00:00Ophelia Snyder. She is co-founder of 21Shares. Ophelia, you heard what Dee was saying about
00:05this convergence between what were formerly crypto mining companies just transitioning
00:09into AI infrastructure companies. What do you think of this wholesale move? It seems like a
00:14wholesale move, at least. And how does it change the economics of a company that's doing just that?
00:19It makes sense. I think there was a moment where a lot of these companies were quite prescient
00:26in securing power contracts and securing infrastructure contracts and actually
00:31building the necessary infrastructure. I think the shift has made the competition for compute
00:38continue to grow. And I don't expect that to abate anytime soon. And there's no reason
00:42these firms that are specialized in doing it can't provide those services.
00:45What if we see, and I say what if, but there are a lot of folks we talk to who
00:49say,
00:49we will see Bitcoin go past $130,000 again at some point. When that happens or if that
00:55happens, do these firms come out and say, wait a second, we're not actually focused on AI compute
01:00now. We're going back to mining Bitcoin because there's money in them chips.
01:05I suspect you will see both. And it likely makes these firms more robust, not less.
01:12So being nimble is a feature at this point?
01:17I think so. I think generally it's a good thing.
01:19Can they, from a technical perspective, can they switch on and off easily?
01:22To like from one, from one special specialization to another?
01:26My understanding, and you know, this is obviously, I'm not a Bitcoin miner by trade,
01:30but my understanding is there, it's not 100% fungible. It's more a function of power costs
01:37and infrastructure and what the best use of that is, which is not dissimilar from what
01:42you typically see around Bitcoin mining. There are moments when it's more or less profitable
01:46and certain locations are more or less profitable. So I expect the decision matrix to remain
01:51pretty consistent.
01:52All right, let's shift gears to tokenization, because Ophelia, you've said that crypto and
01:56TradFi are kind of talking past each other when it comes to tokenization. And we certainly
02:01see no shortage of announcements of traditional finance companies getting into tokenization.
02:06Wells Fargo today, for instance, saying it'll roll out tokenized deposits for commercial clients.
02:10In a situation like this, where you get an announcement from a Wells Fargo, for instance,
02:15what needs to happen behind the scenes to make sure that it isn't just an announcement that kind
02:22of lands and doesn't go beyond that? I mean, what needs to happen for everything to actually
02:28come into practice?
02:29So I think one of the things that's being undervalued in crypto markets today is how
02:33early some of these implementations really are. These are, even though the numbers appear big to
02:38crypto, they are not big compared to what flows and TradFi really look like. And so I think you're
02:42going to continue to see a lot of interest in these projects, a lot of desire for them to expand.
02:49I think these implementations are critical proof points, but they don't represent a wholesale
02:54migration of infrastructure yet. They're much more like test balloons than they are, you know,
02:59full-scale implementation.
03:01What would you need to see in order to say, OK, this is no longer a test balloon. We're now
03:04seeing
03:04full-scale implementation.
03:05You would need to see a significant percentage of flow. And I think that's the piece,
03:10or a significant percentage of assets, right? Right now you're seeing, you know, either a few
03:14hundred million, maybe a couple of billion. That pales in comparison.
03:17It sounds like a lot to, you know, somebody, but you said pales in comparison.
03:20Compared to the actual size of these balance sheets, the actual size of the total market
03:26for bank deposits compared to the total size of equities markets. I mean, those are the benchmarks.
03:31When you think about new capital markets technology, which essentially this is,
03:36varying flavors of it, but new capital markets technology and new payments technology
03:40and new settlements technology, you actually need that critical mass. And that's the part
03:45that's interesting. So you're seeing all these test cases, and a lot of that seems to be going
03:48quite well. And you speak to these institutions, and they're excited about it. The question then
03:52becomes, OK, well, what is the gap between these really exciting initial trials and saying,
03:57OK, actually, yes, we're going to do it for our entire deposit base. And that gap is,
04:02I think, what we're going to be bridging in the next few years.
04:04Right. To actually matter at an institutional scale.
04:07Is this a five-year problem? Is this a 20-year problem? What's the timeline?
04:12So I think, I suspect it's a five-year problem, maybe five to 10. I think you need to get
04:19a critical
04:20mass going, and then it kind of rolls. And the roll part will take a long time, similar to what
04:25you
04:25saw with like the migration from mutual funds to ETFs. These are not small shifts when you start
04:31moving large amounts of money. You're still seeing people deprecate proprietary systems in
04:37favor of cloud, and that's still happening right now. Like cloud transformation is not 100% complete.
04:43I don't think 100% is the goal. I think it's that critical mass. Like once you get to more
04:47than half,
04:48the market starts to shift around that. And so I think that inflection point is maybe five years
04:53out. So you think TradFi and DeFi are overhyping tokenization here?
04:57No, not in terms of what it can do, but in terms of what it's going to take to go
05:01from these initial
05:02proof points to full-scale deployment requires a lot of middleware. There's a lot of connectivity that
05:08goes into that, whether it's updates to risk models to now take into account the possibility of being
05:13margin called on a Saturday or your accounting principles and how your core books and records
05:20actually capture these transactions. None of that infrastructure is entirely controlled by any of
05:27these financial institutions. They buy some, they build some, it's brought together in a variety of
05:31different ways. It's kind of a hodgepodge. It is. And that takes a very long time to migrate and update.
05:38So you do the test balloons, you see that it works, and then you start thinking about, okay, how do
05:42you
05:42think about updating core systems? And these are critical dependencies for doing any kind of business for
05:48these firms. And so what does it take to put a new technology in a critical dependency pathway? And I
05:54think that's the question that we're answering now. What's required to do that? And that's really
05:59exciting. I think it's just going to take a bit more work than maybe people currently realize.
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