Stablecoin Powered Neobanks

Transcript

Uh hello everyone. Uh this is uh fun. I don't know that I've ever done a a dual keynote. Uh so we'll see. Uh it should be interesting. Um so some of you may have seen the uh the announcement on X. Uh but we have some pretty exciting uh things to talk about. Uh specifically this stable coin that Etherfi is uh launching uh with the help of uh uh Athena. Uh so first we'll do a bit of an intro and then tell you more about what uh we're doing. >> So everyone, uh my name is Guy Young. Uh founder of Athena. We started the business around uh 3 years ago now. And the core thesis we had was uh delivering a dollar savings product that anyone in the world could access with just an

internet connection was one of the most interesting sort of problems that you could work on in finance and sort of one of the largest addressable markets uh in the world. So we started that uh the first product around 3 years ago now, which was USDE. Uh that scaled from around 0 to 15 billion dollars in around 18 months uh since our launch. And then started to build out different pieces of uh the business around that since then. So we have a white label stable coin infrastructure uh business and that's what we're going to be walking through today. And then also announced uh Athena Pay, which is sort of following in the footsteps of the product category that Mike and Etherfi sort of pioneered uh a couple of years ago. So super excited to to be here and talk through the product with

with you guys. >> I'm Mike uh Selig I'm one of the founders and CEO of Etherfi. Uh Etherfi uh has created and uh operates a crypto neo bank, uh which is basically meant to be a full end-to-end alternative to traditional banking but built on DeFi rails. So you should be able to live your entire financial life on chain and not really have to make any sacrifices uh by by doing that. Um We are the largest in this non-custodial category of crypto neo banks.

We have about half a million users, couple billion in transaction volume in total about six and a half billion in in deposits including our staking assets. So I would say I mean it's been a wild ride over the last few years. And I would say EtherFly and you know, in many ways have been almost like sister companies. We share a lot of investors. We actually angel invested in each other's companies. So it has felt very natural partnering and continuing to work with the the Athena team. So that's you know another reason why excited to talk about this today.

I guess maybe I'll start well I already explained I guess what EtherFly is. As I said, what we're trying to do is to build DeFi Revolut if you want a you know a quick sound bite. And I think today is for the first time is it's become genuinely possible to actually do that. I would say even a year ago it probably wouldn't have been possible to do the kind of stuff that you know we we've been doing and Athena Pay is is doing. >> Yes, so just to summarize some of the Athena Pay I think a lot of the sort of product design decisions and vision that Mike had around this product has informed the way that a lot of people are thinking about these products today.

So the core idea behind what we're doing here is taking the core asset that we brought to market two years ago and then really thinking about how do we grow the distribution of that product to a user base that exists outside of crypto. So I think it's no secret that a lot of the money and capital that exists within crypto and within DeFi is sort of just left pocket right pocket just shuffling you know coins between each other. Well, I do think that the form factor of these type of products where you're delivering a savings experience, spending experience, and sending experience in a in an experience that people are used to in the normal world is really one of like the largest or like products that can reach the largest number of users that exist outside of this space.

Uh so yeah, the design of the entire app is basically built on USDE. Every single dollar that comes into the app is free to on-ramp and is automatically converted into USDE. That's saving by default within the app, so you're always earning every time or every second that a a dollar is sitting within the app. Uh also built out multi-currency functionality where you can on-ramp for free in other currencies either into dollars or into a savings asset in around five other other currencies that sit outside of dollars. And then obviously have sort of the card spending experience that sits around that as well. So, the product's only been out for around a month now. It's very much in sort of beta phase as we've been rolling it out to a small group of users. I think we've only got about 3% of the waitlist actually using the

product right now. But the idea is over the next 2 to 3 months when we feel comfortable with how everything's uh you know, performing in a secure way, uh we're looking forward to to opening it up fully. >> Yeah, so as Guy said, uh the general flows that a a crypto neo-bank kind of follows is that either fiat or crypto gets deposited into the account. That account then acts as this non-custodial vault that can be used to purchase other assets, uh to borrow, to lend, to do all the normal things that you'd expect uh from a a DeFi product or a TradFi bank. And then there's these uh last-mile fintech uh uh rails integrations that allow you to then send

money out uh and plug into the broader uh economy. Um we now have enough of an ecosystem around crypto that these last-mile TradFi rails are sufficiently well developed uh and continue to get uh better and better, especially across uh a lot of different regions. Um uh that you really can create this this system where, you know, fiat comes in, fiat comes out, and everything in the middle is permissionless and and powered by DeFi. And I think what we'll see very naturally is, first of all, more fintech institutions are going to be moving to this kind of model simply because it's just much more efficient. I would say in many ways it's an order of magnitude more efficient to to operate this kind

of structure. Um and has just a much lower regulatory footprint. Um Uh and so as a result, I think we're going to see a lot of fintechs adopting stablecoins for their internal operations because ultimately that's the only way to actually make this work. And that doesn't mean that you're going to have to think about which stablecoin you're using at any given time, but these things will work, you know, in in many ways the way software works in in companies today where it just helps the internal operations be a lot smoother and easier without the user really needing to to think much about it.

>> Yes, so as you can see on the chart up here, I think this has been one of the most incredible growth stories in the space in the last couple of years. You've grown from sub $100 million of volume per month in September 24 all the way up to $1.2 billion now per month. So on an annualized basis, you're looking at just under $15 billion of spend that's been growing more than 100% year-on-year to date. I think the piece that interests us most about this graph is kind of thinking about what are the things that have been growing even during a bear market, right? So a lot of the businesses and products within crypto are kind of just leverage to Bitcoin price going up and down. And I think stablecoin growth is one example

of you know, a product that's found real PMF outside of just speculation within crypto. And I I this is the new product category where, as you can see on that chart, it didn't really matter what was happening to Bitcoin prices or the prices of altcoins. This was just going straight up into the right on the side. I think the other piece to just appreciate is that this is just still a speck in the ocean relative to like actual spend in the world with normal fintechs and even the user numbers that have been captured within this app right now. And so I think the piece that's most exciting to us is that yes, there are the businesses that are here and have built amazing products and captured a huge user base. But really like the addressable market for these products is the hundreds of millions of people that

aren't operating on chain now, but do find you know, spending technology like this useful day-to-day in their everyday lives. So I think that this is a graph like stablecoins that's basically just going to go up into the right for the next 10 years and excited to be part of that growth. >> Yeah, absolutely massive market opportunity. I mean, to put into perspective, just neo banks, so Revolut, Chime, Nubank, that whole category of of players are doing about 300 billion dollars a year in revenue. So I mean, we're we're talking about a hundred times larger than all of DeFi or all of crypto just in that one category which is a subset of you know, of banking. So I mean, the

opportunity is just so much larger to build real products that are not you know, various you know, incarnations of casinos. So And so with that we sort of you know, I've teased that a bit, um you know, today on Ether Phi users hold hundreds of millions of dollars of stablecoins. And you know, USDC, USDT, great products, but effectively what that means is Ether Phi and these users are paying millions and millions of dollars to Tether and Circle. Which is great, you know, we're happy to support our friends, but I think it just it makes a lot more sense to internalize that revenue, uh and use it to reward users, to

subsidize parts of the product that we want to subsidize, to generate more more and to just streamline operationally how how EtherFlyer works. Which is why, you know, we're excited to to be announcing this new stablecoin launch. >> So, we just wanted to also just run through and kind of point out like what are the very specific product features that we think crypto stablecoins actually enable a 10x better product experience for these type of applications. So, I think the first one is really just around being internet native and global by default on day one is a very important piece as to how these can scale as aggressively as they have in the last couple of years. So,

traditional fintechs usual process to even open up one geography or one jurisdiction is 18 months of trying to set a bank accounts, get regulatory licenses, get fiat rails in place, and that's one country out of 150 that you want to be serving. That will just take another 12-18 months to to sort of get through. I think the real unlock here is that when you move in stablecoin or like balance balances within the application into self-custody your stablecoin wallets, you're really enabling these apps to be global by default on day one because self-custody your stablecoin holdings are much less regulated activity than owning customer deposits within a bank account in the fiat system. So, I think that's a very important point that just makes the product experience that much

better for users. I think the other piece is just doing away with banking hours where you just settle 24/7 instantly at almost zero cost. I think we've all felt the pain of what it actually feels like to transact across borders in normal banking applications and being able to collapse all of those sort of layers of fees and intermediaries to just settle on a blockchain is obviously just a complete night and day experience versus the normal banking system. And then, I think the big piece here, which is obviously relevant to what we're talking about now, is that a huge piece of the business model for these existing banks and fintech applications is underpaying users on the deposits that are sitting within the account and then extracting a margin on the balances that are within the app. So, I'm sure many of

you used to getting the 25 basis points, 50 basis points for the deposits that you're leaving within your bank account. Here, when you can plug into stablecoins or into the financial primitives that you see within DeFi at almost zero cost, you're really unlocking a better user experience with the savings rate that you can generate for users within the product. So, whenever we're thinking about should we be spending time on the new product or new direction within the company, we always try and ask ourselves the question, are you creating a 10x better product by actually building this on blockchain instead of going miles?

And I think this is one of the very few examples that you can point towards and say it really is just a 10x better experience being able to do all of the things that are on the screen here versus the existing existing options in the market. >> Right. Um so, the intent for us is to for Etherfi is to integrate this new stablecoin into every aspect of Etherfi and to really make it transparent so that the user doesn't need to think about the fact that they're using a stablecoin, that their fiat comes in, it gets converted into these stable dollars, they get all the rewards that they expect with Etherfi and more now across these various products, and it's just a totally seamless and much lower

cost experience. And so, with that, we're introducing eUSD, the Etherfi stablecoin powered by Athena. >> Yeah, so some background on the white-label business that we're running at the moment. Across the whole of Athena, there's around 5.5 billion dollars of stablecoin balances. We paid out around just under 800 million dollars actually now in gross interest revenue generated that have been paid out to users. Uh never lost a single basis point of people's money, you know, despite the private hack that we saw 2 years ago, the 10/10 incident, the RV hack this year. I think we've been through quite a lot in the last 3 years and have never lost a dollar or a basis point of of money. And in total have had just over

$30 billion of mint and redemption flows flow through the contract with zero uh downtime on that. So, super excited to be working with the East Side team on this. Uh have a few selected uh white label partners that we've put up on the screen now. I think the approach that we have here is that we don't really want to work with everyone in the space. We want to pick uh three to four partners a year that we really lean into and we have We're just bullish on how big they can get and the growth that's to the head of them. And I think Ethena, you know, squarely sits within that with one of the apps with the largest dollar balances that exist on any on any chain in any application that you see on chain now. So, um yeah, very excited to be working with

them on uh bringing this to market. >> Yeah, maybe to further shill Ethena, we did do an evaluation across a you know, a bunch of different options of uh white label stablecoins or rolling our own. Uh and honestly in the end it was it was a real no-brainer. Um I think Ethena is just the best option. They've got the best infrastructure, the best track record. So, yeah, couldn't be more excited to uh uh to be working with them. >> Yeah, on this slide I'm sure it's adding a ton more to what we've said already, but I think um just highlighting the point now that I think what might staying with East Side now is to really like own the user balances, own the stablecoins within the entire stack is going to be a trend that we start to see evolve with other near banks that are

out in the market right now. I think the end state of these products is that you need to vertically integrate the ownership of uh different pieces of the stack so you can control uh the destiny of your own revenue generation in a more meaningful way. And I think uh the East Side team are pioneering this now when not many others in the market have sort of built their own stablecoins to in-house within their own app, but I think it's going to be a trend that you're going to start seeing pretty aggressively followed as you brought this to market yesterday. >> Yeah. >> Yeah, maybe the only thing to to add is that um you know, to reiterate, I think eventually everyone's going to have to do this because if you want to have a good product there's almost no other option. I mean, you can't uh allow this

sort of leakage of all this revenue that's generated off uh stables outside of the system, outside of your your product. So, to create a truly competitive uh low-cost uh higher reward product for users, uh you pretty much have to uh have to do this. And right now, uh Athena and EtherFire are the uh the only ones that uh are uh you know, are smart enough uh to be doing it. And so, I think that bodes well for uh for both products. >> Yeah, and I think we touched on this earlier, but I think just to summarize the whole talk, uh this is one of the very few products. I kind of cringe a little bit when people talk about how do we bring on the you know, 100 million billion users into crypto. I think the learning that we've had in the last few years trying to build in this space is

that uh assuming everyone's going to come, operate on chain, set up a MetaMask wallet, and do all the things that we've done in the last few years, I think it's the incorrect assumption. And you need to start uh planning for a world where that does not happen. And so, from our perspective, I think you really need to start on the position of build the apps that people already use in in uh in a form factor that they're comfortable with already, and see how you can make marginal improvements on the product leveraging all the stuff that goes on within DeFi. So, from our perspective, this is one of the very few products we think can actually reach that scale. And we're still very early in that story now with a few hundred thousand users, even at the biggest application. So, excited about where the market opportunity is going to go. And

uh obviously wish you the best of luck building this with uh eUSD. >> Great. All right. Uh that's it. Thanks, everyone. I hope everyone gets to try out the product and uh you know, uh have a good experience with it. >> Awesome. Thanks, guys.