As global financial market infrastructure undergoes rapid change, digital assets are moving beyond blockchain proof-of-concept experiments toward institutional implementation, driven by evolving regulatory frameworks, growth in digital money solutions and increasing interest among major investment institutions in asset tokenization and new approaches to settlement and liquidity management. Angus Fletcher, State Street’s global head of Digital Solutions, told Asharq Al-Awsat that digital assets had moved beyond the technology proof-of-concept stage toward redesigning how financial markets operate. He said the convergence of digital assets, digital money and artificial intelligence was paving the way for a new operating model for the financial sector, adding that Saudi Arabia had a unique opportunity to build modern financial infrastructure that harnesses these shifts as part of its Vision 2030 goals. From experimentation to implementation Fletcher explained that financial institutions are no longer focused on blockchain experiments or simply demonstrating the feasibility of asset tokenization. Instead, they are increasingly looking to leverage these technologies to enhance capital markets, investment and settlement processes, liquidity management, and cross-border activities. Recent years have brought significant developments, including clearer regulatory frameworks, growth in digital money solutions, the launch of tokenized investment products and greater participation by financial institutions, he noted. Tokenization as an infrastructure catalyst According to Fletcher, asset tokenization was not an end in itself but rather a catalyst for developing financial market infrastructure. Its real value, he said, lies in making assets more efficient and useful by improving settlement, collateral management, distribution and liquidity. Tokenized money market funds, government securities and private assets are among the categories most likely to see wider adoption in the coming years. Faster payments, more efficient capital flows Digital money, including stablecoins and tokenized deposits, could help integrate the movement of assets, cash and data into a more unified system than the current financial system, he remarked. This could make cross-border investment flows more efficient, reduce trapped liquidity and improve collateral mobility between different markets. AI, meanwhile, will play an increasingly important role in liquidity management and improving settlement and financing decisions in a financial environment increasingly operating in real time. Regulatory and operational challenges Fletcher noted that the industry still needed greater regulatory consistency, stronger interoperability among different market infrastructures and operating models capable of handling digital assets on a broad institutional scale. Many institutions continue to rely on systems and infrastructure designed for a different financial era, limiting their ability to fully benefit from tokenization. AI could help overcome some of these obstacles by automating reconciliation, streamlining operational processes and improving risk management and compliance requirements, he added. Fletcher stressed that regulatory frameworks were fundamental to institutional investor confidence. Financial institutions were not seeking a less regulated environment, but clear rules providing legal certainty, investor protection and operational flexibility. Such regulations give institutions the confidence needed to move from pilot projects to actual implementation, he said. Three layers for digital market growth Fletcher identified three main infrastructure layers needed to support the next phase of growth. The first is digital money, including tokenized deposits, regulated stablecoins and other forms of digital cash used for settlement. The second encompasses identity, governance, compliance, cybersecurity and operational resilience systems. The third is an “intelligence layer” that uses AI to improve liquidity and collateral management, risk monitoring and operational efficiency. Opportunities for Saudi Arabia The State Street executive said Saudi Arabia had a unique opportunity to build modern financial infrastructure under Vision 2030, benefiting from its ability to integrate modern technologies and digital financial services into its long-term plans. Among the Kingdom’s biggest opportunities are tokenizing investment funds and private markets, developing digital money solutions, and improving collateral mobility and cross-border investment flows. AI-enabled financial services could also help strengthen Saudi Arabia’s position as a more efficient and interconnected global financial center, he added. A more interconnected financial system Fletcher expects the divide between traditional and digital finance to gradually diminish over the next five to 10 years, giving rise to a more interconnected financial system spanning multiple asset classes, forms of money and settlement models. Markets will become more connected, programmable, and dynamic, while AI will play an increasingly important role in supporting decision-making and managing growing market complexity. Asset tokenization will help connect assets, digital money will connect financial value, and AI will enhance decision-making, Fletcher concluded, accelerating the emergence of a more efficient and interconnected global financial system. A keyboard and robotic hands are pictured in front of the words “Artificial Intelligence” (Reuters)
