Last week Reuters reported that several of the world’s biggest banks have invested $50 million to “create a digital cash system to settle financial transactions”. It’s an on-going project, according to the report, involving the likes UBS, Credit Suisse, Barclays, and Deutsche Bank.
Banks are being tight-lipped on the project, and it should be noted that Reuters’ report involved an unnamed source, but there was a confirmation from a Barclays’ spokeswoman that the bank is involved in the USC (utility settlement coin) project and that the research and development stage had come to an end.
Any mainstream interest in cryptocurrency and blockchain is always significant, of course. But should it determine whether we buy Bitcoin or other digital currencies? That is to say, should backers of crypto be worried that banks creating their own digital currency be worried that the likes of Bitcoin, Ripple, etc. will be shunted aside?
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In truth, investors in cryptocurrencies shouldn’t worry too much, certainly in the short term. Financial institutions have been notoriously slow in not only embracing the possibilities of blockchain technology but in addressing the problems that they are trying to solve.
The new entity banks are reported to be creating to run the project, Fnality, is aimed at making clearing and settlement in financial markets more efficient. This is not a new issue, but something that has made financial transactions cumbersome for decades.
The point is, one could argue, that while financial institutions are addressing issues that have been around since the 1970s, those developing cryptocurrencies could be stealing a march on financial solutions for the 2020s. Banks will be looking for solutions to long-standing problems, whereas developers will be looking for solutions to problems that have not yet been pinpointed.