UBS Develops ‘Settlement Coin,’ Bringing Block Chain To Financial Markets


UBS is working on a block chain based “settlement coin” that financial institutions will use, according to The Wall Street Journal. Unlike bitcoin, the UBS “utility settlement coin” would link to real-world currencies and central bank accounts.

Oliver Bussmann

Oliver Bussmann

Oliver Bussmann, CIO of Switzerland-based UBS, said the coin will help establish the block chain in global finance. The currency, being developed with Clearmatics, a London-based firm that makes clearing machines for OTC markets, could reduce transaction settlement times. The coin could reduce settlement time from two or three days to a matter of seconds.

UBS’ new cryptocurrency lab in London is leading the initiative, according to Financial News, a London-based newspaper.

Bank Will Use The Coin With Market Players

Alex Batlin, head of the UBS lab, said the bank does not plan to issue the digital coin itself. Instead, UBS will work with other market participants such as buy-side firms, regulators and market structure providers for an industry-wide product.

“Obviously we need to collaborate with other parties around the market in the space, with the regulators, with the central banks, to take this forward,” said Hyder Jaffrey, e-commerce commercial director at UBS Investment Bank.

The bank also said it is collaborating with BNY Mellon on separate block chain projects.

Bussmann said at a recent press briefing that the bank has identified 20 to 25 potential uses for block chain technology in finance. He said there are also limitations, including the block chain’s ability to handle large volumes of transactions.

Also read: Global financial research institute seeks grant proposals on block chain capabilities

Institutions Must Consider Block Chain Limitations

“The limitation is scale,” Bussmann said. “It (the block chain) still can’t handle the volumes that we handle in our traditional business.”

In April, UBS became one of the first big financial institutions to reveal its block chain plans when it launched a lab in the fintech accelerator space Level39 at Canary Wharf to experiment with the technology.

UBS also unveiled other projects developed at the lab, including a prototype for a smart bond platform built on Ethereum, a type of block chain.

The smart bond platform enables the issuance of bonds through distributed ledger technology. The bonds would be “smart contracts,” programmed to pay out coupons automatically. The bank does not plan to bring the platform to market in the short term, but executives said the prototype proved the technology’s potential.

Featured image from Pincasso / Shutterstock.