On Ep. 54 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Diogo Monica, GP @ Haun Ventures and Michelle O'Connor, Founder @ The Digital Future to discuss Tempo's $500M funding round, the rise of vertically integrated payment blockchains and more!
On Ep. 54 of Tokenized, Simon Taylor, GTM @ Tempo, and Cuy Sheffield, Head of Crypto @ Visa, are joined by Diogo Monica, GP @ Haun Ventures and Michelle O'Connor, Founder @ The Digital Future to discuss Tempo's $500M funding round, the rise of vertically integrated payment blockchains and more!
Timestamps:
Tokenized is sponsored by Visa
A world leader in digital payments, Visa is bridging the gap between traditional financial institutions and innovative blockchain networks, helping players in the payments ecosystem navigate the ever-evolving world of tokenized fiat currencies with confidence and ease. Learn more at visa.com/crypto.
Tokenized is presented by Bridge, a Stripe company.
Just like the internet made information global, stablecoins are making money global. And Bridge, a Stripe company, is the infrastructure powering that shift. Built for speed, scale, and simplicity, Bridge helps businesses send, store, convert, and spend stablecoins instantly, all without borders or having to navigate the complexities of crypto. Learn more at bridge.xyz
Tokenized is also presented by Centrifuge
With over $1 billion in total value locked, Centrifuge works with major institutional partners to tokenize and distribute their funds — and with capital allocators onchain to invest and manage yield. Through every crypto cycle, Centrifuge has been building — and today, it’s the market leader in tokenizing real-world assets. Learn more at centrifuge.io
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We’d also like to remind you that the views or opinions of our contributors today are their own and do not necessarily reflect those of the companies they are representing. Nothing we say should be taken as tax, financial, investment or legal advice, do your own research!
Music by Henry McLean
Unknown Speaker 00:00
Simon,
Sy Taylor 00:10
welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I'm your host for today, author at FinTech, brain food and head of market. Dev over at tempo. Welcoming back from your many, many travels, the one and only the man of the hour, the man with the power. Kai Sheffield, how are you? My friend?
Cuy Sheffield 00:34
I am fantastic. We got money 2020 this weekend. It's gonna be a great time. Excited for the show today, with some old friends coming up. Back up,
Sy Taylor 00:42
FinTech never sleeps. Stable coins never sleep. We have the best possible guests. Diogo Monica, General Partner at horn ventures, co founder and exec chairman of Anchorage digital, chairman of the NIA foundation. Do you just like chairs? What's going on here? Man, I think
Speaker 1 00:58
it's a very fancy title. So when I get to select my own titles, I usually I usually tend towards
Sy Taylor 01:04
that, but not a VC, a capital allocator. We will remember that one. Yeah,
Speaker 1 01:08
I'm an engineer that allocates capital, not a VC. That's exactly right. Thank you for remembering Simon line in the sun. Also editorial note, stable coins, RWAs and microphones. That is the third really like leg of the stool here, third
Sy Taylor 01:22
leg of the stool, we're appreciating the microphone chat that was on before we hit record. But thankfully, somebody without overly verbose opinions of microphones is also joining us. Michelle O'Connor, founder of digital future, former VP of market expansion at taxbit, and currently the sitting US ambassador for the global blockchain Business Council. Genuine legend. Thank you for being on the show. How are you,
Speaker 2 01:44
Michelle, thank you for having me. I feel like I need a few more titles to share the stage.
Unknown Speaker 01:49
By the end of this podcast, we will
Sy Taylor 01:52
have a few new ones for you. Yes, perfect. Kai is the only uni titled guy here, actually, that's you're feeling kind of lonely. What's going on? It's a matter of time, all right, before we get into the content, I've got to remind everybody that views and opinions of contributors today are their own and might not reflect those of companies they represent. Please don't take anything we say as tax, legal, financial or investment advice. Please do your own research. And of course, I got to remind you that this podcast is sponsored by centrifuge. Centrifuge exists to bring institutional grade finance products fully on chain. Centrifuge is a full lifecycle defi platform, from asset creation and structuring to defi integration, and it's cross asset by design. What that means is they work across private credit, ETFs and equities, making your financial products much more accessible and much more efficient. This is the tokenization you keep hearing about, unlocked for all asset classes by centrifuge. Kai, over to you for the first story this week.
Cuy Sheffield 03:02
All right from Fortune, crypto stripe backed blockchain tempo raises $500 million so first off, Simon, congrats to you and the team. Pretty big round. This was reportedly led by green oaks and thrive capital. It also came at the same time as dank red Feist, one of the leading Ethereum researchers, a legend, announced that he was joining tempo. So first Simon, anything else you could share about this? Congrats. How does it feel? Tell us what it's like raising 500
Sy Taylor 03:32
million. I can't talk about that, but what I can talk about is dankrad is probably one of the few people on Earth, like LeBron or Madonna that get their own first name, and everybody knows what it means, genuinely excited to have a world class talent who's been there and contributed more than anybody. One of the other things you might not have seen in the news as well is that tempo also acquired Ithaca, which Georgios has been leading for many years, one of the premier contributors to the Ethereum ecosystem, builders of the Porto client, builders of ref really pushing the performance, speed and scalability of the EVM ecosystem. So how do I feel? I feel massively out of my depth. Kai. I am surrounded by people far better at me, who know what they're talking about. Thankfully, I'm hanging on to this British accent and trying to explain things to people slowly in the hope that they still think I'm smart. I'm going to have to buy different glasses, but no genuinely overwhelmed by this talent and really enjoying building a chain and thinking about the trade offs and trying to make it payments native and solve real problems, we've got product market fit. We've got an unlimited opportunity, I think the time's now to really do something special, and why not? The pressure's on them. We've assembled possibly the best team, but we really need to deliver on that, and we feel that responsibility. I certainly do.
Speaker 1 04:55
You know what it's personal opinion. Let me just interject and say that the. Thing that I don't like about this is that before all of this tempo thing, it was pretty easy to identify the Death Star of crypto, which was absolutely Coinbase. And now it's there's competition for the Death Star. And I am not sure if I'm happy about this or not, so I don't know which one is the Death Star anymore.
Sy Taylor 05:16
We don't have a main net yet, so, like, let's try ship something first before it could be anything, you know,
Cuy Sheffield 05:23
yeah, save or like Diogo, like, payments chains are a thing. There are people on both sides. Like, how do you approach from the investment hat, what is the opportunity here? Why is everyone so excited about payment chains
Speaker 1 05:36
in the first place? Look, I think I know what the hypothetical, you know, theoretical framework, but the answer is, we don't know. We don't know. We don't know what the market structure is going to be. These things are new. What we know is very great companies with great brands and great engineering teams are putting serious money behind New, vertically integrated blockchains, in some cases, that actually have as a single purpose. In some cases, say, stable coin payments, stable coin effects, or just generalized versions of those of those areas, some of them don't even have smart contracts, which is kind of surprising. Some of these specific blockchains that are coming out for L ones, for stables, don't even have smart contracts under the idea that they can be much faster and they don't have to be generalizable, because they're like single purpose. But what we're seeing now, in my mind, is, I think one of the things that is less talked about is whole ecosystems. And so somebody like Stripe, somebody like these companies, can create their own ecosystems based on the blockchain, where they can actually provide services, Oracle services, API services, payment services, and then developers can just come and build in their ecosystem. Before an ecosystem was a set of APIs, maybe dozens, and a documentation page that showed you how to use them, maybe now the new actual ecosystems are just smart contract languages running on these blockchains by these ecosystems and that have these sync points into the businesses of the participants that allow them to make money from it. I think that's my best explanation of what's actually coming next and why this actually really makes sense over the long term,
Cuy Sheffield 07:00
Michelle, you've been following stable coins for a long time. How do you think about the evolution of stable coins going multi chain using existing chains now you've got general purpose blockchains where all the stable coin supply is trying to figure out how they can compete with a next generation of payments chains that are coming online. What is this battle going to look like, and is there the other side of it to say, You know what? It's actually the general purpose. It's going to be Ethereum. It's going to be Solana, that are going to be the chains where a lot of the activity continues to grow.
Speaker 2 07:33
I think if we look the trends in the industry over, let's say the last decade, where we are with getting to real world use and solving the problems of what the crypto industry has been wanting to do since its onset. The promise of stable coins has long been stuck, I believe, within industries that weren't using it at scale or weren't really realizing the purpose, they were jumping on stable coin summer last year, because everyone was talking about it. This now brings forward simplification, making it easier and accessible for people who don't have huge teams, don't have big dev teams, they can get in, plug in, go and run. So that's what I think is most excited about it. We'll see probably in the next 12 months. Feels like a lifetime from now, in the next 12 months, the conversation will likely be who is winning this and I'm not going to make a prediction, because I don't want to see on X someone calling out this prediction then telling me I'm wrong, so I'm going to reserve that. But what's exciting is is really the ability for wider adoption and testing and experimentation,
Sy Taylor 08:47
if I was just to add some color to this, you know why I got excited about tempo originally? There's definitely a lot of lessons learned, I think, from reps and cycles in every part of the industry we've had over the past decade. And I think one of the big lessons is 99% of people don't use stable coins every day, and for those people that don't use it, a lot of that is about building up to their problem and doing product stuff. We can have the highest ideals, but we've also got to solve a problem, and some of the things that the traditional payments industry does really, really well are not done well in crypto, things like reliability, things like when I make a payment, it's going to go through, and it's going to go through fairly consistently, surprisingly hard to do in most chains if they get congested, like we saw a couple of weekends ago with the big depegging That wasn't De pegging of Athena and the auto de leveraging. Suddenly, fees are spiking. Suddenly we've got network congestion. What if you make payments of first class citizen? Because that would be what everybody else would expect. You can't have payroll not happen. You can't have critical market structures go down if you're going to bring in the 99% Percent. But if you can have a world in which you start from the payments and you build up, then you can start to layer on other products over time, and you can get more complex, but start simple and build there and build for the 99% I don't think that that's wrong, but I don't think that that obviates the need for other things to go away either. We tend to paint this as a binary, like, oh, it's gonna be all this chain or that chain and this religion and that religion. I suspect there will be many chains, but there's a frontier. We've not finished the evolution of what on Chain Finance is, and on chain payments really do need to evolve to solve for the 99% and it's really exciting to be working with some basic quality of life features for payments nerds, like having support for memo fields, like having an enshrined AMM, like having native account abstraction at the chain level, so you don't have to write a separate smart contract if you want to get rid of these gas fees for users, the amount of things we've had to build on top of Ethereum and other chains because they were built a certain way is quite dramatic. What if the chain just took care of that for you? And I think you can only learn that by standing on the shoulders of people who've built other things that have been successful. So I don't think it's an either or. I think it's a learn from everybody and try and solve a problem for
Unknown Speaker 11:20
somebody, absolutely
Speaker 1 11:21
the only thing that I would say Kai, just like, let me it's not quite pushback. Maybe I'll frame it as pushback. So this is interesting, and there's like, some active debate, but the main thing is that if you take away requirements, things are just much easier. Of course, if you take decentralization as a requirement, things are faster. Of course, you can get lower latency and higher availability. And like every engineer knows, if you take requirements just like it becomes much easier to build these systems. And I think the best, most honest description of what this is at its core is the form factor of smart contracts on these ledgers that have these kinds of ability for developers to interact with permissionlessly, are a fantastic form factor that is winning out on the internet for entrepreneurs building their companies, and this is the companies and this is the companies adapting to that form factor. So we're basically like, moving away from just APIs and REST APIs to No, no smart contracts running on this. I think that is actually a fair version, but there are still corporate APIs. Generally, I think they're going to be much more powerful, because they're going to likely, we don't know, again, it's not main Ed, but in many of these cases, they're going to likely be permissionless, and people will be able to run arbitrary smart contracts and compose them, arguably much easier to integrate with two different blockchains, a main permissionless one that is public and a semi permissioned one that is private, than with just an API and a database on the background. So I think it is
Sy Taylor 12:34
a positive movement. Just for clarity, the intent of tempo is to be decentralized, permissionless over time, starting with a closed validator set, right? So, and we've seen other chains go that route before, it's also fully open to every single competitor in the stripe stack. So other bridge competitors, other privy competitors, other payments companies, could all use this platform. But this platform doesn't exist at the scale that could handle the volume of a payments business that's moving trillions on an annual basis. So really, the design target is not, how do you just take away requirements? It's, How do you solve requirements that are not yet solved? So it's just a it's a refill. Okay, that's fair. But the main
Speaker 1 13:12
requirement that you're taking away, that the crypto community started out with, with Bitcoin, was sovereign resistance. And sovereign resistance just leads you to a totally different set of solutions than the ones that we're in. So it sort of feels like we started with solvent resistance, and we're sort of like chipping away at, like, the requirements. You see that with hyper liquid. You see that with Solana, you see that with all of these chains, we're gonna, like, chip away at it, and you sort of like create a spectrum. And I love this. I love that there's a spectrum for us to engage with. And I love that if I wanna go very fast throughput, high availability, amazing engineering teams, I can go to something like tempo, which, you know, is more corporate. There's gonna be more SLAs, that type of like behavior. And if I want something on the fully centralized spectrum, I can go towards something more like Ethereum. And so I like this. I think this is great for the ecosystem. Tai,
Sy Taylor 13:53
have you been getting lots of questions, lots
Cuy Sheffield 13:56
of questions about everything? I think part of the debate that's been interesting to see is it's almost like you had very general purpose l ones, and then you have this thesis of app chains that may likely be L twos. And you had the Ethereum ecosystem, you had the OP stack, you had arbitrum, you had the success of base. And then now, when you have these payments chains, pretty much every payments chain, at least most of them are L ones. And so you kind of have this tension of, how do you think about the value and the trade offs of bootstrapping a new l1 versus building an l2 or a layer on top of an existing chain? So Michelle, like, Do you have a take on like that has gotten people really riled up on Twitter, of like, why isn't this an l2 like, I demand you tell me why this isn't an l2 like, Are people overreacting? Like, how do you think about the different design decisions between those?
Speaker 2 14:48
I always step back and look at what are we trying to solve for, and if we look at what we're trying to solve for, getting out of our own way, I think would serve a lot of us. Oftentimes. Remember when we get on a hill and people get really upset about it at the end of the day, while their opinion is valid and should be respected, why does it matter? Is it a moral stance of why they need to do it? Is it I believe in this, or is it to solve a problem, or is it to build on top or increase community presence, perception, et cetera. If you get all of the kind of noise nonsense out of it, why does it matter? It should be to matter to improve, to get to the 99% to keep this industry around, to keep building back better. And we get in our own way so much, and we get in Twitter Spats that are sometimes so interesting, and if you watch it, you just go, why are we down here in the weeds? And someone outside of the industry watching goes, What the hell are they even talking about? And someone get me a thesaurus so I can follow this thread. Can
Speaker 1 15:56
I just say that I think actually is 80% like the majority of the thing was at once. And I want to fight with Simon on this, but it's syndrome, not invented here. Syndrome, it's 80% it where it was not invented here. And thus I don't want to use it, because I'm an engineer and I can actually build it myself. So I'm just going to continue iterating. And, you know, there's cool technology that comes out. And so not invented here. Syndrome, I think accounts for 80% of it. And I think the 20% of it is, you know, the things that Simon are saying, is saying which is, no, there's like these memos and these utility fields. But by the way, exists in many blockchains, viewing keys, privacy keys. I mean arbitrary data can be written in any block, and so you can sort of interpret it at the application level, whatever you want, into this thing. And you can have authentic, authenticated messages. There's like so many ways for you to do this. So I think it's 20% that which I recognize, but 80% non inventor tier syndrome.
Unknown Speaker 16:41
I like NIH I haven't heard that before.
Sy Taylor 16:44
Oh, it's a classic. It exists inside every organization to some extent. But I will point you to the history of Liam and Georgios. You know, they're helping build base. Liam the architect of the op stack. This is people who've tried l2 and sort of found them wanting in terms of performance, and found them wanting in terms of what you can bake into the chain itself. And I just think there's a genuine attempt to make something that is fast enough to be internet scale infrastructure, and there isn't yet something that could be internet scale infrastructure, and by tapping into different distribution partners, maybe you could test that it's also very much the case. You're absolutely right. Diogo, that, like a lot of that, like memo fields and referencing, and it does exist in Solana, it exists elsewhere. Nobody kind of uses it. But if you enshrine it, and you make it a part of how you do every single payment, you make the default different. And I think making the default different is powerful, and you sort of almost have to go somewhere else and start with a different customer segment to make the default different. That's kind of something between the lines. At some point,
Speaker 1 17:47
I agree with all that. Let me just point out that that is what someone suffering from NIH syndrome would say, by the way, that is typically like they come into a new company. Oh, it needs to be faster, that nothing exists right now at scale, and thus we need to build something completely new. So let me just say that that is if we're in the we're in the doctor right now, Simon, I would prescribe you with, oh, maybe you are suffering from some NIH,
Sy Taylor 18:07
yeah, potentially. But then, you know, you go speak to a bunch of folks. You listen to them, and you say, what problems are you having? Like, why haven't you gone on chain yet? And they'll tell you the same things. And you then go speak to the lawyers inside their organization, and they'll tell you the same things. And then you go speak to the engineers, and they'll say, ah, you know, this is really annoying us, and we're getting stuck on this all the time. And if you were going to make really great developer tooling and great docs and great everything else, I think that's what. If you look back as, you know, I'm a payments nerd. What stripe did really well was allow anybody to accept payments with seven lines of code. Being able to accept payments on the internet existed long before stripe, making it so easy that almost anybody could do it in seven lines of code. That's incredibly difficult. You can tell a lot of effort went into making that look effortless, and that is there's almost no rational reason. It's 1000s of tiny little decisions that add up to one great experience, and that product mindset, I think, has sort of been missing from the conversation. I think that's her going to move us to the next story, because it seems to be we've gone from stable coin summer to acquisition fall. Classic example over here is ripple acquiring a company called G Treasury for a billion dollars. This is a treasury management system provider, and it's the third major acquisition for ripple in 2025 Their clients include major corporations such as American Airlines, good year, Volvo, and they process $12.5 trillion per in payments volume, I think to date, maybe not annually. It wasn't really clear they was a very vague figure that they threw out Michelle corporate treasury, not something that we've historically thought with on Chain Finance, but seems to be gaining momentum. Why this? For ripple. Why corporate treasury? For stable coins? What are your thoughts there?
Speaker 2 20:03
So a little history that will go and then I'll get to it. So I started at bit reserve in, let's say, 2014 and the founder, Halsey minor, his vision was corporate treasury, because he couldn't be banked because he was a billionaire who'd had a few blips and bankruptcies. So literally, people wouldn't bank him and his vision in creating bit reserve. Well, I'm just going to make something for myself that can address this and build corporate treasuries. They're going to tokenize XYZ. So fast forward a decade plus later, it's really interesting to see this run of acquisitions that ripple has had. You know, we saw the headline when they were looking at Circle, etc, the corporate treasury. To me, it makes such sense that I'm surprised it's taken so long. But that's often how it is. It's that aha moment, or, yes, they're ready, and then it's time, or you need the first one to make the jump, and then the rest follow. What was surprising with this was the size to your point, the volume and time in which they were saying the volume. I kind of wanted to go deeper and see what that meant, because it's understanding then how much ripple is growing and where they're growing, and what that looks like with this acquisition. So overall, I think it's the first of many, and it's sort of the next to bring on chain at scale. So they've got a few more months. Let's see who else they get in by end of year.
Cuy Sheffield 21:34
It seems like they're really executing on an M and a playbook and acquiring some assets that are pretty unique from a distribution standpoint. And so it started with a hidden road acquisition over a billion dollars a few months ago, and then now G treasury. And I think that the question that I have ripple is a really interesting business that has multiple pieces. It seems clear that with hidden road and now G treasury, there's an opportunity to integrate their stable coin, ripple USD or R L USD. And if you own the interface, you own the distribution, you're orchestrating payments or the prime brokerage business that they have being able to embed R L USD as the default in interesting ways like that seems like something that's a pretty clear path for them to execute. Then my question is, well, is it going to be R L USD running on xrpl, or is it going to be R L USD running on existing chains? Last time I checked, the majority of R L USD supply is actually running on Ethereum, and it seems like R L USD is this like multi chain, stable coin. It's not necessarily xrpl. And so how much is xrpl going to be a part of it? Is that gonna get adoption? And then the last piece is XRP. Of Okay, well, if you're not using xrpl, are you using XRP? Are you gonna try and embed XRP as a bridge currency, which seemed like that was the strategy many years ago, but then now it's like stable coins have played that role as the bridge currency. And so I could absolutely see scenarios that they're able to successfully scale R L USD. It seems to be growing pretty quickly today, and like with these assets, could see them integrating it in but What's not clear yet is how r l USD translates to xrpl, translates to XRP, and then it seems like the engine that's funding a lot of this growth and acquisition is ultimately XRP, with the value expected of coming back from RL, USD. And so you have this like really interesting flywheel that is playing out for them, but not necessarily clear how the pieces are connecting from a fundamental, practical standpoint, and so respect to their executing on the M and A path. And I could see paths here, but Diogo, how do you think about that? RL, USC, xrpl, XRP, like, how should we reconcile those together? You
Speaker 1 23:56
come to me because, you know, I have the spicy takes. I think my take is that they don't even know themselves. That's what's happening. And it is primarily a currency, or cryptocurrency that has gained mind share, and it's a marketing engine that is now being turned through M and A into an actual business. I think that's the best description for it. And I think the hypothesis, by the way, on the treasury management and on the acquisition of these companies, is if you have the customer relationship, if you have the flow, if you have the assets for custody, management, administration, then you'll be able to actually influence which stable coin is appointing. So to a certain extent, it could actually be the go to market motion that you're in, like you get enough volume, get enough business, and then you can actually have a seat at the table to decide which currency goes in. I actually really appreciate what they've been doing for the space in particular, I think it's worth pointing out that before 2025 I believe there was exactly zero, over a billion dollar M and a crypto zero. And then in 2025 alone, we've already had four, maybe five, acquisitions over a billion dollars. And this has just turned candidly, the conversation in VC land from tokens are the thing that matters in crypto. Two. Oh, it turns out equity actually has a lot of value, and you can have major outcomes here. And obviously, like circles IPO and the IPOs that have been happening also are the other side of the coin here, also on the equity piece. And so those together have been amazing for our portfolio, for all of our companies. And having an acquire there's actually discerning of the business quality and trying to, like, compose them into something that they're going to use to dominate on their stable coin, I think is interesting, and it helps us all, so I'm not upset about it, but I also don't understand the strategy.
Sy Taylor 25:30
What I think is interesting is how every large bank's biggest customers have been asking them what they're going to be doing with stable coins. Because from a treasury management standpoint, if I'm Netflix, or if I'm Coca Cola, and I have to deal with lots of markets and lots of long tail currencies that gets really expensive and really hard, and I might have 35 banks, which means each legal entity might have 10 different banks. So per legal entity, of which maybe I have 100 I have 30 bank accounts per legal NC, each with a different login, and I have to reconcile all of that against my treasury management system or my ELP, and I probably need a staff of a couple 100 people to do just that, just to know where my money is and move it. People think this is a fees problem. It's mostly a complexity issue, and the idea of being able to do, you know, like one wallet to rule them all per legal entity, where all of the deposits from all of the banks and all of my stable coins can just sit in a single pane of glass is like Nirvana to most CFOs, if you could get them there. So going on chain helps you with some of that. But there's also then, like, a bunch of gnarly legal questions of like, Wait, so could the balances I have at BNY sit inside a wallet from Citibank? What does that mean? Is that still inside the bank? Is that outside the bank? So I look at this acquisition as being like the on chain finance world coming into CFOs and treasury management, but you've also got the banks who are being pushed by their CFOs and their biggest corporate clients to figure out how they're going to start doing some tokenization, because the banks are struggling, to some extent, to sell their token services to other clients, outside of ant group with a few technology companies. Because what good is it to have token services that I can only move with one bank? When, as a global culprit, I have 2030, banks, I need this to interoperate, then the on chain world interoperates, but it doesn't work with the rest of my universe. So for the next three to five years, these things are going to start to collide, and I think that's going to be like treasury management is going to become a really crucial point. Kai, how much are you seeing treasury management in your conversations day to day? And how much do you think that is part of the future piece here? Or are you still more focused on payouts and other use cases? We've had
Cuy Sheffield 27:55
some really interesting discussions with Treasury teams at large merchants. I think that the biggest takeaway is they're all in very much like learning mode. They're not ready to do something today, but it's like one of the priorities to really understand the use cases and what it can mean. I've found that privacy has come up multiple times where that has been something that they're like, wait, what you're telling me that there might be a hedge fund that is able to detect that these wallets are supplier payments, and figure out how much of these goods that we're buying, like, over time, like, that's insane. Like, it's the last thing that I want. And so I think privacy is probably going to be a major area that has to be solved if you're going to see the Coca Colas of the world, like moving billions and billions of dollars on chain. But I think there's clear interest, and I'm fascinated by this idea of you could separate the interface from the underlying money. And traditionally, those have been the same, that you have a bank login, and you have the bank's money there, and you're dependent upon, okay, what features do you want in the interface? How is that going to update, versus if you have a institutional grade self custodial wallet infrastructure, or could even be custodial, that could then innovate and compete around, what is the interface for a corporate treasurer? But like you mentioned, having the forms of money, whether they're tokenized deposits or stable coins that sit behind it and can all work within the same interface. I think that that makes a lot of sense in principle, but you need privacy. You still have to figure out the tax and the accounting and the connections into the existing Treasury systems. You need FX. I think that's the other thing that comes up a lot. Is like, Okay, I operate in a bunch of currencies right now. I look at stable coins, and I only see dollars, and so when we have to convert from dollars to other currencies, well then you have to go back off chain. And what's the liquidity of going USDC to MXN versus going USD to MXN? And so I think we're a ways from getting to the on chain FX side. So I think it's very clear that Treasury is going to be a use case. I. I will be surprised if there are a lot of things happening in the next six to 12 months, but I would be shocked if there's not a lot of things happening in three years. And so it's one of those things that we're like right in between that period of
Speaker 2 30:11
adoption, some of the challenges that we saw at tax bit, which I just recently left managing globally. So let's say you want to use stable coins. You have different banks, different entities, different legal entities, different countries, different geographies, different regulatory bodies have different requirements, reporting, tax, et cetera. So it becomes something that should be very easy, moving instantly across borders to solve time, velocity, scale, save money, have more insight into what you have. Becomes really challenging because you have to layer in the reporting requirements, the regulatory requirements, the need for one to one based on what the government has. So it's different parts of a puzzle being solved, and everyone's saying they want to solve it, but now it's kind of a race of who's doing it first. Is one of the other challenges that we'll face. So it's not only the how do we make the interoperability challenge, it's how do we then make the regulatory and global synergy of how people work together? Because it's a whole other challenge that people are facing.
Sy Taylor 31:22
I think it was the BIS or somebody. Recently, one of the major regulators highlighted that the lack of harmonization of regulatory regimes was going to be the major problem. When we founded global digital finance in 2017 I called it global digital finance because, yeah, I mean, on chain is natively global, but regulation is not. So we were gonna need to harmonize some of this stuff from the very beginning. Like it's really great that the US has one regulatory approach, but China's taking a very different view of stable coins at the moment, maybe sort of pulling back a little bit after seemingly pushing forward through Hong Kong, Europe has a wildly different setup to the US. Then you see the UAE is out somewhere else, and then you've got the OECD countries that are just kind of looking to try and catch up, worried about dollarization. It's a difficult challenge right now to figure out, like, how do I do this as a global company? But there are these pockets where it sort of makes a lot of sense for if I do have dollars stacking up in different parts of the world, being able to collect those is useful. That's not for everybody, not for all the time. But I've talked in the past couple of episodes a few times about ant financial. They have their own l2 they've been pushing all of the banks to tokenize. They've been pushing them to do FX. They're starting to issue their own treasury management token outside of Europe itself. That is like typical Chinese company, three to five years ahead of everybody else, and showing you what corporate treasury will look like in three to five years, and almost pushing the financial institutions and everybody else to adapt to that, so that when everybody else catches up, the infrastructure is there and robust. And they've also, if you look at app, financials, l2 Jovi, they've really pushed the boundaries of like privacy tech. They're doing a lot on Trusted Execution environments. Fascinating company to watch. Well, speaking of regulation, we are actually going to a story soon, but I do want to pause and thank our sponsors before we hear from them. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap, uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat back tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is also brought to you by bridge a stripe company businesses need easier global money movement. Bridge is the stable coin orchestration platform that makes it simple to receive store issue and spend using stable coins. Companies like X, Shopify and airtm already use bridge to lower their costs simplify their global Treasury operations and expand their global reach. Learn how you can grow your business with instant global money movement using stable coins at bridge dot XYZ. Thank you to our sponsors. Next story came from well, just about everywhere but the governor of the Federal Reserve Governor, Waller has signaled kind of a major shift towards what was called a payments account, or a skinny version of a master account in a really fascinating speech, there are a couple of quotes we picked out here. I wanted to send a message that this is a new era for Federal Reserve and pay. Payments. The defi industry is not viewed with suspicion or scorn. Distributed ledgers and crypto are increasingly becoming woven into the fabric of payment and financial systems, and he's asked the Fed to explore the idea of a payment account, which he believed could be beneficial for entities focused on innovations in payments. It'd be remiss of me not to come to Diogo first on this, having run the gauntlet of getting fedmaster account access, going through the OCC and becoming a federally childhood bank, tell me first for the uninitiated, why is fedmaster account access useful and what's different about this payment account to traditional fed master
Speaker 1 35:42
accounts. I guess now doing it twice, or helping folks do it twice, it's the only insane person that is actually willing to do this twice. The other day, it was so funny, like I had an interview, and the folks the regulator, the main regulator, the first thing that they said when I came into this meeting was like, Diogo, welcome back. And I don't know exactly how to feel about this right now I should be happy about it, or if I should be extremely disappointed with the decisions that I've made in life. Look, I think the most high level view here is fed master account allows you to have access directly to the banking system. The Fed wire system allows you to have your own accounts and essentially Park money at the Fed. You also, in many cases, have access to the overnight window, and you get to do some fun stuff with access directly to those rates. So it's just the ultimate expression of being connected to the core banking infrastructure. And everyone would like it because it's a benefit that not that many folks have in that they have to pay yearly for in terms of compliance and operational cost to maintain it. So that's why everybody would like to have it. And if you think about all fintechs trying to actually, like move money around within the United States, but you at some point depend on someone that needs direct, fat master account to move all of the money around. I think it's kind of interesting from a policy perspective. I think Simon, you remember when the first narrow bank was actually being proposed and it was shot down by the Fed? By the Fed. And the complaints from the traditional banks was that, if there was a narrow bank and you had straight liabilities from the Fed, wouldn't this mean that everybody would just take their deposits away from the fractional reserve and just go straight to it, and then somehow crypto created a narrow bank called stable coins, and here we are. Now we sort of like backdoored into it. Now it's not exactly the same thing as you guys know, because, you know, there's treasury bills, which, you know, sort of works the same, but there's a portion of it that sits at some G SIB usually, and so that portion of it is still in the traditional fractional banking system, but we've sort of like reverse engineered into it. And now there's really cool other folks in other banks, banks with broker dealers doing settlement with T bills, and everybody going towards how can we reduce the risk of the system, and how can we actually not have fractional reserve here? How can we actually have full depository banks like anchorage take account of these things and work within this new system that we've created? I think that's a kind of fascinating conversation. I'm glad they're open to it. I think it removes leverage from the system. It makes the banking system safer in general. I don't think the concerns from traditional banks have actually been, you know, they're going to defend their own business. That's basically all I have to say about it, regardless of what the truth on the ground is. And that seems to be what's happening.
Cuy Sheffield 38:11
This seems like a really big deal. And the first thing I thought about we actually, we recorded a podcast, Simon, you and I, like, three years ago with George selgen, who was Professor of monetary theorist, who, like, talked about narrow banking. It's been this like concept that monetary nerds, like, have talked about for a long time in this idea of unbundling credit and lending from payments. Right now they're one of the same. You put your money in the bank, you get access to payment services, and the bank does lending. But there have been other countries, other times where that hasn't necessarily been the case. Now with FinTech, I think that FinTech, historically in the US, has always been built on top of banks. It's always been really an interface that is sitting on top of the bank. And then it's fascinating that other markets in UK, right? That you have fintechs who have direct master accounts with the Bank of England. And so it's not that this is unprecedented. It's almost that the Fed in the banks in the US have been very opposed to this for some period of time. But like Diogo said, stable coins seem to be accelerating this transition in the creation of new types of things that look like narrow banks. So what I'm really interested to see is, if you fast forward and you imagine in a few years, you might have stable coin issuers who have fed accounts, are they going to end up backing stable coins directly with central bank reserves, are they going to be able to operate a stable coin, end to end, without even needing a reserve bank and just being able to manage that? And then doesn't that start to look like synthetic cbdc, which is this other concept that the IMF was talking about, of like, you don't need the government to create cbdc. You could just give fed accounts to private sector companies, and you could actually. Actually have stable coins if you want it be backed one to one by central bank reserves, and so there are so many interesting products like Diogo mentioned, that this would open up. And then on the other side, so many potential competitive dynamics and challenges for banks if they now have a whole new class of fintechs and crypto companies who are going to be going as direct to the metal as possible, operating really lower cost payments and financial services that are separating credit from payments. So I think Waller, to his credit, has been really leaning into stable coins and been on the forefront of this for a while, ahead of his time, way ahead of his time. And so it's going to be really interesting to see how this plays out. And then what reaction banks have? Are they going to push back on this? Like, how does that play out? Because it's been a battle for a while.
Speaker 1 40:49
I mean, that is certainty, and they already have, yeah, yeah, that is a certainty. It's their business model that is at a risk they claim, right?
Sy Taylor 40:57
Michelle, I'm interested in your perspective on the part of this announcement that said that there would be no yield on the Fed master account reserves on like a traditional master account. So as a payments account, it is designed that you would almost not have positive economics in the way that a bank does from the overnight window, again designed to sort of separate payments. There's also an interesting interview I saw with Governor Waller recently. He was actually supportive of the bank position that stable coins should not pay yield. So whilst this, on the surface, is being reported as red meat for the crypto industry, there is this desire to Kai's point, to kind of continue to bifurcate payments from the other How do you think about the economic benefit here? Is this, like risk management, so I don't get de banked? Is this? I've got access to it. What do you think the upside here is, if this came to
Speaker 2 41:50
pass? It seems to me that it's trying to move fast, move ahead of time, and still mitigate some of the de banking issues. Banks are putting a lot against a lot, and there are some really interesting conversations happening in DC and other areas. I envision this will change. I do think is moving toward where someone, somewhere, will be able to solve it. There's no reason why they shouldn't be able to offer yield, other than trying to keep both sides happy. And here's your first phase. Here's this move forward. You know, congratulations, crypto. You're in the room now, but it's only a matter of time before, if there's a bank acquisition of someone issuing then suddenly, Oh, it's okay. Now it would be okay for yield. So it's, it seems that it's trying to keep everyone happy while they continue to move forward.
Sy Taylor 42:51
Do you can't help but look at this as somebody sitting in the UK, where we've had this since 2017 and
Speaker 1 42:58
there's a lot of that in Europe versus the US, I mean,
Sy Taylor 43:01
but Singapore, Australia, the UAE, like payments accounts are not wild. This is just like the Fed kind of catching up with everybody else. And again, the FinTech nerd in me looks at this and goes, actually, I think the biggest beneficiary is probably going to be somebody like wise, like they are, somebody whose unit economics materially improve because they operate at such scale that the tiny bits of margin that a bank makes on the gap between them and the Fed master account really make a meaningful difference to somebody like wise versus this is being made as into a stable coin story, but really it's a payment story, and I think that's a more interesting takeaway.
Speaker 2 43:41
It also feels that it's dipping your toe in getting much closer to a cbdc, and what that means. And it feels like it's the first real move by the administration to welcome digital
Sy Taylor 43:55
assets. Yeah, I really do think that it's going to be fascinating three years, right? Because these things take time across the board, yeah. Like there are some central banks, like the Swiss central bank that's already been experimenting with cbdc, where they've already done live, tokenized deposits between banks, where you can get access to that the Bank of International Settlements hub in the UK, they're looking at wholesale cbdc to be backing some of these transactions. So I suspect this goes a little bit like we've seen where the Bank of England was one of the first to do its access to the master accounts in settlement against the rcgs. I wonder if we could start to see that with stable coins, tokenized deposits, settling across the central bank, and you build that layering out that's going to be fascinating to watch. What's different today that wasn't true 510, years ago, is now you have a fed that wants to go really, really quickly. And what would happen if you had thoughtful central bankers at the Fed, and thoughtful central bankers in Switzerland, thoughtful central bankers at the Bank of England. Could you start to do something really interesting there between those layers and build a bit of a model that makes sense? What can I say? I like speculating. Sometimes it's a lot of fun. Are there any other takeaways you had from this? Or should I cover off the last story we had this week? Because I do want to give it a shout out to one story.
Speaker 1 45:16
I just surprised that the cbdc thing is still around. I thought we killed it, didn't we kill it? Is this still
Sy Taylor 45:24
a time? I have to call it something else. I feel like it needs to glow up. But ultimately, like this, this whole idea of settlement finality, how about, how
Speaker 1 45:32
about government backed stable coins? Yeah, there you go.
Sy Taylor 45:36
The it's, it's, that's, that's kind of what it is. Ultimately, like, you can call
Speaker 1 45:41
it whatever. You can't use the acronym anymore. I think it's dead definitely in the US,
Cuy Sheffield 45:45
it was always confusing. It sounded like a drug. People say, cbdc, like, took a while to, like, get people to believe it. So I think some form of central bank payment innovation around how central bank money moves on, new technologies. Great. Cbdc, like, it's been a tough ramp.
Sy Taylor 46:03
It's some sort of tokenized reserve, something like that, that allows you to have that settlement guarantee and singleness of money, because ultimately, everybody trying to instantly settle stable coins then kicks off a chain of events that ends up in a Fed wire kind of transaction. And
Speaker 1 46:20
by the way, though, let me just say one thing on this conversation is like the conversation always becomes one or the other, when, in fact, I think it would be better for stable coins if both existed, a better API for the governments for direct fed wire access, and stable coins that actually take advantage of it and actually reduce their final step of risk of actually having straight access to the Fed. And so I think actually, like in that composition is better, but we definitely need a better naming system, like Kai said.
Sy Taylor 46:46
So a quick medley story to finish us off, and we can talk about this more a little bit next week. So three acquisitions, those Coinbase acquiring echo for 370 $5 million plus they paid 25 millions for an up only NFT to bring back the podcast. Kobe, how, how did you do that? Teach me. I will do a tokenized podcast. NFT, like I'll happily do it. That's just wow, then. So we can talk a little bit about that story. But also beam cash was acquired by modern treasury. We're going to have the modern Treasury guys and beam cash guys on the show next week, so we'll talk to them a little bit more. And I also just saw that dynamic was acquired by fire blocks. Lots of m and a lots of different things happening very quickly. Tai, your thoughts specifically on Coinbase acquiring echo. Is there something about this? Ico two? Oh, is there a token life cycle coming back here? Have you had chance to look at this one? It's
Cuy Sheffield 47:49
hard to keep up, but you're like, announcing acquisitions. I don't even know happened this week in the past day? Like it really is acquisition false. I don't have a take on the Coinbase one.
Sy Taylor 48:00
It's almost like my job is to pay attention to like
Cuy Sheffield 48:06
I'm reading, I'm getting an alert to my phone. Oh, Trump has pardoned CZ and it's just like this steady stream of news that's happening that is extremely overwhelming. I think it's exciting. Congrats to the beam team. Dan modest, the second visa crypto mafia exit. Really proud of Dan and the team there. So really happy for him. Diogo probably has a better, spicier take on Coinbase echo or one of these.
Speaker 1 48:31
No, I mean, again, congrats to CZ. I mean, what else can we say on the ICO 2.0 a new mechanism to fundraise that worked so extremely well. The first time around with all of its problems, it had massive problems. It was clear that it had to make a comeback at some point in some new version, hopefully a much more Tai mer version with much more transparency and much better projects with actual delivery. I do think that going back to visit it, and, you know, with a company that has to rate like Coinbase, that does things from regulatory perspective in a very, very good manner, and thinks about it deeply, and also has obviously consumer bone. I think it's fantastic, especially alongside the narrative in the meta right now in crypto, which is revenue, all these companies making revenue. I think that combination is actually a very powerful combination, wild, wild, wild that we're talking about revenue in crypto, right? Imagine five years ago, if I came in and I said, No, Ka, I used to be judging this project on revenue, and he would just slap me out of the room. So that combo, I think, is a really interesting one. So I think it will come back. It worked extremely well the first time around. It was very fast paced. It obviously has the same stable coin style advantage, if it's global first, and so it taps into global liquidity in a global market, and again, like with IPOs becoming later and later, it allows people to feel like they're actually owning these things from the ground up and are aligned. So I think there is something there we don't know in which form it will materialize, but this metadata of the revenue, plus actual fundraising that is on chain and people owning these projects from early on, I think it's something that we want in crypto, and it's one of our. Holy Grail.
Sy Taylor 50:01
Coinbase said they'll extend it to tokenized securities in real world assets, and they've already got the like list and trade and custody sort of back end of the trade life cycle, but that creation of tokens is interesting. Any final thoughts from you on this?
Speaker 2 50:15
Michelle, I find Ico always triggering whenever it's brought up, made it through the first one slightly on its gaze. What's nice now is it's bringing the best part of the learnings, real projects, ability, partnering with folks that are regulatory first, which also means consumer protection, hopefully. So I'm excited to go into this next one. Whenever you can make something more accessible, it's always more interesting, and giving people the ability to feel like they were early is always something that's exciting.
Sy Taylor 50:51
Kobe's side projects include Lido and this, and they've always gone on to do reasonably quite well. So shout out to that guy who got his start in a FinTech company as well, little company called Monzo. So really, really appreciate that guy for having a northern ax and being out there and just crushing and look. Thank you so much everybody for watching and listening wherever you do. I want to start by, of course, obviously, thanking Diogo for being Diogo. Where can people find out more about you? Anchorage horn and all of the chairs you sit on, and microphones online.
Speaker 1 51:23
Twitter, you can search me anywhere. There's only one Diogo Monica on Google.
Sy Taylor 51:28
Now I need a soccer chant for there's only one Diogo Monica that's going through my head. I know that Petra just cracked up laughing. Michelle, how about you Sure?
Speaker 2 51:39
So I am also on Twitter. My handle is at m, Q, 2o, C, O. I live in a old world called LinkedIn more often than I'd like to be and then the digital future. Dot, x, y, z,
Sy Taylor 51:53
LinkedIn is fireman. I'm not gonna lie. You just copy what happened on x a day later, and everyone thinks you're smart. I
Unknown Speaker 52:06
sorry. Be divulging your secrets out there.
Cuy Sheffield 52:10
Copy and Paste X to LinkedIn. Just make sure anyone talking about stable coins, please add the s anytime I see like we're really into stable coin, it's just this tell tale sign that you're like, Okay, you're new here, like that. There are more than one, like stable coins, but that is, that is a playbook,
Sy Taylor 52:29
and on chain does not have a hyphen. Good point. All right, Kai, people want to find out
Speaker 3 52:34
more about you and what you're up to on x at Kai Sheffield and visa com slash crypto, you'll
Sy Taylor 52:39
find me at sy Taylor and slowly losing my mind on LinkedIn. And if you haven't already, please, please subscribe to this podcast so you can deal with these over caffeinated thoughts on a regular basis. Tell all of your friends to listen too. We appreciate you. We'll catch you next time.