The resulting “token”, which digitally represents the skyscraper, can then be divided into tiny pieces.

“It’s the blurring of the line between public and private markets. Previously, public assets like bonds and equities were really what we could invest in, and now we’ll be able to access private markets in the same way as we’re able to access public markets,” Wade says.

NAB hasn’t started deploying the technology in real trades, but is preparing for its introduction with pilots and proof of concept projects.

Wade says the democratising of investing, as she calls it, can also facilitate more sustainable investing, by allowing retail investors to put funds into assets such as wind and solar generators.

“If I can fractionalise a wind farm then I can buy one one-millionth of the wind farm. Then all of a sudden I can really have a sustainable portfolio and have the impact that I want in the world,” Wade says.

The digitisation of finance will also create large amounts of data that will have its own value, firstly in helping the data owners to make better investment decisions, but also as a saleable asset in its own right, to other investors wanting to gain insights.

Tokenisation will also change funds’ asset allocations, by altering the risk profile on some assets.

A large real asset might carry a significant amount of risk because of a lack of liquidity, but if the asset is then fractionalised it boosts liquidity.

“I’m shifting the underlying investment risk of that asset, therefore it will change the mix of my tactical and strategic asset allocation,” Wade says.

Digitisation of finance draws on technologies including 5G, the Internet of Things, artificial intelligence and machine learning, but at its heart is distributed ledger technology and blockchain, which allow for programmable assets, which Wade describes as a “true game changer”.

Programmable assets can “talk” to each other when settling a transaction.

Wade provides a simple explanation: “The money says, ‘You have to do five things for me to pay you’.

“The asset says to the money, ‘I’m here. I’m doing all of those things.’ And then they work out that they’ve both done them and then the settlement happens.”

Wade says the glue which holds the process together is a central bank digital currency, or CBDC, where a digital token would represent the virtual form of a fiat currency such as the Australian dollar. These are similar in some respects to bitcoin or other crypto currencies, but importantly are issued by countries’ central banks, such as the Reserve Bank of Australia (RBA).

Crucially, these currencies are programmable, so can facilitate automatic transactions and settlements.

Australia is investigating the issuance of its own CBDC, with the RBA having recently partnered with NAB, the Commonwealth Bank, Perpetual and blockchain technology company ConsenSys Software to explore the potential use and implications of a wholesale CBDC using distributed ledger technology.

The project involved the development of a proof-of-concept for the issuance of a tokenised CBDC that can be used by wholesale market participants for the funding, settlement and repayment of a tokenised syndicated loan.

Chris Thompson, deputy head of the RBA payments policy department, says the RBA is considering the use cases for a CBDC in the wake of this and other projects but can already see some potential benefits.

One is increasing speed and reducing settlement risk when both the tokenised currency and the asset are on the same blockchain.

“Because when you’ve got both the asset and the cash on the same platform, you can do atomic settlement, which means the cash and asset tokens are exchanged instantaneously, and in such a way as to ensure that the transfer of one token occurs if and only if the other transfers,” he says.

He says programmable money can potentially reduce settlement risk by removing humans from the process.

But Thompson says any introduction of a CBDC is likely to be a long-term process.

“We see this as being part of a journey of a research program that we’re doing on CBDC. This is going to play out probably over quite a number of years, so we’re researching what are the use cases, what’s the value add, what are the implications,” he says.

Special Report: Digital investment

Read full report:

Networks: Businesses must bank on secure future

Digital infrastructure: A new asset class is shaping up

Structural shifts: Data-driven strategies will make a difference

Industry insight: Comment from NAB’s David Gall

Transactions: Seamless payment systems heating up