Cryptocurrency blasted into common knowledge a few years ago thanks to Bitcoin, the first alternative to traditional or “fiat” currency that gained widespread acceptance. While its meteoric rise to prominence was considered by many a bubble, it did have a major upside: it brought blockchain, the technology behind cryptocurrency, into the spotlight. Since then, blockchain has been proven to be a tool with a lot of potential in many areas, ranging from the finance and insurance industry to supply chain management and entertainment. While mainstream service providers like Betway casino didn’t embrace it just yet, blockchain is making its way across the digital realm, embraced by merchants and service providers. And, it seems, banks are also embracing the technology behind cryptocurrency, even if they don’t like the coins themselves. The latest bank to experiment with the benefits of blockchain is Wells Fargo, the fourth-largest bank in the world.
Stablecoin
A “stablecoin” is a type of cryptocurrency backed by various assets, created to minimize volatility. The token Wells Fargo plans to introduce is a stablecoin, linked 1-to-1 to its analogue counterpart, the US dollar. “We will hold the fiat currency, so it’s a stablecoin, and we will issue digital cash tokens. These tokens are placed into digital wallets and then those tokens are able to be exchanged”, Lisa Frazier, head of Wells Fargo’s Innovation Group told Coindesk a few weeks ago. But the real innovation is the digital ledger to be used with the coin.
Faster than SWIFT
Banks around the world rely on third-party services like SWIFT (Society for Worldwide Interbank Financial Telecommunication) to move currencies around the world. This involves some costs and takes some time – in our rushing world, in turn, the clients demand faster and cheaper transactions. Wells Fargo’s digital ledger tech (DLT) platform will allow the movement of money in near real-time between the bank’s branches all over the world, “without impact to the underlying account, transaction postings or reconcilement infrastructure”, the bank’s press release on the matter states.
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This new system will allow the bank to operate transactions even outside normal business hours and eliminate intermediaries, thus reducing not only the time but the costs of international money movement. “It’s faster than SWIFT, cheaper and definitely more efficient,” Lisa Frazier told Coindesk at the time. Wells Fargo plans to start using the new DLT next year, first with US dollars and internal settlements. In the future, it plans to expand its use for multiple currencies and many other applications. At first, the DLT will be completely proprietary and for internal use only – in time, in turn, a series of interoperable networks may emerge, making international payments faster and cheaper than ever before.
