Baton Systems’ DLT Now Risklessly Settling Offshore Yuan Transactions in World First

Offshore Yuan (CNH) added to currencies now being safely and efficiently settled, in production, on a Payment-vs-Payment (PvP) basis between large financial institutions – less than 1 year after initial roll-out of USD, GBP, CAD and EUR transactions

 November 17th 2022, London – Baton Systems (“Baton”) announced today that its Core-FX™ platform, built using distributed ledger technology (DLT), is now being used by large financial institutions to efficiently reconcile, net, and safely settle bilateral CNH foreign exchange (FX) transactions on a PvP basis.

This development provides all wholesale market participants with the ability to eradicate CNH settlement risk, increase market access and open up extensive offshore trading opportunities for Chinese Renminbi – Renminbi now being the 5th most traded currency (as reported by the 2022 BIS Triennial Survey of turnover in OTC FX markets). 

In achieving riskless settlement for CNH, Baton’s live and highly scalable DLT, is being used in a production environment – breaking new ground by extending the benefits of on-demand riskless settlement to a virtually unlimited range of market participants and currencies. All of the transactional workflow, from trade reconciliation, to netting, to settlement is captured and hashed on Baton’s permissioned distributed ledger. Additionally, the entire process, including the guaranteed movement of funds and settlement finality is established and enforced under the auspices of the Baton Rulebook. 

With this expansion, Baton embarks on the next milestone in its mission to extend access to PvP settlement to all market participants across a broad range of currencies. Using Baton’s Core-FX solution, automatically netted payment obligations can be settled on-demand, multiple times a day, at intervals or exposure thresholds times specified by the settling parties, with the entire PvP settlement process completed within five minutes of initiation. This enables the repeated use of liquidity multiple times during the trading day. Baton’s approach opens up a vast array of new opportunities to market participants to optimise intraday funding, liquidity, credit and risk management.  

The addition of CNH extends the pool of currencies the banks have been processing using Baton’s Core-FX™ platform over the past 11 months to include the first non CLS-eligible currency to be settled by unaffiliated entities. Since the platform’s initial roll out, which commenced with settlement between affiliated entities, trillions of dollars of FX transactions have been netted and safely settled via PvP.

Arjun Jayaram, CEO and Founder of Baton Systems, commented: “Today’s announcement marks a historic breakthrough. By deploying operationally resilient solutions, able to seamlessly interoperate with a bank’s existing payment gateways and processes, we have been able to operationalise the benefits of blockchain to deliver a world first by using DLT specifically designed to meet the capital market’s extensive compliance requirements. The addition of CNH demonstrates the ease and speed that PvP access can be extended across currencies, empowering firms to radically reduce settlement risk exposure fast. 

Whilst today’s announcement is a remarkable achievement, it is just the beginning.”  

 Baton is now working to further expand PvP access by on-boarding additional non-CLS eligible currencies onto the Core-FX platform over coming months.