When capital is trapped in batch settlement, even abundant liquidity can't prevent forced exits. Stablecoins and tokenization offer a fix, but the build is hard. January's LMAX data shows the cost.
In January, LMAX Group processed more than $300 billion in total volume in a single week. Gold alone accounted for $60 billion. Across the wider market, some institutions were forced out of positions overnight. They could not move assets out of equity or bond portfolios fast enough to fund gold or energy exposure. The collateral was there. It simply could not move fast enough.
That episode, described by Jenna Wright, managing director at LMAX Group, in a recent market commentary, exposes a structural flaw in today's markets. The problem is not capital scarcity. It is capital mobility. Markets trade around the clock. Infrastructure still runs on batch processing, cut-off times and settlement cycles.
Risk reprices by the minute. Collateral does not.
This mismatch is no longer a back-office inconvenience. Wright calls it a market-structure problem. When institutions cannot mobilise collateral quickly to support positions, liquidity thins, spreads widen and price moves become unnecessarily sharp. The problem is not volatility alone. It is infrastructure that has failed to keep pace with the markets it serves.
Settlement remains one of the weakest links. Institutions can execute trades globally in milliseconds. The transfer of value that supports those trades can still take days. That delay creates funding pressure, operational risk and capital drag.
Stablecoins are the most direct fix for the cash side of the problem. Strip away the noise. The use case is straightforward: they allow cash-like value to move with the speed and programmability of digital assets. For firms still working around T+1 or T+2 settlement, nostro and vostro accounts, and hard cut-off times, that is not a marginal improvement. It changes what is operationally possible.
The market has moved beyond theory. Stablecoin market capitalisation is now around $320 billion. Recent on-chain transfer activity hit record levels. Wright emphasises the more important point: regulated institutions are beginning to treat stablecoins and tokenised cash as settlement infrastructure rather than a crypto-market curiosity.
A stablecoin does not need to replace the financial system to be useful. Its role is practical: to allow money to move at the same speed as the risk it is supporting. In continuous markets, that ability will become table stakes. Any institution that cannot settle, fund or rebalance in real-time carries a disadvantage before the trade even begins.
Stablecoins address the movement of cash. Tokenisation addresses the movement of assets. In the January example, the inability to move assets quickly forced institutions out of positions. By representing securities and other assets as programmable units of value, tokenisation makes collateral more portable. Assets that would otherwise sit inside delayed settlement cycles can be pledged, transferred or released faster. Trapped capital can be put back to work.
Wright warns against dismissing tokenisation as another efficiency project. It changes the way trust, settlement and risk management are organised. When cash, securities and collateral can all exist on programmable rails, the old separation between asset classes starts to look less like a necessity and more like a constraint.
The difficulty is execution. Today's market infrastructure still reflects a chain of separate processes: execution, clearing, settlement and custody. Each hand-off adds delay. Each boundary creates another point where capital can become stuck. That model is increasingly out of step with markets that expect exposure, funding and settlement to be managed continuously.
These are operational and engineering challenges. They require infrastructure that can be upgraded without downtime, risk models that work intraday rather than at the end of the day, and settlement mechanisms that can support institutional scale. The firms that solve this will set a competitive standard for markets over the next decade.
This week's headlines show institutional crypto moving further into regulated financial infrastructure. Coinbase and Wintermute kept securing regulatory victories. Wells Fargo joined a major race in the sector. (Wells Fargo has an Alpha Score of 57, a Moderate label, according to AlphaScala's stock page.)
Average BTC and ETH funding has crept back to roughly 5% annualised, now above the 3-month T-bill at about 3.8%. Yet Ethena (ENA) has barely reacted. The disconnect is structural: crypto basis is down to roughly 1.5% of ENA's backing. The token's funding sensitivity has all but faded. That dynamic mirrors the broader capital mobility problem – even in crypto, capital is not flowing efficiently to where it is needed.
Zcash's Tachyon upgrade aims to scale shielded payments, improve quantum readiness, and test whether its funding, security and governance can hold. The upgrade is a test of whether a privacy-focused blockchain can maintain its infrastructure while adapting to new threats.
Every major shift in market structure looks slow until it suddenly does not. Electronic trading, central clearing and shorter settlement cycles all followed that pattern. Adoption begins unevenly, then accelerates once the advantages become impossible to ignore. Technology is available and the use case is clear. What remains is the willingness to modernise the infrastructure that determines whether capital can be used when markets need it most.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.