- Key insights: The Clearing House is targeting 2027 for the launch of its on-chain network that will allow banks to clear and settle tokenized deposit transactions, with the eventual long-term goal of building toward atomic settlement thanks to bank demand.
- What's at stake: Banks' interest in tokenized deposits has been growing; 24 of the top 50 banks in the country have the technology "on their radar" as of the first quarter, according to American Banker research on digital assets.
- Expert quote: [Distributed ledger technology] solutions are very complex inside bank walls because you basically have to have your own DLT infrastructure and be able to connect that to your core payment rails." —Reena Verma, head of tokenized deposit commercialization, The Clearing House.
The Clearing House is preparing to launch its
Development of the network comes as
"We've been in deep design conversations with all of our bank partners," Reena Verma, The Clearing House's head of tokenized deposit commercialization, told American Banker at Sibos in Miami this week.
The Clearing House is also developing an application protocol interface that will enable third parties to access its real-time payments rail and CHIPs network.
"Going into the fourth quarter, what we're really interested in is making sure that we have the [minimum viable product] solidified, as well as continuing to progress the design of both of those solutions at once," Verma said.
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Late last month, The Clearing House partnered with Quant, a programmable money infrastructure provider, to make the on-chain network interoperable with the company's fiat payment systems as well as provide orchestration and transaction management to coordinate the clearing and settlement.
TCH will work toward atomic settlement in "the distant future, when we have everything running smoothly," Verma said.
"We're always going to look for ways to make our solutions more efficient, which could include atomic select settlement," she said. "We understand in the market there are use cases like [delivery versus payment] that are forming that really benefit from atomic settlement, just given there's a securities lag and a payment lag that need to be linked together."
There's plenty of demand for atomic settlement among banks, according to Verma. "DLT solutions are very complex inside bank walls because you basically have to have your own DLT infrastructure and be able to connect that to your core payment bills. That connectivity and complexity is something that they're looking continuously to improve, and atomic settlement is one way that they can improve that."
Business-to-business payments with atomic settlement are becoming a priority for large companies across multiple industries, including insurance and manufacturing, according to Capgemini's 2027 World Payments Report. About 25% of the 1,110 businesses surveyed said they used nonbank providers for always-on, high-value cross-border B2B transactions.
"Atomic settlement is another thing that [corporates] want to see," Michael Levens, vice president, financial services payments lead at Capgemini, told American Banker.
Capgemini estimates that stablecoins, tokenized deposits and central bank digital currencies will account for approximately 4% of global payment volume by 2030.
