- Key insight: Tokenization projects are no longer viewed as modernization initiatives, but rather as a potential source of new revenue, lower operating costs, improved capital efficiency and differentiated products.
- Supporting data: A report from Nasdaq and The ValueExchange estimates that tokenized collateral could reduce operating costs by approximately 12% for global institutions.
- Forward look: Tokenization creates digital assets; interoperability creates digital markets. The next era of growth will be driven by institutions that put those assets to work to deliver real, measurable business value.
Having spent three decades managing global collateral, securities clearing, global custody, and online brokerage services across two of the world's largest banks, I have seen firsthand how much of the financial system's capital remains constrained by market hours, settlement cycles, and fragmented infrastructure.
Like many others, I believe that
However, the
This is the next test for the industry. Accelerating adoption leaves no room for tokenization fairy tales. Intention must turn into execution and use cases that prove measurable business value, across capital efficiency, liquidity, costs, and revenue, must be prioritized.
Tokenized collateral isn't glamorous or headline-grabbing, but it has emerged as a high-priority use case. The reason is simple: the business value is undeniable.
Firms leverage collateral to manage their repo and financing activities, but legacy settlement cycles, fixed cutoffs, and fragmented custody force them to pre-position assets well in advance, leaving trillions of dollars in balance-sheet capacity trapped as idle collateral.
The problem isn't a shortage of high-quality liquid assets, or HQLAs. It's that HQLAs lack mobility and valuable collateral cannot move to the right place at the right time.
When collateral moves on-chain, its value goes far beyond speed. Rather than being locked into once-a-day settlements and cross-time-zone delays, tokenized collateral can be mobilized anywhere, at any time, supporting multiple intraday transactions across borders. A
This transforms tokenization from a technology initiative into a capital efficiency imperative.
More efficient asset mobility can reduce idle capital, improve intraday liquidity management, and allow banks to generate greater value from their existing balance sheets.
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Efficient collateral mobility also requires an equally efficient cash leg. Tokenized deposits, stablecoins and other forms of digital cash can support synchronized settlement, treasury and liquidity-management workflows, allowing money and assets to move together and unlocking new payment, treasury and transaction banking services.
By moving collateral on-chain, asset managers can benefit from broader distribution, faster settlement, more flexible collateral management, and expanded access to tokenized funds and securities. The ability to move assets and cash more efficiently could create new product structures and improve how portfolios are financed and managed.
Additionally, increased capital efficiency is vital for firms engaging in crypto markets where trading is 24/7. Moving collateral on-chain can prevent firms from having to over-position or lock up massive amounts of collateral over a weekend.
The Depository Trust and Clearing Corporation's Tokenization Service is a prime example of use cases with clear value taking priority and institutions advancing rapidly to capture the benefits of on-chain workflows.
Following a
While the tokenization of these assets is a milestone in itself, there is a bigger story here. These assets were not just simply moved on-chain. They became usable and were leveraged to support purchases and sales, repo, securities lending and margin activity on-chain.
DTCC's Tokenization Service is a microcosm of the broader shift needed across the industry: regulated market participants driving real utility at scale to demonstrate durable, long-term business value.
Tokenization projects are no longer viewed as modernization initiatives, but rather as a potential source of new revenue, lower operating costs, improved capital efficiency and differentiated products.
As capital shifts to multiyear, enterprise-scale implementations, funding is targeting core trading, settlement, and compliance architecture to seamlessly connect on-chain assets with legacy systems. But asset creation is only half the equation.
Institutions will move toward environments where securities, cash, collateral and financial applications can interact. Interoperability, within networks, across applications and ultimately across networks, will determine whether tokenization creates another set of fragmented markets or genuinely improves the financial system.
Tokenization creates digital assets; interoperability creates digital markets. The next era of growth will be driven by institutions that put those assets to work to deliver real, measurable business value.
