Franklin Templeton Making It Rain DeFi Yields Sandy Kaul INTERVIEW

BENJI is the World’s First U.S.-registered money Market Fund, on-chain. The BENJI token can offer attractive yield, providing investors with the potential for income generation.

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Guest: Sandy Kaul - EVP at Franklin Templeton & Head of Franklin Innovation
Download Benji Mobile App➜ https://bit.ly/BENJIFranklin
00:00 intro
00:08 Sponsor: Coinbase
00:30 Franklin Templeton Was First!
01:09 BENJI Clients
03:42 New Intraday Yields
05:08 Streaming Yields Possible
05:52 OnChain Costs & Fees
07:13 Entire Market Moving On Chain
08:32 Top Blockchains Using Benji
09:47 Minimum Investment Requirements
10:56 Regulation vs Stablecoins & Money Market Funds
12:51 What Happens if Interest Rates Fall?
14:10 Benji Self-Custody Wallet
14:42 CeFi First Then DeFi
15:44 DeFi Integrations with $BENJI
16:04 Automated Looping Vaults
18:59 Loyalty Reward Points
20:47 RWA Cultural Assets Coming
22:45 Too Early?
24:05 New Chains Coming To $BENJI?
24:54 outro #Ethereum #Crypto #Bitcoin

~Franklin Templeton Making It Rain DeFi Yields!?💲Sandy Kaul INTERVIEW~ ⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺⎺
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Episode Transcript

Speaker 1 (00:00):
All right, so welcome into the show. Today we're going
to be diving into Franklin Templeton a little bit of
where they're going. You guys don't want to miss this one.
My name is Paul Barrel. Welcome back into the show.
Let's do thank our sponsor, and that is Coinbase, a
place where you guys can get into your crypto journey.
Very easy to set up over there. Just visit coinbase
dot com. Whether you're a business or you're an individual,
you can go launch your own account over there on

(00:21):
coinbase and the future of money is here you guys,
of course use our link. It does help the channel,
so we always appreciate that. I want to get into
it today. We've got an executive from Franklin Templeton joining
us here in a minute, but I want to kind
of focus on a couple of things. Of course, as
you guys know, we've been tracking this space for quite
some time. But when you look at token is is
money markets. Franklin Templeton has been at this all the

(00:42):
way back into twenty twenty one, so they are definitely
one of the ogs in the space.

Speaker 2 (00:47):
And if you look at them on.

Speaker 1 (00:49):
The RBA list, you've got securitized in there, but right
there Franklin Templeton holding the number six position. Hopefully this
will continue to grow for them, so it's a good
thing to get one one of their executives in on
the show and ask them some questions. I want to
introduce Sandy Call, who's the VP and head of innovation
joining us today.

Speaker 2 (01:07):
How are you great?

Speaker 3 (01:08):
Thank you so much for having me. Happy to be here.

Speaker 2 (01:10):
With you, Sandy.

Speaker 1 (01:11):
I've watched several of your interviews. I love the fact
that you're so on top of this, so kudos to you.

Speaker 2 (01:16):
I want to get.

Speaker 1 (01:17):
Into a couple of things I'm looking over at Benji Institutional,
and then you can also go into the Benji app,
which is, in my opinion, a really really good and
well designed product.

Speaker 2 (01:31):
Here. Who are the customers for Benji? What are they?
Who are they?

Speaker 3 (01:35):
We've actually designed our Benji product suite to service all customers.
So we have an institutional version of Benji that's targeted
at hedge funds and advanced trading firms that are really
looking to utilize sophisticated investment strategies with derivatives and perpetuals,
and who need a good substitute for stable coins in

(01:56):
their collateral postings. With a token I this money market fund,
you actually get a haircut on your overall collaboral requirements
and it works better for you in terms of keeping
that yield that comes along with the money market fund,
So that's targeted at an institutional audience. We also have
released a forty act, a mutual fund version of our

(02:18):
tokenized money market fund, where the minimum buy in size
is only twenty dollars, and this is very much targeted
at individuals, and that is what the app is targeted
at as well. And we're really, i think the only
retail tokenized money market fund that's out there offering this
type of capability to every day investors.

Speaker 1 (02:37):
Have you seen a large uptake in terms of people
that are coming into this for the first time and
understanding what a tokenized money market fund is.

Speaker 3 (02:46):
Yeah, we're starting to really see a pickup and interest,
and we're starting to get a real, i think broadening
understanding of how money market funds work together with stable coins.
In this thinking of stable coins as almost your cash
account and money market funds as your savings account, and

(03:06):
being able to move seamlessly between the two in a
wallet based ecosystem. So we're starting to get a lot
of interest from that quarter, particularly since we are the
only tokenized money market fund globally that is digitally issued
native on chain, which means that there is no off
chain exposure. The token is the exposure to the fund,

(03:27):
and therefore you can really use it in very different ways.
You can transfer it peer to peer, you can have
automic settlement on this, and it allows us to offer
new types of functionality around the token that other money
market funds just can't offer.

Speaker 1 (03:42):
At this point, we definitely want to get into that
in a second. I want to talk about intra day
real quickly, because this seems like a huge selling point.
I'm just looking at some of the performance here right now.
Has this been a successful selling point for you guys.

Speaker 3 (03:57):
Yeah, so we just released this functionality, and yes, it
is so new. I think people are just starting to
understand how impactful it truly is. We're seeing more interest,
i think, initially from institutional investors who have worked with
money market funds pretty much for decades and who understand
the difference between getting inter day yield versus having have

(04:19):
to hold the positions through the close of a day
to qualify for yield and who are really appreciating the
ability to get yield paid out every single calendar day,
including Saturdays, Sundays, and holidays, instead of waiting for an
end of month to get that yield payout. I think
for retail investors, this is a new concept, right. They

(04:40):
aren't used to getting yield every day in any account.
There's no banking product that offers that. There's no investment
product that offers that. So I think this is a
very unique offering that's starting to get understood. But I
truly believe as we get the word out more, as
we're able to demonstrate and connect into more venues with
this offering, it will become very popular because people deserve

(05:03):
their money each day. If it's their money, right, nobody
else should be holding it and getting the benefit of
it exactly.

Speaker 2 (05:09):
Well.

Speaker 1 (05:09):
One of the things we're tracking quite a bit is
the speed in which these yields are being determined. Do
you foresee a future where you might even get into
streaming yields where it's literally coming to you by the minute.

Speaker 2 (05:23):
What does that look like? Absolutely? Could?

Speaker 3 (05:26):
Yeah. I think that that is the beauty of having
these native token exposures and operating our entire shareholder record
entirely on blockchain is that we can operate at the
speed of the chains themselves, so we can really do
that type of on demand processing. We could stream it.
I think these are going to become commonplace functions over

(05:49):
the next five years. We're just very early to market
with it and helping to set the benchmark.

Speaker 1 (05:54):
What do you think about costs, because this is one
of the challenges. I think that especially young investors coming
into the market, they always talk to me about I
hate using this platform. The rates and fees are too high.
You look at on chain fees versus traditional finance, there's
a big difference there. You guys, of course, are kind
of hybrid in this approach here. How are you guys

(06:15):
addressing that right now?

Speaker 3 (06:16):
Yeah, So we only charge a management fee on the fund.
There is no fee for processing, there's no fee for buying,
there's no fee for selling, there's no fee for transfers.
You just pay the standard management fund management fee on
the fund itself, which you would be doing on any
real fund vehicle, and there's no hitting costs and the

(06:37):
cost savings gets passed along. The cost savings that we
realize by running this on blockchain gets passed along in
a lower cost basis to the underlying investor. So one
of the things they'd never tell you when you buy
investment funds is that they deduct some of those costs
from your returns. Because we're operating on blockchain, we're able
to deduct a lower cost, We're able to operate with

(07:00):
the lower cost, and therefore we're able to pass on
more of the actual yield that you earn to you
as the underlying investor. So there's even less fees on
these tokenized products because we're getting the benefit of operating
on blockchain and passing that through to our clients.

Speaker 1 (07:15):
Would you say that that cost savings is significant?

Speaker 2 (07:19):
Is it just an edge? What is kind of the position?

Speaker 1 (07:22):
Is this something big enough that it would restructure how
markets would act in the future.

Speaker 3 (07:28):
I think when you look at it from the Franklin
Templeton perspective or from the perspective of say a corporate treasurer,
this will absolutely restructure how markets work. But when you're
dealing in small amounts of money, the size of the
savings is pretty minimal. But it still adds up. Right,
Everyone likes getting back whatever they can but when you're

(07:48):
starting to deal with you know, hundreds of thousands of
transactions and hundreds of millions of dollars in transactions, these
savings are appreciative, and we do think that it is
going to change the way the whole market infrastructure works,
that these rails are going to take over and we're
going to see all financial services move into this wallet
based ecosystem.

Speaker 1 (08:08):
You know, it's interesting that you say that because I'm
getting a lot more inbound inquiries from you know, money
managers just in general. They've never been exposed to the
digital space before. Digital assets is a brand new thing
to a lot of their clients, and they're starting to
you know, they discover our channel, so they're always asking
who's out there. And I've talked to many people who

(08:28):
just are not doing digital assets. So it seems like
you guys are in the right place at the right
time when you look at the different levels of blockchains,
because I know you guys have different investment tiers and
in some cases it's by the blockchain. I'm just looking
at your RWA here as an example of Stellar kind
of leading the way here. But what has been the
blockchain that has been serving you guys the best thus far.

Speaker 3 (08:52):
So we built the system originally on Stellar, which is
why we are very deeply embedded with that ecosystem, and
they are very good from a cost perspective in terms
of being able to handle a lot of volume, particularly
smaller orders where you want to keep the costs as
low as possible. What we have found is we have

(09:13):
a whole kind of blockchain selection mechanism that we use
internally based on who the client is placing the order,
the size of the order, how long we think the
duration of the trade is going to be held, and
that kind of dictates which blockchain we go to because
the cost structures, the minimums are very different and the

(09:34):
way that they handle the record keeping is oftentimes very different.
So we have to have a whole strategy around that,
and that is something we have developed through our own
trial and error and really being able to operate across
all these chains.

Speaker 1 (09:47):
Do you feel though that I think it was like
fifty K or something that was the level for Stellar.
Do you feel like that is driving the interest level
based on blockchain because of the requirements that you have
to hit for certain networks, and is there any plan
to change those in the future.

Speaker 3 (10:05):
Yeah, I think that as we see volumes grow, we'll
be able to bring down all of those minimums. But
I think that for now, what we're finding is we're
more interested in extending across the different chains and creating
that interconnectivity, and then we're just working with each chain
where that chain is at the time to figure out
the best way of operating with them. So we believe

(10:26):
that there's going to be a multichain future. We think
that having that connectivity across the chains is going to
be an important differentiator. This is why we also run
our own nodes across as many of the chains we
operate on as possible, because we think that's part of
our due diligence in being a member of this network.
So right now, because it's so early in the development,
we're focused more on making sure we're in the right ecosystems,

(10:49):
and then over time, we trust that the economics will
just get better and better for our customers and for
ourselves as the system matures.

Speaker 1 (10:57):
When you look at you know, we get a lot
of people they love our yield videos when we talk
about stable coin yield, and you know the places to
get that. You look at money markets now paying a
significant amount of yield as well. You also look at
the delay from a regulation standpoint of the Current Market
Structure Act, and if that slows down, it's probably going

(11:17):
to have an effect on money markets and also on
stable coins to a certain extent.

Speaker 2 (11:22):
Is that something that is affecting.

Speaker 1 (11:24):
You guys right now the way that regulation is being
kind of run through DC.

Speaker 3 (11:29):
Yeah, Well, we have been able to make tremendous strides
in our infrastructure, even during the Biden administration, when you know,
it was much tougher to get regulators on board with
some of the innovations we were trying to push through.
So there's been a noticeable uptick in the receptivity to
our points of view. We've been actively engaged in dialogue

(11:51):
with the regulators and really understanding our real life experience
on these chains and some of the learnings that we've
had through operating this environment for multiple years now. I
mean we've been running our tokenized money Market Fund twenty
four seven three sixty five for almost four years now
at this point, So I think that we've been very

(12:11):
engaged and find a good attitude from their regulators. I
think what's happening is is that because we are more ahead.
Sometimes we're able to get exceptions and no action letters
to be able to do things maybe a little ahead
of the rules themselves coming into focus for the whole industry.
But you know, the ground that we're breaking is going

(12:33):
to open up this opportunity for more and more of
our peers as well over time, and we understand that
and look forward to having a more robust ecosystem to
compete within. So you know, we know we're early, but
you know, we're also very excited about being able to
have this most influence and really be able to share
our learnings with the regular rules.

Speaker 1 (12:52):
If you look at yields in general and you kind
of compare this to current interest rates, most likely if
we get a rate cut, yields are going to start
to slide slightly. What kind of impact if we start
to see a near maybe if President Trump gets his
way a one person interest rate out there in the markets,
how would that affect what you guys are doing, especially
around the money markets.

Speaker 3 (13:12):
Yeah, well, the money markets are a product where you know,
when we first came out with this product and we
were starting to experiment on blockchain, yields were zero. So
we've seen yields go all the way from zero to highs,
and we do expect money market yields to always fluctuate.
You know, money markets were what I would call is
our test product for tokenization, and what you'll be seeing

(13:34):
from us in the coming year is really the expansion
of our product suite. We can issue our forty act
mutual funds here in the US, we can issue usage
funds on chain in Europe and in Asia and in
South America and the Middle East, and we can issue
private funds. So you know, having built those core capabilities,

(13:54):
we're now going to start to expand our product suite
and really be able to have a full suite of offering.
So if yields go down, that increases opportunities in other
parts of the capital structure, and that's where we want
to be prepared to offer product to our clients.

Speaker 1 (14:10):
Well, one of the things that you guys are doing,
which I think is brilliant, and that is self custody.
And I was looking at a tweet you had read
here just feels better have your own assets and your
own wallet. Benji now the technology platform allowing you guys
to do this. When you look at self custody when
will we be able to see accessing things like DeFi yields,

(14:31):
et cetera on self custody.

Speaker 2 (14:32):
What is there any plan in the roadmap for that?

Speaker 3 (14:35):
Yeah, I mean we're waiting for a little bit of
clarity here from the regulators on how to treat a
regulated product within these DeFi protocols. We're probably going to
be able to launch in what people are calling the
c FI pools or the set you know, the more
centralized pools where there is ky c a mL, and
that will set the standard I think for how we've

(14:57):
introduce these new capabilities into the world wilet based ecosystem.
But we do anticipate over time being able to incorporate
these products into DeFi as well, and I think that
that will be an important leap to be able to
get into some permissionless pools. Because these tokens, once issued,
we're able to tie them back to the actual token holder,

(15:20):
and if that KYCAML this has been done on the
token holder, I think there's a good case to be
made by encapsulating that in a token. You know, we
are maintaining control of the asset, and even if that
DeFi token recirculates, we still be able to unwrap that
and only give the actual underlying instruments to the registered

(15:42):
kycaml holder.

Speaker 2 (15:44):
Yeah, all right, that makes sense.

Speaker 1 (15:45):
What about the DeFi integrations that would be coming, because
it's likely that we're going to see some pretty amazing
products out there. A lot of DeFi platforms are starting
to really accelerate in a big way, So there's a
lot of people already understanding how to utilize is it.
What kind of integrations do you guys come have coming
down the pipe?

Speaker 3 (16:05):
Yeah, well, one of the things we're looking at right
now is how people are using vaults and how they're
doing some of these looping strategies. We think that's super interesting,
and you know, because we can supply many of these
underlying products that would go into the vault and help
to support that strategy, and we run our own transfer agent.
You know, right now, some of the fees being charged
by those who are administering the looping strategies are quite high,

(16:29):
and we think that there's an opportunity there for us
to step in and offer a product at a better
cost structure for the underlying investor. So that's something we're investigating.
You know, as a regulated entity, we always have to
run this by our internal and external council to make
sure everybody's good with our plans. But those plans are
on the drawing board right now.

Speaker 1 (16:49):
You're kind of skipping ahead on my questions here. It's like,
you know what I'm getting ready to ask, Sandy. So,
first of all, this was to your point right here
is and you look at vaults in general, this is
kind of a new concept that we've covered a little
bit here on the show, but yields via automated vaults.
This is something you are looking into as a trend

(17:10):
that's already happening out there. Where would you put this
on the list of most important? Is this something that
is like up at the edge right now?

Speaker 2 (17:19):
Yeah?

Speaker 3 (17:19):
I would say, you know, right now we're focused on
expanding our product range and really embedding some of these
new i think market leading capabilities in the infrastructure and
expanding those out across chains. Right We've launched these on
some chains, and that's i'd say top of our list.
I think that then you know this really this is

(17:40):
what I always put on our we call it our
R and D list, where we're really interested in these
new structures and understanding how we might apply them, and
getting the right legal and regulatory opinions on how to
operate them, and engaging our internal partners with the different
expertise and managing the different products that would go into
some of these strategies, engaged in the conversations as well.

(18:03):
So I wouldn't say it's at the very top of
the list, but I think that, you know, this is
a very interesting new trend and when you think about
how these new rails might change the way that products
are issued and that products are packaged in the future,
this is where we're really intrigued beyond just the strategies
that are being used today. Does this become the way

(18:25):
that funds get issued in the future, do we exact
or algorithmically driven automated strategies with AI coming into play here,
and you know, are we going to see kind of
a foundational shift in the way that asset management works?
And these are big questions we like to debate inside here.

Speaker 1 (18:41):
Well, it's fantastic to see you guys on the edge
of this because this is something that you know, I
felt like we were going to see some innovators come
out of this set this series.

Speaker 2 (18:50):
Of growth cycles within blockchain.

Speaker 1 (18:53):
Obviously You guys have been around it for a while,
so you you recognize a lot of these trends that
are starting to edge into it. Into one other trend
I wanted to hit on because if you look at
what Robinhood has been able to do, they've been able
to gamify a lot of things like rewards, etc. What
about that in the DeFi space. If we start to
see Benji in the DeFi space, could we see a

(19:14):
rewards architecture starting to layer into Franklin Templeton.

Speaker 3 (19:18):
I think one hundred percent there. I think this is
one of the biggest opportunities we see for the future.
Right when you think about your investment portfolio today, that
investment portfolio is kind of sitting out to the side
of your life and it's something that you kind of
hope grows throughout your life to be able to use
in retirement. And we think that's a very old fashioned notion,

(19:39):
right Your investment portfolio should sit at the center of
your life, and it should be providing you the benefits
and rewards for where you're invested, just like a credit
card would or just like a bank card would. And
so we think that it's very important to really use
the ability to embed contracts with assets in this new
bloe chain based ecosystem to really reward investors for holding

(20:04):
their investments and make the returns that they get not
just financial returns, but rewards and benefits and opportunities and access.
These are all things we think are going to become
important adjuncts to what people expect out of their portfolios,
and we think that's something that we're actively preparing for.

Speaker 1 (20:22):
When investors, sophisticated investors realize that this is happening in
certain firms, they are going to flock to these kinds
of tools because it's something that they recognize in their
daily life. In many cases, they're structuring their whole purchasing
habits around what kind of rewards can I get? Kind
of you know, cash back can I get? When you

(20:44):
layer that into investing properties, that starts to get things
really interesting. Now, I've heard you and others talk about
this phase of RWA's may not be as ready for
the open markets yet, but there could be other areas
such as cultural assets. And we've talked about cultural assets
on our show with you know a lot of culture

(21:05):
guys out there that really understand this. Will that be
something that you're going to implement into your platform.

Speaker 3 (21:12):
Yes, that's definitely something that we believe strongly in. One
of the real exciting aspects of moving onto these crypto
rails is that you know, every individual as well as
every institution can now also become a source of assets. Right,
And that makes it a very interesting proposition because we're

(21:35):
already seeing interesting sharing models emerge and deepen. Right, I
can share my bandwidth, I can share my car's driving patterns. Right.
I think that that idea of sharing is going to
advance all the way to the assets that I own
as an individual. Why can't I share the equity in
my home or why can't I share my overall you know,

(21:58):
physical assets like my art collect action or my boat
or my you know, I wish I had a boat.
But you know, what I'm saying is the kinds of
assets that we might own as individuals. And I think
that these are going to become very interesting ways of
two way communication. Not just a firm like Franklin Templeton
creating funds like this and offering them to our investment clients,

(22:20):
but also our clients becoming sources of these assets and
also being able to participate in the benefits of having
those assets managed through the fees that they collect. So
I think it's going to become a really great community
touch point and point of two way interaction between the
professional managers managing portfolios and the clients that are investing

(22:42):
into those funds.

Speaker 1 (22:44):
Well, listen, I think first of all, you guys have
a lot of products that are one very innovative. Do
you feel like sometimes you're too early? You know, because
you guys have been around since twenty one, You've put
a lot of the new products out there. You were
the first on money market products available when it comes
to especially what's happening in blockchain, Are you worried that
you're too early here?

Speaker 2 (23:04):
No?

Speaker 3 (23:05):
It things always innegatively take longer than you expect. You
run up against all sorts of you know, small hurdles
but none to less hurdles that you have to get through,
and so you know, it's never too early to really
be thinking about the future and planning for it. And
you know, we're perfectly happy to have an early lead.

(23:28):
And then you know, we believe firmly that that lead
will pay off for us, even if the asset growth
isn't happening right away. We think that the learnings that
we have, the ecosystems we're getting embedded into the capabilities
that we're building out, and being able to test in
the market real time as the scale grows, these are

(23:49):
all advantages that we think are going to position us
to be one of the top firms offering asset management
over the coming decades. So we're willing to put the
investment in. I don't think you can ever be too early.

Speaker 2 (24:01):
Yeah, well, that's good that you are.

Speaker 1 (24:03):
You mentioned ecosystems, infrastructures within that. What about what chains
are coming, anything that's in the pipeline for you guys
to start to integrate into some of your products and services.

Speaker 3 (24:16):
Yeah. I think my team would kill me if I
start to give the games out, but I will say
I will say that we are definitely continuing to look
to expand across chains. We are really watching the use
cases that are growing on different chains and are very
excited about some of the newer opportunities that we see emerging.

(24:37):
So I think you will see us continue to expand
our ecosystem and because of the platform we've built, every
time we add a chain, we create interoperability for our
clients across that whole set of chains. So we think
that too, is going to be a long term advantage
for us.

Speaker 1 (24:54):
Yeah, for sure. You guys can read between the lines
a little bit. I mean, you know what chains they're on,
think about the that they're looking at. If you were
in their position, which ones are the strong ones? And
then you can kind of get a picture of that,
because I know everybody's out there just going which one
will it be?

Speaker 2 (25:09):
Which one will it be?

Speaker 1 (25:10):
Sandy, It has been great having you on. Thank you
so much for coming in today. We really appreciate it great,
Thank you so much.

Speaker 3 (25:16):
I really enjoyed the conversation.

Speaker 2 (25:18):
You bet all right.

Speaker 1 (25:19):
If you guys are not in our Diamond Circle, that's
our own private group. You can join absolutely free. All
you have to do is hit the link down below,
and of course follow me out there on X at
Paul Baron. We'll catch you next time right here on
The Paul Baron Show.