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Bitcoin is just the beginning for Digital Currency

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Even skeptics agree that Bitcoin has heralded something huge for finance. It is promises to be just the first of a range of different digital currencies. In fact, in the same way that fiat currencies are traded against each other on world markets now, it could be that digital currencies are traded on exchanges against one another in the future.

Towards the end of 2017, six of the world’s biggest banks (Barclays, Credit Suisse, Imperial Bank of Commerce, MUFG and State Street) began a project to launch a new digital currency later this year with the ultimate aim of clearing and settling financial transactions over blockchain, the same technology that underpins Bitcoin.

The same six banks have teamed up with a further bank, Swiss bank UBS, to collaborate on the ‘utility settlement coin’ which aims to make financial markets more efficient. This project also aims to go live towards the end of 2018. Both developments are clear signs that banks are exploring how to exploit digital currency and the technology that underpins it.

The utility settlement coin being developed by the banks in question aims to facilitate them pay each other or to buy securities without waiting for traditional money transfers to be completed, as is currently the case. Under the new system, they would pay with digital coins – directly convertible to cash – in turn reducing the time and cost involved in post-trade clearing.

In addition, the coins will be convertible into different currencies (the main currency of Barclays being Sterling, Credit Suisse being Swiss Franc, etc) with zero friction. The speed of the transactions will be reduced to a mouse click, as is the case with Bitcoin. In theory, the capital and liquid assets required by banks would also fall.

The fact that these innovations are occuring in 2018 – just ten years after the initial creation of Bitcoin – is an indication of the progress, in terms of recognition and technology development, which is being made in digital currencies. Is it outlandish to think that, before too long, those same banks will be allowing clients to make deposits in Bitcoin?

 

Jacob Lucas

Jacob Lucas

Jacob has been active in the cryptocurrency markets since 2010, specializing in Bitcoin. He received education as Certified public accountant, specializing in taxes and cost management. Looking for alternative sources of income due to some personal struggles Jacob discovered Bitcoin 2010, showing some commitment and first to learn and get all the basics. Jacob made his fists investment in bitcoin in 2011 and has been successful in the field. Writing in the field is part of Jacob’s commitment to share knowledge with others.

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