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Japanese banks leading project to offer global digital currency

Japanese banks are pioneering the development of a digital currency that can be used globally. Experts feel this can be a challenge for cryptocurrencies. The blockchain-based digital coin will facilitate faster and more cost effective cross border settlements. MUFG Bank and Sumitomo Mitsui Banking Corp are leading the project having contributed several million to it, which goes by the name Fnality International. There are 14 banks in the project, which includes UBS, Credit Suisse, Barclays of Europe and US-based State Street. These banks have collectively invested $63 million to establish Fnality, which will be based in London. There will be units at participating banks and these units will issue utility settlement coins (USCs), which will operate like stablecoins and will be pegged to their equivalent fiat currency. Fnality transfers funds to a central bank when a client requests an international transfer. The central bank then issues the USCs which, in turn, are sent to the central bank in the recipient’s country. There, the funds are converted back into local currency, thus saving on forex fluctuations. The system is expected to initially work with US dollars, Euros, Pounds, Yen and Canadian dollars and will be launched in 2020. These tokens will be backed by the banks, avoiding the volatility that cryptocurrencies currently suffer from.

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