On Ep. 66 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Michael Tannenbaum, CEO @ Figure to discuss Visa Direct partnership with BVNK, Figure's on-chain public equity network (OPEN) for blockchain-registered equity and more!
On Ep. 66 of Tokenized, Simon Taylor, GTM @ Tempo and Cuy Sheffield, Head of Crypto @ Visa, are joined by Michael Tannenbaum, CEO @ Figure to discuss Visa Direct partnership with BVNK, Figure's on-chain public equity network (OPEN) for blockchain-registered equity and more!
Timestamps:
Tokenized is sponsored 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.
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Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
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With over $1 billion in total value locked, Centrifuge works with major institutional partners to tokenize and distribute their funds — and with capital allocators onchain to invest and manage yield. Through every crypto cycle, Centrifuge has been building — and today, it’s the market leader in tokenizing real-world assets. Learn more at centrifuge.io
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Music by Henry McLean
Cuy Sheffield 00:00
And I think one of the most powerful use cases and things that stable coins could do is basically eliminate and kill the need for pre funding. But if you can move money 24/7, if you want to fund the payout across the world, you could just send us a stable coin in the balance that you want to fund. We can receive it on a Saturday and then initiate a local payout via RTP. But to do that, we need great partners. We're building world class crypto Treasury infrastructure, and so companies like BV K are playing an important role in helping us do that. And I hope that a few years from now, the term pre funding is just like archaic, like what we used to do that we just have to plan ahead and and I think we're kind of on the path in that direction.
Speaker 1 00:42
You welcome
Sy Taylor 00:50
to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I'm your host for today. I'm author at FinTech brain food and head of market dev over at tempo. As always, I'm joined by the fantastic, the phenomenal, Kai Sheffield, head of crypto visa. Kai, how you feeling, sir, I know you got like a dentist trip coming up later, but you ready for this?
Cuy Sheffield 01:14
I feel good. It's a toddler dentist trip. That's a different type of dentist trip, but I am great. There is so much going on this week. 2026 is off with a bang. We got a lot to break down that
Sy Taylor 01:23
we do, and we've got a great guest as well today. Joining us is Michael Tai N Bond, who is the CEO figure. Welcome to the show, sir. How are you good? How are you thanks so much for having me today. No, no, I'm really excited to have a FinTech OG. You have a background in SoFi and then brex For a long time, and now at figure. So I think you're perfect for our audience, and we've kind of been on a similar journey to a lot of folks. So before we get into the stories and content, I just need to remind viewers and listeners that views and opinions of our contributors today are their own and might not reflect those of the companies they represent, and please don't take anything we say is tax, legal or financial advice. Always do your own research and speak to a professional if in doubt. And also, I gotta remind everybody that this episode is brought to you by our friends at centrifuge. Tokenized is brought to you by our friends at centrifuge. Centrifuge exists to bring institutional grade finance products fully on chain. Centrifuge is a full lifecycle defi platform, from asset creation and structuring to defi integration, and it's cross asset by design. What that means is they work across private credit, ETFs and equities, making your financial products much more accessible and much more efficient. This is the tokenization you keep hearing about, unlocked for all asset classes by centrifuge. Thank you to our sponsors. Story number one, Kai, I'm going to come to you first on this. We do have a snippet coming up from the bvnk co founder, but I couldn't escape this news. This week, bvnk is going to deliver stable coin infrastructure for some pilot programs in visa direct. This is, of course, Visa's $1.7 trillion money movement network annually. And bvnk also received visa ventures investment in May of 2025, so before I get to Kai, we were lucky enough to hear from Chris, so we're going to throw to that now, and in a tokenized exclusive, I am with Chris Holmes, who's the Chief Business Officer at bvnk, to talk about a huge announcement, which is that bvnk will now be powering stable coin payments for visa direct. It's $1.7 trillion money movement network. So Chris, take me inside. What you're doing with Visa what's visa direct, and what's this partnership about?
Chris Harmse 03:55
Yeah, Simon, good to Good to see you again. Look, we super excited about this. So visa direct is obviously the payments arm of visa you know, it's their money movement business, so it's actually where they are in the money flow, not just providing the card rails that everyone knows visa for. And you know they we've recently announced that we are powering two use cases for visa direct. The first one is allowing all visa direct customers to fund their payouts, their Fiat payouts, in stable coins. And then secondly, we will be adding a stable coin payout endpoint into the visa direct network, which means, today, if you're a customer of visa direct you can pay out. You could do a push to card payment, you can do a push to digital wallet payment, you can do a push to account payment. BV and k will be powering that push to stable coin wallets, payment for visa direct. So it's pretty meaningful. We're super excited. We think it's a, you know, Visa leaning in to into stable coins even further. You know, they've got a couple of initiatives on the go, and we're going to be powering a call, a core block of that being, being visa direct.
Sy Taylor 04:59
Yeah. Do you know push to stable coins was almost the perfect framing for it, because I'm used to push to card and push to account, and people forget that banks use visa direct to send money around the world on behalf of their customers. It's something that banks use, and indeed, many FinTech companies use to load wallets to really do a lot of payments activity, but that stable coin endpoint, I can't push to a wallet. So what would that look like now for a visa customer, what are they able to do that's that's a little bit different to before, and are they buying that directly from visa? Are they coming via bvnk? What does that partnership look like?
Chris Harmse 05:38
So this is we providing visa with the full stack, including the compliance capability, the liquidity as well as the orchestration of those those payments. So any visa direct customer will come, they'll use the same APIs that they used to with Visa. But now there will be an additional option. Instead of saying, Hey, pass through Joe, Joe's bank account details. It will be passed through Joe's crypto wallet details. We'll collect those details PV and caters all the transaction monitoring. We screen that beneficiary wallet, we make sure that, you know, it's it's not sanctioned, and do all of that compliance. And we take care of all of that. And then we do the conversion from Fiat into stable coins, and we pay out into that stable coin wallet for that visa direct customer. So think create a payout, as you mentioned. Think remittance payouts, thinks insurance payouts, any payout that's done through the visa direct network now can now be done through through stable coins powered by the billionaire.
Sy Taylor 06:34
And then talk about sort of somebody who's a bank customer that wants to have the instant settlement capability that you talked about as one of the other major use cases we've talked a lot about pre funding and some of the challenges with instant settlement and visa announced a little bit earlier in the year that they're working with lead and cross river around some of those, some of those seven day settlement pieces. What does this look like with Visa direct and bbnk,
Chris Harmse 07:01
yeah, so it's a great question. So I think we have to separate um Visa's card network business and their stable coin settlements that they're running there, which I think is approaching 4.5 billion in settlement, settlement volume. And that is really visas issuers, card issuing customers like the lead bank, like cross river now settling with them with stable coins. 24/7, 365, if we move over to their money movement business, if we think about that money flow, Visa directs, customers would bulk fund them in dollars, and then they would pick up those dollars and pay out across the visa direct network to these endpoints, whether that be so that original funding, you know, if that, if that customer was not in the US and couldn't fund one of visas, you know, on a domestic instant rail, like an RTP, and needed to send a wire to fund their global payouts. We are now enabling visa to accept stable coins as part of that funding mechanism to fund any sort of payout, whether that's a push to card, push to stable coin, push to push to bank account payments. So it opens up two sides of the flow. It allows them to fund in stable coins for quick funding, and also then opens up, you know, push to stable coin payments or payouts for for visa direct customers
Sy Taylor 08:10
get funded and pay out directly. So what are you looking forward to in this partnership? And you know, when's this live? Can customers buy it today?
Chris Harmse 08:18
Yeah, it's getting it's gonna be live test. Final testing is commencing. There's a whole host of customers live about to go live or, you know, in onboarding. So we're looking like the launch is going to be a public launch in January. So we super excited about that. We we've kind of got a tacit handshake agreement. I think visa doesn't get excited for anything less than a than a billion dollars in TPV. So hopefully target is six, you know, billion of TPV in the first six months. So, you know, we're pushing hard with the visa direct team to make sure that that gets enabled and and we really support the team to get this live and in the hands of as many customers as possible.
Sy Taylor 08:55
Well, if people are interested in it and they want to talk to you a little bit more about it, where do they go to find out more about you and everything you're doing at PV? Doing at pbnk.
Chris Harmse 09:03
They can find us@bbnk.com and they can find me on LinkedIn, at Chris Holmes,
Sy Taylor 09:09
all right, thank you, Chris. And thanks everybody for watching this, this little snippet here with with breaking news. And thanks Chris for giving us the exclusive. Chris. Thank you so much, Kai. You heard from Chris there. I thought he had a really nice framework about push to card, push to account, push to wallet. Anything you want to tell us about this from the visa side, yeah,
Cuy Sheffield 09:28
just really excited about the partnership with BV K. They've been a great team to work with. And I think that the use case, the thing that I'm most excited about is this idea of being able to do stable coin funding of our broader payout capabilities. And this concept has been around. Anyone in the money movement business knows the term pre funding, and it's kind of this dirty word. It's like, Oh, you got to pre fund, and we got to plan ahead and figure out much volume we're gonna do over the weekend. We've got to make sure we hit a wire cut off time. And it's just that's the way the industry has worked. If you want to be able to send money cross border, you have to pre fund. Fund. And I think one of the most powerful use cases and things that stable coins could do is basically eliminate and kill the need for pre funding. But if you can move money 24/7, if you want to fund the payout across the world, you could just send us a stable coin in the balance that you want to fund. We can receive it on a Saturday and then initiate a local payout via RTP. But to do that, we need great partners. We're building world class crypto Treasury infrastructure, and so companies like BV K are playing an important role in helping us do that. And I hope that a few years from now, the term pre funding is just like archaic, like what we used to do that we just have to plan ahead and and I think we're kind of on the path in that direction.
Sy Taylor 10:40
Michael opportunity for you, if you've in your SoFi days or brex days, had to deal with pre funding. What do you think something like this would have meant to you back then those days?
Michael Tannenbaum 10:49
I think it's super interesting point. And as you talk about pre funding, is bringing me back to the early days of brex, where, at brex, when we started the company, we were on Marketa, which only offered prepaid debit, which is a version of pre funding. And the reason why brex started to take off is we basically abstracted the pre funding from the customer. So we brex ourselves, pre funded the Marketa account on behalf of our customers, and then made it a credit card like it was a prepaid debit plastic as there's a lot of payments folks on the call. So it functioned as a prepaid card in terms of the network, but we abstracted that from the customers and made it a credit card. And that actually was a huge reason why brex took off early on, because ultimately, to the point, people want credit, they don't want a pre fund. They don't want to think about that, even though it's not that big of a deal to go and allocate funds upfront, it's just not what people want. And there's a reason why credit cards are popular, even a debit card, right? It works against what is essentially a pre funded bank account already. You don't have to change behavior, but the behavior of pre funding things is just so anathema to consumers and businesses that absolutely Had there been that stable coin option, you could kind of get around all the Acrobatics brex had to do early on to address that pre funding. So that's what came to mind first when I was hearing that anecdote.
Sy Taylor 12:14
Great to give it an operator's perspective. So thank you for that. And speaking of operators perspectives, I'm going to pull this to our next story now, because just a day ago, as we were recording this, and a few days ago as you're hearing it, figure announced the on chain public equity network, or open for sure. So open equities are blockchain registered, not a tokenized version of Depository Trust and Clearing Corporation securities. So they're natively registered on the blockchain. And the goal here is to reduce the cost and capital requirements mandated by the DTCC from your press release, and this includes you get self custody, which eliminates the need for custodial brokers, potentially reducing costs you could even do margining through defi to enable cross collateralization and replacing a lot of the stock borrow locate process with a transparent limit order book. So I'd love to step through all of these. I know you've recently been through an IPO. You've had some experience of going through the traditional listing process. What is this product? Who's it for? And what are you hoping to see?
Michael Tannenbaum 13:23
So when you think about figure we're known for seeding out marketplaces and doing that in a greenfield way. We started in the consumer credit space. We're well known for what we've done in tokenized RWAs, specifically mortgage, and we're the market leader in that we've done about 20 billion and we have a huge network of partners that originate mortgage assets with us on a blockchain into a capital market, and we take a ton of time and cost out of the system. And so that was kind of marketplace one, and then marketplace two was crypto defi. We launched a product called democratized prime, which is today essentially a large defi warehouse line in some ways, right? So it's a short term asset marketplace for tokenized assets, and you can borrow or lend against them. And that started to grow really nicely. And an example of that would be one of our partners that say, does the tokenized mortgages with us? If they want to borrow, they can do so at rates that are more attractive than warehouse lines. And so that's democratized prime. Marketplace two. Marketplace three is equity, and the reason I start with the others is to kind of explain how we try and use blockchain to add real value into the real world and take out time and cost. And so you think, from an equity perspective, while that market does work well, it works better than debt, right? It's more liquid, it's more standardized, there's a lot of economic opportunities. That are not afforded to the asset owner in equity. And so one thing that I like to say about what we do more broadly is we do for asset ownership what the internet did for content creators, right? So we're turning over the economics of asset ownership and origination to the people that actually own those assets or create them. And so from an equity perspective today, some of the things you mentioned, Simon is that there's not only a lot of costs in the system, and us doing a blockchain based approach to equity is going to reduce those get that transactional benefit of blockchain. But I think even more importantly is this concept of controlling the stock loan. And I'll be specific about that. So when we launched democratize prime, that short term marketplace, we called it that because we were going to go after prime brokerage. And so in today's financial services landscape, you artificially have people that lend against debt and people that lend against equities, and there's not this cross collateralization. And that gets to why it's so important to do a true blockchain native approach to equity, so you can get that liquidation in the event of a problem, right? You have pure lean perfection into the asset, and you can sort of confirm ownership and custody, rather than relying on a trust based process. And in the aggregate, that's going to result in higher leverage and cross collateralization. And so just as an example, if you own a tokenized equity, and you're custodying that equity yourself, you can control when someone wants to borrow that and control those economics on that borrow. So just whenever people are shorting a stock, they're borrowing that stock, and they have to pay to borrow it, and depending on how in demand that borrow is, right, how much short interest there is, essentially interest in borrowing that stock. It can be really material economics for people that own the stock, because if lots of people want to short it, in some ways, you're getting paid to hold that stock. But today you're not really getting paid to hold that stock. The prime broker is intermediating that, and that's why I got back to that point about same sort of thing the internet did for content creation. We are using Blockchain to do that for asset ownership, and saying, Well, you might as well control your own equity. And when you do so, you should get the benefit of lending it out, and you should also get the benefit of cross collateralizing it. And that's kind of how all these marketplaces fit together, because we're really taking a blockchain purist approach to assets that are obviously we started in debt, but also now equity. Yeah.
Cuy Sheffield 17:37
First off, congrats on the announcement. So many interesting things to unpack here. So let
Michael Tannenbaum 17:44
me we definitely go and lack for complexity.
Cuy Sheffield 17:47
Let me start here and just like ask the dumb questions, obvious questions is like, so who is this for, from like a company standpoint? Is it existing companies that have traditional forms of equity, that go through the DTCC that are traded, the way that it works right now, that would also create a blockchain, native approach to equity, and then the equity would kind of be split between these two form factors. Or is it new companies who, instead of when they IPO, going the traditional route, they would go this route. What's like the ideal company, of when and how they would do this, and then, is it mutually exclusive? Where it's like that's the only version of your equity, or you can have both a traditional version of equity and a blockchain and version of equity? How does that work? It's both
Michael Tannenbaum 18:37
so for figure today, we are launching a second Q sip, or essentially a second share class of our equity on a tokenized approach, right on open essentially. And what we're doing there is it's a new s1 because we're a recently filed issuer that then will be traded on figures ATS and as part of this open network, you can either self custody or use bit go as custody. That's what we announced. And there will be market makers making sure that there's liquidity, and they will also be ensuring that the price stays in line with what's going on on NASDAQ and the NMS security. And so you can also readily exchange through figure treasury, one for the other. And so if that's going to help bridge from kind of zero to 60, obviously we believe and are confident that there's a lot of benefit owning your stock on chain, the tokenized version. But there's, of course, going to be people that want to be able to move between the two, and we've set up figures treasury to do so. So that's how it works for us. And other companies can do that way as well, almost like an ADR, right? When you're coming up with a new Share class. So anybody who's sort of an existing publicly traded company can do that, and then, as part. A future IPO for a company, we envision that investors are going to start to demand and want this tokenized approach to equity, and as a result, just like when figure did its IPO, we allocated a portion to retail. Right? There's a time at the IPO where the issuer says, I'm going to give this much to this people. I'm going to give this much to my friends and family, and I'm going to give this much to retail investors, and these are the pockets there's also going to be, well, I'm now going to allocate this much to tokenized stock, and that is absolutely coming in the coming months. In terms of part of your question was like, well, who's gonna do this? So in general, the first movers and the early movers are gonna be those that stand to benefit most from this and or are sort of blockchain adjacent, right? So think about dats as being a natural place, people that are in the ecosystem already, meaning crypto exchanges, people that are custodians, people filing for or recently IPO Ed, anybody who has a lot of short interest in their stock. I think this would be an interesting place to go, because I think investors that are standing by you will naturally want to control more of that economics. So that's going to be a place to go as well, and so we're going to have this business development effort towards this. And I think the benefit I know, for me, having just gone through an IPO and thinking a lot about retail, I also think this gets into the question of governance and voting, where you see a huge blowback today against folks like, ISS right, the people proxy, the proxy process and the lack of transparency. People across the equity ecosystem are criticizing that, and that's another benefit that I didn't yet mention about doing this on chain, is kind of more transparency, lower cost. Think about all the paper and the constant emails that you get to alert you of a vote, and just having that be managed by your own wallet is just so much simpler. And so that's also going to be an avenue for us to make inroads and get into that conversation, especially because so much of the conversation today is against those proxy firms, and there's a lot there.
Sy Taylor 22:21
There's so much that could be beneficial here. But what I think's nice is this pattern that you've developed with the HELOC mortgage marketplace that you built, you sort of built a business that could have been a perfectly fine business in mortgages, but you happened to do out on a blockchain so that you could turn it into a marketplace. And then with prime, you did the same thing, where you could have built that the old fashioned way, but you did it on a blockchain to almost instantiate it. And now by issuing your equity onto open, you're sort of taking the leap first. You're sort of showing that we can do it so that others might follow and build kind of a business around it. And when I heard you say ATS, I mean, many listeners will know this, but some won't realize that a regulated ATS or alternative trading system operates under SEC rules, meaning you're sort of following everything that a stock has to follow to be SEC regulated. So this isn't like you've done some wild blockchain scary thing. This is sec regulated if you are an ATS, and therefore you then get these other benefits of self custody and cost reduction. But one of the things that's rang through my mind with the proxy voting was that most people don't realize that when you hold a bunch of stock through your Robin Hood or brokerage and Schwab, the you potentially are missing out on a bunch of voting that you could be doing at AGMs and your general meetings, and they might be voting on all kinds of policies. Should we put in a new CEO? Should the management teams get their bonuses, like all this kind of stuff? And there's like two, three companies that do all of this, and it's just outsourced to them I saw about a week ago. JP, Morgan has decided to stop doing that, and they're using an internal AI tool to like, help recommend some of this stuff internally, just because those things are considered like such a centralization risk. So that is fascinating, that once you've created this new system, you can start to unlock these new benefits for users. But I'm curious though, like as you've instantiated this like 99.9999% of all public stock that's on the DTCC, are you seeing demand now to come into your open network because of some of the challenges that they have with some of those things,
Michael Tannenbaum 24:38
absolutely, and I think that the point that you raised about our own inventory is a huge one, and that's a real credit Tai Cagney, the co founder of the company, because repeatedly throughout figure, and since I've been at figure, I've kind of taken this mantle of being comfortable giving up near term economics to build out these. Marketplaces. And so we have to seed this equity out with our own offering, as you noted, because it's really hard to get people to do things that have never been done before. You kind of need to do that first. And so by showing the way and showing that it can be done with our own stock, to your point, that is absolutely bringing people that are interested in doing this. And to be interested in doing this, you don't necessarily have to be an issuer. Of course, issuers are going to be the ultimate arbiter of the inventory. But for example, for figure, we're seeing our own investors that already own our stock saying, Yeah, we want to move our existing figure stock to this platform, which is
Sy Taylor 25:39
absolutely because then they'll be able to get the economics if somebody shorts it, because in order to do that, they have to borrow against it. And if you're borrowing against it, who gets the yield from a borrower? Sort of looks like a Morpho vault, to my mind, like some listeners will be familiar on Coinbase, they have this ability to sort of park your Bitcoin in a Morpho vault, and then you can borrow against that, or you can just simply earn yield from it by parking it there. This is that same concept, but instead of applied to your Bitcoin, it's applied to the investor's equity that's sitting in there. And if somebody's borrowing to short the stock, it's quite nice that you're getting paid as somebody who believes in it for the privilege of letting them borrow against it to short it.
Cuy Sheffield 26:23
I think one major takeaway for me that I've heard Mike Cagney say multiple times on like different podcasts, which really stuck with me is when you think about the value proposition for issuing equities natively on chain, I think that the first thing that a lot of people started saying, and people have been talking about this for years, was, oh 24/7 trading. Like, all over the world, that was like, the value prop and crypto people are Oh, crypto trades 24/7 is like, why don't equities trade 24/7 and so shouldn't we, like, put all stocks on chain so they trade 24/7 and it sounds like, if I understand correctly, that that's not actually that big of a problem or value proposition. Of like 24/7 trading, the much bigger value proposition is really on Chain Finance, defi credit. It's the ability, once you have self custody of an equity, that you can lend it, you can borrow against it, you could do all of these things with that equity that you can't do when it sits in existing database. And so it seems like this is you guys proving out all the things that you can do with that equity, rather than, I don't see anything around, like, just trade it on the weekends, like Sunday at 3am like, that's not the reason to do it. Would you agree with that? Oh, I
Michael Tannenbaum 27:33
think it's well said. There's two points that you're implicitly making there. I think there's the point about where the market is moving in terms of prediction markets, mean coin like, there's that sort of whole factor which has been merging with crypto and blockchain, right? And I think for figure, we've generally taken a little bit of a different approach, which is a more fundamental how do we use blockchain to add value in the real world? And while I think it is strictly better probably to have trading at all times than not, I don't personally, and I think figure Mike, all of us don't really view that as a really latent demand and something that's going to fundamentally change the world. But I think going through the counterfactual is actually valuable here, because if you think about what some people have decided to do, and this gets to the point of liquidity, which is that whole marketplace point I'm making, you need liquidity to make this all work. Let's say you were to tokenize open AI as an example, right, which has been discussed. And in doing so, you're basically saying there's going to be some, ultimately, paper based process, or some electronic share certificate, living in some software, and then you as a buyer of that tokenized equity, or sort of like that version of that stock, if that's tokenized. Now, I guess you can trade it 24/7 I don't know how many people want to trade open, ai, 24/7 or if the price is moving that much. And then at the same time you you don't really have this ability into that equity. Like, how do you know that you actually own it? How do you lend against that? If the borrower defaults? Where do you go to collect on that? And is that happening over a series of lawsuits that are happening for months, right? And so it's very different than what we're proposing, and I think to the point, yes, defi is absolutely where we're headed. And you need that lean perfection, and you need that blockchain, native security to do
Sy Taylor 29:36
that, but it's just a big old marketplace, isn't it? I think that's what's fascinating here. I was listening to Austin Campbell, friend of the show. He was talking on the crypto America in America podcast, and he was recounting that DTC was never intended to be a monopoly and 100% market share. It was just the best way to solve the problem they had in the 70s, that there was too much paper. And the way they did that, of course, as you. Well, know is with dematerialization, and so the stock certificates made were immobilized, and they rights and obligations are what become something that people buy and sell. But of course, the DTC is now doing that through their tokenization initiative, that it is the rights and obligations, but it's not necessarily the stock itself. So what you're doing is quite different to that, but there's an interesting thread here from like Silicon Valley. I'm a big fan of Bill Gurley, who you're probably familiar with, and he's been talking for a long time, and his thoughts on IPOs, for sure, he has lots of thoughts on IPOs. I don't know if you've spoken to him or others that are considering IPOs, about some of those challenges and about whether there's an opportunity to change that, and are they put off by the blockchain nature of it, or do they just see actually, no, this is a better thing, and it's regulated.
Michael Tannenbaum 30:50
So I think, Simon, it was so valuable for us to go through this process of blockchain equity after the IPO that we just did to your point, and there is kind of this even retail allocation. When we were going through it for figure and deciding how much we wanted to allocate to retail, we did more to retail than I think, I don't know about ever, but certainly we had a very large share of allocation to retail. And it was a very uncomfortable conversation with the underwriters on the IPO was obvious that it made them uncomfortable. And if you think about how an IPO would work on blockchain, right, it would be that you would potentially just be going right to someone's phantom wallet, right as an example. And so it would be very disruptive, in some ways, to the process that happens today, if you kind of so it's almost like, if you think about going to the clubby world of a few mutual funds in Boston, to then expanding it more broadly to all institution, to then expanding into retail, but intermediated through Wall Street banks like Bank of America, Merrill Lynch that have big or Morgan Stanley that have big retail, and then Now Robin Hood, Sofi, public, right? Those are options. We used many of those for IPO, but then to be able to say, Well, I'm just gonna go to a wallet directly on chain like so it is very disruptive to the IPO process itself, and I think retail is a version of that, but it's not all the way to direct to the wallet, right? And it was absolutely like we were getting unclear pushback. Well, we really don't recommend allocating this much to retail. Why? Right? There was no real answer. And then it was a huge amount of pressure to allocate to the big mutual funds, right, that you're probably familiar with, and they're supposedly long oldly, but the world is really changing, and I just think that the IPO process is absolutely, look, we're grateful. Was a great IPO. I'm grateful for the underwriters. They did a good job like I don't want to sound disrespectful, because I'm not. However, we do see a new opportunity for this to be done better with lower costs, and, frankly, with a stronger relationship between issuer and shareholder, and ultimately, as an issuer, that's what you want, right? You want a relationship. We're talking about voting and quorum, but like, you want to have that direct relationship with your shareholders and get them have the economics.
Sy Taylor 33:14
So one last quick question before we let you leave. On this one, I think Kai, you wanted to talk about the infrastructure itself?
Cuy Sheffield 33:21
Yeah, I think when you talk about issuing equities on chain, then the natural question for the crypto folks is like, Okay, well, which chain and why? And so my understanding is you all have built your own chain in provenance versus using existing ones. Can you talk a little bit about that decision of, why not just use Ethereum? And then were there specific features or considerations around what makes provenance the right chain for this, versus Canton or Ethereum or others that are out there?
Michael Tannenbaum 33:51
Yeah, so we build on provenance, which is a public l1 it's not a private blockchain, but it's we have about 25% of the hash token, which is the native token to provenance. And when we started building on provenance back in 2018 and created it, the founders of figure were the creators of provenance as well. That was a much different time for the blockchain universe. And at the same time, I think we wanted a proof of stake blockchain that also had the privacy support that we would need for doing consumer loans on chain and being able to handle that, and so that was a big part of it then, and then, since then, we've just always built on provenance. It's been a great partnership and useful for us. But as you've probably seen in the past couple months, we've done a lot more on other chains, and so we've used our stable coin yields, which is an SEC registered yielding stable coin. It's now actually the number three, I think, for yielding stable coins. And we've used that to bridge into other ecosystems, including SWE Solana. And Ondo. So I think similarly here, while provenance is what we're building on, we imagine, especially for the defi financing world that we're building on to be cross cross chain. And as you well know, Kai, the world is such that there's lots more l ones today than there were call it even two years ago. And so as that kind of proliferates, I think our focus is making sure that wherever people are and whatever stable coins they're owning, we want to make sure that they can be a part of our defi ecosystem as well.
Sy Taylor 35:35
I think that's fascinating, how the meta on crypto Twitter right now is all about privacy and privacy change, and since Canton and everybody's seen the size of their RWAs with Broadridge and have realized that privacy is going to be a really key thing to unlock these mainstream use cases. So sitting there in 2018 there weren't a lot of good choices for that, but as you say, that's sort of changing, so it's good that you're remaining flexible on kind of all of that stuff. I'm going to pause this here. We're going to hear from our sponsors, and we'll be back shortly. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is sponsored by stripe. Stablecoins are the building block for borderless financial services making money move around the world as easily as data. With stripe, you can use stable coins and crypto to reach untapped customers, reduce cross border fees and settle payments in minutes instead of days. Best of all, it works the same way other stripe products do by API or right inside the stripe dashboard, meaning you don't have to worry about the intricacies of which blockchain or what wallet to use, from Shopify to vercel, global businesses trust stripe's Complete crypto solutions to unlock new markets and reach more customers. Borderless finance built on stripe. Learn more@stripe.com forward slash crypto. All right. Thank you to our sponsors. The next story we had this week was just about everywhere in my feed as well, which is the Senate banking committee vote on the crypto market structure bill, which was scheduled for the 15th of January has been delayed due to many of the crypto lobby pulling their support. This follows a draft bill in the Senate Banking Committee that had a number of challenges. So for example, the CEO of Coinbase, Brian Armstrong, in an ex post, claimed that it has a de facto ban on tokenized equities, defi prohibitions that would give the government broad access to user financial data and erosion of CFTC authority and eliminating the rewards on stable coins. And I think it's that one that the bank lobby has had a had a real issue with. Meanwhile, Bank of America just did their earnings call, and we heard from Brian Moynihan, the CEO there, who was essentially saying that they believe there's a real risk here, if the current situation where stable coins don't give yield directly from the stable coin issuer, somebody like a circle, though, can partner indirectly with somebody like Coinbase, and Coinbase can offer rewards, and that is seen by the banking lobby as a loophole. So one of the associations in banking has said that they expect to there could be up to $6 trillion of deposit outflow. This would mean there's less fully reserved money, and banks would lose capacity for lending and sort of especially those smaller community banks. So this is kind of fascinating, this crypto market Bill feels like a big, complex one that could be a ways off. It would need to get through the Banking Committee for the SEC side. It would then need to get through agriculture for the CFTC side. And then we might get to something that could hit the Senate, but this one could run for a lot longer. Yeah. Michael, interested in your thoughts on this. I know regulatory clarity is not always easy. I know there have been similar jurisdictional battles in traditional markets, but would it be helpful to have something like this pass and what are your hopes for your business?
Michael Tannenbaum 39:32
I think it would be helpful, and you can't ignore, regardless of kind of opinions of the administration, broadly, the helpful tailwinds that we've gotten from and the regulatory clarity. And forgive the pun on clarity. I think for me, the one thing that I've been watching is just the defi in particular, and regulatory exemptions for that, and clarity there. And I think it's we've been having conversations about self custody. And just trying to make sure that, you know, defi is a little bit ambiguous. And so I think for us, that's what we're mostly watching there, and trying to understand exactly what is and is not required. And I know it's sort of like is self custody, therefore defi and exempt, I think is a big thing for
Cuy Sheffield 40:17
figure it seems like it's very clear that the market structure debate is in order of magnitude more complex and contentious than what the genius Act was, despite part of it actually being relitigating the genius act and in the yield side of it. And so it's been really interesting to see the arguments that different sides are making. But I think as of yesterday, it seems clear that Coinbase isn't supportive of the direction that that it's been going. And now we'll see what happens when everyone regroups and and comes back. But I think it's going to take a lot more debate and discussion. And frankly, I think part of the challenge is this stuff is still really new, understanding stable coins and how they work and like, what the yield and reward products are, and thinking about the second, third order effects of what would happen with the yield. If you block yet, where does it go? And that's just like the yield. Then you get to defi, and you're like, how many banks have spent meaningful time really understanding defi? Not many, because it's new, it's like brand new, and it's super complicated. And so I think anytime you have something that has potentially significant implications, that is also really complicated, from both, like, a technology standpoint, from a risk and regulatory standpoint, it's hard, and I think it takes a long time to really understand and try and find compromises and come up with good policy in these emerging areas.
Sy Taylor 41:48
For sure, I for one, hope we can put to bed of the yield conversation, because we've been sort of doing this rewards model for a couple of years before genius act. I think it's going to continue now, the throwing this into the market structure bill just complicates an already complicated bill. And meanwhile, there are businesses like figure and many others that don't really have regulatory clarity, and they're trying to do the right things and trying to prevent risk and trying to do the right things for consumers in the marketplace. And there's lots of policy guidance that has come out of the SEC and elsewhere, but a change of administration could change all of that. So we do need something on the books. I suspect that would be very helpful. One last story and we'll wrap up for this week, which is polygon acquired both coin me and sequence for a total of about two $50 million so coin me is a crypto payments business, while sequence is a wallet infrastructure business, and this also includes a number of licenses and MTLS in 48 states. And the deals will be anchors to the polygon open money stack, which is a framework for supporting stablecoin based payments. But they have like this open money stack, so everything's replaceable, even though they own these two parts, the idea and what they say is, look, if you're brand new to stable coins, you can sort of almost pick and choose from this open money stack. And if you need the licensing, we can offer that to you as well. And polygons doing a lot of volume in payments. They're one of the largest chains for payments. And kind of interesting to see they've got John Egan now, who left stripe to go join those guys. Kai Michael, any thoughts on this story and the M and A that you're sort of seeing in this space? Is that a sign of maturity? What are your thoughts?
Michael Tannenbaum 43:32
From my perspective, it's kind of I always think about because I started in financial services. FinTech experience. A lot of what you see in blockchain and crypto is rebuilding financial services in a new way. And so I think what you're seeing across the ecosystem is people want to have more and more functionality, but they're still doubling down on what they do best. And so people are there. You have this M and A because there's a lot of adjacencies as you build platforms and ecosystems, it's almost like banks, right? Banks, they specialize in things, but then there's just a set of services that people are ultimately looking for when they go to a bank, or certainly when they did go to a bank, call it 50 years ago. And so when I look at figure as an example, and we were kind of having this conversation with provenance and RL one, it's like we're the best in the world at tokenizing assets, but then at the same time, we offer crypto trading, right? Because some people want to lever what we do or what they own and use and maybe loop or trade with us, or they might want to. Now we have equities, right? And so there's things that we do. You kind of come for the tokenized assets, but you might stay for something else. And so I think that you're seeing that across a lot of these M and A's that have been happening. Definitely, ripple has been active. A lot of people have been active, and people are trying to take the lead that they have and expand into other areas. I mean, Gemini has a card, right? They didn't necessarily buy that. But another example.
Cuy Sheffield 45:00
Ball, lot of expansion. Tai, yeah, I think it's going to be a trend that we see more and more, and it's it's an interesting question of what does the future business look like for blockchain foundations. And blockchain foundations have been around for a while, and I think in the early days, I remember polygon used to do developer grants, and they'd go out and try and convince enterprises to build on the chain. And I think we're getting to a point where you have vertical integration happening from multiple angles, and it's increasingly hard to just go and say, Hey, like, please build on a chain. And so what some of these foundations are doing is they're saying, You know what, let's build a full stack product suite that uses our chain, and let's go out to enterprises and let's sell that product. And so you accomplish the same goal of like getting people on the chain, but instead of having to convince third party infrastructure providers to natively support and really promote and preference your chain, which is incredibly hard, because many of them are creating their own chains. And so it's like, as the infrastructure providers have their own chains that they're integrating in. Anyone who has a chain that doesn't own any infrastructure that's kind of end customer facing is now going to have a harder and harder time competing. And so it makes sense that they do the reverse, and they say, Okay, we need to have something that an enterprise can plug into. So I think it's a smart move, and I think it's only the beginning that we'll see more foundations morph into actual like payment infrastructure businesses, whether it's spin out, whether it's acquisition, and I think it's a general direction
Sy Taylor 46:30
of travel, payments was always a great business. It's interesting to your point. We're not seeing the big deals with Nike or Starbucks so much, but now we are seeing payments volume and revenue, and it's something poly market is on polygon. And there are all these sort of things now that are generating real volume for them, that are starting to look like real businesses. And I think that's the theme today. I mean, figure is probably the canonical example of a real business that happens to use a blockchain. There are many others now emerging. A bunch of stories we didn't have time to cover this week. It was so much news. M pacer partnered with Blockchain Adi to roll out blockchain powered transactions in eight different countries. M PESA being one of the original mobile money wallets. Bitgo is seeking 200 million in its IPO X is developing smart cash tags to link ticker symbols to financial data. BNY is intending to issue tokenized deposits. Ripple got an approval from the UK regulator and shout out to Wallet connect, who did a partnership with a rail payment surgeon Ingenico to make wallet connect available at their 40 million terminal locations. You've probably seen that Ingenico thing if you've ever gone to tap to pay. And then, of course, Galaxy launched the first ever clo on avalanche and could buy a $50 million allocation from grove. So we're seeing those private markets start to evolve. You can imagine we could do like a three day show here, and not get into all of that with the level of detail it deserves. So I want to thank you, everybody who kept up with us today. Who always watches, and I want to thank Michael for joining us. Where do people go to find out more about you and find out more about what figure's up to? Absolutely.
Michael Tannenbaum 48:10
So if you want to hear more about the tokenize equity, it's Blockchain equity@figure.com I'm em tan and bomb@figure.com and I'm on X, although I don't have that many followers, but I have a lot on LinkedIn. So either one
Sy Taylor 48:23
Kai, how about you
Cuy Sheffield 48:25
on x at Kai Sheffield and visa.com/crypto
Sy Taylor 48:28
you'll find me at sy Taylor on all of the socials. You'll find me@fintechbrainfood.com and, of course, at tempo dot XYZ. And you'll find me asking you, once again, to subscribe, like and do all of those things and tell everybody you know about this show. It really helps us. Thank you very much. Bye for now.