How DTCC's SEC Approval Changes Everything For Onchain Finance with Sam Kazemian and Rob Montgomery

Transcript

Like that's why USDT is the centralized exchange liquidity pair. It actually that's the problem it solved, right? USDT made all of the BTC and crypto pairs on centralized exchanges way way way back in the day trade instantaneously. You're going to get a lot lower slippage. You're going to lot have a lot higher efficiency. These onchain forex pools get flow uh so they're very happy and the only one who loses is the uh the existing giants of the payment processing world. From my perspective, it's not really an L1 that's poised to gain a lot of settlement volume. They're going to be doing it on their own accord. But what this does show is that we're going to get composability between the regulated markets and the DeFi markets. I just can't help but think Tempo is going to

mob all these and that Tempo is going to is coming straight for all of the payments chains. And I'm scared. Welcome back to another episode of Stabled Up, our premier weekly show covering the ins and outs of digital dollars, stable coins, and the future of decentralized finance. >> Show is made possible by FRA and FRA is powering the financial engine of the internet, powering FRXUSD and genius compliance stable coins. This is the stablecoin super cycle made possible by FRA. Now enjoy stabled up, our weekly stable coin show. Gentlemen, gentlemen, welcome to Stabled Up episode number 13, our premier weekly stablecoin show

presented by our good friend Fra. We happen to have Sam on the show today with Rob Montgomery of Infinifi. Guys, a lot going on in the stable coin space. Um, we've got uh Standard Chartered news, we've got DTCC news, we've got Docoin news, we've got a lot going on. Sam, Rob, welcome back. >> Thank you guys. >> Hey, always a pleasure. >> Good to be back. All right, guys. Where should we start? You want to talk about Docoin a little bit and I'll go to >> I just did the math for you. >> So Andy, that 40,000 you lost.

>> Yeah. >> So Doco Quuan is the 15 years he's spending in prison. Every seven minutes is equivalent to that 40,000. >> Wow. >> Yeah. >> Wow. >> That's how much money he lost >> in terms of like the total market cap that he like >> Yeah. to the $40 billion. You convert it back to minutes. Every seven minutes, he's paying society for $40,000 that he lost. >> Wow. Sam, I got to think you got a uh US story over there somewhere. I don't know how much you want to share, but I I got to think you were in the trenches, man.

>> Oh, man. Oh, man. I uh Yeah. I don't know if this is the best time now that it's all the the book is thrown and you know all all this stuff but I think I think it's good time to put some some of it out there. Uh as as people might or might not know now it's been years right um you know FRA is and and was back then uh the second largest essentially like decentralized like quasi like hybrid algorithmic stable coin. Now you know we have our FRAUSD genius compatible stable coin. In fact, I would say that event really really shaped us to create a safer stable coin as our flagship product rather than uh a decentralized one. The way that I would actually put

the collective consciousness of the industry is until Terra blew up, right? everyone in crypto from like early like 2018 ICO era and like basis if people even remember that name uh FRA and then Terra were trying to find the holy grail of stable coin design as like this hybrid algorithmic kind of stable coin that has all the best properties of Bitcoin right it's decentralized it has no blacklist it's all onchain it doesn't need a bank account to to work but it also has the USD unit where the the unit that everyone needs wants they they uh do their accounting in and all this stuff. And the the the holy grail stable coin, you know, design of algorithmic, you know, scalability and the stable

coin trillemma, if you if you guys remember, was like this is like, you know, did Terra solve it? Did Frack solve it? You know, maybe like someone else can solve it. Um, and then it imploded with, you know, like you guys said, 40 billion of of capital wiped out. And it was like, no, actually, maybe the best design for a stable coin is an extremely safe digital dollar. And that's just what a digital dollar needs to be on the blockchain is it does need a bank account to work. And for real decentralized assets that people want to be fully non-custodial and fully in the crypto ethos, you have BTC and ETH. So I think that's a important caveat that actually left in people's minds. But where should we start? the four pool, the other pools, the the US uh

backstories like I am uh I'm a multi- saga volume book of you guys can open wherever you want on whatever chapter. >> Yeah, I think the forpool uh on curve is particularly interesting because that was the initial tell that US was having some issues. So this was like in in June 2022 we saw that the uh balance between USDC and USDT in the three pool started really getting imbalanced and that's when like you know the the siren started going off on Twitter. So maybe we can start with some of the four pool you know you were pretty deeply involved like did you know before other people like how did you see this play out? Um

how did you manage risk for fracks? just talk to us about bits a bit of like the war room stories there. Whatever you feel comfortable to share. >> Yeah. Uh first of all, it was May 2022. Um and no, we actually had no idea. Uh it was equally as surp I I would venture to say it was more surprising and and like uh the entire thing was basically um literally in an instant, right? When you look at the chart, it's like like the crazy DeFi charts, it's like right? Just straight up, straight down.

And the the interesting thing about the whole like Terra saga is that I think unlike FTX, everyone kind of understood that this is how it worked, but that it like didn't it shouldn't work in a pure in fact like it shouldn't work at all, right? Like how did it even get get to that far? And that's pretty much I think the point of the whole story that people are like it it had to be some kind of um you know uh lying and things like that to get people to be there. In fact, FRA's entire premise with the original design is that a raw algorithmic stable coin does not work like the do not

actually go in that direction because that is absolutely ridiculous, right? And so um our actual premise of like existing in the original design of the first product that we built was that literally uh this is the the one that's the raw algorithmic stable coin is crazy and it's not going to work right and so um I guess you know we saw that unfortunately in May 2022. >> Holiday is unified crypto payments. Give your users more wherever they are. Go to holiday.xyz XYZ to never write a smart contract again.

>> Looking for yield that stands out? Infinify gives you just that. Deposit stable coins and earn far more than the current savings rate. Infinify is a battle tested, reliable DeFi platform that is ready to go. Head to infinifi.xyz. Havachi is fast and private per trading secured by ZK with Celestia underneath. Go to habachi.xyz to start trading today. >> Yeah, we did. Well, Dcoin's got 15 years now. um he's going to serve half that sentence in South Korea, half of that the first half in America. Uh kind of an end the end of a chapter there for um the industry and kind of SPF's behind bars, Mashinsk's behind bars, Dcoan's behind bars. Um that's it. I mean that

was those were the three culprits amongst you know you ought to think a lot of people got off kind of uh doing similar things at smaller scales or not you know blowing up as bad as those three but there's always the scapegoats and uh those are the guys that that got it. So, let's move on to uh DTCC getting a no action letter from the SEC um uh yesterday afternoon. Uh so, about like about 15 hours before this. Um Rob, maybe you can just set the stage here uh on your side >> for what this means and then we can hear from Rob M um from his side and Sam.

>> Yeah. So, I I think first and we talked about this a little bit before Sam and Rob joined. Uh it's important to recognize the scale of DTCC. This is the largest settlement platform by volume in the regulated markets. They do quadrillions of volume. So, we talk a lot about trillions, but DTCC does quadrillions, and now they've got clearance from the SEC to go and tokenize some of those assets. Um, I think this is huge. I also realize that they have been building out this Hyperledger consortium chain. And so there's not really an L1 that's poised, and maybe Sam and Rob have have their own opinions on this, but from my perspective, it's not really an L1 that's poised to gain a lot of settlement volume. They're going to be

doing it on their own accord, but what this does show is that we're going to get composability between the regulated markets and the DeFi markets. And I think this convergence is going to lead to a an absolute just significant increase in the amount of liquidity that are flowing into the assets that we have. And I I do think this is going to be mostly contained to stable coins, Bitcoin, ETH, and maybe a hand select few other assets that are going to benefit from this rise in liquidity. Um Rob, Sam, maybe you guys have other other perspectives here. Would love to get your thoughts.

>> So I definitely agree that it's going to see a uh a lot more capital coming on chain now. There's a much clearer regulatory pathway for that to occur. I don't know a terrible amount about how this hyperledger setup is designed. What I do know is that in my opinion, most of this will eventually acrew back to ETH L1. However, that's done uh synthetic bridging uh various people, you know, setting up their own well bridge between the two.

I think you eventually see it trickle over to ETH just because that's where there's the most liquidity currently. that's where there's the most uh long-term well support and stability. People are kind of getting tired of the L1, the L2 games and they see that yeah, this really is the biggest store of value, the most secure venue for these sorts of things to be executed on. And I think the main impact for the world that I'm in at least is going to be that we're going to see a lot more RWA uh borrowing, lending and borrowing against these assets in this next year.

For me at least with Infinifi, that is very exciting for what we're doing because one of the new yield sources that we're aiming to tap into in 2026 in addition to various different lending products that we're exploring is both the direct subscription to and the liquidation of RWAS. direct subscription too. Obviously, we can make a pretty good yield from putting money into these things and creating almost a sort of hybridized structured product where we're earning the yield on them and able to scale our returns that way. But also, the liquidation of is really interesting to me because it's a completely unsupported part of the sector right now and that

there's not a lot of people who can warehouse the duration on these assets. That is to say, when you have an RWA that's been tokenized, it usually has some sort of a redemption period associated with it. Most people are not going to set up curb pools on these assets. And so, you need somebody who during a liquidation event can come in, buy that RWA at a discount, warehouse the duration until that redemption occurs, and then pocket whatever the spread was on that liquidation. Infinify is purpose-built to hold assets to maturity. That's our entire line of business. And so with the scaling in this well we become one of the uh the lynch pins to facilitating that scaling and we can also make a very very large

amount of uh you know spread off of that. You're talking like 40% average. >> Yeah liquidations. >> It it's actually interesting here guys uh on that note uh Rob it says DTC is authorized to offer a limited production environment tokenization services across L1 and L2 providers. DTCC will provide more details about onboarding requirements including registering wallets as well as the approval process for L1 and L2 networks in the coming months. >> So like one one thing one thing I want to just say about DTCC for for viewers that aren't familiar uh they literally hold and settle 99.99% of US securities. And that's just a funny fact to just like think about for

a second is like how did regulation get us there where there's one private company that literally entirely settles 99.99% I think it's like something like over a 100red trillion or something of because every single stock in in in the entire US stock market and then most of bonds like literally the story is that the physical certificates when when like they used to trade them on the actual New York Stock Exchange before when things started to get digital with like actually like tapes and then later the internet and stuff. Literally DTCC held the physical stock certificates and then they would move them around instead of just literally hand by hand every single

trade. But it's just really funny that uh regulation, right, like the the SEC, all of these things that were like, oh, it's like, you know, orderly markets for competitions. Well, it's like, well, here's this example in the settlement arena, right, where there's one private company. You you could maybe say this needs to be a public good. It needs to be like nationalized, owned by the US government or whatever. But this is a private company that literally does the entire settlement. not the vast majority, not not like a sort of monopoly, but the entire thing. And so what's interesting to me with now with this tokenization stuff is how will the tokenization uh actually look? Will it be like the the same way that they do paper certificates uh and like tokenize

them like kind of right in in the digital aspect of settling them between like broker dealers and things like that or uh is there some way for them to free float like float around freely on in these L1s and stuff like that? And you know one thing with with us at FRA is we're we're an issuer obviously of a stable coin FRA USD but we also have our Fraal blockchain. And one of the interesting things is if these stocks are like whitelisted like restricted, if we can actually get uh the the Fraal like chains uh proxy bridge right on on Ethereum actually whitelisted to move these assets there uh because the chain is is by by a issuing company then those could be traded on Fraal chain. Uh

they're not literally securities. They're obviously representations of the securities, but they are literally backed by the DTCC's like own securities token, which is literally how the US financial structure works exactly in that way, right? And so we've been thinking a lot about how to get really good pairing uh of like FRAUSD liquidity against these new assets because that's where I we think the market is actually going, right? Like if you think about uh why Tether is so big, USDC is so big, they are the pairs. They are the liquidity pairs for their generation, right? Like that's why USDT is the centralized exchange liquidity pair. It actually that's the problem it solved,

right? USDT made all of the BTC and crypto pairs on centralized exchanges way way way back in the day trade instantaneously instead of having uh arbitrageers have to send wire and then withdraw it two days and then send it to another exchange plus two days and then try to arbitrage over four days prices that move in crypto uh 365 247. Tether made them immediate. You withdraw the tether, you send it there, right? And then USDC did that for DeFi. Well, who's going to do it for this next generation of stocks, bonds, as Rob said, like assets that have duration? What are the liquidity pairs there? Um, and I think we have a really really interesting um few things to release in in Q1 that uh

will answer that for FRAUSD, our own stable coin. >> Yeah, very well said. And Sam, I just want to fill in one one thing that you mentioned there, which was essentially this this stamp of approval. Wherever the security, the financial security goes, whether it lives on DTCC settlement network, their own internal blockchain or if it starts to permeate into the DeFi ecosystem, that stamp is called the CUSIP. It is a 9 character alpha numeric code that identifies a North American financial security for the purposes of facilitating clearing and settlement of trades. And so this was this is a regulation standard that obviously DTCC has and they've internally done it for their own settlement engine for 99.9% of the financial securities that are out

there. Hundreds of trillions of dollars of securities. Now that same stamp is going to apply to assets that they can that will start to permeate into the blockchain ecosystem. >> Yeah. Tokenization, man. It's it's it's happening. Um and it's happening globally. Um Sam Sam, you also, you know, in your in your kind of uh outline of the frack suite, you didn't mention Fracknet, but I wanted to ask about this Korean wand stable coin that you guys started to collaborate with um from uh the trying to, you know, basically trying to make the the Forex onchain um market more liquid, more available, more kind of uh

transparent, global. Um, so you guys recently announced that you will be working with KRWQ Cash, which is the most traded Korean Juan stablecoin. Um, and so they will be joining into your genius compliant stable coin network. I I'm curious how you think about this forex market and from both of your perspectives, how big this can really get. Right. So obviously we've seen the proliferation of US dollar stable coins. I think next year is going to be the year of non US dollar stable coins. Uh there's five or six European banks that are getting together to launch their own uh European kind of like mandated the euro stable coin. It's it's looking like the end of summer next year. Obviously KRWQ is is on track for Korea. We were

with Fede and some of the guys in Buenos Aris uh a couple weeks back. They're launching an entire slew of stable coins for uh Argentina, Brazil, Colombia, Venezuela. I just think next year is the year of the non USUSD stable coin. How do you both think about forex onchain? How do you both think about bringing this massive market onchain? Um and how do you kind of see that happening? >> Yeah, for sure. So the KRWQ Korean Juan stablecoin is by the IQ team. Fracks is the issuance and infrastructure uh provider for it. just like how we're doing stable coin as a service for uh mostly USD but but a uh Korean Juan uh stable coin is exceptional um and we've integrated it into FRA at our neo bank

layer where people can sign up have wires in and out uh stable coins like FRAUSD but also soon KRWQ which is super super cool. I think that exactly what you said is true where 2026 will be the the year of non USD stable coins. I don't want to make this mistake that I made with prediction markets. Prediction markets, I've been in crypto since 2014 there. Every single attempt uh you know, Augur was the first uh Ethereum ICO, you know, then there was like Omen and then there's a bunch of others that I don't even remember. But every single time people tried it and it didn't work. Uh people were like, "Oh, you know, prediction markets are a niche um thing.

Maybe they'll blow up every four years because of the, you know, worldwide kind of event that everyone pays attention to, which is the US election." And then actually Shane at at Poly Market was like, "No, hold my beer. It's actually the biggest thing on on the entire world, right?" And so, uh, I think that, you know, everyone keeps sharing the chart of like 99%, you know, USD, uh, stable coins as like the stable coin dominance. I think like it'll still obviously be like 80% dominance because that's literally what the dollar is right now, 80% of global trade. But that means that non-USD stable coins will 20x if it even looks anything similar to the global trade of the classical you know analog assets before they they they were tokenized right and so it's going to be

huge particularly Korean wands are actually uh if you didn't know this they are last year they were the top trading asset even more than USD they were the most fiat trading asset because all of Korea trades against Korean Juan I think it's actually like a regulation thing and so like Upid and Bitum and all of these Korean exchanges, they have to have KRW pairs. And so I actually think the the second biggest opportunity after non-USD stable coins is actually the Korean one, which is why we thought this was so exciting of an opportunity to be uh KRWQ's like issuance and infrastructure partner, but everything else is going to be growing uh you know, euros um you know, Singaporean dollars, etc., etc. And so I think once those

come on chain, we're already seeing DeFi being built around them. Like the other day I saw someone was doing um I think it was uh I think it's called autonomment and I I just saw it. I don't not affiliated at all. They are doing like um carry trade with FX to get it's like Athena but with different um FX pairs as like the collateral. um this kind of stuff is going to grow a thousandx um onchain and so I think 2026 will be the year like prediction markets it was 2025 um and so we're really excited to be at the forefront of that with FRAUSD and KRWQ all integrated into our uh NEO bank platform >> and real quick there uh is KRWQ then a genius compliant stable coin is

>> no no no I mean genius only applies to stable coins which basically means you could go in and out into KRWQ with genius compliance stable coins like FRAUSD. But it is uh it is entirely Korean thing. Yeah. >> Right. Rob, what what's your take on this? Uh from more kind of like DeFi side, do you anticipate >> these kind of tokenized versions of these non USD assets or stable coins coming into Infinifi to other DeFi platforms? How do you kind of see this playing out? >> I wouldn't see us directly having them as deposit assets. um at least not in the next 6 to9 months. But the way that I see this as interesting is global trade and uh particularly trade

receivables. So, the forex market is definitely starting to proliferate on chain. And what that means is, as somebody who does duration assets, I've been on the lookout for people setting up things that look kind of like what I think Huma was trying to do earlier in their life. I'm not sure if they're still doing it, but I know that there is a market here because I did some research into it a few years ago. And the long story short is you have what's called invoice financing. you have what's called trade financing. These are relatively short-term opportunities uh frequently denominated in a foreign currency where a traditional wire actually loses a lot of efficiency because of you know local fees because

of um inefficient forex. If it's a small denomination like a lot of these invoices are like around $2,000 a $45 wire fee is going to eat up the entirety of the profits you can make off of performing that trade. But if now you're able to do this these receivables financing, this trade financing using stable coins and if you have efficient onchain forex that allows you to open forwards, you've created a really good duration asset that can yield somewhere between 12 and 24%. Depending on what the cost of your hedge against that uh currency's volatility is and I mean this really ties back into the RWA sector. You want to know what the the really most exciting avenues

that stable coins and foreign stable coins in particular are going to be opening up. It's these duration opportunities for short-term loans to countries that have much higher interest rates in their central banks than we do mean that there's a lot of money in these trades. It's just not profitable to run them without stables. like a Turkish stable coin, like a Turkish LRA stable coin could be an interesting thought experiment with regards to how what you're describing because it's so high or or maybe like >> Brazilian real was actually what I did my models on when I was looking into this like years ago. It was showing 24% APR.

>> Yeah. >> And you try to run that with a wire fee. You're talking about a $45 fee for an international wire. Your average receivable is $2,000. What you're doing is you're basically like someone's going to deliver goods with their truck for the next month. They deliver the goods, they get paid 2,000 with an invoice. That invoice won't be cashed in until the end of the month. They need the money now to go make more deliveries front, you know, >> $1,800. You you're making 24% off that 36% in Brazil.

>> But if you got that wire fee, that kills your profit. $45 is 24% APR if you're having to send it every month. >> And the time cost of money too with the, you know, couple days in between as well because usually those people want the money like now. Like the whole point is so that they can reinvest into their business or go pay their suppliers or whatever it is. >> And if you've got really good onchain forex, you can automate pretty much the entire thing. So Robbie, we heard from um um Luca from MZ and Hanoan from Codeex about why like Hanoan was bullish on uh on Jane Forex, Luca was bearish.

Sam, I'm curious to hear your opinion on on this bare thesis. Uh Robbie, I think you can probably say it better than than I can, but but I can give it a stab. >> Well, I Well, I can put it pretty simply. It's that there aren't a there isn't a lot of liquidity in certain forex pairs. For instance, you can take two countries um with, you know, rather esoteric uh currencies and they don't have a lot of liquidity between them. So, they have to route into the dollar, the US dollar, and then route to that other currency. Um and he used, you know, uh South American and I think a Eastern uh Asian currency as examples uh that of a currency pair that they would have to go from currency A into the dollar and then to currency B. they

couldn't go to A to B directly, but we have DeFi, we have AMMs. With stable coins and enough liquidity in those assets, it could make more sense to go directly to the the second foreign currency rather than routing through the US dollar. Um, and you know, the point here was essentially that this takes an incredible amount of effort to unravel because there is so much of a moat in the US dollar. And you know part of the benefit is that you have all of these flows routing through the US dollar. Um and it it really is uh this denomination and reserve currency in that aspect. So we we heard some conflicting opinions.

You know some people said that this could happen onchain and it could happen onchain sooner rather than later. Other people thinks you know think that this is not able to really get unraveled at all. If so it's going to be a decadesl long process. So Sam, have you thought much or or Rob, you know, maybe we'll start let's start with Sam. We'll go to Rob. >> Yeah, I we've actually because of the KRWQ guys that that were helping uh issue this thing, um we actually have an intimate understanding of this because every single country has their own esoteric like capital controls or sort of capital controls. Like for example, Korea like you can't move Korean Juan into a outside bank account. you need to

actually have a local bank to hold Korean Juan. Now, there's interesting ways around that to create a Korean Juan uh stable coin by holding Korean uh treasury bills in uh accounts that are um not in Korea. But every country has their own like uh requirements. And so the US dollar is basically the most most free asset in in the entire world that basically has connected to all of these as like a literally routing pair, right? And so I think that there's there's two types of uh things this says about the structure of the market and in non-USD stable coins. One is it's a winner take all even more than what people are seeing in the USD uh market with like

tether and USDC. Um it is literally there there's going to be like just a tether of Korea, a tether of Brazil or you know tether of Turkish lera because these use cases are extremely important and and being like the Korean Juan routing pair or the you know um Brazilian real or you know the Turkish LRA routing pair and there isn't a long tale of niche you know uses for like a thousand USD stable coins like there's going to be right like like the Claro USD this USD Starbucks USD this and that and uh that's not going to happen with all of these other uh countries that that's why being first for example with KWQ is so important. they're all going to have onchain liquidity and it's just

going to be more and more uh you know powerful right and and no one else is going to need or want or should even to create a second uh Korean Juan or Turkish LRA and that that token that stable coin is going to be so liquid it's going to be able to trade onchain against other non-USD stable coins it's going to be in DeFi and it's going to become a very you know consolidating asset if you think Tether is dominant right now just wait until like these non-USD stable coins really get going in 2026 and whoever the current first mover is for each of these units. Um I'm willing to bet that you know we can come back in a year December 2026 from now and look at the the chart and I will bet

99% dominance of one single uh issuer for each of these pairs. Trade on anything. Economics, weather, sports, crypto, and more. All on couch.com 247 for the world's biggest prediction market. Yeet is built for big moments. The most fun you'll ever have with your crypto. Go to yeet.com to yeet into your next game. Not your keys, not your coins. From the team that pioneered cold storage, Treasure has just released its new wallet. Guys, if you are still using hot wallets in 2025, 2026, you are missing the entire point. Secure your coins. Get a treasure at treasure.io.

>> I would agree with Sam on that. I think it is really a winner take all scenario. The very least winner take most. >> DTCC style. DTCC style. >> Oh, Jesus Christ. Crypto is meant to solve that. No. To me, I don't see any reason why the onchain market wouldn't eventually dominate and supply the offchain. I definitely don't see any reason why at the very least it wouldn't start up. You have you're going to have a decent amount of flow just because people want to do I mean like Sam's talking about basis trade. You okay, who's going to take the other side of that? Well, if someone's doing trade receivables, they're the one taking the other side of that. You have genuine organic demand for the ability to long and short these assets already

and right now it's having to route through off-chain systems, but a decent amount of the capital flow already comes through onchain. People will want to make that even more efficient. If you go and you look at one of the other big uses of stables at the moment, it's store of value. I ran into this a decent amount down in Argentina. I ran into it years ago in Colombia. People do not like uh at least people in our generation actually people in the old generation too they don't like keeping their money their life savings in uh in their local currency because their local currency has a bad habit of going under every like five to seven years. They don't keep it in their banks. Um if they kept it in their own currency in their banks, they lose it when the bank goes

under. They keep it in cash in US dollars often and they keep it under their mattress which is a really terrible solution. So you've seen is you've seen this proliferation of people who are allowing you know these normal everyday folks just keep their money in US dollars via whatever app it is whatever wallet that's hooked up to you know a credit card. Yeah, I'm sorry debit card. That debit card converts the uh the dollars to the local currency at point of sale and it's a very easy user experience. Those sorts of systems right now rely on Visa and Mastercard to perform that forex swap to perform that conversion.

And I don't know the exact fees involved, but I would be willing to bet that Visa and Mastercard are taking a pretty significant cut to do that as they do with any foreign exchange. The minute you get onchain liquidity and you can go from USDC that you're keeping your money in or tether as it's quite common overseas to your local stable coin then go through your local payment provider to uh convert it back to your typical currency. You're going to get a lot lower slippage. You're going to have a lot higher efficiency. These onchain forex pools get flow. Uh so they're very happy and the only one who loses is the uh the existing giants of the payment

processing world. >> Yeah. And I think they feel that and I think they're coming on then they're coming around to it. I mean Stripe with Tempo um I think uh Interactive Brokers is starting to accept stable coin payments as of today. Like they can feel it. Um >> they're going to keep taking their cut. It's just going to be >> Oh, for sure. But I think you you bring us to a nice a nice uh a nice segue here which is uh our boy Sam has been recently appointed as a advisor CTO shadow founder of stable. Um we are investors in plasma. We were euphoric for the first couple weeks. We are now the uh butt joke of crypto twitter. Um tempo's test net has came out. Stable mainet launched and token launched. A

lot of drama. a lot of people mad about the token and the allocations and the pre-eposits and yada yada yada. And then ARC is still kind of like this little, you know, thing in the corner that's just kind of watching it all unfold. Tempo's like the big brother here and like stable and plasma are fighting. Um, let's talk stable chains, guys. We haven't talked stable coin chains probably in for I mean Sam maybe since like the first episode that we did. I know you have a kind of like not like a bias, but you have a role. We have a bias. Uh, so just putting those out there. Um, but I think let's start with with Tempo and then we'll get to stable and then we'll get to plasma and we'll get to ARC. Tempo testnet launched. I just can't help but think Tempo is going

to mog all these and that Tempo is going to is coming straight for all of the payments chains and I'm scared. Um, I'm scared that that Tempo is going to come in with Stripe dist like their distribution is massive. Their technical team is insane. their entire uh uh fleet of uh product decisions in terms of their um subblocks, their uh consensus mechanism, etc. is really really solid. Um they will not launch their own stable coin. They will support a lot of of stable coins likely including FRXUSD. Um what's our take on Tempo test net? Uh what do we, you know, what do we like?

What do we dislike? Uh then we can get into some of the others. >> Yeah. So, uh, obviously, let me let me take as many hats off as as possible as you guys said and, um, same thing with probably everyone on this call. I didn't know you guys were investors in plasma. That that's, uh, pretty cool. I I think there's going to be a lot of these things. I did take a look at Tempo uh, test net frack uh, is a FRAUSD will will be an issuance partner. This is all in in my opinion. Positive sum if people want to play the positive sum game. not obviously uh everyone is um you know bear hugs and and things if if there isn't a you know both sides interest tempo has some really cool tech uh stable will also unveil their ve very

interesting roadmap that uh we we do think is is novel that no one else will will do and not even uh tempo um but tempo's tech if you go look at it the the way that the actual uh payment lanes works the the tip 20 standard and the reward streaming that they've built and the actual gas market where in tempo there's certain things that I actually um as like a engineer and like someone that uh still writes code I'm very very intrigued about the decisions that they've made and I'm excited to see how that goes. Like for example, there is no ETH payable gas in the EVM uh in Tempo.

I don't know if you guys have looked at it, your listeners, it's super new. It is literally the the actual low-level call to like pay gas is it can be denominated in any preferred stable coin or the validator quotes in uh whatever stable coin that they uh want to accept. And like if you low tempo network on MetaMask and or like Rabby or any of these things, you know how all of the networks they're like gas like quoted like tokens says like this ETH balance for your wallet that doesn't even exist in in Tempo which is really mind-blowing there there's no such thing as a single uh gas like token and like the it is EVM though, right? And so there's so many changes um there obviously like I'm I'm

excited to see stables. We have one with Fraal that has zero gas and and things like that for FRAUSD and some of these other products that that we're building. It's going to come out in Q1. There's just going to be so many. I think the most interesting thing is who gets the actual um distribution and the in the customer base because that's where all of the flows are. These are these are things that are monetizing flows rather than uh AUM, right? Chains monetize flows and settlements. So >> Sam, help me understand something. Um people are fing stable coin chains in general and saying okay so Plasma set the standard already saying gasless everything. So there's not going to be any transaction fees on stable coin transfers. Um that's going to be probably ubiquitous across all of them.

Uh so like the revenue or rev from a typical L1 won't won't exist like you you won't be paying ETH fees or soul fees or you know L2 fees to you know use these. So then how do these things make money? Well, it's like okay, then they can be valued based on volumes, I guess, almost like a settlement layer engine, kind of like a DTCC. Like, does that make sense? Like, how do how do you think about stable plasma tempo arc? How do you think about these things making money? Um, if they're doing these gases, stable coin uh transfers, what metrics should we be paying attention to to like uh measure their success? Obviously, TVL is one. I think Plasma's like top six or seven right now in TVL, but of course they had this massive liquidity uh you know uh generation event uh that has now

kind of uh subsided. How do you think about uh the difference between normal L1's and L2s versus what these things are doing for like metrics to watch and how to value them? Yeah, I I think I think the true gasless fee transactions, whether it's like stable, plasma, tempos, payment lanes, you know, yada yada yada, they're all limited, right? Like you there's no such thing as infinite uh free transactions is literally physically impossible. So I think the most important thing is those are subsidized ways to get more flow into these these uh networks and some of them are by issuers like ARC by uh USDC circle, right? And so if if everyone's using USDC right and and ARC is super fast and super good and mostly free not

like infinitely free then basically USDC is is and I think in their uh view dominating because they are able to monetize the stock the TVL the aumumumumumumumumumumumumumumumumumumumumum of their their stable coin and so um same thing with the chains that have relationship with tether right if you give a lot of very very cheap fast uh movements of of tether tether together benefits a lot and it is an interesting question of like what are the chains doing? I think the chains are literally monetizing flows rather than the stock or the TVL uh which is what usually a stable coin issuer uh monetizes and so the the relationship between the issuer and the the chain team is the most

important like answer of like how they're going to make money. >> Gotcha. Very cool. Rob, any anything to add there? >> Yeah, personally I would say my look on these chains, it really varies across the different chain which one we're talking about. Uh, obviously I am still a fan of plasma. We are going to be deploying some crosschain infrastructure in the new year for Infinifi. And as everyone who's been following us knows, we had planned to deploy to Plasma in November. Obviously, the yield situation there got a little bit uh well rough in the fallout from the stream incident. So, we basically

let the dust settle. Plasma still seems to be going just fine. So, we're planning to be there sometime in the early new year and we're also planning to start deploying across some of the other chains that are flying around. That all said, when I think about plasma, I think about their angle is more of, at least from my perspective, it's more of a neoank one versus when I think about stable, I think about transactions. I think about settlement. I think about uh more money moving around. Plasma is a great way to access the entirety of DeFi. It's their selling point is you are looking to deposit into DeFi. You don't know

where to start. we can help you. And that's why you have these sort of single point of origin vaults that Plasma just shows right on their homepage. They're selling to a different person than somebody like Stable who's really looking to engage with these payment processors with and Arc is also taking that exact same tack. Tempo, I mean, they've got, you know, they they uh is it gang? They're really good. No, it's it's uh Dankrat. There we go. Dank sharding. They got Dankrat. And I've interacted with Dankrat before. He's brilliant. Um long time ago helped me keep uh self-destruct from getting

totally deprecated, which I was very grateful for for my protocol at the time. Would have bricked the entire thing. A really smart guy. But from what I can tell of Tempo, it's basically it's the incumbent trying to show up and trying to basically grab market share in saying they view as challenging their market dominance. If we look at historical attempts to perform those sorts of operations, usually they don't work out well for the incumbent. There have been entire books written about this. The uh the one that I would recommend most people read is uh the innovator's dilemma. And the general thesis there is that by the time the

incumbents realize that a new technology is challenging their hold on power and begin making moves to dominate that technology, it is already too late and the new winners have already been chosen. >> Yes. >> Yeah. >> Ethereum and Bitcoin coded. >> You get it? >> You can see this with Caterpillar. You can see this with IBM. >> Yes. >> Like those just the two first examples I think of. Caterpillar, they crushed everybody who was doing like, you know, cable construction equipment. >> Yeah.

>> Uh IBM, they got crushed by the personal computers. Oh, mainframes of the future. Watch this PC. Who cares about this? >> Yeah. >> Dead. >> Yeah. Well, I'm looking forward to seeing how this kind of race continues to play out. Um I think we'll have to continue to monitor monitor the situation. Uh what's that meme? I'm monitoring the situation. Um Sam Rob, guys, I I think we're coming up on time here. Um didn't realize that we had a had a had a tight one here today. So guys, thank you so much for joining. Um Sam Rob, it's been a pleasure. Uh stable up episode 13. Shout out to the amazing people from the Fracks team. Lots to cover in the stable coin verse. So uh glad that we could make it happen today.

>> Thanks guys. I will keep monitoring >> monitoring the situation. Pleasure, guys.