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FRM Part II · FRM Exam Part II · Tokenization and Financial Market Inefficiencies

Which limitation most plausibly prevents atomic settlement on a tokenized platform from fully delivering its benefits when the cash leg is paid in conventional bank money held at a separate system?

Atomic settlement needs both legs on the same ledger or reliably linked ledgers. If cash is paid through a separate conventional system, the legs can settle at different times, bringing back timing mismatch and principal risk, which limits the benefit.

  1. AAtomic exchange requires both assets to be on the same ledger or a mechanism linking ledgers, so a separate cash system reintroduces timing mismatchCorrect
  2. BSmart contracts cannot hold securities tokens
  3. CTokenized securities cannot be transferred between investors
  4. DAtomic settlement requires a longer settlement cycle than T+2

Explanation

True atomic delivery-versus-payment needs both legs recorded on one ledger or reliably linked by interoperability. If cash settles in a separate legacy system, the legs can settle at different times and principal risk can reappear. The other options misstate what tokens and contracts can do.

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