On Ep. 71 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Davis Hart, Founder & CEO @ Omnia and Robert Morgan, Head of Stablecoins @ Payoneer to discuss Payoneer's partnership with Bridge, why stablecoin companies are pursuing federal trust charters and more!
On Ep. 71 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Davis Hart, Founder & CEO @ Omnia and Robert Morgan, Head of Stablecoins @ Payoneer to discuss Payoneer's partnership with Bridge, why stablecoin companies are pursuing federal trust charters and more!
Timestamps:
Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
Tokenized is also presented by Fireblocks
With over $100 billion in monthly stablecoin volume, Fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold, and manage stablecoins. And it’s all done securely, at scale, and with built-in compliance. Learn more at fireblocks.com
***
We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Sy Taylor 0:10
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. And joining me, as always, is Mr. Cuy Sheffield, how you doing, sir, head of crypto, over at visa, treating you well.
Cuy Sheffield 0:28
I'm great. It's been a fun week. I got a lot of lobsters in my DMs, reaching out after our last episode. But it's all good, some fascinating conversations.
Sy Taylor 0:36
Indeed, got a new labs concept you're building. There lots of builders, lots of job applications coming towards visa. Very, very fun. People do go work with Kai. He's all right, despite the podcast nasty man persona that he tries to play sometimes. Joining us and making a return is Davis Hart, who is now founder and CEO of Omnia, a new title and a new company. Since you've last been on the show, Davis, what's the new company? Tell us about it.
Davis Hart 1:02
The new company is stable coin infrastructure for banks. I tried to charter a bank a few years ago. I've worked in stable coin space and payments for a number of years, and I just realized there's this white space, and coming into 2025, with regulatory changes, it just became obvious to me that banks need help getting all this infrastructure stood up. So that's what we're doing.
Sy Taylor 1:20
Oh, yeah, and making a show debut is Rob Morgan, who's head of stable coins over at Payoneer. How you doing? Rob? Good. Thanks. Thanks for having me. Simon, no, really excited to have you. We'll we'll be hearing more from you shortly, I'm pretty sure. But before we do, I need to remind viewers and listeners that opinions of our contributors today are their own and might not reflect those of companies they represent. And please don't take anything we say as tax, legal or financial advice. And with that, let's jump to the first story. First story. Rob might be familiar with this one. So Payoneer have apparently tapped bridge for some stable coin payout capabilities. I could read the Cliff Notes from this one, but why don't you tell us what is Payoneer doing, and why stablecoins Awesome?
Robert Morgan 2:10
Yeah. Thanks, Simon. Really excited. And thanks for the opportunity to talk about some of the things we've worked on with bridge here. We view stablecoin as an important piece of the future of cross border money movement. What we have seen over the recent years is that we're starting to see stable coin move from interesting use cases, not necessarily connected to the real world. We're seeing increasing adoption by real world businesses to solve real world problems. And most importantly, what we're seeing is demand for customers in the markets that we serve today to use stable coin to access their funds faster, cheaper, more efficiently. So Payoneer today, for those that aren't familiar, we're a global cross border payments business serving global SMBs. So global businesses that operate in five or six jurisdictions. Need to collect funds in one jurisdiction, manage a balance globally, and then pay out in other jurisdictions. In many ways, Payoneer was the original stablecoin, right? We'd take payment in, we'd offer a liability of our company, and then deliver funds around the world. So what we plan to do, and what we've rolled out with, in partnership with bridge, is the ability for our customers to use stable coin as a payments rail to accept payment in all of the markets where they operate, to hold funds and then pay out to all of the customers that they pay out. I think importantly for us, we see stable coin in this as something that adds to our existing global business, and we think that interoperability between stable coin and Fiat payment Rails is really what our customers want to see, and it's where we think there's the most opportunity to add real world utility going forward. So happy to add some context around why we think payoneers in this space and the customers we're seeing, but really excited about the partnership.
Cuy Sheffield 4:05
I love this because Payoneer, it's like you're an OG like you you've been in the payouts game for a long time, in working with creator platforms and marketplaces and figuring out how contractors and freelancers and sellers get paid, and like you built your business around that. And it's fascinating that over the past few years, as stable coins have emerged, payouts have become a major use case that people have said, okay, like, what's the use case? It's cross border payout. You know, stable coins could be faster, cheaper to pay a social media influencer or to pay a contractor. And so now you have a whole new crop of companies that are popping up that are saying, we're going to power stable coin payouts. And this is exactly the example of what we talk about on the show all the time. Of we're now at the point in the market with regulatory clarity that the companies that have been doing this for a long time, that know how to do this, that have the distribution. Education, that have the trust, that have the relationships, now have the opportunity to integrate the infrastructure that enables them to supercharge their existing capabilities and networks. And that's really exciting to see. And I think this is exactly like the competition that I think is great for the industry, is the next gen kind of upstarts trying to create these payout companies, and then the established payment providers saying, wait a minute, we've got the licensing, we've got the integrations, and we've got the partnerships, like, how do we add these capabilities to what we do? And I think that that is great for everyone. And so congrats. Excited to see you all moving in the space. And I also think if you're gonna pay out, you need an offer up. And so be exciting to see if there's an opportunity on the stable coin, like card side. When people receive the stable coin payment, what do they do with it? And I think that's an area that we see growing more and
Robert Morgan 5:47
more, yeah. And I think that off ramp side is so key, right? I think the promise of stable coin has always been the ability to simplify what is a really complex world of cross border payments for a business that operates in multiple jurisdictions. Moving funds from one to the other often requires five or six banks, two different payment networks, and a full time dedicated staff to actually manage where in the world your liquidity is. The promise of stable coin has always been, how do we make that better? Right? So I spent a good chunk of my career working on tokenized deposits with a focus in the US. And the reality is, within a market, stable coin adds value, but in much more limited ways. For cross border, there really is some complexity that we can simplify. But I think even today, the promise of stable coin, there's not that full promise until it's integrated into the way companies do business already, right? Stable coin can simplify because tai I can send you a stable coin. It's free, it's instant and everything else, but you can't walk down the street and buy a cup of coffee with it. You can't buy a hammer, you can't go buy all of the things you need to operate in those markets. And so it's really those off ramps and that interoperability with the Fiat systems, where those businesses operate day in day out, that we think moves the needle and drives the next wave of adoption.
Sy Taylor 7:05
I think that point is so crucial, Rob, that you need the sort of combination. And Kai mentioned the cards there as one classic off ramp. But there are many others emerging as well. And what struck me about your story here, Rob was Payoneer doesn't have to adopt stablecoins Just for a press release. You do it because it makes a difference to your business. Can you tell me about the economic difference it makes to either you or to your businesses? Like, just make that business case really real, because I think there's so much fascinating right now about the fact that crypto prices are down, but all of the action is in the thing where the price doesn't move, where $1 equals $1 like the stable coin space is very different.
Robert Morgan 7:48
Yeah, so I think I'd put this into two categories, right? We're seeing groups of customers today that are interacting directly with the form factor of stable coins. So say, I am a business operating in Vietnam, and I sell T shirts on a marketplace if I get paid in a stable coin today, I can't use that stable coin to go buy thread in Indonesia, to go pay employees in in these other markets, in most cases, my best option to convert that stable coin into Vietnamese Dong is to go to go to an unregulated exchange in Vietnam to manage my own wallet keys, send funds there and hope they land in a bank account. Right? We're actually adding complexity. Instead of simplifying at that level. What we think we can do in this space is creating that seamless interoperability so I can take a stable coin, convert it into that local Fiat balance, pay out in all of the ways I do through my business account today, to my suppliers, to my employees, et cetera. So use case number one, we think we can more effectively, more safely and more simply allow those businesses that do get paid in stable coin to do that. Use Case Number two, where I think we're seeing more demand grow, and where we think the world is going as this matures, are companies that don't actually want to see the stable coin right, where stable coin is a means to faster, cheaper, more transparent settlement, particularly in markets where there's less developed banking infrastructure, where correspondent banking can be expensive, take time, and where We see currency volatility that really impacts what that business gets at the end of the day. So in this case, we may have a business that wants to get paid using stable coin rails, where they can receive good funds instantly. There's full transparency into that they see that arrive in their wallet. It costs less to get it into the market, and they can move that more quickly.
Sy Taylor 9:39
It's a great business case, and I think it's one we'll see a lot more of. There was another story that came out of bridge this week, which I'm just going to bring in here a little bit, which is, bridge received their conditional approval to form a National Trust charter Bank, which is, you know, obviously step one of a longer process of getting the National Trust. Trust charter, you then have to go through an organization phase and a mock exam, and the full exam. Davis, I know you've attempted to tread this path before. Talk to me a little bit about why some of these stable coin companies are going for these trust charters, and what that's giving them, and sort of the path to get there.
Davis Hart 10:17
Yeah, I think the high level, I mean, so we look at who's applied for these it's all the crypto companies, all the stable coin insurers. There's a couple of reasons that this is the natural first step. One is, most of these companies are already licensed. So like, Why does bridge actually need the trust charter already has MTLS in, I think, almost all 50 states. The reason is that you get federal preemption, so now you have federal regulation. You don't have to go be an MTL in 50 states. It's a lot simpler. From just a regulatory perspective. You have one regulator, not 50. I think the other reason is, I think there's an expectation that it's going to be sort of the best structure in which to become a genius act stable coin issuer, because you can get the charter today from the regulator that's going to give you the genius act license. So it's future proofing the business for the issuance activity.
Sy Taylor 11:01
The next story speaks to one model of approaching that differently, which is about five regional banks developing their own tokenized deposit network launching in q4 so this is Huntington Bank shares, first horizon, M and T Bank, key corps and all national bancor are developing this infrastructure on the Kalina network, which is led by Eugene Ludwig, who is a former Comptroller of the Currency. And Eugene said we plan to unveil a minimum viable product at the end of March, a pilot program in the third quarter, and provide a full service to customers by the fourth and so, of course, the core of this network is designed to have tokenized deposits, which represent those bank deposits in the form of digital tokens, I guess is the simplest way of saying it. And a lot of the banks in the press release are talking about, well, this protects our deposit franchise. But David, so I want to come to you on this one because you mentioned that stable coins might be a good thing for banks. Do you think that tokenized deposits are also a good thing? Like, where do you stand on that spectrum of like, is it all downside for stable coins for banks, or is there something else going on here?
Davis Hart 12:15
My view is that in 10 years, all the banks that are going concerns will have their Fiat balance sheet doing what it does today, and then they will also have a version of that balance sheet where every single item is in a tokenized form. There'll be tokenized loans, there'll be tokenized forms of money, there'll be tokenized deposits, there will be tokenized liabilities issued out to bond holders, so on and so forth and so in that framework, I think all of these things make sense. I see deposit tokens as having a really unique capability in existing interbank payment networks, which will continue to exist for a variety of reasons. And stable coins are really useful when you get outside of that network. And one of the points of maybe tension isn't the right word, but one of the interface points is where you go from, say, today you have a jpmd deposit token, you can interact with other jpmd customers that are enrolled, and you can basically do account transfers. That's fine, but you can't go into defi. You can't go interact with customers of other banks. And so that's one of those areas where it makes sense to be able to switch between a deposit token and a stable coin, I think this notion of deposit flight is dramatically overblown. I wouldn't looked and the reality is, within the banking sector, you can go get a savings account that will give you three and a quarter percent, yet the average yield on a savings account the United States is 39 basis points. So it just tells me that deposits don't move that much for yield. And so this idea that stable coins are going to drain yield, I think, is actually backwards. And I think that stable coins, what they enable is money to move faster, and they remove the friction. And when you remove friction, what happens is that liquidity will concentrate. And so what will happen if I can move money easily in and out of my checking account, I'm just going to pull all the dead liquidity into my checking account, like, why would I leave it sitting in Paypal and point based and all these other places. So I think, broadly speaking, both of these things are going to exist.
Cuy Sheffield 14:05
Yeah, it's a fascinating story. I have a bunch of questions. Is the first time that I've heard of Kari network? Like, there's like, new players coming in here that seem to be credible with legitimate people and teams behind them. The thing that I like about this is the term tokenized deposit network, because I think that historically, tokenized deposits, and what we've seen over the last two years, it's being viewed on like a bank by bank basis, and it's like, oh, is, is this bank going to create a tokenized deposit? Well, this bank has created a tokenized way. And I think if you look at it in a silo, and you say, Okay, this bank is just gonna create tokenized deposits on their own, yeah? Like, maybe there's some useful things for, like, intra bank transfers, and jpmd is kind of showing that right now. But if you have a tokenized deposit network, if there is a clear structure and scheme and interoperability and like, you have many banks that are participating, like. That, to me, is a lot more interesting, because I think one of the biggest challenges of tokenized deposits is, how do you interoperate if I have a tokenized deposit from one bank and I'm sending it to another bank, and if everyone is doing it on their own, that becomes really, really hard. And so I don't have any strong perspective on this specific initiative, and I think it's great to see more approaches of forward thinking banks that are getting in the arena and looking to ship real products in the space. But I think that the concept of tokenized deposit networks is going to become more and more important. And then the question is, what should that look like? What needs to exist to make it as easy as possible for a bank to join the network, rather than a bank to, like, go on their own and create a tokenized deposit inside, like, in a vacuum, which is much less interesting.
Robert Morgan 15:48
Yeah, I think that interoperability is going to be really key, right? I spent three years trying to build a network of tokenized deposits through USDF consortium with mid sized regional community banks. And the question is always, how will you interact with a jpmd or another token? I think clearly, if anyone can do it, gene can. And where Gene leads, I usually follow. He's always right in these things. What will be super interesting to me, as you look at a group of us focused banks that look at this is what the actual applications they end up focusing are like, what are the problems they are solving in interbank transfers for their members, and how do they tie it into other tokenized assets? And I'm sure we'll talk about this more. But payments aren't generally broken in the US. It's relatively cheap to go from one US institution to another. Where I think this becomes really exciting is when you start bringing things like loans on that same system of record, and start using these tokenized deposits to help facilitate real world transactions for a payment from a loan may flow through to five or six borrowers on this network. So I think there's some really cool things they could do with this, and I'm excited to see where it goes.
Sy Taylor 16:57
Yeah, the thing we're all sort of dancing around here is that networks need network effects, and this is five banks, which is a great start, but it's also five regional banks who very much depend on their consumer deposit franchise. And so how many other banks is that true for in the US market that are smaller and larger? I can imagine some smaller banks actually wanting to do something like this for sweeping deposits, rather than trying to hold on to them. I can imagine the larger banks just having a big enough, you know, like jpmd. They've got a big enough network, they can kind of do it themselves. The interoperability point you made, Rob is the crucial one, and also the operational one. Who gets to control mint burn, and how will these banks agree on what mint burn and on and off ramping needs to look like. And I honestly think that so much of this is coming across defensive when it could be useful, but because it's not necessarily considering, to Davis's point earlier, stable coins are useful outside the networks you can build, and tokenized deposits are useful inside the networks you can build. But how big are those networks? And so I like to separate the difference between deposits being money at rest and stable coins being money in motion, because to exactly what you're doing when you are sort of building your own version of an in house stable coin, potentially, so that you can off ramp really easily and back to fiat. Well, that's kind of making the point, isn't it, that people aren't fighting for yield, and the yield is a bit of a red herring, as David said, and we want to be able to off ramp, so we've got to pull all of these threads together. Any other thoughts on this one from you guys on the tokenized deposit space.
Davis Hart 18:41
I have two quick thoughts on this. I think that the overall sentiment of we need to see what comes next after the payments use case is critical. And I kind of wish people would invert these, because using tokenized deposit networks for US domestic payments is frankly uninteresting, like we already have fed now and RTP. And if you look at the design, I sure the gene is going to do something great here. But if you look at the design of design of carry, as far as I can tell, version one is we're going to create a tokenized version of RTP through the Clearinghouse. And it's like, Okay, what's new here? I want to see the next thing. And I kind of wish people would just, let's do the next thing first, so that we can see the actual value of this technology beyond just faster dollars which domestic payment systems can deliver that being said, I think we are in sort of the early exploration phase of tokenized deposits. I mean, just by way of reference, I think tokenized deposits today are where stable coins were in 2020 because for four and a half years, the only potential issuers of tokenized deposits weren't allowed to utter the word blockchain, or else they'd get slapped by a regulator. So, like, like they're now finally getting involved. So notwithstanding my critique on reinventing RTP, I think we are in that early stage of exploration, and we should think about it that way, like we're still a few years from actually understanding what these things can do.
Cuy Sheffield 19:54
Yeah, can I give Mike Quick from a, let's say, sophisticated consumer or. Corporate treasurer perspective, what I think is most interesting about tokenized deposits and what they could enable for those client segments is I hate moving between bank portals. I hate it, or I gotta, like, log I gotta log into Bank of America. I gotta log into wells, I gotta log into it. And I'm just like, I'm like, bouncing back and forth. I got like four tabs open of like, different bank portals. Bank portals, and I'm checking them, like, going back. Like, it sucks. So it would be much nicer if you could have one interface that had all your money across all your banks. And we've talked about this at the show. So I've like, imagine you have a wallet, and you make that wallet super secure, you control it, and then you could see your Bank of America money and your jpm money, your wells money, and you just like, you could look at it. And it's not like a PFM where, like pfms have existed, where you could view a snapshot, but it's like actually a wallet, and you can move, you can make a transaction and decide, do I want to fund it with my B of A money or my jpm money? You could convert between the two, just being able to have this almost like mission control for money, that all of your bank money is in one place. And then if you combine that with like, oh, I might want to create some agentic workflows. And say, Okay, how do I decide when money moves from one to the other? And like, can I create a smart contract that then when these things happen, it triggers it like, I don't know what exactly that's going to look like, but I think today, bank money in the form of deposits, it's not like there's anything wrong with deposits. Deposits work well, it's bank interfaces leave a lot to be desired. They just can be a lot better. And I think that it gives the opportunity to decouple the bank money from the bank interface. I think that's exciting.
Davis Hart 21:40
What's funny about this, though, is, in the commercial world, this exists called a treasury management system, right? And it's they charge 10s of 1000s of dollars per year for one person to have an interface where they can not just see the balances, but click the buttons and make the money move. And it does the first part of what you're saying. Maybe before agent tech, maybe that goes beyond what banks can do today. It really just gets back the fact that we don't have open banking in this country, and so it costs these companies phenomenal amounts of money to integrate with every single bank to give that feature. And so it's only available to commercial entities that
Sy Taylor 22:09
can afford a TMS. I'm sitting here in the UK, where, apparently we have open banking, but I can tell you, we don't have that feature whatsoever. We have 99% coverage in uptime of open banking, but I don't have the single pane of glass that shows me all of my money that enables me to instantly move it. And I think it comes down to the security and the authorization around it. There's something very elegant about the wallet construct and how it can sort of cryptographically ensure the keys are signed and that the money moves. And it really did come from me. I think there's an identity component to wallets that is really, really fascinating. Friend of the show, Tony McLaughlin, over at ubix, has been talking about moving from the account view of treasury management, where I have each legal entity has lots of different versions of dollars in lots of different markets, to where, even in my TMS, I'm sort of managing that on the account view, like I have 30 legal entities, and those legal entities have 10 different accounts each. That's a horrible experience. Even that abstract it up to, it's all dollars, and you can move it between different things, does get a lot better. And I can imagine for consumers, it would be really powerful. So I'm with you on that chi, and it makes me think if the 90s and the 2000s were about which card is at the top of the consumer wallet, I think now the question is, who's going to be the consumer wallet? And that's just like a different frame for people to start thinking in, and it's a new way to sort of start re aggregating finance, but thank you for coming to my TED Talk. I'm 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. Stable coins are building blocks for borderless financial services making money move around the world as easily as data. With stripe, you can use stable coins to reach untapped customers, reduce cross border fees and settle payments in minutes instead of days. Best of all, it works the same way that stripe products do, by API or in the stripe dashboard, meaning you don't have to worry about the intricacies of which blockchain, which wallet will you custody from Shopify to vercel global businesses trust stripe's 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 stable coin volume. Fire blocks powers stable coin 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. The next story came from just about everywhere. This was Apollo, the large asset manager and private credit firm are deepening a crypto push with a Morpho deal. So Apollo Global Management has struck a cooperation agreement to support lending markets built on Morpho. The deal allows Apollo to acquire up to 90 million Morpho tokens over the next 48 months. And of course, this follows the very recent deal between BlackRock and uniswap, so institutions actually getting into defi in an interesting way. Any thoughts on this one? Maybe Davis, I'll start with you, and from everyone else.
Davis Hart 26:43
Can I ask this in a cool question, of course, which is, what does it mean to be a cooperation agreement and to support lending markets? I just mean to call out this did come a week after a material announcement of Blackrock listing Biddle in uniswap, so you can actually do stuff in defi with the product, and this almost feels like, is this just a marketing release that got past the lawyers that were willing to have morphot tokens on the balance sheet? I don't know. I just want to call that out, like I hope that this becomes something more real. The fact that they're willing to buy Morpho tokens is definitely a step forward. But I was just looking at the news and kind of asking myself, Okay, well, what can we draw from this? What does this actually mean? I have some thoughts, which we might get into. But into, but that's sort of my initial reaction.
Sy Taylor 27:25
I think it's right to have that every time you see a press release about things, but Rob any dissenting views. Yeah.
Robert Morgan 27:31
Look, I have no view on how real this is or not. But what gets me excited when we see announcements like this? How do we see institutional providers who are thinking about real world assets, real world loans, leveraging on chain solutions to do that right? We talked earlier about the concern around deposit substitution in banks. If I were a bank, I'd actually be looking at announcements like this as the real opportunities, more than tokenized deposits. Because if you're worried about a funding crunch, the idea that having a loan on chain can access new pools of capital, lower your cost of funds and make it more efficient to pass a payment from a borrower in through a loan and ultimately to the holders of that loan. I think that's really interesting. And if we think about the business of banking sort of broken down into its three core components. We spend so much time talking about payments and deposits, not a ton of time talking about what lending on chain really means. Most of that lending feels very sort of crypto native today crypto assets. What really excites me is, how can some of these institutional providers start looking at blockchain as a more effective route to deliver loan products for real world companies, assets, et cetera. And so my hope is that as we see these mature, you see some interesting use cases where we prove out the efficiency of blockchain and stable coin based payments, even to facilitate more efficient capital markets here.
Cuy Sheffield 29:03
I think we're responding to Davis and your questions on like, anytime there's a press release, there's always like, oh, like, what does this mean? Like, intent to collaborate. Like, what's actually happening here? I think it's helpful to have the context of Apollo has been around the space for a while. Shout out to Christine Moy. She was at jpm Connexus, and, like, she's been very deep in the space and understands it very well. And I think that this is a smart move for one of the largest private credit funds to continue to get closer to the forefront of how to leverage on chain lending infrastructure. Like, how amazing if you're a lender like you now have this new magical infrastructure that's like open source that enables a lower cost structure to be able to lend and being able to tap into that. And I think, from what's publicly disclosed is they've announced the acred token, which I believe Apollo is working, I think, with securitized to issue. So they created a tokenized version of one of their funds and then enabled that. Fund to be used as collateral in a Morpho vault. And so I think gauntlet and some others were involved in an outspot last year. I think we covered on the show at some point that you could now lock up a cred and then borrow a stable coin. I think it was a stable coin against it, and then you could buy more a cred. So they've been around this space in working with Morpho for some period of time, and so I don't think this is just a out of the nowhere response of Blackrock, and I'm really excited to see what they do. And I think it's just an incredibly powerful signal when you have real institutional allocators and lenders that are getting comfortable and learning how to use this new infrastructure,
Davis Hart 30:42
and I think that they're going to be able to potentially create and enable new lending products that just haven't existed before. And so I'm really excited to see how this one plays out. So thank you, Kai and I stand corrected on the context. I appreciate it. I forgot about the acred token. So for that being said, I do want to add what I do find interesting here about both BlackRock and Apollo is they're both going in on public protocols, on public chains, right? They're going to where the value already is. They're going to more of us got like 5 billion in TVL. They're going to where the money is today, and today that might be loans for stable coins. And we talked about like, how useful are stable coins in the traditional economy? But because of the way the technology works, once we figure out what these deposit tokens are and how to put them on public chains, these protocols can just pick up deposit tokens, and then you'll be able to just use deposit tokens against these tokenized credit instruments like I think what makes stable coins interesting for me is whether you're a bank, whether you're an asset manager, whatever, you can start with stable coins today, and you build all the institutional capabilities, the technology, et cetera. And then when a deposit token comes along, it's a very small switch to just make that stuff all work with deposit tokens. And if you're dealing with situations where you need network effects, those take a long time. They're very hard to build if you want to be able to make tangible forward progress start where there already is the network effect, get the technology in place and then repurpose it for the deposit token in three years, once people have figured it out. That's what I think is really cool
Sy Taylor 32:10
about these announcements. Now that makes a ton of sense to me. I think the signal value alone of two massive institutions are using public blockchain networks to do interesting new things, one of which uniswap was kind of under a Wells notice and being sued by the SEC, what, two, three years ago. So this is night and day from where we were. And the partnership here makes a ton of sense. It sort of reminds me of peer to peer lending. If you remember that in the early days, you know, sort of, you get this idea of like, oh well, you know, consumers would be buying loans and other people would be borrowing. And in reality, the private credit firms came in and just bought up most of those loans, and it ended up looking like private credit. And I wonder if they look at the defi markets and go, well, that's just a better infrastructure for private credit. There's a lot of people who want to borrow. We should be the supplier of capital on that, and we should build those funds, and we should tokenize those funds. But then with all of the efficiencies involved, I don't know if you've ever been through the pain of setting up a credit facility, it Rob's nodding his head. That's not fun. It takes a long time to organize the deal. Then you've got to negotiate it, then you've got to get the terms together. And then once you're done all of that, then you've got to operationally manage it on both sides. So Apollo has to manage the person they're lending to, the person they're lending to has to manage making sure they're sending all of the information back and forth, to continue to draw down from that facility. Smart contracts just automate all of that. They just mean that that becomes a seamless workflow, that we can see that the money you borrowed is tracked on chain. So here's what you did with it. We have quite a clear view of it. And were you lending within your obligations? And have you run out of money, and you now need to draw down more from the facility that becomes a straight through process and way lower cost for everybody involved. And I think that's a real business case. But Kai, you and I have sort of brainstormed in the past that about how vaults and how things like Morpho and other such vaults could make a difference even in payments for transactions and things of that nature. Do you see that possibility still? Are you still of the view that, hey, this could make a difference to the bricks and mortar cards world in some way,
Cuy Sheffield 34:19
for sure? And we've read a white paper on on chain lending sometime last fall, I think November. So if you search visa on chain lending, you can find it. That's our full view. And like all the data, and I think our general take is that the current state of the market has really been in historically, what has existed has been this collateralized crypto back to lending, and that's what's driven I think the number we found was over $600 billion of stable coin denominated loans have been originated in the last five years. Like, that's a big number. A lot of people realize that fiasco bank how many stable coin denominated loans have happened? I don't think most of them say 600 billion. And so, like, that's a pretty big proof of concept that, like the tech work. Works. And so you kind of start with that, and then you say, All right, well, like, what are those loans? Like, what's happening? And then it's, well, 99.9% of them are collateralized by Bitcoin, eth, other types of crypto assets. And what they are mostly crypto traders or crypto native people who have crypto assets, and they lock it up and they borrow stable coins, and then they either use the stable coins, stable coins to buy more crypto, or they use it to buy a house or buy car. That's been the initial product market fit that on chain lending has had. And I think that that's gonna grow like, as crypto assets grow, like lending will grow, and like, there's a market there. And I think there is an opportunity for some banks to say, You know what, we'll take your Bitcoin as collateral, we'll take eth as collateral and we'll lend against it. But I think that the more interesting part to us is you now have all these other real world assets that are being issued on chain, and so what if the collateral is no longer just Bitcoin and eth, which I think is like a subset of the population who wants what if the collateral is tokenized treasury? Isn't that a repo? What if the collateral is a local currency stable coin. And so instead of having to do FX and like, sell local currency for dollar stable coins, you could just borrow dollars against your local currency, make a payment and then get paid dollars back and you repay the loan. What if there was a receivable that was the collateral they could borrow again? So it's like the general primitives that are being built out with protocols like Morpho and Ave and others, and how the smart contracts work, and the design like I think that is going to be very broadly applicable to many different types of lending, not just crypto backed lending. And so I think the key is, and David, like you said this of if I was running crypto at a bank, if I was the head of digital assets at a bank, I would probably be spending 95% of my time on on chain lending. I think it's that important in terms of, like, the long term, what impact this is going to have on the banking ecosystem that, yes, stable coin, payments, remittances, B to B, like that. All that stuff is good. Like, they should work on that too. But the entire infrastructure underpinning lending is like being rebuilt in a more automated, programmable way. Like, how would you not be excited about that? Like, if your business is lending, like, this is a dream and so, like, if you could figure out how it works, how to tap into it, how to manage compliance. Like, there are a bunch of problems to be solved, but I think that we'll get there as an industry, and we want to do our part at visa and support however we can, and we're spending a bunch of time with clients, trying to help them understand
Robert Morgan 37:27
I think that last one is so important and it would probably need to move on. But for me, if you think about community banks in particular, where there's so much concern about that deposit substitution, and you know, Simon, as you're talking about your wallet that holds five different bank tokens, probably harder for a community bank to compete in that market where the token is a little more commoditized. What those community banks have is they know the community they operate in. They know how to underwrite credit in those communities. If they can tap into something like this to make good loans to local businesses and find ways to bring cheaper source of funds in for those loans to power that growth. I think the community bank of the future still knows their local market better than anyone else, but is able to plug into this infrastructure to deliver it faster, cheaper and better and at more scale than anyone else like to me, this is a huge opportunity for community banks, and they should be knocking down the door on the loan side, less worried about the deposit substitution side. I think
Sy Taylor 38:26
there's a bit of a theme here. Is that tokenization is your opportunity. Don't fear it so much like, yes, okay, there may be some movement in the market as a result of it, but if you get on the front foot with this, it could meaningfully impact your business in kind of a positive way. Well, from lots of banking type infrastructure stories now to some wallet and AI infrastructure. So phantom wallet has added an MCP server, meaning agents can now swap sign and manage addresses across all of phantom supported chains. So you guys gonna be letting agents loose on your phantom walnut anytime soon? Davis, have you got your claw bot running your trading strategies for you?
Davis Hart 39:10
I will not be a bleeding edge adopter of agentic autonomous payments, but I think that these are critical developments I've been following this space. I think the watershed moment was Cloudflare getting in front of this and saying, Hey, we need micro payments because the content structure the internet is changing, and AI crawlers are going to need to be paying for access to content. That was the moment for me where it's like, okay, this is where AI, this is where stable coins, this is where crypto all comes together. This is a killer use case where you have really high volume transactions at very small values. And so then a development like what we're seeing with phantom is just putting in some more of those rails and the capabilities, and sort of normalizing the idea of allowing more autonomous purchase decisions
Sy Taylor 39:51
Rob any thoughts on this,
Robert Morgan 39:53
yeah, I think it's so key. Obviously, really early. If you're experimenting with any of these things, you're trying to find ways to put. Controls on it. So one of the things that's exciting to me, I don't want to give club bob my credit card, but I might give it something with $100 limit, right? And the ability to program different wallets for different purposes to allow for some of that testing that have those controls, and then auditability, and when you can look back and see what transactions were made for what purposes, that's super exciting to me as some of the practical next steps to how do we make this more real as we look towards the future? I think what we're excited about are worlds where that SMB of the future may actually be an agent. And how do we support the business flows for those agents in that world? I think stable coin needs to be the native language for that. I think the programmability, the ability to compartmentalize, provide those controls, is going to be super important. I think it's still a ways off, where you have an agent negotiating a materials purchase for you, but I think we need to look at where that's going and be positioned. This feels like a really important step in that direction.
Sy Taylor 41:01
Kai, you're hiring a bunch of lobsters at the moment. So what's going on?
Cuy Sheffield 41:06
I'm having a lot of fun experimenting with a lot of these tools, and I highly recommend it, but for sure, you got to do it in the right way. I do not recommend downloading open claw and giving it access to your entire life, like that's you're asking like for for issues, I do recommend trying to figure out how to set up agents in a like, scoped, secure way to get some experience experimenting with them. And like, the trick, what I did was I asked Claude code, can you create a super secure implementation of open claw. And, like, it's unacceptable that there's ever any of it, like, you just have to, like, work with one tool, like Claude code to help it implement another tool like open claw. And so I created my own implementation of open claw that I believe is more secure there, but I still keep it very scoped in, like, certain areas that just for experimentation. I think on the wallet side. When most people think about wallets, they think about mobile apps right now, that is, like, the default form factor of Phantom. Well, that's a popular mobile app Coinbase. That's a popular mobile app. And, like, yeah, there's a desktop, there's a website you could go to as well. But, like, it's a mobile app. I like to think about MCPS as just agentic native apps. That's it. And so if you have a cloud code or an open claw or, like, doesn't really matter what it is, but those are the two, I think, of the most interesting right now, and you want to do something that it doesn't do normally out the box, like payments, we got an solid app. And so, like, an MCP is an app, and it makes sense that a lot of the wallets who have been mobile apps on iOS are now becoming MCP apps on cloud. And so you see Coinbase launch their agentic wallet as an MCP, you see Phantom launch their wallet as an MCP. And so I think it's like a very natural progression. I think the question is, will the same wallets that won as apps traditionally on mobile, be the same wallets that win as MCPS? And what are the unique features and functionality that you need in an MCP wallet that you don't need in a mobile wallet? And like, how much crossover is there between the two? I think those are some of the, like, big, open questions. And I think the other thing that we feel very strongly about is it's not all about stable coins. If you want to do commerce, you need to use payment methods that are accepted everywhere. And so I think we're seeing a lot of really interesting experiments on the forefront, like, bleeding edge of give a stable coin wallet
Sy Taylor 43:26
to an agent, and then I think what you lead to is somewhat of a disappointment. Of, like, there aren't that many things that you could buy stable coins with. And so I think you need to figure out, like, how do you combine the best of both worlds? And like, yeah, stable coins will have a role. But, like, I think there's a huge role for card credentials in a secure, tokenized, scoped way, with things like a piece of intelligent commerce, like to enable card transactions to happen within the command line, within some of these environments. And so we are working very hard at how we can help enable do that. I think there's a big gap for securing that whole space, because I'm pretty sure everybody agrees it's coming. Nobody's hand on heart show when it's coming, but it feels inevitable. And AI has this annoying habit of being like the second you think it's going slow, boom, it just hits another exponential and blows your mind. And if that came to payments or commas, then it would just be a whiplash effect. So you got to be doing the R and D. Now you've got to be ready for it, and it's good to see Phantom doing this sort of stuff, but you've got to do it in a really secure way. There's a story this week about open AI and my friends at paradigm, launching EVM bench, which is a benchmark designed to ensure that any implementation of the EVM is robust and secure using GPT three as a secure code auditor. So, Kai, you're sort of thinking, I think the right way in getting the AI to be your security model for you, but I also think this is going to need packaging for enterprise. There's, like, no red hat for open call, you know, like we've got the Microsoft and we've got the windows in, like open AI. And thropic, who've got their sort of closed source and that will do extremely well, and I think they'll continue to innovate. But open call feels like a Linux community that doesn't yet have its distributions and its enterprise stuff waiting to happen, so I'm excited to watch that one play out in the not too distant future. All right, bunch of other stories this week. We didn't have time to cover dragonfly. Our friends over there raised six, $50 million funds. So next time we see Rob haddock, Drinks are on him. Base is leaving the OP stack to build their own blockchain. Fascinating. Wonder what they'll do. Robin Hood's layer two test net has seen 4 million transactions in its first week, what were those transactions would be my question from Fortune Kraken has acquired a token manager Magna and the hyper liquid foundation sets up a defi policy advocacy group with a $29 million hype token donation. All right, that's all we have time for this week, I want to thank everybody for viewing, watching and listening, so so much. And I want to thank my incredible guests. Davis, if people want to learn more about you and Omnia, where do they go to do that?
Davis Hart 46:11
Our website's Omnia dot financial, and you can find me on LinkedIn. That's where I post my bi weekly newsletter called The stable coin banker. So if you want to get deep under this, the banking space vis a vis stable coins, that's the place to go. I will check that out. Highly recommend stable coin. Banker is excellent. I read every one. I forward it across to many people. So thank you, Davis for writing me.
Sy Taylor 46:29
Thank you, Kai. Couldn't agree. I got competition here. All right, Rob, where do people find out more about you? And Payoneer.
Robert Morgan 46:36
Payoneer.com We've got the wait list live. We've begun transitioning customers off of that and keep an eye out for more things coming soon.
Cuy Sheffield 46:44
I'm Cuy on x at Cuy Sheffield, at visa Comm, slash crypto.
Sy Taylor 46:48
You'll find me screaming into the void at FinTech, brain food.com, tempo, dot XYZ, and at sy Tai will on all of the socials, and you'll find a lot more of this show. If you hit the subscribe button, you hit like buttons, and you spam all of your friends and tell them about it too. We'd really appreciate that spam away. You have my permission. Take care guys.