The Missing Link Between Stablecoins and Banks w/ Tony McLaughlin

Transcript

Passage of the stable coin legislation drafted by the Senate, dubbed the Genius Act because analysts say a wave of competition could [music] complicate things. >> Stable coin issuer debut right here at the NASDAQ today. >> Everyone, welcome back to Stable Pulse. We have a a special guest here from a company that I think gets thrown around a lot, but in my opinion, very few people understand. And I want to spend a lot of time today diving into a Tony, your background, also you know what sort of led you to found Ubix, but also more importantly what Ubix is doing today because what you guys are doing is incredibly structurally important not just for the people who work in stable

coins but for for the general world for the general world who might use stable coins. So we're going to dive into everything. For those who have listened episode after episode, you know that I like to start every single episode with a segment that I call braggadocious. Tony, this is an opportunity for you to introduce yourself, for you to tell everyone a little bit about what you are building. The reason that we call it braggadocious is because I always find that in intros people tend to be a little bit too humble. And I want to I want to throw that out the window. You have a lot to brag about in in your background and you have a lot to brag about with what you've done with Ubix currently. So, with all that being said, Tony, I'll leave it to you. Tell us all about yourself. Tell us all about Ubix.

And again, brag, brag, brag. >> Hey, Dante, you're really asking me to go against my principles here because >> I know, >> you know, in in presentations that they tell you the first thing you've got to do is credentialize yourself, right? You've got to you got to signal to the audience that you're someone worth listening to. And my thing has always been, hey, forget who I am. Just listen to the message. just process the message. But since you asked, uh >> I wouldn't have let you get away with that, by the way.

>> Well, that's that's fine. [laughter] Well, as the sooner we get through this part, the better. But since you asked, uh I'm Tony. I'm the CEO and founder of Ubix, Inc. uh which is an American company. Uh I happen to be based in London at the moment. I spent over 30 years in traditional finance. some of the things that I'm kind of proud about that apart from making a heck of a lot of money for my for the banks that I worked with over my career. That's probably the biggest thing. I won't talk too much about that in detail, but I I originated something called Regulated Liability Network um which was trial a few times in the US uh in association

with the New York Fed innovation center and a bunch of banks. It was also trial in the UK and has now become something called GBTD, great British tokenized deposits. It also was picked up by the BIS uh and became the unified ledger. And I also started something called the the BIS IIF project Agora, which is not to be confused with Nevanx Agora stable coin. uh but the project ago Agora brought together seven central banks and over 40 banks in a interoperable tokenized deposit network. So that was my life in in banking in traditional

finance. And then after the US election, I thought the world had fundamentally changed that banks would have to enter this world of private permissionless blockchains and I could see that stable coins and tokenized money were going to be a very very important part of the financial system going forward. So, I quit my MD position at City Bank. Uh, I quit on Christmas Eve. Uh, if anyone knows things about uh the bonus cycles of uh banks, I quit a month before my sal my bonus was getting paid, which most people would say is a crazy thing.

You should wait to get paid your bonus and then quit. Um, but I was compelled. I was compelled and uh and it was just meant to be that I would enter into the the public blockchain space, the stable coin space and try to bring my my payments background to the development of this super exciting method of payment. >> I love it. And how are how are you doing that? How are you bringing all of your experience and your passion, your excitement into payments today? Tell us more about Ubix. Okay. So I start from start from the top level which is you know there are three there are three worlds that that have to come together.

One or three concentric circles if you like. One of one of them is this world of traditional finance that I spent 30 years in. The other one is the world of web three and the other one is the world of regulation. And what I thought I could do is I could help I could help create a bigger intersection between these three circles. So I I see a merger uh is necessary between the worlds of web 3, trady and and regulation. And what that will mean is stable coins and tokenized money and public blockchains will become ubiquitous.

So I could also see a role that I could play in bridging the gap between web 3 and and traditional finance because these two groups of people don't speak the same languages. Um and I and having when I worked in in the bank I was on the receiving end of lots of pitches from web three players and it was amazing how how bad the pitches were. So the go to market of web 3 towards tradfi is is less than optimal. Let's say that um also on the trady side the deficiency is not understanding the meaning of the development of these public

permissionless blockchains and also on the regulation side there there's a great deal of comfort that needs to be given to the regulators that these instruments can be incorporated in a way which is which is safe. So what is what is Ubix? >> Ubix is bringing an age-old solution to this modern problem that we face in stable coins. What is the what is the modern problem that we face in stable coins? There are going to be many issuers of stable coins and many issuers of tokenized deposits and many issuers of tokenized money market funds. And all of those issuers need there to be acceptance.

Acceptance means where can you use these instruments. Now the problem is each individual issuer cannot build their own acceptance network. That doesn't make sense. And everywhere in history always whether it's uh checks a swift debit cards credit cards we've solved this many to many problem in the same way and we've solved it by putting in institutional arrangements which means that you've got interoperability and a pluralistic competitive marketplace. So, Ubix is just bringing old wisdom to the new

field of of stable coins. What does that look like pragmatically though? Does that mean that you guys have partnered with all of these different banks to make sure that they can accept these stable coins? Does it mean that, you know, you guys have a a netting mechanism that you do stable coin interoperability with? Walk us through how you actually, you know, accomplish that goal because it's it's a mighty goal, right? It's necessary for anyone who understands the world of either traditional finance and or the world of sort of stable coinbased modern finance or you know both.

>> It's a it's a really really hard thing to accomplish and we're going to dive into why it's so hard to accomplish but I want to hear how you guys are are doing that today with you guys. >> Yeah. Well well let let's think about what it looks like when we get to the the point in spaceime when the mission is achieved, right? What does what does what does success look like? What success looks like is you uh log into your bank and today you see a rooting number and that rooting number is an address where you receive traditional types of payments. So success looks like you log into your bank and you see your rooting number for traditional payments and you see a wallet address and that wallet address enables you to receive

tokenized money payments. Now, when we're really successful, you will be able to receive any kind of tokenized payment into your existing bank or fintech. So, that the success criteria is this. Every bank and fintech on the planet provide their customers with wallets connected to multiple blockchains. And you can easily receive stable coins, tokenized deposits into your bank account in the same way that you can deposit a check into your bank account.

Now, in the US, let's just take the take the example and give the parallel. In the US, you've got 5,000 banks. And let's say Dante, you bank with Wells Fargo. So you you think nothing. If I come to you with a check, if I'm buying your car and I come to you with a check from Fifth Third Bank, you don't care about Fifth Third Bank, you don't care about the issuer of the check. So the success criteria for stable coins is when, and this is this is very different from where we are today. The success criteria is when you can receive a stable coin and you don't give a damn about the issuer.

That's where we're going. I love it. I love it. And so pragmatically, are you actually moving between stable coins? One thing that we see a lot is, you know, people in emerging markets wanting to use a specific stable coin on a specific chain and maybe, you know, a bank across the world wants to accept a different stable coin on a different chain. >> How do you actually accomplish it where those two parties are able to to work together? Are you moving between various different stable coins and chains and allowing you know that bank to settle in their preferred stable coin or are you setting it up in a way where they can actually accept a different type of stable coin. What does that look like?

>> Okay. So to to answer that question I'm going to root that in something which is uh again lots of young people you in America you still use checks right but around the world generally speaking lots of people when I when I give this check analogy that they haven't seen a checkbook they have never they've never used a check this is outside outside of the US but let's let's go back to the example that I gave before so you're you're a Wells Fargo customer and I bring you a check I'm buying your car and I bring you a check. My bank is Fifth Third Bank and so I'm giving you a I'm giving you a cashier's check, right?

I'm not giving you a personal check because the difference between a personal check and a cashier's check is that a cashier's check is drawn on the bank, right? It's not it's not a risk against Tony. It's a a risk against Fifth Third Bank. So, I'm buying your car. I'm I'm buying your Toyota Corolla. I'm sure you've got a a cool kind of like fintech car uh for >> Is a Toyota Corolla a really cool fintech car? I live in New York City. I don't have any car. >> Okay. So, isn't that what people drive? Isn't that Isn't that the humble brag you do? You You're like a billionaire, but you drive a Toyota Corolla. Isn't that like the humble brag?

>> Maybe. I'd be happy with just a bicycle, but you can get [laughter] >> I buy a car. >> I'm buying your car. I'm giving you a check from Fifth Third Bank. You don't give a damn about Fifth Third Bank. You give that check to your bank, which is Wells Fargo. Now, what does Wells Fargo do with that check? They send it for clearing. They send it for clearing. Now, what what does that mean? Clearing just means sending an instrument back to the issuer for payment. That's all it means.

So Wells Fargo take the fifth check, they send it back to sorry they take take the the fifth check, they send it back to Fifth Third Bank, Fifth Third Bank pay Wells Fargo and then Wells Fargo pay you. Now, that happens to be a a beautiful transaction, but it's a different transaction than we're used to in the world of stable coins because stable coins have arisen in in a in a trading mode, meaning these things are bought and sold. And so, if there's one thing for your audience really to grasp is there is a very big difference between trading and clearing.

Now trading is if I send you a stable coin today Dante and you take that and you sell it on an exchange the stable coin goes into an order book and you get the pre you get the spot price on the order book right you you don't necessarily get one to one you get the spot price um that's fine for for many different use cases but additional to that there's also another route called clearing which is I give you a stable coin, you give it to your bank and your bank gets the money from the issuer. Now, when the bank gets the money from the issuer, they get par value, meaning one for one. And this is

super important. This is another part of of making stable coins uh good. That stable coins need to become cash equivalents and that's an accounting standard. Cash equivalence is an accounting standard. The reason why cash equivalence is so important is number one the central banks care about this thing called singleness of money which means a dollar is a dollar right do a dollar is a dollar is not a natural state of affairs because even with banks Wells Fargo and fifth third bank are different have got different counterparty risk so if if a wells Fargo dollar and a third fifth third dollar if they traded against each

other they wouldn't trade at par value. But when you have a a check processed between those banks or an a pro processed between those banks or a wire payment between those banks, they are processed at par value and that that enforces singleness of money that enforces a dollar is a dollar. So this is a characteristics that we that we must bring to stable coins if we want them to be accepted by for example large corporates.

So there's a there's a host of benefits that come from adding a new lane to the highway. That lane to the we've we've got trading of stable coins. It's fine. Um I'm not talking about replacing trading of stable coins. I'm talking about adding a new lane to the highway when anyone who wants to can take a stable coin to their bank and they get par value. >> Do you need to work with the issuers themselves on it? Right. USDT, USDC, they're some of the most by far and away the most dominant stable coins.

>> Sure. >> In the world right now. Do you need to work with Tether and work with Circle directly in order to make this happen? >> Ideally, yes. But in practice, no. because we can source that liquidity through liquidity providers >> on a onetoone basis. >> Well, it's possible to do it on a onetoone basis and have the fees separate. So, you can still get onetoone, but the fees come separately to that. That's possible to achieve, but that's not the ideal solution. You can think of that more as a br as a bridge to the ideal solution. The ideal solution is that the all of the issuers are plugged into the Ubix's system and the receivers are plugged into the Ubix

system and everyone follows the same rule book. And this is this is again in every previous generation of payment technology whether it's with paper checks or AC or credit cards or debit cards. It's always the same. It's always the same problem. It's always many to many. And that many to many problem is always sol solved in the same way. And so that the many to many problem also exists in in stable coins and tokenized money and it will be solved in the same way. The only question so so my thesis is correct. My you know the the Ubix thesis is is is correct. The only question is whether Ubix is the one to commercialize it. But that's uh you know that's up to the gods.

>> Yeah. I don't think that's up to the gods, Tony. I think that's up to to you. and I've seen how hard you and your team work, so I have no doubt it'll it'll uh come to fruition. So, I just want to to recap on the mechanics to make sure that I understand it and to make sure that our audience understands it. >> The the synopsis on Ubiix is this. You guys believe in a world in which there are many different stable coins. Banks want to interact with multiple different stable coins at a time. I agree with that 100%. I agree with that future and I think that it used to be a very contrarian view and now it's starting to become a little bit less contrarian because to your point your thesis is being proven correctly. The way that Ubiix sets this up is you guys

work with a lot of banks and enterprises and we'll get to that in a second. But most importantly, you guys will end up working with every single issuer. And the way that stable coins operate today is through what we call a mint and burn mechanism, which is if you want a stable coin, you move dollars into the issuers or fiat currency into the issuers's bank account and they give you essentially a an onchain version of that dollar that we call a stable coin. And so what you are able to do when you work with multiple issuers is you can say, "Okay, I'm going to take this stable coin and I'm going to essentially move it into an account and you as the issuer are going to send me the redemption for that, the the dollars

for that which can then be used one to one to go and mint a stable coin that the recipient, the bank, the enterprise, whoever it might be would want. Because it's burn and mint, you're able to to do that relatively seamlessly because you have this network of issuers. >> Not >> am I on the same Okay, correct me. >> Not exactly. So So conceptually you're you're right that we are integrated with the issuers and we do facilitate these transactions. We don't do it exactly as as you say. And the if you forgive me, Dante, I'll probably not completely open the kimono on our on our inner workings or or on our legal structure. That's

part of the secret sauce of of how we do it. >> But you can just think of it as a you can just think of it as a black as as Ubix is a black box, right? So here's the here's the black box. On this side, you've got the issuers. On this side, you've got banks and fintex and exchanges. So, what operations do we support? We support stable coin in, fiat out. We support fiat in, stable coin out. We support stable coin A in, stable coin B out. And by the way, we do all of those things for tokenized deposits as well because the they're when it comes to the redemption mechanics, you can treat them exactly in the same way. So what we're what we're really trying to

do is to is to bridge these two worlds. Not bridge in the web 3 sense, but we're trying to make a connection between these two worlds. And and and the the reason for that, the reason why it's important for the for the blockchain community, the reason why it's important for the stable coin community is we want stable coins to be used for every use case. Not just uh crypto and adjacent use cases but every payments use case we want to make available to stable coins and bank acceptance and fintech acceptance is is intrinsic to that mission it's necessary for that mission that doesn't mean that people can't have self-custody wallets that mean doesn't

mean that people can't do their DeFi stuff and this is additive it's not taking away from anything that is intrinsic from the from the crypto perspective The second reason why this is an important mission for the community is if we're successful, every bank and fintech in the world will be connected to multiple public blockchains. Public blockchains. Now, I I don't know if you if you pick up on this, Dante, but interest in tokenization has never been higher amongst banks, but if we're not very careful, they will they will they will they will go back down the private permission route.

You look at a bunch of the projects out there, they're using private permissioned ledgers. So if if the if the result of if the result of this interest in tokenization is banks adopting private permission ledgers, we haven't won. So our mission is to get banks and fintex connected to private permissionless ledgers. Um and and and and that's a natural consequence of them connecting into the Ubix network. They must connect into multiple public permissionless networks in order to be a part of Ubix.

Okay. Okay. I think I'm starting to understand. I want to pivot this conversation a little because there's a a word that you mentioned a few times and I want to go down a rabbit hole here, which is tokenization and in particular tokenized deposits. Can you explain what the hell those are and why they're so important? >> Okay, they're Well, first of all, tokenized I mean tokenization is just uh something that stands for something else. So, I I always use my uh my AirPods case as my prop. That's always my to that's my token, right?

>> I love it. >> So, um for tokenized deposits, why are they important? I'll give you I'll give you the the honest answer. They're important because banks want tokenized deposits to be competitive with stable coins. That's why they're important. Why do banks want them to be competitive with stable coins? Because let's say let's say you and your bank uh and again I won't pick on a specific a specific bank Dante, but let's say that your mainline bank um for whatever reason you want to make a stable coin payment. So if you if if you're making a stable coin payment and funding that from your bank account, you're debiting your bank account and

then let's say paying away in USDC. The the money leaves the balance sheet of the bank and the bank doesn't like that because your deposit is their raw material. That's how they make money by lending against your deposits. So, anything that that that leeches deposits away from the from the bank balance sheet is not something that the banks want. A tokenized deposit is different. A tokenized deposit is a token that represents your money at the bank. Now, if if we're both uh customers of the same bank, let's say that we're both JP Morgan customers and JP Morgan gives you a JP Morgan coin and you send that to

me. the money hasn't left JP Morgan's balance sheet. So from a from a bank perspective, that's good. So tokenized deposits are the bank horse in the race. Banks prefer it because it keeps the money on their balance sheet. But but there's a significant difference between the functionality of tokenized deposits and stable coins. And one of the most significant differences in functionality is that stable coins are not whitelisted instruments. So, stable coins, uh, let's let's say that you're you're making a payment to your relative who's gone to who's gone to live in Japan. When you send that stable coin payment, that uh token can

travel to your relative in Japan and the issuer of the stable coin doesn't know your relative, right? So, so the the stable coin hasn't been whitelisted. The issuer doesn't need to know your relative. But for a tokenized deposit at the moment, they're fundamentally whitisted instruments. So if you're sending me a JP Morgan coin, Dante, then JP Morgan needs to know who I am. And in in today's world, I would need to be a JP Morgan customer. Now the banks are working super hard on making state making tokenized deposits interoperable which means that in the future they want

it to be the case that I can be a city bank customer and you can send me a JP Morgan tokenized deposit but that's not the way they work at the moment. So stable coins are much more let's say free in terms of where they can be sent to than tokenized deposits today. I was talking to someone earlier about this and I think that the mental model that really stuck with me is tokenized deposits are really really awesome for bank-toank value transfer and then stable coins sort of act as the best and most efficient first and last mile uh extension of that. Right? Right. So an individual might use an individual user might hold stable coin A, stable coin B and then once they deposit it, it

becomes, you know, it sort of adds to the the tokenized deposit. An individual user will never hold, you know, to your point, a tokenized deposit of JP Morgan Chase. Uh an individual user will never hold a Wells Fargo tokenized deposit, but they will hold stable coins. And so they're they're not competitive against each other. They're two very very important parts of the same value flow within the same ecosystem. Is that is that fair? >> The they there are lots of subtleties to add to it. Um you know one subtlety is in the main stable coins live on public networks in the main tokenized deposits live on private networks.

Um stable coins again are not whitelisted. Tokenized deposits are whitelisted. Tokenized deposits um are unambiguously cash equivalents. They really are cash because they're bank instruments. Stable coins are still struggling to reach cash equivalents from an accounting perspective. Um the one one use case which is interesting for for tokenized deposits is the use case that I spent 30 years in which is corporate cash management. So corporate cash management is a big US multinational moving money between its 100 different subsidiaries.

Now the reason why tokenized deposits is interesting there is because they're FDIC they're FDIC insured to pay interest their cash equivalents but also the this is something very very important counterparty risk right so if you are a large multinational you've probably got $und00 million of counterparty risk against a G bank you may not have $und00 million of counterparty risk against a stable coin issuure at this at this particular moment in time so I think your your general analysis is correct, which is it's going to be horses for courses. Um and and both of them will play a part.

Um but one thing I I would very much like to see is a a greater um let's say courage from the banks to start putting the tokenized deposits onto public chains. Um the next thing that the banks need to do to make tokenized deposits truly competitive with stable coins is uh trust the KYC of third parties. So in again in today's world uh JP Morgan coin can be held by JP Morgan customers but to make that useful it will have to become the case that JP Morgan coin can be held by nonJP Morgan customers maybe

by City Bank customers or Wells Fargo customers those things have to be made interoperable otherwise uh tokenized deposits won't be competitive with stable coins You mentioned that it's very difficult right now for stable coins to maintain cash equivalency. Can you tell us a little bit more about that? >> Yeah, sure. Because the the natural the natural market price of any IOU is related to the counterparty risk against the issuer.

So let let me just let me just talk about that even in the world of not not stable coins but just uh pieces of paper, right? So imagine um you gave me $10 and I wrote on a piece of paper. I owe the bearer of this piece of paper $10 payable on demand. So I give you that piece of paper and I've got your $10 and and the $10 is in my pocket, right? the tendles in my pocket. So, here's here's what you can do with that IOU. So, you've received an IOU, right? You've got this piece of paper in your hand. You can come back to me and you can say, "Hey, Tony, give me back my $10." Now, in that in that transaction,

it's quite likely that you get your $10 back, isn't it? So, this is a little bit like going back to the stable coin issuer directly and getting the money directly from the stable coin issuer. But then think about this. Let's say that you walk out of your room and you walk down the street and you say, "Oh my god, I really need money to buy a coffee and the only thing that you have in your pocket is the IOU from Tony." So you imagine you walk in you walk into Starbucks and you say, "Hey, random random girl, I want to buy a coffee.

I've got no money, but I've got this IOU from Tony. It's for 10 bucks. And if you give that IOU to Tony, he's going to give you 10 bucks." Now, how much is that girl going to give you for that IOU? >> Hopefully $10, but probably not. >> Well, why should why would she give you 10 bucks? She if if she's a rational actor, she will evaluate the counterparty risk of the issuer and she will give you a discount which is reflective of the counterparty risk. So if she's a rational actor, she will give you less than 10 bucks right now.

>> Go on. >> What do you think it will take in stable coin land? And I this is one of your concentric circles, the regulation, right? dive into this, but what do you think it will take to reduce that counterparty risk to make the barista trust the Tony IOU and actually enable >> you know uh stablecoin redemption at $1, which obviously is the first step towards uh singleness of money and dollar ubiquity which you mentioned before. >> Exactly. So, so if that barista, if that barista knows that she can give the IOU to her existing bank or fintech and get 10 bucks, then you then she'll take it from you,

right? That's the that's the that's the condition. So the the condition necessary for cash equivalence from an accounting perspective is that the instrument with a very very high degree of confidence can be redeemed at par value on demand. Now here's a here's a here's a very strange way in which checks are superior to stable coins. So this is a this is maybe a bizarre claim, but it's it's none nonetheless true. So, a check is just that piece of paper which says I promise to pay, right? I'm again I'm buying your car. I'm giving you a a cashier's check from from Fifth Third

Bank. You're a customer of Wells Fargo Bank. If I if I give you that check, there are actually three ways to redeem. You might say there are three offramps in stable coin parliament. There are three offramps for the check. What are the three offramps? Number one is you can actually take that check back to Fifth Third and ask for the money, right? That's like going back. That's like having a Circle Mint account. You take the instrument back to the issuer and you say, "Give me my money." So that's that's route number one. The second route with that check is you can sell it. So you know that these uh I think you still have them in America.

You know the places where you can take your payroll check during the week and when you take your payroll check to one of those places they don't give you full value, right? They give you a discount. >> Yeah. >> A paid loan. >> A paid a payday loan. So So essentially what's happening there is you are you are discounting the you're selling the check for a discount. So this is this is like taking your stable coin and selling it on an exchange. You're selling it into an order book. So these two things you can also do with a check. These two things you can do with a stable coin.

But the third thing you can do with a check, you can't do with a stable coin, which is you can take that check to your bank and get par value. You cannot take a stable coin to your bank and get par value. So stable coins in that respect, in that offramping respect are inferior to checks. Now, I think that's ridiculous. I think that's nonsensical. Now, here here's the here's the thing. Do market participants want an oligopoly in stable coins or a pluralistic competitive marketplace?

So if you want a if if like me you want a pluralistic marketplace of stable coins with many issuers not just dollar coins but coins from many currencies then here's what you do you enable banks and fintex to receive stable coins because let's think about how that levels the playing field Dante it means that your stable coin from whoever the issuer is can be accepted. Why? Why is there an oligopoly today?

Because the acceptance network doesn't exist for the other coins. That's why there's a barrier to it. That's why every other stable coin struggles to gain traction because acceptance doesn't exist and acceptance should not be proprietary. So if you're a stable coin issuer and you pay you have to go around and pay every exchange millions of dollars to get a listing then you're building a moat. Can every issuer pay millions of dollars to every exchange to get acceptance? No. So then the conclusion is that the acceptance network has to be

common across issuers. Once the acceptance network is common across issuers, anyone can be an issuer and that's when we get to a competitive market structure. So that's what needs to happen and the I I you know because I hope this analogy of the check stick I say this in in many markets there are six words that lead to an efficient market structure for stable coins and those six words are banks can process stable coins like checks.

Those are the six words and it's going to happen. Dante I'm I I don't know. It's a bit like the Elon Musk predictions of self-driving car. >> It's going to happen in 18 months. >> I agree. >> I agree. I think it's funny and I'm actually very interested to get your take on this is I am sitting in the US and right now the US is undergoing a lot of very very intense stable coin regulation and you see sort of the stable coin industry really really pushing for just in my opinion what's very very basic clarifications some might even call it clarity on regulations around stable coins but you

also have this opposing force in the US which is coming from the banking lobby and you know regional banks and community banks and their fear is and this is something I believe to be unfounded is that stable coins will actually uproot their their business model and cause a lot of damage to that very delicate ecosystem. Now, I view stable coins as a tool, as a tool that anyone can realistically use. And same thing with tokenized deposits, but you come from a very you come from a lot more banking expertise than I do. So, I'm very curious how you view the relationship between banks, both, you know, large multinational banks and smaller, more local regional banks,

their relationship with stable coins and tokenized deposits. Yeah, these are these are great questions and and thorny questions, but I think it deserves to go back to first principles, which is >> uh where's the land of the free? What's the uh what's the home of capitalism? What's the shining beacon of capitalism for the planet? What is capitalism if it's not if it's not competition? If you've got a choice to make, then you should tend towards competition. Now having said having said that there has been a long uh let's say bias against what you might call nar narrow banking.

So is it a good state of affairs if all of the depos if all of your deposits end up in treasuries? Is that a good state of affairs? I mean, is is that cap is that capitalism? If all of your deposits end up in government debt, that's probably not capitalism. So, banks play a fundamental economic a fundamental economic function in capitalist economies, which is they create risk assets. I mean, look, you're you're in New York, right?

Look out. Look out the W. Go to the highest tower and look out. Everything you can see was paid for was bought on credit. There is nothing you can see from the highest tower in New York which is paid for in cash. Everything is built on credit. So we don't want everyone's deposits to f to be to go into government debt. We do want banks to be able to lend to on to entrepreneurs. So a a balance does have to be does have to be struck. But on the mark I mean the the the conversation in the US is such a a polarized conversation. Can you pay

interest? Yes or no? This is very very black and white. Um you know other instruments are going to come up which will pay interest. There'll be tokenized money market funds. uh tokenized money market funds I think offer great promise to give yield to people who are not getting sufficient yield at the moment. So I would I I would like market forces to to to take their to take their course their natural course. I'd like them to be free to take their natural course. But it would be a bizarre outcome if the stable coin revolution led to all the deposits in America being backed by US treasuries which again is government debt which is government debt. So look the world the world is made up of

balance sheets right this is the fundamental reality there's the government balance sheet then there are bank balance sheets then there are corporate balance sheets then there are individual balance sheets it's a stack of balance sheets it's a stack of deposits and a stack of it's a it's a stack of of assets and assets and liabilities where those assets and liabilities sit is very influential on on the economy but is There is there room to compete again to compete more against the banks for deposits? You're damn right there is. Of course there is.

>> Yeah, I think you're goddamn right, Tony. I love it and I'm I'm going to make sure to clip that and, you know, throw it on everywhere I can. I think that, you know, to your point, and I I recognize I'm a broken record here, is that stable coins and tokenized deposits are a tool, and that tool serves customers. And as a financial institution, your job should be to provide the most amount of value to your customers. And in a in a capitalist world, everyone is competing to provide the most value. The person who provides the most value wins in a purely capitalistic world, right? Obviously, there's regulation that needs to be involved that it's rapidly rapidly developing as we speak. But to treat stable coins, a fundamental innovation in the way in which money moves and is

accumulated as the enemy, I think is is shooting an entire system in the foot and doing a disservice to users, whether these be, you know, retail consumers or businesses, rather than recognizing what's right in front of you, which is the opportunity to to take the the existing system that you've run on for 50 years and and radically improve it. And you know, no small part to to folks like you uh for making that happen. >> Dante, the change is coming anyway because you can't you can't stop the the revolution which is which is coming. Um because once you look, I'm a lot older than you and I've seen multiple waves of technology and it always it always looks like the thing that you've got can't

can't change. Like I I remember when I had my Nokia feature phone and I I I can specifically remember thinking I cannot believe that I cannot imagine a better phone than this than this Nokia. And then >> was it the brick one? >> It was you know the one in the Matrix uh where you clicked it and the fight down that was the one. I mean the these phones were um as good as you can imagine that they were possibly going to be. And then in 2004, I got my first Blackberry. And I couldn't imag, you know, Blackberry used to be called Crackberry because people were so addicted to them. They couldn't believe how good it was. And then iPhone comes along. So, it always looks like things can't change, but the I'm afraid the

forces of technology are are more powerful than vested interests. So, um, banks and fintex, here's what here's what's going to happen. banks in FinTech. Um, a lot of them at the moment are saying to themselves, what's my digital asset strategy? The foundation of any bank digital asset strategy is to provide wallets to their customers. Now, let let's just play this forward, right? You've got a you've got a bank account, but what you haven't got is a wallet from your bank. Now, let's think about this then. You've got your Bank of America bank account and your Bank of America wallet. I'm talking like three years from now. So, what can you hold in

your Bank of America bank account? Just dollars. Just dollars from Bank of America. What can you hold in your Bank of America wallet? Well, you can hold tokenized deposits. You can hold stable coins. You can hold tokenized money market funds. You can have tokenized stocks. You can have tokenized bonds. You can have cryptocurrency. You can have Bitcoin, Ethereum. You can have whatever you like. So when those two things are compared to each other, which which infrastructure is going to be the place that the innovation takes place, it the the innovation once the cat is out the bag, once you give the general purpose technology a chance, it subsumes the special purpose technology.

and and that is a is a confident prediction that the the the locus of innovation is going to move to the wallet and it's going to move to the chain because just like the iPhone it's a more general purpose technology than what came before it. The general purpose technology subsumes what came before it. So this force cannot be put back in the bag. Yeah, I love it. I love it. And >> now one caveat one sorry one caveat to that is >> if we leave banks to their own devices then what they will do is they'll come

up with bank ccentric solutions and they will tend to keep play it safe and stay on and stay on private permission chains and this is a trap. This is a dead end. So I think one part of advocacy from from uh from our community should be to get banks onto public chains. Um last week we we published an article with the help of 17 chains and it was called banks should validate public blockchains. So the you know the banks are scared about moving on to public chains. They don't know whether they'll be held responsible for bad things that happen on public chains. Um the the the

the key example that people always come up with is well if I'm on Ethereum and then I pass pay gas fees to the North Koreans, will I be um fined by the by the OC? But the truth of it is that the banks not being on the public chains is making the public chains less safe than they otherwise would be. So the the the re the revolution is not just tokenization. It's public chain. It's not it's not getting every bank onto private chain. That's not what the game is. That's been tried over and over and over for the past 10 years and it hasn't scaled. The revolution is public chain and the banks haven't got the message yet.

What is that message Tony? You talk to banks all day every day. when you try to convince them to work with Ubix, what message do you do you send them? >> Well, I I don't I don't start by talking to to to uh about Ubix because that's not the first discussion with with a a bank. The the the first discussion with a bank is this and you have to meet you have this is the part of the problem of the go to market from from crypto and from chain into bank is which we don't recognize how to meet the bank where they are. So the first thing that I say to a bank is is as follows. And if we just role play this, right? So if you're a bank executive, I say, "Dante, do you think that tokenization is a thing?" And most

bank executives will say, "Yes, you know, tokenization is definitely a thing." And then I will say, "Dante, do you know which chain will win or which token will win?" And they say, "No, I've got no idea which chain will win or token will win." So then I say, what is the what is the what is the no regret investment that you can make that equips you for a future of tokenization and hedges your bets against there being lots of different tokens and lots of different chains and that fundamental investment is in wallet infrastructure.

So the first thing the first thing for web three to sell to a bank is the notion that the bank is futurep proofed once they have wallets. They've got accounts. They need to be able to provide wallets. Now are we is the first thing and this is again another mistake that the chains make when they go to the bank. When the chain goes to the bank they say I'm the best chain. you must choose my chain. And so that that what that does is it gives a computation to the bank that takes too long to solve because the banks don't want to try to pick a winner. So that the the correct thing to say to a bank is forget about you're not

picking a chain at the moment. But your wallet infrastructure needs to be able to connect to any chain. Now the minute a bank has a wallet infrastructure and it can the minute that Bank of America can give Dante a wallet connected to any chain, Bank of America is future proof and that's the starting line. Now we can get into discussion about what's the best chain for the best use case. But the first thing for the banks to do is not to start issuing tokens. The best thing for the banks to do is to start receiving tokens. So, let's think about that community bank you mentioned,

Dante. That community bank is afraid of stable coins leeching balances off their balance sheet. So, what's the best thing for a community bank to do? Get a wallet infrastructure. Give wallets to your customers and enable your customers to receive stable coins. This is money coming into your balance sheet. This is something you like. You like money coming into your balance sheet that so so the first thing to sell to a bank is get a wallet infrastructure that connects to any chain. The second thing to sell to a bank is receive stable coins, not issue stable coins.

And then we're off to the races because I hope you can see like once the bank has the wallet infrastructure, every other use case is available to them. Whether that's buy, sell, hold crypto or issuing tokens or whatever. But this is what I mean by go to market. This is what I mean by meeting the banks where they are. Um I'm a big fan of Wolf of Wall Street. I'm I'm sure you've you've watched that that movie many times right?

>> So when it comes down to sell me, sell me on web three, we have to start in the right place and we have to close. And there are there are thousands of banks on this planet, thousands of Fentex on this planet and we have to get them on the on the path to merging with web 3. And the go to market of that has to be prosecuted in a specific order. It um it it is it's um because I've been on the other side of it, I've seen the ineffective go to market from web 3 to try.

So yeah, sell me sell me a web three strategy. I've given the I hopefully I've given an outline to the industry of how to go about doing that. >> First wallet, second receive. >> I love it. I love it. I think that this is an excellent message to end on, especially for anyone who is a a banker working in a bank or trying to sell to bankers or someone in a bank. Um that is a really really excellent message. So Tony, I very very much appreciate you coming on. If you are an enterprise that's looking to get involved in stable coins, if you are a bank or a financial institution looking to get involved in stable coins or tokenized deposits, I highly recommend that you learn more about Tony, learn more about Ubix and

and what they're doing because it really is really is incredible. Um, keep keep tuning in to the show. We're going to keep really amazing guests coming on. And uh, as always, stay stable.