ETF Edge - SEC tinkering with tokenization 9/28/26

Episode Date: September 28, 2026

The U.S. securities regulator has moved to allow limited application of tokenization. Could the technology eventually be “ETFs 2.0”? Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to ETF Edge the podcast. If you're looking to learn the latest insights on all things, exchange traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors. I'm your host, Dominic Chu. The SEC has given the nod to tokenization, but there's a catch. And the tokens themselves might not even be the most important part of it. Here's my conversation with Nick Churney, Janice Henderson's head of innovation, along with Gabor Gorbache, Open Assets, founder, and CEO.

Thank you both for being here with us right now. Let's talk, first of all, with a broader question, and I will direct this first towards Nick. I want to know. I have a kind of understanding, but I'm trying to get my arms around tokenization. What exactly does it mean? And what exactly does it mean to have tokenized equities

and or ETF products that are going to be coming to market anytime soon? Yeah, I mean, eventually what it means, right, is that the broader financial system, whether it's ETFs, mutual funds, your bank accounts, et cetera, is operating on a new technology stack, right? And that technology stack is blockchain. And today, what's going on there is really around crypto. Most of the activity that's happening on blockchain, people think of it as crypto assets,

crypto trading, et cetera. But eventually, we're going to get to a place where it's kind of a lot more boring than that. And there's parts of this happening already today. We see it in industries like payments, in a lot of other places. But we need to get there kind of step by step, right? And to do that, what we need is funds, whether it's ETFs, mutual funds, what have you, to be represented on those blockchains so that you can move them around like you would a crypto asset.

And that's ultimately where we need to go. But, you know, we got quite a few steps to get there, and the regulation is a big part of that. So this regulation right now has in essence opened up a window to allow this kind of product technology or innovation to enter the U.S. markets in a kind of more controlled fashion. Janice Henderson already has portfolio products that are so-called on-chain or tokenized. What exactly does that mean? And how exactly does it differ? A tokenized fund, an ETF versus the ETF itself that you would trade. anywhere like on Fidelity, Schwab, or whatever platform you're on.

Yeah, I mean, this is the reason that this kind of step from the SEC is really important because today, right, we have about $50 billion worth of ETFs globally. And they are accessed and distributed through the sort of traditional channels that people would expect, whether that's their, you know, wealth manager, through a brokerage platform, et cetera. And then what we're doing in tokenization is really isolated from that. It's a separate universe of investors. and we operate entirely offshore today because we don't have the regulatory clarity

and some of the infrastructure pieces to make it possible for us to do it really at scale within the U.S. But right now we have sort of very similar funds, similar strategies that we manage for institutional investors who want to operate on-chain, who want to be able to integrate these types of solutions,

these kind of investment opportunities into their portfolio alongside the other sort of crypto assets, decentralized finance, there's a sort of a range of reasons that people are using these things. But this is a step to us bringing that closer to sort of that traditional model

that we would expect, you know, an individual investor, for example, in the United States, to be able to access through, you know, Schwab or Fidelity or whatever their brokerage platform is. But this is sort of a step in that direction still. Gabor, it's an interesting point that was brought up here with regard to kind of the similarities

and maybe some of the subtle differences. I wonder if you could take us through what exactly it looks like, from a big picture standpoint, and we'll drill down further, but from a big picture standpoint, what it means to be invested in a fund or a portfolio of assets that are put in an ETF wrapper right now, as opposed to owning units in that same fund

that are then maybe put onto a chain, a blockchain somewhere that shows you what that ownership is, who had it and when the transaction occurred. Yeah, so if you want to think about tokenized assets, it's basically the same story as the ETS, but a little bit more evolution and infrastructure side. So it's better, faster, and cheaper. It's the next wrapper after ETS, but it's also changing the fundamental structure in what I call the post-ETF world. So today, you go through around nine different intermediaries when you hit that buy button on Fidelity, Vanguard,

interactive brokers or wherever until you own a stock. The new SEC regulation basically says that under, if you are an Rigan-MS stock, you can now structure it in a token format and sell it on the U.S. ETF markets or U.S. markets. It could be stocks. It could be bundled stocks like ETS and securities that, you know, you trade today. So simultaneously trans-regent laws also underweregiant laws also underw. rules have also changed. So now you can record ownership and the ownership

records similarly to what you do in the traditional finance world. So the experience will be very similar, except you'll be able to hold your security on your phone. And you can also settle it much faster. And tokenization will be basically allowing us T0 settlements, which is, again, not here today. But for all intents and purposes, the experience should be very similar.

The underlying infrastructure and cost structure changing fundamentally. So we expect actually a tenfold reduction in costs because of the organization and infrastructure change and basically a reduction of 6 to 7 intermediaries from the current system of 9. But the experience shouldn't change that much. How, Gabor, could I follow up there? You laid out some of the maybe similarities

and subtle differences. But how exactly does that experience change given the fact that something is on chain versus not on a chain? You mentioned all the counterparties that are involved in the transaction of an ETF. What exactly will be similar and different big, again, big strokes-wise, in just buying my ETF and portfolio units in my traditional route versus on-chain, why exactly is on-chain going to be the future besides the fact that you mentioned cost? could be significantly less. Yeah, so again, the rule changes on transfer agency particularly are important.

So who records the ownership is changing? So it might not be the DCCC, it might not be your fund administrator or custodian, but you will be able to transfer agents, these new type of transfer agents, like Open Agent, will be able to basically transfer ownership more efficiently. The experience, again, should be very similar. It is the plumbing for large institutions that will change. The end user experience will be relatively similar. Again, just the system will be more efficient.

The un-chained pieces of it is, I think crypto did a good job showing that distribution is possible into more retail user bases and untouched parts of the world. So currently about 89% of the world does not have access to a brokerage account. So issuers, ETF powerhouses, managers, and even stock and bond issuers will be able to distribute their products more broadly. But again, for the end-devil markets like in the U.S. where brokerage participation is pretty high, the experience will be similar. All right.

Nick, one of the interesting parts about this conversation as well is just how, I guess, forcefully and how, I guess, maybe, I guess the right term is to maybe say, how quickly will people adopt this kind of technology? There's a reason why there are some folks out there offshore to the United States who are a lot more active in these types of markets with regard to tokenized assets on a blockchain somewhere. When you roll out hypothetically or any other issuer does in the United States, fund-link products that are then tokenized and put on a chain somewhere,

how quickly do you feel as though you will have to deal, with the adoption? Is it going to be a ramp up relatively quickly, or do you think it'll take years before people really start to feel as though they have the comfort level to transact in tokenized products that are on a chain somewhere that are not necessarily something they can go to their online account and see, this is, I hold 100 shares of some Janice Henderson fund? Yeah, I mean, you know, I started an ETFs, you know, almost 25 years ago. And at that time, we were, you know, out talking to investors about what the benefits were. of ETFs and why they should consider using them. And I think they were quite clear, right? There was

very material advantages to investors in many cases to use an ETF over a traditional fund wrapper. And yet 25 years later, we're still having that conversation, right? And so I think the adoption will be faster here just because of the nature of the technology. And so just purely cost, right, which we're talking about is not going to be enough. I think if you said the only benefit of having these types of wrappers move on chain versus a traditional brokerage model was going to be cost savings, I just don't think it would be enough because to your point, the U.S. market is pretty efficient. So there's costs that we can cut out.

There's a lot of intermediaries. Let's simplify it. Let's make it better for investors. And we certainly think that's going to happen. But as you go offshore, maybe it's much, much more inefficient. And so there's a lot more savings to be had there. So I think what you're going to have to see is adoption offshore to really crystallize this, create a market, create some dynamics.

and then onshore it's going to take a little bit more than cost. And I think one of the things that is really critical is unlocking new things that you can do. So if you think about ETFs, right, the fact that I can hold an ETF in a brokerage account, what's one of the things that it made possible for investors that they couldn't really do in a mutual fund? Well, it was shorting, right? Before the advent of the ETF, the idea of individual investor, even a very high net worth investor, being able to go short an actively managed portfolio or a diversified fund, it was virtually impossible. And now it's just normal, right? I can buy options, I can short. There's all of this infrastructure

that's now deployed against ETFs that wasn't possible in traditional fund wrappers. Well, there's another evolution of that, which is coming with blockchain. And so there's this idea that I can sort of custody my assets in my wallet. And now I can do all sorts of things across barriers that today exist in traditional financial markets. So even just simple things, if I think about my bank account and maybe I need to have a checking account and a savings account to get a little bit higher yield and then I need some assets in a money market fund and then I need to be able to wire money. All of that can be collapsed, right? And in addition, I can now start thinking about other assets that can come in there. So in some future state, what if I want to

pay my rent with my S&P 500? Right. Today, that's just impossible. But this utility, this increased ability to make your assets, your investment assets, deliver more value to you, I think is really what's going to drive that adoption. And so I understand Gabor's point that it should be kind of seamless. And so that is true. We can replicate the existing brokerage model on chain and have an investor not really see anything different. But I actually think what will happen is whole new business models will evolve. And we're seeing this already in, for example, crypto exchanges, who've pioneered whole new ways to trade crypto assets offshore largely. But that can, you know, come onshore, right? And it's going to touch a lot of different parts of the financial market.

And I think that's why the SEC is doing what they're doing, which we certainly applaud around this innovation exemption is, well, let's start. Let's start the process. Let's get people experimenting. Let's test the system. But ultimately, I think it's more than just cost. There's really changes in the fundamental way in which financial services can be delivered. How much, Gabor, I'll ask this to you because it was brought up, and Nick just brought it up, this idea that there are seamless aspects of this. It also, by the way, necessitates a comfort level with a kind of technology that is not inherent to financial markets in the U.S., at least right now, but that could be in the future. How much are people going to look at this and say,

I need extra security? You know, Nick mentioned, could I have it in my own digital wallet? Is that kind of detached from other networks, or is it kind of like in a cold storage capacity? something you access on your phone that access as a chain. There are a lot of concerns with regard to just how people know they actually own the asset and what they can actually do with it. So how exactly does that comfort level shift and evolve over time in your mind, given what we know right now and what you think the trajectory could be in the coming years? I think people are already getting more comfortable and especially experiences outside of the U.S. Everything is digital, people bank digitally.

And in many ways, before blockchains, people haven't really owned their asset. They trust their banks and they trust their Dasey chain of intermediaries. And cutting out those intermediaries actually should give comfort to people that they own the asset more directly. Should something happen? So that's one. Certainly some education is needed on the security side and there are many companies doing that. But I think the story that also Nick was mentioning is that there's going to be more utility with these type of assets. and more use cases.

And I would also say one of the interesting things that we're seeing our platform is supporting around $5 billion in issuances from various places. And the issuers who didn't traditionally get to go to the public markets are now coming forward and they issue their assets. It's tax the drivers in Kenya. It's small governments issuing bonds. It's microfinance companies that don't have access. to traditional markets are starting to issue new products and that will be available to folks.

So there's a lot of benefit going on, not just for investors, but also, you know, a large part of the world actually does not have access to capital markets because it's so expensive. It's so expensive to issue an ETF. It costs from hundreds of thousands of dollars to millions of dollars to do that. And again, compressing the fees around it will have benefits for capital to go around to, you know, a lot of places beyond ETF issuers and, you know, into the hands of people. So very excited about it. I don't think the technology piece is a barrier experiences are inherently digital.

And I think crypto experiences are also getting sort of like more seamless. And I think that's what's getting adopted on the tokenized asset side. And again, just remember ETFs and I, you know, Nick is in the space for 25 years. I was in ETS in 15 years. When I joined the ETS for a trillion-dollar asset class, now U.S. ETS are around $16 trillion, and global ETS for probably around 24. Tokenized assets are still for all intents and purposes, which stable coins included are below half a trillion. So we are just seeing that inflection point in adoption.

But it's going to be faster as I'm excited, too, because the world is inherently digital and on the phones now. So, again, that's just happening to stocks, and I'm very happy to see that. in the United States. And one of the big reasons why this is important is because we cannot have atomic or, you know, T-0 or real-time settlements for cash or securities without this technology. So this is the technology that's operating the 50 to 60 or financial system that's, you know, brought with risk and this is a lot of problems. So I'm excited about it.

And I think the markets are realizing the benefit of this technology to very quickly. Nick, it's an interesting point because a lot of the reason why we're talking about this right now is because financial regulators, specifically folks like at the SEC, CFTC, have kind of taken it upon themselves from an executive standpoint to put these products out there to allow them a little bit more of that innovation runway. You work for a traditional asset management, traditional Wall Street, a fund manager and Janice Henderson that issues things like mutual funds and ETFs, a 40-act company. The SEC itself is now going to allow this type of innovation to happen. If you are the head of innovation at a traditional Wall Street asset manager, why is it important for the U.S. in this market to move ahead with this? Is it a competitive issue? Is it one where you feel as

though if we do not move in this way, that we are going to lose ground to international competition. And by the way, if that is the case, why was it so difficult to get the Clarity Act through Congress? Yeah, I mean, we're a $500 billion global asset manager, right? So we have offices all around the world. We have clients in all different jurisdictions. And as I mentioned, our efforts in tokenization have largely been offshore. And you're seeing that everywhere, not just large institutions like, ourselves, but, you know, new companies that are starting up, creating these innovative new products,

and some of them may work, some of them may not, right? This is sort of the power of capitalism. We'll see who's going to win, but I liken it to the early days of the internet where, you know, you had all of this cool stuff going on and nobody knew exactly what the internet was going to be. And if we don't create the sort of regulatory framework within the United States for that experimentation to happen, we do run the risk of being left behind, right? More and more consumers, investors, institutions, they want to utilize this technology because it does drive efficiency. It does unlock new utility. And today, the focus is very much on the tech still because people haven't really adopted yet. So we partner with a company called centrifuge to do what we're doing.

And we have about 200 institutional investors who are utilizing those funds. And every one of those institutional investors, they need to deeply integrate with centrifuge. And so the quality of that technology, the diligence around it, it's extremely important. What we're unlocking here with the SEC is starting to make that a little bit more seamless for U.S. investors, right? And again, it's early. It's a five-year trial. It's limited in its scope. And it's very heavily focused on the trading infrastructure, not so much the fund provider infrastructure.

But I think if the U.S. regulatory system broadly doesn't keep experimenting and enabling this, we do run the risk of being left behind. And so our job as a, you know, a firm who ultimately is trying to invest assets on behalf of our clients, help them deliver better financial outcomes. We need to pursue every avenue. So sometimes that means, you know, stock picking, sometimes it means asset allocation, and sometimes it means making sure that they're getting our services

on the most efficient technology possible. So this is going to take some time to play out, right? This is not, you know, tomorrow, you're not going to wake up, and U.S. consumers are just all on chain, right? But we see it as an inevitability, and we see it as important to drive that change, right? So we're engaged with regulators, we're engaged with government agencies, you know, and we're engaged

with elected officials to try to move this forward, safely, securely. Ultimately, it's about delivering benefit. But I do think, you know, the Genius Act was a big step forward for the U.S. regaining a little bit of leadership in stable coins. The Clarity Act did not pass, obviously, but this innovation exemption is, again, another step forward. And, you know, we're the largest capital market in the world. I think we have the right to be the home for this type of innovation, but we need both market participants like ourselves, but also regulators and lawmakers to help create the possibility for that to really flourish. Gabor, does the current blockchain infrastructure and construct that we have right now,

is it good enough, they're robust enough to support the kinds of things that you guys had mentioned, seamless transactions, lower cost transactions, multi-platform, multi-asset type transactions in almost a T-plus-0 or instantaneous fashion. If so, how exactly will it evolve in the coming years to make it so that it is easier for people to see the use case for adopting tokenized-type products as opposed to what they're doing right now? Yeah, absolutely. I think, you know, we are our company is supporting some of the largest companies in the world. So, IAS, New York Stock Exchange, AWS, Teter, World Bank, big organizations that have actually just ended up hiring us to make their technology

stack better. So it's not only that blockchain technology and the associated infrastructure is good enough to support these type of activities, but financial services are looking to make their activities and processes better. So, you know, banks, for instance, don't have as good of a K-by-C technology as crypto exchanges have. The settlement technology and how securities are transferred today are archaic and the new transfer agent laws and some of the things that we are doing on the transfer agency side will effectively cut 30 years of history and make transfer agency much better.

So, like, we are there. I think there's just a lot of education needed on how to use these technologies. And once companies realize that, you know, ETS, for instance, are people perceive as a razor-tin basis point, you know, double-digit basis point business. But at the background of it, there is multiple percent of inefficiencies on the brokerage side on the admin side regularly. Multiple percent of securities get lost on a daily basis. People just don't know where it is, like central depositories. So that all is getting fixed. And it's not like this is the technology that is fixing the infrastructure.

that is in place today. So financial companies are paying attention and, you know, the effects of it is actually just starting to trickle down to the everyday consumer. And I think just to note, it's worth doing all of this because, again, when I started with ETS, it was a trillion dollars. Now it's nearly $25 trillion to global markets for $318 trillion. And they all will come on chain because it's just better, faster, and cheaper tech. And the, so it was a first of a first institutional guy who was lobbying for Bitcoin ETS, and we managed to put Bitcoin into ETS. Now, we're putting effectively ETS on Bitcoin in different blockchains. And so that's the, I think that's a big evolution that's happening. And the regulators are, again, I've been working with them

specifically on digital assets for almost 14 years. And so this is a long time coming. And I'm glad to see that it's also happening in the US. The Clarity Act, um, You know, people talk about the Clarity Act, but just the innovation exemption from the SEC, the support from the CFTC, and specifically the transfer agent cool changes, allows us to do all the types of activities that we have been contemplating for a long time in the U.S. So, you know, I'm actually very happy to see asset managers, like next firm, to be in the market. And I think more and more firms are coming in trying to figure out how to interact the this new generation of users that are inherently mobile phones, inherently work from wallets.

They might not even have a traditional brokerage account, but they have a crypto account. And so, again, asset managers are trying to figure out how to get in front of this audience. And yeah, just like stablecoins interconnected, the payments were very efficiently. I think tokenization will interconnect the capital market's piece of the equation very efficiently. That's a large market. All right, all right. Perfect. Nick, I'm going to give you the last word here.

As the head of innovation of a Tradfai, traditional finance company, who's making some inroads here with regard to being on-chain and tokenization, I wonder if you could just give us some context. For the funds that you do have that are tokenized, currently offshore, not here onshore yet, how much activity on a relative basis in terms of AUM and transactions, activity are in those tokenized, currently offshore products, as opposed to their onshore traditionally traded by a brokerage account, ETF products. Yeah, I mean, this market is still very nascent, right? So we're invested in it for the long term because we see this benefit for our clients.

But, you know, I mentioned earlier we have about $50 billion of ETFs globally. What kind of our flagship product is J-Tri-A, which it provides access to AAA-rated CLOs, you know, floating rate exposure. attractive to people right now, that's about a $30 billion ETAF. The total market for tokenized funds, depending upon sort of how you measure it globally, is somewhere between those two numbers, right? Total market. So we are like kind of most successful tokenized fund, again, offshore, institutional investors, a different kind of client base. It moves around. It's anywhere from, you know, $500 million to a billion dollars in assets, depending upon, you know,

people's capital needs at the time. So it's still quite. small, but again, I think what for us is really interesting is seeing these institutional users who are attracted to that fund, what they're doing with it, is things that they couldn't do with the ETF. And so, again, that's where we really see the need to invest with these sort of native clients, digitally native clients who are pioneering these new business models, et cetera, and then we see then eventually the benefit that they're deriving to be able to come back. And so I think that we'll see that transition to our traditional clients, but it's just going to

take a little bit of time. All right. It's a fascinating conversation for sure. I wish we had tons of time because this is obviously a big topic for a lot of folks out there. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs, our Markets 102 portion of the podcast. Gabor Gourbache, open assets, founder and CEO continues with us. Now, Gabor, thanks for sticking around for our podcast. I want to kind of build on some of the stuff that we talked about during the ETF Ed show this week, which is to identify some of the ways that tokenization, especially when it comes to the fund management business, how exactly will tokenization make things that much better

and or at the very least different than the experience that we have right now? And are there certain parts of the fund management and distribution chain that will be more disrupted by putting things on chain, so to speak. tokenization is the better, faster, cheaper story that we have seen in technology for a long time. So that's what's happening now to the financial services industry that for all intents and purposes hasn't changed for 50 years. The parts of it that is changing is the settlement piece of it and the middle part of the part of the stack, the issuance piece of it, not so much in trading, not so much. The

What I believe is important is that currently there are, once you hit buy on a stock, on a brokerage, whether it's Fidelity, Vanguard, Schwab, Interactive Brokers, or you name it, Robin Hood, your order goes through a chain of nine to ten different counter parties, and you don't actually end up owning something a day or two later, depending on what you buy. So tokenization helps you basically to do that instantly and replace the current, chain of intermediaries that is about nine to about three. So fund administrators, central depositories, transfer agents, and custodians perform functions that will merge into very likely one entity and most of it will be performed by the transfer

agent. Exchangeers will not change so much. The role of the asset architect or the issuer will not change so much. but the back end sort of settlement then will change a lot. So I'll stop there because I think the big important portion of all of this is technology is making intermediary is less relevant. And today, again, it's a hodgepodge of coupled together tech from 50 years ago by 9 to 10 different intermediaries

performing functions that blockchains can do it for, you know, really 10 to 30x more efficiently from a price perspective and way, way faster. So that's what's replacing the current tax stack. So does it stand to reason then, Gabor, that we will not call it, say, hypothetically, in 10, 15, 20, 30 years, have any of the same types of instance? institutions or intermediaries that they will all be replaced by blockchain technology and the use of tokenized assets and securities that are on chain somewhere. In other words, is it fair to say or not fair to say that the New York Stock Exchange and NASDAQ will not be around in 10 to 20 years? Is it fair to say that brokerages, as we know them today, like the list that you mentioned,

will not be around because things are done. on different types of platforms than they are right now. I think the NASDAX and New York Stock Exchanges of the world will be around. They are a place for price discovery and price formation. So I think trading is pretty efficient and it will be around. But the settlement piece of fund administrators, custodians in this current form, central depositories, they may not be around unless they evolve because,

again, blockchains and automated administrative functions literally perform, perform, you know, six to seven different intermediaries rule automatically and very cost efficiently. So there might be administering some of the functions for blockchains, but they will certainly not perform the services in their current forms. And I do think, yes, this new infrastructure does kill two-thirds of the financial infrastructure stack for the better. Because a lot of these entities are not adding much value. They are extremely costly and they're making, they're intermediating processes for no good reason. And so they will have to either evolve or they will be out of business. But it will be mostly the settlement and the administration

of the assets. It will not be the places for training and it will not be the asset architects and issuers. So if that's the case then, if the trading itself is efficient and, and maybe can become incrementally more efficient because it's already so efficient right now. The price discovery vehicles that kind of allow you to see what transactions are happening at what price and what time. If those things are going to be fairly static, it can evolve with speed on chain, what then is going to be the kind of takeaway for people who use or want to use this kind of technology? It seems to me then if it's not price discovery and it's not the trading that are ultimately going to, to be disrupted, it is the ledger aspect that provides the real value, right?

The understanding that you have somewhere on chain that tells you that I hypothetically own this asset and transacted it at a certain time and place, and it tells me somewhere in a distributed ledger format that I'm the one who actually has ownership of said asset, right? Yeah, so again, I think there's their new transfer agent rules. So transfer agents are evolving. I don't think transfer agents will go away. So you'll have legal holders of record and places of ownership to the transfer agent

that uses a blockchain to track ownership. So you'll see that the ownership records will just be published by the transfer agent. So that's what will happen. And for the end user, there's no change in experience from a brokerage perspective. But the value chain behind it will be so much more efficient that when you buy something, on a brokerage platform, you actually own it immediately. And currently, it's basically pretend ownership until a day or two later. Cash is not fast enough, and securities are not fast enough for you to own it.

So if there's a financial crisis during that day when you bought a security, very likely your account will blow up. And so those type of scenarios are avoided with this new technology. You will also have ownership rights to the actual security. versus a lot of the times you basically get versions of promissory notes from various institutions that may or may not even back your securities with real assets. A lot of custodians have very little insurance behind securities. I've seen $10 billion funds being bagged by $10 million bonds.

And so if those institutions go down, you don't have even, you know, record of ownership, prove it because you see eight layers of promissory bonds over promissory bonds versus direct ownership, which is where we are getting. And again, we are lucky in, you know, G7 and maybe G20 countries, we have access to reasonable brokerages and the experience feels good enough. But the vast majority of the world doesn't even have access to brokerage. And they're not going to replicate the current hodgepodge, you know, centrally cleared infrastructure. Eighty-nine percent of the world does not have access to brokerage. Sounds crazy. easy to us because we have definitely three, four different brokerage accounts, but that's

the reality of it. And, you know, the other piece that people don't talk about is just so difficult today to get something to the public markets, like to go public. It's such a burden. You, you know, as a company, you can't just go out to the public market and raise money. The reason why you can't do that is because the super intermediate infrastructure makes it so expensive that entrepreneurs can't access the public market. That's why it's this way, which seems just crazy because if you travel anywhere in Asia, for instance, you are able to raise money on various platforms. And like in the US, it's just, we're not there because the underlying infrastructure is actually inhibiting.

So what I expect is there's going to be a lot more companies with tokenization that can go public. The public markets will flourish a lot. You'll see many IPOs and IPO sizes reducing a lot. So in emerging markets, we see between 5 and 25 million like IPO type of tokenized security issuances, and those markets are flourishing. So entrepreneurs can raise capital directly in public markets. That just doesn't exist in the U.S. And this also means just a much bigger point that returns are not democratized, right?

Like it's venture capital, private equity, and sort of select very few people in companies that can access growth stories. And with this new technology, we can open it up to more people. And that's the goal of regulators too, and that will help capital formation, that will help public markets grow, and that will help the distribution of assets as well, kind of more broadly in the U.S. And one final question before we let you go here, given the fact that we have this kind of relative clarity with regard to,

kind of regulatory activity around tokenization. Knowing what we know right now, what are your expectations for the adoption of tokenization over the course of the next one, three, five years? Yeah, I think, look, right now in the U.S., the equity markets, roughly $69,70 trillion bond markets, 60 trillion, global around 320 trillion in assets. I think we'll probably get to a 10% asset penetration tokenized within two to three years. So it's all happening very fast. So I think 10% of assets will be tokenized within the next three years. And again, a lot of the change will also happen fast.

So like it to switch, we can switch away trillions of dollars. in assets from the current infrastructure with, you know, press of a button, if the intercontinental exchange decides to do so, or if the DTCCC ends up modernizing it decides to do so. So I think, well, my expectation is 10% of all assets will be tokenized roughly within the next three, five years, let me say three, five. And we'll see, I mean, we're already seeing asset managers racing into the space very quickly and trying to issue their assets to get in front of very successful user bases.

Everyone looks at the coin bases, crackens, and tatters of the world. How do you manage to get hundreds of millions of users and people want to sell into those channels? So they have to communicate and wrap assets, the asset managers, into a format that a new generation users use, which will be through tokenization. So I think the change will be fast. And, you know, there is a third of the world's population is under 19 years of age.

Another third of the population, the world's population is under 34. So every, like, roughly between 13 to 17 years, there is a paradigm shift and things happen very quickly. We're basically 10 years into the next paradigm change. So within the next, like, five to seven years, we'll have a large amount of young people with a lot of disposable income using assets very different. And, you know, the 20-year-olds of the world don't think about what a growth or value of ETF is.

They buy crypto in an exchange. And so that will be, that's what will happen on with tokenized assets too. And again, I think the numbers, it's early in the markets, but I think people and as managers are realizing that we need to build things. differently to work with a new generation of acid owners. All right, we're going to have to check the progress along the way. Gabor Gourbache at Open Acid, thank you so much for joining us, and please update us in the future on your progress as well there.

Thank you very much, sir. Thank you, Tom. All right, that does it for the ETF Edge Podcast. Thanks for listening. Join us again next week or just head over to etfedge.cbc.com.