Today the Bank of England (BofE) unveiled a new kind of central bank account that means that Fnality, the firm founded by 15 major financial institutions, will be able to go live once it’s approved. Fnality, formerly known as the Utility Settlement Coin (USC), is designed to enable banks to settle with each other on blockchains using tokenized money based on a common account at the central bank.
Fiat cash on ledger is seen as the missing link to unlock much of blockchain’s potential in an institutional setting because it enables instant settlement removing counterparty risk. A typical scenario where this would be useful is if banks want to conduct securities settlements using a blockchain, an area of significant activity, particularly for bonds.
What the Bank of England announced today was an Omnibus account which ‘co-mingles’ funds from different entities for the purposes of wholesale settlement. The firms that do the co-mingling will be regulated entities with access to central bank money. Fnality has already applied to open an omnibus account.
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