New York-based foreign exchange solutions company CLS Services has begun testing a blockchain-based payments system called LedgerConnect that has been two years in development.
It hopes to launch the service later this year in collaboration with potentially seven global banking corporations including Barclays and Citigroup. CLS has been working with IBM to create the blockchain system and believe it will reduce costs associated with currency transfer.
Currently, many transfers have to be completed manually due to a lack of standardization in the market. If the new blockchain system is successful it can hopefully replace older systems and improve conditions for both customers and staff.
A spokesman for CLS said that clients would use the SWIFT financial messenger service initially until direct node hosting is added later on after the network has grown further.
Big banks that are afraid of the untested system have chosen not to adopt it at this time. They believe that further testing in the blockchain field must be done to ensure the privacy and security of their databases. Alan Marquard, chief development officer at CLS, said the banks need to build operational knowledge of any new systems before implementing them.
The sentiments echo recent announcements by the U.S. Securities and Exchange Commission (SEC) that blockchain and the cryptocurrency market may not be secure enough to host a Bitcoin ETF. Last week, the SEC denied for a second time a Bitcoin ETF rule change proposed by the Winklevoss twins due to security concerns.
Previous concerns have also been noted by Ripple cryptographer David Schwartz. He believes the lack of privacy and scalability in blockchain hinders its adoption by banks for international settlements.
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