Euroclear Backs Blockchain Payments Consortium Fnality

International securities settlement system Euroclear has invested in the regulated blockchain payments consortium Fnality — formerly known as the Utility Settlement Coin (USC) — which is owned by 16 financial institutions, including Nasdaq, BNY Mellon, State Street, and UBS, Reuters reported on Monday (March 21). 

Headquartered in London, Fnality was founded in 2019 by a consortium of banks to create a payment system for tokenized assets. It is the result of a four-year research and development project to better understand how distributed ledger technology (DLT) could change financial markets.

Fnality has plans to go live with its first payment currency in October with pounds sterling deposited at the Bank of England (BoE). Fnality’s application was approved by the U.K.’s central bank following BoE’s decision last year that an account type was needed to cater to new payments systems, including those based on blockchain.

Having the participation of Euroclear helps grow the consortium’s footprint in market infrastructure as the project transitions from the testing phase to fully implementing its plan this year, Fnality said.

“This has obvious positive implications for the execution of our business,” Fnality CEO Rhomaios Ram said in a statement.

Based in Belgium, Euroclear is owned by a group of banks and exchanges, including Euronext and the London Stock Exchange Group. It operates central securities depositories (CSDs) across Europe, including Belgium, Finland, France, Ireland, the Netherlands, Sweden and the U.K., and has settled approximately 992 trillion euros ($1,095 trillion) in securities last year.

The majority of Euroclear’s activities are in the EU, according to LedgerInsights. Its participation in the consortium could help Fnality potentially gain authorization from the European Central Bank (ECB). Prior to Euroclear, only four of Fnality’s 15 member organizations hailed from the EU. 

The EU DLT pilot regime for securities is slated to launch at the end of 2022. The sandbox for tokenized securities and settlement focuses on the tokenization of conventional financial instruments such as stocks, bonds and UCITS, the European version of mutual funds. The final vote for the pilot is expected to go before Parliament at the end of this month. 

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