Tokenisation has become one of the most prominent themes in financial markets, with industry participants exploring everything from stablecoins and tokenised deposits, to money market funds (MMFs) and digital US Treasuries.
While much of the attention has focused on the cash leg of transactions, Jordan Goldman, chief operating officer and president of M1X Global, suggests the real challenge lies elsewhere.
鈥淎 repo is ultimately an exchange of cash for collateral,鈥� Goldman explains. 鈥淢ost tokenisation work to date has focused on digitising cash, but tokenising only cash leaves you with half an onchain trade.鈥�
For Goldman, the issue is straightforward; if cash moves onchain while collateral remains tied to traditional market infrastructure, many of the efficiencies promised by tokenisation fail to materialise. Settlement remains constrained by the slowest leg of the transaction, preventing the industry from fully realising benefits such as atomic settlement and continuous delivery-versus-payment (DvP).
He highlights the legal and operational complexity of collateral as a key reason why progress has been slower. Questions around title transfer, rehypothecation rights, close-out netting, and bankruptcy protections must all be addressed before institutions can comfortably move collateral onto distributed ledger infrastructure.
According to Goldman, the consequences are already visible in the market. Despite technological advances elsewhere, collateral velocity has declined from around 3 times before the global financial crisis, to approximately 2鈥�2.4 times today 鈥� meaning larger pools of collateral are required to support the same level of activity.
Digital native
As tokenised Treasury products continue to emerge, Goldman believes an important distinction exists between tokenised representations of existing securities and instruments that are issued natively onchain.
Many current offerings, he notes, represent digital claims on assets held elsewhere, whether through fund structures or custodial arrangements. In these cases, the token and the underlying legal instrument remain separate.
USDM1, which M1X Global helped to develop with the Republic of the Marshall Islands government, takes a different approach.
Goldman describes it as a US dollar-denominated, blockchain-native sovereign bond, issued directly by the Government of the Republic of the Marshall Islands under New York law, and backed one-for-one by short-duration US Treasuries.
鈥淭he onchain instrument is the dematerialised bond,鈥� he says. 鈥淭itle moves with the instrument.鈥�
This structure, Goldman suggests, creates advantages beyond operational efficiency. Because the instrument is designed around established sovereign debt principles and existing legal frameworks, it can fit within institutional collateral and capital treatment regimes in ways that many tokenised products cannot.
He notes that the structure supports sovereign look-through treatment for high-quality liquid assets (HQLA) under Basel standards and benefits from established US close-out netting protections.
For institutional market participants, Goldman says the legal structure ultimately matters as much as the technology.
The cost of trapped collateral
The importance of collateral efficiency becomes particularly apparent when viewed against the scale of the repo market.
Goldman points to the US repo market, which he says averages approximately US$12.6 trillion in gross daily exposures, much of it secured by Treasury collateral. Despite this scale, collateral continues to move through settlement cycles, custodial networks, and processing windows designed for a previous era.
As a result, Goldman argues, high-quality collateral frequently sits idle when it could be generating value. 鈥淐ollateral still runs on legacy rails,鈥� he says. 鈥淚t remains trapped overnight, over weekends, or simply in the wrong place.鈥�
The challenge has become more acute following the move to T+1 settlement in the US and the ongoing implementation of Basel 3.1 reforms, both of which increase pressure on institutions to source, substitute, and mobilise collateral more efficiently.
Continuous settlement, he notes, could dramatically improve collateral utilisation. 鈥淥ur analysis suggests that continuous, atomic settlement could roughly double effective collateral velocity, from around 2.2 times to 4.4 times,鈥� he explains.
In practical terms, this would allow the same pool of collateral to support significantly more financing activity while reducing settlement fails, liquidity buffers, and funding costs.
Interoperability and institutional adoption
While distributed ledger technology continues to evolve, Goldman believes interoperability remains one of the most important considerations for the future of tokenised collateral. 鈥淐ollateral is only useful if it can move to where it is needed,鈥� he states.
However, he believes interoperability extends beyond simply connecting different blockchains.
The greater challenge lies in ensuring legal certainty as collateral moves across platforms, custodians, and jurisdictions, preserving enforceability, title transfer rights, and netting protections throughout the process.
For this reason, Goldman believes the industry should focus less on creating entirely new frameworks, and more on ensuring compatibility with existing market standards.
鈥淭he most valuable interoperability is compatibility with the systems institutions already trust,鈥� he says.
He highlights existing industry initiatives, including M1X Global and USDM1 participating in the International Swaps and Derivatives Association and Global Digital Finance working group examining tokenised collateral in US markets, as examples of how regulatory, legal, and operational questions are being addressed collaboratively.
Building the next collateral ecosystem
Although tokenisation discussions frequently focus on stablecoins, tokenised deposits, and MMFs, Goldman views these products as serving a fundamentally different purpose within market infrastructure.
鈥淭he categories get grouped together, but they sit at different points in a trade,鈥� he explains.
In his view, stablecoins, deposits, and tokenised cash products are primarily focused on the payment leg of a transaction, while sovereign bonds continue to serve as the collateral foundation of the financial system.
That distinction becomes increasingly important as institutions seek to build fully digital market infrastructure. Even if tokenised cash becomes widely adopted, it still requires high-quality collateral against which transactions can settle.
鈥淪overeign bonds are the collateral that the financial system is actually built around,鈥� Goldman says.
As tokenisation matures, he expects digital sovereign bonds, stablecoins, tokenised cash, and other real-world assets to coexist within a broader ecosystem, each serving distinct functions.
He notes that for M1X Global, the opportunity lies in creating a collateral instrument capable of operating continuously while retaining the legal certainty, capital treatment, and risk-management characteristics institutions require.
鈥淐apital efficiency is driven by legal structure,鈥� Goldman concludes. 鈥淭he goal is to provide sovereign collateral that moves at the speed of modern markets while maintaining the compatibility and enforceability regulated institutions depend on.鈥�
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