Six Banks Join UBS's "Utility Coin" Blockchain Project

Here’s a piece of news that the remaining human members of Wall Street’s FX sales and trading desks probably don’t want to hear.

According to the Financial Times, six of the world’s largest banks have decided to join a blockchain project called “utility coin” that will allow banks to settle trades in securities denominated in different currencies without a money transfer. What’s worse, the banks expect to begin live-testing the project late next year.

Here’s the FT:

“Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have teamed up to work on the “utility settlement coin” which was created by Switzerland’s UBS to make financial markets more efficient.


The move comes as the project shifts into a new phase of development, in which its members aim to deepen discussions with central banks and to work on tightening up its data privacy and cyber security protections.”

The project’s managers say they’ve already involved representatives from various central banks…

“Hyder Jaffrey, head of strategic investment and fintech innovation at UBS, said: “We have been in discussions with central banks and regulators and we will continue that over the next 12 months with the aim of a limited ‘go live’ at the back end of 2018.”

Here's a brief explanation of how it's expected to work , courtesy of the FT:

“The utility settlement coin, based on a product developed by Clearmatics Technologies, aims to let financial groups pay each other or to buy securities, such as bonds and equities, without waiting for traditional money transfers to be completed.


Instead they would use digital coins that are directly convertible into cash at central banks, cutting the time, cost and capital required in post-trade settlement and clearing.


The coins, each convertible into different currencies, would be stored using blockchain, or distributed ledger technology, allowing them to be swapped quickly for the financial securities being traded. Existing members of the project are Deutsche Bank, Banco Santander, BNY Mellon and NEX.”

Initially, utility coin will be used primarily for interbank payments, the banks told the FT. Say two institutions owed one another sums denominated in two different currencies. They could settle those payments in utility coin instead of routing payments through an interbank broker. This will only hasten the declining employment of human currency traders, as fewer trades executed via traditional systems means even less business and even more pressure to automate.

To be sure, even after the “utility coin” system is up and running, a broader use-case could still be years away. As the FT notes near the end of the story, the coins can only be used to settle trades involving securities that are trading on a blockchain. While a few companies (notably have successfully issued blockchain-based assets, it could be years – or even decades – before blockchain systems supplant the current market infrastructure.

“Before the coins could be used for settling securities trades, he said the securities themselves will need to be transferred to blockchain systems, otherwise the benefits of speed and reduced capital requirements will be lost.”

Assuming it happens at all. Even if the changeover were to be gradual, it would still require the cooperation of banks, exchanges, brokers, clearing houses etc. This remains unfeasible from a technology perspective. And even once blockchains can reliably achieve economies of scale, any kind of transition would probably take years.


Yen Cross Fri, 09/01/2017 - 02:55 Permalink

 Blockchains are good.  Fake cyber-chits, not so much.  It's important that traders know central banks have created this haberdashery. {sp}      I find it highly unlikely it was intentional, and it just exacerbates[hides] global debt issues.

Manthong Yen Cross Fri, 09/01/2017 - 03:14 Permalink

  So, is this the banker streamlined back office bypass/minimization scam that MERS was (is)? Bankers must be held to the most minute degree of accountability. You like your centralization? You can keep your centralization. Except…. Everything is F’d until the bankers are made liable for their crimes but the law is written that allows them to commit crime with impunity. Extreme measures might well be in order to fix this travesty to justice and the country. An idea…maybe EVERY incumbent that is in office in federal government must be ejected unless they prove they are not owned.
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Unfortunately, that means all but a small handful must be EJECTED.  

In reply to by Yen Cross

Manthong Yen Cross Fri, 09/01/2017 - 03:48 Permalink

 Well Yen, when BTC is good for paying Asian taxes, buying houses, condos, cars,,, paying rent and utilities… Then they have something there. Until then it is good for a pizza or coffee here and there and some progressive merchandisers… but in actuality it is a speculation on an ethereal commodity. …and the government and bankers are focused in on it. ‘Nuff said. 

In reply to by Yen Cross

Greenspazm Yen Cross Fri, 09/01/2017 - 06:18 Permalink

I've asked many times on this forum questions like"So your Buttconn thumb drive is now worth 100 000$ and you are crowing after you only paid 100 $. How do you realize the profit? Does the exchange send you a check or wire the money to your private bank account"?Answers are invariably (a) none or evasive, or  (b) I am called stupid as  a plank because the whole idea is to stay in Buttconn and not exchange it for fiat.So what are the Chinese doing? Paying property agents in Vancouver for real estate purchases direct in Buttconn?

In reply to by Yen Cross

The Wizard Manthong Fri, 09/01/2017 - 08:58 Permalink

I am wondering how this corrects a massive derivative exposure that continues to grow. What is the true value of the assets in one's ledger? What is the basis of the asset?Any time something is digitized, the information is no longer private and it becomes a target to a hacker. Blockchains are so called private databases where one is enrolled with an accounting ledger of assets and liabilities.Governments hate cash and any physical commodity that can be used in a transaction of value for value.

In reply to by Manthong

Debugas Fri, 09/01/2017 - 02:59 Permalink

banks are looking for ways to kill cashthay have not found a good enough alternative to lure people intoBitcoin is not widely accepted as of yetbut to remind you ECU ( european currency unit ) was neither and still we ended up having EUR

aurum4040 Fri, 09/01/2017 - 03:03 Permalink

A few years yes, more then 5 no. It's possible in 2 or 3. The beauty of Ethereum is that any machine can run it anywhere anytime by anyone. It's JavaScript based which is turning into the most popular programming language. All it would take is more nodes, PoS implementation which is coming in September and that's about it other then regs. Which is where 220 company Enterprise Ethereum Alliance comes into play. UBS is a member of the EEA by the way.  

Yen Cross Fri, 09/01/2017 - 03:17 Permalink

 The most important axiom of trading, is understanding what and why the counter-party trade is. As an example; a certain equity breaks below long term support. Do you sell or buy the break?  Most people don't understand the " Central Bank" PUT.  Banks aren't hedging by buying "PUTS"   Banks are hedging against ~central banks~ selling "PUTS"  Traders know that the BoJ,SNB,fed,BIS,BoE, will be the "market" and cover those "PUT buy" options.  The Yellen PUT, is just a guarantee, that a floor is in place.

Panic Mode Fri, 09/01/2017 - 03:39 Permalink

You have to remember that the banks & governments are the mafia, nothing else. They will create their own cryptocurrency party and own the show. Eventually illegalise other cryptocurrencies. It's just the matter of time.

css1971 Fri, 09/01/2017 - 04:40 Permalink

Credit and debt,  banking, works just fine with fiat, gold, Bitcoin, whatever.Interesting. They are talking about doing away with the need for lawyers, clerks, accountants. Who owns what will be defined by lists of blockchain ID's.

East Indian Fri, 09/01/2017 - 04:54 Permalink

Even if it is something you can see and trade only in your dreams, as long as everyone has to spend the same energy to produce it, it is better than the digital diarrhea out of the banksters. 

Hope Copy Fri, 09/01/2017 - 05:31 Permalink

Centralized to the max.. DOA  IBM is already doing this, so this looks like an inside job - kick-back scheme..  hide government sanctioned funds  in their own shitcoin and then a lot of finger pointing and laughing as they will think that they are to big to fail.  Time to go back to monarchies when it comes to bankers.  Remember Louis-Auguste of France.  Some one doesn't want gold to go up.  I think that the US Treasury should put a value on them tactical and stratigic nukes as assets..  Hum, isn't that the usual way the USA has been playing the big financial game?

moorewasthebestbond (not verified) Fri, 09/01/2017 - 06:50 Permalink

How come UBS gets to coin? If UBS coins, we'll all coin. It'll be anarchy.

Cutter Fri, 09/01/2017 - 09:33 Permalink

Just another threat to private cryptos. In addition to government creating their own cryptos and outlawing private cryptos, now banks are creating their own cryptos and blockchain. If the big banks can push their cryptos into the mainstream, likely they will try to crowd out private cryptos, by refusing to accept, deal in, or hold them. Instead of government's heavy hand, it will then be pure greed and market incentives that will limit private cryptos.

And the banks have uncle in their back pocket to assist them in outlawing their private crypto competitors.

sirsmokum (not verified) Fri, 09/01/2017 - 09:45 Permalink

LOL @ banker coin. Good luck making people use your crap by force anymore.  But is good because it will only force more people into the true crypto's.Here is how this is going to work. The more you try to resist the freedom of sound monies the faster you will fall.

gdpetti fannyplucker Fri, 09/01/2017 - 17:12 Permalink

Laundering is for their customers, they don't need to 'launder' for their own interests... all this this is the glue or tie that binds the club's members.... add in the other usual tricks of the trade like keeping track of pedophile proclivities of each member... for some like that Dutch ex-banker on Youtube recently, this was where he encountered his limit.... others don't have any such qualms.If nothing else, this is another example of how the system is going digital SDR in the near future... but all of this is OWO... and the NWO is approaching, and once that settles in, none of this will be needed.

In reply to by fannyplucker