- Mastercard partners with major banks like Citigroup, Visa, and JPMorgan to test a blockchain-based settlement system called Regulated Settlement Network (RSN).
- RSN aims to streamline settlements by tokenizing assets like Treasurys and commercial bank money on a shared ledger.
- The ongoing trials, part of an initiative started in late 2022, focus on enhancing the efficiency and security of cross-border and domestic dollar settlements.
Mastercard has teamed up with several of America’s largest banking institutions—including Citigroup, Visa, and JPMorgan—to initiate a series of tests on a new blockchain-based technology designed for banking settlements. This partnership seeks to explore the potential of a shared-ledger system known as the Regulated Settlement Network (RSN), which facilitates the tokenization and collective settlement of various asset classes.
Exploring the Potential of Tokenization in Settlements
The initiative aims to consolidate the settlement of diverse financial assets, including Treasurys, investment-grade debt, and bank-issued money, onto a single platform. By converting these assets into tokens and settling them on a distributed ledger, RSN hopes to streamline the processes that currently operate on disparate systems.
The current proof-of-concept trials are an extension of a 12-week pilot that began in late 2022, which initially focused on facilitating both cross-border and domestic dollar transactions among participating banks. The expanded trials now aim to simulate settlements specifically in U.S. dollars, reflecting a targeted approach to improving the efficiency and security of financial exchanges.
Advantages of Shared Ledger Technology
According to Raj Dhamodharan, Mastercard’s head of blockchain and digital assets, the application of shared ledger technology to dollar settlements holds the promise of pioneering new market infrastructures. Dhamodharan highlighted the potential for programmable, 24/7, and frictionless settlements, which could significantly reduce the likelihood of errors and fraud in financial transactions.
Broader Industry Participation
The Regulated Settlement Network has attracted significant interest, with ten major banking institutions currently participating in the trials, including Mastercard, Citi, JPMorgan, and Visa. Additional support is provided by interbank tokenized deposit networks like the USDF Consortium and contributions from the Tassat Group, while advisory services are offered by Deloitte.
The project is managed by the Securities Industry and Financial Markets Association, with input from other key players in the financial and technology sectors such as BNY Mellon, Broadridge, and the DTCC. These collaborations underscore the widespread industry commitment to exploring and adopting blockchain technologies.
