The Solana Foundation has rolled out an open-source delivery-versus-payment (DvP) framework designed to shorten institutional trade settlement from days to seconds. JPMorgan contributed its knowledge of traditional settlement processes to the initiative.
The nonprofit foundation announced Solana DvP on Oct. 6, describing it as a system that allows institutions to settle transactions atomically on the Solana blockchain, with finality in seconds.
Settlement in traditional financial markets can take one to two days as securities and cash pass between clearinghouses, custodians and other intermediaries. The delay can tie up capital and create principal risk because one side of a transaction may complete its obligation before the other.
Solana DvP is designed to eliminate that mismatch by putting both sides of the transaction into a single atomic settlement. The asset and payment either complete together or the transaction fails altogether.
That means institutions do not have to depend on a counterparty to deliver an asset or payment at a later point. A trade cannot leave one participant holding the proceeds while the other has not fulfilled its obligation.
The foundation also aims to standardize institutional on-chain settlement. Currently, firms may need to develop bespoke smart contracts for individual transactions. Solana DvP instead offers a common framework that can be reused across the Solana ecosystem.
Catherine Gu, head of product for Digital Assets at the Solana Foundation, said the system addresses counterparty risk inherent in traditional finance. She said the open standard is designed to give institutions access to public infrastructure with settlement finality measured in seconds instead of days.
Shorter settlement cycles could reduce the friction involved in transferring value on-chain and potentially make blockchain infrastructure more practical for tokenized assets.
Solana already has experience with institutional tokenization projects. Among them is a commercial paper transaction arranged by J.P. Morgan for Galaxy Digital that settled using USDC. The new DvP framework could help turn similar transactions into repeatable processes instead of one-off implementations.
JPMorgan Helped Shape Requirements
JPMorgan was involved in developing the framework by providing settlement-related input. Its contribution helped shape requirements covering settlement deadlines, escrow isolation and token controls used by regulated issuers.
The framework supports capabilities such as pausable tokens and transfer hooks through Solana’s Token-2022 standard. A pausable token includes an emergency mechanism that allows an administrator to suspend transfers when necessary.
Rhodel D’souza, J.P. Morgan’s head of markets digital assets, said a shared and open atomic DvP standard provides the type of foundational infrastructure institutional market participants need to scale without adding settlement risk or counterparty exposure. He said the bank was pleased to provide its settlement expertise.
Public Infrastructure vs. Permissioned Models
Solana DvP is not the only blockchain-based DvP initiative. Its distinguishing characteristic is that the framework is presented as an open standard operating on public infrastructure.
JPMorgan’s Kinexys has previously tested a cross-chain DvP transaction with Ondo Finance, linking its permissioned payment infrastructure with the public Ondo Chain testnet.
ClearToken, meanwhile, launched DvP settlement through applications that are fully permissioned and regulated and run on the decentralized, privacy-enabled Canton Network.
The Solana Foundation said its DvP framework has undergone external security audits and is ready for transactions involving real funds. Privacy functionality is planned as well, allowing institutions to keep settlement details confidential.
Privacy remains a major consideration for institutional blockchain adoption. During Consensus Hong Kong in February, institutional participants pointed to strong privacy capabilities as an important requirement for blockchain technology to gain wider use among traditional financial firms.
