Michael Shaulov on how tokenisation, Web3 and payments will shape the future of blockchain in Australia
The future of blockchain in Australia’s financial sector shows promise, as attention turns to the country’s big financial institutions explore ways to harness the tech to address increased adoption and curiousity of digital assets. Here, we chat to Michael Shaulov, CEO of Fireblocks, about how such adoption is shaping the future of blockchain in Australia.
In a nutshell, how would you describe the current status of blockchain in Australia’s financial sector, namely adoption (or at least, intention to adopt) among major financial institutions and PSPs?
Hugely encouraging. We see Australia’s major financial institutions building the platform for meaningful investment in digital assets and blockchain technology. Each of Australia’s Big Four banks has teams dedicated to building solutions on the blockchain that are solving big banking problems.
Over the last year, ANZ Bank became the first bank in the world to create a bank-issued stablecoin, A$DC. National Australia Bank (NAB) then became the first bank in the world to complete a cross-border, multi-currency stablecoin settlement, mitigating the need for SWIFT and eliminating T+2.
And it doesn’t end there – the Big Four have also been active participants in the RBA’s CBDC pilot program. Australia’s largest bank, Commonwealth Bank (CBA), executed two extraordinary use cases: re-shaping how small businesses pay GST and introducing a Biodiversity token.
Many of Australia’s major financial institutions are also looking to leverage tokenisation. Some examples include ANZ’s carbon credit token program that has already been leveraged by their institutional clients, as well as the Australian Stock Exchange (ASX) platform built for tokenised digital assets, in addition to securities.
How will blockchain tech bring on greater efficiency to these sectors?
The creation of a digital assets ecosystem depends on a robust infrastructure, which could offer a new paradigm for financial markets infrastructure as a whole.
What makes a digital asset ecosystem built on blockchain technology valuable is that assets don’t just exist within the framework of a particular institution, and ownership of a particular asset is not contingent on the issuing institution. As blockchain technology allows participants to create and store a permanent and verifiable record of information, permissioned blockchains, for example, take this one step further by enhancing the security of the network’s information through security protocols.
Can you cite any real-life examples where blockchain is already being implemented and improving operations and processes?
The Tel Aviv Stock Exchange and the Israeli Ministry of Finance recently announced the successful completion of the Proof of Concept (PoC) phase for Project Eden, which saw the issuing and minting of the first dummy digital governmental bond on a blockchain-based platform as an ERC-1155 Security Token using a dedicated decentralised app (dApp) – this was developed leveraging web3 solutions specifically for this PoC. The go-live event earlier this month demonstrated the successful implementation of advanced technologies and their ability to transform financial markets including the issuance, settlement and clearing of financial assets such as government bonds.
In Australia, two of the country’s Big Four have already minted and piloted their own stablecoins – ANZ Bank, whose A$DC stablecoin is pegged to the Australian dollar, saw the completion of a pilot transaction last year involving the transfer of A$30 million within 10 minutes, whilst NAB completed an intra-bank cross-border transaction using its stablecoin AUDN, cutting costs and transaction time. Fireblocks is proud to have supported both these banks with their stablecoin pilots.
In turn, what impact will tokenisation and blockchain have on end-user experience?
Tokenisation and blockchain will bring efficiencies to traditional custody and settlement models by allowing market participants to interact directly in a trustless environment, removing intermediaries and improving access for investors to otherwise illiquid assets. Take, for example, the tokenisation of real estate. While it isn’t practical to sell a fraction of an apartment, that limitation is removed when the asset is tokenised, encouraging broader investor participation and opening up the market to new investors.
Can you identify any major barriers to mainstream adoption of blockchain tech and tokenisation in these sectors? What solutions need to be implemented to remove the roadblocks?
The existing core banking system and compatibility requirements could be barriers to financial institutions successfully deploying a secure and scalable enterprise-grade digital asset solution. This is why it’s hugely important that banks and financial institutions collaborate with trusted partners such as Fireblocks to reduce the friction of integrating their existing systems – for example, we have recently expanded our key management capabilities and infrastructure deployment models beyond MPC-CMP technology to support HSMs and multi cloud providers. These flexible deployment models will allow banks and financial institutions to leverage Fireblocks’ industry leading security and technology, while meeting their risk, compliance and regulatory requirements.
The Fireblocks Network also connects the largest consortium of regulated financial institutions that are exploring digital assets on the blockchain ecosystem. As we work alongside our customers, Fireblocks continues to build products to help reduce counterparty risks these regulated entities encounter when dealing with digital assets, including off-exchange, smart transfers, and atomic swaps.
Some cite ‘Web3’ as an umbrella term incorporating evolutionary tech such as blockchain, but can you explain the role blockchain plays in Web3?
Blockchain effectively facilitates the decentralisation that web3 requires. When thinking about Web3, people often think about NFTs, however the next wave of non-financial innovation will see retailers in particular honing in on NFTs as a means of extending the purchase experience beyond the initial point of sale in order to build a loyal community and create brand longevity. By minting a limited number of NFTs, brands are able to create exclusivity, as well as drive loyalty and engagement amongst its consumer base.
Do you foresee any other potential applications for blockchain once we see more pick-up in the financial sector?
Yes, blockchain could be used in a multitude of use cases, including in capital markets (whether that be for issuance, clearing and settlement or custody), payments and remittances (cross-border payments or stablecoins), asset management, trade finance, insurance and more.
Fireblocks is a digital asset custody, transfer and settlement technology provider serving over 1,800 financial institutions – including ANZ, Independent Reserve, NAB and SwyftX – and having secured the transfer of over $4 trillion in digital assets.