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Partior Completes Blockchain-Based FX Payment vs. Payment Settlement PoC
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Based in Singapore Divider has successfully completed a proof of concept (PoC) for foreign exchange (FX) payment-versus-payment (PvP) settlement using its blockchain network. The PoC involved key participants, including co-founders J.P. Morgan AND DBS Bankwith MizuhoJapan’s third largest bank.
Partior already offers a production solution for instant 24/7 cross-border payments via correspondent banks. Other founders of Partior include Standard Certificate Authority and Temasek.
PvP Settlement Meaning
PvP settlement is essential in FX transactions as it ensures that both legs of the currency are exchanged simultaneously, thus eliminating settlement risk. This method, known as atomic settlement in terms of Distributed Ledger Technology (DLT), is essential in mitigating potential financial losses.
Globally, the majority of FX transactions are settled centrally via CLSSettlement, which processed $6.6 trillion in FX settlement instructions per day in 2023, peaking at $16.3 trillion in December. However, CLSSettlement only supports 18 currencies. Its DLT clearing solution, CLSNet, does not provide PvP settlement.
A 2019 report by the BIS Committee on Payments and Market Infrastructure (CPMI) has highlighted a decline in PvP coverage from 50% to less than 40% between 2006 and 2019, partly due to the growing role of emerging markets. Furthermore, a 2019 survey indicated a potential daily loss risk of $2.8 trillion, with countries such as the United Kingdom, Hong Kong and Singapore facing potential losses greater than their combined regulatory capital.
Partior PoC Details
Partior’s recent trials have specifically addressed settlement risk for both emerging market and advanced economy currencies. The solution supports 24/7 real-time atomic settlement and offers same-day value transactions for those who do not opt for instant settlement. Partior plans to launch this solution later this year.
“By automating settlement matching through smart contracts, we are not only reducing risk and operational costs, but also unlocking new business opportunities, particularly in EMDE currencies,” said Kelvin Tan, Head of Innovation for Global Financial Markets at DBS.
Other DLT PvP Solutions
Several other DLT-based PvP solutions are already in use at scale. Between 2018 and early 2024, HSBC’s FX Everywhere was used to settle 16 million FX transactions worth over $8 trillion. It used Baton System’s Core FX solution, which is also used by Wells Fargo. In March 2024, Baton signed an agreement for the solution to be operated through OSSTRA, the post-trade joint venture between S&P Global and CME Group.
Another notable company in this space is Fnality, a joint venture between 20 institutions. Despite delays in obtaining a license in the UK, Fnality aims to operate a shared settlement system with a settlement token backed by central bank deposits. It requires authorization from other central banks to enable PvP and is targeting the US and Europe, although it is unlikely to focus on emerging markets in the near term.
The Future of PvP with Partior
With the successful PoC, Partior is poised to capitalize on the growing need for efficient and secure FX settlement, especially in emerging markets. As it prepares to launch its solution later this year, Partior’s advancements in blockchain technology promise to improve financial inclusion and drive economic growth in the region.
View the original Ledger Insights post here.
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