There was an outlier among a group of financial institutions that this week announced they are in the process of building a new blockchain and digital currency settlement network.

Called the ‘Utility Settlement Coin’, the project was created by startup Clearmatics and tested by four global banks: UBS, BNY Mellon, Deutsche Bank, and Santander. But a fifth member of the consortium, ICAP, stands apart for two reasons.

First, its team of participants span multiple companies within the market infrastructure provider. Second, as a market infrastructure provider, a digital currency that runs on a distributed ledger could be disruptive to its offerings.

But, it’s this unique positioning that ICAP hopes to leverage, not to guard against being made obsolete, but to help inform how a proprietary distributed network might be efficiently adopted.

Michael McFadgen, the managing director of ICAP’s FinTech investment arm Euclid Opportunities, elaborated on the principals he expects the firm will follow as a more certain timeline for the effort is laid out.

McFadgen told CoinDesk:

“A long-term vision for market infrastructure based on distributed ledgers is that it has some common layers that the market uses widely. One of those layers is hopefully the Utility Settlement Coin. We will likely be building on top of that.”

The Utility Settlement Coin (USC) runs on a blockchain platform the group calls the Decentralized Clearing Network designed to let central banks open up their real-time gross settlement service and provide more access to central bank-issued cash.

Though details of how market infrastructure providers like ICAP might adopt the technology have yet to be clearly defined, McFadgen said he believes four principles will likely guide the process.

Critical mass

The first principle, McFadgen said, is reflective of the difficulty of changing the very foundational infrastructure of state financial institutions and convincing other market participants to embrace the idea.

“Something like a USC doesn’t work if you have 10 different coin designs,” said McFadgen. “We plan to be very careful to make sure all the stakeholders are involved and there is broad industry acceptance.”

Even if broad adoption is achieved, though, there remains the additional question of how each of these possible central bank-backed digital currencies might interoperate.

At this early stage, McFadgen said the consortium has “not yet thought about how we would interoperate with something like Ripple”, a distributed ledger network that has also seen strong interest from major banks.

He added:

“There are lots of people looking to implement this type of structure. We are going to need to have an operation with people like that to make sure all our asset are coordinated.”

The second principle, is the principle of engagement.

Yesterday, Clearmatics CEO, Robert Sams told CoinDesk that numerous central banks and regulators from OECD economies have been engaged in the process from the early stages of development.

But, McFadgen said that an even more diverse group of financial institutions still needs to be engaged, including, buy-side, asset managers, hedge funds and “any financial institution with a nexus with financial markets”.

The infrastructure

The third principle is that of commercialization. But, this term may only loosely define the actual final business model.

As opposed to a traditional corporate endeavor, McFadgen adopted similar language as Sams in describing the project as a utility that may eventually adopt any of a number of business models.

The USC project is so early in its development that, in spite of Euclid Opportunities being an investment firm, ICAP hasn’t taken a stake in the project. “There is no entity to take a stake in,” McFadgen said.

This could be a sign that confidence in the project remains reserved due to the potential challenges it could face with wider adoption.

For example, if USC is ever implemented, each central bank would have to adopt its own version of the coin, backed by the nation’s native currency.

ICAP and blockchain

The ICAP team currently working with the USC project includes Jenny Knott, CEO of its Post-Trade Risk and Information division; its newly hired chief innovation officer, Charles Ocheret; and multiple distributed ledger and blockchain staffers from Traiana, its financial markets automation startup.

Much of that same group has been working with blockchain at ICAP since late last year.

A large portion of ICAP’s blockchain-related work has been focused on standardizing a post-trade workflow into a “Rosetta Stone” for post-trade, that could be easily integrated with distributed ledgers should that time ever come.

But earlier this year, ICAP also announced that a team of seven employees from Traiana had completed a test with startup Axoni that converted trade data from banks so it could be processed on a blockchain.

According to McFadgen, this effort isn’t competitive with the…



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