The repo market has long enabled market participants to turn securities into liquidity. Tokenization can change how quickly and continuously that exchange happens, enabling collateral and cash to settle together, move intraday and ultimately operate beyond traditional market windows. This guide breaks down how tokenized repo works, who’s involved and what a more connected collateral market can unlock.
Follow the flow of collateral and cash through each stage of a tokenized repo trade.
What can appear to be a straightforward exchange of collateral for cash is supported by a much broader institutional ecosystem.
The participant seeking financing. The seller contributes Treasury collateral to the transaction and receives cash in return.
The provider of cash. The buyer delivers liquidity against the seller’s collateral and receives that collateral as part of the repo transaction.
The marketplace where the transaction comes together. The financing application connects buyer and seller and orchestrates the workflow between the different parties and assets involved.
Creates and maintains the tokenized collateral used in the transaction and the infrastructure connecting the on-chain asset to its underlying collateral.
The issuer of the asset used on the cash side of the transaction. That could be a stablecoin such as USDC or a tokenized bank deposit.
The prime broker can facilitate the accounts and infrastructure through which buyer and seller exchange collateral and cash. Early implementations can be easier when both counterparties operate through the same prime broker.
The tokens move on-chain, but the underlying assets still need to be held securely. Traditional custodians can safeguard the underlying securities or cash supporting tokenized assets, while digital custodians and wallet providers can support custody of the corresponding on-chain tokens.
A single token representing Treasury collateral that can be held, pledged and exchanged against tokenized cash, then redeployed across additional on-chain workflows.
