Asset Tokenization in Financial Markets 2025

Contents33 3.3 Securities financing Securities financing transactions allow investors and firms to use assets, such as the shares or bonds they own, to secure funding for their activities.70 Collateral This report identifies collateral and repurchase agreements (repos) as a key application of tokenization. The global collateral market is estimated to be worth more than $25 trillion.71 Collateral refers to what is posted and received – typically a liquid and secure asset – pledged to support a financial transaction, providing default protection. Collateral is fundamental to managing counterparty risk and ensuring the smooth functioning of financial markets by mitigating credit risk. The ideal collateral should be free from credit and liquidity risks, maintain a stable value and not correlate with the provider’s credit risk.72 Programmable ledger-powered collateral management could unlock more than $100 billion annually in capital that can be redeployed for higher efficiency.73 This objective of improving collateral mobility is at the heart of emerging tokenized collateral management platforms, such as JP Morgan’s Total Collateral Network (TCN), HQLAx and the Canton Global Collateral Network (GCN), which all aim to address the historical challenge of orchestrating complex cross- custodian movements of collateral, or the transfer of ownership countries between custodians through real-time, compliant and interoperable asset mobility between traditional and digital markets.74 This fragmented custodian landscape tends to be costly and dependent on non-overlapping operating hours. Collateral mobility is measured by a participant’s ability to identify the right collateral to be moved to the right party at the right time.75 Acceptable collateral frameworks Current regulatory frameworks and jurisdiction- specific rules limit which investors can hold, pledge or accept collateral, which hinders efforts to trade collateral across borders. Policy-makers and the private sector should clarify the set of eligible tokenized collateral, including potentially expanding the scope of acceptable collateral. Repurchase agreements Intraday repo is observed as the primary area of adoption of tokenization. A repo is a short- term loan where one party sells securities to another in exchange for cash, with an agreement to buy them back later at a higher price. Repos are a common way for financial institutions to obtain short-term funding.76 The global repo market is very large, with an estimated size of more than $15 trillion in outstanding value and a daily turnover of around $3–4 trillion.77 Due to their high turnover, repo markets face several inefficiencies and risks. Manual and fragmented workflows rely on outdated and disconnected systems, leading to delays, errors and costs. Additionally, settlement inefficiencies are born from the many intermediaries coordinating complex transactions – rapid buy and sell orders – that have led to longer settlement cycles, liquidity constraints and counterparty risks. Tokenization offers three benefits for collateral: 1. Enhances information symmetry Money market funds (MMFs) are not directly used as collateral because of data reconciliation challenges between counterparties driven by their complex ownership structures. Tokenization’s shared system of record could bring visibility into the custodial relationship with underlying fund owners, reducing the burden of managing relationships between transfer agents, custodians and counterparties. 2. Facilitates operational efficiency Enables real-time position tracking and instant transfers of ownership.78 Programmability can automate asset servicing and maintain a shared record to ease operational burdens associated with maturities, dividends and coupon payments. 3. Promotes multi-asset mobility Allows participants to extend asset usability through digitally represented collateral across subsequent transactions by using the platform’s programmable and composable smart contracts. For example, a pilot on the Canton Network with Euroclear and the World Gold Council found that gold-backed tokens allow freer usage as collateral.79 SDX and SIX Securities Services are bringing to market the new Digital Collateral Service (DCS), specifically designed to enable the usage of selected crypto-assets as collateral alongside traditional collateral.80Tokenized assets