Mastercard, a payment processing and settlement firm, has partnered with major US banks, including Citigroup, Visa, and JPMorgan, to test distributed ledger technology for banking settlements using tokenization.
The aim of the partnership is to test a shared-ledger technology called Regulated Settlement Network (RSN). RSN allows tokenized assets, such as Treasurys, investment-grade debt instruments, and money from commercial banks, to be settled collectively.
Currently, investment-grade debt and assets 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.
This trial phase builds on a 12-week pilot phase conducted in late 2022, which focused on cross-border and domestic dollar payments between banks. The ongoing proof-of-concept (PoC) RSN trials now concentrate on simulating settlements in the US dollar.
In a statement on May 8, Mastercard explained that the project aims to increase the efficiency of cross-border settlements and reduce the risk of errors and fraud.
Raj Dhamodharan, the head of blockchain and digital assets at Mastercard, stated that the “application of shared ledger technology to dollar settlements could unlock the next generation of market infrastructures – where programmable settlements are 24/7 and frictionless.”
The RSN PoC has seen two significant additions to the participating banks: the USDF Consortium, which will be a direct participant in the interbank tokenized deposit networks, and the Tassat Group, which will contribute to the project. Deloitte, another banking giant, will provide advisory services, while the Securities Industry and Financial Markets Association will act as the program manager.
The ten participating banking giants are Citi, JPMorgan, Mastercard, Swift, TD Bank N.A., U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp.
Six additional project participants will contribute their subject-matter expertise, including the nonprofit MITRE Corporation, BNY Mellon, Broadridge, the DTCC, ISDA, and the Tassat Group.