CI has received commentary on the advancement of tokenization, or digital securities, as jurisdictions pursue bespoke rules to support tokenized assets and more private firms strive to enable and support them.
Brikken CEO Edwin Mata says the tokenization movement is in a more demanding phase. Regulators are reviewing whether tokenized assets can act as collateral, settle reliably, and keep their legal protections when markets come under pressure.
“ESMA has opened a consultation on tokenized collateral in European clearing markets. EU finance ministers have advanced proposals to strengthen supervision and expand the DLT Pilot Regime. In Singapore, the central bank has outlined its approach to settling tokenized securities using digital money. The IMF has also examined the financial stability implications of tokenization, including the risks associated with increasingly connected financial infrastructure,” says Mata.
Institutions need greater clarity for tokenization to grow and adoption to accelerate.
Mata notes that ESMA’s consultation on collateral includes 30 questions covering settlement, ownership rights, client protections and liquidity risks.
“I think this is an important development because collateral management could become one of the clearest measures of institutional confidence in tokenised assets. Clearing institutions need to know that collateral can be accessed, transferred and liquidated when a counterparty defaults, regardless of the technology used to represent it. One issue the paper raises concerns the distinction between technical control and legal ownership. A token may be held in a segregated wallet, but institutions still need enforceable rights over the underlying asset. This becomes particularly important when tokenized records and traditional ownership registers do not match, or when assets need to be recovered during insolvency proceedings.”
Mata explains that if several institutions respond to market conditions simultaneously, collateral movements could become concentrated in a short time, stressing liquidity.
“For issuers, this means establishing clear ownership records, transfer restrictions and settlement procedures from the outset. Institutions will increasingly assess whether those mechanisms remain reliable when assets are transferred between platforms or need to be liquidated quickly,” adds Mata.
Mata notes that the Council of the European Union has agreed to proposals that give ESMA greater authority to supervise trading, depositories and clearing. The proposal includes an expansion of the DLT Pilot and allowing participatnts to serve multiple markets under a single license.
The Council also wants to move approximately €10 trillion in European savings from low-yield accounts into investment markets.
Mata says reforms can address regulatory fragmentation affecting tokenization, as the ecosystem needs consistent processes.
“The impact will depend on whether the final rules make cross-border issuance, distribution and asset servicing easier for institutions. The proposals still require legislative agreement.”
Looking at Singapore, Mata notes that the Monetary Authority of Singapore plans to enable digital settlement, tokenized deposits, stablecoins, and central bank digital currency. MAS also plans to settle in wholesale CBDC following their 2025 test involving several banks.
He says that MAS has raised concerns about stablecoins maintaining their value during market stress, particularly in large wholesale transactions. This could influence which settlement assets institutions are willing to accept.
“I think financial institutions will increasingly choose settlement arrangements based on the asset, transaction size and liquidity requirements. For issuers, supporting different payment mechanisms while maintaining accurate ownership records will become important as tokenised securities enter more markets. Settlement infrastructure could become a greater focus of institutional investment over the next few years. Financial institutions will want to know how payment and asset transfers are coordinated, when settlement becomes legally final and what happens if either side of the transaction cannot be completed.”
The IMF has published an analysis of how tokenization could affect financial stability. Mata says one area to watch is how automated transactions can affect liquidity during market stress. If several entities use similar systems to adjust collateral, valuation changes could trigger larger, simultaneous movements.
“This also raises questions about the responsibilities of custodians, settlement providers and infrastructure operators when transactions fail or systems become unavailable. For institutions, operational resilience will become an important consideration when evaluating tokenized assets. The ability to manage transaction failures, maintain ownership records and continue servicing assets during disruptions will influence adoption.”
As adoption grows, issuers will need to address ownership rights, transfer restrictions, and regulatory requirements throughout the asset’s lifecycle. Regulators are paying closer attention to these requirements, says Mata. Over the next year, institutional adoption will depend on how effectively tokenized assets can be held, transferred, and settled across different financial systems.
“Tokenization has reached a point where institutions need to see how these assets perform in practice. Accurate ownership records, reliable settlement and access to collateral are essential for wider adoption. The industry’s progress will depend on how consistently these processes work across platforms and markets.”