After years of development, distributed ledger technology ( DLT ) has found a compelling use case in institutional finance. A new report from Nasdaq and ValueExchange reveals that collateral tokenization has emerged as the most sought-after DLT application in capital markets, driven by the need to reduce operational friction and unlock idle capital.

The study, which surveyed firms across global markets, found that respondents – 26% from North America, 20% from Europe, 20% from the Middle East and Africa, and 15% from Asia-Pacific – manage an average of US$74 billion in collateral across listed derivatives, over-the-counter ( OTC ) margining, repos, and securities lending. Despite the scale, inefficiencies persist: operational costs now account for 57% of total trade costs for OTC derivatives and 50% for securities financing transactions. Alarmingly, 70% of firms report daily challenges with settlement matching and delivery.

To mitigate these risks, many firms resort to defensive measures. Some 35% post more than half of their collateral overnight – simply to ensure it arrives in time for morning margin calls. This burden is especially pronounced in cross-border transactions. Additionally, firms routinely over-post collateral as a buffer against delivery failures, with the average institution posting 7% more than necessary. This ties up billions in assets that could otherwise be deployed productively.

Tokenization offers a direct solution to these long-standing pain points. By enabling "absolute certainty of delivery" on a shared ledger, the technology facilitates intraday collateral mobility. It allows firms to put idle overnight and weekend collateral back to work and supports true 24/7 margining – eliminating the "Friday-to-Monday guesswork" that has long plagued traditional markets, the study says.

Repos are emerging as the top priority for tokenization, cited by 30% of respondents. These instruments are bilateral, short-term, and heavily reliant on fixed-income collateral, making them an ideal testing ground. OTC and listed derivatives follow, identified as high-priority use cases by 23% and 10% of firms, respectively.

Hong Kong is positioning itself as a regional frontrunner in this space. In November 2025, the Hong Kong Monetary Authority ( HKMA ) launched EnsembleTX, the pilot phase of Project Ensemble, which will run throughout 2026. The initiative enables real-value transactions involving tokenized deposits and digital assets within a controlled environment. Its initial focus is on tokenized money market fund transactions, allowing participants to manage liquidity and treasury needs in real time.

For market participants operating in or with Hong Kong, this marks a shift towards faster, more transparent settlement and the ability to put idle cash and high-quality liquid assets ( HQLA ) to work across a 24/7 cycle. The pilot is designed to move tokenization from theory to live-market infrastructure, signalling a pivotal moment for institutional finance.