All right. I'm honored to be with you all for our opening session of the day. I have three absolutely world-class panelists here with me. We're going to get started with a super quick round of intros. Jenny, could you kick it off for us?
So, I'm Jenny Johnson, CEO of Franklin Templeton Investments. We're about an 80-year-old company. We've got 1.8 trillion in assets under management. We have been doing blockchain technology and work around there since about 2017.
I'm Richard Teng, CEO of Binance. We're the largest crypto exchange, and then now we pivot to a multi-asset global exchange with more than 330 million customers globally trading across different asset classes now. So, very nice to be back in Singapore to see all of you.
I'm Yuval, I'm the co-founder and CEO of Digital Asset. We are the creators of Canton Network, a public network with privacy capabilities.
Excellent. All right. I would love to start. We're going to talk about the new institutional market. And I think we're speaking here at a very interesting point because we're going through an inflection point in digital assets market structure and the rules that govern this new industry. Just to maybe set the scene here, we had stablecoin legislation pass in the United States last year in the form of GENIUS. We got very, very close with a market structure bill called CLARITY, which did not end up passing. But we now see the SEC and the CFTC really leaning in, and global regulators rethinking their stance on this new industry. Jenny, I'd love to maybe call on you first here. How should we in this audience understand the changing rule sets of crypto, and how's that going to impact this market?
Well, I think when the GENIUS Act passed, that was a huge catalyst, I think, to sort of this recognition, okay, this is going to come more mainstream. And it has to come mainstream at some point. And the CLARITY Act, I think probably the biggest issue with the CLARITY Act is there is a view with the administration that there is a conflict of interest and so you had it sort of fall between parties. But the reality is as long as you get regulatory clarity, sure, you'd love to have it be legislated because once it's legislated, you can't change it and the concern of course is you get a new regulator in with a new administration, do they unwind rules? But that's tough to do and in the US people don't like to whipsaw back and forth on that. So I actually think we achieved a lot and it's been very clear with both the SEC and the CFTC that they are trying to provide some clarity for the industry. So I think that's important for institutional adoption.
Yeah, my view is actually right. But if you look at it, until the GENIUS Act, despite all the key benefits that we see in blockchain and crypto, adoption was still mainly among the mass retail. People understand the beauty of 24/7 transferability as much better than the traditional banking system where you need 2 to 3 days to transfer assets and for the recipients to receive it. It's only with the GENIUS Act that firstly in the states you see so many financial institutions coming on board, the payment providers really supporting stablecoins, etc. And then throughout the rest of the world you see Singapore, you see Hong Kong, you see the likes of Korea and different parts of the world because of the competitive pressure that the US is being such a big marketplace and once the US puts its mind and resources to something, the rest are forced to say, 'Hey, I need to react to maintain my competitive edge,' right? So actually I do hope to see the CLARITY Act come into place as well because it's only with that that you don't reverse the course of progression firstly. And then secondly, you have the rest of the world saying that, hey guys, it's time to get serious. And the institutions with that need to come in a big way. But even without a lot of those, I mean innovation is taking place. If you just look at tokenized RWA, it's taking off in such a big way. It's another killer app within the crypto blockchain space other than stablecoins. So we are seeing innovation taking place. But the innovation is afraid of backtracking at some point in time. I think that's the biggest fear among the industry.
But I don't think you can rely on the CLARITY Act. I mean if the midterms go the way everybody thinks they're going to go, you're not going to get more momentum.
Absolutely. Sorry about that.
So I think the good news is with the clarity on the regulatory environment, you can still move forward on that innovation.
Yeah, I totally agree with Jenny. I think we started seeing institutional adoption when the administration changed, even before GENIUS. And I think that what institutions want to know is that the regulators are not going to go after them. At the end of the day, using blockchain, in my opinion, didn't violate any US law even before GENIUS. GENIUS introduced legislation around a new novel asset class which is called a stablecoin. But with respect to using blockchain technology to mobilize treasuries, money market funds, equities, I don't believe that there was anything in the law that prevented it. So my view is kind of similar to if you remember in the days of Uber and Airbnb, by the time people got their act together and decided, okay, we want to legislate against those companies, it was too late. There was no way to reverse the trend of people using these type of services. And I think that that's our job now as an industry because of regulatory clarity is to bring use of this technology to a level that it really doesn't matter what happened in 2028. There is no going back and I think that that's where the institutional adoption is really key.
Yeah, you kind of anticipated my next question there, which is, you know, this is sort of the, I would say, house view is that we have a certain amount of time to build something very valuable and entrenched in terms of usage for consumers so that even if a less friendly regulatory administration were to come in, they wouldn't want to tear down existing business. Where do the three of you, you each occupy very interesting seats in the market, how do you see that adoption, that entrenched usage happening? Is it... So we're kind of sitting on the eve of tokenized stocks. GENIUS is being implemented, I believe, January 18th in the United States. Is it going to be stablecoins? What's the catalyst that you foresee?
So the reason we got involved in this, you know, back in 2017, I had run technology at Franklin Templeton and you looked at it and, Yuval, you made a really important point. So when we got our Benji tokenized money market fund approved at the SEC under the Gensler administration, they had us parallel process our shareholder record keeping system which we built on chain and our old system. And at the time there were only really two asset managers that had an all... and I laughed because I said, you know, we have, I think we had four record keeping systems globally. We have clients in 160 countries and I said nobody ever asked the programming language of any of them until it was on blockchain. Like this is a programming language. It shouldn't even be a discussion. And the reason we were interested is because the programming language does three things really well that to me explains why there is no way this is going to stop. Water runs down the hill no matter how much gravity is a strong force, no matter how much you try to stop it. Number one, it has a source of truth. There is a huge cost in all financial services firms reconciling data between systems because of the latency of data and it gets populated at different times. The second is its ability to do smart contracts. All this work we do when we do an agreement, we have people who have to track the terms of the contract. That gets programmed into the individual transaction. And the third, it has a payment mechanism. We looked at that and said, 'Man, if that can be the rails of the industry, it is going to dramatically drive down costs and increase innovation.' And in fact, when the SEC had us parallel process, it cost us something like over the 8 months to do it, like $75,000 to do the transactions on the old system and it cost us $1.67 to do, we used the Stellar blockchain to do it on Stellar. $1.67 versus $75,000. So, if you want to open a Benji account on our old money market fund, you need $500 to open it up because anything below that the other shareholders were subsidizing you. On the Benji product, you need $20. We could probably go down to $5. From a financial inclusion standpoint, that's a huge advantage, but more importantly, just driving down costs and the velocity of transaction, it's going to dramatically improve it. So, we looked at it and said, 'The industry's going to go there.' There's a lot of business models that are threatened by that, but there's no way this is going to stop.
Can I actually ask a quick follow-up, and you probably might be getting ready to answer this, but one interesting thing about this particular moment in time is a lot of RWAs, so, you know, treasuries, dollars, all sorts of different assets are moving on chain and it seems like we kind of have this parallel record-keeping system. There's the old system which is the source of truth and this new system of blockchain, but the new system is actually better in a bunch of ways. It's cheaper, faster, 24/7 global. And when are we going to get something where that's the ultimate record-keeping system? Do we make that transition or is there always going to be two?
100%. So, sorry, I don't mean to steal all the thunder from my panelists, but just take what we do with our money market fund. The other money market funds that are out there are shadowed on chain. They're digital twins, which means you get none of the benefits of the technology. So, in the case of our Benji money market fund, we calculate the yield every second and we pay it to you at the end of the day. You get cash in your account. If you're a corporate treasurer, that's really significant, right? The only reason we could do it is because we're natively on chain. And honestly, Nasdaq's coming out and they're trading, it's T+1. Why? They could be atomic settlement. It's T+1 because all of their clients' back office can't handle atomic settlement yet, but it will come.
Just to put in perspective in terms of the numbers that Jenny talked about, this cost of reconciliation is estimated right now to the industry at about $130 billion a year of just cost. When you think about the friction of movement of assets, it's estimated that there are roughly $40 trillion worth of assets globally that could be used for lending, collateral, securities that are not being used as a result of friction. And a lot of times we like to say in digital assets, that cost is really just a tax on humanity. No consumer is benefiting from this friction and cost, right? There are some middle players that are benefiting from that friction, but as an overall industry, nobody's benefiting. And I think that the goal of this technology is really to reduce that cost and friction down to zero. And as a result of that, that would enable use cases that benefit all the way from businesses to consumer. As Jenny mentioned, I think treasury management is a great example. We're hoping to announce very soon that we're using Benji with a Fortune 100 company. That company alone sits on $10 billion of cash at any given point of time because of that friction. One company, estimated at 2x the total tokenized money market fund right now out there. And that's just a single company. And they believe that if they can convert the digital to digital money market fund and back into cash in real time, they can generate over $300 million of revenue a year. That is a huge benefit to a Fortune 100 company. Think about what that means to individuals that now can sweep their cash accounts into yield products without even thinking about it, small businesses. The amount of revenue and yield that the whole industry can help generate is pretty massive. And that goes back to my point. As a regulator, why would you ever try to turn that back, right? Like that just would not be a rational thing to do.
