Trade Finance, DeFi and Stablecoins
As stablecoins surge in usage and growth around the world, these digital dollar currencies are finding their way into more and more traditional dimensions of cross-border commerce. This week we'll explore the growth and use of stablecoins in trade finance, invoice financing, and the growing interaction between these traditionally "off-chain" assets and processes into both distributed and fully decentralized financial infrastructure.
To explore these themes, we're joined by Ernst & Young's Paul Brody who is their Principal for Blockchain Technology, where he has been helping spearhead new core supply chain finance infrastructure with OpsChain; by HongZhuang Lim, the founder and CEO of ShuttleOne, an emerging fintech out of Southeast Asia leveraging stablecoins and DeFi for trade finance; and Centrefuge.io founder Lucas Vogelsang, who's firm has been driving innovation in the synthesis of traditional assets such as invoices and DeFi money market protocols.
Listen to the episode now to learn more about how trade finance, DeFi, and stablecoins are converging.
Jeremy Allaire: 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. Over the past months, we've seen surging use of USDC and stablecoins in what we think of as crypto markets activity but we've also seen rapidly increasing use in a variety of different international payments and settlement use cases.
More and more businesses who are realizing the benefits of digital currency as a payment and settlement medium and USDC, in particular, is noteworthy in its use in those international activities. Dollars settle most of the world's trade transactions today and businesses that conduct trade and conduct commerce and have partners or suppliers or employees or others that are around the world are finding that stablecoins are a fundamentally new way to settle those types of transactions.
Now, just payment and settlement is a piece of the puzzle. The real power of digital currencies that are on-chain, such as stablecoins, is in their programmability and their composability, that you have this native digital-dollar token and developers can write code on blockchains that enable more complex forms of economic contracts and interactions to happen on these public networks.
We're seeing this today in the world of decentralized finance or DeFi where smart contract-based protocols are enabling things like borrowing and lending on blockchains. I think for many businesses and for many institutions, deeper integration of this infrastructure with real-world economic contracts is fundamentally the next phase of growth.
The maturity of this in payment settlement and capital markets use cases is also really powerful and important, but at the core, the real innovation is how can businesses that operate in this age of internet commerce connect and contract with each other in powerful new ways. Trade finance, which is the complex web of financial arrangements that undergird global trade and commerce is a whopping big space. Trillions of dollars of value move through trade finance to make the world economy go. It's a whopping big space and we're starting to see USDC and DeFi protocols themselves find their way into trade finance and this more core form of commerce that happens in the world today.
To explore these themes this week, we're joined by Ernst & Young's Paul Brody, who is their principal for blockchain technology where he's been helping spearhead new core supply chain, finance infrastructure, and other forms of on-chain commercial infrastructure with OpsChain by Hongzhuang Lim, the founder, and CEO of ShuttleOne, an emerging FinTech out of Southeast Asia, leveraging stablecoins and DeFi for trade finance and Centrifuge founder Lucas Vogelsang, whose firm has been driving innovation in the synthesis of traditional assets, such as invoices and DeFi money market protocols.
I'd like to first welcome Ernst & Young's Paul Brody, back to the show. Hello, Paul. It's great to see you and great to have you back on the show.
Paul: Thanks, Jeremy. Thanks for having me.
Jeremy: Obviously, maybe we can start. Just talk a little bit about your role at Ernst & Young and at a high level, the thesis that you've been driving at Ernst & Young, and then we'll drive into to more on some of the specific work in this area.
Paul: Perfect. I'm the global blockchain leader at EY, and that really means my job, my vision is to drive, in a coordinated manner, all of the things that EY does in the world of blockchain. I don't control everything, but my goal is to think about the big strategic solutions that we bring to the market, audit, insurance, tax, and business applications, and shepherd them all in the same direction. The central thesis that we have is very simple, it's that blockchains will do for business ecosystems what ERP did inside the enterprise. Let me just unpack that for a little bit because it's a mouthful but it really explains how we've come to think about this.
Enterprises over the last 30 or 40 years have become very sophisticated internally. They've got MES systems, manufacturing systems, they've got ERP which tracks business process tools and shared data. Then on top of that, they got planning and scheduling, and then above that, they often have analytics tools and machine learning systems, and yet the minute a really sophisticated company wants to do business with another company, all that digital sophistication gets boiled down to let's send them by email and PDF documents. It collapses.
The reason that large enterprises don't have more sophisticated tools is because they don't have something they can trust. There are great ways to manage complex multi-party systems with shared business logic and shared fact, but none of them until blockchain allowed you to do so without handing out really strategic information to whoever's operating that digital interaction hub. That makes them way too powerful. Our vision is-
Jeremy: [unintelligible 00:06:25] basically.
Paul: Exactly. Our vision for blockchain is this is finally a way for companies to interact with each other as part of an ecosystem, by the way, this includes payment, that's the whole cycle, in a genuinely level playing field where you are not at risk of becoming disadvantaged.
Jeremy: It's such a breakthrough in terms of how enterprises can contract with each other, interact with each other, communicate with each other, but obviously, at the core. It's about settling transactions. You guys have pioneered and you've begun rolling out OpsChain. From what I've read and understand, this is a very comprehensive set of on-chain infrastructure that reflects these new possibilities. Where are you with that rollout? Just maybe talk at a very high level about the capabilities that are part of OpsChain.
Paul: If you think about how two companies interact with each other and you see this all the time. I've got money, you've got stuff, and we're going to exchange that, my money for your stuff. We're going to exchange that subject to some terms and conditions, volume discounts or payment upon delivery and things like that. The things that really challenge enterprises is to manage the terms and conditions.
They're good at negotiating these deals. They're not always good at applying the rules. We're using smart contracts. In OpsChain, we can allow you to do things like set up your purchase order, set up your volume discounts and we can make sure that every time you do the volume discount, every time you do a purchase order, you get the best discount you're entitled to. Then the closing the loop, the thing that that's most challenging and is least mature is okay, we have a contract, we have an agreement. I sent you a purchase order. You sent me product. Now, you've sent me an invoice and I need to pay you.
This is where I would say we are least mature and have the most high expectations and excitement about what Circle is doing and the role of stablecoins because enterprises don't want to settle transactions at Bitcoin. Now, that's not because they hate Bitcoin or it's not because Bitcoin is terrible, it's not because cryptocurrencies are bad. It's because cryptocurrencies are foreign currencies. My revenue, my taxes, my employee pay, that's all in dollars. I'd like to--
Jeremy: Contracts are denominated in dollars, right?
Paul: Exactly. I want to keep my transaction denominated in dollars.
Jeremy: This set of use cases with OpsChain, this is really drilling into trade finance these complex intercompany economic arrangements. Obviously, you've mentioned here the role of stablecoins, but where do you see that? What are the use cases where you see stablecoins embedded in OpsChain-based smart contract applications?
Paul: I envision two things. Number one, I want us to see this closing of the loop with stablecoin based payments. Secondly, and I think fundamentally, even more importantly, I want to see Enterprise DeFi. I heard you talking about DeFi in your opening conversation. DeFi is a huge deal because in reality, yes, if a big company like EY buys something or we get an invoice from another humongous company, we don't need trade finance. We don't need working capital. We're a huge company. We got great credit. That's not a problem.
That's not true for the vast majority of companies. They need working capital. They need insurance and today, they're probably paying far too much for it.
I believe the thing that gets me really excited is properly programmable privacy-enabled DeFi for enterprises. That's what I want to see with dollar stablecoins or Euro stablecoins, Yen stablecoins, all of those things
Jeremy: It's like in decentralized invoice capital markets that exist on-chain that every business can participate in a seamless way around the world.
Paul: Right. If you get a purchase order from EY, and we have perfect credit, you should be able to get working capital financing to support, serving EY at an interest rate price that reflects the quality of our credit and our ability to pay as a global corporation, not your tiny little local business where you would've paid 10% or 15% and we would've paid 0.25%.
Jeremy: This is technically the building blocks are becoming possible today and there's, obviously, a lot of experimentation. You're rolling out significant things, blockchain infrastructure, self-improving, very, very fast layer-1, and DeFi implementations. If you had to imagine two to three years in the future may be just through the lens of what you're building at E&Y, what do you envision? Obviously, you've given us a little bit of color on some of the things that you envision, but what do you see happening with enterprises themselves adopting this and adopting stablecoins on-chain and these economic contracts?
Paul: I foresee a couple of things. First and foremost, the most important thing, for me, is this will only take off if the blockchain ecosystem invests in privacy. No corporation is going to spend a penny on a DeFi system or anything that doesn't give them privacy. Right now, today, stablecoins, DeFi, none of these services support privacy. That's job number one, that's my number one priority--
Jeremy: That's [unintelligible 00:12:33] or equivalent. [chuckles]
Paul: Not to beat a dead horse, but let me flog privacy some more. There's a lot of privacy challenges to work out because if I issue a purchase order from E&Y, I want you to be able to get credit against that purchase order, but I don't want you necessarily to tell everybody that you have a PO from EY or for the amount. We need to find a way to do credit rating and other things under privacy in that environment. That's one piece of this.
I think the second piece of this is we've got to figure out security. Today, DeFi is a little bit of a cesspool from a security perspective. There's a lot of hacks happening and that does not scare me, it should not scare you. That is a normal part of a maturing ecosystem, but enterprises prefer to be at the back of that. They want to come behind. We need to mature security.
One of our big pushes is we have a system called Smart Contract Review, which is designed to address security issues and help companies manage them. Then I think the third thing is I believe there's a sweet spot where enterprises will start and it's direct materials procurement at the business network level. What I'm talking about here is manufacturing companies that buy routinely from global sourcing from multiple suppliers and they have decentralized manufacturing, which means they've got suppliers in different parts of the world that they're subcontracting to.
What that means is that your manufacturer in, say, Malaysia needs to be able to buy on your behalf and at your discount the raw materials you've negotiated. That's what we mean when we talk about network operations. That's what I think is the sweet spot in terms of creating value. Security and privacy are essential requirements, but the decentralized structure of the system is what will get, I think, companies to spend the money and to do the work.
Jeremy: As always, Paul, incredible perspective. Really excited to see the progress you guys are making and really appreciate you joining us to share your perspective today. Thank you, Paul.
Paul: Oh, no, thank you. Thank you for having me on and letting me ramble on. It's always a pleasure. What you guys are doing is very, very important. We need this payment mechanism, we need programmable fiat currencies. We are very appreciative of what we see Circle doing.
Jeremy: Thank you so much. Have a great day.
Paul: Thank you.
Jeremy: Absolutely. Our next guest is ShuttleOne founder and CEO, Hongzhuang Lim, who joins us from Singapore. Thank you so much for joining in the middle of the night. I deeply appreciate it. Where he and his startup have been hammering away at real-world uses of stablecoins in trade finance, having deployed some of the very first uses in the world. It's really a pleasure to have you on the shows, Zhuang.
Hongzhuang: Thank you, an honor. Thank you for having me.
Jeremy: Absolutely. Maybe we can start. Just briefly, tell us about the history of ShuttleOne and how you got into this and working in this problem space.
Hongzhuang: ShuttleOne has been a startup. We are based in Singapore for about two years. We were founded as a group of friends at the end of 2018 and we saw a very clear need at the height of crypto winter, I guess, and this clear need was there was a lot of promises of the blockchain, the technology, stablecoins was just coming out, but there was no real-world use case. It wasn't impacting many forces of life that the blockchain technology is supposed to function.
We decided to do something very simple from the onset and there was just building fiat on and off-ramps or the Southeast Asian countries like Indonesia, Malaysia, the Philippines, Thailand, and so on. With that in place, and one of our first few transactions to Indonesia, to IDR, was actually a remittance from Malaysia to Indonesia utilizing I think it was 400.52, $400 of USDC.
Hongzhuang: It was done in a matter of like 13 minutes, which is unheard of in the remittance space and end-to-end, in that sense. From there, we just decide to branch out into what are the more impactful use cases there could be. We started looking at real assets, things like your trade financing, cargo. We were fortunate enough to work with some of the government entities around the region that supports our global supply chains.
We [unintelligible 00:17:39] reports now and programmable money such as the stablecoins, USDC, for example, we are able to capture off-chain data. Things like your port data, things like your risk management data, bring them on-chain and interact with a virtual currency like USDC, make certain disbursement for trade finance, and make the financial services seamless and very straightforward, in that sense.
Jeremy: It's very, very cool. I know you've been at the cutting edge of this. Maybe just walk through an end-to-end use case for stablecoins in these trade use cases tied to the ports and shipping activity like very, very specific about an end-to-end use case.
Hongzhuang: Absolutely. Maybe since we are in the COVID-19 pandemic, I'll bring up an example that I'm very proud of. One of these things that came in the months of April, May, June, till now actually, especially during the early onset of the pandemic, a lot of these small and medium-sized enterprises-- Paul mentioned earlier on that that corporations, no problem with credit. Everybody's going to fund them, but the SMEs, the small and medium-sized businesses, cashflow financing is a lifeline.
Before the pandemic, we are already having big issues with such SME financing, in that sense. At the early stages of the pandemic where people are trying to secure masks, gloves, PPEs, especially from maybe China or production houses like Indonesia or Thailand, and when they fall below the credit line, that's always an issue.
We had many instances from April where the merchants are able to take a loan on the blockchain, on the internet if I may, pay their suppliers, which they instruct the smart contracts, which is all powered by infrastructure of smart contracts, who they want to pay, say, in China or in Thailand, for example. The supply gets paid, they secure their supplies and because we work with some of the biggest ports around in Southeast Asia, they're able to arrange for logistics and move these supplies in quick fashion, in that sense, which maintains certain business continuity.
This is important for SMEs, for their communities where they serve. We serve a lot of merchants who are in rural areas of Indonesia, for example, and these things cannot be late. Some of these supplies cannot stop and being efficient in financing, being efficient in payments does make a big difference during this period of time.
Jeremy: That's pretty powerful. You're using, essentially, I don't know if it's truly [unintelligible 00:20:53] port data to communicate the movement of goods, provide underwriting based on that, provide credit in the former stablecoins to provide forward capital to move goods to the next phase.
Hongzhuang: Right. Maybe I can expound a little bit on that port data side. We tokenized the port data. We have a process innovation that ties the on-chain risk management to the off-chain processes risk management. With these two combined and with the efficiency of stablecoins and digital assets, that creates stability in this whole trade. When I mean stability, it actually reduces the level of trust that is needed maybe without the blockchain technologies, without programmable money, in that sense, and it allows the trade to be more straightforward and efficient. That's how we are doing capturing data. There's operational data, tokenizing those data and making sure that the risk involved are well mitigated.
Jeremy: That's awesome. As you look out and what you're building, you're obviously implementing processes and using technologies that are new, both in trade and commerce and in the financial systems. What are the barriers that you see especially within the Southeast Asia market? What are the barriers that you see to this having much wider or broader adoption?
Hongzhuang: I think in Southeast Asia, we are always a little bit behind in terms of the top process or developments of the West in that sense. We don't know what we don't know and this includes a lot of the partners that we interact with on a day-to-day basis. I think awareness is always the first hurdle. We spend a lot of time lobbying, educating, creating awareness, not just for the people that work immediately with us but also their stakeholders. That could include their operational partners and stuff.
I don't think that's the biggest hurdle. I think one of the key hurdles could be always regulatory. It's still gray in most parts of, I think, Southeast Asia. I'm based in Singapore. We have a law for digital assets or what we would like to call digital payment tokens. We call it crypto. It's taboo, words like that. We don't talk about crypto publicly but everybody knows that it's virtual assets, crypto using the blockchain. I think regulatory is also a big hurdle.
Lastly, I think great UI and an awesome UX is missing. A lot of these smart contracts are in the background. It's behind. It's powering something like smart contracts power software that are almost as old as me, almost 36, 37 years old and they're still using that. These are the main challenges, I think, and we need great user experience for mass adoption, I think even for on the enterprise side, for them to understand how this works, in that sense.
Jeremy: I think I see that, the regulatory piece, the user experience piece, and then obviously the scalability and efficiency of these underlying platforms which I think is being addressed more and more. That's very, very helpful, Zhuang. I really appreciate you joining to share the ShuttleOne story and how you're solving problems with stablecoins in trade in Southeast Asia. Really deeply appreciate you joining us in the middle of the night again.
Hongzhuang: [chuckles] It's all good. Thank you very much for the opportunity and for the stage that you have given us. Circle has done a great job with USDC and it's one of the most efficient, I would say, stablecoins that we use for remittance and trade financing in our ecosystem right now.
Jeremy: That's great to hear. Awesome. Have a great rest of your night.
Hongzhuang: Thank you, Jeremy. Cheers. Bye-bye.
Jeremy: Absolutely. I think building on this conversation with Zhuang, we're now joined by Centrifuge founder and CEO, Lucas Vogelsang. Welcome, Lucas.
Lucas: Hi, Jeremy.
Jeremy: You're back in your hotel. You're safe.
Lucas: Probably the last conference for a while.
Jeremy: What city are you in now?
Lucas: I'm in Frankfurt and funnily enough, the crypto assets conference which is a very, actually pretty well regarded more on the enterprise regulatory side conference that they did the first iteration this year in March, right before things start getting bad. I guess now actually [unintelligible 00:26:11].
Jeremy: [unintelligible 00:26:11] shut down again.
Lucas: Germany's getting shut down again. They [unintelligible 00:26:15] in again right before. It was a funny coincidence or not-so-funny coincidence.
Jeremy: I'm happy to hear that you're in a good place. Look, I've been following Centrifuge for a while. I think you're obviously working on some very related areas here but maybe you could just tell us a little bit about yourself and your journey into this just to set the stage.
Lucas: Maybe, I think there's two things I always like to talk about specifically during my journey into the Centrifuge. Maybe a bit of my past life and my co-founder's past life is that actually, we built a fairly large traditional FinTech in San Francisco, a company called Taulia that pioneered a specific piece of the, I would call trade finance or B2B lending space. Specifically, Taulia pioneered this idea that the financing opportunities, your entire supply chain by working together with a bank, getting a line of credit from them and then offering that giving an alternative to these companies going to what tradition are very complicated and expensive [unintelligible 00:27:41] businesses.
Taulia, to date, I think they're averaging financing out $30 billion a year, originating $30 billion in loans, and are doing that for 150 of the Global 2000 companies. Maybe just super quickly this, for example, Toyota is one of their customers. Toyota offers some of their smallest and some of their largest suppliers a chance to get an early payment at the click of a button and that's using either Toyota's own cash or third party cash to do this. This is where we came from.
We got to know the B2B banking and finance world really well and we saw what it looked like both for the largest and the smallest businesses in the world. Based on that, actually, then end of 2017, beginning 2018, we started sitting back together at a table figuring out what would the next iteration of Taulia be? What would the next FinTech be if we were to talk about blockchain and crypto and think, how could this technology be adopted? At the time, I think DeFi became a maybe somewhat common word in half a year later or even later. Really it was [unintelligible 00:29:00] was a thing. Dharma protocol was just coming up, I think.
Jeremy: It was about half a dozen projects that were [unintelligible 00:29:07] DeFi. There's the concept of--
Lucas: When was Circle actually founded?
Jeremy: We were actually founded in 2013.
Lucas: Good. I don't remember when I first heard about you. It was a small space. We were thinking of, okay, how do we find a way that actually real businesses, the ones that we knew, the ones that we work with that had this huge need for capital could actually access the liquidity that existed in blockchain and what Paul Brody said earlier on businesses don't want to pay for invoices in Bitcoin. Obviously, very true.
We started to think about working with using stablecoins to finance loans. Fast forward to where we are today, actually, then we quite soon realized that a large missing piece and this chain from invoice or house or asset to financing is actually that DeFi today is not made to scale to the single non-fungible asset level. These assets are, they have an independent due date that you can't really cut them up. You can bundle them but--
Jeremy: It's a specific thing. It's like an invoice from a company. There's one of those.
Lucas: We were actually some of the first people to think of oh, NFTs are the thing to use for representing your old assets but then exactly invoice NFT which is we pushed that out as a first experiment in 2018 but the problem was actually DeFi while everyone loves to use NFTs and think of how to do the governance and the scalability is not there to do that for individual invoices. We started building a securitization layer on top of that.
Having a way that you can bundle those invoices, pool them and have investors invest in these pools, getting a blended return, getting a diversified portfolio and now there's much more liquid larger asset class is actually what you can interface with an [unintelligible 00:30:59], for example, or a MakerDAO. That's what the product is that we're building that with [unintelligible 00:31:05] allowing real-world assets, trade finance with a large focus but also others to be financed using DeFi liquidity settled and stablecoins.
Jeremy: It's extremely cool. This intersection of "real-world assets" using DeFi mechanisms like liquidity pools even AMMs on liquidity pools of these NFT based real-world assets, stablecoin settlement. It creates essentially decentralized money markets for these externalized forms of assets.
Jeremy: That's awesome. [chuckles] It's very, very interesting. How are people using it? What are some of the first use cases that you're seeing?
Lucas: We've been live with the first version of Tinlake since May. We actually just last week launched the second major iteration. Technically, it's version 3 because we did some of the very earliest transactions with our really first version, together with the Maker Foundation, back in summer last year. The second iteration we launched on [unintelligible 00:32:32] public product release in May and the usage has been still very small, it's super early. I can just name a few.
For example, ConsolFreight is a freight forwarder technology company. They're building tools to allow freight forwarders and buyers to coordinate the delivery of goods, settle these shipping transactions. They have invoices, they have data, they have customer relationships. These businesses, like almost every other business in the world, do have a need for capital. A lot of times, working capital is a thing that they would like to use as a source to get liquidity when they need it. ConsolFreight is in the ideal position to offer that service.
Instead of building out this finance product using a bank line of credit or some credit hedge fund as a source of capital, they were visionary enough and believed in crypto and DeFi enough that they said, "Actually if I can tap into the liquidity in DeFi, in the long run, I'll be able to have a source of capital that isn't just one source of capital where I depend on one bank, and I'm subject to whatever the system is they have, whatever the underwriting criteria, the slowness of the process, but actually, I can offer my debt to whoever's interested." That could be a MakerDAO, that could be money markets, that could be you and me that just want to have exposure to this asset class.
That's the vision for these users is to get this super flexible, dynamic line of credits, essentially, use DeFi as their line of credit to start originating these loans. ConsolFreight, as an example, they finance over 100 loans. I think they did around DAI700,000 in originations. They're using DAI to settle these loans. They done this, I think, in three pools so far, and they've now just last week, were also one of our early-- Actually, the first ones on the new release that we just released, and so we've started a revolving pool that has now grown to 300 DAI in size. They have around $300,000 in money that they are originating, growing that over time.
That's maybe a quick summary of what's been happening in the last month.
Jeremy: That's awesome. Connecting the dots to really making this happen for people is really exciting. Obviously, we can see where this is headed at a high level. As this grows, who stands to benefit the most from this and who stands to lose the most from this, assuming this gets to scale in the coming years?
Lucas: What I always think of crypto is the thing that people always see is that it can disintermediate a whole bunch of things. In trade finance and in just a lot of debt, that is actually where we can get to a point where the person providing the liquidity and the person requiring the liquidity now move that much closer. That, in the end, will result in, hopefully, more interest for more yield for the investor, but also a lower rate for the borrower. That is what the transparency and the openness of the Ethereum ecosystem and then by extension the DeFi ecosystem that came through it, I think it has it ingrained in this idea.
This is transparent and if there is an opportunity that could be arbitrage, that could be removed, then you can do that. I think that is, ultimately, what stands these businesses, both investors to benefit the most. The ones that I think will be, ultimately, left behind are the large institutions today that are not willing to really optimize their process. The companies that today are happy to pay or charge 0.50% for a bond that Google issues but at the same time, say, a small business needs to pay 15% APR on their trade finance assets. The credit risk is not 30 times more. The reason this discrepancy is here as well because its scale and efficiency of process.
Jeremy: This concept, I use this a lot. The internet is incredible at building these multi-sided marketplaces, multi-sided platforms that allow a very, very long tail of participants to get involved very, very efficiently, whether that's like I'm a tennis instructor and I'm going to bid on ads, I'm going to find the right person through AdWords this auction marketplace or, obviously, the original example of eBay. Marketplace platforms, that the long tail participants have the same level of reach, the same level of access as the biggest. We haven't had platform marketplaces on the internet in financial markets.
What blockchain does and DeFi and decentralized markets, it creates that level playing field. It makes it efficient, even at that small business scale, to participate in debt markets, whatever they might be, in a way that in a human intermediated world where you've got loan officers looking at books and records and so on, it's just not feasible economically.
Lucas: Exactly. That's really what's happening. I think the reason why is that maybe you could say peer-to-peer lending and then crowdfunding where some of the technological or more product inventions that started breaking down these barriers of large institutional banks. Really still, there's so much red tape around that that it hasn't been the 10X improvement. Where I agree with you, crypto DeFi is the place where we now see that, actually, this could enable this marketplace for financial assets.
Jeremy: We hope and pray. In all seriousness, it's happening with an incredible pace. There are barriers, obviously. We're both entrepreneurs. We're trying to build this and we're running up against the inertia of the existing institutional frameworks, the existing regulatory frameworks, all this kind of stuff. What do you see when you think about the biggest barriers that are in the way for what you're doing? What are you seeing?
Lucas: [chuckles] I need to make sure that I don't start just complaining about fiat on and off-ramp costs and usability.
Jeremy: [crosstalk] out there.
Lucas: I know. When you do start interfacing with the real world, you have regulatory issues. If people would know the legal bills involved in trying to innovate in both within the legal framework and the technical side, then, yes, it's a sad story but the other thing that I do think is extremely important as well. As long as we're operating at this bridge between or at this intersection between real-world and crypto, a key thing is just making this on and off-ramp really easy and fast. It's not just the cost but also the speed. When we started doing these first real businesses that never owned any stablecoins in it before, never really had a significant amount of crypto, I was looking at how do we solve this problem for our users where they pay upwards of 0.50% for buying their crypto, and then how do they keep them safe and all that.
For a small business, I dream of a time where, actually, I can have a bank account. Whether my money is in crypto or whether I write a check somewhere or send a wire, it doesn't matter. I can do both from the same balance because, as soon as I have to think of my money being in crypto or out of crypto, it's a hassle. It's like, actually, I have this problem that now suddenly I have a liquidity crunch on one side or the other.
Jeremy: We're moving inevitably to a digital currency first treasury operation world. Where probably start with SMEs. It's not going to start with the Ford Motor Company or BMW. It's going to start with SMEs that go I want to keep my working capital in stablecoins. I'm going to participate in yield. I'm going to have the fastest first-party payments that I've ever had. I can interface with wires and other things. I can do that on-demand. I can do that with the same cost and efficiency as people who are entirely in that. I'm inheriting these benefits that are there.
We're excited about that. Once you're there and people can interface with DeFi markets and other protocols and whatnot, I think businesses will say, "This is just so much superior." It's like people moving from the running their own data centers to using cloud services. It's insane when you think about the number of businesses that had like all these racks and racks of stuff that they're doing. Everyone's pretty much cloud first in most businesses now. It seems we're inevitably headed there but it's a barrier.
It's definitely a barrier and that's one we're working very hard to to knock down. Looking out a little bit, what is mainstream adoption look like in broader global commerce and the next like two to three years from your perspective?
Lucas: I think, and this is maybe also a learning of the three years or more now that I've been in crypto, is that just thinking of the user, we went with what you would probably call a multiplier. The way we started building these pools, how we allowed users to actually access liquidity, is unfortunately not going directly to the business today because, sadly, for them, to start dealing in crypto, it's still a bit out and it means there's a whole lot of knowledge.
Keeping your keys safe is really not that easy, even for me. As a software engineer and doing this thing every day, I'm nervous every time I do something bigger. The early adopters that I think are interested in this stuff and see it and understand and have the long-term focus are FinTechs. That's why I think, ConsolFreight a FinTech. I think those are the businesses that can take, actually, this opportunity. Think already about money as a technology that they use are interface that directly with technology.
Those, I think, are going to be the ones that start adopting this stuff first. For us, they're the multipliers that actually do make sure that the loans originated in DeFi end up in you as US dollars on the business's bank account that needs it.
Jeremy: Totally agree. FinTechs are going be the front edge of market adoption. Awesome. Lucas, really great to have you on, and very excited about the progress you guys were making and look forward to--
Lucas: Let's talk about that on-chain treasury first bank account idea. I really, I'm curious to see what, I think so you guys have some interesting stuff in store as well there.
Jeremy: We've got things in the oven.
Lucas: Good. [chuckles] We'll see.
Jeremy: Awesome. Lucas, thanks for joining us late at night, and safe travels.
Lucas: Have a good one. Bye-bye. Thanks.
Jeremy: A lot of, I think, really powerful ideas here on this connection between public blockchains, stablecoin as this base layer of money, and building block. This programability connectivity to these new borrowing and lending platforms that are being built entirely on these blockchains. Then, finally, and really most importantly, the trade piece of this, the trade finance piece of this is the connecting real-world assets, connecting things like invoices that are tied to trades that are between companies for goods and services.
This is the last mile of commerce. We're seeing this really starting to come into place, which is very, very exciting. Hope you enjoyed the show and we'll look forward to next week. Until next time, stay well, stay safe and stay informed.