A consortium of 6 of the world's largest banks, including Barclays and HSBC, are planning to use distributed ledger technology for their own digital currency. The "digital settlement coin" could potentially replace clearinghouses and other back-office plumbing. Because the digital coins will be backed by cash at the central bank, which cannot default, the tokens will not hold any credit risk.
The world’s biggest banks aren’t immune from cryptocurrency euphoria, with a range of projects underway to explore how traditional financial firms can benefit from the innovation. Swiss banking giant UBS and 10 other companies say that they plan to use the technical idea behind bitcoin—a distributed ledger called a blockchain—for their own digital currency (paywall). This could show the way for the world’s biggest central banks to do the same. Banks like Barclays and HSBC are the latest to join the “utility settlement coin” project, started by UBS and Clearmatics Technologies in 2015. The idea is to develop a new, streamlined payment mechanism for institutional purposes. According to CoinDesk, it could potentially replace clearinghouses and other back-office plumbing that sits between buyers and sellers of assets.