SIFMA Launches Project to Explore Shared Ledger Technology
Commentary by Andrew Lom
On behalf of "members of the regulated U.S. financial sector," SIFMA launched an initiative - the "Regulated Settlement Network ("RSN") proof-of-concept ("PoC")" - to explore the feasibility of a shared ledger to settle tokenized commercial bank money, wholesale central bank money, U.S. Treasury securities and other tokenized assets.
SIFMA stated that it will serve as program manager for the RSN PoC project, which includes named participants (Citi, J.P. Morgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa and Zions Bancorp); project contributors (The Bank of New York Mellon, Broadridge, DTCC, ISDA, Tassat Group and the MITRE Corporation); and a technical observer (The New York Innovation Center ("NYIC") at the Federal Reserve Bank of New York.)
SIFMA said the project will further previous research on the settlement of tokenized cash and securities on a common system and that the RSN PoC will be conducted in a test environment which will simulate multi-asset transactions in U.S. dollars.
SIFMA outlined the project:
- Scope: The PoC will simulate Delivery versus Payment transactions denominated in U.S. dollars.
- Industry Collaboration: The collaborative effort by participants and contributors would 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: The PoC participants will publish the findings of the project to contribute 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 also clarified that the NYIC's participation will be narrowly focused on observing the participants’ research and experimentation with tokenized settlement assets.
Commentary
For years, financial services firms around the world have been working on various blockchain-based or tokenized systems for tracking cash, payments flows, securities and other assets. The systems often focused on single use case, asset or transaction type. At the same time, central banks have been exploring official digital currencies, and FinTechs have offered stable coins as a means to store value and make digital payments in a way that avoids volatility or exchange rate risk. How these systems are connected to each other will have important implications for custody, collateral pledges and hypothecation, clearing and settlement, and market stability, and for future innovation around smart contracts and other technologies that run on blockchain and distributed ledger infrastructures. All of this is developing, of course, against the backdrop of the desire for the United States to remain competitive in the global financial system.
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