Security is one of the most critical aspects of banking and finance. Not only do banks need to keep money secure, they also have to keep transaction records safe, all while not slowing down the verification process.
That's why banks and other financial institutions have been taking a good hard look at blockchain, a decentralized, distributed digital ledger technology first created to support the bitcoin cryptocurrency. Now, six of those banks have decided the best way to take advantage of blockchain is by partnering on their own cryptocurrency.
The digital coin, which they are calling the "utility settlement coin," 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 six new banks — Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG, and State Street — join UBS, BNY Mellon, and several others already on the project.
“The distributed ledger is one of the most innovative technologies out there,” Lee Braine from Barclays told The Financial Times. “From reducing risk to improving capital efficiency in financial markets, we see several benefits of this project.”
The new cryptocurrency is slated for a limited back end run by 2018, and the banks have been in discussions with central bank regulators regarding the cryptocoin.
While blockchain technology can be used for a variety of purposes — distributing aid, fighting climate change, tracking electricity in the grid, etc. — its potential for disruption is perhaps still greatest in the world of finance. Projects like the utility settlement coin, which can test the tech on a bigger scale, will be essential if that potential is to be reached.
Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.