We need more regulatory clarity to collateralise tokenised securities
14 October 2025
EJ Liotta, head of prime finance and equity derivatives at TS Imagine, on issues surrounding using tokenised securities as collateral and the implications for prime brokers
Image: EJ Liotta
Recent legislative support for the crypto industry has the potential to transform prime brokerage as tokenised securities emerge as a new source of collateral.
By some estimates, tokenisation could unlock up to US$2 trillion of underutilised collateral over the coming decades, reshaping how leverage, liquidity, and risk management function across global financial markets.
But using crypto for collateral still carries substantial risk. Smart contracts can be exploited, stablecoins can de-peg, and the legal enforceability of tokenised assets across jurisdictions remains uncertain.
Two decades of strict regulation following the global financial crisis has created a culture of ultra-compliance at financial institutions. To truly integrate tokenised securities into pools of high-quality collateral, more regulatory clarity is needed.
Tokenised assets spark collateral innovation
Collateral quality is essential for prime brokers. Hedge funds and other institutional clients pledge assets to secure loans and derivatives, and to meet margin requirements — with cash, equities, and bonds forming the backbone of these arrangements.
Tokenised collateral has the potential to significantly enhance this model. Stablecoins and tokenised Treasuries settle instantly, operate 24/7, and offer programmability and portability that traditional financial (TradFi) assets do not.
They have the potential to secure synthetic or delta-one positions, provide margin for cross-asset strategies, and facilitate near-real-time risk rebalancing. In securities lending, tokenised Treasuries could be pledged to borrow hard-to-secure equities or digital assets, expanding the collateral pool and improving execution.
Heading in the right direction with GENIUS and CLARITY
One of the most significant legislative achievements to date has been the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), which recognised Treasuries and fiat-backed stablecoins as legitimate financial instruments.
Congress has also introduced the CLARITY Act, aimed at assigning clear jurisdiction to market regulators over digital assets, while regulators have announced initiatives to harmonise oversight of leveraged and margined digital-asset markets. Both measures are important steps toward clarity and reducing fragmentation.
Real-time pricing, secure wallet integration and flexible custody arrangements are also crucial. But none of this infrastructure can truly scale without regulatory certainty.
Three key questions for legislators
How will tokenised securities be treated for margin and capital requirements?
What rules will govern custody, segregation, and enforceability across jurisdictions?
When can stablecoins and tokenised Treasuries be treated as high-quality collateral on par with cash and sovereign debt?
While the legislative and regulatory initiatives already in play are promising, and we are still in the early innings of a pro-crypto administration — the financial industry still lacks formal, practical rules on collateral eligibility, margin treatment, and custody standards.
Without these rules, tokenisation will remain an opaque and high-friction territory that invites time-consuming scrutiny from compliance officers.
If regulators can deliver clearer guidance to financial institutions on tokenised collateral, the industry can support safer, more efficient, and more liquid markets.
By some estimates, tokenisation could unlock up to US$2 trillion of underutilised collateral over the coming decades, reshaping how leverage, liquidity, and risk management function across global financial markets.
But using crypto for collateral still carries substantial risk. Smart contracts can be exploited, stablecoins can de-peg, and the legal enforceability of tokenised assets across jurisdictions remains uncertain.
Two decades of strict regulation following the global financial crisis has created a culture of ultra-compliance at financial institutions. To truly integrate tokenised securities into pools of high-quality collateral, more regulatory clarity is needed.
Tokenised assets spark collateral innovation
Collateral quality is essential for prime brokers. Hedge funds and other institutional clients pledge assets to secure loans and derivatives, and to meet margin requirements — with cash, equities, and bonds forming the backbone of these arrangements.
Tokenised collateral has the potential to significantly enhance this model. Stablecoins and tokenised Treasuries settle instantly, operate 24/7, and offer programmability and portability that traditional financial (TradFi) assets do not.
They have the potential to secure synthetic or delta-one positions, provide margin for cross-asset strategies, and facilitate near-real-time risk rebalancing. In securities lending, tokenised Treasuries could be pledged to borrow hard-to-secure equities or digital assets, expanding the collateral pool and improving execution.
Heading in the right direction with GENIUS and CLARITY
One of the most significant legislative achievements to date has been the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), which recognised Treasuries and fiat-backed stablecoins as legitimate financial instruments.
Congress has also introduced the CLARITY Act, aimed at assigning clear jurisdiction to market regulators over digital assets, while regulators have announced initiatives to harmonise oversight of leveraged and margined digital-asset markets. Both measures are important steps toward clarity and reducing fragmentation.
Real-time pricing, secure wallet integration and flexible custody arrangements are also crucial. But none of this infrastructure can truly scale without regulatory certainty.
Three key questions for legislators
How will tokenised securities be treated for margin and capital requirements?
What rules will govern custody, segregation, and enforceability across jurisdictions?
When can stablecoins and tokenised Treasuries be treated as high-quality collateral on par with cash and sovereign debt?
While the legislative and regulatory initiatives already in play are promising, and we are still in the early innings of a pro-crypto administration — the financial industry still lacks formal, practical rules on collateral eligibility, margin treatment, and custody standards.
Without these rules, tokenisation will remain an opaque and high-friction territory that invites time-consuming scrutiny from compliance officers.
If regulators can deliver clearer guidance to financial institutions on tokenised collateral, the industry can support safer, more efficient, and more liquid markets.
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