NEW YORK (Reuters) – a Number of the world’s largest banks are in the process of investing around $50 million for the creation of a digital cash system using blockchain technology to settle financial transactions, according to people familiar with the plans.
FILE PHOTO: Bitcoin.com buttons are seen displayed on the floor of the Consensus 2018 blockchain technology conference in New York City, New York, USA, 16 May 2018. REUTERS/Mike Segar/File Photo
The previously mentioned project, known as the “utility settlement currency,” was first proposed by the Swiss bank UBS Group AG and London-based technology startup Clearmatics in 2015. The goal is to develop a system for the clearing and settlement in financial markets more efficient. (few.rs/2wLsV3c)
A dozen banks to invest in a new entity called Fnality that would run the project, one of the people said.
The deal has not been completed yet, so details may change. The new system could launch in 2020, the person said.
It is unclear what banks participate in the investment round.
Banks, who previously announced that they were working on earlier phases of the project are UBS, Banco Santander, Bank of New York Mellon Corp, State Street Corp, Credit Suisse Group AG, Barclays PLC, HSBC Holdings Plc and Deutsche Bank AG.
“We are a member of the USC Project and can confirm that the Research & Development phase comes to an end,” a spokeswoman for Barclays said in a written statement. She has not comment on the deal.
Representatives for the other banks did not comment.
Blockchain, which for the first time emerged as the software underlying the cryptocurrency bitcoin is a shared ledger of transactions maintained by a network of computers.
Banks and other financial institutions have invested millions of dollars to test new blockchain systems aimed at reducing the cost and complexity of cumbersome processes. These include securities settlement and international payments.
Some projects are deployed at scale so far.
The utility settlement currency, one of the most ambitious of such projects, would consist of a digital cash instrument that banks can use to settle transactions.
The currency would be a digital equivalent of the central bank-backed currencies like the dollar or euro that would run on blockchain-based technology. It would be convertible on parity, and supported by a cash and cash equivalents held with a central bank. The use of the digital currency would be the same as the expenditure of the fiat currency it is paired with.
The group of banks has previously said it was in discussions with the central banks and supervisory authorities to ensure that the project and the structure was in accordance with.
Other initiatives on Wall Street try to test a digital currency represents the fiat currency that would run on blockchain-based technology. JPMorgan Chase & Co announced in February that it had made JPM Currency, a token for enabling instant transfers of payments between institutional accounts.
Reporting by Anna Irrera; Editing by Neal Templin and Phil Berlowitz