Last week, the Regulated Liability Network (RLN) shared the results of a proof-of-concept of DLT for payments with the Federal Reserve Bank of New York and ten institutions, including BNY Mellon, Citi, HSBC, Mastercard, and Swift. SETL was one of the primary technology providers to the project along with Digital Asset and is developing the SETL RLN Protocol software as a separate project and company, LedgerSwarm, to be funded separately.

The recent RLN trial focused on two use cases for domestic and cross-border payments. It is the latter that shone by allowing 24/7 real-time settlement, with the added benefit of programmability.

LedgerSwarm DLT helps banks compete with JP Morgan

Global banks are likely to start using the LedgerSwarm solution for intraday payments between their subsidiaries around the world. This allows them to offer real-time cross-border payments to their multinational corporate clients.

JPM Coin by JP Morgan offers a similar solution. The difference with LedgerSwarm is that it can work within a single bank or between banks (and central banks). It is interoperable with most mainstream bank ledgers, as well as a variety of DLT ledgers.

“The 24/7 global movement of dollars is what really is a point of competition right now,” SETL CEO Anthony Culligan told Ledger Insights. “International banks are competing for multinational accounts. Every time JP Morgan wins one of these big international companies, it puts pressure on all the other banks to say, ‘we need something that will give us real-time settlement on our own network.'”

A DLT version of Swift?

Conceptually, RLN offers a programmable version of Swift that is future-proofed for integration with DLT networks. LedgerSwarm wants to provide a software and network layer similar to what regulated Financial Market Infrastructures (FMIs) connect to. That includes banks, real-time gross settlement systems (RTGS) and central securities depositories (CSDs).

Taking a step back, the goal of RLN is not simply to move money, but also to enable a settlement layer for tokenized assets. Clearly, carbonated drinks are critical to that.

“If you think about the custody book within the bank, the CSD book and the custody book at the receiving bank. It’s about trading those three ledgers for a stock transaction,” Culligan observed.

Interoperability with conventional systems is also critical here. The recent issuance of UBS digital bonds on the SIX Digital Exchange (SDX) would not have been viable at the CHF 375 million scale without the link between the SDX CSD and conventional SIX CSD enabling investment by asset managers not yet ready for blockchain. .

A plethora of unified ledgers?

The BIS effectively endorsed the RLN concept when it recently published its ‘Unified Ledger’ document. Last week, the Banque de France also proposed a pan-European shared DLT infrastructure and British banking body UK Finance urged the government to explore the industry’s appetite for a shared infrastructure. In fact, the UK has already run an initial low-profile RLN test involving several banks funded by the government-owned British Business Bank. And a second iteration is in progress.