Vaults as the Next Infrastructure for Onchain Asset Management | EBC12

Hello, nice to meet you. I am Stan de Mest. I am the co-founder and CEO of Willem Capital. We are a Willem Capital. We are a Luxembourg platform that offers market-neutral strategies based on the blockchain ecosystem blockchain ecosystem , i.

e. mainly DeFi. And we have different types of products for our customers. We have a Luxembourg fund. We have SMA and of course the voting rights that we provide to retail and institutional investors.

Perfectly. Thank you, Stan. Andrew O'Neill, Head of Digital Assets Research at S&P Global Ratings. So we are a recognized provider of credit ratings in traditional financial markets. I lead all of our work that's related to how we assess risks as markets move along the chain, whether it's tokenization, uh, of regular things, or crypto risks that are emerging, uh, in the context of the financial market.

We publish ratings of tokenized funds tokenized funds that are used as collateral in vaults. Uh, we publish risk assessments for stablecoins. Uh, and, uh stablecoins. Uh, and, uh , yes, storage is at the center of our thinking right now. Perfectly.

Thank you very much, Andrew. Let's. Hello everyone. Uh, this is Yanni, the head of special projects at the Bitwise network. Uh, we're one of the largest crypto index fund managers in the world.

Hmm, probably best known for their ETFs, but at the moment we have, I think, over 70 products for ETFs, uh, private funds, SMAs, as well as curation of online storage, uh, which is what we're talking about today. Uh, yes, that's on my part. Perfectly. Thank you very much. Let's.

Greetings. Greetings. Er, my name is Artem. I'm, uh, the head of RWE at Falcon Finance. So, essentially, we are creating a universal collateral infrastructure that allows any asset on and off the network to be used as collateral.

We are releasing a synthetic dollar, and we also have a brilliant version of this stablecoin with complaints. So, yes. We would be happy to chat about RWA chat about RWA , walls, etc. Thanks, guys. Perfectly.

The last one, please. Of course. So, my name is Blake. I have 18 name is Blake. I have 18 years of experience working at Ernst&Young.

So I created digital assets, that is, I helped create this practice for Ernst&Young. I am now a partner at EY Digital. So I appreciate a lot of the work that people are doing here, both in and outside of blockchain. What do I do? Basically do?

Basically , I make sure I can guarantee a certain form. So glad to be here and see what we can do. Hello, uh, Thomas Doyle. Sorry, I was in the wrong room. I was deeply involved in the tokenization debate in my neighborhood.

Nice to meet you all. Um, I'm Thomas Doyle. I have been working in traditional markets for 20 years. I was a managing director at Citigroup and Goldman Sachs in the equity derivatives sales department. I have been working in cryptocurrency for about 5-6 years now.

Very excited for today's panel, even though I was in the wrong place, because tokenization, for those of you with trading experience, reminds me of the ETF boom. You know, people talk about ETFs. I survived this through Delta One and the stock market. But people could see the value in having a wrapper and the huge interest in wrapping different assets and making them accessible to different customer segments. And tokenization is exactly that, isn't it?

Tokenizing assets is Tokenizing assets is actually the easy part. And if you imagine an iceberg, if you look at tokenization, the asset that we tokenized is the part that you see above the water, right? This time we'll delve into what's underwater. What is the operating model of tokenization? What is the risk management for the repository?

How is this risk managed? What parts of risk management do we dedicate to smart we dedicate to smart contracts? What do we still allocate to independent auditors independent auditors ? How does this relate to regulation, because now we are talking about real ownership of real assets, as well as secondary liquidity. So I'm really using this time to dig into some of the headlines that we've seen, because tokenization is one of the biggest topics that you'll see in cryptocurrency.

We saw it everywhere. In fact, I think EBC has done a great job of tokenizing coffee orders that need to be purchased for those who have already ordered coffee today. So let 's start with the key topics we want to cover today: repository stewardship, asset risk management, and reserve transparency. We have an incredible group of experts here who are experts in certain parts of these fields, and in some cases, all of them . And then secondary liquidity secondary liquidity , and also, if we have time, we want to touch on euro-denominated assets, given that we are in Barcelona and there is a huge European contingent here.

You know, 99% of contingent here. You know, 99% of the assets on the chain are still denominated in dollars. So, what does this look like for the euro and other assets? And if we have time, we'll also look at gold, because I know gold, because I know some of the panelists have some pretty interesting products with gold. So maybe let's start with the tokenization operating model.

We'll run through the panel, starting on my left with Belém Capital. You know, you guys have created a fantastic partnership at RockwayX. Maybe just tell us what part of this operating model underwater in tokenization you specialize in and what you're most excited about for the next 6-12 months? Yes, of course. Hmm, every week we received many requests from financial institutions that want to tokenize financial products.

And the first answer we gave them was that we gave them was that there's no interest in tokenizing something if it's just to put it on the blockchain. I believe that placing something on the blockchain will not create magical liquidity. You won't have magical liquidity. Therefore, you need to know how to use the blockchain ecosystem blockchain ecosystem if you want to host something on the blockchain. So, blockchain.

So, first, we check four parameters for issuer quality. issuer quality. Secondly, liquidity. Third, does the asset have its own return? And can an asset be valued at any time?

If these four parameters are valid, that is, positive, then we move on to due diligence, which is basically about, I would say, independent audit, depth of secondary liquidity, stress redemption mechanism, and that's the first, first part, okay? So, after that, I would say, there are only a few candidates left in our pocket. And, what then, uh pocket. And, what then, uh , will AWB Unchained AWB bring to the AWB user in the end? I would say that this is, uh, a simple example.

Let's take the example of the euro, okay? We are in Europe. So, we buy, uh, euro-denominated assets that are doing something, okay? And we do what we call a cycle. So, uh, these euro assets will be used as collateral.

We don't sell them. Uh, with this collateral we can borrow stablecoins borrow stablecoins denominated in euros. And we will place these euro-denominated stablecoins on, uh, Unchained money markets. So, in the end, uh, you get the spread and the yield. So, we will get the coupon on one side plus the lending rate minus the borrowing rate.

This will create additional returns for your RWAs. So, that's basically what we do with Balancer Capital with RWA do with Balancer Capital with RWA . Perfectly. And I like the checklist. Could you please remind people about your checklist again?

It was the issuer, you, because I think these are important checklists for everyone, whether you're a consumer, whether it's B2C, or B2B, right? With colleagues. Your checklist included the issuer rating, whether the asset is traded 24/7. Could you just remind us about your remind us about your ... Yes, that is, the quality of the issuer, the liquidity of the asset.

Er the liquidity of the asset. Er , is the asset valued? For example, real estate is not valued in price. I can't tell you the price of a building at any the price of a building at any time. But we need a valued asset at all times.

And, um, does the asset generate its own return? It is very important whether we can get our own profitability. It's not necessary, I would say. For example, gold does not generate its own profitability, but it is a great collateral in the blockchain. Okay, we'll delve into some of these points as well.

Perfectly. Thank you. Andrew, from an S&P perspective, what position would you take on underwater tokenization , for example? In this iceberg analogy... We...

yeah, maybe by staying with the iceberg, we're trying to highlight the risks of the iceberg that might be hidden underneath it, and I, you know, I think blockchain finance creates incredible opportunities for risk transparency. Um, and so we're trying to use this to shed light on some of the differences that might exist in repositories. So when we think about the most common, simplest storage, there's a lot of transparency in blockchain that comes from, for example, investing in blockchain lending markets. There are other vaults where the deposits made by the user are made by the user are simply withdrawn by some small organization that has a certain profitability strategy that you trust will yield some profit, and this is where we see some problems. So, going back to Stream Finance, for example, there was an example last year where, you know, you have this off-block risk that the end investor is probably not very well equipped to assess or understand.

This creates risks when potentially different repositories are exposed to the same protocol. This creates the risk that repositories may be exposed to each other. So, one of the things that I'm most concerned about is actively discussing risks as this space evolves and grows so that we support the key benefit of transparency that Vault Finance, in particular, can bring. I think there are some really powerful benefits, especially when we move to when we move to , um, real assets , um, real assets . I think they are a kind of positive light, but also a warning.

If we consider the largest tokenized real-world asset available as collateral on Morpho today. It's a token called Prime, which is backed by a portfolio of U.S. residential mortgage-backed credit lines created by Figure. This is a very interesting case study of a company that actually issued these loans on the blockchain.

Many may ask what is the point of issuing these loans on the blockchain, if not how does it change how you finance yourself? By introducing these loan tokens into this instrument that issues this permissionless token that can be used in direct financial investments, suddenly there is a new funding avenue for this originator to fund their portfolio of mortgage loans. So, as this question is on a more cautious note, I also want to point out that in terms of real world assets, we are in the very early stages of establishing liquidity for some of these real world assets. And this is really the first step in the Figure ecosystem to start creating them. But let's be clear, this token cannot ultimately be liquidated in the same way that your wrapped Bitcoin or your Ether tokens can be liquidated in the lending market.

So it's interesting to watch this development of events as real storage is combined with real funding in the real world. But, um, we still view it as a pretty significant risk factor in terms of the depth of liquidity that's available or unavailable, um, for different asset types. Maybe a little later I can also come back to some of the counterparty risks that may arise, but may arise, but maybe I'll pass the word on. Of course. Uh, I think maybe one thing, I mean, we're all talking about vaults now, but does everyone actually know what a vault is?

Uh, because I think there are two types after all, right? Uh two types after all, right? Uh , a vault is just a smart contract that pools capital and then does something with it . You just mentioned lending markets, Morpho, Camino, some of these protocols where you just lend, uh, to markets, like a vault lends, to markets, you know, depending on the parameters that the curator sets. And then there are, you know, more strategic repositories, which are just repositories that can do anything.

A lot of this is also due to the cyclical use of risky assets and the use of leverage on these positions. But then, yes, liquidity is very, uh, very important. And I think that, in addition, I think two things that you guys said that make a lot of sense to us, uh, at Bitwise, are, uh, you know, the lack of permission for assets. I think a lot of people who talk about tokenization just think, "Hey, we're issuing the same asset on the blockchain, and that's it." Uh, but I think you also hinted at that also hinted at that , right?

It's like there should be, uh, liquidity be, uh, liquidity . You need to think, "Okay, where does this integrate? How does liquidation work? What about counterparty risk?" And I think that's where, ultimately, the risk curation aspect comes in.

Where do you ultimately trust the curator to have conducted this check? I think we also work quite a bit with Prime numbers. And it took us, I think, about four months to get used to it. Just like how to start working with it. You know working with it.

You know , underwriting an asset from a credit perspective, understanding liquidation, and also the blockchain component blockchain component , right? Smart , right? Smart contracts need to be verified. And all that. And so, I think often when we talk about storage and tokenization, people think, "Oh, great, here's a smart contract.

I'll plug an asset in there, and then we're done." But yeah, to your point, I think we're just getting started. It's nice to see you guys getting involved. I think there needs to be a more consistent standard for how we do certain things. And so, I think ultimately, when it comes to these RWA assets, they bring this off-blockchain yield to the blockchain, which I think, especially in times where there's not as much activity in crypto and as much lending demand to drive the growth of crypto and more liquid assets, um, um, and yield, then, you know, it becomes incredibly important to have an underwriter who can actually understand all of these different components of that RWA.

Um, and yeah, so I think that's where we're starting to see, you know, more institutional approaches to risk underwriting and curation, and also, you know, the general, sort of rating aspect. So that's great to see, but yeah, I think in many respects when we talk about tokenization, we're just talking about let's tokenize the asset and that's it . And that's a long way from what you need to do to actually be able to use an asset on the blockchain, right? Yeah, I mean, that's a contradiction in terms, is n't it? Tokenization as a concept means simplification and tokenization, and also a wrapper concept to make it simpler.

And yet, by doing so, we make it more complicated. Although this is relevant to Andrew and Stan's point of view, more transparency and more means of risk reduction. Artem, can we touch on Falcon and touch on Falcon and how you guys support how you're just looking at the possibility of tokenization from your perspective? Yes, at Falcon, we are essentially doing underwriting because we accept different types of collateral and generate synthetic dollars against that collateral. So we need to be very precise about risk.

So all of my fellow panelists who, uh, described their perspective, are 100% in agreement on the institutional approach to risk, which is what we're looking for, and I think it's a great taxonomy. Uh, uh, as mentioned, the risk levels that supported the RWA are quite important to us because we need to be sure: uh, can we liquidate the position if we take some private credit, or uh, tokenized treasury fund, or something like collateral, and we issue a synthetic dollar against that collateral? We need to be sure that there is enough liquidity, and also that we need to be sure that we can do something with that collateral. So, if it's just a revenue-generating asset, fine, we can get some revenue, but our goal is to our goal is to maximize value for users to allow users to get additional revenue. And if the asset is just sitting idle in five wallets, well, we have a tokenized fund or tokenized assets, but we can't do anything with that asset.

So asset. So , another important thing for us: yes, we check what exactly can be done with this asset on-chain, or the asset just sits on wallets and waits until maturity. So, and yes, I think that's kind of an important issue for tokenization. The purpose of why you are transferring the asset to the blockchain. So, transferring an asset to the blockchain is easy.

It requires some technical work, some legal work, uh, some audit work. Uh, but ultimately, the main question is why, what problem does tokenizing an asset solve, and how can users actually use this tokenized asset. Uh, are there any additional capabilities additional capabilities that a user might have because the asset is on the blockchain, or is it just the same asset in a Fire asset in a Fire wallet wrapper? So, yes. Uh wallet wrapper?

So, yes. Uh , I think, uh, that the main thing for us is liquidity and the actual opportunities that the tokenized form of assets opens up for the owner. Of course. And maybe we'll touch on HT digital. Uh, you know, you guys Uh, you know, you guys , come back, uh, maybe touch on in your introduction, I suddenly missed it, but a very long background is one of the oldest accounting firms in the UK, consultants, and I've been specialising in digital assets for quite some time.

You know where you clearly see tokenization? Apparently this is a huge trend you are focused on. Can you tell us about that for those who understand the risk of smart understand the risk of smart contracts, and also about independent orders, which is obviously a cornerstone of not only combat but commerce in general, right? If you don't have an independent warrant, I think the world has been relying on that for a while now. Maybe just touch on how that works and then touch on bringing in client assets under the UK or Mika caste, because I imagine that's a huge opportunity for HT Digital.

Yes, I think I would compare our position in this industry to where we are literally in the middle between what investors need and what the regulator expects, versus what management is doing. And what is the center of requirements? And this is about building trust. Because trust is a token that is very difficult to build, but very easy to lose. And reputation, I think everyone either comes from a financial institution or you've worked too long to build that element of trust in the marketplace.

And so the next question arises: how to build this trust? And how to increase this level of trust in the market? Hmm, the best part was that I think everyone was talking about the element of concern or the element of risk that needs to be considered. So I guess I'll start with Belham Capital. They mentioned the issuer, right?

How do I know? It seems you mentioned four considerations, if I'm correct. This is the main thing. Yes. Yes, you will have many more, and to be fair, you mentioned those four.

I'll just give you an analysis of the first one. So, stablecoin issuer stablecoin issuer , the fact that you need an element of transparency reporting that comes out. I know many people have heard of the concept of reserve confirmation and the report that needs to be published, but there is a lot that needs to be done underneath that . So the analogy that was used was what's under the iceberg, right? And that's what we're really trying to uncover and uncover, because when you're auditing and vetting someone, you need to really uncover all of these risks.

So, S&P also mentioned many factors in terms of risk. Right? So we really look at things very holistically, you know, the risks, the controls that you have, because the key risks need to be mitigated, and if you don't , you kind of stumble. Um, and Bitwise mentioned a smart contract, but I'll take the analogy of what your smart contract will actually do ? Yes, you can run a code review, but does it have to be consistent with what you have legally agreed to with each client?

Because this is a mandate that you give to the client. And this is very closely related to the regulation that the EU has already introduced. In terms of the mandate, are you actually following it? Even if you say, for example, I'll put 10% into stealth mode, right? Um, but if you transfer 5%, what does that mean?

Are you really not fulfilling your mandate? Right? It becomes much easier to test, but a lot of people just forget about it because it's in the code and you haven't tested it for compliance with the legal contract, right? So for us, the fact that we're intermediating to help people assess risk from start to finish represents a huge opportunity huge opportunity , but it also comes with a very big responsibility because we want to make sure the industry moves forward. Uh, and we want to do the right thing with individuals and firms that want to build that level of trust.

So, uh level of trust. So, uh , it's an opportunity, but we do it very responsibly because we don't want to trip up and not identify the right risk for the firms, which means you can't increase investor confidence. And thank you for that. And then, in terms of business in terms of business opportunities for HC Digital, are you probably working directly with issuers? Also with colleagues who want to use products, both institutional and others?

100%. So we work from start to finish. This applies not only to issuers, we work with institutions, custodians, centralized exchanges, liquidity providers. We also collaborate with Falcon. The information you can see is also public.

So I'm sure I'd like to promote this as much as possible, but the main thing to note is that we work with a lot of people across the ecosystem. But the main thing we try to focus on is when we work with someone, for example, if you work with Waltz, it might be an asset manager, but then we look at a very specific risk that we want to address. So, a comprehensive asset manager can be very large, but maybe we need to focus only on that aspect of the storage risks. And in that case, we will look at things very holistically. Good.

Um, Jana, can we touch Bitwise? Um, you know, there are a lot of ETF issuers, right? But I think Bitwise is well known as one of the most crypto-focused providers. And I think this is just a European problem European problem , you have always had a strong presence in Europe. What does your product portfolio look like at the end of 2026 and the beginning of 2027 in terms of tokenized products compared to, you know, both institutional investors and retail?

So, as far as ETFs go, I think there are a bunch of people here at Bitwise who can talk about it a lot better about it a lot better than I can. Regarding tokenization, we recently acquired USCC, the Bitwise Crypto Equity Fund managed by Superstate. Um, this is generating a lot of, um, a lot of interest, and I think it's one of those examples of combining something permitted with something induced. Additionally, we are looking at ETF tokenization and looking at what we can do on that front, but it's too early for that . As for the trend, I think the main focus for us was " focus for us was " OK".

It has good mood music. What should I do? Maybe dance. I wasn't sure if you were going to sing there and thought it was a short commercial . A little surprise for you.

Good. Okay, then we'll continue. Regarding trends, yes, I think we've spent the last 6 months mainly on two things mainly on two things . First, it is asset underwriting asset underwriting , because, as we mentioned earlier, the yield on cryptocurrencies is quite low. Uh, if you just look at Bitcoin and Ethereum as collateral, you end up with rates that are not much higher than what you can get, you know, with Treasury bonds and similar instruments.

So for a large amount of capital on- chain, the risk associated with D5, which as you know is obviously a little bit higher than if you just put your money in a bank account, you need higher rates, and the returns on cryptocurrencies are just not there right now. So, the last 6 months we've been underwriting risky assets ( risky assets ( RWA) that we like, mainly those that are more collateralized by short- term assets, you know, payment financing, the Prime numbers, I think, are also a good example. So, assets that we can work with in all directions, and then we create product lines on both sides. One is lending. So we launched, I think about 2 weeks ago, a repository on Morpheus on the Ethereum mainnet that provides loans to markets that include these risky assets that we have underwritten that we like.

And then on the other hand, we're going to launch a repository next week that works directly with these issuers, issuing RWAs and then taking leveraged positions behind them to achieve a higher yield profile, I would say somewhere around 10% or something like that, which we've seen a lot on the blockchain side; this is kind of one of the barrier indicators that blockchain capital would like to see. But we also manage liquidity, cycles, etc. in a way, and so these two bubbles working with the same assets in different products are very exciting for us because we can build relationships with these issuers. And so, I think we're going to see a lot more of that convergence in this world, right? I think if we had S&P ratings for these storage facilities, there would be a lot more capital to access them.

I think the liquidity of the whole RWA and the ecosystem of tokenized, uh, tokenized assets is still in its infancy, and we're seeing more and more players trying to figure out, "What can we do here?" Can we take over some of these assets? We are comfortable with duration risk and provide immediate liquidity at a discount.” Um, I think that's what we're also trying to work on from the Bitwise side, trying to build our own ecosystem with partners so that we can build products that can scale to billions of streams. Um, because I think the products we've seen so far often don't scale much beyond, you know much beyond, you know , the $500 million mark or something like that before profitability starts to shrink significantly.

So yes, we are working on many areas. It's been an exciting year so far It's been an exciting year so far . Um, and yeah, it's also interesting to be able to work with, you know, people on the scene to build this ecosystem together to get it to a point where, you know, more and more, um, more traditional distributors will have access to it as well , because, I think right now it's still fintech companies, neobanks, anyone who has large stablecoin balances or an economy that revolves around stablecoins, wants to get instant income from it. But, yes, I think the next step would be to bring in capital advisors and ensure they are comfortable working with online financing. Ultimately, it will all be network-based funding, but yes, I think we are on the path to that.

I think that's also a good point about the main risk, right? I used the analogy of flying with Ryanair. When you see a headline about tokenization, you know, you get a huge number, but in reality, you know, it's a bit like Ryanair, your flight is X, and then when you go to pay for it, it's 3X. Um, it's not like I have any problems with Ryanair. I think that's enough...

I flew to Barcelona with Ryanair. Um, the first thing they say to you when you get on the plane is: you get on the plane is: "Thank you for choosing Ryanair." Nobody chooses Ryanair. I'm here because it was the only airport. But anyway, I think that's the point.

I mean, you know, there's a huge difference between a title and a usage. Could we really dig into this? And you know, let's take an asset that, you know, something like gold something like gold , where storage has traditionally been used for centuries. This is the main asset that can be purchased in the chain. How does Belham Capital, if we start with you, Stan, see this opportunity?

Because I'm sure it must be quite significant. Yes, I won't talk much about gold because it's kind of "under development," but we have demand from investors. Gold investors. Gold is a great, uh, great collateral that we can put on the blockchain, even though it doesn't have a natural return, as I said, but it's very liquid, uh, and a token that's backed by real gold, uh, is becoming more and more accepted in the blockchain lending market. Yes, we are discussing this with a very high-quality issuer that owns real gold, and, uh, the idea is to give investors the ability to stay, uh, invested in gold and have access to additional gold-denominated returns of about 2-4%, and that's something we can only do on blockchain, uh, with a storage wrapper, uh storage wrapper, uh , mainly through lending, borrowing, markets, etc.

borrowing, markets, etc. Yeah, I think that's something you know, let's keep an eye on it over the next 6-12 months. You know, people who criticize blockchain specifically will point to the lack of utility or, you know, real-world impact. And I think you're looking at gold itself: blockchain and tokenization in particular, even if it's two to four percent, that's more than anything that's ever than anything that's ever been achieved with gold, right? And you have all the cornerstones, whether it's S&P or HD digital, to make this product possible now, which is exciting.

Artem, can we touch Falcon? You know, when you think about one point, I'm really curious, and also about secondary liquidity and, you know, the reality of trying to underwrite this asset and provide a price over the weekend. Tell us about the waterfall, you know, maybe a practical example of, you know, underwriting an asset underwriting an asset , because, you know, demand is clearly going to be different on the weekends compared to Monday through Friday. Yes, this is a really important question because again, if you are stuck in a position and the asset drops sharply. So, yes drops sharply.

So, yes , you will have bad debt. Yes, for us it depends on the asset. Let's say we have some tokenized treasuries, and for some tokenized treasuries, the market already solves this problem, such as liquidity on weekends and so on. So, for some assets, uh, there are already capabilities for instant withdrawals on the network without T plus one, T plus two. So, of course, we take that into account.

There are some over-the-counter opportunities for other tokenized funds. So, essentially, there is no single metric for all types of RWA. Each RWA should be considered individually, and you need to figure out where the liquidity of that RWA's assets is and how quickly you can withdraw funds. So, I think one of the biggest and most interesting RWAs right now is volatile RWAs, like tokenized stocks, tokenized gold. Yes.

For this type of asset, the problem is even greater because during the weekend there is no trading in gold and stocks and you can only rely on transactions like on-chain, and there has been a lot of discussion about Robinhood. You probably remember when they announced these tokenized shares, and tokenized shares, and , um, there's a share of Company X that we're working closely with on tokenized shares. So yes, it depends on the asset. We value a specific asset and provide a discount for that asset based on liquidity. So weekend liquidity is really important.

As I mentioned, for some assets the market already solves this problem and you can have T-chain asset maturity plus zero. Um, and I think that's really think that's really how, um, these assets will be viewed in the future. But for most assets, yes, it can be a problem, but yes, we guarantee it based on the specific asset class and specific conditions. Of course. Andrew.

Yes, I just wanted to add my opinion. Last year, we actually assigned a credit rating to the Sky protocol, formally known as Maker DAO, you may know it by that name. This is the largest name. This is the largest , or one of the most well-known, lending protocols in decentralized finance. And they are actually the largest holder of tokenized funds tokenized funds .

When we think about where the capital that goes into some of these tokenized funds, some of which we've evaluated, is coming from, they are the primary investor. This is partly due to managing one 's own liquidity. They have certain liquidity targets that they achieve by switching between stablecoins and tokenized funds. But we also see that through one of their subsidiaries, Grove, they have started to provide liquidity pools for some of these tokenized assets. This is still early; this is still quite small.

But that's exactly what's needed to establish the 24/7 liquidity that you're talking about, because there's this, you know, limited- size pool of USDC that you can exchange your tokenized fund into at any time of day. And this provides the basis for liquidity. And maybe just bringing it back to the context of repositories, because, you know, when we think about repositories that invest in lending markets in particular, repositories that invest in lending to ether. There are bots that scan these lending markets constantly looking for liquidation opportunities, and that's why this system works and has proven itself over the years, you can see huge drops in the price of collateral, but in reality these lending markets are largely intact because the liquidations worked. To get to this point with real asset backing, we're not there yet .

A lot of it depends on permission, so you just can't, so you need, let's say, a registered identified counterparty that, uh, will commit to liquidating, and so you, yeah, again potentially get back into a very traditional type of counterparty risk. Or you're looking for people who are going to start seeing similar financial opportunities in those permissionless RWA tokens, and that's the part that, you know, could evolve as we see more and more permissionless tokens. And as we see different organizations starting to see these financial opportunities financial opportunities , acting as market , acting as market makers in these liquidation markets. But we are still at an extremely early stage, so I would again caution about liquidity. Yes, at an extremely early stage.

I think in some cases you have assets that are, you know, hundreds of millions, and then if you look at liquidity, it's about 3-4 million about 3-4 million . And this is kind of like your first- loss buffer or your liquidity that you can work with. So, just to reiterate, how early. As if it's literally tiny compared to the size of the assets in many cases. But we see, as you say, counterparties that are doing a great job of taking these assets and buying them back from the issuers, providing immediate liquidity.

Yes, slowly and steadily, but we're still pretty early. But if I look at this risk, they were very careful to say what the risk was. So for a complex institution, they will disclose it and announce it. Right? And they will say that this is the situation.

To be fair, things are different for retail . And I think that's why it's still early days, but the responsibility is to ensure transparency. And they honestly said that's how it works. And they will make adequate disclosures either on the website or when interacting with them so that whoever is a difficult person or institution, they have done the right thing by assessing the risk. So, fair enough, this is just the beginning, but the good thing is that everyone is acting responsibly to build trust, because we understand what the problem is and how to solve it, but we're taking it step by step, not saying, let's jump in and move everything to blockchain.

Yes, I think disclosure is important, but also when we look at who are the actual users of many of these repositories now, right? I think the best recent examples are Coinbase and Robinhood, who have integrated them into their retail app, right? So the requirement that I have as a retail user is of course instant liquidity, right? But I also want to get a 7% return get a 7% return . And we, as we know, high returns, instant liquidity and security, as you know, all of these parameters are usually not fully aligned.

So yes aligned. So yes , I think disclosure helps, and it's good that we're working on it, and people are starting to understand the risk of these new assets that are also emerging on the blockchain. But I think we'll also have this, you know, the nature of stablecoins is instant settlement. And so while we have that, people expect, I think a lot of the recent hacks that we've had were like operational issues that, in many ways, could have been , you know, at least, a lot less bad, you know, if it had had a sort of, I don't know, T+7 settlement period or something like that for the people who used them and didn't have instant exchange. So I think there are a lot of things we can do, but yeah, I think we're always going to struggle a little bit with the fact that blockchains have instantaneous computational load and people expect that behavior for everything they do on the blockchain.

And that's what we've seen from a lot of our distribution partners, which, you know, is one of our requirements. And so, I think we're not really doing a good job of building this ecosystem ideally as quickly as possible and as reliably as possible when it comes to liquidity. Could we touch on assets not denominated in dollars? So maybe if you're in Barcelona, Euro...Sten, you deal with a lot of the biggest institutions in Europe, right?

With some of the largest family offices. Some of them probably want access to assets denominated in euros. Can you just tell us about the development, because we feel like we're a little behind, whether it's because of MiCA or the pros and cons pros and cons ... Yeah. Hmm, that's a good question.

Hmm, and we're in Europe, so I'm happy to talk about euro-denominated stablecoins. Hmm, liquidity in blockchain remains close to 99% in dollars, maybe 95, 99. Hmm, and to attract, uh, institutions and, uh, investors in Europe, we need to provide a euro-denominated and fully regulated, uh, level of infrastructure. Um, so at Bellum Capital we work with regulated stablecoins like Euro P, Euro C V from Forge, um, Euro C, um, Euro C, and um, we need new use cases, and risky assets (RWA) offer new use cases. So, um, we need new use cases to allow our investors to get a neutral return denominated in euros, which is quite difficult these days.

But we spend a lot of energy and effort looking for these new opportunities, um, mainly with RWA. So, we are finding new issuers for euro-denominated assets. And, um, the missing elements are these risky assets denominated in euros. So, um, we spend a lot of time on that. Um, our ambition is to become the first, um, asset manager to deal with euro stablecoins in the near future.

So there's actually a huge opportunity . Yes, because I think there is a huge, um, great future for euro stablecoins and the euro yield mechanism. Um, Lake, can we touch on HT digital and maybe a global view? So you guys seem to be headquartered in London, right? And where is the USA?

So, we work all over the world. We're not limited by, you know, geographical location. We also have offices in various jurisdictions. Yes, our Yes, our headquarters are in London, which basically means it's pretty easy for us to operate in the US and the rest of the world. But that's why , I think, the fact that our fact that our headquarters are outside the UK essentially means that we can appreciate a lot of the advantages across the geography.

Because when we serve a client, we are not limited by the fact that we have to be in that jurisdiction, and then we can do something. Uh, what has allowed us to be quite flexible is that we have a lot of experience in solving very local problems that everyone has faced, which makes us much smarter in assessing the regulatory challenges that you will face, the expectations of the investor, but institutionally, because that is what we have always focused on from a financial services perspective, right? Because the bar is always there, and every time we're asked a question, even from a storage perspective, the question has been how do we regulate this in a way that makes it easier, and what's the risk involved? Yes, you have a smart contract, but we look at things from start to finish. We have a UK view of how this will impact the regulatory space compared to the EU in other jurisdictions, and some are likely to be a bit silent, but we value the system that we can put in place on top of that to be responsible be responsible .

And then, to be fair , regulation will catch up, reporting will catch up, and so on and so forth. So, we're really excited because the concerns of local businesses have been voiced to say, "You know what? It's a current issue of 24/7 versus 24/5 versus, you know, 9 to 5." All of these things have started to emerge, and so we can recognize the risk and therefore find the best way forward. Yes, it was exciting in that regard, and so the possibilities are quite large.

Artem from Falcon Lens, you know, of course, you use different strategies. Given the lack of a base and financial base over the last 12-18 months, do you see some large crypto firms and market makers leaning towards tokenization as an opportunity to deploy capital deploy capital ? Yes, definitely. I think there's a lot of room for crypto-local companies to transition to RWAs, and basically a lot of RWAs are struggling as they try to focus their concerns not just on their current customer base, but also try to focus on that crypto- that crypto- local capital. Yeah, I think even retail, but retail is not something that doesn't have as much access to RWA, but, um, crypto institutional entities like trading desks, um, treasury bonds of some protocols.

Yes, I definitely already have tokenized RWA clients from RWA, as mentioned RWA, as mentioned . Sky is one of the largest RWA owners today. Yes, I think it's pretty simple, and it's quite understandable why, because everyone would like to have a diversified source of income not only from crypto strategies, but also from real asset strategies. And yes, I think it's inevitable. And we already are, but not on the scale that everyone wants.

Perfectly. Andrew, from an S&P perspective, to conclude S&P perspective, to conclude . I mean, you guys are like all the panelists, right? A key factor for the growth of tokenization as you can brand this creditworthiness and build trust. What is the priority of tokenization ?

Is this number one for S&P Global in terms of your digital asset initiative? So, I think the broader topic of online finance is definitely at the heart of what we're doing, and that's why I'm flying to Barcelona. I think, you know, we're just looking at the storage in detail . We started with the iceberg analogy. I also want to draw attention to the fact that we think of an iceberg in terms of what is under the water, as well as how it can move.

So when we think about storage, we often think about a portfolio of exposures. Many vaults can look almost identical to each other from day one. They may have the ability to change in to change in different ways. And so that's kind of a key part when I talk about using funding transparency online is also understanding not only what is there but also the limits to where things can change. Perfectly.

Thank you very much for our panelists. They are all in place today and tomorrow. I would encourage all of you who are considering using a product, releasing a product, collaborating with equal partners, to try to find time for them and look at that underwater part of the iceberg. Well, thank you very much. Thank you very much.