From Code to Capital: What It Will Take for Tokenized Collateral to Scale

Key takeaways from the Abu Dhabi Finance Week panel conversation in December.

At Abu Dhabi Finance Week 2025, conversations on capital efficiency consistently returned to the same question – whether today’s market infrastructure is actually built to support it.

On a panel focused on building the rails for tokenized leverage, Redwan Meslem, Executive Director of the Enterprise Ethereum Alliance, joined leaders from insurance, clearing, custody, and trading to unpack what’s really standing between tokenized collateral and institutional-scale adoption.

The conversation quickly moved past whether tokenization matters, and instead focused on how, where, and under what constraints it could be integrated into leverage, credit, and liquidity frameworks.

Across insurance underwriting, CCPs, and custodianship, panelists converged on one reality: collateral lives at the intersection of risk management, legal certainty, and operational control.

From an insurance perspective, tokenized assets face immediate scrutiny on four fronts: stability, legal clarity, transparency, and regulatory acceptance. Even with hundreds of billions deployed globally as fiat collateral, crypto-based collateral remains marginal – not because of liquidity constraints, but because regulators still lack confidence in enforceability, valuation standards, and custody models.

Clearing and derivatives infrastructure echoed this view. Central counterparties don’t evaluate collateral through a “crypto vs. TradFi” lens, they evaluate whether assets can be valued reliably, apportioned per account, mobilized 24/7, and liquidated without introducing systemic risk.

Tokenization, in this context, is about shortening settlement cycles and reducing counterparty exposure in markets that already operate around the clock.

Custody brought the discussion into sharper focus. Legal title alone does not make an asset usable as collateral if control cannot be exercised in real time.

Andrej Majcen of Bitcoin Suisse captured the custody challenge succinctly: “Not your keys, not your coins.” When collateral values move quickly, the ability to act instantly matters, and complex custody or authorization structures can undermine enforceability when it’s needed most.

This is where tokenized assets face their first real institutional stress test not in issuance, but in enforcement under pressure.

When the conversation turned to interoperability, Redwan’s perspective was clear: tokenization without connectivity simply recreates the silos of legacy finance, on-chain.

“There’s no technical problem we can’t solve,” he noted, but interoperability only creates value if it enables capital velocity, not fragmentation. Tokenized assets must be able to move across venues, communicate with existing systems, and remain composable across clearing, settlement, and collateral management workflows.

Standards are beginning to emerge – including ERC-based frameworks gaining traction for compliant tokenization – but Redwan emphasized that standards alone are not enough. The real work happens when technical design is informed by business reality.

Too often, crypto conversations, especially institutional ones, remain engineering-first. Institutional adoption, by contrast, requires translating those standards into language risk committees, compliance teams, and treasury departments can act on.

One of the most understated, yet critical, insights from the panel was the role of regulatory equivalence.

Global markets function because jurisdictions recognize each other’s regulatory regimes as comparable. Tokenized collateral will not scale globally unless similar equivalence emerges, not just between countries, but between types of institutions. Banks have long acted as trusted collateral intermediaries. Token-native custodians must eventually be recognized as bearing comparable fiduciary, compliance, and supervisory standards for regulators to become comfortable.

“Having parity and recognizable equivalent regimes is very paramount”, said Sabrina Wilson of GFOX, underscoring that regulatory equivalence, not novelty, is what allows global markets to function at scale.

That theme was reinforced from the insurance side by Helen Ye, CEO of Qubit Underwriting, who pointed to a different – but related – gap: “How can we actually have the equivalently regulated entity as credible as banks… so regulators will say, ‘Yes, we actually accept that’?”

From Europe’s MiCA framework to regional experimentation in the Middle East, regulatory certainty, even if imperfect, is proving more catalytic than regulatory silence.

Redwan closed with a framing that resonated strongly with the financial audience: “In code we trust” is not sufficient when systems touch the real economy.

Ethereum and the broader ecosystem are no longer in their infancy. Privacy-preserving standards, interoperability frameworks, and enterprise-grade tooling are maturing quickly, but progress depends on sustained dialogue between builders and institutions, not parallel conversations.

The future of tokenized collateral will not be decided by a single protocol or jurisdiction. It will be shaped by how effectively standards, regulation, and infrastructure converge around shared risk models.

By the end of the session, the panel aligned on a pragmatic outlook. Tokenized collateral is unlikely to replace traditional systems overnight. Instead, it will become another increasingly important tool inside institutional toolkits.

The real transformation lies in velocity: faster settlement, reduced counterparty risk, and more efficient use of capital across markets. If those benefits materialize, tokenization will go beyond simply modernising collateral – it will quietly redefine how leverage, credit, and liquidity are structured across the financial system.

And as Redwan suggested, once interoperability and trust are in place, the range of assets that can participate may expand far beyond today’s imagination – from financial instruments to real-world value itself!