Enabling effective and efficient
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Introductory Information: Page 3
Wholesale CBDC RTGS Expected Impact: Page 11
Wholesale Digital Securities Expected Impact: Page 16
Way Forward: Page 21
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The document will explore the expected impact to financial markets from central bank
backed real time gross settlement (RTGS) for securities and payments transactions.
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Satoshi Capital Advisors
Satoshi Capital Advisors is a New York-based, global advisory firm that
works with central banks, governments, and industry leading private sector
organizations on financial technology, digital transformation, capital
advisory, and growth initiatives. Our team has been building digital
currency markets since 2012 and brings decades in financial markets
̵Founder and global CEO Josiah Hernandez is a FinTech entrepreneur as well
as global thought leader and expert on central bank digital currency, bitcoin,
and financial market structure; frequently releasing research reviewed by
senior leaders at the IMF, BIS, and numerous central banks. His work and
expertise has been cited in mainstream publications such as Forbes, Wall St.
Journal, Yahoo! Finance, International Business Times, and The Hill.
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Institutions with accounts at a respective central
bank or multiple central banks with connected
RTGS systems can settle transactions between
each other with instant finality. *
Individuals with accounts at a respective central
bank, multiple central banks, or any financial
service provider with connected RTGS systems
can settle transactions between each other with
Institutions with accounts at a respective private
sector institution can settle transactions between
each other with instant finality.
Individuals with accounts at a respective private
sector institution or any financial services
provider with connected RTGS systems can settle
transactions between each other with instant
Central Bank Private Sector
* The document will focus on Central Bank Backed Wholesale RTGS.
•Low cost or free
•Accessible 24 x 7
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•Centralized ledger(s) –The operating central bank(s) or private sector bank(s) each maintain
their own ledger(s) that gets reconciled after every transaction.
•Blockchain ledger –The operating central bank(s) or private sector bank(s) maintain a
distributed and decentralized ledger that gets reconciled after every transaction.
•Public blockchain –The blockchain ledger can be accessed and viewed by anyone.
•Permissioned blockchain –The blockchain ledger can only be accessed and viewed by approved
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RTGS Mechanisms For Implementation (Payments)
•Central bank digital currency (CBDC) –A central bank backed digital RTGS system where
central banks issue natively digital currency into a monetary system to facilitate payments and
savings. CBDC can be retail or wholesale.
•Account based CBDC requires all direct system participants to maintain accounts at the issuing
central bank or institutions with accounts at the issuing central bank.
•Token based CBDC enables anyone with compatible software to utilize the CBDC.
•Electronic funds transfer (EFT) –A RTGS system backed by a central bank(s), private sector
bank(s), or financial services company(ies) that enable deposited funds to be transferred from
one party to another party. EFTs can be retail or wholesale.
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RTGS Mechanisms For Implementation (Securities)
•Digital securities –Securities that are natively digital and therefore only exist on a digital
ledger(s). They are directly backed by respective issuers.
•Tokenized securities –Securities that are natively analog and represented in digital form,
existing in parallel on paper and digital ledgers. They are backed by the respective issuers or
third-party institutions that reconcile paper ledger and digital ledgers to prevent double
spending; including the escrow agent custodying the analog securities and ensuring that no
transactions take place on the analog ledger(s) that may disrupt consistency with the digital
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Less Domestic Retail Payment Fees
Most major banks charge their customers up to $25 per transfer for domestic wires.
Introducing a wholesale CBDC RTGS system should lower bank transfer fees to zero or near zero
due to lowered processing costs, less administrative requirements, and increased system
throughout capacity with regards to transactions per second.
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Lower Transfer Settlement Times
Most transfers facilitated by banks require at least a few hours to settle and sometimes up to a few
weeks, introducing significant settlement risks and systemic capital requirements.
Introducing a wholesale CBDC RTGS system should introduce instant (i.e. less than 1 minute)
settlement for all bank facilitated transfers due to decreased processing time, less administrative
requirements, and increased system throughput capacity with regards to transactions per second.
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Even the most developed countries maintain significant underbanked and unbanked populations
(e.g. 25% in the USA). Banks disregard these populations due to their lower and variable income
profiles not being compatible with common prices for bank services.
Introducing a wholesale CBDC RTGS system should enable banks to better service underbanked
and unbanked populations due to less domestic retail payment fees and lower transfer settlement
times. In turn, this would enable additional financial products (e.g. microloans) to be offered by
banks and other financial institutions to these populations.
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Increased Central Bank Access
In most central bank backed payment systems only large financial institutions have direct access
to the system, its respective central bank and their services.
Introducing a wholesale CBDC RTGS system should enable central banks to extend access to the
system and central bank services facilitated through it to smaller financial institutions, financial
technology companies, telecommunication companies, and big technology companies offering
financial services and products to their users; due to less administrative requirements and API
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Wholesale Digital Securities
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Instant Delivery Vs Payment
Most securities transactions take days to settle due to archaic settlement infrastructure and
Introducing a wholesale digital securities RTGS system should enable instant (i.e. less than 1
minute) delivery and payment when combined with a wholesale CBDC RTGS system due to
being able to transfer cash and securities simultaneously and instantly.
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Lower Collateralization & Working Capital
Financial institutions that actively trade securities on leverage and margin are required to post
collateral to their prime broker or custody bank to back their positions. Multiday payment and
delivery settlement times for securities transactions increase market and counterparty credit risk,
resulting in higher collateralization and working capital requirements.
Introducing a wholesale digital securities RTGS system combined with a wholesale CBDC RTGS
system should significantly lower collateralization and working capital requirements by enabling
real time collateral transfers to meet margin calls in addition to real time collateral exchanges, in
turn reducing market and counterparty credit risk exposures as well as freeing up working capital
to deploy in more productive financial market activities.
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More Liquidity Across More Marketplaces
Institutions issuing securities are often limited in marketplace optionality due to fragmented
liquidity caused by collateralization requirement strains and accessibility constraints associated
with multiday settlement times for securities.
Introducing a digital securities RTGS system should enable standardized multi-marketplace and
cross-border issuance for securities with significantly less overhead due to decreased
administrative requirements and instant settlement across numerous marketplaces; also bolstering
liquidity in secondary marketplaces for securities.
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Financial market regulators face challenges in maintaining extensive transparency on systemic
and participant-level risks due to fragmentation in the ledgers utilized to facilitate financial market
Introducing a digital securities RTGS system combined with a wholesale CBDC RTGS system
should enable regulators to maintain a real time, comprehensive view on systemic activity and
participant-level solvency & capital at risk due to all securities issuance and transactions being
recorded on a digital ledger(s) to which the respective financial markets regulator(s) may have full
view access on all system participants regulated by them.
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We suggest a CBDC RTGS and digital securities RTGS pilot program to be launched with
participation from the central bank and up to 5 large financial institutions with accounts at the
A pilot program will exhibit RTGS systems’ extensive functionality and scalability, while enabling
the centrals bank and securities regulator to observe and document the various regulatory and
systemic risk considerations with regards to a digital currency and capital markets system.
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