Tokenized stocks and ETFs: Ian de Bode (Ondo) on What’s Next [EN]

00:00:00: Lidia Kurt: Welcome to Inside Digital Assets, the podcast about the future of capital markets tokenization, digital assets, and the technologies that power them. We talk to people driving this transformation about real world projects, digital innovation, and one big question, what will the capital markets of tomorrow look like?

00:00:27: Lidia Kurt: Welcome to a very new episode of Our Inside Digital Assets, the podcast. And today I'm very pleased to announce, a very special guest I have today with me, um, Ian de Bode from Ondo. Hi Ian.

00:00:39: Ian de Bode: Hi Lydia. Thanks for having me.

00:00:40: Lidia Kurt: It's a, a big pleasure to have you here because, we announced we have a partnership together.

00:00:45: Lidia Kurt: Uh, so, uh, it's very interesting for us to deep dive today a bit into that partnership, but also hearing, uh, what you're doing with Ondo, uh, where you're looking at and where you're planning to go to. But for, uh, the listeners, uh, that might not know you, I'm not sure whether there are people around there, but there still might be, uh, people.

00:01:01: Lidia Kurt: So, uh, you're president at on the finance. Congratulations to also that role, which you, uh, acquired, uh, very recently, and you oversee strategy, partnership, and institutional engagement. For Ondo, but you have been with the firm already a bit now, uh, for, for the last, uh, couple of time, uh, also for building up Ondo.

00:01:18: Lidia Kurt: So very much, uh, like to hear how, how that has been going. Before joining Ondo, you have been a very, like, let's call it a traditional consultant. You worked for McKinsey. Uh, we have a, a career there. Um, so interesting to hear as well, uh, how you got, uh, from that side of the business, uh, to the tokenized asset side.

00:01:35: Lidia Kurt: But so thank you for being here and I'm very much looking forward to our conversation.

00:01:39: Ian de Bode: Thanks for having me.

00:01:41: Lidia Kurt: Let's start maybe, uh, also looking a bit into your, uh, personal, um, journey that you made. So how did you actually end up on, on the tokenized side of the world? Maybe you can, uh, share a bit those insights.

00:01:52: Ian de Bode: Yeah, uh, thanks for the question. Um, I, as you mentioned, um, post-business school, went to McKinsey, uh, wanted to a, a wide variety of things, but it's around the same time that I discovered Ethereum. As a concept, um, I'd, I'd heard about Bitcoin in, call it twenty fourteen, twenty fifteen. Uh, 2016 is really when I discovered Ethereum, and I was completely enamored by the concept of a smart contract, right?

00:02:22: Ian de Bode: The fact that you could automate things on a blockchain that could then operate 24 7 without any human intervention. And I had at the time, already done enough in financial services at McKinsey that I understood. Wow. This could actually be a pretty meaningful thing if it ever scales at the time. It was, uh, very, very, very early.

00:02:44: Ian de Bode: Um, but I was completely enamored by the concept of trying to build out this whole, call it defi ecosystem before it existed. But in order to do that, you had to obviously put more assets on chain. You had to get the financial services companies to really take blockchain seriously. And so even in, back in 2016, I was this, uh, you know, uh, associate that kept telling everyone, I wanna do all the blockchain work that we can do.

00:03:10: Ian de Bode: And people would look at me and say, what? But at the time there was one guy already who had, uh, discovered the power of blockchain technology and was doing studies with banks

00:03:22: Lidia Kurt: Okay.

00:03:22: Ian de Bode: To, uh, help them understand what is a blockchain, how does it work, what are the benefits of tokenization? So one of the first studies I did at McKinsey back in 2016.

00:03:31: Ian de Bode: Was for, uh, a couple of French banks to teach them about tokenization and the benefits of it. So been going back, uh, quite some time. I guess that's now 10 years ago. Um, obviously since then a lot has happened. Also, not a lot has happened in some instances. But that really was the start of the journey for me, at least within McKinsey, to try to do as much as possible on this concept of tokenization.

00:03:56: Ian de Bode: At some point, you get a little tired of doing it for the large traditional financial institutions and telling them what they should be doing, but in reality, they move very slow, as we all know. And they just, or, or they just don't do it. That's also very possible. I have plenty of those. Um, so about two years ago, I decided to, uh, join Ondo.

00:04:17: Ian de Bode: I was very impressed already at the time with everything that they had shipped. Um, I really thought like on's always been a very. Credible and smart team with tra fi roots that understands tfi, uh, as well, and really has the mission to build a more open financial ecosystem.

00:04:33: Lidia Kurt: Hmm.

00:04:33: Ian de Bode: And that as a mission always really attracted me.

00:04:37: Ian de Bode: And when I was looking around at the market in terms of who's to, who's doing tokenization, right? Uh, anda really was the one, quite frankly, that stood out. And so the decision to join them, quite frankly was pretty easy.

00:04:48: Lidia Kurt: How important was that? Um, that characteristic, which I also see is that you have some sort of a tie to the traditional industry at Ondo.

00:04:56: Lidia Kurt: How important was that for you also to make that shift to Ondo? How important do you think is that factor for, for success?

00:05:02: Ian de Bode: I think it's actually pretty, pretty important. Um, there's a lot of reinventing the wheel in crypto, you know? Does a lot of things imperfectly, but there's a lot of things that they do very well and so on.

00:05:16: Ian de Bode: Those missions always been, let's take the best offi and improve that with the best of crypto, but in order for you to understand what is the best offi. Uh, you typically, it helps if you at least have had deep exposure to both these firms, the markets, et cetera, so you really understand what works well and what does not work well.

00:05:35: Ian de Bode: And sometimes in crypto you see a little bit too much of, we're just gonna reinvent things and from, from basics, which is very laudable. I mean, I like it because it, it leads to a lot of experimentation that in financial services has. Been lacking, quite frankly for a very, very long time. Uh, but at the same time it does mean that some people waste a lot of time trying to reinvent the wheel.

00:05:58: Ian de Bode: But our mission really always has been to just take the best of tra five, put it on chain, and compliment it with what blockchains and defi does best. You know, a good example of this can be the liquidity that exists in traditional markets. I know we'll talk about that probably a little bit more soon, but liquidity in traditional markets is great.

00:06:15: Ian de Bode: Ideally, when you tokenize an asset, you find a way to bring that liquidity on chain in a most seamless fashion. You don't try to recreate it. Whereas in many of the tokenization pilots that we've seen in the past, that seamless liquidity bridge was never built in part because people were trying to reinvent the wheel.

00:06:32: Lidia Kurt: Uh, I think it's, it's very interesting. And can you elaborate a bit more on, on the Ondo side of things? So now being at Ondo and, and your view that you have with Ondo on tokenized assets and, and in general securities and how they are going to evolve into the next generation, next decade of technology.

00:06:47: Ian de Bode: For sure. So. At Ondo, as I mentioned, our vision is really to create a more open financial ecosystem that anyone can have access to and really get the best available assets at the best available services, at the best available rates, right? That essentially is what we're trying to do. We're also pretty unique in the sense that we're one of the only firms, maybe the only.

00:07:09: Ian de Bode: That is taking a full stack approach to building out these ecosystems. So we have the ability to not just tokenize our assets, but also to build protocols, build applications, build platforms, even build our own blockchain to bring everything together. So we really run across the stack. We started this journey, uh, by doing that for tokenized treasuries.

00:07:30: Ian de Bode: Uh, we looked at stable coins and the product market fit that they had and said, stable coins are great products, but they're not perfect. They lack very good investor protections. They also do not offer yield, at least at the time. Um, so we thought, you know, tokenizing, uh, a treasury asset is a very good place to get started.

00:07:47: Ian de Bode: We have then focused on, since then we've iterated a little bit in how we tokenize these treasuries. Happy to talk a little bit more about that. But then we moved over to public stocks, public equities, ETFs, more broadly. We get a lot of questions on why, you know, treasuries and stocks and all of these liquid asset classes.

00:08:05: Ian de Bode: 'cause there's a predominant theme that u tokenize illiquid asset classes to try to enable more access and get people to buy them. But our thesis has always been kind of the opposite. Uh, u tokenize things for two reasons. One, because you wanna enable more seamless access into the asset. And number two is you wanna enable it as collateral on chain.

00:08:28: Ian de Bode: Because then people could use it 24 7 margin or for staking purposes or whatever it is they want. So it's seamless access and collateral launching. For both of those use cases, you actually need really good pricing discovery. Otherwise, no one's gonna wanna buy your thing 'cause they don't know if they're getting suckered or not, right?

00:08:47: Ian de Bode: If you wanna enable seamless access, people need to be able to look at an asset and say, I know this is priced in the right way, so I feel comfortable buying it. Same thing if you wanna enable something that's collateral on chain, you need very good price discovery, otherwise the haircut you're gonna get on your collateral is so large that it almost doesn't make any sense to do it.

00:09:07: Ian de Bode: So for both of these two reasons, you actually end up with assets that are very deeply liquid in traditional markets, typically public equities and the like, because they have incredibly good high pricing discovery because of the deep liquidity that already exists. So in part it's kind of, we are tokenizing assets because the underlying markets are already efficient.

00:09:30: Ian de Bode: Mm-hmm. Right? Because then we can enable them in, uh, the crypto ecosystem and for more seamless a access. Mm-hmm. That essentially is why we're doing the things we're doing. But that's a complete 180 on a lot of the things. You read otherwise?

00:09:46: Lidia Kurt: Yeah. Uh, but we totally agree there. And me personally, I have been involved in a lot of tokenization projects also early on in like real estate tokenization, all those private asset things that he tried to tokenize, which I believe at some point in the future that that might be an added value.

00:10:00: Lidia Kurt: But at the current point in time, uh, when we look at what we are doing now is exactly what you're saying is we look at the liquid assets and, um, tokenizing them, in my opinion as you're saying makes sense because. They're already liquid. And what we are also seeing, uh, at the moment is that for us, tokenization is just the next generation of technology, right?

00:10:19: Lidia Kurt: So after you had physical certificates and electronic registries, now you have tokenized asset. And what makes more sense than bringing, uh, asset classes on the next. Technological level than those asset classes, which are actually being used the most, which are the liquid asset classes, right? The ones that are being transferred, um, millions of times, uh, to the every day, right?

00:10:39: Lidia Kurt: And you need to have their more efficient settlement infrastructures that you have today. So our conclusion's exactly the same, right? You have to start where already liquidity is today, and you can even make that part more efficient because that's also what we hear often. But those asset classes. Are already efficient.

00:10:54: Lidia Kurt: Right. They might be on a trading level layer. Right. But they are not that much. If you look at settlement, if you look at cross border, uh, transaction and the like. Right.

00:11:03: Ian de Bode: A hundred percent.

00:11:04: Lidia Kurt: Yeah. Like

00:11:04: Ian de Bode: fundamentally. Uh, this, this, I guess goes back to the point of what does stratify do well and what does stratify not do well?

00:11:10: Ian de Bode: Stratify does the trading of these assets on a centralized exchange incredibly well. Right? The latency, the pricing discovery that you get there, unbelievable. You can make a critique about the trading hours, and I think that's fair, but when it, when it's up and running, it's very, very deep. Mm-hmm. But then the settlement of these things.

00:11:30: Ian de Bode: Is hardly, you can hardly call that efficient, particularly if you then compare it to some of the efficiencies that you can get on a blockchain where, uh, settlement can be instantaneous and you compare that to a t plus one settlement, right? Mm-hmm. So that's a good example of where you can really improve by just changing the underlying rails that this stuff.

00:11:48: Ian de Bode: Works on. And that's ultimately why you tokenize something.

00:11:52: Lidia Kurt: Yeah. Now, you recently launched, uh, your global markets suite where you tokenize over a hundred equities and funds, uh, uh, US equities and funds. Can you share a bit what you learned over, uh, the last few months when you were live, your biggest learnings, uh, since, since you went, uh, live?

00:12:08: Ian de Bode: Yeah. Um. So, I guess a quick recap, we, we launched on the global markets back in September, and it's the first platform that combines two components. Number one is the assets that we issue and the assets that you can buy are permissionless in the secondary market, meaning that you can freely transfer them around and the secondary market between any type of wallet.

00:12:31: Ian de Bode: So they're very similar to a stable coin in that regard, right? If you wanna mint and burn the asset, you have to onboard with us. In the secondary market, you can freely transfer them anywhere you want. That's a, that. That's a design choice. Uh, there's not a lot of assets tokenized, uh, stocks and ETFs out there that follow that model.

00:12:49: Ian de Bode: There are some others, but that is one big component of ARM gm. The other big component is the liquidity that is available to actually buy these assets, right? When you buy an asset, uh, on chain, whether that's, you know, tokenized Tesla or tokenized name, your ETF. You wanna make sure that when you buy the asset, you're essentially getting the best available price as you would get it in a normal brokerage account, right?

00:13:12: Ian de Bode: Um, otherwise, why would people buy the asset on chain? Maybe there's a couple of reasons as to why they would still want to do it, but it's gonna be very hard to scale these assets on chain if a user can get them at the same price as they would in a normal brokerage account. Well, again, when you look at the existing implementations, particularly for the permissionless versions, that type of price, stability and pegs to the underlying typically wasn't there.

00:13:35: Ian de Bode: Mm-hmm. And so when we launched on the global markets, it was the first time that you could buy these things, uh, with a permission in permissionless format while having this execution that you would normally get in track five. So since then, our platform has, uh, gone up to about 450 million in TVL. I think that means that we have about 65% market share in the category right now, which in a period of five months is not that bad.

00:14:01: Ian de Bode: Um, and it's growing pretty rapidly, but I think in part it's because it was the first time that you can combine the two. Now, in order to do that. We had to build a seamless bridge between the on chain environments and the track file liquidity so that we could instantly mint and burn an asset whenever someone wanted to purchase it.

00:14:20: Ian de Bode: That whole infrastructure of really seamlessly connecting tradify liquidity to on chain liquidity that had never been built. I think that was very clear as we were starting to build it. Uh, there's a lot of, and this may get into too much of the technical, um, specifics, but the way our platform works is via intent.

00:14:40: Ian de Bode: It means that a user basically signals and intends to purchase on chain. It doesn't immediately hit the buy button. There's a couple of steps. It's basically an RFQ model.

00:14:50: Lidia Kurt: Okay.

00:14:51: Ian de Bode: And that model is not the predominant model that exists on chain. People are used to buying with pre-funded inventory on chain, whether that exists on a centralized exchange or in a decentralized exchange.

00:15:02: Ian de Bode: The entire model in crypto runs on pre-funded inventory, instant buys. Mm-hmm. From available liquidity. And that's not how tripod works. Right. Um, even in stratify you can put, uh, orders on an exchange, you need to have the inventory somewhere, but at some point you net settle. It's not like, you know, everything needs to be pre-funded all the time.

00:15:22: Ian de Bode: And so that difference really came out as we were building the platform. Um, for the on chain environment. We ultimately, clearly made it work, but as we were dealing with some defi protocols, data aggregators, et cetera, we had to spend. Hours and hours educating them on how this system actually worked, because it kind of broke the fundamental mold of how a lot of people on chain think about markets.

00:15:48: Lidia Kurt: Yeah. So you somehow had to disrupt the thinking of the disruptors.

00:15:53: Ian de Bode: That's

00:15:53: Lidia Kurt: essentially, yeah. But can you, um, so the, the usage then ultimately. Did they have some, uh, aversion track to use such an RFQ model, or was it just rather a technical implementation, a hurdle, but once it was live, the users happily accepted that?

00:16:08: Lidia Kurt: Or do you still have hurdles for the users to get used to that or aren't they actually, um, realizing that at all?

00:16:14: Ian de Bode: Um, yeah, we try to abstract it as much as possible mm-hmm. From the user. So I'm pretty sure most users don't understand the technical specifics of how our system works. I mean, in the end, a u all a user cares about is how much can I buy, how much can I redeem?

00:16:30: Ian de Bode: Making sure that the liquidity to do that is there, and at which price can I do both.

00:16:34: Lidia Kurt: Mm-hmm. Right.

00:16:35: Ian de Bode: That is what a user should care about. So we built our system in such a way that that is essentially what a user can care about. But still today, when we're dealing with other centralized crypto exchanges and data providers and the, like, there's still a lot of ongoing education happening there.

00:16:50: Lidia Kurt: Yeah. Okay. Understood. Um, can you tell us a bit about the actual investors, uh, into the, into the, uh, on the products? So is, or are those mainly retails? Is it rather like large whales investing? Uh, how do you see that?

00:17:04: Ian de Bode: Yeah, it's definitely a little bit of both. So, uh, right now anyone with a crypto wallet and stable coins outside the US can purchase these things in the secondary market.

00:17:13: Ian de Bode: Um, we've seen some of our wallet partners really try to focus on two key client segments. Number one is the retail audience outside the US that has historically struggled with access to these assets. Mm-hmm. Right? It's kind of the thesis that. The what a, a stablecoin led the stablecoin is a very good way for a global audience to get exposure to the US dollar, right?

00:17:39: Ian de Bode: It's a very seamless way to get access to it. We've seen major adoptions in markets like Argentina, uh, in Africa, Southeast Asia. And it's those same markets where people struggle to get access to the US dollar. They definitely struggle with access to US capital market products more broadly. And so we're seeing significant amount of users access the product there, and some wallets really betting on those geographies to try to target, you know, the, the population that historically has struggled with axis.

00:18:09: Ian de Bode: That's one. The other bit is really the very, very large whales that are crypto native that, um, you know, hold sometimes tens if not hundreds of millions of crypto on centralized crypto exchanges, or sometimes in Web3 wallets, and that now for the first time, have a platform where they can have both their crypto and their stocks in one place.

00:18:32: Ian de Bode: And really seamlessly trade between them 24 5.

00:18:35: Lidia Kurt: Mm-hmm.

00:18:35: Ian de Bode: That as a value prop already rings very interesting to many. Uh, and we're seeing, you know, some users literally buy 10 million bucks of, of, of tokenized Google. Actually earlier today we had a user buy $9 million of tokenized Google, um, more or less in, in about four minutes time.

00:18:54: Ian de Bode: Um, so those are clearly big whales that are making big purchases, and for them the main appeal is to have everything in one spot. Moving towards the Everything app that, you know, there's been quite some rage about. Because these assets are tokenized, they can live on the same rails as other crypto products.

00:19:10: Ian de Bode: So crypto native audiences, crypto native wealth, can access all these things in the way that they're used to and wanted.

00:19:18: Lidia Kurt: Do you see in your vision, uh, for Ondo, a move from like those individual investors, uh, also for towards like institutional adoption or maybe also more in general? What do you think is needed for the.

00:19:29: Lidia Kurt: The whole tokenized asset space to move even more, uh, into the, into the institutional adoption phase. We see it a bit on the money market fund side, but uh, I'll be interested to hear your opinion in general, how that move, uh, can actually be accelerated.

00:19:42: Ian de Bode: Yeah. I think when you, when you think about the overall roadmap of how this is all gonna evolve, I think the first user group that will always adopt this stuff is those ones that historically have not had, had access.

00:19:55: Ian de Bode: Right? All of a sudden, if you have access now, you're definitely gonna start using it. The value prop is a complete no brainer. Um, but that's typically retail unbanked type of populations or people who have struggled. Then you go into the next user group, which. Before had access. It was just not, the user experience wasn't that great, right?

00:20:15: Ian de Bode: You have people, uh, globally, but quite frankly, even in the US over time. Um, although to be clear, our current product is only available outside the us. These users have a brokerage account, they have a crypto account. They would love to have them in the same spot. Now all of a sudden, that's, uh, available to them.

00:20:30: Ian de Bode: So they start. Over time, even migrating some of their assets over from the brokerage into the crypto environment. And they, they like having everything in one place. So that's really a convenience argument, as long as the experience is more or less equal, if not slightly better. And then the third group that is going to adopt this stuff.

00:20:49: Ian de Bode: I think is really those, the group that already has access and pretty good access for what it's worth, they have access to services that a lot of the retail audience, quite frankly doesn't have access to. But then at some point, your product reaches a scale. A utility that they can't get in stratify, and that's when you get to institutional adoption.

00:21:09: Ian de Bode: So a good example of that for tokenized treasuries may very well be. Um, right now with tokenized treasury, you get this question a lot like, why would I even put my money into a tokenized treasury? Why not a normal treasury? Well, turns out in our tokenized treasury products, you can subscribe and redeem 24 7 right now with stable coins.

00:21:27: Ian de Bode: Pretty soon with tokenized bang deposits. So the concept of a cutoff disappears.

00:21:33: Lidia Kurt: Mm-hmm.

00:21:33: Ian de Bode: That as a value prop to a lot of institutional investors, I think will ring pretty interesting. 'cause then let's say you miss the cutoff on Friday, uh, you know, 2:00 PM 5:00 PM whatever it is, if it's Saturday, 2:00 AM and you wanna sweep some cash into a tokenized treasury, you can't.

00:21:51: Ian de Bode: That's where you start seeing institutional adoption really is when the utility you can offer on these tokenized products is better than what is available in stratify. But in order to make that happen, sometimes we also need tra fi rails to come along a little bit, and we're starting to see that happen with major banks rolling out 24 7 tokenized deposits.

00:22:12: Ian de Bode: Uh, you know, there's a lot of pilots going on to actually tokenize an individual treasuries, so you can move it around 24 7. It's collateral. Once those stratify reels start moving 24 7, I think, you know, it'll be very quick. A lot quicker than what a lot of people think when tokenized products can have a much better value proposition than traditional products.

00:22:34: Lidia Kurt: Are you also looking, um, I'm not that sure how, how closely also in the US that's, that's even possible on, on your side though. But in, in other jurisdiction there's definitely the possibility. Um, so instead of taking like treasuries or even stocks and then rapid and tokenize, uh, the, the wrapper, um, really tokenize.

00:22:54: Lidia Kurt: The, the issuance itself, obviously with treasuries that, uh, might need a bit of the, um, collaboration with the, with the treasury itself, uh, but looking at, at other, uh, other asset classes, maybe even, or, or like smaller equity shares, or is that something you're looking at intensively?

00:23:09: Ian de Bode: Oh, for sure. Um, 'cause you know, there, there are different ways to tokenize.

00:23:13: Ian de Bode: Uh, we recently put out a blog post, uh, not tokenization. Uh, not all tokenization is created equal, right? 'cause right now in the market, there's a lot of debate around what is the right way to tokenize.

00:23:22: Lidia Kurt: Yeah.

00:23:22: Ian de Bode: You've got the DTCC and nasdaq, et cetera. There are starting to work towards a tokenized version of whatever asset is actually held at the DTCC.

00:23:31: Ian de Bode: That's nice because then you can move the underlying acid around 24 7 and settlement dramatically improves. Great. Then there's a version of tokenization where. It's not at the DTCC level that you're doing it, you're doing it at the transfer agent level. That means that an individual company can go and tell a transfer agent, Hey, I would like you to tokenize some of my stocks natively so that the token itself is the equivalent of the stock of the public company.

00:23:58: Ian de Bode: And that way an investor can hold the actual stock on chain and again, move it around 24 7 between allow listed wallets. If you want to do SEC lending over time on chain and actually have the, you know, underlying stock, uh, on chain, that could be quite beneficial. Great. Uh, and then there's the version that we do where instead of, you know, tokenizing the native asset, you tokenize it via a wrapper form.

00:24:23: Ian de Bode: Could be, you know, the concept of beneficial ownership or something, or a new, uh, legal structure. Uh, there are other benefits of doing it that way because particularly if you issue it as a new instrument. You can issue it like a dead instrument, for example, against the underlying, that's how we did on OGM.

00:24:41: Ian de Bode: And that allows us outside the US to make it, uh, permissionless transfers in the secondary market. Can't do that if you do native tokenization, for example. Mm-hmm. At least not currently, uh, the way the US laws are written. So each model, I think has. Different benefits. Um, Ondo as a company actually has the reg stack to do all, all three of them.

00:25:02: Ian de Bode: So that's why we try to stay abreast of each and every one of them and make sure that we understand the benefits of each over time. Will definitely do all three of them. Um, but my overall message, I guess to the audience would be. Uh, don't let yourself get suckered into thinking one is so much better than the other because one company said that this is so much better.

00:25:22: Ian de Bode: Typically, companies try to push that narrative because they can only do one model and not the other two. Right. I think we're in a unique position 'cause we can do all three. I. Um, so, you know, each one has benefits.

00:25:34: Lidia Kurt: Mm-hmm. Uh, now, uh, looking a bit into the future, so now having a tokenized, let's say asset stack, uh, allows for totally different possibilities.

00:25:44: Lidia Kurt: Right. Have you considered, uh, yourself and also for, for others, a company, how that might, might actually shift market structures? So are the roles of the banks going to stay the same? Are the roles of the, the other financial intermediaries are going to. Stay the same, or how do you see a change actually happening in the future through tokenization?

00:26:02: Ian de Bode: Yeah. That really is the billion dollar question, isn't it? It's a great question though. I would've loved that question when I was at McKinsey. Um,

00:26:12: Lidia Kurt: nice flight on that.

00:26:13: Ian de Bode: Oh, I'm sure

00:26:15: Lidia Kurt: now we wouldn't have to build it.

00:26:17: Ian de Bode: Um, I mean, the role of companies in financial services. Obviously will change once assets become increasingly tokenized.

00:26:29: Ian de Bode: And, um, you know, this will be most apparent with concepts like, uh, the CSDs and the TAs, um, or a custodian and a bank. What a bank is able to do, their role may change because, I mean, take the concept of a bank. Uh, you know, a bank and, and the, the services they do, it was never really built around infrastructure where you can take your asset and move it into a self custodial wallet.

00:26:57: Ian de Bode: 24 7. Right. That whole concept of self custody, I mean, it existed in the form of cash, I guess. Mm-hmm. It's not very safe. And you could argue that self custody in a crypto environment also still has some safety issues.

00:27:10: Lidia Kurt: Mm-hmm.

00:27:10: Ian de Bode: Um, but obviously it's a very different paradigm. And in a world where people would like to have the ability to do self custody of their assets, the role of a bank may change over time.

00:27:20: Ian de Bode: Maybe instead of holding the assets, they hold the private keys or they hold a shard of a private key. So what that role is in some instances will change, but then again, it won't really change. It's just a different implementation of it. Again, going to the example of the bank, whether they hold the actual underlying asset or they hold a shard of the private key, so they allow you to hold the asset.

00:27:41: Ian de Bode: You could argue that's a little bit of the same thing. However, if a bank doesn't actually hold the asset, can they still do maturity transformation on those assets? Probably not. So it does change your business model quite a bit.

00:27:53: Lidia Kurt: Mm-hmm.

00:27:54: Ian de Bode: Um, I think a lot of companies, uh, are not really ready for those types of shifts, quite frankly.

00:28:02: Ian de Bode: Um, but it is still early days. However, every single traffic company, I think, should be actively looking at all of these developments and forming a perspective. What some of the new business lines and new opportunity is that they could have in a world where assets become increasingly tokenized.

00:28:22: Lidia Kurt: Now, specifically for, for Ondo looking into the future, um, seeing how also the financial industry develops and, and develops even further into the, the tokenized world.

00:28:31: Lidia Kurt: What's on your agenda? So what are your next steps? Where are you planning to go?

00:28:36: Ian de Bode: Yeah, great question. Right now we're at a stage where. I mean, it's, it, I, I feel it's, it's been 10 years since I did my first tokenization project. You would've expected us to be a little further than we are now, but in the 10 years.

00:28:51: Ian de Bode: You know, we're still pretty early days, quite frankly. We are and we aren't, right? Like there's only one asset class that has reached a little bit of terminal velocity as it comes to tokenization, and that's cash right in the form of a stable coin. I forget what the latest numbers are. I still, in my mind, stable coins are 300 billion in a UM, give or take.

00:29:09: Ian de Bode: It's probably bigger at this point, but you know, those are meaningful numbers. And it's, and it's growing very, very rapidly, but everything else is still early days. Tokenized treasuries is almost 10 billion. Um, you know, it's only 10 billion in the market. That is, I don't know, God knows how large tokenized stocks as a total category is not even a billion dollars right now.

00:29:29: Ian de Bode: So it is very early days, but in part, that was because. The liquidity layer to do these trades on chain wasn't available. We needed stable coins for that, and they are now available in size. That's why you're seeing all these other asset classes really come on board as long as you can guarantee redemptions and subscriptions.

00:29:49: Ian de Bode: Stable coins in size at all times, then investors feel comfortable really entering a category and exiting it, uh, at the same time. And that's why you're seeing such rapid growth in tokenized treasuries. When I joined Ondo two years ago, the entire category was listed a billion, right? And now at 10 billion.

00:30:07: Ian de Bode: Um, and so I expect tokenized treasuries as a category to continue to grow. Tokenized stocks reminds me of tokenized treasuries two years ago. So, you know, maybe in two years that thing will be at $10 billion. Still in the grand scheme of things, that's not a lot, but it is growing rapidly.

00:30:20: Lidia Kurt: Mm-hmm.

00:30:21: Ian de Bode: But we at Ono feel pretty comfortable that at this point we've built the infrastructure to bring these assets on chain in a way that makes sense for investors, that has good investor protections, and that people feel comfortable entering and exiting these positions, um, with ease.

00:30:37: Ian de Bode: So if you assume that more or less right now, we've reached a point where. Stratify assets are making their way onto crypto rails with ease in at scale in terms of number of assets. I think what you'll see over the next two years is that people will really fundamentally innovate in all the other things surrounding it, whether that's brokerage, prime, brokerage, really in particular, right?

00:31:00: Ian de Bode: Not just buying spot access, but really getting leverage on these access. And really being able to, uh, deploy trading strategies at scale. That's a major focus. We're starting to see some of that with perps on equities. Perps are not perfect products, but they're pretty cool in a sense. So I expect perps on equities to grow, but there's other ways to get leverage that really haven't been implemented that we're focusing on as well.

00:31:25: Ian de Bode: And then in parallel, I think what you'll see is how people do broader asset management, passive and active strategies. Will fundamentally change like the customization that is enabled by having these assets on public. Blockchain rails with defi enabled, I think is gonna take a lot of people by surprise.

00:31:46: Ian de Bode: Like right now, if you want passive exposure to a certain theme. You have to pick from the available ETFs that are out there and that are very active, that are well managed by large asset managers. Thank you very much for doing it. But for that service, they do charge, you know, admin fees that have been coming down over time.

00:32:04: Ian de Bode: But depending on the ETF and depending on how competitive it is, those fees can still be pretty high. Once all these individual stocks live on blockchain reels, it is trivially easy to start setting up smart contracts that can essentially do the same thing as a passive ETF, right? Just at a much lower cost base and with a lot more customized flexibility, like if I want defense exposure.

00:32:28: Ian de Bode: Uh, right now, most ETFs that offer defense company exposure, they don't include the tech forward companies like App Palantir. If I want to create a custom investment portfolio that does a couple of defense ETFs plus a bunch of Palantir in it, it's very trivially easy for anyone to set up a vault or whatever you wanna fund, or whatever you wanna call it, where people can basically put in stable coins.

00:32:51: Ian de Bode: It invests automatically into, into these individual stocks, and then it rebalances monthly, quarterly, doesn't matter. You pick, right? Mm-hmm. You can set these things pretty seamlessly, so. Those things, I think will start popping up more and more, um, where it's really innovation in asset management, wealth management more broadly now that these individual stocks are tokenized, it's very similar to all the innovation that we're starting to see in banking and payments.

00:33:16: Ian de Bode: Now that we have stable coins. Over the next two years, I think we'll see pretty dramatic innovation in brokerage more broadly, wealth and asset management, because we're starting to have tokenized stocks and treasuries.

00:33:27: Lidia Kurt: Totally agree on the, the individualized portfolio side of things. That's going to be a huge use case, uh, of tokenized assets.

00:33:34: Lidia Kurt: And also one thought on the, um, the. Timeline you said. I also believe we are very early days and we are already a couple of years in it. However, if you believe or if you think that we are restructuring how financial markets work for ground up, so we are really reshaping the backend of the financial industry.

00:33:49: Lidia Kurt: I believe that that is going to take a couple of years to that. That's all right. So having patience a bit, um, that's what what we try to stress also is in the market. It, it doesn't go overnight, uh, but it definitely gonna change quite a bit. Yeah.

00:34:02: Ian de Bode: Yeah. And it's funny 'cause then you work years towards it and then all of a sudden all the components are in place and that's when you see the hockey stick.

00:34:09: Lidia Kurt: Yeah.

00:34:09: Ian de Bode: And all the people that say, oh, it'll take more time. It'll take more time's. Typically when you're in this stage. Mm-hmm. And when the hockey stick occurs, everyone's not ready.

00:34:17: Lidia Kurt: Yeah. You totally see that with stable coins. Right. Um, everyone has been watching and now suddenly. Everyone is a bit too late, uh, to have a strategy.

00:34:24: Lidia Kurt: Um, I totally believe we are, uh, going towards that route on the tokenized asset side as well. No, it's very interesting, Ian. Um, maybe as the LA last question also, um, as we have a collaboration going on, um, obviously, uh, we are gonna, uh. Um, gonna partner on the products, meaning that, uh, the, on the products, uh, will be able, uh, to be purchased, uh, through Bakes digital, um, our exchange in Switzerland.

00:34:49: Lidia Kurt: Um, apart from that, um, when listeners are interested in the, on the products, uh, what can they do today and, and how can they get access or what should they do if they're interested?

00:34:58: Ian de Bode: Yeah, I would definitely read up more on Ando. We love, uh, you know, more recognition. We put out a bunch of blogs about our thinking on broader capital markets, so would highly recommend that you just also check those out.

00:35:09: Ian de Bode: Um, our assets are available on a wide variety of platforms. As mentioned, they are permissionless as well. So, you know, right now you, you can go on a wide via a wide variety of wallet and even increasingly centralized crypto exchanges to actually purchase some of these assets. Um, so highly encourage everyone to just check it out, see how it works.

00:35:28: Ian de Bode: Um, I think the main thing, limiting. Tokenized stocks and even treasuries, quite frankly, more broadly right now, is still a lack of understanding of what is already possible. The moment people see it and realize it, they're like, oh my goodness, this is actually better than what exists today in phi. But it is overcoming that lack of awareness.

00:35:48: Ian de Bode: It's overcoming those educational barriers. That is the number one thing.

00:35:52: Lidia Kurt: Hmm. I'd also like when you enter, uh, the cryptocurrencies a bit earlier, it's. Uh, always like start the first transaction, right? Uh, start doing something. Uh, try it out. And then you see, see it, how it happens, how it works a

00:36:03: Ian de Bode: hundred percent.

00:36:04: Ian de Bode: And once you see it, it's hard to unsee it.

00:36:07: Lidia Kurt: I think that's a very good sentence to close on. Uh, Ian, it was a pleasure to have you here. Um, we can't unsee it, what we saw. Um, so I'm looking forward to continue, uh, working together with you. Uh, thanks for being here.

00:36:18: Ian de Bode: Awesome. Thanks Lydia. My pleasure.

00:36:21: Lidia Kurt: This was Inside Digital Assets, a joint project by BX Digital and Seturion.

00:36:27: Lidia Kurt: If you enjoyed this episode, subscribe to our podcast and feel free to share with others.