1960s New york stock exchange the big board and brokers on the trading floor NYC NY USA. (Photo by H. Armstrong Roberts/ClassicStock /Getty Images)
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The blockchain industry has spent a decade selling speed. Faster settlement, atomic transactions, a world where trades clear in seconds instead of days. The pitch has never wavered.
But some institutional capital markets practitioners are raising the question of whether instant settlement is the endgame the industry should be optimizing for.
“For large institutional participants, the conversation is not simply about raw transaction throughput,” Jorgen Ouaknine, Group Head of Innovation and Digital Assets at Euroclear, one of Europe’s largest post-trade infrastructure firms, said in an interview.
“A corporate treasurer moving billions of dollars is ultimately focused on liquidity efficiency, interoperability, risk management, and capital optimization.”
Ouaknine’s skepticism goes beyond preference. He argues that pushing institutional markets toward atomic, instant settlement could actually make them less efficient.
So where do blockchain and distributed ledger systems add value in the capital markets context, at least in the near term?
Automating corporate actions is the faster path to measurable gains, he argued: processing coupon payments, dividends and interest distributions automatically; using large language models to validate Swift messages against prospectus documents without requiring counterparties to change their existing workflows.
“In an industry wide proof of concept with Chainlink, Swift and other key institutions this has been tested and is a huge unlock,” Ouaknine said.
The Netting Engine
Ethan Buchman, co-founder and CEO of Cycles Protocol and a co-founder of the Cosmos blockchain network, argues that expanding traditional concepts of netting and clearing into new markets like digital assets could unlock enormous amounts of liquidity.
Netting is the process by which clearinghouses cancel out offsetting trades before settlement, so that a full day of buying and selling resolves into a fraction of the gross transaction volume.
The compression is enormous. A typical shop that engages in trading all day, every day might need to hold a balance sheet in the billions if it were required to settle every transaction atomically. Net the day’s trades instead, and those obligations collapse to a small fraction of that.
That compression is what makes institutional trading economically viable. Destroy it in the name of speed, and every participant in the system needs dramatically more capital to operate. Ultimately, T+1 settlement exists not as an artifact of outdated technology but because a sizable portion of transactions arrive with some problem: insufficient cash, missing securities. The buffer gives firms time to fix them.
Liquidity in the Graph
Cycles, Buchman’s startup, recently announced a $6.4 million funding round led by Blockchange Ventures, with participation from Coinbase Ventures and Compound VC, to build an open clearing network for crypto markets.
Buchman describes the current settlement system as a payment gridlock problem. “In the payment system, you have gridlock where I can’t pay you because I haven’t been paid by someone, because they haven’t been paid by you,” he said in an interview.
He reached for a traffic analogy. In a payment network without clearing, gridlock spreads from one party to the next, each unable to pay because they have not yet been paid. “You stick a roundabout in there and suddenly everyone can move.”
The lack of robust netting infrastructure in crypto markets specifically has resulted in painful consequences. For example, more than $19 billion in crypto leverage was liquidated on October 10, 2025. It was the largest single-day deleveraging event in crypto history, with 70% of forced liquidations occurring in just 40 minutes, according to data from Amberdata and FTI Consulting.
Rather than moving assets faster, Cycles aims to identify loops of mutual obligation within a network of participants and cancel them out without any assets changing hands.
Because netting infrastructure is lacking, much of the digital asset market still operates on a gross basis, requiring participants to fully prefund trades rather than net them out.
“Clearing is a financial superpower that has historically only been available to large financial institutions,” Buchman said in a statement. “Our goal is to bring that superpower to everyone else, through a privacy-preserving clearing network with capital efficiency at its core.”
Cycles Prime, the startup’s institutional product, launched earlier this month with crypto trading firms Lynq and FalconX as anchor partners. It offers multilateral netting to OTC desks and market makers without requiring a central counterparty or collateral posting.
Where It Matters Most
Both Ouaknine and Buchman identified over-the-counter fixed income as the market where the absence of multilateral clearing is most costly. Whereas equities have a functioning netting engine, OTC fixed income trades bilaterally, peer to peer, with no clearinghouse in the middle.
The introduction of netting systems in fixed income and other markets where trading is heavily concentrated in OTC rather than on exchanges or other automatic systems could free up significant liquidity.
“When you think about liquidity in terms of a graph instead of just in terms of how many assets are available, all kinds of new opportunities for settlement and liquidity become available that were just not possible before,” Buchman concluded.