The transition to shorter settlement cycles and greater regulatory clarity is driving a rapid convergence between traditional and digital assets, according to a report by Citi.
Citi’s recent securities services white paper, based on a survey of 500 market participants, revealed that 65% of respondents plan to adopt non-central bank digital currency (CBDC) options, such as stablecoins, tokenized deposits, money market funds, and digital payment systems, to meet cash and liquidity needs for digital securities settlements by 2026. This marks a significant shift from the previous year, when 52% favored CBDCs.
The transformation is partly fueled by widespread adoption of distributed ledger technology (DLT), with 64% of sell-side participants expecting to utilize private networks managed by banks, technology firms, and financial market infrastructures as asset tokenization gains traction. Conversely, buy-side asset managers are increasingly looking toward public blockchains for fund tokenization and distribution.
Okan Pekin, head of securities services at Citi, commented, “The move to T+1 has emerged as a critical focus in the post-trade industry over recent years. Our largest white paper since its inception in 2021 explores the next frontier for the industry—the expanding relevance of technologies, including distributed ledger technology and digital assets, and the substantial potential for scaling tokenization. These advancements are set to reshape the securities landscape as we progress toward shorter settlement cycles globally.”
The research highlights that the global shift to T+1 remains a challenge for market participants, with 33% of project work still pending. In total, 44% of respondents reported a significant impact from T+1 going live, an increase from 28% in 2023. European respondents felt the effects most acutely, with 60% indicating significant impact.
Additionally, the survey revealed changing expectations for accelerated settlement, with 40% forecasting real-time, atomic settlement within the next decade; the optimism is highest in Asia at 42%.
Amit Agarwal, head of custody for securities services at Citi, said, “The accelerating convergence of traditional and digital assets and operating models underscores the need for modern platforms, reliable data, and real-time insights. We anticipate sustained investments in automation, cloud infrastructure, and APIs, alongside solutions that integrate with DLT networks. In response to these trends, Citi continues to innovate and utilize our integrated product offering to support clients in today’s dynamic ecosystem.”