The Next Phase of Digital Assets in APAC: Scale, Interoperability and Regulatory Fragmentation

Digital assets in APAC have reached a strategic inflection point. For much of the past decade, policymakers focused on whether digital assets should be regulated and how to protect consumers and preserve financial stability. Across much of the region, that debate is now largely settled. The more important question is whether fragmented regulatory frameworks are becoming the principal barrier to their evolution into mainstream financial infrastructure.

Regulators have made significant progress. Stablecoin regimes are emerging, while regulation is expanding to capture a broader range of digital asset activities. Financial institutions are beginning to integrate tokenised money market funds, fixed-income products and other real-world assets into their long-term strategies. The debate is shifting from regulation as an end to regulation as an enabler of institutional adoption, market efficiency and economic competitiveness.

The next phase will be determined less by technological innovation than by regulatory execution. Three strategic questions will shape the market going forward. Will regulated stablecoins generate meaningful institutional payment volumes? Will tokenised investment products achieve commercial scale? And will regulators begin recognising one another's digital asset frameworks to reduce cross-border friction?

Digital asset policy is increasingly a question of economic competitiveness rather than regulation alone. Jurisdictions are competing to position their financial infrastructure as a preferred destination for global capital and cross-border activity. Those that provide regulatory clarity while preserving sufficient flexibility to accommodate technological innovation and evolving market structures are likely to strengthen their position as regional financial centres.

Three developments explain why this strategic inflection point is occurring now. First, regulatory frameworks have matured sufficiently to provide institutions with greater certainty around regulatory outcomes, while retaining the flexibility needed as technologies, business models and market structures evolve. Second, firms are moving beyond experimentation towards commercial deployment of tokenised financial infrastructure. Third, governments increasingly view digital assets as a source of long-term economic competitiveness rather than simply a conduct or prudential issue. Together, these developments mark a transition from regulatory experimentation to financial infrastructure development and institutional adoption.

A Region in Transition

Although APAC is often discussed as a single market, its regulatory landscape remains highly diverse. Several jurisdictions have introduced comprehensive frameworks covering licensing, stablecoins, custody, market conduct and prudential oversight. Others remain at an earlier stage.

This diversity reflects different legal systems, policy priorities and market structures. It has encouraged regulatory innovation but also created growing complexity for financial institutions operating across multiple jurisdictions. Increasingly, the challenge is not the absence of regulation but the lack of consistency between regulatory frameworks.

A fund manager operating across Singapore, Australia and South Korea may need three separate custody arrangements, two stablecoin compliance frameworks and no mutual recognition of licensing—adding cost and operational friction that undermines the very efficiency tokenisation promises.

Figure 1 illustrates the current landscape. Across APAC, the first phase of digital asset development focused on establishing regulatory frameworks. The second phase centres on institutional tokenisation through pilots and early market initiatives. Progress remains uneven and the next challenge is making these regulatory frameworks interoperable across jurisdictions so that assets, money and collateral can move safely and efficiently across borders.

Figure 1. APAC digital asset regulation is maturing, institutional tokenisation is accelerating, but interoperability remains uneven

Source: Author's assessment

For globally active financial institutions, that increasingly means interoperability not only across APAC, but also with major financial centres such as the United States, the United Kingdom and Europe.

The Commercial Opportunity

The greatest opportunity for APAC lies not in creating entirely new financial products or replacing existing market infrastructure, but in modernising the infrastructure that underpins today's financial system. While public debate continues to focus on cryptocurrencies, institutional attention is increasingly shifting towards how tokenisation can improve the efficiency of payments, capital markets and collateral management.

This transition is already underway, although progress varies across the region. Regulators are supporting tokenisation through sandboxes, public-private pilots and early market initiatives testing tokenised deposits, stablecoins, government bonds, investment funds and other financial assets. While only a limited number have reached commercial scale, the focus is shifting from proof of concept to live deployment. The greatest economic benefits will ultimately depend on interoperability across jurisdictions.

In Singapore, tokenisation initiatives such as Project Guardian are demonstrating how tokenised deposits, funds and bonds could improve wholesale financial markets. Hong Kong is positioning regulated stablecoins alongside tokenised government bond issuance as part of its ambition to become a leading international centre for digital finance. Japan has established one of the world's most comprehensive legal frameworks for stablecoins, providing greater certainty for institutional adoption. Across Australia, banks, market infrastructure providers and policymakers are increasingly exploring wholesale tokenisation and digital settlement as Treasury reforms, ASIC's work and RBA-led initiatives continue to evolve.

Regulated stablecoins, alongside tokenised bank deposits and wholesale central bank digital currency initiatives, have the potential to reshape cross-border payments, treasury management and wholesale settlement by reducing friction, improving liquidity management and enabling near real-time transfer of value. At the same time, tokenised money market funds, fixed-income products and other real-world assets could fundamentally improve how financial institutions issue, distribute, manage liquidity, mobilise collateral and settle securities throughout their lifecycle.

Importantly, institutional tokenisation is developing through two complementary models. The first is native issuance, where new financial instruments are issued directly in tokenised form and distributed ledger technology becomes part of the primary market infrastructure. The second is tokenised representation, where existing financial instruments continue to exist within traditional market infrastructure but are represented digitally to improve settlement, collateral management and distribution. Both models are likely to coexist, although native issuance is expected to deliver the greatest long-term efficiency gains.

Importantly, tokenised finance is likely to evolve alongside existing market infrastructure for many years. Its value lies in improving efficiency, interoperability and resilience rather than creating separate financial ecosystems. As adoption accelerates, competitive advantage will increasingly depend on how effectively institutions integrate tokenised finance into existing business models.

The Strategic Challenge: Regulatory Fragmentation

If institutional adoption represents APAC's greatest opportunity, regulatory fragmentation remains its greatest challenge.

The region has made significant progress in developing domestic regulatory frameworks. However, interoperability ultimately depends not only on compatible technology but also on regulatory alignment. Japan has one of the world's most comprehensive stablecoin frameworks, while South Korea's remains partial and evolving. A firm operating across both markets faces materially different reserve requirements, redemption rights and supervisory expectations. Where regulatory and supervisory approaches diverge, regulators are less able to establish mutual recognition or equivalence arrangements, making cross-border activity more costly and complex.

As tokenised finance evolves into cross-border financial infrastructure, fragmentation becomes more than a regulatory issue—it becomes a competitive one. The value of tokenisation increases significantly when assets, money and collateral move seamlessly across borders. Divergent regulatory frameworks work against that objective, limiting the efficiency gains that tokenisation and digital payments are designed to deliver. Ultimately, fragmentation influences where firms invest, where they establish infrastructure, how they allocate capital and which markets emerge as regional hubs for digital finance.

This dynamic cuts both ways. While regulatory fragmentation creates barriers, jurisdictions that enable interoperability stand to become more attractive locations for internationally active financial institutions. Wholesale capital markets are inherently global, with investment, funding and collateral flowing continuously between APAC, the United States, the United Kingdom and Europe. Over time, regulatory recognition and compatibility between these major financial centres—not simply within APAC—will become increasingly important if tokenised money, securities and collateral are to move efficiently across borders.

Ultimately, the jurisdictions that solve for interoperability first stand to gain the most—not necessarily those with the most comprehensive domestic regulatory regimes, but those whose frameworks are trusted, interoperable and capable of supporting cross-border financial activity.

Looking ahead

Three questions are likely to determine whether digital assets become a core part of APAC's financial infrastructure over the next decade.

First, will regulated stablecoins generate meaningful institutional payment volumes? Momentum is building as banks, payment providers and large corporates increasingly explore regulated digital money for cross-border settlement and treasury management.

Second, will tokenised money market funds and fixed-income products achieve commercial scale? Institutional investors are already moving beyond pilot programmes towards practical applications in collateral management, liquidity management and wholesale capital markets.

Finally, will regulatory cooperation evolve sufficiently to allow regulated digital assets to move seamlessly across borders? Progress will be gradual, but demand for interoperability will grow as financial institutions increasingly operate across multiple regulated markets.

Technology is no longer the principal constraint. The next phase will be determined by whether regulators and industry can convert domestic regulatory certainty into cross-border interoperability and institutional scale. Increasingly, this is not simply a question of financial regulation but of economic competitiveness. Jurisdictions that build trusted, interoperable regulatory frameworks will be better placed to attract capital, deepen capital markets, support innovation and strengthen their position as regional and global financial centres.