Onchain FX:The Next Frontier in Cross-Border Payments | Money Rails 2025 | Polygon Labs

Transcript

Hello everybody. Good. Happy to be here. Hopefully everybody's happy to be here at that wonderful day in Argentina. Today with me, Juan, founder of Kappa, Leandro, founder of Avenia, and Lucas. Yeah. Okay. Good. And then Fedrico conduit pay. Um, quick question before we get started with the panel. And uh who is from Argentina? Nice. Who is from any other Latin American country?

Who is from the rest of the world? And who is just here to chill? Sweet. Everybody's welcome. Good. Um 30 minutes for this panel. Thank you very much for being here. Uh let's start with a quick introduction round. Each of you in 60 seconds share with us what inspired you to build the next crypto payments stable coin and Latin America. And the second one uh what's a fun hobby you do when you're not building and being busy at day and night.

>> Why do I have to start first? It was a little easier. >> No, that was a that was a decision anonymous. I'm sorry. >> Um my name is Ju Diego. You guys can call me Hi for short. GAPA does stable coin effects for emerging markets serving multinationals, banks, and regulated financial institutions. What do I do when I'm in my free time? Probably scuba. It's a little bit hard to do it in Mexico City because it's landlocked, but after that, I love playing tennis. So, yeah. >> Cool. >> So, I'm Federico. I'm from Buenosides, Argentina. I used to be a lawyer in the old days. And whenever we had international clients and we needed them to send us the payment from the US, Europe, China or whatever, it was always a mess. Very hard to deal with effects

with Swift with stuff like that. So it was like, okay, we need to change this. This makes no sense. And that's what inspired us, that precise painoint to build conduit and a fun hobby. Not sure if anyone here would consider it fun, but I enjoy playing paddle a lot. >> Nice to meet everyone. I'm I'm Lucas. I'm one of the co-founders at Avenia. We're building stable coin infrastructure out of Brazil, but focusing in LATAM. Um, I got into the space because doing FX sucks. Used to suck a lot for the small person, for the still sucks for the CFO, you name it. It really does suck. Um, and so we decided to change that like my colleagues here.

Um, fun hobby. I like to sail, but I really suck at it, but I'm trying to get better. So that's something I'm just trying to do. >> So you're multitasking. >> Multitasking. Okay. Always. Sweet. >> Okay. Crossboarder payments are traditionally slow and exciting. Um what we all love to see is a little bit more transparency, speed, cost efficiency, programmability. How does your company support a onchain ethics and what makes your project so unique? >> Uh okay. So basically what we did was we connected the PIC system to stable coins. So we do onchain FX with liquidity pools and our own stable coin as well which is called BRA token. Um and with this the swaps are faster,

cheaper and there's a liquidity issue but we're improving that a lot. Um and what makes us different is that you know we're locally bred. We know all the nuances of Brazil. Brazil has a super advanced ecosystem as well and that helps us a lot with you know developing all of our products. So the regulatory framework helps a lot for once. >> Yeah. And recently like the new framework is super helpful. There's a bit of criticism but I think it's on the right path and the Brazilian central bank is definitely very open-minded >> which sounds like it's perfect. Good. On on our case we're using stable coins as the neutral settlement layer to do settlement for FX transactions and

that's how we're supporting FX. We're connecting what we call stable coins with the Trafy world. So connecting Pix, Spay, AC, Fed, Wire, Fed, now RTP, you name the payment method that you prefer with the stable coin world in order to make onchain effects a reality. Um, and what was the second question? >> What makes >> what makes us unique? Amazing question and great that I forgot about it. What makes us unique is that we're not only building out of the US, we're building for the emerging markets and those are the markets in which we're seeing the pain point because it's very easy to build something out of the US and only for the US. But we're connecting Latam, Africa, Asia with the US, with Europe all through a single API.

>> Okay. Uh I guess that in a single sentence what makes us very unique, we provide liquidity where it's hard to get. And that for companies that are in the panel here today, they've operated with us in Mexico before. Um, if we had to put a big vision of the whole why, it's build a neutral liquidity layer where companies like Avenia, Conduit, you name them, they can have a complete transactional settlement using local stable coins going in and out. There's a when we talk about orchestration and when we talk about doing crossber payments, it seems that we all have like a one-sizefits-all solution of connecting local systems to onchain rails. I do think that you just have to

become a plumber on both ends and you have to own the regulatory side, local market plus not the issuance side exactly, but you need to have deep enough liquidity to handle the real tickets which is B2B for them to flow in the specific regions you operate. Yeah. >> Yeah. It's a holistic problem, not only onboarding or offboarding or the regulatory framework. Yeah. From your perspective, we go the other way around. From your perspective, what's driving the biggest shift towards onchain ethics? Erh, we're in a timeline and I was talking about this on another panel yesterday where local stable coins are not a game

of supply. You can see BRA for example, it's not a token that's very big in supply like USDT or like USDC, but it's going to be used as the principal settlement mechanism between effect pairs. So, traditionally, when you're going uh to do a B2B ticket for a company, you have to convert MXN into US dollars. You have to be very well connected to a bank, send a Swift transaction to Circle, get USDC at spot, and bring it back. So you're basically doing the orchestration flow in a very inorganic way trying to give the end user a uh killer settlement time in T0.

Now that was efficient two years ago. It is not efficient now. And when we're talking about onchain effects and local stable coins, uh, initially the big stable coins like USDT or like USDC are going to be used as a principal trading pair, but local stable coins are going to be used as the principal settlement mechanism. And we have to think sustainability on this business models instead of profiting from yield, it's just that you have to become a whole payment stack instead of simply being a stable coin issuer. That's where I think that the agenda heads in like the next 24 to 48 months.

>> If you think about the traditional system and how it works today, we always like to make an analogy towards thinking of the current crossber systems like a group of isolated islands in which if you want to go from one place to the other, you got to get into a boat. You've no idea how long it will take you to get there, how many intermediaries you have to use in order to get to the other place. and you have no idea about the cost. That's something that we're changing and that needs to be changed yesterday. Um, and that's why we're so excited about onchain effects. What what when you build this and you get access to this unified ledger, everyone's sharing that it's transparent. You can see what you're doing. You know the costs. That's game changer. And that's why we're investing all of our efforts,

all of our debt resources into it going forward. >> Um, sorry, I forgot the question. What was the question again? Yeah, me too. >> Uh, what's driving the biggest shift towards onchain ethics? >> Uh, okay. I think definitely institutional interest is something which is super important here. I know there's a lot of DGens which think that, you know, you have to be super puristic on crypto, but the true volumes are where the big players you see companies like DLO starting to look at, you know, stable coins. And I think the driver is companies like the two that are next to me, our own, you know, giving access to these really big players, giving access to liquidity because in the end of the day, liquidity is key, right? Like you

guys were mentioning. Um, so what if you take 10 seconds or one second to deliver on chain, if you have like a $100 million swap to do and you have no liquidity, it's game over. It's gone, right? So I think definitely the institutional volume is what drives it. And again with regulation and favorable sort of terms like we're seeing around the world, it's a no-brainer for like this to be the start of something really really big. Everybody doing B2B and B2C or clear focus? Uh B2B to X is what we do.

>> We do B2B and B2B T2C >> everything which pays the party. >> We started as a consumer company and pivoted B2B. So yeah, what's the biggest obstacle currently? >> Start in the middle. >> I can start for the first time. So amazing. The biggest obstacle that we're seeing right now, I would say there's two. One is how scattered liquidity is among many different blockchains, among many different protocols, etc. Uh, and liquidity is trapped within all of those systems, and sometimes it's hard to make them talk to each other. So once we get a way to bridge everything and unify all of that liquidity into one layer then

that would be like an amazing path through and the other one would be 100% of regulatory certainty which I know it's very hard to accomplish remember I am a lawyer or used to be a lawyer in the old days and regulators sometimes don't move as fast as as the industry does but um we're we're moving towards a good direction as you were saying Brazil with the with the buffs licensing issues that that they just uh addressed last week, I think it was. So, we're moving in the in the right direction there. But those are the two main obstacles I would say. Uh just I think just wouldn't reinforce and I agree with the regulatory part because it's tough to have Brazil which is super regulatory friendly and then you have another

country which isn't and obviously FX is all about like cross border. So, it's having all of these multiple countries kind of just connect talk and figure it all out. we're going in the right direction, but I think it's still a tough sort of thing to figure out. So, I think like that's probably the biggest obstacle we're seeing and we're coming from a country which is super pro and we're seeing like resistance in more emerging markets and so on so forth. So, I think that's a pretty big obstacle. >> Um, just a completely different topic of what you guys mentioned. I agree with all of you. I think that currently the biggest challenge right now is integrity. Crypto comes from four years of low integrity industry. Erh, basically we have amazing settlement

layers that they didn't have a specific market fit or use case. And now we're seeing a layer tools trying to target institutional players post shift of what's going to be where the industry is headed and and what's like the actual use case for blockchain technology. And then I think that the second challenge is aside from integrity and having to sell to these financial institutions that you can speak ball and that you can play their game. Uh everything is just a matter about composability. There's just one too many local stable coins that a company like Cabba for example has to market make. So you have BRLA which we don't market make but we market make BRL1. So you find yourself in a friction where people are like when are you going

to do a BRL1 BRLA pool? And I'm like, well, that's basically me having to swap BRL for BRL. >> They they actually asked me this today already, so it's good to know. >> Asked very frequently, so probably we're going to have to chat after this and find the best way to make it work. But um when we're talking about stable coin composibility, like who's going to be the end clearing house? Is it going to be the chain? Is it going to be the swap route? Is it going to be the liquidity layer like Kappa? or is it going to be a company like Avenia that's going to do uh multiasset reception plus redemption and minting capabilities? The industry is in a wild west right now that we still haven't found a proper consolidation of what's going to be scale for institution and at the same

time what's going to be the right course of integrity for us to sell to the markets that we do really want which is like the high volume players that can bring payments and mass. If we're talking about integrity and trust, um, does it get better? Not maybe. I mean, the technology is pretty amazing, but as you say, like the industry itself is like if you're not an insider and don't understand the technology, it sounds like wow. >> Definitely a meant to say like like yes, it's definitely going to get better from here even if the prices are down right now.

>> Hope so. >> Yeah, hope so. But I guess that on the integrity side specifically, I think that there is just for the first time in history, you have a mass of blockchain founders with a cryptonative premium or without a cryptonative premium that are heavily aligned in an agenda that lasts for more than three years. So integrity starts from alignment. But I think post integrity cycle with banks just comes from some sort of taking from the best part of everybody's book. It's a game about osmosis. So we take the best from Avenia. Probably Avenia takes the best from us. Uh we sometimes leverage last mile payments from conduit because

they have a very good payment system. But conduit in Mexico leverages a big part of our effect stack. Erh you have to decide where you have appetite. You can't just have glutony on what you're going to eat every single day and you're just going to try to eat a whole market. It's just basically accept that you're Frankenstein. you are Frankenstein's monsters monster and that you can't just go out there limping trying to build the biggest and best payment stack without a specific value proposition of what you're very good at. >> Yeah, I think there's just like a fallacy of this winner takes all sort of mentality because everyone's like oh look at you know Tether USDT and obviously they did a super good job but I think it was it's more of a one-off sort of situation. they were in the right place, the right time, right team.

And I think that it's, you know, it's it's it's it's what he said like we have to work together. Um, you know, hopefully soon we work with Conway already. They work with us. So, I think that's kind of like the right mindset. And the real enemies are, you know, for for effects, the real enemies are the traditional banks. Like, they're the ones that we we can't we can't kill each other. Like, we have less than 1% of the market. Let's be realistic. So we have to go out against like the big fat spreads, the swifts of the world and all that sort of stuff and even they can become our clients eventually. So I think it's like it's just working for the bra the greater good here to be honest.

>> Yeah. And to add on here like I think we're trying here to change the mindset of the people. We come from a system in which uh let's say we trusted the brand but not the system per se. Like here in Argentina for instance we have a lot of banking crisis. Um, so it's very easy to let's say uh break up with a bank. So for us, I don't know, we we tend to look at the US and say JP Morgan, Bank of America, those are great brands, but we don't really trust the system. Now with crypto and onchain effects and stuff like that, the paradic is shifting because we do trust the system now because everything is traceable, everything is accessible. You can see what you're doing. Everything is on the blockchain. And that's one I think one

of my biggest challenges right now when I'm facing a prospect or a client and I have to educate them on why this system is better than the old. I think what strikes me here in this panel is a little bit um when we think of 50 60 70 years ago um somehow cash payment became digital payment and then they started in each country and they tried to make it happen and then all of a sudden they noticed like oh we need to make it international and then you know the stuff grew as it grew uh and then there was you know many regulators many long discussions nobody was under pressure evolution is cool but you on the panel all seem to think in on an end to end solution which is you know not not only how we're making it technically possible but also how are we able to

onboard the users like how are we getting the people h which is the next question how are we getting how are onramping or or onboarding more users no matter if B2B or B2C what's the what's the next thing where we want to be how we want to do it >> yeah I think I I I could take this but like obviously starting in Brazil is is easy because we have Pix and Pix is super efficient now you've have you a number of countries, Mexico, Colombia, even Marado Pago here in Argentina is like super efficient. So I think we started off like Venia as a company started off with the traditional crypto cases just on and off ramp all that sort of stuff and then I think and I think that's a really good question because

that's how we win. We win gaining the masses and I think that there's two ways here. The first way is education and that's something we have to do and the second way is just hiding the blockchain and infrastructure layer and just showing that it's more efficient and compliant. >> All about transparency, right? >> The thing is like the thing is ask a CFO of a multinational company how Swift works. They're not going to tell you how it works. They just know it works and they know it's >> I I agree with you. I think the the user doesn't have to understand how a web two browser is working or how crypto is working. And yeah, in order to gain trust sometimes you you know if somebody's asking the question you need to be transparent but in the other hand if you write crypto on it there's maybe

1% of the population or 4% which currently using think it's cool and the other 96% you think it's oh my god it's ugly. >> I might be massacred here but I tend to not use the word crypto. I use blockchain more often just to talk about infrastructure but yeah I think it's a it's a mix that's why I said it's the two things. I think it's a mix of education and a mix of just you don't have to keep showing if the person doesn't care. Like I have clients who just want to send rise receive dollars and they're like, "Hey, is it if it's compliant and it is and it's faster and it's cheaper, just [ __ ] do it. Sorry for the language." But that's literally like what they say. Just just do it. I love it. Like I'll pay it. Go for it. So

I think it's a mix of things. I have to regret that. I have to agree. What about the other two? I mean doubling down on what you were saying um abstracting the complexity away from the whole operating system is key is crucial for blockchain for stable coins etc to work the idea would be for users for merchants for CFOs for cos whomever for them to be able to move money internationally do effects transactions without even having to you know worry about hey is this a blockchain is this a wallet how do I use it our our whole thesis is like You can send us any money anytime anywhere and we will be able to hold it, convert it and transfer it to whomever you want, wherever that person

or bank or whomever is. And that's the whole key to me. >> Uh on the regulation plus customer side, the best thing I can tell you guys is that it's better to say sorry than ask for permission. Sometimes you you you just have to launch into the market and just let things slide and if something happens, you're just like very honest about what happened. and customers with a very good success rate that you hit 90% of their orders maybe in screwing one nothing bad is going to happen it happens very frequently in traditional payment rails more than we actually think of h and I guess that more on the h on trying to abstract the complexities of a product like ours erh is not about

mixing and matching a network of corresponding agencies orchestrators and banks it's simply letting people ask the important questions like probably Lucas you've raised capital before you normally leave the easy questions for the VCs in the post Q&A we tend to do that for like the same thing as customers simply because they're natively curious about why the technology is good um I guess I have a question for the audience how many times or have you guys seen a stable coin post of what are stable coins on LinkedIn if you can raise your hand everybody knows about them. So it's not a m So it's not a thing of we all know what a stable coin is. It's more of how those how those programmable money can

move my settlements and payments faster. And then in a use case like Kappa for example is like how can I get very deep liquidity at a very reasonable pricing for a company that has recurrency in big ticket sizes without having or needing to have the volume that an institution like JP Morgan needs for them to get that kind of access and settlement. So yeah >> I mean by all fairness Visa doesn't explain the users how this is working between a normal transaction at the supermarket and their bank account. If I counted correctly last time, it's something like 27 steps. Not considering ethics. So, uh, you know, maybe there's a reason why not everybody explains everybody to everything. It just needs to work.

Um, are there any specific regions or user segments where you're seeing the fastest adoption of onchain payments and currency swaps? >> I love regulated financial institutions. It's an easier cell. The spread is tighter, the revenue pool shrinkings, but at least there's constant recurrency and the learning curve is just easier to onboard. Time to market for a regulated financial institution used to be three months if you did an API. Now through a graphical user interface or through a dashboard, it takes a week, maybe 48 hours or less. erh I guess that where local stable coins play a very big role on helping on board financial institutions is that a lot of those ones that are not regulated or that they are their user base doesn't have any actual savings using US

dollars. So the narrative that we normally see in the Andine zone or in South America is non-existent in Mexico or in Brazil. People normally on board using ray ice or people normally on board using Mexican pesos. Now how do we bring it to scale? Erh, it's where I think that regulated financial institutions play a very pivotal role because they control two sides of the order book that are almost equally netted. So it doesn't become a cold start problem. The real cold start problem, it's what's the time to market for these big institutions that move hundreds of millions of dollars in volume so that they can start processing mass dispersements or local payouts uh by the leverage of local stable coins as

an instrument to swap between peso and dollar and peso. I have to disagree over there for us the I I wouldn't say that big bigger institution or financial institutions are the fastest in terms of go to market or or or sales cycles just because there's lots of uh back and forth with regulatory certainty approvals internal processes bureaucracy etc. in our case would be probably fintexs that have operations in in in multiple countries and their treasury teams need to move money uh from I don't know for instance they have their holding company in the US and they have operations in Brazil, Mexico, Argentina even in Africa and they tell us conduit we have $3 million

in in treasury funds in the US and we need to fund our operations you know like working capital in Colombia in Mexico in Brazil same day we can't wait t plus 2 t plus three as the usual swift payments Um, and those would be for us the the fastest to on board. And then of of course whenever we go direct and we get imports or export companies like a Brazilian entity that is importing from China, those are also the the easiest to to to become live with us. >> Yeah, we have a bit of of fintech as well, but I think one that is growing a lot in obviously number of transactions is a lot of consumer apps which are building infrastructure using stable coins. So like I mentioned like we designed our system to be obviously B2B but we do a lot of B2B T2C as well. So

we have like a lot of consumer apps which or already existent or are the new banks which are being built. So you know bellow or cast or whatever they all use our infrastructure and obviously we've seen like a surge in adoption um because we actually see like the individual side as well. So we see how many people are just on boarding and using the solution. So um we have a couple of providers which of of neo banks and and and and consumer apps which use our solution for Argentines to pay pics in Brazil for example. So that's really amazing to see like 10 20 50 100,000 transactions per day going through and growing. So it it's it's really exciting not only the volume but the number of use cases and number of users actually using it. So it's pretty cool.

>> Um let's think of a vision for 2040. 2040. Yeah, of course it's tomorrow. It happens fast. What milestone do you think will mark the moment when onchen ethics truly goes mainstream? Like what's the vision for 2040 here? What do you think is the breaking point? >> I think I might sound new topic, but it's very related to what I was saying. That's why we're here >> earlier on the on the on the panel, but it's basically the moment when money is moving all over the world around the world and no one's caring if it's via blockchain, via traditional system or whatever. It's just like, hey, I've sent a payment from the US into Mexico, from Mexico, into Kenya, and it arrived

instantly with full transparency, traceability, etc. To me, that's the moment when it goes mainstream. >> Okay. um at scale 2040. It's when I called Lucas on WhatsApp and I told him, "Did you see this trade that happened on a liquidity pool and it got sent through your rails?" I think it's the best way to explain it. >> That's a nice one. I I would actually want to join both of them. So, I think the FX uh being like you said, but also the experience, if you haven't used Pix yet, try using in Brazil. It's like a global Pix with transparency and liquidity would be absolutely like amazing. It's it's like 5 seconds, send money wherever you are. Use it wherever you are and that that's it. Like you don't have any hassle and it's you said

utopic. So you no hassle, no worries. Everyone's happy. That's basically it. Using onchain effects. >> Well, but that's the beauty about this panel now. I mean, if we're only talking about today and yesterday, then fair enough. Good. To wrap up in one sentence, what's the biggest wish for the widespread success of onchain ethics and your project? Everybody one minute liquidity >> one word I would that that's okay that's more time for the others so uh >> I've actually used three words so I let Juendi all of the time to wrap it up and it's actually our current slogan which is any money anytime anywhere

>> we're going to Hollywood here. Okay that's nice. >> It is one word because it has an M dash. So it has to be one size. >> Good. And last but not least, because we have another three to four minutes left. Um, if you are talking to the crowd now, who would you like to meet when you go off stage? Who in the audience should come to you? >> Anyone who's interested in launching anything related to stable coins or enabling USD balances, virtual Ivans, whatever. We can do almost everything in the industry. So if you're a treasury person, CFO, if you're a developer, CPO, whomever, you can talk to me. I'm always happy to meet people. I'm an

Argentinian, so I'm friendly. Come talk to me. I'm very happy to be here with you. >> I'm I'm going to steal his as well. But I'll just add one thing. If you also have absolutely no [ __ ] idea what a stable coin is and what onchain FX is, and you want to learn a bit more, you know, reach out not only to me, to any one of these geniuses, which is on the panel as well. I guess if I have to cater it, if you're running a finance business with ticket sizes over $100,000, happy to chat. Thank you. >> Good. So, looking for money, looking for users, and looking for more customers.

Last but not least, any final words and statements before we're done on time? >> I love the Avenian conduit, guys. So, yeah. >> Yeah. I think next time do a panel with like more conflict because we all get along super well and like we love the subject. So it was like we just agreed on everything. So I think it's pretty obvious. But I just want to thank the opportunity and obviously these guys are brilliant as well. You're brilliant. So that was great. Thanks. >> Same. I I might have forgotten that if you're cooking or having an asado tonight, let me know. I'll be happy to pass by and talk about this all day long, all night long. I think the good thing in this industry is um you said

something in the beginning about um you know the enemy and I'm not really sure if I agree on anything which is the enemy not to bring something in but I think you know the banks you might see them as an enemy but you might also see them as you know the old dinosaur and there's people like Mastercard who are moving a little bit faster because they're interested in not being completely disrupted and others who won't get it but I think what's the really nice part on this panel and that's the reason why for this once I like that there's you know some harmony is we're talking about currently 4% of the global population is doing something with crypto. Many of them gambling. Many of them I'm really sorry to say so but I don't feel that everybody understood the massive opportunity which is out there on the

blockchain. I think neither myself nor everybody here understood what we're able to do. When we think of you know two three four years back payment was something way far out too expensive. When we now look at supply chain companies who are, you know, using blockchain on a regular basis like Rush and other pharmaceutical companies, that's really amazing. But the cool thing is that the three of you on this panel trying to solve a problem together, which is a little bit more visionary because we all know we're not competitors yet. There's so much more room to grow for everybody.

The market is massive. So, I really like what you're doing. I think it's amazing. I think it's really important. Not only Mexico, we're still 50% unbanked people. I think it's important to not only facilitate payment for you and me and not, you know, pay the banks the fees they don't deserve. Sorry. But also help the people out there in order to, you know, have opportunities to send and receive money. With these words, thank you very much for listening in. Wishing you a wonderful week at Defconnect. Bye. >> Thank you.