CLS preparing to launch blockchain-powered payment system

July 30, 2018
Chris Wheal

CLS Group, one of the world’s biggest foreign exchange settlement services, is poised to launch its blockchain payment offering for banks after months of testing, according to a report by Financial News this weekend.

 

CLS Group tests blockchain for use in its payments system

Seven global banking groups are expected to sign on for the service when it launches later this summer, with more expected to join as the service grows in momentum.

Netting

The New York-based, multi-currency settlement provider worked on the blockchain system with technology giant IBM in order to provide a network able to provide netting services – a system where multiple counterparty transactions can be settled accurately at the same time, saving provider and clients on settlement costs.

The main aim for the system, which will soon be incorporated into the IT systems of a number of its member banks via the SWIFT financial messaging service.

CLS is a systemically important organization in the foreign exchange market, settling an average of $5tn worth of payment instructions each day.

The company said when it embarked on the project in October 2017: “Our first blockchain project involved the bilateral payment netting of foreign exchange trades in more than 140 currencies for buy-side and sell-side institutions.

Scalability

“Blockchain, we recognized, would simplify the architecture and enable scalability of the underlying solution, as well as provide a strategic network across which additional blockchain services could be delivered.”

While the company has a small number of initial signatories to the system – not all the institutions that originally backed the project are keen to adopt the system, according to the Financial News report.

CLS explained this reticence in its October 2017 introductory paper, saying there was a chasm between the agile approach to innovation favoured by fintech firms and the more cautious risk-averse approach adopted by regulated financial institutions.

“Their reputation is earned on customer trust and the resiliency and security of their systems. Fintechs, like all entrepreneurial organizations, manage and exploit uncertainty. They boldly disrupt niches while banks traditionally favour hedging their bets.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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