Wells Fargo is following in JP Morgan’s footsteps by developing their own cryptocurrency. It is being dubbed Wells Fargo Digital Cash. They have successfully tested their own blockchain which allows them to move money across borders and between banks faster and cheaper than if they were using SWIFT.
SWIFT has been the primary method of communicating and confirming transactions between banks and across borders. SWIFT does not actually move the funds. Third parties are relied on for this which introduces another layer of complexity and cost when using SWIFT. Banks that use their own, or each other’s, blockchain can sidestep SWIFT and save time and money by doing so.
“When we move money across the world and we need to exchange currencies, we have to go through third parties such as SWIFT and other banks,” said Lisa Frazier, head of the Innovation Group at Wells Fargo. “That’s a long process and every time there’s a connection with external parties, it takes time and energy and effort.”
Using the digital cash would enable the bank to transfer funds 20 hours a day, up from six to nine hours, five days a week when it relies on wire transfers and systems like SWIFT, Frazier said.
Why not use JP Morgan Coin?
Wells Fargo Digital Cash will be a stablecoin that relies on their own blockchain, similar to JPM Coin. While there are similarities, there are noticeable differences too. JP Morgan is rapidly, albeit quietly, accelerating the advancement of their digital currency and blockchain project. The two are not currently built to interoperate. However, as the technology matures, we will see other interoperability networks spring up that facilitate the unification of these distributed ledgers.
As Wells Fargo is developing their cryptocurrency, they are also pouring millions into blockchain startups. In 2016 they, along with Euclid Opportunities, invested $18 million in a Series A for a blockchain startup. Other banks that get left behind may find themselves dependent on the distributed ledger technology built by other banks which will have unforeseen consequences.
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