You would think that the centralized banking powers, with the practical legal rights to literally print money for themselves, would have the wherewithal to be at the cutting edge of all forms of technology. Yet, wire transfers still take days to complete, debit cards are still made of the same plastic they were in the 70’s and banks can’t do internal transactions in anything approaching real time.

Then a funny thing happened. That thing the banking kingpins have been laughing at, Bitcoin, has shown the world’s banking establishment how financial business in the 21st century should be done, and the bankers aren’t laughing anymore. They are learning, slowly, that Bitcoin’s underlying technology is far advanced and more useful than anything they have to offer, and they had better start using it. So today, four major banks will announce plans to create their own Bitcoin-like digital currency which will leverage the Bitcoin technology known as Blockchain. Here’s how it will work.

It’s like 2009 all over again

The mega-banks involved, lead by UBS, and including Deutsche Bank, Santander, and BNY Mellon are creating what they call the “utility settlement coin.” The coin is Bitcoin-like in that it is purely digital in nature, runs on a Blockchain like Bitcoin, and can lead to major time and costs efficiencies previously unimagined before Bitcoin showed them the way. And it is a peer-to-peer value transfer, as long as your peers are centralized bankers.

Julio Faura, head of R&D and Innovation at Santander, says to the Financial Times:

“Today, trading between banks and institutions is difficult, time-consuming and costly, which is why we all have big back offices. This is about streamlining it and making it more efficient.”

Banks’ Bitcoin is not Bitcoin at all

Alas, its differences from Bitcoin are also noteworthy. This coin is expected to run on a closed network between banks, limiting the ability to quickly add innovations from a world full of developers. It is not for public use, nor is it likely to appreciate in value over time, as Bitcoin is by design, or be limited in its production. Its goal will be to optimize and streamline internal banking functions and transfers. Banks are now looking to exploit Blockchain technology to speed up back-office settlement systems and free up billions in capital, which are tied up supporting trades on global markets.

Hyder Jaffrey, Head of Fintech Innovation at UBS, says:

“You need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies. What that allows us to do is to take away the time these processes take, such as waiting for payment to arrive. That frees up capital trapped during the process.”

Will banks succeed?

Ok, so when is this digital currency bad boy coming to a closed banking network  near you? The issue will be getting this project through myriad of centralized banking rules and regulations, leveraging the fact that a Blockchain-based system would be easier and much more transparent for regulators to monitor. If all goes well, a “limited and low-risk” commercial launch could happen as early as 2018.

In other words, how long would it take the banks to build a poor Bitcoin knockoff? It will take four of the world’s top banks almost 10 years to eventually create a limited, closed-network, less capable version of the global, decentralized, open-network, valuable, encrypted and secure Bitcoin protocol that was created by just one man.