IMF Working Papers

Programmability in Payment and Settlement

By Xavier Lavayssière, Nicolas Zhang

August 16, 2024

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Format: Chicago

Xavier Lavayssière, and Nicolas Zhang. "Programmability in Payment and Settlement", IMF Working Papers 2024, 177 (2024), accessed December 21, 2024, https://doi.org/10.5089/9798400286452.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Programmability in payment and settlement has yet to realize its potential to support policy goals such as efficiency, safety, and innovation. This paper proposes a comprehensive framework for understanding and evaluating programmability. It explores two key dimensions: external programmatic access, which is the ability for external participants to access the system data and functions with code, and internal programmatic capabilities, the extent to which internal execution of programs is supported and guaranteed. By developing strategies based on these dimensions, financial institutions, regulators, and related actors can better improve resilience, reduce costs and interoperability, all while managing associated risks. The resulting hybrid systems are coordinated efforts balancing the advantages of permissionless blockchains, such as composability, with regulatory requirements and a wider range of technologies. The paper describes these programmatic models to inform and guide the development of digital finance, bridging policy discussions with technical considerations.

Subject: Blockchain and DLT, Financial markets, Financial services, Payment systems, Smart contracts, Technology

Keywords: Automation, Blockchain and DLT, Blockchain and DLT, Blockchain infrastructure, Closed-loop payment system, Financial asset, Global, Payment, Payment category, Payment systems, Payment systems, Programmability, Settlement, Settlement mechanism, Settlement system, Smart contracts, Smart contracts, Tokenization

Publication Details

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