Host (Angie Laauo): Since you're a subscriber to this Bloomberg podcast, we thought you'd be interested in a sponsored podcast called Evolving Money, produced by Coinbase and Bloomberg Media Studios. It explains how institutional investors are adopting the world's newest asset class, crypto. Here's a recent episode.

Host (Angie Laauo): There's been a lot of frustration in the crypto community over the past 15 years because the the Wall Street and financial services industries have ignored crypto or outright been opposed to it.

Host (Angie Laauo): That's Rick Edelman, a longtime financial adviser and podcaster in the financial world and the perfect guest to kick off this episode of Evolving Money.

Host (Angie Laauo): The reason that there has been such antipathy uh about crypto in its early years is because it didn't get invented by Wall Street and Wall Street doesn't like what it doesn't control and own. So, better to quash it if you can, ignore it if you can't. And they did that pretty successfully for 10 years. But eventually, they began to realize it's here to stay. And oh, by the way, the technology is in fact pretty cool.

Host (Angie Laauo): Welcome to Evolving Money. I'm your host, Angie Laauo. I spent decades as a journalist covering the financial industry and well, this is the biggest story yet. This show is co-produced by Coinbase, one of the largest cryptocurrency platforms in the world, and Bloomberg Media Studios. In this series, we are exploring how crypto is being adopted by traditional financial institutions as the next logical evolution of the monetary system.

Host (Angie Laauo): This episode is about tokenization. That's the process of representing a real world asset or financial instrument on blockchain. Now, in less than three years, the amount of tokenized assets has grown eight-fold to more than $30 billion US across equities, fixed income, private assets, real estate, and a whole lot more. And the tokenization revolution is still in its early stages.

Host (Angie Laauo): Now, recently we've seen some of the largest traditional asset management companies embrace it in a big way. This is what I'm talking about. BlackRockck, they've launched what they call the Bidd Fund on Ethereum. It's a tokenized money market fund they've made available to qualified investors. The total value of those tokens around $2.8 billion.

Host (Angie Laauo): And then we've got Fidelity. They've rolled out their own tokenized money market fund currently valued at over $200 million. JP Morgan and Goldman Sachs. They've also made their tokenized assets available to their investors in various ways. But why are they doing it?

Host (Angie Laauo): Well, there are three main drivers. We've got liquidity, broader access, and operational efficiency. We're going to touch on all three of those topics with our next two guests. Rick Edelman, who you've already heard from. He launched the Digital Assets Council of Financial Professionals, the first educational platform helping financial advisers responsibly navigate crypto, blockchain, and tokenized assets. He's uber bullish on the opportunities tokenization is bringing to the market. And Scott Lucas, head of markets, digital assets with JP Morgan. He's actively integrating tokenization and blockchain technology into JP Morgan's operations, but he isn't in as much of a hurry as Rick is. And I think it's important to give them both a place to explain their approaches for you. We'll start with Rick.

Host (Angie Laauo): Now, just a few months ago, Rick, you said that by the end of the decade, tokenization will be the dominant investment platform in the industry. far eclipsing ETFs. ETFs as we know them today really won't exist in five years. That is quite the prediction, Rick. Why do you see that?

Rick Edelman: Yeah, it does sound momentous, but it really isn't. It's iterative. Uh it's just the next logical step in technological generation of money management. Uh remember that ETFs have come on the marketplace over the last 20 25 years replacing mutual funds which were themselves the dominant investment vehicle for Americans for decades and decades.

Host (Angie Laauo): Okay, but mutual funds still hold I think about 20 trillion here. That's a huge piece of the investment world. So why do you see ETFs and eventually tokenized products actually eating into that?

Rick Edelman: They're simply technologically superior. Uh ETFs trade throughout the day. Mutual funds you are only priced once when the market closes. ETFs have better disclosure. ETFs are lower in taxation. They're lower in cost. They're higher in liquidity. So naturally, people love ETFs over mutual funds. The same thing's going to happen with tokenization. We're going to take those ETF shares and turn them into tokens which will trade on blockchains. This will further reduce the costs, further increase the liquidity, further increase the uh broad array of assets available for you to invest in, improving your diversification. So, what's not to love? So, just as everybody graduated from mutual funds to ETFs, next we're going to go from ETFs to tokens.

Host (Angie Laauo): Do customers want it? Do they understand it? Because at the end of the day, if the customer doesn't want it, the bank is not going to create the product. Well, we we all remember Steve Jobs who famously said he never engaged in focus group testing because nobody understood the products he was inventing. So, how could they have a valid opinion? Uh, and it's the same thing with blockchain technology. People don't understand it, and so how can they like it? In other words, all we're going to do is develop the technology, introduce the products on that platform, and consumers will quickly discover it's faster, cheaper, safer with greater transparency and inclusion. So, they will move and adopt to this because it's simply going to offer them tremendous benefits that they currently lack.

Host (Angie Laauo): Right now, we can only trade stocks Monday through Friday, excluding holidays and weekends, from 9:30 to 4 in the afternoon. That's silly. Why aren't we able to do this 24/7, 365? Why aren't we able to do it instantaneously? Like when you go to a supermarket to buy a loaf of bread, you walk out with a bread as soon as you pay for it. Why can't we do that with shares of IBM?

Host (Angie Laauo): You remember back in 2019, we we were both in the space then, but one of the world's first real estate tokenization ideas came to light and it was in Aspen. It was St. Regis. They were fractionalizing uh the sale of their big resort

Rick Edelman: and I think a fifth of it went for I think was it $18 million, Rick? Do you remember?

Rick Edelman: Yeah. And it were 10 they were 10 bucks a piece. Yeah. Uh each of the tokens and that was actually the second transaction. The first one was a year earlier, a condo building in Manhattan tokenized. Uh, and and just think about the wonder of this. See, the big problem with real estate, as we all know, is that it's very expensive to buy and it's highly illquid. I mean, we all know how hard it is to buy and sell a house compared to buying and selling shares of Nvidia.

Rick Edelman: So, along comes the tokenization process where they could take this multi-million dollar asset and split it into tokens of $10 a piece. All of a sudden, people who never were able to buy commercial or investable real estate now can because the price of the token is cheap and it trades with great liquidity. This opens up the commercial real estate sector to retail investors in a scale never before seen. This is a big deal because the real estate market globally is three times bigger than the global stock market.

Host (Angie Laauo): So Rick, I get it that tokenization makes transactions more straightforward. It makes them quicker. It reduces overhead, all of that, but realistically, I mean, actually, how much money will using crypto rails save the banks in overhead?

Rick Edelman: So you look at Kinesis, which uh is a blockchain created by JP Morgan that does $2 billion a day in crossber transmitts. They've moved over $4 trillion worldwide since it was conceived four years ago because they recognize they can move money for their institutional clients faster, cheaper, and easier than they can using the federal uh systems that we use in money management such as the Swift system. So, everybody's beginning to recognize that this is better technology than the technology we've been using to date. It offers big business benefits, saving lots of money. JP Morgan says that blockchain will save banks $120 billion a year.

Rick Edelman: So you're now at the stage where nine out of 10 banks are developing blockchain technology. Two out of three Fortune 500 companies are developing the technology and over the next 12 to 24 months you're going to see all of them begin to deploy and it's going to be an exponential growth curve. traditional hockey stick. Uh, and people are going to be shocked at the speed of adoption and implementation in the marketplace. Uh, it's going to appear to have come out of nowhere, but it's going to be like the Beatles where they spent, you know, six years becoming an overnight success.

Host (Angie Laauo): Rick, what's next? We have the institutionals coming in. We have the BlackRockck, the Franklin Templeton, uh, JPM. All of these folks are coming into this space. How will this look in 5 years?

Rick Edelman: Well, everything is going to be tokenized. Uh not just financial assets such as stocks, bonds, real estate, uh and and other. But everything is going to be tokenized. For example, your driver's license and passport. Why are we carrying a piece of plastic in our in our wallet or purse? That's ridiculous. uh your employment records, your academic records, your health records will all be tokens, making it easier for you to deal with the medical industry or when you're applying for a job or trying to rent an apartment. Uh you're going to uh be able to tokenize your home. We all know that homes are the number one asset for most Americans, but they don't want to sell their house when they're retired to generate income. They want to keep living there. So, well, by tokenizing your house, you can take that million-doll home, create 1 million tokens of a dollar each, and now you can sell them off one at a time as you wish to generate income for yourself.

Rick Edelman: Investors will want to buy it because they're going to want to own a piece of your home because you live in a great community with an appreciating asset. So, we're also going to tokenize salaries. For example, you can already buy a uh into a token that is a contract of a professional athlete, your favorite quarterback or your favorite Hollywood celebrity or your favorite recording artist. You you can buy a token of their music catalog. So instead of being a fan of Taylor Swift, you'll be able to be an owner of her music along with her so that you're earning money by enjoying your favorite radio show or Hollywood movie or Broadway play. This is going to be the tokenization of everything. We're going to be able to take all these real world assets and create digital representations of them that you'll be able to own and trade and enjoy as a hobby.

Host (Angie Laauo): That's Rick Edelman and what he sees makes him highly enthusiastic about the potential of tokenization. My next guest, however, has a more measured perspective. Scott Lucas is the head of markets digital assets for JP Morgan, the world's largest bank and a leader in blockchain usage amongst tradey firms. Scott is an expert and a leader in this space and he recently oversaw a very large transaction that caught my attention.

Host (Angie Laauo): In late 2025, JP Morgan served as an arranger for $50 million US commercial paper issuance on Salena's public blockchain. Galaxy Digital, which is a global cryptofocused financial services and infrastructure firm, issued the tokenized commercial papers. Those tokens were purchased by Coinbase and Franklin Templeton with settlement occurring in stablecoin. Now, this was a short-term corporate debt deal done in a traditional finance structure, but issued, traded, and settled directly on a public blockchain instead of through legacy banking rails. No doubt it was a landmark deal. But my question is why did JP Morgan do it?

Scott Lucas: I guess the key thing for us to really trying to understand what the market adoption is. There's a lot of talk about doing things on public blockchain. And there's a lot of talk about the potential. There's a lot of talk about the appetite. And I feel actually the only way that we can really pressure test that and prove it and adjust the thesis to kind of where the market needs to go is to do something.

Host (Angie Laauo): But Scott, now that you're using both blockchain and legacy rails for transactions, have you chosen a winner, a preferred way forward? quite often in in the in the blockchain space, it gets really emotional really quickly about what technology you use. It's either this or it's that. You can do it this way or you can do it that way. And

Scott Lucas: really, a markets an an efficient market does and so there'll be a whole bunch of products that stay as they work today in a you very deep and liquid capital markets footprint in the United States. And there'll be some stuff that we add to that market, whether it be similar products or new products that work on blockchain. And at some point, the market will decide whether blockchain is a better answer or not, you know, and whether it becomes an all blockchain or a no blockchain or a regular technology and blockchain outcome. And to be honest, like that's not our decision as JP Morgan. I think that's the market's decision. I mean, that's that's the journey we're on. And I think it's reasonable to say that there's a good thesis to suggest that blockchain is a better technology for a bunch of different instruments in the market. There's no evidence yet. So, let's build that body of evidence and make sure that our thesis is correct and and if it if it's not quite correct in one way, can it go another way and perhaps answer the question separately. So, that that's really the point of this exercise.

Host (Angie Laauo): If we were to take a 10,000 foot view, and I'm going to ask you to take that pilot's view, if you will, Scott, um, the amount of money being moved in traditional market channels really dwarves what's moving on chain. If that ratio changes, could those massive amounts of capital be tokenized and handled on blockchain?

Scott Lucas: I I think we need to figure out like for what purpose those changes would happen. The United States already has the most deep and liquid capital markets on the planet. To make those more efficient, you need to kind of say, well, first of all, where are the inefficiencies that we think could be addressed? And second of all, how do those inefficiencies positively impact the market in a way that's worth making the investment to get there? There has been a lot of supply and experimentation with tokenized securities over a range of years. there hasn't been a lot of success in bringing sort of broader market products, you know, into production because there hasn't been a broad set of usable cash sources.

Scott Lucas: And when I as as much as stable coins are growing and the opportunity exists for stable coins to continue to grow, there still aren't an enormous set of scalable cash sources. And so tomorrow, maybe there's cash, maybe there's stable coins, maybe there's tokenized deposits, maybe there's central bank digital currencies in some jurisdictions, maybe there's other means of settling that transaction. And so I think that the question really is like how can you match those up? If you've got a sophisticated methodology of choosing the security on a particular platform and now you've got multiple choices of the settlement mechanism for that, like how does that then get built and how does that work? And again, that's very much a client-driven conversation. You know, it's what do the clients want to do, where they want to operate,

Scott Lucas: >> do we think we can help them with that? And if we can help them with that, like what's our risk footprint we're prepared to take >> in that sort of in that area. And that's the same as every other product. The fact it's on blockchain or not almost doesn't matter. Like we ask ourselves the same questions every time. How do we support clients? How do we think about our risk footprint? Are we prepared to operate in that space? what are the resources we're going to put against that? I think there is a fair bit to learn there and I think the potential exists but you know we we still need to prove the thesis in the market and then you know see where the reality takes us and I think that horizon's pretty open.

Host (Angie Laauo): Scott, the commercial paper transaction we talked about off at the top that was a really great proof of concept in that specific domain. What other opportunities do you see tokenization bringing to other asset classes besides money markets?

Scott Lucas: If you put something on a distributed ledger with a single record that entitled users can see, it's impossible to disagree and it's impossible to disagree that yours mine becomes ours. And if there's our record of that instrument, then the way that you think about and we often talk about this from a sort of a fixed income standpoint that maybe you think about coupon is there's one record.

Scott Lucas: Well, if there's only one record today, we pay coupon on a six monthly or annual basis because there's a lot of overhead around managing that process and checking that process at scale. Well, if there's only one record, why wouldn't you calculate coupon to the millisecond? And then when you trade that instrument, that clean and dirty price associated with a trade at that particular moment is very very clear. Even if you settle it later, like that's the rule set. And there's no debate around what that looks like. You can change the frequency of the coupon payment. You could pay daily, weekly, monthly. You could provide optionality around um whether you wanted to keep all of the coupon at the same frequency or you wanted a different frequency. And that could be at the behest of the investor if they want a different credit risk profile. You could be at the behest of the issuer if they want a different liquidity profile. You could embed a smart contract in to manage the interest rate swap. So the issuer steps out of the equation.

Scott Lucas: And now you've got like the bank managing the cash flows directly to the investor or whoever is managing that that swap. And then you don't need a very sophisticated finance department who can manage the swap on your behalf because you don't have all the accounting rules and processing etc around those cash flows. Like if that's the case then companies that aren't as mature, aren't as big etc might be able to access debt capital markets in a way they can't access today. And so when you really think about like what tokenization can do, it's not just about faster mobilization and bringing more collateral to the table. It's also about like changing the potential for the instruments themselves in a way that enables more utility and enables capital markets to do what capital markets should do which is get themselves wider and deeper to service the wider economy and economic growth. Like that's the point.

Host (Angie Laauo): We had a conversation with Rick Edelman. He said that tokenization will revolutionize the entire industry. He said that within 10 years everything will be tokenized and traded onchain. Do you agree?

Scott Lucas: Possible but improbable. And that doesn't mean it shouldn't. It's not a view on whether it's the right choice or not. But I don't think this change is as easy as everyone thinks. There's a big difference between technological readiness, legal readiness, regulatory understanding, then taking risk, then upgrading internal systems. So that just takes a while. And and I don't care if it takes 3 years, 5 years, 10 years, 15 years. I don't mind if the whole market changes or some of the market changes. But what we do believe in is there is absolute value in deploying this technology into specific areas of the market. We do believe that there will be scalable market change over time. But to be deterministic around um how long that takes or how long that should take, I I don't think that's our job. I think that's the market to figure that out and and we'll hopefully help figure that out with the market.

Host (Angie Laauo): Both our guests today agree that tokenized assets are emerging as a powerful tool for investors and investment companies. But where they differ is in the timeline. Rick talks about tokenization taking over within 5 to 10 years while Scott is monitoring client demand and letting that dictate the pace of adoption. So, I want to wrap this episode by going back to Rick Edelman to get his opinion of what it will take to accelerate the rate of institutional adoption and make his bullish prediction come true.

Rick Edelman: A big impediment to adoption has been the lack of clarity by Congress. We don't know what the rules are. We don't know how to engage. We don't have rules for custody. We don't know what taxation is going to be yet. So, we're waiting for Congress to create the laws. Once we have the rules of the road and the brokerage industry, the banking industry, the insurance industry all know how they're allowed to engage, you'll begin to see the massive levels of adoption.

Host (Angie Laauo): I'm Angie Laauo and this is Evolving Money, a co-production between Coinbase and Bloomberg Media Studios. Thanks for listening. Be sure to follow the show on your app of choice so you'll always be in the loop when we post a new episode.