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If I was running crypto at a bank, if I was a head of digital assets at a bank, I would probably be spending 95% of my time on onchain lending. I think it's that important in terms of like the long-term what impact this is going to have on the banking ecosystem that like yes stable coin payments remittances B2B like all that stuff is good like they they should work on that too but the entire infrastructure underpinning lending is like you know being rebuilt in a more automated programmable way like how would you not be excited about that like if your business is lending like this is a dream uh and so like if you could figure out like how it works how to tap into it how to manage compliance like there are a bunch of problems to be solved but I think that we'll get there as an industry and we want to do our part at Visa.
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And support however we can um and we're spending a bunch of time with clients you know trying to to help them understand.
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Welcome to tokenized the show focused on stable coins and the institutional adoption of tokenized real [music] 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. And joining me as always is Mr. to Kai Sheffield. How are you doing, sir? Head of crypto over at Visa. Treating you well.
>> I'm great. It's it's been a fun week. I got a I got a lot of lobsters in my DMs. You have reached out after last episode, but uh it's it's all good. Some some fascinating conversations.
>> Indeed. You got a got a new uh labs concept you're building there. Lots of pe lots of builders, lots of job applications coming towards Visa. Very, very fun. Uh people do go work with Kai. He's all right despite like the the podcast nasty man persona that he tries to play sometimes. Uh joining us uh and making a return is Davis Hart who is now founder and CEO of Omnia. Uh a new title and a new company uh since you've last been on the show. Um Davis, what's the new company? Tell us about it.
>> The new company is Stablecoin Infrastructure for Banks. Um I tried to charter a bank a few years ago. I've worked in stable coin space and payments for a number of years and I just realized there's this white space and coming into 2025 with the regulatory changes, it just became obvious to me that banks need help getting all this infrastructure stood up. So that's what we're doing.
>> Oh yeah. Um and uh making a show debut is Rob Morgan who's head of stable coins over at Payaneer. How you doing Rob?
>> Good, thanks. Thanks for having me, Simon.
>> You know, really excited to have you. We'll uh we'll be hearing more from you shortly, I'm pretty sure. But before we do, I need to remind viewers and listeners that uh opinions of our contributors today are their own and might not reflect those of companies they represent. And please don't take anything we say as tax, legal, or financial advice. And with that, let's jump to the first story. First story, Rob. Um you might be familiar with this one. Uh so Payaneer have apparently tapped bridge for some stable coin payout capabilities. I could read the cliff notes from this one, but why don't you tell us uh what is paneer doing and why stable coins?
>> Awesome. Yeah, thanks Simon. Really excited and thanks for the opportunity to talk about some of the things we we've worked on with bridge here. Uh look, we view stablecoin as an important piece of the future of crossber money movement. What we have seen over the recent years is that we're starting to see stablecoin move from interesting use cases not necessarily connected to the real world. We're seeing increasing adoption by real world businesses to solve real world problems. And most importantly, what we're seeing is demand for customers in the markets that we serve today to use stablecoin to access their funds faster, cheaper, more efficiently. So, Payaneer today is a for those that aren't familiar, we're a global crossber payments business serving global SMBs. So global businesses that operate in five or six jurisdictions need to collect funds in one jurisdiction, manage a balance globally, and then pay out in other jurisdictions. In many ways, Payaneer was the original stable coin, right? We'd take a we'd take payment in, we'd offer a liability of of our company and then deliver funds around the world. So, what we have planned to do and what we've rolled out with in partnership with Bridge is the ability for our customers to use Stablecoin as as a payments rail to accept payment in all of the markets where they operate to hold funds and then pay out to all of the the customers that they pay out. I think importantly for us, we see stablecoin in this as something that adds to our existing global business and we think that interoperability between stablecoin and fiat payment rails is really what our customers want to see and it's where we think there's the most opportunity to add real world utility going forward. So happy to add some some context around you why we think Payaneer's in this space and the customers we're seeing but really excited about the partnership.
I love this because you know Paneer it's like you you all are you're an OG like you you've been in the like payouts game for a long time and you know working with you know creator platforms and marketplaces and you know figuring out how contractors and freelancers and sellers get paid and like you you built your business around that and it's fascinating that over the past few years as stable coins have emerged payouts have become a major use case that people have said, okay, like you know, what's the use case? It's it's a crossber portal payout. You know, stable coins could be faster, cheaper, you know, to pay a, you know, social media uh influencer or to pay a contractor. And so now you have a whole new crop of companies that are popping up that are saying, you know, we're going to power stable coin payouts. And this is exactly the example of what we talk about on the show all the time of we're now at the point in the market with regulatory clarity that the companies that have been doing this for a long time that know how to do this that have the distribution that have the trust that have the relationships now have the opportunity to integrate the infrastructure that enables them to supercharge their existing capabilities and networks and and that's really exciting to see and I think this is exactly like the competition that I think is great for the industry. is, you know, the nextG kind of upstarts trying to create, you know, these payout companies and then the established payment providers saying, "Wait a minute, like we've got the licensing, we've got the integrations, we've got the partnerships, like how do we add these capabilities to what we do?" Uh, and I think that that is great for everyone. And so, congrats. You excited to see you all, you know, moving in the space. And I also think if you're going to pay out, you need an offer. And so, be exciting to see if there there's an opportunity on the stable coin like card side, you know, when people, you know, receive the stable coin payment. what do they do with it? Uh, and I think that's an area that we see growing, you know, more and more.
>> Yeah. And I think that off-ramp side is so so key, right? I think the promise of stablecoin has always been the ability to simplify what is a really complex world of crossber payments. You know, for a business that operates in multiple jurisdictions, moving funds from one to the other often requires, you know, five or six banks, two different payment networks, and a full-time dedicated staff to actually manage where in the world your liquidity is. The promise of stablecoin has always been how do we make that better, right? So I spent a good chunk of my career uh working on tokenized deposits with a focus in the US and the reality is within a market stable coin adds value but in much more limited ways right for crossber there really is some complexity that we can simplify but I think even today the promise of stablecoin there's not that full promise until it's integrated into the way companies do business already right stablecoin can simplify because you know kai can send you a stable coin and it's free, it's instant, and everything else, but you can't walk down the street and buy a cup of coffee with it. You can't buy a hammer, you can't go buy all of the things you need to operate in those markets. And so, it's really those off-ramps and that interoperability with the fiat systems where those businesses operate day in day out that we think moves the needle and drives the next wave of adoption.
I I think that point is so crucial, Rob, that uh you need the sort of combination and and you know, Kai mentioned the the cards there as as one classic offramp, but there there are many others emerging as well. And what struck me about your story here, Rob, was paneer doesn't have to adopt stable coins just for a press release. You do it because it makes a difference to your business. Can you tell me about the economic difference it makes to either you or to your businesses? like just make that business case really real cuz uh I think there's so much uh fascinating right now about the fact that crypto prices are down but all of the action is in the thing where the price doesn't move where $1 equals a dollar like the stable coin space is is very different.
>> Yeah. So I think I'd put the put this into two categories, right? We're seeing groups of customers today that are interacting directly with the form factor of stable coins. So, say I am a business operating in Vietnam and I sell t-shirts on a marketplace, right? If I get paid in a stable coin today, I can't use that stable coin to go buy Thread in Indonesia to go pay employees in in these other markets. In most cases, my best option to convert that stable coin into Vietnamese dong is to go to an unregulated exchange in Vietnam to manage my own wallet keys, send funds there, and hope they land in a bank account. Right? We're actually adding complexity instead of simplifying at that level. What we think we can do in this space is creating that seamless interoperability. So, I can take a stable coin, convert it into that local fiat balance, pay out in all of the ways I do through my business account today to my suppliers, to my employees, etc. So, use case number one, we think we can more effectively, more safely, and more simply allow those businesses that do get paid in stable coin to do that. Use case number two where I think we're seeing more demand grow and where we think the world is going as this matures are companies that don't actually want to see the stable right where stable coin is a means to faster cheaper more transparent settlement particularly in markets where there's less developed banking infrastructure where correspondent banking can be expensive take time and where we see currency volatility that really impacts what that business gets at the end of the day. So in this case, we may have a business that that wants to get paid using stable coin rails where they can receive sort of good funds instantly. There's full transparency into that. They see that arrive in their wallet. It costs less to get it into the market and they can move that more quickly.
>> It it's a great business case and I think it's one we'll see a lot more of. There was a another story that came out of Bridge this week, which I'm I'm just going to sort of bring in here a little bit, which is um Bridge received their conditional approval to form a National Trust Charter Bank. Um which is, you know, obviously step one of a longer process of of getting the National Trust Charter. You then have to go through an organization phase and a mock exam and the full exam. Davis, I know you've uh attempted to tread this path before. talk to me a little bit about why some of these stable coin companies are going for these trust charters and and what that's giving them uh and and sort of the path to get there.
>> Yeah. Um I think the high level I mean because we look at who's applied for these it's all the crypto companies all the stable coin issuers there's a couple of reasons that this is the natural first step. One is most of these companies are already licensed. So why like why does bridge actually need the trust charter already has MTLS in I think almost all 50 states. The reason is that you get federal preeemption. So now you have federal regulation. You don't have to go be an MTL in 50 states. It's a lot simpler from just a regulatory perspective. You have one regulator, not 50. I think the other reason is there's I think there's an expectation that it's going to be sort of the best structure in which to become a Genius Act stable coin issuer. Um because you have you can get the charter today from the regulator that's going to give you the Genius Act license. So it's kind of futurep proofing the business for the issuance activity. makes a lot of sense. But the next story sort of speaks to to one model of of approaching that differently which is uh about five regional banks developing their own tokenized deposit network uh launching in Q4. So this is Huntington Bank shares uh First Horizon, Mnt Bank, Kik and All National Bank are developing this infrastructure on the Kina network which is led by Eugene Lwig uh who is a former comproller of the currency. Um, and Eugene said, "We plan to unveil a minimum viable product at the end of March, a pilot program in the third quarter, and provide a full service to customers by the fourth." And so, of course, the core of um this network is designed to have tokenized deposits, which uh represent those bank deposits in the form of digital tokens, I guess, is the simplest way of saying it. And a lot of the banks in the press release are talking about well you know this protects our deposit franchise. But Davis I want to come to you on this one because you know you mentioned that stable coins might be a good thing for banks. Do you think that tokenized deposits are also a good thing? Like where do you stand on that spectrum of like is it all downside for stable coins for banks or or is there something else going on here?
My my view is that in 10 years all the banks that are going concerns will have their fiat balance sheet doing what it does today and then they will also have a version of that balance sheet where every single item is in a tokenized form. There'll be tokenized loans, there'll be tokenized forms of money, there will be tokenized deposits, there will be tokenized liabilities issued out to to bond holders, so on and so forth. And so in that framework, I think all of these things make sense. I see deposit [snorts] tokens as having a really unique capability in existing interbank payment networks which will continue to exist for a variety of reasons and stable coins are really useful when you get outside of that network and one of the points of uh maybe tension isn't the right word but one of the one of the uh interface points is where you go from say today you have a JPMD deposit token you can interact with other JPMD customers that are enrolled and you can basically do account transfers, that's fine, but you can't go into DeFi. You can't go interact with customers of other banks. And so, that's one of those areas where it makes sense to be able to switch between a deposit token and a stable coin. I think this notion of deposit flight is is dramatically overblown. Um, I wouldn't look and the reality is, you know, within the banking sector, you can go get a savings account that will give you 3 and a/4%. Yet, the average yield on a savings account in the United States is 39 basis points. So, it just tells me that deposits don't move that much for yield. And so, this this idea that stable coins are going to drain yield, I think, is actually backwards. And I think that stable coins, what they enable is money to move faster and they remove the friction. And when you remove friction, what happens is that liquidity will concentrate. And so, what will happen if I can move money easily in and out of my checking account? I'm just going to pull all the dead liquidity into my checking account. Like, why would I leave it sitting in PayPal and Coinbase and all these other places? So, I think broadly speaking, both of these things are going to exist.
Yeah, it's it's a fascinating story and like I have a bunch of questions. This is the first time that I've I've heard of Kari Network. Like there's some like new players kind of coming in here that seem to be credible with, you know, legitimate you people and teams behind them. Uh the thing that I like about this is the term tokenized deposit network because I think that you historically tokenized deposits and and what we've seen over the last two years it's being viewed on like a bank by bank basis and it's like oh is is this bank going to create a tokenized deposit? Well this bank has created a tokenized and I think if you look at it in a silo and you say okay this bank is just going to create tokenized deposits on their own. Yeah. like maybe there's some useful things for like you know intrabank transfers and JPMD is kind of showing that right now but if you have a tokenized deposit network if there is a clear structure and scheme and interoperability and like you have many banks that are participants like that to me is a lot more interesting because I think one of the the biggest challenges of tokenized deposits is how do you interoperate if I have a tokenized deposit from one bank and I'm sending it to another bank and if everyone is doing it on their own that becomes really really hard and so I I don't have any like strong perspective on on this specific initiative and I think it's great to see more approaches of you know forward thinking banks that are you know getting in the arena and and and you looking to ship you know real products in the space u but I think that the concept of tokenized deposit networks is going to become more and more important and then the question is kind of what what should that look like what needs to exist to make make it as easy as possible for a bank to join the network rather than a bank to like go on their own and like create a tokenized deposit and like inside like in a in a vacuum which is much less interesting.
>> Yeah, I think that interoperability is going to be really key. Right. I spent three years building trying to build a network of uh tokenized deposits through USDF consortium with midsize regional community banks and the question was always how will you interact with a JPMD or or another token? I think you know clearly if anyone can do it Gene can and uh you know where Gene leads I I usually follow he's he's always right in these things. What will be super interesting to me as you look at a group of sort of US focused banks that that look at this is what the actual applications they end up focusing are like where what are the problems they are solving in interbank transfers for for their members and how do they tie it into other tokenized assets and I'm sure we'll talk about this more but you know payments aren't generally broken in the US it's relatively cheap to go from one US institution to another where I think this becomes really exciting is when you start bringing things like loans on that same system of record and start using these tokenized deposits to help facilitate real world transactions for, you know, a payment from a loan may flow through to five or six borrowers on this network. So, I think there's some really cool things they could do with this and I'm excited to see where it goes.
Yeah, the the thing we're all sort of um dancing around here is that networks need network effects. And this is five banks, which is a great start, but it's also five regional banks whose very much depend on their consumer deposit franchise. And so, how many other banks is that true for uh in the US market that are smaller and larger? um you know the I can imagine some smaller banks actually wanting to do something like this for sweeping deposits rather than trying to hold on to them. I can imagine the larger banks just having a big enough you know like JPMD they've got a big enough network they can kind of do it themselves. The interoperability point you made Rob is is the crucial one like and also the operational one. Who gets to control mint burn and how will these banks agree on what mint burn and on and off ramping needs to look like? And I honestly think that so much of this is coming across defensive when it could be useful, but because it's not necessarily considering to the Davis's point earlier, stable coins are useful outside the networks you can build and tokenized deposits are useful inside the networks you can build, but how big are those networks? And so I like to separate the difference between deposits being money at rest and stable coins being money in motion because to exactly what you're doing when you are sort of building your own version of an in-house stable coin potentially so that you can offramp uh really easily and back to fiat. Well, that's that's kind of making the point, isn't it? that like people aren't fighting for yield as uh you the yield is a bit of a red herring as Davis said and we want to be able to offramp so we got to pull all of these threads together. Uh any other thoughts on this one from from you guys on the tokenized deposit space?
>> I have I have two quick thoughts on this. [snorts] I think the the overall sentiment of we need to see what comes next after the payments use case is critical and I kind of wish people would invert these because using tokenized deposit networks for for US domestic payments is frankly uninteresting. Like we already have Fed now and RTP and if you look at the design I'm sure that Gene's going to do something great here. But if you look at the design of Carrie as far as I can tell version one is we're going to create a tokenized version of RTP through uh the clearing house. And it's like okay what what what's new here? I want to see the next thing and I kind of wish people would just let's do the next thing first so that we can see the actual value of this technology beyond just faster dollars which domestic payment systems can deliver. That that being said, I think we [snorts] are in sort of the early exploration phase of tokenized deposits. I mean, just by way of reference, I think tokenized deposits today are where stable coins were in 2020 because for 4 and a half years, the only potential issuers of tokenized deposits weren't allowed to utter the word blockchain or else they'd been slapped by regulators. So, like like they're now finally getting involved. So, not withstanding my critique on on sort of reinventing RTP, I think we are in that early stage of exploration and we should think about it that way. Like we're still a few years from actually understanding what these things can do.
Yeah. C can I give my quick from a consumer let's say sophisticated consumer or corporate treasurer perspective. What I think is most interesting about tokenized deposits and what they could enable for like those client segments is I hate moving between bank portals. I hate it. Like well I got to like I got to log into Bank of America. I got to log into Wells. I got to log into and I'm just like I'm like bouncing back and forth. I got like four tabs open of like different bank portals and I'm checking them like going back and like it sucks. So it would be much nicer if you could have one interface that had all your money across all your banks. And we've talked about this on the show. So like imagine you have a wallet and you make that wallet super secure. you control it and then you could see your Bank for America money and your JPM money and your Wells money and you just like you could look at it and it's not like a PFM where like PFMs have existed where you could view a snapshot but it's like actually a wallet and you can move you can make a transaction and decide do I want to fund it with my BFA money or my JPM money you could convert between the two um you like just being able to have this almost like control system like mission control for money that all of your bank money is in one place. And then if you combine that with like, oh, I might want to create some agentic workflows and say, okay, how do I decide when money moves from one to the other? And like, you know, can I create a smart contract that then when these things happen, it triggers it? Like, I don't know what exactly that's going to look like, but I think today bank money in the form of deposits, it's it's it's not like there's anything wrong with deposits. Deposits work well. It's bank interfaces leave a lot to be desired. like they just they they could be a lot better and I think that it gives the opportunity to uncoup decouple the bank money from the bank interface. I think that's that's exciting.
What's funny about this though is in the commercial world this exists called a treasury management system, right? And it's like they charge tens of thousands of dollars per year for one person to have an interface where they can not just see the balances but click the buttons and make the money move. And it does like the first part of what you're saying maybe before agentic maybe that goes beyond what banks can do today. It [snorts] really just gets back to the fact that we don't have open banking in this country and so it costs these companies phenomenal amounts of money to integrate with every single bank to give that feature and so it's only available to commercial entities that can afford a TMS. I'm sitting here in the UK where apparently we have open banking. Um but I can tell you we don't have that feature whatsoever. We have 99% um coverage and uptime of open banking. Um but I don't have the single pane of glass that shows me all of my money that enables me to instantly move it. And I think it comes down to um the security and the authorization around it. There's something very elegant about the wallet construct and how it can sort of cryptographically ensure the keys are signed and that the money moves and it really did come from me. I think there's an identity component to wallets that is really really fascinating. um friend of the show uh Tony Mclofflin over at Ubix has been talking about you know sort of moving from the account view of treasury management where I have uh each legal entity has lots of different versions of dollars in lots of different markets to where even in my TMS I'm sort of managing that on the account view like that every I have 30 legal entities and those legal entities have 10 different accounts each that's a horrible experience even that abstracted up to it's all dollars and you can move it between different things does get a lot better and I can imagine for consumers it would be really powerful. So I'm I'm with you on that Kai and and it makes me think you know if the the '9s and the 2000s were about which card is at the top of the consumer wallet. I think now the question is who's going to be the consumer wallet? And that's just like a different frame for people to start thinking in and it's a new way uh to sort of start reaggregating finance. But thank you for coming to my TED talk. Um, I'm going to take a quick pause here while we hear from our sponsors.
This episode, if it isn't already obvious, is sponsored by our friends at Visa, the leader in digital payments. Visa's tokenized asset platform or VTAP uses smart contracts and cryptography to help banks bring fiat currencies on chain. Whether it's launching a stable coin or deposit tokens or something else, VAP allows financial institutions to issue fiatbacked tokens, improving financial efficiency and enabling programmable finance. Check out the links in this episode's description to express your interest in VAP.
This episode is sponsored by Privy, a Stripe company. Stable coins can't go mainstream without simple and secure wallets. That's where Privy comes in. Trusted by more than 100 million accounts, Privy lets users launch wallets instantly with familiar login like email or social. It's consumer grade user experience with enterprisegrade security. Stop building with Privy. Learn more at privy.io.
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Thank you to our sponsors. The next story came from just about everywhere. This was Apollo uh the large asset manager and private credit firm are deepening a crypto push with a Morpho deal. So, Apollo global management has struck a cooperation agreement to support lending markets built on Morpho. The deal allows Apollo to acquire up to 90 million Morpho tokens over the next 48 months. And of course this follows the very recent deal between Black Rockck and Uniswap. So, institutions actually getting into DeFi in an interesting way. Um, any thoughts on this one? Maybe Davis, I'll start with you and and from everyone else.
>> Sorry, can I ask the cynical question which is what does it mean to be a cooperation agreement and to support lending markets? Uh, I just mean to call out um this did come a a week after a material announcement of BlackRock listing Bidd in Uniswap. So, you can actually do stuff in DeFi with the product. And this almost feels like is this just a marketing release that got past the the the lawyers that were willing to have Morpho tokens on the balance sheet? I don't know. I just want to call that out. Like I hope that this becomes something more real. The fact that they're willing to buy Morpho tokens is definitely a step forward. But I was just looking I was looking at the news and kind of asking myself, okay, what can we draw from this? What what does this actually mean? I have some some thoughts which we might get into, but that's sort of my initial reaction.
I I think it's right to have that every time you see a press release uh about things. But but Rob, any dissenting views?
>> Yeah, look, I I have no view on how how real this is or not, but what gets me excited when we see announcements like this is that move to, you know, how do we see institutional providers who are thinking about real world assets, real world loans leveraging onchain solutions to do that. Right? We talked earlier about the concern around deposit substitution in banks. If I were a bank, I'd actually be looking at announcements like this as the real opportunities more than tokenized deposits because if you're worried about a funding crunch, the idea that having a loan on chain can access new pools of capital, lower your cost of funds, and make it more efficient to pass a payment from a borrower in through a loan and ultimately to the holders of that loan. I think that's really interesting. And if we think about the business of banking sort of broken down into its three core components, we spend so much time talking about payments and deposits. Not a ton of time talking about what lending on chain really means. Most of that lending feels very sort of cryptonative today crypto assets. What really excites me is how can some of these institutional providers start looking at blockchain as a more effective route to deliver loan products for real world companies, assets, etc. And so my hope is that as we see these mature, you see some interesting use cases where we prove out the efficiency of blockchain and stable coinbased payments even to facilitate more efficient capital markets here.
I I think we're responding to to Davis and kind of your your questions on like anytime there's a press release there's always like oh like what does this mean like intent to collaborate like what what's actually happening here I I think it's helpful to have the context of Apollo has been around this space for a while you know shout out to Christine Moy uh you know she was at you know JPM you kexus and like she she's very been very deep in the space and understands it very well and I think that this is a smart move for one of the largest, you know, private credit funds to continue to get closer to the forefront of how to leverage, you know, onchain lending infrastructure. Like, you know, how amazing if you're a a lender, like you now have this new magical infrastructure that's like open source that enables a lower cost structure to be able to to lend and like being able to tap into that. And I think from what's publicly you disclosed they've announced the the Acred uh token which I I believe Apollo is working I think was securitized you to issue. So they created a tokenized version of one of their funds and then enabled that fund to be used as collateral you in Amorpho Vault. And so I think Gauntlet and some others were involved in announcement last year. I think we covered on the show at some point uh that you can now like lock up ACred and then borrow a stable coin. I think it was a stable coin against it and then you could buy more Acred. So they've been around this space in kind of working with Morpho for some period of time. And so I I don't think this is just a out of the nowhere, you know, response of of Black Rockck. And I'm really excited to see what they do. And I think it's just an incredibly powerful signal when you have real institutional like allocators and lenders that are, you know, getting comfortable and learning how to use this new infrastructure. Uh, and I think that they're going to be able to potentially, you know, create and enable new lending products that just haven't existed before. So, I'm really excited to to see, you know, how how this one plays out.
>> So, uh, thank you, Kai, and I stand corrected on the context. I appreciate it. I forgot about the Ared token. So, with that being said, I do [snorts] want to add, um, what I do find interesting here about both Black Rockck uh, and Apollo is they're both going in on public protocols on public chains, right? They're going to where the where the value already is. They're going to Morpho's got like 5 billion in TVL. They're going to where the money is today. And today that might be loans for stable coins. And we talked about like how useful are stable coins in the traditional economy. But because of the way the technology works, once we figure out what these deposit tokens are and how to put them on public chains, these protocols can just pick up deposit tokens and then you'll be able to just use deposit tokens against these um tokenized credit instruments. Like I think what makes stable coins interesting for me is whether you're a bank, whether you're an asset manager, whatever. You can start with stable coins today and you build all the institutional capabilities, the technology, etc. And then when a deposit token comes along, it's a very small switch to just make that stuff all work with deposit tokens. And if you're dealing with issu with with um situations where you need network effects, those take a long time. They're very hard to build. If you want to be able to make tangible forward progress, start where there already is the network effect, get the technology in place and then repurpose it for the deposit token in three years once people have figured it out. That's what I think is really cool about the these announcements.
>> Yeah, that makes a ton of sense to me. I think the signal value alone of uh two massive institutions are using public blockchain networks to do uh interesting new things. One of which unis swap was, you know, kind of under a wells notice and being sued by the SEC what 2 3 years ago. So this is this is night and day from where we were. And uh you know sort of the partnership here makes a ton of sense. It sort of reminds me of um peer-to-peer lending uh if you remember that in the early days you know sort of you get this uh idea of like oh well, you know consumers would be buying loans and other people would be borrowing and in reality the private credit firms came in and just bought up most of those loans and it ended up looking like private credit. And I wonder if they look at the DeFi markets and go, "Well, that's just a better infrastructure for private credit." There's a lot of people who want to borrow. We should be the supplier of capital on that and we should build those funds and we should tokenize those funds. But then with all of the efficiencies involved, I don't know if you ever been through the pain of setting up a a credit facility. It Rob's nodding his head. This it's not fun. Um it takes a long time to organize the deal. Um then you've got to negotiate it. Then you got to get the terms together. And then once you're done all of that, then you've got to operationally manage it on both sides. So Apollo has to manage the person they're lending to. The person they're lending to has to manage, you know, making sure they're sending all of the information back and forth to continue to draw down from that facility. Smart contracts just automate all of that. They they just mean that that becomes a seamless workflow that we can see that, you know, the money you borrowed is tracked on chain. So here's what you did with it. we we have quite a clear view of it and were you lending within your obligations and have you run out of money and you now need to draw down more from the facility that becomes a straightrough process and and way lower cost for everybody involved and I think that's a real business case but Kai um you and I have sort of brainstormed in the past about how vaults and how things like Morpho and and and other such vaults could make a difference even in payments you know sort of um for for transactions and things of that nature. Do do you see that possibility still? Are you still of the view that um hey this could make a difference to you know the the bricks and mortar cards world in some way?
>> For sure. And you know we wrote a white paper on onchain lending sometime last fall I think November. So if you search Visa onchain lending you can find it. That's our full view and like all the data. And I think our our general take is that the current state of the market you has really been and historically what has existed has been this collateralized crypto back to lending and you know that's what's driven I think the number we found was over $600 billion of stable coin denominated loans have been originated in the last 5 years like that's a big number a lot of people don't realize that if you ask a bank like how many stablecoin denominated loans have happened I don't think most of them say 600 billion and so like that's a pretty big proof of concept that like the tech works. Uh, and so you kind of start with that and then you say, "All right, well, like what are those loans? Like what what's what's happening and then it's well, you know, 99.9% of them are collateralized by Bitcoin, ETH, you know, other types of crypto assets. And what they are are, you know, mostly crypto traders or cryptonative people who, you know, have crypto assets and they lock it up and they borrow stable coins and they either use the stable coins to buy more crypto or they use it to buy a house or buy a car. like that that's like been the initial product market fit that onchain lending has had and I think that that's going to grow like as crypto assets grow like lending will grow and like there's a market there and I think there is an opportunity for some banks to say you know what we we'll take your Bitcoin as collateral we'll take ETH as collateral and we'll lend against it um but I think that the more interesting part to us is well you now have all these other real world assets that are being issued on chain and so what if the collateral is no longer just Bitcoin and ETH, which I think is like a subset of the population who wants what if the collateral collateral is tokenized treasury. Isn't that a repo? Like what if the collateral is a like local currency stable coin? And so instead of having to do FX and like sell local currency for uh dollar stable coins, you could just borrow dollars against your local currency, make a payment, and then you get paid dollars back and you repay the loan. You what if there was a receivable uh that was the collateral that you could borrow against? So it's like the the general primitives that are being built out with protocols like Morpho and A and others and like how the smart contracts work and the design like I think that is going to be very broadly applicable to many different types of lending not just cryptobacked lending. And so I think the key is and and David like you said this like if I was running crypto at a bank, if I was a head of digital assets at a bank, I would probably be spending 95% of my time on onchain lending. I think it's that important in terms of like the long-term what impact this is going to have on the banking ecosystem that like yes stable coin payments remittances B2B like all that stuff is good like they they should work on that too but the entire infrastructure underpinning lending is like you know being rebuilt in a more automated programmable way like how would you not be excited about that like if your business is lending like this is a dream uh and so like if you could figure out like how it works how to tap into it how to manage compliance like there are a bunch of problems to be solved but I think that we'll get there as an industry and we want to do our part and support however we can um and we're spending a bunch of time with clients you know trying to to help them understand it.
I I think that last one is so important and I know we probably need to move on but like for me if you think about community banks in particular where there's so much concern about that deposit substitution and you know Simon you're talking about your wallet that holds five different bank tokens probably harder for a community bank to compete in that market where the token is a little more commoditized. What those community banks have is they know the community they operate in. They know how to underwrite credit in those communities. if they can tap into something like this to make good loans to local businesses and find ways to bring cheaper source of funds in for to power that those loans to power that growth. I think the community bank of the future still knows their local market better than anyone else but is able to plug into this infrastructure to deliver it faster, cheaper, and better and at more scale than than anyone else. Like to me this is a huge opportunity for community banks and they should be like knocking down the door on the loan side less worried about the deposit substitution side. I think there's a bit of a theme here is that like tokenization is your opportunity. Don't fear it so much like um yes okay there may be some movement in the market as a result of it but if you get on the front foot with this it could meaningfully impact your business in in kind of a positive way. Well, from lots
Of banking types of uh infrastructure stories, now to some uh wallet and AI infrastructure. So, Phantom Wallet has added an MCP server, meaning agents can now swap, sign, and manage addresses across all of Phantom supported chains.
So, uh, you guys going to be letting agents loose on your um Phantom wallet anytime soon, Davis? Have you got your clawbot um run running your trading strategies for you?
Uh, I will not be uh a bleeding edge adopter of Agentic uh Agentic autonomous payments, but I think that I think these are these are critical developments. I've been following this space. I think the watershed moment was um Cloudflare uh getting in front of this and sort of saying, "Hey, we need micro payments because the content structure of the internet is changing, and AI AI crawlers are going to need to be paying for access to content."
That was the moment for me where it's like, "Okay, this is where AI, this is where stable coins, this is where crypto all comes together." This is a killer use case where you have really high volume transactions at very small values. And so then, a development like what you're what we're seeing with with Phantom is just putting in some more of those rails and the capabilities, and sort of normalizing the idea of allowing more autonomous purchase decisions.
Yeah, I think it's so key. Obviously, really early if you're experimenting with any of these things, you're trying to find ways to put controls on it. So, one of the things that's exciting to me, you know, I don't want to give CloudBot my uh my credit card, but I might give it something with a $100 limit, right?
And the ability to program different wallets for different purposes, to allow for some of that testing that have those controls, and then auditability. And when you can look back and see what transactions were made for what purposes, that's super exciting to me as some of the practical next steps to how do we make this more real as we look towards the future.
I think where what we're excited about are worlds where that SMB of the future may actually be an agent, and how do we support sort of the business flows for those agents in in that world. I think stablecoin needs to be the native language for that. I think those the programmability, the ability to compartmentalize, provide those controls, is going to be super important.
I think it's still a ways off where you have an agent negotiating a, you know, materials purchase for you, but I think we need to look at where that's going and and be positioned. This feels like a really important step that in that direction.
K, you're hiring a bunch of lobsters at the moment. Um, so, uh, what's going on?
>> I I'm having a lot of fun experimenting with a lot of these tools, and I highly recommend it. Um, but you you for sure you got to do it in the right way. Like, I I do not recommend downloading, you know, Open Claw and giving it access to your entire life. Like, that's just like you're asking like for for issues.
Um, I do recommend trying to figure out how to set up agents in a like scoped, secure way to get some experience experimenting with them. And like, you know, kind of the the trick, uh, and and, you know, what what I what I did was I asked cloud code, "Can you create a super secure implementation of openclaw?"
And like, it's unacceptable that there's ever any... like, you just have to like work with like one tool like cloud code to help it implement another tool like openclaw. And so, I created my own implementation of open claw that I believe is more secure than it, but I still keep it very scoped in like certain areas, so just for experimentation.
Um, I think on the wallet side, like when most people think about wallets, they think about mobile apps right now. Like, that is like the default form factor of Phantom. Well, that's a popular mobile app. Coinbase, that's a popular mobile app. I'm like, "Yeah, there's a desktop, you know, there's a website you could go to as well, but like it's a mobile app."
I like to think about MCPs as just a native apps. That's it. And so, if you have a like cloud code or an open claw, or like, doesn't really matter what it is, but those are the two I think are the most interesting right now, and you want to do something that it doesn't do normally out the box, like payments.
We got to install an app. And so, like an MCP is an app, and it makes sense that a lot of the wallets who have been mobile apps on iOS are now becoming MCP apps on cloud. And so, you see Coinbase launch their agentic wallet as an MCP. You see, Phantom launched their, you know, wallet as an MCP.
And so, I think it's it's like a very natural progression. I think the question is: will the same wallets that won as apps traditionally on mobile be the same wallets that win as MCPs? And what are the unique features and functionality that you need in an MCP wallet that you don't need in a mobile wallet? And like, how much crossover is there between the two? I think those are some of the like big open questions.
And I think the other thing that we feel very strongly about is: it's not all about stable coins. Like, if you want to do commerce, you you need to use payment methods that are accepted everywhere. Uh, and so, I think we're seeing a lot of really interesting experiments on the forefront, like bleeding edge of, you know, give a stablecoin wallet to an agent. And then, I think what you lead to is somewhat of a disappointment of like: there aren't that many things that you could buy stable coins with.
And so, I think you need to figure out like how do you combine the best of both worlds. And like, yeah, stable coins will have a role, but like, I think there's a huge role uh for card credentials uh in a secure, tokenized, scoped, you know, way with things like a piece intelligent commerce, like to enable card transactions to happen within the command line, within, you know, some of these environments. And so, uh, we are working very hard um at how we can help enable do that.
>> I think there's a big gap for securing that whole space because I'm I'm pretty Sure, everybody agrees it's coming. Nobody's hand on heart sure when it's coming, but it's it feels inevitable. And AI has this annoying habit of being like, uh, the second you think it's going slow, boom, it just hits another exponential and blows your mind. And if that came to payments or commerce, then it would just be a whiplash effect.
So, you got to be doing the R&D now. You got to be ready for it. And it's good to see Phantom doing this sort of stuff, but you got to do it in a really secure way. Um, there was a story um this week about OpenAI and my friends at Paradigm launching EVM bench uh which is a benchmark designed to ensure that any implementation of the EVM is robust and secure using GPT3 as a secure code auditor.
So, Kai, you're sort of thinking, I think, the right way and getting the AI to be your security model for you, but I also think this is going to need packaging for enterprise. There's like no Red Hat for OpenClaw, you know. Like, um, we've got the Microsoft and we've got the Windows in like OpenAI and and Anthropic who've got their sort of closed um source, and that will do extremely well, and and I think they'll continue to innovate. But OpenCore feels like a Linux community that doesn't yet have its distributions and its enterprise stuff waiting to happen. So, I'm excited to to watch that one play out in the not too distant future.
All right, bunch of other stories this week. Um, we didn't have time to cover. Dragonfly, uh, our friends over there, raised $650 million fund, so next time we see Rob Hadock, drinks are on him. Um, Vase is leaving the OP stack to build their own blockchain. Fascinating. Wonder what they'll do. Robin Hood's layer 2 test net has seen 4 million transactions in its first week. "What were those transactions?" would be my question. Um, from Fortune, Kraken has acquired a token manager, Magna, and the Hyperlquid Foundation sets up a DeFi policy ad advocacy group with a $29 million hype token donation.
All right, that's all we have time for this week. I want to thank everybody for viewing, watching, and listening so so much. Uh, and I want to thank my incredible guests, Davis. If people want to learn more about you and Omnia, where do they go to do that?
>> Uh, a website's Omnia.financial, and you can find me on LinkedIn. That's where I post uh my bi-weekly newsletter called "the stablecoin banker." So, if you want to get deep into this, the banking space, vis stablecoins, that's the place to go.
Highly recommend. Stable coin banker is excellent. I read everyone. I forward it across to many people. So, thank you, Davis, for writing it.
>> Couldn't agree more.
>> I got competition here.
All right, Rob. Uh, where do people find out more about you and Payaneer?
>> Payaneer.com. We've got the the weight list live. We've begun transitioning customers off of that. And keep an eye out for more things coming soon.
>> And Kai on X: Kai Sheffield. At visa.com/crypto, you'll find me screaming into the void at fintechbrainfood.com, at tempo.xyz, XYZ, and at Sytailor on all of the socials.
And you'll find a lot more of this show if you hit the subscribe button, you hit like buttons, and you spam all of your friends and tell them about it, too. We'd really appreciate that. Spam away. You have my permission. Take care, guys.