US banking sector launches digital asset settlement proof of concept

A group of US banking sector heavyweights, working with the Federal Reserve Bank of New York, has launched a proof of concept (PoC) for a regulated digital asset settlement platform.

BNY Mellon is one of a number of banks taking part

Private sector financial institutions including BNY Mellon, Citi and Wells Fargo are looking to explore the feasibility of an interoperable digital money platform called the regulated liability network (RLN), powered by distributed ledger technology (DLT).

The 12-week PoC will operate in US dollars, with commercial banks issuing tokens representing customer deposits and settling through simulated central bank reserves on a shared distributed ledger. The aim is to see if such technologies could improve financial settlements.

The PoC will also test the feasibility of a programmable digital money design that could be extended to other digital assets, as well as the viability of the proposed system within existing laws and regulations, particularly know your customer (KYC) and anti-money laundering (AML) requirements.

The banks will be working with the New York Innovation Center (NYIC), a division of the Federal Reserve Bank of New York which fosters collaboration between the private and public sector.

The financial institutions taking part are BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, US Bank and Wells Fargo, with the technology provided by Digital Asset, SETL and Amazon Web Services.

Interbank cooperative Swift is also participating in the initiative to support interoperability across the international financial ecosystem. The PoC will also engage with the broader US banking network, including community and regional banks.