Payments for settlement, coupon payments or redemption payments of DLT bonds which are tokenised bonds can take place in the same way as traditional bonds. Payments related to DLT bonds that are native digital assets can, from a technical standpoint, take place in the same way as traditional bonds, or use any payment mechanism which is also in code-based or distributed ledger form, commercial bank money in tokenised form, so-called stablecoins representing value denominated in fiat currencies (see also Q&A 4), or central bank digital currency (CBDC, see also Q&A 3). However, in practice, access to central bank money is generally restricted to wholesale commercial banks and to enable DvP with a CBDC, investors would also require direct access to a CBDC, which is a policy choice rather than a technological question.
The below diagram illustrates the forms of payment that have been used in a Delivery-versus-payment (DvP) scenario in bond markets, based on ICMA’s tracker of new FinTech applications:
Examples include:
-
- JPM Coin, “a permissioned system that serves as a payment rail and deposit account ledger, that allows participating J.P.Morgan clients to transfer US Dollars held on deposit with J.P.Morgan within the system, facilitating the movement of liquidity funding and payments in right time”.7
- Tokenisation of CHF held within an account with SIX Interbank Clearing (SIC) for settlement of DLT instruments on SIX Digital Exchange.8
- Fnality Payment Systems, formely known as “Utility Settlement Coin” (USC), which is backed by a consortium of banks and market infrastructures and seeks to provide a “a peer-to-peer digital cash asset to settle tokenised transactions with finality''.9
- JPM Coin, “a permissioned system that serves as a payment rail and deposit account ledger, that allows participating J.P.Morgan clients to transfer US Dollars held on deposit with J.P.Morgan within the system, facilitating the movement of liquidity funding and payments in right time”.7
7https://www.jpmorgan.com/onyx/coin-system.htm
8General Terms and Conditions, SIX Digital Exchange AG (GTC SDX) - Version 1 July 2022
9https://www.fnality.org/about-fnality
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