Blockchain-Powered Interbank Netting

Now live as Fnality, this consortium of major global banks (including UBS, Barclays, and others) built a blockchain-based system for peer-to-peer settlement of digital cash equivalents. It targets wholesale banking markets to enable real-time, cross-border payments and securities settlement. This is a direct, production-grade example of interbank netting principles applied to reduce settlement risk and cost at an institutional scale.

J.P. Morgan's Onyx Digital Assets network automates intraday repo transactions and netting. By moving collateral and cash movements onto a shared ledger, they've achieved:

• Real-time settlement finality, eliminating intraday credit risk.
• Automated reconciliation, removing manual errors and operational overhead.
• Programmable logic for collateral management, optimizing capital efficiency. This live platform processes billions in daily transactions, showcasing a clear path from PoC to production-scale cost savings.

HQLAx uses a tokenized securities ledger to enable seamless collateral swaps and netting across custodial boundaries. This solves the traditional problem of collateral silos and inefficient rehypothecation. Key benefits for participants include:

• Reduced settlement fails and associated penalty costs.
• Optimized balance sheets by unlocking trapped high-quality liquid assets (HQLA).
• Atomic Delivery-vs-Delivery (DvD) settlements, mitigating principal risk. Adopted by major banks like Deutsche Bank and BNY Mellon, it demonstrates regulatory-compliant innovation.

Fnality International is creating a network of wholesale payment systems using blockchain for real-time, peer-to-peer settlement and netting. It targets the core plumbing of financial markets to:

• Eliminate counterparty and settlement risk through atomic Delivery-vs-Payment (DvP).
• Dramatically reduce liquidity needs by enabling instant, final netting across asset classes.
• Provide 24/7 availability, breaking free from traditional banking hours. Backed by a consortium of global banks, it represents a strategic move to future-proof market infrastructure.

Komgo digitizes and automates commodity trade finance processes, including payment undertaking netting. By connecting traders, banks, and inspectors on a single source of truth, it delivers:

• Faster document processing, cutting letter of credit issuance from days to hours.
• Automated netting of payments between counterparties, reducing transaction volume and fees.
• Enhanced fraud prevention through immutable, shared transaction records. With users like Citi and Shell, Komgo proves blockchain's value in high-volume, document-heavy industries.

De-risk the initiative by starting with a single counterparty. This phase focuses on establishing the technical and legal framework.

• Key Deliverable: A private, permissioned ledger for bilateral netting between two trusted banks.
• Business Value: Reduces settlement risk and manual reconciliation for a high-volume corridor. Provides a tangible case study for internal stakeholders.
• Example: J.P. Morgan's Onyx and DBS Bank successfully piloted a similar model for USD/SGD transactions, cutting settlement times from days to minutes.

Expand the network to a closed consortium of 5-10 major trading partners. This phase unlocks significant liquidity and operational savings.

• Key Deliverable: A shared ledger for multi-currency, intraday netting cycles.
• Business Value: Dramatically reduces nostro account funding requirements by netting obligations throughout the day. Automates SWIFT MT202/205 message reconciliation, cutting operational costs by an estimated 30-50%.
• Real-World Parallel: The Utility Settlement Coin (USC) project, now Fnality, was built on this consortium model to enable real-time, peer-to-peer settlement.

Connect the private netting ledger to a central bank digital currency (CBDC) or a regulated settlement asset. This phase eliminates final settlement risk.

• Key Deliverable: Atomic Delivery vs. Payment (DvP) and Payment vs. Payment (PvP) capabilities using central bank money.
• Business Value: Achieves true finality, removing counterparty and credit risk from the settlement process. Enables 24/7 near-instant settlement, unlocking new business models.
• Example: The Project Helvetia trials by the BIS and Swiss National Bank demonstrated the seamless integration of tokenized assets with a wholesale CBDC for instant settlement.

Transition to an open, standardized network protocol. This final phase creates a new financial market infrastructure.

• Key Deliverable: An interoperable platform supporting smart contract-enabled conditional payments, automated compliance, and seamless integration with trade finance and capital markets.
• Business Value: Transforms netting from a back-office utility into a strategic liquidity management tool. Enables complex, cross-border transactions with embedded logic, reducing manual intervention to near zero.
• Forward Look: This vision aligns with the Regulated Liability Network (RLN) concept being explored by major global banks and regulators.