Cryptocurrency comes to big finance

09.18.17

The Financial Times reports that six of the world’s biggest banks have joined a project to create a new form of digital cash that they hope to launch next year for clearing and settling financial transactions over blockchain, the technology underpinning bitcoin.

Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have teamed up to work on the “utility settlement coin” which was created by Switzerland’s UBS to make financial markets more efficient.

The move comes as the project shifts into a new phase of development, in which its members aim to deepen discussions with central banks and to work on tightening up its data privacy and cyber security protections.

Blockchain technology is a complex set of algorithms that allows so-called cryptocurrencies — including bitcoin — to be traded and verified electronically over a network of computers without a central ledger. Having initially been skeptical about it because of worries over fraud, banks are now exploring how they can exploit the technology to speed up back-office settlement systems and free billions in capital tied up supporting trades on global markets.

The utility settlement coin, based on a product developed by Clearmatics Technologies, aims to let financial groups pay each other or to buy securities, such as bonds and equities, without waiting for traditional money transfers to be completed. Instead they would use digital coins that are directly convertible into cash at central banks, cutting the time, cost and capital required in post-trade settlement and clearing.

The coins, each convertible into different currencies, would be stored using blockchain, or distributed ledger technology, allowing them to be swapped quickly for the financial securities being traded. (Source: Financial Times))


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