Digital Finance – a strong foundation for Australia’s digital economy 

The Digital Finance CRC is one of the newest CRCs after a successful bid in Round 22. Its CEO-elect, Dr Andreas Furche, spoke with the CRC Association about the opportunities which come with the green light. 

The CRC will ensure Australia is ready to take advantage of the next transformation of the financial markets which will see the universal digitisation of all assets so they can be traded and exchanged directly and in real-time between any individual or organisation. 

“Digitised assets have come of age” says Andreas. “This lays the groundwork for the new world of digital finance which is going to be the next generation of economic interaction.” 

“The basic technology for the creation and exchange of digital assets has been around since the mid-1990s but created relatively little impact for a while. With Blockchain coming up as another key technology to create digital assets and asset registers, people are now paying more attention to the changes this can make in financial interactions.” 

“You can create digital coins, you can create digital certificates or tokens directly representing the ownership real-world assets, and then instantly buy or sell them. You could even include graphics to increase the analogy – ownership of the token means ownership of the asset. And once you’ve got that, you can change how you invest, what you can invest in, you can also change what you sell, and how you sell it.” 

“The entire internet instantly becomes one effective, efficient global financial marketplace.” 

Andreas says that we are in a period similar to when the internet started, and it wasn’t clear what the commercial possibilities might be.  

“When some time down the track all your investments are held on digital registers, and you are buying and selling them instantly whenever you choose, you’ll come back to this time and think ‘why would have anyone doubted it could be useful?’” 

“It’ll take time, but the transition will have so much impact and we have a good opportunity to turn that into a positive direction if we do it right.” 

The CRC will play a critical role in that transition for Australia and aims to make Australia a leader in digital finance, able to bring together all the players to ensure we have the right skills, right legal framework and the right system that ensures we make the market fairer and more efficient in a real-time trading environment. “Because we will be trading in real time, we need be built the ruleset into the actual transactional technology,” says Andreas. 

“Our job is to work out, with the stakeholders and regulators, what a good ruleset is, and then ensure that we can enforce that in our part of the global marketplace.” 

Andreas says that if Australia gets that right, it sets itself up to be an attractive marketplace for generating and managing digital assets, even for assets located or originated outside Australia..  

The CRC model offered the highest chance of success. 

“To build a good model in this new area, you can’t leave it to a single industry group because it could create prejudice towards existing business models.  Participants have to be willing to challenge their own established business models, even if it initially appears to work against their interests.” 

“It is one of those topics that really needs to be a collaborative effort.” 

He says the CRC model works in a new industry where the regulatory environment will matter. “Regulators are very difficult to engage when you are a single industry group because they rightly assume that what you are trying to do is promote your own interests.” 

“But if you have a collaborative body, which has research expertise leading in the field, combined with the economic interests of a diverse group, it’s much easier to engage the regulators.” 

Andreas says that the Digital Finance CRC needs significant research because of the complexity in the system. “It’s not just a matter of applying blockchain to asset registers,” he said, “you also need to change the processes and legal statutes around it. For example, if you want to make a blockchain title for real estate and allow instant changes in ownership, it has to be legally effective and secure. This requires research in several areas, such as technology, finance and law.” 

“This research can lay the foundation to make real-time exchange just as safe as if lawyers were sitting down in an office in person for real estate settlements.” 

“So it’s much more than just putting it on a register of one digital kind or another, it’s actually about making an ecosystem around that whole space.”   

Nurturing researchers with industry experience are an important part of the ecosystem Andreas wishes to create.  

“We’ve made the PhD program a centrepiece of this CRC.” 

“A lot of our industry partners are expecting to work with PhD students as interface point to the CRC. That is important because these new concepts of how a digital marketplace might work are abstract and difficult to get across.” 

“[PhD students] need to get into organisations that work in that space, so that the organisations can start thinking differently. Instead of feeling threatened by change, organisations need to think how they can adapt and use it for their business models.” 

“You won’t get that unless you have people who are actually trained in innovative thinking and the necessary details of the new field. Our PhD students will be a blend of industry and research. We’ve got quite a high target for numbers [of PhD students]. About 150 over the ten-year lifespan.” 

“We’re also implementing  an MBA program. It’s a shortcut to get the innovative thinking around digital finance into [industry] organisations where people already hold positions. In the discussions with industry partners leading up to this, it was quite well received.” 

Andreas thought about the end of the CRC’s lifespan. Ten years is a short amount of time for the digital economy transition, but he has high expectations for the impact of the CRC.   

What we’d like to see in ten years, is that this digital finance ecosystem is working well in key pilot areas. If in ten years’ time we have a fully working ecosystem, with some meaningful assets being traded that way, then we’ll be happy.   

We welcome the Digital Finance CRC to the community and wish Andreas and his team the best for their endeavour.