Is this a coming of age for stablecoins? On Ep. 10 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Dante Disparte, Chief Strategy Officer & Head of Global Policy @ Circle and Chris Harmse, Co-Founder @ BVNK to discuss Stripe acquiring Bridge for $1.1 billion, if stablecoins and CBDCs have shifted the narrative about crypto and the future of the stablecoin space.
Is this a coming of age for stablecoins?
On Ep. 10 of Tokenized, Simon Taylor, Head of Content & Strategy @ Sardine, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Dante Disparte, Chief Strategy Officer & Head of Global Policy @ Circle and Chris Harmse, Co-Founder @ BVNK to discuss Stripe acquiring Bridge for $1.1 billion, if stablecoins and CBDCs have shifted the narrative about crypto and the future of the stablecoin space.
Timestamps:
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Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized My name is Simon Taylor, and I am your host for the tokenized podcasts. I'm author at FinTech brain food and head of strategy at sardine. And joining me is my co host, my friend Kai Sheffield, the head of crypto at visa. How you doing, Kai?
Speaker 1 00:26
I am doing well. It's been a fun week, Vegas for money, 2020, FinTech week at DC last week. A lot going on. Excited to unpack the latest news.
Sy Taylor 00:37
Indeed, I briefly bumped into you in both places. There's been a lot of policy movements. There's been a lot happening in FinTech. But speaking of policy, well, my goodness, do we have the perfect guess? We have Dante disparte, who is the Chief Strategy Officer and Head of Global Policy for circle. Dante, how you doing? My friend, living
Speaker 2 00:56
the dream. And it's good to be back on with you. And Kai,
Sy Taylor 00:59
it's really great to have you back, and of course, alongside him get perfect timing. Is Chris or miss, co founder of bvnk. How you doing? Chris?
Unknown Speaker 01:09
Very good in you. Simon, really good to be here with you guys today.
Sy Taylor 01:12
No, it's really good. Couldn't have asked for better guests before we get into this. I'd also like to remind you that views and opinions of our contributors today are their own and don't always reflect those of their companies they're representing. Nothing should be taken as tax, legal or any other kind of advice. Please do your own research. What a story to kick us off this week? There's one story to talk about. I don't know if you heard the news, but stripe acquired a company called Bridge for a reported $1.1 billion of course, bridge had become one of those key software solution providers enabling any enterprise to process stable coins for payouts for any other kind of use case. And it was stripes, single largest acquisition ever and the most valuable m a deal in the crypto industry so far. It's a huge moment. And before I get to our guests, just a quick plug, because Zach Abrahams, who was co founder of bridge, was just on the tokenized podcast on episode five of the show. So you'll find that in the archive. So it would feel wrong if I didn't come to Chris on this first, because Chris, this is very much in your wheelhouse as well. I know it's something that the vnk has been very passionate about. I want to just get your thoughts and reflections so far.
Speaker 3 02:37
Yeah, definitely. I mean, it's great to see stable coins making such a splash as a bit of a intro. So bdn K is actually one of the largest stable coin payments infrastructure providers. We also enable Use cases across pay ins, payouts and settlements for some of the big global enterprise merchants, like deal and rapid but on this specific deal, I mean, it really does feel like 2024 has been the year for stable coins, whether that's stable coin regulation coming in, and then deals like this happening at the back end of this year. It does feel like the stripe is throwing some fuel on the fire, coming into the end of 2024 so we super excited. I think it's been a it's great for us, more broadly, as I think many of the customers that we serve are summer stripes, large PSP competitors. So I think it's opened up the market really well for us, so we really well positioned and quite excited.
Sy Taylor 03:23
And of course, Mr. Stablecoins Dante, your thoughts on this and what it means for the market.
Speaker 2 03:28
I thought you would refer to me as a stable genius, but, but that's actually Kai on today's conversation. For one, it shouldn't come as a surprise to people that the killer app in crypto has proven to be stable coins over the last many years, and that part of what I think is really interesting and compelling about stripes announcement like PayPal is before it, which is that as large incumbent payments companies start to enter this space, the feature they're most looking to in either supporting stable coins or crypto and payments is this idea of constantly upgradable sort of financial infrastructure, and so companies that are serving as an abstraction layer for crypto finance and for the experience of multiple chains to choose from the end user experience at the wallet level, abstracting away blockchain, ironically, is the best thing that we could do. It's the highest value sort of case study to reach billions of end users and ultimately serve trillions of dollars of economic activity. And so it should not come as a surprise at all to people that incumbents are coming and that there's a lot of very real world interest in what these innovations can do to support always on payments and banking activity, we should be enthusiastic.
Speaker 1 04:40
A ton of thoughts. I think the first thing the reaction that I've had is it feels kind of weird for many of us who've been in the space for a long time talking about stable coins, where all of a sudden, stable coins roll in payments. It's becoming consensus. It's like, Duh, of course, of course, stable coins are useful in payments. Midst. And so I think many of us have for years been like, hey, we think there's potential here. We think there's opportunity. And then when Patrick Colson says, This is what stable coins are, room temperature semiconductor for finance, it's a major, major moment for the space. So I think that's the first reaction. I think some of the other interesting elements of this, particularly just based upon talking to a lot of investors and companies in the stable coin ecosystem at money 2020. Is there are almost three ways that people are looking at what's next here. And one is people saying, okay, who's the next bridge? Who are the other companies building stablecoin infrastructure? And kind of what role can they play? And are there global ones, and what about regional ones? And so that's, I think, a very obvious question that a lot of companies and investors are starting to ask. I think the second is, bridge has this ecosystem around them. Who are the companies building applications that are consumer facing or business facing on top of bridge? And so a lot of bridges success has been the developers and companies that have been built on them. And so I think that many of those companies are very excited and getting a lot more attention. And then I think the last piece is bridge partners very closely with many companies across the stablecoin ecosystem, from exchanges and custody platforms. And so in many ways, bridges success pulled the whole industry and many of the companies that are partnering, interacting with or competing with bridge, they're all seeing increased interest from payment companies, from financial institutions. And I think that that's really exciting, that it's not like bridge was just out there alone in a vacuum building. It's as one company in the stablecoin ecosystem starts to get recognized and validated and grows. It kind of pulls the rest of the ecosystem with it. I think that's one of the really exciting things. Is stable coins start to create this broader network effect in the payments ecosystem.
Sy Taylor 06:50
I love that narrative shift. Kai John Collison, the other Collison said something really interesting on the money stuff podcast recently, and I'm paraphrasing, but he described money 2020 as a serious work conference, but to get to it, you have to walk past the smokers, the slot machines and the blinking lights and a lot of crypto is the same. And then you get to stable coins, which is the serious work conference where payments happen. But I also noted with interest this week, Janet Yellen had suggested in some comments that perhaps stable coins get too big, we might have to displace them with CBDCs. Dan Tai, I'm interested in your policy readout on how has this shifted the narrative, and what are you seeing as you talk to friends and colleagues in that space? Yeah,
Speaker 2 07:33
two things can be true at once, right? So I've had to reconcile since the very, very early days of uploading US Dollars onto the internet with failed projects and successful ones like circle, that these innovations could at once be poker chips in a crypto Casino. So staying true to John collison's observation that you may have to pass the somewhat seedier part of the casino to get to the breakthrough, to also then recognize that at the same time delivering what exactly Kai described as sort of a developer, first ecosystem based approach toward crowd sourcing. Major innovations in payments and finance is an extraordinary breakthrough in the entire world of moving money and that the stable coin is the digital thrift of doing that. The other couple big things that have transpired that are really adjacent to stable coins. And it's sort of the first is the US Treasury Department, for the first time, issued a national strategy for Financial Inclusion. We personally contributed to that conversation. And as you all know me very well, part of what gets me out of bed in the morning is to show the art of the possible, and that if you think of stable coins as digital Thrift, the rails on which the stable coins ride, and the fact that any basic internet connected endpoint today can now become a part of this global payments network, that you could really, really demonstrate some pretty profound use cases in the financial inclusion category and in the more accessible finance category, and so we cannot ignore some of the policy considerations coming out of Treasury, including the financial inclusion strategy. The second one is the Under Secretary for domestic finance, Nellie Liang, together with the United Kingdom counterparts, are, for the first time ever, starting to discuss a national payment strategy in the United States. And caged in that conversation is not just the boundary line between where banks end and fintechs begin. It's also, in some respects, a reconciliation of payment stable coins, which would be e money tokens under mica inside the broader payment system. And these are breakthrough innovations in payments for a lot of reasons. And so I think the acknowledgement as a part of a national payment strategy. Conversation is really important when we'll see those two conversations being reconciled on both sides of the Atlantic and the UK and the US, at least into 2025 Yeah,
Sy Taylor 09:51
it's surprising how much good work has been done in the policy world. Policy people work hard. Should not be a surprise, but it often is from the outside in Chris. I want to talk about some of the tangible business benefits, because it felt to me like a lot of my payments, nerds, friends sat up and took notice of that weird stable coin thing in the corner and money 2020 went, why did stripe do that thing? And what do you think it is? What did you talk about when you're saying, here's why you should use a stable coin and not just an API, not just like go multi PSP, not just orchestration, top payment node. To me, no, 100%
Speaker 3 10:26
we definitely view stable coins as a global infrastructure upgrade for payments. And what that really means is you able to start tapping into some of the use cases, the real world use cases that some of traditional fintechs, I guess, tried to solve over the last 15 years, and have done a great job at doing that, but really, all of their innovation was UX upgrades on top of kind of outdated infrastructure. So if we looked at the stablecoin space today, is with that upgraded infrastructure that you're able to achieve with a blockchain, you're then enabling three core use cases that we see and what we enabling for our customers around the world, and that first one is really pay ins. So think about this like stable coins at checkout. You've got your credit card payments, you've got your digital wallet payment, and now you've got a stable coin payment. That payment operates, 24/7, 365, and you can reach a global consumer base as a merchant quite easily. That's one of the first use cases in terms of the second use case that we enable is really B to B stable coin settlements. And this is the interesting one that we've been chatting with the visa team on and that sort of thing, where it's you can start bringing and doing B to B payments, and you bring those payments on chain. And again, we've got PSPs like rapid who are settling their merchants. And it's actually the merchant demanding a stable coin settlement. They're coming there and saying, Hey, you processing global Fiat payments for me across multiple different channels, but I don't want to be settled with dollars on a swift payment that's taking two days, or sometimes it gets stuck. And you're not just settling a stable coin. So we're seeing those B to B use cases pick up as well. And then one of the most exciting use cases for us is really payouts. You know, we've obviously got deal the Global Payroll platform as a customer, and we do all of their stablecoin payouts, and that's generally for their contractors, but that use case extends from contractor management platforms paying out. That extends to marketplace payouts, that even extends to last mile remittance payouts. And what we're seeing there is that end user in Argentina, in Nigeria, is demanding a stable coin, a digital dollar, over their local currency and and we're starting to see the local payout method starting to be cannibalized by stable coins. So it's this whole rethinking of Local Currency Payments. Local currency payouts, what are those payments methods look like? And it's it's really exciting to see stable coins as a payment rail for those B to B use cases, but then stablecoins is a payment method as well for those consumer use cases. So it's a really exciting time coming into the back q4 and topic, of course, I
Speaker 1 12:49
think one of the things that bridge did really well, which helped to grow momentum across the industry, is just have a number of really good examples of non crypto businesses that are getting value using stable coins across different use cases. And I think that's something that we've really as an industry, been looking for for many years. And it's interesting how sometimes all it takes is for a few examples and a few case studies of if you ask a year ago, who are the biggest non crypto businesses that are moving stable coins at scale and kind of finding real value from it, it was much harder to answer that, and we did the podcast with Zach a few months ago, and just there were a number of very large companies that weren't in the crypto industry that were starting to figure out how To incorporate these, and many of the use cases are starting with B to B are starting with payouts. Pay ins will likely take much longer to play out, but it's really exciting to really see how stable coins are moving from just crypto companies to payment companies to non crypto merchants. And it's like we're really watching this in real time. And I think that that's going to accelerate going forward into 2025
Speaker 2 14:06
a quick build on both your comments and Chris's as well. I think it's just important to look at both payments and Treasury functions as analogous to IT teams at the dawn of cloud computing, if up until a certain point of time. The basis of your job preservation and job security was sort of keeping the server farm in house, and there was this alternative infrastructure for computing called the cloud that shows up, you would be right to approach it with temerity and a little bit of institutional fear. And I think the journey of stable coins into the payment activity the work that you're doing at visa is a really good example of abstracting away the crypto part of crypto and making it a background activity. It would be reasonable to assume that business people, Treasurers and people dealing with payments around the world would approach this innovation with some temerity, but I think it's starting to be decoupled from a crypto only activity. It's use case. Prices are abounding, almost 1000 flowers sort of blooming around the world because of the openness of the networks that can be supported by it. And then the critical piece of the puzzle is integration within the banking system. And let's not bury the lead to Simon's point earlier about how much policy people are doing real work by creating legal and regulatory clarity. Stable coins are treated like legal electronic money in all of continental Europe courtesy of the markets and crypto assets framework. And so the more you see that occur, tech fade to the background, integration with banking and payments, and then fundamentally legal clarity, then you argue that stable coins, in some respects, become digital cloud, dollar settlement infrastructure that the whole world eventually will start using. I think
Sy Taylor 15:40
it's such a great point. And the narrative shift is one. I keep coming back to one of the things that I, as I put my payment analyst hat on for a second, find fascinating is why stripe? Why now? And as I look at and then I analyze where stripe has been going, they were canonically the software first software led, PSP, they add new value by if payments are a race to the bottom and commoditizing the movement of value, and you need the cheapest possible rail, then your value really becomes about the software you can build on top of it. Make the payment work, make billing happen. Do subscriptions and so famously, you know, chat, GPT, subscription runs through stripe and many others. But if I'm in Nigeria, it's not a cards market. It's hard to buy chat, GPT, it's hard to use something like that. So perhaps, from a stripe perspective, this not only gives you access to this global 24/7, rail, it expands your target addressable market, because historically, what they'd had to do, and where they'd started to go was going up to being multi PSP, once I serve a Netflix and a Spotify and all of those big companies, they would naturally not just want to work with stripe. They want to work with stripe, and they want to work with Argent and they want to work with somebody else, because that's going to improve their costs, it's going to improve their performance, but it's also going to improve the amount of markets that they can play in. Why go multi PSP? Why orchestrate all of that as stripe? It's sort of like you're trying to be the software layer on your competitors. It's difficult. Stablecoins gives you this other rail that is neutral, that is independent, that is accepted in some of the fastest growing markets in the world. Tai, I just wonder on your reflections on that,
Speaker 1 17:29
the direction that my mind goes is the importance of the integrations with local Fiat, Rails, with banking providers that Dante mentioned before, of it's something that continues to move in a positive direction. And Chris would love your take on what you're seeing. But I think it's an interesting thought experiment to say, if you have $100 of USDC or $1,000 of USDC, how many currencies can you convert that into? How long does it take, and what's the cost, and who are the providers that can enable that? And if you just take that thought experiment and you say, four years ago, when did USDC launch? Or, like, it was basically dollars. Six years ago, just dollars. And like, not many providers, and that's about it. And now today seeing liquid markets emerging between many of these local currencies with regulated exchanges, with banks in certain markets that are providing settlement rails. And so Chris, what's your view on the state of the Fiat side and how important that is to make stable coins work? And it seems like that's been a big approach that you all have taken at BB, ok, no,
Speaker 3 18:41
definitely. So we've been building in the space over the last five years, and quite early on, realized that if we're going to have a world where banking rails and blockchain rails are merging and interacting, you need to be fully compliant on both sides. So what does that really mean? It's a lot easier to interact with a blockchain than a bank, but either way, you've got to start with that base layer stack, which is global licensing. And once you have that licensing piece, you can start chatting to those banking partners, and we're getting access to those local real time payment trails. So BVK has obviously got licenses in the EU the UK on the Fiat side. So EMI license is there, and that gives us access to the local banking rail. So think Faster Payments in the UK. Think SEPA in Europe. Think RTP, fed now and ACH in the US. And if we really want stable coins to get to their true potential, you do need this link back into the Fiat payment world. And that's really what we've been doing on the g3 currency side. But then to your point, Kyle ni in some of the kind of long tail currencies you're seeing local players, solving some of that problem in Nigeria, in Argentina, in some of these other markets. So I don't think one company is going to solve that access in all of those different markets, but we've definitely taken the view that we needed to be in our core markets, highly regulated, working with Tier One banking partners and providing that seamless access between traditional payment right. Rails and blockchain payment rails. And then as more companies come to market in these long tail kind of currencies, where we're seeing a lot of adoption, you can start knitting together and creating new use cases. Then cross border payments, where, you know Fiat and Fiat on each side, with a stable coin in the middle. So that's kind of the route you're going. And I think the policy clarity that's coming through, obviously with media in Europe, hopefully a stable coin bill in the in the US over the next year is really going to unlock more of that kind of fast track, some of those local, non USD stable coins, or local on REM on an off ramps. Chris,
Sy Taylor 20:32
you make a great point about the job of knitting in payments, generally, money, 2020, a lot of the job there is finding partners who can help you with Latin America last mile access payments always had a last mile problem, and every company was trying to find partners that could increase their coverage at the last mile. And what I find fascinating now is you have people solving at the last mile plugging into stable coins, and you have people solving at the first mile, plugging into stable coins, and the stable coin becomes this consistent infrastructure. So now I don't need one to one partnerships with hundreds of different providers. I need to be one to one with stable coins, and that stable coin could be one to one with lots of companies who sold for the last mile. So it becomes this sort of more internet like approach, which is fascinating. I'm gonna link us to the next story, because I think the question then of how do you link to the last mile does always come back to the policy conversation, which we can't escape. There was a story in crypto news this week that the United Kingdom is going to introduce its own stable coin legislation within months. And of course, it featured an interview with one Dante disbar Tai is that familiar? Said that apparently we are within months, not years, of stable coin legislation in the UK. So if only I had somebody I could ask about this. Who might that be? Yeah,
Speaker 2 21:59
well, it's funny, because I've promised us legislation on a Wednesday for stable coins. What I've, of course, qualified my promise with was I never said which Wednesday or which year. I did, just recently return from a UK state visit, had the privilege of meeting with stakeholders across government, and I think now, with the benefit of a stable government in place in the United Kingdom, the UK can make good on lots of interest, long standing interest, frankly, from the Bank of England, the FCA and many other stakeholders, on ensuring that the City of London is in a flyover city when it comes to FinTech and digital asset innovations, my read of the policy direction of travel is there's an emerging understanding of how to treat stable coins. And candidly, my unsolicited national policy advice to the UK is very similar to the one I would give the US, which is that there's something to be said for a second mover advantage circle is the first company to be fully mica compliant. And like Chris described, you know, we chose France, and we're an E money issuer out of France. And so both our Euro denominated stable coin and USDC enjoy pass portability across all of Europe, but there's some features in mica that are a little bit overly prescriptive. And so if you're a rule maker in the United Kingdom, or if you're a rule maker in the US, we're both countries of strange bedfellows, and having a regulatory Game of Thrones and lots of equities and swim lanes to navigate, then you could sort of look at what has developed around the world and say, Okay, if I were to make rules for the sector today, would I err on the side of having more principled rules, or would I be overly prescriptive? My view is that what will come out of the UK will be much more principled around promoting competition in an, ideally a tech neutral manner. And what we should expect of the US is something relatively similar, in part because we have a very thriving payments ecosystem, and payments activities are regulated at the state level in the US, for example. That's why I think it's important to look at the stable coin conversation in line with the global geopolitical and geo economic discussion around digital currency, space races, and how the Western world will effectively, effectively compete in incentivizing sort of competition on a rules based matter. So I'm optimistic about what I've heard in this round of UK state visits. I may have to re qualify the concept that the rules may be coming in months, but how the news gets reported, and the precision of time is not mine to report as much as the signals being shared by stakeholders across the UK shows that we're moving on both sides of the Atlantic
Sy Taylor 24:33
as somebody quite close to the subjects as well. Dan Tai, I find it fascinating that the UK has a real opportunity. It would be true to form, to be more principles led, given the nature of UK regulation, tends to be principles LED. But it is also one where there is currently a review by the House of Lords Financial Services Committee looking into the second principle of competition. Within the regulatory agencies in the UK, and whether or not that's been fully adhered to, and I think the short answer is no, it hasn't, not for a long time, possibly not since Brexit. And there are active hopes for policy input and suggestions from the industry. And I will be presenting at the House of Lords in about a week's time, along with some colleagues from the industry to mention things along those lines, Chris, I'm interested in your view here, as you've looked at mica, you've looked at policy solutions around the world, what do you think those lessons learned are, and what does it mean for a business like yours to see news like this?
Speaker 3 25:32
That's exciting for us, because we've taken that regulation first approach, hence the Fiats and crypto licensing in all of our main markets. So the summary really is clear rules equals faster adoption. That's how we think it through. So mica, we obviously have in a Spanish fast we have an EU EMI, so technically, could also issue stable coins through our EMI, and then obviously offer stable coin services in in the EU as well through Mika. So this regulation is really helping in our enterprise type conversations. Because, you know, those big businesses, those global merchants, those global PSPs, are starting to go, Look, I can finally move now, because this regulation is coming in. And Simon, I do like what you mentioned by the the second move advantage, I think mic has come in, but it does leave other markets or other regulators to look at that and say, Where are the small tweaks that have created some friction for for guys like circle in launching through Europe first, and the UK seems to be picking up on that, and hopefully comes out with a slightly tweaked version of some of the pain points that some of the early regulators have kind of embed in their regulation and and tweak those for the better. And if that then feeds through into other jurisdictions, like the US, you know, I think we're just off to the races in 25 and the one thing I would add is there's definitely a bifurcation. You know, I saw it at money 2020, as well, is in Vegas, is there's that crypto discussion and there's the stable coin discussion. So despite Bitcoin going through 70k no one was talking about crypto. Everyone was just talking about stable coins. And I see you think you're seeing that same bifurcation in policy. You're seeing, how should we regulate crypto, and then how should we regulate stable coins? And I think that's a pragmatic way to first tackle the stable coin problem that is real use case is helping real people around the world and get that right before moving on to some of the more complicated, I guess, use more speculative use cases in crypto. If
Speaker 2 27:14
I could just 1/32 add on, because Chris is making great points. The first is that where the rules come, competition follows, and that's a good thing. It should be noted that while circle was the first major operator to get a mica, sort of compliant framework for its stable coins, the morning after Societe Generale in Paris made an announcement about a Euro denominated stable coin being offered. And that's great. The other editorial point would just be that when you look at this case, most of the successful stable coins reference the US dollar to varying degrees, but think about it that the US digital dollar enjoys more legal and regulatory clarity in continental Europe than it does in the United States. And I think that gap isn't going to last very long, in part because our regulators, we take a bit of a laissez faire approach, but I think now it's past time the US starts to enact laws for an industry and an innovation that fundamentally pays homage to the greenback. It's definitely
Speaker 1 28:08
encouraging to see and agree with all the points that it seems like it's a when, not if every major jurisdiction has some stable coin regulation. And then what are the details? How does one jurisdiction compare to each other, and it'll take years to play out, but I think having Mika in place now it's hard to imagine other jurisdictions don't try and have some similar framework. Question for you, Dante, I'm interested in what role you think the Bank of England will play. The UK seems unique in that they've been a hub for FinTech, they've been open to fintechs having direct accounts with the Bank of England. They've talked about the importance of central bank money, and we've covered that on previous podcasts. Do you see a world where stablecoin issuers are full reserve backing stablecoins that reference pounds with central bank accounts? How do you see the Bank of England creating the structure compared to Micah?
Speaker 2 29:04
Yeah, it's hard not to have. I mean, I have a very, somewhat fraught, but long standing relationship and very deep respect for the Bank of England, and many of its either current or former leaders, such as Sir John Cunliffe, have had lots of engagements with him in the past, and while he spoke of one of my prior projects as referred to the ill fated Libra project, as you know, black ships on the horizon, and really roused a conversation around among central banks about the role they have to play in money and their own payment systems innovations. I recently analogized to that conversation that hopefully newer and more regulated projects in this space find safe harbor in the United Kingdom to stick with the analogy. But I think any operator in payment systems and or stable coins that ignores the invisible hands but also the foundational permanence of central banks does so at their peril, and that, for example, here in the United States, you. SDC is a digital expression of the US economy and the safety and soundness of the underlying economy. And if you're a stable coin structured in a regulated manner mirroring the pound sterling, for example, you're going to be completely responsive to the monetary policy of the central bank and some of the recommendations we're hearing from the UK and then the Bank of England makes sense, which is the ability to have bank and non bank issuers of these innovations have cash custody at the central bank. Because many of the policy conversations over the last five years have been preoccupied of what risks would crypto introduce to the banking system and the real economy of crypto got big, but very few conversations focused on the risk going in the other direction. Risks from fractional reserve balance sheets on fully reserved digital tokens like stable coins, is a real question, and so having the central bank play a part of both the financial infrastructure discussion but also the Prudential risks is really key. And I'm encouraged again by the signs that the Bank of England is sort of now with a political environment that will enable these innovations to come on shore in the United Kingdom in a bigger way.
Sy Taylor 31:07
If I was to read the comments from Janet Yellen in the most optimistic tone, I would infer that they're looking for a similar thing in that rather than having stable coin issuers hold treasuries and bank deposits, perhaps it would be better if they had a direct claim on the central bank, so that from a prudential regulation and policy standpoint, they could see and they had oversight, but also the stablecoin would effectively act as cbdc at that point. There is no difference between the two. It is a cbdc, but it's also a stablecoin, and it potentially gets some of the benefits from the wholesale markets and some of the good work that the Bank of International Settlements is doing to look at bridging CBDCs and bridging currencies more directly, so we could end up with the Internet. And I am going to have to pause us here to thank our sponsors, and we will be right back this episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat back tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This podcast is also supported by our friends at digital asset, the creators of the Canton network, which is the first privacy enabled interoperable blockchain network designed specifically for regulated, real world assets. They recently joined a bunch of leading market participants to launch the global synchronizer, which is supported by the Linux Foundation under open governance the network's native utility token called Canton coin is also live, delivering decentralized interoperability at the backbone of the Canton network, with over $3.6 trillion in tokenized institutional assets, Canton Network is the largest and most diverse network for regulated real world assets. All right. Thank you to our sponsors. Our final story this week comes from a 16 Z crypto who dropped their state of crypto 2024 report, and it had some fascinating insights. For example, crypto activity, not prices hit all time highs with 220 monthly active crypto addresses, although, of course, 30 to 60 million of these are monthly active users. But mobile wallet use hit record highs driven by growth in countries like Nigeria, India and Argentina. It's the global south that continues to drive the volume. Of course, they say that stable coins have found product market fit. They say it represents 32% of all daily crypto usage, second only to defi, and it's totally uncorrelated to the booms and busts in the crypto markets. Trading volume and blockchains are processing more than 50 times as many transactions per second as they were four years ago. All of these points seem interrelated. Kai, I'm actually going to come to you first on this, because I don't know if you had chance to read this report, and I know you are in the position of speaking to lots of financial institutions, lots of folks around the world. Do you think this view has landed on stable coins? Do you think this view is landing on the market more broadly, or do you think was still work to do?
Speaker 1 34:55
Shout out Tai, it's a really good resource that you can. Provide to someone who's not following the space every day the same way that we are. And I feel like these state of crypto reports, it's interesting to go back to look at them each year and to see if crypto isn't your full time job, just what's happened. And I think there are a few areas that seem to resonate, particularly when you have more people coming back in that might not have spent much time on the space for the past few years, and what is just the improvement around the underlying infrastructure. And I find myself having this conversation more and more where there are a good number of folks who followed crypto in 2021 maybe early 2022 and then took a two year break kind of focus on something else that are now coming back and saying, oh, what's happening with these stable coins? And I think what they're finding is the underlying rails that stable coins run on, and the blockchains that exist have significantly improved. And so just the core experience of the speed, the cost, the number of options, the competition between layer twos and layer ones, like Solana. And so I think that there's now this kind of re education around, oh, the infrastructure works much, much better. And two years isn't that long of a time, but there have been really, really significant improvements. And so I think that that's getting people more excited that Sure, maybe a lot of the promises that people thought and the potential that blockchains had, it wasn't that they were wrong. It was just too early and the infrastructure didn't work. Now the infrastructure works, and so when we look at it again, we can revisit some of the things before and maybe that they'll work today. And so I think that was one of the biggest pieces that ASIC CD does a really good job just kind of breaking down the state of infrastructure. They've made a number of investments in that space.
Sy Taylor 36:46
Yeah, you go in too early, you play with it. It was hard to use. It was janky. Things have actually moved quite some way. But Chris, what about the enterprise story? What about for corporates? What about for the merchants? Have things changed there? Or is that side still a little janky, and maybe the consumer end is a bit better.
Speaker 3 37:03
It's a good question. If you take go back five years when we started, probably coined the term stable coin sandwich, but that was kind of what we were doing about five years ago. You know, these big corporates and these PSPs didn't really want to touch the stable coin, so it was a Fiat stable coin, Fiat piece. But what we have found over the last two years is these merchants and these PSPs are starting to look at it, at least the enterprise level ones, and going, Look, we're actually happy to approve USDC as a treasury asset inside our risk models and inside the Treasury. And therefore we're happy to find partners to enable us to interact with blockchains. And then we also want a partner who can abstract away which blockchain to choose. So our platform really does that. We've got multiple blockchains under the hood, and to Kai's point earlier, blockchains like Solana, getting TPS closer to a high performance payment system like Visa needs to be. So with all of those improvements on the infrastructure side, we've managed to abstract a lot of that complexity away through our platform. And we like to think of making blockchain payments as easy as bank payments, and we're starting to get there even on the enterprise side. And I think you're seeing a lot of those merchants, whether they're using the UI to execute a payment or do a mass payout on Solana, all these sorts of things, will use multiple different blockchains on the hood. I think we actually kind of then, you know, companies like bridge V and k are really starting to bring that enterprise level platform to merchants and PSPs, given the progress we've made on the underlying infrastructure. So I think we're there. There's obviously user adoption driving a lot of those emerging global south use cases, but I think the orchestration layers built on top are really enabling merchants to feel comfortable with stablecoin payments products
Sy Taylor 38:39
today. Dan Tai, I'm interested in some myth busting. There was a great chart in this Andreessen report that compares stable coins versus PayPal, Visa ACH and fed wire. And what I thought was fascinating is they break down the transaction volume versus the number of transactions. So for example, fed wire has a transaction volume in dollars of something like 284 trillion, but has less than 50 million transactions, or 500 million transactions happening on it's tiny, whereas something like Visa has far less transactions, less than 1% of the transactions, sorry, far less volume, 3 trillion of overall Volume, but 59 billion overall transactions. So a lot more transactions happening. What was fascinating about stable coins is it both had a high transaction volume and a high number of transactions. And so what that implied to me is there's a lot of trading activity that you would see, a lot of corporate and institutional money moves on a rail like fed wire. So you don't see a lot of transactions, but the overall value is very, very large, whereas visa is typically the consumer, the business, paying things, moving money, doing it quickly. It has to be high performance. So you see a way higher transaction volume, but perhaps less overall dollars sent still. Coins seem to be the only thing that is both. So is it interesting to you, or have you considered that this thing could be both a Fed wire and more of a consumer rail? Is that something you'd come across in your travels before? And do you think that's confusing the market a little bit?
Speaker 2 40:17
I think in some respects it would defy traditional nomenclature and data analysis, because in some respects, it's a non traditional financial product, right? And one of the reasons over the last two years we've been putting out these USDC economy reports is to shine a light on what are the types of use cases that digital money would support if digital money was studying itself and providing analytics around it, and you have to look at the three attributes of money to fully understand the metrics that would correspond with a stable coin, the store of value, the medium of exchange, and a unit of measure, USDC at rest, in digital wallets all over the world, in more than 200 countries, is a digital, dollar denominated store of value for people. So it may not be moving in the classical payments use case, because it's serving as a hedge against domestic hyperinflationary currency. And a big percentage of USDC, our last report showed that up to 70% of it is off of exchanges in externally owned wallet addresses supporting the store of value, but at the same time, the all time transaction volume USDC has supported alone is $17 trillion since first issuance to today. And that's a cumulative number that in some ways the real flywheel will not completely take effect until you start to see integration with merchant services providers, the stripe story is going to be really dispositive about what happens when stable coins get plugged into real world commerce, but we cannot ignore the internet native or the digital asset native use cases that they already support today. But to fully understand their metrics, I think some of these charts are in some respects false comparisons, because the payment rails of today eventually will also accept stable coins as a settlement asset on their networks, and so a visa, a MasterCard, a stripe and these types of firms integrating stable coins in their own activity won't displace their activity, necessarily. It'll just make stable coin a settlement asset on traditional networks as well, but on its own, really looking at the metrics, and again, our two years worth of USDC economy reports underscore a store of value use case is a really prevalent one, and that a lot of the real metrics around volume are also driven, of course, by capital market activity and, of course, payments activities, which is encouraging more and more of the flywheel with household name brands, Stripe just being the latest among them. Carrie,
Sy Taylor 42:44
your thoughts on the confusion in some of the use cases, and one of the myths I hear is it's all for speculation and trading and that sort of thing. What's your thought? Though?
Speaker 1 42:54
First, I think you have to be really careful with the on chain data, and that's something we've been very focused on, and we put out a dashboard, visa on chain analytics.com, and I think that there is just a lot of noise, in many ways. It's not a judgment towards stablecoins. I think one of the things that makes them really interesting is that they're one of the more general purpose value transfer networks around that are used for potentially 1000s of different use cases, that it's $1 that you're transferring, and could be everything from a fraction of a penny to a billion dollar transfer that effectively can run over the same network. I think that that's really interesting. And then the ability to write smart contracts enable automated payments. A bunch of interesting things there. But what that leads to is, when you just look at the data in aggregate, you're lumping together all of those different use cases. And what we've seen is there's really a small number of not even just use cases, but individual addresses and users of stable coins that account for a disproportionate amount of activity, and I think that that's a lot of the algorithmic trading and arbitrage. It's not to say that that's not useful economic activity, but you're actually you'd compare that more to NASDAQ volume than you would to payment volume. So I think you just have to be really, really careful, and we're trying to do everything we can both creating new adjusted transaction methodologies on the dashboard I mentioned, as well as just talking to consumers. And I think the report that we put out a few months ago finding that we are seeing this decoupling of crypto users who have stable coins. They're using them as store value. They're using them for payments. They're not just using them for crypto trading. And I think that you got to look at the data, but with a ability to separate the signal from noise, and you got to talk to customers, talk to developers to get a better picture. So that's what we recommend. This is precisely the reason why we put out the piece of real estate, usdc.com was to try to create this kind of single source of truth as well in real time. Am on developments with the market and end users, precisely for the reasons that Kai just mentioned. Chris,
Sy Taylor 45:05
as you look out over the next sort of six to 12 months, what are you seeing? What are you hearing from the payments industry and from other actors in the market? And what do you think somebody who's in the payments industry can expect, and somebody that's interested in stable coins. Can expect over the next sort of 12 months,
Speaker 3 45:23
what we're definitely seeing is a massive increase in interest across the space. It's investor interest, it's large PSP interest, it's merchant interest in really figuring out how they can use this. I'm sure every conversation in every PSP boardroom is what's your stable COIN strategy, basically. But you know one thing we've always held true, and hence we sat at this intersection of bank rails and blockchain Rails is the future of payments is multi rail. And that means RTP rails across Fiat. That means stable coin rails across stable coins running on blockchains. And I think the more and more people in the industry and in the payments industry are starting to come to that same kind of world view where one rail is not going to win them all, but global payments, TPV is moving on chain. It's really, really, really early, but I think as stable coins and stable coin payments start chipping away at this, global payments TPV, and more and more use cases get moved on chain, I think we're gonna win for an exciting time, you know. And I think we just started to see that now, in terms of early adoption, is starting to move slightly more mainstream, and 2025 could be a another breakout year for stablecoins. So that's really where we at.
Sy Taylor 46:25
Don Tai, how about yourself for prognosis for 12 months time, what we'll be talking about
Speaker 2 46:29
in 12 months time, we will look back at 2025. Is really the year where we have harmonization under the principal global currencies for what stable coins will do and how they'll be treated in sort of legal and banking circles, and I think that's a critical piece of the puzzle. And then the real discussion, frankly, is about the infrastructure. The degrees to which these innovations become fully interoperable and almost universally accessible to end users will have little to do with the stable coin itself, and more to do with the physical infrastructure on which they ride the rails. And so my analogy is talking about stable coins, CBDCs, or tokenized deposits, is like designing a train engine but not caring about the rail network that it rides on. And so I will see in Carson's fintra net may come, but it would just be an intranet or an extranet amongst institutions. The real Internet of value is going to be built bottom up, open source, up and stable coins are already an escape velocity product that are serving millions of users around the world.
Sy Taylor 47:33
Tai, what are you seeing in stable coins over the next 12 months? Some
Speaker 1 47:37
of the biggest trends that we're looking at is the role that banks will play. And just more and more banks starting to look closely at the space, figure out, do they want to get into reserve holding, reserve assets and settlement infrastructure and Fiat for existing stable coin issuers? Do they want to create their own individuals branded stable coins? Do they want to join stable coin consortiums? So I think there are a lot of really interesting discussions. And we've said this many times, if stablecoins are going to get to a trillion dollars in circulation and grow another 5x plus from here, you're going to need participation from many of the largest banks in the world. And I think that requires the regulatory environment to be clarified. That requires banks to really lean in and get much more knowledgeable about the underlying infrastructure, and then I think there are a lot of different ways that it could play out, but we're really excited about just the opportunity for visa to help banks navigate the ecosystem and figure out what their strategy is and how to execute it here. Here,
Sy Taylor 48:36
well, that does about dealers for time this week, but I want to thank everybody for listening to this stable coins coming of age moment, because it's really exciting for me as a payments nerd to see and walk the halls of money 2020, and have people ask me about it for the first time in a few years. And to I'm not just the FinTech guy anymore. It's like, did wait? Don't you know about stable coins as well? So yeah, they're kind of interesting. You should check them out. They're really cool. Here's why. So that's fascinating to me to see that shift in the market sentiment and narrative. But if people do want to find out more about our guests and what they're doing, Dante, where can people find out more about you and what you're up to?
Speaker 2 49:16
Sure, well, look, I'm on all the requisite social media platforms. I have my own personal website, Dante disparte.com for the musings over the years, and then obviously go to circle to learn more about circle and usdc.com as well to learn about our dollar stable coin. USDC.
Sy Taylor 49:32
Chris, how about you and bvnk? Yeah. So
Speaker 3 49:35
I'm definitely the best place to get me is on LinkedIn, just Chris Holmes and bvnk.com as you can find all things about our business
Sy Taylor 49:42
and Kai
Unknown Speaker 49:44
on Twitter, at Kai Sheffield and visa.com/crypto
Sy Taylor 49:47
you find me at sy Taylor on Twitter, or Simon Taylor on LinkedIn, FinTech brain.com and if you haven't already subscribed, why would you not, after an episode like this, subscribe to tokenize on Apple. Spotify, or wherever you could get your podcasts. And finally, if you enjoyed this show and want more, leave us a review. It legit helps others find the show. Thank you to our guests. Thank you for listening. Bye for now.