Inside BlackRock’s Crypto Strategy: The Next Trillion, Tokenization & Stablecoins | Robbie Mitchnick, Head of Digital Assets

Robbie:
[0:00] If you think about the big categories of institutional investors, you've got family offices, asset managers, sovereign wealth funds,

Robbie:
[0:08] university endowments, foundations, corporate treasurers, insurers, pension funds. You have some adopters in every one of those archetypes, but not the majority, not even close.

Ryan:
[0:25] Robby, you run crypto at BlackRock. So I feel like you know more about institutions and crypto than just about anyone we've talked to on Bankless. So I want to start with the question that's on everyone's mind, particularly on a day like today. So we are recording this a day that's a little bit red in the crypto markets. They seem to be coughing up a little bit. So prices, Is it over or is this just a bear trap?

Robbie:
[0:51] Gosh, well, if we counted the number of times that people have declared it over over the 16 years, then that'd be a pretty high number. So, no, I certainly don't think it is. I mean, to put it in perspective, right, this is the fifth cycle we've seen in Bitcoin and crypto's history, right? And through each of those five cycles, or at least each of the four preceding cycles, you had these extraordinary bull markets, right? And at the end of each, a pretty severe correction. But through each successive cycle, the level that Bitcoin reached was massively higher than the prior cycle, right? Right. And collectively, across these five cycles, Bitcoin's gone up by six orders of magnitude, right? 1 million X, 100 million percent since when it first started trading on exchanges in 2010. So- This is obviously nothing new to crypto. I actually think, you know, if you'd polled people on this day a year ago and they said, you know, Bitcoin would be at over 100K and crypto market cap would be three and a half trillion, most people would have said, wow, that's an amazing outcome. So I think there's a tendency to maybe overreact in both directions. In fact, more than maybe, there's definitely a tendency to overreact in both directions in crypto markets. And I think some of the negative sentiment that we're seeing right now is consistent with that trend.

Ryan:
[2:21] Let's talk about those four previous cycles, maybe now this fifth one. So I guess it's not over for crypto. I think most bankless listeners would wholeheartedly agree. I think they're wondering, though, if this cycle is over. And so previously, crypto cycles have been boom bust in these four-year increments. Some people talk about that following kind of the global liquidity trajectory. Others, you know, that it follows the halvening. But we've seen this history play out before. And this would be the fourth year of a new cycle. So it's about time that Bitcoin would sort of end one cycle, go down, correct for some period of time. We might have 12 months of quote unquote bear market before things correct. Do you think that's what's about to play out right now? Do you think it's the end of a cycle or do you think this one is different? This one extends into 2026 or maybe the notion of cycles is less relevant now that we have so much institutional capital at play?

Robbie:
[3:24] Well, I think there's a bunch of reasons why the cycles are probably less relevant on that sort of predetermined schedule that it seems to have followed in the past, right? The first is a lot of people believe the cycle is tied to Bitcoin halving, right? The Bitcoin halving at this point is almost totally irrelevant, right? Right. When ETFs are accumulating inflows, the magnitude of those inflows is many, many multiples larger than any change in supply created by a Bitcoin halving event from here until the end of Bitcoin, right? So, or until the end of the Bitcoin reward function in 2140. And you also have, I think, as you alluded to, more institutional maturity in this market and certainly more participation than you had before. I mean, I was with a very large institutional investor recently, and they've accumulated a decent-sized position in Bitcoin, and they said, we want to buy more, but we want it to go down 25% first.

Robbie:
[4:38] It's a dangerous game. You know, one, it's a dangerous game. It's an interesting strategy, but it's also fascinating because when's the last time you heard or saw that behavior from most people in crypto markets, right? Most people in crypto markets say they tend to get more enthusiastic the more it's gone up and they tend to sell as things go down. And that creates reflexivity in both directions. So now that you have this institutional participation, I think you have more ballast in the market. Look at October 10th, for example.

Robbie:
[5:08] The 21 billion in liquidations that we saw in crypto that day, we could talk more about what's going on there because I do think it's a really important event. What was the impact on ETFs? Outflows? Tiny, right? A couple hundred million. 21 billion being liquidated over there. And the ETF investor base kind of went, huh?

Robbie:
[5:29] Nothing really to see here. There wasn't any relevant news. Like, there was just kind of noise. And so I think that you will see probably a muting of some of those maybe cyclical effects that have happened. And the last piece is, before anyone starts to declare a cycle over, If you look back historically through the previous four, there were some big events that actually precipitated those endings, right? And we haven't seen anything like that here. In the second cycle, it was the Mt. Gox implosion. In the third cycle, that rally had just gone totally parabolic insane where Bitcoin was at $2,000 in September of 2017 and it was at $20,000 in December of 2017. So that was crazy and obviously unsustainable. And then in the fourth cycle, you had just an enormous pileup of really negative events fueled by excessive risk-taking, bad ideas,

Robbie:
[6:27] Outrageous leverage, et cetera, that all sort of coincided, whether we're talking about Terra Luna or we're talking about eventually FTX, which was kind of the final blow to end that fourth cycle. But that hasn't really happened yet. Now, what we have seen happen that I think is cause for some concern is Obviously, there was a lot of exuberance around digital asset treasuries. Some of that may have gotten ahead of itself, right?

Robbie:
[6:53] And so that, so far, though, seems to be fairly orderly in the way that that amplitude has come down and sort of the, you don't see a lot of new financings being announced anymore in that category, the way you did sort of every single day this summer. You also see I think a worrying amount of leverage in particularly levered perps and so that really was the story of the October 10th flash crash there wasn't a whole lot of news worthy of a negative market reaction but you had so much leverage in the system and obviously you had some you know collateral pricing dynamics that exacerbated the the impact of that but to see how severe that reaction was. It's a reminder of just how much leverage there is on a lot of those platforms. And that also, we talked about that in the past, it's really confusing to sort of the marginal institutional adopter, the marginal financial advisor adopter, when they think of something like Bitcoin as this digital gold diversifier potential hedge. It exists outside of any one country's economic, fiscal, political, geopolitical matters, et cetera.

Robbie:
[8:12] And then there's these periods where Bitcoin and crypto trade like they're levered NASDAQ on sort of economic and macro news. And that's puzzling to people. And sometimes people try to slap this risk on framing on it to sort of reverse

Robbie:
[8:25] rationalize what's happened. I don't think that makes a lot of sense. The drivers of crypto and certainly Bitcoin are very distinct from you know, your traditional equities or other, you know, traditional portfolio assets. But when you have these levered futures where trading does behave that way and sort of amplifies these sell-offs alongside equities, even if they don't make a lot of fundamental sense, that's confusing to the incremental adopter.

Ryan:
[8:55] It's confusing. Does it scare them away? So when you have a $20 to $30 billion flash crash in the month of October, as we had in crypto, the biggest liquidation event that we've ever seen, does that scare institutional investors away from this asset class?

Robbie:
[9:09] It certainly does to some extent. I would say not all selloffs are created equal. And what's behind it has a larger effect necessarily than what the amplitude of the drawdown is. And so luckily for Bitcoin and crypto to some extent in that event was that the alleged explanation, the alleged trigger was so de minimis in terms of its plausibility as a negative event for crypto that it didn't really draw folks' attention all that much other than, wow, that was sort of a big sudden drop, which is different than, say,

Robbie:
[9:53] Back in April where you had tariff dynamics and equities obviously were down in the short term on that when Bitcoin also was down At the start, you had a lot of questions because people said, wait, like, fundamentally, this is digital gold. This is supposed to be a diversifier and a hedge. And why is it reacting to tariff news and sort of economic dynamics? And that didn't make sense to people. And it did temporarily give them pause. Now, to Bitcoin's credit, as we've seen in many other instances where this sort of behavior happened, by even just a couple of weeks later, Bitcoin was off to the races. Because the sort of long-term fundamental buyer base had said, you know, the more economic and geopolitical uncertainty there may be, actually, the more advantageous that is for Bitcoin as this global, scarce, decentralized asset that exists outside of all these economic and country-specific systems.

Ryan:
[10:52] Robbie, I remember you beating this drum when you came on. It was just over a year ago, I believe. And you talked about Bitcoin is not a risk-on asset. It's really more like an uncorrelated hedge-type asset, more like a digital gold. Now, when you see the performance of actual physical gold this year, and institutional investors see that, which is, you know, they've been calling this a debasement trade. I think gold is up on the air about 50% times. It was as high as 60% has certainly outperformed Bitcoin, at least from a year-to-date perspective. And so people are looking at that and saying, well, if physical gold is overperforming this digital gold, then maybe Bitcoin is not an uncorrelated hedge asset. Maybe we needed gold all along. Now, some people in crypto are saying, well, wait, just wait for the catch-up trade, right? Bitcoin is going to catch gold price. What's your take on this? And what do you tell institutional investors who are asking why gold just keeps outperforming Bitcoin on the year?

Robbie:
[11:57] Well, actually, some of this is gold's catch-up trade. Because Bitcoin actually had a massive rally to end 2024, going from high 60s to over 100K. And so that actually sort of artificially maybe inflated the 2025 starting benchmark a bit. And gold didn't have that same reaction that it's now obviously had a tremendous year since, particularly the last month or two. For a lot of that debasement trade rally that gold has been enjoying, Bitcoin was right alongside it, right? That is a big part of what buoyed Bitcoin to that $126K new all-time high. It was very closely tied, obviously, to the government shutdown developments

Robbie:
[12:44] and sort of continued fears over US fiscal and political dynamics in the long term. And that probably would have continued, frankly, if not for the October 10th flash crash, which had nothing to do with anything fundamentally for Bitcoin. But it totally derailed the momentum that had happened and created this sort of new hangover overall of crypto and certainly undermined and sort of in an unhelpful way for Bitcoin, changed the channel from the debasement trade, which it was enjoying alongside gold, to volatility and, you know, risk on type behavior, justified or otherwise.

Ryan:
[13:23] There was an article this week that made the rounds, at least among crypto investors. It was an article by an investor analyst, Jordi Basir. And...

Robbie:
[13:33] He was looking at the numbers and,

Ryan:
[13:35] You know, trying to explain the reason why Bitcoin has been somewhat stagnant, I guess, on the year. And again, year to date, right, I'm talking about. And one of his explanations for that was just looking at long-term holders, the original Bitcoin whales. And he had some graphs where you can kind of see long-term holders selling in these graphs. He brought up the point that, you know, Galaxy Digital, they did a $9 billion trade with some unknown crypto whale. And the point, I think the article was entitled The IPO Moment for Bitcoin. He was drawing an analog between public companies going IPO and the early believers, the early VCs, the early investors, the early employees kind of selling. And he's saying the original cypherpunks and libertarians behind Bitcoin, this is kind of their moment to sell as their capital has appreciated into the millions and the hundreds of millions and the billions. Now we have ETFs, and so they're taking opportunity to sell. So it's Bitcoin's IPO moment as one class of investors, maybe the early pioneers, early adopters, shifts to institutional capital. And he's saying that's the reason for some of the stagnation. Do you buy that argument? Do you see any of that in the data?

Robbie:
[14:51] A little bit, not entirely. I think that to draw a parallel to IPOs, I think maybe a little bit of a stretch here. I think more of what's going on is $100,000 was a target that I think a lot of very early investors maybe had for whatever reason, right? It's a nice round number, but people who came in and their cost base was $100 or $500 and $100,000 seemed like a nice round number to take some chips off the table. And frankly, I don't blame them. I mean, these are people who deserve a lot of credit for having the conviction over many years and through many volatile cycles, right, to continue holding and holding. And I think it's pragmatic the way I think about it. I certainly don't expect to ever have that kind of wealth in my life. But think about it. If you have a billion dollars, you know, how much better is your life if your billion dollars becomes two billion dollars? I think what, like maybe 2% better? Like not a lot better, right? So at some point, you do have to take some chips off the table and say, maybe it's not prudent to have 98% of my net worth in Bitcoin as much as I believe in it. And so I think that's probably the primary explanation of what's going on. I think it's entirely reasonable.

Ryan:
[16:12] We are 21 months from the launch of the BlackRock Bitcoin ETFs and all Bitcoin ETFs. So I've been in the market for a while, almost two years. I think one of the questions we have this cycle, however long this cycle continues or does not continue, is what's the catalyst? Who are the new buyers of crypto assets? One thing we've been waiting for for over a decade in crypto is for the institutions to come. Now we're talking to BlackRock. Now we have ETFs that have been purchased, I assume, by some of the institutions. So are the institutions here yet? How much crypto do they actually own? What's the next net new buyer of the Bitcoin ETFs if the institutions are already here? Do you see any catalysts?

Robbie:
[17:01] Well, the institutions are here at the very leading edge, right? So if you think about the big categories of institutional investors, you've got Family offices, asset managers, sovereign wealth funds, university endowments, foundations, corporate treasurers, insurers, pension funds. You have some adopters in every one of those archetypes, but not the majority, not even close.

Ryan:
[17:28] Did you also mention sovereign wealth? Do we have sovereign wealth in that category?

Robbie:
[17:31] We do.

Ryan:
[17:32] We do have some adopters in sovereign wealth.

Robbie:
[17:34] That's right. Wow. Yep. And so you have early adopters, but they're very much the minority still. And I'll tell you what is the critical thing that either unlocks or doesn't their adoption. It's all about correlation.

Robbie:
[17:50] And that's why, you know, we've talked about this in the past that I was on. I talk about this a lot. I'm sure it's very annoying to some people how often I harp on it. But it's because it is that important in terms of the way people look at this from an institutional allocation perspective. I was with a client recently, sizable pension fund allocator, and the CIO said, literally, that's the one metric I'm looking at. Correlation? That's right. Because if it actually is uncorrelated, digital gold-like instrument that is a diversifier and a hedge, it's a slam dunk to put a couple percentage of portfolio allocation in it, right, from their perspective. But if it's more like levered NASDAQ, if, you know, it's whatever this risk on narrative sometimes is. Proclaims it to be, even though, you know, that's counterproductive and also not really supported by fundamentals, then it's a totally different bar. Because then an investor has to say, what is the sort of broad investment thesis on the technology and the utility and the adoption curve and future money and all these sorts of dynamics, which lots of people do that analysis and they come out and say, okay, Bitcoin's interesting, ETH is interesting,

Robbie:
[19:15] You know, these other crypto assets are interesting, like you can get there. But it's a very different threshold. And you're competing against every other interesting technology play that exists in the world today. And there are lots. And that's a very different question than is this digital gold? And if so, well, then, you know, it makes sense as a hedge against monetary debasement, inflation, fiscal challenges, geopolitical uncertainty, to have some in my portfolio. So that's what almost all these guys are watching.

Ryan:
[19:47] So ideally, for them to buy more and buy in size, you'd want to see Bitcoin and other crypto assets, presumably, but in particular, Bitcoin correlated with gold rather than the NASDAQ and risk-on assets?

Robbie:
[20:01] That's right. So for Bitcoin, that's the thesis, right? for the vast majority of new adopters, say, is this idea of it as digital gold, right? A global, scarce, emerging monetary alternative. For the rest of crypto, it's about blockchain adoption, digital asset and blockchain adoption, right? And so the proof point for Bitcoin is How does it consistently behave against that? And people have to look beyond these short-term moves, which are largely driven by levered perpetual futures kind of volatility. And more about, you know, medium and longer term, how does it track against that dynamic? And when you look at it in a more zoomed-out lens, it's actually been very compelling, even with these short-term variations. The proof point for ETH and for the rest of crypto is, show me the use cases, show me the adoption, show me how the technology's actually being deployed and transforming different parts of our economy and financial system.

Ryan:
[20:57] And so back to are the institutions here and in what size? So you seem to indicate that there are pioneers in each of the major categories that are here. Are they in size yet? Like if we were to try to say, I don't know, if it's a baseball game, what inning are we in as far as institutional capital that could be allocated to crypto? Or what percentage of 100% are we kind of in? I think what we don't really have, what crypto natives, many of the bankless listeners probably don't have a lens for is how much institutional capital we actually have. Like how far, we know central banks like don't really own very much crypto, but how about these large institutions? Have they already bought in or are they just starting?

Robbie:
[21:48] Well, I would say that the allocation levels that you're seeing from those who have is typically in kind of a 1% to 3% range. So that's the most common range that we're seeing from those who have. And that's actually pretty significant. And the way that's showing up, the first quarter after we launched the Bitcoin ETFs, IBIT, for instance, was over 80% direct retail investors. Every quarter thereafter, that number has come down to the point where today it's close to 50%. And so the other 50 is the growth in wealth advisory and institutional. And so the trend is very clear. Those latter buckets, which are, of course, a larger asset base ultimately than retail investors in the direct channel are today, is moving more slowly. But they are moving and they're paying attention to a lot of the subtle dynamics around adoption, around long-term tailwinds, around political and regulatory environment, and yes, around some of the price behavior and how that fits or doesn't with certain investor narratives.

Ryan:
[23:08] So we're still early in the journey, it sounds like, even with respect to institutions. How about central banks? I mean, part of the big driver of gold, at least lately, has been talk of central banks increasing their gold allocation, China, Russia, other central banks. We haven't seen quite that movement or anything close to that with respect to Bitcoin. But the whole Bitcoin crypto narrative has been in the fullness of time. It starts with retail and then it gets to institutions, larger and larger institutions. The biggest institution of all is a central bank treasury. And that's where gold has found itself.

Robbie:
[23:43] How long will it take

Ryan:
[23:43] Bitcoin to find itself there? What's the path?

Robbie:
[23:47] Well, I don't think that that should be a core part of anyone's investment thesis. Remember that central banks, absent a little uptick here, the historical trajectory is they've moved away from gold, right? That used to be the fundamental basis of central bank reserves. And as we moved off the gold standard around the world, the migration has been in the other direction. And obviously, there's a little bit of a rebound in the last couple of years. But, you know, for Bitcoin, I think those other institutional categories that I mentioned are probably far more likely to see meaningful adoption, sovereign wealth funds, pension funds, insurers, endowments, foundations,

Robbie:
[24:28] family offices than our central banks could happen. You know, there have been more surprising things that have happened. Certainly there's discussions in various countries about the strategic value of accumulating some degree of Bitcoin reserve. So that is happening. But I would say that's kind of an out of the money option at this point in Bitcoin's valuation.

Ryan:
[24:48] Let's talk more about the ETFs. So the two big ETFs that BlackRock has launched are IBIT, the Bitcoin ETF, and ETH-A, the Ethereum ETF. How successful have these products been? And can you put this in, I guess, a comparative lens with other ETFs that you've launched over the many decades at BlackRock?

Robbie:
[25:06] Yeah, it's been pretty amazing, right? And I think that what's happened is the value prop of being able to hold these assets in a accessible, turnkey, convenient, low cost way, you know, that for the traditional investor, the institution, the financial advisor can be, you know, traded as conveniently and held as owning any stock.

Robbie:
[25:34] Has been massive, right? And so a meaningful share of the investor base and particularly of new adopters, the ETF has been resoundingly their vehicle of choice. And the way that's manifested, you combine that, the value prop of the ETF wrapper, which has tremendous appeal, obviously, there's a reason that there's many trillions in assets held that way today, with Bitcoin and with Ether, which have justifiably generated a lot of excitement from now hundreds of millions of people over the world, you get a recipe for what we saw, which was unprecedented levels of inflows and asset growth. So IBIT today has been the fastest growing ETF post-launch in history, fastest to reach 80 billion by a factor of roughly 4x faster than the prior record. And then Ether has been the third fastest in history to its respective milestones along the curve, 10 billion and now 15 billion. So it's been quite a remarkable couple of years, no question.

Ryan:
[26:40] ETH had a bit of a slower start. The IBIT ETF was just like rockstar from the very beginning. It has felt like the Ethereum ETFs, they really took off during the summer. And I don't know if this was the Tom Lee effect or what, you know, Tom Lee launched, of course, his Ethereum DAT strategy over the summer. It seemed like the Ethereum ETFs were really catching a bid this summer, although the inflow has been positive for quite some time. What changed and how do you explain the more recent uptick in the Ethereum ETF? Has this been a narrative that has finally clicked?

Robbie:
[27:18] Well, I think for one, sentiment in Ether had gotten overly negative. If we think back to this winter, you know, I think it got even below 1700 and, and it was kind of all doom and gloom. I think that was a little bit overdone. And so there was, there was some element of a relief rally once that, that reversed. And, you know, people recognize that there's still lots to be excited about in Ethereum. And I think it was also helped, frankly, by the genius bill and optimism around stable coins and, and the growth of that as a really powerful use case. I mean, there's lots of people who look at this space and, you know, maybe they've struggled to. To really resonate with it in lots of different applications that have been thrown out and that have been explored over the years. But stablecoins is such a logical one to so many people when you see what an unlock that is for moving value around the world in a low-cost, efficient way. So stablecoins, I think some of it's optimism around tokenization, which obviously has been a topic that's generated a lot of excitement, particularly in the last year. We've seen, you know, green shoots of progress in terms of growth and adoption there. And so I think all those things together were enough to really, you know, change sentiment and get folks' attention that drove what, you know, was a pretty extraordinary summer of inflows and price action.

Ryan:
[28:47] This word tokenization, this has been a word that Larry Fink has uttered more than a few times recently. I was watching him on CNBC, I think it was a week or so ago, and he said this, I believe we're at the beginning of the tokenization of all assets from real estate to equities to bonds across the board. And he described this as taking traditional financial assets and repotting them, kind of a tokenization shell. Can you paint the vision of how that happens? So we obviously, we have stable coins, so that's one form of tokenization. But Larry's talking about tokenizing all of the financial assets that we have. So how do we go from here to there? What's the tokenization roadmap for BlackRock?

Robbie:
[29:32] Well, we, as you know, really started with Biddle as our first public blockchain tokenized fund. It's a tokenized private money market fund. And that's been very successful, right? Almost 3 billion in assets and the key unlock there and I think this is a really important point to remember It's all about taking the generalized value prop of tokenization, which has lots of exciting things, right? 24-7, real-time settlement, digitally native, global, interoperable, programmable, and saying, how do we deploy that in a given asset class in a way that creates material new value or utility for investors, right? And so in the case of Biddle and in general, in the case of money market funds, tokenizing them has broken the paradigm that previously existed that forced you to choose between capturing full yield on your U.S. Dollar savings and having full liquidity, right? For the first time, you could hold U.S. Dollars in a tokenized money market fund. And then as soon as you needed liquidity to make a payment or settle a trade, etc., you could convert that to a stable coin.

Robbie:
[30:52] And that I think is a really powerful value proposition. That's why this asset class far and above any others to date has seen real growth and adoption and tokenization. So now the question is, where do we go next? And a lot of it is going to stay in this category, right? Because there's lots more to do to be able to open up access and serve more

Robbie:
[31:13] and more clients and investors. But also it's about figuring out what are the, you know, second and third, you know, next most viable asset classes where you can use tokenization to drive real utility, to expand access, to create an incrementally distinctive level of value for users of that. And that's the journey we're on now.

Ryan:
[31:37] It seems like an exciting journey. I noticed a headline that I didn't quite understand. It was earlier this month, and it was BlackRock unveiling a Genius Act aligned money market fund. I wasn't actually sure if this was Biddle or something else. And what in particular needs to be Genius Act aligned? What does that unlock for money markets and other tokenized products at BlackRock?

Robbie:
[31:59] Sure. So there's a regulatory construct in the US called 2A7 and that describes a very specific, very strict approach to managing a money market fund that is meant to effectively maximize liquidity and safety of the way that's held. And it turns out that the Genius Act prescribed a reserve management framework that was quite similar to 2A7. But not quite the same.

Ryan:
[32:31] I see.

Robbie:
[32:32] And so what that headline was referring to was an existing fund that's a 2A7 fund simply having some slight modifications to the reserve management approach that would make it a viable option as a genius compliant measure. Now that fund is not tokenized, right? But that is saying to the extent there are potential money market fund clients who do need to hold their assets in a Genius compliant way. That's a vehicle that historically has always been 2A7 compliant. Now it's also going to be Genius compliant.

Ryan:
[33:10] So this is about BlackRock getting its money market funds in a position such that they can be used by other companies to essentially back their own stable coins. So this could be the backing for other stable coins out there.

Robbie:
[33:23] That's right. We would expect that the vast majority of stablecoin reserve assets are going to be in money market funds. And that's it. Competency that we are very deep in at BlackRock. We manage roughly a trillion dollars in liquidity funds and money market funds globally. And so it's exciting to see the growth in stablecoins, which we're big believers in. We've had a longstanding partnership with Circle dating back to 2022. And the growth of USDC, particularly in the last year, has been amazing to watch. And we're very excited for that. And so this is a category that's going to, I think, continue to grow in significant ways.

Ryan:
[34:05] Last time you were here, we asked a question about tokenization in terms of what's missing, right? What's missing to get tokenization off to the races? And you said there were three things that were missing, institutional custodians,

Ryan:
[34:18] secondary marketplaces, and more regulatory clarity. In the past 12 months or so, how far have we come on those three dimensions of what was missing?

Robbie:
[34:29] So I think the first one, actually tremendous progress in a little over a year, where a number of the largest global banks, global custodians, have or are developing capabilities for custody of both crypto and tokenized assets. So I think outstanding progress on that front, and that's going to be critical, certainly, because if you think of the majority of institutional investors, they are, intend to, they would want to, if they're going to hold an asset that they used to hold in a non-tokenized form, and now they're going to hold in a tokenized form, they would way rather be able to just do that with the existing custodian that they use for whatever that asset class is or whatever that fund category is. And now that's possible,

Ryan:
[35:15] Much more possible than it was.

Robbie:
[35:17] Well, it's made tremendous progress, I would say. It's not quite there in a fully ubiquitous way, but it certainly seems to be headed in that direction. Liquidity venues, I would say, mixed. There's been tremendous progress, obviously, in the DeFi world of creating platforms for tokenized assets to trade and also to do other things with them, to borrow against them, use them as collateral, et cetera, but less so in sort of the TradFi exchange world extending into tokenization and listing assets. And so I think that may yet come. And certainly, we've seen some announcements to that effect in recent months. And then the third piece, the regulatory clarity, and this is the really interesting one, as much as, you know, this SEC has been, you know, incredibly supportive of innovation in this space, this is a really hard problem. It's not as simple. I think crypto people sometimes need to realize that regulatory clarity doesn't just mean clarity that there are no rules.

Robbie:
[36:18] And so there actually is a really complex challenge before us as an industry and frankly in concert with agencies like the SEC to figure out, how to make the old set of rules and what novel rules and exceptions come into play that harness the innovative potential and opportunities from this technology without undermining some of the key principles that exist in market structure today. And I don't think there's anyone in the world who has written down on a piece of paper, like, here's all the answers. If only the regulators would do this, then it would be great. It's a really hard set of problems to solve, and that's a journey that we're on with other players around the ecosystem and with regulators.

Ryan:
[37:07] On this journey of regulatory clarity, is this going to take bills in Congress? Is this going to take something like the Clarity Act, or is most the blocking and tackling behind this sort of rulemaking with regulators and sort of just defining processes and the nitty-gritty of things? What's it going to take?

Robbie:
[37:25] I think it's meaningfully more complicated to try to create legislation to address all the tokenization-related regulatory challenges. And so I think that that is more likely to happen at the agency level than necessarily through a new piece of legislation. We'll see how that plays out, right? There have been points where that idea has been floated of trying to tackle tokenization within clarity or within a separate bill, and that may yet happen, but there's, as I said, it's a pretty complex topic. The good news is there's a lot of positive energy around finding ways to help make this work, to support innovation in the space, particularly innovation around tokenization. So I do, as hard as the challenge is, I'm quite optimistic. And then do

Ryan:
[38:17] You feel like we've made progress on that? So if it's a lot of blocking, tackling, regulators, you're just sort of defining things. 12 months ago, I don't know where we are. Were, but now as you look forward to like where we are now and even looking forward over the next 12 months, do you get the sense that we're making a lot of progress, that we're on the right track?

Robbie:
[38:38] I think so. I think that, frankly, what needed to happen was for players in the ecosystem to actually, you know, do the work knowing that there was an opportunity to engage with regulators and figure out solutions to these problems. For people in the industry to do the work of actually defining in a very clear way what the problems were and what a reasonable set of solutions would look like, I think that work has happened on a lot of fronts. Now there's a process of engaging with regulators in a very consultative way. It's been a very sort of consultative, collaborative process to try to put that into action and deliver the clarity that's needed.

Ryan:
[39:21] So if we have the institutional custodians, if that's kind of, you know, checkmark, and we're on the path towards greater regulatory clarity, will we get the third by virtue of that? So once we have more of the regulatory clarity, will we get the secondary marketplaces?

Ryan:
[39:36] Will we get the liquidity? And is this all falling into place now?

Robbie:
[39:40] I think that is the natural progression of it. So obviously, this is a space that we're spending a lot of time on as a firm. Lots of players around the ecosystem are. And I think that these elements of progress across those three threads that we've talked about do have a self-reinforcing sort of flywheel effect compounding off of each other. And so this will be a pretty pivotal 24 to 36 months ahead where tokenization really has an opportunity to prove itself in generating adoption and driving real incremental utility and efficiency in markets in the way that has long been held out as a real area of promise.

Ryan:
[40:25] What's the bull case if we look forward to, say, five years from now, 10 years from now for tokenization? I recall you saying last time it's kind of a binary. Either we have kind of no tokens, none of this works, or basically everything. We have many tokens, everything is tokenized. So looking at kind of Wall Street and U.S. capital markets in five to 10 years, is basically all of our assets when it comes to ETFs or stocks or real estate, just everything under the sun, is it all available in some sort of token form and all of this available on kind of your Aladdin platform, let's say?

Robbie:
[40:56] Well, that is the bull case. I think five is probably too soon, but when you talk about ten, With all these technology innovations, right, there is a S-curve where if you really hit liftoff, the rate of adoption can really accelerate and there can be a fast-paced migration to a new technology paradigm. And that's the journey that we're on. And as you noted, there were many asset classes that are pretty interesting candidates for this. Obviously, we started with money market funds, but you think about stocks, bonds, ETFs, commodities, real estate, private markets funds, lots of asset classes that have been tried with mixed degrees of success. But once you have a bunch of asset classes that hit that inflection point, it becomes a lot, a lot easier to bring along other asset classes in behind it because more and more people are migrating to that new infrastructure paradigm and they've built comfort with it and they've built the capabilities and the systems to be able to interact with it.

Ryan:
[41:58] Who's left to convince on Wall Street, Robbie? So I think, you know, crypto's taken a while to really saturate in Wall Street. It feels like in this cycle, we had some major achievements on that score. Even Jamie Dimon, I think there was a clip from last week, he's got this quote, crypto is real, blockchain, stable coins, JP Morgan deposit coin, you can move stuff, smart contracts are real, all this stuff is real. It'll.

Robbie:
[42:22] Be used by all of us

Ryan:
[42:23] To facilitate better transactions and customer service. This is even Jamie Dimon, who has himself been crypto skeptical in the past, seemingly warming up even further to crypto. Is that everybody? We've got BlackRock, we've got JP Morgan. Is there anyone else left on Wall Street to convince?

Robbie:
[42:42] Well, frankly, JP Morgan has been a great leader in this space and they have been for many years. And that's, you know, they've done a lot of development work around tokenization. They're a huge player in the IBIT ecosystem. They've been a leader there. So, They've been innovating, I think, frankly, the group that needs to still be convinced is actual investors, right? Because that's one of the challenges that tokenization has faced so far is that these projects will develop tokenized asset offerings and the end investor demand hasn't always showed up, right? And that's not, you know, their fault. It comes back to what is the actual tangible utility unlock that you're using tokenization to generate for me? And does that overcome the inertia effect and whatever risk and operational complexity is involved in migrating to that new format? And so the bar for that is pretty high.

Ryan:
[43:46] And we've passed that with stable coins, but it's not clear that we've passed that with other assets. Maybe flip this. Is there maybe a more bearish case for tokenization? So what if we only get to stable coins and money market funds that kind of back stable coins and the Biddle Fund and that sort of thing and nothing else takes off? Can you envision that world? What would go wrong, do you think, with tokenization in order to have that type

Ryan:
[44:11] of a more bearish outcome.

Robbie:
[44:12] Yeah, I think that probably the bear case is that only stablecoins work, right? It's hard to imagine a world where not even stablecoins have significant adoption because already today it's 300 billion in market cap, right? And that's in a pretty high interest rate environment, which is remarkable, right? So... The stablecoin value proposition, this ability to move money around the world in near real time at near zero cost between any two people with a smartphone to get access the world over to digital U.S. Dollars, which many, many billions of people around the world have shown a clear desire to be able to have that access. That horse has left the barn. And it's just a question of how fast and how broadly adopted across other domains do stablecoins get. Whether we're talking about retail remittances, which are massively inefficient today, cross-border payments for corporate multinationals, which have lots of frictions and costs associated with them, and maybe more ambitiously, financial market settlement activities. So subscribing and redeeming from funds in stablecoins, settling trades in stablecoins, processing corporate actions, margin and collateral in stablecoins. So lots of pretty exciting applications for it. But that, I think, if that's the bear case for tokenization, it's actually not that bad.

Ryan:
[45:42] I mean, even the bear case, I guess, with stable coins and the genius bill, it's not clear that that's been, I guess, fully priced in. It seems to, you said the horse has left the barn, but it seems like we are

Ryan:
[45:51] only getting started on that. How is that going to shake things up or change things across traditional finance? I mean, will this change the structure of banks? There have been some instances where maybe some banks are not favorable of letting interest go to, say, crypto exchanges. At least there's been some fights about this. But one gets the sense that the underlying structure of traditional finance will be shaken up, will change a little bit with the advent of stablecoins. Do you know how? Do you have any predictions?

Robbie:
[46:22] Well, what's interesting is I think if the industry executes well, then the whole sort of fight over interest, which ultimately was banned in the Genius Bill, becomes not that big of an issue because tokenized yield funds become the natural vehicle through which users hold U.S. Dollars on a sort of going concern basis, digital U.S. dollars, and capture that full interest. and they're holding these assets, which are clearly securities, but that's okay because they're being used to hold, not to make payments. And then the moment they need to make a payment or settle a trade, they convert, right? And so stable coins become sort of the operating cash and tokenized yield funds become the investment or hold cash. And... The latter is where you capture yield. So even if stablecoins don't pay any yield, they're still going to be very useful in payments. And we sort of see that as the natural future state of this ecosystem. And obviously, to do that, you need to really drive frictions to zero, pretty much, in moving between tokenized yield funds and stablecoins. Need to have tokenized yield funds that are accessible and that have essentially instant and very, very cheap liquidity convertibility back and forth between themselves and stable coins.

Ryan:
[47:51] If we have that, do you see a world where we have many different stable coins? Or right now we have kind of two power law winners. There's Tether and USDC from Circle, but will that change? Will we have hundreds, maybe thousands of different stable coins?

Robbie:
[48:05] I don't think so. So, you know, network effects are really powerful in the stablecoin space. And so there's a lot of value in being widely accepted and having liquidity from a trading perspective and being, you know, used on platforms ultimately in the future in having liquidity and volume in a foreign exchange pair against that stablecoin. So, you know, I think you'll continue to see, you know, growth in the industry and healthy competition, but I certainly wouldn't expect we'll have, you know, a thousand different stablecoins. I don't see that level of fragmentation as being efficient.

Ryan:
[48:41] We're getting closer to the end of 2025 and the beginning of 2026. If you fast forward and you think about maybe November of 2026, what do you hope that crypto has accomplished by that time? What does it look like? Are there some major things in your mind? And maybe the same question for BlackRock.

Robbie:
[49:00] Yeah, I think that the big test of the next year plus is going to be, okay, for many years, there was frustration over an absence of regulatory clarity in the U.S., right? And certainly, you know, some of that was a fair complaint, but it became almost a mantra or cliche at points to hear, you know, regulatory clarity, regulatory clarity. Now that's coming, right? It's been a very supportive environment from that standpoint over the course of 2025. And so the test is going to be prove it. Show the adoption, show the real economic use cases. And there's obviously lots of really exciting early proof point, proof of concept type stuff happening particularly in the DeFi world. But show me the examples of places where we as a human society or economy either couldn't do something or we had to do it, but in a really inefficient way. And then using blockchain or using digital assets, we've now solved that and we do it overwhelmingly using blockchain in a much more efficient way, right? And to date, there's been a pretty short list of things that fit that category.

Robbie:
[50:25] Bitcoin as a first monetary instrument in 3,000 years to gain global adoption because of its technological breakthroughs. Stable coins and moving value around the world in a 10x better, more efficient way. And a handful of things that are happening on Ethereum and some of these other blockchains. That sort of tidal wave of really powerful use cases, I think, we're still waiting on beyond that. And now it's finally the environment where that regulatory support exists. And so it's time to prove it.

Ryan:
[51:01] 2026 is the show me phase. Maybe it's the building phase. Robbie, this has been great. I mean, last question. So every cycle we have institutions who talk about crypto, but they don't necessarily follow through and build or get very excited during the bull market, but they head for the exit, you know, as things turn down the bear market. And so for those institutional investors or those institutions who are building on crypto, and this is maybe their first cycle actually in, they see this volatility, you know, they see the $30 billion sell-off or red days like today,

Ryan:
[51:36] where this looks to be maybe a negative 10% on total crypto market cap. And they start heading for the exit. What's your advice to them?

Robbie:
[51:44] Well, I think my advice is more for the people coming in, in how they approach the space. I think it's very important to be discerning and to be very particular about which assets one is going to hold, right? There's a reason Bitcoin is still roughly 65% of the market cap of the space because it has very clear product market fit and investor narrative and a big addressable market is this digital gold-like asset. There's a reason there's consolidation in a lot of the rest of the market cap in a few top assets, which is those are the handful that have really proven themselves and developed some degree of product market fit and economic utility. One has to be very wary going far down the table. There's hundreds of thousands of crypto assets out there today. The vast majority of those are or will be totally worthless. And so investors have to be careful around that. And they also, I think, should be wary around trading on a short-term basis. Certainly, short-term levered basis is a tough game a lot of times in the crypto space. And I think the people who've done the best in this space have taken a much more long-term fundamental view and understood that you have to be patient and you have to understand that there's volatility in this space and there will be cycles.

Ryan:
[53:08] Robbie Michnick, thank you so much for joining us. Best of luck to BlackRock in the show-me phase of 2026. I appreciate your time today.

Robbie:
[53:14] Thank you, Ryan. Good to see you.

Ryan:
[53:16] Got to let you know, none of this has been financial advice. Of course, you could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad to have you on the bankless journey. Thanks a lot.