How Crypto Solves the Global Money Problem | Paul Bances, Paypal

Transcript

I think that there's going to be always a portion of the population that's going to want to use tether uh for a variety of different reasons and and great they should have that option and usdc you know big fans of those guys I know a lot of them over there and I think what they do is is fantastic and there'll be use cases for them no one is situated like we are and what we're trying to do here which is really laser focused on on the payment side when you start off from a base of 400 million users around the world and tens of millions of merchants and two and a half Decades of knowledge and um you know and sort of a regulatory structure in place I think that's just going to lift sort of the stable coin Market hey everyone we all know

blockchain is changing the world but who's actually driving it I'm excited to invite you to the sixth edition of Meridian a web 3 conference hosted by the Stellar development foundation in London from October 15th through 17th get early bird tickets at meridian. stellar.org with code blockworks pod special thanks to Stellar for sponsoring us now let's get into today's episode hey every on the polygon Community grants program was launched with 1 billion tokens All For polygon Builders really excited to share that on today's episode of Empire season 1 of the polygon Community grants program is now live it features 35 million in madic to

support the next generation of polygon projects join the aggregated future today by applying at polygon.net ing Empire all right everyone got a fun podcast today with Paul bis VP of market and business development of PayPal crypto uh my goal for this is to talk about how how money moves around the world and how stable coins enter the chat basically so Paul welcome to the show thank you very much uh as I mentioned to you earlier it's actually my my first podcast so I'm pretty uh pretty excited about this thank you I know excited man the untold story of Paul bis what is g to come out um great man well actually I I to to

start this conversation off I I actually don't want to talk about crypto I want to talk about just how money moves around the world um you have this background that uh kind of positions you to talk about this conversation without just money movement uh you were from my understanding leading like money grams us plus Canada plus ladam plus Caribbean markets which is you know the whole like Western Hemisphere I feel like uh and now you're running like a lot of the global market stuff for PayPal crypto so maybe just start with the non- crypto like how can you tell us how money moves around the system today yeah so um just by way of background like I I started my career off as an attorney uh so I was representing uh here in Miami Florida so a lot of international banking uh

clients and uh started really focusing on payments and and banking from sort of the legal perspective but then that's when I got interested a little bit more in sort of the operational side and trying to understand exactly that how how money moves and I think the biggest uh misconception is and when people start talking about I know we're going to lead into stable coins and crypto the biggest misconception is well why do you need all of that if you have all these ways to move money like instantly and and the first thing I tell people is money doesn't move instantly right you have to separate sort of the uh the user experience of what you're seeing with the actual settlement of the money behind the scenes right so if you take a traditional even when you use a PayPal remmo or cash app or whatever you're

using in terms of wallet and you're sending money you know those become sort of Ledger entries uh but nothing has actually settled right so let's look at a typical remittance product where an individual in the US is maybe sending money back home to their parent in in Mexico um you know I walk into a money remitter I provide the information for my mother uh this is the amount I want to send her information and I process that transaction and then that money transfer company will process that and my mother can walk into an agent uh 10 15 20 minutes later in Mexico and pick up uh the money in local currency so that's fantastic most people think oh it's great money has moved and you sent it from the US and it received in Mexico

nothing has actually happened right all it is is a bunch of Ledger entries on the companies and all the settlement of the move of the money still has to to happen so in that case now there's a settlement between that us entity and that foreign entity that's paying out there could be a various uh a variety of different banks involved in corresponded banking um and then there's settlement times Etc and all of that then has a cost right because then we have to use the bank to with the agent that is paying out there's FX components then there's sort of cash management considerations um and people don't realize that right that on the back end the settlement of all of this money through these traditional rails takes time um and we've all exper and that's with these sort of products that do allow you to do things sort of

instantly or within a couple of minutes when you look at more traditional ways of sending for example a wire transfer again it's an instruction that I am sending to my bank they need to S an instruction and then there's a settlement of funds and there's a clear of all of that and all of these take days um and the issue with that is is that all that money then um is being locked up during that time right and as a result of that it costs folks because they can't have access to the money and then there's a series of of cost in just processing that the beauty of what stable coins bring and and sort of what we were thinking about doing here and why we've built this out is that as you reduce some of those intermediaries and it's not just Ledger entries of a

booking entry it's the actual asset that starts to transfer and you have control of that asset that reduces this down from days to a matter of of of minutes right when you look at the technology you use now whether it's ACH whether it's Swift um you know anything it's it's still a matter of the the settlement time takes a much greater time because it's the difference between an acknowledgement or Ledger entry of the value versus the actual movement of the asset and for the first time it's the asset itself that can move uh so I can have a finality of payment with you much quicker right so that concept is what got me interested in sort of um dealing with this because when I was at money gram for example um and by the way that's where I transitioned from being an attorney to running sort of a panal I

was very fortunate there uh so I got to run all of the Americas for a period of time one of the most complicated things that we had was the settlement aspect of this again we're moving money around people are making payments but then part of our job was to settle with all of these agents around the world using traditional rails and there you're sort of um you've become victim to some of the policies and procedures of some of these financial institutions there was this whole concept of drisking where a lot of banks were getting out of the money service business meaning that they weren't going to provide h a bank account for a local money service business and all of a sudden it's like okay I don't I don't have a way to pay this agent and the agent that's collecting money on my behalf that I'm

paying out to people somewhere else in the world I have no way of collecting that money and it was those challenges really that uh you know sort of opened up this concept of how can the actual asset much quicker and that's where led me down obviously the path of of crypto and then you know stable coins themselves yeah okay so maybe one thing to help me understand is I've always understood the use case for a consumer which is like yeah I don't have to lock up you know when I send a wire internationally it might take three days now I don't have to take in in those three days the capital is locked and that's in that's basically dead money in the system and there's I don't know the number but probably billions tens of billions what whatever it is of of i' call it dead money I'm sure there's a

technical name there I haven't really understood the use case for businesses because uh not the business but like a money gram or a PayPal if I'm thinking about MoneyGram for example like let's say I use MoneyGram and I send money to my family in uh I don't know Latin America or something like that money gram is actually able to take that float and then make money off of that float is is my I've like super Layman I have no understanding of it but what I would guess is MoneyGram can make money off the float so why would they be incentivized to decrease the settlement time so there is an opportunity sometimes there to monetize when the float depending on how the structure of the money trans and I speak in general not just Money G just money transfer business uh depending on how your model

works there's the opportunity to float but there's also a lot of challenges that come from delayed settlement you know you do have sort of at certain times credit risk with your counterparty agents right so think about a situation where I'm using an agent in country X and they're collecting money on individuals that are sending outside of that country let's just pick folks sending money out of Chile and I have an agent down in Chile and collecting the money on my behalf but I am already paying out that distribution of that payment of the Chilean sending to the Spaniard uh when I went when the uh recipient in Spain walks into an agent I've already effectuated that payment so there's a lot of credit risk also going on with some of these things right and that's sort of the counter to it is

saying okay well if settlement happens t plus1 t plus2 whatever the case may be it's both ways it's not just me settling with the agent but the agent settling with in this case uh the money transfer company is there challenges there's there's as I said there's the um there's the counterparty credit risk uh there's also limitations as to the cash management of what some of these agents can do they just don't have a capacity to payout so sometimes you're limited if you can speed up the settlement process and it can happen instantaneously it could happen several times throughout the day theoretically if you can settle on a per transaction basis if you're using a stable coin that unleashes greater power for those small and mediumsized sort of agents that you want in the country so it's a bit of a a risk analysis and benefit analysis of what

benefit do I get um from monetizing the float Etc versus what are the costs here what is my counterparty risk here um and what are the limitations that are inherent now because of the fact that I'm using AES that I need to settle um and that's true for moving wav In from from many remits if you just look at a small business right cash management for a small business is incredibly important this is why we're excited about again I keep bringing the stable coin too early into the conversation but bringing it into sort of our merchant services and what we want to do at sort of on the PayPal side is you know small business uh needs to pay suppliers employees you know content creators whatever the case may be um if we could speed up that settlement time and again you buy something from a small Merchant and it

could settle on a per transaction basis instead of next day or two days or whatever the case may be unleashes them the ability to buy more supplies greater content you know things to that extent um and we just think that yeah well sometimes you lose the ability to monetize certain floats of things like that just the wave of what that unleashes is just going to grow sort of the ability to do more business right and whether that's a remittance and whether that's small business selling you know goods and services for someone who hasn't so like people in the US sometimes I'll share like I'll talk about stable coins to people in the US to my I don't know my friends or something like that they'll say well I mean I have venmo right I have like yeah I you know I can already send money

instantaneously to my friends and I understand that behind the scenes it's not settling but like why would I care about that as a user maybe um there's actually this wus Cass I don't know if you know W course W's quote he's like uh crypto is the I think he he's actually talking about Bitcoin at the time he said uh this is I think on lur Shin's podcast maybe 2016 or 2017 he said um uh Americans and people in the US are the hardest people to explain Bitcoin to why because the US Works excuse me because the government works and your money system works um maybe you can tell me about like outside of the US to my friends like speaking with my friends as the target audience here like who have just used ven in their life like what does that look like elsewhere yeah so

you can imagine my challenge when I work for PayPal venmo and I'm trying to explain to them why I'm doing a stable coin thing the Lego wait a minute isn't that exactly you know what your system does it is it is interesting that you know in the US uh we have good enough right and if it's good enough then why why do you need to sort of innovate although we can challenge that a little bit as well but on the international side which is again most of my background let's go back and pick that that Chilean uh that I was talking about earlier now um let's talk about crossb e-commerce right so that chain now to be able to do and again we take it for take advantage we have venmo we have PayPal we have credit cards that we can use over you know

anywhere in the world but for a lot of folks in uh crossboard in certain regions it's very difficult for them to do a crossb transaction because uh you know they almost all need to have some sort of international funding instrument like a credit card with international charging capabilities to do International e-commerce right so that limits your Universe of folks that even using a system like PayPal can buy something from a European Merchant from an Australian Merchant or from a US Merchant right um in that particular case uh crypto in general or but in specifically a stable coin that's backed by uh you know USD unleashes a lot of purchasing power for that individual right so you know again we take for granted how easy it is to get a credit

card and have an interal a card with international charging privileges it's not that easy outside of the US right it's not that easy in America small percentage of folks had that but now you have folks that if they can have access to the stable coin locally what that does is completely unleash some International purchasing power from them because now they can use that as an instrument that they could use to pay for merchant and anywhere around the world right and I think that's where again as a global company when we see these opportunities the international site for me is the most exciting because when you start picking places like you know Peru and Colombia and Venezuela and Latin America it becomes very very interesting what you do there and that's completely excluding some of the other issues of why folks are going to want a us back stable coin sitting in

certain countries right let's I'm talking more on the payments and commerce side but obviously the ability to maintain a value uh you know stable coin that has a USD value for a lot of these uh folks and a lot of these countries is a way to uh you know to hedge against uh what's happening with their local currency but just purely from a purchasing standpoint um it does give you purchasing power that we take for granted here you know sort of in the US going back to the US and and the comment that was made um by your friends about hey I have ven mail and PayPal I'll challenge it a little bit in the sense that you know we joke uh that we are the original stable coin when you think about it right when you think about the concept of a PayPal balance so

digital representation of an asset which is a dollar that's sitting in a bank account um and you can transact with them within a permissioned environment right but I think what was cool what we did now is uh basically tokenized that and put it out to the rest of the world right so that um before the inherent limitation in any payment wallet was that we both needed to be customers of the same company right that limits our optionality and choice so if you want to use PayPal PayPal Veno venmo cash app cash app Etc by now incorporating a stable coin that becomes the Common Thread between the wallets and you now have interoperability so when you talk to your us friends and say hey but I have VMO said yes but did you now know that with that same venmo wallet you can

pay XYZ person in a non on venmo wallet just using the PayPal stable coin so now you have pure interoperability between PayPal and venmo venmo and other wallets and and the ability to receive so it's just expanded the reach of that same V mode I think that that's the unlock that's the unlock right there is um I am as a venmo user I am limited to only sending money between other venmo users so let's say there are 350 million Americans I don't know how many people have venmo let's call it 50 million I'm making that number up 100 million whatever the number is I'm still limited that's let's say at 100 million that's still only a third of the US right but now with a stable coin I can send to people with cash app I can send and internationally as well right

so and that's and funny little story is uh you know PayPal obviously owns zmo we've had it for several years the first phenominal acquisition by the way didn't you guys get it for like 24 million I don't remember the amount but yeah it's off looking back phenomenal yeah yeah yeah that was a fantastic one but the funny thing is and I think you you know the head of our business unit Jose Fernandes Theon he says this often is you know we have PayPal we have venmo but those systems never really spoke to each other um so the first transaction that occurred between a Veno wallet and a PayPal wallet was a crypto transaction with what when we uh realize yeah when we released uh the transfers product uh a couple of years ago the ability to

transfer crypto because as you know we we had sort of a slow roll of how we put our products out into the market so first it was closed within the ecosystem and then we opened up transfers the first transaction was between Ben PayPal was with Bitcoin transfer right and then now you can use the stable coin was it necessary to use crypto or stable coin probably not but the reality of situation is it is something that unlocked that possibility right um so we feel that this is a way for the interconnection and interoperability of wallets which leads to again the main thing that we're concerned with is opt optionality and choice you should be able to look at one side of the the transaction say whichever way you want to pay we should be able to support it I should look at the other side of the

payment and say whichever way you want to receive it and you want to be settled um we want to be able to support that and that's sort of our guiding principle here is optionality and choice some folks will never use any of these products some folks will and the other aspect is while you may not use it on the front end there's still arguments of why it's important on the back and on the settlement side for this because you know there's two there's the consumer facing aspect am I going to use a stable coin for a payment or there's also the I'm going to use blank for the payment but unbeknownst to them in the background there's a whole stable coin aspect that's being used for the settlement and the movement of that money right um so I think there's a combination of both of those that you're

still using your traditional venmo but there's a world in which maybe I am using stable coin in the background to do interc company settlements or settlements with any other entity that I need to maybe uh maybe we can get into py USD now um I'd love to I'd actually love to just learn more about the the almost history of crypto strategy inside of PayPal like my rough memory is that you guys got into this around 2020 um I'm I'm sure there were I'm sure PayPal was exploring this internally and way way way before that but I remember I think you guys launched a wallet in 2020 there was some sort of checkout with crypto in the following that but I'd love for you to take us in I I actually don't know when you joined PayPal but take us inside of like what you remember there

yeah no F fantastic uh it's a good story actually so uh it's actually my second time at PayPal I was here 2010 to 14 still a lawyer back then but that's where I met uh Jose Fernandez Leon who at the time ran the Latin America region and I was his lawyer we both leave uh PayPal around 2014 2015 and then we reunited in 2019 uh and part of our our remit there was specifically to help put together the the cryptocurrency strategy uh you know for PayPal and execute on that as you suggest you know there had been some research that had been done we had some folks that were doing a block blockchain research team and all of that but it was really in 2019 when we started to to think about okay what if anything should we be doing in the space

um we did a lot of research at the time and a lot of uh you know blind studies Etc just to determine did we have a right to play in the space and what it would look like we were highly encouraged by those results uh which indicated not only that we had a right to be in the space um but it seemed that we we were uh positioned uh to be a leader in the space as well because of again two and a half Decades of moving value around the world digital payments platform our knowledge of fraud uh fraud prevention elicit activity you know security everything like that um we thought we were in a good position to take advantage also of that double-sided Network to to make a meaningful difference to uh for the industry um so we put the strategy together and it was

you know sort of a long strategy in the beginning it was uh we needed to get folks accustomed to the idea of PayPal and and crypto were PayPal and digital currencies right um and that's where in 2020 so right middle of the P October of 2020 we launched the the buy hold sell product and that was uh the ability to buy cryptocurrency hold it in your PayPal wallet and sell it so you couldn't transfer it out so it's still very closed but that was sort of the initial entry point because we wanted folks to understand okay PayPal is jumping into the space uh but doing it in the PayPal fashion what I mean by that is um you know we're a global entity highly regulated around the world we have a very very strong culture of compliance here um so we wanted to make sure that we did things uh you know the

right way from that perspective and also understanding who our customers were our hypothesis at the time was not we're going to launch this we're going to steal a bunch of traders that are on other platforms um that's not the case ours didn't have a lot of bells and whistles it was a it was a a design to be for what we called crypto curious right it was customer uh PayPal customer who's heard of of cryptocur cryptocurrency wanted to get in wanted to explore Bitcoin so it was all about making um you know a very best-in-class userfriendly design uh we limited to four coins it was Bitcoin ethereum Bitcoin cash Litecoin um and a very seamless sort of process full of educational materials Etc because we

knew that this was going to be for folks that were not necessarily uh you know too knowledgeable of the of sort of the industry so far and that's exactly the case right uh what we did and what we're very proud of it's not that I stole other crypto folks from other I we actually created new ones right we got our user base who had not been in cryptocurrency before and then started interacting so we brought millions and millions and millions of people to crypto uh because that was you know our base and and uh you know that's what we catered to my brother by the way Paul my brother um said should I for you he's like should I buy crypto should I buy crypto and then I think I I I forget how the conversation went I was like yeah buy buy crypto and he never and and he

didn't buy crypto and then finally he said just got I just got some crypto I bought some I think it was Bitcoin and salana and eth or something like that um and uh I said that's awesome where did you buy it he said I bought it on my venmo account there you go there you go so it's a and and it's exactly that and and at one point in time I want to say the stat was something like 70% of the holders or people that were buying and selling crypto on the PayPal platforms uh designated as either their their first or amongst their first crypto activ we brought W us to so we were highly encouraged by the results of that that was October 2020 middle of pandemic I remember I was uh you know we were all

uh working from home and I rented a place up in the Northeast uh you know for that month uh to to kind of go through uh and enjoy the the weather up there in October and uh you know we we were able to launch and it was fantastic time the reception was was great from the industry right I mean obviously there's some folks that don't believe any entity should ever be involved any incumbent entity should be involved in the space but really what we felt is people were excited about you know an incumbent player like us well positioned um to be able to come in and say hey we're going to support this so we uh decided at that time to then build a business unit around what we were doing um before it was four or five of us uh sort of running around trying to do this

very much of a startup feel to it but then when we launched and we saw the reception we created a business unit called blockchain cryptocurrency and digital currency or bcdc um Jose is the the head of that and and I S as part of the leadership team there and then we made an acquisition of a company out of Tel Aviv uh called Curve without the e at the end uh which was another fantastic acquisition I have to tell you some of the most talented Engineers curve the custodian yes the the yes that you guys bought curve I we we used to work with curve in uh 2018 and 2019 they're we it was so fantastic and we got I got to tell you uh you know just some of the most talented folks that I've ever had the pleasure of working with and it's been a great uh

integration into PayPal we wound down the curve business but we use that to to sort of build in some of the infrastructure that we have now on our crypto business and then we created this business unit uh to have end to-end visibility on all things that we were doing and and strategically we wanted to have um you know a dedicated team not only of Engineers and product but but legal and compliance and risk relations and in uh regulatory relations and uh and government relations so we created this BC DC unit which is now a couple of hundred uh employees and then from there it was uh I think again one of the most um you know people don't highlight it as much as they should is when we offered transfers for the first time um because

it was the number one thing obviously that folks were asking us about as our own customers started to evolve from okay buy hold sell I'm getting educated well hey I I want to now interact with the rest of the ecosystem I kind of have to hold it at PayPal so we said okay now we're going to launch the ability to do on chain transfers again maybe it's not so unique in the crypto world but when you look back at the PayPal world first time you're kind of breaking down that Walled Garden right and saying now your PayPal wallet can interact with wallets outside of the world outside of the ecosystem and and vice versa and we did that a couple of years ago and that was now extraordinary right because now we started attracting folks that valued a lot of the things that papal had to

offer um as again being a reputable company with with some of the things that we have in place and they're just used to interacting with us they've made purchases for decades with us we started attracting a different uh you know crowd and in terms of people that were much more active in the community um and then uh so we built the transfer product and we expanded that to venmo as well we did some International expansion as well but then that led to the stable coin and the stable coin uh you know strategy was in place for a while in terms of we had been looking at it for a while um and we thought that it finally had reached the right time um that we had you know G through the process of what we wanted to to feel comfortable and feel that we can

manage this and and uh we were able to launch in August of last year and as you know we launched initially on on ethereum as an erc20 token and then recently we expanded that to salana couple months ago now hey everyone Jason here just wanted to take a a quick break to talk about something exciting in the world of blockchain the Stellar development foundation is hosting their sixth annual Meridian conference this October 15th through 17th in London it's a 3-day event where the brightest Minds in web 3 come together to discuss everything from tokenization to defi if you're a developer Builder policy maker or business leader looking to make an

impact in transforming Global Systems through blockchain this is your chance to join the conversation you'll get to network with the forward thinkers who are defining the future of this space head over to meridian. stellar .org and use the code block Works pod for early bird pricing now let's get back to today's episode this episode is brought to you by polygon polygon Labs is developing the next generation of open-source zero knowledge Tech to aggregate crypto liquidity and user bases empowering developers to grow in a unified web of interoperable chains with the agir that was a big mouthful so I'm going to tell you what it means in my in

my words there's all these things popping up l2s and l3s and it's chaos right if you are building something you no longer have to worry about bootstrapping liquidity you can basically just build in the a layer to tap into the liquidity of the a layer and the users of the a layer you get the users you get the liquidity it's the Ager it's hot it's by polygon Labs they've got the polygon Community grants program it was launched with 1 billion tokens Just For polygon Builders season 1 it's live right now it features 35 million in madic to to support the next generation of polygon Builders join the aggregated future today by applying at polygon.net polygon.com market and how you thought

about building it and which part of the stack you guys had to own um you guys are built on paxos right so like why not build the full stack yourself like why build on paxos why Outsource that like tell tell me about those decisions yeah so obviously you know we thought a lot about the design of all of this right and and what what we needed to own and not what we were good at and what our core was and and what uh you know perhaps we should we should Outsource so starting first uh you know with paxos first of all we had a relationship already with paxos uh they're the ones that power our trading and custody so whenever you buy Bitcoin or ethereum or whatever your or ether that you buy on um on PayPal or VMO it's actually being powered by paxos in the background so we

have that integration um and we're big fans of paxos uh I think the approach that they've taken in the market Chad and Walter of you know again going back to our culture of compliance to focus on being compliant and doing the right things from day one um you know buil we built a very strong relationship with them and we were very impressed with their operational aspects of this it's not that you know we really looked under the hood and said walk me through this entire thing of how you do this and we decided that uh at that time the right move for us was was was definitely to partner with them you know they're subject matter experts uh they had had stable coins in the market already they knew everything from the technical side to also the reserve Asset Management side and again keep in mind we were

still kind of a small team here at PayPal so we wanted to make sure look let's let's let's get the experts to do this and we enjoy a great relationship with them um and we were able to launch with them and we've benefited a lot from that relationship with paxos and their experience uh I should also mention that even when we uh launched the buy hold sell product um you know with our relationship with them we were actually the first company to ever receive I don't know if you know this a conditional bit license from the New York Department of Financial Services um it was actually we were the first one so um usually a bit license could take much more time it took us a matter of months to be able to do this so that when we launched we could include New York in in

our launch um and that relationship with the New York DFS is also very important for us you know we started with a conditional bit license then we got the full bit license and what was important here also that paxos did all of their stable coin activity um connection with the DFS right in connection with the New York DFS in terms of their supervised as a limited purpose Trust Company um so we thought again uh this just makes absolute sense for us you know we're aligned to how we approach the business um they're subject matter experts they have uh you know a team that knows how to do this we have a really strong relationship so that should be sort of the core to Market approach there what we want to H now with all that being said I mean then The Logical question there may be well why not you support a

stable coin that exists uh you know out there as opposed to even having a PayPal right the edge of the spectrum of Outsourcing would be just integrate usdc or something like that right and and you know a couple of reasons why we didn't do that is is number one again we think some of the value here is that it is tied to an entity like PayPal right and and um you know the trust that we bring to the market the the security that we bring the way that we value things of protecting our consumers and all that was important but also going back to the regulatory side and the risk side is um you know supporting a stable coin and paypals not an ins insignificant Endeavor um so we wanted to have sort of a voice in it a seat at the table right

so while paxos is the issuer um you know we have a very close relationship and we can make certain decisions that we think need to be made um for the stable coin from a regulatory side functionality side etc for example you know just the reserve assets that we have um to support PUSD is actually more conservative than even the New York guidance suggests right and a decision we wanted we wanted to be very conservative on that side um so having that relationship with maxos um and having sort of a seat at the table we felt we're more comfortable uh you know bringing this into the to to the eoser is there a world where it can be more than one absolutely uh but I we just think that for us uh having that was important having that seat at the table

and again I think the ubiquity of the brands um and wanting folks to understand that it's not just the stable coin but when all of this is fine finally built out the global on and off ramps that you're going to have because you know stable coins have to coexist right with the existing payments that we have the ability to do sort of global on and off ramps and all of that is very very important to us so we wanted it to be part of that PayPal brand right and that people trust and have used for decades so that was sort of some of the logic behind that what we did want to own for sure and and and focus our energy is uh what we do well and that's these fantastic sort of user experience es that we have for consumers and for merchants you know globally and we're

focusing a lot of our even today um a lot of our efforts are building that out right and we have very talented folks here that that are building out some very cool things for e-commerce for P2P payments for B Toc payments uh and that's what we're really focusing on uh you know during that time the other thing that we did want to have major ownership in and we did built uh build up um was the sort of the backend monitoring uh you know again we're very strong culture of compliance here um so we did a lot of work to make sure that either whether it's buying Bitcoin or eth or whether it's you know the stable coin that we had the tools necessary for our compliance teams to be able to do the right monitoring and Reporting and risk management and all of that kind of

jazz um and that just means like chainalysis or Ellipsis or trm or we we have a bunch of those that are integrated and have built up a team and now I would argue they're some of the you know the best in in the industry right now because we really build to St from scratch and you know and not only the knowledge of what happens on the crypto side but how do you sort of weave that into what's happening overall right so we can look at holistic relationships with folks and holistic sort of money movement not just the stable coin side and I think that again speaks to the power of what we can do because of what we've been doing for the last couple of decades so we definitely wanted to build that out and we did uh do that with our team as well who do you think of as a

bigger competitor usdc or tether so I'm gonna I'm going to cheat you out of an answer and say I don't think anybody I don't I don't think we should be talking about competitors at this point in time of where we are in the stable coin Market that's a very PR thank you thank you but there's a reason for there's a reason for that and I think it's because honestly speaking I think we're such at the early stages of this that if we're talking about taking share away from tether or someone else you're having The Wrong conversation uh you know this really should be about building now I think that there's going to be always a portion of the population that's going to want to use tether uh for a variety of different reasons and and great they should have that option and usdc you know big fans of those guys

I know a lot of them over there and I think what they do is is fantastic and there'll be use cases for them in our case I think um for for the way that I see it is no one is situated like we are and what we're trying to do here which is really laser focused on on the payment side you know obviously there's going to be activity on the crypto side of the house and we love that and we love what people are doing in the ecosystem and supporting you know want to support developers and building on this is is fantastic but as I said our focus is how do we Unleash the Power of this for payments make it more efficient less costly for merchants for consumers for remitters um when you start off from a base of 400 million users around the

world and tens of millions of merchants and two and a half Decades of knowledge and um you know and sort of a regulatory structure in place I think that's just going to lift sort of the stable coin market and we're just going to be we're going to look the same way that when we started looking at this the market was around 4 four or five billion I think it was and now it's over 100 the same way that you and I are having this conversation and when somebody sees this three or four years from now going to be like oh you know these guys it's 10x of what they were talking about or what the market size could be so that's the way that that I that I you know view it and also the other distinguishing thing for us which I think is going to be h a

major component in sort of Enterprise adoption and adoption by other financial service providers all this is again our commitment to the regulatory side right we are the only one that has that regulatory sort of overview of of you know the limited purpose Trust of paxos you know us as a bitl and and the token itself or stable coin itself um that's going to matter uh we can say whatever we want but if you want a traditional incumbent financial service provider a large Enterprise to start using your stable coin for XYZ they have a risk management program they have committees they're going to look at this they're going to want to do due diligence and I can tell you that every conversation I've have ever had I always ask about you know licensing regulatory structure of whoever my counterparty is and I

think that's going to matter uh when companies are really starting to double down and using the technology right so and I think that again we're very well positioned in that yeah okay that was a very safe PR answer let me ask apprciate that yeah your PR team's gonna be very happy with you let me ask it different I'm actually not really getting at usdc versus tether it's um for people who have uh people in the US might not realize this but so you usdc really dominates in the US but if you go somewhere like ladam like it's or or or Africa or uh Asia it's very dominated by tether so I'm curious like when you think about the global global development of of PUSD do you get more excited about if you only had to pick one market maybe I could phrase it

like that US market uh expansion of py USD or like the global market of py USD no obviously it's the global market of py USD I think it's what's very very exciting and I think going to your point of of you know certain markets at latam and tether that's where the ability to have those seamless onramp and off-ramps really seem to matter right and and that's so again when you start getting down the rabbit hole of what this can unleash and you could start thinking about you I could receive a stable coin into my whatever wallet and then I could use you know the local PayPal to to to do an offramp of that or or or use that for international Commerce that's where I think it becomes exciting so again you know on the us a lot of wonderful use

cases there that I'm excited to see but obviously on The Intern ational side where it's a bit more challenging is where we we those crossborder payments is what becomes very very very critical for us yeah what about B2B versus b2c what I don't know if you know this number off the top of your head but like what roughly percentage of PayPal's business is uh B B2B versus B Toc orer yeah yeah yeah yeah so so yeah it's it's it's different components because uh you know obviously our bread and butter is is sort of the the Commerce side of the house right so it's consumer to business it's somebody buying pair of shoes uh and we'll process that payment you can use your PayPal account which is what we call our branded service right

so I'm sure you've gone to a website you want to buy a $200 pair of shoes you see check out with PayPal right so you go and now you're authenticating into PayPal now you're using your PayPal account that's a big part of our business that's the Branded checkout that I'm using my PayPal account to buy the parachut there's also the unbranded checkout which is I don't want to use a PayPal account I don't even have a PayPal account I just want to enter my credit card and my debit card uh but in the back end who's processing that is also PayPal right uh that Merchant has an arrangement with us and we're processing your credit card even though you don't know that that that we're behind the scenes on that that's our unbranded uh checkout that's really the bulk of what we do is that s of consumer

to to to business side um there is the P2P component right and we also not only have the P2P component that's within PayPal meaning I can just send you a Paypal payment or I can send you a Veno payment not sure if you know this but we also have the zoom remittance business uh which is similar to the money transfer companies we were talking Zoom with an X right not with an X not zoom with a z right exactly Zoom with the next uh that we actually the bcdc group uh now took over in terms of managing that uh we took it over at the end of last year because specifically we saw a lot of interesting interaction between cryptocurrency and remittance crossborder payments um and we thought hey there's there's a lot that we could do here that is an important business right to zoom remittance business as

well that's outside of PayPal and it's sort of a different uh you know service that we provide uh but that is a major component of what we do too and that is a pure remittance business there that is individuals digitally sending a remittance back to friends and family kind of a money gr Western unit type of thing the other interesting component is we people don't realize we also have a b2c business and that is sometimes businesses need to pay out to individuals think um maybe a ride sharing app that collects funds and needs to pay its drivers or uh or it could be you know some sort of with their consumer is that they're issuing some sort of payments back um and that's sort of what we call the hyper wallet uh functionality that we have is ability to do payouts into bank accounts Etc very

excited about that because you know there you're limited to hey word of the bank accounts that you can place money into and all of that if you start doing payouts with the stable coin perhaps you can start reaching other types of wallets as well right so we see it both on the C to b side the B to C side and then obviously on the B to b side it's about the efficiencies of settlement and as I said before cash management aspects for small businesses um we started to do that already and start working with um some use cases of just testing out proof of concept for folks of using the stable coin versus uh using a traditional Fiat we made an investment in a company called mesh not too long ago um and we funded that with py USD right on a Friday afternoon and the transaction was

instantaneous fantastic to show hey here's here's an example of not having to send a wire on a Friday wait till Monday or whatever to closes we'll send it we close everything's fantastic and we did it in a matter of minutes right um we also uh included on the P2P side on the remittance side in Zoom we now offer folks the ability to fund a remittance with PUSD and so normally when you send a remittance let's go back to the example of $100 I'm sending to my mother in Mexico uh I could pay with that with a variety of ways here on my zoom app uh we now allow you to pay with py USD now because PUSD is our stable coin and there's no sort of processing fee in between from interchange or anything

like that we're able to give it to these folks uh for no transaction fee at all for free so there's uh there's no fee for you to send it there's still obviously an fx component but there's no fee and waving a fee because you're now funding it with py USD it's a couple of dollars when you're sending a $100 a two or three doll fee it's 3% of the transaction right um and that's showing folks that well again here's the efficiencies of if we take all of this out and you have less costs you have less losses because you know you're not using a there's no charge back or a stable coin it's sort of good funds that we're using we are able to process this um not charge you anything and and and your family member on the other side is getting more bank for their B right it's

getting more for the same $100 that you sent you know now they're getting more because there's no fees that are being taken out of this so that's what we're trying to do as well is making sure that in all those different elements we start showing folks here here's the value of of of sort of the pyd whether it's funding instrument and right now the individual same as checkout with crypto when you the concept of checkout with crypto was to as I said before optionality and choice in the sense of I want to look at the consumer and say you pay the way you want to pay and I want to look at the merchant and say We'll settle with you the way that we you want to in the beginning it was very clear to us that the merchants did not want to receive cryptocurrency so the checkout

with crypto product much like now the py USD actually gets converted to Fiat in one Fell Swoop of a seamless transaction instantaneously the merchant is completely unaware of the fact that you paid with Bitcoin to buy the $200 pair of shoes it's converted and all of that uh what becomes interesting now and and is been now conversations where folks are wait a minute what if I do want to receive the digital currency you know directly right and and that's what I think the stable coin permits more than any other because when you reduce the volatility and all of that issue now you're starting to have conversations saying no perhaps um not only is the payment funded in a stable coin but can it be settled in a stable coin again less costs perhaps there's a lower take rate on something of those transactions

and there's ability to provide some value back to Consumers so again the possibilities in all of this are are very very interesting yeah thinking about the two different use cases for usdc versus tether um so so usdc like I use usdc for you mentioned the mesh like PayPal Ventures funded mesh with with py USD like I do the same with usdc which is I fund like most Angel Investments at some point in the last couple years it moved from like funding via wire to funding via USD and blockworks accepts stable coins for a lot of our like uh Merchant I call like B2B Merchant to Merchant payments um tether is different though tether has a lot of uh like a lot of the big trading uh a lot of the big trading firms use tether as like the

pair basically have you thought about like is that something that you guys want to get into is having you know people are trading on wobe and okx and coinbase and Kraken and it's like they're trading BT it's not BTC tether it's BTC P us is that a thing you want to guys you want to yeah no absolutely that's when I said that's when I said that you know what's happening in the ecosystem and all that we really want to support there are already certain platforms by the way have PUSD you see three either PUSD to Fiat you see py USD to another stable coin but in some of you already see py USD to at least Bitcoin and E right as trading Pairs and certainly you know I want to be clear I'm focusing a lot of what I'm saying on the payment side it was very important

for us uh to build this for every body right and we want that Community to to to use and support and for trading activity and all of that we think there's a lot of value in that our focus is on building this and we want sort of the ecosystem to start developing that but we do have a team of folks that we work with and constantly having conversations and seeing what are the opportunities in there that's why you already see you know these liquidity pools that are up there and and and in the new ones on salana and all of that and we really want to participate in that and help that grow we really want to be a good player for the entire industry right it's just that when we talk about what we're controlling and we're building it's more on that that payment side but very very encouraged by

what we're seeing there uh and again the reception was pretty cool when we launched on salana I think there was sort of a people may have thought are these guys a one-trick pony like are gonna you know they launched on ethereum that's sort of the easiest entry point the obvious you know you went with the ubiquitous one but now saying hey guys now we we' brought in a second chain and these are the reasons why and this is the reasons why we chose salana I think people now are starting to again understand hey these these guys are for the Long Haul right and and the fact that we pick open permission list s of protocols it's because we want to really benefit from this incredible developer community and people that all the incredible things that people are doing um when you asked earlier about what did

we need to own and not own you know I'm most excited about just what people are going to build on what we're doing and and the use cases that we're going to see and again people were very excited with salana especially with the whole token extension thing I don't know if you read that um so you know it's it's it's great that that aspect and that part of the community is going to continue to grow we're going to do whatever we can to to support that but yeah our focus is is obviously on this side this might be more of a question for um for Edwin who's uh for people who don't know he's the Chie Chief Architect or C he he is our extremely talented CTO Edwin II so I don't know if this is more it's probably more of a question for him

but maybe I I don't know if you have insight into it why did you guys choose so as so you guys built on the eth like L1 main chain and then you were looking for other I read the press release of the announcement is was like you needed a reliable protocol lower gas fees and uh higher transaction speed I think were the three characteristics why did you choose salana over uh maybe one of the other l1s like an appos or something like that and why did you choose it over some of the l2s like uh optimism or arbitrum I don't know if you have insight into that yeah no of course I I'll say this uh one of the wonderful benefits of working for a company like PayPal is uh you get to speak to everybody right everybody's going to answer your phone call uh and

is willing to have a conversation so uh I consider one of the and I mean this sincerely one of the great benefits of what I've been doing the last five years is getting to meet all these people that are building this incredible stuff and understanding what they're doing so we're big fans of what a lot of folks are doing on both the layer one and Layer Two side um and we looked at a wide variety of them right and and we had wonderful choices right I don't think there was a a bad choice in the bunch that we had narrowed down to um and and again you you mentioned Aptos and we're investors in apas you know it's very close to to a bunch of folks on what they're doing but we felt at the end that um you know the next one needed to be you know salono for a variety of

reasons I think they had done a good job of becoming sort of important in that stable coin side if you look at sort of their volume and what they had been doing uh I think it was very very important on that side the fact that we were able to again with the token extensions looking at it from a payment standpoint which obviously speed costs and all of that is important but also this concept of like you know uh private confidential essenti priv maintaining the privacy and confidentiality of the amount of the transaction which is going to be important for um you know some of our our Merchants Etc they seem to have taken you know strong steps towards solving that sort of payments side of the house right and some of the things that they were looking at um and we worked very closely with that team and

and we just impressed with what they were doing but again we could have gone in other directions but uh very strong team they're very impressed what they were doing uh you know we had a seat at the table of talking to of what our needs were going to be and I think it's worked out you know very very well um you know we always intended to be multi-chain um it's just we didn't know what the sequence was going to be and and I don't know how many you know chains at the end you know I don't foresee us being in dozens and dozens and dozens I think it's a handful um but it depends on what you're optimizing for and in this particular case um you know they had been tested for some time they've been in the market uh focus on payments uh some of the cool things that

they were building and and just you know big fans of of of their team itself and what they were enjoying is why we went down that route I'm sure Edwin has a much more uh eloquent and complex answer to it but uh but from my perspective it was um how do you think about the so you it's tough to talk about crypto today without talking about the political climate I don't know if you can you can touch on this but like how does the current political climate impact product decisions that you guys make and how you think about py USD very it it really does obviously impact um you know anything that you're trying to do globally again we're a global company so we always when you say political not just us thinking all over the world um part of my my responsibility is I I work

very very closely with our reg relations team and our government relations team and and sort of try to assess what what where what we should be doing where and you know you do have uh despite being a giant company like PayPal you have a limited amount of resources like everybody does right and want to make sure you deploy them the right way the lack of certainty is certainly a deterrent for us sometimes in in picking which Market or which product or what we're going to do because um you know these things are not necessarily easy to do it's not flipping a stretch right you you it's and the reason I say that for people say well it's why is this so complex remember that we've built this all within the PayPal house it was very important for

us this to not be something outside of it and be like we say a speedboat it needed to be part of the main carrier right so all of this that we do touch is all of the aspects of what exists already within the PayPal ecosystem the PayPal wallet the PayPal platform so there's significant decisions that we're making in terms of products to prioritize or markets when there's a lack of clarity um you know you start getting a little bit shy about investing too much if you think it's going to you know try to read the te leaves of where it's going but the lack of clarity you know can really disrupt what you're trying to do if all of a sudden there's a massive shift in sort of the mindset or a new set of uh obligations that come in that you didn't contemplate and then

you kind of turns things on its head and we are trying to as much as possible obviously considering local requirements we're trying to have a universal experience for everybody right we want to be able to I don't want to do one offset every market and and it has to be completely different look and field different this and that we want to try to make this as uniform as possible so when there's a lack of clarity it does become a risk of you investing in in XYZ right and uh when we look at markets that we've expanded in you we've expanded the Buy sale Market um to the UK uh and to uh Europe through Luxembourg um setting ourselves up there for for obviously you know the future uh but that's the only International expansion we've done so far and that's of the buold sell product the

PD is obviously Global in nature because it's open and permissionless but from a PayPal perspective you can only interact with it in your PayPal andma wallet in the US um but we obviously Monitor and we have a very talented government relations team they monitor what's happening around the world we as I said earlier about um you know one of the benefits of working for PayPal is everybody's willing to speak to you that's also true on the Regulatory and government side right um I think we have a very good reputation for two and a half Decades of of being good uh you know good players in the space the adults uh in terms of you know responsible Innovation Etc so we get invited a lot to speak um and hopefully help shape some of what this looks like right domestically and internationally but no certainly that is uh you know one

of the top considerations for us in anything that we do to do and prioritize absolutely the a lot of the big stable coins whether it's like gusd back in the day with Gemini or B USD with binance or tether with bitfinex or usdc with their coinbase relationship they've had these big exchange relationships yeah um and they've almost kind of planted their flag with one exchange and then obviously they expand all the exchanges do you guys like is that is that on the road mapap to have some sort of strategic partnership with an exchange NE Never Say Never I I we don't currently have a plan to do that we are sort of when you say it's tied to you know this stable coin tied to Gemini well this stable coin is tied to PayPal right uh and we're more than an exchange

right but uh but no I mean obviously um you know you never know where the markets are going to go and and opportunities that are going to come up of right now our focus is tying this to to PayPal and all the things that PayPal can offer right um and I think when you start looking at that not only the ability to trade but when you start looking again Commerce side and all the other things that that we power we support um you know that's that's the main focus now but no I can see that in the future uh you know opportunities this Market shifts so quickly you know if we had this conversation two years ago and again invite me back two years from now and we'll have another conversation and see how much of what I said is nonsense by comparison but it

just it all changes so quickly that um that's actually the exciting part of this right it's that not black and white it's not binary it's uh it's it's there's a lot of opportunities here for collaboration and as I said when you start start talking about interoperability and all of that it's exciting because I think that's um that's what's going to keep this Market going right that's what's going to keep this ecosystem going is the fact of when you start talking about that that um the interoperability and sort of the openness of this uh the possibilities become you know great right of what you can do yeah maybe as we think about wrapping this up we can um I'd love to just get your almost like the most optimistic end game for PUSD and I'm not talking like two years from now like

what basically what does the world look like in let's call it 10 15 20 years if you guys are maybe we can limit it to five or 10 years because I mean the world in 20 years man I don't even want I was gonna say yeah but yeah five five to 10 years like if you guys are wildly successful at executing every single thing that you want to execute what does uh how is the world different um with P USD that's directly and indirectly and I'll explain what that means um money movement is benefiting from this stable coin rail that we have now provided to to the globe and what I mean by that directly is I do think success looks like individuals being able to use a stable coin for payments and having

that optionality and having that choice and it's going to coexist you know in five 10 years do I think oh this is going to replace you know cash or credit cards or what no it's it's going to coexist with that but that is a meaningful coexistence in terms of having optionality and choice for people that they understand how to use this and what I mean mean by that is Success also looks like abstracting away the complexities of all of this right um most people I always use the same analogy most people can't tell you how an email works but my 86y old dad knows how to send an email right and and and can do that we need the same thing here he doesn't need to understand how crypto or stable coins work but he needs to have a very easy way of being able to

plug in some information and all of a sudden the stable coin goes to their side so if you're able to abstract all of that away I think having meaningful um usage by individuals in fronts is success but for me the bigger one is everything else that we've been talking about before is whether or not it's you and I that are using the stable coin but our financial institutions other service providers other Enterprises on the backend just reaching more efficiency and passing that efficiency along to the individuals it's um it's you know one of my again you know coming from remittance is you know being poor uh is costs a lot of money and those are the folks it's expensive to be poor the people that pay the highest sort of fees for things are

usually the individuals who are not imp position to pay those fees so I would love to see because of that change on the infrastructure because of the change on the back end that fees can come down and becomes more efficient for folks and they can receive their payments quicker and they don't have to pay exorbitant fees uh and they don't have to wait in line for two or three hours for things to occur that for me is Success here right and that you're you can buy a pair of shoes with PUSD had and Merchant and and becomes an efficient way of paying we've unlocked International Commerce the PTP side individuals are receiving money quicker and there's just a general sort of usage of this to bring efficiencies that ultimately ultimately benefit the end user that's how I would Define where we'd want to be next five

years nice Paul anything we didn't touch on that you want to touch on anything that we missed no I just uh I have to say again first podcast this is fantastic than thank you for taking easy on not too shabby for the first appr appreciate it I just like to say you know again um PayPal's in this right this is not a hobby for us we have a very very dedicated group of folks who uh who really believe in the things that we've been building and it's been uh wonderful to see that grow and to be finally out and launched and the things that we're doing uh we're very excited and again um we feed off of what people want I know it sounds like a cliche but we really do that we're constantly doing research and speaking to people so we encourage folks to reach out to us and tell us what do

you need what do you want right we're not building this out of ego we're not building this out of uh you know just for for our own entertainment we want to really solve real world problems and and sort of fill in those gaps that we think we're uniquely positioned to do right and whether that's on ramps and off ramps as I said whether it's you know the concept of you know just a a payment being part of a transaction and how we fit this all into a transaction all of that stuff so we really want um folks to reach out to us and let us know what they need um because that's going to encourage just to to keep building and keep putting good stuff out there cool well Paul appreciate it excellent man I appreciate it man hey everyone big thanks for watching today's episode

wanted to just quickly remind you about the Stellar development foundation's sixth annual Meridian conference this October 15th through 17th in London this is an incredible opportunity to network with the forward thinkers who are defining the future of this space head over to meridian. stellar.org and use the code block Works pod for early bird pricing [Music]