Then let's move on to the next session. Can I invite Jennifer and Yad on the stage? Both persons need very little introduction. Jennifer Johnson runs Franklin Templeton, an asset manager that's been around for 80 years, managing a trillion dollars of assets. Yad is the co-founder of Animoca, one of the most active investors in crypto. So I'll start with a conversation that I think is rare, bringing two leaders from very different worlds: one from the deep end of Web3 native and one from a storied company with a lot of history in asset management. But of course, crypto is part of your company's conversation and strategy. So maybe I'll just start with that. Starting with Jennifer, how is crypto now entering part of your conversation and strategy? And then Yad can follow.
Well, first of all, I always remind people in the TradFi world that this is a programming language. They should think of that, start with that. It's a programming language that does really important things that make life easier in financial services. So the first thing I say, it's three things. First thing it does is it has a source of truth. And anybody who's been involved in a traditional financial firm knows that there's a huge amount of money spent reconciling data between systems. And that often, even if you get the right source of truth, the latency of that data can be a problem. And so the reality with blockchain, you got one source of truth. And not only do firms have to reconcile the data within their own firm, they have to then go reconcile it with their counterparty. That all goes away with blockchain. You have one source of truth. Huge efficiency opportunity. The second thing is the ability to have a smart contract program for whatever your rules are. And that's significant in that initially, a lot of firms that are starting from the traditional side to get into this space, they're just programming what they already do today in that smart contract. But as you can imagine, as we bring AI into this technology, the smart contract, the ability to innovate with new types of financial instruments and the velocity of which assets will move becomes really interesting. And the third is it has a payment mechanism, so you can have this atomic settlement. So to me, as a traditional firm, I ran the technology department and the operations department, so I had a view into how these inefficiencies existed. And so we said, well, this looks really interesting. So we started back in really in 2017 kind of this journey. We have a tokenized money market fund that we now have actually is globally approved in various jurisdictions. And I'll talk later about the benefits of that. But it got us into the space. And then it was actually in our buying loans. We were trying to buy consumer loans for one of our portfolios and we were doing it with Figure. And Mark Kagny said, 'Hey, it'd be really helpful if you actually be a node validator.' We didn't really know what that was, but we started to then be a node validator and now we do that on 13 different chains. And so it got us into the ecosystem and just became big believers. And I have to tell you, I really genuinely believe 2026 is the year where TradFi and DeFi start to have a convergence. And why do I think that? Because for the first time, I'm getting traditional asset firms saying, 'Could you come in and educate us?' And we both attended a crypto conference. There were a lot of traders and market makers there, which is the time that they're starting to really be interested. So that's the journey.
Yeah. Maybe just to pull on that thread. I mean, Animoca originally started as a gaming business, right? And so we're known for essentially, sometimes people say, 'Oh yeah, gaming are virtual assets.' And you basically tokenize that. So game virtual to virtual, but I would describe actually gaming assets almost like RWA because it is basically a $200 billion industry that actually has real value for the people who play games, right? It just happens to have this virtual construct. But just to pull a little bit on that thread that you were talking about, what we saw when we entered into the space really with NFTs originally was this ability to create sort of mass democratize, if you will, actually financial access of these tools that weren't previously possible. For instance, you could turn a gaming asset into an actual real asset or you could turn a piece of art that was virtual into an actual asset, right? That was the attraction point for us. And what it also did was it brought in, you talk about TradFi, we talk about essentially people who are not from TradFi, people who actually might not even have ever touched anything on money before, but suddenly because of their passion points on whether it's gaming, whether it's entertainment, they go, 'Oh, wait, hold on a second. This thing has value. Suddenly this is something that actually I treasure and someone wants to buy it.' And suddenly you learn about money and actually it brings people in. And so what we see essentially in the Web3 and blockchain space, a large new, not just a wealth class, but a large new number of people who don't understand much about money then started to learn about money and then now they're also kind of going far as well. So it's kind of this sort of mishmash between the two. And the way I think of blockchain technology, it's basically providing access to a banking-grade financial system that essentially anyone can touch. Right. And that's something before if you wanted to build some kind of infrastructure to do that, you'd have to spend billions of dollars. You need the resources of Franklin Templeton or any big financial group to do so. But now anyone can experiment and do stuff on it. And I think that's partially Paul talked about a little bit the risky side because they're experimenting, right? But that's actually where the innovation really starts to drive and creativity can come to bear, right? So that's what was exciting for us. I mean, Animoca today has over 600 portfolio companies. We think of the space very similar to how information and data was essentially revolutionized from an access standpoint. Knowledge was a privilege 40 years ago, right? That's something we all thought of, if you had an encyclopedia Britannica, if you could have access to the newspaper, you had information that most others didn't. That information symmetry was power. And now with blockchain, you have the same for value and value creation. So I think the whole world will become more financially literate and we'll have a new sort of ecosystem because of it.
I think financial literacy, that's a super important point. We're going to come back to that. Jennifer, you briefly mentioned use cases, right? So starting with Benji, do you want to describe a little bit more on what are use cases that you see in your world? And a question around, I understand efficiency, you mentioned programmability, transparency, and it serves your existing clients very well, but do you think it's going to help bring in a new class of investor, the underbanked, the underprivileged, a little bit to the point that Yad was mentioning?
Sure. Well, first of all, I actually want to just recognize HKMA and Paul himself on this. We deal with regulators all over the world in this space. As you know, in the US, I actually felt like they were being left behind. Fortunately, I think we're now a little bit more focused on trying to be constructive. But Hong Kong from the very start worked with companies like us and crypto companies and said we understand that this is going to be significant, created a sandbox and has been very constructive. And that's been helpful and I think really important. This world is going to get regulated. I know that there are a lot of historical crypto people who felt like it is going to get regulated. What we need are constructive regulators who are responsible in how we approach that. So when we worked with the SEC to get our tokenized money market fund approved, they required us to run parallel our old shareholder recordkeeping system and our blockchain recordkeeping system. And I reminded them that they never asked me what programming language it was on the old system. They only seemed to care what it was on blockchain. And so we were one of the few firms that was still actually running our own recordkeeping system. We did about 50,000 transactions in about six months. It cost us $1.50 per transaction to do it on the old system. It cost us in total $1.13 to run it on the Stellar blockchain. So, it shows you. And so, today, if you open our old money market fund, the minimum investment is $500 because anything below that, we're losing money and that means other shareholders are subsidizing. So, you have to have a $500 limit. In the case of our Benji blockchain money market fund, we actually you can open an account with $20 and arguably we can go lower than that. So, if you think about financial inclusion, that is really significant. If we drive down the cost, we're going to be able to be much more democratic in what we can offer to people from an investment standpoint. The other benefits of the Benji application is we actually calculate the yield every second. So, as you think about the evolution of these investment products, if you're say a hedge fund and you're using it as collateral and you own it for 4 hours, 32 minutes and 22 seconds, we're going to pay you that yield and we actually post your earnings of that day on your account. Now in a traditional money market fund you're getting those, it's accruing those but you don't get them till the end of the month. So if you're a corporate treasurer who may move billions of dollars, to get that money posted to your account and use of that capital daily is really useful. And then it's 24/7. So we will very soon be able to have you transfer on a Saturday, you decide you want to move from the yield-bearing money market fund into a stablecoin, we're going to be able to do that transaction for you. So, it's that opening up those types of things, but I do want to give my favorite example, which actually didn't work, but it shows you how this can open up, which is Rihanna's NFT. And so, what she did is she launched, I think she sold 300 NFTs. Each one had the rights to 0.0033% royalties to one of her biggest songs. So, why was she able to do that? Because when the streaming service plays the song, the smart contract kicks off. Said, 'Yad's a big Rihanna fan. We owe him that partial cent in his account.' And so it is going to open up new types of investment opportunities that are uncorrelated simply because this technology is so efficient. And again, it's going to democratize those things. So those are just a couple of examples that I think kind of gives you a... and what always happens here is none of us can quite envision where this is going to go other than to say it is incredibly powerful and really exciting.
But it sounds like the efficiency is there, the tech is there. I love that $20 example and I hope there's more Rihanna songs. And I think that brings to Yad, which is, I think GameFi has started the cycle of adoption, but people do get tripped up with what chain, how to open a wallet and all that, right? Do you envisage as you get to bring the next billion people, do you invest in each different type of application? Is it the Rihanna NFT that's going to bring people on board? Is it going to be RWA? Is it going to be like your violin? Is it going to be other kind of financial instrument like a $20 minimum ticket Benji?
Yeah. I mean, just quickly to echo, first you have to keep experimenting. And actually, I do want to give again a lot of credit to basically Paul, HKMA, and what happened in Hong Kong. We're based in Hong Kong and I would argue that if we were not based in Hong Kong during the time when the US was particularly difficult in crypto, we would be a very different company, probably a lot smaller. So thank you very much for Hong Kong and everything you've done in the region. Now, so quickly on sort of this area, what I love about this is this inclusivity, but it's not only inclusivity in places where, who would buy a Rihanna NFT? Maybe someone who might understand the economics and so on, but even one of my favorite examples, and we have a few of those, and I'll get to gaming shortly after, is what we did for instance with Tiny Tab with teachers, right? Basically, you would take teaching content from a teacher somewhere around the world that would make maybe $100 or $200 a year, right? It didn't take off a lot, but the construct was that you could basically protect your intellectual property through an NFT at a cost of less than a dollar, right? Just think of how expensive it is to actually protect your IP rights, right? But in the US, for instance, you just have to prove origin first, right? And if you can choose and prove that with blockchain, then it becomes a capital asset. And so this asset would generate $1 to $200 a year, people started buying this NFT on a basis of 20%, 30%, 10% deal, doesn't really matter. And that was actually, if you think about it, if we didn't have legal systems to protect basically music rights or film rights, you wouldn't have a music or film industry whatsoever. There'd be no Michael Jackson, no Taylor Swift, right? Because we now had a form of protection. Blockchain scales at literally to your point, basically at a fraction of a cost, right? So that's really exciting. I think the thing about GameFi is, when we say GameFi, we don't necessarily mean finance and games, which is what a lot of people interpreted. And also speaking of our big moment was when gaming basically met DeFi actually in '21 and '22, like DeFi summer was sort of really proved the point what were possible, provided a lot of financial inclusion in places like the Philippines where people started learning about money, right? But I think the other way to think of GameFi is gamified finance and I think that's really around the culture of gaming itself. So all of our children and frankly my generation and younger generations, we all play games, right? There's 3.5, maybe even 4 billion people today who play games on a regular basis. It's their language. It's their culture, right? So if you talk about my parents' generation, they would not think of money as a game, right? In itself, right? But now whether it's a prediction market, whether it's what you see in eToro or when you see it in Robinhood, right? When you see leaderboards, I see no reason why platforms like Robinhood couldn't become Instagram in a way, right? Or have essentially a sort of a social leaderboard, which they're kind of already doing right now. Their ranking and popularity is based on their success in trades but ultimately they are points in the system and they follow them and that's actually where that culture, they speak to them because gamers, they grew up in gaming and so they want a leaderboard. I mean, imagining a leaderboard for instance in financial systems 30 years ago was like, what is that, right? You don't need that. But today it's almost expected because that's the culture they understand. So sort of gamified finance brings them in but really what happens is that those people who play games and the culture of games then move into, okay, I like to play these games, I learn a little bit about money and suddenly I'm made here. One of my first experiences when I came to Hong Kong 30 years ago, my goodness, was I took a, I grew up in Europe, right? So I took a train to Shatin for the horse races and there was a father teaching his, I think six or seven year old kid how to bet on horses. Okay, now I'm, coming from Austria, it's like horrified, I'm just like, oh my goodness, what are you doing, right? But then I came to realize just as they played mahjong and all that kind of stuff. It's not about just the return or the gamble per se. It was social. It was fun. It was entertaining as well. Right. It was a way to bring people together. And so money in Hong Kong and in that culture brings people together. Right. You talk about stuff. You make friends through business. Right. This is not typical unfortunately in Europe. Right. So it's a different culture. But now I think this culture becomes pervasive everywhere. Right. Money is a bond. It's social. It's actually the very first social network if you think of it. You know, I can now have a relationship with you without knowing who you are, but at least this dollar or that dollar or that gold or whatever has some value and I can begin that relationship. And I think what we see here now is that money becomes deeper. With smart contracts, network effects of the money becomes even deeper, which means to the point on the violin. You know, my mom will never buy Bitcoin. She's not interested in that, right? She doesn't know anything about money, but she will buy a fraction of a Stradivarius because to her that means something. And if you think about how we all learn about money, we don't necessarily learn, some of us learn from money because we love money, but that's a small percentage of the world. Most people love things and learn money through that. Like you learn it through Pokemon card trading or you learn it through games. And that's actually the opportunity, which is why we think financial literacy will go the way of digital literacy.
And I think there's going to be more of in that direction. And I mean look at prediction markets and it was Golden Globes two weeks ago and there's Polymarket prediction result on the screen for Golden Globes. So everyone that's watching it, millions of people are getting exposure to gamified finance, right?
And I mean I think if just to quickly echo that, before in the older days we used to have essentially tele-voting, right? Or people calling in, right? This is just a much more efficient and much more direct way of doing that.
