Has compliance become the best growth strategy in crypto? On Ep. 2 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Chris Brummer, Founder @ Bluprynt to discuss compliance in crypto, regulation, disclosures, MiCA and much more!
On Ep. 2 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Chris Brummer, Founder @ Bluprynt to discuss compliance in crypto, regulation, disclosures, MiCA and much more!
Timestamps:
This episode is brought to you by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
This podcast is also supported by Digital Asset.
Digital Asset is excited to launch the Canton Network, a proven, trusted, and scaleable service that provides interoperability between institutional-grade tokenization platforms. The Global Synchronizer is now live, managed by Linux and institutions are actively using Canton Coin to manage the governance. No, the banks haven’t launched a token in the classic sense, this is much more interesting. They’ve done it to make all token networks interoperable. Find out more at canton.network
Sy Taylor 00:10
Welcome to tokenized. My name is Simon Taylor, I'm your host for the tokenized podcast author at FinTech, Bradford and head of strategy at sardine and joining me is my co host, the one and only Cuy Sheffield, who's head of crypto visa, how you doing, Cuy,
Cuy Sheffield 00:26
I'm fired up. It's an exciting time in the world of stable coins and payments and tokenize assets. We have one of my favorite people in the entire space here today as a guest, and I've learned so much from him excited to learn more today,
Sy Taylor 00:40
which considering your new dad, and how tired you all this level of excitement does not happen for nothing. And I respect you for that, my friend, I respect you so so much. And joining us for episode two of token Ali's is one heck of a guest Professor Chris Brummer, who's a Professor and Faculty Director at the Institute of Economic Law at Georgetown University. And now of course, founder of blueprint, Chris, how are you my friend?
Chris Brummer 01:06
I am doing really well. I got to say you know from two of the people I really respect the most out there in both the thought leadership DJing FinTech world. So it's good to be here.
Sy Taylor 01:18
Thank you so much, Chris, for being with us. And audience, we would like to remind you that the views and opinions of our contributors today of their own, and don't necessarily reflect those of the companies that representing nothing we say should be taken as tax, financial or legal advice. So please do your own research. So Chris, launching Blueprint was an interesting journey. So you've been working with European regulators to advise for quite some time. But I'd be very, very interested in your new company. What is blueprint? And what problem does it solve?
Chris Brummer 01:57
Well, you know, I've been writing for a very long time as an academic on these issues of disclosure. You know, I can go all the way back to, you know, the famous Libra project, where I was sort of trotted in front of Congress as right next to Gary Gensler and Milton Maris from from our three, and we were sort of experts being asked about our opinions. And from my standpoint, at that point in time, you know, I really wasn't getting into the substantive matter. But I was sort of looking at the White Paper of that particular project, because I thought it was a really important project and the libre, folks were trying to solve a very real problem in the world. But the white paper itself I thought could have been sort of drafted a little bit better. And I use the Jay Z song have sort of 99 problems, which everyone really loved, to kind of go through the white paper in terms of what it was trying to explain, because I thought it could be a little bit clearer. And I think it could have sort of worked through some of those issues in a way that would have been a little bit more relatable to the people who are using the product. And by the way, the Libra folks responded extremely positively to my thoughts. And I kind of sat back and I thought, well, if it's this hard for a company, with the resources behind it, like like Facebook to kind of create a white paper that spoke to all the intricacies and the things that you need to know when holding a crypto asset. There's a lot of work that has to be done to kind of think through what's the best way what are the best means to to execute disclosure, what exactly is the important information that one needs to share in order for an investor, a miner, a holder, a user of a crypto asset to kind of know what they're holding, using investing or mining it right. And that kind of sparked a years long journey to kind of think about the fundamentals of disclosure, and I wrote some research papers for a Stanford journal. And I had also done some research with with Broadridge, in which we, we did surveys of 1000 people in the United States and then 500 people in the UK and 500 people in Canada to sort of ask them well, what do you think is important? What would you like to know, before buying a crypto asset? And after doing enough research on sort of the substance, I really felt that the delivery mechanism for sharing information had to be built. And I thought that the underlying core infrastructure for sharing information was one where the fact that you had transactions on decentralized, Ledger's, you know, it was just kind of interesting. I said, you know, we're in a space that is inherently transparent, but sort of getting that information and deciphering that information. That's that's kind of the hard part. And it really distinguishes itself from sort of traditional disclosure tools and mechanisms out there. And I felt that this was the job of someone who thinks about these issues all the time I teach securities law over at Georgetown and I and I said I, you know, why not try to build it? Why not try to build a kind of core infrastructure that To have over in your traditional markets, you know, they're the sort of back office printer guys who are very core infrastructure to Wall Street, almost any company that's gone public has sort of interface with these companies, you don't really have that kind of core infrastructure in the crypto space. And I thought that someone needs to build it. And I thought it would be me. And so blueprint is a company that provides disclosures for the crypto asset industry, we started off with mica because there's a set of rules out there. And one of our first projects was just sort of turbo taxing mica, and making it very, very simple for new people, new founders, who are creating new crypto assets, to create their white papers. And to sort of lower the cost of composing those white papers, and delivering them to their respective regulatory authorities. And that was, that was a pretty big hit.
Cuy Sheffield 05:55
It seems like this is a super interesting time with mica rules, at least the first part of it was stablecoins going into effect. And you've been spending time with European regulators as well as companies, what have been some of the interesting things that have stood out to you, as you've engaged around the process of going from we've got these new rules, how do we actually implement them and make sure that they're as effective as we hoped that they would be? One of
Chris Brummer 06:21
the really challenging or, you know, parts of any kind of reg tech company, particularly if you're in crypto is how do you build a reg tech company? Like how do you help people comply with rules that are themselves incomplete? And very much sort of in the process of being created? Right? I mean, it is the classic, how do you build the plane while you're in the air, after you've jumped off the cliff scenario, right. And that's what we had to do, you know, and the good thing is that I'm old, right. And being old means that you kind of know, regulators, and you know, the market participants. So it's not as difficult to sort of know how the regulatory sort of infrastructure works, you know, pick up the bat phone and participate in a kind of process to figure out well, what are you thinking? What kinds of questions are you trying to solve? And then, frankly, being a law professor, you actually put on your law professor hat, and you sort of anticipate what are going to be the problems that even the regulator's themselves are going to have to tackle If not now, then at some point in the future. And then you have to kind of find the right supporting crew of engineers. And over at blueprint, you know, we it's a pretty cool group that we have, I mean, we have a lawyer, programmer, don't see too many of those running around, along with a couple of law professors and a team of just first rate engineers, a very interdisciplinary team. And you know, you have to talk every day for several hours about different kinds of rules. And we know how exactly do you want to sort of automate different kinds of processes, you know, what should be going on on chain, what should be going on off chain, but you kind of have to do it with a limited view of what the rules will be. And with an understanding that when you start to do this work, others are going to glom on to your standard, right. So we're as much of a gap filler and a compliance tool, as we are a standard setter. And I think that that's a pretty neat place to be in, particularly in an industry where regulation is very quickly coming to the fore, and is obviously the central point of attention, at least for the time being. I'd be
Sy Taylor 08:28
very interested in your market readout of where we're at in that regulatory journey, because 2022 FTX happened since then, we've actually seen sentencing and we've seen by Nance look at how they're going to make up with regulators. Your market read out was you're apart from its respective where's the USA? And what are the jurisdictions stand out to you?
Chris Brummer 08:52
I gotta think about regulation, right? When you talk about like regulation of crypto as encompassing, you can always think of it as a triangle, you have this sort of tip of a triangle kind of being your AML KYC, which is what everyone has been focusing on, really, when you think about crypto since its inception, which is your anti money laundering, and what does this mean in terms of preventing someone from drug dealers and narco traffickers and the like, and even though that's been the center of gravity, for regulation in crypto, if you're familiar with traditional Trad fi stuff, it's really a pretty small part of what one thinks of as regulation. Instead, there's this entire sort of larger base of regulations that include what I would call sort of the operational end, and then the disclosure end, right. And what you've seen is very logically, the National Security sort of issue of AML KYC is what people sort of address first and what people are still trying to hash out. And then after you get past those threshold issues of AML KYC, which is what you've seen internationally with FATCA. And with different sort of deviations from fat F, depending on what jurisdiction you're in. Now, people are thinking about the operational questions and the disclosure issues, right. And the operational stuff is like bank capital adequacy, you know, your risk mitigation and stuff. And then you have sort of like the disclosure rules, which is like, what are your regulated communications, because when companies communicate with their shareholders or with stakeholders, Twitter is not the only way by which they do it. And there are these certain kinds of channels through which companies typically communicate with the people who are backing them. And I think that, in that journey, different countries sort of sit along a different spectrum of maturity. Right? The big deal with mica was that it that they were the first ones to really put out a comprehensive set of rules for stable coins for cryptocurrencies and the like. And it kind of covers all of those rules. I mean, AML, KYC, was already addressed previously. And what you see with mica is an attempt to get through disclosure and the Prudential rules and the licensing for the entities and also for the regulated communications, right. It is still though very much a glass half full, there are a million issues in mica that haven't been worked out entirely. Even on the disclosure in you know, there's certain kinds of terms and not really defined and there's very limited guidance, but you do have forms, like you have some idea as to what you should be doing. Then on the other end, you know, we you have like the United States, where we don't have a glass at all, you know, do you just kind of pour it in your hands, and you kind of have to figure out exactly what those rules are. And there's no clear path to compliance, in light of the existing sort of pre established regulatory framework that will change soon, I think, perhaps gradually, but currently, that's the case. And then you have any range of jurisdictions that are quickly on the way to operational and disclosure sort of requirements. So if you think about Vera, and now they're introducing like another level of licensing regimes, you have, particularly for the stable coin environment, lots of interest in both the Prudential element because you have someone who's issuing the stable coins, presumably at least for many stable coins. And so you know, who's doing that? What's the backing mechanism? You know, you have these sort of weird banking, regulatory people who are out there and want to make sure that nothing blows up. And then you have also on the disclosure, and there are jurisdictions right now that are trying to explore what kind of information has to be shared to someone holding those cryptocurrencies shouldn't be like a cereal box, right? Where you see your calories? Or should it be more like Google's IPO, where you get this very extensive 300 page document, you know, marking down all the specific economic fundamentals of of the product, right. And so you have those conversations that are all going and people are trying to kind of hammer it all out? That's
Cuy Sheffield 12:58
been one of my biggest questions with you. The mica rules are like, what are the implications for end consumers and businesses, with the ultimate goal of today, you have many different stable coins that exist across the world. And those stable coins are designed and constructed with different reserves, different policies and different ways that they're treated. And I think it is a pretty difficult environment for an individual to understand the risks with one to the other. Simon, I'm curious how you're thinking about that. First of like, does mica solve that problem and help with at least? Is it a end consumer that now can have more confidence in the stable coin? Or is it almost like the entities, the exchanges, you know, the wallets, other providers playing a role? Like, how does this play out?
Chris Brummer 13:45
That is such a good question, you know, and the thing is, you know, it's a question that's relevant, not just from mica, but for like disclosure in general, right, like I've said, the United States. So, you know, in the US, if you're listening from the United States, you may be familiar with something called Edgar right. And Edgar is this database. And it's this database, where, if on any kind of public company for any kind of regulated communication or filing, it's sort of housed in this EDGAR database, and it's ran by the SEC. Now, using the EDGAR database, it's this world of contradictions. Because on the one hand, it's like the closest thing to a time machine that modern finance has invented, right, like, you know, there have been like, very few sort of updates to this sort of EDGAR database, and you kind of go in and, and you try to use things. So in theory, it's very simple, but it is archaic. So the contradiction is, it's kind of a simple technology tool. But on the other hand, it's only used for two purposes. Number one, for people who are trying to sue other people in the world, something's gone wrong, and they want to see what kind of information has been deposited in the database. And then number two, it's worse sort of investment analysts over at Goldman Sachs, right? So it's not actually something useful for retail investors. And I've often said, you know, the way in which our Trad fi infrastructure works is that disclosure is meant to be filed but not read. That is like a central problem, which then gets you to the question that you just asked, right, which is, you know, for whom is this information? What is it supposed to do right? Now, I know from you know, when you talk to some of the people who crafted mica, like Peter Kerstin's folks over the European Commission, like, they were actually very explicitly looking at the US model and say, I don't really know if I want to have all that, right. And this idea is, well, we don't want to necessarily replicate everything that the United States is doing. And we'd like to have a disclosure document with utility for presumably a kind of a larger public, like a larger base of stakeholders, we can ask certain kinds of questions as to whether or not what mica does actually gets you there, right. Like, there's certain kinds of things that mica does that, you know, you can look at and say, the formatting is kind of salted. And they're very, very, you know, maybe it's like a civil law kind of thing. You know, they're very, very European, right. So in that instance, of like, saying, you know, we have very, very specific things that we want you to talk about, but you better not talk about anything else. Right. So that puts a lot of pressure on whether or not the regulator's got it right, you know, like as to what they're requiring people to talk about. Whereas the US system, to its credit, does have something that's a completely different kind of philosophy. And the US philosophy is, say whatever you want in your disclosures, along with the required stuff, but you can't just dump you know, do an information dump that's intended to deceive people by hiding the ball with the important information. So if you think something else is important that we've missed, go ahead and add it. Right, is sort of like the US philosophy and sort of mica philosophy is no, if you do that, you know, you're you're kind of violating Mica. So there are sort of differences in terms of how they, they're looking at it. But mica is trying to do that, with the belief that, you know, the US approach is maybe a little bit too voluminous. And so we're going to try to contain things a little bit by having a more structured and more sort of detailed disclosure process. Mica is important, because it's the first time anyone any regulator, much less a capital market of the size has tried to do this. And because those disclosures are gonna be public, anyway, in Europe, that means it's the internet, they'll be public everywhere, right? So so it does change markets and market structure, potentially, for those crypto assets that kind of fall into the regulatory perimeter of the European Union. And then lastly, you know, one of the things I found with blueprints, which was really very interesting, we've gotten a ton of interest from different kinds of players, as you can imagine, like the issuers because it's, like cheaper, you've gotten cast, you know, the kind of broker dealer slash exchange world, you know, part of the interest, even at the very, very beginning of trying to launch this thing was from companies who are thinking about liquidity, right? And how it you know, in order to sort of generate liquidity in a market, you need more information, imperfect information, helps you to trade, but no information makes everyone like not want to, you know, get involved. And if you want to get some of the more traditional market players involved, particularly the more highly regulated market participants, then the idea is, you know, more information about any kind of asset helps to enable the liquidity flywheel, right, which is an interesting idea as to sort of who are the third party beneficiaries of more disclosure, people can debate, you know, maybe if you're a hedge fund, you kind of like imperfect information, but you're not going to have a very liquid pool of players until you get more information. So there are lots of people who have like a dog in the fight when it comes to disclosure in mica and in crypto assets more generally,
Sy Taylor 19:08
genuinely fascinating. The liquidity flywheel is such a such a great way of phrasing, the kind of unlock you create with disclosures and the bringing in the institutions. The talk for a long time has been when will the institution show up? When will the institutions show up? And slowly but surely, we saw hedge funds, as you say, but it does now appear that that sort of Rubicon has been crossed a little bit and that there are the first movers on the institutional side. And this credibility halo of having a major jurisdiction have a regulatory framework can be hugely, hugely powerful in kind of unlocking some of that. I want to get your thoughts on that. And can I ask you one last point before we do move on, which is, does this end up like GDPR cookie consent? thing where, you know, like a Europe creates it. And so the world ends up having to do it because Europe's a big market. And B, that actually it sort of gets squished for most people out of the way and doesn't achieve its intended aims, or will it actually be sort of if the goal is liquidity flywheel it looks like that might be happening?
Chris Brummer 20:22
I think the jury's out a little bit. I mean, mica does not apply to every crypto asset. There are all kinds of little carve outs, if you like smaller issuances. And there aren't too many people holding it. There are different kinds of issues. And then there are potentially people who may choose not to come to Europe right and to instead have their their assets listed elsewhere. Now, the trigger for ex territoriality under mica is pretty low. So you can conceivably find yourself subject to make it pretty easy, all things considered. And because of that, there's sort of like this question about GDPR. Like, is it something that either you automatically fall into? Or is it just so big that you have to my sense is a number of things. Number one, we were pretty proud of our blueprint to have done the very first sort of mica pilot, and we did it with the Bank of Lithuania. And you know, we did like a simulation, we had some stable coin issuers work with us on their white papers, even prior to mica becoming effective. And then when June 30 came along, they were able to sort of deploy their white papers on day one and to be compliant. And what we noticed sort of after the fact, we're the number of people, we also have like a tool to kind of check the mica white papers, and to kind of automatically do a diagnostic as to their compliance, right? That was pretty cool. And, you know, people started to take screenshots of our assessments and putting them online and like on LinkedIn, and there's a little bit of a race to the top right, in which, you know, clearly in an industry where trust does not always abound, you know, being able to show credibly, through a third party that you're kind of doing what you need to be doing is clearly something that is not a bad thing. And that there's institutional interest in achieving those kinds of measures. Think about almost as being part of the trust industry, right, is going to be essential to kind of getting and motivating folks to ultimately disclosing more information about themselves. And I think that mica is a catalyst, certainly other regulators are also going to adopt their own disclosure rules. But just my casual observation is that there's like, there's going to be a lot of pressure, when some people start to do it, there's gonna be a lot of pressure for other people to do so as well. And then there's going to be a little bit of pressure for people to show why what they're doing is better than what the other guys do. And I don't think it takes very much to get us there. And I do think that that'll be a sea change for the industry. There'll be a bit of a
Sy Taylor 23:03
domino effect, but as an industry, we are one that has craved credibility. And let's face it, there have been a lot of things that have lacked credibility when you believe that this technology can be transformative. If there is an opportunity to race towards credibility by complying Race to the Top is a great phrase for putting that and long way that happens. So thank you so much for talking us through that we'll get some more opportunity to unpack this but I do want to just run us through our ad read because this episode is brought to you with FISA. This episode of course is sponsored by Visa, a world leader in digital payments. Visa is bridging the gap between financial institutions and innovative blockchain networks and helping players in the payments ecosystem. Navigate the ever evolving world of tokenized fiat currencies with confidence and ease, learn more visa.com forward slash crypto, and this podcast is also supported by digital asset. Digital Asset is excited to launch the count on Network A proven trusted and scalable service that provides interoperability between institutional grade tokenization platforms. The global synchronizer is now live it is managed by line x and institutions are actively using Kenton coin to manage the governance No, the banks haven't launched the token in the classic sense this is much more interesting. They've done it all to make token networks interoperable you can find out more at Canton dot network. Kai you are going to jump in and I am just going to mention this story because I think it's somewhat related to the conversation we're having the first story came from block works and it was about circle becoming compliant with mica and according to circle it became compliant under its electronic money institution license, which it has from the French banking authority under the license circle can issue USD C and Euro See, in the European Union circle, I can also offer circle mint, which allows users to access stable coins directly. So, Kai, kind of interested in your thoughts on this? And I know you had a question for Chris as well. Let's open this one up. I
Cuy Sheffield 25:18
think in general, it seems like this is a big mark of legitimacy for stable coins as a real payment method. And I think even the description of the E money token, it makes a lot of sense that there's been e money and now they're e money tokens that use a different set of technology. And it will be fascinating to see the implications of how regulators and other markets observe and follow it. I think one of the biggest open questions I'd love both of your your perspectives on is, what does this mean for the European stable coin market and activity? Right now, when we've looked at the data, you have you north of $150 billion of stable coins in circulation, and 99% of them are backed by dollars. And so you're kind of starting at a very small base, where you've had Euro stable coin products out there, but they haven't seemed to get significant adoption yet. And so if you have this clear regulatory framework, more legitimacy, clear rules around what it means to issue them, what they have to be backed by will that catalyze more adoption of Euro stable coins? And then what will be the use cases? Is it a domestic capital market use cases that crypto capital markets, you know, we're seeing some euros stable coins on exchanges? Will there be institutions that get involved with other types of tokenized? Stocks and bonds and using euros stable coins? And will we ever see Euro stable coins outside of Europe, where we've seen dollar stable coins be pretty popular around the world? So Simon, here's your thoughts on that. And Chris, like, as you see the motivations of the regulators is part of it, wanting to kickstart drive more growth, rather than only have $1 denominated stable coin ecosystem.
Sy Taylor 27:01
It's interesting, isn't it? If you look at the history of the European Union, EMV Eurocard, MasterCard, and visa, is the standard that all credit and debit cards use for not just the magstripe, but also the chips that sit in there, and then Lisa, the tap to pay. So originally, there was a European payment card issuer and issuing scheme that was then sort of wrapped into MasterCard many years later. And there's sort of been this gap of a payment network that exists in as domiciled in Europe for the European area. So then you see SEPA and you see target to but the idea that Europe is federated is not really true. It's 2627 different markets that are connected by a regulatory super framework. But you think about like the states versus the federal level in the US, this is a whole different level where it's kind of the the other way and and that's very much true from the local payment networks standpoint. Whereas in the US mindset, it's all cards. It's all visa, it's all MasterCard, in Europe, you've got ideal in the Netherlands, and many of them. So there is this giant need for European wide level interoperability, but stable coins, I don't know that that can be it immediately. And I think the gap here that we're seeing is the dollar is usually the preferred mechanism for global trade. You see the Euro USD as a way to manage currency risk and as a major trading pair. But you also see it as because Europe has a very large market and is considered stable. So there's a lot of geopolitical reasons why the Euro has historically done well. Those don't necessarily apply to the crypto markets today. But if we did bring in the institutions to this world, then does that math still add up? Chris? I'm interested in your perspectives. No,
Chris Brummer 28:56
I mean, I think that was masterful assignment. I think that's absolutely right. I mean, when you when you think about, just in general, like why is the Euro not as globalized, right as the US dollar? Well, there are all kinds of historical reasons behind them, in part because of the motivations of the central banks that have traditionally sort of backed the euro. The German Bundesbank has never even prior to the creation of the euro was never this big fan of becoming an international currency. Because when you when you become an international currency, that means you have to kind of you have to print lots of your currency, the United States. In other words, in order for the US dollar to back the global economy, it means that the Fed has to actually print lots of dollars to provide the liquidity to support global commerce in other parts of the world, even where countries are transacting with each other. And the United States is not even involved, right? And then you can still have those dollar denominated transactions. If you have say, like if you're hanging out in Germany and you have this history of, you know, inflation leading to really bad things you sort of save yourself, I'm not really willing to engage in that internationalization of my currency, even though having the international currency involves giving the issuer certain kinds of exorbitant privileges. You know, like, you know, you don't have to worry about your FX as much right? You know, everyone's stealing your currency. Other people have to worry about how you manage your monetary policy. And you can externalize the cost of your monetary policy on other countries, as opposed to having to worry so much about what other countries are doing, right. So when you think about the Eurozone, their relationship with their currency, and how they view what their currency should be, they're coming off of things with a completely different kind of track record and a different historical trajectory. And that's before we even then get into the, hey, you're doing this, you know, with crypto, or you're doing it on a blockchain kind of an issue as to where has the legacy crypto economy evolved? Who have been the players traditionally in the crypto economy? And where are those players located? Right. So if a euro coin or you know, a Euro, back stable coin, doesn't get the same prominence of USDC, or some kind of other global us denominated stable coin, there are different kinds of reasons for it. Now, what the question seems to suggest is, and I heard this, at a meeting yesterday, here in Washington was, you know, the US dollar possibly has had historically, the best brand of any American export in the history of the United States, right? Because everybody sort of stacks away, you know, packs US dollars away in their suitcases or in their stable coins. And, you know, that's a very tough network to break. It's a hard thing, right. But there are certain kinds of trends in the world, geopolitical, as you had mentioned, which are making inroads into sort of dollar dominance in the sense that people are after new kinds of alliances and sort of non western alliances, and also, even some countries, even within the United are in the EU sort of hanging out with with countries that maybe some of the core countries from the EU would rather not deal with. And, you know, you do see even on the geopolitical risk issues, certain kinds of pressure being exerted onto the dollar, and maybe the Euro steps into the breach. If sanctions policies are being applied heavily against countries in the European Union, there's always theoretically, this idea that they could start to deal more in the euro. But I think that ultimately, the demand is going to be driven by one of a couple of things, the crypto native networks and transactional space, that's generally we know that there's a certain utility and obviously keeping your money in stable coins until they're being transferred or deployed in the form of another crypto asset for other uses staking or whatever. And the kind of question as to well, at what point do stable coins become used for sort of real economy use cases is one that everyone's still asking, even when it comes to US dollar back stable coins? That's a kind of a, we're gonna say, kind of question. And I do those sense that it's my own complete opinion, kind of a judgment hunch, really, is that it's going to be a little bit sooner than what a lot of people think. Just because of, you know, being able to move money quickly across borders cheaply.
Sy Taylor 33:13
Kind of has a lot of utility, doesn't it? Yeah, and these things could snowball chi, I'll come to you in a second but I just wanted to read the next story because I really want to get your take on all of that. But the next story is sock Jen so society, generali has debuted its Euro pegged stable coin. So they Ahsoka was not the only issuer to be awarded an EMI institutional license. Within France. Sock gents forge also announced it received a license and now was making Euro c v stablecoin. compliant with Mica. And until now that stable coin has been only transferable to whitelisted addresses. But that's now much more open loop. So this is sort of a division of a bank here that's getting involved in what's happening. That's really another Rubicon mobile and Ky. They said they plan to launch a lot of new stable coin use cases, including integration with d phi, do you think we're gonna see those new use cases? What all those new use cases like Colombian here because you will probably have the best perspective on this out of out of all of us?
Cuy Sheffield 34:24
I think the first really interesting question is just what does this all mean for banks, and before there was regulatory clarity around stable coins, we haven't really seen a lot of banks anywhere across the world that are directly creating their own or interacting with existing stable coins, as I understand it as a part of makeup. Now you have an example of a large bank that is issuing their own stable coin up through a subsidiary that is compliant with the mica rules. And I think that there's this big question for banks of tokenized deposit More stable coin. What's the difference? Is this more focused on updating our core ledger? And it's more about our existing clients? And are their back office efficiencies and benefits? Or is this more of an acquisition play? Is it a product that we can put out in the market to get customers that might not have opened a traditional bank account with us, but would use a stable coin that we provide. And they're, I think it's almost like an a kind of embedded finance. But as you both mentioned, I think, particularly for Euro stable coins, it feels like, you know, the use cases that we've seen so far, are very much crypto capital markets. And so, you know, sock Jen is doing this with Bitstamp, was my understanding of the announcement. And so they're listing it on a crypto exchange. And I think that the argument I would imagine would be their Bitstamp customers who might not be Saracen customers. But if you're trading on Bitstamp, and you need a Euro pair to trade against, or you want to hold euros, now sock, Jen is effectively acquiring customers via Bitstamp through this product. And so I don't think we've seen a lot of mainstream payment use cases in general, I think we're still very early in that. And the question will be, does it expand beyond some of the crypto use cases? And is that enough to motivate banks to get involved in the space? And then you've got that tokenized deposit versus stable coin? What are the implications of the bank's balance sheet, and that's gonna be really interesting to see play out over the next few years. The
Sy Taylor 36:31
reality is, we just don't know I'm sitting in the digital asset office at the moment, they kindly let me record from here today and use some of their space, shout out to our sponsor. But as I talk to financial institutions, there's a lot of experimenting and waiting for like that thing to cross. And actually, that stablecoins It's, it's this sort of quite small, by contrast to some of the things they do market, but it's becoming increasingly clear thanks to the work of Chris and others where they can play and where they can't. And it's a good way to learn where their services may or may not be valuable. And I think that learning thing is really powerful. Can I just sort
Chris Brummer 37:07
of also jump in, you know, just to take a step back, you know, as someone living in Washington, DC, you know, where you guys are already thinking, okay, what are the use cases? You when you're sitting here in Washington, you're immediately thinking, wow, you mean, a bank can issue a stable coin, which is in and of itself, right? Remarkable because in United States, it's very, very challenging to do. And it's hard enough to sort of bank, an entity that is in the crypto business, much less be a bank that actually issues a cryptocurrency or crypto asset, I'd like to definitely sort of highlight Simon's quick observation that on the one hand, that obviously gives European based banks a tremendous sort of advantage over their US counterparts, to the degree to which they can experiment and sort of engage in sort of fact finding product discovery and the like, in a way that in the United States is really limited to sort of in house projects, right. And you can try to deploy certain kinds of experiments at scale, at least in theory in Europe in the way that you can't in the United States. That being said, as Simon also notice, there are still, you know, as I said, these operational rules that are still very much coming into effect internationally, about a, you know, what kind of capital charge does the bank have, if they have crypto on their balance sheets and the like, and that's going to impact you know, regardless as to whether or not a bank can actually get in the game of crypto, it's still going to impact its appetite and the speed at which it ultimately does. So. Blueprint was not the only plane without wings in the air. Others obviously, you know, who are getting into the space have to sort of figure it out as and learn by doing as well. Our whole
Sy Taylor 38:46
financial services is really accounting with a mess with an email on the other side of it, it's it's very much the case and accounting rules definitely matter. And the last story, I'm just going to move as to because we're going to talk about this one copy from Business Insider 10, Jim is going to unveil its first visa payment card combined with a hardware Wallet. So this is a visa payment card that's combined with this hardware wallet to allow users to make payments using their crypto or stable coin balance at visa accepting merchant locations. The technology is accessible via the tanjun Visa Card across Europe. And unlike traditional custodial solutions, which depend on third party entities to handle user funds, tantrums card embeds a private key within the chip, and requires the physical cards use in every single transaction. This helps ensure that users can maintain exclusive control over their assets at all times. So you can make payments and it's self custodial. Like what's happening here. Okay, how does it work?
Cuy Sheffield 39:55
I think first it's just been really exciting to see the amount of innovation And at the intersection of crypto and payments really just over the past year with new fintechs and wallet providers that are creating these products that we've never really seen before. And so this notion of I think tangibles is this great example of in the crypto space for a while you've had this challenge of security of wallets, and the concept of cold storage and hardware wallets emerged of can you actually have a way to really protect the key instead of exposing it and having it be online. And so they created a hardware wallet product with a key is actually in a card uses the chip on a physical card, it looks and feels like a normal card, you could put it in your wallet, you could tap that card to sign a transaction when you're sending funds over a blockchain. And then now what they're doing is they're saying, okay, you know, they have customers that are carrying around physical cards that are hardware wallets, should have that physical card, also be able to tap to pay at any visa accepting merchant. And then having this concept of it used to just be custodial exchanges that had cards, we're seeing more and more companies that are self custodial wallets, where the customer actually has control of the funds until they tap to pay. And then you have interesting mechanisms at the back end to pull funds out of the wallet, and then ultimately settle them with with Visa. And so we're really excited to see these different types of innovations. And I think that there's a lot of ways that even just to think about cards as a form factor are being reinvented and used in different innovative use cases, like storing the private keys that control your crypto assets or stable goods.
Sy Taylor 41:36
The card is a cold wallet is just such an interesting meme that I can't kind of escape from my mind. And the idea that I could use a call to not just access a bank account, but the cash in my pocket. Like it's really sort of changing the nature of something if something becomes global 24/7, but self custodial for consumers. Yeah, I can imagine markets where that's hugely compelling, not just consumer basis goes, we could keep going forever on this, I'm pretty sure. But I do have to wrap us now. So I want to thank the listeners for listening. I want to thank Chris for joining us, Chris, where can people find out more about you? Where can they find out more about blueprints? Hit me with the details.
Chris Brummer 42:13
You can check us out over@blueprint.com That's B luprynt.com. And I'm obviously on LinkedIn and on Twitter at Chris Romer DT R, which
Sy Taylor 42:25
I also saw you with Mark Cuban on LinkedIn yesterday, apparently what happened there?
Chris Brummer 42:29
I was I was that was pretty cool. That was that was that was pretty neat. And you know, talking about sort of Washington DC. I don't know if you knew but in the United States, there's an election coming out. And
Sy Taylor 42:42
we had all so wicked Yeah. You know, like
Chris Brummer 42:45
the crypto industry is kind of interested in it. And so yeah, he had come for a little roundtable with Novogratz and Ro Khanna and Gil Brandt and the White House is about 30 of us it was highly engaging. Good
Sy Taylor 42:57
man, good man and Kai, where can people find out more about you and what you're up to
Cuy Sheffield 43:01
on Twitter and LinkedIn at Sheffield and visa.com/crypto. You
Sy Taylor 43:06
can find me at sy Taylor on Twitter, or Simon Taylor on LinkedIn or you can head to sardine.ai. And check us out what we do over there. If you haven't already, please go ahead and hit the subscribe button on Apple or Spotify or wherever you get your podcast. And if you want to leave us a review, it legitimately helps others find it. So you know if you enjoyed what any of us had to say especially Chris, then please please, please do leave us that review. And remember, this is not financial or business advice and the contents for information only. While we'll focus a little bit more on the tokenization of real world assets and tokenization. A lot of web three is underpinned by crypto and crypto can be volatile, meaning you can lose all your money if you're buying those assets personally or as a business. We're recording right now in the UK, where the majority of crypto asset businesses are still unregulated. But thanks to today's show, we're learning that that is changing in many, many parts of the world. Thank you very much, and we'll see you next time.