The Money Movement / Episode 13

Episode 13

Banking Meets Stablecoins

Summary & Key Takeaways

Full Transcript

This week on the Money Movement we'll be talking about how banking is meeting stablecoins. This past week brought big news from the US Treasury OCC who provided fresh guidelines for banks, allowing for them to hold and custody crypto assets, including stablecoins. This is a major signal that traditional financial institutions are going to be getting into the crypto and stablecoin space. At Circle, we’re seeing accelerated interest from neobanks, fintechs and global banks on adopting digital currency as a payment and settlement medium, and expect this to be a major theme in the coming year.

Jeremy Allaire: [00:12:44] Hello, I'm Jeremy Allaire and welcome to The Money Movement, a show where we explore the issues and ideas driving this brave new world of digital currency and blockchains. So this week we're going to be we're going to be talking about banking meets Stablecoins. But just to set the context a little bit on this, you know, clearly a lot of the impetus for cryptocurrency, the broader digital currency movement, this money movement, as we say, is really anchored in the idea that we're building a new kind of financial system, a more open, more inclusive, more global Internet based financial system. [00:13:27][43.0]

Jeremy Allaire: [00:13:28] And a lot of times, you know, certainly from the early origins of this industry and even today, this is often positioned as, you know, crypto and blockchains digital currency is threatening to banks that this is anti bank in some way. [00:13:45][17.3]

Jeremy Allaire: [00:13:46] And I think what we're seeing and what we're learning is that fundamental innovations that are happening in the space, the use of public blockchains as a secure transaction, processing and settlement infrastructure, the rise, the incredibly rapid rise of innovations such as Stablecoins may actually turn out to be the ultimate path to banks using crypto. We recently saw guidelines from the national banking regulator in the United States which offered that federal banks, national banks in the United States could hold in custody crypto on behalf on behalf of customers. And we wonder if this is a harbinger of things to come. [00:14:34][48.1]

Jeremy Allaire: [00:14:35] Meanwhile, at Circle ourselves, we're seeing accelerated interest from NEO banks, challenger banks, fin techs, global banks, lots of firms that want to use things like USDC as a payment rail and as a as an infrastructure, which is very, very exciting. And then obviously outside of payments, which is a lot of what people often think about when they think about things like Stablecoins, what about the real business of banks, so to speak, which is borrowing and lending? [00:15:07][31.9]

Jeremy Allaire: [00:15:08] We're also seeing a very rapidly evolving stablecoins capital markets and that's happening through D-FI or decentralized finance and C-FI or centralized finance models, where billions of dollars of loans and borrowing in Stablecoins is taking place, and that's rising at an incredibly fast rate. So with this theme of banks, meet Stablecoins. We're going to be joined by several, I think, excellent guests who are at the frontlines of this convergence of banking stablecoins. So joining us now are Oliver von Landsburg Sadie, the founder and CEO of BCB Group, a European neo bank that is embracing Stablecoins as a core payment medium. And Julien Hawle, the head of Blockchains lab at Bank Frick and Company A.G.. Similarly, a fast growing European bank that has adopted USDC in their broader digital asset brokerage platform. Welcome. Oliver and Julien. [00:16:07][59.3]

Oliver von Landsberg-Sadie: [00:16:13] OK, thanks very much, Jeremy. Hi. That intro. It's great to join you on this conversation, Stablecoins. An extremely exciting part of the space. And I look forward to the conversation. [00:16:27][14.5]

Jeremy Allaire: [00:16:28] Excellent. Welcome, Julian. [00:16:30][1.0]

Julien Hawle: [00:16:30] Nice to see you. Hi, Jeremy. Thanks for having me. Yes, I am. And very looking forward to the show. [00:16:36][5.5]

Jeremy Allaire: [00:16:36] Excellent. Well, let let let's get started. So, Julien, I actually want to start with a little bit about Bank Frick. I actually I think I met your founder in Zurich many years ago, as you were literally, I think, quite Denovo at the time. And you've really been a tremendous example of a Challenger bank that is built for this new world, built with the digital currency and blockchains ecosystem in mind. Maybe you could just share a little bit of the Bank Frick story first and then and then I want to maybe also talk a bit about the role of USDC today and where you see it going. But let's just start with a little bit of the story. [00:17:15][38.7]

Julien Hawle: [00:17:16] Definitely. I mean, Bank Frick started about twenty two years ago. It's an original bank from the traditional world. So a lot of focus on the traditional banking private banking sector. But with more competition, at least in Stein and Bank fixed, started to diversify its business model first went into acquiring and processing of credit card payments. Then e-commerce. And with that line of business, Blockchains was first the logical next step. We started in 2016 two to offer services to blockchains companies. However, traditional products company, bank accounts, payment accounts and so on. And then soon realized that just with bank accounts, the show was not really done. There needs to be a lot broader range of offerings, especially in the way of custody and check ins. A lot of institutions needs professional counterparts where the bank as a regulated bank can step in and facilitate this. And from that step forward, we continuously develop new products, narrowing down the customer groups. So we have by today specialized products for exchanges, for brokers, but also in regards to token offering minors and see that. Yeah, we went pretty well with serving specific needs of or customers that have a very clear problem which can be solved with a yeah, with a banking. [00:18:46][90.0]

Jeremy Allaire: [00:18:47] That's that's great. I mean, I think you're obviously an example of a bank that has really leaned in into this space and into the digital assets space. You know, I think you made news recently and obviously we're very aware of it. But, you know, this sort of step towards adopting and supporting Stablecoins as a bank. And I think, you know, I think that's a that's a bigger theme. It's one of the key things that we're talking about here today. But maybe just talk about the first steps that you've taken with USDC and and then maybe share a little bit about your thoughts on on where you see that going. Where do you see that value? [00:19:25][38.0]

Julien Hawle: [00:19:27] Definitely. S So for us, we either select new crypto assets on customer demands or if we see an efficiency gain or some some new products from our site. The U.S. Dollar Coin we needed will be for our product offering, which we plan to roll out in the future. We need to to use the stablecoins. It just makes a lot of sense. And there were different stablecoins out there for us. Only, of course, regulated ones that whether banking is audited, came into question and US Dollar Coin was the way to go for us. We integrated into our custody infrastructure as well as trading offering. This is the normal step, how we roll out new currencies. We included into custody trading and then from there on kind of on the second level, built out specific products. And the roadmap for USDC looks looks pretty nice. I mean, maybe two highlighted the ambition which we have for where we want to go is pretty much to have the same offering which we currently have for a euro or U.S. dollar fiat currency to offer that same thing for U.S. dollar, for the U.S. dollar. [00:20:32][65.7]

Jeremy Allaire: [00:20:34] That's awesome. We're gonna come back to some of the themes that you touched on that maybe turning to you, Oliver, obviously. Likewise. I mean, you're you're a rapidly growing neo bank. You're serving these digital asset markets. Give us a little bit about your journey. And then you guys have been doing some stuff recently where, you know, sort of USDC as a payment medium has sort of become core. And we'd love to hear you talk about what role it plays and where you think it's going as well. But maybe just start again with a little bit of the journey. [00:21:05][31.2]

Oliver von Landsberg-Sadie: [00:21:06] Absolutely. Thank you for that, Jeremy. And Julianna was great to hear. You know how that path evolved and what I observe here is a kind of a convergence to the center. So where you bank Frick is a great example of a bank who has come from more traditional routes and then embraced the Blockchains business and better products and services around that. We've kind of come at it from the opposite directions in 2017 when we open shop. Our primary business was in secondary markets, buying and selling crypto on behalf of customers. First as a broker and then what was the primary model. And then and then kind of like a moat was the market make model. But it wasn't trying to move money around, especially dollars, which was super difficult at first, that it became clear that we need to be part of the solution to moving money at scale. So about 18 months ago, we were you know, we kind of added the second critical vertical to our product line, which is this banking service offering transaction banking for where you can, European market makers, exchanges, et cetera, just to clear those pathways for moving money. You know, we've seen the Stablecoins evolution and how that really facilitated trading at scale in the past. And it's it's become extremely clear, I think, to anybody in this market that Stablecoins are the future of money. There is and now is a great opportunity to get in. And one like one particularly vivid illustration of this is I mean, I'm looking at your latest USDC in circulation at one point, one billion. Now, you know, that sounds like a large number to some, but it's it's like the foothill of the mountain. I'm looking at the money markets, which which there was like a trillion dollars in issuance alone. Imagine the shift today from money market instruments denominated in US D.C. towards money market interest. It's enormous. We're at the precipice of a massive revolution. [00:23:20][133.6]

Jeremy Allaire: [00:23:21] We certainly believe so as well. That's great. So maybe maybe we can just maybe shift to some of the specific themes. I mean, I think when we talk about, you know what, you know, if I if I'm a bank or I'm a fintech or a near bank, you know, what are the advantages of Stablecoins? You know, what are they going to get? How is this going to be beneficial to their business customers, to their end users? There's lots of benefits that we talk about, global cross-border cost, speed, etc. But I'd love to hear you each talk about, you know, as as professionals that are in the banking industry have been in this infrastructure for a long time. You know, why is this so superior? Why is this going to grow so fast? [00:24:06][44.7]

Julien Hawle: [00:24:09] Yes. Maybe I start. So when we look at the traditional financial world. We are very limited in regards to opening hours. So, for example, operates from 9:00 to 5:00. We have a lot of public holidays in Liechtenstein, but we have, on the other hand, the Blockchains world, which is run 24/7. And so at the end of the day, I firmly believe that we are developing into a digital 24/7 basis society. Also the financial market. So for us, it it helps to bridge the gap between the traditional 9 - 5 system and then the 24/7 Blockchains world where we can use the stablecoins, which is not really volatile in the sense to to facilitate the payments, in the sense to bridge the gap where our traditional banks are not operating at all. [00:25:00][51.7]

Oliver von Landsberg-Sadie: [00:25:02] I absolutely agree with that. And so I'm going to take this from the point of view of and from what are the risks that are perceived in the Stablecoins market and say last year, you must have seen around this time last year to be B.I.S. (Bank for International Settlements), published this paper on the risk of Stablecoins. And literally all of the risks that they listed are actually advantages that Stablecoins can offer. So they're talking about legal sense, anti governance, AML, market integrity, data privacy, tax compliance. All of these things are actually way more easy when you have a transparent, blockchains based system of money. They also talk about, you know, the impact on monetary policy, on financial stability and, you know, fair competition. I think all of these risks which were highlighted in this report are all of the assets that have done the stablecoins a massive favor if you actually read the report properly. [00:26:02][60.0]

Jeremy Allaire: [00:26:03] Yeah, yeah. I mean, and yeah, I obviously we believe it's a it's a superior form of money and it's ultimately something that will, you know, not just for the efficiency and so on, but that this is actually a more transparent, more secure, more auditable mechanism ultimately as a full reserve model. It has more underlying kind of integrity vis a vis safety and soundness than commercial banking money does in many ways. And, you know, it has it solves some of the complexity in cross-border payments of, you know, the time delays, the costs, et cetera. It sort of really allows us to move, move at Internet speed as well. [00:26:48][44.8]

Jeremy Allaire: [00:26:50] You know, I guess I'm related to that and and sort of thinking about the move of banks into this space. More banks wanting to use these rails, support these money formats. You know, a lot of banks make money charging fees, sometimes exorbitant fees for moving value around. But Stablecoins, you know, make money, behave more like content and data on the Internet. The big question is this. Is this technology or stablecoins going to do payments and the payments business model, what the Internet did to content and communications and the underlying business models that were were relied upon by the incumbents there. [00:27:35][45.3]

Oliver von Landsberg-Sadie: [00:27:38] Good question. [00:27:38][0.2]

Julien Hawle: [00:27:40] Yes. I firmly believe so. I think that the technology at the end of the day, the blockchains is the core piece here, and we'll see an infrastructure shift, which will definitely turn the payment industry upside down. I mean, we saw a lot of technical innovation already over the last year without using a blockchain. I think once we shift on there, we'll see a complete upside down payment world where international cross-border payments are done pretty much instantly or within seconds for nearly no money. I think the whole remittance business model is going to be very turned around because that is still a service which is from a consumer perspective, very expensive and unique. [00:28:26][46.6]

Jeremy Allaire: [00:28:27] Even retail payments and domestic payments. Right. If you get a Stablecoins that you can can on these third generation blockchains can handle very high throughput at a fraction of a penny to two to transact and settle. That's got to be a threat to, you know, people who help coffee, make coffee shops, collect payments, too. So it kind of goes all the way there. But, Oliver, what are your thoughts on this kind of transformation? [00:28:52][24.8]

Oliver von Landsberg-Sadie: [00:28:54] Definitely a.. The efficiency argument. There's also the information argument. You can't put a Post-it note on a one hundred dollar bill and be sure that the information is going to reach the other side. But, you know, when you've got this new breed of technology, this is a new possibility and you can put your real well naegele contract on that. And so I think getting enriching money, if you'll excuse the pun, is is the you know, it is. This is the possibilities that are within that we haven't even begun to explore. [00:29:30][36.4]

Jeremy Allaire: [00:29:31] Yeah. And it's actually great. It's a great Segway to something I want to talk with you guys about, which is, you know, digital securities, the idea of financial contracts that are written in code that interact with with digital cash and stablecoins this whole promise. It's massive. You know, banks, obviously, and brokerage firms and others. Right. They're really very heavily involved in the securities space, issuing them, costing them, lending them, selling them all these all these different things. You know, what's the role of Stablecoins going to be in the future of financial contracts and of digital securities? [00:30:13][42.2]

Julien Hawle: [00:30:15] Yeah, I think this was one of the large arguments why we integrated U.S. dollar, obviously, especially for digital securities. On the one hand, investing in them, trading them through a stablecoins, but then also corporate some dividends payments. It makes so much more sense from an efficiency perspective. To use an stablecoins like the U.S. dollar coin for this use case instead of relying on the old Fiat was like Swift or Zoubi in Europe. [00:30:42][27.0]

Oliver von Landsberg-Sadie: [00:30:43] Yeah, I think there's a lot of evolution ahead of us. That's hard to foresee. We embrace obviously, clearly this, you know, the whole stablecoins movement. But to looking at the smart contract in a market in general, you know, when, if and when that securities took took nice securities market takes off. You know what we're doing BCB to future proof for that scenario is, is it? So we're integrated with this third party criminal dazzled by this lab called Laptops and seven. It's based on kohta and it's super efficient at having these smart contracts. This is one of several initiatives that we have to, you know, to make sure that we are ready for what this looks like. You know, obviously within that family is USDC and and the Blink network that we've just released last week, which is this instant settlement network. [00:31:41][58.0]

Jeremy Allaire: [00:31:43] Yeah, but it's a really exciting space. In fact, I just saw an announcement today. There's an Internet company that is paying dividends in in USDC, which had done a digital security using using smart contracts. [00:31:59][16.7]

Jeremy Allaire: [00:32:00] And I was in a discussion today with a company without getting into names that's that's in the real estate market doing tokenized, real estate and really Stablecoins are going to be critical to how people are able to purchase essentially shares in real estate and also get paid out the equivalent of a note on a continuous basis. These kinds of innovations, tokenization, real what assets? I know we've talked about them for years now, really since 2017 in a significant way. But it seems like now that the infrastructure is really getting there, regulatory clarity is coming into. Face Stablecoins are are kicking into gear in in as a settlement medium in some of these as well, which actually touches on another theme, which, you know, both of you are a regulated financial institutions under a number of different regimes. There's a lot going on there. The FSB is working on its, you know, its policy recommendations. And it looks like the EU is going to put forward, at least for for discussion and then ultimately for legislative initiative e wide kind of crypto policy that'll be inclusive of Stablecoins. And the US National Banking Regulator is is issuing guidance to open this up to the financial sector as we speak. Where do you see the regulatory picture for Stablecoins as sort of this crypto generally, but specifically the use of these types of digital cash instruments and the infrastructure that we are building on? [00:33:37][97.3]

Julien Hawle: [00:33:41] I think it's it's depending a little bit on a geographic perspective. I think we here in Europe. We are a fan of regulation. We we like to have that regulatory regulatory certainty compared to other continents. I think where regulatory is. Yeah. Rather, on the second end where you rather try and then see how it works. We enlist in some we have since the beginning of this year our blockchains back in law. So Liechtenstein is a completely regulated jurisdiction when it comes to crypto currencies, digital securities and so on. I think for a broader adepts, especially with financial institutions, I'm talking in the context of Europe, a clear regulatory guidance, clear regulatory framework is one of the most important things. [00:34:26][45.0]

Jeremy Allaire: [00:34:27] Yeah. [00:34:27][0.0]

Oliver von Landsberg-Sadie: [00:34:30] In the U.K., it's super cool to see the FCA embracing crypto finally with the crypto assets regulation, which which looks at it from an AML point of view. Sooner or later, the FCA was going to look at this from a market efficiency point of view. And this is where Stablecoins actually really shine, because in a highly volatile asset, like, you know, the majors in crypto market efficiency is hard to measure and hard to manage. But a stablecoins by definition, when pegged to the national currency, it's kind of it's a non-issue. So phase one, captain of this regulation, the U.K. looking at AML, the super positive step that's going to bring a lot of people into legitimacy, a lot of businesses into legitimacy. Phase two, when we start looking at market efficiency, well, Stablecoins really got a head start with that. [00:35:25][54.9]

Jeremy Allaire: [00:35:26] Yeah. Last question for the two of you. Three years from now, what do you think we'll see in terms of neo banks? Traditional banks adopting stablecoins, you know, storing value in them, facilitating payments with them. How far are we going to go in that period? [00:35:44][17.6]

Julien Hawle: [00:35:46] I think we'll we'll see a broader adoption. Definitely, I think certain financial institutions are faster than others. But within three years, every financial institution will be somehow at least started using it. I think in three years we'll have some some definitely a first few concept of central bank digital currency and use adoption as well as market cap size of Stablecoins will be increased substantially, I think. [00:36:15][29.3]

Oliver von Landsberg-Sadie: [00:36:17] Yeah, definitely. We're going to see that gap close between, you know, circling back to the opening point about the money, the size of money markets. You know, we've got a billion today. There's a trillion that's there that's going to equalize. In my view, of the next few years, that's when the kind of money markets point of view, but also from a capital markets and a lending point of view. If we look at, say, compound deep financial work, I see today they've got one point seven billion dollars in total supply, a billion of which is in the total Borro pool, a bunch of which is for USDC. But the point there is that, again, this is scratching the surface with negative yields on dollar and these stupid positive, you know, sometimes double figure yields on Stablecoins in that market as it is going to explode in the next three years. [00:37:07][50.1]

Jeremy Allaire: [00:37:08] We are in agreement on that. It's actually a good segue to our next guest and a partnership that we announced earlier today, which will we'll jump to. But Oliver and Julian, I want to thank you guys both very much for joining us on The Money Movement this week. And I hope to speak to both you very soon. [00:37:25][17.1]

Oliver von Landsberg-Sadie: [00:37:27] A great pleasure. Thank you. [00:37:28][0.7]

Julien Hawle: [00:37:29] Thank you very much, Jeremy. [00:37:29][0.8]

Jeremy Allaire: [00:37:30] Absolutely. [00:37:30][0.0]

Jeremy Allaire: [00:37:33] So we've seen and expect this significant acceleration in banks, especially as we've heard, fintech oriented banks need banks, players that are that are moving fast, that are tech forward. You know, we expect more and more to support digital, our stablecoins. And, you know, as just reference, it's a really good Segway. Banking is about much more than payments. It's also very much about lending and borrowing. And over the past six months, we've seen a huge surge in markets for lending and borrowing stablecoins such as USDC. [00:38:09][35.9]

Jeremy Allaire: [00:38:10] And today, I'm very excited to have as a guest Michael Moro, the chief executive officer of Genesis. Perhaps the largest institutional lending facility in crypto and whose firm is driving and building very significant Stablecoins based credit markets. Hello, Michael. [00:38:27][17.3]

Michael Moro: [00:38:36] Hey there. Hey. Hi, Jeremy. Thanks for having me. [00:38:39][3.0]

Jeremy Allaire: [00:38:39] Yeah, absolutely welcome. I want to start actually just talking a little bit about about our partnership, which which was announced today, obviously from from Circle side. We see this tremendous opportunity for yield and credit that's built around Stablecoins. And we want to we want to provide a way for businesses around the world, for developers that are building fintech apps on top of our hour platform on top of USDC to be able to tap into these emerging credit markets that are that are built around crypto. Bill Stablecoins. And first of all, I'm thrilled to be in partnership with you guys, but we'd love to maybe have you talk a little bit about both the partnership and then, you know, kind of what we'll get. We'll get into a little bit of how how that business has grown for you as well to chat about it. [00:39:32][52.8]

Michael Moro: [00:39:33] And likewise, I'm thrilled to announce about the partnership between our between our two firms. We've been close as as a company for a number of years, but it's really nice to kind of formalize a partnership. [00:39:45][11.8]

Michael Moro: [00:39:46] The other announcement today. So Genesis, where I am an institutional crypto currency focused prime broker. And as a business, we've been around since 2013 on the LTC market making side, helping institutions and high net worth individuals do large block transactions in various crypto currencies. And we added our lending business jettisons capital in early 2018 to enable folks to borrow and lend crypto and U.S. dollars and stablecoins and have create sort of by yield producing product and making holding crypto a productive asset. Whereas previously you basically had to rely on price appreciation for any kind of gains, the ability to hold on to the upside while well, earning yield and interest. In the meantime was a was a new element to serve the crypto landscape and right along the lines of, hey, this exists in traditional markets, I can do this and earn interest. Why couldn't you create something similar in the crypto world? And that lending business has been very, very successful at growing and we have over a billion dollars in loans outstanding today. About a third of that loan portfolio, approximately 400 million dollars or so, is in U.S. dollars and stablecoins. And as you might imagine, kind of given the popularity and explosion of USDC growth, a large percentage of that 400 million dollars also in USDC already. So there is certainly a large institutional size demand for further USDC certainly on the borrowing side. And I think it certainly makes a ton of sense to enable the holding of USDC to also be a yield producing product. [00:41:39][112.8]

Michael Moro: [00:41:40] And I think the partnership that we announced this morning about building various lending and yield creation products with Circle makes a ton of sense simply because we just look this number up ourselves. We've done over three billion dollars of U.S. dollar based lending since we started our business in 2002. It's a huge number and that number is only growing bigger and bigger every single day. And so really through really thrilled to be in partnership with Circle. [00:42:09][29.0]

Jeremy Allaire: [00:42:10] Thank you, Michael. I mean, it's been fascinating to watch the evolution. And clearly, as more and more institutional market participants get comfortable with wanting to hold and utilize things like USDC that fuels these these credit markets, you know, even further. And and so, you know, I think obviously what what started, as, you know, people borrowing facilities and things like Bitcoin is now, you know, sort of stablecoins denominated, two sided markets that that you're facilitating, that evolution's been been obviously fascinating. You know, I guess on one related question is sort of as a lender, you know, what are the advantages to using a standard bitcoin? You know, how is it a superior asset for from the lending perspective? What were some of the benefits that you guys see? [00:43:05][54.8]

Michael Moro: [00:43:06] Certainly. So as folks who are lending to firms like Genesis and we have we're fortunate to work with a number of different partners on the funding side of our overlending lending operation. [00:43:17][11.7]

Michael Moro: [00:43:19] But effectively, I view and I think growingly more and more institutional investors think of something like USDC and dollar as being exactly the same thing. Given the regulatory status of USDC and its audited nature, and basically the company is kind of standing behind the product. I think there is certainly growing amount of confidence that USDC of a dollar is a dollar in your bank account. The big difference certainly is the availability of lending capital pool that is available in the crypto market today versus what might exist in other markets. And as you might imagine, the traditional lenders, starting with the banks, are not making capital available to companies, operate in the crypto space. I'm sure that'll change. But that might take quite some quite a bit of time. As a result, the rates, the interest rates for those products are far superior and much higher than what you might get. Certainly the United say in a low interest rate environment and certainly across Europe and parts of Asia with the negative interest rate environment where, you know, you are able to earn interest on an annualized basis, certainly only about eight to 10 times what you might be able to get in your traditional bank account. Certainly is a meaningful difference as one reason to think about, hey, why don't I lend this out in terms of us in USDC rather than keeping this dollar in my bank account? [00:44:46][87.0]

Jeremy Allaire: [00:44:46] Yeah, absolutely. And for borrowers. Right. You know, they can you know, you you're able to transact with them. You can get a satellite transaction to them very quickly. They can pay you back very quickly. There's no counterparty risk. It's fast. It's cheap. It's secure. Works around the world. You've got counterparts around the world. So sort of some of the things that the prior guests were talking about it, the efficiency of the medium is is obviously benefit beneficial for for a lending operation like yours as well, I imagine. [00:45:13][26.2]

Michael Moro: [00:45:13] Absolutely. I mean, look, we have a couple of different sized for business right on the trading side. The ability to settle Bitcoin transactions or a few transactions and buy sells instantaneously, 365 days, 24 hours a day is incredibly valuable to not have to wait for banks to wire. [00:45:29][15.4]

Michael Moro: [00:45:29] You do a transaction or a Friday after the what banks close. You've got to wait till Monday morning to kind of get your money back. Right. And the 48 hours is forever. And so the ability to use USDC to settle transactions certainly is attractive on the lending side. There are lots of good uses for USDC on the lending side as well, not just so for lever long plays the borrow some cash and buy additional bitcoin or get get USDC to grow your business from a commercial loan perspective. So for lots of reasons, it's certainly an attractive instrument. [00:45:59][29.9]

Jeremy Allaire: [00:46:00] Yeah, that that actually leads to the next topic, which is, you know, as you know, the fundamental thesis that we had behind USDC is that this is going to expand much more broadly into mainstream business, mainstream finance, mainstream commerce, that the benefits of this as a payment medium as settlement medium are going to be profound and it's going to find its way into more and more, you know, areas of the economy and use cases. And it seems like, you know, kind of following right on top of that are going to be, you know, businesses that need capital and individuals that want to take loans against assets. And it will it will find its way outside of just taking loans against things that crypto and into other areas. This sort of expansion into other sectors. You know, what might that mean for Genesis? [00:46:51][50.7]

Michael Moro: [00:46:53] Sure. I mean, the tokenization, the digitization of everything has been a trend that's been going on for quite some time. [00:47:00][7.2]

Michael Moro: [00:47:01] And as the world becomes much, much more about a digital economy, the idea of certainly digital money and a cashless world is becoming true more and more every day. And so for firms like Genesis, and certainly through our partnership, I think there's so many different creative ways we can work together to extend lending. It won't simply be Genesis and Circle working to create yield producing investments. It will expand the available pool of capital that is available to enterprise customers at Circle and other merchants that have businesses that might conduct commerce in USDC. We're only kind of touching the tip of the iceberg here in how we can operate not just as partnership between USDC and its growth can certainly do for the entire business ecosystem outside of crypto. [00:47:51][50.6]

Jeremy Allaire: [00:47:52] Yeah, absolutely. I mean, we're seeing obviously some fascinating growth and some really interesting growth drivers with just like this theme of dollarization and international customers who are using Circle business accounts that prefer to be able to settle in something like USDC to hold value in something like USDC, to be able to make international payments in it, which have the utility of the Internet. But a lot of these businesses are in jurisdictions where they don't necessarily want their currency. And and if they're able to access credit denominated in Stablecoins or if they have short term assets and they want to deploy those and hold and generate yield on them. Really, really powerful, not something that is necessarily readily, readily available to them within their regional banking system. So sort of connecting the dots on some of these bigger international things, too. [00:48:44][51.8]

Michael Moro: [00:48:45] Absolutely. And I think our previous two guests, Oliver and Julien, we're going to talk about money market instrument. I think there's certainly a future around money market instruments actually holding USDC rather than the fiat or equivalent simply because the USDC element might carry a higher interest rate than. But there's nothing equivalent. And so all of those types of things around, you know, to your point, the topic on dollarization, I think presents a tremendous level of opportunity, certainly for it, for your business and the ecosystem as a whole. [00:49:18][33.4]

Jeremy Allaire: [00:49:19] Yeah, the the you mentioned earlier kind of, you know, traditional banks not being in this space, whether, you know, either extending credit to certain types of businesses or extending credit against assets like like crypto. Obviously, we saw, you know, the OCC giving guidance that, you know, hey, banks can hold this stuff, they can custardy this stuff. Once banks can hold it in custody, it they can lend against it. Those become, you know, underlying assets on their balance sheet. And so we may soon see banks actually getting in the game, at least in the US. And, you know, I guess I'd be interested to hear what you think that looks like. And how do you guys stay out ahead of that asset as a prime broker and obviously as a sort of leading lending facility in the space today? [00:50:11][52.2]

Michael Moro: [00:50:12] So here's how I view the world, looking at just simple factors of supply and demand where interest rate just kind of intersects. Right. The demand for for borrow in dollars versus the available supply of dollars leading to interest rates that are, as I said, eight to 10 times higher than what you might get in traditional, you know, the dollar market today. If one of the big banks or if one bank doesn't like that is more than one bank does, it is make capital available, readily available at an effective rate to folks around the world in the those banks that were to happen temporarily. Sure, the supply gets flood. Right. And interest rates might kind of come down. But my bet is that the demand for that even spikes because I do think the avast if capital were available, that means a little. But biggest banks in the world are making capital available to crypto that is even further legitimization of the asset class. My bet is that there will be more new money flowing into this space to soak up those available capital really, really quickly. So the interest rates will back again, naturally kind of normalize to what they might be. So I'm not necessarily sure that's simply the influx and supply might do the demand. I'd argue the demand is going to grow multifold more than the available capital supply. [00:51:28][75.3]

Jeremy Allaire: [00:51:30] That sounds really good. Michael, I agree with you. I think I think that that's sort of the next page of mainstream adoption is a catalyst for even more demand. And obviously, you guys are. So Michael is great to have you. Congrats. And of course, thank you as well for the partnership. We're obviously very excited about it and what we're going to be able to do together. And as we said in our announcement today, this is part of bringing Stablecoins into mainstream finance and looking forward to working on that with you in the coming years. [00:52:06][35.6]

Michael Moro: [00:52:07] Likewise. Thank you very much for the partnership as well. From from from all of us agenesis, I'm really, really excited to come in with all the different creative ways we can come up with and create value for our four four USDC customers. [00:52:19][11.8]

Jeremy Allaire: [00:52:20] Thanks, Michael. We'll speak very soon. Bye bye. So these themes of banking made stablecoins banks holding stablecoins on behalf of their customers, using this as a new payment system that has enormous advantages over legacy payment systems and the birth of the rapid ascendance of capital markets. Debt markets denominated in Stablecoins. All these are things that were, I think, just a glimmer in people's eyes many years ago, and it's just really exciting to see that accelerating. So we're gonna have this theme of banks and fin techs and others building on this infrastructure is going to be a very significant theme, I think, in the coming year. So we'll have a lot more to talk about that on The Money Movement. I'm I'm very excited about next week's show where we're going to be bringing on what I consider to be a very special guest, the legendary crypto trading Oji Dan Matt of Chesky of CMBS Holdings, by way of background. Dan has been deep in trading crypto since 2012. He built a legendary trading desk. Here with us at Circle Circle trade, and he now runs a prop fund with some other significant players out of this space called CNS Holdings. Well, there's a lot that we could talk about together on that episode. But the theme next week is going to be the Stablecoins trade, the history of stablecoins, the role in crypto markets, their current evolution and state, and where things are going. Dan has probably held and traded more stablecoins than almost anyone in the world and has witnessed their explosive growth, has an incredible amount of insights around this space. And so he's going to be providing what I expect to be. Amazing perspective and what is going to be a lot of fun as a conversation. So until next week, stay well, stay safe and stay informed. Thank you very much. [00:52:20][0.0]

Episode Highlights

CEO of BCB Group on how they used stablecoins to solve money market instruments trading at scale

Julien Hawle of Bank Frick gives background on how Bank Frick got into crypto stablecoin adoption

The Money Movement guests on why banks are adopting stablecoins and why adoption will grow rapidly

The Money Movement guests discuss whether stablecoins will revolutionize banking and finance like the internet did for communication

The Money Movement guests give their predictions on the next 3 years of stablecoin adoption

Jeremy & guests on how stablecoins revolutionize finance like the internet did for communication

The new Circle + Genesis partnership and the opportunity it presents for customers lending and yield

Guests on the regulatory frameworks and infrastructure for stablecoins within different economies

Guests in this episode

Oliver von Landsberg-Sadie

Founder & CEO, of BCB Group

Julien Hawle

Head of Blockchain Lab, of Bank Frick & Co. AG

Michael Moro

Chief Executive Officer, of Genesis