Big Banks Want to Use Digital Cash to Cut Costs and Speed Transactionsby
UBS joined by ICAP, Deutsche Bank, Santander, BNY Mellon
Banks are trying to speed transactions that can take days
UBS Group AG and peers on both sides of the Atlantic plan to seek regulatory approval to use a new form of digital cash to settle financial transactions, cutting costs and time.
UBS, which pioneered the “utility settlement coin,” is joining forces with Deutsche Bank AG, Banco Santander SA, ICAP Plc and Bank of New York Mellon Corp. to test the system in a “real-market” environment, the Zurich-based bank said in a statement on Wednesday. The project uses blockchain, the technology underpinning bitcoin, to let firms pay for securities without waiting to complete traditional money transfers.
“Today’s settlement and clearing is a process involving many institutions,” Paul Maley, managing director at Deutsche Bank’s Institutional Client Group, said in the statement. “It’s vital that we collaborate with our peers to develop viable alternatives to current models, creating new digital capabilities for the financial services industry.”
The idea of using digital cash on a blockchain ledger has captivated Wall Street executives because it could speed transactions and free up capital. Investment banks including Citigroup Inc. also have projects in the works, hoping to improve upon the financial industry’s existing system, which can take days to move money across town or around the world, tying up billions of dollars.
The consortium will argue the system would improve transparency for regulators. They will continue the dialogue with central banks and regulators to ensure USC is compliant with regulation. The companies plan to add more firms as the project progresses, UBS said in the statement.
“Digital cash is a core component of a future financial market fabric based on blockchain technologies,” Hyder Jaffrey, head of strategic investment and FinTech innovation at UBS’s securities unit, said in the statement. “The utility settlement coin is focused on facilitating a new model for digital central bank cash.”