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.
“The choice is innovate or stagnate — to evolve or become extinct.”
Over $35.8 billion worth of real-world assets are currently tokenized onchain. Boston Consulting Group estimated this 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.” This has led 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.
Australia Being Outpaced on Innovation
Longo noted that Australia was an early adopter of electronic trading systems, citing the Australian Securities Exchange’s securities settlement system, the Clearing House Electronic Subregister System (CHESS). He also mentioned that the first tokenized bond was issued in Sydney in 2018.
“Now, other countries are outpacing us,” he stated. “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 shared that a meeting with US Securities and Exchange Commission Chair Paul Atkins last month highlighted that Australia is in a competition with other nations to attract capital and “seize a larger slice” of the rapidly emerging tokenization market.
ASIC's Support for Innovation
Longo indicated that the regulator is looking to “do more to support innovation from the ground up.” To achieve this, ASIC will relaunch its Innovation Hub to assist startup fintech firms in navigating regulations.
This initiative follows ASIC's recent release of updated guidance on balancing digital asset innovation with investor protection.
JPMorgan's Tokenization Plans
Longo anticipates that tokenization will accelerate more rapidly than expected. He referenced discussions with JPMorgan staff who indicated plans 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.
Longo further explained that tokenizing these asset classes will broaden market access, making it available to a wider range of traders who have traditionally been limited to institutional investors and high-net-worth individuals.