Three UK FinTechs and two major European banks have successfully conducted a proof of concept showcasing the benefits of Distributed Ledger Technology (DLT) in offering near-instant settlement in capital markets and payments - the first cross-chain pilot debt transaction on public Ethereum and Fnality Payment System
Fnality is one step closer to the 2022 launch of their first Fnality Payment System (FnPS), which will enable wholesale payments in real time with near instant settlement in a central bank money-backed digital cash asset
Nivaura provided the automated workflow platform and integration with public DLT for asset creation, settlement and payment administration
The Ecosystem TestNet that facilitated the payment leg was developed in collaboration with Adhara
NatWest acted as dealer and issuer in the pilot, with Santander fulfilling the role of investor
London – 9 February 2022. Three UK FinTechs, in collaboration with two major European banks, today announced the successful completion of a pilot proof of concept (POC) involving the issuance of a tokenised security on a public blockchain, with the payment leg conducted through a new, DLT-enabled payments system.
Fnality – the FinTech firm creating a network of distributed payment systems using blockchain technology – partnered with Nivaura – the FinTech firm developing low-code/no-code transaction management workflow automation technology for primary markets – to structure, execute and settle a tokenised primary securities issuance, with the payment leg settled in a test central bank money-backed digital asset.
Fnality also partnered with Adhara – a leading software company that provides real time, multi-currency, liquidity management and international payment solutions – to facilitate the payment leg via the creation of an Ecosystem TestNet.
The TestNet is an early working and live example of how Fnality’s DLT-based payment systems will help facilitate several benefits and use cases, including intraday liquidity savings, end-to-end repurchase agreements, and interbank intraday FX swaps.
It has been adopted alongside Nivaura’s product by Santander and NatWest for the purposes of this POC to demonstrate, in what has traditionally been a time-intensive and manual process, a near-instant solution that structures, executes and settles trades on a T=0 basis, enabling participants to easily accelerate time to market for debt issuances.
NatWest and Santander acted as the two counterparties to the transaction, demonstrating the ability of DLT to streamline both capital markets and payments activity in the future. This pilot transaction is a major step in the adoption of digital and automated technologies in the industry, and a clear demonstration that UK FinTech is at the leading edge of progress in this space.
The announcement comes ahead of an exciting year ahead for the three companies:
Leveraging on successful dealer and infrastructure deployments in 2021, Nivaura continues to develop its transaction management workflow technology to provide a seamless digital journey today while creating the on-ramp solution to get ready for tomorrow’s scalable DLT future.
Fnality’s launch of its DLT-enabled payment system is scheduled for October 2022, and will be enabled by the Bank of England’s new Omnibus Account, which opens up the full potential of their unique distributed Financial Market Infrastructure.
Adhara and Fnality have successfully launched the Ecosystem Testnet on which a number of business use cases are being tested - highlighting the benefits of utilising Fnality and showcasing how new target operating models can be implemented by major wholesale banks.
Dr. Vic Arulchandran, Co-founder of Nivaura: “This POC builds on our ethos of innovation in primary capital markets, particularly as the first firm to use DLT to issue and settle the world's first legally compliant tokenised securities on public blockchain. Partnering with Fnality on this POC enables us to extend our previous work to test the potential benefits of entirely DLT based settlement of digital assets with central bank money-like digital cash. As we move forward and collaborate with other innovative firms like Fnality, Santander and NatWest, we will continue to work under the governance of the FCA and other regulators, law firms, market infrastructure and capital markets firms to ensure that the banking ecosystem is involved in shaping the future of primary capital markets.”
Commenting on the inception of their Ecosystem TestNet, Fnality CEO, Rhomaios Ram, said: “After much recent hard work in collaboration with our blockchain partners at Adhara, the Fnality Ecosystem TestNet finally allows us to proudly introduce our structure for DLT-based payments and settlements ahead of live operation. This early phase of testing under specific use cases for Santander and NatWest promotes the exploration of multiple system benefits, allowing those within the Fnality consortium - and those who stand to gain outside it - to examine how the technology will work to deliver speed, cost and risk benefits, while also defining workflows for the future. With the help of Adhara and industry partners like Nivaura, the creation and implementation of this TestNet will aid us in demonstrating the key capabilities of Fnality Payment Systems and providing a practical window into the future market structure they will enable.”
Commenting on their involvement, Adhara COO, Peter Munnings, said: “We’re very pleased to have the opportunity to assist Fnality and Nivaura in demonstrating the benefits of this POC by providing the test implementation of the underlying payment system architecture. The opportunity to be Fnality’s blockchain partner for the first-of-its-kind DLT system for payment and settlement applications is unique in building the wholesale financial ecosystem of the future. We’re looking forward to facilitating the demonstration of further use cases on the Fnality Adhara TestNet to provide Fnality’s users with full confidence ahead of the FnPS’s full market launch.”
Christopher Agathangelou, Head of Digital Capital Markets & Flow Credit at NatWest, commented: “NatWest is delighted to have acted as issuer and dealer in this landmark pilot transaction. Financial markets are increasingly embracing distributed ledger technology and NatWest will always advocate for innovation and market standardisation in line with our values and the interests of our customers. Distributed ledgers and digital assets will help level the playing field by lowering the barriers to entry to financial markets for both large frequent issuers and smaller enterprises.”
John Whelan, Managing Director of Digital Assets at Santander, said: “The benefits of programmable digital securities can be maximised by incorporating programmable digital cash for settlement and the entire post-trade lifecycle leading to many efficiency gains and bring enormous amounts of innovation to the capital markets.”
Founded in 2019, Fnality International is a consortium of global banks that is building regulated payment systems to support the growing industry adoption of tokenised assets and marketplaces. By using distributed ledger technology (DLT), Fnality offers central banks a simpler, faster, safer, and more resilient system for managing payments.
With a global roll-out set to commence in 2022, Fnality International’s network of distributed Financial Market Infrastructures (dFMIs) will provide a near-real-time 24/7 settlement capability in a central bank money-like digital cash asset while facilitating interoperability with other platforms, allowing banks to significantly reduce their intraday liquidity requirements, and unlocking the institutional potential of tokenised financial markets.
Fnality’s founding shareholders are: Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, Mizuho Bank, MUFG Bank, Nasdaq, State Street Corporation, Sumitomo Mitsui Banking Corporation, and UBS.
For more information, please visit www.fnality.org
Over the last six years, Nivaura has taken a leading role in bringing efficiency to the primary markets, and through its active dialogue with regulators and capital markets participants, it has driven key innovations in digitalisation and automation. Nivaura is continuing to work with the industry to refine its fully flexible technology, which is an easily adaptable white-label solution for capital markets participants to configure seamless digital journeys for their clients. This also enables a bank’s clients to try innovations in a controlled environment in parallel with modes of operating that they are accustomed to - for example issuing traditional and tokenised securities through a single and seamless digital platform. For more information, please visit www.nivaura.com
Adhara is a leading software company that provides real time, multi-currency, liquidity management and international payment solutions. Benefiting commercial banks, their corporate clients, central banks, exchanges and international payments networks, Adhara’s platforms deliver certainty by atomically clearing and settling tokenized fiat transactions over enterprise-grade, smart contract enabled distributed ledgers. Together, Adhara’s components provide comprehensive liquidity management capabilities for payments, market making and funding solutions, helping to manage FX risk and leverage global liquidity (on a network) in real time. Adhara has global reach with development hubs in Spain & South Africa, as well as business bases in the UK and Singapore. Its diverse team has decades of experience across commercial banking technology, capital markets, blockchain and product design & development – including an Engineering team with excellence in cryptography, enterprise systems and end user app development.
For more information, visit www.adhara.io
NatWest is a relationship bank for a digital world. We champion potential; breaking down barriers and building financial confidence so the 19 million people, families and businesses we serve in communities throughout the UK and Ireland can rebuild and thrive. If our customers succeed, so will we.
Banco Santander (SAN SM, STD US, BNC LN) is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful presence in 10 core markets in the Europe, North America and South America regions, and is one of the largest banks in the world by market capitalization. Its purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising over €120 billion in green financing between 2019 and 2025, as well as financially empowering more than 10 million people over the same period. At the end of 2021, Banco Santander had €1.15 trillion in total funds, 153 million customers, of which 25.4 million are loyal and 47.4 million are digital, 9,900 branches and 197,000 employees.