Six global banks join forces to create digital currency

Six of the world’s biggest banks have joined a project to create a new form of digital cash that they hope to launch next year for clearing and settling financial transactions over blockchain, the technology underpinning bitcoin. Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have teamed up to work on the “utility settlement coin” which was created by Switzerland’s UBS to make financial markets more efficient.

Having initially been sceptical about it because of worries over fraud, banks are now exploring how they can exploit the technology to speed up back-office settlement systems and free billions in capital tied up supporting trades on global markets. “The distributed ledger is one of the most innovative technologies out there,” said Lee Braine from the chief technology office of Barclays’ investment bank. “From reducing risk to improving capital efficiency in financial markets we see several benefits of this project.”

The coins, each convertible into different currencies, would be stored using blockchain, or distributed ledger technology, allowing them to be swapped quickly for the financial securities being traded.

Peter Randall, founder of the UK-based Setl, said there were still questions over whether payments using a quasi-central bank currency would be considered certain and risk-free enough to achieve “settlement finality” — reducing the capital and liquid assets that need to be held against them.

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