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U.S. megabank Wells Fargo announced today that it is nearing the release of an in-house cryptocurrency coin named (rather unoriginally) Wells Fargo Digital Cash.
The move marks a striking turn of events, as just this past July the bank issued a note saying that it would block cryptocurrency transactions from domestic banks. In its press release, the bank gives a nod to the fact that cryptocurrencies are here to stay and serve a purpose outside of normal fiat currencies.
Of course, we all know what Bitcoin and Ethereum is, at least at a high level. However, if you want to know how cryptocurrencies actually function as a financial tool I suggest heading over here for an excellent series of articles we ran last year called the Cryptocurrency Conundrum.
Wells Fargo to use Digital Cash for international "real-time" payments
Wells Fargo (NYSE:WFC) intends to use the stablecoin internally at first by using it to settle accounts. Company representatives said that its ability to transact outside of normal banking hours, and internationally with a shorter delay was key to convincing it to move ahead with its own digital currency.
The distributed ledger technology, DLT for short, is a platform developed by Wells Fargo to help run the coin.
As a result of the increasing digitization of banking services globally, we see a growing demand to further reduce friction regarding traditional borders, and today’s technology puts us in a strong position to do that. We believe DLT holds promise for a variety of use cases, and we’re energized to take this significant step in applying the technology to banking in a material and scalable way. Wells Fargo Digital Cash has the potential to enable Wells Fargo to remove barriers to real-time financial interactions across multiple accounts in multiple marketplaces around the world.
-Lisa Frazier, head of the Innovation Group at Wells Fargo
However, their "digital cash" will not be able to interact with other cryptocurrencies such as Bitcoin (Btc). A big part of the this coin's appeal to the bank and perhaps some of its customers, is the fact that this is a stablecoin as it's pegged to the U.S. dollar. It cannot fluctuate more or less than the dollar and so its value is a known variable.
The pilot is slated to begin next year and will be for internal use only as the firm will attempt to mature its understanding of how the technology works before it gives customers access to its DLT platform.
DLT is built upon proprietary technology, R3's Corda Enterprise platform to be precise. Digital Cash will not be able to interact with the other megabank coin, JPMorgan's JPM Coin.
It's interesting to see Wells Fargo completely reverse its stance, at least publicly. Crypto coins bring some serious advantages to the table versus typical fiat currencies and their transaction methods, which the bank could no longer ignore. We'll have to wait until next year to see how successful Digital Cash winds up.