The world’s fourth largest bank is tokenizing cash using its own blockchain-inspired platform — just don’t call it a stablecoin or cryptocurrency project.
On September 17th, Wells Fargo announced it was piloting an internal settlement service using distributed ledger tech (DLT), of which blockchain is a type. Dubbed Wells Fargo Digital Cash, the system has been devised to reduce friction in the bank’s “internal book transfers of cross-border payments within its global network.”
The service, which Wells Fargo has already tested in transfer trials between locations in Canada and the U.S., is set to become a “reusable enterprise utility for Wells Fargo to build” future blockchain applications.
The system’s official pilot will take place next year, and if all goes well it will be expanded to “multicurrency transfers and the entire global Wells Fargo branch network.” To start, the bank’s inaugural tokens will be backed 1:1 with U.S. dollars.
As Lisa Frazier, head of the bank’s Innovation Group, said on the news:
“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.”
Bank Carefully Chooses Its Words
Similar to when U.S. banking giant JP Morgan announced its JPM Coin earlier this year, some industry publications simplified the Wells Fargo Digital Cash development by calling the project a cryptocurrency or stablecoin.
While reasonable people can disagree on the precise definitions of those terms, Wells Fargo itself later went on the record to resist such characterizations. In clarifying comments to The Block, a spokesperson from the bank said the effort was “not a cryptocurrency” project but rather “tokenized USD / fiat currency that runs on a distributed ledger rail.”
Of course, even the wording of that last phrase can be nitpicked, though it’s from those remarks that Wells Fargo is trying to avoid linking the phrases of cryptocurrency, stablecoin, and even blockchain with the new internal project.
Notably, some around the ecosystem honed in on how — short of actually launching an actual cryptocurrency — Wells Fargo was essentially just looking at the possibility of transitioning to a new internal database. One of those persons was Angus Champion de Crespigny, formerly a senior blockchain and cryptoasset strategist at EY, who, in a series of Tuesday remarks, commented:
“I’m genuinely curious as to the definitional difference, and then the supposed improvements. How many people can explain how this solution is technically different than what banks have always done? […] They’ve just changed their database.”
Again, it’s not the ecosystem’s first rodeo this year when it comes to how to label a new blockchain-inspired product. Many stakeholders in the space, including non-profit advocacy group Coin Center, contested the characterization of JP Morgan’s JPM Coin as a cryptocurrency since the project was permissioned and closed-source.
“A cryptocurrency is one that is open and permissionless, if you want to download it, you don’t need permission,” Coin Center’s executive director Jerry Brito said at the time.
Whatever Happens, Big Banks Are Interested
Like Wells Fargo and JP Morgan, some of the worlds biggest banks are looking for innovation in the blockchain arena.
So far this year, Banco Santander and Societe Generale have used Ethereum to release bond offerings, and Germany’s second-biggest bank Commerzbank AG recently revealed it was trialing blockchain in machine-to-machine (M2M) payments.
Central banks are getting in on the action, too. The Bank of Russia is reportedly doing its homework on a blockchain-powered digital currency, while the People’s Bank of China is accelerating plans for its own.