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Major Global Banks Team Up to Create a New Digital Currency

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World’s six largest banks have joined forcesto make a new form of digital currency, the launch for which is scheduled next year. Financial transactions are going to be settled over blockchain, the technology that bitcoin uses. The news was first reported by Financial Times.

Blockchain is a technology that allows users to distribute digital information without being copied. It is one of the most innovative technologies that help in reducing risk and improvingcapital efficiency in financial markets. Though this was originally developed for bitcoin, the financial industry is coming upwith other ways to explore its potential.

The six banks that have signed up for the “utility settlement coin” are Barclays PLC (BCS - Free Report) , Credit Suisse Group AG , Canadian Imperial Bank of Commerce (CM - Free Report) , HSBC Holdings PLC (HSBC - Free Report) , Mitsubishi UFJ Financial Group Inc. and State Street Corporation (STT - Free Report) . This was initiated by UBS AG (UBS - Free Report) to improve the efficiency of markets.

A few major banks like Deutsche Bank AG (DB - Free Report) , Banco Santander, S.A. (SAN - Free Report) and The Bank of New York Mellon Corporation (BK - Free Report) are already involved with UBS on the development of this digital currency. The project has reached that period of development, in which the banksare working on strengthening their data privacy and cyber security protections. Discussions with the central bank and regulators are on and are expected to continue over the next 12 months, after which it is expected to “go live” at the end of 2018.

The main intention behind launching this is to allow financial groups to exchange money without waiting for physical money transfers, which takes a lot more time. Digital coins could be exchanged for cash at central banks and thus help in cutting costs for the banks.

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