On Ep. 17 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by John Nahas, Chief Business Officer @ Ava Labs to discuss stablecoin regulation and what the GENIUS bill means for payments.
On Ep. 17 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by John Nahas, Chief Business Officer @ Ava Labs to discuss stablecoin regulation and what the GENIUS bill means for payments.
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This episode is brought to you by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
This podcast is also supported by Canton.
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Sy Taylor 0:00
Simon, welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is, of course, Simon Taylor. I am your host, author at FinTech brain food, and head of strategy at sardine. And joining me is my co host, my friend Kai Sheffield, head of crypto at visa. How you doing, Kai?
Cuy Sheffield 0:30
I'm excited for next week. It's SF stable coin week. We're making San Francisco, the home of stable coins. It'll be great to see you in town, Simon. It's going to be an amazing, amazing week, a lot going on, very stable conference, a bunch of events. Hit me up. Anyone if you're coming to town,
Sy Taylor 0:47
yeah, so you'll be listening to this on a Monday. If you're coming in and checking out. A very stable conference, we'll be there, and we'll be doing some tokenized things. And we're not alone on today's podcast, because there's a lot of news to get through. We have John Nahas, who is Chief Business Officer at Ava labs. John, how are you? Sir? Good Tai man, thanks for having me today. Thank you so much for being here just before we get into all of the news. I just need to remind everybody that the views and opinions of contributors today are their own, and they don't necessarily reflect those of the companies they're representing. And of course, please don't take the tax, financial, investment or legal advice ideas from this. Do your own research. But John, now, with that out of the way, before we get into our first story, just give me a lay of the land Where's avalanche from a network and an institutional perspective, and give me a feel for what you're hearing from institutions.
Speaker 1 1:45
So looking at the landscape with avalanche, a couple of months ago, we unveiled one of the largest network upgrades we've had since the launch of the network inception. It did a couple of things, and I think this is important, primarily when we talk about institutions and their adoption. This is what we've been seeing. We lowered the fees on the sea chain, which is the public permissionless EVM that we run. That's the great test bed. It's a liquidity hub. It's everything for the broader ecosystem. But what we also did is we dropped the fees and the kind of barriers for people to launch their own chains. So we used to call these subnets. They're not avalanche l ones. They've always been their own l ones. And to date, we have about 100 of these on test net, and then we have 60 live, 37 that are the projects have launched, but the chains are live with a lot more coming in. This up until this point, was only on the private permission side, so with institutions, government, and then permission at the validator set, but open for public use. This has been great for enterprises, and particularly gaming. Now we have the ability to launch public, permissionless chains as well. So you have a network of interoperable chains across multiple industries, multiple use cases, multiple assets and jurisdictions and compliance requirements. And the final part is we remove the necessity to validate the primary network, the public, permissionless chain, so people could launch their own chain without having to validate the rest of it, which is ideal for institutions, right? What we've seen and what we did with many institutions up until last year before, kind of the regulatory shift that's starting to take place is they were very comfortable launching a permission chain or their own chain, with their own rule sets and their own parameters on a public network. Previous to that, right, they were focused on the Enterprise chains, and those are really just a silo, but in doing so, they can connect to other institutional chains and other things there. So we've had a tremendous amount of growth over the past year, year and a half, with that adoption, a lot of these initially were POCs, and as you guys know, nobody just flies from day one, they crawl, they walk, and then they run. So we've been able to do a lot of great work then, and now we're really seeing these guys who were moving from crawl to walk, kind of turbo charge and going from crawl to fly. Things are opening up. People are excited. They're willing to really start to innovate and do things that they previously felt that they were
Sy Taylor 3:56
restricted from doing. It turns out they were caterpillars, and now they're butterflies. They've gone from crawling to flying. It's a beautiful thing. They really, really have. And perhaps part of that is all of the regulatory moves that have been changing, particularly in the US, and there has been so many moves. And it brings me to the first story, and there's a couple of pieces to it, right? So first of all, us, Senator Haggerty has introduced the quote genius stable coin bill, which proposes state regulatory supervision of stable coins for institutions under 10 billion in market cap and above that market cap, they'd be supervised federally. So mirroring what you see with the oversight of banks, the bill would also define stable coins as digital assets pegged to the US dollar, and establishing reserve requirements for those issuers. So we also saw, in the same week that the crypto saw David Sacks also mentioned that the. This isn't going to get passed tomorrow, but they are confident within the next six months, given the nature of the upper and lower house and the presidency that they have at the moment. So Jordan, is it signaling like this that is making institutions feel like they're at least going to have some clarity? Should they start to adopt some of the tokenization initiatives that they've been playing with
Speaker 1 5:21
for a while. By all means, I think so. I saw a great tweet out that said, everything that's happening makes people feel that there's a sense that the risk is lower, but the rules haven't changed yet, right? So there's this dichotomy going on where people think things have changed, but they haven't yet. But there is hope. I think what you've seen from policymakers over the last couple of years was them kind of butting their heads against the wall and trying to get some kind of regulatory clarity out there, or at least signal through some legislation or proposed legislation, that this is where we would like to see change, but nothing was ever going to happen. I think now you're actually feeling that change, because it's coming from the White House. It's coming from both chambers of Congress. And ultimately, I think people who see the value of stable coins now see it as a way to strengthen the US dollar, both domestically and abroad. Right when you travel to East Asia or Latin America or the Middle East, people are transacting in stable coins. They're moving US dollar stable coins. Their ability and access to dollars is increasing. And I think whereas in previous years, they saw that, people may have seen this as a threat to the incumbent system, I think now they're seeing it as an ability to open up the dominance of the dollar even more and move it around globally in a better fashion. So there's hope here, right? It's not just, Hey, this is what we believe the legislation should be, and we're going to give it our best shot. I think we don't know what it's going to look like when it's finally baked, but this is a move in the right direction with the potential to actually lead to transformative change.
Cuy Sheffield 6:49
I agree with all that. I think a few takeaways on my side. One, the US policy and crypto kind of regulatory landscape is just moving so quickly it's hard to keep up, even for people in the space like it used to be that there would be an announcement or a bill, like once every few months, and then you could spend a bunch of time digesting it. Now, it's their press conferences, their bills there. There's like guidance. It's just it is moving at a very rapid pace. It seems to be in a relatively organized fashion that, as I understand it, the policy priorities for the administration seem to be, one, clarity around stable coins. Two, market structure, and then three, the concept of a strategic reserve. And if, how do you do that? What does that look like? And I think of those three areas, it seems that stable coins could end up being the lowest hanging fruit, that there is just more agreement around some of the basic common sense rules. I think that there's a growing consensus that stable coins are going away and that they have a number of positive implications for the US. So it'd be really interesting to see, I mean having the press conference with many of the Senate and House leaders joining, and be interesting to see what happens and like, will this bill get traction? I'm very interested in what does it mean for banks. How do banks perceive it? Does it create a path for them? And I think we'll be able to get a good sense over the coming weeks of what kind of chance does this have to move? What would the timeline be? And then, what would it mean, particularly for large institutions like banks, if it were to pass?
Sy Taylor 8:33
Well, Kai, you're fond of saying every bank needs a stable COIN strategy. And I don't know if you saw this week the stripe acquisition of bridge closed, and of course, one Patrick Collison, the CEO of stripe, said that not only has he been shocked by the volume growth in stable coins, genuinely shocked by just how rapid the adoption has been, but that every company needs a stable COIN strategy. I wonder where that line came from, I think you should start to trademark it. That's going to be pretty cool. But there's it's not the only regulatory action we also saw. SEC Commissioner Hester Peirce announced a series of priorities from the crypto Task Force, including clarity on token offerings, clarity on what is a security how custody needs to work, and then what clearing agencies and transfer agents need to be able to do, and how this would work within a cross border sandbox for securities. And of course, securities is so important because it's the bond market, it's public stocks, and it's direct access to consumers. And so it's interesting that there's a cross border piece of this. And John, I'm curious as well, how many of the clients in the institution you're speaking to want to get into that tokenization of real world assets on the security side, and how important are moves like this to help them do that.
Speaker 1 9:58
Look, I think it all comes down. Custody for the most part, for a lot of these banks or asset managers, right? They're going to need a way to hold these tokens, and you need to be a qualified custodian to do so. So I think a lot of institutions are waking up now and trying to figure out what that strategy is going to look like for them, and I think they only have three options. You either buy an existing custodian, you build your own, or you go hire somebody for the ones. They're going to build their own. It's going to take a long time, and they might be late. I think the ones that are okay with it are going to have to hire someone that their competitors use, so that can cause some friction there. And I think there's going to be some acquisitions happening, and some M and A in the custody space. Once that foundation, I think, is set, I think they'll be able to start doing this. I think the appetite is there. And look, I think for people that are very crypto native, they think tokenization is going to solve all the financial world problems and all this great stuff. And what you have is crypto people talking over traditional finance people. And traditional finance people talking over crypto people. Ultimately, whether something is going to be tokenized or not, I think it's inevitable. Whether you know it's tokenized or not doesn't really matter. And I think that's the difference. Is that crypto people want to hammer home the idea that something is tokenized, and the average person, the trillions of dollars that are sitting there across commodities and real estate and a million other things, doesn't matter, right? Nobody cares about the form of their stock or whatever it is they're holding in their Schwab account. So I think you'll start to see different flavors of this, right? You'll have people that are tech forward, that want to explain the virtues in this, and maybe with that, add some benefits. We've been talking to institutions that want to get very creative from day one. They want to start at the most extreme and trying to figure it out. I think they're trying to take a really big bite out of the apple. You might have some successes there. You might have some this is going to happen for two, three years, and God knows when it'll ever come. And others are going to crawl into it slowly and then ramp up where needed. So I'm curious to see how it happens. And I think the custody side will be very telling to see who's willing to jump in and either acquire or hire someone first, because that gets them to market fast. If I
Cuy Sheffield 11:53
was reading correctly, I believe there's now an email that is crypto@sec.gov and so it's, it's really interesting to see, and Hester Peirce has been someone who the industry has really admired and gained a ton of respect for through many of the dissents and comments that she's made publicly over many years. And so it feels like the door is open, and there's already I saw tweets about kind of people kind of walking into the SEC building, like in the front door, like having deep, deep engagements and discussions. And I think it really takes in any emerging space, it takes this kind of public, private sector partnership and engagement to figure out what are the opportunities, as well as what are the risks, and being able to address that, and I think that there are plenty of real questions around investor protection, around disclaimers and disclosures, our good friend Chris Brummer, and all the amazing work that he's been doing. And so I think that the industry and the people that I've talked to are are very encouraged about the approach at the SEC now, and very confident in Esther's leadership and figuring out the right balance between moving into these new areas while maintaining investor protection.
Sy Taylor 13:08
So John, what are you saying to institutions who are asking, What should I be doing about stable coins? What should I be doing about tokenization? Because I don't know about you, but in the past week, I had four Chief Product officers from neobank say, Where do I get started in stable coin? So what's, what's your answer to that? There's a lot of answers there, right? Yeah. It sort of depends on who you are and what you're trying to achieve, right?
Speaker 1 13:30
Yeah, exactly. It depends on who you're talking to, right? Some people come in and go, I don't know what to do. Can you help? And it's like, Okay, we're gonna help you try and build a new bank. Others are like, look, this is where we think we can make a move. This is where the board sees room for movement. Today, we'd like to dip our toes here or there. I think a few things. I think one, a lot of banks can use blockchain infrastructure, first internally, for intrabank settlements, account settlements, trades. It moves faster for certain things. I think they can use it for payments or remittance. I like to always say that the industry has completely failed, for the most part, on delivering the most basic thing that they could, which was remittances and payments, right? Everyone's tried to do things around the edges. Payments don't work that way. You have to go through the traditional rails. I think if you rebuild some of the traditional rails or put them on chain, you can make things faster first, and that'll be a great way in so, you know, to the point of, everyone needs a stable COIN strategy. Our first thing is, you know, to them, what do you want to improve, right? Do you want to improve back office function first? Or do you want to present new products and new use cases for your clients? Right? So that kind of gages for us. Where do we go? What we are seeing is that excitement that I mentioned earlier, is when we go to people and we say, Look, you don't need to put your payments or your transfers or your settlements on a public chain like anyone else that's publicly visible. You don't have to put it alongside nfts and meme coins and all these things that kind of you still kind of squeamish about. You can create your own environment. You can have your own permission chain that anyone can access that's a client we can build that. Solution for you, or provide you with the solution, and for their tech teams, the solutions that kind of allow them to have their own chain. I look at the way that avalanche was built from the ground up as kind of solving for this, where you see certain things that are like an inverted pyramid with like Ethereum system, which we all love, but it wasn't really built for these use cases. And then there's the monolithic chains that are single, big pipe, and everything is intended to go through it. That's great up until a certain point, right? But ultimately, the way we've built out this network, and we anticipate building it out, is like a highway system, and you just keep adding more lanes. Some lanes are for just specifically this bank, some are for this state, right? Some are for this jurisdiction or for this asset class. And the way that has interoperability makes sense. So you could have each bank have their own chain for intrabank settlements. But when all these banks connect and move assets between these chains, like you can do within our network, you start to see kind of the recreation of a swift or a SEPA or a Fed wire. Ultimately, you got to kind of take the existing rails and upgrade them, and that's kind of what we're seeing, and that thought to them makes sense, right? Because you have to go to these guys with an analogy or a way for them to understand how they're upgrading their legacy systems to new systems on one side and then on the second side, kind of going to them, telling them, this is the these are the unlocks that you get by utilizing these systems in these tokens. Because all they care about first is their clients want access to crypto or crypto assets, right? But there's both sides of that.
Sy Taylor 16:25
Kai, how about you? What are you saying when somebody comes to you? How many times a day is people asking you that? At the moment,
Cuy Sheffield 16:32
let's just say I my schedule and stress level is a lot higher than the days when nobody cared about stable coins. But in general, I think you have to start with use cases. I think it is a bit different for banks than for payment companies. I think for banks, most banks are very much following all of the regulatory developments very closely. What we've encouraged is, as you see the direction of travel and momentum, it starts to feel more like a when, not if there is regulatory clarity. And so even if, today, as a bank, particularly a bank in the US, it is not particularly clear, can you make transactions on chain and a stable coin? And if so, like, how and like, what do you have to do? I think starting with putting together that strategy and that plan of here are the use cases that you care about the most that stable coins could make sense for. And then here's the infrastructure that you would need to be able to enable those use cases. And like John said, there are multiple paths to be able to get that infrastructure, I think putting that plan in place now with the expectation that there will be regulatory clarity that comes that will enable you to execute it is a much better position to be in than just waiting and seeing and the regulatory clarity happens, and then you're starting at ground zero. Okay, now let's create a plan. I think most of the companies in the space that are going to have success are going to be ready to hit the ground running as soon as there is regulatory clarity in the US. And we'll see what happens with the OCC and some of the other banking regulators. My understanding today is it still requires a non objection, and that's been the approach that US regulators have taken, that if you're a bank, you want to do anything in the space like you anything in the space like you need to come to us first, and you need to seek a non objection. Is that going to remain? Will that be overturned in some way? So I think that's on the bank side, on the payment side, I think that there's just more opportunity for payment companies to be able to get started just moving value in a stable coin. And that was when we started looking at this piece of all the way back, 2020, 2021, my first goal was just to say, how do we get experience moving money on chain? There is a very clear before and after, like, we've never sent or received a stable coin payment for any amount on any blockchain versus we've been able to send and receive stable credit payments. So like you know, that process inside any large company can take months, and probably should take months if you're doing it the right way. And so finding what the lowest hurdle use cases are, where you have the most control, where you can manage the risk, where you have partners, because the other piece is you need partners that also speak this language. And so there are many payment businesses where some of your partners are banks are not able to interact with these stable coins at all, and other partners are crypto companies. And so starting with crypto companies that already have the ability to send and receive stable coins, that was an area that we saw in some of the pilots that we've done on stable coin settlement. It was starting with crypto companies, because they knew how to send and receive stable coins, and so we were able to learn through that. Then how do you expand to fintechs? Then how do you expand to banks? So I think it really depends the type of organization, but it's dangerous to wait until there's clarity to put a strategy together and put a
Speaker 1 19:56
plan together, just adding to that real quick, you really touched on that you have to go. In with use cases. First. Crypto people, for the longest time have gone been technology first, right? The technology, it's that it allows for so much stuff, and no bank's gonna change their stack overnight. They're gonna, not gonna change it over the next three to five years, right? But you got to come in first with a use case. And depending on who you're talking to, each use case could be different. Each potential use case could be different. You need to go to them with solutions, right? And oftentimes we, we don't do that in this industry, or at least on my side of the table, right? Like, people go in and like, we can transform everything. Well, nothing's gonna happen, right? Like, so you got to go in first and foremost with a clear thing. Go to them and listen, right? People in our industry don't listen, at least on my side. They say, this is what you should do. Instead of saying, what are your pain points? What are you guys having issues with? What would you like to see be changed first? What would be a big win for you, or big unlock that then allows for greater adoption and greater growth? And I think that's
Sy Taylor 20:53
a big difference. It's going to be fascinating to watch, Kai, as you rightly point out, you got to have that sort of thing ready to go when the clarity comes. In case of clarity, break the seal, and then you can kind of push go. It's not an emergency. It's clarity. Well, another story from CoinTelegraph, it says the real world asset market stays at an all time high despite some of the crypto assets having a slump. So the total value locked on chain for real world assets like treasuries reached highs of over 17 billion, and that's been stable at a level since mid January, and that increase in recent weeks was about 17% so as other risk assets have sold off, defi, some of the meme coins have really struggled real world assets, treasuries, people have flown to safety, but they've done it on chain, which is which is really fascinating, and this is up 94% year over year. So that's kind of huge. And in the same week, Ondo finance unveiled, they have a tokenization platform to bring on stocks, bonds and ETFs, kind of on chain. So this is such an unbelievably hot space. The thing that seems to follow stable coins is the treasuries and the real world assets, and it feels more like a real market than a speculative one when you see that sort of sort of behavior. But what are the biggest opportunities, John, from your perspective, for a financial institution, away from stable coins, more in the real world asset space, because selling treasuries is not necessarily in the classic sweet spot, especially for a bank, but maybe for other institutions. It's interesting.
Speaker 1 22:39
You all really see that move out of treasuries, right? A lot of these, let's be serious, a lot of this stuff that's sitting on chain is a lot of blockchain foundations parking some of their treasuries, or US dollars into these treasuries as so it's they're seeding that, and they're holding it, but other participants are starting to look into it, right? Black Rocks, middle has seen consistent growth, because institutions, people that want to hold are comfortable maybe with as their first on chain asset to be holding treasuries, right? These are things that they're familiar with. Again, they know what these are. This isn't a meme coin. It's not a speculative asset. It's not like utility or governance token. They have to wrap their head around that. They're like, Oh, I could buy a Blackrock money market token or a Franklin Templeton money market, token or Treasury, but have it reflected on chain. Maybe I get more yield. Maybe I'm able to move it or trade against it or borrow against it. That's something they can wrap their head and their arms around first, right? So it makes sense that that grows, and that continues to grow, and there's no need for that to sell off. What are they going to sell it off to from the tokenized version into the real world version, like or the regular one. There's not much of a change there, right? So you're going to see that. You're going to see treasuries, whether they're Foundation, treasuries, crypto company, treasuries, existing businesses and enterprises that traditionally hold these regular assets using regular into the real world, regular world assets on chain, because that's a nice first step for them, right? It's a nice, easy, understandable thing. They don't need to go get some crazy approvals and board approvals. So it makes sense that that's the logical first place for the incumbent World to Come on chain and for that to continue to grow. Where that allows again, first, right? That's a great first step. Then they can start to think about doing other things and maybe tokenizing some other assets they may have, or whatever it may be. So we're starting to see that. We're seeing that with a lot of great players in the space, there's great innovation starting to take root, things that previously were questionable, or we'll wait for the right time for that, and now, like, well, we need to get this done yesterday. So we're seeing a lot of that stuff, whether it's private equity access to other funds, things that traditionally people haven't been able to get access to. We're starting to see that demand for that to be tokenized, but you're really going to need those distribution, probably distribution on the traditional side, right until people can start to buy parts of a KKR or Apollo fund in their Schwab or on Robinhood. I don't think you really. To see that huge leap, until those guys are allowed to or are willing to.
Sy Taylor 25:04
Well, speaking of Robin Hood, I saw an op ed that the CEO of Robin Hood did in the Wall Street Journal recently calling for tokenization. And one of the quotes from that was, I'm paraphrasing, but once people realize that the public infrastructure of blockchain networks handles a lot of the settlement and reconciliation and transaction costs that you used to have to internalize, and that this is a giant efficiency play versus the traditional world. That's like a big unlock for people when they realize, oh no wait, all of that stuff I was doing, I can just let the network kind of handle that. And we had Mike Hudak from sling money on the show, I want to say, five or six episodes ago. Episode Eight. Check it out. So he was Chief Product Officer at Monzo. He was Chief Product Officer at Deliveroo. He was at meta, where he ran and built a lot of their ads. Product. This is a heavyweight product, person who saw this public infrastructure and said, Well, you just took all of my costs and all of my complexity away from me and gave me that as a utility. Now, what problem can I solve for a customer? But Kai, who do you think the customers are right now for for some of these real world assets. Is it more of a crypto native institutions and and what are you sort of seeing in this landscape?
Cuy Sheffield 26:27
I think that's been my understanding of it, that right now, most of the demand is coming from crypto capital, and we've talked about this on the show multiple times. Of once you have a institution in crypto, whether it's a foundation of a blockchain protocol, whether it's a crypto asset manager or fund, once they're on chain, they prefer to stay on chain, and they want to do as much as they can on chain. And so it's like the blockchains are not just a technology, they're a distribution platform. And so it seemed like that was the motivation of Blackrock, at least, from what we can tell that they said, Okay, you've got some amount of crypto capital that's available on chain. Why don't we just meet them where they are and bring a money market fund, you know, to them? And I think that it's clear that there is some product market fit there. As crypto markets grow, I could see the potential that that demand side continues to grow. I think that the question is, what does it take for the demand side of non crypto native capital, traditional capital, to come in and buy other types of tokenized assets? And is a tokenized Treasury attractive enough to motivate someone to come on chain for the first time just to buy a tokenized treasury? I think that could be difficult, because you can just buy a treasury off chain. And so there will be many institutions that come on chain to buy crypto assets, and those are kind of the assets that you can only buy really well and do all the things that they could do on chain. And then once they're on chain, then they'll consume more products of what they use to consume off chain, they'll consume it on chain. And so I think it'll be really interesting to see that back and forth. I also want to point out want to point out, I thought the Robin Hood CEO Op Ed was super interesting, and that he called out private securities. I think he mentioned open AI and SpaceX and Stripe, and how you've got these companies that are worth 10s or sometimes hundreds of billions of dollars that are staying private for longer, and could retail investors have access to those securities in a more efficient way if you were able to use tokenization? So I am really interested to see what Robinhood does, and I think they've been so much of a proponent of this notion of democratizing pretty sophisticated financial products and making them available to many consumers. And what else can tokenization enable? Can tokenization enable easier lending products? Of how many consumers today are getting loans against their Apple stock? Probably not that many retail consumers. But if you've got a private wealth manager like that's something that people do. I feel like buying and selling alone, there are not nearly as many benefits as what can you do with those assets outside of buying and selling, whether it's using them as collateral, being able to lend and borrow, I'm sure Robin Hood is interested in some of the leverage implications of products that you can offer. So I think you have to do things other than just buy and sell to really get the most benefits of putting a stock or some of these securities on trade.
Sy Taylor 29:24
Do you know it's so interesting when you link that to the previous comment, because the sort of PTSD I have from working in banks is just blaring in the back of my head right now, and what it's saying is, but I could sell private equity in stocks and credit to consumers already. I don't need a token for that, and yes, you can, but at what cost and when you now go back to vlad's prior point about somebody took all of the cost infrastructure and made it an order of magnitude cheaper. Now you have an opportunity to serve. Consumers at an order of magnitude lower cost products that previously they might not have been able to afford, and that sort of does align to Robin Hood's mission. But also, in the same week, Robin Hood had pushback from the CFTC about some of their sports betting contracts, and I think that's an important sign here, which is, whilst we have a new administration, we don't have a license to do just anything we want, regulatory wise, so taking your time understanding what is possible, understanding what the technology can bring you, in terms of use cases, if your costs are an order of magnitude lower, what would you sell? And who would you sell it to? And what problem Would that solve for them? It's just good product, first principles, stuff and on that crazy idea of listening to customers and trying to solve a problem for them. Let's go to our ad break. 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. This episode of tokenized is also brought to you by Canton network. Ever wondered where the real tokenized asset volume is heading? It's heading to Canton network, the groundbreaking public chain where traditional finance and crypto are converging. Why? Because Canton is the only public network with full privacy, no workarounds, no compromises, private moves, unbounded potential. $3.6 trillion in assets are on this chain. Hundreds of app operators and validators are in sync native stable coins and payments are next. This is 24/7 markets on demand financing with real yield, where the value moves as freely as information on the internet. This isn't just another chain. This is serious money flowing to solve real market risk. So what could you do on a public network with privacy? Why not ask the team at Canton network today, visit Canton dot network to learn more. Thank you very much to our sponsors. We really enjoy doing this show, and we appreciate your support in making it happen. The next story came from coin telegraph, and it's about Whoa. Coinbase had a pretty big week so they won approval in the UK from the FCA as a registered crypto service provider, but they're also going to require an on chain advertising platform called spindle. Now, Kai, I want to come to you first on this on spindle, because we haven't seen advertising as a revenue model in the crypto world, and it kind of supports the entire internet for better or worse. So what are your thoughts on this acquisition? Are we just going to have ads following us around in our crypto future? Like, what's what? What caught your attention with this one?
Cuy Sheffield 33:14
Yeah, so in my past life, I was a an ad tech nerd, before I became a stable coin and crypto and payments nerd, and I really just saw firsthand that having sustainable channels for customer acquisition is critical for the growth of any industry. And I would argue crypto has not had that. I would argue that customer acquisition and crypto has basically come down to prices, and it has ebbed and flowed, where, when the price is up, people are talking about it pure organic media that people are then people rush to, like, download a crypto app when the price is down, hard to get people to download and onboard into it. And so that's really been most of the history of crypto customer acquisition. You could also argue that Twitter or X has played a big role in a lot of new crypto products. I might discover it for the first time again, organically just seeing a post on x and following it, and then it might try it out. And I think that that's just that's a very challenging ecosystem for builders. And I think what has kind of been missing is you now have all of this activity that's happening in wallets, whether it's Coinbase wallet or phantom or Metamask like these are becoming major platforms that have millions and millions of daily active users that are inside those wallets, that are trading, interacting with defi, checking their portfolios and their balances, and we haven't really seen advertising come into that environment in any major way yet, and I think that it is inevitable that it will, because I think it will become a very good business model for wallets, particularly given that wallets have very valuable transaction data around. Around what assets consumers are holding, how they're sending and receiving assets. Everything that someone does on chain is a really good depiction of who they are as a person. And so if you control the real estate and the consumer experience, and you have a good sense of the context of who that consumer is, being able to surface relevant ads to them for new applications, to shop at merchants, it could be for anything, I think will become very powerful. And I think once you have a well built out market structure for on chain ads, it will start to accelerate the customer acquisition and predictability of customer acquisition for app developers, which I think is really big deal. And the last thing I'll say is I think back to the time when Facebook really, really kind of accelerated cost per install ads. When new apps were being developed. If you just build an app, how do you get somebody to find it? It used to be you had to be the top of the App Store charts, and that was like the only way then you could start running ads on Facebook, and people would see your app and they download it. And so that became a channel that many early apps used to acquire customers, like will Coinbase and Phantom and Metamask become this channel with mature ad businesses that many developers use to acquire customers? I think that'll be one of the most interesting things to watch for in the next two years.
Sy Taylor 36:18
What people underestimate about Amazon is it's got a major ads business, and the where commerce meets advertising, it gets fascinating. Klarna and affirm use the data, and then they sell ads and shopping to reactivate users, kind of back around the other side. This is something that's understood, but it's always been kind of janky in the tradfi world. It never really kind of fits together. John, any any reflections on the on this, this idea?
Speaker 1 36:46
Yeah, right. I think you're gonna start to see kind of the evolution of what cookies were on websites in the same way, kind of in wallets. So you have this ability to now have a client or customer profile built around the wallet address, rather than your name, your email, your phone number and everything else that gets leaked, right? So we started talking to some enterprises a while ago about this, and they were excited about this, but you can start to really think of it as like an online CRM for all of your an on chain CRM for all of your potential customers. And you can track wallets, see what the behavior is, and then send them a targeted ad, right? There's some great companies doing this feature, is doing smart content, which kind of digests your data or your attention and then uses that for this specific purpose. But what we're missing, I think, and what this industry is going to start to do is you're going to start to see the use cases within crypto kind of overtake advertising in a new way, through the form of air drops. Right? Like air drops don't have to be a crypto coin. An AirDrop could be a coupon for something. An AirDrop could be a special event, or special access, or early access, or whatever it may be, or rewards points, right? So you're just changing the background of it. But with targeted ads, you can also start to do targeted air drops, and I think that really starts to change it, because then you start to build the virtuous cycle that you build upon, and then you reward people, and you can reward them in many different ways.
Cuy Sheffield 38:03
When you say cookies, I start thinking about tracking pixels, and back in the days, like when you're running ads, how do you close the loop and determine that someone clicked through the ad and then made a purchase? And traditionally, you would place a pixel on the page and it would fire code when the refer came through a certain link, it breaks all the time. It actually doesn't work that well. And then what if someone sees the ad on mobile and then they purchase on desktop, like you lose that attribution. So I think advertising attribution has been a huge challenge ever since the beginning of the internet, and there have been a number of companies built around it. If you look at that in an on chain context, well, blockchains do attribution very, very well, like if you could show that a wallet, this address saw an ad and they then purchased or interacted with the address that actually paid for the ad, you can close that loop. And so I think it gets really, really valuable when you could start to track and you can even price on a performance ad basis, being able to have really, really good attribution, regardless of if it's on mobile or desktop or whatever the the interface is that the consumer is in. So I think that there's a really big opportunity for on chain ad markets. And then I think the last thing is, what is an ad market? At the end of the day, it's an exchange. That's what it is. What is crypto been building? It's been building exchange infrastructure that enable people to bid and to buy things. And so if you combine many of the primitives happening in building exchanges, if you have experience in attribution and blockchains are more effective than pixels in that way, and then you've got customer interfaces that have 10s of millions of consumers with contextual data around it, like those are all the ingredients for some really interesting, effective ad products to emerge, and they haven't yet. And I've been surprised it's like taken this long. And so I think if we're talking about this two years from now, I will be surprised if two years from now, there is not an ad business. That is generating meaningful revenue. Being able to connect consumers from a wallet to either merchants or other applications on chain,
Sy Taylor 40:07
fascinating to watch, and maybe, just maybe, if they're self hosted wallets, we might get some semblance of privacy in this new advertising world. But, you know, one might argue I'm a little naive on that side, but I live in hope the other part of this story, of course, was the kind of piece around the Coinbase getting FCA approval and the state of European regulation. More broadly, we also saw the Swedish crypto asset manager this week launch an avax ETB for investors in Finland today, John, I'm interested in your views. As you look to Europe, as you look to the UK, there is a little bit more regulatory clarity. Is it getting left behind? Are these products still valuable? What are you seeing, and especially from the institutional side? I think
Speaker 1 40:56
for the last couple years, it's been easier to work in Europe than it has in the States, right? So the UK is always, and always has been, and always will be, a financial hub alongside New York and other markets like Abu Dhabi or Singapore, but the UK has been ahead, right? And they've allowed for people to actually do a lot more, like the JP Morgan team, right? Is based out of the UK. There's a lot of great stuff happening in the UK. We've been working with some of these great people for a while. I think now that you can see kind of a transatlantic UK us alignment, realignment around the future of this technology and of these asset classes, I think it'll just spread really quick. I think you'll see the rest of the world start to fall in line. You know, you had the US completely on the other end of the world, on the other side of the spectrum here and now, kind of with that little coalescing happening, and more and more clarity on our side, or potential clarity on our side, with what they've done over there. I think at the end of the day, clarity is all that's needed. I think for so long, a lot of us would say, you know, no no to bad regulation. We don't want bad regulation, right? I think it got to a point where even bad regulation is better than no regulation at a certain point. I think we're past that. Now we're potentially looking at good regulation, but nobody, right, nobody's ever going to put any risk or any or take any chance if they could wake up one day on the wrong side. So just opening up all that, I think, to Kai's point, it's been extremely stressful and hectic, because there's so much incoming and so much happening, and so many things happening as quickly as I think the technology come out. For the technology side has always been like, oh, this takes too long, and now it's kind of like, who's going to move first? So we're seeing a big shift there. And Europe's always been doing a great thing. The UK has always been a hub for innovation, especially on the financial side, and we're seeing a lot of them.
Cuy Sheffield 42:41
It's interesting. Just your comment there made me think about, if you take the thought experiment, imagine we would have gotten regulatory clarity in 2021 the infrastructure didn't work very well, like it's I could, I could actually see a world of more disappointment. Of there was a lot of hype in 2021 Yeah. Of course, everyone was excited. It was a cycle. If every major institution was able to come in and interact with blockchains in 2021 and they saw the state of wallets and the cost of the speed like it just it actually didn't really work that well. And so I think objectively, blockchains work much better in 2025 than they do in 2021 you have more options. There's more resilience, there's more speed, there's lower costs, there's better infrastructure. We figured out, like, so, I mean, my delusional, optimistic self, like, sometimes I like, like, look at the bright side. Like, we had four years in relative obscurity to be able to like test and harden and innovate and figure out how to get infrastructure that can support stable coins, could support fiat currencies and real assets, at least to a basic degree, and then there's still a long way to go. But if you would have imagined a world of regulatory clarity at a stage when the infrastructure was very, very immature, you could have a scenario where people come in and they try it and it just it doesn't work. So they leave because the infrastructure doesn't work, rather than they're not able to participate, because there's not regulatory theory, which are very different environments to be in for an institution.
Speaker 1 44:16
I'd say that we're not there yet either, even now, right? I'd say that I don't think we still have the technology and the ability to tackle a lot of these problems at scale. I don't think we have it yet at all. You know, you see all these things on X every game, TPS and all this great stuff, and it's all kind of like, you know, nice little narratives that come and go. I don't think we're there yet either, right? I think this industry's still been very introspective. I think crypto people build crypto products for crypto users. Still, I think there has been tremendous improvements. I think we need to go a lot farther, because we've been building stuff kind of in our own little sandbox for the longest time. I'll make the argument that I think that there's too many blockchains and too much block space, but that's because there's too many general purpose chains. My argument is there's just too many general purpose chains with a. Little bit of tweak here, a little cheaper, a little faster, shove everything through this pipe or that pipe. My solution, counter intuitively, is that there needs to be a lot more blockchains and a lot more block space, but they need to be purpose built to take on traditional finance and payments and all these things that could be used by millions, if not billions, of people around the world. You need hundreds and 1000s of blockchains all doing these different things that have interoperability. I don't think we're even close to an end state, and maybe even even the middle state. I think we're just starting to see what this technology can do when the rubber hits the road with real mass scale use cases.
Sy Taylor 45:35
We're seeing people are coming for the stable coins staying for the 24/7, instant global Oh, my God, this works. And then wait, I've got stable coins, but I'd really like to have some yield. Oh, wait, I can instantly swap this for treasuries, and that's sort of like the gateway into Yes. And now imagine that with all of your assets everywhere, all the time, anywhere in the world, and all you need is compatible software at the user end to be able to address that. So the infrastructure will go through a forced upgrade as adoption comes and these things now, instead of it being a supply and not enough demand problem, there is now demand on the first killer app, and so now we have a supply undermined virtuous circle happening in stable coins that forces up the infrastructure, and it also forces in other players to start to figure out some of these gnarlier issues. Because, as you rightly say in lab conditions, most chains look great, but it's in the real world where always like to say, payments are easy, edge cases are hard, and that's where things start to go wrong. And it's the same for all the finance. Moving value is easy in lab conditions. It's the edge cases. What happens if I don't get paid? What happens if this merchant doesn't deliver my goods? What happens if somebody was standing over my shoulder and forced me to move the money and I really didn't want to? Should I be made whole for that, and that's why we evolve all of these other mechanisms around it, but having this transparent ledger stuff in the middle that massively reduces costs and gives us a shared source of truth would be a really great place to build from and take it from there. So on that crazily optimistic finishing note that sort of does us for time. So I want to thank everybody for listening. And I also want to thank John for being with the show. Where can people find out more about you and what you're up to over at Ava labs, tell us everything. Well, thanks for having me,
Speaker 1 47:30
Simon, it's great to be with you. And chi, I'm on x at John Nahas 84 you can follow avalabs, at Ava labs, and then, of course, all things avalanche at avax, a V, A, X. So look forward to chatting with you guys soon. And if anyone has any questions, comments, concerns or criticisms, shoot me a DM. I'm always around.
Sy Taylor 47:47
Oh, I love all of the alliteration That was beautiful. Speaking of alliteration, Kai on
Cuy Sheffield 47:54
x at Kai Sheffield and visa comm slash crypto.
Sy Taylor 47:56
Find me at sy Taylor on Twitter, and you'll find me on LinkedIn. Simon Taylor as well, remember to leave a review. Tell all your friends about this show. It helps other people find it, and we will catch you next time.