During WisdomTree’s earnings call last week, the asset manager ($100bn AUM) spent a significant proportion of the time covering digital assets. In fact, CEO Jonathan Steinberg spoke about little else. Even the graphic on the earnings presentation was a blockchain image. This is a company that isn’t just talking about tokenization. It’s walking the talk.
WisdomTree was the issuer of one of the eleven spot Bitcoin ETFs that gained SEC approval last month. But that’s not WisdomTree’s most exciting initiative. Its wallet app, WisdomTree Prime, which provides access to digital funds and crypto, is the star of the show.
A month after the spot Bitcoin ETF launched, BlackRock’s iShares Bitcoin Trust has surpassed $3 billion in assets, whereas WisdomTree’s has $11 million. The asset manager seemed sanguine, noting that the eleven simultaneous ETF launches were unique in several ways, not least competition, including fee waivers and a considerable amount of asset switching from other trusts.
Instead, the company emphasized its strong presence in European ETPs, with over half a billion in AUM there.
WisdomTree Prime – an eye on tokenization
We wrote about WisdomTree Prime when it launched last July. It’s a consumer-facing wallet app that provides direct access to Bitcoin and Ether, a dedicated Gold token managed by WisdomTree itself, as well as access to several digital funds. Given the U.S. regulatory stance, the digital funds – including Treasury funds – have a secondary record on blockchain, with the primary record kept in the usual way.
When one of the analysts on the earnings call asked about the benefits of tokenization, he got two answers. One of them was the more mainstream answer – liquidity, transparency, and standardization. But CEO Jonathan Steinberg stepped in to share his vision.
“One of the real advantages, I would say, will be around the user experience,” he said. “And by that, I mean you’re going to get much greater control of your assets as opposed to the infrastructure that exists today – where your savings, your investments and your payments are all connected much more closely. That kind of flexibility will prove to be, I think, of tremendous excitement to investors over time.”
What Steinberg is doing now is similar to what will be considered normal in ten years or so. For example, one of the features currently being tested is a Visa card linked to the Prime app. Want to pay for a coffee? You can do it by selling a little of your gold token or one of your funds or some of your crypto. This is how it already works for crypto, but not yet for traditional assets, except for WisdomTree Prime. One difference is that you may or may not need Visa as an intermediary in ten years (our observation, not WisdomTree’s). It depends on how wallets evolve.
Playing for the long game
It’s still early days, and so far, WisdomeTree’s 13 digital funds have a total of $18 million in AUM. When it launched last year, the app was available in 21 states but has now expanded to 38. By early next quarter, it plans to launch nationally. It’s targeting partnerships to accelerate take-up and has some interesting product features on the roadmap, such as the Visa tie-in.
But Steinberg has been here before with ETFs, WisdomTree’s core business. This time, he’s ahead of everyone.
“I think that for those that can remember the early days of ETFs, they thought it might be a niche structure, but the user experience was so much better that it’s actually conquered every single liquid asset that exists. And I believe that the trend line long term for tokenization will be the same,” he said.
Steinberg added, “But more so, so that everything I believe, over periods of time will be tokenized and you’ll get not just things like crypto sitting seamlessly with traditional assets. You’re also going to see illiquid assets or private assets sitting seamlessly with liquid assets. And again, all of it much closer to greater functionality like payments.”
In building WisdomTree Prime, the technology partner was Securrency, the startup recently acquired by the DTCC, where WisdomTree was an investor. Sometimes, when startups get acquired, their clients have to shift to other technology. But given the buyer is the DTCC, it turns out WisdomTree is simply ahead of everyone else.
Steinberg has good connections in the institutional blockchain space. He sits on the board of Fnality, the institutional settlement infrastructure in which the DTCC invested and recently went live. Something that’s not been publicized is that WisdomTree has a single nonvoting share in Fnality.
