Mastercard, a payment processing and settlement firm, has partnered with major US banking institutions, including Citigroup, Visa, and JPMorgan, to test distributed ledger technology for banking settlements using tokenization. This collaboration aims to test a shared-ledger technology called Regulated Settlement Network (RSN), which allows tokenized assets such as Treasurys, investment-grade debt instruments, and money from commercial banks to be settled collectively.
Currently, investment-grade debt and money from commercial banks operate on separate systems. However, with RSN, settlement procedures will take place on a single platform by converting various assets into tokens and settling them on a distributed ledger.
The current trial phase builds on a 12-week pilot phase that began in late 2022, which focused on cross-border and domestic dollar payments between banks. The ongoing proof-of-concept (PoC) RSN trials now simulate settlements in the United States dollar.
Mastercard stated on May 8 that the project aims to enhance the efficiency of cross-border settlements and reduce the risk of errors and fraud. Raj Dhamodharan, head of blockchain and digital assets at Mastercard, believes that applying shared ledger technology to dollar settlements could revolutionize market infrastructures, making settlements programmable, available 24/7, and frictionless.
The RSN PoC has welcomed two significant additions to the participating banking institutions: interbank tokenized deposit networks, with the USDF Consortium as a direct participant, and the Tassat Group as a contributor. Additionally, Deloitte, a banking giant, will provide advisory services, while the Securities Industry and Financial Markets Association will act as the program manager.
The participating banking giants include Citi, JPMorgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp. Six more project participants will contribute their expertise, including the nonprofit MITRE Corporation, BNY Mellon, Broadridge, the DTCC, ISDA, and Tassat Group.
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