On Ep. 8 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Mike Hudack, Co-Founder @ Sling Money. Mike talks to Tokenized about how his time at Monzo, Meta and Deliveroo influenced Sling Money's rise into one of the best crypto experiences on the planet.
On Ep. 8 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Mike Hudack, Co-Founder @ Sling Money. Mike talks to Tokenized about how his time at Monzo, Meta and Deliveroo influenced Sling Money's rise into one of the best crypto experiences on the planet.
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This episode is brought to you 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
Visa’s Tokenized Asset Platform (VTAP) uses smart contracts and cryptography to help banks bring fiat currencies onchain. VTAP allows financial institutions to issue fiat-backed tokens, improving financial efficiency and enabling programmable finance. Express interest in VTAP at globalclient.visa.com/vtap
This podcast is also supported by Digital Asset.
Digital Asset is excited to launch the Canton Network, a proven, trusted, and scaleable service that provides interoperability between institutional-grade tokenization platforms. The Global Synchronizer is now live, managed by Linux and institutions are actively using Canton Coin to manage the governance. No, the banks haven’t launched a token in the classic sense, this is much more interesting. They’ve done it to make all token networks interoperable. Find out more at canton.network
Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. I'm Simon Taylor. I'm your host of the podcast, and oh my goodness, am I excited today? We'll get into that in just a second. But Joining me is, as always, of course, the one and only Kai Sheffield, head of crypto at visa. How you doing? Kai?
Cuy Sheffield 00:25
I am doing fantastic. One of the reasons I'm so optimistic about stable coins is the quality of builders coming in the space. And so our guest today exemplifies that incredibly talented builder, excited to unpack all things stablecoins And his product with him.
Sy Taylor 00:42
So without further ado and with absolutely zero expectation on your shoulders. Mike Kodak, co founder of sling money, thanks for being with us, my friend.
Mike Hudack 00:55
Thank you for having me
Sy Taylor 00:57
absolutely so let's just briefly do the story, right? Because you've worked in a couple of places. So remind everybody of the job titles you had in your journey to sling money.
Mike Hudack 01:07
Well, I dropped out of high school and I was 15, and I've been working building things on the internet ever since. But before sling, the most recent thing I did was I was Chief Product Officer at Monzo, which is at neobank in the UK, and then before that, I was CPO and CTO at Deliveroo, which is kind of like DoorDash in Europe and a bunch of Asia. And then I was at Facebook before that, where I did a bunch of things, including writing ads product after the IPO for a while, and then sharing, I had an online video company, all sorts
Sy Taylor 01:37
of stuff. So you seem like a bona fide person that's worked in a bank and in product, and yet you're doing stable coins, and the world seems to be still unsure on stable coins. So what leads you to sling money? What are the insights along the way that get us to sling money? Well,
Mike Hudack 01:55
the thing that got me here was having an experience of moving money from the UK, from London to San Francisco using USDC on Solana. And it was a few $1,000 my friend wanted to get the money in USDC, and I had to go and buy that USDC, and that was a really arduous, kind of difficult process. And then I had to get the wallet address to send it to, and then I had to ask him whether or not it was the right wallet address. And then I kind of like, held my breath while I sent it, and he messaged me one second later and said, I got the money. And it was one of those moments where you're like, oh, wow, I just sent all of that money from London to San Francisco, and it was instant, and it was free. And why can't I just do that all of the time? Why doesn't it work that way all of the time? And my friend I was sending the money to had actually written, I think it was the first angel check into Venmo. And I said to him, we should just start a global Venmo. And he said, Let's go. I'll wire the money now. And I spent the next six months after that, with my co founder, Simon, talking to everyone you know, talking to the folks at wise and PayPal and Cash App and circle and Paxos and everybody just understand kind of why nobody had done this yet, and after six months, just came to the conclusion that we'd be crazy not to try to do it.
Sy Taylor 03:15
What was the answer to why they hadn't done it? And what do you think the answer
Mike Hudack 03:20
is, Well, to start with, I should kind of describe sling a little bit. It is a global Venmo. It is Skype for money or WhatsApp for money. Our view is you should be able to send money to anyone in the world, whether they're next to you or 3000 miles away. You shouldn't have to know anything about their bank account. It should be just a couple taps. It should be instant, and it should be really inexpensive. And our view is that stable coins and very fast blockchains make this possible for the first time ever. The reason why this doesn't exist, or nobody did it before, is because the technology you know to do this with Fiat is really, really hard for a variety of reasons. And I think the reason why nobody built this specific thing that we're building now, like sling, with stable coins global payments like this. It's just because it's very difficult. It is really hard to do. And you need to be able to understand the way that a blockchain works and do some engineering there. You need to be able to build a really delightful user experience and have experience designing products that move money, which not that many people have. You need to understand compliance and be able to build a compliant product. And, you know, work with regulators. I don't think there are very many teams that can do all of those things, that have all of those things in one place. And I think that that is probably why it hasn't already happened, or people didn't do it before. Yeah,
Cuy Sheffield 04:38
I think it's super interesting that the first experience that you had sending a stablecoin still seems to be the common perception that people have about that's the challenge. Is stablecoins are hard to use, and you mentioned the nervousness about, did you send it to the right address? I assume you had to go and buy some either eth or sold. To pay a gas fee. Can you talk a bit about some of the things from a payments mindset, if you're trying to reach a mainstream consumer that you just don't think are going to work in the traditional model of sending a stablecoin on chain that have been priority features for you as you've kind of thought from first principles, how do you create an experience that's usable, that abstracts away a lot of this technology behind the scenes. Yeah,
Mike Hudack 05:24
one of our principles has just been, you should send money to a person, not a number, not a really long wallet address. And we were originally working actually, on an identity product, and what we realized is that payments is probably the killer app for identity. And you know, identity is so important for payments, you want to know that your money is going to the right person. Even all of the compliance work is really about making sure that the right people are moving the money and everything. Identity is really core to this. And so abstracting away wallet addresses is very important. I think also speed is very important. And the seamless integration most crypto products out there and most Fiat products out there that interact with any kind of stable coin or anything like that, the seams are really obvious, like you feel when you're moving from one to the other. So you open up your wallet, and then you like, go into another thing to buy some stable coin with moonpay or Coinbase or whatever, and then you go back into your wallet, and then you have to find the person. And traditional payments products don't work like that. The whole thing is just one product and one experience, and it should all be seamless. And I think that one of the really important things for us is to seamlessly merge the Fiat and stablecoin world. You shouldn't really need to know anything about either one, and you should never feel like you're moving from one to the other. Really, it should just be one end to end experience. And that has meant that we've had to build really deep. We've had to build at a level that I think most crypto builders don't build in Fiat at the level that we build and most Fiat builders don't build in the level that we do in crypto, either to integrate all of these things you would see in a Revolut or Robin Hood, they have that bid over to the side that does crypto, even cash app does, and vice versa. You would see in the crypto wallet that little bit that lets you move money in and out of the wallet, but you don't go deep. So
Sy Taylor 07:19
unpack that a little bit for me, because you were at Monzo, right? And you've probably seen closer to some of the compliance and some of the infrastructure. What does that actually look
Mike Hudack 07:28
like, the compliance infrastructure,
Sy Taylor 07:30
the compliance infrastructure, but also the technology, yeah. What are you doing that's like? So have you built your own on ramp? Yeah?
Mike Hudack 07:38
Well, we built everything, really from scratch. Actually, the first thing that we did after we raised our seed round, when we decided we were going to start the company, we realized that one of the hardest things was going to be compliance. We didn't want to end up building a company where we would have to be doing remediations for regulators two or three or four years down the road, and we wanted to build the kind of company where regulators understood that we respected their interests and society's interests in what we were building. And so really, the first major thing that we spent money on was our financial crimes policy. And we sought out the best people in the world who knew how to do this. Actually, it turned out they didn't fully know how to do it. We went to them, and the first thing they said to us was, like, you're kind of crazy. You're building a payments product with self custodial wallets and stable coins. This is terrifying, but these are people who had been in government, been at regulators, who had been doing this for a really long time, and we sat down and we did an engagement, and we spent a lot of time together figuring out how to do sanctions enforcement properly, figuring out how to do transaction monitoring properly. And we solved a lot of problems that I think are core to building something like this in a truly responsible way. And that was a huge focus of ours from the beginning, along with prototyping the UI and figuring out how we were going to build the user experience, and then infrastructurally, we spent a lot of time figuring out how we were going to mint and burn directly, how we were going to take Fiat payment, how we were going to move everything around. It's a complicated system, but I think is under the hood far more efficient at sling now we have instant Fiat on and off ramps in about 75 countries now. And if you were trying to build that just with Fiat, with like custodial subledgers, it would take you 10 years, 20 years, who knows? And we've built this so far with 20 people in two years.
Cuy Sheffield 09:26
So on the compliance side, I find it fascinating that I think there's still this perception of this dichotomy of custodial wallet, KYC, self, custodial wallet, non KYC. And so you're one of the first examples that I've seen that is self custodial wallet. But KYC, can you talk a little bit more about the choice to go self custodial and the fact that you're actually using the Solana blockchain as a core ledger? Yeah, it is our ledger. And so when you have the experience that Mon. Zo and other Neo banks, there's usually this question around, okay, what ledger Are you going to partner with? What are you going to build in house? What do blockchains actually look like from a builder perspective, when you really use it as a core ledger, and what are the benefits and challenges of that functionality? Well, one
Mike Hudack 10:17
of the things that I never understood about crypto before, starting sling, I would look at all of these crypto exchanges and crypto businesses, and I never understood why they were basically just building banks. So they would run one centralized ledger for everyone, and they'd be like, Oh, well, we have 100 Bitcoin, and this user has like, half a Bitcoin, and this user has a third of a Bitcoin, and this user has five and it's like, guys, one of the fundamental innovations of crypto, of the blockchain, is that you have a distributed ledger out there like you should use that. Why are you making this more complicated than it needs to be? And so we started from that position. And we really care about these values. We really care about people being able to take their wallet and go elsewhere. We want people to have choice. We want there to be true portability of people's funds, and if they're not happy with us, they can go to some competitor, whatever. You know that that kind of thing is, I think, really important, and you can really only do that properly with a self custodial wallet. And it also means that you are using the blockchain, I think, for what it does best. And we have people on the team who built the ledger at Monzo, and once they spent about six months building slang. They're like, I don't understand why anybody would build an old school custodial ledger anymore. It seems obvious that this is superior. It's fast, it's reliable. Everybody owns their own money with sling, like it's theirs. And I think just that very thing for somebody who has worked at a bank before is like fundamentally freeing. Reconciliation
Sy Taylor 11:44
is incredibly difficult. If you've ever dealt with some of the errors and some of the payment systems and syncing and dealing with that one bank from that other side of the world, that one occasionally sends the payment for oil this way and occasionally sends it that way. Payments are actually quite easy. It's the edge cases that kill you, and to have somebody just go, Yeah, I'll take care of the edge cases. You just go build a great product. It's counterintuitive that that's kind of not where we started.
Mike Hudack 12:12
It's really cool that every sling user is on the same ledger with the same underlying mechanics, and they can interact as equal participants in the system, no matter where they are in the world. And it's the localization happens with IDV and with the Fiat on and off ramp. You know, sometimes that's a Visa card and sometimes it's picks, but within our world, everybody is an equal participant, which is wild when you consider the number of geographies that fleet works in.
Cuy Sheffield 12:42
How do you think about stablecoin brands and the choice of stablecoins within this type of experience? My understanding is you use USDP today, but USDP kind of sits on the back end that the consumer doesn't really have to have a brand association with USDP. But then you're also offering this in you said, 75 countries, and so you represent many other currencies. Are you using local currency stablecoins? Are using dollar stablecoins, but converting to local currency. How do you create that multicurrency experience that is entirely stablecoin native? And what parts does the consumer have to have a brand association with a third party versus it's just sling. Yeah,
Mike Hudack 13:23
so really it's just sling, but we tell people how their money is stored, and we tell them about USDP because we think it's really important for them to know. We don't want to hide it, and sometimes the physics are a little bit different, and we don't want people to be surprised by slightly different physics. We want them to anticipate the slightly different physics. We picked USDP because it's very close to money. It's very well regulated. It's very well backed. Paxos is a Trust Company in New York, which is the good structure for this sort of thing, and so it's a great stable coin to form our base. We do anticipate that we will have other stable coins. We'll add a Euro stable coin fairly soon. I think we'll probably add a Mexican peso stable coin. We'll add a Canadian dollar stable coin. Eventually, I assume there's going to be a stable coin for most every currency in the world, and we'll support them, and we'll let people choose what currency to hold their wallet in. I can hold it in USDP, or I can hold it in Europe. The way that we handle multiple fiat currencies right now, we kind of abstract it all away. So when you add money to sling in Europe with a Euro transfer, you can actually denominate that on ramp in whatever currency you want. So you can say, oh, I want to add 100 Rand, or I want to add 100 1000 Kenyan shillings. And we'll figure out, we'll calculate for you in the background, how many USDP that is, how many euros that is? Will take the right amount of euros from your debit card and transfer the right amount of USDP to your wallet, and then you can send your 10,000 shillings to somebody in Kenya who can then off ramp in MPesa. And. The same thing happens, and they get Kenyan shillings in their M PESA account. Or, if it went to Brazil, they get real or wherever it goes. We really believe that you should, wherever you live, be able to participate in the global financial system really easily. And none of these things should matter. Currency shouldn't matter that. What matters is the amount of value that you need to transfer between two people?
Sy Taylor 15:21
Yeah, it's an interesting set of choices, but the default is abstract to the pain from the user, like they they shouldn't have. It's a very sort of crypto question, in a weird way of like, why did you use USDP? But it's not a user question that they would think about. But it is interesting that the user experience problem that everybody bumps into is, oh, well, I've got some usdt. Would you like some USDC with that? And it's like, if I'm gonna give somebody $1 bill, I typically don't have to ask what flavor of dollar that I wanna deal with. So why do you think the user experience in crypto is so poor? Has just nobody come from that product world? Or is it just that it's really hard to build? Is it a combination of factors?
Mike Hudack 16:01
Well, we do support USDC. So we support you can bring your own stablecoin to sling, or you can remove a stablecoin from sling, and when you do that, you can choose if you do it in USDP, or you do it in USDC, and we'll transparently do the swap for you. And we think you shouldn't have to worry about that either. And I imagine we'll support additional stables over time. In doing that, in terms of the user experience, all technologies, I think, go through these phases of development, where I think Neal Stephenson wrote a book called, In the beginning was the command line, and in the beginning you had to use a command line. There were no windows, and you were writing a little bit of script to do anything, bash script, or, like, concatenating a bunch of DOS commands together into a batch file or whatever, and then eventually you got Windows 1.0 and the Amiga and the Mac. And now, like, we don't think about the fact that, like, an iPhone is this incredibly easy to use, beautiful thing with I just got Siri with Apple intelligence. I'm so excited to try it. But under all of that is a BSD kernel. I assume that the same will happen with blockchains and stable coins, and we're just going through that experience. And one way that I think about sling is that we're building, like the iPod of this space, where, you know, one of the criticisms of the early iPod, they were like, Oh, well, all of the technology to do this already exists. You can get a creative Zen player that'll play your 128 kilo mp three that you can plug into your PC with USBA and like all this kind of shit. But actually, what people wanted was an ad that just set 1000 songs in your pocket, and it took a long time before people got there,
Sy Taylor 17:40
simple is a very hard thing to do, very
Cuy Sheffield 17:43
hard when you talk to your consumers. I'm curious, from what you've seen so far, how many of them have some association they've already like been in crypto, but you're just providing better on and off ramps with Fiat, versus how many of them have absolutely no idea? They don't care at all about crypto or blockchains, and it's purely just a payment product, and it seems to be, I mean, one of my favorite topics is gas abstraction, and the idea of requiring a consumer to purchase a volatile crypto asset to make a payment, and even as gas fees go down, then, you know, on a super fast, cheap blockchain like Solana, that's great, but it's actually even more annoying of so I've got to buy $1 worth of soul so that I can pay my 10th of a set of gas to send my $100 of USCC. How many transactions does that take before I can then just make a payment? So here's how you're managing the gas abstraction. And then, like, how you think about this perspective of consumers in crypto already getting value from slaying versus outside of crypto coming into it?
Mike Hudack 18:48
Well, the way the gas abstraction works today is we just give everybody a little bit of soul. We gift them a little bit of soul to pay for gas in their wallet, and we check and make sure they have enough. And we gift them a little bit more, if necessary, lots of people also do kind of like CO signing, or you can become a fee payer, and all of that kind of stuff. But we decided, at least for now, not to do that, for a variety of reasons. This is a much simpler design from a lot of different standpoints, in terms of the user base. You know, we have some Solana crypto people who use sling, and I think really enjoy it, and we get a lot of really good feedback from them, and we want to build a product that they love. But most of our customers and our target customers are not crypto people. Now the early adopters might understand what crypto is, and maybe they once bought a Bitcoin or whatever, and they kind of understand that we use a stable coin, but we want to build, like the first billion user financial product. We really want to connect everyone in the world to this instant financial system, and that's a lot more people than there are crypto users in the world. It
Sy Taylor 19:51
certainly is. It's a heck of ambition. But are you seeing the adoption coming from the Global South? Is it more those sorts of corridors? Are you seeing it more in Western markets? If somebody is somewhat savvy in this space, who's your ICP right now? Well,
Mike Hudack 20:06
geographically, it's fascinating. It's actually very widespread across geographies. I'm very excited about this because we've got users all over the world who have ties to another country, and it doesn't really matter whether they're in the global south or the north or wherever, and we actually have some domestic P to P starting to happen now too, which we thought was going to take a lot longer to start. And we're really, really excited about that. In terms of the ICP, the initial customer profile, you know, it's really demographic and psychographic more than it's geographic. So think about somebody, kind of like, in their 20s, 30s, 40s, who's, like, pretty tech savvy, and, you know, probably understands what I was saying a little bit about, like the mp three player, or kind of knows what a stable coin is that maybe they don't have phantom, or they've never, you know, bought soul to pay gas, but they sort of know what that is enough that they're not, you know, they're aware of it. And it's people who care about speed and user experience. I got a DM from somebody yesterday who was like, I think they used us to send some money from Europe to Brazil or something. And they were like, This is the smoothest, fastest thing I've ever used. And we want people who appreciate that. Speed
Sy Taylor 21:23
is everything, isn't it? In customer acquisition funnels, in payments funnels, to retention, to reactivation, to all of that. I was speaking to the founder of Nala Benjamin, and he was saying that, like, that's the one thing is, did it get there, and was it fast? And those are the two things final question before I got to push us to an ad break, unfortunately, is, what would you say to the incumbent bankers right now, or to anybody that's sitting even back at your old shop at Monzo? Should they be moving into this space? Should they be dabbling with it, who's not at sling that should be thinking about this space? And what would you say to them? Well, we
Mike Hudack 21:59
are getting a ton of inbound, actually, from banks that want to ask about offering sling to their customers, and whether or not there's a way that we can partner to do the last mile in their country. And I think this week, we probably had two or three reasonably sized banks reach out the week before similar you know, it's happening, and it's wild to me that that is happening at this stage already, and they're coming in. They're saying, regulators increasingly understand this sort of thing, and we see what you've built, and it's better than what we have now with, you know, a lot of these banks have a partnership with, like, a more traditional money transfer company or whatever, and they're like, we'd like to replace that. So we have a ton of inbound like that. And I think that that's probably the right level at which most banks should be playing. But there's a whole infrastructure of like instant transfers and on chain FX, which is going to happen soon. And there are banks now that Kai, you know this. You talk to a lot of these people. You partner with a lot of them. There are a lot of banks now that are creating their own stable coins and their local currencies. And I think the really beautiful thing that's going to happen soon is we're going to be able to do all of our FX on chain very quickly and very low cost. And one of the biggest problems with FX today is that so much of the transaction doesn't matter, whether it's a small transaction or a large transaction. Like a lot of the work is similar, but once you move it on chain, it doesn't matter. And you can do it instantly, and you can kind of, like, make the market a lot more efficiently. And I think that is going to transform business for so many companies out there. And if banks, Apple, I think, has this thing. Now, when they don't have to be the first mover on everything, they have a huge install base. They differentiate with UX. I don't think banks have to be the first mover with this stuff. I think they can afford to see it shake out a little bit. But then I think there's a huge advantage to the ones that kind of like move reasonably quickly and do so from the perspective of offering a better service to their customers. Market
Sy Taylor 24:05
share is cheap when markets are still small, but buying back in later gets very, very expensive, and
Mike Hudack 24:11
the quality of the experience that you can drive with this kind of stuff now is so much better, like the whole thing is just going to open up.
Sy Taylor 24:18
Well, that couldn't have been a more perfect segue. So I will push us to the ad breed and coming back out of it, you'll you'll see exactly why. So we need to thank 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 podcast is also supported by our friends at Digital Asset the creators of the Canton network, which is the first privacy enabled interoperable blockchain network designed specifically for regulated real world assets, they recently joined a bunch of leading market participants to launch the global synchronizer, which is supported by the Linux Foundation under open governance. The network's native utility token, called Canton coin, is also live, delivering decentralized interoperability at the backbone of the Canton network, with over $3.6 trillion in tokenized institutional assets. Count on network is the largest and most diverse network for regulated real world assets. All right. Thank you to our sponsors. I had a news story that just we cover these things occasionally on this podcast, we have a go at being a new show, and this one is pretty, pretty close to Kai's heart. The last episode, we talked about BBVA readying their stablecoin, but also society generali is readying its stablecoin. And so this is about SG Forge, the subsidiary of SOC Gen is going to roll out its Euro stable coin, the euro coin vertable, which is just a phenomenal name, Euro CV on the Solana blockchain, and they had launched it on Ethereum last year as a highly regulated Eurocentric alternative to top dollar linked stable coins. But the Solana debut will test whether crypto users have any appetite. So Kai, I'm going to come to you first on this, but I want both of your perspectives on this. What are we seeing here? Is this just the first movers? Is this dabbling, or is the more going on here? Yeah.
Cuy Sheffield 26:54
So firstly, I think sokchan is one of the most interesting stories and examples as a bank that's really seemingly leaning into the space, and so, as I understand it, they initially launched your CV on Ethereum. It also had an allow list that was pretty restricted around who could use it. They did partner with Bitstamp and enabled your CV to be accessed on Bitstamp. They then, recently, as they became Mika compliant, they've removed the allow list. They've expanded to Solana. Now they're partnering with bitpanda, and so you can kind of see them opening up the stablecoin more and more. And I think to me, from the outside, it really looks like kind of a recognition that crypto exchanges and users in crypto today, and potentially defi, it's a new distribution channel for the bank and for the bank's products. And so if you think about particularly as interest in the the asset class and in the industry, comes back, you've got a lot of growth and activity on Bitstamp, on bitpanda, of consumers going there. And I think stablecoins, for many years, have played a major role as the representation of local Fiat that you can trade with on an exchange. And so the question is, are there customers that could be potentially valuable customers to SOC Gen across their products, that they could then meet where they are, that they can then add this product, make it available on an exchange that someone's already using, potentially to be able to go off the exchange into defi and so I think there's both a consumer angle of a new customer acquisition strategy, bringing their product to an exchange, rather than having a consumer have to go to SOC Gen and open up an account to be able to get access to it. And then I think there's this interesting institutional angle where they're partnering with market makers. These are starting to become, you know, they're crypto native institutions, but they're moving a lot of value. And so now market makers, presumably, they're opening up accounts at SOC Gen so that they can mint and burn directly, and then supplying liquidity on those exchanges. And so I think increasingly, particularly as the industry grows. We've talked about this before in earlier episodes, you can think about crypto exchanges. You can think about blockchain networks. Crypto wallets as just a new distribution channel for Fiat based products. Now, the form of Fiat that you need to have to reach those consumers is different. The Fiat needs to come on chain be represented in a way that they can access, but huge credit to them. And I think expanding to Solano, we've seen the success of PayPal with pyusd and so following that kind of multi chain, kind of moving to fast and cheap chains also makes a lot of sense. So really excited to see where they go with it, but impressed with how forward thinking
Sy Taylor 29:47
they've been. Mike, why do you think they went Solana? And why did you go that way? Is it just the builder's default now, but double click on that for me,
Mike Hudack 29:56
I think Solana is the best chain for payment. Pretty clearly, it's incredibly fast and reliably So, and it's incredibly inexpensive and reliably So, and it's capable of handling a huge number of transactions per second. Its capabilities are really strong, and I think it also has broad consensus support from a lot of people in the space. So a lot of stable coins are available on Solana. A lot of networks support Solana, and so there is probably some amount of once you start winning, you keep winning. But I can't think of another chain that really is better suited for payments. It should be the default.
Sy Taylor 30:34
Interesting. And what are your thoughts more broadly, on the idea of mica and the regulation there. Do you think that's helped some of the banks come in? Do you think that's helpful to you as a builder as well? Like having that regulated perspective, for sure? I
Mike Hudack 30:48
think it's great. I think it gives banks in Europe a framework in order to participate, which is phenomenal for us. It's been great too. We have a Dutch subsidiary, which is regulated by the Dutch central bank. And we're, you know, in process with mica, which we could only file our application recently. That's the way that stuff works. But we're working with the AFM and the Netherlands, and they've been great. And I think that the regulatory clarity that it offers is actually phenomenal.
Cuy Sheffield 31:18
You mentioned earlier, one of the opportunities that's enabled by banks coming into space and having more local currency stablecoins. Is this concept of on chain. FX, yeah, which seems like it sort of exists, but not really at scale. Yes, there's a uniswap pool that you can move from USDC to euroc with like, a little bit of volume there. Like, what does on chain FX look like in a few years? And what are the missing pieces that you think have to be resolved for that to actually become a major market that non crypto businesses are using to convert between currencies? Yeah,
Mike Hudack 31:58
well, I think that the very simple sling case will be that we'll have a bunch of users who store their primary balance in euros and a bunch of users who store their primary balance in USD, and they will be able to perform an on chain swap when sending to each other to just kind of like in flight, change their USD to Euro. And that can just be done with a simple transaction. You need to have somebody who will perform that swap for you. I think slang will perform that swap for you. They'll just be seamless and easy. And I think that that sort of thing will happen more and more, and it's really no different than when you swap one token to another, as a lot of people already do with like distributed exchanges or centralized exchanges. I think when it becomes really interesting is when multiple participants join the same exchange. It can be a decentralized exchange, but you can have all regulated participants, and you can bring your Mexican peso stable and your US Dollars stable and your pound stable and your Euro stable, and your Canadian dollar stable and your Japanese yen stable. And you could actually have the stable coin makers for each of those that have access to real time rails on the other side for Fiat, and they can just perform swaps there. And you know, truly, what is the cost of that? It's very, very low. It's a little bit of gas. Maybe there's a little bit of exposure that people need to manage. But that transaction can happen if it's on Solana sub second. And I guess when it's a little bit like when you start building sling around a blockchain like Solana, and you say, Well, why would I ever do this with a centralized ledger? Again? You know, once you see that, you're like, Well, why would I ever do FX any other way?
Cuy Sheffield 33:43
Simon, we've talked about this in earlier episodes as well around the stable coin sandwich models, many of them today that are happening, they're very dependent upon centralized exchanges. And so you're seeing centralized exchanges, particularly in emerging markets, play this pretty significant role where people are sending $1 stable coin to that exchange, and then they're selling it on an order book, or just traditional Fiat, and initiating an RTP transfer from that exchange. And so it sounds like, if I understand you correctly, Mike, you could see a world where you can scale that much greater instead of having a centralized exchange with an order book and having to bootstrap liquidity there to just have a pool, it could still be permission to have the right requirements around it, but many participants could interact on that pool. And so that 10 bips that an exchange is taking every time you're doing these conversions goes down to a fraction of that that Simon, how do you think about on chain FX like this as like an institutional defi case? Like, how should banks look at that as a use case?
Sy Taylor 34:52
A lot of banks will be familiar with the fixed protocol, which is the standard messaging format for trading foreign exchange. Initially, but all sorts of fixed income products, hence fixed and then there's the wonderful, wonderful ISO 2002, two, and our friends over at Swift. And so what you have in that transaction is, you know, the infrastructure at both financial institutions and all of the intermediaries in the different countries sending fixed messages back and forth in this long, convoluted format, and once they've agreed to the trade and locked in a price, then a whole other workflow kicks off later in the day to add up all of those trades and figure out what money actually needs to move. Send some messages to some banks and start moving the money around. And to Mike's earlier point, all of that, like complexity of where money actually sits in a bank account somewhere, and swift messaging probably isn't going away. But wouldn't it be a really nice abstraction if we had this sort of other pool where we could almost in real time, figure out our positions against each other and manage it as if it was real time, and instead of moving that money around, nostros, vostros everywhere,
Mike Hudack 36:03
I think that one of the things that happens so like, one of the interesting things A stablecoin does is it kind of like separates custody from ownership. That might not be quite the way of right way of saying it, but if you have a unit of USDP in your self custodial wallet, the dollar, which is backing that is being held at Paxos for you. And you know, you have an instrument that you can go and you can bring that USDP to Paxos, and you can get $1 back. That's really what that thing is. And I think that if banks are willing to trade those kind of tokens and then move the Fiat on the other end, after all of that happens on chain, it's much faster and more efficient than passing all of those messages back and forth, which are basically emails and getting tallied up manually at the end, and then net settlement at the end of the day
Sy Taylor 36:54
and everything. So it's meaningfully different. I do want to bring us to the next story, because, again, it's an almost perfect segue, which is story from CoinDesk, which is former Coinbase, executives have introduced a new stablecoin native exchange called Truex. It is non custodial, and it's stablecoin based, and they say it's rising to demand for truly secure segregation between execution and custody and the default settlement. Currency is pyusd, paypal's dollar back stablecoin, and they've secured 9 million in seed funding from RRE reciprocal Paxos and the Solana foundation and a bunch of others. So this kind of speaks to that broader point. Would you think that this is going to be meaningfully differentiated as being stable coin based and self custody from, say, like a uniswap, which is potentially self custody has stable coins, but is sort of out there and not necessarily competing with a coin base and everybody else. It
Cuy Sheffield 37:54
sounds like a super interesting model. And the Shah, he was one of the early folks that helped build USDC, and so he knows the stablecoin ecosystem as well as anyone, and it just seems like this natural evolution towards what do the next generation of exchanges look like. And most of the largest exchanges today were built 567, years ago that it's been a number of years, and at the time there weren't enough stable coins running on high speed blockchains to be able to actually build an exchange from the ground up that used stable coins as the core form of Fiat. And so I think now that Mike mentioned, like the infrastructure has improved so much, you could start to build these different exchange models. I think the non custodial aspect of it, not having to send funds to an exchange trust that that exchange has custody of it, that those funds are there, but being able to still execute trades and match with buyers is really important. And so it sounds to me like it's on one hand, we have the centralized exchanges that have been around for a while, that are mostly operating in traditional Fiat as the kind of Fiat pair, and then we've got defi pools that are kind of all on chain, stablecoin, Native this is kind of somewhere in between, where you can have many of the features that an institutional, friendly exchange has, but use a lot of the technology defi pools have. And so I'm really interested to see across that spectrum. It's not a binary of centralized exchange or decentralized exchange. It's kind of, where do you fall on, what features you have, who are you catering to? Kind of, how are you using on chain primitives. It's just great to see more companies that are being built at that intersection.
Mike Hudack 39:35
I totally agree. I think that this comes back Kai, to your point earlier about having a KYC self custodial wallet you can have. There's actually a lot of infrastructure now that's been created around the travel rule. There's a lot of standards for how you can associate identity with a wallet address and so on, and that allows you to build a. A compliant decentralized Exchange, or a compliant self custodial product, which maybe people thought wasn't possible a few years ago, but it's actually the, I think it's a default state of this technology, or should be the default state
Sy Taylor 40:17
of this technology, yeah, IVMS 101, and the intervasc working group for my sins was a past life going towards my Barclays days, and I set up the nonprofit global digital finance for this exact reason, my thesis has been for more than a decade that anything in financial services, you start the compliance and you Work backwards, and that's how you execute at a global scale. And so we were going to have to figure out fat F and travel rule. The next thing to figure out is our equivalent to the FX code, and how we manage FX and cross border. And then once we've got through that custody happened, but that's largely a local thing. Every market has a slightly different perspective. These would be the big unlocks, but the thing I had not seen was somebody that wanted to wrap that into a beautiful experience. And so I'm inspired by what you're building, Mike, in terms of that beautiful experience. But what is your vision for that? Is it just that sticking the landing on being the global Venmo is the focus for the longer time. Or to get to a billion people, you're going to have to build some stuff.
Mike Hudack 41:25
Well, yeah, you got to build some stuff, for sure. I do think that sending money from person to person and later, person to company, company to person, company to company. It's one of the most basic things that pretty much everybody in the world does, wherever they are. And if you look at the user experience of most of the products that do that all over the world, they're pretty similar and pretty simple. It's as close as you can get to like a universal experience. And so I do believe that if you build something which is beautiful, usable, faster, easier, cheaper than the alternative, and it works with everybody in the world, like your network is everybody in the world that can get you to a billion people. Now I think it's important there is additional utility that people want. If you want to be the money button for the world, you need to be able to do other things. And I think offering a debit card over time is going to be very important. I think that right now it's all individual, peer to peer. I think adding support for businesses over time will also be very important. I know there are people who are putting US Treasuries on Solana now and so on. And maybe offering people the ability to buy something like that might be interesting as well. I think there's like a revolution. Bill Gates had this thing, this idea that change often takes a little bit longer than people expect, but it's a little bit more revolutionary than than people expect as well. And I think that's probably true here too. I think that people's financial lives are going to be transformed in a really meaningful way by this technology.
Sy Taylor 43:13
There's a really big thing happening in the FinTech space at the moment, which is everybody's annoyed at banking as a service, especially in the United States, after some some particular issues around some middleware providers and some banks and some consumers lost life savings and so on. And there's a view that stable coins could be our Savior in that because the issue happened here is that the middleware provider and the bank and the FinTech companies don't know where people's money is. Is that just overly simplistic, like, Could this be a real solution?
Mike Hudack 43:43
Perhaps one of the things that really gave me a deep appreciation for the purpose of regulation and financial services when I was working in Monzo as the first regulated company I worked at. And there are a lot of committee meetings, and there are a lot of forms to fill out, and there are a lot of really long papers that have to get written and read, and there's a lot of consideration for the regulator. And I had not that long before that worked at Facebook, where you move fast and break things, and I remember having a conversation with our chief risk officer at Monzo, and he said, The reason why this stuff is so important, like so many crises that have happened in the world, have originated as banking crises, when people lose their money, when when institutions collapse, really bad things happen. And he's like, you know, all of this process and all of these rules are designed to protect against those kind of outcomes, and that's a legitimate goal for society to have. And if you're going to build products that involve money, you need to respect that that was, to me, like a really profound thing, and was hugely influential and changed my attitude towards a lot of this stuff. He's a great guy. He's brilliant. Has become a really good friend. And I think that it is possible and even likely that a set of these technologies do help. Help solve some of those problems. But I think we shouldn't be naive. They may also create new problems. And so knowing that the dollars that back your USDP are safe and sound over here, and knowing that the ledger, the distributed ledger, says that you have this many of them, does, I think, solve a lot of the very specific problems that you're talking about, but we need to be very aware of all of the benefits and all the risks of the technology and everything else, and not get too comfortable. It's interesting
Cuy Sheffield 45:33
to me, just this notion of there are new technologies that enable you to build products that have a different type of trust, in the sense of, if you understand the technology, and it's self custodial, and you know that you can take your keys and bring it someplace else, you don't have to trust the interface as much. But the challenge is a lot of people that's still a very complex concept that just it's not something most people think about. And so there's still the importance of the trusted brand, of the interface itself. And trust takes decades to build. I think that's been one of my biggest takeaways, particularly working at visa, just how long it takes to build trust. And when I look at the stablecoin ecosystem, stablecoins have not been around for decades yet, like stablecoins are still a new payment technology, and so I think it's going to be having people experience this new form of money, get value from it, over many, many years, before you could start building, you know, some level of trust, and whether it's in the stablecoin brand or the interface binding, like that's so we have to figure out of where does the trust sit and who is able to build that brand. But it's gonna be fascinating to see how that plays
Unknown Speaker 46:49
out, for sure.
Sy Taylor 46:50
All righty, well, that brings us to time. Guys, Mike, if people are now obsessed with slinging each other money, where do they go? Find out more about sling money and yourself. Www, dot sling. Dot money perfect and Kai, how about you
Cuy Sheffield 47:04
on Twitter at Kai Sheffield and visa.com/crypto
Sy Taylor 47:08
you'll find me on Twitter. Sy Taylor, look at Simon Taylor on LinkedIn or check out sardine.ai if you have any fraud or compliance issues you want some help with if you haven't already, go ahead and hit that subscribe button. How could you not after a show that was this good, super grateful to have Mike with us. And finally, if you want more of this show, leave us a review. It really helps others find the show as a reminder, as always, this is not financial Advice. It's for informational purposes only. Bye for now.