Decentralised Ledger Technology (DLT) will change all this. With electronic documentation securely encoded on distributed nodes and automated with smart contracts, these processes can be broken down into tasks on multi-party platforms and hard-wired from day one to execute with the minimum of delay. They aren’t strictly linear anymore, so our way of thinking about them doesn’t need to be either.

A hub or a network?

This new era of digital efficiency, however, is only possible if all parties work together at the outset. To return to the widgets example, there is little benefit to putting the paperwork on a blockchain if the payment bank still insists on a hard copy bill of exchange before it will release the money.

That’s why the pursuit of a decentralised economy depends on something akin to a centre where various constituents of the blockchain and crypto communities can interact, exchange knowledge, solve problems, secure funding and generally benefit from one another’s energy. But this is not a conventional centralised system; it is an ecosystem.

This is not a new idea, of course. At Australian Blockchain Week, Cory Klippsten, CEO at Swan Bitcoin, acknowledged that his business had taken off in the “Silicon Valley ecosystem.” And Scott Farrell, Partner at King & Wood Mallesons, namechecked last year’s Review of the Australian Payments System[1] compiled by the Treasury, which was subtitled “From System to Ecosystem” – not a bad summary of the benefits of this concept.

In fact, this trend was in evidence in the set-up of Australian Blockchain Week itself, which used videoconferencing tech to bring together a large and diverse worldwide community of innovators, investors, banks and regulators.

Banking beasts

The big beasts in our financial ecosystem are obviously the banks, which have an enormous influence on the wider community. They may not be the first movers, but it’s clear that they are responding to customer demand for blockchain products and services.

“900,000 Australian customers have put money into crypto exchanges in the last three years,” said Commonwealth Bank’s Sophie Gilder in her Blockchain Week session. “This is a good measure of where Australia is on the crypto adoption journey – we are already there.”

Commonwealth Bank is already trialling ten cryptocurrencies on its consumer banking app. “Response to our launch has been very positive – engagement with the app is up,” she said. “The most complaints are from those not included in the trial.”

Joining the dialogue, Howard Silby, Chief Innovation Officer at NAB, underlined banks’ ability to set the direction for digital assets.

“Australian banks have very strong credit ratings – we have four of the ten strongest banks in the world, which gives them a role on the global stage,” he explained. “This gives them the stature to drive innovations, such as the way stablecoins could be used in settlement operations.”

ANZ has recently issued its own stablecoin[2], A$DC, the first pegged to the Aussie dollar. A first tranche of $30 million A$DC was recently minted in seconds using the Fireblocks Network, providing an efficient and direct method of transferring funds via a decentralised exchange.

Investors are another key participant of the ecosystem, providing the financial oxygen needed for innovative ideas to blossom. Andrew Gee, Executive Director at Macquarie Bank, sees a “wide range of opportunities” in financing blockchain and digital asset infrastructure.

“We have made a number of small investments,” Gee told the Blockchain Week audience. “Most have done pretty well but what we have gained is a lot of learning – not just our team but the broader institution.”

An enabling environment

The success of any ecosystem depends on a favourable environment. In the natural world, factors like temperature and geology hold the key to growth; in financial services, ecosystem variables include regulation, trust and liquidity – all of which we know well at ASX.

In her keynote speech on the first day of the conference, Senator the Hon Jane Hume announced a consultation on proposed Federal regulations that will mitigate the risk of harm to consumers, giving them confidence to use digital assets. “We are releasing a policy paper to establish trust through principles-based obligations,” she said. “It proposes a licensing regime and custody arrangements for crypto exchanges, so people can always access their money.”

As the trusted marketplace for Australian securities for more than three decades, ASX’s experience is important in shaping the environment for the future of digital assets.  The Australian Stock Exchange Limited was formed in 1987 after the Australian Parliament passed legislation enabling the amalgamation of six independent state-based stock exchanges. Each of those exchanges brought with it a history of share trading and exchange services dating back to the 19th century. A pretty good example of various constituents coming together to make the marketplace more efficient.

In fact, ASX offers a blockchain solution of its own. Synfini, our DLT-as-a-Service platform, provides a secure, open-source environment in which developers can turn use cases into reality. Synfini allows multiple parties to come together to develop blockchain-based services within a safe and trusted framework.

Australia’s digital ecosystem already boasts considerable liquidity. Kate Pounder, CEO of Technology Council of Australia, told delegates that Australia now has 100 technology companies valued at over AU$100m. But she would like to see more.

“I don’t think we’re fully seizing the opportunity – our rates of investment in digital assets are lagging.” She pointed to initiatives from banks, brokerages and fintechs to bring digital assets into the mainstream. “People are asking about risks, and the industry has stepped up to take responsibility,” she said. “That framework must be in place to give consumers confidence.”

Ultimately an ecosystem succeeds when it becomes self-sustaining, and the whole is greater than the sum of its parts. In Australia, it’s clear that the components of a lively digital asset ecosystem are already beginning to coalesce. At ASX, we want to be part of this community – and help it thrive.

[1] https://treasury.gov.au/publication/p2021-198587

[2] https://media.anz.com/posts/2022/03/anz-completes-landmark-stablecoin-payment