Jefferies sees tokenisation shifting from trial to early adoption

Investing.com -- Jefferies said tokenisation is moving from experimental phase toward early strategic adoption in European market infrastructure. The firm said the key question for exchange investors is no longer whether tokenisation will occur, but rather what problems it addresses and how profit distribution will change across the value chain.

The firm said the discussion has been technology-focused, but the more important issue involves whether the industry is replacing, replicating or redesigning market structure. Jefferies said moving current systems onto distributed ledger technology risks maintaining existing inefficiencies.

Intraday collateral mobility represents the most compelling wholesale use case, according to Jefferies. The firm said moving eligible collateral intraday could improve capital efficiency by 3% to 5% on large flow bases. Deutsche Börse's (ETR:DB1) system, which includes HQLAX feeding into Eurex and Clearstream, serves as an early example of mobilising collateral without moving the underlying asset.

London Stock Exchange Group's (LON:LSEG) LCH and swap agent are also well-positioned if pre-trade issuance and post-trade eligibility can be connected, Jefferies said. The firm noted the cash leg remains a binding constraint, as distributed ledger technology rails are pre-funded and credit cannot be natively represented on-chain.

For equity tokenisation, Jefferies said it is primarily a retail distribution story. Platforms such as Robinhood (NASDAQ: HOOD) issue tokenised wrappers on shares to provide crypto-native users with equity exposure. The firm noted the token is issued by the platform, not the underlying issuer, making it closer to a derivative on the cashflows without governance rights.

Cash tokenisation is the true bottleneck, according to Jefferies. The firm said true delivery versus payment requires securities and cash on aligned rails in real time. Fiat currency runs at T+1 or slower, stablecoins are private money with unresolved accounting treatment for global systemically important banks, and central bank digital currency coverage remains limited.

Jefferies said tokenisation represents both a threat and an opportunity for listed financial market infrastructures. The firm said regulation still requires registry-like functions, protecting some revenue pools. Vertically integrated groups with liquidity, connectivity, collateral and asset-servicing under one roof are best positioned to capture share, according to Jefferies.

The firm said three to five years is a short timeframe for financial market infrastructure, as adoption, regulation and ecosystem coordination move slowly. Jefferies expects limited near-term disruption to central securities depository or exchange market shares.

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