Speaker 1: So Trillion is an OTC desk that provides a lot
Speaker 1: of liquidity between stable coins and FIAC currencies across Latin America.
Speaker 1: And what we've been doing from Borderali as standpoint is
Speaker 1: when you're building a payments network, there's two things that
Speaker 1: matter to me. The most one is what's the breadth
Speaker 1: of that network, and the second is what's the depth
Speaker 1: of that network? So how much liquidity do we have
Speaker 1: in all these different markets, and then how broad is
Speaker 1: the coverage that we have across the world.
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Speaker 2: the description. Hey folks, I'm down here at Station three
Speaker 2: NYC in New York's Financial District and joining me is
Speaker 2: Kevin Litinity, who is the CEO of Borderless Xyz. Kevin,
Speaker 2: I'm so happy we're doing this in person.
Speaker 1: Thanks for having me on. It's always more exciting to
Speaker 1: do things irl, you know, I'm just so tired of
Speaker 1: zoom rectangles through screens. I'm excited that I'm meeting you
Speaker 1: face to face, have a real genuine conversation. That's that's
Speaker 1: what the industry is.
Speaker 2: And it's a perfect timing because Kevin the genius act
Speaker 2: pass right. It's stable coin, party time, innovation and much more.
Speaker 2: You know, we had an interview where we went through
Speaker 2: all the great things Borderless is doing, and I think
Speaker 2: this is a very good time for us to be
Speaker 2: chatting posts Genius Acting.
Speaker 1: Look pass USDC is going to two dollars. I'm calling it. Okay,
Speaker 1: it's happening.
Speaker 2: You know some people, I remember the memes are starting
Speaker 2: about that someone posted I invested in USDT and it
Speaker 2: didn't go up yet. That's well no, So Kevin, before
Speaker 2: we get into all things genius act and the future
Speaker 2: is stable coin payments and much more, give the folks
Speaker 2: a quick overview of borderless.
Speaker 1: So with Borderless, what we've tried to do is we've
Speaker 1: tried to completely commoditize connectivity. And what I mean by
Speaker 1: that is when you look at the liquidity that exists
Speaker 1: between stable coins and local fiat currencies, that liquidity is
Speaker 1: highly fragmented around the world. So you have companies which
Speaker 1: we all know is kind of the big brands, right Bridge, BVNK, Bitso,
Speaker 1: Yellow Car, these kind of leading orchestrators and different geographies.
Speaker 1: And then you have a ton, especially in this market,
Speaker 1: of startups that are getting funded that are also providing
Speaker 1: liquidity in a smaller subset of regions, and the reason
Speaker 1: this is so fragmented is still the regulatory landscape. So
Speaker 1: blockchains are global. We all know that tokens are global,
Speaker 1: we all know that, But regulatory frameworks are still super fragmented.
Speaker 1: So just because you have a regulatory license in Brazil
Speaker 1: doesn't mean that suddenly you can operate in the EU.
Speaker 1: So you've got all these not small but fragmented local
Speaker 1: liquidity providers. And in the traditional payment space, we've solved
Speaker 1: this with networks, the Visa network, the MasterCard, the Swift network.
Speaker 1: Nobody is licensed everywhere, even JP Morgan Chase doesn't have
Speaker 1: regulatory licenses in one hundred and ninety five different countries.
Speaker 1: And imagine a world in which every bank needs to
Speaker 1: do an API integration into every single other bank around
Speaker 1: the world in order to transact with them. Completely unscalable
Speaker 1: and completely solved by standards. I connect to Swift. Swift
Speaker 1: is connected to all these other banks. Therefore we can
Speaker 1: transact together. That doesn't exist in stable points. If Bridge
Speaker 1: wants to transact with yellow Card, Bridge needs to go
Speaker 1: into a partnership with and an integration into Yellow Card.
Speaker 1: So what Borderalist has done is try to build that
Speaker 1: connectivity where you connect once into borderless and borderless is
Speaker 1: connected into the borderless network which is now fifteen and growing,
Speaker 1: regulated counterparties and all these different jurisdictions across the US, EU,
Speaker 1: Latin Africa, Southeast Asia. So you can connect one time
Speaker 1: and then enable all these different counterparties that you can
Speaker 1: transact with to create these cross border products and global
Speaker 1: payments products.
Speaker 2: So you're like a hub connecting all these bangs and
Speaker 2: payment service companies via stable coins.
Speaker 1: That's exactly what we do. So pretend that you're a
Speaker 1: payments company or an orchestrator and you're licensed in Columbia
Speaker 1: and Brazil. You're like, great, I want to create a
Speaker 1: corridor into South Africa. I want to create a corridor
Speaker 1: into China. I want to create a corridor into the EU.
Speaker 1: I need to now have access to a network of
Speaker 1: regulated counterparties in South Africa, in China, in the EU
Speaker 1: to do that other leg of that transaction. So if
Speaker 1: I connect to the border as network, now I have
Speaker 1: all these counter parties already built in that I can
Speaker 1: choose from, and I'm basically the way we think about
Speaker 1: it is, in this case, you're the originator and then
Speaker 1: these counterparties are the beneficiaries, and now you can do
Speaker 1: and then to end either on ramp off ramp stable
Speaker 1: cooin sandwich, treasury management, whatever that looks like. Right, So
Speaker 1: we don't work on the liquidity or the regulatory licenses
Speaker 1: in any country. We work on this connectivity, messaging and
Speaker 1: communications later where we say, great, there's already one hundred
Speaker 1: companies out there that are licensed in all these different
Speaker 1: countries providing the liquidity. How do we connect them all
Speaker 1: in one platform that makes it really easy for people
Speaker 1: to use.
Speaker 2: So the real world use case, just putting myself in
Speaker 2: this situation, if I wanted to send a friend in
Speaker 2: Hong Kong some money and I want to send him USDC,
Speaker 2: you could help connect that even if he's not using
Speaker 2: the same bank or same payment provider that I am.
Speaker 2: So let's say I send it through JP Morgan and
Speaker 2: he has I don't know, with some bank in the
Speaker 2: Asian markets. You essentially you're helping to build the interoperability
Speaker 2: in the bridge to have that go through seamlessly.
Speaker 1: Basically. So let me give you a great customer example.
Speaker 1: There's a new kind of stable cooin focus in THEO
Speaker 1: Bank that launched recently called Polar, and Polar is all
Speaker 1: about and I love this example because it's a niche market,
Speaker 1: which is like use cases, I don't think of that.
Speaker 1: I love they're specifically targeting like cruise ship workers because
Speaker 1: cruise ship workers have massive payments problems in the sense
Speaker 1: that they're getting paid from us EU kind of other countries.
Speaker 1: And the vast majority of why cruise ship workers go
Speaker 1: into that industry, like why would you work on a
Speaker 1: cruise ship right You're gone from home months at a time.
Speaker 1: That's a giant sacrifice, mostly to send money back home.
Speaker 1: So they then need to get payroll processing is straightforward.
Speaker 1: But when I get paid to the cruise ship worker,
Speaker 1: how do I then send that money back to the Philippines,
Speaker 1: back to China, back to all those things. There's liquidity
Speaker 1: providers in each of those regions, and the way that
Speaker 1: Polar's doing it is by connecting to Borderless and then
Speaker 1: they're using the borderless network of liquidity providers all around
Speaker 1: the world to say great, it doesn't matter if you
Speaker 1: live in country ABCD or f you can off ramp
Speaker 1: your USDC balance in the Polar app to your family's
Speaker 1: FIAT bank account. Basically, anywhere in the world because they're
Speaker 1: connected to borderless, and borderless then connects them to these
Speaker 1: regulated liquidity providers all over the world.
Speaker 2: Interesting and so essentially you're a new modern day Swift,
Speaker 2: if you want to call it that.
Speaker 1: I think the VCS hate when we use the Swift
Speaker 1: analogy because Swift isn't a for profit, you know, giant business.
Speaker 1: But that's effectively what we've done right in capital markets.
Speaker 1: A lot of this is like an ECN is one
Speaker 1: way to think about this, right, So you connect to
Speaker 1: the ECN, the ECN is connected to a bunch of venues.
Speaker 1: Because what you can imagine after connectivity is now we
Speaker 1: work on optimization. Right, So there's five counterparties that are
Speaker 1: providing liquidity between USDC and BRL in Brazil. They're all
Speaker 1: offering it at different rates. So now you get into
Speaker 1: some like best execution and things like that. Of great,
Speaker 1: if you have a bunch of providers on a network,
Speaker 1: now I can start to run Algos on top of
Speaker 1: this network, and I can say, hey, provider A is
Speaker 1: at X, provider B is at Y, Provider C is
Speaker 1: at Z right now this second, in real time, the
Speaker 1: best FX rate is provider B do you want to
Speaker 1: route the transaction through their liquidity right now? In this
Speaker 1: second it's provider C let me route there. And those
Speaker 1: are the things that if you connect directly to a
Speaker 1: provider like a bitso as an example, you get bitso's
Speaker 1: rate no matter what. If you connect to bitso through borderless,
Speaker 1: you can also connect to three other people and now
Speaker 1: they're almost bidding for the order flow and you're able
Speaker 1: to route the transaction in real time to whoever has
Speaker 1: the best FX versus just being stuck with one person's rate.
Speaker 1: So there's all these cool things that you get to
Speaker 1: start to build on top of the liquidity.
Speaker 2: Oh sure, and that's great. I mean to have that option.
Speaker 2: And are you supporting institutions mainly or is it retail
Speaker 2: or the retails on the end of the respective.
Speaker 1: It's often on the end. So our entire business is
Speaker 1: B to B. We're an infrastructure company. So we provide
Speaker 1: our platform and our network to originators that look like
Speaker 1: you know, trust companies in the US, to orchestrators around
Speaker 1: the world, and to some of the like FinTechs, the
Speaker 1: neo banks, the PSPs, people like that, and then they
Speaker 1: in turn serve both corporates that are looking at like
Speaker 1: treasury management repatriation. You know, SpaceX does a lot with
Speaker 1: stable coins to repatriate funds back into the US, and
Speaker 1: then they also serve end users, right, So think creator economy,
Speaker 1: neo banks, think consumer cross border remittance apps, things of
Speaker 1: that nature. Those are kind of the application layer is
Speaker 1: our customer, and then they're taking it to their user
Speaker 1: and corporate customer base.
Speaker 2: That makes sense.
Speaker 1: So B to B two C B two B two B.
Speaker 1: There's a lot of bs and twos in there, but
Speaker 1: generally that's what works.
Speaker 2: I read recently that you point or a trillion digital
Speaker 2: joined to borderless XYZ network. Tell us about that.
Speaker 1: So trillion is an o TC desk that provides a
Speaker 1: lot lot of liquidity between stable coins and FIAC currencies
Speaker 1: across Latin America. And what we've been doing from border
Speaker 1: as standpoint is when you're building a payments network, there's
Speaker 1: two things that matter to me. The most one is
Speaker 1: what's the breadth of that network and the second is
Speaker 1: what's the depth of that network. So how much liquidity
Speaker 1: do we have in all these different markets? And then
Speaker 1: how broad is the coverage that we have across the world. Right,
Speaker 1: can we support every single country on planet Earth today?
Speaker 1: The answers no. I dream of a day in which
Speaker 1: the answer is. The Borderless Network is literally in every
Speaker 1: non sanctioned country in the world. And you know, Trillion
Speaker 1: is part of our you know, big push on expansion
Speaker 1: where we've been doing some transaction processing with their liquidity
Speaker 1: for some corporates that are repatriating funds actually from Brazil
Speaker 1: back to the US, very specifically with Trillion. And the
Speaker 1: more and more we started to talk with the team,
Speaker 1: the more they're like, hey, we don't want to just
Speaker 1: kind of do these one off things, like we want
Speaker 1: to actually join the Borderless Network and we want to
Speaker 1: be one of the regulated counter parties that's on the network.
Speaker 1: And you know, when there are people that need to
Speaker 1: consume our liquidity, and our liquidity is are the best
Speaker 1: possible price. We want to be able to fill those orders.
Speaker 1: And when we want to consume liquidity that we don't
Speaker 1: have because they are licensed in a subset of countries, right,
Speaker 1: They're not licensed in one hundred and ninety five countries
Speaker 1: around the world, we want to be able to consume
Speaker 1: that liquidity for the network. So a lot of the
Speaker 1: people that are joining the network are joining it as
Speaker 1: both a beneficiary where they're filling transactions when they win
Speaker 1: from a price standpoint, and then they're also originating transactions
Speaker 1: when they need liquidity in areas they don't cover.
Speaker 2: That makes sense. It's exciting. And there's a question I
Speaker 2: want to ask you, but I want to get ahead
Speaker 2: of myself because I'm been too excited about what's happening
Speaker 2: right now. But you know what else is new? I
Speaker 2: around border lists that you want to highlight, you know
Speaker 2: that maybe you guys recently launch or whatever it may be.
Speaker 1: Oh, just the growth has been really really fun, right,
Speaker 1: It's we're talking about this before the cameras were rolling.
Speaker 1: It's it's a good time to be in the stable
Speaker 1: point business, right And we just had our our quarterly
Speaker 1: board meeting last week and we were pulling up like
Speaker 1: volume graphs and things like that. Q two volume was
Speaker 1: quite literally ten x Q one volume. That's I've been in,
Speaker 1: you know, the blockchain world professionally since twenty sixteen, which
Speaker 1: is kind of scary at the same time as you
Speaker 1: it's weird to think that's been like nine years and
Speaker 1: we've seen a lot of cycles and a lot of growth,
Speaker 1: but ten x in a quarter that's kind of insane. Yeah,
Speaker 1: And I'll be honest, I don't know how much of
Speaker 1: that is super sustainable right like I do think the
Speaker 1: market is very frothy. There's a lot of hype right now.
Speaker 1: There's a ton of stable coin use cases that I
Speaker 1: would argue not only don't make sense, but we have
Speaker 1: the data to refute that they don't work. That people
Speaker 1: are still super excited about, so whatever. But that just
Speaker 1: shows the demand right now is off the charts for
Speaker 1: people that are whether they end up doing it sustainably
Speaker 1: or not, are legitimately looking at and trying to understand
Speaker 1: should they move part or all of their transaction flow
Speaker 1: to the stable coins, which to them represents, you know,
Speaker 1: instantly settle programmable money versus kind of the legacy structures
Speaker 1: we've had before.
Speaker 2: So would the Genius Act pass into law for those
Speaker 2: who don't know, that's a stable coin legislation that President
Speaker 2: Trump just signed into law last week. Are you seeing
Speaker 2: if your phone ringing off the hook more demand coming in?
Speaker 1: I think, you know, when we think about the borderless network.
Speaker 1: We started the company about a year and a half ago,
Speaker 1: and one of the questions that we get the most often.
Speaker 1: Now since Circle launched their payments network called CPN, the
Speaker 1: question is okay, well, what's the difference between borderless and CPN?
Speaker 1: And when we started the company, there wasn't really such
Speaker 1: a thing as a payments network, right, that didn't exist.
Speaker 1: CPN didn't exist. This concept was completely new, and it
Speaker 1: was really difficult for people to understand what we did.
Speaker 1: They're like, wait, so are you a provider or are
Speaker 1: you a blockchain or are you a stable coin? Like
Speaker 1: we're none of those things. We're a payments network. And
Speaker 1: people are like, what is that? Why do I need it?
Speaker 1: Et cetera, et cetera. Now that's will come out with CPN.
Speaker 1: That's massively validated the fact that a payments network should
Speaker 1: exist as a category. Right, Circle is, you know, the
Speaker 1: publicly traded giants of the stable coin space. That there
Speaker 1: is the market cap giants of the stable coin space.
Speaker 1: Circle is the publicly traded giant. So that to have
Speaker 1: the biggest publicly traded company and stable coins create a
Speaker 1: product that looks very similar to ours is massively validat
Speaker 1: into the business model. And our super simple answer now
Speaker 1: is well, we're a stable coin agnostic version of CPN. Right,
Speaker 1: CPN has no incentives and I'm sure they will at
Speaker 1: some point, very little incentive to promote competing stable coins
Speaker 1: to USDC, euroc et cetera. And now that the Genius
Speaker 1: Acts has been passed, there's so much more interest in
Speaker 1: launching new stable coins. That is perfect for us because
Speaker 1: we're the stable coin agnostic version. If the entire world
Speaker 1: collapses to USDC, there is no need for borderless just UCPN.
Speaker 1: That's it. If the entire world doesn't collapse onto one
Speaker 1: stable coin, which we firmly believe it won't, and right
Speaker 1: now we're in this expansionary environment on stable coop issuance
Speaker 1: with the Genius Act. Then the network layer needs to
Speaker 1: be credibly neutral. It can't be built by a stable
Speaker 1: coin because that stable coin will always buy us its
Speaker 1: own token. It can't be built by a layer one
Speaker 1: blockchain because that blockchain will always buy us its own network.
Speaker 1: It can't be built by a wallet provider because that
Speaker 1: wallet provider will always buy us the assets in its
Speaker 1: own wallets. Right, it can't be built by any of
Speaker 1: these market participants and be credibly neutral. So the only
Speaker 1: way to build a credibly neutral payments network is something
Speaker 1: like Borderless, which is not a layer one, which is
Speaker 1: not a token, which is not a wallet provider, which
Speaker 1: is not you know, any of these things, and is
Speaker 1: just quote unquote a payments network.
Speaker 2: Yeah, that that absolutely makes sense to your point of
Speaker 2: being agnostic. There's so many stable coins out there already
Speaker 2: to market, and then we have news that banks are
Speaker 2: going to launch your own. Oh yeah, Bank of America
Speaker 2: is just I saw I think it was yesterday Western
Speaker 2: Union CEO speaking about they want to integrate stable coins.
Speaker 2: So with this legisy in place, almost anyone can launch
Speaker 2: your own stable coin. We don't know which ones are
Speaker 2: going to be successful, but there's going to be more
Speaker 2: than one.
Speaker 1: Oh there's going to be a giant explosion.
Speaker 2: Right.
Speaker 1: So, the more that we've talked to institutions previously about
Speaker 1: launching stable coins, the number one thing that's been holding
Speaker 1: them back. It hasn't been technology, it hasn't been kind
Speaker 1: of business case. It hasn't been executive sponsorship or interest
Speaker 1: from the leadership teams. It's been regulatory uncertainty. And companies
Speaker 1: like Boba have basically said, look, we are going to
Speaker 1: launch a stable coin as soon as we have a
Speaker 1: legal framework which our compliance and risk teams can be
Speaker 1: comfortable with. And now with Genius, that's all starting to happen,
Speaker 1: right and that I think is going to see a
Speaker 1: giant explosion, and we can jump into what stable coins
Speaker 1: will win in which ones well, when I'm happy to
Speaker 1: put some theories out there, but I think we're gonna
Speaker 1: see a giant explosion of stable coin issues.
Speaker 2: And to your point of being an agnostic, you're also
Speaker 2: interoperable in many different blockchains exactly, multi multi geography, multi blockchain,
Speaker 2: multi stable coin, multi infrastructure provider. So we have integrations
Speaker 2: and partnerships with like fire Blocks, Utila Defense, working on
Speaker 2: some others. We're looking at accounting and reconciliation platforms like
Speaker 2: the bitwaves and tres Finances of the world. We're looking
Speaker 2: at compliance vendor integrations like the sok here, some subs, personas,
Speaker 2: et cetera.
Speaker 1: Of the world. So that really when you think about
Speaker 1: building a stable coin stack, at the end of the day,
Speaker 1: we want Borderless to be that glue that holds it
Speaker 1: all together. It's say, great, if I'm using borderless to
Speaker 1: connect to all of this liquidity all over the world,
Speaker 1: why am I not also using borderless, to connect to wallets,
Speaker 1: to connect to compliance systems, to connect to accounting and
Speaker 1: reconciliation systems, to connect to risk systems, et cetera, et cetera. Right,
Speaker 1: connectivity is more than liquidity. Maybe that's a little bit
Speaker 1: of a of a teaser, some alpha into what are
Speaker 1: you know, three or five year roadmap looks like, But
Speaker 1: that's kind of how we view the business.
Speaker 2: Yeah, that absolutely makes sense. Expect everybody in their grandma
Speaker 2: to launch a stable coin now, and is this market
Speaker 2: going to get oversaturated and it had to be some
Speaker 2: consolidation at some point.
Speaker 1: I think everybody in their grandma will launch a stable coin.
Speaker 1: I think the vast majority of those stable coins will fail.
Speaker 1: There's three models that I think may do well, and
Speaker 1: I think the model which will fail completely across the
Speaker 1: board is this like third party, single issuer model. So
Speaker 1: what Circle and Tether have done. That market is dead,
Speaker 1: that opportunity no longer exists. It's owned by Circle, it's
Speaker 1: owned by Tether. If you're a tech startup saying hey,
Speaker 1: you know what, I'm just going to build a stable
Speaker 1: coin and that's going to be my business, that's not
Speaker 1: gonna work. The ones that I'm bullish on are one
Speaker 1: people with distribution. So if you look at Circles as
Speaker 1: one filing when they did their IPO, and you look
Speaker 1: at how much they paid a coinbase and others for distribution,
Speaker 1: anybody that has a built in distribution base can avoid
Speaker 1: those costs, which is absolutely massive. So in that realm,
Speaker 1: I'm thinking traditional payments companies, so the Western Union, the
Speaker 1: money Grams, et cetera of the world, who already have
Speaker 1: all this distribution. Super simple for them to flip on
Speaker 1: a stable coin, right, Well, simple is relative, but you
Speaker 1: get my point. Oh, you know Paypals kind of started
Speaker 1: doing this with PYUSD. They own a tremendous amount of
Speaker 1: distribution themselves. Why give that to someone else. The corporates
Speaker 1: that have a large entrenched customer base, so Amazon stable coin,
Speaker 1: Walmart stable coin, Samsung stable coin, you know these sorts
Speaker 1: of companies. I'm very bullish on those because they have
Speaker 1: existing giant customer ecosystems that they can push those into.
Speaker 1: And then I'm bullish on bank owned stable coins BOVA I.
Speaker 1: You know, they've made some announcements. I would imagine JPM
Speaker 1: they tokenic deposits. I would imagine like b and Y
Speaker 1: and others are also looking at this. And I had
Speaker 1: a conversation with someone who works at a very large
Speaker 1: US institution maybe three or four months ago, and I
Speaker 1: asked him because he's the head of the blockchain stuff there,
Speaker 1: and I was like, why aren't you guys doing anything
Speaker 1: with stable coins yet? It seems so obvious. And what
Speaker 1: he said to me was basically, Kevin, when you operate
Speaker 1: at the scale at which we operate, we think a
Speaker 1: lot around counterparty risk. And our counterparty risk today when
Speaker 1: we hold dollars is the FED in the US government
Speaker 1: our counterparty risk when we hold USDC pre IPO is
Speaker 1: this tiny fintech startup that's not even public yet called
Speaker 1: Circle And granted now Circle as ipo'd there continued to
Speaker 1: grow and you know, Jeremy's built up a phenomenal business,
Speaker 1: and I wish all the best to Circle. I think
Speaker 1: a lot of the giant when we think of enterprise,
Speaker 1: like the actual enterprise end of enterprise is looking at
Speaker 1: this and saying, Okay, my counterparty risk profile changes from
Speaker 1: the FED in the US government to Circle. I don't
Speaker 1: think so, but my counterparty risk profile changes to be
Speaker 1: of a or to JPM. Great, we already bank at JPM.
Speaker 1: We already have two hundred million dollars in corporate cash
Speaker 1: sitting at JPM. Okay, we could take a JPM coin. Now,
Speaker 1: the counterparty risk profile it changes from a regulatory standpoint
Speaker 1: because you know, insurance things change and liability, but your
Speaker 1: fundamental counterparty remains JPM or BOVA or Wells or you
Speaker 1: know one of the top US money center banks that's
Speaker 1: already managing your treasury that you already have comfort with,
Speaker 1: versus switching your counterparty risk to someone completely new. So
Speaker 1: I'm really bullish on that segment.
Speaker 2: Yeah, and even the circles, right, the small companies now
Speaker 2: they come in line because they're being audited and reviewed
Speaker 2: because of this legislation. So even if you had some skepticism,
Speaker 2: but Circle, this is a small startup. Okay, they got
Speaker 2: distribution on coinbase, but it's not like you said, JP
Speaker 2: Morgan or some of these big banks. But now they
Speaker 2: have to validate that they have US treasuries backing their reserves,
Speaker 2: the audits and much more. It just eliminates that friction.
Speaker 1: It creates the consumer protections that I have been missing. And
Speaker 1: I think one one kind of more framework that I
Speaker 1: think is interesting is the partnership framework. So if you
Speaker 1: think about I think USDG is leading the game here
Speaker 1: what they've done with the consortium saying Okay, going at
Speaker 1: it alone isn't going to work in the market anymore. Right,
Speaker 1: That was the twenty sixteen to twenty eighteen play. Now
Speaker 1: we need to create critical mass, and maybe we ourselves.
Speaker 1: We're talking about you know, people that have large amount
Speaker 1: of distribution Walmart, Amazon, et cetera, launching stable coins. Maybe
Speaker 1: we're a smaller company that doesn't have that level of distribution,
Speaker 1: but if we can pool that distribution with a bunch
Speaker 1: of other companies. So you look at USDG and it's
Speaker 1: Paxos plus Anchorage plus robin Hood plus world Pay plus
Speaker 1: I think Visa. Now I wasn't sure if that was
Speaker 1: a rumor or not. Maybe it was a rumor, but
Speaker 1: putting together this consortium of companies behind a stable coin
Speaker 1: that I think is interesting.
Speaker 2: Yeah. When I saw that, I was like, wait a minute,
Speaker 2: this this is interesting because the big names that are involved,
Speaker 2: and it's global, you know by the name what is it.
Speaker 1: A global dollar now global dollar?
Speaker 2: Yeah, And I saw Mike Novagrass's firms was also involved
Speaker 2: and it's very interesting. So maybe we could see more
Speaker 2: of these different types of consortiums create.
Speaker 1: I think there's going to be a consortium play and
Speaker 1: I think the consortiums are going to be a winner
Speaker 1: take most and today Global Dollar Network was kind of
Speaker 1: the first to move right there, the first to create
Speaker 1: this consortion model, and they should get the credit for
Speaker 1: kind of creating this contortion model. You know, Circle tried
Speaker 1: to do it with Center way back in the day
Speaker 1: and then it just became coinbasins, but Global Dollar Networks
Speaker 1: actually pulled it off. And I think we're going to
Speaker 1: see quite a few of those enter the market. And
Speaker 1: whether it's USGG that wins or doesn't, I don't know.
Speaker 1: But we're you know, we've had the privilege of being
Speaker 1: pretty close to that team and we know some of
Speaker 1: the way that they're thinking about this, and I'm super
Speaker 1: bullish on the way that they're thinking about it.
Speaker 2: Yeah, it's fascinating. It's it's a stable coin wars right state.
Speaker 1: That is you need like some Star Wars soundtrack with
Speaker 1: the scrolling credits and the stable coin wars, but that is,
Speaker 1: that is what's happened. Look, the most profitable business on
Speaker 1: planet Earth by employee is a stable coin. And I
Speaker 1: don't care if you're bullish or bearish on crypto. You
Speaker 1: gotta like the fact that it's the most profitable company
Speaker 1: on Earth by employee, Like in any cfo's office at
Speaker 1: any company around the world. That's gonna raise the attention
Speaker 1: and that's gonna get serious consideration.
Speaker 2: What do you think happens to Tether? You know, given
Speaker 2: at it's King of the Hill, has the largest market share,
Speaker 2: It's had some issues in the EU with the MICA regulations.
Speaker 2: It sounds like they're gonna be okay to us. The
Speaker 2: CEO said they're going to have a top four accounting firm,
Speaker 2: do the full audit and all that jazz. Do you
Speaker 2: think they lose market share over time?
Speaker 1: So for the US, yes to the top four thing.
Speaker 1: Trump also called out Paolo by name when he was
Speaker 1: signing the Genius Act. So I don't know what happens
Speaker 1: behind closed doors. Unfortunately I was not invited to be
Speaker 1: in the room.
Speaker 2: But lut Nick came out, I think at Dablos last
Speaker 2: year and said Cantor is backing Tether. We review their reserves.
Speaker 2: They have the money, so that's maybe the fix.
Speaker 1: I think that's the fix. And look, I think Tether
Speaker 1: has gone through its fair share of struggles as it's grown, Right,
Speaker 1: I've been very critical if Tether at points in the
Speaker 1: past when I maybe I'm right, maybe I'm wrong, didn't
Speaker 1: really believe that they were fully reserved in the right
Speaker 1: way that they should have been, and that was kind
Speaker 1: of a you know, a general market feeling. I think
Speaker 1: if that has been the case, I think Tether of
Speaker 1: today is very different from Tether of twenty eighteen. And
Speaker 1: you know, I think what Circle is doing is they're
Speaker 1: making a big push around regulated environments, so Mike and
Speaker 1: the eu US things like that, where they've really tried
Speaker 1: to position themselves as and I don't mean to call
Speaker 1: Tether unsophisticated, they're not, but Circles really positioned themselves as
Speaker 1: the sophisticated stable coins right for institutions, for enterprises. This
Speaker 1: is super regulated, this is super you know everything. And
Speaker 1: where Tether's done a phenomenal job is in organic growth.
Speaker 1: Like I always think of Circle as the stable coin
Speaker 1: in the Ivory Tower and of Tether as the stable
Speaker 1: coin for the people. Right where they've gone into emerging
Speaker 1: markets where dollarization is super important. Argentina, Brazil, Colombia, Mexico,
Speaker 1: parts of Latam, parts of Africa, South Africa, Kenya, other
Speaker 1: parts there. They've gone really big into Southeast Asia, Philippines
Speaker 1: and Thailand and those and they're kind of that organic,
Speaker 1: grassroots stable coin where if you are outside the US
Speaker 1: and the EU and you ask someone about stable coins,
Speaker 1: I don't know if it's it's more than nine out
Speaker 1: of ten. I don't know if it's ninety nine out
Speaker 1: of one hundred, but it's more than ninety out of
Speaker 1: one hundred. People go oh USDT or oh tether and
Speaker 1: they have this grassroots, real world adoption by consumers everywhere.
Speaker 1: And then tether's gone institutions, enterprises, Wall Street, et cetera,
Speaker 1: et cetera, And ultimately, I want to think the people win.
Speaker 1: That's what I want to think, you know, That's that's
Speaker 1: the feel good story that we tell ourselves. But the
Speaker 1: stable coin wars are for sure heating up and will
Speaker 1: be interesting to see how this market changes.
Speaker 2: To add to the tether thoughts that you shared, anecdotally,
Speaker 2: the vendors I've worked at overseas, they don't ask for USDC,
Speaker 2: they ask for tether all the time. They're like, no,
Speaker 2: we want USDT. So you're a spot on on that.
Speaker 1: Well, the liquidity is different, right. So one of the
Speaker 1: things that we can do on the Borders platform to
Speaker 1: show ourselves a little bit, which I think is legitimately
Speaker 1: kind of interesting, is we have all these real time
Speaker 1: price feeds from all these different people providing stable coin
Speaker 1: liquidity all over the world, right, and these price feeds
Speaker 1: are not public, So this is kind of like interesting
Speaker 1: data that we sit on that a lot that not
Speaker 1: a lot of other people see it, especially at this extent,
Speaker 1: so across I think, you know, sixty seven countries now
Speaker 1: we're seeing real time liquidity feeds on price. And one
Speaker 1: of the things that we can do is we can
Speaker 1: look at it on a per token basis and I
Speaker 1: can tell you what the usd cfx rate is versus
Speaker 1: the usdtfect rate, and that's a function of how deep
Speaker 1: the liquidity is in those markets. And when you get
Speaker 1: outside of the US and the EU, there's pretty significant
Speaker 1: price differences between USDC rates and USDT rates because the
Speaker 1: liquidity in USDT is so much deeper, the adoption is
Speaker 1: so much greater that I think that's the uphill battle
Speaker 1: for circle. It's like, yes, you know, if we put
Speaker 1: everything on a level playing field, both tokens are worth
Speaker 1: a dollar, right, But that doesn't mean that both tokens
Speaker 1: are worth the same amount of ZARH.
Speaker 2: That is interesting, and I can see how each other
Speaker 2: has that first move advantage there and they put their
Speaker 2: stake in the ground. But not so much institutions but retail.
Speaker 2: And because this technology obviously makes things a lot better
Speaker 2: in moving money, settling instantly, lower fees, why would I
Speaker 2: even want to move over unless there's some great incentive.
Speaker 1: Interesting, when everyone's asking for USDT, there's going to be
Speaker 1: a price difference. If you have USDC instead, you have
Speaker 1: the asset that people don't want. What is the price difference?
Speaker 1: And we can actually quantify that in real time across
Speaker 1: sixty something countries.
Speaker 2: Wow, So, Kevin, hard question. Are we hitting a one
Speaker 2: trillion dollar market cap for stable coins by next year? Oh?
Speaker 1: That is a hard question to answer. I'm gonna answer
Speaker 1: a different question first, and then I promise I will
Speaker 1: come back to the more speculative question I was talking to.
Speaker 1: I was on an NPR segment earlier last week, and
Speaker 1: one of the things that I said that didn't make
Speaker 1: it into the final edit, which I'm really mad about,
Speaker 1: Which is what I'm saying it again, is I think
Speaker 1: that over the next five to ten years, the vast
Speaker 1: majority of commerce will operate on stable coin rails, and
Speaker 1: I would bet almost anything on that fact being true.
Speaker 1: I think that where we are sitting today is kind
Speaker 1: of the you know, the the Internet in the nineties,
Speaker 1: And if you went to somebody in the nineties and
Speaker 1: you predicted glass rectangles sitting in all of our pockets,
Speaker 1: constantly connected with five G connections to all the world's information,
Speaker 1: people would have thought that you were absolutely insane. But
Speaker 1: it wasn't one hundred years to get from the nineties
Speaker 1: to the twenty tents and now the twenty twenties. And
Speaker 1: I think as people we are terrible at understanding exponential growth.
Speaker 1: We just assume that everything is linear. That's how our
Speaker 1: brains are wired. But adoption is never linear. The pace increases, increases, increases, increases, increases,
Speaker 1: and all of a sudden you realize three years ago
Speaker 1: this doesn't even exist. Right, Just for how long of
Speaker 1: human history have humans been able to fly? It's not
Speaker 1: that big of a part of human history. But now
Speaker 1: we take going to the airport flying to Singapore for
Speaker 1: Token twenty forty nine as a completely granted thing that
Speaker 1: the you know, moves all over the world about it. Yeah, so,
Speaker 1: I you know, I think we'll hit some very interesting
Speaker 1: market gaps in the next twelve months. I actually think
Speaker 1: we'll then see our retracing back from that. I think
Speaker 1: we are in a hype cycle, so I think we're
Speaker 1: gonna see a ton of adoption. I'd love to see
Speaker 1: it hit those numbers, and then I think it's gonna
Speaker 1: pull back for a few years. And then I think
Speaker 1: we're going to see another option wave, and that next
Speaker 1: adoption wave is going to make this look like child's play.
Speaker 1: You think in that's like twenty thirty, because you have
Speaker 1: we just got the legislation. There needs to be R
Speaker 1: and D trial and error testing.
Speaker 2: Maybe the bear market wipes out some of the players
Speaker 2: who are now running your business well, but then you
Speaker 2: know the ones who are building great tech and they
Speaker 2: come out of the bear market and they get the
Speaker 2: big adoption by twenty thirty.
Speaker 1: That's exactly what I think. I think we've got kind
Speaker 1: of a yearish left on this market cycle, and then
Speaker 1: we pull back and we go into a bear for
Speaker 1: a few years, and that bear is going to be
Speaker 1: the perfect time for R and D, for large corporate initiatives,
Speaker 1: for a lot of large banks to be building. Right,
Speaker 1: the banks aren't going from legislation today to launch products
Speaker 1: in twelve months. That's not the speed at which these
Speaker 1: institutions move. They move at the speed of years. So
Speaker 1: that bear market's going to be a ton of building.
Speaker 1: And then then twenty thirty ish bull run is going
Speaker 1: to come back, and that's going to be everybody at
Speaker 1: an enterprise and institutional level getting into stables. It's not
Speaker 1: just going to be the fintech startups.
Speaker 2: Or you know, from an adoption standpoint. I'm curious about
Speaker 2: your perspective on this because we talk about the demand
Speaker 2: for USDT outside the United States, and people are familiar
Speaker 2: with the brand. But are we gonna eventually get to
Speaker 2: a world where I, like, I don't think about my phone.
Speaker 2: You know, I'm carrying all these apps, I'm connected to
Speaker 2: the internet. I'm just gonna move money. I'm not thinking
Speaker 2: this is a stable coin. Here's what I can do
Speaker 2: with it. But eventually, these big players getting in Western
Speaker 2: Union and banks it's just going to move faster, cheaper fees,
Speaker 2: and I don't need to think about it.
Speaker 1: Yeah, I'll flip the question back to you. What database
Speaker 1: architecture does the chase app use?
Speaker 2: I have no.
Speaker 1: Idea and you don't care. Yeah, exact same thing. I
Speaker 1: think in the next adoption wave that we see from
Speaker 1: a retail perspective, you may not even know it's a
Speaker 1: stable coin. To be completely honest with you, I think
Speaker 1: the word stable coin disappears from the lexicon. It's going
Speaker 1: to be I'm sitting in an emerging markets country. I'm
Speaker 1: pulling up my banking app, whether it's a traditional banking
Speaker 1: app or an eobanking app through a fintech, Whether like
Speaker 1: I pull up my bank and in my bank three
Speaker 1: thousand dollars, whether those dollars are in tether, are in circle,
Speaker 1: are in some bank issued stable coin, are actually a
Speaker 1: deposit token, or some consortium stable coin. I'm not even
Speaker 1: gonna know as a consumer, nor am I gonna care.
Speaker 1: All I know is that I, in country X, am
Speaker 1: able to hold a balance of three thousand dollars in
Speaker 1: USD and I'm able to do that because of stable coins.
Speaker 2: Yeah, yeah, definitely. I mean we've seen the s curve
Speaker 2: adoption of technology and the perations. You don't eventually think
Speaker 2: about it, Like you said, like you don't think about
Speaker 2: going on the internet, TCIP and all that, Right, we
Speaker 2: don't think about those things.
Speaker 1: I remember buying something on the internet for the first time, right,
Speaker 1: and like that was a big deal to buy something
Speaker 1: on the internet. It was like, you're gonna get scammed.
Speaker 1: You're never gonna get the package. It's gonna be terrible quality.
Speaker 1: They're gonna steal the credit card number and run up
Speaker 1: a bunch of other charges. Like I vividly remember my
Speaker 1: first time making an Internet purchase. Now, not a thing,
Speaker 1: you know, it's the default method for how things are purchased.
Speaker 1: I would argue, I've never looked at the data, but
Speaker 1: I know in my own personal life probably ninety percent
Speaker 1: of the things that I buy I buy from the Internet.
Speaker 1: I don't go walk into a brick and mortar store.
Speaker 1: It's not a thing anymore. Same thing stable coins today, scary, blockchain, scary,
Speaker 1: big deal rug pulls, other things like that. Fast forward
Speaker 1: ten years from now, it's gonna be the default way
Speaker 1: to move money.
Speaker 2: Absolutely. Do you think though there might still be a
Speaker 2: segment of the market, like the early adopters who are
Speaker 2: very knowledgeable about this technology and say, hey, I want
Speaker 2: to hold USDC on coin base because it gives me
Speaker 2: this x amount of ap y YEP per year. There
Speaker 2: might be a segment of.
Speaker 1: The Oh, yield's going to be a huge thing, and
Speaker 1: yield's not just gonna be a pro user kind of
Speaker 1: a function. I think one of the giant benefits that
Speaker 1: you have, especially when you think about this emerging markets perspective,
Speaker 1: The biggest advantage is, hey, I can hold dollars instead
Speaker 1: of my own currency. Right, That is value proposition one.
Speaker 1: Once that becomes table stakes, what's next, And the answer
Speaker 1: is now I can even earn yield on top of
Speaker 1: these holdings. That's amazing, right, And as people who are
Speaker 1: sitting here in New York and who live in the US,
Speaker 1: we take interest bearing accounts so much for granted, right,
Speaker 1: we take our And this was part of the stuff
Speaker 1: kind of arguments that I may when you started the company,
Speaker 1: where people are like, I don't understand the use case
Speaker 1: for stable coins. I'm like, you live in the US,
Speaker 1: your default currency is US dollars. Go talk to someone
Speaker 1: at Argentina and go ask them why they want a
Speaker 1: stable coin. You just can't appreciate that because you live
Speaker 1: in the country that owns the global reserve currency, right,
Speaker 1: and that's like maybe a cop out, but that is
Speaker 1: a super privileged position to be in. And in addition
Speaker 1: to being the global reserve currency, we're also used to
Speaker 1: being able to open high interest accounts in one of
Speaker 1: I don't know, ten thousand VC backed fintech apps that
Speaker 1: can sit on your phone. But all of a sudden,
Speaker 1: when you bring that into markets where that isn't something
Speaker 1: that they're used to, this is transformative for the people
Speaker 1: who live there. And I think yield is going to
Speaker 1: be the second value proposition for stable coins. The first
Speaker 1: is going to be access to dollars and the second
Speaker 1: is going to be accessed to yield. Yeah.
Speaker 2: He brought up a great point because behind this genius
Speaker 2: or another layer to this genius law being put into place,
Speaker 2: is the royal reserve currency, the US dollar dominance, right,
Speaker 2: and this providing another avenue for people to purchase US treasuries.
Speaker 2: And you got bricks trying to compete and bypass the
Speaker 2: US dollar. But now that you put in a digital format, here,
Speaker 2: throw it. Throw the wide cast net out there, a
Speaker 2: bunch of people around the world are going to be
Speaker 2: able to easily access to the dollar, get yield. You
Speaker 2: see this boosting the adoption to the US dollar.
Speaker 1: Stable Coins are without a doubt, and I will argue
Speaker 1: at length with anybody about this. This is a hill
Speaker 1: that I will die on. Stable coins are by far
Speaker 1: the best way for the US to export the dollar
Speaker 1: around the world. That is a factual statement, and that
Speaker 1: is part of why, outside of whatever your political affiliations
Speaker 1: are and your feelings about the current administry and things
Speaker 1: like that that can be very polarizing, I understand as
Speaker 1: a wide range of views, they're outside of that. As
Speaker 1: a country, we need to be pro stable coin, and
Speaker 1: we need to be pro fully reserved, and we need
Speaker 1: to be pro legislation and regulation around issuance. Not because
Speaker 1: this is political party A, your political party B, but
Speaker 1: because this is the best way to continue and grow
Speaker 1: US dollar dominance around the world, and our entire economy
Speaker 1: is based on US dollar dominance around the world. If
Speaker 1: that is all of a sudden untrue, the quality of
Speaker 1: life that we have all come to be complacent in
Speaker 1: and that we have all come to enjoy is going
Speaker 1: to look very very different from now. And there are people, countries, governments, whatever,
Speaker 1: who aren't in first place, who wake up every day
Speaker 1: trying to figure out how they're going to be in
Speaker 1: first place. You know, there's that there's that great saying
Speaker 1: that I that I love. It's like, you know, bad
Speaker 1: times creates strong men. Strong men create good times, good
Speaker 1: times create weak men, and weak men create bad times.
Speaker 1: And I think it's difficult to argue that the US
Speaker 1: for the past one hundred years hasn't been good times.
Speaker 1: And we've taken a lot of things for granted that
Speaker 1: other political nation states haven't been able to take for granted.
Speaker 1: And where they're hungry and they're innovative and they're trying
Speaker 1: to get to that top spot, we're becoming very complacent.
Speaker 1: And as stable coins represents the best way for US
Speaker 1: to export the dollar globally, we as a country, regardless
Speaker 1: of political affiliation, need to all be all in on
Speaker 1: stable coins if we're going to have a fighting chance
Speaker 1: over the long term.
Speaker 2: Yeah, And there's so much history behind the US dollar
Speaker 2: being the wild reserve currency after World War Two and
Speaker 2: how that shifted the entire world, and then they backed
Speaker 2: it with Goal and all the other currencies were pegged
Speaker 2: to US dollar. And then you have with this technology
Speaker 2: the ability for China or folks in the EU or
Speaker 2: Russia or whatever to be able to try to take
Speaker 2: advantage because it's moving so fast, it's in digital format,
Speaker 2: and I can easily push it into different markets. You know,
Speaker 2: I was talking to someone about it. You know, with
Speaker 2: China developing certain parts of Africa, it's easy for them
Speaker 2: to push their digital you want, and everybody there, why
Speaker 2: they may not have a computer, they have smartphones, set
Speaker 2: up the wallet there you go.
Speaker 1: And these things are happening. This is not tinfoil hat
Speaker 1: conspiracy theory, like there are geopolitical battles that are happening
Speaker 1: on the nation state level. China is not investing tremendous
Speaker 1: and again I'll put my tinfoil hat away, but China's
Speaker 1: not investing tremendous amounts of capital into developing markets because
Speaker 1: they feel like helping people. That is not what is
Speaker 1: going on, right, And there is a very long term game.
Speaker 1: And it's not just China, it's others right as well.
Speaker 1: You've got the petro dollar stuff, You've got some like
Speaker 1: rick stuff, and there are you know more than one
Speaker 1: nation state that are actively trying to figure out how
Speaker 1: do they disrupt dollar global dominance and put you know there,
Speaker 1: whether it's a controltion framework or whether it's their currency,
Speaker 1: you know, how do they take that spot? And again,
Speaker 1: it's something we don't think about, right. We think about
Speaker 1: what's when's my next PTO? What am I going to
Speaker 1: eat for dinner? When do I you know, where am
Speaker 1: I going with my wife for date night? And I
Speaker 1: think unfortunately, I think the same can be said of
Speaker 1: a lot of our political leaders where we're not really
Speaker 1: in a landscape today that's thinking about, well, what is
Speaker 1: the best thing for the US on one hundred year
Speaker 1: time horizon. And maybe part of that is because you
Speaker 1: have a four year term and you're like, screw, screw
Speaker 1: the hundred years, right, I just need to have a
Speaker 1: good four years, right. But I think there's you know,
Speaker 1: very real long term threats in the US, and then
Speaker 1: stable coins are a phenomenal way to mitigate those.
Speaker 2: So do you think some of those risks and threats
Speaker 2: have been mitigated by this law being passed? And again,
Speaker 2: it doesn't matter politically, why if it was another president,
Speaker 2: it doesn't matter, But at the end of the day,
Speaker 2: Congress got the bill through given in a president's yep.
Speaker 1: I think that's huge for US, and I don't think
Speaker 1: it's too late. Right. Obviously, we're not the first. There's
Speaker 1: been MIKA regulations, There's been a lot of other things.
Speaker 1: I can't make the statement that the US is leading
Speaker 1: the way on stable coin innovation. But if we did
Speaker 1: this a decade from now, it would be way too late.
Speaker 1: Doing this now we at least we're not first, but
Speaker 1: we're in the leading group. We have the ability to
Speaker 1: do this. Right. Our economy, in addition to being based
Speaker 1: on dollar dominance, also based on innovation. Right. If you
Speaker 1: look at the amount of enterprise value that's created in
Speaker 1: the world, a large concentration of the enterprise value is
Speaker 1: created in the United States. And it does so because
Speaker 1: we have an entrepreneurial and innovation culture that allows for
Speaker 1: the creation of net new things in the world. And
Speaker 1: we should combine that culture with the most important asset
Speaker 1: we have, which is the dollar. And if we put
Speaker 1: those two things together, we can create some pretty amazing things.
Speaker 1: And that's what the entables.
Speaker 2: I want to explore just the perspective of someone, let's
Speaker 2: say Venezuela or in some country in Africa. So let's
Speaker 2: say I have a friend in Venezuela and he's like, hey,
Speaker 2: any help to get something done in my house or whatever.
Speaker 2: Maybe I send him one thousand dollars worth of us
Speaker 2: DC or USDT with the infrastructure that's being built. Now,
Speaker 2: can he spend some of that but also hold some
Speaker 2: of that and earn yield, but also put it into
Speaker 2: some sort of DeFi protocol and do more.
Speaker 1: Yep, that's exactly kind of what the what the off
Speaker 1: ramping part and the DeFi ecosystem's worth. So what you
Speaker 1: don't want to do in these markets is you don't
Speaker 1: want to do like the old school Western Union thing.
Speaker 1: And what the old school Western Union thing is is
Speaker 1: I send you one thousand dollars and you in Venezuela
Speaker 1: receive Venezuelan currency. Right, One, the transfer is slow, to
Speaker 1: the transfer is expensive, and three the transfer fully converts.
Speaker 1: And the fully converts piece is actually the biggest issue. Right,
Speaker 1: What you want to do in an emerging market that
Speaker 1: doesn't have a super stable currency or has a lot
Speaker 1: of inflationary issues is you want to be able to
Speaker 1: retain as much of that balance as possible dollars. So now,
Speaker 1: all of a sudden, if I send you a thousand dollars,
Speaker 1: then you need to use a hundred of it. It
Speaker 1: doesn't fully convert on receipt. Right, you can say, Okay,
Speaker 1: I've gotten a thousand dollars, I'm going to convert a
Speaker 1: hundred of it for groceries, rents, fixing the house, whatever
Speaker 1: it is that I want to do. I'm going to
Speaker 1: hold the other nine hundred dollars still in dollars in
Speaker 1: stable coin form, and then talking about yield as the
Speaker 1: second giant use case, I'm now going to go and
Speaker 1: I'm going to earn yield on this right. And I
Speaker 1: may do that through a yield bearing stable coin. I
Speaker 1: may do that through a DeFi protocol. I may do
Speaker 1: that through some sort of like a lending protocol. Granted
Speaker 1: there's counter party, the risk profile change is very differently
Speaker 1: on that. But I can start to do things with
Speaker 1: these dollars that I haven't been able to do before.
Speaker 1: And I think one of the questions is, okay, well,
Speaker 1: if you extrapolate this out a decade, would you ever
Speaker 1: need to convert it back to Venezuelan currency or would
Speaker 1: you be able to pay for everything in dollars, And
Speaker 1: there's a really strong narrative going around in the stable
Speaker 1: coin space around dollarization that's like, hey, off ramps are
Speaker 1: completely meaningless because in the long run everything's gonna be
Speaker 1: dollar based stable coins. I don't like that narrative, and
Speaker 1: I'll tell you why. When you think about these nation states,
Speaker 1: whether it's Venezuela or anything else, a large amount of
Speaker 1: the power that the government has comes from the central
Speaker 1: bank and controlling their currency. And if you look at markets,
Speaker 1: especially markets with strong capital controls, look at India, look
Speaker 1: at Turkey, look at these places, there's a lot of
Speaker 1: stable cooin adoption happening there. I just don't see a
Speaker 1: world in which the Indian government, as an example, wakes
Speaker 1: up ten years from now and is like, oh wow,
Speaker 1: nobody uses ion R anymore when as well sunset it
Speaker 1: and just adopt dollars as a country, That's not happening.
Speaker 1: So I do think in the long term there is
Speaker 1: probably a digital I in R that things convert to,
Speaker 1: but there's still gonna be a need for the infrastructure
Speaker 1: that takes that USDC and that converts it to a
Speaker 1: local central bank controlled currency. Whether it's a CBDC or
Speaker 1: an independent stable coin, doesn't really matter. The point is
Speaker 1: countries aren't going to throw their own currency away in
Speaker 1: favor of the US dollar. They haven't done that historically.
Speaker 1: They're not going to do that in the future. That
Speaker 1: completely erodes their country's identity.
Speaker 2: I mean literally, wars were fought over it. Yes, Like
Speaker 2: I said, no, one's going to be.
Speaker 1: Like, yeah, armies have died over this. They're not going
Speaker 1: to randomly wake up one day and change their mind. Right,
Speaker 1: We're still going to have fragmentation. Fragmentation exists by currency, right,
Speaker 1: Most countries have their own currency, Most countries have their
Speaker 1: own regulatory frameworks and regulatory licenses. So no matter what
Speaker 1: the end state is from a blockchain technology standpoint, the
Speaker 1: reality of nation states is that we're still going to
Speaker 1: have global fragmentation. Right. We also have fragmentation by language.
Speaker 1: There was an attempt to create a universal language a
Speaker 1: while back, right, Like, these things don't work because there's
Speaker 1: so much national identity, national pride, and most importantly, governmental
Speaker 1: power that's tied to creating that fragmentation and owning these
Speaker 1: things yourself.
Speaker 2: Absolutely, yeah, well put and I don't see the European Union,
Speaker 2: and they're creating the digital Euro. They're not going to
Speaker 2: give that up. Say oh yeah, just use US dollars.
Speaker 2: China digital yuwan are no way.
Speaker 1: China is not replacing the yuon with dollars. If I'm
Speaker 1: wrong about that, the world will be a very different
Speaker 1: place than it is today.
Speaker 2: But it's fascinating because now you know, I could be
Speaker 2: in any part of the world and have a US
Speaker 2: dollar savings account, which is going to be game changing.
Speaker 1: That is game changing, and that's why it's the best
Speaker 1: way to export the US dollar around the world. Right.
Speaker 1: And not only can you have a US dollar savings
Speaker 1: account as a consumer, think about companies in these different areas. Right. So, yes,
Speaker 1: there's been a little bit more access to dollar banking
Speaker 1: on the corporate side around the world, and there has
Speaker 1: been on the consumer side, but it's still a hard
Speaker 1: problem from a corporate standpoint. And if you think that,
Speaker 1: you know, your thousand bucks of savings in an emerging
Speaker 1: market country is a big deal to you, imagine what
Speaker 1: the corporate balance sheet is as a big deal to
Speaker 1: that corporate right. And now stable coins are also simply
Speaker 1: changing the treasury game because all these companies in emerging
Speaker 1: markets that haven't been big enough to get multi currency
Speaker 1: accounts and things of that nature, but have considerably more
Speaker 1: dry powder than the average retail individual. They're also looking
Speaker 1: at it going, wait a minute, we can protect against
Speaker 1: inflation on our entire balance sheet by going to a
Speaker 1: stable coin, and then we can start to create yield
Speaker 1: bearing programs on top of that, with interest sparing things
Speaker 1: with tokenized tea bills, with like you know, Benji and
Speaker 1: Biddle and all those different things. The work that Ondo's doing,
Speaker 1: and a lot of the tokenizing yield and money market
Speaker 1: fund side that's game changing for corporates. And now those
Speaker 1: are multimillion dollar ticket sizes versus on hundred dollar ticket sizes,
Speaker 1: right wow.
Speaker 2: You know in El Salvador and some other countries, they
Speaker 2: tried to do the payments infrastructure with bitcoin, but it
Speaker 2: seems like that's all going to be replaced by stable
Speaker 2: coins because I don't I have bitcoin. I don't want
Speaker 2: to spend my bitcoin. Now bitcoin goes to like two
Speaker 2: million dollars and I spend a few said towshe's okay,
Speaker 2: but sif like stable coins.
Speaker 1: Yeah, I think the way that I have always looked
Speaker 1: at adoption curves is that they happen a step at
Speaker 1: a time and to convince people. And I'm long term
Speaker 1: super bullish on bitcoin. One of the things that I
Speaker 1: think has been challenging is to get people to adopt
Speaker 1: a whole new technology paradigm and to get people to
Speaker 1: accept a new form of money, even if it is
Speaker 1: harder money. To do those two things at the same
Speaker 1: time is massively, massively difficult. To get people to adopt
Speaker 1: a dollar on a new technology is a much much
Speaker 1: easier lift. And once we get people to adopt a
Speaker 1: dollar on this crazy new technology, then all of a sudden,
Speaker 1: it's a much smaller lift to get them to adopt
Speaker 1: a better form of money on that new technology. And
Speaker 1: I think, you know, maybe long term that's where that goes. Again,
Speaker 1: I think you're gonna have a lot of nation states
Speaker 1: disinterested in that. Right. What else Salvador has done is
Speaker 1: very unique in the world, and I don't think that
Speaker 1: we're going to see a bunch of nation states adopt
Speaker 1: a bitcoin standard. Unfortunately, maybe they do, but I do
Speaker 1: think that it certainly if stable coins represents a form
Speaker 1: of digital payments, I definitely think that bitcoin represents the
Speaker 1: best form we have of kind of digital value storage.
Speaker 1: But I agree with you. It's you know, it's not
Speaker 1: going to become the default payments mechanism.
Speaker 2: And it's like you said, the store of value digital goal.
Speaker 2: If I have a goal bar, I'm not spending them
Speaker 2: that carrying it around to distort it, right, But I
Speaker 2: use my local currency, but that goal bar stays in
Speaker 2: my safe. I definitely want to keep it, and I
Speaker 2: wanted to appreciate in value over time, but I want
Speaker 2: to spend my local currencies just easier. And I feel
Speaker 2: like it's the same thing happening with bigcoin.
Speaker 1: Exact same thing. And I think there's massive treasury use
Speaker 1: cases for bitcoin right, not in terms of like a
Speaker 1: leverage thing like you know some other companies have been doing,
Speaker 1: but but I do think that every company, if you've
Speaker 1: got a long term treasury strategy, it's going to include
Speaker 1: T bills, it's going to include things like that. A
Speaker 1: lot of that is dollarizing with stable coins. I think
Speaker 1: it really would behove most people to have a long
Speaker 1: term treasury strategy that revolves around bitcoin. Right, need to
Speaker 1: do the whole micro strategy, like complete dive into the
Speaker 1: deep end. But if you're a corporate that's holding one
Speaker 1: hundred million dollars in treasury that represents you know, ten
Speaker 1: years of lifespan. Why wouldn't you take twenty million of
Speaker 1: that and if you don't need it for ten years,
Speaker 1: hold it in bitcoin. Right, It really is to use
Speaker 1: your digital gold narrative. Like, it's a much better way
Speaker 1: to store long term funds. Now. If you need liquid availability,
Speaker 1: stable coins are going to be way better for that.
Speaker 1: But if you have a long term treasury, I think
Speaker 1: it belongs to most people's bounce sheets.
Speaker 2: Yeah, all right. I want to get your thoughts on
Speaker 2: the Clarity Act, the market structure bill that is expected
Speaker 2: to pass late September early October. What do you think
Speaker 2: the impact is going to be on the market for that.
Speaker 1: I think, for lack of a better word, we're finally
Speaker 1: gonna have regulatory clarity. Well named act. I guess you know,
Speaker 1: cryptoek guy gave us not just genius, but it also
Speaker 1: gave us gave us some clarity. And I think one
Speaker 1: of the things that's been really difficult for digital assets
Speaker 1: here in the US it's been what is the regulatory
Speaker 1: framework that applies?
Speaker 2: Right?
Speaker 1: Is it a security, is it a commodity? Kind of
Speaker 1: what what happened here and kind of under under Gensler.
Speaker 1: I think there was some overreach, right. I think maybe
Speaker 1: that's a polite way to put it. There are a
Speaker 1: lot of arguments that were made that like, hey, everything's
Speaker 1: a security like it just went a little bit nuts.
Speaker 1: But fundamentally, that is a very good question, and it's
Speaker 1: a question that nobody yet has been able to answer
Speaker 1: because we haven't given it regulatory clarity. And if we
Speaker 1: can get clarity passed, I really like the concept of
Speaker 1: the dual market structure, right, I think that makes a
Speaker 1: lot of sense. You know. One of the analogies that
Speaker 1: I love to use for like, oh, how do you
Speaker 1: regulate a token? Is like, great, how do you regulate
Speaker 1: a pdf? Right? A pdf can be an image of
Speaker 1: my cats, a PDF could be the title to my car,
Speaker 1: a pdf could be a legal agreement. Regulating a pdf
Speaker 1: makes no sense. Regulating what the PDF represents that makes
Speaker 1: a lot of sense, right. And I believe the same
Speaker 1: thing about tokens, and how do you regulate a crypto token?
Speaker 1: I think is a horrible question to ask because there's
Speaker 1: so many different structures of token. A token is just software,
Speaker 1: that's all it is, how do you regulate software? Well,
Speaker 1: what does the software do? If the software makes payments,
Speaker 1: you probably regulate it like payments. If the software lets
Speaker 1: you post funny JPEGs of your cat, you probably regulate
Speaker 1: it like a social network. Right, And I think clarity
Speaker 1: is some really good first steps of doing that, of saying, Okay,
Speaker 1: we're not just going to regulate a piece of software
Speaker 1: as this blind overarching thing. We're going to look at
Speaker 1: the characteristics and we're gonna say, okay, what does this
Speaker 1: actually do? And then based off of what it actually does,
Speaker 1: then we're going to regulate it as a commodity or
Speaker 1: as a security. And I think we can take that
Speaker 1: framework a lot further. And I really hope that this
Speaker 1: evolves over time, but I think that's a great place
Speaker 1: to start.
Speaker 2: Yeah, I'm so excited to have that in the market.
Speaker 2: I know it's not perfect, but it's going to really help,
Speaker 2: you know, give the market and builders and innovators clarity
Speaker 2: and they can, you know, stop looking over at their
Speaker 2: shoulder and just put their heads down and start working.
Speaker 1: Right, that's what we need to do. Short term number
Speaker 1: go up, long term builders building, that's what's actually sustainable.
Speaker 2: Yeah, and it's funny. You know, along with stable coins,
Speaker 2: we see a lot of banks and big institutions are
Speaker 2: now looking to launch crypto services DeFi trading, custody and
Speaker 2: so forth, and this bill might spark a huge adoption run.
Speaker 2: Just yesterday, Jpmore reports that JP Morgan wants to launch
Speaker 2: crypto lending. P and C Bank is partnering with coinbase
Speaker 2: to launch crypto trading. It's incredible what's happening.
Speaker 1: These giant institutions that make tremendous amounts of money are
Speaker 1: not dumb. They haven't been on the sidelines of this
Speaker 1: market because they didn't see opportunities to make money. They've
Speaker 1: been on the sidelines of this market because they haven't
Speaker 1: had their regulatory clarity to enter that market. And they
Speaker 1: understand the size of the target that is on their
Speaker 1: backs versus the size of the target that is on
Speaker 1: other people's backs. And it's you know, I would imagine
Speaker 1: that once those regulatory frameworks are in place, and again
Speaker 1: Fleck better word, the clarity exists, we are going to
Speaker 1: see over the next year every significant traditional finance market
Speaker 1: participants come into this space, and I think that will
Speaker 1: rock some of the current incumbents. The level of volumes, connections, technology,
Speaker 1: sophistication of some of these Wall Street and kind of
Speaker 1: like traditional finance firms is insane. And some of the
Speaker 1: you know, like crypto brokerage apps and things like that
Speaker 1: that have great volume today. I would argue one of
Speaker 1: the only reasons they have volume today is because people
Speaker 1: can't do this in JPM or Schwab or e Trade
Speaker 1: or other places. As soon as that turns on, I
Speaker 1: would not want to be in their.
Speaker 2: Business spot on. I've been talking about this that, you know,
Speaker 2: crypto native companies, they better up their game because.
Speaker 1: And I think that's good. I think that's healthy for
Speaker 1: the market. Crypto native companies should be winning because they're
Speaker 1: providing the best products and services to their customers. They
Speaker 1: shouldn't be winning because the competition is sidelined by fear.
Speaker 2: Right. Well put man, I'm excited. I think it's going
Speaker 2: to be a great Q three Q four for the
Speaker 2: Q three And we got to do another round of this.
Speaker 2: Since you are close by, You're.
Speaker 1: Like, it's right up the street. It's perfect.
Speaker 2: Awesome, Kevin Pleasure, thank you for joining me.
Speaker 1: Thank you for the time. Am m H