In this bonus episode, Simon Taylor, Head of Market Development @ Tempo is joined live from Stripe Stablecoin Day in London, by Zach Abrams, CEO & Co-Founder @ Bridge to discuss the shift from small developers to large banks and fintechs adopting stablecoins, the critical role of last-mile providers in stablecoin adoption and more!
In this bonus episode, Simon Taylor, Head of Market Development @ Tempo is joined live from Stripe Stablecoin Day in London, by Zach Abrams, CEO & Co-Founder @ Bridge to discuss the shift from small developers to large banks and fintechs adopting stablecoins, the critical role of last-mile providers in stablecoin adoption and more!
Timestamps:
Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
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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
Zach Abrams 00:00
So I think this is one of the bigger opportunities in the stable coin space that's kind of like out there for for the taking, that you're going to have many folks who build, you know, take, like dollar app, for example, who build this, like global infrastructure on top of stable coins. But that will mean that all these applications will need these last mile providers, because consumers who are using dollar app, or businesses who are using dollar app need to make payments, need to settle transactions in their local currency, and historically, because you were primarily building on top of one single bank in a country, you would just use your bank to facilitate that payment. And now you it might be very cumbersome to integrate with a new bank in every single country you know like to support something like sling is building, and so you're going to want infrastructure providers that solve this. Up this this problem for you at scale.
Sy Taylor 01:03
Welcome to tokenized the show focused on stable coins and the institutional adoption of tokenized real world assets. And today we are recording at stripe stable coin day live in London, Tai
Sy Taylor 01:23
Hi. My name is Simon Taylor, head of market dev at tempo, author at FinTech, brainfield. And today I'm joined by Well, the one and only, Zach Abrahams, CEO and co founder of bridge.
Zach Abrams 01:34
How you doing, Zach? I am doing very well. Excited to be here. Good to have
Sy Taylor 01:39
you this side of the this side of the pond and really appreciate you. How's life?
Zach Abrams 01:45
It's good. Yeah, I'm adjusting to the time zone, but it's good.
Sy Taylor 01:49
You're doing well since the last time we had you on the pod. Zach was on tokenized podcast about 1314, months ago. A lot's changed since then, but that was our most popular episode ever, and really good still today. No, we've grown a bit since then. But you know, you were there at a point in time I think this is going
Zach Abrams 02:10
to be, yeah, we were the biggest crypto acquisition of all time, very, very short lived. Yeah, no. Well, a lot's happened since story in my life.
Sy Taylor 02:19
Just before we dive into some of my questions, I gotta remind everybody that views and opinions of contributors today are their own and might not reflect those of companies they represent. And please do not take anything we say is tax, legal or financial advice, and definitely, in my case, not fashion advice. So I'm gonna remind you that this episode is made possible by Visa and our friends at stripe. So Zach, you were just saying that you were once the biggest stable coin acquisition. How's it How does it feel now, other people are getting acquired for bigger numbers. Did you sell too soon?
Zach Abrams 02:54
Isn't it obvious? I mean, we, we. I mean, right now, who could have predicted how big this space would become? And, you know, I think that in many ways, like we helped catalyze, and our acquisition helped catalyze all of this activity. So hard to say, but it is certainly the case that the opportunity is much more clear and much, much, much bigger today, you know, as you look at it today, than if you were to look at it a year ago. I mean, if we had this podcast, you know, a year ago, that's why I asked if it was still the number one, because I feel like there were, like, you know, maybe 100 people in the world who are excited about stable coins then, yeah.
Sy Taylor 03:42
I mean, I was back at sardine as you remember, and sort of have been in it for a while. It feels like a few folks, like zero hash, like bvnk and others, have been plugging away, and it was that one thing that nobody seemed to care about, except for a few weirdos, and those weirdos are now billionaires. Good on them, but I'm interested. Since the last time you were on the podcast, what's really changed in the market? Yes, that announcement. Yes, the genius act. But in terms of use cases, in terms of who the customer is, what would you say the biggest difference is now who's buying from you, and what problem are they trying to solve?
Zach Abrams 04:20
Well, a year ago, we basically the market was developers, generally outside of, you know, the US and Europe, who were very small, like very small teams, very small products, who had independently come to some conclusion that stable coins were going to be very important for them or help them serve their markets. And so for us, our inbound interest was like teams of two people in Argentina or three people in Nigeria. And today, our inbound interest is, you know, large banks and fintechs and so. So you couldn't have a more dramatic shift over the course of the last year, and after the acquisition, we, like very viscerally felt that, you know, bridge and the stable coin space, sort of shift along the adoption curve, and it brought this whole new wave of folks into the into the space, because stripe had sort of legitimized the opportunity, and then when they came into this space, they began to see what all these startups ahead of them had built and the momentum that they were gaining and wanted a part of it.
Sy Taylor 05:37
And what are the use cases that have momentum. Now, one of my favorite slides from the stripe tour and sessions was this, this one I think will did, or maybe it was Patrick of like stripes hockey stick growth, and then they overlay bridges growth on top of it, and it kind of dwarfs it in the early years. So, but what's driving that? What is the primary set of use cases? If you could just off the top of your head, top two or three,
Zach Abrams 06:02
if I were to, like, you know, make it as generic as possible, it is. The first is cross border money movement. So, you know, someone like Felix pago or Zulu moving money from the LATAM to the US, or us to La Tam, or like Starlink moving money from Africa back to the US. And then the second is folks who are building on top of stable coins as a global financial building block. Before stable coins, all building blocks were localized. You know, you needed GBP infrastructure to serve to serve the UK. You needed us infrastructure to serve the US. Stable coins are the first bit of infrastructure that enables you to serve all of these markets on top of one platform, one wallet, one store of value, one card, one one money movement integration.
Sy Taylor 06:54
Do you think that with the genius act, with these new money movers coming to market. Is that a threat to banks, or is it, as Tony from ubix would say, a gift to the banks and everybody involved?
Zach Abrams 07:10
I think that state, my guess is that stable coins will sort of shift the opportunity for banks. And it kind of depends, you know, I think that what will happen is a lot of fintechs will start to be built on top of banks, but that does not disintermediate. The need for banks, you know, money will need to move from this tokenized layer and settle back down into this, into this Fiat layer. And so I think that the, you know, the infrastructure that that ubix is building is really important. I think that banks will continue to be really important. But I also believe that the overwhelming majority of transactions and activity and payment volume and raw number of payments will happen on this tokenized money layer. And so
Sy Taylor 08:00
how much is that? That last mile still an issue in stable coins? Because that's one thing I always hear from folks in the traditional financial services world. Okay, you've got $1 stable coin to a mobile phone in another country, but then what can they do with that? And are cards helping that? What's healthy?
Zach Abrams 08:24
So I think this is one of the bigger opportunities in the stable coin space that's kind of like out there for for the taking, that you're gonna have many folks who build, you know, take, like, dollar app, for example, who build this, like global infrastructure on top of stable coins, but that will mean that all these applications will need these last mile providers, because consumers who are using dollar app or businesses who are using dollar app need to make payments, need to settle transactions in their local currency, and in their case, that's in MXN or in Argentinian pesos or or Brazilian Ray eyes, or Colombian pesos, or whatever else. And historically, because you were primarily building on top of one single bank in a country, you would just use your bank to facilitate that payment. And now you it might be very cumbersome to integrate with a new bank in every single country you know like to support something like sling is building, and so you're going to want infrastructure providers that solve this. Up this, this problem for you at scale,
Sy Taylor 09:38
makes complete sense that you probably want one API to kind of manage that. It's certainly something that has been around for a while. But the other trend, I mean, you announced recently a new product called Open issuance. But historically, this has been a very concentrated market. It's tether and USDC and then maybe Athena, if you count that as a stablecoin. Coin, but actually it's more collateral. Does that change? Are you making a bet that that changes? Will everybody issue their own stable coin? Or are we sort of just pushing something up the wrong way, and there's a power law here? Yeah.
Zach Abrams 10:15
I mean, I certainly believe it will change, or I actually believe it has to change for the stable coin space to be as big as we want it to be. Right now, the ecosystem is wholly dependent on basically two assets. Those two assets are not super interested in the payments business itself. Like their business models are AUM oriented. So, you know, they make money when money doesn't move it. They want money to sit statically, and their business model is collecting, collecting the interest. And in fact, they so don't want money to move that. Both of them charge fees when you want to convert money back into fiat currency, so that that that misalignment is going to make it hard for stable coins to improve upon the economics that that exist in a bunch of you know, Fiat, Fiat payment experiences. And so you're going to need other stable coins that want to serve payments use cases and want to serve banks. Want to diversify where their assets are held, so other people can participate in the in the underlying economics, and are going to want to be programmable by the underlying, you know, users of those of those assets to serve the use cases that that exist on that specific platform. So we think it like it has to happen to to grow the market where we where we think it's going to be. And over time, I believe that, you know, tether and circle will get bigger, but have a much smaller share of the overall market. Hopefully they double or triple or what have you, but in a couple years, they're 15 or 10% of the overall market, and we have, you know, 1000s and 1000s of other issuers, and
Sy Taylor 12:06
then if you've got a long tail of other issuers, there's probably a bunch of fragmentation risk there. How are you thinking about that? And what are you saying when people ask the fragmentation question?
Zach Abrams 12:17
Yeah, so we, we certainly think there will be a ton of, a ton of different stable coins. I think that, you know, my mental model is that the stable coins, over time, will recede into the background. So, you know, today, we're in this weird place where someone logs into a crypto wallet and then they kind of like, go to the stable coin store and they can like, buy, you know, the circle stable coin and the tether stable coin and the Phantom stable coin and like that. That model makes no sense. Like you're never going to go to the stable coin store and select among amongst, like, 20 different versions of $1 and pick one based on some arbitrary, you know, decision,
Sy Taylor 12:54
basically asking a consumer to assess the credit risk of the stable coin issuer.
Zach Abrams 12:58
Yeah, and that's that's just, it's never gonna happen. What will happen is that you will move money from platform a to Platform B, and Platform B will just seamlessly transition your money into the stable coin that they are working with, and then you'll move it to Platform C, and Platform C will seamlessly transition money. And to give a concrete example today, let's say you are storing money in Metamask that's an m usd, which we help issue. You move it to Phantom. When you move it to Phantom, it'll default into cash, which is phantom stable coin. Then you take that stable coin, Phantom cash, and you pay at a stripe merchant that will settle down into cash to the stripe merchant, or settle into into, you know, USDC on stripes platform. So, so all of this will happen without the consumer knowing that it exists. So yes, the market will be fragmented, but there will be this connective tissue that removes the complexity tied to that fragmentation, much like Visa has done, as as we were talking about before with all of the all of the various banks that exist,
Sy Taylor 14:04
it makes sense. You got to hide the wires. I'm not thinking about how cloud platforms work when I'm using Netflix or YouTube or whatever else. That makes a ton of sense. But do you think that there's a risk that the countries, some of the ones you mentioned, in the Global South, that are the biggest adopters of stable coins for cross border money movement. Are you seeing any pushback from local regulators, and is that some sort of risk here that people need to be aware of when they're looking to use stable coins?
Zach Abrams 14:34
You know, today, there is not that much pushback, I would say, outside of, you know, Europe and the UK, weirdly, yeah, but, but in most of the world, there is, you know, a lot of Regulatory Flexibility as folks build with build with stable coins, but, but I do suspect that i. Um, as stable coins become a bitter bigger part of all of these economies, it's going to be something that regulators are keenly aware of and interested in and will treat unique, you know, in a unique way, to sort of serve their country's needs.
Sy Taylor 15:17
Where does the sort of existing platform company, ride hailing, company, those sorts of companies. Where do they get the most value from? Something like stable coins? Is it treasury management? Is it payout? So what are you seeing and hearing?
Zach Abrams 15:34
Yeah, it's a good it's a good question. So two, two things, or maybe more. So the first is definitely treasury management. So all a lot of these ride handling companies like you take Uber, well, not all of them you take Uber. For instance, Uber is in a lot of different countries, like Lyft is only in the US, I think, but Uber's in a ton of different countries, so that creates a lot of financial complexity for them. They have entities in all these different countries. They have currencies, foreign currencies in all these different countries. They're collecting payments locally in all these different countries. And they they operate primarily in US dollars. They report in US dollars. And so as a result, they're taking risk in all these countries. And we solve a you know, we work with Starlink, who has a very similar type of problem. They're selling Starlink in all these different countries. They then work with bridge to take money out of these various countries and bring it back to the US. So we expect that we'll see companies like Uber work with companies like us to repatriate funds and rebalance corporate money all around the world, I also think what will happen is companies like Uber, it's challenging for them to move money. Moving between all these various entities is not as simple as sending money from like if your entity in Japan needs money, it's not as simple as simple as sending it from the US to Japan for legal reasons, you might have to send it from the US to Mexico, to Europe and then to Japan. And all of those are swift payments that take time to settle. So if you need money quickly in a different legal entity, it takes a lot of time that can easily be solved with stable coins. The second thing I think that will happen is, like a company like Uber, it is very hard to stand up the unique payment infrastructure in every single country, and so it's sort of, I think a lot of people have heard this story, but like in India, they went into the Indian market, and everything was cash based, and so they had to build all this human infrastructure to be able to facilitate cash payments, and all the risk that was associated with that. And I think that as stable coins are, you know, permeate, you know, gain more and more consumer adoption, it will make it trivially easy for the the Ubers of the world to turn on the nth market
Sy Taylor 18:03
makes a lot of sense, because the complexity has always been, as you said earlier, that everything is national infrastructure, that payments feel global if you're far enough away and you squint, but they are the opposite of that. It's just layer cake all the way down.
Zach Abrams 18:20
Yeah, anybody who's worked in payments know that they are deeply, deeply local indeed.
Sy Taylor 18:25
And then there's like a layer cake of different companies that help you with a lot of that stuff. If I'm a NEO bank or even even a more tech forward financial institution, should I? Should I be adopting stable coins? And what am I? What are my steps to be able to do that? Take a large Neo bank who's maybe a bit more tech forward. I know a NEO bank has stable coins available. Some folks have done different things. What are your thoughts on the Neo bank space? Yeah.
Zach Abrams 18:52
I mean, we we work with a number of them. So we work with a number of Neo banks that are just based in the US. We work with a number of Neo banks that are global. We work with a number of Neo banks that are that are regional specific, like in LA Tai am or Africa. And you know, the use cases are all a little bit different. So we, in the US, we work with meow, who is building, increasingly, on top of stable coins. They make it so that every dollar deposited into those accounts is a yield bearing on day one. So you don't have to move money between all these different different accounts to get access to those earnings. They also enable folks to accept, to deposit and withdraw funds via stable coins, which enables them to serve a bunch of more crypto native companies, which has become a very, very big market for them, the the others, you know, if you think about LA Tam, we work with a number of folks who are building in LA Tam. In fact, they're like three or four ex Revolut teams who are all serving that market in various ways, the revolute mafia. Yeah, yeah. And they're building dollar based account to serve, you know, consumers or to serve businesses in these various markets. Dollar app is one but another. Another example is slash. They're a Brazilian company building a business, Neo bank, and they offer a global US dollar account through bridge, so they can serve businesses in like, 100 plus different countries. And we also work with clever in Africa, which is doing something similar on that continent. And there was, you know, before working with us, they're really, you know, I think we all take it for granted, because there's a number of, you know, banking infrastructure companies that we could integrate with to build what we want to build. But if you wanted to serve the African market, There literally is, like, not a bank that has clean APIs in Nigeria that wants your business, because you are just going to compete with them, and they're like, one of two banks or what have you. So there has not been the underlying infrastructure to serve those markets, so they're building on top of stable coins and giving them like a world class Neo banking experience.
Sy Taylor 21:10
But I hear you say that, and I really argue why I think the European psychology has been one of risk first, because the European payments regulatory conversation is always about sovereignty, the worry about the lack of sovereignty in giving up sovereignty and the dollarization. And I have some sympathy for that, but I do wonder if that turns around, if we start to get tokenized deposits just briefly, before we get some fun questions to close out on your thoughts on tokenized deposits, are they a thing? Are they a pint dream? Is it just what banks say in earnings to make themselves feel better, or are they part of the story?
Zach Abrams 21:48
I think that so for a long time, I could not understand tokenized deposits for the life of me, it just seemed like a worse stable coin, like you know, it's stable coin, but not yield bearing. But, you know, now my view is pretty different. We've spent a lot of time with banks, and it's pretty clear that like they don't want to issue stable coins like they they the underlying access to the yield via treasuries is not their business. Their their business is, you know, lending the money and generating return on those loans which is higher than the Treasury rate, which totally makes sense. So for them, they want to tokenize those assets and then use them to transact. And there is an enormous while. I don't think that consumers are going to be outside of the walls of the bank. Would be large users of these tokenized deposits, or at least, I'm less convinced of that. I do think that there is an enormous amount of bank to bank activity that happens, and that bank to bank activity is going to happen via tokenized asset that the banks want, which is a tokenized deposit.
Sy Taylor 22:55
Atomic swaps of tokenized deposits coming soon to a blockchain near you. Definitely the case. All right, couple of quick, fun ones to finish off. I asked, I put out on my social media that that I was going to be interviewing Zach, and I asked for questions. And these were two of my favorites. First one, how did you get this at stable coin? Handle on x
Zach Abrams 23:20
so we realized, I think we had some lame handle, like that was, like, bridge, like, literally, bridge, D, o, t, X, Y, Z, or something like that before. And we realized that at stable coin was was a dead handle, and nobody was using it. And so we reached out to the Starlink team, because we know that they're owned by the same entity that owns some individual that owns x. Then they connected us to folks at the X team, and we reached out to someone to acquire that handle.
Sy Taylor 24:00
It's not what you know, it's who you know. And then last fun question for you, if you could be a stable coin, which one would you be, and why?
Zach Abrams 24:11
I mean, I think everyone would kind of want to be tether. It's like the fun stable coin that makes all the money. But I think, you know, ultimately the stable coin that is, like, the closest to my heart is going to be the ones that we issue.
Sy Taylor 24:27
Yeah, I thought it was going to be usdb, all right, I just want to thank our live audience and everybody watching or listening at home, so much for listening to this conversation with Zai. Can we give it up for
Sy Taylor 24:49
Zach? Zach, if people do want to find out more about you or what you're doing at bridge, where do they go to do that?
Zach Abrams 24:55
Bridge is handle is just at stable coin, and I'm at zca.
Sy Taylor 25:00
Rooms, and you can find me at sy Taylor on X or wherever you get socials, head to FinTech, brain food.com, if you like long ranty British guys opinions on things. And please subscribe to the token ice podcast. Leave us reviews, likes and all those things I'm supposed to say at the end of a podcast. Thank you very much. And we'll go to the live Q and A for just the live audience, in just a second. Bye for now.