Bitcoin's surge in popularity among users and investors has not gone unnoticed by financial institutions.
Six of the world's biggest banks that include: Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG, and State Street have decided the take advantage of the decentralized, distributed digital ledger technology by partnering to create their own cryptocurrency.
The six banks join UBS, BNY Mellon, and several others already on the project.
Security is essential, and is one of the most critical aspects of banking and finance. Not only do banks need to keep people's money secure, they also have to keep transaction records safe, without ever slowing down the verification process.
For this reason, banks and other financial institutions have been learning how to use blockchain, a decentralized, distributed digital ledger technology first created to support the Bitcoin cryptocurrency.
The digital coin they are creating, is called the 'utility settlement coin'. It was developed back in 2015 by financial services firm UBS, and its purpose is to enable the clearing and settling of transactions worldwide over a blockchain.
"The distributed ledger is one of the most innovative technologies out there," said Lee Braine from Barclays. "From reducing risk to improving capital efficiency in financial markets, we see several benefits of this project."
The banks have been in discussions with central bank regulators regarding the cryptocoin.
While blockchain technology can be used for a variety of purposes, its potential for disruption could affect the world of finance. Not to mention its volatile nature.
Projects like the utility settlement coin, can test the technology on a much bigger scale, and shifts the phase of development to tighten up the currency’s issues of data privacy and cybersecurity, if the potential is to be reached.
The ‘utility settlement coin’ isn't meant to rival Bitcoin or other cryptocurrencies, but it will help the banks to develop the blockchain technology necessary to bolster the transparency and exact recordkeeping they want for financial transactions. It will also speed up the transfer of bonds and equity, rather than waiting for the completion of cash transactions.
