15 April 2024 Fintech

Linklaters advises UK Finance on its Regulated Liability Network experimentation phase

Linklaters is advising UK Finance on the experimentation phase of its UK Regulated Liability Network (RLN) project with eleven of its members.

The UK RLN is envisaged as a common ‘platform for innovation’ across multiple forms of money, including existing commercial bank deposits and a shared ledger for tokenised commercial bank deposits.

Through a collaboration of several stakeholders within the financial services industry, the UK RLN explores the options for users to make payments, transact and settle liabilities in the increasingly digital marketplaces of the future.

The firms currently involved in this work are: Barclays, Citi, HSBC, Lloyds Banking Group, Mastercard, NatWest, Nationwide, Santander, Standard Chartered, Virgin Money and VISA. They are being supported by Linklaters and EY and a technology team of R3, Quant, DXC and Coadjute.

Some of the potential benefits to customers, businesses and the wider UK economy include giving users more options to manage their payments, enhanced fraud mitigations, and improved settlement capabilities.

The UK RLN experimentation phase will focus on the following use cases:

  • Payment-upon-delivery for a physical product, aimed at reducing fraud in online marketplaces.
  • The process of buying a home, improving customer transparency and mitigating conveyancing fraud.
  • A digital bond settlement, to connect digital customer money to digital assets.

These use cases will examine how the UK RLN can facilitate different forms of money, including existing and tokenised deposits.

The experimentation phase will run until summer 2024 and will cover the following areas:

  • Customer and business benefits: Exploration of foundational capabilities (aligning with the Bank for International Settlement and Bank of England's Project Rosalind experiments for an application programming interface for a possible digital pound).
  • Technical feasibility: Proof of concept via a technology sandbox to gauge the functional and non-functional requirements of the UK RLN design, including simulated connections and transactions.
  • Legal framework: Analysis of how existing (and potential future) laws and regulations apply to the operation of a shared ledger settlement system, including tokenised deposits.

Linklaters’ Fintech sector team advising on this project is led by partner Richard Hay, alongside partners Harry Eddis, Michael Voisin and Peter Bevan, and managing associates Olivia Murphy and Sam Quicke.

Richard Hay commented:

"The potential for the Regulated Liability Network in creating a single, unified ledger recording and orchestrating transfers of different forms of money is significant, not only in streamlining operations and creating efficiencies, but also for users of different forms of payment, by creating enhanced functionalities, reducing fraud risks and increased innovation in payments and the across the financial sector more broadly. We are delighted to be supporting UK Finance and its members with this truly innovative project."

The results of the experimentation phase will be published after the summer. UK Finance will host a number of engagements and events to provide all stakeholders, including innovators, technology companies and Fintechs with an opportunity to explore how they can engage with the project.