Could Stablecoins Leapfrog the Global Move to T+1 Settlement?

The two-year anniversary of the transition to T+1 settlement for U.S. securities is rapidly approaching, and the rest of the world, at least the UK, the EU, and Switzerland, is set to follow suit in 2027.

Already, in some corners of the world, there are whispers about whether stablecoins could leapfrog the T+1 step in countries where two days are still the norm for now.

The reality of faster settlement times is indisputably the right direction of travel, but from an operational perspective, they make for a tricky transition period and require lengthy preparation, because the stakes are very high, especially when stablecoins are introduced to the equation.

The Shift Beyond T+1: Why Atomic Settlement Matters

In a world of 24/7 consumer apps and a cycle of online consumption, the notion of settling transactions two days after execution in wholesale markets seems archaic at best and laughable at worst. But there are good reasons for the delay. The fact that money now moves around the world faster than ever doesn’t mean that the structural issues that led to the need for delayed settlement are eliminated. In recent years, much has been made of the potential solution digital asset technology could provide in the shape of instant, or atomic settlement. Some, like legendary investor Stanley Druckenmiller, believe that the global payments network will run on stablecoins within 10-15 years, as a result of offering a superior settlement solution to the current system.

Whatever the next steps might be, the structural rebuild and disruption to markets is a significant risk, as well as opportunity, that has to be carefully considered and managed. As US banking giant Citi told its clients in a recent note, the impact from the transition to shorter settlement cycles on the end-to-end transaction lifecycle is “is going to be nothing short of transformative,” requiring an operational rethink of everything from trade execution to matching and reconciliations, funding and inventory management, and ultimately clearing and settlement.

An already major task becomes even more daunting when considering scale: according to The 2025 McKinsey Global Payments Report, the payments industry is the most valuable part of financial services, generating $2.5 trillion of revenue from 3.6 trillion transactions as $2.0 quadrillion worth of funds flows around the world each year.

Getting it right is imperative and far from optional.

Settling the Settlement Question

The reason for delayed settlement is simple: timezones and cut off times at banks and central banks. For a corporate sitting in Australia, this can be a real headache: if they miss the Friday 4pm local time cut off, they’ll have to wait until Monday morning to send settlement or payment instructions and a lot can happen on weekends. A fund manager could see their tracking error blow out because a geopolitical event flared up on a Sunday and markets moved before their trades from the week before settled.

Digital money and stablecoins have emerged as a sticking plaster solution and they’re increasingly cementing their role as a permanent feature in payments and settlement. JP Morgan’s Kynexis unit counts BMW and Siemens among clients that chose digital rails to avoid liquidity traps like the one described above. Meanwhile, payments companies are increasingly relying on stablecoins for cross-border payments and fund transfers. This is causing policymakers in countries with big time differences to contemplate whether the T+1 step is a necessary one at all?

It’s possible that a third, blended solution might emerge in the shape of programmable money, which navigates existing market structures instead of requiring a wholesale rewiring of existing systems. The current forms of “programmable money” are mechanisms you can wind up and release, but they still fall short of the name.

Truly intelligent money would do more than execute predefined commands. It would respond, adapt, and make decisions based on real-time conditions rather than stale instructions written days, hours, or even seconds ago.

Fixing the Unbroken?

The transition of US financial markets to a T+1 settlement cycle on May 28, 2024, did not result in a major spike in settlement failures, contrary to some initial fears, with data indicating that, in some cases, failure rates actually decreased compared to the previous T+2 regime. However, the compressed timeline has heightened operational risks, increased the need for automation, and created significant challenges for global, particularly European and Asian, investors dealing with foreign exchange and securities lending.

Many in remote time zones also have to pre-fund trades for FX or come up with other, often costly, solutions to the issue of mismatched settlement times and existing cutoffs. These bottlenecks arise due to T+1 creating a liquidity mismatch for foreign investors who must obtain US dollars to settle within the one-day window, exacerbating the overall risk of settlement failures by operating outside CLS hours.

At the same time, operational teams are battling tightened timelines as the time to resolve exceptions (trade breaks) is greatly reduced, causing errors to result in failures more quickly.

As financial markets contemplate the future of settlement, the path with the biggest long-term utility might be a rethink of money, rather than attempting the equivalent of changing the engine in-flight.