Foreign Exchange Giant CLS Admits: No, We Don't Need a Blockchain for That

Blockchain technology is nice to have, but it's hardly a must for rewiring the global financial markets.

So says Alan Marquard, chief strategy and development officer at CLS Group, the global utility for settling foreign exchange trades, owned by the 71 largest banks active in that market.

Nearly a year ago, it went live with CLSNet, touted as "The first global FX market enterprise application running on blockchain in production," with megabanks Goldman Sachs, Morgan Stanley, and Bank of China on board.

CLSNet was built on Hyperledger Fabric, the enterprise blockchain platform developed by IBM. But a blockchain was not the obvious solution for netting down high volumes of FX trades in 120 currencies, Marquard said recently.

"We wouldn't have put all the investment into standing up a blockchain if we didn't think that."

Specifically, the benefit is having the output of the netting calculation on a blockchain so that both participants are definitely getting the same version.

Blockchain was not the essential cost-saving element, he said.

In fairness, the fact that it is in production sets CLSNet apart from most other enterprise blockchain projects which are at various stages of testing.

CLS is doing analysis "In the background" to see if it could ultimately create some kind of settlement solution using blockchain, but Marquard said, "That's way, way off."

"The big thing blockchain was going to do was the transfer of value, of money and assets, and get rid of all the payment systems. It was just silly," he said.