Australia risks ‘missed opportunity’ by shirking tokenisation: ASIC boss

Australia’s capital markets risk being outpaced by other countries unless it embraces new technology such as tokenization, says the head of the country’s markets regulator.

“As other countries adapt and innovate, there’s a real risk Australia could become the ‘land of missed opportunity’ or be passive recipients of developments overseas,” Australian Securities and Investments Commission (ASIC) Chair Joe Longo told the National Press Club on Wednesday.

ASIC Chair Joe Longo delivering a keynote address at the National Press Club in Canberra on Wednesday. Source: National Press Club of Australia

Over $35.8 billion worth of real-world assets are currently tokenized onchain, which Boston Consulting Group estimated could rise to $16 trillion by 2030, while McKinsey & Co predicted a more conservative $2 trillion over the same time frame.

Market regulators in the US have also floated the idea of 24/7 trading, which “may be more viable in some asset classes than others,” leading finance leaders, such as BlackRock CEO Larry Fink, to push for the tokenization of everything from stocks and bonds to money market funds as a solution.

Others outpacing Australia on innovation, says Longo

Longo said Australia was an early adoptor of electronic trading systems, with the Australian Securities Exchange’s securities settlement system, the Clearing House Electronic Subregister System, or CHESS, and noted that the first tokenized bond was issued in Sydney in 2018.

“Now, other countries are outpacing us,” he said. “Distributed ledger technology that facilitates asset tokenisation could fundamentally transform our capital markets, in the same way as the introduction of CHESS once did.”

Longo said he met with US Securities and Exchange Commission Chair Paul Atkins last month, who made him realize that Australia is in a battle with others to court as much capital as possible to “seize a larger slice” of the rapidly emerging tokenization market.

ASIC takes steps to “support innovation”

Longo said the regulator is looking to “do more to support innovation from the ground up” and will relaunch its Innovation Hub to support innovation by helping startup fintech firms navigate regulations.

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It comes about a week after ASIC released its updated guidance on how digital asset innovation should be balanced with investor protection.

JPMorgan could tokenize $730 billion assets by 2028

Longo expects tokenization to accelerate faster than anticipated, having cited discussions with JPMorgan staff who told him that they plan to tokenize their money market funds within the next two years.

Four of JPMorgan’s largest money market funds hold a combined $730 billion worth of assets.

Tokenizing these asset classes will also enable a broader range of traders to access markets that have traditionally been limited to institutional investors and high-net-worth individuals, Longo noted.

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