Barclays, HSBC and Credit Suisse are among six major banks joining an ambitious project led by UBS to create a digital currency for financial services.
Canadian Imperial Bank of Commerce, MUFG and State Street will also join in with efforts to launch the Utility Settlement Coin (USC), alongside Santander, Deutsche Bank, BNY Mellon and Icap.
Development of the blockchain-based digital cash first began last year with London startup Clearmatics, and the group is aiming to launch it next year with the latest joiners signalling the third phase of its efforts.
It's hoped the USC can aid settlements and payments and could even be a first step towards a Central Bank issued digital currency.
In a description of how USC works, UBS said:
"There will be multiple USCs, one for each traded currency. Each USC will be paired one-to-one with its domestic currency and is 100 per cent collateral-backed with its respective cash, held at the domestic central bank. Settlement finality and transfer of ownership happens with the exchange of the USCs, so spending a USC will be the same as spending its paired real-world currency.
"Strictly speaking, USC is not central bank money, but it would have many of its properties. Most importantly, a USC would be a form of digital cash that is fully asset-backed by cash at a central bank. So, unlike payments received in commercial bank money, a payment received in USC will be free of credit risk. That gives USC the attributes of a final settlement asset, much like central bank money itself. And transfers and ownership can be done instantaneously."
The use of a digital currency would significantly speed up transactions between banks.
Earlier this month the Bank of England published a working paper on blockchain's distributed ledger (DLT) technology. It found that it could reduce costs and improve efficiency of securities settlements, but the "technology is still evolving and it is uncertain at this point what form, if any, a DLT-based solution for securities settlement will ultimately take".
It also added that co-ordination and facilitation with authorities was more likely to help it reach this potential and that without regulation it could become a monopoly.
Several other central banks, such as Canada, China and Japan are exploring the possibilities of DLT. The consensus is generally one of exploring the technology, but with some concern about the potential risks.
BoE governor Mark Carney earlier this year said it was "not yet sufficiently mature" to be used by the central bank, which is currently undergoing a revamp of its Real-Time Gross Settlements (RTGS) system, the plumbing which governs interbank transactions.