- Citi develops a blockchain-based FX solution using a permissioned Avalanche blockchain as part of the Monetary Authority of Singapore’s Project Guardian.
- The solution enables streaming of spot FX prices and secure bilateral messaging between trading parties, enhancing transparency and efficiency in FX trading.
Revolutionizing FX Trading with Blockchain Technology
Citi has embarked on an innovative journey in the realm of foreign exchange (FX) trading, leveraging blockchain technology to create a groundbreaking solution. This development forms a crucial part of Project Guardian, an initiative spearheaded by the Monetary Authority of Singapore focused on exploring tokenization in financial services.
Collaborative Efforts for a Cutting-Edge Solution
In creating this FX solution, Citi collaborated with notable financial institutions T.Rowe Price and Fidelity International, utilizing a permissioned instance of the Avalanche blockchain. This collaboration highlights the growing trend of major financial players adopting blockchain technology for more efficient and secure trading processes.
Enhancing Trade Life Cycle with Blockchain
Shobhit Maini, Co-Head of Digital Assets for Markets at Citi, emphasizes the goal to improve all stages of the trade life cycle, including pre-trade and execution phases. The trial solution implemented by Citi accomplishes this by streaming spot FX prices for the USD/SGD pair directly to the blockchain using an oracle, facilitating bilateral messaging exclusively visible to the trade counterparties.
- Innovative Use of Smart Contracts and Oracles: The solution involves a request-for-streaming process, where a dealer offers a series of firm prices, executable for a limited duration, allowing clients to compare prices from multiple liquidity providers. Smart contracts are potentially used to automate the selection of the best price, ensuring efficiency and transparency. Once the price is selected, the blockchain serves as an immutable record of the trade, enhancing the integrity and trust in the transaction process.
Citi’s Growing Blockchain Endeavors
Citi’s venture into blockchain-based FX trading is part of its broader commitment to blockchain technology. The bank has significantly increased its blockchain activities, including the launch of the Regulated Liability Network, a shared blockchain network involving central banks and commercial banks for tokenized money and assets. Moreover, Citi recently introduced its Citi Token Services, including a pilot for tokenized deposits, and went live on two smart contract platforms, one for Chinese securities settlement and the other for syndicated loans.
The Future of Blockchain in FX Trading
This development by Citi, leveraging the Avalanche blockchain, represents a significant advancement in integrating blockchain technology into FX trading. It showcases how blockchain can offer improved efficiency, transparency, and security in financial transactions, potentially transforming the landscape of FX trading.
In summary, Citi’s foray into blockchain-based FX solutions under Project Guardian is a pioneering effort in the financial sector. It not only demonstrates the practical application of blockchain in complex financial operations but also paves the way for future innovations in this space, potentially revolutionizing the way financial institutions handle foreign exchange transactions.