Financial institution BNP Paribas initiates transactions on blockchain-based settlement system Fnality, completing a swap payment
In the realm of financial technology, Fnality's Sterling Fnality Payment System (£FnPS) is making waves as a tokenized central bank reserve system. This innovative platform, which enables near-instant, risk-free settlement of complex financial instruments, is transforming wholesale financial markets by bypassing intermediaries and manual reconciliation[1][4].
Recently, BNP Paribas executed an interest rate swap payment to Lloyds on the £FnPS, demonstrating the system's ability to handle sophisticated transactions in real time[1][4]. This marks BNP Paribas as the fourth bank to publicly announce its platform integration with Fnality, following Lloyds, Santander, and UBS.
The system's central bank regulation and trust are key to its success. It uses a digital asset with central bank money credit characteristics, providing the trust and finality required by regulated institutions to scale tokenized market activity[4]. The Bank of England supports Fnality’s use of omnibus accounts in its Real Time Gross Settlement (RTGS) system, allowing integration of the £FnPS ledger with existing payment infrastructure[2][3].
Looking ahead, Fnality plans to expand currency coverage beyond sterling, offering a multi-currency unified ledger backed by central bank money. The Bank of England is exploring models to support systems like Fnality’s, including an orchestration approach and a unified ledger approach that could integrate assets and payments on a single platform, potentially with a wholesale central bank digital currency (wCBDC)[2].
Fnality's US initiative is also progressing, aiming to enable real-time settlement with central bank backing, similar to its sterling platform. The company is currently exploring an integration with DTCC's digital asset platform, which targets collateral[5]. Hubert de Lambilly, Head of Global Markets at BNP Paribas, believes platforms like Fnality will build interconnected, global networks[6].
Institutions can take advantage of the low-risk settlement instrument through Fnality's solution, which offers efficiencies and programmability benefits. As more institutions onboard, such as BNP Paribas, the system's operational maturity continues to grow[6]. Fnality has landed an 18-month interim approval as a state chartered innovation bank in the US, further solidifying its position in the financial technology landscape[7].
References:
[1] Fnality. (2021). Fnality and BNP Paribas complete first on-chain interest rate swap. [online] Available at: https://fnality.org/news/fnality-and-bnp-paribas-complete-first-on-chain-interest-rate-swap/
[2] Bank of England. (2020). Central bank digital currencies and wholesale settlement: a Bank of England perspective. [online] Available at: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2020/april-2020/central-bank-digital-currencies-and-wholesale-settlement-a-bank-of-england-perspective.pdf
[3] Fnality. (2020). Fnality receives Bank of England approval to access RTGS system. [online] Available at: https://fnality.org/news/fnality-receives-bank-of-england-approval-to-access-rtgs-system/
[4] Fnality. (2021). Fnality launches live platform for real-time settlement of complex financial instruments. [online] Available at: https://fnality.org/news/fnality-launches-live-platform-for-real-time-settlement-of-complex-financial-instruments/
[5] DTCC. (2021). DTCC's digital asset platform targets collateral. [online] Available at: https://www.dtcc.com/news/2021/dtcc-s-digital-asset-platform-targets-collateral
[6] Fintech Futures. (2021). BNP Paribas goes live on Fnality's DLT settlement system. [online] Available at: https://fintechfutures.com/2021/03/bnparibas-goes-live-on-fnalitys-dlt-settlement-system/
[7] Fnality. (2021). Fnality receives 18-month interim approval as a state chartered innovation bank in the US. [online] Available at: https://fnality.org/news/fnality-receives-18-month-interim-approval-as-a-state-chartered-innovation-bank-in-the-us/
Business and financial institutions are leveraging the Fnality Sterling Fnality Payment System (£FnPS), a tokenized central bank reserve system, to execute complex financial transactions in real-time, such as interest rate swaps. This technology-driven platform, powered by digital assets with central bank money credit characteristics, is gaining traction due to its ability to bypass intermediaries and offer efficiencies and programmability benefits in wholesale financial markets. The Bank of England supports Fnality's initiatives, exploring models for potential integration of assets and payments on a single platform, which could lead to the development of a wholesale central bank digital currency (wCBDC).
