Euroclear Joins Consortium Building Tokenized Payment System

Securities settlement house Euroclear has acquired a stake in a consortium currently developing a payment system based around tokenized assets.

The Belgium-based securities settlement house purchased a small stake in the three-year old consortium Fnality as part of its growing integration of blockchain technology, also known as distributed ledger technology. 

Euroclear currently offers settlement, where cash is swapped for legal ownership of an asset as the concluding act of a transaction, for stock and bond trades. Through its stake in Fnality, it now hopes to settle tokenized assets, or digital securities, against digital cash in a faster, more efficient way.

Owned by a group of banks and exchanges, including Euronext and the London Stock Exchange Group, Euroclear settled roughly €992 trillion in securities last year.

Fnality’s footprint

For its part, Fnality said that Euroclear would benefit the consortium by expanding its footprint in financial market infrastructure, moving from testing to implementing its plan this year. “This has obvious positive implications for the execution of our business,” said Fnality CEO Rhomaios Ram.

With founding shareholders from over a dozen global banks, Fnality said it hopes to leverage digital currencies to optimize transaction processes between financial organizations.

Last year, Fnality applied to the Bank of England to operate a new type of account the monetary authority had introduced, which will facilitate a broader spectrum of anticipated payments systems, including those based on blockchain. Fnality’s pound sterling payments system is set to go live in October.

Meanwhile, the Bank for International Settlements, in partnership with several central banks as part of Project Dunbar, has developed prototypes for a common digital currency platform.

BIS said the two prototypes, developed in collaboration with the monetary authorities of Australia, Malaysia, Singapore and South Africa, could make cross-border payments more efficient.

The development also demonstrated that financial institutions could use the shared platform to transfer central banks digital currencies directly with one another.