Citigroup Invests in London FX Blockchain Startup Cobalt
Citigroup Inc recently announced that it was investing in forex trading blockchain company, Cobalt. Furthermore, former Nasdaq NLX CEO Charlotte Crosswell is also moving in as a strategic advisor to Cobalt DL and her focus will be on long term strategic partnerships so that the company can get new clients. However, Citicorp did not provide any additional details about the deal, especially with regards to its terms. Incidentally, the forex startup is very close to launching its service and this is expected to happen in the first quarter of 2017.
The forex trading industry is awaiting the launch of Cobalt’s post-trade processing solution known as Cobalt FX which uses distributed ledger technology or blockchain. This is an internet-based system for processing transactions and settlements. Records are replicated and made available to all parties connected on a secure network, as a result of which there is no requirement for third-party verification.
Citigroup will be one of its biggest and first clients at the time of its launch. Cobalt DL is currently conducting beta testing on its own peer-to-peer (P2P) network that is based upon this technology. A number of forex traders are taking part in the testing and the overwhelming feedback is positive. As a matter of fact, there are indications that Cobalt FX will be able to reduce post-trade costs to a fraction of the current levels and also reduce risks to a great degree.
There have been many ventures committed to transform the forex trading industry but Cobalt is one of the most significant ones. The technology used by Cobalt DL is likely to revolutionize the forex trading industry thanks to the many benefits it offers. The technology can be seamlessly integrated with all currently used trading sources and existing infrastructure. The benefits from using this trading solution will be available to traders without any delays. At present, forex traders have to pay many license fees and ticketing charges in addition to employee costs and IT expenses. It is no surprise, therefore, that at least 15 major institutional participants in the forex industry have signed on to the service.
The existing structure of the forex trading industry is very complex indeed. Each transaction results in many trade records because buyers, brokers, sellers, clearers, and third parties will also have to be sent one. Their systems tend to get overwhelmed by the need to reconcile large numbers of transactions on a continuous basis. One of the biggest advantages of using Cobalt DL is that it creates a single view of each and every transaction so that it can be viewed by all the parties concerned. Traders using Cobalt DL will therefore be able to free up a lot of resources.
Citi G10 FX Global Head James Bindler said that the company was impressed with the practicality of Cobalt DL’s infrastructure. He pointed out that the industry stands to gain tremendously from cost and risk reduction.
Ms. Crosswell said that she was excited to be part of Cobalt DL at this juncture. She also pointed out that Cobalt would be able to bring about positive changes in the industry and enable market participants to get immense savings. Citibank is the largest forex trader in the world at present and its support has come at a very significant time for Cobalt which has been anticipating a second round of funding. Cobalt CEO Andy Coyne said that the company was eager to attract the attention and investment of institutional players.
The online forex trading industry currently sees $5 trillion of transactions on a daily basis. As the biggest player in the business, Citibank stands to gain the most from reducing the cost of trading and increasing security of transactions.