Citi Payments Perspectives

9 Treasury and Trade Solutions Citi Payments Perspectives Global Initiatives Payments Infrastructure Developments Regional Developments (North America) FSB/CPMI Consultation on Expanding Payment versus Payment (PvP) Settlement In October 2021, the CPMI put out a call for ideas on solutions on payment-versus-payment (PvP) settlement. Cross-border payments frequently involves the settlement of an FX transaction that requires payment of one currency and receipt of another, giving rise to FX settlement risk exposure. The key objective of a PvP settlement is to combat this exposure, limiting settlement risk. As one of the 19 building blocks for improving cross-border payments, the CPMI is developing proposals for increased PvP adoption by encouraging enhancements 1) to existing PvP arrangements and/ or 2) development of a new public and/or private sector solution. In response to the call, Citi proposed the creation of a new FMI through a global public/private partnership that tokenizes “regulated liabilities” to support broader adoption of PvP mechanisms for any regulated liability that exists in the network (i.e., the Regulated Liability Network (RLN)). In essence, RLN tokens will be digital records of the liabilities of central banks, commercial banks, and e-money issuers, based on existing national currency units. The RLN is envisaged as a distributed ledger technology (DLT) network representing the liabilities of different institutions without changing the underlying legal instruments. The independence of legal instruments and technological representation will be held across a network of regulated institutions. Tokenization of such liabilities will support “always on,” programmable and instant settlement. Interoperability of RLNs, each founded on national currencies and supervised by local regulators, will support PvP through the agency of institutions that participate in multiple currency networks acting as a bridge between them and providing foreign exchange services. In Other Words • CPMI initiative expands PVP settlement to help reduce FX settlement risk, support global financial stability and lower cross- border payment costs. • Proposals include enhancements to existing PvP arrangements and/or development of a new public and/or private sector solution. • Proposed creation of new FMI that tokenizes “regulated liabilities” to support broader adoption of PvP mechanisms. • Tokenization will support “always on” programmable and instant settlement. The RLN is envisaged as a distributed ledger technology (DLT) network representing the liabilities of different institutions without changing the underlying legal instruments. Global Initiatives Financial Stability Board (FSB) Enhancing Cross-Border Payments Roadmap Emerging Payments and Digital Assets Payments Infrastructure Developments ISO 20022 SWIFT Transformation Instant Payments Financial Market Infrastructure (FMI) Interlinkage Initiatives Regional Developments (North America) Immediate Cross-Border Payments (IXB) TCH Request for Pay (RFP) Bill Pay Latest on Fed/CHIPS ISO Timelines Lynx — Canadian High-Value Payment System Glossary