Good news for users of cryptos. There are plans by thirteen of the world’s largest banks, including UBS, Barclays, and Santander, to launch crypto versions of major global currencies in 2020, according to the Financial Times. The banks would be led by UBS and they have been working on crypto, nicknamed Utility Settlement Coin (USC) since 2015 to determine if blockchain can help optimize processes in wholesale banking.

Here Is What This Means

• To make this a reality, the 13 banks, in addition to Nasdaq, have also invested £50 million ($63 million) in a new venture, Fnality, to run the USC project. 
• The USC will make it possible for users to get digital cash instruments to settle their transactions. 
• The system will be denominated in major global currencies including the US dollar, yen, euro, and sterling. 
• Each unit of the crypto denominated in a specific currency will be backed by the corresponding unit of traditional currency, so as to keep the price of the coin stable.
• At the outset, the project will focus on creating niche applications. That is, Fnality will initially focus on creating the necessary market infrastructure that will make the crypto to work. 
• These initial applications will include meeting margin requirements in derivatives trades. A derivative is referred to as the security or financial instrument that depends or derives its value from an underlying asset or group of assets.
• They are simply contracts between two or more parties. The value of such a contract is determined by changes or fluctuations in the asset where it derives its value from.
• Currently, that process takes at least a day to be satisfied, but it would become almost instantaneous with the USC, according to Fnality CEO Rhomaios Ram cited by the Financial Times. 
• Beyond that, the USC could soon make it possible to clear and settle trades immediately. This could prove to be transformational, according to Hyder Jaffrey, head of strategic investments at UBS’ investment bank.

This May Suggest That More Banks Are Finding Blockchain and Cryptos Acceptable

Although this is not assured, USC suggests that banks are gradually finding confidence in blockchain and cryptos. However, these 13 banks will most likely still have to scale some legal and regulatory challenges in their efforts to adopt the technology and will need to prove that the scalability issues that hamstrung early experiments in crypto have been resolved. 

The journey may be a tougher one though. This is because to develop an ecosystem that will be enough to convince the majority of banks and financial institutions (FIs) across the world to throw away existing processes for transaction settling will take time.

Indeed, the USC is a major step towards sealing a major approval for the technology but the end of the road is still far. The weight of the banks backing the USC should help the project secure traction — but this won’t guarantee success.

The Implication of All These

It appears blockchain technology is gradually gaining momentum. Facebook is seriously ready to launch its own crypto solution. The social media network has been busy pushing out efforts to enter financial services via a crypto solution. The solution will aim to provide payment options for its 2 billion users. A 2020 launch date is expected any moment from now. 

A group of banks in Japan is also considering a 2020 calendar date for the launch of the group’s own cryptos. For sure, 2020 is going to be a year of blockchain technology. When these happen, blockchain tech may be signaling that it has become accepted into the mainstream system as a legitimate way of transacting, a hope that has since been hanging unfulfilled. 

Combine all of these with USC, you get to find that cryptos are beginning to gain traction both within retail and institutional settings. 

However, blockchain’s potential would still need to convince more of its believers. The head of Germany’s central bank said, for instance, that its trial of using blockchain to transfer and settle securities didn’t prove to be faster or cheaper than existing processes. Bank of America’s (BofA’s) tech and operations chief, Cathy Bessant, also echoed that she has yet to see a genuine use case that can scale to meet enterprise needs — despite the bank holding or having applied for the most blockchain-related patents among US FIs. 

Should the USC finally work as desired, it would be an end to all these speculations and fear. Repeated over and over again without much concern, blockchain would finally come to stay.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/