News > Blockchain, Financial Services

Blockchain is Already Bigger Than Bitcoin

By NexChange
Blockchain, Financial Services

Fair or not, one of the major criticisms levied against blockchain technology is that its only real-world application to date remains its first one, which is as the distributed ledger that powers bitcoin.

When you read or hear from critics of the technology, the word most often used to dismiss – or at least cast doubt on the potential of blockchain – is hype. There is a feeling among critics that not enough is being done to prove that the technology is actually being utilized in any meaningful way.

“Despite all the hype about how blockchain will bring unheralded transparency to processes and operations in low-trust environments, the industry is itself opaque,” a group of researchers wrote in a report for the Monitoring, Evaluation, Research and Learning (MERL) Technology conference held in Washington, D.C. this past October:. “From this, we determined the lack of evidence supporting value claims of blockchain in the international development space is a critical gap for potential adopters.”

There exists, of course, the possibility that the only reason people see bitcoin as blockchain’s only true innovation thus far is because bitcoin is the only one that most people ever talk about right now. There exists another possibility: That some of the most exciting developments happening with blockchain technology are, well, kind of boring to the layman.

Which brings us to the significant announcement made by HSBC this past week, in which the banking giant revealed that it has now settled more than three million forex transactions and made more than 150,000 payments worth $250 billion using blockchain technology. Specifically, the bank is using a distributed ledger technology called HSBC FX Everywhere, noting in a press release that it “has been used for the past year to orchestrate payments across HSBC’s internal balance sheets, creating significant efficiencies and opportunities.”

As one of the biggest names in FX trading, the Financial Times notes that the $250B in payments “represents a tiny sliver of its overall currencies business,” but adds that its use of distributed ledger technology “offers a rare example of a blockchain-based product that has proven its worth in wholesale finance.”

The key benefits of the blockchain-based product, according to HSBC, is that it increases transparency, reduces risks and costs, and supports balance greater sheet optimization.

“The global, cross-border nature of HSBC and its clients sees us conducting thousands of foreign exchange transactions within the bank, across multiple balance sheets, in dozens of countries,” Richard Bibbey, Interim Global Head of FX & Commodities at HSBC, said in a statement. “HSBC FX Everywhere uses distributed ledger technology to drastically increase the efficiency of these internal flows.”

Bibbey adds that the bank is “now exploring how this technology could help multinational clients – who also have multiple treasury centers and cross-border supply chains – better manage foreign exchange flows within their organizations.”

HSBC is certainly not alone in its embrace of blockchain technology: There is eTradeConnect, a blockchain-powered platform developed by Chinese insurance giant Ping An and launched by the Hong Kong Monetary Authority (HKMA) last October. The platform, which has 12 banks on its network, was developed to deliver efficiency to the Hong Kong trade finance market for small and mid-size enterprises, while also protecting against fraud.

And there is also the China Trade and Finance Interbank Trading Blockchain Platform which was announced by the China Banking Association (CBA) earlier this month. This blockchain-fueled trading platform boasts over 10 banking giants – including Bank of China, China Merchants Bank, Ping An Bank, and China Postal Savings Bank – on its roster.

There are other projects still in the development or piloting stages, including a massive blockchain payment trial called the Interbank Information Network (IIN) that was launched by JPMorgan, Australia’s ANZ and the Royal Bank of Canada in October 2017. That trial has now added over 75 major banks to its roster.

Speaking at a press conference in Buenos Aires this past August, JP Morgan CIO Lori Beer predicted that we will soon see “a greater and wider use of blockchain” within the banking sector. In a few years, Beer added, blockchain “will replace the existing technology.”

While Beer’s assessment may sound overly ambitious, it becomes a lot more reasonable when you consider how far the banks have already come with blockchain.

Photo: Getty iStock

 

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