- Key insight: Barclays is investing in Ubyx, a U.S. startup, to help banks directly redeem stablecoins for fiat currency and generate new revenue streams.
- Expert quote: "Interoperability is essential to unlock the full potential of digital assets," said Ryan Hayward, head of digital assets at Barclays.
- What's at stake: Traditional banks are racing to adopt blockchain tech to prevent nonbank fintechs from disintermediating them in the payments sector.
Overview bullets generated by AI with editorial review
As regulators in the U.K. and U.S. establish a regulatory framework for digital assets, Barclays is advancing its strategy by investing in Ubyx, a U.S.-based clearing system designed to facilitate interoperability between various stablecoins and tokenized deposits.
Ubyx sells technology that enables stablecoin issuers to create relationships with banks for redeeming their tokens for traditional currency. In return, banks get noninterest income through redemption fees and foreign exchange spreads.
Barclays' investment in Ubyx reflects a push by traditional financial institutions to stay ahead of nonbank fintechs that stand to disintermediate traditional payment rails.
The London-based bank said the deal with Ubyx is a necessary step toward integrating blockchain-based assets with traditional finance.
"Interoperability is essential to unlock the full potential of digital assets," said Ryan Hayward, head of digital assets and strategic investments at Barclays, in a Wednesday press release. "Specialist technology will play a pivotal role in delivering connectivity and infrastructure to enable regulated financial institutions to interact seamlessly."
Ubyx proposes a "mutualized acceptance network" where banks and fintechs can redeem stablecoins from multiple issuers at par value, similar to how checks or card payments clear today.
"Bank participation is vital to provide par value redemption through regulated channels," said Tony McLaughlin, CEO of Ubyx, in the release. "We are entering a world in which every regulated firm offers digital wallets in addition to traditional bank accounts."
Barclays' focus on infrastructure for corporate and institutional clients mirrors a wider shift in the banking sector's digital asset strategy. Among financial institutions planning to issue stablecoins, 54% identify corporate clients as their primary target audience, according to
Confidence in the longevity of these assets also appears to be solidifying among bankers. Among industry respondents, 56% believe stablecoins will remain a permanent asset class in financial markets, according to
Banks mobilize as regulators clarify stablecoin rules
Barclays' move comes as traditional financial institutions enter and attempt to own the stablecoin arena, where governments (the U.K. included) have been establishing the rules to the new game.
In October, Barclays joined a group of 10 major international banks including Citi, Deutsche Bank and MUFG Bank to explore issuing one-to-one reserve-backed digital currency on public blockchains.
The next month, the Bank of England published a consultation paper proposing a strict regime for "systemic" stablecoins used for retail payments.
The central bank proposed requiring issuers to back at least 40% of their stablecoins with central bank deposits with the remainder held in short-term government debt.
The Bank of England also proposed holding limits to prevent rapid outflows of deposits from commercial banks: Individual holdings of regulated stablecoins would be capped at £20,000, and corporate holdings capped at £10 million.
How Ubyx works
The Ubyx model attempts to address a specific theme in recent regulations over stablecoins that a digital dollar always be convertible to a fiat dollar at par value.
Today, stablecoin recipients looking to redeem the value of the crypto asset often must sell on secondary markets, where prices can fluctuate (albeit around a one-to-one peg) rather than redeeming them directly with issuers.
Ubyx plans to establish a clearing system in which issuers maintain pre-funded accounts at settlement banks, so when a customer deposits a stablecoin at a participating bank, the system routes the request to the issuer and settles the transaction in fiat value in real-time.
This structure could allow banks to treat stablecoins as cash equivalents on their balance sheets, potentially opening the door for corporate treasurers to use them for liquidity management.
For Barclays specifically, the investment also offers an early foothold in an infrastructure it believes could process stablecoin redemption flows.
"Those who choose not to participate will see their clients migrate to those who do," McLaughlin wrote in the Ubyx whitepaper. "Choosing not to act is a choice, because the process has already begun."
