‘Beginning Of The End' For Banks: Here's What's Next | Sandy Kaul
Summary
Regulatory Developments: The passage of the Genius Act and new SEC listing standards are accelerating the approval process for crypto ETFs, reducing the timeline from 190 days to as little as 30-60 days, which is expected to boost the flow of new crypto products.
Crypto ETFs: The expansion of crypto ETFs is solidifying cryptocurrencies as a regular asset class in investment portfolios, with expectations for large, mid, and small-cap crypto ETFs to become part of multi-asset class portfolios.
Stable Coins and Financial Ecosystem: The increased usage of stable coins, supported by regulatory changes, is seen as a shift towards a wallet-based financial system, potentially marking the beginning of the end for traditional banking systems.
Tokenization of Assets: The tokenization of real-world assets, including equities and commodities, is being embraced by major exchanges and financial institutions, offering new opportunities for democratization and efficiency in financial markets.
Partnerships and Innovations: Franklin Templeton's partnership with Binance aims to explore new digital asset initiatives, leveraging Binance's extensive wallet platform to meet evolving investor demands.
Future of Financial Systems: The discussion highlights the potential for tokenized assets to facilitate peer-to-peer transactions and the need for regulatory advancements in digital identity and blockchain settlement systems to fully realize these innovations.
Transcript
this passage of the Genius Act and this increase in usage uh of stable coins is going to be seen as the beginning of the end of the traditional financial ecosystem. What we're getting toward is a high techch barter society where I can really barter goods for one another. When you think about sovereign wealth funds that represent the wealth of these nations on behalf of their citizens, right, it would almost be irresponsible of them not to be thinking about how they can use and tokenize their strategic reserves uh to make them more broadly available. Our guest today is Sandy Call. She's the executive vice president and head of innovation at Franklin Templeton. Exciting things happening in uh the ETF space. A lot of things are getting tokenized. Uh Franklin Templeton is partnering with one of the largest exchanges in in the world in the crypto space. We'll talk about that. I won't reveal who it is yet. And um generally speaking, what is going on in the regulatory landscape for crypto? Sandy is also uh co-chair of the CFTC's digital asset subcommittee and she sits on both the World Economic Forum's digital assets advisory board and the DTCC's digital asset advisory board. So, she's well positioned to be talking to us about the future of regulations in the crypto space. Welcome back to the show, Sandy. It's been a while since you've been on the show. I spoke to you in New York way back in March. So, good to have you back. Thank you for being here. Great to be here, David. Thank you for having me. I want to start by talking about regulations. This is this is a topic that has been front of mind for crypto investors ever since last year when the uh Bitcoin ETF speculations, rumors were were floating around the cryptoverse. finally happened and then people were finally uh euphoric about the biggest and most successful ETF launch in history. Back in March, you had told us about uh how we could see a little more clarity on uh regulations in the crypto space by the summertime. We're now in we're now in September. We've seen the Genius Act pass uh this week. For example, let me just take a uh share my screen here. The SEC approved uh generic listing standards for commodity based trust shares. um tell us about not just this development but the the broader uh pathway of regulatory development in the crypto landscape since March. Yeah, so there there's three streams we should really talk about when we're talking about regulation. Uh this first one around ETFs is moving fast, right? If you think about it, it it took almost 190 days from your first filing to get those early ETFs uh approved in the crypto space. Even if they were approved straight through by the SEC, uh it was taking more than half a year uh to really be able to get a product to market. Uh and as we know the SEC didn't always approve them in that timeline and it could stretch out way beyond 190 days as well. Uh but with these generic listing standards now you are able to skip one of the filing steps that you needed to do prior to this. Uh and it's cutting the timeline from 190 days to potentially as little as 30 to 60 days. Right? That is a huge shift in our ability to bring product to market and it's also giving us more standards around what has to be in place for an asset to be considered uh eligible to go through this straight through process. So that's about having predictability. It's about having some um reference to how it has performed in a futures market. Right? there's starting to be criteria that can tell us that a token is ready to be listed within an ETF structure uh and it is cutting the speed with which uh it's cutting the delays uh and increasing the speed by which you can get listings into the marketplace and then launched. So this should really start to increase the flow of new product. Uh and I think you can see from the whole slew of filings that are starting to come in now people have been waiting for these rules. uh and holding off on filing because you know they're actually gaining time by having waited a little bit more because these have been widely anticipated and not only were they widely anticipated they actually came out even faster than people had expected. So this is a big development that will really help to expand uh and support the growth of crypto ETFs. So crypto ETFs is one big stream with the growth of ETFs um expanding into the crypto sphere. Uh investors want to be protected. So certainly we may see a lot of just scam products trying to list ETFs or investors wanting to be protected from uh ruck pulls and what and the not. Um we we we want to see the SEC greenlight ETFs but at the same time we want protection as well. How do we walk that balance? Yeah. Well, I mean and this is where the listing criteria are going to really help, right? You know, there's lots of tokens out there that might get a lot of interest, but you know, to be professionally traded, there really has to be futures markets around them, market makers engaged with them, um, you know, policable activity that shows a whole track record of reliability and pricing, right? There's there's you might open up uh you know the the um aperture in terms of allowing more types uh and more tokens to come through but it will still be very tough to get anything that isn't really meeting a professional standard of trading through as a potential source of ETFs. So you can still trade them but I I think it will still be hard to get certain types of tokens through in an ETF structure. Uh SEC chair um Paul Atkins made a pretty bold statement in this press release. By approving these generic listing standards, we are ensuring that our capital markets remain the best place in the world to engage in the cutting edge innovation of digital assets. What does he mean by that? What do you think is going to be the future of digital assets in America? I think that we are going to see a whole set of you know basically the equivalent of large cap crypto in ETFs. uh we are going to potentially start to see some mid and small cap type crypto in ETFs. Uh we'll have indexes in ETF crypto holdings. Uh so it will become a regular part of the investing ecosystem, right? Portfolios will have allocations to crypto ETFs. It's really solidifying this as an asset class uh that will be included in multi-asset class portfolios. So, it's a pretty exciting time to see how quickly this has all occurred. When you were speaking earlier, David, I was like, was it really only a year ago that we were talking about? It wasn't even a year. It was uh six months. I know. And now I'm like freaking out that it's been the longest six months in the world, I think. Welcome back, Sandy. Good to see you again. I know. Well, the XRP and Salana ETF launches are buzzing. It's um what's next for those for those uh tokens? What do you think? Yeah, they're they're becoming, you know, uh I think important parts of what the future state ecosystem is going to look like. Um you know, I had said the regulatory is affecting three things. Obviously, stable coins are a big part of what is being affected here. We had the passage of the Genius Act. Uh the CFTC just came out. uh the acting chairman fam of the CFTC just came out and recommended being able to use stable coins as collateral on listed derivative trades. Right? So, you know, this is really again bringing a crypto instrument into the mainstream. Uh, and the stable coins in particular, what's interesting about them is every dollar that comes out of the banking system into stable coins and then stays in the wallet-based ecosystem is a dollar that has exited the traditional banking system and moved into a parallel ecosystem. And so I think in retrospect this is going to have been really seen this passage of the Genius Act and this increase in usage uh of stable coins is going to be seen as the beginning of the end of the traditional financial ecosystem that was all accountbased and really opening the floodgates to having a wallet peer-to-peerbased system. uh because now there's cash to pay for transactions there that can be counted upon with a strong set of uh consumer protections and regulations backing them and I no longer have to necessarily purchase items using cryptocurrencies in the crypto space uh which will bring in many more types of institutional investors who don't yet have a full appreciation and understanding of crypto. So, it's going to actually allow these crypto rails to be utilized by traditional players in ways that will put their existing infrastructure to shame. Uh, and it's really going to mark the beginning of the transition of the traditional financial ecosystem onto these blockchain and crypto-based rails. Before we continue with the video, let me tell you about a very important topic, Bitcoin. It's had a 10-year compounding annual growth rate of over 80% and it's been one of the best performing assets in the world. That means there's a high opportunity cost to spending your Bitcoin savings. Now, with today's sponsor, People's Reserve and their revolutionary Bitcoin powered financial products, you can now borrow against your Bitcoin with no credit checks, no income verification, no taxable event, and no rehypothecation risk. Their flagship product, the Bitcoin powered mortgage, is redefining home ownership for Bitcoiners. And here's the best part. Liquidation risk isn't tied to price volatility, only to non-payment defaults. This protects borrowers and lenders from the biggest risks in traditional crypto lending. With the advent of People's Reserves revolutionary lending products, you can now unlock the purchasing power of your Bitcoin savings without having to give up ownership. Go to peopleleserve.com link down below or scan the QR code here. Sign up for their newsletter and discover how to build wealth smarter. That's people'sreserve.com. That sounds interesting and you know I'm all for you know I'm all for uh the advancement of technology but what does that practically mean for uh the trader on Wall Street when when everything moves to the blockchain? Yeah. Well, so look, there has recently been a filing from NASDAQ asking to tokenize real world asset securities including the big tech index QQQ. Right? So this tokenization of equities and indexes and ETFs, right, we've been seeing emerging players like Kraken moving in this direction and we've been seeing NEO brokers like Robin Hood moving in this direction. Uh but that's a little bit different than seeing someone like NASDAQ move in this direction. Right? So I I think that what it means is that just like I can use my crypto today in lending protocols, in automated marketmaking protocols, uh I'm going to be able to use my equities and I'm going to be able to use my bonds and I'm going to be able to use my investment portfolios uh in traditional assets in all of these crypto inspired models, which is really super exciting and I think opens up tons of new opportunities for individuals like you and I who really haven't been able to take advantage of a lot of activities in the financial markets that have only been available to institutional and highly qualified investors who are super wealthy. So I think it's a great step in the democratization of access and uh the ability for every person to be able to really use the capital markets to their utmost. Here's uh Black Rockck's Larry Frink on CNBC a year ago talking about this issue. Just I'll play just play for uh I'll play for you this clip of a minute of him talking about this and I'll get your reaction. Take a look. You now expect other cryptocurrency ETFs meaning do you think that Gary and we'll talk to him later will have to approve an Ethereum ETF and is that a function of something the SEC has to do or do you think that all these things have to go to court first? I couldn't respond to that. I I I see value in having an Ethereum ETF. As I said, these are just start stepping stones towards tokenization and I I really do believe this is where we're going to be going. We have the technology to tokenize today. If you want to talk about think about this, if you had a tokenized security and you have a tokenized identity, you Andrew, the moment you buy or sell an instrument, it's known. It's on a general ledger that is all created together. Um, you want to talk about issues around money laundering and all that. This eliminates all corruption by having a tokenized system. Jamie Diamond disagrees with you on that, but uh I won't talk about Jamie Diamond here. Um maybe next time, Sidi. Uh but okay. What ultimately is the game uh the endgame for not just Black Rockck but many large institutions moving towards tokenization? What are they trying to accomplish? Well, I mean for institutions like Franklin Templeton and Black Rockck, we're we're number one trying to make our investment expertise available to broader audiences, right? Lots of people have made great profits on their crypto trading and you know there is opportunities to diversify those exposures and spread that out across a greater set of assets to really protect uh and hold those holdings longer or help them to grow in a more diversified way. So, we're going to introduce products into the crypto ecosystem that allow for that diversification of exposure. Um, new products like 401k type products, uh, products IRA type products for people who want to live out of their wallet. Uh, but I think what it also does is it takes our cost structures down tremendously, right? We have tons of people in these legacy firms whose entire job it is is to reconcile different ledgers and to reconcile between off uh you know PDF documents and systembased activities and we're going to get to stop all of that. We're going to be able to use programmable smart contracts and the blockchain to be able to enhance our operations and cut the need for us to have all of these operationally intense and expensive processes. So, it's going to make our companies more profitable. It's going to open up more opportunity. Uh, and I really think it's enabling, you know, this whole idea that every investor should have the opportunities to invest and use their assets to their full utility. Yeah, I love talking to you because it gives me a clear insight as to what institutional um asset managers are actually doing in response to changing regulations and you work on the regulatory side. So, you're well positioned to talk about both sides. So, let's since we've talked about changing regulations, let's talk about the industry side here. Here's an example of um a landmark change um executive order uh by Trump dated August 7th democratizing access to alternative assets for 401ks. In in short, now we have the ability to uh grant access uh to 401ks um to cryptos. So in other words, we can now have um Bitcoin and perhaps other crypto products in retirement um products. What is Franklin Templeton doing about this? So, we offer our liquid crypto strategies. Uh we offer our ETFs. Uh and we will be offering them to all of the distributors we work with in the 401k space. Uh we have multi-asset class models that we are offering right now to wealth distribution networks that incorporate crypto and have actually embedded uh the crypto indices into the benchmark for those model portfolios. uh and we will be looking at can we translate those into target date funds and put them into workplace retirement plans right uh and it's the other way too right we can bring our tokenized ETFs and our tokenized funds into the crypto space so that you can incorporate your own crypto into your retirement portfolios right so I think it's going to work in both directions it's going to bring crypto into the traditional ecosystem and it's going to bring traditional investment products into the tokenized wallet based ecosystem both. Okay. Uh before we talk about your partnership with uh with a crypto exchange, I want to just touch on another example of tokenizing a real world asset. Tether recently tokenized $100 million in physical gold royalties. Um I know we're not, you know, you're not a Tether executive, but just looking from the outside, why would why would a stable coin company want to do this? Well, I think there's a couple reasons why Tether wants to do this. Number one, Tether wants to be able to offer a product that meets some of these newer standards. Uh, and the way that Tether has run their stable coin in the past and their decisions about their reserve pool and wanting to keep that reserve pool private uh, make it harder for them to be in certain markets. So, this is a way for them to relaunch uh, with a product that meets all of the regulatory standards. Uh, so I think number one, it's a smart strategy. It gives them entree to markets where they're struggling to have entree today, particularly Europe under the Mika rules, uh, and the US under the Genius Act. Uh, but I think what it also does and what I'm excited about the most for this Tether announcement is we've thought for some time, David, that what tokenization really enables is that it's not just stable coins that are going to be forms of payment. we can use any tokenized asset potentially as a form of payment and store of value. So, you know, it's perfectly possible for me to pay for a cup of coffee uh or to pay my rent in a tokenized gold instrument. It's perfectly possible for me to pay that in a tokenized money market fund instrument. Right? This idea that I only pay for things with money I think is going to go away and I'm going to have That's a very cool concept, right? That's really cool. So, let's suppose I own I don't know, I'm just making this up. Let's suppose I own Tesla shares and I have that in in an exchange or, you know, with my broker somewhere. Are you saying that in the future I could tokenize that? I can go to Starbucks and pay with a tokenized Tesla share. Is that Is that going too far, Sandy? Yeah, I think that's accurate, right? In a sense, what we're getting toward is a high techch barter society where I can really barter goods for one another, not just using cash. Why would vendors like I'm just using Starbucks as an example. Why would companies and vendors want to accept the system though for for payment? because maybe they get better yield on being able to invest that gold or they'll pay lower fees or they'll get faster payouts or they'll be able to transfer that into a different form of money and make a little extra on that transaction. Right? There could be a lot of reasons. Uh and then they may not have any choice because if a consumer wants to pay that way uh and they risk losing that transaction, they may just agree to do it. So, I think that, you know, there's going to be a big change in behavior coming. Uh, and this is why AI is so important because I'm going to need my AI to help me optimize of all the potential ways I could pay for something. What's the way that's going to maximize my buying power the most? So, let's suppose, okay, so you're in the US, I'm in Canada. This is a real world example. I owe you money. I'm going to transfer you some money, Sandy. Trans. Why are transferring money from Canada to the US and vice versa is annoying. I have to go to the bank. It takes days. Whatever. So now instead of paying you, let's suppose uh you and I don't have um crypto wallet set up. So I can't send you Bitcoin or a stable coin. Let's suppose I have gold in a vault somewhere. I own gold. I've tokenized that gold. I can just send you, you know, $100 or $1,000 equivalent of tokenized gold. Is that the future of uh B2B and peer-to-peer systems? Yeah, but I'm going to need a wallet to do it. I am going to Everyone's going to need wallets to do this because it has to be tokenized, right? It has to be recognized by the blockchain. But if it is tokenized, if it's in able to be third-party custodied, if it's able to be verified that the underlying asset is really where they say it is and that the token represents a real underlying asset, and it can be transparently valued, I could use it as a form of payment. Very cool. So, let's suppose I'm a trader. I'm a commodities trader. Gold is just one commodity that's being tokenized. Let's suppose oil is tokenized now. So, I'm an oil futures trader. Now I have oil contracts tokenized on the blockchain. How does that change my operation as a trader? Now I need to do my basis trading, right? Just like we're seeing with the ETFs in the futures. I need to do basis trading to hedge my spot token gold. I need or my spot token oil in your example. I need to be able to get in there and and short the perpetual or short the future so that I lock in my basis on that trade. I was a commodity analyst for 15 years. I covered coffee, sugar, cocoa, cotton, and frozen concentrate, orange juice. Let me tell you, there are experts in hedging these things moment by moment, and that will all translate into this new environment. How does the CFTC feel about tokenizing commodities? CFTC is very much in favor of us using these technologies to really be able to enable the financial system to operate ever more effectively and efficiently. So being able to tokenize commodities creates new demand channels for them that can help farmers in countries or can help producers uh in areas where the value of their commodities can now be better recognized. I I think it's a win-win for folks. Okay, let's talk about your partnership with uh surprise surprise for some people, Binance, Binance and Franklin Templeton to develop digital asset initiatives and products. Some people in the crypto sphere or I suppose even traditional finance might be surprised to see the world's largest crypto exchange partnering with uh one of the most established traditional finance institutions in the world. Although I suppose if you factor in everything we've discussed so far, this partnership kind of makes sense. I'll let you talk talk about this. $1.6 6 trillion in assets under management. Um is Franklin Templeton uh recently announced a collaboration to build digital asset initiatives and solutions tailored to a broad range of investors. What are these initiatives and solutions, Sandy? So if it's not clear yet, David, let me make it 100% clear. We believe very strongly that the future of the financial system is going to be wallet-based. Binance is the largest exchange in the world with the largest number of wallets on their platform and we are so excited about this partnership with them because this gives us a expert with direct access to these customers and their wallets to really begin to explore where is demand. What do they want in this new ecosystem? We don't have to have the same products that we had in the traditional financial world in the wallet-based system. We may have very different needs and different demands from this audience. And this partnership with Binance gives us both the access to that audience to understand their needs and demands and a partner to bring products to market with uh that are going to be super helpful. Okay. Uh when you say that you don't know what these initiatives are yet, um they're not announced yet or they're not announced yet, but yes, we know what the initiatives are. Okay. So, you know, and your colleagues know. We just don't know yet. When can we know? When can we know what is also something that you know? When I know, I'll let you know. All right. I'll follow up then. Andy, um, just give us a broad stroke of what this partnership may look like for, um, a Binance wallet holder or perhaps an investor with one of Temp, uh, Franklin Templeton's, uh, products. You know, how will this change for somebody who's already in one of these ecosystems already? Hopefully, what it means for you is you're going to have more access to more investment opportunities that will allow you to diversify what you hold in your wallet, right? Be that new products, be that more yield, be that access to markets that you might not have been able to trade previously, right? Uh our hope is that in creating this partnership, we bring together our crypto native expertise and our ability to really be able to run real time books and records, which we continue to be the only asset manager that's really able to do that, right? because we've built our own transfer agent system. Um, and so we can operate at the speed and in the ecosystem of a digital native. And now what we're able to do is bring our traditional expertise of 80 years of active asset management onto these rails. Right? We've only had tokenized money market funds so far. Um, but you would can absolutely anticipate seeing a far broader range of products coming out that will be available to investors. Can you give us a teaser as to what the future of ETF offerings will look like now that more digitization is on the way? Um, you don't have to guess specific tickers or anything like that, but um, what does Franklin Templeton have their eye on? Well, I I I like to talk about what's going to happen with ETFs in two stages, David. The first stage is going to be I can buy shares of a trust that owns ETFs, right? This is the model that we're seeing Kraken use already uh and Robin Hood, right? That I have exposure to the price changes of the ETF. I have exposure uh to the underlying assets that are part of the ETF. Uh but I don't actually own the ETF, right? I own the shares of the trust and the trust owns the ETF. Right? That's phase one. I think phase two though is that every security in the ETF is tokenized and the wrapper that all of those individual securities are put inside of is tokenized. So to make it really simple, the S&P 500 right today I can trade an S&P 500 token potentially. uh in the future I can trade an S SNP500 digital token which is the actual exposure and then not long after that I'm going to be able to trade that S&P digital token and if I want to get at all 500 securities that sit inside of it I can burn the index wrapper and just take delivery of all 500 of the individual securities. So it almost eliminates the need for the ETF wrapper. Uh ETFs are going to become tokens of tokens and I can use it to easily transport those 500 tokens around or I can break the wrapper and I can have all 500 tokens in the right proportion in my investment account immediately. It's going to be very exciting. But what's the uh financial incentive or I guess the revenue model for companies wanting to tokenize a real world asset? So for example, let's just take gold for example. Well, suppose Franklin Templeton were to tokenize gold and I, you know, I buy a tokenized gold product from Temple Franklin Templeton. Well, now I can use that tokenized gold as a peer-to-p peer payment system with my friends or whoever I want without going through any middlemen. So, you know, Franklin isn't making a bid ask on it. So, how, you know, how how do they make money? Yeah. Well, we'd make money by being able to manage the underlying gold, right? we would be managing that investment in the gold uh that the token is representing, right? Um and so, you know, you might want to increase your supply of gold if you think that prices are going to be going down and you want to take advantage of that. You might want to loosen up your supplies of gold if prices spike suddenly, right? You're getting the professional manager who is ensuring that the representation that you're getting in the token is managed as optimally as possible. With a single asset like gold, you would want a commodity expert manager managing that. So, think of oil, think of gold. But when you get into mixed baskets of securities, right? Um, you know, you're going to want active management of those securities. Well, I have just the index. If I can have the index and I can have active management on top of it where we're taking some directional bets and overweing or underweing the proportion of how the tokens are constituted to be able to get you better than market returns, right? So again, active management adds value. Uh and you can choose to have just the index or you can choose to have active management of all the components of the index. How can investors ensure that the underlying asset, the underlying real world asset is actually there? In other words, what's the auditing mechanism that could be in place? Yeah. Well, so first off, there's market makers that are completely incentivized to take advantage of any pricing anomalies, right? So if I can see two of the same asset listed at different prices in different venues as a market maker, I can immediately take advantage of that and capture that spread as a profit and bring those price anomalies back into alignment. So that's the whole job of market makers and there will be market makers. There are already market makers supporting all these products and they will just translate that support into the crypto ecosystem. Um there's also regulations for regulated products uh around not being able to have different price quotes in different venues. So it's likely that as these products become regulated and tokenized under regulatory frameworks uh that we're going to see these rules like regms and other rules that dictate how exchanges today that trade securities have to keep their prices in quotes in alignment. We'll probably see those same rules and regulations translate into the crypto space to protect consumers and ensure that you're not getting ripped off by people manipulating the underlying assets. Okay, there are now um rumors uh shifting gears now to crypto reserves around the world. Claims of UK and Dutch Bitcoin reserves go viral uh despite severe exaggeration. I think um the Dutch government has denied this rumor. Anyway, I'll let you comment on not this rumor in particular, but the overall broader implications of the US setting a president for a Bitcoin strategic reserve. By the way, what's the update on that? Haven't heard much of an update. I think there is a proposal working its way through Congress. Um, but look, I have felt for years, David, all the way going back all the way to 2020, felt for years that Bitcoin will become a strategic reserve asset. Uh it is the curtailed nature of how many bitcoins there are. Uh this idea that they are immutable. This idea that the ownership can be completely verified. Right? Bitcoin is a good asset for these types of strategic reserves. Uh and I think that this will become common. Right? It's all very exciting now because people are first talking about it. In five years, people will be talking about what countries are not having strategic Bitcoin reserves and why aren't they. So, I I think this is just the nature of Bitcoin as an asset becoming more widely understood. Uh, and people realizing that with all of the geopolitical uncertainty in the world today, having this non-governmental asset store of value that's highly transportable uh is pretty important, right? People have had reserves of gold for decades and decades, but you there's a lot of infrastructure involved in holding reserves of gold. Uh it's a lot easier to hold Bitcoin. The uh the critics of having a reserve of Bitcoin on a government scale will point to the fact that Bitcoin's price is still in 2025 quite volatile. Just because it's gone up 100% in the last year doesn't mean it can't go down 50% in the next year. We don't know. It's done certainly done that in the past. Um I'm I'm I I don't know if Trump has actually had an or Trump and his associates have had actually had an response to that. What's your response? My response to that is the same response I had to the commodities, right? Is that we have had an ability for hundreds of years to hedge volatile assets through putting on futures trades or doing options contracts. And we hedge Bitcoin just as well, right? There's no reason why something being volatile should prohibit it, right? Oil is a highly volatile commodity, right? And we're still able to have strategic reserves of oil. So, you know, you need professional traders that are going to be able to hedge that exposure and manage that exposure. Goes back to why you asked why if we tokenize gold, would someone need, you know, why would a firm like Franklin Templeton want to tokenize gold? Because you still need someone to actively manage the asset to ensure it keeps its maximum value. I wonder how tokenization of real world assets could affect uh sovereign debt. Presumably, nations can then just tokenize their resources, natural resources, whatever else they have within their borders, uh claim a collateral on that and you know, use that as some sort of debt instrument in the capital markets. I'm just speculating here. How do you see that playing out? I think you're exactly right. I mean, especially when you think about sovereign wealth funds that represent the wealth of these nations on behalf of their citizens, right? It would almost be irresponsible of them not to be thinking about how they can use and tokenize their strategic reserves uh to make them more broadly available and more uh you more have you more utility in the financial ecosystem. So, I I think that, you know, again, tokenization is opening up all of these opportunities and because the Genius Act has now put stable coins into the common lexicon and and provided a generally accepted form of payment that is not linked to a cryptocurrency. All of these things become much easier to envision. Okay, very good. Thank you very much. Um, that was a great talk. Uh, final question before I let you go, Sandy. So, we've seen the Genius Act pass. We've seen clarity on ETF offerings and their timelines. We've seen um the tokenization of real world assets, which we're talking about, uh transpire. What is the next innovation and or piece of legislation that could move uh the crypto world even more into 2026? What's what are you looking forward to next? Look, the the there's two pieces that are still missing, right, that we need to see action on. The first is even if you're tokenizing real world assets, there has not been enough discussion about moving them off of these old traditional settlement rails onto blockchain settlement rails. Right? If I can exchange payments and assets instantaneously in blockchain, I'm not going to want to wait 24 hours to actually trade a tokenized equity. So, it's great that we're talking about tokenizing these assets now. Uh but we're not to talk we're not talking yet about making them digitally native instruments. We're still talking digital twins. Once we get to digitally native instruments and we have atomic settlement, that really opens up a new possibility. And then the second thing is identity. Right? Right now both counterparties to a regulated transaction have to perform their own independent know your customer anti-moneyaundering check. There are far superior digital identity solutions now available and we need the regulators to really start to consider these new identity solutions and upgrade their approach to KYCL. All right, very good Sandy. Thank you very much. Where can we learn more about you, Franklin Templeton, and keep up to date on uh your offerings and um developments? You can follow me on LinkedIn. You can check our uh cryptox um chat under cryptoft and you can go to our FT website where you can download a lot of the research and the thought leadership papers that we're publishing. So we look forward to uh hearing from you guys. We love feedback on the work. Excellent. Thank you very much. Put the link we'll put the links down below. So make sure to follow Sandy and Franklin Temple there. So congratulations on all your uh success and developments in the space. Uh Sandy, we'll speak again soon. Take care for now. Thank you so much for having me. Thank you for watching. Don't forget to like and subscribe.
‘Beginning Of The End' For Banks: Here's What's Next | Sandy Kaul
Summary
Transcript
this passage of the Genius Act and this increase in usage uh of stable coins is going to be seen as the beginning of the end of the traditional financial ecosystem. What we're getting toward is a high techch barter society where I can really barter goods for one another. When you think about sovereign wealth funds that represent the wealth of these nations on behalf of their citizens, right, it would almost be irresponsible of them not to be thinking about how they can use and tokenize their strategic reserves uh to make them more broadly available. Our guest today is Sandy Call. She's the executive vice president and head of innovation at Franklin Templeton. Exciting things happening in uh the ETF space. A lot of things are getting tokenized. Uh Franklin Templeton is partnering with one of the largest exchanges in in the world in the crypto space. We'll talk about that. I won't reveal who it is yet. And um generally speaking, what is going on in the regulatory landscape for crypto? Sandy is also uh co-chair of the CFTC's digital asset subcommittee and she sits on both the World Economic Forum's digital assets advisory board and the DTCC's digital asset advisory board. So, she's well positioned to be talking to us about the future of regulations in the crypto space. Welcome back to the show, Sandy. It's been a while since you've been on the show. I spoke to you in New York way back in March. So, good to have you back. Thank you for being here. Great to be here, David. Thank you for having me. I want to start by talking about regulations. This is this is a topic that has been front of mind for crypto investors ever since last year when the uh Bitcoin ETF speculations, rumors were were floating around the cryptoverse. finally happened and then people were finally uh euphoric about the biggest and most successful ETF launch in history. Back in March, you had told us about uh how we could see a little more clarity on uh regulations in the crypto space by the summertime. We're now in we're now in September. We've seen the Genius Act pass uh this week. For example, let me just take a uh share my screen here. The SEC approved uh generic listing standards for commodity based trust shares. um tell us about not just this development but the the broader uh pathway of regulatory development in the crypto landscape since March. Yeah, so there there's three streams we should really talk about when we're talking about regulation. Uh this first one around ETFs is moving fast, right? If you think about it, it it took almost 190 days from your first filing to get those early ETFs uh approved in the crypto space. Even if they were approved straight through by the SEC, uh it was taking more than half a year uh to really be able to get a product to market. Uh and as we know the SEC didn't always approve them in that timeline and it could stretch out way beyond 190 days as well. Uh but with these generic listing standards now you are able to skip one of the filing steps that you needed to do prior to this. Uh and it's cutting the timeline from 190 days to potentially as little as 30 to 60 days. Right? That is a huge shift in our ability to bring product to market and it's also giving us more standards around what has to be in place for an asset to be considered uh eligible to go through this straight through process. So that's about having predictability. It's about having some um reference to how it has performed in a futures market. Right? there's starting to be criteria that can tell us that a token is ready to be listed within an ETF structure uh and it is cutting the speed with which uh it's cutting the delays uh and increasing the speed by which you can get listings into the marketplace and then launched. So this should really start to increase the flow of new product. Uh and I think you can see from the whole slew of filings that are starting to come in now people have been waiting for these rules. uh and holding off on filing because you know they're actually gaining time by having waited a little bit more because these have been widely anticipated and not only were they widely anticipated they actually came out even faster than people had expected. So this is a big development that will really help to expand uh and support the growth of crypto ETFs. So crypto ETFs is one big stream with the growth of ETFs um expanding into the crypto sphere. Uh investors want to be protected. So certainly we may see a lot of just scam products trying to list ETFs or investors wanting to be protected from uh ruck pulls and what and the not. Um we we we want to see the SEC greenlight ETFs but at the same time we want protection as well. How do we walk that balance? Yeah. Well, I mean and this is where the listing criteria are going to really help, right? You know, there's lots of tokens out there that might get a lot of interest, but you know, to be professionally traded, there really has to be futures markets around them, market makers engaged with them, um, you know, policable activity that shows a whole track record of reliability and pricing, right? There's there's you might open up uh you know the the um aperture in terms of allowing more types uh and more tokens to come through but it will still be very tough to get anything that isn't really meeting a professional standard of trading through as a potential source of ETFs. So you can still trade them but I I think it will still be hard to get certain types of tokens through in an ETF structure. Uh SEC chair um Paul Atkins made a pretty bold statement in this press release. By approving these generic listing standards, we are ensuring that our capital markets remain the best place in the world to engage in the cutting edge innovation of digital assets. What does he mean by that? What do you think is going to be the future of digital assets in America? I think that we are going to see a whole set of you know basically the equivalent of large cap crypto in ETFs. uh we are going to potentially start to see some mid and small cap type crypto in ETFs. Uh we'll have indexes in ETF crypto holdings. Uh so it will become a regular part of the investing ecosystem, right? Portfolios will have allocations to crypto ETFs. It's really solidifying this as an asset class uh that will be included in multi-asset class portfolios. So, it's a pretty exciting time to see how quickly this has all occurred. When you were speaking earlier, David, I was like, was it really only a year ago that we were talking about? It wasn't even a year. It was uh six months. I know. And now I'm like freaking out that it's been the longest six months in the world, I think. Welcome back, Sandy. Good to see you again. I know. Well, the XRP and Salana ETF launches are buzzing. It's um what's next for those for those uh tokens? What do you think? Yeah, they're they're becoming, you know, uh I think important parts of what the future state ecosystem is going to look like. Um you know, I had said the regulatory is affecting three things. Obviously, stable coins are a big part of what is being affected here. We had the passage of the Genius Act. Uh the CFTC just came out. uh the acting chairman fam of the CFTC just came out and recommended being able to use stable coins as collateral on listed derivative trades. Right? So, you know, this is really again bringing a crypto instrument into the mainstream. Uh, and the stable coins in particular, what's interesting about them is every dollar that comes out of the banking system into stable coins and then stays in the wallet-based ecosystem is a dollar that has exited the traditional banking system and moved into a parallel ecosystem. And so I think in retrospect this is going to have been really seen this passage of the Genius Act and this increase in usage uh of stable coins is going to be seen as the beginning of the end of the traditional financial ecosystem that was all accountbased and really opening the floodgates to having a wallet peer-to-peerbased system. uh because now there's cash to pay for transactions there that can be counted upon with a strong set of uh consumer protections and regulations backing them and I no longer have to necessarily purchase items using cryptocurrencies in the crypto space uh which will bring in many more types of institutional investors who don't yet have a full appreciation and understanding of crypto. So, it's going to actually allow these crypto rails to be utilized by traditional players in ways that will put their existing infrastructure to shame. Uh, and it's really going to mark the beginning of the transition of the traditional financial ecosystem onto these blockchain and crypto-based rails. Before we continue with the video, let me tell you about a very important topic, Bitcoin. It's had a 10-year compounding annual growth rate of over 80% and it's been one of the best performing assets in the world. That means there's a high opportunity cost to spending your Bitcoin savings. Now, with today's sponsor, People's Reserve and their revolutionary Bitcoin powered financial products, you can now borrow against your Bitcoin with no credit checks, no income verification, no taxable event, and no rehypothecation risk. Their flagship product, the Bitcoin powered mortgage, is redefining home ownership for Bitcoiners. And here's the best part. Liquidation risk isn't tied to price volatility, only to non-payment defaults. This protects borrowers and lenders from the biggest risks in traditional crypto lending. With the advent of People's Reserves revolutionary lending products, you can now unlock the purchasing power of your Bitcoin savings without having to give up ownership. Go to peopleleserve.com link down below or scan the QR code here. Sign up for their newsletter and discover how to build wealth smarter. That's people'sreserve.com. That sounds interesting and you know I'm all for you know I'm all for uh the advancement of technology but what does that practically mean for uh the trader on Wall Street when when everything moves to the blockchain? Yeah. Well, so look, there has recently been a filing from NASDAQ asking to tokenize real world asset securities including the big tech index QQQ. Right? So this tokenization of equities and indexes and ETFs, right, we've been seeing emerging players like Kraken moving in this direction and we've been seeing NEO brokers like Robin Hood moving in this direction. Uh but that's a little bit different than seeing someone like NASDAQ move in this direction. Right? So I I think that what it means is that just like I can use my crypto today in lending protocols, in automated marketmaking protocols, uh I'm going to be able to use my equities and I'm going to be able to use my bonds and I'm going to be able to use my investment portfolios uh in traditional assets in all of these crypto inspired models, which is really super exciting and I think opens up tons of new opportunities for individuals like you and I who really haven't been able to take advantage of a lot of activities in the financial markets that have only been available to institutional and highly qualified investors who are super wealthy. So I think it's a great step in the democratization of access and uh the ability for every person to be able to really use the capital markets to their utmost. Here's uh Black Rockck's Larry Frink on CNBC a year ago talking about this issue. Just I'll play just play for uh I'll play for you this clip of a minute of him talking about this and I'll get your reaction. Take a look. You now expect other cryptocurrency ETFs meaning do you think that Gary and we'll talk to him later will have to approve an Ethereum ETF and is that a function of something the SEC has to do or do you think that all these things have to go to court first? I couldn't respond to that. I I I see value in having an Ethereum ETF. As I said, these are just start stepping stones towards tokenization and I I really do believe this is where we're going to be going. We have the technology to tokenize today. If you want to talk about think about this, if you had a tokenized security and you have a tokenized identity, you Andrew, the moment you buy or sell an instrument, it's known. It's on a general ledger that is all created together. Um, you want to talk about issues around money laundering and all that. This eliminates all corruption by having a tokenized system. Jamie Diamond disagrees with you on that, but uh I won't talk about Jamie Diamond here. Um maybe next time, Sidi. Uh but okay. What ultimately is the game uh the endgame for not just Black Rockck but many large institutions moving towards tokenization? What are they trying to accomplish? Well, I mean for institutions like Franklin Templeton and Black Rockck, we're we're number one trying to make our investment expertise available to broader audiences, right? Lots of people have made great profits on their crypto trading and you know there is opportunities to diversify those exposures and spread that out across a greater set of assets to really protect uh and hold those holdings longer or help them to grow in a more diversified way. So, we're going to introduce products into the crypto ecosystem that allow for that diversification of exposure. Um, new products like 401k type products, uh, products IRA type products for people who want to live out of their wallet. Uh, but I think what it also does is it takes our cost structures down tremendously, right? We have tons of people in these legacy firms whose entire job it is is to reconcile different ledgers and to reconcile between off uh you know PDF documents and systembased activities and we're going to get to stop all of that. We're going to be able to use programmable smart contracts and the blockchain to be able to enhance our operations and cut the need for us to have all of these operationally intense and expensive processes. So, it's going to make our companies more profitable. It's going to open up more opportunity. Uh, and I really think it's enabling, you know, this whole idea that every investor should have the opportunities to invest and use their assets to their full utility. Yeah, I love talking to you because it gives me a clear insight as to what institutional um asset managers are actually doing in response to changing regulations and you work on the regulatory side. So, you're well positioned to talk about both sides. So, let's since we've talked about changing regulations, let's talk about the industry side here. Here's an example of um a landmark change um executive order uh by Trump dated August 7th democratizing access to alternative assets for 401ks. In in short, now we have the ability to uh grant access uh to 401ks um to cryptos. So in other words, we can now have um Bitcoin and perhaps other crypto products in retirement um products. What is Franklin Templeton doing about this? So, we offer our liquid crypto strategies. Uh we offer our ETFs. Uh and we will be offering them to all of the distributors we work with in the 401k space. Uh we have multi-asset class models that we are offering right now to wealth distribution networks that incorporate crypto and have actually embedded uh the crypto indices into the benchmark for those model portfolios. uh and we will be looking at can we translate those into target date funds and put them into workplace retirement plans right uh and it's the other way too right we can bring our tokenized ETFs and our tokenized funds into the crypto space so that you can incorporate your own crypto into your retirement portfolios right so I think it's going to work in both directions it's going to bring crypto into the traditional ecosystem and it's going to bring traditional investment products into the tokenized wallet based ecosystem both. Okay. Uh before we talk about your partnership with uh with a crypto exchange, I want to just touch on another example of tokenizing a real world asset. Tether recently tokenized $100 million in physical gold royalties. Um I know we're not, you know, you're not a Tether executive, but just looking from the outside, why would why would a stable coin company want to do this? Well, I think there's a couple reasons why Tether wants to do this. Number one, Tether wants to be able to offer a product that meets some of these newer standards. Uh, and the way that Tether has run their stable coin in the past and their decisions about their reserve pool and wanting to keep that reserve pool private uh, make it harder for them to be in certain markets. So, this is a way for them to relaunch uh, with a product that meets all of the regulatory standards. Uh, so I think number one, it's a smart strategy. It gives them entree to markets where they're struggling to have entree today, particularly Europe under the Mika rules, uh, and the US under the Genius Act. Uh, but I think what it also does and what I'm excited about the most for this Tether announcement is we've thought for some time, David, that what tokenization really enables is that it's not just stable coins that are going to be forms of payment. we can use any tokenized asset potentially as a form of payment and store of value. So, you know, it's perfectly possible for me to pay for a cup of coffee uh or to pay my rent in a tokenized gold instrument. It's perfectly possible for me to pay that in a tokenized money market fund instrument. Right? This idea that I only pay for things with money I think is going to go away and I'm going to have That's a very cool concept, right? That's really cool. So, let's suppose I own I don't know, I'm just making this up. Let's suppose I own Tesla shares and I have that in in an exchange or, you know, with my broker somewhere. Are you saying that in the future I could tokenize that? I can go to Starbucks and pay with a tokenized Tesla share. Is that Is that going too far, Sandy? Yeah, I think that's accurate, right? In a sense, what we're getting toward is a high techch barter society where I can really barter goods for one another, not just using cash. Why would vendors like I'm just using Starbucks as an example. Why would companies and vendors want to accept the system though for for payment? because maybe they get better yield on being able to invest that gold or they'll pay lower fees or they'll get faster payouts or they'll be able to transfer that into a different form of money and make a little extra on that transaction. Right? There could be a lot of reasons. Uh and then they may not have any choice because if a consumer wants to pay that way uh and they risk losing that transaction, they may just agree to do it. So, I think that, you know, there's going to be a big change in behavior coming. Uh, and this is why AI is so important because I'm going to need my AI to help me optimize of all the potential ways I could pay for something. What's the way that's going to maximize my buying power the most? So, let's suppose, okay, so you're in the US, I'm in Canada. This is a real world example. I owe you money. I'm going to transfer you some money, Sandy. Trans. Why are transferring money from Canada to the US and vice versa is annoying. I have to go to the bank. It takes days. Whatever. So now instead of paying you, let's suppose uh you and I don't have um crypto wallet set up. So I can't send you Bitcoin or a stable coin. Let's suppose I have gold in a vault somewhere. I own gold. I've tokenized that gold. I can just send you, you know, $100 or $1,000 equivalent of tokenized gold. Is that the future of uh B2B and peer-to-peer systems? Yeah, but I'm going to need a wallet to do it. I am going to Everyone's going to need wallets to do this because it has to be tokenized, right? It has to be recognized by the blockchain. But if it is tokenized, if it's in able to be third-party custodied, if it's able to be verified that the underlying asset is really where they say it is and that the token represents a real underlying asset, and it can be transparently valued, I could use it as a form of payment. Very cool. So, let's suppose I'm a trader. I'm a commodities trader. Gold is just one commodity that's being tokenized. Let's suppose oil is tokenized now. So, I'm an oil futures trader. Now I have oil contracts tokenized on the blockchain. How does that change my operation as a trader? Now I need to do my basis trading, right? Just like we're seeing with the ETFs in the futures. I need to do basis trading to hedge my spot token gold. I need or my spot token oil in your example. I need to be able to get in there and and short the perpetual or short the future so that I lock in my basis on that trade. I was a commodity analyst for 15 years. I covered coffee, sugar, cocoa, cotton, and frozen concentrate, orange juice. Let me tell you, there are experts in hedging these things moment by moment, and that will all translate into this new environment. How does the CFTC feel about tokenizing commodities? CFTC is very much in favor of us using these technologies to really be able to enable the financial system to operate ever more effectively and efficiently. So being able to tokenize commodities creates new demand channels for them that can help farmers in countries or can help producers uh in areas where the value of their commodities can now be better recognized. I I think it's a win-win for folks. Okay, let's talk about your partnership with uh surprise surprise for some people, Binance, Binance and Franklin Templeton to develop digital asset initiatives and products. Some people in the crypto sphere or I suppose even traditional finance might be surprised to see the world's largest crypto exchange partnering with uh one of the most established traditional finance institutions in the world. Although I suppose if you factor in everything we've discussed so far, this partnership kind of makes sense. I'll let you talk talk about this. $1.6 6 trillion in assets under management. Um is Franklin Templeton uh recently announced a collaboration to build digital asset initiatives and solutions tailored to a broad range of investors. What are these initiatives and solutions, Sandy? So if it's not clear yet, David, let me make it 100% clear. We believe very strongly that the future of the financial system is going to be wallet-based. Binance is the largest exchange in the world with the largest number of wallets on their platform and we are so excited about this partnership with them because this gives us a expert with direct access to these customers and their wallets to really begin to explore where is demand. What do they want in this new ecosystem? We don't have to have the same products that we had in the traditional financial world in the wallet-based system. We may have very different needs and different demands from this audience. And this partnership with Binance gives us both the access to that audience to understand their needs and demands and a partner to bring products to market with uh that are going to be super helpful. Okay. Uh when you say that you don't know what these initiatives are yet, um they're not announced yet or they're not announced yet, but yes, we know what the initiatives are. Okay. So, you know, and your colleagues know. We just don't know yet. When can we know? When can we know what is also something that you know? When I know, I'll let you know. All right. I'll follow up then. Andy, um, just give us a broad stroke of what this partnership may look like for, um, a Binance wallet holder or perhaps an investor with one of Temp, uh, Franklin Templeton's, uh, products. You know, how will this change for somebody who's already in one of these ecosystems already? Hopefully, what it means for you is you're going to have more access to more investment opportunities that will allow you to diversify what you hold in your wallet, right? Be that new products, be that more yield, be that access to markets that you might not have been able to trade previously, right? Uh our hope is that in creating this partnership, we bring together our crypto native expertise and our ability to really be able to run real time books and records, which we continue to be the only asset manager that's really able to do that, right? because we've built our own transfer agent system. Um, and so we can operate at the speed and in the ecosystem of a digital native. And now what we're able to do is bring our traditional expertise of 80 years of active asset management onto these rails. Right? We've only had tokenized money market funds so far. Um, but you would can absolutely anticipate seeing a far broader range of products coming out that will be available to investors. Can you give us a teaser as to what the future of ETF offerings will look like now that more digitization is on the way? Um, you don't have to guess specific tickers or anything like that, but um, what does Franklin Templeton have their eye on? Well, I I I like to talk about what's going to happen with ETFs in two stages, David. The first stage is going to be I can buy shares of a trust that owns ETFs, right? This is the model that we're seeing Kraken use already uh and Robin Hood, right? That I have exposure to the price changes of the ETF. I have exposure uh to the underlying assets that are part of the ETF. Uh but I don't actually own the ETF, right? I own the shares of the trust and the trust owns the ETF. Right? That's phase one. I think phase two though is that every security in the ETF is tokenized and the wrapper that all of those individual securities are put inside of is tokenized. So to make it really simple, the S&P 500 right today I can trade an S&P 500 token potentially. uh in the future I can trade an S SNP500 digital token which is the actual exposure and then not long after that I'm going to be able to trade that S&P digital token and if I want to get at all 500 securities that sit inside of it I can burn the index wrapper and just take delivery of all 500 of the individual securities. So it almost eliminates the need for the ETF wrapper. Uh ETFs are going to become tokens of tokens and I can use it to easily transport those 500 tokens around or I can break the wrapper and I can have all 500 tokens in the right proportion in my investment account immediately. It's going to be very exciting. But what's the uh financial incentive or I guess the revenue model for companies wanting to tokenize a real world asset? So for example, let's just take gold for example. Well, suppose Franklin Templeton were to tokenize gold and I, you know, I buy a tokenized gold product from Temple Franklin Templeton. Well, now I can use that tokenized gold as a peer-to-p peer payment system with my friends or whoever I want without going through any middlemen. So, you know, Franklin isn't making a bid ask on it. So, how, you know, how how do they make money? Yeah. Well, we'd make money by being able to manage the underlying gold, right? we would be managing that investment in the gold uh that the token is representing, right? Um and so, you know, you might want to increase your supply of gold if you think that prices are going to be going down and you want to take advantage of that. You might want to loosen up your supplies of gold if prices spike suddenly, right? You're getting the professional manager who is ensuring that the representation that you're getting in the token is managed as optimally as possible. With a single asset like gold, you would want a commodity expert manager managing that. So, think of oil, think of gold. But when you get into mixed baskets of securities, right? Um, you know, you're going to want active management of those securities. Well, I have just the index. If I can have the index and I can have active management on top of it where we're taking some directional bets and overweing or underweing the proportion of how the tokens are constituted to be able to get you better than market returns, right? So again, active management adds value. Uh and you can choose to have just the index or you can choose to have active management of all the components of the index. How can investors ensure that the underlying asset, the underlying real world asset is actually there? In other words, what's the auditing mechanism that could be in place? Yeah. Well, so first off, there's market makers that are completely incentivized to take advantage of any pricing anomalies, right? So if I can see two of the same asset listed at different prices in different venues as a market maker, I can immediately take advantage of that and capture that spread as a profit and bring those price anomalies back into alignment. So that's the whole job of market makers and there will be market makers. There are already market makers supporting all these products and they will just translate that support into the crypto ecosystem. Um there's also regulations for regulated products uh around not being able to have different price quotes in different venues. So it's likely that as these products become regulated and tokenized under regulatory frameworks uh that we're going to see these rules like regms and other rules that dictate how exchanges today that trade securities have to keep their prices in quotes in alignment. We'll probably see those same rules and regulations translate into the crypto space to protect consumers and ensure that you're not getting ripped off by people manipulating the underlying assets. Okay, there are now um rumors uh shifting gears now to crypto reserves around the world. Claims of UK and Dutch Bitcoin reserves go viral uh despite severe exaggeration. I think um the Dutch government has denied this rumor. Anyway, I'll let you comment on not this rumor in particular, but the overall broader implications of the US setting a president for a Bitcoin strategic reserve. By the way, what's the update on that? Haven't heard much of an update. I think there is a proposal working its way through Congress. Um, but look, I have felt for years, David, all the way going back all the way to 2020, felt for years that Bitcoin will become a strategic reserve asset. Uh it is the curtailed nature of how many bitcoins there are. Uh this idea that they are immutable. This idea that the ownership can be completely verified. Right? Bitcoin is a good asset for these types of strategic reserves. Uh and I think that this will become common. Right? It's all very exciting now because people are first talking about it. In five years, people will be talking about what countries are not having strategic Bitcoin reserves and why aren't they. So, I I think this is just the nature of Bitcoin as an asset becoming more widely understood. Uh, and people realizing that with all of the geopolitical uncertainty in the world today, having this non-governmental asset store of value that's highly transportable uh is pretty important, right? People have had reserves of gold for decades and decades, but you there's a lot of infrastructure involved in holding reserves of gold. Uh it's a lot easier to hold Bitcoin. The uh the critics of having a reserve of Bitcoin on a government scale will point to the fact that Bitcoin's price is still in 2025 quite volatile. Just because it's gone up 100% in the last year doesn't mean it can't go down 50% in the next year. We don't know. It's done certainly done that in the past. Um I'm I'm I I don't know if Trump has actually had an or Trump and his associates have had actually had an response to that. What's your response? My response to that is the same response I had to the commodities, right? Is that we have had an ability for hundreds of years to hedge volatile assets through putting on futures trades or doing options contracts. And we hedge Bitcoin just as well, right? There's no reason why something being volatile should prohibit it, right? Oil is a highly volatile commodity, right? And we're still able to have strategic reserves of oil. So, you know, you need professional traders that are going to be able to hedge that exposure and manage that exposure. Goes back to why you asked why if we tokenize gold, would someone need, you know, why would a firm like Franklin Templeton want to tokenize gold? Because you still need someone to actively manage the asset to ensure it keeps its maximum value. I wonder how tokenization of real world assets could affect uh sovereign debt. Presumably, nations can then just tokenize their resources, natural resources, whatever else they have within their borders, uh claim a collateral on that and you know, use that as some sort of debt instrument in the capital markets. I'm just speculating here. How do you see that playing out? I think you're exactly right. I mean, especially when you think about sovereign wealth funds that represent the wealth of these nations on behalf of their citizens, right? It would almost be irresponsible of them not to be thinking about how they can use and tokenize their strategic reserves uh to make them more broadly available and more uh you more have you more utility in the financial ecosystem. So, I I think that, you know, again, tokenization is opening up all of these opportunities and because the Genius Act has now put stable coins into the common lexicon and and provided a generally accepted form of payment that is not linked to a cryptocurrency. All of these things become much easier to envision. Okay, very good. Thank you very much. Um, that was a great talk. Uh, final question before I let you go, Sandy. So, we've seen the Genius Act pass. We've seen clarity on ETF offerings and their timelines. We've seen um the tokenization of real world assets, which we're talking about, uh transpire. What is the next innovation and or piece of legislation that could move uh the crypto world even more into 2026? What's what are you looking forward to next? Look, the the there's two pieces that are still missing, right, that we need to see action on. The first is even if you're tokenizing real world assets, there has not been enough discussion about moving them off of these old traditional settlement rails onto blockchain settlement rails. Right? If I can exchange payments and assets instantaneously in blockchain, I'm not going to want to wait 24 hours to actually trade a tokenized equity. So, it's great that we're talking about tokenizing these assets now. Uh but we're not to talk we're not talking yet about making them digitally native instruments. We're still talking digital twins. Once we get to digitally native instruments and we have atomic settlement, that really opens up a new possibility. And then the second thing is identity. Right? Right now both counterparties to a regulated transaction have to perform their own independent know your customer anti-moneyaundering check. There are far superior digital identity solutions now available and we need the regulators to really start to consider these new identity solutions and upgrade their approach to KYCL. All right, very good Sandy. Thank you very much. Where can we learn more about you, Franklin Templeton, and keep up to date on uh your offerings and um developments? You can follow me on LinkedIn. You can check our uh cryptox um chat under cryptoft and you can go to our FT website where you can download a lot of the research and the thought leadership papers that we're publishing. So we look forward to uh hearing from you guys. We love feedback on the work. Excellent. Thank you very much. Put the link we'll put the links down below. So make sure to follow Sandy and Franklin Temple there. So congratulations on all your uh success and developments in the space. Uh Sandy, we'll speak again soon. Take care for now. Thank you so much for having me. Thank you for watching. Don't forget to like and subscribe.