Bitcoin: Credit Suisse joins UBS-lead blockchain project

Several major banks have joined a project called Utility Settlement Coin (USC) that is intended to facilitate the issuance by central banks around the world of currencies using Blockchain technology.

Six international banks: Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have joined up with UBS to develop a new digital cash system using the blockchain. BNY Mellon, Deutsche Bank, Santander and the blockchain company Clearmatics joined the project back in 2015.

The USC is a collateralized digital coin that banks could use to pay one another or to buy securities more quickly. While traditional money transfers take a while to occur, the USC would use a distributed ledger—a blockchain, like the one that underpins bitcoin—to record transactions quickly and allow payment tokens to go straight to the owner of the asset being sold, rather than passing through clearinghouses.
Unlike bitcoin, the USC would not be its own cryptocurrency, acting rather as a convertible stand-in for major currencies.

According to project co-founder and UBS Head of Strategic Investment and Fintech, Hyder Jaffrey, the project will serve as a stepping stone to a future in which central banks around the world are already utilizing their own virtual currencies.

"It may well inform the way central banks choose to move things forward. We see it as a stepping stone to a future where central banks issue their own [cryptocurrency] at some point."

But before the platform can become just that, Jaffrey and the USC team are prioritizing further development, having created a kind of testnet for the project that seeks to back cryptotokens with collateral.

Part of the group's third phase revealed today is the testing of a formal transfer of ownership and an accurate cash equivalents definition for the transfer, in an effort to mimic what a real-time end-to-end transaction between members would look like.

More and more banks, and governments, for that matter, are coming round to the idea that the blockchain is where future payments will take place.

As a decentralised ledger, it means faster payments can take place, across borders, without fees or third-party verification. This is something Circle, the peer-to-peer payments app has taken advantage of.

As well, several countries around the world are exploring incorporating digital currencies into circulation. Ecuador was the first government to introduce a state-run electronic payment system back in 2015.

UBS says it is in discussions with central banks and regulators about its USC digital currency and it could be live as early as 2018.