Fnality international, the institutional settlement solution that uses tokenized central bank reserves, has announced its latest feature, the earmarking of funds. We also disclose previously unpublicized details about a £20 million ($27m) convertible loan note issued last year. The company is backed by 20 of the world’s largest global financial institutions.
At an institutional level, if a securities transaction fails because of insufficient funds, that can sometimes trigger penalties, never mind the loss of the transaction. Hence, Fnality now supports earmarking so that an amount of tokenized currency can be earmarked for a particular transaction at a specified time.
The banks involved in developing the programmable functionality were Lloyds Bank, Santander and UBS, the first three banks to go live on the sterling Fnality payment system (£FnPS). The latest feature adds to the 24/7 instant payments previously showcased for margin payments, FX swaps and repo transactions.
“One of the promises of institutional blockchain-based applications is ‘atomicity’ in that all the legs of a transaction either fulfil together or they all fail,” said John Whelan, Managing Director of Digital Assets at Banco Santander. “There is no leg-risk. The concept of ‘earmarking’ as introduced by Fnality helps enable this feature in a way that can be truly interoperable with other DLT systems. Again, bringing us one step closer to the utilization of this tech at scale in the banking industry.”
As previously reported, Fnality is planning to launch a dollar version of its settlement system and has applied for a banking license. The name of the new US subsidiary is Fnality XB, doubtless a nod to plans for cross border payments.
Fnality’s recent funding
In recently filed accounts, Fnality International disclosed it issued a £20 million convertible loan note on 30 September 2024. The note will convert to equity on the completion of its Series C funding, which is in progress. It raised a £50 million ($66m) Series A in 2019 followed by a £77.7m ($103m) Series B in 2023, shortly before its official launch at the end of that year. Goldman Sachs and BNP Paribas led the Series B which also saw the addition of the DTCC as an investor.
New banking solutions are notoriously slow to get off the ground, as banks have painful integration processes. Hence, Fnality didn’t earn any revenue in 2024, its first full year of operation. It lost £28.9 million for the year pre-tax, fractionally more than 2023, but had almost £34 million in cash on hand at the year end.
One of Fnality’s biggest goals was always FX settlement. Once a second currency goes online, the range of use cases will expand significantly.
