BNY, Citadel Securities Run Tokenized Treasury Through Triparty Repo

BNY has completed a triparty repo transaction with Citadel Securities using a tokenized representation of a U.S. Treasury note, the custody bank said on Tuesday. BNY described it as the first use of tokenized assets on a major triparty repo platform.

The workflow began with Citadel Securities buying a two-year U.S. Treasury note through BNY on Tradeweb. Once the trade was executed, a tokenized representation of the security was recorded on BNY's private digital ledger and settled within minutes, compared with the T+1 cycle that governs ordinary Treasury settlement. Citadel Securities then pledged the tokenized note as collateral in an overnight triparty repo, with BNY providing cash in return.

The point of the exercise is collateral mobility. Dealers and trading firms fund their positions by pledging Treasuries in the repo market, and any delay between buying a bond and being able to reuse it ties up balance sheet. By compressing settlement and moving the same asset straight into a financing trade, the test shows how a firm could put newly acquired collateral to work on the same day.

"Efficient movement of high-quality collateral is fundamental to well-functioning markets," said Dan Doherty, digital assets operations lead at Citadel Securities. Laide Majiyagbe, BNY's global head of markets, called the trade "a real example of how tokenization solves for client needs."

BNY's role in this market gives the test more weight than a typical pilot. The bank is one of the main agents in U.S. triparty repo, which is where a large share of Treasury financing between dealers and cash lenders such as money market funds takes place. Running a tokenized asset through that existing infrastructure, instead of a separate blockchain venue, is a sign that large incumbents intend to bring tokenization into their current plumbing. Brian Ruane, BNY's global head of clearance and collateral management, said tokenized collateral can reduce friction while relying on established market structures.

The transaction was a single trade on a private, permissioned ledger, and BNY did not say when the workflow would be offered to clients at scale. The bank said it plans to add digital cash and tokenized deposit capabilities to support on-chain settlement and financing, and expects to extend operating hours for its traditional settlement platforms for Fed-eligible securities and U.S. triparty transactions into European and Asian trading hours next year.

Those two efforts are related. Tokenized collateral that settles in minutes is of limited use if the cash leg and the repo platform still close at the end of the New York day, and BNY framed tokenization and longer operating hours as developing together toward round-the-clock markets.