Stablecoins as an Instrument for Financial Inclusion in Developing Economies

Transcript

We have yet another impressive company here on stage with us who is no other than Visa, right? And just from the having the crypto hat on, we kept saying when they you remember the transaction per second, the TPS war and bets were on. How many TPS can go and everybody compared themselves to Visa. And Visa was silently working in their business on making it happen and guess what? They came prepared, right? And Visa is today leading charge on what they do in order to maintain their position in the global ecosystem of finance and of payments. So, next up I have the pleasure to announce on stage

Mark Muhuma Madeyeva from Visa. Here she is. Please put your hands together for her keynote. Hey. Thank you so much. Good afternoon, everyone. Oh, perfect. You can hear me. It's a great pleasure to be here today. As I was mentioned, my name is Mahbuba Muhammadiyeva and I'm leading digital currencies and crypto solutions for Visa CEMEA and CEMEA stands for almost 90 countries. We cover Africa, Middle East, Central Eastern Asia and the Central Eastern Europe as well.

So, let me begin. Uh when we talk about financial inclusion, first thing which comes to our mind is actual people. But this people which lack an access to the banking ecosystem, banking products and these kinds of stories. But the thing is so let's have a look at the situation from a different angle. Financial institutions from the developing economies actually also has the problem of that financial inclusion into the global networks. The thing is that for the same type of services, they have to pay more, they have to wait more and actually they have a lot of challenges in terms of how to connect there. And more cost, more delays, more complexity.

And the problem is very vivid when we start speaking about cross-border money movement. And we as Visa actually global leader in terms of everything connected to the global money movement and let me give an example. Uh for example, today I paid for my breakfast and how it works, I have my card issued from the UAE, we have hub there and uh in a second transaction passes, but what happens on the back end? On the back end, bank of the merchant goes back to Visa, Visa identifies who is an issuer, issuer uh says that there is enough funds, there is a response back and the and the in 4 seconds there is a response. Can I get my breakfast paid or no?

This first layer which happens on the user level in a second goes just authorization. And this is the data messages. Actual money movement didn't happen yet hasn't happened there yet. There is another data messaging layer which is called uh authori- clearing, but the thing is that at the end of the day, all those transactions which happened in the network actually should be settled. And at this point we come to the actual money movement between our principal members, the banks in simple terms. And us as Visa. And actually this is one of the core value propositions of Visa. So, for the banks all the cross the globe,

they don't have to be connected to one another to process those transactions. They just need to be connected to us and we are trusted element of this ecosystem to ensure that the funds will pass and everything will be okay. Uh so, what happens? At the end of the day, my bank has to send money to Visa so that Visa can send money to the Swiss uh to the bank in Switzerland for the transactions which passes, that bank will pass the money to the acquirer. What is the situation with cross-border money movement? And and imagine, I'm coming from the UAE. Imagine guys coming from far less developed economies. We speak about Central Asia, we speak about Africa.

And the complexity of that process is the following one. The banks from developing economies has a lot of challenges how to get connected to the correspondent banking networks in the US. They invest much time, money, effort in order to find the right path to actually support it and there are usually some challenges which are happening constantly with the correspondent banking, with some banks uh not ready to work with the banks from the developing economies and it's a very complicated process.

The story that actually every single extra correspondent banking which has to be the part of this uh complex network also adds extra cost, extra time, extra KYC checks and actually even the holidays can be different. And what is the story for the bank which wants to have a business with us, which wants to have the the cross-border business with us? They have to pay more for the same services. They have to wait more. And they don't have any predictability when finally the transaction will go through.

And this story creates a lot of friction and creates a challenge in scaling the business. And here we come to the stablecoins actually. And what is the situation with the stablecoins? Stablecoins in this specific example enables us and the banks from those developing economies actually to communicate almost directly without all the complexity of the corresponding banking and be very predictable in terms of when the transaction will come.

So, speaking precisely about our what we have done in CEMEA and what is actually happening globally with this solution which we have. Um our first launch happened with the bank which has which had no previous exposure to crypto, to stablecoins, to anything. But they had a very real problem with the money which they had to spend on the networks, with the complexity of the process. The bank is called Kyrgyz Commerce Bank and this is from Kyrgyzstan. And actually in collaboration with the Hodler, we made that experience working for them and we launched that pilot project. Again, for us it was the first bank globally for Visa with no previous exposure to crypto which has a real pain point and they invested much in terms of

understanding what is actual stablecoins, how does it work? And actually you Hodler played a huge role there. They uh helped the bank to set the infrastructure, to understand how it all will work, together we all thought about how accounting will look like, but eventually to what we come. From the process when they had to pay and they were not sure when the transaction will pass, we came to the situation when actually in in a minute settlement was done, obligations were fulfilled and everything felt completely secure and trusted in terms of what is the process.

And that was a big win for us and that was the first one from zero to one launched in CEMEA region in the Central Asia. And as of today in CEMEA and globally, we have a very healthy pipelines of the banks which are actually interested in the launching the solution and in November of the previous year, we actually shared that our estimate of annualized volume, how much money which we will settle using stablecoins using stablecoins was about 3.5 billions and we did exceeded that figure. So, there are different use cases why financial institutions, why the banks want to turn on, want to turn off to to move from classic rails to stablecoins

and one of them is actually uh taking care of of real pain points of the of the banks. So, this is not just experiments. This is doing the same business, but changing the rails to the next generation of how money can be transferred, how the cross-border money movement can be set and actually this solution help helps us to bring that innovation to the developing economies and uh make that kind of the leap frog frog to the next generation.

So, as of today, what do you we we support four public blockchains, we support four stablecoins and we constantly work on increasing this number. We are we have no preferences there. This is just should work for our clients. Um speaking about the challenges, which kind of challenges do we have today? I would call out basically two main two. The first one is regulatory as when we're speaking about developing economies, for sure there is no such a thing as what we shall do with the stablecoins, how the money movement shall look like. And this is and every single time we have to explain from scratch. Usually we go through the sandboxes together with the banks and after pilot is live, the regulatory

landscape changes to enable those solutions to come to the market on the most scalable layer. So, this is the first story, regulatory. And the second one is actually the infrastructure. It's complicated to find the players who are ready to support basically custody and liquidity in the developing economies. And this is a huge market opportunity for those ones from the developed economies, from different kinds of players to go there, to invest time, to invest money, to actually um fulfill that opportunity. And the first one will be the the winner there.

And we believe that this is just the beginning in terms of our region, quite big pipeline. In Europe, we will also have a lot of players slide and actually this is a situation all across the globe. So, to summarize, stable coins for us is the infrastructural play and we see very practical use cases when they make sense and enable us to do more innovative solution to address actual pain points. Thank you so much for attention.