tZERO Adds Sovereign Digital Bond Collateral to Regulated Broker-Dealer Custody
tZERO now allows institutions to hold USDM1, a sovereign digital bond backed by U.S. Treasuries, within its SEC-registered broker-dealer custody, bridging traditional finance with on-chain assets.
tZERO Group, Inc., a tokenization infrastructure leader, announced today that USDM1, a USD-denominated sovereign bond issued natively on-chain by the Republic of the Marshall Islands, can now be held through tZERO Digital Asset Securities, LLC, an SEC-registered broker-dealer custodian of digital assets. This development allows institutional participants to securely hold USDM1 within a regulated framework aligned with U.S. securities laws.
USDM1 is a natively issued, USD-denominated sovereign debt security backed 1:1 by pledged short-duration U.S. Treasury instruments. Each unit represents a direct interest in secured sovereign debt issued under New York law, structured in the style of a Brady bond, with an explicit customary waiver of sovereign immunity. Cleary Gottlieb advised the RMI as issuer's counsel. The instrument combines legal and structural protections of traditional fixed income with settlement efficiencies of tokenized assets, paying a coupon and potentially treated as a cash equivalent.
Alan Konevsky, Chairman and CEO of tZERO, stated, "USDM1 introduces a new category of on-chain sovereign collateral that aligns with how institutions manage custody, financing, and balance sheet efficiency. Supporting USDM1 within tZERO's custody solution reflects our focus on expanding regulated access to digital assets that can integrate directly into institutional workflows for cash and treasury management."
USDM1 is currently issued across multiple blockchain networks, including Stellar, Canton, and Solana. As collateral, it benefits from robust U.S. close-out netting protections and supports sovereign look-through to Level 1 HQLA under Basel standards. This addition to tZERO's platform enables institutions to hold sovereign, Treasury-backed digital asset securities within an SEC-registered qualified custodian, integrate on-chain assets into existing custody frameworks, and access digital asset securities designed for margin, financing, and collateral workflows.
Looking ahead, tZERO expects to explore broader infrastructure interoperability with USDM1, including expanding availability to its institutional client base, further integration with its SEC- and FINRA-regulated broker-dealer capabilities, compatibility with its clearing infrastructure and forthcoming derivatives framework, and API-level connectivity through tZERO Connect. The parties also expect to evaluate pathways for USDM1 to function as both a trading and funding instrument within regulated secondary market environments, including exploring access to liquidity through tZERO's regulated alternative trading system.
USDM1 has been engineered to function within familiar broker-dealer custody and secured financing frameworks, offering a pathway for institutions to hold yield-bearing, Treasury-collateralized instruments in regulated custody environments while maintaining 24/7 on-chain settlement capabilities. This announcement reflects continued momentum in bridging traditional financial infrastructure with blockchain-based assets, as institutions increasingly seek regulated pathways to access tokenized securities and on-chain collateral.