USC isn’t really a blockchain project as much as a market infrastructure project — even if it leans on blockchain jargon for the purpose of gaining popular momentum. …
On paper, the technology promises to un-encumber cash collateral by creating a much more reliable form of distributed settlement, requiring a fraction of the collateral needed to operate a comparable centralised system.
She points to possible conflicts of interests. The project could just aim at convincing regulators that settlement processes are robust.
Hence most blockchain ventures today equate to nothing more than a lobbying effort by banks to get decentralized settlement approved again, ideally without any of the associated collateral headaches.
Can a USC-type project operate without support by the central bank? Kaminska says no since only the central bank can credibly monitor whether the promised backing of USC by base money actually is observed.
more control over transactions; better data protection;
improved possibilities for macro prudential monitoring.
Speed; scalability; security;
smart contracts require new contract law;
interface between traditional payments system and blockchain payment system.
Lehmann favors common standards and he points out that this is what is happening (R3-consortium with UBS, Hyperledger project with Linux foundation).
Related, Martin Arnold reported in the FT in late August that UBS, Deutsche Bank, Santander, BNY Mellon as well as the broker ICAP pursue the project of a “utility settlement coin.” Here is my reading of what this is:
The aim seems to be to have central banks on board; so USCs might be a form of reserves (base money). The difference to traditional reserves would be that USCs facilitate transactions using distributed ledgers rather than traditional clearing and settlement mechanisms. (This leads to the question of the appropriate interface between the two systems posed by Lehmann.)
But what’s in for central banks? Would this be a test before the whole clearing and settlement system is revamped, based on new blockchain technology? Don’t central banks fear that transactions on distributed ledgers might foster anonymity?