How Can Stablecoins Replace Traditional Banking

Transcript

Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization in the blockchain revolution. I'm Kria Ants and today I'm speaking with Zach Abrams who is the CEO of Bridge. >> Look, we love investing in uh new areas of the business and we described a few of them at crypto as a particular area uh of investment. We made a large acquisition in the stable coin space. When I looked at stable coins, it was very clear to me that they were an economically rational winner over time. Getting into the crypto space, the banks were like, uh, you know, if you're doing anything with stable coins, you're automatically in this risk bucket.

Whereas, if you're doing the same activity, but not with stable coins, you're in a different risk bucket. We're starting to make for the first time regulatory investments. The long-term success of the stable coin space is going to be downstream of regulatory changes. I'm Krika Ants and today I'm speaking with Zach Abrams who is the CEO of Bridge a Stripe acquired infrastructure platform um that lets companies issue move hold and spend stables of in various ways. We'll get into all of the weeds in just a bit. Before that, these are our sponsors this week.

>> This episode is brought to you by Nosis, building the open internet one block at a time. Nosis was founded in 2015 and it's grown from one of Ethereum's earliest projects into a powerful ecosystem for open userowned finance. Nosis is also the team behind products that had become core to my business and that of so many others like Safe and Cow Swap. At the center is Nosis Chain. It's a low fee layer 1 with zero downtime in seven years and secured by over 300,000 validators. It's the foundation for real world financial applications like Nosis Pay and circles. All this is governed by Nosis DAO, a communityrun organization where anyone with a GNO token can vote on updates, fund new projects, and even

run a validator from home. So, if you're building in web 3 or you're just curious about what financial freedom can look like, start exploring at Nosis.io. IO. >> Hi, Zach. It's good to have you here. >> It's great to be here. Thanks for having me. >> For listeners who don't know you yet, give us the cliffotes version of your background and how you ended up in payments and money. So, I founded Bridge with Shawn. Uh, and in maybe 2010 or so, Shawn and I founded another company that was a payments company. And we were trying to build a payment network by tying together university payment networks. And I don't know if this is a thing in in Germany, but in

the US, every school has their own payment network that's not like Visa, Mastercard, MX, Discover. It's like your campus dollar situation. Uh these payment networks facilitate billions and billions of dollars of payment volume. And we were trying to be like what Venmo is to your bank account but for these student payment networks and then in doing so bootstrap a new payment network by tying these together. Anyways, we tried to build that business for a while and uh we were woefully unsuccessful because it what turned out to be a university sales business that we were very illquipped to do successfully. We sold the company to Square and basically you know from that point in time I spent my entire career in fintech. It's like moving money, building money products

were always the most interesting to me. And you know, we saw from the very beginning what felt like really small changes in, you know, economic access, how big of an impact those could have like with Square Ener payments, enable millions and millions of businesses to, you know, uh or or individuals to start businesses and run them full-time when otherwise it would not have been possible. And so I stayed on that kick for, you know, a decade plus now. >> That's a long time. Um, payments kind of to someone who is not in payments, payments seems, and I hate to say this, seems somewhat trivial. No. So kind of you have a balance on on kind of one

account or it on uh uh one bank account of one wallet and kind of it it moves somewhere else. tell us about the misconceptions about how money actually moves versus how kind of the lay person thinks it moves. >> Yeah, I mean I would say the thing about payments that is so interesting to me is that you have so many areas where you can be creative and find new solutions. So, you know, you could build new products at the UI layer, you know, by basically just making it easier to see balances and and, you know, make a

transaction or what have you. It could be at like actual the money storage layer. It could be at like the regulatory layer, you know, and it can be and and it could keep going down. And like we've seen how like the best products are not just like innovations in terms of consumer behavior but are material changes in how uh material changes in in how you know in money capabilities that are facilitated by you know regulatory changes or you know enabling functionality that others didn't have. And and a very quick example of this that is like totally outside the crypto realm, but uh Cash App for instance. Cash App is a

peer-to-peer payment product in the in the US. Um it's been very very successful. Early Cash App enabled you to instantly send money to any bank account. This was like not possible in the US before Cash App built their product. And the way Cash App built their product was by taking advantage of a debit card refund. So everybody in the US had a debit card and you could refund money to a debit card which then immediately credited that balance back to your bank account. And the Cash App team figured out that you could use this debit card refund to enable what felt like an instant payment in the US. and, you know, finding these types of

opportunities and being able to figure out how to take all these like wildly complex puzzle pieces and rejigger them together is what intellectually makes payments very interesting. And I think like stable coins, you know, bring it back to our business is sort of an innovation at every layer, which is particularly fun to, you know, makes it particularly fun because it enables so many new uh types of payment experiences. >> So, so the cash app example um is very much a legacy rails example, right? I lived in the US for a number of years and it always struck me how backwards the financial infrastructure was

compared to Europe because kind of like we've had free instant transfers between bank accounts for a really long time. So why do you think kind of like there's this systemic difference in how powerful the underlying rails are? >> Well, yeah. Yeah, I mean this is so this is a this is a great um a great a great question. So uh in the US there are like you know a thousandx the number of banks than there are in in Europe. And so in the US we have this like dual banking structure where you can be a federal bank like JP Morgan or Wells Fargo or what have you. These are banks that operate across many different states or

you can be a state regulated bank uh like you know the North Carolina community bank for instance that would just serve folks in a specific town in North Carolina and this dual banking structure has m multiple different regulators and the net result is that it's a lot easier and permissive in the US to create banks that operate at different scales. The benefit of this is you have a very this like very diverse and you know very competitive banking ecosystem and it enables you know lots of uh neo banking and like a lot of fintech products to be created because you have so many different banks are trying to

find ways to compete with each other that some banks choose to support fintexs you know and they do that by enabling you know exposing their APIs and then a bunch of new fintech products get get created. Whereas in in Europe, there's fewer banks and those banks are much more heavily regulated. The flip side of that is that in the US, as a result, rolling out any changes to a payment rail necessitates the bottoms up adoption of that payment rail. Um because there is not one regulator that can say, "Hey everyone, you're now using this bit of functionality." And so you've seen this play out in the US where we have the automated clearing house that tried to roll out um RTP payments which have gotten some adoption

but not that much adoption and the Fed has tried to roll out you know Fed now which is getting some adoption but not universal adoption. Whereas in Europe they could just say everybody we're in SEPA and everyone's going to support SEPA instant and it and it and it happens. Um, so there are pros and cons to this and you know I think everybody around the world can can see the cons in the US where we have some of the most robust banking infrastructure in the world yet some of the worst payment you know and lowest performance payment rails of any you know major developed country.

>> You've kind of transitioned from uh the traditional payment rails to kind of the the new shiny stables rails. Um, was there a specific moment that kind of made you say, "I'm done with this. I'll see what else is out there." >> Uh, it wasn't it wasn't so much like I'm I'm done with this. More that with one one of the reasons that I really liked, you know, financial products. I'm curious, you know, what drew you to crypto products. But but for me, I've seen a bunch of different products be successful. the commonality across all of them, whether it was Square or Coinbase or, you know, Brex or what have you. All of these products were made

financial sense. Um, and so that by that I mean they enabled the payment or some type of functionality to happen faster or cheaper. Um, and they did it in a way that was much more durable. And so like Square, you could accept a card payment at a fraction of the cost and a fraction of the time invested versus getting a terminal before. Or Brex, if you were a startup, you could sign up and get a credit card with, you know, a fraction of the diligence required. You didn't have to pledge personal capital and you could do it same day, you know, and if you can find those opportunities, they're just like super obvious. And and the most clear example of this is Robin Hood. you know, Robin Hood, if you know, before you trade for $5 and now you can

trade for free. Of course, if you can build a sustainable business around free trades, it's going to win. And when I looked at stable coins, it was very clear to me that they were an economically rational winner over time. They enabled payments to happen faster or cheaper. And as a result, it was super clear to me as we started spending time in the space that at some over some arc of time, this was going to become a very very important payment rail. In some ways, it took longer than I thought and in some ways it took took less time than I thought, but uh but but that's really what drew me to the to the opportunity and to build in the space.

>> What year was this? So I was at Coinbase in 2018 when Coinbase was launching USDC with Circle and I was running Coinbase's consumer business at the time. So this is uh you know basically the consumer app that people sign up for and use to to trade and um there was a different group of folks who was launching USDC and we were tasked with figuring out how we would use it. And as we started spending time, you know, figuring out USDC, it was like our first idea was to make Coinbase into a global bank on top of USDC. So enable you to build financial products across borders that wasn't possible before. Our second idea was to facilitate crossber payments and

peer-to-peer payments through it because it enabled you to move value, you know, in a way that was much cheaper. Ultimately, it's taken, you know, I left Coinbase. It took Coinbase some time to build a bunch of those products, but that bug sort of stayed stayed with me. And then when we started bridge in 2022, it was shocking to me that more had not been done over the subsequent 8 years to enable that type of functionality. Stable coins had mostly been used for trading use cases. You know, DeFi and Bitcoin settlement and and so on and we wanted to make it possible for others to take advantage of that opportunity.

>> Were you worried about the regulatory implications of stables? because in 2022 the situation looked much different than it does today. >> There there's a bunch of ways in which I could I could take that take that question. I mean, I think there's um uh yes, I was I was I was worried to some extent, but at the time when I was trying to when when Sean and I were trying to start the company, it was, you know, the first order um you know, in Maslov's hierarchy of needs, you know, we were still at like shelter and water.

Uh and and that was like just finding one customer. And we always viewed it that like if we if we were worried about the regulatory implications then that meant that we had some business to defend against regulatory changes and that would be a champagne problem. And uh so so for the first bit we were we were really just like hyperfocused on shelter and water. Now that we have a business it's clear that stable coins are really starting to work. the, you know, we're starting to make for the first time regulatory investments that um, you know, in trying to work with regulators to help them understand our business and and the

opportunities that are available because it is really clear that the long-term success of the stable coin space is going to be downstream of regulatory changes. And this is like no different. I think all of us in the crypto space have like operated in a weird and temporary regulatory zone where most of us could ignore the regulatory requirements and it was much like the internet in like the mid90s. There's like this great book called Who Controls the Internet all about like the regulatory changes and regulatory thinking around the internet which like early internet everyone thought that local regulators didn't matter. You could sell goods anywhere. you could do what you wanted and so on and uh France and PayPal you know got into this whole

thing and that reshaped you know regulatory requirements around the internet and we're kind of in the precipice of our sort of France PayPal moment but in the stable coin and crypto space >> so um you recently um well recently a while back were acquired by Stripe you already alluded to it um walk us through how that happened and how much kind of regulatory thinking kind of came into that. >> I did not think that heading into I guess like those conversations were in 2024 started in 2024. Yeah. And so heading into 2024, even midway through

2024, I did not think our business was acquirable. um mo mostly because we were so optimistic about what was possible with stable coins and it was hard to envision there being an inquirer who was similarly optimistic um and had the scale to put behind that, you know, to to invest behind that optimism and had sort of the the risk tolerance to be pushing forward in this brand new space And you know it is like it's really it's really complicated like take an example of a business that is like you know

regulated in to do you know a specific type of banking activity or money transmission or what have you. And then getting into the crypto space, we just heard it over and over again from our customers of like our board doesn't know if we should be doing stuff in stable coins or, you know, our regulator doesn't understand stable coins, so like this is too risky. Or the banks were like, uh, you know, if you're doing anything with stable coins, you're automatically in this risk bucket. Whereas, if you're doing the same activity but not with stable coins, you're in a different risk bucket. There was no like first principles to it. it was just deemed to be in this in this risky in this risky category. And it became pretty clear though when I

started spending time with Patrick that um him and John and the rest of the and the rest of the Stripe team were incredibly optimistic about what was possible with Stable Coins, you know, just as much and maybe even in some cases more so than than I was. And um as we spent more time together, it was clear that we could do a lot more together than Bridge could do on its own. And and now I think we're seeing a lot of that play out where our stable coin issuance business for instance is growing at a faster rate and is um you know much more compelling together with

Stripe than it would be than it would be separate as an independent independent entity. And so I think their optimism, you know, combined with our like shared belief in how far we could go together is sort of what made it happen. But I did I certainly thought the risk and regulatory stuff was going to be a problem. I I actually had one of our investors as part of the process call Patrick and I was like, "Do everything you can to convince Patrick not to do the deal as part of as part of the process." And so he called Patrick and put in like a really hard anti-ell around like you know are you willing to take the risk and make the investments and so on to

push forward in this space even if some things might be competitive with products you're building internally and so on and then afterwards he called me and he was like no he's all in which was great. Yeah, that's uh uh yeah, some some some some people just have uh um a lot of founders kind of have um really unshakable belief in things kind of like they've once convinced themselves of. So I think kind of yeah 100% I I I hear you. >> I I totally I I agree. I'm guessing you see this with your business, but like now I feel like there's a bit of a cheat code that like if you are a founder of a business that has like worked, you kind of see how important growth curves are,

you know, like cohort curves or growth curves or, you know, what have you in a business. And like, you know, you can apply the same thing to industries as a whole. And it's like once you see it, it's hard to be it's hard for it to be unseen. and you know things that are like really starting to compound. It takes some like you know herculean force to prevent and stop compounding once it starts going. Uh and I think that they could apply that to the stable coin space and you could see it starting to compound or you could apply that to our customers and like the cohorts of bridge which are starting to compound now as I see it. you can like apply it to a bunch of different a bunch of different

industries but these like you know starting these increasing growth curves where there is like clear opportunity to continue to compounding it's like pretty easy now to gain conviction regardless of how crazy the idea seems >> yeah I I think coming from a payments background and knowing how um worthy of disruption many of the base technologies are something so simple and clean. Uh a blockchain tech is also compelling in its own right. So um >> 100 100%. I mean is that what is that what attracted you to the space?

>> Um no I was on a very early wave. I came for the cryptography uh and uh I I stayed for the permissionless innovation and uh the agency uh that kind of uh it can confer on people. So but I I do actually appre appreciate um the uh uh the operational efficiency gains that you can get as well. >> Totally. So does that mean that like did you come in was like Bitcoin the thing that brought you in or was it >> so kind of when I came in Bitcoin was the only thing that was uh that was around so yeah >> cool um let's talk about the things that you actually offer um so kind of so far

there's been kind of a lot of kind of like meta questions um but you have a platform that offers services to businesses and they they kind of they come in a number or flavors. Can you walk us through them? >> Yeah, we we have five sort of core businesses, but but at the or business product business lines, but at the end of the day, you know, we're totally focused on serving developers. So a team comes to us and they have a vision to build a fintech for their local country or to facilitate payouts or you know a government entity might come come to us because it wants to disperse aid. But

you know these these applications whatever they are come to us and they have an idea around how they want to use stable coins to facilitate some aspect of their of their business. And then we provide APIs that enable them to to take advantage of this tokenized money layer and to build products that reach more people or serve folks in new countries or you know facilitate payouts into geographies that were cost prohibitive or inaccessible before or uh whatever the whatever the need might be. Um and and the the manifestation of that are these five products. The first are our orchestration APIs. That's the first

product we built and that is basically send one type of dollar in and spit another type of dollar out. So, US dollars in, you know, USDT out, USDT in, you know, USDC out, um, and so on. And it can take any way, shape or form. So, like the US government might use these APIs to send US dollars in. We convert them into stable coins and send hundreds of thousands of uh, stable coin payments out to end end recipients. The second APIs are are stable coin issuance API. So you can hit an API and you can create your own stable coin. So someone could send in USDC and you could settle it as your own stable coin. And you would do that so that you can access the economics underlying the stable coin.

You basically get, you know, 4% interest on the on the balances. So it it unlocks new economics for you. And it helps you control your dollar so you can make sure it's on the right blockchains. There's no burn fees. you know, it is a it is a money platform that you now control. The third APIs are our FX products. So, you can send in dollars and spit out Mexican pesos or Brazilian rays or a bunch of other currencies, euros, GBP and so on. Then we issue cards uh on top of that and then we also offer wallets and essentially all of these products have come together through various needs of customers to build you know whatever

stable coin products they need. >> How bespoke is it? So kind of do you just provide the APIs or do you also do consulting for say you an aid agency comes to you and asks for often they don't have the most hackforward um kind of people inhouse right so is it kind of like a dual nature job where you kind of also consult with them or is it just these are our APIs kind of you you do you >> yeah I mean I think that it is at the beginning it was like entirely consulting like entirely consulting. That was partially because like our APIs never quite offered what anyone wanted because like the V1 maybe met like 50%

of the needs of every customer who who came in. But but also because we're kind of creating a new category and so this like whole segment space didn't really exist when we started the company. There really weren't companies that were building like, you know, core financial services with stable coins. It like the market was more or less non-existent. And as we've created our APIs, the market has come around and matured through a lot of the use cases that have been built on us and some others. And uh and and and so the the early result is that we're sort of constantly on the frontier of the market. And I feel like being on the frontier of the market is,

you know, you have to have to play more of a consulting role. Like you see this now with the AI companies. You know, they're doing a lot of forward deployed engineers to help businesses adopt AI because it's not clear how it's going. There isn't really a playbook quite yet. And so I would say there's some areas of our business where we're on the frontier still. Like stable coin issuance is very much on the frontier. teams are still figuring out how to issue a stable coin and how to grow a stable coin, what it takes for a stable coin to be successful. Whereas other products like our stable coin orchestration business, there's now like many years of data points on like what is working and what is not working. And if you want to

replicate a use case that we've seen before, like you want to build a stablecoin neo bank, like that is super plug-andplay. like you could come to our API, spin up accounts, serve millions of consumers and do it extremely quickly. >> Super interesting. Um to to me out of kind of out of this bunch, the intellectually most interesting use case is the the stable coin issuance just because kind of it goes to the heart of what money is, right? Um, so maybe give us some examples of entities that issue their stable coins through you and um kind of uh what what kind of usage they see what they use it for um how much

adoption they have. >> Yeah. So um well first I'll take a step back like why why does stable coin issuance need to exist uh in in our view you know today the market is a is a duopoly more or less it's USDC and USDT both of which have been um amazing at building these markets and building really strong products that have like millions of users and a ton of adoption. However, neither of those have a business model or or really an interest that is aligned with enabling stable coins to be a core payment rail. For instance, in order to convert USDT into dollars, Tether charges you 10 basis

points. Um, that makes Tether an economically unviable uh payment rail. It is like literally would cost you many hundreds or thousands or tens of thousands of dollars more to move money and settle it into a bank via USDT versus using US dollars. Uh and the same thing is true of of USDC. Both of these businesses are AUM oriented. They keep the yield and so it um it it it limits how big this space can be. And we really think there needs to be, you know, a neutral platform that is optimized for, you know, payments use cases that distributes the economics back to the developers so that they can

build whatever products they want. They can enable better financial services for their consumers and make sure that there aren't these burn fees or other other costs that inhibit payments adoption. And I think like the duopoly will remain really big and meaningful. And I think there will be this like whole world of other applications that are built around it that ultimately over time will be much much bigger than those two. >> Issuing your own stable coin, it was quite the rage for a while. Um and it seems even as someone who who really has distrib distribution such as um MetaMask, as soon as incentives go away, um kind of the outstanding stables drops

precipitously, right? The geopoly you talked about kind of the way that I see it as divvied up the world. So USDC is the US and USDT is every everywhere else. um uh and kind of they they are dominant in their own sphere and somehow it balances. Um what do you think has hindered other USD stables from surging? >> Yeah. I mean so I will answer this question via via an analogy which is sort of the way I think about I think about the the one of the ways in which I think about the market. There is a history of products that were meaningful network effects products that had huge

adoption and remained monopolies or duopolies for periods of time only to lose over the longer arc of time to more open ecosystems. And one such example are airline booking systems. totally sort of niche analogy, but early on with computers, the first booking systems that were created, uh, first sort of like online booking systems were really the airlines. They airlines put all their inventory into a database and then booking agents could buy computers that were hardwired into those databases that could look up those flights and you created a two-sided

network where the travel agents on one side facilitated a ton of consumer demand and then whichever which called a GDS system whichever GDS system had the most inventory was the most attractive to the booking agents which then garnered the most demand which then attracted more flights into the booking system and so on. Anyways, American Airlines created the first GDS system called Apollo, gained huge adoption, was a huge driver of their business because they basically put their thumb on the scale. So if you search for a flight, American was the first flight every time. Uh then then United Airlines built another GDS system called Apollo that Apollo gained a ton of adoption on all

the routes where American was not successful because there was no airline that was everywhere. So United was in the coast and in Chicago and so on and so it gained adoption there and for about 15 to 20 years they just completely controlled the GDS markets. A bunch of other people tried to compete. Eastern Airlines tried to compete and and a few of these other Continental tried to compete, but ultimately they they built failed systems because they just tried to compete head-on and they didn't have the network and so on. And over time, there was just no adoption.

It was too hard to break into the network effects of United and so on. Uh, however, the European Airlines came around and the European Airlines realized they were never going to use an American or United system. That's just like completely against that. You know what I mean? They'd be seeding their entire business to these American uh networks. So, the the the European networks built their own collective uh GDS system called Amodus. And when it launched, they immediately won Europe obviously. And now today, Amadius is the biggest GDS system completely supplanting United and Apollo. And then

when the internet came around, a fourth one came around, which was Worldsp, which served the Expedias and so on, which is now also bigger than Apollo and Saver. And this all happened over a 40-year period. And so anyways, my as I tie this back to the stable coin space today, a lot of the stable coins are launching and just trying to do exactly what you know, it's like Eastern Airlines trying to create the exact replica of Apollo, but doing it with no network effects and 5 years too late. Um, and so if a stable coin tries to do that, it's unlikely to be successful.

And what I think we're going to see and what we are helping to enable is a bunch of stable coins to compete in orthogonal dimensions which we think are completely wide open spaces. You know, the equivalent of Europe right now and these stable coins are all going to start small and these networks that we're building are going to start small. But if you have a 10-year arc of time or a 20-year arc of time, the opportunity that we are chasing is so much bigger than the opportunity, you know, that that USDC and USDT are going after.

They're going after just DeFi, you know, they're going after just AUM. They're not sharing any yield. They have burn fees. Those markets are much more limited than the global market for money movement. And so that's the market today that's small that we hope to win and scale over the next over the next 10 years. Um, doesn't answer your question directly, but like this is the arc of time and I don't think anybody's going to come around and win tomorrow. Like I don't think USDC or these network effects things take time but we're operating on a very meaningful timeline and we think like this is an enormous you know multi-deade sort of platform shift in how money

moves and I think we're investing behind the opportunity that we think is going to be bigger over a much longer period of time. tell me um about these orthogonal dimensions kind of like this Europe of a stable coin. So kind of what are what are the dimensions along which kind of you have to differ in order to kind of potentially become meaningfully uh successful. >> Yeah. Like a a great example is banks. So uh today it doesn't make any sense for a bank to use USDC or USDT. If you think that stable coins are going to be core financial infrastructure, they have to be used by banks in some capacity.

That's just the way money moves and settles globally. But a bank is not going to use the existing stable coins because if you're using someone else's stable coin, they're getting all the yield. The deposits are held somewhere else on someone else's balance sheet. Uh and again, there are burn fees. So it so it costs more money than than using US dollars. Like think of a card network settling huge volumes of transactions via USDC. You know, right now it would cost you more money to settle money settle via USDC than it does to settle on US dollars. Um, so these types of opportunities are completely green field because the existing stable coins don't have the underlying structures or

economics that support winning in these spaces. They're being used in those spaces because everybody wants to do a science experiment to like figure out what could be possible. But actually scaling adoption necessitates having the econ under underlying economics that align with that use case and align with that entity. You know, a bank needs the deposits to be held at their bank. A bank needs to be capturing the the treasury yield to the, you know, to the extent that's where the funds are invested and a bank sure as heck needs to ensure that, you know, they're not going to be paying a burn fee when stable coins are converted in and out. I think you kind of you implicitly already answered this, but in crypto we kind of

we have this this duality of world views where kind of half of the people kind of believe that crypto will replace banks and the other half kind of believes that crypto will quietly sit underneath uh them. So I I I take it you fall into um the latter camp. I I I I fall into the into the latter camp, but but I mean I think that even I think it's sort of both. Um in the sense that like ultimately if you look at the crypto ecosystem uh and the stable coin ecosystem, the the foundation the base layer of the stable coin ecosystem are banks because every stable coin is backed by um you know every dollarbased stable coin is

backed by dollars and treasuries. um and it could be euros and euro treasuries or whatever but but those assets are held you know at a bank and so whether even if you're die for instance D is predominantly backed by USDC and USDC is predominantly backed by dollars and treasuries uh so if you tie a lot of these stable coins back to the base layer it is it it is a bank somewhere holding the funds um the question is Will consumers ever engage with that bank the way consumers engage with the bank today? Today consumers engage at that at that bank level, you know, to

open a bank account and so on. And in the future, it's very possible that that all of these this crypto ecosystem is built on top of these core banks that are holding the treasuries and so on. But a lot of the customer engagement happens through a wallet. Um, and so you're predominantly engaging with the stable coin. you're issuing a card through your wallet and so on through your um through your wallet instead of through a traditional bank or a neo bank or or whatever else and I think that's totally possible and that's what I mean by both is that like banks will continue to be important at the base layer and I do think more and more consumers are going to be moving to engaging directly with wallets and in the and beyond just

like the adoption of bridge and the folks who are building on top bridge. Um, what you can see and what we can see as like a great proxy for this is just adoption of cryptobacked cards is like a great example of this shift. You know, why would consumers want cryptoback cards? It's because they're using a wallet as a primary spending spending account in and in effect replacing a bank. And so whether you're using like a Ledger wallet or whether you're using like a Phantom wallet or whether you're using Nosis or whatever else you um if you're if you're doing that it's like your wallet is effectively becoming a

bank replacement. >> True. um in that world where um these kind of tens of thousands of potentially tens of thousands of banks kind of issue their own dollar stable coins, how much um will that still matter? So kind of kind of the one of the hallmarks of the dollar is that there's one dollar, right? kind of like there's kind of and it's it's they're funible and kind of like you you know what you have um depending on kind of like who these things are issued by obviously how much they should be valued at could be very

different right so kind of you have say you have um uh you have a Silicon Valley bank dollar kind of all of a sudden kind of like it may only be worth.7 cents or something and if you kind If you look at um the clearing technology that kind of we have today um I see why kind of why kind of this pluralistic ecosystem could could emerge. On the other hand, I I think I could also make the case that um with prices readily available for everything, you don't actually need a fungeible money token anymore. you you

you could just pay in fractions of factionalized um S&P 500 or kind of whatever stock you you may have. So kind of like this this kind of uni universal layer that money is used to supply us with kind of like in as how much is it really still necessary while technology advances the way that it does today. I I think it's a great question and I think it is going to be an amazing experiment over the next 10 years as you know you have all these different assets that are tokenized and someone their primary you know you could

have let's like take a card for instance let's just assume that a card remains the permanent form factor for the next 10 years big assumption but you know you have a you have a card and then backing that card, you could choose as a consumer to back that card with dollars or euros or Bitcoin or gold or tokenized, you know, S&P, you know, token tokenized stocks or whatever else you deem to be the store of value that is interesting for you as a consumer. And it's the first time where that's like really possible. Uh I don't know what consumers are going to are going to choose. To date, it has been hard to get largecale adoption for people to use a

investment asset as a spending asset. I would say, you know, you see that with relatively low adoption of like Bitcoin for payments because most people believe the value of Bitcoin is going to keep going keep going up. Uh and and the same thing with gold bucks, you know, they believe the value of gold is going to keep going to keep going up. However, if you see uh if all of a sudden government spending goes, you know, let's say like American, you know, dollars become much less trustworthy, I could easily envision a scenario where someone would rather sit on top of tokenized gold or Bitcoin to spend than US dollars. Uh and it and it's and it's going to become, you know, 10 years ago that was

impossible, like literally impossible. And now it's um it's totally easy. Yeah, that kind of naturally segus into the non US dollar stable coin kind of domain, right? If you look at the volume of stables in web 3, um 99% are US dollar denominated. Um this is this is a temporary phase. Um do do you think Yeah, >> for sure it's temporary. Yeah. Yeah, for sure. It is like we see it across our business. There is immense demand for other tokenized uh dollar formats.

>> So tokenized Colombian pesos and Mexican pesos and Brazilian rays and GBP and euros. There is just immense demand, but uh the issuers don't really exist. So, uh, we're just in the super early innings and, you know, it's like I don't know like, uh, I I like to read a lot of like business history books, you know, and like you it it's in in the business history books, they're like, you know, like the GDS example, they're like telling the history of these GDS systems over the course of like 30 pages, but it's 40 years of history. So like you know you like fly through 40 years and

it feels like it's this like wildly intense thing and then you try to zoom out and you're like holy crap that actually it there was like 5 years where there were no competitors at all and then I think about like what people would write about this moment in time and right now it feels like there's no other stable coins that exist. Uh, and I feel like when they write the book of this period of time, you know, it's going to take like 3 or 4 years, but like, you know, the there's going to be like one page between there only being USDC and USDT and then there being like, you know, a thousand different different dollar formatted stable coins. Uh, and we're just like right on the precipice of it. You see like we see a bunch of

companies starting in Africa and Asia and Latam and Europe starting to build stable coins and then we need to have the minting and burning infrastructure that enables very quick redemptions and conversions so that we could operationally use these stable coins. And then when that happens, we need to build the liquidity between these different stable coins so that we can do all of our FX and so on at like really high velocity with really solid depth. And I think all of that will come, but it will take time.

>> How much do you think that company issued stables will be a thing? So, kind of if I think kind of like say um I imagine I'm the CEO of Amazon or Walmart or something kind of I would um be absolutely giddy about the prospect of issuing Amazon dollars that kind of my customers could hold because it's an easy way of kind of um financing the business. you can give your you can give kind of um say 5% discount if you if you spend Amazon dollars at Amazon um and kind of h how do do you think we'll see this and if so when >> I mean I I think that all things that

are economically rational will be tried and and then it's just a matter of whether consumers will will want them uh and and so you know it's not that different from Amazon gift cards and so is this like a better replacement to Amazon gift cards? Yeah, probably. Uh and and so as a result, will it exist? Yeah, probably. And like is it economically rational for Amazon to try it? Absolutely. And so they over time they pro they you know it's just a matter of like when uh just over the arc of time people try and do things that are in their you know economic in their economic interests. Uh I I do think there's a question of like how this will work for consumers and like what will

the adoption be and so on. But I think gift cards have the the best are the best analog. And um I like for Amazon for instance, if you issue a stable coin and you can put it directly in consumer consumer wallets, you bypass an immense amount of costs that exist in the gift card market. You know, you're not you're no longer traversing on Visa Mastercard rails. So, you know, all those fees and the bank fees and, you know, prepaid car fees, all of those go out the window. You no longer are dealing with, you know, the distributors who are sitting between you and consumers, you know, putting these on racks and stores and, you know, so on and so forth. So, there's a there's a huge amount of

savings to be had there. >> Yeah. Um, this kind of naturally begs the question, what about custody? So, kind of you also offer wallets as a service. Is this um this is also for your uh your customers customers, right? So kind of why um where do where do you kind of see the trade-off between um kind of safe custody and and convenience here? What what kind of what's the spectrum uh we we you expect to see in uh in on consumer's phones?

Yeah, I mean we just think wallets are, you know, if if if the future is going to be is going to if stable coins are going to be like an enormous part of the financial future, then wallets will obviously be incredibly important infrastructure because all of these stable coins will have to traverse through wallets. And this is sort of why you know we we acquired Stripe acquired Privy um and why sort of what that team has done is so strategically important for our business and I just think for like developers who are who are building products generally um we have have taken the view that we want to support wallet infrastructure in whatever format makes

the most sense for the developer. So if they want custodial wallets we will provide that and then privy is the primary product through which we provide non-custodial wallets and to date we have seen that um a lot of companies are just you know more comfortable with custodial solutions given the way some of their architecture works today. And one of my one of my like personal frustrations coming from the traditional financial world is is um especially when we work with some of these companies who want to adopt uh stable coins, you know, are are you familiar with FBO bank accounts?

>> No. Maybe. No. Okay. So, basically every financial product because it's so costly to move fiat. Every financial product that's built today is an FBO account which means that it's one account with a giant pool of money in it and then there is a company that independently maintains a ledger. So like you know if you have your Revolute bank account or you have your cash bank account or you have your Chime bank account or whatever generally all your money is in one more or less one giant account and then there's just a ledger of like you know you know $2 of this balance goes to Zach and you know so on. Obviously in crypto that's like totally unnecessary because it's trivially easy to spin up wallets

and the blockchain is like really good at ledgering like extremely good at ledgering. It is like what a blockchain is is built to do. So so there should never be a need for FBO bank accounts ever again. However, every single fintech that was created 5 years ago or 10 years ago, all of their business is built on the assumption that there is an FBO account. So, one of like my big frustrations coming back to wallet is like all as a result a lot of these companies need to stand up a custodial wallet that stores all the stable coins in one wallet and then they ledger it independently which is like wildly inefficient because you just don't like

like what what are we doing here? Um but because of where we are in the adoption cycle, we're kind of this is how companies currently must adopt and and obviously the folks who are coming around and building neo bank like a stable coinbased neo bank from the ground up would never do that. They're spinning up a bunch of custodial or non-p predominantly non-custodial wallets. Everybody has their own wallet. They're letting the blockchain do the work and then they have a team that's like 1/100th the size to maintain a similar type of infrastructure.

>> Yeah, it's it's wild how inefficient legacy tech often is. Not just because anyone build it deliberately shoddily just because kind of it it's layer on layer on layer on layer. Um so >> yeah and and it's just at its core it it's just makes you know fiat makes this fundamental assumption that moving money is expensive >> and the net result of that is all of this stuff built around the fiat system to enable it to feel like money is moving but money never actually moves and stable coins and crypto enable money to move you know at more or less no cost

depending on the blockchain you're using. But you know, if you're if you're using a lowcost blockchain, it moves more or less at no cost. And so then when the movement of money is phenomenally cheap, a whole bunch of new stuff is possible. >> Yeah. What what do you see as the biggest risk to the stable coin ecosystem right now? >> Uh I I would say there are three. So the first is that we only end up with USDC and USDT. I think this is like a huge a huge risk to the to the ecosystem that we are building. And I think that if we

only end up with those two, stable coins will be much bigger than they are today and those businesses will obviously be wildly successful. But none of the economics will go back to consumers because they're going to be a duopoly. And why would they do that? these payments use cases are not going to be economically viable because they don't want high velocity of money, they want static aum. Uh, and so stable coins will only realize 1 1,000th of their opportunity. And it's really, you know, as much as it makes economic sense for there to be a third or a fourth or a fifth or a sixth or what have you, uh, it's not, you can't take it for granted like it doesn't. Somebody has to build it. the future has to be created by someone and and we're certainly trying.

The second major risk is regulatory. Like we're we're all downstream of regulatory requirements and to believe otherwise would be crazy. And um you know we have seen what European regulation has done to slow the growth of European stable coin market and it's been really hard to get that market catalyzed in any meaningful way. And you know the US is being litigated and relitigated. We saw Genius and then we have market structure and the community banks are fighting and the big banks are fighting and everyone's saying that stable coins are going to destroy you know you know going to going to take away all local businesses because

community banks are going to go away. There's going to be no lending and you know so on. So um it's like a whole you know thing that's going on right now. The third major risk is uh DPEG is you know one of these one of these two or or if there's a third one that gets really big or something but you know the we're still at this very fragile point in the market where the trajectory can be materially shifted by some major erosion in um in trust. And so I think those are those are probably like the big risks right now. Are there any that you think of that that I missed?

>> Over reliance on the US dollar. Um, yeah. >> So, I mean kind of like if if you look at >> the the global geopolitical situation, it seems unwise to kind of have 99% of the stables market denominated in US dollars. I totally I totally agree and we are like we want we just want like as many folks in as many countries to be building as many stable coins as they possibly can and as quickly as possible >> quicker than USD1. Um, so, um, um, I mean, Bridge is not a very old

company. Um, so you might not have a lot of regrets, but kind of like if you were to kind of start over again today, anything you would do differently? I would say a lot of our regrets stem from a similar behavior which is that it was it was so hard to start our company and and like I think that I I don't know how folks listening this might think of our company or what have you but like you know there was like a whole year where we did nothing but fail like you know and and everybody and at the same time the entire crypto market was just a complete wasteland. I mean, this was

Terra Luna happened and then FTX happened and then SVB happened and USDC DPEG and it was like people were like, "What are you even doing wasting your life building literally nobody is going to going to use this?" And so we were kind of like children of the depression where like our our like cultural norms as a company were shaped by scarcity and we were constantly fearful that like the market was going to go away. And that resulted in us constantly being behind customer demand. Uh and when the business really started working and so

we found ourselves like scrambling from like issue to issue to issue. And it was like so interesting for us cuz like we looked at the business and we were always like this could all fall apart tomorrow. And our investors looked to the business and they were like, "What are you guys talking about? Your business is going so well. This is like one of the best companies that we've seen in a long time." And we could never get it through our head. Which which enabled us, which which forced us to like underhire, you know, and we really, you know, redline the team. It it caused us to invest, you know, behind a bunch of a bunch of demand. It caused like me mentally be to be you know never sort of quite realizing where bridge was in its

sort of like arc of um uh it's sort of like journey and building a company that's probably like not one thing but a theme of things that consistently plagued us over the last couple years. I let it stand although kind of like it it uh it veers into humble brag territory. But uh sack um where where can people follow your work um and learn more about what you and Bridge are building?

>> Uh visit us at bridge.xyz. If you're interested in using the product, you can sign up there and then you can follow me on Twitter. I'm just ZC Abrams. Uh, and then Bridg's handle is stable, so follow us. >> Fantastic. Thank you so much for for coming on. >> Yeah, thank you for having me. This is very fun.