How Stablecoins Are Setting The Stage For Every Business To Come Onchain (Why Now)

Transcript

There will be a Frax DeFi card. >> Okay. >> It will not work the same way as other DeFi cards >> Okay. >> have worked. >> Welcome back to a roll up, guys. Hit the like, hit the [music] subscribe button. We interview some of the best minds in finance every single day. Enjoy today's show. >> [music] >> All right, guys. We are back here for the final guest at Token 2049 DAS Asia. Sam, Sam, good to have you, buddy. >> Always [snorts] great to be here. >> I'm a little bit jet-lagged, uh but I'm still energized. Um how's how's the event been so far? How's the week been? >> Uh it's it's been great. I I also had a one 22-hour total total trip, so it's it's far getting out here. Uh always worth it. Token 2049, the organizers, Alex Fiscom, all of them, they're

honestly some of the best ever do it. Um we've been coming for a few years, and I just saw uh an hour ago they announced on on Twitter they're coming to New York in June 2027, so >> it's going to be a huge one. >> It is it is, man. So, I mean, Sam, we we're obviously running our weekly show called Stable Up, and talking about stablecoins and institutional assets on chain tokenization. I was just there at the Hood Summit last week in Houston with the Robin and the guys. They were, you know, it it seemed like like the crowd was a little bit upset at the lack of kind of crypto news, but very clearly there's just this kind of massive sum of capital and allocators coming on chain, you know, specifically bringing stablecoins

on chain. Um that Open US Dollar network launched. Uh I think you you all saw that. That was a couple days ago. Um I I believe they launched across a couple chains, um and, you know, they're starting to see a a little bit of traction. You know, I wanted to kind of stop uh talk about where you think that these stablecoins are actually going to end up living. So, if you think about like the this kind of breadth of assets coming on chain, seems like stablecoins have kind of been like the opening of the floodgates for the broader set of assets. Um when you think about like like the actual life cycle or the existence of stable coins and tokenized assets on chain, I know it's kind of like a very like open-ended question, but how do you see those things actually existing on

chain? Is it similar to crypto assets? Is it similar to the way that they exist in traditional financial system? How do tokenized assets actually end up having a life cycle of their own on chain? >> Yeah, it's a I mean, it's a good question cuz it's so wide like green field. No one's really been able to figure it out cuz it's so early. Uh, I saw the open USD stuff. Frax is actually one of the consortium members. We have the ability to mint and redeem at zero bips. Um, the interesting thing about it is that it's it's a payment type of stablecoin, right? So, they they intend to take fees from how I understand it based on payment volume, right? Cuz a lot of the payment companies that Stripe and then the others, MasterCard, Visa, they're

they're all payments. So, that the flows rather than the stock of of the of the currency is is what gets them their their main cash flow. I think the most valuable important thing for us at Frax is we're actually turning our Fraxnet neobank platform into an app store. So, it's actually going to be the first neobank with an app store. The reason for that is there's so many things going on like you said. Everyone, depending on what kind of user you are, whether you're if you're retail or you do stablecoin heavy transactions or you just want to hold equities or DWAs, these kind of things, they all need slightly different flows, right?

You you need to be able to either mint or redeem like equities, right, and hold them. You or if you're a business that is using a neobank or a platform to accept payments and payouts of like stablecoins and crypto, you need it to look slightly different. You need compliance, you need invoicing, you need accounting, you need balances. And so, we haven't been able to build a one-size-fits-all solution. No one has, right? If you look at like Etherfi's cards right? Ethena's plasmas, right? All of these really popular cards. They're retail consumer-oriented products, right? They are optimized for the consumer payment gateway, right? Like you, me, right? We want to buy stuff, we want to sell

stuff. They're not optimized for a business accepting or doing anything with. In fact, the the the the selling point is business doesn't even know they take stablecoin. That's great, right? >> Right. >> But at the end of the day, eventually, one thing that we're actually really interested about is eventually businesses will want to do something with with like digital assets rather than only go through Visa or or Mastercard's rails, like only do that, right? Um and we've been like we've said before and getting close to announcing um we've been working with a few large ones.

>> Yeah. >> Um they the extent of their involvement isn't just we'll just take it through Visa. They actually want to do direct custody of stablecoins, regulated stablecoins. >> Interesting. >> Um actually accept them and even in some cases be able to uh extend credit or do receivables with them. >> Mhm. >> So like the the very first instances of low-risk regulated digital assets, not like giving your Bitcoin or your meme coin or your >> naming these types of things?

>> Exactly. >> Yeah. >> And there's no real neo bank or like integrated like platform that makes it easy to do those things. >> Right. >> Fraxnet has been expanding a little bit in that area where you can essentially soon be able to download different kinds of Fraxnet apps. >> Yeah. >> Like an invoicing app, like a there will be a card app, obviously, but then other things as well, like uh a receivables app, so you can actually upload receivables and then if you have a entity that wants to extend credit, right? You can actually receive credit and then the payment of the receivable goes directly to that KYC'd entity.

These kinds of things that no one else is doing, Right? right? That that businesses actually want to be able to do with stable coins, with low-risk digital assets, and then maybe eventually they'll want to do them with tokenized securities, right? As like a step two or thing down the line. These things are missing a lot. >> I like it. I like it. And I like this app store perspective, and I also like this whole idea of the perception shift being like, "Nah, we're we're going to hide it to know we're going to embrace it." Maybe not publicly through our marketing, but through our comms and through our our decision-making. So, EtherFi, so you mentioned on the neo-bank side, they just launched their they announced their first stable coin powered by the Athena guys with their white-label product. Curious A, your take on that, but B, specifically

because we had that we had the CAST CEO Rags on. Guy's a bit of a character for sure, high on his own supply a little bit, and I'd tell him that to him. So, I you know, but I but I think he's smart, and I think he knows what he's doing. He's built a successful company. The one thing that we agreed on was this kind of verticalization and this owning of of this stack. And I think it was actually you, maybe, who said this. It was like, "Why are you going to build an entire neo-bank around Circle's stable coin? Why not build or, you know, an an entire neo-bank around your own?" Right? And I think Athena and I and we spoke to Guy about this as well. And so, you know, as much as I'd like to be all like, "Everyone's going to win. It's all, you know,

sunshine and roses." When when all the neo-banks are competing for similar customers and launching stable coins and having similar offerings, you do start to see a commoditization and obviously competitive forces at play. So, just give us your take on EtherFi's stable coin launch and this kind of verticalization of the neo-bank stack and like how that kind of leads into this newer world that we're seeing of owning the whole thing. Because in traditional financial services, there's been no such thing as stable coins, such that you're building your neo-bank on the US dollar rails. You don't get yield from holding the I mean, well, you do, right? If you hold the T-bills, but you there's a lot of other things that you can do with a stable coin.

>> had to partner with banks essentially, right? They were weren't the bank. Then you're just a bank, right? >> Exactly. >> And and whenever your typical bank usually it came with you used boomer tech and it wasn't very >> Exactly. >> Yeah. [laughter] I actually was just at the announcement with Mike and Guy. I saw it downstairs before coming up here. >> Yeah. >> Look, I I think it I think it's great. I like the positive sum mentality. I I actually like to think Frax kind of invented the positive sum mentality last cycle when we were like, "We'll create curve pools with everyone. Let's do like joint yields for our you know, like everyone wins, right?" And and we kind of you know, invented that whereas you know the Terra model, you know, I'm with die will die with my hands, right? The famous stuff. [laughter] Yeah, the the opposite

there didn't really work out. >> Um >> I think it's interesting. I actually don't know how it it will work because Athena has their own card as well. >> Right. >> Um but again, it's I do agree that people are finally seeing like, "Oh, Frax issues a stable coin. Frax also is building uh a neo bank." They are capturing a good amount of the the the actual platform. >> Yeah. >> Uh I think I think we're right on that and I think that that's what we're seeing. Um I don't exactly know what the what eUSD will do in terms of synergy. I I think the current announcement's early, but I'm pretty curious to to see because it's pretty interesting. I'm not sure uh I'm not sure how the economics of it

will work. Um but hey, as long as it's two friends and they both are growing together, we I think it's >> because Athena's got a a card and a stable coin and a fancy neo bank offering. >> That's so so so Yeah, that's the only thing that confused me and that's where it led us to our Fraxnet app store idea, actually. >> have to just be Yeah, yeah. >> Because we were like we were like at first, so either if I accept Frax USD, you could spend it in there. >> Sure. >> We wanted to actually think, "Do we build uh a a Etherfi app inside of our Fraxnet neo bank so you can actually import your Etherfi card and then you can actually interact with the vault inside of

Fraxnet. Uh and then we thought, well, that is a cool feature. We could just have a general card application that lets you import those or uh someone else or even Frax can also launch their own card. So, you have like multiple cards in this neo bank and they can interact with each other. Maybe maybe the best one for rewards depending on what you're actually paying. >> It roots through it. The In order to build something like that, by the way, it's actually very different architecture. You have to actually be able to build on the runtime layer as we call it, not not the blockchain cuz it could be on multiple chains, but on the actual layer on the neo bank that can compose with rails >> Like Stripe.

>> compose with Stripe and payment processors and and also can compose with the different compliance flows because like if you're going to import or you're going to start uh getting an Etherfi card, if it can really work in like the Fraxnet platform, you have to be able to pipe the KYC and reuse it without actually doing it every single time. Then you're just actually just signing up for multiple cards. >> Yeah. So, um you know, is there a Frax card coming? Is that something that you want to even step your feet into cuz it almost feels like um you know, people give layer zero some flack right now cuz they're like, "Oh, we interoperate all the chains." And then like they're launching their own chain. It's kind of like, "Well, why are you launching your own chain to compete

with all the chains that are your are your clients?" And I'm not, you know, whether it's positive or negative, I don't really have a take. That's just what some of the sentiment can be. The token's ripping. I'm happy for them. Um I own a little bit. I'm sidelined though, unfortunately, it's ours. >> [laughter] >> That being said, um you know, when it comes to Fraxnet, it's like, all right, hey, you if you're going to be if you're going to be kind of this aggregator of sorts of all these offerings and kind of bring people together into one place, you know, why launch your own card? It is is that a smart move? >> It's It's a great question. Something we were talking about a lot. So, the short answer is there will be a Frax DeFi card. It will not work the same way as

other DeFi cards >> Okay. >> have worked. So, we'll we'll wait until announce how how how works, but >> go. We got some alpha here. Roll up your >> So, there will be a Frax card. >> There's a Frax card coming. >> Inside of as as an as an independent Fraxnet app that you can download and put into your Fraxnet account, but it won't work [clears throat] exactly the same way as the other ones. And what's what's interesting about that is uh there will be certain places that there will be very very very lucrative to use it and not because of subsidies, because of a different mechanic that that we're building.

Um and then you can use it with new DeFi primitives and things like that that Curve pools, different things that we're we're known for, especially because you'll be able to spend the Frax USD underlying. So, we'll be able to do some really kind of interesting things like extend pre-swipe credit for for certain things and uh it'll be it'll be really unique. >> But, the cool thing about it is >> the way our platform is going to work going forward is that uh if you have an EtherFi card or if you have a plasma card or something like that, um the Neobank platform is cross-chain and multi-chain and supports a bunch of different features. You can import and interact with uh some of those cards.

>> Yeah. >> Uh load them up, do certain things on off-ramp uh through Fraxnet. >> Okay. >> Yeah. >> Yeah. And and so, like, for example, you've probably seen or you had Stani on, right? For for for the Aave app, right? >> Yeah, that's another example, right? Where it's like they have go, they've got the app, they're going to have the car, and it's like, here we go. >> Exactly. So, so we were thinking like, are all of these apps are they very siloed because the and and the only thing that's composable between them is the part on chain like like the token or like the location that you lend.

>> Right. >> And the way that we've re-architected for Fraxnet is that the KYC, the identity, and everything is shared among different Fraxnet apps. So that actually like if you have a Fraxnet account, you can onboard and actually deposit directly into Aave and earn in like a regulated manner, withdraw it with your account, sign up for a card. You don't have to KYC again. You can actually get a card through Rain, through Persona. And it's actually really interesting. You can think of it like an iPhone, right? With like the App Store.

You just download multiple types of apps. You can also just use those independent apps and then you will not get the benefit of the entire composable ecosystem, right? You could just only use the Aave app, for example, or only use Etherfi. >> Sure. And so Sam, one of the concepts that we had heard about from the I believe it was the SEC was it was Hester Peirce. One of her last things before she resigned was this idea that they were going to do this potential ZK KYC passport where the the whole concept here is that with tokenized assets, you want to have the asset issuer and be the KYC mandated platform. Obviously with the bank that's holding those assets and

then whatever kind of tokenization platform. And then once you have that singular ability to have your KYC verified, you can trade on what they call tokenized tokenized securities venues, TSVs, anywhere on chain, on any blockchain, across a variety of venues. And so the whole concept is like KYC once and not have to KYC for every blockchain and every trading venue. Trade on Uniswap, go to Hyperliquid, go to Aave, go to Aerodrome, whatever you want to do, right? Um you know, is that something that you think that Fraxnet could serve a purpose for because I I could see value if I'm like, all right, download Fraxnet, we manage all that for you. If you want to sign up for the Eaton 5 card, we we'll

do it on your behalf. We'll do that card, and then we'll aggregate them all for you. You don't have to think about what card you're going to spend it on because we know if you're doing travel, you know, we're we're going to have an AI agent or something optimize what the best path is, etc., etc. >> Is that a value prop you're going to be building? >> the Fraxnet environment was almost like an AI harness, right? Because it has all of the constant all of the cards. It has all of those. >> Cuz like for me, it's like, okay, why do I need to sign up for another card, another card, another card just to add them into Fraxnet? It's like, holy hell. All of that is like my Grugbot is like my Apple Wallet, right? My Grugbot is like my Apple Wallet where it's like I

have it controlling all my other agents, and I don't ever go on Cloud anymore. I don't really go on Gemini anymore. I just use my Grugbot. It's very similar like Coinbase. >> I I think that's actually the end game. We're actually even more better positioned to do exactly that because because of Frax USD, we have direct relationships with Superstate, WisdomTree, Securitize, you name it. Like Midas just added Frax USD as subscription assets. So, now they have a Fraxnet account, right? All of these issuers. >> That's what I mean. >> And so, we're able to if you have a Fraxnet account, you can actually through us pre-mint and and mint and redeem cuz we at Frax Inc because if we issue Frax USD, we have the direct relationship with all of them, right?

>> Exactly. >> And so, we can already provide essentially a passport ID to be able to do that. And I wish eventually they uh if we could do it with ZK, but it's always it has to do with the end issuer. Uh we'll we'll have that that account and be able to one account Fraxnet can do all of these things, but until the actual uh RWA issuer, right, is like, "Sure, a ZK proof is fine." Uh then >> of funny they're doing that right now, isn't it? >> You'll have to you'll have to like accept your Fraxnet permissions sharing your, you know, legal name and address and all this stuff, but we would be in that prime position to do it now, which is what's really exciting.

>> 100%. >> Uh last thing I just want to get just a couple seconds here. Um You know, we were talking like 6 months ago about when the bull was going to start. I'm pretty bullish up, man. Where are you at? >> I think you might win this one. I think I think you might win this one. I think we have a few more months, right? Till the end of the year? >> Yeah, yeah. >> Uh it's looking like you're going to win this one. >> if we'll get all time highs, but I think we can get a nice Q4 rally. >> Yeah, I'm pretty excited, I think. >> all time highs would be a stretch. >> Even with a rate increase, right? Even with one rate increase, there might be a second one. >> which is nuts.

>> And you still have a probably going to win. >> It was a bullish hike. Isn't that Isn't that funny how we do [laughter] these things? >> They write themselves. >> All right, Seth. Thanks for your time, man. >> Thanks, man.