--- path: /report/creating-more-liquidity-mobility-in-markets/ title: "Creating More Liquidity in Markets: Why the next generation of market infrastructure has to get the trade-offs right" description: A market-structure report on why liquidity mobility should be the primary lens for evaluating tokenized settlement infrastructure. image: /og/2026-q4/og_2026-q4_report_creating-more-liquidity-mobility-in-markets_linework-f5_v02.png category: Market infrastructure order: 5 heroTitle: "Creating more liquidity in markets: why the next generation of market infrastructure has to get the trade-offs right" seoTitle: Creating More Liquidity Mobility in Markets — Get the full report seoDescription: A Tempo research report on liquidity mobility, privacy, and speed in next-generation market infrastructure. printTitle: Creating More Liquidity in Markets shortTitle: Creating More Liquidity in Markets reportSummary: text: The report argues that speed and privacy are table stakes, while liquidity mobility is the variable that determines whether tokenized infrastructure unlocks value or recreates market silos. items: - How legacy market infrastructure trapped and released liquidity - Why public chains proved mobility but fragmented liquidity - How private-chain silos bought privacy at the cost of mobility - Why shared settlement with private execution can balance all three audience: FMIs, bank strategists, market infrastructure teams, and institutional settlement leaders subtitle: Why the next generation of market infrastructure has to get the trade-offs right eyebrow: Stablecoin Advisory authors: - name: Simon Taylor url: https://www.linkedin.com/in/sytaylor/ - name: Borja Neira url: https://www.linkedin.com/in/bneira/ - name: Jevgenijs Kazanins url: https://www.linkedin.com/in/kazanins/ metrics: - value: $120B label: Annual cost attributed to trapped liquidity, fees, and delays - value: $25.5T label: Assets estimated to sit idle as deadweight capital - value: $385B label: Average daily repo volume in a major private DLT example reportUrl: /report/creating-more-liquidity-mobility-in-markets pdfUrl: /reports/creating-more-liquidity-mobility-in-markets.pdf readerUrl: /report/creating-more-liquidity-mobility-in-markets/print blogUrl: /blog/creating-more-liquidity-mobility-in-markets locale: en canonical: https://tempo.xyz/report/creating-more-liquidity-mobility-in-markets/ --- # Creating More Liquidity in Markets: Why the next generation of market infrastructure has to get the trade-offs right A market-structure report on why liquidity mobility should be the primary lens for evaluating tokenized settlement infrastructure. **For:** FMIs, bank strategists, market infrastructure teams, and institutional settlement leaders ## A mobility-first frame for institutional settlement The report argues that speed and privacy are table stakes, while liquidity mobility is the variable that determines whether tokenized infrastructure unlocks value or recreates market silos. - How legacy market infrastructure trapped and released liquidity - Why public chains proved mobility but fragmented liquidity - How private-chain silos bought privacy at the cost of mobility - Why shared settlement with private execution can balance all three ## Key metrics - **$120B** — Annual cost attributed to trapped liquidity, fees, and delays - **$25.5T** — Assets estimated to sit idle as deadweight capital - **$385B** — Average daily repo volume in a major private DLT example ## Read the report - [Report landing page](/report/creating-more-liquidity-mobility-in-markets) - [Download the PDF](/reports/creating-more-liquidity-mobility-in-markets.pdf) - [Open the reader](/report/creating-more-liquidity-mobility-in-markets/print) --- ### **_Thesis_** _Liquidity mobility is the critical variable to judge tokenized infrastructure on. Speed and privacy are the enabling support. Architectures that collapse mobility to optimize for one of the other two are re-creating the same fragmentation problem that DLT was supposed to solve. This piece explores the balance required to deliver the maximum value to market participants._ ## Creating More Liquidity Mobility in Markets ### Why the next generation of market infrastructure has to get the trade-offs right **Executive summary** Every generation of market infrastructure gets built in response to a similar problem: liquidity gets trapped. It is trapped in nostro accounts, trapped behind operating hours, trapped inside one asset class, trapped on the wrong venue at the wrong moment. Market structures like CLS, RTGS systems, tri-party repo, central clearing were all fixes for a specific instance of trapping that succeeded. However, in aggregate, the general problem remains unsolved across venues. The original promise of blockchains was to enable the mobility of collateral. A shared ledger with atomic settlement, programmable assets, cash, and collateral on the same substrate could move liquidity where it's needed, when it's needed, instantly. The public-chain world has delivered a partial version of this promise. You can arbitrage across venues in minutes. You can route a payment through three chains and two stablecoins in one transaction. There are, however, drawbacks, such as bridging, which creates new risks, and liquidity fragmentation across those chains. But the mobility does work, sometimes too well (as seen during times of stress and deleveraging). The private-chain world has delivered mostly siloed ledgers built around a single market. These solutions solved for privacy as their primary constraint and produced enormous throughput but the liquidity once again became trapped. The cash leg is usually an afterthought. Synchronization between environments is bolted on rather than native. The result is a very fast, very private, very trapped pool. This essay argues that the primary frame for evaluating the next generation of settlement infrastructure is liquidity mobility — the ability for cash and collateral to move across venues, institutions, and use cases without rebuilding trust at every hop. Speed and privacy matter. They are table stakes. But they have been delivered at the cost of liquidity mobility. Modern blockchains can now deliver all three. ### Liquidity always gets trapped Pick any era of market infrastructure and the story rhymes. During the late 1960s paperwork crisis, trades still settled on physical stock certificates that had to be moved between firms by clerks, reconciled by hand, and signed off in triplicate. As volumes climbed past the system's capacity, the NYSE began closing on Wednesdays so firms could catch up on the paperwork. During this time, dozens of brokerages went under because they could not track their assets. The fix that eventually emerged, the DTC, was a central depository that immobilized certificates. This freed the liquidity that had been trapped inside the choreography of moving paper from one vault to another. Two decades later, the trap moved into FX. Because banks settled the two legs of a currency trade hours apart and across time zones, the system had a structural exposure that finally crystallized when Bankhaus Herstatt was wound up by German regulators on a Wednesday afternoon in June 1974\. The core issue was a liquidity timing mismatch. The bank had received Deutsche Mark payments from its counterparties that morning, but its New York correspondent had not yet released the matching dollars. Counterparties were left holding nothing on one leg of trades they had already paid for on the other. CLS arrived in 2002 to close that gap for the major currency pairs by imposing a payment-versus-payment settlement window and a central counterparty, and within a few years, it had largely succeeded. The trap closed for those pairs. It quietly stayed open everywhere else, including weekends, holidays, and any currency that didn't make it into the CLS cohort. The 2000s gave the same dynamic another form in tri-party repo. Collateral was tied up in bilateral relationships and couldn't be efficiently reused across counterparties without the clearing bank intermediating every move, which meant a security pledged to one lender on Monday couldn't easily be redeployed against a different counterparty on Tuesday. Tri-party solved the intermediation problem and the operational drag that came with it. What it didn't solve — and arguably wasn't trying to — was the deeper issue: collateral sitting inside one silo still couldn't migrate to another without manual choreography between custodians. The pattern is so consistent that it should probably be treated as the fundamental problem of market infrastructure rather than a series of separate crises. Cash sits in the wrong place. Collateral is pledged to one counterparty when another counterparty needs it more. Margin requirements across venues can't be netted because the venues don't talk to each other. We waste $120B yearly on fees and delays linked to trapped liquidity ([Oliver Wyman](https://www.google.com/search?q=https://www.oliverwyman.com/our-expertise/insights/2021/sep/unlocking-120-billion-in-cross-border-payments.html), 2021). $25.5T in assets sits idle as deadweight capital not being put to productive use ([GFMA](https://www.google.com/search?q=https://www.gfma.org/policies-resources/gfma-and-bcg-report-on-global-collateral-management/), 2024). Moving to T+1 would free 41% of the "safety cash" banks must lock up as insurance in the US alone ([DTCC](https://www.google.com/search?q=https://www.dtcc.com/dtcc-connection/articles/2024/january/23/t1-settlement-is-coming), 2024). Now scale this out to globally, and across all venues. This trapped liquidity is a tax on the world; it is capital frozen by legacy infrastructure that fuels the global economy when freed. Every solution to trapped liquidity in one place has pushed the trap somewhere else. DLT's original promise was that a shared ledger could finally end the game. Not by closing one trap faster than the next opens, but by making the underlying architecture mobile by default. ### The public-chain proof of concept Whatever one thinks of crypto, the empirical observation is hard to argue with. On public chains, liquidity moves. A trader on Arbitrum can route funds to Base, swap into a different stablecoin, and deploy into a yield strategy on Solana inside a single coffee break. The infrastructure is still early and somewhat unreliable. Bridges have been hacked for billions, as seen in the [$292m KelpDAO exploit](https://www.coindesk.com/tech/2026/05/09/layerzero-says-it-made-a-mistake-in-usd292-million-kelp-exploit). Cross-chain messaging has variable finality depending on the receiving ledger's nature. And the practice of bridges “wrapping” tokens (by locking them on one chain and minting them on another) fragments the canonical version of the same asset. Researchers writing about L2 fragmentation are not wrong; over twenty active L2s collectively secure nearly $40 billion in TVL, with capital and users dispersed across isolated environments.\[^1\] With all of that said, a user on a public chain today can move value across execution environments in a way that a bank moving dollars from London to Singapore over the weekend cannot. The public-chain world has imperfect liquidity mobility. The legacy world has none. Historically, there has been a direct correlation between the strength of a ledger's privacy and its latency. Generating zero-knowledge proofs or ensuring transaction anonymity required a heavy "computational tax," resulting in longer bridging windows ranging from several hours to several days. This created a real mobility tax: - **High Privacy / High Math:** Slower finality, as the system waits for complex proofs to be generated and verified. - **Low Privacy / Optimistic:** Faster perceived speed, often relying on "optimistic" assumptions or trusted liquidity-pool bridges to bypass waiting periods. The trade-off was clear: privacy and mobility were levers pulled in opposite directions. If you wanted the speed of an optimistic rollup, you often had to sacrifice the privacy or immediate mathematical certainty of a ZK-based environment. This matters. The design space for private settlement is not "pick one of privacy or mobility." It is: what architecture minimizes the tax each imposes on the other? ### The semi-private-chain trap The dominant institutional DLT pattern today is what we might call the "vertical silo." A permissioned chain. Built for one market. Privacy is enforced by giving each participant visibility only into transactions they're a party to. The largest live example of this pattern processed $385 billion in average daily repo volume in October 2025, running on a private-chain architecture that handles roughly $8 trillion in transactions per month for a single market.\[^5\] The technology works. The volumes are real. The institutions running these environments are not wrong to believe that there is business value here. However, the architectural choice embedded in this pattern is worth examining carefully for margin, collateral, and settlement. It is usually not articulated as a choice. It is presented as a technical necessity. In this model, each institution runs its own node, and transactions are distributed only to parties who need to see them, on a need-to-know basis enforced by the protocol. An ordering service sequences encrypted messages across participants. Atomic transactions can be composed across applications connected to a common synchronization domain.\[^6\] This delivers sub-transaction privacy and selective disclosure rather than pseudonymity. That is a genuine achievement. For a securities transaction where the custodian should only see the securities leg and the bank should only see the cash leg, this is the right property to optimize for. The problem is what the architecture does to liquidity mobility. It does three things. **Synchronization is per-domain.** Two applications that share a single centralized synchronizer can compose atomically. Applications that straddle multiple networks or ledgers cannot do so without significant infrastructure work on top. The "network of networks" framing is accurate. That is the limitation as much as it is the feature. Liquidity within a synchronization domain is mobile. Liquidity across domains is the engineering problem the industry is now retrofitting solutions for, after the fact. **Cash is usually an afterthought.** The dominant institutional DLT deployments have focused on a single asset classes like repo, tokenized securities, a particular derivative, and the cash leg has typically been solved last. A tokenized deposit or a settlement coin built primarily to clear that one market. The cash is captive to the venue. A treasurer who wants to move the same dollar from a repo platform to an FX venue to a corporate payout cannot. They need three different cash instruments, three different reconciliation paths, and three different operating models. **The privacy model constrains the liquidity pool.** If only the parties to a transaction can see it, liquidity providers outside those parties cannot price it or provide depth for it. Market-making inside a fully bilateral, fully private environment is structurally thin. The workaround is to concentrate activity inside a synchronization domain large enough to have its own depth, which is exactly what creates the silo. None of this is a criticism of the engineers who built these systems. They made defensible choices given the constraints they faced and the specific market they were solving for. The point is that those choices encoded a trade-off — privacy and throughput purchased at the cost of cross-market liquidity mobility — and that trade-off was never put to the test because it seemed like the only option available at the time. It isn't anymore. ### The three properties a cash settlement chain has to balance Three properties matter for a chain that wants to be the settlement layer for cash at an institutional scale. 1. **Speed and reliability.** Sub-second finality without re-orgs. Dedicated blockspace so that a meme coin going viral on the same infrastructure cannot starve payments. Predictable, fixed-denomination fees that a treasury team can model. This is the easiest property to deliver and, critically, it is no longer the differentiator. 2. **Privacy zones.** Where payment amounts, counterparty identities, and balances not visible to the public. The issuer, the regulator, and the parties to a transaction each get exactly the visibility they need and no more. Payroll ledgers stay private. Treasury movements stay private. Settlement details between two institutions stay between those two institutions. 3. **Liquidity mobility.** Cash moves across use cases and venues from payroll, treasury, settlement, FX, to wider tokenized asset markets without fragmenting into a separate pool for each. An asset issued once is usable anywhere inside the environment and any privacy zone without losing speed. The mobility is not just "cross-chain bridging works." It is "the cash leg doesn't re-fragment every time it enters a new use case." The architectural move that unlocks the third property without sacrificing the second is the separation of _execution_ from _settlement_. Private execution environments run as parallel chains where participants transact without public visibility. Funds remain locked in contracts on a common mainnet. Assets stay interoperable across environments. Liquidity pools on the mainnet remain accessible through deposit and withdrawal flows that are themselves private. ![Figure 1](/reports/figures/creating-more-liquidity-mobility-in-markets-figure-01.png) This is a different shape from the vertical silo. The silo makes privacy and liquidity adversarial. This architecture makes them orthogonal. Privacy is handled at the execution layer. Liquidity is handled at the settlement layer. The two stop fighting each other. ### What this means for the build decision For FMIs and bank strategists evaluating where to put institutional cash infrastructure, the questions worth asking are different from the ones the industry has been asking. It is not primarily _how fast?_ Sub-second finality is available from multiple vendors. It is not primarily _how private?_ Strong privacy with selective disclosure is achievable on several architectures. The questions that actually separate the options are about mobility. Can the same cash instrument clear a repo trade, fund a cross-border payment, post margin at a derivatives venue, and settle a tokenized securities trade without being re-issued, re-tokenized, or reconciled separately at each venue? Can a compliance policy set by the issuer once be enforced everywhere the token goes, including within a private execution environment, without custom integration? Can liquidity pools used for price discovery on the public side of the environment remain accessible to participants transacting privately? Does the cash leg actually treat cash as first-class, or is it a bolt-on to whatever the chain was really built for? An infrastructure that answers yes to these questions is optimizing for liquidity mobility. One that answers no, no matter how strong its privacy appears, is building a new silo. Tokenization is live and in production, and increasingly delivering value over weekends during geopolitical crises. Much of this activity is happening in stablecoins. The FMIs and banks that architect their next-generation infrastructure for mobility first, and solve privacy and speed as engineering problems on top of that foundation, are the ones that get to stay in the center of the flow. ### A note on the trade-offs Nothing here is cost-free. Architectures that achieve mobility through a shared settlement layer with private execution environments inherit trust assumptions from that settlement layer. Zone-style operators in such architectures see more than they would in a fully cryptographically hidden environment. This is a deliberate choice that works for institutional use cases with existing compliance mandates and works less well for retail privacy. Interoperability across environments adds operational surface area that a single-application silo does not have. These are real trade-offs, and any responsible evaluation should name them. The argument is not that mobility is free. The argument is that the cost of the alternative, rebuilding the silo at a new layer, is higher, and the industry is not yet pricing it correctly. **Closing** Every generation builds to fix the trap the last generation created. The question for the next build cycle is whether the architecture chosen solves the general problem or kicks it one layer down. Tempo has consistently strived to find the balance between mobility at the settlement layer, privacy at the execution layer, with compliance policies that travel with the token. We welcome discussion and feedback on these points. --- \[^1\]: Gate News, "$40 billion in liquidity fragmentation, Ethereum L2 economic zone proposal presents an integration path," March 2026, citing L2BEAT data. \[^2\]: CoinDesk, "How To Fix Ethereum's Fragmentation Problem," February 2025\. \[^3\]: Ethereum Economic Zone (EEZ) proposal, Gnosis and Zisk, Ethereum Foundation, 2026\. \[^4\]: Espresso Systems, "Defragmenting Liquidity with Asynchronous and Synchronous Composability." Trust-minimised cross-rollup messaging requires waiting at least 12–15 minutes for L1 finalisation, and up to several days for most rollups. \[^5\]: Broadridge press release, November 2025: Distributed Ledger Repo platform processed an average of $385 billion in daily repo transactions in October 2025\. Canton ecosystem references $8T+/month in DLR repo volume; Q4 2025 figures from Blockworks indicate Canton has processed $6 trillion in tokenised real-world assets to date, handling \~$350 billion per day in US Treasury activity. \[^6\]: Digital Asset, "Canton Network Overview"; Canton DeFi technical documentation on Global Synchroniser architecture. \[^7\]: Canton Foundation, "How Canton Network Delivers Institutional-Grade Privacy"; technical primers describe synchronisation domains as the unit of atomic composability, with cross-domain interoperability handled by the Global Synchroniser as a separate orchestration layer. > Interactive report gate is available on the HTML page. --- ## Site links - [Tempo home](/) - [Privacy policy](/privacy-policy/) - [LinkedIn](https://www.linkedin.com/company/tempo) - [X](https://x.com/tempo) - [YouTube](https://www.youtube.com/@tempo) ### Products - [Earn](/earn/) - [Routes](/routes/) - [Zones](/zones/) ### Solutions - [Agentic payments](/solutions/agentic-payments/) - [Credit](/solutions/credit/) - [Cross-border payments](/solutions/cross-border-payments/) - [Institutional settlement](/solutions/institutional-settlement/) - [Stablecoin accounts](/solutions/stablecoin-accounts/) - [Tokenized deposits](/solutions/tokenized-deposits/) ### Developers - [Documentation](/developers) - [Tempo Explorer](https://explore.tempo.xyz/) - [Tempo API](/developers/docs/api/) - [Performance](/developers/performance) - [Status](https://status.tempo.xyz/) - [GitHub](https://github.com/tempoxyz) ### Resources - [Blog](/blog/) - [Customers](/customer-stories/) - [Learn](/learn/) - [OUSD](/ousd/) - [Partners](/partners/) - [Reports](/reports/) - [Stablecoin Advisory](/stablecoin-advisory/) ### Company - [About](/about/) - [Careers](/careers/) - [Brand kit](/brand/) - [FAQ](/faq/)