Fnality commences initial phase of Sterling payment operations in a world-first for both wholesale finance and digital asset markets

In a landmark event for both wholesale finance and digital asset markets, the initiation of the Sterling Fnality Payment System (£FnPS) brings together for the first time the safety and institutional quality of central bank funds in a systemic wholesale payment system with the innovative functionality and resilience of blockchain technology. Lloyds Banking Group, Banco Santander and UBS have all played a critical role as initial participants in the £FnPS. The inaugural live payments in this first phase of the new digital FMI and regulated payment system have taken place leveraging an Omnibus Account held by £FnPS in the Bank of England RTGS service, exemplifying the ambitious innovation that Fnality brings to the markets.

This milestone goes beyond just demonstrating Fnality’s functionality — it evidences the first foundations of a broader multi-jurisdictional vision; one that enables a seamless global liquidity management ecosystem by empowering new digital payment models for payment (P), payment versus payment (PvP), and delivery versus payment (DvP) transactions in both wholesale financial markets and emerging tokenised asset markets.

With this broader vision and our regulatory context in mind, our focus now turns to scaling £FnPS operations in a managed and phased approach. This initial phase, focused on ensuring system resilience and functionality in a live environment, is subject to limits set by the Bank of England. Scaling operations will be subject to the £FnPS meeting the Bank of England’s operational and supervisory expectations for the next managed phase. This will pave the way for establishing FnPSs in other core currencies including USD and EUR, onboarding more participant banks, and rolling-out a range of value-adding functionalities including conditional payments, digital securities settlement, intraday repos, intraday FX swaps, and more.

Fnality appreciates the UK authorities’ commitment to innovation and resilience which has provided a robust regulatory backdrop/framework in which Fnality has been developed. In April 2021 the Bank of England published their Omnibus Accounts Policy, a vital enabler of new payment and settlement models in central bank money. In August 2022, the Sterling Fnality Payment System was recognised and designated by HM Treasury, bringing it into the regulatory remits of the Bank of England and the Payment Systems Regulator due to its likely systemic importance. £FnPS is now connected to CHAPS to prove its provision of payments services in a live environment and joins the select group of payment systems that form the UK’s recognised payment infrastructure. During this initial phase, the BoE will continue to assess £FnPS operations against regulatory expectations as we scale up to commercial operations.

Angus Fletcher, CEO of Fnality UK, reflected:
“This marks the culmination of significant efforts by Fnality, our shareholders and participants, our key partners, as well as the UK authorities. As we step into 2024, our focus sharpens on scaling up operations within a managed and approved framework as set out by the Bank of England, and steadily progressing towards unlocking new market use cases.”

Rhomaios Ram, CEO of Fnality International, shared:
“Today’s success is a major step in the wholesale payments and digital assets arenas, demonstrating the global potential of Fnality’s DLT-based payment systems. With a committed group of participant banks and Financial Market Infrastructures ready for onboarding in the coming months, alongside an exciting suite of functionality expansions under development, we are solidly on track towards realising our vision of a seamless global liquidity management ecosystem.”

Samantha Emery, Director – Payments Industry and Development at Lloyds Banking Group, comments: 
“We are delighted to see Fnality take the next step in its journey to become a multi-jurisdictional, digital FMI. The initiation of the Sterling Fnality Payment System is a unique event, which will not only revolutionise settlement but transform the way in which Financial Institutions manage their future liquidity needs.
Our partnership with Fnality will help us to meet our own objectives of Helping Britain Prosper, whilst aligning to the UK Government’s ambition of putting the UK on the map as being a global Fintech hub. Lloyds Banking Group have played a key role at the heart of this, through both strategic investment and technical deployment, which has enhanced our own colleagues’ expertise in an important new domain for financial services.”

John Whelan, Managing Director of Digital Assets at Banco Santander, comments:
“Banco Santander has been part of the visionary Fnality story since the beginning.  As one of its founders, we are delighted to be one of the inaugural banks to make payments on the first of its kind – a wholesale digital-cash settlement system. Systems like Fnality will help eliminate settlement risk and make wholesale payments instant and 24/7.”

Hyder Jaffrey, Managing Director, Principal Investments and Strategic Ventures at UBS, comments:
“Transacting the first live payments over Fnality is evidence of the Fnality vision coming to life. The creation of a new systemically important global payment system is a once in a generation event. In conjunction with our partners at Lloyds and Santander, we and Fnality have evidenced a very real step in such a creation and we look forward to further evidencing new transformational use cases built upon Fnality rails.”

About Fnality International
Founded in 2019, Fnality is developing a series of regulated, DLT-based wholesale payment systems in key jurisdictions, each overseen by its home central bank. In each Fnality Payment System (FnPS), participants use settlement balances in an account directly at the central bank to make wholesale payments in real-time. These settlement balances are bankruptcy remote and backed 1-to-1 by central bank money in the relevant currency. FnPS offers banks a faster, safer, and more resilient system for managing digital payments, and supports the growing industry adoption of tokenised assets and marketplaces.
Fnality’s interoperable network of distributed Financial Market Infrastructures (dFMIs) will provide a composable, compelling suite of use cases. The launch of FnPSs in other core jurisdictions will enable real-time cross-currency payments on a 24/7 basis, with the central bank money credit quality of the underlying settlement balances providing the missing ingredient for novel digital asset markets: an institutional-grade on-chain cash asset. With the linkage of a real-time, cross-currency payment versus payment (PvP) capability in these assets to the ability to settle any delivery versus payment (DvP) transaction atomically and on a real-time basis, participants in FnPS are empowered to manage virtually the entirety of their cash and collateral from a single, global pool of liquidity.
Fnality’s shareholders comprise: Banco Santander, Barclays, BNP Paribas, BNY Mellon, CIBC, Commerzbank, DTCC, Euroclear, Goldman Sachs, ING, KBC Group, Lloyds Banking Group, Mizuho Financial Group, MUFG Bank, Nasdaq Ventures, Nomura, Sumitomo Mitsui Banking Corporation, State Street Corporation, UBS and WisdomTree.
For more information, please visit www.fnality.org