Fnality boss expects the 'starting gun' soon for the project formerly known as Utility Settlement Coin

Central banks will publish regulatory policies on payments systems that utilize distributed ledger technology by the end of the year, and that will finally be the “starting gun” for the highly-anticipated interbank payment project formerly known as Utility Settlement Coin. 

At least, that’s what Rhomaios Ram, chief executive of the London-based Fnality International, predicts.

Fnality, the consortium of 15 major financial institutions is aiming to make the clearing and settling of payments in wholesale financial markets more efficient by using tokenized versions of U.S. dollar, the British pound sterling, euro, Canadian dollar and the Japanese yen. The consortium, which has raised $63 million from its big bank backers, had initially planned on a 2020 launch date but will have to wait until it receives the necessary regulatory green light from central banks.

That will be coming within the next few months, and soon after that the platform should go live, Ram told the Block.

Specifically, Ram expects major central banks to publish eligibility criteria for DLT payments systems sometime before the end of 2020. If the project is found to be compliant with those criteria, Fnality will then be measured against the so-called Principles for Financial Market Infrastructures — a set of standards maintained by the Bank of International Settlements, the so-called central bank of central banks.

“If that’s all good then you have to go through all of the onboarding process, all of the technical testing, and then you can go live,” said Ram.“I think we will have cleared quite a big hurdle.”

Originally called Utility Settlement Coin, the initiative was launched in 2015 by Swiss bank UBS and London-based startup Clearmatics. Its goal is to create a network of “distributed financial market infrastructures” using tokenized fiat money that can be transferred peer-to-peer via a distributed ledger. 

In June of 2019, the project announced that it had received funding from 14 different banks — including institutions in the U.S., Europe and Japan — and would be renamed Fnality International.  

According to Fnality, its “research phase” was completed last year, and this year the firm began working with the relevant central banks on regulatory policies designed for DLT-based payment systems. At this point, said Ram, “(the central banks are) quite a long way down the process of getting to these policies and understanding what they need to do.”

Meanwhile, in September, the European Commission unveiled its Markets in Cryptoassets proposals — a comprehensive set of regulations that includes relatively strict rules for stablecoin issuers, including capital requirements.

Ram, however, does not believe Fnality fits neatly within the EU regulators’ proposed definition of stablecoins, and thinks that the use of the word “coin” to describe the project has caused confusion in the market. Instead, Ram views what Fnality is building as a payment system and thinks it should be assessed accordingly.

That explains why the project has scrapped its original name. “Everyone knows that we’ve been moving away from the (Utility Settlement Coin) nomenclature for almost 18 months now,” Ram said. "And the reason for that is we don’t actually fall under any of those definitions."