On Ep. 36 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine is joined by Chris Harmse, Chief Business Officer and Co-Founder @ BVNK and John O'Brien, Chief Revenue Officer @ dLocal to discuss Shopify enabling stablecoin payments via Coinbase and Stripe, Walmart and Amazon exploring issuing their own stablecoins and more!
On Ep. 36 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine is joined by Chris Harmse, Chief Business Officer and Co-Founder @ BVNK and John O'Brien, Chief Revenue Officer @ dLocal to discuss Shopify enabling stablecoin payments via Coinbase and Stripe, Walmart and Amazon exploring issuing their own stablecoins and more!
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.
Tokenized is also presented by Avalanche.
With Avalanche’s purpose-built Layer 1s, institutions can tailor digital asset strategies to their exact needs—while still tapping into the power of public blockchain innovation, developer communities, and seamless interoperability. Learn more at avax.network
***
We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Unknown Speaker 00:00
Simon
Sy Taylor 00:10
Taylor, welcome to tokenized. The show focused on stable coins and the institutional adoption of real world assets. My name is Simon Taylor. I'm your host for today, and author at FinTech, brain food and head of strategy over at sardine, there is no Kai Sheffield today. He's on a plane taking my place of missing a few shows. But I promise you, the Cy and Kai double act will be back soon. But my goodness, joining me for today's show are some incredible guests making a return for the third, possibly even fourth time, is Chris arms, the Chief Business Officer and co founder of bbnk. How you doing? Chris,
Chris Harmse 00:51
great. Very good to be here with you. Simon, back for a fourth indeed.
Sy Taylor 00:54
Man, you're just too good to quit. It's those insights. You just keep dropping them. And of course, making a debut is John O'Brien, who is Chief Revenue Officer of a FinTech company called D local. John, how you
John 01:08
doing good? Very impressed with your pronunciation of our moniker as a company there, Simon, emphasizing the D local. So no good. Great to be with you, and nice to catch up with Chris again. And yeah, happy to dive into the topics and have a good discussion.
Sy Taylor 01:24
Yeah, Chris knows I'm great at pronunciation, and if you haven't heard that episode, then you should check it out. Good call back, guys. All right, just one last bit before we get into the fun of the content, I have to remind everybody that views and opinions of contributors may well be their own and might not reflect the companies they represent, and please don't take anything we say is tax, financial, legal, investment, sports, fashion, or any other form of advice. Do your own research, folks. All right, the first story this week came from everywhere, and this is Shopify, unveiling the ability to accept stablecoins for payments. So the ecommerce giant announced that merchants can now accept stablecoins Through a collaboration with Coinbase and stripe. An interesting aspect of this alliance is it's built on joint work involving a smart contract, or the E commerce payment protocol that mimics the two step Card process of authorize and then capture with an escrow contract. So this announcement is potentially positioning Shopify as enabling cross border payments with no foreign transactions or exchange fees. But Chris, I look at this and I wonder, who's the ideal customer for this, and is this PR, or do you expect to see real volume for something like this, based on, you know, what you see in the market? You see lots of cross border activity.
Chris Harmse 02:58
Yeah, I think it's really good to see that the kind of the merchant acceptance checkout use case gaining some momentum. You know, at Vivian K we've been powering stablecoin acceptance for the last three years, but they've really been more focused on other verticals outside of E commerce. So think retail trading platforms, think PSPs, think even some luxury, but never really gone mainstream into E commerce. And I think this announcement with Shopify actually changes that, you know, Shopify is the the ultimate e com platform, doing about a trillion dollars in TPV across e com. And so I'm quite excited to see the adoption within e commerce, because I feel like it was the last use case waiting to drop or to really get to scale, was getting stable coin acceptance alongside cards and, you know, other sorts of local payment methods. So I think it's a super exciting use case and super exciting announcement, and then just more specifically around that kind of commerce payment protocol. I mean, this one's quite ecom focused, you know, like it's the commerce payments protocol for base. But I think, you know, when we were building over the last couple of years, I think it's always been quite a challenge when we started scaling this stable coin payments product, because we would have, you know, we're a blockchain agnostic platform across multiple different stable coins, consumers end up making mistakes. So they'll pray with the correct token on the wrong blockchain, or they'll pray with the wrong token on the correct network, or they pay the incorrect amount at checkout. So having some sort of standardized protocol for kind of crypto checkout flows, I think is a great idea, and something we were thinking through, you know, how do you do this in some sort of consortium? But, yeah, it seems like we're heading in the right direction with this sort of kind of standardized payments protocol. So I think it's just overall quite exciting news for that specific merchant acceptance use case.
Sy Taylor 04:43
Yeah, I'll come back to the protocol. But John, I wanted to pick your brain on kind of the idea of the latent demand for E commerce in markets that are historically labeled the global south, from sellers from that part of worlds, maybe selling. To the global north for being able to make payments. Like, who would you see as the ideal customer of this product from Shopify?
John 05:08
Yeah, it's to be honest, it's hard to know Simon when you look at it, because if you think about where the majority of people who are buying from Shopify are today, or where that TPV number that Chris mentioned is arising from. It's going to be in the US, right? Where it's very hard for me to see that people who've got pretty embedded spending and user habits, right? I mean, I've purchased using Shopify before. My car's locked in with stripe. It's a very smooth experience, you know? So I think there would have to be something very well thought through, outside of just, I think the dynamics around a protocol as it relates to incentives for people to migrate over there. I mean, Shopify, Amazon, other platforms have thought long and hard about things like open banking, let's say in the UK here, or fed now in the US. And still, I'd say the adoption of those protocols, even though they're very cost sensitive, has been relatively anemic, you know. So I think the use case which Chris and I had been discussing previously, I think opens up a lot more for Shopify is those consumers in emerging markets. So folks who think about a currency like Argentinian peso, right? Or Nigeria Naira, you know, we would even have members of staff on our site who'd be asking us for salary payments in usdt Or well, usdt primarily in emerging markets. Don't tell the circle guys I said that, but that's primarily what how things are operating there. It's not difficult for me to imagine a world where those people would be very willing to not just do things with their savings there, but also a veil of an opportunity to pay for something on a site that you have to bear in mind results. I mean, in many of these cases, these people can't buy from these platforms because the platforms aren't localized, the cards they have are not enabled. The bank won't get my loan, etc, and they're excluded, really, from that global financial system. So I think it's as an inclusive move globally, it's much more interesting in the short term, in terms of the economic impact it will have for the GMV of Shopify and a lot more incremental sales. I think remains to be seen how they market it more when I read it yesterday, I think the of course, we have our bias about emerging markets, because what the company is focused on but it was very like a US centric and heavy kind of push with it, as was some of the other news, kind of this week too, which that's also how our global news goes. It's pretty dominated by the by the American cycles, but yeah, I'd like to see a bit more color on it as the product expands. But I think, as Chris said, it's great to see the adoption and the people are pushing it. And I can certainly see the use case, because it's something we live day to day in the markets we operate.
Sy Taylor 07:45
Yeah, people forget that 75% plus of Shopify is revenue comes from payments. You think of them as the E commerce site, but they actually it's the payment facilitation where they make their money. And I just wondered if this is expanding their tam on the merchant side, on the consumer side, so consumers can buy from the global north and the merchants in the global south can sell to the global north. And Chris, I think you were speaking to some of the challenges with that. Chris, I'm going to come back to that protocol thing, because it introduces two concepts, the idea of escrow and operator so funds from somebody like the consumer who's making a payment are collected into the escrow, I guess, wallet, before being transferred onto the merchant, and then the operator can essentially facilitate that transfer of funds from escrow to the merchant or back to the payer based on the outcome of were the goods delivered or were they not? As I look at this commerce protocol, it starts to sound like it's got consumer protections baked in. It starts to sound like what we would have called a chargeback, and all of those cards sort of things. Do you think that's going to be essential for consumers to use this stuff? And do you think we're going to see more people trying things like this?
Chris Harmse 09:03
Yeah. I mean, I think exactly that you're starting to see the power of programmable payments. So this is where the escrow contract, you know, you bring that smart contract in to allow for programmability into a payment that was kind of set at the network level, let's say in, like a visa net or that sort of thing. So I think it's quite exciting to start baking those rules into the actual payment or into this protocol that kind of executes itself through a smart contract. So I'm quite excited to see how that develops. I think it is early days to see where that protocol gets to. It's obviously on one blockchain being based, but I think it's just starting to show that this infrastructure can be rules based, and it can be rules based based on smart contracts that execute themselves based on predefined conditions. So, you know, we've spoken before about, are we solving payment problems, the speed, the cost, the reductions of all stable coins? But very rarely do we start talking about the programmability of stable coins. You know, I think this is a good example
Sy Taylor 09:55
of that. I wrote a piece called, stable coins aren't cheaper, they're better and. Often, frankly, they are cheaper, but that's not the point. There's a whole bunch of other benefits we start to get. And I wonder if our next story is more about the programmability or the cost, because this story came from the Wall Street Journal and apparently, Walmart and Amazon, you may have heard of them, are exploring issuing their own stablecoins. The decisions would depend on the genius Act, the bill which just passed through the Senate and is now heading to the house to establish that regulatory framework for stablecoins. But according to the Wall Street Journal, Expedia, group and other large companies such as airlines, are also discussing issuing their own stablecoins. And apparently the DTCC is, I'm thinking about the Oprah meme. You get a stablecoin. You get a stablecoin. But Chris, I've always wondered, Is there only so much fun you can have with your own stablecoin? Or can you see a use case here for these giant merchants? Is this just, oh, this is the hot thing. We better go investigate it. Or is there a real tangible bit of value here? I mean, I
Chris Harmse 11:01
think I'm in the camp of, maybe this is the hot thing, and everyone needs a stable COIN strategy, and they're not quite sure what to do and but, I mean, like these sorts of branded stable coins, I think have worked really well in terms of, you know, think of them, Aiken took in some sort of reward token or loyalty points or that sort of thing. But I think forcing a user to adopt a branded stablecoin And then use your stablecoin at the checkout on your shop. Probably creates a lot more friction for the end user. Might be better for the merchant, like an Amazon or Walmart with lower fees, but I think it creates more friction for the actual end consumer to go now and be forced to acquire or somehow get access to the stablecoin that's linked to a branded entity, and then go pay with that stable coin on platform. So I also kind of think money tends to have network effects, as we've seen, and that extends to stable coins. So you see things like usdt and USDC have strong networks, and those networks are growing, and you've got this long tail of 200 plus stable coins struggling to get to scale. So you know, does adding Walmart's branding change the direction of that network effect or that momentum? I'm not so sure, but I'd love to get John's take on it.
John 12:09
Yeah, I think when you look at an announcement like this, it does remind me that I'm getting old number one, because I feel like I've seen so many of these over the last 1520, years, where, particularly in the US and these two brands in particular, at various different points, have focused on building their own wallet or looking at various sort of different technologies to apply significant pressure on to what's a huge cost base for them on their interchange. And it gives them very strong arguments there with the car brands and the current cases that are ongoing in the US or the DOJ investigation, to perhaps give some further credence to negotiation positions there, I'd agree with Chris's view on that. Think the Pareto principle would apply in these cases, right? Like, I mean, everyone's going to try and have one in the end. You know, it's a handful that actually will get any sort of scale and be successful. I think the genius act will have a overforce multiplier effect. I would say for circle, for sure, maybe to be a bit more challenging for tether, with their regulatory position in us, but they're winning by quite a long margin in emerging markets from what we see today. But a lot of this, in particular, Simon, from my perspective, and it has a bit more substance. I think when Expedia accepted Bitcoin, like 11 or 12 years ago, and I'm not sold completely on the case of everyone having their own stable coin, it had been completely interoperable, like maybe there's something related to the rewards that Chris mentioned, but I think a lot of this is just to put pressure on what are significant cost lines, two very margin sensitive businesses have within their core retailing operation too, and they've both been very vocal about those positions. I think Amazon removed, did remove visa was a MasterCard in Canada last year at some point, I can't quite remember which one. So they're used to kind of making these kind of pushes as well. I do think all these companies are exploring the technology. It may be on the collection side. I think it's particularly interesting for them on the expatriation side too, for either retained earnings or payouts for sellers or things of that in markets where it's particularly difficult, like if you think about Simon Says, someone who's in Pakistan today, who may have an AWS bill in Dublin, right? An AWS bill is going to be critical for that guy to pay. It's going to be extremely difficult for that person to get dollars today, you know, extremely difficult. So is there use cases there? I think there is to have high degree of utility for that kind of business, you know, where I think someone much smarter than me had reference, that's first line debt for most companies right there at their cloud bill. So I think there's real practical utility to some of those cases that probably lie a little bit beneath the headlines for those companies there. But I would view it also as positive PR in this case, right a minute, even, getting those companies to kind of look at stable coins and consider it like wasn't a really a realistic goal even, let's say, a year, 18 months ago. You know. So I think it's I would track it as some sort of progress from that perspective, and certainly triggered by the genius act as well and all the noise that that's made. Two
Sy Taylor 15:09
things can be true. It can be brand you've heard of, plus stablecoin equals headline in the middle of stablecoin summer. But also, there's genuine on chain data now from Artemis and others to show that the volumes are not only there and real, but they're exploding, and the real world adoption in the global south is there. The question is, does the genius act become a tipping point, and where does it the corporate treasury use case is one I hear coming up quite a lot, Chris, because we saw, I think a couple of weeks ago, we covered Sony are looking at issuing their own stablecoin, but they have their own bank in many markets, and they use that bank to move dollars and other currencies, kind of around the world. And their rationale was, well, if we can collect the Treasury yield and we can move those treasuries around, as simple as we can send an email like you can with stablecoins, perhaps that becomes a path for them to be collecting yield on daily payment operations. That's instant in 24/7 that was like quite a thoughtful approach that I hadn't heard articulated before. But I wonder about the corporate treasury use case for these guys, perhaps more so than the collections use case, or just purely the narrative wars for what's happening in various lawsuits and whatever else, do you see the corporate treasury use case there? Chris,
Chris Harmse 16:27
yeah, look, I think we, 50% of our TPV is B to B payments. And you could argue, in some way, shape or form, that some sort of corporate treasury use case, but you are lying underneath the hood. It definitely is global businesses that have cash around the world that are parked in multiple different bank accounts and need to move, you know, have big cash pooling requirements and that sort of thing. You get a lot of idle cash stuck in the kind of system. And I definitely, definitely think that maybe the corporate treasury use case is probably a better place to start than issuing your own stable coin. If you're someone like an Amazon or a Walmart, that's for sure.
Sy Taylor 16:59
I know Mikado libre has its own stablecoin, and they use that primarily for the rewards use case, John, I don't know if you're familiar with the Mikado libre token. If you can speak to that for a moment?
John 17:10
Yeah. I mean, I can probably speak more to use cases Chris was referencing. I mean, it's think we'll probably get to this at the end. That's a lot of the work that we been doing with Chris over the last three or four years to write like practical, real world use cases of making sure that you're not building up stock in an emerging market right in the currency. That's that that's a liquid there. I think the other use cases around rewards, for sure, are interesting. You know, I am a bit more with Chris in terms of, I think the corporate treasury adoption of this, particularly in these markets, is extremely beneficial to Treasurers and the heads of finance, etc, and CFOs, because it's a thing I imagine most of them would stay up at night on and in the cases I mentioned Simon for, let's say, like, meta ads, or, you know, Google Cloud, or AWS, like, that's a real business case on the revenue side, where you can't get paid, right? And someone's going to create a bank. To create a bad debt with you. Maybe you're going to churn a customer. Maybe they'll buy a slightly inferior you. Maybe they might buy from a provider who actually can offer to pay in tether or USDC or another stable coin. So I think the use cases are there, and I think those ones, in particularly on the Treasury side. Currently, as things stand, I think have the most utility to really drive benefit for businesses, which are more like an infrastructure play, rather than super visible to the rest of the world. Chris,
Sy Taylor 18:31
is there anything else from a global supply chain standpoint or merchant use case that you're seeing as you speak to your clients and prospects? What are you seeing and hearing?
Chris Harmse 18:40
Yeah, I think we're seeing more and more merchant demand, forcing PSPs to really articulate their stable COIN strategy well. And I mentioned before that, we started to see the way they've approached. It's almost like three steps. They come to you, and they go like, How do I look at this? And they start with some sort of treasury use case that they can control the risk. You know, maybe that's a B to B stable coin settlement or some sort of corporate treasury movement. Then they see the benefit of it, and then they're like, how do I do actually, B to B to C payouts, actually, for my allowing my merchants to pay out into the global South, if you're a, you know, an E com platform or a marketplace. And then I see some early adoption, and some early conversations I've been having where those payouts are not landing in wallets of users in the Global South. And they're going, how I actually now want to pay, which merchants accept stable coins. So you're going like, B to B. Treasury is feeding payouts. It's kind of feeding merchant acceptance. And that's why I think this, even though, in the Shopify announcement, just kind of rubber stamps that, you know, it's go time for the merchant acceptance use case as well. And I think you're getting this nice flywheel between the different use cases, and we're definitely seeing those kind of interact quite nicely and quite excited about what the next six months look like as some of those get to scale. John,
John 19:50
does that resonate for you? For us? Yeah. I mean, the ones we see, I think, are very similar to probably what other guests would have shared as well, Simon, or discussed with you before, like we've had. Remittance companies funding us in USDC, usdt this year, which people were not super interested in doing it 18 months ago, I think payroll companies as well, looking to lab with us. We're also having cases for, we'll say, employer of record models, where they're hiring IT staff, or they want to be paid in tether or pay to USDC directly as well, you know. So you are seeing those use cases across the board. So even for us, like it was when we started, more just a function of, okay, we have a particular challenge in this market, where we've got a choice of where to building up some stock and taking some time, or we use stable coins to take the money out to now, where it's much more a fundamental part of the offering for us, driven by our dialog with customers, where they had a desire to fund us in stables as well. So we participated in the CPN network, and we're kind of launching some stuff there this week with those guys. But overall for us, it was more of, kind of out of necessity, Simon, rather than us saying, Okay, we need to have a super defined stablecoin strategy on our end, it's just about being super close to our customers having a broader dialog as possible. And from those dialogs, it's become very apparent what the opportunity was there. And as I said, we've also seen those cases, even amongst our employees, asking for things right in terms of paying them in in stablecoins, etc, as well. So I think those those cases that Chris had mentioned are probably not talked about enough, really, and I think represent the really big opportunity for folks in the in the global set.
Sy Taylor 21:29
Yeah, the growth is ahead of those use cases without question. And I think that point about like following the customer demand is one that's often confused when there are big headlines like Amazon and Walmart may be doing something which is, yes, okay, that may be headline grabbing, but the real volume and the real data is actually here, and that makes it very different. To your point earlier on the Expedia writing Bitcoin in 2014 This is worlds apart from where that was.
John 21:57
Yeah, I completely agree. The other one, I think Chris and I discussed before was around, I guess depends on how you define these B to B use cases. But I would think about, we'll say, like a Unilever or other businesses who have, you know, stock built up in a certain country, who would look to liquidate it, and say, like a Nigeria or Mexico or other markets, we found that since the stripe acquisition, really, you know, another genius act and everything else that's really sped up the dialog and almost converted the pipeline. I'd say that we did have those B to B use cases into stable coin use cases, because they've accelerated the dialog with the customers where they're saying, Okay, would you be able to take it out, you know, off ramp to us? Could we give you stables flat and cases the other way as well? So I think you will see more of those use cases move to stable coins as well, because it's kind of acted, as I would say, almost a marketing incentive to CFOs and Treasurers and other folks to say, like, okay, maybe there's a real world utility here where we don't have to have that problem and we can liquidate that position, and it's actually going to be much more cost effective, which, as Chris, I know from emerging markets, in some cases, three or four years ago, it wasn't that cost effective, you know. And it was quite expensive to off ramp it, and it was difficult to get people to buy into those cases, too. But we've, we've seen that. I think it's probably a more substantive change. Simon, over the course of the last six to nine months, I
Sy Taylor 23:19
want to come back to the economics of that, but first, before I come into those economics and the next story, I've just gotta stop here and thank our sponsors. So we'll be back while we hear from the folks who make tokenized possible. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform, vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat back tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap tokenized is also brought to you by avalanche, major banks, FinTech challengers and industry leaders are using avalanche to create new business models on a fully customizable blockchain infrastructure. Think of it as more than a blockchain. Think of it as an entire network built for financial institutions to innovate with purpose built layer ones. Institutions can tailor digital asset strategies to their exact needs while still tapping into the power of a public blockchain innovation developer communities and seamless interoperability, join the institutions shaping the future of finance on avalanche, and you can learn more at avax dot network. All right. Thank you very much to our sponsors. The next story, I think we're going to. Cover the economics in but I want to contextualize this giant story before we do which is JP Morgan has announced the pilot of their US dollar deposit token on Coinbase is base blockchain, so jpmd is backed by deposits, not treasuries, and it's positioned as an alternative to stablecoins. So being a deposit token, it's designed to offer many of the benefits of having cash on a public chain, but it's linked to commercial bank money, which offers FDIC protection and potentially for large corporate treasurer's access to JP Morgan's additional suite of capabilities, which large companies will definitely care about, such as JP Morgan Connexus. And before I get into the economics, actually, John, I want your thoughts on this. Why do you think such a global bank is doing the deposit token versus a stable coin?
John 26:02
Yeah, it's interesting, right? Because I think if you listen to any of the comments from Jamie Dimon over the last few years, I don't think many people would have suggested that you'd be sitting here in June 2025 and we'd be talking about deposit backed token from jpm. So I know from talking to some banks, and even the event I mentioned we attended, Simon for circle like I was even myself surprised with the level of bank interest and participation, you know. So I think in many parts of the larger finance institutions, and certainly you have you talk to executives who run these banks like this is something they've been thinking about for some time, whether or not they've been able to verbalize that and vocalize their opinions, you know, if they're us, executives, etc, it's been more tricky, but I think you'd be surprised that it meant to people in these organizations who are working pretty diligently on these kind of activities, and I wouldn't, don't want to ruin the surprise for you, but I think if you looked at the kind of people these folks have been hiring over the course of the last few years, too. It wouldn't be a major surprise they'd be looking at these things. It is a unique spin on it, and I think it's an advantage that's unique to jpm, given their size in us. Jpm, as you know, has performed quite well in entering the UK market too. As you know, in what we do for a living, it's a lot of trust and reputation. So if you're bringing trust and reputation to moving money around, I certainly think all of those things help on the adoption side. Of course, like every technology in the B to B space, it's entirely down to execution as well, right? And how that will be used. So it'll be certainly really interesting to track, I think could kind of obvious in terms of why they are doing it. It's, I think, good and smart, defensive, protective move longer term, and, to be quite frank, about a quite innovative approach as well that they've taken. So be interesting to see how it plays out. Conversely, on the flip side of that, you'd have many people who, I think, who would say, you know, we've been running our crypto company, Chris and others, and they've not been able to get backed by JP Morgan last few years as well. So it'd be interesting to see how the broader community kind of receives news like this. It's an endorsement, of course, for for sure. But, uh, these organizations are have large tentacles. You know, they're many faceted in many sides, and sometimes one part of the organization is not necessarily in sync with the other. But yeah, I was quite surprised with Simon. I thought, really, really interesting, and we'll be keeping a close eye on it for sure. Well,
Sy Taylor 28:25
speaking of that, listening to customers thing, I immediately thought, how many JP Morgan customers are asking what their stablecoin strategy is? And they needed to have something to point at. And of course, JP Morgan has JP Morgan Connexus. We had nikhil sharma, who's the exec director of their digital assets business on the show that last episode, it was with the avax summit, and he said something that blew my mind, which is, I think Connexus has cleared something about two, two and a half trillion dollars of volume so far. This is their real time 24/7 settlement network, but it's only inside the wall gone of JP Morgan, which happens to be massive and really, really large. And on that basis, I actually ended up in a bit of a back and forth with the CEO of airwallex, Jack Zhang, on Twitter or x about a week or so ago. And what he was saying is, like, I don't see this pre funding going away. I don't see this economics use case. I have JP, Morgan, Connexus. I have really strong economics. But Chris, I know you've been talking about this sort of the draining pre funding accounts for a very long time. What are the corridors specifically that you see the opportunity in for corporate treasurers, for others to have the economics, and do you think something like a jpmd or something else could deliver against that? But first on the economics, the benefit for certain corridors, as
Chris Harmse 29:51
we've discussed previously, the look and feel of instant payments that we have today is not really instant. It's a bunch of pre funded accounts, as we know, hauled around the world. Yeah, and I really, truly believe that if enough FX moves on chain, so you've got other fiat currencies that move on chain as well. You're able to move from a system that works today, from like a liquidity pool settlement system, which is pre funded in all these accounts, to a single threaded payment system using stable coins and RTP rails, and that's where you can get this draining of pre funded accounts to your point. So I do think there's corridors in Africa, LATAM, Southeast Asia, where they're notorious pre funded markets. Think markets like Philippines, you've got to send swifts a couple days ahead of time so that you can make sure you have enough liquidity in Philippines to do your PHP payouts if you're a remittance app. So I do think there's tangible benefits and economic benefits of draining some of these pre funded accounts, putting four or five days of capital to work elsewhere in your business. I think treasurers are starting to get wind of this, how that kind of relates to JP Morgan and JP Morgan deposit token. I think to John's point, the scale of JP Morgan makes this very interesting. You know, many people have been talking about deposit tokens for quite some time. There's pros and cons to deposit tokens. I would say. I mean, you can definitely see the Pro for JP Morgan's business in terms of using that as a as a settlement currency for JP Morgan securities business, the fact that it's FDIC insured is, is great, but I don't think that's a USB, because the reason it needs to be insured is because banks go bust and those deposits go away, and therefore someone has to insure those deposits. And if you direct one to one Treasury back non fractional reserve tokens, like a tether or a so called, you know, probably still a better instrument. But John then, I guess on the con side of that is there's really this. The permission nature of all of these bank grade stable coins and stable coin projects is still something that I think is probably a hindrance to adoption, even though JP Morgan is at scale with all of them, you know, millions of customers around the world and their large payment flows. It's great that they've moved and now issued it out of this closed garden and put it on a public blockchain, being base, but it's still only permission to JP Morgan customers. So I think getting that balance right of like, what does one of these deposit tokens look like out in the wild, so to speak, for everyone to use on a permissionless blockchain, I think that's still the question that I that I have to see where these things kind of get to, I
John 32:21
didn't read you back and forth Simon with Jack fully. I read what he posted, what I took primarily from it, and I would have some concurrence with Jack's comments around the regulatory arbitrage size, you know, working in emerging markets, day today, you know, if you think about today, if we have to send money to for a remittance company in Nigeria, I have to have my imto licenses, the local in Nigeria with the CBN. I also have to have my EMI in the UK with the FCA, and all those things I think are well intentioned where you have any kind of arbitrage around that, I think was one of the things that the Jack was trying to highlight too, right? That, like, compliance obviously going to be really important. Of course you would argue with the technology. It being on chain, these things should be far easier to do, right, using that sort of technology. I think a general point he was making on the speed side, I'd say for sure, in some countries, it's a relevant point, right? I think it's your argument is much more substantive. Simon on, what could you be doing if you're not pre funding? You also have to remember that businesses like air well, except flow on both sides. So often Jack is using his own liquidity paying out quicker too. So you may also be experiencing all of those pains there, but I do think there is real substance to the regulatory side of things. I think not because he's on the call with us. But I think, you know, Chris can regulate in the UK to send money there, and you know other businesses like AAA doing it in Singapore. If people are taking those approaches, it adds a lot more credibility, I think, longer term, to how you move those things. It's also hard for me to imagine a world longer term, Simon just never happened in human history, right? We're all everything we all do is completely interoperable, and that we're all going to be the exact same. And, you know, the Nigerian government and the Argentinian government are going to be in symbiosis and happy to just trade Molly freely amongst each other. So I think the technology has the opportunity to improve those relations and maybe take out some of the mistrust you have, you know, but when those kind of things happen, because obviously, the ledger is immutable, and people can check the information ourselves. But I did think there was considerable error, at least in the regulatory arbitrage commentary that Daddy made as well. And you know, from knowing Jack's business very well, I can understand from his perspective why he's not seeing it there. But we see it the opposite in ours, you know, and in running a business in emerging markets. And see demand on on both sides, from people funding you in stable coins to also the receipts with them as well. So I think, I don't think he's going to be able to compete island on his own there, but I'd say at some point, his customers also will be pushing him a bit more on that, knowing some of the four. Books that do business with him
Sy Taylor 35:01
today? Yeah, indeed. And I should say, I don't wish to throw the guy under the bus. We had a phenomenal conversation, and his points are extremely, extremely well made conversation, and his points are extremely, extremely well made he's great, and they run a great business, yeah, and especially with regards to compliance. But Chris, it might be worth sort of giving people an update on your compliance position as well as other people's compliance positions, because I imagine you get that question a lot about like, what about compliance? So how do you answer that?
Chris Harmse 35:32
So we've taken an approach, having built in the space for five years now that that we needed to be heavily regulated on both the bank side and the blockchain side. So we went out and got EMI licenses so that in the EU, the UK, we were about to get a Singapore MPI license. We've almost got full coverage in the US on the MTL side, and we have similar crypto asset licenses in those markets. And the licensing gives you the framework to operate. And then you've obviously got all the nifty tools you need to use to do things like KYC, KYB, and then, more specifically, what differs between the Fiat world, as you'd know, and the blockchain world is on chain and blockchain analytics tools that allow you, like chainalysis, to do transaction monitoring, screening, blocking incoming payments from nefarious wallets, risk rating payments. So I think you definitely have to build with the compliance first nature and intention in early doors. I think that's changed a little bit now, because the regs have caught up. You know, early days there were no regs, so you had to kind of build, and we used Fiat payments regs to kind of architect our business and our compliance program so that we were operating as if we had a license, even though there were no crypto licenses back then. Now those frameworks are becoming a lot clearer. Mika, we know that genius just got past the Senate two days ago. So I think the frameworks are there. They're quite pragmatic. They're not too different on how we do Fiat payments today. And I think you just have better tools in the blockchain to to actually manage risk. I think
Sy Taylor 36:58
you do. I think there's a new type of risk that emerges, which is the arbitrage between the two. It's something that Supes, the founder of sardine he was at Coinbase in 2014 when you're head of data and head of fraud in an emerging area like that, you very quickly get used to people trying to arbitrage the two systems against each other, and you need to build like a pretty robust compliance house to manage both of those sets of risks, not just your Fiat risk, but your crypto risk, and kind of build the connective tissue between those as a regulated entity and anybody who, frankly, is responsible in this space. Well, listen, that concludes this episode. I will be talking to you guys in the not too distant future on an episode that's about to drop. But I do want to just thank you guys so so much for your input on today's show. And Chris, remind everybody where people can find you. At bvnk.
Chris Harmse 37:48
Great. You can find me@bnk.com and also on LinkedIn.
Sy Taylor 37:53
Fantastic. And what about yourself? John,
John 37:56
I'm not super used to leaving my social media on there. Simon, I like that people can't find me generally, which is probably a bad thing to say for a chief revenue officer, but just@delocal.com you can find us there and contact us directly. And always happy to have people reach out direct and have a conversation. And
Sy Taylor 38:12
you can find me at sy Taylor on all the things. You can find sardine@sardine.ai you can find FinTech brain food@fintechbrainfood.com because I seem to take the opposite approach to Doxxing myself. But ladies and gentlemen, thank you so much for listening, watching however you're consuming this please, if you haven't already, subscribe, like, share, do all of the things that help this show grow. We keep hearing feedback that you're starting to really enjoy the show, please help it spread with a lot of podcasts that could and with your help, will go a long way. Thank you so much, and bye for now.