{"text":[[{"start":5.62,"text":"In 2016, the Australian stock exchange unveiled a bold plan to use blockchain technology to transform its trading systems."}],[{"start":13.68,"text":"Its chief executive vowed to “put Australia at the forefront of innovation in financial markets”. Headlines touted the “world-first” and “history-making” move, emphasising the significance of a traditional stock exchange eager to use the technology that powered an invention as potentially disruptive as cryptocurrencies."}],[{"start":32,"text":"The enthusiasm was misplaced. Problems with the software design, which prevented rollout at scale, and dysfunctional management scuppered the project permanently. The exchange apologised, wrote off its $170mn investment and paid a $14.5mn fine for misleading investors."}],[{"start":50.16,"text":"Ten years on, Australia’s expensive failure has been brushed aside as global financial companies once again embrace blockchain and plough hundreds of millions of dollars into projects that they say could transform financial markets."}],[{"start":64.04,"text":"Blockchain technology, a decentralised digital ledger that securely logs transactions across multiple computers, will lower transaction costs, speed up settlement times and open the door to a world where retail and institutional investors can trade all assets at all hours of the day, proponents say."}],[{"start":81.64,"text":"This world looks possible because major regulators now largely oversee blockchain and digital ledger technology, giving executives the confidence to invest in the tech and upgrade their systems."}],[{"start":null,"text":"

"}],[{"start":92.62,"text":"For years, blockchain was seen as risky, too close to the volatile cryptocurrencies that many regulators warned investors against. That has now changed because officials largely accept the technology can offer significant advantages in terms of speed and efficiency."}],[{"start":108.28,"text":"In the US, President Donald Trump’s administration is encouraging financial firms to embrace blockchain and crypto, without threatening regulatory action as officials did during Joe Biden’s presidency."}],[{"start":119.84,"text":"Wall Street’s real interest is tokenisation — the concept of turning everything from cash to stocks, bonds and commodities into blockchain-friendly digital versions, or so-called tokens, which can be tracked and traded 24/7."}],[{"start":133.76,"text":"Executives compare the introduction of such digital asset technology to the sweeping changes brought by the advent of the internet and the move away from paper-based transaction systems."}],[{"start":142.64,"text":"Banks and stock exchanges previously “were in the driving seat of those technology transformations, they were inventing the standards, they were inventing the pace”, says Stéphane Boujnah, chief executive of Euronext, which runs Europe’s biggest stock exchanges. “Now we are catching up.”"}],[{"start":160.68,"text":"The impetus to rewire financial markets is more intense now than it was in 2016. Competition from crypto exchanges is getting sharper. They dominate digital asset trading and are now muscling into the territory of traditional finance, aiming to become one-stop shops for trading everything else — stocks, commodities, private credit — at all hours of the day."}],[{"start":null,"text":""}],[{"start":182.56,"text":"A full revolution is still years away, and scale and liquidity remain small. Tokenised assets remain a fraction of global markets."}],[{"start":193.24,"text":"And the risks loom large. The IMF warned in July that in blockchain systems, “failures can propagate faster than institutions or supervisors can respond”. It said risks that “once were borne by the balance sheet of individual institutions behind a transaction become increasingly concentrated in the platforms and code that govern [blockchain] transactions”, and that the risks are “significant”."}],[{"start":214.52,"text":"But for the big banks, investors and exchanges, the direction of travel is clear."}],[{"start":219.36,"text":"“A whole new set of competitors is emerging based on blockchain, which includes stablecoins, smart contracts and other forms of tokenisation,” Jamie Dimon, chief executive of JPMorgan Chase, told shareholders this year, adding that “we need to roll out our own blockchain technology”."}],[{"start":219.86,"text":"‘The way the world will be’"}],[{"start":236.52,"text":"Despite big downturns and intermittent scandals, global crypto markets have pulled in billions of dollars of retail and increasingly institutional money."}],[{"start":246.8,"text":"Since returning to the White House in January 2025, Trump has ushered in a wave of crypto-friendly rules, dropped high-profile lawsuits against crypto exchanges and installed Paul Atkins, the former co-chair of a crypto trade association, as head of the US Securities and Exchange Commission. Atkins has encouraged companies to embrace tokenisation, saying “it’s the way the world will be”."}],[{"start":270.12,"text":"The passing of landmark US stablecoin laws last year as well as sweeping digital asset market structure laws, which are currently making their way through the Senate, have given US executives comfort in ploughing ahead with tokenisation since they now know what the rules are."}],[{"start":284.7,"text":"Authorities in the EU, UK, Singapore and other regions are also regulating blockchain and tokenisation, giving companies the go-ahead to embrace it."}],[{"start":294.48,"text":"While global regulators are less wary about crypto, traditional financial players say they are more interested in the technology powering crypto markets than crypto itself. Tokenised assets can be traded 24/7 on exchanges around the world and investors can borrow and lend against them in a way that proponents say is more straightforward than traditional markets."}],[{"start":315.16,"text":"Executives say that the global financial markets are antiquated, with too many intermediaries that cost investors too much money."}],[{"start":322.04,"text":"The key allure is that tokenised assets can be programmed to automatically carry out certain actions once specific conditions are met. These conditions are lines of code referred to as smart contracts, which can tell a stock to pay out dividends to investors on a certain date or release a mortgage loan once proof of funds is received, for example."}],[{"start":341.7,"text":"These automatic actions remove the need for intermediaries, so processes that currently need days to confirm and clear can be finalised in moments."}],[{"start":350.52,"text":"Tokenised money is the biggest growing area. This is mainly stablecoins, more than $300bn of which are in circulation globally, as well as tokenised bank deposits. Central bank digital currencies are at an early exploratory stage in some countries."}],[{"start":366.12,"text":"Stablecoins are pegged 1-to-1 to sovereign currencies such as dollars and euros and are largely used by traders to move between sovereign currencies and the tokenised world. Stablecoins move faster than, for example, the Swift payments system and settle instantly, freeing up funds to move in the financial system, unlike transactions using sovereign currencies, which can take days to settle."}],[{"start":387.44,"text":"Larry Fink, BlackRock chief executive and Wall Street’s biggest blockchain evangelist, told investors that for the money system “today, relying on Swift feels like routing emails through the postal office” and that instead, “billions of dollars currently immobilised by settlement delays could be reinvested immediately back into the economy, generating more growth”."}],[{"start":null,"text":""}],[{"start":407.84,"text":"Other forms of tokenised money are also growing as traditional financial players seek to get a slice of the action. Banks are exploring tokenising customer deposits, while asset managers have launched tokenised money market funds, an asset class that has grown from less than $4bn at the start of 2025, to more than $16bn today."}],[{"start":427.32,"text":"Sandy Kaul, head of digital assets and innovation at Franklin Templeton, says the investment firm’s tokenised fund is increasingly being used by corporate treasurers at traditional companies."}],[{"start":438.96,"text":"“It pays yield out every day including Saturday, Sunday and holidays, which has never been possible before,” she says, making it more attractive. Traditional money market funds pay yields monthly."}],[{"start":451.82,"text":"Tokenisation should be thought of as a new, more efficient wrapper for financial products since they can be programmed, Kaul adds, while current exchange traded funds, mutual funds and others are “dumb wrappers” that cannot automatically set actions."}],[{"start":465.92,"text":"“Every day with an ETF I need to, as an authorised participant, take an index file and upload my index file and look at the position holdings and rebalance based on the index file,” says Kaul. “That index file gets manually submitted, gets uploaded into the system, people have to get a report back from that system.” If that rebalancing was programmed into the smart contract of the ETF, “it would do [that] automatically”, she adds."}],[{"start":491.2,"text":"Another area where financial institutions are actively using tokenisation is for collateral. Tokenised collateral, such as government bonds, can be used in the unsexy but vital area of repo transactions."}],[{"start":502.94,"text":"In these, investors borrow cash by selling Treasuries and agreeing to repurchase them later, in effect using the bonds as collateral. When tokenised, investors can borrow and lock up their collateral for a few hours rather than being restricted to overnight terms, therefore freeing up their funds."}],[{"start":519.64,"text":"The Depository Trust & Clearing Corporation, which runs the core plumbing of US markets and is owned by the banks and asset managers that use it, is building tokenised versions of the assets it holds, in a move seen as very significant for markets when it rolls out in October. “Collateral continues to be the killer application,” says Brian Steele, president of clearing and securities services at DTCC."}],[{"start":542.92,"text":"Another more competitive area is tokenised equities, which turn share ownership into individual tokens."}],[{"start":null,"text":""}],[{"start":548.64,"text":"Coinbase, Kraken and Robinhood have already rolled out tokenised stocks, promising customers that share trading in this way is faster and cheaper while giving international investors easier access to US equity markets."}],[{"start":560.8,"text":"Big global stock exchanges have taken notice. Nasdaq is working to allow tokenised equities to be traded on its stock exchange around the clock. In theory, corporate actions such as paying a dividend will be programmed into the token and delivered automatically to the investor."}],[{"start":575.76,"text":"Tal Cohen, president of Nasdaq, says the company is looking at “proxy voting, corporate actions, anything that is manual or time-consuming today or based on legacy technology — can we automate and digitise and make that experience better?”"}],[{"start":590.2,"text":"But he adds that while the benefits of tokenisation are “very clear” to investors, it is “maybe not as clear to issuers” who could benefit from lower issuance costs and programmability of corporate actions."}],[{"start":602.64,"text":"Nasdaq sees a future where companies directly issue tokenised stocks themselves. “We’re working to make sure next year we can launch a Nasdaq equity token,” Cohen says, to lead by example."}],[{"start":603.14,"text":"Markets 24/7"}],[{"start":613.652,"text":"For all its promises, blockchain technology creates risks for the global financial system. As more processes become more automated, operational problems can arise."}],[{"start":625.04,"text":"European Central Bank officials have said that programming assets and automatically executing actions “may increase the possibility of events spreading across platforms and increasing systemic risk”."}],[{"start":637.12,"text":"For example, automating margin calls, when investors need to stump up extra money to back their trades, can pose issues."}],[{"start":null,"text":""}],[{"start":643.09,"text":"“If there was a human involved they’d probably pick up the phone, [but] you’ve gotten rid of grace, discretion, things that are very helpful often in times of panic,” says Hilary Allen, a law professor at the American University Washington College of Law, who has testified before Congress on tokenisation."}],[{"start":660.84,"text":"The prospect of 24/7 markets also brings a host of new potential problems. The timing of company announcements and market-moving news may have to be reconsidered, as well as how to manage round-the-clock operations. “Operational risks may be compounded,” the ECB officials said."}],[{"start":677.46,"text":"Further issues could stem from the use of public blockchains such as Ethereum, the world’s biggest decentralised platform, whose security is maintained by independent validators worldwide rather than a specific team like at financial institutions. BlackRock and Franklin Templeton both use Ethereum’s blockchain."}],[{"start":694.4,"text":"Ethereum-based projects lost $332mn due to hacks in the first half of 2026, according to security company Blockaid, the most of any blockchain."}],[{"start":705.36,"text":"“When you put traditional finance products on infrastructure that has no accountability associated with its operational matters, that is deeply concerning to me,” Allen says."}],[{"start":715.92,"text":"Some banks such as JPMorgan are sticking to internal, private blockchains, wary of using public blockchains where transaction data is visible globally."}],[{"start":725.08,"text":"As more banks embrace blockchains, a different problem arises. JPMorgan, Standard Chartered, Lloyds and other banks are exploring turning deposits into tokens, but currently cannot use those tokens in each other’s systems. This so-called interoperability is not an issue for commercial bank money, which is backed by the central bank and clears across the same systems."}],[{"start":747.32,"text":"“The big limitation obviously remains that we don’t have an interchange mechanism for tokenised deposits to move between banking institutions at any scale today,” says René Michau, global head of digital assets at Standard Chartered, which runs tokenised deposits in Hong Kong and Singapore."}],[{"start":763.72,"text":"The Bank for International Settlements is trying to tackle this issue with its Project Agorá, exploring how tokenised central bank reserves and commercial money can be used to settle trades. Currently, stablecoins are largely used for settlement. To truly scale, executives need central bank money to be available on blockchains."}],[{"start":783.16,"text":"The Bank of England and ECB are exploring creating their own digital currencies. This could take years. The US Federal Reserve has categorically ruled out the move."}],[{"start":793.86,"text":"“Faster doesn’t automatically mean more efficient and round-the-clock doesn’t automatically mean more liquid. Those gains can only be achieved if you are able to set up a system that is interoperable,” says Francesco Pierangeli, assistant professor of finance at Birmingham Business School."}],[{"start":null,"text":""}],[{"start":808.817,"text":"If assets are traded through banks, traditional exchanges, crypto venues and even decentralised platforms, liquidity may become even more fragmented rather than improved."}],[{"start":819,"text":"Many things are still contentious, not least the structure of equity tokens. Last year, retail broker Robinhood found itself in hot water when it gave users stock tokens in OpenAI, the private company that developed ChatGPT. Unlike normal shares, Robinhood’s private stock tokens give holders no economic or voting rights in a company and are instead just derivatives pegged to the value of the business’s latest funding round."}],[{"start":845.42,"text":"When OpenAI released a statement saying the tokens were not equity and not endorsed by it, Robinhood’s chief executive Vlad Tenev defended the structure, saying: “I don’t think it’s entirely relevant that it’s not technically an equity instrument.”"}],[{"start":859.8,"text":"“It’s a very complicated structure to think through,” Allen says, especially for retail investors. “People are going to think they have the stock and when they find out they don’t, I think that’s going to be highly problematic.”"}],[{"start":871.498,"text":"The debate about the OpenAI equity tokens crystallises many of the concerns that blockchain technology and its applications are advancing faster than regulators can control or investors can understand."}],[{"start":883.117,"text":"But at present, misconceptions afflict relatively few. Though investment and interest are growing, tokenised markets are still a tiny part of the global banking system. “The biggest risk is that we all get distracted by things that go nowhere,” says Michau of Standard Chartered."}],[{"start":899.4,"text":"This article has been corrected since original publication to clarify that Nasdaq is working to allow tokenised equity trading on its stock exchange. It is not planning to create a tokenised equity exchange."}],[{"start":910.652,"text":"It has also been corrected to reflect the fact that Robinhood gave away stock tokens in OpenAI."}],[{"start":911.152,"text":"Letter in response:"}],[{"start":916.49,"text":"Expect a hybrid world in capital markets in the future / From Dini Ajmani, Former Deputy Assistant Secretary, Capital Markets, US Treasury, Hoboken, NJ, US"}],[{"start":932.36,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1786137372_7876.mp3"}