Welcome to our panel. RWAs are the real point of crypto. Meltem and Robert are ready to rumble. All right, so Robert Leshner of Superstate, which is one of the sponsors here and a real world asset company. Robert, let's have your opening statement.
My opening statement on whether RWAs are the real point of crypto is simple: blockchains are better ledgers than the traditional ways in which recording of wealth is done, because blockchains — as probably anyone here, including Meltem or any Bitcoin OG understands — it's the best possible way to record wealth. There's no question about ownership. Settlement is essentially instantaneous and final. Assets are transferable, and you're able to reconstitute the entire record of a blockchain in a ledger in a way that makes sense. Over time, all assets will migrate from bad ledgers to good ledgers, from the way they're done now to onchain. You might say that RWAs are not the point of blockchains because the point of blockchains is Bitcoin or tokens that are extremely speculative, but those are just example assets, the first assets that are owned and programmed and recorded on a better framework. I think the real point of crypto is RWAs, because that's about $500 trillion of assets that can migrate over time from bad ledgers to good ledgers, where the assets can do more and be better. That transformation of migration is going to be a long process and it's going to make everyone in crypto very happy when it happens.
All right, all right, so let's go. So RWAs, what are they? Tokenizing something does not make it crypto. Putting something on a public blockchain does not make it crypto. Today there's about $200 billion in stablecoins. What are we doing? We are taking money out of the crypto ecosystem. We are taking liquidity out of the crypto ecosystem and giving it to BlackRock, the Fed, and other tradfi issuers who hold these assets. We are basically taking wealth that was non-custodial in nature and giving it to custodial institutions. Another example: Bitcoin ETFs — have they been a boon for buying Bitcoin? Yes. But taking $50 billion of Bitcoin liquidity out of circulation and giving it to a financial institution that charges between 20 and 250 basis points for the privilege of them holding your Bitcoin for you is not crypto innovation. That is financial innovation, that is asset management innovation; that's not crypto innovation. My issue with the RWA narrative — I believe in tokenization. I think it's a great way to put lipstick on a pig. You dress up something that is not pretty, not liquid, doesn't trade easily, is not compatible with crypto rails, and you make it crypto compatible. That is a worthwhile endeavor, that is a great use of blockchain technology. It is not crypto. Of the $500 trillion in assets that Robert mentions that are suitable for tokenization via RWAs, let's talk about it, because not all assets are equal. Taking a pile of dog shit, putting a wrapper around it, and putting it on chain does not make it a better asset, does not create demand for it. Case in point: real estate. The majority of real world assets in terms of dollar value are real estate. Real estate is a tricky investment; real estate as a category is really in trouble right now. Of course they want to try to figure out how to tokenize billions of dollars, trillions of dollars of dog shit assets that nobody wants to own. Just because you tokenize a pile of dog shit and put it on chain does not make it crypto, does not make it better. And this is my fundamental issue with what we see happening in RWA and tokenization today. We are conflating technology innovation in terms of how the underlying asset is represented from a technological perspective, from a market microstructure and compatibility perspective — we are conflating that with the underlying value proposition and investability of that asset itself. I think we need to make a clear distinction between RWAs and tokenization, which is a technological process, and crypto, which is the creation of net new value. My objective is to bring dollars from outside of crypto onchain and into crypto. RWAs today are taking dollars from within crypto and giving them to traditional financial institutions, custodians, banks — as we saw with the Stripe acquisition of Bridge yesterday, PSPs who are going to benefit, not the crypto ecosystem.
Well, that was a great opening statement. And I do wonder, you know, real world assets — they keep the intermediary, and I thought crypto is about decentralization and doing away with intermediaries. So what do you have to say to that, Robert?
I think the best response to that is that crypto is about disintermediation and decentralization of the ledger, of the blockchain itself. Bitcoin has to be relentlessly decentralized for the blockchain to be useful. Ethereum has to be relentlessly decentralized for the blockchain to be useful, because you have to know that there's a sanctity of the transactions, that they're censorship resistant and tamperproof at the blockchain level. The assets that are recorded on them do not have to be decentralized in the same way. USDC — no one requires it to be decentralized in its creation. Any financial asset that exists — that $500 trillion — is not decentralized, but the recordkeeping of it must be. That's why there's going to continue to be massive efforts on building better ledgers that are more robust over time. Blockchains are already vastly more robust than historical legacy systems, and that will continue to improve through a lot of research into how to build better distributed systems.
Question for you — counterpoint. Okay, let's say that I am in the business of tokenizing treasuries or other financial products. In order to dematerialize that product, I am required to have some type of custodian, typically a regulated entity. Let's say that I place a withdrawal request and my custodian refuses the request because they've been told to do so by a regulator. I decide not to honor that request. How is that non-custodial? I'm not trying to suggest that it is non-custodial. So what benefits, other than the fidelity of data and recordkeeping on a public ledger, does this bring?
So the primary benefits of why an asset — even a custodial or centralized asset, let's just take the $500 trillion of, you call it dog shit — I didn't call them dog shit, I said what people are doing with RWAs is wrapping assets nobody wants and trying to offer them — but again, with that $500 trillion, let's delineate. Let's take the $110 trillion in public equities, since that's an easy example. Already dematerialized, sure, okay. So non-custodial? It's custodial. But tell me how the redemption process works when you're dependent on a centralized custodian. So you're asking about why does it even benefit from being tokenized if somewhere behind the scenes there's trust for the asset? I'll explain it simply. Right now, for that $500 trillion, there's a huge number of trust assumptions for the asset. Almost all the returns come from physical property in the case of real estate, or tons of companies generating equity returns with tons of smart people working hard for publicly listed companies. Every asset's financial return is coming from some centralized thing. The advantage of moving it onchain, into decentralizing the recordkeeping of it, is that the onchain properties for recording an asset are just fundamentally better than spreadsheets and paper contracts and filing cabinets. When an asset is brought onchain, even if the trust assumptions for the return itself are staying the same — they're still coming from the same manager, the same bank custodian holding the securities, the same commercial property manager — even if the return assumptions stay the same, by moving it onchain those assets inherit all the properties that make tokens awesome. The properties that make tokens awesome: they're global out of the gate, they settle essentially instantly, they are programmable — you can literally add software on top of them to automate them — and there's a shared understanding of who owns what, where, why, when, and how. The properties that made Bitcoin so cool can be applied to this $500 trillion of the boring stuff too, and that's going to get us to this utopia over time. We're able to upgrade how we record all of that wealth, and in that world we're all going to be better off.
