Several banks across the globe are seeking to build a blockchain-based settlement system by investing $50 million. An anonymous source unveiled that this project has around 12 banks working together. They plan to create a joint agency named “Fnality”.
However, the source did not mention the names of the banks involved. While the deal is not yet finalized, the partners aim to roll out this project in 2020.
According to a report, this is not the first time that banks are coming together to launch such an initiative. In 2015, Clearmatics, a London-based firm and UBS Group, a Swiss bank came up with a project dubbed “Utility Settlement Coin (USC)”. This project sought to create a system that uses the blockchain to increase the efficiency of clearing and settlement in financial markets. Two years ago, another six banks joined the project.
At the moment, the participating members of USC are Banco Santander, Bank of New York Mellon Corp, State Street Corp, Credit Suisse Group AG, Barclays PLC, HSBC Holdings Plc and Deutsche Bank AG.
USC would be virtual currency whose value is equal to central bank-backed fiats like the Dollar. It would be backed by cash assets held at a central bank. This means spending the coin would be similar to spending the fiat to which it is pegged.
USC in Final Stages of Development
The news of Fnality comes as the Utility Settlement Coin (USC) project nears completion.
A Barclays’ spokesperson commented on the initiative’s development saying,
We are a member of the USC Project and can confirm that the Research & Development phase is coming to an end.
However, the spokesperson did not disclose further details regarding the deal. Representatives from the other banks remained tight-lipped when reached for comments.
The Rise of the Blockchain in the Banking Sector
The blockchain has proved to be instrumental in the financial sector. It has the ability to boost the efficiency of the settlement process between banks while cutting costs. Ripple has created several solutions that seek to address the challenges in the settlement sector. These are xrapid, xcurrent, and xvia. On top of this, the firm unveiled that it had joined hands with over two hundred banks in the world.
JPMorgan Chase, a Wall Street giant also announced that it is working on creating its native crypto asset dubbed JPM Coin. According to the bank, this coin would help enable instant transfers between bank accounts.
In another instance of a bank using the blockchain, the World Bank and the Commonwealth Bank issued a bond on a private blockchain. This project enabled the institution to record all the data related to the bond on a decentralized ledger.
Do you think the blockchain technology has the potential to revolutionize the banking sector? Let us know in comments below.
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