Theatre is over
03 February 2026
Glenn Handley, founder and CEO of SecFin Solutions, looks at why T+1 settlement and structural balance sheet pressures leave tokenisation not as an efficiency play, but as a necessity for systemic survival
Image: stock.adobe.com/Bilal Ulker
The end of the pilot phase
The financial services industry has spent the better part of a decade trapped in a cycle of ‘innovation theatre’. We have attended countless conferences, sat through glossy presentations on the future of money, and watched as proof of concepts (PoCs) were launched with fanfare only to be quietly decommissioned six months later. For the serious practitioner — the trader, the treasurer, the collateral manager — distributed ledger technology (DLT) has largely been viewed as a solution in search of a problem.
I am here to tell you that this era is over.
Having spent 35 years in the trenches of global securities finance markets — trading through six major financial crises from the exchange rate mechanism (ERM) debacle of 1992 to the liability-driven investment (LDI) implosion of 2022 — one develops a specific perspective. It is not that of a technologist, but of a plumber. At SecFin Solutions, we focus on the mechanics of liquidity and collateral, caring less about the theoretical ‘future of money’ and more about whether the pipes work, whether the pressure is sustainable, and whether the system can handle the flow when the valves are opened wide.
The market intelligence I am receiving today indicates that our plumbing is breaking. We are witnessing a convergence of structural pressures that legacy infrastructure simply cannot handle. The repo market is facing a ‘velocity Crisis’, where collateral velocity has degraded to levels that threaten systemic seizure. Simultaneously, the regulatory enforcement of T+1 settlement is applying Formula 1 compression to an engine designed in the 1980s.
The argument for tokenisation is no longer about efficiency or modernisation. It is about mathematical survival. We are running a US$100 trillion market on a shrinking base of mobile collateral. The only way to solve this equation without adding dangerous leverage is to increase the velocity of assets through atomic, intraday settlement.
The anatomy of fragility: The velocity crisis
To understand why the system is creaking, we must look beyond the headline rates of SOFR or SONIA and examine the underlying physics of the market. The most critical metric for the health of the repo market is not the price of money, but the speed at which collateral moves.
The mathematics of collateral velocity
Collateral velocity measures how many times a single unit of high-quality liquid assets (HQLA) — such as a US Treasury bond or a UK gilt -—is rehypothecated to support funding obligations. Before the 2008 Global Financial Crisis, estimated collateral velocity was approximately 3.0x. This meant that for every US$1 billion of physical collateral issued, the market could support US$3 billion of secured funding transactions.
Today, based on market analysis and data tracked by SecFin Solutions, that velocity has degraded to approximately 2.1x. We are effectively attempting to run a global financial system with exposure stacks exceeding US$100 trillion on a base of approximately US$7 trillion of actual, mobile collateral.
The implication of sub-2.0x velocity
This decline is a flashing red warning light. As velocity drops, the friction of moving collateral increases. When velocity approaches 2.0x, the system loses its elasticity.
Liquidity hoarding
In a low-velocity environment, dealers become terrified of being caught short. If they cannot rely on the market to return collateral efficiently, they stop lending it out. This creates a feedback loop where hoarding further reduces velocity, leading to sudden seizures in funding markets.
The zero-haircut trap
We are currently seeing a disturbing trend where roughly half of the UK gilt repo market is trading at zero haircuts. This is a sign of desperation. To maintain deal flow in a constrained environment, lenders are eroding their risk buffers. In a low-velocity world, if a counterparty defaults, the lack of a haircut means there is no cushion.
The ‘Great Unwind’ failure
Compounding this is the failure of central banks to normalise balance sheets effectively. As the Federal Reserve drains reserves via quantitative tightening (QT), the reliance on the private repo market to redistribute liquidity increases. But a market hobbled by 2.1x velocity cannot circulate this liquidity fast enough. We are removing the central bank safety net at the exact moment the market is losing its grip on the collateral bars.
The ‘antique’ reality of T+1 vs. ‘The Atomic Future’
While regulators present the transition to T+1 settlement as modernisation, I argue it is a ‘faster horse’ when we need an internal combustion engine.
The friction of compression
Moving from T+2 to T+1 compresses the time available for trade matching, allocation, and funding by 50 per cent. In the US, this is manageable due to a unified depository (Depository Trust & Clearing Corporation). In Europe, forcing T+1 onto a fragmented landscape of multiple central securities depositories (Euroclear, Clearstream, Monte Titoli, etc.) without fixing underlying interoperability is a recipe for a massive spike in fail rates.
The most glaring flaw is the FX mismatch. Most FX trades settle on T+2. If a European asset manager buys a US Treasury settling T+1, they must execute the FX trade to fund that purchase on T+0 or T+1.
This pushes FX execution into the illiquid late-afternoon window or forces reliance on Continuous Linked Settlement (CLS) systems that may not have capacity, creating a structural funding gap.
The atomic alternative:
Intraday repo
Contrast the friction of T+1 with the reality of atomic settlement. Atomic settlement implies that the exchange of cash and securities happens simultaneously and instantaneously. But the real revolution is Intraday Repo.
In a T+1 world, the smallest unit of time you can borrow money for is one day. In a tokenised, atomic world, you can borrow money for hours, or even minutes. A European asset manager facing a funding gap could tokenise their existing gilt holdings, pledge them into an intraday repo facility for four hours to bridge the FX settlement gap, and then release them. This turns a funding crisis into a routine, automated optimisation.
At SecFin Solutions, we estimate that for a mid-sized NBFI, the drag caused by T+1 pre-funding and settlement fails can amount to 15-20 basis points of lost yield annually. Atomic settlement eliminates this drag, allowing firms to run ‘just-in-time’ liquidity.
Proof of production:
The Eurosystem DLT trials
Skeptics often dismiss DLT as vapourware, arguing it cannot handle wholesale market volumes. In 2024, the Eurosystem (the European Central Bank and national central banks) proved them wrong.
The numbers that kill the ‘pilot’ narrative
Between May and November 2024, the Eurosystem conducted trials for wholesale settlement in central bank money using DLT.
The results were unequivocal: over 200 transactions settled with a total value of €1.59 billion.
This involved 64 institutions, including major commercial banks like BNP Paribas and Goldman Sachs, and market infrastructure providers like Clearstream and Eurex.
They settled real transactions, using real central bank money, across real borders.
The Holy Grail:
Intraday DvP repo
Perhaps the most critical milestone for the repo market was the successful execution of intraday delivery versus payment (DvP) repo transactions by Goldman Sachs, Clearstream, and HQLAX. In these live transactions, cash was borrowed against collateral held on a DLT platform.
The trade was agreed, executed, settled, and unwound within the same trading day.
This validates the core thesis: DLT is not just about recording ownership, but about enabling mobility. It proved that collateral can be moved across the fragmented European custodial landscape without being trapped in multiday settlement cycles. It proved that 2.1x velocity can be uncapped.
Following these trials, the European Central Bank (ECB) committed to a dual-track strategy: Pontes (a short-term solution for DLT settlement) and Appia (a long-term vision for a unified European ledger).
The central banks are building the rails. We are now in the build phase.
The new systemic risks:
NBFIs and stablecoins
The repo market has fundamentally changed since 2008. Banks are no longer the sole holders of collateral. The rise of non-bank financial institutions (NBFIs) and stablecoins has created new nodes of risk in the plumbing.
NBFIs — pension funds, insurers, hedge funds — now control nearly half of global financial assets, estimated at £47 trillion. Unlike banks, these entities do not have direct access to central bank discount windows. They rely entirely on the private repo market for liquidity.
The LDI crisis of 2022 was a velocity crisis. Pension funds held plenty of assets, but couldn’t transform them into cash fast enough to meet margin calls.
Tokenisation offers the only viable solution. If pension funds held tokenised assets that could be instantly pledged via smart contracts, the time to liquidity would be reduced from days to seconds.
Stablecoins:
The transmission mechanism
Stablecoins are fast becoming a critical component of the repo ecosystem. Major issuers are now among the largest holders
of US Treasury bills. However, a run on a major stablecoin is no longer just a crypto event; it is a repo market event. If holders redeem billions overnight, the issuer must liquidate T-bills or reverse repo positions instantly, sending shockwaves through short-term yields.
Conversely, qualified stablecoins could serve as the digital cash leg for the repo market, offering 24/7 settlement capability and solving the banking hours problem that restricts traditional repo.
Strategic roadmap:
Survival of the fastest
The market is bifurcating. On one side are the ‘antique’ players relying on T+1 and spreadsheets. On the other are the ‘atomic’ players building connectivity to DLT platforms and optimising intraday liquidity.
The done-away clearing model
The US Íø±¬³Ô¹Ï and Exchange Commission’s (SEC’s) mandate for central clearing of US Treasuries is the catalyst that will force the industry’s hand.
By June 2026, trillions of dollars of repo transactions must be centrally cleared. This will crush the economics of the current bilateral model.
To make clearing economic, the market must adopt the done-away model, where execution happens on agile digital platforms but trades are done away to a central counterparty (CCP) for netting.
This requires seamless, real-time connectivity. Tokenisation is the architectural glue that makes this possible, allowing for instantaneous pledging of margin to CCPs.
Actionable steps for market participants
Drawing on my experience advising firms through SecFin Solutions, here is the survival checklist:
Digital gap analysis
Measure your collateral velocity. If you cannot move an asset from custody to a counterparty in under 30 minutes, you are obsolete.
Diverse connectivity
Ensure your systems can talk to aggregators like HQLAX, J. P. Morgan’s Kinexys, and the emerging Eurosystem rails.
Hybrid risk models
Current value at risk (VaR) models assume one-day holding periods. In an atomic world, you need intraday risk models that account for smart contract risk alongside credit risk.
End the zero-haircut addiction
Prepare for positive haircuts. The clearing mandate will make zero-haircut trades unsustainable. Review every such position on your books today.
Table 1: The Evolution of Repo Infrastructure
Table 2: Key Data from Eurosystem DLT Trials
The mathematical inevitability
The repo market is a creature of mathematics defined by rates, haircuts, time, and velocity.
Velocity is falling due to balance sheet constraints.
Time is the enemy; settlement latency creates risk.
Capital is becoming scarcer as central banks withdraw liquidity.
Tokenisation is the only available technology that positively alters all three variables simultaneously.
It increases velocity by allowing assets to be reused intraday; it reduces time to zero through atomic settlement; and it frees up capital by enabling precise, automated collateral management.
The Eurosystem trials have proven the technology works at scale.
The 2.1x velocity crisis proves the current system is failing. The mandatory clearing deadlines prove the clock is ticking.
Innovation theatre is over. It is time to stop applauding the concept of digital assets and start using them to rewire the machine before it seizes up completely.
The financial services industry has spent the better part of a decade trapped in a cycle of ‘innovation theatre’. We have attended countless conferences, sat through glossy presentations on the future of money, and watched as proof of concepts (PoCs) were launched with fanfare only to be quietly decommissioned six months later. For the serious practitioner — the trader, the treasurer, the collateral manager — distributed ledger technology (DLT) has largely been viewed as a solution in search of a problem.
I am here to tell you that this era is over.
Having spent 35 years in the trenches of global securities finance markets — trading through six major financial crises from the exchange rate mechanism (ERM) debacle of 1992 to the liability-driven investment (LDI) implosion of 2022 — one develops a specific perspective. It is not that of a technologist, but of a plumber. At SecFin Solutions, we focus on the mechanics of liquidity and collateral, caring less about the theoretical ‘future of money’ and more about whether the pipes work, whether the pressure is sustainable, and whether the system can handle the flow when the valves are opened wide.
The market intelligence I am receiving today indicates that our plumbing is breaking. We are witnessing a convergence of structural pressures that legacy infrastructure simply cannot handle. The repo market is facing a ‘velocity Crisis’, where collateral velocity has degraded to levels that threaten systemic seizure. Simultaneously, the regulatory enforcement of T+1 settlement is applying Formula 1 compression to an engine designed in the 1980s.
The argument for tokenisation is no longer about efficiency or modernisation. It is about mathematical survival. We are running a US$100 trillion market on a shrinking base of mobile collateral. The only way to solve this equation without adding dangerous leverage is to increase the velocity of assets through atomic, intraday settlement.
The anatomy of fragility: The velocity crisis
To understand why the system is creaking, we must look beyond the headline rates of SOFR or SONIA and examine the underlying physics of the market. The most critical metric for the health of the repo market is not the price of money, but the speed at which collateral moves.
The mathematics of collateral velocity
Collateral velocity measures how many times a single unit of high-quality liquid assets (HQLA) — such as a US Treasury bond or a UK gilt -—is rehypothecated to support funding obligations. Before the 2008 Global Financial Crisis, estimated collateral velocity was approximately 3.0x. This meant that for every US$1 billion of physical collateral issued, the market could support US$3 billion of secured funding transactions.
Today, based on market analysis and data tracked by SecFin Solutions, that velocity has degraded to approximately 2.1x. We are effectively attempting to run a global financial system with exposure stacks exceeding US$100 trillion on a base of approximately US$7 trillion of actual, mobile collateral.
The implication of sub-2.0x velocity
This decline is a flashing red warning light. As velocity drops, the friction of moving collateral increases. When velocity approaches 2.0x, the system loses its elasticity.
Liquidity hoarding
In a low-velocity environment, dealers become terrified of being caught short. If they cannot rely on the market to return collateral efficiently, they stop lending it out. This creates a feedback loop where hoarding further reduces velocity, leading to sudden seizures in funding markets.
The zero-haircut trap
We are currently seeing a disturbing trend where roughly half of the UK gilt repo market is trading at zero haircuts. This is a sign of desperation. To maintain deal flow in a constrained environment, lenders are eroding their risk buffers. In a low-velocity world, if a counterparty defaults, the lack of a haircut means there is no cushion.
The ‘Great Unwind’ failure
Compounding this is the failure of central banks to normalise balance sheets effectively. As the Federal Reserve drains reserves via quantitative tightening (QT), the reliance on the private repo market to redistribute liquidity increases. But a market hobbled by 2.1x velocity cannot circulate this liquidity fast enough. We are removing the central bank safety net at the exact moment the market is losing its grip on the collateral bars.
The ‘antique’ reality of T+1 vs. ‘The Atomic Future’
While regulators present the transition to T+1 settlement as modernisation, I argue it is a ‘faster horse’ when we need an internal combustion engine.
The friction of compression
Moving from T+2 to T+1 compresses the time available for trade matching, allocation, and funding by 50 per cent. In the US, this is manageable due to a unified depository (Depository Trust & Clearing Corporation). In Europe, forcing T+1 onto a fragmented landscape of multiple central securities depositories (Euroclear, Clearstream, Monte Titoli, etc.) without fixing underlying interoperability is a recipe for a massive spike in fail rates.
The most glaring flaw is the FX mismatch. Most FX trades settle on T+2. If a European asset manager buys a US Treasury settling T+1, they must execute the FX trade to fund that purchase on T+0 or T+1.
This pushes FX execution into the illiquid late-afternoon window or forces reliance on Continuous Linked Settlement (CLS) systems that may not have capacity, creating a structural funding gap.
The atomic alternative:
Intraday repo
Contrast the friction of T+1 with the reality of atomic settlement. Atomic settlement implies that the exchange of cash and securities happens simultaneously and instantaneously. But the real revolution is Intraday Repo.
In a T+1 world, the smallest unit of time you can borrow money for is one day. In a tokenised, atomic world, you can borrow money for hours, or even minutes. A European asset manager facing a funding gap could tokenise their existing gilt holdings, pledge them into an intraday repo facility for four hours to bridge the FX settlement gap, and then release them. This turns a funding crisis into a routine, automated optimisation.
At SecFin Solutions, we estimate that for a mid-sized NBFI, the drag caused by T+1 pre-funding and settlement fails can amount to 15-20 basis points of lost yield annually. Atomic settlement eliminates this drag, allowing firms to run ‘just-in-time’ liquidity.
Proof of production:
The Eurosystem DLT trials
Skeptics often dismiss DLT as vapourware, arguing it cannot handle wholesale market volumes. In 2024, the Eurosystem (the European Central Bank and national central banks) proved them wrong.
The numbers that kill the ‘pilot’ narrative
Between May and November 2024, the Eurosystem conducted trials for wholesale settlement in central bank money using DLT.
The results were unequivocal: over 200 transactions settled with a total value of €1.59 billion.
This involved 64 institutions, including major commercial banks like BNP Paribas and Goldman Sachs, and market infrastructure providers like Clearstream and Eurex.
They settled real transactions, using real central bank money, across real borders.
The Holy Grail:
Intraday DvP repo
Perhaps the most critical milestone for the repo market was the successful execution of intraday delivery versus payment (DvP) repo transactions by Goldman Sachs, Clearstream, and HQLAX. In these live transactions, cash was borrowed against collateral held on a DLT platform.
The trade was agreed, executed, settled, and unwound within the same trading day.
This validates the core thesis: DLT is not just about recording ownership, but about enabling mobility. It proved that collateral can be moved across the fragmented European custodial landscape without being trapped in multiday settlement cycles. It proved that 2.1x velocity can be uncapped.
Following these trials, the European Central Bank (ECB) committed to a dual-track strategy: Pontes (a short-term solution for DLT settlement) and Appia (a long-term vision for a unified European ledger).
The central banks are building the rails. We are now in the build phase.
The new systemic risks:
NBFIs and stablecoins
The repo market has fundamentally changed since 2008. Banks are no longer the sole holders of collateral. The rise of non-bank financial institutions (NBFIs) and stablecoins has created new nodes of risk in the plumbing.
NBFIs — pension funds, insurers, hedge funds — now control nearly half of global financial assets, estimated at £47 trillion. Unlike banks, these entities do not have direct access to central bank discount windows. They rely entirely on the private repo market for liquidity.
The LDI crisis of 2022 was a velocity crisis. Pension funds held plenty of assets, but couldn’t transform them into cash fast enough to meet margin calls.
Tokenisation offers the only viable solution. If pension funds held tokenised assets that could be instantly pledged via smart contracts, the time to liquidity would be reduced from days to seconds.
Stablecoins:
The transmission mechanism
Stablecoins are fast becoming a critical component of the repo ecosystem. Major issuers are now among the largest holders
of US Treasury bills. However, a run on a major stablecoin is no longer just a crypto event; it is a repo market event. If holders redeem billions overnight, the issuer must liquidate T-bills or reverse repo positions instantly, sending shockwaves through short-term yields.
Conversely, qualified stablecoins could serve as the digital cash leg for the repo market, offering 24/7 settlement capability and solving the banking hours problem that restricts traditional repo.
Strategic roadmap:
Survival of the fastest
The market is bifurcating. On one side are the ‘antique’ players relying on T+1 and spreadsheets. On the other are the ‘atomic’ players building connectivity to DLT platforms and optimising intraday liquidity.
The done-away clearing model
The US Íø±¬³Ô¹Ï and Exchange Commission’s (SEC’s) mandate for central clearing of US Treasuries is the catalyst that will force the industry’s hand.
By June 2026, trillions of dollars of repo transactions must be centrally cleared. This will crush the economics of the current bilateral model.
To make clearing economic, the market must adopt the done-away model, where execution happens on agile digital platforms but trades are done away to a central counterparty (CCP) for netting.
This requires seamless, real-time connectivity. Tokenisation is the architectural glue that makes this possible, allowing for instantaneous pledging of margin to CCPs.
Actionable steps for market participants
Drawing on my experience advising firms through SecFin Solutions, here is the survival checklist:
Digital gap analysis
Measure your collateral velocity. If you cannot move an asset from custody to a counterparty in under 30 minutes, you are obsolete.
Diverse connectivity
Ensure your systems can talk to aggregators like HQLAX, J. P. Morgan’s Kinexys, and the emerging Eurosystem rails.
Hybrid risk models
Current value at risk (VaR) models assume one-day holding periods. In an atomic world, you need intraday risk models that account for smart contract risk alongside credit risk.
End the zero-haircut addiction
Prepare for positive haircuts. The clearing mandate will make zero-haircut trades unsustainable. Review every such position on your books today.
Table 1: The Evolution of Repo Infrastructure
Table 2: Key Data from Eurosystem DLT Trials
The mathematical inevitability
The repo market is a creature of mathematics defined by rates, haircuts, time, and velocity.
Velocity is falling due to balance sheet constraints.
Time is the enemy; settlement latency creates risk.
Capital is becoming scarcer as central banks withdraw liquidity.
Tokenisation is the only available technology that positively alters all three variables simultaneously.
It increases velocity by allowing assets to be reused intraday; it reduces time to zero through atomic settlement; and it frees up capital by enabling precise, automated collateral management.
The Eurosystem trials have proven the technology works at scale.
The 2.1x velocity crisis proves the current system is failing. The mandatory clearing deadlines prove the clock is ticking.
Innovation theatre is over. It is time to stop applauding the concept of digital assets and start using them to rewire the machine before it seizes up completely.
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