On-Chain Settlement: Beyond the Hype and Into the Messy Middle
Written by Sharyn Tan (Views are my own) “Instant settlement” has become treasury’s favorite buzzword. The promise is intoxicating: transactions clearing in seconds, transparency no baked in, settlement risk vanishing into the ether. For treasurers drowning in reconciliation spreadsheets and chasing payment confirmations across time zones, it sounds like salvation. But here’s the part nobody mentions at conferences: most treasury systems still run in a batch-processed, end-of-day world. And honestly? For good reason. The Promise Is Real… So Are the Problems On-chain settlement does offer genuine advantages. Near-instantaneous confirmation. Reduced counterparty risk. A single, immutable record that should eliminate reconciliation nightmares. For treasurers managing global liquidity, the appeal is obvious: why wait T+2 for FX settlement when you could move value in minutes? But let’s be honest about what this actually requires: Your TMS wasn’t built for smart contracts. Your ERP speaks SWIFT, not blockchain. Your bank rec process assumes predictable cut-off times, not 24/7 activity. Your auditors want custody trails, not wallet addresses on an explorer. And your CFO still needs to explain to the board why the company is suddenly “doing crypto.” That’s before we discuss regulatory complexity, tax treatment ambiguity, or the operational reality that most of your team barely tolerates the current treasury platform. Questions the Optimists are not asking Do corporates actually need 24/7 settlement? Let’s be real: most corporate payments don’t require instant settlement. You’re paying suppliers on 30-60 day terms. Your FX hedges follow standard spots and forwards. Your debt service runs on predictable schedules. The treasury operations that genuinely benefit from instant settlement—emergency cross-border payments, just-in-time liquidity moves, rapid repatriation from more restricted jurisdictions—represent maybe 5-10% of daily volume for most corporates. Before rearchitecting your entire stack, ask: what percentage of your payments actually demands real-time settlement? And what’s the cost-benefit versus improving existing rails like instant payment schemes? Is it even possible to carry out without running into regulatory issues? Are we trading settlement risk for operational risk? Traditional settlement is slow but reversible, insured, and backed by tested legal frameworks. On-chain settlement is fast and final—which sounds great until you send payment to the wrong address, or a fraudulent transaction confirms before you can stop it. Smart contracts introduce new risks: code vulnerabilities, oracle failures, governance attacks. We’ve seen enough bridges collapse to know “trustless” doesn’t mean “riskless.” What happens when blockchain speed hits treasury controls? Treasury isn’t just about moving money quickly—it’s about moving it correctly. Your AP team needs three-way matching. Your FP&A team needs data that ties to forecasts. Your tax team needs entity-level tracking. Your compliance team needs sanctions screening before payment execution. Can your on-chain solution handle dual authorization? Enforce payment limits? Generate audit trails your external auditors actually accept? Or are you building an elegant blockchain system that creates a compliance disaster downstream? The Integration Reality: Not Pretty Even if you’re convinced on-chain settlement works for specific use cases, implementation is not straightforward. You need middleware translating blockchain confirmations into formats your TMS can ingest. Real-time reconciliation matching on-chain activity against your chart of accounts. Custody solutions satisfying both your security team (cold storage, multi-sig) and operations (payments before month-end close). And you’re doing all this while maintaining existing banking relationships as this isn’t replacement—it’s addition. More complexity, not less, at least for a period. The “last mile” problem is real: Getting that super-fast blockchain transaction to connect with all the slow, traditional enterprise systems that actually run your business. It’s like upgrading to fiber-optic internet at your house, but still having to print out your emails because your filing system only works with paper. The speed improvement is useless if you can’t integrate it into your actual workflow. In treasury terms: The blockchain moves the money fast, but the value only becomes real when your GL is updated, your cash position is accurate, your working capital forecast reflects it, and your auditors can verify it—and right now, there’s a huge gap between blockchain settlement and making all of that happen seamlessly. That gap? That’s the last mile. And it’s where many blockchain payment projects actually fail. A Treasurer’s Take: The opportunity isn’t replacing everything with blockchain. It’s creating optionality—having on-chain rails available for use cases where instant, transparent settlement genuinely creates value, while maintaining traditional systems for everything else. Think of treasury becoming multi-modal: some payments via instant schemes, some via correspondent banking, some via stablecoin rails—each chosen based on specific transaction requirements. The real question to ask: What Problem Are You Solving? On-chain settlement is a solution. But what’s your problem? Technology should follow the problem, not the other way around. And the honest assessment might be that for your treasury, traditional systems with incremental improvements deliver better risk-adjusted returns than a blockchain overhaul. That’s not failure. That’s good judgment. The Path Forward? On-chain settlement represents a genuine evolution in how value moves. For treasurers, it offers real benefits—when implemented thoughtfully, for appropriate use cases, with proper integration and controls. But we need to get past the hype and into the messy middle: the hard work of integration, honest cost-benefit assessment, realistic timelines for when this becomes mainstream infrastructure rather than experimental edge cases. The practitioners who succeed won’t be true believers or skeptics—they’ll be pragmatists whoidentify where on-chain settlement creates genuine value, build the integration layers that make it operational, and maintain the risk discipline treasury demands. The future isn’t purely on-chain or purely traditional. It’s hybrid, multi-modal, and boringly practical—using the right rails for the right payments at the right time. And that future is being built by treasurers willing to experiment carefully, fail small, learn quickly, and share honestly about what’s actually working. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Franklin
How Swap Automation Reduces Risks And Costs
This article is written by Kantox FX swaps are one of the most widely used instruments in currency management. The omnipresence of swaps and forwards in fx-risk-management is best understood by glancing at recent estimates by the Bank for International Settlements: “FX swaps and forwards had reached the $130 trillion mark in late 2024. The rise in the notional value of FX derivatives was driven mainly by greater positions in FX swaps and forwards” — BIS A currency swap is equivalent to a package of forward contracts. On the one hand, an amount of currency is bought or sold against another currency with a given value date. On the other hand, the reverse trade takes place, but with a different value date. FX swaps are used in a variety of companies, asset managers and banks with different hedging-strategies. In 2023, the Riksbank —the Swedish central bank— hedged part of its foreign exchange reserves with swaps, selling USD and EUR against SEK. This blog discusses, in the context of corporate fx-risk-management, the following topics: Using swaps to adjust currency hedging Ensuring a perfect match between the settlement of commercial transactions and the corresponding FX hedges is next to impossible. To bridge the gap between these positions, swapping is necessary. Swaps allow treasury teams to: Consider the following ‘early draw’ example. Company A has an open forward position to buy $1,000,000 against EUR at a forward rate of EUR-USD 1.1100. The position was taken several months before to hedge a forecasted commercial exposure. Company A now faces a payment of $100,000 related to that exposure. Swapping is therefore required to ‘draw’ on that forward position. There are two ‘legs’ this transaction: Thanks to this transaction, the treasury team not only obtains the required amount of dollars on the spot — its forward position at the original value date is also automatically adjusted. Quite naturally, FX gains/losses will be involved, as the exchange rate has shifted. This simple example illustrates the enormous practical value brought by swaps. As companies execute such transactions on many thousands of occasions on any given day, we can understand why total FX forwards and swaps stand at more than $130 trillion. The costs and risks associated with manual swap execution Treasurers know it too well: swapping is complex and resource-intensive. Day in, day out, we encounter situations that show the stress members of corporate-treasury teams find themselves in as they execute the indispensable FX swap transactions: When manually executed, the process of using FX swaps to adjust the firm’s hedging position can be so cumbersome that currency managers may fall victim to the siren song of so-called flexible forwards. Here’s an example. A Canadian importer of vaccines and other medical inputs hedges its CHF-denominated purchases with flexible forward contracts. The treasury team likes the flexibility of fully or partially settling the forward contract during one month for the same rate. But what is not fully transparent to the team is the high costs of the process. This is because, as the company’s liquidity providers protect themselves from FX risk, they set the exchange rate at a date that is more convenient to them in terms of forward points, i.e., the difference between the forward and the spot rate. If the company needs funds before expiry, it pays the desired amount of Swiss francs at the CHF-CAD rate of the value date of the forward contract, instead of the lower rate that would correspond on account of the Canadian dollar’s forward discount to CHF (about 3.34% for 12 months). Swap automation to the rescue Faced with an array of costs and risks, beleaguered members of the treasury teams can turn to API connectivity to solve the many operational and cost-related challenges related to swap execution. Going back to the Canadian firm cited above, we backtested an alternative way of letting the company draw on its currency forwards: swap automation. The savings are material: they represent about 0.20% of the firm’s traded volume, which is equal to a third of the savings from forward points in a layered FX hedging program (not discussed here). And that’s only for one currency pair. Add the other currency pairs, and the proposed connectivity to a multi-dealer corporate FX trading platform, and pretty soon we are talking hundreds of thousands of (Canadian) dollars in savings. As Ignacio Recalt, Treasury SaaS and Payments Product Owner at Kantox says: “Swap automation frees up resources and removes operational and other risks. Whether they need to anticipate or roll over FX forwards linked to payments/collections, treasurers can execute the process in one click.” With complete visibility and control, the finance team obtains: The illustration below shows how PowerBI displays the perfect traceability between swap legs and the underlying FX forwards of a hypothetical user: Conclusion. Treasurers of the world: automate! Although it represents only one of the many tasks that treasury teams execute on a daily basis, the process of swap automation neatly encapsulates the benefits of API-centred Currency Management Automation: Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in Treasury Management or those interested in learning more about various topics related to Treasury Management, including Cash Management, foreign exchange management, and Payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.