HSBC Exec at Money20/20: Blockchain, CBDCs Pose ‘Great Challenge’ to Interbank Settlement

A senior executive from U.K.-based bank HSBC has said that time-efficient distributed ledger technologies (DLT) and central bank digital currencies (CBDCs) represent a “great challenge” to existing real-time gross settlement (RTGS) systems, Cointelegraph learned at the Money20/20 conference Oct. 23.

HSBC’s Global Innovation Lead for Global Liquidity & Cash Management, Craig Ramsey, made his remarks during a panel during the Money20/20 conference in Las Vegas yesterday, which was devoted to “Digital Opportunities for Cross-Border Inter-Bank Transactions.”

When asked by moderator Robert Ruark — principal at financial services at “big four” audit firm KPMG — about which technologies HSBC is currently looking into for RGTS, Ramsey responded at first by suggesting the bank was looking at incumbent mechanisms, referring to SWIFT global payments solution, “SWIFT GPI”:

“All the incremental changes that SWIFT are doing [were] one of the things that we considered […] they issued some statistics in May 2018 that using SWIFT GPI technology, 43 percent of those transactions were settled in 30 minutes, 90 percent […] were in under 24 hours.”

Ramsay continued to say that “one of the things” being looked at in bank working groups is whether corporations really need transaction settlement in real time, or whether 30 minutes is sufficient. “Because if it is, then that suggests we can actually get quite a long way … with just using [existing] technologies,” he said.

As he developed his argument, Ramsay then made an apparent about-turn, saying that given that “the technology we have across [existing] RTGS systems needs to be replaced,” the idea of central bank issued digital currencies and distributed ledger productively “challenges [banks’] frame of reference.”

Ramsay also noted that this is a “great time” to pursue new possibilities on “behalf of corporates [… ]and in connection with regulators,” adding:

“It doesn’t need to happen in the next six-nine months […] and it’s too early to say which would win — it’s about the transition and dialogue that will create the ecosystem […] for corporates to allow them to do what they need to do.”

At Money20/20 earlier this week, experts disagreed on whether DLT such as blockchain will have benefits for payments systems more broadly. Ripple’s CTO David Schwartz argued from a retail perspective that “th[ose] companies that can provide those high-speed low-cost payments [using blockchain] will get the business, and those that don’t will have to adapt or die, just like in any technological revolution.”

Also at Money20/20, Dash CEO Ryan Taylor noted that he thinks CBDC’s are “inevitable,” but clarified that it will be people who “will decide what form of money they want to consume and use as part of their lives.”

This summer, HSBC’s compatriot, the U.K.’s central Bank of England, revealed plans to rebuild its RTGS system so that it can interface with private business and platforms using DLT.