Blockchain offers a better way for the foreign exchange market

August 31, 2017

Trading currencies is costly and slow for traders at major financial institutions—transactions need to go through a bunch of middle men, each of which take a slight fee. Blockchain technology that is behind bitcoin could revolutionize that process.

Blockchain and  currency trading

In the current market, currency and share trading tend to be conducted through third party brokering sites and clearing houses, who facilitate orders in exchanged for predetermined commission fees. This can be a relatively elongated process (for financial institutions in particular), while it can also prove increase fees in instances where more than one middleman is involved.

By leveraging a transparent and decentralised ledger,  Blockchain technology would create a direct link between participants who could complete their transactions through a peer-to-peer network of brokers and independent traders.

So while participants would still execute orders through an online trading platform, the underlying, back office function and final settlement will be completed by using blockchain, boosting efficiencies and market liquidity in the process.

There are numerous benefits to this practice:

Blockchain would universally create a more efficient and cost-effective trading process: This would also lend itself to instantaneous and real-time trades, which could prove crucial in a volatile and constantly changing entity such as the foreign exchange.

Timely benefits in the form of transparency: This would solve an issue that sits at the core of financial market trading in the digital age, particularly in liquid and malleable entities such as the foreign exchange. In short, blockchain would act as a decentralised and virtually impenetrable ledger of completed transactions, listed encrypted orders that are then distributed through a public network for the purposes of transparency, compliance and accountability.

 

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