On Ep. 35 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Davis Hart, General Manager @ Solana Labs and Daniel Mottice, Founder @ Beam to discuss Stripe's acquisition of Privy, the future of embedded and self-custodial wallets and more!
On Ep. 35 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Davis Hart, General Manager @ Solana Labs and Daniel Mottice, Founder @ Beam to discuss Stripe's acquisition of Privy, the future of embedded and self-custodial wallets and more!
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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 presented by BVNK.
BVNK is the leading provider of stablecoin payments infrastructure—helping businesses move money faster, settle globally, and even launch their own stablecoin products. Head to BVNK.com to learn more!
This podcast is also supported by Canton Network.
The groundbreaking Layer 1 public chain where traditional finance and crypto are converging. Visit canton.network to learn more.
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Cuy Sheffield 00:00
Kai, welcome to tokenized. The show focused on stable coins in the institutional adoption of tokenized real world assets. I'm Kai Sheffield, and once again, Simon is in the air, and I am your host. He promises that normal service will resume soon. We're excited to have him back next week, but joining me on today's show is Davis Hart, General Manager at Solana labs, and he may be up to something new. We might have a little tokenized exclusive here. Davis, tell us what you're up
Speaker 1 00:42
to. Thanks for having me on. Really excited to be here. So I've been at Salon labs last couple of years and have been incubating a project within labs that we're taking out of labs here right now. Can't say too much about it, but it's gonna be my new thing. And really, at the nexus of banking and stable coins, maybe 14 of your listeners might know that I tried to try to rebank a couple of years ago as a stable coin issuer, and I'll just say it's along those lines,
Cuy Sheffield 01:04
excited to hear more about it. Davis and I have had fascinating, multi hour long discussions around the intersection of banking and stable coins. And also joining me today is Daniel motice, founder of beam. Welcome Daniel, and the first member of the visa crypto product, founder mafia. It was amazing to work with Dan for multiple years at visa, and incredibly excited about what he's
Speaker 2 01:29
building at beam. Yeah, and thanks very much for having me, Kai. I'm excited to get reconnected in this context. I describe beam as a stablecoin PSP, or payment services platform, so we handle the compliance and regulatory work to allow for normal fintechs that don't traditionally touch stable coins, to add the payment method to their mix for both pay ins and payouts. So broadly, it's been described as orchestration more recently. So we handle on off ramps and basically the connectivity into both liquidity and blockchains such that value can be delivered in this new medium, and increasingly spending more and more times with more traditional folks in the ecosystem, across fintechs, merchants and even banks now. So interested to chat through that Davis and see kind of if there's any world in which we can work together,
Cuy Sheffield 02:11
and you've had a fascinating journey in the space since the founding days of beam. So just one last bit before I get into the content, I need to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those companies. They're representing nothing we say should be taken as tax, financial investment or legal advice. Do your own research
Sy Taylor 02:29
before we get into the show. We just need to remind everybody that this podcast is sponsored by our friends at bvnk, and if you've been listening to this podcast, you've probably heard us say every business needs a stablecoin strategy, and if you're looking for the best place to start, that's bvnk. Bvnk is the leading provider of stablecoin payments infrastructure, helping businesses move money faster, settle globally and even launch their own stablecoin products, all with licensing and compliance, so you can build with confidence. We're proud to partner with bvnk on tokenized To learn more, visit bvnk.com
Cuy Sheffield 03:10
All right, let's jump into it. So for the first story from everywhere, Stripe acquires crypto wallet provider privy and so coming after the stripe bridge acquisition last year, which was a major turning point in the space, we have another huge day of news with the Privy acquisition in March. Privy said it supported 50 million wallets. With that figure now up to 75 million wallets supporting 1000 applications. Notable customers include hyper liquid Blackbird and forecaster privy will continue to operate as an independent product. Quick plug. We also did have Henry, the CEO of privy, on the podcast in Episode 29 and so if you missed that, go back and take a look at that. So let's start with you, Davis, what's your initial reaction here? How big is this for the space? Like, why is stripe buying another crypto stablecoin wallet company? Like, what do you think is the strategy here?
Speaker 1 04:08
I was thinking about, what's the right mental analog for what I see happening here? And as much as I hate calling something like the Uber of cat delivery or whatever, I think there is a useful analog here, which just feels like the AWS Azure, Google Cloud, what they did for all of that infrastructure, back end infrastructure. And it does feel like what stripe is doing here is starting to build the sort of AWS version of these financial building blocks. And I think that's maybe not too surprising. If you look at the past. They launched Atlas as an example, which is this product that makes it easy to start companies. And so this feels very much on trend for what they've been trying to do. And so, you know, as you think about it, they're basically integrating the layers that have been built on top of them, or on top of other pieces of infrastructure, and integrating that into a single sort of toolbox for builders to consume and then create sort of the. Application front end on top of they've done this with card acquisition, card acquiring, and now they've moving into stable coins. I think when they bought bridge, there was sort of a question in my mind of like, are they going to do more here? Are they just buying bridge to provide this, like, back end stable coin movement capability? And what this tells me is, no, they're actually trying to build out a more comprehensive tool set for, I think, the next wave of FinTech apps, right? I think every FinTech app, if they're not thinking about how they're going to leverage tokenized assets, maybe it's not this year, maybe it's in three years, but they need to start thinking about it. I think every FinTech app is gonna need these products. And having built sort of a integration type of product at Solana labs in the last two years, I can tell you, like it is still a pain in the butt to go find, like a wallet provider and go find, you know, an asset minting service and all these things. So it absolutely makes sense to kind of create a one stop shop for
Cuy Sheffield 05:53
this stuff. And I think in February, I think it was John Collison that said they want to be the best platform for developers to build on stablecoins, and so it seems like there's this very developer facing mindset. I think if you look at both bridge and privy, one of the things they have in common is developers love them. They were really, really smooth, easy to integrate platforms that had some of the same ethos and spirit that stripe had, did help the audience unpack what's the difference between bridge and privy? Like, why did stripe need to buy two crypto stable coin companies? Like, what are these pieces of the stack? And like, how do those two pieces fit together?
Speaker 2 06:32
Generally, I view bridge as the financial plumbing, so the regulated pipes through which Fiat can be moved into a stable coin or back and so on or off ramp, and then privy is the basically the account infrastructure that allows for new Neo banks to be created, or new P to P ups to be created. And without the two of them, you can't really create a new end to end experience. You need the ability to fund the wallet and you need the ability to cash out from the wallet. But the wallet, in and of itself, is a hyper complex architecture that privy did a tremendous job of simplifying. And so I think they are really a match made in heaven, especially under the stripe banner. More interestingly, if you look at this as stripe vertically integrating the stablecoin stack, the main mental gymnastics I've been trying to do are associated with if this is a play to go public in light of how well circled it, and if this is a repositioning for a stripe as a whole, to be the stablecoin payments platform, the acquisition of these companies such that they can ride this kind of new bull market that's been kicked off by circle and finally go public. That is very much speculation, I know, but that is the main question in my head. Is this a positioning game? Is this a game of 40 chest that the collisons are playing to ride the momentum that's been started by circle? Because it's very clear now that there is latent demand for stable coins in public markets, and so, yeah, generally, I'm really fascinated by the move. I think it's going to be tremendous to see how privy is integrated with bridge in some way, shape or form, or if three years from now, they're going to still be these discrete products. To your point, my take is that there's going to be kind of a coalescence of the two and the two of them will begin to be consolidated into a single stablecoin engine, but yeah, ultimately, will be interesting to see how the stripe team handles that, and how bridge and privy also handle that.
Speaker 1 08:10
I want to double click on this concept of wallet infrastructure and embedded wallets, because this might be something that there are folks in the audience that aren't necessarily familiar with. I think when people have generally thought about stable coins, there's been this assumption that stable coins live and are transferred between crypto wallets, and I think that that was the case in many of the largest wallets that held and were used for stable coins were large crypto exchanges or self custodial wallets like Metamask and Phantom and the same wallets that people use to trade crypto they would use to be able to pay in stablecoins. Then we saw a wave of like new fintechs. Think about companies like sling money in front of the show Mike Kodak of building purpose built, here's a wallet that's like just for stablecoins. It almost feels to me like privy represents the ability to turn any mobile app into a stablecoin wallet, just embedding a wallet into where consumers already are, rather than necessarily having to build a brand new wallet from scratch. Davis, is that how you think about it? Like, where do you see this idea of embedded wallets going? And is it almost separating out from the crypto wallets that used to be what people would use for stablecoins, yeah. I mean, I think that's 100% right. I think we all know the difficulty of getting someone onboarded onto a crypto wallet, and I'm sure you've talked about this on the show, like the difficulty of seed phrases and private keys and all this sort of stuff. So I think the industry has been talking about, like, abstracting all that complexity away for a long time, and I think that absolutely is a key building block. Again, if you think about who is stripe trying to serve, for the types of businesses they are trying to serve, these are, by and large, not crypto businesses. They're normal businesses doing normal things, for whom money movement and money actions, it's critical to their business, but it's not central to their product. And. Necessarily, there's a minority for whom it's central to the product, and so stripe needs an answer that allows them to sort of treat stablecoins In the same way that they can use stripe to treat credit cards, right? And I think that this abstraction on its own is important, but it's insufficient. There's actually a number of wallet companies out there that do just this, and people have been working on this for a number of years. I think what's more interesting here is like when stripe brings us in with their global footprint, with what bridge brings now, all of a sudden, what you get is the ability to abstract away, not just the wallet itself, the token of the stable coin itself, but then also, hopefully they'll build out all of the on ramps and off ramps globally, right? And I think, like the big unlock here for stable coins is from a developer perspective, is if you can get a developer to the point that they can actually think about money in a singular, global sense, I think that dramatically simplifies the development and deployment of applications. I worked at Google Payments. I know people have built out payments at Uber and all these companies, and it's just astonishing how many engineers, how many business development people, they have just to build out that global Fiat infrastructure. And so if you layer stablecoin on top of one of those, and you can do that globally, now, all of a sudden, you actually don't really have to worry about different jurisdictions, different card network rules, and how those vary country to country. Like Stripe is building that in, and now they're putting in maybe one of the final pieces, which is that last piece of the wallet, where, now you don't even have to think about whether this is stable coin or $1 it
Cuy Sheffield 11:28
almost seems like there are two different paths of where a platform like privy can be used. One is integrating and embedding a wallet into an existing app. And so that app, it could be a merchant, it could be a software provider, could be any app that could just decide to embed a wallet. People talked about embedded finance for a while. Now it's embedded wallets. And then there's also the ability for developers to build brand new products that have a wallet just with them from day one. And so I think back to the friend tech days. That was the first time I heard about privy. Was you had this, like new social app that went viral, became very popular, and you could just when you created the app, you created a wallet, and the wallet was embedded inside the app, and people were like, wait a minute, this is actually a usable crypto experience. Who made the wallet and it was privy and so then being able to get this momentum of usable crypto applications that had wallets built in. Dan, how do you think about those two do you think Stripe is gonna be more focused on, how do you turn an existing merchant or software providers app into a wallet? Or it's this, like next generation of fintechs and even social platforms and games, and, you know, all different types of applications that don't exist yet that will be built on top of that. Like, how do you see those two different market opportunities for
Speaker 2 12:44
them? I think both will be reasonable and achievable. I think one of the beauties of keeping privy as a standalone brand and keeping a separate go to market function and ops function and developer relations function, for example, could allow for privy, for example, to focus on next generation applications, a la friendtech, 2.0 that's created using their infrastructure. Well, my guess is that stripes team will focus more so on like embedding crypto infrastructure into, you know, existing merchants that they have, right? And so I think they both are possible. I think it's very realistic that the Privy team will continue to push the bleeding edge, and Stripe will, with time, begin to kind of take all these pieces, also inclusive of bridge, and begin to embed them into large scale merchants generally. I think the biggest question mark that I have as it relates to privy infrastructure is that they have absolutely crushed it in consumer crypto. I think they are the clear winner in my head as it relates to the friend techs and other net new like the hyper liquids, the net new product experiences that require very clean user auth and respectively, like, you know, spinning up a wallet for a consumer behind the scenes. I think that some of the stable coin infrastructure, lower level infrastructure, is a little bit newer for them, you know, that's been built out in the past year or so. And so it will be very interesting to see how this evolves as it relates to, kind of both the continuity of the consumer infrastructure directly and also the deployment of this lower level infrastructure under the new stripe leadership, as it relates to, like, proper stablecoin centric functionality versus more, you know, generalist wallet functionality that could be applicable to things well beyond stablecoins.
Speaker 1 14:18
You know, I wonder, as you're talking Dan, like sort of bifurcating between how stripe might apply this to merchants and how privy may still go after more like application developers. It got me thinking about, what does this really enable someone to do? It enables someone, whether it's a merchant or whatever, to integrate stored value into their product, right? That's really what this is about. Is like that. Now you can have this stored value attached to any app, and it's very easy to transact with that app or potentially with others. And it leads me to wonder like, Okay, how many merchants really need a stored value wallet? I don't know. Maybe it becomes a thing. Maybe not. I think it becomes a thing if those stored value products embedded in a merchant are not. Siloed, right? Because, like, Why do I want to have stored value at each of the 25 merchants I shop at? It makes no sense. I do wonder if there's a path here where stripe basically deploys this across merchants, but under the hood, it's all connected together through the Privy infrastructure, and then all of a sudden, now there's a stripe. You now have a stripe wallet. There's just the collection of all your stored value across all the merchants
Cuy Sheffield 15:20
that seems like that's kind of the framework of stripe link today, and being able to aggregate together your payment methods so you could have a wallet embedded inside of that. I think the other really interesting part of the story is my understanding, like the core product that privy has, and where they've gotten the most adoption has been enabling self custodial wallets, and self custodial wallets that are usable, that are recoverable, but that are still self custodial. And so I believe that it's up to the developer how they can configure it. And so you can use privy for custodial wallets as well. But I I think the vast majority of the 75 million wallets that they have are self custodial. And so that that leads me to think how important are self custodial wallets in the future vision of how stablecoin adoption rolls out, and I think there are a lot of people, you know, I still find myself explaining the concept of self custodial wallets to tradfi and payment folks on almost like a weekly basis, because it's just, it's new and it's different. And so if you're a global company, if you're a big tech, if you're a software provider, and you wanted to do embedded finance and have an embedded wallet that you want to roll out to customers in 100 countries. It seems like, yes, there's a technology challenge, but there's actually, like a pretty big regulatory licensing challenge, because then you have to go and either find a banking as a service provider, you have to go and get your MTLS. It feels like one of the innovations that stable coins or self custodial wallets have provided, has been this notion of you can offer a wallet that gives some type of financial service without the app that that wallet is embedded in being responsible for that financial service, because the consumer manages keys themselves. And so Davis, how do you explain the innovation of self custody and where it fits into the broader stable coin ecosystem. When you're talking to tradfi, when you're talking to bankers, like, how do you explain that? Well, so
Speaker 1 17:07
there's a difference in how you explain it, but I think there's also, in my mind, there's still, like, a big question around some of the things you just described, I mean to me as, I think more broadly about stable coins, like, why are they interesting? And this is how I explain what you're asking is, to me, a stable coin is the third version of money, right? Version one was physical bearer bearer money. Version two is digital money, like we've developed over the last 75 years, and those both have trade offs, right? There's benefits and trade offs to each of those. To me, stable coin takes the benefits of both and kind of jettisons the trade offs. You have a bearer instrument that you can transact globally without intermediaries, without trust, and intermediary for very low costs, very quickly, at any volume that you want. And to me, it's the self custody nature of it is. It's a bear instrument. It's someone walking into the store with their own wallet with cash in it. That's the analogy. This question about self custody versus custodial I think the answer will continue to evolve. It's true that with all these solutions, the end user controls the keys, but I think you get into this space where, if you're putting this wallet in an embedded form in your application, and you're sort of defining the scope in which the user can actually interact with their wallet, because you have the front end, how much control do you have, right? It's kind of this gray area, because if you say, hey Kai, you control your keys, and you can control the stable coin your wallet. But I'm only giving you a button to spend the stable coin with me. You know, what are my responsibilities vis a vis I don't know, the design, the messaging, et cetera, et cetera. And so I think that for big companies, right for them, having a stored value product has been worthwhile because the float alone is worth a lot, and so it's worth it for them to go do the things that MTLS, bank handles, service, et cetera. What I think the self custodial wallets today open up is for smaller entities that want to control the customer relationship, that maybe want to get some of the benefit of the float. Maybe they do that through a yield bearing stable coin. It gives them an answer to doing that today, without wading into all the financial regulation, I think that that's still a little bit of a gray area. And as this becomes deployed at greater scale, I think then those questions will get asked and answered.
Speaker 2 19:12
I think this is why bridge and privy can't exist in isolation under stripes ownership, right? You need license plumbing to get money into self custodial infrastructure and back and self custody wallets in isolation are big nothing burger, right? You can't do much with them unless you have license pipe that can get value into them. And then then there's a bunch of question marks around, like, how is value off ramped? At what point is value off ramp? Like, we can get into that as well, but you do need both infrastructure pieces together to have the cohesive solution. And it's a big question mark that I've had for the kind of MySpace as kind of the licensed PSP and the wallet space overall, in my head, both need to persist, exist and coexist, to actually, like, create the solution that you could go sell into really any customer type, regardless of if that's the biggest, most traditional bank in the world or the most cutting edge app, a la friend tech. You know what I mean? Yeah.
Cuy Sheffield 20:00
It's almost like self custodial wallets have been out there in this parallel space where they were not very well connected into on and off ramps, the consumer and the key management. Writing down seed words wasn't very good. There was this, like, negative connotation around Wait, like, why are you using a self custodial wallet? Why are you managing your own keys and the back to, like, the Bitcoin, not your keys, not your coins. Now we're seeing self custody wallets just becoming more a design choice for developers and how they build infrastructure that's more tightly integrated into on and off ramps, but still big, open regulatory questions there. So we're gonna move on to the next story. So from everywhere, I think the biggest story last week was really the circle IPO, which set off a Wall Street frenzy. The stock was initially priced at $31 per share, opened at $69 and is currently trading at roughly $115 nearly a 270% increase in just a few days. Believe it's up to 2022, $23 billion market cap. Seems like this is a big moment for the space of I don't know about you all, but the the number of inbounds and questions that I've gotten about stable coins, you always see the uptick. There was the stripe bridge acquisition, you got the uptick. The circle IPO, you get the uptick. And there are these moments that just drive more interest from the space. Now it's like, once a week, yeah. Like, what's your reaction? Like, what does this mean? Were you surprised? What was your take on how the IPO played out? Least in the first week.
Speaker 1 21:22
I'll be honest, like totally shocked. I think having been working in stablecoins for a number of years, maybe I know too much. I don't know. Maybe I've just gone through a full cycle. I don't know what it is, but, you know, I think there's just all these questions around, how long can circle keep its distribution advantage? How long can they hold back as much of the yields are holding back. And given all of those, and I guess maybe call me conservative, like, I was just completely surprised by this run up in price and just sort of the implied valuations, and sort of what it's saying about well, what does circle have to become over the next X number of years in order to justify these valuations? Like, that's the big question, in my mind, is, okay, fine. We know what the business is today. We know some of the paths that could go down. Do those paths lead it to a point where the valuation makes sense? Right? I like looked, Tai, your company right, is trading at 37 times earnings. Circle is 150 times earnings. And so that means they have to grow 4x just to grow into a valuation that I think is somewhat comparable, if circle would return into a payments network, for example. Is that reasonable? Is that viable? I don't know. I think there's a lot of arguments for and against that, but that's where my head has been going, is, is there a path here for them to grow into this?
Speaker 2 22:34
Yeah, I would agree. I think the CPN, the circle payment network news was timely. I think it's a big question mark in my head as to what that exactly looks like. And if, in earnest, the payment network can be built on top of circle, with partners that have been announced and new partners that will be added. I think generally, though, of course, it was tremendous for the space. I think one of the most interesting things I've seen is a lot of folks, now that they have liquidity, or soon to have liquidity from the IPO, there's been a lot of a lot more circle folks that have left in the past, like three months to build something new, to raise money and to join the fray with Davis and I, which is always a good thing. So the quality of builders is improving week over week. At this point, the bar for ideas, the type of projects that are getting funded, the overall ecosystem, is being uplifted by this event. And of course, that's a net positive. I am no financial analyst. I'm not going to debate the valuation. I have my questions, right, but I'm going to be the positive side of it.
Speaker 1 23:24
Oh, yeah, sorry, don't get me wrong. Like, I don't mean to be negative about it. It's more like, it's really what, yeah, what is this? What is this? Maybe the better way to frame it is, the market is seeing something here, yes, right? And they're seeing something that's a lot bigger than what it is that is definitely positive. It's just sort of like, well, what's that going to be? I agree with you, but I
Cuy Sheffield 23:43
think that's the big that's a big takeaway. And in the question is, there's one world where there's, like, a fundamental analysis of circles business and the revenue and kind of, what are the risk factors, and there's another of just this theme of stable coins, which people are hearing more and more in terms of the path towards regulatory clarity, in terms of the number coming of the number of companies adopting it, and there aren't that many ways for investors to express interest and excitement about the theme. And so I think for the full space to really show and it seemed like it was pretty unclear. Would investors be focused on the very specific fundamentals of the business, or is there this, like pent up demand for exposure to a theme. And it feels like this theme, while not particularly well understood, it's new and it's different. It's kind of weird. Is getting more and more momentum as something that people think could become a platform, and I think that's kind of the difference. Like, are you looking at a stablecoin issuer as just the interest income that they're getting? And maybe there are many stable coin issuers and it's all interest based revenue. Or are you looking at a stable coin itself as a platform that there could be many different things built on top of many different businesses that the issuers of those stable coins get into? And so great moment for the space to have the validation of any company. Going public, and then excited to see how it plays out and reverberates through the rest of the ecosystem, in terms of what it means for venture interest in the space, what it means for other companies that are looking to come in. So from Mega M and A and IPOs to making space for our sponsors. I am not as smooth as Simon on the transitions. I don't know how he does it, that man's like ad transitions. They're incredible, but we need to take a quick break to hear from the folks who made tokenized possible.
Sy Taylor 25:31
This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visas, tokenized assets platform 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 is brought to you by Canton network. Ever wonder where real tokenized asset volume is going? Canton network the groundbreaking layer, one public chain where traditional finance and crypto are starting to converge. Why? Because Canton is the only public network with privacy, no workarounds, no compromises. This is 24/7 markets on demand, financing with real yield, where value moves as freely as information on the internet. This isn't just another blockchain. No, this is where the serious money is flowing to solve real market demand and risk. Visit Canton dot network to learn more.
Cuy Sheffield 26:49
All right, for the next story, for anyone who is on stablecoin x, which I guess is kind of now a thing. It used to be what crypto Twitter or crypto x, and now, now I feel like my feed is stable cord x that's
Speaker 2 27:04
even made it to LinkedIn. Man, that's how you know it's true. Man, we can't even talk about
Cuy Sheffield 27:10
what lit up the socials was airwallex CEO Jack Zhang's commentary about his perspective on stable court. So I'm going to read what he wrote word for word, because I think it prompted some fascinating discussion and questions. So Jack saying says investors keep asking me about stable coins and how that it can reduce FX fees if you send money from USD to euro and the receiving end still requires receiving euro to bank, I can't see any way stable coins can reduce fees off ramping from stablecoin to recipient currency are far more expensive than the FX interbank market, and so crypto is an area I've never been able to understand. I still don't see a single use case. Even if stablecoins are less volatile, I don't see how it will help B to B transactions, unless it's related to exotic currencies. Unlike AI, where the use case is real and everyone will use it, stablecoins. How many people are using it? I don't get it all right. Davis, let's start with you of what was your reaction to both Jack's perspective and then the broader debate, of which I think probably hundreds of people weighed in. What do you think were the most interesting takeaways that this prompted?
Speaker 1 28:15
Yeah, look, I think what this triggered for me is the opportunity for stablecoins is so big and so broad, it's very hard to talk about them in this, like, monolithic fashion. We used to be able to do that three years ago that you were used for one thing, it was pretty straightforward. But now the ideas are endless, like, where they can apply is very complicated. And so in the context of sort of the hype around stable coins, you really have to peel back the layers to ask, Okay, where can they have the most value? And I don't think that we should presume that stable coins are going to unlock value in every single part of the financial system. There's a lot you can do with pre funding. There's a lot you can do with centralized counterparty clearing, things like this. And so his reaction, I think, kind of makes sense, which is, Hey, there's this hyper unstable coins in FX. And of course, he's picking like USD to euro, which is probably one of the most liquid currency pairs. And sure, like, maybe, if you just look at trading FX, maybe stablecoins don't necessarily have an advantage in that little part of a financial flow. I think where he starts to go, though, is okay now, if we look at BB transactions, if you look like end to end use cases, that's where I start to disagree a little bit more. And I disagree because it's not just about the speed of moving the money compared to, say, doing it in a bank. Like, that's important, and that's part of it. But I think there's so many more angles for some of these use cases that look it's x, right? Like, you can't get into details on x. It doesn't work. But I think the reality is, like, you have to go down a few layers to really answer the question of, where can stable coins be impactful? And I think when you do that, there are plenty of areas where it makes sense, especially if you broaden your lens beyond just the dollars and cents of like, how much does the currency trade cost? You start to think about well, like, what does this mean for the cost of reconciliation? You know? What does this mean for the cost in my like, AP, AR departments, like operational cost controls, audit, et cetera. Then it starts to paint a clearer picture in my mind.
Speaker 2 30:00
Yeah, yeah. Look, I think for the currency pair he picked, he's right. Like, if you get jpm wholesale rates for euro to dollar, or dollar to GBP, or many of the majors, like the rack rate is two whips right, you can go get the rate sheet from jpm today. Generally, though, like, my take is it's taken airwallex 10 plus years to get those rates right. I can almost guarantee that when Jack started the company, he didn't get like a two bit rate from jpm wholesale desk, and probably got something marked up on top of that. So it takes time in the traditional world to get down to that cost basis. Therefore, if stable coins allow for you to move from currency a to currency B at even five bips or 10 BPS in a year of building, that's a stepwise improvement versus what was possible with Fiat only. Secondly, of course, air walks is at a scale now. Where they get those rates, but like, I'm able to go get USD to usdt or GBP to usdt rates because of the fact that it's more liquid than USDC in many of the places around the world, at very similar rates as a company of my size, right? And that just did not exist before stablecoins. So there's a whole democratization of access play here that I think wasn't discussed with enough nuance in the write up that he had. So I mean, to summarize, like, I guess again, he's right. It's a massive company. It's a massive payments platform at this point, but I couldn't go get those rates right now from jpm, number one, because I'm a crypto company, so jpm still won't really touch us. Secondly, it takes a while to get those rates, and you need to be moving significant size to do so. And then, yeah, I think Davis, to your point, there's also like that is in the context of FX, for the purpose of a cross border value transfer. I think there's a wide array of other use cases that are still being explored. And under the umbrella of like, stablecoins represent this platform shift. IE, they are this new platform. I'm super excited to see what really smart people that are coming to market now, getting funded now, come up with that, with ideas that just haven't been concocted yet or experimented with yet, which is the beauty of this infrastructure, right? You can experiment way more quickly than you could with Fiat only infrastructure.
Speaker 1 31:55
I think that last point you made is really important, and kind of your point about having access to these rates at a smaller scale, the way that Jack is presenting this is he's sort of looking at, here's what we do today, if we lay our stable coin in place of fiat money, like, how does that change things? And maybe it doesn't change things so much. And that's the first step that you have to do in the analysis. But then the second step to your point is actually in tying back to the Privy stripe acquisition discussion is composability and access. And so I think we're finally getting close to the idea of on chain currency markets. People have been talking about this for a long time. I think we're like starting to get there. We're starting to see those foreign currency stables coming. Now imagine, Okay, you go to stripe and you embed privy, now you have an embedded wallet that can do the on ramps, off ramps. That's right. And now, all of a sudden, you immediately have access to best in class FX markets and FX rates, and you don't have to go to a third party provider, to a bank, to a currency broker, any of this sort of stuff. It's just there. And now it's just another API call for you from stripe. Like, that's where this goes. And if you don't get past that, hey, we're just replacing the existing thing, you don't see that
Cuy Sheffield 32:53
possibility. It seems like the reason that this went so viral is because he wasn't wrong for him in airwallex, like in that flow, I think he's absolutely correct. I think that the number of founders who like Dan said he's like, they're not in the position with the same level of access, and that takes a decade and raising a billion dollars to be able to get yet still being able to build products is an incredibly exciting thing for a founder to still have access. And so Simon did a post about this a while ago. Of stable coins aren't cheaper, they're better. And so anyone who's just looking at cost and speed, just looking at an individual transaction, taking a step back and saying, Okay, well, what, what would be the cost and access to build that product in the first place? Who can build it? Where can you build it from? How many people would it take to build it? How much proprietary tech and infrastructure would you need? What else could you build on top of it? And I think that's the other really interesting piece that I continue to look at stable coins, is like the value transfer is just like the lowest layer. What else can you do in lending, NFX, other types of products and applications that natively sit on top of that stablecoin, rather than, if you take an existing fiat money movement platform, you want to build the same type of products. What do you have to do when those are disconnected in sits outside of the RTP networks or the networks that you use to transfer that value? And then I think the other piece, which would love both your views on is like, I think there's this, like, really clear shift of people are starting to recognize stable coins are a rest of world innovation. And if your focus is developed markets, if all your customers are in developed markets, the value of stable coins, it's like that may be incremental in some ways, but whenever you talk to entrepreneurs that are in Latin America, that are in Africa than Asia, the way that they look at stable coins in what it enables them to build and businesses in those markets, it's a very different conversation than if you talk to customers or companies that are just focused on developed markets. Do you see that resonating more? Because it feels like that's still not quite. Quite well understood by everyone, that they look at it in a US context, and they say, I've got dollars in a bank account. Why do I need a stable
Speaker 1 35:07
credit? I do wanna make a little comment, though, about Jack's posts. You know, you've got a good social media strategy if you post something and exactly half the responses are like, right on, that's totally right, and the other half are like, you're an absolute idiot. Yeah, exactly. So, you know, that's like the sweet spot. I think you probably hit nail that here. Crushed it. That's why I always go forward with the rare time I post on social. My only
Speaker 2 35:28
question on the airwallex front has been like, effectively, I've been trying to deduce for the past three to five years now, really, if airwallex and the folks from wise and others were just basically decrying crypto because their core business works. And, you know, in some way, shape or form, crypto and stable coins are competitive to that. And if, under the hood, they have a skunkworks group that's secretly working on crypto and stable coins, and they're gonna come out with this, like, killer platform, once it's actually legalized, right? I love how Jamie does it at jpm, where he, you know, he decries Bitcoin, but they have 1000 person org building blockchain infrastructure, and it's, it works really, really well, right? So I think the final thing I'll say on that is, like, it's clear now that Jack is, I think, anti crypto, and they probably don't have a skunk works, group, TBD, unwise and some of the other big platforms. We'll see how the next, like, six months, looks after stable coins, very daily, legalized shortly.
Speaker 1 36:15
Well, I would point out, zoom, zoom. Just adopted stable coins for some remittance flows last fall, right? And I think for a long time they had and I know this because I worked a little bit with PayPal in the past, and I know that there was concerns about cannibalizing their own business with stable coins for remittances. And Zoom's picking it up. So I'm sure someone at Air walks is looking at this. Yeah, I know. I know. But I think Kai to the question you raised about sort of developed versus developing, or domestic versus International, however you want to frame it. Yeah, I think that's actually kind of to the comment I was making earlier about you need to peel back the layers. I think it's a little harder to see the value for stable coins in a domestic market like the US that has a really well developed domestic payment system. That being said, you know, there's a number of other countries out there that have strong domestic payment systems. You think of Brazil with picks, you think of India with UPI, and stablecoins are finding a home there as well. I think in the US, maybe a little trickier, because we're already a dollarized economy, and so you don't have that as sort of a use case, like the dollar access. That being said, I think even in the US, there are pockets of near term value creation for using stable coins, because we have, although we have a robust domestic payment system, it is still batch process. It is still nine to five. And so there's very much an opportunity to go from nine to five to 24, by seven in a lot of use cases. What's important, though, is you do that at scale, and that's where the incremental value on lock starts to compound and look really attractive. So I think it's early to write off domestic use cases in the US, but I definitely see the contrast. That if you look at some of the international use cases, it's really clear. It's going from 7% to 4% 7% to 2% or whatever, from non dollars to dollars like those are very clear. It's just a little trickier to see it, but it's here in the US
Cuy Sheffield 37:57
as well. Yeah, I thought there was a good post earlier this week. I forget who it's from. We could try and add to the show notes of it's a different value prop and use case per market. And so it's like domestic markets you have programmability is the most interesting thing. It's what can you build on top of it, using smart contracts as this kind of advanced core ledger infrastructure in emerging markets, it's the permissionless nature of dollar access. They care less about smart contracts and programmability. They care about getting access to dollars. And so you kind of have to look at stable coins in a different way, depending upon which market you're focused on and which properties of them make them interesting. Which is one of the reasons I think stable coins are fascinating in the first place, because it's, you know, it could be used in a different way in different places, and I think that the way it's adopted will be different in those markets. For the last story, wanna make sure we have time for from Fortune, Apple X and Airbnb among growing number of big tech firms exploring crypto adoption. So according to sources familiar Apple X, Airbnb and Google are all in early conversations with crypto firms about integrating stable coins. They said the firms view adoption of crypto assets as a means to lower transaction costs and optimize cross border payments. The same week, the Uber CEO publicly announced the companies in a study phase of using stable coins to reduce costs. A lot of companies in a study phase. Davis, I want to ask you, like, you've been at Google before. You've worked in big tech like, how would you view stable coins if you're Google, from what you could share, like, what, what would their mindset be, and what should they do? How do you see big tech firms coming into the space?
Speaker 1 39:27
Yeah, I can't pretend to understand how, like, what Google thinks. I haven't been there for a while, and it's a big organization. But that being said, I think, you know, you take a company like Google or Apple kind of stand apart, I think because of the app stores and because of the content, right? Google has YouTube, for example. And the reason I think those set them apart is those are massive, multi sided marketplaces. They're global. There's a lot of players in those marketplaces. So from a payments perspective, super complicated. Doing tri party payments, where you have someone buying something in an app, and now you have to split and Like. Google gets its share, and the developer gets its share, and you have to worry about disputes and all this kind of stuff, and those parties are all international, like you could have a user in Lithuania buying an app from an app developer in Brazil, and it's processed through the Google entity in Ireland, and now you have to figure out that payment. Think about the combinatorial complexity of how many countries, and take that to the cube of that number, and it's massive. And so the idea of stable coins as being a singular or a global form of money, where you can kind of push that complexity to the edges of the on ramp and the off ramp, and in the middle you just get one discrete set of logic could be massively simplifying for these businesses. And again, like Google has hundreds and hundreds and hundreds of engineers to just work on the core payment system. You can imagine how much that costs them every year. So the cost savings, I think, is remarkable. And then you go one step further with Apple and Google. We talk about privy having 75 million wallets. Well, Apple and Google have what, 345, billion wallets like that. They can just sort of turn this on, and now all of us could have a stablecoin wallet on our phone, literally overnight with one OS update, and then the opportunities just you can just imagine the opportunities for these companies and for developers that are using these devices as platforms. It's just absolutely remarkable. So I'm sort of shocked why they haven't gotten deeper into this yet. But they are big organizations. It's hard to turn the cruise
Cuy Sheffield 41:18
ship. Then what about X, Airbnb, Uber, Dan, if you were advising them, like, how should they be looking at stable coins through the study phase that this report claims they're in?
Speaker 2 41:29
Yeah, I think in my head, the use case differs slightly for each of them. I think x, if Elon is going to attempt to make the Western everything app with that and enable P to P payments inherently from every X account, so I can send you money through x versus through Venmo or through sling or another kind of like crypto enabled platform. I think stable coins are a no brainer for me in terms of how x could optimize, you know, the P to P play, and then on the periphery, they could stitch together a lot of infrastructure to make the best off ramps on an off ramps available to them. So in my head, stable coins are the only way through which x can actually innovate in P to P payments, ie, the usage of stable coins to do the peer to peer payment, versus stitching together the infrastructure that wise has stitched together with with theirs. And I would guess that they could probably get something to market using stables three to five years faster versus what it would take if they built the on the Fiat infrastructure and got licensing everywhere so time to market would be massively improve there, I think, on the marketplace side. So for both Uber and Airbnb, the main use case I really, really love on that front, is basically under the assumption that both Airbnb and Airbnb, excuse me, AirBnB and Uber are are selling goods or services around the world, and there's different payment methods all around the world that are being used for the consumers and buyers of that service. There's so much improvement that could be realized by managing these marketplaces, treasuries and stablecoins, as it relates to visibility into when sales are happening, earning yield on the cash that's sitting in these idle pockets around the world, and respectively, repatriating that currency back to their HQ states every quarter or however frequently, the treasurer at Uber or Airbnb or insert other marketplace here, does that? I think that's tremendously fascinating. It's not really possible based on my understanding of what's available through global bank offerings right now at global scale, and could only be done truly via the usage of tokenized currencies, ie, in this case, stablecoins. And not only would that save a bunch of costs, but there's more yield that could be realized there. There's like the velocity of money that could be unlocked by getting money from Columbia, for example, back to the HQ and the US is is just tremendous. And I think that use case is one I'm hopeful will be brought to light in the next year or so. Obviously, these are to Davis's point. Like these organizations are absolutely massive. They have tons of lawyers, of compliance folks, of engineers, of product, people of ops, people that need to figure out how to assemble all these pieces, and that does take time, but I'm hopeful that as regulatory clarity comes, they will feel empowered to jump in and really like explore these tools as a way that they can save money and improve operations
Cuy Sheffield 43:57
with X it's also fascinating. I think it was this week they announced the partnership with polymarket, where it would be pretty cool if you could see these prediction markets embedded directly into your feed. And polymarket uses USDC today. So I could see a use case where you have an X wallet that as you see a post if you think it's wrong, and then you're immediately clicking to say, Oh, this is wrong, and having some skin in the game. So I think there are a bunch of really interesting things that x could see, that x could do. And I think it just for any big company. The difference between a world where we don't have regulatory clarity, we don't know what's going to happen, and if things are going to go back to what it was 912, months ago, where the risk of engaging with stable coins, frankly, was just much higher than the upside that you could get with them. That calculation seems to be continuing to trend in the opposite direction, where the risk is getting lower, and then as more companies adopt, the upside gets higher, because there's more of a network that stable coins become more powerful. There's more infrastructure. They work better. They're more on and. Off ramps, and so it's always that risk versus reward calculation. And then I think you still have to think about what happens three years from now, four years from now, like, what? What could this look like if you make big investments building on top of stable coins and things you know, go in the other direction. But it's exciting to see every week there's news that a year ago, we would have been like, this is the news of the year. It's like, oh, it's just, it's a random, random week. Now,
Speaker 1 45:25
I would just add to that, Kai, like, I think I've seen the talent that's coming into the space and the people that are building these stable coin products, like, we are so far from the kind of culture and talent that was predominant, say, like, three years ago, and stable coins are kind of its own thing, separate from, I would say, like the rest of grip rest of crypto. And to your point about sort of regulation and sort of the pendulum swinging back and forth, my hope is, what happens over the next couple of years is one, we get more scale, and we demonstrate that this stuff is actually safe and useful on all of those things, and we do that with the talent that's coming in that I think people I know that are building this space. They're coming with a risk mindset. They're coming with a compliance mindset. They're coming with non negotiables that I think line up with what a financial regulator would expect. And so my hope is that we get scale that's built in a very responsible way, so that when the pendulum tries to swing back like the answers are there and we're already operating in a compliant and safe
Cuy Sheffield 46:17
manner for sure. So on that note, that's all the time we have today. Thank you so much for joining, Dan, where can audience find you or learn more about beam?
Speaker 2 46:26
Yeah, on x, at get or at beam. Underscore, cash
Speaker 1 46:30
and what about you? Dave, so I'm sort of in between. So I'm going to send people to LinkedIn, not not crypto Twitter. Just find me on LinkedIn. It's probably the best spot for now.
Cuy Sheffield 46:39
We have a big LinkedIn audience here. So there's nothing wrong with LinkedIn. I need to spend more time there. I default to x. But
Speaker 1 46:46
quick story. So I went to my first crypto conference and I was coming. I forget what company I was coming from, but I brought business cards to a crypto conference. Nice. I like it, and everyone laughed at me. And so I've never carried a business card since then. But now that I'm back working with banking sector, everyone's asking me for a business card. I don't feel too bad about LinkedIn.
Cuy Sheffield 47:04
Bring it back, physical business card. That's what it takes to integrate stable coins with tradfi business cards. That's the advice for every founder. That's right. And there you go. There you got spend the missing piece, all right. And I'm at Kai Sheffield on x and visa.com/crypto thanks for listening. If you enjoyed the show, please leave a review, share it, reach out. Give us feedback, let us know what we can do better, until next time.