Inside JP Morgan's $3T tokenization machine, with Dennis Cristallo, Head of Wealth Management at Kinexys, JPMorgan

0:00 [gentle music] Uh, we know that JPMorgan launched a JPM Coin, and you also just announced a Cant network integration. How do you look at deposit tokens versus stable coins?

0:09 In some ways, they could be competitive to stable coins. In some ways, we think they could actually be complementary.

0:14 When we think about this superpower of blockchain technology, it's really this ability to have multiple types of assets and cash sitting side by side.

0:24 What's actually stopping a wealth advisor today from offering tokenized PE or hedge fund access through a private bank? Is it technology? The technology, I don't think is the bottleneck.

0:35 I think, you know, we need to scale it up, expand it out to other types of alts as well.

0:40 If we're sitting here in five years and tokenization has fully matured, what does the wealth management industry look like that doesn't exist today? Yeah, I think the biggest thing that doesn't exist today- [music stops]

0:55 Welcome to another episode of 51 Insights, today with Dennis Cristallo. Dennis, welcome to the show. Thanks so much for having me, Marc. Uh, big fan of your writing, so excited to have this conversation. Yeah, likewise.

1:06 Dennis, I'm very excited to have you here. You are leading wealth management for Kinesis Digital Assets at JP Morgan. You design end blockchain tokenization solutions for the private banks and its clients.

1:18 You did a lot in what JP Morgan connects its, their digital asset solution, and I'm super excited to unpack this today. You also had a lot of recent announcements that are very exciting that we're gonna unpack today.

1:32 Sounds good. Let's do it. So Dennis, uh, first question. Many banks talk about digital assets.

1:39 Few build at the depth like JP Morgan has been in the game since years, and Kinesis now has processed over one trillion in total.

1:48 What gave the firm the confidence to commit capital, talent, and also stake their reputation this early while other players waited on the sidelines? Yeah, sure.

1:58 So, uh, so we're-- we just surpassed three trillion in, in total tokenized notional value, so we're, you know, a bit beyond the one trillion mark at this point. But, uh, to your question, I mean, I think

2:08 the approach and the investment in the space, uh, has really been enabled by just being incredibly relentless on trying to avoid complacency.

2:16 If you look at Jamie's recent CEO and, and chairman letter, literally one of the first few sentences in there is about the emerging threat from fintechs and tokenization, uh, related different initiatives in, in the space.

2:29 So we definitely wanna understand the different threats and the opportunities for all of the different JP Morgan lines of business.

2:34 In order to do that, you know, you could buy teams, you could partner with consultants, or you can try to build up those capabilities internally, and we, we chose the latter.

2:42 And as you mentioned, we were pretty early to the game.

2:45 We started, uh, predecessor groups to Connexis back in twenty fourteen, where there was a small group in the bank, and the idea was, you know, do we need to defend against this technology?

2:55 Do we need to try to utilize this within our businesses?

2:58 And so this group went away, and they came back, and they said resoundingly, "Yes, we should be looking into this technology because it's incredibly powerful for moving assets, for moving value, and for moving information."

3:10 And when we think about this superpower of blockchain technology, it's really this ability to have multiple types of assets and cash sitting side by side.

3:19 And when we think about our businesses within JP Morgan, really all of them are, are doing different variations of moving assets, value, and information.

3:26 So we do think this could be incredibly valuable, uh, today, tomorrow, and, and especially as this industry grows.

3:32 Uh, we think there's a lot of different use cases that, that we could put this, uh, these tools to work within.

3:38 And so, you know, I think over time, the focus for our group has evolved from being kind of this internal consultant for all things blockchain, crypto, digital assets within JP Morgan.

3:47 And today we're more of a commercial business unit where we have some expertise and we have some skills and services and solutions that we're out there talking with, you know, other asset managers, other financial intermediaries to try to help bring them on chain, whether that chain is public, uh, you've alluded to some of the recent announcements, or if that's more of the private chain solution where we've built historically.

4:07 And you also co-authored a Bain paper that cites the tokenization opportunity at four hundred trillion US dollars. So, and as you said, you've been building inside of JP Morgan since the Onyx days.

4:19 That's how it was called before Kinesis. What was the moment when you realized that this is not some kind of internal, you know, science project play.

4:29 Like, this is not just Bitcoin, this is much bigger, and this could potentially be transformational for banking and the financial industry. Yeah, sure.

4:37 So I, I've been on the team for about three and a half years, uh, and I spent prior to that about ten years building portfolios of hedge funds, private credit funds, co-investments, things like that.

4:45 I'm saying that because one like have the expertise and have felt the pain points associated with that s- that specific use case of delivering alts at scale.

4:54 But, you know, the team's been around for much longer, and even before I joined, they were, you know, very much at scale as far as delivering some of the core applications, uh, to our client base.

5:05 And so our flagship one is called Digital Financing, or, you know, it's known as this intraday repo application, and that's been at scale for, for quite a time.

5:14 And what we're doing there is we're enabling wholesale intraday lending activity with the borrowing leg of the transaction and the cash leg of it also happening on, on the same set of infrastructure.

5:25 And really what that does is it allows us to give hyper-precise intraday lending, and we're able to unwind these repos effectively instantly.

5:33 And the benefit there is that, you know, clients, if they borrow for an hour, they only pay an hour's worth of interest, and there's no overnight capital charge because it's an intraday loan.

5:41 And so, yeah, this idea's been at scale for, for a while and, you know, I think the approach historically has been very use case specific, like the one I just mentioned.

5:50 I think now we're at a s- at a place now where we're trying to think much bigger picture, especially as we're now able to deploy assets on public blockchains.

5:58 What does this overall, you know, industry and, and idea start to look like when you have all those assets or many more assets sitting side by side with, with each other? You know, for, for us

6:09 Every time we, we do something meaningful, uh, especially with the tokenized alternative investment platform that you mentioned, the outreach internally, externally from folks all around is pretty overwhelming in the sense that people wanna understand it, people think it's really cool.

6:23 And I think it's also just a reflection that, like, the pain points that we're targeting really resonate with people and, you know, they're particularly acute in, in specific industries.

6:31 If we take a step back, can you paint us that journey from where you started in the early days with Onyx and now what you call Conexus?

6:41 How did that project looked at the very beginning, and as you just described, how did that evolve now into something much more broader and powerful? Yeah.

6:50 So, uh, the team did do-- we did do a rebrand last November to change the name from Onyx to Conexus. The, uh, main idea is that, you know, when we came up with the Onyx name, it was...

7:01 sounded cool, it sounded mysterious, people didn't really know what was going on, and we were doing these really cutting-edge, interesting proof of concepts and, and works of, uh, um, you know, using blockchain and tokenization.

7:12 Uh, over time, like I mentioned, this evolution towards being more of a commercial business unit, we wanted to actually put something behind it that, you know, means something.

7:20 And so, you know, just recently, we, and probably by the time this comes out, we'll launch a new kind of vision for the group, which is around this physics of finance.

7:29 And so for us, this Conexus name is about kinetic energy and meeting clients, uh, all around the world with more interesting ways to utilize their assets. So it's, it's the same group, it's the same team.

7:41 It was a marketing rebrand that we did, but it was really meant to kind of refocus the group on the mission right now, which is to, uh, tokenize the world's assets and to do so in a way that we're, you know, building commercial relationships.

7:54 One of the reasons I love to have you here today, Dennis, is that at least in the crypto industry, banks are often painted as adversaries, and they wanna beat crypto and things like that.

8:06 But if you talk to people like you, you realize how much thought is going into what you guys are actually building inside. It's great to have you here today to talk about this.

8:17 When you have these internal conversations with your colleague, how do you look at blockchain and crypto as a technology?

8:25 Is crypto still a thing or are you mainly focused on blockchain as a technology to kind of improve the plumbing of financial services?

8:35 I think we generally, at least the way I think about it, we separate the world into kind of the money crypto and the tech crypto piece, and there's a very big gray area in between.

8:44 Um, we definitely sit, like, you know, probably more on the, the right side of that spectrum where we're looking more at the tech crypto aspect of things, where we're trying to use this technology, bring real-world assets on chain, and create new kinds of utilities and new ways to distribute these assets and interact with them.

9:00 And so for us, the focus is primarily on the technology side of this.

9:04 That said, now that we're doing things on public blockchain, you start to get into more of that money crypto or, you know, pure cryptocurrency side where, you know, now we need to be mindful of crypto wallets, we need to be mindful of, you know, paying gas to facilitate transactions on behalf of, of our clients who are asset managers.

9:21 That gray area that I mentioned definitely comes into play. But the Conexus group, we're focused on more the traditional assets than the cryptocurrency side for sure.

9:31 You said you run Conexus, processes about $5 billion daily. And Conexus runs on a private blockchain, correct? That's right, yeah.

9:40 So most of our applications are on what we call Conexus Digital Assets, and that is this private permission network. It's a fork of Ethereum that we stood up back in, in 2014.

9:50 Now, uh, and we allude to this a couple times, but I'm sure we'll dive in, but we've recently deployed a few different assets onto public blockchain networks as well, and the way we got there, and this is really the realization of a vision that we had a long time ago, is, you know, we're building using the same tooling.

10:07 In a lot of cases, you know, we're building in Solidity, we're using similar type tech stacks.

10:11 And so the journey from private permissioned Ethereum-based chain to, you know, a public permissionless chain, uh, wasn't nominal by any sense, but it was definitely eased by the fact that we've built and tested a lot of this stuff that we've done already.

10:25 And how do you look at that differentiation between permissionless and permissioned?

10:30 Do you think that's gonna be a setup where both worlds will co-live, or do you think it's gonna eventually end up in a more, like, permissionless environment and lots of different blockchains, open blockchains connected with each other?

10:43 There is space for both permission chains and permissionless chains. And, and for us, we really think of it as, uh, pretty use case dependent. So at, at this point, you know, we're agnostic.

10:54 You know, we can help clients, we can help asset issuers bring their assets onto public chain or onto the private chain network.

11:00 And for us, it becomes really more of a question of what are you, what are you trying to do?

11:03 Like, everybody sees and hears the noise around tokenization, it's gonna change the world, and all these different things, and we agree, but not as many people truly appreciate why and, you know, why are they taking these assets and putting them on chain.

11:16 So for us, the way we look at it is there are very, uh, distribution-focused use cases where we're taking an asset and we're putting it on a public blockchain primarily today as a means of distributing that asset to this new and very fast-growing user base, right?

11:32 So the crypto natives, the stablecoin holders, the stablecoin issuers, these pools of capital that live on chain, and that's a fine use case and that's working well.

11:40 Uh, on the other end of the spectrum, we have clients that wanna, say, bring their assets on chain because it's incredibly painful to deal with these assets. It's very inefficient.

11:47 Like in the case of, of alternative investments- You know, it's very labor intensive, it's very manual. Cash and assets are, uh, completely divorced as it relates to capital calls and distributions.

11:58 And so for those use cases, I think it makes more sense to use the private permission network because we don't have to require our clients to have crypto wallets.

12:07 We don't have to do additional sanction screening and transaction monitoring because all of that happens today behind the same infrastructure that JPMorgan Payments uses.

12:16 And so it's an easier way to have that streamlined, uh, use case as opposed to, you know, you try to do that same thing on crypto rails on, on public blockchains.

12:24 Now every user of it needs to get very smart on wallets very quickly, and they're not necessarily there yet. Dennis, you just launched Kinaxis Fund Flow together with, uh, Citgo.

12:34 Can you unpack a little bit for us what's that all about and how does this work? Sure. So Kinaxis Fund Flow is an application that, that we built.

12:42 Uh, and the idea is, is getting at that inefficiency in delivering alternative investment use case.

12:48 And so today, for anybody that's been around the alt industry, especially dealing with high net worth individuals, you'll know it's quite painful. And it's really painful because there's no DTCC in the middle.

12:58 There's no standards around how data is shared, how capital calls are processed. And so what you end up with is, you know, the three major participants in delivering alternatives.

13:07 You have your fund manager, who builds the product and manages the money.

13:11 You have your fund administrator/transfer agent, usually the same in alts, where they're the ones holding the pen on who actually, uh, owns this investment and processing capital calls and things like that on behalf of the fund manager.

13:23 And then the third party is the distributor, which can be a wealth manager, RIA, or a private bank. And so where you landed in this, in this space is that all three parties have different systems.

13:33 They have different definitions, different data schema, and they don't talk to each other very well. And so the first thing that we wanted to do was to enable better data management amongst these parties.

13:43 And the way we did that is instead of going to them and saying, "Hey, here's a new template to use. Just fill this out and everything works."

13:49 Uh, that would be the easy thing for us, but we actually didn't do it that way. What we did is we said, "How do you consume data? How do you output data?"

13:55 And we built a, a discrepancy surfacing tool that allows them to see where there are issues in that data. And, you know, honestly, you don't need a blockchain for that.

14:04 It's helpful, but you don't need a blockchain for that. You just need better data management.

14:08 Um, the more interesting thing though, and why we did that, is because when we start talking about capital calls, that's where things get really challenging.

14:17 And so for a capital call on a private equity or a private credit fund, you know, the fund manager may say, "I need ten million dollars from these thousand investors," right?

14:25 And so that thousand investors, that gets bundled up by the fund administrator. They send over a file, individual statements to the, the fund distributor or the wealth manager, and the wealth manager does their best.

14:36 They pull together the ten million dollars, get on the phone, "How do you wanna fund this?" All that stuff.

14:40 And what happens is the ten million that shows up is really like nine and a half million, and nobody really has a great sense of why that's the case.

14:47 And so there's a lot of reconciliation that happens after the fact, and nobody knows, like, who actually owns this thing.

14:54 And so what we did is, you know, like I mentioned, we used that data management piece, and now when the capital call comes through, we consume that, and we kick off a message that starts a transaction flow that begins in the end investor's brokerage account.

15:08 So in that investor's brokerage account, the money moves to this platform, uh, becomes tokenized effectively, and that tokenized cash gets settled against a fund token with, you know, basically what we would call a, a near instant settlement.

15:22 And so what happens there is the, uh, tokenized cash is in the investor's blockchain cash account.

15:28 That moves to the fund manager's ca- blockchain cash account, and at the same time, the fund token moves from the manager to the, uh, to the investor. And what that allows us to do is really two things.

15:39 One is it automates the movement of money, so no need for manual wires. And two is it gives us what I'll call, you know, almost perfect transparency on who actually has paid for this and who hasn't paid for this.

15:53 And the way we wrap this all together is, you know, there's a nice application or user interface that everyone can see and log in, and it makes their lives easier. That's effectively Fund Flow.

16:02 The other things to mention there really quickly are that, you know, because this data management becomes a lot easier for the fund manager, we've been able to successfully argue that the fund manager doesn't require a feeder fund in this case, which, you know, some cases they're requiring feeder funds just for convenience reasons.

16:17 They don't wanna deal with the data management. Um, that saves end investors, you know, fifteen, twenty basis points in structured costs.

16:24 And then the last thing I'll mention is that, you know, this for us, uh, it's early days. This was a pilot. Uh, we are looking to continue to scale this out.

16:32 But where we see this going is a future going back to the beginning of this conversation where assets interact with each other, where you could do something like, say, taking a money market fund that's tokenized and using that as a funding source for a private equity capital call.

16:45 And the benefit there is an operational benefit because you connected these two things intrinsically by having them in the same chain.

16:52 But then it's also a monetary benefit for the client who, you know, effectively eliminates the cash drag that's endemic in their portfolio from funding these particular things.

17:00 So essentially you're saying this is predominantly an efficiency play. Like you basically just need better database structure, in that case blockchain, that handles these range of processes more efficiently.

17:13 The second thing is, okay, you could now plug in a tokenized money market fund. Uh, then you would have to move to a public blockchain, correct? Well, not necessarily.

17:22 I mean, we could also deploy the money market fund onto the private blockchain, which would more seamlessly connect those two things. But you're correct.

17:29 This, as described, is primarily an efficiency play, which is compelling and interesting, but we do think it leads to better product development.

17:37 But the other cool thing about it is, you know, we're actually tokenizing these funds, right? Like we're tokenizing this private equity fund. We solve for capital calls.

17:45 And should the fund manager want to also deploy that fund token for a distribution use case, so selling it on public blockchains We will be able to do that fairly easily Dennis, in December twenty twenty-five, you also launched JPMorgan's Moni that's publicly like tokenized fund on Ethereum, seeded with hundred million in capital.

18:06 Can you just explain us a little bit how did that get started? Why did you launch that? How did this all work? Yeah, sure.

18:14 So, um, pretty quickly on in twenty twenty-five, we realized that we would have a, uh, [coughs] a clear lane to deploy on public blockchain.

18:23 And so we started, you know, taking all the great work that we've done over the years and started building towards the first, uh, or the first couple of different public blockchain launches that we would, uh, endeavor to do.

18:34 And where we started is really kind of harnessing the power of the firm.

18:37 So we started with JPMorgan Asset Management, who obviously has the expertise and the know-how of structuring, building, distributing, and managing money market funds.

18:46 And so we worked with them to try to get to market quickly. And what we did is in December, we deployed a tokenized money market fund, uh, onto Ethereum.

18:56 It launched with about a hundred million of seed capital, and the team that runs that product now is, is out there having a ton of conversations and raising capital for, for that particular, uh, fund.

19:07 And so what's cool about it for us is that on the dig- on the Connexus digital assets team truly was the realization of a vision that we've had for a long time.

19:16 The team, you know, is filled with blockchain nerds and people that are like super into this space and, you know, it had been something that we wanted to strive for for a long time.

19:24 And so again, realizing that vision was really important for the team that's in place today and the team that, you know, uh, that we've had historically as well.

19:32 Um, and so getting there was, was an important moment for, for us on that front.

19:35 And I think from here it's about how do we take that product, which is cool, and it's, it's targeting, you know, those pools of capital on, on blockchain rails, on public blockchains, uh, how do we take that product and make it better than the BAU version, the, the regular way money market fund?

19:53 And for us, we have a very clear path and vision towards how we get there, and it involves really three main things.

19:59 One is trying to get to twenty four/seven liquidity, where an investor has options to get out of this fund any time of day.

20:07 Two is what I would call hyper-precise or minutely interest accruals, which for individuals may not move the needle that much, but for corporate treasurers that have big cash balances and are trying to optimize that, uh, that could be a very significant addition for them, where when they hold the fund for half a day, they get half a day's worth of interest.

20:24 And then lastly is this collateral use case, and you're seeing more talk about this in the US. Uh, different regulators are very focused on enabling tokenized collateral, and it makes a lot of sense.

20:35 You know, you can move our Moni fund today twenty-four/seven, three sixty-five, and that makes it very suitable to be able to pledge it very precisely.

20:43 And you get rid of some of these issues around double pledging of assets and things like that in, in certain types of transactions.

20:49 So all in, we're, we're quite excited about Moni and, and the future of money market funds, and we'll have, uh, you know, at least, uh, at least a few more this year that we'll go live with, and we're also looking to expand to, to other chains as well.

21:01 Yeah, to other chains that runs on Ethereum, so excited about that as well. So another big topic is deposit tokens versus stablecoins.

21:10 And we know that JPMorgan launched a JPM Coin on Base back in November, and you also just announced a Cant network integration.

21:18 And when you look at that is right now Genius Act explicitly exempts deposit tokens from stablecoin regulation. How do you look at deposit tokens versus stablecoins? What's the strategic play here for JPMorgan? Yeah.

21:33 So, so for us, the idea is to extend out this capability that we have, right? So we, we've had these id- this thing called blockchain deposit accounts for quite some time.

21:42 It is basically a bank account, a bank account on blockchain, which is on the private permission network.

21:48 And what we did here is we took this concept and extended it by, you know, putting these tokens, uh, onto, onto Base, and in, in the future will be other networks as well, as you mentioned.

21:59 Uh, but the idea overall is that actually, you know, in some ways they could be competitive to stablecoins. In some ways, we think they could actually be complementary.

22:07 And so, for example, you know, what-- regardless where we land on the yield debate for stablecoins, the stablecoin issuers themselves, they're gonna hold treasuries, but they probably also need a very liquid cash-like product in their capital stack as well.

22:20 And this could play that role, right? So this is a very liquid type investment. It will, you know, eventually have some yield associated with it, and we're going to be connecting this directly to JPMorgan bank accounts.

22:32 And so you'll have the ability to more easily on-ramp and off-ramp from JPMorgan bank accounts to this deposit token product.

22:39 I'll mention still relatively early there, but as far as, you know, stablecoins versus deposit tokens, I think more complementary than people recognize, and w- we'll see how the market develops.

22:50 You know, I think, uh, ultimately, you know, wholesale money will, will likely move through deposit tokens more likely than stablecoins.

22:56 And we often have this debate with guests on our podcasts, uh, how will that stablecoin situation play out?

23:03 Will we have like an explosion of different stablecoins and every bank will have their own stablecoin, or will we have like a consolidation around certain issuers like Circle and Tether, and we'll mostly move to, um, deposit tokens on the banking side?

23:17 How do you think this is gonna play out? Do you, do you have a theory here? I, I don't have a particularly interesting or insightful theory here.

23:23 I think, you know, ultimately stablecoins and deposit tokens are a distribution game.

23:28 And so, you know, the groups today that have done really well at distribution, whether that's through exchanges or through DeFi or otherwise, um, will probably continue to dominate those types of networks.

23:38 You'll start to see, and you're already starting to see ad-additional use cases, non-crypto trading related use cases start to proliferate.

23:46 And I think the groups that solve those problems the best will, you know, get the best distribution, and you'll probably start to see similar monopoly or duopoly, uh Like outcomes like you've seen already in the stablecoin space.

23:58 You know, liquidity is incredibly important. Um, and so I think there will be somewhat category killers depending on the use case.

24:06 Dennis, your Bain research found that individuals hold around $150 trillion in global wealth, but only allocate about 5% to alternatives. Now you've built the infrastructure to change that.

24:17 What's actually stopping a wealth advisor today from offering tokenized fee or hedge fund access through a private bank? Is it technology, regulation, or culture? Yeah. I mean, I think, um- Or all of them.

24:29 Yeah, it's probably a combination. I, I think it's actually less on, on the regulation side.

24:33 I think, you know, the way we did it was, was pretty straightforward as far as, you know, what's actually being tokenized, how it's all working. And so nothing-- I don't believe anything very controversial there.

24:43 Um, I think, you know, with a lot of these ideas and the hypothesis that we had going into this is that alts is, um, alts are hard to distribute, right?

24:54 And so the groups that are, are good at selling these assets, we wanna give them reasons to want to buy tokenized funds on behalf of their clients or enable their clients to buy tokenized funds.

25:05 And as we get those reasons, which we think will be around, you know, more efficient settlement and being able to connect these to other types of assets, like I mentioned, the money market fund example, and then just streamlining those distributors' operations.

25:19 We think that they will start to demand these kinds of products. Um, and the conversations that we've had with different fund managers, you know, there's a spectrum.

25:27 Some fund managers, they, you know, basically delegate a lot of their work on the admin and, and transfer agency side entirely to their TAs and their fund admins, and they're pretty hands-off.

25:38 And so for them, they don't really, you know, care too much about, like, how this gets done.

25:43 Uh, for other groups, like JPMorgan Asset Management, for example, they are incredibly rigorous and diligent as far as, you know, doing the same set of shadow accounting that fund administrator and fund, and transfer agent does.

25:55 And so what that means is that this is actually a benefit for them too, making it easier to reconcile, making it easier to know who actually owns this investment, benefits them as well as the, the distributor.

26:06 And so we haven't had challenges convincing fund managers that this is a good idea. And then on the fund administrator side, you know, we're plugged into Sitko, as you mentioned.

26:14 We do a lot with JPMorgan Security Services, and we have several, uh, relationships with several other TAs in the space as well, and it's not that fragmented, so we think we could get there.

26:22 What I'm getting at here is you need to build the network. It is a network technology. It's early days, but we need to start showing and demonstrating these benefits more completely, and I think we're getting there.

26:32 We just did our first set of capital calls for the first private equity fund we tokenized, and what we found are two really interesting things.

26:40 One is that money moved from client accounts to the fund manager thirty-eight times faster. It was a couple minutes versus, like, several hours to get the dollars over there, which is great.

26:51 Uh, and then on the other side, the actual labor that went into processing the files and, you know, uploading and mapping and reconciling, we were able to reduce that by about ninety-three percent.

27:03 And so for the distributor, it becomes a pretty powerful value prop where you have a very large team that all they do is reconciliations and things like that. And so we, we think we're getting there.

27:11 It's gonna take a little bit of time. The technology I don't think is the bottleneck. I think, you know, we need to scale it up, expand it out to other types of alts as well.

27:19 The reg piece, uh, I don't think is, is, is the challenge here. A question about your multi-chain strategy.

27:26 You're operating across Conexus private chains, Ethereum base, and now also Canton, and each with different trade-offs and also privacy compliance and composability structures.

27:36 Is the future a network of networks where assets flow across chains, or does institutional finance eventually consolidate around one or two or, or three platforms? What's your thesis here?

27:48 Yeah, I mean, like I mentioned a, a bit ago, I think there are too many chains, right? And so you will start to see a consolidation. Uh,

27:56 we, like others, share the view that interoperability is, is key to a lot of use case and proliferation of this o- overall idea.

28:04 But ultimately today, the way we look at, especially on the public chain side, is, is we look at them as distribution mechanisms. You have on Ethereum sixty percent of all stable coins issued. You have a ton of users.

28:15 You have, uh, very deep liquidity pools. You have all these, you know, decentralized apps that, that people can access.

28:20 And so for us, when we're working with fund managers, like, we wanna ultimately deploy tokens and assets where people are there to buy them.

28:28 And so for Ethereum, that's kind of been the default starting place given the Lindy effect. It's been around for a while. It's quite decentralized and, and resilient.

28:36 But then we'll also see other chains where there's more, you know, fintech and B to B to C kind of use cases, uh, developing because maybe there's better throughput, et cetera. And so we're, we're looking there as well.

28:48 Uh, so we need to be everywhere. We recognize that. And how we pull it all together and whether we need to pull it all together, we're, we're still in kind of wait and see mode.

28:57 Um, I know there's, there's a lot of discussion around, you know, with real world assets. I haven't seen and haven't heard a phenomenal use case around the need to go cross-chain. You know?

29:12 Like, I think being able to take your assets from chain A to chain B can be accomplished in a number of different ways. Whether that needs to be done atomically or very quickly, I think is, is a bit TBD.

29:23 So we're kind of waiting and seeing how that develops a bit more. And if we're sitting here in five years and tokenization has fully matured, what does the wealth management industry look like that doesn't exist today?

29:34 Yeah. I think the biggest thing that doesn't exist today is, is, is wallets. You know?

29:38 So for this idea to gain traction, uh, and this idea being a future where wealth is managed almost entirely on chain, like I'm a big believer that that's the direction that we're heading.

29:49 Uh, for that to happen, you need a place and a way for investors to scalably hold these assets. That is going to require some kind of wallet solution.

30:00 I don't know that, you know, investors are going to want to self-custody assets. I've personally have never been like, "Oh, I want to self-custody my JPMorgan stock," but maybe somebody wants to do that.

30:11 But I think the point is that- You need integrated wallet solutions into broader places where people hold their wealth, whether that's a brokerage platform, custody account, whatever.

30:22 Um, and then I think once you get there, and once you get a very, you know, significant breadth of assets, different types of assets, different asset classes on chain, then I think that's where the magic happens.

30:31 That's where you can start to really do interesting things as far as deliver managed portfolios at scale with infinite levels of personalization, and potentially enabling instant settlement.

30:43 Which the benefit again there is that when you have that, now all of a sudden your portfolio doesn't need to hold, like, any cash on a meaningful basis, which is kind of a secret tax on a wealth managed portfolio where, you know, there's some level of cash for,

30:56 uh, investments that haven't settled yet or opportunistic kind of trades. And so I think when we look back in the future, maybe five years from now, this idea of idle cash is going away.

31:06 Dennis, you've been building at JP Morgan now for the last three years. If you look back at your journey, what were some of the top learnings or realizations you had while building this? Yeah, I mean,

31:19 so I joined the space, I joined the Connexus team as a pure hobbyist. You know, I was doing a, a, a good amount of, of crypto related work, digital asset related work on my prior team.

31:30 But from the technology perspective, I came in as, as purely a hobbyist. And so, you know, when you come in that way, there's a lot to learn.

31:37 You know, there's a ton to learn as far as, like, how it all comes together, what's achievable, what's not achievable.

31:42 And so I think just overall getting immersed in the technology side of this industry has been, um, tremendously powerful and enlightening as far as, you know, the cool things that, that can happen and, and some things that, that can't happen.

31:54 I mean, I can't tell you, like, how many conversations we, we go into where we think that we have a, a beat on, like, a really good interesting use case, and we get in there and we're like, "Eh, actually, that's not really, like, a blockchain solve th- or a tokenization solve.

32:06 That's really just something where you need better data or better data management or cleaner information," uh, that kind of stuff.

32:12 So I think it's been very helpful as far as truly understanding, like, which use cases make sense, which ones don't necessarily make sense.

32:20 And we've had a tremendous team from the time I got here, and it's been just, uh, awesome to, to learn so much from folks within the group, around the bank, and in the broader industry.

32:30 Are, are there any use cases that you think are massively over-hyped? Massively over-hyped. No. I mean, I think there's, there's definitely use cases that still need to prove it.

32:39 Like, when you, when you look at tokenized assets on public chains beyond money market funds, I still think it's a question of product market fit.

32:47 I think you're seeing, starting to see some interesting things on the tokenized equity side where it's a global access play and that makes sense.

32:53 But, you know, for, for other types of assets like, you know, alts that have been to- like, uh, private equity, private credit funds that have been tokenized on public blockchains,

33:01 I don't think we're, we're quite there yet. I think, you know, some of the earlier iterations had structural flaws associated with them, and you just haven't seen a meaningful bid for some of those assets yet.

33:11 And are there any other areas outside of tokenization and banking that you look at that you are excited about when you see what's happening in that industry? Yeah.

33:19 I mean, look, it, like, what's going on in AI is absolutely mind-blowing. It's become, like, a part of our everyday lives very, very quickly. And, you know, in some ways that shifts, um, and that kind of ChatGPT moment

33:33 was

33:35 really interesting to watch from within, you know, another, you know, I'll say, like, niche technology focused team within the bank because a lot of attention gets pulled away from, from what we were doing, which in some ways, you know, is not the best thing, but in some ways actually allowed us to really focus on the mission and focus on, like, what, what actually matters.

33:52 But no doubt we watch and we collaborate very closely with our, uh, friends that are working on different AI projects throughout the bank, and there's really interesting things happening there.

34:01 And, you know, I think there's going to be eventually interesting convergences between AI and crypto besides, you know, the obvious of using some of the LLMs to, to help you build different pieces of code.

34:12 But, you know, maybe go back to your last question. I think a lot of the early, uh, discussion on, you know, crypto X AI was probably over-hyped. You know, some of those use cases didn't, didn't make a ton of sense.

34:24 I think it's c- becoming more refined as we go along. That probably would've been a better answer. Yeah, definitely agree with you on that. Dennis, we're almost at the end of the show.

34:32 We usually do a quick lightning round. Those are short questions with short answers. Uh, the first one is, uh, deposit tokens or stable coins, which dominates institutional payments in 2030?

34:44 Uh, for institutional payments, deposit tokens. I think it's just more, it's a more scalable model, uh, that makes more sense.

34:50 The biggest internal obstacle to tokenization at a global systemically important bank, compliance, technology, or politics? I think it's just the sheer number of people that we have to bring these ideas to.

35:01 A tokenized PE access for the mass affluent, 2027 or 2032? 2027, for sure. That's great. Dennis, thank you for coming on the show. It was a pleasure to have you on.

35:11 Where can people learn more about you, about what JP Morgan is building? Yeah.

35:15 As mentioned, uh, the Connexus team, we're going through a relaunch of our marketing vision, and you'll see some cool content on LinkedIn, on the website, uh, jpmorgan.com/connexus.

35:26 So feel free to go there and feel free to reach out. Great. Thank you, Dennis, and all the best and talk soon. Uh, thanks so much, Marc. You obviously like this video enough that you got to the end.

35:35 Listen, do me a favor, hit that like and subscribe button because I think you'll like it.

35:41 And if you want even more, with more I mean incredible alpha, research, and digital asset market updates, subscribe to our newsletter on 51, that's the number 5-1, insights.xyz, and get the most actionable insights on digital assets.

35:58 See you next time. [upbeat music]