Speaker 1: Hey, folks, we're recording at Chainling's smart Con event. And
Speaker 1: joining me today is Nathan Allman, who's the founder and
Speaker 1: CEO at Ondo Finance. Nathan, great to have you. Yeah,
Speaker 1: thanks for having me, Nathan. Ondo's been in the news
Speaker 1: a lot. I've been following Ondo closely, getting a lot
Speaker 1: of adoption, and I would love to hear about the
Speaker 1: founder's story, so to speak. What led to you creating Ondo?
Speaker 2: Sure?
Speaker 3: So, I founded Onto about five years ago. I previously
Speaker 3: worked in traditional finance, So originally I was in private credit,
Speaker 3: and then I was at Goldman on the digital assets
Speaker 3: team immediately prior to founding Ondo. When I was there,
Speaker 3: we looked at a whole bunch of blockchain based platforms
Speaker 3: that tried to you know, drive post trade efficiencies to
Speaker 3: different asset classes. And you know, that provided me an
Speaker 3: opportunity to go pretty deep into the weeds of understanding
Speaker 3: why things are the way they are are in trad FI.
Speaker 3: And you know, very much became apparent to me that
Speaker 3: that there's been a path dependent evolution that has resulted
Speaker 3: in a bit of a Frankenstein, uh. That is the
Speaker 3: you know, current global clearing and settlement system for you know,
Speaker 3: all sorts of different assets, and you know, I think
Speaker 3: you know, in parallel, I was very active in DeFi
Speaker 3: in twenty twenty, twenty twenty one and saw that DeFi
Speaker 3: presented a you know, radically better infrastructure for you know,
Speaker 3: certain financial services you know that interoperate really naturally with
Speaker 3: one another.
Speaker 2: You know, we talk about this idea of like money.
Speaker 3: Legos and composability, and you know, DeFi is twenty four
Speaker 3: to seven and transparent and always on. But you know,
Speaker 3: at the time DeFi was being applied purely to largely
Speaker 3: like DeFi infrastructure, tokens and other cryptonative assets, right, it
Speaker 3: was very you know, very self reflexive, and so I
Speaker 3: became very excited about the idea of, like, how do
Speaker 3: we repurpose you know, what we have in DeFi and
Speaker 3: start to apply it to you know, to actually drive
Speaker 3: greater accessibility and transparency and you know, the real financial system,
Speaker 3: you know, merging DeFi and trad FI if you will, sure,
Speaker 3: And so you know, I left five years ago to
Speaker 3: to do that. You know, our mission at ONDO is
Speaker 3: to expand accessibility for financial products and services. You know,
Speaker 3: we token aze assets. I think that's a necessary part
Speaker 3: of you know, making DeFi compatible attritional assets. You know,
Speaker 3: run the assets on chain, but we also build DeFi
Speaker 3: protocols and define infrastructure to make those security tokens you know,
Speaker 3: more usable, you know, to to given greater utility, I
Speaker 3: should say absolutely.
Speaker 1: And some of the adoption I've seen for Onto by
Speaker 1: folks by such as MasterCard, JP Morgan. So are these
Speaker 1: institutions are they now past the taboo phase or to
Speaker 1: stigma of you know, cryptos scam and then now looking
Speaker 1: to actually build on blockchain rails.
Speaker 2: Yeah?
Speaker 3: Absolutely, yes, And that feels really good because that's a
Speaker 3: very recent change. Sure, you know, the I would say
Speaker 3: there's a big breakthrough in twenty twenty three, twenty twenty
Speaker 3: four after black Rock got into the space with their
Speaker 3: token is Treasuries Fund, which came shortly after ours. And
Speaker 3: then that led to Franklin Templeton and Fidelity and Wisdom
Speaker 3: Tree and Wellington and you know a bunch of asset
Speaker 3: managers seeing the opportunity of tokenization as initially you know,
Speaker 3: a new distribution pathway for their.
Speaker 2: Products, right.
Speaker 3: And then you know, more recently we're seeing banks and
Speaker 3: broker dealers and you know, and and a lot of
Speaker 3: that is post. You know, the new SEC coming in
Speaker 3: and right, you know, opening the doors to particularly banks
Speaker 3: doing you know, interesting work on public blockchain. So you know,
Speaker 3: now we're really seeing the full spectrum of institutions active.
Speaker 2: Engaging on chain, you know, in various ways.
Speaker 1: So, Nathan, I think you're a great person that answered
Speaker 1: this question for those who are still trying to grasp
Speaker 1: what is tokenization and what are the benefits answering to
Speaker 1: So what question why do we need to tokenize? Ask?
Speaker 3: Yeah, I mean the answer varies quite a lot based
Speaker 3: on the target audience. So you know, I'll segment into
Speaker 3: two main buckets. Sure, and that's those in emerging markets
Speaker 3: who might not have great access to financial products and
Speaker 3: services today. So for them, tokenization is just a very
Speaker 3: simple access play, so much in the way that stable
Speaker 3: coins have driven access to the dollar in Latin America
Speaker 3: and Turkey and Southeast Asia and so on. Sure are
Speaker 3: tokenized stocks in our on a global markets platform which
Speaker 3: launched just six weeks ago. You know, they're they're driving
Speaker 3: accessibility to stock spawns and ETF's high quality US financial
Speaker 3: assets to you know, those outside the US in emerging markets. Sure,
Speaker 3: And you know that is a very cryptonative value prop.
Speaker 3: I mean, that is one that's building on the fact
Speaker 3: that you know, Bitcoin was this innovation that gave us
Speaker 3: this ability to have digitally scarce value that could be
Speaker 3: you know, transferred peer to peer, uh, you know, twenty
Speaker 3: four to seven without using an intermediary.
Speaker 2: So that's one that we're very very excited about, right.
Speaker 2: It was very mission.
Speaker 3: Aligned for us, and you know, very core to the
Speaker 3: ethos of the space.
Speaker 2: You know.
Speaker 3: The other is around the use of token is securities
Speaker 3: in DeFi. Right, So as we were talking about earlier,
Speaker 3: you know, DeFi has certain advantages over traditional finance from
Speaker 3: an infrastructure perspective.
Speaker 2: You know, a big one is.
Speaker 3: The unbundling of financial services. So today, right, you know,
Speaker 3: you hold your securities at a particular broker dealer and
Speaker 3: then you have to get trade, execution and lending and
Speaker 3: custody you know, and advisory and all sorts of services
Speaker 3: from that broker dealer. And if you want to, you know,
Speaker 3: if you want to trade elsewhere, you know, or get
Speaker 3: a margin loan from someone else, you to move all
Speaker 3: your securities to another BD and that takes like days
Speaker 3: or weeks and as a result, you know, each of
Speaker 3: these beds, Each of these platforms is able to you know,
Speaker 3: charge a lot of hidden fees if you will. Like
Speaker 3: margin rates are like pretty crazy for retail in the US, right,
Speaker 3: and there just isn't as much competition as there would
Speaker 3: be in a more like open composable environment like what
Speaker 3: we see in DeFi. So we're only at the early
Speaker 3: innings of doing this. But once we have DeFi with
Speaker 3: a bunch of token is stocks in it, right, I
Speaker 3: think that's going to open.
Speaker 2: The door to.
Speaker 3: Like cheaper, better financial services for even folks in the US.
Speaker 1: And in addition to what you mentioned with DeFi and
Speaker 1: accessibility is it, also we're kind of exporting our capital markets.
Speaker 1: If you the person in Latin America or in some
Speaker 1: country in Africa who couldn't access these assets now can
Speaker 1: But it also brings in liquidity to the issuers.
Speaker 3: Oh yeah, I mean hugely a creative to issuers. I mean,
Speaker 3: you know, asset managers are a subset of that, right
Speaker 3: and seeing the value prop of selling their funds to
Speaker 3: more folks, but corporates as well. So for now we're
Speaker 3: tokenizing stocks of corporations that already trade on NASADAC and
Speaker 3: New York Stock exchange. But sure, certainly tomorrow, you know,
Speaker 3: we could be tokenizing stocks for companies that might not
Speaker 3: actually need to or want to trade on you know,
Speaker 3: those those big exchanges.
Speaker 1: Right, And we also do you do you see an
Speaker 1: opportunity for private equity, Like if I'm an entrepreneur and
Speaker 1: I want to raise capital and I have the world,
Speaker 1: I have more opportunities out outside of just the United
Speaker 1: States to have participants. And it doesn't necessarily have to
Speaker 1: be a fund. It could be an individual that I
Speaker 1: can access some more liquidity and more people can participate.
Speaker 2: Yeah.
Speaker 3: Absolutely, it's not our current focus. You know, we have
Speaker 3: to sequence these things, and I just don't think it's like, right,
Speaker 3: quite the lowest hanging fruit. Yet there are there are
Speaker 3: other challenges that tokenization can't solve that need to be
Speaker 3: worked through as well, like reducing info asymmetry and like
Speaker 3: you know, creating better price discovery mechanisms for a lot
Speaker 3: of these assets. Sure, but those are being solved in parallel.
Speaker 3: And you know, you look at certain asset managers. You
Speaker 3: look at Apollo for instance, They're doing a lot of
Speaker 3: work to make private assets more liquid and more retail
Speaker 3: accessible through they have certain like ETFs with private credit
Speaker 3: in them. So there's there's definitely a trend of private
Speaker 3: assets becoming more retail accessible, and you know, tokenization is
Speaker 3: an accelerant of that trend.
Speaker 1: And then do you eventually see assets like real estate
Speaker 1: being tokenized and precious Well, there's some precious metals being
Speaker 1: tokenized right now, some folks that put gold on chain
Speaker 1: and so forth, but real estate being the largest asset
Speaker 1: class that going on chain. And maybe folks tokenize some
Speaker 1: building here in the United in the Manhattan, I should say,
Speaker 1: and that's appealing to a lot of folks because hey,
Speaker 1: I can get a fraction of this property in the
Speaker 1: middle of Manhattan. That's probably a good investment, right, just
Speaker 1: thinking long term.
Speaker 2: I don't know, it's not my space.
Speaker 3: I would say that real estate falls in the camp
Speaker 3: of areas where there's a lot of problems that tokenization
Speaker 3: can't solve. Like it might be part of the solution,
Speaker 3: but you know, the status quo of I guess there's
Speaker 3: a couple of camps, right, there's the folks that are
Speaker 3: trying to like, you know, put title on chain for
Speaker 3: like sort of I don't know, lower value, you know,
Speaker 3: single family or you know, type real estate, right, and
Speaker 3: then you know they have to contend with like all
Speaker 3: sorts of very antiquated you know, laws and rags and
Speaker 3: processes for that.
Speaker 2: So yeah, I don't know how that's going.
Speaker 3: And then to your point, there's other folks that are
Speaker 3: trying to take some like marquee property, like you know,
Speaker 3: the the Burj Khalifah. Let's like, you know, tokenize that
Speaker 3: and make it more accessible. I feel like that's a
Speaker 3: little more tangible, Like sure we would know how to
Speaker 3: do that for instance, like that actually would it be
Speaker 3: very very hard to do, So I don't know. I
Speaker 3: think that's that's more feasible. I don't know what the
Speaker 3: demand is for that right now.
Speaker 1: So I think your point you brought up there demand
Speaker 1: is important because if you don't have a market or
Speaker 1: liquidity for it, then like dead right, who's going to
Speaker 1: want to get participate? But it just depends on the
Speaker 1: asset or the building or whatever it is. If it
Speaker 1: has mass penetration, I guess and mind share whatever you
Speaker 1: call it, and people know, oh the Empire state building,
Speaker 1: I know what that is. And I could be in
Speaker 1: another country. Yet let me get a crew tokens of
Speaker 1: the Empire state building or something like that.
Speaker 3: And this is why we started by tokenizing assets that
Speaker 3: already have established market prices and deep liquidity. Yeah, so
Speaker 3: we don't you know, if you tokenize an asset that
Speaker 3: isn't yet liquid, then you have to build both sides
Speaker 3: of the marketplace at the same time. Whereas you know,
Speaker 3: in our case, like even if there aren't any other
Speaker 3: new sellers, like there's a lot of sellers on the
Speaker 3: stock market, and we're just like making you know that
Speaker 3: liquidity available on chain. So it works for a buyer
Speaker 3: almost just as well, whether you know they're coming to
Speaker 3: our platform the day that it launched, or you know,
Speaker 3: in a more distant future where there's a.
Speaker 2: Whole bunch of sellers on chain.
Speaker 3: I mean, at some point we may have more actual
Speaker 3: liquidity formation even for public stocks on chain, particularly as
Speaker 3: we start thinking about weekend trading, where there isn't yet
Speaker 3: liquidity traditionally. But we already have a lot of liquidity,
Speaker 3: so the product works quite well even without new price discovery.
Speaker 1: What's on your roadmap that you can highlight.
Speaker 3: We think that it's table stakes for token ied stocks
Speaker 3: to really take off. That you know, a holder of
Speaker 3: a token I stock has access to all of the
Speaker 3: same services at at least you know, as good or
Speaker 3: better terms as would a holder of traditional stock. So today,
Speaker 3: I mean really just in the last six weeks, they
Speaker 3: have the ability to buy and sell at the same liquidity,
Speaker 3: but they don't yet have the ability to like margin
Speaker 3: their token I stock at the same sort of margin
Speaker 3: rates that you could get at you know, a prime
Speaker 3: brokerage account in the US. So offering offering that is
Speaker 3: very top of mind, right, Maybe that's all all league
Speaker 3: for now. There's sort of other services that you should
Speaker 3: imagine that folks have access to, you know in the US,
Speaker 3: like you know, derivs would be a big one that
Speaker 3: there's still a need for on chain.
Speaker 1: So yeah, well, a lot of folks are looking forward
Speaker 1: to the Market Structure Bill passing. Uh that's we got
Speaker 1: the government shut down and the bills in the Senate.
Speaker 1: But once that passes, what do you impact do you
Speaker 1: think it's going to have on the industry as far
Speaker 1: as innovation and growth?
Speaker 2: It's a good question.
Speaker 3: I mean, it's not something that's super top of mind
Speaker 3: for us because I think it mostly contends with questions
Speaker 3: related to like what isn't isn't a security, or at
Speaker 3: least that's like the crux of the focus of much
Speaker 3: of the industry. Sure, we're just in the land of
Speaker 3: accepting that everything that we deal with is a security. Okay,
Speaker 3: So you know, we are able to make quite a
Speaker 3: lot of progress around things like bringing token is securities
Speaker 3: into the US, even without having to wait for new legislation.
Speaker 1: Oh for sure, Nathan, great stuff. We're going to have
Speaker 1: to do a longer form interview in person, am I
Speaker 1: study at some point, and I'm looking forward to the
Speaker 1: future updates Aron onto. But thank you so much for
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