Understanding the Regulated Liability Network (RLN)

Almost everything we own is recorded on a ledger – our money, our investments and even the property we live in.  Ultimately our ability to realise value from our possesions depends upon our being able to effect change onto those ledgers.

The Regulated Liability Network (RLN) is a groundbreaking proposition in the world of finance and banking, offering a path to a more functionally rich financial system by creating a network which synchronizes the ledgers where our value is stored.

The RLN harnesses DLT and blockchain technology to create a real-time, programmable, 24/7 settlement framework between regulated ledgers.  Always on, instant settlement of value.

The concept of the RLN, while currently theoretical, emerged as part of the global discourse on the future of money. Born from a group of industry experts, led by Citi, RLN redefines the way we understand money, unlocking the power of blockchain technology to provide:

  • An interoperable network of all facets of the sovereign currency system
  • 24/7 programmable, on-chain settlement in sovereign currencies
  • Compliance with all existing laws and regulations
  • A bridge between central bank digital currencies (CBDC) and other regulated money including commercial bank deposits and e-money

Pilots and testing of the RLN Concept

There are a number of RLN related technical research initiatives involving both members of the public and private sectors that have or are testing the feasibility and potential applications of the RLN concept

These include members of the U.S. financial services sector who published the findings of a proof of concept (PoC) that explored the feasibility of the Regulated Liability Network (RLN)

The study was spearheaded by a collaborative working group leading three workstreams that analyzed the business applicability, technical feasibility, and legal viability of using shared ledger technology to settle the liabilities of regulated financial institutions through the transfer of central bank money. The experiment was conducted in a test environment and used only simulated data. All payments were denominated in U.S. dollars (USD). 

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What are the Advantages of the RLN?

The RLN concept offers several significant advantages over traditional banking systems. It takes into account the tokenization of regulated liabilities, enabling the creation of Tokenized Regulated Liabilities (TRLs) that are fungible across different regulated issuers. The RLN also promises instant transfer and settlement of TRLs, programmability of TRL payments, and compliance with existing rules and regulations.

The RLN can be advantageous for various use cases, including retail remittances, international trade finance, cross-border disbursements, cross-border merchant payment processing, and treasury management. The RLN is intended to be programmable, offering a new level of convenience and efficiency to users or central banks, the RLN could modernize real-time gross settlement (RTGS) systems and facilitate the use of central bank digital currencies for retail customers and inter-bank settlement.

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Why is RLN the Future of Settlement?

The RLN is revolutionary because it seeks to overcome the challenges posed by traditional clearing and settlement systems, which are often siloed, slow, and fraught with risk. Such legacy systems are sequential in nature, leading to expensive manual reconciliations and inherent latencies. This not only stunts innovation but also locks potential value across markets.

The RLN, based on distributed ledger technology, could radically optimize data use, reduce the need for reconciliation, accelerate delivery and payment timelines, and dramatically improve overall data use and quality for any market or asset class. It also provides a secure framework for transactions that ensures the delivery of assets and data only to intended recipients, maintains an immutable record of all transactions across all accounts, and allows each entity to net its obligations while granting participants access to real-time, pertinent information.

By incorporating all aspects of sovereign currency and ensuring interoperability across different regulated issuers, the RLN presents the potential for a new global settlement infrastructure. It addresses a broader range of use-cases than narrower proposals, while maintaining the two-tier structure of public and regulated private balance sheets. The RLN also has the potential to incorporate multiple currencies to solve cross-border payment efficiency and represent multiple asset types. As such, it provides a solution to the missing piece of the global financial puzzle: a global solution for settlement.

Thus, the RLN represents a revolutionary step in the future of banking settlement, promising a future that leverages the potential of blockchain technology for a more efficient, inclusive, and compliant financial system. It is a vision of a future where financial transactions are not just faster and more efficient but also more transparent and secure, a future where the full potential of digital currencies and distributed ledger technology is finally realized.

LedgerSwarm sets the bar high, delivering speed at scale while being ledger-agnostic.

Successfully tested at 1 million transaction settlements per second, our solution offers an unprecedented combination of speed, reliability, and efficiency.

LedgerSwarm is ledger-agnostic, offering easy interoperability across DLT and traditional platforms, and guarantees privacy and immutable reconciliation between participants.

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