London, 15.04.2025 – Fnality has introduced a pioneering capability that brings programmability and conditionality to the digital representation of funds at the central bank in the Sterling Fnality Payment System (£FnPS), the world’s first regulated DLT-based wholesale payment system.  

Banco Santander, Lloyds Banking Group, and UBS all played a significant role in this development, utilising the £FnPS’s Earmarking functionality. When funds are set aside for a specific purpose in FnPS, they are ‘earmarked’. This prevents the “earmarked funds” from being used for anything other than this specific purpose, thereby maintaining transaction and business model integrity.  

The transformative implications of programmability achieved through Earmarking are essential to scaling digital business models for institutions. With Earmarking, institutions will be able to systematically program when funds move, for example, in exchange for a specified (digital) asset, or a related market event. With this in mind, Earmarking is a key enabler of tokenised asset markets – estimated as a $2tn opportunity – which require a real-time programmable cash leg to unlock their promise of faster, cheaper, and safer settlement, as well as new revenue opportunities. 

The versatility of Fnality’s programmability, achieved through Earmarking, has already been demonstrated in several proofs-of-concept, including for real-time settlement of tokenised securities, real-time cross-border FX swaps, and real-time repurchase agreements. This new functionality sits alongside other Fnality capabilities such as 24/7 availability and real-time settlement, underpinned by a digital representation of funds held at the central bank, to enable transformative collateral mobility and intraday treasury optimisation benefits. These market tests illustrate Fnality’s drive towards becoming a key institutional payment rail for market-level digital business models. 

Michelle Neal, CEO at Fnality International said: “Fnality’s Earmarking feature is a landmark achievement, bringing smart contracts and programmability to payments in a digital representation of central bank money for the first time. This not only addresses existing challenges in wholesale financial markets but also paves the way for a range of innovative solutions that will shape the future of digital finance.”  

Angus Fletcher, CEO at Fnality UK commented: “The continued collaboration between Fnality, Banco Santander, Lloyds Banking Group, and UBS has unlocked another new frontier of possibilities, with the real-world implementation of Earmarking just the latest world-first for the Sterling Fnality Payment System as we continue to scale-up, mature, and unlock new value-adding market solutions.” 

John Whelan, Managing Director of Digital Assets at Banco Santander said: “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. 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.” 

Christian Kramer, Head of Payments Strategy & Business Development at Lloyds Banking Group said: “In 2023, we were the first UK bank to achieve a blockchain-based payment using a digital representation of central bank money via Fnality. Now our partnership has reached another milestone by enabling programmability through the earmarking of digital funds held at central bank. Using programmability and smart contracts in payments will enhance financial security, accountability, efficiency and customer confidence while reducing failed payments. Adding these features means taking another step on our path to innovate together by leveraging distributed ledger technology, which brings a new way to unlock value for customers in the UK and beyond, across multiple use cases.” 

Anthony Clark-Jones, who leads the Strategic Ventures portfolio at UBS Investment Bank said: “One of our focus areas in DLT and Digital Assets is the development of infrastructure to handle tokenized assets. This is why we are partnering with central banks and peers on digital currencies and institutional payment solutions. Systematic earmarking of funds is an essential feature in scalable digital business models. The connectivity and programmability enabled through a regulated, DLT-based, institutional-grade payment rail can be leveraged for sustainable commercial outcomes, namely intraday liquidity and balance sheet optimization, alongside delivering positive risk outcomes at scale.” 

 

Notes to editors – More info on earmarking: 

The £FnPS’s Earmarking feature holds digital cash for release upon receipt of proof of an event elsewhere. 

A proof is a cryptographically signed piece of data representing specific information from another system, triggering the programmatic release of the £FnPS’s digital representation of central bank funds. This enables a diverse range of value-adding use cases. For example, a proof could represent: 

  • An agreed trade being executed, or clearing being completed.
  • Assets being Earmarked elsewhere, outside the perimeter of the FnPS (such as digital or traditional assets held in another ledger, enabling achievement of settlement on a DvP basis).
  • Cash being Earmarked elsewhere, outside the perimeter of the £FnPS (within another system, such as the forthcoming $FnPS, enabling achievement of settlement on a PvP basis). 

When an Earmark is in place prior to its release, the funds remain on the originating participant’s balance sheet at all times.  

– ENDS –

Media contact

The PHA Group – fnality@thephagroup.com

 

About Lloyds Banking Group 

Lloyds Bank International is a wholly owned subsidiary of Lloyds Bank Corporate Markets in the United Kingdom, which is in turn part of Lloyds Banking Group, one of the largest banking groups in Europe. 

Lloyds Bank’s overseas expansion began in 1911 and the Lloyds Bank International name, historically a major international commercial bank, is now used for the group’s offshore banking interests. 

For more information, please visit: https://www.lloydsbank.com/international.html 

About Banco Santander 

Banco Santander (SAN SM) is a leading commercial bank, founded in 1857 and headquartered in Spain and one of the largest banks in the world by market capitalization. The group’s activities are consolidated into five global businesses: Retail & Commercial Banking, Digital Consumer Bank, Corporate & Investment Banking (CIB), Wealth Management & Insurance and Payments (PagoNxt and Cards). This operating model allows the bank to better leverage its unique combination of global scale and local leadership. Santander aims to be the best open financial services platform providing services to individuals, SMEs, corporates, financial institutions and governments. The bank’s purpose is to help people and businesses prosper in a simple, personal and fair way. Santander is building a more responsible bank and has made a number of commitments to support this objective, including raising €220 billion in green financing between 2019 and 2030. In the first half of 2024, Banco Santander had €1.3 trillion in total funds, 168 million customers, 8,300 branches and 209,500 employees. 

Santander Corporate & Investment Banking (Santander CIB) is Santander’s global division that supports corporate and institutional clients, offering tailored services and value-added wholesale products suited to their complexity and sophistication, as well as to responsible banking standards that contribute to the progress of society.  

For more information, please visit: https://www.santander.com/en/home 

About UBS 

UBS is a leading and truly global wealth manager and the leading universal bank in Switzerland. It also provides diversified asset management solutions and focused investment banking capabilities. With the acquisition of Credit Suisse, UBS manages US$6.1 trillion of invested assets as per fourth quarter 2024. UBS helps clients achieve their financial goals through personalised advice, solutions, and products. Headquartered in Zurich, Switzerland, the firm is operating in more than 50 markets around the globe. UBS Group shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).  

For more information, please visit https://www.ubs.com 

About Fnality  

Fnality is developing a series of regulated DLT-based wholesale payment systems. Each system, known as a Fnality Payment System (FnPS), is supervised by its respective central bank. 

Within a FnPS, participants utilise a digital representation of funds held at central bank for instant wholesale payments. The launch of FnPSs in key jurisdictions will enable real-time cross-currency payments, and the secure atomic settlement of any delivery versus payment transactions around the clock. The credit quality of the central bank funds underpinning Fnality Payment Systems provides the missing ingredient for novel digital asset markets: institutional-grade digital cash. 

In December 2023, the Sterling FnPS, previously recognised by HM Treasury as a systemically important payment system, commenced controlled live payments and has been granted settlement finality designation. Joining a handful of other regulated payment systems in the UK, it became the world’s first regulated DLT-based wholesale payment system, settling in a digital representation of funds held at central bank. 

Fnality’s shareholders comprise: Banco Santander, BNY Mellon, Barclays, BNP Paribas, CIBC, Commerzbank, DTCC, Euroclear, Goldman Sachs, ING, KBC Group, Lloyds Banking Group, Mizuho Financial Group, MUFG Bank, Nasdaq Ventures, Nomura, Sumitomo Mitsui Banking Corporation, State Street Corporation, UBS and WisdomTree. 

For more information, please visit fnality.com 

About the author

Fnality Press Team