Solana Foundation Launches Institutional Settlement Programme With JPMorgan Input

Solana Foundation has introduced an open-source settlement solution that allows banks to execute transactions of tokenised payments and assets simultaneously, according to Solana Foundation, in a matter of seconds. Solana Foundation has announced Solana DvP on October 6 as a delivery-versus-payment (DvP) solution available under the MIT license. JPMorgan contributed information on the securities settlement process during the development of the framework by the Foundation. DvP is the process where the transfer of the asset is linked with the payment. In Solana DvP, either both transfers are made, or neither transfer takes place. 

Solana DvP Supports Multiple Token Standards and Settlement Authorities

As per the announcement, the solution is built to replace the institutionally required custom settlement contracts for transferring tokenised securities across public blockchains. As per Catherine Gu, who is the head of product for Solana Foundation's Digital Assets, the solution offers a single settlement protocol to institutions, with finality achieved “in seconds instead of days.” The time claim is made by the Foundation itself, but no figures on the performance of the launch have been mentioned in the announcement. 

As per the Solana documentation, in every transaction there will be two escrow accounts created, one for the asset and the other for the payment. Both participants will make their portion of the transaction as an escrow with token transfer. 

The settlement authority will be appointed at the time of creation of the trade and will sign the agreement. These two transactions will take place within a single Solana transaction. If the entire transaction does not go through, neither party changes possession. The authority could be a bank, custodian, exchange, or any other third party selected by the two parties. It is not possible to change the destination addresses at any time afterward, as these addresses are recorded during the creation of the trade. The participant is able to retrieve their leg, which is funded before settlement, and the settlement authority is able to cancel the trade. 

The involvement of JPMorgan was limited to giving advice regarding the best settlement practices used by financial institutions for Solana Foundation. Rhodel D'Souza, a head of markets digital assets at JPMorgan, stated that there needs to be one unified atomic DvP protocol because it's exactly what institutional organisations demand. 

This release by the Foundation marks out clearly the bank's involvement. JPMorgan is not involved in developing or designing Solana DvP and is not the operator of the system. This involvement of the bank does not mean that the bank certifies, guarantees, or approves the system. 

The Solana DvP system uses the initial SPL Token protocol and Token-2022, so that a transaction can use assets minted using both protocols. The Foundation added that the service will allow for the Token-2022 protocol functionalities, which include permanent delegates, pausable tokens, and transfer hooks. Such restrictions may prove useful to issuers who want to have control over their token transfers. 

Several Token-2022 protocols are not allowed. Solana's documentation states that tokens with TransferFee, InterestBearing, ScaledUiAmount, and NonTransferable extensions are not accepted when creating or settling a trade.