What if collateral moved at market speed?
The derivatives and financing markets live with a quiet paradox. To meet their obligations, firms hold liquid, low-risk assets such as money market fund shares, government debt, or cash. When a margin call arrives, those liquid assets often cannot be mobilized directly. They have to be converted first. The result is a chain of steps that consumes time, ties up liquidity, and adds friction at the very moment it matters most.
Convert before you can move
Take a company that parks its treasury in a money market fund. The money is safe and liquid, and because it is held as fund shares, it earns a moderate yield.
When that company has to post collateral, the usual route is to sell the shares, receive the cash, and only then deliver it as collateral. Afterward, the custodian typically sweeps that cash back into a fund so it does not sit idle. The asset thus makes a full round trip: fund, cash, collateral, fund. Each leg has its own cutoff times and its own intermediaries. In episodes of market stress, this process of liquidating in order to deliver cash becomes a bottleneck.
Two costs come out of this: the idle cash buffers firms hold as a precaution, and the yield forgone while the asset is in transit.
What tokenization changes
When the fund share is tokenized and accepted directly as collateral, the loop gets shorter. The holder pledges or transfers the interest in the fund as is, with no redemption and no subsequent sweep. The asset remains a yield-bearing share throughout the process, and settlement can complete in minutes rather than over a conventional settlement cycle.
A recent report from GDF and ISDA, produced with input from more than 120 firms, put this idea to the test in a controlled environment. Tokenized money market funds were pledged, substituted, segregated, and returned within the operational frameworks institutions already use, with settlements completing in under two minutes across different custodians and on different chains, and without participants having to rebuild their systems.
Putting the results in perspective
Tokenization improves collateral mechanics where the framework already allows it, without creating new rights or circumventing eligibility rules. The asset changes format, not regime. If its reuse as collateral is permitted by contract and by regulation, tokenization makes exercising that right faster and more traceable, but the permission comes from the rules, not from the technology.
That framing — same asset, same rules, more efficient movement — is what makes the proposition credible to counterparties and regulators.
Beyond money market funds
The report focuses on US money market funds, but the logic extends to any real-world asset (RWA) that can be represented as a tokenized security with full legal validity: corporate debt, real estate interests, instruments that finance the real economy. The total market for tokenized RWAs reached $31.4 billion in May 2026 (Token City, May 2026), and the segment the report examines — tokenized funds, government debt, and deposits — accounts for $8.4 billion (GDF and ISDA, 2026). These are still modest figures next to the global collateral market, and that is precisely the signal: the infrastructure is maturing ahead of scale.
Collateralization is just one of the use cases that open up when a real asset lives natively on programmable infrastructure with legal recognition. Intraday mobility, automatic substitution, real-time traceability of ownership and encumbrances: these are capabilities that, applied to real-economy financing, point to collateral that keeps working while it is posted rather than sitting immobilized.
