Podcast Summary: "Tokenizing Trillions: Here's Why Massive Institutions Are Secretly Betting On Crypto | Nathan Allman"

Podcast Information:

• Title: The Wolf Of All Streets
• Host: Scott Melker
• Episode: Tokenizing Trillions: Here's Why Massive Institutions Are Secretly Betting On Crypto | Nathan Allman
• Release Date: May 4, 2025

Introduction

In this insightful episode of The Wolf Of All Streets, host Scott Melker engages in a deep conversation with Nathan Almond, CEO and founder of Ondo Finance. The discussion centers around the burgeoning field of tokenization, particularly focusing on how massive financial institutions like BlackRock, Goldman Sachs, and Franklin Templeton are strategically investing in crypto through tokenizing trillions in real-world assets.

Understanding Tokenization

Defining Tokenization and Its Benefits

Nathan Almond opens the discussion by demystifying tokenization:

“The biggest benefits from tokenization don't come from creating liquidity per se.” [00:00]

He explains that tokenization involves representing off-chain assets (e.g., stocks, bonds, ETFs) on a blockchain. Unlike non-fungible tokens (NFTs) which represent unique assets, Ondo Finance focuses on fungible asset tokenization, enabling uniformity and ease of transfer.

“Bitcoin was really the first digitally scarce asset that could be held by anyone, anywhere, at any time and transacted on a peer-to-peer basis without any intermediaries...” [01:34]

Distinguishing Between NFTs and Fungible Tokens

Scott Melker draws parallels between the tokenization movement and the NFT craze, highlighting how Ondo’s approach differs:

“NFTs, of course by their name we're non-fungible asset assets and everything that we do at ONDO is tokenizing fungible assets.” [03:06]

Almond emphasizes that while NFTs have gained popularity, the real potential lies in tokenizing standard financial assets to enhance accessibility and programmability.

Ondo Finance’s Unique Approach

Launching Yield-Bearing Tokens

Ondo Finance pioneered the tokenization of US Treasuries, creating yield-bearing alternatives to traditional stablecoins. These are split into two products:

• OH USG: A permissioned US-accessible Treasuries fund for qualified purchasers.
• USD Y: A permissionless yield coin accessible post-KYC with more fluid secondary market transfers.

“Both of these products of course pay their holders a yield, you know, unlike conventional stablecoins.” [06:55]

Since their launch in January 2023, Ondo has expanded to over 50 tokenized Treasuries, aiming to evolve towards tokenizing public equities and ETFs. The introduction of Onto Global Markets facilitates on-chain tokenization of public securities, ensuring access to liquidity comparable to traditional broker-dealer platforms.

Building OndoChain

To address infrastructural challenges seen in traditional public blockchains, Ondo developed OndoChain—a hybrid public-permissioned chain. This chain:

• Permissioned Validators: Ensures regulatory compliance by restricting validators to vetted institutions.
• Permissionless Operations: Maintains openness for transactions, code deployment, and wallet usage.
• Cross-Chain Governance: Enables synchronized governance across multiple public blockchains, enhancing coordination and security.

“Our assets, USDI and OH USG are already on eight different public blockchains...” [06:55]

Regulation and Institutional Adoption

Shifting Institutional Perspectives

Almond highlights a significant shift in institutional attitudes towards digital assets:

“Just a little over two years ago was when we launched the first of those products...” [06:55]

Initially, major institutions like broker-dealers and banks were hesitant to engage with digital assets due to regulatory uncertainties. However, recent policy shifts and a more constructive stance from bodies like the SEC have catalyzed institutional participation.

“A lot of the world's largest asset managers are going to be pretty quick to follow suit...” [13:00]

Navigating Regulatory Landscapes

The conversation delves into the complexities of regulating yield-bearing stablecoins. While traditional stablecoins face regulatory pushback, Ondo's USD Y is designed under securities law to inherently handle yield payments without falling foul of stablecoin legislation.

“USD Y is very clearly able to pay yield because... it is structured as a security.” [22:01]

Almond underscores the importance of regulatory clarity, advocating for guidance rather than new legislation to foster innovation while ensuring compliance.

Future of Tokenization

Expanding Beyond Treasuries

Ondo Finance is positioning itself to tokenize a broader array of assets, including public equities and ETFs. The goal is to provide global retail investors with seamless access to US financial markets, overcoming the fragmentation and inefficiencies of traditional systems.

“Through things like Onto Global Markets we can provide global retail investors with a much better way to access US Financial markets.” [18:45]

Real-Time Settlement and Infrastructure Efficiency

Almond envisions a future where tokenized assets settle in real-time, drastically reducing the delays inherent in traditional settlement systems (e.g., T+2). This real-time gross settlement (RTGS) would enhance capital efficiency and enable more dynamic financial operations.

“Public securities in the US are all ultimately held...but holders of our tokens can settle between each other 24/7, 365 on a real-time gross settlement basis.” [31:14]

Global Integration and Cross-Chain Functionality

As the crypto ecosystem becomes more multi-chain, OndoChain is designed to serve as a pivotal hub for coordinating tokenized assets across various blockchains. This interoperability ensures that tokenized assets retain liquidity and accessibility irrespective of the underlying blockchain infrastructure.

“We are developing OndoChain to support Onto Global Markets and similar tokenization activities.” [06:55]

Personal Insights & Conclusion

Nathan Almond’s Journey and Vision

Almond shares his journey from being part of Goldman Sachs' digital assets team to founding Ondo Finance. His experience underscores the potential of tokenization to revolutionize financial systems by making assets interoperable and accessible to both institutions and retail investors.

“Blockchains and tokenization represent a pretty disruptive and...fundamental upgrade to that system.” [37:24]

Challenges and Competitive Landscape

While acknowledging the dominance of established blockchains like Ethereum, Almond points out the limitations of these platforms in handling real-world asset tokenization. OndoChain’s tailored approach addresses these challenges, although competition from other institutional players remains fierce.

“We're building similar products, but there's a lot of things that you'll probably be able to do for them that they can't necessarily do for themselves.” [42:27]

Looking Ahead

The episode concludes with optimism about the future of tokenization. Almond anticipates a financial ecosystem where decentralized and traditional systems converge, offering unparalleled accessibility and efficiency.

“There’s no longer the haves and have nots, at least with access. When you really democratize this and open it up and decentralize it.” [40:27]

Key Quotes

• Nathan Almond: “The biggest benefits from tokenization don't come from creating liquidity per se.” [00:00]
• Nathan Almond: “Bitcoin was really the first digitally scarce asset that could be held by anyone, anywhere, at any time...” [01:34]
• Nathan Almond: “Both of these products of course pay their holders a yield, you know, unlike conventional stablecoins.” [06:55]
• Nathan Almond: “Our assets, USDI and OH USG are already on eight different public blockchains...” [06:55]
• Nathan Almond: “USD Y is very clearly able to pay yield because... it is structured as a security.” [22:01]
• Nathan Almond: “Public securities in the US are all ultimately held...but holders of our tokens can settle between each other 24/7, 365...” [31:14]
• Nathan Almond: “Blockchains and tokenization represent a pretty disruptive and...fundamental upgrade to that system.” [37:24]
• Nathan Almond: “There’s no longer the haves and have nots... When you really democratize this and open it up and decentralize it.” [40:27]

Conclusion

This episode offers a comprehensive exploration of the tokenization landscape, highlighting Ondo Finance’s strategic initiatives and the broader institutional shift towards embracing crypto. Nathan Almond provides valuable insights into the technical, regulatory, and market dynamics shaping the future of finance, emphasizing the transformative potential of tokenizing trillions in real-world assets.

For more information and updates on Ondo Finance, listeners are encouraged to visit their website or follow Nathan Almond on Twitter @athanlalman.

End of Summary