Not even banks can escape from the mania surrounding the meteoric rise of cryptocurrencies such as Bitcoin this year.

For some time, some of the world’s major financial institutions have been looking into ways they can exploit the blockchain technology that underpins Bitcoin and other digital assets. On Thursday, several of them said they are joining an initiative called the “Utility Settlement Coin” project, which could one day lead to their creating their own alternative cryptocurrencies.

Banking giants including Barclays PLC, Canadian Imperial Bank of Commerce, Credit Suisse, HSBC Holdings PLC, Mitsubishi UFJ Financial Group Inc. and State Street Corp. said on Thursday they’re joining the project alongside founding financial institutions UBS Investment Bank, Bank of New York Mellon Corp., Deutsche Bank, Banco Santander, NEX Group Plc and blockchain startup Clearmatics Technologies Ltd. Coindesk said the initial plan for USC is to create a new and streamlined clearing mechanism for institutional purposes, in order to replace traditional clearinghouses, which serve as intermediaries between buyers and sellers of financial instruments.

“Digital cash is a core component of a future financial market fabric based on blockchain technologies,” said Hyder Jaffrey, head of Strategic Investment & FinTech Innovation at UBS, when USC was first established last year. “There are several digital cash models being explored across the Street. The Utility Settlement Coin is focused on facilitating a new model for digital central bank cash.”

The banks said they hope USC will lead to something that’s faster, cheaper and more reliable than existing clearinghouse systems. The settlement coins would be used to represent fiat currency such as the U.S. dollar or the euro on a one-to-one basis, which means that unlike Bitcoin, for example, they would be backed by collateral at central banks. Essentially, the digital currency would represent “real” currencies, serving as a more efficient method of exchange.

Because central banks are backing the settlement coins, it means they’re free from credit risk. Other advantages include being able to settle transfers and ownership instantly, which is one of the major promises of blockchain technology. Still, there remain questions over whether blockchain would be able to handle the massive volumes of transactions that the scale of bank’s institutional markets demand.

The banks backing USC aren’t alone in pursuing blockchain technologies. The central banks of both China and the U.S. are also said to be investigating the use of blockchain and the creation of their own cryptocurrencies. Meanwhile, the Bank of England recently published research that suggests blockchain’s technical ideas could be used to provide better controls over the U.K. pound and stimulate the economy in new ways.

However, the bank also warned that the “technology is still evolving and it is uncertain at this point what form, if any, a DLT-based (distributed ledger technology) solution for securities settlement will ultimately take.”

Image: BTC Keychain/Flickr