The Solana Foundation has introduced an open-source delivery-versus-payment (DvP) program designed to allow institutions to settle trades on-chain within seconds rather than waiting days. JPMorgan contributed settlement expertise to the project during its development.
The nonprofit organization, which focuses on the decentralization, growth and security of the Solana blockchain, announced Solana DvP on Oct. 6. The program is designed to let institutional transactions settle atomically on-chain, with finality targeted within seconds.
Traditional financial settlement can take one to two days as assets and cash pass between clearinghouses, custodians and other intermediaries. That process can lock up capital and expose participants to principal risk. Solana DvP combines the separate settlement steps into one atomic transaction, meaning the asset and payment are completed together or neither transaction goes through.
This structure reduces the need for counterparties to rely on one another to complete their side of a trade at a later time. A transaction either settles completely or fails, limiting the possibility that one party receives the cash or asset while the other side fails to deliver.
The program also seeks to address the fragmented approach institutions have faced when conducting on-chain settlements. Rather than developing separate smart contracts for individual transactions, participants can use a common DvP framework.
“Atomic settlement removes counterparty risk that is inherent in traditional finance,” Catherine Gu, head of product for Digital Assets at the Solana Foundation, said in a press release shared with CoinDesk. She said Solana DvP gives institutions a common open standard across the Solana ecosystem while operating on public infrastructure with settlement finality in seconds rather than days.
Reducing settlement time and counterparty exposure could lower the friction involved in moving value on-chain, an important consideration as institutions explore tokenized assets.
Solana is already being used in institutional tokenization initiatives. One example is a commercial paper transaction arranged by J.P. Morgan for Galaxy Digital that settled using USDC. An open and externally audited DvP standard could make similar transactions easier to repeat rather than requiring individually built settlement arrangements.
JPMorgan Contributes Settlement Expertise
JPMorgan also provided input during the development of Solana DvP. The bank contributed its experience with settlement processes and helped shape requirements involving deadlines, escrow isolation and token features used by regulated issuers.
Those features include pausable tokens and transfer hooks available through Solana’s Token-2022 standard. A pausable token includes an emergency-stop function that allows an administrator to halt transfers when necessary.
“A shared, open standard for atomic delivery-versus-payment is exactly the kind of foundational infrastructure institutional market participants require to operate at scale without introducing settlement risk and counterparty exposure,” Rhodel D’souza, head of markets digital assets at J.P. Morgan, said. He added that the bank was pleased to contribute its settlement expertise.
Other DvP Approaches
Solana DvP is not the first blockchain-based DvP system, although the foundation says its approach is distinguished by being an open standard running on public infrastructure.
JPMorgan’s Kinexys, for example, has tested a cross-chain DvP transaction with Ondo Finance that connected its permissioned payments infrastructure with the public Ondo Chain testnet.
ClearToken has also introduced DvP settlement through its native applications, which are fully permissioned and regulated and operate on the decentralized, privacy-enabled Canton Network.
The Solana Foundation said its DvP program has undergone external security audits and is prepared to handle real funds. It also plans to add privacy capabilities that would allow settlement activity to remain confidential.
Privacy has been identified as an important requirement for broader institutional blockchain adoption. At Consensus Hong Kong in February, institutions highlighted stronger privacy protections as a key factor in bringing blockchain technology into wider institutional use.
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