Institutional DLT payment platform Fnality delays launch – Ledger Insights

Fnality, the DLT payment market infrastructure backed by 17 major financial institutions, was supposed to launch the Sterling Fnality Payment System (FnPS) this month, but the date has been pushed back to Q3 2023.

The company says the decision was made in collaboration with the Bank of England “to allow additional time to complete relevant regulatory and onboarding work.”

As previously reported, the platform was officially recognized by HM Treasury as a systemically important payment system in August, meaning the bank is its regulator.

The payment platform is designed to support settlement of tokenized assets. From the start it planned to be multi-currency, including Sterling, Euro, US Dollar, Yen and Canadian Dollar.

A former Fnality director, Santander’s John Whelan, recently stated on Linkedin that we should see Fnality supporting GBP, Euro, USD in 2023. Fnality confirmed that it is moving ahead with the launch of wholesale payments in the US and Europe from “2023 onwards”. Our sources have said that Fnality Euro is advancing, boosted by Euroclear investments earlier this year.

On the other hand, in the last three to four months, the European Central Bank (ECB) has started talking about the possibility of a wholesale CBDC. But that does not rule out the launch of Fnality Europe. Technically, Fnality is a synthetic CBDC – a Fnality central bank account will support the currencies, hence the need for central bank purchases. On the other side of the Atlantic, Fnality participated in a DLT initiative, Project Ion, run by DTCC in the US.

From a time perspective, 2023 makes sense because that is when DLT initiatives will increase. The UK will launch its FMI sandbox next year and the EU’s DLT Pilot regime will come online in March. The latter allows limited derogation from certain EU regulations, such as allowing direct access to retail investors and supporting a single platform for both trading and settlement of digital securities.

Meanwhile, Fnality is in the process of raising additional funding, with Nomura recently joining as its latest investor.

The full list of Fnality investors are Banco Santander, Bank of New York Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, Euroclear, ING, KBC Group, Lloyds Banking Group, Mizuho, ​​MUFG Group, Nasdaq, Nomura, SMBC, State Street and UBS.

Last week, Fnality and Finteum, the DLT-based FX Swaps platform, announced a successful proof of concept for interoperability between their platforms. Fnality runs a separate network for each currency and uses a permissioned variant of the Ethereum blockchain. Fineteum’s platform is based on the R3 Corda enterprise blockchain. It settled the USD and GBP legs of the FX swap on the two separate FnPS networks in a pay-to-pay transaction. Finteum expects to go live in the same timeframe as Fnality, with three banks signed up so far.