According to its latest report, the Regulated Responsibility Network (RLN) has completed its discovery phase in the United Kingdom and is ready to proceed with retail central bank digital currency (CBDC) use cases. The RLN project is designed to accommodate central banks, commercial banks, and regulated non-bank transactions operating within “partitions” of a single network.
RLN is a UK regulated financial market infrastructure with contributors from financial institutions around the world. It is backed by UK financial advocacy groups.
The RLN discovery phase examined three potential use cases for the network—consumer domestic payments, wholesale cross-border payments, and securities settlement—and identified the first case for a proof-of-concept. The report identifies a number of domestic payment uses that could be tested, citing the list outlined in the Rosalind project results as examples. According to the report:
“This use case will help explore how an ‘upgraded’ commercial bank currency can co-exist with a retail CBDC, how the RLN can accommodate both forms of money on a single infrastructure, and how to ensure functional equivalence for all retail digital currencies.”
The report found that RLNs offer several benefits for domestic payments. It helps to provide consistency between the CBDC and the commercial bank currency, thereby helping to maintain the uniqueness of the currency. It could also help reduce authorized push payment fraud, which is payments authorized to fraudulent merchants, and give consumers more control if an item doesn’t arrive. Finally, it will also reduce settlement times.
RLN will use native settlement tokens, thus containing tokenized regulated currencies and digital assets on the same ledger. The tokenized liability (currency) will still be a claim on the issuer, not on RLN.
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The project completed a wholesale cross-border payments pilot program earlier this year in partnership with the Federal Reserve Bank of New York and several large financial institutions. Now, however, it says this particular use case is “probably the least viable for a PoC” [proof of concept] Due to the complexity of dealing with multiple jurisdictions, players (including central banks) and regulatory requirements. ”
Securities settlement is considered moderately viable due to the multiple non-bank parties involved and regulatory complexities.
UK Regulatory Accountability Network, a blockchain network for interbank payments and other digital assets, plans to trial a retail digital pound backed by commercial bank funds or tokenized deposits https://t.co/HiGqfQz67I
…#U.K #DigitalPound #tokenize #fintech pic.twitter.com/BUyoMtyfA6
— Digital Pound Foundation (@digitalpoundfdn) September 5, 2023
RLN does not primarily rely on blockchain technology. The report identified five infrastructures on which it could operate. The RLN is very similar to the “Unified Ledger” solution proposed by the Bank for International Settlements and the “Trusted Single Ledger” also launched by the International Monetary Fund in June. The report’s authors also noted that the project is similar to pilots conducted by the Swiss National Bank and six digital exchanges, as well as an “enhanced digital currency” proposed by Bank of England Governor Andrew Bailey.
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