Bitcoin has made waves in the financial services markets in seemingly countless ways. Once a cryptic mode of payment for cybercriminals and black market deals, the virtual currency is now catching on as a legitimate way to ease payments friction, whether it be through faster settlement times or through easier cross-border transactions.
Key to bitcoin is the blockchain technology on which it runs. Now, one major bank wants to take advantage of the blockchain for its own virtual currency of sorts.
Reports in The Wall Street Journal last week said Swiss banking giant UBS is working on a virtual currency for other banks and financial institutions to more seamlessly settle transactions within the mainstream market.
Market players will likely immediately think of bitcoin in response to UBS’ prototype, a so-called “utility settlement coin.” “But unlike the bitcoin digital currency,” reports said, “the Swiss bank’s proposed ‘utility settlement coin’ would be linked to real-world currencies and central bank accounts.”
[bctt tweet=”Market players will likely immediately think of bitcoin in response to UBS’ prototype.”]
The coin is reportedly being developed in partnership with U.K.-based startup Clearmatics, which develops software on the blockchain to enable businesses to clear and settle payments. According to reports, UBS and Clearmatics are among a growing list of financial players that believe blockchain technology will soon go mainstream to allow for payment settlements in a matter of hours, not days.
Reports said the virtual currency could power payments for banking platforms built on the blockchain, meaning that two different institutions with different platforms could use the same utility coin to settle payments if those platforms are built on blockchain technology.
According to analysts, the blockchain is becoming a more mainstream way for banks to trade. UBS said it is not planning to actually distribute the virtual currency but will look to partner with financial service players like regulators, asset managers and clearing houses to implement the technology. UBS eCommerce Commercial Director Hyder Jaffrey told WSJ that the bank has already begun reaching out to other entities for potential deals, though he did not indicate who the bank is in talks with.
There are some critics that doubt UBS’ new virtual coin will have the effects desired by its developers, however, and reports said that the technology remains in concept stage. But Oliver Bussmann, UBS chief information officer, and Alex Batlin, head of its new cryptocurrency innovation efforts, told reporters that the utility settlement coin has the potential to set off a catalyst of widespread adoption of payments platforms built upon blockchain technology.
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