SETTLEMENT AND PAYMENTS INFRASTRUCTURE

Nostro/Vostro Accounts

Pre-funded accounts that banks maintain at foreign correspondent banks (nostro = ‘our account abroad’; vostro = ‘your account at our bank’) to facilitate cross-border payments. On-chain settlement could eliminate the capital trapped in these accounts.

EXAMPLE

McKinsey estimates that global banks trap over $10 trillion in nostro accounts to fund cross-border payments—capital that on-chain settlement could free for productive use.

Relevant Roles and Functions

On-chain Role
Chief Digital Payments Officer
Head of Next-Gen Payments
Function
Account-to-account Real-time Settlement
Blockchain Payment Rails
Corporate Treasury Integrations
Cross-border Blockchain Payments
Stablecoin Payment Infrastructure
TradFi Equivalent
Card Rails
Correspondent Banking
SWIFT-Based Settlement

Related Terms

Correspondent Banking

A relationship where one bank holds deposits and provides payment services on behalf of another bank—typically across borders—enabling international money movement. On-chain rails are increasingly viewed as a replacement for the correspondent network’s cost and latency.

Example

Stablecoins settled on-chain can route cross-border corporate payments in seconds, bypassing the multi-day correspondent banking chain that currently extracts 2–5% in fees.

Cross-Border Payments

Transactions that move value between parties in different countries, historically expensive and slow due to correspondent banking chains, currency conversion, and compliance checks. On-chain stablecoins and tokenized deposits are emerging as competitive alternatives.

Example

Visa's crypto division processed stablecoin-settled cross-border payments in emerging markets where traditional remittance corridors charge fees exceeding 6%.

Settlement Finality

The point at which a transaction is irrevocably complete and the transferred assets are unconditionally owned by the recipient. On-chain systems can achieve near-instant finality, replacing the deferred finality of traditional clearinghouses.

Example

On-chain settlement finality eliminates the intraday credit exposures that central counterparties currently absorb on behalf of clearing members.

On-Chain FX

Foreign exchange transactions executed directly on a blockchain, using tokenized currencies or stablecoins, enabling 24/7 settlement without a traditional FX dealer or correspondent bank acting as intermediary.

Example

Ripple's on-chain FX mechanism allows banks to convert between tokenized currencies at point of settlement, eliminating pre-funded nostro accounts in each currency.

Tokenized Deposit

A bank-issued, blockchain-based representation of a commercial bank deposit that moves on distributed ledger infrastructure while remaining a liability of the issuing bank—distinct from a stablecoin, which is typically issued by a non-bank entity.

Example

Citi's tokenized deposit pilot allows corporate clients to move cash between subsidiaries in real time on a permissioned ledger, with the same credit standing as a traditional deposit.