Wells Fargo has announced, that it will launch a new blockchain-based system for internal book settlement in its global network using its Cryptocurrency.
Lisa Frazier, Head of the Innovation Group at Wells Fargo, says about the bank’s blockchain, “It’s faster than SWIFT, cheaper and definitely more efficient.” SWIFT is a global messaging service used for fund transfers.
Wells Fargo Digital Cash uses R3’s Corda Enterprise software and will operate on the banks distributed ledger network.
It will be subject to a Proof of Concept, and if successful, it will be launched as a pilot project next year.
Wells Fargo is the second bank after JP Morgan to seek its cryptocurrency, for internal fund transfers.
Till now, banks were using global messaging systems like SWIFT for both external and internal international transactions. This need for third parties was causing delays and inefficiencies.
Wells Fargo Digital Cash will make the banks internal cross border transactions faster. Banks can move funds for 20 hours using this blockchain compared to only 6 to 9 hours at present.
Wells Fargo Digital Cash will be backed by fiat currency in the ratio 1:1. Thus, it will be a stablecoin as a physical reserve backs it.
When an internal cross-border fund transfer is requested, digital coins equivalent to the request will be transferred from one wallet to the other and redeemed from the other wallet in equivalent fiat currency which right now will be the dollar but later on, could include other currencies also. That will cut out third parties and reduce processing time taken for fund transfers.
Wells Fargo has clarified that the Wells Fargo Digital Cash will be used for internal cross-border transactions and later on will also allow internal fund transfer between the bank’s branches within a country, but it will not be connected to other Cryptocurrencies. Isolation from other Cryptocurrencies saves it from the volatility associated with digital currency.
Thus, Wells Fargo Digital cash will have the speed of digital currency but the stability of fiat currency. The best of both the digital asset and the physical one.