Citi has invested an undisclosed sum in Cobalt, a blockchain startup aiming to bring distributed ledger technology to the processing of foreign exchange trades.
Transactions in the FX market are notoriously inefficient and costly because of the need for multiple records for all the counterparties and reconciliations across mulitple systems. Consequently, FX processing has been identified as one area where distributed ledger technology like blockchain could bring true cost savings and efficiency.
More than $5 trillion is traded daily in the globalFX market and Citi is its most active trading participant.
What Cobalt and other blockchain-based startups are looking to do is create a single record for all participants without the need for third-party verification.
“We have been impressed with the way Cobalt DL is redesigning the post-trade FX infrastructure with its practical implementation of distributed ledger technology” said Citi’s Global Head of G10 FX, James Bindler. “The Cobalt DL solution has the potential to significantly improve post-trade services by cutting costs and reducing risk for our industry.”
The investment comes ahead of a second round of financing scheduled for 2017.”The goal is to get a group of investors that know the market, but that will be institutional players,” chief executive Andy Coyne told Reuters.