Latest / The Paul Barron Crypto Show / Tokenized Assets U.S. Hearing | BlackRock vs Hillary

Transcript

Tokenized Assets U.S. Hearing | BlackRock vs Hillary · The Paul Barron Crypto Show

• 0:07
  Let's get into the token I's assets hearing today. We'll break down a whole
• 0:10
  bunch of clips for you. You definitely want to stay tuned because we've got
• 0:14
  some zingers for you. So it's going to be a good woman named small
• 0:17
  Bara. Welcome back in a tech path. Before we get a started,
• 0:19
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• 0:53
  right, let's get into a few points here. This, of course,
• 0:56
  is a hearing that happened today and it was really breaking down how tokenized tokenization
• 1:03
  of real world assets will facilitate efficient markets. Now, Carlos Domingo, founder
• 1:07
  of Securitize, who's been on our show, was here along with Hillary Allen,
• 1:12
  which we've shown before. We're going to break down all of this and
• 1:15
  get into it because there's a couple of potential bills that are at stake here.
• 1:21
  One of course, is the development of tokenied securities and derivatives, and
• 1:25
  then also the Tokenization Report Act of twenty twenty four. All of these are
• 1:29
  being represented and they're basically going through this in the hearing. Let's go to
• 1:33
  this first clip kind of get you guys caught up listen it. I'm concerned
• 1:37
  that financial institutions will be incentivized to simply tokenize basic securities that are commonly exchanged.
• 1:47
  Indeed, some shareholders might insist that company management use that approach to avoid
• 1:53
  compliance costs. It cost one hundred and twenty billion dollars to move twenty three
• 1:57
  trillion dollars across and that a multi currency CBDC could cut costs by eighty percent
• 2:06
  down to about twenty billion dollars. It seems the only uptake has been by
• 2:09
  the crypto industry. For organization whose products are primarily used by gamblers and criminals.
• 2:19
  All Right, so you know the typical Lynch intro right there, or
• 2:23
  I should say the typical intro that we've seen from them before, and it
• 2:28
  kind of goes on and on. They go a little bit further into this.
• 2:31
  This also sets up the introduction of Carlos and also Hillary Allen. Take
• 2:37
  a look at this one. Carlos Domingo. Carlos is the co founder and
• 2:40
  CEO of Securitize and Hillary Allen as Allen is a professor of law the American
• 2:46
  University in Washington College of Law. We need clarity in the definition of these
• 2:50
  docet securities or organized securities to distinguish them from other forms of digital assets.
• 2:53
  Second, we also believe that SPBD should be permitted to hold payment stable coins
• 2:59
  to facilitate efficient unchain transactions. We're doing securities and cars today, this is
• 3:04
  not possible. Third, tokenized securities must be allowed to flourish some public permissionless
• 3:07
  blockchains in addition to private permission chains to realize the benefits of blockchain technology.
• 3:12
  These suggestions are critical aspects of what tognized securities members should include. This is
• 3:16
  currently the model chosen by the European Commission for Europe and US entities should be
• 3:21
  able to realize similar efficiency and capabilities. Now I know that there's a strong
• 3:24
  narrative about this being transformative technology. I fell into this trap when I first
• 3:29
  started writing about bitcoin nearly a decade ago. So these kinds of blockchains can't
• 3:32
  process large volumes of transactions, and the delays and fees can be significant at
• 3:37
  peak times. So why use the public permissionless blockchain in the first place.
• 3:42
  Furthermore, tokenized deposits may speed up payments processing for the already banked, but
• 3:46
  tokenized deposits will not bank the unbanked. They require constant monitoring and maintenance to
• 3:51
  address bugs and cybersecurity issues, but it is often unclear who they are,
• 3:55
  what powers they have, who is funding them, or how they are chosen.
• 4:00
  Could they be bad actors? Can they always be counted on to get
• 4:02
  the blockchain up and running again in a timely matter after an outage? What
• 4:06
  if they just give up on the blockchain? Could the assets hosted on that
• 4:10
  blockchain be lost? All right? So a lot of things happening there.
• 4:15
  I think, you know, the one major thing is the issue that she's
• 4:18
  kind of referencing a decade ago in terms of our research versus some of the
• 4:24
  things that have been happening here within the blockchain technology really in the last eighteen
• 4:29
  to twenty four months, which is pretty much re revolutionized, I think the
• 4:31
  direction of it, and like most technology, it advances much quicker as things
• 4:35
  starts to develop. That's the case that we're starting to see. Hence tokenized
• 4:40
  assets are becoming such a talking point but also very important situation right now,
• 4:46
  of course from a regulatory standpoint, but also from a financial standpoint. So
• 4:51
  she's kind of talking about things that really she doesn't know about just yet,
• 4:56
  but hopefully that will change during all of this. All right, So let
• 4:59
  me go to this next clip, which is Carl's talking a little bit more
• 5:02
  about the middlemen and where the yields are going. How all this is basically
• 5:06
  being done and it can be circumvented. Take a look. So the organization
• 5:11
  obviously provide a much more efficient way of managing the underlying securities of a fund.
• 5:15
  It provides automation for things like redemptions, do it then payouts, et
• 5:18
  cetera that can lower the cost of actually maintaining a fund. Typically dividends are
• 5:24
  delayed into reaching the hands of the investors after the company has basically transferred those
• 5:29
  to the transfer agent, and transfer agent tend to hold the dividends for as
• 5:32
  long as they can to try to, you know, monetize on the asset
• 5:39
  not being transferred to investors. So I think this technology can you know,
• 5:42
  improve how money flows from companies to investors so investors can be deploy their assets
• 5:46
  and get better returns. So it's right, yeah, I mean, this
• 5:51
  is the situation where we will start seeing returns coming in and once that we
• 5:56
  see a stable coin bill start to roll out in Congress and really lining up
• 6:00
  with what Mika has done within the EU, which remember is happening at the
• 6:03
  end of this month, we'll have these kind of products starting to go into
• 6:08
  the market, all of these kind of things that would come very apparent,
• 6:11
  I think to many of the lawmakers and of course many financial instrument companies as
• 6:15
  well. Now Alan goes a little bit further into this, and part of
• 6:19
  what she goes into is now the game stop topic. So listen to what
• 6:23
  she has to say here. When is something efficient enough such that making it
• 6:27
  more efficient will introduce too many fragilities and be counterproductive in the long run,
• 6:31
  mis she carr. DTCC is the most important behind the scenes company, and
• 6:38
  you were very involved, not you personally, but DTCC very involved in the
• 6:43
  GameStop media where Robin hood A woke up in the middle of the night trying
• 6:48
  to make margin. Could tokenization have made that analysis of determining what the margin
• 6:55
  call was for them more straightforward, more easy? Seem like there's a lot
• 6:59
  of mystery in that back and forth. Would having it on a ledger have
• 7:01
  made that easier? Yes, one of the attributes that we've so that would
• 7:06
  reduce fragility in that instance, particularly one of the attributes. We believe that
• 7:12
  tokenization along with smart contracts would allow the automation and increase efficiency of margin calculation
• 7:18
  and margin movement, so you will see an increase of velocity there. So
• 7:23
  we do believe that's one of the efficiencies to be able to deliver faster and
• 7:27
  more efficiently. This is one of the things that I think Larry Fink,
• 7:31
  of course, has woken up to blockchain and understands now and so much so
• 7:35
  that he's wanting to accelerate the whole process of token is securities and tokenized assets
• 7:41
  in the real world in a big way, and I think this aligns with
• 7:45
  it much to what she was trying to do. Hillary was trying to do
• 7:48
  around the whole issue with GameStop. Now it doesn't stop here, and we've
• 7:53
  got a couple of clips. There's one of the end that you got to
• 7:55
  stick around for. Though it is unbelievable that this is being said on and
• 8:00
  in Congress. This next clip goes into, of course, mister Sherman,
• 8:05
  we always have to bring him in so we can get a little bit of
• 8:07
  comic relief listening. With that, I call on the gentleman from California,
• 8:11
  mister Sherman, for five minutes. I've been on the committee for a long
• 8:15
  time. This hearing hearkens back to my first hearing when we focused on the
• 8:20
  move from abacus to ten key adding machine. A lot of what we're being
• 8:24
  told is innovative, is doing things that we've already done very efficiently for a
• 8:28
  long time. Professor Allen, and you're retting testimony. You mentioned that this
• 8:33
  provision in FIT twenty one would be very attractive to issuers who seek to avoid
• 8:39
  SEC oversight. What would that mean for retail investors? It's a fit twenty
• 8:43
  one where to become law. That new title too would basically allow you to
• 8:46
  slap a blockchain on any kind of investment contract, and therefore it becomes magically
• 8:54
  exempted from the securities laws. And so token is securities are record down blockchain
• 9:00
  they are no different than traditional securities. Toned stock or tokenized bond is still
• 9:07
  a bond or stock when it's whether it's a traditional a ledger or a blockchain
• 9:11
  ledger. I think it's important to remember tokenization does not change the nature of
• 9:15
  the asset, all right, Well, you can kind of see the situation
• 9:20
  there when they're really not even understanding the whole process of how token ised securities
• 9:24
  work. This next clip goes into a little bit about SAB one twenty one
• 9:31
  and how it basically kills one of the biggest categories for banks, which is
• 9:35
  going to be token ised securities and tokenized assets. Take a look what they
• 9:39
  had to say there. Do you agree that under the current regulatory regime created
• 9:43
  by Chair Gensler, we do not have the necessary flexibility to fully realize the
• 9:50
  capability of blockchain technologies. Yes, so, as SAB one T one is
• 9:56
  currently written, the definition of crypto acids is very broad, so encompasses potentially
• 10:01
  tokenized securities, even if it's a traditional security recorded on a blockchain ledger.
• 10:05
  It's unfortunately Gary Gensler is holding back tokenization technology with SAB one twenty one.
• 10:11
  I'd like to use this moment briefly to call on Gary Gensler to withdraw SAB
• 10:16
  one twenty one if he's putting President Biden in a very difficult position on this
• 10:20
  issue. We have a tremendous executive order and continuous statements from the administration wanting
• 10:28
  to work with Congress on this issue in a bi partners in manner, and
• 10:33
  if Gary Gansler were to withdraw SAB one twenty one, we could work in
• 10:35
  a bipartisan way on the custodial banking piece and these definitions that I think is
• 10:41
  so important. So that is my hope here. All right, So you
• 10:43
  can kind of see not a good position for banks, it could be possibly
• 10:48
  for other people out there. We'll just say people that aren't banks. You
• 10:52
  know that we already seeing kind of these kind of scenarios that play out.
• 10:54
  And one of the things that you have to remember, whether that's it's the
• 10:58
  FITBIL that goes through or the stable corn Bill goes through. All of this
• 11:01
  lines up into a potential bonanza I think for the financial services industry, which
• 11:07
  is really where this boils down to, is when we will get regulatory alignment.
• 11:11
  All right, So I've got one more clip here. This is Lynch
• 11:13
  talking about CBDCs. Take a look. You need crypto to trade crypto sort
• 11:18
  of like a self licking ice cream. Talk about some of the dangers here.
• 11:24
  Thank you very much for that question. I mean, I think there's
• 11:26
  there's simple gradations of risk. In unexpected circumstances, things can blow up.
• 11:31
  No computer programmer can think of all future states of the world. So let's
• 11:35
  just sort of think about this. You've got a bunch of different tokenization systems.
• 11:41
  Wouldn't you need a central bank sort of one one central not necessarily a
• 11:48
  result, well, sort of like a reserve currency where everybody could exchange their
• 11:54
  their tokenized assets, one that everybody recognizes and respects. Some people say that
• 12:03
  stable coins should be a settlement asset. I think that is a terrible reason.
• 12:07
  I really think that the settlement asset has to be some kind of central
• 12:11
  bank money. Ultimately, long story short, stable coins aren't currently used for
• 12:16
  making payments for a cup of coffee. That's a sort of a narrative that
• 12:20
  is incorrect. Right now, they're helpful for gambling. You can stake them
• 12:24
  or use Well, that's one of the laws you try to evade. Yeah,
• 12:26
  and we're told an innovation is wonderful, but then this Congress passes a
• 12:31
  bill against even studying CDBC. It's certainly not a hearing about central bank digital
• 12:39
  currency, and what a terrible idea that is by all means, mister Lynch,
• 12:43
  continue to study it, know and come to the conclusion that it is
• 12:48
  a terrible idea, particularly the one currently conceived. And so I hope we
• 12:52
  can move on and have a focus on this hearing topic and not the straw
• 12:56
  man that some of our colleagues want to continue a pillage. All right,
• 13:01
  so you can kind of see this is a problem right now within Congress.
• 13:05
  At one point I thought we were going to see a little bit more awareness
• 13:09
  of what was happening within the markets, especially around all things tokenized. And
• 13:16
  there was a point I think that we started to see that. And maybe
• 13:18
  it's just the certain representatives that don't necessarily understand it that we're highlighting here.
• 13:24
  But I want to go to this next clip that goes into tokenized assets for
• 13:28
  things beyond money. Take a look in Ohio mortgages or you know, title
• 13:33
  to property is one of the things that's under study, is Chairman of Housing
• 13:35
  Insurance. We're paying a lot of attention to that. If you look at
• 13:39
  the representation of a title to a home or a car, deed to a
• 13:43
  land or property, you know what kinds of things as you look across the
• 13:46
  market do we need to address and where do we need to address them to
• 13:50
  provide functional markets. We're seeing apply to ticketing tokenized concert or sports tickets.
• 13:56
  Real estate is another use case that we're where you can record tokenized title leases,
• 14:03
  mortgages all on blockchain to have the level of transparency. All right,
• 14:09
  and this is already happening actually out there right now. What they're talking about
• 14:11
  is getting into real estate is it is one of the big categories that's coming
• 14:16
  soon to be tracked on, you know when you look at real world assets.
• 14:20
  But propy is a good example. We've had the proper CEO on before
• 14:24
  talking about this very thing. These are opportunities I think that all start to
• 14:28
  lead in the right direction. I want to go to this last clip.
• 14:31
  This is the one you've got to wait for, because this is a little
• 14:33
  bit of a trigger warning. This is mister Caston versus mister Domingo. Take
• 14:39
  a look. Calling blockchain a ledger is like calling a cup of flour a
• 14:43
  cake. To call that a ledger is disrespectful to ledgers. Right, it's
• 14:50
  just a list of names and numbers securitized, tokenized and distributed shares of a
• 14:54
  private money market fund issued by Blackrock on the Ethereum blockchain, a public blockchain.
• 15:01
  My understanding is that any wallet on Ethereum can accept tokens from any other
• 15:03
  user on the network. Right, that's not correct. For the tokens we
• 15:07
  should they're only transferable to white listed wallets. So you put controls to protect
• 15:11
  against what we're talking about here, we do correctly. This is totally possible
• 15:16
  on a public distributed blockchain. And saying that, you know, providing email
• 15:20
  controls, okyc, et cetera on a public distributed blockchain is not possible.
• 15:24
  What it's like saying it's not possible to run fund sometimes okay, will help
• 15:26
  me out then, because almost immediately after that money market fund was deployed,
• 15:31
  internetrols found the wallet addresses, they sent mean coins, they sent n FTS
• 15:33
  tainted funds from Tornado cat There were more than one hundred cryptocurrencies that were mixed
• 15:37
  up in legitimate funds that Blackrock access that. How is that possibly a compliant?
• 15:43
  So? First, did those meme coins and sanctioned tokens were not sent
• 15:48
  to a black Rocke wallet at all? It was sent to some the wallet
• 15:50
  that was you labeled with black Rock, So there was a missed perception in
• 15:54
  the press how of what happened. Second, the fact that somebody can send
• 15:58
  you a meme coin to your wallet doesn't mean that the token that represents the
• 16:00
  unit of the money market fund, which is a security, can be freely
• 16:03
  sent to some other wallet. Or are you suggesting there's a technical solution to
• 16:08
  this or that we will have to actually have individuals and the technical solutions theres
• 16:12
  or the blockchains that prevent assets to be sent to a wallet unless the accident
• 16:17
  has reapproof And that's something that could be built on top of a public permissioners
• 16:19
  network without a problem. Well, I'm fundamentally dubious that do any of you
• 16:25
  believe that a blockchain system that allows mixers and anonymous wallets can provide a robust
• 16:32
  ledger of all the transactions and block anti money laundering. I do believe so
• 16:37
  the same way the Internet is also used for legal things and illegal things,
• 16:40
  and it's a public infrastructure. I think the industry would be a lot more
• 16:44
  credible if they were fighting harder before the enforcement actions to protect against money launcher
• 16:48
  has expired. All right, So you can kind of see the problem there
• 16:52
  of really understanding how this works. Much like any other open network system,
• 16:57
  whether it's Internet, even to a certain an extent, the traditional banking system
• 17:02
  also works in that fashion, this actually starts to really give the kind of
• 17:06
  security elements that blockchain is designed for. All of this is an issue because
• 17:11
  one of the things that we have to do to overcome most of this is
• 17:14
  going to be education, and this is educating our lawmakers. So it's going
• 17:17
  to take some time, but I feel like there is at least some steps
• 17:21
  in the right direction. Yes, you know, FIT twenty one will be
• 17:25
  a big step in the right direction. Soul will stable coins. Once we
• 17:27
  start to see some of those activities and the use cases start to become reality.
• 17:32
  That's I think when we're going to see lawmakers starting to open up and
• 17:36
  understand really what's happening here from a technology innovation standpoint. Not normal that we
• 17:41
  don't see these kind of things when they're dealing with new technologies. Happened,
• 17:45
  you know, in the era of the Internet, most likely in telecommunications and
• 17:49
  mobile many of those kind of things were faced with what we're dealing with now.
• 17:52
  So anyway, we'll get and continued to cover this for you guys.
• 17:56
  There's going to be a couple more hearings and we'll obviously see a lot of
• 18:00
  action towards the end of the month as we start to see MICA and stable
• 18:03
  coins become reality, along with a ton of products most likely rolling or out
• 18:07
  rolling out in the EU that could some put some pressure on us, So
• 18:11
  make sure to stick around for that. And if you're not following me on
• 18:14
  x do so it's it just at Paul Parent. We'll catch you next time
• 18:17
  right here on tech Bath