On Ep. 19 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Anna Yuan, Founder @ Perena and Elise Soucie, Executive Director @ Global Digital Finance to discuss why Robinhood uses stablecoins and more!
On Ep. 19 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Anna Yuan, Founder @ Perena and Elise Soucie, Executive Director @ Global Digital Finance to discuss why Robinhood uses stablecoins and more!
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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!
Sy Taylor 0:10
Simon, welcome to tokenized the show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor, and I am your host, author at FinTech brain food, and head of strategy at sardine. And joining me just about is Kai Sheffield, head of crypto at visa, who's struggling with laptops and all kinds of stuff. How you doing? My friend?
Cuy Sheffield 0:32
It's been a weird week, just really, really weird. We got a bunch of news, a bunch of different things all over the place to unpack. We've got amazing guests. Let's jump in.
Sy Taylor 0:40
All right. Let's do it. Also joining us is Anna Yuan, who's founder of perenna and the former stable coin lead, Solana. Anna, welcome to the show. How you doing
Speaker 1 0:51
good? That was interesting week as well. Welcome to some fun news. Ooh.
Sy Taylor 0:57
I mean, I love the foreshadowing going on here. We'll we'll have to get to the news, but before we do get to that, I do want to just cover off this point. You posted something pretty interesting on LinkedIn. Let's see if we can pull that up for a second. I'm going to read it out word for word. You said, Shall I start a stable coin advisory firm? I'm getting flooded with DMS wanting the scoop on stable coins and real world, asset tokenization, banks, fintechs, Fortune 500 sliding into my inbox like, Hello, what's up? Maybe it's time to start charging for these 10pm consultations. Like, what's going on?
Speaker 1 1:32
Correct? Since stripe acquired bridge, my inbox started flooding with non crypto people. Prior to that, it was mostly crypto people asking about stable coins. And after that, it was banks, pure web, two companies that have nothing to do with payments, all sorts of I talked to a number of central banks. A lot of people's bosses want to know what to do with stable coins, from Wall Street to Main Street to like, everywhere around the world, and they all want to know, yeah,
Sy Taylor 2:03
somebody keeps saying, Every bank needs a stable COIN strategy. I blame that guy, whoever he is, but Elise, good to have you back on the show of returning guests, exec director at global digital finance. How you doing? I
Elise Soucie 2:16
am great. Thank you, and thanks for having me back. I'm glad that even after I said central bank money was boring the first time, you had me odd that you've agreed to let me come back and talk about regulation and all things policy again. So great to be here. Let's
Sy Taylor 2:30
rock and roll, all right. And just before we get into the show, I'm happy to remind you that 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 stable COIN strategy. And if you're looking for the best place to start, that's bvnk. Bvnk is the leading provider of stable coin payments infrastructure, helping businesses move money faster, settle globally and even launched their own stable coin 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 All right. Thanks bbnk for being a great sponsor. So let's start the only place we can start. A couple of years ago. When you say Libra, everybody thought you meant a stable coin. Now they think about something different. This is the President of Argentina who endorsed a stable coin called Libra, that, of course, then rocketed in price. He then walked that back maybe three hours later, which correlated with that price crashing. The initial claim that this was a private sector initiative that was going to boost Argentina's economy, but the scandal that has taken off since then, it appears, and it is alleged, that insiders had benefited almost entirely from this and that there are several groups involved that coffeezilla has interviewed. There are several NGOs that say that estimate 40,000 citizens lost a total of maybe more than $4 billion the Argentinian stock market dumped more than 5% on this news, showing it really wasn't isolated. So there's a lot of allegations here, and there's a lot of things that we could kind of unpack. But Elise, I know you've been watching this, I know you talk to policymakers quite a lot. What's your sort of takeaway from the last few days of what's been happening with meme coin mania?
Elise Soucie 4:40
So yeah, I have a couple of thoughts on this. One is that I think it really emphasizes and underscores the point that you cannot take one set of regulations and apply them and just say, these are the regulations for crypto, which sometimes I think is the approach we start from. We've been dealing with this, for example, in the UK. There's a consultation that's out at the moment on market abuse admissions and disclosures. Now, this consultation basically is proposing to treat all crypto assets, from stable coins to meme coins, the same way, which is very similar to how Mar is structured to prohibit and to prevent market abuse for securities that doesn't work for meme coins when we look at how this happened, and then if you look at current structures for preventing market abuse, we're going to need something totally different to combat this in meme coin markets versus stable coin markets versus tokenized deposits. You know, all of these similar to what we have in traditional finance, highlight the need for really clear regulation that looks at these individual products and services in their own individual and unique ways. So that is the first thing that I would say about that. The second thing is that even though, if you think about these meme coins that we've seen and obviously with Trump as well, that when you look at the regulatory priorities, though, they're not usually focused on that segment of the market at all. So even in the US, q1 is completely devoted to stable coins, and then q2 is going to be market structure. And so actually, Simon, I think that I saw you posted something about this earlier, which is stable coins are searching ahead. Crypto markets down. It's an interesting direction of travel when you see where the regulation is going and then where the market will potentially follow, which is something I bang on about all the time, is that good regulation actually can drive markets forward in a really helpful way? Fascinating. Anna, what
Speaker 1 6:36
are your thoughts? I think a lot of people associate Solana and some of the other ecosystems that have high meme coin activity as blockchains are only good for meme coins. That is definitively not true. It happens time and time again throughout history. Before meme coins, it was stocks. Before stocks, it was the Dutch in East India Company ones that people bought, like way back when. So people will buy things that they think will go up in value, whether they know it's rugging other people at the expense of being extractive or not. I think that's the reality meme. Coins just make it a lot faster and a lot easier to do so. So when it comes to regulation, I don't think regulation, banning these things are the right way to go, because people will find ways to do this. I think financial literacy is a really important thing. Like a lot of people think this is not gambling, but it kind of is. And a lot of people think they will make money, but they probably won't. So educating people not to participate in toxic markets is more beneficial in the long run than trying to protect users. In my opinion, the Libra case also highlights a maturing. If maturing is a way to describe this. Libra is the manifestation of how meme coin markets have matured in sophistication and value extractiveness. So pump fund, when it first started was actually quite fun for a lot of people, based on anecdotally talking to these traders, because it was a lot of edge. It was just, it's a PvP game, but people were happy, and they were making money, having fun. And then you got these like bots come in, and more sophisticated funds came in, and then the more extractive ones came in, because as funds come in, their purpose was to make money. They didn't care about the memes. And then Libra was like the probably late stage of Wow, the bubble finally burst, and people are now finally realizing the types of players are in this arena when they've actually been around for a couple of months. And if you talk to the traders in the so called in the trenches, they've already seen this shift two ish months before Libra and Trump launched. I think going forward, one of the potentially, many of the institutional, non crypto listeners here are thinking that, Oh, crypto is this seems like the hype and the essence of crypto, this cycle, and of watching this cycle, it's definitely not true. There's, like, a ton of other things happening that are unrelated to memes. And for example, what we're building at perenna, we're building stablecoin infrastructure, what many of the other projects that are building, are building decentralized physical infrastructure for various industries that have nothing to do with memes. I thought
Cuy Sheffield 9:17
there was a really good articulation that it feels like there's this sense of exhaustion in the general sentiment with the meme coin meta and narrative. And as Anna mentioned, blockchains are permissionless. Anyone can create any type of asset that they want to create on them, which can be a feature or bug, depending on how you look at it. And then once those assets are created, then this market structure forms around it. So you've got decentralized exchanges, you've got liquidity pools, you've got all these ways to bootstrap trading in an asset that five years ago, 10 years ago, if you had a picture of a dog, how were you going to create a liquid market around a picture of a dog? Like there wasn't a way to do that. Now, there's a way to do that. And I. Think that it started as retail investors who were doing this for both fun and profit, and it was there was this cultural element around being in the trenches and being a meme coin trainer. But as Anna mentioned, it seems like this story is an example of how it has become industrialized and industrialized in a way where you now have very sophisticated participants that have significant advantages in terms of the knowledge as well as access and kind of the tokens that they have. You have a lack of disclosures around who these participants are, what are they doing? And it's gotten to the point where I think people are generally saying, Okay, this, this is unfair, and, like, once it gets the point where, like, this is unfair, and then retail investors are feeling the brunt of it, I think a lot of people are realizing, and even just within the industry, there need to be better standards, better disclosures. We have to figure out, as an industry, how do we move beyond these markets that are potentially extractive to retail consumers. How do we leverage all of the public blockchain infrastructure to enable markets that can be fair, versus enabling all that infrastructure to be misused in a way that is that is unfair? And I think it's still a big question around how does that happen? And you can't really just ban meme coins. It's not an easy thing to do. But I think there's also just this bifurcation of, how do we focus on real world assets, on stable coins, on these use cases that solve a real problem, versus moving away from some of the early markets that have now become in many ways unfair to most participants, there's
Sy Taylor 11:39
a real opportunity now for the Spotify versus Napster moment, where Spotify is the better product than Napster. And Napster was fun for a little while, and it sort of said that the market was ready for a new form of distribution and a new form of value and a new way of consuming content, but the better product was the legitimate one that figured out the business model and packaged it and delivered it to consumers. And there is clearly in financial markets a problem in how financial products are distributed to consumers and how they're manufactured and distributed that the consumer is saying, I feel left out. Businesses are saying, This isn't working for me. I needed better infrastructure. And unfortunately, in the early days of this, it is still a little bit the Wild West, especially on the frontier. There's always a frontier in crypto that's a little bit ugly. And then on the back end, there's a Bitcoin ETF and the stable coins getting adoption. And so if you get distracted by the headlines and the scams, then I can see why. I can absolutely see why.
Elise Soucie 12:42
Yeah, and I think to those, a couple of the points that were raised, like one, I agree. I don't think that banning meme coins is the way forward at all. I think, though, that there should be better education so completely. Second that point, Anna, but also better division, what you were saying, Kai, between retail and wholesale markets as well, because in current financial services, we don't just have sort of one category of product that's sort of open to everyone. And there can be better ways to have consumer protection coupled with that education, if you also have that better sub categorization of what products are offered to who. And that makes it work better for businesses, for infrastructure and for the consumers, and so I think that's an important piece here too, that could really protect people in the long run. And it's not to say again that retail customers can't have meme coins. That's not what I'm advocating for. But I do think there does need to be some sort of clear division of what types of products are you actually investing in? What is being offered, what makes sense for these different types of the market?
Sy Taylor 13:42
There's a reason the under elevens don't play with the adults, right? Like there's a difference in just the size and scale of their ability to physically maneuver. And that division probably makes sense. And one last point, and then I there's so much to cover today that I do need to move us up.
Speaker 1 14:00
Yeah, coming from a defi perspective, I don't think consumer protection is a restriction, but rather an optionality. So to your guys's point, we should have disclosures, but we shouldn't bend retail from trying anything. But clearly, Blockchain is democratizing access to pretty much every type of financial product.
Sy Taylor 14:22
Yeah, it's crazy. We had Chris Brummer on the show a little while ago. He's the world expert on disclosures. He's built a blueprint. And one of the things with the EDGAR database and SEC is disclosures don't work. They're supposed to create a level playing field, but most people don't understand them. So how could you do disclosures differently, and how could you do it transparently and on chain? I think it's a fascinating, fascinating idea. So the next bit of news was it's been earning season. Coinbase crushed, Robin Hood crushed. And there was a crazy thing where Robin Hood, well, it's not crazy, but I think a war shed moment where. Robin Hood say they're using stable coins for 24/7 settlement when, uh, markets are closed over weekends. And I think that's a fascinating moment. So let's start with Coinbase, and I'm just going to read out some of the bullet points here from their earnings. So Coinbase custodies $93 billion worth of crypto for the Bitcoin ETFs, they have two 20 billion assets under custody. Their base their l2 on Ethereum, had an 89% quarter over quarter increase in assets on the network, and they did 6.6 billion of revenue over the 2024 calendar year with a net income of 2.6 billion. And here's the standouts for me, trading revenue in retail that was 82% of revenue in 2021 that's dropped to 59% trading revenue from institutions that was 4.6% in 21 it's now 6.2 and stable coin revenue is now well over 10% and they are a much more diversified business. So Kai, I'm going to give you the honors on kind of going first on the Coinbase news and and some of the diversification you're seeing in that space. What are your thoughts as you look at that trend and that change in the public market. I think
Cuy Sheffield 16:23
it's really interesting to go back a few years and ask, Where was Coinbase three or four years ago? And I think that there were questions around a lot more of the revenue was coming from retail trading. There was a question of, would the fees that you were able to charge there would those have to come down over time as the market became more competitive. You had the growth and decentralized exchanges, and uniswap was taking off and doing a ton of volume. You had offshore exchanges like binance and FTX that were adding more tokens faster and seemingly disrupting Coinbase. And I think one you have to give Coinbase a lot of credit for. They didn't try and play that game, and they stayed focused on doing the best they could within the regulatory environment, being able to serve institutions. I think powering being the custodian for the vast majority of the ETFs, that's a major win for them as a company. I think their ability to navigate and transition to the on chain world, and with launching base, and not just getting base off the ground, but base is now one of the most successful l twos or kind of next gen blockchains out there. I think Coinbase wallet has improved dramatically as a product. I think it's clear that they're driving a lot of adoption and usage of USDC, so I think they're really becoming a case study in just how successful they've been in diversifying their business into many different areas. I think the other side of it that's really interesting is they're starting to compete on many different vectors, with many different companies in the industry. They're competing on the institutional custody side. They're competing with other blockchains, other layer ones and layer twos. They're competing with other stable coins. They're competing with some of the FinTech companies, like Robin Hood and so I think they've been so successful diversifying themselves that now they're competing on many different dimensions. And it'll be really interesting to see how other exchanges, other custodians, other fintechs and trading platforms, how they view Coinbase and and how those dynamics play out. But I think you have to give them a lot of credit for the way that they've diversified their their revenue, and the way they've executed with their on chain strategy, with with base,
Elise Soucie 18:36
I would add that on diversification. Completely agree this is hugely important, Simon, I know you recently did your kind of state of FinTech report, which wrapped up everything that happened, and also looked ahead a bit at the year to come. And I personally agree, and think that a key trend in the coming year to five years is going to be one acquisitions, but also new types of global giants emerging. And I think that Coinbase is just one example of this. So a lot of various crypto institutions are moving really fast in jurisdictions where they feel that they have clarity and in regulatory certainty and able to do so, but they're buying not in addition to diversification and setting up new businesses, they're also buying existing companies, getting existing licenses, and expanding the way they can offer both crypto products and Trad five products. So I guess what I would say is that, to my view, they're going to be a new class of behemoths, like, you know, when you think about BlackRock, for example, hype scalers, yeah, yes, exactly. But in kind of breath as well, in terms of the suite of products that they offer. And I think this is just the beginning of
Sy Taylor 19:41
that. Absolutely Anna, I want to bring in the Robin Hood element here and ask you, I don't know if you saw the CEO's interview on Bloomberg, where he was saying they use stable coins to facilitate transactions and settlements between cash and crypto, 24/7, particular on weekends, and he said it can solve a whole. Bunch problems, because it is running 24/7 you know, I saw that, and I thought people have kind of got that stable coins are global, you know, especially if you're in the Global South, but maybe they're still under pricing, the 24/7 side of it, which is kind of understood in defi, but is, is tradfi waking up to this? And where do you think Robin Hood fits in that big picture, I
Speaker 1 20:21
think Robin Hood is testing waters with stable coins and blockchain, and I saw Vlad also said that he's trying to get approval to launch tokenized equities, which is what Ando announced recently as well. So I believe there's going to be a decoupling of issuer and venue, just like how Robin Hood, in the future will do a lot more things than just using stable coins to settle on weekends in terms of faster settlement, tokenizing equities and money is one way to settle faster. But another major use case, similar in nature, is pre funding for payments. And I think both the trading use case the payments use case of allowing assets to get to a place where the counterparty trusts that you have that asset there 24/7 is something many non US countries have taken for granted with their real time payment systems. But I think in the US in the financial industry is relatively new, so that is a super cool innovation that they're doing.
Cuy Sheffield 21:24
It's fascinating to me that we're in 2025 we're in an era of exponential improvement in AI towards Artificial General Intelligence. We're kind of living in this like crazy futuristic world, and generally, money doesn't move on the weekends. Like we're still we kind of, like, brings you back down to earth, of like, as humanity, we have not solved how to actually move money on the weekends at scale across any use case or any industry. And even when it might feel like money's moving on the weekends, whether it's some RTP systems, whether it's wise and others, a lot of times the money's not actually moving on the weekends, particularly cross border. And then you have all of these dependencies behind the scenes, whether it's pre funding, whether it's collateral, you have all of these challenges and really things that have been put in place to enable the front end to seem as seamless as possible, but on the back end, there's this huge gap of two out of the seven days of the week, like things are just closed. And so I think that we're now at the point where it's like people are seeing the light that if you ask someone, like, three years ago, like, how many people in capital markets and in payments were like, waking up every day trying to figure out how to actually move money on Saturday and Sunday and bank holidays three or four years ago? Like, there's just, there really weren't that many. It was kind of just a given that, oh yeah, it doesn't work. You can't do that. And so they were like trying to figure out all the things that you could do in place of that. I think now, when you have this technology breakthrough of 24/7, global settlement layers like blockchains, you have a lot of smart people inside of lot of large institutions and firms, from payments to capital markets, waking up every day saying, now that there's a rail that works 24/7 what does that mean for us, and how do we use it? I think it's going to take a significant amount of time. Many systems are built to kind of only work during the week, but I am very optimistic that when we're sitting here in 2028 and 2030 we're not going to be having the same conversation that, Oh, do you realize money doesn't actually move on the weekend like I think there will be many examples at scale within traditional institutions where money is moving on the weekend. And that alone, I think, is just a positive thing for the overall global economy. Where
Sy Taylor 23:53
Robin Hood goes, others tend to follow. People have opinions about Robin Hood, and sometimes they definitely break a few eggs in their omelet making process, we saw the CFPB push back on some of the things they were doing around sports betting contracts, and there is definitely a line that they are finding that is serving a new consumer and a new market space. But they're also pushing quite heavily, as you say, for the tokenization of assets and this 24/7 settlement is something that I think every broker in their position would love to have, especially one that's subject to weekend volatility, especially one that sees meme coins launched on a weekend like the Trump coin, and potentially was building up a lot of systemic risk. Let's not forget that several years ago, during the meme stock craze, the DTCC actually made a margin call for posting a lot more collateral against Robin Hood, because they were going to be closed over the weekend, and they wanted to make sure they just had enough collateral, just in case. Robin Hood always argued back against that and said, Well, if we could settle this stuff real time, I wouldn't need to post all that ridiculous amount of collateral. Based on your calculation of my risk. So the pushback here has been kind of consistent and multi year from these guys, and everybody forgets fed wire, and the Fed payment system is 23 six, so 23 hours a day, six days a week in the world's capital market, and that is potentially quite risky. But of course, the true capital markets nerd would point out the other side, which is the Silicon Valley Bank risk, which is, if you have real time payments, you have real time runs on the bank. So we do need circuit breakers in the system. We do need to think about what those are going to be. Speaking of breakers, I'm just going to thank one of our sponsors and move us to the next story. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap, uses smart contracts and cryptography to help banks bring fiat currencies on chain, vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode of token earnest is also brought to you by Canton network. Ever wondered where the real tokenized asset volume is heading? It's heading to Canton network, the groundbreaking public chain where traditional finance and crypto are converging. Why? Because Canton is the only public network with full privacy, no workarounds, no compromises, private moves unbounded potential. $3.6 trillion in assets are on this chain. Hundreds of app operators and validators are in sync, native stable coins and payments are next. This is 24/7 markets on demand, financing with real yield, where the value moves as freely as information on the internet. This isn't just another chain. This is serious money flowing to solve real market risk. So what could you do on a public network with privacy? Why not ask the team at Canton network today visit Canton dot network to learn more. Thank you kindly to all of our sponsors. This next one comes from ledger insights and about State Street launching crypto custody in 2026 and Citi starting to lean in so the SEC is accounting role sub 121, as many of us know, blocked us banks from really participating in digital asset custody for almost three years, because for every asset they custody, they would have to hold it one for one, it wouldn't be anything they could treat really fairly on their balance sheet. Now, just to give it some kind of scale, State Street has 46 point 6 trillion assets under custody, with Citi having 25 trillion. So you know, not like Coinbase is two 20 billion. This is well into the trillions. These are the world's second and fourth largest custodians globally. At least, going to come to you on this, what are these financial institutions seeing? What is it about the timing? Is it just the accounting move that's let them move in, or is there something bigger going on here?
Elise Soucie 28:24
So yeah, a few things on this. I mean, great that sab 121 was repealed. This was definitely a huge blocker for the industry. But what I would say is that for the really smart banks, they were already building and preparing for this, and there has been so much really good advocacy that was done to try to educate lawmakers that I think this is why sub 121 got repealed so quickly, because of all the efforts that everyone had been making about why this was such a bad thing for the industry. However, I would note that while these are interesting news announcements, BNY already had a small crypto custody business for Bitcoin and ether, and we're already kind of preparing to scale. And so I think that my headline here, well, for the banks that maybe hadn't already started preparing and laying their plans for custody or how to get involved in this world, they're going to need to make some smart partnerships and smart acquisitions really fast, because the banks that we're already building and preparing are going to have a huge leg up and to the points raised earlier. So are the crypto firms who are already doing this and preparing to do it as well. That being said, though, there were other blockers for the banks, and some of those blockers do still exist. So while SAP 121 was great, we still don't have the market structure legislation which was fit 21 last year, going to be a bit revamped under the new administration, that still will be needed. And if you are a risk person inside of a bank, you'll say, well, where's the legislation that says we can do this? Where are the compliance requirements? Is it really worth it from a risk perspective, for us to build a whole new business, to get involved in these markets and to convince. It's your internal compliance people, you'll need to have that legal certainty, regulatory clarity beyond a shadow of a doubt. So that's been the other blocker for banks. A number of other pieces of legislation had blocked it for a while as well. But I think that the last thing on that is, you know, really tone from the top, and education from the top is something that I hear from a lot of the tradfi institutions is you might have your great innovation division, or, like crypto and digital asset division that are really all in on this and supportive really hard to get things moving quickly, if you're senior executives. The points raised earlier are like, well, crypto is all meme coins. Why would we want to get involved in that rubbish? You know? So I think that that piece of education is also a huge blocker for banks. But yes, hugely exciting in general, about the SAP 121 repeal, and yeah, the institutions are coming.
Sy Taylor 30:48
Anna, what do you think about the growth of the crypto native institutions, kind of in the custody space, and how's that market space been evolving? Because generally, people always get excited when they see headline of City and State Street in big name, but maybe less excited when fireblocks does something amazing in Anchorage and somebody else. I'm
Speaker 1 31:12
hugely bullish on defi native and crypto native players from the innovators dilemma you see like throughout the decades, typically new emerging players get a get to increase in market dominance as market dynamics shift, I still think traditional custodians and financial institutions will play a huge part in this future of Trad fi and on chain five. Let's call it coexisting in terms of the custodian landscape for digital asset native custodians has been innovating rapidly. Right before this, I got off a call with one of the custodians, and two years ago, segregated custody for trading and delayed settlement was not really a thing post FTX, a lot of these custodians started offering that. So most institutions nowadays, when you say like, Oh, binance, big get by bit, OK, X, maybe some of their balance sheets are maybe people have questions about their balance sheets post FTX. But now it's no longer an issue, because the institutions now can trade on those venues without co mingling their assets with the exchanges. In addition to that, a lot of those custodians are also working. So for us as a defi player, we are working with the custodians to get integrated and as institutions, you can now access staking defi like borrow land or decentralized stable coins through the custodians, while maintaining institutional level protection. Those are things I think traditional asset managers or custodians will have a hard time quickly catching up or integrating as deeply into the ecosystems as the crypto native ones do.
Cuy Sheffield 32:56
It's really interesting to think about if you're inside of a large bank and you are putting together your stablecoin Strategy that Simon has been telling you that you need to have. It starts with custody. And custody is one of those big questions, and it kind of depends, like custody for what what use case, and what are the considerations around how to approach it. And so I think we've seen that there's one mindset of, okay, we need custody for payments. Well, what does that look like? You need low latency, high throughput. You got to have access to the keys. Focused on stable coins being able to support many different chains. There's custody for holding Bitcoin, and that's one thing, and maybe that can be more cold storage. You're not moving it around as much. There's custody for defi and staking. Do you have institutional participants that want to do things with those assets? And so there are many different considerations as you think about custody. And then you can go through and say, All right, well, do we want to build everything in house, and do we have the technical talent and expertise of how to manage cryptographic keys? We might have some existing HSMs. How do we repurpose those and like, are we prepared and ready to do that? Do we want to partner with a custody tech provider like a fire blocks and say, Okay, here's a platform that we can then be able to bring into the bank and build on top of, do we want to outsource to a sub custodian? Do we want to go to someone like acreage and use them where we don't have to manage keys ourselves? And so I think just within that single question of, what's your strategy on custody, how are you going to approach custody? There are many different dimensions that banks need to evaluate it under and different paths that they could go. And I think that there's a short term how do you prioritize speed to market? There's almost like this whiplash feeling of, there were banks that laid off their digital asset teams like six months ago, and so it's like, you're going from like, we thought, oh, like, this isn't going to be a thing. We don't need a team. And then now, all of a sudden. Like we've got clearance, or there's a path to clearance to being able to participate. And so how do you manage that, and is it faster to get to market with sub custody versus what are the long term implications? So I think it's a fascinating topic that many banks are starting to spend a lot of time on, and the ones that I think are the best position are the ones that have had teams and strategies that have been in place for the past two or three years, and many of them have built products, and now they're just focused on bringing them to market, versus being at square one. There's a lot of work that you have to get up to speed on very quickly, and there's a high risk of getting it wrong. You've got to be able to safely protect keys, and you can't compromise any hack of your custody infrastructure is unacceptable, and so it's this really interesting infrastructure layer. We
Elise Soucie 35:45
actually did some work around this. So we did a whole primer and report a couple years ago about, like, basically, what is digital asset custody? What does it mean? It's exactly your point. How does that get broken down? And now that same Working Group at GDF is launching a new phase, which is going to look at what do these new forms of custody look like? What are some of the new products that might be offered under digital and digital native custody? And that's a range of participants to your point, Simon, all the way from really traditional custodians through to fire blocks and defi. So it's really interesting to see that kind of group coming together on a specific topic where I think that there is going to be a lot of innovation coming in the next few years. It's certainly
Sy Taylor 36:25
going to be fascinating. Well, one last story for us to cover off this week is FinTech, finance. So Standard Chartered and Bucha brands and HKT have created a joint venture to issue a Hong Kong dollar backed stablecoin. So it's going to apply for a license from the Hong Kong monetary authority, the HKMA, and they intent is to issue this Hong Kong dollar backed stablecoin. And the Group Chief Executive of standard charters, Bill winters, said, digital assets are here to stay, and the development of different forms of tokenized money is integral to the advancement of this industry. We are introducing solutions and instruments to service this market and meet growing client demand, as public chain instruments with proven use cases and stable coins play a critical role in the overall digital asset ecosystem. That is a bank CEO saying that that is so different from what you might hear from other bank CEOs, at least. I know standard shelter to remember, GDF, I know you've been working quite closely with those folks. What is it that the Hong Kong dollar can do as a stable coin. And do you think you'll start to see more local stable coins along those lines? First
Elise Soucie 37:48
of all, I do think that in some ways, with all the hype and the noise about the US and the hype about mica, that people have quietly ignored what they've been building in Asia in many various jurisdictions for a really long time, so Hong Kong and Singapore and Japan as well, they were some of the first to put forward digital legislation. And what that meant for a lot of the institutions that were based there and for the crypto firms too, is that they could build more quickly. And I know I sound like a broken record about this regulatory certainty, but it really does matter. The statement that I really liked, from what he said, There is digital assets are here to stay, but also the different forms of tokenized money. So back to something we were talking about earlier, where, you know, we said meme coins shouldn't be banned, but neither should stable coins or tokenize deposits. I really think that this comes back to this core issue here, which is also we shouldn't just have one type of stable coin. That's not how any markets operate today. And I think the various backing assets for stable coins and allowing for that diversification, as well as reciprocity, can only be good for the market. And people do bang on about dollar dominance as a US expat, I don't actually think that $1 backed stable coin is necessarily the right product market fit for every single market. But last thing I'll say about this as well is that, you know, this isn't the only thing that standard charter have been doing. And I think another region that's often overlooked is the Middle East. So we had a number of announcements come out last week around Abu Dhabi finance week about stable coins, one being that Standard Chartered, also partnered with Paxos for stable coin reserve management. And then there were another of other huge partnerships that were announced that week, as well from circle. We also saw with that partnership and binance. And so again, I think that while we hear a lot of noise coming out of the US, we can't forget what's happening in these other jurisdictions that have been offering honestly, really competitive regulatory proposals and working with the industry there to help them grow and build
Sy Taylor 39:52
stable coins are an offshore dollar for offshore cross border transactions. So the offshore. Jurisdictions that have given regulatory certainty are better able to do more because zodia custody and zodia markets are sort of investments of standard charts and heavily involved in cross border flows and usdg, which brings us back to Robinhood, is domiciled out of Singapore, where the Monetary Authority of Singapore has regulatory certainty. Anna, what are your thoughts on this story and the many types of stable coin? Do you think there will be many types of stable coin in the future, or are we going to coalesce around a few? I think
Speaker 1 40:30
there will be many types of stable coins in the future, and that was a major thesis behind why I started Corona in terms of HKD, a lot of people may think that it's a small region, but the Hong Kong processes a lot of financial activity and trade from mainland China to the rest of the world and vice versa. Also, I think that I not as surprised by a bank CEO statement, given that the US president also launched a meme coin, despite not commenting much on that. But the rapidness of change in adoption of digital assets in all shapes and forms has been dramatic. But it's not something that came overnight. Everybody's been a lot of people inside the industry and banks have been eyeing this, and it's kind of a game of chicken and egg, and also, like, what are other competitors doing? I understand that a lot of them are afraid of this regulatory uncertainty that Elise was mentioning, or like, even the potential hostility towards pure digital assets. However, the moment when one major bank or one major asset issue, or starts utilizing stable coins and digital assets, it becomes a competitive game. If the rest of the banks slowly adopt or don't adopt, then the one who adopted this technology may be able to offer better services, better yield better rates and cheaper fees. So all of that could squeeze out market share, and that's why I think once there's a turn in the sentiment of potentially a bit of fear and a lot of concern and question to like, Hey, this is actually something that's inevitably coming. That's when you will see a lot of influential decision makers make this kind of statements. Most of the leaders are using existing frameworks to view the financial system with a new technology. But I think what's missing is like we're going to see new financial frameworks coming together with this new technology here. Here
Sy Taylor 42:36
sounds to me kind of like that is a bank with a stablecoin strategy, but it's also a country that's potentially got a bit of a stable COIN strategy. Does every country need a stable COIN strategy and every local Fiat pair?
Unknown Speaker 42:50
Yes,
Cuy Sheffield 42:52
yes. Everyone, everyone in the world needs whatever
Sy Taylor 42:55
you get a stable COIN strategy. The Oprah meme,
Cuy Sheffield 42:58
I think, one of the most interesting things to watch for in the next one to two years is it seems very clear that they're going to be more non dollar local currency issued stablecoins In many jurisdictions across the world where regulatory clarity either exists or is coming, and Then once you have more stable coins representing many different currencies, then you start to see on chain FX and I think we are just scratching the surface around if you have credible, regulated issuers putting currencies on chain that are all running on the same blockchain, that can then start to use the same defi primitives that people traditionally only used for meme coins and other types of crypto assets. Now those primitives can be hardened, can be institutionalized, can have the right permissions around them, and then can be used for next generation, instant, 24/7 FX markets. And I think that that's a massive opportunity. I think that that will accelerate the adoption of stable coin payments when you can do on chain FX as part of a payment flow. But I think there are a ton of open questions around, how will it work from a product perspective, you know, regulatory clarity, not just on issuing a stable coin, but on defi and institutional defi, and can banks be liquidity providers into an Amm? And how do AMMS work in the first place? Like, the rabbit hole just gets deeper and deeper where what is a stable coin is now, just like everybody knows that what is a automated market maker that does on chain FX, and the rules around that, and who are the liquidity providers? Like those are, like, the questions that people are starting to like, really think about and try and understand,
Sy Taylor 44:44
yeah, there was a good project. I think it's project Marina, by the Bank of international assessments, looking at all things automated market makers and Anna, I kind of want to come to you on that, because that's the world you live in. So are you? You got to set up this firm where you explain. In this to the to the midwits in trod fi, we
Speaker 1 45:02
have built automated market makers, and that's only an MVP that we launched last year. We're building even better automated market makers market structures. So in the world of trod fi, there's generally limit order books and there's OTC or RFQs in crypto, because of early days, there's low liquidity pairs in this you came up with this thing called an Amm. So what it is, is a market has a buyer and seller. Traditionally, you would have market makers that place quotes that are bid and asks. But when you don't have a human or system doing that. You have a math curve that sets the price. So that's an automation on how the market works. And when you buy, the price goes up. When you sell, the price goes out. So for AMMS, it's we run stable swaps, which means stable swaps are stable coin AMMS. So you have, let's say USDC, and PayPal is pi USD, you want to swap from USDC to pi? USD, how do you know how much it should cost? Well, if you have a ton of people selling USDC for pi, USD, there's probably something going on that's not great for USDC. So in that case, in a traditional market, price discovery is via market makers in an Amm. It's the bonding curve, or the curvature as the market will change and shift, so that USDC becomes increasingly cheaper and pi USD, which is the asset that everyone wants, becomes increasingly more expensive. There are some other nuances that go into AMMS, but one of the things I think is really great is it introduces a new market structure that is much of it is still being explored. There's Oracle based ones. There's the traditional ones are passive price discovery. So if there's no real price, amen, does not know a price. It's just based on however people are trading Oracle ones are it will tap into an Oracle, such as a price feed, like in the traditional world, like a Bloomberg price feed, and if the price goes up, the AMM will quote the price around that number. So around it, the one that we're very excited about is using amm LPS or amm liquidity provider positions as collateral for other use cases. So you're getting increasing capital efficiency that a traditional limit order book cannot provide. Another way to do so is you're lending out additional idle capital in the AMM. So everything that we are researching is, how do we maximize capital efficiency of stable coins at the point of exchange and at the point of liquidity provision such that you don't require having a large amount of idle stable coins, which is really expensive from a cost of capital perspective, sitting there just to wait for the person to show up and trade, because the yield on that that people are going to get would be way lower than if they were doing higher risk trading strategies. And if that's the case, stable coins would become not fungible with each other. They'd be really fragmented. And we don't want that outcome. So that's, yeah, what we're working
Sy Taylor 48:07
on that sounds insanely exciting, and capital efficiency is like catnip to anybody in tradfi or any trader. So if you can start to deliver some of that catnip, I think you're going to have trader cats hanging out, mewing at you, trying to scratch your leg. I don't know why I'm taking this cat metaphor way too far, but I think that's a good place to leave it. I'm going to thank everybody for listening. I'm going to thank Anna for joining us, first time guest, but I hope you'll come back off and where can people find out more about you and what you're up to at piranha
Speaker 1 48:38
peekaboo. Can follow us on crypto Twitter and follow me for spicy posts on LinkedIn where I very unhinged to talk about the future of money and the singleness of money, as Elise would be happy to hear otherwise. Come to our website, piranha.org We have stable coin repository, and we share a lot of writing and educational content on stable coins.
Sy Taylor 49:02
Fantastic, Elise, how about you and
Elise Soucie 49:04
GDF? So you can find me at Elise. Susie watts on LinkedIn. I also talk about the singleness of money a lot, though we would probably need a whole other podcast episode to cover that. Or you can find out more about gdf@gdf.io and we have a lot of consultation responses there and lots more information about regulation. If anybody is interested, thanks for having me. Heck
Sy Taylor 49:26
yeah. Get yourself to gdf.io thank you so much for having me as well. Man, no worries, Kai, where do people find out more about
Cuy Sheffield 49:33
you and visa? I'm x at Kai Sheffield and visa.com/crypto
Sy Taylor 49:37
you'll find me at sy Taylor on Twitter and Simon Taylor on LinkedIn, and you will find this podcast wherever you get your podcasts. We're on YouTube now. Go check us out. Go drop us a like over on YouTube. Go see if we have faces or if we are just voices from the ether, and we'll speak to you all soon. Have a great week, whatever you're doing, because crypto never sleeps bye.