I thank the Minister of State for being here today and I am grateful for the opportunity to raise this matter. Let me briefly explain the technology. When the Cathaoirleach introduced "tokenisation" into the record, he said "tokenism", and they are radically different. I am conscious of this for myself, as getting my head around it was difficult.

Tokenisation is the conversion of a real-world asset into a digital token on a blockchain, such as a share or an investment fund. It is then registered as a digital token on a distributed ledger. For those who are watching at home, they can think of it like this: instead of their ownership of shares being recorded on a paper register or a centralised database somewhere, it is encoded as a secure digital record, which can be transferred, verified and settled almost instantly at any hour across the world and across any border. What it does is remove layers of manual processing and dramatically reduces costs. It can open investment funds to a far wider range of investors.

We have spent years watching Ireland compete and win in a global context with regard to financial services. For four decades, the funds and asset management industry has been one of the great success stories of the Irish economy. Even the International Financial Services Centre, IFSC, when I was much younger, was something that really stood out. Today, it sustains over 20,000 jobs and nearly half of them are outside Dublin in towns and counties that depend on this vital sector. It contributes over €1 billion annually to the Exchequer.

The fund industry is undergoing a rapid digital transformation and tokenisation is no longer a future prospect. It is already happening. Luxembourg has updated its legislation to accommodate tokenised funds. The United Kingdom is moving with purpose regarding financial services and the markets Act reforms. Singapore has been ahead of the curve for years. These are our direct competitors for the same global mandates, asset managers and jobs. We have to ask ourselves what Ireland is doing in this context. The industry has been making submissions to the Department of Finance since last year. It has set out very specific, targeted changes in legislation that would be required, including changes to the Irish Collective Asset-management Vehicles, ICAV, Act, updates to company law and something as straightforward as allowing registers of fund members to be held on a distributed ledger. These submissions have been received but to date there has been no commitment to act and no timeline offered.

The case being made by Irish funds and the industry itself is asking for a political commitment to bring forward the necessary amendments to our laws in Ireland that will allow this to happen. Let us imagine an Ireland where the next generation of global tokenised funds are structured and domiciled here. Whether they are jobs in digital assets, blockchain infrastructure or the operation of a legal ecosystem around tokenised finance, these are Irish jobs. The taxes would then flow into the Exchequer, while a graduate from Trinity College, the University of Limerick or University College Cork can build a career at the frontier of financial technology without ever leaving the country.

I look forward to the Minister of State's response. I think it is something we can be very strong on in Ireland. I hope we can work together across the House to move this forward.

The Senator did not even use all his time.

Unusually.

I thank the Acting Chair. Certainly, us politicians can quite often be accused of "tokenism" but I am very conscious we are not talking about that today. We are talking about "tokenisation". I thank the Senator for raising this important and topical issue.

Given that Ireland is both a large funds domicile and home to significant financial services and technology sectors, there would appear to be obvious synergies that should allow us to keep pace with these technological advances. We are closely monitoring developments across the EU and globally and will continue to engage with industry and the Central Bank to ensure we can remain competitive as a jurisdiction while upholding our high regulatory standards. That is very important.

As the Senator outlined, tokenisation could fundamentally reform how capital markets operate enabling real-time trades, increasing transparency and liquidity, expediting clearing and ultimately providing for simultaneous settlement. The Funds Sector 2030 report included a recommendation that industry should continue to engage with the Central Bank of Ireland and the Department of Finance, as necessary "with a view to mapping out a pathway for adoption of tokenisation". The Department fully supports and encourages the work that industry has undertaken to assess what can be done within the current legislative and regulatory frameworks. Officials from my Department are considering submissions from industry regarding proposed changes to the current legislative framework.

In Europe, the regulatory landscape for digital assets is still evolving both at the national and EU levels. Whether an investment fund is permitted to distribute digitally depends on European and national rules. Some countries such as Germany and Luxembourg have started pilot work on implementing tokenisation. As part of the savings and investments union, SIU, strategy, the European Commission has published the market integration and supervision package, MISP. This package will amend 18 pieces of existing EU financial services legislation across trading, clearing, settlement and assets management and will be a central focus for Ireland during our Presidency.

Amending the distributed ledger technology, DLT, framework among other related measures forms part of the MISP proposal, which seeks to turn the use of DLT in capital markets from a limited sandbox into something that can be scaled across the Single Market. The DLT pilot regime is being amended in order that tokenised securities can be issued, traded and settled at meaningful scale. Other changes amend existing EU financial services legislation making them technologically neutral allowing for the use of DLT and other technologies. This proposal is currently under negotiation at EU level.

In March this year, the Central Bank published a discussion paper on tokenisation. This discussion paper is to encourage informed debate on how DLT and tokenisation could shape the future of financial services in Ireland. The paper seeks input from a wide range of stakeholders to explore the impacts of technology, understand how its benefits can be realised and identify how risks should be managed. Submissions on the discussion paper are invited by the Central Bank with the deadline earlier this month. The Central Bank intends to publish a feedback statement following the consultation period. My officials will continue to engage closely with the Central Bank on the matter and the outworkings of the feedback received on its discussion paper will be used to inform the Department’s next steps on this important policy matter.

It is also worth noting that at the end of May, I convened a round table with some of the leading thinkers in digital assets and blockchain technology to better understand the opportunities and challenges for the sector. There is great industry ambition in this regard and I am confident we will match that ambition with the forthcoming launch of the Ireland for finance strategy. I intend that strategy to have a dedicated focus on digital assets so that we can realise the opportunities that are in front of us.

We understand that the strategic risks of inaction might be significant. However, it is crucial to note that the regulatory framework for tokenised assets requires extensive consideration for issues like data protection, anti-money laundering, tax, beneficial ownership, insolvency or enforcement scenarios or property rights. We are closely monitoring developments in other countries to ensure we remain competitive but importantly uphold our requirement for strict regulation.

I welcome the engagement. I want to be constructive here. What the Minister of State's statement does say is that we understand the strategic risks of inaction, which might be significant. We are also waiting on the Central Bank to come back with its findings and we are also looking at other countries. I do not think the industry is asking for a whole lot here. It is looking for specific amendments to existing legislation regarding the Irish Collective Asset-management Vehicles Act and company law and practical changes that will clearly signal to global firms that Ireland is ready to play a huge part in the next chapter. When the Minister of State is looking at countries that already do this, I have mentioned Luxembourg, Singapore and the UK and they certainly are not waiting.

However, I understand that the Government has to be careful. I understand the concerns regarding GDPR, money laundering and so on. I ask the Minister of State to take one question away with him today. Can we commit to the amendments in this year's finance Bill?

I thank the Senator for raising this very important and topical issue. I will not give a commitment to amendments in the forthcoming finance Bill but I think I have been very fair in what I have outlined regarding the work officials in my Department and the Central Bank have done to date in engaging with industry. We acknowledge the huge opportunities this presents. We want to capitalise on them. That is why I have confirmed publicly here today that there will be a section within the Ireland for Finance strategy. That strategy outlines our priorities for financial services from this year right out to 2030. A key component of that will be tokenisation. I am not going to publish part of the strategy in the Seanad today. I do intend to publish it in the coming weeks. I do not believe there will be any doubt about our commitment to tokenisation once it is published.

I thank the Senator for raising this matter. I also thank the industry, which has engaged very fully with me, most recently in round-table discussions a number of weeks ago, and which has had ongoing engagement with officials in my Department to ensure we are acutely aware of the opportunities being presented to us.