How could blockchain change the Forex market? – Guest Editorial

Callum Cliffe

In this article, IG Group takes a close look at the future of trading, including the potential influence of blockchain on the forex market in the coming years.

Callum Cliffe is a financial writer for IG Group, a FTSE 250 trading and investments provider. His work covers a range of asset classes and risk management strategies, as well as the effects of politics and economics on markets.

Forex is the largest financial market in the world. But, it does not have a central exchange like stocks or commodities do. Could blockchain change this, and how would forex blockchain trading work?

    1. What is blockchain?
    2. How is forex currently traded?
    3. Could forex benefit from blockchain?

What is blockchain?

Blockchain is a public database of information, which is stored across multiple computers. The information stored in a blockchain cannot be updated or amended without the consensus of a majority of users, meaning that it is almost impossible to falsify information.

 Blockchain could revolutionise the way in which trades between buyers and sellers are recorded, and it might one day replace centralised exchanges. This means that stocks, commodities and bonds could all be traded on blockchain – but so could over-the-counter markets, including forex.

Currently, the primary market that blockchain is used for is cryptocurrencies – most notably, bitcoin. However, the increasing interest in cryptocurrencies around the world has led many to speculate whether blockchain could be the next big thing for the financial markets, and whether it could make transactions easier, faster and more secure.

How is forex currently traded?

Forex is currently traded on an over-the-counter network of traders, banks, brokers and market makers. It is this international web that helps to make forex a 24-hour market, with different trading sessions opening and closing simultaneously around the world.

However, there are some problems with the way that the forex market works. For example, there is no single centralised body that oversees the regulation of the forex market – something which it could certainly benefit from.

Instead, the market is regulated by different organisations in different countries. These include the Financial Conduct Authority (FCA) for the UK market, or the Commodity Futures Trading Commission (CFTC) for the US market.

Forex transactions could also benefit from increased transparency, because forex trading is not subject to the same level of scrutiny as on-exchange transactions. Blockchain could change this, because each transaction would be visible to other users on the blockchain platform.

Learn more about how the forex market works

Could forex benefit from blockchain?

The main benefit would be greater transparency. This is because blockchain records each transaction in a public ledger which can be accessed by anyone. This would also help to detangle the web of brokers and market makers around the world by recording all transactions within a single platform.

Some companies such as Vanguard and Symbiont are already working on developing a blockchain platform for the forex market. But, developing blockchain for forex is not without its own set of unique difficulties.

For example, it has proven difficult to create a blockchain system with easily-amendable rules and configurations that can be altered by regulators. This is because of the decentralised nature of such platforms.

While the precise timeframe for pairing blockchain and forex is unclear, research into the future of trading by IG suggests that the use of blockchain will be widespread in the next 50 years. Their analysts also anticipate that the introduction of blockchain could well phase out the more traditional exchanges – as well as over-the-counter markets in the case of forex trading.

Learn more about the future of trading

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

Read this next

Digital Assets

US wants Bittrex to settle federal dues before compensating customers

The U.S. government has raised objections to Bittrex’s proposal to compensate its customers, adding to concerns about the resolution of the crypto exchange’s bankruptcy case.

Digital Assets

Binance prepares to suspend US dollar funding after SEC crackdown

Binance.US said it will temporarily suspend US dollar deposits and provided customers with a deadline to withdraw their fiat balances. This decision comes after the US Securities and Exchange Commission (SEC) filed a lawsuit requesting the freezing of Binance’s assets in the country.

Digital Assets

Januar launches real-time payments network to fill gap made by Silvergate and Signature

“To all the entrepreneurs and innovators out there is a clear message: if you are a legitimate European business working with crypto then Januar is here to provide you with the account and payment infrastructure you need to operate successfully and build the financial system of tomorrow.”

Retail FX

Exness’ active clients top 515K as monthly volume hits $3.35 trillion

FX trading volumes are climbing again as economic uncertainty spurred by recent developments over central banks’ policies encouraged speculators to pile back into the market.


Danske Bank plans signficant investment in digital platforms

“We have decided to significantly increase our investments in our digital platforms, expert advisory services and sustainability, focusing on the areas where we see the best opportunities for profitable growth.”

Digital Assets

ERD DeFi Lending Platform and USDE Stablecoin Unveiled at EDCON 2023

ERD, the Ethereum Reserve Dollar, is a decentralized lending platform and stablecoin that aims to provide a capital-efficient, decentralized, and stable solution to the challenges faced by the stablecoin industry, introducing a minimum collateralization ratio of 110% and a robust liquidation mechanism.

Institutional FX

CMC Markets acquires 33% stake in UK blockchain firm StrikeX

“This is a major strategic investment in the growing Web 3.0 technology space of which StrikeX Technologies gives us access to the very best technology and advancements. StrikeX is a brilliant, young dynamic company, with a very talented team that has its finger on the pulse of fast moving technologies.”

Digital Assets

Archax utilizes Hedera Hashgraph DLT to tokenize interest in abrdn’s money market fund

“It is exciting to see a tangible application of Archax’s tokenization engine working with Hedera and it paves the way for us to look at creating other digital, blockchain-based token investment solutions.”

Institutional FX

Citi connects directly to Hong Kong’s central clearing and settlement system

“In 2020, we were the first sub-custodian in Hong Kong to offer our clients real-time notification of the trade matching status. The latest solution is a continuation of our efforts to provide a complete suite of services that are as close to real-time as possible.”