- Fnality has linked its blockchain-based settlement platform with OSTTRA’s foreign exchange network.
- The partnership adds central bank tokenized money as a new settlement method for foreign exchange transactions.
- Initial integration is in British pounds, with U.S. dollar and other currencies to follow.
- Payment versus payment (PvP) technology reduces settlement risk by ensuring transactions finalize for both sides at the same time.
- The update expands options for financial institutions and aims to make foreign exchange markets more resilient and efficient.
Fnality has joined its distributed ledger technology (DLT) settlement platform with OSTTRA’s foreign exchange payment network. This integration provides more flexibility for settling foreign exchange transactions by allowing the use of tokenized funds backed by central banks.
The connection builds on OSTTRA’s adoption of settlement tools from Baton Systems. The platform now gives banks the option to settle transactions with tokenized central bank money, in addition to traditional commercial bank money. Fnality currently operates with British pounds, with U.S. dollar access in development and plans for further currencies.
According to Fnality CEO Michelle Neal, “Joining the OSTTRA and Baton PvP network marks a significant milestone in our mission to make institutional-grade digital settlement a practical reality… This integration is the first step in bringing true PvP capabilities to our customers, enabling them to settle FX transactions using a digital record of funds held at the central bank.” Neal stated that the project should strengthen markets by reducing settlement risk, boosting liquidity, and supporting faster, around-the-clock settlements.
Data from the Committee on Payments and Market Infrastructures (CPMI) shows about $2.2 trillion in daily foreign exchange trades settle outside large clearinghouses such as CLS, which increases the risk of failed or delayed payments—especially during times of market crisis. Payment versus payment (PvP) solutions help reduce this risk by ensuring both sides of a trade exchange funds simultaneously, sometimes called atomic settlement.
A recent proof of concept tested Fnality in British pounds against commercial bank money in another currency, using OSTTRA’s PvP solution for efficient, intraday settlement with added netting features.
Fnality is supported by 20 major firms, including leading banks and firms like the DTCC and Nasdaq. Its first three active banks were Lloyds, Santander, and UBS. OSTTRA originally used the PvP system from Baton Systems, with HSBC as the first user and Wells Fargo as a counterparty; its network includes 12 major banks.
Unlike Fnality’s platform, which uses tokenization to digitize funds, the PvP platform relies on blockchain mainly for managing workflows.
This latest step aims to make markets more efficient by helping banks use liquidity that is often separated across platforms. OSTTRA and similar platforms, such as Partior, are exploring ways to help banks move money more easily between systems.
In related news, OSTTRA’s owners, CME and S&P Global, have agreed to sell the company to KKR for $3.1 billion.
For deeper analysis of stablecoins and digital payments in banking, Ledger Insights offers a research report on the topic.
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