Confining its use to the settlement of transactions among banks, on the other hand, would not involve any substantial changes over the status quo. In particular, non-banks could convert their sight deposits at banks into central bank-issued digital currency if storage as an entry on the distributed ledger appears more secure and more convenient than hoarding it as cash.
In 1892, on the centennial of the famous Buttonwood Agreement, the New York Stock Exchange took its first steps to improve clearing and settlement by creating a clearinghouse for limited types of brokers’ trades.4 Faced with growing volumes of trading and the associated clearing costs after World War I, the New York Stock Exchange took a further step in 1920 by establishing the Stock Clearing Corporation; this new clearinghouse reduced the number of checks needed for settlements by up to 90 percent and the volume of funds and credit needed by 70 percent or more.5 It was not until the dramatic increase in equity trading volumes in the late 1960s, however, that backlogs of trading tickets, confirmations, and delivery instructions caused the infamous “paperwork crisis” that led the exchange to curtail trading hours and close on Wednesdays for six months in order to manage the situation.6 The paperwork crisis represented more than a set of operational problems for financial institutions and other market participants.