Blockchain to Unlock Collateral Movement, More Efficient Financing
Revolutionizing Capital Markets: How is Set to Transform Finance
In the fast-paced world of financial markets, efficiency is king. Trillions of dollars move daily, but outdated systems create bottlenecks in settlement, collateral management, and financing. Enter blockchain technology, poised to unlock
This isn’t hype—it’s an evolution backed by executives from Nasdaq, Tradeweb, Figure, Digital Asset, and DRW. Their insights reveal blockchain’s potential to streamline capital markets without sacrificing liquidity or speed.
The Pain Points in Traditional Post-Trade Settlement
Today’s equities and fixed income markets handle massive volumes with lightning speed. U.S. equities, for instance, process 4-5 billion messages daily at latencies of just 10-20 microseconds. Yet, settlement times lag behind, exposing markets to overnight risks and trapping capital in clearing houses.
Mortgage trading, a cornerstone of global finance, suffers from inefficient cycles that limit participants and velocity. Collateral movement is clunky, confined to business hours, stifling 24/7 digital asset trading. Corporate actions, proxy voting, and ownership tracking remain manual and error-prone.
- Trapped capital: Billions idle in clearing systems due to slow transfers.
- Limited hours: No true 24/7 operations for traditional assets.
- High costs: Intermediaries add friction in origination, aggregation, and securitization.
Blockchain promises to address these by enabling instant, immutable settlements and programmable assets.
How Enhances Post-Trade Efficiency
At its core, blockchain offers an immutable ledger for better ownership tracking, atomic settlements (simultaneous delivery versus payment), and smart contracts for automation. This reduces settlement from days to seconds, minimizes counterparty risk, and modernizes corporate actions.
“Blockchain can make a huge difference in post-trade by improving time to settlement and the nature of securities upon settlement.”
Tokenization—converting RWAs like Treasuries, mortgages, and equities into digital tokens—unlocks fractional ownership, liquidity, and cross-collateralization. Imagine using tokenized stocks as collateral for DeFi loans seamlessly.
Key benefits include:
- 24/7 Collateral Mobility: Instant transfers enable round-the-clock trading.
- Cost Savings: Firms report cutting 150+ basis points in processes.
- New Liquidity Pools: Attracts diverse participants to markets like mortgages.
- Transparency: Real-time visibility into asset status (e.g., loan delinquency).
Real-World Examples: From Treasuries to Mortgages
Innovation is already happening. One platform executed the first real-time, fully on-chain financing of U.S. Treasuries against USDC stablecoin—on a Saturday. Institutional investors accessed automated financing with atomic settlement via smart contracts.
Another leader originated $22 billion in on-chain home equity lines since 2018, generating $66 billion in trading volume. Blockchain slashed costs and built a liquid mortgage marketplace by providing real-time certainty on loan performance.
Tokenized public equities are now entering on-chain borrowing markets for the first time, recorded directly on issuers’ cap tables. Even commercial paper issuances are hitting public blockchains, bypassing manual processes and dealer-set pricing.
These pilots demonstrate
Industry Leaders Weigh In on Tokenization Momentum
Nasdaq’s Vision: Evolution, Not Revolution
The chair and CEO emphasized preserving market liquidity while leveraging blockchain for post-trade upgrades. Instant settlement cuts overnight risk, but netting remains essential for high-volume equities. Interoperability is key to unlocking trapped capital across the industry.
Tradeweb’s Push for Fixed Income Efficiency
The CEO of this electronic marketplace giant noted their recent blockchain embrace. Mortgage markets stand to gain new participants, while innovations like on-chain Treasury financing pave the way for 24/7 fixed income trading and superior collateral management.
Figure’s DeFi Transformation
With a public listing this year, the executive chairman advocates tokenized securities for cross-collateralization. Buy-side firms can turn stock loan books into self-controlled limit order books, expanding DeFi opportunities for prime brokers.
Privacy and Plumbing: Insights from Digital Asset and DRW
Institutional adoption hinges on solving privacy. Firms stuck in legacy “A-to-B” models risk disintermediation, while winners streamline proxy voting and corporate actions. Market makers stress 24/7 collateral as the major unlock, predicting asset owners and infrastructure builders as big winners.
“The big losers are those who fight the change,” one executive warned.
Challenges Ahead: Interoperability, Privacy, and Regulation
Despite enthusiasm, hurdles remain. Gross versus net settlements must balance in equities. Privacy solutions are critical for institutions. Regulatory clarity, like treating tokenized equities under existing rules, will accelerate adoption.
TradFi giants are leaning in aggressively, outpacing some crypto natives. Expect momentum in the next 2-3 years as credibility grows.
The Future: as Market Infrastructure
Asset owners gain portable collateral; lenders tap expanded DeFi pools. The result? Faster, cheaper, always-on financing that democratizes capital markets.
Stay ahead: Monitor RWA tokenization, on-chain DeFi, and blockchain interoperability. The
Key Takeaways
- Blockchain excels in post-trade: faster settlements, better tracking.
- 24/7 collateral mobility enables true digital markets.
- Tokenized RWAs cut costs and unlock liquidity in mortgages, Treasuries, equities.
- Institutions prioritize privacy, interoperability for adoption.
- Early movers in TradFi will dominate the evolution.
