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Can Blockchain Help Alleviate the Credit Crunch in FX?

Can Blockchain Help Alleviate the Credit Crunch in FX?

Franck Mikulecz, managing director of FXCH, talks to Galen Stops, deputy editor of Profit & Loss, about how blockchain technology can help mitigate some of the credit challenges facing the FX industry.

With blockchain, or distributed ledger technology, still being so new to financial services, Mikulecz claims that banks are still trying to figure out the most effective way to deploy this technology.

“I can see a lot of banks have an interest because they know that the market will evolve and the market will potentially be disrupted by the technology but they don’t really know how it’s going to happen and they don’t really know how to use it themselves. 

“So in general the incumbents are going to look at what’s going on with the new fintech companies, and probably the winners of this game will be bought by very large incumbents,” he says.

Profit & Loss reported in July that FXCH had begun clearing spot FX via the blockchain, with Mikulecz now arguing that this might help alleviate the challenges that some firms are experiencing with accessing the FX market.

“Accessing the FX market is too difficult, when you look at other asset classess it’s much more difficult to participate in the FX market compared to futures or some commodities. You’ve seen last year currency futures have gained nearly 30% in volume compard to the year before when every other futures asset class has gone down.

“The banks are still interested to price and trade but they are no longer willing to offer their credit liens to other people to access the market and that problem creates a gateway, a bump, to accessing the market,” he says.

By using blockchain technology to provide transparency around firms’ assets and an immutable database that is made available to everyone on the network, Mikulecz says that this issue of access can be improved.

You can watch the full interview here: