Global Banks From Europe, Asia, and the U.S. Join Hands For a New Digital Token

After criticizing cryptocurrencies for many years, banking institutions across the globe are looking into having their own digital currencies to facilitate instant cross-border payments and settlements. According to a recent report from the Wall Street Journal, 14 major banks across Europe, Asia, and the U.S. are planning to launch a new digital token called the Utility Settlement Coin (USC) for instant money transfers by lowering the transaction costs.

The 14 participants bank include Japan's MUFG Bank and Sumitomo Mitsui Banking Corp.; Europe’s UBS, Credit Suisse and Barclays, and the U.S.-based State Street. The new digital currency projects will be seen by a newly established company called Fnality Investments established by these banking institutions by pouring $63million initial investment.

Fnality will then set accounts at each of the participating banks and issue the USC tokens, the digital equivalent of many currencies and convert them into the paired currencies on one-to-one basis.

The USC token will be working on a new permissioned blockchain platform that has limited access only to the participating banks. The idea is to leverage the benefits of instant funds transfers at lower costs and reduced risks.

Speaking to the Wall Street Journal, UBS Investment Strategy head Hyder Jaffrey said: “You remove settlement risk, the counterparty risk, the market risk. All of those risks add up to costs and inefficiencies in the marketplace.”

It is clear that the Utility Settlement Coin (USC) will be available only for commercial use for inter-bank settlements across the globe and is less likely to be available for retail purpose. The WSJ report states that besides working as a payment device, the USC token will act as a “messenger that carries all the information required to complete a trade”.

Earlier this year in February 2019, Wall Street banking giant JP Morgan announced it’s JPM Coin as a step to achieve quick and instant settlements with its global clients. JP Morgan also plans to leverage the blockchain tech for its native crypto token which will most likely be available for commercial use only.