The core objectives of liquidity management remain constant: preserving capital, maintaining liquidity and generating income. Yet the operating environment continues to advance, creating a growing disconnect between modern financial systems and traditional treasury operations.

“A lot of the treasury infrastructure still operates around traditional market hours, settlement cycles and reconciliation processes,” comments Daniel Maley, Head of APAC Cash Business at BlackRock. “That’s creating a gap between how businesses really operate and how liquidity can move.”

As businesses become increasingly global and operate in real-time, Maley notes that liquidity is increasingly constrained by “legacy cut-off times, intermediated systems and fragmented technology.”

Meaningful opportunities and use cases

Against this backdrop, the possibilities presented by tokenisation and digital assets are becoming more apparent. According to Maley, the benefits of these developments involve modernising market infrastructure rather than changing underlying investments.

“Digital currencies – which include stablecoins, tokenised deposits and central bank digital currencies (CBDCs) – can improve how value moves through the payments and settlement systems,” he notes.

“This introduces the possibility of transferring that value over digital rails or blockchain technology, with greater speed, more transparency and better connectivity than traditional payment systems.”

For treasurers, Maley sees the most compelling use case not in holding digital assets or digital currencies “for the sake of it”, but in using digital cash to streamline settlement and cash movement.

Beyond this, Maley believes that tokenised money market funds could provide treasurers with a new liquidity optimisation tool by enabling fund holdings to be transferred between approved digital wallets.

“So a treasury subsidiary could potentially transfer a token – which represents a share or a fund holding – to another whitelisted digital wallet that sits within their group entity,” he explains. “Or they could even transfer the token to another third-party approved wallet. Other potential use cases include collateral management and reserve management.”

Digital currencies in Asia

While emphasising that adoption of digital currencies is still at a very early stage, Maley says he is seeing considerable interest from companies in Asia.

“Corporates are looking at digital assets where there are operational problems they can solve – such as inefficient cross-border payments, inefficient liquidity movements and high transaction costs,” he states.

“In Asia, this is coming to light more because corporates tend to operate across a lot of different jurisdictions, with multiple currencies, banking systems and regulatory requirements. Being able to move liquidity across those different entities and markets presents the most tangible use case for them.”

At the same time, Maley points out that the regulatory momentum in markets such as Hong Kong, Japan and Singapore is accelerating the adoption of cryptocurrencies and stablecoins in those regions.

Seeking yield

As adoption of digital currencies increases, treasurers will increasingly look for yield-bearing instruments on-chain that can operate alongside digital cash.

“Stablecoins are non-yielding by nature,” says Maley. With more money moving onto digital rails, treasurers will need to consider how they can generate income – and Maley argues that tokenised money market funds can play a key role in the solution.

“Traditionally, treasurers have used money market funds to manage operating or reserve cash balances, both as a diversification tool but also to generate income,” he explains. “Tokenised money market funds have the same underlying investment, but it’s moving onto those digital rails.

“We envision that as more cash moves into digital cash formats, more investors are going to seek those same institutional-grade investments on-chain.”

Bridging the gap

For BlackRock, the goal is to act as a bridge between the traditional financial ecosystem and the digital assets ecosystem. “We want to ensure that capital can flow efficiently – but we also want to provide the same money market funds on-chain that we do off-chain,” says Maley.

“That means bringing institutional quality investment exposures, governance and risk management into those digital formats. It also means working with the infrastructure providers, transfer agents, custodians and fintechs to make sure those tokenised products operate with appropriate controls.”

At the same time, Maley emphasises the need to help treasurers access the benefits of digital finance without fundamentally changing the way they manage liquidity today.

“What we aim to do is provide access to on-chain avenues,” he says. “The way we build portfolios and create exposures is exactly the same – it’s really about giving treasurers the same access to these things as they move on-chain.”

Governance and control

So, what should treasurers be thinking about when adopting digital cash? For Maley, governance is key. “Tokenised money market funds are going to potentially introduce new service providers, such as which blockchain to leverage or which digital wallet to use,” he explains. “Institutional investors need confidence that the infrastructure is secure, compliant and operationally resilient.”

With this in mind, treasurers should ask the same types of questions that they focus on when using traditional money market funds, such as who is responsible for onboarding, how anti-money laundering (AML) and know your customer (KYC) processes are being conducted, and which controls are in place on digital wallets.

“It’s not necessarily about asking different questions, but about asking the same questions to new providers,” Maley adds.

Direction of travel

While digital assets are still at an early stage, the direction of travel is becoming clearer. “What we foresee is digital assets becoming more embedded into treasury’s platforms and the banking infrastructure, and ultimately their investment workflows,” Maley predicts.

The growing integration of digital assets could also reshape how treasurers segment cash for investment purposes. Today, treasurers often divide their cash into three buckets for investment purposes: operating cash (which is held for one day), core cash (which can be held for three-to-six months), and strategic cash (which is held over a longer investment horizon).

As access to liquidity extends beyond traditional banking hours, however, the conventional three-bucket approach may no longer be enough. “What we see emerging is an ultra-short liquidity bucket that you can access on a 24/7 basis – so liquidity bucketing will need to become even more segmented as treasurers consider what they need outside of traditional banking hours,” says Maley.

“Ultimately, treasurers will still be looking for the same investment outcomes: stability of principal, capital preservation, liquidity, yield – and also operational efficiencies.”