Trading Tomorrow - Navigating Trends in Capital Markets

The Blockchain Revolution in Finance

• Numerix • Season 4 • Episode 32

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Blockchain technology has evolved from a buzzword to becoming the backbone of financial infrastructure, with institutions putting serious resources into distributed ledger technologies to enhance efficiency, transparency, and ownership concepts.

 In this episode of Trading Tomorrow – Navigating Trends in Capital Markets, we rewind the clock to explore how blockchain-related predictions from our earlier seasons have played out. From unexpected turns to spot-on foresight, we examine where the hype met reality—and how blockchain's accelerating influence continues to reshape financial innovation. 

Speaker 1:

Welcome to Trading Tomorrow Navigating Trends in Capital Markets, the podcast where we deep dive into technologies reshaping the world of capital markets. I'm your host, jim Jockle, a veteran of the finance industry with a passion for the complexities of financial technologies and market trends. In each episode, we'll explore the cutting-edge trends, tools and strategies driving today's financial landscapes and paving the way for the future. With the finance industry at a pivotal point, influenced by groundbreaking innovations, it's more crucial than ever to understand how these technological advancements interact with market dynamics. Hi there, I'm Jim Jockle, host of Trading Tomorrow navigating trends in capital markets.

Speaker 2:

And I'm Emily Drewby, the show's producer.

Speaker 1:

For the start of the fourth season, we're taking a moment to pause and reflect, looking back at key insights from our first and second seasons and where those trends are now.

Speaker 2:

And today we're zooming in on what's predicted to be the biggest game changer in finance blockchain, besides AI, of course. Since our first season, it's gone from being just a buzzword to becoming a real backbone evolving far past crypto.

Speaker 1:

Well, when we started first talking about blockchain in 2023, crypto headlines were everywhere Price swings, new coins popping up instantly. But fast forward to now, the conversation has really shifted. Financial institutions are putting serious resources into distributed ledger technologies to boost efficiency, improve transparency and even rethink the concept of ownership.

Speaker 2:

Right, but along with this new tech infrastructure has also come new questions like what does decentralization mean in a tightly regulated space, how do we balance privacy with transparency, and where is blockchain headed next?

Speaker 1:

That's what we're going to dive into in today's episode, While it might not get as much airtime as AI blockchain has consistently remained a major focus for over the years.

Speaker 2:

For our discussions. We actually kicked things off with Neil Chennai, operating partner at Sandhill East, who flagged blockchain asset tokenization as one of the four major trends to track.

Speaker 3:

Yeah, I mean I think we're headed in that direction. Some of the sell-side firms are already doing tokenization. It could be bond offerings, it could be different aspects of the capital market structure. I think we're going to see a lot of this kind of play out in the next couple of years. If you know the company Digital Asset, they just rolled out on top of Damel, a blockchain solution. So there's a lot of activity in the background going on that will come more into mainstream over the next couple of years.

Speaker 1:

Well, Neil has clearly pointed to the early signs of a shift and those building blocks have been laid and now we're watching that structure go up. I think a couple of interesting things that have happened in the market is with the change in the administration here in the US, there's an anticipation of a much more friendly SEC, especially to blockchain, which is also creating a little bit more of a shift within financial institutions. Regulatory barriers are coming down as there is more regulatory certainty, which is also now opening up investment strategies and suitability from the major institutions.

Speaker 2:

And we got even more perspective from Graham Moore on where finance and blockchain are intersecting. He's head of tokenization at the PolyMesh Association, which supports the growth of the PolyMesh blockchain. Now I think this conversation from season two is a great reference point and it shows how far we've come and where the momentum is going Like as of Q1 2025, platforms like Polymesh Avalanche Fireblocks have helped push tokenized assets to over $9 billion in on-chain value. Now even traditional exchanges are getting involved, like Deutsche Börse recently announced. Its D7 digital securities platform has processed over 4,000 tokenized issuances since launch. Now we're clearly seeing a shift.

Speaker 4:

The one thing I'm set on is dollar value of assets tokenized. I think that's when we know if we're successful or not. Right now, we're in the billions, which is good, but still very nascent. When you talk to anybody in traditional finance, once you hit trillions, then that's when people start caring. That's really what happened in crypto as well, when the cryptocurrency market cap hit a trillion dollars. That's when you started to see BlackRock really care. That's when you started to see a lot of the traditional financial players start to really care.

Speaker 4:

And we're still at billions in terms of tokenization of assets, but it's getting up there and it's getting up in an accelerated fashion. So I mentioned BNP, sockgen, jp Morgan has their Onyx private blockchain implementation for tokenization, and then also there are a number of other players that are just starting out. So KKR, a large fund, they've announced that they've tokenized one of their funds so that they can increase access and availability to who can purchase that, and so there's a ton of stuff that's happened in the last six months, a ton of stuff that I will hopefully be able to announce in the next six months. Yeah, it's really only picking up from here, but yeah, the main thing is what is the dollar value of assets tokenized on-chain, because that's when people start to really care.

Speaker 1:

Well, I think the thing that stuck with me the most is really the billions to trillions. It's a clear way of showing the gap between early innovation and full-scale adoption, and the fact that we're seeing so much activity back then just reinforces how fast this space is moving. But I think you know, with the institutional heft behind it, trillions is a barrier that will be breached very quickly.

Speaker 2:

Yeah, jim, and I think it's interesting that when we were filming these episodes almost two years ago, a lot of what's now happening was still considered to be in the pipeline. So since now it's showing up across the financial ecosystem, from BlackRat piloting tokenized fund shares to HSBC launching its digital asset custody platform. Blockchain's no longer an experiment. It's becoming part of financial DNA. The World Economic Forum even projected that 10% of global GDP will be stored or transacted via blockchain by the end of the decade, and we're well on our way there in 2025.

Speaker 1:

Well, you know, I think the more interesting thing that we're going to have to start exploring in future episodes is really around quantum computing, and you know, obviously there's so many headlines floating around that quantum can disrupt any kind of encryption, including blockchain. So, as we're seeing this shift, we have another emerging technology that could be even more disruptive, as we have other technologies that are getting into play. So, something for future episodes.

Speaker 2:

We're going to have to find some quantum computing experts. If you're listening, dial it.

Speaker 1:

Another key perspective came from our chat with the team at Broadridge. Their take is particularly relevant now because it highlights how blockchain has shifted from speculative bet to practical tool, especially when it comes to capital markets efficiency.

Speaker 5:

And so there has been a revived interest, I would say, actually in tokenization of assets, real use of DLT to improve actually processes in the capital markets.

Speaker 6:

Yeah, that's a really good point. Again, kind of looking back a few years ago, everything was about crypto. We were waiting for institutions to adopt crypto in portfolios. We saw sort of the launch of first ETFs and trusts and institutional products, and we all assume that hedge funds and other speculative investors would be adopting the technology. Now, yeah, to Prakash's point, there's been this crypto winter, so now the focus really has shifted towards the technology that's underlying them. Well, maybe that's still coming, maybe that institutional demand is coming. I think most people are waiting for some sort of regulatory clarity, but the technology has really sort of surpassed the coins themselves or the current digital currencies themselves in terms of the attention that they're getting out.

Speaker 1:

And FTX and others didn't help the argument, if you will, but I thought it was very interesting specifically around. You know blockchain and distributed ledger. In the report you know you found 27% of firms saying they're actually increasing their investments into these technologies and that's only 1% less than AI and machine learning. And I do want to get back to it because you know you can't have a chat without ChatGPT. But have you personally seen or heard how big a priority blockchain and distributed ledgers are becoming and, if so, what are the drivers?

Speaker 5:

I would say I do not know whether the 1% difference is truly reflective. I would say, if you look at budgets right and Matt, you can add to this right I would say the budgets are more skewed towards AI implementations today than blockchain, right and DLT. But what has happened is actually that there have been a few specific use cases actually of blockchain technology which have kind of been validated and people have understood the true value that when you kind of digitize and tokenize assets existing assets actually right uh, you can actually, through smart blockchain and smart contracts, kind of make the current processes around transacting and settling these products, like repos for instance, more efficient, right, I think one of the key themes that I hear across the board is efficiency.

Speaker 1:

Whether it's blockchain, whether it's AI or any tools that are coming out, is how we're becoming more efficient, and it's not just about replacing old infrastructure and, believe you me, there's a lot of it out there it's all about optimization, and that's what institutions are really getting behind.

Speaker 2:

And I mean again, it's not just theoretical anymore, it's happening, it's real. And just this year the DTCC expanded its Project Ion platform, which uses distributed ledger technology to process over $2 billion in daily transactions.

Speaker 1:

The last episode, we explored AI, but we'd be missing a huge piece of the puzzle if we didn't revisit our conversation with emerging tech expert, dr Mara Vozer, where we dug into the intersection of AI and blockchain. Let's roll that clip.

Speaker 7:

Blockchain, in a sense, is everything that AI is not. It's transparent, it's traceable and it's immutable. Whatever you know goes into the blockchain cannot be erased, and AI has been called black box and sometimes you know these models are black box. They are. I mean, it's hard to interpret them, hard to explain them, and you need to explain them.

Speaker 7:

You need to explain these models for two reasons. One is that if you want to make a decision, you need to understand why you're making this decision this way or that way, why the output is like okay, do X, why should I do X? So you need to understand that. And also it helps to understand how to evolve with this model, because the models are not static. I mean, they are updating and evolving and you know what changes do you need to make in the model to make it better. So if you don't know how the output came out, you don't know where to start. So it's important to understand this explainability and interpretability, and part of it is understanding how it was developed. So you need to understand the code, you need to understand the data to trace and audit everything, and blockchain allows you to have this transparency.

Speaker 1:

That contrast, she made AI as black box versus blockchain. As transparent and immutable is such a powerful way to think about their relationship. It makes a compelling case for why we need both working together, especially as AI becomes more integrated into critical systems.

Speaker 2:

And I think just in general too, jim, ai is going to be pulled into every single conversation, every single technology. I mean it's impossible at this point for it not to be. And back in 2024, Dr Ozer really laid out the blueprints for using blockchain asa safeguard in the AI space, and now in 2025, we're watching that become a reality. So, from tracking AI models to watermarking content, blockchain is stepping in as that technology that makes AI accountable, and I think it's really interesting in terms of my prediction from last episode that AI regulation would really be the space to watch in this upcoming year.

Speaker 1:

Well, just in the first half of this year, openai, meta and Google partnered with blockchain-based platforms to embed tamper-proof Providence metadata in AI-generated content. The EU's Digital Service Act even recommends blockchain as a compliance tool for transparent AI auditing, and it's fast becoming the digital record keeper for the whole age of automation. And, of course, we can't wrap up without talking about our conversation with Igor Talianakov, ceo and co-founder of AlphaPoint.

Speaker 8:

As far as the audience of this podcast, though, I would say that the most impactful will be the tokenization of everything. So you know everything from your car, you know and commodities, gold we worked on a project with the Royal Mint and the CME group to tokenize gold and they were early for their time, but we're going to see all assets, stocks, bonds, going onto blockchains and then what you can do with those assets, how you can use them for collateral, how you can swap them between each other, how you can use them for collateral, how you can swap them between each other. There's a whole new world that opens up in financial markets. That that's going to be huge and going to be quite you know, quite an innovation and, in some ways, disruptive as well.

Speaker 1:

Well, I will say Igor's vision is bold, but it's grounded. It's grounded in what's already unfolding. We're seeing this wave of tokenization touch everything stocks, bonds, real estate, you name it. I don't think this is just a trend anymore. It's the next evolution of market infrastructure.

Speaker 2:

Yeah and Jim. What I loved about that conversation with Igor is how clearly it painted the scope of what's ahead. You know, tokenization it's not just a cool concept, it's creating new market opportunities, new ways to trade, new ways to think about ownership. It's not just innovative, it's transformative. And in 2025, we're seeing this with fractionalized real estate on chain, tokenized green bonds tied to ESG benchmarks, and even major sports teams launching tokenized equity offerings to fans.

Speaker 1:

Well, I think the one thing that is really clear is how the technologies are all coming together. It's no longer to talk about cloud, it's no longer you're talking about blockchain, it's no longer you're talking about AI or machine learning or agents or whatnot. These technologies have been on a track but have parallel many ways, but that is all converging and I think that was kind of the grand design, and now we're just seeing that come to play, which really makes trading tomorrow a different place.

Speaker 2:

And it makes it so important, right? You've got to have a really good foundational understanding of a lot of these technologies so you can understand how they intersect with each other. And thanks for joining us as we looked back and looked forward on this important topic. Blockchain's integration into capital markets isn't slowing, it's scaling, and so is our podcast. We will be kicking off our regular season now. Jim, you want to tell them about that?

Speaker 1:

Thanks, Emily, and if you haven't yet checked out episode one of the miniseries, we've done a similar pulse check on AI and capital markets. Thank you so much for listening. Remember, like, subscribe and share More to the conversation, the better conversation we can have.

Speaker 2:

Thanks, Jim.

Speaker 1:

Thanks, Jim you.