Quick take from the lively session yesterday at the FX Week Europe Roundtable: “The Future of Blockchain in FX” that I hosted as CEO of FXCH Ltd.
Very broad range of backgrounds of delegates who chose the Blockchain roundtable –> Good, diversity! FX Dealers, lawyers, software developers, Settlement specialists, Exchange staff, Prime Brokerage professionals, journalists etc.
Blockchain applicability – how can it be deployed successfully in the FX market
Advantage in reducing risk of Settlements, same as for simple “payments”. Frontier markets, over complicated and expensive (e.g. Argentina was cited). Is Blockchain just a “sexy database”? Immutability, consensus and cryptographic proof of ownership are unique and innovative features. Reconciliation processes, but confidentiality issue still to be resolved.
At which stage(s) in the trade-life cycle can Blockchain be applied most practically
Trade cycle is particularly challenging, Transactions per Second (TPS) a hurdle. Settlement phase, legal aspects of finality crucial: “Matter of ownership” Blockchain = proof of ownership, but certainty of contract obligation not only a technology issue.
Overcoming trust. Objectives and realistic timeframes.
Involvement of a Central Bank determining factor for speed of adoption. GARTNER research sees 5 years for global adoption in Finance, attendees see same for FX. Some initiatives could get adopted faster in limited, less ambitious scopes (focus on technical/mechanical benefits). Example of a Bundesbank/Deutsche Borse Bund Clearing initiative, model should be emulated in FX.
==> Optimist conclusion: Financial Markets always grab opportunities to save money. If Blockchain proves it can save money, there are lot of costs lying around in FX to be soaked up.
Big thank you to the FX Week organizers, top class show. Definitely coming in 2017!