How Stablecoin Yield Changes the Neobank Business Model

Transcript

Hi everyone, I'm Pod founder of stable channel and very important topic today I wanted to cover. So how onchain yield is replacing the bank savings account. So let's look on the market structure first. uh the credit card APR uh national average in US is at 21% highest in very long time and at the same time the savings APY uh is at 0.61 61 lowest also in quite a long time and that is more than 20 percentage points of a spread widest spread on record.

What is not visible here is that consumer sentiment in US is in the lowest spot in 75 years of tracking. uh the US households are sitting on almost 190 bill uh of depth and the midterm inflation is expected to be at around four to 5%. So the math is pretty simple. If the inflation is that high and the savings account are paying us almost nothing then this is guaranteed loss and not really uh savings account. Then consumers feel it and they're looking for alternatives. If we looking at the bank mergins, uh, then we see that they're pretty jazzy. It's like

3.4% at the moment, and that's more than five times than what they're paying us, uh, on the savings account. Uh, the problem is that banks can't really share more of those yield, more of those uh, more of the money with us because of the macro environment. So looking at this chart, banks entered a lot of commercial real estate loans back in 2020 especially. There's a really big maturity event happening last year also this year. Almost 900 bill of Siri debt is maturing this year and almost 400 bill of that is sitting directly on the uh banks of the uh balance sheets of the banks. The

problem is that they entered those loans when the rate uh rates were much lower at 1.5 to 2%. But most importantly the prices of real estate dropped from that time. So banks are sitting at the moment at around 300 bill of uh unrealized losses and if they would like to operate as intended under under the Basil 3 regulation they need to hold enough of equity capital uh on their balance sheet. So they need to build healthier balance sheets. They need to just save more money and because of that they can't fight with each other and share more of this yield uh with users with depositors. So have we ever have kind of

like similar situation kind of. So like in 1982 uh MMFs hit the market. We've seen a lot of outflows from savings accounts at banks and they've been captured by MMFs at around 220 bill. Banks reacted very fast because back then the balance sheets were much healthier. uh they launched MMDA so money market depository accounts recaptured most of those outflows and even more around 300 bill in just three months but uh today's situation is different so banks are in much uh worse situation and the threat m is much bigger fed reserve is expecting that they're going to be trillion uh

dollar migration from the banks to these stable coins and because of that banks will have less than uh more than 1.3 billion uh capacity for lending. Um and uh because of that we can say it's not anymore uh niche crypto story but really big macro events and something like this never happened earlier. Um so Jamie Diamond said something very important in his latest letter to uh shareholders in April that the whole new set of competitors is emerging and that of course includes stable coins and other form uh of tokenization. the fintex uh

the thread fivey banks already seen that banks are frozen and this is providing us uh and the fintex space in the crypto space with really big opportunity to uh capture that so if we look at the uh payment railways they already been changing from the old architecture to uh being settled on chain PayPal QAD uh reach more than four bill um in deposits over very short And when we look at fintex, the Robin Hood gold cash sweep account is paying 3.35% APY. That's more than five times uh national average in US. It's pretty similar when it comes to Europe and Revolute. And I believe that we at

crypto were positioned really well to capture um those users needs because we are building neo banks from scratch based on those crypto railways. And in the recent months, we've seen more than 100 uh of those companies um coming to the market from like Plasma One, Anom Pay, Ether, you probably know quite few of them. And the yield in their cases is generated totally different than how to generate it uh on the Treasy side or at FinTex. First way normally is to do that through vaults and the problem is uh with that is that uh they need to hire risk curator to manage the funds perform some underlying strategy. Um but

curators take no responsibility for the funds if in most of the examples and we've seen some blowoffs in the recent months uh depositors been left on ice unfortunately. Second way uh is lending. But the problem here is that the yield concentration is very narrow. It's mostly running on leveraging of two assets. And if either of them would rubble, then once again depositors would be um left on ice. We've seen problems with liquidity or even bad depth uh within this model. So at stable watch we've been working a lot on research and risk uh when it comes to yield bearing stable coins or yield bearing assets and

we think that there is a better solution which is um SUSDS uh issued by sky it's currently the biggest yieldbearing product on chain fully transparent you can see what's the backing on the graphic on the right side of the screen balance sheet consists of yeah more than 11 bill at the moment And the rate if we compare it even to uh Robin Hood or Revolute is pretty competitive I would say even for the western world 3.6% 6% APY. Uh more than half of the balance sheet is uh instant liquidity sitting in USDC. A lot of the other assets on the balance sheet, they are um they have very short time to liquidity as well.

But what's the most important and what excites uh new banks and any kind of platforms, wallets maybe would like to integrate this asset is the very clear uh and easy to understand risk framework. which is based on basil 3 regulation. So this a regulation which is pushing banks now to accumulate more capital. So in this scenario there's almost 200 mil of this risk capital. It's easy to understand towards the waterfall of losses. There's junior tranch mezine senior one and some side pocket. Uh and once again it's uh very clear to understand what going to happen uh when something wrong. uh will appear

and up until now it was not that easy to integrate uh SUSDS into your products and at Osero we've built um our first product Osero Earn around that it's 10 lines of code so super seamless integration can be done in our uh and put into new bank or wallet uh some first use cases went live last weeks with anomay for example where you can get your yield fully private for such a use case uh in crypto I believe and at the moment 250 bill uh of stable coins are no yields um in any space and if we think the same as federal reserve that uh they're going to be trillions of

migration into stable coin market then uh it's very big opportunity so if you would like to talk about that you can hit me on uh telegram that's the upper uh QR codes uh I promise I don't miss uh install malware on your Guys, if you're interested in the data uh and the whole picture about our thesis around this migration, we've prepared the full report. You can see that uh if you scan the bottom QR code. I also got some physical copies so you can catch me and and grab one. Thank you very much.