Jan van Eck: ETFs, Global Macro, Tokenization

28:17But they're also investing in software as well. So, you know, the way I simplify it, Raul, is like, okay, take investing over the last 30 years. Did you want to bet against the internet? No, right? So I define, you know, these magnificent seven is effectively our pipes into the internet in the United States. Take the two pipes in India and invest in them. And from a three or five year perspective, you're going to be super happy. We can get to the asset of the internet later when we talk about crypto. Yeah, I mean, I've gone through a whole journey of, I don't know if you've seen that bell curve meme where there's the moron and the Jedi, and then in the middle is everybody overcomplicating everything.

29:05and and like you i i am now ultra i'm happy to be on the left being the moron which is like india young population no debt and a complete technological revolution why would you not own this we've seen this before i i developed a thesis called monsoon And what I did is back in 2013, 14, had we just gone through the financial crisis and then the European crisis, I thought this debt thing is a fucking mess. So I got a map of the world and I said, right, I'm going to take out every indebted country that's excess debts and then took out everybody with an aging demographic and said, what's left of the world?

29:55and once you ignore some of the african countries because they were too small you basically got a world centered around india and all of the middle east down to singapore indonesia and all across north africa and up as high as iran and what you and this was the old monsoon trade winds this was the old spice route they have been trading for several 5 000 years together and i looked at it and it really struck me because they've all got young populations they've all got low household debts, low government debts, and rapidly growing economies. And I just said, well, I'm just going to keep it simple.

30:31That is where you want to be with your money, and you don't want to be in old economies. Yeah. I think where a lot, listen, I would say your average American investor has given up entirely on emerging markets. And one of the stories that they heard was sort of the demographic growth, if you will. And that didn't translate into good stock market returns. And so I kind of try to downplay the GDP growth argument aspect of it, and more just, hey, India is free market oriented, they're development oriented. And they're, I would call it, you know, pro capital return oriented. It didn't, it didn't used to be that way.

31:18The revolution that triggered me for India was actually Infosys. So this was the first sort of, I'll call it Indian outsource company that was a huge success, not the first one necessarily, but the biggest. And what it demonstrated to the market was that you could get rich through the public equity markets. Because sometimes in India, the equity markets, there was a little bit of abuse of minority shareholders, and there was a lot of gamesmanship, and just wasn't the most efficient or investor friendly market. And I think to me, Infosys was a big mind changer for a generation. Now that generation is fully baked into the market now, right?

31:59They don't even think about that. But, you know, that now we're well into that. So I think that kind of positive mentality, approach to markets, approach to investing is a very, very important component. And I leave out the growth aspect for my Americans that don't want to hear about, kind of emerging markets. Yeah. And the financialization of the middle classes of India, right? If you look at a number of brokerage accounts being opened, crypto holdings, you see all of this. And then the other trigger for me, I've been involved in the Indian market for a while based on this thesis, but the big trigger was reliance.

32:40Because my cousin was running American Tower in India. So he was in the mobile phone market. He was ex-McKinsey and General Electric. And I was speaking to him about what was going on in his business. He said, there's a crazy war going on with Reliance coming in, driving the price down to zero, literally zero, to take market share. He's like, I don't know who's going to go bust or if everybody's going to go bust, but this is the worst I've ever seen. Reliance managed to catch 60-something percent of the entire market share, push half of them into bankruptcy or mergers, had borrowed, what,$18 billion to do this.

33:18And then just at the beginning of COVID, paid it all off because he raised the equity, which I'd never seen. That was the fastest payback of corporate debt probably in history. And it was at that point, I'm like, oh my God, okay, this guy's serious. And that really got me interested again. Yeah. I mean, listen, you probably know the market structure better than I do, but it is interesting how countries like chae bowls in South Korea, right? Or trading companies in Japan. I mean, in China, it's the state-owned enterprises, and they're not even necessarily multi-industry conglomerates. But in India, there are these big family conglomerates, right?

33:56And I think it's viewed as a synergistic positive by the government to let them, as long as they're investing in what's good for India, So alternative energy or mobile phones. Yeah, go do it. You know, they're not and stay out of politics. Sorry. Right. As long as they do all that, it's really, I hate to say this, a harmonious relationship, which is great for investors. Now, listen, we both know that the Indian market can be overvalued at times. So most of the time it trades expensive, right? Most of the time it's expensive, which stops many people buying and it keeps going up. Right. And listen, the biggest misses of my life, like Microsoft and Apple and everything, you know, I've missed because, you know, I've worried about the price.

34:45That's why I say that's why I called them the screaming buys. But from a three year perspective, right. in three years looking back, what will be so obvious? The internet has worked for three decades. It's not going to stop working in India, right? It'll be those companies that are going to have great, should have good earnings and good growth. I think that's right. And just, you know, I asked on Twitter recently, I said, Will, you can see the pushback about technology investing or crypto investing. People have some philosophical differences around investing in that space because of the valuations and all of this stuff.

35:25But you asked a simple question, I said, in a year's time and five years time, is the world going to be more digital or less digital? 96 % of people said more digital. I'm like, well, that's why these stocks are going to keep going up. Sure, there'll be bear markets, there'll be ups and downs, but it's very difficult to break that secular trend unless something truly structural changes. Now, maybe it's AI causing it in 10 years time or eight years time, whatever. But right now, it's difficult to see. And from a 10-year perspective, if you add up, I've got some other favorite EM countries, Saudi Arabia and Brazil.

35:58If you add them up with India, they're going to be bigger than Europe in 10 years, right? So the world continues to kind of become more and more decentralized. lives. People talk about deglobalization. I don't know what they're talking about. But maybe I could also, I do like to focus Americans' minds a little bit on Saudi Arabia. So no, we don't have a Saudi fund, and I'm not pushing Saudi as a - You should do. I think it's one of the best investment opportunities for the next 10 years. Tell me. The amount of change happening there is, you know, and listen, they're also coming from a country with very concentrated wealth in one sector.

36:40So they've got a long ways to go. But, you know, the allowing women to enter the workforce and giving them more social rights, huge game changer. They're using capital markets, the debt markets and the equity markets. We all remember Aramco going public, but that's just a symbol of bringing in discipline into their economy. And then the biggest deal to me, and even with all the headlines over the last couple of months, I'm not sure people recall, Saudi and Iran reached a peace agreement. And that's like your arch enemies. I mean, you think Hamas and Israel fight, you know, so does the Sunnis and Shiites, right?

37:19So the fact that Saudi has really tried to, and they constantly are investing these billions of dollars to re-earn their economy, I think is really interesting to watch. Maybe you need an active fund probably to take advantage of it, I would guess, I don't know. We decided not to do an ETF on Saudi. But I think it's really interesting. And I think the optimist in me hopes that it will frame a peace solution in Israel. Interesting. I've got exactly the same viewpoint. Because I've invested in the past in Iran, and I've watched that story. I watched the Saudi story. It's part of this monsoon thesis.

37:56And I've seen the changes in Saudi, saw the Iran, and the fact that Saudi and Israel are friends, I'm like, okay, this is a potential, you know, we know there's a lot of trouble, but it seems that at the core, most of these countries are holding true to their agreements, you know, letting Israel clean up what it needs to do without causing majors. Yes, the Iranians cause a bit of problems around, but if those three can hold this together, then we've got a complete game changer in the Middle East. Yeah. And we don't know through the newspapers, at least, what the conversations are between Iran and Saudi Arabia right now.

38:35I mean, clearly, things have heated up in the last month or so. So hopefully, it doesn't get too bad. But at least in the first month, there was clear that there was a lot of conversations happening. And that's only a good thing. Yeah, like you, I share the same optimism. What's your view on China? You guys have got China ETF, have you, or not? Yeah, we have two. And I should throw in a little bit of an infomercial on our Indian funds. We have a general India fund that actually has a valuation screen on it to try to take out some of the overvalued companies. I don't know if so far it's been working, but we'll see.

39:12And then we have one that's just called Digital India. So it focuses on that kind of digital revolution. That's the new fund. That's the new fund, right? Yeah, Dijin. So, you know, as far as I'm not, I used to travel a lot to China. We have an office there. I don't have any really profound insights. It's just that what I've been talking about, which, you know, I'm not alone anymore, but was the demographic wave. and China aside, in Japan in 22, I guess it was the data. Do you know that every county in Japan had fewer citizens except for Tokyo in 2022? Can you imagine, just think about how an economy has to evolve, right?

40:00Housing demand, there's fewer people, right? So I feel like that's something that's, people argue with me on this, how is it affecting China? China can still has this urbanization trend. There's counters to that whole demographic argument. It's not today, it's in 10 years. I kind of think, you know, like the market's price and things. I think this demographic trend in China is in people's minds. And it's going to be a headwind for their economy. Yeah. I mean, if I look at trend rate of GDP growth, it's generally driven by population growth plus productivity growth plus, let's say, debt growth.

40:42China and everybody finished the debt growth phase. Nobody can do anything more really with that. It's just been servicing old debts. Population growth. Great point. Yeah. They're all shrinking populations. So you've got productivity growth is the only thing and aging populations lower productivity. I don't know if you saw the front page of the FT today, I think it was today, which is a story I've been writing about for a while that robots and AI are demographics. And they were talking about Japan is having to ramp up its robotics and AI capabilities to offset falling labor force. Now, what we're going to walk into is a world of infinite productive units, human-like things, robots.

41:23Amazon now employs, I think, more robots than it does humans. And so we will see that shift where we just get this almost infinite scale of knowledge plus physical labor at low cost. I mean, that's a big deal that's coming. And it will help offset demographics, but not yet. We're not there yet. Super interesting. I love, I'm going back a little bit. I love your debt growth cycle because I think that's, you know, I would I would sort of push on that a little bit. Not not against you, but I think it's not necessarily perceptive, perceptible from the outside because national government debt isn't sort of out of control.

42:10But it's the state and local debt. Right. That where the issue is. And then somehow this sort of over the counter market debt related to the real estate markets. So just for me to ask you a question, you think they're kind of, I'll call it over 80 % done with that debt growth cycle in terms of it's being a boost to their economy? So I did some work in something called the Everything Code. I can't remember if I've sent it to you or not, but this was to show that everybody's economies changed in 2008. And what happened in 2008 is we had this like, call it a Plaza Accord, a debt jubilee, where everybody said, we're going to cut interest rates to zero and forgive interest payments for a while.

42:54Right. And that lasts until like 2016, 17, when rates started rising again. Every government reset their government debt to this three to five years time horizon. And the business cycle has been clockwork every four years. Same as the Bitcoin halving cycle, same as the election cycle and the macro cycle the ism cycle they're all the same thing and it's driven by this debt refi cycle and so what i figured out in this everything code was that we reach the end of the ability to increase debt at government level because the government's all hit 100 of gdp and debt and if you think of interest rates at two percent just to make easy maths and trend rate of GDP at 2%.

43:40Therefore, 100 % of economic growth has to service the government interest, but the private sector is in debt. So what I suddenly discovered, and I think I was the first person or the only person to discover this, is all of the interest payments end up getting monetized on the Fed balance sheet the following cycle. So basically, they monetize everything above trend rate of GDP growth. And I found it was exactly the same in the UK, Europe, Japan. I'm like, holy shit, it's like they've all agreed to do the same thing, which is debase your currency, basically. It's financial repression. So I think China's in the same boat here, that they can't get out of this trap either, because the debt servicing costs keep going up.

44:33So basically, all of their activities, debt service costs, so that they have no choice but to use the balance sheet. Because as you rightly alluded to, government debt only looks like it's whatever the number is, 60 % of GDP, but it's not because it's all the pseudo government debt at the next tier down. So they're probably somewhere close to Japan levels of debt, call it 230%, 50 % at government level, let alone the private sector. So that game can't go on. It's done. And I think at a societal level, it's not just the interest rate payments. You also have to, there's debt write-offs. And so the cost in China is actually kind of higher because of their property problems, right?

45:14the cost of debt is, yeah, the interest rates are coming down, but they're not getting some of their principal back. So it's more repressive. It's a little bit more repressive just than their interest rates would too. And it reminds me, I mean, you and I are old enough to remember when Japan had to go through that exact process with its banking system and its real estate sector, because it had done something similar. And so all of the 90s was basically unwinding of that. and the US has had it in phases. Europe had it big time in 2012, 10, 12, 13, where this real estate sector became unsupportable because of the debts behind it.

45:54And then it takes a long time and the European banks have been broken ever since. And arguably most of the US banks have been, except for this debasement of currency that allows for collateral to rise. So I'll ask a question and there's some assumptions that I'll then go into. So when do you think governments are going to get sick of their banks? And I ask that question because, first of all, in the United States, going back to the financial crisis, they basically told banks to stop making risky loans to the economy. Right. So the banks have gotten out of the lending. I'm really over exaggerating, but they're getting out of the lending business.

46:31And all of that is going to alternative or private credit hedge funds or whatever you want to call them. And then even despite that, right, a year ago coming up on March, they had the maturity mismatch, right? So they had to do yet another bailout of these regional banks, Silicon Valley Bank, right? Because they were borrowing, you know, long, but it was only government debt. So they were out of, I'll call it the lending business, but they still screwed it up. So at some point, I wonder when they're just going to say, you know what, I'm just sick of subsidizing the banks. I want to get out of this.

47:07I think it's a really great question. I listened very carefully to the ECB and look what's been happening in Europe. I remember sitting on the desk at Goldman in the late 90s and there was an FT headline that was like 18 ,000 different banks in Italy. And we just thought, that's interesting because there has to be consolidation as it's going into the euro. and we saw nothing but consolidation then it all blew up and then they've never recovered none of the european banks and then if you look at citibank i mean the chart just goes like that it's a flat line and you see most of them and then you see the next wave which is the smaller regional banks and i'd listen to the ecb and obviously they're super keen to get this um central bank digital currency out.

47:55And that is how you circumvent the banking system. I think the US is playing, I think everybody has a national bank. Now, whether it remains private or state control, but it's essentially under state control. So Germany has Deutsche Bank, maybe two others. The UK, everybody does the same kind of thing. And then the whole supply of money and direct ability to stimulate comes from the central bank itself, which is a breakdown of the whole banking process. What does it mean for banks? What services do they provide? It becomes very unclear. But if they turn it into a monopoly, then they can control the few.

48:36And I think that's what the US is doing. I think it's basically JP Morgan eats the world and the US wants it. Yeah. Well, you want to be an asset management firm, right? So you want really to have, I don't know how big JP Morgan is in terms of asset management, but it's starting to become a very big part of their business. Same with Morgan Stanley. Wealth management is a huge part of their business. Citibank says they want to grow it. So what are the other businesses that are sustainable in a world of disruption or crypto? I hate to say crypto, but I believe it. There are a couple of monopolies like clearing of government debt and things like that.

49:16But it's margins can, you know, technology is going to put a lot of pressure on margin, seems to me. And I think that all the banks know it, you know, when you speak to them and they've all got big crypto teams. They understand it's going to blockchain rails. You know, they've had their hands tied behind their backs, but they kind of all know. And they don't mind some of that because some of the issues within the system are just the system itself. Swift payment, T plus three settlements, all of that stuff. they'd rather not tie up all the capital into this either. It's not them taking the rake on everything.

49:52I mean, they're a bit beholden. Here's a fascinating story for you, Jan. You'll like this. I had my global macro investor roundtable in Mallorca last year. And there's an old mate of mine, an ex-Goldman guy who was running National Australia Bank's fixed income foreign exchange and commodities business, their fixed business, and their treasury, I think as well. And he'd just retired. And I'm like, so what's been happening? What have you been up to? He's like, I spent the last three years in crypto and I'm going to go and do crypto now, now I've retired. I'm like, what the hell were you doing? Are you trading your PA account?

50:29He's like, no, I spent three years building stable coins. I'm like, a National Australia bank? Why? He's like, nobody's realized is the US is going to T plus one settlement. fx is t plus two we're in australia where you lose a day we need three days to settle he said we can't settle so in which case we have to give tens of billions of dollars to our brokerages like morgan stanley and goldman to fund it yeah and he's like we're not going to do that so we have to settle expensive i was like i hadn't even thought about it. Unless the whole world has that problem. Even the Europeans, you've got to go to T plus one settlement.

51:14They still have T plus two for FX. You do have to change your funding. That's really interesting. Yeah. So it just makes me think that this snowball will develop. And I think your question is, what is even a bank at that stage? It's a financial services company, but maybe banking is a direct to central bank operation, which is good and bad. Bad is they have complete control over your money, but the banks do anyway. And good is I think they can allocate capital maybe more efficiently than by the banking sector. If they inject liquidity like now, everything goes. What you might want to say is, we want to inject liquidity in this particular sector.

52:03And knowing governments, they'll abuse that power and central banks, because that's what they do. Or just be not good at it. I mean, you know, Silicon Valley Bank, the regulators were right there looking at the books. I mean, the train was coming right down the tracks. Every single quarter before that, they were taking capital write-offs on the losses on their debt. You just have to wonder. But yeah, it's interesting. It's a big, it's a major structural. I love the understanding these structural changes because it does affect how investors should put their portfolios together. And in thinking about this, we talked about the, you know, kind of the inverted yield curve and then that, you know, normalizing.

52:47That's why it's really hard for me to figure out what the consequences are from an investor perspective. Like, do you buy bank stocks? I'm not so normally that would be your kind of reference right you're sorry your your your uh reflex i'm not sure it is now and you know so we talked a lot about this complexity of what's out there and you know the opportunity you talked about are kind of far-flung places and there's few and far between this india this saudi there's stuff like this but what i realized a long time ago that we're building a new system and if the world is going to get more digital we're going to go to the new system.

53:26So I want to hear your crypto story. How the hell do you go from a lot of kind of traditional sectors? And then, I mean, you've been quite a while in crypto, you know, as an investor and been interested. I'd love to hear your story. What was your seed? Where did it come from? And how did it grow from there? So personally, 2016, because the only single word answer to anyone in crypto is the year you got started right so personally 2016 and then my day job 2017 uh which is not particularly early i mean it's sort of like it's not super late either no it's sort of like 2006 for etfs like early enough i wouldn't call it like genius but early enough um listen you know part of a macro view is technology is as important, if not more important than global, political and economic trends.

54:24So what you have to look for disruption, and especially since crypto was pretending to play, in our industry, the question is, okay, what would be the effects? And the first move was in 2017, do the deep dive, we have a lot of our AUM and gold funds, like is gold going to get disrupted? I kept all the people. Before we go to that, who was the person who got you across the line? Who was your ground zero? Everybody's got somebody, right? Yeah, there were two. One was my son, my oldest son. So he was buying Bitcoin in 2016. But to be fair, he had done an internship at Horizon Kinetics where Murray Stahl is.

55:17and Murray was very pro-crypto. So I don't mean to discount my son's enthusiasm, and he's been in the space, but I just want to give Murray credit because he's not typically given credit for that, I think, particular insight. And then the other is the founder of a crypto hedge fund who I met at a parent's event, and he started going. He had been involved in Priceline and the internet and he started going berserk on blockchain and like all the other parents were like walking or running away from him and I tend to like provocative people so I have to give him credit too I'll leave his name out of it for for these purposes but that was that was those those were the people but to be honest like and you do this as well you have to do your own work for anything You have to separate fads from trends.

56:17And so I had to do my own work in 2017. And that took a while. That was weekends when my family wonders what I'm doing. That's stuff like that. And so what did you see? What is your big picture thesis on crypto? Because it's a very multifaceted technology, right? It's going to play a big role in the business you're in, a big role in the money system, a big role in many things. So what is your current working hypothesis of what this is? So to me, Bitcoin is a gold competitor, just like platinum and silver. And I don't think it's that interesting to talk about. But I mean, that's because I can't prove that.

56:57I can only sort of say how investors treat it in their mental models, which, again, I can't prove. But my basic thesis on Bitcoin, again, going back to March of last year, I was pounding the table because I said sooner or later, the Fed's going to stop its tightening and it's going to loosen. And then you want to be long gold and you want to be long Bitcoin pounding the table. I think now short term, Bitcoin's overdone. Anyway, so let's talk about blockchain. What I love, actually, I'll frame this as a skeptic. I was listening, I'm listening to the Elon Musk biography, and he's he's a skeptic on blockchain because he doesn't know whether it's scalable or not.

57:40He wouldn't, for example, put Twitter servers on a blockchain. And so I think that's debatable. I think that crypto enthusiasts like myself say the engineering will get there. So you can have and you can disaggregate where the functionality happens in that database, which has frankly happened since databases were invested, invented, which is that, you know, work gets apportioned between different functionalities and the hardware and the software. But my premise is that the blockchain will be reliable, which is really important. and then we'll be able to have the capacity. The thing that really changed in 2023 that I think gets misunderstood is that before last year, people were a little bit, that was the end of their analysis.

58:33And the most important thing is if you're a company going to use a database, the cost of that database has to be cheap and predictable. Not true for Bitcoin, not true for Ethereum, right? Gas fees are volatile. Bitcoin transaction fees and mining, right? And so like, if you're a corporation, this is, I think what came through in the success of Solana is just to oversimplify and L2s and all this other is like, well, if you're going to have industrial use of this, you know, block of this database technology, all those things has to be scalable, has to be reliable, and the costs have to be predictable.

59:10And I think we're there. Okay, so that's that. And then my other view of skepticism is how does who benefits? Is it the tokens or is it the Web2 companies like a Facebook that somehow uses the blockchain to lower their operating costs? And I would just say it's a bet. Like, you know, those of us who have allocated to crypto think that those applications will move faster. will be able to have breakthrough, either it's business to business or business to consumer applications. But it's not a guarantee. And that's one of the bigger risks, I think, for tokens is that companies somehow, if you will, steal the technology and get the benefits from it without necessarily the token holders.

1:00:03Like I use the analogy of the relational database. So relational database is just a way more efficient database. is like, I don't know, when it was invented 40 or 50 years ago. Are there any real investment themes out of that? I don't know, maybe IBM and Oracle for a while, but it's not real. It's not a, you know, it's not a theme. So anyway, that's my counter crypto kind of story. I think of blockchain as, let's say the mobile phone network, right? We grew up in that massive, disruptive change of mobile phone networks coming across the world. If you add up all of the mobile phone networks around the world combined, they're probably worth a lot of money, like trillions of dollars, a lot of money.

1:00:48The difference is we couldn't own all of the underlying networks, a share in that overall technology stack. But in this, we can. So we get the database technology stack. It's like owning a share of cloud or owning a share of the internet. That's kind of how I think about it. But I think your point is also very valid, is how much value is going to be captured by the applications layer? And I think big. I think that's why people are splitting up the people who can their investment thesis via owning the underlying tokens, but also doing VC on top. So like, you know, we don't know how this plays out.

1:01:21Because the other thing I'm worried about, and I want to see what you think, because you've seen many of the same trends as me, is I do worry that in the end, all of these blockchains are in business of selling block space. That's all they do. And we dress it up in many ways, but that's what they do. And they tell different stories around why their block space is better and they have different features and benefits. When do we hit excess capacity? And what does that do to the industry? Because we're used to this growing every time, But again, we've seen this with 3G. We've seen it with mobile.

1:02:02We've seen it with many of these things where suddenly you think it goes forever. But before you know it, we can't fill the block space that's available and something changes structurally. I'm trying to think through that. Somewhere are we not going to get this cyclical bull market? I don't think it's this time around, but I'm kind of worried we're the next time around. You know, so I don't really worry about that because there's so much economic rent, right? There's so much profits between, let's call it like a decentralized blockchain world and the way things are done now. You used the example of phone companies, right?

1:02:37Right. So that's not where my eye is focused on. I mean, I think that's a long ways off. I could be wrong. I mean, I don't know. That's interesting. I just haven't thought about that, but that seems like a long ways off to me. You know, I do like to frame it by saying, you know, VanEck, why are you involved in crypto? There's so many scams out there and whatever. I'm like, yes, there's 20 ,000 tokens. But if you narrow it down to the ones that actually have economics, where people are paying to use that blockchain or the ecosystem, it's not that many. It's 20 to 50 real ones, and then they start falling off the map.

1:03:19So I think those are the ones we're talking about. And so they're already getting use and getting people are paying for using it. Also, one of the funds that you have within VanEck is a hedge fund that manages crypto. Right, right. And my point is, it's not picking out of 1 ,000 tokens, Raul. It's picking out of 50. I mean, the 50 change, the 50 change, right? And there's a new entrance, but it's really understanding those and the potential new ones, right? But it's not like most of them you can just discard out of hand. Yeah, and Pranav's been on Real Vision a couple of times explaining his process.

1:04:02And as a disclosure, my asset management company, XPAM, is an investor in it as well. So just so everybody knows. Now, I just want to get your thoughts around what it means for your business and for capital markets. So I'm thinking about, do we see the rise of the ICO again as an allocation of capital? And also, how are you thinking through tokenization of funds and the future of your business? The constraints for anything can be tokenized. I feel like I've got a little bit of an insight as an ETF person, because I index very much on one big issue, which is liquidity. Who provides liquidity? Anyone can theoretically tokenize anything.

1:04:48But if there's a buyer and a seller of an asset, someone's got to make that market. Right. And you think, oh, Jan, S &P 500. It's so obvious, so easy to price. But someone has to make a market in it, Raul. And someone's got to make money making a market in it. So it's not just the, oh, I can create a tokenized real world asset of anything. It's who's providing the market structure around the liquidity. So that's big picture question number one. Big picture question number two is where can you do that without a lot of regulatory headache? Right. And, you know, in the world today, you're not doing that in the United States.

1:05:31That's fine. Now, it'll be really interesting. My bet is on Europe just because it's got a large retail market, as well as having a regulatory structure that enables crypto investing and trading and whatnot. But we'll see. I think there's a lot. A lot of developments need to happen. But those are the big things that I focus on. And what about, let's say, the tokenization of ETFs? Well, so I go to that point. Okay, who's going to provide the liquidity? And also, it has to be better than today's market structure. I can trade it on the weekend and I can instantly settle it. So I can trade the SMH all weekend in some markets because there's plenty of market makers who are traditional market makers operating crypto.

1:06:25So they work 24 hours, seven days a week. And I can instantly settle it. I can store it in my crypto wallet. So I don't have to worry if the brokerage I've gone through is going to go bust. I lost a lot of money in MF Global. You know, we've all got war stories of where we've lost money. I just think that is a nice world. I could trade SMH all day. You can trade night hours on Robinhood and a lot of independent brokers on a lot of platforms. And if I took a Bitcoin ETF and compared it to trading Bitcoin on Coinbase at retail pricing, it's cheaper as an ETF. The fees, the management fee of an ETF, let's call it 20-25 basis points, plus the spreads, which I'll call it 5-20 basis points, are cheaper than the 2 % you pay buying and selling the bid-offer spread on a retail crypto platform.

1:07:26So that's my point about the liquidity provision. There hasn't been a centralized order book in crypto to force a very cheap, efficient liquidity for tokenized assets yet. We were getting there, and then we had a couple of hiccups. I can't remember what they were, but there were a couple of hiccups in the industry. So listen, I wish I could figure out a path, Raul, to tokenize our ETFs. Trust me. I hear the pitch every week, right? You can imagine. I'm just saying, what are my first two questions? How is the liquidity being provided and in what jurisdiction? And then life becomes, then it's a four hour Zoom and I want to go have a drink.

1:08:11Yeah. I think probably the answer to your question just lies in the future. And that's as simple as that. We know what the obstacles are. We kind of know the way the world's going. Is it going to get more digital or less digital? We know it's going to get more. Just What is that time horizon for that particular part of the digitalization of the industry? Just a coda to my liquidity point, this choke point 2.0 to 3.0 that happened in the United States in terms, I mean, they were telling traders, right, look at these Bitcoin ETFs, the authorized participants are not allowed to touch Bitcoin, right?

1:08:48So they're trading a Bitcoin ETF, but they're not allowed to touch Bitcoin. I mean, it's really funny. But anyway, those liquidity providers, the big ones that were in crypto, you know, they were told to stop it. You know, so a lot of them did. It wasn't a rule or regulation. They just did. So, of course, Bitcoin and Ethereum and Solana are liquid. But, you know, the liquidity, you know, conditions in these markets are still a major challenge. Sorry, I'd like to pound that drum. So final question is, what's next in the ETF market? I presume there's an ETH ETF and there's the battle that you all have to face with who's going to get the market share and how that's going to go with a Bitcoin ETF, which I think is a bit unfortunate as there were so many people going to market.

1:09:37It's a shame because you kind of want pioneers to be able to. I mean, you guys tried to do this a while ago and then people come in. We were first to file a Bitcoin futures ETF, third to market. And now, yes, with spot Bitcoin, arguably second to file, third to file, and now someone who filed three months ago is in the same spot as us. But anyway, that's life. And also, it just felt like they just wanted an even larger asset gatherer to be in the middle of it. It was just, I don't know, it just didn't feel right that you approve 11 firms at the same time. So really, it makes it very difficult, stupidly competitive for everybody.

1:10:22So what's next for you in the space as this space develops further? Because we're still early days. There's a lot to be done. What's next? What excites me is what we were talking about, which is Europe and an on-chain world. And it's just not in the US. I mean, I described the United States approving, Not me, but maybe me. Approving a Bitcoin ETF is like telling an eighth grader, congratulations, you finally made it into kindergarten. It's just ridiculous, right? So given what's happening in the rest of the world, and one asks, wow, this is what was so controversial. What's happened in the last 10 days of Bitcoin that people were so agitated about?

1:11:10Anyway, having said that, on-chain, real disruption at scale, meaning the technology that can operate at scale like Solana or the L2s, and that's happening. And that's going to happen in the next year or two. That's really exciting. For us as an asset manager, we can get it through our hedge fund. That's it. And we can get it through on-chain non-U.S. activities, which we're doing. Are you growing your European operations to start looking into this? Yeah, but not just listing tokens, but also literally on-chain stuff. Yeah, that's what I mean. It's just being able to explore that all. You've got the sandbox that now is Europe, which is weird that Europe's allowed the regulation and the US hasn't.

1:11:55But there we go, right? The Germans. Let's go. My mom's German. So very, very excited about that. But no, we're going to go into beta with some software projects later in a matter of months. And so that's to me, it's great. I love to be on chain. Yeah, it's very cool. Yeah, listen, thank you ever so much. It's been a wide ranging, super interesting conversation. And I wish you luck with all of this. You guys have been pioneers in pretty much everything you've done. And I think that's a really important thing. And good luck and keep going. Yeah, let's keep the conversation going and have a great 2024.

1:12:31And you, and I look forward to seeing you somewhere in the world soon. So a fabulous discussion with Jan, wide ranging. You can see he thinks like me in these secular themes, how to play them, how to take advantage of it. And I loved his story of crypto as well. You know, Jan is a real pioneer, a very humble, very nice guy who's built an amazing business. and I'm just feel blessed that I can have conversations with people like this and bring them to you. I hope you enjoy it. See you next time. If you haven't subscribed to the YouTube channel, please do too. So it makes a difference for us. It helps us attract the best guests in the world.

1:13:09So just click like, obviously, please comment in the section below and subscribe to the channel to get updates. All right. See you around next time and sign up for Real Vision. All right. Take care.

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