An effort backed by UBS, Barclays, Banco Santander and a dozen other major banks to speed payments using digital coin equivalents of major currencies has been delayed until 2021 due to regulatory issues, according to Reuters.
Fnality, a London-based fintech, is working to create blockchain-based coins representing the euro, Japanese yen, British pound, Canadian dollar, and U.S. dollar, facilitating fast, low-friction payments between financial institutions. By collateralizing these digital currencies with fiat money held in central banks, Fnality aims to offer the stability of those banks, combined with the speed of digital payments.
The project was initially developed by Switzerland-based UBS in 2015 as the “Utility Settlement Coin.” The project’s creators hoped to secure approval in every country and region where it will operate, leading to substantial regulatory hurdles.
In 2019, Banco Santander, Barclays, and Credit Suisse created Fnality International with a GBP 50 million ($65 million) investment in the project. Fnality is led by CEO Rhomaios Ram, a former Deutsche Bank executive. Ram now hopes to launch the project in the first quarter of 2021, pending regulatory approval.
Payments for bonds, securities and the like are slowed by the need for cash to change hands. Fnality seeks to solve that problem through tokenized currencies on a decentralized blockchain system that distributes the payment infrastructure among its users.
The fintech is backed by some of the world’s largest banks and financial institutions, which also include Bank of New York Mellon, Commerzbank, ING Group, Nasdaq, KBC, Mizuho Financial, Lloyds Banking, Canadian Imperial Bank of Commerce, MUFG Bank, Sumitomo Mitsui, and State Street.
One notable absence from the list is JPMorgan Chase, which is working on its own digital currency, JPM Coin, potentially for a similar purpose. The largest bank by assets in the U.S. recently sold its blockchain platform to fintech company Consensys.
The U.S. Federal Reserve has also dipped its toes in these waters. In August, Fed board member Lael Brainard expressed the importance of the central bank staying up to speed with the latest developments in digital coinage and payments, and potentially creating its own technology.
“As part of this research, central banks are exploring the potential of innovative technologies to offer a digital equivalent of cash,” Brainard said in a speech. “We are continuing to assess the opportunities and challenges of, as well as the use cases for, a CBDC [central bank digital currency], as a complement to cash and other payments options.”