Tokenization: Rebuilding Global Finance Onchain - TOKEN2049 Dubai 2025

uh just to kind of give an context about what we are going to talk about how important is tokenization today I'll give you some big numbers and I'm sure many of you would know about it though we are talking about real world asset tokenization in market which is about $22 billion has grown has tripled in one year just one year and there are estimates that say that it can be between 11 trillion to $30 trillion in the next 5 to 8 years. So that kind of size is what we're talking about and here are the key players who can maybe make it happen. Um so I'll start the the session by asking some of the relevant questions. First uh if I can uh started with the case what is the case for tokenization and why do we really care? I mean why are the traditional and the crypto players equally interested in this market and if I can start with Christine you uh yeah sure thank you uh really a great honor to be here.

So tokenization fundamentally modernizes how assets are created distributed and managed. The first thing is it makes assets programmable. We're actually converting financial services into microservices and we're able to create assets and code them the way that we can program software. The second thing is we are building multi-asset interoperability. For those of you who are in trad or have had a trady background, you know that equities and dollars and credit and crypto all live in separate systems.

But with tokenization, we're bringing them all together in the same operating system. So they can operate seamlessly with each other through like through the software that we're developing. Additionally, we are able to experience accelerated product innovation. Now, think about how innovation typically happens in Shroudfi. You have one team of product specialists and engineers.

They have maybe a couple ideas and they, you know, kind of chart something out and then they start building it waterfall, then they have to test it and then how long is that going to take to actually build something new? Now, in the world of crypto and DeFi, you have hundreds of teams working together on open-source code, on token standards, all coming from different backgrounds, different experiences, and just accelerating the process of innovation. And then the last part is tokenization creates a killer cost base. Now at a bank and I I I know I know I know banks at a bank there are tens of thousands of people that are required to support the operations of financial services doing reconciliation doing paperwork. Now with smart contracts everything is automated.

You don't need that operations cost base. So tokenization is actually the next evolution of capital markets. And I really mean it as an evolution because who's going to survive? You've got one side that has total unlock with programmability, multi-asset interaction, a killer cost basis, and you know, essentially all of the attributes that I mentioned before, and then you have what we have today. That's really a hell of an answer, and you really sound very excited about it.

I'm super excited about it. I've only spent like a decade working on it. Yeah. If I can just ask Robbie about it. I mean, what do you think about Christine's views and do you have anything more to add?

I'm sure you have. So, sure. Um, Robbie Mitchnik, I'm the head of digital assets at BlackRock. And I think Christine gave a a terrific encapsulation of the dynamic. So maybe I'll uh tackle it from a slightly different angle which is to think about a very granular use case within a particular asset class for tokenization because I think that's been the real uh rub in this space is getting from this uh very enticing theoretical promise that Christine so articulately laid out to tangible on the ground impacts uh in a granular way And the asset class that clearly I think has the most traction in the whole tokenization space today is these tokenized yield funds or tokenized money market funds.

And the reason that tokenization is so significant in that context is that historically uh investors of all types have always faced a trade-off between yield and liquidity. uh either you could get full access to, you know, as is generally the case, a US Treasury uh full yield or you could have full liquidity in the form of cash, right? But you couldn't have both. If you wanted even to hold a money market fund, traditional money market funds is either next day or end of day. Uh redemption typically limited to banking hours, doesn't work over weekends.

And so this ability for the first time because of tokenization and as Christine describes the way uh tokens can interoperate with each other, you have this exchange ability in a frictionless way between a tokenized yield product and a stable coin which can be moved anywhere in the world in near real time at near zero cost much more efficiently than old world cash does. You put the two together and you have a fundamentally disrupting paradigm uh for the whole system that we use to handle savings and payments. That's a very important point you mentioned about the real time settlement also that that's uh you know that solves this issue of uh tokenization uh from the trady perspective. Getting to Tarun you know you you represent one of the the core native crypto uh panelists over here. So what are your thoughts about you know how what does it help what does it solve tokenization for the real world?

Yeah. Um I think the main thing right that we've seen with DeFi historically is a composability allows you to basically make very complicated financial products out of very simple financial products which means you can analyze the simple financial products understand how they work put them compose them in a with some rules and constraints via smart contracts and get a more complicated product. One thing I think a lot of things in traditional finance don't have is that they tend to have a lot of peer-to-peer contracting, right? So, if I'm creating a new fund, I have an LP agreement that is made for that fund that the LPs and the the fund actually subscribe to. There's no reuse of any components.

You're not reusing components in the LP agreement. Sure, lawyers will copy and paste things, but there's a sense in which everything is sort of bespoke every time you make a new fund. Um, and I think the beauty of smart contracts is these modular components that you can put together like Legos allow you to have reuse of existing financial primitives, reuse of liquidity, which is one of the reasons you're able to kind of get yield and liquidity at the same time. And they also allow for public transparency of pricing and interest rates and and things that are usually often times much harder to understand the mechanisms for. So, you know, I I think if if you've been in crypto for a while, you've of course heard about, you know, oracle problems or how people, you know, get data on chain.

But if you think about it, at some level, onchain data is generally a lot easier to reason about than 90% of financial indices where I don't understand what happens at the opening auction. I have to think about the dynamics at the close. I have to think about the participants more directly. they have to think about oh like is this an MSCI weight whatever there's all sorts of custom stuff in in traditional finance funds that makes it hard to to reuse components and I think this reusability of components is one of the most important things that very interesting the logistics part is cut out that's what you're trying to say interesting uh Rita if I may come to you you are literally joining the tradefi and the crypto world at secretary so when there are lots of onchain assets they claim that you know they are the from the real to the onchain. Can you differentiate what is because what what is hype and what is real?

I mean there are like thousands of them, right? So what can you help us understand what is real and what is hype? Yeah, I mean I think if you think about the idea of tokenization, everyone wants to tokenize something, right? And that's kind of a buzzword right now. Um and you have a huge kind of spectrum of different types of products that get tokenized.

Um and I think you have to kind of ask yourself like why are you tokenizing something? Is it just because you can? And my my view on that would be you probably shouldn't. Um unless you're adding some level of utility or some enhancement in yield or kind of unlocking uh additional features or distribution, not everything needs to be tokenized. Um and so I think that's kind of you know where everyone on this stage is providing some type of unique interoperability between um the assets that those guys are issuing, these guys are doing things with and then we're kind of sitting in between and helping enable.

Right. If I if I have to understand a little bit better about you know in terms of this was like a big picture but when we have to zoom down between the defy and the trady world connecting with each other and what exactly are we doing what are the kind of compelling use cases that we are solving over here uh in that in in this kind of a you know real world real world sense where we are marrying these two. So if I can maybe start with Christina on this if you if you want to or or yeah maybe would be better what do you want to say? Yeah I mean I think one important thing that you see in DeFi is these complicated structured products that generally need a lot of bespoke handholding from lawyers need a lot of sort of maintenance from the thousands of people that Christine was talking about can suddenly be five lines of code. And I think what that means is things that are, you know, in trad people would say would have a really high hurdle rate to be borrowed against.

So like a certain type of position, it might be very expensive to actually syndicate a loan, figure out how to write the SPV, figure out how to find buyers. In DeFi, you can do that much more efficiently. And I think that's that's the core of all the lending markets. That's the core of also all the uh trading markets. And I think what you're seeing with RWAS is as they get more integrated via things like securitizes S tokens, you can start using them in DeFi as if they were normal tokens and you can take leverage on them.

Uh that's sort of one of the the things that we've been working on with with both secure ties and others. Uh and then after once you can do that then you've basically made something that would have had a much higher hurdle rate. maybe you would have been paying hundreds of basis points suddenly costs you know a few basis points or even just a gas fee to do and I think that reduction in cost basis for complex structuring is probably the number one feature and the number one reason I think you're seeing this increased usage of both real world assets being issued but also real world assets being composed with it and other D5 protocols that's a very important point for me if you can come in over here Reed as well and then I'll come to you Christine especially about the cost and how does it really help remineratively also in terms of the returns. So could you add I mean anything specific to add on that? Yeah, I mean I think you know when we talk about these two worlds right historically they've been separated probably because of technical reasons you can't interop the same way.

Um but also a big barrier has been regulation and so something that uh Drew was talking about in terms of how do these securities interact in the real world and kind of what happens with rates on chain versus what's happening kind of in the real world and and other hurdle rates. And so one of the projects we've been working on uh collectively has been uh this S token project which is a technology that we've developed that provides an unlock for securities that are regulated and permissioned to interact with um DeFi the way it operates today. So everything is not settled on the the regulatory front and I don't expect it will be for for a while. Um but what happens is you have a bunch of capital on chain. People can iterate at at much higher speeds.

you don't need to have aggregated capital kind of sitting and go convince someone to to underwrite a structure. um you can just experiment and so we've uh put together um an exciting investment um product uh which combines some of our forces um it leverages uh a cred which is Apollo's uh diversified credit fund um as a stable sustainable yield that it has nothing to do with any supply demand dynamics in kind of crypto uh which is traditionally kind of the real source of leverage um and interest rates on chain um using RS tokens and uh risk management and capital through through Gauntlet. We're offering um a levered loop on on this a credit token. Um so that puts yield somewhere around 16%. It's permissionless lending uh from the the DeFi world and I think it's a really great example of how these two worlds don't need to to stay apart and they can learn and operate together um better.

This I mean honestly like this is the first convergence of TRDFI and DeFi and I've been waiting for this since I bridged my first uh assets on Polygon during DeFi summer 2020. So you know it's been a long time coming but you know we've always talked about mobilizing traditional assets and by the way like you know we we like this is this is very exciting. Um, you know, for my part, like we are focused on digital assets, tokenization, and DeFi because we're here to focus we're here to expand access to private markets. Apollo has three more than more than three decades a track record of generating alpha, basically creating what we call excess spread per unit of risk. We do this in a few different ways like through our proprietary credit originations through our value investor mindset where purchase price matters in all scenarios and specifically where we're aligned with our investors.

If we have or if we're underwriting credit and that we're putting that in a fund that investors are investing in, we're also investing in it with our balance sheet. So we're totally aligned with our investors. Now, historically, private credit, private assets has only been the domain of the most significant institutions and sovereigns of the world. But what I'm really excited about is how I can provide access to all of that alpha to all of you. The next generation of cryptonnative investors that can benefit from our track record of alpha generation and you know with basically some of the really interesting features and functionality that this team has put together.

That's interesting. you know you democratizing money private credit fund to the broader gener broader people and that you at a high return. Yeah. Yeah. Uh okay.

I have one question for Robbie and then maybe I'll go to Reed on the same question. Uh basically somebody like a tradfi investor who invests in US treasury treasury kind of return right. How do you convince that guy to switch to a money market uh tokenized money market fund yielding a similar return? I mean what what are your arguments on that? Yeah.

Well, we haven't yet. I think that's an important thing to understand is that when at least not at scale when we look at um the tokenized asset category and specifically tokenized yield funds where the vast majority of the AUM is today, the predominant investor in that is already digital asset native. so that they're on these rails and they recognize the enhanced value prop and utility of this technology over and above the traditional format. U but what hasn't happened yet is a broad-based migration of those who've only to date been within the trady world actually moving over to be able to hold the same thing but in a tokenized format. And the way that we're going to do that is by expanding, continuing to deliver against real utility from tokenizing these things.

And that comes in part by uh compounding the value prop. And Jeremy was just on stage before us thinking about stable coins. If we get more of Tradfi, realizing the tremendous opportunity in stable coins, then as a user of a stable coin, holding your savings in a tokenized yield product becomes much more logical because you have that frictionless interoperability between them. We're not quite there yet, but I think the momentum is is pretty significant. You rais a very important point that stable coins are a first step maybe for a broader uh you know uh acceptance of uh the the traditional world coming into the tokenized money market funds as well which is which is important because that's a first step for a bigger play.

If you have anything to add to that Re Yeah I mean I think it's a lot of the the topics we've been discussing. I think you know for a tradfi investor there's kind of just the the pure financial reason right which is onchain liquidity instant issuance um and actually the daily compounding of your interest that you can use right rather than waiting for your brokerage statement to come and need to interact with um with your with your custodian. Um, but then there's also the the world of composability um, and all of the other interops that avail are available to you once you hold the the tokenized version of it. Um, and I think you quickly will learn through everyone on this stage that all of these things are happening in real time really quickly. Um, and I think once you start to understand what are the possibilities, it becomes a no-brainer.

If I can continue with both of you a little bit more. uh firstly I want to talk a little bit uh to understand a little bit more about the how the evolution between uh black rockck and secretize is going what are the kind of products I mean how are you looking at going ahead about this how is it going so far and then I'll little bit come about a biddle to you uh Robbie uh about something on bidd how the growth record growth has been so far um yeah well securitize uh has been a great partner uh for us they're our foundational partner in the tokenization space that's been consistent with the strategy that we've undertaken in other key pillars of of the digital assets universe. Um and so what has been enabled is um tuning into the capabilities of of the platform that they built which has you know been uh the industry leader in many ways and you know Christine and Apollo uh kind of reached the same uh conclusion and that has been a pretty powerful combination in terms of bringing both traditional asset capabilities together and uh jointly kind of building from the best of both and then being able to go to market uh and to and to tell the story and connect with that wider audience that spans in many cases both tradi and defi and how does it look ahead how do how does it what are the what is the strategy going ahead how do you see you want the product road map can't do that well I'm a reporter I have become a question that needs some news that is that is that you have in in the in terms of what next for black? Well, I think the the most important thing to recognize is um as Reed just said uh just because you can tokenize something doesn't mean you should, right? At least not yet.

And so for us it's uh a question of where can we find high conviction that tokenization is going to solve a real problem that our clients whether Tradfi native or digital asset native or both have today and deliver that unlock and see real commercial traction and product market fit. And so that's why you've seen us take a very discerning strategy to date really one public blockchain uh product that we've been been focused on and building around that. There will be other asset classes. There will be other opportunities, but we're not just going to scattershot, you know, start tokenizing everything and and see what happens. Oh, makes sense.

And that's pretty logical and reasonable. Reed, do you have anything to add to the partnership? But yeah, I mean I would think if you take a look at kind of the the backgrounds at least of the firms that are on the stage, securitize has played a really important role in that. Um, and part of our our business is compliance and regulations and doing things the right way, which is the reason Apollo and and Black Rockck work with us. Um, but on the same side with S tokens and some of the other projects that we're working on, we're able to actually connect these assets that are permissioned and security in the right way with platforms like Gauntlet, Morpho, Elixir names in the DeFi world that you guys will will recognize.

And so I think what's most exciting for me that's coming down the pike is not necessarily some new asset that's coming. Um, we've got two fantastic assets right now that are playing today live in DeFi. Um, and I think the expansion of that interop between the permission tradfi world on chain and platforms doing really exciting and interesting stuff. That's what I think this is all about. Let's bring the base assets on on chain and then let's crypto kind of build on top of them.

Um, and again it's this symbiosis that I think historically has unnecessarily been uh separated. That's nice. I wanted to understand uh uh Robbie also a little bit about I'm sorry I'm hogging the I just wanted to kind of come to you before I go into the next part of the question but uh about Bidd and uh the interconnectedness with for example the Athena stable coin and I want to understand how the the how is how much is biddosed to the demand side shocks or you know impact from uh this kind of a interplay. Well, I think in general when you look at the tokenized yield fund category, it's basically uh solving three use cases today which maps to three client segments and there'll be more over time but but today um it's a combination of uh tokenized yield strategies leveraging underlying tokenized yield fund building blocks. So that's kind of category one.

Category two is stable coins and variations of stable coins that are using tokenized yield funds rather than having to use a trady money market fund or SMA type arrangement being able to to actually have the underlying reserves in an onchain format that's attractive to them. So uh you know Athena is one example as as you note and there are others um and that's been uh certainly a a segment that that this uh that this category is is growing in. And the third is sort of DeFi use cases, a lot of which today is collateral. And I think the collateral uh segment is small today um but growing pretty rapidly. And we've seen a lot of interest from uh exchanges and other DeFi protocols of how do you wrap a tokenized yield instrument or how do you deploy a tokenized yield instrument uh on a platform and be a potentially a a very compelling collateral instrument for users.

But how does it impact in terms of the demand pressure on bill? Does it make it a little more susceptible to risks to kind of demand side pressures? No. If you think of um Black Rockck's global cash business, we manage about 900 billion. Uh and so the liquidity of the underlying pool of assets, which is really uh US treasuries and repo uh is orders of magnitude larger in scale than what we're doing today in a in a tokenized uh yield fund context.

Got it. That was such a flex. That was such a flex. I love it. Yeah, he gave a big very big picture view from Black Rockck.

It's that that's actually realistic. Uh coming to the interplay between you know crypto adoption uh especially by institutions was in 2024 saw a big jump especially by all of you guys over here. How how does it look like the adoption by institutions for tokenization and how does it inter how does it uh play between crypto and tokenization when it comes to institutions going ahead? Um I can start with maybe Tarun first and then I'll come to Christine and Robbie maybe. Yeah.

I mean, um, I think the main thing we've seen is is in general, if I if I take a sort of like historical lens of crypto cycles, you have a sort of ebullant sort of bubble slash high growth cycle uh followed by sort of generally this sort of bare cycle where people are generally trying to preserve assets rather than kind of invest in new assets. Uh, and what you have at each cycle is sort of this kind of money multiplier kind of effect where like you start a 10. Imagine you started before one cycle, there's $10 of new capital. At the peak of the bubble, there's maybe sort of $1,000 of levered capital that's in the system. At the end, in the bare cycle, there's maybe around $100.

So, sort of the crypto general stable capital has grown over time. And if you look at each cycle, what has caused the the kind of net retention of capital uh at each cycle, it's usually some technological innovation. So after the ICO boom, you saw a huge growth in stable coins, especially in in in USDT and USDC. And then after uh DeFi summer, you saw a huge growth in money markets and people actually leaving things in onchain yield. And I think effectively what we're seeing now is the RWAS are providing a reason for you to not leave the chain.

You maybe went on chain, made some money, maybe you traded memecoins, uh but then now in in past cycles, you might have said, "Okay, I'm going to take my money off and go back to US equities." But now you actually don't have to leave. And I think this notion of this retention effect being much more enabled by each new wave of assets is really important. And for to to have that keep growing, you need to have composability and you need to have a way of being able to offer yield even through the down cycles. And RWAS act as a sort of counter cyclic uh instrument that provides that yield during those times.

That's an important point. Stickiness and scalability I think go hand in hand. So that that's nice to kind of Can you can you help me understand a little bit more about the enterprise? Yeah. Yeah, sure.

I mean like I said, I've been working at this for about more than 10 years now. So, uh, you know, I spend a lot of time thinking about why am I doing this? And it hasn't been easy this whole time. Right now, was the answer easy? Sorry for No, I mean the answer is that I'm looking to build 10x better experiences for all of us with financial services.

Okay. So, like let me just give you a very simple example that maybe you can relate to. today when I get paid my salary from Apollo into my bank account uh you know I just get paid like it's a direct deposit and nothing happens like I don't do anything with it mostly because I'm a hot mess and I'm busy working I maybe look at it and say like oh I have this much I have to pay my credit card bill and I have this much the these this much cash left I should do something with that most often than not I'm not doing anything with it but if I if I if I was doing something maybe at best I would deploy that extra balance of cash into treasuries, get get a little bit of yield and you know that's like five button clicks later got to call someone to confirm something. Maybe if I was especially ambitious I would actually I would invest in Apollo funds but again takes a lot of effort and then but like you know today or like today or in the future when we have our crypto wallets and what I meant to say is that the crypto technology exists today in the future I can get paid direct deposit into my crypto wallet where I actually have like the perfect portfolio designed for me like designed for how much money I need to spend, what my risk profile is, how much I'm saving for retirement. I know you all not thinking about retirement yet like yolo, but like you know like basically designed just for me customized to my risk profile.

And it would look something like I need 10% stables. I need 20% treasuries, preferably Black Rockck. Uh I need 25% leveraged yielding private credit and 25% crypto in my portfolio. And what should happen and what can happen with the crypto technology that exists today is that I should get paid. It deploys into like stable coins and then automatically swaps into that customized pie chart of investments just for me without me having to do anything.

And the net effect of that is that every penny of my earnings is fully invested and yielding without me actually having to do anything. And then, you know, when I go out and I take uh I take the crew out here for for for sushi and I'm at the restaurant and I'm like, "Okay, like I'm going to pay Nou." I mean, it's not actually the crew. It'll be much more like I want to pay $100 to Nou. Then that's an automatic swap.

This is where DeFi comes in, right? An automatic swap out of my Black Rockck treasuries into stables off ramp to pay pay the restaurant. So, I'm earning and yielding until like the very last second that every penny is leaving my my account, right? Like that is absolutely a 10x experience for not just people but also like well I mean well first of all first world people but then also people that are underbanked or unbanked right like and the interesting thing about this technology is that you can scale up and down. that doesn't matter if your account has $100 or a million dollars, the technology still works the same at a killer cost basis.

And it's also relevant for treasuries. Regardless of if you're a small business where you might not have the capacity to manage your finances because you're so busy on making your business or if you're a large cap with many millions of dollars in your treasury could also benefit from active active management of your treasury. So this is the reason why I build on blockchain. This is the reason why I tokenize. So, you know, we're we're it's baby steps and like I said, it's taken a it's taken a little while, but we're moving like accelerating towards this vision so that we can all have better financial experiences.

Thank you. I think I just give the last one to uh Robbie because we out of time. In 30 seconds, sum up what's the big deal about interplay. I'll do the very quick version. So initial hypothesis that a lot of people held was that uh tokenization would unlock participation eventually in crypto by institutions.

I think the revised hypothesis that most people are now seeing is that uh crypto adoption by institutions allocating some uh small portion of portfolios to this new asset class is actually more likely to go the other direction and be a catalyst ultimately to adoption of tokenization by institutions. On that optimistic note, that was a great evening. Thank you so much for the chat and wish you all a great evening. Thank you.