Banking consortium Fnality is one step closer to launch after two major European banks successfully conducted a proof of concept showcasing the benefits of distributed ledger technology (DLT) in offering near-instant settlement in capital markets and payments.
The PoC involved the issuance of a tokenised security on a public blockchain, with the payment leg conducted through Fnality's DLT-enabled payments system. NatWest acted as dealer and issuer in the pilot, with Santander fulfilling the role of investor. Supported by fintechs Nivaura and Adhara, the test run marked the first cross-chain pilot debt transaction on public Ethereum and the Fnality Payment System.
Fnality CEO, Rhomaios Ram, says: “With the help of Adhara and industry partners like Nivaura, the creation and implementation of this TestNet will aid us in demonstrating the key capabilities of Fnality Payment Systems and providing a practical window into the future market structure they will enable.”
He says the consortium - which includes Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, Mizuho Bank, MUFG Bank, Nasdaq, State Street Corporation, Sumitomo Mitsui Banking Corporation, and UBS - is on track to launch its DLT-enabled payment system by October 2022, taking advantage of the roll out of the Bank of England’s new Omnibus Account, under which which payment system operators can offer their participants settlement funded in central bank money.
With settlement taking place in real-time, consortium members will be able to significantly reduce their intraday liquidity requirements while unlocking the institutional potential of tokenised financial markets.
John Whelan, managing director of digital assets at Santander, comments: “The benefits of programmable digital securities can be maximised by incorporating programmable digital cash for settlement and the entire post-trade lifecycle leading to many efficiency gains and bring enormous amounts of innovation to the capital markets.”