Former BlackRock Executive Joseph Chalom: Why Ethereum Will Reshape Global Finance

Original Title: Ex-BlackRock Exec: Why Ethereum Will Reshape Global Finance | Joseph Chalom

Guest: SharpLink Co-CEO and former BlackRock executive Joseph Chalom

Host: CoinFund CEO Chris Perkins

Podcast Date: September 10

Compiled by: LenaXin

Editor’s Summary

This article is compiled from the Wealthion podcast, featuring SharpLink co-founder and former BlackRock executive Joseph Chalom and CoinFund President Chris Perkins. They discuss how the tokenization of real-world assets, stringent risk management, and large-scale intergenerational wealth transfer could push trillions of dollars onto the Ethereum blockchain.

Could Ethereum become one of the most strategic assets of the next decade? Why do DATs offer a smarter, higher-yielding, and more transparent way to invest in Ethereum?

ChainCatcher has compiled and edited this content.

Highlights

• My focus has always been on building a bridge between traditional finance and digital assets while upholding my principles and raising industry standards.
• There are unique advantages to indirectly holding ETH by owning publicly traded equity listed on Nasdaq.
• Fundraising must avoid truly diluting shareholder equity; it is better to wait for multiples to recover before financing, purchasing ETH, and staking.
• The biggest risk currently is no longer regulation, but rather our behavior and the types of risks we are willing to take in pursuit of returns.
• A small but focused team can achieve significant results by excelling in a few key areas.
• If we can earn ETH through operating businesses, it will create a powerful growth flywheel.
• I hope that in a year and a half, we can establish one or two companies that support a trading loop within the Ethereum ecosystem and generate revenue in ETH, creating a virtuous cycle.
• The current global financial system is highly fragmented: assets like stocks and bonds are traded in specific locations, lack interoperability, and each transaction typically requires fiat currency as an intermediary.

(I) From BlackRock to Blockchain: Joseph's Financial Journey

Chris Perkins: Can you tell us about your background?

Joseph Chalom: Although I have only been with SharpLink as CEO for five weeks, my story goes back much further. Before coming here, I spent twenty years at BlackRock. For the first ten years, I was deeply involved in the expansion of BlackRock's Aladdin fintech platform.

This experience taught me how to drive business growth and keenly identify pain points in the business ecosystem. The last five years at BlackRock were particularly memorable: I led a vibrant elite team to explore the new field of digital assets.

I was born into an immigrant family and grew up in Washington, D.C. I came to New York 31 years ago, and the city's vitality continues to motivate me.

Chris Perkins: It surprised everyone when you returned after retirement.

Joseph Chalom: I didn’t jump directly from BlackRock to SharpLink; I officially retired and received a generous compensation package. I initially planned to relax, but unexpectedly received a phone call. My life trajectory seems to always intersect with Joe Lubin.

We talked about mission and legacy, which sounds cliché, but who isn’t striving to leave a mark?

My focus has always been on building a bridge between traditional finance and digital assets while upholding my principles and raising industry standards. When I learned about a digital asset custody project needing a leader, I was initially cautious.

However, the expertise of ConsenSys, Joe's involvement on the board, and the project's potential to help SharpLink stand out ultimately convinced me. Thus, my brief retirement came to an end.

Ideally, everyone should have months to reflect. But at that time, the market was undergoing a critical turning point—not a battle between Bitcoin and Ethereum, but rather Ethereum was entering its own era and should not be assigned risk attributes similar to Bitcoin.

To be frank, I oppose the irrational dichotomy in the market. All types of assets have value in a portfolio. And I chose to return because of my firm belief in the long-term opportunities of Ethereum.

(II) Why Ethereum is the Core Bet

Chris Perkins: Can you talk about how you understand DATs and your commitment to Ethereum?

Joseph Chalom: If we believe that the financial services industry will undergo a structural transformation lasting a decade or even decades, and you are seeking long-term investment opportunities rather than short-term trading or speculation, the key question is: where can you exert the most influence?

There are various ways to hold ETH. Many people choose to hold it in spot form, or store it through self-custody wallets or custodial institutions, while some institutions prefer ETF products.

Of course, each method has its limitations and risks. Indirectly holding ETH by owning publicly traded equity listed on Nasdaq has its unique advantages.

Additionally, through equity packaging of listed companies, you can capture not only the value growth of ETH itself, which has significantly increased in price over the past few months, but also earn staking rewards. Holding equity in a listed company often comes with the potential for future multiples appreciation. If you believe the company has growth potential, this method's excess returns could far exceed simply holding ETH.

Therefore, the logical sequence is clear: first, ensure that Ethereum holds long-term opportunities; second, choose the tools to hold it.

(III) Driving Growth in Net Asset Value: What Drives the Model?

Chris Perkins: How do you balance financial operations, timely equity issuance to enhance per-share equity, and genuinely improving fundamentals and potential returns in driving MNAV growth?

Joseph Chalom: I believe there are two complementary elements: first, how to finance in a value-added manner. Most asset management companies currently raise funds primarily through issuing stock.

Issuing equity when the stock price is above the net asset value of the underlying assets, leveraging the asset's net value multiple for financing. At this point, the company's value exceeds the actual value of the ETH held. Financing methods include market issuance, registered direct offerings, or starting from the pipeline.

The key is that financing must achieve value addition; otherwise, early investors and shareholders will think you are merely diluting their equity to increase your ETH holdings.

If financing is efficient, the cost of acquiring ETH is reasonable, and staking yields are obtained, the value of each ETH will grow over time. As long as financing can enhance the value of each ETH, it is an appreciation for shareholders.

Of course, the net asset value (NAV) or main net asset (MNAV) multiple can be high or may fall below 1, largely influenced by market sentiment, but will eventually revert to the mean in the long run.

Therefore, fundraising must avoid truly diluting shareholder equity; it is better to wait for multiples to recover before financing, purchasing ETH, and staking.

Chris Perkins: So essentially, you need to monitor the average net asset value (MNAV). If MNAV is below 1, in many cases, it presents a buying opportunity.

Joseph Chalom: ETH attracts the following types of investors:

1. Retail and long-term holders who firmly believe in Ethereum's long-term capital appreciation potential. Even without considering staking rewards, they actively seek asset appreciation and passive income through public finance companies like ours.

2. Some investors prefer Ethereum's current high volatility. Especially in the context of Bitcoin becoming increasingly institutionalized and Ethereum's relative volatility increasing.

3. Investors willing to participate in gamma trading through stock-linked structures to lend funds for returns.

One important reason I joined SharpLink is not only to reach consensus as a strategic partner but also because it can attract top institutional talent to conduct business in a risk-adjusted manner. The biggest risk currently is no longer regulation, but rather our behavior and the types of risks we are willing to take in pursuit of returns.

(IV) Talent and Risk: The Core Secret to Building an Excellent Team

Chris Perkins: How do you find and attract hybrid talent who are proficient in both DeFi and traditional finance (like Wall Street)? How do you address security risks such as hacking and smart contract vulnerabilities?

Joseph Chalom: Talent is actually relatively easy to find. I once led the digital asset team at BlackRock, starting with one core member and gradually building a lean team of five strategists and seven engineers. Leveraging BlackRock's brand and reputation, we raised over $100 billion in a year and a half. This shows that a small but focused team can achieve significant results by excelling in a few key areas.

We only recruit the most talented and mission-driven individuals and adhere to one principle: reject arrogance and negative personalities. We seek those who genuinely believe in a long-term vision for change, not just those who are optimistic about ETH's price increase or pursuing short-term fund management, but those who firmly believe in a profound and sustained structural transformation in the industry and are willing to engage in it.

Excellent talent often comes from recommendations by trusted individuals rather than headhunting firms.

Risk is more complex. Overly pursuing extremely high yields, blindly chasing every basis point out of anxiety, or measuring progress over too short a time frame can easily lead to mistakes.

We see ourselves in a long-term opportunity, so we should steadily accumulate assets. Risk primarily stems from operational methods; for every dollar raised, we purchase one dollar of ETH, ultimately forming a portfolio containing billions of ETH. This portfolio needs systematic management, covering various forms from the most basic and secure custodial staking to liquid staking, re-staking, circular strategies, and even over-the-counter lending. Each method can introduce risks and leverage.

Risk itself can bring returns. But if you do not understand the risks you are taking, you should not venture into this field. It is essential to clearly identify smart contract risks, protocol risks, counterparty risks, term risks, and even the convexity characteristics in transactions, and use this to build effective risk-return boundaries.

Our goal is to establish an ideal portfolio, not to pursue high returns daily, but to continuously win this "game." To truly create value for investors. Those who blindly pursue returns or do not understand their operations may actually bring resistance to the entire industry.

Chris Perkins: Is risk management the key to achieving long-term success? Are you planning to drive business success through a streamlined team and low operating cost model?

Joseph Chalom: Reflecting on my experience at BlackRock, one thing is very profound: the more successful the product, the more humility is required. Because success is never the result of a few individuals. Our team is merely the "tip of the spear" in the entire system, supported by a strong brand reputation and distribution channels, as well as a trustworthy large trustee institution.

One of the great attractions of the digital asset business is its high scalability. Although you need to equip compliance, accounting, and other professional teams to meet the requirements of public companies, the actual team responsible for financing can be very lean. Whether managing $3.5 billion or $35 billion in ETH, the scale itself is not the key. If the portfolio you build is efficient enough to handle assets at the $1 billion level, it should also be adaptable to larger scales.

The core issue is that when the scale becomes extremely large, you need to operate cautiously to avoid interfering with or questioning the security and stability of the protocol; on the other hand, you must ensure that the staked assets can maintain sufficient liquidity in adverse situations.

Chris Perkins: In asset management, how do you understand and implement the primary principle that "treasures are not meant to lose money"?

Joseph Chalom: At BlackRock, they often said that if 65% to 70% of the assets you manage are pensions and retirement funds, then there can be no mistakes.

Because once a mistake is made, many people will be unable to retire with dignity. This is not only a responsibility but also a heavy mission.

(V) How SharpLink Gains Competitive Advantage

Chris Perkins: In the long run, how do you plan to position yourself to address the multifaceted competition, including ETH and other tokens?

Joseph Chalom: We can learn from Michael Saylor's strategy, but the capital management approach for ETH is entirely different because it has higher yield potential.

I view competitors as worthy allies. We have great respect for teams like BM&R. Many participants from traditional institutions recognize this as a long-term opportunity. There are mainly two ways to participate: directly holding ETH or generating returns through ecological applications. We welcome this competition; the more participants there are, the more prosperous the industry becomes. Ultimately, this field may be dominated by a few institutions that actively accumulate ETH.

We mainly achieve differentiation through three points: first, becoming the most trusted team among institutions. Although we are lean, we gather top experts to manage assets in a professional and rigorous manner.

Second, the partnership with ConsenSys. Their expertise provides us with a unique strategic advantage.

Third, operating businesses. In addition to accumulating and appreciating assets, we also operate a company focused on affiliate marketing in the gaming industry to ensure compliance with SEC and Nasdaq regulations.

In the future, if we can earn ETH through operating businesses, it will create a powerful growth flywheel. Staking rewards, debt compounding, along with ETH-denominated income will accelerate the expansion of capital reserves. This direction may not apply to all ETH capital management institutions.

(VI) Strategic Layout: Mergers and Global Expansion Plans

Chris Perkins: What is your overall view and direction regarding future merger strategies?

Joseph Chalom: If the scale of ETH debt grows significantly, and some debts lack liquidity, it could present opportunities. Currently, publicly traded companies in this field mainly finance through daily market plans. If the stock has good liquidity, this channel can be effectively utilized for financing. Some companies may struggle to raise funds, potentially trading below net asset value or seeking mergers, which is also an innovative way to acquire more ETH.

As the industry matures, yields may gradually increase from 0.5%-1% of ETH supply to 1.5%-2.5%. Issuing structurally similar sister bonds in different regions may be wise, such as targeting Asian or European markets, with the same issuance conditions and shared core operational costs and infrastructure to cover a broader range of investors.

In the future, we expect to engage in such creative mergers, although the specific timing is uncertain.

I believe that the industry will first experience an initial differentiation phase before entering a consolidation period. Technological development and business evolution often follow this pattern. The stablecoin sector is likely to see similar consolidation and merger trends, which will be very noteworthy.

Chris Perkins: Why is transparency so important? What is the main motivation for publicly sharing operational details daily?

Joseph Chalom: Most companies do not frequently issue stock, typically doing so once every few years. According to SEC regulations, companies only need to disclose the number of outstanding shares in quarterly reports.

In our industry, financing may occur daily, weekly, or at other frequencies. Therefore, to comprehensively reflect operational status, it is essential to disclose a series of key metrics. For example: the amount of ETH held, total funds raised, weekly ETH accumulation, whether we actually hold ETH or only have derivative exposure, staking ratios, and yields.

We release press releases and AK documents every Tuesday morning to update investors on this data. Although some metrics may not be favorable in the short term, transparent operations will enhance investor trust and stickiness in the long run.

Investors have the right to clearly understand the products they are purchasing; hiding information is not sustainable.

(VII) SharpLink's Growth Blueprint for the Next 12 to 18 Months

Chris Perkins: What are your plans or vision for the company's development in the next year to year and a half?

Joseph Chalom: The top priority is to build a world-class team, but this cannot be achieved overnight. We are continuously recruiting key talent to form a lean team of fewer than 20 people, with each member excelling in their field and collaborating harmoniously to drive growth.

Second, continue to finance in a way that does not dilute shareholder equity, flexibly adjusting fundraising efforts according to market rhythms, with the long-term goal of continuously increasing the concentration of each ETH.

Third, actively accumulate ETH. If you firmly believe in Ethereum's potential, you should seize the opportunity to efficiently increase your holdings at the lowest cost—even those funds that allocate only 5% to ETH should do so.

Fourth, deeply integrate into the ecosystem. As an Ethereum enterprise or custodian, failing to leverage the ETH held to create ecological value is a dereliction of duty. We can leverage billions in ETH to support protocol development through lending, providing liquidity, and advancing in ways that benefit the ecosystem.

Finally, I hope that in a year and a half, we can establish one or two companies that support a trading loop within the Ethereum ecosystem and generate revenue in ETH, creating a virtuous cycle.

(VIII) Core Investment Insights: Key Focus Areas for the Future

Chris Perkins: What additional advice or information would you like to share with potential investors considering including SBET in their investment plans?

Joseph Chalom: The current traditional financial system has significant friction, with low capital flow efficiency and transaction settlement delays; even at best, it requires T+1, which brings substantial settlement risk, counterparty risk, and collateral management risk. The transformation will begin with stablecoins. Currently, the scale of stablecoins has reached $275 billion, and they primarily operate on Ethereum. But the real potential lies in tokenized assets.

As Minister Bezanet stated, the scale of stablecoins is expected to grow from current levels to $2-3 trillion in the coming years. The scale of tokenized funds, stocks, bonds, real estate, and private equity could reach trillions of dollars and will operate on decentralized platforms like Ethereum.

Some are attracted by its yield potential, while more see its future. ETH is not just a commodity; it can also generate returns. As trillions of dollars in stablecoins flow into the Ethereum ecosystem, ETH undoubtedly becomes a strategic asset. We must establish a strategic reserve of ETH because you need to hold a certain supply to ensure the liquidity of dollars and assets within the system. I can’t think of a more strategically significant asset than this.

More importantly, the first on-chain securities issued by Superstate and Galaxy mark one of the largest unlockings for blockchain. Real-world assets are no longer locked in custodial boxes but are directly integrated into the ecosystem through tokenization. This is a turning point that has not yet been widely recognized but will profoundly change the financial landscape.

Chris Perkins: The pace of development far exceeds expectations. Regulating assets has just begun; as more such assets continue to flow in, a whole new ecosystem is forming, which will greatly accelerate the development and integration of assets on Ethereum and other blockchains.

Joseph Chalom: Regarding why tokenization is necessary, people often mention characteristics like programmability, borderlessness, instant or atomic settlement, neutrality, and trustworthiness. But the deeper reason is that the current global financial system is highly fragmented: assets like stocks and bonds are traded in specific locations, lack interoperability, and each transaction typically requires fiat currency as an intermediary.

In the future, with the realization of instant settlement and composability, smart contracts will support automated trading and asset rebalancing, almost returning to a flexible exchange method akin to "barter." For example, why can't the S&P 500 index be traded in the form of a Mag 7 combination? Whether through swaps, lending, or other forms, financial instruments will become highly composable, breaking the traditional notion of "trading in specific locations."

This will not only unleash tremendous economic potential by reconstructing the underlying logic of value exchange but will also reshape the entire financial ecosystem. As for SBET, we plan to launch a compliant tokenized version in the near future, prioritizing Ethereum over Solana as the underlying infrastructure.