December 18, 2023

UK Financial Titans Embrace Blockchain for Revolutionary Payment Systems

Major financial players, including Lloyds, Banco Santander, and UBS, have joined forces with blockchain startup Fnality in deploying the Sterling Payment System. This move signals a pivotal step towards integrating blockchain technology into the fabric of traditional finance.

Blockchain technology is continuing its transformative journey within traditional finance, as prominent financial institutions such as Lloyds Banking Group, Banco Santander, and UBS actively participate in the recent launch of a liquidity management network. The Sterling Fnality Payment System, developed by blockchain payments startup Fnality, achieved a significant milestone by facilitating live payments within the Bank of England's real-time gross settlement service.

Fnality's groundbreaking achievement with blockchain technology

Recognized as a regulated payment system by HM Treasury in August 2022, the Sterling Fnality Payment System now operates under the oversight of the Bank of England and the UK's Payment Systems Regulator. Live transactions executed within the Fnality-held omnibus account represent a substantial stride toward adopting digital transaction models in both wholesale financial markets and emerging tokenized asset markets.

Fnality's success story is accentuated by a strategic partnership with financial powerhouses, including Goldman Sachs and BNP Paribas, who collectively invested $95 million last month. Fnality specializes in creating tokenized versions of major currencies like US dollars, euros, British pounds, Canadian dollars, and Japanese yen. These tokens are backed by cash held at central banks, ensuring enhanced stability and reliability.

This development aligns seamlessly with the broader trend of blockchain technology gaining prominence in traditional finance. Notably, JPMorgan has been actively exploring tokenization and blockchain initiatives, exemplified by a collateral transaction between BlackRock and Barclays facilitated through a decentralized application. The bank has also unveiled a programmable payment offering for blockchain-based accounts on the JPM Coin System.

Anticipating the future

According to research analyst Carlos Gonzalez Campo, the industry is currently in an "experimental stage" for tokenization. Looking ahead to 2024, there is an expectation of transitioning from experimentation to production, with a primary focus on overcoming challenges, particularly in cross-chain communication.

The launch of the Sterling Fnality Payment System aligns with the Bank of England's commitment to engage with more payment systems, particularly those leveraging distributed ledger technology. As operations scale, the Bank of England is poised to evaluate the system's compliance with regulatory expectations, ensuring a seamless transition to full-scale commercial operations.

The House of Commons Treasury Committee has urged the Bank of England and HM Treasury to exercise caution in considering the introduction of a central bank digital currency (CBDC) in the UK. Despite the advocacy for a digital pound, concerns about potential impacts on financial stability persist. In a three-month experiment with major banks, the New York Federal Reserve suggested that centralized blockchain payments could address pain points in the settlement process.

Stay Connected
Join the conversation on 𝕏
Make a Difference
Support our content creators
and help us stay ad-free
BTC: bc1q6nt2u2u539kjgfn5hj8g9f8xk2hnwuudlrlnr9
Cryptocurrency news & learning platform
All Rights Reserved © 2024