Blockchain: Some remarkable announcements part II
| 05-09-2016 | Carlo de Meijer |
While Blockchain is seen by many as a network phenomenon that needs large market participation, collaboration and interoperability to succeed, both R3CEV and a group of four large global banks came with announcements that are at least a bit remarkable. The bank-backed consortium had filed for a patent of Corda (which is contradictory to the need for open standards and protocols), and at the same time a small group of R3 consortium members have expressed their wish to create their own digital currency (while large collaboration is needed).
Utility Settlement Coin
A second remarkable announcement was that of a number of large global banks to create their own digital currency. This plan could be seen as another example of going alone, or at least with just a limited number of players, while large scale collaboration is required for more massive adoption of this technology.
Separately, a group of four R3 consortium members, including BNY Mellon, Deutsche Bank, Icap and Santander have joined with UBS and Clearmatics to a blockchain based transaction settlement project called the Utility Settlement Coin (USC), and plan tests in a real-world environment.
What is USC?
USC is an asset backed digital cash instrument implemented on distributed ledger technology. The USC is focused on facilitating a new model for digital central bank cash. (By the way, there are several digital cash models being explored). USC is aimed at facilitating payments and settlement for use within global institutional financial markets. Using this technology could contribute to more efficient transactions in terms of speed and lower costs.
USC is aimed as a service of cash assets, with a version for each of the major currencies and USC is convertible at par with a bank deposit in the correspondent currency. USC is fulltime backed by current assets held at a central bank. Sending a USC will be sending its paired real world currency.
Going forward
The group will collectively build of on earlier experiments by UBS and blockchain software company Clearmatics. They launched the concept in September 2015 to validate the potential benefits of USC for capital efficiency, settlement and systemic risk reduction and as a forerunner for central bank backed digital cash issuance. The virtual coin will act as a proxy for physical currency assets held in deposit at the central bank.
“The focus of the work will consist of financial structuring of the USC and wider market structure implications, as well as market integration points for a fully operational utility settlement coin for future use by institutions” according to the group.
The USC concept will be developed through a series of short repetitive phases and platform developments. At each stage the aim is to increase the number of market participants, broadening engagement, connectivity and network effects. That virtual currency, USC, should go live in 2018.
Active dialogue
Active dialogue with central banks and regulators will continue to ensure a regulation compliant, robust and efficient structure within which the USC can be deployed. Recent discussion of digital currencies by central banks and regulators has confirmed their potential significance.
Read more remarkable Blockchain announcements in the first part of this article.
Economist and researcher
