BLOCKCHAIN-ENABLED REAL-TIME SETTLEMENT FRAMEWORK FOR FEDNOW AND INSTANT PAYMENT NETWORKS

Abstract

The rapid expansion of real-time payment networks—such as FedNow, the RTP network, and other instantsettlement infrastructures—has accelerated the pace of financial transactions but exposed structural limitationsin the underlying settlement processes. Current systems primarily rely on prefunded accounts, end-of-dayreconciliation, or deferred transfers of central bank reserves, creating liquidity fragmentation, intraday creditexposure, and operational inefficiencies. As transaction volumes grow and financial institutions demandcontinuous 24/7 settlement, these constraints inhibit scalability, resilience, and competition.This paper proposes a Blockchain-Enabled Real-Time Settlement Framework designed to enhance thesettlement capabilities of FedNow and other instant payment ecosystems. The framework leverages apermissioned distributed ledger to provide immutable, cryptographically verifiable, and atomic settlementfinality, while maintaining strict regulatory oversight and interoperability with existing payment rails. Byrepresenting central bank reserves or interbank settlement obligations as on-chain, regulator-supervised digitaltokens, institutions gain the ability to settle transactions instantly with reduced prefunding requirements andimproved liquidity efficiency