US Banks and Mastercard Test Ledger Tech for Settling Tokenized Assets – Institutional Adoption on the Rise?
Payments giant Mastercard joined several leading U.S. banks on Wednesday to test new distributed ledger technology to enable tokenized asset settlement between its entities.
Financial giants, including JPMorgan, Citibank, and others, announced a proof-of-concept (PoC) for a Regulated Settlement Network (RSN) exploring the potential of shared ledger technology to make sending money across borders smoother.
Banks Experimenting With Distributed Ledgers
Some of the tokenized assets circulating in the system will include commercial bank money, wholesale central bank money, and securities like U.S. treasuries and investment-grade debt – assets that trade on separate systems within the traditional financial system.
“The RSN PoC will be conducted in a test environment and will simulate multi-asset transactions in U.S. dollars,” read the banking group’s press release. “The PoC aims to highlight opportunities to improve the operation of multi-asset settlements for domestic users of financial instruments denominated in U.S. dollars.”
Back in 2022, Mastercard announced a twelve-week PoC to test tokenized US dollar commercial bank transfers settled through “simulated central bank reserves on a shared multi-entity distributed ledger.” The company’s new work builds on the former project to enable multi-asset settlement on a programmable digital ledger.
JUST IN: US Bank has $14m in #Bitcoin ETFs, per SEC filings today.
The USA’s fifth largest bank, with $450B AUM! pic.twitter.com/trBC74jS9v
— Julian Fahrer (@Julian__Fahrer) May 8, 2024
Visa, Swift, TD Bank N.A., U.S. Bank, USDF, and Wells Fargo will be some of the trial’s other participants. U.S. Bank, in particular, recently disclosed a $14 million allocation to Bitcoin ETFs.
Meanwhile, the Federal Reserve Bank of New York will serve as a technical observer for the project to learn how distributed ledger infrastructure can conduct regulated financial transfers.
The Tokenized Asset Boom
has become a hot topic in mainstream financial circles. Even leaders like JPMorgan CEO Jamie Dimon – who liken free floating blockchain-based currencies like Bitcoin to a “pet rock” – have simultaneously called blockchain the “real deal.”
After its Bitcoin ETF launch shattered records in January, BlackRock introduced a tokenized asset fund called BUIDL, which secured $240 million within a week of its debut. The fund records share ownership on the blockchain by issuing BUIDL tokens and invests in stable assets like cash, U.S. Treasuries, and repurchase agreements.
“A key element of the tokenization thesis is the potential to build more general-purpose venues for the settlement of financial transactions,” said Debopama Sen, Global Head of Payments at Citi Services, regarding the new RSN launch. “Citi looks forward to exploring the opportunities of this project.”
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