Tokenized Shares as Collateral Moves Closer to Reality

With the approval of rules for their use by a consortium of financial institutions, efforts to enable tokenised shares of money-market funds from Wall Street giants like BlackRock and Franklin Templeton as collateral in trading took a significant step ahead.

A subcommittee of the Global Markets Advisory Committee of the Commodity Futures Trading Commission decided to forward its recommendations about the subject to the whole committee, Bloomberg reported.

All the suggestions are being considered, including how registered businesses might store and move non-cash collateral using distributed ledger technology.

In line with the margin requirements of the Commodity Futures Trading Commission (CFTC) and other US authorities, as well as derivatives clearing organisations, these suggestions would implement current rules and processes to support the use of blockchain for non-cash collateral.

A vote on the proposals is likely to take place later this year.

Since many companies are interested in pledging tokenised collateral to get financial efficiency, the complete adoption of the suggestions might lead to a growth in the usage of tokenisation.

Mutual funds, bonds, exchange-traded notes, loans, securitisations, and alternative funds are the primary drivers of the tokenised market, which McKinsey predicts may reach over $2 trillion by 2030.

This, of course, excludes stablecoins.

That's almost the same as the current value of the cryptocurrency market.

The BUIDL token, issued by BlackRock, is now being accepted as collateral by crypto prime brokers Hidden Road and FalconX.