Citi says 77% of institutions eye tokenized collateral

Citi has found that 77% of financial institutions expect to use some form of tokenized collateral during 2026 as banks and market operators move blockchain-based settlement into live environments.
Summary

• Citi says 77% of institutions expect to use some form of tokenized collateral during 2026.
• About 25% of collateral remains idle or unremunerated because operational frictions limit efficient asset mobility.
• Tier 1 institutions could lose roughly $346 million annually from inefficient collateral use, Citi estimates today.
• DTCC plans to launch its tokenization service in October after completing live production trades successfully.
• Tokenized cash, money market funds and government bonds are emerging as primary institutional collateral forms.

The bank's Sept. 24 report, Digital Collateral: A Practical Reality, prepared with The ValueExchange, examines tokenized cash, money market funds, government bonds and other assets used for margin and financing. Citi said institutions are moving beyond testing toward practical collateral applications.

The report places the change against a costly problem in traditional markets. Large financial institutions manage substantial pools of collateral spread among custodians, clearing houses and counterparties, but settlement hours and fragmented systems can prevent assets from moving when needed.

Citi's published findings say as much as $15 billion of collateral can remain idle at an individual institution, contributing to roughly $346 million in annual lost income for large firms. Citi's Digital Collateral report

This is an excellent report by my alma mater @Citi and I was thrilled to participate.

Collateral is one of the very best use cases for tokenized products.

It's the only time in my career where there is an opportunity to lower collateral and lower risk.

How is this possible?... https://t.co/wa0VbVUjQ0 --- Christopher Perkins 🦅🌎⚓️NYC (@perkinscr97) September 26, 2026
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Citi sees tokenized collateral moving beyond pilots

According to the report, systemically important financial institutions manage an average of roughly $74 billion in collateral each day through around 65 custody locations.

About 25% of collateral can remain unremunerated or be posted as an extra buffer because existing infrastructure cannot always move assets when markets require them. The resulting idle balance can reach around $15 billion at a large institution.

Citi estimates that inefficient collateral deployment can cost a Tier 1 institution around $346 million annually in lost earnings. Its public report page identifies outdated settlement cutoffs and idle collateral among the main sources of that cost.

Earlier research from Nasdaq and The ValueExchange reached similar conclusions on the size of institutional collateral pools. Their survey placed average collateral under management near $74 billion and found roughly 25% generated no returns for its owner.

The earlier study found 52% of surveyed financial institutions planned to actively manage tokenized collateral by 2026. Citi's newer report puts the share expecting to use some form of tokenized collateral at 77%, covering a wider set of potential applications.

Cash, government securities and money market funds feature among the main assets institutions are considering for digital collateral arrangements. Citi said tokenization can let firms transfer eligible assets without waiting for conventional settlement windows to reopen.

Tokenized repo is already handling institutional volume

Repurchase agreements have become one of the more developed institutional uses of blockchain-based collateral.

The Citi report estimates that roughly 5% of monthly repo volume is already being transacted in tokenized form. Repo markets allow institutions to obtain short-term funding by exchanging securities for cash while agreeing to reverse the transaction later.

Separate production data shows large transaction values are already moving through distributed-ledger repo systems. Broadridge said its Distributed Ledger Repo platform processed $8 trillion during July, with average daily volume reaching $365 billion.

As crypto.news reported, Broadridge's platform allows firms to settle repo transactions while moving tokenized collateral without replacing their existing trading systems. Broadridge processed $8 trillion in blockchain repo volume

Citi's report says tokenized collateral could address another constraint as derivatives and digital asset markets operate beyond normal banking hours. Traditional collateral transfers may depend on local market schedules, custodian availability and settlement cutoffs.

Around 60% of global margin remains in non-yielding cash, according to Citi's published findings. The bank said tokenized money market funds could combine yield with faster transferability, allowing collateral to remain invested until closer to the point when it must be moved.

Such structures are already reaching regulated products. JPMorgan filed for its OnChain Liquidity-Token Money Market Fund, which uses blockchain technology to let investors submit transaction instructions connected to fund shares. The portfolio primarily consists of cash, short-term U.S. government securities and fully collateralized repurchase agreements.

U.S. Treasury securities form another part of the institutional collateral market moving toward tokenized infrastructure.

The Depository Trust & Clearing Corporation plans to launch its DTC Tokenization Service in October 2026. The service will allow eligible securities held at DTC to be represented in tokenized form while retaining their existing ownership rights and investor protections.

DTCC moved the project into production activity on July 15. Participating firms completed transactions involving U.S. Treasury repo, collateral pledges, securities lending, equity settlement and central counterparty margin workflows.

More than 30 financial and technology companies took part, including BlackRock, Goldman Sachs, JPMorgan, Citadel Securities, Circle, Nasdaq, CME Group and State Street Investment Management.

The tests included tokenized U.S. Treasury assets used in delivery-versus-payment trades and repo transactions. DTCC said the production activity prepared its infrastructure for the scheduled October rollout.

DTC received regulatory clearance for the project in December 2025 through a U.S. Securities and Exchange Commission no-action letter. DTCC said the authorization applies to specified liquid securities, including U.S. Treasury bills, notes and bonds, Russell 1000 stocks and ETFs linked to major indexes.

Tokenization targets around-the-clock collateral movement

Citi's report focuses heavily on the ability to move collateral outside conventional market hours.

Global derivatives and digital asset markets can continue moving while banks, custodians and settlement systems in certain regions are closed. Firms may respond by sending excess collateral in advance or maintaining larger liquidity buffers.

Citi said tokenization could support collateral transfers closer to 24 hours a day, seven days a week, reducing reliance on prefunding. The bank pointed to real-time margining and the movement of U.S. Treasuries through different time zones as practical examples already under development.

DTCC is working on a separate Collateral AppChain designed around the same issue. The platform is intended to give collateral providers, receivers, custodians and other market participants shared infrastructure for moving assets between different markets and blockchain networks.

Working with Chainlink, DTCC plans to support automated eligibility checks, valuations, margin calculations, collateral optimization and settlement on the platform. The Collateral AppChain is expected to enter production in the fourth quarter of 2026.

Citi acknowledged that legal frameworks, legacy systems and institutional risk controls remain obstacles to adoption. Its Sept. 24 report said financial institutions are increasingly moving from observing tokenized collateral to applying it in live treasury, margin and settlement processes.

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