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Dramatically reduce crypto-fiat settlement risk with a new DvP solution

December 13, 2022

Settlement risk is a type of financial risk associated with the final settlement of a transaction. It occurs when one counterparty in the transaction fails to settle its obligations on time, or in an orderly fashion, resulting in losses for the other counterparty. In any financial market, settlement risk can derail liquidity and financial stability. This is not different in crypto markets; however, the complexity increases when fiat-to-crypto trades bridge two varying systems of blockchain payments and traditional banking across multiple jurisdictions. Left unchecked, these risks may have caused disruptions to even the most established players — a danger that should not be taken lightly by those operating on either side of crypto transactions.

Finery Markets and Clear Junction have collaborated to introduce the delivery-vs-payment (DvP) mechanism for institutional trading, providing an innovative solution which eliminates crypto-fiat settlement risk. This safeguard is applicable across major blockchain networks, resulting in a dramatic reduction of fiduciary concerns — ultimately promoting greater confidence within digital asset transactions.

Finery Markets has become the first electronic marketplace to implement Clear Junction’s newly introduced escrow accounts solution. Through its independent settlement agent and payment rails services, Clear Junction offers Finery Markets customers secure settlement of fiat trades while also serving as custodian for all fiat transactions involved.

Clear Junction facilitates the secure exchange of cryptocurrencies and traditional currencies, supporting both buyers and sellers on Finery Markets using its escrow accounts. Simply send your digital currency to a buyer’s account — verified through the blockchain network — while Clear Junction takes care of processing any fiat payment released from an authenticated buyer into the seller’s bank account; should crypto not be delivered according to trade terms, full reimbursement is made back to the purchaser.

“The DvP system employed by Finery Markets and Clear Junction removes the need for manual reconciliation between counterparties, reducing risk and improving effectiveness. The escrow solution allows both parties to securely commit funds prior to settling transactions, thereby making it easier to complete transactions while minimizing counterparty risk.

This new solution is especially useful at a time where market volatility has become increasingly high due to recent events. Such instability can lead institutions into potentially dangerous situations if they do not have sufficient protective measures in place as part of their trading strategy. By utilizing the DvP mechanism, customers of Finery Markets will be able to reduce settlement risks while simultaneously increasing control over their exposures — giving them peace of mind when trading on our platform.” — said Konstantin Shulga, CEO and co-founder of Finery Markets.

“In light of the problems we have seen with FTX and other crypto exchanges, people and businesses are understandably concerned about whether their funds are safe,” explains Dima Kats, Chief Executive of Clear Junction. “With our new escrow accounts solution, we have used a financial product that has existed for centuries and applied it to a sector that has been around for a little over a decade or so. By doing this, we help to build and restore trust in digital currency transactions and ensure that settlement risk is eliminated”

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