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Delivery v payment using Central Bank Digital Currencies: a “settlement choice model” for securities settlement

  • Global
  • Technology
  • Financial services
  • Financial services - Digital Financial Services
  • Financial services - Payment services

27-01-2022

Blockchain and digital currencies are two key fintech developments to have occurred in the decade following the global financial crisis. Whilst substantial attention has been given to the retail uses of these developments it is clear that the most significant efficiencies and paradigm shifts that they can achieve will be in the wholesale space given the values and volumes in these markets.

Securities settlement which employs Delivery versus Payment (DvP) and real time gross settlement systems (RTGS) methodologies is one wholesale market currently exploring the application of blockchain and Central Bank Digital Currencies (CBDCs) to achieve better efficiencies across settlement systems globally. Key to these efficiencies will be maintaining DvP settlement risk minimisation via RTGS and netting efficiencies associated with delayed batch settlement. Simultaneously, solutions need to be found to reduce the current RTGS liquidity requirements and the delays to achieving final settlement that are associated with delayed batch settlement.

This paper which we produced with the global blockchain software firm, R3 and D-Fine, the European Consulting firm considers a new model for securities settlement. This model offers both a choice of settlement type at the time of trading and offers the ability to settle both gross and netted trades instantly using CBDCs and digital assets on a blockchain infrastructure. This tokenised solution offers a significant step forward from a current model which relies on intra-day liquidity provided via traditional fiat currencies held in settlement accounts at central banks.

Read the whitepaper >