The Blockchain technology is good to have, but it’s almost a necessity for rewiring the global financial markets.
So says Alan Marquard, Director of Strategy and Development at CLS Group, the global utility operations to liquidate foreign exchange, owned by the 71 most active banks in that market.
almost a year, which was launched with CLSNet, touted as “the first business application global currency market that runs on blockchain in production” with mega-banks Goldman Sachs, Morgan Stanley and Bank of China (Hong Kong) aboard ago .
CLSNet was built on Hyperledger fabric, blockchain enterprise platform developed by IBM. However, a blockchain was not the obvious solution for compensation for the high volumes of FX operations in 120 currencies, Marquard said recently.
“I’ve been very clear from the first moment conceived CLSNet, which was not to be executed in blockchain” he told CoinDesk. “Blockchain is not essential for the process to run -. Or even to work well”
CLS could have opted for “a centralized way to make calculations and pushing them out”, but he did for a reason, Marquard said.
“We are in favor of blockchain not get me wrong,” he said. “We have not put all investment in blockchain foot if you do not think that [would have some benefit].”
(Marquard declined to say how big was the investment, but an industry source put in the “millions of pounds.”)
Specifically, the benefit is having the output of calculating compensation in blockchain so that both participants are definitely getting the same version. This is valuable, especially with emerging market currencies where there are inefficiencies and potential breaking operations, Marquard said.
But blockchain was not the essential element of cost savings, he said.
“The more we address compensation coins, more people will be saved. So the service will save money people, “said Marquard, adding:
“Is that because of blockchain? No, I don’t think, hand on heart, I can say that.”
Since its launch, more than two banks – Bank of America and Intesa Sanpaolo – have joined CLSNet. Marquard said there will be a total of nine banks live on the platform this year.
“There are five [banks] live and there are four who have spent a frustrating month by month … almost there, almost there,” he said. “They will go live before the end of the year; all of them are in the final stage of testing. ”
The five participating banks declined to comment, like IBM, which built the system.
According to Marquard, CLSNet volumes are growing, but in no way comparable with the system main CLS solution, which acts as the intermediary settlement of transactions in 18 currencies.
“Volumes are amounts that are very happy with,” he said, declining to give a number. He noted that the major currency pairs like the dollar / euro are already in the CLS settlement system and do not require CLSNet, adding:
“How do you compete with $12.8 trillion on the main system? It’s going to take years before we can get anywhere near that. I have no aspirations of CLSNet ever getting to the scale of the main settlement system.”
To be fair, that is in production sets CLSNet apart from most other projects blockchain company that are in various stages of testing.
Meanwhile, CLS is doing the analysis “in the background” to see if ultimately could create some sort of solution using blockchain solution, but Marquard said, “that’s far, far away.”
He remains skeptical about the rhetoric of a few years ago technology ledger with amounts almost sweeping and replacing large pieces of critical infrastructure payments.
“The most important blockchain going to do was the transfer of value, money and assets, and get rid of all payment systems. It was silly, “he said. “In the opinion of a technician how markets operate with very little understanding of such entities and how they work.”
A thorough understanding course informed the gradual approach to be taken with CLSNet, Marquard said, concluding:
“We knew that we couldn’t do a settlement application. We wanted to do something on blockchain to help bring the technology forward, to help participants acclimatize to it and frankly just to keep ourselves in the conversation – which it has done.”
Currencies image via Shutterstock