Distributed Ledger Technology Experiments in Payments and Settlements
FinTech Notes, June 24, 2020
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Bibliographic details
- Authors: Ghiath Shabsigh, Tanai Khiaonarong, Harry Leinonen
- Published: June 24, 2020
- Series: FinTech Notes
- DOI: https://doi.org/10.5089/9781513536330.063
Publication metadata
- Authors: Ghiath Shabsigh, Tanai Khiaonarong, Harry Leinonen
- Date: June 24, 2020
- Series: FinTech Notes No. 2020/001
- Issue: 001
- Volume: 2020
- Pages: 22
- DOI: https://doi.org/10.5089/9781513536330.063
- ISBN: 9781513536330
- ISSN: 2664-5912
- Subjects: Asset and liability management; Banking; Blockchain and DLT; Credit risk; Financial markets; Financial regulation and supervision; Liquidity; Payment systems; Securities settlement systems; Technology
- Keywords: Blockchain and DLT; counterparty; Credit risk; distributed ledger technology; DLT implementation; DLT payment transaction; DLT prototype; DLT solution; FTN; Global; Liquidity; market; Payment systems; permissioned DLT network; Securities settlement systems; settlement system; transaction
Historical context and generational evolution of payment and settlement systems
- First generation: paper-based; delivery times for payment instruments took several days domestically and weeks internationally.
- Second generation: computerization with batch processing; links between payment systems were made through manual or file-based interfaces; long change-over periods and residual use of paper-based instruments like checks and cash.
- Third generation (emerging): electronic and mobile payment schemes enabling integrated, immediate, and end-to-end payment and settlement transfers; example: real-time gross settlement systems available in almost all countries.
Role and potential of DLT in next-generation payments and settlements
- DLT has been viewed as a potential platform for the next generation of payment systems, enhancing the integration and the reconciliation of settlement accounts and their ledgers.
- Experiments with DLT point to potential shifts in financial infrastructures toward:
- real-time settlement,
- flatter structures,
- continuous operations,
- global reach.
- Testing in large-value payments and securities settlement systems has partly demonstrated the technical feasibility of DLT for this environment.
Technical and operational issues examined in DLT experiments
- Projects analyzed issues associated with:
- operational capacity,
- resiliency,
- liquidity savings,
- settlement finality,
- privacy.
Practical DLT-enabled capabilities demonstrated or facilitated
- DLT-based solutions can facilitate:
- delivery versus payment of securities,
- payment versus payment of foreign exchange transactions,
- efficient cross-border payments.
Summary of substantive findings
- Generational change in payment systems has progressed from paper to computerized batch processing to near-real-time electronic/mobile schemes.
- DLT experiments suggest technical feasibility for parts of the payments and securities settlement stack, with demonstrated potential benefits in settlement speed, system structure, and cross-border reach.
- Key operational concerns remain central to evaluation: capacity, resiliency, liquidity efficiency, finality, and privacy.
Distributed Ledger Technology Experiments in Payments and Settlements, FinTech Notes 2020, 001; Ghiath Shabsigh, Tanai Khiaonarong, Harry Leinonen; June 24, 2020.
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- Distributed Ledger Technology Experiments in Payments and Settlements; June 24, 2020