Blackrock's $10T Bet on Ethereum | BUIDL Fund

Transcript

we're hitting this afternoon 150 million in AUM by the time this gets published it's probably going to be 3 to 400 million I don't know depending on how the inflows come but wow my sense is that this is going to be pretty big fun because there's so much stuff out there that is likely to move here welcome to bankas where we explore the frontier of Black Rock on ethereum tokenizing Securities really interesting subject today so earlier this month the largest asset manager in the world that is black rock released its first tokenized fund on ethereum we talked about this on Bank list it's called The Black Rock Biddle fund so I think David and I knew this was big like a big deal

but after the recording the episode you're about to listen to I think we're realizing it's an even bigger deal than we initially thought this is about tokenized treasuries on chain this is about tokenized Securities on chain this is about the largest institutions in the world opening what we call a bank brand on ethereum and starting to tokenize their assets a very bullish episode for you today before we get into the episode we're going to talk to our friends and sponsors over at cryptex Finance cryptex is a defi app on arbitrum that makes crypto native markets tradable they've been around for a while and cryptex produces the asset TCAP total crypto market cap it's a synthetic asset that tracks the total market cap of crypto if you just want to think less about the

tokens that you are buying in this bull market use a chain link to produce that synthetic asset and cryptex is launching other indices and they want you to be a part of that all cryptex indices are managed and governed by CTX governance so if you share the same vision as cryptex which is of course to make crypto native markets more tradeable hop into their Dow and see what you can do there's a link in the showdowns to get started I think this is the best uh Indy in crypto by the way David because it's truly said it and forget it yeah it's just you buy everything all at once you don't have to think about it right you have to think about yeah think less it's a really nice passive instrument I think for peace of mind today the show we have Carlos Domingo who is the founder and

CEO over at securitize not Black Rock uh but Black Rock uses leverages securitizes software like a software platform to help them uh produce and maintain this onchain security this tokenized Security on chain there's been like a mixed reviews about people's perceptions about Black Rock coming and being on chain like oh everyone is so excited that black Rock's here and then the other half of the other half of the people are saying like oh why are we celebrating this Bank coming on chain is that first off it's actually not a bank black Rock's not a bank it is an investment management firm has a lot of assets black rock is allowed to go bankless just like everyone else and so to me this is the process of Black Rock taking its treasuries taking its assets putting them on ethereum and taking them

away from other people so this is the process of Black Rock the largest by Capital uh organization firm ever choosing to put their toe into the world of going Bank list starting with the most approximate security after actual dollars which is tokenized treasuries putting it on chain pretty cool all right guys we'll get right to the episode with uh Carlos talking about Black Rock on ethereum but before we do we want to thank the sponsors that made this episode possible including and especially Kraken which is our recommended exchange for 2024 this is an exchange that David and I personally trust go create an account if you want a crypto trading experience backed by worldclass security and awardwinning support teams then head over to Kraken

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USD institutional digital liquidity fund on the podcast today we're going to find out what exactly that means and if it's as big a deal as it seems and we have the perfect guest to guide us through that Carlos Domingo he is the founder and CEO at securitise a company that tokenizes real world assets and they were the ones that were involved in in the press release and provided the platform to help Black Rock tokenize uh the Biddle fund Carlos welcome to bankas thank you for having me big fun of it oh well thank you we're we're a big fan of um what you're doing in terms of bringing real world assets uh onto our our crypto networks and so I think we want to start by really trying to understand what actually happened last week because we got excited crypto got

excited Black Rock of course is the largest asset manager in the world something like 9 trillion in assets under management absolutely massive they are uh certainly a bellweather for the rest of traditional finance and if they are tokenizing we want to know as much as we can about it so can you help tell us what is going on we see a press release Here we see black rock tokenizing something in your words what just happened last week so what happened last week is exactly what you said right that the the largest asset manager in the world decided to take one of their uh their funds uh and tokenize it on the public ethereum blockchain which I also agree with you guys I read the the post you guys did yesterday this is a bigger deal than most people think um and we've

done a lot of tokenization projects over the years probably more than anybody else but I think this is uh really an inflection point in the industry because of the importance of the company doing it but also how it was done and we can talk about the the specifics of that but yes it's a it's a big deal and I hope crypto people realize about it just to nail down some of the specifics here this is actually not a new fund this is a pre-existing fund that is now putting being put into the form factor of a digital token on ethereum is that correct no so this is a brand new fund set up specifically to be tokenized it is just similar to other funds that black rock has BlackRock has I think $800 billion dollar of cash management products they call it uh so these are

funds that help companies manage their their cash um and this is one of them which is very similar to I think it's called the FED fund the one they have but it's an Standalone fund that is been set up brand new for uh you know the tokenization project okay so what are the details behind this fund like what is the what is the return profile of this fund what composes this fund so the fund contains uh over 90 repos and and three month duration uh treasuries so it will give you the same yield that the the Fed rate gives you today and obviously depends on how interest rates changes so but around that um and then it's a cash equivalent fund if you want because it's uh what it contains is like

cash and it's as liquid as cash okay so uh short-term interest rates short-term treasuries this is like cash and cash equivalents this sounds like the um the safest most proximate um uh fund to actual cash the it's like Cash Plus like the most the most approximate amount of yield possible but but it gives you a yield right like if you hold cash you don't get a yield or if you go hold stable coins you don't get a yield if you if you held this which is Cash equivalent then you're getting a yield on your on your assets right so it's used for we can talk about the use cases but the most obvious one is is treasury management right like anybody that has treasury you keep a portion of it in in a very safe instrument to make sure it doesn't

disappear uh overnight and that you can convert it in cash anytime you have liquidity needs so so that's the the kind of uh instrument that we're putting on the ethereum blockchain now really dumb 101 Nob question for you Carlos like when you're talking about a fund this is a black rock a new Black Rock fund what do you mean by fund is a fund just a pool of capital or is there some specific asset manager meaning to the term fund no a fund is basically a an structure a legal structure that is set up as a as a fund meaning that is an investment vehicle where people can uh you know deposit money to that money be deployed in certain underlying assets that you need to disclose who they are which ones they are that provides a

return to to investment so a fund it could be a private Equity Fund a VC fund a credit fund or or these kind of instruments which are referred usually as money market funds would it be accurate to say Carlos that this is like a a tokenized treasury we've been talking a lot on on Bank list over the last six months about this sort of uh emerging theme of like tokenizing treasuries is that what this is or how proximate to that yeah it's very close you don't tokenize one treasury let's say you can buy a t bill for a certain duration and then tokenize that this actually is an actively managed fund that they keep you know basically buying different Treasures in the underline uh and that what you're buying is the unit of the fund that is actively managed by by a by investment manager which in this

case is it's Black Rock so it's it's yes it's within the realm of tokenized treasuries but I will say it's a bit more sophisticated than just taking a treasury and tokenize it what what what is something a similar analog maybe in the in the traditional uh Finance world to to what this actually is would a would a money market be in kind of money market fund is a very good uh this is essentially a money market fund correctly okay so um I actually use a product in the in the trafi world through Apple pay it's really nice because it's integrated uh into the wallet for instance and I I think Apple behind the the scenes works with Goldman basically and with apple part for the credit card and everything we go yeah yeah there's actually like a credit card

and it's there's a high yield savings account so like my Wells Fargo account like full disclosure in case people in Bank list didn't know both David and I have bank accounts uh we bank at Wells Fargo occasionally try to minimize them whenever possible you know some people are very surprised by that Carlos but we still do have to pay some uh you know Trad bills around here but anyway uh so I also have a um an Apple pay account and they offer a high yield savings it's like 4.7% something like this it's better than what Wells Fargo offers which is like 0.2% they are not passing on the savings uh in the checking accounts to their customer and I think they were through Goldman uh to effectively you know power this I'm sure Apple gets its cut Goldman you like takes it 4.7 a lot of people gets a cut

in between yeah exactly exactly so it's not great but it's much better than my Wells Fargo account so I guess how um close is this to something like that now it seems like it is gated to institutions of course so like retail can't get it in the same way I can get the you know 4.75% in my Apple wallet but like how approximate is it to something like that it's very close so you have on on the blockchain you have stable coins right that's like like dollars that you can move around um and then in the real world you have like the actual dollars and then you have your saving accounts that give you a yield right so so this is the same thing people can actually move their dollars their digital dollars and put them on a let's say digital

savings account on chain to start earning a yield something that's unique that is part of this um offering this this uh this tokenized product is that it's a the the tokens themselves are stable coins are worth they're worth $1 um but it's a yield bearing instrument and so the way that the yield actually gets sent to the Token holders is that every 30 days there is like a an onchain dividend uh call it where the yield that was accured over the last 30 days is sent prata to the Token holders on chain can you talk about the the design choice of why make this a yield a stable instrument stable value instrument and then the also the design choice of sending the yield every 30 days so the

first this is common like there's many Market money market fans that you buy a unit at a fixed price let's say a dollar and then as you acrew interest they will give you more units of the money market fund so the it's called rebasing and the underlying value of the of the unit of the fund or the token in this case doesn't change and then the the way we're doing it though that is very differently is that once a month and you know hopefully one day this will not be once a month it will be block Black Block because from a technology perspective there's no reason why you know tokens are infinitely divisible right so you could think of a scenario where you know every block on the blockchain you're creting 0.1% of a token and then you get all those tokens there but today we we walk before we run it's once

a month and it's kind of like a n drop if you want uh I'm that's not a technical regular it's a technical ter it's not regulatory term but essentially what you're getting is you're being air drop more tokens with the same price into your wallet wet um every time you do it and and for us is it's easier than to do it this way because from an infrastructure perspective we basically once a month we you know calculate in our platform look at all the holders on chain see how many tokens every wallet has Etc and then just run one transaction on the blockchain that basically does all their drops to people so from an operational perspective is a super efficient way of doing it so the other U mechanism would have been uh a rebasing token this is a token that we

seen throughout defi at times where uh rather than having these tokens be worth $1 they would actually just like increment upwards where uh the collateral behind the token increases in value and so like it it starts at $1 then it's like $1 and two pennies and it's $1 four pennies but you're saying you you are choosing to do it this way just because that is the form factor that it exists in other uh traditional uh money market funds is that is that that's just the thought process that's correct and it's also if you think about what we were discussing before that you have cash and deposits as a as a a simil of you know having a stable coins and and the bill product and you want to move them in and out then it's better if they have the same price right because

for one token you get one stable coin for one stable coin you buy one token so certainly how does the value actually get transferred so these treasuries and repos in the back end are increasing in value how does that actually uh what's the steps for the increasing value of the treasur IES and the other products that make up the fund they eventually ends up as more tokens in people's wallet how is that calculated how is that how's the value actually transferred what's going on in the back end so treasuries are are basically loans to the US government in a basic form so so the US government has to pay you an interest on that and they have a certain duration so when they mature they pay and then you keep like buying more of the same duration and you keep

staking them so that's how these funds work and then as the treasuries are acre value or been uh liquidated then there is a a traditional fun admin that has nothing to do with the blockchain or world uh that operates in the traditional side of things that provides us uh which where the the transfer agent of the fund the nav calculation of what has been the interest the crew um we actually getting a daily basis um and then once a month we then accumulate that and and do the the air drop of the of the tokens okay so Carlos when we're saying uh do the airdrop of the tokens what uh token are we talking about like what's the denomination of this um D David mentioned you like a stable coin when you're you're talking about

airdropping the yield is that denominated in a stable coin or is that denominated in Biddle tokens and in in the B token is denominated on the B token the B token is not a stable coin it's a security I know crypto people don't like that term but that's what it is so and by the way I think this helps people understand that the fact that things are security is is not necessarily A Bad Thing and and that they can we can figure out how to make them work in the in the crypto space as well this is security we are registered transfering with SEC uh we are selling it through a broker dealer Etc so and then the token it represents one unit of the fund and the B token and then we keep sending you more uh bid tokens that

represent the interest that you've acre over time so I have these bid tokens and that that represents the interest I accur over time so let's say I want to like cash that out and I want to go back to the uh traditional Financial system and and get dollars or something uh to that effect or you're like well let's just start with that case I I want to take my bidle tokens that I've acred uh over the past year and I want to cash that out how do I do that at the moment at launch there's a a Redemption wallet um that is controlled by us where you basically send your tokens to a Redemption wallet and then that trigger basically liquidating your position or or the or the partial position of how how many wallets you've sent and then we

will wire you uh money to a bank account that's how it works today um the idea what we're working on is that there's a much better more crypto Centric process where you know the bidle tokens uh you know get redeem on chain uh and and you get stable coins into your wallet instead of getting dollars in the bank Etc so so that's the ultimate you know vision of the of how this it will in integrate with the crypto ecosystem that there is you know funding mechanisms that are crypto as well as Redemption mechanisms that are crypto and you don't have to you can completely live parallel from the banking space that you guys probably like that oh Bank list we go Bank huh you will be Bank list this product will be bang list so but as much is not we're part of the way there then

with uh with Biddle to to to kind of going Bank list right now if I want to redeem uh if I have a bidd and I'm uring that that those bidd tokens and interest then I have to sort of redeem via the the traditional banking rails and essentially go back to Fiat um but to be to transform my eth address uh where I hold bid into a complete like um bankless um like savings account then we need some sort of onchain redemption process and that's what you're talking about there now like in the meanwhile could I like spin up a um a Unis swap liquidity pool for for bidle or are there actual technical restrictions on like transferring Biddle at the the the contract level or like I I'm not sure that I'd have an incentive to do that

but like you know with with with crypto all this stuff is permissionless so you like maybe someone could do that so this is unfortunately not fully permissionless because it's a security so so yes you can transfer your tokens but it has to be to another authorized uh party so somebody else that has been uh on boarded in the fund and that we have wi listed their wallets uh once that happens across all the all the market participants they can basically send their tokens peer-to-peer so you don't have to actually redin them you can just sell them to somebody that wants to to get the tokens and that's another form of liquidity if you want uh instead of redemption in terms of interacting with defi ultimately we want to do that as well obviously like from a

technology perspective is super interesting both the lending side as well as the automated Market making again we will require a bit of an upgrade in the system to be able to deal with Securities but I think this is this is coming this is unavoidable that is going to happen I think the the def space will have a pure permissionless you know side of things but it will have also a sort of like my team and I would call it Hi-Fi like hybrid uh Finance so it's not fully decentralized because that's never going to work well with regulations uh but it will be hyrid in the sense that today the Bild token if you you know Ryan are on boarded in in the fan and you've purchased some tokens and and David has also been on boarded you can permission LLY send it to across

uh the blockchain with only smart contracts approving the transaction without any inter mediary uh you know touching the transaction so so it is to some extent there some degree of decentralization and permissionless but there is also some degree of permission and centralization which is unavoidable when you're touching regular instruments I want to uh backtrack a little bit because we were talking about redeeming uh we said the redeem word uh and inside I was poking around inside of the contract that you like all of crypto Twitter found and started playing with over the last week uh and there's actually a redeem function uh that was called like seven or eight or nine days ago or something um by whoever deployed this contract and when you called the redeem function that Us by the way sorry

it's deployed by us it's deployed by you guys okay so so great you're exactly the person I want to have then I'm gonna tell you what it is for but this this redeem function swapped out 25 Biddle tokens for 25 usdc tokens on chain uh specifically usdc so like what what what happens why what happens under the hood when the redeem uh contract is called so I I this is our contract that on chain so people you know very quickly find out what we were testing so as I mentioned the idea is that you can do onchain Redemption of the token uh against uh stable coins in this case uh usdc so so that's something we were testing uh it hasn't uh been launched so that's all I can say for time is it is it stable

coins uh could this be like die as well or like what what what's kind of the scope here I mean ultimately you can think of anything that um that you can redeem against that has a stable value because that this is why we kept the the B tokens $1 because it makes it easier to swap with another token that has the same price you don't need any complicated like let's say pricing oracles or or looking at pricing which might be different in one place from another Etc so yeah it doesn't have to be usdc for the time being the test that people have on chaines with usdc okay okay so the this is the where you guys were talking about the the parallel Financial system where like yeah you can get it wired out to your bank account or you could just stay in stable coins

directly on ethereum because there is actually this unique technical property of the token contract that allows onetoone transferability between stable coins that are like added to the redeem function right uh can't be any stable coins that has to be actually manually approved to the smart contract but then you can get Ono one redemptions for your onchain fund into stable coins that's the banglas uh future yes beautiful and then is the idea for this that um because like once you get that like once you have Biddle uh being onetoone uh transferability between like stable coins like usdc being the big one uh then like bidd has a similar uh liquidity profile on chain to usdc which starts to like open up some doors for

Biddle being a collateral in defi uh is this like some is this like on the thought process of the road map or is there any sort of conversations about this or like what is there it could you see Biddle as like collateral inside of like a or maker da or like other applications I i' love to for that to happen and we're certainly thinking about it and been looking at it um I think da is D is easier because you can just work with the foundation and you know get it approved as collateral uh and but in a pure defi pool that is permissionless I think that's a bit more tricky from a regul perspective because you're basically Bally putting a security as collateral and you don't know who is on the other side so it could be somebody from a sanction

country or things like that which is a bit more more tricky from a regulatory perspective but a has a AR which as you know is a a permission pool we actually one of the companies approv has been a while Lister for for AAR and and I know there's many defi companies that are thinking about that way Maple Finance has already done some some stuff along those lines uh Unis swap is coming with version four which has permission pools Etc so I think that's the that's the the direction of they industry is taking and we certainly would like to participate as much as possible because that's the the beauty of what we're building here right I yeah actually want a a brief aside because I'm not sure how much Carlos can comment on this so this is a brief aside to my to my uh fellow

co-host here because David we were talking about this in in the rollup yeah we're sidebar and Carlos just gets to watch and we we'll look for his facial expressions if heads are nodding or whatever else we'll do a body language analysis tell not to react do anything so Poker Face Carlos so for David so so uh we saw the redeem function on chain being used in in some of the crypto Twitter sleuth thing including some of your own because again you can you can see this entire like it's basically like a black rock has uh opened a branch uh bank branch on the ethereum network and and what's cool about it is we can see we can see what the bank branch does we can see it you know like its functions and one of its functions is this redeem function in

fact we saw on chain we saw it used for usdc now what would it mean if on chain something like bidd uh had a redeem function for usdc I you know and I want to ask that to you David to see what dots you're connecting one dot it seems to me to connect and this might be kind of like a like a a Layman take or a dumb take but this feels like almost like a liquidity portal from trafi to crypto that's like directly on chain right so we can go from Securities and the biggest security of them all which are these like treasuries thing and the biggest asset holder of them all which is freaking black rock with like a lot more and we can get that into directly redeem into stable coins into usdc that

is very fascinating because that would be a direct onchain like um bank branch that black rock has to exchange like you know that Meme I have an offer right it's like uh the offer is treasuries for usdc so that could absolutely explode um something like usdc in in terms of uh the the amount of usdc that's out there that that's what that's what I'm connecting but what are you thinking what's in your mind no that that that's exactly right there's like it's just less reasons to uh remove your wealth from being onchain to offchain if you can simply like liquidate your Biddle treasury to like usdc or like a stable coin like it doesn't sound like uscc is particularly in shined here U but just like if you can go from bidd to usdc

like that is a usdc sized foot in the door for people keeping their wealth on chain uh rather than like getting a wire back back to your bank account and having your bank account custody your bidle fund now you can have your ethereum wallet custody your bidle fund and then when you're done with the bidle fund you can go to usdc and you can buy Your Meme coins straight on Unis swap so like you're you're actually like one degree one degree separation from it's like really close coupling between Biddle and meme coins confirm or deny go for it I'm not going to confirm or deny I deny the function because it's on chain and

everybody it but I I want to quote Jeremy aair Jeremy aair is the C of circle he's probably in my opinion one of the most articulated persons in the industry I love his podcast and uh I've been there with him and I've met him many times I think he he always says something which is is has always resonated with me very well because I've been on the tokenization of Securities for a long time right and he's been in the toiz of cash which is basically what statable coins are and then he always says that one of the reasons why blockchain is so powerful as a new you know Capital markets infrastructure if you want is because For the First Time In in history you have on the same Ledger with the same underlying technology you can represent Securities and cash alongside and this is the B token is

anc20 token use the cc20 token and suddenly you have the two instruments that on traditional Finance are completely pain in the ass to swap around because the the banking rails that manage the cash and the Securities rails that manage the Securities are completely disjointed and separate and they use different Ledger right like a blockchain at the end of the day is a ledger and then today now you have these two these two instruments representing on the same Ledger with the same technology with the ability to swap them without taking any counterpart to with atomic swaps and all that stuff so that's where the future is going and why you know tokenization of Securities is so exciting and it was not something when I started the company in 2008 you could do because there were not stable coins so now you have stable coins as the most successful use case of

tokenization the next one is Securities and very well and that will allow you to go bangl because that at that point in time you have on the same Ledger the two instruments that you want to be dealing with in your daily life right which is something to pay and something to move around quickly and something to you know invest or earn a yield yeah and with the this the bidle fund which is short-term treasuries overnight repos the most liquid uh noncash assets that exists and so like now what do we have tokenized on ethereum a ton of stable coins like one of the most liquid assets that exist the dollar and then like the second most liquid asset that exists which is like short-term uh short-term treasuries and overnight repos and so like what I see is like this is the first of like

opening up a very long door of like you know still pretty liquid assets but then even like less liquid assets and even less liquid assets more and more Securities uh and this is just Lo logically the first one uh but now we are like moving down the curve of uh liquidity Beyond stable coins now into short-term treasuries maybe then like medium term treasuries maybe then like long-term treasuries and then after that like it's quite a quite a lot number of things credit credit is the next one right so if you look at the tokenized credit is the largest asset class of the tokenized uh so it's tokenized uh cash as you said that's the number one then you have tokenize you know treasury money market funds you know those kind of instruments of different durations I think some of the companies have like

multiple variations of the same product but then credit is the next one that has less liquidity but higher yield than a different risk profile we have B A tokenization of a fund with Hamilton Lane which is a trillion dollar asset manager it's not 9 trillion like Black Rock but it's pretty big I can tell you and then Hamilton Lane has a product with us called scope which is a tokenized uh credit fund which has less liquidity so is is we are kind of enabling through the cash in our platform a more frequent liquidity but the fund itself is only monthly liquidity because obviously credit is is more difficult to liquidate if you have underline loans but that's kind of like the the next uh Domino default and if you look at the the credit on chain is great there's a lot of companies doing credit but and with with all the respect

to anybody I just don't want to sound offensive to anybody but I think that there is a lot of like higher credit product credit products out there from the largest asset managers um rather than crypto companies you know plan to be asset managers and selecting loans and stuff like that I don't think that that's their the job to do for crypto people that's what the asset managers that been doing this for decades and that they have trillions of dollars and their uh management are good at um so so we're bringing those on chain already with Hamilton Lane and hopefully with some other asset managers race that's really cool yeah I I agree with you on the credit category by the way that that's actually that tra something that trafi does far better than than crypto right now I mean like crypto does you know over collateralize loans uh fairly

well but when it comes to credit when it comes to like doing collateralized loans are not credit right credit means I'll give you a loan against a certain asset or Revenue stream or something like that so so the the financial service process of analyzing the underlying asset to make sure you're lending at the right rate and with the right risk profile it's a very complicated thing yeah they do a reasonable they do a reasonable job about that but let me ask you when you're talking about credit are you also including like like mortgages would would that be uh something inside of this I'm thinking about private credit private credit crate has exploded because the banks you know when they went uh under last year and they they've stopped uh giving a lot of credit so the private credit space has exploded so people you know just basic basically

create funds that you invest in it for an asset manager with experience on credit to be able to provide those those loans that the banking system is not providing today by the way this is another side for my co-host David the reason I think it's going to be more usdc on this redeem function than something like die and tether this is my own speculation and uh you we can watch Carlos's body language but it's because um this is Black Rock we're talking about going to take a long time for that them to get more comfortable with like kind of like a die uh type of uh primitive or like a tether like you know tether was just uh you know maligned in front of Congress whereas you know usdc is is home home homegrown America and like tied in with the the biggest banks uh in the US but but we'll have to see

how that redeem function works I'm another another example of what they could do with this product which is you know as you know tether one of the problems with tether is that the lack of transparency on their Holdings right that's been a speculation in the crypto industry for a very long time that they don't for some reason they can't come with an attestation of their underlying assets Etc by the way Circle doesn't have that problem because the circle Reserve is managed by black drug very comfy for that this is public information by the way I'm not disusing anything um so so you can think in a scenario where somebody like tether if they really wanted to you know convey trust to the industry by having transparency into their Holdings they will hold the Biddle token it's by bid

by bid by bidd is probably very similar to what they're buying anyway because apparently tether move away from you know doing commercial uh paper and things that are more risky nature now the interest rates went up so so so just by B people can see it on chain and you know this other uh friends uh like Martin from the mon protocol that has announced that he's going to do that with his uh yield bearing stable coin is going to buy ble so people will be able to see the attestation uh on chain so I think that's that's another great use case right not just treasury management but build derivative prod so okay so it does sound like the actual usdc contract specifically is enshrined in the bidle contract but I won't I want to ask I don't know about that but I

just feel like there's some social enshrinement at least um there but like what what's what's really crazy about this is um by Black Rock essentially opening a treasury bank branch on ethereum uh like main net then it's essentially exporting all of black rocks like credibility regulatory compliance like all of that entire apparatus to anybody who can then buy bidd as a treasury for their fund so if tether wants to like quote unquote legitimize with the US uh traditional banking system rather than like you know like get better Auditors to look at all they have to do is replace the Assets in in uh tether with with bidd and then like

immediately they've got like Black Rock level assurances in their treasury again this is just me uh speculating with my co-host uh so Al also look I mean you just say something that is very important that I don't think people understand that so when you're investing on the B token you're giving the money to Black Rock we are just the the tokenization platform we are the transfer agent managing the assets providing the smart contract infrastructure for you know transfers possibly redemption in the future and broker dealer Etc but the money is managed by Black Rock so the counterparty risk you have here is with black so there's a lot of other you know tokenized uh treasure projects and money market funds where is either much small asset managers um or you know crypto

people that they woke up and they decide to be asset managers and now they are managing a money market fund I just don't understand why when you have the product from the largest asset manager in the world will not want to take counterpart r with anybody else right especially if if all the functionality you need is there right like it's on chain is peer-to-peer transferable uh in the future better interaction with the stable coins for investment and Redemption Etc so mantle formerly known as bit Dow is the first Dow Le web 3 ecosystem all built on top of Mantle's first core product the mantle Network a brand new high performance ethereum layer 2 built using the op stack but uses igen layer's data availability solution instead of the expensive ethereum layer one not only

does this reduce mantle Network's gas fees by 80% but it also reduces gas fee volatility providing a more stable foundation for mantle applications the mantle treasury is one of the biggest Dow owned treasuries which is seating in ecosystem of projects from all around the web 3 space for mantle mantle already has sub communities from around web 3 onboarded like game s for web 3 gaming and buy bit for tvl and liquidity and onra so if you want to build on the mantle Network mantle is offering a grants program that provides Milestone based funding to promising projects that help expand secure and decentralize mantle if you want to get started working with the first Dow Le layer 2 ecosystem check out mantle at mantle.

XYZ and follow them on Twitter at zerx manle cell is the mobile first evm compatible carbon negative blockchain built for the real world driving real world use cases like mobile payments and mobile Defi and with Opera minay as one of the fastest growing web 3 wallets cell is seeing a meteoric rise with over 300 million transactions and 1.5 million monthly active addresses and now cello is looking to come home to ethereum as a layer two optimism polygon matter laabs and arbitrum have all thrown their hats in the ring for the cell layer 2 to build upon their Stacks why the competition the cell layer 2 will bring huge hug advantages like a decentralized sequencer offchain data availability secured by ethereum validators and one block finality what does that all mean for you with cell layer to gas fees will

stay low and you can even pay for gas natively using erc20 tokens sending crypto to phone numbers across wallets using social connect but cell is a community governed protocol this means that cell needs you to weigh in and make your voice heard join the conversation in the cell forums follow cell on Twitter and visit c.org to shape the future of ethereum okay so Black Rock has the actual assets uh securitize issued the token like wrote The Token contract can you talk about can you just like shed more light on like securitizers role uh in this the whole creation of this uh this product so so blackr is the investment manager of the fund so they take care of anything that is related to the fund in terms of you know receiving the money investing

buying the treasuries liquidating them Etc um there of an admin that takes care of the enough calculation for on a daily basis for us and we are we play three roles if you want one is a transfer agent a transfer agent is an SEC register entity that basically keeps track of who owns the Securities right so we are the ones responsible to monitor the blockchain and changes on the blockchain for uh you know PTP transfers uh redemptions whatever to be able to keep an an updated cap table of who holds uh the tokens we also responsible for issuing the the air drops with the dividends we brought all the smart contracts and and everything and we're also the broker dealer that

does the investor on boarding so to to invest on the Bild fund you have to create an account with secur tize we do all the KYB for the entities on board them then we basically register the wallets wh list them on chain Etc okay so you guys primarily deal with like the onchain state and the onchain logic uh it also sounds like you guys have your own like it's complicated because we deal with the onchain but we regulated entity right so we need to basically be able to take the onchain data produce an offchain version for a regulator this called the Securities Master file that as as an S register transfer we have to keep from from legal uh regulatory reasons so but yes we built all that infrastructure we've been building that for for years so I think the reason we

landed this project probably and is because there I can't think of any other company in the space that has done all the tech work and the the regulatory layer on top of it to be able to kind of interact between the trfi and the and the crypto World in this way right so we have this like onchain digital Ledger and then secure tise in order to like make this compliant with SEC has to like make a mirror like a carbon copy of that make it go back into an analog form because that's the analog form that the SEC understands uh and and and that's like that that checkbox and then all the other kind of like nuances of it being on chain you guys are just managing like the um the traditional way

of operating this this structure but then it also you couple it into the making it onchain and like in this digitally native format so it will be a bangas project but I don't think will be an SEC less project for the time being yeah I mean what's really interesting and why I think this is an absolutely massive deal is like you know like number one this is Black Rock so again largest asset manager in the world number two what we're looking at here is the early phases of a of a pipeline between treasuries and potentially uh onchain redeemable stable coins so that's a new Pipeline and then number three it's kind of like um like a meta uh transformation of of of what we're

doing here because on the one side of that pipeline is sort of like Securities and on the other side is you know potentially something more more Crypton native in a in a stable coin and so to your your comment earlier Carlos what can we kind of like uh securitize next and what other like pipelines can can we actually create so this to me is a big freaking deal let's remind folks though that of course uh this is starting small and um it is is starting of course with uh like um I believe there are some limitations and you call them Whit lists early can you talk about I think it's sized 100 million right now how does that grow larger over time so you you can see the token on chain and track the

the progress uh so the the token uh open up on so we issue the first tokens on Thursday last week uh well I don't know when day this gets published so on Thursday I'm just going to give the the the date so people know so we issue the first tokens on on Thursday 21st and then uh as of Monday 25th we're hitting this afternoon 150 million in AUM by the time this gets published it's probably going to be 3 to 400 million I don't know depending on how the inflows come but my my S my sense is that this is going to be a pretty big fund uh because you know there's so much uh you know stuff out there that is you know likely to move here right like why don't you

move as I mentioned uh you know treasuries of crypto companies that they want to keep it on chain instead of like having to go on to the to the hustle of opening a a bank account with a a warehouse to be able to buy those products Etc when they can just buy it on chain from as you mentioned the largest asset manager in the world so it's pretty risk-free the other uh use case that that I mention is a lot of these derivative products that are being built that have treasuries that those treasuries are analog now they can just buy a digital treasury digital money market fund to to build the derivative products that will do other stuff and then the third use case which is very interesting as well is if you think about how crypto trading works today when a trading firm or a liquidity

provider is trading on on Exchange they post collateral right and they post collateral for you know as a margin account or to borrow against Etc today that's done with stable coins there's no reason why you wouldn't be able to post coll be as a collateral on Exchange and that opens up like a massive another use case uh of this product because you know it's cash equivalent is less risk- free from an underlying perspective is risk- free from a counterparty perspective uh or as risk free as it gets so so there's no reason why uh trading firms and exchanges will not do this uh in the in the near future so Carlos how can we watch this grow is this just like directly on ether scan if we go to Ether scan search for Biddle uh we we work

with a friends from Mian which by the way thanks a lot to them for helping us with uh with getting this uh quickly done uh so so if you search there you can actually see the actual contract of the of the fund and you can see how is it growing we issue tokens only once a day at 3 p.m. so so we receive funds all uh throughout the day and then every day at 3 p.m. you will see new tokens being issue and hopefully grow so not on weekends though right not yet not on the weekend seriously man so we are that's all right Black Rock I guess gets off huh look ideally you want to be able to make this uh something that you know the same way that you can in the

future have a faster Redemption process on in crypto you you can also buy a faster purchase process uh on chain right so that it's 24/7 available Okay so we've talked about some of the the demand sources for this right I'm I'm just like looking the trajector so we're in the you know like 100 million uh range now and that could quickly rise to 300 million 400 million that sort of thing you've talked about the the Demand Being from like treasuries exchanges uh derivatives platforms um let's camp on the demand a little bit uh longer what do you think the the total Market size of of demand is for something like a tokenized treasury from from Black Rock for for bidle and we we should note that this is not available for everybody right there

are some right so like I can't like necessarily buy this uh you know bankless listeners can't necessarily buy this it's not a retail product there are some Securities laws that go into effect here but um H how does this grow to like 1 billion and then 10 billion and then 100 billion in your mind Carlos so so first just to address the first comment it is for institutions for the time being I think that's the the the the number one use case all the crypto institutions uh whether they're startups or they're uh you know L1 Dows uh you know foundations trading firms change they all qualify so so there's hundreds of you know companies that could potentially buy this uh this product and use this

product so it's not necessarily that limiting in that respect it you know it can be registered with as a 40 act fund and then it's available to retail that's another like regulatory process so um that might happen in the future and then in terms of how big can this get well so first the there's two aspects of it right one is that there's a lot of crypto companies that have cash off chain that's the number one thing because a lot of the companies they actually keep their money on a you know Morgan Stanley money market fund so so there's no reason why that can actually not move to to this uh product on chain once you have the option to do it on chain with you know a credible asset

manager like black dog uh Etc so that those are like billions of dollars already like because look at how how much money all the crypto companies have raised and and if you look that's not on chain right so then there is the the billions of dollars of onchain uh stable coins that are not necessarily earning a yield that are been used for you know liquidity purposes people keeping uh stable coins or for you know posting as collateral for exchanges or for trading Etc so there's another like few billion dollars like probably tens of billions of dollars that is there then the the third part is that all the state coins themselves that could use this as uh as their underline so that's another like

100 plus billion dollars so this could get really really big uh over time so it could get really really big and I think it could uh that could happen fast right it sort of depends but you know like yields are so attractive right now I could easily see how this gets to you know tens of billions of dollars and then potentially um hundreds of of billions of dollars I I I want to bring this also a full circle because I I wonder if it's possible to you know the the Apple um Goldman example that I was talking about earlier where Apple has the distribution anyone with a like an iPhone has the potential to use Apple pay so it has you know hundreds of millions of of uh customers just waiting and then Goldman comes in with basically the you know like the tokenized you know

treasuries and boom you've get a high yield uh interest account I could see a future where a uh distributor you know someone like a coinbase for instance or a metamask with a wallet basically has a high yield option for retail in their wallet where they get a cut of it and they go through all kind of the the Securities regulation but underlying all of this and the source of the yield is something like Biddle and I wonder if that like could increase things more again this is just me uh you know projecting of of things that I've SE work in um like in fintech I guess and on you know in the web 2 side of things but there's all sorts of sources for demand for this thing I agree I mean there there's regulatory hops to be able to provide yield

accounts you we we went through these in the crypto space where you know blog five Celsius and All Those comp companies that were giving these yield accounts we doing something were breaking a million loss uh because you know banks are authorized to give yield accounts uh how does Apple do it I'm just saying you know if Apple can do ITA wallet should be able to do that it's probably when you're depositing on on on Apple I'm assuming I I just don't know the details but uh that the the money is managed by Goldman Goldman gives you the yield and Goldman is the bank so they can do it I I remember the uh I'm not going to say the name but one of the CEOs of one of these you know uh companies that were doing centralized uh yield that was saying oh we can we can

do this because Banks do it it's like no banks do it because they have a banking license oh you're talking about somebody like a block fire Celsius or some some of those names that went down hard uh last exactly so I mean unfortunately and by the way the reason Banks do it and Celsius and block fight were not authorized to do it and they went under is because if they had been authorized to do it they had a lot of more scrutiny about what they were doing with the money right and they will not have gone under the way they went so yes we don't like regulations or we think regulations get on the way but at the same time they protect uh investors to some extent so I think some some degree of uh regulation is is good for retail people right so let's talk about the the supply side of

things we talked about the demand is is Black Rock going to run out of treasuries like do they have like infinite amount of treasuries sort like if we got to 100 billion in would that be a problem for black the US government keeps sprinting money that's where treasuries come from right so it's not so we have infinite Supply basically and you so there's trillions of dollars in trees and look at the you know when they when the US government uh prints money is that they're basically borrowing money to issue dollars and then they have a yield to pay so and I think that there is yeah there's plenty of treasures out there so it makes sense that keep mind these are like three month Treasures right so they buy them and then they buy another one and then they buy another

one and then the previous one gets liquidated and then so so it makes sense that this product's first buyers are like onchain participants Dows organizations people who are already crypto native um but what how would you sell how would you pitch this product to people who are definitely interested in treasuries uh but they aren't onchain uh so like in what ways might this product actually bring more people on chain and what kind types of people might this be have you thought about something like this yeah I don't know if this product is what's going to be people on chain that are not on chain already because I think that you know for for the most part you can get what Ryan was saying you can get treasuries through a a yield bearing account with banks maybe you don't get

the same yield because there's two or three layers of intermediaries there but you get pretty decent one as opposed to having a a bank account um if you are a more sophisticated investor that have an account with a wealth management uh Bank like say Morgan Stanley JP Morgan you can buy treasuries there so I don't think this is necessarily what's going to move people there but I think what's going to happen with this product is that it's going to move more assets on chain because I think we've been talking to asset managers all the time like we and the first large asset manager that was did something on the token space was KKR back in 2022 then we closed Hamilton Lane which we done three funds unfortunately in between all the shenanigans with crypto happen with

block five Celsius FTX Etc so that kind of like give a pause to people thinking this is is this like a serious industry is the regulatory risk is there reputational risk Etc I think that we are in a position now where for the most part whoever needs to be in jail is in jail whoever paid a fine has paid a fine and you know now the Bitcoin ETF kind of brought crypto back into you know a more legitimate space and now with black rock entering the tokenization space I think that all the asset managers and then I can look at my own email the last week or so are now thinking oh what we need to do something about it because black rock is doing it so I think that's going to bring them a ton of more interesting projects and those are like eventually

will be things that are not just trying to serve a need for the crypto natives like this product but but how to provide efficiencies for the non Crypt Crypton native when they move on chain yeah I I think Black Rock has kind of a flag bear and a bell weather for all of this if black Rock's doing it then you can bet every single large asset manager is figuring out like in their boardrooms what is our tokenization strategy right now and I I want to make kind of like a prediction because like we've been fortunate enough to watch uh crypto emerge over the past you know 5 to 10 years Carlos and this to me is just a major Milestone we have the largest asset manager in the world now tokenizing opening up a bank branch on ethereum you know the only thing larger than something like black rock is

actually a different type of bank and that is a a central bank and I sort of wonder when we are going to see our first ethereum smart contract directly from a nation state Central Bank deployed on chain and I don't know if we'll be able to get a central Banker on from the representative uh country in the in the way that you've been able to come on the podcast Carlos but I bet that has a redeem function in that smart contract and there's some way to sort of mint uh new new tokens new uh whatever the denomination is from the from the Central Bank currency on chain that is kind of the next step and I I'm just zooming all the way out I don't know to give folks like like we have come so far to this point and yet we still have

other larger entities that have yet to come on chain so at some level we are still early as well I'm not a big fan of cbdcs and let me tell you why I think that first we already have something like cbdc like usdc for me is like cbdc why do I need that to be issued by the government when I have Circo which is a private Innovative company doing it when I have the Reserves being managed by Black Rock so I I trust that the reserves are there um at Le Pro by stable coin um so and I think that the the the Pate Market is more Innovative mve faster it will do more things and I don't know what's the point on the the US government to like step in and do a cfdc and if they do it governments have a tendency to want to

then monitor uh transaction and using it to exercise more control over people Etc so from from my perspective I don't think that I'm guess you're kind making yeah I guess you're kinding anything what would be like or what would be the difference like the only difference I can think of is that the if the the stable coin providers could connect to the FED to be able to like right that's sort of what I was thinking would be done by by private just cut out the middleman entirely but but but I guess what you're saying is um in a way maybe this is the central bank this is the dollar this is a proxy cbdc on chain because if you think of something like um you know usdc and to like mix that with treasuries it's kind

of like well the US already has a central bank digital currency it's just in the form of stable coin this is certainly Jeremy Air's take and uh I think it's very interesting by the way talking about like going banglas this is an interesting project not just because it's going to be bankless at some point but because it also it's taking business from the actual Banks we've seen so many people that call us and say oh I have treasuries with xbank I'm not mention anybody specifically uh I'll just move it on chain and suddenly they've got rid of the bank so so and they move it to Black do on chain so so I think that this should be a wake up call to the banks as well that they need to be participating in this uh in this space

and of course Banks unfortunately uh because I know some of them are trying to be Innovative and do stuff they have restrictions because of the the OCC regulations of not using public blockchains uh which fortunately asset managers don't have those restrictions but um but eventually this is this should be a wake up call for uh for banks because they will see the deposit is go you know decrease because people will move the money to this onchain product that is a safe and and higher yield as what they're providing 100% I I totally agree essentially like we're seeing property kind of like uh migrate uh on chain you're sort of freeing yourself from like I I very much prefer I would prefer a high yield savings account in my ethereum account like in my ethereum address on a wallet uh that

that I can control versus like going and connecting to well Fargo by the way it's also uh more secure like uh you know I can I can keep it more secure and I can use any front end that I want I'm not like constrained to you know the Wells Fargo developers and their ability to spin up a user interface it's it's really a bring your own assets uh world to the wallet world and uh you so much that will be built on on top of this um is certainly very exciting so Carlos uh where do we go from here so do you have any like are there any other Milestones that that you're excited about certainly we'll be on the lookout for that uh that redeem function uh on chain uhe function yeah so so maybe some of that what what

does the future hold for this I think that look um I was thinking the other day like the the moment that crypto kind of became mainstream was when they hit $1 trillion dollar because that's kind of like a a catchy term like the moment crypto uh you know cross the $1 trillion doll Mark is what people started taking really seriously and then that has triggered also the events we've seen recently with the Bitcoin ETF being approved and and things like that I think on the on the tokenized uh you know real assets uh tokenized Securities where most real assets are going to be tokenized as Securities anyway but let's say tokiz real asset which is the the crypto term I think we're in the in the very early stages right like maybe what crypto was uh uh before so if you if you

add even if you add um a stable coins we're still not even like uh in in the in the 200 billion or 300 billion Mark right so I think that ourselves and hopefully now many other the companies like the the the last few years has been very exciting for me because I've seen a lot of companies coming into the space which is great because when I started six years ago nobody care about this and now people care in crypto which is great so so collectively I think that as an industry once we hit the one trillion dollar Mark of real wall assets on chain that's when this becomes to be really really really important as a part of the you know Capital markets and financial services industry right so for me that's kind of like the the future I'm looking at then the next I don't know three to

five years whatever it takes hopefully three not five um collectively we we get to that number uh and that's when this becomes mainstream and when there is no way to stop it and then that's when you know all these promises that everything will be toiz everything will be on Chained and start like happening so Carlos is something like this going to improve our our narrative and our positioning with um regulars regulators and those in government who've been cynical on crypto in the past and when they look at crypto they somehow even even though we've we've uh reached the heights we've reached they only see are are you know like see drug dealing and uh whatever else they see meme coins and Ponzi schemes and S SPF and all of the kind of the negative connotations and they dismiss it but now we have black rock here with like the risk-free asset

of the world which is treasuries and that's deployed on chain that seems to me to be a a counternarrative and a counter reality that flies in the face of this idea that crypto is just a bunch of ponies and and memes and like deeply unserious people and I would think that something like well we are we are deeply un unserious so we'll concede that point coin being sent to the I'm just saying does this help our case like this is does it does help our case look I mean they I've been active last year for the first time on going to Congress and trying to reach out to uh to the right people there from from the house of financial services from the subcommittee of digital assets there's there's great people there uh I had the pleasure to spend uh quite some time

with uh you know Congressman fren Hill and um and I think that you know tokenization is not a controversial topic I think both sides both Republicans and and Democrats they do understand that this is an important thing that they need to support and then they need to facilitate that it happens at a scale because it's it's good for everybody right so I don't I I probably other topics in crypto are a lot controversial like you know what's the security what it's not what is the market structure for trading crypto uh all the you know still iOS and all that stuff and and so but forget about that part this part tokenization I think that this is the this is the use case that we can get everybody to Rally around to

really push towards doing something productive with uh with blockchain and I I you know this this whole narrative the last two years of the real wall assets I think that one side is a terrible name because rwa means something else in traditional Finance but in one side it's actually interesting that the crypto people are calling this real as opposed to what they were doing before which had nothing to do with reality m coins and you know imaginary internet money and it's a different kind of reality digital reality yeah so so I think this is uh something that hopefully you know there's no reason why Regulators wouldn't like it and and will not see as an improvement as an upgrade the financial system right like we when

I started this industry what I got me excited about crypto was not the meme coins or the nfts or or or the tokens it was an upgrade to the financial system that this technology could bring right for the reasons we' discussed you have you know cash and securities on chain that can interact easily that transparency you know speed of s settlement and Etc so so hopefully this narrative is is the emerging one in the in the crypto space and of course there will be some people still building mem coins is an avoidable because it's permissionless and people can do whatever they want but hopefully that will not be that big part of the market as we've seen in the last few years but small one so Carlos completely hypothetically speaking uh if there was a second product tokenization product out of

Black Rock what might that be the next one yeah well I can't speak for black R so I don't know yeah completely like or just like what makes perspective so let me speak for secuti if uh I as I mentioned so there is you know token Treasures which is now big and we have a product that can get the scale bigger than anything else there's variations of that that maybe that's one of the potential paths to follow but there is also private credit which I think it's very interesting because also you know defi lens itself very well for Lending right like the defi protocols for Lending they solve a real problem in in financial services people don't realize that when you want to take a loan of let's say an asset the number one

problem is how do you prove you own the asset right that's I know some silly but nobody knows whether you actually are the owner of a of an asset because you maybe purchase a fund from let's say Morgan Stanley you go to JB Morgan they have no idea whether you actually own that they look at paperwork that you've done but they don't know if you sold it if you got divorced and you only own 50% Etc so I think that the token model solves very elegantly the proof of ownership because it's there if you put it as collateral it's not there anymore so you kind of like borrow twice against the same asset it also the whole liquidation process is very efficient and Etc so I think that I'm very excited about lending and credit uh and how to bring that on chain because I think

that's a massive also multi- trillion dollar industry that that you know has a lot of uh opportunities to to bring it on chain and then I think also the next one which might be a bit more complicated from a regulatory perspective is automated Market making right but Unis Swap and others are doing is super Innovative I wish I could do it for Securities uh uh because Securities have this problem right that they have the the longtail of Securities that are very liquid that these protocols could actually bring bring liquidity um I think it's more complex to make it to get it right from a regulatory perspective for for Securities but we'll eventually get there all right Penny penny stocks on uniswap maybe that's the future Carlos this is well that's what it is today is Penny know coins on Unis you might as well put something real

that's true that's true not just any coins but there is a lot of alternative assets that are not small necessarily but are liquid because of the nature of the underlying asset that you can bring some degree of liquidity and if you want to democratize access to to financial services products liquidity is a big problem for individual investors because you don't know what's going to happen with your life like tomorrow you have to you know move uh cities because you got a new job and you have to buy a new house or or you get married and have three kids and you need cash and you know or you get divorce and you need cash to pay 50% of it so there's a lot of stuff that prevents individual investors from accessing liquid products um that if we can figure out how to bring some degree of liquidity with this

technology it will democratize the access to to those products and will allow individual investors to invest like the rich people invest because the rich people don't have that problem so and I think that's the the the thinking of crypto as a democratization layer for financial services that's what I'm excited about Carlos thank you so much for sharing uh this with us that the mission truly is to democratize uh finance and this is an incredibly exciting milestone for crypto guys Black Rock is now on chain they have something tokenized huge and uh Carlos we appreciate you sharing more about it and what your is doing to help uh further the tokenization journey for crypto thanks for having me it was a pleasure bankless Nation just one action item for

you because I think this is a this is a milestone it deserves some celebration we will include a link to the Black Rock Bank branch on Shane on ether skan in the show notes so you can go check out what that looks like if you're a nerd like the three of us I'll give you the right link to make sure I got it got there were some people there like pointing to different test smart that we usue ex make sure you find the right one we don't want you to be a victim of the Fisher but it'll it'll be there in the link got to end with this of course RIS and disclaimers crypto is risky so is banking you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the

bankless journey thanks a lot [Music]