UK Finance’s Regulated Liability Network: Key Findings and Future Prospects for Blockchain in Finance
UK Finance– A blockchain-based ledger for payments and settlements may have the potential to significantly transform the United Kingdom’s finance industry, which processes $14.5 trillion in payments annually, according to UK Finance.
Regulated Liability Network (RLN) Successfully Completed
On September 17, UK Finance announced the successful conclusion of the experimental phase of the Regulated Liability Network (RLN). This blockchain-based ledger is designed for central bank digital currencies (CBDCs) and tokenized assets. UK Finance highlighted that the RLN could drive innovation and introduce new financial functionalities, such as programmable payments, based on the findings from experiments involving 11 banks.
Innovative Financial Functions of RLN
The key findings from the RLN experimentation phase include:
- Support for Innovation: The RLN could support the development of new financial functions, including programmable payments.
- Fraud Reduction: The platform may help in reducing fraud and minimizing the cost of failed payments.
- Access for New Firms: It could offer new firms a common point of access, allowing them to interact with established institutions and enhanced payment systems.
Call for Further Regulatory Engagement
UK Finance has called for increased engagement with regulators and other public bodies to further develop the RLN. Jana Mackintosh, UK Finance’s Managing Director of Payments, emphasized the importance of a partnership between the private sector and regulators to successfully advance the RLN. She noted that the UK’s legal and regulatory framework is sufficiently flexible to support this innovation but requires additional implementation and regulatory engagement.
Technological Framework and Applications of RLN
The RLN employs distributed ledger technology (DLT) and is primarily intended for use by commercial banks to manage the $14.52 trillion in payments processed annually in the UK. The ledger can accommodate wholesale CBDCs, commercial bank money, and electronic money. Entities with access to the RLN can record, transfer, and settle funds, as well as tokenize and program payments and settlements.
Benefits for New Market Entrants
One notable outcome from the experiments was that the RLN could provide new firms with a common point of access, facilitating their interaction with established institutions and improved payment and settlement systems.
The RLN is also seen as a tool to help meet the objectives set out by the Bank of England’s July discussion paper, which focuses on maintaining the integrity of money and promoting sustained innovation in the UK payments industry.
Experimentation and Bank Participation
UK Finance initiated the RLN experiments in April, collaborating with major banks including Barclays, Citi, HSBC, Lloyds, Mastercard, NatWest, Nationwide, Santander, Standard Chartered, Virgin Money, and Visa.
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