Citigroup, Barclays Near End of Blockchain Test Managed by IBM

Matthew Leising (Bloomberg) -- Barclays Plc and Citigroup Inc. are poised to complete a test of how blockchain technology can streamline their operations as part of a group organized by IBM and one of the world’s largest financial infrastructure providers.

The project, known as LedgerConnect, aims to allow banks and financial firms to share techniques for know-your-customer checks, collateral management and sanctions screening. The private network was created by IBM and blockchain software developer Hyperledger, according to a statement Monday. CLS, whose global foreign-exchange network settles $5 trillion of payments a day for 24,000 clients, is also heading the project.

Wall Street has experimented for several years with using blockchain technology to simplify back-office functions and speed up transaction times. The allure of the LedgerConnect project is that it lets banks cut their technology and operations spending by allowing them to share services on a network, Ram Komarraju, head of innovation and solution delivery at CLS, said in an interview. Other firms competing to offer banks enterprise blockchain applications in this area include R3, Chain and Digital Asset Holdings.

Still, widespread blockchain adoption faces several challenges, including regulatory approval and persuading competitors to work together to form networks.

CLS’s background in connecting banks and traders in the global foreign exchange market makes it a natural fit to running a blockchain network, said Alan Marquard, chief strategy and development officer at CLS. “You need to know that the network is being maintained where you trust the technology standards,” he said in an interview.

The proof-of-concept test was begun about three months ago and should be done in a few weeks, Komarraju said. Other firms in the group include Calypso, OpenRisk and SynSwap, according to the statement. If the project moves to the next step, more banks will be invited to join.

“We so far have been very happy with the reception and feedback we’ve been getting,” Komarraju said.