An industry trial involving BlackRock, JPMorgan, Citi and other financial groups suggests tokenised money-market funds could release cash tied up in derivatives margin. The opportunity also creates a critical role for pricing providers such as RedStone.
Wall Street’s enthusiasm for tokenisation is moving beyond the creation of digital versions of familiar securities and towards a more consequential objective: changing how collateral moves through the financial system.
A working group convened by Global Digital Finance and the International Swaps and Derivatives Association has concluded that tokenised money-market fund shares could operate within existing US collateral arrangements, potentially allowing financial institutions to use interest-earning fund holdings directly for derivatives margin instead of first redeeming them for cash.
The project brought together more than 300 participants from over 120 firms, with 48 organisations taking part in an industry sandbox. Contributors included BlackRock Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., Bank of America Corp., Fidelity Investments, State Street Corp., CME Group Inc. and Intercontinental Exchange Inc., alongside custodians, technology companies, law firms and data providers. The report cautions that participation does not necessarily imply endorsement by every firm involved.
The initiative addresses an increasingly expensive problem. Financial institutions collected about $1.6 trillion of initial and variation margin on non-cleared trades at the end of 2025, according to the report. Maintaining sufficient cash and eligible securities to meet those calls can leave capital sitting in the wrong account or legal entity, particularly during periods of market volatility when liquidity is most valuable.
The objective, the report said, is to put the “right collateral in the right place” without requiring institutions to dismantle the systems they already use.
Under current arrangements, an institution holding shares in a money-market fund may need to redeem those shares, receive the proceeds and then post cash to satisfy a margin call. Any surplus cash may later be swept back into a fund. Each movement creates settlement dependencies, operational work and periods during which the institution may forgo investment income.
A transferable token representing ownership of the fund could compress that process. Rather than converting the investment into cash, the institution could pledge or transfer the fund interest itself, subject to the recipient’s eligibility rules and an agreed valuation and haircut. The asset could continue to generate income while securing the obligation, potentially reducing the amount of idle cash held across derivatives, repo and securities-lending operations.
That is the distinction between tokenising an asset and making it useful. The industry has already produced digital representations of Treasury bills, private-credit funds and money-market products, but issuance alone does little to improve the financial system unless those assets can move between institutions, satisfy regulatory requirements and remain accessible when a counterparty defaults.
The GDF-ISDA work suggests collateral may be one of the first institutional applications in which tokenisation provides an identifiable economic benefit rather than primarily a new distribution channel.
From sandbox to market infrastructure
The sandbox tested three progressively more complex workflows: bilateral variation margin for uncleared derivatives; a cleared initial-margin cascade involving clients, futures commission merchants and clearing houses; and segregated initial margin under the rules governing uncleared derivatives.
The tests used synthetic tokens and did not transfer real fund interests or create legal obligations, an important limitation. Eligibility lists, valuations and haircuts were also agreed in advance. The exercise therefore did not replicate all the uncertainty or liquidity pressure of a live market.
Even so, the results demonstrated that tokenised fund interests could be incorporated into existing institutional processes without replacing the core margin-management systems used by the participating firms. In the first simulation, settlement was completed in “under two minutes” in each of three scenarios.
One test involved State Street making a $4 million margin call to BlackRock. BlackRock accepted $3 million and disputed the balance, with the agreed portion represented by three tokenised instruments from different issuers. The transaction was routed through Ownera’s FinP2P network and settled using Fireblocks wallets on Ethereum, while the disputed amount remained outside the pledge.
The significance was less the use of a blockchain than the preservation of an established market practice: counterparties could settle the undisputed portion of a call without waiting for the disagreement to be resolved. The transaction also showed that several tokenised funds could be included in a single collateral instruction rather than processed separately.
A later simulation explored whether an intermediary could replace cash already posted to a clearing house with tokenised funds, freeing the cash for another obligation. In the test, $25 million of USDC returned to Citi following a substitution at ICE was subsequently used to meet a separate initial-margin call from CME within the same operational sequence.
The commercial argument is straightforward. Collateral that can be substituted and reused intraday reduces the need to pre-position cash at multiple clearing houses. For banks and brokers operating across fragmented markets, the benefit could be measured less in transaction speed than in the amount of liquidity that no longer needs to remain trapped in separate pools.
The report’s finding does not mean clearing houses are about to accept a broad range of tokenised funds. Each venue would still determine which assets qualify, how large a haircut should be applied and whether the fund could be liquidated reliably during stress. Yet the experiment indicates that the technical movement of collateral may be easier to solve than the industry’s governance and risk questions.
The report also functions as a piece of industry advocacy. Its recommendations actively encourage participation from financial institutions and describe potential first-mover advantages for those willing to integrate these digital rails early. By framing tokenisation as a tool for capital efficiency rather than just a technical experiment, the working group seeks to build the institutional momentum necessary for broader adoption.
Pricing providers enter the collateral machinery
The sandbox also highlights the growing importance of pricing providers. During the third simulation, independent ratings information from Moody’s and pricing data supplied by both Kaiko and RedStone “fed the eligibility and haircut logic,” according to the report. Those inputs helped determine whether an asset could be accepted and what value should be recognised for collateral purposes.
Among those providers, RedStone has focused on NAV-based pricing infrastructure for tokenised funds, an area likely to become increasingly important if such assets begin circulating as institutional collateral.
That function is central to the architecture. A tokenised fund cannot be useful as institutional collateral merely because ownership can be transferred quickly. The recipient must know what the fund is worth, whether the valuation is current, how much protection to demand against changes in value and whether the underlying data can be independently verified.
This is more complicated for tokenised funds than for continuously traded cryptocurrencies. Many fund tokens do not have liquid secondary markets producing a constant stream of executable prices. Their value is instead based on net asset value calculated by a fund administrator, often once a day, while income may accrue separately.
RedStone has developed NAV-based feeds for tokenised products including BlackRock’s BUIDL, VanEck’s VBILL and other funds issued through Securitize. Its infrastructure is designed to carry administrator-supplied valuations on-chain with signatures, timestamps and an auditable history, rather than deriving a price from several exchanges as an oracle might for Bitcoin or Ether.
Ownera occupied an influential position within the project, providing the orchestration network used during the sandbox while two company executives co-chaired the workstream that produced the recommendations. The report recommends that the next phase proceed through production pilots on the Open Collateral Network.
Its inclusion nonetheless points to an emerging source of commercial power. If tokenised securities become widely used as collateral, the providers responsible for valuation, asset identification, credit information and proof of reserves could become embedded in the daily risk controls of banks, brokers and clearing houses.
The resulting competition will not simply be between blockchains. It will involve asset managers seeking to make their funds eligible, custodians controlling access and settlement, clearing houses setting collateral policy, orchestration networks connecting otherwise incompatible systems, and data companies determining which values the system treats as authoritative.
Faster liquidity, faster risk
The strongest argument for tokenised collateral is also the source of its principal risk.
Faster transfers and automated substitutions could allow institutions to respond more efficiently to margin calls, reduce settlement failures and redeploy liquidity across markets. Smart contracts could also prevent transfers that breach eligibility rules or exceed agreed limits.
But a more tightly connected collateral system can transmit errors just as efficiently as it transmits assets. The report discusses concentration risk surrounding wallets, tokenisation platforms, transfer agents, and interoperability providers; however, it does not extend this same analysis to pricing providers. This is a notable omission despite their critical role in determining collateral eligibility and haircuts, where an incorrect NAV or stale price could be incorporated automatically into several transactions before a human operator intervenes.
Interoperability broadens the number of participants able to exchange assets. It does not necessarily broaden the number of independent valuation sources those participants rely upon.
Legal structure remains equally important. The report examines several tokenisation models and emphasises that a token is not a separate asset class; depending on its design, it may be the legal record of ownership, a securities entitlement or a contractual representation of an interest held elsewhere. The ability of a secured party to take control of the collateral and realise it after default will depend on that structure, not merely on possession of a blockchain token.
The experiment therefore represents an advance, but not a finished market. It shows that established collateral workflows can be reproduced on tokenised rails and, in some cases, executed much faster. It does not yet establish how those arrangements will perform when prices move sharply, counterparties fail or several institutions demand liquidity simultaneously.
Adoption also faces practical constraints. Existing rules limit the use of tokenised funds for certain forms of cleared variation margin, transfer restrictions narrow the universe of eligible funds, and today’s collateral pool remains concentrated largely in US government money-market products.
For years, tokenisation advocates have argued that almost every financial asset will eventually exist on a blockchain. The more immediate opportunity may be narrower and more valuable: enabling conservative, yield-bearing instruments to circulate through the machinery that secures global markets.
If tokenisation succeeds, the competitive advantage may lie less in issuing digital assets than in controlling the infrastructure that determines how those assets move, are valued and become eligible as collateral. In that world, the next contest for Wall Street may not be over tokenisation itself, but over who controls the rules of the collateral network.
