#1374 Annelise Osborne | Why Wall Street Is All-In On Crypto

Annelise Osborne is the author of a brand new book, “From Hoodies to Suits: Innovating Digital Assets for Traditional Finance.” She also is the Chief Business Officer at Kadena. In this conversation, we talk about a brand new trend where Wall Street is starting to interface with the hoodies, what the suits are interested in, where they are putting their money, what the hoodies are doing, banks vs. bitcoin, and more. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you. ======================= CrossFi is the Apple Pay for Crypto. For the first time in history, anyone with a web 3 wallet like Metamask can spend crypto through a physical or virtual visa cards anywhere in the world where Visa is accepted. Be one of the first to get your hands on a CrossFi card and a prize pool of $3 Million Dollars by joining and participating in their testnet today: ⁠⁠https://xfi.foundation/users⁠⁠ ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. All right, guys. Today's a fantastic episode. I have Annelise Osborne with us. She is the author of a brand new book, From Hoodies to Suits: Innovating Digital Assets for Traditional Finance. She also is the Chief Business Officer at Cadenas. In this conversation, we talk

• 0:43Anthony Pompliano?

  about a brand new trend where we're having Wall Street, aka the suits, starting to interface with the hoodies, all the technologists that were innovating and creating this $2.6 trillion asset class. In this conversation, you're going to hear, what are the suits really interested in? Where are they putting their money? How are they going to make money? What are they being attracted to? And then you're also going to hear, what exactly are all the hoodies doing? Are they interested in just making money? Or are they more idealistic? We get into all of it. This book is great, and this conversation is even better. So please go check out the book. And here's my conversation with Annalise Osborne.

• 1:17Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:40Anthony Pompliano?

  Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your desk. I got a gazillion tabs open and different windows for different activities. There's my web browser, my text messages, I have Slack open, and I got a Notes app. I normally work on a desktop and can be very, very productive. But everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work, or just want to work from the kitchen table, my laptop doesn't have

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• 2:53Speaker 02

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• 3:13Anthony Pompliano?

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• 4:00Anthony Pompliano?

  All right, guys. Bang, bang. I've got Annalise here with me. I thought a great place to start the conversation is there's tons of innovation obviously happening in crypto and kind of the tip of the spear of that innovation is all the things that are happening in the corners of crypto. It is really like done by the hoodies by the young people. And that's been really exciting. It's created tons of value, tons of dollars of value, but now. Now, the adults are moving in the room, the suits are moving in the room. The people who are interested in saying, hey, wait a second, can we take this novel innovative technology that all these people have created? And can we now start to commercialize it and use it inside of Wall Street or these large financial institutions? You literally wrote a book on this, which we'll get to in a second. But talk a little bit as to like, where is Wall Street maybe like attracted to most? Right?

• 4:44Anthony Pompliano?

  If crypto is a magnet, where is Wall Street being sucked into in the industry?

• 4:48Speaker 03

  Sure. Well, first I'm excited that Wall Street is being sucked in. I started in the space back in 18, recognizing the benefits of what this technology can do for finance. And it was not cool because crypto was very cool then. But what was interesting to me was the ICO boom, that it was this whole global world of investors that were looking for alternative assets. And they missed the tech boom and then this was their opportunity. And so I think that kind of has caught the attention as well of, of the banks and the asset managers. I think a lot of opportunities are them looking for, looking for new clients, right? How can they, how can they expand their assets under management? And I think the way to do that is really to hit the retail segment. And we can go back to numbers. I appreciate numbers.

• 5:31Speaker 03

  A lot of people in the space don't throw out numbers, but 51% of the wealth right now is in the retail hands. So it's in yours and mine. And then 49 is in the companies. And so a lot of these asset managers are looking to increase their assets under management, but everybody goes to the same pool of investors. So it's, they're going to endowments, they're going to sovereigns, they're going to insurance companies and other like, and they're not increasing their allocations, but where the opportunity is, is to hit the retail segment. So I feel like the tokenization of funds and money market funds is over a billion dollars. And the experience that these asset managers are having, like BlackRock didn't want to be a leader, but, and they've just tokenized a fund.

• 6:11Speaker 03

  KKR tokenized a fund, Hamilton Lane tokenized funds, private equity funds, both of them. And one of the opportunities there is that you can bring more people in from that retail sector because the buy-in is lower, right? So instead of a million to $5 million initial buy-in, you can have a, it's like 100 or 250, depending on which fund, but it's still. Lower buy-in, so it attracts more people. So I feel like you're, one of the big steps of Wall Street is opening up their, their investment opportunities to a bigger crowd. I think there's also, um, digital currency is going to be a big step, which is going to affect us as well, um, as also banks.

• 6:47Speaker 03

  If you look at what JP Morgan has created with JP Morgan Coin, they reported to save $20 million last year, generally on repo transactions for their JP Morgan coin, which is only done inside the bank.

• 6:59Anthony Pompliano?

  And explain a little bit, like what is JP Morgan Coin? Cause they've been talking about this for a long time. I think many people thought it was defunct and it wasn't working, but they are using it.

• 7:07Speaker 03

  Yes.

• 7:07Anthony Pompliano?

  And so, um, you know, Jamie Dimon goes out and says, hey, Bitcoin's garbage, crypto's garbage. You're saying, hey, wait a second, they're using this, they're saving $20 million internally. So what are they doing?

• 7:16Speaker 03

  So, um, it was interesting, kind of on one hand crypto is, it's a pet rock, it's a fraud, um, but then on the same side blockchain, oh, we're using this to move money or we're using it to move information. So they, JP Morgan created their own internal blockchain called Onyx. Um, for that, they've also created their own internal stable coins. So the stable coin can't, it's, it's backed by depository receipts of JP Morgan. So it's really more of a cash, internal cash flow collateral management, treasury management tool for them. So it can't leave the bank. So if I'm a big insurance company, I can look in my account and I can see the dollars in my account. But from them moving or balancing between banks or countries or countries, I'm sure they're, you know, they deal with legalities, but, um, they're able to immediately transfer and save money.

• 8:00Speaker 03

  So one of the ways they have saved money as well on this JP Morgan Coin, which again is only within JP Morgan, um, is on treasuries. Because if you think the way the, the, or repos, if you think the way the repo market, uh, it's trillions of dollars are transacting every day in repo. Um, and you can decrease the time, it's not a 24 hour interest period. You can decrease it to hours, to minutes. Uh, and that's something that in time, I think blockchain will do for the fixed income markets and the bond markets, uh, is just re, so you, you're not, you're not paying monthly interest. You're paying say hourly interest, uh, you'll have information, but I think that's how the majority of the money has been saved.

• 8:35Anthony Pompliano?

  So JP Morgan's got JPM Coin.

• 8:38Speaker 03

  Yeah.

• 8:38Anthony Pompliano?

  Do any of the other banks say like? Oh, that sounds smart. You said 20 million. We want to say 20 million. Let's go build out our own internal coin, our own internal blockchain.

• 8:46Speaker 03

  I think a lot of people are looking at that.

• 8:47Anthony Pompliano?

  Okay.

• 8:48Speaker 03

  Um, a lot of people are looking at, a lot of both banks and asset managers are looking to build their own internal blockchains. A lot of them are private chains. I'm a big believer in the public versus private as like the internet and the intranet. So when the internet, you know, rolls rolled out, companies were concerned about the people having access to their information. And the internet, intranet was like a bulletin board for company employees. And then they recognize the power of a decentralized internet, which think of all the companies. I mean, think of a company that doesn't have an internet site. And there's companies that get most of the revenue off of internet or some all. So I feel like the blockchain, private and public is going to get there. That said, banks are heavily regulated. There's got to be privacy around, um, around cash flows and accounts.

• 9:29Speaker 03

  But yes, they, banks are looking at doing that. There are some consortiums that are looking at doing that as well. There's also some companies that are offering similar services to create that. But I do think that's a big, I think that's a big win for banks and they should be touching it. There is regulations that if you're touching anything, if a bank wants to touch anything crypto oriented, it has, they have to get approval. So I think we need a little more clarity for regulation. Also, some banks are looking at generating revenue instead of saving expenses. And I think those are the two, you know, benefits that this technology could provide.

• 10:00Anthony Pompliano?

  This is a very interesting part to me of these larger organizations, right? If you look at, I don't know, macro hedge fund managers, you look at venture capitalists, like they are known as good investors. They are trying to drive outsized returns. Most of the people I've talked with inside of these large financial institutions, they're not trying to drive outsized returns. What they're trying to do is create products or revenue streams for the bank. And what they really want is, hey, we have a lot of money. So if we can drive revenue off of that and do it in a repeatable, scalable way, that's much, much more interesting to us than, hey, we came up with some novel investing strategy where we're going to clip, you know, 200, 300 basis points of outperformance. And so is that your experience? And like, what are some of those revenue streams that they're trying to create?

• 10:40Speaker 03

  Sure. Revenue is much more sexy than cutting expenses for sure. I think part of the revenue was finding alternative investments that are attractive to retail clients. I think that we're going to see a big boom in that. There's been a big shift in, there's a big shift in the investing strategy, I think. If you look at, um, Blackstone did a study for ultra-high net worth and they're investing 60-40, not in stocks and bonds, but in traditional and alternative investments. So 40% in alternative investments, which have outperformed the market of publics. In publics, there's half as many companies as there was at Y2K. So there's less opportunities to invest there. But I think with more being in the private and alternative markets, if they can create more private and alternatives, there's a demand for that. And if they can spread that

• 11:25Speaker 03

  demand outside of the ultra-high net worth, they're the only ones really investing in alternative assets now. I'm a big push also for the changing generations and dynamics, right? If you look at the, like, from a macro and a micro push of where the money is coming from and where it's going. So millennials and Gen Z, which are half the workforce, and they are going to have a majority of the world's capital because the baby boomers, which was the best performing over time for markets, who have amassed the most money, is going to pass down to baby boomers and Gen Z. No, I'm sorry, to millennials and Gen Z. Millennials are turning 40, so they're also starting to run the companies, trying to run groups. They were born with a supercomputer in their hands. They're very digital in nature. Look at what happened with GameStop, right? It's a different idea of approaching investments.

• 12:10Speaker 03

  I think that that will happen again. I think Dogecoin will happen again. It's them using social media and also showing how they're investing. They're investing in something they believe in or they feel in. Looking at, there was a study done in the UK that 85% of Gen Z'ers get their financial information from finfluencers, which is social media all online before parents. And so I feel like that, that Wall Street needs to come up with new products that will be attractive to this millennial and Gen Z crowd because they're the, they're the future of the investors, right? They're, they're, they look at things differently. My, we live in Connecticut and my son was going to weekend classes at Yale. And he came back and told his brothers, "It's just as old inside as it is outside.

• 12:54Speaker 03

  Who would ever want to go there?" Very, very different from how I grew up and the whole push of academics. And it's not that it's not, that he's not academic. It's that it's a, the idea of things being new and not understand, not appreciating the legacy and tradition associated. I think, but I think that highlights the ideas of a lot of millennials and Gen Z, right? They want to do something different. They look at the world differently. So I think Wall Street's going to have to recognize giving them new opportunities to invest.

• 13:21Anthony Pompliano?

  Is it that they're also losing trust in the institutions? Like, if you are an institution, then maybe they think that you're full of shit?

• 13:28Speaker 03

  I it's the okay boomer, right? They're old. They don't know what they're talking about. I could do it so much faster myself.

• 13:34Anthony Pompliano?

  But that's not new, right? Like for a long time, people have definitely said, oh, the older people, they don't know this is new. Here's this thing they don't understand, vice versa, right? The older generation said, hey, these people are young and dumb. Wait till they get some experience and then they'll see it our way. But it does feel like across the economy and society, trust and institution, you can see in the data, right, is falling from news organizations to colleges to, you know, name the organization. And I wonder how much of it is, you know, the internet kind of took like a sledgehammer to education. It was like, hey, now this stuff's free online.

• 14:07Speaker 03

  You can make a lot of money working for yourself.

• 14:09Anthony Pompliano?

  Yeah, finance is the same way, right? Where now all of a sudden, hey, maybe you don't have to go work at the bank. Like you can literally just open a brokerage account and get started. So like accessibility became a huge kind of tailwind for this generation. But at the same time, there is still a lot of value in experience in that institutional knowledge.

• 14:28Speaker 03

  Absolutely.

• 14:28Anthony Pompliano?

  And so it's this very weird dynamic where like the world is changing, but maybe actually the people who are younger should understand history to kind of better position themselves. So it's like you want the best of both worlds, not either or.

• 14:40Speaker 03

  Absolutely. I totally agree. I will point on also Robinhood, right? Robinhood, 80% of their user base is under the age of 35. That's huge. The average age is 31. It's a different dynamic and they they didn't charge fees. Now, nobody is charging fees for a kind of online brokerages. I'm also if if the idea of this is kind of the hoodies and the suits too, right? It's the it's the younger inexperienced, but more idealistic. And then that's the recognition of tradition and having been through cycles and investing. And I really think that you need both. But I also wonder if that generation is going to stick with their, you know, parents' wealth management, right? If I'm in the private wealth group at this bank, they need to really focus on that next

• 15:22Speaker 03

  generation who thinks differently, who invests, who has Robinhood accounts that they I forget how many times they check a day, but it's ridiculous. Like I was surprised the number was so high, checking your investment account all the time. So there is a demand for investments and the number of people that, you know, hold crypto is an alternative. Of asset or even I was talking to a 14 year old that buys sneakers off eBay and sells them. So there's definitely a mind towards making money, I think, but it's not necessarily the same old school ways.

• 15:50Anthony Pompliano?

  Yeah. And I do wonder how many of those people who are going to step into this transfer of wealth, whether they're inheriting a company, whether they're inheriting actual assets. They think differently, but how much are you willing to express it in the market? Right. I always kind of think about it from the perspective of, let's say that you're a kid and your parents give you a stock portfolio that's worth a million bucks. How many kids really are going to go sell the million dollar stock portfolio and go buy a meme coin or even buy Bitcoin or whatever? Some will, but is it a really high percentage or not? And I think that's kind of the open question is how much does the capital allocation

• 16:32Anthony Pompliano?

  change? Once this generation steps into it, because what we're seeing on the company side is actually that big transfer of, oh, the older people are going to leave their companies are going to pass them off to their kids. From what I see, most of the kids don't want the company.

• 16:44Speaker 03

  That's true.

• 16:45Anthony Pompliano?

  So what they end up doing is there's a sale, but it doesn't stay within the family. Instead, what's happening is it's going, there's trading hands, private equities, buying it up, you know, all these things. And so if you take that same mechanism where you're like, yes, there is a transfer, death is coming, right? There, there is a certain portion of the population that's getting older. They're going to have to pass their assets on. When it's a company, I don't know the exact numbers, but it feels like anecdotally, it's not all going to the kids like it used to, or maybe it's high of a percentage. So on the finance side, when this money gets passed down, does it change its allocation or not? You got to imagine some of it will. But if you're inside this bank, are you basically betting on the fact, hey, I'm a financial advisor? I just don't think the kids are going to change the allocation. They're going to keep it right here in these accounts. It's really hard to transfer the money out, right? You got to get

• 17:29Anthony Pompliano?

  on the phone. They don't like to get on the phone, like, you know?

• 17:32Speaker 03

  Do they have to get on the phone? You know, I just opened an account yesterday for like,

• 17:37Anthony Pompliano?

  I, I recently had to move money from, from one platform to another. And literally it was, call us, do this. Um, you know, I called, it was a holiday. Uh, so they're closed. I could wait till the next day. I mean, it was, it was the classic, you know? Ten years ago type of experience. And so when you look at that, you're like, okay, maybe the financial advisors are actually just betting on what's not going to change in the world, which is that people are lazy.

• 18:03Speaker 03

  Which is a, which is a big chunk, I think. You know, it's easy. Not everyone thinks about their investments in their money.

• 18:08Anthony Pompliano?

  But if you go and then you look at Wall Street and you say to yourself, okay, they're looking for new revenue opportunities. Crypto seems to be an area that has a lot of potential new revenue opportunities. You see with the ETFs, again, they're very low fees, but you get 50 billion, $100 billion of assets into one of those funds, you're going to start making some money.

• 18:24Speaker 03

  Because you don't have to do a lot.

• 18:25Anthony Pompliano?

  You don't do anything, right? And then you start looking at, okay, what else can we do? And so there's the JPM coins and stuff kind of internally, but it does feel like the innovation around products is coming. And so like, I think it's Franklin Templeton recently announced this like on-chain fund. So maybe you can talk a little bit like, what is that type of innovation? And is that something, again, you'll see it kind of exported across Wall Street? Or is that unique to one organization?

• 18:47Speaker 03

  No, I think Franklin Templeton is very forward thinking and almost like a family office, even though they're a public company, because they're generally owned by the Johnson family. So they have Jenny Johnson, who's the CEO and president of Franklin Templeton, has reported she believes all ETFs and all money market funds will be tokenized because they have tokenized funds and they have shown such efficiency and decrease in, and decrease in costs that it, that they believe that this is the wave of the future. So much so that BlackRock has similarly tokenized a fund. Their first step is money market funds. So they're doing a lot of, in essence, US Treasuries. There's a demand for tokenized Treasuries. There's also alternate use cases that haven't really come across yet, but

• 19:28Speaker 03

  they can be used as collateral and different things in time. But there's definitely been a boom there. So I feel that that, and that's over a billion dollars, has been tokenized in money market funds. And so that's the first step.

• 19:41Anthony Pompliano?

  And when you say tokenizing a fund, just for people who are listening or watching this, what exactly does that mean?

• 19:47Speaker 03

  That so it's US Treasuries that are in a typical fund structure and the shares of that fund structure have been Created as a digital token that you can buy and sell similar to a cryptocurrency, except for that it is a security and so it is whitelisted. And you have KYC AML, which is know your customer, anti-money laundering. So you have to be, which is, once you've been approved and passed that, then you're technically on the whitelist, so you can buy or sell that security.

• 20:14Anthony Pompliano?

  Got it. So if I want to be an investor in this fund, I basically have to go through all these steps. They got to know I'm a good person. I'm not involved in any bad business. I get approved. Now I'm kind of like in the ecosystem or on the platform. And then I can buy and sell shares of this as much as I want, but I'm doing it with a digital token rather than traditional electronic Qsips.

• 20:31Speaker 03

  Absolutely. And so also you have intermediaries generally with funds. And what they're finding is it can decrease intermediaries and that the blockchain serves. Franklin Templeton has found that the blockchain is an excellent transfer agent, such that they're still required, you're still required to have them with the SEC. But Franklin Templeton has proved out that the transfer agent case.

• 20:53Anthony Pompliano?

  So I have shares. Let's, let's, I'm balling. I got a hundred million dollars of this, of this fund. Do I hold the tokens like in my own self custody wallet? And if somebody hacks me, the tokens are gone? Or how does it work in terms of securing the actual assets? Am I using a custodian? What are people doing?

• 21:09Speaker 03

  So most people are using custodians. You, I don't know that you, I don't know anyone that I'm not sure people are doing self custody, to be honest. There's also kind of, I used to run a broker dealer. You can leave them at the broker dealer, but also when you have a security and it's whitelisted, you know exactly who owns that security. So even if it were to be hacked, you could actually burn that token and mint a new one. So there's an extra layer of, since it is not, it's fungible in the sense that there's multiple tokens, but that, that additional layer of permissioned and the whitelisting actually is, people know who owns it. So it's not, it can't be hacked such that they're going to get your interest, if that makes sense.

• 21:48Anthony Pompliano?

  Yeah, that makes a, makes a ton of sense. And so.

• 21:52Anthony Pompliano?

  Will they eventually just do every fund? Like, are we just gonna see anything that is public, private? Every fund will be tokenized and traded on these blockchains? Or do you think there's some that it's more applicable and kind of valuable?

• 22:04Speaker 03

  I think that, um, not, I think, first of all, blockchain will be, blockchain will be behind the scenes. Right? And it's not going to be as noticed. I think that a lot will be tokenized. I'm not sure everything will be tokenized. If there's not a liquidity aspect to it as well, there's definitely an efficiency. Right? There's an efficiency because so much more can be digitized and programmed in and automated. I mean, really what this technology brings is, is smart money or smart contracts that can be programmable.

• 22:32Speaker 03

  But I do think in general, yes, right? So much, even from a corporate perspective, if things are tokenized, the transfer is so much faster. Than waiting, I, you know, waiting for securities, there's that float in between versus this is automatic. Right? I cashed a check the other day, it took five days to close. So that money is floating similar when you have T plus two. If I can actually, or if I'm a company, or if I'm a person, I would rather put my own money to work right away that day. Than wait for two to five days until I can actually access my capital. So I think it's much more efficient. Now, from the bank's perspective, they're going to lose that revenue line of the float. But I think they also have to recognize that this is coming. Cause if they're not going to do it, someone else, and this is the whole like blockbuster or Kodak moments.

• 23:17Speaker 03

  Right? You have to recognize where change is coming. I think we need to look two, five, and 10 years in the future and plan for that.

• 23:25Anthony Pompliano?

  All right. So you wrote this book, From Hoodies to Suits, Innovating Digital Assets for Traditional Finance. And it's a great book. People should go get it if, if they haven't yet.

• 23:35Anthony Pompliano?

  But what's interesting is you're essentially pitting kind of the early adopters, innovators, technologists versus more of like a finance, kind of adult in the room, you know, type of audience.

• 23:46Anthony Pompliano?

  Are they on the same team? Or are they actually working against each other, right? And maybe like the Bitcoin ETF is like the first collision point where Bitcoin was created in the wake of 2008 financial crisis. It's got all these ethos, it's, you know, libertarian to a degree.

• 24:01Speaker 03

  Occupy Wall Street.

• 24:03Anthony Pompliano?

  Yeah, people will talk about, you know, separate state and money, do all the stuff. And then like Larry Fink and BlackRock got more Bitcoin than anyone, right? And they're pulling it into the system. And so are they on the same team or no?

• 24:15Speaker 03

  So I will say Bitcoin was developed as kind of anti-establishment to not, you know, I don't trust the banks, I'd like to keep it myself. And there are some that are very strong that way still. I think that the world of DeFi and traditional finance will merge. So I think there are benefits that have been developed within this technology for decentralized finance. But yes, I think there's a huge use case for for actual traditional finance. I think the hoodies and suits need to work together. And I think it will benefit both those that want to work outside the institutions from innovation and a money flow perspective because more will be tokenized. And I feel like once traditional structures are tokenized, it's hard to change the technology and the structure at the same time. So if we can tokenize traditional structures, once those are tokenized, think of all the derivatives

• 24:58Speaker 03

  and more complicated structures that can come out of that. And so I feel that will help kind of the hoodies in the in the more complicated world. However, I think hoodies and suits need to work together. The hoodies are, I look at hoodies as being the idealists, the technologists, the entrepreneurs that created this $2.6 trillion industry, right? Without the without the suits for the most part. And so now recognizing for that to be institutionalized, which is what the company, which is what kind of Wall Street capital markets and even Main Street, it makes a lot of sense to do that, they need to work together. It's hard to create innovation inside of a corporation just because it's generally very, not that straight laced, but it's very structured, right? I think

• 25:41Speaker 03

  a lot of times it's a freer thinker that you can create innovation with. But I think they need to work together in the sense that the institute, the hoodie, sorry, the suits are bringing together the fiduciary knowledge, the understanding of regulation, the fact that markets change, checks and balances. I think we can learn from crypto's mistakes about some younger generations of people who had a lot of money and were acting as fiduciaries without the experience.

• 26:06Speaker 03

  And of recognizing that we're working on securities and we, you know, we go to jail if we do this wrong. So I really think that you need to work together. I also think diversity of thought helps.

• 26:15Anthony Pompliano?

  One of the things that's interesting to me is when I go to events, I see a lot of the quote, quote suits, the people on Wall Street trying to dress down and appeal to kind of the crypto folks. I actually think it's a huge mistake. You know, I'm sitting here in a suit and tie right now, and I think that the world should be moving the opposite direction. It's like as we become less serious, more problems get introduced and maybe what we should try be trying to do is take the less serious folks and make them more serious. And if you look at the trajectory of many of the great technologists and kind of business leaders, they're, that's a normal trajectory for them to take, you know, it's kind of like you, you live long enough, you become the man, you know, Bill Gates used to be in the

• 26:57Anthony Pompliano?

  garage. Now he's, you know, some circles considered kind of this evil billionaire. And that is a maturation process that I think the industry overall is going through. What is interesting to me is there is crypto native revenue and kind of crypto native business opportunities. And then there is kind of the true commercial, very large opportunities. And what I continue to remind people is you get credit for being early, but being early doesn't mean that you actually win. And what's so interesting is like, you know, again, Black Rock has more Bitcoin than you.

• 27:33Speaker 03

  Yeah.

• 27:33Anthony Pompliano?

  You were early, they got more Bitcoin. Who actually is going to get the big win? And so larger pools of capital can wait longer. Right? They actually want it to be de-risked because they want to have a high probability batting average versus a slugging percentage. And so one of the risks that I see for the kind of hoodie crowd is they take their foot off the gas. I was early, look how smart I am. And here come all these other people. And they're going to catch up pretty quick.

• 28:00Speaker 03

  But I do think they need those hoodies to continue to innovate as well. But I understand what you're saying. I feel like, you know, first in like, look at AOL, Yahoo and Google, right? I feel like there's, so you're not always the first. But I do feel that they're still bringing a lot to the table. There's still with, you know, with zero knowledge proofs that are coming out. There's still innovation with artificial like AI that's going to be kind of pulled in. And I don't know that the, the institutions have a lot of money to throw behind it. So yes, they can hire their own, hire their own hoodies. But I still feel like there's still hoodies within them that are helping. It's just them working together.

• 28:35Anthony Pompliano?

  Correct. But I look at like the tech industry. Microsoft is one of the most innovative companies in America, which sounds insane. Right? When you think about like innovation, you think of like people in a garage, writing code, doing all this stuff. Microsoft is the leader in AI out of companies, you know, when it comes to this whole trend.

• 28:56Speaker 03

  Investment.

• 28:57Anthony Pompliano?

  But, but, but, I mean, look, Satya Nadell, right? When OpenAI fired Sam Altman, he wrote an email to stakeholders that eventually leaked. And he said, we are above them, we are below them, we are all around them. They can't do anything without us. Right? And so if you think about that, it was a large company that is actually gaining most of the economic benefit, especially because OpenAI is supposed to be this nonprofit thing, whatever. And so it, it breaks the mold, right? Like, like it took me a while to be like, well, that's really counterintuitive. Wait, Microsoft is the leader in AI. I, you would expect it to be some new company that nobody is heard of before. It's kind of innovation, et cetera. And so is BlackRock the leader in crypto now?

• 29:40Speaker 03

  In crypto? It's funny thinking about just, just Bitcoin.

• 29:45Anthony Pompliano?

  Right? And, and or Bitcoin, right? Is like, if you said, who is the big winner in Bitcoin?

• 29:50Speaker 03

  Well, I guess.

• 29:50Anthony Pompliano?

  BlackRock, you have Fidelity, you have Bitwise, like you have a couple of players. But actually, it appears that the large players are going to end up having outsized benefit here.

• 30:02Speaker 03

  Yes, yeah.

• 30:03Anthony Pompliano?

  Compared to the people who are early or the quote-unquote hoodie innovation crowd. And that's not to say that those people aren't important. I actually think they're incredibly important. And if I had to guess, Satoshi's wearing a hoodie, not a suit, right?

• 30:16Speaker 03

  But I think they bought in at a dollar, right? BlackRock didn't buy in at a dollar.

• 30:20Anthony Pompliano?

  But that's my point. If you buy in at a dollar with $10, maybe it's worth $10 million today. Be incredible return. BlackRock made that in the first second that their ETF started trading.

• 30:29Speaker 03

  Yes, and it's going to change the world for crypto too, I think, because there'll be a lot less volatility because there's a lot of buy and holds. But look at the top data companies in the world, for example. This is the, I do think there's going to be growth, which is where I'm going with this. So the top data companies in the world, number one is IBM, right? That's their business, cut and clear. Both Google and Amazon fit into the top data companies in the world, neither of which is their core business. But they are what we call web, you know, I know people don't like web two, web three, but you get the idea of their web two companies, you know, born and bred. And they've recognized opportunities outside of that. I think we will have web three companies that similarly will become behemoth companies that recognize opportunities outside of just what their day job is.

• 31:10Anthony Pompliano?

  Are there any examples that you have?

• 31:11Speaker 03

  Because of data, I think there's a lot of different things. And now we're dealing in the banking world and people are a little more forward thinking. So, I mean, it's difficult, but if you can find revenue streams, which is, and something that you can actually generate capital, really. I think there's different, if you look at, you know, stable coins, and again, the winners haven't, aren't out yet, but because part of that's expanding their business. But look, Circle has done really well with stable coins, USDC. It's through, it's regulated compared to the other stable coins. And it's with the recent regulations, it's kind of coming, to be clear.

• 31:47Speaker 03

  I think they have opportunities. I think Fireblocks has done a good job in creating a custody solution. For example, just, you know, there are other opportunities they can do outside of just that. So maybe they have an opportunity. Coinbase, for example, I think Coinbase has created something, they've gone public. So there's other opportunities. Again, I think they would have to expand into different revenues, but I think there's. All of them are revenue positive, I believe. Some are private, so.

• 32:16Anthony Pompliano?

  So what now becomes interesting is like Coinbase is the upstart. Coinbase is like the hoodie crowd, right? And they've grown and now they're this huge thing. New York Stock Exchange not participating yet outside of letting, you know, kind of ETFs potentially trade.

• 32:30Speaker 03

  But they did invest.

• 32:31Anthony Pompliano?

  So they are benefiting. It was kind of a, either way this market goes, we're gonna, we're gonna make money. Now they are talking about potentially adding crypto. I think it was CME or CBOE. They said, hey, we're looking at this. This is interesting to us, right? Obviously, there's all the futures. Like you can see, hey, here we go. Like they, they are not going to get left behind here. And so when I see that, I'm like, okay, wait a second. Who owns New York Stock Exchange? ICE. Okay. So they own New York Stock Exchange, which is going to benefit from the ETFs. They're going to potentially add crypto themselves. They also are investors in Coinbase. They also did backed, right? Like you start second, you're like, yep. Maybe actually people have been making a lot of money all along were the big institutions. It doesn't mean that other people didn't make money, but I think this

• 33:16Anthony Pompliano?

  narrative of like Wall Street wasn't involved.

• 33:19Speaker 03

  They were involved from their strategic venture groups.

• 33:22Anthony Pompliano?

  And I also think that many of the crypto funds, how many of the LP dollars, because a lot of these funds couldn't raise money from endowments or hospital systems or, you know, pension funds, et cetera. How many of the dollars came from people who would fall into, you know, the Wall Street crowd? A lot of them.

• 33:39Speaker 03

  A lot. Look at, look at the FTX, you know.

• 33:42Anthony Pompliano?

  So you kind of go down this line and you see all this. And so what my point is not so much like, oh, one side is better than the other or whatever. It's that actually it's one big market, even though I think when people talk about it, we like to try to, you know, make this like analysis. And I think what you're talking about in this book is this idea that like, hey, the other side, meaning the suits are going to be really important here and they're coming to adopt this stuff. And so there's an education component. There, there's, you know, capital flow. There's all these things that are going to really matter here. And if you want to get mass adoption, you need everybody is always like a funny thing to me. People are like, I love mass adoption, but not those people. Right? Like they're coming because you ultimately are going to see the mass adoption occur both individual and at the corporate level.

• 34:24Speaker 03

  I also think everyone needs to be connected. I think there's a huge interconnectivity and it's this is kind of, there's lots of consortiums. I think you have to work together to help create this. There's no standards yet. There's starting to be standards when you have more institutions working together. And I agree, the point of, you know, the inside of the cover talks about Mark Zuckerberg, who was obviously a big hoodie, who then when he went to Congress, now he wears suits a lot. And so that's kind of the maturation. And that's why I feel like this market is maturing as well.

• 34:52Anthony Pompliano?

  There have been a lot of people who have left traditional organizations, either in tech or finance and moved into crypto, kind of helped go build those. Do we see the, you know, kind of brain drain the other way? Are people leaving kind of hardcore native crypto companies and going into these larger organizations?

• 35:10Speaker 03

  I think it's harder to go into corporate. I'm trying to think of examples. Most of the, there have been some. There have been some kind of, if you look at the heads of innovation or heads of digital assets, some of them have experience in startups. I don't know that would be a brain drain though, because I feel like that makes a lot of sense because you're adding value both to the institution and then that will help the startups too, because you know who to work with or partner with. But there have been a lot and there continue to be, especially with the bull markets, people looking for opportunities that are leaving kind of the more standard, comfortable job into crypto, something crypto oriented.

• 35:50Anthony Pompliano?

  Yeah, it's fascinating to me, right? In terms of how, how this all plays out. Where do you think the biggest opportunity is for Wall Street? We talked about where they're being sucked in now, but that doesn't necessarily mean it's the biggest opportunity. Where do you see that value creation occurring over the next 10 years or so?

• 36:06Speaker 03

  I think digital money is number one. I think just payments. I don't think that they're like CBDC is tough, which is central bank digital currency, which is backed by reserves, the US bank, US. Thank you, Federal Reserve. Because of a privacy perspective, right? I think that's gonna be hard, but I do think there's lots of opportunities within digital dollars, programmable money. I think the funds, like we were mentioning, and then I think debt, I think there's a lot of opportunities in debt, because again, debt can be programmable, which could be corporate bonds, which are generally pretty basic, but also loans. I think Figure has done a great job in proving out cost savings in both securitizations and in loans. I think there are about 150 basis points in cost savings, which might not sound like much, but when you deal with

• 36:49Speaker 03

  huge sums of money, it is. So I feel like those are probably the first steps. And really, that, you know, when we talk about tokenization of real world assets, it's the opportunities, which I was kind of putting into funds, right? The alternatives of asset, different types. I will talk about, for example, the horse mage who won the Kentucky Derby last year was token, well, not tokenized, he was a security, though, right? Because he, people, it was, it was.

• 37:17Anthony Pompliano?

  Wait, what is the story?

• 37:18Speaker 03

  Madge was, won the Kentucky Derby last year, and he was a crowdfunding, so he was fractionalized, he wasn't tokenized yet, but he was technically a security. If we look at Legos aren't securities, but he's a security, and that's the definition of, like, securities, because there was, because he was fed, he was trained, all of these different things. And there's a demand for these alternative assets. And so I think from a tokenization perspective, you can add that in as well. So I do think that will be, that will come along as well. So even if it's not in tokenization of funds, I think the tokenization of, technically, all of these are real world assets, but I think alternative investment opportunities will, will pick up as well. That's a little more bespoke, because they're not as liquid as Apple stock, for example, but I do think that will continue.

• 38:01Anthony Pompliano?

  The horse, people crowdfunded the money to buy the horse and feed it and do all this stuff, and then they got a certain percentage of the profit?

• 38:08Speaker 03

  Well, they were just investors in the LLC that owns the horse, if you think about it that way. But it's just interesting to think different types of things. I think also, within that alternative investment crowd, Rihanna had a song that was tokenized. So anytime you listen to that song, you can, you know, make money off of it yourself. And so I think there's more, that touch that crowd, that almost user experience of things that you're interested in. I think that is, is going to be smaller, but I think it's going to be very interesting and seeing all that develop. I also think companies also have tokenization, you can actually have more interaction with your, with your investors. Look at, this is something that Amazon Prime and Amazon Stock, right? There's utility that I think will develop, which is kind of in that real world asset bucket.

• 38:53Speaker 03

  I bought AMC stock because it gives you a utility of free popcorn. And I wanted to see if that worked. But you didn't, it doesn't actually tie together. You just check a box, right? So as in like they're not checking that I actually own the stock.

• 39:06Anthony Pompliano?

  Wait, they just give you free popcorn if you check a box at the movie theater?

• 39:10Speaker 03

  Uh, well, it's actually online that when I signed up for the rewards program, they asked if you're an investor. And so now I checked the box that I'm investor. I don't think they're checking because they don't have access to my investment accounts. But I am, I did buy this stock immediately. Just to see that example, my thought process here is like the, and this is the Amazon, the utility experience you can get from stocks. For example, the Amazon stock and Amazon Prime. Amazon Prime are their super users. Super users are the ones that are actually helping generate revenue for the company. They're also the best feedback providers of how to, like how this company can do better or, or what it's doing great. Right? Amazon Stock, you actually are benefiting from the profits of the company. What if those two merge?

• 39:51Speaker 03

  What if there, there was some sort of opportunity that, you know, you get Amazon Prime to become a super user? If you're a shareholder, something like that working together. There was Aspen St. Regis coin was done years ago. Nothing else has really been done like it, but there are utility benefits to owning that token as well. And this is a, um, the St. Regis in Aspen, Colorado. And if you stay there, you get upgrades or you get champagne in your room, you get different benefits. So I feel that there's different ways that in that tokenization, real world assets, there will be utility benefits also.

• 40:23Anthony Pompliano?

  It's fascinating to me how much, um, has been tried already, but it feels like it's only half a percent of what is going to be tried.

• 40:31Speaker 03

  Yep.

• 40:32Anthony Pompliano?

  All right. What, um, what did you learn from writing the book?

• 40:36Speaker 03

  Oh, I never thought I would write a book, um, but I, it was after, for me, it was really, I think that we need education for adoption. And I think people just need to understand Bitcoin and blockchain are not the same thing. Uh, and this is, there's so much this technology can offer. And this is why I should care and why it can affect me and how I should think of business going forward, especially from a business perspective. Understanding how this might change my business line, I think is important, but what did I learn? I, um, I actually enjoyed the process of writing. I knew what I wanted to say. I did it in three months. I did quit my job to do it. I wrote a majority of it in the two months and then I backed it up with fact. And then the last month was the 11, like chapter 11, which is where the world's gonna go, only because that's where you can poke holes in and that's where there can be a lot more

• 41:21Speaker 03

  pushback. And it didn't change what I said. It just, I spent more time researching and kind of looking at the upsides, downsides. I learned that I'm better in the morning. So I would write from like six in the morning till noon and then the afternoon I do phone calls because I was had a hard time concentrating. What else? I learned that the process of writing a book is not, you know this, you've got your book coming out, which is exciting. Working with like the publishers were great, but a lot of the promotion actually is, is on me, which is interesting. I tried to work with PR. That didn't work very well for me. But luckily, you know, it's a great, it's a great industry. And I think there's a lot to say. So this was really a labor of love. I don't think

• 42:03Speaker 03

  that it's, you know, I'm not going to get rich off the book, but I really do hope, hope that it, you know, makes a difference for people. What I've found, I thought it was for the finance crowd. I have found lots of tech people that have really appreciated. Now, this book only came out last week. It sold out on Amazon over the weekend, which is exciting. But it really like the tech crowd really appreciates it because it teaches them about finance. I've talked to finance professors that have read it, that helped them explain the tie in of tech and finance that they didn't actually get before. So there's a, and I think also millennials appreciate it because it's where kind of the world is going. So for me, it's got a much more broad audience than just, you know, from a finance perspective.

• 42:42Anthony Pompliano?

  I love it. From Hoodies to Suits: Innovating Digital Assets for Trilateral Finance. Again, if you haven't gotten it, go get it. There's the title. Book cover looks great. I appreciate you coming in and doing this. I think that you're dead on in terms of this, this transition that's happening and this kind of teamwork and collaboration. And so I think it's important for people to be aware of it because then they can kind of be open minded to it. So thank you so much for writing the book and we'll definitely do this again in the future.

• 43:07Speaker 03

  Thanks so much. Thanks for having me. It's been great.