When we think of blockchain technology, three main benefits tend to come to mind: quickness, anonymity, and security. This technology can facilitate fast transfers of data, and it can do so without revealing the identities of the parties on either end.
However, blockchain is perhaps most valued for its security. As Host Review’s take on blockchain as a “super-technology” put it, it is “nearly impossible” to alter the mathematical blocks that comprise blockchain-based transactions. The perception, at least, is that this makes transfers on blockchain networks virtually incorruptible, and thus uniquely secure.
While there are still some who would disagree with that characterization, it’s the perception of blockchain tech as a security mechanism that has helped Bitcoin and other cryptocurrencies to establish their reputations. In fact, according to one of our previous articles written by regular contributor Bradley Collins, nearly 73% of financial executives believe that their institutions will be left behind if they don’t adopt and reap the current benefits of blockchain technology.
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Might the same ultimately be true of forex trades?
A brief recap on forex
As a refresher for those who may not regularly engage with the market, forex is another word for currency exchange. In FXCM’s forex trading overview, forex is described as the biggest and most liquid investment market on Earth, with its average volume in daily trading exceeding $5 trillion. In other words, there are virtually innumerable people all around the world engaging in the currency trade, exchanging funds on a constant basis.
This is done through a variety of different trading platforms, most of which exist today as websites or mobile apps. These platforms allow people to conduct forex trades in much the same way they might execute stock trades through a broker. On the whole, it makes for a smooth system.
The limitations of forex
However, some security concerns come with forex trading, as well. Some of the common risks associated with this type of investment include broker trust, account passwords and protections, and Wi-Fi security, among others.
As you’ll notice, these are all concerns that you have control over as a trader. You can research brokers to choose one with a trustworthy reputation; you can set up a strong password and two-factor authentication for your account, and you can make sure you don’t use vulnerable networks when trading.
Blockchain in forex
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Beyond this, some forex traders are also concerned with the actual security of their accounts and transactions when they’re active as well, and it’s here that blockchain technology could conceivably offer benefits. We are in fact beginning to see blockchain moving into forex already, though as of now this appears to be more for the purpose of cutting costs than enhancing security.
According to HSBC accounts of early blockchain use in conducting forex trades, the company has cut 25% off the cost of transactions. This is a benefit we’re seeing matched by numerous major banks and brokers in the space, and ultimately it’s one that appears likely to drive further engagement between blockchain tech and the forex world.
If this proves to be the case, blockchain will likely help forex transactions become more secure. Blockchain’s primary benefit to banks and companies facilitating forex trades may be that it makes them cheaper. But given the technology’s reputation for security, its expanding usage in forex will be reassuring to traders, as well.