On Ep. 96 of Tokenized, Simon Taylor, Head of Market Development @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Luca Prosperi, Co-Founder & CEO @ M0 and Ryan Bozarth, Co-founder & CEO @ Dakota to discuss Rain acquiring Ansa to put branded wallets on stablecoin rails, stablecoin linked cards, onchain credit and more!
On Ep. 96 of Tokenized, Simon Taylor, Head of Market Development @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Luca Prosperi, Co-Founder & CEO @ M0 and Ryan Bozarth, Co-founder & CEO @ Dakota to discuss Rain acquiring Ansa to put branded wallets on stablecoin rails, stablecoin linked cards, onchain credit 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
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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
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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 stablecoins and the institutional adoption of tokenized real-world assets. My name is Simon Taylor, head of Market Dev and Tepo, and author at FinTech Brain Food. And joining me as always, oh well, not as always, but occasionally is my co-host. Hi, Sheffield, head of crypto at Biza. How are you doing, man? Usually, we've had a few weeks in a row. It was a good streak. It's great to have you in the Bay Area. It's gonna be fun to hang out later. This could be a great show. We've got some amazing guests. We gotta jump into. Oh wow! Yeah, what a pair of guests we have here joining us this week, making a long-awaited debut, is the one and only Luca Prospera, co-founder and CEO of M Zero, and of course author of the Dirt Roads Substack. Possibly still, yeah, my favorite newsletter on the internet. Luca, how are you doing, sir?
Luca Prosperi 0:56
I'm great, Simon. Thanks for the kind words as usual.
Sy Taylor 0:59
Oh, always happy to help. And making a debut is Ryan Bozarth, who's the co-founder and CEO at Dakota, taking the world by storm, one podcast at a time. How are you doing, Ryan?
Ryan Bozarth 1:09
I'm great, thanks.
Sy Taylor 1:10
Thanks for being on the show. Before we do jump in at the stories, I've got to remind viewers that opinions of our contributors today are their own and might not reflect those companies they represent. And please never take anything we say is tax, legal, financial, or investment advice. Always do your own research. And with that, story number one is about Rain acquiring Answer to put branded stored value wallets on stablecoin rails. For those who don't know, Answer builds branded stored value closed loop payments, so that any merchant can have like a Starbucks style wallet. So think about your rewards in that wallet to buy things, and if you use the wallet, you get more loyalty. Answer founder and CEO Sophia Goldberg was previously senior at Adyen, and she also is the author of the Field Guide to Global Payments. Proper payments nerd. She joins Rain as head of payments, and of course, this follows Rain Series C in January at a 1.95 billion valuation. And Ansa has this really interesting arrangement with Mastercard that lets store balancers spend in store on merchants' existing terminals. Rain also acquired a company called UpTop, an on-chain rewards company, in November 2025. So now they have load, hold, earn, and spend rewards points. Kai, I'm I'm going to have to come to you first on this because I know you've spent a lot of time in the trenches on the loyalty side. Interested in your views on we've not seen a lot of stablecoin loyalty stuff. Are we are we starting to see that, or are we are we never going to get there?
Cuy Sheffield 2:44
I think we talked about this in in one of the predictions for the year at the beginning of the year. Of I've been really interested in in the potential of tokenized loyalty points and how you can reimagine some of the closed loop kind of merchant stored value use cases. We haven't really seen any of it scale yet, but I think there is still this interesting opportunity where today most loyalty point programs the points are issued on really siloed databases that don't really talk to each other. They're hard to convert back and forth, and you can imagine a world where a merchant can issue points that are on chain, and those points can then be liquid and be convertible with stablecoins, and then can effectively be spent anywhere on the equivalent of a stablecoin link card. And so, I love to see Rain moving in this direction. Of I think there's just a lot of opportunities to differentiate card programs with with next generation loyalty. And then, I think one of the reasons Rain has been successful is they've been payment nerds. We love that on the show. Of like, they they leaned into how do you merge these two systems together, and and I think having Sophia as the author of a payments book, like just getting more of this payments DNA inside the company seems like a smart move.
Sy Taylor 3:55
Ryan, bit of a payments nerd yourself. Your thoughts on this story?
Ryan Bozarth 3:58
Yeah, 100% idea of liquidity, and then also there's this concept of interoperability that comes with this that is really interesting. So for a long time, we've talked about examples where you walk into a stadium and maybe you get the ability to have you know $25 that you can put towards concessions, or that you can have a set of awards that are tied to things that are nearby you, and those are all very compelling on their own right. But I think what's interesting here is the ability to kind of build a network around these, where you take these points and you say, based on what you're doing for a certain demographic, you can start to either kind of prioritize a certain experience for a user to kind of work them down or through a channel, or you can say you can essentially trade or give back some of these points in favor of something else at another merchant, and so you start to build these really interesting systems and networks that are really grued in this idea of they have to be liquid and they have to be interoperable. And I think stablecoins as technology is very good at that.
Sy Taylor 4:53
Yeah, your target rewards are not exchangeable for Starbucks today, but smaller merchants in. Longer tail markets might be more possible. Luca, interested in your thoughts here, because my understanding is Rain is primarily winning in non-US markets, right, where people are doing stablecoin backed cards type of products, bit like you have with contribute to with MoneyGram and many other places. So, is loyalty something that can work in more of a hyperlocal context? Do you think and underdone?
Luca Prosperi 5:28
I mean, stepping back one second, I think that we always meant refer to stablecoins as programmable money. So it's value with features that you can program, right? And loyalty point is a money with features, and I think there are features that are specific to like a context ecosystem where they are used. So I think that the idea of tokenized loyalty points or branded version of money, branded stablecoins, the line there is blurred. I think it's a money with the liquidity and the store of value characteristics of money with additional features that are context specific, whether it's yield or whether it's additional rewards that incentivize certain behaviors or whether limitations in where you can spend it or not. This is a trend we will see. We're we're still wrapping old concept on new technology, but I think all these things will blur. And I've known the rain team for a long time, and the guys are awesome. I think that what I I believe I cannot talk for them because obviously I'm sure they are keeping their strategy pretty tight. But I would assume that they are trying to expand their platform to allow any corporate to do many many things on tokenized rails, right? Originally was stablecoin back credit cards launched very easily across the world, it has been a great product, a great money maker that has helped them scale. But I'm, I assume now their their ambitions are way are much wider than that in the stablecoin or tokenized money infrastructure space.
Cuy Sheffield 6:55
Yeah, Ryan, I'm curious how how you see the current state of stablecoin linked cards because it it feels like a few years ago there just weren't many of them out there and so launching a stablecoin link card and you know it started on the consumer side that was the product that was the value and if you had one you had demand and people were were using it now it's becoming like a table stakes feature that anyone building a stablecoin neobank needs a stablecoin link card, and then it feels like it's going from consumer to now you've got stablecoin based business neobanks. Like as there are more out there, what do you think is is going to be the driver of differentiation, and and how do you look at it at Dakota of features beyond just the core card and ability to spend?
Ryan Bozarth 7:41
Yeah, 100% I think whenever you have an early market, generally capabilities will like win the market. That like if it's a zero to one problem to say I have the ability to spend down on a single point back card, but as the market matures, we start to see those points of difference change quite a bit. And so right now, I think this story, among others that we see in the market, is really a story about like collapsing kind of the stored value stack, and so you start to see loyalty come into play. You see acceptance. You see programmable money. All these things become a layer on top of that core capability that make it more interesting, more differentiated. And so, you know, a class example of this might be the ability to have issuance or ability to earn rewards on that balance of that card. And so you start to see people start to put together either internally or with partners a kind of stack that allows them to collapse that stored value kind of moniker into something that is increasingly more straightforward, but has more points of difference at the same time.
Sy Taylor 8:33
Yeah, you either kind of got these giant stored value programs like Starbucks, or you had airline rewards cards, and it was only the global corporates that really had that capability and access and scale, probably to be worthwhile. There's there's a little piece of me that loves the democratizing the size of merchants. This goes to I think Anso was always a really nice business doing that, but it is hard to go merchant to merchant without a lot of distribution, and I wonder if Rain buys them a bit of distribution, and I also think it's fascinating how this changes what you do with the marketing budget. I was speaking to former CMO of like about five or six different Fortune 500 companies about a similar topic a few months ago, and she was like, "I stablecoin the cards, loyalty. This would be a far better way to use. Like immediately got this would be a far better way to use my marketing budget. Luca, interested in your views on the stablecoin linked card space as well. Same question Tai gave. How how are you thinking about that?
Luca Prosperi 9:33
Yeah, I mean I'm. I mean there are a few things I I cannot say. I sit on the board of Cast. Cast is one of the largest clients of Rain, I think one of the most successful stablecoin list linked neo bank with RedoPay and DollarApp, now Ark and a few others. I mean, it's first of all, I I absolutely agree with what Ryan has said. I think that we are we're just collapsing a lot of features now on a new stack. And you mentioned Earn, you mentioned loyalty. But I mean, why not credit, right? You know, I always, I've always been convinced that stablecoins are going to be the tool through which BMPL really becomes real. But I think, in general, it is a great acquisition tool for a specific market, and then you can expand the platform. I mean, I, as you know, Simon, like you, I lived in London for many years, and I was there when when Nick launched Revelo Card actually at the Google campus, and it was like an FX card for like expats and nomads that wanted to pay less fees, right? Like two years later, it was table stakes. anybody had it, even HSBC. But at that point, they were building something different. They were being building a platform that was around the needs of this new group of people, and I believe those platforms like are doing the same. I think that even Cass itself, like you know, many things have been public, like going into the business banking side as well, etc. Now I think the question will be for Rain to convince these guys to remain on their stack and not verticalize and go independent, because at some point, if you're getting large enough, then you obviously have the incentive to develop your own stack and connect directly with the credit card circuits. But, I mean, I'm a money nerd. I'm partially a payment nerd, so I'm really I'm not too much into the weeds of how much that would take.
Sy Taylor 11:15
Yeah, I think it'd be kind of challenging becoming a Visa principal member is no joke, Kai. I
Cuy Sheffield 11:20
was just say I I think there's just this fascinating design space of what's the future of Cobrand cards, and if you think about Cobrand cards right now, you have massive success stories with major merchants partnering with banks, but they tend to be on a very kind of local basis, and most of them are in the U.S. and there are a few other markets across the world that have successful, whether it's Amazon or United, airlines you know tend to make more money from their co-brand cards and loyalty programs than they do from flying the the planes, and so you kind of start to ask this question of what would global co-brands look like, and if you are a a global brand and you have customers all over the world, and your co-brand has has been a major revenue driver as well as a loyalty driver together. How can you use some of the new infrastructure and stablecoin rails to be able to scale and offer that co-brand to markets that you couldn't before? And I don't think we've seen that yet. But when you think about like what what's the next wave of stablecoin linked cards? Like, where does this go? You know, it's like one path is like Luca said, credit. Like, how does on-chain credit become combined with card rails? And I think there are a bunch of interesting early experiments happening there. And then the other is loyalty. And I think the co-brand direction. I think it's a matter of time before we see the the first large programs go down that path.
Ryan Bozarth 12:42
Yeah, I think to add to that, like I think it's a really interesting era that's ahead of us that allows us to take these things and start to think about users. We talk about personalization for a very long time, but that's been a pretty kind of binary set of things. You belong in cohort one or cohort two. I think when you have more programmable money and more efficient way of offering these things, more operability. You start to see a world in which you can offer a kind of type of user a set of like linked experiences that they might actually participate in them and actually enjoy. So, aside of having a relationship with a single brand or maybe a very small subset of brands, you start to have a network of these things that say these types of users tend to enjoy these attributes. They tend to enjoy going out to these places and visiting these things, and therefore, I can start to kind of build all the programs that traverse multiple brands in a way that kind of makes sense for everybody, because it settles instantaneously. The way that they can upload the points, and for the user, it's a far better experience. You're not stuck with you know endless cards in your wallet. You're kind of given something that is more personalized to you, or a group of people that kind of look like you.
Luca Prosperi 13:45
Yeah, and I think the the last thing I wanted to add on this because it's so interesting is that because we have seen a lot of experiments, even a couple of years since like the last few years, but it's very early. Is you can have like a plastic that is holding different version of co-branded money, right? For example, that you can use seamlessly, but I think we haven't seen anything. I we we carry. I think we haven't seen anything here yet, because the only market that this these products have have marketed into so far is the market of the emerging market of offshore dollar users. That is a market, and that market, as that there is a global user base with a global product, and you are building two products around this. As stablecoins or dollar-based stablecoins are coming on shores by the rails, we will start seeing a lot of those experiments. I mean, I've been, we have been advocating this at M Zero with with guys like MoonPay, with guys like Bridge for a long time, and I think we haven't seen anything yet. People have been obsessed themselves on the yield kickback, but the yield kickback is just a very small portion of it. I agree with Kai.
Sy Taylor 14:45
Yeah, the prepaid card space in the domestic U.S. market is very painful to deal with. You've got things like achievement laws and just a whole bunch of complexities there that make them not very profitable and quite expensive. But actually, issuing a virtual. Card to somebody that's got a stored value on it that has a bunch of loyalty features becomes almost a better alternative to the traditional prepaid card. It's a really simple product. You know the compliance burden on stored value is way different to say credit, but you're earning revenue from it on the interchange, and you're potentially getting kind of a new way to engage customers, taking what was marketing budget and turning it into revenue. So, really, really fascinating to see. I'm going to move us to the next story. This is Brazil finalizing a 24-hour delay on large crypto and stablecoin transfers to fight fraud. The rule came out from the central bank on the 7th of August, requiring virtual asset service providers to hold crypto and stablecoin transfers for up to 24 hours. The hold applies to anything above $10,000 in a single transfer or aggregate. The central bank says the hold is not a freeze. The funds can be released before that 24 hours once risk checks are complete, and VASPs must keep records of fraud incidents and attempted fraud. The central bank cited fraudsters using virtual assets and stablecoins to move stolen funds offshore or into self-hosted wallets faster than they can be recovered. Luca, I know you know Brazil inside out and backwards. I know there's been a lot of challenges with picks and criminality more broadly and scams. What do you think about this move from the the central bank of Brazil here? Yeah,
Luca Prosperi 16:26
this was. I mean, I'm not Brazilian, but part of my family is, and I spend quite a lot of time there. And I'm very close to some of the builders in the stablecoin space in Brazil, both like USD denominated and Brazilian RIS denominated. This they had seen this coming for a long time. I think fraud is just part of the reason. The main reason is, as usual, capital control. I mean, Brazil is not Argentina. Brazil is one of the largest economies in the world. They always had currency stability issues that is impacting their main export, which is commodities. They have now even more issues because they are running a budget deficit significantly over the last four or five years, and they they need to control money outflows. And they've been trying to do it with taxes, the IOF tax that has been increased, that they've been trying to increase for a few times, and since until now, stablecoins was a were a niche loophole for corporates and very large investors and family offices to move money in and out of the country, and obviously a country that is tightly controlling their currency base doesn't like that. So, yes, fraud might be part of the reason, but in my opinion, it's a capital control story, and we we will see more of those stories around the world when stablecoins are starting to have macroeconomic impact on treasuries.
Sy Taylor 17:40
Yeah, I recall in July the IMF warned the Central Bank of Brazil that cross-border stablecoin flows are growing faster than traditional capital, about two to 3x more sensitive to global economic shocks than conventional portfolio investment. I mean that wasn't subtle. I think Ryan, your thoughts on this one?
Ryan Bozarth 18:00
Yeah, I think very similar to what Luca said. I think you have a country like Brazil, which like aggressively has rolled out and used regulation to guarantee access things like PICs, and so they've kind of used and have not been afraid, I think, to lean into using regulation to require the largest banks, the FIs, to participate in programs like this. And so you see something like stablecoins come along, and it does feel like at least part of the story has to be around, aside from potentially fraud prevention, is that kind of rebuilding the ability to kind of have that regulatory perimeter, that stablecoins. To I think the point making here has made a little bit more porous, and so using mechanisms like this to do that, I think is something that it has to be taken with alongside the story, as a a way for them to enforce that that border they have.
Cuy Sheffield 18:45
Yeah, I think for for me, like like Lucas said, I I think we're going to see places where stablecoins have been a loophole and used at scale. They're not going to be a loophole anymore. Like I think it's just it's a matter of time that every government and regulator has to figure out how how do we deal with this and and it's just you can't be in a in a loophole forever, and so I think we're seeing a bunch of experimentation of regulators taking different approaches, trying to figure out what can they do to balance the clear demand and need that particularly I think businesses have in these markets with their objectives, whether it's capital controls and yeah the other things they're trying to accomplish. I think the thing that I wonder on this is this is targeted at it's a rule for VASPs, the kind of registered digital asset service providers, and if you make it really difficult or more difficult for VASPs to enable these flows. It feels like one side effect and outcome of that is people use more self-custodial wallets, and so the fact that stablecoins work in self-custodial wallets, there's always this kind of weird counterbalance of you can have a business that manages keys themselves. That has a self-custodial wallet, and they could send and receive payments in and out of Brazil to other self-custodial wallets. And it sounds like, based upon yeah the high level of this, that this is the plan is that it's the VASP that's enforcing this rule. And so I think you are always are going to have to balance this trade-off as a regulator. That arguably it's better for stablecoin flows to go through regulated entities that you have control over, that you can supervise, that you can enforce the rules that you want to enforce. But the more rules that you enforce, it then drives more demand for people to say, "Well, self-custodial experiences are getting better and better, and if I can make a cross-border payment to a supplier instantly, and yeah, they have a self custodial wallet, or even self custodial in Brazil to VASP outside of Brazil. Then, are you just going to inadvertently drive more people into being their own bank rather than using a service provider? But Luca, how do you think about that? Like, is is that the right trade off? And are you you think that's going to happen?
Luca Prosperi 21:01
I I agree because ultimately, if people don't want to keep money in a country, they will not keep money in the country. Period. I think that the the problem is the the issue should be that of fixing macroeconomic stability rather than rather than trying to block ways to get out of to get the money out of the country. I mean Brazil. I always struggle when people bundle Latin America as a whole. Like you know, Brazil is not Argentina, is not Venezuela. Brazil is a massive market. These are not flows of a parallel economy that doesn't want to get exposed to local economy. These are flows that are coming from domestic businesses to the outside. But I agree with you. I mean, I think that if you're trying to limit the regulated space, the money will flow through unregulated space, I this is a guess, so please do not quote me. But I would be surprised if 100% of the dollars that are originated in the Brazil to China soy market actually goes back to Brazil. I would be pretty actually not surprised if they stay out of the country, never come back into the country, right? I I totally agree with you, but I I think in general, the country in Brazil has been relatively short-sighted in trying to protect the perception of the market and the currency that their current budget deficit is sustainable. They are running a massive budget deficit. Still, their GDP, the debt over GDP ratio, is much lower than emerged economies, developed economies. So they have some some space to run, but at the end you need to fix the original problem. You need to convince businesses to keep money exposed to your currency and your sovereign debt. And if you're trying to limit the way they can get out, they will try ways that you cannot control. So I absolutely agree with you. I think that most of the businesses, the the on and off ramp, the orchestrators moved through VASP recently in Brazil because the regulatory burden was much smaller, and now they might well move through exchanges and non-custodial rails or through the network of brokers that is very developed in the country and non-custodial rails, and there is no way you could see that. I absolutely agree with
Sy Taylor 22:57
you. Yeah, it's difficult because you can't uninvent tether and you can't un-invent self-custodial. And we had this this long time where regulation is jurisdictional, and like one country sets its own regulations. Regulatory harmony doesn't really happen. I mean, the G20 and FATF and BIS and IS code-they try, but I mean, at best, you get something called functional equivalence. Which, if you look at Mica and you look at what Clarity was going to be, they they end up miles apart. Realistically, the only good examples I've seen where things have happened cross borders is probably the FX code. Luca, you're probably familiar with that, which was the initiative by the industry itself to set up a code of conduct for how foreign exchange flows would work, I believe it was following the LIBOR scandal, if my history is correct, and maybe that's more something you could do here. Is like, can you create a high water mark of behavior among self-sovereign wallets that is designed to be somewhat mindful to the the needs of local governments? But but yeah, I mean, you're fighting physics and fighting gravity if if you think currency controls are going to stop self custody wallets.
Luca Prosperi 24:08
Yeah, and and also like an interesting anecdote connected to this is, I mean, I've seen that Coinbase this week announced that they will start tokenizing assets from I think from the from the UAE from Abu Dhabi, and obviously there is a clear fine print that says that those products should not be purchased, are not going to be distributed in the U.S. market. Yes, of course, but the point is that you are using a jurisdiction that is a neutral jurisdiction to tokenize assets and launch them into the stratosphere, where it's very difficult to control the geographical boundaries. And then, I think Elon Musk has been master in dominating environments where regulation couldn't reach right before regulation got there right superchargers and space, and I think the the the blockchain and the noncustodial the noncustodial environment is kind of similar to space exists around the Earth, and everybody can access it, but no.
Sy Taylor 25:01
Yeah, and you can launch from anywhere. Exactly, that's kind of the the other problem. Ryan, any final thoughts on this one?
Ryan Bozarth 25:08
On the space piece, there's always like the analogy of things that hopper in space have to come down and land somewhere, and so you have this idea of like there's these like regulatory perimeters that sit at these like home like space stations, and those are the areas that end up being regulated, and depending on how you set those up, and where you set them up, and how the regulation unfolds, is kind of defines how we will watch the market unfolds. But then you're right; like once you get out of the atmosphere, you have a lot of things that are governed by more technology properties than anything else. They're you know fast, cheap, global,
Sy Taylor 25:37
and and how long can you stay up there? I think the next story speaks to that. But before we get to it, I'm going to have to just take a quick pause here while we hear from our sponsors. Stablecoin operations usually mean a wallet from one vendor and on-ramp from another, and then controls stitched together across all of them. Visa's stablecoin platform fixes this fundamentally. You can mint, move, and manage stablecoins across OpenUSD, and you remain your own custodian all in one single environment. Then stablecoin linked cards let you spend balances anywhere Visa is accepted. That's Visa, the global leader in payments and, of course, sponsor of this show. You can find out more at visa.com forward slash crypto. This episode is also brought to you by Bridge, a Stripe company. Businesses need easier global money movement. Bridge is the stablecoin orchestration platform that makes it simple to receive, store, issue, and spend using stablecoins. Companies like X, Shopify, and AirTM already use Bridge to lower their costs, simplify their global treasury operations, and expand their global reach. Learn how you can grow your business with instant global money movement using stablecoins at Bridgexyz. Tokenized is also sponsored by Fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses from Visa to WalPay to Bridge to Revolut, with over $100 billion in monthly stablecoin volume, Fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters, and banks to issue, move, hold, and manage stablecoins. It's all done securely at scale with secure built-in compliance. With Fireblocks, you get complete control to build your own stablecoin orchestration layer, create payment accounts, manage liquidity, and access on and off ramps in over 60 currencies. Makes it easier for you to build and scale and expand your business globally. Learn more at Fireblocks.com. Okay, thank you to our sponsors. And the next story is about Deal, the payroll company launching their stablecoin in 80 different markets and adding an earn product on Tempo. So the Deal wallet launched back in June, and they had early access to contractors in Argentina. They're now rolling it out to 80 different countries across Latin America, APAC, Middle East, and Africa. They use their own stablecoin DLUSD on Tempo to hold earnings in that stablecoin, and the Earn functionality. They've given us some statistics here, where 74% of payout recipients deposited into earn with an 85% 30-day retention rate of those deposits, and about 60% of eligible users are now actively earning. And it's kind of interesting. This product roots DLUSD into a morpho vault on Tempo, where borrowers post CBTC is collateral, and the vault is curated by Centaura. It's a real mix of things that happen under the hood here in these sorts of products. Ryan, I know you've probably done a lot helping people make payouts and payroll around the world, given you do infrastructure. Your your thoughts on this story?
Ryan Bozarth 29:39
Yeah, I think as part of this much larger trend we see around marketplaces and payroll companies that already have distribution, finding opportunities in ways in which they can improve their own kind of efficient payouts, global payments, things on those lines. But also, it's a for some of these companies a potential revenue driver. So we have the ability to kind of monetize a float. The card programs they can earn on interchange, and so you look at these companies, and when you talk to them, they're talking a lot about both the things they can do from the user experience and be able to speed up a global payout, for example, but also the ability to think of their users and increase the lifetime value of those users. So all of a sudden, you have you know one or two additional revenue lines for those users that are coming to you as a payroll provider, but now there is a float involved. Now there is an exchange, there is a interchange. All these things that allow you to then, if you increase your lifetime value, the thing is that you can increase your CAC. You can go get more distribution. You go grow your business. And so we see a lot of folks that are both optimizing for their own customer experience and their own payouts and distribution that already have, but because they already have the distribution, and this is a far more kind of efficient way of incorporating things like float and cards and have been in the past, it becomes a way for the business to actually grow its revenue as well.
Cuy Sheffield 30:54
It seems to me on this, there's a lot of demand for these earn features and for like this concept of vaults, which I still don't feel like is is very well understood in TradFi in terms of the just the term and the concept of offering a vault that someone deposits into. And I know crypto, we always just make up make up new terms to describe things that are similar to to what exists today. I think that the big question is how you scale the actual collateral forms in the ways that these vaults function over time, and it it feels like a lot of the the early iteration of what's behind these earn products and vault products, it's basically CBBTC. It's Coinbase's Bitcoin as collateral, and so it is this this interesting element of we know that consumers want to deposit payroll that they can immediately receive into some higher yielding account. It's not clear how much they know, care. You know, big question of like how the disclosures and and what the rules are around how these vaults function, but it doesn't feel like this is super scalable if it's all dependent upon Bitcoin or CBDC like versions of Bitcoin as the collateral for the vault, and so I think we need to have a lot more diversity of other forms of real world assets and and collateral that can then compose these vaults, both for them to be lower risk and I think easier to explain to consumers that it's it's not just dependent upon the Bitcoin ecosystem. So I'm excited about the vault product, but like I think we've got to figure out more forms of of collateral. And Luca, you know this stuff a million times better than I do. Like how do you think about that side of it?
Luca Prosperi 32:42
Yeah, yeah. I mean, I I spent some time writing on my dirt roads blog that I where I don't write so often anymore about lending markets and vaults. I think I I released a piece on vaults this week and one about the markets, which is like the the basic primitive underneath the vault, like a few months back. And disclaimer: I know and do business with a lot of the people involved, and I've known the Morpho team since the very beginning. I'm an indirect investor through a fund that I advise in the Morfo team, was like one of the best teams in DeFi. But I am very I am I'm not very relaxed when I see this phenomenon for a few reasons. I think first of all, even the super safe version, and we had I had open debate with the the some of the curators about this, which is ultimately providing a say like an over collateralized margin loan against CBTC. The risk reward is not there. If you look at the vaults that are Coinbase Bitcoin backed, so to say, they yield less than risk free. Now, I would pretty much to your point, Kai, that the the depositors maybe they haven't done the math. Is we can argue, but I'm pretty sure that if you could choose, are you gonna give money directly to the government for 3% or are you going to invest in a permissionless, overcollateralized BTC margin lending vault curated by an unknown entity for the same amount? What would you do, right? So I think obviously it's the the risk reward is not there, and I wrote I wrote about in my opinion even for blue chip products. I wrote about this the week before Ave blew up, and you know Ave was, I mean, didn't blow up. Let's say like some of the assets underneath Ave blew up, and it was like a massive hit for the protocol. And the people were exposed to that structured credit; they were still getting only risk-free. Then you're going back to your point about expanding the the asset pool, yes, I agree. But and two buts. The first one is you need very good primitives because otherwise you are giving a liquid repo against illiquid credit, and we know what happens when this this is done. You know when the the cycle turns, the margins is very slim. Everybody runs for the door, and the depositors get screwed. And the other one is, what is the regulatory perimeter around it? Because if you are a curator that is just doing parametrical checks about a protocol, is one thing. If you're a curator who's actually doing risk assessment of risk real worth asset credits and doing rebalancing of that, you are a fund manager, so you should be regulated as fund manager, and your product should be a fund. And I think that I really hope that Clarity or the SEC will just provide some provide some guidance about this because we have been here before. We got burned, and as a sector in crypto, we went back two three years because of Celsius, because of FTX, because of everything we know already, that I would actually not love to go back to. So I'm pretty surprised, actually, some of those very large fintech companies with massive distribution, they offer those products. But probably because they have done the math, they are comfortable that something happens that will make whole their depositors. To your point, that this stuff is probably not very scalable, but this is not the end state of this. And I really hope that we we reach a more mature state before the things become too big.
Sy Taylor 36:09
Yeah, I think it's definitely not the end state, and I do think a company of that size has done the the math on on this sort of stuff. They have to their their business is knowing local laws and local regulations in order to make payments out. And I've spoken to several other companies in the past week who love the product but want to understand what the curator does, and they want to understand where the collateral comes from. So there is good due diligence going on, and I think people are are wrestling with that. But Tai's overall point, I don't think the market understands what these products are in general. What I thought was an interesting development is that we're starting to see was it Bailey Gifford issuing directly themselves onto I think it was Ethereum some of their fund products and when you get that it's it's a little bit clearer that a fund manager has issued a fund product as a token, and you can probably start to think, well, I I know Bailey Gifford, and they've been around, and we can see their their track record. HSBC and the London Stock Exchange, I think HSBC issued Digit, which was a UK government gilt, so government debt. That is direct issuance that I think is is kind of coming, and you sort of know what that product is, and we are getting to a place where you know maybe the direct product itself wouldn't be holdable by a consumer, but a fintech might be able to get more access to that. So this is definitely not the end state. We've also seen some of these vaults have had some time in market, grunt, and and a bit of a bear market really in the last six months, so that you'd imagine that the the tests are are being done. None of that disqualifies anything you've said, Luca. I broadly agree with you, but I'm I'm sort of also crypto's disappointed dad. You know, sort of like it lets you down, but I'm always hopeful for its future. The the thing I did want to point out here, Ryan, there was these attach rates on a consumer product are off the charts, and sort of the demand for consumers to go from I can hold my stable coins to I can earn on them, and the ability of brands then to have something that they can go ahead and monetize really strikes me as something that if we can get the the due diligence right is going to be pretty special.
Ryan Bozarth 38:24
Yeah, and I think one of the pieces that we've kind of started to bring up here is, I think one of the ways in which we do that is you have more options available in the market. So it's obviously a very early market. I think when you have a very early market, you have a mismatch of like kind of demand and supply, and therefore you have you know these things like rates or different kind of like outputs of that, but as you think about being able to bring more assets that are being tokenized from more traditional funds, equities, etc. bonds, you start to allow the market to kind of find the right risk profile and find the right kind of risk trade-off because there is quite a bit of risk with smart contract risk, obviously, very alluded to here, but you allow that mechanism start to work, and so I do think one of the kind of like underlying functions here is that as you bring more of this available, more supply, you start to have a demand that starts to meet it. But right now, 100% I think when there is such limited supply, it becomes very easy for rates to become higher than what might the the typical like risk ratio, what's just?
Cuy Sheffield 39:22
Yeah, I think it's it's interesting to just take a step back and say stablecoins are being distributed to users all over the world, and so there are more and more wallets that people have access to that now a stablecoin is falling into, whether it's a payout or payroll, or and now what do they want to do with it? And I think a natural thing is okay. How do I earn yield on that? And one way is okay. Well, how does the market of revenue share, kind of yield share from the underlying issuer, work passing through to the distributor, and then can they pass it through to the end customer? And we'll see how things continue to evolve and play out. So that's like. Door one, door two is these vault earn products of someone has the the stablecoin. It's not the issuer that's paying yield, but it's you have a vault that they can choose to deposit into. You know that is then collateralized by some other asset that they're actually lending the stablecoin out itself. And then how does that market evolve? What are the rules and the disclosures? And it seems like one of the benefits of that is that it's today less regulated, and that you can do that globally in ways that you perhaps can't on the issuer passing yield back to end consumers. But then the third is you actually convert the stablecoin into a tokenized money market fund or a tokenized treasury, and so you're going from receiving and holding a stablecoin to actually holding government debt or or a fund that then pays yield. But traditionally, those funds, you know, they have to KYC or KYB, and it's harder to get access to them. And then you can't necessarily do 24/7 conversions between stablecoins to those funds, and so it's it's like to me those are like the three doors. If if we assume that every stablecoin wallet three to five years from now there will be some yield option, like it's it's hard to imagine that there's just not going to be any way that anybody can earn yield, and then you're like, okay, well, of those three, which is going to be the most effective per use case per type of client, like is is that the right framework, or am I missing any other options of like how people can get yield once they have these wells?
Luca Prosperi 41:32
Yeah, I I I I want to try to give an answer given that it was the most bearish. First of all, I'm a DeFi fanatic. You know, I gave my life to DeFi a while back, so obviously I always try to criticize to get better. That's the spirit, and I know some of the teams involved here, and they're very, very high quality teams. But I think the point is exactly as you said, Kaira. I always believe that stable coins in the stablecoin sandwich, this transient nature of money, where you go from fiat to stable to fiat is a bit like the era of scanners and printers and digital photography. I think that more and more we go forward, we were gonna stay digital on digital, so people will have digital money and they will need to do something with digital money natively, whether it's spending, swiping your card, or investing, or storing value, or purchasing other things, I I 100% agree. But a question is going to be, I think, what type of primitives will need to evolve in order to satisfy each use case, and how regulation evolves in order to protect the consumer not to get exposed to things they do not understand. And I think in those two situations, we're still behind because I think we are using primitives to do things that, like lending markets, are great for digital commodities like Bitcoin and ETH. They are great for loopers that are specialized investment firms that are using it for hyper leverage. They're probably not great for 70% in the market where you need different primitives or you need evolved vaults and the teams like Morph are also working on that, but I think this yellowing into vaults now is mainly due to regulatory arbitrage, and you see some of those vaults actually are heavily incentivized by the platform, and the platform is making money on the other side on the float because they cannot share the float. So, I think that going back to the point of regulation you were making about Brazil, I think that regulation needs to get smarter, so they can truly protect the user instead of channeling risk appetite through different pipes that they cannot control. I I think this is part of the evolution. We will see permission vaults. We will see regulated vaults. We will see like natively issued investment products that can be acquired by everyone. We can see commodities that are levered. We will see a bit of everything, but nothing is panacea-not even a vault. Like it's the vaults today are much better than the vaults three years ago, and the vaults in three years is gonna be are gonna be much better as well. But we need to be careful when we connect the consumer, especially the unsophisticated consumer, especially when incentivized behind a brand that is highly trusted, that's the only thing I'm saying.
Sy Taylor 44:03
Makes a lot of sense.
Ryan Bozarth 44:04
Yeah, and I think one thing to add is like the amount of complexity when you get to the vaults is quite different than the other two options we're talking about. Talk about stablecoins and even tokenized government bonds and T-bills, things like that. The liquidity, all those pieces are much more more straightforward. You know, Genius does a great job of saying like, here is the kind of duration that you're allowed, and so we think about cash. You think about tokenized T bills. You have a set of constraints that are quite straightforward. Once you kind of get to that third bucket and you start to talk about things that are now going to be like a little more risk on, a little more kind of like risk management. There's some really big questions around liquidity, like we're bringing up. There's questions around discretion, who's making decisions, things like that. And I think I don't want to underestimate that kind of like step level change and complexity that comes with it. I think that's made a piece that it's worth keeping an eye on, is making sure that like as we go through that process as an industry, that we are keeping an eye and be able to kind of understand these pieces, communicate. Get these pieces, and of course, adapt as you know regular frameworks come in place.
Sy Taylor 45:04
Yeah, I think there's a handful of companies in the world really engaging to try and do that. But the risk is that people follow and fools rush in, doing this slowly, gradually, and rolling it out, and sort of really engaging with the local regulation is going to be key. And to the point Luca made, I don't know that local regulators in a lot of markets have really got their head around this yet, either. So they don't know to to regulate and there's kind of historical standing rules. One last story this week is Nasdaq are acquiring level markets. They're the third largest alternative trading system in the United States with 2500 institutional clients, and this is part of their push to be 24/7 for always on market. They're also establishing something called the digital liquidity networks, which is aimed to bring together the company's expertise in digital assets and market modernization kind of in one place, which I found really really interesting.
Luca Prosperi 46:00
So they're seeing this as part of the broader transformation of the architecture of capital markets themselves, and sort of assembling a whole stack here. Luca, I know you're our resident capital markets guy today. Do you see the push from 24/7 coming in, and and this convergence thing that Nasdaq seems to be building towards as as kind of an inevitable path, or you know, they're going to be speed bumps along the way. And what do you think the benefits are to Nasdaq to acquiring this ATS? Yeah, I mean, I think both. Like, I think it's inevitable, and there will be speed bumps. I I think there will be attempts to just to control the evolution and just control the settlement layer, which might not be possible, but I mean, I'm not surprised. We we we have seen ICE moving into the market aggressively with the investment in Poly Market, which is a retail-oriented, 24/7 agnostic market. We have seen Canton emerging, and people might criticize the fact that Canton is a blockchain, is not a blockchain, is transparent or not. But I think there is clear desire from the institutions to actually enter a world of global 24/7 settlement among themselves, and I think like the smart guys in the capital market stack are realizing that they need to get smarter, otherwise they will be disintermediated. I think the blockchains are clearly sending the signal that the settlement layer is going to be new. So if you cannot control the settlement layer because settlement layer is a blockchain, whether it's Ethereum or Tempo for payments or or or another side chains, then you need to ask yourself actually what type of value you're creating given that you get this settlement layer almost for free, and you know liquidity provision, compliance, market matching, and the creation of new primitives. It is, in my opinion, going to be the battlefield. So we will see more markets actually be ready to come direct with issuance that doesn't depend on the legacy rails. And legacy companies need to ask themselves what they're going to do in this space, right? Because they are not going to be the monopoly monopoly holders of settlement. Let's see what the risk appetite is actually going to be to operate in open networks, because we have seen attempts to go back to like permission closed networks, which ultimately are glorified databases. That we can opine how decentralized is a network. I think that early day crypto people were a bit more obsessed about it. I agree with with people in that are more pragmatic that for certain use cases, like for example, fast payments, you don't need aggressive decentralization in the same way you need it for Bitcoin of the network. But the settlement layer needs to be open. So I'm very curious how these companies will evolve in the next five to 10 years in this new paradigm.
Sy Taylor 48:39
Yeah, Kai, we've seen a lot of from the DTCC trying to bring things onto public chains, but slowly, slowly, gradually, gradually, this stuff's kind of rolling out. Your thoughts on this story?
Cuy Sheffield 48:50
I'm just trying to learn. Like, I I think that there's it's fascinating to me that the whole blockchain ecosystem and and just the the innovation that's happening could end up having bigger impacts in capital markets than just in payments, and so like I'm I'm a payment stern. I spend my time thinking about payments, but there are just these intersections between payments and capital markets that you kind of have to try and understand. You know what's going on on the other side, and and I think we're seeing for the for the first time that there's just more collaboration and sharing and discussion between capital markets people and payments people. And traditionally, like you might have the the same institution, you might have a bank. They've got an asset management arm and team. They've got a payments team, but they don't really talk to each other that much. You know, they run on on different infrastructure. Like at Visa, we we don't really engage with the asset management side. We're starting to get a bunch of questions from the asset management folks at banks that are trying to figure out how to think about custody infrastructure and how to use stablecoins for settlement. And so I think these these worlds are starting to come together, and and I'm most excited about. The intersection in the context of of B 2b payments, and I continue to believe that working capital should be significantly reduced for most businesses across the world over the next five years. And it feels like if you give a business an option of do you want to hold a deposit in their local bank that's not going to pay much interest, or do you want to hold government debt, paying the risk-free rate with lower counterparty risk? They would rather hold the government debt, but the issue is always: well, it's not liquid enough, and if payments come up, they have to keep cash on hand inside of a bank, and depending upon the business, they might have to keep a lot of cash on hand so that they can make those payments. And so, I think they're going to be really interesting next gen B 2b payment solutions that basically help businesses be able to optimize their treasuries to earn the maximum amount of yield on safe government, whether it's tokenized treasuries directly at the DTCC, whether it's money market funds, but then the moment that you have to make a payment, be able to swap out of that and be able to make a stablecoin payment. So that's one of the things I'm most excited to see. That I think to happen requires innovation all across the stack between capital markets and payments, and and I just like to see the the two sides talking to each other more.
Sy Taylor 51:25
Ryan, if you had any conversations with folks either in the corporate treasury space, and and I know B 2b was kind of where you guys got started as well.
Ryan Bozarth 51:32
Yeah, 100% And so I think one thing that we see, if we take a step back, even from this story, we look at you know it wasn't that long ago that even the kind of like payments and custody side of the house wasn't really obvious that that was going to be kind of a replatforming of money, and I think these days it is a foretold conclusion, and it feels like capital markets are kind of going through that in real time. That maybe over the last kind of 12 months and kind of approaching forward here, it looks like capital markets are kind of starting to kind of re-platform in a lot of ways, and you see that these two things have the ability to reinforce one another. And so, one thing, as we sort of look up at, to say we have these new regulated forms in which you can have access, you know, broader liquidity networks, things along those lines. But they're going to settle into, you know, most likely things like stablecoins. You start to see a world in which these things really start to work well together. That the liquidity from one side can help feed into the other and create more interesting use cases, and then when it comes to things like treasuries and be able to kind of an individual and businesses really start to take advantage of that, you see a world where there is these treasuries that have global kind of impact in the sense that there are entities all around the world that for a single corporation that can now manage that treasury and be able to earn liquidity and earn rewards and interest in different ways, whether it's access to T-bills outside of the United States or it's access to reward mechanisms like we were talking about earlier, and be able to get quite a bit more sophisticated with that treasury. And you see where things like potentially in the future agents can start to inform and add some reasoning to some of those decisions as well, and it gets very interesting very quickly.
Sy Taylor 53:10
Yeah, that 24/7 money movement plus AI's ability to not sleep is is kind of fascinating to watch, and 24/7 is becoming the default. It's becoming the norm. It's becoming the expectation, and if you can't do that, then and you're on Wall Street and you're an FMI or you're a large asset manager, your clients are looking at hyperliquid and they're looking at geopolitical volatility over a weekend, going help me sell. Like you need to do this now, and so whenever bankers and capital markets guys hear client demand. I think they rationally respond to that, and I think that's what we're seeing is quite a rational response, as well as some increased regulatory clarity. Few stories we didn't have time to cover this week. Goldman Sachs has acquired a company called Neos to gain Bitcoin and Ethereum income ETFs. The value is said to be up to 2.2 5 billion in the underlying assets, the SEC has cleared Franklin Templeton funds to use the on-chain Benji system for cash management. Really interesting for followers of the 40 Act fund. What's gone on there and how that's been allowed. And the UK's FCA is exploring tokenizing gold as collateral for wholesale markets, which if sovereign debt starts to look a bit risky, then why not? And of course, London is very central to the global gold markets. That is all we've had time for this week. I want to thank everybody for watching and listening. And Luca, I want to thank you for making a debut and for writing dirt roads and just being yourself. If people want to learn more about M Zero, where do they go to do that?
Luca Prosperi 54:45
They can find me and the company on Ax. I think at Luca Prosperity is my handle, and at M Zero is M Zeros or M zero.org on the web.
Ryan Bozarth 54:54
And Ryan, if people need help with stablecoin infrastructure, where do they go for Dakota and yourself? You can find me on x at Ryan Bozarth and the company Decota XYZ.
Sy Taylor 55:06
I'm in Kai
Cuy Sheffield 55:08
on X at Kai Sheffield visa.com/crypto,
Sy Taylor 55:10
and you'll find me at sy Taylor on all the socials, screaming into the void@fintechbrainfood.com, and of course at tempo dot xyz. And you'll find a lot more of this show if you subscribe. Simple as that, really. And leave us a review. I think this conversation depth and intellectual honesty absolutely wanted to review. So go ahead and do that now, and we'll catch you next time.