Tokenized Assets, Stablecoin Cash Legs and the Infrastructure Gap

Transcript

Okay, so thank you for that intro. I think that sets the stage and the topic of our conversation today. Ultimately, we're going to be discussing where we are with tokenization and I think it's quite clear that we're in a pretty good strong place with the topic and the category tokenization in itself. Right now, there's roughly about 30 billion real world assets on chain. City recently reported that they're forecasting 5.5 trillion by 2030. There'll be potentially 1.9 trillion stable coins also in 2030. So all things are pointing in a upward direction in this category.

And I would say like that is very much anchored by much of the regulatory support that's been taking place in the last year. So with genius providing clarity on how a stable coin can be launched and be compliant and regulated and then with the clarity act which is moving through legislation essentially outlining how market structure exists on chain. So that despite the markets the crypto markets being quite down today, there are some bright spots in in our space.

>> [snorts] >> So to kick it off, I'd love to do some quick intros. I think all of the companies represented are are very well known. So instead of explaining what your company does, we'll just quickly go through what each of you are focused on and and the problem you're ultimately trying to solve. Monay? >> Hey all, I'm Monay Supply from Spark and I'm primarily focused on helping our partner um coins and tokenized assets, um achieve utility and liquidity on chain, um and then also standing up some more uh institutional lending and collateral management businesses.

>> Hey, I'm Simon from Superstate. I talk to asset managers and companies looking to IPO or access capital markets on chain, and we make it the most efficient and enjoyable experience we can. >> Hello, I'm Antonino from DTCC. I'm the embedded risk management uh director for digital assets. I'm mainly focused on introducing and overseeing the introduction of an adoption of new risk controls as we adopt DLT technologies. >> I'm Jasmine Gia, head of tokenization ecosystem at Fidelity Digital Asset Management. I'm the asset manager of this uh of this group. Uh so, our group focus on adding crypto to accessible fund structures such as exchange-traded product structure for easily accessible

uh to treat cryptocurrency as an investment asset. On the other side, we take investment funds on chain for additional utility. So, that's part of mandate that I focus on full-time. I focus on product strategy, go-to-market, solving use cases, and figuring out the narrative of investments and utility. And then we are eventually excited to see how we can build native investment portfolios on chain in the far future. >> Awesome. That sounds like you are quite busy.

Uh Simon, let's talk a little bit about Superstate and um specifically where you guys are focused now because initially um the product you were building was really kind of focused on that the actual management of the assets that you were tokenizing, and more recently you've kind of um shifted into just purely being the infrastructure for that and passing the management onto partners such as Invesco and Bitwise. >> Yeah, that's a that's a great question. Thank you. I think we started about 3 years ago with a view to saying traditional assets can also be on chain and we can add utility to the holders and the issuers, right? So, whatever that might mean. It might be the ability to borrow or lend against an asset in

Camino or Ave A Horizon or it might be good for the issuers to have more transparency into who holds their assets and how how often they trade it. So, that was the kind of idea. We decided to stand up two funds ourselves just because it was easier to do that than go to an asset manager with an unproven product. So, we started a T-Bill fund and we started a You What's USCC, which is a crypto carry trading fund where you trade the basis versus CME and and spot. We got those two up to about 1.3 billion uh and the management of about 300 institutional clients and integrated them across across Solana and Ethereum and Bloom and now Base. Um but we were never an asset manager. That wasn't our goal. Our goal was to be a technology

layer and be a regulatory uh umbrella for any asset manager who wanted to bring their assets on chain. So, hence the launch of Fund OS. So, we said, "Okay, well, we're going to pass over this $1 billion fund to Invesco. They're using our rails. They're using our technology. They're using our transfer license. Great. We passed over our basis trading fund to Bitwise, which is great. We just announced uh Coinbase Asset Management is using our platform. So, we're over half engineers. So, I'm in the minority not being an engineer and not being that smart. So, those guys are doing all the work and that's the service that we're offering. And it's kind of the service we were always getting to. Um and that's where we see our scalable business. And then we have the equities inside where we're taking public equities and

natively issuing them on chain. And and natively is an important word because we can compare and contrast that to the wrapper model. We're very much natively issued in clear light aside of the regulator working with the SEC on every step of the way. Um distributable onshore in the US unlike a lot of the other products, and we can take any equity, we can take any fund, any ETF in future, there's a little nuance around that, and put them on chain within a couple of weeks. That's our superpower, not managing T-bills, which is what Fidelity do super well.

>> Awesome. So, with that, you you know, you're essentially able to kind of take care of the the bringing to life any type of financial asset and make it usable on chain, tokenizing it in a wrapper form. Um, where do you find, uh, the bottleneck when it comes to the cash leg? Um, and and what is, in your opinion, the best format of a cash leg? >> Yeah, so I think, um, it's a good question. So, I think I'll take a step back. I think when you've done a wrapper or a natively issued asset and brought on chain, you're a long way there. You've done like a good number of miles in the marathon. Um, probably the last stage is why we believe natively issued is better than a

wrapper form, because a wrapper form gates that last stage of primary minting and redemption, unlike anything that's natively issued on chain. A wrapper and natively issued is great, because it's 24/7 trading, it's DeFi integrated, it's all the cool stuff you can do in addition to traditional markets, you're adding on utility, you're adding on distribution, you're adding on all that kind of cool stuff. But, a wrapper still is at the behest of traditional market structure, which comes down to the timing, it comes down to Fed wire timing as well, and it comes down to all that kind of stuff. If you want to go in and out of a fund, for example, with Fidelity, if it's a wrapper system, you're going to wait till Fidelity's functioning again or the markets are open and you can do that.

Um, a natively issued equity can, or equity or asset can happen 24/7 365. Our T-bill fund is 95% in US government debt. It has a NAV that ticks up by the second, so you earn interest every second you're in that fund, and you can redeem out of it, you can go into it on a Saturday morning, come out of it on a Sunday afternoon, and earn a day and a half's interest in US government debt when the markets have been closed and all the banks are shut. And that's a huge implication for intraday repo, for interest payments, for velocity of money, for balance sheet requirements, and everything else by that. So, add whatever asset you want in that, and we're away.

>> Okay. Um Monet, so coming from the lending side and also having, you know, your own stablecoin product um embedded within it, what talk to me about your opinions on what is the best cash leg? So, in in the choice of a stablecoin, a tokenized deposit, and a tokenized money market fund, are there pros and cons with any of those? Do they all do fine just as they are, or should one potentially be the the dominant cash >> Yeah, that's that's a great question. Um I kind of view them as like two main like use cases. So, I would say that

stablecoins and tokenized deposits are quite similar in the form factor. Um they provide uh very high liquidity, but the economics being passed through by the issuer typically are a bit less. Um versus a tokenized money market fund, the economic pass-through is a lot better, but the liquidity and sort of like on-chain usability being able to get in and out is um not as not as strong. Um from our perspective, we, you know, we pulled billions of dollars of stablecoins, and in the past we've held, you know, over a billion dollars of tokenized money market funds.

Um we have a pretty strong preference for stablecoins over tokenized deposits. Um tokenized deposits, uh you know, it's they're still kind of like in an earlier stage of development, but they don't have the level of on-chain acceptance, of broad sort of like network effects and support by different centralized exchanges and and service providers. So, that's that's a major gap. And then, beyond that, there's also a, you know, in some sense like an elevated risk that we face if we're holding um you know, basically bank deposit exposure that's exceeding FDIC limits, um then suddenly we can find ourselves in a situation like back in 2023 when Silicon Valley Bank um had a, you know, had almost a

blow-up. Um USDC was at like a pretty high risk of insolvency there, which could have flown through into uh our products. So, you know, tokenized deposits I think public policy makers, they they view it as potentially like a a positive that um it can keep more funds in the banking system, help facilitate credit creation like, you know, like banking has worked uh until now. Um but, you know, if we were to hold a tokenized deposit on our balance sheet, uh we'd probably only be willing to face uh like a globally systemically important bank, someone who has like an implicit government guarantee.

So, it's uh it's not clear whether that's actually like really fulfilling any public policy goals if we're just siphoning more money into a very small list of already, you know, a major uh major banks. >> Okay, that's a very interesting point and kind of looking at looking at it from like where where you are a crypto native, on-chain native, DeFi native, pick whichever word sounds best today. I keep changing it depending on uh the perception in the market. Um and then I think this is an interesting point because on the panel you have two companies that are like have been built from the traditional finance world. Uh DTCC, Fidelity, um Superstate and Spark have been built up from a crypto native

um place. And so, Monet, what you're saying partially is that looking at a cash leg you know, like candidate the the risk calculus is actually being put on traditional banking, right? There there's some limitations in, you know, what you guys believe you can move in and out of and have like the have no limitations on how much you want to hold with a tokenized asset from let's say, you know, JP Morgan, some some bank, right?

>> Yeah. Yeah, I mean, I think from people coming from a TradFi perspective might feel more comfortable with a tokenized deposit product because it's sort of on a firmer regulatory footing. You know, it's it's the banking system, it has prudential regulation, capital requirements, but from, you know, our perspective as like a DeFi protocol, very crypto native, it actually is sort of less digestible, less appealing for us than stablecoin products, which are a bit more up in the air of like how they're they're handled, but they have, you know, strong acceptance and the way that they're backed is, you know, for us it's it's lower risk.

>> Yeah. I want to make a quick question quick comment on this question. So, often I get asked like who's going to win, right? They kind of put these three words in competition and say, "Hey, which one's better? Oh, stablecoin's better than tokenized deposit cuz it's fully backed." Or like tokenized money market fund is not as good cuz it can't move around. But like when you think about it, actually that question itself is misleading, right? When you look at tokenized money market fund, it is a security, it's not money, right? It is fulfilling a investment use case. People use it for cash management, right? It's a it's managed by professionals to rebalance treasury assets, right? So, it

is an instrument that's not designed for use as money, right? Like for payment. Like so, that's where we always use the terms money arrest, like money in motion, right? So, I think that there's actually so much synergy between the like among these three, right? So, when you look at tokenized money market funds that can use stablecoins for e-money out, right? And then the um token I the stablecoin can use money market fund to um to uh fulfill the reserve portion to also outsource the portfolio management component to the professionals, right? so then the builders of stablecoin can actually

focus on the um scaling of the stablecoin solution itself to get users to optimize the product future of the stablecoin without struggling with like, you know, portfolio management that you know, Fidelity should do, for example. So, um yeah, I just wanted to quickly add on top of that. >> Yeah, that's a great point. Otto, um you know, you have, you know, been sitting in, you know, DTCC, which is, you know, settling trillions, right? And so, this while while I said the tokenized market is 30 billion, that sounds like a lot, like you're that's like peanuts to what you're seeing.

Um so, what what are your thoughts on, you know, this cash leg on chain and uh what that looks like? >> Uh well, fortunately we have reached the quadrillions in the in the settlement and to clear, but uh you know what what I love about this subject is that it's taking us, if we pay attention, to back to the basics of economics, right? It's really the use of money, the value of money, and what we use the money for, what we consider money. And let's remember that at the beginning of the whole economy or economic concepts, the money was based on the liquidity and acceptance, right? And the use case, of course. People that will use money to save value with different use case and a different structure that the people that was using it for payment or for money money of exchange, right? So, the

comparison that we're making here between the three types of stable coins sorry, tokenized deposits and CBDCs is precisely that. What are we Where are we putting our faith on the value management of that currency, right? And what are we in it in it for? Like like you were saying. Um I don't think there's a competition. What we need to What we need to focus is in who is controlling that or who are we placing the faith at the end of the day of controlling that value, right? If it is a bank, yes, we trust in professionals and everything is but it's human error at the end of the day.

There's operational process, technology, there's many risk that can go into that. If we put it in the central government, history has proven that sooner or later, it will end up in inflation or with some sort of monetary manipulation, let's say, right? Whether it's policy, whatever, it might be good for the country, but there is a power of decision on our value and use of that currency. And if we keep it to ourselves as a stable coin that eventually we'll have to run into self-custody and really understanding what is it. Um then it comes to what is it pegged?

At the end of the day, this is a pegged currency and we have had pegged models before, right? So, are we pegging it to the dollar? It's the same thing as a CBDC. At the end of the day, who issues the dollar? If we peg it to a smart contract or to an algorithm, who manages that algorithm and what is it serving? What strategy, what purpose, right? So, I think it's really I don't think there should be a competition. What I like about free markets is that you can understand your risks and use it for the best way you can use it, right? In the in the in the transactions or type of economic activity that you want to do. Investment managers may choose or rely more in a tokenized deposit because of the banks that are behind it.

But people that is using it for investment, they might want to look into more options including the one more that is more liquid, which is the most acceptable. So, coming back to your original question of what is the main bottleneck, is really what is the level of acceptance. Who is accepting stablecoin? And which one? That's what's going to rule at the end of the day, uh which one is more adopt adopted, I think. >> Simon, any thoughts? >> Yeah, I was thinking like I was thinking back to this. It's a good question. I don't think it's a zero-sum game. I don't think one wins, the other one doesn't. I think you can equate a stablecoin to a dollar bill and you can a stable money market fund on chain to a money market fund off chain. I think it gets super cool when you can settle in

assets that are instantly yielding interest, right? And I know it's a different regulatory oversight, but if you're buying stuff on chain and you can settle with a fund like US TB where you know the price is exactly where it is every block. And as soon as it's in my wallet, I'm earning interest. And the second I send that over to my OTC counterparty, they are now earning interest. They don't have to go from being on chain stablecoins off chain money market funds and take a two-day day run. The second it hits their account, they start earning interest. I think that's a really cool proposition.

And then ultimately, why not when I go to Starbucks, I tap and pay and I'm earning interest on my money until I give it to them and then they're interest on their money the second I pay for it. I think it makes sense and I know I'm blurring boundaries between stablecoins and money market funds, but ultimately we could end up there. >> But, let's let's keep in mind that lower risk means lower returns, right? That is by law. So, we we have to find where is the return coming from? I think now is shifting to more operational technology risk that we need to understand. But, those those liquidity gains that you're saying are are are going to have to have trade-offs, right? In terms of the returns of the portfolios, in terms of many other um components.

>> Yeah, for sure. But, we're competing with zero at the moment on returns. So, it's not going to be hard to do. >> click on that, right? So, um when you mentioned that someone has a wallet has stable coin, it should be like automatically yield bearing. But, when you think about all of us holding a brokerage account, uh the cash in your brokerage account are actually in money market fund automatically. You don't have to opt in, right? Like you don't have to do another set of paperwork to sign up for a money market fund. It's already in there and it's like effortless, right? Well, we want that to be in the wallet structure as well, but what are the gaps why we can't do it as of today, right? So, think about the largest treasury fund managers, they usually like uh distribute through banks

and broker dealers. There's set pathway to do that. Uh the banks and broker dealers does the KYC. They say, "Okay, we know these people. We do the bookkeeping." But, in the on-chain world, that model has not been built. So, then you rely on the the issuers, the fund managers to individually onboard each every um user. So, I would say like years ago, like a couple years ago, you see this huge uptick of adoption in tokenized treasury. It is because um all these emergent market retail users are uh willing to get on these rails because

the stake is high for them. They need US denominated assets. They want higher interest rate. They're motivated, right? But, when you look at the US users, they're not they're less motivated because they have easier access to treasury assets. Instead of downloading another app and filling all the paperwork, upload your ID, why would you want to do that for like, you know, $2 of yield, right? So, I think that um eventually uh you would see, you know, the whole maybe it takes fundamental regulatory like progress to some extent, right? So, right now, the rules and regulations are still pretty much tailored for a more

centralized model, right? So, uh, when you when you push the asset issuers to know every user, and if that's what it take, of course, then you build adapters and you have multiple layers of manual work that's off-chain, that will create friction. So, I tell people that these frictions are not Web3 problems. However, these are the necessary Web2 adapters that we have to live with as of today. >> The main limitation is finality. It's what the previous panel was was discussing at the end, right? This Where do you consider your settlement to be recorded?

And until regulation allows the blockchain to be the actual book of records, right? There's going to be this all these limitations and troubles because we have to compile and where is it that the value that I'm accounting as my investment or my worth is being reflected, right? And when we have options of chains, options of transactions, it's going to be hard to reconcile. Especially we still keep a leg on the pure cash. So, I think one of the objectives that the industry has to have is to move towards a single concept of finality and how to treat it and where to treat it with the technology that we're facing because it's not going to be away.

So. >> Yeah, I listen to that's 100% right. I think you can have netting and finality and it works and having worked on a trade in this for like 12 years, you realize that it's we've come a long way from noting stuff down in the blotter and consolidating the end of day. And then equally if someone made a mistake and you're trading against if you're at UBS and you made a trade against Goldman Sachs, then you pull the tapes, you pull that, you look at a Bloomberg and you reverse the transaction. I kind of feel like that might be part of the narrative as well, right? You net stuff down, you finish the transaction, you get all the upside of the cost savings and the stripping out middle and back office functionality. And then if someone's made a mistake, which there'll still be humans involved at some capacity and

still be human error, then that gets reversed, right? And that's But you can only do that with well-known counterparties that you're documented with with ISDA's and CSA's and all that kind of stuff. But I think that's where we end up institutionally sooner rather than later. >> Yeah, I that that's a good uh segue into netting and how does that fit in into atomic settlement on chain? So, um kind of doubling down on what you just described, Simon, you know, right now and uh obviously this is your world, Otto. Um you know, all the trades are settling through the front, middle, back office. And through that chain of kind of checkpoints, there could certainly be human error, right? But that's okay in some cases because humans can have the

time to correct those errors and reconcile it and people don't necessarily lose money in most cases. If we're moving towards this kind of, you know, instant settlement, atomic settlement on chain for these token, you know, securities, um you know, we we can do this easily with crypto-native assets, but you know, is that really possible? And if it is, um why why I would love to hear why do you guys think so? And maybe, Monet, if you want to start. Are you Do you see a future on chain where tokenized assets can have um instant settlement?

>> Yeah, I mean, so we uh Spark is, you know, a DeFi-native um protocol, so we're very comfortable with uh atomic settlements. Um our business started basically lending uh permissionless stablecoins like DAI against permissionless collateral assets like ETH. So, that's kind of where we are most comfortable. Um I think that it's like like was was mentioned, it it relies on um regulation kind of catching up and making sure that the tokenized representation of an asset actually is legally where the the title and like the ownership of the asset sits. Um but I yeah, I expect that once um once we have that regulatory system develop a little

bit more, we'll be able to have a lot more um assurance that like we can provide a stable coin atomically against a tokenized fund and we're not going to be, you know, at risk of it rolling back. Um and when you have like a trusted counterparty relationship, you can still build netting and sort of like delayed settlements um on top of that and just kind of look at like the stablecoin transfers as like the sort of more efficient uh always-on equivalent of Fedwire or something like this. Um but the fact that you have this globally accessible sort of real-time gross settlement system that's very efficient, um available, means that you can also have,

you know, trading relationships, counterparty relationships with people that you don't trust, you would never be willing to have, you know, delayed settlement with. Um but you can still have, you know, an economic relationship with them uh based on, you know, kind of like a real-time gross settlement style of system, which I think expands the the types of economic activity that can that can take place efficiently. >> I probably wouldn't add much to that. I really want to hear Otto's opinion cuz he's better placed to talk about this than I am. So, I'll hear you what you have to say first.

>> Well, first definitely we believe in so, otherwise we will not be moving to that in that direction, right? Um the thing is I I don't think the risk is eliminated completely. It's shifted, as I mentioned before, to an earlier stage in the process, right? Now, the programmability of assets what it allows you is to keep it standardized. Instead of having random events of risk or random events of where the the security didn't settle or didn't process because of a human error, you have programmability that will standardize all that. Now, that requires attention to the detail in how you're programming those assets, how are you designing the processes in the smart contracts, the auditors us smart contracts. It it at the beginning. So, we have to be just more proactive and more, let's say, smarter in terms of how we are dealing with the information. And this is

something that we covered in the in the last white paper that we published with Clearstream and and Euroclear. The precision in the processes, right? The attention to the access of data. The standardization of those processes, that's what's going to enable us to really adopt a settlement with atomic settlement across the board. But it requires design. Programmable assets are designed assets, right? So, if we can do that, definitely this is possible. >> Yeah, and I think, you know, there is a opportunity now to kind of like start from scratch in in establishing those standardizations, but still doing that carefully. Once you are on chain, you would have to

trust the entire system has those same kind of you know, risk you know, controls, right? So, you can get a an asset on chain and you could have done your due diligence on that chain and know the counterparties, but if it's going to be composable and interoperable, like how do you really make that whole wide universe um >> Well, I think one of the beauties of tokenization is that the asset doesn't depend on the rails anymore. The rails are in the asset. Let's remember that interoperability, liquidity become an attribute of the asset, not of the blockchain, right? So, as long as you design and you really understand what is the process and the logics and the patterns that you will

have that asset to perform, that that's the exercise. That's what we need to have our brains put on. And then it doesn't matter really what rail you are. You can be in any blockchain, any any L1 or whatever. If the asset is well structured and well well programmed, it will function. >> So, in the case, I guess Monay, let's I'll let you maybe take this topic. And sorry, you are like the DeFi hack on the on the floor here, but um with Otto's point of if everything is kind of programmed into the tokenized asset, right? And that's kind of where the risk is managed, um there still are incidents if if that asset is being, you know, used as collateral, um there could be a key management exploit, right? So, even

though the the token itself could be like, you know, bulletproof in its like >> operation >> design, you still can't control these externalities of key management, you know, exploits. >> Yeah, I think it's um I mean, it's an interesting challenge because um you know, today like I think the key sort of like um horizon or like uh separation has been between the off-chain systems where real-world assets are being kind of like held, recorded, and then blockchains. So, there's kind of like a barrier there um where different sides of it can like have a settlement failure or something like this, and it's not actually atomically like payment versus payment settling. Um if we move more of

these RWAs to use, you know, programmable tokenization on chain, but the rules of how that programming works is not uh you know, it's heterogeneous across different RWAs, different issuers, or maybe considering a trade of like a tokenized fund versus a permissionless asset like ETH. Um you still end up having that sort of like barrier where like legs of this trade are not settling under the exact same rules, so you can have you can have them kind of diverge a bit.

Um so yeah, I I mean, I think it is going to be um you know, a significant challenge. Um with that being said, I think um you know, a lot of the like we've seen a lot of hack activity in DeFi in the past few months, uh you know, hundreds of millions lost, but um what we're seeing is that less and less of these losses are resulting from code bugs and like, you know, the actual like smart contracts being faulty. It's more just key management or custody issues, which it actually makes me very, you know, I have growing confidence that like we are going to be able to create bug-free code to run these assets. And then, you know, if we can bring in

more professionalism on the custody side, which I think the crypto industry somewhat lacks so far, but there's a lot of really qualified professionals coming in who are very very strong in this regard. I think we'll be able to, you know, have a an ecosystem that has less of these faults happening. >> And I'd add one more point of security in this situation. Superstate assets are permissioned, so it can go into permissionless pools, but they're permissioned as in there's what's called an allowed list. So, only people who have KYC'd and AML'd with us or through a third-party provider can then hold these assets. They whitelist a Solana wallet or Ethereum wallet. And then, if you try and send this asset outside of that allowed list, which can

include smart contracts, that transaction just gets decayed. It doesn't happen, right? There's no point hacking Superstate, and there's no point sort of trying to send assets or hacking the pool and sending Superstate assets anywhere else cuz they're just it's just not going to happen. And then, we can just burn those tokens anyway and send them back to where they should be. >> So, the one So, one example where I think there might still be like some risk, let's say that you are a whitelisted user on Superstate, and you're you let your, you know, private key get hacked, so somebody has access to your tokenized funds. They can post that as collateral on a DeFi lending market, and then exfiltrate some permissionless assets that can't be clawed back. So, I think there's there continue to be like some

risk factors there, and then, you know, who who holds the loss in that situation? Is it the DeFi lending market that's allowing you to margin these tokenized assets and not checking if they were, you know, the proceeds of like a theft or or crime? Um so I yeah, I think there's still some some challenges, but it's uh it's definitely like a significant improvement versus just like DeFi wild west no rules situation. >> Jasmine, um do you hear like coming from any of your kind of customer segments um like concerns about DeFi hacks? Um so when when something happens, um do you get pinged by either uh peers that aren't working on the

tokenization part of the Fidelity business or >> Yeah, of course. Of course. A lot of them. >> [laughter] >> So I would say like we we always have fascinated by these uh financial pyramids like especially for structure like a vault, right? So that create possibility for asset managers to create native uh portfolio on chain, which will solve a lot of problems cuz right now the portfolio is managed off chain in either private fund structure or regular registered investment fund structure, but then you constantly still have to do the on ramp off ramp. Sure, the the as more solutions get built, that's getting easier. However, it won't change the round trip model that's going to be

inconvenient, right? If the portfolio is on chain, then you you you don't have to do this round trip. I always use an analogy. It's like, "Okay, right now I'm asset manager. I want to cook a meal on chain. However, I don't have enough ingredients also today today to make a decent meal." Uh but once there's enough tokenized assets there, then it would we would do it, right? So that's another hurdle. I know the original question is about whether or not we get questions, right? I wanted to mention this first so you know that like I personally believe in the concept. I think it's going to create so much possibilities for our industry and

I think my peers with this background that feeling positive about the development and the future. And then they hear about these hacks, then I would say it wouldn't automatically put people think, "Okay, these are non nonsense. We won't look at it again." It is more like, "Okay, what are the risk? Is it a security risk? Like a smart contract risk?" Or like what's the like what's the problem, right? That help us to think through how we should build solutions with these risk factors considered. In a way, it is a stress test of the space, right? So of

course it's very unfortunate that these instances happened, but it also kind of showed okay what could have gone wrong and what we could have done better, right? So I think that lessons learned is very critical. And then hopefully eventually we'll be able to do more like to do more real business on chain once those concerns are addressed. >> I think we this is where the infrastructure really needs to be analyzed and discussed, right? Because after all, even if we move to the LTM web 3, we're still connected by a cloud.

There is still a component there that is still public, is still you know commonly used for many users and many cases and many actors. So what we need to understand is really the points of entry of that risk, right? I think wallets are key. Wallets have to really up their game in terms of finding implementing the different models of solutions for algorithmic threats as well as for security and vaulting. Even if they don't intend to be custody wallets, there's certain custody infrastructure they need to guard because they will be managing, for example, the the custody of the right of control of a function. Right? Even if it is not a key. Um the cloud, the connectivity to the cloud, we still have to connect APIs through APIs to the connect by the data. So, there's still components in infrastructure that have

to evolve as quickly as they have in terms of programmability. Um but definitely it's going to get there. I I'm I'm trustful on that. >> Um we have a couple more minutes left. I guess I want to kind of touch on that point um more broadly. So, with DTCC and and they're kind of um building into on-chain rails. Um was is the driver more on the the 24/7 enablement of trading and settlement? What is kind of um you know, the vision? Or is it something else? I mean, it could be a mixture of both, but is it high-level?

Why did you, I think, what was it a couple years ago get tapped or it was your idea say, like, we we should be working on this and moving in this direction? >> Our role as an as a as an FMI, right? Is to provide infrastructure to reduce risk or to better manage risk. Yeah, among that risk, liquidity, of course, which is settled by the less time, more efficiency in the settlement. But ultimately, it's also the interoperability and the inter-use of assets, right? Uh we know the problems and the cost that it has for an economy to have huge amounts of fixing income, for example, sitting in one leg and equity on the other one and not being able to use it either way, either for collateral purposes or for a transaction purposes or for return.

So, I think ultimately, one of the biggest efficiencies that we're seeing is the reduction in the risk of transferring your operations from one asset to the other. Assets ultimately could become interoperable and exchangeable, right? If we can provide that security that, you know, trading, all the other commercial and and and financial activities will take place uh with more like flexibility and more liquidity as well. Right? So >> Okay. Awesome. I guess final comments real quickly.

If everybody could go through what What have you changed your opinion about crypto in the last 2 years? Is there something regarding risk, what it can do, what it can do? I know that's a bit broad, but >> I'll start. >> What we Do you want to go first? >> Yeah. Um I guess I've I've warmed [snorts] up to tokenized assets. So I I came into the space originally just like really uh gung-ho like every asset needs to be permissionless.

Um you know, if it's backed off chain, it's not real. Um and yeah, I mean I think like the level of robustness that we're seeing with stablecoins improving, uh new classes of tokenized assets having like really strong levels of disclosure, um is is very encouraging. So like I think it's something that, you know, even as like a DeFi native uh person, I'm I'm getting more confident. >> Yeah, I and I think we've seen a few stellar use cases of the blockchain technology over the last couple of years, and I think that's prompted institutions to really come at it hard and really get involved. And that's been great because maybe prior to that I'm like, "Okay, is this just a silly thing that's happening and no one really cares?" I think people care now.

>> I've changed my mind with open source. I used to be very like a verse of about open source, but I've learned that is the only way to really test whether your programmability functions or not are strong or not. Uh and just like in, you know, in real estate there's location, location, location. I call it here test, test, test. You have to test your assets to make sure that they're working correctly. >> Yeah, I wanted to mention something around like uh which asset classes get need to be tokenized to make it useful, right? I kind of flip-flop between the two barbells. I was okay, initially we started with illiquid and I was okay, it makes so much sense. The operational efficiency of real estate or collectibles and etc. And then and then it was like

of course it didn't really work well and had adoption then we went to the most liquid side of stablecoin treasury assets. And then now I kind of flip back and say, okay, maybe it is very interesting for private market as long as it's done right because just the price discovery mechanism that blockchain market on chain markets can do is very valuable. >> And probably the yield has something to do with it, too, but that's a different panel. All right, this is awesome. Thank you guys so much.