Hi, everybody. How's it going? Well, I'm excited. I got some real legends on stage with me today. So when I spoke my opening remarks a couple hours ago, I talked about the convergence of Wall Street and crypto and how that's really become a defining theme, not just of this conference, but of the space as a whole. And I feel like these two guests really represent that convergence better than almost anybody. We have Adam Back here, who is a key figure in the Cypherpunks movement, and that was a community that believed that cryptography and open networks could reduce reliance on traditional institutions. And then we have Jenny Johnson, who is the CEO of one of those traditional institutions. And Franklin Templeton was one of the earliest companies to bring financial products on chain. So we really are talking about the crossroads here of the Cypherpunks movement, early roots, and the traditional financial getting into crypto. So, Adam, I want to start with you because we had an interesting conversation backstage. A lot of people frame Wall Street's embrace of Bitcoin as being in tension with the original vision of Bitcoin, the original cyberpunk vision. But you have a counterargument, and you say that the Cypherpunks were also strong believers in the free market. So is institutional adoption perhaps more in line with the Cypherpunks vision than we originally thought?
Yeah, I mean, I think that it's a sign of growing adoption. And being able to buy Bitcoin in an ETF is an improved way to get accessibility to a lot of people. So you have to bear in mind that many people are not doing self-directed trading. They're not trading on it. You train or something. So, you know, on the Cypherpunks list, when people were talking about electronic cash in the like 1997 to 2004 era, I was, you know, actually a day trader as a, you know, not as a professional trader, but trading on E-Trade, which is now part of Morgan Stanley. And I'd invested in some IPOs in the UK. And so I think generally the cypherpunks for what they would call anarcho capitalist. So it's a free market advocate, but a strong believer in the function and purpose of capital markets for driving, you know, the wealth in the world, right. The development of products and services.
Would you agree that there is some tension, though, between maybe some of those original visionaries in the space who saw Bitcoin as maybe a way to operate outside the financial system, maybe a method of freedom from sort of those traditional bonds, as it were. And that's sort of now merging with that, you know, system that they wanted to get away from.
Well, I think it's maybe a bit like the internet itself. So in the early era of the internet, it was very freewheeling. And then over time, you know, all companies had a web presence and then smartphone apps and so on. So I think it's just that Bitcoin has some of the value proposition is that it is like it is physical. Even though it's electronic, you can physically own it yourself, which is generally not possible or not easy with shares. There aren't bearer shares. Or if you have shares in a company, you depend on the company management. And if you have cash or a bank account balance, you're depending on the government, you know, to if they how much more they print the monetary policy. And if you depend on a bank, you depend on their solvency and prudent behavior and so on. Whereas with Bitcoin you can hold, you can elect or hold a bearer asset, and it has much lower friction. So you have the sort of benefit of an open financial network. And so the internet is an open network. And open networks innovate faster and ultimately deliver a lot of value. But, you know, as with the internet, you saw a whole range of startups and applications of big companies building things on top of it. So I think you can think about Bitcoin as the Internet of finance. And with Blockstream we build the sort of settlement network technology for that, which is a liquid network.
Jenny, you've been on Wall Street for over 30 years and you know, you've seen it all from the 2008 financial crash. You've seen the really start of Wall Street coming on chain, as it were. And Franklin Templeton has really been leading the charge on that front. You guys were the first to tokenize a money market funds, you know, with your Benji platform, which I believe just turned five years old. So that's exciting. You know, what do you think crypto has really gotten right? You know, as someone who's come in from the traditional side and and seeing, you know, the merits of crypto, but also the shortcomings, what would you say crypto has gotten right? And then also, where does it still fall short?
So I would say, and the reason we became interested in it, what it got right is that it was a technology that does some things that can create great efficiency in financial services. So this technology, what does it do? One is it has a source of truth. There is a huge cost. I used to run our operations technology. There's a huge cost in every financial services firm that in reconciling data between systems and the latency of data, you do a batch system at night, the next day, you're trying to figure out when to get that piece of data. When is it updated? That's a big expense. With blockchain, you have one source of truth. And then, oh, by the way, you have to reconcile that data with your counterparty. And if you one of you gets it wrong and it ends up being a failed trade, there's actually lost there. So that's another expense. And then the other kind of features of it is this idea as you move to atomic settlement and the smart contracts, it drives a huge amount of efficiency in the system. When we actually saw that when we launched Benji, the SEC required us to run the shareholder record keeping system on our in-house system as well, parallel processing on the blockchain system. And it was so dramatically cheaper, it cost us about $1.30 a transaction for 50,000 transactions on the old system, and it costs us about $1.13 to run on the stellar blockchain. So right there, we were able to drive down the cost of it. Actually from a financial inclusion standpoint, our old money market system, you need $500 to open an account. Because anything less than that, everybody else is subsidizing you. When you do it on chain, we can you can open an account with $20. We could probably go down to $5. So we looked at that and said, okay, these are going to be efficiencies that are going to be really important in financial services. And then the smart contract component is going to create a tremendous. And you add it with AI, tremendous amount of innovation with the kind of vehicles. So that part's the exciting part. I think the part that is a little bit harder, and it probably comes from the roots of a little bit anti-establishment, of kind of the original crypto world is that unfortunately, regulation will come and inevitably happens because governments love to regulate. And so it will. These two worlds will come together and there will be a certain amount of regulation. And the regulation is always behind the innovation. And so that'll be the challenge.
I'm glad you brought up regulation, because we're talking a lot about the implementation of the SEC's tokenization innovation exemption. When that's going to come, we're not entirely sure. But we also have the Clarity Act, which is supposed to unlock a lot of capital flows, you know, a lot of talent coming back to the US. You know, when we talk about the Clarity Act, I'm always, always curious to know I ask my panelists this a lot. We've seen Wall Street really, you know, launch a lot of initiatives and pilots and the intent to launch tokenization projects XYZ. But there's seems to be sort of a hesitation when it comes to, okay, we're actually going to deploy here. Are you seeing companies and maybe, maybe you can speak to Franklin Templeton specifically, like waiting for the Clarity Act to be passed to kind of, you know, greenlight that? Or would you say Wall Street's not waiting? Wall Street already is deploying and making the most of these products right now.
So first of all, this technology threatens a huge number of business models that exist today in traditional finance. So if you see any kind of hesitation, it's because there is a threat to the business model. Think about the toll takers in a transaction. We were talking backstage. I was saying, you know, I Franklin Templeton, when we do a foreign exchange transaction, say with a Malaysian bank, we have a large bank, a US bank usually, or a large multinational who is our counterparty and who cuts the deal on the other side, and they take a piece for that. If we can have atomic settlement and we know the smart contract kicks off, we don't actually need that third party to play that counterparty role. And so I actually think that one of the reasons we see it slowly coming through the traditional finance side is because of the threat to the business model. So that's one as I already mentioned, regulation is always a little bit behind. And there'll be a lot, a lot of lobbying that goes on both sides. But I don't think that's the reason why anybody's waiting. And then the second reason I think you is that there wasn't demand from the clients. If you don't have clients demanding that you hold a wallet and because they want tokens, then then you're not going to go build it. But what has happened in 2025 and I've said 2025 coming into 2026, it's very different now. Every large multinational bank is now talking to us to say we need to get educated. Our clients are pushing. They want to hold their crypto assets alongside their traditional assets. And what's also happening is that the crypto exchanges are now. So we've now got tokenized ETFs that are now being sold in their traditional ETFs sold on Kraken and Onda, because they're interested in crossing over to have traditional assets as part of their savings.
Adam, you've been in this space for a long time. You've seen that crypto has been asking for clear rules of the road. You've seen what happens when there are not, you know, good policies and good regulations put in place. I mean, what do you think is, you know, still fundamentally misunderstood about smart regulation when it comes to crypto, you know, and what should regulators enable? What should they stay out of in your opinion?
Well, I mean, I think it's important for bitcoin at least, that people continue to be able to hold their own keys as an option. And so that is that should be protected in my view. And there are a few bits of regulations that talk about that interestingly. So I think generally it's been reasonably positive how the regulation has evolved that, you know, the there are different areas in the government, but as the governments are in some cases holding Bitcoin themselves or putting Bitcoin into reserves or sovereign wealth funds, pension funds that you can see that they are thinking in the same way that a Bitcoin investor me, but from the mindset of a government. So the fact that it's bearer and you know you're not relying on a counterparty is good for them in the same way that it's good for a sovereign to hold gold because, you know, somebody can't seize your gold, where if you have foreign, if you have reserves in foreign countries or in foreign assets, and the counterparty turns unfriendly, that becomes a problem. You know? So I think the bearer nature of Bitcoin is good for, for that kind of use case. And then I think, you know, the current US administration has been much more open for business for Bitcoin. And so you know the clarity adds add something about stablecoins. So I think that's generally been positive for the US in bringing, you know more businesses back to the US that were previously offshore. And so I think there's you know there's more of that to happen. And I think also it's generally probably good for market structure to have better run sort of investor protection exchange operations rules, because you do end up trusting the exchange for fair operation of markets in some cases. So some more on shoring of for example, recently some of the derivatives trades around Bitcoin have been brought onshore into the US. I think that's generally good for the for the markets. So you know I think it's a global market. So you know it won't go away. But the regulators do look to each other for example. So you saw that when the US became more up in for business, for example, the UK FCA started approving ETFs that had been on hold. And so I think it is gradually improving, you know, country by country as they look at some of them are had, some of them are behind. But it's progressing forwards and that's good to attract business and you know improve the markets.
I just want to add one comment to it. Adam said I completely agree that the regulators should permit people to hold Bitcoin and their keys. There should be no restriction on self custody, and I think that I didn't appreciate it as much until I was talking to somebody from Israel. I think if you're raised in the US, you don't fully appreciate this as much talking to somebody to Israel who said my parents and grandparents had all of their assets taken away by the government. They will always keep a percentage of their savings in Bitcoin. I talked to somebody in the Middle East who said, I fear that if I say the wrong thing, I could have my assets frozen. So when you live in a country where you have a certain amount of trust with the government, you're not as worried about it. But there are plenty of places in the world that don't have that luxury. And so that option, I think, is really, really important to have that flexibility.
And actually, this is something that Franklin has been increasingly talking about is the wallet native financial system. And Bitcoin also is originally built around self-hosted wallets. So it's a theme that both of you guys have been talking about. Do you think and I'll ask both of you this, do you think that wallet native infrastructure becomes sort of the primary mode of how we're going to hold assets in the future? Or do you see sort of traditional intermediaries like banks still sitting between users and their assets? How do you see that relationship between the user and their assets in the future, maybe, say, ten years down the line? And, Jenny, I'll let you take it first.
Look, I think it's going to take a long time before we disintermediation and have solely wallet based infrastructure. But I think that there we already have kind of a hybrid mode where you have some people who have a traditional bank account, traditional investment account, and a wallet based infrastructure. And I think over time, what happens is more and more moves to your wallet based infrastructure and the type of personalization of the investments, the type of capabilities, the rights, the almost loyalty programs and things that are all going to be part of the ownership in those wallets. It's going to be very much personalized. And so I think there's going to be a natural flow, but I think it takes it'll be slower than people expect.
Yeah. I mean, I think that, you know, there are some people that just want to, you know, talk to an investment advisor and have them handle things. But you can see that the, the internet of finance using like a layer like the coin layer two liquid, which supports tokenization and settlement is, you know, evolving to be the new way to transfer electronic shares between platforms. So if you if you ever tried to move shares between two brokerage accounts, it's a little it takes a while and it's quite manual, complicated instructions where you know, with the the way the bitcoin exchanges have evolved, you can just, you know, paste the bitcoin address from one to the other or a QR code and it's there within, you know, half an hour or something like that. So I think it opens up that kind of capability to move collateral between platforms. So I think that's that's valuable. And as Jenny described, you know, there are now traditional assets in tokenized forms being made available on the Bitcoin exchanges. And so I think the value of that, if you're if you're a trader is that if you have your assets separated into two isolated buckets, you know, it reduces your liquidity and increases your risk. And the, you know, some of the traditional brokerages are adding Bitcoin and some of the Bitcoin exchanges that have securities licenses are adding tokenized shares. So I think every time you see those converge and they're offering different things, you know. So but certainly the ability to use the sort of cross collateral cross margin of our share portfolio combined with a Bitcoin folio is actually beneficial. And locks value for both both viewpoints or both for both investments. It reduces the combined portfolio volatility, increases liquidity, and makes it safer. Because I think what has happened and you've spoken to some Swiss banks who saw, you know, a lot of money leaving the bank. And when they trace where it's going, it's getting wired to bitcoin exchanges. So of course then that becomes a driver to you know, support bitcoin purchases in the in the wealth management banks as well. But for the same reason, you know, the users are just looking for a place where they can have both types of investments on one platform, cross margins. So there's that becomes a competition basically between the bitcoin exchanges and the traditional brokerages and banks.
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So you guys, I guess in a way both operate asset management firms now, right? Because, Adam, you're kind of a native on chain asset manager with Blockstream Asset Management, which you guys launched in 2025. Jenny, obviously, Franklin Templeton is a long time traditional asset manager on Wall Street. Adam Blockstream Asset Management You now build Bitcoin native investment products on chain. So with the spirit of the panel name in mind, you know the future building on chain for the on chain investor. Are you guys competing now for the same type of customer or you solving different problems for, you know, the same portfolio? Like kind of how do you think about, you know, the future customer? Adam. Go ahead.
I mean, I think there are different audiences. So I mean, I've thought for a while there the, you know, the next stage for Bitcoin is sort of financialization. So providing structured products on top of bitcoin with different strategies in them. And you know, we have the STR which is a treasury company awaiting US regulatory approval. And that's, you know, kind of a similar type of company to MicroStrategy but using active management strategies. And so as we think about those asset management strategies, there's a separate activity within the block stream group of companies looking at strategies and making those available. And you know, we're thinking about pension funds and endowments and sovereigns. So it's a particular target audience that you have to, you know, structure and set things up appropriate for. And so, you know, there are different institutions facing, different kinds of investors. You know, retail via E-Trade, that's owned by Morgan Stanley, Franklin Templeton, fidelity, all these kind of entities are interested in Bitcoin two, you know, and obviously Robin Hood now you know, is every few weeks there is an announcement of Bitcoin being onboarded a different brokerage retail or adding to model portfolios. So I think that's quite interesting to see how the model portfolios, you know, as they start to get put into action, because in some cases they have just started on that track. So yeah, I think it's you know, there's some new entrants, but it's all a combined market ultimately.
Yeah, I guess what I would. So Franklin Templeton just to we're 1.8 trillion asset manager. We have clients in 160 countries and we're about 50% institutional clients 50% kind of wealth channel clients. So we view the one thing that we do though is we sell through financial experts. So through financial advisors. So we tend to not go direct like a Vanguard would go to direct. So that's kind of the universe that we play in. And what has, you know, kind of opened our eyes is if you just take the top five crypto exchanges, they have a billion wallets, okay. We're actually finding that most of those aren't existing clients and they are looking for traditional assets. So that's a new market for us. We've actually I think of Adam as a lot of the infrastructure. You know, I think most financial services firms are competitive and cooperative. So there'd be infrastructure that Adam sells in his companies that we'd say, oh, that'll be great. We can we can add that, you know, that helps us with our clients. But we've had model portfolios with Bitcoin in them, an allocation bitcoin for probably 3 or 4 years. And and we just or we're actually in the process of acquiring a venture fund. 250 digital where basically the institutional clients said we weren't so comfortable allocating to you as a small firm, but now that you're going to be part of a traditional asset manager or not, I see because one of the principles is right here in the front row is saying we we'd like to we want to allocate like we're comfortable doing that. So I think that, you know, again, these worlds are kind of converging. And it's an opportunity for both sides to to pick up market share. And I think the good news is the pie is growing.
