Barclays, one of the largest banks in the world with approximately $2 trillion in assets, is looking into the potential role of blockchain technology.
The financial giant is allegedly exploring another side of its future financial infrastructure, including the use of stablecoins and tokenized deposits.
The bank’s move comes in parallel to a broader trend among international banks, which are increasingly turning to digital assets.
It is worth mentioning that Barclays is moving towards the development of blockchain and stablecoin infrastructure not for investment but for improving the efficiency of traditional banking systems.
Stablecoins are digital currencies that are pegged to fiat currencies such as the U.S. dollar and the British pound. Stablecoins are being considered as a faster and cheaper way of transferring funds.
While traditional payment systems take days to complete cross-border transactions, stablecoins allow for almost instant transactions on the blockchain.
Blockchain could help Barclays cut settlement delays
For a bank as big as Barclays, the move would be a major factor in reducing settlement times, operational expenses, and liquidity management for institutional customers.
However, the bank is also considering the use of tokenized deposits. Unlike stablecoins, which are issued by private cryptocurrency firms, tokenized deposits are the digital representation of existing money held in the banking system.
The tokens will continue to be supported by bank deposits and will be governed by existing regulatory frameworks. This makes them more familiar and perhaps safer for regulators and institutions.
Tokenized deposits would enable banks to make programmable payments, automated settlements, and real-time reconciliation while still being within the regulatory framework.
Big banks increasingly see blockchain as an upgrade to traditional financial infrastructure
Barclays’ foray is an indication that major financial institutions are no longer seeing blockchain as a disruptor but rather as an improvement over the current financial infrastructure.
By implementing blockchain-based settlement systems, financial institutions can optimize processes such as securities trading, treasury, and cross-border payments, which are currently carried out through a number of intermediaries and outdated infrastructure.
Another key consideration is competition. With fintech companies and crypto-native solutions working on faster payment systems, financial institutions are at risk of being left behind if they do not adopt similar solutions.
Blockchain provides a means for financial institutions to upgrade without having to walk away from regulatory frameworks and consumer protections.
However, Barclays is still in the testing phase, which means that there has been no full-scale implementation.This is also likely to be affected by regulatory environments, system compatibility, and risk management.
Regulatory bodies across the globe are closely monitoring developments related to stablecoins and tokenized assets and their potential impact on the financial system, particularly with regard to consumer protection and maintaining economic stability.
In short, the Barclays blockchain research shows that traditional finance and blockchain technology are starting to come together in the industry.
People no longer see blockchain technology as a way to replace banks. Instead, they see it as a way to make banking faster, more open, and better for a digital economy.