Nasdaq CEO states tokenization could unlock tens of billions in trapped capital

Tokenization's Impact on Capital Liquidity

Nasdaq CEO Adena Friedman indicated that tokenizing financial assets, such as Treasurys, equities, and money market funds, along with the flow of money, could release tens of billions of dollars currently tied up as collateral. This process would increase the liquidity of collateral across the global financial system.

Growing Institutional and Retail Interest

Friedman noted a rise in institutional interest in tokenization, partly attributed to the U.S. Genius Act which established a regulatory framework for stablecoins. This institutional demand converges with retail investor interest in 24/7 trading capabilities, a feature retail ecosystems have explored for about a decade.

Challenges of a 24/7 Market

Transitioning to a continuous 24/7 market presents significant challenges for the financial industry. While exchange infrastructure is a simpler component, the primary hurdle involves adapting risk and collateral management processes to operate continuously, as traditional systems rely on market closures for updates and risk assessment.

AI's Role in Real-Time Operations

Artificial intelligence is identified as a critical tool for managing the transition to 24/7 operations. Nasdaq has introduced digital agents within its risk management platform to provide recommendations, with the potential for these agents to take more direct actions over time, supporting continuous risk and collateral management.

Global Access to Capital Markets

Arjun Sethi, co-CEO of Kraken, added that companies outside the U.S. are showing interest in tokenization to access American capital markets. He cited examples of companies exploring tokenization to expand their access to capital, suggesting it could broaden participation in global financial markets.