Welcome back to Talking Tokens. Was this forwarded to you? subscribe here.
Is there a need for a glow up?
Tokenization is gaining traction across financial markets, but adoption will depend on whether teams can create compelling new use cases for institutions that are already well served by traditional infrastructure.
That was a central theme on the latest StrataMedia Talking Tokenization episode with John D’Agostino, head of strategy at Coinbase Institutional, and Rebecca Rettig, COO and CLO at Jito Labs. Both see tokenization as an evolution of financial markets, but believe adoption will accelerate when new products and market structures create demand that the existing system cannot easily satisfy.
Rettig saw that firsthand at a recent conference with traditional buy-side equity traders, where she discussed tokenization, perpetual futures and other digitally enabled financial products. “They do not think that the current equities market needs a glow up,” she said.
Traditional securities markets already trade and settle reliably and the institutions that operate within them have spent decades building businesses around that infrastructure. Simply moving those same assets onto a blockchain does not necessarily provide enough of a reason for those participants to change their behavior.
D’Agostino views tokenization through the broader lens of risk transfer. Financial markets have evolved from exchanging physical certificates to centralized exchanges and increasingly complex instruments such as swaps and options. Tokenization can bring those different forms of risk transfer together through smart contracts and create more flexible, fungible markets.
The question then becomes what will accelerate that evolution and both view stablecoins as one of the strongest catalysts.
As stablecoin adoption grows, Rettig argued that other financial products will increasingly need to operate at the same speed. “When you see the growth of stablecoins, you need other financial tools to move in the same way, at the same speed, settle in the same manner,” she said.
Perpetual futures, or perps, offer another example, as their significance comes from the ability to express market views continuously, without waiting for traditional markets to open or dealing with the mechanics of rolling conventional futures contracts. D’Agostino pointed to crude oil as an example. If geopolitical news hits at 2 a.m. on a Friday, traders can now hedge their exposure immediately rather than waiting for the traditional market to reopen. That changes expectations around when and how financial markets should operate.
It can also apply to pre-IPO markets, which D’Agostino said he has watched many attempts to build secondary markets for private-company shares for roughly two decades. Some have struggled to scale because the companies themselves ultimately controlled the equity and had little incentive to allow employees and shareholders to trade before an IPO.
Perps can provide another way to create exposure. Rather than transferring the underlying equity, investors can take a position based on its value through a derivative, creating a market around an asset without requiring the company to participate.
The pre-IPO perp market around SpaceX became a notable proof of concept in May as prices on these markets converged closely with the eventual IPO prices of major companies, raising questions about both the quality of price discovery and whether information is leaking from people close to the deals, Rettig noted.
The broader opportunity extends beyond the US. Early attempts to tokenize US equities for global investors have seen significant uptake, suggesting substantial latent demand from people who cannot access traditional US brokerage accounts. D’Agostino sees this as one of tokenization’s biggest opportunities: giving billions of people who currently lack access to traditional US brokerage accounts a way to participate in US equity markets.
With that in mind, the three pieces are beginning to reinforce one another. Stablecoins provide faster, global payment rails, tokenization brings traditional assets onchain and perps create new ways to trade and express risk around those assets.
The transition will likely happen incrementally, the two agreed. But the remaining obstacle standing between that vision and reality is within the user experience. Like how Venmo took the process of bank account numbers, routing numbers, and ACH transfers and reduced it to a peer-to-peer transfer by usernames, crypto needs that “Venmo moment,” D’Agostino said.
Check out the next section for more details and the full episode.
The latest Talking Tokens podcast 🎙️
For today’s episode, I interviewed John D’Agostino (Head of Strategy at Coinbase Institutional) and Rebecca Rettig (COO & CLO at Jito Labs) for a masterclass on the real state of institutional crypto adoption. They discuss what it actually takes to bridge the gap between TradFi and Crypto, ranging from why Wall Street is actively resisting tokenization, to how perpetual contracts (perps) are secretly solving the pre-IPO liquidity crisis for companies like SpaceX, to why the crypto user experience desperately needs a "Venmo" moment.
John and Rebecca also break down the surprising parallels between the current AI boom and crypto's early days, explaining why Artificial Intelligence ultimately needs blockchain to survive its hallucination problem. Finally, they share a contrarian take on how stablecoins might actually be the ultimate secret weapon for preserving U.S. dollar dominance globally.
TIMESTAMPS:
00:40 What Is Tokenization?
03:19 Why Traditional Finance Is Resisting Tokenization
07:37 Perpetual Futures and the Crypto Advantage
11:06 The Rise of Pre-IPO Perpetual Markets
16:18 Who Is the Future Investor?
19:47 Crypto vs. Blockchain: The Reputation Problem
24:34 Why Are Crypto Products Still So Complicated?
29:25 What Happens If the Clarity Act Passes?
31:20 Can Crypto Grow Without Regulatory Clarity?
35:24 AI and Crypto: Competitors or Partners?
39:23 Can Blockchain Solve AI’s Trust Problem?
41:55 Why Blockchain Adoption Is Inevitable
45:05 Stablecoins, Cross-Border Payments & Global Markets
47:20 What Will Crypto Look Like a Year From Now?
49:52 Final Advice: Build Useful Things
Talking Tokens episodes are released on Spotify and Apple Podcasts at 6AM EST or YouTube at 8AM EST every Tuesday and Thursday. Listen in!
Make sure to subscribe to keep up with the latest episodes. Feel free to leave a review and tell us your thoughts.
Get involved and share the newsletter. The more you refer, the more perks you could get. If you do (or don’t) like what you see, let me know by sending feedback to [email protected] or leaving a review on your preferred podcast platform.
This product is built by StrataMedia (The parent company to Token Relations, Talking Tokens & The Market Runup.)
Please note this content is for informational and educational purposes only. Any views shared should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research. We may have a direct or indirect financial interest in content mentioned in this newsletter.