US, EU banks partner up for digital currency
(23 August 2016 – Europe) Four of Europe's and the US’s largest banks have partnered up to deliver a “digital-only” cash system, with the aim of launching in two years' time.
BNY Mellon, Deutsche Bank and Santander, in addition to UK brokerage ICAP, will join UBS to develop the Utility Settlement Coin (USC), promising a quicker and more efficient alternative to the current clearing and settlement process.
The coin will be aimed at banks' institutional clients and will use blockchain.
"Digital cash is a core component of a future financial market fabric based on blockchain technologies," said Hyder Jaffrey, UBS Investment Bank head of strategic investment and financial technology innovation.
The Swiss bank highlighted that the USC could decrease the complexity and time taken to settle trades, cutting risk and improving capital efficiency for users.
However, the key to the new technology’s success is widespread adoption by financial institutions. Currently banks across the world are in the process of developing their own blockchain technology, or participating with other lenders and technology firms.
UBS is in discussion with regulators to determine how the USC should function to get regulatory backing. The bank may then look to get more institutions involved.
"Recent discussion of digital currencies by central banks and regulators has confirmed their potential significance. The USC is an essential step towards a future financial market on distributed ledger technologies," Julio Faura, head of research and development at Santander, said in a media statement.
The USC would be based on cash assets, with versions available in major currencies, including the US dollar, euro, sterling and Swiss franc, and would be convertible at parity with a bank deposit.
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