NBH Bank, which does business as Bank Midwest in the Kansas City area, made a first-of-its-kind electronic transaction as a test of a new payments system developed with partner banks.
NBH Bank is one of five FDIC-insured banks belonging to the USDF Consortium, a membership-based association tasked with developing ways for banks to use blockchain to improve the speed, safety and efficiency of financial transactions.
USDF created its own stablecoin, a type of cryptocurrency tied to a real asset. In this case, USDF stablecoin is tied to the value of the dollar and minted by member banks.
“USDF (stablecoin) in itself is a one-to-one representation of cash,” NBH Chief Digital Officer Valerie Kramer said. “What makes it unlike other stablecoin available today is that USDF is minted exclusively and available exclusively by USDF Consortium banks that are FDIC insured, ensuring the safety and soundness of USDF traveling on the Provenance Blockchain.”
The stablecoin allows users to send and receive payments in real time — at any hour on any day of the year — instead of waiting for transactions to clear and then money to appear in an account.
On Jan. 19, NBH Bank played a role in the first USDF transaction between two different financial institutions. NBH Bank minted USDF stablecoin and sent it to a customer of New York Community Bank.
“It’s in line with one of our strategic initiatives at the bank, to remove friction in the financial system and unlock opportunities within the blockchain to leverage real time payments and help reduce costs,” Kramer said. “We’ve got the framework, regulatory, safety and soundness in place, but there’s still a lot of foundational work that member banks in the consortium need to do. Today we have five banks and we are looking to grow our membership. You have to be a member bank in order to mint or have your clients send and receive USDF.”
