The stablecoin thesis: crypto's trillion dollar opportunity

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that just went from Rock Bottom to we are so back baby I'm your host Jay Hamilton it's Monday March the 3rd holy geesus March what's happening this year today we are talking of first we got to talk about the bounce everybody we bounced over this weekend we are so back what is going on we're going to touch quickly on markets but today's episode is really all about stable coins now why are we talking about stable coins I know everybody listen his episode is like I don't care about stable coins Jay talk about Bitcoin talk about ethereum talk about the tokens that I can make you know the big money on but stable coins is the most important thing in my mind to understand in crypto right now I'll

tell you a few reasons why number one stable coins is the best product we have in crypto right now and is R rap changing and not many people are paying attention to that uh and I know that because whenever I talk to people about stable coins they're still using usdc and USD mostly and also in our business we use stable coins every day and we also see people are still using usdt and usdc most of the time and that needs to change and then also we got to talk about this because you guys are a lot of you are investing in stable coin protocols you're investing in maker and you need to understand what is going on with stable coins right now and what's going to come in the future and a lot of today's conversation is about the architecture of money in the banking

system and understanding that will help us understand the future and then finally if you are manag managing a treasury either yourself or you're involved in a business uh or you're an owner of a business or maybe you're just part of a big business and you want to go tap the CFO on the shoulder everybody needs to be understanding onchain treasury management uh and so that's another important point and then finally I made this episode for my mom because I was talking to my mom last week and she was like stable coins like she doesn't understand how you can get yield off stable coins and it's risk manage yield she can't wrap her head around that so I needed to make this shout out to my mom because this episode's for you Mom so in order to have this conversation we brought on one of the best builders in

the space uh Toren Gupta from coin shift now first he built coin shift which is a leading uh treasury management software for bookkeeping and accounting on chain uh over one billion is managed through coin shift used by a gitcoin a bunch of leading institutions use it and then he spent the last year him and his team building a new stable coin you guessed it in order to improve improve treasury Management in a risk adjusted way so we had to bring on Toren because he knows this stuff better than anybody now before we jump in uh wherever you guys are listening please do me a quick favor smash the Subscribe button give us a like give us a follow and if yall really are feeling good about the bounce right now and crypto being so back give us a

rating I hope you give us a five star but honestly give us whatever you guys want to give us because it helps us learn more about what you need in the show and also helps us get better guests and grow the show today's epe episode is brought to you by definitive the only place to trade like a pro you're going to hear about more from them later on the show without further Ado torren welcome to the milk Road Show I'm still excited to be here thanks for having me yeah excited to have you okay I gotta start with uh before we jump into stable coins um what what a weekend uh we it was La we ended last week on Friday with everybody thinking you know it's over we were dipping below 80k bit coin it was red everywhere and then we bounce back Trump puts out a

tweet saying that we're going to get a crypto Reserve in the US and it's going to include salana xrp cardano uh that's actually only three tokens he said and then he follows up with another tweet and says oh and it's gonna include Bitcoin and ethereum too and he says I I also love Bitcoin and ethereum and boom everything everything bounces back hard we're we're back heading up back in the green I think you know we've established a nice new floor is what it feels like here which is very important because we talked about last week uh in Friday's episode with Jamie CPS from realvision about how we didn't really know where the floor was as we were falling here we we knew there was a floor at 70k for

Bitcoin and every every other altcoin had basically tipped below their 30 365 day floor so we weren't really sure where we were going a lot of fear but we've clearly established a solid floor and we're coming back up uh which is really exciting to see torren what are your thoughts on the current market yeah I think like pretty roller coaster going on right but I would just say it's more of like you know this is the mov right like from last decade we have been waiting for these kind of moments where actually countries like us and others just put these things like BTC e on their balance sheet as reserves right so I'm I'm actually living this to be honest I'm enjoying this how how we

all have thought about it and now the time has come so so yeah I think I'm very very excited and I see like more countries will follow the same because end of the day right like as a country if you if you are making your currency stronger is as good as your reserves end of the day right and and BTC e and couple of others as Trump mentioned it's like going to make everyone uh every every country like pretty solid so yeah if you're only trading on centralized exchanges then you're not going to make it the best Traders know the alpha is on chain definitive founded by coinbase alums let you trade any token on salana bass or any chain all in one platform what makes definitive different is its

Advanced order types you can execute limit twap and stop loss plus you get the best prices as your order is routed instantly through every decks and liquidity pool getting you up to 19 times lower fees trusted by funds w and the Milkman himself now you too can trade like a pro milk Road listeners get a tasty glass of milk with zero fees on your first 25,000 at milro definitive fi the the the the number that I saw that really stood out for me over the weekend was comparing uh crypto adoption in particularly Bitcoin adoption to social

media and the internet so Bitcoin it it's tough to know the exact number of humans that that own Bitcoin but roughly 250 to 300 million people hold Bitcoin that's about 3% of the global population okay today so for anybody out there who thinks that like it's too late like I'm late to the party no no you are so we are so early do you know when the internet had 3% adoption 1997 1997 we are in 1997 in internet terms so it is just it's so early that sometimes when you're in this market and it's so volatile and it's so scary it's very

easy to eject quit basically like hit the emergency break and get out and don't please just don't make that mistake I I just want to celebrate today for everybody that's stuck around for these last few weeks way to go you're still here good times are coming now look I'm not saying it's not going to be volatile there will be more pullbacks and there will be more dips but we'll be with you all through that uh okay torren let's let's talk about stable coins give us the the what's the current state of stable coins when you look at the numbers because the numbers are are so impressive when you look at them and I think most people aren't looking at how big stable coins are getting right now yeah for sure so think about right now like I think it has crossed uh 200 billion in total market cap right and

obviously out of that usdt is the leader here but uh because of you know us uh Trump and Administration is here like we can see usdc at I think 56 billion plus right that really speaks the volumes of what they have been doing for the last decade and then once the regulation is more sorted I believe like they are literally going to touch like trillion dollars right in the next couple of years so because once regulation comes like things go super super fast because more sophisticated players can can easily uh start putting usdc on their balance sheet and then to be honest like right now there are like 53 plus stable coins if you see the landscape and uh everyone wants to launch their own

stable coin but how I'm seeing uh the pattern a is like there will be a good division in terms of like the money use case where okay you want to put your F fiat currency on blockchain and then you want to utilize blockchain for faster cheaper and better right as compared to normal uh internet money right and or E money you can say but the other hand uh obviously there will be more yield use cases where people can make money on top of these stable coins and that is the second pattern uh maybe we can discuss more in depth but yeah these are the two use cases and so far we have seen the money use case pretty successful right

the crossborder payments or the payments so coin has been like doing almost billion dollars in payouts in salaries contributor payments etc etc so I think that use case is going to explode uh with stripe and others but then I'm more excited on the yield use case which we can go more deep like uh literally helping people uh earn more money uh think of it like a biggest onchain account right so yeah I just want to pull up a a chart here quickly or a visual that you put out recently just to like really make the the point of why stable coins are so valuable um if is the let's explain the traditional crossb

payment rails versus the stable coin and the reason why I think crossb is so interesting uh I don't know if you listen to um the stripe Founders recently were on the all-in podcast and they talked about how they like stripe settles about 1% of global transactions over a trillion dollars every year that they're settling and they they were like yeah yeah stable coin make so much this is a this is a no-brainer it's going to happen uh so if if you're not seeing seeing this and there's so many use cases for stable coins but just explain this one to us yeah so if you if you think about it right end of the day when when you want to move money in your own jurisdiction

in a local environment yes you you have like certain kind of capital controls if One bank can literally sync with another bank very very easily and you can move money at a very cheaper rate and for example in us even in India with UPI uh the money movement within the country is very cheap to move right it's not a problem even like you have some still Capital controls right so that you can't just uh move like billions of dollars without any risk management in place but when it comes to crossborder movement right then imagine you need to settle multiple ledgers Ledger entries or bookkeeping entries you can say and you need to do lot of reconciliation at the global level right and that has lot of

these intermed intermediaries in between and because of that obviously because everyone is taking risk in between from originating to the end right uh and it means like they're going to charge some percentage of that because that is what fraud protection and risk management looks like in movement of money and because of blockchain this risk management layer especially right is taken care by the network now you just need to sort of you know move money as you move your data because the risk management layer is on the on the uh blockchain and nodes and and decentralized networks like ethereum solar Etc right and that's why it's so easy to move money in blockchain you don't have any intermediary and even if

you are sending like $10 on 10,000 or 10 million it's just a data on the blockchain right rather than you're taking the risk of all these amounts and that's why I think players like strip are are are like super bullish and they bought uh bris uh recently right and and end of the day what bridge is doing is moving in and out uh from usdc like stable coins across borders very very fast so I think this is the future and and there is no doubt uh why Banks even don't integrate with blockchain to move sort of stable coins right for settling money it just doesn't make sense to use that old orle database and settling Ledger all the time and blockchain has

inbuilt reconciliation this is like a super important point to understand is like if the another bank really want to like let's say receive the money they can always say if there are 10 plus block confirmations I will accept this money right and now you relying on blockchain rather than the in between B so blockchain is solving reconciliation solving settlement solving uh at a lightning speed so yeah just a better system it's just it's it's so obvious right like it is so obvious and and it's it's funny because when when things are so obvious they they tend not to get a lot of of attention and they tend not to be very exciting I mean you said yourself uh to me before when we were prepping for this episode that uh you know you want to make stable coins

exciting like you want everyone to be paying attention to stable coins and a lot of people just aren't that excited about it because it's kind of become accepted and like the norm especially within crypto but I think the thing you need to remember is stable coins are not accepted than not the norm outside of crypto and there is so much money that is in cash that is getting very low yield and we're going to talk about why stable coins offer better yield and how they do that in a risk safe way later but one thing I just want to talk about first is um what's interesting to see is who when you were when you were doing some research you were looking at who is using stable coins and you had some very

interesting examples who's who's actually using stable coins outside of like the crypto natives yeah I think it's like uh you know people in Indonesia let's say you want to accept money uh through you're providing some freelancing Services etc etc right you can literally have a wallet crypto wallet and you can accept the payment without any intermat and because of that you're just saving like 2% of strike fees very easily right and it and if you have a local rails of converting let's say usdc to your local currency at 1 is to one or maybe some friction uh like very little fees you will be always preferring that versus actually paying like 2.7% or even more

uh to stripe Etc right so I think for any Merchant where uh these stable coins are legal it makes ton of sense to actually accept this but more than that I think we have seen like a salary use case uh for crossb sort of employees because every crypto company is majorly multi- entity and then they have employers or or contributors all around the world right it just doesn't make sense at one point to actually use banking infrastructure you might not uh find like a great banking infrastructure in all the jurisdiction you are hiring for and that's where uh usdc just works right because it's on blockchain so it's so easy and that's how I think Quin like platform has processed almost like $1.5

billion doar and and there are other platforms who have processed almost same so billions of dollars are getting moved actually for the real value so all use cases we see in the Neo banking world right where you want to accept payments expense management contributors payment Etc all these use cases we have seen and even people are using like coin for the exact same reason they're using bricks or Mercury or any other Neo Bank basically yeah it's uh it's really interesting to look at all the use cases of stable coins so we've got we've got crossb remittances movement of money cross border okay makes a ton of sense very a very small percentage of crossb

remittances is currently using stable coins massive growth it's it's like that is a that's a done deal in my mind it's just going to take some time we'll talk a little bit about regulation and what will lead that then we've got uh people who are living in countries where their currency inflates at a rapid rate Argentina Venezuela okay great you want to hold the US Dollars instead of holding your own currency to protect your wealth okay here's a way that you can do that with stable coins then we've got uh the company treasury corporate treasuries as the other big use case and as we said right now corporate treasuries using stable coins is mainly crypto corporate treasuries they're

using stable coins but what happens when Amazon's corporate treasury or Facebook's corporate treasury meta's corporate treasury which has you know billions of dollars in cash says oh I can I can hold the this this cash in a stable coin and get much higher yield on it that is also coming so the use cases are are far and wide let's look at can you explain to us let's take a step back for a second can you explain to us like the architecture of money and what the different layers are of our current money system because I think if you understand those layers now and the current state then it'll help us

understand the future state exactly exactly so end of the day right always in throughout like history uh what we call it money is generally like bagged by something and and it's generally like all these institutions especially custodians like Banks they always promise you to give like a higher level money in exchange for this so so for very very long time our currencies like fiart currencies like US Dollars and others like backed by gold so if you have like X percentage of reserves you can back that through a paper currency right and and you can always redeem as long as the reserves exist right but the always promise is okay there is some higher level money which is protecting

you uh the money you hold right and that is the promise all these institutions have done so far and then we have seen in like during 1930 and World War time as well like the the system has changed and system has literally became like more dep backed right and then more fractional Reserve backed where we you just do only have like gold reserves you you have like more inflationary system right and and uh we don't need to go like too much deep into that but end of the day the simple gist is the way architecture of money works is when you hold something like US Dollars you are getting a promise from that bank so that when you want to redeem that dollar right uh you will get like $1 against

that right and this is like a simple promise and under the hood that bank is managing like reserves or doing lot of credit and fractional reserve and generating T out of Revenue which you don't know but the promise is that and then in a banking system if everything breaks up right especially in us uh yes there is a Federal Reserve which can come in and jump in right and then there is like banking licenses and full regulation what you can do with the customer money or not right and that's why it's so hard to get a banking license right it's very like these days it's very easy to build a new bank on top of existing Bank system but you cannot just build like a new bank very easily right so so I think based on this architecture if we start

comparing uh the same architecture of can you create a similar kind of money on blockchain right which has all the properties of blockchain but has all the properties of money as well which I explained right and this is where uh Circle did this thing uh like they launched usdc which is end of the day is promis pring you to give $1 at any given time when you want to redeem it but end of the day they're not a bank right they're not a bank they they just a money they have this money transmitter licenses and couple of other licenses and what they are doing is they are they're keeping those uh they're uh basically having dollars in the bank account or in short-term treasuries or

couple of other instruments right and and they're representing that entire Reserve management to the promise to give you one USD DC so when you go to them uh and if you have a circle account you can always take one USD out of that but this architecture in itself is is a very unique thing because if you apply this now architecture to usdp they are not saying okay it is only bagged by cash equivalents or us treasuries yes they are the largest holder of us treasuries as well but they have BTC as well they have bare Metals as well so so this architecture itself has this Innovative way to have better Reserve management right you can innovate a lot on the reserve management maybe better

than the current banking system and you can represent that entire system with one token which is could be usdc usdp or etc etc so I think I've see the future of architecture of money or the money is just uh this unique representation of uh these reserves and these reserves can be well managed through regulation yeah we can yeah yeah let's just talk about the the the reserve management side because I think uh everybody assumes that banks are safe right that's just like this General assumption but there are problems and there are issues with our banking system even though the system has been built to tell us like oh we're all safe

so talk about some of the problems what are the problems with the current banking system yeah I think uh other than just movement of money I think the number one problem I see from the depositor angle let's say your mom is putting money or saving or you are putting money you actually don't know what's going on under the blackbox right so they are taking your money and then uh it's not like okay they always have uh you you have like full transparency of you always have one sort of dollar against your money right they might be doing like lot of under collateralized loans right which you are not aware about and and that's why we have seen uh problems in India and couple of other countries

where where banks have like defaulted multiple times and end of the day you are using that currency but you want to go to the bank and give me my money back and they don't have right and I think the number one reason I see is like not transparent uh at all and transparent by a virtue of function right yes you can have a banking license you can obey all the laws laws and all that but end of the day you are doing reconciliation every single day and you can do certain things and maybe the fraud will detected at some time which you don't know then there will be lawsuit and then you know but in blockchain you just can't do that if if you are very clear in terms of like obviously if it is like fully

regulated uh we can talk about the regulation in stable coins as well but end of the day like uh stable coins like die for example let's say or or what we launched recently CS usdl you can check out the resultes on chain right you cannot lie how much guy uh or a usds in circulation you cannot just lie about it right so I think this is the power of of of blockchain versus the traditional Finance yeah yeah there there is a a big aspect here of trust and verification right with our current system you you basically there's no verification you do not know the way the bank is holding

your assets what they're doing with those assets how much risk they're taking right and then and then you also just have to trust them basically hey you're a regulated bank I trust my government therefore I trust you and directly because of the regulation and let's be real these regulations are outdated they're old and how often are each of these Banks being audited not not often enough and the it's too complex and too difficult to actually audit them properly so what that leads to is as you said it leads to this problem that we're in right now and it's not really discussed enough in my mind is yeah Banks default and that impacts the end users and puts us in a very this

is not us protecting our our people and our citizens and helping them Thrive This Is Us supporting a banking system and propping it up in the wrong way so okay so where that leads us to is we all stable coins are going to provide a trustless way that you can verify you can see what is actually happening with your dollars behind the scenes but let's talk about the regulation for a second here because uh we still we're at over 200 billion in stable coin volume but we still don't really have regulation yet what is the state of Regulation what's going to

happen there yeah for sure just one thing I will uh mention on the previous thing is like transparency brings a lot of competition at a fair ground limel right if if one party is like very very transparent then other Banks need to be more transparent otherwise they can't just compete because user will always trust the transparent uh company or a bank right yeah so I know I I fully agree like The Innovation transparency breeds Innovation which will lead to the best product for the end user right and that's what we're seeing in stable coins right now I want to talk about regulation what's the state of Regulation yeah I think before this Trump Administration I would love to like talk about governments like Abu

Dhabi right or or in Singapore I think they have gone really really far in terms of understanding how to actually tokenize these digal assets or any kind of value on J right and and I think what we have seen last year as uh for example if you know about paas paas is one of the largest uh stable coin issu they work with PayPal Mastercard etc etc and last year they launched uh a stable coin called usdl based out of Abu Dhabi and it is fully supervised by Abu Dhabi government right what does it mean is they're working with the government to regulate a table back stable coin on chain and they're going to represent

that uh t uh interest rate on the blockchain through rebasing mechanism so think about the state of Regulation right now is the government is excited to understand the power of smart contracts and they're working together okay rebasing mean is actually not possible very easily in trei they're utilizing that mechanism very similar to St in Lido's case right so through that rebasing mechanism you are representing the interest rate of a treasury bill right and for the end user they're just holding $1 one usdl with one uh dollar they can hold like a t- asset and that usdl will always be redeemed to $1 and it's the promise of the government right R like a you know only P sauce right so when you see the these kind of things I

think Mountain protocol has done like a similar job in Bermuda I guess if I'm not wrong and so the governments are getting excited in terms of okay let's let's uh try to bring all these financial instruments on CH and this is very very exciting on the other side I think Super State also is doing great job it is also supervised they have this uh table bag like fund right uh USB which is already 300 million plus so it is fully regulated in in that sense and then on the other side you have uh uscc which is a crypto carry fund more of a margin and basis trates but at the same time it's a fund which is like supervised right so what we are seeing last year is you can apply all the

innovation of a smart contract now to Fiat baged sort of value creation instruments like the bills and crypto carry funds etc etc and you can supervise that as well right it was the beginning before this Trump Administration but now I think my my sort of uh intuition is after this I think all large asset managers if you see black rock is already doing that with secuti right they have regulated that entire bule uh with with and you can redeem it through usdc uh right very easily and we are seeing like more Franklin and uh Franklin templon is also doing the same thing so I think Fidelity is also getting very active so I think

these large asset managers are also realizing okay now why we need to use the banking infrastructure we can we are perfect in managing risk we are perfect in managing clients's money why don't we just utilize this this blockchain infrastructure and then get fully regulated because all these institutions want regulation right on their before putting money on their balance sheet and so I see this kind of pattern emerging the more sophisticated asset managers governments are coming into it and and after I think uh the stable coin regulation you will see they will go more aggressive they're starting out with very small things right billion dollars for black rock is literally nothing right so so imagine once it is regulated they have like1 trillion AUM

right I don't see the reason of that managing into a banking infrastructure I literally don't see that reason so that those kind of instruments is coming on chain in the next decade for sure yeah it feels like there is a couple of Trends converging at the same time here one of the big trends that we've talked a lot about uh recently and over the past six months is institutional adoption and the the institutional money really is not here yet yeah sure there's some of it you mentioned some of those names but it's as you said it's like a even a there's only a fraction of the institutions are here the institutions that are here they're only taking a

fraction of their dollars and putting it on chain uh because the regulation isn't here yet so there's institutional adoption is growing rapidly plus the regulation is happening and coming right now and so those two Trends converging at the same time should very likely lead to an explosion of stable coins and the wild thing about stable coins is when you look at the chart it's it's it's almost up only yeah we've had a few dips especially around FTX and that scare but stable coins don't they don't disappear in the bare market like everything else price action and the

speculators they you know that dips hard and that's always tough in the bare Market but stable coins continue to rise at at a consistent base so I think what is going to happen is we're going to see just an absolute explosion of stable coin uses and one of the other reasons why we're going to see this explosion is there's also a lot of innovation happening and this is the next thing I really want to talk about on the crypto side to offer yield in your stable coins right now most people are just using tether and usdc which do not offer yield they're amazing at solving one of the the issues of that we identified one of the use cases with stable coins but they don't offer the yield yet what's where are we at with yield bearing stable

coins right now and and what's what's coming and feel free to talk about CS usdl which is your stable coin that you've launched recently because that might set some context for sure I think before we get into csusd I really want to credit a lot to Circle first uh in terms of right why they are not giving huge amount of needs to the end user so one thing we need to really understand as like they are solving the simple use case of money and when you think about money you want to move in and out of the money so think about a time when you have a lot of cash let's say right and then the distal banking just started right so for the

End customer they have cash they believe in cash and they also believe started to slowly slowly believe in the in the distal money which is like internet e- money right so they will not convert 100% of it on day one right practically you have not done it I have not done it none of us us have have done it right because we still know because the the the some shopkeeper will always accept the e- money right now so it is a similar error and and that's why because not everyone is on chain and if you want to solve a money use case it means you need to enable lot of redeemability of that so that customers and institutions are really comfortable to get in and out of dollars and this is what Circle has been doing right so they are not putting like

everything to really generate yield you need to actually your your asset becomes like literally illiquid to redeem right end of the day even if you if you have all the money in US treasury bills there is like T plus1 redemptions right you cannot just immediately redeem everything out and that's why I think they it's a huge credit to them they they're making and optimizing more on the liquid side so that you can go in and out very easily and if you go to Circle website they are intentionally showing on the transparency page like how much is redeemed actually last seven days right and once as a customer or a very large institution you start feeling I can go back to Dollars very easily at such a large scale you might not even go

you might not even think about going back right and that's how the trust comes right and obviously uh they they you can check out their transparency reports in terms of where they're putting the money into short-term long-term treasuries right but end of the day they're not optimizing for the yield and they recently acquired usyc uh which is like a table representation uh right and then uh for that you are going to generate like tble rate very easily and they must be doing something related to that so I think circle with usdc is not optimizing for the guild use case they're optimizing for the money use case and that's how they are going to be uh very successful in my opinion but now on the other side uh I think there is like not a very good like regulation

regulatory Clarity on uh passing the t- yield directly to the user and and uh and it is not like fully regulated this kind of instrument and that's why paxos launched usdl not out of us uh they launched out of abudhabi because abudhabi government regulated that me right so first thing is like it's not that straightforward it's not like Circle don't want to do it or or they can't do it it's just that it's not legally like right now they can't do it legally right so so I think that is like one aspect but at the same time I think we have seen huge amount of yeld bearing stable coins growth and and uh majorly there are two categories I see one is like okay you are just launching a tble

bagged asset for example USB Ono I think usdy these are like T representation these are not as such stable coins these are t t bagged instruments right so you end of the day your yield Innovation is just fixed as compared to like okay it's only T but on the other side what paas and Mountain protocol are trying to do is they are innovating it's stable coin representation today it is backed by T bills plus it can be backed by more cash equivalents in the future right so they liting a usdc kind of structure right but also representing the yield onchain and this is where I was like really amazed when I was doing the research

okay right they they they are actually innovating on the base layer and today if you see no stable coin other than these two usdl and usdm nobody gives you the yield on the base L you need to stake you need to lock or you need to do something extra to get the uh basically yield right in case of make a DA majority of the funds are not staked actually and that is the number one reason of huge revenues of of maker d right so I think when I was doing the research the main thesis was can we build a stable coin which gives the yield to the end user without doing anything extra and that's why we sort of uh tried working sort of with with paa

and we have like a partnership with them and that's why what we did is like we take this usdl right we're putting into a lending protocol by default and and user is able to generate so I'll explain now cssd what is sort of cssd so csdl is yield bearing stable coin backed by usdl and CBBC and stte and in the future more rwa regulated collabs right and what does it give to the end user is our our promisees you'll get minimum T yield on this asset without additional lockup and an additional lending yield similar to make a dow like system right but in a single asset without additional

locker and imagine you will be able to borrow against that very easily so imagine you hold CS usdl you can borrow uh usdc against that so you can do leverage whatever you want to do or maybe you want to buy property Etc and then you can go in and out in a permissionless manner so this kind of stable coin does not exist right now which has all the properties of of maker down and all the properties of sort of you know usdc and in a single asset without additional lock up and that is our value proposition and that's why we're going very fast but yeah this is like what we are doing so so the the the question that always comes up when it comes to these yields bearing stable coins is is the risk management right

there's always that fear of okay great you're offering me you know 10 20% yield you know you get very high numbers I think right now with cs usdl I think you guys are up in 30% right which like makes a lot of red flags go off right like a lot of people are like well that's not possible how can you offer that yield talk to us about the risk management side 100% and first of all like that that 30% pluses including Moro and then upcoming uh shift rewards right so we don't have like a point system we want to be just more transparent with the end user so that they can uh speculate on based on the fdv calculations uh so right now like I'll

talk about the native yield first without involving shift rewards or Mor for rewards right so so right now that that native wield is around like uh 6 7% basically where you actually like uh you know put money directly into CS usdl you can swap it whatever and then uh you get this yield and all the time you can earn this yield uh basically and the risk is very transparent because it's a Moro protocol they are already like one of the largest uh lending protocol like I think the second largest right and on the other side it is usdl and under the H and usdl is fully regulated by by Abu Dhabi so so it's a very low risk strategy right in terms of like getting uh getting getting yield and then on top

of it because we are bootstrapping this asset and we have over billion dollars in in asset under management and in our B2B solution we really want to grow this asset quickly to to 50 to 100 million first and and that's why there are huge incentives uh for the early adopters and majorly these this asset and unstable coin is adopted by like large institutions and market makers at this stage and once we surpass let's say $100 million then we want to enable it to all treasuries to to rather than holding usdc in your balance sheet right because you're not going to transfer 100% of your usdc to employees every single day why are you not earning minimum 6 to 7% yield which is very very low risk right

and who is managing the risk of this entire stable coin is stos financials they they have like huge experience in working with maker da their two billion plus rwa program they work with all like major Dows as well like Lio Etc so they're managing with us this asset uh and and that's why we are like very confident it's a low conservative risk strategy but enough competitive yield plus it is highly liquid in the in the secondary market and you can borrow against that so I think we're trying to replicate basically the treasury bill like asset on chain uh so that you can always pledge it as collateral and you can borrow against that so you don't need to sell it basically right so that is like the idea behind that and the

yield explanation I think so do you where where does this all go so what's the end state that you see um five 10 years from now and I think that the reason I asked this question is like what's really important to understand as an investor in this space is where these big opportunities where these big products are going to come from within crypto and obviously uh we all know Bitcoin has achieved product Market fit as a store of value okay great stable coins have also achieved product Market fit but still pretty small like it's much smaller than Bitcoin right so where does this all lead to yeah I think I think

obviously the Innovation is very hard to predict like how how it'll look like but I think I'll try my best to to Really predict uh so what will happen is uh I think all these like all the market cap of e- money uh right if it is like you know 25 trillion plus or or more that has to come on chain there is no other way you are going to use your banking infrastructure right so that is like first simple explanation of why trillions of dollars will come and once they come on chain they don't want to go back right now how you see about cash right you you don't look cash as the similar manner 20 years ago how how people used to see cash so it'll be very similar like you everything is on chain and once money is on chain because

blockchain Works block by Block in a time delay function it means you can generate yield block by block right and all those assets will be generating yield uh in my opinion and whenever you want to move that asset you either exit out of it or you borrow against that so that is the feature uh we see and then because you'll have all degrees of risk management right you will never consider a t-bagged asset versus a margin trade asset uh in a similar risk category right so these are like different risk profiles I would say and and and and it's up to the Institutional Investor or user or or treasury managers how they will categorize this but my thesis is like your Capital should be hyper

efficient and should be earning yield for sing single block even right why not because you can earn it this is like magic right so you should earn that that yield and and this is where CS usdl is heading and you want to become like the ultimate treasury Reserve asset and and all these like billions of dollars should be earning at least 7% they deserve it right so yeah I think this is the future which sounds awesome you say at least 70 7% like nobody's getting at least 70% right 7% right now so that's that's fantastic I think that like the other thing is um traditional banking is so slow and crypto moves much faster and obviously

there's a balance here of slowing down innovation in order to let regulation catch up and so there will be a balance but there is a speed we've never had the financial system innovating at the speed that is innovating now it's been a long time you could argue that fintech did did cause a lot of innovation but not to the scale of affecting the entire system the way that blockchain and crypto is Reinventing the system so there's also just this like speed of innovation that is happening so quickly and I think from the outside you don't see it so you don't really realize that speed but the other the other thing that really stands out to me about everything you're saying is just

how most of these stable coins and most a lot of the yield is coming from rwa and I I hate the term rwa it's like what does rwa even mean it's but it's coming from t- bills it's coming from these regulated assets so the that's where I think a lot of the risk management comes from is that a lot of this is it's not like it's yield that's coming from you know some algorithm or some crypto asset that's incredibly high risk it's coming from regulated real world assets that are safe and that are trusted and it's just being done in a new Innovative way so yeah I think it I mean it's just it's

it's it's such a no-brainer it feels so obvious and so if if you're a you know if you're if you're managing a corporate treasury start to learn about stable coins we took a big portion of our corporate treasury at milk Road and put it into Stables moved it from Fiat into stables and we're not going to take that back so that we could get higher yields right if you're thinking about what to do with your and I know everybody listening in is like I'm fully allocated I'm I'm investing right now I'm in I'm in speculation mode and that's fine if that's what you're doing but eventually in this cycle you are going to start to take some profits and where do you take those profits to sure maybe you need to take some to and back into Fiat in order to pay taxes and stuff like that I don't

think your government's going to accept table stable coins quite yet to pay your tax bill maybe in the future but with some of it you might want to take it into Stables because there's going to be great yield there and then the final thing is like when savings accounts really start to become and I think we're closer to that there's there's a lot of there's a lot of steps you need to do basically if you wanted a stable coin STV account you would also need to learn how to have a onchain credit card where you could spend your cash from onchain and spend your Stables to buy coffee and do things in a regular world so you need a couple more steps here but all of that it we're we're in that world we're so close there it just feels like I think you're you're dead on when you say like

we're going to be at trillions of dollars in stable coins faster than we know it exactly and I think all these like uh manifestations I would say since I in the industry since 2017 uh I actually came in the industry just to like really love all these use cases right and now seeing everything working it just excites me and to actually build uh in a permissionless manner uh right whether in in in any other world you can't just work with like like for example Ste house paas and Moro like this way we are working right it can only happen because of the blockchain Innovation right so yeah I think it's just fascinating all

this is coming into life now yeah which is another reason why the speed of innovation is so fast like this open source permissionless building is we've never really seen anything like this and that we could do a whole episode on that torren it's been absolute pleasure to have you on the show today and sit down with you and to get your take on the stable coin thesis and where we're headed thank you so much for joining us thank you so much thank you it's a pleasure everybody listening in appreciate your time I want to know every listening which stable coins are you guys holding I I I'm guessing it's mostly USD usdc and usdt but are you guys holding any other ones which ones are you using let us know in the comments because it's always very interesting to know what you guys are using and then we can make sure we help

you with those assets thanks for listening in everybody have a wicked awesome day as always if you liked today's episode please hit subscribe and make sure you follow us so you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is

financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day