Having kept their distance from bitcoin, fearing the risks of fraud and criminality, big banks now see huge potential benefits from harnessing the blockchain to make the existing financial system more efficient.
“In today’s banking world, it is all about cost savings, as they are all struggling with low returns and
that is why they are all locking on to the blockchain,” says Richard Lumb, head of financial services at Accenture, in an article in the FT.
The latest example of big banks organising themselves to exploit the potential of blockchain technology came this week with the announcement that four big lenders have teamed up to develop a “utility settlement coin” — a new form of digital cash.
The four banks — UBS, Santander, Deutsche Bank and BNY Mellon, which are working with UK broker ICAP and developer Clearmatics Technologies — stress that they are not creating a new cryptocurrency.
Instead, the system they are developing uses blockchain technology to create different coins that are each directly convertible into existing currencies deposited at central banks. In essence, it is a way of putting dollars, euros and pounds on the blockchain.
While other digital cash projects are being examined by banks — such as Citigroup’s Citicoin or Goldman Sachs’ “SETLcoin” — this is the first time several institutions have teamed up to create a digital cash utility for use in financial markets.