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DvP using CBDC: a "settlement choice model" for securities settlement

December 2021

Abstract

Delivery vs. Payment is central to the world's securities settlement systems, but is implemented in multiple forms that differ by jurisdiction. All of these different models exist on a continuum from intraday gross settlement–which minimizes settlement risk while requiring a great deal of liquidity–to delayed batch settlement–which offers netting efficiencies but delays final settlement. Market participants acknowledge the benefits of real time gross settlement but continue to rely on the operational and liquidity advantages of delayed batch settlement. Acknowledging that reality, this paper proposes a new “best of both worlds” model that allows for a choice of settlement type at the time of trading and offers the ability to settle both gross and netted trades instantly using Central Bank Digital Currency and digital assets on a blockchain infrastructure

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