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LONDON (Reuters) - U.S. bank Citi has invested in blockchain venture Cobalt DL ahead of what the company expects will be a second round of funding next year, Cobalt said on Thursday.
Citi's support is the latest step forward for Cobalt, seen by industry players as one of several new initiatives in this area to deliver promised savings on processing currency trades.
The U.S. bank is the single biggest trader of currencies globally and is also involved in a number of other moves that aim to cut the cost of settlement, credit and execution in the $5 trillion a day foreign exchange market. The size of Citi's investment in Cobalt was not disclosed.
Blockchain, also known as distributed ledger technology, works as a web-based transaction-processing and settlement system. It creates a record of any given set of data that is automatically replicated for all parties in a secure network, eliminating any need for third-party verification.
Foreign exchange trades currently need multiple records for buyer, seller, broker, clearer and third parties and then reconciliation across multiple systems.
"We have been impressed with the way Cobalt DL is redesigning the post-trade FX infrastructure with its practical implementation of distributed ledger technology," Citi's Global Head of G10 FX, James Bindler, said.
"The Cobalt DL solution has the potential to significantly improve post-trade services by cutting costs and reducing risk for our industry."
Cobalt also said former Nasdaq executive and City of London veteran Charlotte Crosswell had joined the firm as an adviser to help to forge partnerships and that it expected to bring in more investors next year.
"Probably we will do a second round next year. 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.
Reporting by Patrick Graham. Editing by Jane Merriman