Banks & Cryptos

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Banks now plan to employ cryptocurrencies and cryptos like Bitcoin and Ethereum have been in existence for quite some time now. Every year, crypto money is getting popular and adopted by more and more firms for their transactions. However, central banks, the guardians of official money, have yet not embraced this new technology. Nonetheless, seeing the range of benefits that cryptocurrencies come with, banks are on their way to joining hands with this form of currency.

Many projects are underway where banks are exploring the use of cryptocurrencies and how they can benefit from this form of money. UBS, the colossal Swiss banking unit, along with 10 other firms, is planning to use the technology behind bitcoin, which is blockchain or distributed ledger, in order to form their own digital form of currency (paywall).

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Taking cue from UBS and affiliated companies, other big central banks across the world are following the suit. Some of the other banks, including HSBC and Barclays, have also recently joined this venture of cryptocurrency (named ‘utility settlement coin’), which was launched by UBS as well as Clearmatic Technologies in the year 2015. This is done in order to expand a new and modern payment mechanism for internal purposes in institutions. In fact, the new technology can possibly replace clearinghouses as well as other back-office measures that take place between asset sellers and buyers.

‘Utility Settlement Coin’ Project

The head of blockchain projects at BNY Mellon, Alex Batlin, also led the work on this utility settlement coin project when it was introduced at UBS. He says that the blockchain technology promises to reconstruct finance in a whole new way and this project is its prototype. According to him, blockchain is a very strong and flexible technology with unhackable powers. No one has yet been able to crack this technology. And, still the technology is entirely open and can be accessed by everyone.

At the end of the project, the UBS group hopes to produce something more reliable, cheaper, as well as quicker as compared to the existing financial systems. As the name of the project goes, utility settlement coin, each coin will symbolize fiat currency such as dollars and euros in a group and this is why it will be fully supported by collateral at the state’s central bank as per the Swiss banking giant. Moreover, the other main idea behind this project is that the exchange of cryptocurrency as asset payment system will be more effective as compared to the traditional system.

As mentioned above, UBS will keep collateral in support of cryptocurrency. This means that the digital money will have the backing of cash at the domestic central bank. This, in turn, cannot fail, since central banks can print money if required, thus making crypto coins free from any risk of credit. Moreover, with the new technology, the ownership and transfer of money would be really quick. However, questions such as would blockchain be able to manage the huge volume of data that institutions and banks have still loom at the forefront.

Nonetheless, cryptocurrencies are surely the better means of exchanging money as seen by their increasing popularity and usage. This form of currency is quick as well as fully secure. This is why banks and big companies should go for it.

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