Blockchain and Foreign Exchange Trading

forex trading Oct 26, 2017

Blockchain’s increasing penetration and adoption in across industries has been the hottest buzzes in the market and also at yourtraininedge.com[1], where we keep on embracing the new innovative technologies ready to revolutionize the markets somehow. After education, banking, medical records, and healthcare insurance, the next market or industry we see blockchain giving a boom to, is Foreign exchange trading. This is actually amplified when a year old technology firm stated its desire to simplify the currency markets by streamlining the methods trading data is saved using block chain oriented technology.

Cobalt DL, a business based in London, which has been founded by Andy Coyne, former CEO of Traiana Inc, in 2015, announced that is has started beta testing on the distributed ledger network, which the company hopes that it will cut their post trade costs and give a singular database for the foreign exchange transactions[2].  The network is expected to launch in 2017, and will generate a single record for each trade. As per Coyne, the execution in the foreign exchange markets over the last decade has really shown immense growth. If we don’t simplify and done take opportunity to redevelop the entire shared trade system, we might miss a great opportunity. According to the statement, the platform is expected to save billions of dollars for the participants in market, by preventing things like fees for ticketing, staffing and licensing. At present, a lot of market participants are loaded with a burden of maintaining varioyys systems and layers to handle records.

The network will utilize block chain ideas like digital signatures and encryption to develop the unified system. Block chain, the software that runs bitcoin, is a kind of distributed database that is touted as a means to uplift the financial industry. Cobalt has signed the contract for using the system, with eight leading institutional foreign exchange participants.

Another case is of Goldman. Essentially, the company desired to merge the advantages of block chain technology i.e. efficiency and speed, with other technologies that provide security, privacy and compliance with the legislations and regulatory guidelines[3]. For instance, Goldman’s tailored Block chain will enable private transactions only visible on a need-to-know basis, i.e. permit the regulators to access database and comply with anti-money laundering regulations and KYC laws, requiring banks to confirm their customers’ identity. By applying such a private block chain, the Goldman is seeking for the venture into the world of foreign exchange. Or that is what their patent filing tends to show, as they would use a distributed ledge for processing the financial transactions. These transactions are all based on foreign exchange transfers.

It is indeed logical to use block chain technology for the foreign exchange. Trade currencies in its present form are both costly and slow, with much involvement of middlemen. By using the distributed ledgers, those middlemen can be eliminated from the transactions, with enhanced efficiency and lower costs. At the same time, the patent filing by Goldman for block chain based forex trading, also shows how the block chain is still a risk factor[4]. With its extraordinary transparency, anyone is able to see forex trades accruing in real time. This describes the decision to utilize a private block chain, as just eligible parties would see particular details of a transaction. In addition, private blockchains seem to be much easier to manage when it is about regulation. Conducting Aland KYC procedures on an unchallengeable record is quite straightforward. In addition, regulators would be given access to this ledger at any given time, preventing any friction that is linked with the process[5].

The big question is whether or not patents have a fair place in the blockchain world. It makes logic interested players do not desire their competitors to determine how the new platform works. But that doesn’t signify no one should be able to employ it unless it involves some covert proprietary Goldman Sachs technology

[1] www.TheBlockchainAcademy.com
[2] http://www.bloomberg.com/news/articles/2016-08-17/blockchain-pitched-as-way-to-simplify-fx-trading-databases
[3] http://qz.com/779660/goldman-sachs-wants-to-put-foreign-exchange-trades-on-the-blockchain/
[4] http://www.newsbtc.com/2016/09/15/goldman-sachs-files-patent-blockchain-based-forex-trading/
[5] http://www.e-forex.net/articles/jun-2016-fx-clearing-house-how-blockchain-could-triple-spotfx-liquidity.html

Stay connected with news and updates!

Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.

Subscribe