GSN CEO warns: All-weather tokenization market could expose weekend U.S. dollar funding gap

DBS Bank and Citibank completed a weekend cross-border U.S. dollar payment test for tokenized deposits, triggering deep thinking about final settlement, liquidity and foreign exchange pricing.

DBS Bank and Citibank completed a cross-border U.S. dollar payment within minutes over the weekend through the Swift Digital Ledger on September 5. The transaction not only tested the feasibility of a round-the-clock transfer system, but also sparked extensive discussions on key issues such as final settlement, liquidity management and foreign exchange pricing.

Legal boundaries between technology implementation and traditional settlement

According to DBS Bank's announcement, the two banks used tokenized deposits to complete transfers from Singapore to the United States. This process takes just a few minutes and spans the weekend. In contrast, traditional cross-border payments usually take up to two working days. By making transfers on Saturday, banks effectively avoid differences in time differences and delays caused by the closure of regular payment systems.

Ryan Kirkley, CEO and co-founder of the Global Settlement Network (GSN), pointed out that the information disclosed so far is not enough to prove that every basic obligation behind the payment immediately achieved final settlement at the legal level. Kirkley emphasized that the concept of "payment shown on the digital ledger has been completed" must be distinguished from "all relevant claims have reached final legal settlement." The former can happen in minutes, while the latter may still rely on the financing and reconciliation processes that are still being done through the traditional banking system.

"The important difference here is that seeing payments complete on the digital ledger is not the same as knowing that every obligation carried under it has reached a final legal settlement." Kirkley said in an interview. He further explained that if any portion of the payment required top-up or reconciliation after the reopening of the traditional banking system, then the transaction, while demonstrating 24/7 ability to move funds, did not necessarily provide 24/7 certainty of final settlement.

Liquidity Challenge: Cost of pre-funding and buffer inventory

Access to liquidity is another challenge as central bank settlement systems are often unavailable at weekends. For example, Fedwire, the Federal Reserve's high-value payments service, currently does not offer continuous weekend operations. As a result, banks that cannot replenish central bank funds over the weekend may need to inject capital into tokenized payment systems in advance or hold a larger liquidity buffer to cover customer transfer needs until traditional settlement infrastructure is reopened.

"Just because payment channels remain open does not mean liquidity will suddenly become unlimited." "If banks are unable to access or replenish central bank funds over the weekend, the immediate option can only be a combination of pre-funding and a larger liquidity buffer," Kirkley said.

Kirkley pointed out that when banks must hold balances in multiple currencies, networks and jurisdictions, both options can carry high costs. Funds set aside for possible weekend payments cannot be efficiently deployed elsewhere, and agencies have to weigh faster transfer speeds against the cost of retaining additional capital. In the long term, systems need to provide organizations with a clear view of available liquidity and allow funds to be directed where they are needed, thereby reducing the problem of idle funds caused by system connectivity. "If we make payments immediate but require significantly more precipitated liquidity to support it, then we are just solving one problem and creating another." he said.

Inadequate depth of the foreign exchange market drives up transaction costs

This problem is particularly acute for US dollar payments, as the US dollar appears on the side of 89.2% of global foreign exchange transactions. Although the tokenized market may continue to operate on Saturday and Sunday, institutions may have difficulty obtaining the dollar funding and central bank currency they need to support their activities. In addition, when payments continue during periods of limited market demand, foreign exchange pricing becomes more difficult. While digital payment infrastructure can stay online, the underlying foreign exchange market has inconsistent trading depth throughout the weekend.

Kirkley said banks or liquidity providers would have to bear this exposure if tokenized payments were used at a different exchange rate than when regular markets reopened. "Banks and liquidity providers must incorporate this reality into pricing, whether it is through widening spreads, dynamic pricing, or through other mechanisms to compensate the risk-taking party."

Sharp exchange rate fluctuations before the market reopens may cause losses to the party guaranteeing the weekend exchange rate. Kirkley recommends that trading terms should clarify in advance who bears the risk and how the price reflects this factor. Although market depth and spreads may be increased in the future as institutional activity increases during off-working hours, current weekend liquidity has not yet reached this stage.

Enterprise application prospects and the criticality of atomic settlement

For corporate customers, this payment model can still provide faster access to working capital. Companies can make payments to suppliers, transfer funds between subsidiaries, or respond to unexpected funding needs without waiting for banks in multiple jurisdictions to reopen. DBS pointed out that corporate demand from all-weather industries such as e-commerce and digital services is rising. A survey commissioned by the bank showed that 50% of financial leaders are exploring blockchain-based tools for liquidity and foreign exchange management.

Citing research data from Money20/20 and FXC Intelligence, DBS Bank said that outbound cross-border payments in Asia are expected to increase from US$13.5 trillion in 2025 to US$24 trillion in 2033.

However, to achieve real efficiency improvements, Atomic Settlement is crucial. Interoperability becomes indispensable when transactions involve assets held on different networks. Tokenized securities, deposits used for payments, and liquidity supporting transactions may be located in different systems. Atomic settlement requires both parties to such transactions to complete them simultaneously. If one part fails, the other part cannot be continued to prevent one party from delivering assets without receiving payment.

"I think you need an orchestration layer to coordinate these different systems, confirm that assets and liquidity are indeed available, and ensure that when one party fails, the other party cannot do it alone." Kirkley said. He warned that without such coordination, financial institutions could replicate existing market fragmentation on blockchain networks rather than eliminate it. In addition, shared technical and legal standards are needed to establish how to handle transactions when the network stops working or an asset cannot be delivered.

Industry Collaboration and Future Outlook

Large U.S. banks are also developing systems designed to connect tokenized bank funds. According to reports, JPMorgan Chase, Citibank, Bank of America and Wells Fargo are working together to develop a shared tokenized deposit network through The Clearing House, with the goal of launching in the first half of 2027.

For its part, DBS Bank launched DBS Token Services in 2024 to support programmable and instant transfers on its licensed blockchain. Its services include DBS Treasury Tokens, which is specifically designed for enterprise and liquidity management. As the only Asian headquarters member among the 12 core design team members participating in the Swift Digital Ledger architecture design, DBS Bank used the ledger to transfer tokenized deposits from Singapore within minutes during the September 5 transaction. To Citi's New York office, demonstrating its leadership in digital financial infrastructure.