Follow the Money: What Institutions Are Asking for in 2025 | Joshua Lim | Annabelle Huang | Grant |

[Music] it's quite the calling on that note I'm excited for the next panel follow the money what institutions are looking for in 2025 handing it over to our moderator Zach Zach thank you very much appreciate that good morning everybody how are we doing today what yeah some some Applause would be good come on now I know things are things aren't that bad all right today we are going to be talking uh institutions what they want where we're at right now what's going on in the ethereum world and Beyond uh we're going to do some quick intros I myself am Zack Usman former anchor at CNBC in Yahoo now running the only and fastest growing uh community-owned media Outlet on eth at coinage uh and we have our treasury in eth so hopefully what we learned today will actually be applied immediately at our Dow um but Stacy why don't we start with you and just do intros real quick sure thanks so much Zack my name is stac and Pearson I'm currently the managing director of uh Singapore and Southeast Asia for zodiac custody which is a custodian that was created by Standard Chartered bank and uh supported by four other Banks previously I was head of web 3 for APAC at AWS and a bunch of other uh initiatives that we're happy to talk about good morning everyone my name is Annabelle Hong I'm the co-founder and CEO of ltas where a new protocol that came out of Sals just last week focusing on building a VM agnostic modular execution layer that brings high performance to any blockchains previously I was uh a managing partner at Amber group focusing more on uh institutional Focus liquidity and uh liquidity provisioning hey everyone good morning uh my name is Joshua LM uh I am the head of markets at Falcon X um Falcon X is a global uh digital assets Prime broker and trading firm um we do everything from you know spot and derivatives kind of OTC liquidity um electronic Market making and um lending borrowing custody all the the full spectrum of services but um happy to dive into all that hi everyone my name's Grant Hummer uh been eth about 10 years I'm the co-founder of ethereal which is a project trying to bring Wall Street to ethereum nice I like that and yes Grant maybe we start with you because right now it's very interesting to think about where we are in the ethereum road map I myself was just reflecting it was one year ago that I was on the stage with Jesse poock when Bas was just kind of getting set off and fees as the L2 strategy has played out have come way down and it makes it way easier to use you know real life applications on ethereum and I guess I just want to start with a question to you with ethereal is now launching to get institutions to understand even that road map or the fact that fees are down or what they can do with it what's kind of like the thrust of what you're trying to do with e theor Li to help educate institutions yeah so we before founding etherealized we did a bit of a deep dive into the level of wall Street's education about ethereum and Discover it it's it's pretty low um I think this is compounded by the fact that ethereum is very complicated right now and it's only become more complicated with the rollup red map um so yeah we're just trying to explain that to them ethereum is currently in something of an awkward adolescent phase um the fees have come down usage is actually up but it's not up uh sufficiently yet to compensate for the decline in fees and so there's this law called javon's Paradox or javon's law which is that if the price of a resource Falls the usage of the resource will increase by more than the decline in the price such that revenues will increase and I think that's what will happen with ethereum in the coming years with an Institutional Focus too I I think uh Josh I'd be interested to get your take cuz the idea of the road map playing out kind of right when the ETFs got approved I was looking at the numbers and I think to date it's about a little over $3 billion in net inflows for the ethereum ETFs and about 10 times that for the Bitcoin ETF and and you could make the case that when e ETFs got approved it was in that hangover period where it was like in the shadow of what happened with Bitcoin and so I I mean I guess with what Grant just said what do you make of kind of the way that it kind of got caught in the launch and what institutions are looking at when it comes to eth yeah I think that's a a great point that you brought up around um just institutional awareness and education around ethereum I think in a lot of ways the narrative on eth has um deteriorated in the last couple of years right because institutions are either focusing on crypto Bitcoin and particular as a store value uh inflation hedge as a sort of like a macro portfolio allocation and um it's very correlated to other Global backro markets um alternatively they're looking at sort of the technology itself as a way to make payments and sort of like have a decentralized and uncensorable network of um of money and and value transfer and that unfortunately a lot of that activity is in the minds of Wall Street and institutions uh on salana and other kind of faster and maybe cheaper networks and um that narrative is constantly changing and I think a lot of it is like investor relations work and talking to Banks and hedge funds and trying to educate them on like what types of activities are still happening on eth and on on the l2s and so yeah we're seeing a lot of that happening now um you know obviously uh there's a lot of supply and demand Dynamics at work right now especially around like uh investing schedules on like salana and things like that so there's constantly rotation happening um and the fact that you know there's only a handful of assets that have really Global reach through ETFs um means that you know all of the focus of the Global Financial Community is really on these like you know top three assets and and that's where all the rotation will happen if I could just quickly add on to that um because when I was at Amber we've tried from early days to educate our institutional and high Networth clients on bitcoin and obviously ethereum but Bitcoin has always had a very clear almost brand as the story the digital gold right and then the investors uh especially the traditional investors can quickly understood for ethereum because it has so much um different usage um it became it it first of all was uh proof of work and then turned into proof of stake and to outter sound money and then there was the world computer narrative and then I guess now infinite Gardens so I think for for institutions they they actually also just want to follow maybe you know one clear Direction and the you know oneliner of why invested in ethereum and I think because it was so widely used in so many different use cases that made it a little complicated so obviously Bitcoin has the first mover and a very clear narrative all throughout the last 10 plus you know almost two decades so um it was very easy to for for Bitcoin to become the Gateway so hopefully that trickles down to ethereum especially as we have etherealized to put have the institutional push can I offer also an opportunistic view so I do agree with the the panelists in terms of the dominant narrative one thing I think that we're recognizing at zodia custody is because we primarily serve traditional financial institutions because we're bank backed uh you know asset managers family offices ETF issuers uh we are able to see the trends and the asks upfront and what we're seeing is that institutions are looking for now bear with me with this oxymoron safe defi so they are looking for better ways to enact Capital efficiency for the funds that they're custody with us so I think the opportunity for ethereum here given that you know it was one of the first uh big blockchains to uh really Galvanize the defi uh ecosystem is to lean into that with institutions right so providing this uh safe ecosystem for D5 projects that have Enterprise grade Solutions I think that is where you know that narrative shift could really help uh to play with the institutions because we know today they are looking for more Capital efficient uh opportunities for their funds I want to yeah I want to dig deeper into safe defi because you know I want to get the the tough questions out of the way and these are questions everyone again in the ethereum ecosystem are asking right now Grant I feel like the bybit hack is probably the worst way to start your institutional push in terms of like hey safe defi is a thing but I think it's important especially like people in the media to get right in terms of what happened uh because I think we all know it's not like ethereum got hacked and people need to make sure they're clear about that but uh when it comes to kind of safe Defi and things like that the overhang what are you kind of hearing when it comes to those fears and getting those questions answered you know I think um we even still a little ways away from that the institutions are still at the crawling stage I call defi the running stage um some of the more adventurous ones like family offices and hedge funds they were deploying into defi years ago but you're talking about the big sside institutions like Banks they're uh they're still a ways away from that I think if you can get more some of some of the more buy side institutions they're also more adventurous um they're they're certainly open to it I don't think the buit hack actually changed very much in the long run you know krypto's had a long series of hacks they understand it wasn't a hack of the core protocol this was kind of a wallet snafu and uh yeah I think you know the trend will still remain up and to the right so yeah I mean I I'm curious to get other people's takes on that too and Josh you're I guess kind of more attached into some of the market structure piece but it I mean to think about the bit finex hack in 2016 that was $72 million Bitcoin dropped like 25% I think back then and the ethereum hack 1.4 billion and at least on the day I mean we can talk about what's happened in the few weeks since but not as extreme but then then maybe over time so I'm just kind of curious to get the impact from you well yeah I mean I think the biggest cure for um you know this sort of Fallout of these major hacks and a loss of trust is just like the ability to generate cash flows right and you've kind of seen this happen with things like tether and bitfinex and um bybit now it's just sort of if you have these dominant firms that are actually you know creators of useful products that people use and um they're able to generate cash flows to cover any losses that's actually the biggest um way to recover consumer trust and and rebuild um it's kind of ironic right because like a lot of the ways that these institutions are able to generate so much money is because maybe they operate in a way that's like a little bit outside of like the black and white regulatory regime um and so they're able to bring in like more users globally uh in this decentralized world that we live in and I think um the fact that that is originally maybe a source of like mistrust but actually the fact fact that they can produce Revenue should increase their credibility to the market yeah so I just wanted to add on because I think the piece that we typically underestimate within the web 3 side is the sentimentality that comes with you know hacks in terms of getting folks who are not native to crypto to either explore or buy into the ecosystem uh so I think one of the aspects around one of the residual I should say uh effects of you know such a large hack is for institutions to continue to ask for better riskmanagement practices um as well as the kinds of governance and controls that they are typically used to on the traditional side uh institutions that are well positioned with internal risk controls and and risk management will be well poised to win some of these uh big institutional deals uh because they'll feel that sense of comfort so a very quick example cuz that seems uh vague uh at zodia custody we have a a product there are other custodians that have it as well is off exchange of venue trading and settlement right this is huge for institutions so what that simply means is the institution is able to trade or do asset swaps without putting their funds on an exchange which introduces them to counterparty risk that's something that's huge in the sense that they are looking for these kinds of riskmanagement embedded products in order to protect themselves from from what they might read in the news for example like by bid hack yeah well let's shift maybe into some of the uh optimistic outlooks here too now that we you know think about where we go from here and Annabelle I I wonder if we could highlight kind of some of the advantages that ethereum has now in the road map and kind of where it is as a technology where we are um because again I think there is some of the ethos that gets lost in terms of what Grant was mentioning and fees and other options other chains out there I'd like to go down and just kind of talk about what the biggest competitive Advantage ethereum might have right now that maybe people Miss in terms of why institutions might be drawn there instead of other options yeah I think the biggest thing and I think the reason why we at least I think a few of us on this panel still bullish on E and remain e back holders and keep building on top of e the ecosystem is just the amount of Mind share um that it has among just super talented group of people that could be developers using users um and this community um obviously we're going through a bit of rough patch uh but there there have been a lot of newcomers over the years um but having that mind share and market share has historically been very difficult to surpass so um and I see people coming you know coming out of retirement to focus on building um ethereum again uh just a sign that we have uh what it takes um and I think um going back to the point of institutional adoption um again I think uh e being the number two um after Bitcoin um salana would have and other AAS would have uh many years to catch up um your earlier point about you know e being maybe ETF being the a tenth of bitcoin's uh Flow versus maybe eth is at now uh between 25 to 30% of the uh Bitcoin market cap um so I think we will see that chuckling down to eth and eth will be the next because um having ETF issued uh is actually a a really big milestone and it'll take years for other assets to catch up and even within I think just the the crypto space we talked about the the hacks and everything but I think it just shows resilience of of the market um whether the operators themselves they don't have government to back stop them um and we can quickly iterate and find out what the vulnerabilities are and and quickly move on so Josh and and Grant would you agree with that because I think you know the other thing over H is we got CME Futures and salana potentially coming too and that that idea of a salana ETF could potentially also put ethereum back in the same camp so I'm curious your thoughts as well yeah you know I would look at um I would I think it's important to look at Ground truth like what is the actual fundamental differentiators uh in these networks and I think in ethereum's case it's is that it's actually decentralized and if you zoom out and you think about what's needed for a real Global Financial system on the internet I don't think a chain that runs in like three data center providers is that you know versus a globally decentralized network with 10,000 plus validators distributed around the world um I mean yeah so I think that that's ethereum's main competitive Advantage it's true to the original cyppher Punk ethos of crypto and and that makes incredibly neutral uh for countries all around the world to actually do business on it yeah yeah I mean I think to annabell's point it's um ethereum has a long and story uh history behind it right it's been battle tested and I think um retail always leads the way in in Defi and like Financial Innovations like all of us in this room are pioneers in a way like trying out new protocols and new yield farms and things like that and um eventually uh like uh like the other panelists were saying like all these in ution players want to come in and capture some of that yield right over time look for that safet defi um and what they're actually going to pick are protocols that have a lot of durability and have gone through you know Med iterations maybe even have recovered through different hacks um and so they kind of trust the team that's behind it and also trust like the brand and the fact that it's uh able to survive even you know further into the future so that that is and I'll say one more thing which is like if you think about the way that these institutions access defi it's through like custodies w and NPC wallet providers and also using like kyt tools to do the compliance like AML sanctions checks and all that kind of stuff that's actually a very owner's requirement all those tools have been built for ethereum and not necessarily for a lot of other chains true that's very true I mean the infrastructure piece of it should not be overlooked either but the other big thing and I will put myself out there and say that this Catalyst I thought you know you couldn't have predicted the bybit hack I don't think unless maybe you're North Korea but uh I didn't see that coming and I really thought there was going to be a huge Catalyst that's coming now and we're just kind of waiting to see when it's going to get green lit but the idea of staking via the ETFs that is kind of probably presumably kind of like the safest defi option to earn yield when it comes to things like that and I don't know when it's going to happen but I am curious to kind of ask you guys what the impacts of that will be because before the hack thought it might be safe to say that'd be a pretty big Catalyst for things in ethereum but what might be the impact aside from potentially number go up impact of institutional staking on that scale so I just want to make a very quick point on the the last question is you know in my role at in my previous role at at AWS one of the things that we typically were trying to educate the web 3 Community about is that a lot of the institutions don't actually care about things we care about in crypto um you know being fully decentralized I think is phenomenal for Crypton native folks and companies that are used to crypto uh but the majority of Corporations if you think it's not a company right it's an individual in the company making the decision and if they're not crypto native they don't care how decentralized your blockchain is or how centralize it is what they care about is what can it do is it cheap and is it fast uh so that's one of the things I think you know we have to remember within the different blockchain communities is that when you're working with institutions you have to ensure that you know what they care about and what's the story that you need to tell for them to be able to work with you so then moving to the uh staking piece uh through through ETFs I think it will be quite interesting uh because institutions are looking for that safe yield now the piece here will be that what we are recognizing is that a lot of Institutions are now asking for better and better and better apis and so the point will come is can we do Innovation on top of the uh staking through an ETF is there a way to you know use some of the innovations that we're seeing on the liquid staking side or you know other uh ways to Yi whether it's through lending or whether it's through uh you know decentralized comput whatever it is right are there ways that we can capture that yield um uh in the ethereum community because that's where you'll start to get a lot more inflows for the the uh ethereum side whether through ETF or through staking Etc yeah I would also open it up maybe I'm wrong you could tell me if I'm wrong in terms of Zach don't pay attention to e staking it's not the thing but are there other catalysts that you're kind of more excited by yeah I mean if you think about like traditional marketing um and what is usable is collateral so basically like if you have a bunch of assets on your balance sheet you want to put them to productive use right and if those assets are not generating any kind of yield like if you're just holding dollars at a bank account let's say that's paying zero interest a checking account then um you're forgoing a lot of interest income and that's obviously a very big consideration for eth holders even Salon holders like any any sort of Yi bearing asset what we're seeing on our side is a lot of Institutions who have these assets want to use them is collateral to do trading activity on exchanges bilaterally with dealers on derivative structures like a good example would be you're holding a lot of ethereum and you want to sell call options on it just to get more yield right it's a common strategy in traditional markets like if you hold you know Apple stock you would sell calls on Apple um to get additional yield pickup um it's it's now more common to kind of post like lsts or lrts that you the the um holder of the of the uh initial asset that's overriding can collect the yield while they're posting it as collateral so that's a very powerful idea and it's going to translate to the utfs as well yeah I I think a big catalyst is going to be rwas um you know I there's this concept I call the aobos which is a snake eating its own tail I think that describes like most of the crypto markets over the past decade um where the there's no actual like positive sum impact on the world from it but traditional Finance does offer that by tethering itself to real businesses real value creation and crypto can be the substrate on which the new rails on which those things take place and so I think ethereum is perfectly positioned to to be that yeah Annabelle real quick I don't know if there's anything else that you're more excited about other than that to squeeze in if there is by all means no before we wrap up um again I'm very excited about what the future looks like for institutional adoption for ethereum and just crypto in general and part of what I'm building now um is actually more focused on the infrastructure side so that that's not not going to be a bottleneck um whether it is consumer adoption or maybe institutional adoption um and that's always been very dear to my heart um and even um as we build out a lot of the in institutional um liquidity services for uh for institutional adoptions a big part of it is trading related use cases um if we can get to even uh we're at maybe less than 10% of what uh centralized exchange volumes that we see uh on chain um and on ethereum is maybe just a fraction of that so can we actually uh bring more volume that's traded on chain um and unlocking more more cases um on there is a lot you know happening on the asset side um improved security maybe you know eel bearing collaterals um but what about uh oning infrastructure can we get close to uh of like a onchain binance um that we can uh bring more trading uh activities directly onchain well I will say as we wrap up here I think Grant's final point is is very interesting to think about the ethos of of ethereum and what it's fostered and real world assets very interesting coinage now paying out a dividend big news I think anyways uh thank you guys for joining us and thank you to the dog who's here as well thank you for waking up early uh that's it for us thanks guys appreciate it lightning for