Citi says 77% of financial institutions expect to use some form of tokenized collateral during 2026, and the bank estimates that inefficient collateral management is costing the largest firms roughly 346 million USD per year — a quiet, multi-billion-dollar plumbing problem that blockchain technology may finally fix.
By Amir Hassan | September 27, 2026
The Hook: Billions Sit Frozen Because Money Moves Too Slowly
Every day, the world’s biggest banks shuffle enormous pools of collateral — the cash, government bonds and other assets they post to back trades and loans. According to Citi’s September 24 report, Digital Collateral: A Practical Reality, prepared with research firm The ValueExchange, systemically important financial institutions manage an average of roughly 74 billion USD in collateral each day, spread across around 65 custody locations.
The problem? Settlement hours and fragmented systems mean assets often cannot move when they are needed. Citi found that about 25% of collateral sits idle or unremunerated — dead weight that generates no return. At a single large institution, that idle balance can reach around 15 billion USD, and the bank estimates the resulting inefficiency costs a Tier 1 institution roughly 346 million USD annually in lost earnings.
Think of it like this: imagine having plenty of money, but it is locked in savings accounts that only open during certain hours, at certain branches, with paperwork that takes a day to process. That is collateral management today. Tokenization — representing assets as digital tokens that move around the clock on blockchain rails — is the fix banks are now actively pursuing.
The Evidence: Adoption Is Moving From Pilots to Production
The headline finding of the report is the jump in institutional intent. An earlier survey by Nasdaq and The ValueExchange found that 52% of institutions planned to actively manage tokenized collateral by 2026. Citi’s newer report puts the share expecting to use some form of tokenized collateral at 77% — a significant jump that covers a wider range of applications, from margin to financing.
This is not theoretical. Some of it is already live at scale:
- Tokenized repo is real — Citi estimates roughly 5% of monthly repurchase-agreement volume is already transacted in tokenized form.
- Broadridge’s blockchain repo platform processed 8 trillion USD during July, with average daily volume of about 365 billion USD, according to production data cited in the report.
- The DTCC plans to launch its tokenization service in October 2026, after successfully completing live production trades. The service will let securities held at DTC be represented in tokenized form while keeping their existing ownership rights.
- JPMorgan has filed for its OnChain Liquidity-Token Money Market Fund, a blockchain-based fund holding cash, short-term U.S. government securities and collateralized repurchase agreements.
The Core Shift: Cash, Bonds and Money Market Funds Go On-Chain
According to the report, the assets institutions most want as digital collateral are tokenized cash, money market funds and government bonds. These are the boring, safe building blocks of finance — exactly the kind of assets that benefit most from moving faster.
One striking data point: around 60% of global margin is still held in non-yielding cash, per Citi’s published findings. Why? Because firms keep cash ready in case collateral must be moved quickly and traditional transfers are too slow. Tokenized money market funds could change that calculus — letting collateral stay invested and earning yield until the moment it must be posted, then moving in minutes rather than waiting for the next settlement window.
Christopher Perkins, a Citi veteran who participated in the research, called collateral “one of the very best use cases for tokenized products” — noting it is a rare opportunity to lower collateral requirements and lower risk at the same time, rather than trading one for the other.
What This Means for Crypto Investors
For everyday crypto holders, the significance is less about any single token and more about direction. The infrastructure being built here is the same rails that public blockchains use: digital representations of real assets, moving programmatically, 24 hours a day. As banks normalize tokenized collateral, the conceptual distance between “crypto” and “traditional finance” keeps shrinking.
It also validates a use case that survived the hype cycles. While speculative corners of crypto have come and gone, collateral management is a genuine, measurable cost problem — hundreds of millions of dollars per year per institution — with a technology that directly addresses it. When banks adopt blockchain to save money rather than to chase returns, that adoption tends to be sticky.
The macro backdrop helps too. With 24-hour crypto and derivatives markets increasingly the norm, collateral that can only move during banking hours is a growing competitive disadvantage. Institutions that tokenize their collateral can compete around the clock; those that do not cannot.
The Verdict
Citi’s report is one of the clearest signals yet that tokenization has crossed from experimentation to deployment. When 77% of surveyed institutions expect to use tokenized collateral this year, and platforms like Broadridge are already processing trillions in monthly blockchain-based repo volume, the question is no longer whether traditional finance will use this technology — it is how fast.
For investors, the takeaway is patience and perspective. The beneficiaries of collateral tokenization are mostly institutional platforms and infrastructure providers rather than any single cryptocurrency. But every bond, fund and cash balance that moves on-chain makes the broader ecosystem more robust, more liquid and harder to dismiss.
The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.
65 custody locations per SIFI is the insane number here. no wonder 15 billion just sits there, finding it probably costs more than the yield
65 locations per institution is just an inventory problem in disguise. tokenized collateral wont kill custody sprawl overnight but consolidating to even a dozen venues frees a chunk of that 15 billion
15 billion of dead collateral per institution and they needed a survey to notice it
avg 74 billion managed per SIFI and a quarter of it earns nothing. the arbitrage here is embarrassing
74 billion USD a day parked across 65 custody locations and people still ask what blockchains are for. this is the actual use case, settlement plumbing
agree. boring plumbing beats jpeg mania, this is where chains actually earn their fees
settlement plumbing is right but try selling that to a bank IT department. 65 custody locations means 65 fiefdoms with their own budgets and none of them volunteer to be merged
65 fiefdoms is exactly right. every cost center reads consolidation as their headcount going first, so the 15 billion stays parked and everyone keeps their little kingdom
and every fiefdom has a vendor contract expiring in 2028. consolidation happens the year those renewals come due, not a day before
renewal cycles deciding the real timeline is depressingly accurate. so the 77 percent is a 2028 number wearing a 2026 hat
15 billion in idle collateral is a problem the banks created themselves by refusing to update custody tech for three decades, lets be honest
curious which chain actually wins the collateral tokenization race, the Citi report stays pretty vague on that part
the report stays vague because the banks have not decided either lol. my money is on whatever settles USDT at scale, the collateral race follows the liquidity
three decades of custody inertia and the invoice is only 346M a year? honestly surprised its that low given the plumbing
346M is only the measurable slice. the unremunerated 25 percent also means trades that never got backed intraday. the real invoice is the business they lost, not the idle balance
346M a year is basically a rounding error for systemically important banks though. not sure it alone forces the change
346M alone maybe, but add the capital sitting dead at 65 locations and the math changes. opportunity cost is the real invoice here
Citi publishing this with The ValueExchange gives it more weight than the usual consultancy deck. The 77% number is the one to check at year end.
77 percent in a survey is free, collateral actually settling onchain is the receipt. revisiting the Citi number next september is going to be the fun part
that september check goes either way hard. if a third of the 77% actually shipped, a few custody vendors are having a very bad earnings call
the report stays vague on chains because the pilots are all permissioned EVM forks nobody wants to name in print. tokenized collateral is a sales cycle, not a tech race
permissioned EVM forks is exactly why the chain question does not matter. whoever runs the custody wrapper wins, the chain itself is a line item
surveys measure intent, the treasury ledger measures movement. still, first time the big banks have admitted the idle number out loud. 15 billion per institution sitting dead is a confession in itself
and 346M a year is just the visible invoice. the ops headcount babysitting 65 custody locations dwarfs it
some form of use in that survey includes holding one tokenized money market fund in a pilot. headline vs reality gap is enormous
the 52 to 77 jump makes more sense when you notice the old question asked about actively managing tokenized collateral and this one says some form of use. some form is doing heroic work in that sentence