Building Robust Onchain Financial Markets: Debt, Equity, and Beyond | DAS London 2025 | Day 1
Summary
Institutional Adoption: The podcast highlights the significant shift from theoretical discussions to actual implementation of tokenization strategies by institutions, with onchain asset values exceeding $34 billion.
Regulatory Developments: Key regulatory changes, such as the Genius Act and Micah, are providing clarity and legitimacy, fostering confidence and liquidity in digital asset markets.
Tokenization Strategies: Discussions focus on the tokenization of debt and equity, with companies like Franklin Templeton and Open Eden pioneering these efforts, enabling new financial product structures and efficiencies.
Technological and Operational Innovations: Tokenization is enabling real-time settlement and yield generation, as seen in Franklin Templeton's tokenized money market fund, which offers intraday yield and daily payouts.
Legal and Structural Considerations: The podcast emphasizes the importance of legal structures like trusts to ensure bankruptcy remoteness and regulatory compliance across different jurisdictions.
Future Outlook: Panelists predict a shift towards a wallet-based financial ecosystem, with increased real-time transactions and a broader range of tokenized assets, including commodities and real estate.
Challenges and Risks: Key concerns include legacy system integration, investor education, and the need for regulatory harmonization to ensure robust and compliant onchain markets.
Market Evolution: Over the next five years, the panel anticipates significant advancements in tokenization, potentially reducing the role of intermediaries and introducing innovative financial products.
Transcript
Good afternoon. Uh my name is Dave Rodriguez. I'm the head of Blockworks Advisory and today we're going to be talking about building robust financial markets on chain. The old adage of institutions are coming in my opinion is outdated. Institutions are here. Every single institution worth their salt is thinking about their digital asset strategy, thinking about tokenization and stable coins and token tokenized asset value on chain is seeing hockey stick growth up over 100% year-over-year to over $34 billion in onchain asset value. We've moved away from the theoretical of tokenization of assets of tokenizing money market funds. What if we did that? What if we tokenized debt? What if we tokenized equity? We actually have some panelists on stage today that have really pioneered this fast growing vertical. And I'm really excited to hear their thoughts on um what is the current how's the shifting regulatory landscape today impacting like the catalystic growth that we've seen over the past couple years. Uh what are the different strategies that they're deploying to tokenizing equity and debt? what does the next stage of tokenizing beyond debt assets? Um and also, you know, what is the next five to 10 years look like uh of this, you know, growing vertical. So, with that being said, I'm going to ask my panelists to give brief introductions before we kick off the rest of the panel. Uh Sandy, I'll start with you and then we can work our way here. >> Great. Hi guys, Sandy Call with Franklin Templeton. Uh I head up our innovation team, uh including our digital assets unit. Uh happy to be here today. >> Hi, I'm Alex Prager. I'm the head of product for Kexus digital assets at JP Morgan. Uh Kexus is JP Morgan's blockchain based unit. >> Hi, good afternoon. I'm Jeremy. I'm the founder and CEO of Open Eden. Open Eden is an end to end regulated tokenization platform. So we tokenize, you know, US treasuries. We've created stable coin that's backed by tokenized treasuries and we're happy to be here as well. uh Brett Hillis uh partner at Reed Smith Law Firm uh in London. Practiced in the digital assets area for about 10 years. Um particularly in terms of tokenization, I've worked on tokenization of commodities, uh loans, debt, all sorts of products, um both on the regulatory and the sort of transactional structuring side. Great to be here. >> Awesome. Thank you guys. So just uh to kick off the the rest of the conversation, I want to open up a question for the entire panel. Um why is this time different? Has there been a certain point in time over the past maybe two or three years um where your clients, your customers, u even the regulatory bodies that you deal with really opened up their eyes and started taking tokenization and onchain markets more generally seriously? >> I'll jump in and start. Um I think this time is different for three reasons, right? Number one, uh there has been a change in administration in the US and the Trump administration is far friendlier to crypto and is willing to push the boundaries on rulemaking faster than the Biden administration was willing to do so. We'll say nicely. Um I think secondly, we saw the passage of the Genius Act in the US uh and the implementation of Micah this year. um both of which have started to give some regulatory certainty. Uh and with the Genius Act in particular, it's legitimizing the cash layer for the new liquidity of the system which you can't have a system without liquidity. Uh so this is giving people confidence now that we will see that liquidity layer grow with big banks coming in and with others coming into the space. Uh and then I think the third reason it's different this time is because there is starting to be greater and greater acceptance that digital assets are part of a portfolio exposure. Uh the wealth networks are now approaching, you know, the point where they have seen Bitcoin and other ETFs in crypto in operation for close to two years. They're seeing that there hasn't been big blowups, big issues. It's giving them confidence and they're feeling increasing pressure from their own clients to not just make this available on a reverse solicitation basis but to actually start to make this part of a regular set of portfolio advice. So I think it's those combinations of regulatory pressure uh and acceptance new uh ability to count on the liquidity layer in the marketplace and then growing customer demand. >> Got it. >> Yeah. I think the big Oh, go ahead. Yeah, I mean clearly the regulatory part, you know, plays a very important part. So I think what I would touch on is utility. Why is it different now? Because tokenized RWA has gained greater composibility and utilities in addition to simply just holding it as an investment product. So for example, if you look at exchanges, they're now opening up to accepting tokenized RWA, for example, Open Eden's USDO as a accepted collateral. And the way they structure that is allowing institutional investors to hold this yield bearing collateral off exchange and the exchange will allow you to have a mirror asset for them to use as a collateral. So I think you know in addition to obviously the way that the product is being structured is a lot more regulatory compliant and whatnot but giving them utilities to these products either on CFI or on DeFi is propelling the adoption and propelling the especially institutions coming in to use them. >> Yeah, completely agree. I think on my side the regulatory clarity as already pointed out has been huge. I think it's something in the US we've been waiting for for quite some time and so that has really allowed us to um continue forward and continue forward at a faster pace than we have been in the past. I think also the you know emerging growing product market fit of everything that is out there right now is is a driving factor behind I think the increase in activity that we're seeing and those things coming together you know really make this time different. >> Got it. Um, Brett, I want to double click on your, you know, your expertise being like the legal space for digital assets. How are you seeing the diverging, uh, I guess handling of regulations between like the UK, the EU, and the US? Like how are those diverging approaches to how they're handling digital assets um, I guess, impacting the development of of token tokenized assets, at least maybe in the jurisdictions you're >> aware of? So this is something I'm I'm kind of more relaxed about than I might have expected. Okay. Um so certainly in in the UK and Europe probably the key factor is that if a product's already regulated as a kind of financial instrument or kind of investment then if it's tokenized the standards are pretty much the same. So you're not in a situation where you're suddenly facing like a an additional sort of set of hurdles. Um so the the way the regulator is looking at it is technology neutral or trying to be technology neutral. Um looking at sort of specific issues. So, we're expecting in the UK um a fund tokenization paper from the FCA looking at kind of how they're going to take that forwards um tomorrow. And uh for that, yeah, we're we're expecting something as I said, technology neutral and pretty pretty pretty straightforward. Now for more I suppose the more inventive products are commodities there's going to be more issues but certainly for the more traditional kind of investment products and their tokenization I I don't see the regulatory divergence as being as bigger an issue and obviously any divergence can increase costs but but because of the attitude it's less of an issue than it may have otherwise been. >> Got it. Um I want to double click into uh building onchain debt markets. So Sandy Franklin Templeton's pretty much pioneered was one of the early pioneers of this uh with your Benji money tokenized money market fund uh I believe launching in 2019 or 2021 actually you told me right before um what does onchain what does tokenization actually enable Franklin Templeton that you couldn't before and also how are you handling daily yield generation? What are some equity- like properties that now you can apply to tokenized debt that you really couldn't in the traditional sense? Yeah. So, we launched our tokenized money market fund in April of 2021. Um, Franklin Templeton is a little different in that we are not running a digital twin. Like our tokenized money market fund, the token is the digitally native exposure. Um, and therefore, we're able to do some things with our tokenized money market fund that, you know, is not possible for many of the other products in the market that are still digital twins. For example, we can settle our shareholder record second by second. Uh so every transaction that occurs settles immediately upon that transaction being added to the block. The payments and the securities are exchanged. Uh and you are actually credited as becoming a shareholder the second a transaction settles. Um and since we're accumulating the shareholder record uh in a second by-c manner, we're able to pay intraday yield. So, if you just held our money market fund for an hour and 15 minutes, uh you will get an hour and 15 minutes worth of yield. That's just something that's not possible today with the way that money market funds trade. Uh the other thing that we're able to do is we're able to pay out that yield every single calendar day of the year, including a Friday, uh including Saturdays, Sundays, and holidays. uh and that yield is paid out in incremental new issuance of tokens dropped directly into your wallet. So this is a daily yield product uh and it's paid out daily whereas most money market funds today accumulate that yield for a month before they pay it out. Right? So we're able because we're running natively on blockchain to enable these new use cases. Uh and we're going to be enabling that for any tokenized realworld asset. So tokenized equities are coming, tokenized bonds are coming because the smart contracts in these assets are programmable. All of the middle office operational tasks that today don't get kicked off until after the close of the trading day and the settlement of the security. Right? Today we're able to kick those processes off the minute a transaction occurs onchain. And so we're cutting out entire layers of operational risk by moving our infrastructure onto blockchain and being able to deliver our entire set of middle office functions via the smart contracts. And that's really I think the the benefit and the potential in this space is that those assets become much more transferable. We already enable peer-to-peer wallet transfers and self-custody. Uh you start to be able to use them in many more use cases. We can use them in DeFi use cases. You can use them in collateral mirroring use cases, right? And these are regulated financial products. So there's also a degree of consumer protections to them that translates into the web based into the chain-based environment. So I think that building natively on chain does give you some real advantages in thinking about how the future state financial market infrastructure is going to operate. >> Awesome. Jeremy, I want to uh click on you because um your Open Eden's T-Bill product is really setting the standard for audited transparency. I believe like a week or two ago, the S&P gave uh your T-Bell product an AA plus rating. So, kudos on that. Uh want to like learn from you, how do you ensure robustness during market downturns? And also, um what are some trady lessons that you're applying on chain to ensure from like a risk management perspective everything is okay? >> Yeah, that's a very good question. I think while we see a huge proliferation of out of bay products, I think one thing that we need to be aware of and remind ourselves is that no auto out of products are created the same. And one thing that I remember very clearly is back in my Trafy days when the global financial crisis happened. Now I personally owned some lemon issued structured notes and even to the underlying uh some blue chip equities that actually you know still has value but because of what happened to Leman being insolvent all the senior secured um unsecured debt including the structure not that issue will be trading just exactly like the Leman bond which is down you know 80 80% 85%. So it doesn't matter what is your underlying now compared to the SPV repacked that Lehman Brothers has issued you know essentially using a bankruptcy remote vehicle and to repack whatever is the underlying asset. Now those products continue to perform in accordance to exactly what the underlying assets are trading. So kind of bring that back to RWA is very important that how you structure the issuance vehicle can either add a lot of counterparty risk or can you know reduce or at least eliminate right so I think it's really important that you know over here you know we hear Franken Templeton open Eden our products are all regulated or all issued you know through licensed entity and and I think that really kind of sets the difference between a lot of the other out products that are issued you know just through some LLC or or some you know limited uh uh private limited company that is either not regulated or not structured in a way that is bankruptcy remote meaning that the asset liabilities are completely ring fans. So I would say that you know apart from being transparent the legal structuring of the issuance is critical. >> Got it. I mean that's a great segue for a question I have for you Brad. Uh so from a legal perspective what kind of structures like trusts are essential to make sure that um they're enforceable especially in crossber scenarios. >> So as a sort of English lawyer a a sort of you know practicing kind of common law you know there's we're not in a situation where like you know I've got a hammer so everything looks like a nail. I mean, you've got so many different kind of options and and kind of techniques that you can use, but the trust probably is one of the kind of absolute sort of key ones around kind of bankruptcy, remoteness, limited recourse, and kind of those sorts of structures um and facilities to kind of put them in place to actually create something that's that's robust. It's not the only way um to do these things, but certainly like a lot of the structures, you know, we've worked on uh in the tokenization space to kind of provide that bankruptcy remoteness um are based on trust. So that's a that's a key one. you see you you can see other structures based on you know loan based but certainly the trust is the kind of most common one and it really is a structure where um sort of English law um most sort of most US law and sort of a lot of the laws around uh some of the sort of UK kind of territories Cayman Islanders they all use the trust kind of mechanism and in a lot of other jurisdictions you don't quite have um the same toolkit. Um so that's certainly one that in a lot of the structures that that we work in, it's kind of absolutely key. Got it. >> Great. Um so moving on to tokenized equity and expanding accessibility. So Alexander, I want to ask you um how is Kexus addressing identity and privacy to make equity tokenization viable for commercial real estate and other types of illquid assets? Yeah. So privacy and identity for us have been paramount for quite some time and we've been looking at the two together and apart for a number of years now. So from an identity standpoint, we have developed our own um SSIS SDK. We've open sourced it in the past um and have been looking at verifiable credentials for upwards of five years now. I think on the um the actual implementation and scalability part, we still have a ways to go. I think there's a need for industry standards and frameworks that that um the ecosystem can adopt so that it's able to actually scale um in a way that would be extremely meaningful uh for the market. Identity is something that is extremely important in the market today right for existing instruments. So it's the same um when we think about one of the kind of parameters to truly scaling onchain activity um I think identity and privacy as well they won't be the first thing solved because we need to first get market adoption utility and activity I think that is the first order of business and then once we have that the privacy and the identity components I think become even more important um from an identity perspective we did the um we did project guard Guardian in in 2022 with the Monetary Authority of Singapore looking at institutional DeFi and being able to actually authenticate a trader's identity and credentials before completing a trade. So early on have seen the need and the value of that um for onchain activity. And then from a privacy standpoint uh last year we did um project epic. So um not only my favorite project name to date, but it's enterprise privacy identity and composability. And so really the need for privacy preserving identity onchain and reusable identity onchain is something that will make onboarding way more efficient. It will make secondary trading way more efficient. And so both identity and privacy I think are two of the key unlocks to really having scalable long-term activity on chain. >> Got it. Um Sandy, so I've listened to a couple of your talks before. I know you've spoken about how tokenization transforms equity markets. um how does so recently I think relatively recently Franklin Temple partnered with Binance um uh to I guess offer um more accessibility for tokenized assets and I want to know like from Franklin Templeton's perspective what additional beyond debt assets are you really excited about and what are you looking into? Yeah. So, look, we we have an overarching thesis that we are moving out of an account-based world and into a wallet-based world and that every asset we own, right, from every investment asset we own to every monetary asset we own to our key identification documents to Alex's point, right? That all of that is going to sit in our wallet. And and once all of those assets are in a wallet, the way that you optimize and manage and utilize every asset in that wallet to its utmost becomes what differentiates service in the future. Right? So in in that pursuit, we need to really get closer to people who operate every day in a wallet-based environment. Right? We are in traditional finance. We are part of the accountbased world. So, we need to be closer to the wallet-based world. So, that is why we made this partnership with Binance. Binance is one of the largest providers in the world. They have nearly 300 million wallets. And this is a chance for us to really engage that audience and start to really understand their behavior, their needs, uh, and be able to model and adapt our products for this wallet-based environment. Um and so you know when we think about what tokenization of equities and what other new assets go into that wallet you know I think that there will be a progression right we're already starting to see these kind of derivative like equity products from uh offerings like Robin Hood and Kraken where they're putting the equities into a trust and then they're tokenizing access to the trust. I think that's a great first step. Then I think you get to digital twins. Uh there's already some talk about um NASDAQ and others looking at the digital twins, which is I lock the shares up in an account and then I issue a token on top of those shares that are locked into custody. Um which is great. So now you're one step closer. I think that the end point is really issuing equities natively on chain. And once you're issuing n equities and you're issuing securities, not just equities, but bonds and other securities natively on chain, that is when you start to really find the full utility of the rails. And so I think that we will speed through that progression much faster than people anticipate, right? It would surprise me if it's going to be more than 18 months before we go from this first stage, which is, you know, the tokenization of things in a trust, which is a derivative, to full canonical equities. And and that's what's going to unlock all of the lending use cases, all of the collateral use cases. That's what's really going to create the utility that makes it more attractive and to be in the wallet-based system than in the accountbased system. So, these are all, I think, very necessary steps on the way. Uh, and that vision of what that future wallet is going to hold and what it's going to be able to accomplish, it's so compelling, right, that it it's such an stepchange improvement over what's possible today for the majority of the world's investors that the pressure to move fast and get there, I think, is going to be extreme. In a wallet based world, especially where you're offering tokenized um assets to 300 million plus Binance users, just as an example, is there anything that's at odds with like providing equitable access to these tokenized products and like a compliance perspective? Like are we at odds? Is how do we ensure that we maintain the compliance required from like a Trafi perspective while also providing equitable access to you know people all across the world for these types of products? really open question for all if anyone like has a a thought on this. >> I'll start. I mean it's it's goes back to the stuff that Alex was talking about, right? Is that there are new technologies and new solutions for how identity operates on chain. >> Uh there's new technologies like zero knowledge proofs. There's new abilities to issue soulbound tokens. There's new abilities to link identity to the wallet, not to the transaction. Right? We already have whitelisted wallets which is what is allowing uh regulated players like Franklin Templeton to operate in the public blockchain ecosystem. So I think that we're already on the pathway to devising the right solutions that will be able people to preserve as you said a sense of privacy but also give enough information to the underlying institution that they can reliably trade with that entity. >> Got it. Anyone want to? We can move on if anyone wants to add anything. >> Sitting at a bank, it's something we think about every single day. Uh not a day goes by without my legal and compliance partners. Um but you know to just kind of echo on on Sy's point and just thinking about identity in general and and compliance in general, one of the I think biggest hurdles that we've faced in the past is we all know that the technology technologies sorry are out there in order to make our products compliant. But there's two kind of sides to it. You can either solve first for the compliance piece but not have any clients or activity or what we're seeing a lot of now is there's a ton of activity going on on chain, right? But we don't necessarily have robust scalable privacy and identity frameworks in place at large. And so I think it's a it's a balance of both, right? Because if you have this incredible product but you have no one there to buy it, it almost doesn't matter. And there's, you know, a ton of work going on um from a technology standpoint that is continuing to iterate on what we have today from a privacy and identity standpoint. You have, like Sandy mentioned, there's verifiable credentials, there's soul bounds, there's NFTs, there's so many, you know, different ways of creating those compliance solutions. I think what it comes down to as well, and it sounds super boring, but it's, you know, agreed upon standards and frameworks so that these can actually be used and and used at scale. And I think that the sort of the regulators kind of need to be careful about kind of making sure that the way in which they set out the standards are actually technology neutral and that hasn't always been sort of the case. So kind of part of this work is really around getting them to recognize where there are elements in the current regulations that sort of go beyond the mere kind of protection of identity and kind of in ensuring kind of KYC um and and that actually it really is neutral. I think it's the technology is clearly there I feel but a lot of times is the technology is really way ahead of regulatory harmonization. So what I mean by that is if you look at a couple of the tokenized equities product that is being issued by issuers being adopted by exchanges I think all of them are excluding the US and there must be a reason why they're excluding the US and allowing it to be offered to the rest of the world is they're unsure whether is that proper clarity that this product is acceptable in the US or by the SEC or not. And while we have all this technology to create the ZKS, the soul bounds, as long as there isn't a global standard, which I personally don't think that we're going to ever get to a global standard, it's actually going to be quite difficult to to have the operational efficiency that we like that we as the issuer, we create a product, we follow a certain rules and expect it to be transported for every single jurisdiction to use it. Unfortunately, that is not the case. And and as long as we don't have that harmonization or or greater clarity, it is still going to be quite siloed. You're not going to see these kind of products being proliferated in a way that is you can really kind of confidently say that it's regulatory compliance. >> Got it. >> Yeah. I mean, so the way to get around that is you launch products in every region that offer the same types of exposure, but they adhere to the different regulatory regimes. So with our tokenized US money market fund, we actually already have four actively trading versions of that. We have a US40 act version of it. We have a USITS version of it. We have a private version of it. We have a Singaporean VCC version of it. Right? Um, you know, because there's not the global standard, the only option you have in in really wanting to operate a global business is to then create the product that each reg that each regulatory regime allows and make sure you're in adherence with that regulatory regime. So, it'll be much easier if they can come up with a global standard, but that shouldn't the growth of the of the ecosystem. And I think that you know we shouldn't let that stand in the way as an obstacle to us really growing the amount of product and the amount of and transactional activity that's happening there. >> Yeah. I mean so on that point it also means that it is a lot more difficult for new players startups to do that because just don't have that scale and the capital of a big asset management company like Franken Templeton that can issue different products locally because they already have the scale they have the licenses. >> So it's really kind of balance of innovation speed versus being compliant. just to like double click into something because one of the beautiful things or at least one of the concepts of tokenization is that it's going to allow for like operational efficiencies especially when you have digitally native assets. I'm kind of asking this question off the cuff but like if you have to deploy these digitally native or digital native or not you have to deploy these digital assets jurisdiction by jurisdiction does it actually negate the operational efficiency that was originally once promised? I I don't think that it does because some of the operational efficiency relates to these kind of regulatory processes and like so the different things that you have to do to kind of comply with the different rappers in the US, in Europe, in the UK and Singapore. Um so I don't think it I don't think it negates it. I think it's still it's still valuable. It's it's just it's valuable in this in a complex landscape. Okay. Awesome. Thank you. Um, that was a good one. Uh, all right. So, moving beyond debt and equity. Uh, I want to talk about like new innovations on the horizon for tokenization. So, Jeremy, I'm going to start with you. Um, how do you see tokenized treasuries moving beyond like different RWA asset verticals and also more specifically about Open Eden's product suite? How are you going to try to optimize yield across different asset classes? by tokenizing treasuries is really a step one because first of all it is the most liquid asset in the world and it is well arguably the the safest asset in the world. So for that to be the first product of choice to be tokenized I think is makes a lot of sense. So it's really kind of built the distribution channel building the recognition and building the use case. Now once that building block is done and people can see that it is working it can be adopted then adding new product or or new asset classes would not be that difficult because you can kind of follow the same model and at open eden what we do is yes we've launched our own products uh being an issuer and even investment manager at some point uh it's just the beginning what we really truly want to become is having our platform to be offered to our partners whether are you a asset owner asset manager, corpus or whoever that want to bring their product uh onchain, they can come to open eden and we can provide a whole suite of white label solution including issuance, tokenization and even distribution in a way kind of like an RWA version of Shopify. So I think that's really our vision because we know a lot of asset owners a lot of even new stable coin issuers they want to come to the market they might not necessarily need to build their own tokenization platform you know hiring five 10 engineers writing smart contract but they can focus on what they do best they can focus on the use case and can focus on distribution and then we just kind of help them kind of pluck and play and very quickly bring to market so that's really where open eden's uh vision is and that's where we're building towards Got it. Alexander, how is JP Morgan with Kexus? How are you preparing for like uh tokenized commodities, tokenized FX? We're actually starting to see a little bit of that start to pick up on Salana and a couple other ecosystems. Um and also like how are you trying to how are you going to ensure interoperability across chains for these tokenized assets? >> Yeah, it's a great question and so and it comes back to something I think we think about at the core, especially at this point in time. We've been working on the technology for a number of years and um have been really focused on getting our infrastructure in place and with that knowing which touch points across the ecosystem are going to be important for products and clients. So interoperability of course being paramount for that. What I find interesting at this point in time is that the technology I think is the easiest part of it. What we're really preparing for when I think about you know the next iteration of of onrain products is really clients their demand and the use cases that they have. I think the technology you know is more known at this time than making sure that our clients are ready and and comfortable for whatever onchain use case that they are looking at and I think from there the technology follows. So, one of our largest measures of success is really utility and ongoing utility, right? Not uh one or two trades and then and then we're done and and we proved that out, but really where is their meaningful long-term utility and activity and so focusing there first. I think the technology then then comes secondary for us. >> Got it. Thank you. So I think that uh you know when you think about how it's progressing right and Brett has talked a couple times about tokenized commodities right um you guys are doing tokenized FX right these are all starting to be you know functions that are very commonly done offchain which are now being done onchain and I think that's the direction of travel right there's so many assets today that are investable but they're very difficult to create much volume in and difficult to create much liquidity in because there's so many contracts and there is so much operational friction in being able to transfer ownership, right? So even it just takes something as simple as a painting, right? To transfer ownership of a painting is actually very complex and can sometimes take several weeks to actually complete the transfer of ownership of a painting, right? You could transfer the ownership of a painting in seconds on chain land titles, right? All of these assets that today intellectual property, all of these assets are things that people would like to own, but it's very hard to own because there's a lot of operational frictions and therefore there's not a lot of liquidity and therefore the access is very limited. And so we believe that we're moving into a world where many assets are going to become available that can act as their own stores of value. Right? There's no reason why I can't use a stable coin to pay for something. I can't use a tokenized commodity to pay for something. I can't use a tokenized money market fund. I might be able to use a tokenized painting, right? Fractional shares. As long as it is custodied by a third party, as long as it's transparent in terms of the pricing and the valuation and the availability, as long as the ownership rights can be clear, cleanly and clearly defined, I can program those assets to become stores of value. And so in many ways, we believe we're moving towards this kind of almost high-tech barter society where all of the options I'm going to have from these different assets in my wallet are going to become, you know, much more uh a much broader set of choices. It's almost like today when you go on Amazon and you're buying something on Amazon, they give you your whole drop down menu. Do you want to use your debit card? Do you want to use your credit card? Do you want to use your loyalty points? I think it's going to be that same concept, but it's going to extend across many, many new types of assets. And if you think about it, as human beings, for centuries, we had barter society. So, it's not like this is not precedent for having this. I just think it's going to be a very high-tech barter society. >> Awesome. Thank you. I know we're coming up on time soon, but I do want to try to ask like two more questions if we have if time allows it. So, uh moving to like the forward-looking like the challenges, the risks, and like forward-looking predictions for a tokenized asset class. Um, regulatory headwinds historically have now turned to tailwinds at least in like major jurisdictions. But what are what would you say is like the biggest risk? And this is a really open question to anyone. What is like the biggest risk today to building robust onchain markets? Is it still regulatory especially every regulatory region has its own regulatory body and its own rules. We won't have like one open standard like Jeremy you probably you know alluded to. Um is it the fact that we don't even know if there actually is like maybe retail demand. Maybe we know there's institutional demand maybe not retail demand. like what is like that one thing that keeps you up at night building in this vertical and thinking about this vertical? >> I think on our side, one of the one thing that I would say keeps me up at night the most is legacy systems and integrations. I think that those cannot be um underestimated in terms of what needs to be done in order to match where we're seeing you know on the front end and and onchain efficiencies happening. There's still a lot that is happening back here after execution that I think will take time to to fix and and it'll take um you know not not two years I think we're looking more out than that but I do think given the complexity of legacy infrastructure and also how it is different by client set by asset type by you know jurisdiction anything at all I think the legacy infrastructure side is is one of the biggest hurdles to overcome you from for my side actually the one thing they're most concerned about is investor educations because everybody is kind of jumping on these out of bay bandwagon so there are different kinds of issuer coming out to just launch all kinds of out of bay back products and a lot of the investors in the crypto world they are just chasing after yield so they look at anything that has the highest yield they just jump in but without really knowing what risk they're taking in either the underly line risk or the counterpart risk and when things blow up you know either fraud or whatever that happens then a lot of money is lost and I think that is something that I am most worried about and not just because they could be competing with us but it's really that all these kind of failures will lead to lowering of investor confidence and obviously giving a bad reputation to to the web three world so I think that that is one part that I would like to see more like you know better investor education and proper regulation of you know issuers that come out to launch RWA products. >> Yeah. A lot of the reg regulatory landmines that you worry about are actually because people have kind of invested and not really understood what they were doing and then a regulator kind of comes along and tries to deal with that. So it's that kind of almost like regulatory failure is probably the thing I would worry about most. >> Got it. Yeah. Um the final two minutes what I want to ask is uh brief concise. What does the next five years look like for tokenized uh the tokenized asset class vertical? Um yeah like what are maybe what are your wildest dreams? What is like a spicy take you have about the tokenized asset class more generally? Um I'll start Sandy with you and then we'll work our way down. >> Yeah. So I think within the next five years you're going to see the widespread introduction of wallets across the entire financial ecosystem both traditional players and emerging players. Um I think that you will have kind of a range of product that's being offered though there. Uh and that because of the legacy system issues that a lot of the traditional players have, you're probably going to have this kind of digital twin world where things don't operate in real time. they operate on trade date uh time and then you'll have this this more kind of cryptonative world where things are happening in real time and you know the question becomes is that real- time advantage big enough that the pressure builds and you start to see a wholesale try transition of assets out of the trade date to the real- time infrastructure uh and if I had to lay a bet I think that's what's going to happen >> um I will use my wish question for the next 5 years, but I do think it is true in in certain areas more than others. Definitely in the cash side is more of an abstraction away from the tech. I think in 5 years time there'll be certain parts of the life cycle that we won't be talking about in as much detail as we talk about today. Similar to how I go to a coffee shop today and and I pay for my coffee. We don't talk about the amount of, you know, spaghetti that that goes through afterwards in terms of payment and and where which bank it goes into and and then which bank, etc. So I'd like to see you know us move away a bit from talking about the tech specifically and more about the products themselves. >> Got it. German >> very quickly I think some intermediaries could be removed for example fund administration because a smart contract effectively can do that job. >> Sure. >> Um weird and wacky products that we um we and interesting products that we haven't seen kind of on chain before. So things like yeah commodities um I I think there's going to be a lot of innovation. >> Awesome. All right guys well that's all the time we have. Thank you for everyone's time. Thank you guys very much. Had a great chat. Um enjoy your day. Thank you for coming. Take it.
Building Robust Onchain Financial Markets: Debt, Equity, and Beyond | DAS London 2025 | Day 1
Summary
Transcript
Good afternoon. Uh my name is Dave Rodriguez. I'm the head of Blockworks Advisory and today we're going to be talking about building robust financial markets on chain. The old adage of institutions are coming in my opinion is outdated. Institutions are here. Every single institution worth their salt is thinking about their digital asset strategy, thinking about tokenization and stable coins and token tokenized asset value on chain is seeing hockey stick growth up over 100% year-over-year to over $34 billion in onchain asset value. We've moved away from the theoretical of tokenization of assets of tokenizing money market funds. What if we did that? What if we tokenized debt? What if we tokenized equity? We actually have some panelists on stage today that have really pioneered this fast growing vertical. And I'm really excited to hear their thoughts on um what is the current how's the shifting regulatory landscape today impacting like the catalystic growth that we've seen over the past couple years. Uh what are the different strategies that they're deploying to tokenizing equity and debt? what does the next stage of tokenizing beyond debt assets? Um and also, you know, what is the next five to 10 years look like uh of this, you know, growing vertical. So, with that being said, I'm going to ask my panelists to give brief introductions before we kick off the rest of the panel. Uh Sandy, I'll start with you and then we can work our way here. >> Great. Hi guys, Sandy Call with Franklin Templeton. Uh I head up our innovation team, uh including our digital assets unit. Uh happy to be here today. >> Hi, I'm Alex Prager. I'm the head of product for Kexus digital assets at JP Morgan. Uh Kexus is JP Morgan's blockchain based unit. >> Hi, good afternoon. I'm Jeremy. I'm the founder and CEO of Open Eden. Open Eden is an end to end regulated tokenization platform. So we tokenize, you know, US treasuries. We've created stable coin that's backed by tokenized treasuries and we're happy to be here as well. uh Brett Hillis uh partner at Reed Smith Law Firm uh in London. Practiced in the digital assets area for about 10 years. Um particularly in terms of tokenization, I've worked on tokenization of commodities, uh loans, debt, all sorts of products, um both on the regulatory and the sort of transactional structuring side. Great to be here. >> Awesome. Thank you guys. So just uh to kick off the the rest of the conversation, I want to open up a question for the entire panel. Um why is this time different? Has there been a certain point in time over the past maybe two or three years um where your clients, your customers, u even the regulatory bodies that you deal with really opened up their eyes and started taking tokenization and onchain markets more generally seriously? >> I'll jump in and start. Um I think this time is different for three reasons, right? Number one, uh there has been a change in administration in the US and the Trump administration is far friendlier to crypto and is willing to push the boundaries on rulemaking faster than the Biden administration was willing to do so. We'll say nicely. Um I think secondly, we saw the passage of the Genius Act in the US uh and the implementation of Micah this year. um both of which have started to give some regulatory certainty. Uh and with the Genius Act in particular, it's legitimizing the cash layer for the new liquidity of the system which you can't have a system without liquidity. Uh so this is giving people confidence now that we will see that liquidity layer grow with big banks coming in and with others coming into the space. Uh and then I think the third reason it's different this time is because there is starting to be greater and greater acceptance that digital assets are part of a portfolio exposure. Uh the wealth networks are now approaching, you know, the point where they have seen Bitcoin and other ETFs in crypto in operation for close to two years. They're seeing that there hasn't been big blowups, big issues. It's giving them confidence and they're feeling increasing pressure from their own clients to not just make this available on a reverse solicitation basis but to actually start to make this part of a regular set of portfolio advice. So I think it's those combinations of regulatory pressure uh and acceptance new uh ability to count on the liquidity layer in the marketplace and then growing customer demand. >> Got it. >> Yeah. I think the big Oh, go ahead. Yeah, I mean clearly the regulatory part, you know, plays a very important part. So I think what I would touch on is utility. Why is it different now? Because tokenized RWA has gained greater composibility and utilities in addition to simply just holding it as an investment product. So for example, if you look at exchanges, they're now opening up to accepting tokenized RWA, for example, Open Eden's USDO as a accepted collateral. And the way they structure that is allowing institutional investors to hold this yield bearing collateral off exchange and the exchange will allow you to have a mirror asset for them to use as a collateral. So I think you know in addition to obviously the way that the product is being structured is a lot more regulatory compliant and whatnot but giving them utilities to these products either on CFI or on DeFi is propelling the adoption and propelling the especially institutions coming in to use them. >> Yeah, completely agree. I think on my side the regulatory clarity as already pointed out has been huge. I think it's something in the US we've been waiting for for quite some time and so that has really allowed us to um continue forward and continue forward at a faster pace than we have been in the past. I think also the you know emerging growing product market fit of everything that is out there right now is is a driving factor behind I think the increase in activity that we're seeing and those things coming together you know really make this time different. >> Got it. Um, Brett, I want to double click on your, you know, your expertise being like the legal space for digital assets. How are you seeing the diverging, uh, I guess handling of regulations between like the UK, the EU, and the US? Like how are those diverging approaches to how they're handling digital assets um, I guess, impacting the development of of token tokenized assets, at least maybe in the jurisdictions you're >> aware of? So this is something I'm I'm kind of more relaxed about than I might have expected. Okay. Um so certainly in in the UK and Europe probably the key factor is that if a product's already regulated as a kind of financial instrument or kind of investment then if it's tokenized the standards are pretty much the same. So you're not in a situation where you're suddenly facing like a an additional sort of set of hurdles. Um so the the way the regulator is looking at it is technology neutral or trying to be technology neutral. Um looking at sort of specific issues. So, we're expecting in the UK um a fund tokenization paper from the FCA looking at kind of how they're going to take that forwards um tomorrow. And uh for that, yeah, we're we're expecting something as I said, technology neutral and pretty pretty pretty straightforward. Now for more I suppose the more inventive products are commodities there's going to be more issues but certainly for the more traditional kind of investment products and their tokenization I I don't see the regulatory divergence as being as bigger an issue and obviously any divergence can increase costs but but because of the attitude it's less of an issue than it may have otherwise been. >> Got it. Um I want to double click into uh building onchain debt markets. So Sandy Franklin Templeton's pretty much pioneered was one of the early pioneers of this uh with your Benji money tokenized money market fund uh I believe launching in 2019 or 2021 actually you told me right before um what does onchain what does tokenization actually enable Franklin Templeton that you couldn't before and also how are you handling daily yield generation? What are some equity- like properties that now you can apply to tokenized debt that you really couldn't in the traditional sense? Yeah. So, we launched our tokenized money market fund in April of 2021. Um, Franklin Templeton is a little different in that we are not running a digital twin. Like our tokenized money market fund, the token is the digitally native exposure. Um, and therefore, we're able to do some things with our tokenized money market fund that, you know, is not possible for many of the other products in the market that are still digital twins. For example, we can settle our shareholder record second by second. Uh so every transaction that occurs settles immediately upon that transaction being added to the block. The payments and the securities are exchanged. Uh and you are actually credited as becoming a shareholder the second a transaction settles. Um and since we're accumulating the shareholder record uh in a second by-c manner, we're able to pay intraday yield. So, if you just held our money market fund for an hour and 15 minutes, uh you will get an hour and 15 minutes worth of yield. That's just something that's not possible today with the way that money market funds trade. Uh the other thing that we're able to do is we're able to pay out that yield every single calendar day of the year, including a Friday, uh including Saturdays, Sundays, and holidays. uh and that yield is paid out in incremental new issuance of tokens dropped directly into your wallet. So this is a daily yield product uh and it's paid out daily whereas most money market funds today accumulate that yield for a month before they pay it out. Right? So we're able because we're running natively on blockchain to enable these new use cases. Uh and we're going to be enabling that for any tokenized realworld asset. So tokenized equities are coming, tokenized bonds are coming because the smart contracts in these assets are programmable. All of the middle office operational tasks that today don't get kicked off until after the close of the trading day and the settlement of the security. Right? Today we're able to kick those processes off the minute a transaction occurs onchain. And so we're cutting out entire layers of operational risk by moving our infrastructure onto blockchain and being able to deliver our entire set of middle office functions via the smart contracts. And that's really I think the the benefit and the potential in this space is that those assets become much more transferable. We already enable peer-to-peer wallet transfers and self-custody. Uh you start to be able to use them in many more use cases. We can use them in DeFi use cases. You can use them in collateral mirroring use cases, right? And these are regulated financial products. So there's also a degree of consumer protections to them that translates into the web based into the chain-based environment. So I think that building natively on chain does give you some real advantages in thinking about how the future state financial market infrastructure is going to operate. >> Awesome. Jeremy, I want to uh click on you because um your Open Eden's T-Bill product is really setting the standard for audited transparency. I believe like a week or two ago, the S&P gave uh your T-Bell product an AA plus rating. So, kudos on that. Uh want to like learn from you, how do you ensure robustness during market downturns? And also, um what are some trady lessons that you're applying on chain to ensure from like a risk management perspective everything is okay? >> Yeah, that's a very good question. I think while we see a huge proliferation of out of bay products, I think one thing that we need to be aware of and remind ourselves is that no auto out of products are created the same. And one thing that I remember very clearly is back in my Trafy days when the global financial crisis happened. Now I personally owned some lemon issued structured notes and even to the underlying uh some blue chip equities that actually you know still has value but because of what happened to Leman being insolvent all the senior secured um unsecured debt including the structure not that issue will be trading just exactly like the Leman bond which is down you know 80 80% 85%. So it doesn't matter what is your underlying now compared to the SPV repacked that Lehman Brothers has issued you know essentially using a bankruptcy remote vehicle and to repack whatever is the underlying asset. Now those products continue to perform in accordance to exactly what the underlying assets are trading. So kind of bring that back to RWA is very important that how you structure the issuance vehicle can either add a lot of counterparty risk or can you know reduce or at least eliminate right so I think it's really important that you know over here you know we hear Franken Templeton open Eden our products are all regulated or all issued you know through licensed entity and and I think that really kind of sets the difference between a lot of the other out products that are issued you know just through some LLC or or some you know limited uh uh private limited company that is either not regulated or not structured in a way that is bankruptcy remote meaning that the asset liabilities are completely ring fans. So I would say that you know apart from being transparent the legal structuring of the issuance is critical. >> Got it. I mean that's a great segue for a question I have for you Brad. Uh so from a legal perspective what kind of structures like trusts are essential to make sure that um they're enforceable especially in crossber scenarios. >> So as a sort of English lawyer a a sort of you know practicing kind of common law you know there's we're not in a situation where like you know I've got a hammer so everything looks like a nail. I mean, you've got so many different kind of options and and kind of techniques that you can use, but the trust probably is one of the kind of absolute sort of key ones around kind of bankruptcy, remoteness, limited recourse, and kind of those sorts of structures um and facilities to kind of put them in place to actually create something that's that's robust. It's not the only way um to do these things, but certainly like a lot of the structures, you know, we've worked on uh in the tokenization space to kind of provide that bankruptcy remoteness um are based on trust. So that's a that's a key one. you see you you can see other structures based on you know loan based but certainly the trust is the kind of most common one and it really is a structure where um sort of English law um most sort of most US law and sort of a lot of the laws around uh some of the sort of UK kind of territories Cayman Islanders they all use the trust kind of mechanism and in a lot of other jurisdictions you don't quite have um the same toolkit. Um so that's certainly one that in a lot of the structures that that we work in, it's kind of absolutely key. Got it. >> Great. Um so moving on to tokenized equity and expanding accessibility. So Alexander, I want to ask you um how is Kexus addressing identity and privacy to make equity tokenization viable for commercial real estate and other types of illquid assets? Yeah. So privacy and identity for us have been paramount for quite some time and we've been looking at the two together and apart for a number of years now. So from an identity standpoint, we have developed our own um SSIS SDK. We've open sourced it in the past um and have been looking at verifiable credentials for upwards of five years now. I think on the um the actual implementation and scalability part, we still have a ways to go. I think there's a need for industry standards and frameworks that that um the ecosystem can adopt so that it's able to actually scale um in a way that would be extremely meaningful uh for the market. Identity is something that is extremely important in the market today right for existing instruments. So it's the same um when we think about one of the kind of parameters to truly scaling onchain activity um I think identity and privacy as well they won't be the first thing solved because we need to first get market adoption utility and activity I think that is the first order of business and then once we have that the privacy and the identity components I think become even more important um from an identity perspective we did the um we did project guard Guardian in in 2022 with the Monetary Authority of Singapore looking at institutional DeFi and being able to actually authenticate a trader's identity and credentials before completing a trade. So early on have seen the need and the value of that um for onchain activity. And then from a privacy standpoint uh last year we did um project epic. So um not only my favorite project name to date, but it's enterprise privacy identity and composability. And so really the need for privacy preserving identity onchain and reusable identity onchain is something that will make onboarding way more efficient. It will make secondary trading way more efficient. And so both identity and privacy I think are two of the key unlocks to really having scalable long-term activity on chain. >> Got it. Um Sandy, so I've listened to a couple of your talks before. I know you've spoken about how tokenization transforms equity markets. um how does so recently I think relatively recently Franklin Temple partnered with Binance um uh to I guess offer um more accessibility for tokenized assets and I want to know like from Franklin Templeton's perspective what additional beyond debt assets are you really excited about and what are you looking into? Yeah. So, look, we we have an overarching thesis that we are moving out of an account-based world and into a wallet-based world and that every asset we own, right, from every investment asset we own to every monetary asset we own to our key identification documents to Alex's point, right? That all of that is going to sit in our wallet. And and once all of those assets are in a wallet, the way that you optimize and manage and utilize every asset in that wallet to its utmost becomes what differentiates service in the future. Right? So in in that pursuit, we need to really get closer to people who operate every day in a wallet-based environment. Right? We are in traditional finance. We are part of the accountbased world. So, we need to be closer to the wallet-based world. So, that is why we made this partnership with Binance. Binance is one of the largest providers in the world. They have nearly 300 million wallets. And this is a chance for us to really engage that audience and start to really understand their behavior, their needs, uh, and be able to model and adapt our products for this wallet-based environment. Um and so you know when we think about what tokenization of equities and what other new assets go into that wallet you know I think that there will be a progression right we're already starting to see these kind of derivative like equity products from uh offerings like Robin Hood and Kraken where they're putting the equities into a trust and then they're tokenizing access to the trust. I think that's a great first step. Then I think you get to digital twins. Uh there's already some talk about um NASDAQ and others looking at the digital twins, which is I lock the shares up in an account and then I issue a token on top of those shares that are locked into custody. Um which is great. So now you're one step closer. I think that the end point is really issuing equities natively on chain. And once you're issuing n equities and you're issuing securities, not just equities, but bonds and other securities natively on chain, that is when you start to really find the full utility of the rails. And so I think that we will speed through that progression much faster than people anticipate, right? It would surprise me if it's going to be more than 18 months before we go from this first stage, which is, you know, the tokenization of things in a trust, which is a derivative, to full canonical equities. And and that's what's going to unlock all of the lending use cases, all of the collateral use cases. That's what's really going to create the utility that makes it more attractive and to be in the wallet-based system than in the accountbased system. So, these are all, I think, very necessary steps on the way. Uh, and that vision of what that future wallet is going to hold and what it's going to be able to accomplish, it's so compelling, right, that it it's such an stepchange improvement over what's possible today for the majority of the world's investors that the pressure to move fast and get there, I think, is going to be extreme. In a wallet based world, especially where you're offering tokenized um assets to 300 million plus Binance users, just as an example, is there anything that's at odds with like providing equitable access to these tokenized products and like a compliance perspective? Like are we at odds? Is how do we ensure that we maintain the compliance required from like a Trafi perspective while also providing equitable access to you know people all across the world for these types of products? really open question for all if anyone like has a a thought on this. >> I'll start. I mean it's it's goes back to the stuff that Alex was talking about, right? Is that there are new technologies and new solutions for how identity operates on chain. >> Uh there's new technologies like zero knowledge proofs. There's new abilities to issue soulbound tokens. There's new abilities to link identity to the wallet, not to the transaction. Right? We already have whitelisted wallets which is what is allowing uh regulated players like Franklin Templeton to operate in the public blockchain ecosystem. So I think that we're already on the pathway to devising the right solutions that will be able people to preserve as you said a sense of privacy but also give enough information to the underlying institution that they can reliably trade with that entity. >> Got it. Anyone want to? We can move on if anyone wants to add anything. >> Sitting at a bank, it's something we think about every single day. Uh not a day goes by without my legal and compliance partners. Um but you know to just kind of echo on on Sy's point and just thinking about identity in general and and compliance in general, one of the I think biggest hurdles that we've faced in the past is we all know that the technology technologies sorry are out there in order to make our products compliant. But there's two kind of sides to it. You can either solve first for the compliance piece but not have any clients or activity or what we're seeing a lot of now is there's a ton of activity going on on chain, right? But we don't necessarily have robust scalable privacy and identity frameworks in place at large. And so I think it's a it's a balance of both, right? Because if you have this incredible product but you have no one there to buy it, it almost doesn't matter. And there's, you know, a ton of work going on um from a technology standpoint that is continuing to iterate on what we have today from a privacy and identity standpoint. You have, like Sandy mentioned, there's verifiable credentials, there's soul bounds, there's NFTs, there's so many, you know, different ways of creating those compliance solutions. I think what it comes down to as well, and it sounds super boring, but it's, you know, agreed upon standards and frameworks so that these can actually be used and and used at scale. And I think that the sort of the regulators kind of need to be careful about kind of making sure that the way in which they set out the standards are actually technology neutral and that hasn't always been sort of the case. So kind of part of this work is really around getting them to recognize where there are elements in the current regulations that sort of go beyond the mere kind of protection of identity and kind of in ensuring kind of KYC um and and that actually it really is neutral. I think it's the technology is clearly there I feel but a lot of times is the technology is really way ahead of regulatory harmonization. So what I mean by that is if you look at a couple of the tokenized equities product that is being issued by issuers being adopted by exchanges I think all of them are excluding the US and there must be a reason why they're excluding the US and allowing it to be offered to the rest of the world is they're unsure whether is that proper clarity that this product is acceptable in the US or by the SEC or not. And while we have all this technology to create the ZKS, the soul bounds, as long as there isn't a global standard, which I personally don't think that we're going to ever get to a global standard, it's actually going to be quite difficult to to have the operational efficiency that we like that we as the issuer, we create a product, we follow a certain rules and expect it to be transported for every single jurisdiction to use it. Unfortunately, that is not the case. And and as long as we don't have that harmonization or or greater clarity, it is still going to be quite siloed. You're not going to see these kind of products being proliferated in a way that is you can really kind of confidently say that it's regulatory compliance. >> Got it. >> Yeah. I mean, so the way to get around that is you launch products in every region that offer the same types of exposure, but they adhere to the different regulatory regimes. So with our tokenized US money market fund, we actually already have four actively trading versions of that. We have a US40 act version of it. We have a USITS version of it. We have a private version of it. We have a Singaporean VCC version of it. Right? Um, you know, because there's not the global standard, the only option you have in in really wanting to operate a global business is to then create the product that each reg that each regulatory regime allows and make sure you're in adherence with that regulatory regime. So, it'll be much easier if they can come up with a global standard, but that shouldn't the growth of the of the ecosystem. And I think that you know we shouldn't let that stand in the way as an obstacle to us really growing the amount of product and the amount of and transactional activity that's happening there. >> Yeah. I mean so on that point it also means that it is a lot more difficult for new players startups to do that because just don't have that scale and the capital of a big asset management company like Franken Templeton that can issue different products locally because they already have the scale they have the licenses. >> So it's really kind of balance of innovation speed versus being compliant. just to like double click into something because one of the beautiful things or at least one of the concepts of tokenization is that it's going to allow for like operational efficiencies especially when you have digitally native assets. I'm kind of asking this question off the cuff but like if you have to deploy these digitally native or digital native or not you have to deploy these digital assets jurisdiction by jurisdiction does it actually negate the operational efficiency that was originally once promised? I I don't think that it does because some of the operational efficiency relates to these kind of regulatory processes and like so the different things that you have to do to kind of comply with the different rappers in the US, in Europe, in the UK and Singapore. Um so I don't think it I don't think it negates it. I think it's still it's still valuable. It's it's just it's valuable in this in a complex landscape. Okay. Awesome. Thank you. Um, that was a good one. Uh, all right. So, moving beyond debt and equity. Uh, I want to talk about like new innovations on the horizon for tokenization. So, Jeremy, I'm going to start with you. Um, how do you see tokenized treasuries moving beyond like different RWA asset verticals and also more specifically about Open Eden's product suite? How are you going to try to optimize yield across different asset classes? by tokenizing treasuries is really a step one because first of all it is the most liquid asset in the world and it is well arguably the the safest asset in the world. So for that to be the first product of choice to be tokenized I think is makes a lot of sense. So it's really kind of built the distribution channel building the recognition and building the use case. Now once that building block is done and people can see that it is working it can be adopted then adding new product or or new asset classes would not be that difficult because you can kind of follow the same model and at open eden what we do is yes we've launched our own products uh being an issuer and even investment manager at some point uh it's just the beginning what we really truly want to become is having our platform to be offered to our partners whether are you a asset owner asset manager, corpus or whoever that want to bring their product uh onchain, they can come to open eden and we can provide a whole suite of white label solution including issuance, tokenization and even distribution in a way kind of like an RWA version of Shopify. So I think that's really our vision because we know a lot of asset owners a lot of even new stable coin issuers they want to come to the market they might not necessarily need to build their own tokenization platform you know hiring five 10 engineers writing smart contract but they can focus on what they do best they can focus on the use case and can focus on distribution and then we just kind of help them kind of pluck and play and very quickly bring to market so that's really where open eden's uh vision is and that's where we're building towards Got it. Alexander, how is JP Morgan with Kexus? How are you preparing for like uh tokenized commodities, tokenized FX? We're actually starting to see a little bit of that start to pick up on Salana and a couple other ecosystems. Um and also like how are you trying to how are you going to ensure interoperability across chains for these tokenized assets? >> Yeah, it's a great question and so and it comes back to something I think we think about at the core, especially at this point in time. We've been working on the technology for a number of years and um have been really focused on getting our infrastructure in place and with that knowing which touch points across the ecosystem are going to be important for products and clients. So interoperability of course being paramount for that. What I find interesting at this point in time is that the technology I think is the easiest part of it. What we're really preparing for when I think about you know the next iteration of of onrain products is really clients their demand and the use cases that they have. I think the technology you know is more known at this time than making sure that our clients are ready and and comfortable for whatever onchain use case that they are looking at and I think from there the technology follows. So, one of our largest measures of success is really utility and ongoing utility, right? Not uh one or two trades and then and then we're done and and we proved that out, but really where is their meaningful long-term utility and activity and so focusing there first. I think the technology then then comes secondary for us. >> Got it. Thank you. So I think that uh you know when you think about how it's progressing right and Brett has talked a couple times about tokenized commodities right um you guys are doing tokenized FX right these are all starting to be you know functions that are very commonly done offchain which are now being done onchain and I think that's the direction of travel right there's so many assets today that are investable but they're very difficult to create much volume in and difficult to create much liquidity in because there's so many contracts and there is so much operational friction in being able to transfer ownership, right? So even it just takes something as simple as a painting, right? To transfer ownership of a painting is actually very complex and can sometimes take several weeks to actually complete the transfer of ownership of a painting, right? You could transfer the ownership of a painting in seconds on chain land titles, right? All of these assets that today intellectual property, all of these assets are things that people would like to own, but it's very hard to own because there's a lot of operational frictions and therefore there's not a lot of liquidity and therefore the access is very limited. And so we believe that we're moving into a world where many assets are going to become available that can act as their own stores of value. Right? There's no reason why I can't use a stable coin to pay for something. I can't use a tokenized commodity to pay for something. I can't use a tokenized money market fund. I might be able to use a tokenized painting, right? Fractional shares. As long as it is custodied by a third party, as long as it's transparent in terms of the pricing and the valuation and the availability, as long as the ownership rights can be clear, cleanly and clearly defined, I can program those assets to become stores of value. And so in many ways, we believe we're moving towards this kind of almost high-tech barter society where all of the options I'm going to have from these different assets in my wallet are going to become, you know, much more uh a much broader set of choices. It's almost like today when you go on Amazon and you're buying something on Amazon, they give you your whole drop down menu. Do you want to use your debit card? Do you want to use your credit card? Do you want to use your loyalty points? I think it's going to be that same concept, but it's going to extend across many, many new types of assets. And if you think about it, as human beings, for centuries, we had barter society. So, it's not like this is not precedent for having this. I just think it's going to be a very high-tech barter society. >> Awesome. Thank you. I know we're coming up on time soon, but I do want to try to ask like two more questions if we have if time allows it. So, uh moving to like the forward-looking like the challenges, the risks, and like forward-looking predictions for a tokenized asset class. Um, regulatory headwinds historically have now turned to tailwinds at least in like major jurisdictions. But what are what would you say is like the biggest risk? And this is a really open question to anyone. What is like the biggest risk today to building robust onchain markets? Is it still regulatory especially every regulatory region has its own regulatory body and its own rules. We won't have like one open standard like Jeremy you probably you know alluded to. Um is it the fact that we don't even know if there actually is like maybe retail demand. Maybe we know there's institutional demand maybe not retail demand. like what is like that one thing that keeps you up at night building in this vertical and thinking about this vertical? >> I think on our side, one of the one thing that I would say keeps me up at night the most is legacy systems and integrations. I think that those cannot be um underestimated in terms of what needs to be done in order to match where we're seeing you know on the front end and and onchain efficiencies happening. There's still a lot that is happening back here after execution that I think will take time to to fix and and it'll take um you know not not two years I think we're looking more out than that but I do think given the complexity of legacy infrastructure and also how it is different by client set by asset type by you know jurisdiction anything at all I think the legacy infrastructure side is is one of the biggest hurdles to overcome you from for my side actually the one thing they're most concerned about is investor educations because everybody is kind of jumping on these out of bay bandwagon so there are different kinds of issuer coming out to just launch all kinds of out of bay back products and a lot of the investors in the crypto world they are just chasing after yield so they look at anything that has the highest yield they just jump in but without really knowing what risk they're taking in either the underly line risk or the counterpart risk and when things blow up you know either fraud or whatever that happens then a lot of money is lost and I think that is something that I am most worried about and not just because they could be competing with us but it's really that all these kind of failures will lead to lowering of investor confidence and obviously giving a bad reputation to to the web three world so I think that that is one part that I would like to see more like you know better investor education and proper regulation of you know issuers that come out to launch RWA products. >> Yeah. A lot of the reg regulatory landmines that you worry about are actually because people have kind of invested and not really understood what they were doing and then a regulator kind of comes along and tries to deal with that. So it's that kind of almost like regulatory failure is probably the thing I would worry about most. >> Got it. Yeah. Um the final two minutes what I want to ask is uh brief concise. What does the next five years look like for tokenized uh the tokenized asset class vertical? Um yeah like what are maybe what are your wildest dreams? What is like a spicy take you have about the tokenized asset class more generally? Um I'll start Sandy with you and then we'll work our way down. >> Yeah. So I think within the next five years you're going to see the widespread introduction of wallets across the entire financial ecosystem both traditional players and emerging players. Um I think that you will have kind of a range of product that's being offered though there. Uh and that because of the legacy system issues that a lot of the traditional players have, you're probably going to have this kind of digital twin world where things don't operate in real time. they operate on trade date uh time and then you'll have this this more kind of cryptonative world where things are happening in real time and you know the question becomes is that real- time advantage big enough that the pressure builds and you start to see a wholesale try transition of assets out of the trade date to the real- time infrastructure uh and if I had to lay a bet I think that's what's going to happen >> um I will use my wish question for the next 5 years, but I do think it is true in in certain areas more than others. Definitely in the cash side is more of an abstraction away from the tech. I think in 5 years time there'll be certain parts of the life cycle that we won't be talking about in as much detail as we talk about today. Similar to how I go to a coffee shop today and and I pay for my coffee. We don't talk about the amount of, you know, spaghetti that that goes through afterwards in terms of payment and and where which bank it goes into and and then which bank, etc. So I'd like to see you know us move away a bit from talking about the tech specifically and more about the products themselves. >> Got it. German >> very quickly I think some intermediaries could be removed for example fund administration because a smart contract effectively can do that job. >> Sure. >> Um weird and wacky products that we um we and interesting products that we haven't seen kind of on chain before. So things like yeah commodities um I I think there's going to be a lot of innovation. >> Awesome. All right guys well that's all the time we have. Thank you for everyone's time. Thank you guys very much. Had a great chat. Um enjoy your day. Thank you for coming. Take it.