We'll sit in order to make sure nobody gets confused between the Joes.
Everyone comfy, like we're in a living room just having a chat.
Yeah, there's no audience.
Not 300 suits in the room. Is this what you expected for?
Friendly looking audience.
It is friendly. A lot of familiar faces. Hi everyone. Thank you so much for being here. Hello. Great to be back for the third Real World Asset Summit in New York. I really love this panel topic and this introduction because so much of why we're all here is this intersection, and there's an intersection of so many things happening. There's what we've always talked about from the beginning of this event: traditional finance and decentralized finance coming together. But now, as that is table stakes and that's the work that we're all doing and the foundation we're building on, there emerges more interesting convergences. How do we think about AI and tokenization and programmable money, and how does that realization of that future rail change the way that we're all operating as an industry? So, I wanted to pull out some differences between the group here and really leverage the various backgrounds to ask some of the hard questions and to hopefully go a couple levels deeper than what we typically get to talk about at these types of panels. So, I am going to kick it off with Joe. And we did decide we're Joe and Joseph. So, as I'm kind of going through the questions. So you have always talked about how we're moving towards this world where everything can become programmable and all assets can become tokenized. Let's talk about the like five years from now, so not too far in the future, September 2031. What can an ordinary investor or company do when money is programmable that they can't do today? And then the second part of that question is how does that differ from the original vision of Ethereum?
Okay. So, in the early days of Ethereum, one of the rallying cries was 'decentralize all the things and tokenize all the things,' and now we're getting to the point where that's actually viable. I'm assuming that you're asking about like five years from now, but I think of that as probably a massively accelerated future where we have a hybrid human-machine economy. And it's significantly different from now. So, if things go slow, this may not apply, but I think the acceleration is accelerating, it seems like. And so one can imagine a world where the nature of money completely transforms qualitatively, where because people and organizations are going to be able to tokenize all the things. Tokens will be part of how we do virtually everything, whether they're identity tokens or stable money tokens or real-world asset tokens or protocol tokens or decentralized infrastructure tokens. It's going to be tokens all the way down and around. We're going to see the different characteristics of money expand and evolve. So in terms of just means of payment, you can imagine that you'll be able to pay in virtually any token for any good or service. You'll be able to trade any token against any other token. Tokens will probably carry in their metadata information about how they can trade, what they can trade against, when they can trade, etc. So we may not actually have to work 24 hours on weekends for certain tokens at least. They won't need narrow venues on which we'll be forced to trade, say, public equities. Probably many different venues will support different kinds of trading. If I want to buy something, my AI-enabled wallet will speak to your AI-enabled point of sale. They'll figure out, based on the priorities that we've set, which tokens I'd rather pay and which tokens you'd rather receive.
The exchange rate will probably be dependent on the balance of our needs. Like if it's one that I'm easily interested in getting rid of, then I'll accept a worse exchange rate, and there'll be brokers if we're not able to make that match. So numeraire could be interesting. I imagine the US dollar is going to continue to be a financial numeraire in most places around the world. But if you're an AI living on some AI system on some decentralized network and your whole business is conducted in the token of the network or some tokens acceptable via different foundational models or other kinds of models, you may choose to use as your numeraire for your business a small basket of tokens or your own AI token. In terms of store of value, stablecoins will be a store of value, but I think there will be a handful of tokens like Bitcoin, Ether, and some others that have moneyiness in the sense that they are either disinflationary or deflationary. And gold will continue to have that moneyiness. Clearly, in addition to the qualitative nature changing, I think the quantity of money or purchasing power is going to accelerate massively. So, we're going to need machine intelligence buildout, and people are going to be able to create their own money and use them, and people will accept them to do work or for goods and services. And so, I think the hybrid human-machine economy is going to be orders of magnitude faster, more valuable than the traditional economy, and these tokens will grow to support all of that.
Okay, that's a radically different future. Kathy, what does that mean for index providers? How do you think about the adaptation of your business?
Yeah, I mean, I think, you know, for index providers, it's not necessarily hypothetical even at this point. You know, we've worked with you to tokenize the S&P 500 on Centrifuge, make that broadly available on public blockchains. We've worked with Kao to tokenize our iBox Treasuries index on the Canton network. And so I completely agree with Joe's vision. This DeFi matrix of commerce, of investing, the velocity of interaction of investments and commerce, money moves fast. I think in that vision, though, we have to accept a couple of realities that we are not there yet. The technology that would enable this DeFi construct is radically there, but what's not there is the ideology. So when we think about what are the tradeoffs to have that vision come to reality and how do we bring everybody along on the journey, you know, we have to think about the things in the marketplace that exist as insurance, not necessarily tax. The taxes are the frictions that we want to get rid of. Those are the things that bring in efficiencies. Those are the things that get in our way. Those are the things that actually impact that vision from happening. But the insurance are the things that actually protect investors and consumers and things that we can't lightly just dismiss. I mean, think of things like the circuit breakers in the market. Think about all the ways in which there are points of friction. We would say they're friction, but they're there as an insurance mechanism and not just a tax. And I think between now and 2031, we have to really have honest conversations about what part of the insurance friction do we actually want to persist in a programmable way and what parts of the tax of friction are things that we can eliminate and move quickly to get rid of. But indexing, you know, we sell one product. It's trust. And whether it's on the traditional financial rails or on-chain rails, whether it's on a private permissioned blockchain, whether it's on a public blockchain, we're there to provide a benchmark, a reference rate that folks know how to interact with and they know how to expect its performance and they know what it stands for. So, we're very excited for whatever the future brings and we're so agnostic to how these actually come together that we just want to participate. I would say though that the easy part, and I know Joseph lived this at BlackRock, the easy part is the tokenizing part. You know, we could tokenize all of our indices with our partners, you know, in very rapid order. The thing we have to think about is what actually brings that demand side to want to interact with that token in ways that they're not interacting with it today. And that's really, I think, the challenge that we have as well as like operating in a hybrid system for the, you know, next few years at least.
Yeah. It has to be better, right? It has to be different and it has to be protected. We have to make sure we're not transferring risk to those that don't know they're holding the risk and they're not compensated for holding that risk.
Yeah. Before I move to the demand side, I want to go to you, Joseph. So, you've been on the operating side bringing these visions and these crazy ideas into products and actual operationalization across BlackRock, one of the largest, most sophisticated organizations in the world. What's hard to connect those two? How do you take that vision and how do you actually rally internal teams around it?
Well, I think it starts with not building something unless there's customer demand. And the customer demand problem in crypto is very often things were built without actual client feedback or a product-market fit. The things we built were client-driven, and there's people in the room who worked really closely with us. People wanted exposure to crypto but in a wrapper they could understand. They wanted exposure to yield but in a format they could understand. They wanted stablecoin access. I think that we no longer have a technology problem, but if you take a step back, I think we're seeing a classic like business models colliding. It's going to feel chaotic. We're going to have more reconciliations and more overlaps and requirements for APIs and bridges for a while. But what we're missing is when it actually converges and the two rails become one. There's a massive expansion of prosperity that's coming, and I think we'll get to agentic later. You're going to see empowerment of retail investors like we have never seen before. So tooling and primitives that the largest institutions in the world take for granted. You know, you have a treasury that will sweep assets to the right yield. You will know what you own, be able to lend it and get yield on that. You'll be able to be empowered to vote your proxy on behalf of investors. You're going to start seeing when these primitives come together: stablecoins as the money layer, real-world tokenized assets as an exposure layer, DeFi, or I think you should call it on-chain because it's not all going to be decentralized, and execution layer, and agentic will automate this. Retail investors are going to have the same capabilities that they've never had before that institutions have been using for years. But I think we're going to have business models colliding, then some overlap and then convergence, but it's not a technology problem. The final thing I'll say is, having witnessed lots of structural market structure changes, we completely overestimate the time frame in which it happens. You know, electronification of the equity markets, of bond markets, took decades, but the impact on the ecosystem is magnitudes bigger than people anticipated. And I think that's what's coming. Not just expansion of money and velocity, massive prosperity and efficiency for most users.
What do you think the time frame is?
I think it's going to go slow and then really, really fast. And I think the tipping point, you know, we started with tokenization of funds. It's $32 billion in funds. I would anticipate when you start seeing more and more funds tokenized and tokenized equities across the board, it'll be measured in trillions in 2028. And there's a tipping point where liquidity begets liquidity. And at a certain point, when the US declares war on a Friday night and you can't express your views because the markets are closed, as a fiduciary, you're going to want to own the tokenized version where 24/7 you can express your views. And when you have that liquidity, it has to be the preferred form factor as a fiduciary. And I think it's going to happen on Ethereum largely, and that'll be the global settlement layer for finance.
So it went slowly over the last 10-plus years, and now it's going really, really fast. So, Joseph and BlackRock had the luxury of having actual customers and users. I would argue that over the first 10 years of the development of our technology, we didn't really have users. We had protocol nerds and protocol nerds kicking the tires on protocols. We had art nerds and art nerds making things and collecting art. And we had finance nerds building DeFi protocols and kicking the tires on those things. But now we're a scalable and usable technology. And so TradFi now understands the technology and it's ready to support TradFi, and so we're going to have users. We do have users now, and they're coming fast, and the merge is going to be very exciting.
It still can feel a little bit slow, doesn't it? Sometimes, I mean, I think you're probably in it more day-to-day, and so you can feel maybe the acceleration. I'm still like, where is the demand side at, and how are they actually, when you talk about Joseph, the retail, really the unlock for the retail, I mean, I completely agree with you, but like, you know, when does it actually kind of make it over the line? Like, when do we actually think we're going to see that interaction from the demand side?
I would use the equivalent of the late 90s in e-commerce. Like, how many of our parents felt comfortable putting their financial information into Amazon and then storing it and then transacting? Now you have 80-year-olds who are doing this all day long. There's a generation who's going to inherit over a hundred trillion dollars over the next decade and a half who are AI-native, who trust code more than institutions. And when you layer in agents who can work on their behalf, I think these primitives come together, and as people get more and more comfortable, they're going to run a lot of their financial lives. They're going to get exposure through agents. They're going to move assets through agents. They're going to borrow and lend. They're going to get S&P index exposure instead of trying to necessarily build their own indices. You could do it for three bits. You don't need to do it. I think it's going to happen much faster. I think the adoption curve today is going to be two to three times faster than what we saw in 1996 in e-commerce. And look what happened. You had a big bang of just an expansion of commerce like we've never seen before. We're going to see that sooner than we expect. People just need to be comfortable with agents transacting on their behalf, and when they do, and if they really, they will give users agency as long as you're not masters to a corporate chain who's going to end up taking your agency away from you. I'm going to get spicy.
And do you think that this inflection is contingent on the success of agents? Is that the big unlock on the demand side?
Yeah. So crypto was built for the use of people in the same way that jet engines were built for the use of people. You need a lot of infrastructure around it. You need enabling operations. And so when wallets are very easy to use, when you have one account from which you can do absolutely everything, when you have one account that is automatically earning you very significant yield up until the moment that you're spending your money on a credit card network or in some other way. When you have one wallet that can answer your questions, that can satisfy all of your intents, 'I want you to set me up with the necessary tokens on this gaming platform,' and it goes ahead and it talks to a bunch of solvers and sets up that configuration for you. That's when it gets easy for humans to use the stuff, and that's when it gets ubiquitous.
