Speaker 1: We interface with financial institutions all over planet Earth. We
Speaker 1: were early and aggressive. I mentioned we just started experimenting
Speaker 1: in a blockchain. We began to understand that maybe there's
Speaker 1: a number of different blockchains that are going to be
Speaker 1: winners here. Blockchains are technologies they'll continue to iterate in
Speaker 1: the information based economy. We think of these as just
Speaker 1: utility rails, So we want to be on as many
Speaker 1: of those ecosystems as we can because that's where we're
Speaker 1: going to find customers eventually.
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Speaker 2: welcome into the Thinking Crypto podcast. I'm your host Tony
Speaker 2: Edward and we're recording at Station three in New York's
Speaker 2: Financial District. And joining me today's Roger Bastin, who is
Speaker 2: the head of Digital Assets at Franklin Templeton, which is
Speaker 2: one of the largest investment firms in the world, managing
Speaker 2: over one point six trillion dollars in assets. Roger, great
Speaker 2: to have you. Yeah, thanks for having me, Roger. I'm
Speaker 2: excited for this conversation. Franklin Templeton is leading to charge
Speaker 2: in many different ways as it relates to your assets.
Speaker 2: So I have lots of questions for you. Awesome, but
Speaker 2: I'd love to start with your backrop tell us a
Speaker 2: bit about yourself. Where are you from, where'd you grow
Speaker 2: up and how'd you end up at Franklin Templeton.
Speaker 1: Wow. Well, yeah, I actually grew up in the midwest,
Speaker 1: central Illinois, but I came kind of the East coast
Speaker 1: to do my undergraduate work at the University of Virginia.
Speaker 1: Came to Wall Street in New York in the mid eighties,
Speaker 1: spent about three years here, and I found myself heading
Speaker 1: to the West coast to go to graduate business school
Speaker 1: at UCLA. Once I got to UCLA in the wonderful
Speaker 1: California and sunshine, I was like, well, this is going
Speaker 1: to be a good place to be ended up being
Speaker 1: hired out of business school what then was known as
Speaker 1: Franklin Group of Funds. Wow, in nineteen ninety one. And
Speaker 1: I've actually been at Franklin and then, you know, as
Speaker 1: we've been a net acquirer of asset managers over time.
Speaker 1: Franklin Templeton, Yeah, since nineteen ninety one. Who do you
Speaker 1: have on your show who's been at the same firm
Speaker 1: that long?
Speaker 3: Nobody? That's an incredible tenure. So did you want to
Speaker 3: go into finance?
Speaker 1: You know?
Speaker 3: Was out your target goal?
Speaker 1: So I had some exposure when I was younger because
Speaker 1: my father was one of the first persons who took
Speaker 1: the CFA Exam, and that CFA Exam program is a
Speaker 1: kind of a there is an organization CFA, but there's
Speaker 1: a lot of professionals that aid in like creating the
Speaker 1: exam and creating the exam, and you know, they really
Speaker 1: draw on the whole community of of CFA participants in
Speaker 1: order to be able to make that whole thing work
Speaker 1: and hum. And this was many years ago now, but
Speaker 1: a lot of those CFA people had investment. There were
Speaker 1: investment people right in the investment community, and so I
Speaker 1: had a lot of exposure to a lot of different
Speaker 1: investment professionals having been around that CFA institute early in
Speaker 1: my you know, when I was you know, in junior high,
Speaker 1: in high school and those you know, college formative years,
Speaker 1: and so I had a pretty good idea that I
Speaker 1: wanted to be doing investment investment related things. And so
Speaker 1: when I went to graduate, when I came to New York,
Speaker 1: I actually was working for a company that was then
Speaker 1: called Banker's Trust Company, and we were you know, in
Speaker 1: several locations in the city, but I was I was
Speaker 1: in the index fund group. So like think about the
Speaker 1: you know period in nineteen eighty six toward nineteen eighty nine,
Speaker 1: which is when I was there explosive activity in the
Speaker 1: number of pension funds who were thinking about, hey, maybe
Speaker 1: I can you know, put some lower cost index fund
Speaker 1: passive investment strategies in our portfolio at a lower cost
Speaker 1: rather than paying high cost active management fees. So that's
Speaker 1: kind of where I cut my teeth. And it's been
Speaker 1: a great career. I've seen a lot of things over
Speaker 1: almost four decades of experience now in these markets.
Speaker 2: Oh yeah, I'm sure you have a plthora of knowledge,
Speaker 2: and I'm curious what your point of view is or
Speaker 2: take of or perspective I should say on how the
Speaker 2: markets have changed, especially as they become digitized, On what
Speaker 2: the internet and help blockchain.
Speaker 1: Well, I think in the in the big thematic one
Speaker 1: is a fact that all of these technologies have continued
Speaker 1: to drive down the pricing of asset management services. I
Speaker 1: think of the world in two camps. Those who have
Speaker 1: capital and then those who want capital. So have capital
Speaker 1: would be like big major retirement plans, pension plans and
Speaker 1: that kind of stuff. Those who want capital, businesses you
Speaker 1: know who want that, and anything else in between. And
Speaker 1: the intermediary role in between that take out rents between
Speaker 1: those two that prevent the have capital for getting the
Speaker 1: most return on their capital, and they want capital to
Speaker 1: get the lowest costs of capital. Inside of all that
Speaker 1: are a number of different actors, and what we've seen
Speaker 1: is keep hollowing out of those actors and those rents
Speaker 1: in between. And I think you know where we've arrive
Speaker 1: now with blockchain technology, because a lot of those rents
Speaker 1: in between those two actors are really a legacy of
Speaker 1: like we have this record, you have that record. It's
Speaker 1: gonna take us five days to settle a stock. I
Speaker 1: mean that's when I first started, right because we have
Speaker 1: to get these records moved back and forth. And this
Speaker 1: whole distributed ledger technology where you have a record, I
Speaker 1: have a record and that's the same record, really dramatically
Speaker 1: changes all of that. So I've seen that whole path,
Speaker 1: you know, keeps shrinking down, and I think that's ultimately
Speaker 1: to the benefit again of the the owners of capital
Speaker 1: to get higher returns on capital. I think there's a
Speaker 1: whole bunch of other things happening with blockchain and distribute
Speaker 1: ledger technologies that expand the opportunity set uh for those
Speaker 1: investors as well. But those are some of the themes
Speaker 1: I think I could point to.
Speaker 2: So is it like a natural evolution of the technology
Speaker 2: that you know, the macro internet, internet based companies, the
Speaker 2: ability to move data real time uh subtle real time
Speaker 2: with now stable coins and tokenized assets. It's it's a
Speaker 2: natural evolution of how maybe things started in nin nineties
Speaker 2: with the Internet.
Speaker 1: Well, I mean you say it started with the Internet,
Speaker 1: but I mean all of these activities started a long, long,
Speaker 1: long time ago.
Speaker 3: Oh sure.
Speaker 1: I mean, like one of the one of the basic
Speaker 1: I guess laws, securities laws that govern a lot of
Speaker 1: these things, like our projects like Benji, our tokenized money
Speaker 1: funder are called the forty Act. They're called forty Act
Speaker 1: funds because the law was written in nineteen forty. And
Speaker 1: so you know how we did things in nineteen forty
Speaker 1: where we were passing paper certificates around to each other
Speaker 1: and you needed to self custody you know, this particular
Speaker 1: asset by holding the piece of paper and you had
Speaker 1: some sort of fire safe or we started having these
Speaker 1: big custody businesses who are like, well, we'll take care
Speaker 1: of that for you, so you don't have to worry
Speaker 1: about that that is all just rapidly changing because of
Speaker 1: these technologies. And yes, it might have been the Internet
Speaker 1: and the networking of you know, businesses and planets and
Speaker 1: entities all over planet Earth, but it's arrived at a
Speaker 1: pretty exciting time. In those forty some years that I've
Speaker 1: described in my career, I've never seen more opportunities in
Speaker 1: asset management than i've you know, ever, So it's pretty
Speaker 1: exciting time to be able to be in the space
Speaker 1: base and exploring.
Speaker 3: Quite frankly, Roger, there.
Speaker 2: Are still some skeptics out there who said, who needs
Speaker 2: this blockchain stuff? What does tokenization matter? So I'm curious
Speaker 2: if you can answer that question from a perspective of
Speaker 2: what Franklin Templeton's building. Is this in a test? Is
Speaker 2: this an R and D project or is this something
Speaker 2: you are looking to build that's going to.
Speaker 3: Be the fabric of the business.
Speaker 1: I think that's a really great question because a lot
Speaker 1: of times when technologies come forward and we start doing things,
Speaker 1: and you know, we've been aggressive and token is exploring tokenization,
Speaker 1: and we have a you know, a big branded, you
Speaker 1: know product that we're really kind of talking to clients
Speaker 1: all over the globe, and that's a tokenized money fund.
Speaker 1: Money funds are our securities, and we still operate within
Speaker 1: the kind of geographic borders of very securities laws all
Speaker 1: over planet earths. We have a number of different Benji's
Speaker 1: that we have a US Benji, we have a ce
Speaker 1: keV use it's eligible. We have a Singapore Benji. You know,
Speaker 1: we have a number of those things. And you know
Speaker 1: we have been and we we have you know, over
Speaker 1: a billion dollars of customer client assets in it. That
Speaker 1: doesn't feel like a proof of a concept really, but
Speaker 1: I think what we've really uncovered because the question gets
Speaker 1: asked a lot. You should call them skeptics, but tuality
Speaker 1: like the current system seems to work, so why are
Speaker 1: we doing That's differently, but what we have uncovered and Benji,
Speaker 1: we just had this idea. I had this idea, Hey,
Speaker 1: how do we use distributed ledger technology in our business?
Speaker 1: I mean ledger? That word ledger is really important. As
Speaker 1: I mentioned, the whole industry is full of records. Yes,
Speaker 1: whether it's asset management, whether it's capital markets records is
Speaker 1: what I'm honing in on. And this idea that this
Speaker 1: technology would be disruptive disruptive means it could you know,
Speaker 1: impact your current business. It could also create opportunities for you.
Speaker 1: Meant that we were just like, hey, let's start and
Speaker 1: do something. And now we started that some eight years ago,
Speaker 1: so at that point I think it was a proof
Speaker 1: of concept. But what we unpacked was being on these
Speaker 1: new rails created new utility, and that utility accrues to
Speaker 1: the users and the shareholders and the customers of the product. Now,
Speaker 1: in Benji's case, that utility kind of is into form one.
Speaker 1: You and I can I can transfer Benji back and
Speaker 1: forth to one another, literally as fast as a new
Speaker 1: block can be appended onto a blockchain. So those times
Speaker 1: are you know, fractions of a second. So I can
Speaker 1: move an interest bearing asset back and forth between economic actors, individuals, companies, whatever,
Speaker 1: in less than a you know, in fractions of a second.
Speaker 1: Number one. But because the blockchain is composable, we have
Speaker 1: been able to take the twenty four hour cycle of interest,
Speaker 1: decompose that into seconds, and for however many seconds and
Speaker 1: minutes or hours you hold Benji, I can pay you
Speaker 1: for those portions of the day, rather than it's being
Speaker 1: on this twenty four o'clock. Now, that may, you know,
Speaker 1: for you and I as individuals, I don't know if
Speaker 1: that's you know, super interesting, but for the tremendous the
Speaker 1: billions and trillions of dollars that flow through the capital
Speaker 1: markets and financial system every day, an interest bearing an
Speaker 1: asset that if I hold it for five minutes, my
Speaker 1: asset is sweating big thing, so big new type of
Speaker 1: markets that unfold because of the utilities of using these
Speaker 1: new blockchain rails in order to build products and services
Speaker 1: on top of that's what we've discovered.
Speaker 2: Pardon the interruption. Hi, I'm Tony. I'm the host of
Speaker 2: the Thinking Crypto podcast. I wanted to ask you if
Speaker 2: you can please support the podcast by hitting the like
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Speaker 2: the five star rating.
Speaker 3: I'll let you get back to the content. Thank you
Speaker 3: so much.
Speaker 2: Now, you mentioned there's a different form of benji across
Speaker 2: the globe in the US markets and different markets.
Speaker 1: Tell us a bit.
Speaker 2: About is that all connected to a central hub, so
Speaker 2: to speak? All running on the same blockchain rails, but
Speaker 2: just categorize in different regions.
Speaker 1: Well, I think the way in our exploration of deploying
Speaker 1: these tokenization platforms, we you know, we started on one chain,
Speaker 1: but we quickly began to think about how and when
Speaker 1: we started that process. By the way, again, we wanted
Speaker 1: to be a user of blockchain, right. We weren't sitting
Speaker 1: here looking back and saying, well, do cryptos X, Y,
Speaker 1: and Z have value? You know, how do we extract
Speaker 1: value from those? It's like, oh, these are new and
Speaker 1: interesting and vastly improved, you know, data record systems. This
Speaker 1: idea that we both have the same copy of the
Speaker 1: ledger at any given time, let's experiment and do things
Speaker 1: on those. And we we found efficiency gains in the
Speaker 1: part of the securities business that we call transfer agency.
Speaker 1: So if we're in the business of issuing securities, we
Speaker 1: have rules and responsibilities wrapped around transfer agency to receive
Speaker 1: permission to issue those securities. And those those are records
Speaker 1: that we have to maintain forever. Those are records of
Speaker 1: who you are, where you are, and those are kept
Speaker 1: in more private database systems that you know, don't expose
Speaker 1: personal identify information out into the marketplace. But it's the
Speaker 1: transaction records. So it is the things that say, hey,
Speaker 1: you subscribed, you redeemed, you reinvested dividends. These transaction record
Speaker 1: keeping systems are large and large, and they grow and
Speaker 1: we have to keep them forever, and so we were
Speaker 1: just kind of thinking maybe the blockchain would be a
Speaker 1: better place to house those records rather than in our centralized,
Speaker 1: monolithic database system that we head inside of our transfer
Speaker 1: agency system. And so in that experimentation, you know, we
Speaker 1: covered big efficiency gains and that gave us super big
Speaker 1: confidence that this wasn't something that was just a fad,
Speaker 1: but these were going to be rails. These were going
Speaker 1: to be new infrastructure for the capital market. It's asset
Speaker 1: management moving forward, and so we kind of put more
Speaker 1: chips on the table to develop what those outcomes would be.
Speaker 2: You just mentioned something that these are going to be
Speaker 2: the rails for the capital markets. So is that where
Speaker 2: the puck is heading in, where banks, investment firms, stock exchanges,
Speaker 2: you name it, and then would plug into the government
Speaker 2: with the treasury and so forth. All these things will
Speaker 2: be running on plup chain.
Speaker 1: Yeah, I might go back. You made a statement that
Speaker 1: I was kind of raising eyebrows about there's still skepticals, skill,
Speaker 1: still skeptics. Where are those skeptics? By and large? I mean,
Speaker 1: we interface with financial institutions all over planet Earth. We
Speaker 1: were early and aggressive. I mentioned we just started experimenting
Speaker 1: in a blockchain. We begin to understand that maybe there's
Speaker 1: a number of different blockchains that are going to be
Speaker 1: winners here. Blockchains are technologies, they'll continue to iterate. There's
Speaker 1: in the information based economy. We think of these as
Speaker 1: just utility rails and pipes for the information based economy.
Speaker 1: So we want to be on as many of those
Speaker 1: ecosystems as we can because that's where we're going to
Speaker 1: find customers eventually. And so it's not you know, it's
Speaker 1: not one winner takes all. In our environmvironment. We think
Speaker 1: of these as kind of digital nation states. They have
Speaker 1: their own economies, they're aggressive and pursuing and growing their
Speaker 1: own economies. We want to grow in there with their economies,
Speaker 1: alongside of them. Whatever we may decide to bring as
Speaker 1: a you know, securities you related product or service on
Speaker 1: top of those rails. And so that's kind of where
Speaker 1: our journey, So our journey actually permates a across a
Speaker 1: number of different blockchains. I think we may be on
Speaker 1: either ten or eleven blockchains currently with our products and services,
Speaker 1: where we are in the process of building a tokenization factory,
Speaker 1: and we are doing that and we're deploying toward that
Speaker 1: end specifically because we have massive confidence about all of
Speaker 1: these legacy partners that we know that have we worked
Speaker 1: with in traditional financial service firms over time are going
Speaker 1: to be coming onto the web three wallet ecosystems, and
Speaker 1: of course there's just hundreds and hundreds of millions of
Speaker 1: web through digital wallets all over planet Earth already, and
Speaker 1: we want to be able to provide products and services
Speaker 1: into that existing ecosystem as well.
Speaker 2: Now, you mentioned you're building on public chains and a
Speaker 2: handful of them, and it seems it's going to be
Speaker 2: a multichain world, as you alluded to, But are you
Speaker 2: also looking at building your own internal permission blockchain. It
Speaker 2: seems like that's a hybrid model. Is kind of the
Speaker 2: what some people are doing where they're bridging public chains.
Speaker 1: I think the short answer is no, I mean, and
Speaker 1: that is obviously a trend. We talked with friends yesterday.
Speaker 1: You know, coinbase has a has a blockchain, Yes, right,
Speaker 1: And I was asking questions like, look, hey, in my
Speaker 1: in my in our past life, and we're work counseling
Speaker 1: and talking to you know, investors all over planet Earth.
Speaker 1: You know. The previous kind of construct was, let me
Speaker 1: choose a custodian where I know my assets are saving
Speaker 1: trust and usually they have relationships with these entities over
Speaker 1: decades quite frankly, our institutional investor communities and clients have.
Speaker 1: And then let me work to find where I can
Speaker 1: get best execution because in my fuduciary responsibilities for these clients,
Speaker 1: I have to make the lowest transaction costs. Where can
Speaker 1: I get the best execution on whatever the idea is
Speaker 1: that I'm offering advice on to them. But all of
Speaker 1: those are kind of subdivided different actors. And now you know,
Speaker 1: you have somebody like coinbase who's like, well, we're the
Speaker 1: change you're gonna custody with us, and oh and as
Speaker 1: our blockchain that you might be evolved into. So it's
Speaker 1: a real interesting conversation when you're describing this ecosystem to
Speaker 1: institutional other institutional investors and adopters who are so used
Speaker 1: to being like, well, all of these things are separated out.
Speaker 1: How can they be all knitted together? And clearly we're
Speaker 1: seeing large cases where you know, people like Robin Hood
Speaker 1: are saying, hey, we want we want our own chain.
Speaker 1: You know, I think that's a really interesting strategy. Franklin
Speaker 1: Templeton is not diving down to that strategy. We want
Speaker 1: to be part of a bunch of people's chains, quite frankly,
Speaker 1: and ride inside of those kind of like I said,
Speaker 1: digital nation states. As they grow, some of them will
Speaker 1: grow faster, some of them may become obsolete. We don't know,
Speaker 1: but we do know that there's a lot of capital
Speaker 1: deployed by these legacy chains, and some of those actors
Speaker 1: like Ripple have really fantastic plans to be able to
Speaker 1: take that capital that has grown an XRP over time
Speaker 1: and be able to redeploy that to build quite frankly
Speaker 1: substantial businesses. And they have a lot of money to
Speaker 1: be able to deploy to make those ends come about. Oh.
Speaker 3: Absolutely.
Speaker 2: Now we're seeing different types of assets being put on
Speaker 2: the blockchain money market funds. You know, obviously frank and
Speaker 2: Templeton is doing that. Are you planning to do anything
Speaker 2: with all their asset classes? Precious metals real estate and
Speaker 2: things like that.
Speaker 1: Well, yeah, I mean I think what is unfolded in
Speaker 1: front of the opportunities. And this is why I say
Speaker 1: it's so exciting, is that as the as we approach
Speaker 1: opportunities in what we call the have wallet ecosystem. So
Speaker 1: we're talking about the finances and coinbases and okax and
Speaker 1: Krakens you know of the world that have literally hundreds
Speaker 1: of millions of wallets. Those are potentially new customers for us.
Speaker 1: You know, our journey started with money funds, but you know,
Speaker 1: with our one point seven trillion and we cover you know,
Speaker 1: basically every asset class on the planet. How can we
Speaker 1: take those our services of offering advice around those things
Speaker 1: and bring them delivery into the new have wallet ecosystem. Simultaneous,
Speaker 1: you have all of these legacy actors who are just
Speaker 1: over the past year quite frankly, have permissions to be
Speaker 1: able to seek wallets. Those are our legacy business partners
Speaker 1: for decades, quite frankly, and we know they're going to
Speaker 1: be coming into space. And so we are firmly firm
Speaker 1: believers that we will meet customers large and small in
Speaker 1: a web three point of wallet you know service somewhere
Speaker 1: and so yeah, we're going to you know, over time,
Speaker 1: and it will take time sure, transmit all of these
Speaker 1: other things into this type of you want to call
Speaker 1: them tokenies, but really what they are is just a
Speaker 1: new kind of form that clients are holding the asset,
Speaker 1: but there's still a security. They're still you know, they're
Speaker 1: wrapped in securities or they're wrapped into commodities type of wrapper.
Speaker 1: Those are at least that's what our experience is showing
Speaker 1: so far.
Speaker 2: You mentioned Binance right recently that you have formed a
Speaker 2: partnership with Finance. Tell us about that and how you'll
Speaker 2: be working together.
Speaker 1: Well, Benji is we are working with a number of
Speaker 1: different exchanges, and Finances is one of those to bring
Speaker 1: U specifically some of their institutional customers who want a
Speaker 1: trade on finance but want to hold a yield bearing
Speaker 1: asset as collateral inside of the trades versus a non
Speaker 1: yield bearing stable coin. And it's as simple as that.
Speaker 1: How do we how do those customers you know, who
Speaker 1: are doing maybe complex derivative trades get a little bit
Speaker 1: more economic value by holding something that sweats yield all
Speaker 1: the time. It's pretty simple. In that construct, there's there's
Speaker 1: a number of different exchanges that are they're doing that.
Speaker 1: We've we've been doing that with Okax as well, and
Speaker 1: we're having conversations because you know, what we have done
Speaker 1: specifically with Benji is that we have worked hard and persistent,
Speaker 1: invested a lot of time and money to work with
Speaker 1: their regulators so that Benji is actually natively on chain.
Speaker 1: We're not a shadow record keeping, We're not a you know,
Speaker 1: digital twin of any sort. We're actually a native on
Speaker 1: chain and that gives a lot more permissions for these
Speaker 1: ecosystems that are absolutely on chain as opposed to relying
Speaker 1: on the legacy transagency processes and systems. And so that
Speaker 1: makes Benji a perfect candidate to be brought into these
Speaker 1: kind of constructs.
Speaker 3: You mentioned earlier.
Speaker 2: Sweating yield constantly with the tokenization of assets, you now
Speaker 2: have twenty four to seven markets, three sixty five, no
Speaker 2: more opening and closing bell, so to speak. How are
Speaker 2: you managing that are using AI? You have global teams,
Speaker 2: that type of thing going on.
Speaker 1: If I understand your question correctly, you know, moving from
Speaker 1: basically what is the fund is a five business day
Speaker 1: week into a seven you know day business seven day,
Speaker 1: twenty four hours a day environment is a gap, there's
Speaker 1: a bridge to get there in that construct, and so
Speaker 1: we're working with the number of different actors, liquidity providers.
Speaker 1: You know, this idea that for for the near term,
Speaker 1: while certain stable coins have achieved this ability to offer
Speaker 1: rewards depending on top of which platform that they're riding
Speaker 1: on top of this idea that that a money fund
Speaker 1: which offers you know, full transparency of whatever the clateral
Speaker 1: may be, and it you know it, you know, by concert,
Speaker 1: it kicks out all its yield. You know, we don't
Speaker 1: kind of have to determine what we're going to be
Speaker 1: paying out. It's all a function of the underlying you know,
Speaker 1: collateral that we own, the assets that we own underneath it.
Speaker 1: You know what that means is we are you know,
Speaker 1: in this phase right now where we are trying to
Speaker 1: find liquidity between stable coins and money funds. That's a
Speaker 1: new thing, right stable coins are relatively new and there's
Speaker 1: obviously a lot of transaction activity and stable coins. I mean,
Speaker 1: I think we could point and you'd probably know this
Speaker 1: is better than anybody. The biggest killer app and all
Speaker 1: these blockchains. If you think about the number of records
Speaker 1: being you know, appended If you think about blockchain as
Speaker 1: an as an nty that you know sells block space,
Speaker 1: the vast majority of block space that they sell is
Speaker 1: stable coin moving from you know, Party A to Party
Speaker 1: B by and large, and the idea that that there's
Speaker 1: this other now new, complementary and kind of similar, but
Speaker 1: the benefit of the yield component on it can come
Speaker 1: and begin to interrupt, operate and collaborate, be a substitute
Speaker 1: for number of word choices if you want to come up.
Speaker 1: The idea that there would be markets between tokenized money
Speaker 1: funds and stable coins is something that we're aggressively pursuing. Now.
Speaker 1: The financial system is going to continue to lurch forward
Speaker 1: from five business days and seven business days, you know,
Speaker 1: and we're seeing that kind of begin to come about.
Speaker 1: But you know, we're talking about a heavy lift on
Speaker 1: a whole bunch of things to get to that space.
Speaker 1: Whether you and I are both you know, you know,
Speaker 1: around to focus on these things by the time that
Speaker 1: comes about, maybe have some uncertainty on that.
Speaker 2: Are there any risks that I don't know how much
Speaker 2: you can share on this, you know, from a risk
Speaker 2: mitigation standpoint, are there any risks when it comes to
Speaker 2: tokenized assets and stable coins, like maybe things that haven't
Speaker 2: been proven as yet, or still we still need to
Speaker 2: test the waters because we don't have the full network
Speaker 2: or all players on board. Are there any risks that
Speaker 2: you know keep you up at night.
Speaker 1: So to speak? I actually sleep pretty good at night,
Speaker 1: And we wouldn't be deployed with customer money if we
Speaker 1: didn't think that we have been able to mitigate any
Speaker 1: risks whatsoever. I think in general, if I've looked back
Speaker 1: over my forty years of experience, we've obviously increased the
Speaker 1: velocity of activities. So harken back to the global financial crisis.
Speaker 1: Where were you in the global financial crisis?
Speaker 2: Man, I didn't know anything about the financial markets. Ago
Speaker 2: was my financial university, so to speak, where I learned
Speaker 2: how money works, how the economy works, how the FED works,
Speaker 2: and all that.
Speaker 3: So I was just an onlooker.
Speaker 1: Well, as you were onlooking, you probably realized that, you know, weeks,
Speaker 1: months transpired as different financial institutions began to be woven
Speaker 1: into the kind of the damage that began to permeate
Speaker 1: through the financial system. It took months for and took
Speaker 1: collaboration by regulators and rescuers to come together pushing Company
Speaker 1: A into Company B in order to stabilize the system
Speaker 1: and all that kind of stuff. Fast forward to a
Speaker 1: couple of years ago when in one weekend, Silicon Valley
Speaker 1: Bank and First Republic went under right, and so velocity
Speaker 1: of bad outcomes has definitely increased. And what we're talking
Speaker 1: about when we're talking about blockchains and these economies, we're
Speaker 1: talking about networking, right, it's a network economy and the
Speaker 1: goal of financial crisis. One of the words we were
Speaker 1: all feared was contagent. Yeah, where is it? Contagent? And
Speaker 1: the word contagent implies that there's networking. You know, something
Speaker 1: happened here, but it's linked somehow. Networked is something over
Speaker 1: here And if this domino falls, is that's going to
Speaker 1: tip over a domino over here. Well, think about that
Speaker 1: blockchain and the networking and the contagion impacts. You know,
Speaker 1: something happens and it permeates across the system pretty quickly.
Speaker 1: Is a real live factor. And we started to have
Speaker 1: conversations with the SEC about these things. It became clear
Speaker 1: and neutral wisened grizzly old veteran myself, just because we
Speaker 1: can do something, should we be doing something? I mean,
Speaker 1: I remember being on a trading floor. In the fall
Speaker 1: of nineteen eighty seven when the stock market dropped by
Speaker 1: twenty five percent, what was the response, then, Well, let's
Speaker 1: put in circuit breakers, stop the activity, Let's let you know,
Speaker 1: rationality return, or let's have the market particistants evaluate the
Speaker 1: situation and come in and make a decision about where
Speaker 1: to go. You know, when we get to twenty four
Speaker 1: to seven constant velocity, you know, will we have those
Speaker 1: same circuit breakers. Will we have to implement those type
Speaker 1: of things. It's possible because these are what's happened in
Speaker 1: the past, by and large. The other thing that I
Speaker 1: just get a little bit concerned about is the fact
Speaker 1: that a lot of this ecosystem and digital assets and
Speaker 1: blockchain have developed post the global financial crisis. Now I
Speaker 1: say the global financial crisis, and what I really mean
Speaker 1: was a full born credit cycle. Right, so when we
Speaker 1: have companies going under, when we have more bankruptcies on individuals,
Speaker 1: when history shows when we have credit cycles is when
Speaker 1: the weakest links find themselves. Now, we could have had
Speaker 1: a credit cycle dur the pandemic, but monetary policy authorities
Speaker 1: all over the plan that flooded the planet with liquidity
Speaker 1: and prevented a full credit cycle from developing. So we've
Speaker 1: developed this whole new ecosystem. It's about networking and possibilities
Speaker 1: of linking contagion and a more aggressive way. And we've
Speaker 1: done that without having any credit cycles. So, uh, you
Speaker 1: know what happens when the credit cycle comes about, and
Speaker 1: you know, do we have enough kind of watchdogs and
Speaker 1: firepower on the other side to kind of help solve
Speaker 1: those problems as they come together? Again? I sleep, I
Speaker 1: sleep all night, but I just I have been at
Speaker 1: business long enough. Yeah, I've been student of things long
Speaker 1: enough to know that it's really credit cycles that are
Speaker 1: going to cure any sort of you know fallaties that
Speaker 1: are you know, that don't exist, any sort of you
Speaker 1: know failing points that might exist currently. They're good, they'll
Speaker 1: be exposed in that and then we'll well, you know,
Speaker 1: it will right set the environment for you know, another
Speaker 1: huge expansive wave of growth. But you know, those would
Speaker 1: be the my wisdom. Sure you invite me here to
Speaker 1: share kind of years and decades of wisdom to you,
Speaker 1: those would be the things that I would kind of
Speaker 1: share with you.
Speaker 3: Oh absolutely.
Speaker 2: And I asked those questions because I know I get them.
Speaker 2: Sometimes I know the answer, but you know there are
Speaker 2: people who are new to this is all Newton and
Speaker 2: they're like, well, what are the pros and cons?
Speaker 3: What are a risks?
Speaker 2: And I think it's great to have someone with your
Speaker 2: expertise to be able to share, you know, the knowledge
Speaker 2: around that and how some of these things could be
Speaker 2: mitigated or are being mitigated. And I'm curious, would AI
Speaker 2: be a big help in monitoring blockchains twenty four to
Speaker 2: seven in the markets? And is Franklin Temple are looking
Speaker 2: to leverage AI in that way?
Speaker 1: Well, we looked at like all businesses, we're gonna information
Speaker 1: based business. We're looking to leverage AI in an under
Speaker 1: the number of different ways. You know, if I was
Speaker 1: a regulator, i'd be have an AI. The beauty of
Speaker 1: the public blockchains and when we were actually beginning to
Speaker 1: talk with regulator friends, you know, years and years ago
Speaker 1: now and to seek these permissions, what we're doing the
Speaker 1: idea that many of these blockchains are public blockchains, and
Speaker 1: with the right tool sets you can surveil them in
Speaker 1: the activity. If I'm using these blockchains in my transfer
Speaker 1: agency process, you can kind of surveil that transfer agency process.
Speaker 1: You're not going to know names of people again, because
Speaker 1: we will never expose customers and clients' names in any
Speaker 1: sort of public place. We protect that. But the idea
Speaker 1: that you know, the movement, the transactions that are happening,
Speaker 1: you can do that. I mean previously, if they if
Speaker 1: some regulator thought there was bad acting going on, they
Speaker 1: would go to judge, they get a subpoena, they come
Speaker 1: into you, and they say, Okay, we're gonna come in,
Speaker 1: We're gonna look at all those records. But like literally
Speaker 1: now you can surveil and observe them with the right
Speaker 1: tool sets. So you know, yeah, I think. I think
Speaker 1: because of the public nature and the massive amount of
Speaker 1: information that's available in these public blockchains, of course AI
Speaker 1: are the tools to be that's used to be able
Speaker 1: to understand all that in a pretty efficient way.
Speaker 2: So, Roger, it is twenty thirty What does a tokenization
Speaker 2: market look like? What does the markets look like? Is
Speaker 2: it all like you mentioned earlier, running a blockchain rail
Speaker 2: is the convergence of crypto and TRADFID there's just one market.
Speaker 1: Okay, So this is twenty twenty six, and you said
Speaker 1: twenty thirty five, So nine years from now, look, I
Speaker 1: think actually we're not going to be talking about tokenization
Speaker 1: well before then, because I think, like lots of things,
Speaker 1: we use word choices as we transition from one thing
Speaker 1: to another. The user experience will just know I have
Speaker 1: a record somewhere, I have an asset somewhere. It's held
Speaker 1: here in this wallet somewhere. Is it called toganization, is
Speaker 1: it called blockchain? I don't really give a crap quite frankly,
Speaker 1: I just know that it's there, it's protected, and it's
Speaker 1: there for my use and for you know, to grow
Speaker 1: my assets in portfolios. I think in twenty thirty five,
Speaker 1: what we're likely to see is blockchain to be able
Speaker 1: to allow a whole new array in different types of
Speaker 1: assets to flow. And this is where I actually kind
Speaker 1: of sunk myth in this whole thing. Many years ago. Yes,
Speaker 1: I was focusing on Ledger distribute Ledger technology, but I
Speaker 1: also was aware it had spent a lot of time
Speaker 1: in my career trying to figure out how I could
Speaker 1: keep expanding the opportunity set of investments for clients. So
Speaker 1: I had a friend at Franklin Templeton who went on
Speaker 1: to work at the biggest pension fund in the country
Speaker 1: in Sacramento for a period of time, and then he
Speaker 1: came back to Franklin Templeton and he was describing to
Speaker 1: me one time about a project that they had done
Speaker 1: at this super large pension fund in Sacramento. And the
Speaker 1: study that they'd done had said that if you examine
Speaker 1: all of the assets on planet Earth again the super
Speaker 1: large public pension planet and Sacramento, had they see every
Speaker 1: investment opportunity possible. They have every manager coming in and
Speaker 1: saying what about this, what about that? So they see
Speaker 1: all investment opportunities. But in this study that they had commissioned,
Speaker 1: they had come to determine that they really only touched
Speaker 1: about half of the planet's assets. And this was only
Speaker 1: about ten years ago. That's pretty interesting, right, You see
Speaker 1: every investment opportunity, but you were only seeing half. Quite frankly,
Speaker 1: so is there a possibility that these blockchain technologies create
Speaker 1: more fungibility for maybe that remaining half of assets, whatever
Speaker 1: the case may be. And so can we raise the
Speaker 1: efficient frontier? Will we raise the efficient frontier that you
Speaker 1: know that curve that we draw a tangent to to say,
Speaker 1: this is the mix of assets that I want that
Speaker 1: gives me the best risk adjust returns over time, or
Speaker 1: maybe we do away with the idea that we don't
Speaker 1: live in a two dimensional world of risk and return.
Speaker 1: People want other things from their portfolios. They want outcomes,
Speaker 1: they want impact. So maybe there's third or fourth vertices,
Speaker 1: quite frankly in dimensions, and so now we're optimizing client's
Speaker 1: portfolios across a plane rather than across a curve and
Speaker 1: a tangent to that curve. I think that's what we're
Speaker 1: gonna end up unpacking. I think we're going to end
Speaker 1: up having more and different type of assets. I think
Speaker 1: for individuals those assets will have emotional appeal. When they
Speaker 1: have emotional appeal, they're sticky. And if you're an advisor
Speaker 1: and you're offering advice to customers and clients, and you're
Speaker 1: drawing in things that aren't just financial assets, but there
Speaker 1: are in investments and other things that have an emotional appeal,
Speaker 1: you have a better chance of counseling and keeping that
Speaker 1: client for a long period of time. So this is
Speaker 1: I mean, all of these things is what I speak
Speaker 1: to you about. Why it's such an exciting time because
Speaker 1: of these technologies to allow you to be able to
Speaker 1: focus more intently on customers and what they want and
Speaker 1: when you can deliver. We know from any business, if
Speaker 1: you can deliver to customers what they want, then you're
Speaker 1: going to have a customer for a long time.
Speaker 2: Absolutely, you know the emotional connection you're talking about. Are
Speaker 2: you highlighting like, let's say, rare artwork or certain collectibles
Speaker 2: even like look, Pokemon card just recently sold for sixteen
Speaker 2: point something million dollars, Right, it's a piece of cardboard.
Speaker 3: Obviously it does a rarity to it, Like, could that
Speaker 3: be token.
Speaker 1: Well, yeah, certainly. There's a lot of people have cultural assets,
Speaker 1: and we engage in a lot of different projects. And
Speaker 1: you probably have talked to my friend Sandy Call about
Speaker 1: cultural assets in the past, and so we have some
Speaker 1: proof of concepts we're exploring. We have a lot of
Speaker 1: partners who were thinking about that. Uh, the idea that
Speaker 1: you might be tokenizing interest in sports clubs for example,
Speaker 1: and bring that. I mean, sure, yes, those could be
Speaker 1: some of them, but there's a lot of other things.
Speaker 1: I may be a little bit too far afield to
Speaker 1: talk about this, but when I talk to my kids
Speaker 1: about what the best investments are there investments and experiences
Speaker 1: in my book, Yeah, I mean you can have a
Speaker 1: good pile of money and you might be able to
Speaker 1: have more experiences. That's true, But it's this idea that
Speaker 1: there's more to investment than just financial returns lots of
Speaker 1: times and so you know, this is all, you know,
Speaker 1: changing and folding in front of us. And so yeah,
Speaker 1: if you're focused on those opportunities and you're doing some
Speaker 1: R and D activity, I mean, I think that's what
Speaker 1: we found ourselves doing. It's just like we had support
Speaker 1: to do just basic R and D activity in distributed
Speaker 1: ledger technology, and it's now unfolded this whole, you know,
Speaker 1: interesting world of the things that I'm talking to you about.
Speaker 1: You know that feels pretty good, even having spent you know,
Speaker 1: almost forty years in the industry. In the industry.
Speaker 3: Oh yeah, I'll give an example. We're in New York.
Speaker 2: I'm a New York Knicks fan. I'm a big basketball fan.
Speaker 2: If the New York Knicks tokenize themselves, I'm buying. Yeah,
Speaker 2: even if I don't get up a return, but if
Speaker 2: that token allows me to earn certain rewards or benefits
Speaker 2: or perks, you know, I could go meet at one
Speaker 2: of the players, go in the court. At some point
Speaker 2: you know, depending on how much token to.
Speaker 1: Yeah, so that's that's exactly what you're saying. Yeah, what
Speaker 1: you're doing is you may be investing in that, and
Speaker 1: it might not be a cash flowing investment, right, You
Speaker 1: might need to be awaiting, you know, new media deals
Speaker 1: that cause the enterprise value to rise over time. But
Speaker 1: if the New York Knicks are going to give you
Speaker 1: more experiences from that, you know that fills your need, right,
Speaker 1: especially if that experience comes in a championship year for
Speaker 1: crying out loud.
Speaker 3: Right, yeah, that would be amazing. It takes like.
Speaker 1: New York Knicks winning a championship would be amazing to agree. Hope,
Speaker 1: hope we see it again in our in the next
Speaker 1: several years.
Speaker 3: Yeah, well hopefully this year.
Speaker 1: We'll hope you Okay, bring it closer, right.
Speaker 2: But no, to your point, it goes beyond just a
Speaker 2: monetary value or even a return, just creating these experiences.
Speaker 2: And could you see big companies like an Amazon and
Speaker 2: some of these retailers doing things like that, maybe with
Speaker 2: stable coins, but also tokenizing themselves in different ways and
Speaker 2: it builds more customer loyalty, brand affinity and things.
Speaker 1: Yeah, for sure, we see the ability for enterprises. I mean,
Speaker 1: loyalty programs have existed in airlines for a long time, right,
Speaker 1: and in fact it's I think it's a fact that
Speaker 1: the loyalty programs for the airlines are worth more than
Speaker 1: the airlines themselves. Now, airlines have this business model where
Speaker 1: they lease, you know, the airplanes, so they're really the
Speaker 1: airplanes are really owned by somebody else. But the idea
Speaker 1: that there's this big sticky I mean, I'm flying United
Speaker 1: at home tomorrow and my wife won't book me on
Speaker 1: another flight besides the United flight, you know, anytime soon
Speaker 1: for a long period of time. So yeah, they you know,
Speaker 1: take that model and apply as their creativity to apply
Speaker 1: to bring that to other type of industries. For sure,
Speaker 1: that we see those possibilities unfolding as well.
Speaker 2: I remember Sandy call and I read some things about
Speaker 2: Franklin Templeton building crypto wallets. What can you tell us
Speaker 2: there are you building moreph at the institutions for retail
Speaker 2: and things like that.
Speaker 1: Well, really it's kind of funny. We had to, you know,
Speaker 1: to get permissions to use blockchain and the transfer agency
Speaker 1: activity for Benji and working with the regulators. I mean
Speaker 1: that has to be held in a you know, you
Speaker 1: know what's it going to be held in. You're gonna
Speaker 1: create token, what's going to go and it's going to
Speaker 1: go into digital wallet. So that's exactly what we've done,
Speaker 1: and we build those digital wallets across you know, a
Speaker 1: number of different blockchains, those digital wallets, you know, we're
Speaker 1: in our building of that. We see a world of
Speaker 1: inner operability of blockchains. We have to be able to
Speaker 1: you know, we talked to the regulators. You know, in
Speaker 1: the very very very remote chance that blockchain A goes down,
Speaker 1: all of our customer experience has to be on blockchain
Speaker 1: B immediately. So I mean, I think you can think
Speaker 1: of us as had problem solved some interoperability sure issues already,
Speaker 1: but this idea that we've that we have built digital
Speaker 1: wallet ecosystems wrapped around a number of blockchains and in
Speaker 1: a securities permission space. Right because there's a lot of
Speaker 1: digital wallets on planet Earth. I in my I have
Speaker 1: two phones in my pocket over there. That means I
Speaker 1: have two digital wallets on my Apple phones right now,
Speaker 1: those aren't those aren't wallets that hold securities by and large, right,
Speaker 1: I mean again, my United ticket tomorrow is held in
Speaker 1: one of those digital wallets. But this idea that we
Speaker 1: have three point zero digital wallets where you know, you
Speaker 1: and I can control ourselves and where we can actually
Speaker 1: you know, we get the outcome of what's in the wallet,
Speaker 1: as opposed to you know, somebody like Apple just taking
Speaker 1: that information and use it for their own benefit to
Speaker 1: provide us goods and services. You know, those are the
Speaker 1: futures that we see, and you know, we've had to
Speaker 1: be and we've developed digital web through printal wallets, and
Speaker 1: we have a lot of in qorey and discussions with
Speaker 1: folks who don't want to go through the brain damage
Speaker 1: that that they've gone through to you know, is there
Speaker 1: a way that you know, we can leverage Franklin Temple's
Speaker 1: a digital ecosystem. You know, I have nothing really to
Speaker 1: report about that specifically other than that, yes, we have
Speaker 1: built digital wallets across the number of different blockchains with
Speaker 1: our kind of proof of concept and yet commercially viable
Speaker 1: and expanding Benji array of assets. You know, we expect
Speaker 1: to have you know, digital representation, tokenized representation of a
Speaker 1: wide variety of products and services in the future. They'll
Speaker 1: have to be held in a wallet, whether they're in
Speaker 1: our wallet or where they interoperate with somebody else's wallet.
Speaker 1: You know, we're an advice we're an advice business, not
Speaker 1: necessarily the infrastructure business, but we see the future needed
Speaker 1: to be in the wallets, yes for sure.
Speaker 2: Yeah, so go back to that twenty thirty five question again.
Speaker 2: Our majority of us with our phone, our digital identity,
Speaker 2: are assets in a digital format, tokenize stable coins and
Speaker 2: things like that, crypto assets all in a unique central wallet,
Speaker 2: or we're having multiple wallets.
Speaker 1: You think, well, I don't know what do you think about.
Speaker 1: I mean, you're still gonna have a phone.
Speaker 3: That's a good question.
Speaker 1: We're gonna be using that. Are you gonna be using
Speaker 1: those medical assets that you're just going to talk to
Speaker 1: it and something else happens. I don't know what the
Speaker 1: hardware device he is of in the future. But yeah,
Speaker 1: the idea that you can control that's the problem. That's
Speaker 1: the kind of thought about Web three point zero and
Speaker 1: different between you know, earlier versions of the Internet where
Speaker 1: you can control the outcome, where you're an owner of
Speaker 1: the assets and you can permiss others to access your
Speaker 1: data and your information. That's so that's a we see
Speaker 1: that world. Yeah, you know, unfolding in front of us. So, yeah,
Speaker 1: lots of opportunity, oh for sure.
Speaker 2: Now Franklin Templeton has a big ETF business, and you've
Speaker 2: launched a lot of different crypto ETF assets ETFs. I'm
Speaker 2: curious what's your strategy there? Do you foresee tokenized assets
Speaker 2: living in ETFs as well?
Speaker 1: Okay, so let me unpack that question a little bit.
Speaker 1: I think the ETF, the the bringing crypto into the
Speaker 1: securities forum through the ETF and unlocking the opportunities in
Speaker 1: the legacy want wallet broker dealer was was a was
Speaker 1: a big watershed moment because previously you had, uh, you
Speaker 1: had more do it yourself. You know, individual investors with
Speaker 1: all these digital wallets who are buying you know, uh,
Speaker 1: bitcoin and eight and soul and a variety of digital
Speaker 1: assets including n fts like board apes and all that
Speaker 1: kind of stuff inside of that digital wallet. And now,
Speaker 1: all of a sudden, the first time you had well,
Speaker 1: I don't have to have a digital wallet. I already
Speaker 1: have a relationship. I already have a broker dealer account
Speaker 1: for granted, and I probably have four or five of them.
Speaker 1: And now I can buy this exposure to this emerging
Speaker 1: thematic story about the expanding block chain and the importance
Speaker 1: of being able to invest in networks into my own
Speaker 1: broker dealer, and and you can do it at really
Speaker 1: low cost. We have a a passive market product that
Speaker 1: we call easy pz easy, So we're making crypto easyps,
Speaker 1: make investing in crypto easyps. It's kind of a nice
Speaker 1: little jingle to say, but I mean we're offering that
Speaker 1: at like nineteen basis points. We're kind of out loud,
Speaker 1: so I mean calling out a lot of cost to
Speaker 1: allow that to happen. I think that was a big
Speaker 1: watershed moment because a lot of investors that either had
Speaker 1: to be I got to do this and figured it
Speaker 1: out myself, or institutional investors would be paying, you know,
Speaker 1: private funds with private fund fees, a lot of money
Speaker 1: to make that happen. So I think I think there's
Speaker 1: gonna be a lot of change because of the ETF themselves. Now,
Speaker 1: the second part of your question.
Speaker 2: Was, remind me if tokenized assets will be in ETFs
Speaker 2: as well.
Speaker 1: If token i ised assets and ETFs, I think of ETF.
Speaker 1: I mean, and ETF looks like a stock, right, but
Speaker 1: it's like a portfolio wrapped in a kind of a
Speaker 1: stock wrapper in some way, shape or forms. There's again
Speaker 1: a lot of change it's going to come about because
Speaker 1: even ETFs themselves have a number of different components of
Speaker 1: the make the ETF work that are in this back
Speaker 1: up our conversation, you know whatever thirty minutes when I
Speaker 1: say there's rent seekers inside of the process that make
Speaker 1: an ETF work. Whether this technology supplants replaces some of
Speaker 1: those is an interesting thought process. It wouldn't surprise me
Speaker 1: that it doesn't dramatically change in some way shape ETFs.
Speaker 1: I mean, ETFs are the most successful you know product
Speaker 1: in you know, on the planet bringing money. And this
Speaker 1: is and we do have a great ETF business, and
Speaker 1: we're and we're focused on expanding our ETF business as
Speaker 1: it currently exists. But we're also smart enough and aware
Speaker 1: enough to know that there are technologies that come along
Speaker 1: in every industry that's a plant, whatever the current form is,
Speaker 1: whether that's albums and CDs and then MP three's, you
Speaker 1: know type stuff, it's like all of that gets impacted
Speaker 1: in some way, shape or form. So our eyes are
Speaker 1: always forward about how to make sure that we're prepared
Speaker 1: to deliver those services as the technologies allow us to
Speaker 1: do so.
Speaker 3: Yeah, for sure, Roger.
Speaker 2: One of the things everyone is waiting for is the
Speaker 2: Clarity Act to pass. So I'm curious, you know, what
Speaker 2: are your thoughts you expect that to pass this here
Speaker 2: and that's a tough question. But also what would that
Speaker 2: mean for Franklin Templeton's digital asset business.
Speaker 1: Yeah, I don't, you know. Market structure acts are certainly important.
Speaker 1: I mean we would. I think we're supportive of a
Speaker 1: number of different things as it relates to the Clarity Act.
Speaker 1: I mean, the defined rules always help all of us
Speaker 1: in the environment moving forward. You know, we think things
Speaker 1: that are securities and act like securities and smell like
Speaker 1: securities probably should be considered securities. At the same time,
Speaker 1: we understand, again, these technologies have come together and some
Speaker 1: of these laws you know, are literally eighty five years
Speaker 1: old now their law is because they are protecting consumers
Speaker 1: right by and large, and you know, I think that's
Speaker 1: a that's a great idea. Quite Frankly, We're going to
Speaker 1: see time and time again new things come about and
Speaker 1: if consumers get abused in some way, shape or form,
Speaker 1: that is not our desired outcome. We're in the business
Speaker 1: of trust right, We're in the business of trust. Everything
Speaker 1: we build and do has to be around promoting and
Speaker 1: expanding that trust. We even refer to our blockchain engineering
Speaker 1: not as software but as trustware, and so that business
Speaker 1: of trust is and that brand of trust is hugely,
Speaker 1: hugely important to us. Any sort of you know, new
Speaker 1: laws that are coming about need to keep emphasizing consumer
Speaker 1: protections and promoting trust in the overall ecosystem. However, it
Speaker 1: comes forward as opposed to, you know, displacing that trust
Speaker 1: and losing the confidence. I mean, I think that's what
Speaker 1: makes our capital market in the US, some of them
Speaker 1: robust on planet Earth, and you know, the great promise,
Speaker 1: so that you can accomplish lots of things. There's lots
Speaker 1: of different markets that have developed in the US that
Speaker 1: haven't developed in other parts of the world because we
Speaker 1: have that robust ecosystem. So any of the type of
Speaker 1: new laws that wrap around these things, we do have
Speaker 1: to recognize that there are new things though. The idea
Speaker 1: that you can invest in a network is a new thing, right,
Speaker 1: and so we don't want to constrict that behavior. We
Speaker 1: want to just modify it toward the benefit for all users.
Speaker 1: I didn't answer your question, did I.
Speaker 2: Did the bill get Do you think the bill is
Speaker 2: going to get past?
Speaker 1: No? No, I don't really have a good idea on that.
Speaker 1: I do believe that, you know, some of the large
Speaker 1: sponsors of the bills are now contending with a new
Speaker 1: environment with crypto winter, and so it's been really important.
Speaker 1: I'm sure they will be doubling down their efforts to
Speaker 1: try to move it through. But you know, politics is
Speaker 1: not something that's really easy to predict or hedge.
Speaker 2: Well, the big battle that's kind of holding up the
Speaker 2: bill is the banks pushing back on stable coin yield,
Speaker 2: which was part of the Genius Act. Any thoughts on that,
Speaker 2: and you know the banks maybe trying to still hold
Speaker 2: on to interests and yield.
Speaker 1: In that way, Well you say banks money funds. That's
Speaker 1: a differential between benji and a stable coin, right, And
Speaker 1: so the idea that again, if you if you pay rewards,
Speaker 1: you get a tax document that says you're getting some
Speaker 1: sort of reward. Is that interest? Is that a reward?
Speaker 1: What does that come in the idea that you hold
Speaker 1: an asset, you're going to get some reward for holding
Speaker 1: that asset. That reward has an economic value? Does that
Speaker 1: look an act like a security or we're trying to
Speaker 1: make big carve outs. Look, we know there's a geopolitical
Speaker 1: strategy for the US to be able to expand US
Speaker 1: dollar stable coins deeper across planet Earth. For the retain
Speaker 1: US dollar is the currency of reserve across the planet.
Speaker 1: And so there's a lot of you know, momentum in Washington,
Speaker 1: not just by the crypto or digital asset community, but
Speaker 1: you know, anything that keeps the US dollar in that
Speaker 1: position is going to be massively supported by and large.
Speaker 1: I think that's the big thematic reason to pay attention
Speaker 1: to this fight over about you know, whether stable coin
Speaker 1: can offer yield and whether that imperils community banks that
Speaker 1: sit in every corner you know, on main Street and
Speaker 1: every town by and large, and they may not not
Speaker 1: have their name JP Morgan Chase on them, but they
Speaker 1: might have you know, your your state state bank type
Speaker 1: of situation. Those I mean, those are real things, right,
Speaker 1: I mean, I think what you want to be careful about.
Speaker 1: Going back to the global financial crisis, what did we
Speaker 1: learn We learned from the Global financial crisis that if
Speaker 1: the banks aren't operating, the economy doesn't operate, right, and
Speaker 1: if you're going to be doing things that remove a
Speaker 1: tremendous amount of the revenue and or profit potential for
Speaker 1: banks themselves. I mean a stable coin does it. When
Speaker 1: you put money into a stable coin, there isn't a
Speaker 1: multiplier effect that they lend it out into the economy
Speaker 1: and fund mortgages or fund you know, small businesses in
Speaker 1: any way, shape or form. They take it, they earn
Speaker 1: the yield on the t bills, and they pocket and
Speaker 1: put it their shareholders. So there is you know, we
Speaker 1: found in the global financial crisis that banks, you know,
Speaker 1: their utilities, they're important utilities, and we need them to
Speaker 1: function on function properly in order for us to have
Speaker 1: a vibrant economy. This is again the difference between the
Speaker 1: US economy and a whole bunch of other economies on
Speaker 1: planet Earth that have very fragile and unstable you know,
Speaker 1: financial systems. I did a lot of work in Argentina
Speaker 1: many many years ago in South America, and my visits
Speaker 1: would be, you know, one day in Argentina and like
Speaker 1: two or three days in Montevideo, Uruguay. You know, why
Speaker 1: is that the case? I mean, Argentina is a big country,
Speaker 1: Uruguay is a big hunt it's got a lot of people,
Speaker 1: it's got a lot of cows. Love both countries, by
Speaker 1: the way, just difference between the population base. Why is
Speaker 1: that the case. I'm in Montevideo, Uruguay. I'm there because
Speaker 1: the Argentines learned a long time ago that if your
Speaker 1: money's in the banking system, it's possible that the government's
Speaker 1: gonna come in and take your savings account and convert
Speaker 1: it into long term Argentine bonds and right, and so
Speaker 1: the confidence in the financial system themselves that eroded, so
Speaker 1: they wanted to move money out of the country. I mean,
Speaker 1: we don't want those things outcomes in the US. And
Speaker 1: so there's gonna be a dynamic at play here because
Speaker 1: of the way banks do. I think it's naive to
Speaker 1: think that banks just you know, come in and charge interest.
Speaker 1: And so therefore, if we have a new form of money,
Speaker 1: we should be able to you know, pay interest as well,
Speaker 1: and we're gonna have the same We're gonna have the
Speaker 1: same you know, operate in the same economy and helping
Speaker 1: expand the economy as banks have done for literally decades.
Speaker 1: That that's probably a somewhat naive position, to be honest
Speaker 1: with you, Yeah.
Speaker 2: And I don't know what the compromise is going to be.
Speaker 2: We're gonna have to wait, and said, I think there
Speaker 2: was an they're meeting today this morning at the White
Speaker 2: House between the bank and the crypto industries. So hopefully
Speaker 2: they find some sort of compromise and we can get
Speaker 2: the Clarity Act pushed through.
Speaker 1: Yeah. Again, I think one of the big, big, big
Speaker 1: I mean, going back to early last year when one
Speaker 1: of the first UH moves by the administration was to
Speaker 1: kind of do away with SAB one twenty one, which
Speaker 1: was the accounting you know recommendation that said you had
Speaker 1: to hold a dollar capital for everything that might be
Speaker 1: in some sort of blockchain product or service. I mean,
Speaker 1: that was just a freeze ray on everything. And so
Speaker 1: we do want to unleash the creativity and opportunities exist
Speaker 1: within the financial systems, you know, here in the US.
Speaker 1: I think we I mean, I think that's a noble
Speaker 1: and you know, good idea. By and large, how they
Speaker 1: crypto industry, you know, lobbies against bank. We do know
Speaker 1: also that there's a lot of money deployed by the
Speaker 1: crypto industry in super PACs prepared for the mid term
Speaker 1: election relative to what the you know, legacy financial community
Speaker 1: is doing as well. So yeah, we'll be super interesting
Speaker 1: to see who comes out on the right side of that.
Speaker 2: Yeah, I didn't have this in my bingo card. You know,
Speaker 2: the banks would you know, be battling crypto this year
Speaker 2: on that. But yeah, hopefully to find a balance, right,
Speaker 2: I think that's important. But to your point, I don't
Speaker 2: think you can just you know, with all the things
Speaker 2: that banks are responsible, like you mentioned mortgages and all that,
Speaker 2: and credit and all that, we can't just pull the
Speaker 2: seat from under them.
Speaker 1: The other thing that it's going to be important, and
Speaker 1: we saw this in a global financial crisis too. It's
Speaker 1: the lines kind of credit ultimately, you know, whether it's
Speaker 1: in the in the banks and stable coins, it's all
Speaker 1: sits inside of you know, the US dollar that the
Speaker 1: Federal Reserve has responsibility for, you know, and you know
Speaker 1: the Treasury and all of that kind of system. And
Speaker 1: so we have to recognize that as well. And so
Speaker 1: it's likely if you have these big if you have
Speaker 1: a if you have some institution that has some sort
Speaker 1: of systemic risk associated with it, with a whole bunch
Speaker 1: of money from businesses and or you know, consumers, you know,
Speaker 1: associate with it. Then they are going to need to
Speaker 1: have lines, you know, maybe even just like credit lines
Speaker 1: with the FED as well. Put those things type of
Speaker 1: things in place. Those are things that don't necessarily exist currently, right,
Speaker 1: I mean we talked about that with money fund as well.
Speaker 1: I mean, we'd love to have Benji be big enough
Speaker 1: that the that the FED is like, we need to
Speaker 1: have you to have a credit line associated with that.
Speaker 1: Those are going to be important things as well. Right,
Speaker 1: You don't want to grow up this thing by its
Speaker 1: own with you know, being permissious, permissionless, and and and
Speaker 1: deregulated without understanding how it potentially gets woven in again,
Speaker 1: because while the genius acts certainly for the vast for
Speaker 1: for the US specific stable coins defined what that collateral
Speaker 1: pool could be should be and limited it kind of
Speaker 1: in the same way that two A seven money funds
Speaker 1: in the US have a very limited types of assets
Speaker 1: that they can hold. You know, that's just one step
Speaker 1: of that. When you think about that, we haven't had
Speaker 1: a credit cycle unfold. You know, let's let's make sure
Speaker 1: that we're making sure that we have all of the
Speaker 1: appropriate safeguards in place for all actors moving forward. So
Speaker 1: those are also going to be important things to be
Speaker 1: thinking about.
Speaker 2: Yeah, well said so Roger, what's on your digital Asset ROAPEMAP.
Speaker 1: For this year. It's this idea that you know, now
Speaker 1: with you know, skepticism melting and more significant players coming
Speaker 1: into the entire using blockchain as infrastructure ecosystem, how we
Speaker 1: integrate with more of those, how we deliver more products
Speaker 1: and services besides just you know, kind of these boring
Speaker 1: things like money funds. Money funds are I call them boring.
Speaker 1: We think of them as infrastructures much as anything, not
Speaker 1: like really an asset class. But we kind of you know,
Speaker 1: just kind of solve that problem an opportunity coming forward.
Speaker 1: So how do we get this experience of other assets
Speaker 1: into the h the both the existing kind of digital
Speaker 1: ecosystem as well as kind of our legacy customers and
Speaker 1: clients who are exploring those. That's a lot of our
Speaker 1: heavy lift that we're involved in over the next couple
Speaker 1: of months. But it's an exciting thing to be doing.
Speaker 1: As I mentioned very early, you know, of the forty
Speaker 1: years that I have been doing this, the idea that
Speaker 1: we're going to meet customers and clients in a new
Speaker 1: environment We're going to be receiving assets, by the way,
Speaker 1: in these new environments, right, we know the projects by
Speaker 1: the Treasury obviously NASDAC, New York Stock Exchange. So the
Speaker 1: raw materials of asset management that are coming to us
Speaker 1: are becoming on these you know, blockchain rails. That changes
Speaker 1: a lot of the underpinnings of the operations that we
Speaker 1: have to think about. And then that third component I
Speaker 1: talked about, can we bring more differentiated type of asset
Speaker 1: experiences into clients portfolios? Those three things that's a lot
Speaker 1: of would to chop quite frankly. Oh.
Speaker 3: Absolutely.
Speaker 2: Well, I'm excited for the updates and I'll be paying attention.
Speaker 2: We'll love to have you back on as things progress.
Speaker 2: I have some wrap up questions here for you. First,
Speaker 2: if you could create your own metaverse.
Speaker 3: What would the theme be?
Speaker 2: Oh my god, where'd you put your oculus in metaverse?
Speaker 1: Well, I have some great passions in my life. I
Speaker 1: too like basketball. I grew up a Central Illinois boy,
Speaker 1: and you know, basketball was everything we do. The movie
Speaker 1: Housier's could have been our community by and large, So
Speaker 1: the metaverse would have a lot of basketball. And you know,
Speaker 1: we're seeing this huge inflection point in women's basketball. By
Speaker 1: the way, right, the delta of popularity and opportunities and
Speaker 1: women's basketball is rapidly rising. That's super exciting to my family.
Speaker 1: I have a whole family female basketball players. I have.
Speaker 1: It took the Midwestern boy put them in some alpine
Speaker 1: communities for a while. I love sliding down slick things
Speaker 1: at high rates of speed, not as you know at
Speaker 1: my age, maybe not as high rates speed I used to.
Speaker 1: My metaverse involves a lot of explorations and mountains and
Speaker 1: different type of topographies. I guess the other thing is
Speaker 1: I'm hoping and then not too distant future as I
Speaker 1: get to experience, you know, not just my own children,
Speaker 1: but another generation about how to grandparent through that. I
Speaker 1: don't know. Has that really a metaverse? So I grandchildren,
Speaker 1: snowsports and basketball.
Speaker 3: Were you a Chicago Bulls fan?
Speaker 1: I was. The Chicago Bulls weren't very good when I
Speaker 1: was growing up. But my boyhood hero was a a
Speaker 1: player by name of Doug Collins who ended up being
Speaker 1: a coach with Chaga Bulls. But he played in my
Speaker 1: at the Illinis State University, which is in normal Illinois
Speaker 1: where I grew up, and of course, he went on
Speaker 1: to I think he was the number one draft pick
Speaker 1: for the seventy six years, and he had that that
Speaker 1: experience in the the Munich Olympics where you know, you know,
Speaker 1: the US did not win gold. We don't have to
Speaker 1: punch down all that premiation of that. But yeah, Doug
Speaker 1: Collins was my childhood hero. Is the best call.
Speaker 2: I love them as a commentator as well. I enjoyed
Speaker 2: listening to him when you commented on games, Okay, rapid
Speaker 2: fire questions. Favorite food, favorite food I like tacos. Favorite
Speaker 2: musician or band, Favorite musician or band?
Speaker 1: My favorite? If I said Taylor Swift. How would you
Speaker 1: feel about that?
Speaker 3: Well, my daughter will love that.
Speaker 1: Yeah, well good, I'm appealing to your daughter. The Women's
Speaker 1: committee at my house, I mean maybe that's just happened
Speaker 1: because the Women's committee dominates who gets to beyond the
Speaker 1: airwaves at my house and on stuff. So I've taped
Speaker 1: to that. You know who else I like quite a
Speaker 1: bit is Green Day.
Speaker 3: Oh yeah.
Speaker 1: Green Day is a Northern California band, their East Bay band.
Speaker 1: I live in the East Bay and so I love
Speaker 1: I love Green Day Quay. But it's great. It's great
Speaker 1: to see them on a Super Bowl pregame show.
Speaker 2: Yes, Dookie one of the best albums ever.
Speaker 1: Absolutely yeah.
Speaker 2: Regarding Tailor Stuff, every time I go into my car
Speaker 2: my phone because it's automatically SYNCD with Spotify, Taylor stuff
Speaker 2: comes on.
Speaker 3: Oh yeah, I don't like that, but my eight.
Speaker 1: Year old absolutely well, anything for the eight year old.
Speaker 3: Right yeah.
Speaker 1: Favorite movie, A favorite movie. I love the Godfather movies.
Speaker 3: Yeah, yeah, it was a great. Favorite book.
Speaker 1: A favorite book? Wow, you know I I love the
Speaker 1: John Irving novels, the whole series of them. I spent
Speaker 1: one year my academic life at the University of Iowa,
Speaker 1: and he was at the writer's workshop in Iowa, and
Speaker 1: I just liked historytelling quite a bit. Turns out I
Speaker 1: can think his grandchildren were Olympians on the on the
Speaker 1: alpine ski team, and uh In in Italy and Qurtina
Speaker 1: right now, Yeah, I read an article about that, but yeah,
Speaker 1: I was. I always found his story history is fascinating.
Speaker 3: Wow, I'll check that out. When you're not working, what
Speaker 3: are you doing for fun?
Speaker 1: Gosh? I try to keep myself, you know, healthy and
Speaker 1: and uh moving forward, moving I find that, you know.
Speaker 1: I want to keep the body limber. I want to
Speaker 1: be able to you know, I expect to live to
Speaker 1: a ripe old age. I want to enjoy, you know,
Speaker 1: multiple generations behind me. I want to be able to
Speaker 1: teach them to, uh, to shoot a basket, teach them
Speaker 1: to you know, fish in a stream, teach them just
Speaker 1: to kind of enjoy life and and uh, just I
Speaker 1: love spending time with my family. Of course, I have
Speaker 1: very very great long term friends from when I was
Speaker 1: you know, even in first grade that are still really
Speaker 1: good friends of mine, and so I you know, I've
Speaker 1: taken up golf in the past several years. I used
Speaker 1: to think of golf as like kind of a well,
Speaker 1: is it an old person type of game? I don't know.
Speaker 1: But I started experiencing golf with my wife and her family,
Speaker 1: and it was such an enriching experience. It was just
Speaker 1: like I when I was a younger guy and I
Speaker 1: was playing golf, it was all about like, you know, trash,
Speaker 1: talking about oh crab shop. But what I really learned
Speaker 1: is like it's a whole bunch of enriching people. Might
Speaker 1: my wife might totally like long breakdown laughing when I
Speaker 1: totally miss and swing a shot whatever, but almost always
Speaker 1: there's something complimentary to say to somebody like you know,
Speaker 1: good ball strike, or like you know night direction. Oh
Speaker 1: you're in the fairway. You only might be thirty yards
Speaker 1: forward in the fairway because you mishit it. But I
Speaker 1: found it to be an enriching thing and it's very
Speaker 1: humbling situation, right, And so that's you have to pace
Speaker 1: through life on like that. Life is not. You have
Speaker 1: to be able to enjoy the journey through life. So
Speaker 1: you have to be able to enjoy the journey of
Speaker 1: the nine or eighteen holes, not just what the outcome is.
Speaker 1: I found that to be true in lots of life.
Speaker 1: It's not about the destination where you're getting to, but
Speaker 1: it's like the everyday journey that gets there. And I
Speaker 1: found that to be a nice humbling thing about golf.
Speaker 1: That puts you out there. You know, you got to
Speaker 1: wipe away what just happened, and you got to try it,
Speaker 1: you know, try for something else, and every once in
Speaker 1: a while, like a real miracle happens, and then you
Speaker 1: hope to keep doing it. But that's a that's a
Speaker 1: new pastime for me.
Speaker 2: I used to trash golf a lot, and then I've
Speaker 2: learned to respect it when I try to play with
Speaker 2: some people.
Speaker 3: This is hard man. Yeah, did your point pace?
Speaker 2: And it's a bit slum moving because I'm used to
Speaker 2: playing basketball and baseball, grew uplaying you know those sports,
Speaker 2: but golf is tough.
Speaker 1: Well, I hope you get to enjoy more golf. And
Speaker 1: what I also learned is like, if I golf, this
Speaker 1: is what I saw with my wife, she spends she
Speaker 1: prioritized spending time with her father golfing, you know, multiple
Speaker 1: times a month, you know. And I was at that
Speaker 1: time golfing with them. But I was like, if I
Speaker 1: take up golf, my kids will prioritize spending and I
Speaker 1: invest with them. There's going to be a time in
Speaker 1: my life where my kids actually prioritize spending time with
Speaker 1: me for five hours without phones or anything.
Speaker 2: Yeah, I'm in Yeah, oh yeah, for sure. I'll keep
Speaker 2: that in mind when my daughter gets a little bit
Speaker 2: older and I get older. But Roger, great conversation, looking
Speaker 2: forward to the future. Updates are on Franklin, Templeton, and
Speaker 2: Digital Assets. Thank you so much for taking the time.
Speaker 1: Yeah, thanks for having me.
Speaker 2: Thank you so much for tuning in. Please hit the
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Speaker 2: so much.