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Temenos integrates with SETL’s LedgerSwarm RLN; demonstrates banking capabilities for deposit token transactions settled with wholesale CBDC

Temenos continues ‘future of money’ innovation series, demonstrating banking capabilities for tokenized deposits, with on-ledger transactions settled in wholesale CBDC. For this proof-of-concept, Temenos integrated with SETL’s Tranquility testnet, a regulated liability network (RLN).

The world’s financial rails are set to be rebuilt to benefit from the advantages of tokenization, offering programmability, near real-time settlement, reduced intermediaries, and always-on capability. Central and commercial banks globally are actively exploring the multitude of possibilities this new technology can bring.

Within this new monetary paradigm, the role of commercial banks will remain as fundamental as always – providers of regulated, secure, and trustworthy financial services in their countries. They will be the gatekeepers, managing the customer, and providing the bridge between traditional account-based ledgers to these new tokenized forms of money.

Deposit tokens and wholesale CBDC

Retail CBDC’s are being piloted globally, however face headwinds to win over the public on utility and privacy concerns. A new approach that leverages technology to facilitate and improve payments is by tokenizing commercial bank money, so called deposit tokens. Furthermore, by settling deposit token transactions with tokenized central bank money in the form of wholesale CBDC, the existing monetary system can be fully replicated on these new ledgers, now being described with the term regulated liability network (RLN).

This is exactly what’s happening in several countries globally such as in Brazil with their DREX pilot. SETL, the provider of LedgerSwarm RLN technology, are participants in this pilot with their scalable Tranquility test network.

Temenos – SETL integration

Temenos is delighted to share the details of their latest innovation proof-of-concept (PoC) in collaboration with SETL, showing how the Temenos Banking Platform can integrate with the LedgerSwarm RLN to offer digital currency banking capabilities based on real-world pilot software, using the Brazilian central bank’s opensource DREX smart contracts for both wholesale CBDC and deposit tokens.

Anthony Culligan, SETL’s CEO, commented, “For tokenised deposits and CBDC to become a reality, banks need a core banking platform that is tooled for purpose. Temenos is a leader in its field and SETL is proud to assist Temenos in showcasing the flexibility of its product and in demonstrating some of its leading edge features. This experiment opens the path to broad adoption of digital cash. SETL’s LedgerSwarm software is a best-in-class, production ready network that can deliver to Temenos’s large customer base today.”

End-to-end digital currency services

For the PoC, Temenos used mobile apps built with Temenos Digital for customer journeys. We used a dedicated wallet microservice for servicing wallet related requests combined with Payments Hub for payment order AML processing and related checks.

We built a new token bridge component that connected to and managed on-ledger activities such as account creation and transaction handling. The token bridge also orchestrated across core banking account-based ledgers with the new token-based ledgers, both for issuance of wholesale CBDC to bank wallets, as well as for funding customer deposit token wallets from regular deposit accounts.

The PoC used SETL’s Tranquility RLN testnet, powered by the LedgerSwarm software, to orchestrate the minting, burning, and transferring of deposit and wholesale CBDC tokens within a single atomic transaction, with the deposit tokens being on one blockchain and the central bank tokens being on another.

The Temenos RLN adaptor was able to capture the on-chain activity and generate events via our integration framework, such as to mirror deposit token balances back to core for regulatory accounting.

A bridge to tokenized finance

Combining deposit token payments with automated CBDC settlement through tokenization opens the exciting prospect of streamlined payments infrastructure. Through this PoC, in collaboration with SETL, we have demonstrated how the Temenos platform can enable seamless bridging from traditional forms of money held in account-based ledger systems with these new token-based DLT ledgers.

It’s of fundamental importance that tomorrow’s commercial banks can fully participate in these new monetary networks as they emerge globally and offer related financial services. Through this PoC we’ve shown just how Temenos is enabling this future.

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