Today the Utility Settlement Coin project confirmed that it incorporated in the UK as Fnality International and raised a Series A of £50 million ($63m). Fourteen major international banks have backed the institutional stable coin project. Of note in today’s announcement is the changed set of banks. Previous members HSBC and Deutsche Bank did not participate in the funding, and there are several additions including Nasdaq.
Two weeks ago, Reuters reported a rumored fundraising and Ledger Insights explored some of the pros and cons of the USC.
The USC will be an institutional digital currency. Initially there will be digital versions of five currencies Canadian Dollars, Euros, Pounds, Japanese Yen and US Dollars. The USC is for use by financial institutions (only) to make instant settlements. For example, stock and derivative trades could be settled almost immediately. Today there are large centralized clearinghouses that exist because payment is not instant, and hence the intermediary is needed to absorb the risk of a failed payment. The project aims to create a regulated “network of distributed Financial Market Infrastructures (dFMIs)”.
The USC tokens will be 100% backed by central bank money and hence will only be available to financial institutions.
SWIFT is often mistakenly referred to as a payment system. But in fact, it just communicates messages between banks. The banks that send the messages make the payments. By combining both of these functions, and removing the settlement risk, there are potentially significant costs savings.
The USC states it will enable a single pool of funds available for settlement across multiple markets. As opposed to pockets of money tied up separately. That pooled liquidity could also potentially be a huge cost saving, subject to regulators potentially requiring separation.
“Working with our founding shareholders, we will start the regulatory approval process right away and look forward to connecting to the first business applications as soon as possible,” said CEO Rhomaios Ram (formerly with Deutsche Bank). “USC will be an enabler for tokenised markets and also offers a significant opportunity to simplify liquidity management using one cash asset for as many settlement needs as possible.” But that’s expected to be next year.
The founding shareholders
The last published set of member banks dates back to a list of twelve in 2017. Today’s list of 14 banks shares eight members. The former members that have not participated in the funding are HSBC, Deutsche Bank, ICAP, and NEX. Both the Fnality CEO and Chairman spent the bulk of their careers with Deutsche Bank.
The new joiners are Commerzbank, KBC, ING, Lloyds, Nasdaq, and Santander.
Hence the current members are Barclays, BNY Mellon, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds, MUFG, Nasdaq, Santander, SMBC, State Street and UBS.
Apart from the CEO and Chairman the initial board members are from BNY Mellon, CIBC, Credit Suisse, ING, MUFG, Santander and UBS.
The project was initially founded in 2015 by UBS and UK technology company Clearmatics and is based on a permissioned version of Ethereum.