For most treasury functions the use of cryptocurrency has historically been fairly limited, given one of the primary roles of a treasurer is to manage risk, and the most widely used cryptocurrencies tend to be very volatile. While direct investment in cryptoassets remains unlikely for most treasury investors, the underlying technology offers more relevant and beneficial applications.
Distributed Ledger Technology (DLT) is a digital system that records and shares data across a network of participants rather than relying on one central authority. This creates a tamper resistant and transparent record of ownership and activity. In a treasury context, its primary significance lies in enabling the “tokenisation” of assets: digital representations of securities that can be issued, tracked, and transferred efficiently.
In practice, a tokenised fund operates similarly to a traditional pooled fund but with potential operational enhancements. In a standard fund, units are purchased from a fund manager, who records ownership on a centralised register. By contrast, tokenised funds record ownership on a shared ledger, reducing the need for reconciliation between fund managers, investors, custodians, and payment providers.
These operational benefits are one of the key attractions of a tokenised fund structure or at least a share class offering this type of ownership. The investor still has access to the same underlying assets and fund strategy but benefits from increased flexibility through near instant transaction times, easier reconciliation between counterparties, and better transparency and visibility of holdings.
Faster transactions and real-time visibility of holdings have important implications for commonly used treasury vehicles. For example, tokenised money market funds could extend dealing windows beyond traditional cut-off times, as they are less reliant on custodians, transfer agents, and banking infrastructure. In more advanced implementations, this could support intraday liquidity management or even continuous (24-hour) trading through the use of smart contracts; automated programmes that execute transactions without intermediaries.
The use of tokenised funds could work hand in hand with stablecoins, a type of digital currency that is usually tied to the value of a fiat currency such as pounds or dollars but is built on DLT. This could enable investors to sell holdings in a tokenised fund for near instant settlement in exchange for a stablecoin tied to the currency of their choice. That stablecoin could then be transferred into fiat currency if the investor wished.
Regulatory approval for these types of solutions is progressing rapidly with the Bank of England and FCA jointly regulating stablecoins in the UK and consultations for tokenised collateral and digital asset ownership being completed in 2025. This signals the institutional desire to see these kinds of products developed with regulators keen to realise some of the potential efficiencies they can bring.
As with any emerging technology, there are risks and limitations. A key consideration is the liquidity of the underlying assets. While tokenisation may suggest enhanced liquidity, this is only effective where the underlying assets themselves are liquid. For example, money market funds are well suited to tokenisation due to their low volatility and high liquidity. Applying the same structure to less liquid asset classes, such as property or private equity, could create a mismatch between the tradability of the token and the liquidity of the underlying investment.
There are also operational and cybersecurity considerations. Smart contracts, while efficient, may be vulnerable to coding errors or exploitation if not properly designed and audited. In addition, the reliance on new forms of digital custody and infrastructure introduces operational resilience and governance challenges that treasury teams would need to assess carefully.
While the market for tokenised funds remains small relative to traditional fund structures, it is developing rapidly. For treasury investors, tokenisation is unlikely to represent an immediate shift in investment strategy, but it may materially enhance how funds are accessed and managed over time. As regulatory frameworks mature and adoption increases, tokenised money market funds and similar instruments could become a more prominent component of the treasury toolkit.
19/05/2026
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