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Citi develops blockchain FX Solution - Industry roundup: 17 November

Citi develops blockchain FX solution under Project Guardian

Citi has developed an application that uses blockchain infrastructure to price and execute bilateral spot foreign exchange (FX) trades. The application is a part of Project Guardian, a collaborative initiative by the Monetary Authority of Singapore (MAS) and the financial industry. While the current application phase tested spot FX for USD/SGD, the underlying solution could be used for any fiat currency pair. The application is not currently available to clients.

Citi’s on-chain solution provides real-time streaming of price quotes while recording trade executions on a blockchain, which supports the immutable, cryptographically secure record-keeping of trade data. At the same time, it allows for compliance and conformity with institutional practices and, where applicable, regulatory requirements, with only counterparties to a quote or trade having access to the underlying trade details.

A private permissioned instance of the Avalanche blockchain was used for the current phase to capture price quotes, as well as trade confirmations specific to each counterparty. Citi collaborated with T. Rowe Price Associates, Inc. and Fidelity International on its application under the Project Guardian initiative.

The request for streaming (RFS) application explores the use of oracles for bilateral messaging and would enable best execution analysis through real-time post-trade analysis on a single platform.

“We are taking steps towards building foundational capabilities to offer liquidity, pricing and risk management to our global clients wherever they choose to trade – be it on traditional rails or on blockchain,” said Sam Hewson, Head of FX Sales at Citi.


PwC calls for shift from supply chain resilience to growth

A new report from PwC, titled “Global supply chains: The race to rebalance”, outlines the considerations business leaders need to contemplate to survive in a rapidly evolving business environment, one of which includes supply chain disruption. There’s a global race happening right now as businesses look to rebalance their supply chains and seek new suppliers, locations and talent. It’s no longer enough to focus on resilience and short-term profitability. Businesses need to transform for viability.

The report considers the challenges facing organisations seeking to relocate supply chains given geopolitical uncertainty. Companies seeking to rebalance operations more evenly across the region are unlikely to find a single location that can replace China. Instead, businesses seeking alternative locations in Asia Pacific or Latin America will require trade-offs between political risk levels, workforce profiles, infrastructure capabilities and the regulatory environment.

This is in line with a recent PwC analysis that showed 65% of companies surveyed considered labour costs and availability to be the top concern when relocating supply chains. PwC also found via a survey that 56% of companies cited varying supply chain standards without guidelines as the biggest ESG challenge facing their supply chains.

The report further highlights three fundamental points that businesses need to consider when repositioning their supply chains for growth:

  • How to navigate the competitive landscape of supply chain transformation.
  • How to use next generation technologies.
  • How to turn ESG into a value driver for business growth.

Despite the global turbulence, Asia Pacific is weathering the storm. Over the next decade, 70% of global growth will come from Asia Pacific. 

“Rarely in history have business leaders dealt with as many challenges as they have in the last three years, each uniquely complex and compounding,” said Raymund Chao, PwC Asia Pacific and China Chairman. “And never before have leaders had to respond to them all at once. While Asia Pacific continues to be primed for growth, minor business tweaks like ‘lift and shift’ are no longer enough. A shift from resilience to growth is necessary. A race to rebalance for growth is happening at this very moment.”


Insurers shift investment priorities due to higher rates

With increasing rates, insurers are waving goodbye to the era where short-term holdings were a drag on investment income. This is according to the Clearwater Analytics 2023 Insurer Cash and Short-Term Investment Management Market Outlook study. The shaky economic outlook propels insurers to stash cash into high-quality short-term investments.

Insurers increasingly leverage technology and liquidity ‘supermarket’ platforms, enabling them to manage and oversee their money market fund portfolios efficiently. Integrations with robust solutions further streamline the process. Despite the volatile environment, a surprising two-thirds of insurers maintain a highly or "moderately" passive approach, holding primarily cash or custodial sweep vehicles. The poll also uncovered that 52% of respondents consider the massive flows into short-term investments as a passing trend, assuming future normalisation of yield curve and recession fears.

The impact of recent upheavals in the banking sector has led to around 40% of insurers adjusting their custody partners. However, a significant 43% report no change. Over 50% of insurers reported using treasury management systems for treasury functions, with a strong desire for improved cash and bank account management tools.

“Today's economic uncertainty and complexities are leading insurers to rethink their investment strategy,” said Scott Erickson, Chief Revenue Officer at Clearwater Analytics. “The study marks an increased focus on short-term assets, driven by higher rates and an inverted yield curve. The key takeaway is the integral role technology can play in managing and optimising liquidity portfolios, and robust solutions… can streamline operational processes."

The survey conducted in September 2023 engaged over 120 insurers and represented US$2 trillion in assets, underlining the most substantial trends in insurer cash and short-term investment management.


NAB launches digital wallet-enabled virtual corporate card

NAB has launched a plastic-free virtual corporate credit card to help businesses streamline, modernise and simplify their expenses. The NAB Virtual Corporate Card is designed to allow organisations to create virtual cards on demand for employees and contractors to use in apps, online, or in-store, no matter their location. Additionally, these cards can be used with digital wallets such as Apple Pay or Google Pay.

The card aims to give businesses the flexibility to provide access to funds quickly and securely for staff while at the same time helping streamline cash reimbursement and procurement processes. NAB Executive Business Everyday Banking Products, Shannon Peachey, said the card would help Aussie businesses reduce administrative work and get time back in their day.

“There’s one thing our customers can never get enough of – time,” Peachey said. “So, we’re really focused on developing innovations that reduce paperwork, remove clunky processes and make the lives of businesses just a little easier. The advanced, smart card, security features offered by our new Virtual Corporate Card also ensures spending is controlled before usage, not after. This means cards can be issued for a specific purpose, with all spend pre-approved and unauthorised expenditure blocked."


Mangopay’s end-to-end FX solution to support global platform and marketplace expansion

Mangopay, a modular and flexible payment infrastructure provider for marketplaces and platforms, has announced the expansion of its cross-border capabilities by launching its end-to-end FX solution. The FX solution aims to reshape how platforms approach currency conversions by bringing more transparency and control into cross-border operations. This could enable them to unlock new revenue streams, create local payment experiences for their users, and increase control of their treasury operations.

The end-to-end FX solution enables platforms to build a flexible and modular cross-border strategy. It includes Spot FX, which allows platforms to access real-time exchange rates for instant conversion, and Guaranteed FX, which briefly locks in rates to mitigate the risk of currency fluctuations. In a survey of 200 CFOs and nearly 300 treasurers, 77% of CFOs in EMEA said that their company had suffered reduced earnings in the previous two years due to avoidable FX risk.

By leveraging Spot or Guaranteed FX, platforms can offer local buying experiences that help reduce checkout churn, take control of their treasury and liquidity management, and enable both their buyers and sellers to collect and convert funds in multiple currencies. Platforms can implement FX at any point of the payment flow without being limited to converting currencies during pay-in or payout.


HSBC goes live on Broadridge’s distributed ledger repo solution

Broadridge has announced that HSBC is the next client to go live on the sponsored repo solution built on Broadridge’s DLT-enabled Distributed Ledger Repo (DLR) platform. Through DLT and smart contracts, platform users could anticipate substantial reductions in settlement costs, streamlined processes, enhanced scalability, and a marked decrease in operational risks. HSBC is the second client to go live since the launch of the sponsored repo solution in early October.

The global expansion of the DLR platform across both sell-side and buy-side firms triggers a network effect, according to Broadridge, offering amplified benefits and enabling a broader range of transaction types. Broadridge’s DLR platform has a monthly volume of US$1 trillion.

“Digitising our existing sponsored repo trade flow and seamlessly integrating it into Broadridge’s DLR tech stack empowers us to enhance efficiencies, mitigate risks of transaction failures, and significantly lower settlement costs,” said John Farrell, Americas Head of Markets Operations, HSBC. “We are committed to exploring innovative avenues to reduce operational risks, and we believe this platform will be instrumental in achieving our objectives.”


Commerzbank granted crypto custody licence

Commerzbank has issued a statement saying it is the first German full-service bank to be granted the Crypto Custody Licence under Article 1 Section 1a Sentence 1 No 6 German Banking Act (KWG). The licence will enable the bank to build up a broad range of digital asset services, with a particular emphasis on crypto assets.

The first step by the bank is to establish a secure and reliable platform with full regulatory compliance to support its institutional clients by providing custody for crypto assets based on blockchain technology.

“Now that we have been granted the licence, we have achieved an important milestone,” commented Dr Jörg Oliveri del Castillo-Schulz, Chief Operating Officer of Commerzbank. “This highlights our ongoing commitment to applying the latest technologies and innovations, and it forms the foundation for supporting our customers in the areas of digital assets.”

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