Barclays Invests in Ubyx to Facilitate Stablecoin Redemption
Barclays, a leading financial institution, has made a strategic investment in Ubyx, a U.S.-based startup. The investment is aimed at enabling banks to directly redeem stablecoins for traditional fiat currencies and generate new income streams. This move marks a significant step in Barclays’ ongoing strategy to integrate blockchain-based assets with traditional finance, as it navigates the evolving regulatory landscape in the U.K. and U.S. for digital assets.
Why Ubyx?
Ubyx offers a proprietary technology that allows stablecoin issuers to create relationships with banks for the redemption of their tokens into traditional currency. This technology provides banks with a new source of noninterest income through redemption fees and foreign exchange spreads.
“Interoperability is essential to unlock the full potential of digital assets,” said Ryan Hayward, head of digital assets and strategic investments at Barclays, underscoring the importance of specialist technology in enabling regulated financial institutions to interact seamlessly.
The Mutualized Acceptance Network
Ubyx proposes a “mutualized acceptance network” where banks and fintechs can redeem stablecoins from multiple issuers at par value, akin to the way checks or card payments clear today. Tony McLaughlin, CEO of Ubyx, emphasizes the critical role of bank participation for par value redemption through regulated channels. “We are entering a world in which every regulated firm offers digital wallets in addition to traditional bank accounts,” McLaughlin noted.
Stablecoins and the Banking Sector
Barclays’ investment in Ubyx aligns with a broader trend in the banking sector’s digital asset strategy. A recent study by American Banker found that 54% of financial institutions planning to issue stablecoins identify corporate clients as their primary target audience. The study also indicated that 55% of respondents view increased payment speed as the top reason for launching a stablecoin.
Regulatory Environment for Stablecoins
With the rules of the game for stablecoins gradually being established by governments across the globe, traditional financial institutions like Barclays are making strategic moves to own the stablecoin space. Barclays was among a group of ten major international banks, including Citi, Deutsche Bank, and MUFG Bank, that joined forces to explore the issuance of one-to-one reserve-backed digital currency on public blockchains in October.
The Ubyx Model
Ubyx’s model addresses the requirement in recent stablecoin regulations that a digital dollar must always be convertible to a fiat dollar at par value. Currently, stablecoin recipients looking to redeem the value of their crypto asset often have to sell on secondary markets, where prices can fluctitate. Ubyx aims to establish a clearing system where issuers maintain pre-funded accounts at settlement banks. This would allow customers to deposit a stablecoin at a participating bank, with the system routing the request to the issuer and settling the transaction in fiat value in real-time.
Barclays’ investment in Ubyx offers the bank an early foothold in an infrastructure that could potentially process stablecoin redemption flows. “Those who choose not to participate will see their clients migrate to those who do,” McLaughlin noted in the Ubyx whitepaper, emphasizing the urgency for traditional banks to adapt to the rapidly evolving financial landscape.
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