Mastercard and US Banks Trial Tokenized Asset Settlement

Mastercard is teaming up with leading US institutions to try out shared-ledger technology for settling tokenized assets, such as commercial bank money.

This collaboration aims to explore how this technology can streamline the settlement process for tokenized assets across different financial entities.

Testing Shared-Ledger Technology for Tokenized Asset Settlement

Mastercard and its partners are conducting tests on shared-ledger technology to settle different tokenized assets, including commercial bank money, Treasury-issued securities, and investment-grade debt securities. This effort, known as the proof-of-concept for the Regulated Settlement Network, is specifically tailored to replicate transactions in US dollars.

The primary objective of this initiative, according to Mastercard, is to improve the speed and efficiency of international transactions. Additionally, the project aims to reduce risks related to errors and fraudulent activities during settlement processes.

Transforming Financial Transactions with Ledger Technology

The adoption of ledger technology holds the promise of revolutionizing the landscape of financial transactions. Currently, assets such as commercial bank money and investment-grade debt securities operate on separate systems. However, by converting these assets into tokens running on a distributed ledger, settlement processes could be streamlined on a unified platform.

Mastercard previously conducted a twelve-week test in late 2022, focusing on domestic interbank and international payments denominated in dollars. The ongoing trial builds upon the insights gained from this earlier experiment.

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Notable participants in the current trial include Citigroup Inc., JPMorgan Chase & Co., Visa Inc., Swift, and several other key players in the financial industry. Additionally, organizations like the International Swaps and Derivatives Association and the Bank of New York Mellon Corporation are contributing their expertise to ensure the success of the trial.

Despite widespread participation from financial institutions worldwide in trials of shared ledgers for tokenized transactions, it’s important to note that the current trial does not guarantee the technology’s immediate adoption in commercial settings.

Financial Institutions Urge SEC for Spot Bitcoin ETF Participation

Several prominent financial institutions in the United States, including the American Bankers Association (ABA) and the Bank Policy Institute (BPI), have reached out to the Chair of the Securities and Exchange Commission (SEC), Gary Gensler. Their purpose is to request specific amendments to Staff Accounting Bulletin No. 121 (SAB 121) to facilitate their participation in the recently legalized spot Bitcoin exchange-traded funds (ETFs) market.

The Banking Industry Faces Challenges

Coinciding with these requests, the official shutdown of Republic First Bank on April 26th, 2024, has drawn attention to the ongoing challenges within the banking sector. Notably, Republic First Bank’s closure marks the second failure of the institution, following its initial failure in 2023. This event underscores the industry’s enduring concerns and emphasizes the urgent need for regulatory adjustments to address systemic vulnerabilities.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.


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