The proof-of-concept for the Regulated Settlement Network (RSN) highlighted the potential of shared ledger technology to enhance multi-asset and cross-network transaction settlements for domestic users of US dollars and regulated securities.
Led by the Securities Industry and Financial Markets Association (SIFMA), the working group comprised major financial institutions, including Citi, JP Morgan, Mastercard, Swift, TD Bank, US Bank, Wells Fargo, Visa, and Zions Bancorp, along with USDF, a membership association of insured depository institutions. The technological foundation for this PoC was developed by Digital Asset, while Swift facilitated the interoperability of the prototype network. Legal support was provided by Sullivan & Cromwell LLP, and Deloitte & Touche LLP offered advisory services to SIFMA.
Additionally, contributors from BNY, Broadridge, DTCC, the International Swaps and Derivatives Association (ISDA), Tassat Group, and the New York Innovation Center at the Federal Reserve Bank of New York participated in the initiative.
After the initial PoC in July 2023, the group tested the feasibility of achieving simultaneous and coordinated 24/7 settlement for multi-asset and cross-network transactions involving tokenized central and commercial bank deposits, US Treasury securities, and other regulated assets. The current system for transferring these assets relies on separate, siloed systems, leading to inefficiencies, increased operational risks, higher costs, and longer settlement times.
The latest study on the RSN PoC examined how shared ledger technology can resolve these challenges through the tokenization of regulated financial instruments, enabling round-the-clock settlement. Conducted in a test environment, this experiment utilized simulated data to perform transactions in USD.
The PoC aimed to design a financial market infrastructure (FMI) capable of settling tokenized US Treasuries, investment-grade bonds, central bank deposits, and commercial bank deposits based on predetermined characteristics. It tested cross-network interoperability by connecting the RSN FMI to multiple third-party networks for synchronized settlement.
Key findings included:
– A shared-ledger FMI could enhance multi-asset and cross-network settlement by incorporating tokenized securities and deposits, allowing each institution to manage its own partition. The network provided a common settlement infrastructure with 24/7, programmable, and precise settlement capabilities, helping financial institutions optimize their collateral and liquidity. It also addressed challenges like infrastructure fragmentation and uncertainty in the settlement process.
– This infrastructure successfully supported precise settlement capabilities across various asset classes, demonstrating scalability and versatility for modern financial transactions. The RSN effectively connected with other third-party networks to enable synchronized settlement.
– The legal workstream found no issues that would obstruct the creation of the RSN as proposed in the PoC under existing legal frameworks; however, further regulatory engagement would be necessary for final conclusions.
Kelly Mathieson, Chief Business Development Officer at Digital Asset, noted, “The success of the RSN is rooted in a careful design phase that developed the technological infrastructure for seamless simultaneous settlement. Addressing configuration, functional challenges, API modifications, and test case development provides a framework for other initiatives.”
She further stated, “The US RSN demonstrates how interconnected, synchronized systems can simplify complexity and improve operational efficiency, setting new standards for modern financial markets. It’s not merely a technological achievement, but a collaborative endeavor that lays the foundation for a cohesive digital market infrastructure. By emphasizing broad integration and scalability, we avoid the pitfalls of isolated proof-of-concept silos. Implementing true simultaneous settlement with real-time updates illustrates how next-generation networks can function, offering the potential to minimize settlement delays and operational risks.”