The evolution of digital asset collateralisation: Enhancing security and capital efficiency

By Darren Jordan, Chief Commercial Officer, Komainu

The article below was originally posted on Hedgeweek on 25/06/2025.

The digital asset industry has evolved at pace, presenting both opportunities and challenges for institutional participants. One of the most pressing concerns has been counterparty risk – how firms can securely trade and manage assets without unnecessary exposure to vulnerabilities. Exchanges typically hold assets on behalf of clients, but growing concerns over security and operational risk prompted a shift towards off-exchange collateralisation, offering enhanced risk mitigation while preserving capital efficiency. 

Komainu is at the forefront of this evolution, bridging the gap between traditional financial infrastructure and the digital asset ecosystem. By adopting best practices from established financial markets, Komainu has developed collateral management solutions that allow institutions to unlock asset utility without compromising security. 

The need for off-exchange collateral management 

Collateral agreements have long been central to risk management in traditional finance. However, the digital asset industry has historically lacked the same level of structure, raising concerns about asset safety, liquidity, and efficiency. In response, tri-party agreements emerged to replicate the trusted frameworks found in TradFi, enabling institutions to move assets off exchanges while retaining their utility for trading. 

The industry’s shift towards off-exchange collateralisation stems from a fundamental need: institutions must mitigate risk while maximising the potential of their assets. By implementing established risk management practices, firms can optimise liquidity without exposing themselves to undue risk. 

Komainu Connect: Redefining collateral management 

To address these challenges, Komainu developed Komainu Connect, a purpose-built collateral management platform designed for institutional clients. This solution provides a secure, off-exchange environment where firms can hold their assets in regulated custody, in segregated wallets, under a bankruptcy remote trust structure, while benefiting from streamlined trading and financing opportunities. 

Komainu Connect enables efficient collateralisation, reducing counterparty risk while allowing flexibility in trading and investment strategies. By enhancing operational transparency and ensuring compliance with institutional standards, the platform supports capital efficiency without sacrificing security. 

Balancing security with capital efficiency 

In traditional finance, custodied assets play a crucial role in improving capital efficiency, serving as collateral across a range of financial transactions. By contrast, firms holding digital assets have historically had to make a difficult trade-off between security, asset ownership and on-chain visibility vs utility of assets. 

Today, collateral management solutions, such as those offered by Komainu, provide a bridge between these two priorities. Institutions can now secure assets while leveraging them for trading, lending, and other financial activities – bringing the digital asset sector in closer alignment with traditional finance. 

The expanding scope of digital asset collateralisation 

Initially, collateral in digital asset markets was limited to a handful of stablecoins and trusted tokens. As confidence in the ecosystem has grown, the range of eligible collateral has broadened, leading to key developments such as: 

– Money market funds – Traditionally used in financial markets to provide liquidity and stability, tokenised money market funds have now become viable collateral options in the digital asset space. This allows a yield bearing instrument to be used as collateral.

– Liquid staked assets – Liquid staking has gained traction as an innovative mechanism that enables institutions to earn staking rewards on assets while maintaining flexibility for collateralisation. Unlike traditional staked assets, which are locked for a fixed period, liquid staked assets provide liquidity, allowing institutions to use them as collateral while benefiting from staking yields. This approach enhances capital efficiency, ensuring that staked assets can contribute to market activity without compromising their earning potential.

– Yield-bearing stablecoins – Stablecoins have traditionally served as a secure, low-volatility asset class within digital finance. However, advancements in stablecoin models have introduced yield-bearing variants, allowing institutions to earn passive returns while maintaining stability. These assets combine the benefits of collateral security with income generation, making them an attractive option for institutions looking to optimise their capital efficiency.

– Tokenised traditional assets & securities – As digital finance converges with traditional markets, tokenised versions of equities, bonds, and other financial instruments are emerging as viable forms of collateral. Tokenisation enables these assets to be represented and transacted on-chain, facilitating seamless integration between TradFi and Digital assets. This development is expected to enhance liquidity, improve accessibility, and unlock new collateral opportunities for institutions. 

As the sector continues to evolve, the expanded range of collateralisation options is likely to drive broader institutional adoption of digital asset trading, reinforcing trust and efficiency across the market 

The future of digital asset collateralisation 

The long-term vision for digital asset collateralisation is clear: security must remain paramount, but firms require capital mobility to support growth and innovation. As the industry matures, collateral management will likely expand to include a diverse mix of assets, reinforcing liquidity, stability, and institutional trust. 

Komainu remains committed to driving this transformation, enabling institutions to navigate digital asset markets with confidence, flexibility, and security. 

Conclusion 

The digital asset industry is entering a new phase – one where security and utility are no longer mutually exclusive. Advanced collateral management solutions allow institutions to move assets off exchanges while maintaining efficiency in trading and investment strategies. As collateral offerings become more diverse and the market continues to mature, Komainu remains at the forefront of shaping a robust, secure, and efficient digital asset ecosystem. 

Komainu is dedicated to becoming the institutional gateway to the digital asset ecosystem. If you’d like to find out more about Komainu’s custody and digital asset services, please get in touch: https://komainu.com/contact-us