In competition with R3 and Swifts blockchain initiative, six of the world’s biggest banks have joined a project to create a new form of digital currency that they hope to launch next year for clearing and settling financial transactions over blockchain.
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.
Hyder Jaffrey, head of strategic investment and FinTech innovation at UBS, said: “We have been in discussions with central banks and regulators and we will continue that over the next 12 months with the aim of a limited ‘go live’ at the back end of 2018.”
Having initially been sceptical about blockchain 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 – according to the FT.