Speaker 1: Financial use cases that touch our day to day life.
Speaker 1: They need to connect with the treade file stack right,
Speaker 1: And I think this connection between DeFi and treade file
Speaker 1: is clumsy, it's difficult, it is opaque and is prone
Speaker 1: to risk. So I think that the first the first aspect,
Speaker 1: I think the first evolution that will be required is
Speaker 1: for more stuff to come natively on chain. So we
Speaker 1: see a lot of securities to organized so called, a
Speaker 1: lot of things natively coming on a on a on
Speaker 1: crypto stack. So I think the define needs to expand
Speaker 1: a little bit because otherwise we are just like patching
Speaker 1: different technologies at the same time and this create risk.
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Speaker 2: Link will be in a description. Welcome to the Thinking
Speaker 2: Crypto Podcast. I'm your host, Tony Edward. With me today
Speaker 2: is Luca Prospery, who is the CEO and co founder
Speaker 2: of m zero Labs. Luca, great to have you on.
Speaker 3: Thanks for having me Tony, Luca.
Speaker 2: As stated before the recording, I'm excited to learn about
Speaker 2: m zero you guys. Recently ran is an incredible of
Speaker 2: funding round which was led by being Capital Crypto. But
Speaker 2: let's start with your background. Where are you from and
Speaker 2: what's your professional background?
Speaker 1: Technically from Italy, although I haven't lived in Italy for
Speaker 1: a very long time, I actually spent most of my
Speaker 1: adult career in London. I'm a mathematician by background. I
Speaker 1: spent fifteen years more than fifteen years in traditional finance
Speaker 1: as an advisor, investment banker, or investors in financial institutions
Speaker 1: before deciding that DeFi was too interesting for me. To
Speaker 1: stay out of it during COVID, and then I decided
Speaker 1: to leave what I was doing before and join the
Speaker 1: DeFi revolution. I mean, we can go as deep as
Speaker 1: you want there. But I spent the first couple of
Speaker 1: years being actively participating to some of the largest protocols INFI,
Speaker 1: most notably maker Out, advising some funds, investing in the space,
Speaker 1: and publishing my own research under a sub stack called
Speaker 1: dirt Roads that started as.
Speaker 3: A game and became something more.
Speaker 1: Then we decided to join forces with my two co founders,
Speaker 1: Oliver and Gregg, and found and zero at the very
Speaker 1: end of twenty twenty two.
Speaker 2: Now you mentioned, you know, being in a treadfy historically
Speaker 2: and an advisor to companies and funds. What was your
Speaker 2: first encounter with crypto? Was it a DeFi protocol or
Speaker 2: was it bitcoin? And you know where did it click
Speaker 2: for you?
Speaker 3: Yeah?
Speaker 1: For me, it was not Bigcoin. For me, it was DEFY. Indeed,
Speaker 1: the reason is that I have been deeply involved in
Speaker 1: financial institutions for fifteen years, right, And you know, sometimes
Speaker 1: there is this conception of I don't know a banker
Speaker 1: that knows who knows banking. Actually bankers are service providers
Speaker 1: or investors or service providers.
Speaker 3: They know the industry they operate.
Speaker 1: And I used to be a banker for bankers, So
Speaker 1: I used to be a financial institution specialist at Morgan Stanley,
Speaker 1: so one of the largest investment banks in the world,
Speaker 1: and I used to invest in banks and financial institutions,
Speaker 1: so I knew deeply how money is created, distributed, and
Speaker 1: how actually financial intermediation works most people, most people ignore it.
Speaker 1: But I stayed out of the so called fintech revolution
Speaker 1: because for me, it was a very interesting front end,
Speaker 1: let's say, innovation, but the back end of financial institutions
Speaker 1: world was always the same, like you know, the way
Speaker 1: we we create money, we move it, we store it,
Speaker 1: the way we the way we like we recognize value,
Speaker 1: et cetera. So when I started looking at DeFi protocols,
Speaker 1: this was in the beginning of the DeFi summer. For me,
Speaker 1: it was like an Euroca moment in the sense that
Speaker 1: I realized that for the first time, maybe even unconsciously,
Speaker 1: there were teams that were trying to reinvent the way
Speaker 1: actually we create money in the first place. So there
Speaker 1: were actually innovating the back end of financial institutions, which
Speaker 1: is very philosophical in nature, so that's why I got fascinated.
Speaker 1: So for me to click, the real clique was maker
Speaker 1: out I started. I don't even remember how I got
Speaker 1: in touch with the guys at the first place, but
Speaker 1: it was very quick down the rabbit hole time kind
Speaker 1: of process.
Speaker 2: Wow. And does it surprise you that many of these
Speaker 2: firms like Morgan Stanley, black Rock and so forth are
Speaker 2: now participating with ETFs pick one ETFs, Many are testing tokenization,
Speaker 2: some are custodying stable coin reserves. I think black Rock
Speaker 2: custodies circled USDC reserves. Do you feel this is inevitable
Speaker 2: they all have to capitulate to this technology.
Speaker 1: Yes and no, in a sense that it doesn't surprise
Speaker 1: me that very sophisticated and diversified financial institutions like the
Speaker 1: large investment banks for USET managers like black CROC are.
Speaker 3: Active because the guys are very small.
Speaker 1: They want to be at the forefront of innovation and
Speaker 1: they want to service an industry that emerges. The ATF,
Speaker 1: I think is a separate story. I think there is
Speaker 1: market demand and they want to be on top of
Speaker 1: the flows. At the same time, not everyone is the same,
Speaker 1: so on the other side, we see a lot of
Speaker 1: resistance from traditional commercial banks about proper innovation in DeFi
Speaker 1: because I really want to protect their business right and
Speaker 1: I think crypto is threatening the financial institution's business and
Speaker 1: will keep threatening it. So in my opinion, the most
Speaker 1: innovative and smart institutions will adopt this revolution and thrive
Speaker 1: and transform themselves. The least innovative will not, and I
Speaker 1: think they will they will go back. They will just
Speaker 1: shrink with time. So it's interesting now to see the
Speaker 1: smart and most innovative ones get very active and the
Speaker 1: others one get very resistant at the same time.
Speaker 2: Yeah, now, question on DeFi, because I'm a big believer
Speaker 2: in DeFi believe it's the future. However, we've often seen
Speaker 2: with technology version one point zero is you know, nowhere
Speaker 2: close to being perfect, and there's usually a lot of flaws,
Speaker 2: and we've seen a lot of exploits around DeFi. Where
Speaker 2: do you think or how do you think the industry
Speaker 2: goes from one point oh to two point to avoid
Speaker 2: these exploits in these things, I.
Speaker 1: Think a couple of I think a couple of ways.
Speaker 1: First of all, DeFi currently.
Speaker 3: In order to.
Speaker 1: Absorb most of the financial use cases that touch our
Speaker 1: day to day life. They need to connect with the
Speaker 1: treade file stuck right, And I think this connection between
Speaker 1: DeFi and trade file is clumsy, is difficult, it is
Speaker 1: opaque and is prone to risk. So I think that
Speaker 1: the first the first aspect, I think the first evolution
Speaker 1: that will be required is for more stuff to come
Speaker 1: natively on. So we see a lot a lot of
Speaker 1: securities organized so called, a lot of things natively coming
Speaker 1: on a on on crypto stack. So I think the
Speaker 1: the finance to expand a little bit because otherwise we
Speaker 1: are just like patching different technologies at the same time
Speaker 1: and this create risk. And the second point is I
Speaker 1: think the early early builders in defire, we're dejons, we're innovators,
Speaker 1: were disruptors. This is great, but obviously some sort of
Speaker 1: institutionalization and professializational services is going to benefit everyone. And
Speaker 1: we have seen it also in tach right in Web two.
Speaker 1: Google now is not a startup. Google is the largest
Speaker 1: is the largest company in the world or something like that,
Speaker 1: so they have very standardized processes, a way to do stuff.
Speaker 1: So I think we are professionalizing ourselves as an industry
Speaker 1: as well.
Speaker 2: M Yeah, great points. So let's talk about M zero,
Speaker 2: tell us about M zero, how it came about, and
Speaker 2: what's the mission.
Speaker 1: I think it's connected to what you were saying before.
Speaker 3: When us as founders.
Speaker 1: We we got like we fell in love with the
Speaker 1: maker now construct and mission. You know, Maker it out
Speaker 1: was an early For those who are not too familiar,
Speaker 1: it's still like a very big defa protocol, but it
Speaker 1: was an early protocol that was trying to innovate the
Speaker 1: way you create money. So instead of creating money, I
Speaker 1: don't want to get to nerd your money creation. But
Speaker 1: in the world, banks create money out of thin air.
Speaker 1: It's not that they're giving you money that is someone
Speaker 1: else's now. In the case of maker ow, they had
Speaker 1: this system decentralized and permission less to create fungible money
Speaker 1: by pledging certain.
Speaker 3: Digital assets.
Speaker 1: So we thought that that was a very very powerful
Speaker 1: construct and within the DOW we tried to expand it
Speaker 1: and to integrate it with the traditional financial world. And
Speaker 1: you mentioned Black Crock, but you know, we we spoke
Speaker 1: back in the days with many financial institutions Black Crock,
Speaker 1: Pin Costs, Sociotationeral, and a few others. They wanted to
Speaker 1: connect to the protocol and they were trying, but it
Speaker 1: was very difficult. So I think that we we took
Speaker 1: those lessons and we decided to actually recreate a new
Speaker 1: protocol that would learn from those lessons, but without certain
Speaker 1: flows in governance, in retail participation that we thought were
Speaker 1: detrimental for the protocol to scale. And at the same
Speaker 1: time spend a lot of time thinking about the integration
Speaker 1: with the thread five and and and the protocol, and
Speaker 1: ultimately what we want to do is very ambitious. I mean,
Speaker 1: I think we want to create a protocol that the
Speaker 1: the elevators. The Elevators pitch is a protocol that empowers
Speaker 1: a federation of minters, so any any approved institution can
Speaker 1: come and bring and print to fully fangible stable coin
Speaker 1: that is hyper transparent and it's fully fangible across the network.
Speaker 1: The real ambition is bypass completely banking institutions and issuers
Speaker 1: from money generation. So instead of having a system with
Speaker 1: central banks and commercial banks just like taking a lot
Speaker 1: of risk but also participating in distributing money, et cetera,
Speaker 1: we would like to have a protocol like m zero
Speaker 1: at the center of everything, enforcing full transparency innovation so
Speaker 1: that money actually can be generated and used in fully
Speaker 1: fangible way without depending on the legacy legacy stack. So
Speaker 1: it's very very very ambitious and long term project.
Speaker 2: So it's all us about the protocol of the blockchain.
Speaker 2: Is obvious there's different protocols out there, proof of history,
Speaker 2: proof of stake and so forth. What protocol does the
Speaker 2: M zero blockchain use?
Speaker 1: So M zero is currently deployed on may not. So
Speaker 1: is on ethereum may not. So that uses obviously the
Speaker 1: standard consensus consensus approach of ethereum. But this is the
Speaker 1: engine we think the stable coin for a lack of
Speaker 1: a better term, that will be generated by interacting with
Speaker 1: M zero will exist on every chain. And how we
Speaker 1: are actually taking care of this portability is something that
Speaker 1: we're working on now.
Speaker 3: Got it.
Speaker 2: And then there's the M token. Tell us about that
Speaker 2: and the tokenomics.
Speaker 1: Yeah, so actually we have three tokens. We like to
Speaker 1: be to do things complicated apart from the jokes and
Speaker 1: you know, like we if you look at the M zero,
Speaker 1: if you look at the M zero logo, it's M
Speaker 1: a power, a power symbol and zero. There are reasons
Speaker 1: why we M zero is called en of course. The
Speaker 1: nerdier one is empower anything power zero is always one,
Speaker 1: so there is a lot of stability within the logo itself.
Speaker 1: So we actually have an empower, an MP token, a
Speaker 1: power token, and a zero tok Now the M token
Speaker 1: is what we what people in this space called a
Speaker 1: stable coin. So the M token is a token that
Speaker 1: represents a claim on the underlying collateral and is should
Speaker 1: be because before because the market forces softly packed to
Speaker 1: the dollar. So for the use for the user, uh,
Speaker 1: the experience shouldn't be different from using a us DC
Speaker 1: and U S d T. We just think is a
Speaker 1: better better design in terms of transparency, in terms of resilience,
Speaker 1: in terms of ill portability. If within the stack, I think, uh,
Speaker 1: the MP token is not ill bearing itself, but can
Speaker 1: bring underlying yield to the to the user venues. So
Speaker 1: the M is some sort of so called stable coin.
Speaker 1: Let's put it like that. And then the power token
Speaker 1: and the zero token are our governance tokens. So the
Speaker 1: power token and the zero tokens in jointly they govern
Speaker 1: the protocol, so they allow token holders to take decisions
Speaker 1: who can come and connect, how to parameterize the protocol,
Speaker 1: and how to claim the economics of the protocol. Now
Speaker 1: we are not a tao in the in the appropriate sense,
Speaker 1: in the sense that we don't have a decentralized workforce.
Speaker 1: We don't have a treasury that is accrued, but the
Speaker 1: protoct can be used by the tao. We're just like
Speaker 1: a group of parties that take decisions through tokens. But
Speaker 1: there is no there is no treasury, there is there
Speaker 1: is no underlying workforce. Whatever whatever economic flaw is generated
Speaker 1: by the protocol gets distributed out. And these two tokens
Speaker 1: have a very like a rather sophisticated toconomics, a set
Speaker 1: of sort of in set of emission and set of mechanisms.
Speaker 1: And you know, we spent we spent a long part
Speaker 1: of our white paper describing those.
Speaker 2: Your core use case seems to be stable coins, a
Speaker 2: US dollar backed stable coins. Are there other use cases?
Speaker 2: Could it be central bank digital currencies? Could the central
Speaker 2: bank use this for that? And are there other things
Speaker 2: like to organization that are possible?
Speaker 1: So the central bank digital currency is an interesting question.
Speaker 1: I don't think central banks could use M zero for CBDCs.
Speaker 1: I think M zero could use CBDCs or collateral. So
Speaker 1: it's that a way around cbdc's most probably would be
Speaker 1: a wholesale instrument, meaning that central banks will use it
Speaker 1: interacting with all salors like commercial banks, et cetera. So
Speaker 1: we currently the M zero protocol approves only US treasuries
Speaker 1: as collateral for the meanting of stable coin. Nothing forbids
Speaker 1: us to actually approve CBDCs as collateral for the issues
Speaker 1: of several coins because we always think there's going to
Speaker 1: be an additional layer for distribution required. So this is
Speaker 1: another point in the direction of bypassing the banking sector
Speaker 1: in sever ways when it comes to toganization, Yes, I
Speaker 1: think it is a very important point. I think our
Speaker 1: point is that we can we are using our technology
Speaker 1: stack to mint fully fangible stables from many issuers. We
Speaker 1: could evolve these technology stack to allow issuers to create
Speaker 1: as the tokens that actually have different collateral and different nature.
Speaker 1: So we could actually use the protocol to create some
Speaker 1: sort of one chain securitization. So toganization platform itself, it
Speaker 1: is actually one of the.
Speaker 3: Next chapters of our development roadmap.
Speaker 1: But now we're absolutely focused on the stable coin use case,
Speaker 1: which we think is a massive is the largest use
Speaker 1: case encrypton in the world, and I think has already
Speaker 1: seen obvious product, market fit, market adoption, and very strong
Speaker 1: economics by the very few issues that dominate those markets.
Speaker 3: Yeah.
Speaker 2: Absolutely, Now, maybe you can do a mock scenario. Let's
Speaker 2: say Morgan Stanley, right, they want to issue a stable
Speaker 2: coin and do it and do it. Let's say on
Speaker 2: M zero, how would they go about doing that? And
Speaker 2: once they issued that stable coin, what could it then?
Speaker 2: Could they then use that stable coin to do lend
Speaker 2: it out, move it off onto another chain. You tell
Speaker 2: us about the different things an issuer can do.
Speaker 1: Yeah, I think that it's supply and demand. I think
Speaker 1: the use of a stable coin is always the same.
Speaker 1: Like you use stable coins, you use money to store value,
Speaker 1: to transact, to settle.
Speaker 3: To do everything.
Speaker 1: Now, producing money is very profit doble like because what
Speaker 1: you are actually what you're.
Speaker 3: Actually doing when you produce money is.
Speaker 1: You are, let's say, keeping someone's wealth and paying someone
Speaker 1: an interest. Like you know, you deposit your money in
Speaker 1: a deposit, in a bank deposit, you get an interest rate,
Speaker 1: and then you use this money to invest it in
Speaker 1: the back end on certain assets. And typically the money
Speaker 1: you pay to the depositors is way less than the
Speaker 1: yield you get from the assets, and you benefit from
Speaker 1: this spread, so public printing money is a very profitable business.
Speaker 1: The issue is that this system works if there is
Speaker 1: a lot of demand for your money, so there has
Speaker 1: to be used for your money.
Speaker 3: And this is where this is why.
Speaker 1: We're seeing the domination of very few parties in the
Speaker 1: stable coin because if you want to use a stable coin,
Speaker 1: the stable coin needs to be liquid, otherwise it is unusable.
Speaker 1: And currently the only true liquid stable coin in the
Speaker 1: crypto space is Tethered. It might not be a great
Speaker 1: stable coin in the way it is designed, but it's
Speaker 1: super liquid and in omnipresence, so people really use it,
Speaker 1: at least the people that are in crypto today. Now,
Speaker 1: whether this is good enough for the future of crypto,
Speaker 1: it's not for me to tell. I have opinions, of course,
Speaker 1: but it's not for me to tell now. So let's
Speaker 1: say that everyone wants to print a stable coin. The
Speaker 1: reason why it's difficult for everyone to go their own
Speaker 1: way is because you imagine, if you have ten twenty
Speaker 1: fifty stable coins, you are fractionalizing late the liquidity. And
Speaker 1: if you fractionalize the liquidity, there is not a real
Speaker 1: use for stable coin. If there's not a real market
Speaker 1: for your stable coins. Who are you're selling your stable
Speaker 1: coin into. So the fact that many institutions are thinking
Speaker 1: about issuing a stable coin, we think is not a
Speaker 1: viable solution. It's just like a race to the bottom.
Speaker 1: So what we're trying to say here is that we
Speaker 1: are like the call to action would be for institutions
Speaker 1: like Morgan Stanley, like large market makers, like some of
Speaker 1: the market makers in our cap table, the Winter Mutes,
Speaker 1: the Galaxies, the gsrs of this world is guys you
Speaker 1: think is very profitable to actually enter in the stable
Speaker 1: coin business. So set yourselves up in a way to
Speaker 1: be compliant with the M zero requirements, and you all
Speaker 1: together meant the same stable coin. So you kind of
Speaker 1: help each other by creating something that is bigger and
Speaker 1: it's more liquid and can grow and benefit everyone so
Speaker 1: stronger together kind of approach. In order to do that,
Speaker 1: we are now launching our first issue of stable on
Speaker 1: the network that we are booth strapping. We are publishing
Speaker 1: guidelines on how those issues issues should be set up
Speaker 1: in order to be hyper safe. For this for the
Speaker 1: backing of the stable, we will we will open source
Speaker 1: these standards to the institutions want to connect, and we
Speaker 1: will help those institutions to set themselves up to connect.
Speaker 1: So as soon as they have a good connector, which
Speaker 1: is some combination of legal structure and tact, they can
Speaker 1: actually part collateral meant the stable the same stable if
Speaker 1: they want, and use it in the network for everything.
Speaker 1: So that we really want to empower the Stronger Together mantra,
Speaker 1: not only for the institutions, but also for other stable
Speaker 1: coin projects instead of going the wrong way and not
Speaker 1: everyone has the benefit of as the luxury of having
Speaker 1: raised the amount of mind with it just to come
Speaker 1: and participate with us Stronger Together.
Speaker 3: Yeah.
Speaker 2: Absolutely, And a follow questions to that, how do you
Speaker 2: verify that the issuer has the reserves? And in context
Speaker 2: of you know, there is new stable coin regulations coming
Speaker 2: in the EU, they're working in the United States, there's
Speaker 2: been questions about, you know, our certain stable coins backed appropriately,
Speaker 2: So how do you verify they have their reserves?
Speaker 3: Yeah? Two elements for the answer.
Speaker 1: The second one is more controversial, but I'll risk it.
Speaker 1: The first one is that we have created a system
Speaker 1: today as a set of cross checks that can allow
Speaker 1: the ongoing daily verification that the reserves are there. What
Speaker 1: it means is that we are suggesting how the vehicles
Speaker 1: that hold the reserves should set up, what are the
Speaker 1: contractual obligations of the parties that come and interact, how
Speaker 1: they should look like.
Speaker 3: We are actually.
Speaker 1: Planning to publish templates of those contracts to make sure
Speaker 1: that the contractual set up is as strong as possible,
Speaker 1: so that we are piggybacking on law. The second part
Speaker 1: is we are empowering a network of so called validators
Speaker 1: that have the ability to continuously check those reserves and
Speaker 1: publish signatures about what's in those reserves. And those validators
Speaker 1: are independent, so that there is an independent check ongoing,
Speaker 1: and the penalty for not having this independent check is
Speaker 1: to be deepermissioned by the protocol. The third aspect is governance, Right,
Speaker 1: we want governance to be always ongoing on top of
Speaker 1: what's going on. So I think we have a system
Speaker 1: of several cross checks. But also we know that that
Speaker 1: part will evolve. Right at some point the reserves will
Speaker 1: exist directly on chain and we can just purchase them
Speaker 1: and put them in a smart contract.
Speaker 3: But this is not what happens today now.
Speaker 1: The second part of your question is that I think
Speaker 1: that the current m zero construct is not compatible with
Speaker 1: European regulation or US regulation because the US regulation and
Speaker 1: European regulation are not good enough. They are exposing the
Speaker 1: regulator the holders to a lot of unnecessary risk. I
Speaker 1: make you an example, like you know, if the if
Speaker 1: the regulator wouldn't have would have decided not to bail
Speaker 1: Citicon Valley Bank, the circle called USDC holders would have
Speaker 1: been would have incurred like a massive loss and circle
Speaker 1: would have been doomed. And I think that when you
Speaker 1: park money in a bank account, you do it because
Speaker 1: you want to use your money, not because you want
Speaker 1: to provide an unsecured loan to a bank. I think
Speaker 1: that there are other regulators that are more forward looking
Speaker 1: in how to actually store the reserves, like Singapore, like Dubai,
Speaker 1: like I think, I think New York as well. But
Speaker 1: telling someone that you need to back a stable coin
Speaker 1: with the posits that are sitting in a bank is
Speaker 1: not synonymous of risk free. It means that you are
Speaker 1: taking the risk of the bank, and the risk of
Speaker 1: the bank is unsecured. If the bank goes down and
Speaker 1: you have more than one hundred thousand dollars in an account,
Speaker 1: which any stable cord issuer has you are incurring losses
Speaker 1: and it's not too safe, so it's as safe as
Speaker 1: the So I think that we are spending a lot
Speaker 1: of time, as you can imagine, in trying to make
Speaker 1: sure that the collateral backing, collateral storage, and reserve transparency
Speaker 1: is as pristine as possible, because this is very, very
Speaker 1: important for US.
Speaker 3: Yeah.
Speaker 2: Absolutely, I did have a question about there seems to
Speaker 2: be more demand and this is probably because the US
Speaker 2: dollar is the world reserve currency, but for US backstable
Speaker 2: coins versus euroback stable coins or any other VR currency.
Speaker 2: Is that what you're seeing and is that why you're
Speaker 2: primarily focused on US back that people around the world
Speaker 2: they want the US dollar because it has that store value,
Speaker 2: it is the well reserve currency.
Speaker 1: Yes, absolutely, I would say US packed rather than US backed,
Speaker 1: but yes, absolutely, we are convinced that today the reserve
Speaker 1: currency of the world is a dollar and cryptoi is
Speaker 1: by definition global, so they will adopt the reserve country
Speaker 1: reserve currency of the world. At the same time, we
Speaker 1: think this can evolve. The reason why we called the
Speaker 1: stable coin m A not M dollar or m USD
Speaker 1: or something like that is because we think that this
Speaker 1: pegging might actually change it might become a basket of currencies,
Speaker 1: it might become some sort of combination of digital assets.
Speaker 3: We don't know. So we think that the.
Speaker 1: Pegging, the reference, the reference currency in the world might
Speaker 1: change with time, but we think we live we live
Speaker 1: in a dollarized world and we will live in a
Speaker 1: dollarized world for a very long time.
Speaker 2: Yeah, you brought up a great point about it might
Speaker 2: be a basketter currencies in the future as maybe maybe
Speaker 2: you know, these different countries launch their CBDCs. Maybe because
Speaker 2: it's in a digital format, it can be pulled together
Speaker 2: in a basket.
Speaker 3: Absolutely, and then you have.
Speaker 2: Like countries like the bricks countries are coming together and
Speaker 2: using alternatives to the US dollar, and that's a whole
Speaker 2: geopolitical thing. But they we're seeing signs of possible change.
Speaker 1: Yes, absolutely. UH being a reserve currency. Going back to
Speaker 1: the point that printing currency is a very profitable business
Speaker 1: because you're it means that you are financed, you can
Speaker 1: finance yourself at very attractive rates.
Speaker 2: Uh.
Speaker 1: Printing currency is UH is a geopolitical gain. And the US,
Speaker 1: the US, the US dollar wants to protect its space.
Speaker 3: Uh.
Speaker 1: The I mean, I'm sure that other other geopolitical geo
Speaker 1: political and pillars want to do the same. Like funnily enough,
Speaker 1: and this is something that is shared by others in crypto.
Speaker 1: I think that stable coins that are packed backed by
Speaker 1: treasuries are doing a big favor to the US dollar.
Speaker 1: They are really empowering the US dollar as a reference
Speaker 1: currency on this new monetary stack.
Speaker 3: Offshore dollars already exist, you know, there is this.
Speaker 1: Weird concept of euro dollar, which is an offshore dollar
Speaker 1: that is printed outside of the banking system, a bit
Speaker 1: like as at back stable coins today, a bit like tether.
Speaker 1: This stuff already exists. You know, there are fifteen to
Speaker 1: twenty trillion dollars of euro dollars existing. It's just like
Speaker 1: it's so weird and so paiked and non standardized that
Speaker 1: people do not really know what it is, so we
Speaker 1: can actually standardize it. But I think dollar treasury backed
Speaker 1: stable coins can do which are dollar packed, can do
Speaker 1: a huge favor to the US in maintaining their status
Speaker 1: as a reference currency of the world.
Speaker 2: Yes, absolutely, And it was funny because I think just
Speaker 2: last week there was a report or an opinion piece
Speaker 2: in the Wall Street Journal where a former speaker Paul
Speaker 2: Ryan mentioned exactly what you're saying, for the US to
Speaker 2: maintain that world reserve currency status, you need to get clarity.
Speaker 3: We need to have that.
Speaker 2: US backed US treasury back stable coin, and that could
Speaker 2: help maintain that status. So these yes, yeah, this is
Speaker 2: the dialogue is happening, right, Yeah.
Speaker 1: At the same time, I think this is you know,
Speaker 1: the US, let's say, the regulated US banking system is
Speaker 1: way smaller than the universe of holders of US treasures,
Speaker 1: so a lot of most of US treasurers are sitting
Speaker 1: outside of the US, right. The natural buyers are outside
Speaker 1: of the US. So by forcing US dollar pagged stable
Speaker 1: coins to exist only originate only from the US, we
Speaker 1: are massively limited the space. I think by allowing anyone
Speaker 1: in the world to pledge their collateral and mints the
Speaker 1: usd paged stable coins, we are really expanding this space
Speaker 1: because the holders of treasuries are way more than the
Speaker 1: regulated banks we have in the US. Right, most of treasuries,
Speaker 1: I don't have the stats in my in my in
Speaker 1: my in my head, but I think I guess that
Speaker 1: most of treasure is US treasury are probably sitting in China,
Speaker 1: the Middle East, or in other countries which are not
Speaker 1: the US, and they want to have some sort of
Speaker 1: US reserves.
Speaker 2: Mm hmm. What do you think the stable coin market
Speaker 2: looks like in five This is a hard question. It
Speaker 2: looks like in five years. You know, let's say we
Speaker 2: have different iterations of regulations, we have more DeFi protocols
Speaker 2: such as m zero, and you know, you have some
Speaker 2: of these big commercial payment companies like Ripples said they're
Speaker 2: going to launch a stable coin. Yeah, PayPal has a
Speaker 2: stable coin. We talked about Circle and Tether. What do
Speaker 2: you think the stable coin market looks like in five years.
Speaker 1: That's a very difficult question, obviously, right, because it really
Speaker 1: depends on how much what would be the next big
Speaker 1: use case of crypto. I think the first use case
Speaker 1: of crypto was trading, so they needed a trading pair.
Speaker 1: That's why Tether was very powerful. Then DeFi came in
Speaker 1: and Circle had a pretty strong peg, and so the
Speaker 1: Circle grew. Now we're starting to use to see the
Speaker 1: use of stable coins for emittances or in fintech. So
Speaker 1: it's really difficult to tell. But in my opinion, in
Speaker 1: ten years, no one would care what is the flavor
Speaker 1: and the brand of the stable coin. We will all
Speaker 1: look at our application that has a dollar amount and
Speaker 1: we don't know how actually this dollar amount is.
Speaker 3: Created.
Speaker 1: And stable coins will be very powerful back back end stacks,
Speaker 1: so in ten years people will not care and I
Speaker 1: think there will be a few big ones. But this
Speaker 1: market is going to be two trillion dollars, so there
Speaker 1: will probably be like ten twenty big players in five years.
Speaker 1: I think there is the risk of having more because
Speaker 1: everyone will just rush and try to run their own
Speaker 1: and I think we will still have like sixty seventy
Speaker 1: percent of the market dominated by very few players and
Speaker 1: the rest just like a long tail. So there's gonna
Speaker 1: be a lot of activity I think the next four
Speaker 1: five years, because it's a very interesting space.
Speaker 3: Yeah.
Speaker 2: Yeah, I'm already seeing rumblings and talks of random Wall
Speaker 2: Street firms and different folks look into launch stable coins.
Speaker 2: So it will see how things pan out. That recently,
Speaker 2: you guys had a thirty five million dollar funding round
Speaker 2: led by being Capital Crypto. Tell us about that.
Speaker 1: Yeah, So we have been lucky that to have the
Speaker 1: belief of amazing investors since the very beginning of our.
Speaker 3: Story.
Speaker 1: I think we raised a twenty two point five million
Speaker 1: dollar seed at the very beginning of twenty twenty three.
Speaker 3: It was led by Pantera. It was already a very
Speaker 3: very large seed.
Speaker 1: In all standards, but then you know, we we have
Speaker 1: been discussing about very high quality investors since forever, right
Speaker 1: so Pain offered like their interest to actually come into
Speaker 1: the cap table at the beginning of the year. We
Speaker 1: really liked them because I think that they could provide
Speaker 1: they can provide this connectivity with the fintech space that
Speaker 1: we were looking for. And then we started conversations and
Speaker 1: I think that conversations then materialized into a Series eight.
Speaker 1: It was heavily oversubscribed, but it was I think a
Speaker 1: very successful Series eight. We know, raising thirty familion dollars.
Speaker 1: And I think that another great success we had was
Speaker 1: not only the participation of being Capital Crypto and our
Speaker 1: current investors, but also the participation of some of the
Speaker 1: best strategic players in crypto.
Speaker 3: Right.
Speaker 1: So, Galaxy Digital is an investor of ours. We intermuwe
Speaker 1: GSR Caladan SCB ten X, which is the venture fund
Speaker 1: of one of the largest Asian financial institutions. Because our
Speaker 1: ambition is really to build an infrastructure for crypto savvy
Speaker 1: and crypto friendly institutions to expand their footprint in the industry.
Speaker 1: So I think we have an incredible cap table. I
Speaker 1: could couldn't be more like, happier or more proud of
Speaker 1: the cap table we put together. Now we need to
Speaker 1: Now we need to demonstrate the guys they invested the
Speaker 1: money with the right team HM and.
Speaker 2: What's on their roadmap for the remainder of twenty twenty
Speaker 2: four for you guys.
Speaker 1: So we launched technically a large part of the stack
Speaker 1: on chain in conjunction with the race. So our governance
Speaker 1: protocol is on May not our poor protocol is on
Speaker 1: May at itself, and we will start issuing the first
Speaker 1: large chunks of stable coins through the protocol in the
Speaker 1: next few weeks and then the next The remainder of
Speaker 1: the year, of the next two years is going to
Speaker 1: be integrations, just like convincing venues that m is a
Speaker 1: better stable coin to integrate with. So new chains, new
Speaker 1: DeFi protocols, new lending markets, new exchanges, new large users,
Speaker 1: and on the other side, on the supply side, as
Speaker 1: we say, convince issuers or want to be issuers and
Speaker 1: projects of stable coins that they should join forces and
Speaker 1: issue on the mz on network. So I think most
Speaker 1: most of Our job in the next twelve months twenty
Speaker 1: four months is going to be in just educating the market,
Speaker 1: learning from the market feedback, and just convincing projects and
Speaker 1: issuers and participants and distribution venues to just integrate with us.
Speaker 1: So we will spend a lot of time outside of
Speaker 1: the company, not necessarily outside. We spent the first eighteen
Speaker 1: months of our journey, as always happens, very focused in building.
Speaker 1: Now I think we need to we need to integrate
Speaker 1: what we built with.
Speaker 3: The rest of the world.
Speaker 2: Yeah, for sure. I did want to get your thoughts
Speaker 2: on the crypto market at large. Obviously, there's been a
Speaker 2: lot of success with the bigcoin et launch, Wall Street
Speaker 2: is here, There's been incredible inflows, and just recently the
Speaker 2: SEC started to approve the etherorem's body t apps. What
Speaker 2: are your thoughts on the et aps and as the
Speaker 2: success they've had so far.
Speaker 1: I think from a business perspective, let's start from an
Speaker 1: innovator's perspective. I think from an innovator's perspective, it is
Speaker 1: an incredible success story. I think never like unprecedented that
Speaker 1: an asset like bitcoin that started started in the cipherpunk
Speaker 1: cycles and was antagonized by pretty much everyone managed without
Speaker 1: any centralized coordination. To go through all the required processes
Speaker 1: and be the backing of one of the largest ETFs
Speaker 1: in the world is astonishing, And I think this is
Speaker 1: really an incredible positive story, whatever you believe in or not,
Speaker 1: the fact that a disordered movement can go through the
Speaker 1: ranks of Wall Street and take central place. It's it's
Speaker 1: just like for a builder and disruptor is spectacular from
Speaker 1: a business perspective. It's also transformational. I mean, like the
Speaker 1: amount of liquidity that will come in the compartment directly
Speaker 1: or indirectly through the ETFs is going to be transformational
Speaker 1: for this space. There's going to be more money for
Speaker 1: builders to build, more money flowing through the pipes of
Speaker 1: crypto and defy requiring also higher standards for builders. And
Speaker 1: then naturally it will provide more familiarity for users about
Speaker 1: what those.
Speaker 3: What those.
Speaker 1: Those technology stacks can do. And I think on this
Speaker 1: the ETHEREOTHF ETF is going to be even more transformational
Speaker 1: than the bigcoin ETF. I think the big coin use
Speaker 1: case of being the uh like the digital version of
Speaker 1: gold now is it's completely accepted and I think this
Speaker 1: stuff will keep growing.
Speaker 3: But itself, itsself contained.
Speaker 1: I think the ethereum e TF with Ethereum consider being
Speaker 1: considered almost a common good. That is, like it's like
Speaker 1: a socialized platform to build interesting stuff on top. Like
Speaker 1: the global computer is even more transformational because the equidy
Speaker 1: is going to go straight into that. So I think
Speaker 1: it is it is impossible to overstate the importance of
Speaker 1: this for for the sector.
Speaker 3: So it's it's it's pretty exciting.
Speaker 2: Yeah, so it's on a noteway Etheroreum. Do you view
Speaker 2: it as you mentioned global computer? Do you view it
Speaker 2: as a software almost where anybody can plug in open
Speaker 2: source software.
Speaker 3: I think Ethereum blurs the.
Speaker 1: The distinction between what is software when is what is hardware?
Speaker 1: I mean, it's a software that allows the use of
Speaker 1: shared hardware. It's defacto hardware, but it's it's a it's
Speaker 1: it's it's somewhere in between. But I think, in my opinion,
Speaker 1: is it's software hardware infrastructure that allows anyone to actually
Speaker 1: build something great without the cost of bootstrapping, Like an
Speaker 1: infrastructure that that provides security so anyone can do and
Speaker 1: do stuff by sharing this consensus security that the ethereum
Speaker 1: is and this consensus memory that ethereum is, so I
Speaker 1: think it's something, it's something in between.
Speaker 2: Yeah, what are your thoughts on cryptoregulations? Obviously around the
Speaker 2: globe there's different countries working on these things. Here in
Speaker 2: the United States, there's been a lot of movement lately
Speaker 2: with Congress and Democrats joining Republicans where it's going to
Speaker 2: help bring clarity between what's the security what's not, what's
Speaker 2: the SEC's role, what's the CFTC's role, because that's hindering
Speaker 2: a lot of innovators here in the United States at least.
Speaker 2: Do you think we see comprehensive regulations by next year?
Speaker 3: This is.
Speaker 1: This is too difficult for me. I don't think we will.
Speaker 1: I'm pessimistic in the short term. I'm optimistic in the
Speaker 1: long term for the same reason, which is political pragmatism.
Speaker 3: I think this is this this issue is extremely.
Speaker 1: Charged up politically, and politicians in good or bad faith,
Speaker 1: will use it as an issue to rally their own
Speaker 1: electorate on. It's also a very charged up point because
Speaker 1: there are powerful lobbies that are lobbying one side or
Speaker 1: the other. But I think in the long term, I
Speaker 1: think that the technological superiority of cryptoids so obvious that
Speaker 1: it will keep pushing use cases, and use cases will
Speaker 1: keep pushing interests of the public, and politicians tend to
Speaker 1: listen to the public because the public votes them. So
Speaker 1: I think I think that in the next in the
Speaker 1: next year, I'm not too optimistic, although I hope for
Speaker 1: a constructive and an open, an open and good faith
Speaker 1: debate about about regulation required regulation. But I'm not too
Speaker 1: optimistic that we're going to find absolute clarity. But I
Speaker 1: think the direction is relatively clear, and I'm very optimistic
Speaker 1: over the next five to ten.
Speaker 2: Yeah, I'm in agreement with you. There. Look, I got
Speaker 2: some wrap up questions here for you. First, if you
Speaker 2: could create your own Matter verse, what would the team be.
Speaker 1: I have a I have pretty schizophrenic interests. There will
Speaker 1: be some sort of like radio player, one type of
Speaker 1: like randomic universe with everything in.
Speaker 2: It nice and rapid fire questions.
Speaker 3: Favorite food.
Speaker 1: I'm Italian and I'm a Japanese obsessed person, so I
Speaker 1: think I would say both like Italian cuisine and Japanese
Speaker 1: one minimal great great ingredients, quality of the ingredients, and
Speaker 1: attention of the craft.
Speaker 3: Mm hm.
Speaker 2: Favorite musician are bad.
Speaker 1: Ah. Going back to the ready player, one thing. I
Speaker 1: am an opera fan I love I love Italian opera,
Speaker 1: but I also love hip hop, mainly his.
Speaker 3: Cost All School hip hop.
Speaker 2: M favorite movie.
Speaker 1: Tampopo is a Japanese movie about food from the seventies.
Speaker 3: Pretty niche but pretty good.
Speaker 2: I'll have to check that out. I haven't heard about it,
Speaker 2: but I'll check it out. Favorite book.
Speaker 3: I think Ulysses by James Joyce.
Speaker 2: Mm hmm. And when you're not working at M zero,
Speaker 2: what are you doing for fun?
Speaker 1: I used to be a semi professional and and sathlete,
Speaker 1: so I'm not competitive anymore, but I still do a
Speaker 1: lot of sports. So I'm a mountaineer. I do a
Speaker 1: lot of like very very long races in the mountains
Speaker 1: without sleeping and when my wife allows me. So family
Speaker 1: is the most important thing for me.
Speaker 3: Better will work, for.
Speaker 2: Sure, Luca, really great chatting with you. I'm excited for
Speaker 2: the future updates around I'M zero. But thank you so
Speaker 2: much for joining me.
Speaker 3: Thanks Tony, A pleasure.