Big Bank Stablecoin - Can It Compete?

Sy Taylor  0:10  
Welcome to Tokenon East, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name's Simon Taylor. I'm your host, author of Fentek Brain Food and head of market there at Tempo. And joining me back once again is Kai Sheffield, head of crypto at Visa. How are you doing, Kai?

Cuy Sheffield  0:24  
I'm fantastic. It's an exciting week. A lot going on. It's great to have a return guest back to break it down, and we got to get into.

Sy Taylor  0:33  
Joining us this week is Ada Vaughn, who is the head of DeFi at the Stella Development Foundation. How you doing, Ada?

Ada Vaughan  0:39  
Great. Thanks so much for having me, Simon. It's been too long.

Sy Taylor  0:43  
Aha! Good to have you on the show. Making a return is Darko Heydukvich, who's head of securities digitization at the London Stock Exchange Group, or LSE, as the cool kids call it. How are you doing, Darko?

Darko Hajdukovic  0:55  
I'm doing very well, thanks. Super excited to be here.

Sy Taylor  0:58  
Oh, so excited to have you back because we've got one heck of a story, which we'll get onto in just a second. But before we do, I need to remind viewers and listeners that views and opinions of our contributors today are their own and might not reflect those of companies they represent. Please don't take anything we say as tax, legal, or financial advice. I'm still not as quick as the guys in the radio ads, but I'm really trying. And also, I'm going to remind you that this episode is sponsored by our friends at Modern Treasury. This episode is sponsored by Modern Treasury. Stablecoins are here, and so are checks and ACH. They're not going away. RTP and Fed now and new types of payments rails are emerging all the time. The challenge now is integrating all of these without slowing down, modern Treasury offers one single API for fiat and stablecoins, helping teams launch payments products in days, enter new markets, and serve more customers. Trusted by companies like Procore and Navan and Morse, and backed by over $600 billion in payments history, learn how to adapt to changing payments rails with scale and confidence at moderntreasury.com. All right, story number one: the London Stock Exchange Group will put its 100 largest stocks on chain as X Stocks partners with Kraken's parent Paywood and plans to trade them on its new 24 hour venue, LSE 24. So, I could stop reading all of the bullet points on this story, but Darker, why don't you tell us about this partnership and X stocks, and firstly, what it is, what people will be able to do, and and sort of what the journey looks like.

Darko Hajdukovic  2:41  
Great. So we're very excited about this partnership. It's a collaboration between Assets and Payward, as you said, and it's a very complementary collaboration. On one side, Payward and Kraken are bringing their digitally native distribution. On the other side, you have London Stock Exchange that has has a trusted market infrastructure, and it is subject to regulatory approval. I always have to stress that subject to regulatory approval, X stocks will be listed on the LSC 24. And you remember LSC 24. This is when I was here last time. We talked about this a little bit, where we will use the London Stock Exchange in extended trading for ETP, so this is a very much a natural evolution. Now thinking about also trading the stocks in in X stocks form, but can I also say that there are many ways to digitize and tokenize equities? X stocks is certainly one, and there are many other similar ways of doing that. I would also want to say that as part of the efforts that we that we are doing in the digital securities depository. If remember, I was talking about that as well. We are also exploring solutions where we create tokens that are rights preserving, that are giving all of those benefits that are associated with the public equity trading. So we are building on that separately, and we will be talking to the market in due course as these things develop. But can I just sort of take one step back and look at the future here? Really, what XTox is showing, and and not just Xbox, but others as well. I have to always say there's the other products there. What they're really showing is that there is definitely appetite in a digitally native community to consume the products, financial products that exist in more traditional world, and this is a great opportunity, a very broad opportunity for us to make public markets more accessible without really compromising the features that give investors and issuers confidence in those public markets, and really, I think when we talk about, and I hear you a lot. I'm a great fan of your show, and I hear you a lot talk about different use cases. And every week there is something new coming to the market. That's absolutely right, and each one of those use cases will have its own business case, and they will be solving some real, real, real. Life problems, but I think it's also important for us to look at the big picture. Where is this whole train going in real world assets? And you can see from the announcements that we're making that we're making a lot of announcements recently. We're certainly seeing a future where an investor in the future, a market player in the future, not just investor but a broader market player in the future, can consume these financial products in a digital form, but also in a traditional form, and they can choose what they want, and they can choose how they want to trade them and what benefits they want to get from one or the other, and they should be able to do that across different asset classes and across different jurisdictions. And I think that through what we are building, you can kind of see that future taking a little bit of shape, especially in the announcements. And I'm hoping, and I'm pretty sure, this is not my last appearance here. There will be more things to come.

Sy Taylor  5:49  
Tai, you were saying before the show your entire X feed is like something to do with stock tokens at the moment and stocks and stock trading. If you kind of your thoughts on this

Cuy Sheffield  5:59  
one, yeah, I don't know if you all have been been following the the Robinhood chain and and kind of Robinhood season, but it it feels like just in the past week, the growth in excitement and interest in the concept of stock tokens has really accelerated. I think the big question that I have is, it's like you have a a segment of very early adopting crypto traders speculators that are now interacting with stock tokens for the first time, and there are all sorts of weird experiments that are starting to happen around them. Some of which I I think are really interesting and novel. Some of which are like pretty scary, and people are likely to to lose money, and so I'm most interested in this question of what happens after stocks go on chain, and is it like that's the end point that the stock is there and now someone could just hold it or trade it, but it feels like what Robinhood is showing is when you put stocks on chain if they're in this format, at least that that the Robinson tokens are in, it's then starting to merge into DeFi, and then you have people building and using these stock tokens in all sorts of ways. And yeah, I saw in my feed the other days someone built a game that involves stock tokens, and so it's like you're playing a game, and then you're like earning stock. It's like something I never would have imagined. And there's so many questions from a regulatory perspective, from investor protection. And so that's that's kind of the question I'm interested in all of you. Of like, is the end just you put it on chain and you buy and hold it, or is part of the expectation that there will be experimentation of new products that are built around these stock tokens.

Darko Hajdukovic  7:43  
So, look, where we are really here is providing access. So, this is about access. This is not about people's behavior. People will behave in the way that they want to behave, and that is the most appropriate for them. So, Kai, to your point, this is not about us now choosing the investment strategy, it is about access. People today access equities, they access fixed income, they access all sorts of instruments. It is just making that access easier. Now, is it possible to develop future products on chain that you can't do currently? It's possible. I mean, you can also create products on today's financial products, and people do that. So, as far as we're concerned, from from the exchange, from traditional exchange perspective, is we're seeing this demand, and it's without doubt there's a demand for greater flexibility for access. People want to access securities in a in a different way, in a more flexible way, maybe certainly for extended hours, so we are therefore going to be meeting our clients' demand. How they choose their investments-that's that's not for us.

Sy Taylor  8:50  
I do think about the the difference role that an exchange plays versus the distributor plays. To your point there, Darko, that many different people in the market have many different roles to play, but I also think about the nature of the UK stock market. You know, as an observer and a market commentator, I think many would agree that the UK equities market is is pretty good value, arguably underweight and underpriced in global portfolios. The UK hasn't necessarily had that many blockbuster IPOs lately, but it's not like that the London Stock Exchange has been sleeping on its hands when it comes to tokenization. This model is a little bit different to what the DTCC is doing. This is talking about bringing stocks natively on chain rather than letting them sit off chain and having a token that sort of represents that stock claim move around on chain. How do you think about the difference to those two things, and and how do you think about the difference, and what might make that more attractive to somebody who's issuing stock to potentially do so in in LSE as a venue?

Darko Hajdukovic  9:53  
We see a world where tokenized stock and and traditional stock, whatever whatever we want to call it. Is going to coexist, and I think we need to find ways and mechanisms of, as I often say, toggling between one and the other, and that is to meet the investor investor appetite and how they're going to hold and what they want to do with that stock eventually. So we need to be able to enable investors to do that. That's going to make the whole UK financial markets more attractive, more accessible, and we can do that without compromising any of the current protections that are inbuilt in the system. And I can talk about a little bit later how we think about those those protections. So we can't sort of comment on the valuations. I'm going to have have to call whatever you said beginning, Simon. We are not giving investment advice here, but certainly there are some really interesting opportunities. This is about making people access those opportunities in the way that they want to, in a way that works for them in the best possible way, and that's what we are. We are enabling our clients to come to the market, access that market, and develop some benefits in the in in the future from that different access.

Cuy Sheffield  11:05  
In Ada, how do you think about the intersection of stock tokens and DeFi? And you know, we were starting to talk about that earlier. Of like, how do these worlds come together once you have a stock token that's running on a public chain? What do you think people are going to start to do with it, and how do you see that play out. I

Ada Vaughan  11:22  
think the initial promise for the equities markets and bringing stocks on chain is really about additional distribution. Like we talk about this, I think across many areas of public blockchains is expanding financial access. So it seems like the most obvious use case, right, is like giving someone who is in an emerging market, for example, access to U.S. equities through a tokenized instrument-super interesting, like making these levels of permission go away so that KYC users all over the world can access U.S. equities. So that's kind of the first layer. But I also think about DeFi in general being an expansion of the financial system in ways that go beyond what TradFi can do, so some of the things you were mentioning about gamifying stocks or making them used as a reward or an incentive to do something else, like bringing people exposure to new instruments, is is a pretty interesting and fun space. But more so, I think about the repetition of what we have that works well in works well in TradFi, but it's not accessible. And in that case, you know what you're describing earlier, Kai, is something like a margin account, right? Like you have a certain amount of value on a on a stock exchange, on a on an ETrade or a Fidelity account or or one of these platforms that you know most people in the U.S. use, they don't have those platforms in Latin America or in sub-Saharan Africa, places where they might want to start to preserve wealth or or build wealth in small ways, and they can't get anything less than you know a full share of a stock from a registered broker, which has a lot of gatekeeping and a lot of barriers to entry, so those are the things that I that I think are super exciting. And then this idea of margin bringing, I do see some experimentation already with bringing equities as collateral into DeFi. It is fraught. It is not an easy thing to operationalize because of the volatility and because of the the liquidity that's needed to support liquidations, et cetera, but it's starting to happen. And and I think anything that that is a real world asset representation has the opportunity to be presented in into DeFi in new ways. So that's kind of what we're tracking and trying to facilitate on public chains.

Sy Taylor  13:38  
The composability is is the unknown. It's still early days, but it's always the exciting bit. But Dalco, what should we look forward to over the coming weeks and months from this partnership, and and what are you focused on as we round this story out?

Darko Hajdukovic  13:54  
So look, we are we are going to be looking. I said we're going to be looking at subject to regulatory approval listing X stocks, we are obviously looking at this market very carefully. Listing them on LSD 24, I should say. We are also looking at those other solutions. Just to be clear, on the LST 24, that is being launched in using traditional technology, so that is not yet done in a in a tokenized form. We are certainly looking at Elsec DSD, digital security repository, and what role it can play in that space. But there are a number of technical solutions that need to be resolved in order to have that handover between traditional and digital. That is actually really interesting and exciting thing to look at and see how those two infrastructures coexist, and that is that that we will be will be looking to do. But this is definitely we are looking as all the marketplaces. We're looking at this new demand from the market, that demand from traditional exchanges, from current scale digital players. And that is all about greater flexibility, as you said, broader distribution. How do we make everything more efficient? And so we will definitely be looking at that. And yeah, stay tuned.

Sy Taylor  15:11  
Indeed, indeed. Well, Paywood has also been a been a big part of this, and seems to be doing quite well with their X stock solution. Very different business to what they were some time ago. And speaking of tokenized stocks and and that whole story, the New York Stock Exchange's owner ICE has invested in T Zero and names it the second digital transfer agent for its tokenized securities venue, the digital trading platform. And ICE joins the latest funding round and gets a license to its a patent portfolio, the T Zero patent portfolio. They've got 23 patent families with 103 patents covering compliance-aware transfers, upgradable smart contracts, very interesting, and corporate actions. And the two will look at using T Zero tokenized assets as collateral at ISAs, clearing houses, Ada, as you were just sort of talking about. Securitize was the first digital transfer agent back in March 2026. This is now the the second. And this summer, T Zero sent Securitize a cease and desist over two products. They had a patent on how interesting and how curious Isis seemingly playing matchmaker here, very very interesting today. And of course, just just yesterday, as we were writing this, the SEC actually proposed changes to its transfer agent rules, which haven't been upgraded significantly since the 1970s, and sort of required a very specific type of ledger and wouldn't have allowed tokenization to happen. So these little details changes that are coming from the SEC are really seem to be enabling things, even if we've not got the Clarity Act. Any any thoughts on this particular story?

Ada Vaughan  16:53  
I think it is signs of a sea change, right? Like we've seen this with DTCC coming into the Stellar ecosystem and leveraging other public blockchains, it's a very interesting space. And I think because the base layer is about to go on chain and become much more efficient, it's going to pull everyone along with it. Right. So I'm not sure. I'm not a patent attorney, so I can't necessarily comment on the the value of the IP that's in play here, but I can say that these movements in the regulatory, I would say, sentiment and kind of attitude and and a willingness to move forward and somewhat keep pace with the technology that can really help market efficiency is super encouraging. You know, we've seen a lot of movement and have had a lot of conversations since the DTCC announcement, which have driven just a lot more value to come on chain. We're seeing on Stellar, there's over 4 billion in RWAs issued on chain now across a variety of assets, a variety of issuers. So it's become less concentrated, right? Like more people are experimenting, more people are issuing on chain and finding utility. It's kind of this barbell, right? Like you have the issuers, and even at retail, like the use of blockchain at the end, at the at the delivery end, and then you have it at the base layer. And I think what we see is this kind of filling in and kneading in the middle over the next say year to three years, where the entire value chain of the markets, you know, all the capital markets on chain promise will come to fruition.

Cuy Sheffield  18:30  
Yeah, it's it's fascinating to me that T Zero was started in 2014, so I think it's what 12 years old, if if I if I recall, and like the whole story of Overstock.com, you know, being a first mover, accepting Bitcoin at the checkout, kind of their their CEO being a big proponent of of crypto, and then spinning out this this T zero tokenized security space, and what a throwback man! I

Sy Taylor  18:56  
completely forgot about Overstock. Totally,

Cuy Sheffield  18:58  
they were like 10 years too early. Like I think they're wrong about the Bitcoin at checkout piece, but like they're right about tokenized securities. They were just so early in the space, and I'm interested in in kind of what type of technology innovation is going to have to happen across the stack to support these types of products. And when you think about enabling smart contracts that can support dividend payments and just the the ways that stocks have to be managed over time and are are different than a traditional crypto token and so I think that there's you know going to be a role and seems like increasing competition around technology and IP for how to best represent stocks on chain, but yeah, shout out to them for just sticking it out. Like to start the vision in 2014 to be right today is is cool.

Ada Vaughan  19:48  
Oh my gosh, that's true. We had we had tokenized stocks. There were tokenized stocks on Stellar six and a half seven years ago. There were several projects that came in. We're you know trying to offer stock like you know something a tokenized instrument that married with a stock in the U.S. it completely fell apart. You know it just did not work. There was no regulatory framework for it. There was no way to make it legal, and and the projects just floundered because of the lack of regulatory framework or clarity. So I mean it's a different world today. Now, now there are like you know going concerns. There are actually programs that are working and running and and delivering. So you're right, timing is everything. I think a lot of these ideas get tried.

Sy Taylor  20:33  
Post Robin Hood, post figure, different U.S. administration. Just sometimes timing is is everything darker, but I also think about the the demand side of the equation, right? Like the distribution side of the equation. Can you get stocks to more global markets? We we had Stephen Sykes from public.com on the podcast a few weeks ago, and one of the things that was attractive to him about tokenization was the ability to go into multiple geographies much much simpler than you ever did before with self custody wallets and and the nature of that and you know those sort of global self nations may start to have some regulatory pushback and not everybody has the appetite for doing that sort of thing. One person's financial inclusion is another person's regulatory arbitrage. You know, it's always a difficult line for different businesses to kind of cross, but the potential there is is really really huge, and we're in such a fascinating time. Docker, your thoughts on this story and as a as a market observer, the different approaches people are taking around the world.

Darko Hajdukovic  21:37  
Yeah, you know how I said that there are technical solutions that need to be resolved, especially when it comes to the handover between traditional and digital markets, I suspect that this story is one of one of the technical solutions that need to be put in place. But what is really exciting about tokenization, and what is really demonstrated, is that there is a demand for wallet-based solutions. There is something in the wallet that attracts demand and attracts that that flexibility, that easiness of access, and ability to do to do things within the wallet. That is very exciting, but also ability to put in the wallet different types of securities. And that's last time I spoke here, we were talking about fixed income. Now we're talking about equity. So you kind of see where where we are going with this, right? You want to consume in a in a particular way. Now, of course, wallets have been very much a retail product. So another big handover that is kind of coming on the horizon is is a handover between retail and institution, or a handshake, if you want, between between the two and how institutions react and how will they start to to access the the products. So when we look at the the things that we, in a traditional sense, bring to the equation, when you look at the regulated price formation, market governance, but then you and established participant networks, but then you also look at the distribution channels that the digital players bring. That is where that complementarity between the traditional and digital can really sort of create benefits. One plus one equals three rather than than than two, and success ultimately will not be measured by there who announces the first or who does the longest hours or whatever. the the The success will be based on that sustained liquidity. Who can bring that to the table? Who can preserve investor protections? Let's also not forget who can preserve issuer protections and who can preserve and who can even enhance issuer experience in this space, and and who can improve the end-to-end market process, whilst creating new benefits for clients, and they can be a number of different things. And to be honest, they can also be be things that we haven't even thought about right now, as as they should. And as the markets involved and the regulatory frameworks evolve, we shouldn't forget that DLT, and especially when it comes to real world assets, the DLT shouldn't just be let's replicate the existing process, just use a slightly new way of doing it. I mean, nobody really is going to adopt that. What we need to think, and you mentioned this before, how is the new technology going to make everyone better off in in the system? And when I say everyone, I don't just mean an investor, but investors and market participants and regulators as well. We're shooting from. They can also benefit from from these from these networks and the new ways of doing things. So that's kind of the way we approach this: is that there are traditional players that are bringing something to the table that are digital, and then the combination of the two can really be powerful.

Sy Taylor  24:41  
You know that's such a great point. The hardest thing to change sometimes is the way you do things. You can have a new technology, but if you try and use your old processes on top of that technology, you're not going to get any of the benefit. And I think so many times, the way we did things solved some problems. So we think, ah, I should do this because the reason I did it solved. The problem, and that problem still exists. Maybe it's investor protection. Maybe it's market manipulation. There are lots of good reasons we do things in tradfi, but there might be a better way to do them with a different technology, and that's sometimes the the hardest gap to to kind of cross. And I think it's a really good point, Docker.

Darko Hajdukovic  25:17  
And and there is also some things that traditional finance still does better than digital. We can talk about a number of things that that are actually very very efficient and very

Sy Taylor  25:27  
oh yeah

Darko Hajdukovic  25:28  
very good to to do in a traditional way. So it's not like now there's going to be systemic change. Everything moves moves into the new world. There will be that's why I keep talking about handshakes and handovers. There's going to be between the two. We should just be careful that we don't keep adding cost in both senses. So it needs to be done in a very thoughtful way and sensibly.

Sy Taylor  25:47  
Oh, absolutely! I wrote a piece recently. Netting is all you need because I'm not a believer in pre-funding everything 100, which is the way most stablecoins work today. And absolutely, there are lessons to be learned on all sides, and there are also ads to be served to you, my dear watchers and listeners. So we're just going to take a quick pause here while we hear from our sponsors. Stablecoin operations usually mean a wallet from one vendor and on-ramp from another, and then controls stitched together across all of them. Visa's stablecoin platform fixes this fundamentally. You can mint, move, and manage stablecoins across OpenUSD, and you remain your own custodian all in one single environment. Then, stablecoin-linked cards let you spend balances anywhere Visa is accepted. That's Visa, the global leader in payments, and of course sponsor of this show, you can find out more at visa.com forward slash crypto. If your finance team is interested in stablecoins but doesn't know where to start, then Tempo has a stablecoin advisory team. This is like payments nerds, just like me, including me some of the time to work alongside your team, figure out the right use case, and actually build it all the way to production. You can talk to an advisor by getting in touch at tempo.xyz/advisory. All right, story number three this week: Athena, makers of USDE, has launched Athena Pay, a self-custodial neobank app built on Avalanche, and it's paying up to 6% on dollar savings with up to 5% card cashback, and it's live today in 48 countries. And so the cashback runs four, four and a half, and 5% by tier, and there are different tiers based on on the fees that you pay. USD, Euro, and GBP transfers are free. Other currencies cost between five basis points and 10, and the app pairs a fiat IBAN with a self custodial account. This is a very complete neobank from what I thought of as being a stablecoin. The beta covers 48 countries, including Brazil, Mexico, Kenya, the Philippines, Singapore, Japan, UAE, Australia, with the US and EU left out for now. Although Guy did reach out to me on X and say they'll be coming in the not too distant future. Now USDE, as many of you will know, is the stablecoin of sorts, but it's not necessarily a stablecoin in the Genius Act. It uses a delta neutral hedge to maintain its peg rather than treasury yield. Kai, as our resident payments guy, stablecoin linked cards are in hypergrowth mode, man. Like this is this is just another example.

Cuy Sheffield  28:42  
Every week, every week there are new global stablecoin neobanks coming online that have more and more complete features. If you're launching a global neo bank and you don't have localized off ramps in the countries that you're in at a low cost that support many different payment methods. It's it's hard to compete, and so I love to see it. I think it's amazing for consumers. I think it just increases the competition and raises the bar. and And the question is, how do these companies differentiate and try and innovate in creative ways? You know, I love seeing more creative card art. I love seeing different rewards value propositions, and I think Athena has like a really good brand in the crypto ecosystem of many crypto traders who are familiar with the mechanism that they use behind the the core product and have used it on exchanges and in a number of trading scenarios, it's interesting to see. This seems like a a push to make it more of a mainstream consumer product, where you don't have to understand the the trading mechanism. Now, I think there's a question of okay, what about disclosures and what's the the risk and where's the yield coming from? Every time you see kind of 6% Yield. Then the natural next question is: Okay, exactly where and how, and does the consumer understand where and how that yield happens? I think the self custodial trend continues that more and more neo banks are are going live as self custodial wallets first, where you manage your own keys, and so I think this is one of the biggest mega trends. That it feels like there's still a lot of room to grow, but there's just going to be vicious competition between these different providers, and and I think that that's that's a good outcome to just move financial services forward with more products for consumers.

Sy Taylor  30:35  
Taiwan, I think a lot of these markets really like home markets for Stella. Your thoughts on stablecoin linked neobanks?

Ada Vaughan  30:44  
Sure, boy. You know this country list couldn't be more diverse. When I think about the typical user that they might acquire in Kenya, for example, I just actually just returned from a trip to Nairobi last month, and the user in Brazil, for example, they they absolutely could not be more different in terms of their usage of of basic financial services. You know, in Kenya, the card penetration is very low. Even banking penetration is very low, and they use M-Pesa for absolutely everything. So the success of a product like this in Kenya could hinge entirely on whether they're well integrated with M-Pesa, for example. In Brazil, you know, do they have picks? Is it easy to get value in and out of the card? So this is quite a a colleague of mine used to say this is a big hairy meatball that they have tackled in terms of this this country list. I think that the I would agree. I see a proliferation of of card products, and I think this one is interesting in terms of the landscape because you do see a lot of you know the the card issuers and program managers of the world have made it much easier for an app that has a whole bunch of users to like expand their product range by bolting on a card, and so you see these companies that come into the crypto space, and they're kind of courting the same few 100,000 very mobile, financially well-off users that'll kind of jump to a card, get the rewards, see what it's like, jump in, jump out. But I think that what Athena Pay has going for it in terms of this product, is that it's very integrated to their core value proposition as an asset, right? Like, if you look at the underlying, and it's all public on their website. If you look at the underlying reserve of Athena, what started as a ETH BTC kind of delta neutral patch strategy has completely changed. I think ETH and BTC holdings are, you know, in the single digit percent, like way less than 10% of the reserve. Now they're holding all these RWAs, and so it's a pretty interesting reserve strategy shift. And so it's a lot less of a crypto native strategy and more RWA based. Still very much on the tokenized side, though. So I think Athena is really interesting. They're definitely evolving, and I think this card has a reasonable value proposition based on a brand that has stood the test of time in terms of their product. So all in all, I think you know I give them like this is a good positioning, but I think every single company, you know, and and I think Kai is probably the expert on this, underestimates how difficult it is to change consumer behavior. You know, to acquire a card customer, one card customer, it is hard. It's expensive. So, you know, if they can if they can keep their customer acquisition cost low, and get some good value from these users. Go for it.

Sy Taylor  33:45  
Well, and they've got some interesting levers for the marketing budget, as you say. And Edith, thank you for telling me that. I wasn't aware that they'd shifted their backing. I was aware that the yield had come down, but of course, I guess if they switch strategies, that would explain why the yields come down. But the the yield on USD is running around 4% I believe, at the moment. Yeah, I

Ada Vaughan  34:04  
think it's coming up. It's yeah, I think I looked last week. It was about 5% but yeah, in that range.

Sy Taylor  34:09  
It's it's in that ballpark. So they they have a little bit more that they can work with from an incentive standpoint. They also did this with Avax, and if you look at it, their cashback is paid in Avax, which makes me want, hmm, incentives like everybody plays the incentive game in l1. It wouldn't be surprising if Avax is is helping with some marketing budget there, and and then the ENA token, which is another part of this, because you know Circle and Tether don't have like this separate other token that USDE does. They have their ENA token. That is almost like a loyalty scheme of sorts. Like you can earn this other currency thing. So, Kai, interested in how that tickles your loyalty bone from your old trial paydays? That's a that's a throwback for people who remember that one.

Cuy Sheffield  34:57  
I think there's just there's a lot of experimentation. Happening and and I think that's a good thing. We don't know what's going to work. I think it is interesting that the competition. There's competition at the the stablecoin wallet neobank layer, and then there's a ton of competition at the chain layer that every chain wants to be the default that stablecoins are transferred on that get into these consumer products, and so it makes a lot of sense that a lot of the chains are are looking to do incentive programs. Avex has a AVAX card, as my understanding. They have their own direct to consumer card program in a self custodial wallet. But it almost feels like these are these are new types of like co brand partnerships where Athena's really the one leading here with their community and their brand, but it's built on top of Avax, and Avax is is funding the rewards. And I think we'll just see more of these combination of a chain and a wallet trying to work together, leverage the economics, the incentives that they have to drive adoption. And it's just it's only going to get more competitive going forward.

Sy Taylor  36:00  
Delka, your thoughts?

Darko Hajdukovic  36:01  
So these are, you know, really what you're talking about the retail retail usage. So maybe I can take a different lens and put more of a how do I see it from a perspective of the real world asset tokenization. So it's not about when it comes to RWAs and and how it's being used. It's not just about another stablecoin. It is really what the the test here really is: is the stablecoin that is being used is it removing the friction from the workflow? So, what do I mean by that? Does asset and a cash leg go together seamlessly? Is there a reduction in settlement exposure? Is there avoiding separate reconciliations across multiple networks. So I think that the question remains: Is the stablecoin the right thing to do? That is a tokenized deposit. Is it a combination of of all of them? It would also be remiss, and for me not to mention our own solution here. And sorry for the plug, but we also have a something which we refer to as digital sacrament house, which is a open access platform that enables instantaneous and programmable settlement between independent payment networks. It's called Dish, Digital Settlements House. So that that's also another way of orchestrating payments that that you need on chain. But absolutely two critical tests when it comes to stablecoins or other payment mechanism is, as you said, Kai, interoperability. So is this going to be localized in a in a chain or in a bank, or it can travel around? We talked about before, and you mentioned it also, Ada. How do you move things across the borders? How do you move it across chains, across organizations? So we really need to think about that. But also, when you think about governance and redemptions, those things matter, and they matter especially in times of market stress. Is there going to be confidence that those payments will be made, and that there will be access to the underlying? So, at the end of the day, the winning solution or winning combination of solutions here will be the one that get repeated institutional usage. People institutions become confident in using them. Some of this credible across multiple platforms. Evidence that is actually improved economics. As I said, we shouldn't be thinking about DLT as adding cost. Is this actually helping us achieve better outcome for our clients? I think we should. That those are the things that we will be that we will be looking at.

Sy Taylor  38:24  
So interesting to watch this development because the it's just another example where the regulators space the the multiple geographies are going to be key to watch. I did see just as as one last final thought on this one that the mobile app looks pretty slick. Something that you thought of as being primarily like a stablecoin has seemingly executed a pretty decent app. Can you get users? Can you get distribution? You're certainly paying for them. You're in a lot of markets. It's a very big switch from capital markets, on-chain DeFi to consumer distribution, but why not pivot? Good for Guy, good for the team. All right, the last story this week is about 21 global financial institutions, including Goldman, Citibank of America, Deutsche Bank, and UBS, are forming a joint stablecoin company, and they're targeting $1 stablecoin in H1 of 2027. The company, not yet named, got aims to get set up by the end of this year. This initiative apparently started in October 25 as 10 banks and has now been joined by folks like Fidelity, Wisdom Tree, and Capital One. And the markets media reports that the pitch is a bank-grade compliance, governance, and distribution institutional risk management infrastructure aimed at wholesale institutional retail use. So it's going to be used for basically everything, but it's going to be by the banks for the banks. I'm I'm confused on this one. Looking at that list of names of of banks, you know, TD banks. Deutsche, Deutsche, Lloyd's, Rabobanks Standard Bank, B of A, Wells Fargo. What unifies all of these banks? What what use case kind of kind of brings them together? I don't know if anybody has a view on what that might be. Ada, Darko, or or is this more of a defensive play? What were your thoughts when you saw this story?

Ada Vaughan  40:21  
I definitely had the. My first thought was that they can't stand to see private companies who are not banks running away with the stablecoin business, and so this is a sort of a countermeasure. I feel like when I speak with institutions in a friendly environment and ask them, you know, someone that we're not partnered with, a new bank or or financial institution, and I asked them like I ran into this woman at a at a party who was the head of innovation for a midsize regional bank. I was like, Oh, you're doing innovative things. What's you know what's that all about? And it turns out that the head of innovation at a midsize regional bank is really there just to manage risk, just the risk of losing business to another bank in a significant way is the only thing that causes innovation in her space, and and I really took that to heart. This was a couple of years ago, but I think that financial institutions have a real obligation, obviously, to their customers and the institutions that they serve to manage risk, and so I think until something is really hurting them, innovation is very, very difficult. And maybe that's a contrarian view, but banks struggle to innovate. And so when I see this, and and like you said, it's like everything but the kitchen sink-a dollar stablecoin that doesn't seem to have a clear use case, but just is designed for everything. It's like, is this crypto Zelle? Is that is that what we're seeing? Like, you know, what does this look like to all of you? I I'm I'm struggling to see the the utility.

Sy Taylor  41:51  
Well, Zelle, I think is crypto Zelle because they're doing their own stablecoin, aren't they?

Ada Vaughan  41:55  
Oh yeah, they don't need that because Zelle is doing crypto Zelle.

Cuy Sheffield  41:58  
It's the battle of the bank stablecoin consortiums, and I, I think one takeaway is you're not seeing many banks on their own wanting to go out and create a stablecoin, and I think that was something a year ago, year and a half. You'd have some banks saying, "Oh, maybe we we should create a stablecoin occasionally. There's a headline. I think banks are creating tokenized deposits on their own, but very few, maybe exception of SoFi and and some of the ones that are very much on the forefront, like Revolut. And so I think that there's safety in numbers of saying let's work together as part of a consortium, and let's kind of instead of fragmenting, try and kind of bootstrap something. But I think it comes down to like you need a vision, you need use cases, and you need the right team and talent to be able to execute it. And what is going to start the initial flywheel? And I think we'll see. 2027 is going to be an incredibly exciting year with a number of new bank stablecoin consortium products that will likely get off the ground both in the U.S. and across the world with Cavallis and and others, and I don't think we know yet. You have big banks as part of it, but what is going to be the use case driver? How much are they going to commit to driving adoption of it versus just kind of riding along? And we're excited to see. We're excited to work with them, and and I think, from my perspective, with with Open Standard, we're spending our time on how do you actually get this thing in circulation, and what can we uniquely do as Visa to be able to drive a flywheel and an adoption of it. And so we're very focused on that. But I think that you'll see banks take many different approaches. Then we'll join multiple consortiums, and there'll be some consolidation of a winning approach at the end.

Sy Taylor  43:46  
Yeah, it's it's going to be fascinating, Delco. Your thoughts?

Darko Hajdukovic  43:50  
So, kind of what I've said in a previous answer, but I think when it comes to stablecoins and and in general, we really need to think about the the cash the cash leg of of transactions and and payments and how is that going to be done because that is one of the points where it's really important especially and Simon, I'm with you in terms of prepayment. Not everything has to be prepaid. Not everyone wants everything prepaid, but we need to think about that programmable payments and programmable settlement. That that's the real value here. It's not necessarily atomic, but it's programmable payments, and you really need cash like for that. Yesterday, I was on a panel at a big event, and somebody said, "Oh, 12 months is a long, long time in in this industry. And I was like, "Yes, it is. But I look at my roadmap. I'm thinking, "Can we just kind of squeeze more in these 12 months? There's a lot of things that's going to have to happen in next 12 months, and it's super exciting.

Sy Taylor  44:39  
Yeah. Oh, oh, absolutely. I love that bringing us back to the cash leg because I think different institutions look at a stablecoin and see different use cases for it. And for tokenized deposits, frankly, the clearinghouse sees tokenized deposit clearing as being a major benefit if you want 24/7 capability. Zelle sees and stablecoin as an offshore dollar that they can use to potentially expand their network, so people can remit Zelle out to other markets to send money back home. And so there's a bit of that sort of what's the observer bias. What a stablecoin can do depends very much on my perspective of what I want and what business objective I have, and I think that's the the art and the science of consortia. Here is like you kind of hope they got to want the same things. I've been speaking a lot to the Civalis team lately, and I think they're zeroing in on a couple of use cases because they've clustered around some mid-sized European banks who are looking to do a euro stablecoin for some very specific use cases, and there's like two primary ones that are that are leading the front, and that kind of gradually moving people forward is is really really difficult. So, is this as you say, Darko? Is this about the cash leg transaction, the programmable cash leg transaction, and can stablecoins enable off hours cash collateral mobility that is programmable and things that were difficult in traditional markets, but with some of the benefits of traditional markets, I've still got margining. But now I'm doing cross-margining, maybe across multiple venues. That would be amazing for a stablecoin because there might not be a deposit or central bank money available in in both markets at a certain time of day. A stablecoin fits that really really nicely and you know with my tempo hat on that's something we're spending a lot of time looking at as a material use case for some clearing banks. But then on the other side of it, thinking about just defensiveness. Oh, what if stablecoins drain my deposits? I need to do a thing. This is a thing, therefore I will do this. I do think that there are inevitably in all consortia some banks that are along those lines, and and these things are really hard to pull off, really really hard. As Kai said, they're not easy. Win shouldn't pretend they're easy, but success will be measured in the ones that can cluster around a few use cases with traction, deliver value, and then all of the hangers-on and the observers and the passengers will then get on board once we've kind of delivered something there. So very conscious of the time. Few stories we didn't have time to cover this week. Revolu received their conditional OCC approval. Holy crap! Revolut. If you're in the US, you might not have heard of, but if you're in Europe, everyone's heard of them. They're massive. They're a monster. Watch out, America, because they have launched their own stablecoin recently, and this is going to be really interesting. SoFi and Paywood have partnered to connect banking and digital asset markets, and Hargreaves Lansdown, good old British story, has opened their Bitcoin and Ether ETNs to 2 million clients, hallelujah! All right, that's all we have time for this week. If people want to learn more about you and Stella, where do they go to, Ada?

Ada Vaughan  47:47  
Find me on LinkedIn, Ada Vaughn or X.

Sy Taylor  47:51  
Darko, how about you and the Elsig?

Darko Hajdukovic  47:53  
I'm on LinkedIn. I'm pretty searchable with my name and surname, easy to find. But we're also on on Elsig is also on X and Instagram and LinkedIn.

Sy Taylor  48:05  
Heck yeah! All right, go on, Elsig. And how about you, Kai? On

Cuy Sheffield  48:09  
X at Kai Shaf Film visa.com/crypto.

Sy Taylor  48:12  
You'll find me at sy Taylor on all the socials, screaming into the void@fintechbrainfood.com, and of course@tempo.xy c. And if you haven't already, you'll find a lot more of this podcast if you push those subscribe buttons. This is where I bug you to do it because it helps us. And if you really enjoyed this conversation anywhere near as much as I did, I hope you'll leave a review. That's all we have time for. We'll catch you next time.