On Ep. 51 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Nassim Eddequiouaq, CEO @ Bastion to discuss Visa Direct for stablecoin cross-border payments, Stripe Open Issuance for custom stablecoin creation and more!
On Ep. 51 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Nassim Eddequiouaq, CEO @ Bastion to discuss Visa Direct for stablecoin cross-border payments, Stripe Open Issuance for custom stablecoin creation and more!
Timestamps:
Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
Tokenized is also presented by Fireblocks
With over $100 billion in monthly stablecoin volume, Fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold, and manage stablecoins. And it’s all done securely, at scale, and with built-in compliance. Learn more at fireblocks.com
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon tai I am your host for today, author at FinTech, brain food, and head of market dev over at tempo, and I'm welcoming back the one and only. Kai Sheffield, Kai, how you doing today?
Cuy Sheffield 00:30
I'm great. It's been a busy week. There's a lot going on. We got to get into the show. If we can cover all this, we
Sy Taylor 00:37
can and joining us today is Nassim, who's the CEO of Bastian. How you doing? Nasim, great. Thank you so much for having me. Thanks for being with us. Okay, before we get into the content, I got to remind everybody that views and opinions of contributors today are their own and might not reflect those of the companies they represent. Please don't take anything we say as tax, financial investment or legal advice. Please do your own research. And with that, let's move to the first story. Well, the first story I've kind of got to come to Kai on this, which is visa. You may have heard of them, are piloting pre funded stable coins for cross border payments. And Kai, what should we know about this?
Cuy Sheffield 01:19
Yeah, so we were really excited to announce this this week at Sibos. And I think that the announcement is visa direct is going to be integrating stable coins to enable clients to fund our money movement platform. And I think first, if you take a step back, when people think about visa, the first thing they think about is usually consumer to merchant payments using a card. What a lot of people don't realize is we actually operate one of the largest global money movement platforms, where we can enable financial institutions, remittance companies, to push funds that can land in about 11 billion endpoints. So that's cards, accounts and wallets. And if you're using a money movement platform, and the way that most platforms work today, you want to make a local payout in fiat currency in another market across the world, but to do that, you have to fund that payout. Now, if this is Fiat end to end, and you need to fund a payout in the US that then needs to be delivered in Mexico, you are restricted by existing banking hours of when you can fund. And so if you fund on Friday, you have to predict how much volume you're going to have from clients initiating payments over the weekend. And so when we saw stable coins emerge, we saw them as just this better settlement layer and funding mechanism where, if you could let a client be able to fund visa direct seven days a week, 24/7, that is a much more flexible solution, without having to predict and plan ahead and make sure that you have set us Fiat if you want to be able to do an end payout. And so we're seeing more and more demand from clients in this send stable coins to us. We can then convert and then enable local Fiat payments all across the world. And there are a number of partners and clients that we're starting to work with that excited to talk more about soon.
Sy Taylor 03:04
Amazing. Well, look, I think everybody wants money to move a little bit faster, and off ramps have been a huge, huge issue, and visa direct is a natural piece of that. So I'm sure we'll come back to this when there are other partners that you can talk it through. But congrats to you guys on getting this one out the door. I'm going to move us to the next story, because I think this one we've got a lot more to talk about, because it has partners. It has everything. This story is stripe. They're launching open issuance to help companies launch their own stable coins. Q, the Oprah meme, you all get stable coins. It is a new platform that enables any business to launch and manage a stable coin with just a few lines of code, they'll also apply for a federal banking charter in order to meet us. Stable coin guidelines, Patrick Collison pointed out on socials that they're opening stable coins to try and make them go mainstream with issuance on any blockchain, customizable smart contracts, reserve management handled for you, but full control over things like mint and burn fees and this one's kind of an interesting one out of the box, interoperability with other stable coins that are open issuance. So if strike client number one, like a DoorDash and CloudFlare, they both had their own stablecoin, but they were both on open issuance, they would work together. So fascinating story, Nassim, I'm going to come to you first on this one. What do you think this market move signals and where are you seeing the demand for things like this?
Speaker 1 04:44
So we've seen a lot of interest for stable coin issuance. Every single company I think that you've been talking to, that we've been talking to, is thinking about issuing their own stable coin. You want to have full control over the economics of every single dollar, and you need to value flowing to your ecosystem. System you want to have control not only over that, but the redemption fees and the min fees as well, without being pushed into certain directions based on the issuer that you work with. And so I think that it's been pretty clear from the get go that various companies want this product, wants access to that. A lot of companies are just not set up to do it themselves, whether you're smaller or bigger. It requires a lot from a technical standpoint, operational and compliance as well, right from a licensing standpoint, and so it's pretty clear that a lot of companies will actually outsource that and buy instead of building. Bridge has been in the issuance place for quite a bit of time, even before, kind of like this announcement of open issuance. We at Vash are so focused on regulated stable coin issuance as well. Out of our New York limited purpose trust charters, we're more focused on enterprises and institutions. I think that we can see kind of like in the announcement to focus on more crypto native companies, the Metamask, the Phantom and so on. And I think that if you think about stable coins as a distribution and liquidity game, and you see kind of like two branches, really, of different types of stable coins in the market, full stack stable coins on one end, where you have your reserves, you have your own banking relationship, your accounts, everything for yourself, and then you have the wrap stable coins on the other end, where you take an existing stable coin and you wrap it. They're kind of like pros and cons on both sides. And so I think that we're seeing different types of offering that offer flexibility to start maybe in one and then move to the other, or if you don't manage to get the network effects with a full stack stable coin, where you need to rebuild your own distribution and your own liquidity, leveraging things like cross stable coin issuance network effects, where you have the same issuer for two stable coins, then you can tap into the liquidity and the distribution of another stable coin as well. So that's a lot of what we see on the market, and small to medium sized businesses will tend to focus on the perhaps stable coin model in work, for example, with the M zeros of the world and others behind the scenes. I believe that m zero is actually used for metamasks as stable coin behind the scene to kind of defragment the liquidity right and allow those stable coins to get to less volatility faster, and then the larger companies want way more control and way more risk management across the regulatory standpoint, the financial standpoint, et cetera. So we're seeing kind of both sides on the market. We're more focused on, kind of, like the institutional side, but I think the demand across the board is just absolutely massive. I've never seen that much energy behind stable coin issuance. It's just great to see.
Cuy Sheffield 07:44
It seems like the landscape and the market structure is getting a lot more interesting, with many new entrants and options that people have to figure out how they want to participate in the space. And to Zach's credit, at bridge, when we met him back in 2022 he was talking about, everyone's gonna have a stable coin and and I think at that time, there really weren't that many stable coins that existed at all. The barrier to entry to be able to issue one was really, really high. It was unclear. I think historically, there was pretty high perceived risk of, are you going to put your brand on a stable coin? Are you going to create this product? And then what does it mean? It mean? It was a really big deal when PayPal said we're going to create p, y, USD, even though it was through a white label model with Paxos. And it seems like the general direction of travel is lowering the barrier to entry to creating white label stable coin products with a number of different providers specializing in different areas and and I think Stripe has such a big influence on the space that as they get in and make it easier in the pitch of in a few days with a few lines of code, I think you'll see more and more different competitive approaches to making it easier for companies to create stable coins. But then a lot of the focus moves towards interoperability. And I think it's one thing it's interesting to see. Okay, well, any stripe issued stable coin can be interoperable with each other because they share the same underlying issuer and reserves. But then how do you enable interoperability between Bastion stable coins and Stripe stable coins and Paxos stable coins? Of like, what does it look like cross provider instead of just within provider, and I think that's where we're still super, super early, and they're gonna be a lot of solutions and value created in figuring that out 100%
Sy Taylor 09:30
Yeah, selfishly, I'd say things like automated market makers on tempo would be very, very helpful for things like that. But to your point, we've had exchanges and AMMS for a while. We've had bridging solutions for a while. There are many blockchain networks. There are many stable coins. It is difficult to deal with the fragmentation, I mean, and the same, given what you do, kind of looking at some of the orchestration, every time a new network or coin pops up, it's another thing you have to think about integrating to. So I can imagine that's quite challenging. But. What I did spot here was they were launching with some pretty impressive companies. So open issuance was partnering with phantom for their cash stable coin, which got a lot of pickup on social as being quite major. I think phantom has 25 million users, or something like that, so it's got a lot of distribution. They're also behind the native market stable coin, USD H, which again, had a lot of social behind it when they were doing the native stable coin fill the defi platform, hyper liquid and as well as meta mask and Dakota, Dakota being the sort of ramp brex, but built on stable coins, they've got a native stable coin as well. So I wonder about the sort of business rationale here. Why are all of these companies wanting to launch their own Nassim? Do you think there's some business case there? And what would you say to people? Because I can see that Bastion sort of helping people, or intends to help people issue stablecoins in the future. What's the rationale there? What's the trade off? Yeah.
Speaker 1 11:02
I mean, you can only go so far by partnering with an existing issuer. That's the reality, right? You have limitations in terms of the economics that you get on the reserves. You have limitations on the economics that you get out of the redemption fees. You have limitations in terms of control over the stable coin as well. I'm going to give a very simple example. We're currently working with one of the large with one of the largest companies in the world to issue their stable coin. And the mere fact that they have their own stable coin allows them, because they have all the Fraud Management account takeover detection on the web two side they look into having their own stable coin to be able to undo transaction and revert to transactions in a way that is fully integrated into their own security system. Metamask has similar capabilities, and Phantom and others have kind of like detection of hacks that can happen and in some cases, actually undo transactions and revert transactions false hacks, right? And so I think that we're going to be seeing the control both on the economics and then providing a better UX that is more natively integrated into the ecosystem, and then finally, just better improvement from a security standpoint as well. But the applications are very broad. We're seeing things that are consumer facing, merchant acceptance, facing, treasury management, intercompany settlement, asset globally, we're seeing just all kinds of optimization all throughout for companies that are just not satisfied with just working. First and foremost, not everyone can partner with JP Morgan and Citibank, right? But even beyond that, just the level of optimization that stable coins allow you to have across micro transactions globally, being able to sell new products is just unmatched, and having that right away be invested the moment it gets unwrapped into and so I'm very, very excited for those companies that can finally offer better product, better yield, better incentives, better rewards, is just going to be a massive benefit for all consumers.
Sy Taylor 12:59
There's a lot of hidden paper cuts to working with some of the biggest stable coins. People don't realize. To your point, the mint burn fees were true. Were initially designed to prevent people from spamming the use of the kind of the minting and burning and other things along those lines. So they were designed for a good reason, but they end up becoming quite expensive, and for what you gain in the trade off of like, well, there's a lot of liquidity, there's a lot of acceptance, you essentially lose in some of those other control points, in some of that yield access and some of the marketing that's coming there. And it'd be very, very tempting to be able to collect that yield and to have your own little closed loops. I mean, Kai, I know you have a loyalty background. Do you see merchants? Thinking about it that way? What do you see?
Cuy Sheffield 13:40
I haven't seen a lot of merchant activity yet. I think that the smart contract customizability and control is a interesting area that not a lot of people have spent a ton of time on yet. But there is this dynamic of for the largest global stable coins that exist right now, every stable coin has this freeze and seize mechanism built into the smart contract, so the issuer has control to be able to if something happens, they can freeze the stable coin from being able to be moved. They can actually reissue it like they've got a bunch of control at that layer. However, it's really hard to decide when to use that functionality? Do you use that as, what if someone just sent money to the wrong address? Is there a customer service line that they can go directly to a major stable coin issuer and say, Hey, like, I made a mistake, like, I want to get those funds back and and I think historically, we've seen the spark contract functionality really used only in, like, compliance scenarios where it's a suspicious address or it's a subpoena from law enforcement, and so it feels like there's a lot of experimentation starting to happen. To say, if you control or as a white label provider, you're working with an issuer that controls the smart contract, can you have customizability at that layer? Better, that better fits with your application, and that could be customer service if someone loses their keys or funds, that you could reissue to them. That could be more allow listing around only certain customers can be able to access it. And so I think that there's going to be a lot more activity and experimentation around the smart contract layer controlling stable coins. On the other hand, then it's also the more complex smart contracts, you know, the more risk, the more attack surface. And I think there's so many things that when the genius Act was passed, the initial way that most people see stable coin market structure is a handful of large stable coins that are relatively static, and now you're going to have to have, while the rule making happens, this flood of really interesting, creative, innovative, different approaches towards many more stable coins created under white label models and different customized ways. I think that's going to be the interesting area to see how that plays out of what the genius rule making looks like and the differences between white label models and traditional, vertically integrated, large stable coins.
Sy Taylor 16:03
Yeah, do we see that separated? I certainly see some discourse about the loophole of rewards being put out there, whilst they see in Patrick collison's statement, he was talking about the importance of being able to share and distribute that for the growth of a nascent industry. And there are definitely different perspectives on that. And I would imagine as a financial institution, you would feel one way, and I would imagine if, as you're an innovator, you might feel a different way. And there would be good reasons for all of that. The other thing in this story that I think sort of got buried is phantom itself is now doing a lot of different things, potentially that look a lot like a NEO bank, but with 25 million users, it has the ability to store value. It has the ability to pay yield on value. You can move value. You can have other assets and stocks in there, and the ability to issue your own stable coin. Is a quasi sort of deposit and a quasi sort of reserve there. And I wonder if we'll start to see the MorphOS and others in the lending markets move into that space, because you've sort of been able to unbundle the Neo bank, and then suddenly there's this rush of stable coin native Neo banks coming to market. And any thoughts on that goes before we move to the ad break. I think
Speaker 1 17:22
that it's it's going to happen. I think that it's definitely going to happen. Stable coins are platforms. A lot of companies are moving away from building on top of APIs and SDKs and starting to build on top of stable coins instead. And that actually allows these companies to have not only the economics but also the extensibility, right? If you're a phantom, you want to be able to build your next product easily, but also build your next partnership easily while benefiting from it, right? And if you can actually not provide a sort of API and have your partner build on top of your stable coin, that's actually extremely powerful. So definitely, I would say that chains are going to be issuing, protocols are going to be issuing, wallets are going to be issuing and we're going to be seeing interesting kind of who builds on top of which stable coin.
Cuy Sheffield 18:09
I think it's interesting that the use case of self custodial wallets creating their own stable coins both now meta mask and Phantom, versus some traditional Neo banks or custodial wallets, because the principle of a self custodial wallet, you can't necessarily default and force someone into using a specific product. And so it seems like there will be these Neo banks where the entire Neo bank can be built around the stable coin. And when you on ramp into the product, they're just converting it into their stable coin. On the back end, they have full control over what stable coin is being used, and so it's just you don't even have a choice. If you're using their Neo bank, you're using their stable coin. And I think we'll see more products like that created in the future, versus the self custodial wallets, you could still use any stable coin on the platform. They can't auto convert USDC that you have over to cash or over to MUSD, they can just use their interface and use the distribution that they have to try and create financial products and convince their customers to move over. And so I think the question will be, how successful can these self custodial wallets be in converting what likely is billions of dollars of existing stable coins that are sitting on those wallets today over to the self custodial wallet branded stable coin. And I think it's a big opportunity if they're able to do that. And it's clear that between both Metamask and Phantom, while they're taking slightly different approaches and the construction of the stable coin, and like the end to end suite, they want to have this capitalizing on the distribution and bringing it into a product that they have underlying economics on, and that could be really powerful, if they can get consumers to make that shift.
Sy Taylor 19:51
The stable coin boom is being built on a business case of New Economics, of a new way for self custodial wallet. It's a new generation of Neo banks to make money from issuing their own stable coin. And I would argue that the FinTech boom in the United States at least, was built on top of regulatory quote, unquote loophole under the Dodd Frank Act, there was something called the Durbin amendment where Neo banks were able to partner with much smaller, you know, sub 10 billion in asset banks, and share a much higher percentage of interchange. So you would hear banks like coastal and fin wise and web partnering with giant brands like a Robin Hood or an Intuit and that sort of quote, unquote arbitrage and allowed them to get to market, but actually now is fairly well understood as a part of the furniture and a different business model and a different type of distribution. And now the big banks have competitive products in there, and the big banks partner with some of those brands as well. And so it changed the nature of the ecosystem. And I wonder if we'll look back on the genius act as creating this explosion of innovation. Because certainly Everywhere I look, I see just everybody going at this space. We really are in a stable coin boom. I am going to pause here whilst we hear from our sponsors. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments, Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is also brought to you by bridge, a stripe company businesses need easier global money movement. Bridge is the stable coin orchestration platform that makes it simple to receive, store issue and spend using stable coins. Companies like x Shopify and airtm already use bridge to lower their costs, simplify their global Treasury operations and expand their global reach. Learn how you can grow your business with instant global money movement using stable coins at bridge dot XYZ tokenized is also sponsored by fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses, from visa to WorldPay to bridge to Revolut, with over $100 billion in monthly stablecoin volume, fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold and manage stable coins. It's all done securely at scale with secure built in compliance with fire blocks. You get complete control to build your own stable coin orchestration layer, create payment accounts, manage liquidity and access on and off ramps in over 60 currencies. Makes it easier for you to build and scale and expand your business globally. Learn more@fireblocks.com thank you very much to our sponsors. The next story. Well, speaking of neobanks, brex, the modern spend management platform and financial operating system for businesses, has launched stablecoin payments, and they are the first global corporate card to enable paying your balance with stablecoins, they are also allowing their customers to accept and receive stable coin USD instantly. So that instant settlement use case, plus pay your balances, kind of interesting use cases with this one. So I'm fascinated about the implications for this. We have another big brand coming into the space, Kai. What are your thoughts
Cuy Sheffield 24:00
on this one? I think it makes a ton of sense, and I think we'll see most of the B to B Neo banks launching some type of stable coin integration. We saw ramp announced with stripe that they're going to be launching a stable coin link card as they expand outside the US. We've seen Miao and Brandon, who came on the show, talked about how they're integrating stable coin payments is another mechanism within their kind of B to B platform. I like the product construct of for a lot of businesses, the ability to spend on credit is super valuable. They would prefer to be able to have a credit line they spend on but then if they have stable coins in their corporate treasury, making it really easy to then pay down that credit line using a stable coin. I think we're to see more and more of that, and so it's not necessarily a stable coin linked debit card where you're spending from good funds, but it's easier flexibility, if you're a global company, if you want to move money across different subsidiaries, to then pay a corporate credit card. Balance, you could do that instantly versus paying in Fiat. So I think that the stable coin corporate card intersection, we're just getting started, and we're going to see more and more products that are starting to incorporate stable coins in interesting
Unknown Speaker 25:17
ways. There. Nasim, your thoughts? Yeah, I
Speaker 1 25:18
agree with that. I think that it's a very different approach, obviously, from ramp, right? This is, like, I would say, a much more pragmatic approach in the sense of making it easier for businesses to add stable coins in a way that builds value tomorrow, which is really, if you want to accept stable coins as payment, you should be able to do so without having to change, really, the way you operate your company, the type of financial instruments that you deal with on a daily basis. But as Tai mentioned, people want to be able to accept stable coins more easily whenever they get paid. We know that the average purchase amount is typically higher whenever done in stable coins. And also, we're going to see more and more businesses who receive stable coins and want to be able to pay their cards as well. I know that the credit card product at brex is doing incredibly well compared to the debit model, and so it makes sense for businesses to continue with that, but also being able to pay those balances with stable coins. So I think that this is a very pragmatic approach that unlocks access for a lot of businesses that interact with stable coin based businesses or stable coin based users.
Sy Taylor 26:27
I love that focus on day one value, because it struck me that ramp's proposition was about expanding the markets they could operate in, whereas brex is about serving the customers they have today they'll want to move in stable coins, so there might be more short term tangible ROI, but also that this happens after the fact. It happens later now that stable coins are more developed, now that they are seeing those signals of traction, now that potentially they have some customers who use this for their corporate treasury. Tai's point, I thought that was such a brilliant insight, which is, if you are starting to use this in your corporate treasury, which many institutions are starting to think about, many at scale technology companies, they are the early adopters of corporate treasury. That's stable coin native. They would therefore be somebody that wants to move stable coins and be able to accept them into different legal entities, potentially quite quickly. And also, if I'm living in stable coins, that instant settlement could be really powerful.
Cuy Sheffield 27:27
Tai Yeah, I think brex mentioned in the announcement that today they serve a number of crypto companies. And again, it's they have crypto companies are using stable coins as kind of a core part of their corporate treasury. And as much as you could look at and say, Oh, it's this like crypto niche. And crypto companies are growing really quickly. If you follow the fundraising, you follow the revenue that they're generating. And so I think crypto companies from the perspective of a B to B Neo bank, where a few years ago, it might have been more challenging to be able to onboard and serve crypto businesses. Now, when you have a regular environment, that's pretty clear you could serve businesses that are in the crypto ecosystem. They're an attractive client segment, and then if you can update capabilities that you have that make it easier for crypto businesses to work with you, I think that becomes a really logical thing to do that then grows the core business right now. Yeah, it's
Sy Taylor 28:23
kind of interesting to me that people live in two different universes. There's, there's like the the pre crypto universe of, oh, this is all a scam, and they're still in that mindset. I saw producer Petrit sent me something earlier today where the guy who leads the FTS banking correspondence, or like editor, the FT banking editor was still absolutely convinced that crypto is entirely a scam. The whole thing top to bottom is a scam, and I think we're long past that, when Blackrock is making two $60 million a year out of its ETF on Bitcoin. And yet, some people really hold on to this kind of world perspective. And yet, there are these publicly traded companies like circle and like Coinbase, who have massive treasuries in stable coins, and they are like the dream client for somebody like brex. So why wouldn't you want to serve them? And also, now there are all of these stable coin native businesses being born. I saw bvnk Just put out. They're four years old, so congrats to those guys. But the founder also put out that their total processed volume on an annual run rate basis had just passed 20 billion. So they've gone from sort of 10 earlier in the year to 20, and that growth rate is actually accelerating. And NASM, I'm sure you're seeing the same thing in your own business, yes. Like the growth rate is real, yeah. And that's what surprised
Speaker 1 29:49
people, yeah. And so I think that a lot of the companies that are unable, for example, to accept stable coin payments from their clients, their retail or businesses, are going to be less. Behind same thing with the inability to do anything with stable coins. You need to be able to use those stable coins. You need to be able to accept them. And then, as Kai mentioned, I'm very excited about the ability for people in businesses to be able to spend them. And so I think that the next frontier is going to be stable coin linked corporate cards, especially tied to proprietary stable coins that these companies are going to be issuing over
Sy Taylor 30:20
time. It'll be fascinating to watch. All right, next story we had was societies generalized crypto arm SG Forge has deployed its euro and dollar stable coins on uniswap and Morpho, so Morpho users can now lend out their SG forge backed euro, euro CV and USD CV, and they can also borrow against it, Morpho, the on chain defi lending protocol, just hit a billion dollars in Bitcoin backed loans. Famously, if you are a Coinbase user, you may have seen Morpho before they offer you up to, I think, something like 10, 10.6% yield, if you were to lend out your collateral to it, and then you could borrow against your Bitcoin using Morpho inside of Coinbase. Fascinating to see a financial institution. Yes, it's a captive, sort of separate company that is doing this, but really a watershed moment. Kai, what do you think about financial institutions innovating in this way? And what did you think about when you saw this story?
Cuy Sheffield 31:30
I think it's a big deal that a bank or a subsidiary of a large bank is directly participating and interacting with a defi protocol and credit to society general. Like, I think they'd done some things with maker several years ago. Like, they have been on the forefront of the space for some time. And I'm increasingly going down this rabbit hole of how defi is really evolving into what I like to think about is like, on chain credit and on Chain Finance, it's not even just about it being decentralized. It's about there's new infrastructure that's emerging that is leveraging the properties of smart contracts to enable things like better lending platforms. And when I look at Morpho, it's it seems like it's this protocol that connects lenders and borrowers, but Morpho itself is not a lender. They're just a protocol, and they're now being embedded inside many different applications. And so it's one of those trends that it's starting in crypto again, that Coinbase has embedded Morpho, first to do Bitcoin back loans, and then now to earn extra yield on top of the USDC rewards you already get. Then crypto.com has embedded Morpho and so it's this kind of shared infrastructure layer that many crypto wallets are using to very quickly iterate around lending and financial products inside their platform, which is super powerful if you think if, if any application could easily launch lending products on top of some shared infrastructure, that becomes very interesting. But again, it's crypto. How do we get from crypto to more traditional financial institutions? And the fact that you have a bank that has done the diligence, has been willing to get comfortable using these protocols, I think this is going to be one of the biggest stories of 2026 where you're going to see more traditional financial institutions, not just looking at stable coins for payments, but looking at stable coins for on chain credit. And these could be some of the most powerful use cases that are 10x better than existing solutions of managing loan books with spreadsheets and old legacy infrastructure. So I'm really excited to see where it goes and and I think it's really hard to separate lending and payments that if you have significant changes in how lending works, once you receive a stable coin, you gotta be able to spend it. And so then what are the off ramps look like around once loans are dispersed to stable coin, what someone does with it? And that's gonna be one of the biggest areas to watch
Sy Taylor 33:55
if you wanna see what most banks are gonna be doing in five years time. Look at what Coinbase is doing today. And I agree with you how many financial institutions that you would not have thought about five years ago now offer crypto, buy, sell, hold. I mean, BBVA, Santander, PNC Bank, I think even Bank of America might, if I'm not mistaken, but I can't remember on that one like buy, sell, hold. Crypto is a bank feature that is a default feature. Stable coins are interesting, but payments, like most banks, don't get a positive business case out of stable coins, necessarily. It's not I must rush to adopt this, unless maybe I could remake correspondent banking, but that's going to be difficult and take time. So what do I need to do right now? Here's this giant lending opportunity that's incredibly efficient, and the worry might be, well, does that compete with me? Does that compete with my balance sheet? But actually, no. What does defi really benefit from? It benefits from liquidity, and banks are essentially highly levered lenders, right? Like forever. Every dollar in deposits they take in, they can lend up to $10 this gives them a unique advantage in lending, because they're very good levered risk managers, doing that for consumers at scale with an efficient protocol in the middle, where there are a load of consumers now who happen to have adopted this stable coin thing, and the way you get into that being a model could be really interesting. So you could go directly into the lending, or you could just collect deposits in a completely different way, by issuing a stable coin that is backed by your deposits, like SG four just done so. Naseem, interested in what you think the business case might look like to a financial institution. Yeah.
Speaker 1 35:41
So if you look at the stable coin journey, kind of like, think about it as issue, hold, use. So you have the ability to, obviously, kind of like, capture the economics on the stable coin by being the issuer. You have the sand hold receive piece, which is kind of like, really the core couple payment part, and then the actual usability of it and the utility with, like, actual spending, kind of like cards, lending, borrowing, trading, and then just more, like settlement features for various financial instruments. At the end of the day, those stable coins are a means to an end, right? Like you want to enable access to some type of service, some type of product. And I think that, as Kai mentioned, the power of stable coin is being able to unlock access to a speed of building products that is just unmatched, right? If you look at them just on the payment side, how long did it take for PayPal and Venmo to connect to each other? Right? It was kind of like decade long in the making, despite being part of the same company, the time to get those products to market. The speed at which now stripe is able to iterate and others are able to iterate just because of the standardization provided by stable coins is absolutely massive. And there is this who said, I don't know if this is like naval or someone else said that the beauty about open source software is that you only need to solve every single problem once, so every single time that you have one company that actually solved this problem. For example, Coinbase did that first, as you mentioned, Simon, the ability for others to follow very quickly, and then it's really just a matter of kind of compliance and pulling stuff like that the levers from a risk management standpoint, but the speed of iteration is really, in my opinion, the big part of the story. A bank like SG should not be able even like a sub arm that is smaller, faster, more lean, typically does not move as fast as what we're seeing them do. And that's really, in my opinion, because of the enablement of stable coins and then defi standardization on both sides. So very, very excited. The one thing that is puzzling me is so like the Euro stable coin, I haven't seen that much demand for it to this day, and so that's we're still trying to, kind of like, understand where the value in Catholic appetite for Euro stable coins are. But everything else in this story is, like, super, super exciting to me, and concur with both of
Cuy Sheffield 38:01
you, arguably, there'll be more demand for Euro stable coins in a lending context than in a payments context. 100% if you're in Europe. Do you want to be able to lend and borrow in dollars like it doesn't make nearly as much sense. But I think Simon, like, we've been talking for years about this concept of composability, and it was always this, like, very abstract thing. It was like, what if you had these, like, Lego pieces, and if anything that Venmo built, that cash app could immediately use and it, and it was like this concept, we're just, we're seeing this play out on like, a week by week basis, where, if you take crypto.com, and Coinbase are very directly competitors. They are two custodial crypto exchanges, and they both now have lending products that are powered by the same infrastructure. And so we went from crypto wallets and exchanges compete with each other, but they share the same blockchains as the underlying ledgers that enable it to be easy to move funds from one to another. Now those exchanges and wallets are innovating, creating financial products like Bitcoin backed loans or yield accounts that are sharing the same underlying infrastructure. And so you might actually have a crypto.com customer depositing a stable coin to earn yield that ends up funding the loan of a Coinbase customer that's borrowing against their Bitcoin. And these are fierce competitors. And so only when you have this like really interesting neutral infrastructure can you have the composability that is going to bring more liquidity into one place and make for more efficient markets. And then if you look at like, the cost, if you wanted to build a Bitcoin back lending product from scratch, end to end, like, you have to go and secure a credit facility, you have to have your ledger, you have to have your margins. This is, like this modular you integrate into it. And now, I don't know how long it took Coinbase, but like, they've launched this product, and it's been one of the most successful products the past six months. I think you're gonna see more and more companies go down that path of leveraging the defi infrastructure to do that.
Sy Taylor 40:06
It's fascinating to me that a financial institution might look at this and go, Oh, lending protocols are competitive, but they might also look at this and go, actually, I could deploy balance sheet, or I could be much more asset light lender into this space. A lot of banks now are in private credit, so they fund almost like an investment product, version of lending, rather than the sort of traditional balance sheet based lending. JP Morgan does it, and several others. So classic private credit vehicle would be your Apollo's, your blacks, your kkrs. These are the lenders to non bank lenders to your auto dealership, to your BNPL providers, and so on. But also the banks are lenders to BNPL and to auto dealers and so on. And indeed, the banks are lenders to the private credit funds. So for banks have opportunity in every single direction here, and I think where there's money to be made, I do think we'll see the bank show up eventually. All right, last story, and we'll cover this one briefly, was we did see that swift and 30 global banks are now working on a blockchain based overhaul. The announcement said they are working at pace on making cross border payments, instantaneous and a system capable of handling new forms of digital money. They didn't name stable coins. The timeline is yet to be defined, but it will initially focus on enabling real time 24/7, cross border payments. And there are a group of more than 30 financial institutions that will help design and build this ledger, including the great and the good from JP, Morgan, HSBC, Deutsche and so on. Nassim, did you see any more about this one? Did you have any thoughts when you saw this story? Yeah.
Speaker 1 41:52
So first and foremost, I think that we've seen, we've heard, I feel like, over the years, quite a bit of noise around like swift and intersection of Swift and blockchains. It sounds like this is the real deal, and things are actually happening. I'm actually quite positive on this. I think that any sort of standardization, so long as this is built as a ledger on top of existing standards, I hope that they're not trying to reinvent the wheel with completely new protocols and interfaces and languages and so on. I think that this is very good. The standardization here is quite powerful. I'm not entirely sure I understand how open it will be. I didn't get to read as much, but I think that all standardization is good. I just want to make sure that we have integrations for each one of those large banking institutions that will enable the same format, ideally of money in make it interoperable with the ones that everyone is building currently in the stable coin space, or even in the tokenized deposit space as well, right? Because then that actually allows network effects that are extremely powerful for money movements globally. But having swift that modernizes is always very good. I know that the crypto crowd is going to be kind of like taking decentralization, decentralization. I feel like having optimization of money movements is an excellent thing. And, yeah, I'm very, very positive about it. I think that this is longer rigid.
Cuy Sheffield 43:15
I continue to find that most people in the crypto ecosystem don't even know what Swift does. And so like swift sometimes is like, see it as this enemy. And they're like, Oh, we're gonna beat Swift. Or you're like, Do you know what Swift does? They're like, No, but we're gonna beat 'em. It's like, it makes a ton of sense that Swift, as a method layer, has a role to play here. Really excited to see what they do. Ton of open questions, like they're working with consensus. Consensus has their own l2 linea, is this using linea? Is this there a swift l2 with Swift as a single sequencer? Is it entirely permissioned? Are the banks gonna run nodes? Like, is it gonna settle to layer one? Like, there are all these like questions on the implementation details that I'm fascinated by, but like, makes a ton of sense for them to move in this direction, excited to see where it goes. If I was to
Sy Taylor 44:01
make the bold case for this, I would imagine something that allows you to turn a ISO message and very quickly have a standard way of turning that into some sort of tokenized deposit and or be interoperable with the universe of stable coins, if that's the focus Nassim, as you said, then doing that with Swift governance and swift backward compatibility would be phenomenal. I think if this is some sort of competitor to the world that's out there, then I think that's a very difficult uphill climb. But they do move $5 trillion a day, and people forget about Swift superpower here, which is they enable the top 30 banks to lend to very small banks around the world and fund their cross border settlement. So people talk about the cost of nostros and the cost of collateral, what they forget is smaller banks don't necessarily have a high pre funding cost because some large bank somewhere is helping them get a line of credit. To be acting in the correspondent banking system, and that's something that potentially we should think about rebuilding in stable coins, like, what does the line of credit look like to avoid any form of free funding? And then there's the whole talk of bridging and settlement assets so swift dominates in those big, large payments
Speaker 1 45:18
boards. We're seeing some of that with like centrifuge and others, right, where you have companies that are built on top of them that essentially do pretty much like what you said, which is just pulling funds out of centrifuge and then doing kind of like the risk management and the credit risk and distribution to various banks and emerging markets to help them with their liquidity locally. That's kind of like a beauty about the stable coins and the fragmentation and defi of liquidity into very specific lending protocols, because then it can actually be pulled by companies that can do this credit and risk management
Sy Taylor 45:52
that's fascinating. Today, I learned thank you for that. Nas. Imagine how efficient that would be at swift scale, and imagine how much more capital could be deployed by the large financial institutions into long tail, exotic markets that they otherwise would have not made economically viable. And that's often the reason why stable coins are being adopted in exotic corridors, sort of Cambodia to the Philippines, India too, somewhere in Latin America, Chile, and those sorts of flows, historically were quite expensive and quite difficult, and those flows are ideal for stable coins, and that's where most of the growth is going to come from in our global economy in the future. So long may that continue, and yes, there will be risks along the way. Look, that puts us just about out of time for today. So I want to thank everybody for listening and watching nurse. Where can people find out more about you and everything you're up to at Bastion?
Speaker 1 46:47
Yeah, so head to bastion.com to learn more about Bastion. We actually have quite a few announcements that are coming up. So excited. I wish we had done this a few weeks from now, but very excited for it. And thank you so much for having me, Kai. How about you
Cuy Sheffield 47:02
on x at Kai Sheffield and visa com slash crypto. You'll find me
Sy Taylor 47:05
at sy Taylor, everywhere you do social, and you'll find me at FinTech, brain food.com or tempo dot XYZ. And before you go, have you hit subscribe yet? Because if you haven't, what are you doing? That's craziness. And have you left us a review or a comment or something along those lines, that's how you say thank you, because that's what really helps us. So have a good week, and we'll speak to you soon.