Tokenized Deposit Settlement

Definition ∞ Tokenized Deposit Settlement refers to the process of finalizing transactions using digital representations of deposits, typically fiat currency, on a blockchain. Instead of directly transferring traditional funds, a tokenized version of those funds is moved and settled on a distributed ledger. This method aims to accelerate settlement times, reduce costs, and enhance transparency compared to conventional banking systems. It digitizes the settlement layer of financial transactions.
Context ∞ The state of Tokenized Deposit Settlement is a significant area of innovation within central bank digital currency (CBDC) research and wholesale finance. A key discussion involves the legal and operational frameworks required to ensure these tokenized deposits maintain their legal equivalency to traditional money. Future developments anticipate pilot programs and eventual broader adoption in interbank settlements and cross-border payments, potentially revolutionizing the efficiency of global financial transfers.