Another of the country's biggest banks is experimenting with digital currency.
Wells Fargo & Co. will pilot an internal settlement service tied to the U.S. dollar. Dubbed Wells Fargo Digital Cash, the service will run on Wells Fargo's first distributed ledger technology, or DLT, platform. The move follows JPMorgan Chase & Co.'s announcement of JPM Coin in early 2019, but it was not in response to the competitor's launch, according to Lisa Frazier, head of innovation at Wells Fargo.
"This is a fundamental new technology that will shift the way banking works," Frazier said in an interview. Wells Fargo has been working with DLT since 2016, and moving to the pilot, which will launch in 2020, is the natural next step, Frazier said.
Using a digital coin could bypass traditional cross-border money transmission problems, such as lengthy settlement times and high costs. Through its digital coin, Wells Fargo aims to speed up the settlement of international payments for corporate customers.
The bank will initially complete transfers in U.S. dollars and Canadian dollars, though it hopes to expand the service later on. Once the pilot launches, Wells Fargo customers will see transfers between the U.S. and Canada that approach real-time speeds. The operating window during which customers can initiate such transfers will also expand with a digital coin.
Like JPM Coin, Wells Fargo Digital Cash is a stablecoin backed by a fiat currency. Unlike JPM Coin — which will run on Quorum, an in-house developed distributed ledger based on Ethereum — Wells Fargo's book transfer application will run on the Corda platform run by blockchain software company R3.
But both banks' distributed ledgers, for now, run on internal networks that will not connect to other digital cash solutions on the market.
Although Frazier said it is too early to know if Wells Fargo will expand the product beyond its client base, that could be a path forward. The digital cash service is not one where Wells Fargo chose either to develop an internal system or an external system, Frazier said.
"We need to do both," she said, clarifying that the bank is active in other external initiatives. Those initiatives, often working with a consortium, take a while to develop, and Wells Fargo can move faster on its own internal system.
Since the distributed ledger is still a new technology, Wells Fargo has a "step-by-step evaluation" of potential new use cases, Frazier said. The executive declined to elaborate on what those future uses might be.
