Stablecoins and Global Financial Inclusion

Huge swaths of the global population have mobile devices, but don't participate in the financial system. Stablecoins and the proliferation of digital currencies present an exciting new opportunity for people to connect to a more open and inclusive financial system, creating new economic opportunities for those who have been excluded from the banking sector.

This week we are joined by several guests who bring a wide range of perspectives on the potential for stablecoins to broaden access to the global financial system for billions of people. We are joined by Harish Natarajan, Lead Financial Sector Specialist on Payments & Market Infrastructures in the Finance, Competitiveness and Innovation Global Practice at World Bank; Danelle Dixon, who is the CEO and Executive Director of the Stellar Foundation, one of the preeminent blockchain projects in the world that is focused on global financial inclusion, and by Tristan Cole, Founder and CEO of Sempo, an innovative startup leveraging stablecoins to power digital money distribution in partnership with leading global NGOs.

We will dig into the big picture challenges, the technical innovations that stablecoins on public blockchains represent, and a hands-on view of the impact these technologies are having today on global financial inclusion.

Listen to this Money Movement episode today to learn more about stablecoins and how they can improve global financial inclusion.

Jeremy Allaire: Hello, I'm Jeremy Allaire. Welcome to The Money Movement. A show where we explore the issues and ideas driving this brave new world of digital currency and blockchains. Today, we're going to talk about Stablecoins and global financial inclusion. I think everyone understands, at least at a high level, that there are enormous sectors of the population, all around the world, domestically in the United States and in markets all around the world without access to the financial system, or with varying degrees of access to the financial system.

That has a tremendous impact on people's ability to gain livelihood, to store value, to participate in the economy safely. There's been this very clear asymmetry that has existed between these masses of people who have access to the internet and increasingly have access to the internet through powerful smartphones and mobile devices that have become more and more affordable but yet still do not have proper participation in the financial system.

It is a critical issue and we're going to explore that more today. I think even those that do have some degrees of access, oftentimes face punitive costs, time delays and real limitations and burdens that the average person doesn't have when dealing with things like storing money, moving money or even generating savings. Digital currency obviously emerged nearly a decade ago and it's often been heralded as a solution to this problem, to increasing financial inclusion, banking the unbanked, making payments and remittances more low-cost, accessible et cetera.

After seven years, it's been off to a slow start. Now, literally, as we speak, we are starting to see this explosion in Stablecoins. Stablecoins as stable value, digital currencies, often denominated in things like digital dollars, like USDC hold really great promise to actually fulfill some of these broad ambitions that many in the digital currency and blockchain sector have had for the last decade.

Today, we're going to be exploring all of those issues as we focus in on Stablecoins and global financial inclusion. This week we are joined by several guests who bring a very wide range of perspectives on the potential for Stablecoins to broaden access to the global financial system for billions of people, including Harish Natarajan of the World Bank. Denelle Dixon, who's the CEO and executive director of the Stellar Foundation and startup founder, Tristan Cole, an Australian-based startup back called Sempo, which is really at the cutting edge of using Stablecoins in disbursements to those without banking.

To kick this off, we're going to zoom out into a global view with Harish, who's the lead for payment systems development at the World Bank, has spent a lot of time focused on these issues over a long period of time and he's both been analyzing and making recommendations to global leaders and policymakers around these topics. Welcome, Harish.

Harish Natarajan: Hi, Jeremy. How are you doing

Jeremy: I'm very good. Thanks for joining us today.

Harish: Thank you. Thank you for inviting me. It's a pleasure to be here.

Jeremy: Excellent. First, I want to maybe have you talk a little bit really broadly about the problem space. What is the challenge that the world faces in terms of participation in the global financial system?

Harish: Jeremy, there are broadly maybe five different kind of challenges, which I would like to outline. The first one is clearly about financial exclusion. I think you already alluded to that. This is to a large extent, of course, it is a problem of the emerging markets and economies but certainly not restricted to them. There are, of course, pockets of financial exclusion even in high-income countries. Just to quote some statistics, they're based on the data, which we gather at the World Bank on what you call is the index survey, which basically measures the number of people who have access to the most basic level of financial inclusion of access to an account.

That is about 63% in lower-income and middle-income countries as of 2017, 2018 and for high-income countries, it was over 93.7%. It shows the gap between the low-income and the high-income countries, but also at the same time, it shows that even in high-income countries, it's not 100%. That's perhaps the very first one. The second one is also the limited usage of even people who have access to an account, the limited use of that for making digital payments.

As per the statistics, we are tracking less than 50% in the lower-income countries actually use it for making digital payments versus around 90% in the high-income countries. The third area is about access to finance. This is about I'm talking about savings instruments, credit investment insurance so and so on. There the gap is actually even bigger between middle and lower income, middle-income countries, and high-income countries.

Here, I'm talking about both individuals and businesses. Here, for example on savings, the gap is like 20% for low-income countries versus 50%, 54%, 55% for high-income countries. Similarly borrowing from a regulated financial institution is just about 15% in lower-income and middle-income countries. Then there's a gap of over $5 trillion for SMEs in terms of the financing gap for them. This is 1.3 times the current level of funding.

It shows the gap in terms of what is the demand versus what is the supply. Then the fourth area is about cross border payments and you alluded to that. It is slow. It's so big. It is costly. The only aspect of cross-border payments, which is currently very diligently measured is on remittances and which the World Bank has a marking mechanism for that.

Then as per our estimates, the cost of sending $200 is around 6.7% now. It is a significant improvement from the past but still way too high. Then the last one is I think this is not much talked about and I call it the case of an ignored middle in the cross-border payments world. If you segment the market, you have the larger corporates who have access to multinational banks. For them, I think the world is not so bad. The experience of cross-border payments is not necessarily that bad.

Then at the bottom end, you have remittances, which are of course expensive based on the for instance [unintelligible 00:07:07] but at least it's a functioning market. Though there are services available, you can send money to most of the countries almost instantaneously, even if it is based on cash origination and cash disbursement, at least people are able to not get notified that the money is available and they're able to withdraw.

It's a functioning market and inefficient though but it's still functioning, but there's this middle which is not being fully served. These are the new-age services like freelance workers who are coming in from emerging markets, small merchants, and small businesses who are participating in the global value chains. For them, the experience of cross-border payments is really rocky. They're not being served well and I think for them, the experience is really bad. I would say these are perhaps the five areas, at least the ones from my vantage one.

Jeremy: An incredible amount of work to do clearly.

Harish: Yes, indeed.

Jeremy: It seems like we all take for granted the utility value that we see in the financial system living in a developed market, for example. It really feels like whether you're an SME or an individual on a vast scale, really harnessing the utility value of money is harder. It's more expensive. It's more difficult and in some cases, just completely non-existent.

Harish: Exactly.

Jeremy: That's extremely helpful context and really again zooming out, looking at the data, looking at the gap that we have. As I said, I think a lot of us come from the technology world and the internet world and the software world into this because we want to solve some of these problems. You also alluded to fundamental technology innovations that have been happening, digital payments, mobile payments, obviously we've seen rising levels of participation because of that. Obviously, in some cases, incredible leapfrogging even in developing markets but we still, obviously, just given what you've just shared, we have these profoundly uneven access and it's across a lot of different dimensions of the utility.

I want to focus in a little bit on this immediate opportunity. How can digital currency and in particular Stablecoins and what the IMF describes as hybrid central bank, digital currency models, where you've got private sector actors operating digital currency environments but in concert with the central bank money, which is obviously an emerging phenomenon, but just as we look at these global Stablecoins, things like USDC, things like Libra that are on the horizon, how do you see that transforming access to financial services?

Harish: I think here maybe a little bit of contextualization here. When we look-- I think it'd be good to segment the market. Let's think about people who currently do not have access to accounts, who do not have access to payment services. I think, if you go behind and ask and go behind the reasons why people do not have access and why they're not using, you get some very interesting information.

In some cases, it is about lack of funds and this is more or less, basically, it doesn't necessarily mean that they don't have any money, it just means that the amount of money they have is perhaps not enough to typically justify a large amount of fees and so on. Then it is too expensive, that it is the documentation requirements required to open an account, et cetera is too onerous for them. I think there are a lot of fundamental reasons behind it.

Any solution which has to address this problem has to address those two issues. The way I see it now, I think the digital currencies and Stablecoins, et cetera, do not necessarily address these issues to some extent maybe on the cost side, but not purposely on the other issues I mentioned. That is one segment of people.

The other segment of people are people who have were able to meet all these requirements, but simply they do not have efficient mechanisms for them to use and make payments. I think there, clearly, I think all these different designs has a role to play. There, again, we have to also look at against all the other innovations which are also happened.

You have fast payment systems being developed worldwide. There are APIs open banking, which are coming out. I think one has to really compare this against that and see which one really moves forward. Maybe taking the specific case of say cross border payments.

I see a role for digital currencies to potentially play a bridging mechanism, to bridge between the currencies im the sending side and the receiving side, expanding the pool of entities who are able to offer services that currently are only relying on the money transfer operators and then you have relying on the large correspondent banks. I think this model of digital currencies can bring in new players on the crypto exchanges and so on and subject to them being properly regulated, meeting all the cyber safety requirements and foreign exchange and capital controls, I think they will expand the market and give more options and are perhaps a better design. The caveat from my side is, they have to meet the key requirements from a regulatory perspective and they're there for a good reason. I think any solution has to either meet them or obviate the need for them but not [unintelligible 00:12:30]

Jeremy: We're clearly seeing this burst in digital cash innovation and on-chain stable points are an example of that. We're seeing obviously global regulatory frameworks, the FSB recommendations other things, fat recommendations, these regulatory regimes saying, Hey, this is a great innovation.

We got to make sure intermediaries can meet their obligations and so on, but, we're obviously seeing organically very, very fast growth and demand in particular for these digital dollars, which actually maybe leads to another high-level question, which is, in this world where digital currencies exist like digital content and digital data on the internet, given digital currency can exist everywhere that the internet exists.

In theory that the Chinese digital currency, if you have a software wallet that could support it, you could connect directly and settle a liability with the Central Bank of China from any mobile phone in the world. Again, these digital currencies built on the public internet, whether it be permission or public blockchains, really creates some interesting meta-level issues for how we think about global currency models.

Do we believe that the advent and growth of digital currencies based on the major worlds, the major reserve currencies of the world order are going to drive us towards more, whether it be dollarization or something else? What do you see emerging in that arena?

Harish: Right. I think clearly, the technology is showing what is possible and what is feasible, from a technological perspective. On that itself, I think also, as I was saying earlier, when used to contextualize that against, what are the other innovations that are happening? I would perhaps classify them as incremental innovations in the sense they are building on the existing system.

Things like the SWIFT global payments initiative, then there are interconnections of payment infrastructure which are happening in many parts of the world. There are also new institutions coming in to create platforms, interconnecting different national payment systems. In particular, the fast payment systems on both sides. There are various incremental innovations that are happening.

On that, of course, taking a complete clean break and looking at a global currency model is of course another alternate. The amount of coordination and implementation challenges there raises the question of, which will be faster, which will be much more tangible results immediately versus the medium term, long term issues. Also, other issue which has to be looked at is, financial sector regulations are very jurisdiction-specific.

The world can be united through a network and from a technology perspective, but for financial sector regulations, there are different jurisdictions and there are different regulations. There are certain areas on which there is harmonization globally, but clearly, there's a desire to maintain control over the broader macroeconomic framework within those jurisdictional boundaries. Any global currency model has to take those into account.

Anything has to come up with the proper global coordination and governance structure to ensure some of the benefits which are being achieved through having control, are not lost. I think the technology is pointing us in a direction of what is feasible. I think we have to see what is practical given the other considerations of global policy objectives we have.

Jeremy: Yes. Without a doubt, the internet continues to collide with nation-states and create a lot of really fun policy challenges for everyone, whether it's data and privacy or cyber security or money. All these things that really get stirred up. Well, Harish, this has been a really excellent conversation.

Your high-level perspective here is very, very deeply appreciated, and helps really set the stage for both the problem space and some of the challenges that we need to move through to get through this. Really appreciate you coming on the program today. Thank you, Harish.

Harish: Thank you. It was a pleasure. Thank you.

Jeremy: Absolutely. Some of these numbers obviously are staggering access to savings or credit, proper participation in the financial system, costs that are, orders of magnitude higher than what many folks deal with on a domestic payment basis really significant. That really helps guide us forward I think in terms of really solving what we think here is a major problem in the world.

With that, I want to turn now to a practical, more hands-on view of how coins and blockchains can help solve some of these problems. I'm very pleased to welcome Denelle Dixon CEO of the stellar foundation, a project who are, "creating equitable access to the global financial system". Hello, Denelle.

Denelle Dixon: Hi, Jeremy. So great to be here. Thanks for having me.

Jeremy: You're welcome. Really nice to see you and really appreciate you joining today. Maybe we'll start a little bit with you. You've spent a lot of your career helping to foster open access to information including, I think, driving some really significant internet companies, technologies that touched hundreds of millions of people. Maybe just start with talking a little bit about what drew you into the digital currency realm and why blockchain? Why this problem right now?

Denelle: Yes, it's very much the same as why I went into the space of the web and what I call the content side of the web to begin with. I think that so much there, we had promised to be able to create access to information and ideas and innovation for everyone all over the world. I think that taking all of those learnings, and some of the things that we did wrong on the content side of the web. I think that we handled privacy in a way that we said, regulators stay away from us. We actually don't need your help to figure out privacy.

I think we were wrong when we first did that. I think, to be able to take those learnings and move that over to another part of a technology that can actually have even greater impact because it's dealing with money and access to the financial system which we take for granted, I think from where we sit, just creates an opportunity to be able to do this side.

What I mean by that is to engage with regulators all over the world to help to create and foster those relationships, to not look to supplant, but look to enhance a financial system that exists today. There's just so much opportunity here. I think blockchain being-- I've been in this space for a little over a year, and when I first started, I used to call it nascent technology. I don't think it's nascent anymore. I think it's pretty [crosstalk] it's picked up.

It's picked up pretty quickly and moved. I feel like using this technology layer, which frankly not everyone in the needs to understand that layer of technology. Much like you don't need to understand the underpinnings of the internet, but you need to be able to gain benefits and to derive value from it. That's our goal. For me, that's just crazy exciting.

Jeremy: It really is. I think both of us have the perspective of these other phases of the internet and we can see the analogies. We can see where things break and so on but everyone opens up their mobile phone and can get to all the content everywhere and have access to all the world's knowledge. Young people grow up with it, take it for granted. It's just like, "Of course, there's infinite knowledge that I can access with a voice command," but I think probably in 10 years, if you're successful, if we're all successful, people say the same thing about the way that they interact with the economy, the way that they interact with money.

I want to focus in on the work you're doing really specifically with the Stellar Foundation. I mentioned the mission in introducing you creating equitable access to the global financial system. Talk about that mission and talk about how you are starting to tackle that very, very immense problem. That problem that Harish helped articulate for us in the numbers.

Denelle: That was awesome to hear those numbers. We focus on just a few of those numbers in terms of 1.7 billion adults globally are unbanked. From our standpoint, if you think about that number, but then you juxtapose that with two-thirds of them actually have mobile devices. If we can actually take those two numbers and put them together and try to solve that problem.

Jeremy: [unintelligible 00:21:11]

Denelle: Yes. You can see where the value of something like this can happen and folks can get access to it. For us, we tried to synthesize our mission into that one sentence creating equitable access to the global financial system, recognizing though that's a mission that takes a really long time to accomplish. You got to break it up in bite-size chunks. For us now, what we're focused on is really developing what we call a minimum viable or even larger ecosystem, to think about making sure all the players in that whole stack are there so that this technology layer can actually really be pushed out to the world in a way that can solve some of the problems that we just heard about this morning.

You got to think about it as again like there's this underpinning, which is the blockchain, but then there's stablecoins, which you obviously know so much about, and how those stablecoins interact and create the opportunity to go from Fiat currency to digital currency back to Fiat if you so choose and to go in and off and on and off the blockchain. Stellar is a public blockchain and what we really need to do is create those, what we call in our ecosystem, anchors. Those on-ramps and off-ramps that you can actually get in and out of the blockchain from Fiat to digital, digital to Fiat. Our focus, the bite-size chunk that we're focused on, at least for this year is really developing even more. We have many that are already participants in the ecosystem.

Jeremy: In that. A lot of activity in the stablecoin space with Stellar.

Denelle: We would like a lot more even Circle. We would like Circle. To have these corridors open so that you can actually see payment channels and you can see folks actually interacting and using this for remittances and just for cost border payments. It's already pretty great, but it's that bite-size chunk of growing that anchor-base and creating the financial institutions which aren't necessarily banks.

They come in different shapes and forms. They're all regulated on the edges so that's an important piece because regulators know how to deal with money. I think that's an important component too. That's our core focus, is to work with regulators to get them comfortable with blockchain generally, and to get them to understand that this is actually enhancing their system and their ability to be able to provide even more access to their constituents.

Jeremy: That makes a lot of sense. Familiar territory. I think when that happens, if you see the digital watts lighting up, the on and off-ramps lighting up, what does that look like to those, I guess, the 70% of the 1.7 billion or whatever, the 1.2 billion? What does that look like for them? What becomes possible for them as that happens?

Denelle: I think it's such an important question and I think about it all the time. I think about it in the World Bank example if you think about folks out there in the world who don't have bank accounts, but they can have a wallet and they actually don't need to understand that they can if they so choose, but don't need to be able to understand all the inner workings of blockchain. If their wallet allows them to take their currency to convert it to digital, and then to send it to family that's in some other region.

It's actually that simple or if the World Bank, for example, were to lend money using a digital wallet or a digital currency that they control, and then it gets all the way down to the farmer that's doing the actual work through a wallet. Again, and that farmer, he can or she can know, but they don't need to know how this all came to be. It's just another layer of technology that they get used to.

Jeremy: For so many of these people, they can turn on WhatsApp or they can turn on their phone, they can click a URL and get to content and do all these things they take it for granted that they have the world in their hand and then there's this missing piece. We're really trying to fill in that layer and again, encouraging signs. I think as you talked about, there are these layers and getting these pieces in place.

I look at things like public blockchains and then Stablecoins as building blocks for this new global financial system, this new, more opening and inclusive global financial system. There's a lot of talk about the value exchange piece, getting value from point A to point B, taking the cost out, making easier, more access, but what are the next layers that get built? Again, hearing Harish talk about the disparities in terms of access to financial services, are those the next layers that come once we get this value exchange layer dealt with?

Denelle: If you think about what does it mean for someone who doesn't have a bank account and can't get access to a bank account? The most important thing for them is to be able to access something that's simple, clean, easy to use. I think what we haven't done enough of on the blockchain side is using applications, but focusing on those applications from the user standpoint and just ease of use and simplicity. I do think we need to have those wallets that we have many of them that are out there in the world already, but then we also need to be able to have-- a company D Stock is actually launching and they're able to allow folks in all parts of the world to be able to purchase shares of stock in the US but from everywhere in the world. Those are the kinds of things that really opens up the infrastructure and the ability to really derive value.

It's these applications that come in, again they have to be simple from the user standpoint and then they just open up opportunity. What about if you could hold assets? We already have this on some chains where you could hold assets and get interest with those assets. You don't have to have a bank account to do that because some folks can't get to the banks. It's hard for us to understand this, but in other countries, banks aren't just on the corner. These kinds of applications are going to allow users to be able to just feel like they're present in this ecosystem that they've never been a part of before.

Jeremy: It's a great vision. Speaking of vision, paint a picture for us all of what you see in three years, in five years. We're seeing acceleration. It's taken a while to get here, but lots of stuff are coming place. What do you hope that we see?

Denelle: I think it's so funny because I was just thinking this morning. We're doing a webinar next week on anchors. Anchors again, are those as financial institutions like, for example, Circle who's is issuing stablecoins or they can provide an on and off-ramp. They come in different shapes. We have 1,400 folks attending from all over the globe because everyone's interested in how they can be part of this and become part of this system.

I feel like we're going to have all of these. I love the way that you think about lighting these visions up all around the world. We're going to have of all these endpoints that you can see light up all around the world. Then I really do believe it's going to take some time just like, for example, email. If you think about this as the blockchain in the same way email, you can send email not just within one walled garden. You could send it to all the different walled gardens.

That is what I think we're going to see. We are going to be able to see corridors open up, people really being involved and part of the ecosystem, and then I think we'll see a lot more folks come in to develop these applications that we talk about from the user standpoint. Really solving user problems. We are laying the foundations. You guys are. We are, in terms of, here's the foundational technology that you can use. Now, we just need all these innovative creative folks out there to be thinking about ways to engage and that's what I think we're going to see in the next three years.

Jeremy: I wholeheartedly agree. It's really, really nice to hear your thoughts on this, Denelle. It was great to have you on. Thank you so much and look forward to seeing you really soon.

Denelle: Thanks, Jeremy. Take care.

Jeremy: Absolutely. I think this vision of these layers getting built and the blockchain layer, the stablecoin layer, these new types of markets that are available, and then this is all fundamentally open public infrastructure that creators, engineers, software creators, designers can build on top of much like we collectively built out the experience of the web. Very interesting time for developers, very interesting time for creators as these layers come into place and we can all hack on the global financial system a bit.

Speaking of a building, I want to turn now to a startup entrepreneur who's very much hands-on building and delivering solutions for financial inclusion using stablecoins and doing this in partnership with global NGOs, such as Oxfam. Very pleased to welcome Sempo Co-CEO, Tristan Cole. Welcome, Tristan.

Tristan Cole: Thanks, Jeremy. It's a pleasure to be on.

Jeremy: I have to double thank you because I believe it is very late for you in Australia.

Tristan: Yes, very late or very early. [laughs]

Jeremy: All right. Is this early, I guess?

Tristan: Yes.

Jeremy: Okay, you're going to go for a run after this?

Tristan: We'll see. Probably not. It's quite early here. It's a pleasure to be on.

Jeremy: Thanks, Tristan. I think the backdrop of big picture of what the challenges are in the world, a little bit on these infrastructures coming in place. You're now at the forefront of using cutting-edge payment technologies for the delivery of funds to those that are most in need of help. Maybe you could just start talk a little bit about the mission of Sempo.

Tristan: Yes, sure. From our firsthand experience, we've found that cash is the most empowering thing in the world. When you think of NGOs distributing humanitarian assistance or development, a lot of what is done today is actually just giving people goods and services. What we're seeing in the industry and what we've seen over the last decade is that slowly, NGOs are starting to give more cash.

That's because it's more empowering. It's more transparent for donors. It's ultimately more effective for everyone. The stat that I always like to bring up is that 70% of Syrian refugees actually sold the aid they were given to buy what they actually needed, which is just astonishing that people are receiving these goods and NGOs are giving things that they think people need, but we're not sure. Instead, they're just going out onto the market and selling them.

That's why we got into it, to help NGOs distribute money effectively. To date, we're at a run rate of over a million transactions for aid and development, working with, as you said, NGOs like Oxfam. We ran their first cryptocurrency-powered aid program in the SOD of 2019, in Vanuatu, with Oxfam Australia. That was funded by the Australian Government. We've done projects with the Red Cross and Mercy Corps. I think what we're trying to do is really focused on these application layer products. How do we help these people who don't have access to financial services today? You can't start a business if you don't have access to a bank account. You can't do all these things that we just take for granted.

Jeremy: I think when you look at these really, incredibly challenging parts of the world like remote communities, refugees, displaced persons communities, as you said, that just they don't have any access to the banking system at all. Maybe specifically as we talk about digital currency, stablecoins, et cetera, what role can these play, not just in the disbursement piece, which I think is a huge piece, digital cash in people's hands, but in bridging people into participating in the financial system itself?

Tristan: Disbursing cash is the tip of the problem. It is so hard. The stat that was brought up was 1.7 billion people are unbanked. When we're talking about distributing money to these people, today the best case is literally giving them stacks of physical cash. NGOs will go down a river with a pile of money in a backpack because that's more safe than driving a car. They're less likely to be attacked by say terrorists or other entities.

I think that's the start of the problem. What we've discovered through our work over the last three years with NGOs is that it's actually this financial exclusion for these people that is causing the real problem. From some of our firsthand experience in Vanuatu, when we've been [inaudible 00:34:09] people there, the most exciting thing for them was these plastic bills, these plastic bills that were being swapped over from paper bills like you've got in the US.

The reason people were really excited about this was because they could-- people today are burying their money in Vanuatu as a form of savings. These plastic bills won't rot. That's why they were getting so excited about it. To us, that's just crazy.

Jeremy: Little bit more durable.

Tristan: A little bit. When we heard that it's like people laugh but it's true. Then some Oxfam staff we were working with, they were losing nearly 20% of their money when they were sending funds back to their families. It's all these problems that just come up. We live in the US or Europe or Australia. We just don't experience this firsthand. I think when it comes to real access to the financial system, the financial exclusion is causing a lot of these issues. Financial inclusion can be as simple as access to basic transaction account on a smartphone. The reason this is so powerful is because you look at a lot of these banks and these banking branches today. As it was mentioned, they can be like two hours down the road. They're not accessible for a lot of people today.

Jeremy: Needs to be entirely in your pocket, obviously.

Tristan: Yes.

Jeremy: I know, some of the issues that you're identifying things like the risk of delivering cash or the accountability, I know, which is a really big issue for NGOs with funds distribution, the accountability versus transparency, security, all these things, and then access, it sounds like some of those things have led you to blockchain-based Stablecoin and the power of those as a secure store of value, but also in a very efficient medium. Maybe talk a little bit about your journey into Stablecoin, how you're using them today, how you expect them to play a role in your initiatives going forward?

Tristan: Yes, sure. When we started looking at technologies that could really help us with a problem, and that's where we came from it. We had a problem that we were trying to run these cash transfer programs in really obscure parts of the world that don't have strong banking systems today. We were just looking at a bunch of different technologies. We actually started with just issuing credits on a centralized database, and we were like, "Okay, that's cool. That can work." That's how a lot of systems today work. They just centralized databases.

As we started to scale and work with larger NGOs, they started to have more expectation around trust and transparency of funds. I think when it comes to Stablecoins, what we're seeing in a lot of the use cases, especially with, say, USDC, we're exploring a program in Venezuela, where money there just you can't use the local currency there. People need access to dollars. Something like USDC makes it really easy for us to run those programs.

I think, ironically, when it comes to Stablecoins, one of the biggest use case really is that stability. If you're a small corner store, who sells a $2 loaf of bread, you just can't expect to lose 25% the next week, because Bitcoin dropped 25% for some obscure reason. I think that is the reason they're starting to get such uptake amongst businesses and for real use cases around the world.

Jeremy: Yes. As people figure it out, they say, "Oh, this is like if I have a messaging app, but then now it's money." As I like to say, people around the world are going to vote with their smartphones what financial system that they want to participate in. With that in mind, looking out two or three years, maybe not forever, are we approaching a tipping point? What might this mean for those who have really struggled to participate in and have been excluded from the global financial system?

Tristan: I certainly think we are. We're seeing over the last few months that COVID is really accelerating that transition to digital money. When I look out two to three years, and as Sempo, I think we see two worlds really. One is one of privatized money what we've got today in these closed systems of these closed financial systems [crosstalk]. Exactly, [inaudible 00:39:08] run by a single corporation versus another future and another alternative which is decentralized money that is more of a public good.

I think when you look at those walled gardens it is, I think, a little bit scary because when you compare it to cash, just physical cash, it is quite regressive. We've seen in Kenya M-Pesa is just blocking entrepreneurs and businesses from accessing that network. It is basically a public good in Kenya. When M-Pesa goes down in Kenya, that's national news which is just insane to think about, and it's run by a single private corporation. M-Pesa can block entrepreneurs just because it doesn't agree with their business model. It doesn't align with their business model which is-- [crosstalk]

Jeremy: Yes, I was going to say it gets to this. I think people are familiar with electronic money. They've, "Oh, we have electronic money. Isn't this just electronic money?" We're talking about digital cash. There's really a big difference between a bearer instrument that is a form of digital cash and walled garden electronic money. Actually, central banks are quite aware of that. It's a very delicate issue when you hear people talking about things like central bank digital currencies.

I met at one point with the product manager of cash at the federal reserve, and I thought that's pretty cool. There's a product manager of cash. Cash was a product. There's attributes of it that are really important. I think there are obviously legitimate concerns around abuse and financial crime. I think just like the world is navigating on a Razor's edge issues of privacy, issues of identity. This is a Razor's edge issue as well probably in the years to come.

Tristan: Yes, definitely. It's interesting that you touched on central bank digital currencies, because I think over the next two to three years, we will see a sovereign nation issue their own digital dollar or digital currency, which is I think really exciting because at the end of the day, it's something as important as money, something that is tracking the credits and debits of society it needs to involve everyone. It needs to involve the community. It needs to involve regulators and not just be one private corporation that's running it.

Jeremy: Totally agree. Tristan, this has been great. I really appreciate your perspective. Congrats on all the success. Really hoping that you guys can continue to drive the kind of change that's needed in our financial system. Thanks again for waking up so early.

Tristan: Thank you, Jeremy. It's been great to be on the podcast.

Jeremy: Excellent. All right. Take care.

Tristan: Bye.

Jeremy: Bye bye. I think hearing from all three of our guests today, the possibilities of an open, inclusive transparent, accessible, efficient financial system is obviously what has inspired so many of us to be builders and innovators in this space over the past decade and more and more people are coming in.

I think there really is a sense that we can change what's possible for people everywhere. I think that was the feeling we had with the web of information and communications, it's the feeling we have here with this world of global digital money. The more that our digital economy is open and inclusive and integrated, the value that can be brought into the world is really tremendous. We are on the precipice of this being a reality at a really large scale, and we are tracking that obviously here at The Money Movement and that actually leads us into next week.

I'm really excited for the program next week. We are going to go in a very hands on way into the actual movement of money, and we're going to follow Stablecoins around the world from businesses in the US, to people in Europe, to Asia, coming in and out of different currencies into Latin America, through market places to India. It's going to travel at the speed of the internet and we're going to show everyone what the power of this is and how this is. Such a huge significant improvement in that is emerging in our global financial system. Going to be really excited for that program.

Then also, very excited to announce that the following week on Thursday, June 25th we'll be joined by the former secretary of treasury and former chief economic advisor to Obama, Larry Summers. We'll be doing a one-on-one fireside chat to talk about these issues. Talk about some of the global economic system issues, the role of digital currency and get his views on this. Should be a very exciting program. We'll have more on that soon. Until next week, stay well, stay safe and stay informed. Thank you.

[00:44:46] [END OF AUDIO]

Harish Natarajan
Lead, Payment Systems Development Group World Bank
Denelle Dixon
CEO and Executive Director, Stellar Foundation
Tristan Cole
Co-CEO, Sempo

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