Nasdaq CEO Adena Friedman stated that tokenization has the potential to release tens of billions of dollars in capital that is currently being held as collateral within the global financial system.
At the TOKEN2049 conference in Singapore, Friedman stated in an interview with Joanna Ossinger that tokenizing assets such as government bonds, stocks, and money market funds, as well as the capital flows themselves, could potentially make collateral more liquid.
She said, "If you tokenize all these tools as well as the capital flows, then the collateral will become very flexible."
Tokenization refers to the process of representing financial assets such as stocks and bonds as digital tokens that can be transferred through blockchain technology.
Friedman indicates that in the past year, there has been an increase in interest from institutions in tokenization. Part of the reason for this is that the United States has passed Genius Act, which establishes a regulatory framework for stablecoins.
She said, "If we can tokenize currency, then we can also tokenize capital flows."
She stated that this growing interest from institutions is converging with the needs of retail investors. Retail investors have long desired the ability to trade around the clock, and Friedman said that the retail ecosystem "is about 10 years ahead in this regard."
Moving towards 24/7 trading
Friedman indicates that transitioning to a fully 24/7 market will be a major undertaking for the financial industry.
She said, "The easiest part is the exchange infrastructure."
Friedman indicates that financial institutions traditionally update their systems and manage risks during market closures. However, to operate around the clock, these processes, including risk and collateral management, must be continuous.
She said, "Everything must always be real-time."
She stated that artificial intelligence can help financial institutions achieve this transformation. Nasdaq has already introduced a series of digital agents in its risk management platform, which initially provided suggestions, Friedman said.
She added that over time, banks could use these agents to take more direct actions.
Friedman said, " AI is crucial 24/7."
Connecting Cryptocurrencies with Traditional Finance
The co-CEO of cryptocurrency exchange Kraken, Arjun Sethi, told CNBC that overseas companies are also paying attention to tokenization and the opportunities to enter the US capital market.
Sethi mentioned that a company with an annual revenue of about $25 million is exploring ways to enter the capital market, while there are also larger international companies interested in tokenization and listing in the United States.
He said that tokenization can help companies around the world expand their access to capital markets.
However, Friedman indicates that not all assets are suitable for 24/7 trading.
She said, "Not every asset has sufficient liquidity to support a 24/7 environment."
Nevertheless, Friedman indicates that a stronger connectivity between the global financial systems may also open the door for some investors who were previously unable to access a wider range of asset classes.
