Building Onchain Payment Infrastructure That Serves Europe

Transcript

[Music] [Music] Hello everyone and welcome. So when I look over the audience, I see a room full of builders and founders. And I guess what unifies us is that we all share the same enthusiasm for building the next fintech application and probably change the world while we're at it, right? So I bring a good news. Stable coins are finally going mainstream. And as the CEO of a stable coin issuer, I had prepared some slides for my talk where I had all the hype in it. So it had all the graphs

going from left and up or sorry right and up. And then I looked at it. It was actually very beautiful. But then I scrapped it because today I'm not here to pretend that I have all the answers. Today I want to share a personal story, our vision, some of the decisions and challenges and why we are where we are. So it's going to be building an onchain payment infrastructure that serves Europe from the trenches. So if you're ready, let's go.

So as European founders, we all face one big challenge that the onchain economy is overwhelmingly denominated in USD stable coins. I'm sure many of you will relate. You may have funded your companies in euros. You pay your salaries and bills in euros. But when it actually comes to managing the company treasury, you'll need to convert into US stable coins, incurring fees on the way in and also on the way out. And over the duration, you know, the FX risk of the the rate moving against us um is all there. So these are not big things, you know, these are tiny things, but they add up. And as builders, we really

shouldn't be spending any brain cycles thinking about those things. So the obvious answer seems to be let's create a Eurocoin, right? So it turns out it's a little bit more complicated than just to create an ERC20 token and voila, here's a Eurocoin, right? You know, if we think about how stable coins emerged, it wasn't to perform treasury function or payments. They emerged as a solution for crypto speculation and trading for traders to exit volatile markets, survive crypto winters and actually to be able to go between the exchanges without touching bank accounts and for that the dollar is actually a superior product.

So in order for a eurocoin to be usable, we somehow have to figure out what we call the last mile problem. How do we get the money from the banking system on chain and preferably back? Right? When we were starting in 2017, stable coins were kind of emerging as a category and now like then we had broadly three designs. These were the fiatbacked stable coins where every token issued has a equivalent amount on a bank account. There's the cryptobacked stable coins where we essentially try to do the same but with overcolateralized

crypto assets. And then there's the third most experimental where we try to incentivize user behavior so that we maintain the pack somehow. And you know some of these have actually succeeded right um die for example is a phenomenal example of something that succeeded from the second category but some of this have failed and many miserably. This graph here is the Teral Luna graph which you all probably know by now which maintained its pack pretty well for some time one to one but then a blocks one event happened and poof zero and actually we just shift the time axis a

little bit to the left this could have been the Icelandic banks in the wake of the financial crisis. So as you may hear from my accent, I come from Iceland and for us it was instrumental to create something resilient. Another thing that we all shared as founders was that we think money is a political instrument first and foremost. So we couldn't envision a future where it mattered whether money was on crypto rails or trfire rails. So the design decision for Monarium was pretty easy to be made. We wanted to build something efficient, boring, and resilient.

So we got to work. We hired the first employee, Yonkuner, who is still our legal counsel. His tagline was to keep us out of jail. That was the official job description. So 600 pages later, we designed a company with all the right procedures with, you know, risk mitigation and the full nine yards. And uh in 2019, Monerium became the first electronic money issuer or an EMI like PayPal, Revolute, and CLA to be authorized to issue e- money aka stable coins onto public blockchains.

Now with that we started to think of think about the problem. How do we get the money on chain? And at this point in time some of the more reputable exchanges had actually managed to open up US dollar accounts. They were US dollars because all the trades happened in dollars. So going through those exchanges wouldn't necessarily helped us in any meaningful way. Um additionally it didn't kind of align with our vision. We wanted to build a bank so you don't have to. We wanted this to be embatible in your products. So therefore, we had to do something different. Tried to be more clever.

It suddenly dawned on us that the IBAN, which is the main mechanism to route payments in the European payment system, could actually be leveraged to route payments to a blockchain address. So, this effectively creates a virtual bank account on top of your wallet. And if you haven't seen the magic yet, go ask these guys here in the front. They have a booth. But the way it essentially works is that every wallet gets uh an IPAN and you can receive funds to that IPAN and it automatically gets minted as stable coins. It's beautiful. The other way around is equally as simple. You send, you sign your transaction, you input the IP of the destination

recipient and you know we burn the tokens, we take care of the rest and few seconds later the recipient will see your name, three euros coming from you. So there's no monarium in there. It's abstracted away because we thought it was important to have the money in your name, right? And this turned out to be a very efficient system. uh even so efficient and here I'm going to share with you some insight. Even so efficient that we got under the radar of scammers. Now these scammers were not cryptosavvy. They were just doing regular scamming. So if for those of you who remember when we instated the invite codes that was actually us trying to lineage the tra the scammers in the audience and remove them all together.

So that was one of the challenges. um our users have transacted the URI close to six billion worth of transactions of which 1.6 has traversed over this IPAN. So this has been a phenomenal success and 90% of the volume happened in the last 12 months and we are predicting a 10x going for the next 12. Now okay the next thing then is how do you actually integrate to DeFi? And for those of you in here who have a a DeFi token, the best strategy is to premint some of the tokens, allocate them to your treasury. You can use them to incentivize behavior, bootstrap liquidity, and life is good.

Monarium though, as a regulated stable coin issuer, has to hold one euro for every token minted. So, we're unable to simply pre-mine Yuri. Um, and not having big balance sheets, we couldn't just throw money at the problem. So, we had to think outside the box. And the only way we could think about it was to try to try to align ourselves with some of the D5 projects out there and and help out kind of bootstrapping that liquidity. After a couple of failed attempts, we find found our home on Nosis Chain. And there are actually a few locos here that I want to shout out to. Uh but there are many many more.

Balancer in the room. Uh thank you so much. Um, an interesting insight is that the one major unlock in all of those cases or close to all of them were when these founders of these protocols onboarded as Monarium customers and started to be able to use their crypto to lend and pay their landlords. So that was kind of when they became these monarium missionaries that would move mountains to make sure that it worked for them. So that's a that's an insight you can have.

And so at this stage we had the stable coin, we had the IBAN for easy topup and payouts and we had enough liquidity in DeFi. It turns out this was a great foundation for disrupting card payments. So the Yuri is now the driver of two next version cards, the Nosis Pay and the Metamas card. Now happy to tell you about that. And the way these cards work are they allow you to um hold stable coins in a self-custodial wallet and make them available for spending uh immediately. So it's beautiful.

Just to be absolutely honest and showcase like where we are on this journey is that card payments are actually a value trade chain from the bank or issuing bank, the Visa and Mastercard, the settlement network and the merchant bank. And right now we're at the stage where the issuer bank will actually use stable coins but redeem them and settle through traditional means. We are working with both Visa and Mastercard to make sure that the URE is accepted as a settlement token on Visa and Mastercard. But the main unlock comes when we are able to do end to end onchain payments from the card holder to the merchant.

And I actually think we are just scratching the surface of what's possible with this technology. The new use cases coming up, they include you being able to hold a yuri in a earning yield on your euros and due to the atomic nature of the blockchain, you're able to spend it. So at the time of point of sale, it's actually unwrapped and made available for settlement. And the other way around is also emerging. So a credit card like behavior where you hold your crypto assets and you're earning yield on it and at the point of spending you'll actually automatically be borrowing Yuri to for the settlement. So this is all coming up and I'm super happy to see

this kind of working out. As I mentioned earlier, our plan was always a go-to market strategy to go through the partners and we spent years trying to convince wallets to integrate our infrastructure to unlock some of the use cases that I'm talking about now. These wallets would usually be crypto only. Some of them were starting to integrate DeFi. And those who were kind of on and off ramping, they would do so through the card systems. That would be incredibly inefficient for users to pay like one, two, three, four, five percent even for onramping. But for the use case at hand and the expectation for Bitcoin

to to go to the moon, this was okay. However, we are now starting to see the next version of these wallets. These wallets have simplified the key management. So, they use biometric things like your face. They've exchanged the language from trading and tokens to savings accounts and payments. And here are a few wallets uh on the slides. There are more coming. But it's very cool to see how they in an permissionless manner use those building blocks like the card and import it into the wallet. And now with the IBAN, you can actually top up really easily and

and make payouts. and a as the main yield instrument, they can create savings accounts. And these wallets are starting to resemble Revolute. And this is where we're headed. So, have we made all the right decisions? Definitely not. Is our market strategy to go through the partners rather than the exchanges like every other stable coin issuer the right one? Well, only time will tell. But what I can tell you is that the stable coin market is going bananas at the moment.

And I think it's going to lift all the boats, everyone in here. And with new entrance into the space like Stripe with a monster acquisition of of uh Bridge, new use cases are emerging like crossber payments. And again, I hear that the US dollar will be the only thing that matters when it comes to stable coins. So for those of you who have know the terminology, the the stable coin sandwich. So according to the theory, it's all about having local convertability from fiat currency to a dollar stable coin which gets settled over the world and then exchanged for local fiat somewhere else. Right? And as

you can imagine, I cannot subscribe to this future for two reasons. One of them is I think jurisdictions with strong currencies will oppose to this. And we actually see this in Mika, which limits the nonuro tokens that can be used for payments. Europe does not want dollars for payments. Money is political. And number two, which I think is much more important, because all of us in here, we're on the journey to put the world's economy on chain. And if we think that is the way we're we're going, we're going to need more tokens, more currencies, not fewer, and especially especially not one. Right?

So I think it's fair to say that Monarium now is on the mission of bringing more currencies. We now issue the euro which is the flagship. We're starting to issue pounds and we'll have dollars by the end of the year. Earlier this year we also had our VASP registration approved which unlocks a few things for us. namely being able to exchange between um stable coins issued by others, crypto stable coins by us and so on so forth.

And the end result where we're headed is to be able to source the liquidity from the traditional FX markets and bring it on chain by by being able to exchange at near mid-level rates from the biggest markets in the world. Now that I've shared with you some of the things that we've been h some of the issues that we have been having some of the decisions that we've made I want to tell you in honesty one of the biggest unblock we have at the moment so if you're onboarded as a monarian customer life is good you have the iPad you can exchange you can do all of those things have the have these apps it's beautiful

but if you are for one reason or another a nonky seed customer or user token holder you may be a US anti person which we are unable to on board at the moment and you want to have a euro exposure because Trump is doing his thing uh if you're in this category life is still pretty miserable and it's my main mission right now to solve this while I don't have any announcements yet I'm actually here at ETC to try to validate or invalidate the idea that I have and so far I'm happy to share that I have not been able to invalidate it but I'll give you a glimpse into what I'm talking about. So as the mentor we have some

special privileges. We cannot throw money at the problem but we can use the technology in a clever way where we will be able to inject UR liquidity on demand on all the chains where we are supported. So I have to say things like this and working with the community with you guys makes me after all these years eight years what is that in crypto years it's like 100 crypto years right I am still as in you know so excited about where we're all going and I actually believe that all these years later that we're all going to make it. So with that I

thank you. [Applause] Hi uh Vlad from Labs here. I wanted to um ask you how do you envision the relationship between Euro stable coins and the potentially potentially uh yeah uh potential central bank digital currency of uh of the European Central Bank. Um do you see that as something that you're planning to integrate into

your products or uh is it a a competitor in some way? Uh, also I I guess at this point we don't know if there will be a a retail element for the digital euro, but yeah, how do you how do you look at the digital euro in general? That's a fair question. So, here's a hot take. I think the digital euro will never emerge. Yeah. Um, maybe in some shape or form as a wholesale thing. Uh, I I usually just say the digital euro is already here.

It's called the Yuri and some of the other issuers. And I think the way to go here is much more like the US is going where they, you know, incentivize market participants to, you know, go to different chains. Like is the digital euro going to be on all chains? No, it's not even going to be on a blockchain. So this is something that is supposed to actually be able to used as cash. So if you go through the numbers, it's supposed to be like limited to €3,000. uh and supposed to by its design requirements to be able to use offline which is not on a blockchain and I actually predict if it emerges it will do everything but be able to be used offline right uh so there's another

story about like whether there's going to be a wholesale CBDC which I actually think will benefit the issuers uh the euro is because we can then use that as a collateral to kind of use to get indirect uh central bank deposit facilities So, I actually think that is a good thing. Um, it's just weird to me that, you know, the hat of the central bank is touting the digital euro and it's kind of just hurting the the the the innovation. So, uh, but what I hear from inside the system is that there's this one person who is kind of championing the digital euro. Everybody else opposes Yeah,

yeah, just a quick one. Uh what is your take on the real like I mean real real non-custodial card if that's like possible at all like with I mean no KYC at all like uh if we're talking uh about the like emerging countries and uh like yeah the rest of the world basically. Thank you. So when you say a custodial card, I'm assuming you mean card payments like Visa and Mastercard or something like that. I can definitely say there will not be a non-KY seed card anytime soon. Like that's not going to happen. However, like when we initially applied for the

license, um our regulator wanted us to onboard every token holder and we fought that quite hard because we said that would just kill the use case of blockchains, right? Then you're just recreating something that you know you're not using the benefits. So it actually delayed our application progress pro process probably by six months. But effectively, this means that you now can hold tokens even though you're not KYC. And you can do a lot of cool things as token holders, but Visa and Mastercard card spending unfortunately won't be any of them. But maybe something clever emerges. I don't know, some experiments. But I wouldn't

hold my breath to be honest. [Applause]