Tokenized collateral could unlock billions in capital and transform liquidity management: New DTCC White Paper

The Depository Trust & Clearing Corporation (DTCC) today published research that explores how smart, tokenized representations of traditional assets and near real-time collateral mobility could help financial institutions reduce liquidity buffers, lower capital requirements, and navigate periods of market stress more effectively.

The paper, Collateral Infrastructure for Tokenized Capital Markets, developed in collaboration with Finadium, examines how distributed ledger-based infrastructure – such as DTCC’s Collateral AppChain, designed as shared infrastructure to modernize collateral mobility and improve capital efficiency – could enhance the speed, efficiency, and accuracy of collateral movement across global markets, including outside of traditional market hours.

As markets evolve toward shorter settlement cycles and increased adoption of digital assets, the paper highlights the growing importance of interoperable infrastructure enabled to support just-in-time collateral management. Such capabilities are critical to reducing fragmentation, improving operational consistency, and supporting financial stability. Early adopters may benefit from improved cost of capital, more dynamic capital allocation, and increased competitiveness as market structure continues to evolve.

Key findings include:

• Tokenized traditional assets can offer the clearest near-term balance sheet benefits.
  Digital forms of traditional assets such as bonds, money market funds, and cash could move faster across jurisdictions and platforms, enabling more precise capital, liquidity, and risk management within existing regulated frameworks.

• Intraday repo could materially lower funding costs and liquidity buffers.
  By enabling secured, minute‑by‑minute funding on a digital ledger rather than overnight, intraday repo may reduce reliance on costly daylight overdrafts and overnight funding. The paper projects that intraday funding costs could be cut in half and free up significant capital at large dealer banks.

• Real-time collateral mobility can reduce capital and liquidity requirements.
  Faster collateral movements can lower reported exposures at the end of day, potentially reducing liquidity coverage ratio (LCR) requirements and counterparty credit risk charges while increasing return on capital.

• Interoperable digital ledger technology infrastructure could improve market resilience during stress.
  The ability to move tokenized assets seamlessly across markets and time zones could reduce forced asset sales in periods of volatility, addressing vulnerabilities seen in past liquidity crises.
  

“Digital assets represent the next phase of capital and liquidity optimization in global markets,” said Nadine Chakar, DTCC Managing Director and Global Head of Digital Assets. “As these assets evolve into smart assets with embedded data and programmability, financial institutions can achieve greater precision in collateral allocation, liquidity forecasting, and capital planning. This paper serves as a blueprint for the material value to be generated from adoption.”

Improving collateral mobility is the key use case for DTCC’s Collateral AppChain, a shared infrastructure platform. DTCC’s Collateral AppChain is designed to provide a common, interoperable foundation across market participants including collateral providers, receivers, and managers, along with triparty agents and custodians. The Collateral AppChain was publicly unveiled during DTCC’s Great Collateral Experiment and is expected to go live in Q4 2026.