Major banks around the globe have decided to mint their own digital currencies based on the Blockchain tech in order to help them settle overseas money transfers instantly at a minimal cost. The project is being headed by Fnality International and boasts of 14 bank partners from around the world who contributed 50 million pounds in the capital for the project.
The 14 participating banks include Japan’s MUFG Bank and Sumitomo Mitsui Banking Corp.; UBS, Credit Suisse and Barclays of Europe; and U.S.-based State Street.
How Would Utility Settlement Token Project Function?
Fnality would set up a digital token account at all the participating central banks, these accounts would be used to send utility settlement coins or USCs, which will be equivalent to major currencies that can be later converted to their paired currencies on a one-to-one basis.
Suppose the bank of Japan sends a certain amount of Japanese Yuan to a bank in the US, then Fnality would send an equivalent amount of USC to that specified US Bank, which the bank in the US can convert back to US dollar and send it to the user’s account.
The USC will be backed all the participating central banks which would enable the system to mitigate the price fluctuation risk, and thus help in creating a modern-day interbank transfer. This system can also prove more beneficial than using the actual cryptocurrencies since they have high price volatility.
Fnality is also looking forward to talking with the representative of these central banks in order to set up USB accounts. The current traditional method of sending money across borders involve third-party intermediaries and if there are different currencies, then Foreign exchange comes into the picture as well which add a ton to the service cost.
The use of digital utility currency would eliminate any third-party or different currency use, thus helping in transferring almost instantly at a minimal cost. In laymen terms, the use of utility settlement tokens would have all the benefits of the blockchain-based financial network, without the drawbacks of cryptocurrency price fluctuations as well as complexities involved with regulations.