Nonco, an institutional digital asset firm with businesses spanning derivatives, lending, OTC liquidity, market making and institutional execution, today announced that it will accept USDM1 as collateral from eligible counterparties and post USDM1 across its derivatives, financing and institutional trading activities.
The adoption marks the latest expansion of Nonco’s institutional collateral toolkit. The firm, which has surpassed $100 billion in bilateral OTC trading volume and onboarded more than 900 institutional counterparties.
Was an early participant in the use of tokenized money market fund shares as collateral in live derivatives transactions, including the use of Superstate’s USTB in a bilateral BTC/USD options trade.
Where payment stablecoins are generally structured as corporate obligations and tokenized money market funds represent interests in investment funds, USDM1 is a natively issued, secured sovereign bond – with different legal rights, economic characteristics and applications across 24/7 institutional markets.
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USDM1 is a USD-denominated sovereign bond secured on a 1:1 basis by short-dated US Treasuries pledged to a US trust company in a bankruptcy-remote structure. Its issuance, collateral and redemption arrangements are governed by New York law, with an explicit customary waiver of sovereign immunity.
As a dual-recourse instrument, holders maintain enforceable rights to par redemption against a sovereign issuer and a first-priority perfected security interest in Treasury collateral under Articles 8 and 9 of the Uniform Commercial Code.
Cleary Gottlieb Steen & Hamilton LLP advised as issuer’s counsel. M1X Global serves as coordinating agent. Sovereign securities have long served as foundational collateral assets across global institutional financing markets, with roles spanning derivatives margin, repo, secured financing and liquidity management.
USDM1 pays a sovereign coupon and, when unencumbered, has been structured to support look-through to HQLA1 with 24/7, T+0 settlement. It is compatible with industry-standard ISDA, GMRA and GMSLA documentation, benefiting from robust US close-out netting protections.
For institutional trading firms, the legal and financial characteristics of collateral can directly affect financing flexibility, counterparty exposure, liquidity management and the amount of balance sheet capacity required to support trading activity.
“Nonco was early in demonstrating that tokenized fund interests could become productive collateral rather than simply investment products,” said Jeffrey Howard, Head of North America and Partner of Nonco”.
Natively issued sovereign debt adds another important building block to our toolkit. Institutional markets have always optimized among different forms of high-quality collateral depending on the transaction.
As markets move onchain, the same principle applies. “Tokenization is a technology, not an asset class,” said Jordan Goldman, President and COO of M1X Global. “A payment stablecoin, a fund share and a sovereign bond can all move onchain, but they remain fundamentally different financial instruments.
Two assets with the same dollar value can have very different collateral economics depending on their legal rights, eligibility, netting treatment and financing characteristics.”
Institutional custody and settlement infrastructure supporting USDM1 includes Anchorage Digital Bank, BitGo Bank & Trust, N.A., and tZERO’s regulated broker-dealer custodian. USDM1 is also offered through Tradeweb and accepted by FDIC-insured Bank of Guam.
Most recently, USDM1 served as the sovereign securities collateral leg in the first fully onchain repo transaction with Virtu Financial through Tradeweb, demonstrating its use within established institutional financing frameworks.