On Ep. 87 of Tokenized, Simon Taylor, Head of Market Development @ Tempo is joined by Noah Levine, Partner @ a16z Crypto, Thierry Edde, Head of Crypto @ Deel and William Peck, Head of Digital Assets @ WisdomTree to discuss stablecoins becoming global checking accounts in emerging markets, tokenized deposits versus stablecoins use cases and more!
On Ep. 87 of Tokenized, Simon Taylor, Head of Market Development @ Tempo is joined by Noah Levine, Partner @ a16z Crypto, Thierry Edde, Head of Crypto @ Deel and William Peck, Head of Digital Assets @ WisdomTree to discuss stablecoins becoming global checking accounts in emerging markets, tokenized deposits versus stablecoins use cases and more!
Timestamps:
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Will Peck 0:00
Where a lot of the money market funds, tokenized money market funds, such as Wisdom Trees, others today early permissioned assets that require people to go through what, frankly, is like a painful onboarding process today, even like a more painful onboarding process than you see for like traditional securities. We very much see that changing and kind of developing an ecosystem where you can kind of build like maybe still needs to be permissioned assets, but able to do that permissioning in a more seamless way, so that people can be accessing essentially the risk-free rate, right? Like the U.S. Treasury rates in a very seamless manner, and connecting directly to stablecoins, like what you're seeing with deals. So, very much in money market funds is clearly the start, right? In addition to stablecoins, that's like the next largest category for tokenized real-world assets.
Sy Taylor 0:52
Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name's Simon Taylor. I'm your host for today, author at Fintech Brain Food and head of market dev over at Tempo. And well, joining me as a guest host today, Noel Levine, partner at Andreessen Horowitz. How the heck are you, sir?
Noah Levine 1:11
I'm doing well, thanks. Excited to be here again.
Sy Taylor 1:13
Thank you for being back when Kai's out saving the world somewhere. It's good to have you with us to make sense the news, and also we got some incredible guests as always. First of all, joining us is Thierry Eder, who is the head of crypto over at Deal. Thierry, welcome to the show. So, how you keeping? Thanks,
Thierry Edde 1:30
Simon. Thanks for having me.
Sy Taylor 1:31
Really excited to have you on. We got some news that we'll come back to, and also making a debut is Will Peck, who's head of digital assets at Wisdom Tree. How you doing, Will?
Will Peck 1:39
Upgrade, Simon. I'm still coming down from that Knicks game last night, but got some sleep and feeling good.
Sy Taylor 1:44
Well, you managed to sleep after that. That's that's some good work, sir. All right, one quick bit before we get into the content, I need to remind viewers and listeners that views and opinions of our contributors today may be their own and might not reflect those the companies they represent. And please don't take anything we say today as tax, legal, or financial advice, and always do your own research and stay safe. All right, the first story. Well, this came from a bunch of outlets, but it was about Deal launching DLUSD, a custom stablecoin. So, of course, as many of you know, Deal is the payroll platform for contractors and employees, and having launched the stablecoin, this is a company that is valued at over I think 17 point 3 billion, has a billion in ARR. This is a a big step for a large company. What it does is it allows contractors to hold their earnings one to one with the U.S. dollar, and is always redeemable on the platform, and they can opt in to earn with a single tap, and it will also then auto magically generate rewards with Morfo. And of course, I believe later this month you've got the deal card coming, so you'll be able to spend that stable coin balance, and this is all built on tempo. So Tairi, give me the background here. Who's the product for? Where's the demand come from, and what do they have now that they didn't have before?
Thierry Edde 3:07
Yeah, yeah, of course. It's been a few really exciting weeks on on the G side. I mean, we've we've had a few announcements on the on the stablecoin, and I'm I'm really excited to talk about that today. The background is is pretty simple. We we spent our first few years at Deal, building out our fiat payout infrastructure, right? And when when you deal with with salaries, any any slight delay can turn into a client escalation and into a downstream disaster. And our vision when it comes to payouts was always as simple as we wanted to be the best experience in the world at paying and getting paid. And when I was thinking about that in my early days at Deal, the way to achieve that was to get really familiar with local markets, right? I wanted to understand everyone's preferred way of getting paid. When you look at at our current stack at deal, a contractor in the Philippines today can get paid in local currency into their Gcash or their PayMaya wallet. If we go to Africa and we look at Kenya, a contractor there can get shillings into their M-Pesa wallet. And the way we thought about all of that was that we wanted the experience to be up there, right? We wanted you to get access to your salary in the fastest and most reliable way. But when we dug into other markets and emerging markets specifically, and if we zoom into Argentina, we noticed that local currency payouts and RTP rates were not the solution, right? Contractors were looking for a way to hold U.S. denominated balance, and the access for it was not that as straightforward. So we spent a lot of time with our contractors, talking to them, interviewing them, and what I noticed is that even though we supported a super wide range of withdrawal methods as a contractor today on deal, you can decide how you want to get paid. Essentially, Argentinian contractors go through multiple steps, and the withdrawal outside of the deep platform is just the first step. They go through multiple hubs to get access to their paycheck, and that's that's exactly the problem we wanted to solve. We wanted to bring all of that experience into the deep platform. We wanted to allow contractors to hold U.S. denominated balance, have a card. To spend from globally and potentially earn rewards, all all on Zil.
Sy Taylor 5:03
Such a an incredible combo: the earning rewards and the card. No, we've seen lots of people do stablecoin linked cards in the past, but I'm I'm interested in your views on the earn side of that and some of these markets than what you're seeing as an investor.
Noah Levine 5:18
Yeah, absolutely. So I mean, I I think what we're seeing is that, you know, in many ways, stablecoins are sort of becoming this global checking account where people can hold dollar-denominated value very easily, regardless of which market you're in. And you know, historically, this has been very hard in the fintech market because most banks can't offer you dollar accounts. And so I think that's why we've seen stablecoins predominantly grow in emerging markets. And then I think the next natural question is, you know, what do I do with with those stablecoins? And oftentimes, yield is is really the the first thing you look for. And so maybe that's investing in a vault, but it could also be other you know forms of tokenized assets. I'd be curious to hear Will's perspective in terms of how you guys view your tokenized fund products evolving in terms of who the the main customers are. I think historically it seems like it has been mostly crypto traders or maybe crypto institutions that have a treasury and stablecoin balances, but would love to better understand how you view the fintech element of of it as well.
Will Peck 6:12
No, I think that's absolutely part of it. I mean, there is a little bit of an element of like regulatory arbitrage that goes on with some of the vaults. I mean, that's feels like a leading term. I don't mean that in like a negative way, but just the ability for consumers all around the world receive a permissionless stablecoin right and be able to immediately start your earning yield on that. Where a lot of the money market funds, tokenized money market funds such as Wisdom Trees, others today, early permissioned assets that require people to go through what frankly is like a painful onboarding process today, even like a more painful onboarding process than you see for like traditional securities. We very much see that changing and kind of developing an ecosystem where we can kind of build like maybe still needs to be permissioned assets, but able to do that permissioning in a more seamless way, so that people can be accessing essentially the risk-free rate, right? Like the U.S. Treasury rates in a very seamless manner, and connecting directly to stablecoins, like what you're seeing with deals. So, very much in money market funds is clearly the start, right? In addition to stablecoins, that's like the next largest category for tokenized real-world assets. It's definitely going to extend. You're starting to see that with some other like kind of structured credit or other products, and then going forward, we see that you know emerging to like full model portfolios and equities, right, where somebody could seamlessly get their payout in the deal stablecoin immediately, then invested into a balanced portfolio and be managed in their life from a wallet in a much more convenient way, potentially on like a global scale, which is just a much more seamless, better user experience, kind of democratizing finance, but doing it globally in a way that I think is very value add for people. So yeah, definitely think that's a great point, Noah.
Sy Taylor 7:48
I think one thing we've seen a lot of is this embedded finance idea. You know, we saw that in the fintech era quite a bit, but here you're embedding a wallet into the deal experience in in quite a powerful way. But also, you chose to use Tempo. I mean, I would say this, but why Tempo?
Thierry Edde 8:06
Yeah, I mean, first of all, we we spent quite a bit of time with the with the Tempo team. I mean, I sat down with Annie and Eric multiple hours, and one thing I want to say is I've been really impressed with the team itself. But I really cared about. I wanted to learn more about the native payments feature. I come from a fiat background. I spent most of my time building out fiat rails and and ensuring that salaries land on time across the globe. And I really wanted to understand what what Tempo could offer. And and again, when when we deal with payroll, I mean, transparency on blockchain is great, but privacy is key. If we really want stablecoins and and money to move, money flows to move more and more on chain, especially on an institutional level, privacy is key, and I think Tempo had that embedded into their their offering. And then the last bit, and it's a bit specific to our use case, but if you look at our wallet solution, it's a multi partner stack, and we thought Tempo fit really well between all of the other partners powering our our wallet.
Sy Taylor 8:56
I think that sort of payroll thing of like money has to arrive on time. If you don't make somebody's payroll, if they don't get paid, they're going to notice and they're going to start complaining pretty quickly. And you can't have a meme coin launch slowing that down or delaying anything in that sort of shape or form. I think it's been really interesting as well that you've done this one to one peg to U.S. dollar and a lot of that wallet experience sort of stands and falls on being $1 as $1 When I posted about this on social, Andrew Ramp, who leads a lot of the work they're doing, they peg what they're doing to the U.S. dollar. How important is that for people and as an experience?
Thierry Edde 9:40
Yeah, and I think again, if you look at Deed, we're an HR payroll app. Embedding stablecoins into an HR payroll app is is not very straightforward. Our customer base, they're not crypto native, right? They shouldn't feel that there's a neo bank powered on chain behind that. So we really cared about the user experience at first, and we thought that making DVSD one to one redeemable was going to bring that trust. We're we're trying to solve a real problem. We're trying to give give users the ability to hold USD back balance on a platform where they can potentially spend and and earn rewards. And I think it was it was a no brainer for us. Users can now move in and out of USD and DUSD as they see fit. It's it's free of charge.
Sy Taylor 10:18
So interesting, Will, that this embedded finance move and this sort of flexibility point that you talk about is probably more common outside the United States than it is in the United States at the moment. What do you think the beginnings of that changing? Are you seeing that changing between sort of the the market perspective you have?
Will Peck 10:37
Yeah, absolutely. I mean, I think you know we announced collaboration with Stable Seed Tanner, who I know is a prior guest on the show, kind of around this idea of embedded access, right? And I think you've seen some interesting guidance from the SEC, CFTC around what constitutes actually like financial services activity, where you can have wallet front ends, right, and have broker-dealer or futures, whatever activity embedded into that front end, I mean, I think this, like, in theory, is really what blockchain should be really good at, right? I like to use this example. So, Wisdom Trees, an ETF company, ETFs today, a $15 trillion in assets worldwide. One of the major reasons we think that happened is that go back 20 years ago, it was not so easy to just like access an asset anywhere in the world, right? You're doing new paperwork with some new mutual fund manager, and like it's just it's like painful process. And then what ETS said is like you've got this brokerage account. I'm going to put any liquid asset anywhere in the world directly into your brokerage account with no new paperwork. And I think blockchains like that on superpowers, right? Where you've got wallets, and then you can access cash, you can access different currencies. You can access all these different assets, all on the same infrastructure. I think it makes the ability to do embedded kind of financial services much much more powerful. So that's something that we're really bullish on, and I think you see it in a lot of these different announcements that are happening.
Noah Levine 11:57
Yeah, I think one other thing to add too is you know totally agree on the point of embedded finance, I think the other really interesting thing about specifically what you guys are doing at Deal is I think it's emblematic of there's a lot of companies that are doing they're just in the payment flow today or just doing the payout, but I think what stablecoins provide and specifically embedded wallets is this opportunity to extend the user experience beyond just the payout and actually start being able to monetize and provide services and products beyond when the the payout happens, and I think what makes blockchains great and what we're seeing in the industry is that there are all these new financial primitives that are getting added, whether it's cards, whether it's yield, whether it's investments, whether it's payments, such that you can start to become the primary financial account and financial product for these users, and I think that's a huge opportunity. And in many ways, I think it shows how stablecoins are really a massive catalyst for non-banks that want to expand deeper into financial services.
Sy Taylor 12:50
Yeah, Kai's been talking about monetizing the beneficiary for a while. I'm I'm interested in the on-chain yield component again. I believe Tiari, that's on on tempo. But talk to me about the design of that and and how you thought about that with Eric because that's a tricky product to deliver if your HR software like you've got rules to follow.
Thierry Edde 13:09
Yeah, I mean yeah, it's it's definitely a tricky product. But we the way we thought about about rewards, I mean in in the D Lab, it's we refer to them as as rewards is we want to incentivize users to holding DUSD on platform, and with the Genius Act and all the regulations, the most compliant way for us to really go to market with an earn product was through DeFi. Then we we sat many hours with with both the Morfo team and and the Tempo team, and we wanted to find the right balance for us. And I think to Will's point, I'm really looking forward to tokenize real world assets coming on chain, and I think that will have a lot of utility for our use case specifically. I think our users should decide where they want to sit on the on the risk curve.
Sy Taylor 13:49
They should absolutely set it, and I think there's a lot of work to do before we we get there. But I do think what's interesting about this story to me is that for a while now, people have been saying, you know, everybody wants to launch their own stablecoin, but why would you? Actually, there's some elements of control and some economics and some benefits that you have from from launching that stablecoin. And to your point, the end user just sees $1 They don't care what letter it's got at the end of it or the beginning of it. They just want it to get there quickly. They want to be at home with it, and you have a new business opportunity off the back of it. So congratulations on that point. I'm going to move us briefly to the next story, which is about some of the largest banks in the United States: J.P. Morgan, Citi, and Wells Fargo are planning a new tokenized deposit system. It would be run through the clearinghouse TCH, which is operated by Early Warning Services, who also built Zelle, and the goal is explicitly to prevent deposits from leaving the banking system. Of course, this group did announce about a year ago they were exploring a joint bank stablecoin, but they dropped it and picked a blockchain for deposits instead. Noah, interested in your first reactions when you saw this story. Especially the defensive framing,
Noah Levine 15:02
yeah, for sure. And you know, I will say, like Simon, been a huge fan of your recent content talking about the difference between tokenized deposits and stablecoins. I think it's you know an area that needs more exploration and more commentary. I think fundamentally, first of all, I think it's important to note that tokenized deposits and stablecoins are are just fundamentally different products. For one thing, tokenized deposit is in fact a deposit, and so therefore anybody holding a tokenized deposit has to be a customer of that bank. And so I think for that reason, they just hold very different properties. You know, and it also it makes sense. I think for banks launching or issuing a stablecoin doesn't really make a lot of sense, just given the limitations and what you can do with the reserves, the fact that you have to hold it in high-quality liquid assets that are short-dated, and you know you can't make loans against the the reserves of that, and so I think for them they see tokenized deposits as an opportunity to maintain their existing business practice while also being able to sort of modernize the the back end of of how they work, and so I think for them they're going to continue to try and compete and do things in tokenized deposits, but I think sort of what you've predicted is is going to happen, where stablecoins are going to be mainly used for sort of the money movement side, and then I think whenever value touches a bank, whether it's for the purposes of doing FX, whether it's for the purposes of of holding value, where you're a customer of the bank, tokenized deposits make a lot of sense.
Sy Taylor 16:18
Yeah, so fascinating. Will your views on this as well as somebody who understands balance sheets and markets, very interested in in how you think about
Will Peck 16:25
it. Yeah, I mean, I think product market fit for tokenized deposits is kind of needs to be built out a little bit more. Like, what exactly are you trying to do? I think a lot of people just say it because they're like, "Oh, I'd like to have a stablecoin, but call it a deposit, and like that's not the same thing, right? Just like Noah said, like they're kind of fundamentally doing different things. I mean, we're interested in tokenized deposits from a concept of like financial logistics, right? Like, how can you do like banking actions on chain and coordinate those things on chain? Where tokenized deposits like could actually play like a very interesting role there. I mean, it'll be interesting to see what comes out of this bank. I mean, between stablecoins and like tokenized money market funds, which we think are going to continue to become a major thing, right? Like you've kind of got the ability if you want to have self-sovereign financial services move it peer-to-peer and earn yield between those two things. You've got like all the characteristics to be able to do that. So like I think tokenized deposits need like a clear product market fit. One thing that we are interested, like I said, is the ability to do more financial logistics on chain using banks, using things like tokenized deposits or kind of instruction tokens, things like that.
Sy Taylor 17:29
Tai, any thoughts on this story?
Thierry Edde 17:31
Yeah, I mean, I might bore you with all of the payroll stuff, but in my opinion, I think you you nailed it when you said stablecoins. They found their mainstream moment, right? They found the gap in cross-border payments, and it's it's pretty clear. When it comes to tokenized deposits, and when I think about our use case specifically, when you run payroll globally, I mean, I think deal we maintain over 500 bank accounts across the globe. What I would like to see, and and I mean, you guys, let me know if I'm thinking about this correctly, but tokenized deposits on an open network where we can start settling between our own bank accounts instantly 365 24/7 I I strongly believe this is not the case today across some of our own bank accounts under the deal umbrella,
Sy Taylor 18:09
and I think it's some ways off as well. I mean, there's the Swift Ledger, which is one initiative. There's work by Kivallis, the European banks. There's another initiative that's just launched with nine different banks behind it, and that's European only. And to your point, with each bank you have a different account in each country. So let's say you had like Citi and J.P. Morgan were the only two banks you worked with. But in every country you operate, you've got a different account with them. So you have to move money between bank accounts that have different KYC processes, different logins, different cutoff times. People don't realize that pain unless they've tried to build global payroll or something along those lines. So you just want a wallet, and I want a wallet. And if that lets me move my deposits between my banks, that's absolutely fine, and I want to get there. The problem is to the point a deposit can't leave the perimeter of the bank. It has to be swapped or it has to be cleared. Now, what's interesting about TCH is it's a clearinghouse; it can do that. But in the United States, we have Fedwire and we have TCH and we have ACH. Like I don't know that you have a much of a problem moving your money between the U.S. banks domestically. It's between the banks that you have internationally where you feel a bit more pain, if if I've understood it right.
Thierry Edde 19:24
Yeah, under separate entities, essentially.
Sy Taylor 19:26
Yeah, yeah. So I'm going to ask producer Petrit to bring up that table I discussed a little bit earlier, and to like I try to have a go at like an intellectually honest comparison of like tokenized deposits versus stablecoins. So listeners, you can't see this, but you can check it out on on YouTube. But essentially, on the left hand side is tokenized deposits. On the right hand side, there's stable coins. And the core job is different between the two, right? The core job of tokenized deposits is like intraday liquidity, trade finance inside the bank perimeter. So, if you're a JPMorgan. Customer, you can move tokenized deposits between any of those branches instantly. It's pretty cool, but it's an upsell. Like it's a new product you have to buy. It's not available out of the box. But the stablecoin works out between any bank. It works with any compatible software, but there's a different reserve model and there's a different level of portability. The difference that where the banks say tokenized deposits are better is there's no deposit insurance on stablecoins, and there's no public safety net in a crisis with stablecoins. With stablecoins, you just don't get that. So you see that these are best for different things. Stablecoins today are best for remittances and emerging dollar access and settlement on alternative trading venues, but they're not necessarily better if you want to have a big relationship with a bank and it's going to give you a load of lending or some wholesale FX rates. And I think this argument of like, well, tokenized deposits are obviously better is right on some of the axes of this table, but wrong on the other axis of this table, and that's why I think actually in the long term both of these assets will coexist because nobody's ever going to build the one tokenized deposit network to rule them all. Not everybody everywhere is going to have a bank account. There's always going to be folks like Tairi who wants to build wallets and different types of solutions for their customers, so I can't have one clearing system to rule them all. It just can't exist. So I need this open loop money system. So guys, any thoughts on this? Thank you, Petrit, for bringing this up. Noah interested in your perspectives and guys around the rule. Do you think this is the start or something? Should I keep going with it?
Noah Levine 21:39
Yeah, absolutely. No, I think this is a great summary of sort of the differences between tokenized deposits and stablecoins, and completely agree with you guys in terms of it feels like what tokenized deposits are going to do is it's going to improve your relationship and ability to deal with existing banks you operate with globally. I think to the point made, I think most people don't realize that you know if you're dealing with JPM or you're dealing with Citi in different markets, it's effectively like you're working with a different bank, and I think that's why we've seen a lot of product market fit with products like Conexus from JPM and Citi Token Services from from Citi. They recognize that you know if you're doing corporate treasury or you're moving value between a bunch of different branches in different markets, it's very valuable. But I think for a lot of these you know more payment oriented or more fintech oriented use cases, I'm not sure they're going to have a significant amount of opportunity to be effective in them. And then I think the point, you know, what's interesting of the point of the FDIC insurance is I start to wonder, you know, with the stablecoin that you have real regulatory clarity, it's one to one back held in bankruptcy remote accounts. Do you really need FDIC's insurance if you have all those protections and safeguards, whereas obviously with deposits, because they're they're lending that money out, it does increase the risk. So I agree with the the first point on the benefits of improving how existing banks operate. But I even wonder, you know, if they're truly safer, would be my my question.
Sy Taylor 22:56
Yeah. So I'm going to play devil's advocate on that, if I may, because I want to play the other side of that argument, the redemption risk is real, right? So let's say there's a run on a stablecoin, and people are trying to sell their stablecoin as fast as possible. What the stablecoin issuer then has to do is quickly be able to turn around and sell their money market funds, their treasury, their repo agreements in markets, and have enough of a cash buffer to be able to do it. They they don't have one to one backing in cash. They can't honor 100% of the redemptions. So there's a time lag between when they can sell the funds that they've bought access to that that they own and when they can get the cash. And so they they may actually have a liquidity crunch and be unable to meet their obligations, and that's the the real fear I think people have about stablecoin issuers. And again, it's why I think the the crypto argument is sometimes intellectually dishonest. It says, "Well, it's one to one backed. It's better. It's like, "Well, that's not how this works. There's still a redemption timing mismatch here that's really, really important, and that's the role of the the central bank. A lot of the time, is to take out some of that timing mismatch and be that backstop. So even if you have FDIC insurance and the bank goes under, you still get made whole. Where I think this does differ is if you're a corporate and you have 5060, 70 million, hundreds of millions, 10s of billions spread across multiple banks, then it becomes a very different conversation for your treasury.
Will Peck 24:23
I mean, it's interesting with like money market funds, right? Like you see similar thing where money market funds do not have FDIC insurance that needs to be very explicitly disclosed, right? But they've got their own liquidity stress test and have a similar model where their, especially government treasury money market funds, are backed by like very short duration U.S. government paper, right? So very safe in terms of the asset, and they just need to be able to meet redemption requests like that. I think one kind of underappreciated thing about what the FDIC actually does is the orderly wind down, right? And that gets to the point that you made, which is that you know that if something happens on Friday, Monday they're going to open the bank and have kind of an. For you to get your deposit out, that hasn't been tested yet in any of this. Certainly, stablecoins and even in money market funds, there was you know concern in the financial crisis that one of the prime funds, which is kind of a whole different category than government funds, right, might break the buck, and then the government backstopped it to prevent a run. So yeah, not to be dismissive of what the FDIC insurance does, but I think there are different kind of pros and cons along different dimensions, like you just laid out.
Sy Taylor 25:27
And I think that's the debate I want to start having, which is like I want banks to stop saying tokenized deposits are obviously better, and I want the crypto industry to stop saying stablecoins are obviously better. Better for who to do what, and these things will will probably coexist. All right. Well, I'm just going to take a quick pause here while 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 sponsored by Stripe. Internet commerce is evolving pretty rapidly, and agents are now becoming economic actors. They're managing spend and transacting autonomously, and stablecoins are becoming the default for them to do so, thanks to their programmable, instant, global, and low-cost nature. With Stripe, your business is ready for this new agentic economy. Accept stablecoin payments from agents, equip your agents with wallets, and issue stablecoin-backed cards so they can spend. All through a single integration, from Shopify to RAM businesses, trust Stripe to get ready for agentic commerce. Learn more at stripe.com/crypto. stripe.com/crypto, tokenized is also sponsored by Fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses from Visa to WalPay 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 stablecoins. It's all done securely at scale with secure built-in compliance. With Fireblocks, you get complete control to build your own stablecoin 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 at firebox.com. Thank you very much to our sponsors. We're going to do a bit of a roundup of some raises because every time we went to make the show notes for this episode, new story dropped. First one I'm going to cover is Morpho raising 175 million, led by Paradigm A16Z and Ribbit. Of course, Morpho being the open credit network that I know Tairi, you know quite well that fintechs and non-banks can tap into to create sort of rewards products from on-chain vaults. Tairi, I know you've worked a little bit with the the Morfo folks. Interested in your perspectives on them and their role in the ecosystem?
Thierry Edde 28:36
Yeah, I mean, first of all, congrats to the Morfo team. Look, the way I see it, and again, I think I mentioned that at the beginning of the show. Is we, when we were building our wallet, we wanted to incentivize users to hold funds on Zil, and the the only compliant way we could do it at this point in time was through DeFi. And we spent a lot of time with the Morfo team. I think they purposefully built their model in a way that isolates anyone in in different vaults, and I think that's a really important point that we considered when we we looked at at all different protocols. One thing that that I really want to mention, Simon, and I think we we spoke about that, and we spoke a lot about finance and bringing that experience. I come from Lebanon. I mean, a country where the banking system is completely broken. I mean, good luck trying to get any interest or yield from your on your deposits as an institution or an individual, I mean, I'm I'm a user of those on-chain neobanks where where we can earn some sort of a reward on on our holdings, which which is why it's it was a mission that was really dear to my heart and I really cared about.
Sy Taylor 29:32
Such a great story, and I think it brings it home for people who don't live with that, especially the domestic U.S. audience knower who doesn't experience this stuff day to day and has money market funds from folks like Wisdom Tree that they can go buy as part of their portfolio.
Noah Levine 29:46
Yeah, absolutely. First of all, like we're super excited to participate in this most recent round for Morpho. Been investors for for a long time, and you know, obviously love Paul and the team and think they're great. One of the areas that really excites us about Morpho and really. Just sort of the on-chain credit market in general is that we're seeing sort of these new global networks being established, where you're connecting borrowers on one side and lenders on the other side. In many ways, kind of similar to you know what Visa was able to do within their network of connecting consumers and and merchants. And I think you know today, like one of the the big opportunities that we see is that it is very arbitrary and trivial and challenging to do a cross-border loan, where maybe you're originating in in the United States, but you're making a loan to somebody in an emerging market. That's very challenging to do. And I think when you do this on chain, is it sort of blurs the lines between where you are geographically, and so I think that's one big opportunity is that you can start to expand capital formations such that you can actually make loans on a global basis, and then I think the other interesting opportunity and an interesting trend we're seeing is that you know historically a lot of these on-chain lending protocols have been predominantly collateralized with crypto assets. But I think what we're going to start to see, and it's already starting to happen today, that as more types of assets, maybe starting with tokenized real-world assets, come on chain; those become new forms of collateral that you can use to borrow against. And then I think going all all the way, you know, in the long run, you can even start to use things like cash flows and receivables and other types of maybe not a tangible asset, but but maybe a future or some sort of data that says this is a payment that's going to happen in the future and be able to borrow against that. And I think you know when we talk to the Morfo team. That's very much their vision and what they're excited about. And so, we think that this is another example of something that really started deep in the crypto ecosystem, but is now really expanding into mainstream finance.
Sy Taylor 31:31
There hasn't been a lot of packaging innovation in how like lending and assets are really manufactured and distributed over the last 100 years or so. Will really, I mean, there's there's a lot of types of funds that exist that that have long histories, and so what's happening on chain is is really quite novel. There's a lot to learn from I think the the traditional asset classes and markets, but this new technology is really powerful. Interested in in your perspective on on vaults and and folks like Morfo and Arve and many others, and what the kind of innovation they bring into the ecosystem.
Will Peck 32:04
I think the innovation's been remarkable in terms of your ability to coordinate financial services transactions in ways that are like without involving humans, right? Like this would have blown people's minds like 10 years ago, right? And so I think taking this beyond like, hey, this is a great product for if you like are a trader in DeFi, right? A crypto trader, right? To like, hey, this is like a great product for like all sorts of financial services use cases using these same proof, and that's like what I think we all want to see and expect to see from this. So, like I said, big ETF company focused like that's done a lot for investors. What index funds have done a lot for investors, and I think you're seeing new kind of concepts here, extending it to kind of different categories as well. But same principles of like transparency and trying to like be clear. Like we think that's a big part of this is that showing people like yeah, this is how it works, and like this is you know it's all transparent and auditable has a lot of benefits to it as well.
Sy Taylor 32:58
It's so interesting to see that development of the asset class, Tairi. You're about to jump in. Sorry.
Thierry Edde 33:04
No, I mean I was going to say I'm I'm really excited to see the Morfo team really double down on on tokenized RWAs. I think that's something we would be interested in, just because when we look at our customer base, it's again, as I said, not really crypto native, and and we we believe people should decide where they want to sit on the risk curve. So yeah, I think I think what what Morphin are doing is is really exciting, and I mean yeah, the team is great.
Sy Taylor 33:26
Yeah, it it's bringing more assets to more parts of the world and more distribution as well. The other story this week is Canton have raised more than $335 million in a round also led by Andreeson, the CEO and regular tokenized guest, shout out Yuval said the funding is going to enable digital asset to accelerate strategic partnerships and give the firm freedom to do M and A and participate in interesting projects. Noah Canton ISO also did a privacy preserving transaction with Visa, your alma mater, so there's there's some interesting pieces here.
Noah Levine 34:05
Yeah, for sure. And I think I've mentioned this on the show before, but you know, when we think about the barriers to entry for institutions to come on chain, I think there's really historically been three big ones. One being having high enough throughput and having the technology to support transactions at scale. I think that's largely been solved. Second is regulatory clarity. You know, feeling like you have the right rules in place, such that you feel comfortable engaging on chain, and obviously Genius Act passing and clarity quickly progressing. That's starting to come to form. And I think historically, the biggest barrier is always that hasn't really been solved has been privacy. And given the fact that Canton has a is sort of the the major point of how the chain operates is having private transactions has been something that really resonates with a lot of the institutional clients, and and in addition to that, I think the team is amazing. You know, with Eric, Yuval, Don Wilson, obviously with the DRW background and the Citadel background, they speak the language with with a lot of these institutions, and so we've been really impressed not only with. They they talk about the various use cases and in the traction that they've been gaining, but also even in talking to some of these companies themselves about how excited they are to start participating, and a lot of them already doing significant amounts of volume.
Sy Taylor 35:12
Will your thoughts here? I know Canton have been around for a long while, plugging away, and and we're what four five years early to the privacy meta, long before it was cool to talk about it in in the crypto ecosystem.
Will Peck 35:23
Yeah, I mean, I read Yuval's kind of personal note that he put on on this today, and like, it's just like a lot of grit, you know. Like, digital asset has been working on stuff like this for a while, and like, a lot of firms have come and went trying to tackle like similar challenges, right? And like, true financial institutional financial services on chain, right? And they've worked through it and just grit and gotten a lot done. So, congrats to them! Like it's great to see for them, and I'm very happy for Yuval and the team.
Sy Taylor 35:52
Yeah, likewise. I think I first interviewed Yuval on a podcast in 2017. I think I first met him in 2015, back when Blythe Masters worked there, and you know this is this is a company that's been plugging away from the blockchain, not Bitcoin days. And you know back when I used to work at a bank, I was bumping into some of these people to be still here and still delivering, and now getting major investors involved is is real credibility and grit. And to that point, being able to speak the language, Noah, do not underestimate that. Like it's so interesting to hear how often I hear the feedback of like, well, one of the few grown-ups in the room has been there because the crypto week system hasn't necessarily been there. And what a lot of the institutions will tell you is, you need people who've worked in payments. You need people who understand the pain of their customer to be able to do this. You still need great crack crypto engineers. Don't get me wrong, and you still need people who want to change the world. Of course, you do. No, no shade on that. But it needs that balance, I think, for it to to start to hit scale. I mean, Tairi, you mentioned privacy being key to you. Like payroll just can't appear on chain, can it?
Thierry Edde 37:01
Yeah, I mean, look, our customers. I don't know if you saw it, Simon. We launched stablecoin payouts for full-time employees a few weeks ago. Yes, and that made a lot of noise within our customer base. But the first question we always get when we go on call is, "Are those transactions private? I don't think any employer or even employee want their salary being being disclosed on on the chains. And I think, as I said, right, it's great that transparency in blockchains is really great, but I believe for payroll to really start adopting stablecoins and for institutional breakthrough, as as Noah said, privacy is key.
Sy Taylor 37:31
Yeah, and it's one of the reasons we went for tempo zones and being payments focused is like you get that speed and you still get that that privacy. And Canton's kind of gone a little bit more towards the like ultra confidential model, maybe with a bit less speed. I think both of those answers are good answers, and I think what Circle with Ark have got a different answer for privacy. And the market's now going to try and try and figure out what happens next. So Noah, what are you looking forward to seeing now? You've made this investment, and what are you hopeful to see from Canton in the near future?
Noah Levine 38:04
Yeah, for sure. I mean, just quickly, kind of going back to your your last point. I think historically there has been this sort of tone of that blockchains were a winner take all category, and I think if you believe that basically all financial services are coming on chain, there are going to be a lot of different chains that specialize in different things and have different features that really resonate with the audience they're going after. And so, you know, with Canton, it's very institutional focused. It's very much related to capital markets. Obviously, with Tempo, it's very much more on the payment side. And I think what we're starting to see is that each of these chains are going after to have a sort of a different go-to-market strategy depending on the use cases they're going after, and the features on their chain will effectively follow suit. So, you know I think that's one one thing that we feel strongly about is that blockchains are not a winner take all category, and we're going to increasingly see more builders and developers focused on certain go to markets, and those will be massive TAMS because again these are are massive use cases. I think in terms of where we're excited about in the future with Canton is just in continuing to see more institutions coming and using the platform. I think specifically around you know some of the interoperability stuff is very interesting. JPM announced that they're going to be putting JPMD on chain. I'm very curious, Will, your perspective of you know when you can get a tokenized deposit and then also have a an asset issuer issuing assets. Then there's some very interesting delivery versus payments opportunities and and all kinds of other things. And so, for me, it's just seeing the the network grow, both on the institutional front, but also the developer ecosystem. And we've talked to a lot of companies that are now building on Canton, and it's been very exciting to see that as well.
Sy Taylor 39:31
Will your thoughts on the DBP use case, and and have you seen anything popping up there?
Will Peck 39:36
Yeah, absolutely. I mean, that gets to this kind of standardist ledger point that I talked about where you've got cash and securities represented the same way. I mean, you can even think about it in like the ETF creation redemption process, right? Like, how can you make it more seamless to create new shares of ETFs using an in-kind basket? I think there's some very interesting things that you're already starting to see around that. I mean, fungibility between money market. And stablecoins is kind of already an interesting thing that's coming up more and more. So, I mean, this gets to like true financial plumbing that I think this has this technology has a lot of ability to improve. And yeah, we're going to keep working on it, and we're looking forward for others to as well.
Sy Taylor 40:16
Indeed, indeed. So, shout out to those guys, and shout out to the next story as well, which is Figure, who we've had Mike and Turnerbaum, the CEO on the show in the past. They've acquired a company called Kiavi for $717 million For those that don't know Kiavy, they're an AI-powered lending platform for real estate investors. They do the type of fix and flip and rental loans that the banks mostly won't touch. They originated $7.8 billion last year, with 250 million in revenue and $100 million in EBITDA. So this is like a solid lending business. But the structure here is fascinating. Figures bought the platform, and then in a JV with Sixth Street, they've taken on the balance sheet loans sort of a little bit away from their P and L, and the goal here is to use the provenance blockchain and the Connect product that Figure has built and the marketplace that it has to create deep liquid funding for it. So the Figure story is so interesting to me. It's like you build a lending business on a blockchain so that you can reduce your own middle and back office costs. Then you build a platform for securitizing that, and then you bring you go out and acquire other businesses to run through that platform. It's the sort of private equity emanated playbook, but done with a platform that works. Whereas so often you see, oh, we're going to take these two businesses, we're going to crash them together, and we're going to get synergies. I think figure are starting to prove that that this is really happening, and it's. I think they make something like 70-5% of RWAs in circulation. It comes from Figure. Is at least that's their stat. Really interesting business, and one that probably doesn't get enough attention. Will your thoughts on Figuer and kind of what they're building?
Will Peck 41:56
Yeah, you know, I don't know very much about the real estate lending business, and then it's just been really interesting that one of like the first real angles in terms of real world assets on chain has been Helox that you know figures done right and built like a public company that's multiple millions billions of dollars right it's been very impressive to see what they've been able to do so I hadn't heard of Kiabi before I actually didn't know anything about this business so I'm interested in kind of learning more of what they've been able to do, but they've clearly had a lot of success so far and created like a real multi-billion-dollar public company doing HELOCs on chain, right? So I think they've got clearly like a good plan here to continue to grow that.
Sy Taylor 42:35
They also built an AI adapter that is designed to ingest the loans of the other business and bring it onto the platform, clearly seeing their future more and more as a marketplace. Nora, so interested in your views here because I don't know if this happens to you. Maybe now you're an investor, but it probably happened in your Visa days. People still saying, "What's a blockchain good for? And you point at a company like Figure, and nobody seems to understand it. Like, how do you think that this is changing public market sentiments. If anything, how do you think it's changing the conversations you're having day to day?
Noah Levine 43:07
Yeah, I mean, I think Figure is a great example. You know, not only are they they publicly traded, so there's obviously a lot of information that you can read about the efficiencies. But you know, I think it's very emblematic of the opportunities that blockchains provide, both in terms of reducing origination costs, but also what they've built with Figure Connect, where now it effectively makes the securitization process a lot more cost effective and again better capital formation. You know, I think obviously to Will's point, the the business has basically entirely been HELOCs, but it sounds like now there's opportunities to expand into other types of loans, maybe you know with auto or maybe in the future other types of receivables. I'm actually curious for Tairi's thoughts in terms of today. Obviously, you guys in the payroll business, there's a lot of companies that are in, for example, the the earned wage access industry, and I'm curious if you guys see opportunities partnering with a figure, maybe even a morpho in the future to be able to offer these types of loans in a in a more efficient or or capital effective way.
Thierry Edde 44:00
Yeah, I mean, I mean, I think we just started that trend. I think on on the payroll side of things, it's baby steps as far as I can see, and which is why I'm really excited with our with our recent launch, right? The ability to bring rewards into an HR and payroll platform is is really exciting to me. And and as I said, I do believe there's going to be that trend or of bringing more and more traditional and and real world assets on chain, right? Our partnership with Morfo, I think, is just the beginning of of what that looks like in the in the next few months. And to figures this achievement, I think I'm just really excited overall to see more and more traditional lending products just move on chain. I think it just makes a ton of sense.
Sy Taylor 44:36
It's so interesting to see that like we've always had this theme running throughout the show, which is like we're getting the new platforms like Morfo that are enabling you to do it. You have the new suppliers of assets like Figure that build the RWAs that might end up in a Morfo, and then you've got new embedded finance companies like what you're doing a deal with your own. Stablecoin, they can start to change the the nature of the distribution. And thank you guys for for joining them in the show. I'm I'm just going to briefly cover some stories we didn't have time to cover. So Athena is partnering with Centrifuge as a strategic tokenization partner. MUFG, SMBC, and Mizuho plan to launch a joint yen stablecoin by March 2027. I saw in this one that they're going to launch a committee on building a roadmap or something along those lines. Sounds very much like a bank thing to do. But DBS, by contrast, is launching a tokenized physical gold for Singapore retail investors. Singapore, pay attention to it, and also a really big one. Nouve is in an advanced talks to acquire Payoneer. Nouve being the card acquiring company, and of course Payoneer being one of the larger payouts companies. Tiari, I think you probably know them pretty well. So big things happening in stablecoin slash acquiring payments land. Tiery, if people want to learn more about you and Deal, they want to get paid on a beach somewhere and and change the country they're living in. Where do they go to find out more?
Thierry Edde 46:11
I'm on X Tierry at the 44 and then about Deal, just type in deal.com and I think you you'll find everything. Or DM me.
Sy Taylor 46:17
DM yeah, and that's it. Tier is actually amazing on social, but that sort of stuff. So if you like, if you really want to bang his door down and go like, why did you build on Temple? You can do that. All right, Will, how about you?
Will Peck 46:29
I'm also on X at WB Peck, but I'm better on LinkedIn. So you can follow me on LinkedIn, and I post some good LinkedIn content over there. So you go to Wistontree.com and learn more about everything we're doing here there.
Sy Taylor 46:41
Hey, there's nothing wrong with being a big deal on LinkedIn. It's all in these days. Didn't you know crypto's gone enterprise? No. Where do people find out more about you and what you're up to?
Noah Levine 46:50
Yeah, can find me on X at n Levine19.
Sy Taylor 46:52
Alrighty, you'll find me at Sy Taylor on all the socials, screaming into the void at fintechbrainfood.com, and of course at tempo.xyz, where we have an advisory service now, so if you want the kind of support that Deal got, then give us a call. We'd be happy to give you some Solutions Eng and some FDE to to try and help you get to where you need to get to. Thank you so much for listening and watching. If you want to find more of this show, hit the subscribe button. If you want to say thank you, hit the subscribe button. If you really want to thank us for creating this content, tell some friends about it too. It really does help us, and it means a lot. Thank you so much, and we'll catch you next time.