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Tokenization: The Next Investment Revolution - TOKEN2049 Singapore 2026 — Transcript

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0:08All right, hello everyone. We are here
0:10to deliver the hot spicy takes.
0:13>> [laughter]
0:14>> Most tokenization panels spend all the
0:17time talking about infrastructure and
0:20rails. Uh, not this one. We're going to
0:23focus on changes to investing itself.
0:26The investment process, investment
0:28products, clients, competition, policy.
0:31The gamut.
0:33We're lucky to start with four
0:35world-class experts, and we're going to
0:36dive straight in. Nikhil, I'm going to
0:40start
0:41with this one coming to you.
0:44Crypto spent years
0:46trying to take
0:47digital native products and wrap them in
0:50ETFs.
0:52Today,
0:53we're focused on taking traditional
0:55assets and bringing them
0:57over to the blockchain.
0:59Is this the same trade? Is it the
1:01opposite trade? Like, how should we
1:03think about this as a theme?
1:06>> [snorts]
1:06>> Great question, Michael. Um,
1:08fundamentally, these are different
1:09trades, right? Because if you think
1:11about what ETPs are doing, they're
1:13taking a novel exposure, a crypto
1:15exposure, putting it in a familiar
1:17wrapper, making it available to
1:19investors, fusing it in their behavior.
1:22If you look at it the other way,
1:23tokenization is taking traditional
1:25exposures, exposures that we have today
1:28within the traditional markets, putting
1:30it in a format that's amenable to this
1:32new cohort that's taking exposures
1:34through digital wallets.
1:36They're solving different problems, but
1:38then there is one unifying sort of, uh,
1:40common denominator to both. I'll come to
1:42that in a bit.
1:43Uh, if you look at ETPs, what they
1:45basically solved is like investors were
1:47able to single-click access crypto
1:50exposures. That's what expanded the
1:51market. Now, we are at about 120 billion
1:55in about 2 years. That's what ETPs
1:57enabled.
1:58If you look at tokenization, what it's
2:00enabling is additional utility. So, it's
2:02an access versus utility story.
2:04The common denominator, however, is the
2:06fact that you're not actually changing
2:08or forcing a change in user behavior.
2:11You're actually providing the exposure
2:13where the user actually is.
2:15That's what enabled expansion. So, we
2:17have seen ETPs expand the market there.
2:20Tokenization is a journey in progress.
2:22We'll see where that goes.
2:24>> Carrying on that theme,
2:26Amy, I'm going to come to you on this
2:28one.
2:29Earlier this year, the SEC confirmed
2:32what I think a lot of TradFi believe to
2:35be true, that tokenizing an asset
2:38doesn't fundamentally change the nature.
2:41You know, a a tokenized security is
2:43still a security.
2:44>> That's right.
2:45>> Now,
2:46you've traded emerging markets for many
2:49years.
2:50And so,
2:51using that experience as as a lens,
2:54are there sometimes cases where
2:57the form
2:59is actually more meaningful than the
3:02substance? Like, just tokenizing the
3:04asset, even if it doesn't change its
3:07underlying nature, create new
3:09opportunities, new risks that have to be
3:11incorporated into the investment
3:12process.
3:14>> It's a great question, and I think one
3:15of the things we're dealing with
3:18where in the in the traditional markets,
3:20we had locals, ADRs, derivatives,
3:23P-notes, we had they had different
3:25names, and you got different features or
3:28functions out of those
3:30uh assets before.
3:32In the new market, especially as we're
3:34tokenizing everything, all of those are
3:36called tokens. And as we continue to
3:39bring more clients into this market,
3:42it's starting to get a little confusing.
3:44So, many of the tokens and the activity
3:47we've seen today,
3:49access plays for international
3:50investors, it's a it's a great use case.
3:53It's working well.
3:55But that's not the same as say a a
3:57mirror token and the activity that's
3:59happening on DTCC. And it's one of the
4:02challenges I think we have today is
4:03trying to navigate that.
4:05>> Cynthia, I'm going to pull you in here.
4:09In the investment process itself,
4:11>> Yeah.
4:12>> when a PM is running a tokenized asset,
4:17what are the core changes that they need
4:20to be mindful of?
4:21>> So, that actually is a
4:24really interesting question. The
4:26portfolio process where the the fund
4:31that's being tokenized, if the fund is
4:33investing in traditional assets, that
4:36investment process in terms of portfolio
4:38construction and risk management doesn't
4:41change necessarily. What is different
4:44and it starts with the liquidity
4:46mismatch between the traditional markets
4:49in which the portfolio is investing and
4:51now this new wrapper that is available
4:54to be traded 24 by 7. And so, how you
4:58can reconcile the ability for the
5:01investor to transfer that asset
5:04throughout the 24/7 global
5:08period and be able to understand the
5:11impact on an underlying portfolio that
5:14doesn't trade at the same time. And so,
5:17what that means is there are cutoff
5:19times for when investors are able to get
5:22in and out of the traditional fund
5:24because that's the timeline of the
5:26underlying market and the on-chain
5:29investors' expectation is not that there
5:32is a cutoff time. And so, what a lot of
5:35folks right now are trying to work on
5:38are ways to be able to bridge that gap
5:42between the cutoff times and the
5:45natural expectation on chain that you
5:48can, um, transact 24/7. Uh,
5:52the impact on the underlying portfolio,
5:55as long as you are not impacting the,
5:57um, in and out or redeem and and
5:59subscription, um, periods of the
6:01underlying fund, they continue to trade.
6:04The problem is is now finding a way to
6:06bridge that liquidity mismatch.
6:10>> So, Hunter, at, you know, downstream of
6:12that PM activity,
6:15end investor perspective,
6:17are there new processes that are
6:19necessary to hold tokenized assets? Do
6:22they need separate due diligence,
6:24different, you know, custodial
6:25relationships?
6:27How much of this can be reused? How much
6:28is brand new?
6:29>> Gosh, I agree with everything that's
6:31been said and and something that Amy
6:33said really resonated with me as it
6:35pertains to this question, which is
6:37there are so many different dimensions
6:39to tokenization right now.
6:41We have a a tokenized fund, US CC,
6:44which, uh, runs the basis trade,
6:46generates yield.
6:48That's totally different than tokenized,
6:50uh, SPY or, uh, IVV.
6:53Um, that's very different than in in our
6:56vaults, there's, uh, tokenized GPU
6:59credit.
7:00Uh, USDAI or PST, which is tokenized,
7:03uh,
7:04working capital loans. People know Prime
7:06from Figure. So, there's so many
7:08different So, the it's almost hard to
7:09talk about the subject matter. Um,
7:12>> That's why we're here.
7:13>> I I know I know even even even uh, I I
7:15you know, I feel like people started to
7:17use tokenization as shorthand for the
7:19liquid stuff and RWAs, which are
7:21tokenized, as shorthand for the for the
7:24credit collateral.
7:25Um,
7:27the short answer is yeah, there's
7:28there's tons of nuances, uh, that really
7:31vary depending on which cross-section,
7:33but I think generally speaking, there's
7:35a lane which is, uh, public liquid
7:38exposure to US equity markets, uh, for
7:41investors outside of the US. Um that's
7:44one big lane. There's another which is
7:47um
7:48uh you know, sort of the opportunity
7:50that Biddle uh pioneered, um which is uh
7:54uh tokenizing um
7:56conventional fund instruments to make
7:57them available for uh treasury
8:00management and so on and so forth. And
8:01then I think there's a there's a third
8:02lane today, which is um uh tokenizing
8:05credits that can be interesting
8:06ingredients in vaults and other on-chain
8:08activities. So,
8:10depending which one, um there's
8:11different details, but there's a lot of
8:13details that have to be understood and
8:15and have to, you know, you have to get
8:16right on the engineering front also,
8:18which is kind of a newer dimension from
8:20investment engine perspective, as well
8:21as the regulatory front and everything
8:22else.
8:24>> Throw this one to you, Nikhil, but
8:25others can weigh in.
8:27You mentioned [snorts]
8:28tokenizing conventional assets.
8:32Should investors expect those prices to
8:34diverge?
8:35>> Yeah.
8:36>> And if so, why?
8:37>> That's an interesting one because we
8:39kept we we keep getting that question
8:41from investors as well or prospects as
8:43well that we talked to.
8:44Um I'll I'll limit my answer to the fund
8:48that uh Hunter mentioned earlier cuz
8:50compliance does not allow me to name
8:51that fund.
8:53Um
8:53but when you think about money market
8:55funds broadly,
8:57um it's useful to decouple what the
8:59exposure is, what the utility is, and
9:02then the pricing.
9:03So, if you think about money market
9:04funds, the one that Hunter mentioned as
9:06well, our tokenized liquidity fund in
9:07the US, the underlying isn't changing.
9:09Which means the yields are the same. If
9:11you look at the other money market funds
9:13that we've launched, the underlying is
9:15public debt treasuries, uh individual
9:17currency-based debt, etc. The yield So,
9:19the yields are the same.
9:21What tokenization enables is essentially
9:23taking that same unit in a different
9:26format and moving it faster, maybe 24/7
9:29pay
9:30transfers,
9:31instructing redemptions on chain, etc.
9:34That's where utility starts to set in.
9:36So, the question then is the clearest
9:39utility that arrived so far with with
9:42the fund that we have was for on-chain
9:44native investors with the that were
9:46already on chain.
9:47So, they had stable coins on chain. They
9:49were able to sweep it into the money
9:50market fund, the tokenized liquidity
9:52fund, and yields off it.
9:54Um as the aperture widens and
9:57institutions start to step in, those
9:59utilities have yet to be manifested at
10:02scale.
10:03What we do believe is some of the
10:05unlocks will be on uh collateral
10:07mobility, treasury management workflows
10:09where the principal stay the same.
10:11Where you're taking a tokenized
10:12instrument and saying, "I don't want to
10:14redeem it into cash.
10:15I can take that yield-bearing uh
10:17yield-bearing instrument and just
10:19transfer it peer-to-peer either for my
10:21treasury management workflows or as
10:23collateral or as trading margin."
10:25But for that to scale and for an
10:27institution to actually say, "This is
10:30how I can plug it into my workflows at
10:32scale." We are still evolving in that
10:34journey.
10:35Why that's important is because that's
10:37the price discovery procedure. That's
10:39the price discovery process as well.
10:41That would be the journey when
10:43institutions start to see this and
10:45almost start to say, "Yes, this is the
10:47same uh sort of instrument, same
10:49exposure, but providing me a higher
10:51utility for which I might be willing to
10:53sort of pay an extra price or have a
10:56discount or whatever." So, that's the
10:58process we are on. It's an incredible
11:00opportunity for the
11:03for active management to potentially
11:04come back in to the arena. But we we've
11:07moved so far to just focusing on passive
11:10assets, especially in the traditional
11:11finance space.
11:13But if you do have additional venues,
11:16different ways to access the same
11:17exposure, uh
11:19there's an opportunity there. And
11:21fragmented liquidity, uh mispricing
11:24depending on markets that are open,
11:26markets that are trading 24/7,
11:29I would expect to see some of the
11:31investors get involved in that
11:32opportunity opportunity across the
11:34board.
11:34>> Yeah, I think that's totally fair and
11:36and the point that Nikhil made earlier
11:38about the fact that um there's obviously
11:41our traditional market where the primary
11:43liquidity resides um and a new emerging
11:46market trading similar instruments um
11:49with less liquidity, there's going to be
11:52an opportunity for arbitrage, but over
11:54time as um liquidity starts to migrate
11:58and equal there's an equilibrium that
12:00the markets eventually equalize, that
12:03arbitration opportunity, right, starts
12:05to uh reduce. And that's sort of the the
12:07natural evolution of, right, market
12:09maturation.
12:10>> There's been a lot of harmony on this
12:12panel. I'll try to
12:14upset that now with my next question.
12:16Hunter,
12:19do you crypto-native asset management
12:21firms have a head start in this space
12:25versus the more traditional asset
12:27managers?
12:28>> Three of the largest financial
12:30institutions in the world sitting here
12:32at First of all, don't want to piss any
12:34of them off. Uh admire them. Uh do do
12:36the crypto-native firms have head start?
12:38May- maybe a little bit. I you know, I
12:40don't I don't feel tremendously um
12:44Yeah, that's that's the I guess it'd be
12:46the short answer. I mean, as a firm we
12:48have one
12:50area of focus, so I suppose in that
12:51sense from a prioritization perspective,
12:53I think sometimes
12:55um
12:56in crypto people can forget that
12:59these great institutions sitting sitting
13:00next to me here are responsible for a
13:03lot of things uh that are very important
13:05to clients. Um
13:06whereas we in some ways have the
13:08uh the luxury of uh of just this one
13:11focus, but um
13:13So we you know, we we try to we try to
13:14look to to where things are going and
13:16the uh opportunities investors want to
13:18participate in and and approach that,
13:21but um
13:22I don't know if there's any structural
13:23reason.
13:24>> Such a gentleman.
13:25>> Um some some opportunity there. Um, I
13:29think coming from a large um traditional
13:31asset manager, um our um operating
13:34platform has been optimized uh to
13:37perform um and perform at scale uh
13:40within a traditional market environment.
13:42Um introducing digital assets into that
13:45traditional operating environment has
13:47been a challenge. And so, I think
13:48there's um there's trade-offs to um you
13:51know, having that blank slate. If we
13:53were to create the correct operating
13:55system uh to be able to support digital
13:58assets across the entire investment um
14:00uh ecosystem, um I may not design it off
14:04of the back of a traditional operating
14:06platform. Um and so, does that slow us
14:10down a little bit? Does that offer us uh
14:12maybe some learnings into how we might,
14:14right, think about building um uh
14:17ways to be able to support digital
14:20assets side by side with the
14:21traditional? Um that's also quite a bit
14:24tricky.
14:25>> No, we coexist pretty well together. So,
14:27we we've launched our own crypto ETPs.
14:31We were
14:32late to the game. You would think, why
14:33did we ever need another Bitcoin ETP in
14:35the marketplace?
14:37And here we are in 6 months, we've hit a
14:39billion dollars within our crypto ETPs.
14:42At the same time, Hunter and some of the
14:44products that Bitwise uh
14:47have launched are also available on our
14:49wealth platform,
14:51do super well in terms of uh educating
14:54our financial advisors. Thank you,
14:55that's a huge lift.
14:58>> And and then you also have like the
15:00automated token portfolios. I mean,
15:03that's awesome. It it really is like
15:05starting to look at some of the new
15:07product that potentially will come to
15:08market and uh hopefully at some point we
15:11can consider working together on things
15:14like that.
15:15>> Still trying to stir controversy.
15:17>> [laughter]
15:17>> Proving Proving very hard.
15:19Nikhil, I'll come to you.
15:21Does a firm like BlackRock have a house
15:24view on whether you'd prefer to steer
15:28a client toward a particular wrapper
15:33when an exposure could be available
15:35through a number of different products?
15:37You know, is is a a tokenized asset
15:40versus a mutual fund versus a
15:41traditional ETF?
15:43>> [snorts]
15:43>> You know, how do you think about
15:44prioritizing that type of distribution?
15:48>> Actually, it works the other way.
15:49So, it starts with the client outcome,
15:51right? So, as long as the client outcome
15:54is satisfied,
15:55it could be any wrapper, a combination
15:57of wrappers, it could be a LEGO block
15:59that sort of combines a bunch of
16:01wrappers to kind of achieve that
16:03particular client objective. And as
16:05cliche that that as that might sound,
16:07that's exactly the process because it
16:09starts with the client sort of saying
16:12uh what they actually want and then
16:13which product, which wrapper actually
16:15satisfied that.
16:17So, then the wrapper essentially starts
16:19to become a means to an end
16:22in terms of what objective needs to be
16:24needs to be achieved.
16:25Tokenization, therefore, like as an
16:27extension, is
16:29um it it provides an interesting
16:31proposition in that one, you can use the
16:35wrapper to reach a new cohort of
16:36investors. You can add utilities that
16:39potentially did not exist in the
16:41traditional file format of the same
16:43asset.
16:44As an extension, it also allows you to
16:47sort of interact or it allows the holder
16:50through the asset to interact with
16:52utilities directly on chain.
16:55And that's where we come to
16:56decentralized finance, wallets, and all
16:59the new constructs today.
17:01It's an interesting proposition if you
17:02think about it because it's almost like
17:04an open access market where regulated
17:06financial products could interact.
17:08The ability is there because you have
17:11created the asset in a format which can
17:13interoperate.
17:15What needs to happen though is that the
17:16control parameters that exist in
17:18regulated assets today, think about KYC,
17:20AML, the entire governance model, needs
17:23to somehow marry with these new
17:24protocols as well.
17:26Now, that's a work in progress. Today,
17:28it might not match one-for-one.
17:30It's heartening to see some of the work
17:32happening in the space in terms of like
17:34identity, privacy preserving identity,
17:36verifiable credentials, etc. So, I mean,
17:39going forward into the future, we might
17:41see a time when like regulated financial
17:43products in some ways can interact with
17:47open access protocols.
17:49Preserving the control perimeter that
17:51exists today, but in a way that's more
17:53amenable to this this market. Primarily
17:56being like if you can map out KYC, AML
18:00to
18:01these these tokenized constructs and
18:03like bring it into
18:05protocols on public chain, it's
18:07definitely something that provides more
18:10utility. So, something that might urge
18:12us to sort of point clients towards that
18:15saying, you could hold the same
18:16exposure, but you could do X, Y, and Z
18:18more than what you're doing today.
18:20That still, going back to your question,
18:22doesn't lead us to kind of
18:25pushing that to a client. If it really
18:27adds to a client portfolio in terms of
18:29an addition, bolt-on complement, then we
18:31would. But, overall, it's almost like
18:33that LEGO block that we would like to
18:34create.
18:35>> You mentioned vaults. I'm curious if
18:37other kind of
18:39DeFi-born products are also beginning to
18:43make their way into the, you know,
18:46product construction process. Like, will
18:47we see
18:49prediction markets and perps and some of
18:51these others begin to emerge inside the
18:54more, you know, traditional asset
18:56management menu?
18:58>> The way that I think about asset
18:59management is, you know, we are um
19:02orchestrating, yeah, I'm using a term
19:05right common in crypto. We orchestrate
19:07capital, we orchestrate investment
19:08opportunities, and and we deliver those
19:11um opportunities to our investors. And
19:14um incorporating new instruments into
19:16our investment process is is sort of
19:18natural um to an asset manager. It's
19:21happened, you know, many times over the
19:22last several decades as new derivative
19:24instruments have come um into existence
19:27that allow for um different ways to be
19:30able to slice um exposures or provide,
19:33right, more precise hedges. Um and so,
19:36you know, I think of um tokenized assets
19:39uh being incorporated into a portfolio
19:41as part of the natural portfolio
19:43construction process. You're going to
19:45look for um the lowest cost way to be
19:47able to access an exposure um and and
19:50the lowest capital intensive way uh to
19:53be able to deliver that taking into
19:55account, right, risk management um and
19:58uh the overall um you know, quality of
20:00the investment experience. And, you
20:02know, ultimately, when we think about
20:04what the future of wealth management and
20:06and asset management looks like, um you
20:08know, we're going to succeed if we are
20:10able to um you know, demystify for our
20:13investors how they access investments.
20:16Um and, you know, we don't talk about,
20:19you know, our assets sitting on a
20:20traditional ledger or assets sitting in
20:22paper form in a vault somewhere, um or
20:25our assets, right, sitting on a
20:26blockchain, um you know, in their
20:28account statement, they're going to look
20:30at what their portfolio value is and and
20:32what the investments are, um but we're
20:35not going to um get into the detail and
20:37customers aren't going to ask, you know,
20:39exactly how are you recording my
20:41ownership of that asset?
20:42>> You know, the one thing I like about uh
20:44perpetuals, prediction markets, all
20:46these other themes that we've talked so
20:48much about this year, when it comes to
20:50digital assets,
20:51we need that infrastructure support 24/7
20:54and the real-time data to be able to do
20:56that. So, as we have momentum in so many
20:59of these themes, we're able to push the
21:01teams to really think about some of
21:03those core infrastructure upgrades that
21:05we need to make across the board. And
21:07that's critical no matter what
21:09takes off and is sustainable long-term.
21:12Um so that's the one thing that I'm
21:13getting out of it right now. It's really
21:15push a lot of the uh teams to continue
21:18to build. Maybe if I could just one more
21:20item on the basis of what you just said,
21:22um you know, one of the um proof cases
21:26that uh we've, you know, started talking
21:28about internally with our um investment
21:30teams is the idea of enhanced price
21:33discovery as a result of um perpetuals
21:37and and prediction markets because
21:39they're operating 24/7. And so they have
21:42the ability to take into account market
21:44information real-time um and be able to
21:47produce um the impact on prices during
21:50hours when markets are not open. And
21:53when that reconciliation happens, when
21:55the markets open again, um it's actually
21:58quite remarkable um how valuable that
22:00additional um uh information point is
22:04price discovery process. And so this is
22:07really, you know, from our standpoint,
22:09um an extension of how these new markets
22:12are um you know, adding value and and
22:15integrating into the fabric of markets.
22:17And ultimately, right, it should be one
22:19market, not a traditional market and an
22:21on-chain market.
22:23>> Incidental but important is collateral.
22:26So when these markets are uh sort of
22:28proliferating, you do need to post
22:30collateral trading margin.
22:31And the moment you have a tokenized
22:33instrument as collateral, something that
22:35you trust, it starts to become an
22:38additional sort of instrument that you
22:39could sort of plug into these markets.
22:42That is something that we will see a
22:43proliferation of, I mean, within the
22:45control perimeters that exist. Um
22:48So that's to add to what
22:50Cynthia said.
22:51>> Let me shift to clients for for a
22:54moment. Uh
22:56Hunter, I'll I'll start with you on this
22:57one.
22:58Big picture,
23:00who's leaning in?
23:02Who's leaning out with respect to
23:04tokenized assets?
23:05>> Tokenized assets. Well, I want to be on
23:07the record as saying I think vaults are
23:09awesome and are going to be
23:11transformative.
23:13Uh we introduced uh we we've just
23:15entered the vault category this year.
23:16So, I just want to have shouted shouted
23:18that out. There's a lot to learn. We're
23:19trying to uh understand what what people
23:22want and what the building blocks are,
23:23but I just think it's a super exciting
23:26cross-section of the sort of
23:28permissionless democratization
23:30blockchains, the tokenization of
23:31collateral, um stablecoins, etc. So,
23:34very very um very excited about that. On
23:37the client side, uh who's leaning in?
23:39Who's Okay. So,
23:42today we serve a very broad
23:44cross-section of clients. Sovereigns,
23:47endowments, billionaires, wealth
23:49managers, hedge funds, crypto
23:52entities for lack of a better term,
23:54individuals. Um we do that across uh the
23:57US, Europe, Asia.
23:59Um Interestingly, I have
24:02it's very hard to paint with a broad
24:03stroke and and any any thoughts from
24:05anyone uh on this panel would be as
24:07valid as mine, but interestingly, my
24:09perception has been that the more
24:12professional investor is progressing
24:14forward and the more individual investor
24:17has seemed timid. Um and uh and so I'll
24:21put some data to that. Last year after
24:23Bitcoin crossed 100,000, I believe that
24:25long-time holders of Bitcoin sold north
24:27of $150 billion Bitcoin.
24:30Um
24:32that was individuals and people uh that
24:35wasn't uh institutions, um that wasn't
24:38uh financial advisors. So, uh the great
24:42thing and I think an element of the
24:43maturation of the market is there's a
24:44lot of different market participants. Um
24:48but uh that that's a bit of a read. We
24:50we put out a report about 2 weeks ago
24:52where we shared interviews with 15
24:54institutional allocators, not asset
24:55managers, but um endowment endowments,
24:58pensions, corporates,
25:01uh one or two sovereigns that own
25:03Bitcoin, and um we didn't use their
25:05names, but got their permission to share
25:06their words, and they all um
25:09they all own Bitcoin, they didn't sell
25:11it, they're happy to own it, they might
25:12buy more.
25:13So, that's that's, you know, word of
25:15word from 15 institutional allocators,
25:17and uh
25:18and uh so, I think it's been an
25:20interesting interesting 12 months in a
25:22sense because
25:24uh I think that the professional
25:25investor um
25:28has generally felt constructive about
25:29the space.
25:30>> The client base, if it's self-directed,
25:32so clients coming and actually putting
25:34in their own trades, or financial
25:35advisors that are actually advising and
25:38offering specific recommendations.
25:41Underneath that, there's so many
25:43different client types, and that are in
25:45different journeys across either their
25:47crypto exposure, or where they want to
25:50go with tokenization, and that's making
25:52it very hard to actually roll out
25:54products, and even educate. Because you
25:56have some that have been in the space
25:58for a long time,
26:00they want a product that helps hedge
26:01their Bitcoin exposure, provide a yield
26:04on it. There's others that just want
26:06price exposure, there there's others
26:08that still want the spot crypto
26:09exposure, there's others that want
26:11lending on the back of it. And it's that
26:14on-demand customized solution for
26:16clients, uh
26:18hopefully agents maybe helps solve that
26:21for us.
26:22But, it's really tough. It it creates a
26:24really difficult called environment to
26:26uh and also there's a blurring, right?
26:28Because
26:30on our wealth platform, we have find
26:32uh family offices,
26:34and high net worth investors that are as
26:36large as our institutional clients.
26:39And and same thing on the self-directed
26:42side, it's really tough sometimes to
26:44actually
26:45identify the client channels, and really
26:47segregate that by the client or the
26:49product that we push down to certain
26:51clients.
26:52>> I think one thing to decouple um just to
26:55just to Amy's point is like when you
26:57look at crypto exposures, it's about
26:59access. And that's to sort of
27:01Hunter's point and Amy's point in terms
27:03of what started out with self-directed
27:06has evolved into an execution only and
27:09transforming into advisory,
27:11which is where ETPs sort of fit within
27:14an investor portfolio.
27:16When you look at tokenization, it's
27:18about utility.
27:19So then you're looking at the initial
27:21sort of demand that came in and who
27:22leaned in is mainly a stablecoin
27:25audience that holds cash on chain,
27:27already lives on chain, knows how the
27:29behavior is on chain. So it don't know
27:31it was almost like an extension of
27:34a life that's already being lived on
27:36chain.
27:36Now when you start to think about it
27:38from an institutional perspective, from
27:39a tokenization standpoint, the idea is
27:42like I have the exposure already. What
27:44is that 10x benefit that I'm getting
27:46that I should hold this exposure in a
27:47tokenized format? That's what is being
27:50uncovered right now, which is as more
27:52and more tokenized instruments start to
27:54get more prevalent in like institutional
27:56portfolios, tokenized deposits,
27:58stablecoins, or e-money tokens,
27:59depending on which jurisdiction you are
28:01in,
28:02the question is, okay, I have this
28:04tranche of ultra liquid cash, which may
28:06be idle at some point in time. What do I
28:08do with it? So then I'm starting to
28:10think about other tokenized yielding
28:11instruments out there, which I can sort
28:13of plug into my
28:15So it's sort of I mean, we spoke about
28:17the wrappers in terms of how they're
28:18coming in from opposite directions. I
28:20feel like that has a bearing in terms of
28:22how the investor behavior has been as
28:24well in terms of it coming in from
28:26opposite directions and sort of
28:27converging somewhere.
28:28>> And then we have this theme around the
28:31in-kind transactions
28:33to ETPs. So like I agree with you. I
28:36mean, the value that will come when
28:38we're able to take these tokenized
28:40assets
28:41is yet to even be delivered in the
28:43market, but yet we see crypto assets
28:46being in-kind moved into ETPs. And
28:50that's been I mean you've seen it the
28:52same way we have. Like it's been a
28:53pretty active space.
28:55>> It's so fascinating just to describe
28:56describe it for those who are not
28:57familiar with what we're talking about.
28:59There are
29:00starting last year and I think more
29:02common for all of us this year is
29:06individuals taking Bitcoin or Solana or
29:09whatever that they already own and
29:10swapping it for shares of the ETF.
29:12>> Yep.
29:13>> And I think we've probably all seen
29:15in some cases hundreds of millions of
29:17dollars of that activity this year which
29:19is sort of fascinating but people saying
29:21the benefits of of the ETF or feel
29:23strong enough
29:25that I'd rather own the ETF shares than
29:27the spot asset. I think I think
29:28ultimately of course the answer will be
29:30that people want a bit of both in the
29:31same way that everyone in the audience
29:32sometimes uses cash, sometimes a credit
29:34card, sometimes a wire, sometimes an
29:36ACH. Different you know different
29:37formats for
29:39you [clears throat] know one one person
29:40one institution can use different
29:42formats but that has been a fascinating
29:43development this year.
29:44>> Yeah.
29:45>> I think the diversity of the ownership
29:48population across the ETFs really
29:50reflects
29:51the different use cases. The in-kind
29:54transactions you know one of the primary
29:57benefits of owning an ETF or an
29:59exchange-traded fund
30:00is the tax efficiency that comes because
30:03the portfolio manager doesn't have to
30:05actually buy and sell the underlying
30:07asset in order to accommodate
30:09subscriptions and redemptions. And so
30:12now the ETPs have been able to take
30:14advantage of that in-kind transaction
30:18which is tax efficient to the underlying
30:20investor. But what we saw a lot of the
30:23conversions were coming from investors
30:26who
30:27wanted to be able to hold their Bitcoin
30:30for example or ether or Solana
30:33in an exchange-traded product where
30:36custody was the responsibility of the
30:39ETF. And for them uh, that was a a
30:42combination of things in terms of,
30:44right, safety and security, um, in a
30:47location that they trusted. Um, there
30:49was some estate planning, um,
30:51uh, that went along with their thinking
30:53in terms of why better to have it
30:55through a third-party custodian and not
30:57necessarily one that, um, you know, they
31:00had to, um, individually open the
31:02account and and set up.
31:04>> One of the dominant themes that we've
31:05heard from this stage over the past
31:07couple of days is
31:09tokenization, digital assets, you know,
31:11blockchains broadly
31:13being an extraordinary, you know,
31:15symbiotic, uh, partner to agentic
31:19commerce. I'm curious with some of the
31:21world's leading asset managers on the
31:23stage,
31:24is agentic a channel that you're
31:27beginning to consider, or is that still
31:30science fiction?
31:31>> So, maybe this is where we're going to
31:32get a diversity of views. Um, I I'd say,
31:36um,
31:36agentic commerce, um, you know, agents,
31:40uh, deployed within the, you know,
31:41fiduciary activity of investment
31:43advisors, um, and and asset managers,
31:46um, is is something that, you know,
31:49should be considered, um, and and, you
31:51know, is actively being considered, I
31:53know, across, um, a number of different,
31:55um, organizations.
31:57Uh, it's it's something that, um, uh,
32:00when you look at the, um, increase in
32:03use cases for stablecoins, um, and the
32:07ability to be able to transact, um, you
32:10know, cash value on chain, um, how that
32:13has transformed, um, payment and
32:15settlement networks, um, you know, we're
32:18seeing, you know, with the, uh,
32:20application of, uh, AI agents, um, there
32:24are definitely a number of, right,
32:26potential use cases, but I think it's
32:29still really early days before we can
32:31really establish the overall governance
32:33and and operational and risk management
32:36frameworks, um, for how they can
32:38actually be deployed at scale. So, early
32:40days in terms of research and
32:41development.
32:42>> I think at at a principles level,
32:44instead of getting into whether we are
32:46implementing it or not, at a principles
32:48level as to why it matters is if you
32:50think about the marriage between AI and
32:52tokenization,
32:54AI is essentially ingesting a lot of
32:56information,
32:57sequencing it, providing your decision.
33:00You then need to execute the decision
33:02through value, and that's where
33:04tokenization comes in.
33:05So, if we go by fundamentals in terms of
33:08like what is tokenization enabling you,
33:10it's enabling you to represent value in
33:12a machine-readable format. So, if you
33:14have an AI workflow in which you want to
33:16you want to plug in intuitively,
33:18organically an asset,
33:21which is what has started with agentic
33:22commerce in terms of if you have a
33:24payment workflow and you need a digital
33:26asset to plug into it organically,
33:28that's where stablecoins come in. That's
33:30been the start point. Now, if you
33:31actually extrapolate that journey into
33:33seeing what what could agentic AI do as
33:36a next step? It could potentially do
33:38delivery versus payments, where you have
33:40a regulated asset like a money market
33:42fund or the assets that we spoke about,
33:44and a regulated liability, which could
33:45be any form of cash on chain,
33:48and then that settlement is executed by
33:50an agentic AI platform.
33:53Now, what tends to happen when when you
33:54start to get into these sort of journeys
33:57is that the transactions could become
33:59complex,
34:00at which point you have an agent
34:02actually running on its own and then
34:04executing something extremely complex
34:06directly on chain, at which point it
34:08could require compute, additional
34:10compute on the go.
34:12So, then that almost creates a
34:13possibility for you where there could be
34:15a new sliver of a market that's created
34:17where
34:18as I'm executing that transaction as an
34:20agent, I could buy compute on the go.
34:22So, the possibilities are endless, but
34:25the crux of it remains where AI is
34:28essentially contextualization and you
34:30have tokenized assets that naturally fit
34:32in through like execution of that
34:34decision with value.
34:35>> I'm going to give a slightly different,
34:37more real-time example.
34:39So, going back maybe about 5 7 years ago
34:42on the institutional investing side, we
34:44had this trend. Uh so,
34:47on on our investment team, we had
34:49institutional clients that were coming
34:51in and starting to really get into the
34:54details. They'd bring in these quant
34:56analysts and they would just start going
34:59through every single element of the data
35:02of the fund, risk parameters,
35:05performance details, and even the
35:07portfolio managers themselves didn't
35:09really have a good view, a good lens on
35:12the this risk-return profile down to
35:15like the nth detail.
35:17What an agent can do for consumers now
35:19in this day and age, they can start
35:21doing that same analysis and really
35:23democratizing it down for every
35:25consumer, and then also start finding
35:28hidden fees.
35:30What is there an optimized portfolio
35:32position?
35:33Now, for well asset and wealth managers,
35:36you better have the best product out
35:38there, or else the agent's going to be
35:41providing a trade to that client and
35:44saying maybe there's a better product
35:45out there. And that can happen today. I
35:47don't even think we have to wait for
35:49tokenization to have that in the market.
35:52>> Can I ask? I'd love to actually ask ask
35:54the audience, very briefly if you
35:56forgive me, how many of you have asked
35:58ChatGPT about an ETF or to try to find
36:01an ETF to invest in? I'm so curious.
36:06>> Decent number.
36:06>> Some. Maybe maybe 10%? Maybe 20%? Yeah,
36:09interesting. So, you know, I I think I
36:11think a lot of different vectors uh on
36:13this, um but I think the short answer is
36:16it's it's inevitable that these two
36:18things are colliding. All right, we've
36:19got 90 seconds. We're going to do a
36:21couple of lightning round
36:23questions. Quick answers.
36:26What percentage of your clients will
36:29hold a tokenized product
36:32in 5 years?
36:34>> 5 years.
36:36Um
36:37going to go with
36:3810 in 5 years.
36:41>> Hunter?
36:43>> 60, 50, 60, 70, something like that.
36:46>> I'm going to skip this one.
36:48>> [laughter]
36:50>> I had a hunch.
36:50>> Yeah, I was going to say 10%. We put out
36:52some research and
36:54um by 2030, you know, we were looking at
36:56numbers that were around 10%.
36:58>> All right. I'll pivot to overrated or
37:01underrated for institutions.
37:0524/7 trading.
37:07Overrated or underrated?
37:09>> Overrated in terms of um opportunity or
37:13in terms of frequency of use, um but
37:16underrated in terms of the opportunity
37:18set and of having it available.
37:20>> Appropriately rated.
37:22>> [laughter]
37:23>> Um underrated in terms of what it can
37:25enable, but the nuance is important that
37:28we're talking about just just-in-time or
37:30on demand rather than 24/7 because
37:32market quality may not be appropriate
37:3424/7. So, in that respect, it might be
37:37overrated.
37:37>> Totally agree. Underrated for like what
37:40it can really do in the future, but
37:42overrated in terms of people trading
37:44around the clock 24 hours a day.
37:46>> All right, we're out of time. Please
37:48join me in thanking our panelists.

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