Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305472 
Year of Publication: 
2024
Series/Report no.: 
Staff Reports No. 1120
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
How might modern settlement systems with distributed ledger technology achieve zero settlement risk? We consider the design of settlement systems that satisfies two integral features: information-leakage proof and zero settlement risk. Legacy settlement systems partition private information but are vulnerable to settlement fails. A token system with dynamic ownership representation, or a dynamic ledger, can be designed to achieve both, as long as it employs a protocol that enforces two restrictions: programs must be immediately implemented and must involve transactions based on verifiable claims. We show how such a system can support various arrangements, including insurance, derivatives, collateralized loans, and securitization.
Subjects: 
tokenization
programmability
settlement risk
financial architecture
JEL: 
G19
D86
D47
G29
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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