What does it take to scale tokenized collateral? – Enterprise Ethereum Alliance

Highlights from the December Abu Dhabi Finance Week panel conversation.

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

In a panel focused on building rails for tokenized leverage, Redwan Meslem, Managing Director of the Enterprise Ethereum Alliance, joined leaders in insurance, clearing, custody, and trading to explain the real world between tokenized collateral and institutional-scale adoption.

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

Panelists from across underwriting, CCP and trusteeship came together on one reality: collateralized life at the intersection of risk management, legal certainty and operational control.

From an insurance perspective, tokenized assets come under immediate scrutiny from four aspects: stability, legal clarity, transparency, and regulatory acceptance. Despite hundreds of billions of dollars distributed as fiat collateral globally, crypto-based collateral remains underrepresented, not because of liquidity constraints, but because regulators still lack confidence in enforceability, valuation standards, and custody models.

Our clearing and derivatives infrastructure reflects this perspective. Central counterparties do not evaluate collateral through a “cryptocurrency vs. TradFi” lens, but assess whether they can reliably value assets, distribute them by account, mobilize 24/7, and liquidate without systemic risk.

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

Custody brought the discussion into clearer focus. If you cannot exercise control in real time, legal ownership alone is not enough to use the asset as collateral.

Andrej Majcen of Bitcoin Suisse expressed the custody issue succinctly: “It’s not a key or a coin.” The ability to take immediate action is critical when collateral value moves quickly, and complex custody or approval structures can undermine enforceability when it is needed most.

This is where tokenized assets face their first real institutional stress test, not in issuance but in stressed execution.

As the conversation turned to interoperability, Redwan’s perspective became clear. Tokenization without connectivity simply replicates existing financial silos on-chain.

“There is no technical problem we cannot solve,” he said. But interoperability only creates value if it enables speed of capital, not fragmentation. Tokenized assets must be able to move across multiple locations, communicate with existing systems, and remain composable across clearing, settlement, and collateral management workflows.

Although standards are starting to emerge, including ERC-based frameworks that are gaining traction for compliant tokenization, Redwan emphasized that standards alone are not enough. The real work happens when technical design reflects business reality.

Too often, engineering-first takes precedence in cryptocurrency conversations, especially institutional conversations. In contrast, institutional adoption requires these standards to be translated into something language risk committees, compliance teams, and finance departments can take action on.

One of the panel’s most understated but important insights 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 across countries as well as across institutional types. Banks have long served as trusted collateral intermediaries. Token-based custodians ultimately need to be perceived as having similar fiduciary, compliance, and oversight standards to make regulators comfortable.

“It is very important to have equity and a recognizable system of equivalence.”GFOX’s Sabrina Wilson emphasized that regulatory parity, not novelty, is what allows global markets to function at scale.

This topic was reinforced on the insurance side by Helen Ye, CEO of Qubit Underwriting. He pointed out different but related gaps. “How do you actually get an equivalent regulator that is as trustworthy as the banks? So the regulators will say, ‘Yes, we actually accept this.’”

From the MiCA framework in Europe to regional experiments in the Middle East, regulatory certainty, however imperfect, is proving more catalytic than regulatory silence.

Redwan concluded with a framing that resonated with audiences in the financial world. “The code we trust” is not enough when systems impact the real economy.

Ethereum and the wider ecosystem are no longer in their infancy. Privacy standards, interoperability frameworks, and enterprise-grade tools are maturing rapidly, but progress depends on an ongoing dialogue between builders and institutions, not a parallel one.

The future of tokenized collateral will not be determined by a single protocol or jurisdiction. This will be shaped by how effectively standards, regulations and infrastructure converge around a shared risk model.

At the end of the session, the panel agreed on a practical outlook. It is unlikely that tokenized collateral will replace traditional systems overnight. Instead, it will become an increasingly important tool within the agency’s toolkit.

The real change comes in speed. This means faster settlements, reduced counterparty risk, and more efficient use of capital across markets. If these benefits are realized, tokenization will do more than simply modernize collateral, it will quietly redefine how leverage, credit, and liquidity are structured across the financial system.

And, as Redwan suggests, once interoperability and trust are established, the range of assets that can be engaged could go far beyond today’s imagination, from financial instruments to actual value itself!