BlackRock is Fueling The Biggest Tokenization Boom Yet…(What’s Actually Happening) - Keyrock CSO

Transcript

Like if you look at uh the layer ones and the layer twos, custody solutions, money market protocols and chain indexes, who is who is the core user that that actually really pushes the throughput of all of these systems is us. >> But to your point, money markets grew and then as a result RWA got a lot more attention. We know stable coins are going to grow. What is that next category that we think is going to benefit from the growth of stable coins? >> There's this massive tokenization institutional bull run happening. stable coins. Everyone wants exposure to this kind of trade, if you will.

>> Welcome back to another episode of Money Moves Fast, our premier weekly show covering all things tokenization, RWAS, and payments. >> This show is made possible by Polygon, the leading blockchain for payments and RWAs. Money moves fast is the convergence of Wall Street and digital assets. Now, sit back, relax, and enjoy the show, >> guys. Juan, welcome to Rollup TV live in Bonosis. >> Thank you very much. >> How's the city treating you? >> Very good. I've been here 15 years ago. >> You've been living here for a while. >> No, no, no, no, no. I came once 15 years ago.

>> Yeah. Okay. >> So, I have a little bit of a reference to how it used to look. >> Yeah. >> Looks the same. Really? It's more expensive. >> More way more expensive. Right. >> I was here in 2023 and it's dramatically more expensive. >> Dramatically. Yeah, it's crazy because the peso to the USD has gotten way worse. So, you would think that it's actually better, but it's just not. Like, they've just raised the prices significantly. >> I remember it was 10 to1 when I came last time. >> I was here was 300 to1. Now, it's 1400 to1. >> 1400 to one. >> Um, first time on the show, Juan David. I would love to hear about Krock about I mean, if you want to have some coffee, feel free, brother.

>> Absolutely. Thank you. We know Krock as kind of one of the larger uh kind of asset management, capital allocators, general kind of like infrastructure, not infrastructure providers, but providers of of liquidity in the market. Absolutely. Um you know, you have a trading firm, etc. What what is Krock? What what's your story? You know, you you're the founder. You you've been doing this for a while. Catch us up on on the lore. It's your first time here, man. >> Yeah, absolutely. So, look, I've been working on this for about eight years now. So it's been a it's been a a good journey for me. Um we started in in 2017 uh with a very very core simple idea which is um the only reason that you want to tokenize something is for it to

be liquid and and that simple idea took us to the conclusion that liquidity was the core value proposition of blockchain technology or at least that was that was our our motto. And so so with that in mind and understanding that there would be you know hundreds of thousands if not millions of assets being tokenized over the next decades we um we went on how to build a scalable liquidity technology. That's how the company got started and then from there we we scaled that to all kind of uh financial services to help the industry to to get adoption which took us to today where where we are I would say diversified financial institution. uh you would you could look at it as as a new investment bank.

>> What what do you think changes from you know we we've grown up in crypto like we've talked to thousands of projects. I'd say we've been, you know, building this this media company, this podcast going back six years. And so we we have seen lots of crypto projects and from uh everything that we're seeing, it's like, okay, now the institutions are starting to come, but like you just said, you are a financial institution. You've been here >> eight years to your point. And so the institutions have kind of already been here and are now starting to grow as a part of our industry. What do you think separates a crypto project from a crypto institution? Maybe even before I answer that, I I'll I'll give you a little bit of like a thinking that I had about this. You know, there's a lot of talk

about institutions are finally here and they're they're adopting the technology. I I I like to like create a a framework of thinking where actually I split the idea between what is called an institutional and an institutional allocator. So what so in in my view there's a very big difference between a financial institution which is for example a bank like a Goldman Sachs or a JP Morgan or or a Fidelity and then there are allocators which are the ones that are controlling the capital and allocating it into the asset class. Uh there the the reason that they take decisions is different. I think we got to a point where it's very clear for the financial institutions the banks that there is money to be made from providing services in this industry. And so this

first generation of institutional adoption in in my view is more of you know what there is money to be made helping this industry develop but not really the allocation actually and I think people confuse these two things but at least from where I'm sitting there is appetite from them to use the technology but that doesn't mean that they're just putting they're putting yet their capital into onchain vaults or into DeFi uh to to kind of like really get the full uh I would say 360 adoption of of like traditional finance into digital assets. Um and so so kind of like going into what's the different from a company like ours. Correct. So we we would definitely be in the category

of a a service provider in a sense which sees a lot of value in the industry. >> Uh and and we do see a lot of value into the the power of distribution. So I mean it's just if you look at like the capacity for distribution of the asset classes is fantastic. you can take a product and you get global access to to users all over the world to to get access to to your products and and we we only focus on digital assets. So we have the capacity to approach it with the mindset of an institution with a regulatory framework of an institution but with really identifying where and how to take advantage of the power of distribution that the technology brings.

>> How much assets do you guys have under management? >> Well, I mean to be honest I think that's that's undisclosed. We cannot we cannot disclose that live but we have many different uh businesses. Correct. So we have a a market making business. We we run a structural products desk. We also run an asset management case and every every dollar of what you would call AUM is is very different from one to the other. Correct. So on an on the concept of an asset management business uh you would have a lot of like deposits where you have fiduciary duty. But in the case of for example a market making business you would actually run a lot of debt. So even if I would have like I don't know a few hundred million dollars of debt if I would claim okay is that that is that

AUM well what matters is can you actually generate a delta of revenue between what you pay for your debt to what you generate which we do uh but it would be a little bit misleading to just say okay that's that's that's AUM not your keys not your coins from the team that pioneered cold storage treasure has just released its new wallet guys if you are still using hot wallets in 2025 2026 you are missing the entire point secure your coins Get a treasure at treasure.io. >> Holiday is unified crypto payments. Give your users more wherever they are. Go to holiday.xyz to never write a smart contract again.

Looking for yield that stands out? Infinifi gives you just that. Deposit stable coins and earn far more than the current savings rate. Infinify is a battle tested, reliable defy platform that is ready to go. Head to infinifi.xyz. Uh do you guys have a current market view? Uh uh long bull. >> Long ball. >> Long ball. >> That's it. >> That's it. Long ball. >> Yeah. >> Sounds like uh sounds like um micro strategy and sailor over here. >> Volatility, baby. >> You guys are very opinionated when it I'm you know just looking at what what you believe in. It's very clear. You say the future is tokenized.

>> Absolutely. >> You say all assets will be digital. >> Absolutely. >> And you say your solutions solutions are designed to operate in every venue centralized and decentralized. And so for a long time, I think this was maybe, you know, what what gets to the heart of the difference between an institution as a project is whether or not you're you're partaking in this decentralization theater. You're kind of doing this uh this, you know, what what do you want to call it? Playing this game, you know, trying to pander to the ethos. Uh but in reality, we need some sort of gateway. We need some sort of bridge between the centralized world and the decentralized world. And so I'm I'm curious, you've been in the space 8 years. How has the space evolved? It feels like now we're really getting into this is what matters. We need to bridge

these two worlds. Tradi, DeFi, these no longer exist. It's just finance. >> Talk talk to us about what the journey has been like since you guys got started. If you held the same beliefs, and I think you you do, you seem like a very opinionated person when you were saying the future is tokenized eight years ago. This was before Black Rockck and Larry Frink were saying the future was tokenized. Did people take you seriously or did, you know, did you have to convince some people? Well, back back then it was definitely a lot a lot more difficult, correct? To to to raise capital to to build this story. Uh I I like to to see ourselves as not we're not only a service provider for all of these industry to develop, but what is very interesting is that at the same time that we help everybody to build

their businesses, we are also the power user of blockchain technology. So if you can look at it, it's actually very interesting because as a as a as an institution and what you would want that majority of institutions evolve to is that they are the users of all the stuff that we've been building. Correct. Like if you look at uh the layer ones and then layer 2s, custody solutions, money market protocols, chain indexes, who is who is the core user that that actually really pushes the throughput of all of these systems is us. >> So at the same time that we help them, we're also the core user of the whole thing. And that's really where the learning c the learnings are seen and and where we sit down uh I have a lot of friends that run venture uh and and funds and often when they are taking

their decisions on investment they would call me up say hey look there's this protocol doing this thing tell me what you think with your hat of a user correct what do you think how could this work will you use it and what we've seen is that the technology has gone a long way like from back in the day the first times that we started to implement uh uh trading systems that would trade against the smart contracts. This stuff was as clunk as it would get, you know, like uh the first the very first few use cases of of any type of onchain order books or you know intentbased systems were were very clunky, right? Like you had uh back in the day Cox X was an order book which today is an intent system but like with matchup but back back then was an order

book for you to to place an order and then cancel the order and reposition the order. the the lag on that would be 30 seconds. So imagine you place an order and just update your price. >> We're talking about 200 milliseconds these days. >> Correct. And and even that's too slow. So that's slow. So that's where we going to that's where we start entering into kind of like the whole HFD space on chain hopefully soon. But the technology really has, I would say, gotten to a point where where it's much better. And I would say for me, not only the trading systems, but also the underlying cost of the technology is more often than not something that really prevents institutions from adopting the technology. I I like to make a very very simple kind of like reference on how to

look at this. Imagine that you are a a bank. You have a team of 50 traders and a new blockchain comes and say, "Hey, you want to help us develop and and trade a little trade trade with us." Yeah. But and they developed this beautiful technology and they put a lot of work into it, but they never really looked at custody or what it meant. And so then the bank looks at okay, we want to use this. How do we do it? We're not going to just give 50 ledgers, one to each trader for them to carry it around in their house or at the office. It just doesn't fly correct. And you know what happens if a trader decides that maybe you know they let's say want to part ways and leave the company and do something else.

>> Take their ledger with them. >> What do they and it's like what do you do? You need to then recreate a ledger like kind of like transfer the assets. I mean it's it's a nightmare. Correct. And so all of these custody institutional solutions are not only about the fact that they have like you know MPC and and all of these like sophisticated security systems but the fact that they have like super admin powers for an institution to start saying hey we have this wallet all these users can actually access the wallet I have my 15 traders I'm going to segregate so that they can only use these white listers my contracts which are the clients that we work with kind of like you want to like make it as safe as even if the computer of the trading gets hacked no money can be lost correct

and that definitely was not the case six years ago and I think now it is the case and so that's a fundamental piece that I think has helped a lot of the institutional uh service providers to enter and hopefully later on the instit institutional allocators >> to also put money into it >> well David I think that the thing that people are are upset about right now are a bit kind of like uh confused about if you will is there's this massive tokenization institutional bull run happening stable coins Everyone wants exposure to this kind of trade, if you will. >> But the way in which to get exposure right now to this entire idea is either >> it's either build a company, buy circle, uh stock, Coinbase stock, a couple other, you know, stocks. Uh buy plasma, XPL, um and maybe just buy Ethereum or

like there's like Sky, Athena, a couple others. Basically, >> a few things though. Few things. >> There's now there's quite a few, right? But like it still doesn't feel like there's a clean way to get exposure to this without being like either a VC or being really early into some like uh you know uh some company that's going to go public. Like I'm just curious when people I'm sure people are asking you like they want exposure to this uh what what is Krock's uh exposure to this like trade basically like how are you guys uh going to maximize uh this kind of uh trend? >> I mean we we've been involved in the in the in the whole story of of stable coins for a very long time. As a matter of fact, we're one of the largest, I would say, service providers in the the

stable coin industry. Uh we work with, I would say, every major stable coin issue out out there uh since back in the day with with with Circle and Ted, but now with all of the up and cominging uh you know, stable coins that have come in in the recent years and uh the the experience on how to help them to get adoption is very interesting because stable coin seems to be like a very simple product. Yeah. But the point is how do you get utility out of it for it to like go into like a spiral of adoption and you need to actually really find a way to get a lot of a lot of points of use. Yeah. And so one of the interesting things is that if you look at stable coins the the US dollar stable coin is very successful. Every single

other stable coin that is trying to do other currencies correct I would say exotics or like even even euro British pound and so on is really a struggle. And so we actually work with a lot of these companies that are trying to tokenize the Mexican peso, the the euro, the Filipino peso and so on. And the they have not actually gotten yet to the the point of critical mass of liquidity where they have a a way to provide a ton of added value without relying on the banking system. So with for majority of these products, what ends up happening is that for a end user to use a tokenized Mexican peso stable coin, there's still a market maker in the back that has accounts with the likes of Deutsche Bank and then we can actually

access the the FX market and kind of like broke that >> uh with the USD already scape velocity. Correct. You don't need to go to the to that market. It really acquired that that scape velocity. And so that that's been very interesting to see. uh and we think is is really now the time that that's happening. So in the emerging markets especially the value proposition is is super strong. There's a little bit of like an arbitrage there where you know some of these currencies might have a bunch of restrictions uh into them and then when you have a tokenized version you might be able to skip those restrictions. I don't know if you've seen something like that yourself, but >> well that that's why uh I I think what you're put you're posturing positing here is is almost this uh this take that

maybe uh regional stable coins are going to have more uh limitations to adoption. Uh this might be a reason for why governments might try to limit tokenization of their currencies to stop capital flight out of those denominations. But I think actually what what's happening here is that uh and we we had a a conversation about this a little earlier uh yesterday and we learned about the FX market where a lot of these denominations still go through the US dollar. Uh and so uh you know there's examples out there but less liquid uh currencies, you know, they go from currency A into the dollar to go to currency B because there's not enough liquidity to go currency A to currency B. But what what we can do is we can tokenize those and we can go direct

because we have smart contracts, we have these kinds of innovations and so those types of foreign exchange are possible onchain whereas maybe the entire US dollar foreign exchange market is not possible. Um and so the regional stable coins feels like this is something that is going to take place maybe not in the next like six months to a year but two, three, four years. Uh this will continue to accelerate. Uh, another thing that I'm I'm curious about as I'm uh exploring Krock is uh the the token buyback models that you guys have helped to design. You have some token insights here. Uh, and so I'm curious how you anticipate that this trend will accelerate. We call this the revenue meta because crypto projects for a long time. It was very kumbaya. You raise

funds, you do some research, you raise you raise another round. Now you need a real business model to to sustain. And so some of the insights here uh that uh that come from Krock research token holder revenue is accelerating. Uh buybacks and direct distributions had surged over 5x from just a year ago. You also say protocols are prioritizing payouts over rein over reinvestment. So you're actually paying out token holders rather than putting it back into the protocol. Uh I won't read all of these but uh the third one here is that uh many revenue share programs draw from treasuries. uh mo most protocol revenue distributions are still funded by existing reserves rather than cash flow and so they feel the sense of urgency to share value with their token holders

even if it doesn't come from them generating revenue. So I I'm curious maybe you could just shout out what are some of the more sustainable business models that you've seen on chain? What do you think are things that are going to continue to grow and and maybe just give, you know, uh a a lesson of advice uh to projects that could be listening to to start to think more seriously about their business models? >> Yeah, absolutely. I mean, look, I think that right now the the app layer of of DeFi protocols with revenue is very very interesting. I mean, if you look at what what's happening, I think people will be surprised of how profitable these companies are actually. they do generate a lot of cash flow and I I would say at the moment that you know the two like major success categories are the the

money markets protocols uh and then you know exchange value protocols so everything that is exchanges and then money market protocols >> and you know if you look at you know companies like I would say Maple or you know a now Morpho these are these are tremendously healthy business >> you know they they have a very well-managed cost base and and very predictable sticky revenue. Uh they have a lot of network effects where liquidity equals liquidity and therefore the predictability on the revenue is is very high compared to other type of businesses. So that's really really really very very interesting. So when we work with these companies we see that in you know the relationship the way that they manage their businesses in the in the the price action of the token

correct people are starting to be aware of this. I really like the way that you described it actually because it's really true. I think they the something click people are are looking at it fundamentally differently. >> They are they are behaving uh with a lot more fundamentals than than before and and there is decoupling like every things that have fundamentals are are not behaving in tandem with everything else >> which is which is really I mean it's great. >> You see hyperlquid like over the last two weeks I mean obviously that's like the number one example but the whole market's down like 20%. >> Yeah. >> Hype spin at $38 for like two weeks straight.

>> Yeah. No, absolutely correct. Yeah, >> Havachi is fast and private per trading secured by ZK with Celestia underneath. Go to habachi.xyz to start trading today. Trade on anything. Economics, weather, sports, crypto, and more. All on couch.com 24/7 for the world's biggest prediction market. >> Yeet is built for big moments. The most fun you'll ever have with your crypto. Go to yeet.com to yeet into your next game. >> Come on, David. We have a gift for you. Winard. This is our core brand ethos. >> This is our ethos. This is return to fundamentals.

>> Fundamentals, man. You're an OG. >> Okay. Return to fundamentals. >> You know what fundamentals mean to the space? >> What does this mean to you, for key rock, for the entire space? Tell us what you know what this means. >> Return to fundamentals. >> Yes. For you personally, >> oh, I mean, I guess it means it means the the real success and adoption of the industry. Correct. So I think this is this is a shift that can really make the uh you know innovation to to spark again and if you know I think for for a very long time the lack of fundamentals has uh disappointed a lot of people where things that were great didn't behave great. Uh I think the you know the whole RWA narrative really underperformed massively the last seven years.

>> Yeah. and then something clicks and all of a sudden it suddenly clicks and uh but what is funny is that it it almost always doesn't come only from what people are building but it's just a matter of timing you know >> it's just a matter of time you look at all this RWA stuff and I was looking at the chart I mean so you you're looking at at cur research so cur research is is is very active you know we publish really in-depth analysis of of a bunch of things and you look at the RWA piece and and it it's quite interesting that it was basically flat flat flat and all of a sudden boom it starts going and the TV goes up and you wonder what what happened did like the RWA issues become better.

>> Nah, did people care more about the RWAS? Maybe. But I don't think so either. >> I I think it was the money market protocols. >> Yeah, it was just that that it was tether. >> Oh, you're saying that it's this adjacent category that does really really well and then it brings a lot of attention and necessity for this other category. >> Yeah. And then all of a sudden like it transforms an intrusion value into the fundamental. Correct. And so like you you tokenize on RWA >> but is is it better than the non tokenized version? Probably not. All of a sudden then um vault curation comes into the market and people can come and say hey I'm going to accept this RWS collateral to borrow. And then this thing goes like >> Yeah. Yeah. Yeah. Yeah. And this is

something that we've been trying we've I've been thinking about a lot. we've been talking a lot about it's the idea we know stable coins are going to grow. What >> you know the growth of the stable coin category. >> What is the the adjacent category that will benefit the most as a result? We know this thing is going to is going to grow. But to your point, money markets grew and then as a result RWA got a lot more attention. We know stable coins are going to grow. What is that next category that we think is going to benefit from the growth of stable coins? >> That's the trade. >> That's the trade. And I mean I think you know a lot of people are speculating that you know payments is the most evident next one uh FX onchain FX as you know like the really starting to have

like like different stable coins against each other as an as an onchain FX market. Um I think what's also going to be very interesting is I would say like country risk management which is which is the idea forwards. So if you look at if you look at majority of of of markets outside of the US there's a very clear yield arbitrage like very very clear and if we can if stable coins can also become a tool for you to kind of like fix rates between different different uh you know FX currencies at scale uh in in one click all of a sudden you can access yield from anywhere and you know just pay the delta between the dollar yield like if you look at for example the euro I mean there's almost no yield in euro

which is crazy correct because in fact there's so much yield in dollar you could just like take that yield put it in euro but people don't do it because it's it's very hard to kind of like manage the FX risk nobody wants to take the risk like this year for example the euro at the beginning of the year was one to1 to the dollar now it's like 115 116 so if you would have as a European you put all your money into like some nice on China strategy you got 15% yield but then lost 15% in FX, correct? >> And so I think that could be all of >> smart contract risk and all this.

>> And so all these stable coins come in and then all of a sudden >> what happens if every other single country in the world also gets access to yield and all of a sudden Europe has access to yield, Mexico has access to yield. Boom. And I don't know what's going to be correct, but this it's interesting to think about the fact that when that happens, how does it affect society and and the economies of all these countries, which I think is what's coming next. >> Yeah. Well, David, we're we're creating a Spotify playlist. >> Okay. of all of songs from our guests and we we'd like to have you add a song >> dev connect Spotify >> trailer gift for you as well. Um but first what is your you know what's your artist of choice? What's your song?

>> What kind of music you been listening to? >> I mean I I um company's based in Belgium. >> So I'll take Lost Frequencies. >> Los Frequencies. >> Lost Frequencies. >> Okay. >> Yeah. >> Okay. >> Favorite song by them? >> Well, they're all great honestly. >> They're all good. They're all great. Fantastic. What we got? >> We're going to go with Black Friday. That's great. >> That's a good one. >> There you go. >> All right. And then we got a gift from the Lambda team for you. >> This one's from Lambda Class. You know, we're office helped connect us. This is for you. This is Fed's grapes. >> This is their wine. >> Malach wine from straight from Fed's Orchard. That one is >> from Fed.

>> I'm very tired today because yesterday he made me drink one of these. >> That one's that one's for you for maybe tomorrow. This one is for the Kro team back in Belgium. >> Oh, that's great. That's great. Thank you. I want you to drink that, man. >> Absolutely. And uh >> man, thank you for joining us. It's been a journey for us today. Thank you guys that we got you in. >> It was a pleasure to meet you in person. >> Absolutely. >> Thank you guys. >> Thanks for coming. >> Thank you. >> We'll see you next time. Don't hear us.