ESMA seeks evidence tokenized collateral can be cashed out in crisis

ESMA seeks evidence on tokenized collateral cash-out in crisis

Introduction

ESMA is seeking industry feedback on the legal, liquidity, and operational risks of tokenized collateral before deciding whether additional EU regulatory measures are necessary. The agency wants evidence that clearinghouses can access tokenized collateral and turn it into cash if markets come under stress.

Background

Tokenized collateral is entering live European clearing operations as banks and investors seek faster access to securities to meet margin requirements. In July 2025, Eurex Clearing introduced a collateral service based on distributed ledger technology. JPMorgan executed the first live transaction for Dutch pension investor PGGM, moving securities from another custody location.

Risks and Challenges

ESMA said even assets that are liquid in traditional form may face additional risks when tokenized, including delays caused by redemption procedures or restrictions on transfers. The agency also asked whether token transfers confer ownership or enforceable rights over the underlying assets.

Regulatory Framework

The consultation covers tokenized representations of assets held in traditional financial infrastructure and assets issued directly on distributed ledgers. It also examines how those models interact with stablecoins, central bank money, and tokenized deposits. ESMA said Pontes, a system launched by the Eurosystem in September, could support tokenized collateral arrangements by connecting blockchain-based infrastructure with existing settlement systems.