Tokenized funds shift from issuance to on-chain utility

Tokenized funds are being used as on-chain collateral and margin in decentralized finance and related protocols. Midas’s mWIN, launched in August 2026, is backing loans on Morpho, and Aave’s Horizon allows institutions to borrow stablecoins against tokenized securities.

Issuance of tokenized funds has expanded: tokenized U.S. Treasury funds hold about $16 billion and major asset managers have issued tokenized products. The current focus is on using those tokens inside on-chain finance so they can provide liquidity without selling the underlying assets.

Many tokenized funds are bought, moved occasionally and then redeemed. An alternative is to deposit a token as collateral and borrow stablecoins. The borrower keeps the fund’s credit exposure and yield while accessing cash through a loan.

Tokenized credit differs from native crypto collateral. Credit portfolios often report net asset value periodically, their underlying bonds trade in traditional markets and redemptions can take days. On-chain lending protocols can liquidate collateral in minutes, so protocols set lending terms and liquidation rules to match those timing and liquidity differences.

Midas’s mWIN was issued natively on-chain. Wellington Management runs the underlying strategy and Northern Trust holds the assets. The portfolio includes investment-grade CLOs and other asset-backed credit with a current yield around 6.9%. mWIN can be minted and redeemed daily on a T+1 basis and uses several liquidity sources beyond secondary-market depth.

Sentora created a Morpho market where mWIN is used as collateral for loans denominated in PayPal’s PYUSD. Sentora set market parameters using historical NAV data, past stress events, liquidity measures and redemption mechanics. Those parameters set loan-to-value limits and liquidation processes that reflect how the underlying assets trade and settle.

Other infrastructure developments include Aave’s Horizon, launched in August 2025, which reports more than $250 million in total value locked for institutional borrowing against tokenized assets. Morpho markets have expanded for tokenized credit and Figure PRIME’s activity on Morpho exceeded $200 million this year.

Some industry participants say metrics based only on assets issued on-chain do not capture practical use. They emphasize measures such as tokenized collateral securing loans, the volume of stablecoin liquidity available against tokenized securities, how often collateral moves between venues without selling the asset and how much activity settles inside shared infrastructure.

Market participants are assessing whether protocols, issuers and custodians can align operational rules, risk assumptions and liquidity mechanics so tokenized securities can be used as collateral and margin in institutional on-chain finance.