On Ep. 26 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine is joined by Noelle Acheson, Author @ Crypto is Macro Now and Fernando Martinez, CEO @ Nonco to discuss crypto's impact on macroeconomics and geopolitics, Ripple's acquisition of Hidden Road and Nonco bringing FX on-chain via Avalanche.
On Ep. 26 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine is joined by Noelle Acheson, Author @ Crypto is Macro Now and Fernando Martinez, CEO @ Nonco to discuss crypto's impact on macroeconomics and geopolitics, Ripple's acquisition of Hidden Road and Nonco bringing FX on-chain via Avalanche.
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Fernando Martinez 00:00
Whereas for the last eight years, we have seen the evolution of these stable coins, right? So we started trading BTC, usdt, BTC, USD to create the synthetic usdt Price seven years ago, right? Against Hong Kong and Singapore clients and things like that. And we've seen that what has evolved is that, essentially a bunch of fintechs and web three companies have been created, or have now started to adopt the use of stable coins to perform cross border payments, trade finance related type of payments or remittance you
Sy Taylor 00:51
guys, welcome to tokenized. The show focused on stable coins and the institutional adoption of real world assets. My name is Simon Taylor. I'm your host for today, author at FinTech brain food and head of strategy over at sardine. And there is no Kai, but joining me today is Noelle ageson, author of crypto is macro. How you doing? Noel,
Noelle Acheson 01:12
very well. Simon, thank you. How are you doing today? Great to be here. Really
Sy Taylor 01:16
well. All things considered. The news outside my window is crazy, but this is a moment of sanity, and joining Noel and I today is Fernando Martinez, who's CEO of non co How you doing? Fernando?
Fernando Martinez 01:29
Doing great. Simon, thanks for having me. Hi, Noel. So
Sy Taylor 01:33
before we get into the show, I do just need to remind everybody watching, everybody listening, that views and opinions of contributors today are their own and may not reflect those of companies they represent. And please don't take anything we say as tax, financial or investment or legal advice. Do your own research, folks. All right, before we get into the first story, Noel, crypto is macro. Macro is crypto. I just want to get your readout on the tariffs, the craziness we've seen. We're recording this on a Thursday. The show drops on Monday, so it could all change, but your readout on macros, impact on FinTech, I would love your thoughts
Noelle Acheson 02:15
for sure. By Monday, everything will have changed. I mean, to anyone who doesn't have a whiplash these days, it's really quite exhausting, but it's also really exciting. Simon, as you know, I've been covering crypto now for, oh my god, more than 10 years, with CoinDesk and then with Genesis trading. And when I left Genesis trading, I focused on what I really care about, which is the overlap between the crypto and macro landscapes. And while that may sound very obvious to anyone who's been managing portfolios. Of course, macro impacts crypto. It's like a Bitcoin is a risk asset kind of thing. I'm interested more in the bigger picture here, not just how macro impacts crypto prices, but how crypto can impact the macro landscape. And so starting even more than two years ago, I started focusing on geopolitics, because back then, we could see that geopolitics was starting to change. We could see the polarization coming down the pipeline. We could see relationships start to fray, and when we have alliances looking for alternatives to the US dollar hegemony, when you have censorship and repression increasing around the world, when democracies start to look a bit shaky, then we can be glad there is a new tool in the box. And I'm talking about a tool that gives greater resilience to nation states who are looking for alternative transaction platforms, transaction rails and relationships. I'm also talking about resilience for individuals who may find themselves outside the traditional financial system. So that I started looking at that two years ago, and it's astonishing how everything is sort of coming together now. The macro changes that we've seen over the past couple of months are what crypto sort of has, in a way, been waiting for. Why individuals have been investigating this, why nation states have been building on blockchains, it's because we knew big change was coming. And it's very hard to look at the headlines today and not realize that it's here.
Sy Taylor 04:17
There's a lot going on all at the same time. It's going to be fascinating to watch this play out as capital markets adopt tokenization. As the acceptability of tokenization of on chain digital assets to the largest financial institutions becomes normal, and indeed, the ability to be able to move instantly 24/7, becomes very attractive when you have margin calls you need to unlock collateral when the markets get extremely volatile. So it's going to be fascinating to watch. So let's drop us into the first story. Because speaking of crypto, is macro, well, ripple have acquired a prime brew. Broker. This company is called Hidden road, and they paid $1.2 billion one of the fastest growing prime brokers around the world. So according to the press release, ripple will inject billions of dollars of capital to provide immediate scale and satisfy the demand for hidden roads, prime brokerage clearing and financing platform, hidden road clears $3 trillion annually, and over 300 top institutions are customers. They'll now use ripple stable coin, RL USD and its XRP ledger to settle trades. Fernando, I know you've looked at FX, you understand that world pretty well. What were your thoughts when you saw this story? Right? So a
Fernando Martinez 05:49
little bit of background. We've been in crypto for over 10 years now, and we've had the pleasure of working with both ripple as they've evolved as a company and hit and road when they started being the first prime in crypto, probably about five years ago or four years ago. As we are users of hidden road, we like the team, we like their product. We think it's fantastic. One thing that they could always improve were the settlement and the operations around the use of their platform, right? Because even though they are addressing crypto, they still had a lot of traditional methods when it came down to funding or withdrawing of the assets. Right now that they are part of ripples broader team, the use of stable coins may actually be able to further improve their product offering for those users, right? For example, let's assume that we are having a margin call, which obviously we never have, because we are super conservative. But let's assume that we were, or let's assume that we need to take out some assets right, to settle out sending trades on other platforms, or whatever the current model that they had took forever, right? And I say this with the best intentions. We like them, but it took forever. And if we are able to actually utilize the technology around stable coins, and they can improve the settlement times, that can become even more appealing. What we had to do in order to utilize hidden road as best as humanly possible is we essentially isolated everything hidden role universe, right? So the exchanges that we were market making with and the brokers that we were pricing with, they needed to be a client of hidden role for us to never take those assets out, but this world could never really integrate or interact with the rest of our strategies, because settlement times were horrible, right? So this is definitely a step forward towards a better technology and product and their users to broaden their use case.
Sy Taylor 07:52
It makes complete sense. I think the broker that was really well liked that could have the one thing happen that you needed, which was faster settlement times, makes sense. But Noel, just stepping back for a second, I think it might be important for some of our payments listeners to just contextualize the role of a prime broker and kind of give that some context.
Noelle Acheson 08:15
Absolutely brilliant question for full disclosure, I used to work at Genesis trading, which back in the day was the key prime broker of the market. And prime brokers back then were still a fairly new concept. You had many platforms claiming they were prime brokers, but what they really did was root trades. That's not the full function of A prime broker. The one thing that was missing when I first started looking at this sector was leverage, the lending prime brokers will fund trades for their large institutional clients, and when they start doing that, that brings in new type of liquidity. After all, institutions expect to get that kind of a service from their prime broker. And until the likes of Genesis, hidden Road, Galaxy, etc, started offering that service, liquidity was fairly thin. Then we had the boom. Liquidity was easy to come by, and then we had the crash and liquidity left in the market. And since then, the role of prime brokers has been much quieter, because there has been an aversion to liquidity and risk, et cetera, because the institutions have taken their time in coming back in but arguably, it has been happening since before even the election, since the middle of last year, institutions haven't getting more comfortable, and a large feature of that is the deepening sophistication of the market infrastructure offered by people like hidden road through the leverage that the institutions have come to expect. And what I find interesting about the transaction, about the purchase here, is the influx of the billions that you said that are going to help improve hidden roots balance sheet that gives them more scope to do, more funding to go out and expand their market. Because it's always constrained. Should always be constrained by the size of the balance sheet, of the prime. Rokrum. So hopefully this is yet another sign that the liquidity in the market is deepening, that the institutional sophistication is deepening. I do have a question, if I may, for Fernando, you're talking about how hidden road couldn't settle on chain before. Why not? Could they not use tether and Ethereum? Yeah, they
Fernando Martinez 10:20
had some limitations as a way of background oil. We know Genesis very, very well, right? They're one of the OGS nonko started off as a spin off from a company called OSL. OSL was one of the largest and oldest OTC desks in Asia. So back in 2015, 14, the only OTC desks out there was Genesis, before Matt and Rochon, when it was actually ran by Martin, it was circle and it was Cumberland and ourselves, right? So we saw how Genesis evolved and how the space evolved as well. So fascinating to hear that you worked there. No, they just had operational constraints, right? So if you want to send in US dollars, you have to send it the traditional way. If you want to send stable coins, you would send them as an asset, not necessarily as US dollars, right? So then, therefore you had to sell them in order for them to collateralize them, or take them as USD. And obviously all of that stuff takes a long time, and when it goes down to a withdrawal of assets, all of their operational and hot and cold wallets and all the custody infrastructure that I'm sure it's extremely safe wasn't necessarily extremely fast, right? So there were always barriers, right? Again, I do think that they were probably the closest towards what we saw as the first prime, because you can interact and select any exchange that you want. You have the keys you're trading directly there, and they can give you financing. So that's fantastic, right? I don't know if Genesys did that more. So they were providing lending and borrowing capabilities, right, for institutions to have leverage. So I do think that HRP is relatively different, but from an operational standpoint, there's still a long way that they need to improve, and are obviously working on their product.
Noelle Acheson 12:07
And if I can follow up with one question, Simon, if you don't mind, do you see RL, USD, ripple stablecoin as being liquid enough for this purpose? So I
Fernando Martinez 12:16
think yes, stablecoins are extremely, extremely polarized, right? So the reality is that tether and circle have been doing a great job for the last eight years, right? Obviously, it started with tether, then circle, and they've been doing great and they've really been able to allow that global liquidity that doesn't matter what platform, what pool, what decks you can access it, right? Whereas other stable coins, which potentially have better infrastructure, like PayPal, pyusa, like segregated funds, bankruptcy, remote things like that, which in theory, are safer, they haven't been able to get the liquidity that the other two guys have. So if you're utilizing RL USD in order to have it become that type of c bit right, which is customers rankings and settlement network to interact with kid and road, then you've just created a catalyst for something that you need to drive success, right? So if hidden road is doing a good job, if hidden road is attracting enough clients, then they'll start using RL, USD, as it seems, and settlement network. But that doesn't necessarily mean and yes, I don't think the liquidity here is an issue, because you mean redeeming according to the banks, as long as from a settlement on the bank to bank perspective, it's relatively fast. Shouldn't be a problem. But that doesn't necessarily mean that all the other exchanges will start to accept RL, USD, and even if they did that, doesn't mean that all the market makers will start making markets on RL USD, essentially making it as liquid as USDC or usdt. So it is a step forward. And when you break it down to stable coins, I think a lot of the times you need that catalyst of, why do I need it? That's it. This is one. I don't know if it's the biggest one. It's betting a lot on hidden road. I think they have the potential, but that doesn't necessarily result in having global liquidity and all our problems are solved. I'll give you another example. Usdt right? Essentially, the non green go stable coin. Everybody wants usdt. They use it for payments. It's heavily accepted across everywhere. It started with the Omni chain, which was low, then Tron, and everybody wants to take a Vita Tron, and nobody has been able to fine. When you're trading with the world's biggest exchange, binance, you're sending stables either USDC and usdt. So if you're looking at the top 50 markets, it makes no difference. But if you want to start trading long tail assets on perpetuals, even there, the liquidity in tether is superior to that of USDC, right? So I think that the liquidity concept around how much the exchange is using, how much you can actually utilize it for trading, starts to get very, very fragmented, unless you take the coin based approach that I can send you, as you see, and I convert it to US dollars, and then all the markets are the same. But that would assume also that from a counterparty risk, any stable coin is the same and never going to depict we already know how that story has gone before, right? So there's a bunch of additional inputs there. Always
Sy Taylor 15:48
the way that was a fascinating explanation. Thank you, Fernando. I really appreciated that. I think what's interesting about ripple is you should just never bet against them. Were they ever going to use that massive benefit that they had from the consistent liquidation of XRP to begin the M and A journey. And we saw the beginnings of it with metako and getting into custody now, launching a stable coin, now, buying a prime there seem to be positioning themselves for the flip to kind of on chain and kind of getting deeper into that FX space. And they've been quite a big player in stable coin clearing and settlement in the APAC region in Middle East and North Africa for some time. And that was one of those under the surface things that people didn't really recognize or put respect on ripple for that, that infrastructure, that there was a business there, and they were probably well before bridge and anyone else doing that business, 100%
Fernando Martinez 16:45
so they had the on demand liquidity. Then they did the acquisition on monogram, right? And they started partnering up with a lot of the local crypto exchanges, which allowed them to have these corridors around the world. They did a phenomenal job, right? Absolutely, absolutely bigger
Noelle Acheson 17:01
picture. So we got the ripple payments going back to their early days, we now have ripple market infrastructure and stable coins. What about tokenization? I mean, they have spoken about tokenization in the past. Do we see this as a way for hidden road to become more of a not tokenization platform, but in exchange for digital assets of all types.
Fernando Martinez 17:24
I think, yes, I think it is a step towards that. But we've been talking about tokenization for the last, what, seven years, right? So before we spawn out of OSL, we actually held, for example, BTG pack 12, that's one of the latam's largest investment bank, they did a digitalized rate. Went nowhere with DBS. OSL did the first carbon credit on digitalized fashion. It's a cool I mean, people may hate what I'm gonna say, but it's a great marketing stunt. That's a reality, right? We still have yet to see that real market demand for those digitalized assets, right? We continue to get fixated with trying to fix the old world, but we need momentum, and that is something that at least stable coins, being the first RWA that actually worked, you cannot stop that.
Sy Taylor 18:19
So the only thing I'd add to that Fernando is there is an asset that's been tokenized, and it's US Treasuries, and there's a lot of it, yeah, yep, yep, yep, yep, yep, yep. And so one could argue, once you've got that, you've got the basis trade, so long as that doesn't blow up again. And so once you've got that, you've got credit markets, and once you've got that, you sort of move beyond it. So 100%
Fernando Martinez 18:42
I agree with you all right. So everything from all of your yield bearing stable coins, starting from Ondo to agora to black rocks like it's great, but I think that that is a different play than the payment side. 1,000% different, 1,000% different. They
Sy Taylor 19:00
are very different animals, and therefore can ripple get into that very different animal? I'm just going to choose not to bet against ripple, because I just don't want to this point like they've died 1000 times and they just keep on crawling back and being bigger than ever. But I do also see we just did a podcast with digital asset and some of their colleagues at Dow and Campbell, then they're certainly starting to see that emerge. So do check that one out. All right, so I'm gonna move us to the next story. This is nonko Bringing FX on chain. So founded in 2023 as a spin out from the Hong Kong crypto exchange, OSL, you've quietly grown into one of the biggest digital asset firms that most people have never heard of, and I kind of love that. But now you're bringing FX on chain, so you've built this on the avalanche C chain, and the FX protocol is going to automate conversions between local currency and USD backed so. Stable coins. I'd read a bunch of quotes. I'd read a bunch of press, but since we've got you here, tell me the story. Why this? Why now?
Fernando Martinez 20:07
So let's go back a bit. We've been providing liquidity to the crypto markets forever, and we decided when we were creating non code that we were gonna separate crypto into two, right one? We call that markets, which is essentially treating crypto as a speculative asset class, or as investment as a class. Here, we provide liquidity to 40% of the US ETFs, 80% of the Brazilian ETFs, about 30 of the Canadian ones and 60% of the Asian ones. Provide liquidity to a bunch of liquid forms hedge funds, like all the big names, we have a bunch of them, and we provide liquidity to brokers or smaller OTCs that don't take on or don't warehouse risk. And the last thing is that we market make on all the major sexes and dexes. Fine. We recognize that this is cyclical in two years, or maybe, if the tariff things continue to go bad, there's not going to be a lot of, let's say, impulse from the investors to continue trading crypto, because it's down, and we're going to have to wait for the next cycle. And it's like that. It's a long term game, fine? And here understanding the needs of your counterparts. It's extremely different, right? It's all about balance sheet. It's about how many assets can you trade, how well do you understand the markets? How sharp Can you price? It's never really about settlement, right? It's about counterparty risk, but not necessarily on your scalability to settle, because the funds and ETFs settle once a day, right? So that's it. Whereas, for the last eight years, we have seen the evolution of these stable coins, right? So we started trading BTC, usdt, BTC, USD to create the synthetic usdt Price seven years ago, right, against Hong Kong and Singapore clients and things like that. And we've seen that what has evolved is that, essentially, a bunch of fintechs and web three companies have been created, or have now started to adopt the use of stable coins to perform cross border payments, trade finance related type of payments, or remittance, one of the first ones, obviously, was ripple. So this is dated six years ago with their on demand liquidity. They had that solution, and we saw that in a lot of markets, like, for example, Mexico, yeah, one point, they powered 8% of the Mexican us remittance market. And so that's kind of cool. Eight years ago, this was just starting, but now what we see is a huge influx of cool companies and great companies like bridge, like conduit, like Felix, pago, that is now their sole business model, like push stable coin usage for remittance, cross border payments and trade finance fine. And if you actually think about $1 liquidity was never an issue. It's just there, right? But where you start to have a problem is on the local rails. So on the emerging markets, these guys that actually understand stable coins, but they lack the liquidity. And what the companies, like bridge, like on do it, like Felix, pago, like all those guys reap from Hong Kong, what what they had to do to get access to these local liquidity was interact with a local crypto exchange. So let's take a pause there. In the last five years, there's been an influx of new companies that utilize stable coins. That's fantastic. So a huge evolution there. Then we saw a huge evolution on the stable coin front, right? So it's not anymore just tethers game, it's tether, it's circle, it's whatever it's there's 100 everybody with a different value proposition. So that has evolved all of VCs. They were jumping inside this train forever, but nobody really understood the architecture behind the liquidity that was needed, which is local crypto exchanges, and if you take a look at all of the local crypto exchanges, the majority of their volume will be in a stable coin against fiat currency, and it's not going to be for buying Bitcoin or dot coin or any of that. Like, if people want to buy that, they just go to binance. But the problem here is that the local crypto exchanges cannot have reputable market makers providing them liquidity, because, from a compliance perspective, there's just too much risk. It's not like Jane Street or Citadel is going to make a market in, I don't know, man, small local crypto exchange and being directly exposed to 10 million individual customers that who knows how well their KYC is. So therefore the liquidity was always a constraint. As these businesses, the bridges of the world, started to scale, they outpaced the amount of liquidity that the local crypto exchanges could offer there, and then they ended up being as expensive as the traditional way of sending money because of the fees or the slippage that. Crypto exchanges had. So that is where we decided to start going into local markets. The first thing that we had to tackle is from a legal and operational standpoint, all right, so you set an entity, then you register for the local licensing regime, or if there's no license, you go towards the local regulatory reporting or tax reporting to make sure that everything's in line. From there, we started setting up a bunch of banking partners, right? So you need two types of partners, one the one that you're going to be sending and receiving from your counterpart. So they need to understand that this is operational, and they need to feel comfortable with your amount of compliance procedures and controls that you have in place, because you're essentially saying, give me access to a bunch of money. Now I'm going to be moving a bunch of money, and you need to feel safe with what our process are. Then from there, you need your host of local FX providers, and these need to be traditional. So you package all of this off, and then you pair it up with your trading system, or our trading system that can access traditional FX prime liquidity. For example, we're also a client of hidden roads FX prime. Okay, so there you're receiving non deliverable prices from all the normal guys, okay, so all of the sudden, we have the capacity to provide liquidity and be that bridge between the traditional FX world and the crypto stable coin scene. Whoa, yeah, what we saw there is that the demand was insane. Like, literally insane. We launched Mexico as a beta or, like, let's try this. Took us four months to take over 60% of the market. So we literally replaced one of the oldest players here for that stable coin usage. Why? Because now you can provide them liquidity for them to have their business grow. Okay, so we launched Mexican peso, euros, BRL, Colombian peso, and obviously we have US dollars, massive success, but then we started hitting an operational issue, or like we're going crazy, like it's too many markets so, and this is just on the stable side, right? So you have five markets here, I don't know how many counterparts. You gotta reconcile five currencies and a bunch of banks. Then you pair it up with your markets business, which has 600 assets. So operationally, it started to be a problem. So you have two ways to scale. You can decide to, okay, let's hire a bunch of people and let's all go mad, or let's utilize technology. On the utilize technology front, we've decided to go down the crypto native side to build everything on chain. It's more cost effective, simple as that. And just take a look at the business models from a coin base right against a uniswap. How many people do uniswa pass right? Simple as that. So if you go on chain, you're able to be very efficient on all your processes.
Sy Taylor 27:55
You can massively reduce costs because you push all of the processes into the software. You absolutely, completely change it. Look, I'm sure Noelle has questions. I just want to bring Noelle in to get her thoughts, to unpack it. What are your takeaways from some of this stuff? Noelle the liquidity
Noelle Acheson 28:12
it could unleash. And again, what I've been focusing on, as I mentioned earlier, is the impact that crypto can have on the macro environment. A lot of that is going to come down to access from various parts of the world markets that are traditionally overlooked, and the ease with which they'll be able to access not only more liquidity, but also a wider range of assets, and perhaps even through that facilitate raising of funds for various local projects, be they public or private. That I think, is the most exciting part of this, bringing them all onto one platform with a trusted name, with the liquidity and with the ease of operation that you can get. For me, it's about opening up new markets and delivering new types of functionalities where previously they haven't had that.
Sy Taylor 28:57
Yeah, we're going to see it happen. As all FX markets go on chain. They get that benefit. It's really just a matter of time until somebody came along and built this. But I think you guys, having been deep in the market, are ideally placed. So I'm going to be fascinated to watch this. We could probably do a whole interview show about it. We'll have to get you back on regularly. It is interesting that you're on the avalanche sea chain. I just want to get your thoughts on why that?
Fernando Martinez 29:23
Yeah, that's a good question. So first, EVM compatible, that was a must for us. And then secondly is we started taking a look at the individual teams on each of the protocols, their ability to execute, and where they saw the market going. Could have chosen anybody, but the reality is that the avalanche team has a bunch of effects experience and background, right? So they really believed in what we were building, and we were able to align there. After we signed the contract, we were pleasantly surprised that they work as hard as us, right? So it's been an absolute pleasure for. A service standpoint, from business development technology like, it's been really, really good to work with them. Yeah,
Sy Taylor 30:06
I gotta say they're a sponsor. But also just trying to observe, having interacted with lots of teams, something about teams that can work hard and communicate well, but also seem to get capital markets depth, but are on chain natives. There are vanishingly few teams that are both of those things. They tend to be very, very good technologically, or they tend to be very, very good from crypto backgrounds, or from financial markets backgrounds. But getting all of that with like the startup ethos, there's a handful of those. Avalanche happens to be one of them. So I can certainly see that, given what you do,
Fernando Martinez 30:41
even if they have everything, not everybody hustles as hard and Avalanche literally signed our deal. It was December 24 so for us, that was a great sign that, okay, we are working with doors that get it.
Sy Taylor 30:56
That's a great sign. Well, from on chain foreign exchange to on show adverts. We'll take a quick break here whilst we hear from the folks that did make tokenized possible. 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 tokenized is also brought to you by avalanche. Major banks, FinTech challengers and industry leaders are using avalanche to create new business models on a fully customizable blockchain infrastructure. Think of it as more than a blockchain. Think of it as an entire network built for financial institutions to innovate with purpose built layer ones institutions can tailor digital asset strategies to their exact needs while still tapping into the power of other public blockchain innovation developer communities and seamless interoperability join the institutions shaping the future of finance on avalanche, and you can learn more at avax dot network. All right, coming back. Thank you very much for our sponsors. We appreciate you. The next story I have is tether, are apparently going to have a new US based stable coin for institutions, as regulation advances, both the genius bill and the stable Act would appear to require the onshoring of those assets to get access to those capital markets. So they're apparently exploring the launch, and their CEO, Paolo ardino told the block that the new stable coin will be built for large, regulated institutions, unlike tethers existing stable coins, which are used mainly for trading and financial inclusion. So Fernando, I kind of liked your explanation of the role tether plays at the moment, but Noel, I'm interested in your perspective. This sounds to me like a bit of a B to B to C play a bit like USDC is this sort of tether coming back into the domestic fray. Do you think are they trying to play there more? Or how do you read this one?
Noelle Acheson 33:39
Well, it's definitely not a secret, they wanted to break into the US market. And you've seen plenty of posts of Paulo on the steps of the capital, and it makes a lot of sense, also, given the relationship with counterfeits. Gerald, who's former CEO, is now the Secretary of Commerce. So it again, that part is not a surprise. I do confess, and I would love to get Fernando's input on this. I've been scratching my head a bit as to why a totally separate stable coin for institutions in United States, I guess, regulation. And then there's clarity coming down the pipeline, and fast, but the reserves would be ring fenced and would have regular audits, whereas tethers other reserves wouldn't. Again, I'm clear as to why the need to have a totally separate token when they could set up usdt for institutional use by improving the audits of the reserves. I think Fernando, am I wrong? I agree
Fernando Martinez 34:32
with your questions. I don't have any answers of them. My gut feel is the following, understanding that tethers ecosystem are across the globe. It's already too clings to a lot of the local crypto exchanges, payment providers, things like that. So I don't know if they want to convert the usdt into this new version. What it would imply for the rest of their users, whereas, if you create. A new one, ring fenced one, you're able to attack another market that you haven't been able to access before. I do believe that tether has done things extremely well, funny enough, and I love circle, but they de peg first and tether. And everybody thought that it was going to be tether, right? But that did happen to everybody's surprise. So I do think that they've built a massive business. And if somebody has the ability to enter as foreigners, it's them, right? Definitely, definitely, could
Noelle Acheson 35:34
be a branding thing as well. In that tether has, especially among the regulators in the United States, a certain reputation for being offshore, shall we say, with air quotes. So maybe the branding thing, but it's still tether. And so I'm not even convinced that that would work. What could make more sense, as if they were to set up a stable coin platform to facilitate the issuance of stable coins from other institutions and corporates. We already know that other corporates already use tether for cross border internal treasury management, so perhaps that's where they're heading. I do think is a fascinating development, especially given the regulation that we are coming down the pipeline. I
Fernando Martinez 36:15
think that's a good point. I think it's great for us to remind ourselves is that stablecoin, specifically tether. It's a great way for the US to export their US dollars right to other broader markets. So maybe strategically, they don't even want to touch that. And as you say, locally, they may create a different market brand or whatever, but this will be for the domestic US dollar or us in house market, I don't think that they should disrupt something that has been so successful and working so well. They're
Sy Taylor 36:48
not going to want to cannibalize that revenue opportunity. But they are, I believe, now the seventh largest holder of US Treasuries and Noel, if you were watching the latest Treasury auction as closely as I was, there was a lack of demand and US Treasuries are now more expensive the 10 year and the 30 year than Greece is. So this is something where, you know, there's a problem in the treasury markets. The credit markets are showing signs of stress. You need new buyers of treasuries. It feels to me a little bit like Paul is sort of making that argument for dollar exports for like, let us come on shore. We know you think we're the offshore bad guy, but the history teaches us, the eurodollars started in a very similar way all of the offshore dollars after World War Two suddenly showing up at Midland Bank in London with a higher interest rate for savers, even if they happen to be based in the US or anywhere else around the world, they could hold their dollars in London and get a higher rate. That's ideal. The US didn't like it. The US tried to contain it. And indeed, History doesn't repeat, but it rhymes. I suspect they're going to try and pull as much as possible on shore as they can with a tacit, maybe less than tacit, acceptance of this other type of dollar, and maybe tether is positioning itself to be in the middle of both of those things. So History doesn't repeat, but it certainly rhymes. It
Noelle Acheson 38:11
could tie in with their tokenization push. I mean, they have a tokenization platform. They've said often that this is something that they want to get into, because we do have to ask ourselves, domestic payments work pretty well. So that stable coins not really going to help the mainstream use there. It could help within digital asset markets.
Sy Taylor 38:28
It really could. So the last story I had for us this week is a company called Codex has come out of stealth and raised $16 million led by dragonfly, for a stable coin only blockchain, so definitely worth looking at Codex. This team has an interesting background. Folks are x meta. They've been involved in founding other startups, but they are trying to really differentiate around how they can build more liquidity and security into stable coin payments by integrating with, I think, 26 crypto exchanges directly, and 255 banks with something they call the liquidity Oracle, which sounds like something from the matrix, but actually, if we know what oracles are In the defi world, it is that source of truth. It is knowing where things are. So there's a really interesting debate going on here about one of the advantages of crypto was atomic settlement. It was our on chain. Having the cash leg and having the asset leg on the same network meant that we got that atomic settlement, but also we're now in a reality where there's probably never going to be one chain to rule them all. So why wouldn't there be a payments chain? I'm interested Fernando in how you view this approach. Is it net helpful or just a distraction? Fascinating to watch. Okay,
Fernando Martinez 39:58
so we know the code. Team really well know drone fly well as well. They are a fantastic, fantastic team, and I think that what they're doing has been very thoughtful, and they understand the market very, very well. Before they came out of stealth, they started actually enabling these corridors by partnering with different liquidity providers that had access to certain markets. They also partnered with a bunch of stable coins, one of them being circle. They had this partnership going, and what they essentially wanted to do is start having this network, or whenever they launched their chain, they could migrate, and then start to capitalize from that, right? So I think that they're doing well, and I'm excited to see that evolve right for us. It's definitely something complimentary and anything that can help grow the payment side, like 100% we're going to be there, and we're going to be supporters a company like that. Which is also extremely, extremely interesting, is one money from Brian Schroeder. He was the ex binance us CEO and before that, I believe. Don't quote me on this, but he was seeing PayPal or something like that, right? I'll check it out anyway. They're building something similar, and it's extremely exciting. So we are bullish on payment chains.
Sy Taylor 41:15
Interesting, interesting perspective.
Fernando Martinez 41:18
Yeah, if we want to be a little bit simpler on that for the past, yeah, one money network. He was seen President and Chief, CEO of finance us, and before that, ant group, massive and Uber, right? So he knows his stuff if we simplify the blockchain. Because I think also a bunch of people want to always create a new one, a new chain, and things like that. It would see it's fine, right? We respect it, and the more chains there is out there, the more assets we can trade. So we kind of don't care. But if you see the data five years ago, I think less than 5% of the activity on chain was regarding stable coins. Whereas now it's over 50% of the activity on chain, it's stable coins. So why do you need a new chain? Right? I mean, maybe the chain doesn't work fine, but I think that purposely classifying or trying to make it unique for payments. Kind of doesn't matter. Man, right? Because if all of the other chains are only being used for that, or 50% being used for that makes you wonder. Now, we are agnostic. We will use what's better, what's faster, and what has more demand and more integrations. But as a crypto guy, I'm like, so I kind of wonder,
Noelle Acheson 42:42
yeah, it's exactly the questions that I've been having. So I've seen other l ones that are built for stable coins. And I do recall scratching my thinking, why when there are already good l ones, liquid l ones with vast ecosystems on which stable coins have a lot of experience whizzing around. So what's the advantage of others, but fragmentation tends to offer more choice to the market, and against the free market, the market will decide which ones it wants to use. And
Fernando Martinez 43:11
to everybody's surprise, right? So tether has been, I'm not going to say, exclusively, but almost using Tron. And everybody's like, why Trump? We don't like Trung. Why Trump? Look, the market dictated it simple as that. It's cheap.
Sy Taylor 43:25
It did that. Did? It makes a big difference. And never bet against Justin, sun, marine, uh, Vincent himself as well. I think that's that never bet against is going to probably be my low key title for this show. Well, this, unfortunately, does push us up against time for today's episode. So I want to thank everybody for listening and or watching Fernando. Where can people find out more about you and more about what you're up to at nonko,
Fernando Martinez 43:49
they can go to our website, www.nonco.com, submit an inquiry request there, and one of our team members will directly contact them, or they can keep me up on either LinkedIn and Twitter. I'm always there. Fernando,
Sy Taylor 44:03
thank you, Noelle. How about you?
Noelle Acheson 44:05
You can see what I write at crypto is macro now.com on sub stack, and you can find me on Twitter or x at Noelle in Madrid, which is where I
Sy Taylor 44:16
live. You can find me at sy Taylor on Twitter, Simon Tai on LinkedIn, or FinTech brain food.com if you haven't already, please hit like buttons, Subscribe buttons, all of the buttons, and tell other people to check out this show too. I think we are almost unsociable levels of nerdy on this show. And I think there are people out there that would really enjoy that. So if you know somebody who that is recommend it to them. It helps us out. Thank you very much, and we will catch you next time you.