Intraday liquidity around the world

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? The Dinarian on Locals brings you the latest in news, interviews, in-depth conversations, and stories from across the blockchain and global communities—within and beyond cryptocurrency ?. Experts delve into how blockchain technology is reshaping industries, enhancing business networks ?, transforming transaction workflows, and advancing distributed ledger systems ??. We also explore intriguing topics that may venture into the realm of conspiracies—and so much more!

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thedinarian@thedinarian

April 15, 2023

Intraday liquidity around the world

BIS Working Papers | No 1089 | 14 April 2023

This is the first paper to systematically study intraday liquidity usage by financial institutions in LVPSs across several jurisdictions over a long period of time. Using a unique cross-country data set, we measure intraday liquidity usage at a daily frequency, at the system level, and assess its drivers. We find that intraday liquidity usage is highly economically significant, accounting for 15% of daily aggregate payment values on average or about 2.3% of local GDP.

Consistent with the theoretical literature, we also find that intraday liquidity usage depends on the way system participants interact with one another in an LVPS. For instance, a higher degree of payment coordination is associated with higher liquidity efficiency (i.e., with a higher value of payments made for every unit of intraday liquidity used). Payment
coordination in turn, depends on both policy-related variables, such as the overall supply of central bank reserve balances and system-specific institutional characteristics.

Regarding the former, we find that higher aggregate reserve balances, which are largely the result of quantitative easing programs in several jurisdictions in our sample, are associated with reduced incentives among participants to coordinate their payments and thus economize on intraday liquidity usage.

On the flip side, higher reserve balances appear to induce earlier payment submission and also reduce the reliance on just a few system participants to provide liquidity to the rest. Both of these effects are desirable, as they help
reduce the impact of potential operational outages in the LVPS. In general, the amounts of excess liquidity that have been injected by central banks in many jurisdictions appear to have reduced the benefit of liquidity saving and the need to manage intraday liquidity.

The most novel contribution of our paper, however, is the assessment of the effect of institutional and system-specific characteristics on intraday liquidity usage. Since these characteristics are generally time-invariant, such an analysis requires cross-country data on large-value payments, which our paper is the first to assemble. Our analysis yields several new results. First, incentives for early payment submission seem to have a stronger effect on
payment coordination than actual payment submission times. Given that these incentives often take the form of penalties, it appears that they induce system participants to coordinate their submission times to avoid “standing out from the pack”. Interestingly, the resulting increase in coordination renders the payment system more liquidity-efficient as it facilitates
payment recycling.

Second, system participants appear to endogenize some of the LSM design features. This improves liquidity efficiency in some cases but worsens it in others. For example, multilateral offsetting is associated with increased payment coordination, which could be explained by participants coordinating their payments more in order to take full advantage of the functionality. Increased payment coordination among participants then further enhances
liquidity efficiency. On the other hand, the presence of a FIFO bypass functionality, whereby the offsetting algorithm can bypass the time priority of submitted payments, is associated with reduced payment coordination.

One potential explanation for that is that participants are less incentivized to coordinate their payments in the presence of FIFO bypass. This reduces liquidity efficiency. Overall, a key insight from our paper is that, in endogenizing the various payment system design features and institutional arrangements, system participants can influence the aggregate amount of intraday liquidity they use to fund their payments. We believe that understanding these endogenous dynamics is important when designing payment systems and therefore additional research in this area is warranted.

https://www.bis.org/publ/work1089.pdf

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Source: The Dinarian ⚡ Claude AI

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thedinarian@thedinarian

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Teams building financial protocols, high-dependency data services, high-traction dApps funded by the Stellar Community Fund are able to request an audit and will typically be matched with a reputable audit firm within two weeks. We recently restructured the program for this year to enhance audit efficiency and incentivize accountability, and rapid and complete vulnerability remediation:

Complimentary Initial Audit: Projects will need to contribute 5% of the audit cost upfront, but this co-payment amount is eligible for a full refund, provided that critical, high, and medium vulnerabilities identified are swiftly remediated within 20 business days of receiving the initial audit report (learn more).
Incentivized Security at Key Traction Milestones: Complimentary, extensive follow-up audits are available as projects achieve critical traction milestones (e.g., $10M and $100M TVL). These audits include deeper assessments such as formal verification or competitive audits, significantly boosting project security at pivotal stages.
Advanced Security Tooling: Projects can enhance their security self-serve through complimentary or discounted access to specialized tooling, which provide vulnerability detection and formal verification capabilities (see full list of available tooling). These tools are encouraged to capture ‘easy-to-spot’ issues prior to audit as well as a final check post-audit to increase the effectiveness and thoroughness of audits.
Enhanced Audit Readiness Support: Projects receive structured preparation support, including the implementation of best practices and security standards based on the STRIDE threat modeling framework. This ensures project teams are thoroughly prepared, optimizing audit efficiency and minimizing delays.

Get Started Today

If you're already funded through the Stellar Community Fund, meet the criteria and ready to secure your smart contracts, check your email for an invitation to submit an audit request–if you haven’t received one, contact [email protected].

If you haven't built on Stellar yet, we encourage you to start your journey with the Stellar Community Fund to become eligible for future security audits and ecosystem support. For any broader questions on the program, contact [email protected].

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thedinarian@thedinarian

May 31, 2025

Santander mulls stablecoin, crypto offering

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Santander’s involvement could extend beyond an individual initiative. The bank is a shareholder in The Clearing House, where the Wall Street Journal reported that US banks are exploring the potential to create a joint stablecoin. If a US initiative took that route it could involve nine more G-SIBs including Bank of America, Barclays, BMO, BNY Mellon, Citi, HSBC, JP Morgan, TD Bank and Wells Fargo.

Apart from these initiatives, our research shows that more than 20 other banks have been involved in stablecoin projects.

Until recently stablecoins were mainly used to settle cryptocurrency transactions and by residents in countries with volatile domestic currencies. During the last year stablecoin infrastructure has been expanding, especially for mainstream cross border payments. Plus, President Trump issued an executive order prioritizing stablecoins. One of the administration’s motivations is this increases demand for US Treasuries, lowering the interest rate the government pays on the Treasury bills.

Santander as an early digital assets mover

Santander’s stablecoin consideration builds on years of blockchain experience. The bank was an early Ripple investor and previously used Ripple’s permissioned network for payments (not XRP), while also embracing permissionless blockchain activities including issuing a digital bond on Ethereum in 2019. This dual approach led to collaborations with other major players – alongside Societe Generale FORGE and Goldman Sachs, Santander participated in the European Investment Bank’s first digital bond, also on Ethereum. Currently, the bank’s most significant digital money initiative involves Fnality, the wholesale blockchain-based settlement network, where Santander ranks among 20 institutional backers and is part of the early adopter group alongside Lloyds Bank and UBS.

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