Tokenization in financial markets could release tens of billions of dollars locked in collateral, Nasdaq CEO Adena Friedman said, describing a potential shift in how banks and other financial institutions move assets through the global financial system.
Speaking with Joanna Ossinger at TOKEN2049 in Singapore, Friedman identified Treasurys, equities and money market funds as assets that could become more liquid through tokenization, CNBC reported. Tokenizing those instruments alongside money flows could make collateral easier to move.
In financial markets, tokenization represents assets such as stocks and bonds as digital tokens transferable through blockchain technology.
Tokenization and the shift to 24/7 financial markets
A move to 24/7 trading would require substantial changes beyond exchange systems, Friedman said. Financial institutions would need to manage risk and collateral continuously rather than relying on market closures to update systems and handle those processes.
“Everything has to be real time all the time,” she said.
Artificial intelligence is expected to take a growing role in that real-time risk management. Nasdaq has launched digital agents in its risk management platform that initially offer recommendations, Friedman said. Banks could eventually use them to take more direct action.
Kraken co-CEO Arjun Sethi described interest from companies outside the U.S. in tokenization and greater access to American capital markets, including international businesses considering U.S. public listings.
Friedman cautioned that around-the-clock trading does not suit every asset: “Not every asset is liquid enough to support a 24/7 environment.”
As an example, Sethi pointed to a firm generating about $25 million in revenue that was looking into capital market access options.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.