New US regulatory clarity is unlocking blockchain’s potential beyond theory. From tokenized collateral in Foreign Exchange (FX) trading to stablecoin remittances, institutional investors now have actionable tools to cut costs, reduce settlement times, and manage cross-border risk more efficiently.
The global FX and remittance markets are overdue for disruption. Despite advances in algorithmic trading and high-speed data analytics, the backbone of cross-border capital flows still relies on an antiquated infrastructure of correspondent banks, siloed custodians, and settlement lags. With recent regulatory clarity in the United States, highlighted by the “GENIUS Act” and supportive signals from Washington, blockchain-based solutions are moving from speculative pilot to institutional-grade utility.
For portfolio managers, allocators, CIOs, and risk officers, this represents more than back-office efficiency. It’s an opportunity to rethink how capital is moved, hedged, and deployed across borders. For a broader conversation about the trajectory of blockchain applications in financial services, I’ll be joining Christopher Weise — Managing Director, Education at CFA Institute — on Enterprising Investor podcast. Subscribe to the podcast and don’t miss the episode on September 1.
Why FX Is Ripe for Tokenization
Cross-border investing often means navigating a tangled web of currency conversions, banking holidays, time zone delays, and counterparty exposures. When I was a mutual fund manager overseeing international equities, simply establishing exposure to a Danish company like Carlsberg required setting up local custodians, managing illiquid ADR alternatives, timing trades during odd market hours, and converting dividends paid in Danish krone back into US dollars, often at sub-optimal rates. For smaller asset managers, these operational burdens are a non-starter.
Now imagine a scenario where tokenized collateral enables instant FX settlement and stablecoins allow remittances to be completed in minutes — 24/7, 365 days a year. That’s no longer hypothetical.
Case Study: Tokenized FX Collateral
Lloyds Bank and Aberdeen Asset Management recently executed a successful pilot involving tokenized collateral for FX trades on the Hedera blockchain. As reported by Ledger Insights, the firms used tokenized representations of money market mutual funds to streamline the collateral posting process across multiple jurisdictions. This allowed for near real-time movement of capital and eliminated delays tied to traditional clearing cycles. Importantly, the use of distributed ledger technology (DLT) provided an immutable audit trail and reduced the reliance on intermediaries.
For institutional investors, this development opens the door to more dynamic liquidity management. Portfolio managers can deploy capital more efficiently, risk officers can reduce exposure windows, and traders can compress bid-ask spreads by removing custodial frictions.
Stablecoin Remittances: Institutional Applications
Meanwhile, South Korea’s Shinhan Bank and Thailand’s SCB recently completed a cross-border remittance trial using stablecoins. The pilot proved that stablecoins can displace traditional SWIFT-based transfers, reducing costs and increasing settlement speed. This innovation has broad implications for international firms needing to move cash quickly across borders—whether to fund margin calls, distribute dividends, or execute corporate actions.
Think of the advantages for a pension fund with global holdings: Instead of relying on banking wires that take days to clear and cost dozens of basis points, funds could use digital currencies to settle obligations in real time. Stablecoins also enable better FX rate visibility and reduced slippage, thanks to pre-programmed execution logic and transparent on-chain pricing.
Regulatory Tailwinds: The Infrastructure Is Forming
One of the long-standing barriers to institutional adoption of blockchain has been regulatory ambiguity. But that is starting to shift.
In the United States, the GENIUS Act has introduced critical guardrails for how digital assets are categorized and taxed. And central banks are beginning to coordinate their efforts. The Reserve Bank of Australia, for example, has launched trials involving wholesale CBDCs across both public and private blockchains, with a particular eye on their utility in FX markets.
This matters because regulatory harmonization is the final puzzle piece needed for widespread adoption. With clear rules, financial institutions can begin integrating tokenized FX solutions into their core systems with confidence that they are operating within compliant frameworks.
Portfolio Manager Takeaways: What’s Actionable Now?
For CFA charterholders and institutional investors, this isn’t just a theoretical evolution. It’s a real-world shift with actionable implications:
- Portfolio Managers: Monitor liquidity management opportunities, use tokenized collateral to avoid overfunding accounts, and evaluate pilot projects with custodians or counterparties.
- Risk Officers: Model counterparty and operational risk under blockchain settlement scenarios, and track how instantaneous transfers may reduce exposure windows.
- Allocators/CIOs: Stress test liquidity models under tokenized settlement assumptions, assess potential cost savings from stablecoin transfers, and evaluate alignment with long-term strategy.
- Across all roles: Leverage blockchain’s auditability to enhance compliance and reporting workflows.
The message is clear: the tools for frictionless, blockchain-based global capital movement are no longer five years away. They’re already being piloted today.
A Note of Caution
It’s important to avoid overstating the readiness of these technologies. While the underlying infrastructure is maturing, many implementations remain in the early stages. Not every jurisdiction is aligned on regulatory frameworks, and interoperability among networks is still developing. Early movers don’t need to overhaul systems overnight. A pragmatic entry point is testing tokenized collateral pilots or evaluating stablecoin remittance platforms with trusted partners. Those who begin experimenting now will be better positioned as the infrastructure matures.
A Shift in the Market’s Plumbing
We’ve seen this before. Just as electronic trading replaced the shouting pits of equity markets and internet platforms redefined brokerage, blockchain is poised to transform the infrastructure of international investing. FX and remittances are merely the next frontiers.
Those who recognize and adapt to this evolution will improve efficiency, lower costs, and sharpen their strategic edge. And in a competitive environment where every basis point matters, failing to explore blockchain-based FX and remittance solutions could leave basis points on the table — an oversight no fiduciary can justify.
More to Think About
An Investment Perspective on Tokenization — Part I
An Investment Perspective on Tokenization — Part II
Valuation of CryptoAssets: A Guide for Investment Professionals
CFA Institute Global Survey on Central Bank Digital Currencies
