Stablecoins: Traditional Finance Turned Upside Down | Regulation Day Devconnect Edition

Transcript

Okay, thank you very much for joining us on this panel. Um, super honor honored to to be here. Um, so stable coins have grown incredibly in the past few years. uh the transaction volume is almost twice as the transaction volume processed by Visa. So a couple of questions for you is um what should we what's the status of adoption by institutions right now on of stable coins?

>> I'll do this one. We we'll go back and forth a few times. So >> rapid fire. Now, there's a really interesting question. Boom, boom, boom. Okay. Um, it's funny. I hear this Visa stat a lot. I love Visa. I love Mastercard. But, um, a very I think it's a very interesting look into how much we actually understand payments and institutional adoption because in reality, the volume on Visa or the volume of these stable coins is higher than Visa, but it's not an appropriate metaphor always, right? Because most most there are stable coins being used in payments. most are being used more for like a speculation. I don't say that in a negative sense, right? Uh but it's usually like a DVP of I'm trading USDC for ETH or for WBTC.

And really, it's still being dwarfed because in the actual world of security settlement and reconciliation, the volume is something a little bit more like uh like uh 1.5 trillion a day, right? Uh and it gets us to the point where I I probably repeat this a I think one of our big challenges is that like no one in crypto knows anything about banking and no one in banking knows anything about crypto and we're two like very arrogant groups who will never learn about the other one. So I think a better way to anal like analyze a little bit there's no one thing called a payment. There's actually like five kinds of payments, right? So uh yes I think in the kind of stuff Visa does which is card and largely like payouts, dispersements, the kind of things you see in like a Airbnb host getting paid.

Um but to to step back for a moment at the top of the thing there is like real wholesale payments and these are not like you like the payments that go over Swift and everyone in crypto lies. They're like I sent a wire and it got lost the other day and it took forever. No. No you didn't. First of all, I've worked in wires a long time. I've sent like one wire my entire life and 90% of wholesale wires get credited within 10 minutes and they're actually endtoend trackable since like 2017. But, uh, at Consensus and MetaMask, you know, is one of our products, but we also work with Enterprise a bit. We're working with Swift right now on those. And these are the type of payments for like uh like you know financing like a trillion dollar like oil rig or like a large

scale uh like solar installation or settling like a trillion dollars worth of securities at a custodian. um those payments work well. That the headache for the banks is actually that the the liquidity management the payments process is fine but in order to affffectuate those payments they have to have like 10 to 50 trillion in preunded accounts around the world that they could be like you know using for corporate financing or mortgages or something better than just money sitting dead in a bank somewhere. So like that's one place where I think you're seeing a lot of innovation. We have this new swift chain we can talk maybe a little bit later about how they'll actually capitalize the assets there. Then there's cards. Cards are super fun. We love cards. Jamal's cards. Check out the MetaMask card by the way. Card.amass.io.

Uh we built a lot of uh infra for that where we don't just allow stable coin spend. We allow like DeFi deposits like your ave deposits. So you can earn interest until the precise moment of purchase spend cryptos. We build that infrastructure ourselves. But one thing that makes us really happy is uh Mastercard and Visa are introducing some native settlement on their networks. USDC and that makes our lives easier and it helps other people launch. Um then you get to this like payouts like the type that Visa is doing and uh Mastercard send. This is not the cards. This is like what powers behind Uber or Airbnb.

I think there's a lot of work to do in terms of making sure that folks can be like credited to those different accounts. So it's more around like figuring out the travel rule and such. And then of course there's new payments that we don't even consider yet like micro payments. It's not really that fun to pay someone a penny but in in real life usually. But like I would I would like replace likes for a penny, you know, on a social media platform. I think it'd be more equitable. Uh and it really hasn't been possible with a stable coin. So there is a lot of great stuff happening, but it's really important to understand that like it's in very particular flavors in these institutions. And even in these institutions, people don't know each other, right? Like if you talk wholesale payments like JP Morgan, you're on like

47th Street in Ma in Madison Avenue in New York. When you get into like retail remittances with them, they're like, "Oh, that guy's in Tampa. Like I don't even know him." Right? So, it's [snorts] good that there's institution, but there's not one lane of like stablecoin payments institution uh institutional adoption. >> I I guess we should all just like add some points to it, but unless you guys want to keep it by question, but um when I think institutional, obviously like the banks are a big part of it, but I I consider some of like the PSPs and other payment companies getting into the space also kind of institutional adoption. I think the most important thing is that you're seeing regulated service providers who have done this type of work before slowly start to understand what blockchain rails can do. And I think it's important that we reinforce

that we're not trying to replace existing systems. Like Daniel said, like this existing systems have worked for for a good amount of time. They just need to be upgraded with additional features and services that allow for seamless transfers, better experiences, more cost effectiveness, whatever that reason is. So I think it's important that these like key distribution points start to take advantage of some of these these new solutions like you know companies like Stripe getting closer into the space by adopting deeper blockchain rails and then delivering that downstream to merchants who don't need to know that blockchain is under the hood. They just want cheaper, faster, more efficient payments. So I think that's starting to happen now. I think you needed to see some like regulatory stuff happen before that that started to happen which is like got people a lot more comfortable. But yeah, I think that's like the key key point is

that like getting to a distribution point and then using that to to reach all the merchants in a way that they're comfortable with. >> Yeah, I I mean I think the the super key thing you said which is that you know these figures oh twice Visa, twice Mastercard, whatever often misleading um there there is like an incredible amount of growth but there's a der of information when it comes to hey what is actually going on? Is this a payment or is this, you know, the same, you know, seven wallets recycling the stables back to, you know, pump up to whatever number the VC needs to hear for the next round? Um, yeah, absolutely. And I mean, I think there's very real adoption of stable coins, but it feels more and more like there's a divergence.

You know, there's the more casinos maybe a strong word, but you know, the more speculative side of crypto. Um, and then there's more emerging markets, which is very, very different where you have people that bank. You know, I I bank through a lot of stable coin banks. Um, I've gotten them paid in in stables for five years. Um, and so I think those two worlds are very different. I think that's where the institutions that come in, it's going to be boring. It's not going to be flashy a lot of times. Um, and they'll come in doing this stuff, which is just upgrading. It's going to be under the hood. Maybe they won't even tell you, you know, it'll just say digital dollars. You won't know it's stable coins under the hood. Um, but it'll be stable coins. And what really matters is giving the consumers a better

experience. >> Great. Uh, you mentioned regulations. We have seen a lot of movement in that sense with Mika in Europe, the Genius Act. Brazil has enacted its regulations two weeks ago, last week. Um, and many of these regulations kind of mirror the requirements of banks. Uh, what's your view on that? How how does do these regulations impact on the innovation and adoption of stable coins? >> Yeah, I I I can start here. So I think there's um there's a lot of nuance here and a lot of these central bankers particularly in Latin America or or emerging markets you know they they have a willingness to learn they have desire

to understand hey why are people using this so much what's so great about it um and that's great you know the generic there's more work to do which is very true there there's a superficial level understanding a lot of times and understanding the capabilities and not what's going under the hood which maybe an end consumer doesn't need to know as long as they're safe but the regulator does need to know because they need to decide what is safe Um I I think then what we've seen is there's a lot of stratification within how comfortable central banks are, how they understand it, whether they want to incentivize local stables or disincentivize local stables. Um I I think what's great there is clarity and coming forward to the market. I think the regulators that are going to see, hey, you know, the market or the companies that are both national,

international that are coming to work with them are going to be very happy is when they say, hey, we'll have a conversation. We'll have a working group. um we we'll sit down with these companies and really understand hey what do you want to do um I think there are parts of the traditional system that are broken or you know slow or not great for consumers or don't give optionality and there's a lot of power that that you can give um you know whether it's B2C or B2C side >> I mean I I think that regulation is very important I think it creates safe and sound transactions that's obviously a critical driver of a lot of the success if anyone thinks that regulation hasn't helped this like current stable coin boom with like Genius and and Mika coming out, then I'd like to meet you there and talk about it and and argue

against you. But ultimately, I think that we need to we need to have some of these regulatory concepts in place in order to make sure that transactions and just any sort of building is done in a safe and sound manner. I think that involves working with a lot of like big regulated players as well as regulated uh regulators themselves in order to define what the what does the future of this technology look like and how are we building and what are we trying to do. I think that's like starting to happen slowly now. You're seeing like quite a bit of like traditional bank, traditional fintech interest in the space and they're kind of coming in and saying uh as Daniel mentioned like a lot of the the two worlds don't mix. So like now that the two worlds are converging a little bit, you're starting to see a

sharing of ideas and that sharing of ideas actually getting to a really good balance of how do you do regulatory clarity, how do you give like safety and soundness to the users while still allowing the technology to be fully unleashed and fully functional. Um, I think yes, it does stifle the in innovation a little bit, but ultimately at the end of the day, the customer experience will benefit long term from having regulatory concepts that keep them safe and sound, that make sure that they're protected, that make sure that they don't have bad experiences because those types of things get people to shy away from the technology without ever coming back. So, I do think that yes, we could be growing faster. Yes, we could be moving faster. Crypto moves at the speed of light and regulation is a little bit slower of course, but

ultimately I think it's creating the right framework for us to build methodical things that are going to be really powerful and really go to to scale and and actually change the existing financial system. >> Yeah. So um uh first like a caveat, I work in product and strategy, so don't listen to anything I say about regulation. We have a very good head of global policy named Bill Hughes. He worked at like the White House and Congress. Follow him on Twitter. He's got a lot of good commentary. Okay, all that being said, I got a hot take. Um, you may have never heard this one. I like it when regulation's good and I don't like it when it's bad. Uh, and some of it's mid. It's kind of a little bit of both, right? But ultimately am very heartened by a lot of things you see around like Mika and the stable

genius for two reasons. As Jamal notes, well, I like that it lets us have clarity on what we can build. Uh but it also protects the consumers like part of stable genius that like in being a stable coin holder I know that I will be made whole in the event of an issue much in the way that if I had like funds custody bank of New York that's how custody law works in the new in the US right and I think in most countries right um all that said though I got to say like uh I get a little bit like bored sometimes when people talk about regulation too much uh both bankers and crypto people because I think it's kind of an excuse for not building stuff and just Like some examples is like on the crypto side Agura uh Polygon doing very interesting stuff for years. We've been

doing it circle um before the stable genius law right before Mika your job as a technologist is to look at what you can do look at the laws and then figure out something you can build right and just deal with it. So like the MetaMask card again cardamaso in Argentina. No, but we're like trying to launch in the US and like you know in the New York they have the bit license. So we have to figure out how to like comply with the bit license. In Texas they wrote like an anti-CBDC law but I don't think they wrote it like correctly. So uh really the way it works is uh I don't I'm not judging them.

Maybe they did mean this but you actually have to swap everything to die before you spend it. You can't even use essentially back like if my users want to spend USDC or MUSD or some of Agra's wonderful tokens or USDY or whatever [snorts] I actually have to have an intermediary flow where it switches to die before I go back to dollar because the payment instrument has to be a sufficiently decentralized one right and I could say that's a bad regulation or good one but it's just something I have to deal with right and I think a lot of crypto people kind of you know make these excuses not to build stuff now to criticize the banks same thing right there wasn't regulatory clarity for a bank to offer for like ETH or Bitcoin to attend customers and I'm glad that's getting resolved. But like banks are

allowed to like trade currencies and if it's tokenized that that's just something you have to build. So actually before all this December 2022 our good friends from Polygon uh consensus meta mask and um as well I think a was involved with JP Morgan launched a Japanese yen Singapore dollar swap market not test live Rio in Singapore where you could swap on like a like a institutional deck this is in I think November 2022 right and uh these are live non-est transactions and then for test they also did like this little a poll where you to drop like a 10-year Singapore bond and pull out Japanese yen. And I'd be meeting all these banks all the time and they're like, "Oh,

we're waiting for regulatory clarity." I'm like, "Dude, just copy and paste what JP Morgan did. It's a cool project. Do it." Instead of 10-year bond that I loan for Japanese yen, you could do, I don't know, whatever, auto loans for Hey, ICE. And I would talk to these banks and they're like, "I don't get it." It's because they haven't read enough about crypto. They haven't done the product work or the strategy work to do something that they were totally allowed to do. A bank is allowed to trade Japanese yen for Singapore dollars. That's clear. Uh they just weren't taking the next step of the tokenization. So again, I'm super happy when like good regulatory um developments happen and I praise all the legislators, regulators are doing it.

But it ultimately I think we all are probably in agreement like it's your job to like just sit down and read the laws of every country and figure out what you can and can't do. And when you understand what you can do, go do it. Because I think when some of these regulations get passed, it's like the ocean goes down. because they haven't done the investigation the the research or any of the work backing what they could launch you know so good good and bad good good regulatory movements but like good or bad a challenge to all of us to to to not use it as as an excuse not to build things >> yeah I mean I think where they're good is that they'll level out the playing field right so kind of the conversation

of the past bit especially after the flash crashes the you know the other weeks um is what is a stable coin you know, what is a yield coin? What is a tokenized hedge fund? And so, I think that's good where a regular can come in and say, "Hey, if you want to call yourself a US dollar payment stable coin, these are, you know, this is the backing you can do. This is what you have to do on the marketing side, etc." And I think that stuff's great because most consumers um in crypto, we have, you know, a lot of education. And so, that's great. But the reality is most consumers and if you want to go mass market, most consumers don't have the time, they don't have the expertise, they don't have the desire to learn deeply about these things. And so I think that's where regulation can shine

and so far as saying, okay, this is what you're allowed to hold for a payment stable coin and making that very clear. And then if you want to be outside of that, that's fine. And then your tokenized hedge fund or your yield coin or whatever it may be. >> Great. Um, we were also discussing uh before this panel CBDC's and tokenized bank deposits as potential competitors to stable coins. What's your take on that? >> Oh yeah, >> let's be democratic. We're all going to start first. We're all going to speak, so you may as well hear us in different orders.

>> Yeah. Yeah. Um I don't think the two are competitive. I think that the two will will exist peacefully. I have a very specific thesis on like what I think is going to happen. I'll like share that. I think it's pretty interesting. Uh both are interoperable. Like both will work and function in the same way. Both will work with exchanges. Both will work with any sort of PSPs. Both will work with the Metamas card.io. Check it out. uh but all of them will be interoperable but both of them will have very specific functions right so what we think tokenized deposits will do that makes us actually really really bullish on them is that they come with depository protection and I think that that's great for people who are looking to do treasury management who are looking to on-ramp into the chain space however people like JP Morgan who we

love because they built you know their tokenized deposit program on polygon or people like HSBC who we love because they also did the same thing we think that those people are not interested in going out and being liquid or going out and doing all the right integrations or going out and being traded at all the exchanges or being available as collateral in very very liquid markets. So what we think is going to happen is there will be tokenized deposits. It'll be the future of on-ramping. It'll be the best way to on-ramp. It'll have depository protections that come along with it which will make customers really safe and happy. And that will expand JP Morgan or whoever's network a little bit. It'll make their network a little bit more, you know, seamless, a little bit whatever. But it's not going to take over the world. It's not going to

replace AUSD or MUSD or USDC or anything like that because they're not going to go out and do that leg work. What there will be is, in my opinion, there will be a clearing function that will take JPMD or whatever tokenized deposit and have a onetoone swap directly into liquid stable coins like Agora that then will go out and do all the liquid work to be useful, right? And I think useful is a better word than liquid there. But useful means I can take it and spend it. I can take it and trade it. I can take it and buy something. You can go get pesos cash here. >> Yeah, absolutely. You can load it on your MetaMask card.io >> or the qua if there they'll take your tokenized deposit on the quaos.

>> I I went to my first qua this week. What an experience. Very very interesting. I also feel like a millionaire when I put take out like $500 in in USD and I'm like have a stack of cash this big. So, I'm going to come here more often and maybe film a music video. Uh but ultimately I I think that like both of them have very very strong footholds in the space. Again, there will be a clearing function of someone be able to take that tokenized deposit and provide one AUSD for it and then AUSD will be liquid. You'll go trade that in the markets and do all this stuff with it. And then when you want to go back home, you swap back one back into JPMD. Or let's say you want to do a a crossber payment in Singapore dollars or whatever. You take a JPMD deposit token.

It goes one to one into AUSD. AUSD is liquid against XSGD, which is another stable coin that we see from straight sex on the the Singapore side. And then there's a very liquid market for that. So maybe you're beating the mid-market rate or you're beating some sort of like crossber transfer method method and then you go do the same exact function on the other side. You take your XS SGD and you swap it for a DBS Singapore dollar or whatever and then you redeem that. And I think that's how the future of crossber payments will work. >> Yeah, I I think I agree with parts of it. So I think there there's great things about tokenized deposits etc. Um I I think one of the things um and I I speak about this with regulators sometimes. One of the other things is that if if you're a bank um you already

have a very solid business model and so you don't have so much need and and you know they'll they'll go back and forth on this. I don't know how many of them will admit it but I think a lot of executives bank view themselves more as an asset manager. You know I I take in debt at zero because I don't really pay my consumers very much. Um, and then I, you know, I emit into the market into a portfolio of mortgages or whatever it is, and I make the spread on that. Um, and so they don't really view themselves as as a suite of financial products, but really kind of the the re revealed preference is they look more like an asset manager basically where, you know, they have this huge portfolio and they get to eat a couple bips off that or however much it may be. Um,

so I'm I'm very skeptical that there is going to be this innovate. I I hope you know, hopefully there is. Uh we're always happy to see more innovation, but I'm I'm skeptical also just because of the way the equity structure works, right? You know, if if you're at Polygon and you guys don't innovate on the infrastructure level, you guys are default dead. If we're at Agor and we don't innovate in stable coins, we're default dead. If you guys are at MetaMask and you don't innovate, you're default dead. Um and and so that's where there really is, you know, a fire under your butt to say, hey, you have to change this. You have to create a better option for consumers or your company doesn't exist. Whereas if you're at, you know, JP Morgan, whatever, you know, many of these banks that are great, um, but they don't have this intrinsic need

to to really deeply. So, I think they'll do it. I think they'll do it half-heartedly. I think the UX won't be great. I think there won't be all these integrations. Same way you're saying, and I do agree that hopefully we land in this nice place where at least they're like a great way to on-ramp and off-ramp more seamlessly. For sure. >> Yeah. I think this gets back to the first thing I was saying around like there's just different types of banking that may as well be different disciplines, right? So like I work on MetaMask. I work on the MetaMask card. I won't pitch it again. Uh but separately I we're also helping Swift build their blockchain, right? Swift is working with Consensus to build an L2, not an L1.

Shout out Swift for being Ethereum aligned, a real L2. And when you think about those type of payments, like okay, there's a card payment, maybe there's a remittance that a mother in Jackson Heights sends to uh her cousin in Colombia, right? A Medí or something like that. Jackson Height's a neighbor in Queens, New York that's very Colombian. Sorry, I should have explained that. But you got these remittances. You got these dispersements where like an Airbnb host or an Uber driver in uh Mendula wants to receive like Agura coins directly to his EOA instead of like a peso to his bank account. And I think there's going to be a lot of innovation there. If you want to work in that kind of space, if you want to build some type of neo bank, talk to these two guys. They're really great. I really highly recommend them.

But on the banking side, like the equivalent of the world GDP gets instructed over Swift every 3 days. Uh there was a single day this year that JP Morgan did $15 trillion in payments. No offense to any individual stable coin company. You put them all together. Uh count to three. 1 2 3. All right. Boom. in the 3 seconds just then two banks alone on Swift probably trade it probably sent more value even like on a Saturday than uh the entire market cap of all the stable coins. So in order to support that volume which is not again for us it's not for you know remittances it's not when you send money to your aunt it's not when you pay for a pack of gum or a beer but for these large

wholesale payments security settlement uh financing of very big projects uh trade finance when this happens over the banks they will have to arrive at a way where they have some type of either tokenized deposits where there's some type of insurance and they can trust each other at least maybe some counterparty risk or like mutually created like pals of money. So, as I mentioned before, the banks have 10 to 50 trillion sitting at other banks just to send payments and they don't want to do that anymore. They don't want to hold it if I'm the bank that the account's sitting with. That's called the Vstro.

It's nostro. It's the same account, but like when it's my account and yours is the Nostro and mine's the Vstro. The Vstros at my account suck because I don't get to make money off of them. They're not part of like my financial reporting. Uh, and the Nostros I hold elsewhere is just lost money, right? And in order to reach the volume of those real wholesale payments that they want to enable with these uh they're probably going to there's been an announcement probably for the Swift thing for other reasons like I think 20 European banks are going to get together and do like a good like 750 billion worth of Eurocoin right that'll be mutually exchangeable between them. There's Santandere I know City joined I thinking. So really it's ultimately a question of stepping back and saying like am I building a neo banking thing? Am I optimizing for

lending and payments formemes? Great. Bitso. I like these guys. Uh the Mexican exchange. They have this thing where they leverage the fact that they're exchange in Mexico and in the US where they have banking relationships and they're quietly capturing a lot of the theme volume. You know, you're like a uh auto parts manufacturer with like 25 employees by leveraging their stable coin p capabilities. They're capturing a lot of the US Mexico corridor. They're probably not going to capture though that you know $150 billion dollar mezzanine financing thing on the new to de Angeles anel or whatever that city is paying banamex to pay bonort or whatever right so it gets back to the specific use case of the money and there I think in that wholesale side tokenized deposits are not just like interesting they'll probably be necessary whereas uh

I have to agree a little bit here I'm not sure they're going to be retalized that well unless there's a bridge I agree with both these both these fellas >> great Um the main stable coins going around are USD denominated stable coins. In the last couple of days, uh many local currency denominated stable coins have been announced. What's the utility for users as institutions of [snorts] these type of stable coins? I think the the local stable business is tough. Um you you need two things. You need you need both of them. You need a friendly regulator that will make clear laws but allow you you know the the risk-free

rate in Argentina isn't risk- free right um as as many many a fund has known and I've met many people you know this week that have done great on Argentine bonds over the past couple years maybe not so much over the past couple decades um and and so that's one thing having the clarity but hey is there going to be a profit incentive you know what what yield can you do what you know underlying can you have under that for example for an Argentine peso number one and then number two you need probably an anchor company that is rather large or specific sector that you're going after u because in the short term until you build up this liquidity flywheel until you build up interoperability on DeFi etc you don't have um this great service right stable coins I think the stable

coin sandwich is not super interesting I think it's interesting when you staying in stables on one side or you're coming in from stables on the other um and if you're just swapping through then it's not interesting I I do think what these local stables will also allow is uh which will be great for consumers is right now you have uh a sandwiching of the on-ramping with the FX. So the same company that's on rampidu is also giving you FX and so you have both of these things together and so I think being able to disambiguate you know having two different layers here um should probably lead to more competitive pricing because a a lot of these you know banks or or whatever it is will offer nowadays oh you know we do fileless swaps for FX and it's like great but your your book looks

like Moses parting the Red Sea you know I got to hop over and it's like quite brutal and and painful um and so I think disintermediating where you'll do these things separately separately or have the option to do them separately will force these people to be more competitive. >> Yes. So um totally agree that like the dollar right now is pretty dominant and and probably will be and there will have to be like the correct regulatory frameworks and the right actors but I do think a lot of them will pop up uh to please people but also to make money. I mean it's both ways right like there's an opportunity people pay in the real world in Swiss Franks, euros, they do it in R&Bs, they do it in yen. In fact, the IMF when they make loans, Argentines know a bit about this, uh, they don't

loan you in dollars. They loan a synthetic basket called the special drawing rights, which is a combination of like R&B, yen, Swiss Frank, euro, dollar, which is recognition. The dollar, although it's big, it's not everything, right? And I think you really have to serve these people. So, like in the card business, I hear like people are like, "Oh, I like your I like your MetaMask card. It's you have a better FX than the others, but I still hate the like people complain to me like, why are you charging me FX for spending USDC in Argentina?" Our card is the lowest FX allowed under our Mastercards rules. Other people like fleece you a little bit, but you're still going to get hit because I can't solve the problem that you want to pay a merchant who who who needs to receive pesos. That's an intractable problem. I

can't let you spend dollars at a place that wants to receive pesos without any FX. That that's that's not viable, right? So, I think there are cases where maybe we could develop better products. Like some people just like their local currencies, you know? I mean, they're not really that bad. Like Brazil has inflation. It's like 7% or whatever, right? 8%. But their federal funds rate is like 13. Technically, if the HA outperforms the dollar for the next two years, I'm better off owning a tokenized Brazilian HAO than a dollar, right? Uh Euro, for example, has been outperforming the dollar this year because of the magic of the blockchain.

I'm walking around New York spending euros with my Metamas card and other cards that allow you to spend your circle. So, that's great. So, like there is a demand. Uh the question is though also like how to serve people. So, like these Argentines that complain that they want to spend USDC, but they're sick of getting hit on FX every time that they make a purchase. I could imagine a world where they take a stable, maybe a yield bearing stable or uh, you know, one that's not, and loan it into something like Ave. They're making the yield, but I was out with two bankers from a bank that won't be named uh the other day, and they they were like, "Hey, tell me more about this DeFi." And they didn't know much about it. I just took out a $200 A loan on the spot to buy lunch for

them. Like, oh, it's that easy. Wow. Okay. So, I could see a world where some of these Argentines are saving in dollars in DeFi and then just taking out little peso loans every now and then to settle that. And I think that would be a really great way for them to diversify their savings, get yield, uh lower that currency risk, but then diminish that FX thing that they're getting hit with because ultimately the on and off ramp is is pretty difficult for folks. And then whether the user wants it or not, people are going to be incentivized to do it, right? Like maybe you have like counterparty risk or whatever with like the maybe the Argentine or the Turkish government. and you worry they're going to default on the bonds or not. But if you don't have that worry, even if the money's going down or whatever, like I

could issue a I'm not saying I will, but it even if it is um you know a currency that's performing badly against the dollar, if I'm backing it with that currency, the users already it's a onetoone and I'm just buying a bond. If I'm making like 14% on the bond as I think that's the average federal funds rate for Brazil, why wouldn't someone make a Brazilian hail, you know, stable coin, right? So I think the combination of people need it. People want it. They want the convenience. And someone's going to step in. I mean, there's enough bankers and crypto people in the world. I don't know. There's a lot of currencies. I don't know when the Botswana Poola, that's a currency, is going to get tokenized, but I can guarantee you like the top hundred, we're probably going to see some interesting stuff.

>> I I think the last thing, which is something that consumers might not have visibility to, is you also have the synthetic ones. So, you've probably heard about these a lot and you guys up here on the panel, but so these are actually backed by dollars that are then hedged against FX and fiat markets. um that way it's a little easier around until the regulation caps up or until it's clear, hey, you know, how much profit are you allowed to seek on these or you know, how how how crazy of an instrument am I allowed to sit in um whether it's peso or or you know, Botswana currency or whatever it is. Um and so there's also the synthetics that I think are more practical in the short term. Hopefully as the regulation comes in, it'll be more clear. Um was just kept catching up with the guys from

Mento who are here um and they do it synthetically for example. Yeah, I mean I agree with [clears throat] what both of them said. I think uh the regulatory climate, how the local regulation plays out, how the local players play out, how the banking system, because obviously every fiatback stable coin is going to have to have a banking partner locally. I think all of that is is critical infrastructure. But overall, I am very bullish on the ability to get more demand for non-USD stable coins. Of course, the USD stable coin is always going to be the most dominant. It's still the reserve currency for like a lot of the world. >> While the dollar is the most dominant, >> huh? I do not I don't want to get too controversial in a dollar maybe will be I'm not saying it won't be but in a

world where all token all all like many currencies are tokenized whatever the strongest one will be the best right yeah >> bitcoin maybe just swap it yeah >> yeah we'll see no I agree with you I agree with you 100% um but like until that happens which is like a healthy very very good paradigm shift until that happens I think you're going to continue to see the same kind of world order that's happened which is USD do USD dominance but I think locally people want local currency like they want commerce in local currency. They maybe want to save in dollars. They may want long-term instruments in dollars, but they want to transact and interact with their friends and whatever in local currency. And like that's very prevalent here, right? Like a lot of people save and hold long-term assets in USDT, but they still prefer or they still shop and

they still do whatever they need to do in local Argentinian pesos. Um, I think that there's just not enough tokenization demand for that. I think that's going to slowly happen over time. I think there'll be more infrastructure and I actually think that I'm very bullish on the ability to with enough liquidity and with enough depth be able to do a lot of this swapping on chain. I think uh an automated market maker is going to be a better mechanism for swapping than uh building with people and salaries and benefits and whatever. So naturally that could that has to be more cost effective. Um but I think uh yeah I think that like you need to have a lot of stuff in place first. I think that's like slowly happening. the regulators, the central bankers, and a lot of these different countries are starting to see that they are eating

away at their own local deposits with USD, USDC, USDT coming in, and that money sits overseas, that money sits outside of the economic system. And they recognize that if they don't come up with something soon that they're going to see a lot of loss market share to a lot of these external stable coins like USDT sits in, not in the US, but like close enough to the US, but not here in Argentina. but how much money is being held in ar in Argentina specifically in USDT. So I think that is starting to motivate people. They're starting to see that that has exploded on the other side of the shore and that they need to kind of respond with something. So I think that will start to give a little bit more like regulatory clarity and once that's there and banking clarity once that's there you'll start to see a

little bit more demand a little bit more infrastructure being built builders starting to play with it and I think that will lead to a little bit more of like this onchain infrastructure that will make it more retail viable. Great. Um, the name of the panel is stable coins turning traditional finance upside down. Are we on track to see that in the next couple of years? >> So again, uh, depends right on the specific vertical within I mean stable coins really I think there's like three things that people are thinking about primarily. It's uh May four. Savings, spending lending saving, spending, lending. Yeah, that's it. Yeah. Right. Saving, spending,

lending. Uh credit, credit. The flip side of lending. Right. So like um you know, since Mesopotamia, these things exist, right? It's not even like everyone associated with capitalism. This stuff exists way before capital. People were saving, spending, lending and feudal like uh middle ages under mechanalism. They did it under communism. They do it everywhere. The question is at which scale and in which cases. So I think certainly like in the neo banking side has been mentioned a few times here whether it is explicitly someone who knows it is crypto right say someone with a MetaMask card using MetaMask to access a perhaps on Polygon they make a loan they get their 34% interest they're outspending it or whether it's in a much more white labelled way as we noted with some of these protections I think people can

feel a lot more comfortable that maybe I'm using some type of neo bankanking app where it's stables on the back end I think superior products are just Uh I mean undeniable that they're going to take up a a pretty large proportion of that market. I think about the interest rate that I get on a savings account in the world financial capital of New York. I'm getting five six 7% depositing a pretty safe like morpho a pulse I'm outspending with a card. Why would I be getting like 65 bips from my bank and when I want a loan I just take it out of a the same way and I'm paying like 5.44% instead of 27 as I do with like an unsecured revolving credit line. Uh when we talk about those bigger banks there there will be uh well the bigger banks are also in retail but I mean they're

big operations big wholesale settlement large like triparty lending the repo market that's going to take a little bit of time mostly not because of the technology but again that challenge of how do you bring the value onto the token right like it was easy for us to get retail stood up and back some USDC with some bonds but suddenly when it's like a I don't know like a $150 billion triparty repo loan Okay, I can create a smart contract for that, but how do I even get the 150 billion worth of asset on a chain? Yeah. >> Yeah. I I think on the consumer side and emerging markets, we we have seen it get flipped upside down. Um I always say, you know, I don't want to bore everyone with the same thing, but I've got paid stables for 5 years now. So before, you

know, people were even talking about, oh, the business model and it looks great and you know, the interest rates were were lower back then. And uh but so I I think there it has already turned things upside down uh quite large. And I think there's um there's an opening up of opportunities where hey, you know, the the the rates for dollars here, most banks won't offer you rates on on dollar deposits here. And so you go to a you go through Polygon, you go into Agora Vault using your MetaMask.io card. Um >> card, >> yeah, hash. Um but I I and so I think there what you'll have is you'll have this great democratization. And what's great about that is it's a no-brainer, right? I mean your your country either has a higher borrow rate or a lower

borrow rate and so on one side either on the credit or on the deposit side um global interest rates will be better right and there'll be less intermediaries like you were saying you know you don't have to pay a bunch of people at a at a you know a bank subsidiary somewhere near your home you can log in on your phone and I think it it also hearkens back to what I was saying before which is um you know you you were saying this like your your US bank doesn't pay a lot and something you also have there is you have price discrimination like I'm sure my grandfather gets much you know not not as great deal from his bank as I do just cuz you know he's bank with them for 60 years. He's stuck there. They know he's stuck there. He has his mortgage or

whatever. Um and he's not going to move off of there. Whereas, you know, maybe I'm a little bit more savvy and so oh you know this this neo bank or this whatever has a great rate and I can get a great rate there and so I'll use that instead. Um and that's very that's kind of the the counter side of what I was saying before which is hey the equity structure in these new companies um in these startups or these you know more mature tech companies is such that you have to innovate whereas hey JP Morgan goes and gets my grandfather he's you know bank with them for 60 years uh he's kind of stuck there and they kind of know and so they don't have to give him a lot to get his business. >> Yeah. No, I I I think when I think of

like institutions, I'm admittedly like a payments guy. So like I think about like Visa and Mastercard a little bit more on the banking side. I see like large PSPs getting into the space, payment service providers who like you know people like Stripe or Aden or Checkout.com or whatever. I think that they're starting to realize that well [clears throat] number one I think these blockchains are just new payment rails. Um I think they're maybe that's like a oversimplification. I think they're like new financial operating systems. But to these existing existing players, these are just new payment rails just like they were adding cards at one point in time or just like they were adding, you know, Swift at one point in time as well. So I think uh I think you're starting to see on the payment side a little bit more like uh like a

fear-based approach like Visa and Mastercard are a great example. Like there's clearly a use case for stable coins and blockchains to disin disintermediate Visa and Mastercard. However, they've done an amazing job injecting cards directly into those floats. card.mas.io. It's an incredible product. I have one. I've been using it locally. It is actually genuinely the best FX right here. Uh, and we're not being paid by MetaMask in any way. I'm like a free evangelist for sure. But no, I actually think >> I have Agro Holdings on Pol and I use Polygon every day as well. >> That's the only It's true. It's [laughter] true.

>> So, uh, I mean, jokes aside, we all love each other. >> I'll spice it up for you a little bit more. So, I'm curious. When do you think we'll see, and we're coming up on time, so I'll do it quick, but I think this will be an interesting one. When do you think we'll see, you know, end to end? Cuz right now it's the card the way you're saying. So, do you think there's a timeline? Do you see the companies, do you see the funding actually coming in for actually the merchant who's selling the coffee to actually receive stable coins, be they local or be they US denominated? >> So, yeah, absolutely I do. I think number one um like on the a little bit more cannibalistic side you're seeing that there's like really interesting solutions being put together with like a combination of hardware providers like

the POS terminals the issuers the acquirers themselves where you can actually like you guys have seen like Arculus like really really cool tech where you can put the actual private key signing ability on the card itself as an NFC chip. So imagine going up to a like terminal tapping your card and it actually checks does this user does this merchant have a stable coin wallet. it does instead of using the scheme rails, let's just go ahead and settle directly on stable coins. And that can all happen within the 5-second off window that a terminal gives you, right? So, I think you're starting to see some more cannibalistic stuff on that side. But I actually think that like Visa and Mastercard can live within that as well because they can give you an authorization data window with having uh like a direct facilitation. So like Visa

and Mastercard don't have to actually do the money movement for them to provide value. They have a like a strong O window. They have a strong data protection layer. the strong connective tissue and that could actually be used to facilitate stable coin settlement but still have tremendous value to have Visa and Mastercard as the data you know intermediary in between that so I think that's going to start happening going forward sorry I'm getting really excited about this but uh that's going to start happening going forward and I think that Visa and Mastercard live within that they just take less economic slice in that in that value transfer but they're still providing a very valuable service >> thank you very much unfortunately we run out of time uh >> we could do this for three we're payments nerds up here. We love this. We be here all day.

>> Thank you so much. >> Thank you very much. >> Thank you for having us. >> Thank you for having us. >> Thank you, Christo. Thank you, Afubo. Give it up for the alle tea and the