On Ep. 65 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Sandy Kaul, EVP and Head of Innovation, Franklin Templeton to discuss OnePay's integration of crypto, Franklin Templeton's early tokenization platform and more!
On Ep. 65 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Sandy Kaul, EVP and Head of Innovation, Franklin Templeton to discuss OnePay's integration of crypto, Franklin Templeton's early tokenization platform and more!
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Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
Tokenized is also presented by Fireblocks
With over $100 billion in monthly stablecoin volume, Fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold, and manage stablecoins. And it’s all done securely, at scale, and with built-in compliance. Learn more at fireblocks.com
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Speaker 1 0:00
We run our entire infrastructure, not just on one cloud based provider, but we have multiple redundancies. We are actually constantly running three real time copies of our records at all times, second to second, 24 hours a day, seven days a week. So we're really keeping three completely separate operating environments in sync and running them constantly. So it's a big technical challenge when you're really trying to do this at an enterprise scale.
Sy Taylor 0:39
Welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I am your host for today, author of FinTech brain food and head of market dev over at tempo and joining me once again, back from a good holiday break, is the one and only. Kai Sheffield, how you doing? My friend? You feeling refreshed and ready to go?
Cuy Sheffield 0:59
It's great to be back. It was a great break, but I am excited for 2026 it is going to be a fun and fascinating year. We've got amazing guests to kick off the year, so let's get it. Tai, you're
Sy Taylor 1:09
exactly right, Kai and to kick off 2026 we are joined by incredible guests, Sandy Cole, who is EVP and head of innovation at Franklin Templeton. Welcome to the show. Thank you so much for being here.
Speaker 1 1:21
Thank you guys, so much for having me excited to be here today and kick off the year with you.
Sy Taylor 1:26
Let's kick it off right. And just as we always do, I need to remind everybody that views and opinions of contributors today are their own and might not reflect those of the companies they represent. And please always, always do your own research. Don't take anything we say is tax, legal or financial advice. All right, the first story, Kai, I don't know if you saw this one. I couldn't escape it. The FinTech company, one pay, who is backed by Walmart, have gone live with crypto, so you don't pay for your groceries with Bitcoin. With this it's a NEO bank like app with about 5 million users. You can buy crypto in the app, you can sell it, and those proceeds when you sell them hit your one pay cash balance, which you then can spend as dollars at the register. The point of sale never sees crypto. It sees USD. So this is really quite interesting move here, both with my FinTech hat on and with my sort of institutional adoption of crypto hat on. But Kai, was there anything that you saw from this contextually, that you thought was interesting when you saw the story?
Cuy Sheffield 2:32
Not at all surprising. I think this is a trend that we're seeing of more Neo banks that are looking to become financial super apps and crypto trading, buy, sell and hold is one of those features and capabilities that fits as part of the broader strategy. I think one of the biggest takeaways I see is you can have an announcement like this, lead to a headline of Walmart enabling crypto payments, and then you like, peel it back. You're like, wait, okay, so one pay, which is existing, like Super App that Walmart is kind of associated with, is doing buy, sell and hold, but there's no notion of actually paying directly, because that doesn't really solve a real problem for them. And so as much as people are excited about Bitcoin and have talked about the Lightning Network, if you would have told them, oh, Walmart's like, interacting with Bitcoin and lightning. There were people who thought that that would be from a payment standpoint, but it seems more and more that what the market is telling us is that Bitcoin is an asset that apps are integrating to buy, sell and hold, and they're not necessarily looking to enable it to be spent. I would say cash app and block is the exception. They're going full steam ahead, trying to enable Bitcoin to be spent at the point of sale. I think they're one of the only data points that we've seen of a very legitimate payment company that's like really, really pushing for that. Everyone else is focusing on the buy, sell and hold. So that was my biggest takeaway.
Sy Taylor 3:55
Yeah, and cash app as well have announced support for stable coins, and they're going to launch their own as well. So even there, it was showing some flexibility. Sandi, your thoughts with headlines like this and kind of bigger institutions adopting Bitcoin and crypto. I know it's something that Franklin Templeton has been really a bit of a pioneer in.
Speaker 1 4:12
Yeah, I think that these are really illustrative of how people's financial life is becoming all one, right? It used to be I would have a banking account. I would have a separate investing account. I might have a separate retirement account. I might do some betting on the side, on things that I was interested in. And these were all different lanes in my life, and they are all coming together. This idea of the Super App is really unfolding in front of us, but I do think that this is a healthy way of thinking about the world, right? If we're going to transition to a wallet based ecosystem and away from all of the different accounts that we operate on today, this is a necessary step, right? I am going to aggregate more and more of my financial life in my wallet. The app that allows me to access and optimally use those assets in the wallet is going to become where I want to live my life. It's almost like Amazon was shopping, right? The easier it is to shop for everything on Amazon, the more I'm on Amazon. So I do think this is the direction of travel for the world. I think that a lot of traditional wealth managers have not yet woken up to the threat that this poses to their traditional business. But I do think that a lot of the banks at least, are starting to wake up to the threat that stable coins provide to their business. So I think that this will probably be the year that we see the great wealth management awakening to the threats that this provides.
Sy Taylor 5:45
Interesting that the distribution side, as you say, the app side, is re bundling all of these different products. You can talk about Robin Hood, you could talk about Coinbase. You could talk about many others that have started to go that route and now now one pay in your own business, what are you having to do to prepare for that future in the wealth management sector? Like, how do you get ready for wallets and tokens and all that sort of stuff?
Speaker 1 6:09
Well, this was something we saw coming many years ago, right? I mean, we actually designed our own KYC AML, which is, know, your customer, anti money laundering. We designed our own KYC AML compliant wallet, working with the SEC, we've gotten a patent on that wallet, and we built an entire tokenization platform that can issue tokens, trade tokens, registered fund tokens, and we actually launched our first tokenized fund on that platform, all the way back in April of 2021, so we've been operating in this world for quite a while. We now have funds that trade all over the world that we administer via this wallet based ecosystem. And we're going to be launching many more products into this wallet based domain over the coming year to 18 months as the market is finally catching up with the benefits that these wallets provide. So Franklin Templeton has been ahead in this regard. What we're finding now is we're needing to do a lot of education. We're having to do a lot of explaining, and we're needing to really help people understand why these technologies offer a much better opportunity. Right in financial services, we've had wrappers for decades. Right mutual fund wrappers, ETF wrappers, separately managed account wrappers, and those wrappers have all each offered some incremental improvement to how you can trade financial instruments, but tokenization is a step change beyond that, right? Because they are programmable. For the first time, we really have smart rappers, and putting a smart rapper into a digital wallet on a blockchain enables things that have never been possible in the past, and I think that's what we're starting to see many traditional financial participants realize and they're realizing that, oh my I need to actually rethink my whole business as a result of this.
Cuy Sheffield 8:10
It seems like you all are leading the way on tokenized securities, tokenized money market funds and the wallet infrastructure that you need for those types of products. Do you think about it as that same infrastructure will be general purpose to support any asset, including crypto assets, including stable coins, and that it'll all live together in the same place. And maybe I'm behind on the headlines, but like today, you offer tokenized money market funds. Should we expect that it's any asset on chain could then live right next to them in the same wallet, is that the general direction that you're going
Speaker 1 8:46
100% Kai, that's exactly the vision we have for the future. First off, we are an asset manager. Franklin Templeton has been around for 80 years, and we manage almost 1.7 trillion in assets under management. I would see all the different types of products we provide across that $1.7 trillion platform eventually moving into these channels and being available in a wallet, just like we have it available in a fund today. But in addition, that's just stage one. There are so many assets today that are investable, but they're very difficult to trade. Right? You think about intellectual property rights, you think about art, you think about farmland, you think about sports teams, you think about movies. Right? There's any number of assets that people would love to be able to invest in but it's hard to invest as a small investor. It's hard to get small shares of those investments and be able to create liquidity around them. And I think all those types of investments, too, are going to be moving into tokenized wrappers. They will become part of investment portfolios. And those investment. Will sit side by side with your stable coins, with your Bitcoin, with your other tokens in your wallet, and that becomes my modern portfolio, right? My portfolio today is typically just equities and bonds. I think my modern portfolio has dozens of different kinds of assets in it.
Sy Taylor 10:18
You know, the historically, the 6040, portfolio was the good advice you start your career on, and that's what you're supposed to do. But for this generation, that's not necessarily returning something when asset prices are so high, and so no surprise that some of them have turned to meme coins and whatever alternative they have available, a trend some people call financial nihilism. What I find fascinating about what you're saying is there's also other alternative assets that do have better yield profiles, those alternative asset classes, like IP, like art, like wine, like many others that professional investors have been using for some time to give a higher return profile and as part of a balanced portfolio. Why don't we wrap those? But Well, the reason we didn't wrap them is they were very expensive. It's very costly. Taking a fund meant that the hurdle rate you have to invest, you know, 1 million to $5 million to walk through the door. And most consumers don't have that. But tokens easily fractionize, and they their wallet first, and they enable you to do all of that. So it's fascinating that you've already got started. You already live. You're already in production, and you're already thinking kind of that way down this next story, I would love your thoughts on as well. I don't know if you saw it that fire blocks have acquired a company called tray finance, so trace finance for $130 million now these guys are an enterprise platform for financial data reporting around digital assets, and they build a lot of compliance capabilities for digital asset corporations by turning blockchain activity into structured, audit ready data. And I imagine this is a challenge you might have had to solve yourselves internally, but this is further consolidation in the space. It's the second acquisition after acquiring dynamic late last year, and we had both fire blocks and dynamic on the show back then, talk to me about some of the work you had to do internally to be a regulated financial institution and deal with all of your obligations and still be in the on chain world.
Speaker 1 12:17
Yeah, this has been an ever expanding learning experience is what we find that you've solved one set of problems and you open up an entirely new set of realizations and challenges. But let me rewind to some of our earlier days in building out our infrastructure, because this data issue is a very important one, right? We realized very early on that if we were going to be utilizing the blockchain rails as a ledger, particularly for holding records of regulated fund shares that we needed to be able to really access all the data of all the blockchains that we utilized at every moment in Time to ensure that we actually had an accurate record of what those shareholders positions looked like. And so we began actually running our own node operations. And we really do believe that running your own node on these networks is an important operational due diligence procedure that allows you to really be a part of the network and really be engaging with the network moment to moment. And being able to get at that data and have real time copies of that data second to second is critical for how we have to run the business. So I do think that being able to ingest that data, we had to do a lot of that structuring of the data, that importing and cleansing of the data, that integration of the data into our other systems ourselves. And it sounds like what fireblocks is doing is trying to create a quicker route to market for others that are going to be buying into those services. And then the other thing we realized is that once you're collecting all of that data and you're relying on that data, you then need to start making sure that you have lots of redundancy in that data. And so we run our entire infrastructure, not just on one cloud based provider, but we have multiple redundancies. We are actually constantly running three real time copies of our records at all times, second to second, 24 hours a day, seven days a week. So we're really keeping three completely separate operating environments in sync and running them constantly. So it's a big technical challenge when you're really trying to do this at an enterprise scale. Wow.
Cuy Sheffield 14:40
That alone, we need to clip that. And that is a playbook for financial institutions that a lot of people don't realize at this stage, like, if you're serious about building on chain products, what Sandy just talked through is exactly the mindset that you need to have, and I think it's part of the shift of we've seen block. Chain, stable coin, tokenization initiatives be kind of in the corner of an innovation center. And when it's there, it's easy to outsource. And say, Okay, we're gonna onboard one provider and just do this through the cloud and like, we'll just trust them. There's gonna be no backup, no redundancy. I think where we're heading in 2026 is the real value. It's going to be, who are the financial institutions who can actually get closer to the metal and say, how do we build and design a stack that is not just going to, like, get us to an innovation POC, but is going to get us to, like, trillions of dollars of assets on chain, and if you're issuing and monitoring trillions of dollars of assets on chain, the idea of, like, outsourcing a critical component of the data, operations, of what's happening with those things to like, one company a fraction the size of you is like, very, very hard to do. So I have a ton of respect for that mindset, and we think about that a lot as how do you get closer to the metal and build a foundation that can scale over the long term, and I think that that's the expectation that customers of large financial institutions have. But back to the story on fireblocks. I think that's a really smart move, and it also speaks to the shift of again, you've had products like fireblocks that, at times, have been sold to product and innovation teams where you're either talking to a developer or you're talking to product manager. It seems like this is a shift towards saying maybe the customer is actually the CFO, maybe it's the controller, maybe it's the auditor. And so again, as you get to these, like bigger deployments, if you can be able to have a stack, that's not just here's how we're going to manage your keys, but here's how it connects to your ERP, here's how you have an auditing trail, here's how you have all of those other components. I think that's going to be really important for large enterprises. And the CFOs are going to have a real impact on the buying decisions, and so being able to integrate that into things like key management, really smart move by Firefox.
Sy Taylor 16:57
Completely agree. It feels like one logical product extension into net new revenue. But two, I almost saw it as a signal of like, oh, this is one of those little things that you would only expect to see if they are getting scale and velocity and volume coming through their platform, people will be asking for that if they're pushing into production. They don't ask for that if they're not pushing into production, right? If it is just staying in the innovation theater division, and I think stable coins have been a big driver of that. But as Sandy was sharing, I think it's going to go beyond that really, really quite quickly. And I just wanted to echo your point, Kai, before we move on, which is, I've had four conversations with four different banks in the last two days, and so many of them start up. We just need to figure out how to be an off ramp. And can you teach us how to do that? And then they get into, oh, right, that sounds like a lot of third parties. I'd need to be able to move quickly. Can I go directly down to the metal, and then you coach them through how to do that? And then there's sort of like a different roadmap for everybody of how they get to that, but it's kind of the thing I think a lot of the institutions are going to want to do is they're going to want to figure out how they do what Sandy's already done. So Sandy, you could probably build a little cottage industry and going around the banks and financial institutions and talking to all of the hard run lessons she had there for sure, just before we move to our next story, I'm going to take a quick pause here while we hear from our sponsors. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat bat tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is sponsored by stripe. Here's the thing, selling digital goods globally is still far from easy. Many of the people around the world that want your product don't have an easy way to pay you. They simply don't have access to cards or a bank account. Stable coin payments change this. They're the first truly global payment method that you can use from anywhere. That's why, for any business with global growth ambitions, accepting stable coin payments is table stakes with stripe. Doing so is as easy as flipping a switch from big names like Shopify to fast growing names like shade form businesses everywhere trust stripe to accept stable coin payments from everyone everywhere. See what's possible@stripe.com forward slash crypto tokenized is also sponsored by fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses, from visa to WorldPay to bridge to Revolut. With over $100 billion in monthly stablecoin volume, fireblocks powers stablecoin strategies at scale with. Infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold and manage stable coins. It's all done securely at scale with secure built in compliance with fire blocks. You get complete control to build your own stable coin orchestration layer, create payment accounts, manage liquidity and access on and off ramps in over 60 currencies makes it easier for you to build and scale and expand your business globally. Learn more@fireblocks.com All right. Thank you so much to our sponsors. The next story, again I saw, came from a lot of places, but Barclays, my Alamosa has invested in stable coin settlement firm ubix. Of course, we've had Tony McLaughlin, the founder of ubix, on the show a couple of times. This is Barclay's first stable coin specific infrastructure and investment. And of course, if you're not familiar with ubix, they are a settlement business focused on specifically clearing many stable coins across many blockchain networks with many off ramps. So classic clearing bank and no surprise, Tony ran clearing at City as his last job. So he knows a little bit about clearing so any chain, any token, one single settlement layer. So I found this one fascinating, Kai. We've had Tony on the show before. The stable coin conversation past 12 months has been very us focused, but quietly, the European banks have also been doing a lot. We've not seen a lot out of the UK banks necessarily, but couple of big stories this week coming out of the UK. What are your thoughts on these investments. Do they signal more? And what are you hearing in your network from banks looking to solve this many to many problem? Yeah.
Cuy Sheffield 21:48
So my understanding is that Barclays has tended to be one of the more conservative banks in the space. You don't see them kind of rushing into a lot of different crypto and blockchain type of initiatives. And so I think it's a good signal to say that even the largest, most conservative banks are recognizing the value of stable coins and are taking meaningful steps. And the investment in ubix, I think is a start to that. Think it's a lot of like, shout out to Tony, and like the network and credibility that Tony has built over the years, and if you can kind of trace the past of like he wrote the paper at Citi on unregulated liability network that then led to working groups in rln that then led to the BIS and then, and so he's been able to build this really impressive ecosystem of leaders inside banks that are Really looking at ambitious upgrades to the payments and financial system, and so I've been excited to see him with ubix now, and being able to have some of the banks that he worked closely with on rln and these working groups kind of following and engaging and investing. I think that makes a lot of sense, and everyone should go back and listen to the episode that we did with Tony. I think his analogy around stable coins as travelers checks is like one of the most interesting ways to think about the space, and it's something that if you're a bank, what I've been saying lately is it's really hard to predict every use case that a customer might want to do with a stable coin or tokenized asset, just like it's just really hard to know, but it's likely that some of your customers will end up with some of these assets somehow, like, they'll just, like, come across them as they're bored out in the wild. And so I think a starting point is, if you assume that some of your customers have some of these stable coins, shouldn't you want them to bring those stable coins to you and just deposit those into the bank to grow your deposits. And then you need the mechanism to do the clearing and settlement, to receive the stable coin, redeem it for Fiat, and then have Fiat show up at the bank. As I think it's just like a very natural starting point, like you don't have to predict the future. You just have to say, some percentage of my customers are going to have these if they have them, let them bring them to me. And I think ubix has, like, a really strong positioning on how to do that. So shout out to Tony.
Sy Taylor 24:04
Yeah, I want to echo that, because again, to the point I was just making, how many banks are now trying to figure out how they become an off ramp? And Tony's like, yeah. And then when you become an off ramp, which stable coin Are you accepting on which network and or which third parties are you working with? Actually, I'll just hide all of that for you, and I'll clear it for you, and then you can take it from there. Sandi, I'm interested, from your perspective, in the support you're seeing from the banking sector, more broadly, and stable coin settlement, and where you see the opportunity for that versus other assets in your business and what you've been doing in that space. Yeah.
Speaker 1 24:39
So first of all, I just want to echo your guys' shout outs to Tony. He was actually the person who taught me about stable coins. He and I worked together at city where I was doing a lot of thought leadership around tokenization, as he was doing his work around the regulated liability network. So to me, Tony is one of the absolute greatest thinkers in the space, and I have watched with great. Enthusiasm, as he's built out. Ubik, I do think that the whole conversation with banks and stable coins is pretty fraught, right? If stable coins are really doing what stable coins are meant to be doing, then the banks are going to be losing those deposits, right? And you see a lot of banks already taking very defensive postures in trying to offer tokenized deposits, as opposed to really getting behind and offering stable coins. Because a stable coin, once it sits in my wallet, can recirculate wherever I would like to recirculate it, whereas a tokenized deposit has to come back to the bank. And I think that banks are hoping that by offering these tokenized deposits, they can create an instrument that siphons off some of these cross border flows from stable coins, and kind of reduces the outflows of deposits that they're seeing. But to the point Kai made, inevitably, you're getting stable coins both into and you're getting funds out of the bank into stable coins. So being able to be interoperable across the entire set of stable coins that are emerging is critical. And I think that stable coins are going to come from more sources where people aren't going to have a choice, right? You know, a headline that was recently out for us is that we have helped the state of Wyoming launch their own first stable coin, and we are doing the reserve management for the state of Wyoming. And what's interesting about that is that the state of Wyoming is going to be making statewide payments in their own stable coin. So if I am a resident in the state of Wyoming, and I'm getting paid food benefits, I'm getting paid a tax refund, I'm getting paid any kind of statewide service. I'm going to receive these Wyoming stable coins. And I think that this is going to set a model that a lot of other organizations are going to want to follow. So I do think that we are just at the beginnings of this proliferation of stable coins and different stable coin types for different use cases, and the banks are going to inevitably have to be able to interoperate across this whole space, or they risk really losing those deposits permanently, because once it's sitting in my wallet and I have any kind of self custody arrangement, I can start moving those stable coins around at will. So I do think that a lot of banks are still trying to wrap their heads around what their strategy should be here. I think they have both a nearer term strategy to kind of prolong any defensiveness that they need to think about, and then they probably also have longer term strategies where they need to rethink where some of their own differentiation comes from. So I think it's a tough situation for banks, but I do think being able to interoperate is going to be critical for all players, banks included,
Sy Taylor 27:56
yeah, and that interoperability is really key, because there's a number of initiatives. There's swift there's project agora, there's the clearing house, there's countless kivalis in Europe. There's there's countless consortia popping up. And then there's also the internal tokenized deposits. There's Connexus, and there's city token services, and, and, and, and it's not clear to me that all of these deposits use the same token standard. It's not clear to me that these things could technically interoperate, that if I sent that to a market maker, it would exchange evenly and on what network would it happen? None of this is really figured out yet, and so having somebody going, I know it's a mess, I'll just clear it, whatever it is. It's not a vitamin that's a pain killer like that solves a problem that I think we're inevitably heading towards. Kai, I sort of asked you the question about client demand, because I suspect that's the case that you're hearing as well. A lot of it's coming from some crypto natives, but also just corporations that operate in Long Tail markets for cross border have stable coins and they just want to get in and out of their regular bank account like they don't want it to be in a different place. Do you think that banks, as people that ultimately do listen to their biggest clients, are going to acquiesce, and we're going to start to see them off ramping stable coins in some of the G sibs? Do you know of any already doing that at a big scale for their corporates?
Cuy Sheffield 29:16
I'm not aware of anyone that is doing that today at any scale of any large bank, I think before the holidays, we announced our partnerships with cross river and lead bank, and how we're working with them on stable coin settlement. And so arguably, that's one of the first examples of banks that are actually sending and receiving, holding, touching stable coins, not just tokenized deposits. So I think that's a pretty big deal, and makes sense that those are the early movers, and they serve the most sophisticated fintechs and crypto native companies. And so their clients were clearly asking them to say, hey, we want to be able to send you stable coins, and so they're building the capabilities. And cross river Luca talks about how they were able to integrate that with their core. Ledger that they built in house, and so you can send a stable coin and get Fiat back. And I think that that makes a ton of sense. I think the big question will be from the larger banks, who ends up being the early movers there? And again, as Sandy mentioned, a lot of them are very focused on tokenized deposits and making significant moves on their own products. We have not really seen many lean in publicly today and say we want to accept all your stable coins. And I think that there's an opportunity that the first major banks that say we're open for business send us a stable coin and we'll accept it, and your account will immediately show up as a deposit. I think that that's an attractive service for a growing demographic of consumers and businesses that are coming across these but there's a bunch of questions around I think the infrastructure to do that doesn't exist at scale yet. And so I love what Tony's building with ubix, but it's still early stage. And so how do you actually manage acceptance of a stable coin across multiple blockchains, and the ability to clear it and send it back to the issuer and redeem it for Fiat. And are you going to immediately credit the customer's account even before you've been able to redeem the stablecoin? What happens if you can't redeem the stablecoin? Like there are all these things that you have to think through, but I think in 2026 for sure, the FinTech banks are really ramping up, and then I think you'll see large banks start to dip their toes in but there is this interesting strategic decision around you could either say, we're gonna go all in tokenized deposits and try and convince the world tokenized deposits are better in stable coins and you don't need them. Or you could say, what I'm gonna try tokenized deposit. We're just gonna, like, say, stable coins are gonna happen. We're gonna try and meet stable coins where they are, or to meet somewhere in the middle, and, like, have our own tokenized deposit and accept stable coins and, like, figure out how they interoperate with each other. I tend to think that middle lane is probably a better risk adjusted bet than going to the extreme one or the other, but I think that'll be interesting to see.
Sy Taylor 32:00
You can almost see, I think, the Overton Window shifting in financial institutions in Jamie Diamond's speeches on the topic. So if you wind the clock back, 1218, months ago, and certainly 12, six months ago, it was we believe deposit tokens jpmd is superior because it offers yield like, why wouldn't you want this? We we think it'll out compete stable coins, especially when the genius act first passed, that has mellowed somewhat since then. And I think the reality of stable coin adoption and also bankers, for better or worse, they do listen to their clients, especially their biggest clients, when there's demand, they will service it and they will do what their clients need them to do. That's the nature of especially the big banks. So I think it's gonna be fascinating to watch. I want to move to the next story, because it's bank related as well. And this is from Lloyds Bank, the other large UK high street bank. They completed the first UK gilt purchase. So our equivalent of treasuries using tokenized deposits. This was done with the help of our tracks, a UK company, and of course, Canton Friends of the show and Lloyds issued its tokenized deposits onto the Canton network and their corporate markets. Division used those tokenized deposits to buy a gilt from R tracks, who was the broker of those gilts. And then archaics moved the underlying fund back to its regular Lloyds account. Sandi, what do you think of this use case in particular, because I know that sort of almost reaching into the other side of Franklin Templeton like it's classic business. Any thoughts, as you saw this story pop up?
Speaker 1 33:31
Yeah, this is just the very tip of the iceberg. I really believe that you're going to see more and more and more transactions being done completely on chain for underlying assets, not just funds. And I think that the forms of payment that people are going to be using is going to be expanding pretty dramatically. We actually, in our thought leadership, kind of refer to it as we're moving into a high tech barter society. Because not only can I use a tokenized deposit, I can use a stable coin, but why wouldn't I be able to use tokenized gold? Why wouldn't I be able to use a cryptocurrency, right if I'm looking to buy an asset, I should be able to buy it with any form of payment that is transparently valued and exchangeable, and be able to do that instantly on chain. And so I think this is really, you know, a strong signal that we are going to see the entire financial market infrastructure shift onto new rails a lot faster than people anticipate. Right? The benefits that are gained through this are going to be seen instantly, right? We already at Franklin Templeton can allow clients to subscribe and redeem from our money market funds using stable coins. We're going to be able to allow them to do that using tokenized deposits. We're going to be able to allow them, over time, to do that using potentially other forms of payment. And I think that this ability. Go seamlessly between these different instruments is going to be, I think, foundational to how the new ecosystem works. And to go back to the conversation we were just having, the banks are going to struggle here, because their systems have not been built to operate in real time. 24/7, like this. They need to reconcile back using batch processes. And so if I accept a stable coin as payment, I can give you that stable coin instantly, if you are on chain, but then to get the funds that that stable coin represents back into your bank account, even if the transaction happens on chain right away, the actual funds may not hit your bank account for some time, and I think that this is going to start to be seen increasingly as an unacceptable drag, an unacceptable drag on your own potential money and the way that what you can earn on it, and that is going to push people to transform a lot faster, I think, than many anticipate at This time,
Cuy Sheffield 36:00
Sandy, I have a question for you that I've been thinking about over break. I'm hoping you can help me answer. I'm gonna take, like, a long winded way to get there, so bear with me. But I think what you're saying really resonates is the amount of working capital that an end customer needs to have over time should decrease down to near zero. Like, if you think about like, what does an average customer have in their checking account? How much money do they need to have? It's partially a function of how slow it is to be able to take any other type of asset that's not cash and get it into cash. Because my preference would be to keep 100% of my assets and liquid net worth in assets that earn some return, not in cash or deposits on a checking account that are earning barely nothing, but I have to keep some deposits there because of the fact that I have bills that come in and I can't immediately convert an equity that I have to pay a bill that's outgoing. So it makes sense to me that that working capital comes down over time as every asset becomes more liquid. Now what you said around, okay, you could have all these different types of assets that are tokenized, and then you could actually spend, maybe you're spending a fractional share. You're spending a tokenized money market. That seems kind of like a tax nightmare, of like actually spending the assets themselves. But the thing that makes a ton of sense to me is, why can't I just get a credit line against my entire portfolio that's cross collateralized against all my assets? So if all my assets are on chain and I have money, market funds, equities, crypto, whatever it is, shouldn't at any point of time, I could just open a credit line and be able to borrow against those assets and then be able to spend and that would be a really, really powerful product. What are the barriers to that happening? And frankly, why doesn't that exist today? Why can't I go in my Robin Hood account and say I would like to get a credit line of 10% of my assets in Robin Hood that I could immediately spend against. Does tokenization solve that? I don't even understand why. It's not happening today with traditional equities outside of these, like prime broker, high net worth, like one time type of loans, yeah.
Speaker 1 38:19
I mean, in a sense, it's like if we can offer buy now, pay later at a point of transaction checkout, why can't I be looking at my entire wallet based set of holdings as a collateral base that I could be borrowing against? And it wouldn't even have to be a credit line. It could even be a flash loan for the bill you have to pay in that moment, right? Because you have all of that collateral sitting in your account, and the only hesitation is going to be, how long does it take the cash to actually get credited to me? And so I do think that these will become services. I think that if we get the clarity Act, or if we get some more market structure enacted and more global regulations, I know they're very actively working right now in the UK, and they have the Mika rules that are coming in. I think this will become easier, and these are going to be new services that get offered regularly. And I think this is where there is such an interesting, super interesting convergence of agentive AI and blockchain coming together. Because really what I need is I need a logic layer that sits over my smart contracts that can actually start to algorithmically assess all the assets I have in my wallet, figure out my optimal form of payment, or figure out my optimal collateral, and automatically make a determination and create the contract to move that and I think that's what will enable guy that vision that you laid out there, which is every asset should be almost instantly transferable into either collateral or cash. And then if that's the case, I need smart algorithms that are going to work at that speed that are really odd. Optimizing my options on how am I going to actually manage my overall pool of wealth? And this is why I think to go back to what we were talking about earlier. This idea that I have different pools or different lanes that I manage my financial life in become untenable, right? Everything has to be together so that I am constantly optimizing all of my decision making and all of my options to make sure that I'm earning the most potential I can with every asset that I have in my portfolio. And we really believe that that is the way that the future financial ecosystem is going
Sy Taylor 40:38
to operate. Yeah, like the vision is achievable if everything's inside of a wallet, if everything's on chain and inside of a wallet, we just need to kind of get there. And there's a lot of systems and sunk cost and legacy providers where most of the capital is that are not there yet. But I like this idea, Kai, when you mentioned earlier that Luca at Cross River was able to do the stable coin integration directly to their core, but they self built their core, and it's a 24/7, core. They're not reliant on that batch processing in order to catch up. So I think it's kind of fascinating that Lloyds Bank here is doing something meaningful, that they're doing something useful, that clients could get some value from. But it is one transaction. I'll be interested to see if this becomes many more transactions thereafter, and would this buffer at scale if there is then that giant gap between what the on chain record says and what the system of record inside the bank says, and I would love it Sandy if this became the thing that forced everybody to upgrade those internal systems over time, because that probably would unlock a massive amount of GDP. People don't realize how much working capital is tied up in dealing with just the delays in the banking system. Like what a gift to the world unlocking working capital would be. How many jobs will we create? How much human flourishing would come off of the back of that? But I want to draw your attention Kai briefly to the Canton piece as well, because there's been a lot of discourse on x and elsewhere, from some, some, one of the more crypto natives and true believers that Canton is not a real blockchain. It's not really decentralized. You know, most of what they're doing is with Broadridge on the RWA side, and I get the sense that there's a bit of a misunderstanding of how cantons supposed to work in that it's like the Swiss cantons, like, yes, there are almost like the avalanche model of like, there's the core l1 and then there's the sub l ones that you can build on the sub chains that they have. And so you could have something really, really big, but those are designed to kind of talk to each other. Your thoughts on the Canton portion of this? Yeah.
Cuy Sheffield 42:40
So first shout out to Yuval and Eric. These guys have been building for a decade. Look. So it's, it's not like, it's like an overnight thing that they launched something like now you see all these announcements. It's like they've had a long term vision that they've been building towards with a different approach than most of the industry has taken. And I think that they're now starting to get more and more traction and momentum. I think arguably, Canton was one of the biggest stories over the past month in terms of like, where is there real activity and interest in more announcements, more partnerships and integrations coming. Canton coin, I think, is up like 80% in the past month. It was one of the best performing crypto assets of the past month, which people wouldn't normally expect. I think that's part of what causes people say, like, wait a minute, what's going on here? It's not like a five or $6 billion valuation. And so I don't understand all of the details enough around the like architecture and the mechanics of the network. I will say that it is pretty different than existing blockchains, and like by design, I think they've taken approach that privacy is just a critical default feature that has to exist. And I think that that was a good bet, and it seems today that institutions are validating that, that they're able to credibly go and say, We are a network that is operating on chain use cases in a fully private way that's live at scale. And I don't know that many other networks that could say that. And so I'm excited to see how tempo privacy solution plays out. I'm excited to see what arc does. I'm excited to see what Solana does. So everyone else is like waking up to privacy is important, and we have to build it. But nobody else is really able to say we have a live product and network that has privacy preserving capabilities that you can use today, and so I think that that's a pretty valuable thing for them to be able to go to market with. And my understanding of the way that works is it is kind of this subnet type of structure where you have individual applications that an institution can build that has full privacy. So it's kind of their own internal ledger. They could do any transactions that they want there that are like on us, intra bank transactions. But then there's this concept of the global synchronizer, where you could have interoperable. Between these different apps. Now, what's not clear to me is how much of that interoperability exists at scale right now, it seems like most of the early use cases are individual apps. I think the Broadridge one, I could be wrong, but like, I think that's like an individual app, but there is a growing ecosystem of some really impressive infrastructure providers that are enabling some of the nodes and capabilities for it, and there's just a growing list of institutions that are finding interesting use cases that they want to build on. So I think it has a lot of momentum right now and is pretty differentiated in the overall blockchain market for many capital market use cases. But Sandy, what do you think like you've been following chains for a while. What's What's your Canton take?
Speaker 1 45:43
Yeah, it's super interesting. I mean, we have deployed the infrastructure that we've built across 10 different public blockchains, and Canton is the only private blockchain that we have also deployed across. So we do run on the Canton network. We do run on the main Canton network, but we have done it for exactly the reason that you called out Kai, which is we have clients who, because of their trading strategies, they want to be able to have privacy. They don't even want a wallet address available so that people can see kind of what's moving in and out of the wallet. They want that complete privacy because they feel like not having that, even if it's only pseudo anonymous, really erodes their trading edge. And so I do think there's going to be very specific use cases that are going to always require privacy, and I think you're going to need to be able to offer a range of solutions. I mean, one of the reasons we've chosen to operate across so many different blockchains is we do find that there are a lot of different use cases, right? That we have a pretty complex set of order algorithms that really determine which blockchain we use for what types of orders, because we find that the economics of each chain are different, the characteristics of each chain are different. And so, you know people who always go back and say, Oh, well, we're going to be in a one chain. One chain world, or we're going to be in a one chain compatible world. I do think you're going to have to be able to interoperate across chains, but I still think that those chains serve unique functions in many cases. And I think Canton is interesting, and it is getting traction with a lot of traditional players who want that privacy, but who still want a chain that is actually up and operating and it's not being kind of spun up? To go back to what we were saying earlier about this whole idea of, you know, I don't want it in the innovation lab. I want to be able to run a business on it. And so, yeah, we are deployed on Canton, and that is one of the networks that we're doing node operations on and that is one of the networks that we operate across regularly.
Sy Taylor 47:45
It's fascinating seeing how much the reality of the world you live in with Canton and the client demand you have is something you have to respond to. And I think a lot of people that are coin holders on x, that can make a lot of noise sometimes, but don't understand some of the motivations and the drivers of some of these bigger institutions, and maybe that's not that what they're trying to build, and all power to them if they're trying to build something else. There is one last story I just wanted to get a quick take on sandy before we close out today, which is, I don't know if you saw that Morgan Stanley filed for an ether trust after sort of a Bitcoin and Solana ETF push. They're also going to plan to launch their own digital wallet in 2026 which probably speaks a little bit to your everything will be a wallet thesis. But your thoughts on some of the financial institutions moving in this direction?
Speaker 1 48:32
Yeah, I think that this move, and we're seeing it, not just from Morgan Stanley, but I would say all of these major wealth networks, they have realized that clients have moved money away from their wealth management products to places where clients may not want to be operating long term, right like a lot of people have money that are holding on Coinbase right now that given their option, they would prefer to move it back into Morgan Stanley and have It aggregated with all of the other assets that Morgan Stanley manages for them so that they can see their entire pool of assets. And in order to be able to bring those assets back onto their platform, Morgan Stanley has to provide both the infrastructure to hold the assets, which is the wallets, and then they need to allow these clients to determine if they want to redeploy that money out of a wallet and out of a crypto based holding into an ETF. And so they're going to have some clients that want to go the traditional client account route, and they're going to have some clients that may prefer to start moving more of their other investments into the wallet. And I think that this is them putting into place the first stages of an infrastructure that's going to enable that two way. And that is really how we think of our whole business, that we're going to have to offer exposure to all of the crypto and the crypto ecosystem and the great development and growth going on there, and we're going to have to offer that in traditional wrappers that. Work in account based systems and batch processed systems. And we're going to have to offer our traditional products that people are looking for towards, for diversification and for additional yield, and we're going to have to offer those in a wallet in a tokenized structure. So I think every financial firm is going to have to be able to interoperate across those two extremes for the next decade at least.
Sy Taylor 50:22
Wow, it's gonna be an interesting challenge. A lot of work to do. The revolution will be tokenized one financial institution at a time. Look, that's all we had time for this week. I want to thank our viewers for watching, listeners for listening as well. Sandy, if people want to learn more about what you're doing at Franklin Templeton, where do they go to do that?
Speaker 1 50:40
I have my LinkedIn page under Sandy call, and we also have Franklin Templeton digital assets. You can look that up, and all of our research is public. And we also have a great site called Future portfolios.com and I encourage you all to check it out, because it really explains this trajectory that we've seen of how we've gone from the 6040, portfolio to where we think we're heading with wallets. So all those spaces, and we're happy to share more information.
Speaker 2 51:07
I'm typing it in now, Kai, how about you on the X at Kai Sheffield and visa.com/crypto
Sy Taylor 51:13
you'll find me at sy Taylor, wherever you do your socials, and you'll find me at tempo dot XYZ, or screaming into the void over at FinTech, brain food.com, thank you very much. I'm now going to do the thing where I ask you to like and subscribe and spam all of your friends check out the show too, because that's how the show spreads. And if you like something that Sandy or any of us had to say, then this is the thing you sent them, and We'll catch you next time. Bye for now.