On Ep. 23 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Bam Azizi, CEO @ Mesh to discuss stablecoins for subscriptions, the OCC’s new guidance and building the future of crypto payments.
On Ep. 23 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Bam Azizi, CEO @ Mesh to discuss stablecoins for subscriptions, the OCC’s new guidance and building the future of crypto payments.
Timestamps:
This episode is brought to you by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
This podcast is also presented by BVNK.
BVNK is the leading provider of stablecoin payments infrastructure—helping businesses move money faster, settle globally, and even launch their own stablecoin products. Head to BVNK.com to learn more!
This podcast is also supported by Canton Network.
The groundbreaking Layer 1 public chain where traditional finance and crypto are converging. Visit canton.network to learn more.
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Bam Azizi 00:00
People are moving toward a global economy, a global currency, which is stablecoin and crypto, whether that's mash or somebody else, whomever, that can basically build integration with all these exchanges and wallets in one hand, and as Kai mentioned, all the PSPS and large merchants on the other hand, can build an emerging network, a payment network that can help to move money faster, better, cheaper.
Sy Taylor 00:34
Welcome to tokenized. The show focused on stable coins and the institution adoption of real world assets. My name is Simon Taylor. I am your host for today. I'm the author at FinTech, brain food and head of strategy over at sardine. And joining me as always, it's my friend, my co host, Michael Padre, Kai Sheffield, how you doing? My friend?
Cuy Sheffield 00:58
I am fantastic. It's been two weeks since we've done a new show, it feels like two or three months. There's just way too much to cover. Let's get into
Sy Taylor 01:06
all right, let's do it. What's exciting me this week is the fact that tokenized now has a newsletter. So if you don't like audio and you want the written thing, go to tokenized pod.com, forward slash newsletter, and you'll find it there. So go ahead and hit that subscribe button. It would mean the world to us if you did joining Kai and me today is BAM aziti, who is CEO and co founder over at mesh. How you doing? Bam, good,
Bam Azizi 01:36
good. Thank you for having me. And today is actually Persian, New Year. So Happy New Year to all the Persian fellas.
Sy Taylor 01:43
Yes, I love that fact. Thank you for sharing already. We do need to get into the show, but before we do, we're happy to remind you that this podcast is, of course, sponsored by our friends at bvnk, and if you've been listening to this podcast, you've probably heard us say every business needs a stable COIN strategy, and if you're looking for the best place to start, that's bvnk. Bvnk is the leading provider of stable coin payments infrastructure, helping businesses move money faster, settle globally and even launch their own stable coin products, all with licensing and compliance, so you can build with confidence. We're proud to partner with bvnk on tokenized to learn more. Visit bvnk.com and just one last bit before I get into the content, I need to remind you that some of the views and opinions of our contributors today are their own and not necessarily the companies they represent. Please don't take anything we say as tax, legal or financial investment advice. Do your own research and be safe out there, guys, please. All right, let's get on with this. Shall we first a story from well, everywhere on the internet was a crypto firm called MeSH. I wonder if I've ever heard of those raised 82 million as stable coin adoption sword. So bam. I'll come to you in a second, but let me just read out the cheat sheet version here. Mesh is a crypto payments infrastructure provider, and the round was led by paradigm, with participation from consensus and quantum light and my possible favorite name for a fund ever, YOLO investment. Most of the investment was settled in pyusd or PayPal stable coin and mesh has apparently seen your transaction volumes grow by 300% quarter over quarter as stable coin adoption accelerates and plans to use the funding to expand its payment rail. So there's a lot we can talk about here, bam. But first of all, congratulations, and second of all, tell everybody what mesh is, what you do, how you're different to some of the others, and we can get into this funding, sure.
Bam Azizi 04:01
Thanks for having me on the show. Love to tell you more about mash and the fundraise, and we can discuss all sort of topics as well. In terms of what mesh is. We're building the new network for money movement. So we built this for stablecoin and for the payment. I wish we were genius enough that day one, that was the mission. We went through a bunch of pivots and returned direction a couple of times. But as a stable coin, as you mentioned, sword and the usage went up, and we felt like stable coin is the killer app for crypto, because it has all the upside of crypto and none of the downsides. It's not volatile that's pegged to us, dollar or stable currency. Hence the name is stable coin, and we believe payment is the killer app for stable coin. And the problem for the payment adoption, or crypto payment adoption, is user experience, and mesh is there to solve that. So you can just simply the same way you're using Kai's VISA credit card to pay for a coffee. You can use your coin. This account and tap and pay for something online or in a physical store, and you don't have to wait. You don't have to copy and paste all address we call ourselves, like first mile or last mile. Delivery system that enables users to pay with what they have, where they want, when they want. I want
Sy Taylor 05:16
to be able to use Kai's Visa card for everything, by the way, that would be really, really cool. Uh, Kai, sorry, you were gonna jump in.
Cuy Sheffield 05:23
So first off, huge congrats when we first met, maybe a few years ago, the initial use case for mesh, as I understood, it, was really on ramps into self custodial wallets. And so it was this scenario where you had consumers that had Coinbase accounts, other centralized exchange accounts, and then they wanted to move funds, load funds into meta mask or Phantom. And so you had the ability to log in with your Coinbase account inside of a phantom or Metamask, and be able to easily, one click, move money from Coinbase into Metamask. And that could either be funding it from your card that's on Coinbase, where you're purchasing and transferring at the same time, or a balance that's on Coinbase. And so can you talk a little bit more about the evolution of the business, of this on ramp role that you've played for some time, and then now, transitioning from just a focus on on ramps towards pay ins or enabling merchant acceptance, where consumers are using a Coinbase account to pay at a merchant instead of just using a Coinbase account to load their Metamask or their their Phantom.
Bam Azizi 06:29
Yeah, that's I have a great story to share, and I'm sharing it publicly for the first time. So this is exactly right. Kai, that was the main use case, but we had one customer in LATAM that basically, it was a small company, and they were like top five volume provider for our service. And then, as a CEO, I was curious to see, like, we put this in the universe, and then we asked founders to just go build on top of mesh. I was curious early on to see what are the use cases people building on top of mesh? So I went to the website. It was I couldn't understand. The word of it. I used Google Translate, and apparently it was an educational website that you could buy a training course with crypto. Because crypto and a stable coin payment was a thing even, like three years ago, four years ago, in Colombia and some other countries in LATAM. So when you would want it to pay. Instead of, like, copying and pasting wall address, they put mesh logo there that you could click and then pay with mesh. And I felt like, wow, this is a good idea. You have to build this like this really makes sense. If we believe that the future of finance is crypto, and people are going to hold their assets in crypto, in a stable coin. We have 600 million crypto owners as of today, and it's more than number of users that PayPal has. So if you're offering PayPal at your checkout, you have to offer crypto payments, and we can enable that. So we started building after mesh deposit and mesh ramp, if you started building mesh pay, and the volume you're getting on the pay side is growing faster than anything else we have done in last five years or so. So I wish I would take the credit for like you were genius enough to see that and do that, but it was just a customer idea that we kind of doubled down on it. Sometimes
Sy Taylor 08:14
you just got to smell what the customers are doing, though, right? Like it smell what sells, and kind of do more of it. I love that sort of reactivity. So is that your primary line of business now? Or, like, if you were to split your revenue by how you make money? Is that the vast majority? Or how does it split by use case?
Bam Azizi 08:34
So mesh pay is nothing else than mesh deposit and mesh RAM, as Kai mentioned, the same way you connect your Coinbase and fund your wallet or a third party wallet like Metamask, you can also connect your Coinbase or Metamask wallet and pay with those assets. So it's a combination of deposit and ramp, plus some other features that we have built for the payment use case. We call this smart funding. So like, for instance, if you have Bitcoin or dodge coin, or other type of like meme coins, and you want to pay with a stable coin because the merchant accepts a stable coin. Someone needs to do that trading and conversion and bridging. Then you think like, this is a corner case, but that's not the case. Like 95% plus of transactions on the payment side requires users to do two or more number of transactions manually. And the reason is very simple. The market cap of crypto is around 5 trillion, over 4.5 stable coin is 200 billion. So people still hold their assets in other crypto and pay with Bitcoin is so 2019 nobody does that anymore. Merchants want stable coin. They don't want Bitcoin or Ethereum be accepted here and there, but the general theme and trend is merchants will accept a stable coin or some other type of non stable, but tokenized currency. On the other side, the users own different type of assets, so in that, we make it kind of possible to convert and pay so users get the. They want merchants also get on the other side, but they want so in terms of our focus for the next three to five years, would be only payment we will, of course, continue building on depositor ramp, but because of the payment use case, not because we're going after like that. I call it red ocean market that like there are 30 more ramp providers. I don't think anyone wants a new RAM provider. But in the payment side, there's, I call it blue ocean. So that's kind of where we are.
Cuy Sheffield 10:26
Do you see me as direct to merchants or to PSPs that are then looking to offer stablecoin acceptance to their merchants, and then if you put yourself in the shoes of whether it's a merchant or a PSP, and you want to be able to accept and offer that. How do you think about the challenges of, okay, well, there are you mentioned, 600 million consumers who have crypto, but those are spread across maybe 50 different centralized exchanges, maybe another 50 self custodial wallets, and so like, you could go exchange by exchange, wallet by wallet, integrate those connections, like, what are some of the challenges around enabling acceptance as a PSP or a merchant, and how does mesh fit in
Bam Azizi 11:08
with that? Yeah, we don't want to rerun the will, so we want to work with PayPal afterward sharp off the award. And maybe, if you're a large merchant, or you have set of merchants like Shopify, want to work with you directly, if it makes sense for those companies, but we don't want to be the next stripe. We want to work with those companies, and we are just basically being the network and the connection layer as a startup. It took us five years to build this. We have 300 plus integrations with exchanges and wallets, and it took us 15 years to learn how to build it. My previous startup was no password. We had 2000 integrations there. Still in the team. We have people that work with me and no password, and we have the expertise in house to build integration, fast, maintain it. There are a lot of fork integrations are also not made equal. So you need to offer different type of tokens, different type of integrations. You need to build a unified experience no matter what exchange the user is using, like everything should be exactly the same, whether it's a defi or self hosted wallet or exchange. And then there are a lot of local exchanges. Used to be just binance and Coinbase. Now we have, like lemon cache in Argentina. You have coin Mina in min area. If you have yellow card, we have coin DCX in India. We have paribu in Turkey, so you need to work with those local exchanges as well. Sometimes they're partners. They want to work with us, but they don't have the bandwidth to build OAuth type integration, so we have to go and build it for them, for them to be compatible with our network. So it's a lot of work, and I'm glad that we have done it when people were making fun of us, when we were doing it two years ago, three years ago, and now, like, it's time to kind of basically utilize that and enable other PSPs to just use one API and cover the entire world, versus just going and building integration one by one. Also from Exchange perspective, it makes sense to work with us versus just working with 20 PSPs. Like you just use mash, and then you get all these PSPs leveraging your exchange. It's
Sy Taylor 13:04
fascinating the I think you kind of get lumped in with a lot of the infrastructure companies out there, but you are reasonably different in that this feels like a two sided network that you're intentionally building in visa language. It would be sort of merchants and acquiring banks and then the issuers, and the issuing banks and kind of everything that sits on that side with your model. It's kind of exchanges, a wallet, but it's still a two sided market. Where would you say your focus is, is the mesh button the future? Or do you sort of fade into the background and become a pure integration player? But How important do you think brand is in that as well, brand
Bam Azizi 13:41
is very important, but I think we need to be realistic. So if you want to work with all these top 10, like PSPs, you want to work with Visa and other payment companies, you have to offer some sort of a white labeling or gray labeling for them to be able to basically utilize your product. For us, what matters is we want to kind of be Switzerland, the space, and working with all these parties involved, not going head to head, that's a little bit hard, especially in this competitive market, but we have been successful so far, and want to continue doing that. There is a fine line in terms of, like, how much branding matters here, how much volume and usage matters for us. The game is adoption and usage and volume, not just brand itself. Maybe at some point we can start thinking about branding, but that's not the key metrics for us. Now, I also
Sy Taylor 14:26
wonder about the incentive mechanism when you're building two sided markets as well. Visa has a fairly famous one called interchange that I hear does pretty well, but I'll leave that to some other people. What are your thoughts on this acquisition and the space more broadly? So to
Cuy Sheffield 14:40
clarify that on the investment side, like it's super exciting that there are more pieces of infrastructure that are coming together that are helping to solve some of the challenges and complexity around using stable coins for payments. And I think it's very difficult for every PSP to go and integrate with every exchange and and every one. Wallet. It's been interesting to see like wallet connect and the ability to just connect to self custodial wallets. Some PSPs have started with that, but then it's a very different experience, and then you're leaving out, well, there are a lot of consumers who don't have self custodial wallets, who have custodial wallets. I think the other big missing piece to me, that I've been fascinated by, that I haven't really seen a lot of discussion around is the ability to use stable coins for recurring payments and subscriptions and so as it stands today, I have not yet seen in the wild any successful implementation that has scaled of using stable coins to pay a monthly subscription if you wanted to pay Netflix or Spotify or like there's so much of E commerce that is subscription based. A lot of our network and products we very much tailored towards enabling kind of easy subscription flows. How do you think about solving that problem with stable coins, which is traditionally this kind of push payment flow that I don't think Netflix wants to have to send me a request every month that I got to open up my wallet and click, yes, let me pay Netflix for this month. And so do you see that as still a challenge in the space, and is a role that mesh is playing. What does it look like to unlock subscription, recurring payments in a stablecoin context?
Bam Azizi 16:13
100% I think that's the future. Huge amount of volume of payments happening on the Fiat side is subscription based model and credit cards and debit cards and bank connections, they all solve that problem. And if a civil coin wants to do something here, we need to, as a whole, as an industry, solve that and address that challenge. The way I think about it is we can do that through smart contracts, but the problem is, exchanges, they don't support a smart contract. So again, back to my original talking point about mesh is we want to unify the experience across exchanges and wallets, so we'll take care of all the complexity. No matter where the asset is coming from. As a civil servo or exchange, you get the same experience as a consumer and also as a merchant or PSP on the other side of it, if there is anyone that can do that because of our integrations, it's mesh that can potentially build that for the rest of the world. So they can just simply use that. But from the technical standpoint, it would be leveraging our API integrations, plus some smart contracts, some creative ways to do things to make this possible. Another thing that is happening at the same time in the market that is related to this piece of technology. Or, I mean, like a smart contracts is a borrowing and lending, right? So the same way you're using smart contracts, so you, instead of you selling your Bitcoin, just borrow against that. But your Bitcoin will be, or your Ethereum, in this case, would be basically in as a collateral and smart contract for you to borrow some money and pay for things. So there are some creative way to do that, but the core of it is going to be based on the smart contracts. And I think mesh can be the leader on that end.
Sy Taylor 17:52
It's going to be fascinating to watch. I was thinking immediately about stripe building, as you were talking like such a big part of it, and I think a lot of that is built on the visa direct capability and so really, really interested to watch you guys evolve. I was also thinking about how open banking and sort of ACH and pics and like, we've got an integration problem with all of the multiple rails that we already have kind of out there in the wild. So applying what you do to the rest of the world, and, you know, with something like a visa flex credential, for instance, and having an authentication mechanism over the top of it would be super, super fun. So I think you're in a great spot. So what's next up for you? Never mind Simon's pontificating, like, where are you heading from here? I
Bam Azizi 18:39
think we believe that at some point we will have more crypto owners than bank account holders and credit card holders. So people are moving toward a global economy, a global currency, which is stable coin and crypto, and whether that's match or somebody else whom we work that can basically build integration with all these exchanges and wallets in one hand, and as Kai mentioned, all the PSPS and large merchants, on the other hand, can build an emerging network, a payment network, that can help to move money faster, better, cheaper. And I think that's the future for mash, and that's what we want to build at mash. There are a lot that we need to do on the payment side, and the borrowing and lending and a smart contract, recurring payments. And good news is we have the funding to do that, and we have, we have the we have the money to do that, and also we want to, at the same time, want to expand globally. So if you're a PSP in Turkey, if you're a PSP in LATAM, if you're a PSP in, I don't know, North Africa or in Southeast Asia, will work with you, will come to you and make sure that it will get connected to the grid so we can basically add value on both side of the chain. As you mentioned,
Sy Taylor 19:51
get connectivity already. Well, you mentioned something that made me think of our next story, actually, so I'm going to read this out. But what you said was. Is sort of less focus on on ramps. And I think that sort of on ramping idea seems almost passe now. But speaking of which, moonpay, famous on ramp provider of the last cycle, has acquired an API stable coin infrastructure platform called iron, and apparently this is worth an estimated 100 million dollars in an all stock deal. Iron, of course, offers APIs that allow businesses to easily integrate stable coin payments into their platform. More of a I guess, bridge look alike than anything, and their technology will be integrated into Moon pay suite of services enhancing their stable coin infrastructure offering. So there's a lot going on here. We are, well and truly in m&a season. I saw Kraken just acquired somebody for 1.5 billion today, M and A season is among us. But Kai, your thoughts on is the on ramp disappearing? They're becoming invisible. Is everybody becoming a stable Coin Company now,
Cuy Sheffield 21:03
congrats to iron and moonpay. Stablecoin orchestration is hot right now. It's very clear there's a lot of interest in the potential for stablecoins to be used in many different payment flows, and particularly, I think, cross border b to b, b to c, p to p so we're seeing many new orchestration companies that are popping up. We're seeing many large payment companies looking at the space and and I think a lot of companies are going through a build by partner type of evaluation. And if you're a payment company, and you say stable coins are important, like, what are the different paths for you to offer a product. I think what will be really interesting to see as more and more of these companies pop up is, how do they differentiate between each other, and how do they ultimately get distribution as I think the market is going to be more and more competitive in most large merchants, most payment companies, if you ask them, like, how many pitches have you gotten of same coin registration providers coming to you saying, Hey, we're going to be, you know, the infrastructure that you use for stable grade payments. It's, it's just managing all those inbounds and trying to sort through what's the difference between this provider and that provider. It's, it's very difficult and a full time job. And so I think on one end, there's an argument that companies who have existing distribution, who already have relationships with money transmitters, who have relationships with merchants or with banks, are going to be looking at how they can embed stablecoin offerings into those existing products. And then I think you'll see many of the orchestration providers try and figure out, what is that unique area that they could differentiate Is it a market a region basis. And so we see some stable coin orchestration companies going really deep, just in Latin America, and saying, like, Let's build kind of unique partnerships in markets that aren't well covered by local exchanges. Or let's focus on large value B to B, where some of the liquidity breaks down if you're trying to move a ten million payment. So I think we're at the stage where general purpose stablecoin orchestration that is kind of built for everyone, for every use case, for every market, is going to be a very hard area to compete in, and it'll be much more targeted, either by region or by use case. And then it's a question of, will you have bottoms up new really, fintechs. I don't even consider these crypto companies. They're fintechs. They're fintechs. They're they're not doing anything with with crypto assets. Will they be able to break through, or will existing companies with distribution be able to build, partner or acquire and be able to get into that market? So I think it is a fascinating and very competitive ecosystem that's playing out
Sy Taylor 23:38
right now. Yeah, orchestration is hot, as Kai said, bam. What are your thoughts? I
Bam Azizi 23:43
echo Kai on that. I strongly believe that if you can build something that is general purpose and is successful and is global, and you can do on ramp and off ramp and exchange ramp across the globe, if you can build that, or at least you can stitch some of these together and build that, a lot of companies would use that product. I think the way that these orchestration layers can compete is bacon, different type of ramps, whether it's on ramp or off ramp, to expand their access to the bank account. So there is a use case that both me and Kai Love is the sandwich use case that the Fiat comes in, gets converted to stable coin, moves across the chain and then gets converted to currency in other countries. So you really need to have the entire map covered, both from banking integrations, exchange integrations, and also licensing in different regions to make that happen. So like, I'm just watching that game, eating my popcorn to see, like, who is going to win that game?
Sy Taylor 24:38
Yeah, no, I fascinating to watch, because getting bank partnerships in multiple countries is extremely hard. Getting licenses in multiple countries is extremely hard, managing liquidity in Fiat pairs and stable pairs, and maintaining those banking relationships and managing. In custody and doing all of that, all extremely hard things to do in their own right now, put all of that together and put an API over the top of it like this is probably one of the hardest things to do well, which is why BV and K and bridge and others, I think, are doing quite well from it, because trying to do that alone is hard. One other
Cuy Sheffield 25:18
topic that I think is is interesting and bam, I'd love your view on is, how do you think about the current market structure with the specific stable coins that are being used in these flows and and I think you've got a unique perspective on py USD and the potential that you see for pyust, particularly in consumer to merchant payments. But it feels like both on the consumer demerit side and on the orchestration side, there's kind of a question of one, will there be an end customer preference and choice where someone will say, I want to do a cross border payment. I want to explicitly use USDC or pyusd in it, or if it's a stablecoin sandwich, does that get entirely abstracted away, where the end customer doesn't even know what stable Coin brand is being used behind the scenes. They just care about the end result that lands in Fiat that's faster and cheaper, I guess. What's your take on with everything happening in the competition on the orchestration side, with the work that you're doing on the consumer to merchant pay inside, how do you see the stable coin battles from the large stable coin issuers and the different advantages or ways that might play out between pyust, usdt, USDC and and some of the other taxes products.
Bam Azizi 26:30
Love this question. This is a great question. I think the amount of fragmentation we are seeing on the orchestration layer just multiply by hundreds, we'll have it on the on the stable side, like, every bank will issue their own stable coin, every corporation will issue their own stable coin. I'm sure, like Facebook will come back to the mix and start that project again. And also countries, and nations you're hearing like states in us, they want to issue their own stable coin. And I think from consumer perspective, it would be totally abstracted. They don't care. Like, if it's cheaper, better faster, I get better receptive, better service. Just use that right. There could be some preference from not a stable issuer, but a stable type means, like, if you're in Turkey, sometimes you want to get lira back to stable coin, versus us, dollar back to stable coin. So you might have, as a consumer, those type of preference, or merchant might have those type of preference, but overall, it would be abstracted from your view that who is doing that behind the scene, or what company doing it behind the scene? I put my bet on payment companies like PayPal or stripe to be able to win that, because they already have the distribution. PayPal has 400 million users globally, so they can basically dictate and become the current payment currency of the award. Another one that is emerging that I really, really love is ripple, USD. So repo was a successful company. They're a payment company. They've done a lot of B to B, but now they issued, they started basically repo, USD. So watch that one closely. It's going to grow fast. It's
Cuy Sheffield 28:06
just just very pragmatic, specifically at the checkout. Do you think consumers are going to choose a stable Coin brand like in your use case for pay ins, and the check like you're you're about to pay, and then it says you want to pay in crypto? Are you going to say pyusd, USDC, RL, USD, or is it just going to be your $100 and then you pay with whatever in your wallet, and then the merchant, or the PSP on the back end says how they want to receive it, and that's abstracted away.
Bam Azizi 28:31
It all happens at the back end, for sure. You
Sy Taylor 28:34
don't think about the credit risk of not
Bam Azizi 28:36
only that, and all on the exchange side. On the exchange side, if like, right now, open your Coinbase account or binance account. There are multiple stable coins. I think they're all going to be consolidated as US dollar or us balance. US dollar balance.
Sy Taylor 28:50
Yeah, it has to happen, doesn't it? I wonder how that happens, but it has to happen. I mean, maybe that's that's an initiative for somebody to go do, because some of the issuers at the moment are making so much money out of just holding treasuries that it's very difficult for them to give up their brand and their market space. And there's typically a power law. But as you say, as financial institutions and the genius Bill move into it, then it becomes a fundamentally different thing. And PayPal has lots of users so as well. And of course, the two coins you mentioned, coincidentally, pyusd and ripple USD are both my DFS licensed and depository based, is my understanding which are considered like the lowest risk, highest quality type of stable coin there is. And Mike Hudak at sling money told me the same thing. Part of the attraction for him was thinking, purely from a risk appetite standpoint, that direction of travel is something where, if you want to get comfortable with something, that's the thing that you can get most comfortable with. So I think you've really got a got a great point on all of that. I'm just going to take a quick break right here before we hear from our. Sponsors before. Part number two, 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. V tap 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 brought to you by Canton network. Ever wonder where real tokenized asset volume is going? Canton network, the groundbreaking layer one public chain where traditional finance and crypto are starting to converge. Why? Because Canton is the only public network with privacy, no workarounds, no compromises. This is 24/7 markets on demand, financing with real yield, where value moves as freely as information on the internet. This isn't just another blockchain. No, this is where the serious money is flowing to solve real market demand and risk. Visit Canton dot network to learn more. Thank you to our sponsors. We mentioned the genius bill right before the break, and now, speaking of bills and regulators, the OCC has come out and clarified that, apparently, banks do no longer need to ask permission for certain crypto activities. So the Office of the Comptroller of the Currency, the OCC, has clarified that nationally chartered banks don't need to seek permission before engaging in custody services holding stable coin reserves and using distribution ledger technology for certain banking functions, the OCC emphasized that banks will still need to ensure they conduct these activities safely and soundly. IE, we don't want another SVB like situation with adequate risk management taking place, but more regulatory clarity is coming. Bam. What are your thoughts on this move from the OCC and kind of the broader moves coming out of the SEC and others?
Bam Azizi 32:26
Yeah, you should think holistically about what happened in OCC and also what's happening in Congress. And also SEC is like we also Congress, kind of the genius stable coin act, right? So that is purely for stable coins and payment use case. I think that enables banks to move toward a more stable way and more efficient ways to move money across banks. And also now you're hearing like a company like Bank of America is talking about crypto payments, right? So stable coin payments that could be potentially use case banks can now roll out to all of your customers overall. That means as mash, we are like building rails. The moment regulation becomes available, they're acting as a guard rail. We implement them, and then it makes it more safe and appealing for larger financial institutions and risk averse players to come into that market. And we're just purely the connection layer, the more fragmentation, the more value a company like MASH can add, because we're just that network connecting all of these nodes, and we can unlock new type of use cases, like stable coin deposits, stable coin payments and things in that nature.
Cuy Sheffield 33:34
I think this OCC guidance specifically, is a pretty big deal, and it didn't really get that much attention in crypto circles and and these are the things that like the banking and payment nerds and we get excited about. We're like, oh, did you say that? It's like, this is it's, if you go all the way back, it's been interesting to see how the OCC and their perspective in communication with banks around stable coins and crypto has evolved. I forget which year, but when Brian Brooks was, I think for a limited period of time he was the Comptroller, he put out guidance, specifically saying that banks can hold the reserves around stable coins, that banks can interact with public blockchains. And so he had a perspective that was telling banks that there's a path to be able to do this in a safe and subway. Then, I think what we saw over the past few years was OCC guidance was updated with this requirement to seek a non objection. And I think that that's a pretty big deal and challenge for many banks. And as we talked to banks over the years, there were banks that have wanted to interact with crypto, have wanted to explore initiatives with stablecoins, but once it was very clear that if you wanted to move forward with that, you would need to go and seek a non objection, that was a pretty strong signal and statement that if you're just a product team and you're inside of a bank and you're underwriting the risk and ROI of different opportunities, if you could focus. On one product that fits within the current regulatory framework, that has clarity that you can move forward on, and there's a path to launch and another product that you would do a bunch of work around, what's the strategy, what do you want to do, what's the plan? And then there'd be this extra step that you'd have to go and seek non objection. And then when you seek non objection, very clear, would you get that non objection, and I'm actually not aware of many banks that took that step to go and seek non objection, and I'm not aware of many banks that got non objection. And so I think what it ultimately did was just putting that requirement in place was a pretty big barrier for banks to even try and move forward. You'd have to be extremely motivated to move forward and say we're going to do this. And so as the general market and interest to demand and growth of stable coins in the spaces come back, as we talk to banks across the US, that's been one of the things that they pointed to. They've said, we've got this OCC guidance that requires a non objection. And so yes, we're interested in the space. We'd like to do things in the space, but this is really hard for us to really do anything if we have to go and get a non objection. And so now having this updated guidance that doesn't require a non objection, it enables a path for banks to put together a plan, work on a POC, start looking at what partnerships infrastructure providers that they can have and have confidence. It's not to say that banks don't have to manage the risk, worry about the risk. We like that's that's a big part of what banking is, is, you know, how do you manage and mitigate risk? It's just there's not a separate process for building a product that requires just a certain technology versus a product that requires another technology. It just has to fit within the overall framework. And so I think we've seen feedback from a number of banks that they're excited. This isn't the only thing now. There's FDIC, there's fed, and there's the genius act. So it's not like it's a silver bullet, that there's one thing that happens and then every bank comes rushing in. I think there's this culmination of as guidance gets updated across the banking regulatory agencies and as bills move forward, that gives more and more confidence to banks that there is a path for them to participate, which then will ultimately lead towards products that they start to roll out
Sy Taylor 37:06
in the space. It's funny. I was at FinTech meetup last week, which is, if the bankers gather for the embedded finance banking mode conference to sort of do partnerships in FinTech and payment. It's one place where you see it a lot that and money, 2020, it's like, always the Venetian, always in Vegas. But I had, in one single dinner, three executives from three different banks kind of run their existing stable COIN strategy by me and ask for feedback. It wasn't that they were thinking about doing it. It's like, here's what I'm thinking. Would you change it? Does this sound right to you? And a lot of it comes from, as you say, the SEC is not only no longer suing people, you know, they've dropped their case against ripple, they're starting to run round tables on what an is and is not a security. You've got that clarity. You've got the genius build now you've got this OCC piece. It's really, really adding up, and I want to read out some of the genius bills key points, because I think once you understand this, you understand why banks are interested, right? Because the ACT claims to establish a framework that's going to define stable coins as a digital asset used for payments and settlement. They must be issued by a license entity and cannot be algorithmic. Hello, Tara Luna, sorry, you don't get to exist again. There's going to be dual regulation by federal and state, with bank Supervisors also having a role and stable coin issuers become psis, or payment stable coin issuers. And it follows the Durbin amendment to the Dodd Frank Act, which essentially says, for any issuer with less than 10 billion in assets, then you're subject to state oversight. And if you're above 10 billion, then it's federal and it's state. You can be a bank, you can be a trust company or a non bank, financial institution, and you must back your stable coin, one to one, with either cash or US Treasuries and ideally their custody added FDIC, insured institution. The quiet part out loud about all of this is that is essentially giving you a framework to do FinTech in a way that FinTech never had. If I'm a FinTech today, I want to get oversight. I want to become a bank. I couldn't get a charter. It was very hard to get a charter. I couldn't get fed master accounts. I couldn't get access to the payment systems, but I can become this other thing, this stable coin payment, stable coin issuer, as a bank, I've now got this specific license I can use at the federal level, like it really does create a massive amount of clarity for this new area. What are your thoughts about the genius act? Ben,
Bam Azizi 39:58
as I said, it was a. Lot of doors. I think banks are acting quick because they're hearing and sensing the competition right for like, 4050, years, or, I don't know, like a century, they had access to this payment rails. They had access to certain, like, exclusive things that other fintechs companies couldn't get access to now. The playing field is kind of leveled right now, so whomever can act faster and can be more genius, can get there faster and dominate the market. So I think competition overall is good for the market is for good for the consumer. Again, as this is one other competition landscape that I'm watching closely and enjoying to see, like how it emerges overall. I think it's good for the crypto industry because it leads to more adoption on the financial institutions on the stable coin side, because they already have the distribution. They already have users owning those bank accounts, it's easier for them to enable Use Cases that would be harder for newborn FinTech to do that, but at the same time, it opens doors for large corporations, as you mentioned, like companies like Stripe, PayPal and others that they were like semi bank, or companies like even like Coinbase or binance that they didn't have that banking charter, but now they can get that other things and then compete with banks. Yeah,
Sy Taylor 41:23
I think it's going to be fascinating to watch. And there's another thing I saw, the statistic that today the news broke that tether is now the seventh largest holder of US Treasuries. And if you are looking for a lot of people to refinance short term treasuries as a nation, because I don't know perhaps, perhaps that's something you'd be interested in. Having a bunch of new buyers of those treasuries to get into a new area would be particularly helpful. So I can see why this matters from a policy standpoint. I
Cuy Sheffield 41:54
think one of the fascinating things for banks, particularly banks in the US, is this recognition that as they learn more about stable coins and the use cases, the primary use cases, either for consumers or businesses outside the US, that's where a lot of the demand to hold stable coins comes from. And I think you've seen some banks and people talk about, oh, well, is there a concern about deposit flight? Of consumers are going to move out of their traditional bank account in the US, and then they're going to move into a stable coin. And we've seen in the genius act, there's parts around prohibiting passing interest back directly to the end holder. From my own like, personal opinion, I don't think that there's that much of an incentive in interest for most consumers and businesses in the US, even if stable coins are a kind of regulated payment method to just move their money out of deposits and hold stable coins, I don't think that really solves that much of a problem. I think most of the demand is going to continue to be consumers of businesses outside the US that didn't really have access to dollars before, that couldn't ordinarily open up $1 bank account that's now going to have this alternative that gives them $1 wallet, which will be a really attractive product for them. And so I think there's going to be this like store of value outside the US, which we're seeing today. And then I think that there's stable coins as a payment rail to move money in and out of a bank, deposit or withdrawal or send money cross border. So it'll be really interesting to see how US banks approach the space, given that the vast majority of US banks only serve us customers, and so if you only serve us customers, then yes, there are cross border payment opportunities, but it doesn't really make sense for a bank to offer a stable coin custody to a US consumer that doesn't really bring anything new. And so will you see us banks that don't serve customers outside the United States today look at this as like maybe I could expand globally in a way I haven't been able to, and if I have a stable coin, then I can have a product that I can be able to benefit and earn upside in these consumers that are getting access to dollars outside, and then how do you manage the risk of that? So it's a really fascinating market that I think there's a big opportunity for banks that they really look at how they can leverage their unique strengths. And maybe that ends up just being holding the reserves for stablecoin issuers. And Nick on our last show is like there are eight ways that you can make money just banking a stable coin issuer. So maybe that ends up being one of the primary approaches that banks in the US take.
Sy Taylor 44:25
My hot take is that there will be domestic use cases very quickly after this bill drops, and that's just from having been spoken to enough banks that are moving into it, and one or two of them passed my smell test. Good chunk of them were like, oh yeah, this is a bank trying to do innovation, lol, but there were some those like, okay, yeah, you have that distribution, you have that unique capability. I can see the demand actually. That would really make sense on a purely domestic use case basis. So I think that's coming. Tai, I really, really do. And great. Later, a clarity is always helpful to kind of unlock this. And speaking of the last story is BBVA, who we've had on the show before, are now going to offer cryptocurrency services in Spain. So they will offer crypto trading and custody to their Spanish retail clients. They're expanding. After testing in Switzerland, they're initially going to support Bitcoin and Ethereum, and they plan to add more currencies and stable coins in the future, which makes BBVA one of the first major European banks to directly offer crypto services to its retail customers. This story didn't get a lot of pickup, but to me, this is like the biggest news ever, because it's like big old incumbent bank that's hundreds of years old, directly offering crypto to its retail customers. Bam. Did that stand out to you at all? Or am I just way too in the weeds here
Bam Azizi 45:55
it did, because we just hired a former BBA employee, which is just joined our team. So I know a lot about BBVA, and then their exposure, they work like if you think about it, kind of makes sense, because if you're a US Bank, your target audience are US dollar holders. BBVA is not just a Spanish bank. They have branches in emerging markets like turkey in LATAM, a lot of these Spanish speaking countries, and they move a lot of money internationally, and they're tired of paying these FX fees and managing all the volatility related to FX market. So stable coin makes total sense for them. It's just big chunk of their businesses, global, international. They just rely on that stable coin to basically make it cheaper, easier, faster and better for them. So I'm not surprised, considering that that's their business model. And they are like Spain is a small region for them. So as a result, even though they were originally Spanish bank, but they are kind of spread it out across the globe, so they need to use an alternative method. And what could be better than a stable coin to make that problem go away for them?
Sy Taylor 47:07
Heck, yeah. Kai, your thoughts on the director retail and where Mika plays, yeah, as
Cuy Sheffield 47:12
you say, just shout out to BBVA. And we've worked closely with them over the past year. We recorded an episode with their head of digital assets some point in the fall, so go back and check that out. And I think they have had a long term vision of the role that they could play in the space across both stable coins and crypto. And I think it helps being in Europe. It helps with Mika and the framework there is more clear, and has been clearer for longer than in some other markets. But really it's kind of credit and testament to their team is that, I think what we're going to start to see is there's going to be this very clear separation between banks who have continued to invest in learning and planning and executing and kind of having an approach towards crypto assets and stable coins for the last five years, throughout cycles that they've had a team, they've had consistency. Now they've been able to make progress over time. And then they're going to be banks that have kind of gone with the cycles where they might have had a team in 2021 and then they didn't have anybody working on it in 2022 2023 and then then they started staffing up a team in 2025 and and I think for any large institution to be able to execute in a space as dynamic as crypto and stable coins, it's very hard to go zero to one within one cycle and in a matter of months, like that, initial education that has to happen internally, across all layers of the bank or the institution takes years to Do, and so being able to have a multi cycle view. And then I think it also speaks to, like, who's still going to be around here the next cycle? And like, yeah, we'll get regulatory clarity, and there'll be excitement and growth. And then, you know, there'll be another phase where, yeah, something doesn't work out. And then I think we're going to continue to see a separation between long term my mindsets, long term approaches building with consistent leadership inside large institutions with a long term vision, versus banks that have kind of come and gone with the cycles. De prioritized, prioritize, and I think it's gonna be very hard for the latter to be able to compete. And I think BBVA is a great example of someone who's been in the space for a long time and taken that steady approach and and now like they're launching products, and being one of the first banks of their size to get in the space is a huge opportunity for them. Yeah. Bob, any other thoughts on this one?
Bam Azizi 49:27
No, I think the fact that a big bank is moving that space, and they're not looking at crypto as just a niche, or, as you mentioned, like just trying to be innovative, it's just solving the real problem that's very interesting, and let's not forget that stablecoin is almost like six or seven years old, already making move in the global ecosystem. It's younger than crypto itself is moving faster than Bitcoin itself, so it's super interesting and fascinating to watch. Yeah, it's
Sy Taylor 49:57
crazy. That consists. See, and staying over the cycle is kind of the lesson that we keep on learning. You know, you had it with stable coins when everybody thought you were crazy, and now an $82 million Series B later, they don't think you're crazy anymore. And shout out to the people who do still work in a bank that have been fighting this fight for a long time doing that education, because that's a hard thing to do. I know I did it for a while, and got very bored very quickly of doing that, and left to go be like the media guy, because it's way more fun. And this was a fun show. So thank you very much for listening or watching. If you are checking us out on YouTube or on X bam, where can people find out more about you and what you do over at mesh,
Bam Azizi 50:43
yeah, thank you for having me. I really enjoyed the conversation with you and Kai. Love to come back and discuss more news with you guys. You can check mesh, connect.com, we are hiring globally. So if you're building and you want to build on web tree and crypto in a stable coin juncture, DM me on LinkedIn, or you can find me on Twitter, x.com I would love to chat with you. And one message for all the fellow founders, don't let the funding kill you. Don't think about like every single company has raised, like, hundreds of millions of dollars, and you cannot do that without funding. Let's just have the courage to continue building. There is no better time for building in vector, in a stable coin. So if you're interested to put a dent in the universe, in the finance ecosystem, this is time to build. So I encourage all the founders to start working and building in this ecosystem, Because together, we can make a big change.
Sy Taylor 51:38
I love that call to arms. Kai, follow that. Where can people find out more about you? Yeah,
Cuy Sheffield 51:44
I agree. Visa.com/crypto on exit at Kai Sheffield and really excited about the opportunities in the space. Appreciate Ben, you coming on. Congrats on the
Bam Azizi 51:54
race. Thank you. I appreciate it. You'll find
Sy Taylor 51:56
me@sardine.ai for all things fraud and compliance related if you want to deal with scams, FinTech, brain food.com, if you want my rants about the future of FinTech and where stable coins fits within it. And you'll also find me on LinkedIn or on x at sy Taylor. And if you haven't already, go ahead and hit the subscribe button. If you're watching drop that like on there, hit subscribe. It makes such a difference to us. Honestly, you've been helping the show grow. The numbers are looking good, but we can do better. I believe in you guys, until next time, bye for now.