[00:02] become the big catchphrase for 2025 and 2026, but there are institutions and people who have been pushing us forward long before it became en vogue. I'm Sandy Kaul from Franklin Templeton today for a very special edition of The Daily
[00:16] for a very special edition of The Daily Wolf. Let's go. Daily Wolf on Yahoo Finance. I'm your host, Scott Melker, also known as The
[00:29] Wolf of All Streets. And we're here for yet another very special edition, talk about the news of the day. We're going to dig into what really matters, what's being built in crypto. I have one of my favorites here, Sandy. How are you
[00:43] you. >> Great to do this in person. >> IRL, they say, right? >> IRL, that's what the kids are saying, apparently, these days. So, talk to me about how you're broadly viewing uh what
[00:56] crypto, cuz I know you have some very strong ideas about where things are >> 100%. So, I think that there are two huge macro trends that are both kind of coming together at exactly the same moment. The first is that the financial
[01:12] ecosystem, the market rails that we actually operate all of the equities trading, bond trading, foreign exchange trading, payments, everything that we operate the financial system on, is like 50 years old, right? Like, we are
[01:29] literally using the same system that was designed in 1972. And I don't know about you, Scott, but I don't use many things that are from 1972 anymore. Um so, we are redesigning that entire
[01:42] way that securities move around the world, payments move around the world, and it is being completely redesigned on the crypto rails. Right? On blockchains, using smart contracts, using atomic payments, using stablecoins and
[01:57] tokenized deposits, using tokenized money market funds. That's all happening at a speed that is astounding, right? I mean, we have the biggest institutions in the world doing this. The Depository
[02:10] Trust Company is out there tokenizing up to a hundred trillion in US securities. They're running global collateral networks. We have major firms all over
[02:22] the world participating. We've got the New York Stock Exchange going to 24/7 token-based trading, NASDAQ going to 24/7 smart contract-based 24
[02:34] 7 tokenized trading. And so, we're rebuilding the way that our financial ecosystem works. At the same time, we have seen an evolution in how AI is advancing, right? We went from machine learning and
[02:49] natural language processing to generative AI, and that got everybody super excited. And now we're moving from generative AI to agentic AI, where these AI agents are like little self-executing
[03:03] programs, right? That they go out and they do whatever they're programmed to do completely independently. So, if I tell ChatGPT that I want to book a trip tell ChatGPT that I want to book a trip to Paris, that AI agents inside the
[03:15] ChatGPT will find flights for me, book my hotel, book reservations for me, book tours for me, all without me having to instruct each individual action. And the the fulfillment infrastructure for those agentic AIs is going to be the same
[03:31] agentic AIs is going to be the same blockchain rails, right? And so, the combination of these two giant macro trends really tells us at Franklin Templeton that this is going to be the most important investment opportunity
[03:45] >> So, I want to >> we're building an ability to offer those >> So, I want to I want to focus on the the first one. So, first I >> Yes. >> you wrote a blog post
[03:59] about? >> Yes, I wish it was just a blog post paper. >> a paper. My mistake. tokenization will replace equities and bonds over time. People thought that we
[04:12] were a little crazy in 2017, but it's always nice to be right. >> Yeah, it is happening now. >> At a speed that I think many people didn't expect. So, I guess you get the hockey stick adoption of things. It's a
[04:25] happen earlier. You handicap it, you invest, you miss, and then right after your exit it goes absolutely parabolic. So, you talked about the DCCC doing their pilots. How is Franklin Templeton preparing for this specifically?
[04:39] market fund all the way back in April of 2021. So, we've been trading 5 years 24/7 a day, and we have really used the native capabilities of the blockchain to
[04:51] into money market funds like intraday yield calculations, daily yield payouts. And so, we feel like our product is one of the best opportunities to use as collateral in this new ecosystem because
[05:05] it allows you to earn interest up until the second you cash out. And that is market fund industry operates today. So, we have really I think advanced the ball, um, and I think as collateral
[05:20] increasingly moves onto these new rails, uh, we're going to be super well trend because what we offer as collateral is a superior product. >> Okay. So, do you believe and how soon does it happen that this is the
[05:34] system? >> I think that for collateral purposes, repo purposes, financing purposes, this happens within the next 3 years. I think happens within the next 3 years. I think for general portfolio exposure, it's
[05:48] kind of going to be like the ETF trend. You'll see a big wave of adoption and then you'll see steady incursion and transfers. It took 20 years for ETFs to become larger than mutual funds. I think you have that and you say 10 years for
[06:03] funds. >> What about securities being traded on >> Securities being traded on tokenized rails is already happening and I think it's going to just grow from here. Um but the securities individual
[06:17] really when do you start putting those into portfolios? How do you manage those portfolios to optimize the use of every asset? That's what I think has to get utilization layer. >> I guess maybe the big question for
[06:31] people watching is how do I invest in this as a retail investor? I think that's been one of the sort of big disparities in this cycle if we want to >> Where institutions are increasing adoption, they're building, they're
[06:43] wonder is that going to actually accrue already hold? >> So here's the simplest way I can put it, Scott, right? Is that to run the financial ecosystem on these new rails,
[06:57] I need to own cryptocurrencies to pay to record a transaction. So demand for cryptocurrencies from giant firms like Franklin Templeton, Goldman Sachs, Block Rock, um Vanguard, Fidelity, all of the name
[07:12] players, it's going to go higher and higher and all of our firms are going to need to hold cryptocurrencies. So that tells you demand for cryptocurrencies is going to go through the roof and therefore there are products today,
[07:25] ETFs, that you can go online. Franklin Templeton has one, right? Easy BC, right? Just go online and you can buy a multi-coin ETF token that gives you exposure to this ecosystem and as all of these big financial firms move online
[07:41] and buy the cryptocurrencies to operate, the value of those cryptocurrencies is to do it. >> So, it's this isn't just an idea. You purchased uh you know, I I don't want to get into the improper mechanics of it,
[07:55] but you know, part of Coin Fund and it's become Franklin Crypto and uh Chris and >> Yes, thank you. >> Right. And so, that's a liquid fund. So, you're actively investing now at Franklin in tokens existing and I'm
[08:09] >> Yep. And the way I say to people is in the old era to capture growth, you needed to buy the equity of the companies driving the boat growth. In the new era, you need to buy the tokens and cryptocurrencies of the platforms
[08:22] and networks driving growth. And that's why we are launching Franklin Crypto. That's why we are managing these active portfolios of multiple tokens. And biggest opportunities we've seen in our lifetime.
[08:34] >> Is that primarily focused on layer ones, well? People would always ask me in previous cycles, years and years and rich on? And I would laugh and say I've no idea. But at least I know if I own
[08:48] of that. >> That's right. And I think that to start. And then I think as we said, we think that these AI-based companies are building apps in all of these
[09:00] opportunity. And even quantum, we're going to see the rise of quantum as the growth of the infrastructure on crypto rails, AI firms being built on crypto rails as apps, and then uh as we start to see quantum come on to
[09:16] help ensure and shore up all of the cybersecurity. biggest news. >> No, I'm excited because think about the demand case. If you know that your whole infrastructure is at risk unless you buy
[09:30] going to be buying that service pretty quick. >> I love that the the the that's a much more positive view than we obviously get by quantum. >> I know. Everybody's always got disaster
[09:44] forecast, but usually we can figure our way past disaster. >> So, I want to talk more broadly about AI and agentic trading. Seems like the narrative is there, but people are
[09:57] know that we still we do have hundreds of millions of transactions already by AI agents using crypto. Do you think they'll be using stablecoins? Do you in practice? >> Well, I think that they'll use
[10:09] stablecoins and other tokens for consumer AI agentic AI, but the one we're really excited about is this machine-to-machine payments. So, think about it. They're going to pay fractions of a cent every
[10:22] time I make an API call on your system or every time I use 1 second of computing power. That's going to all start to get paid for at that small and incremental level. And the agentic AI micro payments are going to pay
[10:37] machine for use of its resources, and that's going to happen at millions of times a second. Like so fast that no human's going to even be able to keep up all automated on these blockchain rails. So, there's going to just be surging
[10:52] >> tokens and compute more than I I do think the booking the plane ticket, as >> That's going to be the fun part of it for you and me, but the really lucrative machine-to-machine micro payments. >> I think Visa had a paper very recently
[11:07] where about about this, and they sort of put it into two buckets, which was the Well, they actually kind of made the argument that we'll still use our credit cards to book those plane tickets, but maybe there If I work for Visa, I might
[11:20] be also not wanting to be the Blockbuster of the future, Netflix. But, effectively be. But, it seems that you're of the belief that eventually both of those buckets are are agentic. >> The whole the whole system becomes so
[11:33] automated and so happening at your wallet level under the covers that know how your web two apps work? Yeah, we don't know how they work. You're not work either. It's just going to happen, but you're going to be able to see the
[11:47] evidence of that in terms of trillions of transactions moving on to these >> I have to ask because we have to ask everyone right now, does the Clarity Act whether it passes or it doesn't? >> Whether it passes or not, it doesn't
[12:02] impact what we're building, but I think that there will be an unlock of big institutional capital if they pass the Clarity Act, right? They big institutions like pension funds, endowments, they can't put money into
[12:16] these markets without regulatory certainty because they're fiduciaries, opportunity there is that it's going to give these investors with really deep pockets and big pools of money who don't have much crypto exposure the right
[12:30] cover they need to start establishing positions and allocations. of said at the beginning, the institutionalization of crypto has become the big narrative, but what does that actually mean, I guess? Because
[12:43] past few years, has actually been institutional products for retail >> coming online, but it hasn't actually been institutions themselves investing. creating products. So, what is what is that next wave of institutionalization
[12:59] >> Well, and I think that's it. The first wave of institutionalization was big institutions building out the capability to operate on the rails. The second has been big institutions now building their own capabilities. And now the third is
[13:12] going to be big institutions moving their investment capital onto these opportunity. >> Are they excited that the price is down? >> They don't even understand They we've got to start with basic
[13:25] education there, but they are asking for the education now, and that is a huge ago. >> So, in that process, we're exceptionally >> Yeah. We are exceptionally early, but don't forget when the hedge when
[13:37] institutions started moving into the hedge funds between 2002 and 2006, they moved more than a trillion dollars into hedge funds. Right? So, when move in hard, and they move in with a
[13:50] >> Is there anything else with a minute left that you're super excited about to get to fill our last minute and give us some general thoughts?
[14:02] moment in time. I feel like I've worked my whole career to be right here cuz in the next 5 years. It's going to be absolutely historic. approaching it, though. >> Yes.
[14:17] mean, what do you make of that? You think just higher prices, and then all >> Retail is always cyclical, and when the markets are going up, the retail investors will come back, believe me. They will always buy too late in the
[14:30] cycle, and they will always sell too late in the cycle. the same narrative, which is that institutions are just getting started. They're building. They're excited to do it regardless of the prices, and
[14:43] retail will likely come back at the same time. That's all we've got for you today on the Daily Wolf. We'll see you on the next one. Thank you. Peace.