Regulated Liability Network Advances Retail CBDC Use Case in the UK
Summary:
The Regulated Liability Network (RLN) has completed its discovery phase in the UK and is moving forward with a use case involving retail central bank digital currency (CBDC). The network aims to facilitate transactions between central banks, commercial banks, and regulated non-bank entities. The RLN offers benefits such as consistency between CBDC and commercial bank money, reduced authorized push payment fraud and increased consumer control in domestic payments. It utilizes a native settlement token and resembles other solutions proposed by global institutions and central banks.
The Regulated Liability Network (RLN) has successfully concluded the discovery phase in the United Kingdom and is prepared to move forward with a use case involving retail central bank digital currency (CBDC), according to a recent report. The RLN project aims to facilitate transactions between central banks, commercial banks, and regulated non-bank entities within separate sections of a single network. Supported by UK Finance, the RLN is a regulated financial marketplace infrastructure with contributions from financial institutions worldwide. During the discovery phase, the RLN examined three potential use cases, ultimately selecting consumer domestic payment as the focus of a proof of concept. The report highlights various domestic payment uses that could be tested, drawing from the list presented in the results of Project Rosalind. This use case will explore the coexistence of "upgraded" commercial bank money and retail CBDC on the RLN infrastructure, as well as the assurance of functional equivalence for all retail digital money. The report finds that the RLN offers several advantages for domestic payment, including consistency between CBDC and commercial bank money, improved protection against authorized push payment fraud, and increased consumer control in case of undelivered goods. The RLN will utilize a native settlement token to facilitate the integration of tokenized regulated money and digital assets on the same ledger. Tokenized liabilities will remain claims on the issuer rather than the RLN itself. The RLN has previously conducted a pilot program for wholesale cross-border payments in collaboration with the New York Federal Reserve Bank and several large financial institutions. However, due to the complexity associated with multiple jurisdictions, participants (including central banks), and regulatory requirements, this particular use case may prove less feasible for a proof of concept. Similarly, securities settlement was identified as having a moderate degree of feasibility due to the involvement of multiple non-bank entities and regulatory complexity. It is important to note that the RLN is not entirely reliant on blockchain technology and offers five possible infrastructure architectures. The RLN bears resemblances to the unified ledger solution proposed by the Bank for International Settlements and the International Monetary Fund's trusted single ledger, as well as previous pilots conducted by the Swiss National Bank and the SIX digital exchange and Bank of England governor Andrew Bailey's proposal for enhanced digital money.
Published At
9/5/2023 7:47:03 PM
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