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Citigroup said in a recent report, “The Digital Frontier: Collateral in a Tokenized World,” that institutional asset tokenization is shifting from the pilot stage to the buildout of real operating infrastructure.
The bank said tokenization is transforming collateral into a tool for continuous liquidity provision and more efficient treasury management. It added that linking tokenized assets with on-chain settlement funds that comply with regulatory frameworks could enable atomic delivery versus payment, or DvP, allowing asset delivery and payment to occur simultaneously and reducing risks tied to settlement delays. The report also said the scope of collateral use could expand to yield-generating assets, including tokenized money market funds, or MMFs. Looking ahead, Citigroup said asset managers and asset-holding institutions are likely to pursue hybrid operating models that combine traditional and digital finance to manage collateral across counterparties, custodians and settlement infrastructure while optimizing liquidity.