Mastercard and US Banks Leverage Ledger Tech for Tokenized Assets Settlement: A Boost for Institutional Adoption of Cryptocurrency?

• Mastercard and leading US banks are testing new distributed ledger technology for settling tokenized assets.
• The proof-of-concept for a Regulated Settlement Network (RSN) aims to improve the operation of multi-asset settlements.
• Real-world asset tokenization is gaining traction in mainstream financial circles, with blockchain seen as the “real deal”.

Mastercard and several US banks are testing distributed ledger technology for settling tokenized assets, signaling potential institutional adoption of blockchain technology.

Leading Financial Institutions Test Distributed Ledger Technology

Payments giant Mastercard, along with financial institutions including JPMorgan and Citibank, announced a proof-of-concept (PoC) for a Regulated Settlement Network (RSN) on Wednesday. The RSN PoC will explore the potential of shared ledger technology to streamline cross-border money transfers. The system will simulate multi-asset transactions in US dollars, with the aim of improving the operation of multi-asset settlements for domestic users of financial instruments denominated in US dollars.

Tokenized Assets in the Spotlight

Tokenized assets circulating in the system will include commercial bank money, wholesale central bank money, and securities like US treasuries and investment-grade debt. These assets currently trade on separate systems within the traditional financial system. The PoC builds on a previous project by Mastercard in 2022, which tested tokenized US dollar commercial bank transfers settled through simulated central bank reserves on a shared multi-entity distributed ledger.

Increased Interest in Tokenized Assets

Tokenization of real-world assets has become a hot topic in mainstream financial circles. Even critics of blockchain-based currencies like Bitcoin, such as JPMorgan CEO Jamie Dimon, have acknowledged the potential of blockchain technology. Following the successful launch of its Bitcoin ETF, BlackRock introduced a tokenized asset fund called BUIDL, which secured $240 million within a week of its debut. The fund records share ownership on the blockchain by issuing BUIDL tokens and invests in stable assets like cash, US Treasuries, and repurchase agreements.

Conclusion

The testing of distributed ledger technology by Mastercard and leading US banks for settling tokenized assets indicates growing institutional interest in blockchain technology. With real-world asset tokenization gaining traction, the potential for blockchain to revolutionize the financial industry is becoming increasingly apparent.