Why BlackRock’s BUIDL Fund is Going Multichain

Transcript

this conversation there's things that are actually at stake large bases of capital that we're going to be talking about in this field we could probably argue whether this is a bull market or not but I think for those building in this space it's I don't know I would think about it almost as like an adoption Market I think there there's two different problems in in the industry when it comes to regulation so welcome back to the rollup your home for technical talks and open conversations that shape the modular future nothing on today's show is to be construed as Financial advice you can see our full disclosures list at tholl up.co ventures sit back relax and enjoy today's episode after a quick word from some of our awesome Partners Redstone is def's modular Oracle supporting over 100 clients on

over 50 chains offering 1,000 assets Redstone is the leader for Bitcoin staking and yield bearing assets they offer the most robust customizable price feeds available in any model join the Redstone exhibition [Music] today GM what is going on guys welcome back to the rollup super stoked to be here today we're recording on Valentine's Day with our Valentine tokenized Securities we're here with Carlos and Robinson it's uh Robinson's the front of the show you've been on before Carlos it's your first time thank you so much for coming on to

talk about something that I I'm I'm particularly excited exed to chat about because a lot of times in crypto we get into these very technical conversations and a lot of times it's like we're fighting over like 10 users or 100 users this conversation there's things that are actually at stake large bases of capital that we're going to be talking about in this field Carlos thank you so much for coming on from secure Tiz sure thanks for having me absolutely Robinson welcome back uh Carlos maybe we can start with you and you know tell us a little bit about yourself it's your first time on the show introduce yourself how to you end up getting to the space sure uh my name is Carlos Domingo I'm the co-founder andc of secuti uh I started the company in late 2017 on the back of one of the first

tokenization projects in in the space so so we've been very bullish about tokenization for many many years uh it's great that it's now kind of happening at scale in in the industry started the company in 2018 with the with the aim of basically what people now call real walles that terminology didn't exist back then it was basically about how you take uh you know tokens that represent uh for the most part Securities that represent an asset that you know has some intrinsic value whether it's a physical asset that has been securitized or is a fund or equity in a company Etc and then you put it on chain to make it more useful than than the analog version if you want and over the years this has evolve also on how it interacts with the

rest of the crypto ecosystem like you know Defi and other things that didn't really exist or stable coins that those things when I started in the industry they didn't exist they were like very very small so they were not really irrelevant awesome yeah I mean going back to 2018 this was always a vision was that you know we're going to tokenize everything we're going to tokenize the world guys like Robinson have been working and and have had a lot of conviction in this vision for a long long time because a natural Fallout is connecting these blockchain so that we have a unified experience um but these there's two there's two sides to this battle we got to get everything on chain and and we also have to connect all These Chains together um and so you know it's no coincident you guys are here together uh Carlos you and security TI

have been working uh with some very notable Partners uh Black Rock among among many others in this Biddle fund um I'd love to talk about like what exactly this fund is meant to do this tokenized real world asset uh pool of capital that has done such a great job in tokenizing a lot of a lot of assets U maybe you could speak to like some current metrics how big is this pool of capital now and why is it on chain sure so um if you think about what so far has been the most successful tokenized asset is probably the dollar right so if you look at stable coins they are like around $200 billion dollars uh now and there's a proliferation of a stable coin projects that essentially is a tokenized

dollar is a token that represents a dollar that is kept in some Reserve to guarantee that the token has the underlying value of of the dollar um so if you look at traditional Finance people don't actually use dollars necessarily to move money around they use they use treasuries because treasuries they that their obligations to the US government which is also the the one that issues the dollar so essentially they're kind of like equivalent from a risk perspective but they have a a yield because they're a debt obligation right so treas give you a yield which this point is like around 4.5% but was higher a few months ago and um and therefore you know the natural next large asset that uh should be tokenized are are Treasures right so so that's the project we're doing with with

black rock um is a organized treasuries fund that contains short-term dated treasuries and Report agreements and that gives you gives the yield in a transparent way back to um to the investor in the in the product and the holder of the of the token of course as opposed to stable coins these tokens because they represent units and a fund they are securities so they have different characteristics they're permission so we have to buy these wallets we have to onboard investors and pass through KYB to make sure we comply with obligation with regulations we have to control how they they transfer on chain and when we issue them in multiple chains we also have to control how they move across chains as opposed to let's say digital assets that maybe don't have those characteristics they are

permissionless you don't need to control who holds them uh Etc so in terms of metrics so the fund started in March last year so it's still not even one year old it grew very quickly to become the fastest growing and the largest tokenized treasury Fund in the first few months of uh uh existence and that the whole Space has exploded since then there's uh last time I looked there were like 44 projects or so trying to do similar things uh some of them in collaboration with us building uh you know kind of wrappers some of them trying to build their own uh stuff some of them from crypto native companies and some of them from traditional asset managers um that are basically essentially doing the same and trying to compete for the for the

same space um so it's it's very interesting to see how it has grown from being very small to be I think it's over $4 billion now in size the entire space which we are 650 million of that it's incredible um absolutely stable coins and now we're we're diving deeper into this real world asset base you know this is one of the few things in crypto that has found product Market fit at this level and at this scale Robinson maybe you could speak to the interoperability of this you know it's one thing to tokenize these treasuries ultimately unlock this Capital base and make it programmable in the sense that you know now we can collateralize these treasuries we can stake them we can do all kinds of creative things now

that these are onchain how important is interoperability in the this case yeah absolutely and maybe one one thing I'll say taking a step back and and this is something I also appreciate appreciate excuse me about working with with securitise and Carlos in particular is like study conviction you know the securitize has been really focused on um this particular market for a long time before it had a lot of adoption before it became a narrative or anything like that and I think what's really great to see now is it it's really picking up steam and you know they're right at the center of it is is very much so the experts and then similarly to to Wormhole you know when we first started multichain wasn't the consensus like there was a strong consensus that everything actually could be built on

ethereum and there was a real question about our our our model or like what what we were doing because it was like are we going to actually need this because you know everything could be could be on ium um and so I I just think there's like a a unique a uniqueness to like this this conviction that both of these I guess Partners have that have that that I like and I think what we're seeing now fast forward you know um many years is when you talk to any of these institutions and they can be various types A lot of them right now um fund managers bringing various assets on chain they they think on chain as like ideally it's across as many chains as possible Right like the end goal is you want Act to as many liquidity as much liquidity and as many users as possible

and and onchain I think a lot of maybe blockchains rightfully so like uh we we'll say it as referencing their chain but I think the way we look at it and I think the way and we're trying to meet the customer and in this sense the the fund manager is like giving making onchain mean on all of the blockchains like you're breaking down these liquidity silos you're breaking down you're giving them access to all the users Etc which is how it should be but unfortunately with the nature of how how a lot of uh cryptos progressed it NE it isn't necessarily so with with with interoperability you can kind of have your cake needed too right like uh depending on either how many chains securitizes live on um you know woro can help connect those or just

interoperability more broadly um and so there's been this really unique product Market fit that's happened where it's like hey you know hey I want to be on chain not like on all the chains not on one specific chain um and we help solve that I just want to add something to this uh which is related to the history of the company we started our first oranization project as I mentioned started in 2017 um and the the oldest ones we have in the platform some of them still active today were around that time 2017 2018 and there was no debate everybody will do it on ethereum right like there was not even a question of where to do it um but then you know over the years like people started um you know coming up with new blockchains that

started becoming relevant uh Etc so the first step we took was okay so for us a blockchain at the end of the day is is a ledger right is is a better Ledger because it's you know it's a public Ledger that is cryptographically secure that has you know is designed for you know recording and transfer ownership of an asset which is what you actually need for Securities um so but so initially what we were is like plug on top of ethereum we were like like tied to the hip to ethereum we couldn't do anything without ethereum and then in 2019 we did like a big re-engineering project to create like a an abstraction layer where all our platform is like a massive web platform with a lot of functionality when it has to either issue a share or

or record a change on the share of ownership or pay a dividend something like that we'll talk to the blockchain through this abstraction layer so that was the first step and the Second Step was well now let's connect to other chains and we did you know projects with avalan and with polygon Etc and it hasn't been only until recently but there still we're still we're looking at blockchains as silos like we will issue this asset like remember we did the K project with avalan on avalance and they will only leave there or you know Hamilton Lane with polygon we did it only on polygon so really has been uh more recently when uh we launched beel and be went multi chain a few months after launching in initially on ethereum that we were facing the problem of well now we have the same asset in multiple

chains so what happens if somebody wants to move it in and out because you know you want to I don't know interact with this protocol that it's there but not here Etc and that's how the the relationship with with Wormhole started to be able to facilitate uh doing that so and now we have the second asset multichain which is uh the Apollo crate fund and I think moving forward most of our assets will be multichain because now this is part of our infrastructure to be able to issue in across chains and being able to move the asset in an absolutely this is this is the way the world is trending like and I I Robinson I like the way you put it where you know when we're talking on chain we mean on all the chains and and originally that just meant ethereum if you were on

ethereum you were Bas you had basically coverage over all the liquidity in the users but now this liquidity user base has proliferated onto alternative layer ones layer twos Etc and so onchain really means the vast coverage of all of that state all of those liquidity and users um Carlos I think this would be a good opportunity to unpack more of securitizers architecture you mentioned uh an abstraction layer that lets you communicate with the blockchain are you guys building out your own chain do you have nodes in a network like what what is the the system design here that lets you orchestrate these these tokenization protocols we don't have our own blockchain even though like as you can

see these days everybody that has an an app with users and and assets is kind of looking at at that idea we do run not for all the blockchains that we operate because that's how you can guantee the transaction uh you know through Boot and and finality and we can control how the assets are are issued there so we run infrastructure for all the blockchains that that we connect with and as I mentioned we have this abstraction layer that basically allow us to to use one particular blockchain as a as a ledger but we keep the the record of who holds what right and then wallets have balances and then offchain what we keep is the actual personal identifiable information of the wallet owner which is

obviously something you don't want to put on chain not to disclose the identity of people and on chain we only keep the nonpersonal identifiable information that for compliance purposes is good enough right like have you pass kyc or not um which jurisdiction uh is the investor in from PR purposes you need to know like do are you an affiliate and we need to lock that token or and do you have a a certain Locker period or can you with whom you can transact uh Etc so that information which is the the rule base that smart contracts manages kept on chain and everything else is kept offchain and offchain we actually operate you know the regulated entities right so these are like a transfer agent that use the block as a ledger the broker dealer that kind of sells and And Trades those Securities but we have like a full fles

like brokerage account type thing if you want so we if you're an investor in in any securitized product you will have created an account with us that account passes kyc and or KYB you see your balances there we have cash accounts where you can deposit cash or stable coins you see the products that you qualify to invest to be able to invest and uh and get your tokens you can connect wallets Etc so that's kind of like the the overall architecture of the of the platform and now we have the the the Wormhole um messaging system to be able to move the share class from blockchain A to blockchain B in a very efficient way Robinson anything to add there in terms of the the architecture and the way that tokenization has kind of proliferated across multiple chains as securitized goes and acrs more and

more depos deposits they they you know obviously spread out to the liquidity in the users as as that demand becomes available how have you seen this architecture evolve from 2018 2019 into more of a multi-chain world yeah that's a good question um I would say maybe one of the things that uh I'm I'm excited about in particular is like the different type of Securities that are being brought on chain um and then the other thing I probably say I'm excited about is starting to see them used in defi more so what what I think we're we're seeing in this is particularly with securitize is like the various funds be actually used as collateral and and I think one of the leading ones actually is ble and Carlos can correct me if I'm wrong but like it's a really really good source of collateral and

there's a lot of um you know whether it's stable coins like usde or maybe D or now usds like that that you know need some sort of collateral backing it becomes this really good collateral that you can use in Defi and I think um we're quickly going from FS are coming in 2017 2021 it was kind of like this this promise of like the institutions are coming the institutions are coming and I actually remember when Carlos sent me uh the block explorer link for uh Biddle actually going uh cross chain and it was one of those moments it was like wow they're they're actually here and we went from that moment which wasn't too long ago at least not tokenized on chain but moving cross chain I believe you know the bidle tokenized onchain wasn't

that much like longer before that to Now quickly seeing a lot of it being used in def5 um so that the actual time to adoption is shrinking really fast which I think is a really cool observation and then so I'm I'm excited to see more usage in Defi and I actually you know track it semi closely and I know there's a lot of proposals out there and and Carlos can probably get more into that the other thing I'm interested in is is like the tokenization of different Securities um you know private credit for instance right there's a lot a lot of promises of tokenization I think one of them is you know access to uh maybe Securities and things that most investors maybe didn't have access to before I think that's a little bit more of a progression like uh you know what sort of kyc KYB you will

need to have access to these things but I think private credit's a a really good example of something that's you know historically been reserved for maybe more of like your your higher net worth individuals and there is a path to potentially where this like these private credit on chain assets can be accessible to you know people on chain and people that maybe you know have certain credentials but maybe not the ones required to invest through a Morgan Stanley and then get access to you know whatever sort of like private credit fund that they have so I'm I'm actually interested in in number one the adoption in Defi and I think we're seeing that proliferate and then number two the different things that get tokenized and the one thing I'll say and I think Carlos brought up a really good idea or

a really good point is when you think about like tokenizing something on chain you can have it on salana but let's say you want to use that in Defi and actually you know maybe it's collateral on Athena like that's where this this the interoperability really comes in where it's you're able to actually send that position you have on salana then you can send it to Athena Athena Unfortunately today only exists on mainnet I believe take a position uh in that particular protocol and this goes for all the protocols that uh you know are on the chains where we securitized as tokenizing assets yeah I want to emphasize a bit on what Robinson mentioned about like prior crate which you just launched on with uh with Apollo we had a a previous fun with Hamilton Lane before and and Hamilton Lane is

only on polygon but the Apollo one has launched multichain with Wormhole power in the the cross chain um interoperability these are like if you want to buy a private crate fund today as a as a normal individual you have to have an account with a warehouse that that will be the case so you have to have an account with JP Morgan or Morgan Stanley so that's the number one the first friction point right like not everybody can get an account open with those Banks right um You have to have you know certain amount of capital for for a wealth management account in those platforms to be open and then the second part is that even when you're there unless you have certain amount of money you don't even have access to the products because you know the minimum Investments usually are like half a million dollars or more because you know

the the whole process of investing is very manual right if you go to one of these platforms and have accounts in some of these warehouses you actually don't see anything like you don't even know what you can do there like you only see the positions of something you purchase if you want to purchase something you have to to send an email to your wealth manager if you are like under certain amount of millions of dollars you know good luck getting an answer because they don't care about you and then and then the the minimum Investments are pretty high um so so for you to kind of diversify into private credit mean with a half a million dollars means you have to have many many millions of dollars because otherwise it's not a good investment decision right so and one of the reasons it happens obviously there's regulatory

reasons in terms of how those products are offered to to individual investors but look ACC credited investors is like 17 million people in the US and that don't even have access to to those products and you might be an ACC credit investors and have you know two to $300,000 that does mean you can actually spend half a million dollars on a product right so being able to provide a a good digital uh experience to access those products with minimum Investments has to be enabled through digitization and tokenization at the end of the day is a digitization uh uh process that enables this efficient fractional ownership so so that's the first one and most of the products except B which is for institutions only but the rest of the products we have in the platform

tend to have minimums of like 10 $50,000 that's a number one aspect of it but the second one is is the utility of the product right like you buy a credit fund and it sits there there's nothing you can do with it uh sometimes they don't even you can even borrow against it because these are alternative assets that they don't know how to necessarily want to you know lend you against it and and it will only be seen by the bank right like if Buy in JP Morgan you want to take a loan against it it has to be JP Morgan gives you a loan right once you put it on chain you can get take a loan from anybody that will give you a loan right like this now you know for instance we can create synthetic dollars with a scope which is a a great fun

colateral through Elixir protocol and then Elixir will give you a synthetic dollar that then you can stake and get a higher yield from it that's essentially you're taking a loan against the the asset so so I think that it not only gives you like a more efficient Ledger that allows you to provide better fractional ownership but it also gives more utility to the asset and I think that's the the key to unlock the power of R right the the composite ability how they interact with protocols how you can create you know lending pools or or more liquidity through automated Market making Etc and that's still in its infancy because there's a bit of a friction between the two worlds right like the the defi world is purely permissionless Anonymous and the RW world is permission and and uh and with

you know no holders of the of the wallets right uh so so bridging those two worlds is one of our priorities for 2025 uh and and I think when that happens which I'm pretty confident it will happen you will see an explosion of adoption and is is this the main value proposition when you're when you're speaking to Black Rock JP Morgan Morgan Stanley are you primarily uh speaking about the democratization of potential buyers of these products it is it is it that I'm sure there's you know several value propositions that may be one of them in addition to higher potential yields as a result of bringing these things on chain making them composable with other products where you can again leverage

them for for greater collateralization more loans when you know you're you're in the room in the meetings with with these major institutions how do those conversations go suppose you know we we're you know billion dollar asset manager how how do you come to those conversations and ultimately uh uh propos this tokenization fund I think the conversation has evolved over the years and since I'm probably one of the oldest persons in the industry since compared to the not AG wise probably H Wise as well but also since the the company started um at the beginning it was more about like an efficiency play right like these guys know that they the way they manage their Securities and their ledgers Etc is very inefficient so

so they see this is a better ledger to provide efficiency and reduce cost Etc and over time it in like well maybe that also that efficiency in The Ledger can and with a digital front end can also provide this democratization and broader access to you know get more a on the products by tapping people that today are not purchasing this these products um and I think today it has evolved also on well now crypto because keep in mind I started compar in 2018 at that time crypto was like $150 billion like the entire State coin Market was like4 billion like the they going after the crypto Market was not a thing because it was like no Laugh In Your Face uh now crypto has grown to whatever 4 trillion

I don't know where we are anymore the whole story then was like blockchain not Bitcoin it was like put away this cryptocurrency right so it was this is a better Ledger technology for me to manage my Securities now it has evolved in well maybe this is a way to tap into this $4 trillion fast growing Market that has all these other tools and all these other yield opportunities that these assets can actually participate in that will not only increase AUM but it'll also increase the quality of the asset because the onchain version now it's not just a more efficient one for the asset man it's actually a better one for the investor and before it was not like that so I think the conversation has evolved and that uh has made it more interesting right because it's an easier sale these

days than it used to be and this is why the the industry started with a lot of people doing private blockchains and things like that because it was purely about I need a better database uh now is not I need a better database I need to tap into this ecosystem that is for trillion dollars that has a lot of other like earning opportunities that my assets do not participate in and that's a much very interesting right so if you think about Innovation uh in any field there's always like two consequences of it right you make something more efficient or you make new stuff that you couldn't do before right and historically innovations that only make things more efficient are less uh impactful because yes you can cut cost you can save money here or there blah blah blah but you know so be it right

like it's but an innovation that allows you to do something new that you couldn't do before um that's where the things that really take off right so if you think an iPhone is not a better phone and that makes better phone calls is actually a phone that allows you to do a ton of other things you couldn't do with a Nokia before and that's why the iPhone took off and that's why the completely new industry started right as opposed to back then Nokia Motorola ion coming out with a better phone that you know was cheaper like like high quality boys because they need put a new Cod or whatever so I do miss my my slide my old uh Nokia slide that was good T that was my first one you're not that old I was still about commun telecomunications because that's where I

I worked for many many years before I I moved into into crypto so so there's a lot of examples of things that happened there that are a good example messaging is another good example because you know SMS had existed for a long time right so but then things like WhatsApp Etc it was not like just making uh you know more efficient messaging it was all doing the things you couldn't do before you could actually like share pictures and group chats and yeah you know share other stuff and now they have like a ton ofo stickers you stickers you can create polls and you know there's so many things that you can do that you couldn't do when you were trapped into the old you know technological framework of of the SMS network uh infrastructure a lot of this is a social framework too

right like we had a little bit of a glimpse in this into 2017 2018 and then again after the big runup in 2021 we saw a little bit in 22 where like these companies that had previously like you know they weren't really like allowed socially it was not okay for them to touch blockchain or cryptocurrency they started taking a look we had Brands like Starbucks consumer Brands Starbucks Coca-Cola Etc kind of you know allude to this but you know from a financial point of view this was like you couldn't touch it touch it with a 10-ft pole these things are evolving so much now like again from the 2018s 2017s to now the the the companies and the institutions have evolved and those conversations have evolved but you know if we fast

forward even now just in most recent months regulations have evolved policies have evolved the entire sentiment around the sector has has shifted how has that played into some of these conversations kind of you know maybe we had era one back in 2018 a lot of private blockchain technology and efficiency benefits but not really tapping to the liquidity now fast forward again there's a there's four trillion dollars stable coins have product Market fit defi is real there's a lot of liquidity and users here that that you know these institutions like to tap into now it seems like we're in like 3.0 territory with regulation with policy things are starting to adapt once again starting to evolve once again how

maybe now this is kind of more forward looking how are you guys thinking and anticipating this this will kind of take shape over the coming months and and you know a couple of years innovating Finance Global institutional and onchain deep liquidity to drive Capital efficiency now maximize yields on institutional grade liquid staking with M unlock trillion dollars of capital via F Bitcoin all all of this secured by man Hill's treasury of billions in stables and E Capital Pools this entire ecosystem is coordinated by a vast network of season VCS that are aiming to

create the next generation of Banking and Financial technology this is mantle yeah I think maybe I'll start and um you know we could probably argue whether this is a bull market or not but I think for those building in the space it's it's I don't know I would think about it almost as like an adoption Market more like a cow Market what Market cow Market Market yeah like but but what I would say is that the I haven't had any more like I haven't seen more acceleration ever at least in you know with in in wormholes era uh around meaningful like product adoption and speaking with companies that are uh you know actually driving things forward and I think you

brought up a good example which is stable coins right like stable coins have this product Market fit uh everyone's realizing it I think the US government's even realizing that like hey this is actually kind of good for the foreign Reserve currency status and all of a sudden you're seeing this you know uh acceleration across all these new issuant of new stable coins usdl USD usdg a USD mzero we could we could probably name a lot more and I think um what's interesting is a lot of it is in this theme of like assets being issued on chain um and then what what's good for obviously for our business is like the number one thing that they care about is like okay when I we say on chain just going back to what we talked about at the beginning I mean like all chains or as many chains where there's

meaningful usage and liquidity as possible so I think I think for for us in particular the we've never been more I would say like busy around meaningful adoption not only with onchain protocols that's what I think is maybe the biggest distinction but like entities that haven'ta traditionally participated in the onchain ecosystem that are figuring out how they can gain efficiencies from on chain um and that again comes in the form of stable coins but a lot of it payments right like I actually remember uh not a few not too long ago it was during it was actually La late last year uh there was a bunch of folks in Singapore a breakpoint was there token 2049 and the um the application the grab I think it's called grab it's like their

version of uber you could actually pay with stable coins I my credit card had like one of those alerts where I was traveling too much and it like wouldn't let me pay and I saw the option for stable coins Not only was it usdc which which I thought was interesting was also PUSD like that's pretty quick adoption curve for PUSD and so which who we're also working closely with them um but I just thought that was super interesting it was like a when you experience the tech in the wild it's like that moment where you feel like you know some validation about the industry you're in and I think we'll see those experiences we will definitely see those happen much more frequently if you want me I can talk about regulation a little bit so I think there's there's two different problems in in the industry when it

comes to regulation so one is for the let's say the non rwa part of the market like the digital assets is is like how are you be even being regulator like you know are you regulated by the SEC by the cftc like uh you know how the the trading platforms get regulated kind of fun like always I heard like some of you say oh we're regulated it's like well you're not really regulated regulated by whom like you don't even know how you need to operate right so um that there's no there's no Clarity of Regulation there in the sense that you know they just starting with a basic question of what where my asset Falls is a commodity or is a security and then second is how this asset actually trades when it is being properly categorized into commodity or security and who regulates

the trading platforms and if you think about traditional Market structure you know that it looks very very different right like in traditional Market structures you have Robin Hood which is a broker dealer that will connect to the New York Stock Exchange that is a trading firm that will have a Central Security depository which is the dtcc and custodians are separated everything is segregated while in crypto everything is collapsing into one and single entity where you are the broker dealer the trading for platform the market maker sometimes Etc so so that's something that regulation needs to address and and and determine how it works to make sure that primarily there is no fraud right so this at the end of the day that's what Regulators are are concerned about then on the RWS space I think that the

regulation is pretty clear like as I mentioned 99% of RWS you can think of um are securities because you're either securitizing an asset or you're tokenizing an existing security whether is equity a fund or something like that um so so the fact that this falls under the SEC is not questionable I think what the problem has been is well if I am a broker dealer or a transfer agent and I use a different Ledger technology which happens to be a public distributed distributed cryptographically secure Ledger do I need to be regulated differently or not and it's kind of ironic that in the in the gansler times he used to tell the the crypto people that complain about them saying well you guys shouldn't be regulated differently

because you use a different technology because they were trying to create like exceptions about how the assets work compared to like the say traditional assets like Securities like equities Etc but then will come to broker dealers like us and or transfer agents and tell us oh you need to get a different license because you're using this different different Ledger technology so so my my position there is like I just want to use whatever Ledger technology I want um and then the The Regulators shouldn't regulate by technology they should regulate by making sure I adhere to customer protection rules disclosures like all the stuff that comes with the products that we offer uh to make sure investors are protected I don't lose their assets I always know where they are you know if they want to buy

something they know what they're buying Etc and if I want to store them on on a blockchain or another that should be my problem and and as far as I don't I compli with all the customer protection and rules right so so hopefully this time things will be different um for two reasons why is because they're now going to really seriously you know take decisions on these things that have been undecided in the past or at least uncertain and second is because the attitude will change right which I think is also an important thing like look people take their own views about how regulations uh apply or not um and then besides people purely doing fraud that I think this the SEC and everybody should continue going after those because we

don't want those people in the space but the other people you know they don't do things with a a bad intent they just do because that's the their interpretation of things and then Regulators shouldn't just go and sue them they should just come and talk to them and then Ander a dialogue and if ultimately the the regulator doesn't like what they do because they think it is infringing some regulation that's fine they should let them know to correct it uh and then if not then obviously use enforcement action to stop them from doing something they consider fraud right but but don't start there so start with a dialogue with people to to give people a chance to explain themselves why they're doing something this is fundamentally a a shift in and mental uh mentality in the sense that before it was like it was

just very close-minded right now we're very open-minded and we're at least going to think about the opportunities to innovate whereas before it was you know in the times of gendler he was regulating through enforcement which was an unsustainable practice and also very closed-minded to any kind of innovation um you know now it's just a complete Paradigm Shift you have you know not only do you have Doge and the government kind of just scrapping away all of these expenses and you know would they be easier to scrap away if they were on train on chain absolutely so you know when you when you hear know the scra away they know what they are right like I don't like again is just a better Ledger right ex they need a better Ledger for sure because they apparently don't even know where the money is or

who's being paid and stuff like that uh and and they also probably need a ledger that it's uh shared across everybody so everything gets Consolidated in one place and it's easy to track right and and yes that could be a blockchain but I don't know sometimes know everything gets fixed with a blockchain right sometimes you just need like a proper tracking system or a database that doesn't seem to even exist in those uh in those places I was having this conversation the other day like you know it's just phenomenal if we do end up if it ends up happening but the the the shift from just paper in a vault to a blockchain is a gigantic Lea frog you would think that we go we would go from a paper to a database to digital to

blockchain but if we just go zero to four like by all means Let's Do It um now like when we're when we're thinking just even as a thought experiment in theory if this something like this were to happen you know you guys right now are working with some of these like major major financial institutions to tokenize these treasuries what if we go further up the stack you know what if instead of the treasuries you know getting auctioned off by the treasury in order to you know then get bought by some larger institutions and then ultimately end up in Black Rock and black rock tokenizes what if you we were to go further up the stack and just conduct like when when the treasury needs to finance the government IT issues these treasuries and then people

buy them at auction we just service that auction on chain is that technologically possible I think that this those issues are not technical issues right they're more uh regulatory issues um so again like look the technology is there I think is compared to when I started in 2018 I think it's pretty mature at this point in time so I don't see any any use case today that the the blocker is that the technology doesn't work uh there's going to be something out there that works it's more about uh you know regulations and about maybe integration with whatever system I don't know what system they use but I'm assuming show the department has some sort of Ledger where they keep track of what Treasures they sell I'm not so sure man I don't

they do look I hope they do right because this is our taxpayer money that goes there so but um uh so so yes this is doable but you know I always say something that look you know you can you can solve two types of problems right you can solve uh you know in Innovation they call it the the you know red oceans or blue oceans red oceans is where you're like you know lots of people trying to do the same thing you have to displace maybe some existing infrastructure and and it just becomes like this insurmountable problem to solve uh and and sometimes it's better not to solve it and a good example are are mainframes like you know you will think banks will get rid of mainframes and if you look at IBM pnl they still

make a ton of money with mainframes because somebody has decided at some point it's just better to let that continue existing there and die and then just maybe innovate on the you know digital experience about how you access the main frame and mobile app or things like that right so I I do think that trying to put a blockchain everywhere is maybe not the best approach and you have to do it in the places where there is less friction for adoption because there's literally nothing being used today and you're not displacing an existing system that might be extremely inefficient but nevertheless works right and then yes you can show efficiencies by doing using a blockchain but displacing the existing systems and all the Integrations and all the people to touch points Etc is is very complicated I remember

several years ago we did a project with a bank um and a large system integrator I can't mention who they are but thought to to put on a blockchain something called commercial paper I don't know if you guys have heard of this this is an asset class that is actually trillions of dollars which are basically and secure loans that really high quality companies issue to basically Finance working capital so you can get commercial paper from from Apple and from companies like that um so so this if we we did like a whole study spent months in in the bank and then draw this diagram about all the systems that they were touching to be able to from issuance from say Okay I want to issue a $100 million in commercial paper to like

getting into the hands of the investors that were buying them and all the intermediaries all the systems that were communicating and they had like I don't know few percentage of reconciliations Errors every time because something was getting lost somewhere or somebody was typing the wrong data somewhere Etc so so you could argue this is like a perfect example of having this on the same Ledger where you know the entire life cycle of how this security gets issu and purchased it is tracked there and recorded there is a much more efficient system but the problem is what do you do with all these infrastructure that already that moves trillions of dollars that is already there right so so I think that's a a big problem that uh you know maybe somebody will solve

but I think that it's much easier to take those assets forget about how they're been manage inefficiently today there but take them and put them uh on a blockchain for interacting with a crypto system as a complete new echosystem uh where you don't have to worry about the fixing the Legacy stuff but just take them and and use them somewhere else in a more efficient way the Legacy stuff we we call that Tech debt well so yeah not sure is this Tech debt or Tech that was actually modern back in the days but that you need to replace it right yeah yeah Robinson calling all rollup builders may there's a maybe there's an idea for uh someone to tackle I mean ultimately this is what's happening at a nationwide level and and it's not just our it's like it's it's all it's the

entire world right where you know this is why like uh the IRS never passes an audit for the same reasons that Carlos describes like there's too many there's too many tentacles in this in this you know in the system that you end up like like going further and further further down the line that you really lose track of of where these things are but at such a large scale the things that you lose track of could still be Millions if not billions of dollars um and so ultim record keeping problem right so if you think in in tradational markets the another big problem is is the short sellers that are shorting stock without actually having the actual stock but because nobody can track who holds what

nobody can actually know with that's actually true right like nobody knows how many like if you're Apple you're publicly traded you have no idea who holds your shares there's no way for you there's not like a ledger where you have the names of everybody that keep changing on a daily basis and you can that doesn't exist right it's all like fragmented across all the broker dealers and all the you know OTC desks and like as so many people and and that creates problems like not knowing how many outstanding shares are and there's like tons of examples inational Finance about you know shares more shares uh out there than they have been authorized to issue and problems of that nature which you will think like wow this is if if only they had a ledger where they could keep a record of things so I think it's the

same with payments for the government right like they just probably don't have a ledger to know exactly how much they pay to whom yeah yeah and so so we're suggesting that the blockchain would actually benefit this system incredibly but implementing it is such a tall task that we shouldn't even try I don't know I guess you should look at Case by case right but um because in some places where there's nothing maybe if you need to start from a scratch as you said you know maybe you you just to go out to the best technology available which is a blockchain right and in some of the cases you might actually have you know a bunch of like databases out there that are not properly connected or people are maybe not recording the payments uh well I don't know exactly what the what the problems are right so I will I will look

at Case by case but it's not a simple problem when you're dealing with Legacy infrastructure yeah I can tell you that I mean absolutely and like this you know I I kind of factiously called this Tech debt but if we look at like what the government is doing and treating the government like a company they're going through not just Tech debt but also labor debt in in the sense that they have to lay off all of these people you know getting rid of Legacy systems or federal employees that have been there 20 30 50 years that ultimately is part of that upgrade part of that upgrade it's part of that that process to go from a legacy system that may have a lot of Manpower and a lot of uh paper and a lot of

technical debt towards a more efficient system means laying off people or upgrading systems and kind of what do you what do you do with the old stuff ideally you recycle it you make it some something you can reuse but you know sometimes you just just do away with it I'll give you a good anecdote because and I can't mention the companies but um one of the transfer agents uh traditional transfer agents that we interact with because sometimes we act as a transfer agent uh sometimes so so traditional fan admin and not transfer agent um that we interact with um actually there's something called a super Sheed with where you get actually the positions of of the fund to be able

to calculate dividend payouts and stuff like that and then they actually use a fax so this is like two days and then because we don't have a fox in the office we come up with like an email system where you can basically take a an email uh an spreadsheet that arrives to like a fox uh which I didn't even know that those things existed I didn't even know that facts were being used today so but yeah so the legacy is there and you know it's is uh been working for what they do for a long time and sometimes nobody bothers to upgrade it because there's no immediate need or or or advantage and then when you're faced with you know digital use cases like tokenization that's when people wake up

and say oh wow my my underlying systems are pretty outdated and maybe you need to upgrade them to do something better and I think another interesting anecdote completely different sector uh you know I spent a number of years at at door Dash and I kind of believed sometimes our role was like modernizing restaurants for instance when when we first started out it was incredible to us how many restaurants were still on faxes as well like you they would take orders like call in orders or send in orders from the from the website or something like that it would come in via fax and then they would organize it it was it was almost an uncomfortable amount and a lot of our uphill battle was actually like designing systems around how for them to receive fact as efficiently make sure the driver arrives on time like there's a lot of logistics

to to coordinate and it actually ended up we ended up pushing more and more into the business of like point of order sale so like modern helping modernize the restaurant by bringing them on to like you know more of your you probably would if you were ever to go in a restaurant probably would see it more as like your iPad architecture right now or like they have multip some used to have multiple iPads now they've condensed them um but it was always crazy and funny to me how how many will still use fat so I if that's like restaurants in the private sector just imagine the public sector and all the entities within there it's it's so I think I think that is where some of these sectors and Carlos to your point it's a case-by case basis totally agree because you know you you start to get in these

situations where like a restaurant I got to believe they want to be as efficient as possible they want to modernize they want to upgrade the government I don't know if I can say the same I think there is people in there they want to be more efficient they want to cut spending where it's waste they want you know to to streamline things I think there's another angle where there is some intentional uh secrecy keeping things discreet for the reason of making sure that some payments continue to get through because if they were put on a public Ledger no one would ever approve of it right and so that's where I think some of these starts they they get into a case-by case basis some of them are easier to implement others take a little bit more social proving and social cons

in order to to really rally um a considerable change um nevertheless you guys are fighting the good fight on multiple fronts and in multiple sectors I I really appreciate you guys coming on the fun fight absolutely it's it's a blast and uh it's a wild ride a lot of ups and downs and twists and turns so guys thank you so much for coming on of course thanks thanks for Hing us appr and congrats on the success so far it's been amazing to watch