T+0 Settlement for Digital Asset Funds: The Institutional Case
For decades, the standard settlement cycle for equity and fund transactions has been T+2 — two business days between trade execution and final settlement. In 2024, US equity markets moved to T+1. Tokenized funds are going further: T+0, or same-day atomic settlement. For institutional fund managers, this shift is more than a technical upgrade. It changes the economics of running a fund.
What T+0 Settlement Actually Means
In traditional fund settlement, a sequence of steps must occur after a trade is agreed: the trade is reported to a central counterparty, margin is posted, custodians exchange confirmations, and the transfer agent updates the register. This process takes time — and during that time, risk exists on both sides.
T+0 (also called atomic settlement or delivery-versus-payment in real time) compresses this entire sequence to a single on-chain transaction. The transfer of value and the transfer of ownership happen simultaneously, in the same transaction, with finality confirmed in seconds or minutes rather than days.
For tokenized funds built on distributed ledger infrastructure, T+0 is the default. It is not a feature to be added later — it is inherent to how on-chain transfers work.
The Quantifiable Benefits for Fund Managers
Capital efficiency
Under T+2, fund managers and their prime brokers must hold buffer capital against unsettled positions. With T+0, that buffer is eliminated. For a fund with $500 million in monthly subscriptions and redemptions, even a modest reduction in settlement buffer translates to meaningful freed capital.
Counterparty risk elimination
Settlement risk — the risk that a counterparty defaults between trade agreement and final settlement — disappears with atomic T+0. The trade either completes atomically or does not execute at all. There is no intermediate state.
Operational cost reduction
A significant portion of back-office costs in fund administration is driven by settlement-related reconciliation: matching trades, resolving fails, managing nostro/vostro positions. T+0 removes the need for much of this work. The ledger is the single source of truth, and it is always current.
Intraday liquidity management
With T+0 settlement, fund managers can manage subscriptions and redemptions on an intraday basis rather than batching them into daily cut-offs. This enables more precise portfolio management and opens the door to continuous NAV models rather than end-of-day pricing windows.
What Infrastructure Does T+0 Require?
Achieving T+0 settlement for a tokenized fund requires several components to work in concert:
- On-chain share register — The authoritative record of ownership must live on-chain, not in a traditional transfer agent's database that is later synchronized.
- Digital cash or stablecoin rails — Settlement requires that the payment leg also be digital. Either a CBDC, tokenized commercial bank money, or an institutional-grade stablecoin must be available for the cash leg of the transaction.
- Smart contract compliance — Investor eligibility checks (KYC, accreditation status, jurisdiction restrictions) must be enforced programmatically at the point of transfer, not through manual review after the fact.
- Custodian support — The custodian holding fund assets must support on-chain settlement and be able to receive and deliver digital assets against the fund token.
The Regulatory Picture
Regulators are increasingly comfortable with T+0 settlement for tokenized funds in institutional contexts. Key frameworks include:
- EU DLT Pilot Regime — Explicitly permits T+0 settlement for tokenized securities within approved DLT market infrastructures.
- UK FCA sandbox — Multiple tokenized fund structures with same-day settlement have received regulatory approval.
- MAS (Singapore) — Project Guardian has demonstrated cross-border T+0 settlement for tokenized fund units between institutional participants.
Implications for ETF Issuers
For ETF issuers specifically, T+0 settlement has implications beyond operational efficiency. It enables new product structures that are not possible with traditional settlement infrastructure:
- Continuous creation and redemption windows rather than daily cut-offs
- Real-time arbitrage between the ETF and its underlying basket, tightening spreads
- New distribution channels — direct-to-institutional without intermediary settlement infrastructure
Issuers who build on T+0-native infrastructure are not simply digitizing existing processes. They are accessing a fundamentally different set of product and distribution possibilities.
Andra is purpose-built for ETF issuers who want T+0-native tokenized share classes. Request access →