On Ep. 67 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Jess Houlgrave, CEO @ WalletConnect to discuss institutional adoption of crypto infrastructure by traditional capital markets, differences in approaches to tokenized securities and more!
On Ep. 67 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Jess Houlgrave, CEO @ WalletConnect to discuss institutional adoption of crypto infrastructure by traditional capital markets, differences in approaches to tokenized securities 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.
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Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Sy Taylor 00:00
Simon, welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I'm your host for today, author at FinTech, brain food, and, of course, head of market dev over at tempo. And joining me as ever, is my co host, my friend, my colleague, the superstar, the man of the hour. Kai Sheffield, how are you, sir?
Cuy Sheffield 00:32
I am good. It's a busy week, busy start to the year. We got a lot to talk about amazing guests. Let's dive in.
Sy Taylor 00:38
Let's roll in, and we are joined, indeed, by an amazing guest, Jess hallgrave, who is the CEO of wallet Connect. Jess, how are you?
Jess Houlgrave 00:47
Hi, I'm really good. I'm honestly so happy to be here. I remember coming on the show many, many years ago now. So really nice to be back and look forward to chatting with you.
Sy Taylor 00:59
Yeah, longtime industry friend and somebody who's doing very interesting things at wallet Connect, which we will talk about in today's show. But before we get into today's show, I've just got to remind everybody that views and opinions of our contributors today are their own and might not reflect those of the companies they represent, and please don't take anything we say is tax, legal or financial or investment advice or sports or fashion or theater or anything else for that matter. Please do your own research and stay safe, folks. All right, the big story this week from just about everywhere, was about the New York Stock Exchange developing a tokenized securities platform and venue to support 24/7 trading so of course, the parent company ice announced this development and features will include instant settlement, fractional share trading orders sized in dollar amounts, and stable coin based funding. It's going to support both tokenized shares, and they will be fungible with traditionally issued securities as well as natively digitally issued securities. So last week, we had the folks from figure talking about their open network that would be somebody who's doing digitally native issued and so of course, the parent company is also working with BMY and Citi to support tokenized deposits across clearing houses. Jess, I'm going to come to you first on this. There's been a lot of Wall Street and capital markets announcements. There's been a real blizzard of them. Canton has sort of been everywhere. Privacy is the matter right now. What's your read on the institutions coming into this space, and what that means for where we are in the industry?
Jess Houlgrave 02:45
Yeah, I think it's interesting. All of us have for a very long time talked about bringing institutions into crypto, and I actually think that, like what we're seeing happen in real time is that crypto is infrastructure is actually infiltrating those institutions, rather than the other way around. So finally, we're seeing this convergence where those institutions recognize that this technology is really important for their future. So I think that that's number one, is we've changed our mindset from let's onboard people to crypto to let's build things that are actually going to be used by the traditional capital markets. I think the second thing, and like privacy, is spot on. Until now, there's been a bunch of pieces missing for how you can effectively do this. We solved the scale and the speed piece a while ago, but things like privacy are obviously just really important. Nobody wants their trades visible. Nobody wants their order book being able to like be messed with through some muv type action. So all of these things really need to be in place before we can start to build this out. So I think this news today is really exciting indeed.
Cuy Sheffield 03:50
Tai, your thoughts, it's hard to keep up. I feel like last year, we used to always say it's every bank needs a stable COIN strategy. And now 2026 It's the Year of capital markets, and every week there is a new like major announcement around something related to tokenized equities. You have DTCC, you've got NASDAQ, you've got New York Stock Exchange. Like every major player in traditional securities is clearly making big bets, and not just innovation. POCs focused on tokenized securities. I still haven't wrapped my head around what are the differences between all these approaches, because I know, like the concept of a tokenized security, it's not just a monolith of, oh, everyone's doing this exactly the same way. I think there are certain principles that people are trying to solve for they want to do instant settlement. They want to be able to have collateral mobility and be able to borrow against these assets. But it seems like different companies are taking different directions and angles around how they get there. You have the question around, okay, well, we have a friendlier SEC that is encouraging the tokenization of securities and other types of assets. But. But we have this debate around market structure and the clarity Act, which has it passed. And so it's interesting to see these major players stepping in pre legislation, where they're getting enough comfort in the direction of travel, but then they're all taking slightly different approaches. And so I need to spend some time in unpacking what are the differences of the approaches and the trade offs that they're taking. But Simon, I don't know how you think about that. Have you wrapped your head around this yet, of what's the difference like DTCC and New York Stock Exchange and NASDAQ in how they're approaching the tokenized security space?
Sy Taylor 05:31
Yeah, I saw that beyond narrow put out a really good chart. I was just frantically trying to find it in the background. And if I can find it, or my producer can, we'll try and pull it up for you, because he had a really great spectrum of what you actually own versus what you don't. And at The Most Extreme Ownership end is what super state does and what figure are doing with open this is where you holding the token. Is direct ownership of the stock certificate. So it's direct issuance. That would be like holding the physical stock certificate, which, if you have stocks in your brokerage account today, you don't have that that sits at the DTC, and what you have is the rights and obligations that come with that, which is the second type of ownership that you can have. You are the legal sort of rights holder to that stock, but not the custodian, not the historic owner, that is the DCC or the custodian themselves. And that's Category B, where you have almost all of the features of ownership, but maybe there's one or two trade offs there that you can't do. It's a little bit harder to fractionalize. It's very centralized. It doesn't float like it would in defi, as easily between different networks and between different vaults and so on. So you give up some flexibility, you give up some ownership, but it's sort of the way the world works. The next layer down is this SPV wrapper, and you might have heard of this with open AI and all of these secondary sales are going on where actually you don't own the stock. You own stock in a fund that owns the underlying stock and claims to have bought it. You have no redemption rights, necessarily, other than to the stock that you own, not to the underlying and then lastly, at the extreme end, what Robin Hood has done is really a derivative contract that is essentially buying you exposure to the price movement without actually you having any legal ownership whatsoever of the underlying stock. And so that is one where it's arguably you have less rights, but you may be a little bit more accessible. So companies out there that have been tokenizing stocks for a while tend to be category C or Category D. It's only really the DTC that is doing Category B, but this direct issuance, your trade off on that side is, well, if it's direct issuance, the company itself has to issue those stocks, and so there's a limited supply. And so what, I think, what New York Stock Exchange is saying is, we support as many of these as possible. We support backward compatibility, what the DCC is doing, as well as the traditional way of doing it, as well as the new way of doing it. If that makes some kind of sense,
Jess Houlgrave 08:18
honestly, like, the best explanation that I think I've had is super clear,
Cuy Sheffield 08:23
yeah, super helpful framework. I think the other piece in the New York Stock Exchange news is they mentioned funding in stable coins and tokenized deposits. And so I think that's the other interesting piece of are they going to have this account funding feature, which we've seen some other brokerages, some other prediction markets have done where you can even Robin and you can instantly send stable coins to be able to fund the account. I think that's a very natural thing for them to do. But then they're working with Citi and BNY around tokenized deposits. And so what will that look like? Will tokenized deposits be used to start funding equity trades? We haven't really seen that at any sort of scale. Yet, I think we're still very, very early in tokenized deposits, so I'm interested how the funding mechanisms end up playing out here.
Sy Taylor 09:08
Yeah, just I'm interested in your views on stable coins and tokenized deposits. Have you seen anything in your own business touching capital markets around those topics, and what sort of conclusions have you come to on one versus the other, or how they fit together.
Jess Houlgrave 09:23
I think we see a whole range at wallet Connect. We see a whole range. We see wallet connect being used to top up brokerage accounts in the way that Kai mentioned. We see any wallet infrastructure because we touch the custodian side all the way through to the self custodial side. We see all of these different use cases. I mean, I think just as different kinds of money sit alongside each other in the Fiat world, these things are going to sit alongside each other in the crypto world as well. So the kind of money we hold in our wallets, as cash versus e money in institutions, versus the deposits that we really hold at a bank, we're going to see this spectrum exist in the crypto. World as well. All right,
Sy Taylor 10:01
next story this week. Jess, you had some pretty big news. This is Ingenico, the point of sale, terminal maker with, I think, over 40 million devices at points of sale where people buy in stores have teamed up with wallet connect, pay on a stable coin checkout solution. So I have some notes here, but why don't you tell everybody what it is and what it does?
Jess Houlgrave 10:24
So wallet connect pay is a product that we launched at the end of last year that builds on top of the wallet connect network that for context for people, is a network that comprises of over 700 different wallets, over 80,000 different applications, and we basically provide the standardized messaging that allows them to communicate with each other. Last year, we noticed a bunch of payments companies starting to use this network, but we really realized that the end user experience still felt very like a crypto experience. So it was like, connect your wallet, sign a transaction, which just feels a million miles away from the vernacular and the user experience that people are used to when it comes to payments, particularly in store payments. So within Jenica, what we're launching is basically the ability that their partners and their merchants can switch on stable coin acceptance and hopefully over the longer term, also crypto acceptance for a wider variety of assets delivering a seamless experience, or close to seamless. There's still some work to do where you can scan a QR code and in your wallet choose the asset that you want to pay with and just click Pay feels much more like a payments experience than previous wallet connect experiences, and hopefully it's just a first step for people to be able to actually use their stable coins in store.
Cuy Sheffield 11:42
So as I understand it, Jenica is one of the largest point of sale terminal operators. But then they work with acquirers, who then work with merchants. So you have, like, multiple layers of the payment stack. Can you walk us through, like, let's say an acquirer or merchant wants to turn this on, they're excited about it. What is actually required now that this is enabled on a jennico, what's the process for a merchant or acquirer to launch it?
Jess Houlgrave 12:08
So some of Ingenico customers are merchants directly, and then you're right, and other times they go via acquirers. So we're starting with some direct merchant rollouts. First one's gonna be, I think, in Paris, and then through France. And what that requires is basically just a merchant to onboard right now with wallet connect pay via Ingenico, so they go through a kind of easy onboarding process. The goal here, for most merchants is they want Fiat out at the back end. Whilst we're seeing this like stable coin acquiring settlement flow also be in the news. The reality is, I think a lot of the merchants, especially those more traditional ones, want Fiat. So we have to onboard them, because then we can deliver them Fiat at the back end. It's a simple then click on the Ingenico terminal to enable this, and that shows up as a wallet, connect, pay QR code for them. Interesting.
Cuy Sheffield 12:58
So the merchants are able to onboard directly with Agent CO and then you're offering the Fiat to stable coin conversion, I assume, through partners with the appropriate licenses in those markets. And so in a way, is it fair to say, like, the merchants that are looking to take advantage of this, they're going outside their acquire, and they're saying, like, we might use an acquire for our card payments or for the other payment methods that we use today, but for stable coin payment methods, we don't need the acquire. We're not going to wait on our acquire. We're going to go directly between our terminal and wallet connect to be able to offer stable coin payments on their own. Is that the right framing to look at?
Jess Houlgrave 13:38
I think that's one way to look at it the other way is that people will be able to get this through their acquirers as well. So we have a number of acquirers, both for in general, but also acquirers for E commerce, for example, outside of the terminal setup, that are starting to think about onboarding this as well. So I think over the longer run, my expectation is that most merchants will get this as a product or as an alternative payment method, if you will, via their existing acquirer less onboarding requirements. Everything is just managed like any other payment method for them. But for those who are maybe a little bit more forward thinking and want this faster, there's a way for them to do that as well.
Sy Taylor 14:17
I am interested in the consumer side of this, on the crypto natives as well, there are, I don't know how many wallets in the wallet connect ecosystem. I imagine there's at least 10s of millions, if not hundreds of millions, of wallets out there with stable coin balances. Where are you seeing the demand come from in those user bases of crypto natives, and what sort of things are they wanting to be buying in terms of geographies, because I think it all gets real when we can imagine a use case that we'd want, and we can imagine a persona, because the early adopter is not necessarily the person who's using it in 10 years, but they're the person that starts the behavior change.
Jess Houlgrave 14:54
So the answer is that there isn't really one persona. There are many, and there. Those vary greatly depending on the segment and the geography, as you point out, is really important as well. Some of the key ones that we observe are these, like number one, the digital nomad in these like high volume international cities. So I'm young, I'm working for a company. I'm probably getting paid out in stable coins, maybe now via gusto. I know that's what big topic this week as well. I'm getting paid in stable coins. I want to be able to use those stable coins. And so if you're a business in one of those geographies, in Buenos Aires, here in Lisbon, in Mexico City, where there's a lot of international community, there's a fit there, right for these like nomads plus international The second is in countries where stable coin adoption is really high majority because people want exposure to the dollar rather than to their local currency. These often correlate also with places where the existing payment rails and card adoption is really low anyway, and so there's a very fragmented payment system, and this is a way of a enabling people to pay with the stable coin assets that they're choosing to hold anyway. And B, there's often less of a consumer behavior switch needed, because people are used to other QR code payment methods and things like that. And then the third one is right at the other end of the spectrum, very high transaction value transactions, or places where approval rates on traditional payment methods might be low. So what we're talking about here is like, I'm in a super high end nightclub buying bottle service, and my bill is 100 plus $1,000 my card tabs out pretty quickly at those sorts of limits. So in this like high end hospitality, we also actually see quite a lot of interest as well.
Sy Taylor 16:49
Yeah, people forget about high value payments. You know, most credit cards, Kai, you'll know better than me, sort of top out around 20,000 for a single transaction. Rightly. You're not getting above that very often. So that high value payments use case was always something that I think account to account said it could do, and pay by bank said it could do, but I don't know that's really caught fire. And I wonder if stable coins have a spot there.
Cuy Sheffield 17:12
Yeah, I think luxury goods, hospitality, we've heard a number of the like luxury hotels across the Africa concentrator now starting to accept stable so I think that that's going to be more of a trend. I want to come back to what you said the default user experience, my understanding is QR based, which is where wallet Connect. I've used wallet connect hundreds of times. I like scanning QR code to connect my wallet to an application. I'm curious how you both think about QR versus NFC, and I'm biased both being in the US and just like the approach that we've taken at visas, tap to pay has been phenomenally successful, and both the speed and the security and just the ability to, like, get going in a checkout with Apple Pay, tap to pay. But it seems like the current state of stable coin payments in a direct stable coin, consumer to merchant is almost entirely QR. I've seen like some POCs and demos of NFC, but I I haven't seen like a scaled, NFC based stablecoin experience. And so is your view QR is the better form factor, and like, there are plenty of markets across the world where that's the default, and so that's the focus. Are you agnostic? Where you do QR today, but you could do NFC in the future. What are the barriers around NFC? Like? How do you think about the form factor shifts?
Jess Houlgrave 18:25
Yeah, I mean, I think again, there's geographic differences, which is like, QR code is a very familiar form factor, particularly in Asia, and that's where a lot of our launch partners. We launched with DTC, pay a few others for wallet, connect, pay, sit and in there, there's actually very little feedback or appetite to switch to something like tap. Of course, as soon as you head to the US and even here in Europe, the NFC tap to pay experience is best in class and what most consumers are used to. And ultimately, if stable coin payments are going to really compete with card payments today, or with any other tap to pay payments, they've got to deliver an experience that the user wants. It's no point if everyone really loves that tap to pay experience and saying, Oh, actually, you got to go and do something that you like a lot less, because people just aren't going to do it. So I think cracking the NFC experience is going to be really important over the long term for the success of payments overall using these rails. And there are, as you know, a ton more challenges and barriers to that, whether that's around like the kernels that sit in the devices being able to communicate also the actual like upgrades that we would need to do with all of our wallets. And we have about 700 different wallets, so each of them also has a bunch of different requirements. But I think the truth is, it's a heavy point of research for us at the moment, and I hope that one day, we'll be able to facilitate the payments experience that each and every one of us wants, whether that's QR or tap.
Sy Taylor 19:49
You know, it's fascinating to me, Jess that on the one hand, there's the stable coin linked cards that work everywhere cards do. Then there are other markets where QR codes. Are dominant, and where those work, maybe this is a good solution, and in the middle of it is lots of gnarly legacy infrastructure that we're kind of working our way back to, and partners. But what I've seen in my own experience is the appetite from all of those businesses to try and figure out, post the genius act, what they do in that space. So I'll be looking forward to what you guys do next in this space. I think this is very much just the beginning, and there's a lot more to do. Kai, you want to jump in with any more thoughts?
Cuy Sheffield 20:28
Yeah, I think this may Tai to the next story as well, but you mentioned it at a high level privacy if I go in and I am going to pay at a store, and I've got my meta mask wallet, and I open and use wallet connect to connect Metamask, to that merchant, whatever wallet I connect from, they now can see and read and they know everything that I've ever done in that wallet in the past, and they could also track that wallet and see everything that I do in that wallet in the future. And so it seems like either one approach is maybe like, people just don't care, and, like, that's just how it is. Or you have, like, your burner wallet just has a few dollars of USDC that, like, used for payments. But that's different than, like, what you're trading or doing defi and other activity in or is there a privacy solution that, when you look at the market, kind of the state of play right now, there are different approaches that people are taking, if you wanted to take the existing integration and kind of product that you're launching, you know, with the geneco, and say, how do you add privacy to it? How would you do that? Like, what's the best path to get there?
Jess Houlgrave 21:28
So there's some elements to this which are, like, on chain privacy issues, and then there are some which is just like, data privacy issues. So like, who gets what data? For the latter, I think we really like use PII as a bit of a guidance, or, like PCI compliance, as a bit of a guidance for who in that chain of events should be able to see what data. So if you're a merchant and you're onboarding with us, and you're just getting Fiat out at the back end, doesn't necessarily mean that we need to give you the wallet addresses that that cryptocurrency is coming from. For example, we can give you all the reconciliation This is the specific transaction, et cetera, but you may not get the wallet address. And so some of those things are off chain related and just regular payments. Course of business, who gets what data about what transaction? The second thing is the on chain piece, which you rightly call out, like if I pay from my wallet to this particular merchant, everyone can see your transaction history. But maybe also more concerning for some people would be that everyone can see the merchant's revenue streams, right? So, like, I'm a public company, and everyone can see that I'm getting X amount every day. That's also like an interesting flaw in the privacy setup. So the way that we deal with that on the wallet connect pay side today is through things like rotational addresses, but over the long run, I think there are some really interesting on chain privacy solutions that are going to be helpful here. We're really just at the start of that. Not only in payments, is that a big topic right now, but in crypto more generally, there are really interesting solutions, whether those are like private chains, like Canton, for example, and wallet Connect is compatible with all of that. So if you have your USDC on Canton chain, and you go into a store and you want to pay with with a private version of USDC, you're going to be able to do that. It's going to show up very differently on chain. And similarly, there are a lot of other on chain fhe solutions that I think are going to emerge over the coming year. So this is alongside NFC. This is probably our like second point of deep research at wallet Connect, which is, how do we build this in a way that's private but still compliant? I mean, ultimately, this has to coexist alongside existing payment systems and alongside the existing regulation. And so what we're not here to do, although some of the responses on Twitter last week were like, Yay, fully KYC free payments, like, that's not what we're here to do, right? We're here to build a payment system that actually works. So lots of layers around the privacy piece to consider.
Sy Taylor 24:00
Indeed, I think we'll hear a lot more about that. I know and financial did something around Trusted Execution environments for their privacy approach, something the ZK sync guys are doing a lot with providiums that I think is a really encouraging direction. And I think we'll see a lot more coming from other folks in the industry on that side. Because certainly, what I hear from institutions is Nobody's expecting complete anonymity. They do expect the regulator to exist, but they expect commercial confidentiality. And I think there's an entire podcast and, if not brain food, rant on what do we mean by privacy? Because I think people confuse confidential transactions and confidentiality with absolute privacy for more people all the time, which is not always actually ideal. All right, I'm going to pause us here so we can hear from our sponsors, and we'll be right back.
Sy Taylor 24:51
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, visa. Tap 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. Stable coins are building blocks for borderless financial services making money move around the world as easily as data. With stripe, you can use stable coins to reach untapped customers, reduce cross border fees and settle payments in minutes instead of days. Best of all, it works the same way that stripe products do by API or in the stripe dashboard, meaning you don't have to worry about the intricacies of which blockchain, which wallet will you custody from Shopify to vercel, global businesses trust stripe's Complete crypto solutions to unlock new markets and reach more customers. Borderless finance built on stripe. Learn more@stripe.com forward slash, crypto tokenized is also sponsored by fireblocks. Fireblocks is the stablecoin infrastructure of choice for global businesses, from visa to WorldPay to bridge to Revolut with over $100 billion in monthly stable coin volume. Fire blocks powers stable coin strategies at scale with infrastructure that enables PSPs, fintechs, remitters and banks to issue, move, hold and manage stable coins. It's all done securely at scale with secure built in compliance with fireblocks, you get complete control to build your own stablecoin orchestration layer, create payment accounts, manage liquidity and access on and off ramps in over 60 currencies. Makes it easier for you to build and scale and expand your business globally. Learn more@fireblocks.com you Tai, thank you so much to our sponsors. We are back with a story from zero hash and the payroll company gusto, so they are going to bring stablecoin payroll to global contractors. So this partnership helps gusto pay stablecoin based payouts for contractors outside the United States today, gusto serves about 400,000 small business employers, contractors can receive earnings in USD pegged stable coins, so that would be tether or circle, and payments go directly to self custodial wallets. And for some context here, I think there's a good piece that zero hash put out around 11% of us small businesses employ international contractors. I guess in the age of the internet, post covid, fractional talent, it's become very, very common for even smaller businesses. So unlike deal or remote that serve sort of more traditional tech businesses, gusto is kind of more in that classic Main Street economy. Just I want to come to you for your views on this story, especially given the role gusto plays.
Jess Houlgrave 28:11
Yeah, super interesting. I mean, we are a small US business that uses gusto and constantly get requests from my employees to pay them in stable coins. So I think that whilst we are a crypto example of this, and so it's very likely that our team members want this. It demonstrates that there is use there. And I think that gusto rolling this out more broadly is really exciting. We talked earlier about this idea of, you know, nomads living in different cities, wanting to pay for things with what they have. And I think this is the way that kind of closes that loop. If you're receiving stable coins, your paycheck in stable coins, you want to be paying for things with stable coins. I think a lot of young people now are also using their assets. Once they're through with their rent and other payments, they're using their disposable income to do things like be on Poly market, be on Cal she to invest in crypto assets, and so it feels very natural if you're doing that, for you to accept stable coins, not least, especially if you're international, and you're living in a country where the local currency is maybe a little bit more volatile, or you don't want exposure to that currency, at least over the long run, holding your income in USD and then converting it At the point that you need it makes an awful lot of sense to me.
Cuy Sheffield 29:24
First shout out to Edward and the zero hash team, friends of the show, and they've been early to stable coin payouts, and we've done a number of things in the space I'm really interested in, just like, what is the state of stable coin payroll? And also, like distinguishing between payroll as like regular employees getting paid on a cycle, like every other week or every month, versus disbursements and like contractor payouts, which seem to be like pretty different types of payment flows. I see plenty of examples of Freelancer like disbursements, creator payouts and like the. Seems like that has a lot of momentum, and that's moving. I've seen less examples of payroll in a traditional your paycheck comes in a stable coin every week. I think that has been very, at least initially, very crypto native. Daos are paying their employees and contributors. Like makes sense, but I have not heard of that many companies. I think I had asked a while ago, of like, it seems like the starting point would be all of the major stable coin companies in the first place. Shouldn't they just be paying 100% of their employees in stable coins? Like, if you're the issue of a stable coin, like, is that the first way that you distribute in the circulation is paying your employees? My understanding is they don't do that today, at least not 100% it might be an option, but I'm fairly confident that not every stable coin issuer is paying 100% of their employees salaries in their stable coin. And then you have to ask, okay, well, like, why not? And what are the barriers? And then you get into, like, there are a bunch of unique things within payroll that I don't understand, that like are really important that you have to solve for as like the payroll software, it's not just a payment flow. It's like there are other things about it, that there's probably work that needs to be done to integrate stable coins into that. And gusto. Seems like that's a step forward. And then you get back to privacy. Well, if you start paying your entire company base in stables, someone smart enough for your company might start figuring out how much everybody gets paid, and then what happens. And I think that's also where it's different. If you look at paying to self custodial versus custodial, I think the only way you could really do it is paying to a custodial wallet, because then at least you see money's going to Coinbase. You don't know whose Coinbase account that is, and you can't necessarily see over time how much that individuals earned, but it's it makes sense to me that over some time period, at least every company that their entire business is driving stable coin adoption would want to pay all of their employees in stable coins like at some point. But I don't think we're there yet. And if we're not there yet, we're not there yet, where, like, the stable coin issuers aren't paying 100% of their salaries at stable coins, then why would anybody else pay 100% of salaries at stable coins? And so it's kind of like, that's the first inflection point that I'm looking to see. And I don't even know why. All the reasons why that hasn't happened yet.
Sy Taylor 32:14
I don't know all the reasons. But having looked through this a little bit, employee of record and contractor in 1099, they're like two different worlds apart, like they really, really are because of your legal obligations, your tax obligations, your reporting obligations, and a lot of that system expects certain types of banking references within it in order for it to comply. So it's just extremely difficult. You sort of have to end up fudging banking details into something and stable coin sandwiching everything in order to make the tax stuff work. And it's really difficult. There's a really interesting company called RISE works disclosure. I'm an investor that's done a lot of work in how you can actually do employer of record type stuff on chain and have privacy. They're sort of, I think, still probably a little bit ahead of their time, but it's possible. But that said, contractors are a massive and growing population, and I think the scale at which that population is growing, it often doesn't get credit, the amount of people that prefer fractional work with a tempo hat on. I'm talking to about 10 or 11 different people that are amazing talents in the industry that just want to do fractional work, and they find tempo exciting. They want to work with us. But like, what's that two, three days a week thing? And in a lot of ways, that's how you get some of the best talent in the industry. Is hard to get the classic nine to five day job these days. So I do think the domestic use case for these talents is also becoming increasingly different. On the tempo blog, Jeff and I went deep into what's the what are the fee structures looking like, and if you're a small business, people forget you get your face ripped off by FX. Like, if you're like a really sophisticated global business. FX is like something you can manage, but if you're a small business, it can be anywhere between 10 and $40 using the correspondent banking system to pay a contractor $1,000 so that you're paying like, 4% on the FX spread. That's meaningful. Whereas, you know, if you look at the stable coin, sort of unit economics that can be meaningfully difficult. Jeff estimated somewhere between 60 and 80% lower cost for those payouts, especially to those long tail markets where it can be three to seven days for the money to even get there. And on average, we're seeing a stable coin partner charges a flat fee of between naught point one and naught point 4% for the on ramp and transfer and then at the off ramp, the consumer will, depending where they off ramp pay anywhere between naught point one and 2% so net, net, you still end up better off as the pay. And you can choose. To hold the stable coin to hedge your local inflation. And I think that economic case is something that really does work for contractors, but I buy Kai's point overall of this isn't affecting the core of payroll, but often innovation doesn't affect the core thing that we do every single day. It starts somewhere else. On the edge cases, there's an old blog post by I think Chris Dixon, like, look at what the nerds are doing on the weekends. That's what everybody will be doing for their job in 10 years time. Look at what the nerds are doing with stable coins now, and I think that's going to be everybody in sort of 10 years time. All right, one more story this week. This is another friend of the show. Rob leshner, over at Super state, has raised $82.5 million in a series B, for those of you that don't know, superstate allows SEC registered companies to issue digital shares directly. So this is that Category A and settled trades on blockchain rails. The investment was led by Bain Capital crypto and distributed global with participation from Galaxy digital horn ventures and Brevin Howard digital. Interesting mix. There of some crypto investors, but also Brevin Howard, some more Wall Street stuff. Very interesting background to rob himself, of course, founder of compound finance, then moving into this space, and he's been quite outspoken about that move towards the institutional space. And I think Jess, you might have seen this as well. A lot of folks in the crypto native space are always sort of a bit glum that the institutions have finally arrived, and they don't sort of like the compliance that comes with What's your perspective on that? And any thoughts on Rob's narrative arcade from DGN to Wall Street guy, I guess he's really gone home though.
Jess Houlgrave 36:44
I think it's funny because a lot of us who are in crypto have also had those institutional careers in the past. I know I have, I know, you know. And so it's funny because we kind of move away from that, and then we go, we don't have to deal with them again. And now we're here back dealing with all the institutions again. And the funny thing is also that for the last three or four years, we've all been waiting for that moment. That's what we've been building for. We're saying, When is everyone going to adopt this? And now that it happens, you take those rose tinted glasses off, because actually what institutional adoption means doesn't mean like, insanely fast adoption of everything you've ever wanted, it means slow adoption of stuff that actually works and is compliant, and that's very different than some of the stuff that people have been tinkering with over the last little while. So I think the reality of what institutional adoption means is actually hitting those people who've actually been wanting it for a long time and are now realizing that it doesn't all come with just a plate of chocolates and instant rollout of your product.
Cuy Sheffield 37:48
Well, Said, what's the saying? Like the dog caught the car, like it's what crypto has been dreaming about, of, oh, the herd is coming. The institutions are coming. They're here now. And it doesn't necessarily mean that they're just going to adopt and buy and build on all of the things that crypto has done. I think you have a very sophisticated set of actors who have deep distribution, have very different product requirements than what a lot of companies of the crypto ecosystem are used to. And I think what we're seeing now is there are some protocols and products that are going to figure out how to evolve and adapt and be able to serve those institutions and the needs that they have. And then there are some where the institutions are saying, you know, we could build a better version of this that is more suited towards us and the requirements that we have, because these crypto people don't actually understand what it's like to operate a major brokerage like that's doing trillions of dollars of like equities. So I think you're gonna see a combination of both. I think that that's a good thing. I think this is how innovation works, and that we land somewhere in the middle. And the exciting things that have been on the forefront of crypto have in some ways inspired things that institutions are doing, in some ways, have accelerated and created the demand and urgency for innovations to innovate, if you just think about like, without uniswap, without compound, without Coinbase, without meanwhile, connect, without these crypto protocols and the success and traction that they've gotten. Do you imagine New York Stock Exchange would be making some of the biggest product technological infrastructure investments and updates that they've probably made in decades, probably not. And so that like this is what happens, is you get a new space that moves very quickly, that proves out that there's new technology. And then the incumbents, they look at that and say, All right, it's time for us to innovate, and ultimately, everybody wins, because you lead, it gets you to better products, and that's what drives innovation over time. So I think it's a great natural thing.
Sy Taylor 39:48
Well, there's also been this guy at the that's been plugging away on this stuff for a little while, so gotta give Kai his flowers as well for the institution that didn't quit and just kept coming. But I think Big shout. Out to rob on this. My question, and I'll try and reach out to rob on this, and maybe we can answer it on a future show or invite him back, is, how do you get scale distribution of this type of share issuance? Because today, it looks like the companies have to be involved in issuing those stocks directly, and some of them might be mission aligned. I imagine there's going to be a load of infrastructure that gets built that makes that a lot easier, from your Carter back end, where you're managing your cap table, to distributing those shares and issuing them on chain, I imagine there's a whole bunch of stuff you can do with that, but I don't know what that looks like, and I think it's going to be a fascinating area of innovation. It felt very much like 2025 was the Euro stable coins and tokenize money market funds. It's now the other RWAs that are really coming into focus. I even had a great conversation with a giant G SIB bank this week on trade finance, and how do you tokenize that? So it's certainly going to be interesting. Lots of stories we haven't had time to cover. This week, a 16 Z led around into a company called cork, who is aiming to make our wa risk tradable. Interesting times. Bit panda is going to launch stock and ETF trading. So everything that does crypto also does stocks too. Hong Kong is going to issue a first batch of stable coin licenses in q1 so Hong Kong's will we? Won't we stable coins is finally looking to move forward crypto card. Daily transactions have surged 22x since late 2024 according to Artemis, again, I blame my co host for that. And the CFTC Chair, Mike Selig, has unveiled a future proof initiative to upgrade crypto oversight. Certainly lots happening. I've been glued to Davos and everything Brian Armstrong and the banking lobby are up to. But I hope you will stay glued to this podcast on a regular basis, wherever you're watching and wherever you're catching up. So I want to thank you for watching and listening. Jess, I want to thank you for joining us. Great appearance, as always. And where can people find out more about you and wallet connect and everything you're up to they
Jess Houlgrave 42:00
can find out about wallet connect, follow us on x, or pretty much any other social platform. At wallet Connect, you can find me also on x at wholegrave or on LinkedIn, and drop me a message if it's interesting to chat. Thank you for having me. Yeah, very welcome.
Cuy Sheffield 42:15
Kai on X tech, Kai Sheffield and visa comm slash crypto.
Sy Taylor 42:18
You'll find me at sy Taylor on all the socials at tempo, dot XYZ, or fintechbrainfood.com screaming into the void about all things AI, FinTech, stablecoins and everything else. And if you haven't already, why haven't you subscribed? Hit like buttons, leave reviews if you enjoyed what we've been talking about today. It really, really does help us out, and it means a lot, so take care and bye for now.