Banks Take Blockchain To Task With Settlement Coin

Several major banks that have been exploring the use of blockchain are readying a test of a digital coin to settle transactions.

The concept is known as Utility Settlement Coin, and UBS is slated to begin testing the tool, along with BNY Mellon, Deutsche Bank, ICAP and Santander, reports said this week.

“Digital cash is a core component of a future financial market fabric based on blockchain technologies,” said UBS Investment Bank Head of Strategic Investment and FinTech Innovation Hyder Jaffrey in a statement. “There are several digital cash models being explored across The Street. The Utility Settlement Coin is focused on facilitating a new model for digital central bank cash.”

The banks will test the technology in stages, increasing the number of market participants at each stage, reports said. The FIs will also explore a variety of implications for the tool. FinTech firm Clearmatics will provide the platform underlying the digital coin.

The coin, first announced last year, includes versions for several major currencies and is convertible to its corresponding currency once deposited at a bank, the companies explained. It’s fully backed by cash assets held at a central bank.

“Cash is a leg to almost every trade, so this project is key to unlocking the benefits that the industry can gain from distributed automation technology in clearing, settlement and collateral management,” said Clearmatics Technologies Founder and CEO Robert Sams.

In a separate statement, Deutsche Bank Managing Director of the Institutional Client Group Paul Maley said collaboration in this area of FinTech innovation is critical.

“As today’s settlement and clearing is a process involving many institutions, it’s vital that we collaborate with our peers to develop viable alternatives to current models, creating new digital capabilities for the financial services industry,” he said.