In the month of July this year, the foreign exchange trading market (forex) settlement powerhouse CLS (originally Continuous Linked Settlement) confirmed in a report that it has reached the final testing stage of its blockchain payment service for banks. However, it appears that large financial institutions are not quite ready to entrust their data to a blockchain-powered system as the number of players backing the project has halved since the initial announcement. CLS has reported that they would launch the service soon in August.
Forex is the largest and most liquid market in the world despite being decentralized. It is where all the world’s convertible currencies get traded and their conversion rates determined. The UK-based CLS is a financial institution having the U.S. Federal Reserve Bank as its primary regulator and providing forex players with much-needed risk-reducing settlement services. Payment versus payment (PvP) settlements become more secure with CLS' process ensuring the occurrence of a final transfer of one currency only after a final transfer of the other currency has taken place.
When blockchain technology was still in its nascent stages in 2015 and the prospect of mass adoption barely existed, CLS had already begun researching distributed ledger technology (DLT) proofs-of-concept (PoCs). The financial institution has been careful as to not putting its main settlement system on blockchain until it becomes completely foolproof and suitable for adoption from their viewpoint. Several large financial firms enlisted by CLS show hesitance in incorporating blockchain.
Among the original signees for CLSNet—a network sandbox for DLT-powered attempts at streamlining CLS’s internal processes, about half of the 14 banks have quit the program. At this point when the service is nearly ready for launch, even fewer players are expected to enlist themselves for CLSNet after its release. There is still hope for CLS to win over the majority of banks later through continued efforts like LedgerConnect, which is CLS and IBM’s collaborative creation to help conventional business players understand blockchain. Another rainbow in the dark for CLS in their efforts is their relationship with organizations like R3. To bolster the mass adoption of blockchain technology, these organizations bring together law firms to educate lawyers worldwide. Such acts are instrumental in encouraging global banks to replace their traditional tools with modern blockchain ones.