In May 2019, Fnality announced it had finalised a ‘Series A’ equity round of £50 million, signalling an end to the research and development phase of the research venture proposed by UBS and blockchain start-up Clearmatics, the Utility Settlement Coin (USC).
The USC, a project initially spearheaded in 2015 by UBS and Clearmatics, began as a solution in response to the issue of complex liquidity management alongside time and cost inefficient post-trade settlement and clearing processes typically associated with traditional money transfers. The USC aimed to bypass such constraints by allowing for digital coins to be directly convertible into cash at central banks; allowing financial institutions to purchase assets without waiting for a complete traditional money transfer. The idea of the USC soon gained traction, with several of the world’s largest banks such as BNY Mellon, State Street, Credit Suisse, Barclays, Santander, HSBC and Deutsche bank joining the project in September 2016 during the research and development phase.
Fast forwarding to 2019, the injection of the £50 million investment is a clear indication that the idea of digital value transfer is plausible; signalling an encouraging step away from research and development towards gradual implementation. Although its initial applications will be in relatively niche areas, such as creating a market infrastructure that allows the USC to be used to meet margin requirements in derivatives trades (Financial Times, 2019), one should expect such efforts to gain serious popularity given the size of its founding banks. This, coupled with the milestone that is their newfound investment, has brought them one step closer towards achieving their goal of creating a regulated network of distributed Financial Market Infrastructures (dFMIs) and establishing their position as transformers of the financial services industry.