Over the past five years, regulatory frameworks governing digital assets and currencies have evolved significantly across almost all jurisdictions. With the recent GENIUS Act framework¹ for stablecoins² in the US, which signals a strong ambition for leadership in digital assets, financial institutions now have a clearer legal foundation to further explore the possibilities that distributed ledger technology (DLT) offers.

Major institutions and central banks are experimenting with tokenised assets – digital representations of traditional assets (like deposits or bonds) on shared ledgers – to unlock new efficiencies. Banks maintain extensive frameworks to ensure they have sufficient liquidity at all times, including regulatory ratios such as the Liquidity Coverage Ratio (LCR) and internal intraday liquidity buffers.

The LCR requires banks to hold enough high-quality liquid assets (such as cash, central bank reserves and government bonds) to survive a 30-day stress scenario. If key assets like government bonds become tokenised, their liquidity value should in theory remain the same. A tokenised US Treasury is still a US Treasury; but banks and regulators must ensure these tokens are truly as liquid and robust as their traditional form.

Digital asset innovation can bring several benefits to liquidity management, including greater collateral mobility and velocity through tokenised collateral, real-time settlement with reduced settlement and credit risk, and reduced operational frictions through technology adoption and integration.

Tokenisation is poised to both improve the old models by overcoming the frictions and inefficiencies of the current architecture and enable the new by creating new contracting possibilities. Most relevant to liquidity is tokenised collateral that can be moved and reused more quickly. This near-instant collateral mobilisation demonstrates how tokenisation can eliminate settlement lags that historically tie up liquidity.

Collateral mobility and settlement efficiency are critical for liquidity management. Tokenised collateral networks boost collateral mobility, allowing collateral to be used multiple times a day across markets and providing higher collateral velocity.

This flexibility could help banks meet margin calls or payment obligations late in the day by quickly reallocating assets, rather than holding large idle buffers ‘just in case’. The Bank for International Settlements has highlighted that tokenised repo and collateral markets could reduce intraday liquidity risks by enabling instant delivery-versus-payment (DvP) settlement and faster responses to intraday margin calls.³ Over time, these capabilities might allow banks to hold a leaner liquidity buffer without sacrificing resiliency, since funding can be raised or assets pledged on-demand in real time.

A promising application of tokenisation for liquidity management is intraday repo – borrowing and repaying funds within the same day by using securities as collateral, enabled by instant settlement. Traditional repo markets mostly operate on an overnight or term basis, partly because settlement and unwinding intraday are operationally complex. Tokenisation changes this dynamic. The precision and speed in tokenised repo allow firms to optimise intraday liquidity to an unprecedented degree – raising cash as needed, rather than overnight.

“Tokenisation can eliminate settlement lags that historically tie up liquidity”

In April 2025, the Depository Trust and Clearing Corporation (DTCC) announced a new platform for tokenised real-time collateral management.⁴ Blockchains present a significant opportunity to streamline the flow of collateral across siloed infrastructure, unlocking capital and operational efficiencies. The biggest driver for institutional clients is to free up capital by redeploying collateral instantly rather than tying it up in slow settlement cycles, increasing the mobility and velocity of collateral movement globally and optimising capital efficiencies and liquidity for all participants. Built on its dedicated AppChain (a permissioned Hyperledger Besu network) the platform uses smart contracts to automate collateral workflows and enable complex trade execution across markets in real time, even in volatile conditions.

DTCC is moving US Treasury securities on-chain, signaling a pivotal shift as regulated tokenisation advances from concept to core market infrastructure. DTCC’s subsidiary, The Depositary Trust Company (DTC), has received a No-Action Letter from the US SEC to offer a new service to tokenise real-world, DTC-custodied assets in a controlled production environment.⁵ DTC anticipates beginning to roll out the service in the second half of 2026. While the ultimate goal is to move the US$100trn of assets to be on-chain, the initial phase focuses on a narrower set of liquid assets.

DTCC is not the only industry participant getting ready to service the need for digital assets. In September 2025, the International Swaps and Derivatives Association CEO signalled its desire to work towards tokenised collateral for derivatives markets.⁶ There is a growing appetite from some market participants to extend the range of collateral used to meet variation margin requirements for non-cleared derivatives. Money market funds (MMFs) offer a potentially stable source of collateral, but the current workflow requires collateral to be posted as cash and then transformed by the custodian, which can lead to increased liquidity and operational risks. Once an MMF is tokenised, it can be much more efficiently mobilised as collateral and shares of the fund could be directly posted and returned, without any need for liquidation within the collateral management workflow.

Tokenized 24/7/365 settlement clashes with banks’ legacy batch processes and the limited operating hours of central securities depositories, forcing a shift to continuous ‘always-on’ infrastructure and ‘follow-the-sun’ staffing/support models. In the traditional model, the lag between trade execution and settlement exposes each party to the risk that the other might default before delivering on the deal. By contrast, DLT-based settlement is atomic and instantaneous – cash and securities exchange simultaneously or not at all. This delivery-versus-payment approach removes the ‘give before you get’ exposure and with it virtually all settlement default risk.

Real-time, 24/7 tokenised settlement could radically change intraday liquidity dynamics. On the one hand, instant settlement and round-the-clock operating hours may reduce the need for large buffers. If tokenised money or CBDCs enables near-instant cross-border transfers at any time, banks could potentially free up funds otherwise trapped offshore or overnight. Similarly, a payment on a tokenised network could be synchronised with incoming funds, reducing periods where cash is in limbo.

A tokenised payment rail with atomic payment versus payment/delivery versus payment (PvP/DvP) and smart-contracted conditions can synchronise incoming and outgoing legs in one transaction. That enables just-in-time liquidity use, reduces over-funding, and allows cash to circulate rather than sit immobilised. This model materially lowers daylight funding needs, but it does not remove liquidity risk entirely – participants still must ensure tokenised funds and eligible collateral are available at execution time and manage fallback credit facilities for stress scenarios.

However, it should be acknowledged that instant settlement removes netting, possibly increasing intraday liquidity consumption in gross terms. In today’s deferred settlement systems, financial institutions can net off a large volume of payments and only exchange the smaller net difference, conserving liquidity.

The paradox of real-time finance is that less time delay means lower liquidity tied up after settlement, but also less opportunity to delay payment obligations, which can strain liquidity if not managed properly. Tokenisation increases transaction turnover across the day, but smart contracts, real-time valuation, liquidity-saving sequencing and on-demand intraday funding convert much of that gross activity into reusable liquidity. What is the net effect? With robust legal, custody and interoperability frameworks in place, banks can expect leaner intraday liquidity buffers. This is not because there are fewer payments, but because tokenised assets and real-time plumbing let treasuries fund obligations ‘just in time’, recycle collateral continuously, and sharply reduce cash-draining transformations.

“Regulatory developments and industry infrastructure are quickly adapting to support tokenised finance”

Regulatory developments and industry infrastructure are quickly adapting to support tokenised finance. In September 2025, the US Commodity Futures Trading Commission announced the launch of an initiative for the use of tokenised collateral, including stablecoins, in derivatives markets.⁷ This step expands the use of non-cash collateral through DLT, which could significantly increase efficiency, provided there are clear regulations on valuation, settlement and custody and safekeeping of these digital assets.⁸ /p>

Financial firms are also investing in the infrastructure needed to harness tokenisation. Deutsche Bank, for example, is making strategic moves to build the necessary infrastructure to facilitate atomic, near-instant settlement across a diverse range of tokenised assets. Government bonds, as the cornerstone of financial markets, could enhance liquidity and support various financial transactions, from collateral management to monetary policy operations. On a unified ledger, tokenised government bonds could be more readily sold or used as collateral in real time, enhancing a bank’s ability to convert assets to cash.

There has been a lot of work conducted by financial institutions to build the infrastructure to service emerging needs. Those that are building proprietary platforms need to keep in mind that there is a clear industry need for interoperability to avoid fragmentation. Banks need to balance investing in in-house innovation with the push for common standards.

If every bank creates its own tokenisation platform, we could end up with multiple disconnected ledgers that do not talk to each other. Liquidity could then be split across these networks, reducing the aggregate efficiency. It is crucial to establish interoperability, underpinned by common data models, smart contract standards and messaging protocols, to reduce fragmentation, lower integration costs and enable scalable, cross-platform connectivity and programmability.

Despite current limitations in digital custody, settlement and record-keeping systems, the market for tokenised real-world assets is already significant.⁹ The advent of tokenised assets brings technological advantages to liquidity management. Digital asset payment systems have the potential to significantly improve the speed and efficiency of interbank settlements and corporate transactions, eliminating delays that once trapped idle cash and allowing funds to be reallocated more rapidly. Smart contracts further amplify these benefits by automating collateral management tasks – from issuing margin calls and verifying collateral eligibility to executing transfers in real time – thus streamlining processes and minimising manual intervention.

Collectively, these innovations point toward a more agile and efficient liquidity landscape, where cash and collateral move swiftly and securely under robust, programmable controls.

Sources

¹ See Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law at whitehouse.gov
² See Top Stablecoin Tokens by Market Capitalization at coinmarketcap.com
³ See Basel Committee on Banking Supervision - Prudential treatment of crypto asset exposure at bis.org
⁴ See DTCC Announces New Platform for Tokenized Real-time Collateral Management at dtcc.com
⁵ See DTCC Authorized to Offer New Tokenization Service, Paving the Way to Tokenized DTC-Custodied Assets at dtcc.com
⁶ See Working Towards Tokenized Collateral at isda.org
⁷ See Acting Chairman Pham Launches Tokenized Collateral and Stablecoins Initiative at cftc.gov
⁸ See Technical Submission on Tokenized Collateral, Stablecoins, and 24/7 Trading and Clearing Infrastructure for Regulated Derivatives Markets at sec.gov
⁹ See Every tokenized real-world asset, in one place. at rwa.xyz