Major Banks and Financial Institutions Testing Ledger Based Technologies for Clearing and Settlements
Several major players in the U.S. financial sector, including Visa and JPMorgan, are delving into the realm of shared ledger technology for facilitating multi-asset transactions.
This initiative, spearheaded by the Securities Industry and Financial Markets Association (SIFMA), involves prominent financial institutions such as Mastercard, Citi, and JPMorgan. According to a news release from SIFMA on Wednesday (May 8), the project aims to streamline the current financial landscape, where different types of assets are managed on separate systems.
SIFMA stated, “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.” They added that tokenizing these instruments could pave the way for settlement on a common regulated venue established under existing legal frameworks.
To explore the potential of this approach, the participating financial institutions have launched a proof-of-concept (PoC) called the Regulated Settlement Network (RSN). This PoC will assess the feasibility of utilizing shared ledger technology to settle various tokenized assets, including commercial bank money, wholesale central bank money, and U.S. Treasury securities.
Raj Dhamodharan, Executive Vice President overseeing blockchain and digital assets at Mastercard, emphasized the significance of collaboration between public and private entities in leveraging blockchain technology. He stated, “As blockchain technology continues to mature, it will be critical for public and private organizations to partner closely to explore how it can be applied to solve for real-world pain points and improve efficiencies.”
Dhamodharan also highlighted the potential of shared ledger technology to revolutionize market infrastructures, enabling programmable settlements that are 24/7 and frictionless.
In a broader context, recent discussions have centered on the tokenization of real-world assets (RWA) using blockchain technology. While tokenized RWAs hold promise for enhancing liquidity, accessibility, and efficiency, challenges remain in establishing a widely interoperable infrastructure spanning both private and public payment sectors.
Mastercard’s Chief Digital Officer, Jorn Lambert, emphasized the importance of regulatory frameworks and the involvement of regulated financial institutions in scaling tokenized blockchain money movement vehicles. Until these aspects are addressed, the full potential of blockchain technology in the financial sector may remain unrealized.
Info Source: https://www.pymnts.com/news/banking/2024/us-financial-giants-test-shared-ledger-tech/
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