Unchained Podcast Ep. 986 Summary

Episode Title: Lessons From A Successful Tokenization Project & What Market Structure Reveals About Trump-Linked WLFI’s False Promises: Bits + Bips
Host: Laura Shin
Guests: Mike Cagney (Figure), Steve Ehrlich (Unchained), Jason Brett (Unchained contributor)
Date: December 20, 2025

Episode Overview

This episode dives deep into two timely themes:

1. Figure’s Success in Tokenizing Real-World Assets (RWAs): Steve Ehrlich interviews Mike Cagney, CEO of Figure, exploring how Figure’s blockchain-powered home equity loan operations have finally achieved product-market fit, what made Figure stand out while other tokenization projects faltered, and where the real value of blockchain is emerging in financial services.
2. Market Structure, Regulation, and the Trump-Linked WLFI Token: Jason Brett joins to discuss his recent article dissecting why Donald Trump’s World Liberty Financial (WLFI) "DeFi" project fails the decentralization test and what this means given unfolding market structure legislation.

The episode is rich with practical details, candid insights from industry insiders, and trenchant commentary on the future of DeFi, market regulation, and real-world asset tokenization.

1. Figure’s Tokenization Journey: A Blueprint for Success

What is a HELOC and Why Tokenize It?

• [02:12] Mike Cagney: “HELOC stands for home equity line of credit and it's effectively an open-end mortgage... The fastest area of growth that we found is HELOC in the first lien position... because of the efficiencies we captured through blockchain and the capital markets that we built out... costs us less than $1,000 to reduce that mortgage.”
  • Context: Traditional mortgages are costly to originate, especially for lower-value properties. Figure leverages blockchain efficiencies to drastically reduce costs and access an untapped, now-profitable segment.

Innovating the Borrowing Experience

• [04:51] Mike Cagney: “If we could bring personal loan efficiency into the HELOC marketplace, we could actually get people who wanted to take the loan out for immediate purpose... So what's unique about this HELOC is... we're dispersing $100,000 to you [all at once]... It's an open line, but it's a fully dispersed loan at origination.”
  • Insight: Figure differentiated by making HELOC origination fast and customer-friendly, a sharp contrast to traditional, cumbersome mortgage or HELOC processes.

The Lifecycle on Blockchain

• [08:20] Mike Cagney: “We ingest the data from the loan... directly into the blockchain... the blockchain's immutable... the rating agencies have lowered our requirements down to 20 to 30% of the loans and about $100 a loan. And so this manifests to a couple million dollars of savings per securitization transaction.”
  • Key Process Steps:
    • Loan applications and data are natively created on the Provenance public blockchain.
    • These assets are pledged to warehouse banks (e.g., Goldman Sachs), who can instantly verify them.
    • Loans are then aggregated and sold to institutional buyers or securitized.
    • All payments and servicing flows occur on chain, reducing cost, reconciliation, and fraud risk.

Real DeFi Integration

• [14:31] Mike Cagney: “We have a DeFi platform called Democratized Prime, which is open, although KYC’d. But we recently launched on Solana a platform called Hastra... Hastra applies capital into our DEFI protocol... and that activity lowers mortgage rates for US Consumers.”
  • Notable Impact: International DeFi capital, via on-chain protocols, is directly lowering borrowing costs for US homeowners.
  • Advocacy: Cagney actively uses these real-world examples to push for Defi protection in upcoming market structure legislation.

2. Market Structure, Stablecoins, and Wall Street’s Play

Stablecoins in Figure’s Ecosystem

• [18:38] Mike Cagney: “We’re at a couple hundred million in market cap right now... there’s loan funding which we’re still funding in dollar fiat... pledging to the warehouse where we’re now migrating that to using stablecoin… the securitization is the last leg... in 2026 is issuing those securitization bonds native on chain.”

• [20:09] Mike Cagney: “We use yields within our ecosystem, although yields is convertible into USDC 24/7... but we tend to use yields because it affords us some benefits that traditional stables don’t afford, including the interest that it pays.”

  • Detail: Figure is pioneering the issuance of yield-bearing stablecoins, and is pushing toward full on-chain securities settlement.

Wall Street’s Embrace & The Inevitable Shift

• [21:17] Mike Cagney: “Stablecoin is not proliferated as expected because it doesn’t have utility... The Genius Act’s going to change that. JP Morgan is... building a new payment rail or payment infrastructure... They just moved JP Coin... onto Base... and I think it’s going to bring utility... If I’m a regional or super regional bank, this should be an absolutely terrifying idea to me."
  • Memorable Quote: “Money is really smart. It can get to whatever it wants to. It doesn’t need the blockchain to do that. And so in the beginning, you’re introducing something different that introduces friction. ... In the long run, it will make sense.” (00:00, 37:55)

3. Regulating DeFi and the Importance of Real Decentralization

Policy Advocacy

• [26:26] Mike Cagney: “There’s three things we’re advocating for: ... settle non currency or non security transactions... modernization of the transfer agent rules... and protection of DeFi as a peer-to-peer transaction, not a security offering.”
  • Candid Observation: Lawmakers often conflate truly decentralized systems with centralized actors disguising themselves as DeFi to avoid regulation.

Defining Real DeFi

• [28:42] Mike Cagney: “If at any point you are touching the transaction between party A and party B, that’s not a decentralized transaction... It’s the community that votes for and controls and administers those smart contracts... Decentralization is not anonymity.”

Governance, Control & KYC

• [30:37] Mike Cagney: “We’ve burned enough that we now have 20% of the tokens... Our goal would be to get down at the 10% level... Decentralization is not anonymity... The smart contract could require that you have a KYC certificate in your wallet to participate in that ecosystem... there’s nothing orthogonal to DeFi in doing that.”

4. Figure’s Vision and Lessons for Tokenization

Strategic Vision

• [33:31] Mike Cagney: “Rather than the centralized construct, I... believe that it’s self-sovereign wallets and distributed applications... You and I will carry all the relevant information in our wallet, and we will choose what venue we trade equity on... as distributed apps.”

• [37:04] Mike Cagney: “The idea of just accessing [equity trading] directly with my wallet, that's a very powerful... disruption into the market... That’s one of the things we’re pushing hard on in terms of our equity offerings.”

Tokenization Lessons and Hard Truths

• [37:55 & 40:46] Mike Cagney:
  • On why most RWA tokenization failed:
    • “There really hasn’t been a lot of successful tokenization of RWA other than what we’ve done in the consumer credit side...”
    • “A lot of people don’t realize... [at Figure] we had to leave a lot of money on the table along the way.”
    • “In the beginning, it’s a liability. There isn’t this fantasy of money on blockchain that you can’t get to anywhere else... in the long run, it will make sense.”

5. The WLFI (Trump’s DeFi Project) Controversy and Market Structure Bill

The Reality Behind WLFI

• [43:22] Steve Ehrlich: “Tell us about your story.”
• [46:51] Jason Brett: "When you look at the way the tokens are structured... Trump and his family still own 22.5 billion tokens... The whole premise of DeFi is we all have this vote. But if the insiders don’t like the outcome, they have a right to overrule the vote... If [one] body can unilaterally just decide to revoke someone’s access, that’s not DeFi."

Evidence of Centralization:

• Insiders (Trump and family) retain over 20% token control.
• Governance votes can be overridden by insiders.
• WLFI froze wallets (notably Justin Sun) at their discretion—clear centralization.
• KYC is required and tokens are largely non-transferrable/moveable at company discretion.

The Market Structure Bill’s Implications

• The bill proposes a “bright line” for decentralization (e.g., >20% insider ownership or practical governance control triggers securities regulation).
• If WLFI is ruled centralized, tokens would be subject to SEC regulation—undermining their "DeFi" claim.

Potential for Regulatory or Legal Action

• [59:57] Jason Brett: “If Donald Trump and his family claim World Liberty Financial is decentralized but the rules of market structure suggest that they are centralized... could you imagine a world where the SEC perhaps investigates World Liberty Financial... for circumvention of securities laws?”
• [61:59] Jason Brett: “In the new world that we live in right now, you’re just not going to see that from a practical point of view, I don’t think.”

The Inherent Ethical and Legal Tensions

• The unprecedented scenario: A president simultaneously owns and operates a major crypto business while his own administration shapes industry-defining law.
• [62:40] Jason Brett: “We’ve just never had this as a country.”

Key Quotes & Moments

| Timestamp | Speaker | Quote | |-----------|---------------|--------| | 00:00 | Mike Cagney | “Money is really smart. It can get to whatever it wants to. It doesn’t need the blockchain to do that... In the long run, it will make sense.” | | 02:12 | Mike Cagney | “HELOC stands for home equity line of credit... One of the fastest areas of growth we found is HELOC in the first lien position.” | | 14:31 | Mike Cagney | “We recently launched on Solana a platform called Hastra... that activity lowers mortgage rates for US consumers...” | | 21:17 | Mike Cagney | “Stablecoin is not proliferated... because it doesn’t really have utility. I can’t go to Starbucks and buy coffee with stablecoin.” | | 28:42 | Mike Cagney | “If at any point you are touching the transaction between party A and party B, that’s not a decentralized transaction.” | | 40:46 | Mike Cagney | “We had to leave a lot of money on the table... when you start off right now, it’s a liability... But in the long run, it will make sense.” | | 46:51 | Jason Brett | “[Trump and family] still own 22.5 billion tokens. The insiders can overrule the vote... That’s not really in the spirit of DeFi.” | | 54:50 | Jason Brett | “The values for the Trumps right now is somewhere average around $3.7 to $4 billion. It’s doubled his wealth.” | | 61:59 | Jason Brett | “In the new world that we live in right now, you’re just not going to see [SEC action] from a practical point of view, I don’t think.” |

Key Timestamps for Reference

• 00:00 — Mike Cagney on why blockchain isn’t always instantly valuable.
• 02:12 — Cagney explains HELOC and why it’s perfect for tokenization.
• 08:20 — The loan asset process and how blockchain changes the capital markets.
• 14:31 — Figure’s integration with DeFi protocols and real user impact.
• 21:17 — Cagney on stablecoin adoption and Wall Street’s disruptive role.
• 28:42 — Real definition of DeFi and decentralization vs. anonymity.
• 37:55 — Hard-earned lessons for RWA tokenization projects.
• 46:51 — Jason Brett analyzes WLFI’s centralization problems.
• 54:50 — On the scale and ethical oddity of a presidential DeFi project.
• 61:59 — Regulatory likelihood under current administration.

Takeaways

• Tokenization Success: Figure stands out by enduring initial frictions, sticking to transparent blockchain principles, and offering efficient, real-world benefits—especially in cost and process improvements for lenders and borrowers.
• DeFi Is More Than Labels: Real decentralization means more than marketing claims or partial open-source code; it’s about loss of insider control, transparent governance, and non-intermediated transactions.
• Regulatory Winds: U.S. policy is on the verge of providing long-sought clarity, with implications for projects like WLFI and the future of bank and stablecoin competition.
• Cagney’s Vision: The next phase is not superapps but open, wallet-centric, interoperable systems—changing financial user experience profoundly.
• WLFI as Case Study: Trump’s project highlights the difference between form and function in crypto, serving as a public (and political) stress test for what new market structure legislation will mean.

Recommended For

Listeners who want insight into how RWA tokenization really works, what makes a project succeed/fail, why current DeFi market structure battles matter, and where the real future of blockchain-based finance is being fought—and won.