A slew of banks, including some of the largest in the world, are working together to develop a digital cash system that relies on blockchain technology to settle transactions.
According to a report in Reuters citing people familiar with the plans, the project is known as “utility settlement” coin and aims to create a system to make clearing and settlement more efficient. Reuters noted the system is the brainchild of UBS and Clearmatics, the London startup. The idea dates back to 2015. The banks are investing $50 million in Fnality, a new entity that will run the project. Details could change since the deal hasn’t been finalized. The new system could be operational by 2020. It’s not clear which banks are investing, but the banks that earlier said they were part of the project include UBS, Banco Santander, Bank of New York Mellon, State Street, Credit Suisse Group, Barclays, HSBC and Deutsche Bank, reported Reuters. “We are a member of the USC Project and can confirm that the Research & Development phase is coming to an end,” a spokeswoman for Barclays said in a written statement to Reuters. Officials at the other banks did not provide comment.
The utility settlement coin would be comprised of a digital cash instrument the banks would use to settle transactions. The coin would be backed by central bank currencies such as the dollar or euro. Banks could spend the digital coin the same as spending the fiat currency that it is backed by. Previously the banks said they had talked to central banks and regulators so that the project is compliant with rules and regulations. It’s seen as the most ambitious project on the blockchain yet. While blockchain has gotten a lot of attention because it’s the technology that underpins cryptocurrency such as Bitcoin, banks have been spending millions of dollars to incorporate the technology into aspects of the financial markets. The idea is to reduce costs, speed up processes and add more transparency.