Mastercard, US Banks Collaborate on Shared-Ledger Trial

Mastercard Incorporated is spearheading an innovative collaboration with some of the most prominent US banks to explore shared-ledger technology. This pioneering initiative aims to test the viability of settling tokenized assets through a unified platform. These assets include commercial-bank money, Treasury securities, and investment-grade debt.

The Regulated Settlement Network

According to a Bloomberg report, known as the Regulated Settlement Network, this proof-of-concept endeavor seeks to simulate transactions denominated in US dollars. The overarching goal is to enhance the efficiency and security of cross-border transactions. This involves mitigating the risks associated with errors and fraudulent activities.

Revolutionizing Financial Practices

Ledger technology adoption promises to revolutionize traditional financial practices. Currently, disparate systems manage various types of assets, such as commercial bank funds, central bank reserves, and securities. However, tokenizing these assets on a distributed ledger can streamline the settlement process within a unified ecosystem. This could usher in a new era of efficiency and transparency.

Expansion from Previous Tests

This trial builds upon the foundation laid by a previous 12-week experiment launched in late 2022. The initial phase focused primarily on domestic interbank transfers and cross-border payments denominated in US dollars. The current endeavor marks an expansion of these efforts, incorporating a broader array of tokenized assets and participants.

Key Participants

Joining Mastercard in this ambitious undertaking are several major players in the US banking sector. Citigroup, JPMorgan Chase, US Bancorp, Wells Fargo, Visa, Swift, TD Bank NA, and Zions Bancorporation are trial contributors. Additionally, the Bank of New York Mellon Corporation and the International Swaps and Derivatives Association are providing their expertise. They support the project’s success.

Observation and Oversight

The New York Innovation Center at the Federal Reserve Bank of New York will serve as an impartial observer, overseeing the participants’ research and experimentation with tokenized settlement assets. This oversight ensures adherence to regulatory standards and fosters collaboration among industry stakeholders.

Global Exploration of Ledger Technology

Financial institutions worldwide, including Mastercard, Barclays PLC, and Citigroup, actively engage in similar endeavors. They extend the exploration of shared ledgers for tokenized transactions beyond US borders. Notably, Mastercard and other leading institutions announced a new pilot program in the United Kingdom in April. This highlights the global significance of this emerging technology.

While participation in this trial does not guarantee commercial deployment, it underscores the commitment of industry leaders to innovation and collaboration. As shared-ledger technology continues to evolve, its potential to reshape the financial landscape remains profound. It promises greater efficiency, security, and accessibility for participants across the global economy.

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