Calastone writes on "The Future of Tokenised Yield-​Bearing Assets as Collateral." They comment, "Yield-​bearing assets like money market funds have long been a staple for investors seeking to manage their short-​term liquidity needs. Particularly for larger corporate and institutional investors, like pension funds, which have limited options for managing cash needs due to constraints on unsecured exposure to bank deposits, money market funds offer an invaluable cash management vehicle, diversifying credit risk and achieving returns aligned with short-​term money market rates. They are designed to be redeemed by investors for cash at short notice, typically offering daily redemptions with same-​day settlement." Calastone continues, "However, money market funds are not typically used as collateral, due to operational and in some regions regulatory barriers, they need to be converted to cash first. Indeed, around three quarters of collateral is posted as cash. But the process for doing so is hobbled by inefficiencies. Tokenisation can simplify it." They add, "If money market funds were tokenised, the investor could simply pledge their tokens to the counterparty as collateral without needing to redeem them for cash first. The assets could be posted to an account in the investors name for the benefit of the receiver of the collateral, meaning the investor retains the yield. When no longer required they are posted back to the main account of the investor -- all executed on a single, efficient set of digital rails. This offers significant benefits to both investors and the whole ecosystem. It makes operations more efficient, because tokenised assets can be transferred between accounts with full transparency to all parties in real time on distributed ledger technology (​DLT) networks."

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