Speaker 1: And so you can take that token to posit it
Speaker 1: into our smart contract, and our smart contract basically locks it.
Speaker 1: So and it mints an S token, and that s
Speaker 1: biddle doesn't it's not a wrapper of the security. It
Speaker 1: doesn't provide the holder of the S token any rights
Speaker 1: or recourse.
Speaker 2: To the actual security.
Speaker 1: But what it does is it's sort of a technical
Speaker 1: guarantee that this security is unincomable.
Speaker 3: This content is brought to you by bitco, which is
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Speaker 3: Bitco works with many big companies and brands such as
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Speaker 3: includes lending, borrowing, tradings, taking DeFi access and more. If
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Speaker 3: dot com link in the description Welcome into the Thinking
Speaker 3: Crypto podcast. I'm your host, Tony Edward, and my guest
Speaker 3: today is Read Simon, who's the head of DeFi and
Speaker 3: Credit Solutions at Securities Read. Great to have you on MI.
Speaker 2: Likewise, thanks for having me Tony Read.
Speaker 3: As we were discussing before the recording, I follow securities
Speaker 3: for many years. I've interviewed Carlos Domingo, Jamie Finn, and
Speaker 3: I'm excited to be speaking with you today because there's
Speaker 3: been some new updates and some very big news around
Speaker 3: securities and we're going to get into all the details.
Speaker 3: But tell us a bit about yourself, where you're from
Speaker 3: and what's your professional background.
Speaker 2: Sure, so originally from New York.
Speaker 1: My background has been a weird amalgam of kind of finance,
Speaker 1: heck and crypto. I spent the last six years at
Speaker 1: Botching dot com building their credit business, build credit products
Speaker 1: at uber was a banker and a former life But
Speaker 1: now I kind of get to sit in between all
Speaker 1: of these exciting elements and bring in some of the
Speaker 1: tradify background and help try to figure out ways for
Speaker 1: securities that we issue, had securities to be able to
Speaker 1: interact with DeFi the way it operates today.
Speaker 3: And what was your first encounter with bitcoorn or crypto,
Speaker 3: what was your aha moment?
Speaker 1: Well, so they were different. So my first experience with
Speaker 1: bitcoin was in twenty eleven. I needed access to where
Speaker 1: I wanted access to a newsgroup and that kind of
Speaker 1: was what opened opened my eyes. And then I kind
Speaker 1: of forgot about it for about a year and was
Speaker 1: actually in Argentina and I guess this was during the
Speaker 1: last the last term of Kirchner, and you know, dollars
Speaker 1: were just you would change them, and I was curious,
Speaker 1: you know, why different notes were getting different rates and
Speaker 1: found out, you know, the five hundred euro note was
Speaker 1: the one that got the best exchange rate and was
Speaker 1: talking with people and they were like, oh, but you know,
Speaker 1: bitcoin actually gets an even higher rate. And then it
Speaker 1: was like everything clicked. And being on the ground I
Speaker 1: was living there doing a study abroad and just seeing
Speaker 1: you know, two forced evaluations and kind of just the
Speaker 1: everyone was changing, was changing paces for dollars. That like,
Speaker 1: that was really my AHA moment where I was like,
Speaker 1: oh my god, this actually exists in the real world
Speaker 1: and its solving like a real critical problem.
Speaker 3: M HM. And your background you mentioned in banking your
Speaker 3: d creditsueeze, and then you were Uber and now you're
Speaker 3: in crypto. Do you see crypto being that evolution of
Speaker 3: the banking finance industry? But in addition Uber, maybe it
Speaker 3: can be considered Web two and it eventually has to
Speaker 3: merge over to Web three.
Speaker 2: Absolutely.
Speaker 1: I mean, you know, I think back on a lot
Speaker 1: of the frustrations of kind of how you know, banking operates,
Speaker 1: even if it's just these legacy systems built on top
Speaker 1: of other legacy systems that don't communicate with each other,
Speaker 1: and the walled gardens and inefficiency and absolutely, you know,
Speaker 1: if you think about industry that haven't been revolutionized by technology,
Speaker 1: even sort of in a Web two, you know, function
Speaker 1: finances is certainly one of those. And yeah, I would say,
Speaker 1: you know, part of the reason I joined securitized is
Speaker 1: because you have so much excite mint and innovation and
Speaker 1: kind of the crypto world, but you still have the
Speaker 1: realities of like the deepest capital markets and the investor
Speaker 1: protection of kind of securities regulations. And we see these
Speaker 1: two worlds kind of merging together, and I see securitizing
Speaker 1: at exactly kind of the nexus of those two.
Speaker 3: Do you think we might see Uber and this is
Speaker 3: a hard question, you know, integrate blockchain. And it's funny
Speaker 3: that I remember years ago SEC chair Gary Genser, who's
Speaker 3: on his way out, he said, you could build Uber
Speaker 3: on top of algorand the Algoran blockchain, which is you know, fascinating,
Speaker 3: is out of security. Yeah, but it's funny because I
Speaker 3: think he has a point though, right, that you can
Speaker 3: have blockchain integrated into these Web two companies, helping him
Speaker 3: to move to Web three and then maybe better digital
Speaker 3: identity and verification and faster transaction speeds with stable coins
Speaker 3: and things like that.
Speaker 2: Yeah.
Speaker 1: So I mean, actually, while it was Uber, there was
Speaker 1: a crypto project that was being explored, but it was
Speaker 1: more so on on the payment side. And I think
Speaker 1: you kind of see some similar corollaries for like what
Speaker 1: PayPal is doing with p y u s D and
Speaker 1: kind of using that stable coins as a means for
Speaker 1: internal treasury efficiency, and so for at Uber, it was
Speaker 1: more so around like payment processing fees and being able
Speaker 1: to move money more quickly to drivers in kind of
Speaker 1: an internal system. So for sure, but I mean I guess,
Speaker 1: you know, could could Uber be run on a blockchain?
Speaker 1: I mean, I don't know about this scale and kind
Speaker 1: of the transaction speed element of Trips and all of
Speaker 1: the kind of other data that would need to be
Speaker 1: processed but os sensibly Yeah, but I guess it comes
Speaker 1: to that big question, which is like did everything need
Speaker 1: to be run on a blockchain or should everything be
Speaker 1: organize And I guess, you know, I would probably say no,
Speaker 1: but I think cases like identity and trips a lot
Speaker 1: of I think there's kind of sub elements of their
Speaker 1: business model that are certainly beneficial to have some type
Speaker 1: of distributed ledger support it.
Speaker 2: Yeah.
Speaker 3: Absolutely, And maybe it's a hybrid model that we might
Speaker 3: see some of these companies do where not everything in
Speaker 3: their business is running on the blockchain, but certain aspects
Speaker 3: like you mentioned, and maybe it's just simply using stable
Speaker 3: coins for faster transaction than settlement and on the back
Speaker 3: end or whatever it may be.
Speaker 2: But we'll have to.
Speaker 3: See how these things evolve. Absolutely, But for those who
Speaker 3: may not have heard of securities, can you give a
Speaker 3: quick overview what you guys do?
Speaker 2: Sure?
Speaker 1: So, securitizing is sort of one of the og tokenization platforms. Historically,
Speaker 1: we've had a very regulated footprint and we really haven't
Speaker 1: been a crypto company so we have a transfer agent,
Speaker 1: we have a broker dealer license, we have an ATS license,
Speaker 1: and we have an investment advisor. So kind of all
Speaker 1: of the core regulatory structures to enable the issueance, sale,
Speaker 1: and trading of digital securities, and that's really kind of
Speaker 1: formed the basis of the company. So our goal was
Speaker 1: to go out to top tier asset managers UH token
Speaker 1: IDEs their their private assets and then be able to
Speaker 1: distribute them on chain UH to investors in you know,
Speaker 1: smaller ticket sizes, and then be able to provide users,
Speaker 1: UH the opportunity to not just hold an asset in
Speaker 1: you know, their Morgan Stanley Bank account or you know
Speaker 1: another you know kind of internal ledger, but be able
Speaker 1: to bring those assets on chain and find ways to
Speaker 1: unlock all of the great composed billy and utility that
Speaker 1: you know, crypto and lawn chain activity entails.
Speaker 3: And of course the biggest news that I think most
Speaker 3: people are familiar with is you guys working with black
Speaker 3: Rock to launch Biddle, your tokenized fund, and that is
Speaker 3: growing significantly. I think early this year I read it
Speaker 3: went over five hundred million dollars. It might be higher now.
Speaker 2: Yeah.
Speaker 1: Yeah, So I mean, if if you would have said
Speaker 1: that I would have, you know, left a proper crypto
Speaker 1: crypto company to move to work on a money market fund.
Speaker 1: I would have told you that you were crazy, Like
Speaker 1: who would have who would have thought at that time
Speaker 1: that you know, these products would have such great upload uptake.
Speaker 1: But if you think about, like you know, people have
Speaker 1: repeated this, but like the best product market fit in
Speaker 1: crypto is stable coins, right, And if you think about,
Speaker 1: you know, the proportion of dollars in the US financial
Speaker 1: system versus kind of the treasuries that ultimately back those
Speaker 1: those dollars, it's.
Speaker 2: Like ten to tend to want treasuries to dollars.
Speaker 1: And then you look at our universe of on chain
Speaker 1: dynamics and it's a total opposite. I mean, I think
Speaker 1: we have maybe two billion of treasury products on chain
Speaker 1: and then something like one hundred and seventy billion of
Speaker 1: stable coins. So there really has been this great, great
Speaker 1: up uptake not only just amongst institutional investors, but also
Speaker 1: retail for a whole host of products where they are
Speaker 1: actually getting yield from from the treasuries instead of kind
Speaker 1: of the traditional stable coin providers keeping it for themselves.
Speaker 3: Now, let's talk about s tokens tell us what this
Speaker 3: is and what are the benefits and functionality of it.
Speaker 1: Yeah, so, you know, if you think about real world assets,
Speaker 1: you've kind of got two different categories of that, Right,
Speaker 1: You've got real world assets that are securities and are
Speaker 1: regulated and have kind of a regulatory obligation to fulfill,
Speaker 1: and then you've got kind of a whole host of
Speaker 1: some might be securities, some are definitely not securities. And
Speaker 1: so for us, all the assets that we issue, our
Speaker 1: securities and s tokens are really kind of the technical
Speaker 1: implementation to help break down some of the friction points
Speaker 1: that really make it difficult for securities to interact with
Speaker 1: DeFi the way DeFi operates today. So the securities that
Speaker 1: we issued their permission so they can only go to
Speaker 1: certain addresses that have been ky seed.
Speaker 2: But it's not just KYC it's they have.
Speaker 1: To maintain certain ownership records for how many holders exist
Speaker 1: in certain j stictions. But even more than that, you know,
Speaker 1: can of security sit in a smart contract? Can someone
Speaker 1: earn LP fees off of a security is at a
Speaker 1: broken dealer fee? So there's just really a whole host
Speaker 1: of kind of regulatory and legal friction points for security
Speaker 1: is on chain, and so our S tokens are a
Speaker 1: means to kind of responsibly and and compliantly be able
Speaker 1: to allow securities to interact with DeFi the way that
Speaker 1: you know, you or I would go onto whatever platform
Speaker 1: and do whatever we like.
Speaker 3: So just why I break it down for the audience.
Speaker 3: So let's say we tokenize or let's use the Biddle example. Right,
Speaker 3: how does are the token ized shares a Biddle S
Speaker 3: tokens or S tokens exist outside of the Biddle shares?
Speaker 2: How does that work?
Speaker 1: So, so think about it this way, Like, aside from
Speaker 1: some of the kyic elements like a security, the defining
Speaker 1: feature of a security is really that it has some
Speaker 1: stable value component, a variable return, and then maybe some
Speaker 1: forward stream of distributions. Right, But it's really kind of
Speaker 1: that variable return or the forward distributions that make that
Speaker 1: asset actually become a security. Right, So if you kind
Speaker 1: of think about the parts that make up a security,
Speaker 1: our S token vaults allow you to extract the stable
Speaker 1: value component and use that in a permissionless fashion to
Speaker 1: be able to be a collateral asset. So that's kind
Speaker 1: of like if you think about it from a high
Speaker 1: level view, but I think more kind of tactically as
Speaker 1: it relates to Biddle. Biddle itself is a stable nav fund,
Speaker 1: so the token always priced at one, and you receive
Speaker 1: your interest as distributions, right, And so you can take
Speaker 1: that token, deposit it into our smart contract, and our
Speaker 1: smart contract basically locks it so and it mints an
Speaker 1: S token, and that S Biddle doesn't it's not a
Speaker 1: wrapper of the security. It doesn't provide the holder of
Speaker 1: the S token any rights or recourse to the actual security.
Speaker 2: But what it does is it's sort of a.
Speaker 1: Technical guarantee that this security is unincomorable, so you can't
Speaker 1: borrow against it, someone else can't use it. And that
Speaker 1: token then provides the holder sort of like comfort that
Speaker 1: that dollar actually exists. And if I do liquidate the
Speaker 1: S token, I'm going to be able to receive I'm
Speaker 1: going to be made money good. And what's interesting about
Speaker 1: this is, again because Biddle is permissioned, not anyone can
Speaker 1: just buy it, right, not anyone can hold it even
Speaker 1: if even if someone or to default on it, because
Speaker 1: it's permissioned. But what we're able to do with our
Speaker 1: vault is essentially keep the securities flows between whitelisted users
Speaker 1: and then have stable coins or S tokens flow between
Speaker 1: kind of the non ky seed or non permissioned addresses,
Speaker 1: and part of that is is enabled through circles atomic
Speaker 1: liquidity contract where when the S token comes back to
Speaker 1: our contract, there's four internal transactions. It burns the S token,
Speaker 1: it unlocks the security, it redeems the security with a circle,
Speaker 1: and then we forward the USDC to the redepositing address.
Speaker 1: So it's really one of these kind of like technical
Speaker 1: and legal implementations that unlocks a lot of utility for
Speaker 1: holders a bit.
Speaker 3: And I know you guys are working with Elixir on this.
Speaker 3: I remember speaking to to I think it was sometime
Speaker 3: this year. Is it in regards to their setup? Which
Speaker 3: protocols can this be used on as far as defire protocols.
Speaker 1: So our focus at Securitize, like I said, our regulated
Speaker 1: footprint is really focus on issuing assets from the highest
Speaker 1: quality asset managers. And then if you think about our
Speaker 1: credit entities which issue as tokens, were kind of one
Speaker 1: step over right, So we kind of unlock that intermediate
Speaker 1: utility and then we look to partner with other providers
Speaker 1: who can deliver kind of the last mile of utility
Speaker 1: in DeFi. So with respect to Elixer, they read the code,
Speaker 1: they get comfortable with the code, and they look at
Speaker 1: black Rock or Hamilton Lane or some of the other
Speaker 1: products that will issue, and they say, okay, we think
Speaker 1: that this is money good to to be.
Speaker 2: Able to lend against.
Speaker 1: And that's really kind of the core unlock here is
Speaker 1: then users who have Biddle can mint s bittle, they
Speaker 1: can mint the us D and then d USD is
Speaker 1: a stable coin net Elixir issues and it's permissionless and
Speaker 1: all over. So it really allows users the ability to
Speaker 1: retain their interests on their security. But then you know,
Speaker 1: undertake activity that kind of fit in their risk spectrum.
Speaker 1: So some people may want to go quite out on
Speaker 1: the edge and do some some really esoteric things, or
Speaker 1: some of them they just you know, want to you know,
Speaker 1: lp into a stable coin pool that has no impermanent loss.
Speaker 1: It really is about allowing users to use base assets
Speaker 1: that are high quality and then kind of choose how
Speaker 1: they want to interact with with crypto to to fit
Speaker 1: their risk profile.
Speaker 3: Interesting. So and you mentioned this is only for accredited investors.
Speaker 3: Are you seeing like hedge funds, family offices and so
Speaker 3: forth using this type of service.
Speaker 1: Yeah, so it's interesting, right, like when when Biddle was launched,
Speaker 1: guilds were about five percent.
Speaker 2: We hadn't really seen this uplift in.
Speaker 1: Bitcoin prices, and so you know, interest rates on chain were,
Speaker 1: I don't know, around four or five six percent, and
Speaker 1: so it was a comparable a comparable yield, but still
Speaker 1: not super attractive given kind of all of the permissioning
Speaker 1: and kind of reduced utility of the security. And now
Speaker 1: you see yields you know, north of twenty six percent
Speaker 1: twenty seven percent on just just the basis trade, right,
Speaker 1: which is a delta neutral strategy that other than the
Speaker 1: platform or counterparty risk doesn't have have a price impact.
Speaker 1: And so now if you look at you know, being
Speaker 1: able to use Biddle as as kind of that base
Speaker 1: asset through through s BITTLE and d U s D,
Speaker 1: you're now able to access those yields while still doing
Speaker 1: so with your with your Biddle. So in some cases
Speaker 1: you could argue that it's actually because you can't really
Speaker 1: do the basis trade with a yield bearing asset at
Speaker 1: that scale. It's kind of a it really is kind
Speaker 1: of one of the best use cases for being able
Speaker 1: to capture basis right now.
Speaker 3: Mm hmm. And you know we're using BIDDLE as an example.
Speaker 3: Are there other uh tokenization of real assets examples that
Speaker 3: you can share?
Speaker 2: I is so in terms of like scope for.
Speaker 3: Instance, yeah, or if there are any other existing ones,
Speaker 3: or if there's others on the roadmap that you're planning
Speaker 3: to enable this war.
Speaker 2: Yeah.
Speaker 1: So our view is like, and I've said this a
Speaker 1: couple of times, it's like, we kind of deal in boring,
Speaker 1: boring products, but we want those boring products and we
Speaker 1: think they're interesting because they're super high quality, and we
Speaker 1: make them base assets so people can in crypto can
Speaker 1: then kind of build build on top of them and
Speaker 1: do more interesting things. So our focus has been on
Speaker 1: kind of private assets. You could take BIDDLE as an example,
Speaker 1: which is treasuries. There's basically no risk in the US
Speaker 1: government defaulting on these, and then you can kind of
Speaker 1: move down the risk spectrum. So we have Hamilton Lane
Speaker 1: their Senior Credit Fund, which is a credit fund that
Speaker 1: only invests in senior secured loans to corporations. There's there'll
Speaker 1: be another credit fund that's coming out from another top
Speaker 1: tier investment manager.
Speaker 2: We've got a KKR.
Speaker 1: Healthcare Fund, but really private assets by high quality issuers
Speaker 1: that you know, have been in the business for one
Speaker 1: hundred literally hundreds of years, manage trillions of dollars and
Speaker 1: have really kind of, you know, really have a focus
Speaker 1: on the expertise that Wall Street has in making investments
Speaker 1: and managing those investments and really being able to take
Speaker 1: the best elements of that world and kind of merge
Speaker 1: them with the best elements of being able to the
Speaker 1: user experience and the opportunities for transacting on chain.
Speaker 3: So on that note, what do you think might be
Speaker 3: the phase two of RBA tokenisation? Given at we got
Speaker 3: money market funds and things like that, what do you
Speaker 3: think might be the next uh of a phrasing this right,
Speaker 3: the next product that that is tokenized so to speak.
Speaker 1: So I don't know, I don't know what the next
Speaker 1: product to be tokenized will be, but I think kind
Speaker 1: of the phase two that I'm excited for is more
Speaker 1: so around the way that.
Speaker 2: That DeFi.
Speaker 1: Looks at real world assets and so so what I
Speaker 1: mean by this is all you know, all of DeFi,
Speaker 1: you know, whether it's AVE or you know, pick your
Speaker 1: your CDP platform. Everyone has been focused on kind of
Speaker 1: point in time liquidity and liquidity is something that you know,
Speaker 1: Bitcoin adds arguably some of the best liquidity across you know,
Speaker 1: really any asset, maybe aside from from treasuries, but at
Speaker 1: least that trades. And so it's been this point in time.
Speaker 1: So like the moment bitcoin drops below X, you know,
Speaker 1: there's a four starbatrage, someone comes in and liquidates. But
Speaker 1: if you look at some of these private assets that
Speaker 1: we've mentioned, you know, these the volatility of their underlying
Speaker 1: investments is really quite low, and even so in the
Speaker 1: case that most of them only get marked once a
Speaker 1: month because there's not that much fluctuation in between in
Speaker 1: between the month. So I think as we get some
Speaker 1: more of these assets that have you know, composibility and
Speaker 1: interoperability with DeFi, I think we're going to start to
Speaker 1: see DeFi protocols that take a different view on liquidity,
Speaker 1: which is okay, if this fund has you know, it's
Speaker 1: issued by a manager who the firm has been around
Speaker 1: for one hundred years. They manage about a trillion dollars.
Speaker 1: The thing returns maybe ten percent a year. These type
Speaker 1: of funds don't fall fifty percent overnight. And so thinking
Speaker 1: about what's the liquidity of a fund like that? And
Speaker 1: maybe it's only fifty cents, but looking at it kind
Speaker 1: of a more expanded view of an asset for its
Speaker 1: quality rather than just kind of the point in time. Okay,
Speaker 1: you're done, let's let's move on.
Speaker 3: Mm hmm. Do you think it makes sense that eventually
Speaker 3: ETFs might be tokenized like uh, bigcoin ETFs or a
Speaker 3: basket ETF with crypto ascids? If you know, Big One
Speaker 3: is going to become this strategic reserve asset and so
Speaker 3: forth used by different governments.
Speaker 1: I mean, so, so will ETFs be will ETFs be tokenized?
Speaker 2: Is that? Is that what you're saying? Yeah?
Speaker 3: And and maybe you know Big One obviously already on chain,
Speaker 3: easily accessible and so forth. But do you think some
Speaker 3: of the institutional investors or credit investors may want to
Speaker 3: get access to not bitcoin directly, but through an ETF
Speaker 3: maybe black Rock Blackrocks version I bit? Does that make
Speaker 3: sense that I don't? I'm asking as like a.
Speaker 2: Yeah, yeah, yeah, so I think it's interesting. I mean,
Speaker 2: I I hold I a bit, I hold some you know, eth.
Speaker 1: I think it really depends on like the investor, right,
Speaker 1: I think part of the reason that crypto has had
Speaker 1: such great success is because the user experience is a
Speaker 1: better one. And so to the question around ETFs, like,
Speaker 1: I would one hundred percent love to hold in an
Speaker 1: actual S and P five hundred tokenized form because of
Speaker 1: all of the composibility and the ability to to lever
Speaker 1: it and move it and really managed assets in one
Speaker 1: place instead of needing to move it on chain or
Speaker 1: off chain, right, And so I think there's like this
Speaker 1: push pull of crypto people would like to get some
Speaker 1: more legitimate cash flow business assets on chain, uh, to
Speaker 1: be able to manage airport folio that way. But then
Speaker 1: you've also seen kind of the inverse, right, which is
Speaker 1: rias and companies who have boards feel more comfortable owning securities.
Speaker 1: And if you can do that with on chain assets
Speaker 1: existing in a security form, I mean case in point
Speaker 1: we've seen with the great success of the ETF set,
Speaker 1: like there is demand. So I think, you know, while
Speaker 1: as these two worlds converge together, it's not really because
Speaker 1: it's only one way. I think there is actually opportunity
Speaker 1: for both off chain and on chain to have kind
Speaker 1: of opposite interest in moving the other the other way.
Speaker 3: Now, you mentioned that this product is permission, how are
Speaker 3: you vetting the different participants and is it a global
Speaker 3: market or is it just US based.
Speaker 1: So Biddle is a security, so it's issued out of
Speaker 1: a BBI fund, so it is available globally to qualified purchasers,
Speaker 1: which is a pretty high barrier, which is basically five
Speaker 1: million of investible liquid assets. So it is purely an
Speaker 1: institutional product. But again it's really focused on being a
Speaker 1: base asset. So if you look in and see some
Speaker 1: of the ways that it's being used today, it's really
Speaker 1: to form the backing of Dow's. It's being used to
Speaker 1: form some of the backing for other stable coins or
Speaker 1: stable coin wrappers, or we've seen option strategies kind of
Speaker 1: collateralized with Biddle. We have some interesting use cases coming
Speaker 1: up where market makers are are willing to basically allow
Speaker 1: Biddle to be collateral for open trading positions. So if
Speaker 1: you look at like, you know, basis, we love to
Speaker 1: talk about when it's uh when the market is pumping
Speaker 1: like it is, but you know, right now, if you
Speaker 1: were to put on basis, you'd have to do it
Speaker 1: with a stable point or or cash, right so nonel
Speaker 1: bearing instrument. But we're seeing trading firms that are saying, actually,
Speaker 1: you know what, like I have this total return swap
Speaker 1: on like, why don't I just collateralize it with biddle
Speaker 1: And now I've got you know, the incremental yield on
Speaker 1: top of that. So I think, you know, with with
Speaker 1: new things in a world that's so used to just
Speaker 1: put it out there, let it go whatever, and see
Speaker 1: see what happens. Things will will move slowly, but we're
Speaker 1: seeing a lot more use cases start to get built
Speaker 1: out as exchanges are more willing to accept it as collateral. Uh,
Speaker 1: market makers are starting to you know, quote other coins
Speaker 1: against it, and we'll see you know, greater adoption and ultimately, hopefully,
Speaker 1: you know, through through our s tokens, we'll get the
Speaker 1: DeFi world a bit more connected and people will realize,
Speaker 1: don't do things with stable Quinn's, you can do them
Speaker 1: with with biddle.
Speaker 3: Mm hmmm. So I know the question is going to
Speaker 3: come up because we've seen exploits and hacks and DeFi
Speaker 3: and so forth, and I know version one point zero
Speaker 3: of anything is not perfect and is need for further iterations.
Speaker 3: So talk to talk to us a bit about security
Speaker 3: and how obviously you mentioned its permission. So it's not
Speaker 3: like open to everybody. But at the same time, how
Speaker 3: are you guys approaching security?
Speaker 1: Yeah, so a couple couple comments there. One I think is,
Speaker 1: you know a lot of people, especially from the crypt
Speaker 1: native side, like to kind of riff on you know,
Speaker 1: securities and the friction that that they provide. But there
Speaker 1: is you know, one interesting element of uh of a
Speaker 1: security is that if it's stolen, whether it's a digital
Speaker 1: security or a security, it actually can be reissued. So
Speaker 1: assets like you know, certainly bitcoin and ethereum, if it's
Speaker 1: stolen in a hack, it's gone right. If Biddle is
Speaker 1: hacked or or stolen, we actually have the legal ability
Speaker 1: through our transfer agent if there's demonstrable evidence that that's occurred,
Speaker 1: to be able to burn that token and reissue it. So,
Speaker 1: you know, in some cases you can kind of argue
Speaker 1: that unless you're a very large player in in the
Speaker 1: tether or a circle world, you know, convincing them to
Speaker 1: burn and reissue stable coins is often a big, a big,
Speaker 1: a tall order. That is kind of a built in
Speaker 1: feature for for all of the securities that that reissue.
Speaker 3: So I know Biddle initially was launched on ethereum, and
Speaker 3: I think there's expansion to other blockchains. Uh, with regards
Speaker 3: to the S tokens and so forth, is it all
Speaker 3: primarily based on etherorem No.
Speaker 1: Actually so, I think we've signed seven seven integration agreement siety.
Speaker 1: I don't know which ones are public, so I'll I'll
Speaker 1: just point you to probably DeFi Lama to check that out.
Speaker 1: But yeah, so this is again we we are chained agnostic,
Speaker 1: we are asset manager agnostic. We view ourselves more as
Speaker 1: kind of an infrastructure provider, both on the security side
Speaker 1: and also on kind of this S token concept. And
Speaker 1: so yes, those those vaults are live today on Polygon,
Speaker 1: Avax and Ethereum, and they'll follow for the rest of
Speaker 1: the assets that are issued or will be issued in
Speaker 1: the future, and we'll be available on all of our
Speaker 1: partners chains.
Speaker 3: Question about I think you may have answered this earlier
Speaker 3: about the burning future. So let's say a blockchain for
Speaker 3: whatever reason, you know, not everything is going to be
Speaker 3: a winner and not there's not going to be a
Speaker 3: million blockchains out there. But let's say some of them
Speaker 3: that aren't being issued on they start to fail, and
Speaker 3: those blockchains and those projects start to die. What happens
Speaker 3: to the respective tokenized shares or tokens that are on
Speaker 3: those respective blockchains.
Speaker 2: So there's a process.
Speaker 1: So you know, I don't know how many chains there
Speaker 1: are out there, but there's seven that were integrated with
Speaker 1: and that is a very very small, very small minority
Speaker 1: of chains. So there is a lot of diligence that
Speaker 1: goes into the sustainability, the security, and kind of the
Speaker 1: growth potential for the partners that we have integrated with.
Speaker 1: And the issuer sometimes also has the ability to say
Speaker 1: we don't want to go onto this chain, or you know,
Speaker 1: we only want to be on this chain, right, So
Speaker 1: there's a lot of diligence that's on our part as
Speaker 1: transfer agent and broken dealer, but then also the issuer
Speaker 1: as well. So but it is important to remember that
Speaker 1: these are securities, whether they're natively issued like Biddle is,
Speaker 1: meaning that there is no other way to own the
Speaker 1: Biddle fund than the token or scope for instance, which
Speaker 1: exists in a master fund but has I think a
Speaker 1: two hundred thousand dollars minimum investment. Regardless of the form,
Speaker 1: it's still into security. So if the blockchain were to fail,
Speaker 1: there's still a legal obligation that you are the owner
Speaker 1: of that security regardless of whether the blockchain is operational
Speaker 1: or not, and you have a legal entitlement to your shares,
Speaker 1: and so there is not a risk from that perspective
Speaker 1: in terms of we woke up tomorrow and XIV chain
Speaker 1: just wasn't producing blocks. It doesn't mean that you're not
Speaker 1: getting your security or it's lost. They're you know are
Speaker 1: We call it the DS protocol is basically our infrastructure
Speaker 1: layer that indexes on chain activity and then converts it
Speaker 1: back into the binary data that were required for regulatory purposes.
Speaker 1: And so it's really that regulatory master security file that's
Speaker 1: the ultimate record for what's happening.
Speaker 3: Back in twenty twenty three, Larry Fink says has said
Speaker 3: the future of finance is tokenization, or if you say, well,
Speaker 3: he said tokenization is the future of finance. Get the
Speaker 3: quote right. So with tokenized assets in Wall Street and
Speaker 3: Tradify being able to access this and participate and build
Speaker 3: on these different blockchains, you guys are helping to facilitate this.
Speaker 3: And then you add the DeFi component. Do you see
Speaker 3: the future of the markets running this way? Truly? Global
Speaker 3: market twenty four to seven trading, no opening or closing
Speaker 3: bill no more holidays, but you got securities and different
Speaker 3: maybe commodities, and these things tokenize and folks can easily
Speaker 3: do any type of transaction via defile.
Speaker 2: Yeah.
Speaker 1: I mean, even if you look if you look at
Speaker 1: kind of the evolution of you know, trading products from
Speaker 1: you know, how how did you manage your portfolio of
Speaker 1: needing to buy individual stocks and then kind of readjust
Speaker 1: those and then you look to like the efficiency of
Speaker 1: that mutual funds brought right, and then ETFs and the
Speaker 1: huge expansion again because people enjoy the experience, it's easier,
Speaker 1: there's some tax advantages, but we still have this core
Speaker 1: friction even in trad five between the rails that move
Speaker 1: dollars and securities, right, or commodities or whatever else, right,
Speaker 1: I mean, And I just tried to move some some
Speaker 1: equities from one of my brokerages account to another one
Speaker 1: and it took a week. I had three phone calls,
Speaker 1: Like you would think these things would be easy, and
Speaker 1: that's just moving a security, right. But ultimately, what the
Speaker 1: blockchain provides, and I think it is a natural evolution
Speaker 1: that Larry does talk about, is being able to have
Speaker 1: cash and assets on the same ledger, and that's a
Speaker 1: that's a huge unlock.
Speaker 2: It's probably it. You know.
Speaker 1: My my cynical view would be it is certainly not
Speaker 1: good news to banks and intermediaries who make a lot
Speaker 1: of money on delaying your wires and settlement of funds.
Speaker 2: But I very much do. I very much do.
Speaker 1: Firstly because it is a better user experience and it's
Speaker 1: less error prone, and those two things are quite important
Speaker 1: when you look at kind of the scale and and
Speaker 1: real dollars associated with those markets. And I think fortunately,
Speaker 1: you know, the asset managers like like Blackrock, have had
Speaker 1: a lot more flexibility and kind of the the way
Speaker 1: they're regulated versus banks, at least in this you know,
Speaker 1: last administration. So I think that's been great news. And
Speaker 1: and you know, hopefully some of the other guidance from
Speaker 1: MOCC and and some of the other regulatory agencies will
Speaker 1: start to open this up where banks will also start
Speaker 1: to participate and not just have their you know, internal
Speaker 1: ledger operate on the blockchain, but be able to use
Speaker 1: distributed versions.
Speaker 3: Yeah, that makes sense. And you know, as you're saying that,
Speaker 3: I was thinking about the question that came to mind
Speaker 3: was why is black Rock the leader in interkenization right now?
Speaker 3: As far as TRADIFI and ETFs, and I realized that
Speaker 3: the you know, the the the question or answer was, well,
Speaker 3: they're not a bank, They're just an ascid manager. Because
Speaker 3: I was wondering, why is JP Morgan or Goldman Sachs
Speaker 3: not the leaders here? And then and then you know,
Speaker 3: later on we heard about SAB one two one. These
Speaker 3: banks actually can custody crypto and touch it directly, even
Speaker 3: though they may have some trading desks and do some
Speaker 3: different things with futures and so forth. So it's interesting.
Speaker 3: So you think that, you know, as we head into
Speaker 3: the new year and regulations come in, I get more clarity,
Speaker 3: a more favorable environment, these banks will jump in.
Speaker 4: Yeah.
Speaker 1: I mean even you know, back in my blockchain days
Speaker 1: when we would talk uh talk with banks, and you know,
Speaker 1: silver Beate had a facility where you silver clatalize you
Speaker 1: could borrow against bitcoin, and there were other banks as
Speaker 1: well that kind of ran that through through their their
Speaker 1: commodity commodity division and had a side pool. But ultimately,
Speaker 1: the I think the big unlock or rather blocker, has
Speaker 1: been the occ guidance on banks doing anything with public blockchains,
Speaker 1: and that has kind of forced them into kind of
Speaker 1: the the Onyx model of Okay, this is the private
Speaker 1: blockchain and we're clearing our own transactions. I don't you know,
Speaker 1: I don't think there's a ton of utility for you
Speaker 1: know why I have a blockchain If it's essentially your excel,
Speaker 1: you know, it's it's the same, it's it's the same
Speaker 1: kind of kind of dynamic there, especially as it relates
Speaker 1: to interoperability and and for me, that's kind of the
Speaker 1: the really exciting thing for me about about crypto is
Speaker 1: the ability for someone to spin up a project tomorrow
Speaker 1: and iterate at scale and you know, see see where
Speaker 1: things go versus kind of the legacy traditional model, which
Speaker 1: is all right, you have to go raise a bunch
Speaker 1: of capital, convince a bunch of people, and the scale
Speaker 1: of iteration, or rather the frequency of iteration can really
Speaker 1: only be achieved once you have scalem Yeah.
Speaker 2: Great point.
Speaker 3: So what's on your romat for I know twenty twenty
Speaker 3: four is wrapping up, but anything you want to share
Speaker 3: for twenty twenty five.
Speaker 1: Sure, So you know, Phase one of s token is underway.
Speaker 1: We launched about three weeks ago. We have started to
Speaker 1: crawl before we walk and certainly before before we run,
Speaker 1: and we'll start to open up a bunch more features
Speaker 1: both on the assets that are supported the platforms where
Speaker 1: you can use S tokens as well as the assets
Speaker 1: that you can mintion with S token. So I think
Speaker 1: the first next step for us as it relates to
Speaker 1: two S tokens will be self mint where any holder
Speaker 1: of bid ole can mint their own S tokens. And
Speaker 1: as we add kind of more venues that will accept
Speaker 1: them for different use cases, whether it's collateral as as
Speaker 1: an asset on a on a dex, whether it's a
Speaker 1: c DP platform to to borrow you know, whatever other
Speaker 1: asset you you would like, we'll start to add more
Speaker 1: functionality there. And that's you know, that's that's quite a
Speaker 1: big lift for us, at least for for the first
Speaker 1: kind of expansion phase. And then the the phase that
Speaker 1: will follow from that will will be support for.
Speaker 2: Variable MAB assets.
Speaker 1: So if you think about the biddle, it's it's stable value.
Speaker 1: So it's one dollar, right, And when we talked to
Speaker 1: kind of the beginning of the show, we said, there's
Speaker 1: a stable value component and for a stable value security,
Speaker 1: that's one right. And if you look at like a scope,
Speaker 1: which is variable yield. The price appreciates or you know,
Speaker 1: declines based on the performance of the underlying investments. So
Speaker 1: for that the vaults need to be shifted a little
Speaker 1: bit to accommodate that. But that I think is a
Speaker 1: really exciting unlock because I think it has a lot
Speaker 1: more utility for leverage and composibility in a way that
Speaker 1: even in traditional markets, if I owned ten million dollars
Speaker 1: of I don't know, pick XYB credit fund and or
Speaker 1: maybe not credit fund. Let's let's say something just a
Speaker 1: little less liquid, like a private equity fund, right and
Speaker 1: even if I'm in maybe year four of that, there's
Speaker 1: not a bank that's going to go and do the
Speaker 1: diligence to underwrite and advance against a small position like that.
Speaker 1: But one of the great things about DeFi or kind
Speaker 1: of crypto writ large is it's not that asked to
Speaker 1: lend against that private equity I liquid private equity fund.
Speaker 1: It's not a one off, right like, because it's atomized
Speaker 1: and there's a bunch of people with this, you know,
Speaker 1: with with these stairs, you can really aggregate it into
Speaker 1: an underwriteable asset that then becomes interesting rather than kind
Speaker 1: of like needing to go find who owns it and
Speaker 1: see if there's a consortium to put together. So those
Speaker 1: are those are the two things that I'm most excited
Speaker 1: for is one is self mint and two is support
Speaker 1: for variable mav securneys.
Speaker 3: That's awesome, very exciting stuff. I got some wrap up
Speaker 3: questions here for you. Sure, first, if you could create
Speaker 3: your own metaverse, what would theme be.
Speaker 2: Ooh, my own metaverse metaverse?
Speaker 3: Or would you put your Oculus or Apple pro buses
Speaker 3: on and go to.
Speaker 1: So I I will admit that I broke down and
Speaker 1: I did buy a Vision pro and and I will say,
Speaker 1: like it is, it's not an ad for Apple, but
Speaker 1: the quality is quite fantastic. But I think one of
Speaker 1: the cool things that I enjoy I enjoy skiing. So
Speaker 1: probably be something around like really difficult to access ski
Speaker 1: ski ranges.
Speaker 3: Mm hmm.
Speaker 4: Rapid fire questions. Favorite food, Favorite food, I'm gonna have
Speaker 4: to go with steak. There's there actually no, it's eggs.
Speaker 4: It's one hundred percent eggs.
Speaker 1: There's so many ways to make them, it's so easy,
Speaker 1: super cheap eggs.
Speaker 2: Favorite for done well.
Speaker 3: You staking eggs, right, you could have the best.
Speaker 4: Yeah, there you go, favorite musician or band, Rufus, favorite.
Speaker 1: Movie, favorite Mike Cousin, Vinny favorite book, favorite book. It's
Speaker 1: it's gonna be boring, but it's true. The Ascent of
Speaker 1: the Ascent of money, Nile ferguson m and.
Speaker 3: I think you may have answered this, but when you're
Speaker 3: not working in securities, what are you doing for fun?
Speaker 2: For fun? I live in Miami, so I love, love,
Speaker 2: love the beach, I love skiing, and I would say
Speaker 2: I like Barry's Berrie's boot Camp.
Speaker 3: Nice read, absolute pleasure, exciting, excited for the future, outdates
Speaker 3: around s tokens and maybe I'll have to have you
Speaker 3: back on in the new year. As you know, there's
Speaker 3: further iterations of this project, but thank you so much
Speaker 3: for joining me.
Speaker 1: Absolutely thanks Tony, and we'll check back in and appreciate
Speaker 1: the imitation.
Speaker 2: Discstan descscscopatest