Major financial institutions – Barclay’s, Citigroup and Banco Santander – are looking at developing their own peer-to-peer decentralized digital currencies as they are experimenting with the blockchain system, which has been enabling bitcoin to be the premier virtual currency.
Goldman Sachs is the latest big bank to establish its own virtual currency system that looks to transform the landscape of securities transactions. This was discovered after it was revealed by a U.S. patent application filed by the one of the largest investment banks in the world.
Called SETLcoin, the latest technology would revolutionize the securities clearing system when an intermediary agrees and modifies terms between buyers and sellers of various stocks, bonds and other financial investments prior.
Here is what a part of the application states:
“An SETLcoin wallet or transaction can house a single security, as described above, or multiple denominations of the same security (eg, 1 IBM-S SETLcoin valued at 100 IBM shares). SETLcoin wallets or transactions may also house multiple securities (eg, 1 IBM-S SETLcoin and 2 GOOG-S SETLcoins).”
Financial experts concur that clearing can delay transactions by days, which then increases the risk that the transaction will fail. This still happens even though high-speed technologies allow orders to be conducted at a very fast pace.
According to the patent application, the SETLcoin system produces an opportunity “to substantively instantly settle securities … without the risks associated with traditional settlement technologies.”
Banks are looking to limit the potentially large impacts on their business models through the cryptocurrency technologies by filing for various intellectual property elements.
Here is what the Financial Times writes:
“Not soon, then. Banks will meantime place bets on the technology via the accumulation of intellectual property. They hope to limit the impact of disruptive technology on their market positions. Media companies did the same in buying up dotcom start-ups ahead of the tech rout of 2000.
“As for universal currencies, Goldman already controls one of these. It is the Goldman partnership, readily exchangeable by older Goldmanites for a well-paid job almost anywhere else.”
Blockchain assists users to OK bitcoin transactions by using its software. Blockchain is complemented by an immense public ledger of transactions in bitcoin that is denoted by numerical codes. Proponents of the blockchain system argue that it enhances transparency and the overall confidence of the digital currency environment.
Photo by Arturo Pardavila III via Flickr.
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