Unlocking the future of collateral
7 October 2025
Sam Edwards, head of collateral product at State Street Alpha, discusses the role of tokenisation in a digitally integrated market
Image: stock.adobe.com/nuclear_lily
The collateral landscape is undergoing a profound transformation. Regulatory reforms, market volatility, and the growing complexity of cross-asset financing are converging to place unprecedented demands on collateral efficiency, transparency, and mobility.
In this context, tokenisation of collateral — the process of representing real-world assets as digital tokens on distributed ledger technology (DLT) — is emerging as a powerful enabler of next-generation collateral management.
At State Street, we believe tokenisation is not just a technological innovation — it is a strategic imperative. As the industry prepares for further structural shifts such as the US Íø±¬³Ô¹Ï and Exchange Commission’s (SEC’s) US Treasury clearing mandate, the need for real-time, interoperable, and programmable collateral solutions has never been greater. Tokenisation offers a pathway to meet these demands while unlocking new efficiencies across the collateral lifecycle.
Traditional collateral management is constrained by fragmented infrastructure, manual processes, and time-zone-dependent settlement cycles. These inefficiencies are magnified in today’s environment of rising margin requirements, increased demand for high-quality liquid assets (HQLA), and the growing use of collateral in non-cleared and cleared markets alike.
Tokenisation addresses these challenges by enabling:
• Real-time settlement and mobility of collateral across platforms and geographies.
• Programmable workflows that automate eligibility checks, margin calls, and substitutions.
• Improved transparency and auditability through immutable transaction records.
• Fractionalisation, allowing more granular and efficient use of large-value assets.
By digitising collateral assets — whether cash, money market funds (MMFs), government bonds, or other eligible securities — tokenisation enhances their utility and responsiveness in dynamic market conditions.
State Street’s tokenisation approach
Our vision at State Street is to build a trusted, interoperable digital collateral network that integrates seamlessly with traditional market infrastructure. We are focused on three core pillars:
Tokenisation of traditional assets — we are working with clients and partners to tokenise a range of eligible collateral types, starting with MMFs and government bonds, and expanding to other fixed income and cash instruments. These tokens are issued on permissioned DLT networks, ensuring compliance with regulatory and operational standards. We are also exploring look-through capabilities for tokenised MMFs, enabling accurate assessment of underlying holdings. This ensures that collateral haircuts reflect the true risk profile of the fund, aligning with regulatory standards and improving margin efficiency.
Smart Contract-Driven Collateral Workflows — through smart contracts, we enable automated margining, eligibility validation, and substitution logic. This reduces operational risk and accelerates response times during periods of market stress.
Interoperability and custody integration — our digital collateral solutions are designed to integrate with existing custody, triparty, and clearing systems. We are also exploring cross-chain interoperability to support multi-venue collateral mobility.
State Street’s Collateral+ platform is central to our broader collateral strategy. Developed over the last five years, Collateral+ is designed to support a broad range of asset managers and owners, handling collateral activity across diverse custodial networks. It features a modular and scalable architecture that brings together operations, custody, funding, and analytics into a unified platform, enabling clients to streamline workflows and enhance collateral efficiency.
Our approach to collateral management is rooted in understanding and adapting to the evolving needs of our clients. Whether navigating regulatory complexity, optimising funding strategies, or streamlining operational workflows, we aim to deliver solutions that are both flexible and forward-looking. Our platforms — including Collateral+ — are built to support end-to-end processing across asset classes, enable modern triparty custody models, and provide access to funding tools that help close collateral gaps.
Advanced analytics and optimisation capabilities further empower clients to forecast margin requirements, reduce costs, and enhance portfolio performance. As market demands shift, we remain focused on delivering infrastructure and insights that help institutions respond with agility, precision, and confidence
Regulatory alignment, use cases, and strategic readiness
The regulatory environment is increasingly supportive of digital asset innovation, particularly where it enhances market transparency and systemic resilience. The SEC’s phased rollout of central clearing for US Treasuries is a clear example of this shift. As clearing obligations expand to encompass a broader range of counterparties and transaction types, the ability to mobilise collateral quickly and efficiently becomes not just beneficial — but essential.
The industry is actively collaborating with regulators, infrastructure providers, and industry bodies to ensure that digital solutions are aligned with emerging standards. Our work with clients has already demonstrated the practical value of tokenised collateral. For instance, institutions are leveraging tokenised assets to enable real-time liquidity provisioning, consolidate collateral across jurisdictions, and transform less liquid holdings into eligible collateral through smart contract protocols. These innovations are helping clients reduce settlement latency, optimise intraday collateral flows, and support near-instantaneous clearing cycles.
Looking ahead, the market for tokenised assets is expected to grow significantly, with projections ranging from US$2 trillion to US$9 trillion in market capitalisation by 2030. Institutional portfolios are anticipated to allocate more than seven per cent to tokenised assets by 2027. In response, State Street is preparing for future launch of tokenised collateral mobilisation capabilities. Foundational components — including our Digital Asset Platform (DAP), digital custody, and transfer agency — are advancing through development and integration phases.
While several key clients are aligned on readiness, formal go-live timelines remain subject to executive committee approval. While our current risk posture favours private chains, we are actively exploring support for public permissioned networks, subject to rigorous cyber, AML, and KYC standards. Notably, our strategy avoids reliance on crypto custody, allowing us to maintain a conservative risk profile while delivering meaningful innovation.
Industry collaboration and the road ahead
No single institution can drive this transformation alone. That is why State Street is committed to collaborative innovation. We are working with fintechs, custodians, CCPs, and peer institutions to establish common standards, interoperability frameworks, and governance models for tokenised collateral.
As incumbent triparty agents advance their own platforms, State Street is investing in a DLT-based triparty solution that enables real-time settlement, automated substitutions, and programmable risk management. This initiative positions us to capture balances, reduce operational risk, and offer clients a seamless collateral experience without the need for physical asset movement.
We anticipate several developments will shape the future of this space. Tokenised asset classes are expected to expand beyond MMFs and government bonds to include equities, credit instruments, and thematic securities. Integration with decentralised finance (DeFi) protocols will open new avenues for collateralised lending and liquidity provisioning in regulated environments.
Meanwhile, AI-driven analytics will support predictive margining and stress testing, and tokenised fund products will be deployed using FIAT, stablecoins, and tokenised deposits. These capabilities will enable 24/7 collateral mobility and settlement outside traditional banking hours, further enhancing market agility.
Recent developments in swapping stablecoins for fund units on exchanges are paving the way for tokenised MMFs to be used in trading and lending activities — such as repo — on public chains. This evolution supports broader adoption of tokenised collateral in regulated environments, while maintaining liquidity and compliance.
What the next 12 months might hold
The coming year will be pivotal for both Collateral+ and the broader market. Internally, we expect to continue building out our digital custody and tokenisation infrastructure, and advance real-world programmes with early adopter clients to validate tokenised collateral workflows. Collateral+ will continue to evolve, with expanded capabilities supporting modular, subscription-based services and AI-driven margin forecasting. Integration with platforms like Appian and Aladdin will deepen, enabling dual order management system (OMS) collateralisation and sleeve-level optimisation.
Externally, we anticipate continued regulatory momentum around digital assets and tokenised securities. Adoption of tokenisation in cleared derivatives markets is likely to accelerate, as highlighted by industry bodies such as the International Swaps and Derivatives Association (ISDA) and DerivSource. Volatile macroeconomic conditions will further drive demand for real-time collateral mobility and dynamic liquidity provisioning.
The tokenisation of collateral is no longer a distant vision — it is a present-day opportunity. As the industry embraces digital transformation, tokenised collateral will become a cornerstone of more agile, transparent, and resilient financial markets.
At State Street, we are proud to be at the forefront of this evolution. By combining our legacy of trust, with cutting-edge technology, we are helping clients navigate complexity and unlock new value in the digital age.
In this context, tokenisation of collateral — the process of representing real-world assets as digital tokens on distributed ledger technology (DLT) — is emerging as a powerful enabler of next-generation collateral management.
At State Street, we believe tokenisation is not just a technological innovation — it is a strategic imperative. As the industry prepares for further structural shifts such as the US Íø±¬³Ô¹Ï and Exchange Commission’s (SEC’s) US Treasury clearing mandate, the need for real-time, interoperable, and programmable collateral solutions has never been greater. Tokenisation offers a pathway to meet these demands while unlocking new efficiencies across the collateral lifecycle.
Traditional collateral management is constrained by fragmented infrastructure, manual processes, and time-zone-dependent settlement cycles. These inefficiencies are magnified in today’s environment of rising margin requirements, increased demand for high-quality liquid assets (HQLA), and the growing use of collateral in non-cleared and cleared markets alike.
Tokenisation addresses these challenges by enabling:
• Real-time settlement and mobility of collateral across platforms and geographies.
• Programmable workflows that automate eligibility checks, margin calls, and substitutions.
• Improved transparency and auditability through immutable transaction records.
• Fractionalisation, allowing more granular and efficient use of large-value assets.
By digitising collateral assets — whether cash, money market funds (MMFs), government bonds, or other eligible securities — tokenisation enhances their utility and responsiveness in dynamic market conditions.
State Street’s tokenisation approach
Our vision at State Street is to build a trusted, interoperable digital collateral network that integrates seamlessly with traditional market infrastructure. We are focused on three core pillars:
Tokenisation of traditional assets — we are working with clients and partners to tokenise a range of eligible collateral types, starting with MMFs and government bonds, and expanding to other fixed income and cash instruments. These tokens are issued on permissioned DLT networks, ensuring compliance with regulatory and operational standards. We are also exploring look-through capabilities for tokenised MMFs, enabling accurate assessment of underlying holdings. This ensures that collateral haircuts reflect the true risk profile of the fund, aligning with regulatory standards and improving margin efficiency.
Smart Contract-Driven Collateral Workflows — through smart contracts, we enable automated margining, eligibility validation, and substitution logic. This reduces operational risk and accelerates response times during periods of market stress.
Interoperability and custody integration — our digital collateral solutions are designed to integrate with existing custody, triparty, and clearing systems. We are also exploring cross-chain interoperability to support multi-venue collateral mobility.
State Street’s Collateral+ platform is central to our broader collateral strategy. Developed over the last five years, Collateral+ is designed to support a broad range of asset managers and owners, handling collateral activity across diverse custodial networks. It features a modular and scalable architecture that brings together operations, custody, funding, and analytics into a unified platform, enabling clients to streamline workflows and enhance collateral efficiency.
Our approach to collateral management is rooted in understanding and adapting to the evolving needs of our clients. Whether navigating regulatory complexity, optimising funding strategies, or streamlining operational workflows, we aim to deliver solutions that are both flexible and forward-looking. Our platforms — including Collateral+ — are built to support end-to-end processing across asset classes, enable modern triparty custody models, and provide access to funding tools that help close collateral gaps.
Advanced analytics and optimisation capabilities further empower clients to forecast margin requirements, reduce costs, and enhance portfolio performance. As market demands shift, we remain focused on delivering infrastructure and insights that help institutions respond with agility, precision, and confidence
Regulatory alignment, use cases, and strategic readiness
The regulatory environment is increasingly supportive of digital asset innovation, particularly where it enhances market transparency and systemic resilience. The SEC’s phased rollout of central clearing for US Treasuries is a clear example of this shift. As clearing obligations expand to encompass a broader range of counterparties and transaction types, the ability to mobilise collateral quickly and efficiently becomes not just beneficial — but essential.
The industry is actively collaborating with regulators, infrastructure providers, and industry bodies to ensure that digital solutions are aligned with emerging standards. Our work with clients has already demonstrated the practical value of tokenised collateral. For instance, institutions are leveraging tokenised assets to enable real-time liquidity provisioning, consolidate collateral across jurisdictions, and transform less liquid holdings into eligible collateral through smart contract protocols. These innovations are helping clients reduce settlement latency, optimise intraday collateral flows, and support near-instantaneous clearing cycles.
Looking ahead, the market for tokenised assets is expected to grow significantly, with projections ranging from US$2 trillion to US$9 trillion in market capitalisation by 2030. Institutional portfolios are anticipated to allocate more than seven per cent to tokenised assets by 2027. In response, State Street is preparing for future launch of tokenised collateral mobilisation capabilities. Foundational components — including our Digital Asset Platform (DAP), digital custody, and transfer agency — are advancing through development and integration phases.
While several key clients are aligned on readiness, formal go-live timelines remain subject to executive committee approval. While our current risk posture favours private chains, we are actively exploring support for public permissioned networks, subject to rigorous cyber, AML, and KYC standards. Notably, our strategy avoids reliance on crypto custody, allowing us to maintain a conservative risk profile while delivering meaningful innovation.
Industry collaboration and the road ahead
No single institution can drive this transformation alone. That is why State Street is committed to collaborative innovation. We are working with fintechs, custodians, CCPs, and peer institutions to establish common standards, interoperability frameworks, and governance models for tokenised collateral.
As incumbent triparty agents advance their own platforms, State Street is investing in a DLT-based triparty solution that enables real-time settlement, automated substitutions, and programmable risk management. This initiative positions us to capture balances, reduce operational risk, and offer clients a seamless collateral experience without the need for physical asset movement.
We anticipate several developments will shape the future of this space. Tokenised asset classes are expected to expand beyond MMFs and government bonds to include equities, credit instruments, and thematic securities. Integration with decentralised finance (DeFi) protocols will open new avenues for collateralised lending and liquidity provisioning in regulated environments.
Meanwhile, AI-driven analytics will support predictive margining and stress testing, and tokenised fund products will be deployed using FIAT, stablecoins, and tokenised deposits. These capabilities will enable 24/7 collateral mobility and settlement outside traditional banking hours, further enhancing market agility.
Recent developments in swapping stablecoins for fund units on exchanges are paving the way for tokenised MMFs to be used in trading and lending activities — such as repo — on public chains. This evolution supports broader adoption of tokenised collateral in regulated environments, while maintaining liquidity and compliance.
What the next 12 months might hold
The coming year will be pivotal for both Collateral+ and the broader market. Internally, we expect to continue building out our digital custody and tokenisation infrastructure, and advance real-world programmes with early adopter clients to validate tokenised collateral workflows. Collateral+ will continue to evolve, with expanded capabilities supporting modular, subscription-based services and AI-driven margin forecasting. Integration with platforms like Appian and Aladdin will deepen, enabling dual order management system (OMS) collateralisation and sleeve-level optimisation.
Externally, we anticipate continued regulatory momentum around digital assets and tokenised securities. Adoption of tokenisation in cleared derivatives markets is likely to accelerate, as highlighted by industry bodies such as the International Swaps and Derivatives Association (ISDA) and DerivSource. Volatile macroeconomic conditions will further drive demand for real-time collateral mobility and dynamic liquidity provisioning.
The tokenisation of collateral is no longer a distant vision — it is a present-day opportunity. As the industry embraces digital transformation, tokenised collateral will become a cornerstone of more agile, transparent, and resilient financial markets.
At State Street, we are proud to be at the forefront of this evolution. By combining our legacy of trust, with cutting-edge technology, we are helping clients navigate complexity and unlock new value in the digital age.
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