Dual-settlement refers to a transaction model where the exchange of two distinct assets occurs simultaneously or near-simultaneously across two separate, often disparate, settlement layers or systems. In crypto, this frequently involves one leg settling on a traditional fiat rail and the other on a blockchain, addressing atomic settlement challenges between different asset classes.
Mechanism
The mechanism typically employs an escrow agent, a smart contract, or a trusted third party that holds both assets until all conditions for the trade are met on both settlement networks. For example, a fiat payment might clear through a banking system, while the corresponding digital asset transfer is executed on a blockchain, with an atomic swap-like guarantee ensuring both transfers complete or neither does. This design reduces counterparty risk.
Methodology
Implementing dual-settlement systems requires careful design of interoperability protocols and API integrations between legacy financial infrastructure and blockchain networks. The methodology includes establishing clear rules for transaction finality on each system, mitigating latency differences, and ensuring robust error handling. Legal frameworks must also address the enforceability and ownership transfer across distinct asset registries, creating a synchronized and secure exchange process.
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