Glossary
Short definitions for the terms that come up in cross-border settlement and stablecoin FX, from nostro accounts to off-ramps.
The accounts
- 01Nostro accountA nostro account is an account a bank or payment company holds at a bank in another country, denominated in that country's currency, so it can make local payments there.
- 02Vostro accountA vostro account is a foreign institution's account held on a local bank's books, denominated in the local currency. It is the same account as a nostro account, described from the other side of the relationship.
- 03Correspondent bankingCorrespondent banking is the network of bilateral bank relationships that moves money across borders: banks hold accounts with one another and settle payments by adjusting those balances.
The capital costs
- 04PrefundingPrefunding is capital parked in a destination market before payouts happen there, so local payments can go out without waiting for cross-border settlement to catch up.
- 05Trapped capitalTrapped capital is money a business must hold idle inside its payment operations, in prefunded accounts, in-transit balances, and safety buffers, where it cannot be used for anything else.
- 06FloatFloat is money that has left the payer but has not yet reached the payee, sitting in transit inside the payment system.
Settlement and corridors
- 07T+2 settlementT+2 settlement means a trade finalizes two business days after the day it is executed: T is the trade date, and the number counts the business days until money actually moves.
- 08FX corridorAn FX corridor is a specific currency pair moved between two markets, such as USD to BRL, treated as its own route with its own liquidity, rules, and settlement behavior.
- 09Corridor liquidityCorridor liquidity is the capacity to convert and settle money in one specific currency corridor, at the size you need, when you need it, without moving the price against yourself.
Rates and ramps
- 10Wholesale FX rateA wholesale FX rate is the price institutions pay to exchange currency in size, close to the interbank mid-market rate, without the markup added in retail and commercial channels.
- 11Stablecoin on-rampA stablecoin on-ramp is a service that converts fiat currency into stablecoins: money leaves a bank account and the equivalent value arrives onchain, minus the conversion cost.
- 12Stablecoin off-rampA stablecoin off-ramp is a service that converts stablecoins into fiat currency and pays the money out to a bank account, usually in a different country from where the stablecoins were acquired.