Collateral Without Borders: The End of Fragmented Capital

TL;DR

• Asked for the best collateral, the panel split: tokenized T-bills for mobility, Ethereum for provenance, native Bitcoin, and for Morpho a mix by client type, with money market funds for institutions and tokenized stocks for retail.
• Bitcoin is the largest pool of idle collateral because it is not programmable. Wrapping it brings tax, counterparty and cost issues, which Babylon addresses by making native Bitcoin usable as collateral.
• Tokenized stocks are a retail unlock: holders can borrow against shares instead of selling them, and investors shut out of US brokers can buy them onchain.
• Collateral is trapped across chains, bridges and Bitcoin wrappers. What decides whether an asset works as collateral is the onchain liquidity around it.
• Institutions want confidentiality: encrypted amounts with viewing keys for regulators and auditors, which Zama says has brought $130 million of shielded deposits into Morpho vaults.
• The technology is ready. Compliance and regulatory clarity are the blockers, and much of the gating can be configured at market or vault level.

Speakers

Collateral Without Borders: The End of Fragmented Capital

• Alexandra Kugusheva, Fintech GTM at Morpho
• Fisher Yu, Co-founder & CEO at Babylon Labs
• Darren Camas, Co-founder & CEO at Fusion by IPOR
• Fahim Sachedina, Ecosystem Partnerships Lead at Zama

The panel was moderated by Raphaël Bloch, CEO of The Big Whale, and Noé Giglio, The Big Whale.

Every collateral has its case

After polling the room through the TBW app, the moderators asked each panellist for the best collateral in one word. Fahim Sachedina chose tokenized T-bills, which have the most mobility. Darren Camas chose Ethereum, a native asset whose provenance can always be proven, whereas Bitcoin needs wrapping or staking to be used. Fisher Yu answered Bitcoin. Alexandra Kugusheva split the answer by client: money market funds for institutions and tokenized stocks for retail.

Darren Camas also explained the flash loan, a loan with no capital that must be repaid within the same block. Because everything in DeFi can be liquidated instantly across protocols, lenders can be made whole, but a billion-dollar bond portfolio unwound in one block would create market structure problems. For Fahim Sachedina, institutions now want guardrails so that liquidations do not happen when they do not expect them.

Bitcoin: the largest pool of idle collateral

Fisher Yu put Bitcoin's idleness down to its lack of programmability. To borrow against it, holders must wrap it into WBTC or cbBTC, with tax, counterparty, custody and cost issues. Babylon makes native Bitcoin usable as collateral, with no wrapper. The demand is there:

• A holder going through an OTC desk can pay more than 10% to borrow, or 7% at Tether after three months of KYC, against about 5% for onchain stablecoin loans
• About a third of the holders Babylon speaks to want to borrow, and two thirds want yield, through covered calls or a carry trade on borrowed stablecoins

Alexandra Kugusheva added that Bitcoin wrappers fragment liquidity, while much of the Bitcoin held by custodians is native. Several protocols are piloting ways to keep the Bitcoin with the custodian while representing it onchain, with results expected within four to six weeks. Darren Camas cited Tesseract, whose Bitcoin clients want yield without triggering capital gains or taking smart contract risk. A native Bitcoin vault can serve them, provided enough liquidity exists around it for a liquidator to act within a single block.

Tokenized stocks are a retail unlock

The moderators reported that tokenized stock issuers see collateral mobility, more than 24/7 trading, as the main driver. Darren Camas noted that large institutions can already pledge their stocks, so the change is for retail. Fusion runs what Darren Camas described as the largest earn-on-stock programme on Base by deposits. Round-the-clock trading also brings risk:

Camas: “There's no such thing as overnight in DeFi.”

For Alexandra Kugusheva, the unlock is that stocks now sit in the same wallet as stablecoins, Bitcoin and RWAs. A holder who wants to keep shares for life can borrow against them instead of selling, and investors who cannot open a US brokerage account can buy permissionless versions issued by firms such as Coinbase or Robinhood. On liquidation, Darren Camas said a lending protocol only needs onchain liquidity in the token; legal rights matter when someone redeems the underlying in size.

Fragmentation: chains, bridges and markets

Fahim Sachedina, formerly at Optimism, traced fragmentation to the period when every company wanted its own chain, each needing native stablecoins, wallets and explorers; the industry is still moving idle capital out of isolated pools. Darren Camas considers that game mostly over, with Ethereum's lead in liquidity, and warned about bridges: getting in can take minutes, getting out hours, days or weeks, with costs, hacking risk and slippage along the way.

Asked about a Citi note describing Aave as a possible collateral mobility protocol, Alexandra Kugusheva explained Morpho's design: each market pairs one collateral with one loan asset, unlike pooled protocols. For loans against a portfolio, which fintechs ask about most, Morpho released Morpho Midnight at the end of August: a fixed-term, fixed-rate, order-book protocol where a borrower can pledge a basket such as tokenized stocks plus Bitcoin without exposing existing lenders.

Privacy, with viewing keys

Fahim Sachedina said banks, asset managers, OTC desks and family offices all refuse to put size onchain while anyone can track their positions. Zama encrypts amounts and balances while keeping addresses and the transaction graph visible, and lets users grant viewing keys to the parties that need them, such as a bank, the tax authority or an auditor.

Sachedina: “I just don't want the whole world to see how much I specifically have in my wallet.”

According to Fahim Sachedina, shielded deposits in the Morpho vaults Zama works with went from zero to $130 million, mostly from institutions drawn by selective disclosure and delegated viewing access for their lawyers and auditors.

Compliance is the blocker, and guardrails exist

The panel agreed the technology is the least of the problems. Alexandra Kugusheva said it has absorbed capital at scale, but DeFi remains a grey area in many jurisdictions. Darren Camas pointed out that onchain primitives such as Uniswap's x·y=k pools were built for utility, not compliance, so regulators will have to adapt. In practice:

• KYC can be enforced at market level on Morpho, though Alexandra Kugusheva finds that many institutions asking for gated markets do not need them
• Fusion lets managers whitelist depositors and authorise markets, and a MiCA-regulated firm uses its stack for institutional clients
• Fiat on- and off-ramps are largely solved, but an audience member noted that a basis point on $100 million matters, and that a $150 million redemption can take 24 to 48 hours

On speed as a risk, Darren Camas described timelocks, caps and withdrawal fees in Fusion vaults; Alexandra Kugusheva said a Morpho curator can cut a compromised market's cap to zero within seconds; and Fisher Yu said native Bitcoin in Babylon can only be withdrawn to five predefined addresses. To build market confidence, Fahim Sachedina wants pilots scaled 50 to 100 times and their outcomes published.

Conclusion

London showed that borderless collateral is mostly a liquidity and compliance problem. The tools exist: native Bitcoin collateral, tokenized stocks that can be borrowed against, multi-collateral order books, confidential balances with viewing keys and curator controls that react in seconds. What decides adoption is the onchain liquidity around each asset, fewer bridges and wrappers between them, and regulatory frameworks that institutions can map onto the controls they already run.