On Ep. 15 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Anthony Woolley, CEO @ Ownera and Daniel Lynch, Metamask Card Strategy @ Consensys to discuss the agentic revolution that's happening in crypto.
On Ep. 15 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Anthony Woolley, CEO @ Ownera and Daniel Lynch, Metamask Card Strategy @ Consensys to discuss the agentic revolution that's happening in crypto.
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Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. My name is Simon Taylor, and of course, I'm your host of this podcast, author at FinTech brain food, and head of strategy at sardine. And joining me is the one and only. Kai Sheffield, Kai, how the heck are you, my friend?
Cuy Sheffield 00:23
It's first show of the year, 2025. Is going to be fun. I'm excited to kick it off. We've got great guests. Let's get into it. Let's
Sy Taylor 00:32
do this. All right. Joining us, of course, is Anthony Woolley, Head of Business Development at oneera. How you doing? Anthony?
Anthony Woolley 00:38
Very well. Absolute pleasure to feel I'm here with you from I'm quite sunny, more sunny than London is at the moment. But like Kai, I think it's going to be quite some year.
Sy Taylor 00:47
Oh, it's going to be one year. Let's go. And alongside him is, of course, Daniel Lynch, who is meta mask card strategy at consensus. Daniel, how you doing, sir? I'm
Daniel Lynch 00:59
doing great. Happy New Year to you all, and a big fan. Been listening to you for, I guess, a decade now, back when I used to open with we are here, or as we were starting, was it in the old one? I'm uh, I'm an I'm an OG fan, so I feel quite
Sy Taylor 01:12
Oh, wow, that's an OG blockchain insider listener there, yeah. Should we should we hit one? Should we do it?
Unknown Speaker 01:18
Yeah? Yeah, sure
Sy Taylor 01:21
we are here.
Daniel Lynch 01:23
Indeed, we are
Sy Taylor 01:28
listeners. If you don't remember that show, don't worry about it. But we've got so much to talk about today. The world of crypto is fascinating. If you haven't followed it, a i 16 Z from Eliza Labs has clinched an AI research partnership with Stanford. So Eliza Labs has partnered with Stanford to research how artificial intelligence agents can improve web three. And of course, if you haven't seen AI 16 z it has a native web token, and they've managed to bootstrap themselves to a market cap of almost 850 million since launching in October. But there's all kinds of stats here. The Eliza GitHub framework is currently the number one most starred GitHub project globally. So they got something like 8000 stars in a couple of weeks. They've 220 contributors, and this framework provides infrastructure for fully autonomous AI agents. Kai, you've been watching this thing like, what is it like? Let's, let's, let's dive in. This
Cuy Sheffield 02:41
is probably the biggest story in the past few weeks, and during a period when you expect over the holidays, people are taking time off and relaxing. They're unplugging. They're not online, like just the velocity and speed of development and excitement and activity in this space of crypto and AI together, really was incredible, and it really just took a lot of mindshare. So if we take a step back, we go maybe even two months ago. I think if you ask people, where does crypto fit within AI, does it make sense? Or are these two things complimentary? How do they interact with each other? There was a lot of skepticism. And if anything, a lot of the crypto and AI projects were very much at the infrastructure layer. It was decentralized training, decentralized inference and data. And so there were projects that been around for a while, but they were very much infrastructure focused. I think what started to happen was we started to see some of the first applications that were very visible show up where a lot of us are already spending our time. And these were agents showing up on Twitter. So I don't know about you all, but there were agents in my feed that were autonomous, that were tweeting out content. And some of the content was very interesting, some of it was very annoying, and reply guys and bots that I had to just block. But there were agents emerging that had characters that had personalities that were putting out content that people were following and getting value from. And so I think that was the first thing was this visible in this corner of crypto Twitter, starting to see AI agents contributing value. And then people said, Okay, well, like, Wait a minute. How is this happening? Who's building it. And that's what led to, okay, there are these frameworks. There's Eliza, it's an open source project. It makes it super easy to create an agent. And then there are these plugins that you can add wallets and add other things into them. And so there became this developer ecosystem of both crypto developers who were excited about this new interface of agents as well as AI devs, really, I think crypto is becoming this playground that you could start to see experiments in front of your eyes in real time, and it's still incredibly early. It's weird, it's crazy, it's hard to understand, but you can't deny the mindshare and the activity and the experimentation. Just in the past few weeks. Weeks has been fascinating. So maybe that's like, the high level context, but Daniel or Anthony curious how closely you followed, like, how you think about it, maybe you could do a better job explaining what the hell it is. But what's your take? Yeah, I
Anthony Woolley 05:12
mean, the thought that goes through my head is, and let chaos ensue, right? We're really quite a transformational point in time. And one thing is, what you see with, as you say, AI impacting what's going on in your Twitter feed, etc. The question is, what happens when AI meets money? And we know that, coming out of World of traditional finance, large institutions, hedge funds, have been using AI in some form in trading environments for a while, and they've learned a lot about that. I mean, what we're talking about here is now, if you deliver that into a decentralized context, in a web three context, well, I don't know, a lot of people are going to make a lot of money. A lot of people are going to lose a lot of money. I look at it, and everybody thinks immediately about the potential, the upside, the power of having these autonomous agents working in this environment. Maybe I'm getting old, but I think all of that, and then I immediately think, what can go wrong? What happens in black swan events, what happens under times of stress, this sort of thing. But certainly, we're entering a really exciting time with how AI is going to start to interact with money, first in the world of crypto, and then more broadly, in the financial ecosystem, right? Yeah. I mean,
Daniel Lynch 06:16
I guess I have, like, a bit of a heretical confession to make in the world of blockchain is that in 2021 I made a decision, if you all remember when those nfts were out around those loop hacks or whatever, I said to myself, will this be a thing in a month? And I decided not to pay attention. And that's been my new thing for the new for like, three years now, is whenever the next, next thing comes out, I go, You know what? Let me wait a minute, because I mostly work on things that are like, have an immediate utility to either like retail or enterprise. And that's not there's a personal thing in consensus. We're always in the next next thing. But me, personally, because I'm so focused on that, I usually put a pin in things like restaking. A lot of these concepts, I'm like, You know what? I'll give it like a year, and then I'll see if it's time. But the AO one has been particularly interesting. Maybe I'm getting interested a little bit more quickly than I have in past, next, next things in crypto, because at least for us, it's been pretty impactful. I mean, namely, not just the AI 16 z, but the zero bro, Z, re, bro. I always pronounce it wrong, because I think X Men, it's like cerebro. I want to say Cerebro, but it's not. And then virtuals have been like huge drivers of volume for us over the past few months. I think, not just Metamask, but other wallets. And part of it is, I would imagine, partially because of the fact that there's not spot markets people are doing, like self custody trading. But I think another part of it has to do with the fact that, like a little bit like the 21 NFT phase, it's like inherently on thing on chain, things you want to pay your agent, you want to enable these agents, you want to do cool things on chain. So I think between AI 16, Z virtuals and zero, bro, zerebro, we've seen a lot of activity coming, and I think especially around some of the smart wallet work we're working on, or some of the things we're doing with the card, around trying to create, like, an equivalent to everything that happens in personal finance. So like, saving, spending, lending, credit rewards is like, how do we get all that working in Metamask. I think the idea of folks being able to kind of employ these agents now, the autonomous agent, if someone wants to go be the singularity agent, I think that's interesting. That's fun to talk about. But I'm really excited to see over the next few years, or the next year, how folks can say, All right, I've spent with the Metamask card. I got an eighth reward. I want that eth to be automatically staked. I want to have balancing dollar cost averaging. I want to have resizing my positions. And I think the AI agents are going to bring that to self custody in a way that was previously only available, like a banker, centralized exchange. So despite my caveat that I usually wait a year or two until the next next thing validates itself, I think this is a particularly exciting one, even in the early stages, and it's visceral to people I was talking about the zero bros album on Spotify to a friend that is so much easier to explain than restaking or liquidity provision, it did something I can explain to my dumbest cousin so very excited.
Sy Taylor 08:51
I think agents are powerful because they look and feel like a user interface that people understand about AI, the user interface for most chat bots is really confusing. It's like using a command line or Microsoft DOS. Your results may vary depending on how good you are at using that tool with a large language model, but an agent looks and feels like interacting with a human or a person or a private banker or a trader or something, and we've had Twitter accounts for a long time, like Zero Hedge and stock twits that do market data and market readouts and sentiment analysis. So to have that for crypto makes complete sense. And of course, we had bots doing that, but having llms power those, and having the LLM help make decisions about what a wallet with real value sitting inside it should buy or sell, and the trades it should execute. That's crossing a Rubicon where software controls money, and that is a game changer. And as Anthony says, Oh my God, what can go wrong at the moment? Ai 16. Z is a. Performing a lot of major funds. But as Anthony well knows, as many as you guys well know, everyone's a genius in a bull market like this, this could yet still go horribly wrong, and yet, often from the soup of crypto crawls, real innovation that changes markets and it looks absurd the first time you see it, but then you look closer and you go, but there's really something there. Kai, what are your thoughts? I
Cuy Sheffield 10:27
completely agree on the interface side, that there could be a significant unlock from a distribution standpoint, and like customer acquisition, of how will consumers interact with agents in the first place? And I think historically, it's been the onus is on the consumer. You gotta go to chat GPT. You gotta download an app. You gotta create an account. Maybe you sign up for pro and then you got this box of like, all the knowledge in the world that you gotta figure out, what do I ask it, and how do I ask it this in the right way? And it's how good your prompt is, how good the response is. Now we're seeing this other approach, of I'm just going where I normally go. I'm on Twitter. I spend way too much time on Twitter anyway. And agents are meeting me where I am, and then they're trying to add value to me, and they're prompting me, rather than I have to go out and prompt them. And so I think the ease of just interacting with an account on Twitter, x versus having to download an app, having to discover that, I think, is a big unlock. And then I've started to see, of course, a new acronym in crypto. What is it? Defi. Ai, defi. Defi. I don't know how to pronounce it, but it's D, E, F, A, I, seems to be what some people are saying. And I think Daniel to your point, and Anthony would love your thoughts on this as well. We all know how hard crypto is to use still, like it's gotten better, and like all credit to meta, mask and Phantom, like it's gotten better, but for a normal person to give them the power of doing anything that they want on chain, from a financial standpoint, from staking to lending to borrowing, it's just hard, and it's a lot of clicks. And so if you can have an agent that becomes an interface for a wallet or protocol, and just tell it what you want it to do. Like Simon said, like, it's like your personal banker. You say, I want you to find a strategy that generates X amount of yield and take that yield and then use that to dollar cost average this asset that would take so long, one click at a time, to be able to execute on a regular basis. Anthony, do you see agents becoming an interface that grows defi, given that it could take away the complexity around some of the things, like bridging and like being able to automate these strategies. Like, how do you see that playing out?
Anthony Woolley 12:30
Absolutely. I mean, this is a broader theme, right? Those AI agents will improve the interface as other things will. What's happening is we're at a point where crypto will break out, and this whole environment is breaking out just from those who understand how to use wallets to people who don't have those technical insights. And the AI agents be one of a number of tools that enable that. To Simon's point, in the world of crypto is amazing for the speed of innovation and the trial and this the broader world sees it as a form of lab, right? And so we see those innovations moving extremely fast, and that they will migrate out into the broader world. As they do, there are risks and other things associated with it that people will worry about, and they'll have to be taken on board. But certainly, there's a theme at the moment around all of this becoming easier to use, and we see that also in the theme of the world of crypto now finally converging with the broader world of finance, and those two having a really powerful transformational effect.
Sy Taylor 13:27
Before Daniel jumps in on that, I just want to double click on what you see in the private markets, because I would argue that there's sort of a couple years behind where the crypto bleeding edge they're regulated. They can't necessarily get there, but they're sort of the early adopter from an institutional standpoint. And the tokenization of real world assets is something we've seen a lot. Are there things that you might have seen in defi three, four years ago that you're now starting to see in the private market space? And what are those things in that world? Yeah, I
Anthony Woolley 13:58
think the initial crossover we've seen is the world or first of all, tokenized securities, tokenized money market funds, again, World of crypto, looking for stable coin with yield. This has sort of started to open up this passage through into World of traditional finance. And two or three years ago, we were talking about the potential of real estate, potential of pre IPO, private companies and such like, really inaccessible. I think now that you've got simple products like tokenized treasuries coming to the fore, and that's taking off, that's sort of the start of people understanding that you can get access now to some of these other products. And so I think we're really at the forefront, really the starting gun for getting access to things like investing in real estate, other private market assets. That's ultimately the biggest prize of all, but it's the hardest one. So we're looking at lots of different exponential curves, but they're exponential over different time frames. So we're now on the exponential curve of stable coin and tokenized money market. Funds, and we're very much at the early stage of the curve in private markets, but that's coming, and that's the biggest market of all right, yeah,
Daniel Lynch 15:06
I think, I couldn't agree more. I think there's kind of, like three stages to a lot of this is like, you kind of got the D gens, the retails, and then the institutions, when you look at it, so like, the D gens prove this all out, like, tokenized treasuries. It's not like banks are holding them today. Let's be real. It's just folks seeking a little bit more yield, but they're super eminent right getting into retail, we recently launched like the Metamask card. It's the first card that lets you spend from a self custodial wallet in a true debit fashion. It's not a top up, it's not a prepaid and we're getting a lot of excitement out of like, say, our Brazilian users. Imagine it's already hard enough to have a US dollar account, but imagine when we bring on andos USD why they're not just now spending $1 they can spend a treasury. So we've got a checking and savings account for someone who was previously severely under bank, say, with limited access to US dollars on the institutional side, I would really love to see. I mean, I used to work at Swift, and I will say, all respect to Swift, a lot of crypto people misunderstand what Swift does. They're like, Oh, well, stable coins take out Swift. I'm like, well, they might take out nostro accounts. I think that message with the beneficiary field is still kind of important. But at least in the security space, the fastest growing message in Swift was the 548 and that's just like, the WTF message. It's like, there's a delivery of securities message, there's a receipt of securities message. But the fastest growing message for like, 20 years is just a bunch of custodians and like, CSDs, like, where is the security? What's going on, right? So I would love to see how, like, the RWA starts to crack a little bit more of that market. I mean, we worked on the JP Morgan Guardian project with mass two years ago, which I thought was really innovative. They, like, forked Ave on polygon to create a Singapore dollar Japanese yen swap market with DBS and SBI holdings and all respect to bankers, used to be one, but I've been really shocked that no one's replicated that. Because I get there's a risk department. I get there's bureaucracy, but like, literally, like, the code is there. If you wanted to fork unit swap, you want to throw it on our network linea, which is a theorem equivalent, and because of Zk, VM, it is real time settlement. Whether it's an FX swap market or you want to do, like, real estate titles or bonds. To me, it seems almost arbitrarily easy to take an instance of uniswap, tokenize a few of your assets, and then just have a kind of permission decks. So I'm really excited to see this year if, okay, D gens are doing it. We got this card that's fun. A lot of retail people are buying tokenized treasuries, USDM, USD y. We're probably gonna see other asset classes in Brazil. We already see a lot of real estate happening. I think both they've had a new not a law, but an act, like a comprehensive crypto package that went into effect a few years ago, where you are seeing tokenized auto loans and, like, music royalty rights and retails participating that. So I think the final thing to see is, like, this year is, do we see the stable coin payments? Do we see tokenized bond market securities? Maybe it's 27 but, like, it can't be that far away. That far away. And I'd be really excited to see, like, let's get rid of that 548, message, let's have the swap. And then, boom. You just know it happens. It would
Anthony Woolley 17:49
happen, right? It will happen. But I think it's coming from the where it's not coming from is the traditional public securities markets. First. Where it's coming from is out of this world of getting some new tokenized treasuries, being able to start to make available private market assets, assets and alternatives that investors are hungry to get access to, they can't get access to them. They're overexposed to public securities, starting there, right? And it is about got to learn to love securities, right? I think it's starting to have an environment where you can unlock the global securities market, first in the private markets and in alternatives, and then ultimately public markets as well. And you know, institutions are now managing to navigate trading off the regulatory environment with how do we access this world of public blockchains? How do we access this world of crypto and that's all starting to happen now. So this is where it gets really exciting, because then you can scale up exponentially. We
Sy Taylor 18:42
talked about this in a previous show, but this sense of a regulatory environment in which I'm allowed to operate is really important. Perception is reality. And since the passing of mica and Europe, it certainly seems like the European institutions have been much more able to do things. You know, we've talked about BBVA have partnered with Visa on looking at stable coins. We've talked about society, General, Ali banking circle and many others launching their own stable coins. We will potentially start to see that, I suspect, in the US. And there's actually another story that comes from block works, from the securities CEO, who was saying that our wa integration with defi could 10x the market, and he could see that market being worth 50 billion in the next 12 to 18 months, which would three to 4x from here. So tokenized treasuries currently represent something like four. My notes say million, but I think it's billion of the 15 million on chain currently, but if you look at that price, we're gonna continue to grow in the treasury space, and it should grow to several billion dollars next year, because stable coins are at 200 billion. So fundamentally, there's a mismatch of there's a lot of stable coins, but there's not a lot of yield, which sort of supports the point you're making. There. Anthony, there's a lot of folks out there that just have zero yield, and people need it, and it sort of supports Daniel's Point. So what's going to follow? And what's the path look like, if you would sort of take that prognosis, like, how do we get more on chain? And what's the unlock here to get to that?
Cuy Sheffield 20:17
To me, there are two questions that I think are really important to follow when you look at the tokenized Treasury space. And so you said there's 4 billion, around 4 billion in now, and in many ways, 2024 was a huge year of growth and success of having Blackrock Biddle and the growth of Franklin Templeton two years ago, the idea that some of the largest asset managers in the world would have issued regulated products on a public blockchain would be like, Whoa, but we did that in 2024 and so we're at 4 billion. Who is holding the tokenized treasuries and what are they using them for? And it seems right now there hasn't really been wide adoption of tokenized treasuries within defi with tokenized treasuries being used as collateral. It's been people just holding them in a wallet where maybe it's they're replacing an institution or a corporate treasury. Maybe it's a crypto native institution used to hold stable coins. Now they hold little tokenized treasuries. So what has to happen to get tokenized treasuries integrated into defi? Do they get integrated into the same defi platforms that stable coins are on? Are there going to need to be new platforms that have some identity permissioning there? Is this going to be mostly a market that is collateralized defi using those treasuries? Or are we also going to see on chain identity and uncollateralized lending start to merge? It's a maybe for both of you, like, think in 2025 How far do you think we'll be able to get at this intersection of tokenized RWA and define like, what do you think it looks like this time next year? I
Anthony Woolley 21:53
think it's a two step process, right? What we're seeing at the moment, and you could argue Black Rock fire the starting gun on this, and others, Franklin Templeton and others, but the first step in this year, and we sit at a narrow between the world's crypto traditional finance, in many ways, because we're enabling market participants to connect agnostic to whether it's public, private blockchains, institution or whatever. So we'll work with, say, fire blocks network on one side, and work with a major institution on the other. And I think what's happening the first step is you're going to see much greater mass access to these tokenized money market funds, tokenized treasuries, within the context of crypto, just getting that access there, opening that up. That has to happen, I think, before you can then start to leverage these in a defi context, because of the navigation around the regulation. How do you manage the securities regulation in the context of that? It will happen. But I don't know if Simon would sit there and agree and disagree, but I think it's right. Now we're seeing that exponential expansion. I totally agree with, well, do I agree with that quote you said the 10 times market? I think that's just a way of saying we're looking at an exponential curve. This is going to grow exponentially over the next year, but it is about first of all access, and making that access there, and enabling institutional tokenized money market funds to be available more broadly. And then it's how, once you've got the access, how do you embed it in these processes in a way that, at the end of the day, is complying from a regulatory point of view,
Daniel Lynch 23:15
I'm very heartened by the regulatory developments that we're seeing. And I mentioned Brazil before. I think it's just a fantastic, also kind of non partisan issue. I think the bill was drafted under Bolsonaro, implemented under Lula, and it really regulates a lot of stable coin payments, payments with crypto, how custody is done, how investments do it done. Mika us is developing. I don't usually speak on regulations, because we have a great head of policy. They'll use a consensus who talks on that. But I would say that I'm heartened by it. But I also think it's a little bit of an excuse. Bit of an excuse sometimes, wherein the web, three folks on one end and the banks on another end have just simply not stepped up. So like, if I think of the two extremes, defi lending for regular people, if you're thinking of it as like your savings account, that's great. Again, I go back to we launched this card in like Colombia and Brazil. Great. I can take some USDC, or I can take maybe one of these tokenized treasuries, USDM, USD y, and put in the Ave, that's fantastic. But to be able to then take it out of the lending pool, off ramp it to my bank account, then go spend the house to go buy a muffin or a pair of Nikes or whatever, exceedingly difficult. And I think we're pretty pleased by the fact that we're allowing you to actually just spend those assets directly. So now there's like a tie to the real life. So I can take my tokenized treasury, I can deposit an A token version of it, and then go out and then really earn that yield until the exact moment that I spend it. So if I have, like, a $200 balance, and then I spend 38 cents on coffee that morning in Brazil, prices, maybe it's two pounds over in Britain, I am earning the yield until that actual moment of purchase. So that's something on the retail on the retail end, on the institutional end, I would say, though Blackrock launched vital in the current or last, I don't know what you want to call it, regulatory environment, not in the new one, this JP Morgan project that happened. Banks are allowed to swap Japanese yen in Singapore dollar. They're allowed to do that. That's clear. They brought it on chain. Now all the other things about maybe paying the Matic for the gas costs. They set up a gas tank with bike economy. They did it under the mass framework. But I am a little bit surprised sometimes by the number of banks that have not done these experiments. And I think it's kind of a question of stepping up and also having facilitators. Shout out Kai. I love the V tap thing with BBVA, if you can get the tokenized deposits going. And then again, this is a great example. I can send a swift 103 or Pax message out there on the ISO 2002 two. And then if I can mint euros or dollars out of my treasury and send them to a willing recipient that doesn't really touch my back office, I don't have to call up ACI or finaster for that, right? It's still the same message. I just have to have a little bit different of choreography to not debit a nostro account at my correspondent and just send the tokenized deposit. So heartened by the regulatory developments, but if it comes to making this useful for everyday, regular people, I think the web three folks, we really got to step up. And I do think that all respect to bankers, a few of them have to step up in ways that maybe they haven't. And I see it happening. I mean, it used to be that you talk about the banks that were able to do these type of projects you're talking about, JP Morgan, JP Morgan, SOC, Gen, dBs, Goldman, a few, but I'm starting to see more and more mid tier, regional, super regional banks that are doing cool stuff. And then, of course, the Neo banks and the fintechs pushing that kind of competition on the other end. I think is very heartening as well.
Anthony Woolley 26:16
Talking to many of these institutions. I think now it's moving where it was institutions at best, putting a few people in a lab and saying, Well, let's see what comes of this. Or institution saying, Well, we're invested in it as a hedge against our incumbent position. If it comes off, great, if it doesn't, it doesn't matter. That attitude has changed. I think we now see major institutions, both buy and sell side, now engaged that all these tokenized deposit projects, the end of the day, that crypto lab, right? The whole point about a stable coin and then lighting a fire that results sometime later, in commercial bank tokenized deposits, or ultimately, central bank money. All of this is part of a broader system, and it is starting to happen now for the institutions, regulation is not a binary thing. It's not like you haven't got it today and you've got it tomorrow. So tomorrow. We see many institutional projects going to production in different jurisdictions now in the context of the regulation that they can move under, and things like mica and others are making that ever more easier and then accelerating the way that new solutions can be delivered by institutional markets into this fully decentralized environment. We've said
Cuy Sheffield 27:21
this on the show before. In 2025 every bank is going to need to have a stable COIN strategy. And I think some of them realize that today, and some of them don't. It's also interesting where, a year ago, if you had a stable COIN strategy, and like stable coin, what a lot of it was was looking internally, inside the bank. A lot of it was permission, Blockchain based intra bank, settlement, solving cost efficiencies inside the bank, which there is value to some of those projects, but that is fundamentally different than if we live in a world where there is increasing regulatory clarity for stable coins as a regulated payment method that can be used across many different payment flows. What's your strategy? How do you want to participate? And I think increasingly, it will be an active decision to say, No, we don't want to partner with anyone who has a stable coin and hold the reserves. No, we don't want to issue our own stable coin. No, we don't want to enable access to existing stable coins for our clients. And I think now I've talked to a number of bankers, just in the past few weeks, some of the most forward thinking people in the space, they're starting to really kind of see this destination of stable coins becoming cash equivalents and being able to send a stable coin to your bank account as a way to deposit funds in or withdraw funds out, and it just works. And I think that would be an enormous unlock. And the question is, Okay, was it going to take to get there? How long does it take to get there? I don't think that conversation was happening a year ago, a year ago. It's still like, oh, stable coins are this thing. They're over. They're out there in FinTech and crypto, and who knows if we'll ever cross the chasm to payment. Once you start saying stable coins could become cash equivalents and become a mainstream way that money can move between banks, between a bank and a non bank, between two non banks, then you start to get a bunch of interesting activity pushing in that direction, and the regulatory environment is one of the big questions and will continue to evolve. But that's what's so exciting to me, is that there's not this question anymore. If stable coins will play a role, it's how and when. And you've got a lot of smart people in the traditional financial system working
Sy Taylor 29:35
on it, the Overton window inside of institutions has fundamentally shifted around this topic, I think, in the last six to 12 months, where the majority would have said, I'm not so sure about that, the majority say, what's my strategy? And I think that you can usually point at a moment in time where it feels like it suddenly happened. And Anthony's point is a good one. It's probably taken about a decade to get here, of people working hard. The infrastructure maturing and the regulatory environment maturing, but now it just feels like acceptable on a broader level inside of institutions, and that's absolutely huge. But do you know what really stood out to me about everything you guys said, which is, yeah, the institutions will get there and continue to get there, and you need to do it. The wildest thing to me was that a unbanked consumer in Brazil now has better treasury management than most global corporates in that they can use AI and automatically switch between the savings and checking account just based on their ability to spend directly from it, like the sophistication you need to have that level of treasury management as an individual is probably some sort of private office. There aren't many consumer grade applications that really optimize how your money flows in quite that way. But you can do it as a consumer, and you're one of the most unbanked in the world historically. And I think that is a perfect metaphor for where we're going with all of this stuff and the FinTech companies and others that are listening, what would that product look like for your customer? I think is a great question to play with. I
Daniel Lynch 31:13
was at swift when maker launched, and I was like, we gotta do a POC with die. Man, let's do it. And they're like, Daniel, chill out a moment. But I am happy to see everyone doing it now, namely because I feel like it's just like the lowest hanging fruit, both in terms of the benefit and the investment. There's money locked in nostro accounts all over the world that you could be doing small business lending with. You could be doing mortgages investing, etc, and the actual investment is not super high. If you can still send the Swift message, you don't have to touch your core banking. You just get rid of the nostro account and you have this on demand money that's either now maybe all the banks aren't ready to use the popular stable coins today, but perhaps with vtap, they can tokenize their own deposits. Right as I understand it, layer zero and chain link both have adapters that, when you send the Swift message, the funds move. So I think it's gonna be a super exciting time for that, both in terms of tremendous benefit and then, like, pretty arbitrary amount of investment, keep sending swift messages. Just don't have a pre funded nostril account. Okay, I'll try that out to speak to why it took so long. I think all the building blocks were not all necessarily there, but they're all there now, like MPC having a way to, like, have effective in house custody, the likes of fire blocks are working with all these banks having the L twos. Those one around until 2021 I'd argue optimistic roll ups are not good enough for banks, because everyone's trying to move from like three day ACH to two day or real time, whereas optimistic roll ups still have that seven day or three and a half day finality. That's worse. But like with ZK VMs, those are actually two second execution, half a second execution. So like the evolution of the roll ups of the MPC, these type of adapters that exist, I think it's going to be hard not to do a stable coin, if not POC, even throw in a corridor, because some are interesting. If you look at bits, oh, big Mexican exchange. I love those guys. They're really cool. They operate in all of Latin America, but they're huge in Mexico, and they've kind of quietly started to consume a lot of the US Mexico corridor for both remittances and SME payments, just because they have the banking relationships and the stable coin balances already. And it kind of for I think a lot of people came out of nowhere. They're like, how did this exchange capture this payments business? So I think it's a really exciting time for that. And we're
Anthony Woolley 33:13
kind of seeing a symbiosis between the potential you set stable coins in payments. And for those like Simon, you'd probably see this as another step beyond things like started out as open banking in the world of traditional finance, and now we're seeing complete transformation of payments and but there's this symbiosis, then, with things like tokenized money market funds that can give you yield. And if you can quickly redeem the money market fund, you can use the stable coin for payments, money in motion, and then redeem straight out and get yield off a tokenized money market fund, and these are really powerful dynamics that are really enabling money to flow freely and getting people yield at very low cost. Before
Sy Taylor 33:49
we move to our next story, I just got to thank our sponsors, and we'll be right back. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments, Visa's tokenized assets platform, vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This podcast is also supported by our friends at digital asset, the creators of the Canton network. Canton is unlocking the utility and liquidity of institutional grade real world assets with over $3.6 trillion of assets issued or processed on the network today. Think of it like defi transactions, but with the privacy and control institutions need digital assets solutions make it easy to tokenize use or. Invest in digital assets on the network, create connected applications, or simply get started with a validator node. Visit Canton dot network, forward, slash, connect to get started. Alright. Thank you to our sponsors. And speaking of stable coins, we didn't cover this story, but it kind of happened, and I think it's an important sign of the times, which is BVM k raised $50 million in their series B round that valued them at a reported 750 million. And they say they the payments processes have grown by 200% reaching annualized volumes of 10 billion. And the CEO and co founder, Jesse said stable coins are an infrastructure upgrade for payments ready to replace legacy systems, and because we did have them on the show, you'll find that episode in our backlog. But bvnk has some pretty major clients. They've been around for a little while. How do you see this funding round, the bridge acquisition in the context of kind of everything we've talked about there? Interested in your views? Daniel, from your perspective, yeah, I
Daniel Lynch 36:16
mean inevitable that they continue. I think they'll be the three, right? There'll be the investments like, Thank God, congrats to them. I think they'll be the acquisitions and Acqui hires, like we saw with bridge, and then, of course, the development of the internal capabilities. Of course, we saw, like, PayPal launch the pyusd, for the reasons I said before, it just seems inevitable. Like money locked in, like intra institution accounts, to me, is just the lowest hanging fruit of banking. It's like, it's a model invented by, like, the Knights of the Knights of the Templar back in the day, because they didn't want to, like, carry gold around the Holy Roman Empire. It's like, if you can maintain the same like core banking or messaging infrastructure, APIs, whatever, and not have to have that money locked up everywhere else, it's just a tremendous unlock. The question, I guess, is the capability of these folks to build it, and, you know, buy, rent, use, right? And I think to that end, we're gonna see continued investment in the folks like bank, continued acquisitions like bridge. And, of course, the development of these things in house, whether it's called a stable or tokenized deposit, depends on if you're a GTB or a NEO bank. They kind of rhyme, right? This year is probably gonna be, I wouldn't be surprised if we see like, three of each of those flavors, at least before the end of the day. You know, three more acquisitions, three more investments, three more internal launches.
Cuy Sheffield 37:27
Congrats to B and K team. And it was great having Chris on the show. I think a few episodes ago, I think they've really executed on just this concept of stablecoin orchestration, which I think we'll hear about more and more, and I think bridge, in many ways, put on the map in a big way with the stripe acquisition. But the need to be able to have regulated entities, regulated money transmitters, that have access to fiat banking, of which BV and K, particularly, starting in Europe, has strong kind of Fiat banking relationships, virtual accounts within those Fiat banking providers, and then access to any major stable coin and the ability to move between the two. I think that that is a valuable service, that if you want to build a stable coin payments company, you can't just be focused on stable coins. You got to be focused on Fiat because I think one of the biggest challenges is like, how do you get from stable coins back into Fiat? So I think they've done a good job building both sides of that. And I think the other thing that's unique and interesting about them is they've built a lot of the tech in house, and they've built their own custody so they have a product called layer one, which is just their own kind of custody stack that the BBK orchestration platform runs on top of, and that they're also selling as kind of a custody as a service offering. And so I think it's good evidence of just more demand and growth of this category. And I think as you see more and more payment companies coming into the space saying, Okay, how do we quickly get up and running on stablecoins? What do we do about licensing? How do we get easy convertibility into Fiat? Do we want to go and open up accounts with every stablecoin issuer to be able to support them? BV and k is the type of company that's there to be able to work with payment companies to enable that?
Sy Taylor 39:13
Fascinated to watch it, the numbers stuck out to me, the 10 billion payments processed. There's not nothing I think, stripe in their last year, or their annual letter notice they noted they process something like a trillion dollars. So for a payments processor, this is still tiny, but what's impressive here is the growth rate and the consistency of it, and what, what happens now, and can they, can they kind of keep that growth rate really going? And just as you said earlier. Kai, every bank needs a stable point strategy. I think every PSP does as well. There are only so many of these things out there to acquire that have any volume and have the requisite licenses. Are you going to build this in house yourself? How are you going to do it? I know newveh has done an awful lot in this space. WorldPay has been experimenting. Expect. The major PSPs to start to move towards that and get involved in a little bit of a different way. Anthony, I'm curious about your observations of this market as well. I know you're more on the institutional side, but where payments leads institutions follow. Yeah,
Anthony Woolley 40:14
I always look at things through a bit of a institution rather than retail lens, similar thinking about the global securities market, and I always look across the payments, you see, yeah, that's great, and payments should be zero cost, and they should be frictionless, and that's happening, but on the other side of the payment, there's always an asset, right? So that's what gets really interesting now, is you make payments frictionless, but being able to do DVP, ultimately atomic settlement, being able to exchange that money for assets, whatever they may be, from the simple tokenized money market funds through to a piece of prime Mayfair real estate in London, or whatever it might be, that's the bigger picture for me, and always has been, actually through I spent a lot of my career building the spaghetti that makes the public securities market a bit messed up now, right? It's all held together with sticking tape and and it costs a lot of money, but ultimately, it was about, can you make back office in the front obviously, institutions go as fast as each other? Can you click a button and actually take ownership of something? Can you instantly move that money, whether it's a stable coin or whatever it is, for a security and that, for me, has always been the really big prize, and that's what excites me. That's what's happening right now as we see these two things converge, both the payment leg and the asset leg in digital form, being able to move both instantly, that is massively transformative.
Sy Taylor 41:37
Kai, I'm interested in what challenges stable coins as a category have to solve to get to more adoption. You know, D Hawk famously invented something where he got collaboration between a lot of folks that wouldn't otherwise collaborate, and I think about a lot of the edge cases that are still possible. I don't know about you, but I've seen a lot of pieces from various VCs lately saying that stable coins are going to put swift out of business and payments networks out of business because they're so much cheaper, but actually, stable coins don't necessarily have a chargeback mechanism. Stable coins don't have what happens when something goes wrong mechanism. So are there solutions to these problems, and what do you think that path sort of looks like? Firstly,
Cuy Sheffield 42:22
I think when people talk about the cost of stable coins and the cost of moving money in stable coins, it's important to think about that holistically, where, if you look at the on chain transaction that today is clearly extremely low cost, trending towards zero of there are now many blockchains and layer twos that you can send value in a stable coin for less than a cent, and I assume like that's going to continue to get lower. But that's not the only cost that you have if you want to be able to use a stable coin for most payment flows, first, you need the infrastructure to do so. You need to manage your private keys and be able to do custody. And there's a high bar of if you mess that up, if you lose your private keys, the money is gone. So there's a cost. So you got to figure out, are you going to build it yourself? Are you going to work with a third party vendor? How are you going to manage the transaction initiation process? So that's one cost, right there. Then many of these flows, you're probably going to have to convert to fiat in some form. There will be an on and off ramp. So, yes, there'll be some payments that are stablecoin to stablecoin, but we think a lot of the existing economy that stablecoins will only really get to that next level if you have this cash equivalence and easy convertibility to fiat. Well, there's a cost there. Who are going to use? There's either FX or kind of, what's the process to be able to get a stablecoin Back off chain? Then you say, Okay, well, if you're interacting with the stable coin, what about fraud or illicit activity, and how are you screening addresses and what tools are using there? There's a cost, and so I think you have to look at this holistically. And I think there are many benefits that stable coins have. I think speed, no question. Just speed in terms of money movement, to be able to send someone a representation of money, and they can receive it and say, Okay, I now have that representation of money, even if you then have to go through steps to be able to offer up. There's no question that there's a value proposition around speed in moving money globally. So I think that's number one. I think that there's a value proposition in having more flexibility from a developer perspective, being able to build many things on top of stable coins, being able to leverage smart contracts, being able to bring a lot of payment infrastructure in house that you used to have to outsource to a bank that now you can control and configure and build the way that you want. I think that's a big value prop. So I think it's just a much more nuanced conversation around, what are the benefits that stable coins have, and what can you do with them uniquely versus what are the costs? And you can't just compare what's the blockchain costs, because in most real, mainstream payment scenarios, it's more than just that.
Daniel Lynch 44:53
Yeah, I think there's a philosophical, strategic question too. I totally agree with all that, right? Like you have to get your custody down. Own. You have to get the legal, regulatory questions down. But there's also like, the kind of buyer build, or, I guess in this case, it would be like mentor issue that you're gonna have to figure out, right? Do you trust one of these stable coin issuers, or do you want to issue what you want yourself? And it seems to me, at least over the past maybe four or five months, at least in one space, maybe a few spaces, at one level, I know about the gtbs. I don't know if they're going to use the existing stable coins, right? Stable coins, right? They're probably gonna tokenize deposits. But it seems there is a consensus amongst the, at least the PSPS, the Neo banks, whether you're directly serving a remitter or you're a payment service provider, that there is a level of maturity where they'll just call up circle be like, I want my access account. I can mint, burn these and let me integrate these, whereas, if you're another larger player, do you have to create your own whether you're tokenizing your deposits or issuing like a pyusd? And that is a tougher that's a question that's not just about capabilities and like the legal framework, but actually, I think, a deeply strategic question of the business. And I would understand why some folks would have a little bit of pause before making that decision.
Sy Taylor 45:58
These markets aren't particularly deep and liquid by contrast to what a global transaction bank and a globally significant financial institution is used to, what credit risk are you willing to take with who? And that's a fair question for D gens and defi. It's a very different answer than it is for one of the largest, globally significant financial institutions in the world. So that's fundamentally different when we talk about stable coins being quote unquote cheaper. The contrast that's often drawn as a category error, people are comparing the blockchain network fee versus like a swift message, like the email a swift message costs pennies. A visa authorization message costs pennies. A transaction on the layer two network cost pennies. Go figure like it's actually broadly equivalent, and the network isn't necessarily looking at fraud prevention, and it doesn't have a rule book, and it doesn't have all of those things that kind of come with that. So there is a category error, I think, going on, but there's also potentially the displacement of a lot of intermediaries and a lot of duplication in the workflow that's getting displaced, because if you think about it, everybody in the existing payments flow has to duplicate all of the checks. So if I'm in correspondent banking, or if I'm making a card transaction, and it's making more than one or two three hops between an issuer and an acquirer and a PSP and an issuer processor and so on, and that's going across borders, and there's different banks involved. All of those have their own checks to run, and then they're reliant on somebody else to run some checks, and then they have to make sure all of those records match, and that adds up in cost, whereas on a blockchain, we just point it and go, Look, there's the transaction, and the software can automate a lot of these workflows that were historically duplicated, and that removal of intermediaries workflows is not necessarily the removement of the function that intermediary plays in the economy. And I think that, again, is another category error that people have made consistently. So Kai, any closing thoughts before we finish off on this one? No,
Cuy Sheffield 48:01
I think you covered it. I think there are huge opportunities for stable coins, but there's still a lot of work to go. And I think that just the milestone of crossing 200 billion is a really big deal. But when you look at the 200,000,000,095% of the supply are two players, usdt and USDC. And as more and more large payment companies, financial institutions come into the space, and they look at the market structure, and they say, Okay, if this is 200 billion today, and if this has the potential to go to a trillion, if we all get involved in facilitating these flows, do we want it to be at 1,000,000,000,095% of the market are two players that came out of crypto. And I think that's the open question of there are going to need to be more stable coins that come online, that come in the market. You're going to see both fintechs creating their own. You're going to see banks creating their own. And then it's okay, well, anyone can issue a stable coin with the right regulated kind of license structure. How do you drive distribution of it? How do you manage a messy world of many different stable coins with different designs and different features? And so I think we're going to have a really interesting period over the next year as larger institutions enter, but they're not necessarily going to enter and just agree with the existing market structure and want to scale that to a trillion. They're going to want to figure out, how do we innovate and create a more competitive market of different products that might be more suited or have more economic upside for them, if they're going to be driving the adoption of it? All
Sy Taylor 49:31
right? Well, that calls us towards the end of the show before we move on. Though, I do want to make sure that Daniel people find out more about you, what you're doing at consensys, and how they can get in touch if they if they want to learn more. Great.
Daniel Lynch 49:44
Yeah. Daniel Lynch on LinkedIn, if you look me up, if you're I'm well connected enough, if you're into crypto, we probably have a few mutuals. I'll be the first suggestion on Twitter. Don't use it much, but I'm Daniel Josep, no h like the Catalan version underscore eth. Feel free to contact me about I work a lot. On the payments initiatives here at consensus and Metamask. So like the Metamask card, a lot of our ramp strategy, but I've also worked a little bit in our engagement with financial institutions using linear our network. So if you're one of those folks, you can also reach out to me. And yeah, again, thanks to everyone. Pleasure. Anthony, guys. Simon, always beautiful being here.
Sy Taylor 50:18
Anthony yourself. And ONERA.
Anthony Woolley 50:20
Yeah. Anthony Woolley, so I'm spending too much time on LinkedIn. How boring is that? So, yeah, easy to find me there. Onera.io, so we basically connect market participants to open up this world of tokenization. We connect sell side by side, World of crypto custodians, payment providers. So we're providing some of that glue, that orchestration layer that helps open up distribution and orchestration of tokenized transactions. Oh,
Daniel Lynch 50:50
and if I may, Simon, I'm so sorry I forgot to do a very important plug. If you're in the EU, Switzerland, UK, Brazil, Colombia or Mexico, if you go to portfolio.metamask.io/card, you can try out our debit card today. So I had to get that one in or I'll
Sy Taylor 51:06
get in trouble. Got to do it. Tai How
Cuy Sheffield 51:08
about you on x at Kai Sheffield and visa.com/crypto
Sy Taylor 51:12
you can find me on Twitter, because I still can't call it x at sy Taylor. You find me on LinkedIn as Simon Taylor as well. And of course, before you go, please, please hit that subscribe button to tokenized and tell other people to do hit that button and leave us a review as well. Like it legit helps. I know the end of every podcast they say this stuff, but like, it actually helps. So if you enjoyed this conversation, go on leave us a review. I dare you, I dare you to do it. Thank you guys, so much. We'll see you all soon.