51% of respondents see intraday liquidity as the practical impact of tokenization and digital cash

Every business needs to effectively manage liquidity and capital. Shifting from overnight to intraday creates tremendous financial upsides.

Beyond the day-to-day functions and processing improvements, efficiently managing regulatory capital creates multiple benefits including reduced liquidity ratios (LCR) and net stable funding ratios (NSFR) under the Basel III framework and other regulations. This marks a stark change in the motivation and leadership behind DLT.

The new charge is being led by the repo and financing desks, but the mindset is all Treasury. The DLT business case has finally made the leap from Ops to Finance. While the ability to reduce expenses is a firm priority for firms, no one is implementing DLT programs purely to improve operating ratios. Instead, all eyes are firmly fixed on the 'P' in P&L.

The focus on cash and collateral utilization is also testament to this. More efficient, higher velocity collateralization reduces financing charges and the risk of over allocating and unnecessarily locking up assets. Beyond pure capital benefits, more mobile assets can be monetized or loaned without the operational drag we’ve endured for so long.

However, whilst balance sheet motivation proves compelling, operational costs are not out of sight as 48% of respondents are still looking to DLT to reduce transaction processing costs proving that operational efficiency still remains a core consideration of technology related development in our industry.

The importance of digital assets to fund managers has increased by 136% over the last year.

BUIDL’s success has spurred a buy-side gold rush of fund tokenization, while in contrast, interest from other market participants has held steady, in the case of custodian banks, or even abated most notably across private banks and wealth managers.

In 2024, we identified DLT as a vision for revenue growth for the buy side. Using DLT distribution channels, they were streamlining processes, disintermediating RIAs and wealth managers to reduce expense ratios, and enabling access to a growing pool of digital cash. Given the rapid growth in active development or live projects in 2025 (from 11% to 35%) across organizations large and small, this compelling narrative continues to play out.

It’s still an open question whether anyone but the largest funds can reach or grow their investor base and achieve a level of scale and return that satisfies their investment.

Launching a tokenized fund won’t automatically attract a sizable new investor pool and may not be more cost-efficient than an ETF. But for managers, that may not be a deterrent. They are playing the long game, looking to tap into digital wallets and future proof against a transfer of wealth from traditional to crypto.

On the other hand, investment and universal banks are looking at tokenized funds for other reasons. A tokenized money market fund that is fully backed by assets could allow large pension funds and other institutional investors to realize intraday returns on idle cash, with the flexibility to immediately access those assets and the security of 100% collateralization. As DLT becomes more embedded in how capital markets operate, that’s a likely next evolutionary step - we watch with interest how this develops over the coming year.