Brief Definition and Origin Regulated Liability Network (RLN)
A Regulated Liability Network (RLN) is a proposed financial infrastructure that enables real-time, cross-border, interoperable payments using tokenized liabilities (such as bank deposits and central bank money), all within a shared, permissioned blockchain framework. RLNs aim to modernize payment systems by connecting regulated financial institutions—like commercial banks, central banks, and payment service providers—on a unified digital ledger.
The concept of an RLN was first introduced in a whitepaper co-authored by Citigroup, HSBC, Mastercard, Wells Fargo, and the New York Innovation Center (part of the Federal Reserve Bank of New York) in late 2022, as part of a 12-week proof-of-concept pilot. The goal was to explore how tokenized money and digital liabilities could operate in a multi-asset, regulated environment—bridging the gap between traditional finance and emerging digital systems.
Explain Like I’m 5 (ELI5)
Imagine if every bank in the world used the same super-fast, secure notebook to keep track of who owns what money—whether it’s cash, a credit balance, or central bank money. That’s what the RLN wants to be: a shared digital notebook for regulated money, where everyone writes and reads in the same place, but only trusted banks and regulators have the keys.
Purpose and Goals of Regulated Liability Network (RLN)
The Regulated Liability Network is designed to solve major challenges in today’s payment ecosystem:
- Slow settlement speeds, especially across borders
- Lack of interoperability between banking systems
- Fragmentation between public and private money
- Security and compliance concerns in digital assets
- Need for programmable money without sacrificing regulation or stability
Key Features
| Feature | Description |
|---|---|
| Regulated Access | Only licensed financial institutions can issue and settle digital liabilities |
| Multi-Asset Support | RLNs can support central bank money, commercial bank deposits, and tokenized assets |
| Permissioned Ledger | Unlike public blockchains, access is restricted to verified, regulated entities |
| Interoperability | Connects different financial institutions under a common framework |
| 24/7 Settlement | Enables near-instant, continuous settlement across borders |
| Programmability | Smart contracts can automate conditional payments, compliance, etc. |
Stakeholders and Implementation
Key stakeholders:
- Central banks: Provide access to digital central bank money (e.g., CBDCs or reserves)
- Commercial banks: Issue tokenized deposits representing customer balances
- Payment service providers: Enable access and application-level services
- Regulators and supervisors: Oversee compliance, licensing, and systemic risk
- Technology providers: Deliver the underlying distributed ledger infrastructure
How Regulated Liability Network (RLN) Works (Simplified):
- A central bank and commercial banks join the RLN and issue tokenized versions of their liabilities
- End users (individuals or businesses) transact using these tokenized deposits via front-end interfaces
- The RLN settles transfers on-chain in near real-time, while maintaining compliance and security
- Smart contracts allow conditional or automated transactions (e.g., escrow, tax payments, etc.)
Real-World Examples & Pilots
🇺🇸 United States: Regulated Liability Network – US Proof-of-Concept (2022–2023)
- Led by: Federal Reserve Bank of New York (NYIC), Citigroup, Wells Fargo, Mastercard, HSBC
- Goal: Simulate digital dollar transactions on a shared ledger
- Result: Demonstrated that digital liabilities can be settled on a unified ledger in near real-time, with potential for domestic and cross-border scalability
🇬🇧 United Kingdom: Project Rosalind
- Led by: Bank of England and BIS Innovation Hub
- Goal: Explore the role of APIs in a CBDC system—could integrate with RLNs in the future
- Status: Separate from RLN but conceptually aligned
🌍 Project mBridge (International)
- Led by: BIS, People’s Bank of China, HKMA, and other central banks
- Goal: Cross-border CBDC interoperability
- Relation: mBridge is a public-sector-only version of what RLNs aim to do with both public and private sector integration
Advantages vs. Disadvantages
| Aspect | Advantages | Disadvantages / Challenges |
|---|---|---|
| Speed and Efficiency | Real-time settlement; eliminates delays in cross-border transfers | Requires buy-in and infrastructure updates from multiple parties |
| Regulatory Alignment | Built for compliance from the ground up | Depends on coordination among regulators across jurisdictions |
| Interoperability | Connects central bank and commercial money in one framework | Complex to integrate with legacy banking systems |
| Programmable Money | Enables automation and smart contracts within legal limits | Raises questions about liability, legal enforceability |
| Security and Trust | Permissioned access ensures trust and compliance | Not as decentralized as public blockchains |
Comparisons with Related Systems
| System | Key Differences from RLN |
|---|---|
| SWIFT | Message-based; not a settlement platform |
| CBDCs | Issued by central banks only; RLNs support private liabilities too |
| Stablecoins | Typically issued by private companies; RLNs are fully regulated |
| Ripple / XRP Ledger | Public blockchain with native token; RLNs use tokenized fiat on permissioned ledgers |
| DeFi platforms | Open and permissionless; RLNs are closed and institutionally controlled |
Criticism and Open Questions About Regulated Liability Network (RLN)
- Is RLN just a centralized blockchain? Critics argue that it lacks decentralization, but defenders say trust and compliance are more important for systemic finance.
- Will banks compete or collaborate? The success of RLN depends on financial institutions working together, which is historically difficult.
- Who governs the RLN? Governance models are still under discussion—should it be central banks, consortiums, or international bodies?
Future Outlook
RLNs represent a bridge between traditional finance and digital innovation. As central banks roll out CBDCs and banks experiment with tokenized deposits, RLNs could become the default infrastructure for digital money, particularly for:
- Cross-border payments
- Corporate treasury operations
- Real-time settlement of securities
- Tax and regulatory automation
Expect further pilots in Europe, Asia, and Latin America, alongside global frameworks under development by the Bank for International Settlements (BIS) and the Financial Stability Board (FSB).
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This page was last updated on May 12, 2025.
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