Members of the U.S. Banking Community Launch Proof of Concept For A Regulated Digital Asset Settlement Platform

Rhea-AI Summary

The U.S. banking community has launched a 12-week proof of concept (PoC) aimed at exploring an interoperable digital money platform called the Regulated Liability Network (RLN). Utilizing distributed ledger technology, this initiative will test the feasibility of issuing digital tokens based on U.S. dollars and settling transactions via a shared ledger. Participating banks include major institutions like Mastercard, BNY Mellon, and Citi. The PoC will align with current regulations, maintain anti-money laundering protocols, and evaluate the potential for future multi-currency applications.

Positive

• Involvement of major banks suggests strong industry interest and potential for innovation in digital currency.
• The PoC aims to enhance the financial settlement process through advanced technology.
• Results of the PoC will contribute valuable insights to digital money research.

Negative

• No commitment to future phases after PoC completion may limit long-term impact.
• The project uses simulated data, which may not fully represent real-world applicability.

Platform Design Aims to Prioritize Maximum Participation From Public and Private Sector Regulated Entities

PURCHASE, N.Y.--(BUSINESS WIRE)-- Members of the U.S. banking community today announced the launch of a proof of concept (PoC) project that will explore the feasibility of an interoperable digital money platform known as the regulated liability network (RLN). Using distributed ledger technology, the proposed platform would create innovation opportunities to improve financial settlements and would include participation from central banks, commercial banks of various sizes and regulated non-banks.

The 12-week PoC will test a version of the RLN design that operates exclusively in U.S. dollars where commercial banks issue simulated digital money or “tokens” – representing the deposits of their own customers – and settle through simulated central bank reserves on a shared multi-entity distributed ledger. The PoC will also test the feasibility of a programmable digital money design that is potentially extensible to other digital assets, as well as the viability of the proposed system within existing laws and regulations.

Members of the U.S. banking and payments community involved in this PoC (as listed further below) are pleased to be working alongside the New York Innovation Center (NYIC) that is part of the Federal Reserve Bank of New York. The NYIC collaborates with the private and public sectors on innovations aimed at enhancing the functioning of the global financial system and the ability of central banks to carry out their missions. For information from the New York Innovation Center on this collaboration, see here.

Other key aspects of the PoC include:

• Regulatory framework: The platform will align with the existing regulatory framework and preserve existing requirements for deposit-based payments processing, notably maintaining know your customer and anti-money laundering requirements.
• Scope: The PoC will simulate digital money issued by regulated institutions in U.S. dollars, although the concept could potentially be extended to multi-currency operations and regulated stablecoins.
• Tokens: The PoC will simulate tokens that are 100% fungible and redeemable with other forms of money.
• Industry collaboration: The PoC will include dialogue with the broader U.S. banking community, including community and regional banks.
• Results: Following the conclusion of the PoC, the banking group will publicize the results, which they hope will be an important contribution to the literature on digital money.
• Future plans: The banking group participants are not committed to any future phases of work once the PoC has been completed.

This project will be conducted in a test environment and only use simulated data. It is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a retail or wholesale CBDC, nor how one would necessarily be designed. The findings of the pilot project will be released after it concludes.

In addition to the NYIC, the other participants on this project include the following financial institutions and payments organizations: BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo. The technology is being provided by SETL with Digital Asset, powered by Amazon Web Services. Swift, the global financial messaging service provider, is also participating in the initiative to support interoperability across the international financial ecosystem. Legal services are being provided by Sullivan & Cromwell LLP and Deloitte will be providing advisory services.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221115005936/en/

For more information, please contact one of the following media relations representatives at the participant firms.

- BNY Mellon – Garrett Marquis, 949 683 1503, garrett.marquis@bnymellon.com

- Citi – Nina Das, (212) 816-9267, nina.das@citi.com

- HSBC – Matt Kozar, (212) 525-1007, matt.kozar@us.hsbc.com 

- Mastercard – Katie Priebe, 914-707-9822, katie.priebe@mastercard.com

- PNC Bank – Whitney Wilson, (214) 871-1209, Whitney.Wilson@pnc.com

- Swift – Rachel Lindsay, (32) 478-945-795, Rachel.LINDSAY@swift.com

- TD Bank – Catherine Achey, (443) 682-2309, catherine.achey@td.com

- Truist – Brian Boudreaux, (404) 813-0881, Brian.Boudreaux@truist.com

- U.S. Bank – David McCoy, (612) 303-2309, david.mccoy1@usbank.com

- Wells Fargo – Hilary O’Byrne, (415) 715-4958, hilary.obyrne@wellsfargo.com

Source: Mastercard Incorporated

FAQ

What is the Regulated Liability Network (RLN) related to Mastercard (MA)?

The RLN is a proposed interoperable digital money platform being explored through a proof of concept that involves major U.S. banks, including Mastercard.

How long will the proof of concept for the RLN last?

The proof of concept for the Regulated Liability Network will last for 12 weeks.

Which banks are participating in the RLN proof of concept?

Participating banks include Mastercard, BNY Mellon, Citi, PNC Bank, TD Bank, and others.

What will the RLN proof of concept simulate?

The PoC will simulate the issuance of digital tokens based on U.S. dollars and settling transactions on a shared distributed ledger.

What regulations will the RLN proof of concept adhere to?

The RLN will align with existing regulations, including anti-money laundering and know your customer requirements.