On Ep. 30 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Santiago Santos, CEO @ Inversion Capital to discuss Stablecoins transforming traditional businesses, Inversion Capital's private equity approach and more!
On Ep. 30 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Santiago Santos, CEO @ Inversion Capital to discuss Stablecoins transforming traditional businesses, Inversion Capital's private equity approach 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
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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
Santiago Santos 00:00
I think we're going to see the same arc of evolution in crypto, which is every business is going to be using crypto, whether they realize it or not. It's just it's a step function improvement, and most of that involves stable coins, which I know you guys like to talk about, that like corridor thesis, is acquiring businesses and making them more efficient and introducing a new product line and monetizing that user base with stable coins. There's other things to it, but that's like I hope that I guess success for inversion is to onboard a billion users and take traditional businesses and making them more efficient with crypto rails.
Sy Taylor 00:42
You welcome to tokenized. The show focused on stable coins and the institutional adoption of real world assets. I'm Simon Taylor, your host, author at FinTech brain food and head of strategy at sardine. Joining me is Kai Sheffield, my friend and head of crypto at visa. How you doing, Kai? I
Cuy Sheffield 01:00
am fantastic. What a week. We have a lot to unpack.
Sy Taylor 01:04
Oh my goodness, do we. But also joining us today is Santee Santos, the CEO of inversional inversional inversion capital, easy for me to say, how you doing? Santi,
Santiago Santos 01:19
I'm doing great. Thanks for having me on guys. Thank you
Sy Taylor 01:21
so much. Let's get to inversion capital in just a second. But I just need to remind viewers and listeners, views and opinions of our contributors today are their own and might not reflect those of the companies they represent. So please don't take anything we say as tax, financial, legal, investment, or any other form of advice. It's not even astrology. So before we get into all of the news, and my goodness, there's a lot this week. Santee, tell me a little bit about inversion capital. I love that you're coining it. Berkshire on chain, of course, the goat has now retired, so tell me the thesis? Well,
Santiago Santos 02:02
yeah, I guess now that he's retired, someone needs to take his place, especially in crypto. Look, I've spent over a decade in crypto, and it's always been an Agon question of like, you guys really understand FinTech, and you come from that world, and I think you see the opportunity of stable coins, and whether you believe their room temperature semiconductors as a cause, and brothers calls them, but generally, I mean, Kai, I remember you were one of the first people of visa. It's like, visa is an organization really excited about stable coins. And so where I come at it is like, I I've been just frustrated that we don't have more users on chain using these core products. And I fundamentally believe, after investing in over 200 companies in the space the tech and the timing is very much right. So inversion really is taking a private equity approach, meaning, I'm of the mind that you can buy a traditional business, and we can go into which ones and transform them with crypto elements. It doesn't mean that the entire business is crypto native. It just means transforming an existing asset with certain very specific things that make it more efficient, that you can cut costs, time costs, or introduce a new product line, and in a similar way that, like businesses 20 years ago, were still making the distinction between like an internet and a non internet business. Now, every business uses the internet. I think we're going to see the same arc of evolution in crypto, which is every business is going to be using crypto, whether they realize it or not, it's just, it's a step function improvement, and most of that involves stable coins, which I know you guys like to talk about, that like corridor thesis is acquiring businesses and making them more efficient and introducing a new product line and monetizing that user base with stable coins. There's other things to it. But that's like, I hope that. I guess success for inversion is to onboard a billion users and take traditional businesses and making them more efficient with crypto rails. Very
Cuy Sheffield 03:49
cool. I love the thesis. I think there's a huge opportunity there. And it's also just really interesting to see how traditional organizations are trying to navigate stable coins, and many of them who haven't spent time recently. There's a big learning curve. And so how to get up to speed, how to learn how they work, how to apply them to the business. I can definitely see how many of those companies need help. And there are different models. Some of them are going to consultants. Some of them are doing investments, trade ventures. And so having a private equity approach, bringing expertise with stablecoins coming in, I think is a really cool thesis. Yeah, I was
Santiago Santos 04:23
listening to a podcast about the evolution of visa as a network. And most people like take for granted how credit cards are so prevalent now. But my God, 2040, years ago, 30 years ago, you don't have to go too far back in history to appreciate like these things were, like, incredibly painful and took a Herculean effort to get off the ground, and it's so interesting, because I felt like visas and organizations really taken, like, for many years, just like really appreciated the opportunity of what crypto can really mean for your company, right? So I think we're in a very interesting time in the market where, like, crypto natives are skeptical or tired because prices are not doing anything, but it's organization. Ones like Stripe visa and others that Blackrock that really appreciate the opportunity at hand, which is you can really cut costs in a very meaningful way. Jiren, it's interesting
Sy Taylor 05:08
watching the kind of discourse on x and farcaster and others. And there is this like sort of crypto native, sort of nihilism that's almost crept in as real world adoption is finally coming, and the institutions have arrived, but we had Mike Hudak from sling money on the show several episodes ago, and because he was Chief Product Officer at Monzo, he worked at meta for many years. And what he described is, imagine if somebody took 80% of the infrastructure you had to build for a financial services company and just outsourced all of that cost to a network, then you would be in a completely different place. I'm interested in how you think about that transformation. You have this phrase that I saw in Frontera that was on board through acquisition, scale, through necessity, retain, through utility and repeat. Like, how does that play into what you're thinking about?
Santiago Santos 06:01
I guess if you were to describe what inversion does and try to prompt it with chatgpt, would be like, which platform business can I buy at the best price possible? Because price really dictates everything. Here, in a perfect world, I'll go buy JP Morgan and like, run this transformation. I don't have a trillion dollars yet, but I think what's interesting about what we do is, again, a telco, company, especially an asset like telco, is primed to be that Trojan horse to onboard users right because every user right now in crypto goes through an exchange that's just fundamentally broken. We're not going to sell people life savings products and normal products, because when you go to create an account or an exchange, you're thinking about buying Trump coin or peanut or Doge, and I think the retention is not there. Unit economics are everything about a business. We have terrible unit economics and crypto, not because we haven't built great products, but because the retention is not there, because everyone just comes in thinking they're going to speculate. And so again, you you need to invert that script and say, How can we activate a user without the speculative energy? It's really transformational technology, crypto, like getting people to use a credit card. 2030, years ago was painful. Took a while, but I guess the flow looks something like this. You buy a telco company, you live with a customer. 24/7, you buy this for like, five times, EBITDA, by the way, in a place like Latin America. And then you re architect that wallet so that that wallet becomes not just the telco app, it becomes a bank, meaning people see the ability to pay for mobile services, but also hold dollars in a bank account. I don't know if you guys have been in Latin America, but you cannot. Most people cannot hold dollars in a bank account, but they very much want to. And so this is where the activation energy is very powerful. New bank as an example, probably one of the most successful FinTech companies in the world. 100 million users. They got the scale where pretty much no other FinTech in the region has been able to do. They were extending $1 credit lines in a bright purple car to users. David and the team just really understood the user exceptionally well. But we can do so much more. And by the way, new banks are already doing this in many ways. So they had a crypto strategy, they had a crypto wallet. They even have a new bank token that kind of went nowhere, but now that they've enabled USDC on their wallet, it's the number one asset that users buy, and that's telling you everything about where we're going. Like people want to have dollars in a bank account, and this is how you do it, right? This is how we get 100 200 300 million users, right? And so simplistically, that's really it, I mean. And a lot of people ask is, why telco, if you think about it, telco is really interesting, because you have so much data on these users to extend credit. M PESA has done an exception. Well in Africa, you also live with a customer 24/7, and you have every every user that has a SIEM has already been KYC. So in order to be compliant, there's just a lot of reasons why we like this asset to be this is not a mobile telco play. It's a FinTech play with a really interesting customer acquisition strategy, which is buying an asset that is very unproductive. So that's where the core thesis we have, like most telcos in developing countries, will become banks, and you do that when money is truly digital, with stable coins. And in a lot
Sy Taylor 09:25
of these markets, telco adoption is not the issue. Everybody has a mobile phone, so you have the distribution already. What you don't necessarily have is the business model, but you've also proven the demand for that business model is there. You're connecting the two to the mainstream, which I think is very sensible. You've also been building your own l1 network on avalanche, so that doesn't strike me as a classic private equity play. From an infrastructure standpoint, you're definitely not living in just pure PDFs. Here is, what's the purpose of that? What's it what's it doing? Yeah. Well,
Santiago Santos 10:00
it really acts twofold. One vertical integration approach is necessary to finance acquisitions, right? Because when you go and buy these businesses, why would I leak that value to another chain, all the sediment, MeV transaction on and off ramps like it makes no sense, right? Because we want to accrue that value at the chain level. I think most people, you hear a lot in the timeline, a lot of these differentiations with high throughput chains. My view, after investing in most of them, is there's very limited differentiation. The real key is the go to market and Avalanche just provides that architecture out of the box to allow us to be high performant, high throughput, EVM compatible, low fees, right, which are necessary for us if we want to get the scale. But the real excitement here is, I don't want this to be a private equity fund, because I never want to sell these businesses. If you're a private equity fund, after five years, investors expect their money back. And again, what I want to do is I want to build the largest onboarding funnel for users to the crypto economy. And the way to do that is to have a permanent capital vehicle. So again, this Berkshire Hathaway is such a great organization because they have permanent capital. Every major private equity fund went public to have permanent capital. You know, they can access capital markets. They can sell their stock or use their KKR stock, or Blackstone stock or Apollo. Apollo bought a life insurance company to get float so like having this permanent, more durable capital base as an l1 and imagine a world where we launched the inversion chain, we have a treasury to be able to strategically use to fund acquisitions. I mean, the question is, if you're Solana, Ethereum, any other l1 l2 that has billions of dollars in their treasury, why are you not doing this today?
Cuy Sheffield 11:50
Yeah. I mean, that's an interesting trend that I think we'll see more of. Of, what is the future of a blockchain foundation? What does their mandate become, particularly as the blockchain skills, do they start using those treasuries to fund M and A and instead of just giving out grants or doing investments, actually buying and building businesses? And it's a really interesting opportunity and thesis that touches on a lot of the points that we've talked about in the show, and then a number of news items this week that I know we want to unpack as well. Yeah, last
Santiago Santos 12:20
thing I'll say is, like ripples already starting to do this, right? You're starting to see more M and A but in the same way that, like, I guess, foundations should realize that they have a very valuable currency that is very inflated. And so what did AOL do at the peak of the.com bubble? They went and bought a business seven times their size called Time Warner. That was very real. And I think that's sort of the position where a lot of these foundations are. And it's not to say that they can't grow into that valuation, but they should definitely be more strategic about how they use that balance sheet. Well,
Sy Taylor 12:51
I think tether is buying agriculture assets, and it's looking to buy into sports clubs and other yielding assets. So, yeah, the treasury management of some of these changes certainly starting to change, will something you are absolutely the right person to have us, kind of guiding through the news today and well, I'm going to segue here from the on chain Berkshire Hathaway to on show ad reads. So just going to take a quick break whilst we hear from the folks that make this show 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 backed 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 other 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. I thank you sponsors. Thank you for making this possible. And speaking of sponsors, well, we've got the story that was kind of everywhere, which is visa making a strategic investment in bvmk. This is like my. You made in heaven. I'm assuming you guys didn't find each other through tokenized but I would love that idea. So this follows the $50 million Series B fundraise that BV and K did in December of last year. And Kai, I guess you're the best person to talk us through this one. Yeah, we've
Cuy Sheffield 15:18
gotten to know the BV and K team really well over the last year, and are really excited about what they're building. I think we've talked about many times how much potential we see for stable coins to play a role in cross border money movement, but there's just a real need for infrastructure to make that happen. And I think there's both the need for orchestration in connectivity into local Fiat banking, the ability to do on and off ramps, as well as the underlying technology to enable companies to make connections between their own liquidity providers. And so we look at BV and k as one of the leaders in the space, and we're excited to continue to figure out how we can work with infrastructure providers to help visa facilitate cross border money movement and and I think for visa ventures, we're spending a lot of time looking at crypto companies, different layers of the stack, and definitely plan to make more investments in the space
Sy Taylor 16:14
suit here Sun T What are your thoughts when you saw this news I
Santiago Santos 16:18
said earlier, I mean, I've followed Kai And what visa has been doing for a long time. I think visa is one of those, like, very forward looking organizations that sort of realizes the possibility to transform their business in a very meaningful way. And I think this is just a way to express that view. So it's super, super exciting. I mean, I I have a lot of questions, but I know you do too, but it's, it's great
Sy Taylor 16:41
to see. The other thing that stood out about this is BB and K saying they process $12 billion annually for companies like Ferrari and rapid, and that runs to about a billion dollars per month in total process volume. Now that's not quite stripes, 1.4 trillion on an annualized basis. It's a ways to go, but I keep hearing how fast this stuff's growing, and we'll come on to it a little bit in the next story. But stripe sessions, John Collison was talking about, it's absolutely growing way, way faster than stripe itself did in its early days. So there's definitely a momentum thing there. And actually, whilst I'm there, we might as well bridge to this story, which is strike, launching stable coin accounts, so customers of these new financial accounts will have 24/7 access to instant dollar based liquidity in 101 countries. Only, though two of those are in the g20 it is backwardly compatible with ACH wire and SEPA for stripe customers who have access to those rails. And then, of course, just John Collison showed just how fast stable coin adoption is. Kind of growing. Sun Tai, did you see this story yet? It's all kind of breaking as we recall this on the Thursday. But any thoughts on this announcement as
Santiago Santos 18:07
well? I mean, it's amazing, like, there's a couple of things in the print. So he starts minute 24 everyone should go watch it. He talks about, like, Stripes growth, and he overlays that with the growth that they've seen with stable coins, like with their bridge acquisition. And it's like, as soon as he overlays the growth of stable coins, it's like stripes. Growth is, like muted. It's, it doesn't even show on the chart, which is super impressive. He uses a term that I really like, which is borderless finance, which is something that is a great just, it's a very powerful term. He is just a very a knack of, like, crystallizing terms in a very good way. But look, it's, it's amazing, like, go through the flow. I mean, he goes to, kind of a demo of what it will look like to seamlessly, kind of transition from stable coins to bank accounts. And it's like, you need a company like Visa and stripe to really change consumer behavior in a way that is like, kind of like inserts itself into that flow, right? Because everything in crypto today has been like, I'm gonna pull you away from your day to day workflow and try to convince you to do things that you've never done before in a classical transformational technology sense. And it's just like, really hard for the brain to process that, and very few people actually want to jump through barbed wires to, like, explore this technology. Doing it in this way is like a Trojan horse strategy, which is like a visa and stripe of massive distribution, but doing it in a way that the workflow is super intuitive, that the user thinks about stable coins as money. And I would challenge, like, if you were to run a survey, most people would not think of a stable coin as money in an exchange or in a crypto Exchange, or like through a wallet, like phantom or meta mask, because this is just weird, right? But when you see it, when you're checking out, when you see it, when you're logged in, and all of your workflows, I mean, God, this might be one of the more exciting times, or the most exciting time in crypto, because this is how you like, you kind of just sort of like embedded yourself in. The workflow of millions and millions of people, financial institutions, businesses, and it's like, it's so powerful. I mean, I I said it on record on Empire that, like stripes, acquisition of bridge probably goes down as the equivalent of Facebook acquiring Instagram, because Instagram became so important to Facebook, and they bought it for a billion dollars. I think that's the scale and the distribution is key here to
Cuy Sheffield 20:24
me, when I look at this, it seems like it really represents what I think about almost as, like, the third era for stable coins, and there will likely be more, but like, as I think about the eras, like my mental model is the first era was that stable coins enabled crypto companies to start to look more like global fintechs. And as much as I agree Tai the experiences haven't been great. You still had consumers finding that, hey, their crypto wallet let them hold dollars and send dollars across the world. And so crypto companies were not entirely speculative trading. They had some customers who used them for things that looked like fintech. So that was the first era. Then you had the second era, which was the enablement of brand new fintechs built from the ground up on top of stable coins. And so sling money is a great example of nothing to do with crypto assets. Just saying, here's this new infrastructure. Let me build something that looks and feels like a global Venmo on top of stable coins. And then that gets us to the third area, which I think is what we've seen this week. Some of the largest, most successful fintechs, who have been focused in a smaller number of markets or development markets, are now using stable coins to go global. And I think we'll see this more and more both in the fact that a lot of companies follow what stripe does, as well as we're now at the point where, as we get closer to regulatory clarity, as the infrastructure improves, as the user experiences improve, you could have companies who've been incredibly successful in one or a handful of markets say, Now is the time to go global. And they wouldn't have gone global if they would have had to do local bank partnerships have to figure out how to navigate a lot of the challenges of entering in a new market, where now, if they could build a product one time on top of stable coins and then offer that product to consumers or businesses in many countries, they're finding that there's that, that opportunity, and you can feasibly Go Global in ways that you haven't before. And I think there could be a lot of implications. And we're just now starting to see the beginning of that era.
Sy Taylor 22:23
I love the phrase that Andrew strange used once, which is like, the potential to be default global, because you just can't be that. There is no real, truly global payments business. You know, visa must kind of the closest things to it. But even there are lots of markets in Europe where, you know, it's ideal, and it's VIPs, and it's Swish, and it's UPI, and it's all of these local infrastructure networks that were connecting peer to peer. The stable coin sandwich just abstracts it all. It turns it into the internet. You've got this middle layer now that is open, available and instant I saw around this news ramp, the spend management platform, very popular with startups, has announced that they're launching stable coin linked cards in all of the markets where stripe is making this available. So now suddenly you have this company that was very, very dominant in the US and issued cards in some of the markets for some of its employees, but it was a very US centric company has now suddenly opened up to so many more markets. I think that's sort of the implication number one here is, don't just think about what this means for strike customers. Think about the product strike customers will offer out to the market, and how big that's going to be. And then implication number two, I spent a lot of years in global cash management. Global cash management, if you're at a Citibank or an HSBC, is a network of building correspondent banking relationships. You know, city banks in 90 countries. HSBC is in 60 countries. That's a lot of countries, but it's not 101 and yes, this is a little bit apples to oranges, but to my mind, this is the first real, genuine threat that business line has ever faced, and that is like the comfortable, profitable, gooey bit of the bank, where they had a moat around accounts and they had a moat Around payments, and those moats potentially don't look the same. So it doesn't surprise me to see the bank lobby has started making a lot more noise about the genius act in recent days, because I think there is a slow waking realization, but there's also an awful lot of complacency. And I don't think as a bank you can afford to be complacent on this topic anymore. I think you really have to start to lean in. Sam Tai your reflections on the potential for a alternative to Swift is that just hyperbole, or is that really real? I
Santiago Santos 24:54
think it's very much real. We did a lot of research when we go talk to people that over the. Years. Just don't understand crypto, but understand finance really well, and the amount of friction that you're removing from the equation is is massive. I almost describe it as like, I think the Collison brothers like buying bridges the strongest signal you can have because, like, if they're at the forefront of FinTech, they sort of realize that there's a natural limitation and ceiling to how much you can innovate around the current constraints of the financial system that, by the way, predates the internet. These are all databases that kind of stitch together in a very clunky way, and that naturally has a ton of friction. You mentioned global trade, that's something that the Collison brothers yesterday like always reference that as an example. Like, if you're a company of scale or SpaceX Tesla, you have international vendors stable coins allow you to pay them in real time. Like, that's incredibly powerful and so naturally. Like, I don't think it's an understatement. Maybe a better question would be like, what percentage of world trade business to business transactions, do you think move on to crypto rails? I use stable coins over the next 510, years, if right now they're like less than point zero, 1% what does that look like over the next 510, years? Over Under 510, 20, 30%
Sy Taylor 26:10
so I did the math on this based on the Citibank and Standard Chartered projections for issuance. So if you look at the issuance and the volume, and I tend to use adjusted TPV, so I'm closer to 14 to 16 trillion than the 27 trillion, because the adjusted volume does account for bots and trading volume that you see in stable coins. So if you take that conservative estimate of TPV today, then we don't know necessarily how much that's going to grow, but we do have good estimates of the growth of issuance, and the growth of issuance over the next three to five years is somewhere between seven and 10x so swift says they do 5.3 trillion a day in volume, which would be roughly 1.8 quadrillion per year in Swift volume, if you take the TPB of around 14 trillion today, and extrapolate that seven to 10x you get very closely to seven to 10% of Swift's global volume within three to five years. And that's not unrealistic at these growth rates. Imagine if there was a seven to 10% of Swift payment network being built in the next three to five years that's very serious and worth paying attention to. The banker DNA in me is a little bit like, there's gonna be AML risk here. There's gonna be new risks we're not expecting, but there's always that at the front here. So I think we have to be thoughtful about those things. Whenever somebody says it's gonna grow massively, that's going to be an opportunity for the bad guy as much as the good guy. But that shouldn't stop us from paying attention and taking it very seriously. It's
Cuy Sheffield 27:47
fascinating that, like one, we're talking about a dressable market that's in the quadrillions, and it just, it makes my brain like, how many quadrillions? It's just like, that's how big this, this overall space of global money movement actually is, but I also I don't think it's this like zero sum swift volume moving over to stable coin volume. I think in many ways, stable coin volume can grow swift volume as well. Stable coin volume can grow economic activity, which grows both stable coins and swift and I think even if you just take the example of the stripe product, of what they announced for businesses merchants in 100 countries, they can hold a balance in a stable coin, which might be the only access they have to $1 based business cash account. But then if they want to pay a supplier, they can initiate a wire transfer, they can initiate swift transfer, they can initiate sepa, so they can still use existing Fiat rails. And I think for an extended period of time, most of the suppliers and businesses that they pay, if you are a merchant or a business in Vietnam and you're paying someone that's in the United States, whoever you're paying the United States probably isn't going to accept stable coins today. Stable coins today, and they don't need to, because you could just fund a wire transfer that is basically a domestic wire that comes out of bridges underlying bank from a US Bank to whoever the US Bank is that you're paying. And so what would have been likely a swift transaction going through a local bank in one of those markets that then might have to go through multiple correspondence that would then have FX on it now actually turns into a domestic wire from a bank in the US to the recipient bank in the US. So I don't think it is necessarily all about switching volume when the money is moving over from traditional Fiat rails into stable coins. I think there's a big component of stable coins acting as these dollar accounts when money's at rest and then when money actually moves, being able to off ramp that and initiate local, domestic payments that still go over the same rails that they do today.
Sy Taylor 29:53
It's trade that wouldn't have otherwise happened. You guys
Santiago Santos 29:56
are experts on this, but is it fair to say that a lot of where the volume might come. Prom is like, there's a lot of like trap capital, like working capital, that sits in these Novo nostro accounts when you're doing trade. All of that may not flow into stable coins, but just gets released into more productive uses in the economy. I think
Sy Taylor 30:14
that there's a little bit of that. If you're an existing global corporate like Coca Cola. That's going to be something where you operate in 191 countries, and nostra of austros will be a very large expense to you. But if you're Tesla or SpaceX, you probably didn't have a lot of nostra of austros. So this came along and solved a problem for you before you even hit that scale. And typically, you see that the businesses born more natively to the time frame a new technology comes along. Are A, the early adopters and B, the fastest growing. So actually, I think this is for financial institutions, for swift for everybody else. This is all opportunity cost and not downside to Kai's point. This is not zero sum, but it is extremely positive sum on the growth side. The question from a strategy standpoint, is, how much of that positive sum growth, which looks like it's going to be faster than stripes, do you want to be exposed to? And how do you get exposure to it? I think it's a very different question. Thank you for asking me a question. You can tell you're a host. You throw me. I do want to cover the next story because we're running out of time. I don't know if you saw this one as well Santee, but Coinbase had two stories this week. One is their acquisition of derbet is official. $2.9 billion was agreed with 700 million of that in cash and 11 million in shares. So I'll come to you for perspectives on that. But also, what caught my eye was the announcement of x4, 02, a new protocol for stable coin acceptance on the internet. So maybe the first thing, the first derbet. What role do you think this would play in coin basis business, and why do you think this is strategic for both involved?
Santiago Santos 31:52
Yeah. I mean, it's massive. I mean derbets Money Maker at perps and options, like a huge market in crypto and Coinbase product offering is lacked in that regard. If you look at like binance As an organization, like some of the major exchanges do have more functionality, and yeah, it's really, I think it extends coin basis, product offering, the path towards, like, regulatory clarity and some of these things has been challenging in the past. I think it's not surprising that they bought it in this particular moment in time where we're about to have much just more clarity. And COVID has had different offerings in different jurisdictions, but I do think that their bit is sort of like the signal, which is you can almost imagine internally, they're like, Okay, now they've probably been looking at their bit for a number of years that it was interesting to supplement their product offering, and they said, God, now is the right time to strike, because they're really close with regulators, and I think they have good visibility in integrating that in most of their jurisdictions. So it's really powerful. And I think, yeah, it just complements our product offering quite a bit and makes it marginally more competitive relative to some of the other exchanges that
Sy Taylor 32:51
are offshore. Yeah, the m&a pushback maybe two, three years ago would have been quite bit more significant than this one. I don't know if you have thoughts on this Tai or if you want to jump to jump to the next piece, because the story about x 402 as a payment to node really, really captivated me. Yeah,
Cuy Sheffield 33:05
I think x 402 is fascinating. I haven't had a chance to dive into it in as much detail as I'd like, but one of the things that it speaks to is just the amount of innovation happening in different directions and use cases around stable coins, and then also just this intersection between stable coins and AI. And I thought at stripe sessions, there's the slide of, like, there are two themes of the conference, and it's AI and stable coins. So they were, like, right next to each other, which I think has been consistent our product drop. Uh, last week we talked about what we're doing in agentic commerce, and, you know, an update on stable coins. And so I think those have been really the two big themes of 2025 but they are still very much happening independently. We haven't seen many direct integrations and intersections between AI and stable coins that are gaining traction at scale. I think that there's a lot of interest in how they can come together. I think that there's opportunity, but everyone's trying to figure out agents are early stable coins, arguably, are, like further along, in some ways, than than agents. And so I think these new initiatives around what are the protocols that agents will use to transact, and then will stable coins be part of it. It's a really fascinating question that I'm excited to see how it plays out.
Sy Taylor 34:24
Tokenization was one of the things that unlocked e commerce, originally with card on file, and then tokenization unlocks mobile commerce with sort of Apple Pay, and that's a different kind of token, of course, that we talk about in the crypto world. But then tokenization of agents is a logical extension of that, because I know this agent. I can recognize it through the card networks. But one of the things that has evolved is the potential for something different to the subscription economy when your fee structure is as low as it is in stable coins, and potentially agents operating with micro payments and x 402, Built on something that existed in the internet for a long time, which was HTTP 402, and the idea is, with just a few lines of code, you get built in authentication and automatic settlement through stable coins. And they've got some interesting partners here, AWS anthropic and circle as well as this really caught my attention. I didn't realize the founder of Nier, who was also co author of a little paper called attention is all you need. Of course, the paper that gave birth to the transformer model and the transformer architecture that goes on to become chat GPT and llms Santia, what are you seeing in where agentic commerce is meeting stable coins. Is that just like two buzz words having a baby? Or is it like something real? I think
Santiago Santos 35:46
it's very real. You want to bring productivity into the workforce, or in your business, or as an organization, empowering AI agents require this type of functionality, right? You go talk to like there's interviews Tim Berners Lee and the inventors of the internet said they sort of punted this part. Punted this problem. Like, you can move money, you could move information in packets, but they didn't want to do the settlement of value on the internet. And it's like, this is just comes in and, like, extensive functionality on the internet. It's like an extension pack that is so powerful to transmit value. I don't think it's buzzwords at all. I mean, I think naturally, like AI agents require digital money and require this type of functionality to be very productive and do certain things that you know you want them to trade or you want them to, like, transmit value. You kind of need this infrastructure in place because they can't KYC, they can't kind of work when the current, again, workflows of the traditional financial system. So honestly, it's kind of went under the radar, I think because there's so much news happening. But we probably look back on this and say, Wow, that was like a defining moment of just crypto being a powerful extension pack for the internet.
Cuy Sheffield 36:51
I think there's the big question of, what are agents going to buy? And if agents are transacting at a traditional merchant on your behalf as a shopping assistant, that's exactly what we are enabling through our agentic visa intelligent commerce solutions. And like there are a bunch of things that you can do to make it you have all the controls in place for an agent to be able to leverage a visa credential to spend, I think for some of the the infrastructure spend, are agents transacting with other agents. Are they transacting with cloud platforms, or are they buying LLM tokens for those? Is this, the messaging was all about killing the API key, which I thought was interesting, where you're used to, if you're building something, you go and sign up, you get an API key, you then you pay for some credits or subscription. If you don't actually know what developer service you need. If you ask your agent, hey, I want you to do a task, and then the agent has to figure out what service they need to complete the task. And maybe there are 10 services that they need, and they could just automatically purchase those, pay as you go, using a protocol like, then that gets kind of interesting, but I also still come back to like, if the agent works for you and you have a card, why can't they just use your card? And I think from a micro payment perspective, it's really just a business model question of, if there's enough demand, and we see real value in micro payments, which we haven't really seen demand for micro payments at scale, then I think there are a lot of ways that we could support that as well, while at the same time, people talk about micro payments of stable coins, even though gas fees have gone down, you're still paying a cent, and so you can't really do a subset micro transaction. So I think there are a lot of questions around, how do these use cases play out, and what are actually the problems that stable coins solve, versus what enhancements can be made to existing networks
Sy Taylor 38:44
to support them? Yeah, and the answer usually is all of the above. I wrote a piece a little while ago the four models of agentic commerce, where you see the evolution of just like somebody using operator, and it's almost as if it's typing it in your screen, and then it stops and asks you for card information. Then there's a company called not APIs that does card on file, which is just like storing your card at Amazon, but the agent gets there and it uses the card you've got stored on file, but knows an agent's doing it. Then there's the virtual card model, which is what stripe is live with that says, Oh, you've landed on a stripe. Checkout. Your agent's landed here. Let's give this agent that we recognize a virtual card. Now there's visas tokenization model that says, actually this is a known agent. It's checking out. We understand this at the network level, and we know that it belongs to this user, which adds a lot of potential fraud and chargeback protections stable coins, and honestly, we just don't know which of those it will be. But stable coins is part of that conversation with these things, though, like having something really neat and elegant at the top level for the merchant to be able to recognize. Hey, an agent is coming to my website. An agent is browsing around a little bit and now has an intent to make a. Moment. I think that handshake is potentially hugely valuable. But my rambling aside, I know we're up against it on time, so I want to thank everybody for listening and watching. And I want to thank Kai so much as always. Where can people find out more about you? My co host, my friend
Cuy Sheffield 40:17
on x at guy Sheffield at visa.com/crypto, and Sancy,
Sy Taylor 40:20
where can people find out more about you? And inversion capital
Santiago Santos 40:24
on X Santiago, Roel and inversioncap.com,
Sy Taylor 40:28
you'll find me. Sy Taylor, fintechbrainfood.com and, of course, sardine.ai if you're worried about any of the fraud and compliance issues that all of this implicate. Thank you very much. If you enjoyed this, please remember to subscribe, like tell your friends, spread the good word and leave us a review or a comment. It really helps others find the show. Thank you and bye for now.