01 Mar Tokenised FX Settlement
Tokenised FX Settlement
Financial Institutions, Corporates & Wholesale Investors
Traditional Foreign Exchange (FX) Trading & Remittance networks do not operate 24/7/365, restricting capabilities for instant trade and transfers globally. Public Blockchains such as Ethereum offer an alternative but lack privacy, scalability, compliance and regulatory capabilities.
CBDC will be traded for foreign currency stablecoins on the Canvas Connect platform. Connect offers assurances of privacy, high speed and low transaction costs on the public Ethereum blockchain. Leveraging ZK Layer 2 technology, Canvas eliminates FX market inefficiencies and settlement risks.
CBDC is used to settle the AUD leg of a Tokenised FX trade. CBDC creates an instant and secure way to exchange between AUD and foreign currencies represented by stablecoin USDC.
According to the Bank for International Settlements, the average daily turnover in traditional foreign exchange markets is $7.5 trillion. Remittances totalled US$23.5 trillion volume in Global Cross-Border Payments in 2020.
Currently, cross-border payments are not supported 24×7/365 by traditional services like SWIFT. This restricts flexibility leading to delays and higher costs.
The use of CBDC and Digital Currencies in FX trading and Remittances can enable frictionless, 24x7x365 trading and global movement of foreign currencies, dramatically increasing speed and reducing risks and costs over traditional Foreign Exchange (FX) Trading & Remittance networks.
In this use case, Canvas invited a select group of participants to use the Canvas Connect platform to trade pilot CBDC for foreign currency stablecoin USDC. All trades were settled atomically with no counterparty risk. Canvas offered both pilot CBDC to USDC and USDC to pilot CBDC transactions. Both types of transactions run as follows:
- Canvas conducted KYC/AML checks on all participants and whitelist wallets accordingly.
- Participants prefunded their wallets with pilot CBDC by making a real time AUD transfer to Canvas via the NPP, and this will settle as pilot CBDC to the Client’s wallet.
- Participants placed orders for sale or purchase of USDC on the Canvas Connect platform.
- The platform matched suitable orders between participants.
- The platform submitted a settlement request for both sides of the trade to confirm after which atomic settlement of the assets occurred.
- All participants maintained control and custody of their assets at all times.