Ledger to Ledger

Ledger to Ledger Transfers (L2L) 

We have to distinguish between two distinct types of ledger-to-ledger (L2L) transfers that warrant examination: one in the traditional banking sector and the other in the realm of blockchain technology.

In the context of traditional banking, L2L transfers involve the movement of assets, liabilities or equities between separate ledgers maintained by financial institutions, such as banks or payment service providers. These transfers can occur between accounts within the same institution or across different institutions and are crucial for facilitating secure and efficient transactions within the global financial system.

Conversely, L2L transfers within the blockchain sphere refer to the process of transferring value or assets between distinct distributed ledgers, such as different blockchain networks. This type of transfer often necessitates the utilization of specialized protocols, intermediaries, or techniques, such as atomic swaps or cross-chain bridges, to ensure interoperability and maintain the integrity of both ledgers involved.


Ledger-to-ledger (L2L) transfers in banking refer to the process of transferring assets, liabilities or equity between two separate ledgers maintained by financial institutions, such as banks or other payment service providers. These transfers can occur between accounts held within the same institution or across different institutions. In the context of banking, ledgers are centralized databases or record-keeping systems that track the ownership and transaction history of customer accounts and assets.

L2L transfers in banking are crucial for facilitating efficient and secure transactions between different financial entities and their customers. Here are some key aspects and examples of L2L transfers in banking:

  1. Interbank Transfers: Interbank transfers are a common form of L2L transfers in banking, where funds are moved between accounts held at different banks. These transfers can be facilitated through various mechanisms, such as wire transfers (e.g., SWIFT), Automated Clearing House (ACH) transactions, and Real-Time Gross Settlement (RTGS) systems.
  2. Intra-bank Transfers: Intra-bank transfers occur when funds are moved between accounts held within the same financial institution. These L2L transfers are typically faster and may have lower fees compared to interbank transfers since they only involve updating the bank's internal ledgers.
  3. Central Bank Ledgers: Central banks maintain their own ledgers that track the reserve balances of commercial banks within their jurisdiction. L2L transfers between central bank ledgers and commercial bank ledgers are critical for managing reserve requirements, executing monetary policy, and facilitating interbank transactions.
  4. Cross-border Transfers: L2L transfers in banking also play a crucial role in cross-border transactions, where funds are moved between banks or financial institutions located in different countries. These transfers often involve currency conversion and may require the involvement of correspondent banks or international payment networks to facilitate the transaction.
  5. Digital Asset Transfers: With the growing adoption of digital assets and blockchain technology, some banks and financial institutions have started to explore L2L transfers involving digital assets or cryptocurrencies. These transfers may require the use of specialized protocols, such as the Interledger Protocol (ILP), or the development of new infrastructure, such as central bank digital currencies (CBDCs) or bank-backed stablecoins.

What can be transferred from Bank to Bank?

Bank Assets:

  1. Cash & Cash Equivalents: These are funds that can be accessed immediately or almost immediately. They include physical cash, deposits with other banks, and highly liquid securities like Treasury bills.
  2. Investments/Securities: These are financial instruments that the bank invests in to earn a return, such as government and corporate bonds, stocks, and other securities.
  3. Loans and Advances: These are the funds that a bank lends to its customers, and they generate interest income. They can include personal loans, mortgages, commercial loans, credit card balances, and overdrafts.
  4. Fixed Assets: These are physical properties owned by the bank, such as buildings, land, equipment, and furniture.
  5. Intangible Assets: These include non-physical assets like software, patents, trademarks, and goodwill.
  6. Other Assets: These can include accrued interest receivable, deferred tax assets, and derivative financial instruments among others.

Bank Liabilities:

  1. Deposits: These are funds that individuals and businesses keep in the bank. They include checking accounts, savings accounts, and time deposits. They are liabilities because the bank has an obligation to return these funds to the depositors on demand or at a specific maturity date.
  2. Borrowed Funds: These are funds that the bank borrows from other financial institutions, the central bank, or through issuing debt securities.
  3. Debt Securities: These are bonds or other forms of debt issued by the bank to raise funds. The bank is obligated to pay back the principal and interest to the bondholders.
  4. Other Liabilities: These include items like accrued expenses, accounts payable, deferred tax liabilities, provisions for loan losses, and derivative financial instruments.
  5. Subordinated Liabilities: These are debts that will only be paid after all other debts if the bank goes bankrupt.

Bank Equity:

  1. Common Stock: This is the equity that owners of the bank hold. They have voting rights and may receive dividends.
  2. Preferred Stock: This type of equity has a higher claim on earnings and assets than common stock but usually doesn't come with voting rights.
  3. Retained Earnings: These are the net earnings a bank has accumulated over the years and chosen to reinvest in the business rather than distribute as dividends.
  4. Treasury Stock: These are the bank's own shares that it has repurchased from the market.
  5. Other Comprehensive Income: These are gains and losses from various investments and derivatives that haven't been realized yet.
  6. Minority Interest: This is the part of the net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.

Off-ledger to On-ledger

Transactions between banks, including off-ledger to on-ledger transactions, require additional steps to ensure the proper transfer of assets or liabilities, adherence to regulations, and proper accounting. 

The process is as follows:

  1. Identification of Transaction/Asset: The process begins with identifying the specific transaction or asset that needs to be moved from off-ledger to on-ledger. Both banks involved in the transaction must agree on the asset or liability to be transferred.
  2. Risk Assessment and Financial Analysis: Both banks will conduct their independent risk assessments and financial analysis. This is to ensure that the transaction aligns with their individual risk management policies and financial strategies.
  3. Interbank Agreement: Before the transaction can proceed, the banks must agree on the terms of the transfer. This may involve negotiation on the price of the asset or liability, the timing of the transfer, and other details. This agreement is often legally binding and must comply with local and international banking regulations.
  4. Regulatory Compliance: The transaction must comply with relevant banking regulations, including those related to capital adequacy, liquidity, and risk management. The compliance teams from both banks will work to ensure that the transaction meets these requirements.
  5. Clearing and Settlement: Once the agreement is made and compliance is checked, the transaction proceeds to the clearing and settlement phase. This involves the actual transfer of the asset or liability from one bank's ledger to the other's. This process is often facilitated by a third-party clearing house, especially for large or complex transactions.
  6. Recording the Transaction: After the clearing and settlement process, each bank records the transaction on its own ledger. For the selling bank, the asset moves from on-ledger to off-ledger, and for the buying bank, the asset moves from off-ledger to on-ledger.
  7. Ongoing Management and Reporting: Both banks must manage and report the transaction on an ongoing basis. This involves tracking any changes in the value of the asset or liability, reporting these changes to the relevant regulatory authorities, and updating their individual financial statements accordingly.
  8. Continuous Monitoring: Finally, the banks continue to monitor the asset or liability on a regular basis to ensure that it remains in compliance with all relevant regulations and that its risk profile remains within each bank's risk tolerance.


Ledger-to-ledger transfers, also known as inter-ledger transfers or ledger-to-ledger transactions, refer to the process of transferring value or assets between two distinct ledgers or distributed ledgers. Ledgers are essentially record-keeping systems that track transactions and ownership of assets, with distributed ledgers being decentralized versions of these systems, such as blockchain networks. The concept of ledger-to-ledger transfers is particularly relevant in the context of digital assets, cryptocurrencies, and financial technology (FinTech) innovations.

In a ledger-to-ledger transfer, the assets or value are moved from one ledger to another while ensuring that the transaction is properly validated, recorded, and settled in both ledgers. This process is more complex than a simple intra-ledger transfer (transferring value within the same ledger) and typically requires the involvement of intermediaries or specialized protocols to facilitate the transfer. The following are some key aspects of ledger-to-ledger transfers:

  1. Interoperability: One of the main challenges in conducting ledger-to-ledger transfers is ensuring that the two ledgers involved are compatible and can effectively communicate with each other. This requires a level of interoperability between the systems, which can be achieved through the use of standardized protocols, APIs, or data formats.
  2. Atomic Swaps: Atomic swaps are a specific type of ledger-to-ledger transfer technique that enables the exchange of cryptocurrencies between different blockchains without the need for a centralized intermediary, such as a cryptocurrency exchange. This is achieved through the use of smart contracts, which are self-executing agreements with the terms of the transaction directly coded into the contract. Atomic swaps ensure that the transfer is either completed successfully for both parties or not executed at all, preventing any potential loss of funds.
  3. Interledger Protocol (ILP): The Interledger Protocol is an open-source protocol designed to facilitate ledger-to-ledger transfers across different payment networks, including traditional financial institutions, digital asset networks, and distributed ledgers. ILP enables secure and efficient transfers by establishing a common standard for transactions while maintaining the integrity of the individual ledgers involved. This protocol allows for seamless value transfer between different ledgers, improving the overall efficiency and interoperability of payment networks.
  4. Cross-Chain Bridges: Cross-chain bridges are another method of facilitating ledger-to-ledger transfers, particularly between different blockchain networks. These bridges act as intermediaries that enable the transfer of tokens or assets from one blockchain to another by locking the assets on the originating chain and releasing equivalent assets on the destination chain. Examples of cross-chain bridges include the Wanchain protocol and the Polkadot ecosystem.
  5. Risks and Challenges: Ledger-to-ledger transfers involve certain risks and challenges, such as the potential for security vulnerabilities, the need for effective governance and consensus mechanisms, and the complexity of managing the interoperability between different systems. It is important for organizations and individuals engaging in ledger-to-ledger transfers to be aware of these risks and implement appropriate security measures to mitigate potential threats.

Distributed Ledger Technology in Banking

DLT, or Distributed Ledger Technology, is a system for recording and verifying transactions across multiple computers or nodes in a network. It is the technology that underpins cryptocurrencies like Bitcoin, but its applications extend far beyond just digital currencies.

Here's a detailed explanation of DLT:

1. Decentralization: DLT operates on a decentralized network of computers, often referred to as nodes. Unlike traditional centralized systems (like banks), there is no single authority or central server that controls the entire ledger. Instead, copies of the ledger are maintained independently by many participants in the network.

2. Ledger: The "ledger" in DLT refers to a digital record or database that contains a history of all transactions. Each transaction is grouped into a block, and these blocks are linked together in a chronological chain, creating a blockchain.

3. Transfer: In the context of DLT, a "transfer" typically refers to the movement of digital assets or data from one participant to another. This transfer can represent various things, such as cryptocurrency tokens, ownership of assets, contractual agreements, or any form of valuable information.

4. Security:  DLT systems use cryptographic techniques to secure transactions and ensure the integrity of the ledger. Once a transaction is added to the ledger, it is difficult to alter or delete without consensus from the network participants. This immutability makes DLT highly secure against fraud and tampering.

5. Consensus Mechanisms: To achieve agreement on the state of the ledger among participants, DLT Distributed Ledger Technology employ consensus mechanisms. The most well-known is Proof of Work (PoW) and Proof of Stake (PoS), which validate and add new transactions to the ledger in a trustless manner.

6. Types of DLT: DLT comes in various forms, including public and private. Public DLTs, like the Bitcoin blockchain, are open to anyone and are maintained by a distributed network of volunteers. Private DLTs are restricted to a specific group of participants and are often used by businesses for internal purposes.

7. Smart Contracts:  Some DLT platforms support smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts can automatically enforce and execute agreements when predefined conditions are met.

DLT has the potential to revolutionize various industries beyond finance, including supply chain management, healthcare, voting systems, and more, by providing transparency, security, and trust in transactions and data sharing. Its decentralized nature reduces the need for intermediaries and opens up new possibilities for innovation and efficiency.

If you want to know more about how to transfer funds to your accounts with us, please get in contact with Marie Mayer.