Wells Fargo and HSBC Add Offshore Yuan to FX System

Wells Fargo and HSBC, two of the world’s largest banks, have added the offshore version of China’s yuan (CNH) to their blockchain-based foreign exchange (FX) settlement system.

The offshore yuan is the fifth currency settled between the two banks, using a shared settlement ledger that includes American and Canadian dollars, Britain’s pound sterling, and the euro, according to a Thursday (Nov. 17) press release.

“Extending CNH PvP settlement to Wells Fargo is an important milestone for reducing Herstatt Risk outside G10 currencies,” HSBC Head of Global Partnerships Mark Williamson said in the release, referring to settlement risk. “This development is only our first step in extending our coverage into emerging markets currencies.”

The banks said in the release that since debuting their shared distributed ledger technology (DLT) solution last year, they have settled more than $200 billion in transactions and plan to add more currencies in the months ahead.

PYMNTS reported earlier this week that Wells Fargo and HSBC are among 10 banks working with the New York Federal Reserve Bank’s New York Innovation Center to look at the feasibility of a regulated liability network (RLN), which is an interoperable digital money platform.

The proposed RLN would employ DLT to improve financial settlements and would include central banks, commercial banks and regulated nonbanks.

The 12-week proof of concept will “test a version of the RLN design that operates exclusively in U.S. dollars where commercial banks issue simulated digital money or ‘tokens’ — representing the deposits of their own customers — and settle through simulated central bank reserves on a shared multi-entity distributed ledger,” the center said.

In addition, the proof of concept will also explore the feasibility of a programmable digital money design that could potentially extend to other digital assets, along with the viability of the proposed system within existing regulations.

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