Fnality
Solutions Providers
1. Problems/Challenges it aims to solve
Fragmented liquidity across currencies: Fnality aims to create a digital asset available in multiple currencies to allow for more efficient management of fragmented liquidity across currencies.
Need for interoperability across platforms: The Fnality solution needs to be interoperable across different business platforms to support peer-to-peer or delivery vs payment settlement.
Reliance on existing systems and liquidity: Existing systems rely on fiat currencies and liquidity pools controlled by central intermediaries. Fnality aims to create a decentralized system with its own settlement assets.
Counterparty and credit risk: Current systems expose participants to counterparty and credit risks due to lag time between trade and settlement finality. Fnality aims to enable instant PvP and DvP settlement to reduce these risks.
Operational and systemic risk: Heavy reliance on centralized infrastructure poses operational and systemic risks. Fnality aims to employ a distributed system across participants to reduce concentration risk and improve resilience.
Processing constraints of centralized systems: Traditional systems have capacity constraints and concentrated points of failure. Fnality aims to distribute processing across participants to increase scalability and redundancy.
High costs of intraday credit: Current reliance on unsecured intraday credit is costly. Fnality aims to reduce the need for intraday credit by enabling quicker settlement finality.
2. Solutions
Fnality Global Payments (FnGP): New payment system that will enable tokenised, peer-to-peer markets. Fnality Global Payments (FnGP) will comprise a series of national systems, each regulated in its home jurisdiction called Fnality Payment System (FnPS). In each payment system, a Fnality settlement asset will act as the settlement/payment asset for any Payment (P), Delivery v, Payment (DvP) or payment vs. payment (PvP) need.
In August 2022 Fnality was recognised by HM Treasury as a systemic payment system in the UK, bringing us under the remit of the Bank of England and the Payment Systems Regulator. We are engaging with the Bank of England and, subject to regulatory approval, we aim to go live with the UK payment system in H2 2023.
Services provided:
Multi-currency Availability: The solution is designed to be available in multiple currencies, facilitating greater efficiencies in managing fragmented liquidity.
Interoperability: It is capable of interoperating across various business platforms to support Payment versus Payment (PvP) or Delivery versus Payment (DvP) settlement of financial transactions.
Digital Representation of Central Bank Money: The solution represents a digital form of money held in a central bank account, ensuring that banks can rely on its value as they would on fiat currency.
3. Target Customers
Banks and Financial Institutions: To offer them a more efficient, secure, and cost-effective way to handle settlements using tokenized assets on a peer-to-peer basis. Fnality's system can potentially streamline the settlement processes, reducing the time and cost involved in these transactions.
Central Banks: Fnality works closely with central banks to ensure regulatory compliance and to explore the potential for central bank digital currencies (CBDCs). The Fnality Payment System (FnPS) could be a tool for central banks to implement and manage CBDCs ?
Clearing Houses and Exchanges: Clearing houses and exchanges can use Fnality's services to facilitate Delivery versus Payment (DvP) and Payment versus Payment (PvP) settlements, enhancing the efficiency and security of these transactions.
4. Key Points
Five central banks/five currencies are in scope: CAD, EUR, GBP, JPY & USD.
For each currency there is a Fnality Payment System, a regulated payment system managed by a Fnality Local entity.
Fnality settlement asset, as a payment asset, is for use in the Wholesale Markets.
5. People
Mohamed Amer - Product Lead
Rachel James - Director, Payments Policy & Blockchain Development/DeFi
6. Resources
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