Traditional financial institutions (left) are increasingly experimenting with blockchain and distributed ledger technology (right) in an effort to modernize and accelerate trade settlement. The convergence of legacy banking systems with cutting-edge blockchain networks could fundamentally transform how securities transactions are cleared and recorded.

Why Faster Settlement Matters

The push to shorten settlement cycles comes down to risk and efficiency. In a T+2 system, once a trade is executed there is a two-day window where the buyer hasn’t paid yet and the seller hasn’t delivered the asset. During this lag, counterparties are exposed – if one side fails, the other could be left hanging. Market intermediaries like clearinghouses step in to mitigate this counterparty risk, often by requiring hefty collateral (margin) from brokers until trades settle. This is exactly what happened during the meme-stock volatility: the two-day gap magnified risk, forcing clearinghouses to demand billions in extra margin and prompting trading restrictions. Shortening the cycle to T+1 reduces that risk window by half. The U.S. Securities and Exchange Commission (SEC) noted that moving from T+2 to T+1 could cut the volatility component of clearinghouse margin requirements by 41% in extreme scenarios. In plain terms, faster settlement = less time for things to go wrong.

There’s also a capital efficiency angle. In a T+2 world, trillions of dollars are tied up in unsettled trades or margin. If trades settle sooner, investors get their cash or securities faster and can reinvest or deploy them more quickly, boosting liquidity. A shorter cycle could mean fewer outstanding obligations at any time – akin to reducing an economy’s financial traffic jam. The benefits extend to overall market stability as well: during periods of stress, a long settlement cycle can exacerbate turmoil (as seen in 2020’s COVID market crash and the 2021 meme stocks). It’s no surprise regulators globally – from the U.S. and Canada to Europe and Asia – have been examining expedited settlement. Many major markets already moved from T+3 to T+2 in the last decade, and now plans for T+1 are underway or being discussed in the EU, UK, India and beyond.

However, even T+1 still means an overnight delay. What if technology could eliminate the delay entirely? Proponents of blockchain and distributed ledger technology (DLT) argue we can leapfrog to T+0, where trades settle at the moment of execution. This would virtually erase counterparty risk because ownership and payment swap simultaneously – a true delivery versus payment in real time. It sounds like the holy grail of post-trade infrastructure. But as with any fundamental change, the devil is in the details.

Blockchain to the Rescue: Promise of T+0 Settlement

Blockchain technology, first popularized by cryptocurrencies, offers a radically different model for clearing and settlement. Instead of each institution keeping its own ledger and reconciling with others over days, a distributed ledger serves as a single source of truth shared by all parties in near-real time. Trades recorded on a blockchain can be settled within seconds, not days, once certain conditions are met. Here’s why many see this as transformative:

• Instant, Atomic Settlement: If cash and securities are both represented as digital tokens on a blockchain, they can be exchanged simultaneously via smart contract. This achieves instant delivery-versus-payment – no more “I delivered my part, waiting two days for you to deliver yours.” The result is a dramatic reduction in counterparty risk. Once a trade is executed on-chain, the buyer’s payment and seller’s asset transfer occur as one atomic transaction that’s final. There is no window for a party to default after the fact.

• Reduced Operational Overhead: In today’s T+2 world, firms spend vast resources on trade matching, confirmation, reconciliation, and error handling between multiple databases. Blockchain’s shared ledger means everyone sees the same transaction record, potentially eliminating the need for redundant reconciliation. Accenture estimated that DLT could cut post-trade clearing and settlement costs by up to 50% by streamlining or removing these duplicative processes. In theory, as much as 95% of trade processing and settlement steps could be automated with smart contracts and workflows on blockchain rails. This efficiency could save tens of billions annually in the financial industry.

• Improved Transparency and Security: Every transaction on a blockchain is time-stamped and immutable, creating an audit trail that regulators and participants can inspect in real time. This transparency can reduce the opacity in areas like securities lending or complex chain-of-custody situations. Also, blockchain’s cryptographic security makes the ledger tamper-resistant – once a trade is settled, it’s locked in, reducing the chance of unauthorized modifications or backdating. Proponents argue this could cut down on certain types of fraud and errors.

• 24/7 Markets and Faster Access to Funds: Currently, settlements often wait for end-of-day batch processing and don’t occur on weekends or holidays. A decentralized network doesn’t sleep – in principle, trades could settle anytime, giving investors quicker access to sale proceeds or purchased securities. This always-on capability aligns with an increasingly global, round-the-clock market environment. It could also facilitate broader participation – for instance, enabling markets to operate across time zones without the frictions of time cutoff for settlement cycles.

• Potential to Bypass Intermediaries: Today’s post-trade ecosystem relies on central securities depositories (CSDs), clearing houses (CCPs), custodians, and other middlemen to manage settlement and ensure trust. Blockchain advocates envision a future where smart contracts and cryptographic proof replace many functions of these intermediaries. In an ideal scenario, tokenized assets on blockchain might be transferred peer-to-peer without needing a central clearinghouse to guarantee the trade. This could further cut costs and complexity – though in practice, some central entities might remain for governance or as backup liquidity providers. Even so, the role of traditional middlemen could shrink over time as DLT matures.

To illustrate the differences between the traditional T+2 approach and a blockchain-based T+0 approach, consider the following comparison:

Aspect	Traditional Settlement (T+2)	Blockchain Settlement (T+0)
Speed	~2 business days to finalize ownership and payment.	Near-instant (seconds or minutes) settlement once trade is executed.
Counterparty Risk	Exists during the gap – one party could default before settlement; mitigated by clearinghouse guarantees and margin.	Greatly reduced – trade is completed almost immediately, leaving little window for default.
Reconciliation	Multiple ledgers across brokers, banks, and clearing agencies must be updated and matched, often manually or in batches.	Single shared ledger; all parties see the same transaction record, minimizing the need for reconciliation and manual checks.
Liquidity & Capital	Netting of trades is possible (buys and sells offset), so participants only need to fund net obligations; some flexibility in securing cash or assets by settlement date.	Requires pre-funding each trade (no netting at the moment of trade), meaning traders must have full cash or assets on hand, which can strain liquidity. Real-time credit could cover shortfalls, but that reintroduces risk.
Intermediaries	Reliance on central clearinghouses, custodians, etc., to manage risk and keep records during the settlement process.	Potential to streamline or remove certain intermediaries as trust is placed in the technology (smart contracts and network rules), though new infrastructure providers (platform operators, oracles) may emerge.

A comparison of the current T+2 settlement system versus a blockchain-based T+0 model. On the left, trades settle after two days through multiple intermediaries and batch processes; on the right, distributed ledger technology enables near real-time settlement with atomic exchanges. The blockchain approach offers speed and risk reduction, but demands liquidity and technological coordination.

The promise is clear: faster settlement empowered by blockchain could revolutionize financial markets. In fact, this isn’t just theoretical – early implementations show it’s possible. A notable milestone came in late 2023 when JPMorgan and Barclays completed the first live blockchain-based collateral settlement between two major banks. They swapped tokenized shares and cash on a distributed ledger, instantly and securely, proving complex trades can be settled on new rails. And they’re far from alone; more on real-world adoption in a moment.

But before declaring traditional settlement dead, it’s crucial to scrutinize the other side of the equation. What hurdles and new risks come with this brave new world of instant settlement? As with any disruptive innovation, there are trade-offs.

Pumping the Brakes: Challenges and Controversies

For all its advantages, moving to T+0 via blockchain is not as simple as flipping a switch. The existing financial ecosystem is a finely tuned (if imperfect) machine, and sudden changes can have unintended consequences. Here are some of the key challenges and points of contention:

• Liquidity Strain & No Netting: Paradoxically, eliminating settlement delay can increase certain risks in day-to-day operations. Under the current system, a broker or trader’s buys and sells over a day are netted by the clearinghouse – effectively, you only need to pay or deliver the net difference at end of day. With instant settlement of each trade individually, netting opportunities vanish. The DTCC (the largest U.S. clearinghouse) highlighted this issue: a trader who buys $1 million worth of one stock and sells $500,000 of another would need the full $1 million in cash immediately to settle the buy, rather than just the net $500k after offsetting the sale. In other words, trades must be pre-funded in full. This could force participants to hold much larger cash buffers intraday, raising costs. One workaround might be on-demand credit lines to cover trades – but introducing real-time credit brings its own credit risk (just in a different form). Some critics worry that instant settlement could actually reduce market liquidity because fewer players will have the ready cash or securities to trade frequently, or they’ll have to pull back to avoid liquidity crunches.

• Operational and Technological Risks: Today’s two-day cycle provides a cushion to correct errors, match trade details, and handle system glitches. If something goes wrong in an instant-settlement environment – say a trade is recorded incorrectly due to a software bug or network hiccup – there’s little time to intervene before it’s final. Blockchain systems themselves are not infallible: bugs in smart contracts, hacks on digital wallets, or even something as mundane as a network outage could cause big problems when there’s no grace period. Ensuring absolutely robust, resilient systems is a high bar. Moreover, while blockchains remove some human error in reconciliation, they introduce new complexities like ensuring all participants’ systems correctly interface with the ledger, managing private keys for asset custody, and safeguarding against fraud in a fully digital environment. A poorly designed smart contract could, for instance, settle trades that shouldn’t settle or be exploited by bad actors – a nightmare scenario when happening in seconds with no undo button.

• Finality and Legal Uncertainty: Not all blockchains are created equal when it comes to final settlement. Public blockchains (like Ethereum) have probabilistic settlement – transactions might be reversed if a longer chain is accepted, or in rare cases of 51% attacks. Even permissioned (private) blockchains need clear rules for what constitutes an irreversible final settlement. Regulators and courts will need to define the legal moment of finality in a DLT context. If a blockchain transaction is deemed final in seconds, how do you handle a situation where a mistake or fraud is discovered minutes later? Traditional systems have well-established protocols for trade breaks or errors; replicating that safety net on blockchain is tricky. Some proposals involve very short delays or “preview windows” before finality, but that reintroduces a mini-settlement cycle. Additionally, cross-border trades raise questions: which jurisdiction’s laws apply to an on-chain trade? These uncertainties must be ironed out for global adoption.

• Legacy Integration and Transition: The current market infrastructure – exchanges, banks, clearinghouses, depositories – cannot be replaced overnight. They perform critical roles like risk mutualization, default handling, and record-keeping. A big question is how to transition from traditional systems to blockchain-based ones without disrupting markets. It might not be an all-or-nothing change; more likely we’ll see incremental adoption. For example, some trades (perhaps between willing large institutions) could settle on DLT while others still use legacy rails, at least initially. But running two parallel settlement systems can add complexity and require robust interoperability. There’s also significant investment in legacy tech that firms are reluctant to abandon until new methods are clearly safer and more efficient. As Polymath’s analysis noted, leveraging DLT for post-trade will require navigating a “complex web of regulation and intermediation” – you can’t just discard the safeguards built over decades. Incumbents like CSDs and CCPs will likely evolve rather than disappear; they may become operators or overseers of blockchain networks, ensuring governance and fairness. The process will be evolutionary, not revolutionary, and could take years of industry-wide coordination.

• Multi–Time Zone and Currency Hurdles: One often overlooked aspect is that T+2 was partly designed to accommodate global trading across time zones and currencies. If an investor in London sells a stock in Tokyo, the two-day buffer helps manage currency conversion and differing business hours. Moving to T+0 globally could create pain points – for instance, investors might have to pre-fund foreign exchange transactions immediately to settle an international trade, potentially at odd hours. When India’s regulator proposed T+1 a few years ago, some international industry groups pushed back, citing the difficulty of aligning traders in New York, London, and Tokyo on such a short fuse. Instant settlement would amplify this concern. Solutions may include 24-hour staffing or automated FX smart contracts, but it underscores how one market’s change can ripple worldwide. Not every region will move at the same pace, and that mismatch could itself become an operational headache if, say, Europe is on T+0 but the U.S. is on T+1 – firms active in both would need to straddle two regimes.

In light of these challenges, some skeptics argue that incremental improvements might yield most of the benefits without the disruption. They note that going from T+2 to T+1 (already in motion) and possibly to T+0 in specific cases (like certain stock pairs or via central clearing tweaks) could handle issues like counterparty risk and margin reduction, without leaping to a whole new technology paradigm. Others counter that only a clean-slate tech like blockchain can truly modernize the post-trade world, and that clinging to old systems is what’s truly risky in the long run. The truth likely lies in between – a hybrid model for years to come. Let’s look now at how this is playing out in practice, and how the industry is balancing both views.

Momentum Builds: TradFi Experiments with Blockchain Settlement

Despite the hurdles, momentum toward blockchain-based settlement is undeniably building. Over the past few years, some of the world’s largest financial institutions – the epitome of traditional finance (TradFi) – have begun dipping their toes into DLT for real transactions. This trend lends credibility to the idea that T+0 on blockchain is more than hype. Here are a few landmark moves:

• 2020: JPMorgan’s Onyx Platform – Banking giant JPMorgan Chase launched Onyx, a business unit dedicated to blockchain and digital assets. Onyx created JPM Coin (a token for instant value transfer between JPM clients) and a network to facilitate 24/7 payments. This laid groundwork for using blockchain in various settlement use cases, from repo trades to interbank transfers. JPMorgan’s early and hefty investment signaled that even heavily regulated banks see promise in blockchain to improve settlement and collateral management.

• 2022: BlackRock’s Tokenized Money Market Fund – The world’s largest asset manager, BlackRock, made headlines by embracing tokenization. By 2025, BlackRock’s Ethereum-based tokenized money market fund (ticker: BUIDL) amassed almost $2 billion in assets within months of launch. Large transactions of fund units have been settling on blockchain networks as part of this offering. BlackRock’s CEO Larry Fink even remarked that “the next generation for markets, the next generation for securities, will be tokenization of securities.” In other words, mainstream finance is actively trying out on-chain settlement for its efficiency benefits – and finding success, not just doing a crypto experiment. By 2025, nearly $20 billion worth of real-world assets have been recorded on public blockchains, indicating this is a fast-growing trend, not a passing fad.

• 2023: Tradeweb and Nasdaq’s Blockchain Pilots – Tradeweb, a major electronic bond trading platform, partnered with blockchain firms to explore settling trades on ledger technology (for instance, using a private Ethereum-based network for repo trades). Likewise, Nasdaq has run pilots for blockchain-based settlement of private securities and explored offering digital asset custody. These initiatives often fly under the radar but demonstrate that exchanges and trading platforms want to be ready for a DLT future. Each successful pilot builds confidence and know-how.

• 2024: Euroclear’s DLT Platform – Euroclear, one of Europe’s largest settlement houses (which normally handles T+2 European trades), has been testing a distributed ledger platform to ultimately enable instant bond settlement. In 2023–24 they ran a pilot (Project Fontaine) for French commercial paper on a blockchain, and Euroclear participated in the European Central Bank’s experiments for a digital Euro settlement. When a linchpin like Euroclear actively explores DLT, it’s a sign that post-trade incumbents are taking this seriously and trying to adapt, not fight, the change.

Key traditional finance institutions have been steadily moving toward blockchain-based settlement in recent years. 2020: JPMorgan’s Onyx initiative marks a major bank’s commitment to blockchain. 2022: BlackRock signals confidence in tokenization with a live fund on Ethereum. 2023: Trading platforms like Tradeweb start adopting DLT for some transactions. 2024: Euroclear, a settlement giant, pilots distributed ledger technology. Such developments show that the shift from T+2 toward real-time settlement is already underway in practice.

• 2023–2025: Regulatory Sandboxes and Green Lights – Regulators, often seen as cautious, are actually enabling these experiments in many jurisdictions. The UK’s Financial Conduct Authority (FCA) and Bank of England launched a Digital Securities Sandbox in late 2024 to let firms test DLT settlement for financial instruments in a controlled environment. The European Union implemented a DLT Pilot Regime in 2023, creating temporary legal frameworks for market infrastructures using blockchain to operate with certain waivers (e.g., allowing trading and settling of tokenized securities up to a cap). Singapore’s central bank (MAS) has Project Guardian, running live pilots of tokenized bonds and funds with global banks. These efforts indicate regulators are open to innovation – as one summary put it, “innovation allowed, but under existing investor-protection rules.” In short, the door is open for the industry to prove out the tech, as long as core safeguards are maintained. This balanced approach is helping build real-world data on the pros and cons of T+0 settlement.

• Leading the Charge – or Hedge? It’s worth noting that not everyone is moving at the same speed. While some major players race ahead, others are watching carefully from the sidelines. This is healthy: it means the early adopters can iron out kinks and share lessons. If their results are good (faster settlement, lower costs, manageable risk), the rest of the industry can follow with more confidence. If problems arise, better to surface them in pilot programs than at economy-wide scale. We’re effectively seeing a gradual phase-in of blockchain settlement, where traditional and blockchain systems run in parallel. For the foreseeable future, T+2 (soon T+1 in many places) will co-exist with T+0 DLT settlement in specific niches. Over time, successful niches may expand to become the new norm.

The Compliance Factor – An AML Incubator Perspective

No discussion of trade settlement is complete without touching on compliance and anti-money laundering (AML) controls. Whether trades settle in two days or two seconds, regulators still need assurance that markets aren’t being used for illicit activity, and that participants are properly vetted. In fact, faster settlement could make monitoring more challenging – huge flows of money moving instantly leave little time to flag suspicious transactions. This is where innovative compliance solutions are stepping up alongside the tech.

One intriguing aspect of blockchain-based systems is the possibility of programmable compliance. Smart contracts can embed rules that enforce compliance checks as a condition of settlement. For example, a tokenized security could be coded to only transfer if both wallets involved have been whitelisted (i.e., passed KYC/KYB checks). The Investment Association has noted that tokenization “enables a fund to integrate compliance with AML and KYC into each token, adding more certainty to the process.”. In practice, this could mean each trade carries its own built-in ID verification, automatically blocking transfers to unverified or blacklisted entities. As a compliance consulting firm, AMLI (AML Incubator) sees this as a welcome development – technology that actually bakes in AML controls from the ground up, rather than bolting them on afterward. It aligns with AMLI’s philosophy that compliance can be streamlined without slowing you down. If done right, investors might enjoy both instant settlement and instant compliance validation behind the scenes.

However, AMLI would also caution that technology is only part of the solution. Human oversight and sound judgment remain critical. Blockchain or not, someone must set the rules of those smart contracts, update them for new regulations, and handle exceptions when something looks fishy. There is also the matter of global standards – different countries have different AML requirements, and an on-chain system might have to harmonize these or risk a weakest-link problem. AMLI’s experience across jurisdictions positions it to help craft such frameworks so that innovation doesn’t outpace safeguards. The firm has seen how quickly criminals adapt; if markets are moving to real-time, bad actors will try to exploit any gaps just as fast. So while we at AMLI are excited about the potential for “compliance by design” in next-gen settlement systems, we advocate a balanced approach: marry cutting-edge tech with robust compliance programs and expert oversight. In the end, market integrity and trust are just as important as speed.

Conclusion: Evolution, Not Revolution – At Least for Now

The drive from T+2 toward T+0 settlement represents one of the most significant paradigm shifts in financial infrastructure in decades. On one side, the vision of instant, frictionless trading is incredibly compelling: lower risk, lower cost, and no more waiting for funds to clear. It’s a vision where the plumbing of finance finally catches up with the high-speed world we live in. On the other side, the pragmatic realities of unwinding a century’s worth of market structure and replacing it with blockchain networks demand caution. As we’ve seen, faster settlement isn’t a panacea – it introduces new challenges that must be addressed through smart design, regulation, and gradual adaptation.

So, will blockchain revolutionize trade settlement globally? Probably – but gradually. The likely scenario is a period where traditional and blockchain-based systems run side by side, each influencing improvements in the other. We’re already headed to T+1, and selective use of T+0 via DLT will grow as success stories accumulate. The change will come market by market, use case by use case – perhaps starting with niches like private securities, cross-border interbank trades, or specific asset classes that benefit most from instant settlement. As comfort and infrastructure build, larger portions of the market can transition. Much like the move from paper to electronic trading, it won’t happen in one big bang; it will be an evolution.

Crucially, the conversation is no longer theoretical. Real dollars, euros, stocks, and bonds are changing hands on blockchain platforms today, with the blessing of major regulators. The coming years (2025–2030) will likely bring clarity on which models work best. If the experiments underway continue to show positive results – e.g. BlackRock’s tokenized funds delivering efficiency, or JPMorgan’s blockchain network handling volume securely – then confidence in T+0 settlement will solidify. If unexpected pitfalls emerge, the industry may opt to stick with a safer T+1 and refine that.

From a neutral perspective, what’s important is that both sides of the debate stay engaged. The innovators must heed the lessons of history and design systems that truly improve on all fronts (speed, safety, fairness). The traditionalists must remain open-minded that new technology can solve old pain points and not automatically assume the status quo is safest. In the end, everyone in the financial ecosystem – investors, institutions, regulators, and tech providers – shares a common goal: a more efficient, resilient market that serves the economy without undue risk.

Whether T+0 via blockchain becomes the new norm in five years or fifteen, the journey itself is driving positive change. It’s already forcing a re-examination of processes and spurring collaboration between tech and finance experts. The settlement revolution has begun, but it’s a carefully paced revolution. As it unfolds, expect to see more headlines of successful blockchain pilots alongside steady improvements to legacy systems. For the global audience watching, one thing is clear: the way trades settle in 2030 will likely look very different from 2010, and perhaps sooner than we think, seconds will matter more than days in the world’s financial markets.

In this transition, firms that stay informed and agile – leveraging insights from pioneers and ensuring their compliance foundations are strong – will be best positioned to thrive. The race to real-time settlement is on, and while we can’t declare a winner yet, it’s an exciting time at the intersection of finance and technology. Fasten your seatbelts (and maybe your blockchains) – T+0 is coming, one block at a time.