BlackRock Sees Tokenized Money-Market Funds as the Next Collateral Rail
BlackRock is pushing tokenized money-market funds closer to the center of institutional collateral markets, arguing that investors should be able to post fund shares directly instead of redeeming them for cash first.
Nikhil Sharma, BlackRock’s head of digital assets, said at TOKEN2049 Singapore that tokenized money-market funds could serve as collateral without forcing investors through the traditional redemption process. The approach could remove delays that occur when investors need to convert fund shares into cash before meeting a margin requirement.
The idea reflects a broader shift in how financial institutions handle collateral. BlackRock has previously argued that tokenized money-market funds can transfer ownership directly between approved participants, avoiding the need to redeem shares and then move cash.
Why direct collateral matters
Traditional money-market funds hold highly liquid assets, but their shares have not always moved efficiently between counterparties. That can create additional settlement steps when institutions need to meet collateral calls.
Tokenization could change that process by representing fund shares as blockchain-based tokens.
Key potential benefits include:
- Direct transfer of fund shares without an intermediate cash redemption
- Faster collateral settlement across participating institutions
- Continued exposure to money-market yields while assets serve as collateral
- Greater flexibility outside traditional market operating hours
BlackRock has already moved from theory toward implementation. In April, Reuters reported that BlackRock’s BUIDL tokenized Treasury fund became usable as collateral for institutional trading on OKX, with Standard Chartered providing off-exchange custody.
Tokenization moves toward market infrastructure
The development comes as the financial industry explores standardized frameworks for using tokenized money-market funds as collateral. ISDA published a paper this week examining how such assets could fit into existing collateral agreements.
BlackRock has also expanded its tokenized cash-management offerings in 2026, signaling that it sees blockchain infrastructure as more than a distribution channel. The firm is increasingly positioning tokenized funds as tools for liquidity, settlement and collateral management.
If regulators and market participants establish clear standards, tokenized money-market funds could allow institutions to keep capital invested while using the same assets across trading and financing activities.
