BlackRock is moving tokenized money-market funds closer to the core of institutional collateral markets, arguing that investors should be able to post fund shares directly rather than redeem them for cash first.

Nikhil Sharma, BlackRock's head of digital assets, said at TOKEN2049 Singapore, a major digital-asset industry conference, that tokenized money-market funds could serve as collateral without requiring investors to go through the traditional redemption process. The approach could eliminate delays that arise when investors must convert fund shares into cash before meeting a margin requirement. In derivatives and other leveraged markets, where participants post collateral against positions, the speed with which acceptable assets can be delivered often shapes how firms manage margin calls.

The proposal 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, removing the need to redeem shares and then move cash. The firm laid out comparable arguments in a response to the CFTC's request for input on the use of tokenized collateral, including stablecoins, in derivatives markets, part of the Commodity Futures Trading Commission's process of gathering industry views on tokenized collateral in US derivatives markets.

Why direct collateral posting matters

Money-market funds are a core cash-management tool for institutions, and traditional funds already hold highly liquid assets. Their shares, however, have not always moved efficiently between counterparties, and that friction can add settlement steps when institutions face collateral calls — moments when acceptable collateral needs to be posted quickly.

Tokenization could change that process by representing fund shares as blockchain-based tokens. 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 are pledged as collateral
• Greater flexibility outside traditional market hours

BlackRock has already moved from concept to implementation. In April, Reuters reported that the firm's BUIDL tokenized Treasury fund became usable as collateral for institutional trading on OKX, a major crypto exchange, with Standard Chartered providing off-exchange custody — an arrangement that keeps pledged assets with a third-party custodian rather than on the exchange itself.

From products to market infrastructure

The push comes as the wider financial industry explores standardized frameworks for treating tokenized money-market funds as collateral. This week, ISDA — the International Swaps and Derivatives Association, whose standard documentation underpins much of the global derivatives market — published a paper examining how such assets could fit into existing collateral agreements.

BlackRock has also expanded its tokenized cash-management offerings in 2026, a sign that it views 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 — through channels such as the CFTC's input process and industry work like ISDA's paper — tokenized money-market funds could allow institutions to keep capital invested while deploying the same assets across trading and financing activities.