Making Tokenization a Reality: Bringing Assets Onchain | Samara Cohen

How's everyone doing today? Thank you, thank you. One person. All right, good. Thank you. Yes, need more of that. Well, you guys should be excited. We have Samara Cohen, who is both the global head of market development at BlackRock and also just one of my favorite people in this world to talk to. So yeah, really excited about this. So welcome, Samara.

Thank you, Jason Yanowitz. I'm excited to be here.

Yeah, I'd love to get your take on You have one of the most interesting minds when it comes to just global market structure and how all these things— prediction markets, crypto, equities, everything is coming together. I'd love to get your macro view on just what is happening with market structure today.

So I, I'm incredibly excited to be here today because I just got back from a week in Europe. I spent time in Paris in Brussels. And I really think that the next 6 to 12 months in decisions that are being made around market structure and market design are going to inform the shape of global capital markets for the next decade or more. And I'm not just talking about, um, digital assets and crypto. I'm really talking about the capital markets, what they are, who accesses them, and how, you know, broad the investable universe is. Because as a function of new technologies like blockchain and also AI, there are a lot of really big market structure decisions being made around the integration of European markets as Europe seeks to increase its competitiveness globally. And create more capital formation. And of course, like you guys heard from, you know, several really critical policy and regulatory minds yesterday, and the US— I've never seen kind of such alignment across regulators in terms of moving forward US capital markets. Again, not just specific to digital assets, but broad public and private market structure. And so all of this is happening at the same time, which is exciting, but it's also extremely complex. And I think for all of you, and I asked Jason beforehand, like, who's in the audience here? Who am I talking to? I think one of the things that's really helpful and really important about the convening power that you have and that, you know, Blockworks has is that you guys really are a mix of, um, you know, different parts of the market's ecosystem and your ability to kind of, you know, work together in this moment, I think is really gonna inform whether like we build something that scales.

Yeah. Um, why? Okay, so let's say, so you mentioned the regulators yesterday and the policymakers. So it's, it seems like the policymakers and the regulators are on our side. We've got a lot of momentum, we've got tailwinds, we've got this tech that's probably better than ever. Why does it kind of feel like it actually isn't working right now? Like why are the tokens down and why, yeah, what do, maybe what are the hangups and to what's happening right now?

So I guess I would say the biggest one is I would kind of reframe like there is a problem already if we are talking about what side we're on. Yeah. Right? Like I think to make this technology, um, deliver into its promise, we need to be on the side of building strong resilient markets and the investor experience. And specifically, like, we had a really important learning for investor experience the weekend of October 10th, which is that, like, there are a lot of market design considerations that really need to be developed and developed pretty quickly on crypto rails given the pace at which tokenization is going. Because right now, you know, sometimes people are surprised— you guys, you know, probably aren't— but people are often surprised given how much we talk about tokenized financial assets that on an order of magnitude, like crypto is what, like $2.5, $3 trillion now? Tokenized assets are about $26 billion. Like, they are tiny in the context of crypto. But if the events of October 10th had happened with tokenization of financial markets at large scale, it would have had a much broader impact on investor trust and commitment to the space. And so I think right now, designing with the investor and investor experience at the center, particularly as we start to bring things like equities and bonds on-chain, like that's the critical piece that isn't really in place right now.

Yeah, yeah, it's interesting. I spoke with Robbie yesterday who's the head of digital assets at BlackRock and you both brought up October 10th. What do you, maybe taking that a step further, what, what do we, I mean everyone in, in this room is kind of building these systems. So what do we actually have to get right so that if, you know, we have another moment like that, but you know, tokenization, tokenized assets have grown 100x, what, what is the thing that we need to make sure that we get right here?

So I think that first of all, just looking at October 10th and taking every moment that happens in markets and there will be more and learning from it is critical. Critically important. And one of the key learnings, probably from my perspective the biggest learning from October 10th, is what I think of as the Oracle problem— is the mechanism by which we ensure market participants have the right price information at the right time so they can act. And there were multiple points of failures in terms of pricing sources and data that led to kind of the cascading events that happened on on October 10th. So that, you know, mechanisms for valuation clarity is like first and foremost. And another big one is really, um, uh, the breadth of participation. So one of the things I'm really hopeful for is, especially as we bring more of TradFi on-chain, because I think right now the other thing that's, I think, been exposed by the October 10th events is that there are actually a lot of crypto-native investors that should be more diversified out of crypto into things like, you know, bonds and equities. And so in terms of ensuring that you have enough liquidity providers who can participate in both ecosystems so that they can maintain price alignment, that is the other critical piece.

Yeah. What do you think about tokenized stocks?

Define tokenized stocks.

I go on Coinbase or Robinhood or Kraken and I see Apple stock and it says, I'm on Kraken, it says K-Apple or something, you know, however they do it.

Yeah, so I think what's trading right now outside of the United States with respect to equities and ETFs are what I would consider, and most of the firms who have them like Ondo and Kraken, what we would call tokenized price representations. So they're tokenized securities, but they aren't the— but they reference an underlying asset, whether that's an ETF or whether that's a stock. And we're at a moment that it's really important that investors understand the difference. Now, with respect to the non-US investor who, you know, wants access to a US stock or ETF, That might be much easier than trying to open an international brokerage account, but it's not the same ownership rights as in the stock or in the ETF. So I think one of the kind of imperatives as an industry right now is we do create a common language so that all of this innovation doesn't become a Tower of Babel that creates investor confusion and undermines trust.

You lost the fight on RWAs. On the terminology.

I did lose the fight on RWAs, like, and there's more like banking people in the audience here who understand that RWA means something very different in the context of prudential regulation, but we did lose that battle. But it's early in the days of tokenized securities, and so I think this concept of tokenized price representations and, you know, understanding what ownership rights you have, what redemption rights you have with respect to what you're buying is gonna be very important to scale.

Yeah. What do you guys, when you, so obviously BlackRock, you guys have, you know, the, the best performing ETFs in the market right now. What do you, when you think about your digital asset strategy, is it all, is it all ETFs? Is it all, are the, are there more, do you spend more time thinking about tokenization outside of the ETFs? Is it on-chain, off-chain? How do you think about this?

So we think about how to create the best investment outcomes for the broadest set of investors. And like, generally— not generally speaking, like, I think ETFs over the past 25 years have been the most significant technology disruption in markets that has done exactly that. ETFs have brought broader access to markets to more investors who, you know, couldn't access diversified strategies or parts of the bond market. And all of these things we kind of take for granted we can do right now in, in ETFs. I think tokenization is the next chapter in the same story, and the ETF experience is extremely instructive with respect to tokenization. So we continue to think, and the numbers bear it out, especially as you talk to Robbie about. We continue to see commitment, um, especially to, you know, Bitcoin and Ethereum through the ETP wrapper. But we also see increasing demand from crypto natives to access a broader set of investments like tokenized money market funds, like bonds, equities, and ETFs, where they are in their crypto wallets. So ETFs, TPs, tokenization, are both really important parts of building that full picture, which is centered on just creating better outcomes for more people.

Yeah. If you fast forward a couple of years, will we be able to buy all of the BlackRock ETFs on-chain, on Ethereum, on Solana, on whatever chain it is?

Do you think there will be demand to buy all of the BlackRock ETFs on-chain in a couple of years?

I mean, if you think of that, if you think that every year more and more capital flows on-chain and I mean, like my thesis on all this stuff is tokens and equity, it's all just converging into one. And in 5 years we won't say, oh, there's tokens and then there's equity. It's all, it's all just one thing. And I think the thesis is also that more and more capital every single year will just flow onto public blockchains. And I don't know what those blockchains will be, but I think if you look at what Visa is doing, who just presented, or, and you know, what Stripe is doing, they're just more, more, more GDP will come onto public blockchains.

Yeah, I think that's right. I think more of GDP will come onto public blockchains. And so the question is the pace at which that happens and where the demand comes from. I think in the US and Europe, investors are pretty well served. Served by the existing ETP ecosystems. So the question is, what would actually compel them to switch? And I think, you know, so it could be number one, the ability for on-chain access to provide them something outside the existing investable universe that's available in ETFs. It could be better utility, that they could just do more stuff with those investments that they can't with a brokerage account right now. Um, or, um, it could be that they're conducting just so much of their financial lives on-chain that they don't want to live in two different ecosystems, and that's a tipping point where more goes on-chain. I'm not sure how that timing plays out, but those first two conditions aren't there yet given the breadth of the investable universe that ETPs cover. So my core thesis would be that we have a period of time where we to see how these market structures converge so that investors can manage broader portfolios and that more investors can participate in them. Because something Robbie often reminds us of is that, like, sitting here in the Javits Center, we may be the least appreciative of how tokenization can help somebody create a portfolio because, you know, in the United We have like so many on-ramps into a broad investment universe.

Government works and the money works. Yeah, but kind of tough to explain Bitcoin in America when you— so you're just in— you just had this Europe trip. So it's the US is approaching stablecoins very differently than Europe, right? Europe is very focused on this CBDC. They've got a bunch of different things that they're trying to unify the monetary system. US is very focused on more like private stablecoins. Then there's these tokenized deposits. Like, how do you see all of this stuff coming together?

Yeah. So granted, like my— like I am a market structure nerd and so I get very interested about this, but it has very practical implications that the US and Europe are going in very different directions right now. And we are going to see how this unfolds over the next 6 to 12 months. So the US has made a very strong statement. In terms of stablecoins, and the passage of the Genius Act was a historic moment in terms of codifying what this can actually look like. But, you know, starting in July, we will have Genius-compliant stablecoins that will largely be kind of the bedrock of the US digital assets payment system. Conversely, Europe is really anchoring on a Euro CBDC that should be live in September, and how that works with tokenized bank deposits. And I think it's incredibly interesting that, you know, these are two very distinct paths and we will see them play out in parallel.

Yeah. When you look out at the next several months, do things feel— so we had genius, but even like clarity and just global market structure, do things— are you able to predict what the next 6 to 12 months looks like? Or do you feel like now is at this moment in time where everything's up in the air?

I can't predict what's going to happen after the next 6 to 12 months, but I think it's pretty clear that over the next 6 to 12 months, and you guys have seen evidence of this discussed over the last 24 hours, we are going to see a number of new models of tokenized securities and of payments coming online in the United States. So the big question that will be answered as they come online is How do they work together, particularly should we have like a stressed market event? Are there dislocations? Are there things that really like undermine on a broad basis participation in the markets? Or what are the things that investors actually find the most useful? And I thought the, you know, there was a session earlier with Austin around the importance of, you know, the utility of public blockchains. And I think something that will be really important over the next 6 to 12 months is how the models that have open standards self-improve to create interoperability, to enforce price alignment, and to aggregate liquidity. And how that plays out will define what things look like after that 12-month period. But I think it's going to be a pretty period of aggressive and important learning as these things come online in markets.

Yeah. Are there any important signposts that you're looking out for?

I think that the— how assets accumulate, particularly where we've seen the biggest product market fit right now, are in kind of tokenized treasury funds. So asset accumulation there, actual movement from pilot to production. There have been a number of really important announcements across the DTC, NASDAQ, Coinbase, and how asset gathering works across these different models. Again, all of this is going to unfold in the next 6 to 12 months. And then lastly, like these measures of, of market integrity, like where the locations, why are they occurring, and how many liquidity providers are incentivized by the ecosystem to invest more to make better, healthier markets?

Yeah, I think one of the biggest— we talked a lot about tokenization because that's what this is about, but we haven't talked about prediction markets. I don't know if you want to go there at all, but I do think that's one of the biggest areas of market structure where there's, there's a lot of, I think, debate and good debate about, you Should they be— our prediction market's good, but maybe they shouldn't be doing so much in sports gambling. Is it all— is it all good that they're doing all this stuff and they're going to eat away at FanDuel and DraftKings' lunch? Do they need to be? Is it— is it a cow shit? Is it a poly market? Kind of like, what's the— how do you— where do you see the role of prediction markets?

So I think the facts are prediction markets are asset gathering. They're increasingly being being looked at, you know, as an information source. I mean, 90% of them right now are like sports related, but if we look at the 10-ish percent that is financial markets related, it's, it's significant. Kalshi and Polymarket feeds are available on the Bloomberg terminal. Like, ICE made a big investment, you know, Tradeweb made an announcement. So I think the fact is the integration of prediction markets in financial ecosystem is something to be aware of and to respond on. And of course, there's the, the regulatory side as well with the, you know, CFTC's kind of breadth of engagement with prediction markets. So how investors consider prediction markets in building their, their broad portfolios— they are living in the same markets as these other assets. So as a like as a design mechanism, they are going to be— and as an infrastructure layer, I think they're like increasingly part of what finance looks like.

Yeah, I know we're coming up on time here. There's a lot of folks in the room who are just looking. I see a lot of people I know, like different founders who maybe try to sell to the BlackRocks of the world or other financial institutions, execs at financial institutions. Who are trying to move their digital asset strategy forward, do you have any maybe advice or guidance for, you know, taking what you said about what the next 12 months could look like, just advice or guidance for how people should kind of play the next 12 months?

Yeah, I think the winners in the next 12 months will have 3 big characteristics. One is that they lean into open architecture and that they don't view like creating a, you know, infrastructure that works in a silo is a product. Infrastructure that works across an ecosystem is a market. So infrastructure providers that can work across an ecosystem will win. Putting resilience, volatility mechanisms, and safety safeguards like front and center of a strategy will win. Anybody who doesn't have that will get wiped out in these stress events, which will inevitably, um, occur. And then I think lastly, it is really designing around the investor experience. That's why ETFs scaled to, you know, $14 trillion. They, you know, put investors at the center. And while ETF arbitrage encouraged investment by a trading ecosystem, ultimately the gains accrued to investors, and that's why ETFs as a technology scaled. The same is going to be true in tokenization.

Yeah, Samara, thank you so much.

Thanks for having me.

Yeah, thanks everybody.