Latest / CRYPTO 101 / Ep. 669 Crypto Meets Traditional Finance: A Deep Dive with Franklin Templeton

Transcript

Ep. 669 Crypto Meets Traditional Finance: A Deep Dive with Franklin Templeton · CRYPTO 101

0:09
[SPEAKER_00]: All right, everybody.
0:09
[SPEAKER_00]: Welcome back to another episode of the crypto one-on-one podcast.
0:13
[SPEAKER_00]: I'm your co-host Bryce.
0:16
[SPEAKER_00]: We've got an awesome guest for you today, but I'm joined as always by my good buddy, my compadria across the nation, Mr. Brendan Veeeman.
0:25
[SPEAKER_00]: How are you doing Brendan?
0:26
[SPEAKER_01]: Rice, I am doing good.
0:28
[SPEAKER_01]: I mean, like you said, we got a very special guest.
0:30
[SPEAKER_01]: And we've seen a lot of conversation about what's happening and how the world of crypto is intersecting with track five.
0:37
[SPEAKER_01]: So we brought on one of the best guests possible to talk about exactly that.
0:41
[SPEAKER_00]: Yes, Mike Reed is joining us.
0:42
[SPEAKER_00]: He's the head of partnership developments at Franklin Templeton for digital assets.
0:49
[SPEAKER_00]: Mike, thanks for joining us and how the heck are you today?
0:52
[SPEAKER_02]: I'm doing great, but I thank Slough for having me really appreciated.
0:54
[SPEAKER_00]: Yeah, and we're excited, you know, Markets volatile, but generally things have been up into the right.
1:01
[SPEAKER_00]: And yeah, we're super excited, but yeah, Mike, we'd love to just dive in to Franklin Templeton at a high level.
1:08
[SPEAKER_00]: You know, we see the numbers one and a half trillion dollar sort of traditional asset manager, but who's also breaking into the on-chain world, the crypto world, you know, the RWA world.
1:20
[SPEAKER_00]: You could call it a bunch of different things.
1:22
[SPEAKER_00]: digital assets.
1:23
[SPEAKER_00]: But we want to start with the high level.
1:26
[SPEAKER_00]: What is Franklin Temple to do?
1:28
[SPEAKER_00]: What is their mission?
1:31
[SPEAKER_02]: Oh, boy.
1:32
[SPEAKER_02]: We do quite a bit.
1:34
[SPEAKER_02]: We build and we invest.
1:36
[SPEAKER_02]: We build directly on blockchains ourselves authentically.
1:39
[SPEAKER_02]: We have our own team of engineers that built a digital wall at infrastructure, on chain transfer agent, all that kind of stuff.
1:46
[SPEAKER_02]: And then we invest in the assets ourselves.
1:48
[SPEAKER_02]: We have
1:50
[SPEAKER_02]: multiple track records of different disciplines ranging from index to where to fully discretionary and everything in between.
1:57
[SPEAKER_02]: We have a venture capability.
1:59
[SPEAKER_02]: And then we also run validator nodes on multiple chains.
2:03
[SPEAKER_02]: So we got our hands to a lot of different parts.
2:05
[SPEAKER_02]: I like to tell people, we are authentic and our learnings have all been very organic.
2:11
[SPEAKER_02]: And by that I mean, authentic in that we build authentically on chain.
2:16
[SPEAKER_02]: We're in it.
2:17
[SPEAKER_02]: We're investors, we're enthusiasts.
2:20
[SPEAKER_02]: We use the tech, we love it ourselves and our everyday, but then get to do some of it for our real jobs as well.
2:28
[SPEAKER_00]: When did Franklin Templeton kind of break into the tokenization trend and on-chain management and stuff?
2:36
[SPEAKER_02]: Well, I started learning about the first time I heard anyone talk about crypto.
2:41
[SPEAKER_02]: My boss came in maybe fifteen years ago.
2:44
[SPEAKER_02]: We were there was a whole bunch of us who were in fixed income in Franklin fixed income years ago.
2:48
[SPEAKER_02]: And we were super interested in just looking at different asset classes, esoteric pockets of capital just all sorts of stuff.
2:57
[SPEAKER_02]: And he walked in one day and he said my son was playing Call of Duty and some people paid him.
3:02
[SPEAKER_02]: He was on station and he's like somebody paid him in
3:06
[SPEAKER_02]: Bitcoin to like solve a level.
3:07
[SPEAKER_02]: Do you guys know what that is?
3:09
[SPEAKER_02]: And then I said, I've ever heard of it.
3:10
[SPEAKER_02]: And so we were like, let's dive in.
3:12
[SPEAKER_02]: So we started learning.
3:13
[SPEAKER_02]: And then when Ethereum launched, we started to learn about smart contracts and programmable money and all that kind of stuff.
3:19
[SPEAKER_02]: And to a bunch of fixed income people thinking about if this, then that statements coded into your cash flows, that can super natural to us.
3:28
[SPEAKER_02]: So we started diving deeper and deeper and deeper.
3:30
[SPEAKER_02]: And then one day, we were like, well, why don't we try and do a project here?
3:35
[SPEAKER_02]: We got kind of lucky that the woman who's our president, CEO, Jenny Johnson used to run operations for the company.
3:41
[SPEAKER_02]: And so the idea of ledger efficiency was something she was really psyched about.
3:46
[SPEAKER_02]: And so when we came to her talking about these distributed ledgers, she was like, what can you build?
3:51
[SPEAKER_02]: Can you use those ledgers in our own business to try and build something differentiated and build ledger efficiency into our book?
3:59
[SPEAKER_02]: We're in finance, so ledgers are everywhere.
4:02
[SPEAKER_02]: And so we began the process of tokenizing a money fund at that point and launched that product a few years later.
4:12
[SPEAKER_00]: That's crazy.
4:12
[SPEAKER_00]: It's a crazy story.
4:13
[SPEAKER_00]: You guys went from the traditional financial world to realizing more than an experiment this stuff might actually bring efficiency to our business.
4:24
[SPEAKER_00]: We want to enhance things that we're working on, but we can enhance things for customers.
4:28
[SPEAKER_00]: So you guys really sit at
4:30
[SPEAKER_00]: You know, at the crux of crypto and traditional finance, you do many different things.
4:36
[SPEAKER_00]: You also, I believe, are in the ETF game, as well, this Franklin Templeton, you know, manage Bitcoin ETFs or anything of that nature.
4:47
[SPEAKER_02]: We do.
4:49
[SPEAKER_02]: We have a Bitcoin ETF that tickers EZ, BZ, and the idea was making Bitcoin investing easy.
4:56
[SPEAKER_02]: My own father was really interested in investing in Bitcoin, but the whole idea of a wallet
5:00
[SPEAKER_02]: was pretty scary and cumbersome, and you didn't want another account.
5:06
[SPEAKER_02]: And so as soon as we launched the ETFC started investing in Bitcoin, just because it became a lot easier.
5:11
[SPEAKER_02]: So our Bitcoin one is called EZBC, our Ethereum one is EZET, and then product I really like is one called EZPZ, which is a multi token product that it hears to an index.
5:26
[SPEAKER_02]: And what makes it into that index are assets,
5:29
[SPEAKER_02]: where there's potential for value of cool and stuff like that, but that have been approved by the regulator.
5:34
[SPEAKER_02]: So you can think it was the right now, it's just Bitcoin Ethereum in there at a market weight, but as more assets get approved and make it into that index, the portfolio will expand over time.
5:44
[SPEAKER_02]: So it's kind of
5:46
[SPEAKER_02]: Let's set it and forget it crypto.
5:47
[SPEAKER_02]: It's like I want market beta.
5:49
[SPEAKER_02]: I don't really know what I'm doing.
5:51
[SPEAKER_02]: I can just allocate to this and and know I'll have that that exposures.
5:56
[SPEAKER_02]: It's pretty cool product.
5:57
[SPEAKER_02]: I'm pretty psyched about it.
5:58
[SPEAKER_00]: Well, I could definitely see, you know, we were just talking the other day.
6:05
[SPEAKER_00]: to somebody and they were talking about all the Bloomberg odds for all the different altcoin ETFs that, you know, ninety five to eighty percent or whatever odds of approval this year for like, you know, a half a dozen or a dozen altcoins.
6:18
[SPEAKER_00]: So are you saying that like if they get their spot ETF approved, then they could be maybe added to this easy PZ ETF.
6:26
[SPEAKER_02]: That's right, yeah.
6:27
[SPEAKER_02]: It's, it's, uh, I hate to mention a competitor product on a, on a public channel.
6:33
[SPEAKER_02]: It's kind of, it's kind of like QQQ but for crypto.
6:35
[SPEAKER_02]: It's like, uh, it's like an index oriented beta play for again, people who, who just know they like that, the interesting ask, you know, they think there's a cool space, a lot of really interesting technology, but they don't only know how to allocate.
6:47
[SPEAKER_02]: And so they're, they're like, I like a market way exposure to a bunch of different assets and, and has time goes on and more assets.
6:54
[SPEAKER_02]: get approved that the index will grow and so to well the composition portfolio.
6:59
[SPEAKER_01]: So I saw that Templeton has the basket or the index like you're talking about pending still and then you also have a Solana and an XRP spot ETF that are pending.
7:10
[SPEAKER_01]: Is that the is is the basket that you're talking about right now that one that is pending.
7:16
[SPEAKER_02]: It's live, actually, it's live now.
7:18
[SPEAKER_02]: Wow.
7:18
[SPEAKER_02]: Yeah, we have a hat somewhere that say easy peasy with a lemon beside it, because it's more about easy peasy lemon.
7:26
[SPEAKER_02]: Squeezey was kind of a fun thing, but yeah.
7:27
[SPEAKER_02]: I liked it.
7:28
[SPEAKER_02]: It's approved and by myself, it's approved and available.
7:33
[SPEAKER_01]: That's awesome.
7:34
[SPEAKER_01]: And then you have a couple more that are on the way.
7:37
[SPEAKER_01]: I guess walk us through the mindset here because now what we're seeing is that a lot of asset managers are exploring beyond Bitcoin, beyond Ethereum and they are creating these baskets or these indexes where they can encompass
7:51
[SPEAKER_01]: all of the products that they get approved for in the future and there really is just this push right now to get other altcoin spot ETFs approved.
7:59
[SPEAKER_01]: I guess why is that and what's the interest there?
8:02
[SPEAKER_02]: Yeah, I'll say this.
8:04
[SPEAKER_02]: I can't comment on ongoing file with the SEC, but I would say that to me there's kind of
8:14
[SPEAKER_02]: Bitcoin and then everything else kind of not not really but you know Bitcoin's got got its own investment thesis that I think is different than a lot of the rest of the space and I think a lot of the really interesting things that are happening are happening in the rest of the space a lot of the really interesting projects that are being built on the protocols and like I said in the beginning I actually use some of the products myself so
8:39
[SPEAKER_02]: So like helium, for example, I'm a helium subscriber.
8:43
[SPEAKER_02]: I use the phone.
8:44
[SPEAKER_02]: My phone is a helium phone.
8:46
[SPEAKER_02]: It's a helium is the service provider.
8:48
[SPEAKER_02]: Enjoy the services as a subscriber.
8:51
[SPEAKER_02]: But then I also operate a spot spot out of my house.
8:55
[SPEAKER_02]: So I can earn doing that.
8:59
[SPEAKER_02]: token exposure, Solonic exposure broadly.
9:02
[SPEAKER_02]: I think that deep in narrative is still interesting and I think super relatable.
9:08
[SPEAKER_02]: That's something that a lot of people in crypto really don't think that much about when it comes to talking to traditional investors.
9:14
[SPEAKER_02]: There's a real translation function that has to occur where things we do in crypto are things that are done in traditional finance in some cases.
9:23
[SPEAKER_02]: They just look slightly different.
9:25
[SPEAKER_02]: So for example,
9:26
[SPEAKER_02]: You know, burning tokens kind of feels like a share-by-back.
9:29
[SPEAKER_02]: It's not quite the same, but it kind of feels that way.
9:33
[SPEAKER_02]: Think about paying out validators for doing the validation work.
9:37
[SPEAKER_02]: That's almost kind of like reinvesting in your business or paying, it's paying to secure the network.
9:42
[SPEAKER_02]: But you know what I mean?
9:43
[SPEAKER_02]: It's like we start to think of it in those kinds of terms.
9:45
[SPEAKER_02]: We've noticed the lights really turn on for a lot of traditional investors.
9:50
[SPEAKER_02]: And I think some of those things that are happening in deep in really let people say, oh,
9:55
[SPEAKER_02]: There are real businesses.
9:56
[SPEAKER_02]: There is real cash flow.
9:59
[SPEAKER_02]: There's real product here, real interesting ways of doing things.
10:02
[SPEAKER_02]: So I like using the products because I like trying it all out.
10:07
[SPEAKER_02]: I like seeing what works, what doesn't work.
10:12
[SPEAKER_02]: I have one of those, you know, kudos, the rings.
10:15
[SPEAKER_02]: I have one of those.
10:16
[SPEAKER_02]: I'm wearing it right now.
10:18
[SPEAKER_02]: So you can like
10:19
[SPEAKER_02]: mint your own healthcare NFTs and really fully realize the economics of that rather than having a third party sell your data, if you choose.
10:28
[SPEAKER_02]: So I like trying stuff out and seeing what works and what doesn't work.
10:33
[SPEAKER_02]: So anyway, point is back to your question, which was like altcoins in general in the space.
10:41
[SPEAKER_02]: I think a lot of those things that are happening outside of kind of Bitcoin, even Ethereum, a lot of the things that are happening in the altcoins space are really interesting.
10:51
[SPEAKER_01]: Yeah, like even recently, Bryce, I know we were just talking about this, but you've seen a lot of different players want to get involved in altcoins or want to get involved in crypto one way or another.
11:02
[SPEAKER_01]: I mean, JP Morgan was just talking about it.
11:04
[SPEAKER_01]: Bank of America was just talking about it.
11:06
[SPEAKER_01]: Robin Hood came out yesterday and said, hey, we're going to be
11:09
[SPEAKER_01]: launching our own chain on Ethereum so that we can tokenize assets and there's just been a lot of discussion whereas for a while it was like it started out as how we don't want to touch crypto and then it was we want to look at Bitcoin and then now we're kind of entering into the next stage of that is how can we not only offer altcoins but how can we use this technology and get plugged into the ecosystems which you know you all are doing here you guys are all actively in stage
11:37
[SPEAKER_01]: in stage three and and doing this and it's fascinating it's fascinating because I think everyone has crypto so vast so that everyone has a little bit of a different approach as to how they want to use it and how they see it fitting into their own like agenda and like a good
11:57
[SPEAKER_02]: I think like, so that kind of progression you talked about, something that kind of hit, you remember, like, a couple of months ago I said, we're authentic in organic.
12:05
[SPEAKER_02]: I choose both words by accident, when I said organic, what I mean is all of the learnings kind of build on each other, right?
12:12
[SPEAKER_02]: So like, you hear about Bitcoin and you're like, what's that all about?
12:15
[SPEAKER_02]: You learn about Ethereum, and what's that all about?
12:17
[SPEAKER_02]: And even when it came down to chains like this, our money fund is called Benji, the token is called Benji.
12:23
[SPEAKER_02]: It's an authentically tokenized money fund that's available.
12:26
[SPEAKER_02]: You can download an app.
12:28
[SPEAKER_02]: I think it's called Benji investments, and you can download the app.
12:31
[SPEAKER_02]: KYC your way in, and then buy a money fund to token.
12:34
[SPEAKER_02]: One token is equivalent to one share of the underlying fund.
12:38
[SPEAKER_02]: So again, organic.
12:40
[SPEAKER_02]: So we were like, we were looking at this and we're like, okay, what change should we launch on?
12:44
[SPEAKER_02]: And we were trying to decide looking at all the chains.
12:46
[SPEAKER_02]: We want to do it in a regulatory compliant way.
12:49
[SPEAKER_02]: And so we launched initially on Stellar.
12:51
[SPEAKER_02]: And one of the reasons we chose Stellar as our launch partner was because Stellar at the time thinks, you know, things changed, but at the time didn't have any smart contract capability.
13:00
[SPEAKER_02]: And it felt to us like from a regulatory standpoint that was just a cleaner story.
13:06
[SPEAKER_02]: So we launched on Stellar.
13:08
[SPEAKER_02]: But when we remember choosing the chains, you start to learn some of these chains that they have different transactions per second, certainly different cost structures available.
13:17
[SPEAKER_02]: And so you start to say, okay, well, if all these chains have slightly different cost structures, are there people who are interested in them for different reasons?
13:25
[SPEAKER_02]: And they start to learn about the communities on them.
13:28
[SPEAKER_02]: And so then we start saying, okay, well, we want to be available wherever those communities have a design.
13:32
[SPEAKER_02]: So we started expanding.
13:33
[SPEAKER_02]: So then we went live on Paulinggon, Aptos, Avalanche, Arbitrum,
13:38
[SPEAKER_02]: if made that base and then Solana a couple months ago and so you start expanding to go to where the users are and then we're all the users are nobody's well still here yeah I mean we're trying to be as many places but again like meet people where the demand is you know and then you're like okay so these tokens like the price of the moves around are these investable assets
14:03
[SPEAKER_02]: And what happens if I just equal weight them?
14:07
[SPEAKER_02]: What happens if I use like factor based investing?
14:09
[SPEAKER_02]: What happens?
14:10
[SPEAKER_02]: If I just have like a, I don't know, like a infrastructure thesis or whatever.
14:13
[SPEAKER_02]: So you start to learn all these things and how the assets move over time and what becomes super apparent to you the deeper you go.
14:20
[SPEAKER_02]: That's how not only is this asset class big and it can't be ignored for for that reason alone, right?
14:25
[SPEAKER_02]: Like it's a huge asset class is bigger than you as how you can't ignore that reason alone.
14:30
[SPEAKER_02]: But then you say there's really compelling narratives in here for me to want to invest in.
14:36
[SPEAKER_02]: So that like altcoin thing that you mentioned is something that became apparent to us right away, like really early on.
14:42
[SPEAKER_02]: So that's why we started building
14:44
[SPEAKER_02]: track record, you know, just just to kind of build on looking, looking further and further out and seeing what else there was available to invest in.
14:52
[SPEAKER_00]: It's so cool because, you know, you guys are like a traditional financial firm, but you're not just focused on like tokenizing treasuries or, you know, whatever, you know, just make, I mean, you're doing that, but you're also doing so much more in the space and kind of really rolling up your sleeves and, you know,
15:13
[SPEAKER_00]: making this stuff from the ground up.
15:14
[SPEAKER_00]: And so yeah, like I like that organic and authentic sort of motif throughout everything that you do.
15:20
[SPEAKER_00]: But I want to dive in specifically to that money market fund on Solana.
15:24
[SPEAKER_00]: You guys chose Solana primarily because of its speed and security or what kind of went into the thought process there with Solana.
15:34
[SPEAKER_02]: Yeah, so I would say with all the chains that we launched on and Solana certainly like example of this is that
15:43
[SPEAKER_02]: We have two kind of basic frameworks that we look at.
15:45
[SPEAKER_02]: One is a text suitability framework, which is available in our perspective.
15:50
[SPEAKER_02]: It's something codified into the way that we build.
15:54
[SPEAKER_02]: So just make sure the technology works for us.
15:56
[SPEAKER_02]: And then the other thing that we look at is kind of a business development suitability framework.
16:01
[SPEAKER_02]: So like I said, like meet the users where they are, are there enough thing, are there enough things happening on this chain where we may be able to integrate with different projects.
16:10
[SPEAKER_02]: Where it makes it kind of like, you know, you don't want to just dev on a chain and then have it live with no assets because you know, you paid to have that work done, you want to be able to have, you know, different.
16:22
[SPEAKER_02]: economic opportunities present themselves, I guess.
16:25
[SPEAKER_02]: And one of the things that became really apparent to us early on, like the, again, like, the organic thing.
16:31
[SPEAKER_02]: But if these answers are too long-winded, feel free to say, like, hey, all of them.
16:35
[SPEAKER_02]: No, no, no, no.
16:37
[SPEAKER_02]: I get kicked out of the table at cocktail parties all the time by my wife who's like, I already want to know about this.
16:42
[SPEAKER_02]: But we're super excited about it.
16:45
[SPEAKER_02]: You know, when we lost the money fund in the beginning, yields were at zero and so I'm really no one cared.
16:52
[SPEAKER_02]: And what happened was race started to back up and right as race were backing up Silicon Valley bank failed.
16:57
[SPEAKER_02]: And there were a lot of web three natives who had treasury at Silicon Valley bank and they didn't want to park it in a small regional bank again.
17:06
[SPEAKER_02]: And so what they thought of with
17:07
[SPEAKER_02]: The happened for us is that people knew we were developing in the space.
17:10
[SPEAKER_02]: The knew we had engineers.
17:11
[SPEAKER_02]: We weren't just tourists.
17:13
[SPEAKER_02]: And so they were like, would you guys take our money?
17:16
[SPEAKER_02]: Could you hold up?
17:18
[SPEAKER_02]: So we developed this like the thought exercise for lack of a better term.
17:22
[SPEAKER_02]: We developed this like really extinct thing that we were high-finding about, but no one cared about, and all of a sudden everyone cared.
17:28
[SPEAKER_02]: But what became a pair to us really, really on in that journey was that this is not a money fund.
17:34
[SPEAKER_02]: If you talk to people about this,
17:37
[SPEAKER_02]: I work in partnerships.
17:39
[SPEAKER_02]: My sales is not in my job tail for a reason because we're not selling money fund.
17:44
[SPEAKER_02]: We're talking about a tool that can be used in different ecosystems.
17:49
[SPEAKER_02]: So we started thinking to ourselves, okay, if people are going to use this as a financial tool, what kind of functionality do you want?
17:55
[SPEAKER_02]: Because there's a million money funds already in the market.
17:57
[SPEAKER_02]: They all work with the existing systems.
17:59
[SPEAKER_02]: It's a totally commodified space.
18:01
[SPEAKER_02]: So how can you differentiate yourself?
18:03
[SPEAKER_02]: Why is it being on chain important other than the fact that you have a new customer base?
18:08
[SPEAKER_02]: Which is great.
18:10
[SPEAKER_02]: But why is that an important thing?
18:12
[SPEAKER_02]: So the thing that makes it important is that if you mint authentically on chain, so we don't use a third party to go on chain with you ourselves.
18:19
[SPEAKER_02]: So the asset authentically lives on chain.
18:21
[SPEAKER_02]: There's no off chain book of records that we have to reconcile with, which means things like transferability.
18:28
[SPEAKER_02]: can also be coded into your asset.
18:30
[SPEAKER_02]: So, so we did that.
18:32
[SPEAKER_02]: We coded in transfer ability where users could, could send it to other users.
18:36
[SPEAKER_02]: So we had a user, you know, we have a large multinational then invest some treasury capital in our assets and users basically.
18:43
[SPEAKER_02]: Yeah.
18:44
[SPEAKER_02]: Correct.
18:45
[SPEAKER_02]: Correct.
18:47
[SPEAKER_02]: They, they move money around the opcos in Benji because historically all these opcos help money in money funds.
18:55
[SPEAKER_02]: And if they want to move money from one entity to another, they have to sell out of a money fund, transfer the cash over, and then reinvest it in a money fund.
19:02
[SPEAKER_02]: And that can take like three to five business days where you're yielding nothing.
19:06
[SPEAKER_02]: Yeah, it's a lot of friction too.
19:08
[SPEAKER_02]: So much, so much friction.
19:09
[SPEAKER_02]: And now you've not only removed the friction, but their money's always working for them.
19:14
[SPEAKER_02]: They're fully realizing the economics of their trade because it's an instant transfer of a yield bearing asset that they wanted anyway.
19:21
[SPEAKER_02]: We had a VC investor.
19:24
[SPEAKER_02]: If they could fund portfolio companies in Benji tokens, we had a group wanted to make a payment to a vendor in Benji instead of
19:32
[SPEAKER_02]: I mean, shoot, I have literally been out for drinks with a friend and paid my share in Benji Tokens using the global app.
19:40
[SPEAKER_02]: So this transferability thing was something that we knew had legs immediately.
19:44
[SPEAKER_02]: And we sprinted towards it and added that to the asset.
19:47
[SPEAKER_02]: We've also added other functionality too.
19:50
[SPEAKER_02]: So we have a USDC on-ramp for our institutional investors where they can buy and sell the product with USDC through third-party facilitator.
20:00
[SPEAKER_02]: We are working on some other functionality that think that we're the most excited about.
20:05
[SPEAKER_02]: Again, I'm a fixed income person for a couple decades before I've prepared out.
20:09
[SPEAKER_02]: So the thing I'm the most excited about, which we just announced within the last two, three weeks, is a functional calling inter-day yield.
20:17
[SPEAKER_02]: And what it means is that if I transfer you that asset at noon, I accrue yield from midnight to noon, you accrue from noon to midnight, and then at the end of the day, because our fun pays every day.
20:28
[SPEAKER_02]: It doesn't just accrue daily, it pays daily.
20:31
[SPEAKER_02]: So when the air drop of new tokens occurs, we each get it proportional to how long we held the asset.
20:36
[SPEAKER_02]: Now, if you and I go up for drinks, and I transfer you tokens,
20:42
[SPEAKER_02]: It's not then, you know, it's like, ten bucks, I don't know, twenty bucks of yield for a few, for a few hours.
20:47
[SPEAKER_02]: It's not really that big of a deal.
20:49
[SPEAKER_02]: But if you start to think about the institutional use cases like collateral repo trade finance, you know, the situations where sometimes people hold ten million dollars on their books for four hours a day, every day, but they don't own it when mark the market closes.
21:05
[SPEAKER_02]: So they could realize anything in that.
21:07
[SPEAKER_02]: Now that can get four hours worth of yield.
21:09
[SPEAKER_02]: And over the course of a year, that adds up pretty significantly.
21:13
[SPEAKER_02]: So we actually have a patent pending on that technology, because we're like, super psyched about it.
21:18
[SPEAKER_02]: That only comes because the asset lives on chain and you can cut the rewards up to the block.
21:24
[SPEAKER_02]: We say to the second when we're talking to people, but just crypto to us, right?
21:29
[SPEAKER_02]: Right?
21:30
[SPEAKER_02]: So we can talk to the block to the block to the block, which, you know, and that yield clock runs twenty four seven three sixty five.
21:39
[SPEAKER_02]: So you transfer the asset on a Sunday morning at two in the morning.
21:44
[SPEAKER_02]: It settles authentically at two in the morning.
21:47
[SPEAKER_02]: And then you can do that inter-day yield count to figure out how much yield you would get over the course of the period you held it.
21:53
[SPEAKER_01]: It's crazy that this didn't happen faster because when you think about this, you're like, it's twenty twenty five.
21:59
[SPEAKER_01]: Like, this is the future.
22:01
[SPEAKER_01]: Like, why can't I send a transfer Sunday at two in the morning if I want to, right?
22:07
[SPEAKER_01]: Why can't it happen instantaneously?
22:09
[SPEAKER_01]: Why can't it happen cross borders?
22:11
[SPEAKER_01]: Why can't we have all this stuff happen?
22:14
[SPEAKER_01]: You know, the answer now is like we can and it seems like the super clear like solution, but you know, I think in the past, you know, regulation did get in the way of parts of this happening and I'm curious just to get your take on like like what is happening with regulation and if you think that
22:35
[SPEAKER_01]: The US framework is evolving fast enough to support tokenized products, or I guess even how this regulation infects or impacts something like Benji for instance.
22:48
[SPEAKER_02]: Yeah, so I got a whole bunch of thoughts on every single guest.
22:54
[SPEAKER_02]: One is just to like level set, we actually took the approach with the regulators of being collaborative and not combative.
23:02
[SPEAKER_02]: So when and I'm not just saying this because this is recorded and is going to be published, but but truly we felt like it was much better to like
23:11
[SPEAKER_02]: go on an educational journey together and learn together.
23:14
[SPEAKER_02]: So when we launched our product, we actually worked in conjunction with the regulators on and educate them on everything.
23:20
[SPEAKER_02]: We had kind of a strategy around communicating with them and things like that.
23:25
[SPEAKER_02]: So we never really had it.
23:27
[SPEAKER_02]: have like a problem with the regulators.
23:31
[SPEAKER_02]: It's more just like let's learn through this together.
23:35
[SPEAKER_02]: I think it's an apolitical statement to say that the regulatory environment today is a lot more favorable for crypto than it was a year ago.
23:43
[SPEAKER_02]: That's great.
23:45
[SPEAKER_02]: I think some things like, you know, like stablecoin act, that kind of stuff.
23:54
[SPEAKER_02]: We kind of, so, let me say this about Denji in particular, with Denji, we are not trying to blow up the banks, right?
24:02
[SPEAKER_02]: Like we are not anarchists.
24:05
[SPEAKER_02]: We have a huge friend, he said, like, one and a half trillion dollars that lives on those rights.
24:10
[SPEAKER_02]: So we're not, we're not trying to blow up the banks at all.
24:14
[SPEAKER_02]: We are also not trying to blow up stablecoins.
24:16
[SPEAKER_02]: because stablecoins provide an essential service in this ecosystem that our asset can't provide because we are a permission to asset.
24:26
[SPEAKER_02]: So we have to know who owns every Benji token.
24:29
[SPEAKER_02]: At all times, we have to know that we have to know those users.
24:33
[SPEAKER_02]: stablecoins KYC at the point of mint and redeemed.
24:36
[SPEAKER_02]: The under like don't forget.
24:38
[SPEAKER_02]: So the underline for Benji is an SEC registered two a seven government money fund with a ticker of very traditional vehicle.
24:47
[SPEAKER_02]: It's a security.
24:47
[SPEAKER_02]: It's a digital asset security Benji is.
24:50
[SPEAKER_02]: So it's much, much different than a stablecoin.
24:53
[SPEAKER_02]: So we kind of think about think about like
24:58
[SPEAKER_02]: If stable coins are your crypto checking account, then you can be your crypto savings account.
25:04
[SPEAKER_02]: It's money can move freely between those two things.
25:08
[SPEAKER_02]: And one provides an essential service.
25:12
[SPEAKER_02]: Well, I would argue both provide an essential service because people want to yield on their assets and people want to have their money always working for them.
25:18
[SPEAKER_02]: Like I said, fully realizing the economics of your trade.
25:21
[SPEAKER_02]: That to me is a huge part of the ethos crypto.
25:25
[SPEAKER_00]: I got a question on all this to this point.
25:28
[SPEAKER_00]: You know, why do we even need to have two separate things?
25:32
[SPEAKER_00]: Why can't our USDC just automatically bear interest for us?
25:38
[SPEAKER_00]: Why do we need to have to go from USDC to Benji in order to get that yield?
25:43
[SPEAKER_00]: Why can't the USDC, which is already backed by short term government debt or whatever?
25:48
[SPEAKER_00]: Why can't it just automatically flow through to holders?
25:52
[SPEAKER_02]: So I'm not a securities lawyer.
25:55
[SPEAKER_02]: But I think I think if you start paying out that income then you start bumping up against securities regulations and
26:07
[SPEAKER_02]: Again, the key difference here is a stable coin is a stable coin.
26:11
[SPEAKER_02]: The NG is a digital asset security.
26:13
[SPEAKER_02]: So things like KYC controls are deep in place for us and they are necessarily a stringent for stable coins.
26:21
[SPEAKER_02]: So they're kind of, I hear totally hear what you're saying and, but it's a, they're kind of two separate things right now.
26:31
[SPEAKER_02]: I mean in the future who knows, but I know you can have our cake and eat it too.
26:35
[SPEAKER_02]: Maybe not yet, or not now, but, you know, I think that's something that a lot of people are looking at.
26:40
[SPEAKER_02]: And I think, I think codified into the legislation is that stablecoins can't pay yield.
26:47
[SPEAKER_02]: So, yeah, yeah.
26:48
[SPEAKER_00]: Yeah, so automatically be yielding or something.
26:52
[SPEAKER_02]: Yeah, I think it's, I think that's because then all of a sudden they start to bump up.
26:56
[SPEAKER_02]: They start to look more like a security.
26:59
[SPEAKER_00]: Okay, interesting.
27:02
[SPEAKER_00]: What do you think about that Brendan?
27:04
[SPEAKER_01]: Yeah, I mean, it's it's fascinating, especially when we have so so much going on, especially in regards to stable coins, I think that's the part that's fascinated me the most here lately, lately with the genius act going and being like at the forefront of conversation and seeing how people want to interact with that.
27:25
[SPEAKER_01]: And just also the reaction that we've seen from the triadify markets.
27:30
[SPEAKER_01]: And immediately, I think it was when it passed the Senate, like a week or two ago.
27:36
[SPEAKER_01]: When that happened, we saw a huge reaction from it was JP Morgan, Bank of America.
27:45
[SPEAKER_01]: There was one other.
27:46
[SPEAKER_01]: And then he said, I think it was, it was it, I think city.
27:50
[SPEAKER_00]: Yeah, they all now started doing a stable coin together.
27:53
[SPEAKER_01]: Yeah, and then I think Amazon and one other market also came out.
27:59
[SPEAKER_01]: And it was just like humble.
28:01
[SPEAKER_00]: You know, financial giants, everyone all of a sudden was like, hey, if this goes through, like it's the green light and Uber, I saw as well, alluded to including stable coins into their application to it's probably going to just end up being as easy as Apple pay.
28:15
[SPEAKER_00]: Like I use Apple for everything.
28:17
[SPEAKER_00]: You know, you double click on your iPhone on the side and then you just have your cards loaded in there.
28:21
[SPEAKER_00]: You'll probably just have like your wallet just in there already.
28:28
[SPEAKER_01]: No, I was just going to agree and say, I think what Mike has said so far and probably what you're about to say helps everyone understand like the pros of this and why it's happening and why it's being used.
28:40
[SPEAKER_01]: And again, back to just the original point, like it seems like a logical decision and you've made a great point for this already.
28:47
[SPEAKER_02]: Well, I mean, you know, let's remember one thing about stablecoins.
28:51
[SPEAKER_02]: If there's no adoption, then no one will care.
28:54
[SPEAKER_02]: So the state, you have to find use cases for the stable coins or you write this product.
28:59
[SPEAKER_02]: I mean, they're quite frankly, there's been product proliferation in the stable coin space for quite some time.
29:04
[SPEAKER_02]: I know it's not that US regulations relatively new, but this is a narrative that's being told for a long time.
29:11
[SPEAKER_02]: And what we found is that there's people who have created new stable coins, where those projects have taken off, because there's tremendous use cases for them, and then there's others that have not.
29:22
[SPEAKER_02]: And usually it's something like the acid can be used in pear trades, there's spending venues for the acid, there's all these kinds of things.
29:33
[SPEAKER_02]: I think if you're going to, like saying, you're going to launch a stablecoin is one thing, but having a real business strategy around it is a whole other, you know, ball ax any, you have to figure that second part out before you can launch it with confidence.
29:44
[SPEAKER_02]: Because I, because quite frankly, I think there's a lot of people who already have that business strategy set up and are, you know, have built successful injuries in that space.
29:54
[SPEAKER_00]: Yeah.
29:55
[SPEAKER_00]: Now I love it.
29:57
[SPEAKER_00]: I'm curious, do you see the world kind of evolving more?
30:00
[SPEAKER_00]: Like, I feel like there's two pathways.
30:02
[SPEAKER_00]: And maybe we'd probably go down both pathways.
30:04
[SPEAKER_00]: Pathway one is like centralized companies kind of like what Robinhood announced, like basically trading stocks on chain, twenty four five or whatever.
30:16
[SPEAKER_00]: But you're like doing it through like this permissioned world.
30:20
[SPEAKER_00]: Or do you kind of see like this other world unfolding like where you're trading, you know, tokenized stocks on Uniswap like permissionlessly?
30:31
[SPEAKER_00]: And other sorts of, you know, products that are, you know, and assets that are issued by folks like yourself.
30:36
[SPEAKER_02]: Or the, yeah, I'm, I'm going to say a little from Call of Man, a little from Call of Man be that, the way that it really feels like there's both worlds are have evolved.
30:47
[SPEAKER_02]: people are exploring institutional defight right now.
30:51
[SPEAKER_02]: And I think there's a lot of really interesting things happening there.
30:54
[SPEAKER_02]: Again, we're going back to that idea of translation function.
30:58
[SPEAKER_02]: The looping strategies feel to me just kind of like leverage, which you know.
31:05
[SPEAKER_02]: It's not there's anything wrong with that.
31:06
[SPEAKER_02]: I'm just saying like that to me.
31:08
[SPEAKER_02]: It's called Spanish.
31:09
[SPEAKER_02]: It's Spanish.
31:09
[SPEAKER_02]: Maybe we were like, oh, I know what that is.
31:12
[SPEAKER_02]: You know, a lot of these constructs.
31:13
[SPEAKER_02]: So I think, you know, figuring out what to do with these kind of permission to assets and some of those permissionless spaces.
31:23
[SPEAKER_02]: And a lot of people are sorting that out right now.
31:27
[SPEAKER_02]: It's going to be kind of a next big hurdle for large institutions like us to involve in that space.
31:33
[SPEAKER_00]: Yeah, no, it makes a ton of sense.
31:35
[SPEAKER_00]: And like do you think that like people are going to be having wall, like more and more wallets or do you think the banks are going to be integrating wallets and people aren't even going to really know about it.
31:45
[SPEAKER_00]: Like I'm just kind of curious like what you think about from the UX perspective how people are going to be most.
31:51
[SPEAKER_00]: interacting with crypto is it like going to just be under the hood.
31:55
[SPEAKER_00]: They're on Bank of America.
31:56
[SPEAKER_00]: They don't even realize they're using crypto.
31:59
[SPEAKER_00]: They're just, you know, having a better, you know, experience twenty four seven three sixty five access to their money and their assets.
32:05
[SPEAKER_00]: Or is it going to be like they're going to be on different newer wallets and platforms and stuff.
32:11
[SPEAKER_02]: So so borrowing from my colleague Sandy call who's the head of innovation at our firm.
32:16
[SPEAKER_02]: Sandy's long had a thesis that the wallet is the account of the future.
32:20
[SPEAKER_02]: and all of these assets can live alongside each other.
32:23
[SPEAKER_02]: And I definitely, not just because we work together, subscribe to that thesis.
32:30
[SPEAKER_02]: I think that, you know, and I've heard different people say things like, when everyone just thinks this stuff is money, that's what will all be a lot better off, but, you know, about it.
32:39
[SPEAKER_02]: But I think there, I think it's not just going to be invested assets or investable assets.
32:44
[SPEAKER_02]: I think it's going to be other things that are living alongside those things.
32:46
[SPEAKER_02]: Like you have
32:47
[SPEAKER_02]: You know, and NFT, so like Sandy and I were both big project fans.
32:53
[SPEAKER_02]: So say you have a big project.
32:57
[SPEAKER_02]: So say you have a, like, child of the nines, but say you have like a project NFT that might give you royalty rights, maybe a mean Greek with the band every year.
33:09
[SPEAKER_02]: You know, the new album, like whatever it is, say because you all these kind of benefits, I could keep that alongside mine.
33:15
[SPEAKER_02]: So long of tokens, I could keep that alongside my tokenized equities or whatever I am and upholding that portfolio.
33:22
[SPEAKER_02]: And then, also, you start to think about all these assets.
33:24
[SPEAKER_02]: So let's go with the project example again.
33:27
[SPEAKER_02]: So let's just say, like, I've met the band a bunch of times and I'm satiated.
33:32
[SPEAKER_02]: I think that I've had that experience.
33:35
[SPEAKER_02]: It was great.
33:36
[SPEAKER_02]: And I could figure out, is there a market where I could lend this NFT out?
33:41
[SPEAKER_02]: And someone else could borrow it for a fee.
33:44
[SPEAKER_02]: And they could have the band experience, again, I mean, something's the third or fourth time I said this, but like fully realizing the economics of your trade, right?
33:52
[SPEAKER_02]: Like you're like, okay, I own this.
33:54
[SPEAKER_02]: It's a cool thing.
33:55
[SPEAKER_02]: And there's other people who might not want to blend out their project NFT or, you know, pick whatever it is.
34:01
[SPEAKER_02]: The sports team that sells an NFT to, you know, like the Green Bay Packer shares, you know, that kind of idea where you could blend that out for some kind of benefit.
34:11
[SPEAKER_02]: I think all of these assets are destined to live together.
34:15
[SPEAKER_02]: So I think for advisors, traditional financial advisors, thinking about asset sourcing is going to become paramount because they're going to have to have wallets on chains where they can source good investment ideas for their clients alongside things that investors are passionate about because what we've seen over time is the investor
34:39
[SPEAKER_02]: a desire to have assets that means something to them emotionally is consistently going up over time.
34:45
[SPEAKER_02]: So people care, they want to feel good about something, you know, my kids have, excuse me, stock accounts.
34:52
[SPEAKER_02]: And I'm like, what do you like?
34:54
[SPEAKER_02]: And they're like, I like to eat here at this restaurant.
34:56
[SPEAKER_02]: I'm like, at this place.
34:58
[SPEAKER_00]: And so we buy this game.
34:59
[SPEAKER_02]: Exactly.
35:00
[SPEAKER_02]: Exactly.
35:00
[SPEAKER_02]: So that's kind of how, so now think about that from a grown-up perspective.
35:05
[SPEAKER_02]: Maybe you like really like, you know, a certain asset.
35:09
[SPEAKER_02]: And you also think that the company's got a great chance for growth.
35:12
[SPEAKER_02]: Now you're investing something you're passionate about where you think there's going to be good return.
35:15
[SPEAKER_02]: So I think all of these assets kind of destined to live alongside each other in a single wallet.
35:22
[SPEAKER_01]: You know, the conversation of wallets is interesting because I agree.
35:25
[SPEAKER_01]: I mean, it does feel like the future.
35:27
[SPEAKER_01]: One of the hurdles that I would like to see solved is how do we have this balance between security and making it
35:39
[SPEAKER_01]: I don't know if the accessible is the right word, but people get scared.
35:43
[SPEAKER_00]: They say it again.
35:45
[SPEAKER_00]: I was going to say, like, the, the, the, the community.
35:47
[SPEAKER_00]: Like, yeah, security and convenience kind of thing.
35:50
[SPEAKER_01]: Exactly because that is the biggest gripe that I see from people who aren't super deep into the weeds of crypto.
35:56
[SPEAKER_01]: They go a while it seems either complicated or they get scared with the fact that if they don't remember their seed phrase or they don't write it down and store it somewhere the proper way that they could lose everything.
36:08
[SPEAKER_01]: And I think that idea makes them nervous, even though in a perfect world it is more secure.
36:17
[SPEAKER_01]: It is the best.
36:17
[SPEAKER_01]: It is this brilliant solution, but I think that people realize that sometimes they can be irresponsible and they view that as almost a security risk because it is inherently more secure like if that makes sense.
36:31
[SPEAKER_02]: No, I know what you mean.
36:32
[SPEAKER_02]: It's like the fear that you hear a story feels like a story is all the time of some of you through way.
36:37
[SPEAKER_02]: They're thumb drive.
36:37
[SPEAKER_02]: Yeah.
36:39
[SPEAKER_02]: We have a big one on it.
36:40
[SPEAKER_02]: So I totally get it.
36:42
[SPEAKER_02]: So I'd say two things about that.
36:43
[SPEAKER_02]: Number one, I think that you can just use the ETFs, right?
36:50
[SPEAKER_02]: Yeah.
36:51
[SPEAKER_02]: Again, we didn't name them easy by mistake, right?
36:54
[SPEAKER_02]: You're making your making for people.
36:56
[SPEAKER_02]: But then number two, I think like,
36:59
[SPEAKER_02]: It depends.
37:01
[SPEAKER_02]: There is always with any adoption of technology, like there's time until that technology gets accepted and more broadly used and things like that.
37:09
[SPEAKER_02]: Now you could argue that that's as someone like my kids having to write down a seed phrase is like my kid might oldest is sixteen.
37:16
[SPEAKER_02]: So you could argue that for like my sixteen year old having to write a seed phrase, not a big deal.
37:20
[SPEAKER_02]: He doesn't really care.
37:21
[SPEAKER_02]: You can also say he has nothing.
37:22
[SPEAKER_02]: He has no money.
37:23
[SPEAKER_02]: He has no assets.
37:25
[SPEAKER_02]: He has to borrow money from us for yes.
37:26
[SPEAKER_02]: So like
37:27
[SPEAKER_00]: And I'll never let him forget it.
37:31
[SPEAKER_02]: But you see, you can argue, like someone who has nothing has a very low risk if they use their secret phrase.
37:38
[SPEAKER_02]: It's a good point.
37:39
[SPEAKER_02]: But I think over time, a lot of these things will become institutionalized.
37:44
[SPEAKER_02]: And that user part of it is going to be a big experience going to be going a lot better.
37:49
[SPEAKER_01]: And I'm sure in the early days of like the internet with like passwords and all this stuff people probably got the same kind of scare back then.
37:57
[SPEAKER_01]: They're like, hey, this is new.
37:59
[SPEAKER_01]: What do you mean if I don't remember my password or something?
38:02
[SPEAKER_00]: Yeah, nobody wanted to put their credit card on the line ever.
38:05
[SPEAKER_00]: I remember those days, even.
38:06
[SPEAKER_00]: Yeah.
38:08
[SPEAKER_02]: And there is.
38:09
[SPEAKER_02]: So, so like it's totally for our
38:13
[SPEAKER_02]: For our Benji product, I'm not trying to sell you money fund, but for our Benji product, it's, we have biometrics, right?
38:20
[SPEAKER_02]: So like it scans my face and then logs me in.
38:23
[SPEAKER_02]: Once you set it all up in the account and what's happening in the background is that we have spun up a wallet for every client.
38:30
[SPEAKER_02]: Every client gets their own wallet on on on on chain.
38:35
[SPEAKER_02]: So that you're kind of like obscuring that sea phrase portion of it.
38:40
[SPEAKER_02]: with our wall infrastructure.
38:41
[SPEAKER_02]: So like I said, I think a lot of the UI for this stuff is going to change over time.
38:47
[SPEAKER_02]: But man, I really think one of the best things that anybody who's never experienced this space can do to learn about it is like the great thing about it is these assets can be cut up in these infinitesimally small amounts, which means you don't have to have a lot of money to try things out and just see what works for you.
39:04
[SPEAKER_02]: You know, I think my first cryptocurrency cap was maybe five hundred worth thousand dollars.
39:08
[SPEAKER_02]: I can't remember.
39:09
[SPEAKER_02]: It wasn't a ton of money at the time it felt like a lot, but it's not a lot of money.
39:14
[SPEAKER_02]: It's just like, let's see what this is all about and see what happens here.
39:18
[SPEAKER_02]: And then the first time I went out and bought an NFT and then I moved it from the provider's wallet to a different wallet.
39:25
[SPEAKER_02]: And then there's this period where it's not sitting in any wallet and I'm freaking out like, oh my gosh, I just lost that.
39:31
[SPEAKER_02]: And then all of a sudden it shows up.
39:32
[SPEAKER_02]: And then you learn, oh, the block had to be written, right?
39:36
[SPEAKER_02]: That's what was going on.
39:37
[SPEAKER_02]: And so you learn these things by doing it over time.
39:40
[SPEAKER_02]: It's not just investing in something where you're like, I can feel the volatility, so I understand how the asset performs.
39:45
[SPEAKER_02]: It's also understanding the underlying tech and why these things are good.
39:51
[SPEAKER_02]: That really helps you.
39:52
[SPEAKER_02]: I don't feel good about not just investing in this space, but participating in it as a user as well.
39:58
[SPEAKER_00]: Totally.
39:59
[SPEAKER_00]: It helps you kind of strengthen your conviction, too.
40:01
[SPEAKER_02]: Yeah, for sure.
40:03
[SPEAKER_01]: you know I've got one final question because we were just talking to Matt Hogan from Bitwise the other day and we were asking him what he thinks about the future that ETFs because so far I mean the Bitcoin ETFs
40:19
[SPEAKER_01]: I've gone down in history, like the most successful ETF launch ever.
40:22
[SPEAKER_01]: And my question to him was, like, can we continue to see that same level of adoption and growth and influence?
40:29
[SPEAKER_01]: Because it seems like it's been monumental, but is that something that is a sustainable or can be actually increased from what we've seen so far?
40:38
[SPEAKER_01]: And his responses were actually anticipating it to beat last year's record this year, and then beat this year's record next year, and saying that he thinks that the adoption curve is going to improve and surpass what we've already experienced.
40:52
[SPEAKER_01]: At Franklin Templeton, what do you all see?
40:56
[SPEAKER_01]: I guess what are you all expecting in terms of adoption and just overall performance when it comes to these digital assets?
41:04
[SPEAKER_02]: The assets are the ETFs.
41:05
[SPEAKER_02]: The ETFs and the ETFs.
41:07
[SPEAKER_02]: The ETFs.
41:08
[SPEAKER_02]: So I don't know if you're familiar, but there are these, there are these filings called thirteen have filings where you can see who owns the assets, but there's a cut off where if it's an advisor that manages less than, might be a hundred million, I can't remember what the number is, but you don't, you don't get to see who it is.
41:25
[SPEAKER_02]: If you look, the vast majority of ETF assets are owned by that unknown bucket, which is like
41:32
[SPEAKER_02]: People like me, you know, I buy our ETFs through a retail brokerage account.
41:36
[SPEAKER_02]: And there's nobody advising me on that.
41:40
[SPEAKER_02]: It's not advisory business.
41:41
[SPEAKER_02]: It's just I buy them retail users buying the ETFs.
41:46
[SPEAKER_02]: I think there is a huge potential for growth here when you start to see the advisor community, start to adopt these assets in overall portfolio models, thinking about optimization.
41:58
[SPEAKER_02]: We've actually gone to great
42:00
[SPEAKER_02]: Again, old fixed income person, I was raised on correlations, efficiency frontiers, sharp ratios, like all these investment metrics, right?
42:08
[SPEAKER_02]: It's kind of what I was raised on.
42:10
[SPEAKER_02]: You start plugging these assets into some of the, and to figure out what the metrics look like.
42:14
[SPEAKER_02]: It turns out the investment metrics historically have been really good.
42:19
[SPEAKER_02]: So it's really a question of like any asset.
42:22
[SPEAKER_02]: It's really a question of how much volatility are you willing to assume.
42:27
[SPEAKER_02]: for the reward that you're getting for that volatility.
42:29
[SPEAKER_02]: Am I getting paid for the volatility and then how much volume I wanted to take, I guess, is another way of putting it.
42:34
[SPEAKER_02]: And I think, are we think, and we've papers put out about levels of allocation that people should have in portfolios and things like that, we think that as the traditional investor community continues to adopt these assets and look to them as a way to invest in really exciting new novel technologies, there's tremendous potential for growth.
42:55
[SPEAKER_00]: somewhere between one percent and ten percent is the right allocation you think for for kind of the average you know I guess there's no like typical person of course nothing's financial advice but how do you kind of pair it you know I saw Rick Edelman who's a big wealth advisor said up to forty percent for you know more risk seeking clients of his
43:17
[SPEAKER_02]: I saw that as well.
43:19
[SPEAKER_02]: I'll tell you, I am a, I am a raging crypto bull.
43:23
[SPEAKER_02]: This is my career.
43:24
[SPEAKER_02]: This is, but it's also my passion and my interest.
43:28
[SPEAKER_02]: And at any point in time, our families now worth sits somewhere between five and ten percent in crypto because as much as I love crypto, I love knowing that my kids five to nine plans are funded and knowing that I can make my property tax payments.
43:42
[SPEAKER_02]: You know, knowing that kind of the things I stable cash for are going to be going to be able to be serviced.
43:47
[SPEAKER_00]: So, uh, fixed income by what's that fixed income guy.
43:53
[SPEAKER_02]: Yeah.
43:53
[SPEAKER_02]: Yeah.
43:54
[SPEAKER_02]: Sure.
43:55
[SPEAKER_02]: Sure.
43:56
[SPEAKER_02]: And say like maybe I don't have an appetite for volatility, but like I have an appetite for a lot of volatility and certain parts of my portfolio, but again, like
44:04
[SPEAKER_02]: I don't want to not be able to afford my house because I bought some new super ballad oil and it went down a lot in a year.
44:10
[SPEAKER_02]: So, you know, I think we're actually if you look at that and I don't know what some of our official models say, but I'll tell you this.
44:17
[SPEAKER_02]: If you look at efficiency frontiers, like Markowitz efficiency frontiers is like classic portfolio of the other things.
44:23
[SPEAKER_02]: You get a significant lift in your portfolio from a risk and return perspective by just including one percent.
44:30
[SPEAKER_02]: And there's a lot of people take one percent out of equity and put it into crypto.
44:35
[SPEAKER_02]: You get a really nice pop in return for a really small pop in volatility.
44:41
[SPEAKER_02]: And if you think about just nominal risk, like if it goes to zero, what happens to my overall portfolio, fine, if you think about just like the stomach risk, it's one percent.
44:53
[SPEAKER_02]: But you have to remember for investor portfolios.
44:56
[SPEAKER_02]: And I think when you hear people like say massive numbers in terms of allocation, you have to remember volatility of returns directly transit of volatility of relationships.
45:07
[SPEAKER_02]: I mean, I hear a lot from my dad when Bitcoin is over a hundred.
45:12
[SPEAKER_02]: I hear more from him when it's under a hundred.
45:16
[SPEAKER_02]: You have to remember, this is kind of the way and I didn't give many advice.
45:19
[SPEAKER_02]: You just did it, right?
45:20
[SPEAKER_02]: So this is the way people have to understand is that if people are making investment advice and recommending huge allocations, when the volatility comes, how good is that relationship and is that relation you're going to ban in you because you recommended a massive allocation of something that's supremely volatile.
45:37
[SPEAKER_02]: So yeah, the price way too many words to say what you already said, which is there is no typical investor.
45:45
[SPEAKER_02]: Everybody's got their own risk return appetite and you kind of have to figure out what fits for that.
45:50
[SPEAKER_00]: No, you totally nailed it.
45:51
[SPEAKER_00]: And I love the explanation.
45:53
[SPEAKER_00]: And this is by the way, this is why we asked the pros who want to hear from them.
45:58
[SPEAKER_00]: So take as many words as you feel like you need.
46:01
[SPEAKER_00]: But really what I'm curious to get your insight on.
46:05
[SPEAKER_00]: And you've also been in crypto for a long time.
46:07
[SPEAKER_00]: There's this thing called the four-year cycle, where we've got the having.
46:11
[SPEAKER_00]: Every four years, there's a having, and it drives liquidity, and it drives supply from miners, and all that kind of stuff.
46:17
[SPEAKER_00]: But like we've never had and there's a big risk in markets saying this time is different but like this time is different because we've never had institutions like we've never had these ETFs that have you know billions and billions of dollars of flows we've never had you know the Morgan Stanley wealth advisors and the Wells Fargo wealth advisors like start to come online and say yeah we're going to
46:35
[SPEAKER_00]: be able to pitch Bitcoin ETFs.
46:37
[SPEAKER_00]: And this is kind of in a sense, also like lowered the volatility, like we've talked about like the volatility, like each cycle, you know, every four-year window, the volatility is less and less and less and less and less and probably will be over time is the four-year cycle done now that we have these new market structures.
46:57
[SPEAKER_02]: I mean, no, it's a real thing, right?
46:59
[SPEAKER_02]: Like it's coded into the asset, so it has, it'll happen.
47:03
[SPEAKER_02]: But to your point, I think it's really any time you see more participants enter our market historically what you've seen is volatility goes down return potential also can go down.
47:13
[SPEAKER_02]: You know, it's harder to replicate the returns that you've already received when the asset prices start to go up.
47:19
[SPEAKER_02]: Um, you see that kind of behavior with every every asset that exists, you know, uh, almost every issue and say every cause I haven't studied every asset under the sun, but like generally speaking, that's something you see more market participants tends to equal lower volatility.
47:34
[SPEAKER_00]: Yeah.
47:34
[SPEAKER_00]: No, I'm very curious to see how it plays out.
47:37
[SPEAKER_00]: And if the October slash November sort of market top that's projected by these four-year cycles stays in and then we're going to be in for another correction of a year or so as it typically is.
47:50
[SPEAKER_00]: But who knows?
47:52
[SPEAKER_00]: I know one thing's for sure.
47:54
[SPEAKER_00]: Crypto want to want to be still there.
47:56
[SPEAKER_00]: Reporting on things and I'm sure Franklin Templeton will still be building things, bull market or bear market.
48:03
[SPEAKER_00]: Man, Mike, we really appreciate kind of bringing you on.
48:06
[SPEAKER_00]: Is there anything else that we didn't ask that we really should have?
48:11
[SPEAKER_00]: Maybe anything that you're building any strong opinions that you or the firm have that we kind of didn't dive into yet?
48:18
[SPEAKER_02]: Well, I mean, I kind of mentioned everything that we do.
48:20
[SPEAKER_02]: We have this investment capability.
48:21
[SPEAKER_02]: We have everything we build on chain as well with our Benji products.
48:27
[SPEAKER_02]: We also validate as well.
48:29
[SPEAKER_02]: We operate, we'll have invalidators.
48:33
[SPEAKER_02]: Sorry, thirty validators across eleven different blockchains.
48:37
[SPEAKER_02]: I think what you're going to see over time is more people taking a much more comprehensive approach because all these things feed into each other.
48:45
[SPEAKER_02]: The fact that we operate validators means that when we have our product living on chain, we have our own copy of the records.
48:52
[SPEAKER_02]: It also means that we have all of the data on that chain.
48:55
[SPEAKER_02]: So if our analysts want to use that data in the analysis of the chain and come up with a price target for the token,
49:01
[SPEAKER_02]: We have it all ourselves.
49:02
[SPEAKER_02]: We don't have to have to buy.
49:03
[SPEAKER_02]: So the chains inform that.
49:05
[SPEAKER_02]: If you invest in an early stage chain and they're like, we're going to need validators eventually.
49:10
[SPEAKER_02]: We have that service that we can help to offer if it makes sense.
49:14
[SPEAKER_02]: If they say things like, oh, you know, we could really use help with our coding.
49:18
[SPEAKER_02]: Like we feel like it's good, but we're not a hundred percent set.
49:21
[SPEAKER_02]: We have our own team of engineers that can help with that.
49:23
[SPEAKER_02]: And all these things related, the engineers talked to the analysts when we're trying to decide what chain to go on next.
49:31
[SPEAKER_02]: We talked to the else and say, is there actually something happening here?
49:33
[SPEAKER_02]: Is there is there a real movement going on?
49:36
[SPEAKER_02]: Or is this just, you know, is a zombie project?
49:39
[SPEAKER_02]: Is, you know, so we, I think I think you have to have this kind of comprehensive approach to this space to really understand what's under the hood, which will come to, you know, eventually lead to better outcomes for your clients.
49:53
[SPEAKER_00]: totally.
49:54
[SPEAKER_00]: I feel like I read a study and I could be hallucinating but I think it was done by Franklin Templeton.
49:59
[SPEAKER_00]: It was about transaction costs savings like fifty thousand dollars for fifty thousand transactions and then fifty thousand transactions on.
50:09
[SPEAKER_00]: I think you guys used optimism.
50:10
[SPEAKER_00]: It was like a dollar and fifty two cents and so the math was like a thirty thousand times efficiency in in cost.
50:17
[SPEAKER_00]: Was that your department that kind of did that study?
50:20
[SPEAKER_02]: We don't actually publish the cost savings we've achieved by running things on chain, but it's pretty, and we're not an optimism, but it's, it's pretty intense.
50:32
[SPEAKER_02]: It's the kind of thing where we, we put this money fund on chain and then we have
50:38
[SPEAKER_02]: Oh, someone's going to get really mad at me for not knowing this, but we have a whole bunch of these specialized investment managers that specialize in different disciplines.
50:46
[SPEAKER_02]: So like, you know, real estate, private equity, private data, traditional equity, all these different things.
50:51
[SPEAKER_02]: And when we had the cost savings data, we went around to the CIOs of all of these different investment groups and to a person that reaction was the same, which was
51:01
[SPEAKER_02]: how do we do this sooner rather than later like that's that's that's two intents of a cost saving to it to ignore.
51:07
[SPEAKER_02]: So I think and then look there's a lot like anytime you want to change the transfer agent for a fund there's board meetings that have to occur there's violence that have to occur so it's actually a pretty heavy lift to be able to put funds on chain we started with Benji we started with a brand new fund structure in a brand new fund board specifically because of that because it is quite quite a lift
51:27
[SPEAKER_02]: But to anybody, it's apparent that the costumes are so intense, moving assets on Shane seems to make a lot of sense.
51:36
[SPEAKER_00]: Love it.
51:37
[SPEAKER_00]: Mr. Mike Reed, thank you so much for coming on and talking to us.
51:40
[SPEAKER_00]: All things about digital asset partnerships at Franklin Templeton.
51:44
[SPEAKER_00]: We hope to have you back on again soon.
51:47
[SPEAKER_00]: Talk about some more updates, anything that's kind of going on in your world that, you know, the good citizens of crypto nation should be here and we'd love to have you back on and thanks for coming.
51:56
[SPEAKER_02]: love to be on again, and thanks for having me.
51:58
[SPEAKER_02]: I appreciate it.