Capital Layer and the Future of Stablecoin Payments in the AI Supply Chain

Transcript

Please welcome Justin Wang and host >> [music] >> Dante Reminick for a special Staple Culture sponsored by Capital Layer. >> Awesome. Hey everyone, great to be here. My name is Dante. Justin, really, really excited to have you here. I think that what you're building at Capital Layer is fundamentally different than what most people at this conference are focused on. Let's just start with introductions, right? So, tell me about yourself and more importantly, tell me about what you're building at Capital Layer. >> Yeah, for sure. Hi guys, I'm the founder of Capital Layers. We want to reimagine the money movement for global AI supply chain. Funny Funny things that the way I say global AI supply chain is because we're based in Taipei, Taiwan. 90% of AI

infrastructures are actually produced from Taiwan right now. And then, interestingly speaking, out of every 10 bucks spending in US right now, $8 goes to AI infrastructures. So, to be able to build a a constructed AI data center right now, 90% of equipment infrastructures, all these things are actually coming from Taiwan. And then, you have 5% coming from Korea on memory chips. And then, 5% from fabs from Europe. And then, etc. from US. >> Just so that I make sure I heard that correctly, out of every $10 that the US is spending, eight of those dollars are going to build AI infrastructure? >> Yeah, well, a computer is already a trillion-dollar industry on a path to where I think Taiwan has been seen as a global phenomenon. You know, we're seeing 14% of growth GDP by this year already. We have surpassed several

countries, become the third largest trading partners to US. We actually surpassed China, Hong Kong by earlier this years. So, I think what Taiwan and the US are doing right now is a global phenomenon. >> Yeah, absolutely. I mean, I think people talk a lot about AI. People talk a lot about data centers. But, you are in the thick of what is necessary to build them, right? We see these huge deals come out all over the internet all the time about, "Oh, this company just paid $150 billion to Nvidia or whatever it might be." But, I think most people don't think about the piping that actually needs to make that happen, right? So, it's your point, most of the spending is going through Taiwan in one shape way shape or form. The question then is how does money move from point A

to point B? And I know that you guys are building the infrastructure to actually make that happen. We talked to a lot of people that say, "Hey, we're doing B2B payments with stable coins or whatever it might be." And I know that you guys are in that adjacent world about payments in the world of AI necessitates you to build capital layer from the ground up. Why doesn't the existing infrastructure work for these types of flows? >> Well, before I talk about that, I definitely want to put more emphasis on why we created capital layer in the first place since last year. You know, my family owns semiconductor business in Taiwan. We're trading with a quite a few newer ASICs production companies. And then the other day at dinner last year, one of the chairmans came up to me and he's like,

"Hey, I know you do stable coin crypto related. Our department has been getting numerous requests from our suppliers that want to settle in stable coins. So, as we dive further in, we realized that there's actually quite a quite a quite a numbers on that our supplier just really want to pay in stable coins, especially the ones in Latin Americas, Brazils, and then sanction countries that were incorporated in Hong Kong, Singapore, and then use stable coin to pay off the suppliers. I mean, obviously, earlier this year, you know, Trump has imposed more sanctions toward chips manufacturers where you cannot sell to Russia, you cannot sell to China, or numerous countries you can name it. So, I I think the activity we're seeing for stable coin right now, especially to Taiwan, I think 60% 70% of money are actually paid by sanction countries,

which is nothing wrong, you know, as an exporting nation like Taiwan, if you want to pay me a dollar, I will take the dollar. I give you the goods and services. So, So, since last year, we have partnered with a few foreign banks in Taiwan already. We're building an infrastructure for the banks for them to be able to receive and send stable coin on on behalf of the enterprises. So, right now we have a partner up also our investors Gigabyte, Winstons, and also Penatrons. All these known air suspension manufacturers are our clients investors. >> Let's dive more into the product. You and I were talking backstage, you are not in the flow of funds. You are building an operating system for financial institutions to be able to adopt stable coins. Tell us what that means, why it's important.

>> Well, we initially when we start Capital Layer, we want to gain to the B2B payments. I think that's where the juice it is. You know, you make bids on top of every transactions uh from A to B's. But again, Taiwan is a restricted currency nation. It's not that simple. >> What does that mean real quick? >> So, every com- every enterprises every company there's a capacity of receiving money from external uh countries. So, let's say you're you're you're trading at a billion dollars annually, the government will give you roughly about a couple million dollars extra of the trading trading that allows you to receive more good USDs on outside of Taiwan. So, like I said, Korea, Japan, all these APAC nations are restrict- restricted currency nations. It's not that simple that you want to pay like a billion

dollar USD from Brazil to Taiwan and then people will kind of accept it. So, like I said, the way we we look at stable coins are a lot different than a lot of people that which are attending to this conference. We we first we we wanted to the B2B payment. We got rejected by the banks. It's like, "What you are thinking what you're doing is completely illegal." And then we we quickly pivot to infrastructure operating systems where we actually enable banks to become exchange as in like Taiwan next year are going to pat- bypass all these virtual asset as where where all the banks can do what exchange does. Custodian, offer on ramps, a good exchanges. So, the way I look at Asia banks in the next 2-3 years is in terms of facing stable coins is that they're are going to be

overtaken all these regulated exchanges, especially the one the one in APAC APAC nations. And if that time comes, a lot of enterprises, if they want to if they were going to adopt stable coin, they will go to the banks instead of going for unregulated exchanges. >> Yeah. Talk to me about the role that stable coins has. I mean, obviously the US is one of the one of if not the biggest spender on the world of of AI infrastructure. Are stable coins needed for every single flow or is the financial infrastructure for very very tight and important quarters like US to Taiwan and back and forth? Is that already established, right? Can US companies trade with Taiwanese companies without the use of stable coins or is there a world in which stable coins dominate these types of international flows because they're, you know, at

cliche better, faster, cheaper. >> Yeah, so for the last three decades, Taiwan has been one of the largest OBU account holders for JP Morgan Morgan Stanley. Obviously due to decades of manufacturing goods and services for the last few uh you can name it. So, until recently, there has been an ongoing discussion for a lot of banks in Taiwan enterprises well. So, Taiwan is the sixth largest US debt holders and then we're the third largest trading partner to US. If genius at were going to get past, how how would that impact Taiwan as a nation as a country? So, as a as a country of 24 million population peoples on the continents, we started thinking how much B2B payments can be actually be paid with stable coins. And frankly speaking, for the last 6 months, my answer is no.

I don't think these suppliers will actually need stable coins to settle with cuz you have to we have to know all these manufacturers, they have credit lines. You know, what that means that you can pay within 30 days, 90 days, 180 days, or even 364 days. And then to be able to tell you guys, if you want to buy goods and services from TSMC, you have to pay two half years with three years ahead of time. >> Yeah. >> So, whether it's T+0, T+20, T+100 >> T+2 years >> 3 years >> [laughter] >> it doesn't really matter in a way that how these B2B payments will not affect the way we produce goods, manufacture goods.

>> Interesting. I think it's also interesting you mentioned that Taiwan is, you know, one of the top 10 holders of US debt. I think one of the reasons that Americans are really, really excited about stable coins is because you look at a company like Tether, and Tether is the 17th largest holder of US debt behind most US allies. And so, I think that, you know, to get Americans excited about this and being able to tout that not only are you, you know, doing trade with a country that holds a lot of US debt, but you're doing it with a mechanism that also is a primary contributor to holding US debt, I think is at least when I talk to people about this, something that gets them really, really excited. But to your point, it's not always needed, right? So, it seems like in really, really tight quarters

where there's a lot of financial infrastructure built out, the US, Taiwan being one of them, stablecoins aren't really needed. Where are stablecoins needed? You mentioned LatAm, you mentioned some places in Africa. Why are stablecoins needed for those routes? >> Well, you have inflationary nations. If your own current nation national currencies against USDs are going through high inflations, you're likely going to want to hold the USD stablecoin, right? But the cases where Taiwan as a nation, we we don't suffer inflations against USD. In fact, on the on average of last decades, we go from 0.3 to 0.8 inflations against USD.

Obviously, every inches of fluctuation of New Taiwan dollar against USD, you're literally looking at a billion-dollar losses from these manufacturers. >> Absolutely. >> So, as as obviously as a as a central banks in Taiwan, they're they want to tighten up the fluctuation and volatility between all these two nation currencies. But for the last three, four months, we are invested by all these areas of special companies. There's few reasons why they want to invest us. We want to explore the new forms of money movements. So, I can't say this that I think in the future of AI PC devices, 60-70% of the the AI devices will be manufactured in Taiwan. And every device requires compute inference, all these infrastructure payment tools.

If a Taiwanese company sells AI PC to Poland, to Ukraine, this is what some of Eastern Europe's. All these devices will require them to pay with computer, right? So, start And a lot of a lot of these and how enterprises start asking themself, okay, if this is USC stable coins we're going to get bypassed all these regulations, why can we leverage on top of it? Cuz for the last decade or two, a lot of these Chinese company they're paying roughly about 47% of the local RTP transaction through Europe, a lot Latin America's, where all these different nations. So, if this is something that we're actually in discussion right now. So, if you pay stable coin, you can you can get 2, 3% cheaper on your on your compute. It's possible, cuz essentially all these companies don't have they don't have

they don't have to suffer or pay the local RTP rails. So, I think this is one of the alternative all these Chinese company, especially AI device manufacturers, are looking into as more in the use cases. >> We hear a lot of talk in the intersection of stable coins and AI about tokenized compute, right? Or being bringing compute as a commodity on chain. What are your thoughts on that? >> Well, I think we're still early for that. Absolutely. Obviously to able to be able to have a tokenized a computer markets, you need to have infrastructure, right? So, there is still pretty fragmented in terms of data in terms of data centers right now.

We're a lack of electricity and then the clean waters to to be able to sustain all these hyperscaler neo cloud providers across the world. So, before that, I I really don't think how we're going to be able to do to make this a computer market tangible as a tradeable to all these tokenized assets on a on a blockchain levels. So, I think we're still very early for that. I Ever since I started working on these banks in Asia APAC nation, I've become overly conservative in the way in a good way that I know what is real, what's going to happen in the future. So, in terms of computer market, definitely somebody's going to wrap that, somebody's going to tokenize compute, and then somebody's going to trade with it. That just has always been the way how blockchain traders worked. So, if if that were happens, I'm looking

forward to the the day it comes. >> Yeah, man. I I think it's good for you to as someone who rests in the intersection of stable coins and AI because if tokenized compute is brought on chain, it means that the barriers between that tokenized compute and stable coins become far less than it does between fiat dollars and and standard computes. And if you own that intersection between, which you guys are building out the infrastructure for, you're in a much better position. I want to talk again a little bit more about the intersection between standard banks and stable coins. You went to these banks initially, they're like, "Don't build a B2B product. Don't build Don't do B2B payments." And so you pivoted to building out this orchestration layer, or sorry, the the operational layer. Why is that so hard? Why is that impossible for banks to do on their own? Why do

they lean on you to make that happen? >> Well, first, banks doesn't operate like exchanges. So, I mean, if obviously you guys know Fireblocks, BitGo, all these custodial providers. You can't just throw a custodian to a bank and expect them to operate like exchanges does, right? Well, obviously banks they they don't want order books. They don't want an auto trading engine that actually facilitate Bitcoin trading or on and off ramps. What they care I think what banks care is especially in the APAC region, Japan, Taiwan, that we have been contact with, is enterprises as a clients. So, they don't want they don't want to lose enterprises clients over over stable coins. So, I think for the next 2-3 years the adoption will come where a lot of these Asia APAC banks will have I would say force they're going to be matching toward adoption where are going

to enable stable coin custodians on and off ramps for these retail enterprises clients. And by that time comes, I believe all these stable coin use cases will come out cuz enterprises, especially the one in Asia, they're overly conservative in the way that they will not kick off innovation unless banks enabled it. So, if that day comes, I think we're going to see a lot of interesting cases, especially the compute market inverse models. Like I said, out of 10 data centers that is being built in US in for the next 2-3 years, six or five or six of them are built by Taiwanese operator, chips manufacturers, or equipment producers. So, if they were they were going to rent out to hyper scalers on all these neo car providers, there's some forms of money movement that they could facilitate leverage on top of

stable coins. >> Interesting. When you see stable coins being used in this context, is there a specific stable coin is there a specific chain that dominates? >> Not really, but as far as we're seeing TRCs, all these all these Ethereum chains are they have been always being used by a lot of retail and then and enterprises across Asia. Tron's obviously, you guys know, but I think enterprises they don't care which chain. So, if my my supplier want to pay million USDC or T to my bank accounts, I don't care. I just want to see USD next day.

>> And is that just because you're off-ramping it immediately and >> Yeah, banks would enable that. So, and then using our systems. So, I think interesting speaking, I think what stable coins could become in the next three to five years will become infrastructure layers. I don't think no company would name their company as a stable coin companies. >> Yeah. >> Cuz you're essentially just run run >> the willingness of these institutions to accept stable coins and to work with you is purely by demand. And they have people coming to them saying, I want to use stable coins to pay for this. And so, clearly there are people adopting stable coins on whatever chain it might be, whatever stable coin it might be. I and I'm curious to get your thoughts. I see a world in which someone like, you know, Nvidia or one of these large

providers, TSMC, whatever it might be, builds out maybe their own stable coin so that they can retain the economics around this. Or the institutions that are deeply involved in this so that they can retain the economics around this. And we see a few large organizations in the space playing around with this idea. Some of it is public information, others is is not. Do you see a world in which these companies really lean into stable coins beyond just, "Hey, I want to accept it and immediately off-ramp it." but, you know, using it as a treasury asset, maybe launching their own, seeing what they can do with yield or or things like that.

>> I I there has there has always been ongoing discussion with us and the banks, especially our client sides, that what enterprise in the future launch their own stable stable version of stable coins. You know, I look forward to that if that actually happens. You know, that actually means a major adoptions for stable coin in general. But, what I've seen right now, the way we look at stable coins has always limited to B2B payments, transfer good and services. But, frankly speaking, last last I think it's last month, one of the banks our clients asked us that I mean, invoice invoice financing has always been one of the biggest uh financial sectors in Taiwan.

>> Yeah. >> Obviously, you know, the exporting number if you export more goods and services, you probably have to borrow more money from the banks, right? So, previously, they always borrow USDs from JP Morgan Morgan Stanley in Taiwan. And then, they start asking us that, "Can you guys find out a rate for USDC and USDT?" >> To lend USDC and USDT? >> So, I think the source of USD has been predominantly by JP Morgan Morgan Stanley and others uh Wells Wells Fargo, all these company uh banks in Taiwan. And I was in shock that there's actually a bank asking us, "Can you guys consult with Tether and Circle?"

>> Interesting. >> Asking how much rate they're offering to get USD. And then, that blew my mind in a way that stable coin is a real as a payment methods people are actually considering. Instead of like going through all these uh corresponding banks where foreign banks that are issued based in Taiwan. >> That's really, really fascinating. And do you think it's the same people that want to pay with stable coins that want to receive uh credit in coins, or do you think that there's a world in which, you know, someone who pays in fiat still wants credit in stable? >> Great questions. So, if a bank in Taiwan borrows USD stable coins from one of the companies >> Right.

>> that's lower rate than Wells Fargo and JP Morgan, they're going to the moment they get USDT or C or any version of it, they'll offer them to USD and then lend the money out to the Taiwan AI supplier. >> Locally? Locally. Okay. >> So, I think this has been commonly used, right? A lot of banks in Taiwan they borrow USD, JPY, Japanese yen from all these Japanese banks that are based in Taiwan. Same thing goes to USD as well. They've >> traditionally had to borrow money from JP Morgan, Morgan Stanley, or Wells Fargo. Now they can actually borrow from issuer of stable coins that offers lower rates. So, imagine that can drastically improve by 5 to 10%. I mean, you're essentially looking at a $364 billion trading volume between Taiwan and Taiwan >> Taiwan and then US.

>> You say that number one more time? >> 374. So, I think I think by the end of this year we essentially on track to be 360 billion to 375 billion dollars. >> Wow. That's amazing. >> in US and Taiwan. So, imagine just that. The supply chain finance can drastically improve 5 to 10%. >> Absolutely. >> on the money productivities. So, I think the way you see usage of stable coins will apply differently for different nations. I think to to be able to fully apply to Taiwan, I think the use case would be very different than unlike to Latin Americas or Africa, all these different nations.

Maybe supply chain finance could be one of the angles where all these stable coin issuers come into Taiwan, they want to lend out as much USD as possible, and then get the yield out of this. So, that is one of the interesting cases that I've seen recently. >> Let's talk supply chain. You guys right now are focused at one spot in that supply chain. How does the buyer of chips or of an AI product get it to the company who manufactures it, right? There's other points in that supply chain that I think stable coins could be really beneficial, whether it's, you know, paying shippers, paying, you know, vendors, whatever it might be. How do you guys think about going and expanding throughout the AI supply chain?

>> So, our job is not to enable B2B payments. I mean, we're we're like I said, restricted currency nations. >> Yeah, yeah. >> So, every dollar that comes to Taiwan has to be monetized and due diligence through all these central bank in Taiwan. What What trying to do is creating use cases on top of stable coins where I mean, imagine out of a AI 10 AIPCs that are going to be shipped and sold in US or six or seven of them were are going to be manufactured in Taiwan. And then we have an all these AIPCs they're they're going to be a default stablecoin wallets enable you to buy inference, to consume computes. The way we look at money cycles for these AI infra payments instead of AI hedging payments are going to be revolutionary in a way that the day let's say for example a gigabyte receive uh it uses

$10 USDC, next day it shows up on the Taiwanese bank account. And then they could use that money, reinvest to their manufacturers or or supply chains and you can name it. Or produce or build more data centers essentially. >> Do you see the people who want to use stablecoins view USDC and USDT as a dollar or do they view it as just a mechanism to be able to, you know, send money overseas efficiently? Like I'm an American. When I think about USDT and USDC, I hear USD, right? I see that as a as a, you know, US currency or, you know, in this case US debt. But I think a lot of the world doesn't necessarily associate it with, "Hey, the US is involved in my transaction in some way,

shape or form." They just want the money to get there. How do you think these people view the stablecoin, USD or US US sorry, USDC or USDT in relation to the US? >> Well, first we're not anti-dollar nations. >> Yeah, absolutely. That's what I'm saying. Absolutely. >> So, we I mean, 95% of trading volumes happens on USD pairs. So, even between Japan and Taiwan or Korea and Taiwan, everything happens on USD USD as well actually. So, if genius app were we're going to get past anytime soon, I think it will force us all these nations to be able to adapt to stablecoins and asking themself, "What can I do with it?" So, again it is already pretty handy and easy to for us to wire money from Taiwan to you

US or US to Taiwan. But the question is, can we make it better? Can we make it more productive? >> And can you expand the geography? Like to your point, I think the US and Taiwan have some pretty good banking infrastructure already, right? They need to. >> Yeah, so I mean, again, like I said, Taiwan produce goods, manufacture goods to across the world. It's not only US. Out of 10 AIPCs in the future, six of them or seven of them will be produced, manufactured by Taiwanese companies. If they want to tackle the global audience in terms of payment methods, right next to credit card checkout, there's going to be stable coins.

>> Yes. >> So, the way I look at a stable coin would become a strong payment methods alongside where a lot of these enterprises will leverage so that they can pay lower fees compared to RTP rails from all these different nations. I mean, if there's a hundred million dollars trading volume or I mean, buying volumes, you're saving a couple percents. Essentially, you're adding a couple more million dollars to your balance sheet as a listed companies. >> A couple percent adds up when we're talking about, you know, 360 billion or whatever number you [laughter] gave me before. >> I think B2B sector for Taiwan and Taiwan and US are definitely not as strong as the two as other cases compared to Africa or Latin Americas, but the interesting use case is something that we're constantly exploring with the companies.

>> What do Taiwanese AI companies and Taiwanese financial institutions that deal with these AI companies, what do they get right about stable coins when you walk into a room with them? And what do they get wrong about stable coins when you walk into a room with them? >> Well, we we have pitched over 30 plus enterprises, 10 plus different banks. Banks are very open as in like, they know it's inevitable in a way that this is going to get get passed one way or the others. But enterprises are are overly conservative. You know, I I think the way we look at Asia, especially APAC enterprises, their CFO department, financial department, they are hired to be conservative.

>> Yes. >> There I don't think there's going to be a a day where all these CFOs be like, "Hey, let's use stable coins because it's legal right now." So, it it definitely take time to educate us and then really cultivate the notions of this new money movements for these enterprises, but I think what Capital Ear has done very well for last a few months for these air supply chain companies in Taiwan is that we're we're essentially educating them that the future of payments not only largely depending on credit card or these transaction portals. You guys can actually leverage stable coin, which is free.

>> Yeah. >> You don't have to settle with this Visa, MasterCard or these local RTP real. Even ACH in US charge quite a few quite a bit quite a few bips actually compared to a lot of enterprise overseas. So, I don't think our stable coins are going to here is is is going to overtake all these credit card or via transfers, but it will become one of the strong strongest methods for all these enterprises. >> I agree. I think a lot of the times when people talk about AI, they talk about, you know, jumping into a rapidly growing business and they view it as a as a bubble, but the way I see it is like if you ask yourself not what's going to change in 10 years and build for it, but what's not going to change in 10 years.

What's not going to change in 10 years is that AI will get better and that people will want that AI cheaper. >> Yeah. >> And I think that's exactly what you guys are building for. How can I use more AI and how can I get that computer get the infrastructure I need in the cheapest way possible? Is that fair? >> Yeah, well, if I mean, if you look at the exporting number between Taiwan and US are 200 over a billion dollars. If you can improve the money movement by just by a few percents, essentially you're looking at the largest chunk of savings or reinvesting opportunities for these enterprises. But again, I think we we come from Asia like Taiwan, where we're fully based in Taipei. It's we're more of exploring use cases rather than

rely on B2B payment sectors cuz uh every dollar like I said, every dollar that flows in Taiwan will be monetized by the Central Bank of Taiwan as well. So, hopefully we could give out more good newses. Yeah, I think by next year, I don't want to blush too much on this. I think you guys know Computex, the largest AI exposed in the entire planet. What happened next year in Taipei? >> Amazing. >> We are going to announce something extraordinary with stable coins. >> I love that. >> So, the way we look at payments going to change. The way we will use money is going to change as well. >> Listen, let's let's run this back next year and we'll we'll do the big announcement together. So, very very much appreciate you coming on. What do you want to leave people with here? What should they know about Capital Layer

that they don't already? >> Yeah. Well, we are on a track to work with quite a few data centers already. Our I mean going to be built by Tony's suppliers. And then once these neo class providers are enabling stable coins as a payment methods, we can reimplement implement it into AI device, which is our investors Gigabyte, Asus, Acer, all Panel Tron, all these AI device producers. There's going to be quite interesting collaboration cuz right now every device has a default wallets. >> Yeah. >> And then default wallet will have stable coin methods and the credit cards. Imagine how many people in Latin America or Africa start paying start consuming computes all these AI Tony's data centers using stable coins.

>> Yeah. >> So, I think that's going to be extraordinary and exciting to see. >> Amazing. Thank you so much for coming on. You and I have about three more hours of questions and answers that I want to throw at you, but we're out of time. Justin, thank you thank you so much for coming. I appreciate you answering my barrage of questions. And like I said, we're going to we're going to do this again in a year and and catch back up. >> I'll see you in Singapore. >> Awesome. Love it.