The new wave of digital currencies: The European Central Bank needs to "find debt"

UBS, which pioneered the "multi-purpose settlement coin", has now teamed up with Deutsche Bank, Santander, Bank of New York Mellon and brokerage firm IFX to develop a new form of digital currency that they believe will become the industry standard for clearing and settling financial transactions using blockchain, the technology behind bitcoin transactions.

The Financial Times pointed out that this is the first time that a group of large banks have joined forces to cooperate on a specific blockchain technology to fully utilize the power of decentralized computer networks to improve the efficiency of financial market operations. Blockchain technology is a set of complex algorithms that allow so-called cryptocurrencies (including Bitcoin) to be electronically traded and verified through computer networks without a central ledger. Banks, which were initially skeptical due to concerns about fraud, are now exploring how to use this technology to speed up back-end settlement systems and free up huge amounts of capital tied up in supporting global market transactions.

The European Central Bank needs to "find debt"

JPMorgan Chase & Co. estimates that the ECB has 320 billion euros in bonds maturing between 2017 and 2019 that need to be reinvested to meet its promise to redeploy the proceeds from the repayments. With inflation near zero, there are growing expectations that the ECB will extend its quantitative easing program.

Reuters analysis believes that if the quantitative easing policy is extended beyond March 2017, the ECB may face the risk of insufficient bonds to purchase. Under the influence of such additional bond purchases, liquidity problems that cause price fluctuations in the bond market may be exacerbated. In addition, the ECB may find it difficult to obtain enough bonds in some countries to meet the purchase criteria, especially in Ireland and Portugal, which have already reduced the scale of bond purchases.