Sergey Nazarov: Why Hundreds Of Trillions Of Dollars Are Coming Onchain (Tokenization Supercycle)

Yeah, I've been coming here for a while. I don't even know exactly how many years — five or six or seven years, something like that. It's a great conference because it's basically an infrastructure conference where everyone gets together and thinks about the future of the capital markets infrastructure landscape. I think what I've consistently seen is the growth of digital assets as a topic this year. It's not a controversial topic at all. It's more about how to implement it. The other interesting topic I see here this year is AI agents and their use of stablecoins and onchain cash as a form of payment. So I'm actually now even seeing other trends interact with tokenization, which is a good sign because it means that tokenization is already kind of accepted as normal. In terms of the growth, it's been massive. Many, many years, digital asset — what they call digital asset companies now, blockchain companies or crypto companies — couldn't get any kind of booth, right? We were lucky many years that we could have a booth because we were, you know, kind of very involved with the Swift community and the member banks and Swift itself and so on. And so this year's booth is actually the best booth we've ever had. And I think we have the most meetings set up of any time we've ever had. So I would say that we're kind of at a very big high point here at Sibos in terms of the banks' interest and other service providers' interests. There's also a lot of technology partnerships and global system integration partnerships, some of which have been announced already. These folks are also here, and I'm seeing more and more that they all need a solution to abstract away the complexity of multiple chains. And so Chainlink, I think, is already viewed by, I would say, the vast majority of them as that chosen solution. Like we have a lot of cases where people come and meet with us and they say, 'I know about Chainlink, I already know a lot about it, I'm interested in it,' which is obviously very different from where we were even a few years ago. I would say now is like the time where we're harvesting the fruits of our labor and we're reaping the real benefits of so consistently and over so many years being the reliable provider, being the group that provided the best advice of how to implement smart contracts, how to implement advanced workflows. And now the digital asset industry, I would say, has caught up to the point where they want to do those advanced workflows, they want to do collateral management, they want to do tokenized deposits, and they want all that stuff to work together, which is something that I think people are realizing now only Chainlink is really able to provide them.

Sure. So we've been collaborating with Swift for many years. There's been a lot of clear announcements about our work together with them. There's been clear releases of information and designs where Swift and us and large banks like UBS have collaborated on various flows. Our collaboration with them and various banks here continues, and we're very excited to be working with them in various ways. Really, what you have now is kind of what we predicted and what we said to a lot of folks, is that there's going to be more chains. So that's something that I've consistently said and we've consistently said. Now you see DTCC has the collateral app chain that they released more information about here, and they released also how they're deeply integrating CCIP, data feeds, and various other Chainlink components. The Swift ledger is also something that Swift has been working on for a while. They had some information released last year. There's some more information this year. And in the case of the Swift ledger, the things that I can share now are that Chainlink is basically being used as an interface for banks to be able to access the Swift ledger, sign things on the Swift ledger, do key transactions on the Swift ledger. But from my personal perspective, when I look at all the different other tools that are out there to interact with the Swift ledger, similarly to how there are various tools that you could use to eventually interact with the app chain, I don't see a more robust tool than Chainlink. So I think what's going to happen is that not only will there be more chains, but the initial simple use cases of just tokenize a deposit or launch a stablecoin or tokenize an equity or tokenize a fund — those simple initial operations will not be enough. And that's when more and more FMIs, infrastructure providers, banks, and other kind of folks in this ecosystem here will realize that what you really need is something that can do advanced workflows, interact with advanced contracts, and interact with those contracts across multiple chains. For example, the DTCC collateral management workflow that we released together with them here at Sibos is, I would say, a moderately advanced workflow. I wouldn't say it's like extremely advanced even. That's what you're going to see more of, and that's when I think people are going to look at their options about how do I interact with these various chains — whether it's the DTCC app chain, whether it's the Swift ledger, whether it's any number of other chains — and they're going to realize that, oh, the chain does these valuable things, it's a reliable settlement layer, it's a reliable place for me to define legally binding smart contracts, but I have all these other operations that need to be done around those contracts. And without those operations of bridging data, compliance, the contract is very hard to use. It doesn't really work. And so this is really what I think people will come to realize. We see it with various groups like DTCC that are now having a mandate from their senior management, from their executives, to go into production with advanced flows. And that's when they really start digging into Chainlink and they start digging into CCIP and they start looking at all the capabilities that Chainlink has, and they basically come to the conclusion that: A, for me to build this would take much longer than I thought; B, there's no other provider that has anywhere close to these capabilities; and C, when I look into the other providers and their certifications or their security, that certification and security level is also not close to Chainlink. When you win on those three dimensions, you see more things like the app chain and the Swift ledger, I think, is something we're going to be working with more. We're very excited about it. We're excited to get member banks to be able to access it and use it efficiently. That's, I would say, the current stage where we are there. We're looking at how can we provide various other capabilities to the Swift ledger, working through that question, but you know that has to all progress at the speed at which the Swift ledger is developed and taken to the next stages.

Well, the DTCC themselves, they've announced and clarified their timelines for production. And so I'm going to rely on their statements about their timelines because that's their chain and, you know, their plans, right? So I can't really comment on what their plans are for production. We're, you know, thrilled to be supporting them and providing this technology, and that they've chosen Chainlink as a technology that'll coordinate a lot of this collateral management workflow process, the data delivery, the crosschain from CCIP. I think it's a very strong validation of the value of everything that Chainlink does for advanced smart contracts. That is obviously very gratifying and great. And they have a very smart technical team. They have very, very thoughtful folks. Specifically, Dan Donnie, that is the CTO of Digital Assets there. He's a great guy, and there's a lot of really smart people working for him. So they've done a lot of deep diligence, and I think they've made their choices very clear and very public, and we're thrilled to be working with them.

The way to look at the progression that you described of 24/7, 365, and then, you know, there's more utility from that — I would really view this as needing to reach critical mass. So in order for something like securities lending to work, which is, I think, going to be probably the main use case of tokenized equity, you need the tokenized equity, you need the collateral venues, you need the prime brokers involved. In many cases, you might need the agent lenders involved, you need custodians involved, you need all these different participants involved and enabling that. And so what that means is you need to reach a certain amount of partners and different kind of providers all working together so that enough banks and enough asset managers and enough pension funds can get the benefit of securities lending for tokenized equity, as an example. Now, we're not there right now, but we are getting very, very close to that level of critical mass, in my opinion. And what'll happen, I think, when you reach that level of critical mass where securities lending actually provides value — and tokenized equity isn't just about owning an equity. Tokenized equity is about better yield on the equity, 24/7, 365 movement of the equity, better balance sheet management, and something called funding rates getting reduced, which means you actually have to put less up. You have to do less to meet your obligations. These are multi-billion dollar savings per bank for the larger institutions and hundreds of millions for the medium-sized. These are very significant numbers, but you need enough of these different market participants to all be on this system. And so what we're doing now is we're getting all those market participants on CCIP, on Chainlink, on the Chainlink Data Standard, so that they can enable collateral management and movement efficiently. If that happens, I think what we'll have been a part of is creating real value and real utility for tokenized things — tokenized equity, tokenized funds. And then because having something tokenized provides you a unique value like 24/7, 365 movement and access, better yield, better risk management, then the amount of tokenized equity that comes into existence and the wide adoption of it will massively skyrocket.

Because the difference between traditional crypto markets is that while that market is in the trillions in terms of retail and crypto hedge funds, that is very — well, this market is in the tens and, depending on how you view derivatives and notional value, hundreds of trillions. And this market is also very incentivized to move quickly to better solutions where they save money or they make more money. So I think once you hit that critical mass, you pass that critical mass threshold, and the amount of tokenized equity, the amount of yield on it getting generated, just skyrockets. That's what I see happening. That's the exciting thing, I think, about DTCC doing this also. It's because the DTCC is enabling, I would say, the gold standard of tokenized equity, because that tokenized equity comes with all the relevant rights that you would have gotten with standard equity.