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RWA season - 21x 🤝 Polygon
Recorded: Oct. 30, 2024 Duration: 0:49:40Space Recording
Full Transcription
Hey, Seb, how's it going?
Can you hear me?
Hi, Adam.
Can you hear me?
Yes, sir.
Loud and clear.
All right.
Well, this is good.
We'll be talking about RWAs today, guys.
That'll be a lot of fun.
We can just do some introductions, and then we can dive right into the questions that we
have.
Seb, would you like to tell us a little bit more about who you are, what you do, and then
your journey?
Like, how did you get into RWAs?
Sure.
Thanks, Adam.
So I'm severing, heading the business development at 21X.
21X is an exchange for RWAs, or security tokens, as another term out there.
And we will be the first regulated market in the EU under a new regulation for capital
markets, which is called the EU DLT pilot regime.
That having said, my background in the space is, like, as probably most of you guys started
early on with crypto, a little bit of mining of ETH in the cellar back then.
I'm into RWAs since 2016, and I joined 21X five years ago, where we distributed the first
RWAs across Europe and Switzerland in a fully regulated manner in the primary market.
And since then, a lot happened.
I think we had the first waves of RWAs behind us, and now this is somehow the second wave
that we're experiencing right now, because now, actually, we have the time where regulated
exchanges such as 21X can launch.
Before that, I worked in strategy consulting on the blockchain and financial services space.
I've been in asset management also, and in the technology space, especially IT audit and
consulting before.
So, yeah, I think that's about it.
Been there in the space for a while.
Back then, we were five years early.
I think now is the time.
RWAs are coming, and great to be here today with you.
Yeah, man, I appreciate you joining.
And you mentioned something interesting.
You know, RWAs had a moment, you know, a few years ago, and maybe it was even a little
sooner than that.
But what's different this time?
You mentioned regulated exchanges.
Is that the main crux that you think is why it's having a little bit more legitimacy this
time?
Like, why didn't they take off before, and why are they starting to take off now?
I think it's a different factor.
So, one is regulation.
The second one is institutional adoption.
And the third one would be actually having the infrastructure and service providers in place.
So, all of that needed quite some time to be in place.
And from my perspective, as RWAs are always to be considered also financial securities, the regulation
part was a super important one.
We've seen the SEC in the US quite reluctant to any kind of crypto or RWAs in general.
We have seen the ICO boom, where a lot of security tokens have been marketed as if they were unregulated
instruments.
And now we have the regulation actually in place to use blockchain technology, to use asset
tokenization in a fully regulated manner across different jurisdictions.
So, in the EU, in different national regulations in the EU, but also Singapore, Dubai with the
regulatory sandboxes.
And even in the US, we see now the large capital market players coming into place, such as Blackrock
with their Benji token, Franklin Templeton with the Benji token and Blackrock with the Biddle
token, as an example, with their CEOs driving institutional adoption across the globe.
Yeah, that definitely makes sense.
And, you know, we're going to keep the panel pretty small today, guys.
You know, we're going to probably just keep it at seven.
And Colin, I see you were requesting as well.
And, you know, you seem to outrank me here.
I'm just a degen.
You're global head of institutional capital.
So, I thought it might be a good idea to let you up on stage.
So, welcome.
Hi, Colin.
Yeah, Colin, do you have anything you want to add to what?
The conversation so far?
No, Alan, not at all, man.
We cater to you guys.
Like, you guys are the users of this stuff.
I'm just a guy with a phone.
I just wanted to step in to just really support the call.
You know, from my perspective, what 21X is doing is so important because it's really,
for the first time, there's a secondary market that is created for the assets that are coming
on chain.
It's a big focus for Polygon to get high-quality assets from large traditional asset managers
globally on the blockchain, unleashing all the efficiencies that is created by the technology.
But really, until there's a 21X, like a regulated entity that can trade these in a secondary
market, the utility is a fraction of what needs to be to get real adoption.
So we are super excited by what Severin and Max and the team are offering because for
the first time, it really unlocks, like, the second half of the equation that is completely
necessary to get mass adoption for the tech.
I couldn't agree more.
Sever, what do you kind of think about that as well?
Like, you mentioned, like, mass adoption.
We're seeing institutions actually take RWAs very seriously and allocating serious amounts
of capital.
You know, what has your journey been the last, like, few months compared to, you know, maybe
when it was a little bit more quiet in the industry, like, seeing this kind of happen?
What's happening right now, it's crazy.
Like, we're basically getting overwhelmed because over the last years, they have lots
of security tokens, RWAs being issued, but all of them having one flaw, mainly they couldn't
be sold in the secondary market.
So you had the possibility for peer-to-peer trades, for OTC deals, but basically most of
those instruments were buy and hold products, and you can use them as a collateral, but
if you want to sell them on a regulated secondary market, there was no venue until now that you
could do this.
And what we see with us in this institutional space, when Larry Fink, CEO of BlackRock, promotes
RWAs, I think this is what the market needed to get that push in place.
So it's both the regulated secondary market that comes into place now, but also the large
institutions getting into the space and also building on public blockchains.
I mean, years ago, we had institutions building their own private chains, having some kind of
technological islands.
But it seems that also there we see a shift now, that from private chains, the traction moves
to public chains such as Polybon, and this is an important one as well, as we will have
standardization for RWAs in place now as well.
Yeah, I agree.
And Colin, whenever you want to pop off mute, feel free.
We just have a few questions here that we're going to dive into, so feel free to contribute.
Maybe we should rewind a little bit and just give some definitions.
You know, Sev, what is meant by real-world assets?
Which assets are included in this definition?
Yeah.
Actually, I don't like the term real-world assets too much because it's very broad, right?
So a real-world asset can be anything.
And I think that's also kind of the definition.
Any kind of real-world underlying in the form of a token is considered a real-world asset.
So you can think of real-world assets as digital twins of something that exists physically in
our world.
And so the most famous examples would be commodities, real estate, artworks, luxury goods, etc.
But as we see a lot of traction on real-world assets in the financial sector as well, also
stocks, bonds, and funds are considered real-world assets.
So to give a definition there, it's basically tokenizing, digitizing physical assets, which
also can be shares.
A hundred percent.
And it does seem that a lot of these systems are a little archaic and they've been around
for a while.
So maybe the segue that I would ask you now is in what ways might tokenized assets democratize
access to investment opportunities for everyday individuals?
Like what should normies understand about RWAs and why should they care?
How is this going to impact their life?
Yeah, so what's different with RWAs and asset tokenization is that you can break down large
assets such as real estate or artworks into tiny little bits that are investable with small
investment sums.
So in financial terms, you would talk about lot-size transformation.
With artworks, we talk about fractional ownership, which basically gives the opportunity for investors
to invest in a certain type of asset with a tiny little fraction of that full piece.
So you and me or normies basically can, with tokenization, invest in assets that haven't been accessible
before due to the large investment sums necessary.
And the same goes for investment classes, asset classes that have not been accessible before,
such as private equity, money market funds, or venture capital.
And these type of investment classes, asset classes, now get accessible for everyone.
Another point I wanted to touch on why it is important is basically the cost bit and efficiency
gains we have through tokenization.
So what we've seen in the crypto Web3 space with decentralized exchanges such as Uniswap is
that basically between a buyer and a seller, we don't need an entity.
We just need one single smart contract and an automated market maker to make a trade happen.
This set of rules, this set of technology is now being applied to financial markets, to
RWAs, to security tokens.
This means between a buyer and a seller of an RWA, you only have one smart contract.
And this is what we're building at 21X in a fully regulated way.
And this means you don't need all the intermediaries in between.
Imagine if you're trading on Revolut or Robinhood at the moment with your new broker.
There are about 11 to 15 intermediaries in between the buyer and the seller.
And all of them are charging costs.
If you have only one smart contract in between the buyer and the seller, basically in a regulated
Uniswap, there's no costs in between.
It's just the spread or the costs of the smart contract that's in between.
And you trade directly, globally, in a peer-to-peer manner.
This is what blockchain is all about.
It's about decentralization and disintermediation and efficiency.
And that's what we're doing.
Well, it seems to be important.
That's a lot of parties to take place in a transaction before blockchain.
So that's nice that we're kind of cleaning that up a little bit.
Colin, I do want to ask you a question since you're here.
How did RWAs get on the radar of the institutions?
I mean, these folks are pretty smart with their money.
They're usually pretty early.
How did that information kind of get on their desk?
Do you have any context there?
Yeah, I do.
And it probably goes back to the early, the OGs of the space, at least in traditional finance.
Around 2016, people kind of woke up and realized that you could really simplify the global financial
ecosystem's back office by coming on chain.
And it's really trillions and trillions of dollars.
Like, think of the $2.4 quadrillion a year that DTC settles.
All of this stuff is up for grabs.
There's one major infrastructure player that I talked to recently.
They have, call it, 20,000 employees.
They run on 23 different ledgers.
And by going on chain, they could take that down to essentially one, but maybe, you know,
realistically call it like two or three.
And thereby reduce their human capital costs dramatically.
It's just a tremendously inefficient system.
So what we're really talking about here, and you mentioned RWAs before, and Severn addressed
it pretty well.
But what we're really talking about here is financial transactions on chain.
Like, these aren't necessarily fractional Netflix accounts.
If we're talking about a total addressable market of, I believe it was the Bain and
company's number of $16 trillion in assets on chain by 2030, it's really the market for
financial transactions.
And that's why 21X is critical, is that's really the market that these folks are disrupting
with their first of its kind, best of breed technology.
So that's kind of why we're really excited about this, because for the first time, you
can actually edge into folks like DTCC's $2.4 quadrillion in settlements a year and make
it much more efficient and make it much, all of these items much more accessible to the average
person.
So it's inclusion, it's efficiency.
There's a lot of themes here.
And really for the first time, this is the big unlock to really create that picture that
nobody's had that before.
It's really been the dream in traditional finance since 2016, 2017.
And really for the first time, this could be the crack in the dam that opens up everything
for the vision.
To put that into perspective also, Colin, you mentioned $16 trillion tokenized assets by 2030.
I think if we compare that to crypto at the moment, how much do we have?
$2.5 trillion market cap in crypto, maybe a little more.
And if we compare that figure to global capital markets, we would have $230 trillion in the
global capital financial markets, right?
But I think the really interesting bit to understand is that not only what is traded in traditional
finance at the moment is here the total scope, it's the global real world assets we're talking
about.
So a lot of the assets today are not tradable in capital markets.
We talked about real estate.
We talked about art.
We talked about luxury goods.
We talked about certain types of commodities, private equity.
A lot of those things are currently not tradable on exchanges such as New York Stock Exchange.
So when we talk about the global real world assets, we're not at $16 trillion or $230 trillion.
We're talking about $1,700 trillion worth in US dollars in real world assets in the world.
So we're just at the beginning.
And this market is way larger than finance.
It's larger than crypto.
And it's super, super interesting to be here because this is actually revolutionizing the
way that value is exchanged in the world.
Yeah, the financialization of some of these markets is super exciting for people that want to get
more, you know, that get to their more interested in the in these investment opportunities because
it's not super easy to invest in a lot of these commodities and whatnot right now.
So I'm really excited to watch that.
And then some of the projections are insane, man.
Like, you know, we're talking about these trillions and trillions of dollars.
And, you know, it just kind of shows you it's cliche about how early we actually are.
So it's exciting times to be in RWAs, especially considering to see the institutions are allocating
insane amount of capital.
But let's move on to the next question here.
We've talked a little bit about how blockchain tech is kind of impacting this space.
But, you know, how can blockchain tech ensure the provenance and authenticity of tokenized
physical assets?
Like, how do you actually make sure you're trading what they say you're trading, if that
makes sense?
It's a very good question, especially when you look back of what a blockchain actually
is or what a distributed ledger is.
So as the name says, it's a ledger of transactions, which is immutable and which keeps track of
ownership of assets, right?
So talking about RWAs, it's a perfect, perfect use case for blockchain technology because
blockchain is made for keeping track of who holds how many pieces of something.
So in coming back to your questions, how can the blockchain make sure that the authenticity
or the tokenized physical assets are in line?
If we have an immutable ledger of transactions, we always know who holds how many pieces of
a share or something.
And if the token itself represents the RWA, I can always track and nobody can tamper with
the transaction history.
So the blockchain is actually, in financial terms, the best shareholders registry you can
have.
If we talk now about real estate or commodities being tokenized, there's still an amount of
trust needed because currently when you tokenized gold or tokenized luxury watches or art, you still
need a trustee to make sure that the asset actually exists.
So the way that works in today's RWAs is if I have an artwork being tokenized, I have a safekeeper, like a museum, taking care of the underlying asset.
And I have a trustee that checked that the artwork is actually real.
So blockchain cannot solve all of those problems, but what it can do really good is to keep track
of the ownership.
And this is the most important part, that you have a tamper-proof transaction history and publicly
available shareholders registry.
That makes sense.
It sounds like it's probably a good idea to add a little bit more transparency into the markets because
sometimes things get a little crazy.
And the trust me, bro, Meta hasn't always worked out for the end consumer.
So I do want to ask Colin a question as well here.
You know, what is the institution's long-term vision for the role of tokenized world assets?
Like, are they just trying to open up more markets for their customer base to speculate on?
Like, how are they going to benefit from this, would you say?
Yeah, it's really twofold.
It's a function of, one, increased revenue, and two, lowering of costs.
In terms of the first, you could look at, for instance, a private equity fund.
Take Hamilton Lane, which is tokenized products.
They're around a trillion-dollar private equity asset manager.
They've tokenized three of their funds to date.
The basic idea there is that by being able to reduce their minimum from $5 million, to call it $20,000 or $10,000, because of the cost savings that they gain from coming on chain, they can distribute that to a much wider audience, a much more diversified base of purchasers.
And thereby increase their revenue by potentially double digits.
This technology on the revenue side enables a situation where they could sell that product through potentially wire houses.
Like, for the first time, the folks with net worth between $1 million and $30 million that have essentially 0% exposure to private equity could look at more like an endowment-style allocation of, call it 20%.
If you run the numbers and you loosely say, okay, the world has $300 trillion in assets, individuals own about half of those, you can paint a picture whereby just from that side of the equation alone, there's $30 trillion in accessible capital.
Now, that is a product that can trade on 21x.
And that's critical because it opens up a new market for which there was no prior market, one of the huge value propositions of blockchain.
And then second, on the cost side, you could look at things like BlackRock's $10 trillion in assets, and you engender something like automated portfolio reallocation on the back end at the back office level, and that allows them to save a tremendous amount of costs.
So that's why the large asset managers and the large banks globally are really excited about this tech.
And 21x tech is going to sit right at the center of a lot of that.
It's going to enable a lot of that trading and liquidity really for the first time.
That's interesting.
And maybe you both can answer this, but there's a scene in the big short, which is a great movie if you guys haven't seen it, where Brownfield Capital is trying to meet with JP Morgan.
And they're trying to get a meeting, and they're saying, oh, yeah, but you have to be an accredited investor or something.
And apparently, the current investor has to have some gargantuan number to be able to have a seat at the table and potentially make these investments.
Is RWA going to maybe change that for the end consumer, like you just mentioned?
The people with – they still have to have a decent amount of money, but it's not hundreds of millions of dollars to be able to have opportunities to invest in some of these asset classes.
Is that actually going to make a difference here for the consumer?
I think what the difference is, is the regulation.
So as you mentioned correctly, like we're talking about financial securities and RWAs are in its form, as there are assets that are yield-bearing.
They are securities, and financial securities laws are applicable.
So if we talk about accessibility for private investors, for retail investors, for you and me, actually what plays the most important role is the regulation.
And in the EU, we now have this new capital markets law, which is called the EU DLT regime, that allows for direct access to an exchange.
So before, like if I wanted to trade some Siemens stock or some financial securities, I couldn't connect directly with Frankfurt Stock Exchange or with New York Stock Exchange.
That just doesn't work.
I need to go to my bank.
My bank goes to their broker, and the broker goes to the exchange, right?
So what has now changed is that we actually have capital market laws in place that enable self-custody for financial securities, that enable direct access to exchanges, and that enable atomic matching and settlements through stable coins.
So this hasn't been possible before, and I don't think it's purely the RWAs that make that happen.
It's more the regulation that is now in place to trade efficiently on-chain.
Yeah, that certainly is nice, because the regulation has been a little difficult to navigate, in the United States anyway, for the crypto industry.
And that kind of is a segue for the next question that I have is, you know, what countries will lead the way for RWAs?
I mean, America with, you know, maybe Gary Gensler, for example, they haven't made it easy for a lot of these companies to build and thrive here.
So, like, what countries are you seeing being most friendly with regulation for RWAs, and where do you kind of see America, you know, in the next few years about maybe how their policy on crypto will change?
So, as we're based in Europe, I can speak from the European perspective, and maybe, Colin, you can add afterwards on the American perspective a little bit.
I think that depends on how the elections go.
So, however, from a European perspective, or from a 21x perspective, I think Germany and Europe in general is leading the way.
So, we have a lot of national securities laws that have been amended in Luxembourg, in Germany, in Italy, in France, to enable so-called dematerialized securities.
This means the token itself can be the RWA, so it's not just a digital twin.
The share itself is on the blockchain.
And this is super important because up until now, we always create the digital twin of existing financial assets, having double the cost, not having any efficiency gains.
And the only thing that was why we did that is because we wanted to enable wallet-based access to those kind of RWAs.
However, now, with these laws in place in Luxembourg, France, Germany, in whole Central Europe, but also in Singapore, Dubai, and Asia as well,
there's a lot of countries that now have laws in place that allow for tokenized securities that can be held on the blockchain.
And this is super important.
So, I would say Europe is leading the way from the regulatory perspective.
And we have also super innovative structures in Singapore, in Dubai, and in the US.
We see things moving.
So, DTCC is moving, and the SEC, maybe, Colin, if you can add on that.
I see, like, with BlackRock and Franklin and all the institutions promoting those topics, I think America is coming there as well.
Yeah, America, to be fair, has been very much behind the curve, but I think everybody, especially politicians, should keep in mind that it's a global business, right?
Capital can flow all around the world.
So, as regulation opens up in Europe, where the 21x folks are, where they will ultimately be licensed, things can happen there at scale before America even enters the game.
So, that's one idea, is this is happening now in Europe.
It may happen in America.
The elections will be pretty, probably be pretty determinative in terms of where we see policy going.
But I think the reality is, even if you talk to our policy folks internally at Polygon, like, it's really hard to see exactly what happens beyond, I guess, next week in the US.
Because depending on kind of what, call it what faction gets into office, things could go in different ways.
But having said that, I do sit in New York, and I am very optimistic on the, I would say, the midterm, middle term, in terms of regulatory clarity and crypto in the United States.
I think either way, we're going in the right direction.
Colin, what do you think the level of understanding is with the politicians and policymakers about RWAs and crypto?
Like, do they have an idea of, like, the potential here?
Are they kind of, like, leaning on the financial institutions to lead the way?
Like, how are they going to make policy if they don't fully understand the tech and where the market is going?
Yeah, it's getting a lot better.
And it's only taken them eight years to understand.
I'm sure it's a very short eight years for a lot of people.
But, you know, the reason why institutions like Polygon have chief policy officers, Rebecca Reddick is both our chief policy officer and head of legal, is to really interact with the folks on Capitol Hill in Washington, D.C.
and to really educate them.
And my understanding from those conversations is, at this point, the level of education is pretty high.
Maybe even as recently as 12 months ago, it was not.
But based on the pressure that I think the large institutions that really want to use this technology,
and massive shout out to Franklin Templeton for starting these conversations with regulators in 2018,
the time has finally come that they're ready to adopt culturally.
And they really have a technical understanding that can merit acceptance, broader acceptance of the tech.
So I think now is really the time that we're seeing the inflection point there on the regulatory side.
It's truly our job to have that education in place.
And, like, I think over the last two and a half years in our license approval process with the European Securities Market Authority, ESMA,
but also with the German regulator, BaFin, the German Federal Bank, the European Central Bank,
and all those regulatory bodies involved in our license application,
it took us a while to do the proper education of the persons in charge.
So some people within the regulators are super deep into blockchain Web3.
Others aren't.
So I think it's our joint task to reach out to all the stakeholders and provide for that education.
A thousand percent.
I think Colin has to hop, but we appreciate you joining, Colin, and sharing some perspectives and whatnot.
We've got a few more questions to ask Sev here.
Sev, for people that want to stay informed about RWAs and crypto,
like, what resources do you consume that you trust?
Like, are there any particular you think are great for information that maybe we can point people to?
Yes, yes.
Like, I'm looking to a lot of industry reports, so I'm carefully watching my sources,
so always do your own research and not trust all the sources.
But what I'm looking to is industry reports by well-known entities such as Deloitte, KPMG, EY, McKinsey, BCG,
like all of them, they are reporting on RWAs, but also company reports and can be quite insightful.
So one particular I want to mention there is the Chainlink reports.
And Colin previously talked about DTCC.
So obviously, also the large incumbents in traditional finance, they are checking what's happening in RWAs,
and they are also producing reports.
So those are also interesting to read, but take it with a grain of salt, I would say.
In terms of media, newspapers, et cetera, I consume my news often from Letcher Insights or the Tokenizer,
and I also look into databases frequently on RWAs.
So to mention a few, rwa.xyz.
Dune has some great statistics, so that's dune.com.
And we're also working together with a rating agency for RWAs.
So you can look that up.
That's particula.io.
They are producing reports on certain RWAs that actually go into a deep dive.
They check the details.
And you can also see whether those underlyings are actually existing or whether there have been audits made on the underlyings of an RWA.
And this is super important because, yeah, in the end, we're talking about financial securities.
So it's always necessary to know about the regulation, to know about investor protection,
and to know about your rights.
A lot of those RWAs are structured in a way of subordinated debt,
which means if the issuer goes bankrupt, you don't get anything.
So always check the investment documents as well of the issuer.
Read the terms and do your own research, I would say.
That's great advice.
And, you know, again, a lot of people want to learn about this.
I appreciate you sharing some specific resources.
I'm curious also, you mentioned Chainlink.
You know, Crypto Twitter has an interesting relationship with Chainlink.
Let's put it there.
You know, there's some disappointment maybe, but they seem to be doing a lot of things very well, I guess,
in terms of the relationships that they've cultivated over the past few years.
What do you kind of think about them?
Are they kind of leading the way in the Oracle world still?
What's the perception like outside of the Crypto Twitter echo chamber?
I think if you listen to the founder and CEO Sergei, I think he understood what potential lies in RWAs because crypto compared to RWAs is a drop in the ocean.
And Oracle services by Chainlink are also heavily necessary in the financial security space.
So what we've seen with Chainlink, in my personal view, is that they shifted from a pure Oracle service into an interoperability solution and Oracle service for RWAs.
And so what they're doing in quite a few of the mentioned projects is that they're providing price sources from different entities as an Oracle service to consume that on-chain,
which is important for all those DeFi protocols, right?
So if you talk about RWAs and you want to use it as a collateral, use it for lending, et cetera, PP,
your DeFi application actually needs a price, a solid price of any RWA to calculate the risks.
So what Chainlink is doing, they are converting off-chain prices into on-chain oracles that can be consumed by smart contracts.
So I think that's valuable for certain use cases and also the interoperability piece that they're building with CCIP.
I think that's also quite important because even if we see a lot of RWAs on Polygon, and actually in Europe, most of them on Polygon,
other issuers use other chains.
And to make those interoperability, especially to have a fully functioning multi- and cross-chain secondary market,
the work that Chainlink is doing with CCIP is quite important, I would say.
That's good to hear because CryptoTwitter does have some brilliant minds,
but the narratives that get the most attention sometimes are not maybe as long-term or as serious as outside of CT.
So I always like hearing that perspective because sometimes there are blind spots.
But we've got a few more questions for you.
One would be like, what keeps you up at night with regards to like RWAs?
Like what are the greatest barriers that we have yet to overcome?
It seems like regulation is getting a little bit more clear, but is that one of them?
Or are there other things that you think we really need to get over in terms of hurdles that are kind of holding us back right now?
I would say the regulation is in place, so we have overcome that one.
But what's still kind of lacking or lacking behind is the infrastructure, the service providers.
So 21x has also a huge institutional focus.
And when you're talking to banks, financial institutions and brokers that should onboard on our exchange,
a prerequisite of an on-chain exchange is wallet infrastructure, right?
So there's enough infrastructure and service providers,
but having incumbents to apply wallet-based infrastructure into their chain of services that just needs time.
And the same goes for other service providers in the area of tokenized funds.
There are special roles required transfer agents.
We're working together with Apex Group there or market makers,
liquidity providers as another point and thing that needs to be in place for functioning markets.
So it's not only the regulation, but it's also the full ecosystem to be in place.
And I think we have the tech for tokenization.
We have the wallet infrastructure.
We have certain pioneers doing banking on-chain.
We have the stable coins in place.
But also for the stable coins, there needs to be trust on stable coins.
And it's the same topic like how secure is the underlying, how secure is the issuer.
So a lot of work has to be done on the ecosystem side.
And I'm very grateful that Polygon is helping us to push the market.
100%.
Yeah, it definitely seems like things are getting clearer, which is good.
And just a few more hurdles for us to overcome.
And then, you know, in theory, let's get to the promised land.
So that's awesome.
Well, a couple more questions for you.
Can you tell us a little bit more about 21X?
What prompted you guys to build in this industry?
You know, how have you navigated the quieter parts of the cycle?
I know bear markets can be very difficult for companies to operate in.
Yeah, so as I mentioned, I'm five years with the company now.
And back then, five years ago, it was five years too early because RWA's, like, it didn't take up the time at the speed that we would like to have it, right?
So good things need time.
And we had, in the history of the company, we had to pivot at the time when we saw there was an opportunity for regulated secondary markets because this was one of the huge, huge barriers, huge barriers for RWAs so that there was no secondary liquidity.
It doesn't help me if I issue a bond and investors can buy that bond, but they cannot do anything with it for 30 years.
So, I think secondary markets are very important.
And so, it is a long journey and it's just very important for startups, for fintechs to have the necessary runway, to have the breath, to keep pushing.
Because what we're doing here is not, it's not a sprint, it's rather a marathon.
And I think now is the time with big players like BlackRock, Franklin Temple, and Wisdom3, VanEck.
You can basically go through all the large capital market players and everybody has a tokenization strategy.
So, currently, we have overcome that initial hurdle and I think now we have the momentum to make this a success.
Yeah, the buy-in from the institutions is definitely what caught my eye.
You know, BlackRock doesn't lose money, really.
Like, they're pretty good at what they do.
I think they've got like $10 trillion under management or something insane like that.
And, again, the other names that you mentioned, you know, when they started sending some of their executives to these conferences, I really started paying attention, right?
Like, Goldman Sachs is on stage, Franklin Templeton is on stage.
It's like, okay, Shakira Ties, right?
They're kind of working with BlackRock.
I think they might even have been at...
And also, they're working with Circle as a stablecoin provider.
So, with BlackRock's Biddle Fund, you can have 24-7 creation redemption through Circle, which is super, super important.
Like, you change from a system where you can buy only during daytime into a 24-7 global accessible system where everybody can buy into those products around the clock.
So, institutional buy-in is one thing, but also the infrastructure in place, both on the cash side and the asset side.
I think that's very important.
And also, what Circle is doing with their stablecoins, being regulated now in Europe, I think that was a major driver as well for the stablecoins.
Because in Europe, we have a special regulation for stablecoins now for a few months.
Yeah, I couldn't agree more.
And, you know, again, it's just very exciting to see all this developing before our very eyes, right?
Like, who would have thought?
Even, like, you talk about, like, 24-7 trading.
Like, I imagine once stocks are going to be able to be traded 24-7, we don't have these, like, windows of buying and selling.
It's like, okay, that seems to be a pretty old system for 2024 when you can buy crypto any day or night.
So, but the last question we have for you and then anything else that you'd like to talk about, you know, no worries at all.
I'm happy to have that conversation.
You know, where do you kind of see 21x and maybe even RWAs as well in the next 18 months to a few years?
Like, you know, what are your long-term goals?
Yeah, so I think what we've done now is, like, we built in the bear market for the bull run, right?
So we've been preparing quite some time on our license approval.
And we will now launch the first regulated exchange in Europe with global accessibility for RWAs.
And where do we see ourselves in the next 18 months?
I mean, we want to be the exchange for RWAs.
We want to be the place where institutions and, in the future, also retail trade RWAs with their non-custodial wallets.
So we want to disintermediate.
We want to make capital markets more efficient and especially also more cost efficient.
So having less intermediaries in the value chain also means making products cheaper.
This means benefits for the end customer.
And I think our goal here is actually to give those benefits back to the users and not to the service providers and the oligopoly markets that are using them right now.
So our journey to mass adoption is actually defined by having different topics in place.
So we need the infrastructure providers.
We need the wallet infrastructure.
We need self-custodial wallets.
We need people to be able to use wallets and to trade on chain.
Like all of that hasn't been possible before.
So telling the broad audience that now they can use their wallet to buy stocks without any bank involved.
I think there's a lot of education needed.
But we actually see a shift in moving to public chains, in moving to stablecoin payments, and in atomic matching and settlement.
We get the system right.
If we get the systems right, the customer will be able to trade.
If we keep building, they will come.
Adoption will come.
I love that.
That is very true.
And again, there's a need for it.
Like you should be able to trade these assets 24-7.
Like buying and closing windows doesn't make any sense at all.
But, you know, we'll see what happens and we'll see what that time frame is.
But this has been great, man.
Like I appreciate you stopping by and educating the audience about RWAs.
It's definitely something, you know, folks should be paying attention to.
Because as you mentioned, like crypto is a drop in the ocean compared to what the potential is for this market.
And a lot of these asset classes are pretty archaic.
And, you know, the financialization is going to really shake things up a little bit.
I just want to mention, like, I love crypto and I'm in crypto for quite the time as well.
So, like crypto is a drop in the ocean compared to real world assets.
But, like, hopefully we can merge the two so that you can invest with your bitcoins, with your ethers and with your stable coins into real world assets simultaneously in using one and the same standard.
So, what we believe in is into public chains.
We believe in on-chain trading and we believe in peer-to-peer transactions.
So, what we're doing with 21x is making capital markets, making real world assets accessible for anyone and globally.
And I think this should be the goal to have one standard that has been established in crypto and Web3.
Build on that.
Build on the joint one.
Don't make island solutions and just work together to bring the ecosystem in place and to enable access to those assets that haven't been accessible and liquid before.
I couldn't agree more.
It's exciting times to be alive.
We're not going to be bored these next few decades.
So, what a blessing.
But, look, Seb, I appreciate you joining.
Guys, make sure you give Seb a follow.
Make sure you give 21x a follow.
You know, they're really doing some interesting stuff in this space.
And, you know, they're not going anywhere anytime soon.
So, pay attention to what's going on over there.
And, Seb, just thank you again for joining.
I really do appreciate it.
Pleasure to be here.
Thanks, Alan.
All right, everyone.
This has been another Polygon Twitter space.
We'll have plenty more down the road.
I'm sure Seb will be back on our next RWA panel.
But I appreciate everybody listening.
And we'll be talking to you guys soon.
Much love, everybody.
Peace.
