Programmable settlement refers to the automated execution of asset transfers and final payment based on predefined conditions and logic, often facilitated by smart contracts on a blockchain. This system allows for atomic transactions where multiple legs of a trade settle simultaneously and conditionally, removing counterparty risk and reducing settlement delays. It represents a significant advancement over traditional settlement processes, offering greater efficiency, transparency, and certainty for financial transactions. This capability is central to the vision of tokenized assets and decentralized finance.
Context
The potential of programmable settlement is a major focus in the evolution of financial market infrastructure, particularly for wholesale markets and cross-border payments. A key discussion involves the legal enforceability of smart contract-based settlement logic and the integration of these systems with existing regulatory frameworks. Critical future developments will include the development of interoperable blockchain networks and legal innovations that fully support the use of programmable settlement for a wide array of financial instruments and asset classes.
The tokenization of trade receivables creates a shared, instantly-settled liquidity pool, reducing the $2.5T finance gap and lowering corporate working capital costs.
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