A blockchain payment service for banks initiated by CLS, a foreign exchange (FX) settlement service is in its final stages of testing. The service is due for launch later in the summer with no less than 7 banks showing a genuine interest and ready to sign on the system in the early months after the launch. the foreign exchange settlement firm based in New York City, CLS, has been working side by side with tech giants and innovators, IBM to come up with the blockchain powered payment netting service that is now set for an official launch. The newly created and set to be launched service will be a big plus for the banking sector.
The system will be picked up and applied to bank IT techniques in order to improve standardization levels in the global foreign exchange markets while also significantly reducing the costs of the process. This would seal a gaping hole in the markets since, at the moment, foreign exchange markets lack standardization, forcing Forex institutions to make due with a manual process which is quite expensive and leads to confusing scattered approaches to netting according to a financial times report. CLS will offer its members two options of connecting with the CLSNET service, one option will be a direct connection while the other will be through an intermediary and the connection will be through a swift monetary messaging supplier.
CLS later clarified that the intermediary through the SWIFT service will be the only option available in the first stages while direct node hosting will be available in due time as the service matures in functionality and as client adoption peaks. It is reported that only half of the seven banks that are ready and willing to try out the service at the moment were in support of the project initially, the rest changed their minds and opted to back the project in the latter stages. A possible explanation for this as explained by CLS Chief Strategy and development officer, Alan Marquad, is that a lot of banks were not too sure about connecting directly to the blockchain since they felt the technology had not been tested extensively. These banks also harbored settlement and safekeeping concerns.
Marquad further explained that banks are not expected to just install a piece of software without sufficient groundwork first, which is the building of operational knowledge and know-how about the incoming technology. The CLS group has been in the game for a while now and has overtime gained high profile members such as JPMorgan, Goldman Sachs, Barclays, and Citigroup. The company has also developed quite an appetite for the blockchain with CLS investing 5 million dollars in R3, a blockchain consortium in order to collaborate with other blockchain experts. CLS partnership with an experienced firm like SWIFT is likely to pay off with the latter having announced successful piloting of blockchain bank to bank transfers recently.
