Trace CEO: We Built A $10B Volume Stablecoin Company (How We Did It)

Transcript

Yo, yo, yo, welcome back to episode number 37 of Stable Up, our premier weekly stablecoin show powered by our friends at Frax. Visit frax.com to learn more about their FRX USD products and more. Today, we've got Bernardo Brites, a the CEO of Trace Finance, a fintech platform enabling fast cross-border payments and stablecoin infra for companies in Brazil and LatAm abroad. Before launching Trace in 2020, he ran a successful crypto trading desk in Brazil, sourcing major Bitcoin volumes for local exchanges, and held early roles at other blockchain projects. A graduate of a top university in Rio, a party town that we like to be at. Bernardo, good to have you, man.

>> Likewise. I actually dropped out, but uh yes. >> [laughter] >> I also dropped out. So, well, congratulations on the raise, and let's set the stage here, man. So, this kind of proliferation of stablecoins has uh predominantly been, you know, in the US, the growth of Tether, Circle, um and a lot of this kind of expanding the US dollar hegemony and really kind of growing that. But, the use cases abroad seemingly are the most impactful for a day-to-day person.

Give us the kind of rundown of how you started Trace, kind of what the core vision here is, and just kind of like your view on how stablecoins are going to proliferate and eat finance. >> I have been in crypto for 10 years now, and I it's really interesting to see how the cycles change and uh what's um what the industry puts more more weight into, and um by extension value, right? So, on the stablecoin side, I think that it's really an amazing time because before, you had tokens appreciating, and the interest in blockchain and crypto were a product of, you know, people

getting money essentially because uh uh the token price was was getting up and that applies to memes, that applies to any different token that has speculation into it. Um, people, companies, you know, corporations are not going to stop using stable coins because the stock price of Circle is down or because any specific protocol token is down. So, if there's a specific company that is adopting USDT and other stable coins because it's faster, cheaper, better to use it in a specific corridor, they're going to keep using it regardless of the Bitcoin or the Ethereum price. But, in my opinion, um, the adoption of stable coins and the

adoption of blockchain in general actually feeds back into Ethereum having value, Solana having value and even Bitcoin now with some some layer two projects like you know, like Lightspark and Lightning Network as well, Lightning Labs. Um, processing a bunch of like stable coins on top of Bitcoin as well now. So, I do think that it's an amazing time to be alive. It's an even better time to be leading a stable coin company and I I do think that it's just the start.

Um, we are seeing huge companies now having interest in in stable coins and and in using crypto in payments. So, um, it's really an amazing um, amazing results in in what um, I have seen over the years. So, >> Yeah, man. I mean, the proliferation and the growth of, you know, USDT and and USDC has been remarkable. And so, I'm just curious like let's get into like the nitty-gritty into the niche of Brazil and LatAm and why stable coins are growing so much there. You know, obviously we know about PIX, the primary payment method in Brazil. How How do you anticipate capturing a lot of this

market share in Brazil with Trace for cross-border payments and payments at large? Maybe just give us your view of the flaws in the payment systems in Brazil or in LATAM or specifically like the problem that you find uh to be solved with stable coins down there, you know, given your unique upbringing there as well as your understanding of the financial system in Brazil and LATAM. What is the What is the core of the of the issue and of the opportunity here? >> So, PIX is amazing. Um it's free 24/7 instant um payment system, right? So, that actually enabled a bunch of different industries, even I would say like exchanges to thrive in Brazil because now you can actually receive deposits

and process withdrawals real time. So, that that is really really good for the domestic market and it's has really enabled a bunch of industries that in other markets um are not as successful because you have to use like card networks to to get into and now you can actually move high volume uh into a very low-cost transactions this case free, right? For users. And instant. Um so, in that specific case, I don't think that you would use Datar or even a local BRL stable coin to now process local transactions. Having said that, where I really think stable coins can add a lot of value in Brazil is actually on the cross-border piece of it. So,

Brazil is one of the only uh top 20 economies in the world that has a currency that can't be settled outside of Brazil, right? Outside of the country. And we also can't hold uh foreign currency onshore either. So, you can't have dollar accounts in Brazil. You can have dollar accounts that are held by a foreign bank elsewhere and so on. But, it's a proxy, right? So, you can't really do that natively in in the nation. So, by us actually enabling a BRL stablecoin, we could actually now enable a connection, a bridge between the liquidity of the domestic market and Tether, for example. That otherwise, you would have to settle

BRL into USD, wait 1 to 2 days for Swift, and then you would acquire that USDT. You wouldn't be able to do that at scale, right? So, I I do think that stablecoins in Brazil are very interesting for cross-border payments. Now, for other countries in the region, I do see it as an amazing inflation control, right? So, if you want to have easier access to stablecoins where that you can send to any country, you can actually be a global citizen, live in Argentina, and have your assets in US dollar stables.

In Brazil, I wouldn't say we distrust as much as, you know, Argentina, as much as Colombia and other countries in in Latin America, our currency. So, I think there are a lot of companies and and consumers that want to spend it locally with that specific currency and hold it as well. But, whenever they are traveling abroad, whenever they are paying for a big import or a big export, they actually need dollars. >> Okay, so more trust in the in the kind of underlying, better better kind of fundamental use case from the payments perspective, and and a massive global

economy, right? And so, you kind of get this recipe here for you've got a consumer base that is already used to, you know, the efficiencies and ease of use of pics, right? Given that it's so simple. Um and they also are obviously transacting a lot of Brazilian real on a consistent basis. And so, when you when Trace is looking at this and assessing kind of like the state of of this market, what do you believe is the like zero to one or like the 100x in experience from where we're at versus where Trace is trying to take things? Like, what does that meaningfully

like what does that change meaningfully look like if you guys get this right? If you guys you know, really do this right, what is that meaningful step function improvement from the user perspective, from the money flow perspective, from the economy perspective, you know, how how do you see that zero to one? >> So, Brazil is one of the toughest markets in the world as far as regulation and capital controls. On the opposite side, um you actually have a population that was primed for this type of like instant payment system. And they they are already kind of used to uh what the stablecoin value um adds is. So, um I would say that we have um a really cool landscape uh an amazing uh starter

points, right? Start starting points for for Trace. So now um we are in the US, we're in Mexico, we're in Colombia, in Argentina. We're expanding to APAC now. Um in 3 years time, um I think the shorter the better, but but let's aim for three. Um the ideal vision of Trace is for any company to be able to hold any specific currency, and they wouldn't even need to worry about which currency they are holding because we're essentially making it so that um it's ubiquitous. And um we we are taking away the complexity of having different currencies and managing that treasury on the back end. So, we

want companies to hold m- money, period. And if they want to send that money into MXN, into stable coins, into BRL, or into dollars, they can do it easily out of one single account without the bureaucracy that you have on a fax right now. So, I think that if you own money, you shouldn't actually um have different complexities around sending different currencies. >> And how you know, you guys just raised this massive round, like how do you plan on using these funds to accelerate this adoption? Because it is a difficult nut to crack, right? Like both the complexity of being, you know, kind of building out the stablecoin ecosystem somewhat from scratch, um and then also,

you know, going and getting distribution. How does the $32 million series A help that cause, and where will you be allocating those resources? >> So, I think one of the the first steps here is regulation, right? We want to become banks in many different jurisdictions. Um when you think about uh stablecoins, generally speaking, you have the cyberpunk um idea of, well, uh we are against the banks and we don't um want you to use our infrastructure, we don't want to partner with them, and so on.

And uh I actually think completely opposite idea. I I think that uh for you to build the next um dozens of millions, if not hundreds of millions, of users getting to crypto uh directly and indirectly, you actually need to have that back end infrastructure and that regulatory landscape to be able to do it at scale. Because sure, you could probably do it for a specific period of time or for a specific volume, um some amount and and do business doing the gray area or the the even almost illegal path, right? Um but I do think if you are able to build that at scale and have regulations, be able to build

that out as how she did for example in the US, right? Um well, you have something that is not necessarily clear, you explain it to the regulator, you make them comfortable, and now you can scale um at full throttle because the regulator understands what you're doing, and not only do they understand it, they actually back you up whenever someone um or a judge uh goes and and tries you to counter that. So, um I do think that regulation is the the first pillar. Uh second pillar is actually having the best thing possible. We want to have people that have worked in some of the largest um entities in the world because whenever we talk with Apple, with Meta, with um you know, huge uh enterprises, they are really thinking, "Who do I have

on the other side of this conversation? Do they understand me? Do they understand my language, right?" And uh we can just be, you know, cool and um essentially say that crypto is the future without having the words and the structure to back it up. So, um I think that our team is amazing. Uh we we have built an amazing team in Brazil, Latin America, uh and in the US, but we actually want you now um expand that into APAC um and really have a presence uh throughout the world. Um and I would say third, it's less about the money, it's more about the recognition and the partners that we brought on board, uh CoinFund, Coinbase Ventures, Pantera,

Paxos, and so on. Um it's about having um a a clear um match on our funding history and who backed us versus what we were processing. Before this round, we were a seed company that raised $4 million and we had processed $10 billion of payment volume. Now, I think that having a $32 million Series A with such amazing investors really puts us in a position where we are talking with a lot of those blue chips and and huge companies and they understands that we are the company that can confidently support them with the infrastructure

they need. >> Yeah. So, like you said, $10 billion of volume before the Series A and that that is helpful to justify underwriting the Series A from these investors. Tell us a little bit about the customer segment. Like, what are some of the demographics, right? You know, this is primarily in the region that we've been talking about in Brazil. Maybe you could just describe a little bit more about who your customers are and how you were able to amass $10 billion of volume. >> So, we are now processing four of the the top global companies operating payment volume in in Brazil and Latin America.

So, as an example, we have Elo as a customer and Elo they are processing some of the largest e-commerce players, streaming players. They are doing a lot of like travel, transportation, even like video games. So, by extension, we are now able to process like behemoths that are moving billions of dollars each, right? And we also have direct customers as well. We have a lot of like import exports and other segments, but what we really specialize in doing is getting a customer. One of my dream customers would be like ADN for example or Stripe and then we actually go and process all of their payments on the back ends

because we are really specialized in processing billions of dollars for many different verticals and making it as seamless as possible through APIs and through stablecoin connectivity as well. >> Yeah. You know, I'm curious, is there a a pocket of the business line right now in the kind of broad cross-border payments or, you know, remittances, neo banking? Like Like what is the Is the Trace business model just purely, "Look, we've got, you know, hundreds of millions of dollars of volume being sent across our rails every month. We take a small spread on that. That's our revenue." Like talk to us about the revenue lines and the

business lines for Trace. And then what you see as like the future development as you kind of crack into more economies of scale here, what is the What is that revenue structure look like for the fees and the actual specific lines of business? How will those evolve and change? You know, curious how you know, a company of of your size is is generating revenue, what that actually looks like as well. >> So we charge a spread. We are projecting $35 million of revenue this year. We are profitable as well. We actually made more money in in net profits than what we raised on the seed prior to the Series A.

And um the the goal here is to make a the experience as seamless as possible for those companies to move that large mass of money in the best like frictionless way possible. So we want to make it so that compliance is is key. It's very important, but it shouldn't shouldn't be a a bottleneck, right? So we make it so that by design all the different a flows they don't have RFIs that's essentially lock your operation that make it so that you have frozen money

and so on, right? Uh, we actually build, um, our payment system in a very smart way, um, so that we only halt a payment if we have something out of the ordinary, right? We want, um, the day-to-day payment volume to flow as seamless as possible. So, when you are processing a payment for, let's say, Amazon, for example, you are essentially thinking, "Okay, that's an e-commerce player, right?" And you will have a range of payments payment amounts. So, you have people buying all the different sorts of items on Amazon. We don't really care about what they are buying on Amazon. Uh, we

care really if, uh, that volume is consistent, um, if one specific person spends $2 million on Amazon, that's probably weird and we have to look at it, but it's definitely possible, right? Um, it's out of the ordinary. Um, so we we make it so that all of that volume that is flowing through us, since we already have the pre-existing relationship with, um, a specific customer or if it's specific, um, payment facilitator, we, um, can already have data points to make it so that we understand the behavior of that specific merchant and we process that, uh, in the best way possible that generally banks

aren't able to do, right? Because they, um, moreover in Brazil, but I would say, uh, generally speaking, cross-border payments is not an area of focus on banks. They are usually, um, focused on borrowing, lending. They are focusing on other verticals. We really built Traxster to be the best experience in moving money globally for corporations. >> Yeah. You know, and then on the kind of more consumer use case, is that really part of the Trace vision, or is it really just enterprise um you know, kind of enterprise use cases for large sums? Is the consumer the average kind of like American or Brazilian consumer part of the part of the play here, or how do you think about kind of like the

the the distinction in the amount of value that you guys can provide, and then you know, also capture as it pertains to enterprises versus the consumer? >> We don't want to compete with our own customers, right? So, we we would like to stick with like B2B2C. So, essentially, I heavily admire I'm one of the the earliest adopters of Cash, for example. I I would say like Red Dot Pay, Arc, and a lot of other like cards, stablecoin cards um are are really amazing, and we want to be the backbone that powers all of that for them. But, personally speaking, I have always thought that building a consumer business is so tough, right? Because you actually need to not only

um convince a decision-maker, and then have that business for years and years to come, you actually you actually need to every single day convince that specific user, and because of a small mistake, you could actually lose them, and maybe for life, and you wouldn't even know what happened there, because your relationship with that specific customer is so far apart. You don't have this like high-touch relationship that you have with enterprises. So, um I think that running a a business with like 10 million plus users must be amazing, but getting all the way there, I really respect the companies that can do so.

>> Yeah. And you know, Bernardo, just kind of thinking about the stablecoin super cycle that we're in broadly, um you know, we're seeing it happen. Obviously, US dollar stable coins have proliferated and become mainstream and now, you know, non-US dollar stable coins are continuing to do so as well. I'm you know, we've kind of heard mixed takes. Some people have said that US dollar denominated stable coins are going to continue to be the Goliath and you know, there's really not going to be many others. Other people have said the opposite and have said that stable coins are this catalyst where, you know, it sort of uh a sort of reconfigures the entire foreign exchange, you know, industry and

stable coins presented opportunity for non-US dollar currencies to sort of make up the difference and and become much more prevalent. Where do you fall in this camp? Do you think, you know, the stablecoin market will reflect the traditional fiat currency market or do you think this is going to be, you know, more in favor of the dollar more in favor of local currencies? >> I think it's really about access, right? And and liquidity as well. So, right now, if I have a bank account in Mexico and I want to pay an exporter in Singapore, I can actually go with my Mexican bank and do an MXN payment into that bank in Singapore. And that specific Singaporean exporter can now

hold MXN and pay another person or company in Mexico with that same MXN. Um, so I think that's the access globally for Mexican pesos is very easy and you don't really have friction on that specific transaction. Now, if you ask about BRL, you can't really settle BRL into Brazil if you are not a Brazilian entity or if you don't have accounts onshore in Brazil. So, that makes it so that a Brazilian stablecoin makes a lot more sense versus, let's say, an euro or an MXN stable coin just because you can have euro accounts almost anywhere in the world, right? Um and talking about

like the consumer aspect of it or even the the business aspect of it, you have so many companies offering like euro accounts IBANs right? Um but you don't see the same for for Brazilian reais. So, I do think uh there's demand for euro stable coins, but it's not as dire um as you have for uh Brazilian real, for example. >> Yeah. And and you know, do you you know, you you talk about the APAC expansion? Obviously, you have local on-the-ground intelligence and experience and connections in Brazil. APAC obviously is a whole different beast. You know, when it comes to expanding stable coins there, is there some jurisdictions or some specific unique edge you think that

Trace has in those regions? How do you How do you think about the go-to-market in APAC? >> So, for different reasons, I I actually think that uh APAC in in large ways is very similar to the complexities of Latin America. Yeah. So, um first of all, I think that Singapore is one of the best uh countries for cross-border payments infrastructure in the world. So, you have amazing uh banks such as Standard Chartered. Um you you have um amazing branches of global banks like Citibank uh that's doing an amazing job in in Singapore as well. And you have a great regulator in in Singapore as well, the Monetary Authority of Singapore that really uh holds everything together.

Um and then you have other countries that have um very specific scenarios like Japan or South Korea that have regulators that are very worried about um you know, novelty. So, when you look at Japan, I think the best uh picture I can can put to you guys is uh, all the major exchanges in Japan they don't have more than 20 altcoins listed, right? Because they actually have to be pre-whitelisted by the the um JAFSA. And um, funnily enough, you actually have MonaCoin, which is like a cat's meme coin, as one of them.

>> [laughter] >> But um, I I see that Japan, specifically, is super hard to penetrate, right? I have been to Japan 16 times. I I love that country. >> 16 times? >> It's uh, best country in the world, best food, um, and I really love the culture as well. Uh, but at the same time, I understand the complexities around operating in Japan, right? And I think that you have a very specific way that you need to um, to behave when you're doing business with a specific with a Japanese company and when you when you're penetrating the market. So, it's very hard for a foreign company to actually access the Japanese market. Generally, you do it through JVs right?

Um, and if you can actually navigate that well, you are heavily rewarded. So, I don't underestimate the the how tough it is to to pull that off. But if you do pull pull that off, the reward is uh disproportionate. So, I I'm personally very excited for for the APAC um, expansion, but moreover, because um, it's not like we're starting from from from the ground up, right? We are essentially uh, now having all of our infrastructure in the US, all of our infrastructure in Brazil, in Mexico, in Colombia, and we can start having volume from day one because we

were already moving money to those countries. We were already moving money from importers from Brazil to Singapore. We were already moving money for um, Japanese companies that operate in Brazil and need to move their treasury back into the country. So, it's really going back a step and thinking okay having being regulated in one end of the transaction is great, but I think that you really get the most value out of having both sides of the the transaction being a regulator party and being able to build systems and build flows that otherwise you wouldn't be able to build if you weren't regulated on both sides of the transaction.

>> Yep. Yep. I mean, that's going to be a challenge, but it's going to be a fun like, you know, entrepreneurship is all about like putting out fires, taking on the next challenge, and it's it's going to be a fun one. So, congrats on the raise, Bernardo, again, and sounds like it sounds like the evolution of stablecoins in Brazil is really accelerating. You guys are going to play a big part in that. I'm sure there's going to be competition. I'm sure there's going to be regulatory battles as you mentioned, but you know, more more power to you fighting the good fight. Thanks for spending some time with us today, and again, congrats on the raise, man.

>> Of course. Thank you so much. We have to plan a trip to to Brazil as well. >> Yeah. There we go. We'll be there. >> Thanks for coming on, Bernardo. Congrats. >> Pleasure. >> The raise ever. >> Pleasure. Value. >> [laughter]