Why are financial institutions building on Solana? On Ep. 9 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Guillaume Chatain, Chief Revenue Officer @ Société Générale - FORGE and Nick Ducoff, Head of Institutional Growth @ The Solana Foundation to discuss the state of Solana in 2024, Société Générale - FORGE, EURCV & Solana and the future of stablecoins.
On Ep. 9 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Guillaume Chatain, Chief Revenue Officer @ Société Générale - FORGE and Nick Ducoff, Head of Institutional Growth @ The Solana Foundation to discuss the state of Solana in 2024, Société Générale - FORGE, EURCV & Solana and the future of stablecoins.
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Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized My name's Simon Taylor, and I am your host of the tokenized podcast, author at FinTech brain food and head of strategy at sardine. And joining me, once again, is the one and only Kai Sheffield, head of crypto at visa. How you doing, Kai?
Nick Ducoff 00:25
I'm fantastic. It's been an exciting few weeks with adoption of stable coins and tokenized assets, and looking forward to this deep dive on Solana today with some great
Sy Taylor 00:35
guests indeed. Well, of course, joining us, we have the perfect set of guests for exactly this. First up is Nick dukoff, who is the head of institutional growth at the Solana foundation. How you doing, Nick?
Nick Ducoff 00:49
I'm doing great. Thanks for having me today.
Sy Taylor 00:51
Thank you so much for being here. And alongside him is guil I don't know how to say your last name, but you are the chief revenue officer at society's generales Forge. Hey, how are you doing?
Guillaume Chatain 01:01
I'm great. Thank you. Guillaume shata, thanks for having me.
Sy Taylor 01:04
Yeah. Taran, thank you so much. Course, would like to remind listeners that the views and opinions of contributors are their own and don't necessarily reflect those of the companies they're representing. All right, let's jump right into this. Nick I'm going to start with you. I want to discuss the state of Solana in 2024 especially from an institutional perspective, because we've seen a series of headlines. We've seen Libra capital issued alternative asset funds on Solana securitize announced they're coming to Solana Franklin Templeton is launching their Benji money fund. And Citibank has been researching Solana and everything else. So how would you describe the state of Solana in institutions, given your vantage point? Yeah, so
Nick Ducoff 01:54
it's been a great year for Solana all around and I think institutional adoption is clearly here. It's still very early as it is with the entire industry. And so there's so much more blue sky behind us, which is exciting when we think about salon and where things are today. There's really three things. One is the blockchain itself. Two is the technology and tooling that makes it really easy to use and fun to use as well. And then third is the economy. And I would say the economy is what has grown the most in this past year. Of course, the technology that totally Raj and the founding team built is incredible. And then new developments such as token extensions, which make it very easy to build compliant, permissioned tokens on the permissionless public network. And then the economy has grown tremendously. Rewind to last summer, there was 300 million or so TVL on the blockchain, and today there's about 7 billion. So we've seen nearly 20x growth over the past year, and that catches the attention of large financial institutions, and I think that's some of the reason why, again, the blockchain, the tech and tooling, and then the economy on top of it.
Sy Taylor 02:59
Great brief preview, we will definitely get into that a whole bunch more. You might have seen the a 16 Z state of crypto report talks about the number of wallet addresses coming to the space. Do you think that this has really caught the eyes of developers in the institutional space, and that that growth of wallets that space could be really valuable for institutions as well.
Nick Ducoff 03:21
Yeah, of course. I mean, I could spend all day talking about great metrics for Solana, you know, number one for Dex, volume, number one for stablecoin, volume, number one for NFT, volume, 40 million daily transactions, which is more than all other public blockchains combined. I think all these reasons are what lead folks like Guillaume to inquire and then ultimately build on Solana. It's
Nick Ducoff 03:42
been really interesting to see, if you just look back over the last year, starting with payment companies, Visa included, we started testing, settling on Solana. We then saw PayPal issue a stablecoin, expanding pyusd to Solana. And now it seems like banks and financial institutions are then that next wave, following What's been the process in the mind, shift from an EVM world and kind of this Ethereum understanding that many institutions started with, over to getting up to speed on Solana Understanding the unique properties of the network and so maybe Guillaume, you talk a bit about how you all have viewed Solana, starting on the Ethereum side, in the SOC Gen context. Yeah,
Guillaume Chatain 04:31
happy to the decision to come to Solana was first a technology decision. You need to have the bare minimum the blockchain to meet the bare minimum requirements in order to get there. But it was also in big part, driven by the ecosystem that is being built over there. So obviously, Solana is fast, high throughput, very cheap, secure and more and more decentralized. This is something that we really like. What I like the most is see like the growth in terms of wallet. It the number of builders that are developing new Dapps, and I think that is amazing. I was at breakpoints a couple of weeks ago, and so this ecosystem like so vibrant was, was, was quite amazing.
Sy Taylor 05:11
I think this is why Guillaume to the point on wallets, institutions look at metrics, and they're looking for that credibility. But I want to zoom out to your role and your journey as a financial institution, well as a sort of subsidiary and partner to through Forge. Could you give us a little bit on society generally and forge just a little bit of context on what that is and what that journeys look like?
Guillaume Chatain 05:36
Absolutely So forge started as an independent company created by intrapreneurs from societation eval. It had to be independent at the beginning because the objective was to tokenize securities, and the objective was to do that on Ethereum. So imagine, like a part of the bank trying to buy gas and buy Ethereum directly in 2018 was something just impossible, but things are getting better, and we are more and more integrated within the bank. 2020. Was the date when we became a fully owned subsidiary, and since then, there's been some very cool achievements. One year after we were the lead of the syndicate to tokenize the first EIB for a European Investment Bank born for 100 million euros. And since then, we've been tokenizing more securities, bonds, mostly, and also structured products, which is a combination of derivatives and bonds that are packaged together into transferable assets. This is a place where the investment bank Associate General is also very strong, so that gives us a very cool edge. In the meantime, we've been also participating and helping the ecosystem grow in terms of supporting the Banque de France, for instance, and the ECB with some of their experiments and trials. And finally, what we did more recently was try to push the envelope a bit further and really try to tokenize the investment leg of these products. And let me explain, when you bring a product on chain, typically, until now, people were just like buying it with cash, which is completely inefficient. So we decided, why don't we automate everything and create an instrument where people could buy the products directly on chain? And this is why we decided to create a stablecoin that has been first used as a settlement instrument for a green bond that was issued at the end of last year by societal general group, and bought by one of the largest French insurer, AXA, investment manager, using that stable coin. Congratulations
Sy Taylor 07:27
on that progress. You guys have become the people I point at when people say stable coins aren't really happening, or the regulatory clarity isn't really there. It's very obvious that a globally significant financial institution has to be very careful about how it moves into the space, but it has been really quite consistent. And I think that brings us to our first story on this week's show, which is you've expanded your stable coin, the Euro CV, stable coin, to Solana. And because that was the first stable coin issued by a subsidiary of a G SIB. But now you're sort of moving on to Solana. So what are your goals with the stable coin? And what are your thoughts as to why stable coins work in the Solana use case?
Guillaume Chatain 08:19
So there are a few verticals. The one that I mentioned first is the reason why this stablecoin was born is to use this as a settlement instrument. The next part of that vertical is to also use it as a lifecycle management tool. Whenever you issue a bond or a structured product, you need to pay coupons from time to time. You need to repay at maturity, and with Blockchain technology and a stablecoin, you can automate everything there and save a lot of money and work from middle and back office in particular, the second vertical is demands that we're getting from corporate and corporate traders. They want to be able to transfer value, 24/7, cross border instantaneously and very cheaply, all the promises of blockchain technology, and we start to see that happen. So it's quite cool. Stablecoin is great for that. The next phase of the work that we're doing in that vertical is coming from these treasurers who are asking us to use programmatic money to help them better manage their liquidity, in particular intraday so think of intraday, repo, stuff like that. So these are things we're working on. And finally, the last vertical is the most fun is dealing with the crypto ecosystem. Use the stablecoin as an on and off ramp instrument. I used to work at Coinbase. I was leading institutional sales for EMEA and APAC, and my biggest clients were like the large stratify hedge funds, global macro, multistrats and so on. And one of their problems was, well, it's good to go into crypto, but it feels like Hotel California. You can get in, but you can never get out, especially after what happened to SVB, what happened with like Signature Bank and so on. Now, like all the banks that provide the owner, France for the exchange. Are fairly small, so having a GC bank that offers a stablecoin where these big institutions can come and mean directly one for one at our window is something that is very attractive to them. Finally, the last part is defi. I think it's going to be very important for us to see more and more applications, lending pools, taxis be able to also use our stablecoin as collateral in perhaps future, dexes will be something that would help us be successful at some point and
Nick Ducoff 10:27
then Nick you're talking to financial institutions across the world. How does the SOC Gen journey and kind of progression compare to what many other banks and FIS are looking at today? Like do you see that starting with a tokenized security, then doing tokenized cash in the form of a stablecoin? Is there more focus on back office cost savings versus expanding new customers interacting with the crypto ecosystem? It's amazing that SOC Gen is doing all of the above. But when you talk to other banks, how do you see those journeys starting to play out?
Nick Ducoff 11:03
Yeah, it was great hearing Guillaume talk about it, because so much of that resonated with what I'm hearing from others as well. You've got asset managers, banks and other financial services institutions, but when you think about banks, at least to the extent we've been talking to them, they're typically doing one of a few things. One is stable coins. So like society, general Forge and the euro, CV, stable coin, cm commercial bank in Thailand announced today that they're issuing a stable coin on Solana. You also have tokenized deposits in that kind of intraday repo market that Guillaume was talking about, whether it be deposit backed or trade finance backed. We're seeing increasing amount of interest in those types of products. And something that Guillaume said that really, I think, is the thing I hear the most is that 24/7 no banking hour windows that you have to worry about, the ability for that money to move all day, every day. 24/7 365, and then on the asset manager side, I think it is two things. One is cost savings. I think there really, truly are a lot of intermediaries that can be squeezed out and thus more profit, either to the issuer, or more yield to the customer. And I think that's where you're seeing experiments from BlackRock and the Biddle token and Franklin Templeton and the Benji token and things of that nature. Also, it does reach a whole set of net new customers globally, especially in the what I would call like global mass affluent that doesn't necessarily have access to these types of products through brokerages in their local markets, and especially dollarized products in their local markets.
Sy Taylor 12:41
Could you expand on that theme of the global mass affluent? Because I think one of the previous episodes we talked with Zach from bridge, and he was talking about the stable coin sandwich and the ability to access markets that PSPs and payment rails were traditionally unable to get to. But that's typically framed as SMEs or lower income populations in the Global South, not the global mass affluent, which is much more potentially interesting, I suspect, to the asset managers. So give me an example of markets. Give me an example of use cases. I'm really curious on that one.
Nick Ducoff 13:15
Yeah. So Simon, you mentioned Libra capital. Libra capital has brought a few products on chain to Solana. One is Hamilton Lane's private credit fund. That's an 8% yielding private credit fund. And then they also brought Brevin Howard's flagship hedge fund. And if you were to try to access either of those two products through like a traditional wealth manager, Goldman, Morgan Stanley, whatever, you're probably looking at 100,000 to $250,000 minimum. If you have access to that product through your wealth manager. Wealth manager, or if you're trying to go direct, you know the ticket is probably more like a million plus on Solana through Libra capital, the minimum is $10,000 to access these products. So these are really high quality alternative assets, private funds that, frankly, I'd like to invest in myself. Unfortunately, the United States is excluded as as is often the case with many of these innovative products that are being issued in friendlier jurisdictions. In the case of Libra capital Singapore. But to access these products, you have to be accredited, which is a similar definition under Singaporean law as it is under the United States. 200,000 as an individual in income or 300,000 joint which, there's a lot of people in the world that meet that threshold that would love to have access to high quality private products like Brevin Howard and Hamilton lane.
Nick Ducoff 14:29
One of the biggest questions that it seems like both bankers as well as bank regulators have been debating for years now is this question of public blockchains versus private, permissioned blockchains and so first gumay, from the SOC Gen perspective, it seems like you guys started with a focus on public blockchains at a pretty early stage, way before many other banks were willing to take that step. And maybe that was because. The subsidiary and the structure that you had. Can you talk a bit more about your perspective and why you ended up focusing on public chains and the value that you saw there and then at the same time, how have you managed some of the concerns from a risk perspective around Okay, well, who's using these products? My understanding is you had an allow list at one point on your CV, and then I don't know if Is there still an allow list today, like talk a bit more about that public versus permission blockchain debate and how that played out within suction.
Guillaume Chatain 15:31
I wasn't there at the genesis of SG Forge, but I'm fully aligned with the vision of the founders, which was the future of finance is going to run on rails that are going to be powered by open source technology, public blockchain and technology that is composable, so that people can, just like, build new modules on top of what has been built before. That was like the main philosophy. The second thing was, small subsidiary. You have to look at what are the costs versus the benefits of the infrastructure you're going to use? The subgen or enforcing in particular, is not as big as JP Morgan. We could not build something like quorum or onyx and pay for that infrastructure over time. We definitely prefer to spend money with developers that would help us build the products that we wanted while we were using some some public infrastructure. Doesn't mean that we're going to keep only using public infrastructure for the future. One of the reasons being the US market is the largest market. We want to be able to work with American banks and American investors, and for that, we probably have to be a bit more flexible and at times, use some private chains, or at least working in permission environments. No, it's fascinating. Guillaume, we
Sy Taylor 16:46
had Mike Hudak from sling money on a recent episode, and one of the things he pointed out is that rather than getting a few folks together or doing the R and D of building your own permission chain, somebody's taking care of that for you, and Solana sitting right there, and it manages reconciliation, and it's programmable, and it's robust and tested and at scale, and many other organizations are starting to use it, and that pushing the R and D outside the organization to focus on your USP is something that a lot of organizations have understood now with the adoption of cloud and the hyperscalers, but perhaps less so in this space. So I think that's a fascinating parallel. Nick I'm interested in your views as well, because you obviously speak to a lot of institutions. What are you seeing as their barriers to adoption, and how are you starting to overcome those?
Nick Ducoff 17:38
I think it depends on what type of institution it is and where it's located. For banks, as Guillaume knows all too well, if you're a bank and you have a large presence or nexus to the United States, you're going to have less flexibility than you might have if you are, say, an asset manager in Dubai. But there's an increasing movement towards public chains. I think it's terrific that Blackrock chose to put their first money fund on a public network, Ethereum mainnet, and securitize announced that at breakpoint that they're initially bridging products such as Blackrock Biddle to Solana through wormhole, and then ultimately bringing those products natively to Solana. So I think you'll see more high quality products on this a lot of public network, and I think that's in part thanks to technologies and tooling available, such as token extensions, which I mentioned previously, that allows for very simple functionality that's necessary for regulated issuers, such as Season freeze, such as KYC, AML and other policy maintenance that you need to make sure that you're being responsible for from a compliance and risk perspective. For banks, of course, most of them are operating in private or permissioned environments, and Solana does have the Solana permission environment, which is Solana side chain, where you can configure things like your gas token, who validates transactions to the network and who reads and writes to the network. But the whole idea behind token extensions were, how can we enable more of this permissioning on the public, permissionless network, so that folks don't have to build in a private or permission network?
Nick Ducoff 19:15
It still surprises me how little it is understood by many people who are even on the edges of the ecosystem, as well as regulators themselves. For a while, there's been this dichotomy of it's a public chain that means everyone can use it, or it's a permission chain, and then I can control who uses it. And so the middle ground of public chain base layer infrastructure, but then permissioned allow list where you can individually add wallets and addresses that have been KYC to be able to interact with the product, it seems like there's a lot of potential. That's an approach that we've taken at visa of as we've talked to banks, that an allow list is a. Much lower risk way to manage the product. I think one of the big questions in the long term that I have, that I don't think we know how it's going to play out yet, is for stablecoins, as they get irregulated and adopted as mainstream payment methods, what are going to be the requirements from an identity and KYC AML perspective today, it's almost this like block list model, where most stable coins anyone can access unless they're on a sanction list, where there's another approach to say, Okay, well, most payment systems, you have to onboard someone for them to be able to access that system. And so Guillaume, what's your perspective on the allow list on top of a public blockchain. Is that something that's been important for you all? Do you see a way that you can operate without one like, how are you guys interacting with that today?
Guillaume Chatain 20:50
We are part of a bank that is 160 year old. We have all that legacy, and we cannot screw it up. When we started with the stablecoin, initially, there was this other list. We were working on a white listing basis, and it stayed like that for roughly six to nine months, time for our compliance, time for our risk department to better understand what was going on in terms of transactions, be able to better manage on chain analytics tools arrive first of July of this year, Mika happens. We obtain our EMI license, we make the token fully compatible with Mica. And at the same time, we decided that the token would become fully transferable, meaning moving from a white listing to basically a blacklisting basis. This could never have never happened if we had not been working in this space for multiple years, and it's like more than five years, if our compliance department, freeze department, didn't have access to the big analytics tools for a very long time, and suddenly everybody was comfortable making that move. But it's a bold move. I agree
Sy Taylor 21:56
such a great point that Kai makes in game makes that sometimes learning this stuff takes time. Block lists allow. Lists are very well understood in the world of compliance and payments and sanction screening and transaction monitoring and so on in the traditional payments infrastructure, but we don't think about them in the world of public, permissionless blockchain networks. And yet, with through token extensions, they become eminently doable. And I think there's almost two gaps there. There's the learning curve of what do I apply to this and how do I gradually, sort of build my institutional memory of how to manage risk in this space, but also the learning curve of what new tools have become available in the public, permissionless space that enable me to do that without having to build that infrastructure myself. That's another meaningful shift. So to wrap us out on this one, I'm interested in where you guys see the Euro CV going next, and what else you see Guillain coming from the stablecoin space in particular. What should do you be focused on, and what should listeners be focused on as the next big developments? Is it slowly, slowly, or do you think we're at an inflection point? We're
Guillaume Chatain 23:10
about to see a lot of stable coins arriving on the market? I don't think it's a great thing, necessarily. People will try. Issuers will will arrive, and there's going to be consolidation at some point. My personal fear right now, it's whoever manages to bring the liquidity on their token. As we all know, liquidity, bequates, liquidity is good to have a first mover advantage. It's good to have some good partnerships in place. For example, we signed a big partnership with bitpanda, with their 7 million users in Europe. They also have bitb, Banda technology solution that does B to B to C, and giving access to 30 more million users in Europe. This is going to be super helpful for the future. And same thing, this partnership with Solana, being deployed on one of the chains that is the fastest growing with the vibrant ecosystem, is going to help a lot. And
Sy Taylor 23:58
Nick same question to you, where are institutional stablecoin adoption? What are the weak signals you're seeing that could be poised for real shifts?
Nick Ducoff 24:06
I'd say there's two things. One is, you'll have stables in every Fiat. It's still very much dollar denominated. I don't know what the exact percentage is, but way over 90% Guillaume, I don't know. You may know, but probably more like 95 plus percent of all stable coins are dollar denominated. I think the rise of FX will kind of drive more local Fiat pairs, and there'll be more trading between dollarized stables and other fiat pairs. The second thing is, I think everybody to guillaams point will have their own stable coin. The tokenized podcast will have its own stable coin at some point. And now who's going to power that? Whether it's someone like bridge or Braille or maybe even SOC Gen white labels, your CV for folks to be able to take and distribute in the market. And I think to guillains liquidity point, you're starting to see some innovations there, too. A former colleague of ours at the Solana Foundation, Anna Yuan, recently left to. Start a company called pirena, which is building a stable swap and essentially like liquid staking tokens for stable coins, where you can post your stable coin as collateral back a stable LST that you can then go use in defi that has more ample liquidity. So even as you get into that tail of stable coins, I think you'll see more liquidity available for the tail as well. That
Sy Taylor 25:20
is an exciting way to leave it before we head into the ad break, I think we are poised for some real shifts in stable coins. So without further ado, let's thank our sponsors. 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 podcast is also supported by our friends at Digital Asset the creators of the Canton network, which is the first privacy enabled interoperable blockchain network designed specifically for regulated real world assets, they recently joined a bunch of leading market participants to launch the global synchronizer, which is supported by the Linux Foundation under open governance. The network's native utility token, called Canton coin, is also live, delivering decentralized interoperability at the backbone of the count on network with over $3.6 trillion in tokenized institutional assets, Canton network is the largest and most diverse network for regulated real world assets. Thank you to our sponsors. There's a link story here from coin desk that says PayPal, Ernst and Young and Google Cloud are going to use Coinbase for B to B payments. And in the press release, they said that PayPal has announced they have successfully paid Ernst and Young invoices using PayPal USD or pyusd deposited into ey's Coinbase prime account, and they've gone on to say, an increasing number of fortune, 500 companies are approaching Coinbase to explore crypto payments, and many are quickly moving from proof of concept and exploration to just full scale adoption, and of course, to the points that Nick and Guillain made earlier in the conversation, it's that instant settlement are borderless, and you can even offer rewards to holders and sort of automating some of those business to business workflows. So I guess my question, and maybe starting with Nick, is, is B to B actually the killer use case here, for adoption, more than the consumer side, because everybody thought, When am I going to see stable coins show up in my bank account or wallet or use them for remittances? Is it B to B? And do you think that's more of an inflection point? B
Nick Ducoff 28:15
to B certainly has larger clips, right? And one of the bank that we've been talking to made a comment about in lost interest alone, for a single trading partner, it could add up to 10s of millions of dollars a year, just that extra plus one day of settlement. So if you can collapse that and make atomic settlement for these larger B to B payments, that just is huge savings that means for merchants money's in their pocket faster for them to redeploy it to go buy more supplies or pay their workers or what have you. And the economy loves speed of money flows, and I think that's where B to B payments in particular, has a killer use case, also for cross border payments. As I mentioned, those Fiat pairs will continue to expand. Cross border has notorious friction, and businesses work with their bank who has to connect to a correspondent bank and their country who connects to another correspondent bank in another country, who routes that to a Counterparty bank in another country. I know Kai knows this all too well. And with stables, you bypass all that, right? And so I think that's more cost savings for everyone up and down the chain.
Nick Ducoff 29:16
I think one of the most interesting aspects of the story, I think there are a number of different angles to it. The first is, it's a good example of something that I think we're going to start to see more and more, which is the companies that are at the forefront of building stablecoins in stablecoin related products are really going to start using their own products at scale. Which sounds like kind of obvious, but it hasn't really happened yet, and you can imagine the power of think about Coinbase, PayPal, Paxos circle. Think about the collective spend that they have at vendors, just on the normal course of their business. I think each of those companies. Given that they are either issuing their own stablecoins or providing critical infrastructure for stablecoins, they are incentivized to really be the first example and show how stablecoins can be better than bank wires, and particularly International Bank wires. And so I would expect that we're going to see them convert as much of their corporate treasuries as they can over time. And if you are doing an RFP and you want to sell to Coinbase, or you want to sell the PayPal, well, you better have a solution to accept pyust or accept USDC, and they can start to deploy their own products and drive adoption of them. And I think one of the things that that's going to start to do is that next layer of middleware that's needed to support a, b to b. Stablecoin payments economy is going to have a really big reason to do these integrations build out. And I think one of the most underreported stories is companies like SAP. Last year they announced a digital currency hub. SAP erop solution is kind of building the technology to be able to do invoices reconciliation, all the back office things that it was very hard a few years ago for a large corporate to make a stablecoin payment. And so I think if you've got this clear market driving pressure of large, fast growing companies wanting to have as much of the payments to vendors that they're doing going over the rails that they're then building and bootstrapping, can bind with the companies in the ecosystem supporting that make it as easy as possible. You'll see more and more corporates follow that path. And so I think that's one of the trends that I'm excited I think we'll see a lot more in 2025 can I
Sy Taylor 31:30
build on that? Kai? Because you've kind of got the synapses firing in my mind a little bit about the growth company space. And one of the things I do in my sort of FinTech universe is look at the B to B spend management or the CFO stack category, and you immediately think about ramp and brex and mercury and all of those companies. And one of the interesting challenges has been as their growth companies. You think about a DoorDash one of brexit's biggest clients, have increasingly gone international, then the need to serve them on an international basis becomes the default. And so if you can now position yourself to be able to offer that 24/7, instant liquidity to a company of that scale, but is technologically literate, then you have the beginnings of an early adopter that can move some meaningful scale. So there are, of course, challenges with that, but it is interesting to kind of watch that play out. Guillain you mentioned earlier, as well that sort of treasury management being a really key area. Is this something you're seeing with your client bases and also with your internal stakeholders,
Guillaume Chatain 32:37
with external clients raising demand absolutely for clients want to transfer the value cross border, and there are a few use cases with that. It's typically on the more exotic corridors. So if you want to transfer money from Latin America back to Europe, or from some clients in Africa, something that they call trapped cash back into Europe a bit faster than they could do it otherwise, or much faster they could do it otherwise. We're seeing quite a lot of demand here. Internally. It's something that is being discussed. We're a bank, and we're the subsidiary that is like dedicated to digital assets. Not everybody has the ability to do what we're doing, and there are considerations that you need to take into account, such as the Basel rules, RWA requirements for the banks and so on, something that is very complicated. So we have to thread this very carefully. That's such
Sy Taylor 33:29
a great point. Nick, I'm interested in your views on this Treasury B to B use case where you're seeing those early signs of adoption as you sort of have conversations. So
Nick Ducoff 33:39
I think this is one of those things where you see innovation happen with crypto natives sometimes first and then tradfi adopts it and builds on it and scales it. You have so many large treasuries on chain. For example, in the Solana ecosystem, you've got folks like Jupiter, pith, Cheeto, et cetera, who have large crypto native treasuries, and they themselves need tooling to manage their own increasingly large treasuries, and so the tools being built for them are being built in that crypto first manner, and then, thanks to the composability of the blockchain, those primitives can then be built on and scaled in the more traditional use case. And you mentioned Mercury earlier, Simon, I think one of the things we haven't talked about is obviously smart contracts allow you to set rules. One of the cool things that I think Treasuries are looking to be able to do is say, okay, I can take an inflow and set up a rule for what happens with that after it hits my ledger, right? And those are the types of things that smart contracts make very, very easy. Mercury is one of the more traditional web, two startups that has done this very, very well, I think. But this is again, a native feature of the blockchain, right? And so I think you'll see a native crypto mercury on steroids, scaled for B to B use cases. In the not too distant future, we're seeing that almost on a weekly basis of I think that there's. A lot of understanding, at least now in the market, of the idea of consumer facing stablecoin neobanks, and so we're seeing these new products come live, that it's the global Venmo. We
Nick Ducoff 35:11
talked to Mike with Sling last week. Whereas I think people are aware that that's a megatrend, there are a lot of investors excited about a lot of new products coming live. I think what's less discussed is there are new versions of that on the B to B side that are business focused, stablecoin and native neobanks and so really talented founders that are coming in and saying, We want to build a NEO bank like product one time that works everywhere, and we're going to use a blockchain like Solana as the ledger, it's going to be self custodial. We're going to have on and off ramps. We're going to have a bunch of spend controls with multi SIG addresses. And so I think we're going to see this interesting dynamic play out where they're going to be a new class of next gen business, particularly starting with SMBs or crypto native companies as the client stable, core native neobanks. And then the big question will be, will the large, really successful B to B, neobank products in the US? Will they then use stablecoins to expand outside the US? And then, what do banks do? And so it seems like banks respond to what many of the brexits and the ramps and others have started to play a major role. Will that be a catalyst if those companies start going global, using stablecoins as the rails to do so, it's
Sy Taylor 36:26
going to be fascinating to watch. I'm going to pull this to one last story so that we can round out some of the more recent news. And this one again, comes from CoinDesk, and it's about uniswap Labs launching their own layer two network, uni chain. It says this new network will bring faster, cheaper transactions with more liquidity. And the project was built using optimism's op stack, which is famously part of the EVM world. And one of the innovations which is fascinating is a Trusted Execution Environment, or a tee. The idea of this is to bring transparency to transaction ordering, and the blocks are built within 200 to 250 milliseconds. So this is highly performant, and that's versus seconds on most l twos, and 12 seconds, of course, on Ethereum. So I'm wondering if everyone's going to get their own l2 now, what's sort of happening with that space Guillem? There are many use cases, I suspect you've looked at that could use uniswap like decks, like infrastructure. Why do you think this is such an important development in terms of what might have motivated them to do something like this?
Guillaume Chatain 37:38
What might have motivated uniswap? Yes, think it's a question of like, how much gas fees they were paying on the terion and how, by managing the sequencer themselves, they can keep all that money for themselves. I see that the stack that they've been using is the OP stack, which is the same as base, and that has been also a place where Coinbase has been super helpful in helping build something with EIP, 4844, in particular, that will help transaction being faster, cheaper and so on, so better for everybody. I see it as a huge benefit for all the users, great benefit for uniswap. Maybe I'm wondering, should I sell my ease or not?
Nick Ducoff 38:20
I think one of the most interesting questions in the next year is going to be how institutions look at layer twos. Because I think there are a few different considerations of approaches that they could take. Institutions are clearly comfortable getting more comfortable with Ethereum layer one, and you're seeing products go live in layer one, and I think that that's exciting, but they recognize that that only is going to serve a certain number of use cases. You need a faster, cheaper version of Ethereum. And so it's natural that institutions will start to look at layer twos. I think the question becomes, do institutions choose to adopt an existing layer two so do they say, Okay, we're going to build on base or build on arbitrage, or build on zksync, and there's so many of them that have their new ones being an outside time unit chain, which layer two does the institution decide to build on? And then what if they build on a layer two that goes away in a few years, that no other institutions on? You don't have the composability between layer twos enough today to make that a easy decision, that's no regrets, regardless of what what you choose. So I think that's one option. You choose one. The second option is, or you choose an existing one. The second option is, you build your own. You say, we're going to launch our own layer two. We're going to use something like the OP stack. We're going to operate the sequencer, which I think for ambitious institutions, seeing the success of base there's an argument to do that. However, it's a lot of work, and there's still big, open questions. Just because base was successful, does that mean everyone will be successful launching their own l2 or third, will there be a new general purpose, l2 specifically for institutions that everyone kind of aggregates around, which doesn't really exist yet, and so I think it's this really interesting. Environment and this trade off of to the benefit of Solana today, that the decision is simpler, that it's you just build on Solana, and you don't have to kind of game theory that out. But in the Ethereum ecosystem, it's clear it's not going away. It's not like institutions are going to abandon Ethereum. But I think there's still a bunch of these open questions that institutions are asking, and it's hard to make that decision right now, and when we talk to banks, they just don't really know what to do yet.
Sy Taylor 40:25
There's that Oprah meme running through my head, which is, you get a l2 you get an l2 you all get an l2 and that's difficult. Maybe we will see that start to play out. But Nick What advice are you giving to institutions that are looking to move into this space, maybe a step behind where SG Forge is about solving some of that conundrum, like, how do you move forwards without regrets, but move forwards meaningfully? Because we've seen death by pilots, but you probably now's the time to move beyond that. Yeah,
Nick Ducoff 40:59
it's funny. I had this conversation with a large financial services company earlier today, Ethereum mainnet is a is a great blockchain, right? None of us would be here if not for Ethereum, right? It was the first app chain, and all that came after it. Owe a huge debt of gratitude to Ethereum, and if you were building in 2018 like SOC Gen forge was, and you were looking to build on a public blockchain, Ethereum mainnet was pretty much the only place to be that was, you know, live and had some tooling available to do that. But if you're building in 2024 that's no longer the case, right? And I think the thing that is happening with this proliferation of L twos is the whole kind of l2 market, I think, was like a 2021, to 2022, phase. And now we're in middle part of the 2020s and there are high performance blockchains like Solana and I'll include the move blockchains in that as well Aptos and Sui and if you're looking to do something today that's going to stand the test of time over the next 10 years, you want to be building on a blockchain whose performance can increase and as the underlying technology that actually runs the software increases thanks to Moore's law, right? And that was a whole innovation of Solana was, hey, let's make a blockchain that can ultimately continue to increase its performance as the hardware increases its performance. And now we've got firedancer, an independent validator client being built by jump, hopefully coming to mainnet soon, with up to a million TPS, right? And so the answer to the question, Simon is, why pick an l2 today when you don't have to, when there are really high performance blockchains that have the three layers that I talked about at the beginning of the podcast, the blockchain, the tooling, technology and the economy, on top of it, all in one global state machine. And that's the choice that is Solana, and we see more institutions choosing it. In
Sy Taylor 42:59
the end, there will be one blockchain to rule them all, but Guillain. We live in a world where there are legacy ledgers as well that are unlikely to go away for a very long time, and there's always that sort of interoperability compatibility question, not just in the tokenized world, but sort of backward compatibility with the rest of the world. How are you thinking about that sort of interoperability question? I know that one always gets thrown around, and it seems to be sometimes clumsily used, but talk me through how you think about that sort of a, backward compatibility and B, having no regrets about the forward steps you take.
Guillaume Chatain 43:36
We agree at sogenforge that the future is going to be multi chain. I don't think it's going to be one chain to rule them all. We just have to try to pick the right ones. Probably some of the blockchains that we're going to select are not going to be there in 10 years. We'll see how that goes. But it's a great question about interoperability. Going multi chain is something that we have started to think about. And to be honest, like I don't really have the right answer. I think circle with cctp have done something that is very good, very powerful. They also have a lot of resources compared to what we have at SG forge at the moment. So I cannot give you any preview on what we're going to do, but I can tell you that we're speaking with many different service providers, and hopefully we'll be able to make some announcement early next year. The
Nick Ducoff 44:23
concept of stablecoins being multi chain seems to make a lot of sense, and circle and Paxos and tether, every major stablecoin issuer has taken that approach. We haven't really seen a stablecoin issuer that said no, are stablecoins only available forever on one chain. And I think it also speaks to one of the benefits of stablecoins is that it's fundamentally a developer facing FinTech payments platform that the goal is to make it as easy as possible for developers to be able to integrate. And build and create use cases for that stablecoin. And I think just the reality is developers are opinionated and have different blockchains, different tech stacks, different programming languages that they want to use for different use cases. And so I really like the concept of meeting developers where they are and having infrastructure that can make those stable coins available and and I think that the next step is, how do you have seamless interoperability, that regardless of what chain a stable coins on, it can be set and received. And I think bridge has taken a big step forward with that, but I think that there's a lot more room in need both interoperability between chains, between stablecoins, and I think that that's you have to have both for this to really work in a payments ecosystem. Yeah,
Sy Taylor 45:49
asking what flavor of dollar you would like is not the ideal question to be asking as well. So it's not just the stablecoins themselves developing that interoperability between chains. It's the chains supporting as many of those coins, and making that seamless for developers, which I know there's a lot of work gone into. So before we close out, I just want to ask Nick what we can look forward to over the next sort of 612, months. Where are you seeing the institutional challenges, and how do you think we can start to overcome some of those from some of your constituencies, especially, I think more leaning payments, but I'm interested in the wider perspective as well.
Nick Ducoff 46:26
Sure, if you think about the RWA category as including stable coins, stable coins, of course, is like the RWA that has the best product market fit, right? You then have things like treasuries, which now have about a billion dollars of TVL on chain, with that split pretty much evenly across the Blackrock Biddle product and the Franklin Templeton Benji product, then you've got things like private credit, real estate and the long tail of other assets. I think everything will ultimately be tokenized, and all valuable collateral will be brought on chain, I think totally in this original Solana white paper, had the vision of kind of the financial Everything Store being able to move at the speed of NASDAQ, and that's what we're trying to do at the Solana Foundation, is to be inclusive and bring all financial firms and startups that are innovating together to create that financial everything store that can move at the speed of light. So that's more products, better access to those products for everyone, everywhere in the world. And if that means more stable pairs, that means more access through distribution as well. Yeah,
Sy Taylor 47:33
I'm interested in what you think the key challenges institutions like yours and others are going to have to solve in the next 612, 18 months to kind of get to that position. There
Guillaume Chatain 47:41
are plenty of challenges on the stablecoin side. I think nobody wanted to be first, but you hear banks say all the time, like, I don't want to be first, but we want to be fast followers. So we see, like many banks coming now with stablecoins, and they are plenty in there, in the decks on the RWA thing, it's more complicated. I think it's still very early stage. We're at a point of adoption where it is complicated for people to buy some RWA on chain versus doing in traditional format. There are advantages. As Nick mentioned, with libre capital, you can reduce the size, it's faster, it's probably a bit cheaper. But when you're like a big institution, your clients are seeing all their products already on one listing, one reporting. They want to have the reporting to be the same between, like, regardless if your product is on chain or if it's in traditional format, which means we need to use the same administrator to do all the reporting. So it's duplicating the cost in some ways we will need to pass to cross the chasm, like, past the tipping point at some point, so that everything arrives on chain, and it's going to take, like, many years before this happens. I think change in mentality is going to be super important. A lot of education as
Sy Taylor 48:50
well. Mentality and education are always such a hard thing to do, but this is one of the reasons I'm so passionate about the work we do here at tokenized, is to speak to institutions and just sort of bring them stuff from folks like Nick and Guillain, who are all at the cutting edge. Of course, Kai yourself to be that service on a regular basis. So I want to thank both of you guys so much for joining us. Nick, if people are interested in learning more about what you do over at the institutional side of Solana, how do people get a hold of you and how do they find out more about what you do. Obviously,
Nick Ducoff 49:21
you can find solana@solana.com I'm at Nick dukoff on Twitter, and I'm at stoically soul on Telegram, and I respond to every message. So shoot me a note, and I'd love to hear from
Sy Taylor 49:33
you. Fantastic. Gio. Best way to find me on LinkedIn, fantastic. Kai, where can people find out more about you? And visa
Nick Ducoff 49:40
on Twitter at Kai Sheffield and visa.com/crypto
Sy Taylor 49:44
you'll find me at sy Taylor on just about every platform, including LinkedIn. And if you haven't already listeners, please hit that subscribe button. It helps us so much. And if you enjoyed the show, remember to leave a review. I think Nick and Guillaume the. Observe their own review for this one, it really does teach the algorithm that you thought it was valuable. So thank you so much for listening. And of course, as a reminder, none of this is financial or business advice. This content is for informational purposes only. Thank you very much, and we will catch you next time.