Crossing the Chasm

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Introduction

Welcome to the Tokenized newsletter, brought to you by the creators of the Tokenized Podcast; Simon Taylor of Fintech Brainfood and Pet Berisha of Sporting Crypto, written by Jeremy Batchelder.

We are the newsletter for institutions that need help preparing for a Tokenized future.

We run through the headlines every week, what it means for you and a market readout. Always with an institutional, business-focused perspective. 

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Simon’s Market Readout 💬 

Crossing the Chasm.

One of the classic books on innovation adoption is called Crossing the Chasm.

It talks about how 2% of the market, the innovators, will adopt pretty much anything new.

The early adopters, about 11% of the market, will then generally follow, and before it gets to everything else.

Products might get stuck here for a little while before they go to the early majority and the late majority, AKA your parents or normies or people who don't read this newsletter.

So how do we cross that chasm with stablecoins and tokenized real world assets?

Well, it depends on where you sit in the world.

If you are someone who lives and works a designer gig in Argentina, chances are stablecoins are a part of your daily life.

If you are in Hong Kong and you're looking to remit money to another part of the world, to family elsewhere, chances are stablecoins are a normal part of your life. In fact, if you're an import export business in Hong Kong, you may have dealt with stablecoins.

The future is usually here. It's just not evenly distributed.

Now I think about different archetypes when it comes to Western adoption of stablecoins and tokenized real world assets.

In this case, our innovators are our degens, people who have multiple wallets, and they trade across multiple decentralized exchanges. They stay up weekends waiting for the latest memecoin drop. They have farmed more yield than I've had food in my life. These people are your innovators.

Your early majority is probably everybody else who got a regular crypto account and occasionally looks at it, occasionally dollar cost averages, maybe had a dabble with NFTs in 2021, put it down, and picked it back up recently. Perhaps they can't believe that the few Bitcoin fragments they bought five years ago are now worth something again. That's most of us.

These archetypes play out in institutions as well.

If you think of your innovators as protocols like Hyperliquid, or new L1 stablecoin chains in this cycle as the innovators, these are new models and new ways of doing things on chain that are constantly emerging and constantly adapting.

Those innovators are absolutely here, and they never really go away.

And… the early adopters are back in a big way on the institutional side.

This can be the asset managers like WisdomTree and Franklin Templeton, and VanEck, who have multiple stablecoins, multiple tokenized assets, and are leaning into ETF development. Do not forget that that is probably the most important development in the institutional ecosystem story.

In this category of early adopters, we also have the Fintech companies. Everybody from Robinhood, to Coinbase, to Nubank and Revolut and everybody in between.

They sort of always supported crypto from 2021, they put it down, a bit like most of us, and picked it back up again recently.

But what's different now is that they're looking at whether they should launch their own stablecoin and tokenizing assets.

In addition to this, the game-changer of this current cycle is the regulatory regime. We have, of course, the GENIUS Act. There is a window of opportunity for those people to adopt and adapt.

And then there's everybody else. Will we cross this chasm? 

I think we've got about two and a half years before we start to see the crossing of this chasm, and I think you can sort of look at Europe for how that might happen.

BBVA and Santander, two very large banks with tens, if not hundreds of millions of customers, have offered crypto custody products to their users.

PNC Bank in the United States has announced that they intend to offer the same.

Morgan Stanley offers it to its wealth clients. That's probably the safest toe-in-the-water that you could make. But behind the scenes, behind closed doors, there's a genuine question of, is this infrastructure robust enough now for me to move meaningful volumes of my settlement on?

And here's what everybody forgets: banks have been tokenizing cash for at least half a decade. They've just been doing it in a closed loop. HSBC, Citi and JPMorgan will let you move money instantly, 24/7, and globally, so long as the recipient is you, the JPMorgan customer in another country.

I think what comes next is the instant settlement rail for the world.

What comes next is stablecoins as the bridge between different closed-loop networks — a network of networks.

Somebody once called it an Internet of value. Something along those lines. I think we're starting to get there.

Stories You Can't Miss 📰

🏛️ Wyoming Becomes First State to Launch Its Own Stablecoin

Wyoming has officially launched the Frontier Stable Token (FRNT), making it the first U.S. state to issue its own stablecoin, marking a significant milestone in state-level digital asset innovation.

Key Points:

• FRNT is backed by dollars and short-term Treasuries with 2% overcollateralization, managed by Franklin Advisers with monthly attestations from The Network Firm

• The stablecoin launches across seven major blockchains (Arbitrum, Avalanche, Base, Ethereum, Optimism, Polygon, and Solana) using LayerZero for issuance

• Kraken will be among the first exchanges to offer FRNT trading, leveraging its Wyoming SPDI banking charter through affiliate Kraken Financial

The Tokenized Take:

• Regulatory arbitrage opportunity: A quirk in the Genius Bill's definition of "person" appears to exempt state governments from federal oversight, potentially giving Wyoming's FRNT competitive advantages over privately-issued stablecoins

• States racing to compete: Nebraska and Texas are already considering their own state stablecoin programs, suggesting this could become a new front in interstate competition for digital asset businesses

• Proven crypto-friendly track record: Wyoming's 45+ pieces of crypto legislation since 2016 and its SPDI banking charter demonstrate sustained commitment to digital asset innovation, providing credibility for institutional adoption

• Multi-chain strategy validates infrastructure trends: The decision to launch across seven blockchains reflects the current reality that no single chain dominates, aligning with the broader industry trend toward multi-chain operations

🔍 Google Cloud Unveils Universal Ledger Blockchain for Financial Institutions

Google Cloud has revealed details about its proprietary Layer 1 blockchain called the Google Cloud Universal Ledger (GCUL), positioning itself as a neutral infrastructure alternative to company-specific chains from Stripe and Circle.

Key Points:

• GCUL features Python-based smart contracts and leverages Google's R&D for performance, targeting financial institutions with "credibly neutral" infrastructure that competing firms can both utilize

• CME Group is already exploring tokenization and payments on GCUL, demonstrating enterprise-grade adoption from one of the world's largest commodities exchanges

The Tokenized Take:

• Neutrality as competitive advantage: Google's positioning as infrastructure provider rather than financial services competitor could attract institutions hesitant to build on Stripe or Circle's chains

• Technical differentiation remains unclear: While Python smart contracts may appeal to traditional finance developers, the performance and decentralization claims lack specific metrics compared to established alternatives

💸 Stablecorner ⚖️ → The Great Chain Abstraction Debate: Will Stablecoins Achieve True Fungibility?

A critical debate is emerging in the stablecoin ecosystem: will we achieve true fungibility across chains and tokens, or are we heading toward increased fragmentation as more companies build their own infrastructure?

As Sam Broner from a16z Crypto explained in the latest episode of Tokenized Podcast: "We should be in a world soon where it doesn't actually matter what the stablecoin you sent is as long as it's a Genius Bill compliant stablecoin, you'll be able to swap it at par and end up with whatever stablecoin you want on the receiving end."

This vision of seamless interoperability represents the holy grail of stablecoin infrastructure - where users simply hold "dollars" without caring about the underlying token or chain. But achieving this requires solving both chain abstraction and stablecoin abstraction simultaneously.

The Technology Race Is Accelerating

The infrastructure to support this vision is developing rapidly. Broner notes that transactions costing less than a cent and taking less than a second only became reality two years ago. Bridge's acquisition by Stripe happened just over a year ago. The Genius Bill passed mere months ago. The pace of development suggests that true abstraction may be closer than many expect.

Several companies are building the aggregation layer needed for seamless swapping. The key advantage? Because blockchains are permissionlessly composable, users can always build alternatives themselves, creating natural downward pressure on pricing for these services.

The Fragmentation Challenge

However, this optimistic timeline faces a significant headwind: the current wave of company-specific chains. Circle's Arc, Robinhood's L2, and Stripe's blockchain efforts all represent potential walled gardens that could prioritize their own tokens and ecosystems over universal compatibility.

The incentive structure is clear - companies want to capture more of the unit economics by controlling their own infrastructure. But this conflicts directly with the vision of universal fungibility that would benefit users most.

Privacy: The Second Wave Problem

Privacy preservation adds another layer of complexity. While multiple technical solutions exist - from privacy-preserving smart contracts to dedicated L2s - the market hasn't coalesced around a standard approach. As one participant noted, banks consistently ask "which is the established one?" when presented with 30 different privacy solutions.

The chicken-and-egg problem is apparent: existing stablecoin operators are comfortable with public transactions and don't want to slow their growth, while traditional financial institutions won't enter the space without privacy guarantees.

Market Forces Will Decide

The ultimate resolution likely depends on user demand. When the pressure for better money becomes strong enough, financial institutions will be forced to choose imperfect solutions rather than wait for perfect ones. The parallel to mobile banking adoption is instructive - institutions eventually had to pick platforms and iterate, rather than waiting for consensus.

The next 12-18 months of Genius Bill rulemaking will be critical in determining which technical approaches gain regulatory blessing and market adoption. But the fundamental tension between corporate control and universal fungibility will persist - and likely determine whether stablecoins fulfill their promise as truly superior digital money.

📰 Some More News:

🏦 Tokenization, Stablecoins & Finance

• Stablecoins, crypto cause a third of central banks to accelerate CBDC work – BIS (Read more here)

• SBI to distribute Ripple’s RLUSD in Japan as part of broader stablecoin push (Read more here)

• State Street becomes third party custodian on JP Morgan Digital Debt Service (Read more here)

• SBI Holdings, Startale announce RWA tokenized trading platform (Read more here)

• SkyBridge Capital to tokenize $300 million in hedge funds (Read more here)

• Japanese stablecoin issuer JPYC receives a license (Read more here)

• Crypto unicorn Anchorage Digital launches venture unit to back early-stage onchain protocols (Read more here)

• CFTC launches next phase of 'Crypto Sprint' initiative based on Trump's crypto roadmap, seeks public input (Read more here)

• Bitpanda Considers Public Listing, Rules Out London as Destination (Read more here)

🤑 Funding and M&A

• Stargate DAO approves LayerZero acquisition, despite last-minute interest from Wormhole, Axelar, and Across (Read more here)

• Pantera Capital seeks $1.25 billion for Solana treasury firm (Read more here)

💼 Government & Policy

• US SEC opens comment period on proposed staked Injective ETF from Canary (Read more here)

Tweet of the Week 🐤 

From Santiago R Santos

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