How Tokenized ETFs Bring Wall Street Onchain | Aisha Hunt - Kelley Hunt

Okay, we hope that you enjoyed that talk on how to deal with disputes. Uh, next up we have Aisha from Kelly Hunt who's going to be taking us through a talk on how tokenized ETFs bring Wall Street on chain. Aisha, welcome.

Thank you.

Hi, I'm Aisha Hunt. I'm the founder of Kelly Hunt PLLC. Uh it's an ETF and tokenization law firm based here in Denver. Um I'm very focused on uh representing institutional asset managers. I've represented um multi-t trillion and multi-billion dollar institutional asset managers in particular ETF issuers.

Um right now we're going through a revolution where we're focused on basically transitioning uh various financial products um institutional collateral on chain and what that looks like um really requires uh us to take a step back and think about the last three years. So in the last three years we've been trying to um ask the SEC for permission to um launch what are referred to as dual share classes. This is where a mutual fund can add an ETF share class or an ETF can add a mutual fund share class. When a mutual fund adds an ETF share class, they're doing that to benefit from the tax efficiencies of the ETF wrapper. When a ETF adds a mutual fund share class, they're doing that to access 401k distribution.

And the reason why everybody's focused on this is because the combined total assets for mutual funds and ETFs are 45 trillion. um 15 trillion of those assets are in ETFs, 30 um trillion of those assets are in mutual funds, mostly held in retirement accounts. So throughout a lot of the sessions, you know, at ETH Denver, we're talking about how we can lean into institutionalization and bring further legitimacy to um various projects. And so this regulatory work that I'm doing and others are doing to one um be able to launch dual share class funds so that you can leverage both a mutual fund and ETF rapper is really about access accessing 45 trillion um in assets that are existing. This isn't about raising new assets.

This is about you know essentially transitioning those assets now on chain. So we were the first to propose um on behalf of our client FM investments to the SEC to tokenize ETF shares. What does that mean? It means essentially um offering uh digital representation on chain of ETF shares and doing that on top of dual share class relief not only allows um bringing those ETF assets on chain but also additionally mutual fund assets um where a fund is relying on this dual share class relief. So, we're really excited about the work we're doing from a regulatory perspective.

Um, especially as we see, you know, um, malt claw and and other, you know, agent uh, capabilities and AI build out those agent capabilities. Those agent capabilities inherently require being able to move collateral on chain. And so, specifically for my client FM investments, um, we have, you know, obtained relief to, uh, launch dual share classes. This is a $6 billion ETF. So, these are real assets um that are currently regulated um under the Investment Company Act of 1940 and the 1933 act.

And so, what we're doing here is we're leveraging a regulatory protection stack. When you think about um a Treasury bill, a three-month Treasury bill, it's considered the most liquid and the most safe uh collateral that one can own. Literally, the issuer is the US government. And so when you're taking a treasury bill, a three-month treasury bill, and you're wrapping it in an ETF, you're essentially then applying a 40 act protection for the actual fund, but you're also uh applying a 33 act protection layer with respect to the fund shares. So you have the T bill issued by the US government.

You have the 33 act protecting um those fund shares and you have the 40 act protecting the fund. So that regulatory protection stack um is really uh the really the format for thinking about how do you build within that regulatory framework a tech stack that can support tokenization of ETF shares and and why is this important because it's it's it we're entering a time where um agents could be misaligned and that's going to continue to evolve and so how do you create you know a digital Fort Knox to protect the most liquid safe um collateral and and move that onchain and further institutionalize a lot of projects. And so we're really interested in understanding how um big institutional players like NASDAQ, the New York Stock Exchange, um Coinbase, Securitize, and others are looking at their tech stack and how they can support um tokenizing ETFs because again, this is accessing collateral that agents will need um and and as they expand their capabilities and as we look at, you know, even um the evolution that's going on in terms of um building for web 4. So we think this is a really important project where you know a lot of folks should be very interested because again this isn't about raising assets. This is about tokenizing existing institutional assets and creating protections around those assets um so that people view view it as a safe space in the crypto um ecosystem.

So I'll pause there and take some questions. I know we might be a little behind today.

Yes. So to our proposal to the SEC on behalf of FM investments, we've made it agnostic. So we're looking at projects um that people are developing at the various big players but new players as well to see you know what chain what onchain you know protections make sense what tech stack makes sense to protect a $6 billion ETF right so we view it as another distribution channel to tokenize and um we're really excited about what we're doing from a regulatory perspective and now we're looking for the tech stack that will plug in um to really uh ensure that you know shareholders are protected it right. Any additional questions? Well, thank you all very much.

Really appreciate your time and looking forward to continuing this regulatory journey and the tech stack journey. Thank you.