Removing the Complex from Crypto with Vanessa Grellet of Aglaé Ventures

Vanessa 00:00:00: Account abstraction is really exciting and I think people don't get how much how transformational it's going to be because it's quite technical and they don't understand the implications.

Jeremy - 00:00:15: Hi. I'm Jeremy Allaire, and this is the Money Movement. I'm here in Paris, France, for Paris Blockchain Week, as well as Circle Forum Paris, and really excited to host episodes here. I'm joined today by managing partner of Aglae Ventures, Vanessa Grellet. Welcome, Vanessa.

Vanessa - 00:00:33: Thank you. Excited to be here.

Jeremy - 00:00:34: Yeah. There's so much to talk about. Your own history is maybe a good place to start. You've been active in the crypto and Web three and digital asset world for a long time, but more broadly in financial markets and now obviously investing and leading both in entrepreneurship and social entrepreneurship. And so I would love if you could just frame a little bit kind of your journey to where you are today.

Vanessa - 00:01:03: Yeah, sure. I started in financial services, traditional financial services. I worked for about ten years at the New York Stock Exchange. At an exciting time when we were trying to merge with other exchanges, there was a lot of regulatory change happening. That Frank happened, et cetera. And then we got acquired by Ice markets. And I thought, you know what, I'm going to broaden my horizon and do something else in finance. And I was hanging around the tech meetups in New York and that's where I discovered Bitcoin and thought, han, this is really interesting, but I don't think I got it. At the time, there was a lot of it was in 2013, it was very nations. And then I had the opportunity to meet Joe Lubin, who founded Consensus and co founded Ethereum and became one of the first employees there. So moving on from traditional finance, where I was a lot involved in tech, it was a natural shift for me to move to this platform, which we didn't know exactly what it was going to become.

Jeremy - 00:02:17: Like a collective.

Vanessa - 00:02:18: Exactly. I mean, there were 20 people at Consensus and an idea, and it's fascinating to see after six years, how much traction Ethereum got and became sort of the dominant l one in the space and how we got there.

Jeremy - 00:02:39: It's been incredible to watch. As you know, our original vision for Circle was that we could build a protocol for dollars on the Internet and that could be programmable and kind of like this base layer of these digital fiat. And it wasn't possible until Ethereum emerged. And obviously, having a digital asset like USDC and a protocol such as that, combined with what Ethereum offers, has unlocked huge amounts over the past, let's call it five years. But it feels like we're still early. Right. The number of, say, active wallets using Stablecoins is maybe in the tens of millions. Total number of crypto users, maybe 100, 200 somewhere, these kinds of numbers. And there's been a lot of focus on what is it going to take to bring this to the mainstream. 

We talk a lot about kind of moving from speculative value to utility value. It's a big, big theme for us as a company and really around USDC as well. But there have been some breakthroughs, actually, at East Denver just a couple of weeks ago around how to make the whole experience of using this safer and easier for the average person. Jane Doe, John Doe, you know, the proverbial grandmother who wants to use use this. So in particular, this, you know, Ethereum Foundation published the account abstraction layer. And I'm I'm curious to hear if, you know, what you think about those improvements and what they kind of unlock and what the world might look like as this next level of Ethereum kind of comes online.

Vanessa - 00:04:23: Yeah, account abstraction is really exciting, and I think people don't get how transformational it's going to be because it's quite technical and they don't understand the implications. So we see a lot of projects on wallets trying to do social wallets, trying to have this experience, this Web two experience on wallets, but all this will be trumped, in my view, by account abstraction. So right now, we're very cautious when we look at wallet projects because we want to wait until that comes out to see what is going to be the experience for users. That being said, I think there's the UX experience that's a barrier to entry, but it's also an understanding of crypto and, for example, understanding USDC, that it's the same as a dollar, that you can transfer it immediately at no cost. That is a gap that we need to bridge, because I don't think the general public has that understanding and how easy it is. I mean, I tried to transfer €200 to a French bank account. It cost me $50. And so I was like, can I send you in two weeks? People don't understand how powerful this is, and you have to make it a product, not a technology, because we've been talking technology and that it's decentralized, that it's things like that. People don't care.

Jeremy - 00:06:01: They don't care.

Vanessa - 00:06:01: Right. And so I think the way to really move to that next level of adoption is, one the use of UX to make it as a product that also financial institutions can use, because right now it's only in the crypto sphere. It's for traders, and it's for people who just want to send money across borders. And there's been some L ones who have attempted to go that route. I'm thinking of Silo and others who are trying to make this experience easier, but it hasn't gained the traction that it should have gained. Right. And then Bitcoin is too volatile for the general public and is putting, obviously, people who are not investors at risk of not seeing their money anymore totally.

Jeremy - 00:07:01: With account abstraction. What do you think that that unlocks in terms of simplicity?

Vanessa - 00:07:09: Yeah. So I'll give you, I think, for industries like gaming, that's going to be a game changer. No fancy standard because gamers are not focused on trading, et cetera. They want to buy a shield or a sword and they want to have the same experience as they already have. So having that experience in a safe way I think will be critical. And I see some projects who are already trying to have an account obstruction type of experience and that they're going to transfer once account obstruction becomes real. 

So I think the gaming industry will benefit a lot if intermediaries and banks are able to transact in those instruments, whether it's USDC or others, I think access to your wallet, a simple wallet, is going to be amazing. And then of course, in NFTs, I think that's going to be the big hurdle that's going to unlock a lot of things. NFTs, not only as collectibles or digital arts that you collect, but also NFTs as loyalty points, reward points, tickets, et cetera. Exactly. You have your apple wallet with your wallet with the same access, maybe with visual recognition, et cetera, but it's still yours, it's still secure and more secure than the current situations.

Jeremy - 00:08:50: Yeah, I'm excited about some of the things that we unlocked. I mean, I think the whole concept of needing to have a private key, have a seed phrase, worry about what if I lose this? What if I forget this? It's like terrifying to people and being able to have concepts like social recovery where you have individuals and it's not just tied to one proprietary wallet. It's sort of something that could be used more generally, could be used for.

Vanessa - 00:09:21: Corporations, could be used for families, could be used in inheritance and things like that, and make just the system really smooth.

Jeremy - 00:09:29: Yeah, there's a lot of exciting stuff to come there and we're working on infrastructure.

Vanessa - 00:09:37: What does it mean for USDC account extraction?

Jeremy - 00:09:40: Well, I think for us, we just want to see more utility for USDC, and more utility means basically more wallets out in the world that can support it. And whether those are individual wallets or household wallets or business wallets, we need to see more wallets that support it and can light up that utility value. In order to light up the utility value, we need things like scalable layer twos. We're seeing that happen, but we need the way in which people come online into a wallet to be easier. The threshold is too high. A lot of the user experience design on wallets is still really focused on swapping and trading tokens and staking for yields and so on. It's still investment focused and we really think that account abstraction and NFT really will get us to maybe these are new kinds of digital wallet apps that are just designed to be more mainstream. They're designed with an end user that wants to store, send, receive value, that wants to store and hold various types of credentials whether they're identity credentials or entitlements from NFTs or digital property and kind of connecting those things together. 

So I feel like moving away from digital wallet apps that are basically organized around speculation and moving towards digital wallet apps that are more focused on utility. All of that. Many of the things that account abstraction provides start to allow those experiences to be more seamless for people. And so we want to see that proliferate and we'll contribute to that with our own open wallet, SDKs, things like that as well.

Vanessa - 00:11:28: Yeah, we really think wallets are the new identity or new digital identity, and people need to be conscious that their information is public in that sense and that people can use it to engage, whether it be commercially or otherwise. But you create this persona and this digital footprint. That is a new concept, because I think as you oppose it to privacy and the documents that you hold of who you are, I think people are much especially the younger generations are much more comfortable in really showing who they are and showing what they have, which NFTs they own, et cetera. And so I think that's going to unlock also a lot of possibilities and new business ideas in commerce.

Jeremy - 00:12:25: Yeah, for sure. Sort of a lot of the historical ideas of sort of social commerce and new engagement methods and all these things. A lot of that's been designed on kind of closed loop infrastructures, proprietary infrastructures, and sort of what's happening with digital tokens and open interoperable public internet infrastructure like this. It really can unlock a lot of those things. One of the other themes I wanted to touch on, and you've kind of touched on it in a couple of places already, is really around that leap into the mainstream. And one of the barriers is when people hear crypto, it's highly extreme reactions, right? It depends on your vantage point. There's some in the middle that are less extreme, but crypto has a brand branding problem and it's also a technology problem as well. Right. 

We talked about basically it's too complex and difficult and scary for people. The sort of Web3 in some ways has been appropriated as a phrase to kind of not make this about crypto, but to make this about this next generation internet experience. When you think about overcoming those perception gaps and getting households and firms and people and others really comfortable, do we need a shift in how we talk about this and what all of this is?

Vanessa - 00:14:10: I think the conversation around crypto has been skewed around trading and investments also due to the regulation framework. I mean, the fact that the regulator stepped in so much for such a small asset is quite extraordinary, right. And so there's this constant reminder that this could be an investment product, et cetera. So you should stay away, and that's not great. So that's one thing that we need to shift. I think if you think about AI and Chat GPT when they announced their products, I mean, everyone knows about AI, but ChatGPT made it concrete for people. Right. It's a product, it's easy. They don't need to know about the algorithm behind. They just know that this incredible product pools information and gives them something that they're looking for. And so I think we need to also think of crypto like that. 

Why is it so important that people are looking for that? Or is it people building who are so excited about the tech that they want to push it onto people? And this idea that you don't want to be the piggyback of the metas of this world and you don't want to be the product instead of being the client, I think is a narrative that may not resonate always with the general public. So maybe it's not worth continuing to go that route and just make it a super easy app experience, exciting with new opportunities that are not possible before. And I think transfer of value instantaneously and very cheaply is kind of a great value proposition. Sure, yeah, I'm thinking about it.

Jeremy - 00:16:16: That's consistent with what I'm thinking as well. I think we're really close on things like the ability to download a digital wallet onboard into it without needing to remember a seed phrase. Just by tagging a couple of people who can kind of use their linked identities on a major internet platform to create that kind of security and backup. And then being able to receive something like USDC, and then be able to send and receive it directly without needing to acquire any east, being able to pay if there are fees, pay them in USDC itself, or have a merchant or a counterparty you're interacting with actually take on and pay the fees on your behalf.

Vanessa - 00:17:01: Exactly.

Jeremy - 00:17:03: And do that and seamlessly move between kind of layer one and layer two EVMs if you can do those, they don't need to know any of that. They're just like there's underlying settlement. All I know is I got some digital dollars I can send and receive them.

Vanessa - 00:17:18: And I know it's secure.

Jeremy - 00:17:19: I know it's secure. We're right on the cusp of that. We're situated in early 2023 for the evergreen content predictions. But I think over the next six to nine months we're going to see those user experiences light up.

Vanessa - 00:17:37: I think the other maybe barrier is sort of the app stores and that experience. I think I know a lot of builders who are just not building apps because they know it's going to be an issue with the app store provider. It's going to be interesting right this.

Jeremy - 00:18:01: Week of Microsoft putting Web3 wild infrastructure in edge browser in their core browser.

Vanessa - 00:18:08: I think that's great.

Jeremy - 00:18:09: Put pressure on the other internet platforms to do that too.

Vanessa - 00:18:14: Yeah, so I worked very closely, we worked very closely with Microsoft over the years. They were an initial supporter of consensus and they have been making a lot of headways in Web3, whether it's their investments or even internally, which may not always be public, but they are very much at the forefront of that. And I think integrating this in as many browsers as possible is really the solution.

Jeremy - 00:18:47: That's the next big hurdle, right? That's how we get to billions of people. One of the other kind of pieces that I know you've thought about it too, is sort of TradFi engagement, real world assets tokenization. This is the theme that lots of people want to talk about. And what I like to say is USDC is sort of the best known real world asset that's been tokenized and that's a necessary precondition to a lot of other things. But where do you see that now, whether it be startup activity or startups working with established firms, what are you seeing there? Because that seems like obviously the unlock on that is pretty massive if we get it right.

Vanessa - 00:19:35: Yeah, so it's interesting, at every financial crisis or crisis in the crypto industry, the Securitization comes back, we need real world use cases. And so that is like sort of what people default to when they're wondering if crypto is real. But I think there's some interesting opportunities. I think before, a couple of years ago, it was an interesting idea and people wanted to achieve that, but the infrastructure is not there. So in order to have real world assets trade and be tokenized, you need the infrastructure in the back end to exist. It doesn't exist right now. Broker dealers are not equipped to deal with security tokens and so if they're deemed securities right. And so that's a big issue. I really like securitized. The founder is amazing. He's been here for years. He's starting to tokenize asset management firms. So that's interesting and that's a new experience for the investors, but it doesn't really unlock everything. And I think there's two ways of seeing how real world assets can be traded and tokenized. One is tokenization. So you take your asset, you divide it up and that's the Token you can trade. Or the other way, which may be a quicker way, is take the asset, you custody it and then make the representation and then people can trade, et cetera. 

So I think that's two different rails, right? Because one is like the custodians that are going to do the KYC and then take care of the digital experience. The other way is you have to do the full digital crypto tokenization experience and the regulation implications of that. But I do think that in three to four years we'll see more projects. We're looking at a project that has been doing real estate tokenization for years. And now it used to have only individual investors who would buy parts of individual houses, but now it's getting bigger. So I think we'll see that. But you really need a combination of crypto specialist and then subject matter specialist in order to really create a product again that is compelling. And what's the additive value of creating almost sometimes the same asset class under a token, right, yeah, exactly.

Jeremy - 00:22:29: I mean, a lot of that has always tied into a big benefit of digital assets is that they trade 24/7, they're globally available, there's exchanges around the world, individuals can participate in it. Even in the DeFI world, it's sort of this very open access. Right. The question sort of becomes, well, if you're going to have a tokenized treasury bill fund or you're going to have a tokenized real estate investment, whatever that is, you're still subject to securities laws and you're still subject to market and exchange laws. I think the key is just getting enough jurisdictions that create really clear rules around how you can offer these and the kind of disclosure requirements and other.

Vanessa - 00:23:21: Things and how can people custody them.

Jeremy - 00:23:24: And how can people custody them and recourse and all those things. Hopefully these are very solvable problems. We're investing a lot in direct custody infrastructure for institutions as well and giving institutions the comfort and control structures to be able to manage a wide array of digital assets. Yeah, well, it's interesting. We'll see what emerges there.

Vanessa - 00:23:53:

Yeah, we looked at a really interesting project that wanted to basically take us treasuries custody them and give access to DeFi rails to people who are using the loan based on the treasury collateral. So don't be things like that. And I think you need both.

Jeremy - 00:24:14: Yeah, for sure. I'm going to pivot a little bit to your social impact work and kind of the social impact coalition. Maybe just talk a little bit about the founding, what the organization is focused on right now. As you may know, Circle has Circle Impact, which is our social impact investments and efforts, and that spans digital financial literacy, financial inclusion issues, humanitarian aid issues, kind of helping with under banked issues. There's a lot we care about there and very excited to learn about what you're accomplishing with the coalition.

Vanessa - 00:24:59: Yeah, the coalition was initially a project that was incubated at consensus. I mean, the ethos of consensus earlier on was really about making that change, making blockchain available to everyone. And we had identified a few pillars in the social impact space, whether it's environment, financial inclusion, or others, and it's been a very tough thing to sell. I find it very surprising. But actually the way the crypto world moved, I would say starting with Defy summer has gone full on investment.

Jeremy - 00:25:47: Right.

Vanessa - 00:25:47: Ponziville. I'm not going to say that, but that was kind of in the back burner. And also the issue is that it's so difficult if you think about financial inclusion and reaching the last mile and all the infrastructure that needs to come to bear in order to achieve that, it's just really hard. And people are less keen on financing that they might do that based on a charity perspective. But in terms of straight investment, I see that a lot of these projects are getting less traction because they have less commercial appeal. So what we're doing right now is pretty exciting. I shouldn't announce it here, but we're going to pivot the organization towards climate change and merge with another big organization. 

So we're going to focus really on that in the coming years with the idea that, of course blockchain is energy intensive, so we need to find ways to mitigate that. But also they are the Paris agreements and people are trying to track carbon, trying to offset the carbon, et cetera, and they need the tools to do that. So I think that's a pretty exciting area of developments for sure.

Jeremy - 00:27:19: And I think climate finance and kind of various forms of micro lending and other models for climate finance could benefit from using on chain credit markets and other things like that. We're really excited about that category emerging as well. And on the comment about the kind of, say, financial inclusion piece, we announced a partnership with the UN high Commission for Refugees and really trying to solve this issue of diaspora, people who've been unbanked basically, and whose lives are upside down. And we've been rolling out a program and done that in partnership with Danelle Dixon and the Stellar team, where basically they're able to do rapid disbursements of USDC out to digital wallets. The users can hold USDC, transact USDC, but then they actually can go to any MoneyGram location and they can redeem USDC or cash locally. So the last mile problem is solved. The Usability not worrying about a volatile crypto asset, and then it all can be automated really well. 

And so that's a framework that we hope to repeat with many international aid and humanitarian aid organizations. So I think even things like we talked about earlier account abstraction and simplified digital wallets and the ability to pay fees using USDC, et cetera, all those are going to make it possible. So if you've got someone who's got a smartphone software enabled device, they could actually participate and then use it directly. So hopefully we'll make more progress on all of that as well. Yeah, so I think the sort of social impact agenda is one that it seems like it's vital for this industry to grow and develop and it gets to the real world utility parts of this.

Vanessa - 00:29:34: Absolutely. And I think governments are really focused on that. They really want to see a social impact of this currency and not just trading. I worked with the World Economic Forum. We drafted actually a report on the social impact and the donations and charities, et cetera. So there's a lot of things that can be done. I think one of the other hurdles is obviously the users, the technology, but also people who are creating these programs or the agency, they're not technologists and so there's a big education piece around that. And there's a lot of maybe less serious companies also that go and see them, and so they end up purchasing these solutions which are not optimum. So it's an education process, too. And NGOs, charities, they don't move as quickly as companies, and so they are very careful when they try to implements these solutions because there could be some negative impact. Too right, yeah.

Jeremy - 00:30:52: The risk surface area is challenging for everyone in this. Maybe just turning gears to your venture work and the kind of thesis you have, and what are some of the areas from an innovation perspective that you're most focused on? I think, as we were remarking when you came in, there's sort of a lot of pessimism out there in the world with these various micro financial crises and a lot of anxiety, but we're maybe coming into a crypto spring. I'm not really sure. But what are you focused on? What are the areas of innovation that you're most excited about?

Vanessa - 00:31:32: So, no anxiety is on my side. Pretty bullish on the ecosystem. I mean, if you've been at East Denver, you see the level of engagement, of the devs, the numbers. It's really something different. And I think we're pretty generalist. When we discussed our thesis with Jordan, we sort of looked at what was going on and different dynamics between the L ones, the L two S, et cetera. And so we quickly pivoted to sort of L two scalability ZK infrastructure. So that's a big theme around what we do. The other part is really the creator economy, and my LP is the LVMH family. And so if there's things that make also sense for the group, we try to make connections there. We're pretty excited about the NFT infrastructure, NFT financialization, specialized NFT marketplaces tools that bridge the gap between web two and Web3 in terms of user experience. We're investing in Web3 CRM, for example, things like that. Community engagement, that's the second part. And then the third part is really CFI and DeFi. And so really, again, bridging the gap between traditional finance and DeFi. And so it can be DeFi applications, but it can also be core infrastructure like custody, wallets, et cetera, which we've seen a lot of recently and we're continuing to deploy against because you need that infrastructure. Right.

Jeremy - 00:33:25: That is awesome. I mean, what you've just described, every single one of those are all about the next level of making this work, right? The next level of making it work at a technical level, at a user experience level, at a use case level. So it's really awesome. You seem to be tuned into a lot of the most important themes.

Vanessa - 00:33:46: I hope so.

Jeremy - 00:33:48: Well, Vanessa, it's been great to have you on the Money movement. Thank you so much for joining me here in Paris.

Vanessa - 00:33:46: Yes, thank you.