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UBS Consortium Prepares to Launch USC Crypto Currency

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Its been a long time coming but UBS in conjunction with 13 of the worlds biggest banks plans to launch a Utility Settlement Coin (USC) next year for wholesale banking. The digital currencies could be used for clearing and settling trades between banks. The participants include Barclays, Santander, BNY Mellon, Credit Suisse, ING, CIBC, KBC and MUFG.

 The USC will use Distributed Ledger Technology (DLT which includes Blockchain and Directed Acyclic Graphs such as Tangle) and will be denominated in major fiat currencies including the US Dollar, Euro, Sterling and Yen. But the currencies will be fully collateralised against the fiat currencies, One USC pound will have a backing of £1 sterling. This is the big thing with digital currencies are they collateralised, I really don’t see how they can work otherwise and then I don’t see why you need DLT see also Facebook’s latest moves

Now we get to the catch, DLT apparently enables participants to share information on an open access ledger which can never be altered or erased. I’m not even sure this is a requirement, do you really need an open access database? Immutable, granted but you don’t need DLT to do that, they used to be called WORM Drives (Write Once Read Many) but today Amazon can give you the same thing through its Glacier archival storage product.

So why exactly does the project need a DLT, blockchain or what have you? Surely access must be controlled by the 14 (or more) members and basic security techniques are more than capable of doing that. If you own a digital asset then you are in charge and you must define how it’s looked after, why would you delegate that to somebody else?  Immutable we can agree is not a problem. I’m not sure how you can prevent a database from being deleted given that the attacker has enough resources but hey ho if you have enough copies…. More realistically you shouldn’t be able to delete transactions but isn’t that part of the definition of immutable?

I feel the solution is obvious, if you want a digital currency for wholesale banking then you should use a direct asset transfer model (e.g.MonZap)  which puts authority and responsibility in exactly the right place. This used to be a basic security paradigm, but it all seems to have gone wrong somewhere. Oh I know, if you include blockchain or DLT in you project then it is far more likely to be authorised and/or funded!

Dr David Everett

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