On Ep. 56 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Haonan Li, CEO & Co-Founder @ Codex and Stone Atwine, CEO @ Co-Founder @ Eversend to discuss Jamie Dimon on stablecoins, financial institutions shifting from strategy to execution on stablecoins and more!
On Ep. 56 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Haonan Li, CEO & Co-Founder @ Codex and Stone Atwine, CEO @ Co-Founder @ Eversend to discuss Jamie Dimon on stablecoins, financial institutions shifting from strategy to execution on stablecoins 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
***
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
Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I am your host for today, author at FinTech, brain food, and head of market dev at tempo, joining me once again, is my friend, the one and only. Kai Sheffield, how are you, sir?
Cuy Sheffield 00:32
I am great. We got a lot of shows coming out. I feel like we've been doing them separately. Now we're doing them together. It's been a lot of fun. We've got great guests
Sy Taylor 00:40
today. We've got some incredible guests making a return. Is haunan Lee, the CEO and co founder of Codex. How you doing?
Speaker 1 00:47
Honan, I'm good Simon, I'm good. Day one of the Mamdani era here in New York City. So excited to see how it plays out. Wow.
Sy Taylor 00:55
Yeah, you are there for history. You definitely are living through that, and joining us making history on the show debut is stone at wine, who's CEO and co founder of eversend. How you doing?
Speaker 2 01:06
Stone, I'm good. I'm good. Simon, thank you very much for having me. We're excited
Sy Taylor 01:10
to have you just before we do get into the show content. And my goodness, there's always a lot to get into. I've got to remind everybody that views and opinions of our contributors today are their own and might not reflect those of companies they represent. And please don't take anything we say as tax, legal, financial advice or any other sort and do your own research before you do anything risky with financial assets. And I need to remind you, of course, that this episode is brought to you by our friends at centrifuge. Centrifuge exists to bring institutional grade finance products fully on chain. Centrifuge is a full lifecycle 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, let's start with the first story. I don't know if anybody saw this one, but ripple acquired a European wallet custody firm palisade, and are raising $500 million at a $40 billion valuation. So this is their fourth acquisition this year after buying prime broker hidden Road, stable coin infrastructure firm rail and corporate treasury management platform, G treasury and palisade is a wallet as a service platform, a bit like dynamic or turnkey or privy, or one of those sorts of things. And that's going to be baked into ripple custody again, a bit like how fire blocks has dynamic. I'm going to come Tai Hanan first on this lot of announcements this week. What was most interesting to you about the series of announcements from ripple coming out of their swell conference? I believe it was.
Speaker 1 03:10
I think this is some Giga brain stuff from the ripple team. I think if you zoom out what has been the ripple play, the ripple play has been talk about payments and talk about being the payments chain and hype it all up, have enormous valuation, and then go and buy the substance. There's this kind of elegance to the play you almost have to admire.
Sy Taylor 03:29
Do you know it was Diogo Monica a couple of weeks ago said of ripple, is this the marketing firm that has used M and A to become a real business? And part of me wonders like, okay, but if that's the thing, then that's not incorrect. You can M and o your way into something. And they're sort of full stack here. They've also announced they've done, I think, $95 billion of TPV in that process, and they have a lot of interesting pieces stone. Your thoughts on this announcement, yeah,
Speaker 2 04:00
they are definitely doing a wonderful job of using M and A to become a leading player. And I think the main thing that I noticed is the attempt to build like an end to end stack of everything around payments, they're into custody Treasury issuance, all under one roof. And this place very interesting, a one stop shop for corporates and banks to handle digital assets, stable coins and tokenized assets. It's interesting. It's
Sy Taylor 04:31
an interesting philosophy of vertical integration or not. Kai your thoughts.
Cuy Sheffield 04:36
It seems like every week on the show there's a ripple acquisition. It's it's hard to keep up with the pace of their m&a. It's interesting with the Palisades acquisition, to think about how custody is evolving in general. And ripple acquired a company called mataco A few years ago, and so they have a ripple custody product, and my understanding is that's been very focused on financial. Institutions, enabling banks to set up custody within their own on prem environment. So that's been the core motaco product, but it seems much more on the almost like Treasury side. If you want to create a ability to hold Bitcoin on behalf of your high net worth customers, like a bank could use mataco to do that. Now we're seeing this interest in wallet as a service, which kind of serves the other end of the spectrum, where it's much more about, how do you embed wallets inside many different applications, and being able to offer self custodial wallets to end customers, or have very flexible key management. It's much more server based than it is actually setting something up on prem. So we just saw fireblocks has been a leader in institutional custody tech. They acquired dynamic, which is more kind of embedded wallet as a service. And so I think that we're seeing more of the demand and the need for this broader range of custody services that can do everything from be a secure way to hold keys behind many different assets, as well as be easily embedded inside applications, as well as be able to offer self custodial setups. And so it's really interesting people recognizing like, if you want to do anything in the space with a stable coin, it starts with, Okay, how are you actually managing the keys and then being able to play at multiple points across that spectrum seems to be one of the broader trends
Sy Taylor 06:26
that's happening. What's the glass I'm looking at? And how am I instructing the movement of that stable coin as a customer? And I've had countless conversations in the past week with several different financial institutions, sort of explaining what wallet as a service is and introducing them to this part of the market, because it's, how do you take this to your customers? Is the fundamental question. It's like, all right, I can custody the assets, but then what you're changing my mobile app or changing my online banking is going to take a long time. And, like, I don't want to build all of this stack out. So as a service really, really fits quite nicely. Haunan, I know you've got a lot of connections into Singapore and Asia Pacific. Talk to me about ripples presence in that part of the world, and how significant a player they are or not. When it comes to some of this
Speaker 1 07:16
stuff, I think ripples name comes up. But I think, to speak candidly, I think it comes up more like in conferences than in market. I think you're seeing ripple transform, right? Ripple went from this fantastic business, which is a infinity gross margin business. It's called sell a token and sell a dream, and then now they're moving into really doing payment offs. And so in a sense, I guess their margin will compress. But I think it's good, right? They've working on real substance. And if they integrate all this stuff, I think they'll be a really formidable
Sy Taylor 07:46
competitor the Fortress Investment Group, Citadel securities, Pantera capital, Galaxy, digital, Brevin Howard and Marshall Wallace are the investor group here. That's heavy hitters having an I know you've sort of worked with similar categories of investor. What is it they look for when they're evaluating something like
Speaker 1 08:06
this? I think there's this anxiety in traditional finance that renting columns will not save them, that even though they have these big buildings and this incumbent position, that they're in the midst of a platform shift that will leave them behind. I think when you feel like that, people start throwing money at things in hopes of getting some corporate Xanax of sorts. There's an aspect of that going on here, right? And I think they certainly look for a team with the expertise the focus on stable coins. I think one of the great ironies of our space is that stable coins are payments. Right? Went from the most hated category in crypto three years ago, if you said you were working on payments, people would laugh at you, right? This is terrible. This is the graveyard of all crypto startups to now the hottest possible category. I think it's again, this less enough. You've got to be in the water while the wave is coming up. Stone.
Sy Taylor 08:59
Your thoughts on some of the investors here, or some of the market perception shifts that haunen was talking about there.
Speaker 2 09:06
Yeah, there's a real shift from speculative tokens to real use cases now, and these investors, including the potential customers of ripple the banks and the corporates they are looking at now, on top of the pressure of moving away from traditional payments, as is, there's real confidence in institutional, regulated rails and ripple has noticed this. That's why they're buying everything that's necessary. And I think going away from just looking at XRP as tokens is a massive narrative shift. So payments, Treasury, tokenization now is replacing crypto trading and those tokens that they were building. So I think at the end of the day, it's a good thing. And repo has really been trying this for a very long time. They've been trying to go into payments. It. Never really happened properly, but using M and A is a very good way for them to actually jump in and get moving at the right time.
Cuy Sheffield 10:08
It'll be interesting to see how ripple equity versus XRP are perceived over like a longer term period. And XRP, I think, fully diluted valuations, two $20 billion and now ripple equity raising it 40 billion. I don't know exactly how much of XRP ripple owns. And so then it's like, are they going to go public in the future? And is it kind of like one of these digital asset Treasury companies where you have, you have a business that's making money in payments, and then you also hold a lot of XRP on the balance sheet. And as we talked about on the show, like, what's going to be the connection between the two? Is RL USD going to run more on XRP ledger, and then is that going to drive demand for XRP? But today, RL USD is more on Ethereum, and so if RL USD grows on Ethereum or the other businesses that they have on other chains, how does that get back to XRP? So it's just gonna be really interesting to see this play out. And I think in the future, there will be multiple examples of public companies that also have public tokens that trade separately from the equity, and we'll see how those end up being viewed. And is there gonna be a retail investor run of the same people who buy XRP are now going to buy ripple stock in like, it's hard to really reconcile those two together. Still agree it's
Speaker 1 11:27
a brand new part of the capital structure, right? They got update all the textbooks, and they've got, like, Junior debt, senior debt, equity, and they got tokens, and they're going to figure out all this sort of cross capital structure arbitrage out over time well.
Sy Taylor 11:41
And I think the point here is there was the case one against the SEC, and that set a precedent of XRP in that legal proceeding was not deemed a security ins far as it got. And I think that sort of changed the perception of ripple to a lot of folks in digital assets and crypto more broadly, of like, okay, this is an organization and a token that is here to stay, and then in the things that have happened since, like the genius act, and, like a lot of the announcements from US regulators, tokens appear here to stay, then we have the digital asset Treasury boom. So that is a really interesting question of where that fits with the business. These two things almost feel, still somewhat disconnected. To Kai's point, I don't know where RL USD hits the ripple ledger, and I don't know where g Treasury hits. RL USD, which hits the custody business, which hits the wallet. As a service business, these things feel somewhat disparate. And as a payments veteran, I always used to joke about certain payments companies being like three kids in a trench coat trying to be an adult. That's always the risk with M and E. But there are companies that have pulled it off, like, if you go look at meta, Instagram and WhatsApp were greatest goat acquisitions, Google with DoubleClick and Google Maps and Android like you can do this extremely well, and maybe that integration is just really an execution risk question, so I'm really hoping to see some coherence in that strategy. I want to bring us to the next next piece I picked up this week was there was a round table discussion at the future Investment Initiative event, and it featured sort of Jamie Dimon and Larry Fink talking tokenization. And whoa, it finally happened. Diamond said crypto is real. Stable coins are real. Haunan, how did you feel about that is that responding to client pressure, what were your thoughts when that happened?
Speaker 1 13:44
You know, I think he pulls off the dignified capitulation very well. I'm not sure I would be able to pull it off quite so well. I mean, Jamie is obviously a enormously talented and brilliant man, and he's always sort of been high skeptical of maybe the crypto product market fit. And it's great to see somebody so prominent really see reason. It
Sy Taylor 14:04
does feel like a watershed moments done. And the other thing that happened is Larry Fink saying, I think he was asked quite an open question by the interviewer, who said, We are not spending enough time talking about how quickly we are going to tokenize every asset, and what does that mean for the role of the dollar? What does that mean for the role of bank payments, and what does that mean for the payments companies? Have you spent some time thinking about those topics, and where do you think that the important answers to the role of the dollar or bank payments, or payments companies, starts to come in? I look at
Speaker 2 14:41
it separately. And obviously these guys are not sleeping. They are always thinking about this, especially the existential threat of their traditional businesses as they stand. But I look at stable coins more like the solution to improve better. Payment rails and tokenized assets will be very, very interesting, where they try to put everything on chain, probably do a lot of yield on top of that, and what they're trying to do is to turn the rails that are upcoming into real business for themselves, especially with some of the emerging markets where this is working really well. So I think they are thinking of using payments table coins to move value and tokenize assets to store and grow that value. But at the end of the day, I think it will not matter, and they will do a good job, because most of the users will not be able to see the pipes in the background, but these guys are not playing around. They will still be better, faster, cheaper, like Hanan said, it's capitulation, but still emerging as big players in the space, obviously, because of the amount of payments and asset management that they're already
Cuy Sheffield 16:01
involved in. It's interesting to just think about where this interplay between tokenized assets and stable coins goes. And like, what are the connections between the two? And will this be a flywheel where, like, one accelerates the other. And so my very simple model for this is, I think about almost like, three ways. One, you have tokenized treasuries becoming more and more the reserve backing for stable coins. We're seeing some of the protocols you have shout out to m zero and that team that they're using on chain collateral for the reserves to then be able to see, okay, this stable coin is backed by, I think it's super state as one of the tokenized assets, then you have the ability to say, okay, can stable coins enable 24/7 trading of tokenized assets? And what's the benefit there? And being able across the world to get access to a tokenized version of Apple stock or some fun that you can then trade in real time for stable coin? I think that's interesting. And Blackrock talks about the benefits there. And then the one I think is most interesting is tokenized assets as collateral, to be able to use in a smart contract, to be able to borrow, and being able to have stable coins as the way that those loans are dispersed. And so I think once you can represent many different types of assets on chain, what can you actually do with them? And it seems to me, the most interesting thing you can do with them is actually be able to use them as collateral and create new types of credit markets with those assets. And so I could see this world where stable coins have already hit Escape Velocity. Tokenized rolled assets are much kind of lower in terms of, was it a few billion dollars in terms of the total market cap, but they will continue to come closer together and interact with each other. And I think Blackrock has obviously been really at the center from a mainstream, large financial institution that's trying to drive this intersection. And I
Sy Taylor 17:54
think both of them have customers that are demanding this product increasingly so. JP, Morgan is not custodying digital assets, but it has been settling payments for Bitcoin trades for quite some time. So for a big enough customer, even if they're a crypto native institution wants something, they will do it similarly, blackrocks Biddle is used by some of the largest institutional customers, but both of these companies are the classic economies of scale businesses, the for them, sort of a slightly more efficient cross border payment than retail gets is nothing if they're charging one basis point on an FX transaction, still 99% margin like it's they have such wild economies of scale that getting into tokenized real world assets needs that scale. But if there's a customer willing to pay them at a different rate that wants tokens, then hey, let's go do that. And I think what's happened is, with stable coins and some of the regulatory clarity, the business case is getting better and better and better as time passes. And JP Morgan in particular, has invested for what, half a decade, into Connexus, has multiple products in there, has done jpmd And so now when the client demand hits the product you can sell, this becomes a different conversation to do I like Bitcoin or not? It's a conversation about, Do I like this business that is much bigger than Bitcoin, yes or no. Haunan, I'm interested in your views of, like, who the next adopter is of tokenized real world assets. I know payments are kind of your bag, but is it the growth in crypto native institutions? Is it people who happen to use stable coins? Like, where's that real world asset growth going to start to come
Speaker 1 19:41
from, yeah, we're spending our R and D efforts and really thinking at the frontier of stable coins RPA is, you know, what are new assets you can build that previously were not possible? I think that's what excites me the most. I think the kind of stick and old asset on chain thing is great. And, you know, more distribution fantastic. Has a lot of upside. Side. But what are the de novo assets that are now possible? And I think if you think about a company on using stable coin rails, you could effectively create this sort of super first lien type credit instrument, where for each incremental new dollar that comes into that corporate, it pays down to debt first. And thinking about kind of the risk mitigation that that can create across the emerging world. Thinking about new types of credit flows that are possible when you are able to mitigate risk like this gets us very, very excited.
Sy Taylor 20:30
Yeah, Kai, you've been talking about streaming money or flowing money for a little while. Have you seen that catch fire in any real world use cases, or is that something that you know still to be proven? I know it's an idea that's intellectually very, very interesting to you, but what would be the conditions to kind of make that happen?
Cuy Sheffield 20:52
I think it's still very theoretical today, but in the context of I look at it with things like Visa settlement, where, the way that the traditional financial system and Payments work today, it's almost like it's a clock. So you have this very mechanical you have a settlement time that happens when it hits that time money moves. And so you've got authorizations that are streaming and happening 24/7, those are then creating these settlement positions. A settlement report goes out, and then the clock turns, and then all the money moves. And so it's really interesting to think about the way that money flows, from a messaging standpoint, an authorization standpoint, could you also have settlement at the same time where you could actually move the money end to end, through the network, and it's more streaming rather than it is this kind of mechanical clock function, but there are a bunch of questions and challenges when you have systems have been built over decades where you didn't even have the rails that made that possible. The only option was to move money once a day. And then it's also, when you talk to corporate treasury folks, there are also these efficiencies from only moving money once a day, when you think about things like net settlement, when you don't actually have to move the money. And so I think there's still this question of, how do you reconcile the really cool, innovative future thinking things that these rails can do, like you can technically move money streaming per second, with the just economic efficiencies and realities of, well, isn't it better not to move the money at all, if you can batch together and be able to net settle? And I think that's like, the really interesting problem set in question of, like, where does it make sense to stream, where does it make sense to net settle? What can you do once the money gets there, and we, like barely scratched the surface as an industry on, like, how to find that right balance. I'm curious how stone you think about that. And like, you started moving stable coins from, like, a corporate treasury perspective, do you move on the same settlement cycle of, like, what you normally do, like, where do you find that
Speaker 2 22:54
balance? Yeah, you raised a very interesting point, because we do, or used to do, a lot of netting, and now it could actually get expensive to settle every transaction in real time, although it's much more efficient because it takes away the ability to net off. But I think there's examples of ways to really take advantage of this. And the way I look at stable coins really is to kind of play with the easiest or the most efficient use cases. So we're always talking about, you know, cross border payments. I look at it in terms of collections. So one of the things we're looking at is very, very simple use cases, nothing fancy. Speak to, let's say, Stripe or any PSPs that are collecting money out of Africa, and get them to collect from their African users in local currency. And we can settle them instantly using a stable coin in those One Direction flows, where open AI or Spotify, or any of these global companies don't need to pay money back into Africa. This is a very, very good use case, but when you talk about like the visa settlement, that's a whole different angle, because it's a bigger thing that has been built over years and is very efficient. The netting off is very, very important and saves a lot of cost. So the way I look at it is to see where it goes, but kind of focus on use cases where there's massive value. So like One Direction collections, One Direction payments, you know, a company that is in, let's say, here in London, and sends money to Nigeria or India, but that has no presence in India or Nigeria to send money back. That would be fantastic, because then we can allow them to make payments into Africa, one transaction at a time that they can settle to us as soon as they send the transaction. On, we deliver into M PESA or into a Nigerian bank account, and they said to us, with USDC, or any other stable coin, I think, for me, I'm not spending too much time thinking so hard about the complicated use cases. I'm looking more at the easier things, where these stable coins and produce massive, massive value today, and then we see where it goes.
Sy Taylor 25:23
That's a great point. I was having a conversation earlier today with somebody who's describing the scale they operate at and netting that they have, where there's there's a ton of value, but they also describe the unidirectional payments being the thing that's really clear. And I love how you frame that, because I also think about the corporate treasury use case. It's mostly useful to somebody like a D local or a fly wire, where they have an imbalance of one sort of payment or another. So yes, they could be doing netting, but when the netting doesn't net, when the balance is on equal that's when I need a unidirectional payment, and that's when stable coins are valuable, and so I can't get the netting efficiency from that type of payment with if I don't have those currencies in those places. Now it makes a ton of sense. I love that mental model and frame of thinking about things, because Kai, you and I have both spoken to a chap recently who had that idea of financial compression, which I thought was such a nice way of thinking about what it is netting does and what it is CLS does. They take all of this sort of sets of ways of making payments, and instead of doing it gross, they net it. Instead of doing netting, you'll do an in house bank, and then you have these industry ways of doing it. But there are flows of payments where those forms of financial compression are not available, and that's where stable coins have made a difference. What a what a wonderful way to leave the source. Haunan. Any other thoughts on these topics?
Speaker 1 26:54
No, these are the nuanced industry takes that you can only find on tokenized and not other general industry podcasts,
Sy Taylor 27:01
we're payments nerds. Through and Through. You get a guy from visa and a guy who's worked in payments for 20 years, and we invite equally nerdy folks to have a chat well before we move on, I do want to just thank our sponsors. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visas, 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 sponsored by stripe. Here's the thing, selling digital goods globally is still far from easy. Many of the people around the world that want your product don't have an easy way to pay you. They simply don't have access to cards or a bank account. Stable coin payments change this. They're the first truly global payment method that you can use from anywhere. That's why, for any business with global growth ambitions, accepting stable coin payments is table stakes with stripe. Doing so is as easy as flipping a switch from big names like Shopify to fast growing names like shade form businesses everywhere. Trust stripe to accept stable coin payments from everyone everywhere. See what's possible@stripe.com forward slash crypto. Thank you so much to our sponsors. The next story I had was securitize. Are going to go public via a SPAC deal at $1.25 billion valuation. The CEO said, tokenization is what everybody's talking about, but there's nobody publicly traded that does it. We will do it well in the public markets, because people want to index themselves to tokenization in the same way that people are buying circle because they want to index themselves to stable coins. So securitize is kind of an interesting business that's been tokenizing real world assets for quite some time, and has been trying to get that done. But I want to see that there's more here than just a timing thing, Kai, have you come across securitized before? Have you seen them in the past? Had you looked at this story?
Cuy Sheffield 29:28
Yeah, first like, shout out to Carlos in the team. I mean, they've been building in the space for a long time. And I think this is what we see over and over again, that it's the teams and the founders that in the bear market in 2022 2023 nobody cared about tokenized real world assets. Right after FTX pull up and securitize was just continuing to plug away around. How do you do this in a regulated, compliant manner? And so I think it was a major inflection point when Biddle launched and securitized powers and partnered with black. Croc for that product, and I think that really put them on the map. And I think accelerated the growth of of the whole industry and and I think they've become one of the leading players in it. And so really excited to see this. I don't know the details of, like, are they going to tokenize their own equity? And, you know, we've seen other firms like, you know, Galaxy. I think Galaxy digital has, like, a tokenized version of equity that they're doing with super state. So I'm really excited for that of like, if you're a company where your business is in the tokenization space, and you're going public, like, you got to eat your own dog food and figure out what's the best way that your equity can be available on chain. So I'm interested how that plays out.
Sy Taylor 30:41
They did say they're going to do that, so yes, I would fully expect them to do it. But of course, it's slightly tangential, but the DTCC and NASDAQ have announced they're going to tokenize any stock that's held in the DTCC. And when that's going to happen, don't know, but it's a work in progress, and I think that's why there's this sort of confidence of tokenization is a wave that's coming. We don't know specifically when, but the DTCC is another one that I did, my first piece of work with those guys in 2016 and back then, they were mature on this topic, but the infrastructure wasn't that has meaningfully changed. Now, I think the infrastructure is in a very different position, and they're trying to be sort of supporting the market. And securitize has tokenized more than 4 billion in assets. They have 550,000 investor accounts, and alongside the Biddle fund, they've also tokenized Hamilton Lane's senior credit Opportunities Fund. So this is an evergreen private credit fund that you can buy into with a minimum investment of $10,000 there's also the vaneck Treasury Fund, which is a minimum investment of 100,000 so these are small numbers compared to the overall capital markets wall, but they're good proof of concept. Do you think stone that this type of thing is going to catch fire soon? What are going to be the things that make sense? Is it in the payment space for your own business? Are you seeing corporate treasurers want to get access to this type of stuff? Yeah,
Speaker 2 32:17
I think, like it's been there's a bit of hesitation, but when it takes off, it's just going to be fire. I think we've been singing tokenization for a very long time. So my thinking is it's going to just be all at once, although there might be some initial hesitation, some people are still hesitant a little bit. But yes, that's what I believe in. Going back to what you mentioned, I think trying to do this spark is a brilliant idea for them, because you can see from circle that the public market has massive appetite for tokenization, for stable coins, for stable coin infrastructure, and it's shifting any company that could spark. I think this is an amazing time for them, because capital will definitely flow into these businesses. Aggressively,
Sy Taylor 33:09
fascinating stuff. Hannan, do you think it is going to be that it's going to be that sort of space where it really catches on? And do you have a crystal ball in front of you? Do you have, like a time horizon in mind for some of this
Speaker 1 33:21
stuff. I think this reveals a lot of narrative violations, right? So first is at least one idea of why tokenization is a good idea. Is that, you know, more people can access the asset. It will allow a larger buyer base, and so on and so forth. And certainly, operational efficiencies are real as well, but a tokenization company is choosing to go public on traditional markets. It's a very interesting phenomenon. I think if you observe what's happened in altcoins this cycle, they really haven't had a pump. All right, altcoins really haven't had a pump. Instead, the pump has happened in the public markets with circle stock in other places. And so it's interesting. It's interesting to see these worlds collide and old assumptions be challenged by a new empirical reality.
Sy Taylor 34:08
The narrative violation is an interesting thread to pull on that it does certainly seem like institutions are a much bigger part of this story, and they have, and probably could be for a good while yet to come. But I want to come back to Kai on this story, because I know I've certainly spoken to a lot of folks who are looking at where they think about risk in this space, and whether they should get involved in it, and whether the time is now you've said that you still think that over six months, not a lot will change. Over three years, everything will change. Is that still where your view is here?
Cuy Sheffield 34:44
Yeah, I think in general, when you talk to large financial institutions and you talk to large enterprises, it's clearly shifted from curiosity to execution. And so we kind of went from disinter. Just, I don't care. Maybe this all is going to go away to All right, this is going to stay. We need to come up with a strategy. And we said 1000 times on the show, every bank needs a stablecoin strategy, like, just repeated it over and over. And then I think eventually most people said, All right, like, we need a strategy. And I think now we're starting to go from all right, like we've been spending the past few months on this, you know, we've got a team. We've got some people in place. Like, how do we start to execute that strategy? Now, if you're a bank, if you're an enterprise, executing a strategy is not a thing that happens in a few months. You need to figure out, okay, who are the right partners? How do we onboard them? There's still a lot of people. I think. What I found is, even if there's top down support in an organization where I think that's critical to get anything done in a large company, is anything new, there has to be top down support. There's still a ton of work in educating people in between around how does this work? How do you mitigate the risks? Who are the right vendors? How do you onboard those vendors? How do you structure legal agreements with those vendors, what happens when something goes wrong? So there are all of these things that have to go through. And I think in 2026 you'll start to see more like early stage pilots that start to come out from larger institutions. But I don't think you'll see many scaled products until 2027 2028 just it takes time for any kind of brand new technology to be integrated into the core offers.
Sy Taylor 36:25
With one possible exception, I do see a lot of buy, sell, hold, you know, sort of what the revolutes and the new banks were doing five years ago, that as a feature, is now available in bbda. It's available in Santander. So that's become like table stakes, I think, for the financial institutions, but that point on risk is so key. I'm sure, Hanan, you saw with interest that the usdx synthetic stable coin D peg below 60 cents and sort of caused a bit of a hubbub on x. But can
Cuy Sheffield 36:57
you explain that? Like this is something that I've read multiple threads on usdx, and it was like reading another language of the number of things happening there. Like, I could not explain it. Like, is there a like, very simple explain to me, like, I'm five, what happened with usdx?
Speaker 1 37:17
I honestly have been pretty heads down in business. I'm not super read up on it, my guess would be it's like layered counterparty risk on layered counterparty risk on layered counterparty risk
Sy Taylor 37:26
bullseye. It's rehypothecation, like there's no way you get 92% APY without rehypothecation. So I get a receipt for having parked collateral inside of a defi vault. I then use that receipt, and I park it into a different d5 volt, and then I'd get a receipt from that, and I park it into a different d5 volt, and it's sort of all the way down sets of counterparty risk. So I'm just leveraging up my risk, and if any one of those pieces comes in. Now I don't know what specifically seems to have triggered this, so I'm still trying to, trying to read up on it, to the point about risk management. I wondered. You know, this is obviously quite a small thing. But one, it calls itself a stable coin. And actually it's not. It's sort of a high risk, high yield instrument. And two, actually, yeah, usdx, it sounds like a stable coin. There's that sort of parlance of like having the letter at the end. And then there's the perception institutions. I mean, Tara Luna and FTX were the like, drop, the business case, stop doing pilots, no more PR fire, the innovation team that was working on it moment. And I worry about that happening this cycle, but it happening on the institutional side stone. Were you any closer to this? Did you see what happened here?
Speaker 2 38:44
No, no, no. But from the way you explained, it's definitely a recipe for disaster. I
Speaker 1 38:51
have to take care. So I think people's perceptions of stable coin risks are reasonably well calibrated, because they have to scar tissue from Taira Luna and so on and so forth. I think where risk perceptions are tremendously mis calibrated are actually in traditional financial markets, first when it comes to the S and P, which historically has been heavily weighted towards tech companies that are low in capital intensity, that have no real marginal cost and can kind of grow into infinity. We're seeing a transformation of those businesses that are now becoming capital intensive in the AI era, and that have positive marginal cost per incremental user. I'm not sure that's fully understood. When people are yellowing into S and P that, you know, $5 out of every 10 is going towards this one correlated bet that could play out or not. I think the second area of miscalibrated risk would be in private equity and private credit. You know, there's a danger here, which is this democratization sales pitch is really cover for finding the next bag holder. When Kravis was doing LBOs, way back in the day, retail had no access to that. Why? Because he was making too much money. He was hand over fist. Now that private equity can barely get LPS put in new money when ye. Is selling private equity stakes as fast as they can now, retail is being offered this wonderful opportunity to participate in private equity investments. Why is that the case? I think we should be very, very careful about this, and to the extent that us as an industry enable this through this kind of tokenization sub thesis, we should be, we should be very careful
Sy Taylor 40:19
indeed. Risk is risk, no matter where it comes from. I also saw with interest this week that Robin Hood, in their earnings release were quite cautious on adopting Bitcoin in its corporate treasury, questioning whether it was the best use of their capital. In quite a bit of a different position to the likes of the digital asset Treasury firms and Michael Saylor, but their crypto revenue Rose 300% to $268 million in the third quarter, which you know, was kind of less than 20% of their overall revenue. So it's a meaningful part of their business, but not the only part of the business on the digital asset Treasury space and that sort of move to the public markets, I think you have got an interesting thesis there. How and somebody that's as sort of aggressively pro tokenization as Robin Hood not choosing an asset like that in its treasury, I guess speaks to the difference between capital allocation and prudent risk management versus like, crowding into a religious asset like, I see those two as as being different things. It's
Cuy Sheffield 41:26
interesting. It seems like last cycle, there were more stories of corporates who had a business unrelated to Bitcoin, buying Bitcoin in their treasury, and what Tesla was the largest one. I think there were a few others, we haven't really heard that nearly as much. It's like there are these very specialized digital asset Treasury companies where that's the whole purpose of the company is to try and stack Bitcoin, but there's no really other business as a part of it. But I just haven't really seen that as stone like do you see Bitcoin as a treasury asset at all in the markets that you operate in, or is it just, it's stable coins that people in emerging markets companies actually want to hold stable coins on their balance sheet. They're not looking to hold Bitcoin or any other type of crypto asset,
Speaker 2 42:13
apart from at least what we see in Africa and other emerging markets is there's interest in Bitcoin and all these other tokens from some retail players. So there's speculation there, but corporates definitely not interested at all. I couldn't tell you of one company I know in Africa that is holding Bitcoin on their balance sheet or at all. So people are more interested in the efficiencies, you know, of stable coins. And I think Robin Hood is a great example. You know what we're saying about a company that is actually involved in crypto trading, has massive crypto revenue, but is hesitant to have his assets, to have Bitcoin on their balance sheet. I think that's kind of the right way to play with corporate treasury, and it's important that most of these businesses look at the risk that's possible with Bitcoin. And anyone who is serious about risk will be careful. I think individuals can play this game all they want, but corporate organizations are very careful, even like in our case, our daily treasury management involves making sure and we don't have a lot of exposure to these assets, so we will only hold customers Bitcoin the way it's supposed to be held. Then we will hold maybe, like 3% of our own assets just as a buffer. But, I mean, we've, we've been hacked before,
Unknown Speaker 43:48
so we
Speaker 2 43:49
are very careful. We're doing daily rebalancing and treasury management to make sure that the exposure is not too big.
Sy Taylor 43:59
Yeah, don't make the price pool too big. It's funny how just how many challenges there are is still in the digital asset space. And you can see where the institutions are right to take their time. We give them the scale that they're operating at. But also, it feels like this is the first show in a while where we've sort of been anti bullish on stable coins or tokenized real world assets, because the job has moved from explaining the opportunity, because, I think that's now largely understood, to explaining how not to get it wrong when you do it into and explaining the risks and sort of living in that space, which is an important shift. It's the less exciting person works hard phase of the cycle, which, which is a good thing to have. Well, listen, I want to thank everybody for participating today, everybody for watching and listening haunan. If people want to learn more about Codex and what you're up to, how do they find you and how do they find Codex?
Speaker 1 44:52
Yeah, I'm on Twitter at haunan, H, A O n, a n,
Sy Taylor 44:55
stone, how about you?
Speaker 2 44:57
Yeah, I'm on Twitter as stone at twine or. Stone at twine, like everybody reads my name and with Everson, we're really trying to build very solid liquidity regulation backed stable coin rails to help payments in emerging markets. So if anybody is interested, that's kind of our
Cuy Sheffield 45:21
play. Excellent. Kai. How about you on x at Kai Sheffield and visa.com/crypto
Sy Taylor 45:27
you'll find me on the socials at sy Taylor. You'll find me at FinTech brain food.com ranting into the void about stable coins or something along those lines, and tempo dot XYZ. And if you haven't already, please hit like buttons, Subscribe buttons, leave reviews, comments and all of the things that hosts are supposed to ask you to do. And more than anything, spam. Everybody you know about how important it is they listen to this esoteric, industry focused podcast about tokenized real world assets and stable coins. Because if you're into this sort of thing, we get unusually weird about that sort of thing, so please join us and bring others too. Thank you so much, and we'll catch you soon.