Tokenization: Redefining Capital Markets - TOKEN2049 Singapore 2025

Amazing. Thank you so much everyone for being here and thank you to our panelists. Um there was a little bit of a quick introduction. Uh but starting from the end over there again Alex Thorne. He is the head of research at Galaxy.

Then we have uh Arjun. Arjun is the coco of Kraken and the chairman of tribe. Uh we have here Cynthia who is the head of fidelity digital asset management. And then last but not least, we have Sean, who just got promoted to chief business officer at Coinbase. So, a big round of applause for Sean.

Very excited. Okay, so the title of the panel is tokenizing. We're redefining capital markets. And we have some spicy questions, but first let's start over there uh pretty easy with Alex. So, Alex, there's been a really big surge of issuance uh for the past 12 months or so.

Tokenized assets just surpassed for the first time $30 billion of issuance and so we're going up there. For context, stable coins are around $300 billion of of issuance just under. So 10x larger. Uh my question for you is what is driving the growth? Why now?

There's regulatory is definitely a big part of it I would say right. Um we obviously have a hugely shifting in our favor regulatory regime. It's only going to get better. Um I think also you know the blockchain technology and the applications built upon them have matured a lot. Um you also have institutional players that have become more comfortable with it over the years right think about the fidelities and black rocks and um you know inves and all these firms right so it's I would say it's a combination of all three there I would argue too there is still a latent desire after all of these years to come up with use cases and demonstrate them for public blockchains that are not purely speculative and and I know we're going to talk a lot about that in terms of tokenization but I think the growth in RWA is also part of that

okay so let's Actually, Cynthia, yeah,

uh let's talk a little bit about the institutional side right now.

So, the question is treasury tokenized treasury specifically of the 30 billion are about 7 billion. And my question for you is there's actually pretty few holders of them. There's less than 10,000 addresses and really just a handful that actually have a lot of it. And so,

is the first true TAM institutional cash management? And who's the buyer? Who's buying these onchain T bills?

Yeah. Um so a little bit of what Alex said about uh regulatory um really changing the landscape uh for institutional demand uh for tokenized treasuries. Um so now with the Genius Act in the US um which I'm sure everybody's heard a lot about over the last um few months. Um it is the first major crypto legislation in the US authorizing um stable coins. And so stable coin issuers looking for um you know uh assistance in outsourcing their reserve management are very much looking for um tokenized treasuries.

Um it's part of the ethos of being on chain um and getting access to um short-term liquidity yield generating assets. Um what that also means on the flip side is um that stable coin holders looking for yield um are also um really interested and very big buyers. Um the theme that we saw early in the uh early buyers of um onchain treasuries is that there's a lot of um aggregation uh and um intermediaries that are um facilitating uh more direct retail access um to these onchain products. And so I think as the infrastructure um proliferates uh to more users um and institutional users and um more of these issuers come on chain um we are going to continue to see um demand and growth. The other um big uh part of the growth um and interest from regulated institutions is the collateral use case and I would say between access to interest and the use of an onchain collateral instrument that is generating yield and is able to be transacted outside of traditional local um uh business hours is also incredibly interesting and very powerful.

So let's uh move from institutions and let's Sean let's talk a little bit about retail. Is the first killer app for retail bringing liquidity to assets that are highly liquid like real estate and stuff that is just offchain or is it hyperefficiency from things like stocks that you can already access pretty quickly? Which one is the going to be the biggest killer app and the biggest use case?

Yeah. Oh, I would say the first killer app is obviously stable coins actually, which I would qualify as a tokenized asset with $300 billion of supply. But if you exclude stable coins, the way I think about that is more so uh where is being on chain 100 or uh a thousandx better than being offchain. And one of the magic of uh blockchain technology is you can bring liquidity to illquid markets. So I actually think that the product market fit is stronger for illlquid asset classes, things like private credit, uh, real estate, etc.

And I think you see that in some of the data today where over 50% of the supply actually of tokenized securities excluding stable coins is actually uh, private credit,

right? And and so Arjun on the retail side and one of the things that Kraken announced was um, tokenized stocks. Yeah. So stocks are known to be traded pretty easily and be liquid and already accessible by retail. So the question for you is are tokenized stocks perfect substitutes of traditional stocks or are they actually just different products altogether?

Um I thought you were supposed to ask spicy questions so I'm trying to

I start slow and then I bring on the spice. Look, I I think um look, the whole promise of crypto, in my opinion, has always been um it's free, it's fair, it's permissionless, it can just move um as quickly as possible. Um you can bring liquidity to assets that typically were not um or or were illquid. Memecoins are obviously a good example of that over the last wave. Um I I think like when I think about uh why we thought about Xbox as an infrastructure that was again permissionless, I think everyone forgets about permissionless and liquidity matters more than any of the other things.

And so I get a little worried when people talk about concentration of capital or concentration of assets within a certain few. It's it's like why would we perpetuate the system that we already hate in the first place? like why do we get into this ecosystem? It's it's not to dig on fidelity or anything, but like it's a like like they're a manifestation and a perpetuation of something that is for a very select few and and if you know you're talking about you know 5 billion, six billion or 7 billion between uh being underbanked or or or no banked um that's the way I sort of think about like what the promise of crypto has always been. And so tokenized equities was for us was more about okay, how do we build out the infrastructure so that anyone can have access to it.

So it's not just on Kraken, right? It's on Bybit. It's on a bunch of different chains. We launched on Salana so that it could just proliferate. And may the best products win by enabling the infrastructure.

And I think the the world you ideally want to be able to live in is can I trade, you know, Doge with Tesla pairs um with stablecoin. Can I use that as collateral for getting a house in, I don't know, Portugal? Um, and

I've always wanted that product.

Yeah. And uh, and that's not a world we live in yet, but we're getting there faster and faster. And that's

but but but let's be be candid right now. The state of tokenized stocks and let's use I'm not going to use the example of crack. I'm going to use the example of Robin Hood because we can make fun of them because they're not on stage. Much easier to make fun people that aren't on stage. the future of tokenized stock can possibly be to wrap an SPV that owns or may not own OpenAI stock.

We can't possibly say

Yeah, I I think I think you're using uh so let's separate like private um illiquidity and private markets from public markets and and other you know instruments that have liquidity. Um which I think it's worthwhile separating like all of these markets have power law private markets which the different hat on it um like we invest as well across all these companies like private is private for a reason and you know when you start a company I don't really want you know 5,000 people to tell me what to do it's my [ __ ] company right like that's kind of how you think about it and when you start getting into you know disclosures and in and public markets or in some cases what we see in crypto is that you are more public about like the holdings and what you're doing or you know decentralized fashion. Um I I do think it's important to separate those two pieces which is like how do you give access to people that haven't had access to private markets. That's I I think that's a completely separate issue.

Okay. So let's get spicy. Alex the SEC commissioner has her peers. You know what's coming. Um she recently warned that L2 chains with centralized sequencers controlling transaction ordering that matching rules could qualify as exchanges under the SEC rule.

Now on stage, two of my panelists are running base ink to L2s that have centralized sequencers. Go. Well, uh, so we tokenized Galaxy stock and we did it on Solana and we did when you own Galaxy on Solana, you own Galaxy class A common stock and I I think I I respect a lot Arjun's point about bringing access to people. Private vehicles are different. Um, I think look, we've been very focused on taking that wedged open door that this new SEC made clear existed and just pushing it open for for real existing lifted US equities.

And we were the first NASDAQ listed equity to tokenize its stock. Um, so it's a different project. I think of this as regulatory innovation even more. I mean, the the act of tokenization whether it's even our stock or an SPV is technologically well solved. I mean, how many tokens are there in crypto?

Like 100 million. Like, we know how to make tokens. Okay. Including ones that are backed by off-chain assets or are off-chain assets. I think when we looked at this, we we had questions about two two major questions.

What form should the tokenized stock take and what venues or application should it be allowed to be platforms or venues should it be issued on or trade on? and and we took the view that it well also because we control our stock as the issuer of our own stock we can tokenize our own stock right I don't think Kraken or or Robin Hood or anyone has the ability to create a a native version of a Tesla stock only Tesla can do that and so I I but that also means it's not highly scalable I can't then go and do what we did for Galaxy for Tesla either right so we have to want what I'm trying to do is create the pathway way for issuers to tokenize their real stock. And then to your question, Diego, about the L2s, I mean, you know, we just had to evaluate where we think it would be most appropriate at this current stage for our shareholders to hold and trade our stock. And I I'm of the view that optimistic roll-ups today on Ethereum are not decentralized enough to avoid registration in the context of securities trades. I know many people disagree with that, and that's okay.

I think if that ends up not being the case, then like we would absolutely like any issuer want their stock to trade on the most liquid venue, right? So, it's not that we're advocating that, you know, L2s aren't good enough. It's just how our we did a a review ourselves of where we should issue now and and thought that L1's were sufficiently decentralized to not need to register. And we don't really want to put it on something that has to register because we're already on a registered exchange. It's called the NASDAQ.

So I think that that's we're we're just pushing for the space to be more decentralized when we talk that way.

So Sean Arjun, Alex Thornne over there says you should be regulated as an exchange.

I think I I think it's fair that uh alch aren't decentralized today. They are mostly centralized. We have a path towards decentralization. We're committed towards that path towards decentralization. I think the argument that sequencers are exchanges is kind of bogus.

like it doesn't make any sense to me because uh a sequencer fundamentally is just infrastructure that collects batches and orders arbitrary transactions. There's no discretion involved. There's no matching necessarily. There are priority fees that inform the ordering, but it's effectively an algorithm. So I I just think about it as sort of similar to like AWS.

It's just infrastructure that powers transactions that are flowing to the blockchain. uh which I think is just fundamentally different than an exchange which is matching buyers and sellers.

I I mean I I hear that argument but to me it's like it's still run by one company. How do we know that's how the algorithm functions right? If it's run by many right we whether it isn't how it functions or not there's still no party to regulate and that's why it like fundamentally is impractical to regulate and my goal is to make these decentralized systems impossible to regulate. That's what makes them decentralized. And so that I mean that's where my questions come from like what assurance do we have that the sequencer is only using an algorithm that does this right and and and I don't I'm not aware of one I see I don't think that they're not I don't think that you know they're abusing their users.

I think in fact you can make the case that in like pragmatically today when we look at the sequencers they're they're probably getting better execution for their users even than many of the decentralized L1s. It's just it's a question of like how do we know as the issuer

they don't do but they can. And so part of that that's my thought I may be wrong about that but I mean that this is what we thought about when we when we chose Solano

feel good.

So so we we took the approach with Inc. um that Kraken would contribute um to multiple foundations not just the the first um you know L1 or L2. That's the way we think about it. And then um the goal has been always that we would contribute to a foundation. We wouldn't want to own the layer 1, layer two.

I I actually think it's quite dangerous for centralized companies to own that layer versus the community. And the whole point again of this movement is how do you empower the customer? How do you empower the community? and how do you empower decentralization so that you can you know open source fork and innovate and uh incurs ours. I mean, we have a lot of sway into what we want, but when I take a look at that team, um, I mean, they're arguing against us all the time.

Frankly, it's quite frustrating, but it was set up that way from day one so that they can push back and say, you know what, like, hey, we don't want to go exactly the way in which Kraken wants to, which basically also means that we'll as a as you know, Kraken as a company means we'll take multiple shots on Golden will work not just with ours but um with other chains. Um and again, when we provide and build infrastructure, uh you know, again, XDOX isn't on Inket, right? It's a it's a choice the foundation has made not to support yet. They will um but we've you know worked with Salana, you know, BNB, Tron. There's just a list of folks that we're working with.

Uh which is fine and that's the point. Um Cynthia, it's your turn. Tokenization has one of the core principles as this intermediation of the current intermediaries. Fidelity is kind of one of the big intermediaries right now. So is your move into tokconization an admission that open and decentralized is a better path than the current path that Fidal is on.

So couple of things about intermediaries. um because I'm looking across uh you know the pla platform here um and everybody is in intermediaries right uh the reality of um this core thesis around um decentralization and control isn't about eliminate all the intermediaries um because nobody lives in a hermetically sealed bubble um that's self- sustaining um but rather this is about simplifying the existing construct of how it is that investors get access to capital that investors get access to investment opport opportunities. So when you know I look at uh the way in which Fidelity has constructed its platform over the years um the primary ethos from our standpoint is um we're here to serve our investors and we're here to give our investors choice. We're here to give our investors access um to a range of investments and those um investments take the form of direct um investment in self-directed brokerage. You can buy securities, you can buy funds, you can buy everybody's funds.

we have an open platform um from which we offer investors a wide range of choices and a broad level of education um to help those investors make those choices. So the idea of tokenization um aligns with that ethos of choice um and access uh to investors um access now to onchain investors to get access to uh Fidelity's um uh investment um platform uh and also um the ability as as we think a lot about this integration of traditional markets and onchain markets is about opening up the free flow of capital um between onchain markets and off-chain markets. And speaking of that, I guess the question now is what is stopping us? And so Alex would love to start by saying or by asking you one of the biggest advantages of tokenizing anything and stated I think all of us would agree here is the fact that you get to inherit this very robust set of building blocks that DeFi has for us. We've built so much infrastructure.

It is so cool. It's just begging to be used. However, right now you cannot use tokenized Galaxy stock by superstate by the way portfolio company super cool. Um you cannot use them to actually use DeFi because it is a security and these things just not is there a path forward is my question for a security to trade on DeFi. I think there is in fact I think what earlier today maybe it was yesterday Eastern time um the information reported that the SEC is going to is looking very strongly at an exemption to allow stocks to trade in DeFi very soon.

um we already kind of know this right that's part of the re I mean all the companies on the stage have been meeting with the SEC if you go and look at the crypto task force website you'll you'll definitely see all of us have been meeting with them we know that's the direction it's going so I think they will actually give a pathway it may be time limited or volume limited to start um and then I think you'll you'll see a lot of interesting stuff emerge I mean that's what we all hope like again which regardless of venue like you're totally right the building blocks have proven themselves especially the core of like trading and lending on chain like that's been around a long time. We put a lot of volume through these apps. Um and I think you'll see some really exciting things emerge. I think um I'm of the view that intangible assets are extremely ripe for tokenization more than say real estate or uh you know physical collectibles just because you don't face that provenence problem. So I'm looking for things like securities whether equities are fixed income.

Um possibly like intellectual property or even like legal contracts of some kind. Um, and I think you're going to get from this SEC clarity. I actually think this is probably the top priority of this innovation exemption that the SEC has been talking about. But then also, um, we all got to go and tell if you want to do it the way we're doing it, like you got to go and tell all the issuers how to do it and that they should do it. And I think the arguments in favor are instant transparent settlement.

um you know in DeFi transparent liquidity like no maybe you know like a an AMM like unis swap is going to have worse slippage than like the top of the book on NASDAQ but you're going to know exactly what that slippage is right it's um always on right 20 not only 24/7 but programmable like you're we just haven't been able to try yet and I I think once you do once we are able and I think it's coming you you'll see a revolution in in equity trading um and uh the SEC is going to have to probably write a bunch of other new rules because they don't really contemplate most of this um and I think it's coming that's been the barriers regulatory

and then Sean I would love your point of view so from the vantage point of overseeing uh coins coins based ventures you guys have done thousands of investments at this point probably uh what is what is left to be built uh what is stopping us and what is left to be built in the in the market of tokenization

yeah I mean Alex touched on the regulatory piece that's like the biggest thing that's out there I think uh you know Arjun was talking about wrapped assets Uh, Alex, obviously they took the approach of a more native version. There's a lot of there's a wide spectrum of basically like a synthetic asset that gives you exposure. You mentioned the Robin Hood approach like a the canonical security uh that could be tokenized on chain. And I do think that there's ultimately going to need to be some type of crosset crosschain liquidity layer that aggregates liquidity and allows for interoperability between these things. um that creates a lot of opportunity also like if you think about the superstate approach where there's fungeability between the tokenized security and the exchange traded security then there's a lot of arbit arbitrage opportunities between the off-chain world and the onchain world until there's sufficient liquidity on chain um so I think that's one bucket that cross asset crosschain liquidity um the second in you know we'll see how this works out with the regulations but I think a lot of compliance infrastructure is going to need to get built for you know how do you actually do permissioned uh uh monitoring for which wallets can actually uh you can transfer these assets to uh who's actually engaging in these securities.

I I think I'm relatively skeptical that they'll be sort of like free floating and in the wild. That would be amazing. That is like the dream, but I I don't think that we'll jump jump there uh at least from the onset.

Yeah, that's what I want. So, that was a bridge too far for us to try. We we have never argued that these should be like anonymous bearer assets. Maybe they should be. I think it would be great if they were.

Yeah.

Um but that's another that's a whole another ball game to your

But wait, wait. Do we not agree all of us on the panel that is the only ultimate goal for this and anything other than that is absolute object failure?

Um I have an issue. You need to know. Why would you say that?

Yeah. just because it feels to me and again I'm not one of the panelists but it feels to me that we have built such amazing building blocks and tools and and if we get if we don't get to use traditional finance with all these amazing tools we kind of failed at the actual promise that we are supposed to deliver for all the assets in the world which by the way sit on the trady side of the world not on the DeFi side of the world. No, I I don't know. I mean, you you take a look at crypto and what's happened. Uh, you know, like take a look at Dogecoin or take a look at any of the, you know, the BTC ordinals that just started now or take a look at ETH.

All this stuff that's happened happened on the edges and then there was liquidity and then there was uh there wasn't any friction, right? So like this whole concept of permissionless, we keep talking about stuff like hey let's maybe I have an issue with it like let's just perpetuate the system that's [ __ ] and let's bring it on chain. It just doesn't make any sense to me. So if like if there's a expression of how people feel in like a certain country and they want to tokenize it that's great. Um if they want to do it for their government, if they want to do it for their assets ilquid or not like that's the whole point.

Um, and so I kind of don't really care about the company going public and saying, "How do I get access to leverage my brand and extract value? Care more about how do you bring value to the 7 billion people that are out there with our tech and then figure out what are the uh financial products that are going to be built? What is the thing that matters the most? It's access to capital. What do you do with it?

What is your collateral? Can I get forward mobility?" Um, like those are the things that matter first. then you can think about the next layers and and I think we kind of get lost in translation which is hey US has had this robust you know uh capital markets and liquidity and so let's just copy it. No, there's parts of it that don't make any sense.

I think our banks are fragile. I think rehypothecating people's funds and having like 9x leverage is is stupid. But you feel like we're copying the system and not just bringing the assets over one at a time. My I mean the but you bring in the assets that matter for the people, right? And so does tokenized equities matter?

Yeah, there's a there's a certain amount of intrinsic value and then we're going to be able to trade off of that, lend off of that. Great. Um, can you do that with other assets? Can you pair them together, bring liquidity because it's global liquidity? Yeah, let's do that.

Um, but there's just like there um, again, I I apologize for Fidelity stuff, but like look, Fidelity, most of the products are for rich people, and they don't get access to that if you're sitting in Argentina selling pairs.

Well, those are two things, right? There are retail investors who get access to investments um on the Fidelity platform.

But if you're if you're sitting in Argentina, you don't have access to Fidelity.

Well, and and then

if you want to get if you want to get access to if you want to get access to corporate yields.

Yeah.

You have to have $500,000 or a million in your bank account.

If you're in Argentina, you can't access in the United States. That's a problem, right? I think I think my point being is that um how do you reduce the friction for what rich people get to everybody? And that's the whole point of why we're here.

That's amazing. I mean, I hope that we bring all of the assets to DeFi and then the last person out of TRFI turns off the lights. That is the hope, right? Um

or that we move the system onto a more efficient system for the allocation of capital and access to investments. And and I get totally what you're saying about um countries outside of the US or other developed um countries where access to banking and access to capital um is is almost non-existent. And so this is where crypto has been able to provide um access right to payment systems and access to um you know banking um services and and so as that right will continue to proliferate um and the rest of the world will see that this is a system that offers um better opportunities for allocating capital um more transparency and definitely more efficient um than what we've seen.

People are voting with their dollars, right? There's a reason why worldwide Yeah. people go towards stable coins, right? It's a safer asset on our X stocks. Like I look at it every morning because it's it's so humbling and that like our top stocks is like Tesla, S&P 500, and McDonald's, right?

It just means that there's a lot of things that people care about outside the United States that they want to have access to and then they want to do something with it.

Cars, big companies, and fast food.

That's amazing. Awesome. Okay, so now let's go into a quick fire round real quick. Have to be quick. Um, and I'm going to go start with Sean in order, every single one of you.

So, the first quick fire round question is outside of your own company, you can't cheat. Which project or protocol is doing the most interesting work in tokenization right now? Sean? Uh, I would say a company called Veta that's a vault infrastructure provider. So, they allow asset managers to uh sort of design and curate different yield strategies that you can deploy on chain.

And I think that that infrastructure gets really interesting once you have more types of tokenized assets that are onchain because you can create uh you know n permutations of differentiated bundles.

Gotcha.

Cynthia,

I'm going to cheat a little bit. I'm going to talk about onchain ID because that is the real way to unlock liquidity across all of the different trading platforms and across all different uh protocols. We're spending a lot of time looking at projects developing onchain ID solutions. Arjun,

I'm I'm uh uh I really don't like banks worldwide and so every

you know I started a bank, right?

Yeah. Yeah.

Okay. Just just making sure. I have too but I don't like them and uh and and so when I think about again uh you know insurance mortgage back securities the you know the full gamut there's like how do you bring again all that access to people and so there's a few protocols that have already started that reprotocol is one on the insurance side but it's again what are their names reprotocol is one of them that we're all sort of backed um on the tribe side and uh any any project that is along those lines where I spend more of my time in deploy Alex, uh I mean you guys talked about Superstate. We're also uh they're also a portfolio company of Galaxies. I just like what they have done.

I was looking for the fastest real scalable way to do this and they were the fastest. They have great technology. Um, I also just love the fact that with stable coins also that you can, you know, stable coins are the first time you can self-custody actual digital dollars. And I think with tokenized equities also like self- custody for equities is a very very interesting thing that's really not possible since the physical bearer certificate. Um, that's just every wallet actually.

That's not you don't need a new wallet for that. Okay, we're out of time, but one quick question and it's uh binary choice here, which is in five years, will the most AUM for tokenized assets be on a public permission network like Ethereum or on a private permission ledger run by consortium of banks or a bunch of corporate companies.

God, I hope not on a permission network. So, yeah, a public permissionless network. Sure,

Cynthia.

Public public

public permissionless public and permissionless. Full agreement. Thank you everybody for your time. Let's thank the panelists.