{"text":[[{"start":7.04,"text":"Five years ago, David Omand, a former spook who ran Britain’s intelligence and cyber agency GCHQ, published a pithy book, How Spies Think. This James Bond-style business manual shares his lessons from battling hostile governments, like Russia. Now, Omand is pondering another, more pedantic problem: financial market collateral."}],[{"start":30,"text":"For as mainstream finance flirts with agentic AI and tokenisation — digital representations of a real-world or financial asset on a shared, programmable ledger — he is worried. “It is dangerous if tokenisation and frontier AI are discussed in separate rooms,” he told a central banking conference this week. “Monetary stability now lives in the gap between them.”"}],[{"start":52.66,"text":"Or to put it another way, although investors today are fretting about AI “tokens” (compute units), we need to focus on a second “token” problem — units of high-velocity digital money and securities."}],[{"start":64.64,"text":"Some financiers might scoff at that. After all, tokenised assets are a mere “drop in the bucket” of global finance, as the economist Darrell Duffie put it. He calculates that just $15bn of treasuries, $15bn of “real-world assets” and 5 per cent of all repurchase agreements (repos) are now tokenised."}],[{"start":84.64,"text":"Moreover, most financiers love the idea of more tokenisation, to make it dramatically easier to move money and — crucially — collateral. Citibank, for example, expects a “transaction cost reduction of around 24 per cent, alongside faster execution and reduced manual involvement”, and expects $5.5tn of tokenisation activity by 2030."}],[{"start":107.48,"text":"A UK government task force recently argued that tokenisation could deliver “an estimated up to £33bn increase in annual economic output and £14bn in annual tax revenue by 2035” for the UK. It also projects globalised tokenised finance worth $88tn by that date."}],[{"start":128.4,"text":"So the Bank of England is now consulting with industry about a regulatory framework for tokenised collateral at clearing houses, with the Financial Conduct Authority preparing for a tokenised gold market, the Treasury expected to issue tokenised gilts soon — and three British banks (Barclays, NatWest and Lloyds) have just done the world’s first tokenised bank transfer."}],[{"start":149.12,"text":"In America, big asset managers like BlackRock are now issuing tokenised exchange traded funds, the Securities and Exchange Commission has produced rules around tokenised equities and behemoths like the Depository Trust & Clearing Corporation and New York Stork Exchange are developing token systems for collateral management and settlement."}],[{"start":169,"text":"It could all be wildly exciting. But there are two possible risks. One is that more financial velocity could be destabilising, particularly when driven by agentic AI. The Dallas Federal Reserve notes that if bots use tokenised retail bank deposits “instant settlement would allow deposit holders who prioritize yield to switch banks almost instantaneously” — robbing some banks of funds to make loans."}],[{"start":192.24,"text":"Moreover, “deposit outflows under stress would also rise”. That could create panics far worse than the 2023 collapse of Silicon Valley Bank, the world’s first high-speed, social media bank run. According to the IMF, faster finance means “failures can propagate faster than institutions or supervisors can respond”."}],[{"start":211.6,"text":"The second danger is cyber attacks. “Frontier AI gives elite hacking capability to unskilled actors,” says Omand, who reckons that bots were behind half of recent cyber attacks on blockchains — and expects to see assaults on “everything around the ledger: smart-contract code, keys, bridges, data feeds, cloud providers, and the AI agents”."}],[{"start":231.92,"text":"That could come from hackers, highly organised criminal groups or Russian or Chinese agencies seeking to distract us, he adds. The recent $6.3bn hack of Binance, reportedly by North Koreans, shows the risk."}],[{"start":245,"text":"Stopping tokenisation is unlikely. So the obvious response is to create better cyber defences and central bank safety nets for hyper-liquid, high-speed shocks. Thankfully, national governments and banks say they want to."}],[{"start":257.66,"text":"The issue is cross-border collaboration. Eighteen years ago, the White House forced the G20 countries to collaborate to quell the 2008 financial shock. That was admirable. We must hope that would be repeated if another shock hits. And entities like the Bank for International Settlements and Financial Stability Board have created strong platforms for action, since trust among central bankers is high."}],[{"start":281,"text":"However, the BIS and FSB do not oversee digital regulation. Moreover, geopolitics is undermining collaboration, even among allies. The White House refused to give Anthropic’s Mythos cyber security tool to non-American entities earlier this year. Worse, the US is pushing the world to adopt dollar-based stablecoins, while Europe prefers tokenised currencies like a digital euro. Cue strategic competition, as Europe tries to avoid financial colonisation."}],[{"start":309,"text":"Governments and financiers need to focus, urgently, on the risks posed by widespread tokenisation amid the huge opportunities. Let us hope recent cyber attacks on supermarket and blood bank fridges in Europe are a wake-up call for investors and spies alike."}],[{"start":322.5,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794555061_1658.mp3"}