ASIC’s Lungo Warns Australia Could Become Land of Missed Opportunity

The chair of Australia’s financial regulator has said the country is in danger of becoming the land of missed opportunity, as he called on the financial sector to decisively embrace new technologies and innovative solutions such as tokenisation and blockchain, to avoid getting left behind.

Joe Lungo, chair of the Australian Securities and Investments Commission (ASIC), said that DLT could fundamentally transform Australia’s capital markets, noting that asset tokenisation will play a key part in this transformation, comparing the potential impact to the introduction of CHESS, the computer system for settling stock trades on ASX and record keeping.

He noted that traditional financial market infrastructures need a reboot, pointing to a 80% decline in the value of initial public listings and a convergence between public and private markets. “Once, Australia was one of the early adopters of innovation in markets… But I’m here today with a warning – Australia must innovate or stagnate. Seize the opportunity or be left behind,” he said in a speech called Open for opportunity: Taking charge of the future of our financial markets.

Lungo said that tokenisation has the potential to make certain asset classes and private equity markets accessible to investors outside the institutional and high net worth bracket, with its ability to break assets into smaller, more affordable units. This, he said, will make it possible for new financial market service providers to step up and gain market share.

“This isn’t some far-off future I’m talking about. JP Morgan have told me their money market funds will be entirely tokenised within the next two years. That means their investors will keep earning while value is moving instantly. Compare that to current technology where it takes days for transactions to settle,” he said.

Lungo also pointed to Nasdaq’s efforts around 24-hour trading and tokenised securities and highlighted the DTCC’s proposed tokenisation platform as examples of progress.

Australia, once a pioneer in financial markets innovation, has been overtaken by other countries such as Switzerland and even the UK, Lungo said. “We were an early pioneer of electronic trading. ASX CHESS was innovative in its day…back in 1994. And the first tokenised bond from the World Bank was issued in Sydney in 2018 – the aptly named “bond-i”. Now, other countries are outpacing us,” he said.

Lungo told his audience that Australia faces the same challenges as many other countries around the world and it competes for the same pool of capital. While others have started to actively “court” these funds, Australia has yet to do so, he added. “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,” he said.

He cited Project Acacia, the Reserve Bank of Australia’s joint effort with the Digital Finance Cooperative Research Centre, which is exploring tokenisation in financial markets, namechecking Imperium Markets as an example and adding that as a country, there needs to be more energy and enthusiasm for similar projects.

Lungo cited ASIC’s recent tokenisation survey as one example of reluctance, noting that around half the market declined to take part or even meet with the regulator, and only one third provided detailed feedback.

“Many players in Australia have gotten too comfortable with the status quo. Backing untested innovation means being prepared to take risks. Australia cannot be passive here, we need to be active, to take part and help lead these developments,” he concluded.