Why tokenized stocks could be bigger than stablecoins

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show where the only constant is nothing's constant. I'm your host, Jay Hamilton. It's Tuesday, August the 19th. And you guys know how much I love to talk about the future of finance and the real use cases for crypto. Not just speculation, which we all know it's a roller coaster and everyone loves to gamble, but the stuff that is going to be the fabric of our lives in the coming decades. And everyone knows about stable coins. product market fit. They're flying. They're super exciting. One of the big use cases that I think is going to be a narrative of the coming years is tokenized stocks. I'm so excited about tokenized stocks. It is such an obvious use case and it is a massive

opportunity. Global equities are over $120 trillion worldwide. So when you think about them all being brought on chain, obviously you think, "Wow, that's a massive thing that could really show the scale of blockchain that we all have imagined for years. Imagine NASDAQ on chain is a statement that we've all thought about and this really picked up steam recently. In June, we had Robin Hood and Kraken and Gemini and Bybit all make announcements that they were going to start offering tokenized stock to non- US investors. And now we have joined the party as well. So today we are joined by Ian Debode, the chief strategy officer at Onondo Finance, one of the leading protocols that's focused on bringing RDWAS like US treasuries and

money market funds and now stocks on chain. Before we jump in and hear from Ian, I got to remind you guys if you're making swaps, you got to check out Milkroad Swap. Not only because it's our product and I've got to endorse our own product, but more so because it's got some of the lowest fees in the space. You can trade on Ethereum and Arbitum and Bass and Salana all in one place and the fees are only 0.15%. I challenge you to try to find lower fees anywhere else. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns.

It's also brought to you by Nexo, the platform that grows your crypto without locking it away. With that, Ian, welcome to the Milk Road Show. >> Hello, Jay. Thanks for having me. >> Pleasure to have you. Absolute pleasure. really excited to jump into this conversation with you. Uh let's let's start high level. Global equities are my estimate is 100 trillion 100 trillion global equities. It's a difficult market give or take. Uh you know about maybe the better number to look at is American global equity or American equities is about 60 65 trillion. Uh will will they all be tokenized one day? Is that where this is headed?

>> Uh, I don't know about all of them. Maybe depends on your time horizon. I do think in the immediate future, you know, tokenization of equities, particularly outside of the US, is happening kind of as we speak. You alluded to, you know, tokenized equities having had a very big month in June and July. It's very clear that people have looked at stable coins with a product market fit and said interesting if tokenized cash can do this for the position of the dollar globally can I now tokenize US capital markets and do something similar for the dominance of US capital markets globally and so we're fundamental believers in

that you know tokenization of equities is about to take off this will take time right particularly in the numbers that you're talking about the 60 70 trillion in US equities global equities at 120 trillion that's not going to come all of it onchain next year but we do fundamentally believe that we are at a point where these products can be made available via crypto rails in a much better way to a global audience and over time the adoption of those tokenized stocks and equities we do believe is going to take off and we've already seen it play out with tokenized treasuries in a way. I think when I joined Ono about 18 months ago, the category as a whole of tokenized treasuries was at $1

billion or something. Now we're looking at $7 billion. So that is meaningful growth. It's still significantly smaller than stable coins which are at $250 billion and growing, right? But it's very clear that you see stable coins, tokenized treasuries, and now stocks and ETFs. So we are very excited to bring all these assets on chain truly to facilitate global access into US capital markets which have been a marvel for wealth creation globally for decades now.

>> Okay. So I I want to jump into what's happened so far with tokenized stocks because there's been some issues and hasn't maybe necessarily been the smoothest start uh with all the providers and the way they're providing it. Uh, I'm going to tease everybody there for just a second, but before we talk about that, I just want to make sure that everybody understands why we need tokenized equities because I think a lot of people listening to this are thinking, well, like, what do I can go I got great access to to equity products. Like, I don't need tokenized equities.

I'll just go on Robin Hood and I'll buy all the equities I want. So, I let's just cover that first about why we need them and and then we'll jump into what's happened so far. Yeah, I love that question because it's the number one question I get like why do I need tokenized equities or like when people think of tokenization they still think a lot about real estate, private equity, private credit, a lot of the more private asset classes that are often illquid because I think you know for the past decade or so tokenization has been heralded as this way to you know put illquid assets on chain and then magically the illquidity premium goes down because people want to buy this stuff globally and that has just not played out in part because fundamentally

these assets are illquid for a reason. It often has to do with the fact that it's very hard to price these assets. How are you going to price a building? How are you going to price a PE fund? Uh sometimes it's also not easy or the the the incentives in the overall market may not be aligned to actually put these things on chain and trade them like a PEGP does not really want their fund to trade on chain and be priced all the time. So there's been a lot of talk about tokenization. I think historically people would look at that and say I'm not sure it's lived up to the hype with the exception of stable coins and treasuries now. But that is in part because people have focused on these illquid assets. I hope someone figures it out at some point, but we aso really

focus on assets that are already very liquid in public markets because the reason why you tokenize something in the first place is you want to provide access to those assets and you want to enable their use as collateral on chain. For both of those use cases, equities are actually pretty great because you've got super deep and liquid markets in a Trafi world, which gives these things incredible pricing transparency, which makes them very good for collateral onchain. And very clearly globally, a lot of people want access to these things, just like people wanted access to dollars, and that's what a stable coin did. So why do weing equities? It is for that access use case for a global audience. Can can I just ask you quickly

on the access part? Any predictions there or thoughts there? Like I I always it's always nice to have a stat or to understand the scale of that like how many people don't have to me the obvious thing is if I'm not an American and I don't have access to the American equities, I probably want access to that. Best market in the world clearly shown that for decades. Okay, great. like I would love to buy, you know, QQQ or Apple or Spy, like definitely. So, but how big is that? How many people don't have access to to that and might be wanting that access?

>> I think it's actually very significant. People don't really appreciate how large that market is. I think when I saw some stats that globally there are about 4 to 500 million people with a brokerage account, the vast majority of those are in the US. There are about 5 to 600 million crypto exchange accounts in web3 wallets out there, often with people who do not have a brokerage account. So, if you can tokenize stocks and make them available on crypto rails and get a lot of the crypto exchanges to list these assets, I think the scale of access that you're talking about is very, very meaningful.

Now, how many of those are truly looking to buy US stocks, ETFs? You mentioned, you know, SPY, QQQ, and the like. I think it's going to take a little bit of time uh to educate users on what these assets are, what are they buying, what is the return profile, and the like. But I have no doubt that the scale of access globally of people who want access but historically have not had it is very, very significant. Like most jurisdictions, you got to have a minimum balance of 5 10k in order to even open an account. Good luck. And then when you try to buy these things via your equivalent of a brokerage account in the domestic market, you get four to 5% FX fees, four to 5% trading fees. Uh I mean

those are extreme examples, but there are markets where legitimately you lose 10% of your capital the moment you want to enter into a trade. And that is just not a good mousetrap, right? So tokenize these equities, put them on crypto rails, get anyone with a stable coin to buy these things is going to be a meaningful innovation and helpful for a global audience to get access to US capital markets. >> Okay. Uh that's thank you so much for breaking that down, Ian. That makes so much sense. Let's jump into uh what's happened so far. So there >> well Jay I do if you would allow me because you did mention there's a lot of people in the US that look at that and say I already have my Fidelity account or Robin Hood account and the like which is true uh but even for those I think

people underestimate how much better a tokenized stock can be cuz yes you have your brokerage account and yes you can have access but not all brokerage accounts are created equally like some brokerage accounts now I can trade for five. In others, I can't. In some brokerage accounts, I can take out margin, but I can only use it to invest more on the exact platform. I can't take margin off the uh, you know, brokerage account. And the rate I get, I can't shop it around because I'm locked into this particular brokerage account. Once you tokenize these things, it's kind of very similar to a stable coin. You're going to be able to move your capital between your various accounts seamlessly, between your different wallets seamlessly, and you're going to

be able to shop around any type of margin rate that you want in DeFi or someplace else. So, the the mobility that you can get on your assets once you've tokenized them is incredibly significant. It's kind of what you know, stable coin and the incremental benefit relative to a bank account. Most people who own a stable coin would probably consider it as a better way of money than just a bank deposit because they can move it around 247 because they can send it globally whenever they want and because they can use it in DeFi. The same benefits hold for tokenizing stocks and ETFs. Although in the case of a bank account, at least I could move my cash between various bank accounts pretty seamlessly. But with a brokerage

account, I mean you can, but it's very difficult. It takes very long. So the incremental benefit of going from a brokerage account in Trafi Rails to tokenized stocks I would say is even larger than when we went from a bank account to a stable coin. >> That is a very good point. It's it makes me think about the I didn't realize that with stable coins until I really started using them though, right? So even even though I knew it and when we first started talking about stable coins, everybody was like, "Yeah, of course that makes sense in theory." I feel like that we need that. It's kind of goes back to what you said before. We It's going to take time. Like we need people to use it and experience it. And once

you feel that, then you're like, "Oh my god, I'll never go back to my brokerage 100%." >> Cuz right now, if you if you ask me like, "Oh, your brokerage account, are you happy with it?" I'd be like, "Probably." But it's because I I've never experienced the alternative. >> Right. the moment I can start moving my stocks 24/7. Yeah, if that becomes the norm, I will not be very happy with the current brokerage account I have. >> Yeah, very very good point. Okay, what what has happened so far because I'm going to bring up a uh an article from the Wall Street Journal which highlighted that and I mean, let's be honest, it's it's not all sunshine and rainbows when you're starting a uh a new um a new a new tool, right? uh and launching a new a new a new system and

you're dealing with regular regulators and all that and you mentioned the challenges before around liquidity. Uh but so what has happened so far? This this Wall Street Journal article is titled for everybody that's listening and can't see the screen says want to trade Amazon on crypto uh on a crypto exchange the price might be off by 300%. So, what we've seen so far is exactly this, that there's been some of these tokenized stocks that are not tracking properly the actual price. What's going on? Why is this happening? Uh, and then we'll jump into how we make sure this this isn't an issue because I want to make sure that everybody doesn't read the Wall Street Journal and think that

crypto is is is bad and a scam because, you know, you these clickbait titles, they don't do well for us. >> Clickbait titles Sure, the Wall Street Journal would love that description. Uh, no, but I agree. Um, there's a right way to tokenize, uh, and then there's a not great way to tokenize. Tokenization in and of itself is very easy to do, right? You just take an asset, you would mobilize it into a custody account, you place a token on chain, and tada, right? You've tokenized something. The hard part is making sure that there's always sufficient liquidity to redeem that token against the underlying or the cash equivalent and to make sure that that

token you've issued always tracks the price of the underlying to make sure that whenever people buy the token it's as good as the underlying. The current versions that have been launched because you know there have been previous attempts at tokenizing stocks. Xtocks is the latest attempt that I think that Wall Street Journal article was referring to. Um, but that issuer of that product backed has been around for longer, right? And they issued stocks on Ethereum as well. The problem with these existing models though is that as this Wall Street Journal article highlighted, they tend to not always track the price of the underlying. And the reason for that is because there is no easy bridge in the liquidity between trafi and

onchain for stocks. All the prices are set in the trafi venues, right? The NASDAQ, New York Stock Exchange. That is where price discovery happens and that is where all the liquidity of these assets is. That is where everyone globally more or less now buys their stocks. You can place these assets on chain, but if you do that, you want to make sure that there is always a very easy way to mint and burn these assets on chain at the same levels of liquidity and price as is available offchain in the NASDAQ and New York Stock Exchange.

If there is no easy connectivity of the liquidity between these two avenues, what ends up happening is these stocks that have been issued on chain and that do not have great connectivity to these trapi rails, these prices can start to diverge. And because there's no connectivity, you cannot arbitrage these prices down to where they should be on the other, you know, trapi rails. And that is what you've seen in these other venues. There is no easy way to mint and burn these tokens just in time at the price that is relevant on the tradey venues. And as a result, these onchain stocks that really rely on onchain liquidity with these onchain DEX pools and the like, the prices here can start

to diverge, but it's not easy to bring them down or bring them back up because that bridge of liquidity does not exist. And as a result, you know, people are buying these stocks on chain left and right at depgged prices essentially relative to the underlying. You see it, you saw it with stable coins, particularly in the beginning, too. >> You know, a stable coin can dep, you know, a dollar five, right? Because the moment you do that, you're immediately losing money. And the reason why that ended up happening is for some stable coins, there wasn't an easy way to essentially put a dollar in a bank account, get the stable coin instantly, and then arbit down to the right price.

And the same thing you're seeing now with these first iteration of stocks. You need a way to very easily mint and burn these onchain assets, bring the prices down, and connect the Trafi liquidity to the onchain liquidity. If you don't do that, these things depict. If long meetings and judgmental bankers are your thing, Nexo is probably not. Nexo is a premier wealth platform built for people who value their time and money. It's built for people who have idle cash lying around and want it to grow fast. Whether it's Bitcoin, Ethereum, or even forex pegged assets like USDT or USDC, Nexo offers up to 14% annual interest and access to cryptoback credit in under 24 hours. Your assets

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Okay, great great leadin to Onondo and how how you guys are ensuring that that liquidity is there. Um, maybe we can we can start with liquidity, but I want to zoom out further into the full Ono product that you guys have launched and what what this looks like. So, you can explain that and I'm going to talk about some of my favorite parts of it, too. >> Very good. Um, so we are about to launch the Ono Global Markets platform, which is our version of these tokenized stocks. It really is the next iteration of the assets that we've tokenized already with treasuries. Right? When you look at the journey of Ono, we really started with tokenizing treasuries first

and now we're moving into stocks. The reason why it was helpful for us to start with these tokenized treasuries is because we figured out all of these liquidity issues and how to set up the right rails and how you can, you know, actually do tokenization in the right way. The current CVL in our products is about $1.4 billion. We're the second largest right after uh Black Rockck. So, we have been in the market for quite some time. We know what it takes to tokenize these assets and even most importantly we know how to connect Trafi liquidity to onchain liquidity and to have sufficient liquidity for redemptions. So the way that we have now built our platform that we will you know launch very soon is that when you want to essentially acquire a

stock onchain we our model does not rely on onchain liquidity to make that happen. when we do not rely on these onchain DEX pools like some of the other providers. The way that we have set up our platform is if a primary purchaser wants to acquire let's say a million dollars worth of Tesla, the way it works is that we can instantly mint a million dollars worth of Tesla at the exact same price as is available on the New York Stock Exchange and the NASDAQ on chain the moment you send us stable coins. So there is instant connectivity into these stratifi liquidity venues to make sure that people can always mint and burn these assets at the same price as is

available in trap. As a result, even when people deploy liquidity pools on chain, people are going to be able to arb down these prices. But even more importantly, you do not have to rely on those onchain liquidity pools, those onchain dex pools in order to actually get the stocks and ETFs. Because the other bit we haven't really talked about is it's very very capital prohibitive and expensive to deploy all of these DEX pools in stocks. I mean you can do it on 10 stocks maybe 20 stocks but the moment you want to do it to a thousand stocks who's going to put up all that capital to trade do that out of yeah the balance sheet requirements are rather absurd and even more importantly why would you

because all the liquidity to trade these things is available in trady anyway. So the way to think of our platform that we just built is essentially an instant bridge from a public blockchain instant traffic liquidity back and forth. >> Okay. And tell us the because you've solved liquidity. Fantastic. Uh I I love the ticker names that you guys have gone with. Shout out to whoever I don't know if that was you who came up with these tickers, but basically it's the it's the it's the equivalent equity ticker. So for Apple it's a AAPL and then just an O at the end which on foro but also makes me think onchain. So beautiful mass

mastery absolutely mastery job. So which which is very nice to be able to I when I think about where this goes in 10 years. Okay I can just look at the ticker and see that it's it's spy n okay I know it's an onchain version of spy. Amazing. Um, the other thing that really stood out to me was that you get full rights because a lot of the tokenized stocks so far do not include dividends or full rights that you would get if you were to go buy the stock through a public market. So, talk to us a little bit about how you shape that and how dividends work I think is an important thing to understand as well.

>> Yeah. No, I love the question because this is another thing that has caused a lot of debate in the industry recently of like when you buy tokenized stock on chain, what do you really get? What are you really buying? And there's been even some backlash against what they call rapper models where the stock you hold on chain isn't the same thing as the exact stock. So, in our model, that is the case. We essentially issue rapper tokens. When you buy a tokenized stock on chain, what ends up happening is we go and acquire that same stock in the, you know, NASDAQ, New York Stock Exchange, the traditional venues, and we put that into a clearing broker account.

It is immobilized. Whenever you have your token on chain, you can always redeem it against the cash value of the underlying. We also any dividend that the underlying stock receives we will automatically reinvest into more shares so that over time the token that you hold is the exact same economic exposure as if you were holding the underlying and reinvesting the dividends. We have a structure where the token that you hold is essentially a debt product. it that to means that the SPV that has issued set token only holds the underlying and they issue debt

against that underlying that you end up holding as a token holder. If anything ever happens to the issuer, if we fail to meet a redemption or if a collateral buffer falls below a certain amount, we have an agreement with a third party that will seize all of our underlying, sell it for cash, and repay all of the debt holders, which is the token holders. So, this is a fully bankruptcy remote design with all the bells and whistles in terms of investor protection that are possible. We will post daily at the stations of the reserves that we hold. We will hold a very large collateral buffer on top of the reserves to make sure that everyone always has full comfort that these things are fully backed plus a little bit extra. So we fundamentally believe that even though

these tokens are not actually the same thing as the underlying stock, it's about as good as it gets. Uh it is very similar in a way although better than how a stable coin tokenized cash because a the stable coin also is kind of a wrapper token on top of the cash. It's not the same thing as the underlying dollar, but you can always redeem it for the underlying. And in fact, our tokens have better bankruptcy remote protections than the stable coin. So, we pride ourselves in always backing our assets one for one, fully bankruptcy remote with a large collateral buffer, reinvestment of the dividends, and the like. Some of the other models that are out there right now, when you look at

the fine print, some of them have no obligation to actually back the underlying one for one. And for those issuers that do have an obligation to back it one for one, almost none of them have a meaningful collateral buffer on top that gives people a little bit of extra assurance. >> Okay, fantastic. What about privacy? Because one of the big things that is a a a conversation that is really coming up recently as we move it's these are the moments where I noticed that we're we're in this massive shift from cryptogen crypton natives decentralization maxis like the original creators of crypto into the institutions

being here because we never really talked about privacy as much as we have in the last six months. Why? Well, because most of most of the institution, most large capital holders, they don't want to move money in a way that everybody knows that they're moving money, you know, and when you buy stocks, it's not like everybody knows your portfolio and what you bought, right? But in crypto, a lot of stuff is public currently, right? H how is privacy handled? >> Well, so our issue our tokens are issued or will be issued on multiple different blockchains. We're going live on Ethereum mainet. We'll go live on other chains pretty soon. the privacy restrictions and implementations that we can put on these tokens obviously depend

on the network that they're on >> Ethereum to your point you know people do not really have an expectation of full privacy it's kind of synonymous accounts and that's going to be the same case in you know for for our tokens uh the moment uh crypto exchanges uh list these assets then that obviously offiscates a little bit more the type of privacy that people can have the there are obviously also other chains that are really making privacy a full-on implementation for how the network operates and we will continue to expand our assets to more chains that support full privacy. But, you know, it's always a little bit of a trade-off. You mentioned the institutions that really care about privacy. I would agree with that sentiment. Most institutions right

now, I would say the large ones in particular, the traffic reels have served them well. uh we actually don't think that in the first instance when this product is rolled out that institutions at least the traditional ones are going to be the main entities that are holding these assets. We think it'll be a retail audience that has figured out that a stable coin is a good way to get access to the US dollar and now wants exposure to US capital markets. And for these people, it's a little bit of a trade-off, right? Yes, you may not get all the full privacy that you would like, but at least you get access to these assets and on, you know, networks like Ethereum, Salana, and the like.

That's good enough. >> Yeah, it's a great point. Fully agree. I mean, I'd rather buy Bitcoin than not be able to buy Bitcoin in the end, or I'd rather be able to buy I'd rather be able to take advantage of AI than not be able to take advantage of AI, right? And obviously one of the best ways to take advantage of AI unless you're able to in invest privately is to go buy some of the mag seven right now, right? Like that's just there's your shot. So okay, uh how big is let's talk about adoption. How big is tokenized equities right now? If I look at uh RWA.xyz, XYZ, which is a site that I often refer to, great site to look at stats around tokenization of real world assets. It's saying that we're at about 350 million right now in

tokenized stocks. I don't know if if where you would land on that, if you can verify that or if that's in the range. Um, but it feels regardless small right now. >> Yeah. >> Play this out for us. Yeah. >> What is adoption going to look like? >> Yes. uh tokenized stocks right now is small. I love the 360 million number. I would probably argue it's even smaller. I think the vast value on that page is uh is Exodus, which is the dual listing. >> It's true. It is. >> And so the vast majority of that million of it is >> that's just value that is really on the NASDAQ and the like. Quite frankly, I think when you look at true tokenized stocks, the way we typically think about

tokenized stocks is about 100 mil. It's not a lot at all. But I think in part it's because the way that people have done it so far is just not very good. Uh we talked a lot about the liquidity issues, the deping issues and the like. I think so far people have looked at tokenized stocks with a little bit of suspicion and saying, "Is this really what I want to be buying?" So I'm not surprised that the number right now is small. Once an issuer comes on chain with a real platform that can service all of these global users with the liquidity that they're looking for and with sufficient

guarantees that the price is actually the price of the underlying and the like. I do expect you know more meaningful growth. How big is that growth really going to be? That is a little bit um TBD, but again, as previously mentioned, there's about five to 600 million crypto brokerage accounts out there right now. Most of these people have no access to stocks whatsoever. So once people figure out that tokenized stocks are legitimate, I do expect that number to grow pretty meaningfully. But you'll see it, I think, evolve just like we've seen other tokenized assets evolve where in the beginning there's a little bit of small growth and at some point you get a hockey stick moment, right?

When is that hockey stick moment really going to occur? I don't know. But I would be surprised if we do not get to at least a couple of hundred million dollars by the end of this year. Okay. Okay. So, it it's it is it's gradually and then all of a sudden, right which >> that's typically how it works with all these. >> Yeah, it's how it works for for everything that achieves any sort of adoption. And this feels inevitable. The thing that stands out to me is, you know, if if if the US stock market is 64 trillion roughly in total value, you know, even if even if tokenized equity could get 1% of that, that would massive, right? That's huge. Like it

doesn't you don't need you don't need to capture very much of that to make a big impact here. Any thoughts on you mentioned previously that right now you you're launching on Ethereum soon to launch on Salana BNB and I think other chains as well in the future. Any thoughts on where this will exist long term? Will there be a dominant chain? >> Yeah, it's a great question because I feel like a lot of the chains like to fight over which chain's perfect for equities and RWA. I mean we are building our own chain the ono chain >> to really be also foundational infrastructure to make the issuance >> and distribution of these assets even to

other chains a lot more seamless because we haven't really talked about some of the difficulties that exist in issuing these tokens on the current public blockchains that exist. You know some of the block times are problematic. Some of the frontunning dynamics are pretty problematic. There's a wide range of issues I think for every single blockchain quite frankly out there on how you issue these tokens and the like. The DeFi ecosystems on the various chains I think will have to maybe even change pretty dramatically or a new DeFi ecosystem is going to have to evolve to really support tokenized stocks at scale. I mean, there's a thousand assets, even more, that trade 245 on Robin Hood. Like, using a portfolio, a

brokerage portfolio with a thousand different tickers in it in DeFi right now in a gas efficient way. I don't know who's going to crack that. Um but it is very abundantly clear that the current blockchains have a lot of users have existing DeFi ecosystems and that is why we as you know on onto finance as an asset issuer we like to go where the users are and that is why we are starting on you know mainet Ethereum first expanding to other chains pretty soon. Um, we go where the users are because we fundamentally believe the initial mousetrap of on the global markets is to provide access to that global user base that right now has figured out how to be on chain but does not have access to US capital markets

just yet. But as we start thinking about the broader utility for these assets, the ecosystem around it, I'm not sure which public chain quite frankly really is going to win. It probably will be a couple. And we at Ono are also building out the Ono chain to solve a lot of the needs and build out that ecosystem in a very targeted way to really do DeFi on stocks, ETFs and the like in the right way. >> And and you're not the I mean Robin Hood is we've been talking about this playbook all week because Stripe and Circle just announced they're building L1's as well. Uh and so we're talking about you know how how is the future of finance going to come on chain? uh specifically how does tradine banks come

on chain and we've talked about we talked in uh yesterday's episode about Canton network and how people a lot of the banks are building private chains through there so um I let's let's not necessarily talk about which chain is going to be used because that is a difficult thing to predict um >> let's talk more about as you let's for fast forward 5 years 10 years down the road what is the what is the what are the downstream effects when we have a lot of capital in tokenized equities.

Let's make that assumption. We're going to achieve adoption. It's going to happen in in some way. Not exactly sure how. What are the downstreams effect of that effects of that? And what is the what is the ecosystem going to look like in the future? >> Yes, this is the part that gets me quite excited because it is people don't sufficiently appreciate how bad the Trafi Rails are. I think the moment you have all of these individual tokenized stocks and ETFs that are on multiple blockchains, I mean a blockchain really is a permissionless layer to do cool innovation on, right?

And so how you think about how the equivalent of an ETF or a specific type of strategy is created, how AI agents can engage with finance and start putting together investment strategies, all that stuff is going to get completely blown out of the water because historically these assets only lived on pretty bad fight rails. And I'm exaggerating a little bit like the NASDAQ's tech stack is incredible, right? Those those rails are not bad. But the way settlement happens, the way value moves, that's pretty archaic. Um, so once all of that, all of these assets move to a layer where the movement of value can happen 24/7 and where the execution of

strategies can happen 24/7 and where everything is composable. I personally get quite excited on the level of innovation that that is able to bring to wealth management, asset management, brokerage more broadly and what that exactly looks like. Quite frankly, I don't know, but I don't think anyone does. It's kind of the innovation that you're going to see in payments because of stable coins. I think you're going to see in brokerage, wealth, and asset management because of tokenized stocks. And what that exactly looks like, again, I don't know, but it's going to be a lot. And I don't think a lot of people are ready for it. The other thing I think we'll see too is Trafi is going to have to figure out a way to bridge into 24/7 systems a lot more than they

currently have cuz >> let's let's talk about that because when you launch you're 245 you're not 24/7, right? >> Correct. >> Yes. Why? >> In part it's because literally stocks do not trade in any meaningful way over the weekend. So even if someone on chain wanted to get the stock from us, we can't go into the NASDAQ and New York Stock Exchange and turn around and buy these things. There are other avenues through which you can figure out ways to move towards 24/7. So we are working on that, but it is not an easy thing to do.

But I do think crypto blockchains more broadly, companies like Ono are going to lead the way to figure out 247 markets. Um because the the blockchain rails are uniquely suited to it and you know there'll be a couple of forward-leading Trafi companies that help us with that and we're working on those you know right partnerships right now. But fundamentally a crypto audience, crypto investors, they expect 247 exposure, right? It would be completely absurd even a year from now when something happens in the global scene that is meaningfully impactful for equity markets. It happens, it happens to

happen over in a Sunday or a Saturday or whatever. The crypto market moves but equities don't, right? Um, right now you can kind of get away with it because these equities are not on chain, but the moment they move on chain in any meaningful way, people are going to figure out a way to trade them. So, Trafi is very aware of that, at least the forward-leading entities, everyone is focusing increasingly on 247 markets and I do believe that the infrastructure to make that happen is going to be developed on chain first. >> Okay, final question before we let you go, Ian. our audience is a investor audience always looking to understand uh where the opportunities are. We talked a little bit I want to just touch on who

the who the players are that are building out the ecosystem and infrastructure for tokenized stock. So we talked a little bit about the chains that you're building on Ethereum Salada and BNB. Who are the other players whether they be cryptonative companies or tradi companies? Who are the other active players that are building infrastructure to to operate tokenized stocks? >> Yeah. Um, you you mentioned the a couple of players already. I feel like every week someone new pops up, right? Um, we've been talking about tokenization of equities since last year, February 2024. And at the time, no one cared, right?

>> Um, even earlier this year in February, we did the summit. We were talking about tokenized stocks and people were still like why? So I'm very happy to see there's this like land grab moment. Robin Hood is obviously doing quite a bit. Um their implementation is very different to ours. But if Robin Hood, you know, gets involved, I'm sure I mean it means something for the space. We get a lot of questions about it. You have the XStocks Kraken, you know, partnership that obviously has made a lot of waves, particularly in the Salana ecosystem. And then there's others that focus a little bit more on, you know, the native issuance of some of these stocks. You've got, uh, you know, our friends at Superstate doing very interesting things. Um, I believe Figure Markets

maybe even working on something. So, it's it's the usual names that are all moving towards, you know, the getting capital markets on chain and typically equities becomes a part of that. We do believe, and this is I guess my plug for Ono Finance, but I think we are the only ones that have the track record to actually pull this off. There's no one else out there that has issued, you know, 1.4 4 billion in these tokenized treasuries. Figured out to do it on 10 different chains, integrated into 100 different DeFi protocols, have figured out the liquidity back into Trafi with the right Trafi partnerships in order to build these integrations and bridge the liquidity. I think that really is the hard part. So, we feel pretty good about

our positioning, but no doubt like over the next 12 months, I wouldn't be surprised if you'll see announcements from the Interactive Brokers of the world and the Charles Schwabs of the world and the Fidelities of the world. Like, it's definitely starting to happen. >> And and and what's interesting about that is those are the announcements that we sort of need to get the media attention to educate everybody that this is happening and why this exists. Uh and so everybody in media please help us push this because it is it is such a it is a big narrative that is coming. Uh and it is funny to think how how fast time happens in crypto. Like you said six months ago we weren't even really talking about this. It's wild. Ian really absolute pleasure to get you on

the show today. Thank you so much for joining us. >> Thanks so much for having me Jay. It's been a pleasure. >> Thanks for listening in everybody. I've got to remind you as always that another today's episode is financial advice. I'm not your financial adviser. Ian is not your financial adviser. If you are doing investing, you should speak to a professional. And if you're doing any swaps with your crypto, you should check out Milkroad Swap at swap.mmillgro.com. Some of the lowest fees in the space. Thanks for listening in y'all. Have yourselves a wicked awesome day. We'll see you back again tomorrow. If y'all are making swaps or trades right now. Highly recommend you check out Milkroad Swap. This is a DEX that we built in partnership with Cow Protocol. Why did we build it? Not to make money. just honestly so we could have a place to do

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