Mastercard Joins Forces with Top US Banks to Explore Tokenized Banking Settlements
Summary:
Mastercard has partnered with major US banks, including Citigroup, Visa, and JPMorgan, to conduct a trial involving the use of a shared ledger technology, Regulated Settlement Network (RSN), for tokenized banking settlements. The RSN functions as a single platform where different types of assets are converted into tokens for settlement. The project seeks to augment cross-border settlement efficiency and minimize fraud and error risks. The proof-of-concept RSN trials are currently focused on simulating settlements in USD.
Mastercard, the eminent firm for payment processing and settlement, has united with dominant American banks such as Visa, JPMorgan, and Citigroup. This joint initiative aims to explore the prospects of distributed ledger technology in banking settlements via tokenization. The collaboration is set to experiment with a shared ledger system referred to as Regulated Settlement Network (RSN). RSN allows for collective settlement of tokenized assets such as investment-grade debt instruments, Treasury, and funds from commercial banks. As it currently stands, investment-grade debt securities and commercial bank funds operate on separate systems. However, with the implementation of RSN, settlement procedures will merge onto one platform. Here, various assets are turned into tokens and settled on a shared ledger. This phase of testing continues from a 12-week pilot phase, which began in late 2022 and was mostly aimed at domestic and cross-border dollar payments between banks. Currently, proof-of-concept (PoC) RSN trials are underway with the intent to emulate settlements in USD.
Mastercard stated on May 8th that the project’s main objectives are to enhance cross-border settlement efficiency, minimising the risk of both fraud and errors. Raj Dhamodharan, leading Blockchain and Digital Assets at Mastercard, shared his insights that “putting a shared ledger technology to use for dollar settlements could trigger the next innovative leap in market infrastructures, facilitating 24/7 programmable settlements that are devoid of friction”.
Alongside this, two significant new additions have joined the RSN PoC, the tokenized deposit network between banks – USDF Consortium – as a direct participant and Tassat Group as a contributor. Deloitte, another prominent bank, will provide advisory services. The program’s oversight will be managed by the Securities Industry and Financial Markets Association (SIFMA). The total number of banking giants participating in the RSN PoC is ten, namely Visa, Citi, JPMorgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, and Zions Bancorp. Six more entities will lend their expert advice, namely BNY Mellon, Broadridge, the DTCC, ISDA, MITRE Corporation, and Tassat Group.
Published At
5/8/2024 3:37:21 PM
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