Managing settlement risks in tokenised money: Applying the Principles for Financial Market Infrastructures to digital assets
Abstract
The rise of stablecoins, tokenised bank deposits, and central bank digital currencies (CBDCs) is reshaping the mechanics of settlement in modern financial systems. While debate has focused on technological innovation — programmability, atomic execution, and 24/7 availability — the risk implications of tokenised money depend less on token design than on the settlement architecture that governs it. This paper argues that real-time gross settlement (RTGS) systems provide the appropriate benchmark for evaluating tokenised arrangements from a risk lens, because tokenised transfers operate on a gross, transaction-by-transaction basis and therefore inherit RTGS-level expectations of legal finality, prefunded liquidity, and accountable governance. The paper develops a Principles for Financial Market Infrastructures (PFMI)-aligned assessment framework organised across three dimensions: settlement finality and asset quality; liquidity and credit risk under programmable atomic settlement; and governance and interoperability. Applying the Committee on Payments and Market Infrastructures/International Organization of Securities Commissions (CPMI-IOSCO) observance methodology across stablecoins, tokenised deposits, and CBDCs, the analysis identifies material gaps in statutory insolvency protection, default management, cross-border legal recognition, and system-wide governance in many emerging arrangements. It shows that programmable atomic settlement compresses the temporal buffers that traditional infrastructures use to manage risk, requiring new institutional mechanisms calibrated for continuous gross execution. The central finding is that digital monetary coexistence is sustainable only when settlement systems ensure finality, reliable value at par, and real-time risk control across all instruments. Tokenisation does not eliminate settlement risk; it relocates trust into legal design, liquidity architecture, and governance accountability. Settlement architecture, which is defined by institutional arrangements, determines whether settlement, liquidity, and systemic risks are contained or amplified at scale. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.
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Author's Biography
Divyarani Raghupatruni is Senior Director of Product, Data and Orchestration at Alacriti, where she leads strategy for faster payments, stablecoins, and AI-enabled infrastructure for financial institutions. She has over 15 years’ experience in FinTech and payments, including prior experience at Block (Square) and Transfast, a cross-border payments platform later acquired by Mastercard. Divyarani participates in industry working groups and collaborative initiatives convened by the US Faster Payments Council focused on interoperability and digital assets. Her practitioner-oriented research is regularly published, and she speaks at industry conferences on cross-border payments, digital money, artificial intelligence (AI), and financial market infrastructure.
Mahadevan Balakrishnan is a postdoctoral research fellow at the Indian Institute of Management’s Centre for Digital Public Goods. He has played key roles in the digital transformation of payments in India, notably as Chief Operating Officer of the National Payments Corporation of India, where he oversaw the development of innovations such as IMPS (the platform underlying unified payments interface [UPI] and the Instant Payment System), Aadhaar-enabled payments, the National Automated Clearing House, and the RuPay domestic card scheme. Mahadevan has also worked with the World Bank, advising developing countries on strengthening financial infrastructure and digital payment ecosystems. With more than three decades of experience gained at leading banks and major institutions, he brings deep expertise at the nexus of policy, technology, and institutional design. Mahadevan holds an MBA in finance, a master’s in political science and public administration, a master’s in bank management, and a PhD in finance and payments. He has written numerous articles for national and international journals and serves on the editorial boards of two leading journals focused on payments and banking. His research interests include payments, particularly fast and instant payments, as well as digital public infrastructure.
Citation
Raghupatruni, Divyarani and Balakrishnan, Mahadevan (2026, September 1). Managing settlement risks in tokenised money: Applying the Principles for Financial Market Infrastructures to digital assets. In the Journal of Risk Management in Financial Institutions, Volume 19, Issue 4. https://doi.org/10.69554/QYCJ7058.
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