Global Banks Invest $136 Million in Fnality's DLT-Based Settlement Network → Adoption

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Briefing

A consortium of global financial institutions, including Bank of America and Citi, has injected $136 million into Fnality, a DLT-based wholesale payment system operator. This Series C funding round propels Fnality’s mission to establish a new global settlement network, bridging existing wholesale markets with the emerging landscape of institutional tokenized assets. The initiative directly addresses the imperative for 24/7 payment rails, real-time settlement, and enhanced liquidity management, leveraging central bank-backed digital cash to fuse the operational efficiencies of decentralized finance with the capital optimization of traditional finance. The investment underscores a collective industry commitment to modernize financial market infrastructure, with Fnality having already launched its Sterling Payment System in the UK in December 2023.

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Context

Traditional wholesale payment systems are characterized by multi-day settlement cycles, high operational costs, and significant counterparty risk, particularly in cross-border transactions. These inefficiencies necessitate substantial capital lock-up for financial institutions, impeding liquidity management and hindering the rapid transfer of value required by increasingly interconnected global markets. The prevailing operational challenge stems from a fragmented infrastructure that relies on legacy systems, creating friction points in the settlement of both traditional securities and nascent digital assets.

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Analysis

This capital infusion directly impacts the global wholesale payments and capital markets infrastructure by accelerating the development of a DLT-based settlement layer. Fnality’s system fundamentally alters the operational mechanics of interbank settlements, enabling real-time gross settlement (RTGS) for a broad spectrum of transactions, including tokenized securities via secure delivery-versus-payment (DvP) and on-demand FX payment-versus-payment (PvP) settlement. The integration of central bank-backed digital cash on a distributed ledger streamlines liquidity management, reducing the need for pre-funding and mitigating systemic risk.

For participating enterprises and their partners, this translates into significantly lower operational costs, optimized capital utilization, and the capacity to engage with tokenized assets with unprecedented efficiency and security. The platform’s interoperability also facilitates the seamless integration of stablecoins and tokenized deposits, positioning it as a foundational component for the hybrid future of finance.

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Parameters

Funding Round → Series C
Investment Amount → $136 Million
Lead Investors → WisdomTree, Bank of America, Citi, KBC Group, Temasek, Tradeweb
Participating Investors → Banco Santander, Barclays, BNP Paribas, DTCC, Euroclear, Goldman Sachs, ING, Nasdaq, State Street, UBS
Technology → Distributed Ledger Technology (DLT)
Core Product → Fnality Payment System (e.g. Sterling Fnality Payment System)
Use Cases → Wholesale payments, real-time repo, tokenized securities settlement (DvP), cross-currency payments (PvP), stablecoin and tokenized deposit interoperability
Expansion Target → US Dollar and Euro markets

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Outlook

The successful Series C funding positions Fnality to expand its DLT-based settlement network into the critical US dollar and euro markets, subject to regulatory approvals. This expansion is poised to establish new industry standards for real-time, resilient, and capital-efficient wholesale payments globally. The initiative’s focus on interoperability with stablecoins and tokenized deposits indicates a strategic move towards a unified digital asset ecosystem, potentially driving second-order effects on competitors to accelerate their own DLT integration efforts. This evolution is crucial for unlocking the full potential of tokenized real-world assets and programmable finance within institutional contexts.

The substantial investment in Fnality unequivocally validates the strategic imperative for DLT-powered wholesale payment systems as the foundational layer for integrating traditional finance with the burgeoning digital asset economy.

Signal Acquired from → financialit.net