Programmable Yield Building the Next Market for Tokenised Debt

All right, welcome to the greatest panel of the day.

[laughter]

Self-declared. Uh so, we're going to talk about tokenization today and I just want to set the table in a very simple manner. So, it's it's really important to define these things clearly, so then you can have a clear conversation. So, when you think about tokenization, um think of think of the property rights of any asset moving to digital form on a blockchain. And the reason why everything's moving in that direction is because the user experience is just going to be better.

It allows you to do programmability of your money and other things. Five years ago, we were looking at a tokenization market that was roughly $25 billion. Um um today it's sitting at around $325 billion and most of that is stable coin. So, what we're going to talk about on the panel is where where do we go from here? It's a very exciting time, but where do we go from here?

So, I appreciate the panelists for being here. You all look fantastic. Thank you for joining the best pan- panel of the day. Uh we're going to start off on the institutional side and I'm going to I'm going to hand this one to uh Brett Tejpaul. So, everything on institutional that you're hearing and seeing in the context of digital assets kind of starts and ends with Brett at Coinbase, which is very interesting.

So, it's great to have him here. Um and look, we've gone Brett, we've gone from a an environment where there was not regulatory friction, there was regulatory blockage in the United States to a world now where the SEC chair is saying, "Hey, in 2 years everything's going to be on chain." So, we're now in a regulatory sprint as opposed to a blockage. How are you keeping up? What are you seeing in the context of that regulatory sprint?

Is it global? Is it just the US? I'd love to hear your thoughts on this.

Sure. Uh welcome everyone and so pleased that we have some people in here while Brian Armstrong, my founder, is speaking out there. So, this is super cool. I have to take a picture. It's never [snorts] happened before.

Um so, let's see. As you said, it was frigid, frozen, terrible in the US. We had a new administration, everyone knows that, but the genius act passed. When the genius act passed, that allowed stable coins to enter the mainstream of America. And so, that singular moment is the enormous catalyst.

Although it was specific to stable coins, what now happened is that every bank has to think about their deposits. All right, every financial institution has to think about how financial commerce happens. You have to think about how collateral management happens. And so, we've had an absolute deluge of firms that have now called back the digital team, the crypto team, go find the crypto guy or girl and get them back in here and what's our plan? And so, that happened to um coincide with a moment where we're doing our Amazon to AWS pivot, where all the things we built in our prime broker were now offering out to the world.

And so, we've got crypto as a service. Crypto as a service is custody, wallets, brokerage, financing, staking, all as a service. And so, I'll end with saying like as a sign of the times, I'm here to make uh four major announcements this week. Uh yesterday we announced uh PNC Bank, which is the sixth largest bank in the in the in the US, has opted in for with the other 264 clients we have for crypto as a service to empower their clients to do uh to be able to buy and sell Bitcoin on their PNC app. Uh we also announced today uh Standard Chartered.

So, Standard Chartered, huge global bank, presence here, presence everywhere. They have their own uh custody and zodiac capabilities, but yet they're partnering with Coinbase to be able to participate in what's happening. There's two more announcements, which I'm not allowed to front run, uh but they're going to be really important. So, pay attention the next 2 days, and it's about the transformation of capital markets. So, some tokenization, which we'll talk about, is coming our way.

Amazing. Um going to turn it to uh Oya next. So, if you don't know Ondo Finance, think you know, BlackRock is a household name. If you think of the people who are really doing a kind of very interesting work in the space, Ondo Finance is definitely one of them for people who are intimately familiar with it. Um Oya, I mean, you've seen some really incredible growth opportunities in the context of Ondo with your short-term treasury.

So, think of stablecoin as kind of your payment layer of the of the crypto infrastructure. It's being talked about a lot. Now, you move into the securities infrastructure, and you guys have done a really elegant job of bringing short-term treasury securities to the market in token form. Uh AUM of some of the products up three times this year. Talk Talk about the growth you're seeing, the frictions you're seeing, where you see that initial conditions.

Why did you guys start with treasuries? Why not other things? I'd love to hear about it.

So, we started with treasuries cuz our whole premise was to bring liquid financial instruments on chain. And stablecoins have obviously had huge success, but they were missing a couple of key ingredients. One was yield, which, when treasuries are paying 5 plus percent, became kind of an elephant in the room. And the second was around transparency of holdings and third-party auditing. So, we brought those two things in to a stablecoin, um and it was kind of a no-brainer for investors to make that shift if they had any idle stablecoins sitting to tokenize treasuries that we offer.

Um in terms of OUSG, which is our qualified investor product, which offers exposure to short-term US Treasuries. That, as you said, has tripled in TVL this year, and that shows that there's institutional investors coming on chain looking for cash equivalents in a safe way on chain.

Awesome. Awesome. Um Mark, so you know, we've got stablecoin, we move out to short-term Treasuries, now you have broader debt markets. When I think of broader debt markets, I mean, we we like to think of equities a lot, but when you think of what drives an economy, it's credit. Um so now you're thinking on the Camino side, you're thinking of it more a little more broadly in the context of bringing broader debt markets on chain.

Um what do you think in terms of programmability of debt and money as a general matter? What do you think TradFi is missing? Where do you think the opportunities are? How does Camino fit into that equation? Love to hear your thoughts.

Sure. Yeah, I mean, in with Camino, we've built uh Solana's largest um credit marketplace. So, permissionless blockchain, permissionless access, and then uh Camino provides a marketplace for borrowers to to meet lenders. And um yeah, we really see um that's evolved in the last couple of years from crypto-native assets to now tokenization of real-world assets, including tokenized debt. And the accessibility that public blockchain brings and a and a DeFi protocol brings is is unmatched basically.

So, um really happy with um the progress. We've worked hand-in-hand with uh stablecoin issuers, but then more recently um tokenization partners who are who are bringing these um freely accessible tokens to to Solana and to uh to Camino. For example, um actually just last week, uh Figure, who've who've got a multi-billion uh home equity um line of credit business. Uh they've brought tokenized HELOCs, as they're called, to to Solana, and we've partnered with them to to bring them as collateral on on Camino. And [snorts] this is a 8% yielding asset.

The DeFi participants already in in in the last week in in the tens of millions are uh bringing these HELOCs to to Camino, collateralizing them, taking loans, and you've got stablecoin holders taking the other side and underwriting credit against this this collateral.

So, who are the providers of capital in that case?

Yeah, yeah, yeah, absolutely.

No, who who are they? Who are the providers of capital in that case?

So, on the stablecoin side, anybody who wants yield on dollars, and and the beauty of DeFi, we we've got retail users in in the hundreds of dollars, and we we've got large large-scale credit funds who are who are supplying tens, sometimes 50, 60 million dollars, and and they're underwriting debt against these kind of high-quality collaterals. Yeah.

Awesome.

I was going to use QIC on that for the most in the big institutional space. So, beyond the retail side, are private equity companies that actually want to fund their portfolio companies, but they don't want to go through a many-month process and all the fees and friction that are associated. So, on the platform that you built, uh we've actually seen issuers and investors come together and be able to launch an auction process, a clearing of price, and then private equity company funds portfolio company. It's magic. It's awesome.

Genius.

[laughter]

Genius moment there.

Uh Patrick, welcome. So, the funny funny funny anecdote with Patrick, I live in Abu Dhabi, I live around the corner, and I think Patrick has spent more time in Abu Dhabi than I have in the past year. It's really amazing. And he's from he's Michigan native, so he paints the town blue for those of you who who like Michigan football, but thanks for being here. Uh Not surprised you're here, but thanks for being here.

My heart is kind of in financial plumbing. I think with that with the wrong financial plumbing the kind of whatever you're building on top gets very weak. You're doing just really incredible things on the plumbing side. Uh data data data. So when you think about tokenization, I think it's great to bring things on chain because you can do all these things with it.

But if you don't bring the layers on chain beneath it, then you're you're adding new bottlenecks. Now, you're solving that problem and you were super early to solving that problem. The the the argument that I hear a lot from people is to say, "Okay, great. You want to do all these interesting things at the roots to bring on chain. Why isn't data on chain just a just like a PDF file?

Um what's the what's the value proposition? And I think that it's it's a it's an unfortunate criticism, but I think I think it's just an easy one to to to negate and and as you describe your business and and how you're thinking about it.

Yeah, if you have uh debt against an underlying physical real asset, the the value of that that debt only corresponds directly to the the the value of the underlying collateral. And the ability to surveil your collateral real time on a daily basis and reprice your collateral is a reality today. And that was not a reality before and we have uh large institutional clients, banks, sovereign wealth funds that are beginning to price their data-rich low-frequency trading assets on a go from an annual mark to a quarterly mark to a monthly mark to a weekly and then to a daily. And right now, I'll give an example, we have a top 20 bank. Every loan that they originate in the United States lives natively on our platform and instead of one mark a year that they get a third party and then they get three three discount analysis for their collateral posting that they're funding via uh derivatives total return swaps.

They're now getting 12 third-party marks and they can see and use an AVM intra third-party mark and that's coming not out as a PDF that a first-year Cornell grad has to 10-finger automate the data in, but it's literally real-time pushing in. In addition, we are using agents to surveil those assets real-time. And when we surveil that asset, we're surveilling the the the native systems of the asset itself and the and the and the unstructured data, which is the context, so that you can use smart intelligent functions that you're renting against those with full context, so not structured data, which is the dumbest form of data.

Okay, so if I think of this right, if you're so you're getting clearer, fairer marks on collateral.

Yes.

And that allows you to then do other interesting things with your excess capital. Is that Is that more efficient utilization of capital? Is that fair?

Well, it's price discovery, right? And what does price discovery do? It It explodes the markets in a hundred different ways, right? So, what's the NAV of the the collateral? Then I can run the waterfall, the carry calculation, the expense allocation, reprice the capital stack, and retrade it.

Today, sovereigns buy and hold and they don't really think about sell. We give them the ability with daily marks on their whole portfolio, the ability to buy, hold, sell, or add to the position. And this is price discovery. For that, you need venues and for that, you need structured product, but it begins with data that allows them to understand the portfolio itself.

What are you disrupting in this process?

Private markets. The entire secondaries market is exploding the ability to provide price discovery, how you how you post collateral, moving level three assets to level two, so the accounting treatment on those assets changes. But in addition, this function allows people to understand the performance, so so data operations, right? So, this is data operations at scale in an agentic world where you're connecting agents up to process your data and deliver them to any form of automation you want. That form of automation may be a smart contract.

That form of automation may be an agent. It may be another agent in a a counterparty. And that counterparty is going to need to know proof of origin of that data, proof of process of that data, and proof of state of that data.

Full traceability.

Full traceability of all data beginning to end. Let me give you a really cool example. The new RTE um requirements for the use of sale of semiconductor chips to the Middle East, those requirements came out literally 2 weeks ago. We beta tested a a compliance agent for that that is anchoring proof of origin, process, and state of the data being processed through a chip so that those Arab states can prove compliance with the new legislation so they can take delivery of the newest Nvidia chips. And that's happening with zero knowledge proofs on chain on multiple chains, right?

That's

Yeah. That's plumbing. I like it. I'm going to move to a theme of uh yield. Just to just to identify as, you know, assets come on chain, the simplest form is to is to generate yield.

I'm going to start with uh with uh Oya. Um Okay, is it does the best user experience win? I mean, that's this is the one thing that I when I think of the internet, everybody says, "Well, jeez, we're at like this stage of the internet." I'm like, "Okay, great." And I think back to '94 when the internet was slapping me in the in the face as a as a young buck at the Bank of Canada.

And I think of what what would I have invested in? Probably not the use cases. I would have probably have gone to like infrastructure. I had no money, so I wasn't investing. But if I had, I would have thought of the the infrastructure, not the user experience.

And I kind I kind of stuck with me. So, is it that the best user experience wins, and the best user experience then migrates to higher yielding product? How do you think about that?

I don't think the best user interface wins, but I I would preface this by saying I'm probably one of the more conservative people in digital assets. I think um liquidity um and regulatory compliance and visibility wins over user experience, at least to the investor profile that we're targeting.

And um Mark, I mean, as investors come on chain, you're giving them a whole swath of things to uh contemplate. You're You're making a big bet on Solana, obviously. This is a This is a big part of This is your uh core um How how focused are investors on the underlying chain versus what you're able to deliver through that chain?

Yeah, I think we're moving now into an era where the you know, the the chain is more an infra layer that that that just works and is is the global marketplace. So, we've built on Solana because of this this thesis that um it scales, it's fast, it's cheap, and it can be a global ledger for for for on-chain finance. And we're we're moving from like the geeky phase of of building on chain to to now the you know, the building UX, building um good protocols, and really like the engine room of yield. So, if we take for example uh Coinbase, similar exchanges, um they are often now the the front end to uh yield on chain and uh can provide uh easy-to-use products, which then uses the um the on-chain primitives like Camino,

Mhm.

um which has the borrowers, which has the yield generation activities from from specialists to to kind of power this um economy. So, um yeah, it's now absolutely a new uh a new era um less chain maxis. You need to care less about the infra layer, but more about the

He just want to make sure it works. Safe, secure, it works.

Absolutely. Okay. Absolutely.

Brett, if I had a song I could play right now, it would be it's all about the base. That's the you know, so the the base coin Look, the base chain has been just a just a remarkable success. Um the the amount of building that it's generating is super interesting. Obviously, some of the things that you described earlier be are intricately connected to base. Base is is EVM is an EVM platform.

It's building on on Ethereum. Do you see fragmentation of chains problematic or risk? How do you How do you think about Coinbase's choice with base in this case?

I appreciate the tee up the base, but I've got to give a shout out to Solana. So, I kind of want to prove to the audience that I'm the markets guy at Coinbase. And so, yes, we have an affinity for base, and yes, we have a commercial arrangement with Circle, but as the markets guy at Coinbase, I'm a platform guy. So, I'm a I'm a free marketplace guy. And so, what I'd like to do is partner with everyone on the stage here, including Solana, who by the way is doing a fantastic job of scaling use cases on chain.

And I want to get to the point where, you know, Coinbase is a single entry point into the digital ecosystem. I hope we curate experiences to the extent institutions want us to do that. But, super important to have a multi-chain world. Now, specific to base, yeah, I'd love to see developer activity on something that, you know, Coinbase incubated and progressively over time will become more decentralized. But, what I what I like about what's going on today is that, um, know, sometimes the crypto kids in this world, um, I'm not a crypto kid.

I've got gray hair. There's not that many people that do, but I've been through a few cycles. And so, when I first joined Coinbase, you know, in the lending space, there are a lot of people and engineers that just sort of went, "Oh, this is like free money and free yield and you can get 8%, 9%, 12%, you know, look at that. We can do recursive yield." And then it all blew up.

Um, and so, what I like about what's going on today is that we have uh, progressively more people with real experience and understanding risk, understanding the importance of data, the importance of selecting the right chain, the importance of customer experience, putting that all together, and actually generating yield and new instruments in what I think is generally a more responsible way, and uh, and and constructing things that, you know, once you give them a shake or the market moves or we have a price dislocation, they don't fall apart. So, um, anyway, we're in a good we're in a good phase here now. I I love the development on Base, but I actually really also embraced the development on Solana and other chains.

Very good. Very good. Patrick, um, sim- similar line of similar line of thought. So, as as more and more investors seek yield and things like that on chain, what do you think investors need from Invidia and and and the services you're offering? Do they just need legal clarity, data clarity?

What what what is it that you're hearing from the investor base to say, "This is this is what I need from Invidia in the background to just be confident that I can engage on chain?"

So, I think pre- and post-trade servicing of the asset uh, in in in a bulletproof manner where they can understand data operations at scale, connecting those those data elements without leaking their data, right? And that, you know, that is uh, ZK proofs at scale being used with delivery, with permission to access and then integrating with forms of automation where the data retention obligations of the participants are respected and and met. And so as the big institutions do this, if they want to buy a digitally native asset like Bitcoin, that's easier. But if you're going to have mezz or senior debt trading and you want real access to the underlying asset performance, how are you meeting your data obligations around retention and you're not leaking that data all over. So as long as we can meet those data retention obligations and deliver that in this agentic form to the smart contract that's going to inform the digital instrument so it can be traded, they're all in because everybody agrees that the middle office for alts is going to be transformed, it can be transformed and it's not going to save three basis points, it's not going to trade it save seven basis points, it's going to save 60, right?

And and it and it is going to matter. But then the other thing is that the discount for lack of marketable information on private market assets, when we have an agent that can surveil that, you're not going to take a 20% haircut when you sell your secondaries to the collar capital or you're not going to give 600 basis points to Evercore to sell that secondary, that's literally going to be denominated in a couple hundred basis points, maybe one to two and when you cut out that middle office drag, it creates huge opportunities.

15 lines of code, that's all we're going to replace middle offices with 15 lines of code. So Brett commented on having gray hair, I'll show my vintage. I have I have paper. Everyone else is reading for that I brought paper for my guidance. So it's I want I want to move to the to the risk side of of things.

Um you know, it's a common question and we're going to we're going to we're going to pick it up. We have last couple of things couple of minutes left so we got to be quick on this one. But um as you think about risk scenarios, people like to ask the question of what keeps you up at night and this is a group that sleeps. I promise you. They they sleep well.

So, it's more of what's waking you up at 2:00 in the morning where you're like, "Oh, no." Um so, may maybe just go go go across the group. Start with uh with Oya. What's what's waking you up at 2:30 in the morning?

Yeah. [snorts] Um Well, I started my career at structuring CDOs at Lehman Brothers. So, I'm not easily scared off, but I think in our sector it's vulnerability to hacks uh is probably what wakes me up if my kids don't.

Mark?

Yes, so I mean Kme- Kmeenos been uh battle tested now for for more than 2 years. Um for us, yeah, it's absolutely risk is number one priority. That covers both um market risk, you know, because we're we're um involved in configuring market parameters. We need to understand asset volatility and the like, but also technical security risk. Yeah, we Kmeenos had over uh 18 audits.

It's open sourced um smart contracts formally verified. So, um yeah, it's it's it's technical risk, market risk, but then having a really good team um on it all the time means I can sleep a bit more than I used [laughter] to.

Arthur?

The real answer, the only thing that wakes me up at 2:30 in the night is my dogs.

[laughter]

Um but um 10/10, we had a big market crash. So, uh I did get woken up. And the cool thing about the market crash on 10/10 for me, it was the first time in kind of memory that everything worked. So, uh you know, the exchange worked, prime worked, price feeds worked, margin calls worked. So, I was up for all of kind of a few minutes.

I noticed that things were crashing and I actually went back to bed.

By the way, that was that was a that was a Friday into a Saturday. So, that was that that's no small feat. When when markets close, so

That was the biggest clearing of risk that we've ever had in crypto in that 24 hours. And that's the really the first time this whole industry, you know, your lending product, the customer experiences, everything. There were a couple things that didn't quite, you know, a few delays here and there, but by and large, the ecosystem performed. And that's super important. Don't lose that.

Don't lose that fact. Don't don't forget about that when you think about what to do next next after this after this discussion.

Patrick.

I I thought that was a great answer. The the when the internet came about, tens of thousands of real retailers became dozens of retailers. And it was a massive consolidation of retail globally. What keeps me up at night is the concept that the decentralized structure that Satoshi created and was built upon is going to lead to further consolidation, not distribution. And I think that you see people taking shortcuts in structure in order to them to allow to scale fast that is going to lead to consolidation with greater bottlenecks, not less.

And so that's what keeps me up at night that we push for building ecosystems that have broad ability to disseminate cuz when you think about it, there's only 1.2 billion people on this planet that access the banking rails. There are 6.8 billion people that don't access the banking rails. And when you look at this, Visa's one or MasterCard, excuse me, that was a giant error, is one of our big partners.

Next year, 50% of all of their remittances are going to be cleared in Mina and Africa on using non-bank rails. 50% of all MasterCard remittances will be cleared using non-bank rails. And this is the future and we need to and continue to drive decentralization. That was a long answer.

No, no, it's great. I'm I'm I'm I'm over time, uh as we can see, but then we have to end on a prediction. So, December 31st, 2027, what's the size of the tokenized debt market? Oh, yeah. We'll go around the horn.

All right, let's go in reverse order. I keep picking Patrick.

6 trillion.

All right. What do we know Now, that so to size tokenization right now is roughly 325 billion dollars. So, 6 trillion, that's a big number.

I'm going big, like really, really big. [laughter] So, a panelist yesterday said 10x, I'm going 100x. And the reason being as we're talking in 2 years, I'm going 100x, and it's because I think we're going to tokenize the largest markets first. Mark?

I can't be 100x, but uh I'm I'm bullish. I mean, 10x even sound sounds a lot, but the trajectory that that's going now, I'm going for uh 10 to 20x.

Oh, yeah.

I'm going with 20x.

All right. Big numbers. Thanks, all. Really appreciate it. Thank you for being here.

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