On Ep. 57 of Tokenized, Simon Taylor, GTM @ Tempo is joined by Joao Reginatto, Chief Strategy Officer @ M0, Mark Greenberg, Global Head of Consumer @ Kraken and Kevin Lehtiniitty, CEO @ Borderless to discuss M0 and MoonPay partnership for stablecoin issuance, benefits of companies creating their own stablecoins and more!
On Ep. 57 of Tokenized, Simon Taylor, GTM @ Tempo is joined by Joao Reginatto, Chief Strategy Officer @ M0, Mark Greenberg, Global Head of Consumer @ Kraken and Kevin Lehtiniitty, CEO @ Borderless to discuss M0 and MoonPay partnership for stable coin issuance, benefits of companies creating their own stablecoins and more!
Timestamps:
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Music by Henry McLean
Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I'm your host for today, author at FinTech brain food and head of market dev over at tempo. No Kai today, he'll be back on another episode, I promise you. But while he's away, we've got some incredible guests for you. Making a return is the one and only. Joao Reggiano, who's Chief Strategy Officer at mzero. Joao, how you doing, sir, I'm good, good. Thanks for having me back. I always appreciate you. We've also got Mark Greenberg, who's Krakens Global Head of consumer. Mark, how you doing?
Mark Greenberg 00:44
I'm great working on some really cool products. Simon, so looking forward to the conversation today.
Sy Taylor 00:49
Yeah, you guys are doing a lot in consumer, and there's a lot this week about it, so I'm sure we'll hear more. Also joining us for a debut is Kevin letney, who's CEO of borderless. Kevin, how are you
Kevin (Borderless) 00:59
doing? It's the best day since yesterday, Simon,
Sy Taylor 01:01
it really, really is. It's the best day since yesterday every day. But before we get into the content, I gotta remind viewers and listeners that views and opinions of contributors today are their own and might not reflect companies they represent. Please don't take anything we say is tax, legal, financial or fashion advice. Please do your own research, folks. All right, let's kick off with a story from m zero. Since we have you so I saw that m zero and looks like Moon pay are partnering. Joao, do you want to talk a little bit about this partnership, and what's happening with the m zero network, with Moon pay?
Joao Reginatto 01:38
Yeah, absolutely. I think for the benefit of others, right? Simon, I think we have spoken many, many times about this topic, so I'll pitch our vision of the world, and then I'll talk about what was announced today, but I think a big trend that now, I think the market is beginning to understand better that we have seen a long time ago when I spent time at Circle before joining m zero in 2023 is that stable coins are going to be this phenomenon, but not so much because they are products, but more because they can behave as infrastructure, right? So we have been pitching this idea that stable coins are essentially the next banking as a service layer, if you will, and it's an objectively better one at that. So everyone who wants to build a FinTech product wants to build some sort of a product that demand some level of $1 denominated functionality inside it, they should really consider building that on top of stable coins, or customized stable coin functionality. And we have been trying to educate the market on that. I think if you are buy into that vision, to buy into that thesis, then every platform solution, there's usually two paths for you to take in terms of how you build them. One is a very vertically integrated and more closed style of platform. Another one is a more open platform, like everything else that we see, mostly on the internet, and particularly things that are built on blockchain at m zero would believe a lot in the power of open platforms. And one of the things that we want to bring to the market is this idea that you can come in to build your application on top of a digital dollar platform. But behind the scenes, the platform is also open for any issuer to join and participate. And this week, I heard from I will steal that quote, that two is a data point, three is a trend. So I think we are entering the trend phase now, because moon pay is now the third stablecoin issuer joining the m zero network. And the main, the main news, I think, is actually that moonpay is entering the stablecoin issuance space, right? So above and beyond everything that moonpay has done for years now in terms of payment rails and crypto infrastructure support for the crypto and fintech spaces now, they are going to enter the stablecoin issuance space as well, and a lot of it has to do with the prior acquisition that they had with of iron, right? Because it gives them a different profile access to more institutional rails. So they're definitely tapping on all the infrastructure that they acquired as part of that deal. And then what they have announced today is them entering the stable coin issuance space via an integration with m zero. What m zero allows an issuer like Moon Pei to do, which is the same thing that happened before for bridge and for MX on, which is the very first and smaller issuer on the network, is that these entities can come into a platform like m zero, abide to certain requirements, to certain technical standards and non technical standards, and pledge collateral in the form that both adheres to the network, but also takes all the regulatory requirements that those guys are under, and issue stable coin as part of a common network in a more interoperable way.
Sy Taylor 04:32
And I think that common network's key, because the upper meme of you get a stable coin, you get a stable coin is great, but don't we just create a new interoperability problem, and and I think you guys foresaw that, and are now building that network and seeing other people issue on it as well. And almost there are issuers that are selling the ability for other people to make their own stable coins that are also part of that network, which I think is kind of really, really interesting. You created a category. Of issuance as a service, but also this network thing, I think is really powerful. Kevin, I'm sure you get asked this a lot, but talk to me about why would a company want to create their own stable coin versus using one that's already out there? I'm pretty sure. I think I know the answer is yield. But is that the case?
Kevin (Borderless) 05:16
I think yield is by far the number one answer. I've been working on stable coins now for the past nine years, which is a really long time to say stable coins will be hot next year. And I think that's finally starting to come true. And there's an argument to be made about joining maybe consortium issued tokens as well that have a nice kind of yield sharing elements like I think the folks at GDN with uscg, have done a nice job of trying to coalesce some things here. But in general, when we think about white labeled issued stable coins and some of the customers that we support that are white labeled stable coin issuers, it's all about yield and it's all about more capital efficiency. Those are kind of the two things that seem to resonate the most across the
Sy Taylor 05:55
market. Phenomenal answer. Mark your thoughts from a consumer perspective, does it not get confusing if there's like, a million different flavors of dollar,
Mark Greenberg 06:03
yeah, and a lot of ways, as someone who distributes these things to many, many users, right? We see users get confused by the balances they have on Kraken right now, right? You have four or five different stable coins that are even at the top of that list, but there's probably 10 or 15 on Kraken today, and probably hundreds more coming over time, as this market continues to fragment, I'm a huge fan. We're founders of global dollar network and the usdg token. I'm a huge fan of a more consortium play. It frustrates me endlessly that the top stable coins don't offer yields back to their users. That's part of why we helped create usdg. I'm fine with interoperability, and it kind of works on chain, sort of, but I hate bridging, and even with bridging, sometimes it works, sometimes it doesn't work, sometimes it's easy, sometimes it's hard. It would be nice if we could find something that offered the yield that everybody actually wants, but simultaneously, was interoperable
Sy Taylor 06:57
and we could hide the wires a little
Kevin (Borderless) 06:59
bit. I think of the two giant trends right now in terms of increasing fragmentation is everybody's issuing a stable coin and everyone's creating a corp chain. Those are the two very, very fragmenting things. I resemble that remark,
Sy Taylor 07:13
not a corp chain. I'm going to plaster it to my forehead. It is permissionless, but I hear the fear, which is fragmentation, and do we need any more fragmentation? And at the incentive game of side diamond, and I think there's something instructive. And what m zero is building here, of like building the network behind the scenes, so that above the line there are many different business models that you can start to explore, but below the line there is this interoperability. And I think thinking that through and surprising people in three years time when everybody goes from Joao, what the heck is this m zero thing to Oh, I get it now, that must be kind of a nice journey to kind of have gone on and move from through the fragmentation. I want to move us to the next story. That was because, speaking of people that have been on a journey, JP Morgan has announced that their jpm coin is now going to be available on the base network only to their institutional customers, but this is a representation of a deposit on chain. And I think this is the first time that we've seen that in production available to customers on base and they're also working with dBs, the Singaporean Bank, which Mark. You'll know, Singapore's huge jurisdiction in all things stable coins on a framework for tokenized deposit transfer interoperability across various blockchain networks. So there are these efforts now, I think, for interoperability between tokenized deposits going on chain across multiple blockchains. And I wonder how this starts to play out according to the release, clients using jpm deposit tokens could potentially transact with those on DBS token services. So now you've got Connexus and you've got DBS token services and you've got base in the middle. It's baby steps. But thoughts on this, Kevin, are we going borderless? Is this starting to happen? What did you think when you saw both of these two stories from jpm this week?
Kevin (Borderless) 09:07
I think the shift that we're starting to see at borderless from some of the conversations we have with the banks and the more institutional side of the market, is people have had this assumption that financial institutions are going to move into stable coin based cross border payments, and I think that's false. I think financial institutions are going to move into deposit token based cross border payments, and it's at a high level, a very similar concept from a blockchain infrastructure standpoint, right? You have liquidity on one side, you have liquidity on the other side, you have a blockchain that transfers the token between those liquidity venues. But the actual instrument that's being transferred, that's actually settling the underlying payment is completely different. It's no longer a stable coin, which, for banks, is incredibly capital inefficient because it needs to be fully reserved. It's now a deposit token that represents the deposit that they have, that they're able to now go lend against, generates their normal revenue from, and all those sorts of things. And I was just having a conversation earlier today, right before this. So this is. Very well timed question, or that was a well timed conversation. One of the two that was the first time I've been asked point blank, and this is by a member of CPN, hey, borderless as a credibly neutral global payments network, versus CPN being a circle issued asset global payments network. Would you be open to working with tokenized deposits versus stable coins, and would that global infrastructure, with all the liquidity and on and off ramps around the world, could that be retooled into tokenized deposits? And like the short answer is, there's a lot of exploration that needs to be done, and how exactly that would work mechanically, and thankfully, there's some people at borderless that are far smarter than I am who can do that exploration. But I do think that's indicative of the direction that banks and financial institutions are going to go. It's actually not going to be stable coin. It's going to be
Sy Taylor 10:46
tokenized deposit here, here,
Mark Greenberg 10:48
I'm not sold on that, and I'm going
Sy Taylor 10:49
to, yeah, let's, let's have this argument. I want to have this argument. I've been spoiling for this fight for a while. Let's, let's go. Let's do this.
Joao Reginatto 10:56
Happy to join as well. Look, let's
Mark Greenberg 10:58
start with how boring is it to have another walled garden, slightly on chain stable coin that a tiny group of users can use? Reminds me of RWAs for the long history of RWAs where, like no one can really access them, we're running a bunch of tests, and most of those models don't work. The same reason that we've built X stocks on the tokenized equity side, permissionless for retail users, available to do all sorts of interesting infrastructure plays by companies more than the institutions that are already connected to the bank. Means that you get the creativity and the openness to try things that's really important. And also, we're moving to a world where trust for banks is less, and I think that's true for big companies and small companies and at retail. And I love the idea that I can hold my money fully reserved and earn the yield off of it, and not have to worry about a bank going under, which has happened more than we'd like lately. And I think that's a feature. Honestly, I would even if we didn't have crypto rails and blockchain. I think if money market funds could move around, people would probably use them instead of bank accounts. And the reason they don't today is they're really hard to move around, and you need to say cats and all sorts of other things. So I'm expecting a world where we have significantly more focus on fully reserved assets. And actually, in a world where money can be anything on the blockchain, why do you even need to use dollars at all? Maybe you actually start using tokenized equities like the s, p5, 100 to move things around, or gold.
Sy Taylor 12:34
Well, there's this little thing called credit risk. But where are you at Joao on tokenized deposits versus Team stable coin,
Joao Reginatto 12:41
my opinion is that whatever we deem as the definition of what a bank is is changing, right? And I think that's the interesting part, like Kevin might be right, but I think that's only one direction of the story that I agree with, and it's the direction of what banks are going to do about this whole topic. And actually what JP Morgan is doing in conjunction with Coinbase, you could argue Coinbase, you could argue that it is maybe objectively better than what they have done to date, and it's in the right direction. But the other direction, I think, is what's coming from stable coins, and stable coin issuers in particular, who are going to become narrow banks soon. And then you know, which one do you prefer? As Mark said, like a very traditional bank who, quite honestly, I'm sorry to say, has no idea what they are talking about when they talk about this kind of technology, or the folks who actually dominate the technology and are now, because of regulatory clarity, coming upstream to become a bank, like, where is this stuff going to meet? Right? I think the markets are completely different, right? The markets that are trying to be tackled are completely different, and I think different and I think different use cases will require different of these solutions.
Sy Taylor 13:43
As the former banker in here, I want to pull one out for the bankers and say that I do think there's a lot of them that have an idea, but I also really, really love that idea that they're coming from two different starting points. And if you keep that in mind, then the problem they're solving is different. So the problem that stable coin is solving is that for the excluded, for the Global South, money is too expensive, too slow, and doesn't reward them nearly enough. For the bank's largest clients, the problem is slightly different, which is, I have 35 different banks, each with a different login. I can't move money between them. It's closed on weekends. Can you fix this? Pleat, and so far, the banks have said, Yes, I can fix it inside my walled garden. And now they're starting to figure out how you connect one hyper ledger bessu instance to a hyper ledger quorum instance and start to make these things interoperate with base in the middle. I think they're finding their way through that. And to your point, Joelle, these things will come together. But JP Morgan does what, $10 trillion a day. Stable coins did 9 trillion adjusted last year. Stable coins are growing at 400% year over year. So where do these two things meet in the middle? I don't think that banks disappear, and I don't think to Kevin's point that tokenized deposits are even in. Boring or b a bad idea because banks, some people don't want banks to exist. Like I grew up in the shadow of the financial crisis as well. Just like every millennial Dad, I'm struggling to make property work, and I can see my kids potentially never climbing a property ladder as the decline of the west through the zurp era and zurp phenomenon. But I don't hold banks uniquely responsible, nor bank employees for that issue, but I do think that there's this fascinating question of where these things start to meet. And I'm excited to watch people try and bring the two together. I put out an idea which was like, I think they announced that they'd partnered with b2, c2, which you guys will know as the market maker, and they haven't said they're gonna do this, but I could imagine that if I'm an institutional client of JP Morgan, who's also got a wallet on base, could I not take my jpm coin and see if I could swap my jpm coin for USDC, For instance, on base, and then I've got USDC, and then I can go anywhere USDC can. And so I could imagine, like a future state of this and where they could start to go. So yes, it's experimentation, but this is a 2 trillion asset financial institution with possibly the Eye of Sauron, of regulators around the world looking at them, they maybe have to be a little bit more conservative than others.
Mark Greenberg 16:24
Fair enough. In fairness, Simon, I was a banker for most of my career, too.
Sy Taylor 16:29
I feel the skull tissue, but I wanted to make the other side of the argument, yeah.
Kevin (Borderless) 16:32
Fair enough, yeah. I think you've got to bucket it into two, right? If we look at a traditional example, Swift connects less than 9% of the world's banks, right? I don't think a lot of people understand that. The number is that small. People think of Swift as all this bank connectivity. It's less than 9% the banks that are the jpms, the banks that are the cities, et cetera. While I am originally a Bitcoin Maxi and I am a giant fan of open, permissionless networks, I don't see jpm settling with Deutsche Bank for trillions of dollars a day on an open, permissionless network. I see that happening through tokenized deposits. If we step into the rest of the world, which is like the 91% of all the banks, it's all the fintechs, it's all the consumers, it's all those things, then stable coins are by far a better version of fiat currency. It's fully reserved, it's auditable on chain. You don't have some of these squirrely oops. What happened to the customer assets? Right? You can go look at the wallet balances and independently verify them yourselves. You don't need to have this trust in the banks. And there's great regulatory tailwinds, right? Fully reserved asset, like a stable coin, is the best way the US has to buy treasuries and to export our currency around the world. I would make kind of those two buckets and those two arguments. Just to be clear, I don't think stable coins completely go away with tokenized deposits. I think it's different products for different audiences, for different purposes.
Sy Taylor 17:50
And I think the banks are trying to frame it as if the tokenized deposits obviate the irrelevance of stable coins. And I think that's an arrogant position to take as well. Like no stable coins are a super cycle.
Kevin (Borderless) 18:02
The bank's taking an arrogant position. Simon, never, it's never happened in the history of payments or finances.
Mark Greenberg 18:09
Like, as a Canadian, the only non American, I think, on this call in a way. Like, yeah, I guess that's right, Simon. But like, as someone who needs to access it from Canada and use a Canadian Corp and these kind of things, the ability to access tokenized deposits in the US from JP Morgan, hard, really hard, not easy. I need an ITIN, and I need all sorts of tax documents, and can't get a US bank account, so I can't access us tokenized deposits if I'm thinking about even my connected to Swift banks here in Canada, if I'm trying to make a payment to someone in the US, three or four banks are involved typically, in that process, and fees that I actually can't even predict in advance also happen in that process. So there's going to be lots of use cases for tokenized deposits within markets, especially United States, but I don't see them as replacing some of the bigger problems we have coming up for medium sized businesses.
Sy Taylor 19:04
I think the stable coin Genie is after the bottle. It's going to stay there, but it does raise a bunch of questions that the bankers would object to, which is, like, this is not a level playing field, because as a bank, I'm subject to currency controls. As a bank, I have to make you fill in the ITIN forms, like they are required to do those things. The UK has announced that there'll be an upper limit on holdings of US dollar stable coins, which, for the record, I think, is crazy policy, because it essentially is saying, well, we don't want GBP to play a role in the on chain FX market, and we're trying to push back against dollarization of the UK, which just doesn't make sense. This is the FX hub for the world that aside, you already see Europe in particular, reverting to a sort of defensive position against the dollar and dollarization. There are a bunch of global south countries that are trying to pass laws to prevent backdoor dollarization. Not only that, there's tax law so it's. Essentially, if you go around taxes, if you go around anti money laundering rules, if you go around currency controls, then sure, money gets a lot less frictionless. But the banks will say, Well, I have to follow those rules, but stable coins don't. So where's the meeting in the middle of this, I think there are some gnarly questions that stable coins will have to start answering at some point in the near future. I want to pause the next story, because it's somewhat consumer centric, and Mark, I'm particularly interested in your view on this. I don't know if you saw that. Cash App has just announced they're going to support stable coins in early 2026 their 58 million domestic users will be able to send and receive stable coins directly in the app, so every single user will get a blockchain address. Stable coins sent to that address automatically convert to dollars, but dollars sent out can convert to stable coins on chain, so that you can get outwardly from there. So mark your thoughts on this and your experiences in building for consumer at Kraken as well.
Mark Greenberg 20:57
I love it the more we make stable coins default behind the scenes in all types of apps that move money, the better, the more easily they're interoperable, the more money can move around. And I like the idea. We're also talking about this a lot of Kraken right now, especially on the consumer side of like, how do you make stable coins and Fiat more interoperable, less obvious to users, more just something that you can take out in Fiat, you can take out in USDC or usdg or usdt, or, you know, the 300 more we're gonna get GPM at some point. And I look forward to more folks continuing to build their apps. With that in mind, it'll be easier for users, and it'll also continue to drive the adoption behind the scenes, even if you don't really notice that you're using stable coins.
Joao Reginatto 21:45
I think Simon, you might have posted something, right? So I haven't seen miles Sutter from the Cash App team say this, but if he said it, I believe it, because I spoke to him a few times in the past, and it's exactly the vision that I have having built some fintechs. I think it was something along the lines that if we were to rebuild the Cash App product today, we would build it on top of stable coins. And again, it goes back to my previous point. Stable coin is infrastructure, I think, and infrastructure has to be customized, and you have to have your own kind of piece on top of it. I think people are getting confused about this idea of having 1000 stable coins. Think of it as more like having 1000 AWS instances. You will need these things, and that's how people end up going to build these products. I think this is a first step, and I'm excited to see a product as large as the cash app, like again, joining the fray. And I think this is only one more in a long list that we have seen, and we'll see, but I think in the future, this will still look different from a UX point of view. I think this differentiation of, you know, I have $1 balance, I have a stable coin balance, or I'm sending dollars, or I'm sending stable coins, users shouldn't care about that. We're getting on the way of the best user experience here eventually will coalesce around something that looks and feels much better, and it has precisely all the questions you've asked previously, right? Simon, is it even fair? Like, is it a level playing field? But think of it from the perspective of somebody who is now encouraged to build a new Cash App product, the speed that they can move the money that they need to invest to build that product is significantly, significantly less than what a product like the Cash App, you know, has taken years and years to get to this point. That's what we're really excited about. Is this accelerant, this gas that you throw in that fire, when you have this new type of infrastructure for those kinds of products.
Sy Taylor 23:30
My wild idea is that we get to call any genius compliant stable coins, USD, and we just drop the prefix and the suffix, and then anything else with a prefix and a suffix is some form of collateral, some other form of something that might be trying to hold its value to the dollar, but if it's a Delta neutral hedge, for instance, or if it's backed with other forms of collateral, unless it's inside a genius or maybe there's some other way you could do it, and that you just get to start to call it USD, then that would simplify things. I think there's a branding issue here for stable coins coming up. Kevin, your thoughts on the Cash App piece,
Kevin (Borderless) 24:06
I really like what Mark said. Our mission has always been to make on chain money globally interoperable with off chain money all over the world. I think it's a great kind of yin and yang to some of the great work that Joao and mzeo are doing with making on chain money interoperable with other forms of on chain money. I think both these pieces come together really interestingly, and we've got a fairly significant kind of customer segment now around these stable coin Neo banks and like stable coin AR AP platforms, things of that nature, and the pace at which their volumes are growing is quite staggering. So there's very much a case to be said that. Look, if you're building the next Cash App or you're building the next Neo bank, stable coins are, in fact, the right infrastructure to do that, and stable coins are the right infrastructure in order to be able to build a global first product, and to do it in a way where the balance sheet makes sense. For startup, right? You don't have to be a remitly That's got to finance $300 million worth of cash to now go and deploy in these pre funded accounts that you've got to borrow on a Friday to be able to pre fund through a weekend and all those things, you can actually move your dollars 24/7 around the world to audit off ramps and other liquidity sources. So maybe that doesn't go to zero, but it's really hard to finance $300 million it's really easy to finance $10 million as an example, and much, much more cost effective,
Sy Taylor 25:28
Indeed, indeed. All right, well, that's about all the time we have, because I need to thank our sponsors, and we'll be back for part two in just a second. This episode, if it's not obvious, it's 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. Stable coins are the building block for borderless financial services making money move around the world as easily as data. With stripe, you can use stable coins and crypto to reach untapped customers, reduce cross border fees and settle payments in minutes instead of days. Best of all, it works the same way other stripe products do by API or write inside the stripe dashboard, meaning you don't have to worry about the intricacies of which blockchain or what wallet to use, from Shopify to vercel, global businesses, trust stripes, complete crypto solutions to unlock new markets and reach more customers. Borderless finance built on stripe. Learn more@stripe.com forward slash crypto tokenized is also sponsored by fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses, from visa to WorldPay to bridge to Revolut with over $100 billion in monthly stablecoin volume, fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold and manage stable coins. It's all done securely at scale with secure built in compliance with fire blocks. You get complete control to build your own stable coin orchestration layer, create payment accounts, manage liquidity and access on and off ramps in over 60 currencies makes it easier for you to build and scale and expand your business globally. Learn more@fireblocks.com thank you to our sponsors. Our next story was circle are unveiling an on chain FX engine, and they're also announcing that they've considered a arc native token, arc being their layer one blockchain. So stable FX and circle partner stable coins are live on the arc test net in an attempt to create a unified infrastructure stack for institutional FX activity. So eight regional stablecoin issuers gain integration to circles payment network. That means they're trying to go beyond domestic markets. And this all came out during their earnings that they said they're considering a native token for the arc stablecoin chain, with over 100 companies launching on the arc test net. Joao, I know this is your ALA. Mata, I know you still got lots of friends over at Circle. What are your thoughts on the FX dynamic in stable coins and certainly the institutional side of FX? Is that something you've looked at and did you have any thoughts on this announcement?
Joao Reginatto 28:57
Yeah, no, I'm very happy for the team to be publicizing some of this progress. I can tell from even my time at circle, we were very passionate about the effects use case. There's so much opportunity there. Rachel Mayer, who is now in charge of the arc project at Circle, she comes from an effects background, so I can tell you that they're going to be very biased for trying to figure that out. There's a lot of challenges with effects, right? And I think in my time at circle, we issued euro coin as well. And there was kind of, at one point, a road map for many currencies that circle could issue many stable coins in many different denominations. But it gets complicated and expensive to work on, one by one and distribution by distribution. I think eventually it sounds like now looking from the outside in, over the last couple of years, that circle went towards a more kind of again platform approach, right? Let's welcome issuers of stable coins in other denominations. Let's try to enshrine a few, or maybe have them compete in this platform. The main thing that is important for a platform like CPN is to standardize the access and the quality of those instruments. And then facilitate liquidity, because liquidity is going to be the thing that makes or breaks this kind of solution. Right affects, demands very specific liquidity profiles, particularly if it is for institutional use cases. I mean, these movements are huge. You talked about the trillions. Right effects, markets trade trillions on a day, and that's going to be interesting to see. I don't know how the team is going to square that problem out, but I'm excited for them to try and because I think there are so many use cases that circle and USSC are already facilitating that are cross border that are going to benefit from the final leg, or the initial leg of these transactions also being on chain.
Sy Taylor 30:33
Yeah, be fascinating to watch. I did some digging with some folks in the payment space, and the best numbers I could get, to is that most financial institutions are able to sell to their biggest customers FX at one to three basis points, and that's a 99% margin. So an improvement of efficiency on that, like stable coins have a high bar. Now, if you're not a big institution, you're getting your face ripped off with FX, and that seems like insanely cheap so stable coins obviously have some product market fit for for people who aren't deep in FX, or people who haven't gone all the way down the rabbit hole to figure out how they can really get that much more efficient. So there's kind of this interesting middle ground of like, okay, so who's hurting on FX, but you look at the rates wise, can offer from the work they've done, and even somebody like that, their volumes, they would dwarf what you see in stable coins today. So the liquidity point is going to be really, really crucial. Kevin, have you given any thought to the FX component and where liquidity comes from?
Kevin (Borderless) 31:34
We think the opportunity exists in SMB and in market, for sure, not on kind of high end institutional as a great example. If you call Citi and you want to do an FX trade, there, the trade size starts at a billion dollars. If you're not at least trading a billion dollars in that clip, they don't take the phone call. And when you have that level of volume, that's where you're seeing a basis point. That's where you're seeing super tight margins. So this narrative of stable coin FX as better, faster, cheaper, starts to break down there. And that's the scale of like the MasterCard moves, the airwall X's the cities, the jpms, etc. But to the point you made, if you're not in that ball game, you're getting your face ripped off. And it's going to be the PSPS, it's going to be the fintechs, it's going to be the mid market segments. Those are the people that are paying 1020, 3040, basis points on FX. It's the retail consumers who go to the the ATM machine when they're traveling, and the ATM says, Do you want to accept this price? It's only a 19% FX fee. Those are where the cost optimizations are that can benefit from what stable coins really offer, which is retail distribution to the masses in a very simple way, that's, I think, the much bigger opportunity, versus saying, Oh, we're going to build a better FX test than Citi, because, quite frankly, the volumes are massive, and there's not a lot of room for price improvement, right from one BIP to half a BIP,
Sy Taylor 32:54
okay, yeah. And even then, all you're doing is eating their margin, which is already massive, yeah? Mark your thoughts on this story and circle in general.
Mark Greenberg 33:01
Yeah. Stable coin adoption, in a much bigger way, comes down to us having viable stable coins in other currencies, because we're still in a place where most of what you're taking in and out as mint burn is probably into your local currency, because that's where you're holding it, in the bank, et cetera. To do that, we're going to need to have better FX markets on stable coins. And it makes it much easier if I don't have to, when we're transacting with, say, Brazil, that I don't have to move the USDC, convert it in US dollars, then convert it onto local currency. It's much easier if we can do that with stable coins. And I do think that middle market is the sweet spot right now, even for a wise or otherwise, there's a lot of logistics required for them to be able to offer the rates that they do. And we can continue to bring efficiencies to that and then bring the kind of Yeah, one to five bips, whatever that number is to all users, that gets really exciting. And so I think that's where circle is heading, and actually others as well. And I get really pumped for that, but it's going to take some time. And it really comes down to maturity of stable coins and other currencies, which is slowly coming, but not necessarily quite there yet.
Sy Taylor 34:17
How do we unlock that? How do we get non USD stables. Is it just that the demand for the dollar is the thing and the dollar is the product, or is there some other impediment that's kind of really holding this back?
Joao Reginatto 34:30
Yeah, I've spent a lot of time thinking about that. The analogy that I have mentioned to some people was that we have to have more people working on use cases that actually leverage stable coins more utility, because otherwise this looks a lot like the beginning of digital photography, where, you know, there was no application for digital photography, and then what people would do is they would go to a kiosk in a mall somewhere in the world to kind of download and print them out, right? And that will be the utility, because then I could show it to a friend or family member. I think. We're still doing a lot of that with stable coins when it comes to cross border use cases. I have argued with a lot of folks that I am not a big fan of the stable coin sandwich pattern. I actually think there's a lot of hidden costs in there, but I think it's actually objectively worse than product like a transfer wise of the world, if we actually dig down to the details of cost and balance sheet and who's using what, I think what you need is the ability to continue on this digital transfer, you know, all the way from the beginning of the leg to the end of the leg. And that will require more utility for stable coins on either side of this transaction only when we get there. And as I said, as a digital photography analogy, when people don't have to download and print it. On the other end, will the liquidity profile like have a step increase? And I think we're going there in some of these corridors, we already see some of this happening. Mark mentioned Brazil. There's a lot happening in Brazil with the use of stable coins. Mexico is another good country, but it will take time. I think this is something we're not going to see next year.
Sy Taylor 35:59
Still time for this to grow. All right? Well, next story was about somebody that's been close to that on off ramp for a little while. Coinbase, they've launched a platform for digital token offerings, but they also launched a UK based sort of savings account. So the savings account will be instant access, and you can add and withdraw money at any time. It's 3.75% aer, which is sort of middle of the pack for the UK, better than the banks, but not the most aggressive rate. Interesting that they're doing that in the UK, but their token offering platform is going to involve its first token sale on November 17, for monad in part, with their main net launch. And this follows. Three weeks ago, Coinbase bought echo, the fundraising platform launched by crypto trader Kobe, and this week, they launched those retail token sales. So they've kind of gone full stack on this token sales space, direct to consumer mark. Do you think there's demand from Coinbase customers for access to these token sales and other challenges with them understanding it, are there challenges around consumer harm? What are your thoughts?
Mark Greenberg 37:09
Yeah. So first, we've done a number of these on our platform at Kraken as well, mostly outside the US to date, and have seen demand that far outstripped our expectations. Actually, lots of folks interested to get in on platforms like the pump, dot fund token and other pieces where we've been apart. So the demand is there. At the same time, I think the excitement from the other side around easier access to liquidity, the ability to distribute your tokens to retail and not have to go many layers to do that, to be able to offer tokens globally around the world, as you raise liquidity, I think it's quite exciting, rules still to be figured out. A lot of risk associated with doing it in the United States right now, though, most tokens aren't securities and probably don't follow securities rules, and so maybe it's fine again, I think more to figure out they're excited to continue to see these kinds of things, and folks to use tokens as a way to raise liquidity for amazing projects that they're working on and get easier access from retail into those projects earlier.
Sy Taylor 38:19
I feel so conflicted about this one, Kevin, that like, on one hand, I'm definitely there for the fact that consumers have been largely locked out from value creation for the past two decades and not really benefited from price appreciation. On the other hand, I worry about whenever we're democratizing something where it's also institutions dumping their bags on retail and like, how do we find that line? How do you think about these things?
Kevin (Borderless) 38:44
This is certainly not my area of expertise. I'm much more of a stable coin person than I'm a token person. So perhaps with that disclosure, I will offer some very dumb thoughts, but these should be my thoughts are generally dumb, but these should be considered like extra dumb thoughts.
Sy Taylor 38:58
One heck of a caveat, sir. Well played people.
Kevin (Borderless) 39:03
Love to speculate and people love to gamble. I think that's a pretty indisputable fact. I mean, look at fart coin as an example of things that just objectively should go nowhere, that somehow do. And if I'm thinking from a Coinbase perspective, the core business there is speculating on tokens. So you can either increase breadth by increasing the amount of users that are doing the speculation, or you can increase breadth by increasing the amount of assets that can be speculated on and creating a kind of token launch platform seems like a great way to increase the amount of tokens that people can speculate on and maybe take some market share back from the pump dot funds and the meme coin trading platforms that have started to become a very, very popular form of gambling. But from a consumer protection standpoint, My general advice, if my mom would call me, would be to just not touch that
Sy Taylor 39:55
world. Yeah, now, and we're in a world of prediction markets as well, where Robin. Hood is becoming one of the biggest distributors for Cal she and sports are the biggest prediction market, kind of out there. So there's something to be said for that. But at the same time, what I found interesting about this is the amount of disclosures in the monad ICO. It looks very different to the ICO boom of 2017 and there's also a fact that largely amongst the VC class, it's considered that the IPO market is broken, and that capital formation through SPACs isn't a lot better, that the bankers do very well, but entrepreneurs and companies get sort of left behind in this process. So there is a need for a new form of capital formation, but there's going to be something along the way. But the UK announcement is an interesting one about the savings account as well. Coinbase pushing quite hard at the UK at the moment, and definitely trying to become that everything bank and institution. As a FinTech nerd, I look at this and sort of say Coinbase versus Robin Hood in the US, we could be in a Coinbase versus Revolut in Europe and the UK. Kind of two horse race. Joelle, any thoughts on these two stories?
Joao Reginatto 41:04
Not a lot. I'm more on Kevin's camp that, you know, I have done my share of speculation in crypto in the last 10 years, and I'm sort of past that. But I, I do think the the echo platform that Kobe has built was a really, really interesting thing. I'm always in touch with a lot of early stage teams that are, you know, in the process of raising, and I think there was a lot of teams that started to consider raising traditional VC funding and then having, like, a portion of their race that was being done on echo, right? And I think that was really, really interesting, because it allowed people access to really, really early stage opportunities, right? I wouldn't say, like regular, regular retail. But, you know, folks who wouldn't have, like, access to this. Now, monad is different, right? Because monad is it's pretty late stage as far as, like, the, you know, Cap table is concerned. So there is an argument that, you know, are we opening this up to retail when it's already too late, and then what sort of profile of outcome are we going to see here? I hope, like we find a middle ground because of the echo acquisition, and I'm sure they're going to experiment with the projects going forward. That's my perspective on that. But in general, I tend to be passionate about this idea that we need to we need to balance better consumer protection with giving people access to these things. As you said, Simon, right. Are people going to be able to get on the property ladder in the current generation the way that we maybe did, probably not. So let's give them at least the ability to build a chatgpt based investment model and like speculate a little bit on these early projects, because maybe that's going to be the thing that transforms their life. So I'm willing to explore a little bit on that. I would
Mark Greenberg 42:37
say I always want to make sure that we balance disclosure with giving access. And if we were on a podcast 10 years ago on the topic of Bitcoin, you probably would have heard much of the same thing, risky speculation, just a game, kind of silly that's been proven wrong with history or into the future. And I think that's the risk of us making choices on behalf of end users today as well. And I think that's something important to keep in mind, is that some things that look like funny speculation plays are actually really strong investments, and others won't be. And it's up to users, I think, to be able to make that choice, as long as they understand the choice that they're making. And I hope, over time, that there's less gatekeeping of that, and less, like Big Brother, we know what's best for you, and more make sure you do your research. Yeah,
Sy Taylor 43:34
it's always the ones that don't do their research that get harmed. And I think big brother's not going to do it. Who's the little brother? What are the things? Because financial education doesn't work. And I do think there's something to be said for that. But yeah, I mean, I've been in the position a few times of trying to build consumer warnings for fraud prevention on push payments. Like, is this a scam? Are you really sure it's not a scam? We kind of think it's a scam. Like, here's a giant red sign saying, like, Are you sure you're sure you want to send this? Are you sure? You're sure, but I can't stop you. That's ultimately kind of the position that you know, business can only do so much to, quote, unquote, help its consumers make the right call. Eventually it's their call. So you kind of get to that space. And to your point about the Overton Window on crypto has shifted. The last story I was going to cover off this week very briefly, is SoFi has now announced. They've become the first nationally chartered US Bank to launch in app crypto trading. I do believe some people have done this through partnership. I think PNC has done it through partnership with Coinbase and others, but that's sort of a white label version of Coinbase. It's not something they're doing themselves. So so far, users can now trade BTC, Ethan, Solana, and this is a bank with 12 point 6 million users. They're also planning a so far USD by the middle of next year, and they've had Lightning Network remittances live with light spark since August. So thoughts on that mark,
Mark Greenberg 44:52
probably a little bit overdue, maybe, is the way I'd say it is. I think it's exciting again. It's actually the same point as the Cash App line the. Users who have access to these things and the apps already using the more they will use it, the more adoption will continue to grow. So that's a win for the industry. It's also something that I think more and more users just want by default, the ability to trade in crypto has just become a default portion of many, especially younger folks, investment portfolios, and so it's something you need to offer and need to have access to. And I think so far, is just another example of more and more banks and investment firms around the world adding crypto. We're talking through our embed product about embedding Kraken crypto trading into probably hundreds of different banks around the world at this exact moment, so expect that to become the norm far more than the exception over the year to come.
Sy Taylor 45:46
Yeah, they always show those stats of like, 70% of customers would prefer if their bank offered it, because they want the logo, but the bank has no idea how to offer it, so they're going to come to somebody like crack and Coinbase, Bitstamp, somebody to help them get that done. Finally, this light spot keeps popping up and surprising me. Kevin, your thoughts on that, because it seemed historically somewhat Maxi on the Bitcoin side, but as somebody who's gone from the maxi to stable coin, transition, your thoughts on where light spot might meet in the
Kevin (Borderless) 46:15
middle. This is a great question, because actually had the chance to spend some time with so far as CEO a few weeks ago at the light Spark Summit. So that kind of brings all these different parts of the story together. And it was interesting. Building on what Mark said Is he had shared how many of these products SoFi was planning to release years ago, and then, as a nationally chartered bank, they got a very sternly worded letter under the previous administration, kind of shaking their fingers saying, No, you're not going to do this. And then all those products got shelved. And now I think the reason why these are coming out, kind of Better late than never, is because of the administrative and regulatory changes now allow them to come out. But if they had had their way, buy, sell, hold within SoFi would have been a product three, four years ago. I think what light Spark is doing is very interesting, because they're offering, especially to Sofi, a stable coin sandwich product, but it's a Bitcoin sandwich product, which is a very different flavor, right? So Sofi, as an example, will send light spark USD. That USD gets flipped into BTC. That BTC then gets transferred to bitso bit so flips that BTC into MXN, and then through spay transfers it out to the recipient. So this us to MXN remittance corridor is not even a stable coin sandwich. It's the Bitcoin sandwich. And the question is, then, well, why is Bitcoin the intermediary asset versus USD on chain? And I think a lot of that is certainly the maxi ethos, but a lot of that is the, you know, where do you have the most liquidity in terms of digital assets in the world? Yes, Bitcoin isn't a stable coin, but bitcoin does have the deepest liquidity globally of any asset, more so than most stable coins. So if you're really pushing into emerging markets, and you really believe in this permissionless, Open Network World, and you think it's not about currency. You think it's about liquidity, then the BET's pretty clear, and it's Bitcoin. Now, that said, there's a lot of stable coin things that are coming towards that stack, and we're fortunate to count them as a fairly close partner to some things that we're building together. But expect that worlds to collide with the stable Coin World in some fairly meaningful ways soon.
Sy Taylor 48:18
You know, it's few times in the past year I've heard people describe Bitcoin as at least the crypto native, high quality liquid asset, and for the Global South, it is a high quality liquid asset. And 10 years ago, I would have been laughed at for saying that inside of a bank. And you know, the risk free asset was T bills doesn't look so risk free anymore, and so times they are changing. Where will we be in another decade? I'll certainly have a lot more gray hair on my beard, that's for sure. But it won't be because of conversations like this. I really enjoyed the show, guys, if people want to find out more about what you're doing, Mark, where do they go to learn more about you and Kraken and everything you're
Mark Greenberg 48:53
building? Kraken.com lots and lots of cool stuff coming on there and find us on all the normal places.
Sy Taylor 49:00
And Kevin you and borderless. It's borderless. Dot XYZ and m zero. And, of course, Joao,
Joao Reginatto 49:06
you can go to M zero.org, or on, we're pretty active on X, you can go to x.com/m zero.
Sy Taylor 49:13
Phenomenal. You'll find me at sy Tai on all of the socials, screaming into the void, over at FinTech, brain food.com, on on tempo, dot XYZ as well. If you haven't already, I'm going to do that host thing and ask you to subscribe. You know, like buttons, if you see a button, hit it. Reviews five stars. Whatever you can do helps this show go a little bit more viral and do one good deed for the day. Tell somebody else to listen to thank you very much, and we'll catch you next time.