Executive summary
Tokenised securities trading is arriving faster than the settlement system needed to complete it. Markets are moving the securities leg onto blockchain infrastructure, but the cash leg remains largely tied to conventional clearing and payment rails.
This creates the central problem addressed by this paper: a tokenised security can be transferred almost instantly, yet the payment that completes the trade may still settle the next business day. That gap preserves counterparty risk, capital lock-up, failed settlement costs, reconciliation burdens, and the limits of non-continuous market infrastructure.
The paper argues that the missing link is not mainly technical. The harder question is legal and structural: what instrument can sophisticated market participants accept as final payment for a tokenised securities transaction, in real time, at par value, and without requiring new legislation?
1. Why settlement matters — and why the gap is costly
A securities transaction has two legs: the transfer of the security and the transfer of payment. Modern trading systems can agree the trade in milliseconds, but the cash payment often completes only on T+1 or T+2.
- Counterparty risk accumulates during the settlement window.
- Capital is locked against settlement exposure.
- Failed settlements create penalties, buy-in costs, interest charges and remediation costs.
- End-of-day batch reconciliation remains resource-intensive.
- True 24/7 trading is not fully achievable while settlement remains deferred.
2. The global settlement landscape
The same pattern appears across major markets: the securities leg is advancing rapidly, while the cash leg remains unresolved.
| Market | Current standard | Securities leg | Cash leg | Key obstacle |
|---|---|---|---|---|
| United States | T+1 | SEC-approved tokenised trading underway | T+1 via DTCC; cash leg unresolved | No clear legislative pathway for real-time digital cash settlement |
| United Kingdom | T+2 | LSEG blockchain settlement platform live | Sterling cash leg remains via existing systems | RTGS upgrade and regulatory divergence issues |
| European Union | T+2 moving to T+1 | ECB and TARGET2-Securities work advancing | Central bank money with cross-border fragmentation | Harmonisation remains slow |
| Australia | T+2 | CHESS replacement and tokenised bond trials | Cash leg via RBA | No deployed atomic DVP solution |
| New Zealand | T+2 | No approved tokenised securities framework yet | NZX Clearing and banking system | Small market; likely to follow larger-market technology direction |
| Hong Kong, Singapore, Japan | Mostly T+2 / moving T+1 | Active pilots and frameworks | Pilot-specific or jurisdiction-specific arrangements | Not yet universally portable or scalable |
3. The US legislative constraint
Any globally credible mechanism must be capable of operating in the United States. The US equity market sets the global standard, and institutional participants worldwide trade US securities.
The paper argues that new US legislation is not a reliable near-term path. Stablecoin legislation took years, broader digital asset legislation remains difficult, and agency rulemaking is more vulnerable after recent Supreme Court decisions limiting administrative discretion.
4. What a solution must achieve
Both legs complete simultaneously, or neither completes.
Failed settlement must be structurally impossible.
The mechanism must work within existing law.
It must be available to all opted-in participants across jurisdictions.
No single central processor or single point of systemic failure.
Costs visible and immutably recorded at the moment incurred.
The settlement instrument must maintain a consistent face value.
Exit to cash at par must always be open.
5. Cash asset settlement — the core gap
The core gap is the absence of a legally and structurally suitable fiat-equivalent settlement instrument for tokenised securities transactions.
CBDCs, tokenised bank deposits, regulated stablecoins, and existing payment systems each help explain the problem, but none currently satisfies all SAYG requirements.
The paper suggests that the answer will likely derive its settlement function from contractual acceptance by participants, be backed by assets convertible to cash on demand, be divisible to exact denominations, and operate within existing legal frameworks.
6. Non-cash asset settlement — an emerging dimension
Tokenisation is extending beyond equities and bonds into commodities, carbon credits, emissions units, real property interests, quota rights and digital assets.
Not all settlement obligations are naturally discharged in cash. Some participants may prefer settlement in kind or in an instrument linked directly to the underlying asset.
Non-cash settlement introduces additional requirements: stable value relative to the underlying asset, redeemability in that asset, and reliable availability of the backing asset.
Settle As You Go — closing note
No initiative assessed to date has achieved the SAYG standard. The missing link remains open: who provides the ultimate settlement asset?