Why Euro Stablecoins Will by Definition Hit a 100+ Billion Market Cap

Transcript

Hi everyone. Um, thank you for coming. Uh, my name is Martin Bruno. I'm the founder and CEO of Schuman Financial. We are a Mika compliant French regulated Euro stable coin is insurer. Previously I used to run Europe at Binance and I also used to be in government as an innovation and deputy finance minister in Europe. So, um I'm here today to talk about a topic that I was worried the room would be completely empty because it's either so obvious or so crazy uh uh that um I felt it almost required no uh explanation. But let me walk you through our argument why we have built Schuman financial uh and why it's built on a premise that we are deeply convinced

about which is that the euro stable coins will by definition be a 100 plus uh billion euro market cap uh very soon. So the argument actually let me walk you through the argument uh at the beginning and then I will explain it in more detail. So the argument is very simple. We all believe that traditional finance is moving on chain. Now if you look at traditional financial markets uh the eurodenominated financial markets are about a third of the dollar denominated markets. So this is a euro denominated market is massive. So if you believe that the financial services are moving

on chain and if you believe that Europe will not dollarize in any in the near future, then you will inevitably have and end up with a euro stable coin or a couple of euro stable coins that will actually not be aundred billion uh market. It probably will be a trillion euro plus market. So let me walk you through this argument now in more detail. Um I think all of us sitting here um we we we understand this uh I think quite deeply.

I don't need to go through uh uh deep explanations here. But if you look at where the crypto uh market crypto industry is today, uh it is now getting increasingly uh more and more mainstream or in other words the traditional financial markets are going increasingly moving increasingly more into crypto and adopting uh DT and blockchain technologies. Uh this is just from a recent survey uh done by Fireblocks um about they were talking mainly to traditional financial service companies already around 50% of them are considering using or working on using stable coins uh uh for payments. Um uh there stable coins are already settling

$2 trillion a year um or 25 trillion euros rather uh a year. So that's actually more than either Visa or market sorry Visa or Mastercard uh alone. Um and um you know you have the tokenization of of real world assets uh basically securities also moving very fast. Um and based on different studies by you know really pretty renowned uh uh institutions including traditional financial institutions like standard chartered uh the estimates are that they are going to go into trillions or potentially tens of trillions within the next uh 5 to 10 years.

So now look at the euro where does euro euro sit in this? Uh so the euro as I said the euro denominated uh financial markets depending on the specific type of uh product are roughly a third. So they're anywhere between 23 and 40 plus percent. If you look at payments actually uh this is payments settled by a swift uh it's more than uh the the the equivalent the euro equivalent uh versus the dollar market is roughly uh 44%. Uh so we're talking about a massive uh uh market and I can assure you euro is not going anywhere. uh there is zero chance zero chance that the EU will ditch the

euro officially and move it you know swap to the dollar and there is also zero chance that even if this were to happen de facto the European authorities would allow it and actually even if you look at Mika the Mika is specifically designed to prohibit the use of any non-European uh pegged stable coins for payments I mean it doesn't completely prohibit uh but there is a very small limit of daily transactions um which is I believe uh 200 million uh euros and that's just a tiny fraction that's actually two orders of magnitudes less than the amount of payments that's already happening uh today in Europe uh in in fiat so there's no way Europe is going

euro is going to disappear uh we are here with the euro also I'd like to add that um I don't know if any of you has seen FT yesterday. Uh dollar has had the worst year in more than uh 40 years. Um uh it's actually the value of dollar has declined by 10%. Given what the US administration is doing right now, well, they're being very efficient and effective at undermining the global role of the dollar. So I think this is now becoming more and more mainstream uh idea as well that the role of the dollar in global finance uh is going to decline. And I don't think anybody believes yet today that dollar is going to disappear or not be the number one global currency 10 years from now. But I

think it's just generally starting to be more and more accepted that uh dollar prominence will be much lower uh in 10 years than it is today. Now if now if you actually have these financial services traditional financial services onchain however you need to they will be dominated in a denominated in a in a given currency right and we're now talking about euro specifically so if you want to settle them if you want to trade them you actually need a tokenized version of that currency uh I mean in theory you don't need to have a tokenized version in theory you can have um a a security, a bond on chain and and buy it, settle it with fiat, but and

it's doable, right? But it's kind of equivalent of using a traditional landline phone and a mobile, right? You can actually call someone from a landline phone uh uh uh someone who has a mobile, but what you're able to do between each other uh is so much less than when both of you are calling from a mobile phone. And so this is kind of the the equivalent of the need for a stable coin or a tokenized version of the currency so that you can settle it so that you can use it for settling transactions of um financial services that are uh on chain. Now um uh the these are just some num like some

some numbers of the volumes of of currently euro. So I mean if you were actually to just capture 0.1% of the daily target two settlements um uh basically we know we're talking uh almost 30 uh billion uh daily flow 0.1%. Another example I actually like to use is FX onchain or FX. If you take the uh dollar to euro currency pair FX pair, the daily trading volume of that is roughly five times bigger than the trading volume of all the pairs on all the centralized crypto exchanges of all

the trading pairs on all the centralized crypto exchanges. Right? And that's just one product. Arguably, it's the largest stratified uh product or largest stratified market. But it gives you a sense of size of how big these markets are and what's going to happen once they start to uh move onchain even partially. Now, so going back to you know why you need this uh um uh how you need this tokenized euro. I mean in theory there's two ways to tokenize a currency or in practice as well. You can either have a CBDC or you can have a stable coin. I don't think I need to explain to anyone in this room why stable coins are a much better solution than CBDC's. The ECB is pushing very heavily actually a CBDC.

But I can assure you and also with my experience uh you know having spent many uh a day or many a night in Brussels uh with the ECB leadership um uh actually uh Madame Lagard who is now the at the helm of ECB used to be a colleague when she used to be French finance minister when I was there. Uh so I know how these people think. I know how um governments work. Uh trust me governments in Europe are no more efficient than they are in US or any other country. uh there's no way there's going to be a functional CBDC that really works, let alone at a more of a retail uh level, let alone that FinTech and crypto um uh savvy entrepreneurs will be happy to

work with. There's no way it will be around here in the next uh three to five years. It will exist, but it just won't really uh be be quite mainstream. And so uh we deeply believe that actually the future is really based on stable coins. uh it's not obviously just us. If you also look at the traditional financial institutions, they're all experimenting or many of them moving towards stable coins uh and it just doesn't make sense for them to start creating another stack really focused on uh uh CBDC. So uh it will have to be or in in reality it will be about stable coins. And uh let me maybe just end. So now you ask okay but um you know you

talk about euro stable coins it's basically a non-existent market to be very honest right I mean it's uh it's in the hundreds of millions as opposed to uh you know closer to 200 billion when it comes to uh the dollarbased stable coin so they are kind of a rounding error for now uh the reason why the euro stable coin hasn't haven't taken off until yet is really has to do with the core of my argument which is that stable coins right now are mainly used for uh crypto trading or crypto trading related uh purposes. Of course, uh uh some of them like uh USDC, USDT are also used for payments particularly in emerging markets, but that's a very very very

small fraction. So uh um uh that really change will happen again really with regard to the traditional financial services. And the other reason why they didn't haven't really taken off because we actually didn't have quite a good euro stable coin uh uh in place yet. And so to us, what does a great euro stable coin means? It needs to be obviously Europeanbased and regulated in Europe because of Mika. Um obviously reserves need to be at tier uh it need to be onetoone but they need to be really at tier one European banks. I mean, if you start to speak to even like a really highly respectable centralized exchange, the first thing they ask you, where is

where do you hold your reserves? If you hold them in a small bank, they just won't even work with you. Uh uh obviously it needs to be transparent and and audited, widely distributed, uh multi-chain, deep liquidity. I mean, all of this is, I guess, obvious to us in the room. And so, actually, that's what we did with the uh Europe. So we uh got a French license, French Mika license uh uh last year, end of the year. Uh the reserves were actually holding at Associated General, which is a one of the top 20 global custodian banks. Um we're audited by KPMG by now. We're listed basically on all major European exchanges. Um you know, whether it's

Kraken, Bit Faf, Bitst, Bit Panda, etc. Um we're on um already on a few key chains um and we're adding more and more uh every almost every month. But I think the really really key part is a payment infrastructure. So we do believe we have the best uh uh payment rails and integrations into uh fiat. There's a a number of players now who are building um so-called stable coin payment orchestrators where basically they take a different part of the payment value chain you know custody swift connectivity sepa connectivity uh credit uh car issuance and just plug these different uh operators via APIs we think

this is a great temporary solution it works until it doesn't because it's fragile right if any part of that you you don't control the whole stack, the whole value chain. Uh so what we're also building and we'll be actually deploying in the next couple of months uh is a a full payment stack uh fully controlled by us uh including connectivity to direct connection to SEPA, direct connection to Swift and relation direct relationship with the main uh card providers. Uh and yeah, this is just a quick overview of of the existing ecosystem.

We keep adding new partners uh literally every week. Uh so um these are just some of our main partners. Obviously if anyone is interested to work with us uh we're we're I'm here super happy to talk to you. And uh I guess with that uh it's probably time for questions. Thank you very much. [Applause] Um, how hard do you think is it going to be to offer D5 products like swapping lending to the end user in Europe? Do you think it's a hard from a regulation

standpoint? Is it hard to do? It's actually not particularly hard because um the real issue is passing the interest from the reserve that you make on the reserves directly onto consumers just simply for holding. Uh but actually if you look at DeFi the yield there is generated primarily not from the reserves right it's primarily from operations you know there could be also some marketing support from chains etc. So, so yeah. So, very short answer, legally it's not really a problem. And in fact, we will be uh we are deploying uh we're going to be deploying our uh main D5 product in a couple of weeks. Okay. Thank you. Sure.

Hi, I'm uh I'm Louis from Kao. Thank you for the talk today. Very interesting. I had a quick question. When you mentioned the CBDC's, some of the challenges were that it's uh on centralized rails. I believe was the was the wording. Um, and I I agree with you on this. Um, but my question is how do you think yourselves uh and I'm also going to include other issuers like Tether or Circle differentiate yourselves from a well centralized model uh because I know for example tether they blacklisted a bunch of USDTs and so there is still that centralization aspect which I believe is somewhat important but how do you differentiate yourself from that because you put it also in the in the challenges. So how are stable coins differ in that sense from CBDC's? Yeah.

Well, just yeah central because you mentioned centralization aspect which is a challenge. So what's the solution for this? Uh so for once we're running it on permissionless blockchains. Uh uh and obviously our very first one was Ethereum and we still consider it our uh main chain. Uh so I think that that's that's one difference. Um uh second one is that um we are building this very wide ecosystem of partners around us and also products including on DeFi. Uh this is going to be very hard to imagine uh European central bank doing right uh because I kind of am struggling to think of uh uh business development managers uh at uh ECB let alone uh bisdev

developers for defi. Uh so I think that's kind of uh like two examples uh uh of um of uh and we're not a state actor, right? So I think the the chance that uh and any kind of need for us to snoop on our customers, it's probably much lower uh than uh with the state actor. Thank you. So uh I'm also I'm now working in the crypto podcast, payment podcast. So last actually uh last week we just uh interviewed another bank in Luenberg and they also have their own euro uh stable coin Yuri and also I used to work as a journalist back in China.

So I deal with Chinese central banks and about the civility projects. I totally agree with you. I know from 2018 that they won't make it because of bureaucracy problem. So my question is you know do you think that stable coin is really good business? because you look at the the the circles financial statements you know that they need to share maybe 53% 56% to Coinbase other you know channels to help to promote their own stable coins and for euro stable coins I think maybe this it's even harder because there are not enough you know the uh scenarios or or channels for for people to use that one right so do you feel that it will be very difficult for the stable coins or euros to really to promote your your stable coin or you need to pay a lot of money you know try to uh to promote it on

other channels. Yeah. I mean, so you don't necessarily need to uh share your revenues forever, right? Uh um and actually if anybody's doubting the profitability of stable coins, look at Tedar. Uh uh and so um definitely stable coins can be a very profitable business. It is uh uh to a large extent a kind of game of large numbers. So once you actually start to have a very significant issuance then the revenues are quite high and you just make sure that you you need to make sure early on that you don't lock yourself into forever partnerships uh where you indeed would have to give up a lot of revenue in the future. But where we actually think most of the money is going to come

from and it's already very apparent from what we're doing you know even our own financials it's not going to be from the interest income it's going to be from the services that you're providing on top of that particularly uh payments and actually we have uh customers and we're actually now starting to scale some use cases even in uh in Europe uh with you know with in Euro Euro zone countries where you actually have corporations very much willing to pay uh for um financial services that we basically provide on top of the euro stable coin.

So I think you know uh payments is actually an incredibly profitable business um even if you just take a few bips uh from each um each transaction uh it's again it's a number it's a game of very large numbers. Very last question. Hi Kristoff here. I have two related questions here. Um, one is how do you feel about Wero, the initiative that's coming out in sort of uh European banks to make it really easy to um to make basically instant transfers um without relying on Americanowned payment processors like Visa, Mastercard and such? And um and related question is like how do you think the retail retail

payment experience um differs when it comes to WOR and something like using Euro stable coins right if there is a WOO is there a need for Euro stable coins for retail payments well um let me actually move us back 10 or 15 years when all of these challenge on NEO banks were starting right and I've heard a number of large bank leaders saying this is never going to work they just have an internet interface case uh how can they compete with us right like there's no real technological let alone financial advantage and you know you move forward 101 15 years and you look at the really large particular retail players and you have the revolutes and 26 so I think this shows that large banks really

struggle when it comes to technological innovation there was a similar initiative there still is ongoing similar initiative in the US didn't really pan out very well uh and I think The problem with a do with a bankr run stable coin is that either you need to have every single bank on board kind of like swift uh or if you don't and if you have banks that have their own euro stable coins and there's already a couple of banks uh that have their own euro stable coins then the problem you run into is that a bank a will be very hesitant actually will not want to use a euro stable coin which is uh issued by a bank B. So uh um I simply do not believe that you'll be able to get all the banks uh European banks or basically

overwhelming majority on a single uh shared kind of issued euro stable coin. uh and I'm also a big skeptic as you could have heard uh about the ability of of large banks and particularly large consorcia uh uh to actually develop uh and be competitive in an extremely fastmoving industry such as the uh stable coins and crypto in general. Thank you.