The European Securities and Markets Authority (ESMA) is requesting proof that clearinghouses maintain the ability to access tokenized collateral and convert it into cash during periods of severe market stress.
On Friday, ESMA released a call for evidence to gather insights from the industry regarding the consequences of using tokenized collateral.
Verena Ross, Chair of ESMA, stated that they must establish the necessary conditions for tokenized markets to function securely and at scale across borders, backed by legal certainty, cross-compatible infrastructures, and proper oversight.
As financial institutions and investors look for quicker ways to access securities for margin requirements, tokenized collateral is beginning to see use in active European clearing operations. The assessment by ESMA will evaluate if current European Union regulations can guarantee that clearinghouses can retrieve and liquidate such collateral if a clearing member experiences a default.
Back in July 2025, Eurex Clearing rolled out a collateral management tool powered by distributed ledger technology. JPMorgan successfully processed the inaugural live transaction for Dutch pension fund PGGM by transferring securities away from an alternative custody venue.
Tokenized collateral faces liquidity and ownership scrutiny
The feedback request includes tokenized versions of assets kept within conventional financial frameworks as well as assets created natively on distributed ledgers. Additionally, it looks at how these different frameworks interface with stablecoins, tokenized deposits, and central bank funds.
According to ESMA, even assets that maintain high liquidity in their traditional formats might encounter added risks upon tokenization, such as transfer limitations or redemption delays.
The agency also raised questions over whether moving token assets successfully grants ownership or legally binding rights to the underlying holdings.
Related: ESMA to prioritize EU-wide AI and tokenization supervision in 2027
This consultation comes right after the Eurosystem introduced Pontes in September, a platform enabling financial institutions to settle tokenized asset transactions using central bank money. ESMA noted that Pontes has the potential to bolster tokenized collateral structures by linking blockchain architecture with established settlement networks.
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