C (2:48)

In crypto Rails I've been worried about this for a while and why I'm like not haven't yet gotten up out of my seat about tokenized securities because my understanding of securities laws is that if you want to have a natively issued security on chain, you have to kyc and if you bake KYC into the compliance of the token logic, you can't have any fun. I can't send you stonks, you can't send me stonks. We can't put stonks into Defi. And that's the good stuff. Just like being able to use Ethereum to hold them is like way less interesting. And I kind of thought that that was going could could be a dead end with the wrapper model. Not. Not necessarily. And it's also nice that the wrapper model worked for USCC and ust and it can potentially also work to give wrapped stocks permissionlessness inside of crypto.

A (3:39)

All right, let's get right to the episode with Ondo Finance. Before we do, we want to thank the sponsors that made this possible.

C (3:45)

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A (5:32)

Bankless Nation we are talking about real world assets today. We have some of the chief leads over at Ondo Finance. We have Nathan Allman, he's the founder and CEO. We also have Ian Debode, he's the Chief Strategy Officer at Ondo Finance. We're going to get into the state of real world assets. Gentlemen, how are you doing today?

B (5:48)

Pretty good. Thanks for having us.

D (5:50)

Doing well. Thanks Ryan. Thanks David.

A (5:52)

Is business booming? Because we got about 300 billion I think in real world assets on chain at the time of recording. All right, it seems like it's going kind of well, but put it in your words. Is business booming? Are we doing. Are we doing this thing? Are we getting the real world assets on chain?

B (6:08)

I think so. I mean I don't almost like to anchor on 300 billion, although it is getting significant. But if you compare it to true Tradfi scale, 300 billion is still rather small, but the growth of things is very significant. I joined Ondo about 18 months ago and when I joined I think tokenized treasuries were maybe a billion dollars, Nate, if that. Now we've crossed seven and we're still growing pretty aggressively. So the growth is definitely very encouraging.

D (6:39)

Yeah, I mean, are things booming? I think you can look at this from a couple of lenses, like from a product adoption perspective. Things are booming with stablecoins today. Like stablecoins across the chasm, they're reaching mainstream adoption. Lots of traditional big tech companies are deep in the weeds of their integration and they make up the overwhelming majority of that, you know, 300 billion enrolled assets on chain outside of stable coins. I think we're really just starting to scratch the surface. I mean tokenized treasuries and you know, I guess figures, private credit products are, you know, the bulk of what remains. But I, you know, I think just starting to, you know, see meaningful growth there. You know, we launched our tokenized equities products recently and you know, things are even more nascent there. But certainly from a market interest perspective, things are booming. I mean, asset managers, banks, regulators, they all see the inevitability and the writing on the wall of the long term potential of tokenized securities. And so there's certainly a ton that's being done behind the scenes that I think will lead to more product growth outside of stablecoins in the future.

C (7:52)

Nathan, you said the word inevitability. Can you just actually walk us through why? Because I think as crypto natives we all kind of understand like, oh yeah, blockchain technology is the future. And that assumption has been baked into. We always thought this, we've always known that it's inevitable. But maybe we could talk about why it's inevitable maybe to just start, start off this conversation. Why do we assume that real world assets are coming on chain?

D (8:17)

Well, I think stablecoins have really shown the potential. Right. I mean there is now a blueprint that we can follow for how to make assets globally accessible, you know, permissionless, transferable, peer to peer. And you know, the world outside of crypto is starting to appreciate that potential and that power in the context of money. The current pain points to solve in the context of securities are even bigger in a lot of regards. Right? I mean existing security settlement processes are even more regionally fragmented, cumbersome and slow. Right. Every region for the most part has set up its own, you know, so called central securities depository. It's the, you know, the DTC in the US In Europe there's Euroclear, Clearstream, Lux, csd, you know, Asia has a whole bunch of them. And you know, moving securities from one of these CSDs to another, you know, takes days, if not weeks, you know, and I think, you know, there's obviously similar friction Points, you know, in the tradfi system around moving money. But, you know, I think we're very excited about, you know, taking what stablecoins have done for money and doing that for, you know, the rest of securities.

B (9:34)

It's funny because with a stable coin, I mean, stablecoin is just tokenized cash, right? But we were used to having that cash sit in our bank account, but at least you could very easily send it to other people. Yet still, a stable coin is a meaningful improvement over cash because you now you can do that 247 globally, and you can use it in a smart contract with stocks and ETFs, treasuries and the like. That's not even the case. I mean, you can technically move it from brokerage to brokerage, but that process is way more difficult than just moving cash between platforms. So to Nate's point, I think the leap in enhancement and efficiency and better user experience that we can get by tokenizing stocks, ETFs, treasuries and the like is even so much greater for those assets than it was for cash. Yet people right now are super excited about the concept of a stablecoin already. Rightfully so. But the quantum leap for other types of assets I think is going to be even greater.

A (10:33)

I think people don't understand actually how much tradfi kind of sucks until they use it, like a lot of crypto natives. Actually, I find myself somewhat in this camp of, like, I'm learning about finance by route of crypto, right? And so you see all these advancements and people complain about the UX of crypto. And then you go back to your brokerage and tradfi. I was recently, Ian, to your point, I was trying to move some retirement accounts I had from E Trade over to Fidelity. Oh, my God. What a process. Okay. The amount of people, like, I just. I click some buttons, fill out paperwork. I think, like, they were probably faxing things around in the back office. Like, it's that difficult. Simple things like, you gotta try this stuff. It's fine. It's like going back in time. You can't even in your brokerage. David, I'd like you to. I'd like to see you do this. Like, you have probably a brokerage, right? You can't swap a security. One security for another. You can't just do that trade. Okay. First you have to go back to cash. Yeah. I think you're talking, but you're on mute.

C (11:40)

I am talking. Yeah. I was shocked. Was this so sounds that are coming out of my mouth? Yeah.

A (11:45)

So it's very slack.

D (11:46)

You have to go back to cash and then you have to wait for the cash to settle. Yeah, that's right.

A (11:50)

You have to wait for the cash to settle.

C (11:52)

That's ridiculous.

D (11:54)

Practically speaking, most folks use margin accounts to get away from that problem so that they can, you know, buy without having to wait for the cash to settle. But if you do that, then you're effectively lending out all of your securities and you take on counterparty risk to the broker dealer that you're doing that at. And sure there's, you know, some SIPC insurance, but that's limited.

A (12:14)

So, I mean, stuff like this is absolutely insane. You guys, I appreciate you guys coming here is you both have tradfi experience, right? So Ian, you're. You're ex McKinsey, I believe, right? And you're doing digital assets there. And Nathan, you're at Goldman. And so you're kind of bridging into crypto here. But when people talk about real world assets, I really want to give Bankless listeners a sense for what we're talking about in case they don't understand. So we're definitely talking about stablecoins. Everyone knows about that. They're the most mature real world asset on chain right now. So mature that we even have legislation. So the government has just been like, oh, this is great, we support this. And Secretary Bessant is saying we want to get 3 trillion in stablecoins on chain. Okay. So it's fully blessed now by the US Government. That was the genius bill legislation that just happened. So that naturally is going to be the most mature stablecoin asset. We've got about 270 billion in stablecoins. But let's talk about some of these other categories. And we're going to get to equities because I know you guys have just launched something really cool on the tokenized stocks world and the tokenized equities world. But if we go down from stablecoins, the next largest asset class it feels like is US Treasuries. And I know Ondo has some offerings in US Treasuries. Actually, just prior to this, I was looking at. I think maybe somebody from your team notified me and I saw this. Fidelity launched money market accounts on Ethereum on chain. They're like, I don't know, I didn't hear about this.

B (13:43)

It's kind of a big deal.

A (13:44)

Stealth launched this last week. Okay. And Fidelity, for people who don't know, has about 1.3 trillion in money market accounts. Okay. They're the largest. What's the money market account. That's Tradfi speak for. It's Treasuries. It's Stablecoins with, with a yield wrapper. So you get your 4% yield. Right? That's what a money market is. Don't hold dollars. People hold money markets. If you can, in any of your investing accounts, of course, because you don't want to give up that yield to a bank anyway. That's what a money market is. And they tokenize their money markets and put them on chain. This is Fidelity. There's $7 trillion worth of money markets in Tradfi. That's why you guys were laughing earlier and you're saying, oh yeah, it's kind of cute. We're at 300 billion 7 trillion in just money markets. That's what we're talking about when we talk about this category of U.S. treasuries that includes short duration Treasuries, long duration Treasuries. The short duration is going to be more the money market. I think I'm speaking correctly in terms of Tradfi lingo. You guys correct me, what's Treasuries on chain? It is now about 7.4 billion. How big is the treasury opportunity and what are you guys doing in that space?

B (14:54)

Yeah, I'm happy to start with that one. You are correct. Fidelity launching on Ethereum no less, is kind of a big deal. Money market funds or tokenized Treasuries are an incredibly popular product in traditional finance. Right to your point. Don't keep your cash just at a bank. Put it into a money market fund so that you can earn yield on it. And in part, the reason why Ondo started with tokenized Treasuries is exactly because of that we looked at stablecoins. Stablecoins are amazing products with clear product market fit, but they're not perfect. Right. They didn't really offer very good investor protections. Some of that has been resolved now with the new legislation. But not every stable coin is like that. And the other big downside is that they don't offer yield. And so what better way to kind of address that problem? By tokenizing Treasuries itself so that when users were holding this particular asset, they would have better investor protections and they would get yield paid out on a daily basis. So Ondo started tokenizing Treasuries back in 2023, Nate, if I'm not mistaken, with OUSG, which was the, at the time a pretty meaningful innovation because it was the first time that a tokenized treasury fund could actually be transferred between participants on an allow list. That model was then later copied by the BlackRock Biddle Fund. But the benefit of that structure was that you could actually transfer it even into a smart contract. So then Ondo also launched the Flux Finance Protocol, where essentially you could use OUSG as collateral and start tapping into essentially a repo use case, because that's the other thing in Tradfi that is incredibly massive. Most of Tradfi liquidity runs on Treasuries and repo markets for overnight financing. So that was really the beginning of us tapping into these traditional financial use cases and trying to put a better product on chain with good investor protections, one that paid out yield. But now recently we've expanded that mission and really focus on stocks and ETFs that I'm sure we'll talk about later. But it's interesting to see how stable coins, I mean, right now tokenized Treasuries are at seven and a half billion, give or take is what you showed. I think it took tokenized Treasuries two years, give or take, to get there. When you look at how long it took stable coins to get to the 7 billion number, it is much, much, much longer. So it's very interesting to see how people started with stable coins that obviously is now an incredible large pool of liquidity and capital. But people have kind of understand, understood now that a stablecoin really is just exposure to tokenized cash. They then look at a Treasury and say, oh, wait, if I want to earn yield, maybe I should buy a tokenized treasury asset. And the adoption of that as an asset class has happened a lot faster than a stablecoin. And we think the logical next step now, obviously is to do the same thing for stocks and ETFs, which hopefully, in terms of adoption, we'll see another acceleration.

A (17:49)

Nate's going to jump in here in a second. But Ian, before I let you off, you said repo markets. Okay, that's something in Tradfi I actually, I don't quite understand yet. You said that's a, that's a big deal. You know, Treasuries are used for repo markets. What's a. Like, what's a repo market? What's the 101 on that?

B (18:06)

No, I'm sure Nate will do a better job at articulating that than me. But the concept is essentially a lot of banks, you hold a lot of their assets in these actual Treasuries and they hold them at custodians like BNI Mellon, JP Morgan and the like. And oftentimes there are liquidity financing needs that happen overnight, or people that want to earn yield on excess cash, they can essentially swap them into a Treasury or the other way around. So Treasuries is the most liquid collateral asset that is being used that can typically be pledged in overnight, even at the Fed itself, where you can then earn a yield on it whenever you want. So Treasuries and cash are kind of like the lifeline of the traditional financial ecosystem where you can very easily swap one for the other, even directly at the Fed.

C (18:55)

I'm getting this notion that we are as an industry back in like 2021, 2022, Ryan would, and I would use this line all the time. It's like crypto is speed running the history of money and finance. And I'm getting this notion that we are doing something similar with like the financial tech stack, or it's like the same thing. Whereas we're starting with dollars, just inert basic dollars, federal deposits. Right. Is like the very bottom of the stack. And like the next highest thing is the repo market. And on top of that are people that hold Treasuries, short term Treasuries and then maybe there's like long term Treasuries on top of that. And then we start to get into like equity or like maybe, maybe we get into like corporate bonds, corporate debt, and then at some point we get up to higher and higher into equities markets. That's how I'm imagining things. Maybe. Is, is that a David Brain thing or is that actually like somewhat coherent in terms of like how you guys understand the stratification of Tradfi and also how crypto is starting to build out its own parallel version of that? Is that. Am I onto something here?

B (19:59)

I think so. Nate, do you want to articulate a little bit how you've kind of seen it go from cash Treasuries to equities and why we focus on those asset classes in the first place? Because when people hear tokenization, sometimes they talk about private credit and real estate and PE and all these other asset classes. But one of the reasons I joined ONDO is because Nate had the vision that that's not how it was going to play out. Who's going to go stable coins to Treasuries to equities with good reason. So I actually think that's quite helpful to just articulate a little bit as to why that's going to be the case.

C (20:29)

Yeah, Nathan, give it to us.

D (20:30)

I think it's a totally fair observation. As well. But you know, we're, we're recreating financial rails with some, you know, big advantages that maybe didn't exist the first time a lot of these things were created. I mean, if you think about commercial banking like it is really a historical artifact that you have these institutions that had to both handle payments, savings and lending altogether. Right? And money was sort of created in the process of lending and then through writing paper checks and that was sort of the OG payment system. And now with technology, with certainly Bitcoin creating this ability to hold value in a digital scarce manner, you know, we're able to really decouple savings, payment and lending. You know, that's been a trend that's been happening to some degree outside of crypto for a while with the emergence of the, the so called shadow banking system and all these like specialty non bank lenders taking you know, over more and more of commercial lending from banks. And I think crypto technology is a huge accelerant of that. So certainly we're seeing that with stable coins and then you know, increasingly with other securities to kind of build on what Ian was saying. I mean, we started with Treasuries really because there was a clear pressing market need at the time in early 2023 with 150 billion plus in stablecoins not earning any yield. So that was a very simple value prop. I think the value prop for tokenized securities more broadly, especially in the United States, where investors already have access to these assets, is a little bit more complicated. I think it requires the emergence of an ecosystem, particularly of financial applications of things like borrow lend, which practically speaking is effectively repo trading, maybe derivatives and other arrangements that accept these sorts of assets as collateral. And so we are working to build out much of that ecosystem, as Ian mentioned. You know, we help build Flux Finance, which is a sort of a proof of concept for how you can use tokenized securities as collateral and you know, defi like arrangements. And so, you know, as we build out that ecosystem more and more, I think the value prop will be more clear in the United States. But for now we're very excited by the very simple pitch of making very liquid public US securities more accessible to investors all around the world, in Turkey, Latin America, Southeast Asia, and very small check sizes for folks who don't have US brokerage access today, which is the majority of the world and much of the early stablecoin investors. So we've always viewed tokenized Treasuries as a wedge, a beach ad into broader tokenized securities capabilities. It's become a very, very competitive, almost commoditized space. And we really see tokenized treasuries for us as synergistic with what we do more broadly. We can get into what some of those synergies are when we start talking about global markets in a little bit.

A (23:53)

So for people who haven't maybe used tokenized securities, but I'm sure all bankless listeners are basically familiar or tokenized treasury, specifically, all bankless listeners are familiar with stablecoins. Right. Stablecoins are like, you know, super easy. You use them on exchange, you keep them in your crypto wallet. US Treasuries on chain Treasuries, what you're talking about with Ondo or even Biddle, they are an asset that is a security. And so it's not quite as easy as going to a crypto wallet or an exchange. And just, you know, flip, flip, you're swapping assets, you're using the stablecoin for something I've used on before. It's kind of cool. So for the crypto native, you basically you go to the interface, you connect your wallet, you have some sort of a stablecoin. Let's say you have USDC inside of your wallet. And I believe you have to fill out some paperwork. I don't recall doing this. I'm sure I did. One point in time. I have to fill out some paperwork first because it's a security. And so there's some things that need to be checked due to regulatory compliance. But I can do this in my crypto wallet. I can essentially use my USDC and mint the Treasury. Okay. And this all happens kind of on chain. And then I have the Treasury, I'm holding the treasury asset. Why do I want the treasury asset rather than the stablecoin? Because I'm getting the treasury yield, of course. And then I can. So I can. I've just minted my treasury asset. If I want to swap back to usdc, I can then do that later. But I do have to get kind of like approved by the platform. There is some compliance I have to go through. This is really an early example of putting a security on chain. And so that's kind of cool, but it's not free. You can't do whatever you want as you can with stablecoins and DeFi with these tokenized treasury types of assets. Did I describe this correctly?

B (25:36)

It depends. Is I think, the short of it, there's two versions of a tokenized treasury product. One is we have OUSG that is very similar to Biddle and Some of these other products that have just been issued that very much operates the same way as you just described. You have to onboard with us and you can only hold that asset if you are onboarded with us. Because that asset operates on an allow list. If you want to transfer it to anyone, it checks this address on this allow list, yes or no. And if it is not, then a transfer is canceled. There are other asset implementations such as USD Y that are slightly more stablecoin like so with that one, if you want to mint and burn it directly from us, you always have to onboard. That obviously has, you know, compliance reasons as you highlighted is very similar to Anyone who wants to mint the USDC directly from Circle needs a Circle mint account. Right. That's the same thing for a stable coin. But the USDY asset is issued like a permissionless bearer instrument. So on secondary market, once you have acquired that asset Ryan and certain compliance periods are passed, you are free to do with that asset what you wish. Right. You can also you can put transfer it to Web3 wallet. A different wallet can transfer it to a crypto exchange that they supported. Those assets are permissionless bearer instruments, but they do still pay out yield on a daily basis.

A (26:57)

That's very cool. And the SEC was fine with all that. That's okay. We could do this.

B (27:02)

Now these are issued to non US investors in the primary market.

A (27:06)

That's why I couldn't get my hands on that.

C (27:09)

Okay, so in contrast, the Blackrock Biddle fund, you need to be KYC'd and added to the whitelist, the contract whitelist for the Blackrock Biddle fund. So there is no permissionless transferring of that fund to anyone, which makes this one unique.

B (27:26)

Correct. So Bittle and our fund. Oh, USG very permissioned. Permissioned walled garden on whatever network it is issued on. USD Y is different in that it is a permissionless bear asset, but it can only be issued to non US investors in the primary market.

C (27:45)

How do you know that they are non US investors?

B (27:48)

They have to onboard with us.

C (27:49)

Do they kyc with you? Okay, yes.

B (27:53)

Just like with the Circle mint account, you have to get an account with Circle.

C (27:55)

Right, But I thought I heard you say that the USDY contract address was permissionless.

B (28:00)

Correct. In the secondary market post a compliance period, you can send it wherever you want.

C (28:04)

So okay, so I can go find someone I can me not whitelisted or also technically a US citizen. I can go find someone who has it and they can send it to me.

B (28:14)

I mean what you just articulated is essentially a peer to Peer transfer and they would be allowed. Ultimately, the benefit truly of making these assets permissionless, quite frankly, is that they work in defi. We fundamentally believe that it is very hard to get a defi ecosystem going when your asset is permissioned.

C (28:34)

Totally agree.

B (28:35)

So by making these assets permissionless, they can be integrated into a wide variety of defi protocols, just like with stablecoins. And that really gets, that makes them embedded and entrenched into the defi economy in a way that with a permission asset you could not achieve.

C (28:51)

So as long as the primary, when you say primary market, that means, I'm assuming that means that the. When Ando gives the tokens to their first owner after being minted, that first owner is primary and must not be a United States citizen. And after that, whatever happens after that is not your concern.

D (29:09)

US Persons are not allowed to hold usdy. There's a lot of legal and regulatory nuance here, but the products are fundamentally issued not in registered form, meaning that all investors do not need to be onboarded with the issuer or known to the issuer. And so there are fundamental limits to the issuer's ability to, to police what happens in secondary markets. This is sort of a modern day equivalent to old school, you know, bearer certificated securities where, you know, an issuer would, you know, have as the authoritative record of ownership some piece of paper, you know, that might be shipped offshore by a US issuer to non US investors, you know, and if they want to redeem the coupon or you know, principal value, you know, they need to return that piece of paper. You know, crypto technology allows us to have that piece of paper, you know, be digital. And it actually provides us with a lot advantages from a regulatory compliance perspective because we still do have the ability, you know, to freeze blacklist, do the types of things that stablecoin issuers do. So we certainly do our part to monitor for flowback into the United States to the extent that we can. And you know, to not have selling and marketing efforts for, you know, reg products in the United States. But they are not, you know, registered foreign products. So they have certain accessibility and, you know, friction advantages over registered foreign products. Like what Ryan was describing earlier, where there's pretty cumbersome onboarding paperwork processes.

A (31:03)

I mean, what you're describing is kind of what we all want, of course, and maybe this gets into, I know we're going to talk about tokenized equities and tokenized stocks in a minute, but since we're talking about tokenized treasuries in the Perspective of securities. When I go view Ondo's tokenized securities, I'm in the US So I'm hit with a geo blocker that basically says, sorry, ryan, you're a U.S. citizen. You're. You can't access your own country's capital markets on chain. You can't do it. I know. That's not your fault. If you guys could, you'd open it to everybody. You'd have this all available in defi. This is also the case with tokenized Treasuries. Why is that the case? All right, I understand a little bit why it was the case back in 2023, 2024. You know, the crypto native story is like, Gary Gensler was there, and he really didn't like crypto. He really didn't like us. Now we have a SEC that has a token. Is it. Is it a crypto task force? Like, they have something called Project Crypto. We know Hester Purse. We've had her on Bankless many times. She's an architect of this. They could not be more friendly. They, it seems like, are actually interested in. In moving American capital markets to crypto and modernizing the tradfi stack for the 21st century. That's amazing. We've never had that before. Maybe it's too early. But I'm asking, why can't US Citizens have tokenized Treasuries and tokenized stocks on chain? Why is it always everybody else in Europe and other parts of the world? Why don't we get this?

D (32:40)

I don't think we will be blocking US Persons for too, too much longer. For what it's worth. I mean, these things just take time. It really hasn't been very long at all, you know, in the scale of, you know, getting new regulatory actions, approvals. You know, the SEC's indicated very publicly, you know, as you note, openness, you know, to engage with issuers on multiple different models for tokenization in the US and, you know, we've certainly been a part of those discussions and, you know, expect to see some of those different models in the hopefully not too distant future.

A (33:14)

But, guys, do we need an act of Congress? Because I don't want to wait for an act of Congress. It took a lot of work to get the stablecoin act through. Is this something the sec, I think.

D (33:23)

We pretty clearly don't, generally speaking.

A (33:25)

Okay, we don't need an act of Congress. So the existing regulatory bodies could just go through a process and greenlight this so we can have these tokenized securities. The U.S. you know, when they go through their process. Right. This can happen in the next six months, it could happen in the next 12 months.

D (33:42)

And to be clear, there are tokenized securities in the US today. I mean o our permission tokenized Treasuries product, you know, which you were talking about earlier Ryan, like that is available in the US but only to accredited investors. There are other tokenized securities available in the US to retail. I mean the wisdom Tree tokenized funds, the Franklin Templeton tokenized funds are available to US retail. Not that long ago those tokens were very, very uninteresting in that they were like non authoritative receipts of ownership. You couldn't do anything with those. Asset managers have been making really great progress to get their tokens to be more useful and you can actually self custody them now. You can send them between different allow listed wallets to affect changes in ownership. So there have been really exciting developments, some of which were even under the last SEC towards making those products available in the US Though that progress is very much continuing where exemptive relief or clarity is generally needed. Isn't even around how to tokenize securities in the US Though there are some points of clarity that could be beneficial there. But it's more so around how distributors can get involved in reselling or making these sorts of assets available. Around questions like what qualifies as a distributor or broker dealer. Right. Is a wallet or a front end for a dex, Is that a distributor? So I think the part of why things have been slower in the US frankly is just like the retail value prop is a little bit less clear or is going to take more time to develop especially and that's also where there is a little bit of regulatory uncertainty. But all of that is certainly coming.

A (35:41)

The retail value prop being less clear because what we already have broken because.

D (35:45)

Us retail investors already have. Right.

A (35:47)

But they suck, Nate. What we're saying is they suck.

D (35:53)

But if you're trying to like buy and hold, right. And you're not trying to like shop around for different margin rates and you know, use these assets as collateral for derivatives positions like if you're just you know, really basic retail investor like Robinhood is a great solution. So sure. You know I, I, I think they're in order to really unlock the benefits, you need more of an ecosystem and the involvement of that ecosystem is where we do need some regulatory clarity.

A (36:25)

Since you mentioned Robinhood. Robinhood of course is bringing some of their stocks on chain. So they have about 150, 160 billion in not on chain equities. And to the prospect of them coming on chain is a pretty big deal. They are launching an Ethereum layer 2 Ondo. You guys have just launched a tokenized stock offering as well. Now, of course, to disappoint us listeners, this is only available outside of the U.S. so we'll stipulate, but as Nate and Ian said, they are bullish that this is coming to America sometime soon. Let's talk about that category. So We've talked about stablecoins, 270 billion. We've talked about treasuries, about 10 billion tokenized equities. Tokenized stocks on chain. They are the smallest so far, the most nascent. This is a tiny, tiny market on chain. So at this point, the time of recording, there's about 400 million in tokenized stocks on chain. And some of these are dominated by some silly things that just look more like experimental type projects. Right. There's something, I think, on the. What chain? I don't know. Some. Some chain is just like one stock. It's like not very interesting. But there have been experiments that seem a lot more like what you might find in a. In a brokerage. So xdox is one of them. Denarii. We talked to the founder. Now, you guys launched something on Ondo, and I think you launched with over a hundred different assets. Let's talk about where tokenized stocks are right now and what you guys have launched.

B (37:59)

Yeah, we were very excited to launch on the global markets platform last week, but as you rightfully point out, it's not the first one. Right. We had a very large robinhood announcement in June 30, I believe. Same day X stocks launched. So clearly there's a lot of appetite to figure out how to tokenize stocks and ETFs, which we very much welcome because we've been a proponent of that category for a while. The thing when you look at the tokenized stocks category, the two things you just want to look at, number one is, is this permissionless bear instrument or not, or is it a walled garden? Right. That kind of matters. The second one is what is the liquidity available on these assets and what is the price at which I can buy them in size and sell them in size? Those are the two key things that you want to look at. And I think for both of those dimensions, they're very, very important. Honda Global Markets is the first platform where the assets are both permissionless and you can buy these things in size at the right price. Just the price that you can get in your normal brokerage account for Buying and selling instantly. So it does represent a pretty meaningful innovation. When you look at the Robin Hood offering, for example, I'm sure you can buy in size at the right price, but it is a walled garden approach, right? You can only. Robin Hood is only offering this to their own users and you cannot transfer these assets off platform. The X Stocks example is a. Is the most known example, I think of the permissionless implementation. These assets are freely tradable on secondary markets, but the problems with the X Stocks model is that they really rely on these onchain inventory pools, these Dex pools to trade in and out of. And the liquidity and pricing available in those pools is pretty terrible, quite frankly. So a lot of people have bought, let's say, you know, Tesla X at the wrong price. It's not the price of the underlying and you can't just exit it in size because the slippage you would get on an order like that is incredibly meaningful. So a lot of people I think were very excited about the prospect of these permissionless stocks, but the implementation was such that the pricing of it was unreliable and you can trade in and out in size. So on the global markets does represent the first one where both are present and that is the true innovation that we launched last week.

C (40:16)

I want to explore both of those because both of them are just unique problems in of themselves. One being the permissionlessness and then second being the liquidity. I think the liquidity thing is smaller of the two. So let's start there and then I have a bunch of questions about the permissionless stuff after that. Isn't that just a problem though of a nascent market as in, in tradfi, there are market makers, there are like just, you know, that's where all the bids and asks are. And on day one or week one or year one of on chain tokenized securities, wouldn't you expect that to just be a very illiquid environment that would become more liquid as more buyers come online, more supply comes online and market makers all kind of come online? Or, or also a question. The question is that. And then also how are you guys bringing liquidity? What's that mechanism like?

D (41:00)

I mean, I think it's true that the market is nascent and can and may become more liquid over time. But there are still very fundamental differences between the model we're pioneering with global markets and the X Stocks model that lead to. To very different outcomes in terms of how really how costly creating that liquidity is. So X Stocks is, I mean it is effectively a rebrand of back Finance, you know, in partnership with Kraken and Backed, has been around for a couple of years with, you know, this same model of relying on largely pre funded liquidity venues in order for investors in the secondary market to get access. And this is really how most of crypto has traded to date, where trading and settlement are one in the same and pre funding is required. And we put all these assets somewhat passively in liquidity pools and wait for investors to come around. That really is not scalable to hundreds of different securities or thousands of different securities. I mean you can't have market makers holding inventory and like enormous supply like on every chain, you know, waiting around for buyers and sellers to come around. And that's not how trading and settlement work in tradfi. Right. I mean there is sort of good reason for, you know, trades to be agreed upon, which, you know, at all sorts of different venues, you know, at different broker dealers, and then for settlement to happen, you know, after the fact, only once the trade is agreed upon. Now that's like a pretty long lag in tradfi. We're able to make it, you know, seconds and you know, even a fraction of a second instead of, you know, days. But by supporting this kind of instant mint redeem where the trade is agreed and then, you know, a fraction of a second later we settle, you know, we are able to port like the full Tradfi liquidity on chain, more or less without needing market makers to be holding all this inventory. So like only when a user comes to us or comes to some secondary market platform, you know, and tries to buy a security, only then do we mint the token and buy the underlying stock to back the token.

C (43:26)

I see, okay. And so when it comes to actually like the token itself being liquid off of your guys's platform, not your concern, just normal animal spirits of on chain markets, you know, the uniswaps or wherever people put them. But like that's not the liquidity that you're referring to. You're referring to specifically the bridging of liquidity between Tradfi and your guys's platform, is that correct?

D (43:49)

Well, the. They're very related, right? I mean we don't provide liquidity on secondary markets, but the ability for other market participants to provide liquidity on secondary market venues is very, very tightly coupled to their ability to access liquidity in the primary markets. And you know, as a practical matter, you know, there are a lot of market participants who are, you know, minting these tokenized securities from us on a real time basis, you know, Only after, you know, some purchase request has been made on some other venue, you know, and reselling after the purchase has been made.

C (44:27)

Okay, understood.

B (44:29)

So, David, like, to put a finer point on that almost is like imagine if you want to put a thousand stocks on chain, right? And you have to rely on these Dex pools, like what some of the others are doing. Let's say you need at least a million bucks. At least, right? For some assets, you want to get way, way more to get meaningful liquidity immediately you're looking at a minimum of a thou of a billion dollars to just put a thousand different stocks and ETFs on chain, right? And then you probably have to put that on 10 different chains. So it just, it does not scale because all you're doing, to Nate's point, is reinventing liquidity that already exists elsewhere at a cost of capital that is enormous, particularly for these market makers. So no one's going to be willing to put that capital on chain, which is kind of what we've seen over the years with the backed finance model and increasingly with the X stocks model. And as a result, that liquidity becomes thinner and thinner and thinner, and these assets start to depeg left and right, which is again what we started to see with X stocks, where people are buying something they think is at the price that the right price. But it is not like it's 10% depegged. It's like buying a stable coin at a dollar and ten cents. Immediately you're going to lose money. So no one wants that. The real way to put liquid markets in tradfi on chain is to essentially make sure that whoever wants to buy it on chain can immediately tap into the liquidity that exists in tradfi already. And that essentially is the platform that we've built.

C (45:52)

Legally speaking, is the token an IOU for a security? Is it a true. Is it the true security? How does, how does that work? Is it like a wrapper? What's the nature of the actual asset?

D (46:04)

It's actually a debt security that is secured by, collateralized by the underlying security itself, and that provides a return that tracks the underlying, and we reinvest the dividends. So it's actually a. A total return tracker.

C (46:21)

So if I own a stock that has dividends, I'm not getting the dividends, but the dividends go into the value of the token somehow.

D (46:29)

That's right, yeah. The issuer will reinvest the dividends into more of the underlying stock. And we really do that to aid in composability with DeFi.

C (46:37)

Right, right. Because dividends just break a lot of things.

D (46:40)

Yeah. But the investors have a first priority security interest in the underlying shares. And so there's a third party collateral agent, we call them that every day is checking for sufficient collateralization of the tokens. And if we ever breach collateralization or a bunch of other terms of the debt then the collateral agent has the ability and an obligation to actually step in and you know, seize the assets and you know, take over a kind of a wind down process. Interesting. And and this actually these are investor protections that we added to USD Y back when we launched that, you know, a year and a half ago or so that we saw as lacking from stablecoins at the time that are like very common in traditional finance. So you know, certainly anytime you like wrap a security and somebody structure there are structural, you know, operational, legal, you know, counterparty risks that can be added. But Tradfi is very used to doing this and doing it very well, you know in the securitization space. And so there are a lot of best practices even around things like bankruptcy remoteness of the issuing entity itself, you know to make sure that that would never get caught up in like a hypothetical wand of Finance Inc. Bankruptcy, you know, has an independent board of directors, you know, there's sort of arm's length services agreements so that you know, it's de risked as much as possible which is like, you know, I think to an enormous degree in the wrapping process.

C (48:09)

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A (50:01)

Is slightly still different? So because we're talking about. The different dimensions that you're talking about are important. You talked about liquidity, you talked about permissionlessness. This is a third that I think you didn't mentioned earlier that David was getting into, which is like what are the property rights of, of you as an owner of this? And so you're describing this as kind of a. It's, it's not quite the same as owning a stock in your brokerage. Correct. Because if I own a stock in my brokerage, I have dividend rights, I have the right to vote on, you know, basic, you know, equities, governance types of issues, that sort of thing. I don't get that with the type of tokenized security that you're offering on Chain. And that's different from the sort of the experiment that we saw last week which was people were following this. Galaxy Digital issued Galaxy tokenized Galaxy chain shares on chain. And this is more of a kind of. It gave you all the property rights. Right. It was like a native asset. I mean, correct me if I'm wrong on this, but what are the kind of the property right guarantees and what's kind of the. I guess, where do you think this will all fall when we figure out what these tokenized assets actually are?

D (51:11)

I mean, I think that voting rights are a little bit of a red herring. I mean we certainly could pass voting rights through to end token holders if we wanted to. We just don't think there's much commercial demand for that?

C (51:21)

Yeah, I don't care about that.

D (51:23)

I would add that you guys don't participate in governance.

A (51:27)

Come on. What?

D (51:29)

Yeah, I have a few too many hours to focus on. But look, I mean, if you hold securities in your, you know, Charles Schwab brokerage account and it is a, you know, set up as a margin account like pretty much everyone has, so that, you know, as we were talking about earlier, Ryan, you don't have to wait, you know, for cash to settle. You know, when you sell a security before you can, you know, buy another one, then ultimately what you have is IOU to your broker. Right? And so that is how like the vast majority of people in the US hold their securities anyway. So if you compare that to holding one of our tokens, where what you have is like a senior secured debt obligation that is 1 to 1 backed by shares held in an SPV that does nothing but hold these shares and issue these tokens and you have a collateral agent protecting those interests. I mean, that is tremendously less risky, I would argue, and you know, a whole lot of dimensions than holding stocks at a brokerage. But yeah, it, it is different than, you know, holding shares on the books of some issuer. I mean, that is the, you know, the so called native tokenization approach that some in the industry advocate for. I think it introduces other risks, right? I mean, you start asking issuers themselves to, you know, track or have a transfer agent of theirs track the separation of shares issued in tokenized form versus non tokenized form. You know, and are we really, you know, ultimately someone has to track that. You know, whether you're relying on, you know, the DTC or some broker, dealer or custodian sitting on top the dtc, Right. That's sort of the rap model. A public company issues all of its shares effectively and they're all held at the dtc, right? And then some custodian, you know, holds some of those shares at the DTC and then holds them in an SPV and issues tokens. Right. And when you mint and burn tokens, you move the shares in and out of, you know, the SPV box at some custodian. And you know, custodians in the DTC are very used to doing all of this, right? To tracking the transfer of shares between these different legal owners. The alternative in the native model, you know, you're relying on this new system, the issuer or its TA to track what's on chain versus not. And I think that has, you know, that has other risks of its own.

B (53:59)

Yeah, there's been a lot of conversation around the wrapper model and we've come out pretty much in favor of that wrapper model for our tokenized stocks. And a lot of people then say no, you have to natively tokenize. But I think what a lot of people have forgotten to an extent is that a stablecoin's a wrapper. And that was just fine, in fact, that it was a wrapper with terrible investor protections and people are fine holding it just fine like that. Stablecoin is not the same legal rights as the cash in the bank account. But that was very, that was fine for a very long time. And as Nate articulated the way we do, tokenization in the wrapper model has a bunch of investor protections that you never had in a stable coin. And we could argue, quite frankly may are even better than what you would do if you hold a stock in a margin account at a traditional brokerage.

D (54:46)

And then the upsides are enormous. Right. I mean we could do this for anything that we can invest in. And that avoids a lot of the adverse selection that the native tokenization proponents have. Right. I mean, generally speaking, it's the issuers that can't raise, you know, capital in traditional forms that have been coming on chain to try to sell stuff to crypto natives or stablecoins. And that's led to a lot of the like, you know, blow ups with a lot of the onchain lending, you know, activities that happen in, you know, prior real world asset cycles, if you will.

A (55:23)

Yeah.

C (55:23)

I want to pause for a moment and kind of highlight over what we're talking about and why we're talking about it here, especially with this like native tokenization word. What I, I'm pretty sure I understand what you guys mean by that, which is like true one to one, not even a wrapper, but an equivalent of like an Apple share is a token that is natively tokenized is an Apple share. It's on. Oh, it's not an IOU for an Apple share, but it is an actual itself is the share. And there's a bunch of problems with that. And it kind of goes back to blockchains and nation states just don't play nice together. And a native tokenization process, to me, like neuters some of the biggest, most cool things about tokenization in the first place, which is complete transferability, permissionless transferability between participants, which if you don't have that, you can't put it in defi very well or really at all. The crypto bull in me wants like oh no, Like, I totally want clarity from the SEC to get native tokenization. And so we can have like, you know, put, you know, NASDAQ and the New York Stock Exchange on Ethereum. I want that. But also at the same time, I just know that the SEC is never going to allow permissionless non whitelisted ERC20 tokens to also be true one to one securities because they, you have to have KYC. If it's native, you have to have KYC. There's no way they're not going to allow that. And so what? Maybe we do get guidance on what native tokenization looks like. But I could accept the argument that actually the native tokenization status of securities is actually not going to be the dominant pattern moving forward. And it's actually going to be a wrapper because we want these things to be freely non KYC transferable between all participants because then, well then we get transferability, which we like, and we get full integration into DEFI rather than kind of like hacky integration into DeFi. And so maybe the, I don't know what you guys call it, non native tokenization path, the wrapper path, is actually the dominant strategy that ultimately wins out. I know obviously you guys are a fans of that, but maybe you can kind of just comment on just like the difficulty of native tokenization and how blockchains don't play nice and how maybe this just inevitably turns into just a wrapped system.

B (57:48)

Yeah, I mean, I'm not sure I would go as far as to articulate it exactly in the way that you did, but if history is any indication, like a stablecoin was a wrapper that was a permissionless format that was integrated into defi, clearly had tremendous product market fit, so that globally a lot of users saw it as an easy way to get access to the US dollar and it cemented itself as a liquidity layer in this crypto on chain economy. If a stablecoin had originally been issued as true native cash sitting at a bank account, I'm pretty sure that evolution probably would not have happened. And stablecoins got so important that to your point we have our, you know, Secretary Besant is saying this market can grow to $3 trillion over time. And Congress just passed a bill that essentially cements the stablecoin model as legal and the stablecoin as legal tender. So I think there's a lot of learnings in how the stablecoin model came to pass, how it grew, how it was structured. And as mentioned, the stablecoin is a wrapper. And I would not Be surprised if to an extent, the, you know, on chain, the bring on chain US Capital market assets follows a similar type of path ultimately.

C (59:06)

I remember listening to Nick Carter and Matt Walsh on their podcast on the Brink back back in something like 2020. Their, their podcast has been around for a while and they said something about stablecoins that stood out to me at the time, which is they were comparing USDC to PayPal and maybe we all have PayPal accounts and if I want to send you money from my PayPal account to your PayPal account, well, you have to be registered on the platform and KYC'd on the platform. Otherwise there's no way for me to send you money. That's not true with stablecoins and stablecoins. That was a breakthrough innovation with stablecoins that I think we kind of have just come to take for granted these days, where I can send you stablecoins and you don't have to have account with anyone, you just have to have an Ethereum address and I can send you Stable coins. And money has never been like that outside of cash until stablecoins came around. I remember Matt, Matt and Nick talking about like, this is actually not going. This is going to be illegal in the future. I remember them saying like. And they recently reflected on this on a recent podcast, like, oh, there's no way the regulators are going to allow this. Enjoy your permissionless stable coins while you can because eventually we're all going to have to kyc. And that's not what happened. Stablecoins just grew so large so fast and we just wedged ourselves in. And like, to me and my bankless values in cypherpunk, interest is like, yeah, hell yeah. Like permissionless technology won. And hopefully maybe that's just the same way that tokenized securities plays out is this industry just grows so fast that there's just like new user rights and property rights that happen that become status quo. Because the wrapper model is actually just more aligned with how blockchains work. And this is kind of what bends the arc of regulation towards what I would consider like individual autonomy. Individual freedom.

B (60:52)

Yeah. I mean I would say ultimately what the model that we have now with on the global markets and the product structure that these tokens have, it does combine very, very good investor protections as well as the ability to innovate on chain with these assets. Right. And even from a, from an SEC's perspective or the broader US government perspective, they're not against, you know, innovation and the like. Quite the contrary, they want innovation in US capital markets, if they want to do it in a responsible way and in a way that you can actually have investor protections and ideally in a way that doesn't mess too much with the existing system as it currently stands. And the nice thing about this wrapper model, in the way that Ondo has implemented it with all of the investor protections, the wrapper being tokenized debt instruments, third party collateral agent, everything being fully backed, yet it's still being permissionless assets, is that you actually do get a lot of what it is that you would want to see in a model with permissionless innovation, very good investor protections, and because of the wrapper model, not too much interference with the system that currently exists. So I think the added benefit of the model that we have is even a US regulator may look at that and say, that's fine, let it play out, see if there's any real demand.

D (62:15)

Yeah, I mean, what we're doing definitely could be extended to, you know, a native tokenization model. Right. I mean, it's all just sort of a reference point, but there's no reason why, you know, an operating company couldn't go out and issue directly from, you know, its own corporate entity, you know, securities that are in, you know, effectively bear regular fashion, just like, you know, our global market securities are. Right. I mean, the tokens that the global markets entity, the SPV issues are, you know, native with respect to the SPV itself. It's just that the SPV is in the business of, you know, holding other securities and issuing these tokens. So, you know, I think more than anything we are advancing the wrapper model not because it's what allows us to get to permissionlessness, though it does, but really because it's what allows us to scale without the consent of every issuer so that we can offer, you know, exposure to the whole landscape of all publicly traded securities or you know, those that, you know, our investors actually want, you know, in one go.

A (63:22)

Okay, so we covered the property rights of this thing. I want to go back to the liquidity for, for a minute and I, I think I understand the liquidity story of, of how you guys are doing this. It's almost like a just in time minting, if you will, that if that makes sense. So I buy, you know, 100k worth of Tesla, let's say, and it's not already pre provisioned at the time that I buy it, you guys are minting it effectively and so, you know, lower cost of capital and I believe some of the infrastructure here, you guys are using intense for this on Ethereum, which is all the intense infrastructure, if people are familiar with that, thankless listeners being leveraged. That's kind of what you're tapping into here. I do have a question on that and maybe get back to the intents, but I do have a general question. Okay. These markets though, they're not open 24 hours a day, at least the equities markets. Of course we know crypto is do your markets have to close at night too, or do you have to keep banker hours? Or what do you do during the off hours? If I on Saturday night decide to buy my Tesla or sell it, are you able to connect to the underlying infrastructure and like do the thing where you're. You're minting or burning it?

B (64:29)

We support 24.5minting and burning. So US markets have evolved to enable 24.5trading, which is really defined as 8pm Eastern on Sunday until Friday, 8pm Eastern as well. So you do get that 24.5 window. Most people have a Robinhood account are used to trading 24. 5 at this point. And our platform taps into the same liquidity sources as what a Robinhood would use.

A (64:56)

So what, what happens to the value of those assets in the off hours then? Like who? Like the time when. I mean, during the weekends. Let's say that's, you know, part. Part of the seven, not the five.

B (65:05)

Yeah. The moment the market close, it's at the close price. And then at that point, you know, there's no additional movement in tradfi. So normally that stock would not move in price until market markets open again.

C (65:17)

But I can still take that token, I can still sell it on Uniswap or wherever. Right.

B (65:21)

Anyone can deploy a permissionless dex pool with these assets. And then over the weekend you are correct that that price may diverge.

A (65:28)

Yeah, price. So we've created market discovery during the weekend.

C (65:31)

Price. Price Discovery happens on chain now.

B (65:33)

Yeah, yeah. I mean, one of the value props, quite frankly, that a lot of the centralized exchanges and the like that want to list these assets. Everyone is very excited about 24. 7 markets. And sometimes we do have to tell them. It's like, that's great. If you have inventory on your platform and you have market makers willing to make markets, then you can go for 24. 7 all you want. We cannot support minting and burning over the weekend. But as long as there's inventory on chain and a market maker willing to make markets, then that works. And it's very, frankly, it's very cool. And it's something that I don't think is sufficiently highlighted where some of the very, very large stratfire market makers are seeing the tokenization of these stocks and ETFs as a way to move towards 24. 7 markets. Because the moment some of these large centralized exchanges decide to adopt these assets, their user base is used to trading 24. 7. And so some of these market makers are preparing for that eventuality and are really spinning up, you know, weekend desks trying to figure out how to do these 24. 7 pricing of these assets fully anticipation of large centralized crypto exchanges starting to list them.

A (66:39)

And that will act as a flywheel source of demand, basically. Because if, if crypto is the only place where you can trade effectively and do market discovery on the weekends, then there's going to be more minting of the assets during the weekdays, of course, in order to expand that market. So you could do more price discovery and trading over the weekends. Right. This is an example of actually crypt leading tradfi and offering functionality that they won't have and using that as a flywheel to grow the market.

B (67:04)

I think that's right. And it's uniquely enabled by blockchains that can operate 24. 7. No problem.

A (67:10)

Let's talk about. Okay, so liquidity. We got that, we got the property rights. Can we go back to permissionlessness? So we've. You've said it could be in exchanges. So. But when you guys are saying permissionless, these. If I go and I mint Tesla shares. Okay. And they're in my. Well, I guess I can't do this. So if I was. I was European and I went and I did this.

C (67:32)

You're Canadian today.

A (67:35)

I don't know if it's available in Canada either. So, like, if I was in another jurisdiction and I minted this and I had these assets in my wallet, you're telling me there's no restrictions. I can do whatever I want. I'd spin up a uniswap pool with them. I could send them to whomever I want. It's like just as permissionless as USDC in my crypto wallet.

B (67:57)

Yeah, I mean, there are certain compliance restrictions that we have to enforce, like what a stablecoin does with the OFAC sanctions Oracles and the like. So we do have the ability to freeze these assets, but the main reason why we structured them as permissionless bare instruments is exactly to your point. Such that people can use these things in defi. No problem.

A (68:16)

Okay. So AAVE loan is totally possible on Tesla shares.

B (68:21)

If you want to put up a governance proposal, I'll Happily.

A (68:27)

Wow.

B (68:28)

Some of these things will take time, obviously.

A (68:31)

Yeah, yeah. So how big is this right now? So you guys have opened this up on Ethereum right now I think I saw something like 60 million in tokenized assets.

B (68:41)

Or correct me if I'm wrong, we broke 70 today, but give or take. Okay, so you know, one week post launch we did surpass X stocks in TVL.

A (68:51)

Wow. Okay. And then, so what, what? Can I buy it? Can I buy all the big US Companies? I can buy? Can I buy, you know, indices as well, you know, the spy, something like that? Can I buy nasdaq? Can I buy qqq? I can do all these things.

B (69:06)

SPY is the most popular asset right now. So you can buy all the major stocks, you can buy the major ETFs. The benefit of our model too is it's actually very easy to put additional assets on chain because we don't have to reinvent liquidity. Right. We can just tap into the traditional financial markets. So you'll see us put more assets on chain with a regular drumbeat because it is very easy for us to do. All it takes really is a contract deployment and at that point, you know, people via the intent system can purchase it again. And for the best price and liquidity, we just tap into the traditional financial markets.

A (69:40)

Why did you guys start with Ethereum?

B (69:42)

Great question. I think in, I think it was twofold. Number one is, and I think you posted something about this recently. When you look just at total TVL of RWAs, Ethereum is by far the leader. So there is a lot of existing liquidity available, particularly in the form of stablecoins. But there's also a DEFI ecosystem. I mean, Defi was invented on Ethereum, so over time if you're gonna be structuring these assets like permissionless bare instruments, you might as well do that in the home of Defi so that an ecosystem can grow around it. As Nate mentioned, ultimately more utility on these assets can form to make the tokenized version truly better than what exists in a TRADFI account. And I think the third reason really is the intense architecture that existed on Ethereum that truly was required for us to put the liquidity on chain with just, just in time liquidity. As we discussed, the intense architecture on Ethereum is by far the most advanced of any other blockchain. So it truly lends itself quite uniquely to putting traditional financial assets on chain and really building that bridge between Dratfi liquidity and a blockchain. Really starting on Ethereum, as we get.

C (70:53)

More and More tokenized stocks on chain. I think we're going to be able to see a bigger picture for how the nature of these assets just differ from what we're used to. Because if I open up my brokerage, Robinhood, and I open up the stocks that I own, I got two buttons. I got buy and sell and maybe there's a third. Maybe I can margin. I can margin too. I got three buttons to do things with my tokenized stocks when they're on Ethereum. You have all of Defi, which is something that no stock has ever seen before. Stocks have not seen defi. And that's kind of like the theme of what we're all kind of doing here in the second half of 2025 is like, stocks meet defi. Defi meet stocks. That's what's interesting to me and that's what makes sense about stocks on Ethereum is like we can already exchange. Like we already have the swap button in Tradfi. We can already do all of the trading. That's like, we're not like, yeah, we can do it on chain. And that's kind of cool, I guess. But really, to me, the exciting thing for me is integrating stocks inside of a very rich, vibrant Defi ecosystem where you're like, yeah, you can send stocks, you can sell stocks. I don't think on an onchain context is going to be the best at providing liquidity and swap features for stocks for a very long time because there's so much liquid momentum behind the Tradfi markets. Like maybe we can get at parity to it pretty damn soon. But that's not really what I see as like the main quest here. The main quest is putting stonks onto Defi apps. And I'm just once again on my soapbox here. But like that's what I see as like why stocks will come on chain, specifically on Ethereum. I'm wondering if this resonates with you. Is this to me the main kind of quest line for tokenized stocks? And maybe it's also trading. What do you guys see here?

D (72:36)

I think yes and no. I mean, I think it's easy to get overly excited about all the things that one can do in Defi, but there's a lot of innovation for innovation's sake and there's a lot of very complicated financial engineering. And I don't think that most investors are actually trying to do complicated like interest rate swaps and structured products and like long tail derivatives, you know, on their stock portfolio. At the very least, we're very early in bringing stocks on chain to be super focused on enabling those sorts of use cases. I think you're right to observe that on chain infrastructure is not really going to create like better liquidity than already exists for stocks, at least in the short to medium term. And that's why we're very focused on porting traditional liquidity on chain. So in terms of what defi applications are interesting to us. I mean we are trying to keep it simple. So we're really trying to provide the kind of rates, the terms, the experience to some degree that an institutional client of a large, you know, U.S. prime brokerage desk has to effectively like permissionless global investors. And you know, one area where retail gets kind of scammed today is on cost of capital for leverage. Right. If you want to lever up your stocks in your brokerage account in the US the vast majority of big name brokerages, you pay like many percentage points of premium on top of the risk free rate. Whereas if you're an institution the spread is very minimal. Right. I mean it's very low risk to lend against liquid public securities. So like you know, institutional repo markets where these things are accepted as collateral have like a tiny spread over the risk free rate. So you know, it's not live yet. But one of the things we're working on is effectively bringing that very cheap cost of capital in our case against tokenized stocks on chain. You can imagine a lending protocol architecture being used in conjunction with maybe a RFQ execution environment for the delivery of that sort of experience to global on chain investors. So I think a lot of what we do about Ondo is like repurposing tech, which in this case is like a lending protocol, you know, an rfq, dex, et cetera for traditional markets.

A (75:18)

So I totally get that. I do think what part of what David's getting to is like all the defi innovation that we already have. You guys are basically issuers, right? So if you're a tether or a USDC or a circle or something like that, you just issue the stablecoin. That's all you worry about. And then all of defi gets to figure out all of the various ways the market finds value in using that particular asset. And that's what you, you guys are doing. I mean I for one, the way I, I can't take my ether and buy Tesla right now, there's no way for me to do that, much less on a Saturday at like, you know, 10:00pm I can't do that right now.

C (75:55)

Ryan does his trading not that I ever would.

A (75:59)

But I mean, so that is now possible just because. Why? Defi just makes it possible. It's like totally native. And you guys are issuers in that situation.

C (76:08)

Turning a stock into basically what is essentially an API endpoint for a solidity developer to do anything with. Defi got that. Defi made that available to people in 2015, 2017. Whenever we invented the ERC20 token, we've never had that available for stocks. And now stocks are a money Lego that Defi developers can do anything with. And that is cool. That has always been like the golden goose, the North Star that we've been trying to get to and having that and like allowing creativity, which is just a weird word to combine with stocks, allowing that to flourish I think is pretty exciting.

B (76:46)

Oh, I agree. And what it, what does it even mean to be an asset manager or how you create products? I think that's all gonna change once you have these individual stocks floating around on, you know, rails that allow for permissionless innovation. How we think about a Robo advisor wealth advisory more broadly, whether that can operate 24 7, the type of products that you can very easily spin up. I mean, recently I wanted to invest in defense ETF and I just looked at whether it was available and I found one that looked pretty good. But then I was like, wait, I want Palantir in this. And it didn't have Palantir. But if I didn't want to go and ask an asset manager, can you create a new product for me that automatically gives me exposure to these stocks plus Palantir like good luck. And me doing that myself from a passive investment standpoint, I don't want to have to deal with that. But if all these things live on chain, all of a sudden I'm sure someone's going to spin up some sort of chat GPT interface where it's essentially like I can, you know, tell it what I want to invest in and it just spins up a vault that automatically rebalances with whatever it is that I want. Right. So this level of innovation personalization that I think we're going to see in investing, really enabled by these, I loved your point around these permissionless Lego blocks in the form of individual stocks. I think that's going to surprise quite a few people.

A (78:04)

Very cool. Another thing we're wrapping our heads around at this point in the market is as all of these real world assets come on chain treasuries and stablecoins as we've seen, and now equities and stocks of course, is what chains will benefit the most from this or how will the different chains change, as you mentioned? Ian, I did look at this this morning. Ethereum right now is kind of dominant in real world assets. It was actually pretty surprising. Ethereum has about 70% of all real world assets because it has the bulk of stablecoins as well. L2s have a small portion of that. Then if you look at the EVM, so Ethereum virtual machine, it's like 93%. So there's some network effects at play for Ethereum, particularly if you include evm. There's also been a trend where we've seen some corporate layer ones kind of spin up and develop. Right. So Stripe announced Tempo, that's going to be an evm, but it's its own layer one. Arc or Circle has Ark. Again, stablecoin. These are real world assets and some of these issuers are coming up with their own layer ones. I believe Ondo also has a layer one. I don't know if that's still in testnet or if you guys have yet fully ruled that out, but I think that's evm. I also think it's a layer one, if I'm correct in this. So can you talk about what's going on? So what assets? Where will our open, permissionless, fully decentralized public networks like Ethereum, where will they play? Whereas where will, you know, corporate L1s? Where does the, the, the Ondo L1 play? And how do these kind of markets or how do these, how do these various ledgers kind of work together and like, who does what?

B (79:45)

Yeah, it's a very good question and clearly a hot topic for debate. I mean, I think it's, it's going to. What you're seeing now is a lot of these issuers looking at the infrastructure that they need for a particular use case and saying, you know, Ethereum, Solana, some of these other public blockchains are great, but if I really want to design it in such a specific way to enable specific things with a block time that I can control, a latency that I can control, add some bells and whistles from a privacy perspective or do the right things that I really need as the issuer, that's why they want the L1. And when you're dealing with RWAs more broadly anyway, the trust assumptions that you have in a particular asset are very different than when you're dealing with crypto in the first place. So I actually don't think that it is that bad that a lot of these issuers are designing Their own chain. As you mentioned, we were one of the earlier ones, I think to announce the fact that we were designing our own chain with Yondo L1 that is also EVM, but that was really supposed to be a purpose built environment that made it very easy to issue tokenized stocks, ETFs, securities more broadly with a couple of bells and whistles. But then these assets, once they're on this L1 network, they can freely go to the entire, you know, Ethereum and other public blockchains. We've issued all of our assets as Lira 0 ofts in part because we expect these assets to go to wherever the users are and to wherever there is a vibrant defi ecosystem that can support these things. So I think it's just another sign of us evolving to a multi chain world where certain chains are going to be more specialized for a particular use case. The Ondo chain will be very much designed for equities and ultimately brokerage, prime brokerage more broadly. But it doesn't mean that our assets or that we're not a big fan of Ethereum. Right. We issued the on the global markets first on Ethereum because its intense infrastructure is so good and liquidity available is great. So I think we're just moving towards an omnichain world where different environments are going to be optimized for different things. But ultimately I think the overall innovation and distribution of these assets will become better for it because you're just going to be able to do what it is that you need on a particular environment. I mean take the case of Defi and I promise I'll stop in just a second. But Defi in its current state. David, you mentioned earlier in my brokerage account there's a buy, a sell and a margin button. But you can very easily get margin on a thousand different stocks and ETFs. DeFi right now is not really designed to give you margin on a thousand assets all at once. Right. It's just not built that way. So what if you can design an L1? So that is very easy to be to do margin or prime brokerage more broadly instantly across a thousand different assets. There are certain L1s that will not be designed that way and that's fine. But it means that we as the asset issuer and the use cases that we have in mind for our roadmap, that's what we have to build for.

C (82:43)

What are the like design properties of a layer one that unlocks that? Because my understanding is you can kind of do anything with any app Layer. What's the unique feature of a layer one that unlocks that ability?

B (82:55)

Well, I wouldn't say you can do anything with an app layer alone. Like the latency of a particular network is something that you're going to struggle to work around. Sure, yeah. I think the privacy components of a particular network you're also may going to have difficulty working around. And there's a couple more examples of just how you design network security and the like that you may not be able to do just on any L1. So there are, I think, limitations to the network that you issue on, but I don't think that that is a problem. I don't think a single L1 is going to be able to please everyone and everything. We're already seeing that, quite frankly with Ethereum and Solana and some of the things that they're optimizing for differently. And that's fine. I think that's totally fine. And that's the world that we're going to live in. What we have to figure out though is how these different L1s and different stacks really communicate one another so that we don't fragment everything away. Because then, you know, some people will say, did we really solve the mess of Traffi if all we're going to end up is these islands of liquidity that don't talk to one another because that's the current state in tradfi.

C (83:54)

Yeah, it's like as if some ecosystem should stitch all the chains together.

D (83:59)

Yeah. I mean to some degree that is one of the goals of autochain. I mean we're trying to make it easy for issuers to go multi chain and come to Ethereum, Solana, BNB chain like the broader public blockchain ecosystem. There's a lot to manage for an issuer. A lot of pain points that we've experienced in bringing our assets to a whole bunch of different chains. And those complexities are only greater now that we have this kind of increasingly complicated infrastructure around managing instant minted burns for potentially thousands of different assets. So we view on the chain as a hub where issuers can bring assets for the first time and then we'll port them to the broader ecosystem. And I think that the latency point is certainly a very important one. I mean we have to price in reorg risk, we have to price in mempool front running and other things that kind of impact the experience for end investors on public Ethereum that may not be appropriate for all use cases.

A (84:59)

Can I push you guys a little further on this because I think it's somewhat interesting. We actually recently hosted a debate between two professors and one was of the opinion that real world assets don't belong on public immutable blockchains at all. And his point was basically like immutability for real world assets is a bug. It's not a feature. Your crypto native assets, it's a feature. But for real world assets, what happens if somebody hacks the account and you know, grandma's Tesla shares end up in Lazarus group, North Korea, right? Like, well that's like a bad outcome. And of course the real world asset issuer is not going to honor that. For instance, they don't belong on public blockchains. The other was arguing that no, actually public blockchains are exactly the type of neutrality that we need and that basically all of the industries will kind of, you know, will agree to coordinate to use something neutral. And again, if we want to end up with something that's not like tradfi, where everyone has an independent kind of ledger, then we're going to have to use the same state at some level. What do you guys think? Do you think public chains are the place? Well, they tend to attract the most liquidity is like mutability, decentralization. Is that, is that a feature for real world assets or is, are, you know, is the critique right, that it's actually a bug?

D (86:23)

I guess let's take this in turn. I mean on the first argument being made that public blockchains are not the right place because you know, real world asset transactions should not be immutable. I mean you don't need a permission blockchain in order to have transaction reversibility. I mean certainly that could be done, you know, at the token contractor application layer. And I think the, in terms of whether reversibility is required, I think that very clearly just depends on, you know, the preferences of the parties transacting. Right. And you know, that hinges on the size of the transaction, you know, the use case, you know, the, you know, familiarity of the counterparties with each other and you know, no different than we see in tradfi, you know, all sorts of different, you know, settlement times, reversibility, trade offs, et cetera. I mean, you know, differences between a wire transfer ach. And so I think pretty clearly many market participants, as we've seen with stablecoins, which are real an asset, do choose the instant settlement at the cost of transaction reversibility. So I think we'll certainly see a spectrum there. And yeah, I think, you know, making real world asset transactions reversible for some period of time is something we'll see more and more of. And that is one of the benefits of separating trading from settlement. You know, like it's done in tradfi, so that you have, you know, at least a few hours or, you know, once a day or some period of time to, you know, correct for errors. In terms of, you know, the sort of broader question, I mean, I think before we can even answer it, we need to align on what we're even talking about. There isn't a binary public versus permission chain, right? I mean, you can insert permissioning at so many different layers in the stack, right? Like permissioning the ability to deploy code, to view the block explorer, to run a validator, you know, to have a wallet. And you know, in the case of ondochain, like, the validators will be permissioned in large part because that's helpful from a compliance perspective for some of the more highly regulated activities that we're targeting, particularly in broker dealer land. You know, it's not necessary for a lot of activities, as we've seen, asset managers, you know, can bring tokenized securities to public chains. But, you know, broker dealers, when they're processing transactions on behalf of clients, you know, they have a responsibility to ensure, you know, proper routing, best execution, you know, that the client's orders aren't being front run. You know, these can be a little bit problematic from a legal compliance perspective in a system where there's permissionless validators, where there's, you know, malicious MEV going on, you know, sort of able to address those by permissioning the validators. And that's helpful, you know, for certain applications. But we're able to still have code deployment be permissionless, have having a wallet be permissionless. And so, you know, I'd argue from a practical perspective on chain still is kind of a public blockchain, right? And a lot of blockchains that we might think of as public blockchains and crypto today have like basically information validator sets anyways. And so I don't know, Ian, maybe you have other thoughts to add.

B (89:43)

But yeah, I find it kind of a. I mean, I saw the debate, so I know exactly who you're talking about. Just looking at stablecoins, I think that settles the debate. Stablecoins flourished on a public permissionless chain. They were not structured as some sort of permission asset. They had some compliance controls and they were able to flourish with that model. It wasn't a permissioned rollout at all. And to the extent that there were questions around the legality of that model and what to do, what an issuer is supposed to do. That's in part what the Genius act was designed to address. So I kind of don't really think it's a debate. I think RWAs can very much flourish on published permissionless chains. That's where all the innovation happened. Like fundamentally, this is about permissionless access or global access, which clearly what was needed for a stablecoin and for other RWAs as well, as well as innovation in how you design defi around something like that so that it becomes something better than TradFi. So if you fundamentally believe that an RWA cannot truly operate on a permissionless chain, I'd almost say what's the point? And when you look at the history of the RWA sector so far, it has clearly demonstrated that RWAs on public permissionless chains can very much flourish, can bring about very big innovations, and now have been blessed by the US Congress with the Genius Act.

A (91:06)

Very cool, guys. As we close this out, maybe I have one question. Both of you are from Wall Street. What does Wall street think about all this stuff? Like, are they. Do they understand what's coming? Are they tokenization bulls? It seems like they're starting to wake up to stablecoins. But do they know what is about to hit them?

B (91:24)

I don't think they really do, if I'm being honest. But at the same time, a lot of them have actually been preparing for this moment to give them credit. And now with increasing regulatory clarity, I'm very bullish on what a lot of these asset managers in particular, and now even some banks are starting to do. And we at ONDA have never really taken the position that what we're doing is to replace all the banks and tradfis. It's really to augment the entire system so that it can move on chain and become a better version of itself and really enable global access, global innovation at a scale that wasn't possible before. So we're very happy to be working with quite a few of the tradfis, I think. Ryan, you mentioned, you know, Fidelity just did their first money market fund on chain. They're the largest money market fund issuer in history. Hondo seeded the fund. When you look at it as $200 million in it, that's Rousg Capital. So it was a partnership between us and Fidelity to really make sure that they could be off to a flying start. That's just one example. We did a pilot with JPM earlier this year to really connect their Connexus platform to the OndoChain testnet to make sure that there could be 24,7 flows between TradFi and on chain environments. So we're very happy to be working with tradfis and help them bring on chain. But to answer your question, do a lot of them truly know what's coming? No, but quite frankly, I barely know what's coming in crypto half the time. So.

A (92:52)

What do you guys think is going to happen? So if we were to project this forward to 2030, what do you think capital markets, what do you think TradFi looks like? What do you think Wall street looks like? How much in value do we have in tokenized assets? Just in general. I mean, we're still under a trillion, right? We're a quarter of a trillion right now. How big does this get? How fast does it happen? And what does the future look like?

B (93:16)

That's a tricky answer, tricky question to answer because I think what we've seen so far is the adoption of this space really works with the hockey stick, right? So it's almost like you're doing a lot of prep and for a while nothing really happens and there's a little bit of adoption, but then all of a sudden the right components are in place. I think with stablecoin that ended up being the defi ecosystem that formed. And all of a sudden there was just this hockey stick growth of the asset. So that it now is, you know, 280 billion and continuing to grow because more and more people's minds, the stablecoin is a good way to get access to the US dollar. And I'm sure over time we'll see the same thing with U.S. treasuries, U.S. stocks and U.S. eTFs. So it's going to be very interesting to see. I'm not sure I have a number for you, but I do feel pretty confident that, you know, five years from now, 2030, a lot of people who open up an investment account for the first time, it will be on, on chain rails, on blockchain rails, and they'll be able to hold equities. Crypto really whatever asset class that it is, they want to hold and be able to Transact in it 24 7.

A (94:22)

That's great, gentlemen, thank you so much. Following your efforts to tokenize equities with great interest and other securities with great interests, you're doing fant fantastic work. Thanks so much for sharing on Bankless today.

B (94:33)

Thanks so much. It's been a pleasure.

D (94:34)

Thanks for having us on.

B (94:35)

Really appreciate it.

A (94:36)

Gotta let you know. Bankless listener. Of course you know none of this has been financial advice. Crypto's risky. So are stocks. You lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.

B (94:56)

Sam.