CLS, which is a popular Forex Exchange is in the last stages of testing its blockchain payment service for banks. The service is expected to be released this summer along with a minimum seven banks to sign into the system in the initial months.
CLS, a U.S based financial service company has been working with technology giant IBM in order to launch blockchain-powered payment netting service. The new system is ready to be integrated with the banking IT systems in order to enhance the level of standardization in the global FX markets and decrease the processing cost.
Presently, FX markets are lacking standardization because forex exchanges are bound to complete the entire process manually, this may result in a disconnected approach to the network and also result in big costs.
Why is CLS designing blockchain payment banking service?
CLS is designing to provide its members two choices to connect to the CLSnet service, supplying a direct and intermediary connection through the SWIFT financial messaging provider. SWIFT is a company with 45 years of experience in giving financial firms with transaction information and has lately stated that its blockchain pilot for bank-to-bank transfers remained successful. The firm has previously launched the Hyperledger-based project for foreign payments market in 2017.
One of the CLS Spokesperson explained that the clients can take help from the SWIFT provider in initial stages, however, direct node hosting will be provided as “the service continues to grow with functionality and client adoption, and the DLT [Distributed Ledger Technology] matures.”
Currently, there are seven banks who are ready to test the new service. However, only half of them have backed up the project successfully. Alan Marquard, who is the chief strategy and development officer at CLS stated that several big banking members are thoughtful to connect directly to the blockchain because the system is not entirely tested enough for settlement and protection of securities.
Marquard stated that banking companies cannot just install a piece of software, because they initially require to “build operational knowledge and know-how” to check their databases and have appropriate privacy protection.
CLS Group is a popular FX settlement service provider in the US with high-profile members like Goldman Sachs, JPMorgan, Barclays, and Citigroup. A few months back, the firm invested $5 million in blockchain consortium R3 to make a partnership with popular blockchain experts.