Haircuts and Liquidations: Tokenised Collateral Comes of Age

With The Future of Capital Markets Summit taking place next week in Lugano, Switzerland, this week’s industry news looks at a key topic scheduled for discussion at the event.

Tokenised US Treasury Funds have mushroomed over the last 12 months, partly because they offer a pristine form of collateral with minimal haircuts and instant settlement. There is about $15 billion in these funds, according to RWA.xyz, and their increasing use as collateral is adding meaningful liquidity to onchain markets.

Loans based on tokenised collateral run around the clock, and a lender can seize the collateral if its value moves against the borrower at any time. What happens next varies by product. The largest funds can be held only by wallets the issuer has approved, so whoever takes the collateral has to be on that list.

Accurate pricing is critical. A lender liquidating a bad loan on a Saturday must work from Friday’s price. For Treasury bills this is a matter of mere basis points. The bigger question comes when tokenised collateral covers private credit, equities and commodities, which are more volatile.

Despite these challenges, tokenised assets are increasingly finding their way into institutional collateral arrangements.

In 2025, crypto exchanges began accepting funds such as BlackRock’s BUIDL as trading collateral using institutional custodians and settling off-chain. And, in December 2025, CFTC staff said tokenised Treasuries and money market fund shares could be posted as margin in US derivatives markets, providing the token carries the same rights as the asset.

Stock ETFs are being trialled as part of DTCC’s tokenisation service. JPMorgan tokenised the Invesco QQQ ETF on 15 July and, the same morning, posted tokenised assets as margin at CME Group. The service is scheduled to open to more participants this month.

Who Buys The Collateral

A loan is liquidated when its collateral (the assets backing the loan) falls too far in value. A third party, the liquidator, repays the debt and takes the collateral at a discount. In decentralised loan markets anyone can be the liquidator. For example, when an ETH-backed loan goes underwater, anyone with stablecoins can repay it and take the collateral.

A permissioned security token, on the other hand, can only be held in whitelisted wallets; this doesn’t prevent liquidation but it limits who can perform the task. This means there are fewer eligible buyers leading to potentially tighter loan-to-value ratios and lower caps, as our blog noted in September.

The market has two fixes. One is a standing redemption facility: a contract or desk that takes fund shares and pays out stablecoins at any hour, buying the shares onto its own book so the holder need not wait for Monday. The other is a wrapper: a freely transferable token issued by a whitelisted holder against permissioned fund shares it keeps in reserve.

Haircuts Get Steeper Away From The Bill

Treasuries, with their high liquidity, are easier to use as collateral. Private credit, equities and commodities bring slower pricing and bigger haircuts — the discounts lenders apply to collateral’s value to account for volatility in the asset’s valuation.

Private credit is valued monthly, so a lender works from a price that can be weeks old and applies a haircut in case the collateral has lost value in the meantime. Midas’s mGLO token, which provides exposure to a Fasanara asset-backed credit strategy, is used as collateral in a Morpho lending market on Base network. Here, Morpho values the token at 94 percent of the last published NAV and liquidates any loan above 91.5 percent of that value, capping debt at 86 percent of NAV.

Tokenised commodities are worth about $5.2 billion, according to RWA.xyz, and Tether Gold (XAUT) is close to $3 billion of it. Arch Lending began lending against both on 1 September at up to 75 percent loan-to-value, with a margin call at 85 percent and liquidation at 90 percent.

CME’s benchmark 100-ounce gold futures still stop trading from Friday evening to Sunday evening, New York time. The tokens trade through the weekend, so a 90 percent liquidation threshold has to hold for 48 hours without a benchmark price.

Traditional markets are closing the gap. CME’s smaller 1-ounce gold contract has traded around the clock since July, with about $60 million changing hands in its first weekend.

A Nasdaq and ValueExchange survey of 203 institutions, published in February, found Tier 1 firms hold about $36.8 billion of collateral earning no return, carry a 7 percent excess buffer on average, and 52 percent expect to manage live tokenised collateral by the end of 2026. Tokenised treasuries, which already have a functioning market structure, will likely be their first stop. Haircuts are small because the underlying is liquid, familiar and moves in basis points.

When it comes to using onchain tokens that cover private credit, equities and commodities, the larger haircuts and lower caps demonstrate a market that is pricing the nascent development of these assets. These should ease significantly as the market continues to demonstrate that tokenised assets can move reliably through the collateral lifecycle: from issuance to transfer, liquidation and redemption.

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