First-mover costs stifle digital finance: report

Despite Australia boasting the technology and institutional capabilities for digital finance, several factors, including high barriers to first-movers, are derailing growth.

According to a report from BlockchainAPAC, which recently conducted a national roadshow, the constraint stems from "unclear regulatory timelines, first-mover costs and unresolved coordination challenges."

An example of coordination challenges would be the exclusivity of a digital infrastructure from institution to institution, where several banks possess deposit-token capability, but their systems cannot accept one another's tokens.

"Resolving that requires cooperation on shared infrastructure and governance, alongside workable commercial and regulatory settings," BlockchainAPAC said.

The National Dialogue 2026 Synthesis Report gathered insights from banks, superannuation funds, asset managers, custodians, law firms, regulators, digital asset exchanges, and more, noted institutional engagement is growing but commitment "remains the test".

This sentiment is supported by the recent partnership between Commonwealth Superannuation Corporation (CSC) and Northern Trust to advance digital investment infrastructure across institutional markets.

Both parties intend to establish a framework to exchange insights on developments in digital financial markets, identify "new areas" of collaboration and contribute to the advancement of institutional adoption of digital investment solutions.

Project Acacia also indicated a tokenised ecosystem can inject some $24 billion to Australia's economy.

No regulatory clarity

Meanwhile, some are still waiting for regulatory clarity on the sector, as the report pointed to interdependent processes moving on different timetables, such as a legislated platform and custody framework, an incomplete payments and issuance framework and unresolved prudential treatment of stablecoins and related instruments held by banks.

Institutions are unlikely to commit substantial capital while material implementation, capital and liquidity questions remain open-ended, BlockchainAPAC warned.

Despite several ongoing initiatives, including the ongoing support from the government to overhaul the sandbox framework for financial innovation and the passage of the Digital Asset Framework Bill earlier this year, ASIC reiterated perfect regulatory certainty is not possible for digital finance, stating that it's not a "realistic state of affairs" even among other sectors.

Commenting on the issue, BlockchainAPAC chief executive and report author Steve Vallas said Australia needs to move from trialling ideas to implementation.

"Australia's problem is no longer an absence of pilots or evidence that the technology can work. What remains unresolved is who carries the cost of moving first, who governs shared infrastructure and who is accountable for turning experimentation into functioning markets," Vallas said.

"Regulatory clarity remains important, but regulation alone will not create a market. Institutions also need an investable pathway, interoperable settlement and confidence that other participants will move with them."

First-mover disadvantage

Additionally, first-mover costs are holding back investment even though technology is "no longer" the principal barrier.

"But regulatory clarity alone will not produce investment," he said.

"Adoption costs are front-loaded, while many benefits arise only when infrastructure operates at scale and attracts broad participation. Progress requires workable arrangements for investment, risk, governance, interoperability and the distribution of benefits."

He is recommending that the private and public sector work to establish a "workable" Australian dollar settlement layer for tokenised assets, remove "collective action" problems preventing institutions from pioneering and commit to a dated sovereign digital issuance.

The report, however, does not advocate creating new institutions by default, government selection of technologies or wholesale adoption of overseas models.

"The report is not a consensus statement and does not claim to represent every view in the market. Its value lies in recording where positions converged, where they did not and what remains unresolved," Vallas continued.

"Delay and non-participation are not neutral. Markets and standards will continue to develop. The choice is whether Australian institutions help shape them or operate within infrastructure, governance arrangements and commercial models determined elsewhere."