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Banks Don’t Really Want to Use ‘Blockchain’ for FX Settlement After All
It seems that whenever members of the legacy financial establishment talk about Bitcoin these days its only to bash it in comparison to ‘Blockchain’, claiming that they can usurp the technology while ditching the cryptocurrency. However, when given a chance to actually use a blockchain-based product, the banks are also reluctant to do so.
CLS Group, which provides FX settlement services to the likes of Goldman Sachs, JPMorgan, Barclays and Citigroup, has been forced to “water down” a blockchain project two years in development due to banks’ reluctance to participate. Back in September 2016, the company announced it started working with IBM on a new settlement service, with committed support by: Banco Actinver, Bank of America, Bank of China – Hong Kong, Bank of Tokyo-Mitsubishi UFJ, Citibank, First Rand, Goldman Sachs Asset Management, HSBC, Intesa Sanpaolo, JPMorgan Chase, Morgan Stanley, Neuberger Berman and Northern Trust. Now the service is undergoing final tests ahead of a planned launch later this summer, but only about half of the originally-backing banks are expected to actually sign up in the beginning.
Alan Marquard, CLS chief strategy and development officer, explained to FN London that it was “a big ask” for banks to integrate blockchain. “You are not just installing a piece of software. They need to build operational knowledge and know-how,” and “it has security implications”. Without disclosing the cost of development, Marquard also added: “Building on new tech is always more expensive. We took the step and made this investment. Nobody has a crystal ball.”
A CLS spokeswoman responded: “It was always CLS’s intention to launch the service in phases, with the first phase clients will rely on Swift connectivity for inputs submitted to and received from CLSNet. As the service continues to grow with functionality and client adoption, and the DLT [distributed ledger technology] matures, CLSNet will enable clients to host their own node.”
Undeterred by the challenges their previous product is facing, CLS and IBM today announced a new collaboration on a proof of concept for Ledger Connect − a blockchain-based platform designed to enable banks, buy and sell side firms, fintech startups and software vendors to deploy, share and consume services hosted on a shared distributed ledger network. Users will be able to access services in areas such as, know your customer processes, sanctions screening, collateral management, derivatives post-trade processing and reconciliation and market data. Nine financial institutions, including Barclays and Citi, are said to be participating in the test.
“Together IBM and CLS have been early pioneers in advancing blockchain solutions for the financial services space,” said Marie Wieck, general manager, IBM Blockchain. “Building on the success of CLS Net and leveraging the strong relationship CLS has with the world’s leading financial institutions, Ledger Connect is uniquely positioned as a blockchain marketplace for the financial services industry, which will accelerate innovation across the ecosystem with value added services for blockchain networks.”
Is the idea of a public ledger fits at all with the current banking business? Share your thoughts in the comments section below.
Images courtesy of Shutterstock.
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The post Banks Don’t Really Want to Use ‘Blockchain’ for FX Settlement After All appeared first on Bitcoin News.
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