UBS and Clearmatics launched the USC concept in September 2015 to validate the potential benefits of the coin for capital efficiency, settlement, and systemic risk reduction in global financial markets.
Barclays, Canadian Imperial Bank of Commerce, HSBC, Mitsubishi UFJ Financial Group and State Street have agreed to join the UBS-led group that is developing the Utility Settlement Coin (USC), the “Financial Times” reported today (behind paywall). Jaffrey said that the USC will most likely be used in the interbank market to start with, enabling banks to repay each other in different currencies without having to go through the current cross-border settlement infrastructure and instead rely on the potentially more efficient DLT. “With it, banks could significantly reduce the time and cost of post-trade settlement and clearing”.
According to UBS head of FinTech Hyder Jaffrey, the project is now moving into a new phase of development where its member banks are in talks with central banks around the world toward supporting the digital token.
Falcon Private Bank, for example, announced the launch of the first of its crypto-asset management products, becoming the first Swiss bank to directly offer Bitcoin and crypto-asset management. However, he sees the introduction of national digital currencies to take “many years” due to many “public policy questions” he believes will surface before the issuance of a central bank-issued digital currency.
Together with the representatives of banking sector, giants of other spheres actively use blockchain technologies for various purposes. The currency is created to help migrate financial transactions to the Blockchain technology. And now six more major banks have been recruited.
He added that rather than coming in with a “big bang”, its use will be gradually rolled out. The lapse of time is so long, as in order to experience all the benefits of speed and reduced capital requirements, at first the securities themselves will need to be transferred to blockchain systems to be later used for settling securities trades.
In other words, the utility settlement coin allows financial institutions – banks, hedge funds and others -to pay each other or to buy bonds and equities, without waiting for traditional money transfers.