Digital Currency Plan to Develop by 4 Big Banks
Digital Currency to Coin by Big Banks
In the previous article Bitcoin is the Future’s Currency, it was mentioned that Swiss bank is interested with Digital Currency and they are studying how it works. Now, the world’s four biggest banks joined together to create a new digital currency which they believe will be a standard of the industry to settle and clear the monetary trades over the technology behind bitcoin, the blockchain.
4 Banks to Create New Digital Currency
The four banks which joined forces to create a new digital currency are BNY Mellon, Santander, Deutsche Bank and Swiss bank, the bank that started it all. They are also joined by the broker ICAP. They are aiming to launch commercially early next year.
Banks are initially skeptical about the idea because they are worrying about fraudulent activity. Today, they want to take advantage of the technology to create a quick, cost-efficient and easy money transaction.
More or less the total cost of the financial industry in settling and clearing trades is at $65bn to %80bn yearly. This is according to the report of Oliver Wyman last year.
There are other competitor digital currency systems that are being created. A London based group, Setl which was founded by trading executives and hedge fund investors also wants to settle the payments in financial market with digital cash connected straight to the central banks.
Citicoin solution is developing by Citigroup. SETLcoin on the other hand was filed a patent by Goldman Sachs which lets trades to be established almost in an instant. There is also JP Morgan who is working on the same project as well.
This utility settlement coin purpose is to allow financial organizations for security payment like equities and bonds, without waiting for the completion of the financial transaction. They will instead use the digital coins that can be converted directly into cash at the central banks, eliminating the cost and time of clearing and settlement of post-trade.
The digital currency will be convertible into other different currencies, it would be kept with the use of blockchain, or the distributed ledger, lets them to instantly exchange for the traded financial securities.
According to Hyder Jaffrey, the fintech head of UBS innovation, “you need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies,”, furthermore he added, “What that allows us to do is to take away the time these processes take, such as waiting for payment to arrive. That frees up capital trapped during the process.”
Jaffrey said that their team on the said project would spend the following year looking for the cooperation and the approval of the central banks and regulators. They are aiming for a less risky launch commercially early on 2018.
The members of the team are planning to argue about the transparency improvement of the system for the regulators.
The bank of Canada, England and the US Federal Reserve are examining the digital currencies potential benefits among other central banks. However, there are concerns over the banking stability impact and the security. The Accenture’ capital markets blockchain practice head, David Treat said that at the meantime the technology is at the point of having 3 or more years before it they get scale adopted and 5 or more years before its mainstream.