Fnality Payment System: bank settlement in central bank money
Fnality runs payment systems on distributed ledger technology in which banks pay each other with funds held at the central bank. Its first system settles in sterling, and Fnality Europe GmbH in Eschborn near Frankfurt is developing a euro version.
How the Fnality Payment System works
Fnality describes its business as "defining the future of payments for banks and businesses, fully backed by funds held at central bank." On its how it works page, the participants hold their funds in an account at the central bank. Each Fnality Payment System (FnPS) is a distributed settlement platform on a private Ethereum network, where transactions are validated by consensus and no central settlement agent is needed. Payments settle in real time, 24 hours a day.
Fnality calls the Sterling Fnality Payment System "the first fully regulated, distributed ledger technology-based payment system in the world." The company was founded in 2019 out of the Utility Settlement Coin project, and the sterling system received a recognition order from HM Treasury and is supervised by the Bank of England, The Block reported. Fnality names 24 financial institutions as its shareholders.
Settlement between banks
The first of Fnality's use cases is margin: a bank pledges cash it holds in the payment system. For cross-border payments, Fnality plans a network of systems in several currencies, so that both legs of a currency trade settle at the same moment as payment versus payment. With HQLAX, Fnality piloted intraday repo swaps.
For delivery versus payment, Fnality says its system can connect to existing securities platforms as well as DLT ones.
The euro system from Eschborn
Fnality Europe GmbH, registered in Eschborn near Frankfurt, is developing the Euro Fnality Payment System for regulated financial institutions. According to Fnality, it is to settle in central bank reserves within the existing central bank and regulatory frameworks, for both delivery versus payment and payment versus payment.
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What is Fnality?
Fnality is a company owned by 24 financial institutions that runs payment systems on distributed ledger technology. Payments in its systems are backed by funds held at the central bank.
Is Fnality a stablecoin?
Fnality describes its payment systems as fully backed by funds held at the central bank. The participants hold those funds in a central bank account and settle with each other in real time.
Where is Fnality in Germany?
Fnality Europe GmbH is registered in Eschborn, near Frankfurt, and is developing the Euro Fnality Payment System.
Settlement in central bank money
Collateral and ledgers
Fnality and Finance Loop
Finance Loop covers settlement in central bank money and tokenized bank money in the Payments & Digital Money track.
Finance Loop and Venturebloxx published the report The Future of Money in Europe, which includes perspectives from Fnality, J.P. Morgan Kinexys, Euroclear and the Banque de France.
Finance Loop is a professional network and has the goal of driving the adoption of emerging technologies in finance, such as AI, digital payments, cloud and blockchain solutions. Finance Loop helps its members build skills and personal networks in these fields: Investment & Digital Assets, Payments & Digital Money, Digital Infrastructure & Sovereignty, and Risk & Compliance.