On The Brink with Castle Island - Will Peck on Digital Assets at WisdomTree (EP.526)

Episode Date: May 6, 2024

Will Peck, Head of Digital Assets at WisdomTree re-joins the show. In this episode we discuss: WisdomTree's journey in digital assets and the firm's strategy in the area. Views on the launch of spot Bitcoin ETFs in the United States. Will's views on tokenization and how the firm is approaching this category. WisdomTree's New York Trust Charter and the opportunities that the license opens up. The evolving stablecoin landscape. Views on evolving regulatory landscape. To learn more about WisdomTree visit their digital assets page.

Today in the podcast, I sat down with Will Peck, the head of digital assets at Wisdom Tree. This was Will's second time on the podcast, but the world looks a lot different from his first appearance, certainly in the crypto asset management space with the launch of the Bitcoin ETFs in the U.S. as well as the launch of Wisdom Tree's new New York Trust Charter, which is focused on digital assets. In this episode, we talked about ETFs, we talked about the tokenization of real world assets, stablecoins, and much more. I think you'll enjoy this one. So without further ado, here is my conversation with Will Peck. Matt Walsh and Nick Carter are partners at Castle Island Ventures.

All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guest and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by Bad Mortgage Investments, Lehman, which has 25,000 employees, will be

liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Will, welcome back to the podcast.

Excited to have you back on now that we have Bitcoin ETFs in the world. Yeah, great to be back with you, Matt. So maybe as a just quick refresher, a lot of people will have heard your first appearance on the podcast, but maybe a quick refresher on your background and what you're doing over at Wisdom Tree. Absolutely. So my background is head of digital assets at Wisdom Tree. I've been in this seat for about three years, previously worked in strategy and finance at the firm and came up through investment banking at Bank of America, Merrill Lynch at the time.

I've just joined Wisdom Tree relatively early on, have been with the firm for a while and was just interested and open to new ideas in terms of what we were doing, which evolved for us in digital assets. So that's a bit how I came into this role. Just for your listeners who are familiar with us or who aren't, Wisdom Tree is a well-known ETF sponsor and asset manager. We manage roughly $106 billion in ETF assets globally today. So we're well known as the leading independent ETF sponsor, are one of the first that grew up outside of a big firm. And that's really informed a lot of how we think about digital assets and tokenization. Roughly two-thirds of our AUM is here in the U.S., another one third in Europe. So we're a global business. We've got a suite of crypto exchange

trade products, one here in the U.S. and a number in Europe as well. And very much informs how we think about technology in terms of improving the investor experience and our openness to crypto public blockchains and tokenization. So looking forward to speaking more about it. Well, it's certainly been an interesting time. Where I'd love to start is just around the overall Wisdom Tree digital asset strategy. Obviously, you guys had a strategy before Bitcoin Spot ETFs were possible in the US. And just curious how the advent of that product in the US has changed the strategy, how you guys are thinking about the space overall at this point.

So one way to think about what Wisdom Tree does, what an ETF is. It's a access to transparent exposures. ETFs are these fully transparent instruments. You know what this product holds an underlying, whether it's S&P 500 stocks or Japanese equities or Indian bonds, whatever it is. These products are listed on a stock exchange. They're backed by this underlying basket of assets. And it's been this really revolutionary product and asset management from where we were 20 years ago where mutual funds had trillions and trillions of assets to where we are today. So how that's evolved for Wisdom Tree in terms of our

specific digital asset strategy. One, and that most obviously it's you can put crypto into these types of products, into these vehicles. Bitcoin ETF is the most prominent example of that. So like I alluded to at the start, we do have a Bitcoin ETF here in the U.S. We've actually had a full suite of crypto exchange trade products in the European market since 2019. They were allowed in that market earlier than here. One of the best ways to analogize crypto ETPs and maybe Bitcoin generally is to gold. We were one of the largest gold exchange traded product managers in Europe. So we looked at about the time back in 2018, 2019, some people were talking about Bitcoin as the next gold or a gold-like asset. And we looked at it and we're like, why can't this just be in an ETF? And

ETP in that market is the term that people use. And obviously, the SEC hadn't approved anything in the U.S. to that point. It was still a pretty foreign concept to a lot of people other than the Winkelfoss twins and you could say gray scale as well. So we launched one of the first products in the Switzerland market, a physically backed product, meaning there's actually Bitcoin underlying the product. It's not a synthetic instrument like some of the other products that you might have seen at the time. And that was really our first direct product foray into digital assets. At the time, our CEO came to me when I was leading strategy and asked the question, what can do to ETFs, what ETFs did to mutual funds?

What can be this next wrapper product structure and financial services? Interestingly enough, it was right around the same time that Libra was happening, Facebook's big project, which a lot of pundits pointed out actually looks a lot like an ETF, the way they can describe Libro. So we gained conviction around this idea of tokenization. exposures on public blockchains with certain functionality being a better way to deliver certain financial services products, assets, and gain conviction in that strategy, which forms the second poll of Wisdom Truth's digital asset strategy, which is tokenizing real-world assets. I think

stable coins are the first example of that, obviously the most prominent. We're in the early innings of the next wave of stuff, which I think is going to be short-term treasuries or money market funds, more and more instruments on-chain made available to that audience using the advantages of this technology. So that's a summary of the way Wisdom Free approaches this. That's fascinating. And certainly the real world asset topic is one that I'd love to get deeper into. You mentioned the Bitcoin ETFs. I'd love to just get your view on what the launch was like. So I've never seen a launch like this where you had, I think, 11 participants all coming out at the same time. And I'd say different strategies in terms of distribution. But what was your overall

take on how these products performed as a whole versus expectation? They certainly exceeded my expectation in terms of inflows. At the time, I guess I had more of a modest view of how much money they would take in as a class. The big reason being that I viewed the ETFs as really solve for the wealth management channel where advisors throughout the country are managing wealth for people for people. And they're not setting up direct accounts with Coinbase. It doesn't fit into their workflows. They've got pretty prescriptive ways that they go about providing access for people to investments. And many of these financial advisors, whether through places, like Merrill Lynch and Morgan Stanley, which we call wirehouses, or they have other platforms like an LPL that they might be affiliated with, have different restrictions in terms of what they can invest in, and things need to get approved to be on these platforms. So at the start, none of these were going to be approved, or very few of these platforms would approve these ETFs. So I thought it would take some time for that really wave of organic demand to come. So my expectations were exceeded. When these products came out, launched 11 or 10 on the same date, and took in within a few

weeks, billions and billions of dollars, led by BlackRock and Fidelity, who have big distribution, whether proprietary infidelity's case or throughout their client's set in BlackRock's case. So that was very interesting, I think. And the big thing is these products work great. The spreads tightened very quickly. I think they did exactly what sponsors thought they would do. And from that perspective, I think this can just be a total success for consumers. Maybe the last piece in that is that pricing on these funds got extremely competitive very quickly, which is the lesson in terms of ETFs for commoditized exposures, non-exclusive exposures, where these products are all just giving access to Bitcoin. They're being operated properly. No difference in their

price performance, except maybe a little bit on fees. And the pricing for them quickly deteriorated from where many of the issuers, including ourselves, might have wanted them to be, which is tough for asset managers, but great for consumers. So I think from that perspective, it's been a total success. I guess the fees have been fascinating because the noticeable difference in fees is gray scale, which is obviously a little bit of a different animal. Were you surprised at the pricing strategy of gray scale? I think there's lots you can say about gray scale. They were in an interesting tough spot in this position where they had this trust that was closed-ended and I think a lot of pressure to convert it into this open-end structure for the ETF to bring the pricing in

line with the underlying net asset value, which is definitely better for customers. And I think they were charging, I don't know if it was 200 bibs or 250 bibs at the time, which is just way above what an ETF, somebody bringing this to market for the first time would charge. So I think they managed it as best they could probably. And I think for a lot of new entrance, they immediately went to lower price points. I think people initially were launching or saying they were going to launch in 50 to 100 Bips range and that quickly got driven down to, I think, the lowest price product today is 19 basis points, which is very competitive. And I mean, it's great for consumers. It is interesting. I think this gets analogized a lot to iShares launched

the largest BlackRock iShare is the largest ETF sponsor. Some of their largest ETFs still make the most amount of revenue for BlackRock were launched decades ago, providing exposure to emerging markets or international developed equities. And they felt a lot of pricing pressure from Vanguard at the time. This would have been a decade ago. And then ultimately launched what they called their core exposures. So very similar exposures, slightly different, but at a lower price point, so they were able to retain the assets in at the high fee funds at the time while still competing with Vanguard for new money coming in at low fees. So that the core strategy is this famous example of how people have managed this in ETFs in the past where they've got

a cash flowing high fee fund in the past, but they want to compete for new money coming in. And if you lower the fee on your old fund, you're lowering it on all of those assets, not just on the new stuff coming in. So I think we've seen a little bit of that with this dynamic at Grayscale. Yeah, I would agree with that. One of the things that's been interesting here is it seems like it was a very retail driven first few weeks on these products. And the wirehouse banks have been slower to greenlight these products and certainly don't seem to be offering them on a solicited basis. So what's your view on just the rollout of the ETFs from here? Do we still have a long way to go in terms of just overall access? Yes, we do. I think be interested to talk different people, different ideas in terms of if it's just retail, if there's some hedge funds who have some arbitrage trade that they're using these ETFs. to do. A lot of the initial demand was balance sheet capital from some of these issuers or C as well. But I do think there's a next wave of organic demand, which is going to be financial advisor adoption. I think if you look throughout the country, you can make a case that

crypto is about 1% of global market cap, maybe a little bit more at this point. So anyone who's under that is underweight this asset relative to global market cap portfolio. And most advisors, very few advisors, have a 1% allocation to Bitcoin, let alone somebody who's making overweight allocation to it because they think the asset class of Bitcoin itself is just going to grow over time. So I think that is coming where you're going to see more and more people fitting it into their capital markets allocations, making a case that it should be part of a well-diversified portfolio. Then you get people done this math, one, two percent of this giant trillion dollar pool of assets that are managed in the United States. And that would suggest a large

wave of demand is still to come. I think that'll take years to get there, but we've only just barely scratched the surface of it. And you'd have to think that putting these ETFs into other types of funds that hold equities is also the logical next wave here, where you'll see global allocation funds start to get in the mix here at some point. Yeah, absolutely. It's like you're making an active decision at a certain point if you're not investing in this asset class. And some people won't. Some people are of the belief that only cash flowing instruments have value or things like that. And that's fine, but there's a lot of people who don't think that way. If you're just trying to call a global market cap, and you try and look at it without bias, without political

leaning in terms of crypto gets political very quickly, you can see that, no, this is a liquid asset class that you can make a case should be a one, two percent sleeve of a portfolio just to match the global market cap like a true asset allocation strategy. You mentioned the market structure behind these things and the fact that it works so well for all of these issuers out of the gate. And that comes down to the custodians. It comes down to the authorized participants, the liquidity on these things. It's just continually fascinating to me that U.S. banks are not structurally able to play in this market from a custody perspective. So I would expect that will change over time. I think these banks will see that Staff Accounting Bulletin 121 is really

holding them back from participating in this really explosive growth category. So curious how you're thinking about just the role of the banks from a custody perspective here. Yeah, the banks largely are not involved from a custody perspective. I mean, there is a couple, at least one bank who has a couple now that have approval to custody crypto assets that aren't publicly traded companies who SAP 121 would necessarily cause issues for them then. But I think that's only a matter of time. These should be able to be custodied like any other asset. And it'll be more than just the New York trust companies or some of the other state charter trust companies that can serve this qualified custodian role. So I think that matter of time could be yours, I don't know, but you think that's

going to change, and that's only better for the overall market if they do. But yeah, we'll see. I don't know if that'll make a huge difference for consumers in the near term because Coinbase, others are providing great custody service. It's not like Fidelity and Coinbase aren't extremely well-capitalized entities that have the right regulatory licenses and qualified custodian to serve as this function. And you can already see that pricing for these has gotten so competitive so quickly. So there's only so so much more room we can go down from 25 basis points today where a lot of the ETFs are. So I don't know that'll make a huge difference for consumers, but we'll see. It'll just be interesting to see how some of these banks choose to get into custody when they actually decide to go. The build versus buy versus

partner decisions are going to happen pretty quickly here, I would think, if we start to get a change in regulation. Absolutely. And I mean, subcustody is a pretty well-trodden model as well, where you take over fiduciary custody responsibilities and then you hire a subcustodian. We do that all the time for stocks in India, for example. So that could be a way that some of the banks start to do it. I'm sure some of the banks have spoken about planning to offer the service themselves. So I think we'll see that to custody banks. People joke it's a world's worst oligopoly. There's only so many of them and it's an extremely competitive business as well,

but you want to be able to custody all assets for your clients and especially like you said, as more and more people are building global allocation funds, one piece of which will be Bitcoin, well, you want to be able to provide direct access to that Bitcoin and not need to go elsewhere. So I think that definitely will happen. So I'd be remiss if I didn't ask you about Ethereum. I know you have an active Ethereum ETF applications. You're probably bound by what you can actually say on this topic.

But any insight on how you guys are thinking about the prospects of Ethereum is the next product? No, I mean, it seemed like there was some momentum. The industry felt momentum after the Bitcoin ETF's launched, and that slowed down a little bit. Obviously, there's more questions that some people have raised about is ether security, that probably some impact there. But we don't have any special insight in terms of that. I think we'll see with upcoming elections and stuff coming. up and what the tenor ends up being like there. But it seems like the momentum there has slowed down

a little bit, I think it's fair to say. I'm just excited about the prospects. If it actually happens and you can stake in these things, just think about all the different just market structure things to figure out here. It just makes running these things a lot more complicated. Our European product offers a staking yield. And that's a take, say, takes a diligent manager to ensure that, ensure there can be liquidity of it, manage that process. But from a consumer perspective, a yielding asset like this without the counterparty risk that you're getting, granted, there's different risks with slash and risk, et cetera. But that's a very consumer-friendly product and something that is hard for a lot of people to get access to necessarily. Some of

that's technical, a lot of it's regulatory. So I think it is very interesting. So to maybe transition a little bit into tokenization, this has been a hot topic lately because BlackRock has really entered the conversation in a huge way. So Larry Fink has been going on TV for, I guess, the past nine, 10 months now talking about tokenizing real world assets being the future, Bitcoin being the first step for them. You guys have been at this for a while on the tokenization front. So how are you thinking about that market in terms of the opportunities for the company? We think it's a huge market. I mean, we are firmly of the belief that this will be what ETS did to mutual funds. You can see tokenized exposures doing going forward. Now, that could take a number

of years, but people put out these crazy stats, it'll be 10 trillion to five years or whatever. I mean, sure, but I think there is a big opportunity for this. And then if you get it right, you can start to see the benefits around liquidity, standardization, transparency that can come from this. We are very much believers in tokenization of real world assets. I think it could take some time and people need to figure out their use cases and move beyond this POCville. And look, we do the POCs too, so I don't need to cast judgment. We're just lobbing out POCs and actually getting into a live product, which you've seen with what we're doing with Wisdom Tree Prime, our digital funds we call them, seeing now with Black Rock as well. So it feels like we're definitely entering that stage.

I guess in some regards, regulation will drive exactly what you can do with a tokenized asset. But if that were not an issue, you could think about a number of benefits. One would be people outside of the United States just having the ability to buy these products in a very seamless manner. Global demand for dollars would probably be the best argument there in terms of if you could buy a money market mutual fund that was dollar exposed in any country in the world, you'd probably have a lot of people that would start to do that, and you're seeing that with stable coins. Another argument would be you could have a 365, 24-7 market for a lot of these assets, and you wouldn't really be bound by clearing and trading through Fedwire, for instance,

for moving cash. I'm just curious how you think about what the actual benefits will be here in the near term and maybe longer term where we're going. Why is tokenization so exciting? I think you nailed that these three words, liquidity, transparency, and standardization. So to the liquidity point, I mean, you made it in terms of turning more assets into 24-7-365 tradable vehicles with potentially faster settlement times than just a T-plus-2 or different settlement mechanisms getting to instant atomic settlement. And I think there are pros and cons along the spectrum, but it doesn't need to be an either-or thing and you can give customers more choice in terms of how quickly they might want to settle instruments. So certainly within crypto, with stable

coins, a big advantage has been that these can settle 24-7-365 just based on what a customer does. And you saw some banking products, Zignette, others try and serve in that market as well, just because traditional, surely securities markets are typically weekdays, select hours, moving towards a T-plus-1 settlement cycle. But there's lots of instances where people are looking for instant atomic settlement, reducing counterparty risk for that, and being able to get higher velocity on their asset holdings. through that. So I think that liquidity is a key piece of this. I think one thing that people miss, and I just want to be precise in the term, is just because you tokenize something,

doesn't mean it magically becomes liquid. I think for people who've been following this for a while, there was a big wave of, we're going to tokenize private assets and they're going to trade 24-7 365. Well, no one wants this hotel that you've tokenized, and it's not going to trade just because it's now on a ledger that allows 24-7 transfers. You need actual demand, and then market makers will come in and provide liquidity for that. So that's why we've approached it for more of the liquid side. And frankly, dollars are liquid like with stable coins, where if you get the right use cases, you'll see demand for it, people will be willing to provide liquidity. And you're seeing that more and more with BlackRock did and others, the initial side of tokenization will come

from more liquid assets. I think that's spot on when you think about things like tokenizing LP interest in venture capital funds and people talking about making that a liquid market. Let's say that's very against the interest of a general partner in some of these funds who don't want someone that they don't know buying an LP stake in their fund. So some of these assets just doesn't really make sense to have them tokenized. Yeah, then you need to get more precise. What's tokenizing? What's different things within that? And what are you trying to achieve with having something on tokenizing on a distributed database that different people can access? So I don't know that a lot of people ask themselves that question. So you do end up with this funny adverse

selection problem on some of these things where it's, hey, I don't know how to distribute this thing. of why don't I just tokenize it and put it on one of these marketplaces and then hope. And look, it's early innovation. No judgment on that. But we were trying to think about like the best thing that trades on earth today for consumer friendly is ETFs. We're seeing with a Bitcoin ETF. They work great when they're well structured and you've got liquidity.

They are a very good consumer experience. So how do you improve upon that? And that's what we're trying to do with the tokenization of liquid assets. So that I completely agree. So liquidity, transparency, standardization. Transparency is one that I think some people, people love about crypto, other people would prefer to have things be not just pseudonymous, but more anonymous than it could be, and you can get into various debates on that.

But certainly we think a big part of why ETFs have taken so much share of mutual funds is more transparency to market participants, understand the underlying better. And I think that's an underrated, maybe not underrated. Part of crypto, public blockchains is like the transparency that they allow. Even for things like any money laundering and things like that, you've actually got a better record on chain to be able to do your analytics. So one of the reasons that we think tokenization over time can improve upon what exists today. But really, and I think you hit on this, the last ones around standardization is the idea

that you can wrap any asset nearly in the same universal wrapper. And if you're doing a ERC20 standard, any wallet that could hold the ERC20 token can hold that wrapper from a technical perspective. Now there's other regulatory things that will need to be, I don't mean to minimize those, but from a technical information sharing, record keeping perspective, much better standards, which is what ETS did to mutual funds, where previously 20, 30 years ago, you were signing up with a big mutual fund shop, doing a bunch of paperwork to open an account. If you wanted a fund by a different provider, you might need to be going to them. It wasn't until you started

seeing brokerage accounts. And then with ETS, where it was any asset anywhere in the world, all you need is a brokerage account. And that same standard process, same patterns, ended up adding a lot of value. You got a lot of innovation around that and a lot of improvements in the consumer experience. And even if these were, this was my U.S. brokerage account, my European brokerage account, I think I mentioned this last time I was on the podcast. It is interesting that there's an S&P 500 ETF in Europe and an S&P 500 ETF in the U.S. And they don't necessarily have the same standards of processes. So I think with tokenization and the same set of standards, you should get benefits from that from a consumer perspective, both from distribution of your

products and just in terms of the workflows associated with it. So again, that'll take time. to unlock and to really bear out the benefits of it, but you can start to see the early endings of that or the potential developments there. The standardization is such a good point because it took six or seven years to go from T plus three to T plus two, and it's not because we didn't know how to move things on the internet or run databases. It was really just getting people to align on a standard ultimately. You think about how much of financial services is reconciliations across various databases, and then if you've got databases that have more auto-reconciling data that may not be

technical term, but that's what blockchains are very good at, is reconciling various market participants without them needing to necessarily trust each other in terms of getting the same set of truth. And it should solve some of those problems, at least in theory has the potential to. And I think in some ways, that's what stable coins have done in a certain respect in terms of demand for dollars overseas, where tether, for example, dollar obligation from tether to the issuer trades at a dollar consistently. But it's able to be accessed by people in Turkey who is inflating away and it's like I can just get this on my mobile device, that standards has not existed in the past in the same way. And you can start to see the ability for other funds like

yield bearing instruments, yield bearing dollars to fill more of that need in the same way. If you just look at stable coins, I think as a category, they are the 16th largest sovereign nation. If you just consider them as a country, just every stable coin out there added up and compared to country treasury holdings, stablecoins are the 16th largest holder of U.S. treasuries. And it's not that people in the U.S. are necessarily holding stable coins. This appears to be largely an ex-US, almost euro-dollar type of phenomenon. So, you know, if you believe that people want access to dollars, I don't think you have to squint too hard to see that the market size for U.S. equities on chain or something like that, a S&P 500 fund that's tokenized. It seems to me

like it could be extremely large. I definitely think so. And you alluded to this at the start. All of these stable coins, some by virtue of the business model, some by virtue of regulation, a lot of them don't play interest, and you know what they really are is just money transmission instruments where it's an obligation of an issuer to give you a dollar if you come back and redeem for the dollar. So particularly as more and more people are coming into that, there's going to be wanting yield or maybe different potentially better models of custody to underlying dollar or different bankruptcy counterparty risk in that relationship, which is where like a tokenized money market fund could step in. One thing though that I think is somewhat underappreciated by

A lot of people who talk about tokenization is like a bearer instrument and a registered instrument are very different things. Bitcoin, gold is a bearer instrument in terms of like you have it, it's yours. There's not a record off somewhere else that says, oh, Matt's got five gold bars and Will's got two gold bars. Whereas securities generally, in the vast majority of cases, are registered instruments where there's a cap table. And there is an issuer who needs to know who owns what of which and be able to continue to monitor and update that record.

So if you threw away your shares of fund or you lost your keys or something like that, you still need to be able to reestablish that. It's a technical problem that can be solved for sure. It's just, it is a difference between how securities work with how some of the bearer instruments that generally is crypto works. It'll be really interesting to see how people address that problem. Maybe going into some of your more recent activity over at Wisdom Tree. So company has recently filed a trust charter in New York, which frankly, you don't see every day, just given how difficult it is to get one of those things in New York. So we'd love to understand how this new charter plays into your overall strategy.

what does it unlock for you guys? This was part of our strategy from the start when we looked at this three years ago. And we're comfortable with regulation. We're a regulatory forward organization. As we thought about how could we add value to this space, one of the ways was, hey, we think we can do stuff going through the front doors of regulation. And so we're thinking what two of the tokens that we've launched have been, one is the wisdom tree dollar co.

And it's a stable coin that is used in just a closed loop system today. We're not putting this out on public Ethereum yet. we don't seek a market opportunity for that and are instead just focusing on using it as the basis, the dollar instrument within our Wisdom Tree Prime application. The other asset is a gold token. So you've seen a few different gold tokens launched in the market. I mentioned earlier, we've got a lot of experience with gold's exchange trade products and are bringing that forward in the same way with just a token representing an ounce of gold. So representing title to an ounce of gold that will also be issued by this trust company entity. So we thought the trust company was really the only

regulated entity in the U.S. that could actually issue these products under regulatory oversight. So we at that point in time thought it would be a good license to pursue. Certainly has taken a while. These are very intensive processes, certainly stuff that just takes time. So we were thrilled to get that out. So in terms of what it does for us, one is it provides this counterparty regulatory regulated entity to issue products and be a counterparty for our customers. And the second is with it comes a bit licensed effectively. That allows us to serve. New York customers for people who know you need a bit license or this trust charter in order to be able to offer crypto or crypto-adjacent services to New York customers. And New York's a big

market for us. So we wanted that as well. So those are the two things that the trust company unlocks to us. And I think going forward, it's just if you're trying to do more crypto or digital stuff in the regulated space, this is the leading regulatory regulated entity to be able to do things. It certainly is. I mean, it's a hard one to get. There are a lot of crypto companies that have tried for years to service New York customers, and they can't. So you end up seeing these terms of service that say we're banned in North Korea and a number of other sanctioned countries, plus we're also not available in New York, which is a shame. It is funny. And I mean, I know some people give New York a hard time about that. What I'd say is New York, it's a very reputable regulator.

They've been regulating banks like Bank of New York and Goldman Sachs for years now. So a very reputable state regulator. And they have a framework. They've got a real framework. They've got guidance for issuing stable coins, they've really stepped in and I think done a nice job in terms of bringing forward positive regulation. Obviously, we think so we've applied for this charter and gotten it, et cetera. So sure, I think some people can be frustrated that they can't access certain things in New York because they're banned there. But on the flip side, New York's brought forward regulatory guidance and clarity that I think has been lacking at the federal level and at a lot of other states as well. Now, how do you guys think about the new legal entity in the context of

distribution. Do you imagine that a lot of your customers will want to go direct to that charter company and have direct retail accounts, or will this be available through brokerage intermediaries as well? So the way we've set it up is we've got a money services business called Wisdom Tree Digital Movement. So if you're signing up for Wisdom Tree Prime in a state that's not New York, you are agreeing to terms with Wisdom Tree Digital Movement as well as some other regulated entities around that being a broker-dealer, transfer agent as well in terms of these funds. So we onboard you through the money services business, but when you purchase the gold token, you'd be issued to you a back-to-back relationship by the trust company. If you are in New York, you'll be onboarding

directly with the trust company, and that is just how we've set it up. Fascinating. So we talked a little bit about the New York regulatory landscape. In general, I guess, what would you like to see out of Washington here? We have a stable coin bill being argued. We have a market structure bill. We talked about custody. There's a lot of things the industry would like to see. It's funny. You see this stuff pop up and it's like, yeah, that's probably not going to happen until there's a change and stuff, and Congress never does anything. And then things get momentum very quickly, so we don't know. Part of our thinking with the trust charter is that in a lot of these bills, state chartered banks or banking-like institutions are able to issue stable coins or digital assets

in this way. So we're certainly thinking ahead of the curve in terms of what we wanted to do. I think clarity on that would be certainly helpful for a lot of people, specifically on the stable coin side. Beyond that, I think we've been able to find ways to work within the existing regulation. I don't know that so much will be solved from legislation as opposed to further just dialogue and clarity from the regulatory agencies in terms of what you can and can't do from the SEC side in terms of what you're disclosing your prospectus and things like that. So I don't know that that will be solved, like I said, through legislation, but certainly just continuing to evolve there and be welcoming of innovation would be appreciated. I would certainly like to see that as well. And I guess

you probably do have quite a few customers in the Wisdom Tree customer base that whole Bitcoin related products that probably have interest in other types of assets. And I guess if you had clarity on whether or not some of these assets were commodities or securities, you'd at least be able to decide if you want to launch products like that. Absolutely. I mean, within Wisdomtree Prime, the only crypto assets we offer are Bitcoin and Ether for trading intentional decision, both from a curation perspective, but also these are, in our view, more clearly in the commodities realm than getting caught into the securities realm. But obviously, people may have different views there. So I think more clarity there would just be helpful for a lot of people. I am not commenting too much on specific cases, but do have sympathy for firms that say, hey, I want to register, come in, do things. And then the regulatory agencies have said, yeah, you need to do that, but you can't. And we're not going to tell you why. That's just a hard spot to be put in, even if you can debate certain tokens out there, if there's securities or whatever, it doesn't feel we're getting to the point of having that constructive debate, or at least there's rules around it, which has led to these court cases. So I have a lot of sympathy for some of the firms that are dealing with this stuff.

Certainly there's a lot of taxpayer dollars that are being wasted on some of these cases and arguments. Well, this is a good place to leave it will. Congratulations on all the progress over at Wisdom Tree since last time we had you on. Where can we send people to learn more about just the range of products over at Wisdomtree? Go to Wisdomtreeprime.com is the best place to start and see what we're offering with this app. You can sign up by the time you're hearing this in New York in many states throughout the country.

And be great to get your feedback on that. You can find me on Twitter at WB. Peck. and feel free just to reach out to us in any way. But wisdomtreeprime.com is the place to start. Awesome. Well, thanks for coming on, Will. Thanks a lot, Matt. Thanks for listening to another episode of On the Brink with Castle Island.

To find out more about Castle Island, visit castle island. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.