Trading Tomorrow - Navigating Trends in Capital Markets

Tokenization Moves From Pilot to Market Reality

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Tokenization is moving from concept to practice as regulation, infrastructure, and institutional readiness advance. In this episode, Alan Konevsky, Chief Executive Officer of tZERO and Manish Dutta, Co-Founder & CEO of Alphaledger discuss how real-world assets on chain are shifting issuance, trading, and investor access. The conversation covers the practical arc of adoption, the link between issuance and liquidity, the role of broker-dealers, ATSs and custody, and why interoperability and user-level utility will determine what scales next. 

Speaker 2:

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 Jocko, 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.

Speaker 3:

Tokenization is often described as the bridge between traditional finance and digital markets, and that bridge is being crossed. With advances in regulation, infrastructure, and institutional readiness, real-world assets on blockchain are moving from theory to practice. To explore what this shift means for issuance training and investor access, we're joined by two leaders building what many see as the next generation of capital markets. Alan Kanofsky, Chief Executive Officer at C Zero, leads one of the earliest and most established regulated platforms for digital securities, spanning primary issuance, secondary trading, and custody. With experience at MasterCard, Goldman Sachs, and Seldon Cromwell, Alan has been deeply involved in shaping how tokenized assets fit within regulated financial frameworks. Manish Student, co-founder and CEO of Alpha Ledger, has over two decades of experience in bond market technology and has pioneered the tokenization of more than $800 million in real-world assets, including municipal loans and securities. The first firm in the U.S. to do so on blockchain. Before founding Alpha Ledger, he served as senior technology leadership roles at PIMCO, where he helped modernize the firm's fixed income infrastructure. Together, T0 and Alpha Ledger recently announced a strategic relationship aimed at accelerating tokenization across public and private markets. The partnership brings together Alpha Ledger's product innovation and on-chain issuance experience with T0's regulated trading and distributed infrastructure, a combination that underscores how tokenization is moving from concept to market reality. Thank you for having us on, Jim. Great to be here, Jim. So, Manish, why don't I start with you? You know, uh, where do you think we are right now in the evolution of tokenization? You know, what's real today versus still developing or aspirational in the journey towards institutional adoption?

Speaker:

Yeah, Jim, thanks. Uh, you know, so from outfit's perspective, we are a firm believer in the arc of regulated asset tokenization. And there are five phases that we sort of talked through, which is, you know, we we were in phase one, which was that which was a phase when the blockchains were being built. It was what we call the wild frontier. A lot of experimentation, um, a lot of the the the tokenization of various different kinds, technology was still being built, and then call it late 2021, 2022, um, is when we started to see some real adoption coming through. And clearly BlackRock really took a big lead in that, which is tokenizing of a private treasury fund. And that's really the phase two, which is which is your assets which are stable, which are tangible assets, and and that really started to create the backbone of what the world from a tokenization should look like and will stand like. So that's the phase two of building stability. And where we are headed now is phase three, which is effectively we are starting to unlock the tokenized asset yield. And part of that really is you're seeing the maturization of the blockchain industry, you're seeing tokenization becoming mainstream, and you're now seeing uh um real assets coming on board. Look, we as a regulated institution, which is Alpha Ledger, have tokenized well over $800 million in municipal debt. We were the first ones to really do it in the country from a muni standpoint, both securities and loans. Recently we launched a yield yielding product called T12 in partnership with Simplify Asset Management. So that starts to sort of show you the quality of assets starting to come onto the chain. And and I think that's really the the stage that we are in, which is phase three. As we look at the market looking forward, we have phase four, whereby we'll start to see what we call the T now settlement. So today, when an asset comes on board, whether it's a traditional asset trading through a traditional broker dealer, or an asset coming on through a blockchain instrument, um, it still requires a T plus one settlement, right? I think that's often overlooked unless you're a pure crypto asset. The the market, the regulations have they haven't evolved past the T plus one, and that was just introduced recently by the regulators. The last phase that I think where we will end up, which will be the true ownership, what we call dominium, right? That's that's the ownership of asset as defined by the by the rules and regulations, and they trade real time. They are they're born, they are they're they're issued on-chain, and they're truly the tokenized assets that we are all talking about. So really it's the arc of tokenization, and we are now in phase three of that tokenization arc.

Speaker 3:

Alan, any additional color uh on where we are today and and uh the evolution of the phases?

Speaker 1:

No, terrific. Thank you, Jim. And you know, uh my friend Manisha outlines this perfectly. I'll say that when you answer this question, it's got it's a little bit helpful to ask yourself why tokenize? Uh because answers differ, and you get some good answers and you get some answers that are off-piece. From my perspective, tokenization is critical from four directions. When each had a list of five things, I got a list of four things. So uh lists are getting shorter, that's a good thing. Uh a list of four things. First, it's about cross-asset convergence. And the reason why you want to tokenize real-world assets, private securities, public securities, crypto, of course, is already tokenized. Uh you want to tokenize derivatives, you want to tokenize predictive markets, is to allow seamless cross-asset interoperability. Sort of the way internet allows you to operate across data types and uh and voice and and video the way we're doing now. Blockchain, distributed ledger technology, and in particular smart contract automation will let you operate across assets so that you could buy stocks with Bitcoin, or buy Bitcoin with a share of stock, on or um uh engage on a predictive markets platform, etc. So it's really this cross-asset functionality, particularly as you look into the future where all these asset types are, I believe, going to be technologically interoperable and use common rails. And for the time being, you're focusing more on user experience interoperability. But that's that's a critical reason for tokenization. Um, the second one is geographic convergence, single database, smart contract automation, same as intranet, perfectly suited to smooth out cross-border frictions as you're looking at raising capital and trading capital and custodying and all other kind of ancillary pre- and post-trade processes. Um that's as and people are people, countries are countries, laws are gonna be different no matter what. Policymakers talk about uh harmonizing regimes across countries. And these are good initiatives, but the reality is that countries are still gonna be fragmented. Um, and this technology has a potential to smooth out that global activity. That's number two. Number three is, of course, other efficiencies that come with single database and in particular smart contract automation. So that's what you hear often about faster, cheaper, less intermediated, more transparent, uh, et cetera. And number four, and people talk about that to an extent, is the adaptability of blockchain-based assets and how they can be customized, uh, particularly for utility functions. So a share is not a share anymore. A share becomes uh a relationship between an investor and and the company that received that investor's capital, whether in primary or secondary markets. Um from a utility perspective, there are activities you can engage in, information you can exchange with, from an insurer's perspective, with your biggest fans, your shareholders. And the same the same idea translates into other asset types as well. And so if you think about those four priorities for why tokenization, you know, my view is that early adapters like Alpha Ledger, like T0, have done God's work to lay the foundation. I feel like cross-asset convergence, cross-border convergence, really utilizing the efficiency in single database and smart contract automation and really unleashing the interactive potential of tokenized financial assets is still very much in the early days. Uh and it's gonna take the efforts of early innovators like us, together with traditional market participants uh who are who are looking at this technology not just from an advocacy perspective anymore, not just from a RD perspective anymore, but from perspective of rolling out actual products into the marketplace. That's that's the next click that's going to deliver on that promise.

Speaker 3:

So I want to get to the contingent relationship that was just recently announced between T Zero and Alpha Ledger, but let's just give you the elevator pitch on T Zero and Alpha Ledger independently, and then we could talk about the vision uh within this relationship.

Speaker 1:

So Alan, I'll stick with you. Terrific. Thanks, Jim. T Zero is one of the earliest pioneers in the adoption of blockchain technology in the capital markets. Our thesis statement was always that this innovation is going to be uh gradual and is going to require a regulated footprint that takes existing building blocks for what it takes to be a compliant, good actor in the US securities ecosystem, uh, and then gradually translate in that into an increasing role for blockchain technology in the securities that you offer or trade, in the technology that you use, uh in the pre- and post-trade uh trade processes that the investor or the issuer engages in. And so from that perspective, we built what I think is the best broker dealer-led end-to-end stack for digital asset securities in the US, from capital raising to secondary liquidity on our alternative trading system to custody in our special purpose broker dealer. We want them only two special purpose broker dealers in the US that can custody tokenized securities directly on chain in our own wallet that we maintain. So, end-to-end, we have the best regulatory and operational stack to support important partnerships like with Alpha Ledger and Manish. Um, I think if you look at T0, how we are going to continue to grow a footprint, the future lies in increasing multi-asset capabilities, as I talked about before, as well as as well as geographic capabilities. Uh, and we believe the way to get there is with best of breed partnerships like the one with Alpha Ledger.

Speaker 3:

And Manish, Alpha Ledger. Give me the elevator, Pitch, please.

Speaker:

Yeah, look, I mean, I think Alan summed it up perfectly. So to me, you know, our vision when we started Alpha Ledger was to bring security design chain writ large. That was the starting point for us. The question really was for us how do we do it and how do when do we implement it? It wasn't a question of if. So how we do it is we do it through regulatory infrastructure, right? So we built our broker dealer, we built our transfer agent, we built our investment advisory business. We've started to bring products and assets that are well suited to come on chain. Now, as we think about bringing the assets on chain, what do we really want? What does blockchain offer us? It offers us a fast settlement rail, it offers us a fast execution rail, and more importantly, what it needs is a 24-7 settlement and a trading window, which by default is on blockchain, but it's not there for regulated assets. So you need firms like T0 that were the pioneers in the tokenization of equity. They've built an ATS. So when you start to integrate these critical components from a regulatory standpoint, from a tokenization engine that we have built that is on Solana because of the speed, um, it starts to create an ecosystem where investors like ourselves individually would want to own a tokenized asset. But once you own a tokenized asset, what do you do with it? It looks shiny in your wallet, that's great, but it's of no value if you can trade. It's of no value if you can integrate with certain protocols. So I think to us, it's really the first fundamental shift in the industry. So you have now have two organizations that are heavily regulated, that understand the rules, that understands the governance structure, that have worked with the regulators, and are now bringing on real-world assets on chain for 24-7 trading. So that's what I'm excited about, really. Um and why this is really the first step in our journey to bring sort of like the financial world really on a public blockchain.

Speaker 3:

So there's been a lot of discussion about tokenizing everything. But the real challenge seems to be connecting issuance to liquidity. So what needs to happen to turn one-off digital issuance into cheap functional markets? Um Michelle, say with you, and then uh Alan will get your thoughts as well.

Speaker:

Yeah, look, I mean, I think I think tokenization as a technology concept has existed for years, right? I mean, so if we go back in time, it started during the paper conversion to computers. I mean, the tokens were used for encrypting uh important information. It it morphed into credit card uh transactions, and now what we're really seeing is a programmable asset. So I think tokenization is a very general generic word to be used, but really what we're talking about is composable securities, which means that you as an investor are able to take that asset, borrow against it, lend it, leverage it, and then perhaps you want to assign ownership to somebody else and allow the portfolio manager to trade on your behalf on certain days. So that's composability of an asset. We are now entering the phase one of that composability, which is effectively the base tokenization, which is you take an existing security, you bring it on-chain, which is really the tokenization of it, and now you allow people to trade. And where do you trade? You trade on a platform like T0, you trade through a broker dealer like AlphaLetro Markets, whether it's a public security or a private security. So I think I think fundamentally, as you think about it, tokenization is starting to become a reality, but liquidity is lacking because of the way the assets are being brought on. They're being brought on primarily from a soundbite standpoint that the assets are being tokenized, but we have to start thinking about creating a liquid infrastructure, which is where you need 24-7 trading, which is where you need ATS. And so part of what we think about and why we're excited about T0's relationship is because they bring that the additional components that we don't have at an organization, which is an ATS, the 24-7 access, the technology that goes to kind of build that. So I'm super excited about that part.

Speaker 3:

So, Alan, you know what, uh, maybe you could walk us through as products become tokenized. What is the involvement of the broker dealers, the custodians, the transfer agents, and and and how does that need to evolve to address some of the issues that Manisha's uh bringing up?

Speaker 1:

Yeah, absolutely. And look, you know, Jim, I think this question, the question about liquidity and demand are absolutely, absolutely critical. You know, a marketplace is a frighteningly simple thing in concept. Whether you're selling securities or were you selling chairs? Supply, demand, infrastructure, right? It's those three things. It's a three-legged stool. Um infrastructure, Manish and I have talked about at length, including the investments uh both of our organizations have made to have a compliant regulation first footprint in the US. And that's certainly the approach that we're taking as we think about global interoperability, as I mentioned. Um it's in the DNA of our company, it's in the DNA of our shareholders, uh the Intercontinental Exchange and the New York Stock Exchange are uh significant investors uh in T0, and uh it's critical to our uh footprint. Demand and liquidity are probably the most challenging things to grow in the marketplace. Infrastructure subject to politics and regulation is largely within your control. You can go get a license, you can build technology, you can hire staff, whether it's a broker dealer, whether it's a common broker dealer license or something unusual like our special purpose broker dealer approval, or whether you're a transfer agent or X, Y, or Z. Likewise, with supply on the balance, I think there are a lot of issuers and project sponsors out there, including owners of real-world assets like real estate, ARC, uh, and uh and other properties, who see the benefits of tokenization, particularly with respect to this multi-asset vision that allows you to cross asset types and to achieve uh uh real-time trading and settlement, as Manish mentioned, and other objectives. I think demand, and it's a devil that plagues most new marketplaces, is the hardest thing to catch up because what do you need for a for sort of a functional demand uh environment? You need native demand, so investors, institutional and retail investors or users on your platform, and then you need liquidity providers, particularly professional liquidity providers like like uh market makers or similar types of entities. Um the latter can't exist without the former. Uh, and that's and so the challenge is as you're thinking about each new product at this point that you're bringing onto the system, you're thinking about the demand profile. And whether you have native demand already in terms of the user base uh on your platform, uh and T0 has a significant user base uh since it started trading uh uh digital securities in 2019, uh, or whether you're thinking about users or investors that are not that are gonna follow the asset that you're bringing in, or you're thinking about specific marketing activities, including regulated solicitation that you as a broker dealer can engage in. But you have to think about each of these priorities every time you're building an asset. Uh, and then over time the flywheel, of course, is gonna become uh uh uh self-fulfilling and uh and uh it's gonna be easier like it is for people who bring assets to the public equities markets, right? Or to the non-security digital asset markets like cryptocurrencies, in a particular whether in the US or outside of the US. And but you know, one of the biggest mistakes we can make for now is to sort of compare this evolving marketplace to conventional public equities or cryptocurrencies, because each of them works in very different ways. Uh the crypto market, particularly offshore, to a significant extent relies on automated market makers, bots basically. And so, you know, that's not something that you can really have in a regulated securities environment yet in the US, although we think infrastructure will continue to transform, like market participants like us, and even regulators now like the SEC, talking about greater kind of DeFi penetration into U.S. securities markets. But for now, there are just certain tools, particularly around liquidity, that are not available to a to a to a regulated securities marketplace in the US, and we have to focus on growing demand and liquidity in other ways.

Speaker 3:

So I have a potentially stupid question, and I'm not sure who to direct this to. Um but you know, uh you mentioned UniBonds, and you know, is there any benefit for issuers in terms of having their issuings tokenized? You know, for example, the New York Power Authority or Orange County, California, when they come to market, is there a benefit on that side of this arrangement?

Speaker:

Yeah, look, I mean, tremendous. There's tremendous benefits, right? I mean, at the end of the day, what is a municipal bond? It is effectively your tax dollars that work. So what do you want to what do you want to see with your tax dollars? Do you want to see where it goes and how it's being implemented or not? I think that's that's the fundamental question we should be asking. And then the next question really is why do we as taxpayers don't get the option to invest in these mini bonds at scale? Today, they effectively come from an underwriting desk. They go to large institutional players, right? I mean, I was at a firm called Penco, they are massive buyers. You have JP Morgan, one of the largest firms, Bank of America, that's the largest operator in the municipal debt. They are the ones that actually own it. So you as an investor are largely cherry-picking your mutual fund complex to have an exposure into municipal debt. Fundamentally, as we think about it, Jim, local communities, small communities, and we have done a lot of work in the state of Oregon. They're actually quite a believer in this technology, and especially the special districts of Oregon. And there is an advisor, his name is David Albricht. You know, the fundamental thesis really is if you are doing projects for the for the constituents, they should have access to it. Whether they invest or not, that's a different story. If they don't invest, they should still have access to the information on the debt coming onto the platform, how it's being bid upon, who's paying the taxes. All that information is rightful information that we as taxpayers should have access to. We shouldn't have to rely on a firm like Bank of America, JP Morgan, to fund these large-scale projects. It's not to say that they shouldn't be involved, but more importantly, when you bring these kinds of assets on a chain, you can increase the liquidity, you can increase the velocity of access, and fundamentally, you can change how these assets trade hand over time. Because today, an average municipal bond does not trade after 10 days. Why? Because it goes into a black hole and then nobody knows what's really taking shape, other than you seeing a billboard sign somewhere that says your tax dollars at work. So I think municipal debt makes a lot of sense to me. It is one of the slowest markets. Um it it is it's the last bastion of technology adoption. I think I think that there's a proud feeling about that. But fundamentally, I think as our infrastructure ages in the country, we have to start thinking about technology as an important tool to bring this asset class forward. The other thing I would I would add to you know, to Alan's earlier data point about and your question about adoption, right? I think that's one of the challenges that we really see. Thus far, over the last four or five years, traditional broker dealers that have operated in this space can't tell a difference between a blockchain and a Bitcoin. Bitcoin and Solana, Solana and Ethereum, fundamentally different technologies, fundamentally different use cases. But what you're starting to find out though is very quickly they'll have to come up to speed because the regulators that were stuck for the last five years from making any decisions are now moving at a warp speed, right? So they are now moving faster than I thought they were going to move, which means the adoption cycle is going to become increasingly fast. So today's broker dealers, whether it's Schwab, Fidelity, uh, e-Trade, you name it. You go down the list, and everybody very soon will be a tokenized broker dealer or a tokenized fund manager. That reality is starting to set in, and people are either going to wake up to that or not. That's up to them.

Speaker 1:

Yeah, Manisha's spot on, and thank you for raising it. The amount of inbound conversations I and my team are dealing with with other broker dealers, US broker dealers, offshore broker dealers, crypto firms that are looking for cross-asset capabilities, uh, is is phenomenal. And to Manisha's point, and and by the way, particularly over the last you know, month or two, this is and and a lot of it is because of the accelerating velocity of at least the perception of political and regulatory change in the US. Uh the direction that you get from President Trump's administration uh and the agencies under new leadership is transformational to what's happening now. And you know, regulatory transformation has sort of two elements to it. One was actually rules changing. And while some things have changed, the Genius Act passed, and that's that's very significant for the stable coin industry, although some people are happy, some people are not, and and and folks are still chasing various topics around that. There was a transformational piece of legislation. Other rule changes are still pending, whether it's laws in Congress around market structure, whether it's rules at the SEC, whether it's rules at the CFTC, uh, whether it's rules inside the banking regulatory agencies. Um the pace of kind of substantive rulemaking is still more to come. However, the psychological, the mind share, the perception of US is open for innovation again, uh and and how that impacts on traditional firms, to Manisha's point, um, scrambling to catch up and catch up with people like us who've been doing and investing in this space for years, um uh as well as as well as other market participants, uh, is really important. And I think you know, firms like T0 and Alpha Ledger can offer a lot to participants like that from an infrastructure perspective that we build and is available to them, you know, including correspondent clearing services around digital asset security custody, for example, that we offer.

Speaker 3:

I want to uh just drill down on one point you made uh and give some additional insights. Not all chains will create an equal. I think there's always this assumption that when you say blockchain, it's yay, it's one thing. So I guess the question is, and you rightly highlighted how it's not, but how critical is interoperability across chains for really true market adoption?

Speaker:

Yeah, I think each chain has its own benefits, pros, and cons, right? I mean, we we were on a permission chain for a long time uh called Hyperledger Fabric. It was built for purpose to help originate securities, um, but but as technology has evolved, these public chains are getting much better, right? So we moved to Solana because one, for a speed of settlement and the pace that you can sort of develop, two, it has withstood the test of time now. So it started in 2019. This public blockchain has seen the rise and fall of meme coins, and I think that has hardened the infrastructure, which is a fundamentally different way of looking at technology, right? So people look at in our world, in the traditional world, when you think of meme coins, you think of it as a joke, but there is a real value proposition because Solana is able to trade more transactions per minute per second than traditional firms combined, because folks, folks trading purely on emotions, and that that hardens the chain. And as a result, we are on Solana. And and to us personally, I think there will be a few chains. Um, EVM being one, which is Ethereum, Solana Sternly is another one, and then Bitcoin as an asset class, as a chain itself, has morphed more into a sort of uh digital gold than anything else. So application development, fundamentally, as it relates to Wall Street coming on, it requires speed, it requires velocity, and it requires a human element. The human element part is what's lacking on EVM that's available to us on Solana, which is why I'm a big fan of Solana personally. Um, and then certainly they are focused from an engineering standpoint, which is lowering the speed, um, increasing the speed of transaction and lowering the cost of transaction. I think that's why we are on Solana and why we continue to sort of build and move products onto Solana, which are real-world assets, as we sort of call it in this blockchain world.

Speaker 1:

Yeah, I'll um I'll make an observation on that. You know, if I could get into a time machine and go go back, you know, 10 years into the past or more. Um, I wish that the conversation around digital technology and digital assets didn't start with crypto, but started with the potential of blockchain technology, the potential of disfrigored ledgers, the potential of smart contract automation in particular, you know, the self regulating code that can displace a lot of inefficiencies. Uh, and arranged, by the way, not just in financial services, across the board. Um instead, the The conversation more or less started with a use case of that technology, and that is crypto, whether it's Bitcoin or something else. And that sort of accreted a whole lot of good and bad baggage over the years that the industry spent time unwinding. But these are different technologies. These are different use cases. And I think we're looking at a cross-chain environment for the foreseeable future. Their different protocols have their strengths and weaknesses. And our our goal is to be an omnivorous cross-chain platform that can consume a range of compliant technology providers and issuers who choose to use that technology. Although I agree with Manish over time, like any innovation that you look in financial services elsewhere, there's going to be convergence. And that convergence and consolidation is going to come faster than people think and is happening already. And a lot of it will have to do with people with much larger balance sheets looking to enter the space, thinking they're late, and making decisions, ultimately, decisions that are based on scale and efficiency. And that doesn't lend itself easily to a multiplicity of market participants. They're just a reality.

Speaker 3:

You said, you know, how to the average Joe, meme coins are potentially a joke. And but it brings back how tightly coupled blockchain technology and crypto is, right? In terms of Bitcoin, you know, it's it's a fly-by-night thing. It's you know, the it's the it's the crypto bros, then all of a sudden it's fine, and a reason comes in, and then you know, now you've got BlackRock and others coming out with ETFs, it's legit, and you got recoys, oh my God. You know, how number one, how do you decouple crypto and the technology? And number two, how do you build investor confidence without overhyping that technology?

Speaker:

Yeah, no, I think that's a great question. So I think to me, you know, if you look at the growth of securities industries, you go back in time, you go back hundreds of years. We started from pink slips, paper trading, uh, you know, so there weren't very many large companies back in the day. I mean, they were there were well-known companies, but majority of the the market traded on these papers. So I think if you think about memes on a blockchain, what is happening is folks are trying to create a parallel environment to what exists today, which is somewhat highly restrictive, right? So that allows people to experiment, it certainly causes pain. But the for traditional uh uh player in the market, it seems like a joke when in fact the joke's coming around and it's becoming a reality, which is you now have infrastructure hardened by these tokenized assets. So as I think about assets coming on chain, as we think about BlackRock is now obviously uh on chain, um what is starting to become clear is we have to bring thoughtful products, you know, from an alpha ledger standpoint, when we bring on an asset on-chain, the fundamental question that I have to ask is will I make an investment in that product with my own capital? If the answer is yes, we are going to bring it forward. Why we partnered with Simplify Asset Management, which is a $10 billion ETF shop, to help us build a T12 fund, which is a 12% income distribution fund. And without getting into the specifics of the fund and how it's kicking ass, it really is, uh which we expected, but it creates an ecosystem. So today you have BlackRock on one side offering a government money market fund, which is fundamental to treasury operations on public blockchain. On the far right, you have the crypto assets, which are offering 20, 25%, 30%. It certainly has its own volatility. And now you're starting to see private funds. Our fund fits squarely in between. You have Apollo that has come into play. So you're starting to see a change in the system, which sort of goes back to the first question, Jim. Really is the arc of regulated assets, right? So we are in phase three, which is you now have to start to bring on assets that the that the crypto investors that are holding on to USDC today as a means of transaction can start to make investments into. And that's the yield component that's coming onto chain from our standpoint, and really, you know, as we think of TZ partnership, um, that's a critical component for us to say, okay, these assets are not coming on chain. What does the secondary market look like? So we are moving now from ownership to trading, and then we're gonna go from trading to high velocity trading. That would be the next phase of that evolution in this current phase three of the arc that I talk about.

Speaker 3:

And what would you say, like looking at you know, we're we're coming to the end of the year, if I looked ahead to 2026, what milestones in terms of tokenization are best positioned to uh go mainstream?

Speaker:

Yeah, look, I mean, you know, private assets certainly have taken the lead. So I think that private credit certainly is a big spectrum that's gonna come on on board. The question really is how how much they yield and what's the frequency of trading. The one thing that's really true on a public blockchain and with the new generation of investors, they like they are fast traders, they effectively want liquidity in the market. So I think ETFs are the next step in the evolution of an asset class coming on to public blockchain because it does two things. It gives you the basket of assets that you probably perhaps want exposure to. Two, it trades on an exchange, therefore, there is daily liquidity on that. So you can come in and out, which is really important on public blockchain. And now you can start to think about tokenized equity, pure tokenized equity, that means issuance of assets on chain and then moving on to the ownership and trading of that. So I think 2026, you're gonna see a lot of ETFs come on board. Um, and you're gonna see some announcements coming from from our side as well.

Speaker 1:

Look, I think that the milestones really track back to the themes we started with. What are you gonna see more of? What do you want to see more of if if the the in the ecosystem is developing, it should be. More cross-asset convergence. So again, you know, tokenized assets to tokenize assets, right? At the end of the day, it's the interoperability that that that makes the the single-ledger smart contract-powered technology uh have a real impact. So cross-asset convergence. You're gonna see more of that. And I think that appeals to the generational shift with with digitally native, highly mobile, highly fluid uh investing and and and and shopping and and other consumer level interactions you're gonna see. That's number one. Number two, you're gonna see cross-border convergence. You're gonna see more uh best of breed infrastructure participants partnering to support the global footprint of these assets. Again, why else does tokenization matter? Because it can cross borders more easily. Frictions still exist, and so people partnering to create private rails that can that can address those frictions is important. Um three is that uh it's probably gonna play out longer, but remember the end game. The end game is single database, self-regulating, automated, and uh uh representations of value. So the less fewer intermediaries is is a canary in the coal mine on whether that technology is taking hold. Um whether that runs counter to interests of market incumbents, that's you know, that's that's gonna be a long story. But you've seen this play out with dematerialization, with electronic trading. That that that story has happened before. So that's another thing to watch out for. Um uh and and and I think lastly, this is away from the financial services industry, but use cases for blockchain technology and other industries, whether it's real estate titles, whether it's inventory and provenance management, or elsewhere. And I say that not because I'm sort of a how kind of a secular technology enthusiasts across enthusiasts across the board, but I which I am, but because again, it's the interoperability of this technology, whether with financial services, uh and the same technology underpinning real estate title transfers, for example, that makes all the sense in the world because it's gonna make escros and payment uh a lot a lot easier and faster and it's sitting on on the same interoperable rails. Um uh and so that's all these are data points to watch for.

Speaker 3:

So, unfortunately, we've made it to the last question of the podcast. We call it the trend drop. It's like a desert island question. So if you could only watch or track one trend in tokenization over the next few years, what would that be? I'll start with you, Nish.

Speaker:

Yeah, I think to me it it's the missing middle, which is which is effectively you know, the yield-generating products. Um, I think ETF trend is something that I would watch very closely. Um, I think that will sort of overshadow some of the stuff that's taking place on public blockchain. So to me, 2026 is really about tokenization of the ETF and then trading of the ETF 24-7.

Speaker 1:

No, thank you, Jim. And I think that's you know, that's that's a that's a great one. I'll tell you, consumers, users, whether whether retail or institutional, generally don't care about technology. Retail certainly doesn't. That's an old kind of precept goes back to Steve Jobson before that. So what I f the trend to watch for are products and use cases that deliver functions that people want, that make people's lives better, and make lives better in a total addressable market that provides scale and and velocity to this technology so that people are not investing in something because it's tokenized. That appeals to me, it appeals to Manish, it appeals to you. You know, we sort of live and breathe this. But they they interact with tokenized products because of XYZ benefits, whether it's cross-asset trading, whether it's cross-border functionality, whether it's 24-7 trading, as Manish said, and that's some you know that's the direction we're moving on our ATS. Um, whether uh uh whether it's it's intraday, intra-minute yield that's available on your assets as you move through them faster and cash doesn't sit around that long. Um, it's really to get to a level where people say, I want this because of this feature, not I want this because it's tokenized. Well, gentlemen, I want to thank you so much.

Speaker 3:

I want to congratulate you on your partnership. And this is definitely uh an exciting time and exciting space to watch. So thank you so much for your insights. Thank you for having us.

Speaker:

Thanks, Jeff.

Speaker 2:

Thanks for having us so much for listening to today's episode. And if you're enjoying trading tomorrow, navigating trends in capital markets, be sure to like, subscribe, and share. And we'll see you next time.