SETL and Digital Asset bet that regulated tokenization will beat stablecoins

London-based SETL and New York-based Digital Asset announced that they are entering into a partnership to create a new protocol that can be used by regulated institutions to launch interoperable tokens.

The new protocol, modelled on the Regulated Liability Network (RLN) initiative first proposed by Citibank’s Tony McLaughlin, will be developed and operated as a part of that global RLN, and enable banks, central banks and other regulated institutions to create tokens for their customers.

Each token will represent a promise from the issuer to the holder of the token. Transferring tokens between banks will be handled by the network which will mint, burn and transfer tokens in a coordinated single operation to achieve real-time settlement between the customers of any regulated institution.

This announcement follows recent news from SETL highlighting tests of its version of the RLN implemented on AWS, to a sustained volume of over 1m transactions per second. Digital Asset works with market infrastructures and financial institutions, including BNP Paribas, HKEX, ASX and Nasdaq, among others, to create a range of interoperable smart securities using Daml, the company’s blockchain agnostic smart contract framework.

The initiative also chimes with opinions recently published on the New York Fed’s blog suggesting that tokenizing regulated deposits is a better way forward than expanding the less regulated stable coin market. The new network will provide scalability, with the highest levels of privacy and smart contracting capabilities for Central Bank Digital Currency (CBDC).

Philippe Morel, CEO of SETL, said in a statement: “This approach will be easy for organizations to embrace and will provide an equally simple model for CBDC, bank and e-money coins, as well as any kind of tokenized liability such as bonds, loans and shares.”

Yuval Rooz, CEO of Digital Asset, said in a statement: “Interoperability is a major goal for us and by working with SETL we will produce a world class network with the ability to connect and communicate across all existing clients’ solutions to serve the regulated community. This network will serve as a key building block as we develop the Global Economic Network and to connect the leading financial institutions and usher in a new wave of innovation across the globe.”

Digital Asset’s Daml language allows banks and custodians to describe any kind of financial instrument or contractual agreement in a smart contract which then automatically governs interactions between parties during the lifecycle of the arrangement. SETL’s RLN network, announced in November 2021, focuses on speed and scale. The network applies event management software to process millions of requests to produce an ordered global state that allows thousands of banks to have a common view of their token activities.

Anthony Culligan, SETL’s chief engineer, said in a statement: “The RLN approach finally gives regulated institutions a token network that is fit for purpose. This new network lines up technology and regulation in a way that other blockchains simply fail to match. It is an open protocol and breaks the silo of closed loop systems.”

The joint initiative will be ready for testing later this year and could start onboarding its first use cases shortly after. In the meantime, SETL and Digital Asset will allow interested institutions to open a partition on its prototype network to test use cases and to familiarize themselves with the new protocol.


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