Nasdaq CEO Says Tokenization Could Unlock Tens of Billions in Trapped Financial Collateral

Nasdaq CEO Adena Friedman says tokenization could release tens of billions of dollars in capital tied up as collateral across the global financial system, as financial institutions explore blockchain-based infrastructure to improve liquidity, accelerate settlement and support trading beyond traditional market hours.

Tokenizing assets such as US Treasurys, equities and money market funds, alongside the money used to transact in them, could make collateral more transferable and allow financial institutions to deploy capital more efficiently, Friedman told CNBC's Joanna Ossinger at the TOKEN2049 conference in Singapore.

"If you tokenize all those instruments along with the flow of money, then the collateral becomes very fluid," Friedman said.

Collateral is central to the operation of financial markets. Banks, brokerages and other institutions pledge assets to secure borrowing, support derivatives positions and meet obligations arising from transactions. While this reduces counterparty risk, it can also leave capital tied up in specific accounts, markets or settlement arrangements, limiting how quickly institutions can redeploy it elsewhere.

Tokenization could help ease those constraints by representing financial assets as digital tokens that can be transferred using blockchain technology. If the underlying assets, payments, and supporting infrastructure become interoperable, institutions could potentially move collateral more quickly between counterparties and use existing capital more effectively.

The potential benefit extends beyond faster transactions. More fluid collateral could reduce the amount of capital institutions need to maintain against overlapping obligations, although the scale of any savings would depend on how tokenized assets are legally recognized, accepted by counterparties, and integrated into existing risk-management systems.

Friedman's comments point to a broader ambition for tokenization: moving from the digital representation of individual assets to a financial system in which assets and money can move together with fewer operational barriers.

Institutional Interest Shifts Toward Tokenized Markets

Friedman said institutional interest in tokenization has increased over the past year, citing developments in the US regulatory environment, including the passage of the GENIUS Act, which established a federal framework for payment stablecoins.

Stablecoins are digital tokens designed to maintain a stable value relative to an underlying asset, commonly the US dollar. They could play a role in tokenized financial markets by providing a digital means of transferring value alongside tokenized securities. However, stablecoins and tokenized securities serve different purposes, and the existence of a regulatory framework for stablecoins does not by itself resolve every legal or operational question surrounding tokenized assets.

"If we can tokenize money, then we can tokenize the flow of capital," Friedman said.

But tokenizing an asset without improving the way money moves around it may leave many of the existing frictions intact. A tokenized Treasury security, for example, may be easier to transfer in a digital environment, but its usefulness as collateral also depends on whether the relevant institutions can recognize ownership, value the asset, transfer it when required, and settle the associated payment.

The potential gains therefore depend on coordination across several layers of financial infrastructure. Exchanges, custodians, banks, payment providers and regulators must be able to operate within compatible systems, while ensuring that tokenized claims retain the legal protections and settlement certainty expected in traditional markets.

Friedman also identified an intersection between institutional adoption and demand from retail investors. Individual investors have long sought the ability to trade outside conventional market hours, while established financial institutions have generally operated within defined trading sessions and settlement windows.

The retail ecosystem, she said, "has been about 10 years ahead."

The contrast highlights how the expectations created by digital platforms and cryptocurrency markets are increasingly influencing discussions about the future of traditional finance. Crypto markets already operate continuously, while most major equity markets remain tied to established trading calendars. Tokenization could narrow that divide, but extending trading hours across traditional financial markets would require much more than making securities available on a blockchain.

Why 24/7 Trading Requires a Financial System Overhaul

Friedman said moving to a fully round-the-clock market would be a substantial undertaking for the financial industry, even if the exchange technology itself were relatively straightforward.

"The easiest part is the exchange infrastructure," she said.

The more difficult work would involve changing the supporting systems that allow markets to function safely. Financial institutions have traditionally used periods when markets are closed to update technology, reconcile transactions, assess exposures and manage risk. Those processes are often designed around specific business hours, settlement cycles and operational handovers.

A continuous market would reduce the time available for these activities to be performed in scheduled windows. Risk assessments, collateral calls, payment processing and operational monitoring would have to function reliably at all hours, including weekends and public holidays.

"Everything has to be real time all the time," Friedman said.

The requirement has created a significant challenge for institutions whose technology and internal procedures were built around the assumption that markets would periodically close. Even if an exchange can accept and match orders continuously, a broader market cannot function efficiently if banks cannot process payments, custodians cannot update ownership records, or counterparties cannot meet collateral obligations outside normal business hours.

There are also questions about liquidity. Extending trading hours does not automatically create more buyers and sellers at every moment. Activity could become fragmented across different sessions, potentially leaving some assets more vulnerable to price swings when participation is thin. Market operators would need to consider how to manage outages, settlement failures and sudden changes in risk when conventional operational breaks are unavailable.

Friedman cautioned that not every asset is suited to continuous trading.

"Not every asset is liquid enough to support a 24/7 environment," she said.

Her qualification is important because tokenization and round-the-clock trading are related but distinct developments. An asset can be represented digitally without being traded continuously. For assets with limited trading activity or difficult valuation processes, extending access to every hour of the day may result in additional risks without producing a meaningful improvement in liquidity.

A gradual transition, in which highly liquid instruments adopt longer trading windows before less liquid assets, may therefore be more practical than moving the entire financial system to continuous trading at once.

AI Could Help Institutions Manage Continuous Markets

Artificial intelligence could become an important part of the operational infrastructure needed to support this transition. Friedman said Nasdaq has launched a series of digital agents within its risk-management platform that initially provide recommendations to financial institutions.

Over time, banks could allow those agents to take more direct action, she said.

"AI is critical for 24/7," Friedman said.

The potential role of AI extends beyond monitoring transactions. Automated agents could help institutions identify emerging exposures, assess collateral requirements and respond to changing market conditions without relying entirely on manual intervention during fixed operating hours. If appropriately designed and controlled, these systems could help banks maintain continuous oversight as trading and settlement activity becomes less dependent on conventional schedules.

However, greater automation would also increase the importance of governance and controls, according to experts. Institutions would need clear limits on the actions agents can take, mechanisms for escalating unusual events and reliable records of automated decisions. Errors in collateral calculations or risk assessments could spread quickly in a market operating continuously, particularly if multiple systems act on the same flawed information.

Nasdaq's approach, as described by Friedman, begins with recommendations rather than unrestricted automated action. That progression underpins a distinction between using AI to assist human decision-making and allowing systems to execute operational decisions autonomously. The latter would require greater confidence in model performance, cybersecurity, auditability, and the ability to intervene when conditions fall outside established parameters.

Kraken Sees Tokenization Expanding Access to Capital

Interest in tokenization is also growing among companies seeking access to international investors and US capital markets, according to Arjun Sethi, co-CEO of cryptocurrency exchange Kraken.

Speaking to CNBC, Sethi described a company generating roughly $25 million in revenue that was exploring ways to access capital markets, alongside larger international businesses interested in tokenization and US public listings.

He argued that tokenization could broaden access to capital markets for companies around the world. By creating digital representations of financial assets and potentially streamlining aspects of issuance, transfer and settlement, tokenization could offer new ways for businesses and investors to connect.

Yet digital infrastructure alone will not remove the requirements associated with raising capital. Companies seeking public listings must still contend with disclosure obligations, investor protections, governance standards and the regulatory rules of the markets in which they intend to raise funds. Tokenization may alter how certain transactions are executed, but it does not automatically eliminate those responsibilities.

The wider opportunity lies in reducing operational barriers that make financial markets expensive or difficult to access. If tokenized assets can move more easily between institutions and jurisdictions, and if the associated payments can be settled efficiently, more investors may be able to participate in markets that have historically been difficult to reach.

Friedman said greater connectivity across the global financial system could open access to asset classes that were previously out of reach for some investors. That possibility, however, will depend on whether the technology is matched by appropriate regulation, sufficient liquidity and reliable market infrastructure.

For Nasdaq, tokenization, continuous trading and AI-assisted risk management are increasingly interconnected elements of the same potential transformation. The objective is not simply to put traditional securities on a blockchain, but to make the movement of assets, money and collateral more efficient across the financial system.

The prospect of freeing up tens of billions of dollars in capital offers a powerful incentive for institutions to explore the technology. But realizing those gains will require more than digital tokens.