Six major banks join blockchain project to build new digital currency

31 Aug 2017

Skyscrapers. Image: Lester Balajadia/Shutterstock

Major changes are afoot among the world’s largest banks with news that six of them are to form a new digital currency to explore blockchain’s potential.

Bitcoin’s surge in popularity with investors and the general public has not gone unnoticed in the world’s largest banks, and now six of them are attempting to catch up with the cryptocurrency’s underlying technology: blockchain.

According to the Financial Times (FT), six of the world’s largest banks – Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street – are signing up to a new digital currency.

Expected to launch next year, the ‘utility settlement coin’ will not be a rival to bitcoin, but will help the banks to develop the blockchain technology necessary to bolster the transparency and exact recordkeeping they want for financial transactions.

The coin was first revealed by Swiss financial services firm UBS and, with many major banks now on board, it is set to shift to a new phase of development to tighten up the currency’s issues of data privacy and cybersecurity.

“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,” said UBS’s head of strategic investment and fintech innovation, Hyder Jaffrey, to FT.

He added that rather than coming in with a “big bang”, its use will be gradually rolled out.

An incredibly valuable asset to banks

When operational, the utility settlement coin will be used by the banks to speed up the transfer of bonds and equity, rather than waiting for the completion of cash transactions.

With the six banks having already signed up the coin, each will have cash value that can be instantly converted into whichever currency is necessary.

Lee Braine, a member of the Barclays CTO team, said that blockchain will be an incredibly valuable asset to banks.

“The distributed ledger is one of the most innovative technologies out there. From reducing risk to improving capital efficiency in financial markets, we see several benefits of this project.”

Jaffrey did admit that this new currency could become obsolete if the banks decide to create their own cryptocurrencies and follow the unlikely lead of Burger King.

However, he added that it could be some time before this would be a reality.

Skyscrapers. Image: Lester Balajadia/Shutterstock

Updated, 4.33pm, 1 September 2017: This article was updated to clarify Lee Braine’s role at Barclays.

Colm Gorey was a senior journalist with Silicon Republic