UBS, the Swiss bank started work on what it calls USC or Utility Settlement Coin in 2015. It hopes USC will be the digital equivalent of fiat currencies offered by major central banks. After UBS initiated USC, it attracted the support of BNY Mellon, Deutsche Bank, Santander, NEX and blockchain startup Clearmatics in 2016. In 2017, Barclays, CIBC, Credit Suisse, HSBC, MUFG and State Street became new participants.

The objective of developing the USC is to enable financial markets to make payments and settle transactions quickly and accurately using blockchain technology. The rationale is that this could upend existing inter-bank settlement systems, which can:

  • take days
  • require copious reconciliation
  • keeps back office costs high.

Utility Settlement Coin in more detail

Today there is a spectrum of crypto-currencies. Bitcoin (BTC) is the best known with Ethereum following and ICOs breeding like rabbits. What distinguishes the latter is that they are non-domiciled and unregulated.

In contrast, the USC project aims to provide regulated, near term digital cash which provides the digital benefits of crypto-currencies but possesses many of the characteristics of central banks settlement. If deployed, USC aims to facilitate a new form of settlement and payment in institutional financial markets. The commercial objective is to realise efficiency gains in capital velocity as well as reduce settlement, counterparty, credit and risk.

How Utility Settlement Coin will work

The concept involves multiple USCs, one for each traded currency. Each USC will be paired one-to-one with its domestic currency. As such one USC will be 100% collateral-backed with its respective cash, held at the domestic central bank.

Settlement finality, and transfer of ownership, will occur with an exchange of USCs. In effect, ‘spending’ a USC will be the same as spending its paired real-world currency. Thus a USC would be a form of digital cash that is fully asset-backed by cash at a central bank. Unlike payments received in commercial bank money today, a payment received in USC will have no credit risk. Transfers and ownership will also occur instantaneously, thanks to the blockchain.

The key to delivering the potential benefits requires the creation of real cash on a distributed ledger (the blockchain). That, however, brings with it regulatory requirements. The USC concept will  also need market recognition and acceptance to succeed (and it is not the only such banking initiative)

Cryptocurrencies and the PBOC

Now, switch gears.

On September 4th, the People’s Bank of China (PBOC) rocked the cryptocurency world. In so doing it:

  • declared initial coin offerings (ICOs) illegal
  • required all fundraising activity to halt, along with trading and settlement
  • suggested monies already raised must be repaid to investors
  • prohibited conversions of cryptocurrencies with fiat currencies
  • banned digital tokens as currency in the market
  • threatened retroactive legal action.


This was an earthquake. It turned upside down the fervent Chinese enthusiasm for gambling. BTC values dropped more than 20% in the first 24 hours and and Ether values by more than 15%. Digital tokens can’t be used as currency on the market and the PBOC forbade banks from offering services to initial coin offerings.

Why did the PBOC act?

The evidence that a bubble was brewing has been visible for months. More and more ICOs were coming to market. Most of these, wherever ‘issued’, lacked the minimum of investment information. Indeed, that lack of hard information was probably what kicked the PBOC into action. It feared the destabilising effect when ICOs were seducing investors (gamblers) into get-rich-quick schemes based on rocky foundations. Indeed there were, and are, suspicions that many ICOs are Ponzi schemes wrapped in cryptocurrency techno-sparkle.

What the PBOC did made sense. It may also spare the Chinese, in particular, and the rest of the world from the side-swipe effects of another bubble bursting.

What does it mean

Prima facie, USC and ICOs have nothing in common:

  • USC is an interbank initiative with fiat currency values mapped 1:1, with conformance to existing financial regulation being a key element in establishing trust
  • ICOs operated in a free-for-all ‘market place’ where regulation was often non-existent or near non-existent.


Inside a week, two extremes of cryptocurrency are on open view. The ‘shady’ one must now try to recover from the PBOC’s actions, perhaps by accepting regulation, perhaps by disappearing. In contrast, the USC initiative moves forward:

  • with a widening bank acceptance
  • operating within an inter-bank only environment supervised by central banks.


That said, there must be detailed examination of United Settlement Coin and its exploitation of blockchain. If adopted it could have significant downstream effects. The participants hope for larger profits. The likes of SWIFT and other inter-bank clearing may quake.

What is apparent is that the cryptocurrency world is no clearer today than it was last Friday. It may be a little safer courtesy of the PBOC.

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Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.


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