Six new banks have joined a UBS-led group developing a "utility settlement coin" (USC) for financial trading, the Financial Times has reported.
The group was set up last year, when Deutsche Bank, Santander, BNY Melon and broker ICAP announced they would work with UBS to develop the blockchain-based digital currency.
The group will now expand to include Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street, Hyder Jaffrey, head of strategic investment and fintech innovation at UBS told the Financial Times.
There is a version of the USC for each major currency and these will be used for payment and settlement in institutional financial markets. The coin is convertible at parity with a bank deposit in the same currency, and is backed by cash assets held at a central bank.
Blockchain distributed ledger technology is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it can be likened to a type of database that, using cryptography, can be operated as a digital public ledger for recording information, such as the transfer of assets between two or more parties.
UBS has been testing the coin's potential with Clearmatics Technologies since 2015.
The project is now moving into a new phase of development, Jaffrey told the newspaper, with discussions being held with central banks and work underway to improve data privacy and cyber security protections.
The coin is likely to be in use by the end of next year, Jaffrey said, and will initially allow banks to pay each other in different currencies.
Before the coin can be used in securities trading, the securities themselves will need to be transferred to blockchain systems, he said.
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