It's really nice to see so many people here today. And, uh, today we're going to talk about, uh, L trillion and how, uh, the industry benefits, but, uh, it's becoming less and less visible to end users. And, uh, I've been developing in this field for 10 years now, and, uh field for 10 years now, and, uh , I would say the industry has changed a lot . And, uh, it's changed a lot, I mean, when the whole industry was starting, uh industry was starting, uh , there were very few ways to even get in and out of the market. And, uh, she was, uh, somewhat isolated from the rest of the world.
And, uh, we didn't have too many, uh , real-world use cases. Now, uh, everything is completely different. Many calculations are already taking place on the blockchain , and many products are being tokenized. And we see a lot of real assets on the blockchain. The mid- blockchain.
The mid- to early 20s was the summer of DeFi, and that was actually what gave impetus to this process. So, let's take a look at the numbers a little bit, and now we have over 300 billion stablecoins already on-chain. According to BCG's forecast, this is over 18 trillion by 2033. And let's try to guess, by the way, out of these 300 billion stablecoins on the chain, let's think about how much capital is not idle. How much capital is actually working now?
Let's say, raise your hands if you think it's more than 50%? No hands. Raise your hands if you think it's probably around 20%. Few hands. Good.
Uh, raise your hands if you think it's about 10%. More hands about 10%. More hands . Good. What do you think about 5%?
Good. So the reality is that it's now about 10% that it's now about 10% , and, uh, more capital is starting to work its way up the chain. And, uh, there are a few reasons for that. Actually, there are two main reasons. The first main reason is that the rules are changing.
We all saw what happened during this year. And it's very important that, um, these rules restrict some asset classes and some use cases, but at the same time it allows banks and institutions to hold, um, stablecoins and various assets on their balance sheets. So in this case, it's something that already exists, and we'll see a lot of inflows due to that in the near future. Another thing, it's essentially payments and settlements, and that's a very important part because we see that as a major driver right now for use cases in our industry. For example, many companies are starting to switch to online payments, and there are very natural reasons for this.
These reasons - reasons for this. These reasons - online settlements are atomic, they are cross-border and 24/7, and it's just a natural reason to be online for settlements, the same goes for payments. This makes capital more efficient. It also helps, ahem, move capital between different jurisdictions. This helps companies conduct business more efficiently.
At the same time, this is actually a quote from a real conversation with one of the CFOs. And, um, I think CFOs will be asking even more questions about what we should do with the stablecoins (ahem, stablecoins) in our treasuries on our balance sheets. And, um, if, um, the calculations are already online, then the next step would be to, in essence, leverage this capital. So, um, it's two parts. The first part, the first step, is the calculations.
This has already been decided. There are already, um, keepers. There are settlements with stable coins stable coins , the transition, the entire infrastructure is ready. And, hmm, it's already working. The second part working.
The second part is management. This is, um, something that hasn't been fully launched yet. This is what is currently being built. And it consists of several parts. It's not just a purely, um, technological thing.
It's also, um, about business also, um, about business processes. It's about how, um, asset management strategies are built , what markets are involved, um, compliance , reporting on net asset value (NAV), strategy isolation, things like that. And, uh, it's also important, uh, how the landscape is changing with asset management on blockchain, because initially, when the industry was just starting out, and when the summer of DeFi came, there were quite a few protocols in the market, uh, and the strategies weren't complex. People managed their own assets. The amount of capital was not that large.
Now it's a completely different set of parameters. These are much more complex protocols. These are more complex strategies. The management landscape itself is changing, and, uh, new players are coming into the industry, and they're coming from Chat Fire. They come from FinTech.
They create more complex risk management strategies and systems . And that's why we need more protective fences. We need more technology stacks for wealth management wealth management . And this is what is being built as the next step for the industry. So, there are two parts here.
One part is assets, and the other is distribution. These parts have also already been resolved. We already have stablecoins. We have money market funds. We have the goods.
On the other hand, we have a distribution. We have wallets. We have exchanges wallets. We have exchanges , brokers, issuers, asset issuers. And so on, and so on.
But at the same time, there is something in between. These are essentially strategies and capital routing. And this is what is also being built now. And, uh, it's also what links, uh, links assets and distribution. So, this is the way that assets get into distribution channels, because there are likely to be very, very few people or companies that will use stablecoins or any stablecoins or any other type of asset other type of asset if there is no return on those assets.
Also, uh, the yield itself is not just a number you see on the screen. This, uh, this is a commitment. And for retail and for institutions, these are very, very different characteristics different characteristics . So for retail in many cases it's more about the numbers and more about higher annualized returns, but the risk in that case is very different. And there is no return without risk.
For institutions, it's always much more about the risk itself and the numbers for annual returns, it's like the last question they ask you. So, it's about transparency, about risks, about how exactly you manage capital. And also about asset structure, fund structure and technology. In this case, due diligence is considered much more deeply. And the entire industry is now moving in this direction.
Another topic that has been quite hot recently is agents. And for agents, it's essentially the same stack that's used. Because agents can already manage capital. But I would say that probably very few people would trust agents to manage their capital. Because models tend to hallucinate tend to hallucinate .
There can be many problems with execution, etc. Therefore, we need a stack for agents as well, to establish protective barriers for them and provide an institutional-grade execution environment . This is another piece about yield stacks and about storage infrastructure in the market. The third part is that, um, recently we've probably also seen DeFi products being integrated and embedded into different products inside fintech companies, regular companies, businesses, and, um, there are already cases with the deal, cases with Stripe and other companies. And, um, these products, they're practically invisible to the end user.
It's just a button in the app that someone can click and contribute capital to some pools. He can use some other strategies. And that's how the industry is now integrating into a broader set of services into a broader set of services . Something we're doing in this direction is essentially a storage stack in Mellow. It helps build these strategies and, ahem, helps deploy them on the blockchain without any technical effort.
This is what helps to place a strategy on the blockchain sometimes in a few hours, sometimes in a few days. And without any smart contract development. Another important thing is risk management. Risk management is implemented in blockchain. This is not a case of simply trusting asset managers, and this is what sets our industry apart in general.
I think people who have been in this industry for a few years have already seen a lot of, um, examples where all the risk management is applied to the blockchain and you don't have to trust, um have to trust, um , any asset managers or asset issuers, um asset issuers, um , to manage your assets. You see transparently what is happening in the blockchain. You see all transactions. You see all the guardrails, multi- guardrails, multi- sixes, etc. So that's another important element because it helps, um, work with due diligence.
It also helps to get, um, more transparency for the end user, and it helps to get more trust in the product itself. Uh, another part is, um, the speed of updates for updates for any financial products on the blockchain. Because once we see more RWA, more assets coming onto the blockchain, the industry becomes very, very dynamic. And it is much more dynamic much more dynamic than people have previously seen assets within traditional finance. That's why you need a different pace for working with strategy and capital.
In this case, the on-chain stack, uh, also helps move capital much faster , update strategies if something changes, if the return is higher somewhere or the risk is lower, then you can almost instantly allocate funds to new platforms and switch to a new strategy. So, in summary, what is important is that the entire industry is now moving towards greater distribution within TradFi. At the same time, TradFi uses on- TradFi uses on- chain rails for settlements. It uses on-chain rails to build strategies and, mainly, to improve operational efficiency. Um, and I think by next year we'll see a lot more capital moving on-chain.
We will see this convergence between DeFi and TradFi. Thank you.
Automatic transcript — names and jargon may be misspelled.