Latest / Trillions / Tokenization, Digital Twins and the Future of ETFs

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Tokenization, Digital Twins and the Future of ETFs · Trillions

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Wepener, Jillian's, I'm Joel Webber and I'm Eric Belchernas.
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  Speaker 3: Eric, we're going to talk about the future today.
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  Speaker 4: We're going to go there, not next week, not next month,
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  Speaker 4: although there's things happening in both of those occasions. But
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  Speaker 4: we're going to talk about potential transformative technology.
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  Speaker 3: Yeah.
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  Speaker 2: So the big word is tokenization, and it's been thrown
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  Speaker 2: around for ten years now. And you know, I'm a
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  Speaker 2: big ETF bowl and.
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  Speaker 3: Never I never knew that about you.
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  Speaker 2: I just think they're very powerful technology. And there's been
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  Speaker 2: a couple competitors have come along.
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  Speaker 3: You have always as about their technology.
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  Speaker 2: Yeah, and direct indexing was was hyped up. It didn't
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  Speaker 2: really even lay a glove on ETFs. The new thing
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  Speaker 2: is tokenization. Now it's complicated because ETFs actually can be tokenized,
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  Speaker 2: and yet there's also some competition and there's a lot
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  Speaker 2: of dimensions and it can be confusing. But the idea
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  Speaker 2: here is to use the blockchain technology to eliminate some
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  Speaker 2: intermediaries and some frictions in the plumbing. So this is
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  Speaker 2: a plumbing story largely, but there's also some real world
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  Speaker 2: implications and even some investment opportunities and we're basically starting
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  Speaker 2: to write about it, and we're generally thinking that this
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  Speaker 2: is something that is going to take a while, but
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  Speaker 2: big names have started to pop up, press releases from exchanges,
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  Speaker 2: press releases from Blackrock, tokenizing this, tokenizing.
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  Speaker 4: That, quditions.
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  Speaker 2: So it seems to be like happening and we need
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  Speaker 2: to talk about it. We've been trying to do this
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  Speaker 2: for like a year. We have to cover this.
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  Speaker 3: The time has come. Yes. Joining us on this episode
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  Speaker 3: is Nadine Jaikar. She's the managing.
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  Speaker 4: Director and Global head of Digital Assets at DTCC, as
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  Speaker 4: well as an l Lee, a Process that reporter with
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  Speaker 4: the pret News, this time on Trillions tokenization.
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  Speaker 3: Nadan, Welcome to Trillions.
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  Speaker 5: Thank you for having me.
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  Speaker 3: Okay, want to start with the question you heard how
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  Speaker 3: Eric's a bull? Is Eric an ETF bull? Is Eric
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  Speaker 3: out of a job or will he be out of
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  Speaker 3: a job here at some point? At some point? Yeah, okay,
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  Speaker 3: I would like it.
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  Speaker 4: Not the retirement though, but like Eric, is tokenization coming
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  Speaker 4: for ETFs?
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  Speaker 5: Yeah, you guys use the words. I think seems potentially.
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  Speaker 3: I think we call those hedges.
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  Speaker 5: Yeah, I think it's time to like unwind the hedge.
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  Speaker 5: It's happening. It's definitely happening, and it's happening on July fifteenth,
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  Speaker 5: to be very precise. So what is happening? So why
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  Speaker 5: don't I back up and explain what DTCC is, Because
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  Speaker 5: you even had a hard time getting.
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  Speaker 3: The Depository Trust and Clearing Corporation. Here you go.
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  Speaker 5: So we're probably the most important company nobody's heard of
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  Speaker 5: in the US. And what we really are is we're
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  Speaker 5: the backbone the infrastructure of the US markets. Every time
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  Speaker 5: you buy a bond, you sell, inequity, you whatever you
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  Speaker 5: do in the US markets, it is up to DTCC
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  Speaker 5: to ensure that that trade settles, so you have finality
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  Speaker 5: of settlement. It clears right, so where the buyer to
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  Speaker 5: every seller and the seller to every buyer that it's recorded,
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  Speaker 5: So we're at a good control location. When we say
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  Speaker 5: you've got one hundred chairs, that means you've got one
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  Speaker 5: hundred chairs. And then we do other things like corporate action,
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  Speaker 5: so if there's a dividend, for example, we process that
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  Speaker 5: pricing and other things. So we sprinkled that pixie dust
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  Speaker 5: over at the marketplace to ensure that our markets continue
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  Speaker 5: to be our US markets continue to be scalable, secure,
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  Speaker 5: and they've been running like that for the past fifty
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  Speaker 5: five years.
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  Speaker 3: You a ledger, We are a ledger, and.
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  Speaker 5: That's why when we look at blockchain, we look at
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  Speaker 5: it honestly as a natural extension of what we do
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  Speaker 5: we today, we'll just be moving the ledger to blockchain,
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  Speaker 5: which is what we're excited about.
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  Speaker 4: Okay, so now can you just keep it in the
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  Speaker 4: idiot zone for a little bit longer, since I will
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  Speaker 4: consider myself an idiot in this one.
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  Speaker 3: So that's all well and good. What is it tokenized stock? Then?
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  Speaker 5: Great question. So a token is stock is really taking
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  Speaker 5: the stocks that we have today in the US markets.
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  Speaker 5: We actually look after one point four million CUSIPs, and
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  Speaker 5: we're going to be taking these CUSIPs one by one
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  Speaker 5: and turning them into a digital representation of that original stock.
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  Speaker 5: We call it a digital twin, and it's designed on
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  Speaker 5: purpose to ensure that all the attributes that you have
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  Speaker 5: in this stock as it is today will be represented
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  Speaker 5: in digital format. So we protect get we protect investment
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  Speaker 5: protector protection. It's not a great sentence, but the point
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  Speaker 5: is whatever rights you have today, they will be preserved
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  Speaker 5: in digital world. And the attributes that you get now
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  Speaker 5: is you can move these stocks on a digital ledger, right.
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  Speaker 5: You can't do it with traditional stock. That's why you've
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  Speaker 5: got to convert it into a digital image. This is
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  Speaker 5: probably as simplistic as I can get explaining tokenization. Okay,
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  Speaker 5: And we can tokenize a bond, a stock, an ETF,
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  Speaker 5: which is a basket of stocks and bonds. And that's
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  Speaker 5: what when I said it's coming to us in July fifteenth,
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  Speaker 5: that's what we're going to be doing. We're going to
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  Speaker 5: be taking a bunch of equities and treasuries and ETFs,
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  Speaker 5: and we're going to tokenize them and deposit them in
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  Speaker 5: a wallet. Think of a wallet as a substitute for
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  Speaker 5: an account for a lack of a better term. But
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  Speaker 5: a wallet is a lot more progressive. You could put
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  Speaker 5: a lot of different things in a wallet, from physical
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  Speaker 5: instruments that you've digitized to equities and publicly traded instruments.
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  Speaker 5: Once they're in a wallet, you have full custody of
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  Speaker 5: that wallet. You can move these assets, you can trade
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  Speaker 5: them twenty four EM and among us if you wanted to.
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  Speaker 5: You can move them to DeFi, which is decentralized finance
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  Speaker 5: and trade them off any other platform, so you got
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  Speaker 5: a lot more flexibility with what you do with your
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  Speaker 5: assets once they're in the token format.
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  Speaker 2: You say you're you're sitting there and you're like, oh
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  Speaker 2: my god, I'm going to buy this new ETF a
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  Speaker 2: two x poet which we covered last week, and you
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  Speaker 2: pull up your phone and you type in the ticker
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  Speaker 2: and you hit buy and you own the ETF or
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  Speaker 2: a stock or whatever. That is the experience that most
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  Speaker 2: people are used to having. It's very simple.
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  Speaker 3: It's easy. We're own some shares, they're in my account. Yeah,
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  Speaker 3: I get that.
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  Speaker 2: Where does the token? Will the token happen after that?
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  Speaker 2: Like will you still own the ETF or am I
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  Speaker 2: going to have a wallet now? Or how does it
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  Speaker 2: go from the end person into the DTC out to
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  Speaker 2: other people? Like I get that you have a blockchain,
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  Speaker 2: but would I still have an ETF for a stock
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  Speaker 2: or would I then have a token after you do
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  Speaker 2: what you're going to do.
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  Speaker 5: So all of the above depends on what your agreement
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  Speaker 5: is with your broker dealer. So it's the broker dealer
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  Speaker 5: that decides whether they want to tokenize or not. Most
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  Speaker 5: of the time, I don't believe the end client's experience
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  Speaker 5: is going to change, so you'll still press. Chances are
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  Speaker 5: you won't even know if you have a token or
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  Speaker 5: a traditional part or share or units of that ETF.
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  Speaker 5: We're doing everything we can to ensure that we enhance
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  Speaker 5: the client experience and not change it too drastically. Right, So,
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  Speaker 5: you may have a wallet and you may ask your
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  Speaker 5: broker dealer for a token, or you're happy keeping it
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  Speaker 5: the way it is. Both both work, but you may
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  Speaker 5: have other aspirations for that ETF. You may want to
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  Speaker 5: take it, pledge it as collateral somewhere, or you want
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  Speaker 5: to take a loan against it and take it into
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  Speaker 5: decentralized platforms where you could pick up yield, you could
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  Speaker 5: pick up other flexibility. At that point, you need a wallet,
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  Speaker 5: you need a token. If you're just going to buy,
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  Speaker 5: put it into your account and collect your clip heureb
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  Speaker 5: the dividends, then maybe keeping it where it is is
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  Speaker 5: just fine. So it is we're not mandating tokenization. I
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  Speaker 5: want to be very clear. The tokenization is done on
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  Speaker 5: demand by the broker dealer. So we need to be
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  Speaker 5: instructed to convert something from a fiat or a legacy
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  Speaker 5: into a token and We use the term conversion on
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  Speaker 5: purpose because we're using the same token for both the
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  Speaker 5: traditional CUSIP and the digital CUSIP. Now that's by design.
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  Speaker 5: We want to make sure that anybody, whether it's the
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  Speaker 5: bloke or deal or the underlying retail client, has the
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  Speaker 5: flexibility of using the format that works for them in
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  Speaker 5: terms of liquidity, right, we want to make sure we
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  Speaker 5: don't fragment liquidity, which is really important. And then secondly
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  Speaker 5: to be able to take that instrument that you own
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  Speaker 5: today and do things with it, just instead of just
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  Speaker 5: parking it in an account. So if you don't want
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  Speaker 5: it to be in token format, doesn't have to be.
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  Speaker 5: If you want to and you've got other ideas on
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  Speaker 5: what to do with it, it's done at a click
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  Speaker 5: of a button as well.
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  Speaker 6: Why should an investor care whether something is tokenized when
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  Speaker 6: they already own it in traditional markets, like, for example,
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  Speaker 6: it's good you clarified it as a choice. Like all
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  Speaker 6: three of us on this table, we already own stuff
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  Speaker 6: through the traditional rail so to speak. So what is
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  Speaker 6: the selling point of a tokenized asset or do you
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  Speaker 6: imagine a completely different client base for this, the one
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  Speaker 6: that lives completely in blockchain or in.
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  Speaker 5: More on a defy or decentralized environment. Listen, it's an
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  Speaker 5: amazing question. And if you don't want to change, you
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  Speaker 5: don't have to. But what you have within a digital
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  Speaker 5: environment is more flexibility over your investments. So I'll give
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  Speaker 5: you a good example. One characteristics of tokenization is you
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  Speaker 5: can fractionalize a share. Right, So let's assume you've got
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  Speaker 5: a thousand units of an ETF sitting in your account
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  Speaker 5: in today's world. In order for you to get to
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  Speaker 5: cash it out, you've got to do a trade. You
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  Speaker 5: got to wait till it settles, then the money's deposited
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  Speaker 5: in your account, right, and then you could take that
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  Speaker 5: money and go do something else with it in a
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  Speaker 5: token ise format that experiences collapses. So we have organizations
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  Speaker 5: today that you could take your token, you could fractionalize it.
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  Speaker 5: You can walk into Starbucks and buy a latte with
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  Speaker 5: your ETF shares. Now I'm not advising that, but it's feasible.
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  Speaker 5: And as Lauren reminded me about worth shotting about something
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  Speaker 5: in a car, just because you can't doesn't necessarily mean
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  Speaker 5: that you should, but it gives you that flexibility, right.
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  Speaker 5: It gives you also the flexibility of taking shares that
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  Speaker 5: are enormously expensive for the normal person, and by fractionalizing
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  Speaker 5: these offering you make it more affordable for people to
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  Speaker 5: be able to invest in these characteristics. Thirdly, there could
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  Speaker 5: be investments in DeFi world that are attractive to you.
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  Speaker 5: Right even if you look at Biddle pays out a
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  Speaker 5: premium because it's on blockchain rail, you may want to
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  Speaker 5: invest in that. Well, the only way you can get
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  Speaker 5: into that is via a token. Nice products. So at
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  Speaker 5: the end of the day, they are individual choices, and
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  Speaker 5: that's what we're doing. We're not replacing We're not replacing
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  Speaker 5: the infrastructure. We're enhancing the infrastructure and providing and clients
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  Speaker 5: with multiple channels to hold their assets, to be able
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  Speaker 5: to trade and invest. And I think that's really key.
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  Speaker 5: It's more choice. It's your choice, at your time, at
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  Speaker 5: your pace, and that's an important concept that we should
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  Speaker 5: always keep in mind.
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  Speaker 6: So those are great points. Some proponents of tokenization actually
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  Speaker 6: like tokenization because it eliminates intermediaries. But from what you're saying,
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  Speaker 6: it sounds like DTCC is becoming more important than less.
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  Speaker 6: And I'm just curious how this will reshape the market structure.
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  Speaker 6: Will it give you a more heavy hand or will it.
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  Speaker 6: I'm just curious.
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  Speaker 5: There's kind of a heavy hand is unfair. We are
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  Speaker 5: a facilitator, and we were more of a bridge than
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  Speaker 5: a heavy hand. And I believe that our role will
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  Speaker 5: continue to evolve in the future. I've been asked many times,
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  Speaker 5: will the TCC still be around in ten years, And
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  Speaker 5: my answer is, let's stick around and see. I don't know.
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  Speaker 5: What I do know, though, is our role will be
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  Speaker 5: more a technology enabler, because when you really think about this,
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  Speaker 5: the not everything is going to tokenize, and not everything
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  Speaker 5: will tokenize at the same rate. So for a long
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  Speaker 5: period of time, you will have the old and the new.
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  Speaker 5: And when I first started talking about this, but now
• 12:21
  Speaker 5: as I get older, I realized my audience dos and
• 12:23
  Speaker 5: know what I'm talking about. But I used to say,
• 12:25
  Speaker 5: we're going to help the Flintstons and the jet sense coexists.
• 12:28
  Speaker 3: I really am right.
• 12:30
  Speaker 5: I mean, I love cartoons, so that's but as I
• 12:32
  Speaker 5: find my audience is getting younger and younger, they have
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  Speaker 5: no cull what I'm talking about.
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  Speaker 2: This happens to me all the time. You bring up
• 12:38
  Speaker 2: like the original Star Wars.
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  Speaker 6: Yeah, I only get Eric's react, yeah.
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  Speaker 5: You know that, I feel much better now. So that's
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  Speaker 5: an important So you need somebody that's going to treat
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  Speaker 5: the new assets with the same care and attentions that
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  Speaker 5: we we treat the current assets. Now, the SEC did
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  Speaker 5: come up with four different descriptions if you will have tokenization.
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  Speaker 5: So there's what you just describe. What is the direct
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  Speaker 5: methodology where you're you're going from issuer to the end investor.
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  Speaker 5: But that's really a false narrative because there's gotta be
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  Speaker 5: somebody in the middle that's going to help people manage
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  Speaker 5: corporate actions. That's going to help people manage, you know,
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  Speaker 5: vote their proxies if they care to do. So what
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  Speaker 5: we have is what's called an indirect tokenization methodology, which
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  Speaker 5: is what DTCC has been doing for the past fifty
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  Speaker 5: five years. It's an entitlement, right, so we have custody
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  Speaker 5: of the assets and we're holding on so it's probably
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  Speaker 5: the most secure way of doing that, right, So we're
• 13:33
  Speaker 5: holding onto the assets issuing a digital twin. And you
• 13:36
  Speaker 5: could think of the digital twin as a code check. Right,
• 13:39
  Speaker 5: you go to the museum, you put your cote, you
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  Speaker 5: get a piece of paper that that is a token
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  Speaker 5: it's representing the fact that you have a coat. Right,
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  Speaker 5: That doesn't the mean the value of the code. It's
• 13:51
  Speaker 5: still it's a code. And then you've got the other
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  Speaker 5: two that are more synthetic in nature. And then here
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  Speaker 5: the SEC was a little bit more unclear the state
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  Speaker 5: of ownership.
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  Speaker 2: Right.
• 14:01
  Speaker 5: So for us, we're not looking at replace, we're looking
• 14:05
  Speaker 5: to evolve with the market. As I said before, it's
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  Speaker 5: a natural extension of what we do today. We're just
• 14:10
  Speaker 5: deploying new technologies to be able to do it better, faster,
• 14:13
  Speaker 5: and more efficiently. And when you look at our strategy,
• 14:17
  Speaker 5: we're enabling the adoption of this technology. You both said
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  Speaker 5: earlier that we've been talking about this for ten years.
• 14:25
  Speaker 5: And if you think why, let me make one point.
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  Speaker 5: DTCC is the sole post trade processor in the US, right,
• 14:33
  Speaker 5: So unlike other parties in the world, we've got one
• 14:36
  Speaker 5: post trade and that's helped us execute on T plus
• 14:39
  Speaker 5: one faultlessly, right without looking at what else happens in
• 14:42
  Speaker 5: the market. If you look at the past ten years, right,
• 14:44
  Speaker 5: because there wasn't an entity like DTCC that said all right,
• 14:48
  Speaker 5: we're here, let's help figure this out. You've had many
• 14:52
  Speaker 5: financial institutions erect their own infrastructure. What did we do?
• 14:56
  Speaker 5: We fragmented the market right, financi Stitution one had something,
• 15:01
  Speaker 5: number two hit something else, and because there's no trust
• 15:04
  Speaker 5: in the market, there was no interoperability. If somebody issued
• 15:08
  Speaker 5: something on this platform, it wouldn't work here. Then we
• 15:11
  Speaker 5: all sat back and complained that it wasn't moving. So
• 15:14
  Speaker 5: it was with DTCC moving in. Originally it was just
• 15:18
  Speaker 5: a hedge. We didn't know where this was going to go.
• 15:21
  Speaker 5: We didn't know if that was the right thing to do.
• 15:23
  Speaker 5: And as things have progressed from a regulatory perspective, from
• 15:27
  Speaker 5: a client demand perspective, we're finding that, you know, we'll
• 15:31
  Speaker 5: find out on July fifteenth, if you know there's demand
• 15:34
  Speaker 5: as we move forward.
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  Speaker 4: So I'm going to wake up on July fifteen, let's say,
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  Speaker 4: and I'm going to buy I want to buy a
• 15:52
  Speaker 4: hot new ETF d ram let's let's say, which has
• 15:56
  Speaker 4: had massive inflows so far this year. What is going
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  Speaker 4: to happen differently than on July fourteenth?
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  Speaker 5: If I if I did for the Yeah, if we
• 16:08
  Speaker 5: did our job properly, nothing right, absolutely nothing. And actually
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  Speaker 5: on the fifteenth we did break down our goal live
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  Speaker 5: into two tranches. One is on July fifteenth. The reason
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  Speaker 5: we did that is to ensure market readiness. The next
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  Speaker 5: one is like, the next one is in October. So
• 16:25
  Speaker 5: let's say you wake up in October. What would happen?
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  Speaker 5: And if we did our jobs, probably nothing right because
• 16:30
  Speaker 5: the broker dealers will be set up. Now, if you
• 16:33
  Speaker 5: go to your broker dealer and you say, I'm going
• 16:35
  Speaker 5: to trade and I want you guys to deposit tokens
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  Speaker 5: in my wallets, not units in my account, that's what
• 16:41
  Speaker 5: would be different. And then it's on you to do
• 16:43
  Speaker 5: whatever you'd like to do with these with these tokens.
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  Speaker 3: But the first, right, what's the craziest thing that you
• 16:49
  Speaker 3: think I can do?
• 16:50
  Speaker 5: You can pledge it for colladal, you can borrow against
• 16:53
  Speaker 5: It looks like the government shortly is going to let
• 16:55
  Speaker 5: you use it for coladal to buy a house. You
• 16:58
  Speaker 5: could take it into DeFi and you know, do some
• 17:02
  Speaker 5: some swap on AVE or any other platform that would
• 17:05
  Speaker 5: that would produce some yield for you. I mean, possibilities
• 17:08
  Speaker 5: are endless, but it all depends on your own risk return.
• 17:11
  Speaker 5: You also spoke about direct direct investing indexing a few
• 17:15
  Speaker 5: minutes ago. The concept of tokenization allows from mass customization.
• 17:20
  Speaker 5: So we can take now these these et apps, we
• 17:23
  Speaker 5: can take these indices and actually do direct indexing at
• 17:27
  Speaker 5: a rate that is scalable and more efficient because of
• 17:30
  Speaker 5: the usage of smart contracts. Now, what are smart contracts.
• 17:34
  Speaker 5: Smart contracts are automated instructions that allow us to do
• 17:38
  Speaker 5: investment operations in a very automated way. And the biggest
• 17:42
  Speaker 5: challenge with direct indexing in the past has been the
• 17:45
  Speaker 5: data has been the rebalancing of the accounts. I can
• 17:47
  Speaker 5: program smart contracts to do that all day long, twenty
• 17:51
  Speaker 5: four to seven, do it precisely, and I can match
• 17:54
  Speaker 5: your risk return to any investment strategy that you want.
• 17:58
  Speaker 5: But first we've got to build the basics, which is
• 18:00
  Speaker 5: deploying the blockchain infrastructure, deploying the tokenization infrastructure, and then
• 18:05
  Speaker 5: the sky's the limit with the various configuration that you
• 18:08
  Speaker 5: could do.
• 18:09
  Speaker 2: Let me talk about this, which is that right now,
• 18:13
  Speaker 2: there's a lot of people on chain who have gotten
• 18:16
  Speaker 2: older and want like as I call them, adult assets,
• 18:20
  Speaker 2: like they want stocks like ETFs, VU, Tesla, right because
• 18:25
  Speaker 2: they only own crypto. Their idea of sixty forty is
• 18:28
  Speaker 2: like sixty percent bitcoin forty percent other cryptos. Yes, so
• 18:33
  Speaker 2: I feel as if this will be very beneficial for them.
• 18:39
  Speaker 2: They will be able to now trade real world adult
• 18:43
  Speaker 2: big boy assets on chain in their wallet. They understand
• 18:49
  Speaker 2: all the benefits you just said, that's why they're on chain.
• 18:52
  Speaker 2: I get that, and that should actually help distribute ETFs
• 18:55
  Speaker 2: to a degree. What I'm not as clear on is
• 18:59
  Speaker 2: how any regular people like Joel will actually be enticed
• 19:03
  Speaker 2: to convert to getting a wallet and becoming an on
• 19:10
  Speaker 2: chain person, Like, do you think that more people regular
• 19:15
  Speaker 2: people will convert or will this largely just be a
• 19:18
  Speaker 2: way to cater to people who are already on chain.
• 19:20
  Speaker 5: I think it's a little bit of both. I think
• 19:23
  Speaker 5: when Joel and another realized that there is a.
• 19:26
  Speaker 3: Proxy, I'll take it.
• 19:29
  Speaker 5: You'll take it right, Sorry. But I think when when
• 19:32
  Speaker 5: when you realize there's a lot more that you can do,
• 19:35
  Speaker 5: then park your asset in an account and just log
• 19:38
  Speaker 5: in once a day, once a week to see if
• 19:40
  Speaker 5: it went up or went down, I think you may
• 19:42
  Speaker 5: be enticed to open up a wallet and you could
• 19:45
  Speaker 5: put your real world assets in that wallet. You could
• 19:48
  Speaker 5: put your crypto assets, you could put your digital cash
• 19:50
  Speaker 5: in that wallet. So instead of having a marriad of
• 19:53
  Speaker 5: accounts in many, many places. You can have one wallet
• 19:56
  Speaker 5: that does it all. In the future is going to
• 19:59
  Speaker 5: be a wallet. So at some point, if you're not
• 20:02
  Speaker 5: in crypto today, it may entice you to get into crypto.
• 20:05
  Speaker 5: If you're not in real world assets, it may entice
• 20:07
  Speaker 5: you to do so as well. Because the one thing
• 20:09
  Speaker 5: we don't talk a lot about is the ends. So
• 20:12
  Speaker 5: we talk about the end state, will we buy more
• 20:14
  Speaker 5: real world assets tokenized? But there's a state of readiness
• 20:17
  Speaker 5: that we need to work through right now, and it's
• 20:20
  Speaker 5: not there. For ten years, all we've done is innovation
• 20:23
  Speaker 5: by press release. Look at me, I've done that. Look
• 20:25
  Speaker 5: at me, I've done that. And then when you go,
• 20:28
  Speaker 5: all right, according to all these press releases, you guys
• 20:30
  Speaker 5: should be ready to rock and roll like that. Not
• 20:32
  Speaker 5: really right. So where we need to we need to
• 20:35
  Speaker 5: get the industry to a point where they can handle tokens.
• 20:38
  Speaker 5: They know what custody of keys. Right, there's a new
• 20:43
  Speaker 5: there are new ways of doing things. But once we've
• 20:45
  Speaker 5: got enough adoption, and I hope to god they're right
• 20:48
  Speaker 5: at seventeen trillion.
• 20:49
  Speaker 3: Dollars, you can take a vacation.
• 20:51
  Speaker 5: I can definitely take a vacation. So it's only a
• 20:53
  Speaker 5: couple of years away, so I'm hopeful.
• 20:56
  Speaker 2: Okay, So let's go through this scenario where we have VU.
• 21:00
  Speaker 2: WU is the biggest ETF on planet Earth, Vanguard five
• 21:03
  Speaker 2: hundred in your description. WU will be available in token format.
• 21:08
  Speaker 2: And if WU is a token and I buy the
• 21:11
  Speaker 2: VU token, does that money that I just bought with
• 21:16
  Speaker 2: eventually flow into Wu's assets or does it flow into
• 21:19
  Speaker 2: the token share class of like the VU fund.
• 21:22
  Speaker 5: No, Because we are tokenizing on a post trade basis,
• 21:26
  Speaker 5: So if a broker dealer decides to offer a VU
• 21:29
  Speaker 5: as a token, from your perspective, you're still buying and
• 21:32
  Speaker 5: selling as you do today, so the redemptions and subscription
• 21:36
  Speaker 5: will continue to be operating as they do today. That
• 21:39
  Speaker 5: shouldn't matter.
• 21:40
  Speaker 2: So the token, at least when it comes to ETFs
• 21:43
  Speaker 2: that are on the market now, will actually probably be
• 21:46
  Speaker 2: additive because it will bring people who are on chain
• 21:50
  Speaker 2: will be able to buy VU now, but they'll.
• 21:52
  Speaker 3: Buy in otherwise they have to go back to their brokerage.
• 21:55
  Speaker 2: So in a way, at least the first step, it
• 21:57
  Speaker 2: will distribute ETFs andcetoughcks to more people.
• 22:01
  Speaker 5: That's the hope.
• 22:02
  Speaker 2: Right.
• 22:02
  Speaker 5: It just makes it a lot more accessible.
• 22:03
  Speaker 2: But there could be a time where Vanguard just comes
• 22:06
  Speaker 2: out with a new token of the five hundred has
• 22:08
  Speaker 2: nothing to do with VU.
• 22:09
  Speaker 5: Yes, I mean we do expect at some point. I
• 22:12
  Speaker 5: mean we do have, as I said earlier, about one
• 22:14
  Speaker 5: point four publicly traded CUSIPs today that are out there. Well,
• 22:19
  Speaker 5: they're one point four million. I don't know if they're
• 22:21
  Speaker 5: all publicly traded, but they're out there. But yes, the
• 22:24
  Speaker 5: next wave of this is what you'll start to see
• 22:27
  Speaker 5: our fun complexes and issuers and everybody else start to
• 22:31
  Speaker 5: issue natively, right.
• 22:33
  Speaker 2: And that's natively, that's the word I was looking.
• 22:35
  Speaker 5: They become natively issued and now in order so think
• 22:39
  Speaker 5: I mean, we don't know if this will happen or not,
• 22:41
  Speaker 5: but we are seeing other countries starting to think through
• 22:44
  Speaker 5: when they issue debt, can they just issue it directly
• 22:46
  Speaker 5: like treasuries and anything else directly on blockchain. Should that happen,
• 22:51
  Speaker 5: then the only way to access those instruments would be
• 22:54
  Speaker 5: to have a wallet, would be to have a token, right.
• 22:58
  Speaker 5: And it's going to be an evolutionary process. So that's
• 23:00
  Speaker 5: why we're being very careful to and I hate this
• 23:03
  Speaker 5: expression but I'm going to use it. It's crawl, walk
• 23:05
  Speaker 5: and run. We have the biggest, most liquid, interconnected market
• 23:10
  Speaker 5: on the planet, and we've got to make sure that
• 23:12
  Speaker 5: we don't do anything to jeopardize that. So looking at
• 23:16
  Speaker 5: the safety and sound as continues to be our main concern,
• 23:20
  Speaker 5: and that's why we're doing this in a way that's
• 23:22
  Speaker 5: more evolutionary than revolutionary. At this point.
• 23:26
  Speaker 6: In the note two centus, you also said that d
• 23:28
  Speaker 6: TCC does not believe one blockchain will dominate finance, and
• 23:32
  Speaker 6: I feel like this is one of the arguments of
• 23:33
  Speaker 6: some skeptics when it comes to tokenization, that it'll be
• 23:36
  Speaker 6: so fragmented because there's so many blockchain. So suppose like
• 23:41
  Speaker 6: a token and security moves across several chains in an
• 23:44
  Speaker 6: error occurs. I'm just curious who determines the official ownership record, Like,
• 23:49
  Speaker 6: can you talk to us about that and maybe give
• 23:51
  Speaker 6: a concrete example.
• 23:52
  Speaker 5: It's the TCC. That's why we're a good we're the
• 23:55
  Speaker 5: good control location.
• 23:57
  Speaker 2: But it doesn't go book stocks stops with you.
• 24:00
  Speaker 5: The record stops with us, correct, So if you and
• 24:03
  Speaker 5: this is where the argument of go from issuer directly
• 24:08
  Speaker 5: at a retail, The argument of one blockchain is going
• 24:12
  Speaker 5: to rule the world like maybe someday, okay, but based
• 24:16
  Speaker 5: on what we know today, it's very difficult. And I'll
• 24:18
  Speaker 5: give you a good example.
• 24:21
  Speaker 6: And is it difficult for the better or the worse?
• 24:23
  Speaker 5: Difficult for the better? For well, it's a limitation of
• 24:27
  Speaker 5: the technology. So today blockchains are not as believe it
• 24:31
  Speaker 5: or not, are not as efficient as our good old
• 24:34
  Speaker 5: cobalt mainframes. Right, we process let me put a throw
• 24:39
  Speaker 5: a number at you. We process four quadrillion dollars of
• 24:42
  Speaker 5: settlement a year. Okay, that's four plus sixteen zeros. There
• 24:46
  Speaker 5: is no blockchain on the planet today that can handle that,
• 24:49
  Speaker 5: mainly because the consensus mechanism of every time something happened,
• 24:53
  Speaker 5: you've got to write to the blockchain a record. It
• 24:56
  Speaker 5: takes a while. So a lot of the work that
• 24:58
  Speaker 5: DTCC is doing behind the scenes is also working with
• 25:01
  Speaker 5: a whole slew of fintech bigtech to figure out how
• 25:05
  Speaker 5: to scale. How do we get to a point where
• 25:08
  Speaker 5: we can process many millions of transactions a second on
• 25:11
  Speaker 5: the blockchain, So we can get to a stage where
• 25:14
  Speaker 5: that may be happen. There's another element of privacy, right.
• 25:19
  Speaker 5: Privacy and scale are inversely correlated. So either you get
• 25:23
  Speaker 5: privacy and you're going to have to suffer with slow
• 25:27
  Speaker 5: blockchain or vice versa. So what did we do? What
• 25:30
  Speaker 5: did TCC do? We think about it as a multi
• 25:33
  Speaker 5: layer cake. The first thing we did is we said
• 25:36
  Speaker 5: we're going to work with the industry and find a
• 25:39
  Speaker 5: couple of blockchains that actually there's liquidity on it, that
• 25:42
  Speaker 5: client have their assets on. We very earlier on announced Canton,
• 25:48
  Speaker 5: last week we announced Stellar. We're working on a couple
• 25:50
  Speaker 5: of others. But we will have listen every single day
• 25:53
  Speaker 5: to somebody goes, yeah, heho, I've got a new blockchain.
• 25:56
  Speaker 5: We can't engage with one hundred or ten thousand blockchains
• 25:59
  Speaker 5: out there. We will find, we'll curate a good list
• 26:02
  Speaker 5: of blockchains that we will use, and then we play
• 26:05
  Speaker 5: that orchestration level on top. And your question is really
• 26:08
  Speaker 5: important because if you've got a share of Apple that's
• 26:10
  Speaker 5: operating on Solon, on Stellar and Canton and Beazoo and
• 26:14
  Speaker 5: what have you, there's a drag because there's gas fees
• 26:17
  Speaker 5: that go there. The price is going to be an
• 26:19
  Speaker 5: impact on price discovery, there's going to be an impact
• 26:22
  Speaker 5: on data and corporate actions. Every chain looks at its
• 26:25
  Speaker 5: data differently. So our job is, because we're the record keeper,
• 26:30
  Speaker 5: we actually harmonize that data. We orchestrate it and ensure
• 26:33
  Speaker 5: that's safe. We don't use bridges, right, We use a
• 26:36
  Speaker 5: Minton Burne type of process to make sure that everything
• 26:39
  Speaker 5: that really needs to be that's job one. The second
• 26:42
  Speaker 5: layer of that cake is what I talked about earlier.
• 26:45
  Speaker 5: It's that conversion process. So you come to me and
• 26:48
  Speaker 5: you say, I want to tay, I've got a thousand
• 26:49
  Speaker 5: chairs of Apple, I just want to I want to
• 26:51
  Speaker 5: move seven hundred of them into tokenized format. Now, we
• 26:56
  Speaker 5: for the past two years have done the impossible, which
• 26:58
  Speaker 5: has taken Web three technology and integrated that into our
• 27:02
  Speaker 5: main main frames. Right, so we can give you a
• 27:05
  Speaker 5: look of the old and the new together, right because
• 27:07
  Speaker 5: we don't want you to be blind. So you always
• 27:10
  Speaker 5: know you've got a thousand shares, you've got three hundred traditional,
• 27:13
  Speaker 5: seven hundred in digital, and we built new books and
• 27:17
  Speaker 5: records on the digital side where we check the transfer
• 27:20
  Speaker 5: of ownership like in quasi in your time, and that's
• 27:23
  Speaker 5: really important. We've also done a lot a lot of
• 27:27
  Speaker 5: work around data because once you blockchain is not a
• 27:31
  Speaker 5: great data manager. If you put a blockchain out there
• 27:33
  Speaker 5: and somebody calls up and goes, hey, can you tell
• 27:36
  Speaker 5: us how many shares of mining you may have? I
• 27:40
  Speaker 5: don't know, right, So we've we've done a lot of
• 27:42
  Speaker 5: work where I've encapsulated a lot of data into these
• 27:45
  Speaker 5: tokens so you can track it. But then you look
• 27:47
  Speaker 5: at this and go okay, and I think that's where
• 27:49
  Speaker 5: you guys are going. You've tokenized one point four million
• 27:53
  Speaker 5: qusip one hundred and fifteen trillion dollars in assets. The
• 27:57
  Speaker 5: question is so what so is We've been working with
• 28:02
  Speaker 5: our participants and with the industry I brought to start
• 28:04
  Speaker 5: to create value for these tokens. So the one thing
• 28:07
  Speaker 5: we did and last year we revealed that which is
• 28:10
  Speaker 5: a great collaudal experiment. We showed how you could start
• 28:13
  Speaker 5: to use these tokens as collateral in a way where
• 28:16
  Speaker 5: you just can't do that today. Coladal is the perfect
• 28:18
  Speaker 5: use case for tokenization. I know you guys want to
• 28:21
  Speaker 5: talk about ETFs, but you could use ETFs for colladal.
• 28:24
  Speaker 5: You can use tokenice money market for a colladal, you
• 28:26
  Speaker 5: can use equities for colladal. Right, and we're making these
• 28:29
  Speaker 5: platforms available we're also working with like an army. It
• 28:33
  Speaker 5: takes a village right of other providers out there. So
• 28:36
  Speaker 5: these tokens have value for them and they can use
• 28:39
  Speaker 5: it for colladal and they can use it. You could
• 28:41
  Speaker 5: use it to create an ETF up token.
• 28:43
  Speaker 4: So that dram that I buy on July fifteenth, I'm
• 28:47
  Speaker 4: going to put that up as collateral.
• 28:49
  Speaker 3: Does it leave my wallet?
• 28:50
  Speaker 4: No, doesn't taste my wallet, but somebody can come fetch
• 28:54
  Speaker 4: it if I.
• 28:56
  Speaker 5: Again, they're digital twins, so god forbid somebody goes into
• 29:00
  Speaker 5: your wallet, So we will ask you to register the
• 29:03
  Speaker 5: wallet with us, so we know you're a good guy
• 29:05
  Speaker 5: and you're not doing you know, funky stuff with that wallet,
• 29:07
  Speaker 5: but god forbid somebody breaches. We do have means of
• 29:10
  Speaker 5: making use reach.
• 29:11
  Speaker 4: I mean I put it up as collateral to get
• 29:14
  Speaker 4: something that I want, right, and maybe I haven't been
• 29:16
  Speaker 4: good on that and somebody has a right to the collateral.
• 29:18
  Speaker 5: Well that's a different that's a different story.
• 29:20
  Speaker 3: So how does that mechanism as it does today?
• 29:23
  Speaker 2: Right?
• 29:23
  Speaker 3: So we will the on chain repo man we do.
• 29:28
  Speaker 5: That's probably as good an explanation as any. But in
• 29:32
  Speaker 5: today's world, we mark to market and we'll continue to
• 29:34
  Speaker 5: do that. Actually, you could do that in real time
• 29:36
  Speaker 5: and in digital format. You've got full visibility where your
• 29:40
  Speaker 5: collaudal is and where the token is or the asset,
• 29:43
  Speaker 5: and so does your counterparty. So you know, if you
• 29:47
  Speaker 5: I always say, it's like, I don't think tokenization would
• 29:50
  Speaker 5: have prevented Leman from happening. But what tokenization could assure
• 29:54
  Speaker 5: you is it will probably take us ten days to
• 29:57
  Speaker 5: find the assets and not ten years if that, and
• 30:01
  Speaker 5: it would allow us to mark to market a lot faster.
• 30:04
  Speaker 5: So a lot of the risk management becomes a lot
• 30:06
  Speaker 5: more transparent, which is which is a plush.
• 30:19
  Speaker 3: Eric? Who would you cast as the on chain man
• 30:22
  Speaker 3: in the movie.
• 30:23
  Speaker 2: Young Gary Oldman? But maybe I don't know, Like who's
• 30:28
  Speaker 2: that guy who played Elvis? Yeah, Austin Butler.
• 30:34
  Speaker 5: There you go. It's going to be the same repo players,
• 30:38
  Speaker 5: uh more you know, intra day, more bilateral or more
• 30:41
  Speaker 5: tri party. And what you'll see is the traditional players
• 30:45
  Speaker 5: will find on real colladal to be more efficient faster.
• 30:51
  Speaker 5: I mean, I'm somebody who's managed Colladal back offices all
• 30:53
  Speaker 5: my life and we've spent millions of dollars millions and
• 30:56
  Speaker 5: millions of dollars automating and doing this and doing that.
• 30:59
  Speaker 5: At the end of the day, the way Coladal moves
• 31:01
  Speaker 5: is when I call you or you call me, or
• 31:02
  Speaker 5: I send you an email, right that changes the imatic.
• 31:05
  Speaker 5: Coladal will move to speed up the network. If you're
• 31:08
  Speaker 5: doing a trade in Japan, you can self finance it
• 31:10
  Speaker 5: with treasuries while we're a sleep, and that is huge.
• 31:13
  Speaker 2: I get the blockchain, and I was a European panel
• 31:16
  Speaker 2: once and they were bringing this up, and I thought
• 31:18
  Speaker 2: of ghostbusters, like who are you gonna call if everything's
• 31:20
  Speaker 2: like automated on the blockchain, but what if there's a problem,
• 31:23
  Speaker 2: And like is there somebody to call.
• 31:26
  Speaker 3: In the Dean's number? Were legal reads cars? We call
• 31:29
  Speaker 3: like for real? But this is like the thing because
• 31:32
  Speaker 3: he is in front about yeah.
• 31:33
  Speaker 2: And also like if you're going to make a token,
• 31:35
  Speaker 2: like do you have to go through like the forty
• 31:36
  Speaker 2: Act to register it? So there is legal protections because
• 31:41
  Speaker 2: so that's the other question I guess, generally speaking, is
• 31:43
  Speaker 2: the regulatory protections. You know, ETFs to me have a
• 31:47
  Speaker 2: halo over them, which is the forty Act and the
• 31:49
  Speaker 2: thirty three Act. Are tokens going to have the same
• 31:52
  Speaker 2: feeling of assurance and protections if.
• 31:55
  Speaker 5: They're issued properly. The answer is yes. And before we
• 31:59
  Speaker 5: were bought by dt CCA still run a company called
• 32:01
  Speaker 5: Securrency and Securency actually worked with musdim Tree to issue
• 32:05
  Speaker 5: the first forty ACT funds in tokenize format. So the
• 32:09
  Speaker 5: answer is yes. But you hit on something really important.
• 32:11
  Speaker 5: It goes back to the earlier question when people start
• 32:15
  Speaker 5: talking about they don't want intermediaries, Well, who's the one
• 32:18
  Speaker 5: throat to choke?
• 32:19
  Speaker 3: Right?
• 32:19
  Speaker 5: Smart contracts don't look good in orange. You gotta be
• 32:22
  Speaker 5: there's gotta be somebody you call. And that is a
• 32:24
  Speaker 5: role that DCCC and our member firms play, So that
• 32:29
  Speaker 5: is really important and people don't realize that. And in
• 32:32
  Speaker 5: most most instwuers, we're fiduciaries. Right, it's not our money.
• 32:36
  Speaker 5: So when when we invest as individuals, it's our money,
• 32:39
  Speaker 5: we could take whatever risk we want. But when we're
• 32:42
  Speaker 5: investing on behalf of other people, you become a fiduciary
• 32:45
  Speaker 5: and there's a higher level of care that you need
• 32:48
  Speaker 5: to exert. But yes, and we've demonstrated that Franklin Templeton
• 32:52
  Speaker 5: has done that. So there's been a lot of ETFs
• 32:54
  Speaker 5: that have been issued under the forty Act and other
• 32:56
  Speaker 5: similar sec And that's the beauty of a digital twin.
• 33:00
  Speaker 5: It doesn't change, right, those protections are still there.
• 33:03
  Speaker 6: So I want to go back to the beginner level
• 33:05
  Speaker 6: and using Joe's example of DRAM. So, for example, you
• 33:08
  Speaker 6: used to phrase digital twin a lot, and what exactly
• 33:12
  Speaker 6: is being duplicated if I own let's say ten shares
• 33:14
  Speaker 6: of DRAM, what exactly do I own and what's being duplicated?
• 33:18
  Speaker 6: And does it reflect the same rights as the.
• 33:20
  Speaker 5: Traditional Yes, they're exactly a twin. They're identical twins, same investment,
• 33:27
  Speaker 5: investor protection, same CSIP. And all we do is we
• 33:32
  Speaker 5: take the original shares, we encumber them, and we issue
• 33:34
  Speaker 5: a token that fully represents that. So the token then
• 33:37
  Speaker 5: can move freely while your assets are safe.
• 33:40
  Speaker 6: So the question is, why wouldn't I just get the
• 33:42
  Speaker 6: tokenized option. It sounds like it's the better twin, the
• 33:46
  Speaker 6: prettier twin.
• 33:47
  Speaker 5: Well, I'm glad after the time we spent together that
• 33:49
  Speaker 5: you agree.
• 33:50
  Speaker 3: So that's good. Why why ask two sides all the time?
• 33:53
  Speaker 5: Why?
• 33:53
  Speaker 2: A lot of people in my opinion ETFs And also
• 33:58
  Speaker 2: I'll give Vanguard some credit, have create an investor utopia Yeah,
• 34:02
  Speaker 2: you just buy anything you want for almost no fee.
• 34:05
  Speaker 2: The question is how many people want that collateral you know, option,
• 34:09
  Speaker 2: but that's a right. I don't know how many people
• 34:13
  Speaker 2: care about that, Like, they probably already own a house.
• 34:16
  Speaker 2: They probably because if you if you have ETFs and
• 34:18
  Speaker 2: a good amount of money, you're probably maybe you don't
• 34:21
  Speaker 2: need collateral at that time. So my guess is the
• 34:25
  Speaker 2: younger people though, who are trying to get a house
• 34:28
  Speaker 2: and need that, Like, it depends on how important that
• 34:30
  Speaker 2: aspect is. The other reason I could see people getting
• 34:35
  Speaker 2: token who are like already into ETFs or stocks is
• 34:38
  Speaker 2: if can you tokenize like artwork or like private equity
• 34:42
  Speaker 2: or something I can't otherwise get in the ETF.
• 34:44
  Speaker 5: Yeah, you can. You can pretty much tookenize anything. We
• 34:47
  Speaker 5: could tokenize this room, right, Like again it's theoretical, why
• 34:50
  Speaker 5: would you do that? I don't know, but you would.
• 34:52
  Speaker 5: But there's a really important concept here that we shouldn't
• 34:55
  Speaker 5: forget as well. We talked about the people that've got
• 34:57
  Speaker 5: crypto that may do tokens vice versa. But we're also
• 35:01
  Speaker 5: seeing the biggest generational shift of wealth as well. And
• 35:05
  Speaker 5: these kids today are used to doing everything on their phones.
• 35:09
  Speaker 5: They want instant gratification for a lack of a better term, right,
• 35:13
  Speaker 5: So they want to be able to they don't want
• 35:15
  Speaker 5: to wait to sell theiry TF to get the money
• 35:18
  Speaker 5: and do something else. Well, in a token ized world,
• 35:21
  Speaker 5: you could, you could move it around and get get
• 35:24
  Speaker 5: it right there. You could, as I said earlier, you
• 35:27
  Speaker 5: can fractionalize it so you could you could get a
• 35:30
  Speaker 5: loan again, and all that is done in near quasi
• 35:33
  Speaker 5: real time, right, And it's an important element to that
• 35:36
  Speaker 5: new demographics. That but it also makes things more reachable
• 35:40
  Speaker 5: and affordable others, I'll make it up, uh and I
• 35:43
  Speaker 5: don't know that, but the the I'm directionally correct, my
• 35:46
  Speaker 5: facts may not be accurate. But the Vanguard voo that
• 35:49
  Speaker 5: you keep talking about, it could be totally unreachable to
• 35:53
  Speaker 5: people in Asia or in in Africa. A digital twin
• 35:57
  Speaker 5: gives them the ability to invest in these curities. So
• 36:00
  Speaker 5: you've got affordability, you've got broader Now that's not all
• 36:04
  Speaker 5: happening today, and that is the hypothesis that we all have,
• 36:07
  Speaker 5: so it's really important to note. But that is why.
• 36:09
  Speaker 5: But for Vanguard, who's always been affirmed that's extremely disciplined
• 36:13
  Speaker 5: about their cost, their approach to costs and investments. It's
• 36:17
  Speaker 5: giving them more functionality, and there's different behind the scenes.
• 36:21
  Speaker 5: It may not for you, it may not be important,
• 36:24
  Speaker 5: but for any fund manager that can mark to mark
• 36:27
  Speaker 5: almost in near time, their exposure, think of the balance
• 36:31
  Speaker 5: sheet benefits, the cost of capital that goes down. There's
• 36:34
  Speaker 5: a million reasons, and that all these that goodness trickles
• 36:38
  Speaker 5: down to the end user.
• 36:40
  Speaker 4: We talked about some of the concerns fragmentation, liquidity, the
• 36:44
  Speaker 4: legal stuff, twenty four to seven markets. I do like
• 36:48
  Speaker 4: to sleep, you know, like I don't really want to trade.
• 36:50
  Speaker 3: At two am. What concern do you take most seriously?
• 36:54
  Speaker 5: What keeps me up is fragmentation, right of liquidity, infrastructure
• 37:00
  Speaker 5: because that will have a direct consequences on adoption. I
• 37:03
  Speaker 5: also don't know if this will take off, right soady,
• 37:08
  Speaker 5: I was talking to our CEO before I came over,
• 37:10
  Speaker 5: and we don't know. We think, based on client feedback,
• 37:15
  Speaker 5: on regulatory feedback, that this is the way the markets
• 37:19
  Speaker 5: will go. Are we at a point of no return?
• 37:21
  Speaker 5: Not really? But the thing that worries me is fragmentation
• 37:25
  Speaker 5: and interruptibility, and they're mutually exclusive.
• 37:29
  Speaker 3: Right.
• 37:29
  Speaker 5: Interruptability is a big word that we throw around quite
• 37:32
  Speaker 5: a bit, but we're not there. We're interconnected, we're not interoptable.
• 37:36
  Speaker 5: And until the day you can swap freely and do
• 37:40
  Speaker 5: what you need to do freely, and you and I
• 37:42
  Speaker 5: speak the same language despite the fact we're on different
• 37:45
  Speaker 5: standards in different platforms. And that is again work that
• 37:48
  Speaker 5: you see the likes of DTCC, where we can galvanize
• 37:51
  Speaker 5: the industry and bring it together, which eventually would lead
• 37:54
  Speaker 5: us to atomic settlement. What do you do with netting? Right?
• 37:56
  Speaker 5: Like I got people beating me up all day logs like, well,
• 38:00
  Speaker 5: you guys can't be seriously not providing atomic settlement, And
• 38:03
  Speaker 5: I go, well, we net at ninety eight percent and
• 38:06
  Speaker 5: they go, what is netting right? I'm like, all right,
• 38:09
  Speaker 5: let's go back to my numbers. Four quadrillian dolls is
• 38:12
  Speaker 5: not enough money in the system intergrolactically to be able
• 38:16
  Speaker 5: to settle in real time growth settlement. So we need
• 38:19
  Speaker 5: to think through how do we start netting, how the
• 38:21
  Speaker 5: modality of settlements and so that would enhance the market
• 38:26
  Speaker 5: as we move forward. But before we do that, we
• 38:28
  Speaker 5: need to get the rails. We need to deal with fragmentation.
• 38:31
  Speaker 5: Inter on probability.
• 38:32
  Speaker 4: I have a solution for your enthusiasm concern. There was
• 38:35
  Speaker 4: this entity called Satoshi who did this white paper and
• 38:38
  Speaker 4: then everybody got really excited eventually about where that thing went.
• 38:42
  Speaker 3: You should find that entity.
• 38:44
  Speaker 5: We should look for If he or she will adopt it,
• 38:50
  Speaker 5: I'd be great.
• 38:51
  Speaker 2: I do have a question about crypto, is that this
• 38:54
  Speaker 2: is ye sounds bullish for crypto. Are you working with
• 38:58
  Speaker 2: Ethereum or any of the big blocks or like I
• 39:01
  Speaker 2: guess if you're listening to this and you're like, hey,
• 39:03
  Speaker 2: I actually would like to invest in this movement. Is
• 39:08
  Speaker 2: there any way to directly rest in the blockchains? Yeah?
• 39:13
  Speaker 2: Like I know, hyper liquids hot, there's salon, Like is
• 39:15
  Speaker 2: there a blockchain or just buy a basket? Because like,
• 39:19
  Speaker 2: all of the blockchains will benefit if what you say
• 39:21
  Speaker 2: happens happens.
• 39:23
  Speaker 5: I think they'll all benefit as long as there's liquidity
• 39:27
  Speaker 5: on these platforms and clients are flocking there to trade
• 39:32
  Speaker 5: their tokens and hold them. I would say over time.
• 39:35
  Speaker 2: The answers yes, yeah, it is interesting. You know there
• 39:38
  Speaker 2: is a crowd that just crypto.
• 39:41
  Speaker 3: Crypto bros.
• 39:42
  Speaker 2: You have to hear this and be like, Okay, maybe
• 39:44
  Speaker 2: it's not all a joke. I also have to say that.
• 39:47
  Speaker 5: I wish you it's not a joke.
• 39:48
  Speaker 6: I wish people had visuals when Eric said crypto Bros.
• 39:52
  Speaker 6: Because he really had a funny action. How much activity
• 39:55
  Speaker 6: would need to move into the system before you consider
• 39:57
  Speaker 6: it as success, because I was a little surprised when
• 39:59
  Speaker 6: you said that you're not even sure if this will work.
• 40:01
  Speaker 6: I'm sure a lot of thoughts have been put into this,
• 40:03
  Speaker 6: a lot of investments.
• 40:04
  Speaker 5: So I've got to say that. I mean, my personal
• 40:07
  Speaker 5: opinion is I think people will flock to that. But
• 40:10
  Speaker 5: I think you know this conversation this afternoon. I can't
• 40:14
  Speaker 5: give you a number, and honestly, it doesn't really matter
• 40:17
  Speaker 5: because we're coming from such small numbers today. So anything
• 40:22
  Speaker 5: is a gift that keeps going. And when you look
• 40:25
  Speaker 5: at the larger names that we're working with, so all
• 40:28
  Speaker 5: the names that are originally were skeptics, now they're coming
• 40:31
  Speaker 5: back and saying, hey, there's something there. So I think
• 40:34
  Speaker 5: we'll move forward. I just want to be careful and not,
• 40:37
  Speaker 5: you know, blow up expectations because I don't want to
• 40:40
  Speaker 5: be disappointed. But we're anything that comes on board will
• 40:44
  Speaker 5: be a.
• 40:44
  Speaker 3: Gift Okay, So when Eric retires ten years from now or.
• 40:48
  Speaker 2: Twenty fifteen years, will my team be called the token
• 40:51
  Speaker 2: team or we'll still be ETF team.
• 40:53
  Speaker 5: I hope you'll be known as a token team.
• 40:55
  Speaker 3: Wow.
• 40:56
  Speaker 5: Wow.
• 40:57
  Speaker 4: When he looks back at July fifteenth, what's he gonna
• 41:02
  Speaker 4: how is he going to describe tokenization changing the world?
• 41:06
  Speaker 5: It was? It was the moment in time, right like, uh, So,
• 41:10
  Speaker 5: I think it will be the beginning of a journey,
• 41:12
  Speaker 5: and I want to be clear that it truly is
• 41:14
  Speaker 5: a beginning of a journey. I think we'll see more
• 41:16
  Speaker 5: momentum because what's going to happen is in and I
• 41:19
  Speaker 5: want to be clear about that. In July, we're gonna
• 41:21
  Speaker 5: do a series of trades. There'll be limited in scope
• 41:24
  Speaker 5: and in time, with a limited number of participants doing that,
• 41:28
  Speaker 5: and we're doing that on purpose to just make sure
• 41:31
  Speaker 5: that everything works. The market, you know, feels good, like okay,
• 41:35
  Speaker 5: if so and so and so and so that that
• 41:37
  Speaker 5: it should be okay for me to give it a shot.
• 41:39
  Speaker 5: And then we're actually going to open up our environment.
• 41:42
  Speaker 5: So any DTCC participant that is ready, that means they've
• 41:45
  Speaker 5: got wallet infrastructure, they've got a use case, we will
• 41:48
  Speaker 5: let them come in and they could test it, and
• 41:51
  Speaker 5: then in October, if they want to go forward, let's
• 41:54
  Speaker 5: let's do that. So that's that's what's gonna happen. And
• 41:57
  Speaker 5: then you know, we'll slowly but surely release hopefully more
• 42:00
  Speaker 5: blockchains that we will you know, facilitate people moving their
• 42:03
  Speaker 5: tokens on, more alliances, in partnerships where people can use
• 42:07
  Speaker 5: their tokens there, and slowly but surely we will build
• 42:11
  Speaker 5: that digital ecosystem. But it is going to take a
• 42:14
  Speaker 5: village and you'll see us. You'll hear us talk about standards.
• 42:18
  Speaker 5: You'll hear us talk about what happens to modality of settlements, right,
• 42:21
  Speaker 5: all the things that are important for institutional investors to have.
• 42:26
  Speaker 5: They need certainty. Institutional investors need certainty, and it's an
• 42:30
  Speaker 5: interesting concept. I'm going to digress a little bit, but
• 42:33
  Speaker 5: this whole crypto movement, all the tokenization movement so far,
• 42:38
  Speaker 5: has been really driven by retail and you know, traditional
• 42:41
  Speaker 5: institutions have sat by the sidelines because they need certainty.
• 42:46
  Speaker 5: And certainty began when DTCC entered the game. We got
• 42:50
  Speaker 5: our no action letter in December of twenty and twenty
• 42:53
  Speaker 5: twenty five that was huge. That was a watershed moment
• 42:56
  Speaker 5: for the markets. And now hopefully in July, when you
• 42:59
  Speaker 5: see the names we lined up in the ETFs we've
• 43:01
  Speaker 5: lined up for it to kenization, you're going to say
• 43:05
  Speaker 5: this is real, Like, this is a real thing and
• 43:08
  Speaker 5: it's going to move forward.
• 43:09
  Speaker 2: So the thing with dt CC is this isn't like
• 43:13
  Speaker 2: they're not some talking book for profit company. Like even if.
• 43:18
  Speaker 3: Blacks is the ledger talking to you, they're like.
• 43:20
  Speaker 2: The they're the middle. They're almost like the nucleus of
• 43:24
  Speaker 2: the whole financial industry.
• 43:27
  Speaker 5: The nucleus. You know, it's important DTCC is owned and
• 43:35
  Speaker 5: governed by its participants, right, so that's really important. We
• 43:39
  Speaker 5: serve the needs of the market. So we're not out
• 43:43
  Speaker 5: there like playing around with stuff like we truly believe.
• 43:46
  Speaker 5: But at the same time, we've never done it right.
• 43:49
  Speaker 5: So that's why I've got to be cautious with my
• 43:51
  Speaker 5: terms of like I don't know because I don't listen.
• 43:55
  Speaker 5: I could wake up on the sixteenth with feeling like
• 43:58
  Speaker 5: on top of the world, or I could be running
• 44:01
  Speaker 5: around hiding somewhere. But we believe on everything that we've done.
• 44:04
  Speaker 5: In all the conversations we're having there's real excitement from
• 44:07
  Speaker 5: the studitional marketplace to do this, and we're excited for
• 44:11
  Speaker 5: this journey.
• 44:11
  Speaker 2: Is d Ram one of the ETFs you've got lined
• 44:13
  Speaker 2: up because he's interested? Obviously?
• 44:15
  Speaker 5: No, I think it's the pot thing.
• 44:20
  Speaker 2: Ten minutes to figure out that Poete wasn't available.
• 44:22
  Speaker 4: As long as we're talking tickers, will there be tickers
• 44:27
  Speaker 4: as tokens?
• 44:28
  Speaker 3: Yeah?
• 44:28
  Speaker 2: How does that work?
• 44:29
  Speaker 3: Were they just well, like.
• 44:31
  Speaker 4: Is d Ram going to be a d Ram ticker
• 44:33
  Speaker 4: or will there be such.
• 44:34
  Speaker 3: A thing as a ticker and a token?
• 44:36
  Speaker 5: Yeah? If they do in the traditional sense they would, so,
• 44:39
  Speaker 5: like if you.
• 44:41
  Speaker 2: Basically, but what if I just invent a new token
• 44:44
  Speaker 2: vo o?
• 44:44
  Speaker 5: If we converted dad, And I'm not saying we are,
• 44:47
  Speaker 5: but if we did, it would still.
• 44:49
  Speaker 3: Be vo Okay.
• 44:50
  Speaker 2: But what if Vanguard came up with something called like
• 44:51
  Speaker 2: the Vanguard fifty and it was a new index and
• 44:54
  Speaker 2: they tokenized that, what would the.
• 44:56
  Speaker 5: Ticker be whatever the ticker they gave it, Oh, it.
• 44:58
  Speaker 2: Would still be a three or four let ticker.
• 44:59
  Speaker 3: Okay, gotcha.
• 45:00
  Speaker 4: Nadine, thank you so much for joining us, so much
• 45:02
  Speaker 4: for having it's been fun. Thanks for listening to trillions.
• 45:09
  Speaker 4: Until next time you can find us on the Bloomberg Terminal,
• 45:11
  Speaker 4: Bloomberg dot com, Apple Podcasts, Spotify.
• 45:15
  Speaker 3: Or wherever else you'd like to listen. We'd love to
• 45:17
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• 45:20
  Speaker 4: Trillions is produced by Magnus Hendrickson and Kishov Pundia Bye.