Selected members of the ERC3643 association, together with Tokeny, LayerZero, Fasanara Capital, and ABN AMRO, have launched a cross-chain Delivery-vs-Payment (DvP) solution for “regulated” tokenized assets.
The solution reportedly enables atomic settlement “between ERC-3643-based security tokens and cash-equivalent tokens across the Polygon and Base networks.”
Initiated within the non-profit ERC3643 Association, the solution demonstrates “how on-chain securities and cash-equivalent tokens can be settled across two blockchains, without requiring counterparties to bridge assets across chains.”
This removes a major friction point and “addresses the institutional need to operate the cash and security legs on separate networks.”
The system showcases a real-time proof of concept use case: Fasanara issued ERC-3643-based security tokens “on Polygon using Tokeny’s onchain finance platform, while ABN AMRO issued cash tokens on Base.”
A decentralized application (dApp), developed by Labrys, “orchestrates the cross-chain DvP process using LayerZero’s messaging infrastructure.”
This use case demonstrated “that the ERC-3643-based security tokens and payment tokens can be exchanged across chains with real-time settlement.”
According to a blog post, here is how Cross-Chain DvP works:
- Create DvP Agreement: The seller creates a DvP position specifying the tokens to lock, the tokens to receive, and the buyer’s address.
- Lock Assets: The seller locks their specified tokens in the escrow contract on the source chain.
- Cross-Chain Notification: LayerZero relays the DvP details to the destination chain, notifying the buyer.
- Payment: The buyer pays the agreed amount on the destination chain to fulfill their part of the agreement.
- Release Assets: Upon payment confirmation, the locked assets are automatically released to the buyer, completing the swap.
As asset tokenization gains traction, institutions face “a major challenge: having the cash leg onchain.”
Most current processes rely on traditional payment rails, “resulting in long settlement cycles, high operational costs, and increased counterparty risk.”
To meet privacy requirements, some institutions prefer “using payment tokens on private blockchains.”
This initiative demonstrates how DvP settlements can take place across two separate chains, “enabling the asset and cash legs to operate independently while settling atomically, without any counterparty risk.”