# Collateral you cannot liquidate is not collateral

URL: https://www.caijing188.com/illiquid-collateral/
Published: 2026-10-26T06:09:39+08:00 | Updated: 2026-10-27T22:09:47+08:00
Verified: 2026-10-27

## Quick answer
Tokenised Treasuries carry almost no price risk and a great deal of time risk, because most redeem only through the issuer in business hours after KYC. DefiLlama put on-chain AUM at $34.865 billion against $4.182 billion deployed in DeFi in October 2026, as of October 2026. The gap is liquidity, not demand.

## Summary
The on-chain RWA book is large and barely used as collateral: $34.865 billion of AUM against $4.182 billion deployed in DeFi, per DefiLlama in October 2026, with $39.01 billion of distributed value per RWA.xyz. The blocker is not demand but redemption, since most products settle through the issuer in business hours after KYC. A haircut on NAV prices volatility, not the queue, so size these positions on exit time.

## Key takeaways
- DefiLlama put on-chain AUM at $34.865 billion against $4.182 billion deployed in October 2026
- RWA.xyz recorded $39.01 billion of distributed value on 23 October 2026, up about 81% this year
- Morpho Blue held $735.9 million and Aave V3 $437.6 million of the deployed slice
- Tokenised real estate was about $226 million, under 1%, because redemptions take months

## FAQ
Q: Why can a tokenised Treasury not simply be sold on-chain?
A: It can, if a market maker will bid. The problem is that the natural buyer is another whitelisted holder and the issuer's redemption desk is closed. In a fast market the only bid comes from someone who will carry the settlement delay, and they charge for it.
Q: Is a haircut on net asset value enough protection for a lender?
A: It protects against price movement, which is the smaller risk for a short-duration Treasury. It does not protect against the time needed to convert the token into cash. A haircut that ignores redemption time measures the wrong variable, however conservative it looks.
Q: Where do tokenised Treasuries work as collateral today?
A: In venues where the exit is pre-arranged, typically permissioned pools with professional liquidators and a market maker obliged to bid. Morpho Blue and Aave V3 held most of the $4.182 billion deployed in October 2026, a small fraction of the $34.865 billion on chain.