The liquidity-yield trade-off is a legacy problem

T+0 settlement and tokenised money market funds have removed the historical justification for keeping EMI and payment provider cash idle.

For Electronic Money Institutions (EMIs) and payment providers, liquid cash and yield have long pulled in opposite directions. Keeping funds accessible meant accepting near-zero returns. Chasing yield meant accepting lock-up periods that created operational risk. That trade-off had a logic to it when settlement took days and counterparty risk management was out of reach. It no longer does.

Why T+0 settlement removes the case for idle EMI cash

EMIs have grown rapidly, processing increasing volumes of client funds across multiple jurisdictions. But treasury practices have not kept pace. In many cases, cash reserves are still managed much as they were before the current generation of payment infrastructure existed: parked in low-yield accounts, kept liquid against settlement needs that modern rails have already reduced considerably.

T+0 settlement changes the underlying maths. The operational buffer that once justified holding idle cash was always partly a function of settlement lag. Remove the lag and the justification shrinks with it.

How tokenised money market funds unlock yield on liquid EMI cash

Tokenised money market funds (MMFs) go further, offering yield on assets that remain liquid and transferable within a regulated framework. For an EMI managing float across currencies and jurisdictions, that removes the lock-up problem that has made yield-bearing instruments impractical for treasury use.

Laurin Bylica, Chief Commercial Officer at Axiology said: “This marks a structural shift in how payment providers will manage capital over the next decade. The institutions that move first will operate leaner balance sheets than competitors still carrying a cost that stopped being necessary years ago. Within five years, treasury functions that hold cash idle for operational safety will look as outdated as manual reconciliation looks today.”

Regulated DLT infrastructure and the EU DLT Pilot Regime

The regulatory environment has also shifted in ways that matter for treasury decision-making. The EU's DLT Pilot Regime provides a supervised framework for the trading and settlement of tokenised securities, overseen by national regulators alongside ESMA. That addresses one of the principal objections that has slowed adoption among more cautious treasury functions: the concern that digital asset infrastructure sits outside the established regulatory perimeter.

That concern is harder to sustain now. Tokenised instruments settled on regulated DLT infrastructure are no longer an experiment at the edge of the market. They are authorised, supervised products operating within the same framework as conventional securities.

“The regulatory picture is moving in the same direction. The Commission's December 2025 proposal, part of its wider Market Integration and Supervision Package, would remove the instrument-level caps and the six-year licence limit that constrained the original DLT Pilot Regime. It is now heading into trialogue negotiations expected to conclude with a final political agreement by the end of 2027. As that direction of travel becomes clearer, the case for keeping EMI and payment provider cash in low-yield accounts is harder to make,” concluded Aurimas Galdikas, Chief Legal Officer at Axiology.

This article was originally published on Tradetech Eye by FF News.

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