After the ETF: What Will It Take to Get Wall Street Onchain? | David Alderman - Franklin Templeton

um so good afternoon everyone I'm Tracy Wong I am a crypto journalist previously with coindesk and now freelancing uh so I will be introducing our panel and so this panel is called after the ETF what will it take to bring Wall Street on chain and what's amazing is that we actually have uh two representatives from companies that are uh Bitcoin ETF issuers so it'll be super exciting to um to discuss and so I'll um have our panelists introduce themselves actually uh so maybe just briefly your name the firm that you work for and a little bit about kind of your role there and maybe we'll start at the end there with you Krishnan perfect so yeah um hi I'm Krishna N I run VP of product management at 21 Co may be a little bit closer to the microphone s is this better all right perfect uh Krishna ner I am a VP of product management at 21 Co what 21 Co does does is is the parent company for 21 shares which is uh uh basically issuing uh etps um such like bit that we did uh which is Bitcoin 21 Co oversees both trafi and defy investment products and I also I'm primarily focused on ensuring how do we uh get exposure for both ways to our user base and customers awesome uh my name is Ryan rasmason I'm one of the senior analysts at bitwise Asset Management we are one of the crypto asset managers that issue the Bitcoin ETFs uh we've been in the space since 2017 and we work to bring institutions into the crypto industry financial advisors raas hedge funds and all all of that hi everyone my name is Amel Hong I'm a managing partner at Amber group we are also a crypto asset manager and Market maker been around since 2018 we are a headquartered in Singapore and Hong Kong but we do serve as clients uh institutional clients and high netw worth individuals globally so today I hope hopefully I can bring a little bit more Crypton native and Asian perspective uh to this topic uh yeah I guess I can go again uh David Alderman I work at Franklin tippon um Global asset manager uh a research analyst on the digital assets team um and you know we were just were very involved both in on the investment side and the building side both like tokenization uh Venture and and uh liquid strategies awesome um so before we get to um onchain stuff I want to start talking about the Bitcoin ETF so it's been about 6 weeks since uh ETF started trading um it certainly the market has reacted positively The Vibes are good in Denver this year and so uh maybe let's start with you Ryan do you think what has the reception been like and did the ETF kind of outperform or underperform your expectations yeah the the reception's been tremendous it definitely outperformed our expectations at bitwise I mean we obviously have been bullish on the space for a while and thought that this spot Bitcoin ETFs would be a huge uh unlock for institutional investors but I think overwhelmingly breaking a bunch of Records across the ETF ecosystem ETFs have been around for 30 years and four of the spot Bitcoin ETFs are in the top 25 of all time so that just kind of shows uh where we're at in the uh broader scheme of the the industry and this week was a record for trading volume and I think think that just that momentum just brings more investors into the space we're all over CNBC with the spot Bitcoin ETFs that just means that more retail more institutional investors are coming so it's been really tremendous it's been really exciting uh we you know there's there's a handful of different ETFs that are over a billion dollars and and uh yeah it's just very exciting David yeah I mean I I think it's uh exceeded expectations certainly the Market's expectations um It's actually kind of impressive I mean this week has been insane I have haven't uh I don't think I've been to a conference in a while where it's where it felt like this much energy yes Annabelle do you have anything to add well I guess they they touched on on most Parts but I would say that from a um surfacing the more crypto native side of clients um we've been tracking or looking forward to the ETF launch and and this number especially in the last two weeks has definitely outperformed our expectation and I think that brought definitely a lot more attention to the rest of the crypto Market uh in addition to bitcoin uh which is why we're seeing uh pretty incredible Market run up um and I think that's only going to continue um as we head towards the the rest of the year as in look we we are excited uh it's usually unprecedent to have billion uh like almost a billion dollars in year one um at 21 shares we've hit uh two over 2 billion so our total AUM is around 5 billion if you look at a global product so we just very excited about U what's happened and we look forward for more uh so it sounds like the consensus is the crypto industry overall or everyone is very excited about the ETF but um I want to point out that the ETF it it kind of put crypto into this trafi ETF wrapper instead of kind of the opposite which is putting trafi onto crypto rails and so I'm curious you know as seems like a lot of the demand was just people are now able to buy Bitcoin through their 401ks through brokerage accounts in a um in a ETF structure that has been around for decades and I'm curious if you think that it's more of like a you know to it's do you think that that will continue to be the trend um with potentially e ETFs or more crypto going on to trade fir rails or do you think the Bitcoin ETF will likely just be kind of a a gateway drug of sorts for for Wall Street to get their their feet wet into crypto and why don't we start with Annabelle sure I I think that's a great question and I think um in my opinion it's not either or I think it h probably happens in tendem uh we've been trying to bridge uh Define institutional Finance for a long time but um a lot of Education we've done does not compare to um the the ETF announcement because it really legitimize this industry um Bitcoin is an asset class blockchain is underling Tech so as we see more uh embracement in the traditional Finance space uh towards uh crypto assets and blockchain I think we'll also see more real world assets on chain we started with stablecoin um and now a lot of the Wall Street banks are already experimenting with it um and I think there are more types of assets that can be brought on chain as well and um and I would say that we've already been um servicing a lot of the uh traditional Finance hedge funds that are very active uh within crypto as well um but as they have more venues to trade I think they'll ramp up significantly as well and um you know hopefully we'll see more types of ETF or other types of structural Products that come in and overall we'll bring um Better Price Discovery more more liquidity in the market and um really legitimize this this spase much further okay uh David curious to hear your thoughts on kind of do you think there will be this uh you know trfi side of crypto and then crypto side or do you think the world will somehow merge in a way uh I think at least for the short term I think they're going to remain kind of separated I mean you know it's just because you know I think Wall Street generally speaking right now just has one product that's really you know the Bitcoin ETF um and then you know kind of like maybe Structured Products or something like that could really expand the Horizon of like what they could do um but I think there's still like if you look at the where the market is today like what what tokens and what ecosystems are taking off you know obviously Bitcoin is getting a lot of flows from the ETF um but there seems to be like a lot of where a lot of attention is within crypto native communities is kind of where everything else is going and but you know you're not seeing you're not seeing wall go into that okay Ryan yeah you know I think that we're we're always going to coexists with traditional Finance there will be the crypto world the trafi ETFs are really just like the erc20 rapper of the traditional Finance industry and so we're bringing crypto assets into their world with ETFs we're also seeing a lot of traditional Finance products being wrapped in erc20 tokens like uh treasuries and private credit markets and I think that as Wall Street slowly starts to see the addressable Market of crypto which is which is global and in some ways much larger than the Institutional Investor market then they'll start bringing more and more of these Structured Products on chain I mean companies like Ando Finance uh Maple Finance are clearly seeing a lot of success right now with the tokenization of real world assets I mean it's one of the hottest Trends in crypto right now and so uh I just think that we'll continue to see both worlds dipping their toes uh in a variety of different way way but net ntic grows the ecosystem and uh I think they'll continually coexist for a very long time and I think that's okay uh so I mean we have seen some of you know you mentioned Ando and maple but they haven't really taken off in the way that the Bitcoin ETF has really taken Wall Street by storm I'm curious to hear your thoughts on what hurdles it could be operational regulatory um or or just educational getting Wall Street more educated about what's out there what do you see as the major hurdles to Bringing Wall Street on chain and how the industry can kind of overcome that uh I I guess we'll start with you Ryan and then we'll go to chrishan uh yeah so I mean traditional Finance has so many compliance hurdles to to do pretty much anything uh just getting these ETFs on platform is a huge huge process where uh many committees have to review the assets choose which one they want to issue educate their advisers they have to educate clients Etc so the there's compliance hurdles there's regulatory hurdles as well I think uh I think that in a lot of places outside the US is where I think we're going to see adoption of these products the uh maybe in countries where you can't just go into your brokerage account and buy a Vanguard uh treasury product and so what's the better alternative creating a crypto wallet and going and investing in a Ono Finance or Maple Finance treasury product I think that's why we're seeing companies like Franklin Templeton bring products on chain uh which is really awesome and and and I guess my expectation is that as that market grows it'll largely grow with retail consumers outside of the US first and then institutions will see how uh how they can grow their Market that way and then we'll start to see more and more products come on chain but regulatory hurdles in the in the US in particular are definitely there uh for both issuers of these products and institutional investors in these products look um our thesis is uh ETF and tokens are rappers um basically ETF is where we are taking crypto and providing it as a traditional Finance instrument and the same way uh we are looking at uh tokens as well where you can take different types of things and move it back into defy so really uh the question comes down to is is token going to be seen as a rapper or is it going to be seen as a asset um and once you get more understanding from a regulatory standpoint not just Lo US based but also globally that will help with the traction and and will ensure that uh both the use cases for the users that we going towards uh it does seem like some Wall Street firms are way more proactive in in R&D and kind of experimenting with blockchain than than others so I'm curious David you know Franklin templon seems to be kind of uh at least in terms of uh Wall Street firms pretty proactive while maybe some other firms they've had their CEOs publicly come out and fud crypto why do you think there is such a difference in the range in the in the range of reaction towards crypto and do you what will it take to get kind of the more um cautious firms to kind of come around yeah I think uh I mean I I I don't even think it's necessarily something that's within uh trafi I think you know just you can talk to people that are not in the crypto versus you know crypto Natives and it seems to be pretty tribal like there's a lot of people that just are not in the space and they all they see is uh you know all they see is just speculation and really that speculation is just masking the core innovation of what's Happening um so I think you know at least for us specifically you know um you know from the top from the top of the house uh our CEO is extremely supportive and she seems to really understand like where the Innovation is and she's willing to like weather storms and you know other firms they just haven't I don't think they've just reached that point of understanding you know all they see is kind of that masking of like speculation and you know 100x leverage all that kind of stuff and like uh um it's in some sense it does I think it kind of takes it kind of takes some time for most people to get a good understanding of the Innovation and and uh where it could go you know but um and I think the one thing actually that's really changing things is for example like the Bitcoin ETF it's like completely changing the incentives on Wall Street and so you know that's just that's forcing people to learn and so you're just going to have uh growth of of you know people that don't understand it to people that understand it and that's that's going to help really help Drive the space forward and I guess I'm curious Annaville to hear you know in Asia a lot of your your clients probably go to Amber group because you guys are so crypto native and you've been in the space for a while and whether you see kind of you know if there were traditional Financial firms that started their own crypto departments um whether you see that as kind of competition and and kind of what the or currently how how interested in crypto are these firms actually I I don't think it's quite a competition a lot of times um because we have built infrastructure over the years so a lot of times we actually would while label our solution to them um or work with them in some way where we're the liquidity provider um to a lot of the traditional uh Financial exchanges whether it's a Banks building a new crypto exchange um or offering their own custody type um services to their clients um because we've actually gone through many rounds with different regulatory bodies uh globally um where we got involved in the very initial phase of when they are looking at um the digital assets framework um so I think um we are glad to be early and we want to be able to help more financial institutions to be able to offer uh digal assets to more of their clients um and I think that is really our view of being the bridge between uh onchain or defi to traditional finance and what we love to see is more participants more volume or AUM and that will really benefit um whether it is the the crypto native crowd or um the more traditional Finance crowd uh let's move on to talking about where onchain activity will go uh so historically so so with the Bitcoin ETF W she got interested but historically I would you know Bitcoin isn't necessarily the the most active blockchain in terms of you know onchain activity and smart contracts and although it sounds like that uh Bitcoin is currently experienced a bit of a Renaissance in that area and so when we are talking about bringing Wall Street on chain it means you know a unique custody solution actually interacting with the blockchain rather than buying Bitcoin and ETF rapper where do you see this driving on chain devel vment do you think Bitcoin will see a continued Renaissance or do you think that um a lot of the onchain Innovation will remain mostly in ethereum and other alternative ecosystems uh maybe uh Ryan we'll start with you yeah bit that's it's a good point bitcoin's certainly having a Renaissance moment where uh you have Bitcoin l2s and BRC 20s and I uh nfts and I think two years ago at at a conference like this we would have said that's crazy that will never happen and I think that just points the level of innovation that we see across the industry uh I think institutions and Wall Street for the most part doesn't know don't know what an L2 is don't even understand uh a lot of what like nfts are and defi is so it will take some time but they're most likely never going to land on an L1 because of the high fee structure and if you're going to bring Wall Street on chain you need to do it with low fees and high latency and so uh I think that'll happen on l2s whether that's Bitcoin l2s or ethereum l2s or some other evm uh chain that's low cost High throughput that's that's to be seen but I think it will largely happen in the finan financialization of real world assets uh whether that's real estate or treasuries or or stable coins honestly uh that's probably going to be the the biggest spot where we see these these firms and come into the the space but um it could happen on bitcoin l2s I think I think that a lot of the invest institutional investors just need to First learn what Bitcoin and ethereum are and then they'll choose that path but what we have seen uh is that this time around we're not seeing a lot of Institutions launch their own private blockchain like enter Enterprise blockchain uh they are embracing public uh public blockchain settlement layers which is a big transition from before and I think showing where we're headed in the future mhm if you if you look at Bitcoin as in there's a lot of so firstly the inflows that have come in has has helped Bitcoin go into price Discovery so that's good for Bitcoin as a ecosystem overall uh but there have been layer to like block stack and ordinals that is actually gaining a lot of traction as well uh what it means is um it can help Crypton native Community go deeper into the layer two but for us is we can also look at a lot of innovational work that comes in there and push it back to trfi as a rapper as an ETF so it really depends on the direction that it goes let's move on to uh the ethereum ETF so uh after Black Rock filed for a spot ethereum ETF it generated a lot of Industry Buzz that um an ethereum ETF that we would see an approval by the end of this year and so what are your thoughts or predictions on an EF and we'll start with you uh David and go down the line uh yeah I mean I'm going to be kind of limited in what I can say just because you know we we did file for an ETF and it's undergoing SEC review but um you know it's good to see the industry pressing forward okay well I guess that's also um what I guess me representing Crypton native Community we really also uh want to know that it's happening or when it's happening and um I think the the interesting point of this is that um I think outside of the Crypton native Community a lot of people probably equate crypto to bit coin um maybe they're aware of ethereum but um I think once um the eth e um ethereum ETF is launched they'll realize there's more crypto assets available than just Bitcoin and there are so many things that you can do um on top of ethereum to imp Point earlier versus uh maybe what's available um at Bitcoin on the at the moment um I think that's going to be quite interesting for example there is the native staking play um that could be possible um after a um eth e um eth ETF there could also be a Stak e ETF and that's done purely on chain and uh you're not necessarily taking uh too much additional risk um from that perspective uh obviously reaking is is another Topic at the moment and um all the other things that you can do on chain um once you get into the eth ecosystem um so I think that's going to be even more interesting um from introducing only Bitcoin at the moment uh yeah similar to David I can't comment on any specific applications but broadly speaking if you look at where ethereum is today the market structure looks very similar to where Bitcoin Market structure was ahead of the the spot Bitcoin ETF approvals we have CME futures for ethereum we have ethereum Futures ETFs approved in October so the market structure looks very similar from that perspective I think that uh you know we could likely See Spot Bitcoin ETFs uh we also have some really strong Advocates uh at the SEC there's there's presidential candidates Senate candidates at at this conference you know and so uh the industry is maturing that's what needs to happen we weren't ready for spot Bitcoin ETFs uh until recently is the is the reality and and markets really need to continue to mature to a place where where uh they can be regulated in a manner that that ETFs require so um I I'm hopeful but you know it's it's to be seen and and there's a big decision date coming up in May that we're all watching and all excited for what I can share is that we were the first to file with Ark uh S1 U but that's about it in terms of ethereum ETF uh look for us it's about being regulated and ensuring that we provide such products to our us investors uh what we did do is end of last year we uh pushed out to ethereum future products and this just seems to be the natural step for us MH okay I think we have time for one more question um I want to ask about you know we've seen that Wall Street they move at a very different pace than the crypto industry moves at and you all have kind of expressed relatively um positive views that there they will eventually come around to to the crypto industry and and be on chain I'm I'm curious to to hear what that time frame looks like and whether we will see that kind of in you know one to two years it does seem like the E ETF might rapidly follow the the Bitcoin ETF um but but in terms of actually getting Wall Street on chain uh what's what does the time frame look like and maybe we'll start with you David and just end with you Krishnan yeah I mean Wall Street definitely operates on a different time frame than we do so or at least well I at Franklin I guess I work on the same time frame but personally I operate on a different one so um uh I I think it's you know I think it's I think Ryan's right it's probably through the r rwa kind of uh portal just because it's a way to have products that are on chain it's a way for you know those firms to also have incentives to push those products and you know then you can you can start to see some sort of periph foration of you could call it like permission defi or something like that but in terms of timeline I I think that that's really that's really hard to estimate it's um it's it's really just there's a lot of friction there's a lot of friction to add utility to those those products and uh I don't know one to two years if we if we saw like uh Wall Street really active on chain I would be kind of surprised to be honest but uh maybe maybe I'm wrong annabal yeah I mean I I hope it is within one to two years but um I think that also might be a little bit um to optimistic uh right now we're seeing some um early adopter Financial tions um who have been um looking at onchain um trading or other things but a lot of them can't even do it directly because of um compliance hurdles so they would trade through a um OTC desk like ourselves um and would act as um liquidity um sourcing um or provider for them um so actually I do see that a lot of the uh the hurdles might be on the regulatory Clarity and the compliant side of things I think the interest is there especially after um you know what we're seeing this year uh but ultimately I think um Wall Street definitely needs a lot more clarity before they can move real size in on chain got it I guess very briefly Ryan and kushan will the institutions come this cycle uh I think if yeah I think they will come this cycle but I think this cycle will be could be longer than ones we've seen in the past just because we are maturing as an industry so I would say 3 to 5 years would be great could be could be a little bit longer than that okay yeah I wish I could predict the time but I think for the hope of the community yeah it should hopefully the cycle okay all right let's give a a big round of applause for our panelists and thank you so much for for uh for listening [Applause] in right thank you guys awesome panel awesome awesome we are so back the magical