On Ep. 39 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Oli Harris, Founder & CEO @ Arda Global, Haonan Li, Co-Founder & CEO @ Codex and Raj Parekh, Head of Stablecoins/Payments @ Monad Foundation & Co-Founder @ Portal to discuss Monad Foundation acquiring Portal for stablecoin payments, BBVA launching Bitcoin and Ether trading for retail and more!
On Ep. 39 of Tokenized, Cuy Sheffield, Head of Crypto @ Visa, is joined by Oli Harris, Founder & CEO @ Arda Global, Haonan Li, Co-Founder & CEO @ Codex and Raj Parekh, Head of Stablecoins/Payments @ Monad Foundation & Co-Founder @ Portal to discuss Monad Foundation acquiring Portal for stablecoin payments, BBVA launching Bitcoin and Ether trading for retail and 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 presented by BVNK.
BVNK is the leading provider of stablecoin payments infrastructure—helping businesses move money faster, settle globally, and even launch their own stablecoin products. Head to BVNK.com to learn more!
This podcast is also supported by Canton Network.
The groundbreaking Layer 1 public chain where traditional finance and crypto are converging. Visit canton.network to learn more.
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Cuy Sheffield 00:00
Kai, welcome to tokenized. The show focused on stable coins in the institutional adoption of tokenized real world assets. I'm Kai Sheffield, head of crypto visa, and once again, in the host seat, as Simon is on vacation, I believe, as he would put it, to holiday, it's a huge shame. It's our one year anniversary of tokenized. We're gonna have to celebrate next week properly. When he's back, we will have a special returning guest. But speaking of special guests, we've got some amazing ones today. First of all, welcome Ollie Harrison, founder and CEO of Arda and former MD of digital assets at Goldman Sachs. Ollie, you're up to something new, a new title, new company. Tell us a bit about it. Yeah.
Oli Harris 00:51
Well, thanks for having me awesome to be back. Yeah. We're building the first operating system for private markets, so giving private credit, real estate, the same speed, transparency and liquidity as public markets, obviously, with full local law compliance.
Cuy Sheffield 01:07
Very cool. Excited to talk more about that. Then we're also welcomed by haonan Lee, CO, founder and CEO of Codex. Welcome to the show. How are you
Speaker 1 01:16
doing? How? Man, I'm doing great. Thanks for having me. Kai for sure. And last
Cuy Sheffield 01:20
but not least, we're joined by CEO and co founder of Portal labs and visa crypto mafia legend, Raj Parekh, welcome, Raj, how are you doing? Man,
Speaker 1 01:31
oh, what's going on? Guy? Oh, excited to be here. All right.
Sy Taylor 01:36
This podcast is sponsored by our friends at bvnk, and if you've been listening to this podcast, you've probably heard us say, every business needs a stablecoin strategy, and if you're looking for the best place to start, that's bvnk. Bvnk is the leading provider of stablecoin payments infrastructure, helping businesses move money faster, settle globally and even launch their own stablecoin products, all with licensing and compliance, so you can build with confidence. We're proud to partner with bvnk on tokenized To learn more, visit bvnk.com and just
Cuy Sheffield 02:12
before we get into the content, need to remind everyone that the views or opinions of our contributors today are their own do not necessarily reflect those of the companies they're representing. Nothing we say should be taken as tax, financial investment or legal advice. Do your own research. All right, let's get into the stories. And so we have to start with the big news of monad. Foundation acquires portal to accelerate stablecoin in payments strategy. The acquisition will bring a full stack payment solution to monad and amplify portals. Mission to make stablecoin powered payments effortless for web two and web three businesses. Huge congratulations to Raj. Amazing to see. Tell us more about this. How did this come together? Why monad? What's next with this acquisition?
Speaker 2 02:56
Yeah, I mean, it was really organic, and it was like a series of conversations I think we've been building in the crypto stable coin space for a long time. We've seen every different type of architecture, blockchains, use cases, products being built. And I think one thing that we saw pretty clearly is that as we're starting to deal with the web, two companies, a lot of them are asking me the same questions of like, hey, what chain should I use? Or how do I build this? I think jamming with the the monad Foundation team, it just is pretty awesome. And, you know, I think what they built underneath the hood is, what I joke is like end game, like EDM architecture as well. So I'm excited to step into the head of stable coins and payments role at monad foundation. While portal continues to operate independently, we're still excited to serve many different customers. In fact, I think a lot of the web two companies were actually able to even go deeper there and start to build more of the payment stack with them too, which is really exciting. So
Cuy Sheffield 03:47
it seems like this is another example of m and a season for crypto and stablecoin specifically. But it's also fascinating to me that this is a foundation, a blockchain foundation, that is acquiring a stablecoin payments company, and so how Nan you've been working on a stablecoin focused blockchain. How do you think about this coming wave of competition, now that stablecoins are the theme in the space, how should blockchains be positioning themselves? And how do you think about existing, general purpose blockchains trying to win in stable coins versus your approach of building a new stable coin focused chain?
Speaker 3 04:25
Yeah, I think, first of all, it's a smart acquisition. I think if you can ever get talent like Raj, you should absolutely do it, no matter what the price is. So kudos to the monad team for great taste there. I think General Purpose chains have trouble wrapping their heads around all the specific problems in stablecoin land. Now, I used to run incentives at the optimism Foundation, and I think no matter how good the people are and how earnestly they are trying, if you're trying to target 12 different things, you will never end up doing them particularly well. I think to acquire talent from the outside is probably your highest probability of nailing it. And I think what monad has done here is very, very smart.
Oli Harris 05:02
It also seems interesting that it's one thing to go out and try and tell people, build a product on our chain, build some stablecoin solution, but ultimately you need infrastructure. You need actual payment products that they could use to then build on it. And so, Ali, do you think we're gonna see more of this trend of foundations that are almost becoming product companies, where they're moving on from just steering the core development of the chain, and they're trying to actually have real products that they're taking to developers and going out and selling on top of the chain. Yeah, definitely. I think it's super interesting. So I guess you've got three people here now that are taking a vertical approach. And I think that's a key change, is you need focus, and if you're selling into web two or incumbent industries, you need to go fully vertical, and especially from the customer perspective. That's why I believe, yes, these foundations are going to become more product LED. And actually, depending on where the laws evolve in the US, you might not need foundations at all anymore. You might just have one entity that packages an operating system and then they deliver very focused tooling, basically the tooling for the apps, the platform and the protocol all packaged into one unified experience for end customers. And I think that's obviously this acquisition is another proof point on that. Other news this week was Oasis pro markets being acquired by Ondo. I think it also shows that you're going into this vertical approach where we're trying to make it simpler for customers to engage with blockchains, or even abstracts their blockchain away entirely.
Cuy Sheffield 06:35
Yeah, I think on that point, Raj, when you go to traditional web two customers today. How do you see this evolving of, are they coming in with a chain preference, and they're saying, I want to build a stable coin product, I want to use this stable coin on that chain, or are they just coming in with I want to be able to solve a certain problem? And are they deferring the chain decision to the infrastructure or the Wallet platform, or whoever it is that they need to build it. And do you see the opportunity to enable monad to be like the default chain? How does it play out within portal stack today, where you've been multi chain and then now you're being acquired by a foundation? Are you only gonna support monad like? How do you think about driving chain selection as the wallet layer? Yeah.
Speaker 2 07:23
I mean, I think first off, Portal is gonna continue to upgrade independently, still gonna continue to be a neutral infrastructure stack, right? Obviously, a lot of the portal capabilities can be leveraged, right when we're having these conversations also, which is great, but to your original question, most of the developers of the web two space, they come in with a pain point, or they're like, Hey, I wanna add stablecoins as a feature to my core platform today. So they're coming at it from that point of view. And these developers have, likely have never touched a block explorer. Don't know what RPCs are. They're not crypto devs by any means. And so they have no pre existing bias at all. And so for them, all they care about is like, hey, like today when I move funds, it's gotta happen in like, sub seconds. It's gotta be quick. It's gotta work. Whenever we give the developers like our tooling, previously, you see an aha moment when they made that first stable coin transaction. They're like, Oh, yeah, this makes a ton of sense. They're never thinking about the blockchain underneath the hood as much. They're hoping all that's abstracted away. And so I think a combination of you know what we're doing with portal to at the monad foundation. I think that tag team approach will be, you know, pretty interesting to see how it plays out. And as like more web two companies are starting to explore the space even more. And as the volumes and like, you know, supply of stable coins grow, it starts to get pretty exciting. And I think we'll have the ability to, like, identify those gaps. Because, you know, blockchains in itself is not a silver bullet. You need complimentary developer tooling to support it, and so I'm excited about that combination. Just to add onto what Raj is saying here, I think historically, saying that you're building a chain is sort of the easiest cop out you can have in crypto, because the valuations are so large and the comp set is so great. Something something chain for something, something has tended to work, and it's created big outcomes for folks, even though there's been no underlying product market fit whatsoever. And so I think we're entering into a world where that bullshit is stinks, and everybody can smell it now. And so if you look at a website and they say they're building a chain, but all of it is gobbly gook, or it's word salad, or it says things like, purpose built for developers. I mean, what chain is not built for developers?
Speaker 3 09:29
Then I think people smell bullshit, right? And I think the bar will go higher and higher and great. You're purpose built for X use. What does that actually mean? Can you say something that's different from, oh, it settles on somewhere more secure than Justin Sun's basement. And what are these features that you keep talking about? What are these purpose built features? Why do you need a chain for this particular use case? I think that's where you're seeing the space go. And that's why I think monads made the smart choice to hire somebody who knows what he's doing, like Raj.
Oli Harris 09:57
Yeah, exactly. I think you need to avoid. Yeah, the infrastructure to nowhere. My thesis, and kind of what I bet my career on, is you actually want to go build your own first party apps and then drive down to the technology like even the tooling might not be enough. You need to actually own the app through the tooling, into the protocol, and then abstract away the back end. Because, yeah, no one cares what chain you're on. They just care about the business problems being solved.
Cuy Sheffield 10:23
I was just looking at some of this data. Of it looks like USDC is on 23 blockchains today. Usdt is on nine blockchains. I think about 90% of the overall supply of stablecoins is actually only across three blockchains, Ethereum, Tron and Solana and so maybe predictions like, how does this play out in the next three years? Do we think that there's gonna be this level of concentration where there's this massive long tail you have stable coins that are issued everywhere, but like, the vast majority of supply is really with a handful of chains, Tron being one that is pretty controversial. People have been saying for a while Tron is it's actually not that cheap anymore, even though it used to be cheap compared to Ethereum. How do we get from a world where we've got that much concentration across three chains to is it still gonna be three? It just might be three different ones. Or do we think that we're gonna see more distribution broadly, and maybe there are five or 10 chains that have some meaningful level of stablecoin supply on them. Well,
Speaker 3 11:26
in five years, it will all be on Codex, obviously. But I think these are massive network effects, right, like Tron as why is it that people are paying so high fees to keep using Tron? It's because of their massive two sided network effects. And I think folks who are building chains in the space ought to understand that reality. They ought to have a differentiated way to break those network effects and to win. I don't think you should be trying to play this game. If you don't, aren't going for the win.
Oli Harris 11:55
Yeah, that's interesting. The way I think about it is like, what's the use case for stables, and how does that relate to the blockchain? So I think today, on the general purpose blockchains, you're primarily serving crypto natives who are looking for, effectively, a payment coin, a settlement coin or a yield token, as they're trading in and out of crypto. And that obviously has driven the majority of flows today, I think over the next five years, and obviously where Codex and team come into play is you're going to see that distribution go into these vertical blockchains that are actually solving real world use cases. And I think they're going to coexist. So I think you are going to see, I would say, the percolation of stables into multiple chains. I think the general purpose ones for crypto natives will coexist with the vertical ones for lay people who don't actually know there's a blockchain under the hood. And couldn't care less.
Speaker 3 12:48
I think that's really sharp. Ali that observation. I think the general purpose blockchains actually work fine, as long as you stay on chain, right? What's there to fix? ERC, 20 cent works great. What do you mean? What else is there to build? Of course, once you try to move between on chain and off chain, that's where all the problems happen, and that's what's holding back the space from Route adoption. Because if you're moving between a unit of Fiat and stables, it's actually extremely painful, extremely difficult and expensive, and classically blockchain teams are not set up to solve these problems. Because one ideology, why would you touch Fiat? Fiat is dirty. The whole point is crypto, right? Two skillset folks neither have the interest nor the skill set to solve these issues, and for us, that's kind of where we see differentiation, right? Well, we want to focus on all these thorny boundary issues between Fiat and crypto. We want to get really, really good at that, so we can remove the things that we think are throttling the growth of stable coins
Oli Harris 13:45
today, we're kind of approaching in the same way I kind of joke that, like, I put on my armor every day, and I dive into the real world, and I'm trying to, like, fix this, like, horrible, messy, disgusting, real world and and Then stable coins is a key enabler of what we're trying to do, which is, like, originate loans or trade private market assets,
Unknown Speaker 14:07
totally, totally.
Cuy Sheffield 14:09
And then Raj, like, we've spent a bunch of time in the past few years talking about embedded wallets and kind of what wallet infrastructure needs to look at, also the relationship between wallets and orchestration. And we talked about on the show. I mean, the big news A month ago was stripe buying privy, and so there was an orchestration platform with bridge, and then there's an embedded Wallet platform with privy. And it seems like there are a bunch of ways that these could come together. How do you think about that ecosystem of embedded wallets and the role that they play, even connecting to fiat on and off ramps and orchestration and like, which layer of the stack is the place to start if you're a blockchain
Speaker 2 14:47
Foundation, yeah. I mean, we work with some of the larger payment companies in the world today that have 130 countries in different payment corridors already today, and so for them, they're like, orchestration. Feels like we've done that already. For. Decades. And so for them, what they really need is the connective tissue between their stack today, stable coins and blockchains. Like, that's what they need, and that's what embedded wallets provide. And then you have another part of the stack, right? Maybe they're a, you could think of like a payroll company where maybe they're doing payouts already today. For them, they're like, Well, you know, we've always leaned on partners to do everything. And so we are looking for, like, a nice package solution that includes orchestration, that includes, like, treasury and abstract away the blockchains. For us, we don't really care about that. We're just really indexing on fees, right? You're starting to see this world where, depending on the capability of the platform, they're actually now starting to realize, like, what part of stack they actually need, I think orchestration and better wallets and chains are like, the three pieces of the pie then you can drop in stable coin issuance is like, that kind of sits around it. And so, like, if you're looking to build your stable coin product or strategy, you have to identify, like, what part of stack do you have today? What are you missing? And then plug in those gaps accordingly. And that's basically adding stable coins and blockchains, like, into your overall product set too. And so I think we're gonna start to see more of these complementary platforms start to exist, and maybe that leads to, like, vertical integration, like longer term too similar to, like, what had on the zoo and I Codex as well.
Cuy Sheffield 16:15
Huge congrats. Gonna move us on the next story. So BBVA launches its Bitcoin and ether trading and custody services for all retail customers in Spain, so customers can now trade Bitcoin and ether directly through the BBVA app, all within a fully integrated environment that includes the bank's other financial services. Francisco Morato, friend of the show, and head of digital assets at BBVA says we're continuing to grow our digital assets business, both with new assets like crypto or stable coins and with traditional assets in tokenized form. We aim to offer the best investment transaction based solutions to our customers. Let me start with you. Ali, you have been a digital asset banker, spending time inside large institutions and driving digital asset strategy. What do you think this means as a signal for the industry? Are you surprised? Is this a no brainer when someone the size of BBVA is rolling out Bitcoin, not just for high net worth customers, but in their main mobile app that consumers use for any financial service? Yeah, I think this is amazing. I'm not surprised. I think it's, yeah, they're a beachhead. But I think every Trad fi incumbent bank is gonna have to go this way eventually. And again, you're kind of seeing the collapsing value chains even like Coinbase, Robinhood, BBVA, you know, at the end of the day, I think all of these companies are gonna converge on sort of digital finance.
Oli Harris 17:40
What's interesting is, sort of the journey it's taken to get to a large incumbent like BBVA actually offering this so I think huge kudos to them getting this life. There's still a lot of limitations. And I think, for example, holding crypto assets as principal, as a bank, you're still subject to a huge capital risk add on, which effectively means, if you're holding anything on balance sheet, for every dollar you're holding, you have to hold $1 in capital, so it kind of deletes off a lot of the economics. But I think this is a great start, and yeah, hopefully more banks will follow Hal
Cuy Sheffield 18:15
neon. How do you think about the target customers for these products, if you're offering Bitcoin and eth are these potentially new customers who haven't traded or haven't been interested in Bitcoin before, but as your bank starts offering it and promoting it to you in the mobile app, now that might be the first time you dip your toes in what would your mindset be as a bank thinking about bringing to market a crypto asset trading product?
Speaker 3 18:38
Well, first, I hope it's good for the eth price, which has struggled for the past couple years. So I think it's about sort of mainstreaming the adoption of these assets to sort of the next rung of customers. I think you're seeing this asset move from, you know, a world where it was highly stigmatized and sort of exotic and strange into something where it's just as normal as buying an S and p5 100 index. I'm actually really curious to ask Ali for some horror stories of trying to get these lumbering traditional institutions to do crypto things back in the day. I wonder what's like the most. I don't know funny or horrible story that you have.
Oli Harris 19:15
I have a lot of PTSD that is probably shared over alcohol, but I would say it's super interesting. Honestly, I couldn't have imagined this even like a year or two ago. I think that just the pace of change is amazing, and I think a lot of that has been driven by stablecoin adoption, kind of backing in into crypto. And then the other thing is, their competitors are doing this already, like Revolut n 26 Robin Hood. So yeah, they have to keep up. And, yeah, I think it's great. You know,
Speaker 2 19:47
I think a lot of these banks are also starting to see these exchanges make a lot of money. They're also seeing that a lot of retail like, maybe going down the US public equities path and like, evaluating all these different. Stocks, it's like you have all these different choices, and it gets really difficult. But then for crypto, you simplify it by Bitcoin, by eth, and you know, these banks are not going to list 1000s of tokens. They might list the top 10 or top 20. And so you have a simpler set of products that you can provide a retail audience. They could do that within their existing bank account today. And at the same time, you can capture all the upside and downside as the markets move as well. And then from there, you're able to maintain your deposits that are going to like Robinhood or Revolut, like Ali, like you mentioned, as well. I think it's like a good three pronged approach, where you get to actually increase the lifetime value every user base, too. And
Cuy Sheffield 20:42
what are the use cases I'm really interested to see how evolves is Bitcoin and crypto backed lending products from banks. Because if I think about if it's just trading, then I think there's an argument. There's a customer segment that wasn't comfortable signing up for an exchange, and it was just it showed up in their bank app, and now they're more willing to buy it, but I think that there's still banks have a significant advantage in lending and cost of capital. Now there are a bunch of regulatory questions around how to manage it and kind of, what are the risk considerations. But if I woke up and in my bank app, but said, Hey, do you have Bitcoin? Deposit this Bitcoin as collateral for a loan, either being able to get an attractive interest rate on a personal loan, or even for something like a mortgage, that's where it feels like you could actually get customers who are customers a bank. Today, they don't keep their Bitcoin there. They keep their Bitcoin on Coinbase, to actually take it from Coinbase and go and deposit it into a bank. And so how do you guys think about the crypto backed lending market. And like, how close are we to? We've seen Coinbase and Morpho, they now have a Bitcoin backed lending product you had last cycle all the Sci Fi lenders that many of who blew up and had terrible risk management. Like, where is crypto backed lending and do you think banks will get there this cycle? Is that next cycle? Like, how far away is that? I
Speaker 2 22:02
think we're still, like, maybe a ways away, and it requires a lot of discipline. To your point, I mean, there's a obviously Morpho and Coinbase have proven out. There's clearly demand for this product. And obviously with Morpho, there's like, embedded discipline with just, like, having code process, a lot of this as well, the Sci Fi space just needs to build that discipline from the very beginning. You can't really hypothecate and start to do riskier positions with your lending practices also. But there are companies like, you know, arch lending, that are doing a really good job, that are taking that disciplined approach for it. I think what it's gonna look like is, you know, banks are, are gonna have to re evaluate their underwriting risk models of like, what does it mean to actually take on these loans and from there, like ideally, had built in data sets where they can, like, work off of for many years before they're gonna feel really comfortable with it, and I wouldn't be surprised that they end up making an acquisition to actually accelerate into this, versus building it in house
Oli Harris 22:55
themselves. So yeah, one of the teams I built out at Goldman was the Bitcoin lending desk, and it was the first 24/7, 365, like genuinely fully automated business, which was awesome. I think we were happy to do that for institutions, because it's very easy to it's not it's not easy. It's actually extremely painful, and probably more for drinks. But if you're, if you're lending to a hedge fund or an institution, then they know what they're signing up for. I think you can get Trad fi on the lending Fiat against crypto side. I think for individuals, this is where you know there's an extreme adverse reaction and fear within large banks, because you have this whole customer relationship. You don't want to burn the customer relationship, and you're thinking about the volatility of these assets. And so I think, to your point, Raj, until the models are there and the data, the education, I think it's going to be harder, even in the private banking setting, let alone retail, because even though you're going to have all your disclosures and you know what you're signing up to, if there is a 30% drawdown and you're liquidating all your clients, I'm sure there's going to be a lot of complaints.
Cuy Sheffield 24:07
And Helen, I was going to ask, like we've been talking about on the show for a while, that every bank needs a stable COIN strategy. And I think stable coins, in some ways, can be more challenging for banks to navigate because it's somewhat close to home. It's they take deposits, and now you've got this new form of money that's not exactly a deposit, and it's could be competitive. It could be complimentary, where it seems like crypto assets are. It's more upside of if you can manage the risk, you could get fees, be able to attract customers, and it doesn't really compete with what you're doing already. How would you approach as a bank, the crypto strategy versus the stable COIN strategy? Do you think that there are things that overlap of if you do the work to enable crypto trading, then you get the infrastructure that helped to enable stable coins? Do you go stable coins first and then crypto like? How would you navigate being able to have a. Address both of those segments if you were running product at a
Speaker 3 25:03
bank, I think it's a tough job. First of all, I think it's tough job. I think when it comes to trying to get the banks to adopt stable coins in this Full Tilt way, I think that's perhaps difficult. I think you've run into a classic Innovator's Dilemma, right, where you're asking them to cannibalize their deposit base, which is, I think, quite difficult. I think you're exactly right, Kai, when it comes to sort of these other lines of crypto businesses, it seems like a much clearer win without sort of the hair on it. And I think that's why you're seeing these banks act in the way that they have. For so long, banks have been writing about sort of payment infrastructure on crypto rails and so on and so forth. And a lot of that has, I think, been sort of a white paper factory for board meetings or PowerPoint slides for board meetings. I think that's starting to shift. But I think the fundamental reality is still that there's this Innovator's Dilemma dynamic, I think too. Just to broaden the point out a bit, I think you're seeing all these ironies in the space. I think you're seeing Trad people talk about tokenization, and you're seeing crypto people talk about equities a lot, and how alt season is happening in public equity land and not on token land. And so I think you're seeing these worlds collide, and both sides seem to be learning the other side. And I think all sorts of unexpected things are about to happen,
Cuy Sheffield 26:18
for sure. Let's take a quick break to hear more from the wonderful sponsors who make the tokenized podcast possible.
Sy Taylor 26:28
This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap, uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat back tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is brought to you by Canton network. Ever wonder where real tokenized asset volume is going? Canton network the groundbreaking layer one public chain where traditional finance and crypto are starting to converge. Why? Because Canton is the only public network with privacy, no workarounds, no compromises. This is 24/7 markets on demand, financing with real yield, where value moves as freely as information on the internet. This isn't just another blockchain. No. This is where the serious money is flowing to solve real market demand and risk. Visit Canton dot network to learn more.
Cuy Sheffield 27:46
All right, one more story today from ledger insights, Bank of England eyes stablecoins for wholesale payments and tokenization. This week, Executive Director Sasha Mills says the institution would be open minded about using stablecoins for wholesale payments. She also said, at some point, it makes more sense to build new structures than try to modify the existing ones. In our view, this point in time is fast approaching, if not already. Here, what's the significance of these comments? It sounds like a regulator that is open minded about stablecoins would be Ollie and Raj. What's your take here?
Oli Harris 28:23
Yeah, I think it's a super interesting policy pivot from the Bank of England, who have traditionally always said that wholesale payments are sacrosanct to central bank money. So I think it's positive, and it reflects these two realities, which is, the existing market structure is aging. It might not necessarily scale to 24/7, global supplement. And as we were just discussing around commercial banks and their approach to stable coins, you know, central banks have that same innovators dilemma. It's like they've seen the promise and the product market fit of stables in terms of instant global, low cost settlement, straight through processing, removing intermediaries. So I think they're kind of acknowledging that they kind of have to have this balance. And then also within the UK, I think their mandate has actually shifted, and the government have added in this sort of innovation mandate into the Bank of England, which is kind of they have to reassess, you know, a lot of what they're doing. I think it's very positive, and it also relates to other things they're doing. So for example, another fascinating thing that I think people should keep a close eye on is the UK government is looking at this digital guilt instrument. So how can they launch sovereign debt in a tokenized fashion? And they've created this digital security sandbox, and again, looking at how can they do this while ensuring safety and soundness, given their primary reason for existence, but also bringing in new technology. So yeah, I think it's a positive move. And my view is I think central bank money, synthetic central bank money, commercial bank money and stable coins, they're all going to coexist on the. Same digital infrastructure.
Speaker 2 30:01
I think this is, like, a classic case of, like, the academic versus the builder. And, you know, I think central bank actually, you know, I think discussions and white papers and research have been fantastic, and I'm glad they're like, are thinking about it, but I think for the first time, they're starting to see, like, the builder community is like running away, and it's almost, it's like hitting a skip velocity, 200 billion in circulating supply with stable coins right now, trillions of dollars of volume like you almost there's no time to keep having white papers and academic exercises. It's like time to go build and so I think this is like an interesting case where the central banks are saying, Whoa, like the builder community is actually far ahead of us right now, like we need to adapt, and these innovation sandboxes are great, but like, things are already happening, and there's volume flowing, like we need to be in the game in some way too.
Cuy Sheffield 30:48
But the two 30 billion in supply, 99% of it, it's backed by dollars. So that's what's really interesting to see. As central banks across the world see the growth of the stablecoin space, it's very much been $1 phenomenon. How then, how do you think about the value proposition of non dollar backed stable coins? Do you think that every stable coin is going to be represented on chain? Have you seen any British Pound stable coins? And if you're building a stable coin blockchain, like, do you want to have stable coins of every currency, or is the stable coin story going to just be about dollars, and it ends up that's just people want dollars and local currency. Stable coins don't end up breaking
Speaker 3 31:26
up. We are issue agnostic, so we work with all issuers. USDC, native mint, just went live on Codex. We're the youngest train to get that, and we're very happy about that, but we want to work with all issuers of all kinds, including other denominations. Think you're absolutely right. So far, the stable coin story has been a dollarization story, and it remains to be seen whether these other denominations will really reach adoption. I think there's sort of two stories you could tell. The first is that, well, look, if stable coin rails somewhat approximate real, quote, unquote, traditional rails, then you would expect this ratio of other currencies to increase over time, and therefore, you speak, extremely bullish. The other story here is that the whole reason this is working is because, partly it's a dollarization reason. And so therefore you might want to mediate sort of local Fiat into US dollar stables really efficiently. But perhaps you don't need the on chain stable. I think folks who come with a very specific thesis here are probably over determining it. It's unclear what will happen. I think a lot of it depends on where the liquidity ends up sitting. So how does FX actually happen in stablecoin land? And that's something we're looking into very closely to figure out.
Cuy Sheffield 32:33
So it's almost like there's $1 access thesis, that stablecoins are just the best way to access and use dollars across the world, solving a real problem where there's demand for dollars that has been unmet. And then there's the programmable money thesis that is stable coins represent a new, modernized form factor that is a more efficient way to represent and transfer whatever currency exists. And there's going to be everything that's tokenized capital market use cases on chain lending. Ollie, where do you sit in those two? And I think they could both happen at the same time. But if you believe in programmable money, don't you have to believe that that's going to represent in every major currency, or else, how could capital markets really work if it's only dollar based, given there's plenty of demand in other
Oli Harris 33:18
countries? Yeah, exactly, exactly. That's, sort of my thesis is, again, it all comes back to the use case. And sort of my view is whether it's a stable coin or a digital deposit or whatever the structure is underneath, it's digital money. And for the businesses we're building, this is like a key enabler, because it's all about collapsing. My key takeaway on a lot of this space is, like, it's really about collapsing value chains, because you're taking money, assets and data, and you're collapsing that onto one software stack. And that, to me, is like the true beauty of this space, and a lot of it historically, has been around us, dollar access, I think, over time, and businesses like Codex, etc, are going to be at the forefront of this is, is that distribution long tail, as I mentioned earlier. So I think you are going to see more non USD denominated stables, because you won't need to off ramp into Fiat, because stables and digital rails are just going to be the way we do business. So FX will move on chain, whereas today it probably sits like at the off ramp as someone's trying to get into their local currency, et cetera, et cetera.
Speaker 3 34:19
I'm just glad that we don't have sort of the old state of things where it's like two parallel sets of terminology for the same thing. You know, distributed ledger technology versus a blockchain. Like, Nah, yeah, horrible, yeah, our three quarter white papers that seem to be the Ethereum white paper, but, like, just say with different words, I'm just glad we're past that world, and the worlds are actually colliding. We can do real things. So
Cuy Sheffield 34:44
you don't hear the term DLT nearly as much these days. I feel like that that is one of the past. But I feel like we've been talking about on chain FX as a concept for a while. How far away are we? How do we get there? Like. What needs to exist? Is it you just need to have local currency issued, stable coins that are credible and are the ones that exist right now? There's not enough. Is it the infrastructure? Is it you need better protocols that have KYB? What do you all see are the main points that are missing of why we don't have on chain FX markets to any meaningful degree today. I
Speaker 2 35:22
think the one thing that I noticed is that, you know, if you're really focused on a single currency as a stablecoin issuer, it's really hard, especially if it's a long tail market, it's arguably a small market from just like an adoption and interest standpoint. So, you know, I think if you're a stablecoin issuer, focus on the emerging market. I think an approach similar to what mental Labs is doing is probably more appropriate where you actually you become the issuer of many different emerging market stable coins, instead of just one, and go super deep there. It's just otherwise really difficult to scale a single currency business longer term, unless you have, like, the full central bank putting its entire force and night behind you. And so I think there's like, some structural, like business and like opportunity set disadvantages if you're just a single emerging market stable clinic, sure, but likely a larger opportunity if you're going up for many and you know, if you look really extrapolate out to, like, the entire FX markets, it's like even today, like the US, dollar, euros and GDP make up like 60 to 70 or 80% of it, most of the time, anyways, and the rest of the currencies make up about 10 to 20% depending on the day or the month. And so I think you're gonna have that same extrapolation to like on chain FX as well. But these issuers that are actually behind it are gonna have to rethink their strategy and how they actually go about their business
Cuy Sheffield 36:39
too. And how do you think about that in terms of local currency issued stable coins doesn't seem like they're a standalone business. Are they a complement to an existing business? Do you need banks to issue them, or will you have like Raj RANS in a single entity that issues local currency stable coins across a bunch of different markets, as you build out Codex and try and get more stable coins on chain. How do you see that play out? I
Speaker 3 37:01
think you'll see all the above. I think you'll see all those varieties. And I think ultimately it would become a game of liquidity. And it's a sort of a chicken and egg game, right? There are no good FX facilities on chain today, because there isn't the liquidity in these local denominations on stablecoins on chain. And and partly, that's because there is no real use case for them other than perhaps to facilitate FX. And so you have this cold start issue, and so you need somebody to really give it a shove, and also be willing to get your hands dirty here, because I think a lot of the underlying issues here have to do banking rails. And so that's gory, right? That's not typically the skill set of an on chain team. And if you can't get these settlement times down, these things probably don't perform well compared to Trad, FX, and so, you know, it's buzzy thing to talk about. I think the reality is, there's a lot of work here to do, and that's the kind of thing that we specialize in.
Cuy Sheffield 37:55
Ollie, do you think there's a role for banks there, in terms of, if you're a large emerging market bank and you want to participate in this space, if you issue a local currency stable coin, and then you enable that to be interoperable with dollar stable coins on the chains that are driving the most demand for them, doesn't that make you the de facto off ramp into the market? If anyone can easily trade against your stablecoin and then redeem it back with you. But even there might not be a huge supply in circulation at any given point of time, but it feels like it could be a way that banks compete with local exchanges that today, local exchanges are capturing most of the on and off ramps for cross border payments coming in like, what do you see with banks in terms of coming into that space, is that something you think they'll do?
Oli Harris 38:43
Yeah, I resonate with that thesis. Again. I think, for me, it comes back to, like, the apps and the reason, like, there's a lot of time, resource and effort to stand that up. So unless they're getting paid through apps and utility, like, if there's not enough volumes, I don't think there's going to be enough incentive to get that over the line internally in sort of incumbent banks. I think there might be a role for like capital markets desks, just to add this as another pipe in terms of like FX trading, and I think playing sort of a market maker role, potentially, you might get wider spreads in some of these more illiquid cross currency pairs. So that could be an area to look into, but, but it's still probably a bit too early for me. Yeah,
Cuy Sheffield 39:22
and I wonder if cross border alone is enough, in the sense of, if you're going to issue a local currency, stable coin, don't you want to have domestic capital market use cases and have some other purpose and reason if the only reason that you're issuing the stable coin is to do on chain FX for on and off ramps into the market, then it could not be as interesting. And have you seen other things? Raj on ways, local currency stablecoins are used outside of just the on and off ramp for FX that you think could be compelling and create more of a market for the issuers of
Speaker 2 39:56
them? I would say a couple things. Like, there's like, definitely fintech. Out there, they'll look at what Rev boots done with, like a multi currency account, and they're thinking, that's actually a pretty interesting opportunity. So I have seen, like, some startups sort of think about like, Hey, you can build a global bank. It doesn't have to be just dollars. You can have every currency in a single account, and then now you can launch into many markets pretty quickly. And so always just kind of leading with the dollar might work in some in most markets, but sometimes folks might say, hey, I want to have a combination of MXN and USDC or something along those lines. So I do think, like taking homage from like what Revolut has done historically is actually a lot easier now, and so these multi currency accounts actually might become the future too.
Oli Harris 40:38
Yeah, I was just thinking of the AE coin in the United States of Emirates, and that is an example of like the local capital markets and the applications within one jurisdiction. And I do think there's a strong demand, if you get the right community and use cases behind it, there's obviously a valid reason to have a local stable that can obviously supercharge your economy, whether that's buying goods and services locally, in country, on new rails,
Cuy Sheffield 41:06
and what about on chain lending? Because the other thing I wonder is, if you're in a market outside the US and you're borrowing in dollars, and you actually need the money to spend in local currency, is it a good thing to have a lot of dollar denominated debt, versus being able to lock up dollars or lock up an asset and borrow in local currency. How do you see the convergence between on chain lending and stablecoin payments, and as you build out Codex, are there lending use cases that you're seeing demand from potential clients? I
Speaker 3 41:37
think there certainly is a demand for something like that. I think the bulk of the demand that we see is really for dollar nominated assets. And it sort of makes sense, right? Let's say you're maybe I won't name a particular country, but let's say you're an X country, and you'd like to keep some of your money outside of X country, and you'd like to keep it somewhere safe, and you'd like to buy some assets. That number go up. And I think the first thing you often think of is actually the US, and so for those folks that requires sort of wealth above a certain level, right? If you're sort of just barely meeting payroll, then that person is not really going to want to do this. But beyond a certain wealth level, many of these folks want exposure to dollar assets. Now if that situation shifts, then I think that demand can also shift in a dramatic way as well.
Cuy Sheffield 42:24
Any other thoughts on local currency, stable coins, or how the stable coin wars start to play out, it feels like we're hearing on a monthly basis, you've got new stable coins launching. You've got new blockchains launching like I'm interested what the peak is of number of stable coins and number of chains that we get to that at some point there has to be some level of consolidation coming down, like, what? What's the bet on the peak date in terms of number of stable coins and number of chains? I
Speaker 3 42:56
don't know what the peak date would be. I think it could go on for quite a while. It's very memetic, right? And I think what the smart man does in the beginning, others might do later on. And I think the equilibrium is most definitely not everybody has their own chain. I think that was the straw view of mine. I think those who think that's equilibrium should go read some D hawk and go figure out what D Hawk did all the way back then. Kai. Kai's a deep Understander of D Hawk, so speak to Kai. Maybe, if he can't speak to D Hawk, because he's unfortunate with us anymore, most definitely, I think things will equilibrate down to a few chains. And I think it will be driven by smart incentive structure. I
Speaker 2 43:35
mean, the one thing that I'll add is that I think every day I started to see new projects just even issue their own, like back end stable coin too. So maybe, like, the number of branded stable coins, like, maybe that peaks at some standpoint, but the amount of folks that are just issuing, you know, like, low market cap, like 10 to $20 million like, stable coins is starting to grow even more, and it's honestly surprised me quite a bit. But there's clearly a lot of interest there, and there's obviously new issuance protocols and one click, you know, issuers that are out there now. So, like, I think that alone, I would have said something different, maybe, you know, a year or two ago. But now that I see, like, all these different startups start to issue their own stable coin, it starts to, like, change the paradigm for me as
Oli Harris 44:15
well. It's interesting. If stable coins are fungible, I feel we're gonna be one view of the future might be, we in this everlasting War of stablecoin vampire attacks. And I think is it UB, yx, obviously, which is one of the other startups looking at, how do you create a clearinghouse, or how do you solve for all this explosion of stablecoins? So I don't know. I feel like I agree on the technical side, on the you don't need infrastructure to know where and the incentive structure. I believe you're going to see some consolidation on the blockchain side, I think on the stable coin side, if you solve the many to many problem, if you own a stable coin, you own the money. You're like a synthetic bank, depending on where you're issued and the regulation of that stable coin. So I think everyone wants to own the Nim underneath. For the stable. So maybe there won't be any consolidation. It'll just be like a continued explosion of all these stables that kind of fight over each other.
Cuy Sheffield 45:08
Yeah. Well, it's gonna be fascinating to see it play out. But on that note, that's all the time that we have. Thank you so much for listening. Ollie, where could people find more about you and what you're building?
Oli Harris 45:18
Yeah? Ollie Harrison on LinkedIn, for those that dare to go there, and Ollie J Harrison on Twitter. And how
Cuy Sheffield 45:25
Nan, where can people find more about you?
Speaker 3 45:27
I'm at at how Nan on Twitter, and our company website is Codex dot XYZ, Raj, at
Speaker 2 45:34
Raj farI underscore. And you can find me on portal, hq.io or mana dot XYZ,
Cuy Sheffield 45:40
and I'm at Kai Sheffield on x and visa.com/crypto thank you everyone for listening. If you haven't already, please subscribe to tokenize, and if you enjoyed this. Want more, leave us a review. Tell us what you want, how we can improve the show. It's been a fantastic year. Excited to continue, and we'll celebrate the anniversary with Simon next week. Thank you all you.