Nasdaq CEO: Tokenization Could Unlock Tens of Billions in Trapped Capital, Paving Way for 24/7 Markets

Tokenization holds the potential to liberate tens of billions of dollars currently held as collateral within the global financial system, according to Nasdaq CEO Adena Friedman. Speaking at the TOKEN2049 conference in Singapore, Friedman highlighted how tokenizing assets like Treasurys, equities, and money market funds, alongside the associated money flows, could dramatically enhance collateral liquidity.

"If you tokenize all those instruments along with the flow of money, then the collateral becomes very fluid," Friedman stated, emphasizing the transformative impact of this technology.

Tokenization, which involves creating digital representations of financial assets on a blockchain, has seen a surge in institutional interest, partly attributed to regulatory advancements like the U.S. stablecoin framework. "If we can tokenize money, then we can tokenize the flow of capital," Friedman added.

This growing institutional enthusiasm is meeting a long-standing demand from retail investors for round-the-clock trading capabilities, a trend Friedman noted the retail ecosystem has been pioneering for about a decade.

Implementing a continuous 24/7 trading environment represents a significant challenge for the financial industry. While exchange infrastructure might be the simpler aspect to adapt, Friedman pointed out that traditional systems rely on market closures for essential updates and risk management. A fully operational 24/7 market necessitates these critical processes, including risk and collateral management, to function seamlessly in real-time.

"Everything has to be real time all the time," she stressed.

Artificial intelligence is seen as a key enabler for this transition. Nasdaq is already integrating AI-powered digital agents into its risk management platform, initially providing recommendations. Friedman anticipates that these agents will eventually allow banks to take more direct actions, underscoring AI's "critical" role in achieving 24/7 operations.

Arjun Sethi, co-CEO of cryptocurrency exchange Kraken, observed that companies outside the U.S. are actively exploring tokenization and seeking greater access to American capital markets. He cited examples of both mid-sized companies generating substantial revenue and larger international corporations looking to leverage tokenization for U.S. public listings, indicating a global appetite for this innovation.

While tokenization and 24/7 trading offer numerous benefits, Friedman cautioned that not all assets are sufficiently liquid to support continuous trading. Nevertheless, she believes that enhanced global financial connectivity will broaden access to asset classes previously unattainable for many investors.