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Commerzbank Conducts First Major FX Transaction Using Blockchain

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According to Reuters, one of Germany’s commercial banks – Commerzbank and multinational conglomerate Thyssenkrupp – have successfully executed a foreign exchange transaction through a blockchain platform, making this the first such transaction involving a large German company; which proponents say could make doing business cheaper and quicker.

The EUR / PLN FX forward deal, which amounted to €500,000 with a one month tenor (i.e. amount of time left for the repayment of a loan), was initiated by Thyssenkrupp using FX Live Trader, Commerzbank’s FX trading platform. Because the blockchain used will store the entire transaction as a single immutable record, neither the corporation nor Commerzbank need to worry about transaction reconciliation, the news organization reported.

The deal confirmation was sent directly via Corda, a distributed ledger designed for finance by the R3 blockchain consortium.

Nikolaus Giesbert, of Commerzbank said:

Reconciliation is a major issue for banks when trading FX. Significant resources are dedicated to resolving the issues that occur during the matching process. This deal demonstrates how the use of distributed ledger can transform and digitalise the processes in this space.

Future Benefits on the Way

According to the bank, the use of blockchain eliminates the need for a manual or semi-automated reconciliation between the client and the bank, thereby drastically reducing operational risks in FX transactions. The bank says future benefits could be on their way.

Giesbert says that the successful demo could bring about three major benefits in the near future to both the bank and customers. Firstly, a more streamlined FX transaction process and a real-time confirmation. Secondly, the removal of transaction reconciliation. And finally, the elimination for the need of various third party solutions that banks use to send transaction confirmations to the clients.

While the bank remains upbeat about the new developments, it has been careful not to promise full execution to its clientele. Commerzbank says that to make all this happen, technical, regulatory and legal requirements need to further develop.

CoinDesk reports that in the recent past, Commerzbank has demonstrated its keen interest in blockchain technology. A couple of days ago the bank, supported by SAP, completed an integration between SAP S/4HANA business processes and Corda for improved trade and supply chain finance services. Additionally, in April, Batavia, the blockchain-based trade finance platform that has been jointly developed by a consortium consisting of Bank of Montreal (BMO), CaixaBank, Commerzbank, Erste Group, IBM and UBS, completed its first live pilot transactions with corporate clients.

Commerzbank is not the only bank in the recent past to show massive interest in blockchain. Mainstream banks like JP Morgan and Goldman Sachs have recently made bold steps towards establishing respective blockchain and crypto strategies through appointment of blockchain experts to head up their units.

Image Credit: Deposit Photos

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