Can you introduce RSN and explain the efficiency and liquidity benefits it promises to bring – and is already delivering?
Darko Pilav: The Regulated Liabilities Network (RLM) and later the Regulated Settlement Network (RSN) projects are focused on optimising interbank settlement. One of the guiding principles in their design was to ensure that everything fits into the existing regulatory framework, meaning that these projects don’t rely on regulatory changes to be viable, which is critical for both RLN and RSN.
To clarify, RLN focuses solely on payments. RSN expanded on this, covering delivery versus payment (DvP) and securities like Treasuries or investment-grade corporate bonds. In both projects, we’ve reconfirmed the benefits of real-time settlement, automation, and regulatory compliance. RSN showcases the advantages of a multi-asset network, allowing for atomic DvPs and other benefits tied to tokenised assets.
We’ve also demonstrated how integrations with third-party systems can extend the network’s reach. While this approach sacrifices certain properties, like atomicity, it still delivers other advantages.
One critical benefit of keeping everything within the same system is ensuring atomicity. This eliminates counterparty risk during settlement. In an RLN or RSN transaction, multiple books and records – managed by different entities – are updated simultaneously. The system guarantees that either all updates occur, or none do, preventing scenarios where one-party transfers assets or liabilities without receiving the other side of the transaction.
Kelly Mathieson: Phase one focused on proving the infrastructure’s alignment with the existing two-tier commercial banking system. Phase two demonstrated what’s possible when that payment infrastructure operates within a networked, distributed ledger format. This wasn’t just a proof of concept to showcase the technology’s capabilities – it also validated that the existing policy, governance, and market infrastructure could be enhanced using this technology and new asset types. This preservation of the current system is crucial and sets RSN apart from other proof-of-concept initiatives globally.
How impactful is it to see all these different types of market players collaborating in this way?
Pilav: From my perspective, it’s incredibly impactful. If you consider the barriers to adoption, no single entity could push forward on its own and expect the entire market to adopt their solution. There’s simply no chance the market would collectively say, “Yes, we’re going to use X’s infrastructure.”
However, when it’s an industry-wide initiative where every participant has a voice in shaping how the system is built, the likelihood of widespread acceptance increases significantly.
Mathieson: What’s also notable is that this collaboration hasn’t diminished the competitiveness between the participating organisations or payment providers. They’re working together, yes, but each entity operates independently and retains its individual strategies.
When we talk about a network, we’re not implying a unified approach to client acquisition, product promotion, or service delivery. This initiative preserves competitive differentiation among participants, which we think is crucial. In fact, we see this dynamic mirrored in other network initiatives, like the Canton Network.
Keeping that competitive edge helps push the industry forward, doesn’t it?
Pilav: Absolutely. It’s like a utility – something everyone relies on to function, but not something that provides a competitive edge by itself. Interbank settlement, for example, is critical to the system, but it doesn’t give any single participant an advantage. That’s why there’s strong motivation to collaborate on this shared infrastructure while continuing to compete in other areas.
Another key benefit of broad participation is the diversity of expertise it brings – from the asset side to the cash side. We’ve also worked with third-party networks like Mastercard and Broadridge, which allowed us to test integrations and explore additional benefits. The involvement of legal firms and other stakeholders adds even more value to the process.
Looking ahead, how far away would you say we are from implementing a true 24/7 “follow-the-sun” model, and what steps need to be taken to get there?
Pilav: From a technology standpoint, achieving a 24/7 model would be relatively straightforward. However, I think the initial implementations will likely happen within single jurisdictions. This approach helps avoid the complexities of cross-jurisdictional legal frameworks and the challenges they bring.
Once we see success in individual juris jurisdictions, the next step would be to start connecting them. That said, even a 24/7 model within a single jurisdiction is close to becoming a reality. Technologically, we’re almost there.
The RSN project recently held a webinar in which the participants highlighted this progress. One key takeaway was that the question is no longer about how to implement such a model but rather who will take the lead and when.
Many of the technical and operational questions have been addressed during recent pilots. It feels like we’re ready
to kick things off – it’s now a matter of coordinating the effort industry-wide and deciding who will spearhead the implementation.
How do you see the role of custodians evolving, given the rapid developments in this space?
Mathieson: While initiatives like RLN and RSN are currently focused on leveraging on-ledger payment solutions for real world transactions, I think that’s where the real acceleration will come from. Once we see broader adoption of on ledger financing, margin management, increased liquidity, and reduced capital charges, the volume and demand for on ledger cash will significantly rise.
For custodians, this evolution could redefine what it means to manage assets for clients. Traditionally, being a custodian means taking control of a client’s assets, servicing them, and supporting post-trade and post-settlement activities – essentially acting as an agent in an agent-driven model. I don’t see the agent model disappearing, but how these services are delivered will change significantly.
In this new framework, custody might evolve into managing digital data and its governance. Custodians could shift from safeguarding traditional assets to overseeing the data that facilitates global 24/7 transactions. The role might transform into one where custodians ensure the safekeeping and governance of digital data, including how decisions are made around it and who interacts with it.
Specifically, with RLN and RSN, we might see a blurring of lines between payment services or treasury services and asset services. What has historically been distinct roles – custodians versus treasury or corporate cash services – could merge into a more unified role of digital asset or digital data agents. Custody, in this case, would involve managing data keys and authority on behalf of clients, bridging the traditional finance (TradFi) and decentralised finance (DeFi) worlds.
What would be your message to organisations that haven’t started their tokenisation journey, or are still feeling it out?
Mathieson: My message would be – now is the time!
We’re witnessing the emergence of a new market in the form of crypto. We can debate the merits of some of the assets within it, much like we debated the merits of derivatives or ETFs when those markets first appeared. Back then, nothing was perfectly formed, all answers weren’t clear – but over time, the market coalesced, those products evolved, and they’re now integral to the financial ecosystem.
What we’re seeing now with crypto is very similar. While it’s not perfectly formed, the overlap between the crypto and TradFi markets is undeniable.
So, for those in a “wait and see” mindset, thinking this is entirely new and different – I’d urge them to reconsider. Instead of seeing it as something disruptive, think of it as evolutionary. Are there elements of the TradFi structural model that could address the gaps in DeFi services? And more importantly, are you missing the opportunity to bridge those gaps now?