(BlockBar) Blockchain technology got a boost when14 major financial firms led by the Swiss multinational investment bank UBS Group AG have come together in developing a blockchain-based digital currency for use in instant cross-border payment. London based new firm known as Fnality International will be heading the project. It is worth noting that the firm is backed with £50 million ($63 million) in capital from the 14 financial institutions.
The financial institutions are spread across Europe, Japan, and the US. Some of the participating banks include MUFG Bank,, America’s State Street, Credit Suisse, Barclays of Europe etc.
To use in facilitating cheaper and faster money transfers by cutting out middlemen, the financial firms are creating the Utility Settlement Coin (USC). Fnality will create accounts with central banks and issue USC tokens. These will be digitally pegged on a one-to-one basis with major currencies. If a user sends money from Europe to the United States, a local bank deposits the amount in Euros to the central bank.Then, Fnality issues an equivalent amount of USC coin at the specified US bank and later the bank sends dollars to the recipient.
To be noted, the USC digital token is backed by central banks and there is no price volatility unlike with most cryptocurrencies. But initially the new payment system will be limited to a few select major currencies which are USD, euros, pounds, yen, and the Canadian dollar. Fnality plans to issue its first batch of USC coins in late 2020. This is good news as the new digital token comes in handy as cross-border transfers involve multiple steps and also involve third parties. The situation even becomes more expensive if the transaction involves different currencies.
The USC coin is only similar to Bitcoin or other cryptocurrencies because it uses blockchain technology. However, the USC coin is also different in that it is only used by financial institutions. What can be seen now is a new trend in which banks are launching their own private digital coins to be used by their clients only. Even the central banks are also investigating the possibility of issuing their own digital currencies.