What is atomic settlement?

Atomic settlement is a transaction mechanism where the transfer of an asset and its corresponding payment occur simultaneously, ensuring that both sides of a trade either succeed together or fail together with no exposure in between. The term "atomic" refers to the transaction being indivisible, meaning it cannot be partially completed.

In traditional financial markets, settlement typically takes 1-3 business days after a trade is agreed upon, creating counterparty risk where one party could fail to deliver after receiving payment. Atomic settlement eliminates this risk by collapsing the multi-day process into a single, instantaneous transaction where both legs settle conditionally on each other.

The Federal Reserve Bank of New York distinguishes two distinct properties often combined in the term: instant settlement (immediate finalization) and simultaneous settlement (conditional execution). While both can occur together in blockchain-based systems, the core benefit of atomic settlement is the simultaneity that eliminates principal risk.

How does atomic settlement work?

Atomic settlement relies on smart contracts and distributed ledger technology to coordinate conditional transfers. The system ensures that asset delivery happens if and only if payment occurs, implementing what traditional finance calls Delivery-versus-Payment (DvP) or Payment-versus-Payment (PvP).

• Hash Time Lock Contracts (HTLCs) create conditional payments using cryptographic hash locks and time locks. The receiver must reveal a secret preimage to claim funds before a deadline, or the transaction automatically refunds the sender
• Smart contract escrow holds both asset and payment, executing the swap only when all conditions are met
• Both sides of the trade must be represented as digital tokens on blockchain infrastructure, including tokenized assets and stablecoins or central bank digital currencies for payment
• Cross-chain protocols like Chainlink CCIP enable synchronized settlement across different ledgers

The BIS Project Icebreaker demonstrated this for retail CBDCs across Israel, Norway, and Sweden. Foreign exchange providers held digital currency wallets in each domestic system, with HTLCs coordinating atomic PvP settlement that completed cross-border transactions in seconds.

Where is atomic settlement being used?

Atomic settlement is progressing from research pilots to institutional implementation across foreign exchange markets, securities trading, and central bank digital currency experiments.

Foreign exchange markets

Project Meridian FX explored how synchronization operators can enable atomic FX settlement between wholesale payment infrastructures, reducing the settlement risk that caused the 1974 Herstatt Bank collapse where counterparties lost $620 million. CLS Group, which settles over $6 trillion in FX daily, notes that atomic settlement extends existing PvP concepts to blockchain systems with additional speed benefits.

Securities and tokenized assets

In May 2025, Chainlink, JPMorgan's Kinexys, and Ondo Finance executed a cross-chain DvP transaction exchanging tokenized US Treasury funds, demonstrating atomic settlement between public and permissioned blockchains. Fnality International developed a decentralized payment system supporting atomic PvP and DvP for wholesale markets without intermediaries.

Central bank digital currencies

The BIS Project Icebreaker demonstrated atomic settlement for retail CBDCs across Israel, Norway, and Sweden, using HTLCs to complete cross-border transactions in seconds. Other BIS Innovation Hub projects including Project Jura, Project Dunbar, and mBridge have explored wholesale CBDC settlement on multilateral platforms.

What are the benefits of atomic settlement?

Atomic settlement eliminates counterparty risk by ensuring one party cannot receive payment without the other receiving the asset, removing the principal risk that caused the Herstatt crisis. Transactions either complete in full or don't execute at all, removing partial settlement failures.

• Unlike traditional payment rails constrained by banking hours, blockchain-based atomic settlement operates 24/7
• Institutions can redeploy capital immediately after settlement rather than waiting 1-3 days, improving return on equity
• Shared ledger infrastructure eliminates the need for multiple parties to reconcile separate records of the same transaction
• According to Chainlink research, moving from T+2 to T+0 settlement unlocks liquidity trapped in clearing accounts

What are the challenges to atomic settlement adoption?

Widespread adoption faces interoperability barriers across fragmented blockchain platforms, requiring secure protocols to coordinate transactions across siloed networks. Different blockchain platforms use incompatible smart contract languages and consensus mechanisms, requiring intermediary protocols like Chainlink CCIP to enable cross-platform settlement.

• Financial transactions must adhere to KYC/AML regulations, which can be difficult to implement on decentralized blockchain systems
• Traditional payment systems have clear legal frameworks defining settlement finality, while blockchain-based settlement requires new legal structures
• Most financial institutions operate on legacy infrastructure that cannot natively support blockchain-based atomic settlement without significant technical investment
• The SEC's move to T+1 settlement in US equities demonstrated the coordination challenges even within a single market

The BIS notes that while atomic settlement technology is proven, implementation requires evolving regulatory frameworks and new infrastructure to scale.

Atomic settlement and cross-border payments

Traditional international payments through SWIFT take 3-5 days and pass through multiple intermediaries, with each leg settling separately and creating windows where funds are in transit but neither party has finality. Atomic settlement collapses this multi-day process into a single transaction where both payment legs settle simultaneously.

Due's payment infrastructure enables instant settlement for cross-border payments by combining stablecoin networks with traditional banking rails across 80+ countries. Stablecoin-based transactions settle with blockchain finality in seconds, providing immediate funds availability and eliminating correspondent banking delays compared to traditional wire transfers.