The Stablecoin Supercycle Is Here - Tony McLaughlin

Transcript

The funny thing is there is one modality of what you can do with a negotiable instrument that exists in checks that does not exist in stable coins. And that modality is you can take a check to your bank and get par value and you can't take a stable coin to your bank and get par value. >> The number from my perspective won't change. But on the bank's perspective, they might go and facilitate in order to balance their books and they might take the liberty on my behalf to clear some of those stable coins and some fiat in order so that they can efficiently print uh process transaction.

>> Welcome back to the rule. This is your home to learn from the biggest guests, the brightest minds at the tip of innovation. Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its echo chamber and taking it to the real world. Sit back, relax, and enjoy it. [Music] >> Tony, welcome to the show. It's a pleasure to have you on. >> Yeah, you too. Good to be here.

>> Likewise. Well, I uh I'm really excited to have this chat. We've been hearing so much about stable coins and Polygon is is uh the sponsor of this of this segment. Uh and they recently have had a lot of exciting and interesting things that have happened on their chain. $500 million of of uh Bidd has been transacting. People are kind of kind of coming up with uh their their uh uh not quite conspiracies but everyone's speculating as to what this could possibly mean. Uh so there's a lot of excitement around around this as well as the stable coin super cycle that we are that we are calling it. Uh you guys are at the heart of this industry and uh powering the convergence of Wall Street and uh onchain finance and digital assets with uh uh is it Ubix or Ubix? I

want to make sure I get the pronunciation right. >> You can you can pronounce it however you want. You could do Ubix. Ubix. You can say Ubix. I don't mind. You can say whatever you like. >> I love it. I love it. Well, we're going to make sure that stable coins become ubiquitous. That's for sure. Uh >> that's the story. >> Absolutely. Well, you know, I I've been in the in the digital asset crypto space here for a while. I'd love to hear uh since it is your first time on the show, how you got into the space. >> Um and uh just kind of, you know, the story about how how you uh how you came to be here uh on stable coins. >> Yeah. Well, look, I've been I've been working in um you know, what I now call what everyone calls Trady for 30 years

and always always in the traditional payment space and I've done every kind of uh payment system in the trady space that you can possibly imagine. My very first job was working on traveler's checks, which I'm sure you've never laid hands on a traveler's check because they're essentially gone now. Um, but look, I was working on all different types of payments, foreign exchange um for in corporate cash management the last 20 years for a big American bank, City Bank. You might have heard of them. Mhm.

>> And in the last couple of years, I turned my attention to working on, you know, to tokens and chains. But up until the US election, really the the story from the US regulators was not very friendly towards public chains. Um there was really a big keep off the grass sign for public chains. But then after the US election uh things changed and um you know it became obvious to me after the election that banks in the in the course of you know in the natural course of things would migrate onto public chains if they were allowed to do so. And I also realized that stable

coins, tokenized deposits, tokenized money market funds, you know, the that this is not the origin of crypto, but those kinds of instruments on on chains would be super super compelling. And so I decided to spend zero more time on private permission chains and uh try to try to try to incorporate stable coins into the regulated financial system in a in a good in a good way and in in a way where look I you know I I kind of think it would be really neat if the if the worlds of trfy and web 3 came together in a way where peer-to-peer year

transactions kind of got delivered in a way that the Bitcoin white paper kind of wanted to do, you know, albeit with a compromise. And that compromise is it's going to happen in stable coins which are pegged to fiat currency and not in a non-s sovereign currency unit. Um, so there's a very strange and interesting synthesis I think will appear between the original ideology of crypto and what will emerge from stable coin ubiquity. Yeah, I I'm extremely excited to hear you you describe this vision that you have and how you made the transition from the the traditional financial world as as we've come to call it into one that is onchain. Uh because we also recognize a lot of the same benefits of

this technology. And you you described this as you were working uh at City Bank and and you sort of recognized how compelling blockchains were um but not just private blockchains. You recognized that from the public blockchain landscape. This is where composability and liquidity ultimately coaleses. Could you could you just reinforce in our viewers why it's so important that as enterprises come on chain, why is it so important that they come onto a public blockchain and not one of these consortium walled gardens of a of a private blockchain?

>> Yeah, it's a that's almost like the the critical question. Um the private there's nothing wrong functionally with the private chains. It's an adoption problem. You know, for for 10 years, uh, you know, the the banks and the the traditional players have been doing PC's and experiments and, you know, the experiments are in in one sense they're ridiculous because what what the what the banks and the traditional players say to themselves is does does my use case work on a blockchain? And the answer is yes because the blockchains are just like

Turing complete computers. So of course your use case works on on a blockchain. >> You have a ledger, don't you? >> Yeah. >> Ledger upgrade. >> Exactly. If your use if your use case works on a on a relational database, your your use case works on a on a blockchain. So that's you know does my use case work on a blockchain isn't a good question. The answer is yes. And actually it works on a private blockchain or it works on a public blockchain. The big difference is that in the private blockchain world you you have a significant adoption problem. Now look look at every look at the dozens and dozens of attempted consorcia in private blockchains and they've all

failed or they're failing. >> And so the truth of it is that the public blockchains already exist. they already have users and so you don't have the the boot problem. Uh all you have to all you have to do is to actually decide to you know it's quite it's quite interesting that what what mental model do you bring to what is a what is a blockchain? I I see a blockchain like it's a venue and it's a venue where people transact in you know a bank in the in the 20th century didn't find it strange to put a branch on the high street because that's

where people congregated to do business. a bank in the 2000s, early 2000s or late 90s didn't find it strange to put, you know, mobile banking and internet banking on the internet because that's where people were doing business. So why is it a strange idea to set up shop in a blockchain where people are congre congregating to do business? So it's to me it's a it's a natural evolution. You you want to follow your customers where they are. Mhm.

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>> I think this is a really important point and you you describe this and I think it highlights why the path dependency is so important because we saw such a such an enormous uh capital movement on chain. If some of the private blockchains have been spun up maybe earlier or they had rolled out quicker then we would have seen liquidity coales there. But now that public blockchains have amassed so much liquidity and and again $500 million of you know tokenized structured products on something like Polygon which is a public chain. These are now the the venues as you describe them.

>> Yeah. Uh and so this is where we're going to see continued adoption coalesce around them. Uh and so I I'm curious maybe to learn a little bit more about uh Ubix h how do you help to facilitate the enterprises that you know they have some existing distribution some existing customer base and are now starting to adopt and and kind of make their foray into the blockchain world. what is what is the story and how do you how do you help to onboard some of these enterprises onto public blockchains?

>> Okay, so if you look I I I just um start with very basic building blocks. If you believe that we're moving into a world of tokens and chains, but then if you say to yourself, look, I don't know which tokens are going to win and I don't know which chains are going to win. Obviously, we're on the Polygon Polygon sponsor segment, so Polygon's going to win, right? Um, but let's say that you don't really know which token's going to win and which chain is going to win. The basic thing that you know for sure if you are any bank or any fintech on the planet is that you need a wallet

and you need a wallet capable of connecting to multiple chains. So this is the planning assumption everyone should have. Everyone should get used to the idea that everyone on the planet is going to have access to a wallet which is connected to multiple chains and capable of processing multiple tokens. That's the playing field. That's the arena. Now the the the beautiful merger of TRFI and web 3 is when every bank and fintech offers a wallet. Now I I want to be very clear. I'm not saying I'm not against self-custodial wallets at all.

Self-custod self-custodial wallets are freely available. And if people want to use self-custodial wallets, they should use self-custodial wallets. What is not free freely available is a wallet provided by your bank or your fintech that's not freely available but it will become so this is a firm prediction you know I I firmly predict that every bank and fintech on the planet will offer a wallet because that's the new form factor to deal in this world of tokens and chains.

So, if you just personalize this, if you well, not not personalize it because you're crypto, you know, cryptonative guy, but your second cousin who isn't cryptonative. if they want to be able to receive a stable coin, but actually they just want the money to be received in stable coin format and then turned into their fintech balance or their or their bank balance, >> then it would be really convenient for your second cousin to have a wallet provided by their bank or their fintech >> and then the stable coin goes into that wallet and the bank converts it into a bank balance.

>> Mhm. Now that presents a problem for the bank or the fintech and the problem is there are going to be hundreds of tokens. There are going to be hundreds of different stable coins, different tokenized deposits, different money market funds. The bank has to turn those things into cash. And so this is where a clearing system comes in because in order for your second cousin's bank to give your second cousin cash, your bank needs to turn the tokens into cash. So you can think of Ubix just as a as a black box. Your second cousin's bank gives the basket of tokens to Ubix and we give the bank cash.

Now how we do that within the black box um I won't open it up too much but it's a way of turning tokens into cash without being an exchange. >> Mh. >> So we do not act as an exchange. We act as a clearing system, not as an exchange. And that's a very very fundamental difference. >> Yeah. >> Because in an exchange, you're not guaranteed par value redemption. We're seeking to guarantee par value redemption. Like a stable co if your second cousin deposits five different stable coins from five different issuers uh for 100 bucks each, your second cousin should get 500 bucks.

>> Right. Right. And what the second cousin may not realize is that this stable coin is trading at 1.01. This one's at 0.99. And they want the $500 and they want to be abstracted away. And basically all this is average out >> at par like you're saying. >> Yeah. >> And this is >> well this is Sorry. >> Go ahead. >> Go ahead. This is the this is the thing about like these different worlds colliding like you know your your world of crypto is one where stable coin is an instrument that trades.

>> And my world of 30 years ago from when I started pro when I started working with checks is an is a is a world where these instruments clear. M >> and so the the the real answer is that stable coins banks and fintex can actually process stable coins like checks and that's the way that the so banks and fintex don't want to act as exchanges. When you when you take a check to your bank they're not buying it from you.

They're depositing the money in your account after getting money from the issuer. So these these are this is I'm I'm kind of like my my age on this is a is a is a blessing and a curse because you know crypto guys don't know checks and traditional people don't know crypto and so I'm slightly like the you know in the land of the blind the oneeyed man is has got some some some insight because I'm straddling these two worlds of checks and stable coins. But between the two of us, we can we can square this circle. We can balance, >> right?

>> And so I I'm I'd love to learn more about your world in checks and how stable coins can clear similar to checks. Yeah. >> Because I live in this hyper financialized world where everything is trading and it it's a constant state of flux. >> But your world >> seems a lot more stable, a lot more even keel. And I think that's what banks particularly enjoy. >> Well, you I mean you will enjoy this as well. I mean at the point at the point at which stable coins become ubiquitous. What are we talking about? Like look if you add up the if you add up the revenue that the st all of the stable coins make. I mean maybe you get I don't know maybe you get 17 or 18 billion dollars and that might sound like a lot of money

but it's not because the total payments TAM is $2.5 trillion. Mhm. >> So I genuinely So what I think is is happening is this. Everyone on the planet is going to have a wallet. Those wallets are going to be connected to multiple blockchains. There will be many stable coins, tokenized deposits, uh many cryptocurrencies, tokenized money, market funds, real world assets. And this form factor will take over the entire payments time. every payment type, domestic payments, international payments, crossber payments, every payment will fall to this form factor because this the the token on a public blockchain is the

generalpurpose technology. If you think about it, the st a stable coin is a use case of a generalpurpose technology. Um, and I I gave you the analogy that I like to use. Um, I used to have uh an alarm clock beside my bed. I used to have a Walkman. I used to have um, you know, a calculator. And I used to have a landline. >> Mhm. >> And now I don't have any of those things because they're all incorporated and subsumed within my phone.

And people at the moment, these are so what happens in technology is that the general purpose technology subsumes the special purpose technology. So in payments the special purpose technology is cash, check, credit card, debit card, AC, swift, etc. These can all be subsumed within the world of tokens on public chains and that's what's going to happen. >> Yeah. And once that happens, we're going to see the likes of like you mentioned all these different form factors in the specific case. right now the the tendencies for a lot of the founders of of companies in the tokenized onchain financial world to

build these everything apps this one place to rule them all. Robin Hood is doing this. Uh there's several there's several companies that are doing this and they're trying to build everything in in one because it's all right there on our phone. everything is tapped. And if you can have a depository institution right next to a financial institution that can't handle trading and investing, then we have an opportunity to verticalize this entire stack. And so when you're when you're looking at this and you're building infrastructure to help this, I I I'm curious how just to learn more about the clearing process for stable coins.

>> Yeah. and and you were at City Bank and you helped to build the city's regulated liability network before founding units. >> Was this when you were using C travelers checks and you were you were working to clear these? I just love to learn more about how this clearing process works because again all of these stable coins from my perspective are in flux. Some trading at par, some trading above or below par very slightly. But if you can go direct to the issuer, then you can >> you can mint and redeem these at par and and then transfer or clear those on behalf of the bank that is looking to uh >> deliver the end balance to the end consumer.

>> Yeah. >> What is what is the process to make this happen and and how similar or different or how much can you rely on the infrastructure that you built in this regulated liability network? how how have you been able to extend that in the application of of blockchains and stable coins? >> So, I think I think the most useful thing I could do to get like a deep understanding of of where where do these worlds combine and to do that um I'd like to talk about something which I mean you you don't need to be familiar with it because it's like jargon. It's something called a negotiable instrument.

So, here's here's what a negotiable instrument is. You give me 10 bucks and I write on a piece of paper, I owe I owe the bearer of this piece of paper $10 payable on demand signed Tony. So, when I write that piece of paper, I've issued a negotiable instrument. Now, what can you do with that? So, I've got your 10 bucks, right? I put your 10 bucks in my pocket. >> Mhm.

>> You know it. So, I'm fully I'm a fully reserved issuer, right? I'm a fully reserved issuer of a of a of a piece of paper. You know, that piece of paper is now in your hand and that piece of paper is a token. So, what can you do with it? So, the first thing you can do with it is you can come directly back to me and say, "Give me my 10 bucks." >> That's a little bit like you going to circle directly. If you're an institutional client, that's like you go directly back to circle and get your and get your money back. The second thing with you can do with that piece of paper is let's say that let's say that I disappear and you you can sell that piece of paper to somebody else. You can trade it. Now,

if you sell that, that's a that's a that's a piece of paper where the issuer is Tony and Tony's got 10 bucks in his pocket, so he's fully reserved. So, you can sell that item, but someone might not give you um $1 for it or $10 for it. They might give you they might give it to you at a discount and they should give it to you at a discount because there's counterparty risk on Tony, right? >> I think Tonyy's a good guy. You don't you're not you don't have the >> Well, that that's okay. But you you you might buy it for 10 bucks, but somebody else might buy it for $9.95. And that's that's what the negotiability means.

Negotiability means that the price isn't fixed. So these two modes exist in stable coins, right? So you see that you see the analogy between the piece of paper can go back to the issuer. The piece of paper can be traded. Now here here's the here's the important question. Is the piece of paper intrinsic? In other words, if I had written that I owe you on a on a on a on a clay tablet, does it mean the same or different? It means the same, right?

>> Mhm. >> If I etched I owe you 10 bucks into a piece of metal, does it mean something different? Does the medium mean anything different? Does it mean anything different? Right. >> Right. >> If if I store that IOU on a relational database, does it mean anything different? M it does not >> mean anything different, >> right? >> So if I if I represent the IOU as an ERC20 token, does it mean anything different? >> It does not. >> So this is the key thing. When people define stable coins, they often say it's a crypto asset with reference to fiat currency. It's not.

>> That's not what it is. A stable coin is a is an old-fashioned negotiable instrument wearing new clothes. Mhm. >> So, a stable coin is a negotiable instrument and we've had negotiable instruments for hundreds of years, thousands of years. And the funny thing is there is one modality of what you can do with a negotiable instrument that exists in checks that does not exist in stable coins. And that modality is you can take a check to your bank and get par value.

And you can't take a stable coin to your bank and get par value. >> And why is that? >> Because the banks view stable coins as crypto assets and they're afraid to touch crypto assets because the regulators have defined these things wrongly. Mhm. >> So if the regulators would say these are six magic I mean these are really magic words. They're are magical words. The following six words banks well banks and in parenthesis fintex banks can process stable coins like checks.

Now if if someone in authority were to utter those words, Fed governor, the Treasury Secretary, the president does a truth social banks can process stable coins like checks. every bank, every fintech on the planet would start processing them like checks and they would say, "Wow, there's a way for me to process stable coins where I don't have to act as an exchange. I'm going to do that." You know, think of think of the plight of like community banks in America are scared about stable coins causing deposit flight. Mhm. But actually if community banks open up

wallets for their customers and enable their customers to receive stable coins like checks, it's money into the balance sheet of the community banks. >> I mean generally these are six magical magical words that will and it will unleash bank and fintech participation. Now if you want to sell if you want to sell your stable coins on exchange do it. If you want to take them back to the issuer, do it. This is a third lane on the highway.

>> Yeah. Now, I think you'd agree with the statement that not all stable coins are created equal. >> Yeah. >> And you know, we're we've got sort of this impending Cambrian explosion of stable coins. >> Yeah. every Walmart stable coin, Amazon stable coin, the we had the uh Wyoming stable token commission, the the state of Wyoming is going to be launching a stable coin, >> stable coins galore, >> this Cambrian explosion, several orders of stable coins, all with different varying uh issuance policies, reserve requirements. the Genius Act did help to regulate and stabilize a certain subset

of these stable coins, but generally not all stable coins are created equal. So, kind of a a loaded question, but I I'm curious. Do you think that whether it's the president or some issuer, regulator, will they utter those words that banks should accept stable coins as checks? And if so, how do we know what fits the criteria of stable coins that should be qualified as checks? Is it should it be all stable coins? Should it just be genius compliant stable coins? Or is there some other >> uh uh list of criteria or formula in order to process which stable coins meet that those requirements? So, so, so

we'll look let's let's work out or let's think about how our civilization has solved these problems in the recent past. Right? So, in the US there are 5,000 banks. There are 5,000 banks. Every single one of those banks can issue checks. Every one of those banks can issue checks. >> Now, does that mean there's fragmentation? No, there's no fragmentation. Right? Because all those checks are funible >> because you if I give you like there's 5,000 choose five. If I give you a random selection of five checks from the 5,000 >> Mhm.

>> you don't give a damn about the issuer. You don't give a damn about the issuer. You and and I'm talking about I'm talking now about a cashier's check. I'm talking about a check drawn on the bank. Mhm. >> If I give you five cashiier check from any bank in the land, what do you do with it? You take those five checks to your own bank. So that that that um quality of you not caring about the issuer is a very important quality called singleness of money.

>> It means that a dollar is a dollar. You don't care about the issuer. That's the no questions asked principle. you you give those five checks into your bank and you don't care about the issuer. So I I say you should be able to give the five stable coins into your bank and not care about the issuer as long as and this is the case with the banks. All those banks we're talking about in the US, they're all regulated. >> So here's here's another parallel. Do you know do you know how many card issuers there are on the planet?

uh as in MX, Discover, Capital One, these sorts of >> Well, well, there are 16,000 card issuers on the planet. >> Okay. >> Is there fragmentation? No, there is zero fragmentation because like I come from I come from the UK and I come into the US and in the US I use my UK card and I go to Macy's and Macy's doesn't care about the issuer and there are 16,000 issuers. So when I when I see people say well there's going to be a lots of uh stable coin issuers and that's fragmentation I I have to laugh. This is a failure to what this is a failure to understand the

previous cycles of payments technology. There will be this I've also hear people say there are only going to be a few stable coin issuers because there's a power law. I have to laugh. So in in the age of checks the market structure is everyone can issue checks. There's no bank that can't issue checks. There's no bank that can't receive them. In the age of debit and credit cards, everyone can issue, everyone can receive. In the age of a faster payments, everyone can send, everyone can receive. In the age of stable coins, I guarantee you there will be thousands of issuers and it will be no problem. No

problem whatsoever because you'll be able to take any five stable coins from any regulated issuer to your bank and your bank will deposit them like a check. No problem. >> So you know the we have to place all I'm asking for is this. Let's place stable coins in the historical context and everything is is quite clear. How things will turn out is quite clear. There's nothing there's nothing in the stable coin that make that will make it depart from history in that respect.

>> Mhm. it. Shifting gears a little bit to CBDC's because >> yeah, >> they this does draw a distinction between stable coins and CBDC's. And so when you're looking at CBDC's and you think to yourself, oh, I think to myself, look, the CBDC is a stable coin, but a stable coin is not a CBDC. Meaning that CBDC sort of has these centralized properties to it. Stable coins are a wider basket. And so when you think about stable coins in general, all fungeible and issuance, everyone is sort of treated equally. Do you put CBDC's

into that category as well or do you draw a distinction between the two? So there there is the distinction that exists between CBDC tokenized deposit and stable coins is uh a kind of it's the the reason why people make that distinction is because they're lumping together the issuer with the instrument. So actually what is the instrument? The instrument is a token that can be redeemed at par value on demand. Who can issue such an instrument?

A a non-bank like Circle can issue such an instrument. A bank with a balance sheet can issue such an instrument. Uh a central bank can issue such an instrument. So let's think that again in the in the US context there are different types of issuers of checks. So a traveler's check which are issued by a non-bank. There are there are there are small FDIC uh regulated banks, there are big OC regulated banks. You can have a check issued against a money market fund. Um back in the day, your credit card company used to give you a checkbook and you could write a check against your credit limit from your credit card company.

So the check is the instrument that is capable of being cleared. But the issuer doesn't have to be the same kind of issuer. So to to be to answer your question directly in my definition a CBDC is just a stable coin issued by a central bank. A tokenized deposit is just a stable coin issued by a commercial bank. And what we call a stable coin is a pre you know the fact that the stable coins that we see today are preunded instruments doesn't mean that they always have to be preunded instruments.

It's just something the the the the best definition of a stable coin is is it's in the name. It's something which is stable against the the fiat currency. It's something that if if I was to get if I was to give you like a traveler's check and a check drawn against an FDIC bank and a check drawn against an OC bank and a check drawn against a money market fund and a check drawn against a credit card issuer. You don't give a damn about the issuer. the the property that we're looking for. The way that you incorporate stable coins into the financial system is you get to the point where you don't give a damn about the issuer. Relay, low fees, lightning speed, and the power of

multi-chain at your fingertips. Instant multi-chain payments. Choose any token on any chain. 75 plus network supported. More than 5 million users, 8 billion plus volume processed, 70 million plus transactions, fast, reliable everywhere. Start swapping today only on Relay. >> Habachi provable trade pers with speed and security. Earn rewards. Visit hbachi.xyz. Trading on fire. Now, building on this, as we're thinking about clearing these stable coins like checks between issuers and banks and delivering fiat, >> how how do you just to open up the black

box a little bit if you don't mind? How do how do you actually do this? >> Uh so that we can understand a little bit more once we now that we've got the issuance, we've got the stable coins, we understand how checks are processed, how do you actually clear these payments? Okay. So, clear clearing there's you basically have two flavors of clearing in the world and you've got the the the smart form of clearing within the cap the kind of markets area where people have central counterparties and there's margining and there's all sorts of there's all sorts of uh fancy things going on in securities clearing and then you've got very basic payments clearing and check clearing. So check clearing

it. Check clearing and stable coin clearing is like this. You're this is going to be my stable coin. Okay. Sta stable coin gets received into my wallet at Wells Fargo. >> Mhm. >> Stable coin has to get turned into dollars because Wells Fargo want to give you the dollars. Wells Fargo give the stable coin to me. I give the stable coin to the issuer. >> The issuer says good stable coin. >> Yep. The issuer gives the dollars to me. I give the dollars to Wells Fargo. Wells Fargo gives the dollars to you.

>> That's it's just the DVP. It's just a DVP. The stable coin goes one direction. The dollars go the other direction. >> Mhm. >> Now the again this this mechanism is only invoked when you want to turn the stable coin into fiat. Mhm. >> There's no again I'm not saying that that is what you should do. If you want to hold on to the stable coin by and then send onwards by all means do that. >> I'm only talk this my mechanism only comes into play when the token has to get turned into fiat.

>> Yep. Understood. >> Now when but but when would that when would that be useful? So, imagine imagine now you're imagine you're a corporation and imagine that you sell $10 million of uh of services per day over your website >> and you've got $10 million worth of stable coins coming in every day. There are going to be many many issuers from many countries. So, you might end up with a wallet with a hundred different stable coins. You don't want a hundred different stable coins. Do you want to consolidate consolidate that all down?

Now, maybe you want to consolidate into a single stable coin or maybe you want to consolidate it into into cash on your bank account. >> Mhm. >> So, the only place that my thing comes into being is when people want to turn the tokens into cash, >> right? >> And that's not always, that's just sometimes. Mhm. I can imagine a scenario where to the end consumer uh a business person that has a bank account and has a wallet at that bank account. The number that's shown as far as my balance at that bank is a combination. It's a sum of the stable coins and the fiat that I hold at that bank.

>> Sure. >> And I can understand how the >> the number from my perspective won't change. But on the bank's perspective, they might go and facilitate in order to balance their books and they might take the liberty on my behalf to clear some of those stable coins into some fiat in order so that they can efficiently print uh process transactions. >> Yeah. Well, you put yourself again in the position of the CEO of a community bank. If you give your customer a wallet and the stable coin goes into that wallet and it sits there, the stable coin is not on your balance sheet, it's essentially in custody, >> right?

>> You know, assets in custody are not on a bank's balance sheet. So, what you want as the CEO of that community bank is to convert it into money on your balance sheet because then you can use it for lending. So I I would suggest that the first thing that a the first service that a bank is likely to offer is conversion of the stable coin into a bank balance because the bank wants the money on their balance sheet. This is a good service. You know the the reason why this is good is because if every bank and fintech in the world have wallets and offer that conversion service, then we've dramatically increased the supply of regulated

wallets. That's good. Again, I you know, I've got no problem with people having self-custody wallets if they want to. But on mass, let's say that the US pumps $3 trillion worth of stable coins into the planet. Do we want $3 trillion on unhosted wallets? Look, I I think if that's the case, what will happen is the central banks around the world will will move into a very unfriendly stance against stable coins. And that's not what we want.

We want governments around the world to consider American stable coins a gift. When back in the day when people from America traveled into the rest of the world holding in their hands the American Express travelers check, they were warmly received and everywhere in the world, every bank in the world, every bureau desanch every hotel in the world accepted American Express travelers checks with gratitude. Mhm. >> And the reason why is because when you not you but your parents went into Paris with an American Express travelers check and they took that check to the bank that bank made foreign exchange.

That bank was very happy. Now if the world gratefully accepted American Express travelers checks, it should be the world should be even happier to accept American stable coins. And and it's super bizarre to me that the the dialogue outside of America is countries outside of America are afraid of American stable coins, but if they catch them in their banks and fintexs, they're a gift and something else happens. Once every bank and fintech have a wallet, then American stable coins will no longer dominate because the distribution channel will be there for stable coins

from every country. And you know, there's no reason when a Japanese yen stable coin comes into America, an American bank or fintech makes FX. >> Mhm. >> So Japanese yen stable coins in America are a gift from the Japanese to the Americans. American stable coins going into Japan are a gift from America to Japan. So these are little bundles of joy. Stable coins I define as being a little bundle of joy. >> I love it. I love it. Um Tony, man, I got I got two more questions and I know we're kind of running up on time, so I want to Yeah, I want to speedrun. I I love the concept that every bank in fintech is going to have its own wallet.

Yeah. and and this allows them to take receipt of the the little bundles of joy that we're passing around the world. Will Ubix offer a wallet as a service? Since you're building a lot of the the banking relationships and and you you have experience with stable coins and building relationships with the issuance uh the issuing partners, will you also offer a uh a wallet to these banks? We deliberately won't because there are many great wallet providers. But what we'll do is we'll go we'll go to market with the wallet providers. So so >> we'll go to market with the wallet providers and the chains and the analytics companies and we'll provide together we'll provide trady with the

equipment that they need to capture the bundles of joy. >> Right? Let's just call stable coins bundles of joy from now on. Right? >> I love it. So, so this is the this is the thing. We have to change the go to market, right? So, so wallet providers go to banks and they think they're selling custody and chains go to banks and every bank there. The chains go to the banks and they say my chain is the best. This is this is not the game. >> The the thing that we're selling to the banks and the fintex is the opportunity to catch stable coins and convert them because then they'll make fees in FX.

Mhm. >> And our go to market as an industry as a so look I love poly polygon but if you if we try to go to an individual bank and say polygon is the only chain to connect to they'll be stuck for years they'll be okay is it the right one you're you're asking people to make a false choice it's much better to say this to a bank I I just plead with you know everyone in our industry to think about this. Don't ask people to make a decision that they don't need to make immediately.

We the bank doesn't know which token or chain will win. What we should do is give them a wallet connected to all the chains. Once the bank has a wallet connected to all the chains, then the natural advantage of each of the chain will come to come to the fork. Some chains will be good for one use case, another chain will be good for another use case. But our joint the the way that we get to positive network effects is we all say the same thing. You know, look, if you're not if the the the baseline, every bank in fintech needs a wallet.

>> Yeah. >> Baseline. Let's start with that. That's the building block. Then the the ch the chain wars and the token wars happen on top of that infrastructure. >> But let's make the first step first. >> Yeah. Yeah. Well said. Last last question. Uh through the research that we did on Ubix, we we discovered that there is a you're starting to explore the concepts of decentralizing this network. >> Yes. >> What does that look like to to take this clearing network of stable coins and transform it into a decentralized network of of clearing?

>> Yeah. um we we need to walk the talk of uh being you know being in the space and I you know we look we don't want to build a monolith you know the the monoliths that we've got at the moment like the um the card schemes for example they've got centralized rule book and centralized technologies we want to do something different so we will have a rule book we want it to have community governance but in a responsible way >> uh we'll have a technology stack that to begin with will be quite centralized, but we want to be decentralized and resilient over time.

So we just want to be look if you were if you were rebuilding a card scheme from scratch today, you wouldn't you wouldn't rebuild the ones that we have today. So our our thing is let's uh use the best technology decentralized technology available but first we have to boot the network. We have to we we went live like in the last week. >> Um you know six months after forming the company we went live. So we have to get things going crank the engine. Um but our machine going forward we want to be progressively decentralized.

>> Makes sense. Tony, congrats on going live. Uh congrats on all the great work so far and thank you so much for for coming on the show and helping educate myself as well as our audience on all of your experience and your insights that you ga gathered over the years. really really appreciate it. >> Well, it's a great pleasure and these worlds are coming together and you know, look, it it just takes a little bit of um of us each moving towards each other's space. So, >> lots of people in TRDFI, they've never seen a stable coin. So, the people in TRDFI um can take a step forward towards DeFi and web 3 by just getting a wallet and experience a stable coin. And vice versa, if you're a crypto dude and you can't get to sleep at night, read UCC

article 3 and UCCc article 4. >> Put your right to sleep. >> Put your right to sleep. But also the if you get your head around the fact that stable coins are negotiable instruments. So UC article 3 is the definition of negotiable instruments. If you get your head around the fact that a stablecoin is a negotiable instrument, you you make a you the worlds really combine and the future of the stable coin market structure becomes clear. >> Yeah.

>> So this is about both worlds making a slight effort to get to know each other because we're on a collision course, man. >> Yeah. Yeah. I think so. Ultimately, this is converging. It's important to get back to the basics. And I'm going to check I'm going to check those out because uh this was this was a great great uh opportunity to learn about negotiable instruments and and all the things that you brought here today. So yeah cool. >> I I really appreciate getting the opportunity to know you, get to know Clearing and uh you know share a little bundle of joy with one another in the form of stable coins.

>> Exactly. The bundles of joy are going to be sent all over the world very soon. >> Yeah. And the banks are going to do quite well via Forex. Uh Forex in the bundle of joy. >> Tony, thank you so much, man. enjoy the rest of your day and have a great weekend and uh >> Thank you. >> Yeah. Yeah. Would love to have you on again soon. >> Yeah. >> Awesome. Cheers. Bye. >> Cheers.