Tokenised money market funds as collateral: what has changed, and what a collateral team has to decide

Why this matters now

When margin is called, holders of MMF units usually have to redeem them and post cash, because the funds' transfer-agent systems were not built for posting and recalling units. An industry report under MAS's Project Guardian described MMFs as “trapped” and underused as collateral for this reason [22]. That is the step tokenisation can remove.

The UK has seen the cost. In the 2022 gilt market stress, liability-driven investment (LDI) pools were forced to sell gilts and other assets, and to redeem money market fund holdings, to raise cash [1] [28]. For Irish-resident LDI funds, redeeming MMF shares was the largest source of cash raised in September and October 2022 [28]. Some MMFs used by LDI funds saw outflows bigger than in the March 2020 “dash for cash” [29]. The counterparties receiving that cash often put it back into MMFs [1]. Respondents to an FCA consultation said this cycle “would have been unnecessary if MMF units were acceptable as collateral”. Firms also see tokenised MMFs as collateral as an accessible first use case, because it “increases transparency and may reduce the need to redeem MMF units during times of market stress” [1].

The market is no longer small. By the second quarter of 2026, US tokenised MMFs had reached around US$15 billion outstanding across 66 products, according to the final report of Australia's Project Acacia [27].

The question has moved from “can it be done” to “under which rules, and with which controls”.

What has changed, region by region

United States

• Policy.
  • The CFTC's Global Markets Advisory Committee recommended expanding the use of non-cash collateral through distributed ledgers, without changing which assets are eligible [11]. The committee advises the CFTC; its views are not the Commission's.
  • In September 2025 the CFTC launched an initiative on tokenised collateral, including stablecoins, in derivatives markets [12].
  • CFTC staff guidance in December 2025 defines a tokenised asset to include a “share in a money market fund” recorded on a blockchain. It says tokenisation “need not change the fundamental characteristics of that asset”, and that haircuts can follow the underlying asset, adjusted for differences such as settlement time [13].
  • A July 2026 CFTC final rule on uncleared swap margin removed a provision that had disqualified money market and similar funds as initial margin where the fund used securities lending, repo or similar arrangements. It also set specific haircuts for these funds [14]. The rule is not specific to tokens, but it widens the pool.
• Securities law. SEC staff distinguished securities tokenised by or for the issuer from those tokenised by unaffiliated third parties [15]. For collateral, the question is whether the token is the fund share itself, a custodial entitlement to it, or a separate instrument. Even an issuer's token may only record or instruct transfers on an off-chain register.
• Industry work. In July 2026 ISDA and Global Digital Finance published the results of a joint working group and sandbox on US tokenised MMFs as derivatives collateral, with more than 120 firms taking part [30] [31]. The report finds that tokenising an asset “does not recharacterize or alter the asset, it is merely a method of recording ownership”, and that “tokenization does not bypass existing eligibility, segregation, custody, haircut, valuation, or re-use rules”. MMFs remain excluded from cleared variation margin, and collateral agreements may need updating to define “what would constitute an effective transfer”. Its legal analysis concludes that “it would be optimal” to structure tokenised MMFs as a security or a security entitlement under the Uniform Commercial Code [30].
• Market practice.
  • JPMorgan's “Tokenized Collateral Network” settled its first live client trade in October 2023: BlackRock tokenised MMF shares transferred to Barclays as collateral for an OTC derivative [16].
  • BlackRock's tokenised fund (BUIDL) has been accepted as collateral on Crypto.com and Deribit since June 2025, and as off-exchange collateral on Binance since November 2025 [24] [17].
  • Franklin Templeton runs an off-exchange collateral programme with Binance in which the tokenised fund shares stay in regulated custody [18].
  • BNY and Goldman Sachs offer “mirror” tokens of MMF shares, while BNY keeps the official books and records [19].
  • On 15 July 2026 DTCC processed live trades using tokenised DTC-held securities, including a collateral pledge, Treasury repo and CCP margin workflows. MMFs were not part of that run. DTCC said its tokenisation service would launch in October 2026 [25].

United Kingdom

• Rules and guidance.
  • The FCA's final guidance on fund tokenisation (PS26/7, April 2026) confirms that where an authorised fund keeps its unitholder register on DLT, the on-chain record of transactions may be treated as the primary books and records [2].
  • Eligibility is still the constraint. UK EMIR does not distinguish tokenised from conventional instruments [1]. However, firms told the FCA that the existing uncleared margin rules “would exclude most widely-used MMFs”, mainly because of the look-through haircut requirement [2].
• Joint vision. In May 2026 the FCA and the Bank of England set out a shared vision for tokenisation in wholesale markets. In it, the FCA and the PRA say they are reviewing tokenised collateral eligibility, including tokenised MMFs as uncleared OTC collateral, “subject to developing standards with industry” [3].
• Feedback. The September 2026 feedback statement found that collateral was “by far the most frequently mentioned use case”, with buy-side interest in using tokenised MMFs as collateral “without having to be liquidated”. The Bank will consult later in 2026 on a supervisory statement and a discussion paper on CCPs accepting tokenised collateral [4].
• Market practice.
  • In July 2025, tokenised units of Aberdeen's MMF and tokenised gilts were used as collateral for FX trades between Aberdeen and Lloyds Banking Group, with Archax issuing and holding the tokens [6].
  • HM Treasury expects the first digital gilt (DIGIT) transaction by the first quarter of 2027, on HSBC Orion [5].

European Union

• ESMA. ESMA opened a call for evidence on tokenised collateral in central clearing on 9 October 2026. It closes on 15 January 2027, and ESMA will assess the feedback in the first quarter of 2027 [7]. ESMA asks whether and how tokenisation changes the risk profile of collateral that is already eligible. It says the call is not intended to expand the categories of eligible CCP collateral.
• ECB.
  • From 30 March 2026, marketable assets issued in central securities depositories using DLT-based services, and reachable through T2S, can be eligible Eurosystem collateral if they meet the existing eligibility criteria [8].
  • The Eurosystem launched Pontes on 21 September 2026. It lets wholesale transactions in tokenised assets settle in central bank money. More features and longer operating hours follow, with full implementation expected by 2028 [9].
• Market practice. Amundi has launched a tokenised share class of its euro money market fund, Amundi Funds Cash EUR, on Ethereum with CACEIS. The fund stays available through its conventional channels [10].

Asia-Pacific

• Hong Kong.
  • The HKMA's Project Ensemble moved to real-value transactions in November 2025. Its first focus is tokenised deposits used in tokenised MMF transactions [20].
  • In April 2026 the SFC set out the requirements for secondary trading of tokenised SFC-authorised funds on SFC-licensed virtual asset trading platforms, subject to its prior approval [21].
• Singapore.
  • The Guardian Funds Framework, an industry report under MAS's Project Guardian, envisages that at the most advanced level of its token taxonomy, the token can carry the treatment for collateral eligibility [22].
  • DBS, Franklin Templeton and Ripple announced plans for DBS to explore tokenised MMF units as collateral, either for repo with the bank or for credit from third-party platforms, with DBS holding the collateral as agent [23].
• Australia. Project Acacia's final report (May 2026) covers wholesale tokenised-asset use cases. It notes that tokenised fixed-income securities and tokenised MMF units now serve as collateral in repo markets [27].

Two different markets are forming

1. Crypto trading venues. Tokenised treasury and MMF units are posted as margin for trading, often held off-exchange by a custodian [17] [18]. The appeal is a yield-bearing alternative to stablecoins. The model is custodial and contractual.
2. Traditional derivatives and clearing. Uncleared OTC margin, repo and, eventually, CCP margin. Here the questions are legal title, eligibility under existing rules, concentration and default management. Regulators in all four regions are working on exactly these.

The two share technology but not risk models. A collateral team should not assume that acceptance in the first market says much about the second.

The five decisions a collateral team has to make

1. Eligibility. Is the fund, and this share class, eligible under your rulebook or collateral agreement in each jurisdiction? Tokenisation does not, in itself, change the underlying fund's eligibility, provided the token gives equivalent rights. US, UK and EU authorities have said as much [13] [1] [7]. In the UK, the existing rules are the limit, not the token [2].
2. Control. Which record is legal title: the on-chain register, a transfer agent's book with an on-chain copy, or a custodian's record? Products differ on this point. For one US fund, the prospectus says the blockchain is a secondary record that may lag the official one [2] [19] [26]. A pledge or title transfer has to bite on the record that counts.
3. Valuation. MMF units are priced at a NAV struck at set times. Intraday margin needs a price between strikes and a haircut that reflects the fund, its liquidity tools and the token arrangement [13] [14].
4. Settlement and the cash leg. Collateral that moves in seconds still waits for its cash leg. Tokenised deposits, central bank money through DLT links and regulated stablecoins are all in use or being tested [9] [20] [23]. Each has different hours and credit exposure.
5. Default and the path to cash. A receiver has to turn units into cash inside its default timeline. A fund may limit redemptions in exactly the stress that causes the default. The Bank of England's Financial Policy Committee has made the same point: new risks arise “where funds need to suspend redemptions” while their units are held as collateral across the system [1].

Working hypothesis. Acceptance of tokenised MMFs by CCPs will depend less on the token than on a tested path to cash when redemptions are gated: committed repo against the units, or a secondary market for them.

What we tested

We built this case: tokenised MMF units pledged as CCP margin, then a member default. From that position we tested four ways the CCP can turn the units into cash:

1. A normal redemption through the fund's dealing day.
2. A partial redemption and a repo of other units, for same-day cash while keeping part of the exposure.
3. A sale of the units to another bank, delivery versus payment, at a price within ±5 basis points of the last NAV.
4. An in-kind redemption into US Treasury bills, either tokenised bills delivered on the ledger or conventional bills delivered between custodians.

On a live test ledger we also ran the stress case: a 50% redemption gate on the default day, covered by a same-day repo of the units still held. Only the sale and the repo give cash without relying on the fund paying. See the Lab report: A tokenised money market fund pledged as CCP margin: four paths to cash after a default.

What to watch next

We follow each of these items, with its latest status, in the watchlist tracker.

• UK: the Bank of England's consultation on CCPs accepting tokenised collateral, and the FCA and PRA review of tokenised MMFs as uncleared margin [3] [4].
• EU: responses to ESMA's call for evidence, closing 15 January 2027 [7].
• US: whether the DTCC tokenisation service launches as planned in October 2026, and whether it is later used for MMFs and CCP margin [25].
• Hong Kong: the first secondary trading of tokenised SFC-authorised funds on licensed platforms [21].