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Digital Asset Summit 2026: New York | Main Stage | Day 1
Recorded: March 24, 2026 Duration: 4:31:57Space Recording
Full Transcription
Sun is shining on me
Sun is shining on me
Sun is shining on me
Sun is shining on me
Sun is shining on me
Sun is shining on me
Sun is shining on me Oh, my God. I'm going to go to the next video. Music Good morning. Good morning.
Please take your seats.
Our program will begin in 10 minutes. Hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, hey, Yeah. so
I'll with you. I'll be right here with you. I'll be right here with you. I'll be right here with you. I'll be right here with you.
I'll be right here with you.
I'll be right here with you.
With you.
I'm going to be right here with you.
With you.
With you.
I'm going to be right here with you.
With you.
With you. We were here with you. Good morning.
As a courtesy to presenters and other guests,
we ask that you silence your mobile devices.
Thank you. Música Субтитры создавал DimaTorzok МУЗЫКАЛЬНАЯ ЗАСТАВКА Субтитры подавал DimaTorzok Music
Good morning. Please take your seats. Our program is about to begin.
Music I'm sorry. Thank you. Music I'm out. Thank you. Music Субтитры создавал DimaTorzok We'll be right back. Music Thank you. We'll be right back. Music Please welcome to the stage Blackworks co-founder Michael Ippolito.
Music
Hello everyone, welcome, welcome.
How's everyone doing?
Did we not give you guys coffee or something?
Where's the caffeine?
How's the energy?
People excited?
Okay, fine, fine.
We're going to work into that, guys.
We're going to work into that.
We've got three days together.
All right, everyone.
Welcome, welcome.
Thank you all so much for coming out to Digital Assets Summit.
My name is Michael Ippolito.
I'm one of the co-founders of Blockworks.
We are the organizers of today's event.
Before we get into it, can I give a quick show of hands?
How many people have been to a Digital Assets Summit before?
All right, awesome.
So we've got some veterans here, we've got some newbies.
So if this is, you're coming back to Dask, welcome back.
And if this is your first time, welcome.
So we've been hosting Dask for seven years.
We hosted the first back in New York
in the bottom of a very dismal bear market in 2019.
And ever since we started hosting this conference,
we've been asking one very specific question,
which is what does the future of institutional involvement
look like
for crypto? When we started asking, there wasn't a whole lot. We may have been a little early to
asking that question, but today, as I'm standing in front of you, I'm really excited because I
think the answer to that is more interesting and relevant than it has ever been in the entire
history of this industry. And when I was preparing my remarks for you this morning,
I went back and looked at what I said last year,
just one short year ago, and I called two things out,
which is one, this emerging trend of a dichotomy
that's happening in crypto, a kind of tale of two cities
where you have an enormous amount of enthusiasm
and excitement and people wanting to build
on the institutional side of things.
But in the more crypto-native side of things,
in token land, in kind of the Wild West of DeFi sentiment,
was moving in the wrong direction.
And that was really interesting for us here at DAS.
And then the other trend that I called out
was the merging of financial infrastructure.
Financial infrastructure and crypto rails
to the point where you really had to squint
to see where the line of crypto began
and finance ended.
And as I'm standing here in front of you today,
not only are those two trends still intact,
but I think they've completely redefined
the entire industry.
And actually, it's an interesting data point,
which is going to support some of what
I want to talk to you about this morning.
You know, we've been hosting Dask in many market cycles. We hosted it when, you know, Bitcoin is going to support some of what I want to talk to you about this morning. You know, we've been hosting Dask in many market cycles. We've hosted it when, you know, Bitcoin
is going to the moon, and then when it's crashing and dead. And generally, the pattern for us is we
see huge increases of attendance during bull markets, and then maybe 50% less people during
a bear face. This is the only time in the entire history that we've been doing this conference that during a bare face for prices, we've seen a huge surge of institutional attendance.
And so I think that that trend of the dispersion and focus on the institutional side of crypto is alive and as real as it's ever been.
And I think it's relevant for every single person in this room.
Because the reality of crypto for the last decade or so is that there really have been two industries internally
at Blockworks. We call this the t-shirts and the suits. So the t-shirts are kind of your
blue haired developer product focused person. Maybe you live in, you know, somewhere cool
like Bushwick or Berlin, you know, when you're operating in the wild west where you're building
primitives, you're working on software,
there's that group.
And then there's the suits, which is a lot of people in this room
and you work in a big asset manager or a financial institution.
And these worlds haven't really had to interact in a lot of ways.
So if you're working in a big institution,
even if you're interested in some of the more Wild West stuff,
you never in a million years would have been allowed
to actually implement that, even if you're interested in some of the more Wild West stuff, you never in a million years would have been allowed to actually implement that, you know, where
you worked.
But now these two worlds are coming together and they're merging.
And the largest asset managers and financial institutions in the world are building on
chain.
And you really, really, really need to squint and see where the line exists and where the
difference is.
And right now you can still kind of do it, but in a couple of years they're going to
merge into one thing.
So what that means is most people in this room might have started on one side of the
fence or another.
Maybe you started more in the camp of the developer, the t-shirts, and you didn't really
have to worry about what the institutions were doing or vice versa.
But now all of that has changed.
And what it means if you're building a protocol is your customer profile,
your distribution, your go-to-market,
that is going to be defined by many of the themes
that we're going to talk about over the course of the next couple of days.
And vice versa.
If you are at a financial institution,
you are now most likely building on a public blockchain.
And you need to understand how public blockchains work.
Things like smart contract risk.
And you can't get away with hand-weighted answers anymore.
And that is really, really exciting.
At least from a BlockWorks standpoint, this is the future that we've been building and
planning towards for the course of the last seven years.
So it's awesome to see it manifested in this room today.
And what that means from a thematic or content standpoint,
we've got three days here.
We're going to have a main stage track during the morning,
and then we're going to break into an institutional and investor track in the afternoon.
Three days is a lot of time, so I want to help you guys sort through what's going on
and pay attention to four big themes over the course of the next four days. Number one is regulation. So true story, a couple of years ago, two years ago,
the leadership team of BlockWorks sat in a room and we seriously considered moving our conferences
offshore because at that time, the SEC led by Gary Gensler was not super friendly to this industry
and the constituents that we wanted speaking in this room and on this stage
didn't feel comfortable speaking on U.S. soil.
Today, by contrast, we are going to have the chairman of both the SEC and the CFTC
talking to all of you about how they're breaking down barriers
in between their agencies to better regulate and support this space.
I mean, I cannot tell you how impactful that turnaround is
and how excited I am to have these gentlemen represented here speaking to you.
In addition to that, I want you to pay attention to still the two big pieces of legislation,
which are genius and clarity.
So genius has already been passed, but some of the implementation deals haven't happened yet.
And understanding the details around that and how especially big banks and fintechs
are thinking through issuing their own stable points,
the timing of that is going to be very, very important to pay attention to.
We're also going to be hearing from folks who are in the room
and can give you an update on clarity.
So clarity is the market structure bill
and there are big implications for yield there
that it seems like we're coming
to a resolution on, but also token value approval, right? Like what can I do as an issuer of a token?
That's going to have a huge impact on this other part of the industry that I mentioned before.
Second big trend is I'm going to continue to underline the merging of crypto rails and financial
market structure. So last year I got up on the stage and basically talked to you about prediction markets.
Prediction markets are still doing incredibly well.
They're an architecture which supports all types of trading.
So prediction markets, when they really first came on the scene,
the early 2022, 2024 timeframe, they're doing about $50 million of volume a month.
Today between Polymarket and Calci, they're doing about $50 million of all year a month. Today, between Polymarket and Calci, they're doing about $6 billion. And they are eating markets from derivatives
to sports betting to longer-term investing. They're even impacting other industries like
news. Everything is merging into this one space. You're also going to hear a lot over
the next couple of days about this idea of the everything exchange. So as different types of trading apps, brokerages, exchanges move on to financial rails,
people are really excited from both a regulatory standpoint and an exchange standpoint
about putting all of that in one place.
And when you look at overseas in China, you have these ideas of these everything apps
where you have commerce, brokerage, investment, trading, everything put in one place.
And you're going to be hearing from the Coinbase and the Robinhoods about potentially doing that on U.S. soil.
But also on the more decentralized side of things,
there's a really interesting example in the form of a new exchange that has come on the scene called Hyperliquid,
which is really blurring the lines in between what has historically been very TradFi-focused markets and crypto.
Hyperliquid is a decentralized perpetual exchange, but recently they listed a sleepy little contract
called CLUSDC, which is a synthetic oil market. And that has exploded over the course of the last
couple of months. And now I'm to the point where it was actually doing about 2%
of the CME's volume. That is crazy. And you have Bloomberg and everyone referring to hyperliquidism
on the weekend's actual RWA exchange. So we're going to talk about the everything exchange
and continuing to talk about the blurring lines in between financial infrastructure secondly uh or sorry third third theme stable coins and rwas so last
year when i spoke to you um we were at about 210 billion dollars of stable coin market cap
today we're at about 320 billion so this is just one of these markets where year over year
we're increasing by 50 percent and you have everyone from, you're going to be hearing today,
from the CEO at Western Union
about how this is impacting their industry and business.
You also have giants on the fintech side of things like Stripe
and Tempo thinking about how they're going to bring their merchants
on-chain and facilitate stablecoin payments.
So I want you to pay a lot of attention to that
over the course of the next couple days.
And then finally, investor relations and token value accrual.
I have a talk at noon today where we're going to be charting
what is the performance on the token side of things.
Spoiler alert, it's actually not great.
And a huge part of the reason for that
is because there hasn't been standard disclosure
and there hasn't been enough focus on how these tokens
and projects actually accrue value. And this
is a topic of keen, keen interest for anyone
who's an investor in the space
at the moment. So
that's about it, guys. That's as long as I can
ramble on for you today. We've got a couple
more folks in the audience today. How are people feeling? Excited?
We've got a lot of good content for you.
Awesome. As a
final thank you, I would like to give an extra special shout out to our Ruby level sponsors, without whom this event would not be possible.
Eigencloud, Fairmint, Grayscale, LMAX Group, and Lombard. So big shout out, round of applause. Thank you very much, guys.
And without any further ado, we've got a ton of great content for you.
So I'm going to introduce our first two speakers to the stage, Kristen Smith and Chairman Michael Selig of the CFTC.
Please welcome to the stage, Kristen Smith and Michael Selig.
Thank you. Well, good morning, everyone, and thank you for joining us bright and early this morning. I
think we have an extra special guest to kick off the day, Chairman Mike Selig with the Commodity Futures Trading Commission. Prior to being
at the CFTC, he worked under Chair Atkins at the SEC, which we'll talk probably more
about today, and was also a partner at Wilkie. So very excited to have him here. I just learned
he actually learned about Bitcoin in 2011, which was pretty early on that scale. So certainly lucky to have him where we're at.
I love hearing you speak because you're always saying new things, which is like really great.
So hopefully we can go over the long list of things you've been up to lately.
I want to start with the kind of announcement that you made jointly with the SEC as it relates to the token taxonomy
framework. I think from, you know, I've been in this industry for, I guess, seven or eight years
now, running the Blockchain Association and now at Solana Policy Institute. And I think what, I mean,
the big battle was this sort of fight between the SEC and the CFTC over what was a security,
what was a commodity.
Tell us a little bit more about that framework.
I mean, I was super excited to see that the sole token is a commodity in writing.
But, you know, tell us about that and how that came about.
For far too long, builders have lived in this state of what's what, what's a security,
what's a commodity.
When I want to go to market and sell a token, what are my obligations,
do I have to comply with the securities laws, state consumer protection laws, or what have you,
and it's just been this really opaque and difficult to navigate environment. Our new interpretation is intended to bring some clarity to this once and for all. When you're coming to
market with a new token, the two big questions
are what are my obligations when I'm offering or selling that token under the securities laws?
Are you engaging in a type of public offering or a type of sale or offering that's subject
to registration with the SEC, disclosure requirements, and so on and so forth? And
then what is the token itself? Is the token a type of security? Is it an equity instrument, a debt instrument, or something else? This interpretation clarifies once and for all,
we're hoping to get it codified into legislation, but the two agencies jointly now have adopted
an interpretation stating that certain types of crypto assets, namely digital commodities,
Certain types of crypto assets, namely digital commodities, digital tools, digital collectibles, and stable coins are not securities.
We've listed out quite a handful of different examples of tokens.
Solana is one of them, as well as Ether and Bitcoin and other tokens.
These are either a type of commodity or they're something else.
They're just a collectible good or digital asset that is not subject to any sort of regulatory treatment under the financial services laws.
And then when you're going to market and selling and offering these products, are you making certain promises and commitments?
Are you representing that you're going to engage in what the case law refers to as essential managerial efforts,
where you're generating profits or revenue for the holder of the investment.
And those promises really are what form a securities transaction when you're promising to engage in efforts to generate profits for the holder of the investment.
But that doesn't make the token itself a security.
And so the interpretation clarifies that line when these promises begin, which is typically at the offering or the sale when a company or an issuer is making commitments or promises on behalf of the company or the issuer to engage in efforts on behalf of the holder of a token, or the issuer says that,
you know, we've completed our efforts. And so that's really important. That gives a lot of
clarity to the markets. And so when people are purchasing these tokens in the secondary markets
and in the commodity markets, they have confidence that they're not buying a security and that
they're not subject to the securities laws. Yeah, I think it's one of the most significant developments we've seen in the past 18 months.
Pour one out for the Crypto Rating Council, which was the OG, but no longer.
Well, speaking of the SEC, you and Sher Atkins, and this applies to crypto and non-crypto, have talked about harmonization and have signed a memorandum of understanding.
Can you talk about the significance of this and why this is such a departure from normal practice?
For a very long time, the two agencies have not been able to cooperate with one another.
And we've had these turf battles between the two where the SEC is trying to characterize something,
especially under the last administration as a security.
The CFTC is either fighting it,
saying it's a type of derivative or a commodity.
Those days are over.
We've entered into a memorandum of understanding
that really it's designed both to facilitate harmonization
with our regulations.
So when we're going out with new rules and interpretations and guidance and definitions,
the two agencies should generally agree on that because otherwise we're taking these two separate positions.
And the market's the one that is at the crosshairs of the two agencies
because if you want to go to market with a new product and one agency is telling you you're subject to their domain,
the other one's telling you you've got to go comply with their roles and regulations,
that's not a good place to be doing business.
And that's not a good environment for our entrepreneurs and our builders.
So we're putting that behind us.
We're putting our kind of personal allegiance to our agencies behind us and just making sure we're focused on what's best for the American people.
And that's clarity, that's harmonization, that's coordination and cooperation.
And this MOU really signifies that the agencies are committed to working together.
Chairman Atkins and I, of course, from the top are really committed to harmonizing and
working together.
But then this MOU codifies that at the staff level.
We've got to make sure that the two agency staff are putting aside their pride of authorship with respect to their rules and regulations and are willing to come to the
table and work together. And so this means that they're going to set up joint meetings and work
together on different rules, but it also means surveillance sharing and other types of joint
endeavors. So we're really excited to have this in place, and we're hoping that this is here for
many years to come and really survives this administration.
I want to get into prediction markets, because that is something that you've been incredibly vocal on.
And I want to get into some of the sort of regulatory and legal issues around that.
But I think even before that, can you just talk at a high level as, you know, kind of your thoughts on prediction markets?
Like, why are they valuable,
are they valuable, and sort of what their role is?
Prediction markets aren't new.
We've had them in the United States really since the 90s, and the CFTC has been regulating
them since then.
They started out more on the periphery with political prediction markets, and at the time,
the agency, of course, had authority and recognized that, but it gave
no action letters to a bunch of academic institutions.
So the first of these markets was the ILA electronic market, and they had this no action
letter that allowed them to offer a prediction market for academic and educational purposes.
But they turned out to be really fascinating because the predictions that were generated
and the kind of the data that was generated from these markets was very valuable.
Oftentimes when you have skin in the game and you have a market-based system, go figure, you actually get a better result and outcome than the polling and some of the news media.
And so these really took off.
We started to see them in weather and in oil and gas and other types of predictions, geopolitical events.
And the prior administration had a real concerted effort to shut them down. Unfortunately, they did
not want these markets with respect to politics or sports or anything else. And there was a bunch
of litigation that ensued. And ultimately, the CFTC lost that litigation in court. And the courts
found that these kind of attempts to merit regulate and be paternalistic about what sorts of markets we can have was arbitrary and capricious.
And our statute is set up in a way such that there's infinite number of things that you can trade derivatives on.
I mean, derivatives really are a great financial engineering innovation that you can create a synthetic instrument
on virtually anything.
And some of those things may be securities,
some of them are commodity derivatives,
but these political events, sports events,
other types of events,
these are event contracts,
as we refer to them at the CFTC,
and they're derivative instruments.
And so we have a federal regulatory framework
for these types of instruments.
And as I said, we've been regulating them for a long time. So we've started to see after this litigation with the CFTC with crypto was this concerted effort to debank. And we had Operation Chokepoint 2.0, which fortunately is rest in peace no longer. But we've also had this, you know, on-chain phenomena of trust in our
decentralized markets, trust in kind of the network itself as opposed to a centralized gatekeeper.
And that really relieves the risk of being debanked or being kind of taken out of the
financial system.
And I think we're seeing the same with our news media and our information systems where
centralized gatekeepers, whether it's, you know, the newspapers or, you know, social
media operators or whoever, we're able to censor and keep people out,
change the news to kind of manipulate perceptions.
And this is sort of a dystopian 1984 idea of,
if the news media is telling everyone
that two plus two equals five, people start to believe it.
But the prediction markets really are
this form of decentralized trust.
There's this saying that you're kind of trusting in the markets or that the markets are truth machines.
And that's proven true. If you looked at the election in 2024, the prediction markets were around at this time.
And thanks both to these no action letters, but also to some of the litigation that allowed these markets to go forward here in the U.S.
And they were actually more accurate than the polls, believe it or not.
We saw a landslide victory for the president.
And a lot of the polling, especially leading up to the election, said otherwise.
And so I think it's really important that we protect these markets here in the U.S.
They're a real important check on our news media.
Why don't we break down the different policy issues related to these?
Because you've had some announcements yourself within the agency.
Just this week, we saw legislation that Congress introduced that attempts to sort of prohibit one specific part of this world.
And then I know we have a lot of litigation going on in the states.
So can you kind of break it down and give us some insight into what you think your role is
and what the CFTC's role is going forward?
The Commodity Exchange Act, which is our authorizing statute,
set up this federal regulatory scheme or framework for derivatives.
And that's because, as I mentioned earlier, you can have a derivative on virtually anything.
And that includes agricultural products, metals, crypto, but also events like political outcomes and sporting events.
And so that framework is really important.
It allows for us to not have gaps in our system and to make sure we're fully regulating these markets.
Litigation now has started up at the state level where a number of our registrants,
which are futures exchanges, derivatives exchanges, that are registered with us and are able to offer the wide range of
derivatives that are authorized under our statute, which, again, is virtually everything except for
certain securities, which go to the SEC. The states have been suing different of our registrants,
arguing that these types of contracts are gaming. And it's really interesting because if you look to the turn of the century,
betting on grain was actually considered a national pastime
because all of these markets, they called them bucket shops at the time,
were set up to allow for people to take future predictions
or speculate on the future prices of different commodities or events and things like that.
And the federal framework was ultimately set up under the CFTC
where we're overseeing all of that
because you don't want this patchwork of different states.
You want one rule book for derivatives,
just like we want one rule book for crypto
because it's very complicated to have to navigate state by state.
And so we're involved in some of this litigation.
We filed a friend of the court's brief in one of the lawsuits in Nevada,
and we're actively monitoring the situation to make sure that we are defending our jurisdiction
where appropriate. But it is concerning that some of the states, you know, are encroaching on the
CFTC's jurisdiction. And we really wouldn't have a futures market or derivatives market if everything
was considered gaming or betting or gambling because these markets, again, are set up to allow for people to take positions on the future price or the future outcome of an event.
And if we're going to start considering that gambling or gaming or something that's subject to state oversight, we're going to lose a lot of ability to effectively police our markets.
I would be remiss if we had a conversation and I didn't ask you about perps.
This is obviously a hot topic within the crypto world.
What are your plans there?
This is another market device that we've seen develop primarily offshore, which is unfortunate.
So the perps markets started really around 27, 2018, and a lot of the crypto liquidity went offshore to be able to engage in these types of transactions.
Here in the U.S., we've had futures contracts on crypto, actually starting with the Bitcoin futures contract.
I think it was around 2018, 2017.
And this was a great development.
And we've now seen Ether futures contracts and other listed
futures. And more recently, we've seen these long dated, I call them non true perpetuals,
but they're perpetual contracts with a 50 year, I mean, I guess we can't call them perpetual,
they're 50 year long dated futures contracts. But getting true perpetual futures where there's not
an end date is really important.
And I think that's something that we've already said we're working on,
but we're excited to roll that out in the real near future.
And this will, I think, be one of the pieces that we need to get the crypto markets reshored back here in the United States.
Of course, under the leadership of President Trump, I do think the United States is the best place in the world to build and innovate and engage in the markets. And the
U.S. truly is the crypto capital of the world, but the crypto capital of the world needs the
perps market. So we're working on getting that here. There are a couple issues that we're
working through. The first is that futures contracts is kind of a defined term of art,
as opposed to swaps, which are another type of
derivative. And futures contracts typically are considered contract for future delivery. And so
without a delivery date, when you have a perpetual existence, there's questions as to whether that's
legally a futures contract or not. Are staffs working through navigating that and figuring out
the right way to kind of characterize these contracts. But the bottom line is that we're going to work on getting these here in the U.S. very soon.
Self-custody is, I think, a hugely important feature and value within the crypto community.
And recently you issued a no-action letter, or the CFTC issued a no-action letter to Phantom,
which is a self-custodial wallet.
Can you talk about this, and are we going to see future no-action letters on other topics?
This is another area where I think the United States has really suffered because we've not been clear.
We saw under the last administration attempts to sue everyone from Uniswap to ZeroX,
arguing that these types of software systems
that were non-custodial, operated on chain,
or were kind of digital wallet software programs
people ran on their personal devices,
or a type of broker, or otherwise, right?
And so the guidance that we've put out,
this no action position that we've put out
a few weeks ago now, really attempts to clarify that and set a standard where if you're a digital wallet operator,
there are certain obligations that you have to your customers, certain disclosures and things
that you need to comply with, but we're not going to treat that as an intermediary. Some of these
exist in a quasi-intermediary software operator space, and we've got to make sure that there's a path for that that's not overly burdensome and kind of imposing additional requirements on these software operators that really are unnecessary.
So this guidance is intended to help clarify that.
But when we're looking at on-chain software systems and digital wallets, we really see that along a spectrum.
So there's some of these software operators that are really just deploying code.
They're not involved.
They're not administering contracts.
They're not overseeing the activities happening on the user's device.
Others are kind of on the other end of the spectrum where they're more custodial.
end of the spectrum where they're more custodial. They have some rights through contracts and
administrative rights that are allowing them to control what's happening behind the scenes.
And so we need to treat that in a different way, but it doesn't mean that we want to
treat it the same way as a centralized intermediary where things are happening in a different way.
They're working with certain smart contracts and automating things. So we're certainly evaluating
the differences between these products.
Some things are in the middle.
Some things are at either end of the spectrum.
So we're going to develop purpose-fit rules and regulations
that allow for that activity to flourish here in the United States.
I think it's wonderful to see a market regulatory agency like the CFTC
and your leadership there are actually using the authority
you have to provide rules of the road.
I think that's fantastic.
Across town, we have Congress, and they are also very busy and very passionately working
towards providing more authority to you via market structure legislation or the Clarity Act.
Can you talk to us a little bit about that process and what that would mean for you if it gets across the finish line?
Well, thanks to the president's leadership, we're really excited to have legislation really at the cusp.
I know that there have been several breakthroughs in the past couple days around the yield issue with the Clarity Act,
and we're really excited to get this thing across the line, and it's all hands on deck to try to make sure we get
this done, hopefully, in the next few months and have it on the president's desk for signature.
But the legislation, I think, is very important to future-proof what we're building at the SEC
and at the CFTC. We have a lot of regulatory authority under our
statutes, and we've started to clarify things like, as we just discussed, the broker issue,
the taxonomy of different types of crypto assets, what sorts of offers and sales are subject to the
securities laws, which are not. All of that is great, and it's really important work, but
the legislation can help lock that in. And my biggest concern is that three or four years from now, we have the next Gary Gensler coming in,
and he really just takes an axe to everything that we've built.
We can't allow that to happen, and so having a piece of statute, you know, it really doesn't get as locked in as a statute, right?
It's kind of like diamonds are forever.
Statutes are the closest thing you have in Washington to something that's going to be long lasting. And so we're working really hard
to get that finalized. Ideally, it's something that's really consistent with what we're creating
at the agencies. And so we've been following the lead of Congress and the president, making sure
that everything we're doing from the interpretation to our broker advisories, making sure that everything we're doing, from the interpretation to our broker, advisories, making sure that all of that's consistent with where we think
the bill's going to head.
Looks like we have time for one last question.
It seems like every time you give a speech or go on TV, you have something new to announce.
Do you have anything for me today?
I do have an announcement for today.
So, you know, everyone can check their Twitter accounts and make sure we get this online.
No, we're launching an innovation advisory task force, and this is really something that's special to me because I got to work on the SEC crypto task force with Commissioner Hester Peirce and her team back when I was at the SEC a handful of months ago. And I think that these efforts are
really important because it provides a space where you're not going to get a Wells notice or subpoena
for coming into the building. And you're able to engage with staff and work through your project
and your idea for creating an on-chain system or a prediction market or anything else. So the idea
behind our innovation advisory task force is really to create a space
where innovators and builders can come in and talk with the staff. It's not just crypto, it's going
to be prediction markets, crypto, and AI. So we think these three verticals are really important.
We're seeing a lot of interest in crypto, of course, but in prediction markets as well. And then
AI, really, we look at these agentic finance applications and technologies,
and they're really fascinating.
They've completely transformed the way that we're looking at our markets
and the types of advisors that are entering our markets.
A lot of it's totally automated.
And these three technologies actually, I think, all work synergistically.
So we're seeing agents trading in prediction markets on crypto
rails. And that's really interesting as well, because we're going to start to see some really
interesting algorithms and data outputs from AI trading in prediction markets and creating new
data. So all this is really fascinating. The idea behind this task force is to create that forum to
come meet with the staff, but then also to push new policies and working together with our innovation advisory committee, which is comprised of a number of the leading CEOs across traditional finance, crypto, prediction markets, AI, leading academics and industry groups as well. So we're really excited to see all these different pieces work together
to deliver policy that unfortunately has not been delivered in the past,
but really deserves to be here in the United States
and allow for innovation, builders, and creators to flourish
and develop new technologies right here in the U.S.
Well, I think that's fantastic news.
I know we've gone in to see the SEC's crypto task force
and to have an equivalent,
which sounds like a slightly broader mission at the CFTC,
I think will be welcome and a huge opportunity
for those of us working in this space.
So I think with that, we will wrap up.
But I want to say thank you so much, Chairman Selig,
for being here today and for making news on stage,
and appreciate all that you have done
to provide a pathway forward for this industry to thrive.
So thank you.
Thank you for having me.
Please welcome to the stage,
BlockWorks co-founder Jason Yanowitz,
joined by Devin McGranahan.
How we doing, folks?
One person. How we doing, folks?
Good. Good.
I'm very excited about this.
It's amazing to see just, yeah, the progression of DAS.
We've been hosting this conference since 2019.
And, yeah, this is our biggest DAS ever.
So I know people are talking about it's a bear market
and prices are compressed, but, yeah, it's very exciting to see
just, yeah, the biggest turnout we've ever had
in, you know, eight years of hosting this.
And one of the reasons probably many folks turned out is we're excited to have Devin,
who's the CEO of Western Union here.
So please give him a big round of applause and excited to get in.
I think, Devin, the biggest thing I'm wondering, I guess coming into this chat, is you come
into Western Union, CEO, president position,
stock is down a bit, revenue is down a bit. You can do a million things to kind of turn the business,
you know, get the business humming again, and you go kind of all in on stablecoins. Why is that?
So I've been the CEO for four years. We probably are doing a million things.
for four years. We probably are doing a million things. Stablecoins is one of those million things.
And it fits in a block of the strategy, which is we have an enormous number of assets. So we have
100 million customers. We're a licensed financial institution, either a bank, a money transfer
company, an e-money company in over 50 countries around the world. And we move hundreds of billions of dollars around the world.
So that infrastructure, we have 4 billion endpoints in our payout to account network.
We have 400,000 retail locations.
That infrastructure, which was built really to do consumer to consumer small
dollar transfers is useful. And so we have a number of strategies around how
do you begin to monetize that and how do you use it for other purposes plus how
do we make it more efficient. And so with the passage of the Genius Act, we saw an opportunity to leverage stable coins to do a
couple of things. One, on any given day, we have a couple of billion dollars floating around
in the system. So we solved the problem a long time ago of consumers being able to send consumers
money and being able to pick it up instantly. So, you know, people talk a lot about, oh, well,
crypto will be able to make it real time. So, you know, people talk a lot about, oh, well, crypto will be able to make it real-time.
It already is real-time.
The problem is it keeps a couple billion dollars of mine
floating around in the system to pre-fund all those transactions
using the non-Swift, Swift banking system.
So we have to wait for T plus two, T plus three.
And so stablecoins at an institutional level allow us to take a lot of capital out of
the system to make it more efficient. The second thing it does is we're opening up our network
to lots of other people who want to get access to basically off ramps and tough places around
the world. All the infrastructure lives there. We have all the local, you know, treasury departments and we can do FX
exchange. And so if you have a digital asset in a country where we have infrastructure, we'll now
enable you basically to walk into any Western Union or send it to any bank account in our network
pretty seamlessly. So kind of as an off ramp at scale that allows that kind of instant liquidity option, we find
a lot of people are finding that attractive.
Do you think it's more about the internal efficiency and kind of getting rid of that
multi-billion dollars afloat, or is it more about improving the customer experience or
a little bit of both?
So the customer experience won't change.
Customer experience won't change.
Won't change.
We'll talk about how the value proposition for some people might change, but the customer experience won't change. Customer experience won't change. Won't change. We'll talk about how the value proposition for some people might change,
but the customer experience doesn't change.
Today you can send money to any one of 191 countries pretty much in real time,
and you're still able to do that.
There is a lot of efficiency.
So if I can free up a couple billion dollars of capital,
I can buy back half the company
because we have cash sitting on the balance sheet to make all this thing work that all of a, I can buy back half the company. Because we have cash
sitting on the balance sheet to make all this thing work that all of a sudden I can get access
to. But you then have to, I mean, the work in this is getting all of our partners around the world
to be able to accept stablecoin, to settle in stablecoin, you know, to get that institutional
grade money movement. And again, we're talking hundreds of billions of dollars.
There's only, I think there's only $300 billion of issued stablecoin, right?
So I'm talking about being able to take my company,
which is basically the equivalent of the entire stablecoin market,
and move it into stablecoins in 100 countries around the world.
So there's a big infrastructure play that we've got to get to get it right.
What's the scale there? How many customers do you guys have?
100 million.
100 million customers?
100 million consumers.
Yeah.
Yeah.
And so the value proposition change, though, for some of them is,
by the way the system is designed today,
customers have to accept the local currency.
Now, in some countries, they also are dual currency countries.
So you can accept dollars.
So like in Peru or different places, but lots of countries, you can only accept local currency.
So when you send 100 bucks from New York to Bolivia, you're paying out in bolivars.
It's a country that's had some political instability, some inflation.
The value proposition change will be you can now accept a Western Union stable coin
that you can hold in that country until you want the bolivars.
So you can isolate yourself from the currency fluctuations,
the political instability. But more importantly, we're also going to be able to give people
stablecoin-backed cards. So you can walk into a Western Union and you can walk out
with a stablecoin card. And that, in essence, is almost a bank account. So it's a U.S. dollar denominated card that's backed by the stablecoin.
And so you can keep it on the card in U.S. dollar denominated asset. You can then spend it at a
point of sale. You can add money to it. So in essence, we're going to be giving people in
these countries access to the banking system and to bank accounts without
actually having to open bank accounts for them, which is really hard in many of these countries.
So that value proposition change for our received customers is actually a pretty big deal. And so you
can now open essentially US bank accounts for all 100 million customers. You couldn't do that before
stable coins. You certainly couldn't do that before.
They aren't bank accounts, they're stable cards,
but they function kind of like having a bank account in a dollar.
Look, if you live in Brazil and you're above a certain wealth level,
you have an offshore bank account.
So you have a bank account in Miami or in London or in Switzerland just as a way to hedge the Brazilian economy and the inflation.
And, you know, it's a very accepted way that people in that country conduct their financial affairs.
But lower income people don't have access to that.
They can't open a bank account in Miami or in London.
And private bankers don't have the time or interest in opening it for them.
But a stable card proxies that same ability to hold.
Now, they're not going to hold $100,000.
They're going to hold $100.
But for them, that $100 is as important as the $100,000 for you.
Right.
And so it is a value proposition change that we're excited about.
Yeah.
When you think about the competitive landscape, are you more worried about the kind of circles and tethers?
And you mentioned 100 million customers.
I think Coinbase also has roughly 100 million customers maybe.
Are you more worried about those kind of folks?
Who do you worry about when you think about competition?
Yeah, so I see those folks as an opportunity.
So none of those customers are my customers.
My 100 million customers in Coinbase's 100 million customers
are 100 million different people, right?
The overlap of those is very low.
My customers are unlikely to open a Coinbase account to send $200
to their mom in Guatemala, who now has to figure out what to do with USDC or USDT in order for her
to buy milk. That's just not a thing that's going to happen anytime soon. So by opening up our payout
network, our funds in funds out network, we actually may gain access to some of those 100 million customers
who aren't my customers.
But today, as many people know, local market liquidity,
local market off-ramps, forget about the U.S., forget about Europe.
But in tough places around the world,
it's still a thing that's hard to solve, right?
You know, we do a lot of business in Central Africa.
We can get in and out of SAF at about 2%.
If you go into the gray market, which is where most of the crypto wallets and crypto companies do,
it's 6% or 7% because they don't have access to a central bank.
We actually trade with the central bank.
And so those local market treasury capabilities that we've built up over time are very valuable. So we'll have a much better deal if you own Circle or you own Tether or you own Bitcoin and you want SAF than if you go and you try to do that at some local exchange who's basically trading SAF in the gray market because they don't have access to the central bank. So we think that's access.
We think those are customers that we don't have today that might find what we do useful.
I don't think my customers are going to gravitate to their platforms.
We've seen no evidence of that.
So who's your competitor then?
Or who do you worry about when you're up there?
So our traditional competitors, which are the Revoluts, the Remitleys, the Wises, and they're all doing similar things to us.
You and I talked about backstage, right?
The platform that poses the most potential risk to us would be Facebook and WhatsApp,
simply because all of my customers everywhere in the world use that as a communication platform.
And sending money is just a different form of communications.
We started as a telecom company, right, as a telegraph company, right?
So, you know, the idea that I'm communicating with loved ones and I'm sending money to loved ones is closely, closely linked.
ones is closely, closely linked.
Yeah.
Now, I don't think they want all the regulatory problems, and they certainly don't want all
the infrastructure in the network that we manage around the world.
But lots of, including us, lots of us, we and lots of our competitors are finding ways
to try to use that platform as a way of helping people transfer value between each other.
So that's a more interesting
conversation that somehow I'm going to wake up and Coinbase is going to have all my customers.
Yeah, that's interesting. Do you worry at all then about, I think it looks like Meta,
so Meta obviously had Libra and their stablecoin project and that got shut down. Do you worry at
all, you know, a couple months ago they announced they're kind of re-entering the stablecoin game.
Concern?
Big concern?
Small concern?
I don't know.
I've got to understand what they're going to do, right?
The beauty, the general beauty of my business is people like that make money, mostly make money by selling advertising, right?
And so they want you.
Right.
You're rich.
You spend money. You're good looking. You're rich. You spend money.
You're good looking.
You're like smart.
You've got this whole thing going here.
Like, I want to sell you, you know, new shoes or Rolex, a whole bunch of things.
So I'm going to go advertise.
My customers are generally at the lower end of the socioeconomic strata, right?
Like, we view ourselves very much as an abler of access to the financial institution
financial institutions and you know so our customers are not coveted by many of these
companies as big opportunities for them to make money right so yeah i don't worry about meta that
much yeah i don't know if this would is a question more for your product team so we can skip it i
don't know how deep into the weeds you were but but I was looking at what you guys are doing with your stablecoin. It's very different than what other folks have done, like MoneyGram or something. The way that you guys set up your stablecoin, you guys keep most of the economics. It's your own stablecoin. I think MoneyGram is just using USDC. How did you think about setting this up?
So again, if you think about what problem you're trying to solve,
we're trying to move money around the world
principally for ourselves
in a much more efficient and effective and capital-like way.
And so I will go from being a negative
float business, i.e. I have a cost of capital associated with the billions of dollars that
I have to keep in the system to make this value proposition of instant movement of money
around the world working, to a positive float business where by having real-time 24 by 7 settlement,
anything that actually lives in the system is now backed by Treasury's earning interest for me.
And if one of my partners decides to hold that for some period of time in order to settle,
I'm making money on the money versus today I am paying
someone for the money my partner is holding, right? And so it, again, the problem we're trying
to solve is how do we effectively move billions of dollars around the world much faster and much
more effectively and move from a negative float business to a positive float business that means I need to own the float which means I need to issue the
coin also we want to be able to you know stable coins are basically
programmable digital money right and so in a business in which the regulatory
environment and the compliance requirements and the partner nature of
my business is so important having our
own coin allows us to program that in ways that can manage our compliance
risk can create different situations between different partners on the terms
in which we transact with each other and ultimately can also create some ability
to recognize and reward people who use it differently than if they choose to settle with Swift in the traditional banking system.
So we can embed kind of quote rewards in a way that we can design because it's our coin.
And we can do it on a partner level versus we're using a generic coin that somehow we got to do stuff.
Yeah.
For the same for everybody.
Yeah, that makes sense.
I'm looking out in the audience and see a bunch of our customers
who are execs at other large financial institutions
and payment providers and other institutions
that have been around for 100-plus years.
Can you talk a little bit about getting an organization?
I don't know how many employees you have,
but thousands or tens of thousands.
How do you get an organization of that scale
and of that magnitude?
And you've been around for 150 plus years.
How do you get that organization on board
with moving on to digital asset rails?
Yeah, so just for scale,
we have roughly 16,000 kind of FTEs around the world, roughly 2,000 here in the U.S.
And the rest, so it's a very global company, right, with an employee base spread all over the world.
And hundreds of thousands of retail locations.
Hundreds of thousands of retail locations, licenses, regulatory environment.
Hundreds of thousands of retail locations, licenses, regulatory environments.
People are always stunned when I say, you know, globally we have about 3,000 people in our compliance organization, right?
That sounds fun.
That's to maintain our regulatory environment across all these places around the world in which we do business, many of them which are tough places to do business.
Surprisingly, I have the opposite problem.
The opposite problem, which is everyone is so enthusiastic about a couple of these initiatives,
but this is one of them, that all 17,000 people want to go work on Stablecoin. And I need, you know, 16,900 of them
to continue to do what we do every day
to generate the revenue to pay for
what we're going to do in Stablecoin.
And I need the 100 people who really know
what they're doing to work faster.
And so there's a lot of enthusiasm in the company.
We have a lot of pride for what we do.
We have a lot of people who came to work at Western Union
because we're a purpose-driven company,
helping people who many financial institutions don't want to serve.
And so we have lots of people who can see the benefits
of if we could free up capital,
if we could allow people to have this quasi bank account
that want us to move faster to help our customers. And so that enthusiasm is great. It's just not
helpful. Yeah. Yeah. Yeah. That's fair. That's good to hear. People want to work on stablecoins.
Here, people want to work on stablecoins.
Now, if you actually want people to come to work five days a week, that's a whole different problem.
Does it stop with stablecoins for you guys?
In your digital asset and crypto strategy, will it?
So, you know, one of the things that you can do with stablecoins maybe is you have a wallet,
and then you start, you partner, you do something in DeFi,
you could allow your customers to take out loans.
Have you got that far yet, or start with the stablecoins first?
We're really starting with the stablecoins.
There's obviously paths you can go down and but again we're very focused on what problem are we trying
to solve how do we use this technology and platform to solve that problem and this comes to
if you have a 175 year old company with thousands of people. If you don't remain maniacally
focused on what it is you're trying to do and keep everybody moving there, it's very hard to
get anything done. And so our number one goal is to launch our coin and create institutional grade
money movement to move billions of dollars a year around the world between our trading partners.
That's our number one goal.
And once we get that one done, and the second goal is to launch, basically receive capabilities and USDPT, our coin,
so that our customers can hold dollar-denominated assets in inflationary and politically unstable places where it's regulatorily possible.
Those two goals, that's it.
Come back in two years.
If I've achieved those, we can talk about whatever it is being next.
Why did you guys, I remember, I think it was 2018 or 2019, you were doing something maybe
with Ripple.
Now you're doing this with Solana.
I don't know, this might be, again, a question for maybe the crypto product team, but any
thoughts on that?
Why you chose to do this with Solana?
So 2019 was before my time.
And so when we went down this path, we had basically two or three requirements, and we kind of looked at everything.
So to be clear, we are chain agnostic, right?
So we are going to have multiple. We're going to run USDPT on multiple chains.
We chose Solana to start with for primarily two reasons conduct large amounts of transactions at high volume, being able to, you know, burn and, you know, destroy coin seamlessly as we do this treasury operation, it's well suited to that.
it's well suited to that.
You know, the Ethereum blockchain is a very capable blockchain,
but it's a heavier, requires more upfront investment
in programming, capability building.
To your point, if you move into,
gee, we want to do a lot of lending,
we want to do very sophisticated stuff,
we will look at other capabilities and other platforms.
But for us at this point in time,
in this product evolution for the problem we're solving,
it was the solution that made the most sense for us to get going.
Nice.
And to your point, we're doing it very different,
which is we want to retain control, design, and economics
because we're solving the problem for us.
Right, right.
What does Western Union look like
if you're wildly successful with this?
I mean, you get a bunch more cash on the balance sheet.
What else?
What does, you know, three, four, five years out,
what does this look like if you're wildly successful?
So I would go down two dimensions, right?
One, we take the company from basically solving this problem for ourselves.
But if we have now an institutional-grade ability to move money between trading partners, 50, 60, 70 countries in the world in a highly regulated environment.
We believe that is something, again, the correspondent banking system in Swift is inefficient.
I'll just leave it at that.
We think that's something that other people find valuable.
Small banks, other enterprises.
And so our scale and our ability to build all of that infrastructure,
which we need to go do for ourselves, which all pays for itself,
we think is a valuable thing that other people will want to take advantage of.
So if you run a $2 billion community bank and you have customers who need to send money to Europe,
today you're highly dependent on your correspondent banking relationships
and the SWIFT system and it takes days, and it's not really traceable,
and it's expensive. We think we can move that. The other avenue is what we can do for our
customers. And we think our customers will retain USDPT like a bank account which again will put us into a different business
than just paying out money so now people will hold assets with Western Union in
these countries and then that leads to what do you do with those local payments
savings accounts lending against them all kinds of things that you can now do
in many countries around the world where we're not going to go operate a bank in Bolivia.
That's not a good idea.
It changes what we can do for our customers in those received markets.
Those are the two vectors.
Maybe we can wrap on this one last question
that I think a lot of crypto people talk about,
which is capital is moving on chain.
You talk about legacy systems are not efficient,
Swift, HCH, things like that.
Maybe if we fast forward out 5, 10, 15, 20 years,
how much capital, right now,
probably 99% of the flows in the world
move on these legacy systems.
How much of that will transition onto public blockchains
like the Solanas and Ethereums of the world?
I don't know.
But I do know if you solve the friction points, right?
Like if you go and work on how to actually move it around
in a highly compliant manner with liquidity and
that's the that's the thing like everybody talks about gee you can move
money like the problem is not the moving money the problem is once the coin gets
there how do you cost effectively create the liquidity that's needed at scale
like at scale billions of dollars moving someplace where you can the liquidity that's needed at scale, like at scale, billions of dollars moving someplace
where you can, the thing that works today is it's pretty efficient from that. It's very low cost,
right? Again, my point of the SAF and Gabon, I have a pretty efficient system at doing that.
Today, the digital asset system is not efficient at doing that. And so that local market liquidity is the thing.
Again, U.S. to Europe, nobody's going to, that's not a thing.
The rest of the world is a thing.
And so the sooner you can solve that at scale, the more you'll then have institutions find
that that's a better option.
But today they look at it and say, okay, it's more expensive to do it that way.
I'm willing to suffer some of the cost of time and other things
because the expense of that local liquidity is just too high.
Yeah.
That's all the time we have.
Devin, thank you so much for doing this.
Thank you so much for doing this.
It's great.
It's great, thank you.
Please welcome back to the stage,
Michael Ippolito, joined by Johan Kerbrot and AJ Warner. Hey guys, welcome, welcome.
Thank you very much.
How's the audience doing?
Energized?
More coffee?
Can I get some excitement?
Thank you, thank you, thank you.
All right, guys, we got a lot to cover here,
and I called out one of these big themes
of traditional financial rails and crypto rails
kind of merging and coming together,
and I have the two perfect people on stage
to talk to me about that.
Before we get into all of that,
can you just do a super quick round of intros?
Yeah, I'm John.
I lead the crypto business at Robinhood.
I've been at the company for five years.
I'm AJ, chief strategy Officer at Offchain Labs.
We build a lot of different crypto products, most famous for Arbitrum.
Amazing.
All right, guys, let's get right into it.
I want to start with a concept that some people in this room, I think, are going to know
called the DeFi mullet.
So whoever's feeling bravest, can you just give us an overview of what is this DeFi mullet
that people are talking about?
Sure.
I think it's actually becoming more and more in vogue.
We've been talking about it for years,
but it's this idea of basically having traditional businesses
or traditional opportunities either for yield or for returns
for traditional people, traditional assets,
but the underlying plumbing infrastructure is crypto-native.
So it could be the form of stablecoins.
It could be the form of compounding yield
through platforms like an Aave or a Morpho and with lending products underneath.
But the question is, how do we create the more efficient rails on the back end of the mullet, the DeFi mullet, with creating better products for retail users or institutions on the front end, better liquidity, more composability?
Yeah, and for us, really, the idea is to remove all this complexity and abstract as much as possible so that customers don't ask you to create a wallet. We don't ask you to have gas fees.
We don't get you into a DEX with swap and all these things.
Everything is just looking like you're buying a stock in the U.S.,
and we take all this complexity for you.
And I think that's really the key point that we are focusing on,
making sure that people can benefit from the technology
without having to necessarily understand all the aspects of the technology. So maybe starting from the Robinhood perspective here, what is the benefit
of moving this activity on chain? Robinhood operates a very profitable brokerage. You can
trade a lot of stuff on there. You don't need to do it on crypto rails. Why is Robinhood so excited
about this? What is the future you envision here? Yeah, there's a lot of things that we are excited about the few things I think everyone knows it but it's important
to reiterate it I think you know instance element it's a big one we are
still in T plus one in the US and so when you buy a stock on Friday you have
to wait Monday or if it's a long weekend maybe Tuesday to actually have
the ownership to move to you the The second thing is 24-7.
Currently we're in 24-5 in the US
for a limited amount of assets,
but we think we can move to 24-7
with the blockchain underlying
to support all the liquidity that we need,
to support all the technology.
If you think about some of our exchange that exists today,
they still need to turn off at least 30 minutes,
at least a week.
And so the blockchain doesn't turn off, right?
Like, it just keeps going.
And the second thing is more accessibility.
We think that in the U.S., it's hard to get access to other exchanges.
If you think about, you know, Singaporean exchange, London exchange, there are so many
exchanges across the world.
If you want to have access to these places, there's only a few brokerage that supports
And vice versa, outside of the U.S., it's very hard to get exposure to U.S. stocks if you want to have access to these places, there's only a few brokerage that supports it. And vice versa, outside of the US, it's very hard to get exposure to US stocks if you're not in one of the more mature markets. And we think that with tokenized stocks, we can actually give
all this access to everybody. And finally, it's what AJ was saying is there's so much more we can
do with our assets. So for example, if you want to get a pledge asset line
or a credit based on your stocks or based on your crypto,
it's pretty difficult.
But if it's on-chain, you can actually remove a lot of middle layers.
You can remove all the end-of-rider complexity,
make everything part of a smart contract,
and make it a lot more accessible to everybody.
So when you guys look at, I mean, when we talk about the opportunity,
I mentioned Hyperliquid actually you guys look at, I mean, when we talk about the opportunity,
I mentioned Hyperliquid actually is an example of a decentralized kind of perp decks,
and they've moved into things like oil,
synthetic oil contracts, gold, the S&P,
and they've gone from about 600 million of volume
to about 38 billion of combined volume
in a relatively short span of time.
Is that the opportunity?
Is it 24-7 trading? Is it like if you had to kind of stack rank what is exciting? Is it the 24-7
nature? Is Robinhood excited about staffing 24-7 here too? There's a real element of that. You
work at weekends now, Yvonne? Well, I mean, our crypto business is 24-7. We've been for a long
time 24-7. But I think 24-7 is super important.
The world doesn't stop turning on Saturday, right?
So you see it every time.
News happen on Friday night.
You see everything happening, and what you see on HyperDequid is a result of that.
People want to be able to hedge their position.
They don't want to wait from Friday to Monday to be able to exit something if something happened in the market.
And so having this platform available 24-7 is a great way for them to hedge.
But right now, it's still limited to either people using VPN or DeFi or whatever you want to call it, or super, you know,
assets managers that are, like, very professional in all these things.
And most of retail is kind of left behind right now.
And we think with 24-7, we can actually bring that back to the retail.
And then there is also the aspect of international, right?
We have businesses in the EU, in the UK, in Singapore.
Think about the time where the market is open for them.
Very difficult, right?
And so if they want to actually be able to expose themselves to the U.S. market,
they have to either wake up early or go late at bed,
or they can even trade some days because it's a weekend for them.
And so I think having 24-7 is going to change everything.
Yeah, sorry.
I was just going to say, I think John's last point is really important,
which is about it creates an even playing field for retail, right?
So the programmable nature of the blockchain,
the programmable nature of these assets being able to flow permissionlessly allows, you know, if you're a sophisticated
investor, you know how to hedge against the price of oil over the weekend. If you think either you
want to speculate or you have a reason to be hedging oil or other commodities as a function
of what's happening in the world, if you don't have that access, you're actually behind, right?
So, you know, I think there's also an element here,
which is really important, which is, I mean,
the programmable nature of this infrastructure
has the ability to just enable a fit or playing field.
Yeah.
Can we talk about maybe moving into what is the right stack
to support, you know, the Robin Hoods of the world's moving on chain?
This is an old conversation in crypto, but it's,
okay, we know what we want, which is these 24-7 markets.
We want them to be global.
But what is the right form factor here?
Do I build on a gen purpose chain like Solana?
Do I build an L2 on a stack like Arbitrum?
Do I just spin up my own like POA sort of L1 take us into that world
so I'll walk you through a little bit about
obviously how we think about the Arbitrum platform
because obviously I think this has been very
relevant for Robinhood's business
Arbitrum sits in a very unique place today in the market
there's a lot of, like you mentioned
Solana, Solana is a general purpose blockchain
there's a lot of organizations that offer
the ability to just launch your own chain
and we don't really think about Arbitrum as a product that way.
For us, the way we think about it is things are often a function
of time or a function of business strategy. So Arbitrum today has the largest
layer to blockchain technology on top of Ethereum. We have about $17 billion
in assets. It's about 50% of the market share. And we also
have an industry-leading technology
stack that you can utilize. And the way we think about it is when institutions, organizations,
enterprises ask me, like, what should we use? How should we use Arbitrim? I dive deep into
understanding their business concerns. It's not about trying to sell you a stack or using the
public chain. It's about what do you need? For most use cases, I think a public blockchain in the beginning works well. For a lot of organizations, though,
as they continue to bring more and more of their business on chain, there might be two reasons in
particular that we see frequently why someone would want their own blockchain. The first is
if they control the users, and they can now turn operating expenses into revenue. One of the nice things about a layer-2 blockchain architecture
is that it really operates like a 95% gross profit margin business.
You pay Ethereum about 5% for security and consensus,
and you can retain a lot of the earnings.
So if you have a business that you want this to be a core business factor,
obviously in a public blockchain, you're more of a tenant than a landlord.
The second is if you have either compliance or other reasons why a public blockchain architecture doesn't work for all of your products.
So we design across systems where some things are on the public chain and some things have to live in a private instantiation.
The other reason might be you want a specific customization that doesn't make sense on a public blockchain,
either for performance or for UX, and our team can work with you
to make sure that we have customization.
So the way we think about this is,
how is the product as flexible as possible
for the business concerns,
the business reasons for what people want to build?
What makes this unique in the market,
and Robinhood's a good example,
I don't know, Joan, if you want to talk about it,
is you guys wanted to launch
the tokenized stocks product last year.
So they started on the public arbitrage chain,
and now we're working with them to build the Robinhood chain.
So because we have that flexibility with an industry-leading product
to sort of cross both,
your business goals do not need to stop and wait
for your development of infrastructure.
So we're going to work with the Robinhood team
to think of that migration strategy.
But again, the stocks are available in the EU, and they've been there for almost a year
now. So I think we sit in a very unique place in the market, and that's where a lot of our
partners, how we think about it. You know, we don't start with the technology. We start with
the business goals, and then how do we design a system that works best?
Yeah, and you know, for us, it was this question that everyone has at this point. It's, do you
build your own L1? Do you build
your own L2?
Do you go completely
different and you just use
a chain like you mentioned? And
so we were debating for a long time about this one
and obviously like a lot of
competitors have done different things. At this
point there is a few L1 popping up.
What we were really focused on was having the security of the Ethereum network.
So Ethereum exists for a long time.
It's decentralized at this point.
You know, they started with proof of work, then went into proof of stake.
And for us, that was pretty critical.
We wanted to make sure that the foundation layer that we will use
will not be something that someone could just change overnight
because there is a conflict internally or something like that. The second thing was liquidity. We want to make
sure that the platform that we use to actually bring Robinhood on chain has enough liquidity
to communicate with other platform. And for that, Ethereum was pretty important and Arbitrum as well
since it's sitting on top of it. And the point is what AJ mentioned we have a lot of regulatory requirements
depending on what region you're using Robinhood Wiz we have different
licenses all this compliance hard requirements like we can't just go about
it and say like oh we don't care about this like other platform we actually
have to implement them and so being able to do that within the chain was pretty
important and so that way all the products we launch depending on where we actually have to implement them. And so being able to do that within the chain was pretty important.
And so that way, all the products that we launch,
depending on where you are in the world,
we will give you all the tools that are part of the chain
for you to have all these requirements in place.
I want to...
Sorry, one thing to add, I think...
Yeah, yeah, yeah.
The L1 versus L2 question comes up a lot.
So if you want to launch a proof of authority,
which is arguably less decentralized,
I think let's put that aside for a second,
but a proof of stake blockchain versus sort of a layer two,
one of the biggest differences that we see from enterprises
that are exploring that question is your startup fixed costs.
The security of launching a proof of stake chain,
if you're going to have a meaningful amount of assets
living on that chain, is sometimes in the area of hundreds of millions of dollars a
year.
And it's irrespective of revenue.
The nice thing about the Layer 2 model is it's actually a lot more risk-averse in terms
of startup costs in the sense that the pricing of the chain, the security of the chain, is
a function of variable costs, a function of your revenue, which you pay to Ethereum.
And for enterprises that are sort of starting to dip their toes in and wade,
it's a lot more freeing from a risk perspective. And we've seen a lot of people gravitate towards
that model for that reason. I want to ask the two of you about this idea of the everything exchange.
So I see Vlad talk about this often. And in the last interview that I saw him give on this,
he actually said that he doesn't really think
we're heading toward, like, you know,
one of these Chinese super apps
where everything is in the same interface,
but there are loosely linked applications.
So can you give us this idea of
what does the Everything Exchange look like
from the Robinhood perspective?
Yeah, I mean, for us, you know,
the concept of the super app has been something
we've been working on for a long time.
And we are one of the only platform right now
where you can have everything in one app.
It's not just crypto or equities,
but also options, future, prediction markets.
And I think it's not just about having everything in one,
but it's about this flexibility
for you to go between every type of assets,
being able to use collateral if you want to use margin, all these kind of things that
I think is really critical. And on top of that, there is this question of AI, right?
It's coming. Everyone is talking about it. And we've done a lot of work to actually implement
products that are starting to use AI. And having everything on your portfolio, being able to feed this model is actually very critical at this point.
Because if you want to take a position, if you want to understand how to hedge your portfolio against what's happening in the world,
you need to have the agents to have all the information available.
And I think for us, that's been kind of where we're working on.
And then we launch other apps that are more specific to specific needs. So we have banking,
for example, that we recently rolled out. We have a credit card as well. And so we have all the
interface between the two different apps. But at the same time, the UI and UX is a bit different.
When you're looking at your bank account, it's not the same as when you're looking at investing.
And so we wanted to make sure that we had different contexts for you to really focus
on what you're trying to do. But I think tokenization, this big world that everyone
is talking about, is what is going to bring more and more assets on the platform. Right now,
we are really focusing on tokenization for U.S. stocks and ETF, but I think you can see it for
also private equity. You can see it for real estate, for arts. stocks and ETF, but I think you can see it for also private equity,
you can see it for real estate, for arts, and more and more.
I think having this accessibility is what's kind of limiting
right now people to invest into this type of asset.
It's pretty hard to buy an entire apartment in New York
if you want exposure to New York,
but it's pretty easy to get a fraction of it.
I have just one follow-up question on, you know,
some of these assets, like
when you look at the S&P 500
or gold or
assets like this, that feels pretty widely
available. Where is the incremental
new customer from Robinhood's
standpoint here? Is this the international audience
that you were talking about before? Yeah, absolutely. I think
internationally, it's a huge
opportunity. Robinhood is mostly in the U.S.
at this point. We are starting to roll out outside of the U.S., but it's still fairly difficult.
You will be surprised.
Like, you go to some places and you ask them to open a U.S. brokerage and to buy U.S. stocks.
You will see the number of fees is still pretty high, but it's also the type of asset.
I think, you know, gold is easy to find.
It's commodities, all this stuff.
But if I ask you to buy a private stock, for example, it's still pretty complicated.
Not only do you have to be accredited in the U.S., but you also need to have access.
Even if you have access, you know, there's maybe not enough space or not enough allocation.
So all of this is making it more and more complex for most retail people, basically.
You know, this reminds me of a little bit is when you look at, maybe there's a little bit of an analog to the stablecoin market
here, where when stables were first getting
started, everyone intuitively approached the US
where there's the dollar, but actually
Tether was kind of the breakout
product market fit in the early days because
internationally people wanted dollars and the
frictions were so much higher outside there.
Maybe one final question
to both of you here. One,
looking out into the future, something that I am trying to get my own mental model around is this division in between public and private markets and how these things might be changing over time. to non-private companies like OpenAI. I'm not an expert on this, but my understanding is the SPV is a little bit,
structure in general is fraught with fees and liquidity concerns and things like this.
Do you see these two worlds moving closer together in the future?
How does this fit into the world of trading that I think we want to see?
You want to start, though?
Sure. So, I mean, my personal hope, and I've been in crypto since 2014,
is I've been through the early days of the ICO booms and busts,
and the underlying technology is actually in many ways revolutionary.
It was obviously very early, but I would love to see a world
in which we see these things become publicly available earlier to retail.
I'm not sure how fast that's going to get there. In terms of the SPV structures, again, also not
an expert on how these things are designed, but I think what you're going to start seeing is
the convergence of just mechanisms to get exposure. It could be directional exposure
through crypto rails to either not necessarily specific companies
but to the trajectory of industries.
And I hope that we can get to a place
where the maturity of the technology
shows that both the liquidity
and the ability to access retail,
the ability to build loyalty amongst customers
as a function of capital markets
is something that crypto can enable.
I think we're starting to see a little bit of it.
I think it's still, we've got obviously
a lot of regulatory hurdles to clear on this,
but I can start of seeing the world start going there.
I don't have as much insight into the SPV structure
versus the other one, though.
Yeah, I think, you know, the world has changed a little bit.
It used to be very easy to go public pretty quickly. Now it's actually the opposite.
It's so easy to raise money from private equity that more
and more the companies are waiting. And if you look at the past few IPOs that we had
the past year and a half, they are all companies that are pretty
like it's been a very long time that they've been private. And so
what creates from this change has been that, you know,
the retail is being used as exit liquidity,
but they are not able to raise with the growth of the company
like they used to do if they were investing in Google
when Google went public, for example.
And so I think for us that's one of these things
that we want to change the most.
We think it's not really fair for retail,
and we think that it shouldn't be based on your net worth or on who you know that you should be
able to invest in this company, especially because most of the time retail is the one that are making
this company famous or successful. And so we think we're going to see this shift happening with
tokenization. We are just at the very beginning, so obviously we have to use construct that works for creating the right token, creating the right structure
that owns the equity. But more and more we are starting to have this discussion
with the regulators across the world on how we could do that directly and do
direct insurance of the tokens, for example. And on top of that, when you
start to think about AI and how it's going to revolutionize the way you create a company,
you see more and more of this idea of a few people company,
not a few thousand of people companies.
You will see a shift on how the liquidity is amassed,
and I think tokenization is going to be a great use case for that.
If only we had some regulators or policymakers
we could ask those questions again.
All right, guys, this has been a ton of fun.
Please, everyone, give a warm round of applause here for AJ and Johan.
That was great.
Please welcome to the stage, Jonathan Gould. Oh, this is a longer walk than I thought it was going to be.
All right, Jonathan, thank you so much for joining me here.
Thank you for having me.
This is going to be a ton of fun.
Okay, so we've only got 20 minutes, and we've got a lot of ground to cover.
Before we get into it, could you just do a really quick intro and background on yourself
and describe for folks in this room who might be not as familiar with what the comptroller
of the currency means?
Talk to us about your office.
Sure.
So the OCC was created actually in 1863 by President Lincoln and then Treasury Secretary
Sam and P. Chase.
So as President Lincoln was obviously waging a war for our political union, he had the
foresight, along with his Treasury Secretary, to think about the long-term economic union.
And we were created to facilitate the rise of nationwide markets, whether credit, mortgages,
et cetera, and to forge that economic union over time.
So what the OCC does is we regulate national banks.
So it's over 1,000 banks, about $18 trillion in assets.
It's two-thirds of the commercial banking system.
And we charter these banks, we regulate them, and we supervise them.
I don't know why I find that so impressive that while he was fighting a civil war,
he still found time to regulate the banking industry.
If it were me, I might have let that slide. There was a lot of stuff going on still found time to regulate the banking industry.
For me, I might have let that slide. There was a lot of stuff going on, but he's a very impressive man.
Okay, so can you take us inside?
So obviously within the history of crypto and banking, I think a lot of folks in the crypto space have felt, you know,
maybe a little bit less welcome in the banking system, but you have a very different read on the banking system and the change that you want to see than some of your predecessors in this office.
So, you know, take us in and give us an understanding of how you're thinking about regulation,
especially from a crypto banking standpoint.
Sure. So my agency is 163 years old.
We predate other federal banking agencies
by at least a half a century.
So we necessarily can and should
take a long-term view of risk management.
And just very broadly,
when I think about the business of banking,
I think about it in terms of financial intermediation,
and we are technology agnostic.
So we have seen over the last 163 years significant changes in banking markets,
and we as a regulator have to ensure that activities or technologies that are legally permissible
can be done in a safe and sound manner.
So rather than taking an attitude of, well, you know, yes, this is a legally permissible activity or this is a technology, a new technology that banks that are interested can embrace and putting the onus on the banks to figure out how to do it in a safe and sound manner.
Since I've been at the OCC, we've been taking a different view, which is we need to work with banks that are interested in engaging in these new legally permissible activities or embracing new technologies, whether it be distributed ledger technology or artificial intelligence.
And we need to facilitate their ability to engage in a legally permissible activity in a safe and sound manner.
and sound manner. So again, we want to take some of that onus off the banks themselves,
since it is our responsibility as regulators to make sure that it can be done in a safe and sound
manner. So take us inside, I mean, don't reveal any state secrets, but the conversations that
the banks have been having around stable coins. When I think of big transformative technologies,
especially even potentially that have big implications to the model of banking and risk and all of that stuff.
It seems like stable coins are a really big step function change.
What has the response generally been from the banking industry?
And then take us inside, you know, the implementation details of Genius and when we can start,
maybe expect to see some, you know, bank issued stable coins.
So I probably can't take you too much inside.
Oh, come on, Jonathan.
You're among friends.
Come on.
But I can give you some background.
I hope it's helpful.
So Congress did assign the OCC pretty exciting new responsibilities under the Genius Act
in terms of drafting a regulatory and then supervisory framework for so-called federal qualified payment stablecoin
issuers and foreign issuers. So the OCC is very excited about that. It actually
harkens back to some of our earlier days where our job was to ensure that the notes being issued by
banks were backed by reserve assets that were reliable and consistent across different banks.
That was before we had Federal Reserve notes.
So you can think about what we're doing now
and the task that Congress has assigned us
under the Genius Act as somewhat similar
to what we were doing 150 years ago in our earlier days.
And so again, we're very excited about that.
And we have proposed about a few
weeks ago, a pretty voluminous set of regulations that we believe is a good first step in terms of
attempting to carry out the statutory mandate that Congress gave us.
It is just a proposal.
You'll note that, and some people have countered up the number of questions we ask.
I think it's around 211 questions.
We do that because we actually want to extract as much input from the people in this room and beyond on how we can make our proposal better.
We think it's an intellectually defensible first step, but it's just that.
And we recognize it needs the benefit of input, again, from people in this room and beyond.
That's why we ask a lot of questions.
That's why we try to put enough kind of meat on the bones of the proposal
to provoke responses from people so they can see kind of the direction we're thinking.
They can tell us that's a terrible idea
or that's a great idea, but you need to make these tweaks.
So one thing I just want to tell this audience
is that please do read what we wrote.
We spent a lot of effort in it.
It's definitely not perfect.
Definitely not perfect. It needs your input. And so please do weigh in on what we put out there.
It needs your input.
And so please do weigh in on what we put out there.
So that's kind of where we are in the process on the rulemaking side. You know, we have statutory
deadlines. So we are trying to do our best to meet those deadlines. The proposal that we did
put out does not cover some very important parts of the statutory mandate
that Congress assigned us. Those include things like BSAML, which is obviously of
significant kind of public policy importance. We're going to work on that
together with Maine Treasury, of which we are a bureau. That I think made the most
sense, given where the Financial Crimes Enforcement Network sits also within
Treasury.
So we wanted to partner with them to address those very important aspects of the rulemaking.
So you ought to see something on the BSL, AML front from us and Treasury in the not-too-distant
future as well. And of course, on that too, we would very much welcome and need your robust feedback. In terms of bank adoption on payment stable coins,
I've certainly read a lot of different studies
purporting to offer a range of different scenarios going forward.
I tend to be a little bit skeptical of anybody's ability to predict
the future with any accuracy. We are trying to be thoughtful about the regulatory and
supervisor framework that we're proposing. We will, of course, and you should expect us to,
you should expect any regulator to constantly or at least periodically reassess regulatory
frameworks, particularly when we're talking about a relatively
nascent market, which at least I can't predict with, again, 100% accuracy how it will be evolved.
I'm certainly excited about the opportunities that payment stablecoins do create for a range of
entities, banks and non-banks alike. One of the things that we will work on at the OECC is ensuring,
to the best of our ability, that those who are engaged in payment stablecoin activities
are subjected to a very similar regulatory and supervisory framework, regardless of whether
they are doing it in kind of a national bank structure or doing it in a federal qualified kind of non-bank payment
stablecoin issuer structure. Because we regulate and supervise kind of both sides and both entities,
we can ensure convergence over time to make sure that, again, like activities are being treated in
a similar fashion. That said, we do recognize that non-banks are different from banks. And you'll
note in our proposal on payment stablecoin issuers, we have focused on requirements around
reserve assets, diversification, liquidity requirements. And we place less emphasis on
things like capital, which are kind of more uniquely bank-like features. But again, we invite comment on whether you think that makes sense or doesn't make sense
and how we might improve our proposal.
And let me just go back to, I think, the initial question you asked.
I mean, we are seeing interest from particularly some of the larger banks in the payment stablecoin area.
One of the things, and this goes back to what I was saying at the beginning, which again, I think reflects a shift in philosophical approach and tone and hopefully
practice over time at my agency from perhaps past stances taken by my agency. We want to make sure
that all banks or all parties that are interested in engaging in payment stablecoin activities that
are under OCC jurisdiction have an opportunity to do so. What we don't want to have happen,
and I've seen this time and time again in other areas, including other exciting kind of new
activities or use of new technologies technologies where only the very largest banks
engage in those activities or take advantage of them. Because only the very largest banks
have the fortress balance sheets or the extremely sophisticated risk management
that makes regulators like me feel comfortable that it's okay for them to do it. Right? So I
don't want to see it or I prefer not to create any incentives
that promote or create a two-tier system
where only the largest players can take advantage
of some new technology, but everybody else can't do it,
even though it's legally permissible for them
to take advantage.
So we're gonna try very hard to make sure
that the benefits of payment stable coin activities, at least for those who want to participate in them, are recognized across as broad a sector of the banking system as possible.
While obviously we as supervisors are very focused on mitigating any potential downside risks.
You know, I'm interested from, you know, one of the things that it's really interesting chatting with you is obviously, you know, you're charged with, you know, containing a risk in the financial sector and especially around banks.
And, you know, I think people sometimes, especially in this space, get excited about innovation and changes without maybe fully holistically thinking about the risk.
And, you know, one potential change that you can maybe see coming down the road if some of this plays out.
I'd love to, like, paint a scenario and then get your perspective on this.
But, you know, one of the reasons maybe why fintech in the United States has been hampered
or hasn't been able to move or innovate as fast as it might want
is it still, at the end of the day, relies on banks to move money.
And so, you know, you have almost everyone in the fintech space in the US is kind of a thin layer on top
of this layer of
banks and I think
I have no inside information here but
looking at what a company like Stripe is
doing I think that sits on top as a payment
processor but ultimately still relies on
ACH and wires and things like
that they're saying hey maybe with
stable coins in my own chain I can actually
be the full stack.
And I'm curious from a, you know, in some senses, that could be great for consumers.
That's very innovative. You could maybe save on costs, things like this.
But there maybe is some risk of, I don't know, there might be.
So, like, I'm curious how you might think about, you know, from your OCC hat, if there were to be a change like that.
Is that a good thing, bad thing, risks? How do you think about a your OCC hat, if there were to be a change like that, is that a good thing,
bad thing, risks? How do you think about a change? So at a high level, one of the things that I have
been worried about and that I think has been encouraged by changes we made, meaning we,
unelected bureaucrats, made post-2008 financial crisis to the regulatory and supervisory framework,
made post 2008 financial crisis to the regulatory and supervisory framework. I'm worried that we've
made these discretionary policy choices again around regulation and supervision and they tended
to push more and more activities outside of the banking system. You'll see changes that we have
proposed for example on regulatory capital which are specifically designed among other things to
which are specifically designed, among other things,
to make it less punitive for banks to engage in traditional banking activities
like, for example, mortgage activities,
which, again, were seemingly unintentionally pushed
or discouraged from being conducted in the banking system.
So I have a broad view, again, as to what a bank is
and the financial intermediation services that it is capable and can provide as a socially useful good.
So I don't, you know, if you look at the history of the U.S. financial services system over the last 50-plus years, you know, there is this interesting tension between, you know, where is the best place for a particular service to
be provided?
Is it in the banking system in traditional banks?
Is it in a non-bank?
I think that's true in the payment space too, although as you know, it's been a little
different in the payment space because of the kind of unique nature of our payments
payments rails in this country.
rails in this country.
And, you know, I don't have a particular strong preference one way or the other.
I think it is, generally speaking, an inherent good that banks remain.
And part of what I am doing by resetting some of the risk tolerance in the banking system,
is I want to ensure that banks are restored to their proper roles as financial intermediators
and not being kind of driven into increasingly irrelevant roles.
So, you know, a lot of what sometimes is, I think,
portrayed as these kind of mutually exclusive frameworks of, you know, we've got banks versus non-banks, etc.
Or banks versus fintechs, or banks versus crypto.
You know, my suspicion, and I think we've seen this borne out in the past, is that
over time, these things converge, right?
And so while, you know, I just want to make sure that banks remain relevant over
time, and one of the ways want to make sure that banks remain relevant over time.
And one of the ways that I can do that is by adjusting the regulatory and supervisory framework that applies to the banking system, such that more and more activities that are legally permissible can be done in banks in ways that aren't treated in a punitive fashion by regulators.
treated in a punitive fashion by regulators.
So my general attitude is let markets decide what's appropriate,
try to set rules and supervisory frameworks that make sense,
that are appropriate to the nature of the risks presented,
and then let borrowers, customers, and other market participants decide.
I want to ask you about, there's been, in our closing couple of minutes here,
so Kraken is a company that's been pursuing a national bank charter
and I think is the first crypto company of its kind to achieve this.
I'm curious, you mentioned this idea of convergence,
and it's a big theme of this conference in general.
And I'm curious, I wanted to ask you a little bit about,
I mean, even just from the number of banks in the U.S.,
we have the right number, too few, too many,
and then, like, when you see the profile of some of these
maybe less traditional entities, like the Krakens of the world
or some of the big custodians, is that a good thing in your mind?
Do you want to see more of that?
Do you think that they should remain separate?
How do you view those sorts of applications?
So I think it would be horribly presumptuous of me to claim that I have a view or am entitled to a view, much less to dictate kind of the large-scale structure of the U.S. banking system.
I do, however, have a view that historically we have been well served, meaning the U.S. banking system and I believe more broadly the U.S. financial services system of which banks are a part, and the U.S. economy has been well served by having a both dynamic and a banking system in which we see new banks being formed as a way, again, to kind of refresh the banking system, respond to emerging or changing market dynamics, new technologies, customer needs, etc.
That we also have, as part of that dynamism in the banking system, we have banks, if they so desire, merging, consolidating, changing over time.
banks if they so desire, merging, consolidating, changing over time.
I would note that just in the past 18 years, we haven't had a lot of dynamism in the banking
system.
What we've seen over the last 18 years in the banking system is half the banks with
less than $1 billion in assets have been blinked out of existence since 2010.
That's a stunning number.
And we've seen the very largest banks get
bigger and bigger and bigger. Now, that is not a criticism of the largest banks. They have just
responded to the regulatory and supervisory dynamics and incentives that we have set them.
So the other side of that is diversity. So I believe that we are well served in the U.S.
banking system by having very large banks, very small banks focused on community activities and
everything in between. Again, that diversity of banks, as I just mentioned, we saw half
of banks under $1 billion in assets blinked out of existence over the last 16 years.
That's a bad situation. We've had almost no new bank formation in this country over the last 18 years. So I am very focused on undoing those trends and largely all I have to do to undo those
trends is actually follow our written procedures as to how we evaluate, for example, M&A activity
or new bank formation and apply the statutory factors that Congress have set, which have not changed,
but were not always observed, let's just say, in my opinion. And so we are reverting to form
when it comes to both protecting the dynamism and the diversity of the U.S. banking system.
So in general, you know, we will evaluate at the OCC, and I'm also on the FDIC board, so have a role in terms of new bank formation, at least those banks seeking deposit insurance application.
You know, we will evaluate banks on a case-by-case basis, or excuse me, applicants on a case-by-case basis, based on the statutory factors that we're given and the written procedures that we ourselves say that we apply to the process.
Amazing.
Well, Jonathan, that is all the time
we have, but this has been a fascinating conversation. Thank you so much for coming
out and speaking. Thank you very much for having me. I really appreciate the chance.
Please welcome to the stage Luke Leisure, Guy Young, and Stani Hulachov.
All right. Good morning, everyone.
Hope you're having a fantastic day one at the Digital Asset Summit.
My name is Luke Lazier. I'm the head of research here at Blockworks.
And today I have the privilege of being joined by two titans of the on-chain financial system,
Stani from Aave and Guy from Athena.
Each have built incredibly successful financial products and applications
in their own right, but even more so from working together, which we'll dive into today.
So, Stani and Guy, would you like to begin with some introductions?
Sure. So, I'm Stani Kulchov. I'm the CEO and founder of AVA Labs. And Ava Labs is known for building the Ava protocol.
That is the largest DeFi protocol focused on borrowing and lending.
And roughly between $40 billion and $60 billion worth of net deposits.
Very heavily eccentric on stable coins.
And a lot of the lending is backed by digital assets such as Bitcoin
and Ethereum.
And more recently, since last year, we've been also accepting RWS as a collateral with
the Aave Horizon market that has grown over half a billion, and you can use collaterals
such as tables, money market funds,
AAA credits, and so forth.
And we've been building DeFi now almost a decade,
and it's pretty amazing to see how the space is growing and much more to build.
Hey, everyone.
My name is Guy, founder of Athena.
We started the business around three years ago now
and came out with the first product two years ago.
You can think of it as a stablecoin adjacent product,
so not quite the same in terms of the collateral backing
that sits within the product.
But it's essentially a savings account
and dollar-denominated asset that is used
throughout DeFi and CeFi.
As I mentioned, we came out around two years ago with a product
that scaled from zero to roughly $15 billion in around 18 months since we launched.
So it was like the fastest growing dollar asset that's ever existed within crypto
before we had the deleveraging event last October.
And yeah, excited to be here and chat through DeFi.
Thank you. Yeah.
So, Guy, you've built one of the most successful yield products within crypto.
And historically, we see a majority share of Athena's instruments traded on Pendle,
which is the venue that unlocks fixed yield with zero coupon bonds.
So I'm curious from your perspective as the asset issuer,
what benefits does this yield market provide you in terms of unlocking fixed income?
And then downstream, what benefits might it provide your users?
Yes, I think this piece of DeFi was probably the least mature around two years ago before
Athena and Pendle, I think, came to market at scale.
In some senses, like all of DeFi before was like borrow land with Aave and then very simple
spot trading on AMMs.
And if we think about like real finance in the real world, most of fixed income is like
the distribution of risk in different formats to people who either want fixed, you know, junior, basically just slicing, dicing and distributing risk in different formats.
And really what we saw there was like the return and yield that was produced on Athena's product is extremely like volatile through the cycle. So there's periods where we first came out and on the initial launch and financing rates in
crypto were like 30, 40, 50 percent annualized for months. And then there's periods where it goes down
deep in T-bills or slightly below. And essentially what you're doing with Pendle is just providing a
fixed and floating rate swap where you're essentially just taking that variable income stream,
collecting it as a fixed return up front. And then there's very cool things that you can do.
One of the most, I think, successful integrations that we saw in the last sort of two years in the whole of DeFi
was actually taking that fixed rate collateral, integrating with Aave,
and then allowed, for really the first time at scale, fixed levered exposure to assets.
And we really hadn't seen that at all in DeFi since that came
around. Yeah so let's touch on that Stani. Last summer when Aave listed Athena's zero coupon
bonds as collateral you grew from zero to five billion in collateral in the span of months
and went from zero to 80 percent market share not from taking collateral
from other venues but just growing the utilization and distribution of the market at large so how do
you view aave's role in supporting the growth of fixed income collateral and athena's instruments
i mean the the pendulp tokens and also being able to support these yield-bearing stable coins or similar products is quite interesting because Aave is sort of acting as a liquidity sink.
So you have various different use cases that how Aave as a protocol is utilized, both on the supply side and also on the borrowing side.
on the borrowing side.
And this pulled model actually creates
a lot of liquidity opportunity to actually bootstrap
a lot of the new coming products in DeFi.
Whether that yield is created within the DeFi existing
like native DeFi ecosystem or off-chain for example.
Whether it's with products like for example Athena
or products like, for example, Athena or products
like RWAs as well that you have that component coming from the traditional finance, for example.
And it's sort of these PT tokens enabled to actually utilize that excess liquidity supply
on Aave into this high demand use case.
And I think that's a sort of a model that can be replicated on any product that is tokenized in form of a stable coin or a on-chain fund.
And then also leverage that position for the sake of getting higher leverage
and also getting higher margins as well. And it's
really actually probably the most successful story in DeFi
during the last year. Yeah, agreed.
So we see profound demand for the Athena bonds,
but then there's the other side of the yield market,
the yield strip, which can actually offer a pretty good hedge
to the carrying cost of a levered position.
So, Guy, how might a levered trader use the yield strip of SUSDE to hedge their book?
Yeah, you can sort of think about it as like,
what is the source of return that's sitting within USD?
You're essentially, well, actually all of these dollar products,
I think the simplified way that you can think about it is
you're lending to someone.
So Circle with USDC filled with T-bills,
when you're holding that, you're essentially lending to the US government.
With Sky and MakerDAO, it's essentially lending to other RWA's
or over-collateralized ETH positions.
And then with Athena, the core piece of the basis is that you're just lending to CeFi traders so that they can get long on leverage on the other side.
And so with that at the core, for someone who's actually running a very large derivative book and is long and paying their financing costs on one side,
book and is long and paying the financing cost on one side it's actually a very interesting
instrument to say I want to either lock in my financing or short on the other side to hedge
against it as you described and so I think a lot of this is just like portfolio optimization if
you're running an extremely large derivative book it's just an interesting instrument that
you can sort of hedge against that cost to carry the book absolutely. And we've seen some of this hedging demand result in basically the bonds will pay a premium
to the underlying yield.
So I'm curious, do you all think the zero coupon bonds are more attractive financial
instruments than the underlying outright?
Or what are some of the trade-offs an investor might need to think about between the two yeah well getting very specific on the dependence
off but um no I think just generally why did like fixed rates find product
market fit it was really an area that we haven't seen a lot of development within
def I think even money markets to date have struggled a bit with like actually
unlocking really large fix on the collateral side and then borrow side as well and I think part of
the issue here within crypto is that like it's very difficult to know three
months out what the state of the markets actually gonna look like and so for you
to take a view or fix in a rate of return even three months out I think
in crypto it's very hard to find someone to take the other position on that
because one month it could be a 50% interest rates and the next month it's like below T-bills.
So I think that's just like a broader challenge but also like opportunity within DeFi now which I know, it introduced a very algorithmic way of matching supply and demand,
especially in terms of lending and borrowing.
And that works really programmatically.
So when you are supplying liquidity to Aave,
the rate fluctuates up to the point that the liquidity settles
in the protocol on the interest rate curve.
That is also pre-programmed into these smart contracts.
And when you borrow, you also move the utilization curve.
But overall, the markets stabilize on what is the exact demand in DeFi.
And that's sort of like a back and forth interest rates model has been a quite
a efficient solution. So there's been in the past attempts into build fixed lending as well. I mean,
Aave originally started as ETHLEND, short for Ethereum lending, and completely with a fixed
model. And there is definitely use cases for that.
But one of the sort of key components
why the on-chain lending has been able to succeed quite a lot
is that you have the ability to use DeFi as a sort of a piggy bank.
So you can supply liquidity that is in the pool.
There is sufficient amount of capital
that you can actually pull out of the pools as well.
And what Kai mentioned is that a lot of the DeFi and these native users are actually rather
willing to take the opportunity of being able to reallocate the capital quite quickly because
the markets move and change.
And a lot of DeFi yield and also crypto yield is largely still based on the opportunity that exists increases the funding rates for traders
and also the borrowing costs for borrowers
and the yield in DeFi as well.
And this is sort of like 95% of the DeFi space.
And I think this is actually a really good thing
because being able to take something like these DeFi protocols
and battle test them with a really volatile asset
class has been really amazing because it also showcases that DeFi protocols are actually the
most resilient infrastructure. So for example, a couple of months ago in a market downturn,
Aave liquidated almost half a billion worth of collateral. October the 10th, we liquidated over
250 million worth of collateral in just the 10th, we liquidated over 250 million worth of collateral
in just a few minutes.
Programmatically automated fully in a transparent fashion.
That is something that the existing financial system
doesn't have at the same sort of like transparency
and also ability to participate in those liquidation options.
But I do think that with this, with RWS coming more on chain and seeing like a model of Athena
where you can basically construct a strategy and bring it on chain and then being able
to actually leverage that by using the obvious liquidity is sort of a way to bring more assets and reduce the exposure for the overall the the
crypto leverage and getting more yield from the diversified sources so we've seen the success of
fixed yield collateral with the success of the Athena bonds I I'm curious what we need to see to see the success of fixed rate lending on chain.
What needs to be built to support that?
Or is fixed rate, fixed duration not an appropriate fit?
And perhaps the variable is superior.
You're running a lending market.
I think the basis for having a variable rate and variable lending markets is really
fundamental. So you understand what is the near-term cost of capital, and I think DeFi
has achieved that pretty well. And the second piece that can be attached is the fixed component
where you can let the liquidities to sit in lending markets and then utilize that into a tenure.
And also being able to trade those positions is fairly valuable.
As Guy mentioned, there's a lot of appetite
on actually being able to exchange the exposure over a short time period.
So I think it's a question of time, but also a question of use cases.
And I think probably like a short duration
is something that is going to be really interesting.
And I think maybe even more so
in traditional finance use cases
and RWA tokenization,
that is where it might play actually
very fundamental roles.
And fixed income, fixed rates, whether it's borrowing or on the income side,
is also one of the reasons why we built the ABV4, which is the new generation of lending protocol,
which is more modular. And you can actually attach this different use case modules, like,
for example, fixed lending. So a lot of rates in on-chain finance,
they're particularly short term, whether it's
the variable rate or the eight-hour perpetual funding
rate.
I'm curious what we need to see more duration
and longer-dated yields and loans,
and how much duration can we actually take on-chain?
Can we go out to one to two years?
What does it look like to take more duration risk?
Yes, I think a lot of this does happen, but it's more in a CFI context.
So direct, over-collateralized lending to largely institutional clients with tri-party custody,
the kind of stuff that Maple Finance does at the moment.
A lot of that does actually have like fixed duration,
fixed rates, you know, 30 days, 60 days, 90 days out.
I think the reason for that is like part of why something like Aave
is so interesting and kind of worked so well
is that there's like your ability to bootstrap it extremely quickly
is helped by the fact that it's all like short duration
because you're not needing to match a borrower
and the lender on every single like strike of duration
within the pool.
You're just saying like you lend in here
and everyone has access to the same thing,
which just means you can scale much quicker.
And it's, it kind of taps into what is actually like
powerful about DeFi.
So I think it kind of makes sense what is actually powerful about DeFi.
So I think it kind of makes sense that a lot of that duration piece that you mentioned sits off-chain
and is more like a bilateral type of arrangement
because it's really not tapping into what is core to making DeFi so powerful,
which I think is that shared pool liquidity that Ava has.
There are also these pooled models are quite efficient.
So the utilization curves
typically are at
92, 93%,
which means that there is a very
little margin for that sort of a fixed
component. But I think
in the part where you can actually go and
trade of the exposure in and out
and maybe hedge positions
could be a valuable use case,
regardless of how big of an economical opportunity it is on the yield side.
At large, do you think we have the infrastructure and components in place
for informed and efficient interest rate discovery on chain.
We've seen the emergence of a yield curve with Athena's instruments on Pendle,
but I'm curious where you see perhaps the benchmark DeFi yield curve in the future.
Yeah, I think even before Athena existed, people kind of thought about
the basis is sort of like the risk-free.
It's obviously not risk-free in any way, but that was kind of referred to as a risk-free rate within crypto.
And obviously you have floating rate funding, but then also like fixed deliverable features as well.
And those basically do create a yield curve more within CeFi where you can actually see 30 60 90 days out exactly where the curve is pricing um so i think that that has kind of
existed even before athena sort of bought that on chain um it's just that the yield curves in crypto
just don't really follow exactly what you'd expect from like a normal yield curve just because
uh you know generally you expect their upward sloping in some way.
But in crypto, because, like, views can be so strong in either direction,
it's either extremely upward sloping or extremely down
when the market is negative and bearish in the way that it is right now.
So it's just interesting, I guess, data point that the interest rate curves
actually have, like, no resemblance to what you see in the real world.
I also think that the default particularly is
the interest rates are going to look very different
in a couple of years from now or further,
mainly because a lot of the assets might be less crypto-native.
So I think when you think about decentralized finance,
when you think about these interests as finance,
it's easy to think this system as systems
that rely on digital assets that are native,
like Bitcoin and Ethereum.
And I think that sort of category will keep growing
as there's more people that are interested
in that asset category.
But this exact same infrastructure
will be used for all sort of finance in the future.
Financing and accessing liquidity and funding opportunities in the world, like real world
economy, in traditional finance. And I actually think over years, there's less correlation on,
let's say, like the existing crypto yield curve. and you can start actually bringing a lot of these products
that already exist in traditional finance
in different form factors,
because that isn't even clear.
Is it the tokenization?
And what shape is it?
And so forth.
But I do think that DeFi just sort of becomes an infrastructure
in the background that will empower a lot of these use cases.
And a lot of the yields and a lot of the economics will come from the traditional finance.
Yeah.
So at this point in the maturity of the on-chain financial system,
the marginal participant or user at scale might be more institutional than retail.
So I'm curious what products or business strategies you all are leaning into or pursuing to cater to that client base.
Yeah, so I sort of think about it from two different directions.
So one is picking up a legacy finance native asset, bringing it into crypto,
and then trying to distribute it through crypto,
which is what you're seeing with the biddles,
the money market funds, all those types of assets.
And then I think the one that we find more interesting
is can you create something out of crypto
that's unique and inaccessible for people,
institutions that exist outside of crypto,
and package it in a format that they can actually digest
and interact with that product.
So we do sort of attempt to do both of those things in different directions. side of crypto and package it in a format that they can actually digest and interact with that product.
So we do sort of like attempt to do both of those things in different directions.
So we have like a white label stablecoin infrastructure, which is built on BlackRock's
Biddle product, where essentially you can come and launch your own stablecoin, control
the economics, control the branding, all those different pieces.
And in essence, what we're doing is, as I said, taking a try to find a native asset
and then distributing it in different forms through crypto.
But I think the one that we find more interesting is actually saying, you know, a unique uncorrelated form of return that's actually captured within USD.
Can you package that up and actually export it out in the opposite direction?
So I think it's just, yeah, trying to think deeply around which direction and flow are you actually engaging with on those two ends.
On the other side, I mean, we've obviously
focused quite a lot on the distribution
now that DeFi has proven its resiliency
and basically making it more accessible
to traditional users.
And I think that will happen through a lot of these integrations
and replacing the backends of the fintechs
to actually use a system like DeFi and the Aave Protocol
and 18OS and basically these types of primitives in the future.
So I think that's sort of an interesting way
of bringing more transparent, accountable,
and better execution on lending.
And DeFi is in a really interesting position at the moment
because there is, in some ways,
kind of like a surplus of liquidity,
which is compressing a lot of these yields.
So a lot of our focus is actually at the moment
on the borrowing side and finding new collateral.
And with the Aave V4 architecture,
one of the bigger visions is actually then
to use that DeFi liquidity.
And I think DeFi has solved the liquidity aggregation
pretty well because liquidity flows
into risk-adjusted opportunities, mostly
even programmatically. So that part is kind of sold. And the other part that we want to
solve is that how do we get that liquidity that is floating in DeFi and getting that
channeled into sort of like real-life financing opportunities.
And this can be credit facilities that can tap into
institutional loans, that can be consumer loans.
There's a lot of optionality there.
And so in some ways, DeFi as a system can be end-to-end very native.
You have basically a smart contract system
where all the logic is on
chain. The collateral is on chain. It's basically, you can count it on chain and the liquidity
there as well. But there's a bigger opportunity also to find these use cases in credit that
exist today, but deserves a better cost structure.
And DeFi liquidity doesn't necessarily need to be cheaper.
And in most cases, it might not even be.
But it can disrupt the whole cost structure of lending and borrowing in the traditional finance.
And take a lot of these pieces that can be automated and actually put in the form of a smart contract
that can execute much more better than, for example,
doing it manually or driven fully by humans.
A great example for this is you can borrow today from Aave
between 4% to 5% stablecoins against your Bitcoin or Ethereum collateral.
Similar models that have been run in a centralized fashion
typically charge between 7% to 12% and even an origination fee. So Aave has been able to prove
this model really well in the crypto native assets. And the next sort of thing is to prove that
with traditional assets, traditional collateral, and traditional lending opportunities,
whether that's businesses or consumers or institutions?
Yeah.
So on that, you mentioned there's currently a surplus of on-chain stablecoin liquidity.
It's diluted yields a little bit as it primarily lends against on-chain collateral types.
But what are the opportunities you're seeing off-chain for Aave to begin underwriting to and expand its loan base?
And perhaps this touches on your funding abundance blog piece.
Yeah, I think that tokenization is such a wide kind of like a category. really exciting projects on sort of taking existing financial products
and tokenizing them that has already a liquidity
and are traded equities, for example,
and money market funds and credit funds and so forth, ETFs.
And that's something we're capturing with the Aave Horizon as well,
and we want to expand on this opportunity to find more interesting collateral
that could be brought on chain,
and then the next step is use that as a collateral to borrow against.
The other sort of long-term plan is actually also think about
what is the infrastructure that is banking the future
and actually does that infrastructure or these financial opportunities have liquid markets today
or efficient way to access capital. Now typically the access to capital has been provided in our
society obviously with banks and more recently with private credit and similar lenders.
And what we think about it is that a lot of the future that is going to be built has a high technology risk,
and there's not necessarily access to capital for a lot of the infrastructure.
And that can be, for example, related to the energy transition with funding infrastructure like batteries,
solar, even GPUs,
and that being a big part of the infrastructure
where Aave could actually come
and solve the funding gap for the infrastructure
that we have to rely on in the future.
So I think tokenization plays a big role there.
Aave will play a big role there. Awe will play a big role there and DeFi in general.
And doing it on-chain brings a better cost structure.
Yeah, interesting.
So you are both founders of financial products and applications
with significant assets on the platforms.
I'm curious where you see the most tail risk.
What are the aspects of on-chain finance
that might still keep you up at night as founders?
Yeah, I think a lot of what's different between now and our cycle,
which you can kind of see in the data,
is actually smart contracts on-chain,
I think, are actually 10 times safer than they were four to five years ago.
We still have some level of hacks,
but if you just measure that as like a percentage
of total DeFi TVL,
I think Vitalik actually tweeted about this a few months ago.
It's actually like trending pretty strongly down
over the last few years.
But as we start to introduce off-chain mechanisms,
off-chain assets, off-chain sources of return,
it moves to more of like an OPSEC
and off-chain assets, off-chain sources of return. It moves to more of like an OPSEC, an off-chain operational type of risk
that didn't exist in the same way in 2021.
So yeah, I think we kind of saw a test case of this over the weekend as well.
There was obviously an issue with Resolve, which, yeah, again,
had an off-chain issue rather than anything with the smart contracts off-chain.
I do think there is a piece that we need to rethink in terms of just like incentive alignment
and that kind of stuff when it comes to these curation strategies, I guess, that sit on
chain because a lot of the temptation is basically just to do maximalizing return with little
regard for the risk and that's how you sort of get paid.
And in a sense, there's a sort of dilemma here where your incentive structure
is just to take as much risk as humanly possible, and when it blows up,
it's kind of no one's problem except for the users or the lenders within the market.
So I do think we need to rethink that piece of the market in particular
because I do think they're going to continue expanding in terms of the types of assets,
strategies, and that kind of stuff that we see within Vault.
And if we don't have guardrails around the way that that's presented
or the incentive structures there,
I think we're going to continue seeing what we saw last weekend.
Yeah, one important thing is always to think about the skin in the game
and the incentives.
What Guy mentioned is pretty actually one of the most concrete
sort of drivers
in the space because a lot of the on-chain strategies
get really quickly commoditized.
So to actually find
differentiation to
sort of serve the same audience,
what I've seen is that there's either
the ability to go and lower fees,
which is raised to the bottom,
or then take additional risk.
And the latter is the one that sort of has created
all of these localized challenges in DeFi.
So from Office's perspective,
we actually look into more counterparty risk.
So every smart contract or asset,
every sort of like operational setup, whether it's like a multisig or governance
model is sort of like a counterparty assessment that we do.
And one of the amazing things about DeFi is that it is so composable and you can construct
products really easily.
And also you have this amazing transparency. So for example,
the resolve incident that happened over
the weekend, it
was known when the actual moment
happened by the whole space.
Transparently
and also everyone was
figuring out how to take different
kinds of mitigation
measures. So down the line, what I think
is that by nature,
DeFi is just a better way to manage risk.
And the more you have these assets on chain
and better accountability of these off-chain assets,
that can be also, that has the transparency
that is reflected all the way in DeFi,
end-to-end, you can make better risk assessment
and calculate the risk more precisely.
And that also leads to lower cost for risk as well.
So I think there's a lot of learnings there.
And as the system basically grows, those are the things that we have to focus on.
Yeah.
All right.
That's unfortunately all the time we have for today.
I want to thank you, Guy and Stani, for your time. And thank you to our audience. Thanks. thank you. All right, that's unfortunately all the time we have for today. I want to thank you guys, Donnie, for your time,
and thank you to our audience.
Thanks.
Please welcome to the stage Azeem Khan and Amy Oldenburg. Good to go?
All right.
Hey, everyone.
Good morning.
So a couple weeks back, Amy messaged me saying that she had a potential fireside or keynote
that she was going to do, and she thought
it would be a great idea instead of her coming and speaking just about the Morgenstead, that we
would do something that would actually be a co-fireside where we went and did something that
was a little bit founder and TradFi. So a little bit about myself. I'm the co-founder of a privacy
L2 named Midan. We did a large seed round last year and looking to go to mainnet later this year.
And Amy.
And Amy Oldenburg, the head of the digital asset strategy at Morgan Stanley.
And to Azim's point, we've been friends for a number of years.
So bringing the two sides of this industry together, both TradFi and the builder side,
is just something
that we both feel very strongly about. We've talked a lot about over the years. And ironically,
this is the first time we both live in New York, but the only time we ever hang out is in the
Middle East or Korea or Singapore. So this is the first of its time that we're actually doing
something together in our hometowns. And it's funny because originally I thought I'm going to be on a fireside
with someone who's the head of digital assets at Morgan Stanley.
Maybe I should put on a quarter zip or look a little bit more formal,
which I never do.
And then I said, no, this is a TradFi founder panel.
I should dress like I normally do.
And I was stressing out about being too traditional
and thought about actually dressing down
but went the other way
and felt that a full suit would be more appropriate
for the institutional side of this chat today.
Yeah, so what we thought would be interesting
is just sort of speak about
what we've been seeing recently.
And one of the big themes that I would say
has been in the midst of what looks like
a massive contraction on the crypto native side
teams being fired and laid off and rounds being difficult to raise token prices in the dumps it
seems like at that same time it's never been more hot on the tradfi side to be doing things in crypto
and sort of what the implications of that are and where things are headed.
Yeah, and I think one of the things that, you know, we've been, a number of people have said is like TradFi is getting FOMO and is now getting involved.
But it really isn't accurate. We've been on a journey around the entire modernization of financial infrastructure for years.
entire modernization of financial infrastructure for years. Many people in this room have been in
the DLT era and even the early, the 2021 era when we were looking at crypto and just had so many
limitations for the traditional business to get more involved in building at that point. So, you
know, it really is more of an inflection point right now where we're able to just not only get more involved because of the regulatory environment that we're in, but also just continuing to understand and look at the underlying technology and really learn where we can build new financial technology products for our clients and continue to implement that across every part of our business.
for our clients and continue to implement that across every part of our business.
Yeah, it's been something where, you know, on the founder side, when we look, it's been
the last, you know, year and a half, everyone has talked about we need to do institutional
adoption, institutional adoption. But I don't think many founders have really understood what
that means. Traditionally, most of the folks on our end of the table haven't actually spent time
in TradFi like myself. The best that we have
is reading books about it or something. And so many times when Amy and I have sat down and we've
discussed some of the ways in which things operate within crypto, she's usually like aghast, like,
what do you mean? Like, this is how treasury management works or like, well, that would be
considered money laundering or something like that, where these are like completely normal
practices. And so far, it seemed like like for years these two tracks have sort of been
working in parallel and now we're finally finding that they're getting to
each other in a way that actually will create this adoption that people have
been talking about and maybe so last year at this conference we ran into each
other in the hallway and Azim actually asked me, he goes, do you think I should come over to a traditional finance institution? I'll let you answer the
question. Yeah, I'm really glad that I didn't. I mean, she basically looked at me and said,
you would be crazy, you would go crazy, and that this would not work out at all for you.
But it has been interesting where in that same conversation, I was able to get some
insights into things where what are the actual things that are slowing adoption down? And it was
things around, you know, lack of redundancy in stable coins, lack of redundancy in custody
providers, understanding which laws for which country apply when you're doing cross-border
settlements. And so many of the little things that I find crypto founders have no idea about. And it seems like now we're starting to see where
we're sitting down to understand what are the things that actually matter? Because in general,
I found crypto ends up creating solutions and then looks for problems after. And instead are
trying to see what do we need to do to figure out
what are the actual problems that crypto can solve for some of the things that you have.
So far it seems like stable coins have been the one that everyone is really talking about this
past year and I think that's interesting from a perspective because stable coins are something
that banks can already do but stable coins are faster, cheaper, and more efficient in doing so.
Where I've at least been thinking a lot about, and I don't know exactly where it lands that
becomes interesting, is what are the things that crypto can provide that traditional banking
rails can't, and where needing to use crypto becomes a necessity.
And I think that's one interesting thing, maybe just to expand on the point that Azeem
is making, is that we're really going through the entire traditional business, every single division of our organization,
and trying to understand where are the disruption points as we continue to see modernization of financial infrastructure?
Where are the potential new revenue opportunities?
What infrastructure do we need to build to support that?
And the thing that's really been fascinating over the last number of months is as we went
down that journey of exploration, a lot of times we are having to reteach ourselves what
legacy infrastructure pipes and plumbing look like.
Because so much of this stuff has been in place for decades to unpack it and rebuild
of the stuff has been in place for decades to unpack it and rebuild different models. If it's
everything from moving to T0 settlement or 24-7 trading, all of that has to be rethought of.
And so maybe I can just also touch on a couple different things we're doing across the firm.
We've been in the market talking about offering spot trading for clients on our E-Trade platform.
We continue to bring these two worlds together, both supporting the cryptocurrency side of things,
but also pairing that with traditional capital markets.
So we see margin lending available now on ETPs, crypto ETPs on the wealth platform.
We filed for some ETPs within our asset management business.
And one of the most interesting areas that we're starting to really dig into and explore
now is around our investment banking and our institutional securities business.
So many of the big topics of the year focused on tokenized equity, and we're starting to explore where
that hits our different businesses. If that's our capitals markets business, where we've supported
the secondary tokenized offering for figure, or one of the things that we are planning for the
second half of 2026 is turning on our trajectory cross. So this is our ATS, our dark pool,
to support tokenized equities later this year.
So it already supports traditional equities, ETFs, and ADRs.
So again, you can see how this is just a natural path forward to start opening up some of our infrastructure
to support tokenized equities going forward.
What have you found from founders that come in
or teams that you meet with from the crypto side?
What is the biggest thing that you've seen that they get wrong,
that they just don't get when they come in to sit down with you?
I think how complicated our business is.
I think, and I think it's one reason,
like one of the reasons we wanted to do this on stage
is founders will continue to be critically important and the crypto native side will continue to be critically important as much as traditional finance starts to set up this infrastructure because there's so much to build. specific product, and it's interesting to us, and we want to use it and build it in many cases,
but there's so many other connectivity points that we need to plug in around it. So that's one of the things that we're really trying to understand is how we just get that whole
modernization together, and that goes back to my point on even sometimes we have to teach
ourselves how that financial pipes and plumbing look underneath the hood. Yeah, when I at least studying it from the outside looking in, it seems like a really
inefficient system of reconciliations that have been patched together over time that
now need to sort of be untangled if we're to try to create a new piping for how things
work.
But figuring out how to do that from the outside is extremely difficult.
Well, and I think the other thing, too, is we can't just modernize on our own.
This is an incredibly complex, integrated, global network of financial institutions,
of our clients and so forth.
So as much as we can turn everything on, we can rebuild infrastructure,
we also need to make sure that our clients are ready to do that
and that we can create some of these network effects. I think that's one of the things,
even in the builder side and the crypto native side, you talk about network effects a lot,
but it's really critical to our business too, to try to figure out how to get that right.
Also, I've been seeing, you know, crypto has fortunately or unfortunately finally gotten
to the point where we're realizing that companies need to make money for their tokens to go up in price.
And that's something that TradFi understands much better than crypto.
I feel like we're always like the bad guys in the room.
We come in and ask the question, what your revenue model is?
And everybody gets annoyed that we're so focused on just making money.
But I think ultimately, it's not just solely about having that revenue model,
but also, like, what is your sustainability model?
So how do we continue?
And we've talked a little bit about, like, how do you just stay in the game?
Because that's been a lot of it over some of these cycles that we live through is, you know,
sometimes you can argue you get very academic about this isn't the best tech or this model is better. But
ultimately, if you don't survive through some of these cycles, it ends up being a bit irrelevant.
Yeah. And the old models, at least on the crypto side, I can speak to where you were able to figure
out how to get tier one listings and then do treasury management by just selling a bunch of
tokens into the pump each time you got one of those listings isn't working anymore. And so I've been finding it even more
interesting to spend less time on the academic debates about throughput speed and things like
that, and more so figuring out what are the problems that we can solve? What are the market
sizes of those problems? How can we go about being able
to say hey we figured out something that will either make you more money save you
money or make you money and save you money at the same time and been spending
so much time speaking with people on your side of the table so that we don't
end up making solutions that don't actually have a problem that we're
solving so I have to ask you the same question.
What does the TradFi side get wrong about the builder side or the crypto native side?
That we actually, I think they think we know what we're doing.
I think, yeah, I think that would be the most honest answer to give you, is that most of us have been really fortunate to jump into something that's super interesting technically and has implications, broadly speaking, but that we. But Stani has also been doing this for a really long time, has been focused on very specific problems,
has understood what it means to turn something into more money.
Most crypto founders are not in that position.
And he was also talking about the connectivity with traditional assets, right?
So you're starting to see that really come together now for sure. Yeah. I will say, I think that despite it being a really seemingly bare market,
at least myself who's been in this space now since like 2012 or 2013, I haven't found there
to be what seems like a better time to be building. It's definitely harder to raise money at this
point and token prices across the board are depressed and it's requiring founders to be building. It's definitely harder to raise money at this point, and token prices across the
board are depressed, and it's requiring founders to be much more thoughtful about what their team
composition is going to be like. But just last week, the SEC offered guidance around tokens.
Clarity looks like it hopefully is going to pass sometime in the next quarter or two.
We had the Genius Act last year. Commissioner Hester Purse and Paul Atkins
have been amazing in terms of just their view
on what they think needs to happen.
Privacy looks like it's moving forward.
There was even some IRS guidance last week.
So from my perspective, I've been writing about
and working within this industry
for well over a decade at this point.
I've never felt more bullish about what's going on.
And I'd be curious if you think the same because so many founders are depressed at this point, I've never felt more bullish about what's going on. And I'd be curious if you think the same,
because so many founders are depressed at this point.
And I'm looking around like, why would you be depressed?
This is amazing.
Yeah, I feel the same way.
I mean, it's unfortunate that so much of the,
some of the sentiment just kind of stands
on like some of the crypto majors
in terms of where the prices are today.
But in terms of the activity, the development going on, the build that's actually happening,
because you have some of this expanded total addressable market that we can really tap into going forward,
I mean, it really is very early innings.
And I think everything we can do to try to keep the builders engaged, you touched on talent, stresses me out that you guys feel like you don't know what you're doing, because I think we're looking to you guys to help us really continue to move forward and understand, like, how to piece this together. to be fully multidisciplinary and that's very very challenging when we talk about it we've talked
about a lot other colleagues and I have talked about about it a lot the fact that you know
finance people go this way in school and engineers and computer scientists go this way and in most
universities they're not even like within the same school or have any connectivity to each other
so in a really weird dynamic where we need all of these talents to come together
and really build some of the financial infrastructure for the future.
So there's no better time to be multidisciplinary.
Sprinkle in a little bit of regulatory interest.
And if you've ever aspired to be a lawyer or definitely take all your AI tools and make sure they're working for you, you kind of need everything.
And we're doing our best to try to understand what that roadmap looks like going forward to support the build.
Yeah, yeah.
I'd end it on, like, I think the convergence of what we're doing is going to be actually what creates mass adoption.
Thank you, everyone.
We're at time.
Thank you everyone. We're at time. Thank you.
Please welcome to the stage, New York. I'm Huff, and I'm the founder of Pair Protocol.
Now, you may have noticed this theme where VCs are starting to move towards a more liquid mandate.
And at the same time, some of those liquid token funds have started to become more like hedge funds.
And this is not really a surprise because Crypto VC is on hard mode, both in terms of raising capital from LPs and then also finding deal flow that's worthy to invest in.
And despite a little post-Trump blip, we've seen the trend in deal flow start to go down again.
From blip, we've seen the trend in deal flow start to go down again.
Furthermore, about 20 firms make up more than 60% of all the total capital deployed by VCs.
And so it leaves a question.
What happens to all these tier two and tier three VC firms?
Well, they have a real problem because the old model of investing early and waiting for a token generation event is now essentially broken.
These token generation events are now essentially a dumping ground.
Memento Research looks at 118 highly anticipated token launches in 2025, and 85% of them were down by the end of the year.
And not only were they down, but the medium fdv was down like 72 percent
now we all know the reasons why the marginal buyer of these tokens is gone so what do we do
do we stop deploying in crypto no i would argue and introduce this concept of the great dispersion
what we are seeing is that a rising tide no longer lifts or boats. On the plus side,
tokens that have product market fit and real revenue will continue to do well, whereas the
tokens that haven't had any adoption and don't have real kind of users, plus a token supply issue,
they're going to continue to get worse. We saw bits of this in 2025 with things like hype and XRP,
even to some extent ETH doing very well,
whilst Total 2 was down like 25%.
And I think if you're a fund,
you inherently know that this is going to continue.
So how best do you capture this growing dispersion in crypto?
Now, my Trad5 friends will know that there's a concept
called pair trading. It's this idea that you are long one asset or a basket of assets and then
short other assets against it. And this works in different market scenarios. So I'm going to take
a very simple example. Let's say you have a thesis on hype and instead of being long hype, you decide
to be long hype and short Solana. Now if the market goes down, as long as hype outperforms Solana on the way down,
you make the spread. So in a simple example, hype is down 5%, Solana is down 8%, you've made the
spread of 3%. Similarly, in a rising market, if hype is up 10% and Sol is up 5%, then you've made
that difference. And even in trundling markets, which are sideways,
you can still make money.
Now, the main thing with pair trading
is it's mathematically superior to being long only.
I'll say that again.
So independent research from Delphi Digital
found that compared to being long only,
a long-shot portfolio has a significantly better risk profile
for the fund and they're ultimately for the LPs. So Delphi did this research, they looked at being long hype, long sol and then long the
pair and they found that the annualized volatility was significantly lower, the max drawdown was
significantly lower and that the Sharpe ratio, which is a measure of the return divided by
the volatility, is significantly better as well.
Now once you start introducing
baskets, so not just being long hype, but maybe long Bitcoin, Tau, zero, and a whole bunch of
other things that you believe are going to do well, you can get even better shop ratios on these
kind of returns. Now, the performance, they speak for themselves. The charts look like this,
whether you're doing hype soul orpe versus a basket of other things.
And what we're seeing is that more and more people are trading equities and commodities on chain.
So suddenly you have unlocked TradFi assets with crypto veils.
This is what hedge funds have done forever, being long short by nature.
And we are starting to see this.
The challenge, though, is how do you go
from being a traditional long-only fund
to somebody that can do long-short in a safe manner?
And I say safe because the short leg will scare many people.
You have funding that you need to pay,
you have the risk of maybe getting short-squeezed,
and a whole bunch of other considerations,
especially if you have leverage
and the potential to get liquidated.
So today,
I'm delighted to be introducing PairPro. PairPro is an institutional terminal which is dedicated
for funds and individual traders to start scaling their long-short strategies. At the heart of PairPro
is risk management. So when you are trading a spread, you no longer want to be just trading
longs and shorts. You want to be trading the spread itself and having a take profit or stop loss or trailing stop loss
or these kind of features on the spread itself. And that's what we enable.
The other thing I hear often about pair trading is, oh, great. Well, I can go on my centralized
exchange, click some longs, click some shorts. Et voila, I'm pair trading. And I can tell you
from experience, pair trading is so much more than that. It's about looking at correlations between assets. It's about looking at the beta
between two assets. So you wouldn't necessarily be 50-50, long or short, depending on how the
assets move. It's about looking at rebalancing those trades periodically. It's about how do you
weight each leg on that trade and other things as well. So over the past year, what we've done
is built an AI agent specialized for pair trading. He's called Agent Pair. He or she lives
natively on the platform, and you can ask questions in mealtime. So our users have been
asking questions like, I want to be long Bitcoin, suggest me four shorts against it, and how would
you weight that trade? We also have other users who say,
look, this is my portfolio at the moment.
These are the trades I'm running.
How would you suggest that I rebalance those trades?
And it can do it for you.
So like I said, we want to reduce the friction
to be able to do long-short strategies,
even if you're not doing leverage,
just like with the 1x leverage.
And so we've made it super simple to connect via API keys.
You simply just input your API key, your existing account at Coinbase, leverage, just like with the 1x leverage. And so we've made it super simple to connect via API keys.
You simply just input your API key, your existing account
at Coinbase, Bybit, Kraken Pro, OKX, Hyperliquid,
wherever it might be.
And then you'll connect to the interface
where you can start to trade.
Importantly, it's your assets on your KYC venues
that you can start trading on.
This is not new to us.
We've been building the on-chain version of Pair,
called Pair Protocol, since 2023.
We have executed over $1.6 billion of volume on the platform,
and we're a team of 14 people
specialized in solving long-short trading.
In particular, what I'm proud of as a founder
is the agent pair that we built
was the first agent that was deployed on Hyperliquid
and has won quite a lot of accolades for being something hyper-specialized.
There's a lot of AI slop out there.
This is something that's hyper-specialized for one use case,
and we see thousands of our users using that, or hundreds of them at least, on a daily basis.
So let's recap a bit.
We're seeing more and more of these traditional funds pivoting to become either liquid token funds or hedge funds. The big risk, obviously, and bottleneck is with compliance. And they will get very scared once you start introducing any leverage or shorting, etc.
terminals. I'm sure some of you will be familiar with them where you can do all sorts of complex
executions. What we've done is built a very simple platform where risk management is really at the
key of this. And we want to take individual traders and tier two, tier three firms on the
journey to start doing more long short trading, because my big thesis is that we're going to see
more and more dispersion over time. So in 2026 and beyond, the message is clear. You either pivot or you die. The old
playbook of three to five year lockups, being directionally long with high drawdown risk and
hoping for some marginal buyer, that's broken. It's gone. You have to make the liquid pivot.
And by doing so, you will lower the portfolio volatility. You will hedge your exposure,
depending on if the market goes up or down. But most importantly, you will lower the portfolio volatility. You will hedge your exposure, depending on if the market goes up or down.
But most importantly, you can use the research analysts within your investment team to still make fundamental-based asset allocation.
So, for example, maybe they're looking at the fundamental revenues of Morpho versus Ave, and they can do a relative trade on that.
Or they could do a relative trade on Tau versus Render, or whatever it might be. You can still leverage the same skill sets of your staff. Finally, about myself,
I spent my entire professional career working at different investment banks in London, mostly on
the trading side. For the last few years of my career, I was building long-short strategies for
institutional clients. So when a UK pension scheme wanted to implement a low-risk long-short strategy, they would come to me and my team. After 10 years of doing that, I then ran a
crypto fund and I was long-short trading. And so I'm acutely aware of all the edge cases and unique
things that you need to consider when you're starting to build a long-short book. So if you
are a liquid token fund, if you are a crypto fund, even if you are a larger individual trader
or somebody that wants to build on top of us,
I am here.
Come find me after this talk.
We have a booth for the next few days
and I'll be around.
Or you can send me an email as well.
I'm Huff.
Thank you so much for your time. Please welcome to the stage Felix Javin, Dan Tapiero, Brett Tejpal, and Raoul Pal.
Come on, come on.
Good morning, everybody. Welcome to the Digital Asset Summit and welcome to our panel all about the institutionalization of crypto and what we've gained and what we've potentially lost from that institutionalization. Very excited to be here with an esteemed panel
of some macro legends and just all-around great thinkers. Let's go down here and just
introduce yourselves and a bit about what you do, starting with you, Raul.
So my name is Raul Powell. I'm the CEO and co-founder of Real Vision, plus an asset management
firm in crypto. And I've been in this journey since
2013 through the ups, the downs. I've seen it all. And so interesting to see where this is all going.
Dan Tapp, Euro 50T funds. We invest in the growth stage, equity in the blockchain crypto space.
in the blockchain crypto space.
I'm Brett Teichbaugh.
I have a man crush on Raul and his fashion sense.
And you've got to touch this, by the way.
It's incredible.
We've known this guy for 20 years.
That's the problem.
We've all known each other for over 20 years.
Okay.
I'm the co-CEO of Coinbase Institutional.
I've been at Coinbase six years
and have a long career at Barclays and J.P. Morgan.
And I'm delighted to be on this panel.
Yeah, we have an electric panel up here.
You know, one of the best prep calls I think I've ever experienced ahead of this panel.
So you guys are in for a treat.
I'd be remiss if we didn't start this panel with a little bit of macro talk, because we do have some macro legends up on the stage here, just to set the context of where the market is as it stands today.
Then we'll get into the institutionalization component.
So, Raoul, how are you currently thinking about macro right now?
I'm super positive on the macro.
You know, I look at the business cycle.
The business cycle is growing.
It may have a few ups and downs because of the oil price and other bits and pieces.
Liquidity is flowing.
We've got some sort of changes to U.S. regulations.
We've got the U.S. banks with new liquidity provisions by the ESLR.
So all the things I look at point to a much more positive year than most people are expecting once we get the Iran thing out of the way,
which I think the risk premium is starting to come out of, and I think we can move forwards. Okay. So Raul and I have been talking macro ideas back and forth for literally 30 years.
Yeah, 30 years.
So it's a long time.
And his sort of analytical process has been deeply additive to mine overall.
Deeply additive to mine overall.
And we generally, I don't want to say agree on a lot,
but at least we agree on the analytics behind it.
Waiting for the bounce.
However, at this moment, it's a complete cluster F, the macro.
Of course, you have the Iran war in oil, right?
But then at the same time, while the U.S. employment situation is deteriorating rapidly,
you have the short end of the yield curve going up in yield, which is very bad.
You have liquidity being sucked out of the markets by gold. The big move up to 5,000. I know it's corrected,
but there is a finite amount of liquidity that exists in the world at any one time.
And in the last three months, I can't remember a time where so much has been sucked out. Oil,
the oil price going up takes away liquidity for other, let's say, growth investments. The U.S. economy in the world cares about growth and funding it.
We've got AI.
We have large IPOs coming with SpaceX.
And the AI companies are pulling liquidity out of world markets.
And now all of a sudden you've got rates going up and oil going up
and huge macro geopolitical uncertainty
like we haven't seen in a very long time. Do you think that's nice?
Well, so the problem is that, yeah, this is the hysteria. We're in the chaos moment. We all have
made most of our money buying when things are chaotic and, you know, when there's fear out there. And there's a lot of fear.
But the problem is at the moment, you know, I feel like it's just unresolved that the
Fed really needs to lower interest rates to offset some of the weakness in employment
here.
But they can't because there's ostensibly some fear about inflation, which is nonsense in my view.
And then you have problems like in China
where things have been soft
and Europe has been sort of miasma.
There's no growth there.
So I actually, yeah,
I think it'll eventually resolve fine.
But at the moment, you know, investments that we're looking at,
we're basically holding off.
And in the crypto blockchain space, in the growth area,
so companies making, let's say, over 50 to 100 million in revenue
that we invest in, we've made 24 investments over the last five years,
they're still trading at absurd multiples. Things like
Calci, Polymarket is an example, not Calci, Polymarket at, I don't know, over 50 times revenue.
So it's a very, we'll get into this in a minute, a very strange situation where
the macro is very confused, in my view, for the moment. And at the same time, everyone feels bad in crypto, right?
I mean, Bitcoin's down 50%.
Coinbase is down 50%.
And yet, there are still many of these growth stage private companies.
He was having a dig at you then.
That are, no, not a dig.
that are trading at 50 times revenue.
That are trading at 50 times revenue.
So it's like, what bear market are we in
when companies are still trading at that kind of multiple?
And then you've got a great company like Coinbase trading at seven times,
which is just absurd.
So I find it, you know, I don't know.
And then I wake up this morning and circles down 20% on some nonsense.
So I'm not feeling quite as settled as I usually do or as settled as Raul apparently feels.
You've got to be more long-term in your thinking, though.
Oh, my God.
I'm the longest third guy you know.
You've already been thrown under the bus by Dan.
I was going to hit him on the circle point.
There's no bus.
No, no, we're friends.
I know.
So if their glass is half empty,
I'm definitely glasses half full.
So there's no doubt that the macro
environment is as Dan and
Raul described it. And there's been
a drop in
liquidity and alts in particular.
But that's like in the here and now.
So if your job, my job, is to build the institutional platform,
it's actually a sunny day.
And the outlook is bright, and it's amazing.
So my backdrop is different to theirs.
I'm not in the here and now.
I don't have to worry about Circle going down 20%.
On the open.
On the open.
How does that make any sense?
Okay, why don't you tell them about what you do
so my job is to
bring institutional capital into this space
the backdrop for that is the genius act
which was the massive catalyst
being overshadowed and forgotten
at the moment so that was the thing
that activated the entire world
and within it
a super bright spot
of activity is the PSP world,
payment service providers, and their quick pivot to adopt crypto rails. And so there's a massive
thing that crypto has been talking about for years and years and years that never really
has manifested until literally this moment. And that moment's happening now.
We have a big platform that's there just to do stablecoin payments,
and I couldn't be more excited about it
because that is the catalyst for the next wave of institutional adoption
across a wide swath of different types of investors
that aren't all focused on being long crypto or long crypto stocks.
And so if you look at the world through that lens,
we're also on the eve of getting a market structure bill.
And so circle down 20%, Coinbase down a bunch,
like, okay, we've never seen crypto retail overreact.
All right.
It happens on a daily basis.
All right.
And so the long-term outlook is insanely good on the backdrop for institutional money coming into this space.
And so, yes, we have short-term shocks that happen on a daily basis.
In my job, you ignore those and you keep plotting and happen on market structure, which will set a second big catalyst through the entire ecosystem of all types of companies, not just crypto related companies.
macro confusion is you mentioned how a lot of attention is being taken hold in some of these
more traditional financial assets like, you know, oil and gold has been, there's been a lot of
excitement from that, from the more retail centric audience that might be the ones that were
historically bidding some of these more crypto native assets. And I think there's something to
unravel from that in contrasting with it. If you look at where a lot of the excitement is on,
you know, just look at open interest on perp exchanges, a lot of folks are trading these TradFi assets, but on crypto rails.
And I think that crystallizes what's going on with the industry right now, which is that there's a
lot of excitement and usage of blockchain. It's just in these more institutional or traditional
financial assets. So let's start with you, Raul, and just hear about how are you thinking about
this evolution
of where the marginal attention is
and what that means for this institutional
and retail fork going on?
I think, as Dan's saying,
there is a limited amount of liquidity
and we've not seen enough liquidity put into the system.
So what you tend to find is these massive rotations.
And it sucks in all the capital
and everything else gets kind of sidelined.
But the fact that people are using crypto rails
to speculate on other things or invest in other things
is a good signal.
And the fact that everybody from Robinhood to Coinbase
to Kraken to everybody's looking at tokenizing equity,
looking at using the infrastructure of blockchain technology to do all of this means that we get to win regardless of what happens.
Because it's the use of the underlying blockchain that drives the value of the network itself.
So it doesn't have to be speculation in the tokens.
It has to be use of the tokens.
And so we're seeing that rising.
And, you know, Brett works on this all day every day is to see you know
How much use can we get out of blockchains and all of that is ramping up super fast and stable coins is I mean
The dramatic growth in stable coins is ridiculous and it's only just started and again even though that's in US dollars
That's a red herring because it's actually underlying usage of the networks
So I mean the bottom line is crypto is winning and won.
And I think, you know, the title of this talk,
What's Been Gained and Lost,
this cycle feels very different than previous.
It's definitely, you know, TradFi adoption,
which we talked about five years ago,
but when is it coming?
Well, it's here, and it sort of enveloped our world a little bit.
Meltem has written a nice little piece on Twitter about that, about being absorbed into
the existing system.
And we had always thought that the two worlds would come together, that crypto wasn't going
to dethrone all of the banks overnight.
But we're in a different stage of adoption.
This phase, and again, as I said, it's very weird.
Are we in a bull phase, a bear phase, even broadly?
It's very hard to say. It just feels like within this sort of digital asset world,
different parts of it are in different phases.
And definitely that whole bro-y pump and dump thing
feels like it's in remission.
And I think for the better.
I think, you know, the space itself has really done a lot of damage
to itself over the years by, I don't know, bringing in false narratives, not caring about business or product market fit or not caring about whether something was actually applicable or relevant to anything in the world. And so this is maybe like the grown-up, as much as the space doesn't
like hearing, this is like the grown-up-ification of, you know, of crypto and blockchain.
And I think Coinbase, and this is why Brett is here also, is sort of at the forefront of that.
When we, I don't know, when you went public, there were two revenue lines, essentially,
98% of all the revenue, I think,
was just from retail trading. And now they have 12 different business lines that do over 100
million in revenue. And we're, you know, we're long in the funds. And so, you know, we haven't
had that before, right? In previous cycles, the joke was, oh, Coinbase is down. Like, of course,
it's a bull market, you know, a big move. Oh, Coinbase is down. Well course, it's a bull market, a big move. Coinbase is down. Well, Coinbase isn't down anymore.
They really are with Circle and Figure and some of these other
companies, I think, have moved to the forefront while some of
the jokey, bro-y stuff has moved
to the back and has
actually still stayed in a bare face.
So it's a very significant differentiation.
So what's been gained and what's lost, I mean, I think can be described that way.
So three points I want to make.
The first two are easy.
The third one is an adult term.
So better, faster, cheaper,
everything in one place.
Okay? Better, faster, cheaper,
everything in one place is happening
both on the institutional side
and on the rising demographic
on the retail side. Okay?
So, better, faster, cheaper has been
like an idea in people's minds
on this thing called blockchain and
running parallel ledgers and all
that stuff. But better, faster, cheaper is here. It's manifesting. It's manifesting not only in
stablecoin payments, but it's manifesting in both the everything exchange on the retail side,
right? Better, faster, cheaper. It's been there for a while in retail, but all the things in one
place. The adult term is capital efficiency and cross margin, okay? And so all the things in one place. The adult term is capital efficiency and cross margin.
Okay?
And so all the things in one place, better, faster, cheaper.
You're a macro hedge fund.
You have a limited amount of capital,
and you want to be able to run your position.
Do things in three places, capital inefficient.
I do a derivative over here.
I've got repo over there.
I've got a long and stock portfolio position over there.
And now you can actually run your trading strategy.
Okay.
All the things in one place with cross margin.
So at Coinbase, you can now have position recognition of long spot, short perp.
Long and short, you know, public miners.
And I want to trade next to my other positions,
things like gold, silver, and other macro-related themes.
Okay?
To do it, you need capital efficiency.
To do it, you need operational efficiency.
All the things in one place.
So those are two mega trends that are happening
both on the institutional and the retail side. And they're manifesting with the right tool set.
So that is the moment we're at, and I couldn't agree more. It is now happening, and this time is different. I'm going to back down on that.
I just want to push back a little bit about the retail side and the speculation side.
Crypto has done incredibly well because it's economically incentivized by value- driven to the underlying chains for people to try new types of economic activity.
So, you know, mean coins. What were mean coins?
They were split between two different things.
One was how do you monetize the attention economy?
But also it was instant capital formation.
You can now raise $10 billion of capital in an hour.
But that's never happened before.
We've seen it with the rise of DeFi.
All of these things, they first become speculative, like DeFi summer,
and they end up becoming a core layer of all of this.
So I think speculation is an important part of speed running the use cases of all of this.
We break them really fast.
It all falls apart.
But out of the ashes
rises the phoenix. You love the volatility and the creativity of it. Yes, the creativity of it
is really fascinating. I know, and I mean, you see AI and blockchain now all of a sudden have
overlap. A year ago, there was no such thing. I mean, it's incredible. This is definitely the
most sort of creative, fertile space for innovation, at least on the financial side.
I don't know, you know, with the tech Silicon Valley guys, how they think about things.
But from the markets and financial side, there's never been a more fertile, creative venue than the space we're in.
creative venue than the space we're in.
And blockchain, I mean, look,
you guys are probably doing all sorts of funky stuff,
autonomous agents.
I heard Arjun from, sorry, from Kraken the other day say
that he's comfortable, that's the CEO of Kraken,
comfortable putting he will, by the end of the year,
have all of his assets, all of them,
managed by an autonomous agent, completely independent. Did he actually say I was going to be Coinbase advisor?
Oh, no, he didn't say that.
So I feel like one of the big questions that underlies the premise of a panel like this is,
did institutional adoption actually go the way a lot of early
adopters of the industry actually thought you know there's this idea that look I can speculate on
these tokens before the big boys come in and I can front run them and own them and then they're
going to come and buy my assets from me and bid them up to infinity and it's starting to feel like
we're trying to quarrel with this as an industry where what if in in reality what this institutional adoption looks like looks like innovation like what brett's talking about which
is that look you can we're increasing capital efficiency in ways that we did not have before
and it's leading to more interesting innovation it's just not necessarily a direct corollary
to to what the early adopters were hoping for i just want to open it up. Yeah. So there's two different uses here.
One is number go up, hold the token. And if you think you're going to sell your coins outside
of Bitcoin and a few others to institutions, less likely. But are institutions going to use
several of these protocols and chains for economic activity? Yes. Will that drive value to the
network? Yes. So there is an alignment of interest interest but it's different than people thought i think i wrote a paper in global microinvestment back in 2014
saying that i thought all equities would go on chain all bonds would go on chain the whole thing
would go on chain and that is happening and that is going to drive economic activity and to brett's
point you know the efficiency the faster side, that's where the whole world
is going to go. And the blockchains that can allow that kind of economic activity at scale,
like agents, people have no comprehension what agents are about to do. It makes an infinite
TAM for crypto because you can have billions and billions of agents, all as economic participants.
And that drives economic activity. And so even as retail holders who just hold the underlying tokens, the number will go
up because of it.
Look, I think it could be that crypto, and someone wrote this too, I can't remember,
recently, that crypto blockchain was really made not for humans.
Correct.
Right?
It's too complicated for civilians,
for people who are not, you know, doing this all the time.
Maybe it was actually made for AI, right?
I keep saying that blockchain is the money
of this autonomous agentic future.
I don't know what the AI big companies think about that,
but it seems very clear to me.
I mean, it's code really speaking to code, right?
That's right.
And humans have a hard time.
It's very clunky.
So, I mean, it's for you guys to make sure that that happens, right?
Yeah, I mean, to the original question
of whether institutional formed in the way that we expected it to, the answer is no.
And so if you're in my seat, we had macro and high net worth, and you did have the venture funds coming in and taking positions on tokens.
Then we had MSTR, now called strategy, so corporations buying Bitcoin.
I personally thought that that would spark a bigger trend earlier, and it didn't. Then we had ETFs, and so we had a record outcome,
most of it led by retail participation. So what didn't form as quickly as I hoped it would,
would be there were, you know, endowments were early, but U.S. pensions are laggards.
And big cap allocations from from big big firms that have been
trading crypto for a while didn't happen as quickly. If I fast forward to today the reason
why the big firms running big books trading actively in crypto but not a massive amount of
capital allocation the reason was two. It was regulatory clarity and the
infrastructure and tool set to do the advanced things that I talked about earlier,
which is quick trading, capital efficient, operationally resilient. So we're now at a
point for the first time with the launch of our new prime where the next wave of institutional
capital who's here to trade crypto related assets
is forming and it's forming very very quickly because of the capital efficiency and cross margin
yeah right i still find that they're very slow we talk to you know hundreds of potential investors
in the funds institutional people and they still i mean i still think it's so early. They don't, there are many chunks of the U.S. pension, insurance,
all those guys, they, I still every once in a while have to answer a question
about like, tell me why Bitcoin isn't only for fraud and money laundering.
Oh, let's not go there.
I mean, right?
I agree that they're slow.
I'm dealing with that.
I agree that they're slow,
but it's a little bit of function of how they're organized
because all of their early adventures in the space
were in the growth bucket or the PE bucket.
And so now the question is like,
where does this thing fit in my bucket?
And so what's happening is that
it's actually being dragged into a real asset class
bucket where the commodities traders, and it's not just the growth venture person running small
checks into your fund or maybe larger checks into your fund, but they're limited by saying,
well, we put fives and fifteens there, but we don't put hundreds and 200s and 300s there.
So we also, on the asset management side,
that business is scaling for the first time in a couple years.
And we actually simplified the product set.
So whereas I had this really awesome systematic trading,
trend following with limited downside,
the problem is everyone said,
well, if we're going to get long this Bitcoin thing,
I actually don't want to give up the upside.
And so that was an unexpected thing.
And then we said, all right, well, how about if you're going to be long the asset class and long Bitcoin, how about Bitcoin yield?
And so we simplified it.
Now they're going, oh, I like that then.
So I'll allocate the stuff I haven't allocated, and I can get some yield while I'm waiting for capital appreciation.
So that plus our high yield, it's called Cushy.
It's a high yield stablecoin.
So to your point, with rates being kind of higher
than they should be for your macro look,
it's actually not a bad place, actually,
to park some cash and earn some yield.
You're starting to look more like a TradFi guy can understand.
Yeah.
Right?
I mean, that's what this is about, this whole phase.
Is TradFi kind of... They get it. Yeah. All right I mean, that's what this is about. This whole, this whole phase is
try to fight kind of. They get it. Yeah. All right. 30 seconds left here. I want to give Raul
one last opportunity for you to close out on anything Dan and Brett just mentioned there.
I think it's been a process. We've all been in this for quite a long time and the process is
still unfolding. And we've, I know it's, it's it's it's you hear all the time we're
early we're still very early we haven't got the big capital allocations from the big pension plans
because they need to understand the volatility the companies are just going public they're just
maturing we've just got another complete shock which is to understand that the tam of this
entire thing is much bigger than we ever imagined because of agents.
But agents are super early.
That only happened in the last four months.
It's been the fastest adoption of any technology the world's ever seen is the agentic side
from OpenClaw, the most number of GitHub stars in the shortest period of time in history.
So it's happening at lightning speed, and price is not always the main indicator.
Price will catch up to the economic activity that these guys are talking about because
it's vast, much bigger than people imagine.
All right.
Well, that's all the time that we have.
Well, I'm going to say one thing.
One thing, Dan.
If you're questioning yourself about this space, okay, just understand that all things
of value, all assets are moving on-chain.
And so that process has just started.
This is the digitization of all money and value,
just like the Internet in the 90s was the digitization of information and ideas,
and we know how far that ran so if you're questioning about whether this
space has longevity or whether you know you want to still stay in it people always are migrating out
just think about that take us home brett i'll keep it short i double dog dare the TradFi crowd that has yet to invest in the space to ignore this moment.
There you go.
Boom.
All set.
All right.
Thanks, everybody.
All right.
Cool.
Please welcome to the stage Leslie Picker and Robin Vince.
Thank you for the applause. Hi everybody. Thank Robin, for doing this. Great to be with you, Leslie. Great to be with everybody.
So this is so well-timed because I just spent essentially a day in your offices downtown, and you have such a storied history.
The oldest bank in the U.S., and you are investing heavily in AI. You're leaning into new technologies.
and you are investing heavily in AI, you're leaning into new technologies.
Obviously, we are here to talk about digital assets.
So maybe we just kind of start by level setting how you're thinking about digital assets,
how BNY is really leaning into these new technologies.
Well, maybe I'll just set the scene by just reminding people who BNY is in the context of innovation.
So we were founded 240 years ago as the Bank of New York.
We're the oldest bank in the United States.
We were founded at a time when there were 20,000 people who lived in New York.
It was 100 years before the commercialization of electricity.
And if you just think about what the technology
of the day was, it was basically quill and ink. And cut forward a couple of hundred years,
we bought our first computer in 1955. We started processing using technology, really proper technology,
U.S. government securities
in 1977.
We did our first internet-based
securities transaction
in the mid-90s,
well before the bursting
of the dot-com bubble.
We are a firm that's grown up
with a whole bunch of different technologies
and we've learned over a long period of time
that you get to be a durable, long-term company
when you innovate and when you really take advantage
of the latest and greatest of what's available.
And so our AI story has been one of three years
really investing and innovating.
And our digital asset story is very similar.
We were the first large bank to offer digital asset custody.
And we're excited about digital assets, AI, other technologies, and how they come together over time.
Now, I know you weren't around for a lot of those technological innovations.
But it really feels like with AI and digital assets, we're at a pretty unique moment in the history of financial services.
and digital assets, we're at a pretty unique moment in the history of financial services.
How would you kind of characterize that relative to all of those technologies that you outlined
throughout your history?
It feels to me like an incredibly exciting time.
I think there's a risk that we could somehow fall into the trap, and this has been true
over the ages, that say this time it's different, this time the whole world has completely changed,
because it's the moment that we're living in. So it always tends to be that the present is the
most clear and sort of feels like the most impactful. But I do think these technologies
are truly, truly revolutionary. And the fact that they come together at similar times from a maturity point of view, digital assets, technology, blockchain, the opportunities to do things and innovate financial services, reinvent, reimagine is very exciting.
It's been going on for a while.
I think we're hitting a point of maturity and acceleration.
And then obviously with AI, it's an even quicker curve and it's accelerating.
But those two things over the course of the next five or 10 years and as they come together,
agentic commerce, quite molecular opportunities with digital assets, seeing how the two things
come together, I think it's a very, very exciting time for people, for users of the technology,
but also for innovators who want to actually be part of that innovation story.
If you stick your head in the sand and you think it's not really happening or somehow it's not for me or it's just a piece of tech, I'll leave it to my engineering teams.
I think you're just missing an opportunity. We certainly at BNY don't want to fall into that trap. Yeah, you have AI boot camps where you gather people together to
spend a whole day learning to be experts, not just engineering employees, but the lawyers and others.
Because that's about culture. Right. And in fact, for us as a company, and we have learned this
lesson, which is it isn't just about the existence or availability of a technology.
At the end of the day, it's how does it get incorporated?
How does it get embedded?
How does it actually change things?
That's about adoption.
That's about use.
That's about use cases.
That's about problems that need to be solved
or applications for technologies or capabilities that can actually make the world better
or make customers' lives easier because we're actually solving problems.
And so client listening, how does the technology ultimately change use cases so that we can have more mobility of assets,
more 24-hour seven in the case of digital assets, real time.
These are all real things that the financial system today doesn't deliver as well as it could.
So the combination of AI, which is very exciting for the same thing,
but very importantly, the mobility and the storage,
new opportunities that the technologies
of digital assets provide, I think is a very exciting thing. Yeah, and you mentioned you're,
of course, the first and only G-SIB, which is a systemically important institution that
offers digital asset custody. And this is noteworthy because you're one of the world's
largest custodians with $57.8 trillion in assets under custody or administration.
What did you need to do to feel comfortable doing this?
Because you're really leaning in in a big way, a first mover here.
I can imagine it wasn't something that you just kind of, oh, let's do this and, you know,
turn on a light switch and it ultimately happened.
You know, there was a point of view. some people still have it, and I respect it.
It's not our point of view, but ultimately DeFi was a way to sweep away established players,
entrenched points of interest, and everything could start with a complete clean sheet of paper.
Obviously, it's self-serving for me to say this, but that wasn't our point of
view as an established institution that's been around for a while. But I think we have some very
good reasons for thinking that we have a real role to play in this space because we have several
different advantages. We are a trusted organization because we have a network effect already, we have an existing set of customers,
we're deeply connected to the existing rails, we can act as a very effective bridge between
the traditional finance and the digital finance ecosystems. Because at the end of the day,
a technology that's in search of adopters can sometimes struggle. But we are an adoption vehicle
because we can actually encourage our customers
to make the leap.
Take a money market fund.
We've created digital tokens,
new share classes for money market funds.
So established money market fund providers
who offer share classes of money market funds can also offer a digitized money market fund providers who offer share classes of money market funds
can also offer a digitized money market fund.
It's essentially the same fund, different share classes, different ranges,
and that allows for that to be distributed as a digital asset product.
That will actually encourage adoption as opposed to just starting from absolutely nothing.
So for us, being an established player,
we make $3 trillion of payments every day.
We custody $60 trillion of assets.
We have $8 trillion of collateral assets on our platform.
We settle $20 to $30 trillion of U.S. treasuries every single day.
We have $3 trillion of wealth assets on our software and services platform.
We're the world's largest corporate trustee. These are big established positions that allow us to partner with digital asset clients to
be able to help them drive the innovation, but also partner with our existing clients
to help them adopt the innovation.
And the coming together of those worlds, it's very helpful.
This network effect, the trust, the incumbency is actually a powerful speed to adoption.
How do you think about risk mitigation with this new technology, especially being the first mover and ensuring that nothing unscrupulous is going through the systems?
Yeah, it's incredibly important.
And we're super vigilant about it.
You know, resilience is a commercial attribute for us.
Cyber defense, you know, chasing criminals out of the system,
making sure they can't get a foothold.
That's as true in the new technologies as it's been in the old ones.
And I think, again, another reason why having established,
trusted market participants in the system actually creates a reputational
enhancement for what is the system and the ability of people to trust it.
If it's the Wild West, then it'll be fun for some folks to live in that Wild West world.
But at the end of the day, the 90% of the financial services community,
the pension funds, the big asset managers, the big users who ultimately are going to help to
encourage full adoption, they don't want to have anything to do with it. So it is actually really
important that it's safe, that it's reliable, that it's trusted, that we have kind of the concepts
of know your customer, know your token provenance and all of that stuff embedded actually in it.
And that's obviously important for us as a regulated institution.
But I actually think it's good for the system as well because when the system gets trusted,
it actually can promote this concept of adoption.
It's safe to use. BNY is participating here. We can help and rely on them.
But yeah, you have to have good standards
and sometimes there's a bit of grinding when it comes to that when the old meets the new
but for us that standard setting is uh is an important part of the value proposition obviously
it's essential for us as well how is the standard setting different for digital assets versus
known securities treasuries cash and so forth, I think the concepts are the same,
which is at the end of the day,
who are you transacting with?
What is it?
What is the purpose?
And there are parts of the digital asset world
which are okay to sort of,
they are happy to live a little bit more
without all of the bright light.
But I think for the established system,
in order to truly, truly have adoption,
you've got to have those principles of understanding
and not be trying to hide in the shadows.
And so we're in the business of saying,
who are the customers?
What is the asset?
Is it safe?
Is it doing what it says on the box?
Is it a product that's actually going to be able
to deliver a use case? And
is it actually supporting the growth of the economy and financial markets? Like we take
a very simple straight line approach, which is economic prosperity for a nation is super
important. That's the mission statement really for all of us living in a nation to create
and enable national prosperity, in this case here in the United States, but we do this around the world.
We're a very global institution.
In order to do that, we have a point of view that you have to have a great financial system.
In order to have a great financial system, you have to have great capital markets.
In order to have great capital markets, you've got to have the various different market participant ecosystem that drives that.
That's digital asset providers.
That's traditional rails.
It's asset managers, hedge funds, liquidity providers, large banks, small banks, community banks.
And if you have a rich ecosystem, you have innovation.
That's very important.
So for us, enabling that is part of the mix.
But in order to get everybody in the ecosystem,
it has to be a trusted situation.
You've also opted for partnerships with Ripple and Circle.
How important are partnerships,
given that backdrop of the need to have a trusted partner
and kind of KYC and so forth?
They're absolutely essential because for us,
we have good ideas,
but we don't have a monopoly on them. And so we are very much wanting to partner with other people.
Our clients who are, let's call them traditional clients, they want to partner with us because
they look to us and they say, hey, BNY, you actually kind of get it. You seem to understand
this world a little bit. So can you proverbially hold our hand and walk us through
what does it mean to issue a tokenized share class of a money market fund
or tokenized deposit or can we put our security on chain
instead of just settling in the traditional world?
And then for the digital asset providers,
they look at us and see that
they actually need some of our traditional capabilities as well if
you're a stable coin guess what you actually need custody because you need
somebody to look after the reserve assets you need somebody to be able to
make payments because you've got to be able to move money you need to keep
track of who it is that actually owns your token your your tokens so there's a
whole you need an asset manager to select the assets. We do
all of those things. So they look to us and say, well, you can actually be a bridge to
us, the digital asset providers, through all the traditional things that you do. And so
we represent different things for each constituency, but this theme of connecting the traditional
rails with the digital rails, and sometimes the traditional rails work really well.
I think we can sometimes fall into the trap as humans of saying, hey, there's something new, therefore it's better, therefore it's going to fix all the old issues.
Some things work pretty well in traditional financial markets.
You know, the settlement, the trading and settlement of S&P 500
equities is a pretty slick affair. There are, however, plenty of other assets which don't have
a good home. We don't have full 24-7. So there are use cases where digital asset technology will
solve problems. So it's this combination of the existing participants, the new participants,
what are the problems to solve? Can we be a venue to enable those coming together?
I want to ask you a bit more about Stablecoin because that's been a topic of a little bit
of consternation in the financial services industry. This week, there has been a reported
resolution to the Stablecoin Yield standoff that has frozen the Clarity Act for months now.
And essentially the new contours are that passive stablecoin yield earned just by holding the token would be banned,
but activity-based rewards tied to payments, transfers, or platform use is okay.
What do you make of that? Is that satisfactory, do you think? Look, if you go click back one step out and say, what do we really need?
In order to go fast, we need clarity in rules of the road.
Because when we have uncertainty, when we have maybe different regulatory authorities with different points of view, when we have lack of clarity, it really means there's a hesitancy in terms of how to be able to proceed.
And that hesitancy slows adoption, and it kind of gets in the way.
Certainly for us as a larger established participant,
you don't know exactly how to proceed because you're not quite sure
how things would be judged with the benefit of hindsight
because we don't have that legislative clarity.
If you're a regulator or a supervisor in the environment,
you don't know exactly how to go ahead and make your rules and lay out the standards because you don't have the legislative starting point.
So it creates a hesitancy.
It slows down innovation.
And even though some people look at it and say, gosh, well, you know, we don't need all these rules and we don't need all this legislation, I look at it a bit differently and say clarity of legislation
enables clarity of rules, it enables a playing field that then people can start to innovate on.
And you know, look, Chair Atkins is going to be along here later on, and you know, he's been a terrific advocate for digital assets.
And again, the same point, sensible regulation, clarity, how do we move forward so that we can really get into the
business of adopting a new technology and not somehow let the opportunity pass us by.
The bank's perspective was that, you know, if you offer yield on stablecoin, that, you know,
it encourages consumers to move toward stablecoins versus traditional deposits without the necessary regulatory protections.
So this way where they can offer rewards but not just for passively holding it seems to kind of thread that needle a bit.
It wouldn't make the system less safe, in other words.
You know, there's been debate and controversy associated with this whole question of yield and what essentially is a stable coin.
And if you actually go back to the principle of money and deposits, and there's a little bit of
an analogy here, we walk around with cash potentially in our pockets, maybe a lot less
so than we used to. But if you have a dollar bill, that's a direct liability of the U.S.
government.
It doesn't pay any interest. You put it in your pocket, you don't get any interest from that.
But it has a convenience because it's a method of transacting.
And so it allows to be able to easily perform commercial activities with the cash.
And you could argue that the debit card rails and the checking accounts that we all have are similar in their nature. They don't pay interest, but they're a real means of transaction and they're a means of commerce. And so the
question for a stablecoin is what is it meant to be? Is it essentially meant to be that same type
of means of transaction? And in that case, the proxy would be that it wouldn't pay interest
because those other transactional tools don't or is it a storage mechanism for
money and if it's a true storage mechanism and the proxy would be more
like a money market fund or a savings account which by the way aren't usable
in transactions then it's something that can pay yield but those two things have
been very carefully separated
by governments over long periods of time in the United States
because by separating them,
it enables lending from U.S. financial institutions.
And so the principle of deposits and lending
and lending powering small businesses,
mortgages, home loans, car loans, all of those things
is very important. And so this is an important debate because we've got to make sure that what
we don't accidentally do is create this level of disruption that causes U.S. consumers to not be
able to borrow money anymore. Remember, stable coins can't make credit-oriented loans. They deliberately can only
invest in U.S. treasuries because they have to be risk-free in terms of the way that they're
conceived. So the fact that they are treasuries only means they can't provide credit to the real
economy. So we're going to be very careful to make sure that we don't somehow create this disruption
for credit into the real economy,
which at the end of the day is the thing that powers the U.S. economy.
Absolutely.
Sorry about that.
Allergy is crazy this time of year.
So I'm curious your perspective on the future.
You talked about 24-7 commerce.
How do you envision kind of this all transpiring five years from now? So, you know, we have many people here who live and breathe
digital assets every day, and we can all have perspectives around the exact pace of the
innovation and exactly how things will track. And so for us, we're not actually
trying to predict the future. We're really just trying to lean in to the adoption, recognizing
that exactly how things evolve can change. And so the dynamic nature of strategy, I was a big
believer in AI three years ago. We started to invest significantly in our own AI platform,
Eliza, three years ago.
It's connected to all the large language models.
But I certainly thought AI would be huge and impactful then.
I didn't think we would even be to where we are actually today.
I thought it would take longer to get there.
The scaling laws have held up incredibly well
and arguably are even accelerating.
If I take that same parallel for digital assets,
I would say it's hard to pin the exact pace of adoption,
but you can see the direction of travel.
Where there are use cases
where the current financial system is a little clunky,
less mobility, less 24-7,
less richness of representation on a ledger,
those are great use cases.
And so bringing new asset types into the financial services industry,
loans are clunky, real estate's clunky in the current financial rails,
physical commodities are clunky.
So use cases like that arguably are actually going to provide more value
more quickly than just tokenizing an S&P 500 equity,
which I'm all for. It doesn't solve maybe for the same degree of difficulty.
Then if that's Gen 1, which is adoption, replication, taking things that either work
well or don't work well and bringing them into the system, the question is, what's Gen 2?
The question is, what's Gen 2?
So Gen 2, for me, is making the chains more capable
so that they can handle the throughput and the richness of information
that really allows the application of smart contracts in an interesting way and at scale.
So corporate bonds, it's not about tokenizing the bond.
It's about how do you encode the indenture
and actually making the package of
corporate credit more comprehensive than it is today. That's not something that we really do
today, but that would create a lot of efficiency in the system, arguably increase liquidity in the
credit market and take out some of the inefficiencies that are in there. And then Gen 3, I can imagine
breaking down instruments into their component parts.
And actually, even the philosophical question of what is an equity and what is a bond,
those things are established through history.
But I think you could make an argument that what they really are is cash flows in terms and conditions.
And if you take cash flows in terms and conditions, you can reinvent new combinations of products
which are a little different than today. You can apply AI to it, the intersection with agentic commerce, on-chain,
payment currencies. I think there's a very interesting world for all of that,
but that's a little bit further away. So for us, we're starting, we're partnering with clients,
we are innovating, and I think the future will then open up in those types of
directions. What kind of timeline are we looking at here? You know I will be
guaranteed to be wrong on the answer to the question but I feel that this is a
starting to be relevant today but this will be a 5, 10, 15 year journey which
will be frustrating to some people because
they'll want it to go quicker. Some things will go quicker, but I think the full application of that,
it will take some real time. These generational shifts in technologies, real adoption, and
permeating more broadly through the financial system, they tend to take quite a long period
of time, even in a world of AI and going quickly.
So is it the technology, the regulatory backdrop, the adoption?
What's the biggest hindrance?
It's all of them.
In the case of digital assets today, I think it's all of them.
So some of the L1 chains, if you look at, in fact, all the L1 chains are not today really capable of doing all of the things that I described across the multi-generations.
They require investment.
If you talk to the folks who ultimately,
Ethereum just is a great example of a great L1 chain that's got an enormous amount of traction,
but they need to invest a significant amount of money in order to be able to build out their chain
in a way that can support some of these more advanced use cases.
There are other creators of L1 chains who are working on new chains right now.
So yes, the technology needs to evolve.
We just talked about the legislative backdrop.
We don't even have all of that done yet.
So yes, that needs to happen in some way, shape, or form.
Then yes, the regulators need to do work.
And then yes, established providers,
new providers, everybody needs to lean in. And then adoption. So it's all of the above.
And so when I look at it, it just feels to me just an honest assessment. It's going to take
a little while, but that shouldn't stop us from getting excited about getting going.
Absolutely. Well, thank you so much, Robin Vence, CEO of BNY. It was a
wide-ranging conversation, and I'm very excited about the future. Yeah, me too. Thank you.
Thank you. . The stage, Chairman of the U.S. Securities and Exchange Commission, Paul S. Atkins.
Can you hear me? I guess you can now. Okay, thank you very much. Good morning,
ladies and gentlemen, and thank you for the invitation to join you all at this year's
Digital Asset Summit. I'm delighted to be here, especially on the close heels of what was, by any measure,
a historic week for America's digital asset markets.
There's a lot of ground to cover and little time to spare,
so I'll keep my remarks brief to allow maximum time for a discussion with Ladd Roisman here in a few minutes. But first, let me take just a few moments to describe some of what the SEC has done in recent days
to deliver long overdue clarity to our crypto asset markets.
As many of you all know firsthand, market participants have operated in a state of persistent,
often crippling uncertainty around one fundamental
question. When does a crypto asset implicate federal securities laws? Last week, the SEC
took a decisive step toward answering that question by publishing a token taxonomy and
interpretation of Howey that draws clear lines in the sand
and definitively states our view about the outer bounds of the agency's jurisdiction.
More particularly, our framework clarifies the contours of an investment contract
and distinguishes between five categories of digital assets, four of which are not securities.
We've also begun to chart a path of compliance for entrepreneurs who seek to understand when
the fundraise for a crypto asset implicates the federal securities laws.
Taken together, the SEC's actions return the SEC to its core mission and its statutory authority of protecting investors involved in securities transactions.
In short, they help to ensure that we are no longer the Securities and Everything Commission.
Now, as transformative as I expect these steps to be, I should also like to make clear that our interpretation is not an endpoint as much as a foundation.
Milestones like this one can tempt us to think that we have tackled the hard questions, but that would mistake progress for resolution. Progress for Resolution. In light of last week's interpretation, I'm reminded of the Churchillian
refrain that this is not the end, it is not even the beginning of the end, but it is perhaps
the end of the beginning. Because while the clarity that we have delivered is essential,
it's scarcely sufficient. After all, only Congress can future-proof regulation
in this space through comprehensive
market structure legislation.
And as lawmakers consider broader reform
to guard against rogue regulation,
the SEC is doing exactly what it can and should be doing
by providing clarity about the proper boundaries of our jurisdiction
within existing law, by hastening the end of the beginning, as Churchill would say.
Now, the work ahead merits a fuller discussion than my opening comments allow, so I want to
move to my conversation with Alad Roisman so that we can discuss these issues in greater depth.
So, Elad, I look forward to a thoughtful exchange.
And thank you all once again for the privilege of participating in this year's summit.
Now joining Chairman Atkins on stage, Elad Roisman.
Good to see you.
You too.
Thank you for your time, Mr. Chairman.
And I think I speak for everyone that the work that the commission has been doing has been nothing short of, I think, monumental.
I think there is, we can all agree that there is a stark difference between, let's say, your tenureship and the previous one, especially when it comes to digital assets.
And I think your statement just now is a good example of what I think is a collective approach
to provide clarity to the industry.
For a long time, folks have felt that they were knocking on the door, asking for this,
and the response usually was, not today.
Or tomorrow, really.
Or tomorrow.
Well, as you mentioned, after more than a decade of uncertainty, the Commission announced last week a first-of-its-kind interpretation
to provide market participants and innovators with a clear understanding of how the SEC views crypto assets under the federal securities laws.
I should also note that the CFTC also signed on to the interpretation,
which is another great example of two regulators working together to provide clarity
and the ability for innovators to seek America as the place for their businesses.
Can you tell the audience a little bit more about the interpretation
and how it will help market participants,
both sort of crypto entrepreneurs
and I would say the traditional financial institutions?
Well, thank you.
So, yeah, this was, I think, a real sea change
in how we have approached things.
So, and I should say I'm really thrilled
that President Trump appointed Mike Selig to be
Chairman of the CFTC.
So this is an incomparable moment in time where Mike used to be in my office and he was recruited
by Hester Peirce, Crypto Mama, to be the Chief Counsel of the Crypto Task Force.
So he's a hard worker.
He knows the business and and
knows digital assets very well so to have him as a colleague at our sister agency really breaks with
the past so that you know we will really be working hand in glove and we're determined to get this
right here in the in the coming years so this interpretation that we came out with, you know,
is really focused on drawing a clear line in the sand
so that, you know, we can at least say
what belongs with the CFTC and what belongs with the SEC,
which has been a bit problematic, obviously,
over the last few years.
So I often compare it to two fortresses.
You know, you have SEC, CFTC,
you have a no man's land in the middle. And so the would-be new products kind of venture out
into the no man's land, but then get cut down in the crossfire from the fortresses. So that's sad,
and there are a lot of carcasses laying in that no man's land, unfortunately, but we'll be able to revive some of them I think as as time goes on but so
basically looking at four types of not things of that are not securities four types of tokens so
digital commodities digital collectibles it means like art or NFTs or meme coins, digital tools, which are access rights or identity to work within an ecosystem,
and then finally payment stable coins under the Genius Act that Congress enacted.
So those four are not securities, and those will be with the CFTC,
and anything that comes up, we can refer to them to deal with that.
And had that existed in the past, I think a lot of questions would have been much more
easily answered.
So the things that are securities, though, are tokenized traditional securities.
So equity and debt represented on-chain in tokenized form.
debt represented on-chain in tokenized form. And so the clear analysis, the clear clarifications
that we're trying to do is to take things away from investment contracts and how to
really define that and the separation of the token from the actual contract. The token is relying on what's created through that
investment contract, the promises that are made to investors. And the token, like Mr. Howey's Orange,
is not the security, but it's the contract itself. Yeah, I think it's safe to say, I imagine a large swath of this audience has read that
interpretation at least once.
And I do think it's especially helpful, the discussions especially about the essential
managerial efforts and the fact that they have to be essential.
So I do think the staff and the commission did a very good job of laying out the premise
and the thinking. And I think that's very helpful for innovators who are trying good job of laying out the premise and the thinking.
And I think that's very helpful for innovators who are trying to sort of play within the right lanes.
Obviously, when you do something as monumental, I'd say, as an interpretation,
the question everyone has is, okay, is that it?
Yeah, right.
So is that it?
No, this is just like I said, as Churchill said, we're at the beginning, and this could be the end of the beginning.
But anyway, we have a long way to go.
And the interpretative release is not a panacea.
It's just really kind of setting out a boundary here, and then we will work on a broader framework.
And then we will work on a broader framework.
So, you know, we've done the taxonomy and interpretation, but we have yet to go exemptions and safe harbors, you know, and then bespoke guidance for people.
Because inevitably we'll not get everything at the beginning.
There will always be questions, but that's the way innovation works.
innovation works. It's very iterative. So we need to be ready, willing, and able, and working
It's very iterative.
closely with the CFTC to provide that guidance to the marketplace and to provide clarity without
overreaching, and then to enable innovation to proceed within the defined boundaries that
we'll create. Well, touching upon that, you gave a speech also last week
where you called regulation crypto asset,
which is a safe harbor
that would provide crypto innovators
with pathways to raise capital
in the United States,
taking into account
the characteristics of crypto assets
while providing requisite investor protections.
I noticed yesterday
that there was actually a notice on the ORIRA website
of a new potential rule, which I think may have a similar title.
Can you give us a little bit more about the idea behind this sort of regulation of crypto asset?
Well, there are two main statutes that the SEC deals with, the Securities
Act of 1933, which is all about really doing IPOs and raising capital through the securities
markets, and then the Securities Exchange Act of 1934, which deals with, you know, how secondary
trades go about
with respect to registered securities
and where they should be traded and on exchanges
and how those exchanges are to be regulated and all that.
So that all gets very complicated quickly.
So what we're trying to do is update
these particular statutes as far as our interpretation and our interaction with them goes for the 21st century.
So with respect to this red crypto assets, that's focusing on fundraising and, you know, how that like the essential aspect of what securities were all about.
But we want to set out clear entry and clear exit parameters from that. And so
looking at, you know, this proposal will talk about exemptions, you know, from that Securities
Act plus safe harbors that are now, that's going to be in this particular proposal.
So with respect to structure, you know,
be looking at a startup exemption, a fundraising exemption, and then an investment contract safe harbor
with a goal of trying to have bespoke capital formation pathways
for people to utilize the huge innovation that we have with DLTS technology
and then to balance innovation with investor protection.
For those in the audience who probably want to learn a little bit more,
there's a speech that the chairman gave last week about regulation cryptoasset.
And I think it is incredible because it is the first sort of discussion,
I think, from a 33-act perspective
with respect to digital assets and tokens.
And it sounds like if what's on OIRA's website
is what we're talking about,
we won't have to wait too, too long before it's out.
So I think folks are excited,
and I'm sure you'd encourage them to comment
and come in. Yeah, that's what, so this is the first step here to publish this. It's
a proposed rule. So there'll be a 60-day period for comment. And so really looking forward
to the public's comments on this because we want to get it right and we want to make sure that it will
be usable and helpful for people. That's great. So in this theme, we've talked about taxonomy,
we've talked about capital raising. There's one thing that has been talked about for a while,
which I think is, I would always say, the other side of the coin for folks.
It's the innovation exemption.
So I think it's safe to say many people in this room,
and I think listening in,
have been eagerly awaiting this innovation exemption,
which I think you've talked about in the past,
allowing for sort of trading of tokenized securities
on chain and would help address some of the incompatible,
I would say, or burdensome,
prescriptive regulatory requirements that exist today
because frankly the rules didn't contemplate
the digital assets as much as people were hoping
back when they wrote it.
Can you help?
They did.
You're right.
But, I mean, innovation has always been here.
I mean, from paper to electronic, from just purely on exchanges to off exchange,
innovation is what makes our markets fantastic, and, frankly, the economy amazing.
Can you tell us a little bit more about what you envision by this innovation exemption and what are some of the issues that you're hoping to address? Well, the main thing is we're really
trying to let the market be the market, let innovators innovate. And what's kind of sad
about the last few years is that the SEC historically might not have been at the vanguard of you know pushing
innovation and cheerleading and all that but it also didn't really block things
and stand a fort innovation so back I mean believe it or not when you talk
about what people when they wrote the 33 and 34 acts or thinking of they were in
a paper world and so you had paper stock certificates and all that
and so it was very cumbersome you needed transfer agents in order to you know get the certificates
and say well Mr. X sold to Mrs. Y and you know we'll adjust the ledger books of the company and
the stock ledger to to reflect that so it kind of built up and this is the way things worked and in the 1960s finally
there was like a big bull market in the U.S. securities markets with just lots of new
issuances and lots of trading so much so that the whole infrastructure of transferring shares and recording that from one person to another
was just breaking down because they had just, I mean, huge piles of paper certificates
going from one broker dealer to another down in lower Manhattan or Philadelphia and San Francisco and whatnot.
Francisco and whatnot, and it was just the whole system was breaking down.
And it was just the whole system was breaking down.
It took, broker-dealers were going out of business because it was taking so long to
transfer, record the transfers, that they, that the transactions would fail, and because
it was just taking too long, and people would move on and say, forget it, I'm just canceling
my transaction or whatever.
So that was, you know, right on the cusp of being a disaster.
And so the SEC worked with the industry to come up with the Depository Trust and Clearing Corporation
to have immobilized shares and book entry, digital book entry,
for what past is that in the late 60s, early 70s.
So that was a huge step forward. for what passed as that in the late 60s, early 70s.
So that was a huge step forward. The SEC amended its rules and accommodated all of that.
And then other times in the future as well,
with ETFs and other things,
the SEC was very much trying to help things along.
Again, not really Johnny on the spot
when the idea first came about, but eventually got around.
So here, you know, the same kind of thing, except that in the last few years, it was obviously the SEC was an impediment, a huge impediment to what was going on.
So that's a long way of saying going now to this innovation exemption, what we want to try to do is allow people freedom to work out and do a proof of concept, basically, for their new innovative idea for trading national market system securities, meaning the securities that are traditionally now traded on the stock exchanges. And this innovation exemption would be available
for traditional financial firms as well as new ones.
But this is an idea to try to help things go along,
and including automatic market making
on public blockchains and that sort of thing.
But we want to have guardrails around it.
So issuer consent is central to this.
You know, the company who issued those securities needs to know what's going on with its securities.
And they, you know, we have other statutory provisions that, like 13D and things like that, which provide for somebody in masses control or 5% holding,
you have to disclose that.
So those sorts of things are important that we have to look after with corporate governance
and also.
Then permissioning is a second for whitelisting possibilities, and then investor protections around that sort of thing.
And then volume limits of how big this little ecosystem of that innovation could go.
So as far as maybe a number of offerees or participants, you know, perhaps money and, you know, that sort of thing.
So that's what's all going to be in this particular proposal coming up, and that would be, you know, mitigating risk.
So this is focusing on the 34 Act, and that would be an exemption that the SEC will announce as we're working on that now.
So the objectives of this are to enable on-chain compliant trading
that promotes innovation while protecting investors.
And then we can that way evaluate the settlement efficiency
and the liquidity formation for a long-term rulemaking.
So we'll get experience from the working of this particular exemption, hopefully.
And then there might be an outgrowth of that as maybe there's a reduced reliance on intermediaries.
I mean, that's the thing about any kind of innovation.
It might have that kind of ongoing effect. So anyway, and we'll see how that goes. But in the next month or so, we'll be coming out with this innovation exemption and see how what the uptake is on it.
That's incredible. So there will be a formal sort of commission proposal on this. Right. Well, it'll be an issuance. That one's not necessarily a proposal.
It's not a proposed rule. We have exemptive authority under the Securities Exchange Act, 1934.
But it will be cabined in. So it's not like we're opening the barn door for everything to come in.
But it will be structured and narrowly applied.
Right, that's great.
So we talk about sort of classifications
of what's a security and really what's not a security,
along what you've said in the past,
which is most of these are,
the vast majority are not securities,
and then go to offerings, and then interpretation.
So I feel like you're logically going through the course of sort of a securities transaction.
So I think that's a lot for the audience and everyone else listening to look forward to.
Yeah, no, it's exciting, I think, and it's very, you know, to see, again, we'll see what the uptake is.
I imagine that a lot of people will take us up on this, and we'll see where it goes from there.
So I think I have time just for one last question, which is about the great work that, you know,
it seems emblematic of the work you've just discussed, which is the work with the CFTC and with Chairman Selig.
So last July, you announced Project Crypto,
which was a commission-wide initiative
to modernize the securities rules and regulation
to enable America's financial markets to move on-chain.
I've never heard Crypto Mama,
but I like that for Commissioner Peirce.
It's now a joint effort with the CFTC as part of your efforts to support harmonization between the two agencies.
And there's even an MOU on this.
What have you found the MOU to mean in practice and what are you hoping for going forward?
You talked about these two sort of fortresses.
Do you think people can take down their weapons and hopefully open the doors?
I hope so.
A big ceasefire.
So anyway, but, you know, we'll be able to, our goal is to really, again,
address all of these issues jointly and to try to break down the walls between the two agencies.
And, you know, we'll be working hopefully be working, hopefully, in concert with Congress.
So we're waiting for the Clarity Act.
Hopefully, we'll come through, as I was mentioning a few minutes
ago.
But we need to provide clarity.
And Congress is the only one that can future-proof it.
Because what I really would hate to see is that we go through all this effort, and then in another four, eight, twelve years, something like that, someone comes along to undo it, and then we take us back to where we were.
So we have to, that's why we're proceeding in a very deliberative type of order here,
so that we're laying the groundwork and that, you know, courts can go along with us
and understand what we're trying to do.
We're not throwing the baby out of the door or anything like that,
but, you know, try to make it so that, you know, it is logical and stands,
will stand the test of time.
And so the real goal is we want to increase clarity through regulation.
That's in our remit.
And then have a durable structure through legislation.
And that's obviously in Congress's remit.
I think we're on the cusp of that.
I think it would be great if it happens.
And so we've been trying to help them and CFTC as well. And but the two of us, the two agencies can really work on that together and I think make a lot of progress.
Well, thank you so much, Chairman Atkins, for your time. Thank you for your remarks and your clarity. And we look forward to the Commission's work and I think I speak for
everyone. Thank you for the good work that you're doing. Thank you very much. Good to see you all.
Please welcome back to the stage Michael Ippolito.
Hello, hello.
Where are you all going?
Just kidding.
How's everyone doing?
Energy?
Good?
Feeling good?
Guys, this is like the fourth time I've been on stage and I've asked you to do this.
Come on.
How's the energy?
Feeling good?
All right.
Amazing.
I'm going to try to follow that act from the chairman of the SEC, Paul Atkins, here.
And I'm going to talk to you all about investor relations in the on-chain era.
And if you remember that fourth thematic point that I outlined for all of you at the beginning of this day,
I'm going to talk about something that we haven't actually talked about so far, which is tokens.
Tokens and value accrual and the performance
of tokens that have been happening.
And, you know, you've heard
from me, you've heard from other folks at Blockworks,
is the institutional bull market.
We've got a lot of stuff going for us here. We've talked about a lot of positive
things today, but I'm actually going to start
to show you some of the negative things
that are happening here.
First of all, can I get a
show of hands? How many people like memes?
Oh, wow. Okay, this is a suits conference.
All right, well, we've got memes, we've got charts,
and I'm going to leverage these tools
to tell you all a story.
Okay, we're going to start with a meme.
We got a lot of good stuff going on here.
All right, we just heard from
the head of our regulatory agencies
here in the United States
about how excited they are in this industry.
We've got hundreds of billions of dollars worth of stable coins coming on chain.
We've got RWAs and credit being built on chain.
Banks are all in. Stripe is building here.
Everything seems to be the tsunami of positive activity, capital, and sentiment.
Except for the tokens.
Just don't look at the tokens.
Why is that?
What's going on here?
I think if I were to ask any of you in this audience,
what's the average price of a token done
over the last five years?
I think you would have kind of an intuition
that hasn't been that great.
Like, well, the industry's doing really well, you'd say.
But how are the tokens doing?
There's an uncomfortable reality.
The institutional bull market is here.
It is real.
And it also has not come for your tokens.
And instead of leading with a vague intuition about this,
I'm going to tell this story in data form in six parts.
What we're looking at here is total crypto market cap.
Pretty good, right?
I'm not a trader, I'm not a TA guy,
but I could draw some charts, you know,
that are going up and to the right.
Looks like something, something,
resistance is becoming strength.
If I'm at home on my YouTube setup,
I'm going to buy this chart.
This looks pretty good to me.
This next chart is the total altcoin market cap.
So it is market cap of everything that I just showed you,
but I've taken out Bitcoin and ETH.
I don't know.
Looks a little less good.
Still good.
Highs aren't as high here, but I'm still feeling pretty good from a market less good. Still good. Highs aren't as high here,
but I'm still feeling pretty good from a market cap perspective.
The two things that go into market cap are the number of assets
and then the price of those individual assets.
So let's peel the layer back a little bit
and look at how has the number of tokens in existence changed
over the last couple of years.
Whoa. Whoa.
So we're looking at a market cap which has basically stayed the same
for the last four years.
But the number of tokens has gone up by about 35 million.
Not quite so good.
So when you start to look at it,
and you look at the market cap of the entire space,
and you start to account for the number of tokens
that we've created,
the picture is way less rosy.
Actually, we've barely done anything since 2020,
two raging bull markets,
and the average market cap of a token
is actually down about 50% from where
it was in 2021. We've got one more layer to go here. Now we have to look at the price,
because what goes into market cap is the amount of tokens in supply and the price of those tokens.
So as we know, tokens inflate. The amount of tokens in existence goes up even on an individual
project basis over this period of time.
So when you adjust out that and look at the price, it looks like this.
So that purple, what I want to draw your attention to is that last purple chart here.
The average price of the average token is down about 80%.
That's not great, guys.
That is not great.
And it actually doesn't even really get better.
This is if you break it out into different cohorts.
So this is tokens that were launched 2020, 2021, 2022,
going all the way there.
There are two takeaways here.
One, what is working is Bitcoin.
What is kind of working is market cap.
We've actually done all right on a market cap basis
if you go all the way back to 2020 and 2021.
Since 2022, on a market cap, average price, or median price,
On a market cap, average price, or median price,
everything is down.
So, the last thing that you might say is,
well, maybe the fundamentals of these tokens
actually aren't going that well.
That's not actually true either.
So, what we used to have was a relationship
where revenue that was being generated on-chain
actually lined up pretty well with price.
That broke
in 2025. So what we
actually had was really strong
underlying fundamental
performance, record amounts of revenue
being generated on-chain,
and yet the price didn't move.
So we broke this important relationship.
This is the intuitive way that I think most people would think
about this, right? If the revenues are going up, the price is going to go up.
That's not true.
So something else is broken here.
What's going on?
In one word, we have a trust problem.
Investors no longer trust tokens.
I'm going to divide these issues into two buckets of issues
that are related.
One is market issues, and the other is information issues.
The market side of things, we have too many assets.
We've got too many tokens, guys.
It's fragmented liquidity.
The barrier to entry is too low.
We just have too many.
It's causing these down-only charts.
The next is value accrual.
Okay, you've got a token.
You've got a bunch of active addresses.
You've got a bunch of network activity.
What does that mean? How does that translate?
How do I receive value
from that?
Then on the information
issues, this is the actual core
root cause of the trust problem that we
have. If you were an investor
today, you were flying completely blind. You were in the dark. So oftentimes, it's just missing or
incomplete data. I just have no idea what the actual data is that's supporting these protocols.
Might actually be good. In many cases, it is, but it's not easily available. Second, there's no disclosures.
This space has no disclosures.
And investors have been burned too many times around a project
which actually has sound fundamentals,
but their inflation schedule is nuts.
They have a weird agreement with a market maker.
Anything that you would need to disclose on a regular basis
for a publicly traded company, none of that exists.
And it breaks trust every single time.
And then there's no standardized or regular
reporting. You know one thing that I actually do here
from token projects that we work with
all the time is my data exists
is it standardized?
Do investors have the context?
Do they understand what they're looking at or are they just looking
at charts that you understand
stand because you live in the business, but do the investors have a context needed to
because you live in the business
but do the investors have a context needed to actually
actually interpret that?
interpret that?
There's a meme again from my meme lovers.
These issues are related.
Poor information actively leads to bad market structure.
Sunlight and transparency are the best disinfectant.
And a lot of this bad behavior might still have happened, but if it was in the open and it was transparent,
we would have avoided so many own goals
over the last four years.
Just as a visual, I want to compare what it's like
to invest in public companies versus tokens.
I think if you buy
stocks in the public market today, you actually have a lot of tools that you take completely for
granted at your disposal. So you've got things like a quarterly earnings cadence, standardized
financial reporting. The management teams of these businesses need to go and present. They need to
put things together. They need to put it in one place where every investor knows where to get it.
They need to provide guidance. You have need to put it in one place where every investor knows where to get it. They need to provide guidance.
You have virtually none of that in crypto today.
Virtually none.
There are some companies which are standing up
and trying to do this,
but they are scattered across X or forums.
They're not regular, right?
So maybe a company pushes and pulls together
and gets something that they can show investors,
but it doesn't happen on a regular basis,
so investors don't know to go back and trust.
In many cases, there's just no outward-facing materials
for investors at all,
and there's no default standard
investor-facing source of truth.
That is the big problem here,
and this is the root cause of the trust issue
that investors have with tokens.
We have to do better.
We have to.
This is not a nice-to-have.
This is existential for our industry.
The reality today is that investors have completely lost trust with tokens,
and they are done operating in the dark.
They are not going to do it.
Information has to be standardized and made available.
It is table stakes.
And it is so great that for the
first time in a long time, we're in really good
hands with the leaders of our regulatory
agencies in the United States. But guys,
we have to lead the efforts here.
Don't make it on them to tell us
to do the basic stuff that we
all know we're going to have to do. You have an
opportunity as a protocol here to take the basic stuff that we all know we're going to have to do. You have an opportunity as a protocol here to take the lead.
I'm building to something.
So, what I want to talk to you today
is about a solution that Blockworks is bringing to the market
to help with this issue, which is Blockworks IR.
Tell your story and solve this problem.
If you want to do this, it has to be a part of a stack.
There are three parts to the stack.
One, you just have to get your data out there,
leverage a team of professionals that can help you,
reduce the load.
You don't have to do it all yourself,
but the information has to exist out there
in a standardized way which has been vetted by professionals.
Services, which are basically quarterly reports
and IR earnings calls plug into the network that we've built here. And then really what we're
unveiling today that I want to spend some time talking about is the IR platform, which is a
cockpit to manage this entire workflow for you in an end-to-end way. Blockworks has one of the most
trafficked and extensive databases in all of crypto.
So we go very deep and we will help you surface all of this information.
And more importantly than that, we're going to help you package it and tell your story to our audience of investors.
We view this as something that the market needs on both sides.
Investors crave this information.
They want it in a way which doesn't increase their overhead, the diligence that they have to do. Right now, there's so much redundant diligence that happens.
All right, so this is actually reduced. This is solving a problem for investors and for protocols.
Earnings seasons for crypto, baby. Quarterly reports, investor calls, Connect with and engage people. And finally, a command center to manage everything
end-to-end. What we are debuting live today is essentially a front-facing website. So if you go
to any public company, you would go to coca-cola.com slash investor relations, and you have standardized
data. Everything is unified. Everything is branded, and it looks standardized data, everything is unified, everything is branded,
and it looks really nice.
And most importantly, if you're a protocol,
you don't need to answer tens or hundreds of questions
of where does this information live?
It lives in one standard place.
Eventually, what we're building is an intelligence solution.
So not only are you going to be able to direct
investors to one standardized website where you can take a look at all of your data, you'll get
engagement analytics. You can know who those investors are. If you're Aave, it might be
interesting for you to, or if you are Aave, it might be interesting for you to know, hey, investor
XYZ has $20 million of Morpho exposure. Why don't they have any Aave exposure?
This investor told me that they hold
for an average period of two years.
On chain, it says 20 days.
That's not that good.
Finally, the really interesting thing about this
is the BlockWorks agent coming soon, SunTM.
So right now, the stack looks like you have to pay
for data, software, and technology,
and then you're going to pay some IR agent or IR services firm $50,000 a month or whatever
it is to help you tell your story. I am biased, but the firm that has the best understanding
of this market and what investors want is BlockWorks through our research, through our
data, through our podcasts and our reporting. We have a nerve center
and a view into this market, and we're going to
take all of that information and
compress it into an agent that you
will have access to for a fraction of the cost
of whatever you're paying your external
firm. That's
where this is going. Entirely
managed end-to-end
for you.
If you've been in this industry for a long time,
you've seen the phrase,
fix the money, fix the world.
We need to focus on the markets.
We need to fix the markets,
and the way that we're going to do that
is by fixing the data.
We are already in market with this.
We work with some of the best protocols in the space.
I do want to say we're debuting the platform
that I just mentioned to you live with B&B and Jito.
So, leading the way in terms of communicating
to their investor bases and transparency.
Now, I actually started this presentation
by saying how great it is.
Like, look at the standards of the transparency
of being a public company. There are the transparency of being a public company.
There are some issues with being a public company.
This is the number of companies that are public in the United States
over the course of the last 20 or so years.
It's about half of what it used to be.
What you're also seeing is the cost of being a public company.
So that's about four times what it used to be in going up.
About $2.2 million a year just in auditing and compliance-related costs alone.
And this is where I want to introduce this idea to you,
that the opportunity for crypto and on-chain
is not to replicate what exists already in public markets.
It is to do better.
We can be even better than what exists today.
And I think that becomes obvious when you actually look at how it gets done.
This actually isn't the future, if you look at it.
Stale Zoom calls attended by 37 people.
Websites that look like they were designed when websites first started to become a thing,
stale and basic, outdated data and shareholder materials.
This is not it.
This is not the future.
We can do better than this.
The reason why we can do better
is because for the first time in history,
for most of the protocols that exist today,
90% of your operating and financial
history exists live, on-chain, transparently.
This should be a dream.
Like, data is the best way that you can tell your story to investors.
You can onboard and attract new capital.
You can do it at a lower overhead.
And you can do it in a far more compelling way. We don't need to do this. We can do it at a lower overhead, and you can do it in a far more compelling way.
We don't need to do this.
We can do better.
Here's a quote from Vlad Tenev,
who I think is leading the way on this,
and he actually encapsulates what I think the issue is perfectly.
When I listened to my own company's investor presentation,
I was bored.
And if I was bored, then everyone is bored.
That's because there's an issue
with how this function, IR, has been set up.
It's inherently defensive.
It's compliance-focused.
It's box-checking.
It's cover-your-ass.
Success in this function traditionally has been,
did these investor presentations go live?
Were they accurate?
Few.
That is not how we envision things. The future is leaning into
IRL experiences. It is going on the offensive. It is being proactive. What we already see with some
of our more forward-looking customers here is you're not looking at, hey, is IR a cost center?
Did I do my job?
You're looking at how many investors
did I have at the beginning of the year?
How many do I have at the end?
I better have more.
More people better hold my token at the end of the year.
How are you going to do that?
You're not going to do that by throwing some materials
on a Zoom meeting that no one attends.
What you're going to do is you're going
to lean into IRL activities.
You're going to leverage personalities. You're going to show live you're going to lean into IRL activities. You're going to leverage personalities.
You're going to show live data that updates, that you control.
This is compelling.
This is what this will look like.
A year from now, the equivalent of GTC for NVIDIA,
protocols and exchanges in this space are going to do that.
They're not going to do, hey, here's my quarterly reporting.
Have at it. They're going to do that. They're not going to do, hey, here's my quarterly reporting. Have at it.
They're going to host days.
They're going to leverage people.
They're going to lean into social media.
They're going to spread the word.
And once someone does it,
it will be the most obvious thing in the world.
The entire space will look like this
within two years.
I didn't know how much Chamath
to include in this presentation.
I thought some, not too much.
This feels like a good balance.
But I know that sometimes it feels like we're in the weeds, right?
We're talking about this stuff that's in the future and it's on chain.
People are already hoping for this future.
They're just not using these words.
This is a direct quote.
You can have software that's so vibrant that you release a stream and agents will process it.
Then they will publish a dashboard
that can be viewed in real time.
And I'm hearing this description from investors.
They're not using these words,
but this exists right now.
This already exists.
It's a better future.
So, again, I tell you,
the opportunity is not
to replicate what we have in TradFi.
There's a little bit of a flipping of the slide I showed you before, but in TradFi today, IR is unengaging.
It's compliance-focused. It's box-ticking. It doesn't take advantage of new mediums.
It has zero measurable impact on your brand.
There's no measurable impact on your investor base.
In the future, IR functions will be set up to be proactive.
They will be engaging.
You will measure success by the amount of token holders that you have,
who is in your network.
It will lean into social and the company network.
There's no rule that says you only need sell-side analysts on these calls.
Bring in interesting people that people want to hear.
They can tell the story of your business.
That's what this looks like in the future.
To end on a somewhat inspiring note, crypto has a habit of forecasting the future.
Markets were not 24-7 before crypto.
Crypto changed that.
It's blurring the lines in between how things have been done in traditional finance that's been the whole theme of this conference
the other thing that crypto has anticipated
is the number of assets that exist in the world
and the challenge that you will have as a token issuer
which is to tell your story
and to gain and hold attention
this industry
is built different
we have survived
bull and bear markets
that are, you know, once every 20 years before this.
This industry has strength, it sees the future,
and it leverages innovation.
And that's what this function will be two years from now.
Built different, baby. Built different.
That's all I have for you today, everyone.
Thank you very much for listening. I'm going to go right, I'm moving my body, I'm moving my body, I'm moving my body, Thank you. you
