Global: Citi, JP Morgan, and Partners Complete Tokenization Settlement Trials

A consortium of leading financial institutions, including Citi, JP Morgan, Mastercard, and others, has successfully concluded simulated trials of the Regulated Settlement Network (RSN), testing the potential of a shared Distributed Ledger Technology (DLT) for settling tokenized transactions.

Building on the success of last year’s Regulated Liability Network trials, this phase expanded to include tokenized Treasuries and investment-grade bonds alongside commercial and central bank digital currencies. By enabling delivery-versus-payment (DvP) for wholesale transactions, the trials demonstrated how shared DLT networks could streamline settlement processes while reducing risks.

Trial Overview and Key Participants

Coordinated by SIFMA, the trials involved ten major institutions, including Citi, JP Morgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp. Key contributions came from Deloitte, which provided project coordination, Sullivan & Cromwell, offering legal expertise, and Digital Asset, which supplied the Canton DLT infrastructure.

Additionally, the New York Innovation Center (NYIC) at the Federal Reserve Bank of New York served as a technical observer, while organizations like BNY Mellon, Broadridge, and the DTCC supported the initiative.

Key Benefits of Shared DLT Networks

Tokenized assets on shared institutional DLT networks present several advantages:

1. Reduced Settlement Risk: By settling tokenized Treasuries using central bank money on the same ledger, settlement risks are virtually eliminated.
2. Automation and Efficiency: Smart contracts enable automated and straight-through processing.
3. Extended Operating Hours: Always-on networks support transactions beyond traditional working hours, enhancing global accessibility.

The trials featured five use cases, each highlighting unique advantages. For instance, while immediate Treasury settlement minimizes risk, institutions often prefer net settlement to optimize liquidity. New SEC regulations mandating broader central clearing for repo transactions inspired one use case: a central counterparty (CCP) operating on the shared ledger with multiple intraday settlement windows. This flexibility enhances netting and liquidity management.

Interoperability with Other DLT Networks

Acknowledging the inevitability of multiple DLT ecosystems, the trials explored interoperability between RSN and external networks. This included:

• Swift Orchestration: Coordinating transactions across DLT platforms.
• Direct APIs: Facilitating seamless integration between systems.
  For example, Mastercard’s Multi Token Network (MTN) tested payments between two banks, with interbank settlement performed on RSN using central bank money.

Next Steps and Industry Implications

The trials yielded three comprehensive reports addressing the business, technology, and legal frameworks of the RSN. A virtual briefing on the results will be held at 1 PM Eastern Time, offering stakeholders further insights into the findings.

The RSN trials underscore the transformative potential of tokenized assets and shared DLT networks in modern finance. By enabling secure, efficient, and globally accessible transactions, this initiative marks a significant step toward integrating blockchain technologies into mainstream financial infrastructure, paving the way for a more interconnected and resilient financial ecosystem.