Banks Advance Tokenised Settlement Project with Fnality Launch

A group of banks have become the founding shareholders of Fnality International as they advance their efforts to create a Utility Settlement Coin (USC) – as part of the founding the firm has completed an associated ‘Series A’ equity round of £50m.

The founding shareholders are Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, MUFG Bank, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Corporation, and UBS, while Clearmatics continues in its role as the technology partner to the project.

Fnality was borne out of the USC Project, the earlier stages of which centred on research and development efforts to solve for a more efficient, tokenised means of international cross border in wholesale markets. The project aims to reduce settlement risk, counterparty risk and ultimately system risk in the post-trade settlement process.

The consortium says that with the benefit of earlier work, the focus for Fnality is now to create and deploy a solution incorporating legal, regulatory, operational and technical aspects, to create a regulated network of distributed financial market infrastructures with an associated digital settlement asset per currency, USC, to settle the tokenised value transactions with finality using a peer-to-peer exchange. Fnality will establish local independent (d)FMIs in each currency who will operate a private, permissioned blockchain to support the creation of USC as an on-chain, digital asset. Initially, five currencies are in scope: CAD, EUR, GBP, JPY & USD, but it says that further currencies will likely be added in due course.

“USC has the potential to transform clearing and settlement processes; enabling Delivery vs. Payment (DvP) in tokenised securities markets, and in the secured funding market enabling instant settlement on a Payment vs. Payment (PvP) basis,” Fnality says, adding that it envisages the coin being backed 100% by fiat currency held at the respective central bank with convertibility into fiat currency at par guaranteed at all times. In each jurisdiction, the Fnality solution will ensure that settlement is achieved under the local settlement finality laws and regulations, the firm adds.

Fnality will have two areas of focus, building new foundations, by establishing a USC capability in each currency; and coordinating and orchestrating with the business applications that want to use this new payment functionality.

Each local Fnality entity will be subject to local approval and on-going regulatory oversight.

Rhomaios Ram, CEO of Fnality, spent more than 20 years at Deutsche Bank, including a period as head of European currencies trading, says, “We are delighted to launch Fnality, the commercial realisation of the USC Project. Working with our founding shareholders, we will start the regulatory approval process right away and look forward to connecting to the first business applications as soon as possible. USC will be an enabler for tokenised markets and also offers a significant opportunity to simplify liquidity management using one cash asset for as many settlement needs as possible.”

Colin Lambert

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