Six Global Banks Join UBS’ Digital Currency Project

Six Global Banks Join UBS’ Digital Currency Project

Global Banks Go Into Talks Regarding’ Digital Currency Project with Plans to “go live” in 2018

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Six of the world’s biggest banks have expressed an interest in the development of the “Utility Settlement Coin” – a digital currency token developed by the Union Bank of Switzerland (UBS) – prompting a swift gear change in the development of the digital token and pushing the potential launch forward to 2018.

According to The Financial Times, UBS have entered talks with British-based Barclays, the Swiss-based Credit Suisse, Canada’s Imperial Bank of Commerce, HSBC, MUFG and State Street; all of whom are interested in the adoption of digital currently tokens.

The Utility Settlement Coin (USC) will enable financial institutions to trade equities and bonds whilst making payments without the transfer of fiat cash. All transactions will be recorded via blockchain and convertible to other fiat currencies,.

The Utility Settlement Coin has been in development since 2015. The current round of talks with the six big banks has pushed the limited launch date to the end of 2018.

Three global banks have already joined forces with UBS in the development of the digital token – namely BNY Mellon, Deutsche Bank and Santander. A spokesperson for BNY Mellon has expressed excitement that the project will significantly enhance the payment experience.

Central Bank Talks

Head of FinTech at UBS, Hyder Jaffrey, has issued a press release stating that they have been in consultation with central banks and regulators and will continue with the process over the next year. The aim is to implement a limited “go live” towards the end of 2018.

Jaffrey’s report also released details of how the digital currency is expected to be applied to business practice, following its 2018 launch. He stressed that participating banks will use the Utility Settlement Coin to almost instantaneously pay each other, in different currencies. If one bank was in debt by $100 million to a rival, who was in debt by £50 million in the other direction, then the Utility Settlement Coin transaction over blockchain could permit the two institutions to use the digital currency to transfer monies and document the transaction.

In the case of securities trading, Jaffrey insists that all securities would be transferred and accessible over the blockchain before the Utility Settlement Coins are introduced into the transaction to settle bonds and other trading processes. This caution suggests an existing incompatibility within existing infrastructures, with a universal overhaul of the process required before the Utility Settlement Coin can be widely adopted.

Other digital currencies

Coincidentally, other global banking groups are also in the process of creating their own digital currencies. Singapore’s central bank reported plans toward a blockchain-based inter-banking platform in June of this year, revealing details of a digital Dollar trial, using an Ethereum blockchain.

Additionally, China’s central bank has been developing its own digital currency, having completed their trial over blockchain earlier this year. They’ve publicly stated their intention to roll out their own digital currency, which potentially puts UBS’ 2018 “go live” launch date under threat.

Hyder Jaffrey, head of FinTech at UBS, confides that central bank digital currencies could be a death knell for their project to launch the Utility Settlement Coin. However, he believes that a central bank-issued digital currency is many years away due to the complexity involved in addressing the many public policy questions bound to surface as a result of its roll-out.