On this week's episode of Yahoo Finance Future Focus, our host Brian McGleenon speaks with Zodia Markets Ireland Chair Michael Walsh, discussing BlackRock's market-leading position in the tokenisation of real-world assets on blockchains. Walsh highlighted BlackRock's advancements to date, noting their spot bitcoin exchange-traded funs (ETF) inflows, and a dollar-denominated US Treasury Fund tokenised on the Ethereum blockchain, which saw nearly a billion dollars in immediate inflows post-tokenisation. Walsh maintains the developments positions BlackRock as having first-mover advantage in the burgeoning tokenisation sector. The approval of BlackRock's iShares Bitcoin Trust by the SEC in January marked a pivotal moment, with BlackRock CEO Larry Fink predicting that ETFs are just the beginning of a technological revolution, ultimately leading to the tokenisation of all financial assets.
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00:00BlackRock's Larry Fink believes the next step after spot Bitcoin ETFs is the tokenization
00:09of all financial assets, with every stock and every bond having near instantaneous settlement
00:15on a distributed ledger.
00:16Now, to discuss this prospect, we are joined by Zodiac Markets Ireland Executive Chair,
00:22Michael Walsh.
00:23Michael, welcome to Yahoo!
00:24Finance Future Focus.
00:25Thank you, Brian.
00:26Good to be here.
00:27Thanks, Michael.
00:28So, you described spot Bitcoin ETFs as stepping stones towards tokenization.
00:32Are we seeing a move towards the tokenization of all real-world assets en masse, and will
00:36it give BlackRock, or are they seeking, first-mover advantage?
00:40Okay.
00:41Firstly, unambiguously, yes, we are moving towards tokenization of real-world assets.
00:46There are a lot of reasons for it that we're going to go into in a little while, but mostly
00:49it's speed and efficiency of distribution and fungibility and fractionalization.
00:55So, the answer is, yes, we will do that, and we'll deal with exactly what those are later.
01:00BlackRock is the largest asset manager in the world.
01:03It has $10.2 trillion under management.
01:05It has one job, which is to look after your money and my money, but to earn fees on that.
01:10So, the larger your assets under management, the larger the fees that you will earn.
01:15Because of the demand for real-world assets, tokenized real-world assets, it means that
01:18BlackRock has first-mover advantage.
01:20They've already got $16 billion in their Bitcoin ETF.
01:23And of course, as you and I have discussed earlier on, they also have a U.S. Treasury
01:28fund, a dollar-denominated Treasury fund, which has been tokenized.
01:33They're not the first people to do it, but they've had immediate inflows of almost $1
01:37billion.
01:38Huge demand, and it gives them a market-leading position, or helps them maintain their market-leading
01:43position as the world's largest asset manager.
01:45Okay.
01:46So, we know – so, there are good reasons, then, for BlackRock to gain first-mover advantage
01:50when it comes to tokenization of real-world assets.
01:53But how is this going to look for the normal man or woman on the street, or low-level market
01:57participant?
01:58Sure.
01:59Okay.
02:00So, let's talk about Bitcoin ETF first, and then let's talk a little bit about the U.S.
02:06Treasury fund that they've also tokenized in BlackRock.
02:09Let's talk about those, for example, first of all.
02:11At the moment, if you, as an individual on the street, you want to buy Bitcoin, you've
02:15got to set up an account somewhere or somewhere else, but you may not trust the exchange or
02:20brokerage that you're dealing with.
02:22So, if you're already a BlackRock investor, then you're literally moving your money around
02:27within the same structure.
02:29That's the first thing.
02:31What it means on the tokenization of a real-world asset for the man or woman on the street is
02:37– because you can go right back to basics – it could be any asset.
02:41It could be your house deeds.
02:42So, for example, you know, your house deeds are probably written on paper, probably at
02:48a half a foot thick.
02:49Some of it probably written on foolscap, but written in copper plate writing.
02:53At the moment, when you need to sell or buy that house, you have to get a conveyancing
02:57solicitor on both sides to agree every part, every layer of that, whatever it might be.
03:01Imagine a world where your house was tokenized.
03:05And to match up the fields in order to sell or buy that property, all you had to do was
03:11to press a button to make sure the fields matched.
03:14Imagine what it would do for you and for the buyer or seller.
03:17And imagine what it would do for, like, senior clerical roles like conveyancing solicitors.
03:22Okay.
03:23Yeah, sorry, but there are all other aspects of this, like fungibility and liquidity and
03:27increased fractionalization.
03:29Oh, absolutely.
03:30Absolutely.
03:31So, at the moment, many countries won't allow you as an individual to own a fractionalized
03:35share.
03:36So, if you have a share that's worth $1,000, but you only want to invest $100, you can't
03:40do that in many countries.
03:41Instead, if it's tokenized, you can sell it, you can sell any fraction, sell or buy
03:45any fraction of that share.
03:47That's a small example.
03:48On the other hand, or alongside that, you may also have a fractionalized part of a U.S.
03:54Treasury or a U.K. Guild, whatever it might be.
03:56If they are tokenized, you can exchange those more or less instantly without going through
04:00the whole process of registering and deregistering your interest in those companies or in that
04:06government.
04:07We could end up in a situation, theoretically, where if you have tokenized money, so tokenized
04:12sterling or tokenized dollars, and you have tokenized a Google share or a U.K. Guild,
04:17you could end up in a situation where you pay for a cup of coffee using a fraction of
04:21a Google share or a U.K. Guild, because it is not the actual guild or the actual share.
04:28It's just a tokenized version of it, which is instantly fungible on the same blockchain.
04:32Okay.
04:33That is very interesting.
04:34I can see how this can become attractive.
04:36Now, will this increase the accessibility to a broader range of financial assets for
04:43say low-level market participants or people that currently can't access these products?
04:48Yeah.
04:49I mean, a very good example of that is something like a private equity fund or a litigation
04:52finance pool, for example.
04:54These are not publicly listed markets, but instead what you have is, let's say, a pool
05:00of money comes together into a private equity pool in order to acquire any business and
05:07to run that business for the benefit of the pool of money, the private equity pool.
05:11Normally, to get invested into a private equity pool or a litigation finance pool, you'll
05:19have to be an extremely wealthy individual or institution.
05:22If on the other hand, you were to tokenize that private equity pool or litigation finance
05:27pool, then it could theoretically be sold in increments of maybe $100 or something like
05:32that, which means that you and I can just go online, we don't have to walk in anywhere,
05:36we just go online and we buy $100 or $200 or $1,000 worth of a private equity pool,
05:41which would not have been available to us in the past.
05:44It's proper democratization of finance.
05:46I did hear that BlackRock have already used the Ethereum network for some – you discussed
05:51that for some of these tokenization efforts.
05:54So, what role do you think the Ethereum network is going to play in all of this when we look
05:57at BlackRock partnered with Securitize to launch the tokenized asset fund on the Ethereum
06:02network a couple of months ago?
06:04Do you see that being the layer one or the go-to blockchain for this whole big advancement?
06:11Yes, is the answer, the short answer.
06:15I mean, markets being markets, there will be competition and there'll be development
06:19and Ethereum may not become the dominant one.
06:22For the moment, it certainly is.
06:23It's well-known, it's reliable, it's been used for smart contracts across multiple
06:28aspects of financial markets.
06:30And most importantly, it is a public blockchain.
06:32The difference between a public and private one is, a public one, if you and I are participants,
06:36then we are in control of our own assets and in control of our own keys, in effect.
06:41So, only you and I can affect the transfer of the asset on that blockchain.
06:46On the other hand, if you have a private blockchain, such as some of the, bullish bracket, U.S.
06:50banks have developed, it means that they control it and they control the valuation
06:53of the assets and they control the movement on that chain.
06:56So, I think the public blockchain and most particularly Ethereum for the time being are
07:01probably going to be dominant.
07:05There's also another one called Provenance, where you already have a lot of private lending
07:09through FIGR, for example, which is over $7 billion already on Provenance.
07:14This is also going to benefit, say, people in countries in the world that could possibly
07:19be like less rigorous laws when it comes to the kind of exchange of securities and
07:24all sorts of things.
07:25Sure.
07:26So, you're worried about those securities being used for nefarious purposes?
07:29Yes, that or even some kind of exploit or changing of a ledger if it's owned just by
07:34one entity.
07:35Sure.
07:36Well, actually, the funny thing is, you know, the least compliant instrument out there is
07:43cash.
07:44Okay.
07:45Because cash isn't traceable.
07:47Cash comes in your wallet or sometimes in suitcases.
07:51On the other hand, if it's on a blockchain, there's a record of every single transaction
07:56and the provenance can be proven.
07:58So, yes, yes, it's possible.
08:01It's less possible than it is using cash and less possible than it is using, let's say,
08:07fiat currency that has already been layered and placed into society so that it's already
08:12at a reputable bank, for example.
08:14Okay.
08:15So, in fact, if anything, I would say that it is a safer form of transaction in every
08:21way.
08:22And also, the things that I own, do you think – when more and more people start using
08:26distributed ledgers to store their assets that they own, do you think there'll be more
08:30of a rush to get these digitized, to get these tokenized on distributed ledgers?
08:35Yes, absolutely.
08:36And so, there should be, because there's faster, cheaper distribution and a greater
08:41fungibility.
08:43Well, Michael Walsh, thank you very much for coming on this week's episode of Yahoo Finance
08:46Future Focus.
08:47It's a pleasure, Brian.
08:48Thanks for having me.