Fnality International - Digital Central Bank Money Settlement Systems
Sector: Tertiary sector · Industry: Fintech · Organisation: Fnality International (Konsortium globaler Banken, darunter Santander, HSBC, Barclays und UBS) · Maturity level: Pilot
Fnality International develops DLT-based payment systems for real-time wholesale settlement with digital representation of central bank money to make cross-border payments more efficient. The consortium of 14 global banks (including Santander, HSBC, Barclays and UBS) has already technically launched the Sterling Fnality Payment System as the first step towards a global network and is in the pilot phase with regulatory approval. The system enables near-instant settlement of payments between financial institutions and reduces counterparty risk through the use of Utility Settlement Coins (USCs) that represent fiat currencies on a blockchain.
Documentation status
- Project status: Pilot
- Evidence: Evidence high
- Editorial review: Ufuk Avci, 15 April 2026
Description
Fnality International was founded in 2019 to enable tokenised central bank money for institutional wholesale payment traffic. The Sterling Fnality Payment System (£FnPS) started controlled live operation in December 2023 and was recognised by HM Treasury as a systemically important payment system — the world’s first regulated DLT-based wholesale payment system. Funds at Fnality are backed 1:1 by deposits at the Bank of England.
Fnality originated from the Utility Settlement Coin (USC) project (2019, $67 million initial funding). Core concept: Banks deposit funds at the Bank of England in an omnibus account; Fnality tokenises these reserves as digital monetary units. These tokens can be transferred between banks in real time, 24/7, atomically — without intraday liquidity buffers. Key feature: Earmarking — funds can be reserved for specific purposes (e.g. delivery-versus-payment for tokenised securities) and are only released upon fulfilment of the condition. In October 2024, Santander, Lloyds and UBS conducted the first uncleared bilateral margin payments via £FnPS — the first use of a fully regulated DLT system for interbank margin settlement. Fnality shareholders: Banco Santander, BNY Mellon, Barclays, BNP Paribas, CIBC, Commerzbank, DTCC, Euroclear, Goldman Sachs, ING, KBC, Lloyds, Mizuho, MUFG, Nasdaq, Nomura, SMBC, State Street, UBS, WisdomTree. Series C (September 2025): $136 million, led by WisdomTree, BofA, Citi — total funding over $310 million.
Perspectives
B2B — organisations perspective
Institutional banks can settle tokenised securities, repos and margin payments in real time against digital central bank money atomically via Fnality — without leg risk, without intraday liquidity buffers, 24/7.
Employees perspective
Employees in treasury and risk management departments benefit from automated processes and real-time transparency in payment transactions, making their daily work more efficient. However, the new technology also requires further training and adaptation to digital workflow processes when dealing with blockchain-based settlement systems.
Benefits
General
- Drastic reduction of settlement times from days to near real time by using digital central bank money tokens on a blockchain platform.
- Significant cost reduction in cross-border wholesale payments by eliminating intermediaries and complex correspondent banking relationships.
- Significant reduction of counterparty risk through the use of digital central bank money instead of traditional bank guarantees.
B2B — organisations
- Improved liquidity optimisation and treasury management through 24/7 availability of the settlement system and real-time transparency of payment status.
Employees
- Employees can focus on more strategic tasks as routine settlement processes are automated and require less manual monitoring.
Challenges
General
- The high technical complexity of integration with existing RTGS systems requires substantial IT investments and specialised expertise.
- Regulatory uncertainties and the need for approval from various central banks can delay global scaling.
B2B — organisations
- Companies must invest significant resources in system integration and employee training to successfully implement the new blockchain-based settlement infrastructure.
Employees
- Employees must develop new technical skills in handling blockchain technology and digital central bank money systems, requiring intensive training.
Technology foundation
Fnality International uses a private, permissioned blockchain technology (Distributed Ledger Technology) in collaboration with technology partner Clearmatics to create digital representations of central bank money. This technology is particularly suitable as it meets the high security and compliance requirements of the banking sector and enables seamless integration with existing RTGS systems (Real-Time Gross Settlement).
Implementation examples
Fnality Sterling Payment System Pilot
The participating banks wanted to improve their settlement efficiency and reduce counterparty risk in intraday margin payments. The traditional system required complex correspondent banking relationships and caused delays in liquidity management.
Pilot project for intraday margin payments using digital sterling tokens between leading banks to optimise the settlement process.
The Sterling Fnality Payment System was the first operational system of the consortium to be technically launched and is currently in the pilot phase with regulatory approval in the United Kingdom. Lloyds, Santander and UBS use the system for intraday margin payments and are testing the practical application of digital sterling tokens for real-time settlement. The pilot project demonstrates the feasibility of blockchain-based payment processing between major banks and paves the way for planned expansion to additional currencies and global markets.
The pilot project addressed the challenges of long settlement times and high operational costs in interbank payments. Additionally, counterparty risk was minimised by using digital central bank money instead of traditional bank guarantees.
Tags
Digital central bank money, Settlement, Wholesale banking, Interbank payments, Financial infrastructure