- Fnality International has introduced a new ‘earmarking’ feature for its tokenized settlement system, allowing funds to be reserved for specific transactions.
- The company disclosed a previously unannounced £20 million convertible loan note issued in September 2024 ahead of its Series C funding.
- Despite no revenue in its first full operational year, Fnality maintains strong financial backing from 20 global financial institutions and had nearly £34 million in cash reserves at year-end.
Fnality International has launched a new feature called ‘earmarking’ for its institutional settlement solution that uses tokenized central bank reserves. This functionality allows financial institutions to reserve specific amounts of tokenized currency for scheduled transactions, helping to prevent settlement failures. The company, backed by 20 major global financial institutions, also revealed previously undisclosed information about a £20 million ($27m) convertible loan note issued last year.
The earmarking feature addresses a critical issue in institutional finance where failed securities transactions due to insufficient funds can result in penalties and lost business opportunities. Lloyds Bank, Santander, and UBS – the first three banks to implement the sterling Fnality payment system (£FnPS) – collaborated on developing this programmable functionality, which complements the platform’s existing 24/7 instant payment capabilities for margin payments, FX swaps, and repo transactions.
“One of the promises of institutional blockchain-based applications is ‘atomicity’ in that all the legs of a transaction either fulfil together or they all fail,” said John Whelan, Managing Director of Digital Assets at Banco Santander. “The concept of ‘earmarking’ as introduced by Fnality helps enable this feature in a way that can be truly interoperable with other DLT systems.”
Financial Performance and Future Plans
According to recently filed accounts, Fnality International issued the £20 million convertible loan note on September 30, 2024. This note will convert to equity when the company completes its ongoing Series C funding round. The company previously raised £50 million ($66m) in its Series A round in 2019 and £77.7 million ($103m) in its Series B in 2023, which was led by Goldman Sachs and BNP Paribas and included DTCC as a new investor.
Despite being operational for a full year in 2024, Fnality reported no revenue and a pre-tax loss of £28.9 million, slightly higher than the previous year. However, the company maintained a strong cash position with almost £34 million on hand at year-end.
Expansion into Cross-Border Settlements
Fnality is advancing its plans to launch a dollar version of its settlement system and has applied for a banking license. Its new US subsidiary, Fnality XB, signals the company’s intentions to facilitate cross-border payments. One of the company’s primary objectives has always been FX settlement, and the introduction of a second currency will significantly expand its range of use cases.
The integration of new banking solutions typically progresses slowly due to complex bank implementation processes. However, with its strong financial backing and continued feature development, Fnality appears positioned to overcome these industry challenges as it builds toward multi-currency settlement capabilities.
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