On Ep. 48 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, is joined by Garrett Harper, Head of Partnerships & Comms, Squads, Ran Goldi, VP Payments, Fireblocks and Basak Toprak, EMEA Head, Kinexys Digital Payments, Kinexys by J.P. Morgan to discuss how stablecoins and deposit tokens will coexist and more!
On Ep. 48 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, is joined by Garrett Harper, Head of Partnerships & Comms, Squads, Ran Goldi, VP Payments, Fireblocks and Basak Toprak, EMEA Head, Kinexys Digital Payments, Kinexys by J.P. Morgan to discuss how stablecoins and deposit tokens will coexist and more!
Timestamps:
Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
Tokenized is also presented by Centrifuge
With over $1 billion in total value locked, Centrifuge works with major institutional partners to tokenize and distribute their funds — and with capital allocators onchain to invest and manage yield. Through every crypto cycle, Centrifuge has been building — and today, it’s the market leader in tokenizing real-world assets. Learn more at centrifuge.io
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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 00:00
You. Welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets, and this time we're live.
Sy Taylor 00:26
My name is Simon Taylor. I am your host for today, author at FinTech, brain food and GTM over at tempo. Let's introduce our guests for today. First on the app, it's a returning Rand gold sign, aka Goldie, SVP of payments and network over at fire blocks. How you doing?
Speaker 1 00:42
Goldie, good. Simon, amazing to be here in this live show. I mean, this is more exciting than any episode I've ever been in any podcast. Thank you for having me.
Sy Taylor 00:49
You're so welcome. My friend also joining us is Garrett Harper, head of partnerships at comms over at squads. How you
Speaker 2 00:55
doing, Garrett? I'm doing great. Thanks for having me on. Huge fan of the show.
Sy Taylor 00:58
Oh, likewise, fan of squads. And what you guys are building. Making a debut on tokenized is Basak tolpak, who's the emir, head of Connexus digital payments by JP Morgan bazak, thank you so much for being with
Speaker 3 01:11
us. Thank you very much. I'm really looking forward to this. Likewise, likewise.
Sy Taylor 01:15
All right, two quick bits before we get into the content, I need to remind you that views of contributors today are their opinions and don't necessarily reflect those of the companies they represent. Please don't take anything we say as tax, legal, financial or investment advice. Do your own research. And of course, a huge shout out. And thank you to our headline sponsors, fireblocks and visa for making this all possible in the squads supporting it as well and CMS for hosting us. Tokenized is brought to you by our friends at centrifuge. Centrifuge exists to bring institutional grade finance products fully on chain. Centrifuge is a full life cycle defi platform, from asset creation and structuring to defi integration, and it's cross asset by design. What that means is they work across private credit, ETFs and equities, making your financial products much more accessible and much more efficient. This is the tokenization you keep hearing about, unlocked for all asset classes by centrifuge. All right, the first story came from just about everywhere. If you use social media and if you don't, and you live in a bubble, then good for you. But stable coin issuers are fighting, in all out war on social media to become hyper liquid stable coin partner. So if you're not familiar with hyper liquid, this is the decentralized derivatives markets that's got over 50% market share, and today he controls 5.5 billion of USDC, which is about seven and a half percent of the supply. And this bidding war is playing out in real time. Imagine an RFP, but with crypto Twitter, it's wild. There might be a cat meme that ends up swinging the votes. Absolutely incredible. Of course, you've got Paxos and FRAX and native markets all out there bidding for it, but one person bidding for it is, of course, agora, and we have Nick Van Eck from agora to talk about it. So Nick, do you want to give some perspective on the Agora bid and usdh, Thank you Nick for joining the show.
Speaker 4 03:28
Yeah, thank you for having me so a little bit more perspective on our bid, and maybe I'll give you a little bit of the timeline of events, right? So this ticker proposal and release came out last Friday, very shortly after that was announced, native markets submitted a bid where to a very hyper liquid native team, but they themselves are not an issuer, and would work with stripe to be an issuer. And so we saw an opportunity. Right hyper liquid is one of the most active trading ecosystems, not just in crypto, but I would say, probably the world like outside of just on Chain Finance, and you need an institutional grade provider to actually service this. There's about five and a half billion of USDC on hyper liquid today. And so you need to have 24/7 Fiat rails, some of the largest global custodian banks, to actually support money movement, trading, minting and redemption on this environment, and so we submitted our bid. Think we're one of the very few institutional grade issuers that can support this type of project, similar to Paxos. And yeah, it's a little bit of context on our bid.
Sy Taylor 04:36
Thank you. So my question to you is, is this a good thing for tradfi, that all of this stuff plays out in public. And what's your perspective? Because you bridge those worlds in kind of a unique way,
Speaker 4 04:47
yeah, obviously, sometimes there's good and bad of doing things in public. I think one of the good things for the ecosystem is like they are getting the best possible deals, right? So we came in and said, Hey, we are Institute. Actions forward. We're gonna give you really good underlying infrastructure. We're gonna put 100% of the net revenue that we earn back to the community. That was really to drive the price down to zero for everyone. But then there's also maybe some of the bad which is some of the attacks or charges back and forth on Twitter. I saw on my way here that someone made up some rumor about Paxos bribing validators or something. So that's the downside. But, you know, I think the good thing is that you're gonna get the best outcome for the community. Right, aside from our proposal and Paxos, you had players like sky and Athena offer to invest 10s of millions, or in Sky's case, you know, billions of dollars of liquidity into the ecosystem. And so you really, I think the best outcome for the community, but it is a little bit performative.
Sy Taylor 05:44
It is indeed, well, Nick, I know you got a plane to catch. So ladies and gentlemen, please thank Nick Van Eck for being here in person. Thank you, Goldie. Gonna come to you first on this. Just help me unpack for somebody that's maybe more in the payments industry or hasn't been exposed to hyper liquid. Why is this important that you would have an enshrined stable coin on some sort of network? What are those economics really looking like?
Speaker 1 06:10
Well, first of all, it isn't, I think, and I think that this is what people, I guess, don't understand, is that hyper liquid, obviously, is right now probably the most amazing product launch of the year, probably they've overtaken NASDAQ in terms of revenue right as an exchange. Do they need their own stable coin? Do they need someone else's stable coin? And it's not really clear to me why. I do understand that obviously they want to take care of their community, and they actually do want to have something that all these offers from agora, from Paxos, from others, from circle as well. It will benefit their community, great, and they can do so much with it if, obviously they control it. I think what they've done is genius. Because this happens all the time in financial markets. In traditional financial markets, happens in crypto as well. There's a large company they wanna launch something. They publish an RFP. It's usually a secret.
Sy Taylor 07:04
Getting on the RFP is usually like 90% of the battle.
Speaker 1 07:07
Exactly what happened here, that hyper liquid did, opened this up to everyone and made sure that, again, you know, Nick was talking about all the battles and fights. I'm 100% sure Paxos is not bribing anyone to be working Paxos for a decade. That's not their thing, but putting everything out is super interesting, because was that the original purpose of blockchain and crypto in the first place, to make sure everything's transparent. So I'm really happy that this is happening. I'm still not 100% certain how all of this will unfold. What I am concerned about, I'll tell you, that, is that people think that the stablecoin economy should be not only free, it should pay them. And in a way, what people don't understand is that this economy right now is being subsidized by VCs, and it's great that hyper liquid is asking for all these issuers for more and more incentives, and I think everyone had a great yield offering for the community and for hyper liquidity itself. But what happens when interest does go down eventually,
Sy Taylor 08:08
when the music stops? This sounds a lot like 2022 23 where, you know, sort of everything's easy when the assets are going up, a little harder when they're going down. Garrett, round this out for me, from like, you get this wonderful neutral observer perspective to this, but you're building serious businesses, Neo banks on chain. Like, what does this mean for you?
Speaker 2 08:26
For me, it's a lot of entertainment more than anything. But I would say what's great about this is one it's great marketing for hyper liquid, but also all the stable coin issuers. And I think, more than anything, like, everyone's going on podcasts right now. They're talking about how on Friday night, they all got together and they wrote these memos about how they were going to offer this best deal. I think if anything, it's getting those companies to actually get feedback immediately and in the future. Because, like, right now, hyper liquid is a very big deal. We obviously believe slawon is a big deal, but we're like, multi chain. This is just kind of the warm up for something that's going to come later. And everyone right now is presenting. I think everyone needs to make sure it's not just short term. Because what you're doing is you're showing that you have the chops to do this type of stable coin for a big ecosystem. So you don't have to win this one, but you do need to garner respect, because if you have this attention, your best thing can do is capture something with that. And what they can do is say, hey, we may not even get hyper liquid. Everyone's like, if we don't get the ticker, it's kind of fine. But what about the next ecosystem? You know, that's what I would be thinking about.
Sy Taylor 09:18
We were in the conversation, we were taken seriously, and we can support institutional grade levels of volume. And I think that's kind of fascinating, that people are trying to make that position and make that case. If something is generating more revenue than NASDAQ, it's big, it's important. So we've got to start to take that. And I do think sometimes people confuse the optics of it with the serious business stuff. But I'm interested prosc in how you view this, looking at it from the outside in, sort of going well, it's kind of odd. But other lessons you can take from this whole scenario, the lessons you can take from what happens in the on chain economy as you start to think about your own business,
Speaker 3 09:54
yeah, absolutely. And when I first saw the news, I was like, oh, maybe, maybe we should. Yeah.
Sy Taylor 10:00
Yeah, are we missing something you should jpmd on bid. I'm here for it.
Speaker 3 10:05
Look, I think the message is here that everyone is looking at payments taking its place at the infrastructure level, right? The Economics of payments is quite fascinating, actually. And I think people who are in the business of payments. Know this the best, right? And then questions like, what happens when interest rates go down is, I think, a spot on point, but sometimes it's all about being embedded, right? And then you look at other models to make it happen, yeah.
Sy Taylor 10:37
So once you've got market share, you've got market share, you've got distribution, and the business model might change over time. So do you think there's something different about this cycle versus 21 and 2017 we've had bull runs before? Is the stable coin side of it, some of the tokenization side of it, feel any different to you from like an institution's perspective?
Speaker 3 11:00
Yeah, absolutely, it does. And I think we are beginning to see for us, for our private, permissioned on chain business. It's always been about obviously regulated payments business, tokenized assets and public blockchains have been mostly about crypto right crypto dynamics, on and off ramps, enabling crypto industry, but I think with stable coins, we're seeing that shift and more fintechs coming into this. I think we're now really looking at public blockchains taking its place for being a payment rail. And I think that shifts the dynamics people are now genuinely looking at, okay, this is not just about crypto. Crypto is there as well, but there are other things.
Speaker 1 11:45
Yeah, I would concur that. I mean, I think if I look at the volumes on fire blocks, which we have, about 70% of our clients are those institutions, the banks, the fintechs, whatnot, their volume on stable coins this year is going to be $2.6 trillion we're going to process out of 5 trillion, we're gonna process in general. And if I double click into payments, just to tell you why I think this is different. If you double click into payments right now, the payment company's volume on fire block is about 100 billion a month. About 50% of that is payouts and on off ramps. Now that volume of payouts and on off ramps did not exist two years ago. Wow. And it's actually coming in. It's interesting to unpack this, maybe even later, but it's coming from the grassroots. It's from users actually asking to get paid out in different locations. It's actually more and more on ramps that have come to life over the last two years. So I do believe this is very different, and I do believe that in the next let's call that bear market, or crypto winter, or whatever it will be called, by then, whatever thing will happen that will give it the name. I think this will survive that and will create a new sort of like a new baseline.
Sy Taylor 12:53
There's a new durable business model. And when there's pull from the last mile, when there's pull from the user, and if they're crawling through glass to get this product, what happens when people start to make it easier? So how do you think about that, Garrett and kind of the stable coin pull? Are you seeing that in your own business?
Speaker 2 13:11
Oh, definitely. The last 18 months have been absolutely insane. I mean, not just from, like, our own product, but the whole industry, like you're seeing, every bank, every FinTech, is getting interested. Whether, like, I'm sure you guys are talking to these companies all the time. We know you are. You've come into the space, if anything, now we have more evangelists than ever. Like all these people working in FinTech are now in the space talking about stable coins. So I think it's an absolutely huge change. I mean, we started in about sales in 21 and at the time it was all about, like, native tokens programs, daos, everybody had to be a decentralized, autonomous organization. A lot of those companies did not have stable coins at all. And at all. And at the time, it's like, if you had a stable coin, it wasn't gonna be the US dollar. That was like the opposite of crypto. So it was just in the last, like, year and a half, two years, that people even realize that no dollars are actually like, what is happening with stable coins like that is the use case right now, and we're seeing that from our teams that are on salon, but we're also seeing it from importers and exporters, people in South America, like, we have a consumer app now, and people are getting paid. They might be in South America, Brazil, Bolivia. They're getting paid by US companies, because we're all in a remote economy. Now they're getting paid in stable coins. They keep it in dollars, and now they can spend it anywhere. Whereas used to you bring a friend to crypto, they can't do anything with it. You just have to say, like, deposit into a protocol. And they have no idea what that is, so I don't
Sy Taylor 14:17
know it happens if you've used ether, phi, or Pyro, or any of those apps. All right, so two hands going up in the room, three or four, five, if you haven't used it. It's unbelievable. You can get 9% yield on your USDC, and you can borrow against that at 4% and it works everywhere. A visa card is accepted. Why wouldn't you want that product? It's an incredible product. And maybe those yield figures start to go away over time, but then you've got the distribution to your point. And if that's available in Bolivia and that's available in Argentina, then that's a product that was not as easily available in those markets and was a lot harder to get distribution. And I think that's what a lot of
Speaker 1 14:56
people miss. One last thing on the hyper liquid thing, I think that. But the winner will be mostly dependent on where do they want to take this exchange, right? So if they want to take it continue on the fully decentralized model, maybe they'll go with FRAX, or maybe it's more this type of stable coin issue. Oh, interesting. If they want to go very compliant, they actually want to give like this swing to a institutions. This is now safe. Maybe they will go with Paxos or USDC. You know, the company circle is now a public company, right? USDC to $2 so maybe they'll go with that. They're making a whole show about this, and I believe them that this is what they wanted to do. But I think at the end of the day, they will probably pick whatever is right for their strategic plan. That's a
Sy Taylor 15:43
great way to look at it. The idea of what they pick indicates their strategy. Yeah, and hyper liquid has just been weird for crypto in that like there's no online crypto main character. In fact, the main character is the opposite of a main character, very shy, very retiring. Don't see them at conferences, but quietly, just crushing. And maybe there's something to be said for that approach as well. Maybe that's the next gen of crypto is like little bit less crypto Twitter and a little bit more like institutional focus. So I'm gonna insert our ad break here and thank our sponsors, and we'll be right back with our next story. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat back tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is also brought to you by bridge, a stripe company businesses need easier global money movement. Bridge is the stable coin orchestration platform that makes it simple to receive store issue and spend using stable coins. 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 bridge dot XYZ, tokenized is also sponsored by fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses, from visa to WorldPay to bridge to Revolut, with over $100 billion in monthly stablecoin volume. Fireblocks powers stablecoin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold and manage 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@fireblocks.com thank you very much to our sponsors. Next story comes from ledger insights and ant group and ant financial are going to use Connexus by JP Morgan for real time for an exchange settlement on the blockchain. The payments business arm of Alipay is 1.3 billion users will settle FX swaps instantly on the Connexus platform. And the goal is to have Euro USD settlements completing in minutes instead of the standard two to three day cycle. That's 24/7 right? So that's unbelievable. There's a lot of chalk about on chain FX, but in a way, this is at scale on chain FX. So besak, where else would I start? But you can you just tell us a little bit more about this product and a little bit more about what it enables for your customers? Sure?
Speaker 3 19:11
Absolutely. So the on chain FX is provided on Connexus digital payments platform. So that's JP, Morgan's private permissions. EVM, compatible chain, which has been live since 2019 so we process about $3 billion a day on this network for our clients, for JP Morgan clients and financial has been on the journey with us for a very long time. Has been using our platform for a very long time, and we've basically added on features and use cases on our platform. We started with dollars in 2019 we added euros in 2023 earlier this year, we added Sterling Hong Kong, dollar and CNY. And obviously, with that comes a fix, very natural next step. And you know, as we were saying earlier, as well, you know, those whose business is moving money, money service businesses, banks, etc, that's where it really makes a difference for them, ability to settle 24/7, as well as doing the FX, so that they don't need to sit on a currency unless they really need it, right? Not just in case, but just in time do what is needed. So public holidays, out of hours, et cetera. And money moves globally, 24/7 for these companies, like ant. So that's what the product is. And we're really excited about adding these features in, and we're really seeing the use cases and use
Sy Taylor 20:39
unbelievable. I mean, if my maths is anywhere near right, that's over, what, a trillion dollars annual run rate of total process volume. So if stable coin kind of companies are sort of getting past the 5 billion annually, there's several laps you're doing around them at that stage. Although being one of the world's largest banks is a bit of a cheat code, I suppose. But there's the other interesting thing you said there was your EVM compatible chain. I think that's something that people miss in Connexus quite a lot, is that you have optionality in the future. So I'm interested in how you think about tokenization of payments, and how you think about where these features start to go from closed loop to open loop because I imagine for JP Morgan clients, there's a lot of value you can give them just on what you're already offering. But I saw earlier in the year the JP Morgan deposit token jpmd, so is there some attempt here to learn what opening up that loop would look like?
Speaker 3 21:37
Absolutely. Simon, open loop networks has been on our literature for a very long time, so it's definitely
Unknown Speaker 21:46
one made it move from literature to reality. Yeah.
Speaker 3 21:49
So we did our first attempt in 2023 with Project Guardian. That's when we did a tokenized deposit exchange on Polygon. But that was a preview, and we knew that it was just going to be preview at the time, but we held the vision to make it happen. And then, of course, when the environment changed recently, it was like, we have to do it. Of course, the stable coin hype also helped to put some fire under this. It's always been our vision. But, you know, things need to come together to make it happen, and that's where we are. So we think of it as we definitely see the need for private networks. It will continue. We also see the need for account based products. Accounts will continue to exist. But we also see the need for bank deposit to exist on public networks in token form, and that's why we issued jpmd for institutional use cases.
Sy Taylor 22:47
And what would be the barriers that you see to being able to actually do that today? Sort of, what are the challenges for the existing on chain ecosystem to think about solving for a Tier 1g SIB to meaningfully use on chain networks, strikes me that there were probably some privacy challenges, probably some other things. How would you rank those challenges that need to be overcome?
Speaker 3 23:08
Yeah, so what our expectation is is, when we launch this product, we're probably going to see take up from existing digital assets ecosystem players who are already comfortable with being on chain, and they have infrastructure on chain so they can hold this additional ERC 20 token right, which is a bank deposit, great, and it's also integrated seamlessly with their deposit accounts with JP Morgan, so we see that Being a easier adoption use case. And then, you know, we'll start with, you know, immediate use cases will be things like keeping it as collateral, making margin payments right, keeping it as a reserve, so that you pay for your margin as and when needed. On chain. A lot of these are still taking place off chain, on bank accounts. So replace it with radio on chain payments.
Sy Taylor 24:03
So for the on chain natives, they get the benefits of stuff that they had to do in Trad fi, but just at the speed of being on chain. Garrett, your thoughts on this story? Yeah, I
Speaker 2 24:11
think, like, my biggest takeaway from it is just, it's kind of beautiful now that we had, I think, like two funnels. The first funnel was anybody that wanted to get into new digital assets came into crypto, and then you had stable coins kind of take off. And really what that brought in is just people that wanted to accept dollars, right? And now you have banks getting into this game with tokenized deposits, which I think is absolutely huge, like we know, if that starts to take off, that's going to be one of the biggest funnels, if not the biggest funnel in the world. So now you have these three funnels that are working together. And with stable coins, they're actually interoperable. So that's what's really cool about it. Otherwise, like you were talking about closed loop systems, everything, by default, is closed, whereas this is open for the first time. Even though I know everyone at the end of the day kind of wants to own that verticalized closed loop system, I think naturally though, just like market dynamics are gonna make it where it's gonna have to be open. And I think that's the
Sy Taylor 24:55
best part, yeah, you know, I think that's a putting tempo harm for a second. I think that's a misnomer. For a lot of folks, like the market narrative is everybody wants to vertically integrate and own all of the economics. But actually, my experience is, no, they don't. Everybody wants to be your frenemy, like they want to own some economics, but they want to do business with you because they recognize the flywheel effect. It's like you and I both come from banking world, where you go to cybos, where your biggest competitors are your best customers. That is normal, we should expect that to be the case. Golda, your thoughts?
Speaker 1 25:24
Yeah, I think the reason this is so interesting is that, first of all, FX on chain has been on everyone's radar. And if you look at specifically, by the way, in Latin America, where the companies you got BRL one, for example, I don't know if you're familiar with that, that's like a stable coin that in coin that in Brazilian real has about a billion Brazilian real right now total volume, you have mxnb, which bit so right the largest exchange issued. And if you think about this, all of them are sort of like really trying to capture another merchant, another importer or exporter, and suddenly, JP Morgan brings ant financial boom, right? It's like this game of Stratego. I don't know how it's called in English, but, like, you know, everyone's moving their pawns a bit, and then you bring, like, this huge carrier boom called ant financial. Because ant financial, I don't know how much people are familiar with this. It's the largest FinTech in the world, yeah, right.
Sy Taylor 26:21
1.3 billion users. Yeah. 1.3 billion users. Just keep saying
Speaker 1 26:26
Yeah. Just keep saying that, right? It's like, yeah, it's bigger than the staple coin sandwich. But in a way, when you say ant financial, you're actually saying a revenue that is about, I don't think it's public. I think at the end group, you can look at Alibaba, try to do some math, but it's about $20 billion worth of revenue. About 35 to 40% of that is just payments, if now some of that will eventually move to jpm Connexus. That is massive. And what it tells me that this battle for on chain effects. That's happening. I've seen it mostly happening right now in Latin America, between, again, the Brazilian real the Mexican peso, Colombian cop. You see bank of Colombia, they also issued their own stable coins. We were talking about the banks, the banks, who are your frenemies, right? They all have jpm accounts. They're all connected to you guys. They are also issuing their own stable coins, because they wanna partake in this. They wanna capture the FX. And now JP is moving their carrier into the map. This is gonna be very interesting. I think that 2026, is gonna be the on chain FX year. This is gonna be
Sy Taylor 27:36
cool. It's gotta be line grab. I know we've got some of the folks from velocity, dot XYZ in the room as well, and there's on chain FX, and there's whole bunch of companies in that whole category. And I almost observe it as, like, this interesting barbell, as you were saying, of like you've got the kindling of these small, exotic currencies, local issuers, starting to do on chain FX, following the last mile, following where the market poll was exotics were always very hard for the correspondent banking system to get into, versus the correspondent banking system that itself is tokenizing. One might imagine that these two paths start to converge at some point in the line. But how are you thinking about the economics of on chain FX, both from an institution's perspective, from your perspective, but also to a client, like, how do you make that case?
Speaker 3 28:24
Sure? So, I mean, the case is simple, right? So you don't need to pre fund a specific currency waiting for a payout to happen, right? I mean, these fintechs obviously keep currency pots to make payouts, but then you know the necessity of an on chain FX comes when they need to make additional payments. So they need, for example, Euro liquidity that they have an estimated right. So they can immediately do that as and when needed, which means they can reduce the buffers in terms of how much they need to keep in each currency pot, right? So that's the economic effect of using on chain FX,
Sy Taylor 29:02
it drains the nostrils at Long, long last. There's been the promise for a long time, but we, we've never quite made it there. Garrett, any other thoughts on the story? Yeah, for
Speaker 2 29:10
us right now too. I think this is going to be issuing the relevant like you said in Towson, 26 it's funny, like this was probably talked about years ago, but it's just now that we actually have the technology, the infrastructure, the players, like, bridge, everybody that's come to the space, the orchestrators, the competition, and then, like, fees are coming down. Because, like, I feel like it used to be hard, probably, to go to clients to convince them, like, you can tell them this story, but like, one, do they believe it? One, or they think you're a little crazy. You know, what are you talking about? Putting this on chain, putting it on tokens. And I think we're actually at the point now, whereas, like, if this was two years ago, I think everyone would be questioning, like, is this going to end in some ways, we're past that, yeah. And I think that's the biggest thing. And you can actually go to clients now, and you can not only point to like names, people are starting to understand it, part of this, because you have these podcasts, but you have people like you that are bringing it's everyone. So that, to me, is just awesome, because it trickles down now from both ends. Because I think at one point you had to have crypto start from the bottom up, whereas, like, the. Users kind of demand it, especially from South America and different regions. But now you have people in North America, some of the biggest banks. I mean, you see the incentives, like, there is money to play here, there are cost savings, and you guys are helping lead that. So it's awesome.
Sy Taylor 30:11
I find it fascinating that the crypto natives probably just misunderstood Connexus and city token services and what HSBC has done quite dramatically, because they didn't necessarily understand the value of having a closed loop blockchain. It's like, doesn't that defeat the purpose? Isn't this supposed to be decentralized? And to them, I say, Well, you've clearly never worked in correspondent banking, because if I had 62 mainframes just trying to get those to sync up, then generally you're using Swift to do that. It's like there couldn't you just build a database? Oh, sweet summer child. Have you ever tried to implement it in production in a bank? Oh, no, you haven't. I see
Speaker 1 30:50
Simon. You know, what's the average time of a system in a bank? An IT system? It's 27 years. 27 years is the average time from deployment until it gets replaced by a different system. So I totally relate to what you're saying, if it ever does, if it ever does, exactly right. There was, like this article on Bloomberg, I think, like three, four months ago, on how there's a real shortage of people who know Fortran that can come and solve bugs in mainframes of banks, some of them are now moving to blockchain, just because the people who are handling support are dying
Sy Taylor 31:23
well and so why? Why ever this is real? You can look it up. There's also a group called the COBOL cowboys. These are people who can write COBOL code in their 70s and 80s that occasionally come out of semi retirement for multi millions dollars to go fix and debug code. Absolutely, well. AI is helping some of that now, but the goal is to keep those mainframes running, and then this blockchain thing actually ends up being this really useful abstraction above your 50, 6070, markets, where I've got this golden source of all of my liquidity around the world. It's an ALM team's dream. This is the kind of thing that I think people miss about that, and actually branding it as Connexus and onyx and all of those things, and taking it to market as a bank product was right for the market in 23 and I think you can change the marketing of it over time. So what should we expect from the next few weeks and months? Can you share anything about where Connexus is going and what you're looking forward to do with this product with Ant and others.
Speaker 3 32:21
So we had ant start using it, but we also had a few others. For example, corepay started using our platform as well, again, very similar, starting with dollars a sterling payout. So use cases are definitely building up. We also see a lot of potential for programmable payments, and that's been something that we've been trying to so this is not just about 24/7 but programmable payments, right? That's the kind of pitch all the time, and we've been really working hard on programmable payments part.
Speaker 1 32:52
What does that mean for now, it's still just a buzzword in the space. No, no one's doing programmable payments. What does that mean for yes,
Speaker 3 32:57
yeah. So it is, it is happening. So we also launched very recently with Trimont, which is a loan service provider in the US. So they are using our platform to facilitate payouts for their loan payouts, and that uses our programmable payments function. Again, they have a lot of reconciliation involved, as well as splitting payments, rules, conditions, so all of that we're helping them to actually operationalize and use our network to make the payouts. So programmable payments is also starting to happen.
Sy Taylor 33:34
When you've got complex fund flows, or conditional fund flows, it gets very interesting very, very quickly, and you, unless you've ever been in the flow of funds for a lending business, then you wouldn't know why it needs programmable payments. But if I've got a credit line on the back end and customers for credit on the front end in the middle, I've got a paperwork nightmare that I'm trying to catch up with spreadsheets, which is I'm trying to lend out to you, but that then means I need to pay. Let's say I've got five lenders that I'm borrowing from. In order to deploy lending to somebody else, every time I receive a payment, I have to pay my staff, and then I have to pay all of the other things, all of my other lenders, and I have to figure out who gets paid what in what order, and that's based on a contract which is written on a piece of paper. Oh, my God, that's incredibly hard. Rain cards, if you know those guys, they use credit Co Op on the back end to do a similar thing. So defi has its own version of this. Garrett, you want us to jump in?
Speaker 2 34:30
Yeah, I don't really want to bring AI into it, because it's just like the classic thing. But like, you even saw somebody did it. Somebody had to do it. So I would jump in. We need the klaxon. You know, you saw RAM just a few months ago at their new fundraise, right? And Eric tweeted out one of the first things was like, autonomous finance. So we talk about programmable money a lot. I think autonomous finance, even in some ways, maybe it's just a buzzword, but it does resonate with people a bit more, because ramp showed like how business finance works today and how money flows and how manual it is. And you were talking about like these policies are on paper, but if you. Do bring in AI agents, which are probabilistic, if you wanna control money and you wanna whitelist things and say, if this do that, that is where actual, like programmable money, aka autonomous finance, does have a role. And I think that's like, not there today, but in like 510, years, it could really be huge.
Sy Taylor 35:13
Well, and what happens if an AI agent, yolos, all of your treasury somewhere else? Be really great to have these cryptographic guarantees and boxes on what needs to happen before the money can move, and some sort of smart version of a contract that you use PKI signatures to give you those cryptographic proofs is ready made, right?
Speaker 1 35:35
Yeah, no, you're right. We'll get there. Hopefully there won't be that disclaimer at the bottom, oh, this. Ai, can actually spend all your money without you knowing, but can I ask Zach a question that you cannot because of your hats right now? What happens you guys, I think, are making huge moves forward, really huge moves. And I'm so happy that Connexus is finally getting to where it should be. But what happens with all these corporates issuing those chains like tempo, right by stripe and others, not just tempo. I mean, they all want to be part of that FX game as well. Will you guys be working with them? How do you envision this eventually? Because stripe is obviously probably a customer of JP, as well as all the big fintechs.
Speaker 3 36:16
Yeah. Look, I think we are used to this operating model, so I would say there's nothing new. So we provide services, we draw the lines carefully, sometimes for certain things, right? So there could be areas where we may want to collaborate, and there could be others we prefer not to, right? But I think everything, it's always good to have a discussion to see where we can both win, right? I think that's the model where, like, both parties need to win, or there needs to be an area at some point for both parties to start winning. That's the natural model, like you said in the beginning of cybers.
Sy Taylor 36:52
It's the cybers model. You gotta remember, I'm from that tradfi world of, like, I collaborate and compete with people and where it makes sense for the business we do it and tempo, I would happily ask that question. I'd be very happy to because tempo is not stripes chain. It's a separate legal entity with which stripe is an investor. And that's an a very important distinction. Tempo is also neutral. That means that any payments company, any infrastructure provider, any financial institution, could issue their tokenized deposits on there. What I get excited about with two decades in financial services is, how do we design that to be institutional grade? How could you make it so that it's so institutional grade capable that you could have a JP Morgan scale deposit token on there, and you could have somebody permissionlessly Make a token that is a design challenge is unbelievably hard to try it yet, right?
Speaker 1 37:45
Like messaging, privacy, interoperability, yeah, if you're able, and now you're there. So we're
Sy Taylor 37:51
counting on you. I'm gonna give it a go.
Unknown Speaker 37:54
I think you don't get these three, right. We're missing that,
Sy Taylor 37:57
yeah, non trivial challenges from an engineering perspective. Garrett, any other thoughts before we move to next story?
Speaker 2 38:04
Yeah, I mean the whole tempo thing, I just love going back to it, because I think there's the smiling curve that some people talk about, like Ben Thompson goes into it. And maybe on one side you have like the super centralized it could be like Coinbase. Who wants to be the everything exchange, I think on the other end, which is more where we play, is more like the open ecosystem. It's super leans into that open finance, which for us would be like Solana, but it could be any of those players. And then I think at the end, you're gonna have these, like, more verticalized, niche players. I don't know where that fits, in the in the smiling curve. I think that's where tempo is gonna be. And so, like, some people always frame it's gonna be one or the other.
Sy Taylor 38:35
But you see, I just don't see that. Now, I think the market wants that narrative to be true, and I just don't see that at all.
Unknown Speaker 38:42
What do you disagree with on the on the curve, on
Sy Taylor 38:45
the smiling curve? Yes. Well, what you've done is you've set up a straw man where the smiling curve is the level of centralization, not the level of distribution. So I either have distribution or I have manufacturing on the smiling curve. I'm either doing R and D or I've got distribution. So I would definitely put this on the distribution end of the smiling curve. But I'd also say from an R D perspective, if you look at the history of Georgios and some of the team, these are some of the best EVM developers on the planet. And so what happens if I take some of the best EVM developers on the planet and I add distribution to it, I get something pretty exciting.
Speaker 2 39:19
Yeah, I would. I wouldn't bet against simpo, a huge fan. I think it's also going back to the hyper liquid thing. It shows, like, demand is basically everything. Like, we haven't seen this before going on Twitter, but the reason it is is because demand, right? It's kind of that aggregation layer, and so, like, that's where I do think something like tempo, especially with stripe behind it, other players can be absolutely huge. That's also, though, where you see these other ecosystems that maybe came out of this. Like, there is path dependency with a lot of things, and it's very hard to replicate some of these communities that have been around for a while. So I think that has its own kind of field. Then you have something like Coinbase, which very centralized, but really that's about distribution too. So I agree with you, distribution is king, pretty much, in the secrets.
Sy Taylor 39:55
But distribution doesn't have to mean centralized, and I think there's a difference between those two things. I. And from the banking world was like, you're very familiar with market structure, some of which is formed by committee, some of which is formed by a single legal entity, some of which is the banks. One Bank builds something and opens it up to its other customers. Like that is a very common pattern if you're from banking. It's not a common pattern, not a known playbook, if you're from crypto. And I think these are the worlds we need to start to bridge, which is, if you want to the benefits of being on chain and you want all of the world's liquidity on there, you have to learn some of the lessons from the world's liquidity. I'm going to push us to the next story, though. So this came from FX News Group, and this was 21x tokenizing cash and securities as an exchange. That exchange has gone live. So this is a Frankfurt based 21x and their exchange for tokenized cash and securities is termed as the world's first exchange to enable smart contract based matching and settlement. Investors can now use stable coins or other forms of digital cash and fiat money to buy and sell tokenized assets on 21x and this week, we also learned that NASDAQ wants to tokenize all of its stocks at the DTCC, all of them, all of their stocks at the NASDAQ. This is unbelievable. Is 2026 the year of on chain FX, or is it the year of tokenized equities?
Speaker 1 41:25
Yeah, so I think it's a great question. I think the person who really started this everything, I think, is Vlad from Robin Hood. He took the first shot at we are the largest company that's enabling end user retail to actually access public markets, and now we're going to do this tokenized shares. I think Kraken was a fast follow, but you might say, obviously, that you know, NASDAQ doing this, that would be huge. I just saw an interview of the NASDAQ CEO, and she was talking about how people only think about them as an exchange, but they're actually a financial market infrastructure that's selling this infrastructure globally. I don't know how many people know this. And if NASDAQ actually ends up pulling the trigger and doing this with the DTCC, then that would be amazing, because that would actually proliferate to more countries than you think, because they actually sell their tech to more than 60 different countries. And so we'll come back to 21x in a second. DTCC, there's an amazing lady over there called Nadine. She's been pushing a lot of the digital asset moving forward in the last, I don't know, almost decade. What she said, and I think is interesting, she said this week that innovation through PR is over in the tokenized asset world here? Here? Yeah, I hope so right. I hope so. I hope she's right. But what we've been seeing is that tokenization of securities is starting. It's not big yet. So if you look at the three waves of crypto we've had, obviously, you know, trading and speculation all the way back to the origin since 20 probably 2122 we started to see stable coins. Now they're in full force. Now we're starting to see tokenized securities, tokenized asset, real world assets. I think we'll only see them at full force in 27 just because we we have the regulation, but not we were just talking about this, that there's no financial market infrastructure regulation in the US, for example, for digital assets. There is for licensing. There is the when 21x says they're the first regulated exchange to do this, they're right and they're wrong, in a way, right. They're right because it's the first time that there's actually a license to talk about this, and they're the first one that got it, and I think that's amazing. By the way, they launched it this week. We were very proud to support them, by the way, that runs on fire block. So we're super happy for them. I think they obviously have a huge challenge, which all the exchanges have, which is the fact that you launched doesn't mean that tomorrow morning, there'll be a lot of customers there, and with who's their competitor on the other side? Would it be hyper liquid? Would it be Robin Hood? Now, would it be Kraken? Would I don't know. So obviously, they have a long way to go, but I think this will be the new normal in five years. I am willing to bet all of my fireblocks equity on it. Well, maybe not all of it, but most of my five bucks equity on it that five years from now, there will not be any exchange. They won't have something already tokenized, if not all
Sy Taylor 44:27
of it. Yeah, it's fascinating, though, when is a tokenized security, actually a tokenized security? And when is it a derivative? And when is it a wrapper of an SPV, of a something else, of a something else, and, and I think that's good for innovation, but bad for consumer protection. So we've got to find that line. It's going to be fascinating to watch. There's also Denari. There's super state. Super state launched with Galaxy digital. So Galaxy public stock is now available as a token, but this is one to one from the stock issuer. But I'm kind of reminded of the dematerialization in the 70s. It was Vlad tenef Who said this. What we did is we took the paper stock certificates, we parked them at this place called the DTCC might catch on, and then we recorded it as an accounting balance on a ledger. Well, now we're taking that stock certificate and we're turning it into a token like that's not that big of a leap, and then the adoption curve. Well, now, whereas stable coins have got to the last mile, I can hold dollars, maybe I can even get yield through treasuries. Be really nice to be at buy into the stock market, and especially in markets where that's less available. Gary, are you seeing any of that? Yeah, 100%
Speaker 2 45:37
I mean, I think when you see this coming out of like, huge exchanges like this more than anything like one, I'm on the marketing side of things, so it's like, how do you think about this from a marketing point of view? One, like, if you're a crypto wallet out there, and you're acting like, what do we offer to somebody? And they come there and it's like, Okay, we have stable coins, and then we have crypto Native Assets. The fact that you can now put stocks on there is massive, because a lot of people won't have access to stocks, and before that, they simply couldn't. So that's huge. I also just think there's a trickle down effect, whereas, essentially, like you said, you might come in for stocks, then you realize you can have greater yield. And at this point, if everyone's adopting crypto and tokenized stocks to some degree, does that mean every financial firm is running on wallets to some sort at the end of the day? So it's like wallet becomes almost the fundamental building block of all these different FinTech apps. And then from there, you automatically get access to all of these tokenized assets at once, which is awesome. I mean, it's really cool when some other product that you didn't even know existed, they come out and they release new stocks, new assets, and you immediately get access to it. It's insane. Yeah, that sort of
Sy Taylor 46:32
hidden compounding effect of defi is just really, really misunderstood. When one person builds a feature and the rest of the market has it, that is kind of, what are your perspectives on the tokenization of securities? How are you guys thinking about it? Is this gonna impact more consumer side? Are you thinking about it on the wholesale side? Like, where are you looking?
Speaker 3 46:52
Yeah, the what maybe referring back to the 21x story, right? Just generally speaking, around regulated exchanges. I think that's going to be the pathway for institutional adoption. You know, traditional institutional adoption, because they care about, obviously, regulatory clarity, accounting treatment, et cetera. So I think the regulated FMI piece is important. I think that's the catchphrase to get traditional institutional attention, yeah, and
Speaker 1 47:24
I think people need to understand that the opportunity, this is what 21x probably is aiming for, and I think it is genius, is that money, I come from payments, money, money movement. Let's say that's about $100 trillion worth of market you can try to capture, okay, alternative assets that could be tokenized, that's 570 trillion, right? That's almost six times what you can do in payments you can actually do in tokenized assets. Okay, so when 21x has done that, they're basically saying it's great that payments and stable coins are going live right now, and all of these people coming in, we're targeting that 5x bigger market of token as assets. And I think this is why NASDAQ wants to do it. I think this is why we'll see all these exchanges globally ending up doing it. That's probably the biggest opportunity that's out there.
Sy Taylor 48:16
It does sound like a huge opportunity. Any other thoughts on the institutional side. Garrett, how are you viewing that? Are you viewing that as something that you'd welcome? Do you see it as something that your your customers are gonna want? Is the ball? Well, playing out. Oh, 100%
Speaker 2 48:29
I mean, I can't say everybody, but 95% of people are gonna want that. We came from a very crypto Native perspective where, like, nobody wanted, necessarily, institutions to come in and play and, like, deal with the institutional product. I don't think that's the case. Now, right? You know, everybody thought, everybody talks about including us, at times, too much. We talk about features, we talk about the tech. And this is cliche as well, but it really is about outcomes. Like, the end of the day, people want faster, cheaper and more access to assets, and that's what this gives you. So I don't think a lot of people care where it comes from. The thing you do want to do is like you care about your consumers and keep them safe. So that's where, like, you as a builder do need to care about, like, what you're building on and who you partner with.
Sy Taylor 49:04
I think that's a really great place to leave it, because the responsibility of building this stuff is a little bit less YOLO and a little bit like, Mind how you go. Because there's definitely something to be said for like, you can't just build stuff and throw it out into the open if you're the consumer brand. I think trust really, really matters, and consumers are going to want brands that they trust. And you could offer all the yield in the world and disappear tomorrow, and we'd have another FTX Terra Luna set of headlines, and then all of us that care about this technology would be stuck having to defend ourselves and not getting internal budget allocated. You know, like, that's kind of the difficult phase we want to avoid.
Speaker 2 49:40
It's kind of funny. There's like, a sweet spot when you're, like, promoting yield on a product, I'm not even talking about our own, but like, if it's between like, four and 8% you're like, that looks good. They're doing something right. And then once they go above that 8% you're like, something sketchy is going on. Yeah? So it's even funny. Perception wise, you do have to go about this the right way. And yeah, things have changed. I think used to, you know, people didn't pay attention. They're like, Oh, it's true. Percent yield. That sounds great. People actually do care now, and especially when you're dealing with institutions, it's all about trust. And at the end of the day, like building products is becoming easier. I mean, product industry knowledge is still like, that's where the alpha is more anything is that trust is the brand, and that's just like talking about stripe earlier, like that's what they have, and that's what people in crypto are gonna have to do as
Sy Taylor 50:17
well if they wanna compete with those incumbents. Yeah, all right. Well, I'm gonna thank our incredible guests today. Thank you very much to our live audience, and thank you for listening along at home. Round of applause for audience.
Sy Taylor 50:35
Goldie, where can people find out more about you and fire blocks?
Speaker 1 50:38
Obviously you can look us up@fireblocks.com you can look at me at LinkedIn, ran Goldy or on X, ran Goldy.
Speaker 2 50:44
Garrett squads.io and Garrett Harper
Unknown Speaker 50:47
on Twitter, jpmorgan.com/connexus and on LinkedIn, Basak Toprak,
Sy Taylor 50:52
amazing. You'll find me at sy Taylor on Twitter or LinkedIn. You'll also find me at FinTech, brain food.com and tempo dot XYZ. If you haven't already subscribed to the show. Firstly, what are you doing this live audience? That's weird. Secondly, please hit that subscribe button. It really helps us and leave a review too. And your homework for today is to tell one other person to do the same thing. I trust you, and I believe that you can do it. Thank you so much to the team and the panelists. Thank you to everybody that put this event together, to our sponsors and to CMS for hosting us. This has been an incredible show. It's time for some lunch, and that all important networking. Let's get food.