A different kind of change

Digital assets are commonly described as a new type of investment product. That framing captures part of the picture but misses the more significant development. What distributed ledger technology, the underlying system on which digital assets operate, actually represents is a new layer of market infrastructure: a way of recording ownership, executing transfers and settling transactions through a shared ledger, rather than through chains of intermediaries, separate registries and manual reconciliation processes.

The practical difference is substantial. Under the current system, a share transaction, a bond settlement or a cross-border payment typically passes through multiple institutions before it completes. Each step takes time, carries cost and creates the possibility of error or delay. A shared ledger collapses many of those steps into a single record that all relevant parties can access and verify.

The legal character of a digital asset does not depend on the technology behind it. In Australia, whether a digital asset falls within the regulated financial services framework is determined by what rights it confers and what services it involves. The Australian Securities and Investments Commission has been consistent on this point: a token does not sit outside the law simply because it is recorded on a blockchain. Existing laws apply. What changes is how the legal obligations attached to those laws are met in practice.

The technology does not remove the need for trust. It changes where and how that trust is constructed.

The institutions building tokenised finance are increasingly the ones that already run the financial system. Banks are adapting deposits for digital settlement. Exchanges are testing new market structures. Central banks are examining how public settlement infrastructure should interact with private tokenised money. The real question is how money, securities and legal rights will move through mainstream finance.

Where the real transformation is occurring

Public attention has focused on retail adoption. Research indicates that approximately one in three Australians have held a digital asset at some point, with participation driven largely by investment interest rather than practical use.

The more consequential transformation is happening in wholesale markets, where the volumes, the institutional participants and the regulatory stakes are largest. Research led by the Digital Finance CRC published in March 2026 identifies three areas of structural change:

That research estimates that digital finance innovation could deliver up to approximately A$24 billion per annum in productivity and cost benefits to the Australian economy. The figure is a modelled estimate, not a forecast, and it depends on adoption rates, regulatory development and infrastructure investment. It is, however, consistent with analysis from the IMF and others who have identified tokenisation, the process of representing existing assets as digital tokens on a shared ledger, as a structural response to inefficiencies that have existed in financial markets for decades.

The mechanism is direct. When settlement can occur in near real time rather than two business days, counterparty risk can fall. When cash and collateral can be moved dynamically rather than held in reserve against slow-moving settlement cycles, capital can be released. When reconciliation between multiple record-keeping systems is replaced by a single shared ledger, operational costs can fall. These are the gains that institutional participants are working toward.

What the benefits look like in practice

The benefits of digital asset infrastructure are real but they are not automatic, and they are not uniform. They are most evident in wholesale and institutional contexts where the legal framework is clear, the participants are sophisticated and the operational environment is disciplined. Retail applications have shown more variability and, in some cases, have highlighted governance and disclosure weaknesses that the technology itself neither created nor can resolve.

In practical terms, the areas where institutions are seeing or pursuing meaningful gains are:

Faster settlement: moving from a two-business-day settlement cycle toward near-real-time completion in certain environments, with corresponding reductions in the risk that a counterparty fails between trade and settlement.

More flexible use of collateral: the ability to move and re-use assets held as security more dynamically across transactions and platforms, rather than having them locked in place against slow settlement cycles.

Lower operational costs: replacing manual reconciliation between multiple institutions with a shared record that all parties can access, reducing the duplication and error that comes with parallel record-keeping.

Programmable transactions: the ability to embed conditions directly into a transaction so that it completes automatically when those conditions are met, such as releasing payment on delivery, or triggering a corporate action on a specified date. In September 2026, seven UK banks used tokenised deposits to complete live remortgage settlements, with funds locked and released automatically on completion.

Improved transparency: a shared ledger can give all authorised participants a consistent view of ownership and transaction history, subject to how the system is designed and who has access to what.

These benefits require deliberate design to realise. Tokenisation is not a technical layer that can be placed on top of existing market structures without changing them. It alters how securities are issued, how transfers are recorded, how settlement is finalised and how collateral is managed. The legal questions that arise, including who owns what, when a transaction becomes final and how disputes are resolved, are not secondary to the technical ones. They need to be resolved at the design stage.

Tokenisation does not necessarily mean replacing existing settlement infrastructure. One near-term model explored by the Reserve Bank of Australia (RBA) synchronises a tokenised asset transfer with final settlement in central bank money through existing systems. The legal task is to link the asset and cash legs, make finality enforceable and allocate risk clearly if one leg fails. Near-instant execution is not the same as legal finality. The most important innovation may be interoperability between systems, not migration to a single ledger.

The range of applications

Digital asset architecture is being applied across a wide range of financial products and markets. The legal implications vary considerably depending on the product and the jurisdiction involved.

In financial markets, the focus is on tokenised deposits, bonds and other debt instruments issued and settled on digital infrastructure, fund units in managed investment vehicles, interests in private companies and private equity, derivatives and structured products where certain processes can be automated, and real assets such as property or infrastructure held through a tokenised fund rather than direct title.

Tokenised deposits show that digital settlement need not displace commercial banks. In late September 2026, ANZ, BHP, Citi and Swift completed a live cross-border treasury payment in US dollars between Melbourne and New York, using tokenised deposits on Swift's shared ledger. BHP used its existing ANZ account and banking channel. The customer relationship stayed the same while the settlement rail changed. The legal character of any tokenised deposit still depends on the arrangement: the nature of the claim, its transferability and when payment is final.

Beyond financial services, the same technology is being applied in supply chains to record the provenance and movement of goods, in environmental markets to track the issuance and retirement of carbon credits, and in identity and credentialing to create more portable and verifiable records that can support compliance processes such as customer verification.

Across all of these applications, a consistent legal principle applies: tokenisation does not dissolve existing obligations. Transfer restrictions, licensing requirements, disclosure rules and investor protections remain in force. In some cases, moving an asset onto a digital ledger introduces additional legal complexity, particularly where the ease of transfer on the ledger conflicts with restrictions that exist in underlying legal agreements. That complexity needs to be identified and addressed before a structure goes live, not after it encounters a problem.

Stablecoins: a specific regulatory challenge

Stablecoins sit at the intersection of payments, market infrastructure and financial regulation in a way that requires separate consideration.

A stablecoin is a digital token designed to hold a stable value, typically by being backed by fiat currency such as Australian dollars, high-quality assets or a combination of both. The practical appeal is that it can function as a settlement currency in digital markets without exposing the holder to the price volatility that characterises most digital assets.

The regulatory analysis is more complex than the concept. Whether a particular stablecoin constitutes a stored value facility, a deposit-like product or a financial product under the Corporations Act depends on how it is structured: how the backing assets are held, what redemption rights exist, how the reserves are managed and what governance applies. Each of these variables determines which regulatory framework applies and what obligations follow.

Asset segregation, reserve management, the enforceability of redemption rights and disclosure standards are not secondary considerations. They are the variables that determine whether a stablecoin arrangement is viable and whether it is defensible under regulatory scrutiny. The failures that have attracted enforcement action globally have not generally been failures of technology. They have been failures of legal structure and governance.

Stablecoins are increasingly being considered as settlement assets in tokenised wholesale markets, which raises further questions around how they interact with central bank money and how regulatory oversight is allocated between payments and financial services frameworks. Australia has started to answer them. Treasury's March 2026 draft payments legislation would treat stored value facilities, including payment stablecoins, as financial products, with APRA supervising major issuers. The harder question is which form of money will settle tokenised transactions. Tokenised deposits, stablecoins and central bank reserves carry different claims and risks. The RBA is now consulting on how they can exchange at par, and whether stablecoin issuers could hold central bank reserves. The answer will decide whether tokenised markets keep a single monetary system or split liquidity across competing networks.

Australia's regulatory position

Australia has moved from watching how other jurisdictions approach digital assets to actively designing its own framework.

The Corporations Amendment (Digital Assets Framework) Act 2026 received Royal Assent on 8 April 2026 and commences on 9 April 2027. It brings digital asset platforms and digital custody businesses within the existing financial services licensing regime, rather than creating a separate regulatory category for them. The policy choice is significant: it means that the obligations familiar to financial services participants, around custody, conduct, disclosure and compliance, apply to digital asset businesses as well. ASIC has confirmed through its regulatory guidance that many digital assets are already covered by existing law. Its transitional no-action position ended on 30 September 2026. A business that needs a licence or variation and has not applied now carries a present compliance risk, not a future one.

In parallel, the RBA led Project Acacia with involvement from the Australian Securities and Investments Commission,  the Australian Prudential Regulation Authority and Treasury. Its May 2026, findings covered 20 wholesale use cases, settled in exchange settlement account balances, a pilot wholesale CBDC, tokenised bank deposits and stablecoins. In one, Commonwealth Bank of Australia (CBA), J.P. Morgan, ASX and HQLAX settled repo transactions using a CBA deposit token and wholesale CBDC. Australia has now moved beyond proof of concept. In September 2026 the RBA opened consultation on how RITS and the Fast Settlement Service should support tokenised markets and private digital money. The RBA has not committed to a settlement architecture, but its choices on finality, access to central bank money and interoperability will shape which market structures can operate at institutional scale.

A degree of tension in the policy environment is worth acknowledging. The research that identifies the potential A$24 billion productivity gain also notes that Australia is unlikely to capture much of it without more coordinated settings across the multiple regulatory regimes and institutions involved. That is not a criticism of the regulatory approach. It reflects the genuine difficulty of aligning market participants, infrastructure providers and regulators within a short timeframe. The organisations that engage actively with the reform process are better placed to influence its direction than those that wait for the framework to settle before acting.

The international context

The direction internationally is broadly consistent, even where the specific approaches differ.

Singapore's Project Guardian has tested tokenised funds, deposits and cross-border payments in a structured environment involving major financial institutions. Hong Kong's Project Ensemble has progressed to pilot use cases involving tokenised deposits and settlement. In April 2026, the HKMA granted its first stablecoin issuer licences, to HSBC and a Standard Chartered joint venture. European and UK regulators have established regulatory sandboxes for digital securities and market infrastructure. In each case, the common elements are institutional participation, controlled conditions and a focus on establishing legal clarity before scale.

Equity market structure is now part of the debate. In July 2026, DTCC settled live trades in tokenised equities, ETFs and Treasuries held at DTC. On 17 September 2026, the US SEC granted a five-year conditional exemption allowing qualifying venues to trade tokenised US listed shares on-chain, provided the tokens carry the same rights as the underlying shares. On 5 October, a joint venture between OKX and ICE, owner of the New York Stock Exchange, filed to run a 24/7 venue for tokenised US shares. That venue is not yet approved. The issue is no longer whether shares can be represented digitally. It is how exchange regulation, shareholder rights, custody and settlement will operate when securities trade across new infrastructure.

Large financial institutions are investing in the capability to move collateral across platforms using tokenised assets, to issue securities digitally and to manage treasury functions through programmable arrangements. Asset managers are exploring tokenised fund structures, though the practical constraints around how interests are transferred and valued have not always been resolved in early implementations. Custodians and exchanges are building infrastructure that integrates traditional custody with digital asset controls.

The legal framing is consistent across jurisdictions. Tokenisation is not a new category of law requiring new legal principles. It is a change in how existing obligations are met and how existing rights are expressed and enforced.

The legal challenges that require attention

Five challenges arise consistently across markets and product types. Each is a legal and governance question as much as a technical or commercial one.

The decision that matters now

The markets that will lead in digital assets are not simply those whose governments permit the technology. They are the ones where institutions, regulators and legal advisers have done the work of translating trust, legal certainty and regulatory discipline into infrastructure that can operate at scale.

Australia has real advantages in that contest: a credible regulatory environment, deep capital markets and a public sector that is actively engaged in designing the infrastructure rather than observing from a distance. Those advantages are available to the institutions that engage with the legal and structural questions now. They do not accrue automatically, and they are not indefinitely available. The next decisions are dated: the RBA settlement consultation closes on 30 October 2026, and the Digital Assets Framework commences on 9 April 2027.

Digital assets are no longer an innovation story. For institutions that operate in financial markets, they are a question of legal positioning and strategic decision-making.

Thomsons advises Australia's largest digital asset exchanges, stablecoin issuers and traditional financial institutions on licensing, product design, compliance, regulatory engagement and contentious matters. The firm works closely with policymakers and regulators across all aspects of the digital assets reform programme.

Thomsons has Australia's largest, and best regarded financial services regulatory practice serving digital assets.  Thomsons and Liam Hennessy are finalists in the Digital Economy of Australia's annual DIGIs awards for 2026. 

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