Some of the world’s largest banks are teaming up to create a blockchain-powered digital cash system, which will be used to settle financial transactions, Reuters reports.
The investment is worth around $50 million as the banks work closely to form a new entity, called Fnality, which would operate the new system. Reuters’s story also adds that the new project is expected to go live in 2020.
The aim is to develop a utility settlement coin (USC), which would be designed in an equivalent manner as a conventional currency backed by the state bank. The coin would be convertible at parity and backed by cash assets held at central bank.
“We are a member of the USC Project and can confirm that the Research & Development phase is coming to an end,” a spokeswoman for Barclays said in a written statement. She did not comment on the deal.
This news comes only a couple of days after Newconomy covered the latest report from the Spanish banking giant Banco Santander, which estimated that banks can reduce costs associated with “cross-border payments, securities trading, and regulatory compliance” by $15-20 billion annually.
Officially, it is not clear which banks are taking part in the USC project, although Reuters reported two years ago that Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street, led by the Swiss banking giant UBS, were working together to “create a digital cash system that would allow financial markets to make payments and settle transactions quickly via blockchain technology”.
“The group is in discussions with central banks and regulators and is aiming for a limited ‘go live’ in the latter part of 2018,” said at the time Hyder Jaffrey, head of strategic investment and fintech innovation at UBS.
It is unknown at this stage whether a live test exercise has taken place so far.
In February, Newconomy reported that the world’s biggest bank, JP Morgan & Chase, will issue its own cryptocurrency – JPM Coin, to be used in the payments business. The JPM Coin is expected to go live in the coming months.