ESMA launches tokenised collateral review for EU central clearing

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ESMA reviews tokenised collateral

Highlights

ESMA launched a Call for Evidence on tokenised collateral use by central counterparties, with consultation responses due by 15 January 2027.
The regulator examines tokenisation models’ impact on collateral transfer, management, protection, and conversion to liquidity, particularly during clearing member default situations.
ESMA will assess feedback in Q1 2027 and may propose regulatory or supervisory measures to address risks and standards for tokenised collateral in EU post-trade markets.

Consultation targets collateral safeguards

As reported by ESMA, the regulator has launched a Call for Evidence on the potential use of tokenised collateral by central counterparties, with responses due by 15 January 2027. The initiative examines whether tokenised forms of collateral can meet the operational, legal and risk-management standards required in EU central clearing.

ESMA says the review focuses on how tokenisation could affect the transfer, management, protection and use of collateral across its full lifecycle. It is considering different models, including tokenised versions of assets held in traditional infrastructures, assets issued directly on distributed ledger technology, and hybrid arrangements involving tokenised cash and other settlement assets.

Verena Ross, chair of ESMA, says tokenisation has the potential to make Europe’s financial markets more efficient, integrated and innovative, but adds that cross-border scale will require legal certainty, interoperable infrastructure and appropriate supervision. Klaus Löber, chair of ESMA’s CCP Supervisory Committee, says the core safeguards for CCP collateral must remain unchanged, including high quality, legal enforceability, liquidity and operational availability, including under stressed conditions and after a clearing member default.

Implications for EU post-trade markets

ESMA is seeking feedback on how tokenised collateral arrangements would function in practice, especially during a clearing member default. That includes whether CCPs could access, transfer and convert tokenised collateral into liquidity when needed, and how client protection, segregation and settlement finality would be preserved where distributed ledger technology interacts with traditional market infrastructure.

The regulator is also asking whether tokenising already eligible collateral changes that collateral’s risk profile. Responses will be published after the consultation closes unless participants request otherwise.

ESMA plans to assess the feedback in the first quarter of 2027 and then decide on the most appropriate next steps. Those could include regulatory measures or supervisory convergence action within its remit as the EU evaluates how tokenisation fits into financial market infrastructure.

In our earlier article on Nasdaq’s tokenization push, we discussed how tokenising assets such as Treasurys, equities and money market funds could make collateral more fluid and potentially unlock capital tied up in today’s processes. We also noted that extending markets toward 24/7 trading would require real-time risk controls and stronger operational frameworks, with firms increasingly looking to automation and AI-enabled tools to support continuous collateral and risk management.

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