TradFi on Stablecoin Rails

Transcript

Check. Check. [music] All right. I think this is going to be a good segue from the last talk. Uh because do you remember last time uh last time you waited two days for an email to arrive? Because I don't. And why do we wait two days for money to arrive? So when we look at 50 years of infrastructure, we started with paper. We would print certificates with owner's name. We would uh sellers brokers uh would deliver them. Transfer agents would have to cancel or issue new certificates and the whole loop would take days and sometimes weeks and by 1968 you would assume like the volume

was growing. So it took the system to the brink of collapse. So we went electronic which is reasonable approach here. So if you go electronic it means you instead of shipping certificates you need centralized vaults you need clearing you need custodians asset brokers and we've been able to shorten the settlement window from 3 days to just one and you may ask like can we go even lower and I would say with traditional finance that's really hard because it's not just software problem computers are already fast but this is more organizational problem because you have multiple intermediaries in the

chain and every intermediary is running on proprietary systems decades old infrastructure and it's really complex hard problem to just transition whole thread file to going real time but we have tokenization tokenization is real time it's onchain it's programmable access and it's not a road map it's already running and if you would say like we can put uh we can put concrete cost from going from 3 days to one day settlement and just going from 3 days to two we've been able to free 1.3 billion in collateral and going from two days to one we've been able to free another three billion. So

what happens if we go to zero and that might be tokenization and even deeper shift here is not just onchain is not just real-time settlement but deeper shift here is that with traditional finance assets and settlement were two separate events whereas on chain asset is the settlement it's one atomic sorry for that we are back. It's one atomic event. So, is it already running? And we can find an answer in stable coins.

46 trillion. It's quite a lot. And this is how much was moved on stable coin rails last year, which is three times Visa. Even adjusted for bots, even adjusted for automated flows, we are around 9 trillion, which is five times PayPal. And supply is growing as well. is around 300 billion. When you have a volume, it means money is used as infrastructure. If it if you have a supply, it means people have trust to put their wealth in them. And you you might be right that it's just dollars.

And 1% of all US dollars in circulation exists as stable coin on public blockchain. But it's not just dollars. It's not just trading. It's not just bot activity. And if you are 99% of all stable coins are dollar denominated, which is great if you're in America, but I mean if you are in Brazil, Japan, Europe, you don't want your financial infrastructure to depend on someone else's currency. So local stable coins are a bit different.

They are not used for DeFi uh to chasing chasing yield but they are used more as operational money and for crossber payments B2B settlement remittancies and when we want to understand how they are used local stable coins we can look at where they sit and most local stable coins sit on individual wallets they sit on centralized exchanges lending protocols and they are used as operational money. And if you say like countries are afraid to use local stable coins, here is an answer. When local stable coin is backed by domestic government bonds, every unit of adoption is driving sovereign depth,

which means it shouldn't be the threat for countries to use local stable coins because it drives demand for their own depth. And the biggest player here is circle zero stable coin around 85% of volume. A reason for that is also used for defy. But it's not just that. Hopefully you can see that. But uh we have two stable coins. One is tetra zero the other one is circle zero. Same currency same product but one difference. One was compliant from day one. The other uh couldn't follow requirements from Mika. and in November 2024 almost collapsed and it collapsed not gradually in in a months but in a

week and that tells us something regulation isn't a permission to do something it doesn't block you to build but it gives you some kind of alignment for industry and it creates actually creates new markets and the reason for that is that when you have regulation in place means institutions have legal rails to get in to get money in and we can see it on different markets whether is it real world assets or prediction markets with RWAS that they hit 14 billion um with US treasuries we have black rocks funds being able to trade you can use them as

collateral and with prediction markets they operated in a legal gray zone for many years but now they are CFTC regulated and hedge funds can finally use them. And some examples why stable coins are secretly becoming rails for these markets is for example polyark poly markets PS PUSD which is uh which is settlement token on poly market is one to one to one backed by USDC. You have circle that build smart contract for black rocks uh fund holders to be able to convert 24/7 to USDC. So we have regulations, we have markets that are driven by these

regulations. And just to put it all together with traditional finance, every product lives in its own silo. You have multiple intermediaries. It it's hard to compose different products in this market. Whereas on chain all these markets exist together. They have programmable. They run on a programmable layer. They share decentralized exchanges, lending protocols and they settle uh on the same layer. I'm saying stable coins here uh because stable coins are giving us stability. They are giving us regulatory fit. They are in interoperability as well. And we thought we build this for

banks, but I think we actually build this for agents. And the reason is that agents need instant settlement. They need programmable access and no intermediary. Thank you. [music]