Dublin-based start-up Foreign Exchange Clearing House (FXCH) is turning to crowdfunding to raise €8.5m, to expand its operation that uses blockchain and overhaul how currency is exchanged between financial institutions.
While initiatives like the euro have reduced the risks involved in foreign exchange (FX) between banks among EU member states, the reality is that the vast majority of other currency transactions still carry a lot of risk.
Due to the somewhat fluctuating nature of currency values on a daily basis, banks typically make transactions using bilateral FX spots that agree to make a trade at a chosen date and time.
However, according to the Irish start-up FXCH based in Dublin, this system is reaching the end of its life.
“We are trying to lead the FX market out of an impasse, where doing things the way they have always been done is not working anymore,” said FXCH’s managing director, Franck Mikulecz.
“For finance, the cryptographic ‘proof of ownership’ is a golden opportunity to move away from the ‘blind trust’ that people place in banks’ balance sheets. We all know here in Ireland where that leads, but transparency and simplicity is what blockchain allows us to bring to FX settlements.”
Unlike other fintech start-ups working within FX, FXCH has turned to the distributed ledger technology blockchain to not only make the process more efficient, but more transparent too.
Last July, the start-up became the first fintech company to clear the first series of spot FX trades from its clients using blockchain.
According to the company, this was not only a technological feat, but also the first time a foreign exchange transaction cleared without a bank.
Crowdfunding sends the ‘right message’
Now the company is turning to crowdfunding to raise €8.5m to expand its staff numbers, while also upgrading its software.
“We have a strong timeline for development of software for new features, deep integration of more e-FX trading platforms,” Mikulecz said to Siliconrepublic.com, adding that the company plans to hire “experienced business development professionals in each of the largest FX markets: the US, Asia and the UK”.
In going with the crowdfunding model, he said he thinks it sends “the right message” to those who favour more disruptive technologies, but added that investors are also discussing funding following this round.