Facilitating Wholesale Digital Asset Settlement

The New York Innovation Center (NYIC), in collaboration with members of the U.S. financial services sector, participated in a proof of concept that experimented with the concept of a regulated liability network (RLN). The RLN concept envisions a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets using distributed ledger technology (DLT).

Problem Space

While existing payment systems function effectively, certain frictions remain, particularly around speed, cost, accessibility, and the settlement process.

Distributed ledger technology has enabled certain capabilities in asset exchange, like a common source of truth and atomic settlement, but current designs for exchange mechanisms based on DLT do not enable the interoperable transfer and settlement of digital assets between regulated financial institutions.

Experiment Design

To test the RLN concept, the proof of concept working group (participants listed below) led three workstreams that researched and analyzed the technical feasibility, business applicability, and legal viability of the concept.

As part of the research study, the working group designed a distributed ledger-based network to settle payments between financial institutions using tokenized regulated commercial bank and central bank liabilities. The experiment was conducted in a test environment and used only simulated data. All simulated liabilities were denominated in U.S. dollars (USD).

The project experimented with the following use cases:

  • Domestic Interbank Payments: This use case simulated wholesale payments between commercial banks and was intended to prove the core functionality of the theoretical payment system. Transactions were conducted in commercial bank deposit tokens and settled using a theoretical wholesale central bank digital currency, a tokenized record of a central bank liability.
  • Cross-Border Payments in USD: This use case focused on wholesale payments to counterparties outside of the U.S. and explored the potential of the concept to enhance the experience of global users of U.S. dollars as an international trade and settlement currency.

Participants included BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo. Swift, the global financial messaging service provider, supported interoperability across the international financial ecosystem.

The technology sandbox vendor was SETL with Digital Asset. Legal services were provided by Sullivan & Cromwell LLP, and Deloitte provided advisory services.


The experiment successfully simulated both the domestic and cross-border scenarios, identifying shared ledger technology as a potential solution to support payment innovation.

Three workstreams analyzed the technical feasibility, business applicability, and legal viability of using shared ledger technology:

  • Technical: The technical workstream validated that the proposed architecture was able to deliver the benefits of settlement finality, a common source of truth, standard transaction data, and privacy for all participants on the network.
  • Business: The business workstream concluded that the network has the potential to deliver improvements in the processing of wholesale payments due to its ability to synchronize U.S. dollar-denominated payments and facilitate settlement on a near-real time, 24 hours a day, 7 days a week basis.
  • Legal: The legal workstream considered the application of certain U.S. rules and regulations to the RLN system in the proof of concept. It found that the use of shared ledger technology, including tokens, to record and update the ownership of central bank and commercial bank deposits should not alter the legal treatment of such deposits. Although further analysis, research, and engagement with regulators would be required before final conclusions can be reached, the legal workstream did not identify any insuperable legal impediments under existing U.S. legal frameworks that would prevent the establishment of an RLN system as contemplated in the project.

Learn More on the Proof of Concept Website

Future Research

The NYIC is a technical observer in a subsequent industry proof of concept that will further explore the feasibility of a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets. The NYIC is a technical observer in this proof-of-concept to gain knowledge on the use of shared ledger technology as infrastructure to conduct transfers between regulated financial institutions, including settling tokenized wholesale central bank money, commercial bank money, and U.S. Treasury securities. The NYIC’s role in this project is narrowly focused on observing the participants' research and experimentation with tokenized settlement assets.


This proof of concept is not intended to advance any specific policy outcomes, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a central bank digital currency, or any other product or service, nor indicate how one would necessarily be designed.

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