US Banks and Mastercard Collaborate to Test Ledger Technology for Settling Tokenized Assets – Institutional Adoption Increasing?
In a move towards enhancing cross-border money transfers, leading US banks, including JPMorgan and Citibank, have teamed up with payments giant Mastercard to conduct a proof-of-concept (PoC) for a Regulated Settlement Network (RSN) using distributed ledger technology. The aim is to explore the potential of shared ledger technology in facilitating the settlement of tokenized assets.
The tokenized assets involved in the project will include commercial bank money, wholesale central bank money, and securities such as US treasuries and investment-grade debt. These assets are typically traded on separate systems within the traditional financial system.
The PoC will be carried out in a controlled test environment and will simulate multi-asset transactions denominated in US dollars. The objective is to identify ways to improve the efficiency of multi-asset settlements for US dollar-denominated financial instruments.
Mastercard had previously conducted a 12-week PoC in 2022 to test tokenized US dollar commercial bank transfers settled through a shared multi-entity distributed ledger using simulated central bank reserves. The current project builds on this prior work and aims to enable multi-asset settlement on a programmable digital ledger.
Other participants in the trial include Visa, Swift, TD Bank N.A., U.S. Bank, USDF, and Wells Fargo. Additionally, the Federal Reserve Bank of New York will serve as a technical observer to gain insights into how distributed ledger infrastructure can facilitate regulated financial transfers.
The concept of tokenizing real-world assets has gained significant traction in mainstream financial circles. Even skeptics like JPMorgan CEO Jamie Dimon, who has compared blockchain-based currencies like Bitcoin to a “pet rock,” acknowledge the potential of blockchain technology. Following the successful launch of its Bitcoin ETF in January, BlackRock introduced a tokenized asset fund called BUIDL, which raised $240 million within a week. The fund utilizes blockchain technology to record share ownership and invests in stable assets like cash, US Treasuries, and repurchase agreements.
Debopama Sen, Global Head of Payments at Citi Services, expressed enthusiasm for the RSN project, stating that it aligns with the tokenization thesis and has the potential to create more versatile platforms for financial transaction settlement.
The collaboration between US banks, Mastercard, and other industry players highlights the increasing institutional adoption of distributed ledger technology and its potential to revolutionize the settlement of tokenized assets.
