Fnality, the DLT payments market infrastructure backed by 17 major financial institutions, was due to launch the Sterling Fnality Payment System (FnPS) this month, but the date has been postponed to Q3 2023.
The company says the decision was made in conjunction with the Bank of England “to allow further time to complete relevant regulatory and onboarding work.”
As previously reported, the platform was officially recognized by HM Treasury as a systemically important payment system in August which means the Bank is its regulator.
The payment platform is designed to support the settlement of tokenized assets. From the start, it planned to be multi-currency, including Sterling, Euro, US Dollar, Yen and Canadian Dollar.
A former Fnality director, Santander’s John Whelan, recently stated on Linkedin that we should see Fnality support GBP, Euro, USD in 2023. Fnality confirmed that it is progressing with its launch of wholesale payments in the US and Europe from “2023 onwards”. Our sources have said the Fnality Euro is advancing, reinforced by Euroclear investing earlier this year.
On the other hand, in the last three to four months, the European Central Bank (ECB) has started to talk about the possibility of a wholesale CBDC. But that doesn’t preclude the launch of Fnality Europe. Technically Fnality is a synthetic CBDC – a Fnality central bank account will back the currencies, hence the need for central bank buy-in. On the other side of the Atlantic, Fnality participated in a DLT initiative, Project Ion, run by the DTCC in the United States.
From a timing perspective, 2023 makes sense because that’s when DLT initiatives will ramp up. The UK is launching its FMI sandbox next year and the EU’s DLT Pilot regime comes online in March. The latter allows the limited waiver of certain EU regulations, such as permitting direct access to retail investors and supporting a single platform for both trading and settlement of digital securities.
Meanwhile, Fnality is in the process of raising additional funding, with Nomura joining recently as its latest investor.
The full list of Fnality investors is Banco Santander, Bank of New York Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, Euroclear, ING, KBC Group, Lloyds Banking Group, Mizuho, MUFG Group, Nasdaq, Nomura, SMBC, State Street and UBS.
Last week Fnality and Finteum, the DLT-based FX Swaps platform, announced a successful proof of concept for interoperability between their platforms. Fnality runs a separate network for each currency and uses a permissioned variant of the Ethereum blockchain. Finteum’s platform is based on the R3 Corda enterprise blockchain. It settled the USD and GBP legs of the FX Swap on the two separate FnPS networks in a payment versus payment transaction.
Finteum is expecting to go live in Q2-Q3 2023, initially expecting to settle outside Fnality, with three banks signed up so far.
Update: Added clarification that the Finteum go-live is initially expecting to settle outside Fnality
