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- The Regulated Liability Network (RLN) is a major step towards implementing the UK’s central bank digital currency (CBDC).
- It provides a shared foundation for traditional and decentralized financial institutions to handle digital money.
- The RLN’s ability to streamline operations and reduce fraud can position the UK at the forefront of financial innovation.
The UK has been working on the digital pound since 2023when The Bank of England (BoE) and HM Treasury published their first consultation paper.
On September 17, the UK Finance trade group finished an experimental phase for the RLNspecifically developed for CBDCs and tokenized assets.
Let’s explore the RLN’s role in the UK’s journey toward its goal.
The Ultimate ‘Platform for Innovation’
The RLM whitepaper explains that the traditional financial industry players use proprietary, private databases.
While shared ledger technology could offer a common platform for traditional and decentralized finance institutions, it’s not enough – legal frameworks are equally important.
According to UK Finance, the RLN can host commercial bank money, electronic money, and CBDCs, allowing authorized entities to manage and settle funds, create tokens, automate transactions, and control access to funds.
The RLN would help British commercial banks to process $14.52T worth of transactions annually.
UK Finance notes the current regulatory framework is flexible enough to support such a ‘platform for innovation’ but requires further policymaker engagement.
The experiment revealed that the RLN could serve as a bridge between new companies and traditional financial institutions, offering a standardized way for them to interact with payment services.
Additionally, the RLN could help meet the UK payments industry objectives set out by the Bank of England discussion paper. Namely, preserving the integrity of money and encouraging innovation in the UK payment industry.
To learn more, watch the RLN final report launch event live on Zoom.
Collaboration Before Regulatory Demand
UK Finance, together with prominent financial industry players like Lloyds, Mastercard, NatWest, Standard Chartered, Virgin Money, Visa, Barclays, HSBC, and Citi, started the experiment in April.
They aimed to examine technical and legal aspects and customer advantages in three use cases.
Initially, it focused on payment-upon-delivery for physical goods to mitigate online fraud. Then, it tested the homebuying process to avoid conveyance fraud and concluded with settling bonds.
The RLN’s experimental phase has demonstrated its potential to revolutionize the UK’s financial system.
A shared platform for traditional and decentralized finance institutions can streamline transactions, reduce fraud, and drive innovation.
However, RLN’s successful implementation will depend on overcoming interoperability and regulatory hurdles.
References
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
