Fnality, an international consortium of global banks dedicated to creating a blockchain-based payment system for the adoption of tokenized assets and marketplaces, has unveiled a new feature that allows banks to program funds for release upon the receipt of proof of an event occurring elsewhere.
Banco Santander, Lloyds Banking Group, and UBS have all played key roles in the development of this new ‘Earmarking’ capability. With Earmarking, institutions can systematically schedule the movement of funds, such as in exchange for a specified asset or a related market event. This process relies on a proof, which is a cryptographically signed piece of data representing specific information from another system, that triggers the release of Fnality’s digital representation of central bank funds. Notably, once an Earmark is established, the funds remain on the originating participant’s balance sheet at all times.
Fnality reports that the project has been successfully demonstrated through various proofs-of-concept, including real-time settlement of tokenized securities, cross-border foreign exchange swaps, and repurchase agreements.
Michelle Neal, CEO of Fnality International, stated, “Fnality’s Earmarking feature is a landmark achievement, bringing smart contracts and programmability to payments in a digital representation of central bank money for the first time. This not only addresses existing challenges in wholesale financial markets but also paves the way for innovative solutions that will shape the future of digital finance.”
John Whelan, managing director of digital assets at Banco Santander, echoed this sentiment, noting, “One of the promises of institutional blockchain-based applications is ‘atomicity,’ meaning all aspects of a transaction either complete together or fail collectively, eliminating leg-risk. The concept of ‘earmarking’ introduced by Fnality facilitates this feature in a manner that can be truly interoperable with other DLT systems, bringing us closer to the widespread use of this technology in the banking industry.”