SIFMA, financial firms launch effort to explore feasibility of a shared ledger technology

Financial firms and organizations, including the Securities Industry and Financial Markets Association SIFMA) announced a Regulated Settlement Network (RSN) proof-of-concept (PoC) to explore the feasibility of shared ledger technology.

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The technology would be used to settle tokenized commercial bank money, wholesale central bank money, U.S. Treasury securities and other tokenized assets.

In the current financial system, commercial bank money, wholesale central bank money, and securities such as U.S. Treasuries and investment grade debt all reside on separate systems. The tokenization of these instruments could enable settlement on a common, regulated venue established under existing legal frameworks.

The RSN PoC sees an interoperable network for multi-asset transactions that aim to operate on a 24/7, programmable shared ledger. Building on the results of a previous industry PoC, this effort seeks to advance research and the settlement of tokenized cash and securities on a common system.

The RSN PoC will be conducted in a test environment and will simulate multi-asset transactions in U.S. dollars. Key aspects of the PoC include:

• Scope: The PoC will simulate Delivery versus Payment (DVP) transactions denominated in U.S. dollars.
• Industry Collaboration: The PoC reflects a collaborative effort by a diverse group of banks and other regulated financial industry participants to gain further consensus on the use of shared ledger technology in the U.S. financial system.
• Legal Analysis: The PoC will include an analysis of whether the envisioned network may operate in line with existing laws, rules, and regulations or guidance in the United States or if any amendments to applicable legal framework(s) may be necessary.
• Findings: Following the conclusion of the PoC, the group will publish the findings of the project as an important contribution to the understanding of next generation settlement models.
• Future Research: The participants are not committed to any future phases of research once the PoC is complete.

SIFMA will be serving as the program manager for the RSN PoC. Participants in this project include Citigroup, J.P. Morgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp. Deloitte will be providing advisory services while two additional vendors are being sought to provide the technology infrastructure and legal analysis for the PoC.

“This exploration of shared ledger technology is an important initiative to explore innovations working with digital forms of USD cash and securities, as market participants continue to innovate to support efficient, resilient capital markets,” Charles de Simone, managing director at SIFMA, said,

In addition, the PoC will engage a group of U.S.-based project contributors, who will provide subject matter expertise and explore the applicability of connecting certain external solutions and platforms to the multi-asset ledger. The group of project contributors includes: The Bank of New York Mellon, Broadridge, DTCC, The International Swaps and Derivatives Association, Tassat Group, and the MITRE Corporation, who will engage as a non-commercial knowledge contributor.

Further, the New York Innovation Center (NYIC) at the Federal Reserve Bank of New York will be a technical observer in this PoC to better understand the use of shared ledger technology as infrastructure to conduct transfers between regulated financial institutions. This includes settling tokenized wholesale central bank money, commercial bank money, and U.S. Treasury securities.