2026 Predictions: Off-exchange settlement – the new foundation of institutional market infrastructure

This is an excerpt from our latest report: Zodia Custody 2026 predictions. Download the full report now to find out what next year holds for institutional digital asset custody.

Why now?

Regulation is catching up and aligning
The EU’s MiCA framework became fully operational in December 2024, setting benchmarks for asset custody, transparency, and governance. Throughout 2025, other major markets including the US and UK, through a joint taskforce on stablecoins, AML, and digital securities, began harmonising their approaches. Across Asia and the Middle East, hubs like Hong Kong, Singapore, UAE, and Bahrain are rolling out comprehensive digital-asset regimes purpose-built for institutional scale.

Institutional demand is here and growing fast
Tokenised money market funds (MMFs) surpassed $1 billion AUM in Q1 2024, and have since expanded over 7-fold to $7.4 billion in 2025. Products such as BlackRock’s BUIDL, Franklin’s FOBXX, Ondo’s OUSG, and USYC are now recognised as yield-bearing “digital cash” and collateral instruments across multiple custody and trading rails. Institutions are deploying these assets in settlement workflows, treating them as programmable, yield-generating collateral.

The market is maturing, not speculating
Bitcoin’s spot ETF inflows, record derivatives open interest, and growing institutional treasuries are deepening liquidity and legitimising the market’s plumbing. The result is a clear migration away from exchange-held assets toward segregated, custodian-managed OES workflows, where counterparty risk is minimised, capital is productive, and transparency is built in.

Institutional impact

• Capital efficiency: Tokenised MMFs and stablecoins enable institutions to earn yield on “cash-equivalent” assets while simultaneously posting them as collateral, eliminating idle balances and shortening redemption cycles common in traditional fund operations.
• Risk and controls: OES drastically reduces hot-wallet exposure and counterparty risk. Governance and auditability are centralised under regulated custody, aligning with MiCA and forthcoming regulatory frameworks across the UK and US.
• Liquidity and market robustness: With high-quality collateral available under custody, market depth and execution quality improve without requiring asset transfers into exchange wallets – reducing fragmentation and enabling better capital deployment.

The outcome: OES turns custody from a passive safety layer into an active liquidity engine powering trading, collateral, and settlement without compromising segregation or control.

“Institutions aren’t chasing speculation; they’re chasing capital efficiency. Off-exchange settlement delivers that by putting custody and control back where they belong. As tokenised collateral and regulated venues converge, OES will become the default workflow for serious institutional participation.”

Wing Cheah, Product Manager, Interchange

Zodia in action

Custody as a control centre
Zodia Custody acts as a governed hub that lets institutions deploy assets across multiple regulated exchanges via our off-exchange settlement product Interchange – maintaining full segregation and safekeeping while enabling real-time collateral mobility.

Tokenised assets with on-exchange utility
By safekeeping tokenised MMFs, stablecoins, and RWAs and mirroring them as eligible collateral on-exchange with Interchange, Zodia allows clients to keep assets secure under custody while activating them for loans, cross-collateralisation, and settlement. Institutions can remain compliant while maximising balance-sheet productivity.

Making the model safe, useful, and scalable
Zodia standardises onboarding, chain support, and attestations, while embedding controls for monitoring, segregation, and withdrawals – addressing both exchange risk and smart-contract exposure.

What’s next:

• Expanded exchange connectivity across major regulated venues.
• Formal collateral eligibility frameworks for leading tokenised MMFs.
• Enhanced policy APIs for automated guardrails – letting clients define parameters for collateral use, margin calls, and settlement windows, ensuring assets stay safe at rest but fully usable in motion.

 

This is an excerpt from our latest report: Zodia Custody 2026 predictions. Download the full report now to find out what next year holds for institutional digital asset custody.