Transcription
If you think about the big categories of institutional investors, you've got family offices, asset managers, sovereign wealth funds, university endowments, foundations, corporate treasurers, insurers, right? Pension funds. You have some adopters in every one of those archetypes, but not the majority, not even close.
Robbie, you run crypto at uh Black Rockck. So, I feel like you know more about institutions and crypto than just about anyone we've talked to on Bank list. So, I want to start with the question that's on everyone's mind, particularly on a day like today. So, we are recording this a day that's a little bit red in the crypto markets.
>> They seem to be coughing up a little bit. So, prices um is it over or is this just a bear trap?
>> Gosh. Well, um if we counted the the number of times that people have uh declared it over over the uh 16 years, then uh that would be a pretty high number. So, uh no, I I certainly don't think it is. I mean, to put it in perspective, right? Um this is the fifth cycle we've seen in uh you know, Bitcoin and and crypto's history, right? And through each of those five cycles or at least each of the four preceding cycles, you had these extraordinary bull markets, right? And uh at the end of each a pretty severe correction, but through each successive cycle, the level uh that Bitcoin reached was massively higher than the prior cycle, right? And collectively across these five cycles, Bitcoin's gone up by six orders of magnitude, >> right? 1 millionx 100 million% uh since when it first started trading on exchanges in in 2010. So this is obviously nothing new uh to crypto. I actually think you know if you'd pulled people on this day a year ago and they said you know Bitcoin would be at over 100k and crypto market cap would be three and a half trillion most people would have said wow that's that's an amazing outcome. So I think um there's a tendency to maybe overreact in both directions. In fact, more than maybe there's definitely a tendency to overreact in both directions in uh crypto markets. And I think some of the negative sentiment that we're seeing right now is uh consistent with that trend.
>> Let's talk about those four previous cycles and maybe now this this fifth one. So I guess it's not over for crypto. I think most bankless listeners would uh would wholeheartedly agree. I think they're wondering though if this cycle has is over. And so previously crypto cycles have been boom bust in these four-year increments. Some people talk about that following kind of the global liquidity trajectory. Others, you know, that it follows the the happening, but we've seen this history play out before. And this would be the fourth year of a new cycle. So, it's about time that Bitcoin would sort of end one cycle, go down, correct for some period of time. We might have 12 months of a quote unquote bare market before things correct. Do you think that's what's about to play out like right now? Do you think it's the end of a cycle or do you think this one is different? You know, this one extends into 2026 or maybe this the notion of of cycles is less relevant now that we have so much institutional capital at play.
Well, I think there's a bunch of reasons why the cycles are probably less relevant on that sort of predetermined uh schedule that it seems to have followed in the past. Right? The first is a lot of people believe the cycle is tied to Bitcoin having, right? >> The Bitcoin having at this point is almost totally irrelevant, right? When ETFs are accumulating inflows, the magnitude of those inflows is many many multiples larger than any change in supply created by a Bitcoin having event from here until the end of Bitcoin, right? So or till the till till the end of the Bitcoin uh reward uh function in in uh 2140. And you also have I think as you alluded to more institutional maturity in this market than uh and certainly more participation than you had before. I mean I was with a very large institutional investor recently and uh you know they they've accumulated a decent sized position in Bitcoin and they said we want to buy more but we want it to go down 25% first >> and game you know that one is a dangerous game. It was an interesting strategy, but it's also fascinating because when's the last time you heard uh or saw that behavior from most people in crypto markets, right? Most people in crypto markets say, they tend to to get more enthusiastic the more it's gone up and they tend to sell as things go down and that creates reflexivity in both directions. So now that you have this institutional participation, I think you have more balance in the market. Look at October 10th for example, the 21 billion in liquidations that we saw in crypto that day. And we could talk more about, you know, what's going on there because I do think it's a really important event. What was the impact on ETF outflows? Tiny, right? A couple hundred million 21 billion being liquidated over there. And the ETF investor base kind of went, huh, nothing really to see or there wasn't any relevant news. Like there was just kind of noise. And so I think that you will see uh probably a a muting of some of those maybe cyclical effects that have happened. And the last piece is before anyone starts to you know declare a cycle over. If you look back historically through the previous four, there were some big events that actually precipitated those endings, right? And we haven't seen anything like that here. In the second cycle, it was the Mount Gaus implosion. In the third cycle, that rally had just gone, you know, totally parabolic, insane, where, you know, Bitcoin was at 2,000 in September of 2017 and it was at 20,000 in December of 2017. So, that was crazy and obviously unsustainable. And then in the fourth cycle, you had just an enormous pileup of uh really negative events fueled by excessive risk-taking, bad ideas, outrageous leverage, etc. that all sort of coincided whether we're talking about, you know, Terra Luna or we're talking about, you know, eventually FTX, which was kind of the final blow uh to end that that fourth cycle, but that hasn't really happened yet. Now what we have seen happen that I think is cause for some concern. Um obviously there was a lot of exuberance around digital asset treasuries. Some of that may have gotten ahead of itself, right? And so that so far though seems to be fairly orderly in the way that uh that amplitude has has come down and sort of the you don't see a lot of uh new uh financings being announced uh anymore in that category the way you did sort of every single day um this summer. Um, you also see, I think, a worrying amount of leverage in particularly, uh, levered PERS. Um, and so that really was the story of the October 10th flash crash. There wasn't a whole lot of news worthy of uh, a negative market reaction, but you had so much leverage in the system and obviously you had some, you know, collateral uh, pricing dynamics that uh, exacerbated the the impact of that. But to see, you know, how severe that reaction was, it's a reminder of just how much leverage there is uh on a lot of those platforms. And that also, you know, we talked about that in the past. It's really confusing to sort of the marginal institutional adopter, the marginal financial advisor adopter when they think of something like Bitcoin as, you know, this digital gold diversifier potential hedge. it's uh exists outside of any one country's economic, fiscal, political, geopolitical matters, etc. And then there's these periods where uh Bitcoin and crypto trade like their levered NASDAQ on sort of economic and macro news. And that's puzzling to people. And sometimes people try to slap this risk on framing on it to sort of reverse rationalize what's happened. I don't think that makes a lot of sense. the drivers of of crypto and certainly Bitcoin are very distinct from uh you know your traditional uh equities or other uh you know traditional portfolio assets. But when you have these levered futures where trading does behave that way and sort of amplifies these selloffs alongside equities even if they don't make a lot of fundamental sense that's confusing to the incremental adopter.
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>> It's confusing. Does it scare them away? So when you have a 20 to30 billion flash crash in the month of October as we had in crypto, the biggest liquidation event that we've ever seen, does that scare institutional investors away from this asset class?
It certainly does to some extent. I would say not all sell-offs are created equal and um what's behind it has a larger effect necessarily than what the amplitude of the draw down is. And so luckily for Bitcoin and and crypto to some extent in that event was that the alleged explanation, the alleged trigger was so dimminimous in terms of its plausibility as a negative event for crypto that it didn't really uh draw folks attention uh all that much other than wow that was sort of a big sudden drop. um which is different than say um you know back in in April where you had uh you know tariff dynamics and uh equities obviously were were were down uh in the short term on that when Bitcoin also was down at the start you had a lot of questions because people said wait like fundamentally this is digital gold this is supposed to be uh a diversifier and a hedge and why is it reacting to tariff news and sort of economic dynamics and that didn't make sense to people and it did temporarily give them pause. Now, to Bitcoin's credit, as we've seen in in many other instances where this sort of behavior happened, by even just a couple weeks later, Bitcoin was off to the races because the sort of long-term fundamental buyer base had said, you know, the more economic and geopolitical uncertainty there may be, actually, uh, the more advantageous that is for Bitcoin as this global scarce uh, decentralized asset that exists outside of all these, uh, economic and and country specific systems.
Robbie, uh, I remember you beating the drum when you came on. It was just over a year ago, I believe, and and you talked about Bitcoin is, um, not a risk-on asset. It's really more like an uncorrelated hedge type asset, more like a digital gold. Now, when you see the performance of actual physical gold this year and institutional investors see that, which is, you know, they've been calling this a debasement trade. I think gold is up on the air about 50% times it was as high as 60% has certainly outperformed Bitcoin at least on a year from a year-to- date perspective. And so people are looking at that and saying well if physical gold is overperforming this digital gold then maybe Bitcoin is not a uncorrelated hedge asset maybe we needed gold uh all along. Now, some people in crypto are saying, "Well, wait, just wait for the catch-up trade, right? Bitcoin is going to catch gold's price." What's your take on this? And and what um what do you tell institutional investors who are asking why gold just keeps outperforming Bitcoin on the year?
Well, actually, some of this is gold's catch-up trade, right? Because Bitcoin actually had a massive rally to end 2024, right? Going from, you know, high 60s to to over 100K, right? And so that actually sort of artificially maybe inflated the 2025 starting benchmark a bit and gold didn't you know have that same uh reaction that it's now uh obviously had a tremendous year uh since particularly in the last u month or two. um for a lot of that debasement trade rally that that gold has been uh enjoying. Bitcoin was right alongside it, right? That that is a big part of what uh boy Bitcoin to that 126k new all-time high. It was very closely tied obviously to the the government shutdown developments and sort of continued fears over uh US uh fiscal and and political dynamics in the long term. And that probably would have continued frankly if not for the October 10th flash crash which had nothing to do with anything uh fundamentally for Bitcoin. But it totally derailed the momentum that had happened and created this sort of new uh hangover overall of of crypto and certainly undermined and sort of in a an unhelpful way for Bitcoin uh changed the channel from the debasement trade which it was enjoying alongside gold to volatility and uh you know riskon type behavior uh justified or otherwise.
There was an article this week that uh made the rounds at least among crypto investors. It was an article by an investor analyst Jordi Bassier and he he was looking at the numbers and you know trying to explain the reason why Bitcoin has been somewhat stagnant I guess on the year and again year to date right I'm I'm talking about and one of his explanations for that was just looking at long-term holders the original Bitcoin whales and he had some uh graphs where uh you can kind of see long-term holder selling in these graphs he brought up the um the point that uh you know Galaxy Digital they did a $9 billion trade with some unknown crypto whale and the point I think the article was uh entitled the IPO moment for Bitcoin. He was drawing a an uh analog between you know public companies going IPO and the early believers you know the early VCs the early investors the early employees kind of selling you saying the original cipher punks and libertarians behind Bitcoin this is kind of their moment to sell as their capital has appreciated into the the millions and the hundreds of millions and the billions. Now we have ETFs and so they're taking opportunity to sell. So it's Bitcoin's IPO moment as you know one class of investors maybe the early pioneers early adopters shifts to entrepreneurs or sorry sorry to institutional uh capital and he's saying that's the reason for some of the stagnation. Do you buy that argument? Do you see any of that in the data?
>> A little bit not not entirely. Um I think that to draw parallel to IPOs I think maybe a little bit of a of a stretch here. I think more of what's going on is 100,000 was a target that I think a lot of very early investors maybe had for for whatever reason, right? It's a it's a nice uh round number, but people who came in and their cost base was, you know, hundred or 500 dollars and um h 100,000 seemed like a nice round number to take some chips off the table. And frankly, I don't blame them. I mean these are people uh who deserve a lot of credit for having the conviction over many years and through many volatile cycles right to continue holding and holding and I think it's pragmatic the way I think about it um I certainly don't expect to ever have that kind of wealth in in my life but if think about it if you have a billion dollars you know how much better is your life if your billion dollars becomes $2 billion I think what like maybe 2% better like not a lot better Right. So at some point like you do have to take some chips off the table and say maybe it's not prudent to have 98% of my net worth in Bitcoin as much as I believe in it. And so I think that's probably the primary explanation of what's going on. I think it's entirely reasonable.
>> We are 21 months from the launch of the uh Black Rockck Bitcoin ETFs and all Bitcoin ETFs. So been in the market for a while almost 2 years. Um I think one of the questions we have this cycle uh however long the cycle continues or does not continue is what's the catalyst? Who are the new buyers of crypto assets? Um one thing we've been waiting for for over a decade in crypto is for the institutions to come. Now we're talking to Black Rockck. Now we have ETFs that have been purchased I assume by some of the institutions. So are the institutions here yet? How much crypto do they actually own? Like what's the next net new buyer of the Bitcoin ETFs? If the institutions are already here, do you see any catalysts?
>> Well, the institutions are here at the very leading edge, right? So if you think about the big categories of institutional investors, you've got uh you know family offices, asset managers, sovereign wealth funds, university endowments, foundations, corporate treasurers, insurers, right? Pension funds. You have some adopters in every one of those archetypes, but not the majority, not even close.
>> Did you also mention sovereign wealth? Do we have sovereign wealth in that category?
We do. We do have some adopters in sovereign wealth. That's right. Wow.
>> Y and so you have early adopters, but they're very much the minority still. And I'll tell you what is the critical thing that either unlocks or doesn't their adoption. It's all about correlation. And that's why, you know, we've talked about this uh in the past that I was on. Um I talk about this a lot. I'm sure it's very annoying to some people how often I I harp on it, but it it's because it is that important in terms of the way people look at this from an institutional allocation perspective. Um, I was with a a client recently, a sizable uh pension fund allocator and the CIO said literally that's the one metric I'm looking at >> correlation >> because that's right because if it actually is uncorrelated digital gold-like instrument that is a diversifier and a hedge, it's a slam dunk to put a couple percentage of portfolio allocation in it, right, from their perspective. But if it's more like lever NASDAQ, if you know it's whatever this riskon narrative sometimes uh proclaims it to be even though you know that's I think counterproductive and also not really uh supported by fundamentals then it's a totally different bar because then an investor has to say what is the sort of broad investment thesis on the technology and the utility and the adoption curve. it's future money and all these sorts of dynamics which lots of people do that analysis and they come out and say okay Bitcoin's interesting ETH is interesting you know these other crypto assets are interesting like you can get there but it's a very different threshold and you're competing against every other interesting technology uh play that exists in the world today and there are lots and that's a very different question than is this digital gold and if So well then you know it makes sense as a hedge against monetary debasement, inflation, fiscal challenges, geopolitical uncertainty to have some in my portfolio. So that's what almost all these guys are watching. So ideally for them to buy more and buy in size, you you'd want to see Bitcoin and other crypto assets presumably, but in particular Bitcoin correlated with gold rather than the NASDAQ and risk on assets.
>> That's right. So for Bitcoin, that's the thesis, right? For the vast majority of new adopters say, is this this idea of it as digital gold, right? A global scarce emerging monetary alternative. For the rest of crypto, it's about blockchain adoption, digital asset blockchain adoption, right? And so the proof point for Bitcoin is how does it consistently behave against that? And people have to look beyond these short-term moves which are largely dri driven by levered perpetual futures kind of volatility and more about you know medium and longer term how does it track against uh that dynamic and when you look at it a more zoomed out lens it's actually been very compelling even with these short-term generations the proof point for for ETH and for the rest of crypto is show me the use cases show me the adoption show me how the technolog is um actually being deployed and transforming different parts of our uh economy and financial system.
>> And so back to are the institutions here and in what size? Um so you seem to indicate that there are pioneers in each of the major categories that are here. Are they in size yet? Like if we were to try to say I don't know if it's a baseball game, what inning are we in as far as institution cap institutional capital that could be allocated to crypto or what percentage of you know 100% are we kind of in. I think what we don't really have what you know cryptonatives many of the bankless listeners probably don't have a lens for is how much institutional capital we actually have like how far we know central banks like don't really own very much crypto >> but how about these large institutions have they already bought in or are they just starting
>> well I would say that um the allocation levels that you're seeing from those who have is typically in kind of a 1 to 3% range. So that's that's the most common range that we're seeing from those who have and that's actually um you know pretty significant and the way that's showing up the first quarter after we uh launched the the Bitcoin ETFs IBIT for instance was over 80% direct retail investors. Every quarter thereafter that number has come down to the point where today it's close to 50%. And so the other 50 is the growth in wealth advisory and institutional. And so the trend is very clear. those uh latter buckets which of course a larger asset base ultimately than um retail investors in the direct channel are today um is moving more slowly but they are moving and they're paying attention to a lot of these subtle dynamics around adoption around long-term tailwinds around political and regulatory environment and yes around some of the uh uh price behavior and how that fits or doesn't with certain investor narratives.
>> So, we're still early in the journey, it sounds like even with respect to institutions. Um how about central banks? I mean, part of the big driver of gold, at least lately, has been talk of central banks increasing their gold allocation. You know, China, Russia, other central banks. We haven't seen quite that movement or anything close to that with respect to Bitcoin. But the whole Bitcoin crypto narrative has been in the fullness of time. You know, it starts with retail and then it gets to institutions, larger and larger institutions. The biggest institution of all is a central bank treasury. And that's where gold has found itself. How long will it take Bitcoin to find itself there? What's the path?
>> Well, um I don't think that uh that should be a core part of anyone's um investment thesis. Remember that uh central banks absent a little uptick here the historical trajectories they've moved away from gold right they used to be uh the fundamental basis of central bank reserves and as we moved off the gold standard around the world the migration has been in the other direction and obviously there's there's a little bit of a of a rebound in the last couple years but you know for Bitcoin I think those other institutional categories that I mentioned are probably far more likely to see meaningful adoption sovereign wealth funds, pension funds, insurers, endowments, foundations, family offices than our um central banks could happen. You know, uh uh there have been more surprising things that have happened. Certainly, there's discussions in various countries about the strategic value of uh accumulating some some degree of Bitcoin reserve. So, that is happening, but I would say that's kind of an outofthe-oney option at this point in uh in Bitcoin's valuation.
Let's talk more about the ETFs. So, the two big ETFs that Black Rockck has launched are IBIT, the Bitcoin ETF, and ETH, the Ethereum ETF. How successful have these products been? And can you put this in, I guess, a comparative lens with other ETFs that you've launched over the many decades at Black Rockck?
>> Yeah, it's been uh pretty amazing, right? And I think that what's happened is the value prop of being able to hold these assets in a accessible turnkey convenient lowcost way. You know that for the traditional investor, the institution, the financial adviser can be, you know, traded as as conveniently and held as as owning any stock has been massive, right? And so a meaningful share of uh the investor base and particularly of new adopters, the the ETF has been resoundingly their vehicle of choice. And the way that's manifested, you combine that the value prop the ETF rapper, which has tremendous appeal. Obviously, there's a reason that there's many trillions in assets held that way today. um with Bitcoin and with Ether which have justifiably generated a lot of excitement uh from now hundreds of millions of people over the world you get a recipe for what we saw which was unprecedented levels of of inflows and and asset growth. So, IBIT today uh has been the fastest growing ETF post launch in in history. Um you know, fastest to reach 80 billion uh by a factor of of roughly 4x faster than than the prior record. And then ETHA has been the third fastest in history to uh its respective milestones along the the curve 10 billion and and now 15 billion. So, it's been quite uh a remarkable couple years. No question.
>> Etha had a bit of a slower start. the uh IBIT ETF was just like a rockstar from the very beginning. Uh it has felt like the Ethereum ETFs um they really took off during the summer and I don't know if this was the the Tom Lee effect or what you know Tom Lee launched of course his um Ethereum DAT strategy uh over the summer. Seemed like the Ethereum ETFs were really catching a bid this summer although the inflow h has been positive um for for quite some time. what what changed and you know how do you explain the the more recent uptick in the Ethereum ETF? Has this been a a narrative that has finally clicked?
>> Well, I think for one sentiment in uh Ether had gotten overly negative. If we think back to this winter, you know, I think it got uh even below 1700 and and it was kind of all doom and and gloom. I think that was a little bit overdone. And so there was there was some element of a relief rally once uh that that reversed and um you know people recognized that there's still lots to be excited about uh in Ethereum and I think it was also helped frankly by the genius bill and optimism around stable coins and and the growth of that as a really powerful use case. I mean, there's lots of people who look at the space and, you know, maybe they've struggled to to really resonate with it and lots of the different applications that have been thrown out and that have been explored over the years. Uh, but stable coins is is such a logical one to so many people when when you see what an unlock that is for moving value around the world in a lowcost uh efficient way. So stable coins I think some of its optimism around tokenization which obviously um you know has been uh a topic that's generated a lot of excitement particularly in the last year and we've seen you know green shoots of of uh of progress in terms of growth and and adoption there and so I think all those things together uh were enough to really uh you know change sentiment and and get folks attention um that that drove what what you know was a pretty extraordinary summer of inflows and price action.
>> This word tokenization, this has been a word that uh Larry Frink has uttered more than a few times um recently. I was watching him on CNBC. I think it was a week or so ago and he said this. I I believe we're at the beginning of the tokenization of all assets from real estate to equities to bonds across the board. and he described this as um taking traditional financial assets and repotting them kind of a a tokenization shell. Can you paint the vision of how that happens? So we obviously we have stable coins, so that's one form of tokenization, but Larry's talking about token tokenizing all of the financial assets that we have. So how do we go from here to there? What's the tokenization roadmap for Black Rockck?
Well, we as you know really started with uh Biddle as our first public blockchain uh tokenized fund. It's a tokenized uh private money market fund and that's been very successful right almost three billion in assets and the key unlock there and I think this is a really important point to remember it's all about taking the generalized value prop of tokenization which has lots of exciting things right 247 realtime settlement digitally native global interoperable programmable and saying how do we deploy that in a given asset class in a way that creates material new value or utility for investors, right? And so in the case of Bidd and in general in the case of money market funds, tokenizing them has broken the paradigm that previously existed that forced you to choose between capturing full yield on your US dollar savings and having full liquidity, right? For the first time, you could hold US dollars in a tokenized money market fund and then as soon as you needed liquidity to make a payment or settle a trade, etc., you could convert that to a stable coin.
>> And that I think is a really powerful value proposition. That's why this asset class far and above any others to date has seen real growth and adoption and tokenization. So now the question is where do we go next? And a lot of it is going to stay in this category, right? Because there's lots more to do to be able to open up access and serve more and more uh clients and investors. But also it's about figuring out what are the you know second and third you know next most uh viable asset classes where you can use tokenization to drive real utility to expand access uh to create an incrementally distinctive level of value for users of that and that's the journey we're on now.
>> It seems like an exciting journey. I um noticed a headline that I didn't quite understand. And it was earlier this month and it was uh Black Rockck unveiling a Genius Act aligned money market fund. I wasn't actually sure if this was Biddle or something else. And what in particular needs to be Genius Act aligned? What does that unlock for money markets and other tokenized products at Black Rockck?
>> Sure. So there's a regulatory construct in the US called uh 2A7 and that describes a very specific very strict uh approach to managing a money market fund that is meant to uh effectively maximize uh liquidity and uh safety of of the way that's held. It turns out that the Genius Act prescribed a uh reserve management framework that was quite similar to 2A7, >> but not quite the same.
>> I see. And so what that headline was referring to was an existing fund that's a 2A7 fund simply having some slight modifications to the reserve management approach that would make it a uh viable option as a genius compliant measure. Now that fund is not tokenized, right? But that is saying to the extent there are potential uh money market fund clients who do need to hold their assets in a genius compliant way, that's a vehicle that historically uh has always been 27 compliant. Now it's also going to be genius compliant.
>> So this is about Black Rockck getting its money market funds in a position such that they can be uh used by other companies to essentially back their own stable coins. So this could be the backing for other stable coins out there.
>> That's right. We would expect that the vast majority of stable coin reserve assets are going to be in money market funds and that's a a competency that we are very deep in uh at BlackRock. We uh manage roughly a trillion dollars in in liquidity funds and money market funds globally. And so it's exciting to see the growth in stable coins, which we're big believers in. You know, we've had a long-standing partnership with Circle dating back to to 2022 and and the growth of USDC particularly in the last year has been amazing to watch and we're we're very excited for that. And so this is a this is a category that's going to I think continue to grow in significant ways.
>> Last time uh you were here, we asked a question about, you know, tokenization in terms of what's missing, right? what's missing to get tokenization off to the races? And you said there were three things that were missing. Institutional custodians, secondary marketplaces, and more regulatory clarity. In the past 12 months or so, how far have we come on those three dimensions of what was missing?
So I think the first one actually tremendous progress in a little over a year where a number of the largest global banks, global custodians have or are developing capabilities for custody of both crypto and tokenized assets. So I think uh outstanding progress on that front and that's going to be critical certainly because if you think of the majority of institutional investors they intend to they would want to if they're going to hold an asset that they used to hold in a non-tokenized form and now they're going to hold in a tokenized form. They would way rather be able to just do that with the existing custodian that they use for whatever that asset class is or whatever that fund category is.
And now that's possible much more possible. It's it's made tremendous progress, I would say. Uh it's not quite there in a fully ubiquitous way, but it certainly seems to be headed in that direction. Liquidity venues, I would say mixed. Um there's been tremendous progress obviously in the DeFi world of creating uh platforms for tokenized assets to trade and also to do other things with them to to borrow against them, to use them as collateral, etc. but less so in sort of the trady exchange world extending into tokenization and and listing assets and so I think that may yet come and certainly we've seen some announcements to that effect um in recent months and then the third piece the regulatory clarity and this is the really interesting one as much as um you know this SEC has been you know incredibly supportive of innovation in this space um this is a really hard problem it's not a simple I think crypto people sometimes need to to realize that regulatory clarity doesn't just mean clarity that there are no rules. And so, uh, there actually is a really complex, uh, challenge before us as an industry and and frankly in in concert with with agencies like the SEC to figure out how to make, uh, the old rules and and and what novel rules and exceptions come into play that harness the innovative uh, potential and opportunities from this technology without uh, undermining some of the key principles uh that exist in market structure today and I don't think there's anyone in the world who has written down on a piece of paper like here's all the answers if only the regulators would do this then it would be great it's a really hard set of problems to solve and that's a journey that we're on with other players around the ecosystem and uh with regulators imagine a world where traditional finance meets the power of blockchain seamlessly that's what Mantel is pioneering with blockchain for banking a revolutionary new category at the intersection of Tradfi and web 3. At the heart is UR, the world's first money app built fully on chain. It gives you a Swiss iBAN account blending fiat currencies like the euro, the Swiss franc, the United States dollar, or the raimi with crypto all in one place. Enjoy realworld usability and blockchain's trust and programmability. Transactions post directly to the blockchain, compatible with tradi rails and packed with integrated defy futures. UR transforms Mantle Network into the ultimate platform for onchain financial services, unifying payments, trading, and assets like the MI4, the ME protocol, and functions FBTC, backed by developer grants, ecosystem incentives, and top distribution through the UR app, reward stations, and buyit launch pool. For Mnt holders, every economic activity in UR drives value back to you, embodying the entire stack and future growth of this super app ecosystem. Follow Mantle on X at mantle_official for the latest updates on blockchain for banking. That's x.com/mantle_official.
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on this journey of regulatory clarity. Is this going to take um bills in Congress? Is this going to take something like the Clarity Act or is this is is most the blocking tackling behind this sort of rule making with regulators and sort of just defining processes and and like the nitty-gritty of things. What's it going to take?
I think it's meaningfully more complicated to try to create legislation to address all the tokenization related regulatory challenges. And so I think that that is more likely to happen at the agency level than necessarily through a new piece of legislation. We'll see how that plays out. Right? There have been points where um that idea has been been floated of trying to tackle tokenization within uh clarity or within a separate bill and that may yet um happen. But you know there there's as I said it just it's a pretty complex uh topic. The good news is there's a lot of positive energy around finding ways to uh help make this work to support innovation in the space particularly innovation around tokenization. So I do as hard as the challenge is I I'm quite optimistic.
>> And then do you feel like we've made progress on that? So if it's a lot of blocking and tackling you know regulators you just sort of defining things 12 months ago I don't know where we are were but now as you look forward to like where we are now and even looking forward over the next 12 months do you get the sense that we're making a lot of progress that we're on the right track?
>> I think so. Um I think that frankly what needed to happen was for players in the ecosystem to actually you know do the work knowing that there was an opportunity to engage with regulators and figure out solutions to these problems for for people in industry to to do the work of actually defining in a very clear way what the problems were and what what a reasonable set of solutions would look like. I think that work has happened on a lot of fronts. Now there's a process of engaging with regulators to in in a very consultative way. It's been very sort of consultative collaborative process uh to try to put that into into action and and deliver the the clarity that's needed.
>> So if we have the institutional custodians if that's kind of you know check mark uh and we're on the path towards greater regulatory clarity will we get the third by virtue of that? So once we have more of the regulatory clarity, will we get the secondary marketplaces? Will we get the liquidity and is this all falling into place? Now
>> I think that is the natural progression of it. So obviously this is a space that we're spending a lot of time on as a firm. um lots of players around the ecosystem are and I think that these uh elements of progress across those three threads that we've talked about do have a self-reinforcing sort of flywheel effect compounding uh off of each other. And so um you know this will be a pretty uh pivotal you know 24 to 36 months ahead uh where tokenization really has an opportunity to prove itself in generating adoption and driving real incremental utility and efficiency uh in markets in in the way that you know has long been uh held out as a as a a real area of promise.
What's the bullcase if we look forward to say 5 years from now, 10 years from now for for tokenization? I recall you saying last time it's kind of a binary either we have kind of no tokens, none of this works or basically everything we have many tokens, everything is tokenized. So looking at kind of Wall Street and US capital markets in 5 to 10 years is basically all of our assets when it comes to ETFs or stocks or real estate just everything under the sun is it all available in some sort of token form and all of this available on kind of your your Aladdin platform let's say
well that is the bullcase I think five is probably uh too soon but you know when you talk about 10 um with all these technology innovations right there is a a scurve where if you really hit liftoff, uh the the rate of adoption can really accelerate and and there can be a uh a fast-paced migration to a new technology paradigm and that's that's the journey um that we're on and and as you noted there many asset classes that are pretty interesting candidates for this. Obviously, we started with money market funds, but you think about stocks, bonds, ETFs, commodities, real estate, um, private markets, funds, lots of asset classes that have been tried with mixed uh, degrees of success. But once you have a bunch of asset classes that hit that inflection point, it becomes a lot a lot easier to bring along other asset classes in behind it because more and more people are migrating to that new infrastructure paradigm and they've built comfort with it and they've built the capabilities and the systems to be able to interact with it.
Who's left to convince on Wall Street, Robbie?
So I think um you know crypto's taken a while to really saturate in Wall Street. It feels like this cycle we had some uh major achievements on that score. Even Jamie Diamond, I think there was a clip from last week. He's got this quote, "Crypto is real. Blockchain, stable coins, JP Morgan deposit coco coin. You can move stuff. Smart contracts are real. All this stuff is real. It'll be used by all of us to facilitate better transactions and customer service." This is even Jamie Diamond, who has uh himself been cryptokeep seemingly warming up even further to crypto. Is that everybody? We've got Black Rockck, we've got JP Morgan. Is there anyone else left on Wall Street to convince?
>> Well, uh, frankly, JP Morgan's been
A great leader in this space, and they have been for, uh, many years. Um, and that's, you know, they've done a lot of, uh, development work around tokenization. Um, they're a huge player in the IBIT, uh, ecosystem. They've been a leader there. So, they've been innovating.
I think frankly, the group that needs to still be convinced is actual investors, right? Because that's one of the challenges that tokenization has faced so far is that these projects will develop tokenized asset offerings, and the end investor demand hasn't always showed up, >> right? And and that's not, you know, their fault. It comes back to what is the actual tangible utility unlock that you're using tokenization to generate for me, and does that overcome the inertia effect and whatever risk and operational complexity is involved in migrating to that new format? And so the bar for that is pretty high, and we've passed that with stable coins, but it's not clear that we've passed that with other assets.
May maybe flip this. Is there a maybe a more bearish case for tokenization? So, what if we only get to stable coins and and money market funds that kind of back stable coins and the middle fund and that sort of thing, and nothing else takes off? Can you envision that world? Like what would what would go wrong do you think, uh, with tokenization in order to to have that type of a more bearish outcome?
>> Yeah, I think that, um, probably the the bare case is that only stable coins work, right? Um, it's hard to imagine a world where not even stable coins, uh, have significant adoption because already today it's 300 billion in market cap, right? And that's in a pretty high interest rate environment, which is remarkable, right? So the stable coin value proposition, this ability to move money around the world in near real time at near zero cost between any two people with a smartphone to get access the world over to digital US dollars, which many, many, uh, billions of people around the world, uh, have shown a clear desire to be able to to have that access. That horse has left the barn. Uh, and it's just a question of how fast and and how broadly adopted across other domains do stable coins get, whether we're talking about, you know, retail remittances, which are massively inefficient today, cross-border payments for corporate multinationals, which have, you know, lots of frictions and costs associated with them, and maybe more ambitiously, uh, financial market settlement activities. So subscribing and redeeming from funds in stable coins, uh, settling trades in stable coins, processing corporate actions, uh, margin and collateral in stable coins. So lots of, uh, pretty exciting applications for it that I think is is, uh, the bare, if that's the bare case for tokenization, is it's actually not that bad.
I mean, even the bare case, I guess, with with stable coins and the and the genius bill, it's not clear that that's been, I guess, fully priced in. It seems to, you said the the horse has left the barn, but it seems like we are only getting started on that. How is that going to shake things up or or change things across, um, traditional finance? I mean, will this change the structure of of banks? There have been some instances where, you know, may maybe some banks are not, uh, favorable, uh, of letting interest go to say crypto exchanges. At least there's been some fights about this. But one gets the sense that the underlying structure of traditional finance will be shaken up, will change a little bit with the advent of of stable coins. Do you know how? Do you have any predictions?
Well, what's interesting is I think if the industry executes well, then the whole sort of fight over interest, which ultimately was, uh, was banned in the genius bill, becomes, um, not that, uh, big of an issue, uh, because tokenized yield funds become the natural vehicle through which, uh, users hold US dollars on a sort of going concern basis, digital US dollars and capture that full interest and and they're holding these assets which are clearly securities, but that's okay because they're being used to hold, not to make payments. And then the moment they need to make a payment or settle a trade, they convert, right? And so stable coins become sort of the operating cash, and tokenized yield funds become the investment or hold cash. And, uh, the the latter is where you capture for yield. So even if stable coins, uh, don't pay any yield, they're still going to be very useful in payments. And and we sort of see that as the, uh, natural future state of this ecosystem. And obviously, to do that, you need to really drive frictions to zero pretty much in moving between tokenized yield funds and stable coins. You need to have tokenized yield funds that are accessible and that have, you know, essentially instant and very, very cheap liquidity convertibility back and forth between themselves and stable coins.
>> If we have that, do you do you see a world where where we have many different stable coins? Or right now we have kind of two power law winners. There's Tether and USDC from Circle, but, um, will that change? Will we have hundreds, maybe thousands of different stable coins?
>> I I don't think so. Um, you know, network effects are really, uh, powerful in the stable coin space. And so there's a lot of value in being, uh, widely accepted, in having liquidity from a trading perspective, and being, you know, used on platforms, ultimately in the future, in having, uh, liquidity and volume in a foreign exchange pair against that stable coin. Um, so, you know, I think you'll continue to see, you know, growth in the industry and healthy competition, but I certainly would expect we'll have, you know, a thousand different stable coins. I I don't see that level of fragmentation as being, uh, efficient.
>> We're getting closer to the end of 2025 and and the beginning of of 2026. If you fast forward and you think about maybe November of, um, 2026, what do you hope that crypto has accomplished by that time? Uh, what does it look like? Are there some major things in your mind? And and maybe, um, the same question for BlackRock?
>> Yeah, I think that the big test of the next year plus is going to be, okay, for many years, there was frustration over an absence of regulatory clarity in the US, right? And certainly, you know, some of that was a was a fair complaint, but it became almost a a mantra or cliche at at points, uh, to hear, you know, regulatory clarity, regulatory clarity. Now, that's coming, right? It's been a very supportive, uh, environment from that standpoint over the course of 2025. And so the test is going to be, prove it, show the adoption, show the real economic use cases. And there's obviously lots of really exciting, uh, early proof point, proof of concept type stuff happening, particularly in in the DeFi world. But show me the examples of places where we as a human society or economy either couldn't do something, or we had to do it, but in a really inefficient way. And then using blockchain, using digital assets, we've now solved that, and we do it overwhelmingly using blockchain in a much more efficient way. Right? And to date, there's been a pretty short list of things that fit that category. Bitcoin as a, uh, the first monetary instrument in 3,000 years to gain global adoption because of its technological breakthroughs, stable coins and moving value around the world in a, you know, 10x better, more efficient way, and a handful of things that are happening on Ethereum and and some of these other blockchains. But that sort of tidal wave of really powerful use cases, I think we're still waiting on beyond that. And now is finally the environment where that regulatory support exists, and so it's time to to prove it. 2026 is the the show me phase. Maybe it's the the building phase.
Um, Robbie, this has been great. I mean, last question. So every every cycle, we have, um, institutions who talk about crypto, but they don't necessarily follow through, uh, and build or get very excited during the the bull market, but, um, they head for the exit, you know, as things turn down, the bear market. And so for those institutional investors or those institutions who are building on crypto, and this is their maybe their first cycle actually in, they see this volatility, you know, they see the $30 billion selloff or red days like today where this looks to be a maybe a negative 10% on total crypto market cap, and they start heading for the exit. What, what's your advice to them?
>> Well, I think my advice is more, uh, for the people coming in, in how they approach the space. I think it's very important to be discerning and to be very particular about which assets one is going to hold, right? There's a reason Bitcoin is still, you know, roughly 65% of the market cap of the space because it has very clear product market fit and investor narrative and a big addressable market as this digital gold like asset. There's a reason there's consolidation in a lot of the rest of market cap in a few top assets, which is those are the handful that have really proven themselves and developed some degree of product market fit and, uh, economic utility. One has to be very wary going far down, uh, the table. There's hundreds of thousands of crypto assets out there today. The vast majority of those are or will be totally worthless. And so investors have to be careful around that. And they also, I think, should be wary around trading on a short-term basis. Certainly short-term levered basis is a tough game a lot of times in the crypto space. And I think the people who've done the best in this space have taken a much more long-term fundamental view and understood that you have to be patient, and you have to understand that there's volatility in the space and there will be cycles.
>> Robbie Mishnik, thank you so much for joining us. Best of luck to BlackRock in the show me phase of 2026. I appreciate your time today.
>> Thank you, Ryan. Good to see you.
>> Got to let you know, none of this has been financial advice. Of course, you could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad to have you on the bankless journey. Thanks a lot.