Tokenized Podcast LIVE in London 💂 Get your FREE ticket here: https://lu.ma/6ryjfi41 On Ep. 41 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Kean Gilbert, Head of Institutional Relations @ Lido and Atikh Bana, Co-Founder & CEO @ Acctual to discuss regulatory clarity, its impact on stablecoin innovation and more!
Tokenized Podcast LIVE in London 💂 Get your FREE ticket here: https://lu.ma/6ryjfi41
On Ep. 41 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Kean Gilbert, Head of Institutional Relations @ Lido and Atikh Bana, Co-Founder & CEO @ Acctual to discuss regulatory clarity, its impact on stablecoin innovation and more!
Timestamps:
This episode is brought to you 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.
This podcast is also presented by BVNK.
BVNK is the leading provider of stablecoin payments infrastructure—helping businesses move money faster, settle globally, and even launch their own stablecoin products. Head to BVNK.com to learn more!
This podcast is also supported by Canton Network.
The groundbreaking Layer 1 public chain where traditional finance and crypto are converging. Visit canton.network to learn more.
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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!
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Music by Henry McLean
Sy Taylor  00:09
Simon, welcome to tokenized. The show focused on stable coins and the institutional adoption of real world assets. My name is Simon Taylor. I am your host for today, author at FinTech, brain food and head of strategy over at sardine, and I'm back in the host seat once again, joining me as often is my fantastic co host, sometimes occasional just OG host, crushing it lately on the hosting. Kai Sheffield, how you doing? My friend?
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Cuy Sheffield  00:38
I am fantastic. We're we're cranking out content these days, but it's been in parallel. So good to good to be back together.
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Sy Taylor  00:46
Lot to do, and happy one year anniversary to tokenized as well. We made it. Man, we've one year of this show being alive. Thank you for being my partner on this
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Cuy Sheffield  00:54
buddy. It's been fun. I've, I've learned a lot, and to many years to go,
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Sy Taylor  00:59
heck yeah, we're just getting started. Well. Before I introduce our incredible guests, I do want to let everybody know that we're doing our first ever live tokenized event. It's going to be in London on the 11th of September. So if you want to attend, tickets are completely free, thanks to our sponsors. Appreciate you guys. So click the link in the description of wherever you're consuming this, whether it's podcast or on YouTube, so you can register if you are in London, and if you're not, maybe there'll be a tokenized live coming to you soon. All right, awesome. Let's introduce our first guest. Kean Gilbert is head of institutional relations over Lido. How you doing? Keen, good son. Thanks so much for hosting. Thank you so much for being with us. Very excited to have your perspectives on some of the news this week. And then a teak Barna, who is co founder of CEO and actual, Wait, that doesn't make any sense. Co Founder and CEO of actual How you
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Speaker 1 Â 02:05
doing? We get it. I'm doing well, great to be here with you guys.
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Sy Taylor  02:09
Thank you so much. Okay, before we get into the show as well, just got to remind everybody that
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Sy Taylor  02:21
this was a weird set of show notes. Sorry, guys, the ads in the wrong place before we get into the show of course, I have to remind everybody that views and opinions are those of contributors and not necessarily those of companies they represent. Please, please, do your own research. Do not treat anything we say is taxed, legal, financial advice, sports advice, or anything else. Do your own research. Folks. Okay, the first story there could be only one, the genius act is now law in the United States, having passed through the house and been signed by the President on July 18, making it the first major federal law in crypto history, and the first major financial services law, perhaps since Dodd Frank in 2010 The House passed the bill with a 308 to 122, majority with a lot of bipartisan support. Kai, this feels like the thing that was coming, coming, coming for a long time. We said everybody needed a stable COIN strategy. But here it is, what are your reactions? What are you hearing and seeing?
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Cuy Sheffield  03:37
And first, I'm, I'm proud of the industry, and, grateful to everyone who worked really hard to get this done, and it happened much sooner than I initially expected. If you would have told me a year ago when we started the show, we'd be talking a year later, and stable coins would have a framework signed into law. That's probably the best outcome that anyone in the industry could have possibly expected. There wasn't really a timeline where it would have happened any faster. And I think it's just, it's an amazing story that I just can't find that many historical precedents of a new financial technology that was created in this incredibly bottoms up, way coming out of the corner of this weird crypto ecosystem that over six, 810, years, depending on how you count, it has become legitimized as a major innovation that can now be adopted and used across the financial system to make Money move better across the world, like that's pretty cool. And so now it feels like we're at day one of there are no excuses. You've got the framework in place. It's about the best that anyone in the industry could ask for. Now it's time to build and now it's just time to put your head down and execute. And I think that's the sentiment. That we're hearing and seeing every day is you don't have to spend time. Most of the conversation on stablecoins is about the regulatory environment. Now that's not the conversation anymore. Now it's like, what can you build? How do you build it, and how do you bring it to market with your customers? So I think it's, it's an exciting next phase that we're just entering
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Sy Taylor  05:18
into. We've moved from, No, that'll never happen. No, you can't do it. No, we shouldn't do it. To arguing about the regulation, to arguing how you do it. Well. And Atik, I'm interested in your perspective. I know what you do actual you use stable coins quite closely. Could you give me a sense of your reactions to this news and how it supports a business like yours? Yeah,
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Speaker 2 Â 05:39
for sure. I mean, it's definitely that sort of confidence boost that I think businesses, corporates and finance teams, you know, really need to sort of feel like they can use this thing. I think second to that, we're just going to see a lot more kind of opportunity for us to integrate against other kind of banking rails. And, you know, providers that maybe once weren't even offering this, right? I mean, for a really long time, he would talk with infrastructure teams and say, Hey, can we work with you guys? And like, we saw stable coins on your website, you can't, you know. And so I think that that shift is going to be really, really massive in a lot of senses. And so, and that's something that we're really excited about. But I think at the same time, you know, Kai mentioned that, you know, this is a moment to build, but I think it still will be really, really slow. And I think that it gives the opportunity for a lot of the teams that we're building in this world for a long time, from sort of an infrastructure perspective, an application perspective, a lot of opportunity to just continue to, you know, move with speed. And I think that that also will lead to a lot of M and A a lot more partnerships, a lot more of these, like PNC, Coinbase, you know, press releases are going to continue to happen, but let's not get like to like, I don't know, defeated, or feel like that's keeping us, you know, irrelevant in any way, but that this is just going to be a natural, uh, progression in a lot of ways for everyone, as opposed to just this being a big win only for the big PSPs and FIS. That's
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Sy Taylor  06:57
a great point. It's not just for the big guys. Keen, what are your thoughts?
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Speaker 3 Â 07:01
One of my thoughts, I would say, probably the key takeaway is, like, stable coins have become mainstream. Like, that's just the ultimate kind of result of what's happened with the genius act. And I think it's probably done that from two different sides of the market. Like, obviously, if you take from an issuer's perspective, let's just say circle is the issuer, and they now have regulatory clarity. They know the rules of the game. And from their point of view, they know what they can and can't do, which is terrific. So from a roadmap perspective, from an innovation perspective, they now know what they can execute on. And then on the other side of that, which has kind of lacked in the past, there's obviously consumer protection. So with all these two or I suppose, these two elements now at play, and the boxes have been ticked like it's instantly going to increase adoption for everyone, and that's obviously going to be at the retail level, and then at the institutional level as well. You're going to see a significant amount of adoption. I think that's kind of been proven by what's happened in the markets right now, Bitcoin, Eth and others.
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Cuy Sheffield  07:58
It's interesting that in in a way, I feel like I I agree that it's, it's become a mainstream concept. And when you have, you know, this legislation, and it's, you know, in the news every day, but it's still not a mainstream product yet. And the end customer base, particularly in the in the United States, most consumers. It seems, actually, it's, it's kind of odd to have all of this energy and activity and discussion around stable coins and a bill going through Congress. But if you walk out in the street and you ask a random person you know, have you? Have you used a stable coin before? I would bet most people, particularly in the US, would say no. And so that's this exciting opportunity that, like the foundation, the platform now has everything that it needs to go mainstream. Now, one of the big questions is mainstream for what and where? Like, what are the use cases and where does it matter? It might not be for people buying their coffee in the United States. It might be for B to B payments in emerging markets. And so I think people are still trying to figure out and unpack now that you've got the mainstream legitimacy of the underlying platform and the technology, where does the mainstream adoption of the actual applications and the use cases come from? And and it takes like, it feels like you're very close to, you know, some of where we've seen the early adoption. Can you talk a bit more about what you're seeing from a geographic market standpoint. And even though this is a US Bill, what does it mean for a business in Latin America in terms of their willingness to adopt it? How much are they watching and following? Do they even care? Were they just using it before? Anyway?
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Speaker 2 Â 09:34
Yeah, yeah, for sure. And I think one of the most exciting examples of stable coins being used as sort of the stable coin sandwich, where both sides are still kind of operating with their local currencies, but we leverage stable coins that intermediary to make that payment happen faster, cheaper, et cetera. But it's funny is that when you talk to businesses about maybe doing this, or okay, how is that going to happen? How am I actually going to get paid quicker? There's that hesitancy again, or like, oh, okay, you're using stable coins. I'm not sure if that feels legal, or if my bank is going to be okay with that, where the money's coming from, so on and so forth. And so I think that that narrative kind of understanding, or a little bit of that kind of perception or marketing of the stable coin is certainly going to evolve now, but with regards to sort of the beneficiaries of the technology and who we starting to see kind of leverage this. I mean, one of the examples we love is sort of imagine business in the US. You know, let's say they're exporting to a place like Nigeria, Argentina or Brazil. Very hard typically, to kind of do that on traditional rails. But imagine now that stable coins could either be used as a way to do that pay in or leverage them as that intermediary. That's going to be a massive unlock, which now means that the business can feel a lot more borderless. They can get paid a lot quicker. Maybe it can unlock revenue in places that maybe they've avoided for a really long time. So that's the use case that we also hear of a lot, where it's like, we just kind of don't, you know, work in that area, or we'll just kind of focus on specific other revenue streams or whatever, but now we can open up something that maybe we once weren't maybe as focused on, which we believe is a really, really unique opportunity for maybe a US business, but then also, more broadly, anyone and anyone being able to transact with businesses in any other place,
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Sy Taylor  11:15
import, export is a surprisingly big part of the market, and people forget that We do trade with the rest of the world. And you know, Jack Zhang airwallex will make some great points about how a global remittance business like airwallex has probably got a great FX rate and has done some very sophisticated Treasury things to where stable coins are of marginal benefit to his business in most of the cases, most of the time, but a smaller importer, exporter is nowhere near as a sophisticated Treasury as a global remittance business. So for them, something that's offered that looks like an invoicing tool for cross border, like what you guys do is just an easy button for getting paid, and I think that's what customers want, is what's my easy button where it doesn't feel like anything's happening. So Keith keen, are you on with the hide the wires for the mainstream kind of thesis, that it won't look like a stable coin, or do you think that we need to still have letters at the end of a currency in order to know what we're dealing with?
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Speaker 3 Â 12:21
Yeah, I think for me, it's like any technology, like people are the vast majority of people really don't know how the internet works. They just want a nice UI, they want an app, and they want convenience, like they really don't know what happens behind the scenes. And again, if you look at traditional payments today, if, if I want to send money from the UK to the US, it probably has to go through two or three different banks before it gets there. Gets there, and people don't know that. They obviously know there's a high cost associated with doing that. But ultimately, the technology behind the scenes should just power and execute the way the individual or the company wants. So again, kind of back to your point around like convenience and ease, that should be the key selling point for most.
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Sy Taylor  13:00
I'm interested, Kai, in your perspective from financial institutions. I saw the news this week, as he briefly mentioned it, that that PNC have partnered with Coinbase for a buy, sell, hold wallet, and this is the sixth largest financial institution in the United States, doing something really fairly major. Do you think that that psychology shift is almost bigger than the use case shift in the short term, and are you seeing it in your conversations with clients, customers and partners?
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Cuy Sheffield  13:34
Yeah, so I think on the PNC announcements, it's definitely a big deal. I think the interesting question there that wasn't super clear to me, just from the headlines, is there's one part of it, and it felt like the main crux of the announcement was around integrating crypto assets as the ability to trade, buy, sell, hold, Bitcoin, using Coinbase as infrastructure for that. In the tweet about it, Brian Armstrong also mentioned USDC, but I didn't see PNC talk about sending or receiving USDC as part of the product. And so I think that there's going to be this interesting question of, will banks say we want to integrate crypto and stable coins, and we want to go to a single provider who can give us access to crypto assets, and then if we're getting access to crypto assets, USDC is just kind of another crypto asset. It runs on the same infrastructure, although it has different use cases. And then we'll leverage those wallets to do send and receive or to do remittances. Or will we see banks say, okay, I get that. Crypto assets are still around. They still have less regulatory clarity to some extent than what stable coins have today, at least most of them. I'm less interested in the crypto asset side of it. I'm really more interested in the stable coin side of it. And so how do I figure out how to integrate stable coins, build stable coins into my product, and then which are the use cases that matter? And as a US Bank, I still continue to believe that there isn't really a single. A US Bank today that has any incentive to offer a wallet to let customers hold a stable coin, like USDC, they would prefer if you're holding money with them, that you're holding their deposit and they're able to operate their business and lend based off that. So I could see a number of integrations where banks are enabling deposits and withdrawals, treating stable coins like digital cash the same way you could go to an ATM, deposit physical cash or withdraw physical cash, but they're not offering you promoting a safe deposit box to bring stacks of $100 bills in to just hold on your behalf. So I think it'll be really interesting to see the differences between the approaches that banks take in the United States versus the approaches that banks take outside the US. How much of it is intertwined with a crypto strategy around trading, versus how much is it is separated where there's a stable coin payment strategy that's distinct uses different infrastructure, different providers, than what they're trying to do with with crypto
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Sy Taylor  15:58
trading. Yeah. Is it more the stable coin sandwich is the mainstream thing. The buy, sell, hold is, is the kind of the retail thing. Keen, I'm interested in your perspective on the kind of the parallel financial system for consumers. You know, the base app, Coinbase they now have, I believe, Morpho, who they're working with for defi back loans. And I think that sort of defi space becomes a little bit more mainstream, especially if we get the clarity act in the not too distant future. Is that something where we see competitors to financial institutions, competitors to FinTech starting to go in the in the in the future? Do you think that's realistic, or is that going to be a little ways off?
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Speaker 3 Â 16:39
I think the competition is probably a little bit of a way off, just in terms of size, like traditional markets versus defi, like traditional markets are far larger in terms of the depth of liquidity they have, and just the overall kind of AUM, I think you kind of have to ask yourself, like, what is going to be the gateway, or what's the opportunity for traditional institutions to dip their toe in the water? And I think that's probably more likely the case of traditional institutions will dip their toe in the water with defi from the very beginning, whether it's like permission defi, like products previously with Ave arc, like I kind of see it going down more of that line, to be honest, where traditional institutions will dip their toe in the water. Or you could go from the other side, where defi might start moving closer to traditional markets. But again, I think that will all come into play with regulation and what consumer protection would look like.
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Sy Taylor  17:28
It's going to be unbelievably fascinating to watch. There's a there's a Linked Story here that I want to kind of cover off whilst we're on stable coins, which was the CEO of Western Union was on Bloomberg saying stable coins are an opportunity, not a threat to their business, and he outlined a plan in this interview where they're going to use stable coins for more instant settlement. My guess is a stable coin sandwich, although he didn't disclose how they're going to use their distribution of 500,000 locations to build crypto on and off ramps, which I thought was fascinating, and then going to launch stable coin wallets and make that available to the 100 and 50 million users. And it really feels like the mood music has shifted. What what I'm interested in Atik and keen is your views on is like, how much is this earning season? CEOs being asked about stable coins because the share price of circle exploded, and everybody wants to talk about it. And how much of this is real, long term thinking from incumbents trying to move into this space? Maybe, maybe your perspective and your read? Yeah,
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Speaker 2 Â 18:41
for sure. I think fundamentally, what they're seeing is that there's a playbook here that that's working, sort of an AUM perspective, the yield perspective they can earn, partnering with, you know, issue, or, like, like, a circle, and really just seeing that, you know, maybe this is where things are shifting, and there's a real threat to their business in a lot of ways. And how can we continue to operate within this closed system that is Western Union to Western Union payments, but in a way that still kind of lets us rebrand our moat at some sense. And just think about how we as a legacy player, with all this distribution and deep kind of liquidity and network, you know, don't necessarily fade away, but can plug into what's happening. And so, I mean, it makes a lot of sense. And I think that they are very wise to start to sort of have more of these public opinions about this, and hopefully we start to see some of these implications play out sooner rather than later. It kind of reminded me a little bit of what, you know, MoneyGram is kind of doing with stellar so really curious to see if we can start to think of, you know, this exploration of of where Western Union is going, especially with regards to an on and off ramp like on and off ramp. Like, can we start to see them as infrastructure as well, like a yellow card or a tunes, or is this just going to be, you know, how do we make Western Union remain relevant and stay this close thing?
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Sy Taylor  19:53
Keen? Your thoughts?
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Speaker 3 Â 19:55
Yeah, like, I think Western Union as a company has been around, probably close to 200 Years. So they do have kind of an ability to adapt and survive. And I think stable coins is probably that next iteration for them. Like, it is quite hard as a business, like, convincing yourself to like, Okay, do we cannibalize our business? Or Should someone else do it? And I think it's probably quite forward looking by the CEO to say, look, stable coins are here to say, and we should adapt. Do? I think it's probably the most exciting thing in the world, TBC. And I would be much more interested if they were to kind of add maybe a treasury element to say, like use ether, maybe under a crypto that would probably show a little bit more commitment on my side. But, and to be that forward looking is quite impressive.
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Cuy Sheffield  20:39
Yeah. I think, I think there are two material ways that I could see stable coins having upside for remittance companies like Western Union MoneyGram and others. And the first is just making them a lot more capital efficient in terms of reducing the need to pre fund, whether it's payment partners that they're using that they have to lock up capital. They have to forecast how much volume they're going to do to then be able to initiate transactions. If we move to a world where most payment networks end up accepting stable coins, you could then reduce pre funding, do more instant settlement, which he referred to. They also have these interesting agency models, where then you have these capital challenges that whoever's the agent that's operating a Western Union location has to be able to have some access to capital, because then they get paid later. And so how does that pre funding relationship change? So I think there are real, material ways to improve. And I think the other is, my understanding of many of these traditional remittance businesses, they don't have a great way to really monetize and upsell the recipients. It's very much a business based on the sender, and it's the sender that's coming to them, that's initiating the transaction, that's paying the fees, and the recipients are many times coming and just collecting cash and walking away. And so if you can convert someone who's showing up to collect cash, and convince them, instead of collecting cash, to download a wallet and then receive a stable coin in that wallet, and then can you link a card to that wallet, can you offer other financial services against that wallet? So I think that there is a global emerging market, Neo bank type business that if remittance providers execute, they have the potential to be able to build and so when you hear them talk about offering wallets like they've got the distribution, they've got the brand, if they can build a good product that enables them to build a deeper relationship and monetize these recipients that traditionally, they haven't really been able to do that much with. So I think that there is real, real upside. It's just all about how well they can execute.
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Sy Taylor  22:44
Yeah, exactly. The business model side is what stood out to me. Of like, you go from having a fee structure where I have to charge people because this is the only way I can monetize, to having new monetize options, monetization options because they're baked into the technology on the recipient end. And I think that is fascinating to your point, Kai, I also do think there's a lot of like having to respond to market stuff. So on the back of this story, I went and looked at the circle market cap and the Western Union Market cap. So for some context, they did, I believe around about $135 billion of volume last year. And you want to guess their market cap for that volume of transactions that they're doing against a revenue of 4.2 billion, their market cap is 2.6 billion. So their market cap is below the revenue figure. And that is quite obviously a market saying like, hey, we don't know about this business model. So kudos to them for for reacting and trying to do something innovative. Meanwhile, circles over here with a billion dollars of revenue last year and a $48 billion market cap. So there's definitely something weird going on in the market where that's a little bit distorted. It's obviously not based on today's fundamentals. It's based on expectations of tomorrow's fundamentals. But then if you look at the stable coin side, yes, people will tell you there's hundreds of billions, if not trillions, going through but per last week's episodes, Tai, I really love the work that you're trying to do with with with some of your partners to try and get to the true retail spend that's happening here. And I think from the visa dashboard, it was something like 4.8 billion per month, which would be around about 56 billion per annum, but growing anywhere between 104 100% at least year over year. So where's the growth going? And how do you position yourself closer to it? If anything, it sort of reminds me the early days of mobile banking, which is every large financial institution, every large incumbent, figured out how they play in mobile and it's there's a city model. Mobile App, and there's a Chase Mobile App, and they're pretty good. They're really, really solid, and they serve their customers really, really well. And you should do that thing, but what they're not is this entirely new growth opportunity in this space for for innovation. And I think both of those things are happening. And there's an interesting question of how you position yourself, kind of, kind of, in the middle of all of that. So I just need to pause us here while we hear from our sponsors, and we'll be right back. Kai. I know you wanted to get into the eth stuff. I wonder if doing this through the perps story we've got on Coinbase is the right way there. We've got loads of time so we can sort of run all over the place. That's fine. Bring us back in. All right. Thank you very much to our sponsors. The next story came from Coinbase. They have launched perpetual futures in the United States, also known as pubs. So US customers, starting on July 21 can trade CFTC regulated perpetual futures via Coinbase financial markets. So this is no monthly expirations, up to 10x leverage and low trading fees. Like I think it's two basis points. So it's pretty, pretty affordable. Keen? Do you want to just start out by setting up why this is a is a big deal in your perspective, and kind of where pubs sit versus, kind of the rest of the market, sure,
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Speaker 3 Â 26:29
yeah, I think there's probably a couple of points. I think the first one, and again, it kind of goes back to the genius act. Like, this is regulatory breakthrough, so, like, it's now enabled coin basis clients in the US and to effectively, like access a global product, and that is effectively standard across the world. And another big point is, again, I suppose the Trump administration's goal is to bring more onshore, so it's not just a case now of traders using binance or by bit, it's an opportunity to use Coinbase us, and that's the first thing I would say. And again, a key takeaway. And then the second thing I would say that highlights quite a lot is the product innovation around that. So again, Coinbase is definitely seen as a leader in the space, and they want to offer more products to traders, especially institutions. And I think this is a great first step in doing it.
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Sy Taylor  27:18
Do we just contrast perps versus, like, other types of futures products that are out there, just a brief one liner description on the difference.
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Speaker 3 Â 27:28
To be honest, I probably couldn't do that in any real narrative. Sorry.
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Sy Taylor  27:35
All right, Kai, do you want to just
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Cuy Sheffield  27:38
say I don't think I could do that either. I think this is like, one of the questions that I have of is like, it seems that perps are being perceived as like a capital market innovation of a new type of trading product that has been born out of crypto. It feels like there's somewhat of a reaction to hyper liquid, which has been one of the breakout success, both applications and chains, over the last year that is building this decentralized exchange to trade perps, and then now you have centralized exchange providers competing, kind of with their own perp products. I'm still trying to wrap my head around like, what is so special about trading perps? Is it a element of I can get more leverage than what I could get trading futures elsewhere, and so is it more in the crypto as a better casino type of space? Are there ways that perps will be applied outside of just trading crypto assets, like Are those going to come in? And are you going to be able to trade perps on tokenized stocks like I just, I don't know enough about why this has become but it's, it's very clear that it's a main area that there's a ton of investment and activity going into.
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Sy Taylor  28:52
So I'll have a go at this one, because I did a hot minute in capital markets, but albeit not long. So if you are a cap markets Pro, please forgive me, but most futures products today, like most options products, they are derivatives. So they derive their value from an underlying asset. You're not buying stock, you're buying a contract that derives its value from the stock or the bond or whatever else. So that's it's a derivative. Number one, number two. Nearly all derivatives, options futures, they all have an expiration date. And because they have an expiration date, you've got to track that exact expiration date, and you've got to manage your capital. Then you've got settlement delays, and you've kind of got all of this complexity that comes around with different contract specifications, terminating at different times, whereas with a perp, it's just really simplified. Not only have I got no expiration hassle, I'm just buying that product and I can sell it whenever I want to sell it, I also have the much simpler. Fight kind of reality of dealing with it day to day like and it therefore what you get is 24/7 trading. I'm not trying to wait for a weekend or a cut off time, unlike traditional markets, and potentially I get better price tracking, because that funding mechanism is keeping the price Closer, closer to the underlying because it's liquid, it's more of a true price, rather than what somebody bought it at three months ago and what the market thought three three months ago. So less complex, better price tracking, no expiration hassle, and sometimes you do see higher leverage as a result? That, to me, could be a feature, could be a bug. It's kind of viewer choice. Any other thoughts?
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Speaker 2 Â 30:51
Yeah. I mean, I guess if you just think about maybe how this relates to stable coins at all, it sort of reinforces the stable coin balance across the ecosystem. So, I mean, you could imagine that being part of the margin or what maybe you then take out from profits. And so I think it certainly does strengthen the foundation, just with regards to more capital and stable coins and more downstream effects. Albeit, you know, the user is probably going to be a very crypto native company or trader or whatever else. But as that evolves, as Kai alluded to, as the products evolve, maybe that just means that there's more opportunity for staples to just be used across the company's treasury and balances and
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Cuy Sheffield  31:25
etc. Then it seems like it's it's been following sort of a similar arc where it's started with offshore, centralized exchanges. That's my understanding, where purpose first emerged and were used. Then it has gotten a ton of traction in decentralized exchanges with hyper liquid, and now it's like coming on shore with centralized exchanges, and it'll be really interesting to see what the competition looks like. Of is the combination of Coinbase Robinhood and others offering purpose products. Who are the customers that are going to come in and trade that? Are they the same customers that are trading on hyper liquid or is it reaching a new customer base that wasn't necessarily going on chain and trading on decentralized exchange, but is now getting access to this product in a more familiar place that they already are? And I'm curious how that plays out.
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Sy Taylor  32:16
It's really going to be interesting. I'm interested keen in your views as well. We've seen a bit of a renaissance in the Ethereum ecosystem. And obviously we know a lot of this trading activity is not happening on Bitcoin, which was the primary price move in crypto markets. Albeit we're not talking financial advice on the show. Of course we're not. But I am interested in the momentum that Ethereum is now starting to see in recent weeks, is this due to, to your mind, the passing of legislation? Is it due to some of these moves? Are we seeing more on chain activity, valuing some fundamentals, like, where do you net out? And do you want to just sort of recap, sort of the the abridged history of the Ethereum ecosystem, and why it was sort of seen as not very fashionable quite recently.
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Speaker 3 Â 33:05
Yeah. So firstly, I definitely think, like, the genius act played a big part in that. Like, again, it always blows my mind. Like, how much money is actually sitting on the sidelines. Like, I think eth now, again, is getting closer to 4k which is terrific. And, like, if you look at the beginning of 2025 and I was pretty fortunate going to meet the different wire houses, asset managers, and a big piece of feedback I was kind of getting from the front front line is that, like, I felt like the BD effort for Ethereum was lacking. Like, when you compare that to the likes of Solana, it felt very structured and organized. Where, whereas the kind of feedback I was hearing was like It felt a lot more fractured and not structured from the Ethereum side. And then over the past kind of three months to where we are now, it's become a lot more structured. You have the enterprise Ethereum Alliance doing a terrific amount of work, pushing, driving that enterprise narrative for Ethereum. You of course, have ethereal eyes pushing and beating the drum at the wall street level. And then recently, the Ethereum foundation hired an enterprise team. So I feel like over this kind of three month period, or the past three month period, it's put a lot more structured in place, and I think people are a lot more confident to engage and reach out to the foundation, whereas before, I don't think they really had that kind of point of contact. It
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Cuy Sheffield  34:22
seems like there was a question of what the what the mainstream narrative would be to institutions about Ethereum. And I remember the days of there was the world computer, there was ultrasound money, there are all these concepts that it didn't seem like that necessarily resonated on Wall Street. Were kind of hard to explain. And then you see Tom Lee and fun strat come out, and just say, it's the stable coin chain. It's like something like, super simple, that stable coins are like the chat GPT of crypto. It's a killer app for crypto, and most stable coins today, I think, still, the largest chain by supply runs on a. Ethereum, and so if you get regulatory clarity for stablecoins, then that drives board option for Ethereum. I think that that's a a simple narrative that seems to be resonating. I think the question for anyone who's deep in the space is, is that actually going to be the case? Even though the vast majority of stablecoins are issued on Ethereum today, we're just seeing tremendous competition with both other existing chains that are still faster and cheaper. You've got the L twos, and then does the value actually accrue back to Ethereum or not? Some of the L twos have their own token, and then you have this whole trend that we've talked about on the show of new chains being formed that are optimized for stable coin payments that are trying to have better privacy, better features, focus specifically on the segment of companies, institutions coming in with stable coin so it feels like the narrative is resonating, yet does it continue to be that case in practice? If the lead Ethereum has in terms of stable coin supply, we don't know, and that'll be really interesting to
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Sy Taylor  36:04
follow. Yeah, it's a three horse race, really, isn't it? You've got the Tron sort of global south story, the Etherium and its children story. And I think you know theorems, children includes base include, includes a lot of EVM compatibility, and then there's Solana, and that three horse race to your point, Kai could end up getting disrupted because we don't know what the right design choices and patterns are. We're still so incredibly early, and it's very hard to back one horse. And I think this is why a lot of institutions tend to dabble in a little bit of everything. It's very easy to partner with somebody like a coin base who has base, because they can hold your hand a lot of the way there, and they already have a lot of distribution. I think this is kudos to them, but they are acting as the the on ramp into an on chain future, not just for retail, but for institutions now, and the institutions also sort of positioned to be a major player, if, if markets start to get tokenized, not just the cash side with with stable coins. Tai, I'm interested in, in your view, as to, you know, what does this mean for a business who's just trying to make their invoices in and out, importers, exporters are quite exposed to commodities. Could we potentially democratize access to things that were once the realm of very sophisticated organizations, because you've changed the cost structure by turning it into something that happens on defi and that happens in software, is that something that you're thinking about in your future, visions and stories, or you still just focus on the stable coin side.
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Speaker 2 Â 37:45
Yeah. I mean, quite frankly, like, one of the things that we continually hear from these traders is just, you know, how can we get that margin, you know, down even more? You know, it's, it's almost like this FX game that you're going to always be playing with these, with these guys. But I think at the same time, you know, I think that just presents the opportunity for us to continue to find those ways to cut those costs and provide them, you know, the faster and cheaper settlement even more so than what just the concept itself can kind of bring. And so I think that we try to be very agnostic in terms of how we think about stable coins, how we think about chains, and how we think about dollars, and I think that ultimately, that hopefully serves us better than trying to form an opinion or, you know, lock ourselves into one particular way of approaching, kind of the stable coin intermediary or settlement, which allows us that flexibility to see what happens over time.
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Cuy Sheffield  38:36
For your clients, what are you seeing in the chain distribution right now is you're serving a lot of emerging market customers. Are they defaulting to Tron? Are you seeing Aetherium happening out what's, what's the current
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Speaker 2 Â 38:47
breakdown? Yeah, for sure. I mean, it's kind of that generic story, right? Global South, we're seeing a ton of tether on Tron, a bit more. In the Western world, we're definitely seeing more Ethereum, but we're definitely starting to see a bit more of the L twos, although the volume is quite low. I think it's like one to 5% but I'd say that our dominant chain and asset is USDC on Ethereum, with with Tron picking up, given that we're growing a lot in a lot of these more developing
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Sy Taylor  39:14
countries, keen I wonder, sorry,
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Cuy Sheffield  39:16
I want to get a keen on, like with the growing interest in Ethereum in general. How does that play out with staking? And I know that's the core business you all are in with Lido, as people discover, okay, there are these things called stable coins. They're legit. There's doubt law. They run on this thing called Ethereum. It's a public blockchain. And then there's this asset called eth, and then there's something you have to do with eth to do with eth to secure the Ethereum blockchain, to secure the stable coin payment activity. Like, is, is that connection coming together for institutions that haven't necessarily been open or, like, what's the progression of how you get from learning about stable coins to now you're staking Ethan? Like, you know how far that that that goes? Yeah. Yeah, like, it
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Speaker 3 Â 40:00
definitely feels like staking is becoming the hot topic, which is terrific for Lido and terrific for me. Selfishly, I think a big part of that narrative around staking is start to take off because of the ETF discussion in the states, like I'm sure everyone is aware of, there's a big push in the US to get staking added to ETFs, and a big reason for that is just capital efficiency and generating passive returns from just holding eth. And like Europe, is probably in a fortunate position where staking for European etps has been around quite a long time, and the issue that and these products face is around liquidity and handling redemptions around when you go through the withdrawal cue. So for a little bit of context in Europe, like I said, staking has been around for quite a long time in these products, but only 50% of the Aum is being staked. And the reason for that is when you go and you unstake Your eth, you have to go through the withdrawal Q, and that typically takes about 714, days, depending on the congestion in the network. But these traditional products, or traditional wrappers, typically have to operate on a t plus two basis. So you can't actually add more than 50% stake for that reason. And I suppose this is kind of where Lido would come in a liquid staking where the opportunity for you to get instant liquidity and launch 100% stake product is really exciting. So when we go and we speak to different institutions, that's really the selling point. It's this capital efficiency piece, and it's liquidity piece. And I think there are kind of two big elements where institutions are starting to take a lot more interest and focus
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Sy Taylor  41:28
on I'm interested in that perspective as well. From a businesses standpoint, it's like, are they going to be holding ether? They're going to be staking things? Are they looking for yield in the process? Because we're seeing yield get baked in, even though stable coins themselves, under genius can't offer yield. Yield finds a way, and it's moving around. So where does staking fit versus other things in your customer and prospects conversations?
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Speaker 2 Â 41:53
Yeah, for sure. I mean, I think a lot of our customers live in FX land, and a lot of what they're trying to optimize around for is sort of the more favorable rate. Let me hold this dollar and let me decide over the next seven day period when I'm going to convert it into an IRA or something like that. And so I think that that's where they're spending a lot of their time today, and maybe they're earning yield on that dollar via stable coins over time and kind of earning in that way. But could staking be elements that maybe that's missed opportunity or new opportunity that could emerge. Certainly, I think it's definitely one where there's still kind of a lot of other bigger fish to fry before we can get to the other elements of revenue generation.
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Sy Taylor  42:34
It does feel like if an institution's going into that space and they are having to buy a lot on behalf of their clients, then they're potentially leaving money on the table by not and
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Cuy Sheffield  42:43
Simon, I think one of the points you just made is is really important. Of there's been so much discussion around the genius act from banks about the prohibition on yield, and that was a big point that they they were lobbying for. They wanted to make sure it was included in the bill. It got included in the bill, and now that has passed, I think there's going to be a big open question around how it's interpreted by the OCC but again, it's only a small part of the overall world of yield in the type of products that people are building, and so even if a stable coin issuer themselves can't pay yield programmatically on chain To every holder, we expect that there's going to be a defi ecosystem where you can deposit a stable coin and be able to earn yield in a protocol, there's going to be these different staking opportunities with crypto assets that underpin a blockchain that a stable coin is running on. So it feels like there's, there's going to be a number of different ways that yield gets manifested in these types of products now with different levels of risk. And the question is, are the right disclosures there? But it's hard to see a world where there's no type of any yield or rewards moving around a stable coin wallet, even if the prohibition of the issuer paying that yield directly to the consumer ends up being a main part of how the OCC upholds and sets the rules. Well,
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Sy Taylor  44:08
we had open trade on the show who work with FinTech companies in the global south to help them instantly swap the stable coins they may be holding on behalf of their customers for tokenized money market funds. We also friend of the pod Yuval Ruse and the folks at Digital Asset had a big announcement. So on Canton, I believe Goldman and BNY are going to be tokenizing money market funds. That's a major set of financial institutions tokenizing money market funds, bringing them into the on chain ecosystem, and with Canton then looking to go and cast its net wider, you start to see a world in which yield bearing products can be swapped instantly in 24/7 for stable coins. So it starts to look. And it was you Val that first said this to me, like my stable coin is my checking account, and my money market fund is my yield bearing account or my deposit account. So what you have is, by any other way, something that can look to a consumer, like something that has yield and is kind of there to for for the longer term and something that doesn't have yield. And if I can swap in and out of those with no delay, that's interesting to global corporates, but it might be interesting to consumers as well. So yield always, always finds a way. Well, listen, guys, we could, we could talk about this and many other stories for a little while, but we got to wrap today. Kai's got a million different things to do. We're trying to get everybody together. So before we do run off and leave you keen, I want to make sure people can find out more about you and what you're doing at Lido. How do people get in touch with you and the folks at Lido to learn more? Yeah.
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Speaker 3 Â 45:53
So can reach out to me on LinkedIn, keen Gilbert, or on Twitter, keen underscore Gilbert
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Sy Taylor  45:58
and seek, how about you and everything actual,
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Speaker 2 Â 46:01
yeah, for sure. So I'm at tikbana on Twitter, and then to learn more, you can just go to actual.com two Cs
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Sy Taylor  46:08
love it, and Kai you and
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Cuy Sheffield  46:10
Vita on x at Kai Sheffield and visa.com/crypto
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Sy Taylor  46:14
you find me at sy Taylor everywhere, or on FinTech, brain food.com and, of course, sardine.ai finally, everybody, if you like this show, please hit like buttons. Please leave a review until everybody you know to get obsessed, because we're one year in and we're going to do a lot more. Bye for now you.