Shifting the United States’ Federal Reserve position from Previously regarded as a peripheral innovation, blockchain technology was believed to be linked only to cryptocurrencies. However, it is now steadily permeating the foundation of conventional finance. Financial institutions are slowly realizing the advantages of using distributed ledger technology (DLT), owing to quicker settlements and enhanced security. Michelle Neal, the Chief Executive of Fnality International – a blockchain-centric fintech company backed by Wall Street’s Goldman Sachs and UBS – is leading this change.
In her captivating interview with Financial News, Neal explains how legacy banks are beginning to embrace the idea of using blockchain technologies. Her perspectives are key to understanding what the future of finance will be, especially from the angle of institutions that, only a while ago, were tentative to take the plunge into revolutionary technology.
Who is Michelle Neal?
In her career, Michelle Neal has worked with several global financial institutions such as BNY Mellon, Deutsche Bank, and Nomura and held senior positions before becoming the head of Markets Group at the Federal Reserve Bank of New York, in charge of an $8 trillion balance sheet. a regulator to an innovator marked 2023 for Neal. Moving forward, she will lead working towards the vision of “blockchain enabled liquidity services”; as previously stated by the now former president of the Fed. This change in role signified not just a strategic move but rather an evolution of thinking. It symbolized a broader shift happening across the finance world—traditional finance’s endorsement of blockchain technology.
What does Fnality mean?
Fnality International is a company that came into being with a catalytic project developed by a consortium of banks and financial institutions that tried to address deep-rooted inefficiencies in the cross-border payments and disbursement systems. The proposal was simple yet challenging: design payment systems using blockchain that can support multiple currencies and work under the jurisdiction of the central banks.
Fnality is not just another upstart; it is an innovator. In December 2023, it pioneered the Sterling Fnality Payment System (£FnPS), a blockchain payment system designed for the wholesale banking sector for faster and safer settlements. This is not proof of concept technology; it is actively adopted by some of the most powerful banks, such as UBS, Santander, and Lloyds.
With a funding of £77.7 million from Goldman Sachs and BNP Paribas, including others, Fnality has gained the credibility and resources needed to start shifting the paradigm in the financial markets.
Why Blockchain? The Institutional Use Case
Neal emphasizes a few of the many factors that explain the shifting tides towards blockchain for institutions in finance:
24/7 Real-Time Settlement
Unlike traditional banking systems that operate during certain hours and require third-party services for settlements, Blockchain operates 24/7, allowing for cross-time zone real-time settlements.
More Settlement Risk
Instant settlement drastically reduces the duration of exposure two financial entities have to each other, otherwise known as settlement risk.
Cost Efficiency
Blockchain’s removal of layers of manual middlemen not only saves time but also allows for a reduction in operational costs.
Better Manage Liquidity
Unlike other forms of Blockchain, Fnality uses a more precise and efficient algorithm for liquidity management, which is crucial to today’s market of constricted credit and capital.
The Sterling Fnality Payment System (£FnPS)
One of Fnality’s milestones was to deploy the £FnPS, a blockchain payment system for wholesale finance that allows payments and settlements in sterling. It is fully operational with a growing list of adopters among financial institutions, as Neal points out.
What makes it revolutionary is that £FnPS operates under the supervision of the Bank of England, allowing it to fulfill all essential regulatory standards.
Such allows banks to rest assured that the system is not only sophisticated in technology but also meets legal requirements.
Global Interests: USD Will Not Be the Only One
Fnality plans to first implement a USD version and subsequently expand to other currencies. A USD-based system is in the works and, per Neal, will be ready between late 2025 and early 2026. The firm is actively seeking other currency jurisdictions and hopes to one day build a framework of blockchain payment systems that work together in different financial hubs.
Building this network is in line with Fnality’s goals, which seek to unify the financial infrastructure of the world and eliminate the outdated systems used today.
The Shift in Wall Street’s Perspective
Neal observes that blockchain technology is no longer a concept on Wall Street — it is being adopted and applied through DLT systems at scale. Goldman Sachs is not passively investing in fnality’s competitors; they actively test internal tokenization systems and build blockchain infrastructure with other players.
This is part of a larger trend:
- JPMorgan has developed Onyx, a blockchain-based platform that has handled trades and payments worth billion-dollar repos.
- Citi announced a new platform that puts digital assets on a blockchain while using traditional financial services.
- Deutsche Bank and Commerzbank have obtained regulatory permits for crypto asset management and are in the process of creating digital custody services.
These steps aren’t taken in a vacuum, and they indicate a sea change in how banks are treating blockchain technology—as a core infrastructure for the future of finance.
Central Banks and the Digital Currency Push
Commercial banks are not waiting for their peers to join the race. While Fnality allows innovation from peripheral players, central banks aren’t quiet, either. The Bank of England, for one, is studying the feasibility of issuing a wholesale Central Bank Digital Currency (CBDC) for big-value interbank transactions. This digital pound, however, would be exclusive to institutions.
Fnality is actively discussing with regulators and central banks, trying to establish itself as the private infrastructure contractor of public policy willing to help integrate innovation with governmental oversight.
Regulatory endorsement: the new paradigm
One of the biggest paradigm shifts that Neal has reported is that financial authorities seem more at ease using blockchain technology, which is a developing trend. It’s not limited to sandbox-style approvals and pilot schemes. They are now starting to roll out full realizations on the ground.
Fnality’s subsidiaries are bound and monitored by a network of central banks and financial watchdogs. The compliance-first strategy is enabling banks to tackle what has been a growing problem for them—constantly being one step ahead in a volatile environment.
The Human Element: Talent and Culture
Neal highlights the other part of the talent issue in this transition. Fnality is now in the process of expanding its multidisciplinary team of 100 employees in the UK and the US to include a variety of technologists, compliance, and financial analysts.
Such a combination speaks to a growing organizational culture that requires banking, blockchain, and regulation expertise to synergize. In many ways, it’s a snapshot of the ideal future financial institution—one that is nimble, open, and decentralized.
Overcoming Skepticism
Skepticism still exists even as the enthusiasm around blockchain continues to grow. Some old-school folks still wonder if advanced versions of centralized systems would not make better use of distributed ledgers.
Neal understands them but addresses them with evidence. It is with FnPS already live and real-world payments are being processed, there is an observable demonstration provided by Fnality of how blockchain is not just an improvement in theory, but rather a necessary practical one.
The Bigger Picture: Smart Contracts, Tokenization, and Everything Else
In banking, the potential that blockchain holds goes beyond just payment rail and includes numerous different applications:
Tokenized Assets: Bonds, real estate, and commodities can now be tokenized, which increases liquidity and simplifies trading.
Smart Contracts: From derivatives to syndicated loans, these programmable contracts can facilitate complex automated financial transactions.
Cross-Border Settlements: Blockchain technology can alleviate the long-standing problem of inefficiency in international trade and finance by greatly streamlining cross-border transactions.
Fnality is building foundational infrastructure that supports all of these trends so that they can capitalize on them.
The Road Ahead: What Comes Next?
Success for Fnality could be a case study on how to adopt infrastructure blockchain technology at scale, given its plans to expand into new currencies and jurisdictions. The company describes itself as striving to become the “plumbing” of the financial system: a neutral and solid framework through which banks, markets, and central banks connect, operating in a regulated system that is decentralized.For Michelle Neal, this is no longer just a business opportunity—but rather a chance to redefine finance.
Final Thoughts: Is Blockchain Technology a Turning Point for Financial Services?
The introduction of blockchain within the processes of traditional finance used to be difficult to fathom. Now, it’s almost inevitable with businesses like Fnality, led by visionaries like Michelle Neal, not only ideating about it but implementing incredible solutions that are currently working with millions in transaction volume.
It’s easy to imagine a financial system where blockchain runs silently yet omnipresent in the background – while delivering speed, reliability, and enhanced transparency. Such an advanced system becomes worthwhile to build and invest in for institutions, regulators, and consumers.
FAQs
Supported by prominent global financial institutions such as Goldman Sachs, UBS, and BNP Paribas, Fnality is a financial infrastructure company with a blockchain focus. Rather than pursuing cryptocurrencies or retail-oriented solutions, as many startups do, Fnality constructs payment ecosystems on blockchains for wholesale banking, governed by intense regulations in cooperative arrangements with central banks.
£FnPS functions as a payment processor and execution venue for high-value sterling transactions, permitting real-time, 24/7 settlements among participant institutions. This capability decreases counterpart risk while enhancing liquidity management, which is beneficial from a treasury perspective, as FNPS functions mechanically. Regulatory oversight is through the Bank of England.
The technology’s efficiency, ease of use, and security all contribute to its appeal. Settlement is instantaneous, with no required third-party involvemen, and is available all day, every day. It also improves liquidity and risk management. Adoption is unavoidable with trusted partners like Fnality, along with regulatory sign-off.
The primary focus has been on exploring the underlying technology through the lens of Central Bank Digital Currencies (CBDCs). Fnality partners with central banks to provide its platforms with legal and technical frameworks to operate within emerging digital currency infrastructures, blending public governance with market innovation.
By 2026, Fnality intends to incorporate additional currencies like the US dollar into its payment systems, subsequently aspiring to build a distributed blockchain payment system. In general, it seems as though blockchain will become a core infrastructure layer in modern finance, especially for cross-border and institutional payments.
