Tokenized funds are entering a new phase as investors and financial institutions look beyond simply putting traditional assets on a blockchain and begin using them as collateral, margin and building blocks for structured financial products.
Tokenized US Treasury funds alone now represent about $16bn in distributed value, with most of the biggest names in traditional asset management now involved in issuing them. Creating and distributing these assets is no longer the main challenge. The more difficult question is what they can do once they exist onchain.
At present, the typical tokenized fund is held by an investor, transferred occasionally and eventually redeemed. That can improve distribution and settlement, but it leaves much of the asset’s economic value unused.
A more significant opportunity is to use the fund within an onchain financial system. An investor could pledge it as collateral, use it to support margin or include it in a structured position while retaining exposure to the underlying investment.
For example, an investor holding a tokenized fund backed by $100m of bonds might need access to cash. Under the conventional approach, the fund would be redeemed, the underlying assets would settle, and the proceeds would then be invested elsewhere. Although blockchain infrastructure may speed up the process, the economic result remains the same: the investor has to give up the position to obtain liquidity.
Alternatively, the investor could deposit the token into a lending market, use it as collateral and borrow stablecoins against it. The investor would keep the credit exposure and its yield, while receiving the cash without selling the asset. In that scenario, the tokenized fund is not merely a faster distribution vehicle; it becomes part of the financial infrastructure.
Traditional financial markets have developed extensive systems to mobilise the value held within assets. Tokenization could make similar processes programmable, but the risks and mechanics differ sharply between asset classes.
A lending protocol cannot treat every tokenized asset in the same way. If ETH falls below a liquidation threshold, it can be sold into a market operating continuously, with available depth visible onchain. A tokenized credit portfolio is very different. Its bonds may trade only during traditional market hours, its net asset value may be calculated periodically, and redemptions can take several days.
DeFi can liquidate positions within minutes, while traditional credit may take days to settle. Turning an asset into a token does not remove that mismatch. The necessary safeguards must instead be designed around the token and the market in which it operates.
That means assets intended mainly for distribution should be assessed differently from those designed for use as collateral.
mWIN, launched in August 2026, provides an example of a product built with that second purpose in mind. Midas issues the token, Wellington Management manages the underlying credit strategy and Northern Trust holds the assets. The strategy was created natively onchain, rather than being added to an existing fund afterwards.
Its portfolio includes investment-grade CLOs and other asset-backed credit, with a current yield of about 6.9%. mWIN can be minted and redeemed daily on a T+1 basis, using several competing sources of liquidity instead of depending solely on secondary-market depth.
Sentora curates a Morpho market in which mWIN is used to back loans denominated in PayPal’s PYUSD. It sets the market parameters using detailed information on historical NAV, previous periods of market stress, liquidity and redemption processes. The aim is to establish a loan-to-value limit that allows a forced sale to be completed before the collateral falls below the value of the debt.
The token makes the asset programmable, but these supporting arrangements are what make that programmability practical and safe.
The industry has largely measured tokenization by the value of assets issued onchain. That number is straightforward to report, but it does not distinguish between assets sitting idle and those being actively used.
More informative measures could include the amount of tokenized collateral securing loans, the quantity of stablecoin liquidity available against tokenized securities, how much collateral can move between venues without selling the underlying asset, and how much activity settles on shared infrastructure.
The market is beginning to develop in that direction. Figure PRIME’s growth on Morpho this year surpassed 200 million. Aave launched Horizon in August 2025 to allow institutions to borrow stablecoins against tokenized assets, and its total value locked is currently above $250m.
Additional Morpho markets are being developed around tokenized credit, while tokenized equities are also beginning to enter the same infrastructure.
Digitising documents alone did not make the internet transformative; linking those documents through a network did. Financial assets may be following a similar progression, moving from representation to distribution and now towards utility.
The long-term value of tokenization is therefore likely to be judged not by how many assets exist onchain, but by what markets can build once those assets can be used effectively.
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