World’s Biggest Banks Team Up To Create Blockchain Digital Currency
Some of the world’s largest banks have partnered with a London financial firm to create a blockchain-based digital currency. Banks from Japan, Europe, and the United States plan to issue a utility settlement coin, or USC, that makes cross-border payments more efficient.
The banks have teamed up with London’s Fnality International. The firm has received $63.1 million in financing from 14 banks worldwide, including Barclays of Europe, US-based State Street, Japan’s MUFT Bank and Sumitomo Mitsui Banking Corp, along with UBS and Credit Suisse. Each Japanese bank has reportedly contributed “several hundred million yen”.
Banks have become increasingly interested in blockchain-based international payment solutions in recent years. Blockchain has a proven ability to reduce the cost of cross-border payments, lowering fees, cutting out middlemen, and boosting speed. Banks can transfer money between currencies worldwide more quickly using a blockchain-based settlement coin – like the utility settlement coin proposed here – than a traditional payment solution.
We’ve seen banks partner with Ripple and xRapid, which uses the XRP token, for precisely this reason. Catered to financial institutions, Ripple’s xRapid technology allows banks to transfer money more efficiently worldwide without relying on costly middlemen.
In the United States, Wall Street giant JPMorgan has been experimenting with its own settlement token, the JPMorgan Coin. That coin is already in use among a small number of JPMorgan’s institutional clients, where it’s used to facilitate cheaper cross-border transactions.
JPMorgan CEO Jamie Dimon, who has previously made headlines for his anti-bitcoin sentiment, praised the digital token in a recent statement and hinted about its future uses:
“JPMorgan Coin could be internal, could be commercial; it could one day be consumer.”
In other words, you may be able to purchase JPMorgan Coin from crypto exchanges in the future – just like you can purchase XRP today.
How The Fnality International Settlement Token Will Work
The utility settlement coin being proposed by Fnality International will likely work in a similar way to JPMorgan Coin instead of XRP. It will be used internally and unavailable to the general public.
As CCN reports:
“Fnality will set up accounts at participating central banks and issue these USCs as digital equivalents of major currencies. These then get converted into their paired currencies on a one-to-one basis.”
In other words, there will be a utility settlement coin for the USD, for example, as well as the EUR and other major fiat currencies. The process relies on a unique solution: partnering with each country’s central bank.
The digital token will come into effect when a client transfers money from one country to the other.
Let’s say a client wants to transfer money from Japan to the United States.
Under the proposed USC system, a bank in Japan can send money to a bank in the United States with minimal friction along the way. The Japanese bank will transfer the specified amount of Yen to Japan’s central bank, then Fnality will issue the equivalent amount of USCs, depositing them into an account at a specified American bank. The American bank will then immediately send an equal amount of dollars into the end client’s account. An international transfer has been completed at a lower cost and higher speed.
The higher speed of the blockchain-based settlement solution comes with another advantage: less risk of being affected by exchange rate fluctuations. Foreign exchange rates change constantly. A difference of a few hundredths of a percentage point might mean nothing when transferring $100, but it can be significant when transferring $1 billion.
Overall, this system is expected to vastly improve on today’s system where cross-border payments go through multiple steps between two parties, adding fees and other costs to every international transaction. A blockchain-based USC can eliminate the foreign exchange part of the international transfer, allowing for more efficient payments.
Initially, the 14 banks and Fnality will setup the utility settlement coin to work with USD, Euros, Pounds, Yen, and Canadian dollars.
The first USC is expected to be issued by late 2020.
- Source: First Appeared Here
- Published Time: 2019-06-03 20:40:53
The views and opinions expressed in the article World’s Biggest Banks Team Up to Create Blockchain Digital Currency Utility Settlement Coin (USC) do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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