The group, comprising fourteen financial institutions including some of the world's largest banks, is investing around $60 million in the project to create a "utility settlement coin" (USC). The crypto token is aimed at developing a system to make clearing and settlement in financial markets more efficient.
According to reports, the USC will provide participants with digital cash instruments for transaction settling and will be denominated in and backed by major global currencies, including the US Dollar, Canadian Dollar, Yen, Euro, and Pound Sterling. A new venture, called Fnality International, has been created to run the USC project and is currently working with regulators in several countries to get necessary approvals.
Initial applications for the coin will include meeting margin requirements in derivatives trades, a process that currently takes at least a day to transact, but which would become almost instantaneous with the USC. Beyond that, the USC could soon find use in clearing and settlement of trades, which could prove to be "transformational," say some involved with the project.
"You remove settlement risk, the counterparty risk, the market risk," says Hyder Jaffrey, head of strategic investment at UBS, which is leading the project. "All of those risks add up to costs and inefficiencies in the marketplace."
The founding shareholders of Fnality include Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, MUFG Bank, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Corporation, and UBS. Blockchain R&D company Clearmatics, which initially launched the USC concept with UBS in 2015, continues as a technology partner to Fnality.
The new system could launch in 2020.
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