Tokenized collateral: putting a security to work without selling it

A tokenized security only makes credible collateral if it carries the same rights as the original and settles on regulated infrastructure.

Key points

Derivatives, repo, lending: it all runs on collateral. Tokenization lets ownership move in minutes, without selling the asset or stepping out of the investment.
The pieces are landing at the same time: CFTC conditions (clarified on 24 September 2026), an ISDA white paper (6 October), BlackRock's BUIDL accepted as collateral with a bank custodian, and J.P. Morgan's collateral network in production.
In Europe, BaFin has just granted Seturion (Börse Stuttgart) a DLT trading and settlement license under the EU Pilot Regime: regulated infrastructure is taking shape on both sides of the border.
Our view: a token only makes credible collateral if it carries the rights of the underlying security and settles delivery-versus-payment on regulated infrastructure. That is where liquidity is decided.

Within a few weeks, ISDA opened the debate on tokenized money market funds as derivatives collateral, and the US derivatives regulator spelled out its conditions. The technology is ready. The real question is legal: when can a tokenized security be pledged with the same certainty as a traditional one?

Why collateral

To post money market fund shares as collateral today, an institution often has to redeem them, transfer the cash, let the receiver reinvest it, and then reverse every step when the collateral comes back. ISDA lays out those four steps in its 6 October 2026 white paper: a tokenized share could be posted directly, and keep earning while it does the job.

What the US regulator says

In Staff Letter 25-39 of 8 December 2025, CFTC staff set out five tests: the asset must already be eligible as margin, the token must give rights that are "the same or functionally equivalent" to the traditional form, custody must be segregated with an eligible custodian, haircuts must be risk-based, and operational risk must be under control. Its FAQ, updated on 24 September 2026, accepts tokenized money market fund shares as margin for uncleared swaps on those terms.

What the market is doing

Since 28 April 2026, BlackRock's tokenized money market fund BUIDL can be posted as collateral on OKX while staying in custody at Standard Chartered, off the exchange. J.P. Morgan's Kinexys Tokenized Collateral Network moves collateral ownership without moving the underlying assets, and won an award in August 2026 as a live, production solution. According to Crypto Briefing (18 October), BlackRock stresses that taking this into traditional finance depends on counterparties accepting the tokens, on existing infrastructure and on legal certainty.

Banks are also bringing digital-asset custody in-house. Standard Chartered, already the custodian behind the BUIDL arrangement with OKX, has agreed to acquire 100% of Zodia Custody, the custodian it launched in 2020 as a joint venture with Northern Trust (Finextra, 21 October). Central banks are moving too: on 20 October, Bank Negara Malaysia launched SSDS+, a platform for tokenized bonds and sukuk linked to its RENTAS+ system so that payments settle in central bank money around the clock, and Figure has urged the US Treasury to follow suit (crypto.news, 21 October). Regulated custody and settlement infrastructure is converging, and that is what makes tokenized collateral usable.

The bottleneck is not technical

ISDA is clear that its paper "is not a final statement": enforceability, conflict of laws and custody remain open. Moving collateral in seconds is worthless if, on default, nobody knows which law governs the token.

The Swiss angle

Switzerland started with the law. Since 2021, article 973d of the Code of Obligations has made the distributed ledger the legal register of a ledger-based security, so equivalence of rights is settled at issuance. On the settlement side, SeturionX, the FINMA-authorized DLT trading facility, locks the security in a settlement contract, routes the Swiss franc payment through SIC, the Swiss interbank payment system, and then delivers the security, typically within 30 minutes. The Swiss National Bank notes that this SIC link runs in a production environment, while its Project Helvetia separately pilots a wholesale digital franc on the SIX platform.

The European side

The same model is taking shape in the European Union. This week, Germany's BaFin granted Seturion, a Börse Stuttgart Group subsidiary, a DLT Trading and Settlement System license under the EU DLT Pilot Regime, following a process conducted with ESMA and the ECB. It is a first for a European exchange group. The first announced chain covers every link: Société Générale plans to issue tokenized structured products, flatexDEGIRO will distribute them, SG FORGE's EURCV and USDCV stablecoins will settle the cash leg on Seturion, and Nasdaq Stockholm joins Börse Stuttgart's venue on the trading side. No launch date has been announced. For collateral, the lesson is the same as in Switzerland: it is regulated infrastructure end to end, from issuance to settlement, that makes a tokenized security usable.

Our view

Liquidity is not only about selling. A security is liquid when you can sell it, but also when you can put it to work as collateral without parting with it. Tokenized collateral opens that second route, provided the counterparty accepts it.
Law comes before technology. The CFTC and ISDA land on the same requirement: the token must carry exactly the rights of the security. A ledger-based security under the Swiss DLT Act meets it from day one. That is the framework under which we issued our participation certificates.
No collateral without a regulated rail. Collateral is only as good as a final transfer, settled against payment in central bank money. An authorized venue, an approved settlement rail and a regulated custodian: it is the full chain that makes collateral credible, not the token on its own.

That is the order we followed when building SwissChain: the legal framework first, the infrastructure second. Putting that chain together teaches one lesson: a security can only really be put to work when every link is in place, from issuer to custodian.

FAQ

What is tokenized collateral?

An asset, such as a money market fund share or a security, recorded on a distributed ledger and pledged to secure a transaction: a derivative, a repo or a loan. Ownership can move quickly without selling the asset.

Can a Swiss tokenized security be used as collateral?

Legally, yes: a ledger-based security (art. 973d CO) can be transferred (art. 973f CO) and pledged, even without a transfer, as long as the security interest is visible in the register (art. 973g CO). In practice, acceptance depends on the counterparty, its haircuts and the custody and settlement infrastructure.

Why does delivery versus payment matter?

Because the security is only delivered if the payment is made, and the other way round. Neither side performs alone, which is essential for collateral.

Sources

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