Lupsee
    Glossary

    Settlement & Tokenization Terms

    Clear definitions for the terminology used across institutional settlement, deposit tokens, and tokenized finance.

    A

    Atomic Settlement
    A transaction mechanism where all legs of a trade either complete simultaneously or none of them do. This eliminates the risk that one party delivers while the other defaults.
    PvPDvPHerstatt Risk

    C

    Correspondent Banking
    A system where banks hold accounts with each other (nostro/vostro) to facilitate cross-border payments. This creates trapped liquidity and settlement delays of T+1 or T+2.
    Nostro AccountVostro Account

    D

    Delivery vs Payment (DvP)
    A settlement mechanism in securities trading where the transfer of the security and the corresponding payment occur simultaneously, eliminating principal risk.
    Atomic SettlementPvP
    Deposit Token
    A digital representation of a commercial bank deposit issued on a distributed ledger. Unlike stablecoins, deposit tokens represent direct claims on a specific bank and fall under existing banking regulation.
    StablecoinTokenization

    H

    Herstatt Risk
    The risk that one party in a foreign exchange transaction delivers currency but the counterparty fails to reciprocate. Named after the 1974 failure of Bankhaus Herstatt.
    Atomic SettlementPvPCounterparty Risk

    K

    KYC (Know Your Customer)
    Regulatory procedures requiring financial institutions to verify the identity and assess the risk profile of their customers before and during business relationships.
    AMLCompliance

    N

    Nostro Account
    An account that a bank holds in a foreign currency at another bank. Used in correspondent banking to facilitate international transactions. The term means 'ours' in Italian.
    Vostro AccountCorrespondent Banking

    P

    Payment vs Payment (PvP)
    A settlement mechanism ensuring that two currency payments are exchanged simultaneously, eliminating the risk that one payment occurs without the other.
    Atomic SettlementDvPHerstatt Risk

    R

    Real-Time Gross Settlement (RTGS)
    A funds transfer system where transfers are settled individually and immediately rather than in batches. Each transaction is processed on a one-to-one basis.
    Atomic SettlementBatch Processing

    S

    Shared Ledger
    A distributed database that is consensually shared across multiple institutions, providing a single source of truth for transaction records without a central administrator.
    DLTBlockchain
    Smart Contract
    Self-executing code deployed on a distributed ledger that automatically enforces the terms of an agreement. In settlement, smart contracts enable conditional, atomic execution of trades.
    Atomic SettlementShared Ledger
    Stablecoin
    A digital asset designed to maintain a stable value relative to a reference currency, typically through reserve backing. Institutional stablecoins are issued under regulatory frameworks for settlement use.
    Deposit TokenTokenization

    T

    T+1 / T+2 Settlement
    Settlement timing conventions where "T" is the trade date and the number indicates business days until settlement. T+1 means settlement occurs one business day after the trade.
    Real-Time SettlementBatch Processing
    Tokenization
    The process of converting rights to a real-world asset into a digital token on a distributed ledger. In finance, this enables programmable, instantly transferable representations of deposits, securities, or other assets.
    Deposit TokenStablecoin

    V

    Vostro Account
    An account that a foreign bank holds at a domestic bank in the domestic currency. The counterpart of a nostro account. The term means 'yours' in Italian.
    Nostro AccountCorrespondent Banking