Is the Stablecoin Sandwich Dead?

Sy Taylor  0:10  
Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name's Simon Taylor. I'm your host, author at Brain Food, Netta Market Dev over at Tempo, and I'm joined by my fantastic co-host, the one and only Kai Sheffield, head of crypto at Visa. How are you doing, sir? I'm fantastic. It's good to be back together. Excited for the show today. I'm excited for our guest this week as well. Making a debut is Jacqueline Melinick, who is the founder and CEO at Strata Media. How are you doing, Jackie?

Jacquelyn Melinek  0:37  
Hey guys, I'm happy to be here. I'm excited for my debut. Longtime listener, first time caller, perhaps. Yeah, maybe get to call back.

Sy Taylor  0:44  
Yeah, call back. But we're a fan of your show as well, so I hope people will check that out as well. Making a debut is Manuel Godoy, who's the co-founder and CEO at Felix Parker. How the heck are you, sir?

Manuel J Godoy  0:56  
I'm great. Thank you so much for the invitation for having me here. Excited for the conversation.

Sy Taylor  1:00  
Likewise, before we do get into that conversation, I've got 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. And please don't take anything we say as tax, legal, or financial advice. I'm happy to remind you that this show is sponsored by 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. Just one bit before we get into the news, I got to do this very quickly. If you want to come see tokenized live in person, we'll be at my very own conference, FinTech NerdCon in San Diego on the 19th and 20th of November. So come get yourself some sun before Thanksgiving. Head to tickets. fintechnodecon. com and use the code tokenize 20 for 20% off. And with that, let's get to the first story. So this one was about Mastercard and BVNK launching global money platform, one API for fiat and stablecoin accounts. The idea is that banks, fintechs, and enterprises can embed multi-currency accounts under their own brand, and they can hold fiat and stablecoins with real-time conversion between the two. And they come with stablecoin-linked cards and local bank payouts. And the platform's live through the acquisition of BVNK with clients like Nuvei on top, Beam, and Almond named as early users. Manuel, coming to you first on this because this is going live in 40 territories. I know you have been bumping up against the stablecoin sandwich and trying to make things work for your users for a long time in Felix Pargo using using some other players in the market. What are your thoughts on the increasing convergence of fiat and the stablecoin sandwich.

Manuel J Godoy  3:24  
Definitely. Well, first of all, I'm excited for for those two teams. I we have a relationship with Mastercard, and I know the BBNK team. And congrats to them. This is exciting for the industry in general. You know, it's interesting because when we started Felix, and maybe for your audience to get the context, we started Felix with the obsession to support Latin American immigrants to care for their families back home, right? And we knew from early conversations with users that they trusted deeply going to physical stores, and they really couldn't care less how the money got to the other side. I always say that it could be a donkey carrying the money to the border. They just want the money to get there fast, reliably, and they want to maximize the money they send, right? They don't. They don't want to be be paying outrageous fees. But for me and my co-founder in those early days, we knew that crypto in general or stablecoins had to play a part because, well, first as a native Venezuelan myself, I witnessed when you witness essentially how a centralized government can destroy a currency, you essentially very easily understand the value of crypto. So, so that's when we started to saying, okay, crypto is going to play a part. And stablecoin sandwich didn't really exist back then, right? So, so we had to build our own rails, right? So in the early days, we talked to Bitso to make sure that this could happen in in Mexico, they were more focused on consumers, right? They were a retail product, and so we built alongside them. So this like B 2b, you know, a rail, so that we could actually move money on stablecoins, and we extremely value this world in which you have fiat and stablecoin. Working together, because fiat is not going away, and particularly for us, think about cash. Like we have to make sure that folks can actually pick up cash. So it's not just about digital fiat. This is also about that physical component, and we always are moving. And and in every quarter in which we operate, we have to build our own rails, or we had to at the beginning that make sure that that we have fiat component and the crypto component to maximize the trades and reduce the costs and pass those savings back to the users. And in the markets in which there was enough liquidity, so we can actually offer the payout in fiat. So now seeing all this being live, like this launch of Mastercard and BBNK partnership and platform, it's gonna accelerate the adoption of stablecoins. It's gonna, and ultimately users are gonna win. They're gonna see lower fees, faster money movement. So it's definitely exciting for the industry.

Sy Taylor  5:52  
Kai, I want to come to you as well because you literally had some news this week as well with Visa Direct launching stablecoin powered money movement as all of those pilots you'd been doing moved to production, so there's some volume coming here for this off-ramping at scale.

Cuy Sheffield  6:07  
Yeah, I think every global money movement platform has to integrate stablecoins in some way, and I think we're seeing that across the board that it's it's just becoming a table stakes feature that customers expect. What I'm really interested to see is if I think back a few years, it felt like the stablecoin sandwich when we talked about it on on the show was like one of the first flows that resonated with people. It was partly because people were so skeptical about stablecoins that they were like, okay, if we could use them without using them, we we don't want to have to introduce to any of our customers that there's a stablecoin involved. But if you could start with fiat, we'll just use the stablecoin on the back end, convert back into fiat. Like that was the the use case that was kind of the easiest to get the most skeptical person to say, okay, maybe that'll work. And Manuel, it seems like Felix was like one of the innovators and pioneers that you could point to. I'd say, hey, look at what Felix is doing, kind of using stablecoins on on the backend. But it feels like as the adoption has grown, and as we've got the Genius Act, as as people have been more comfortable, now I hear a lot more about either stablecoin in fiat out or fiat in stablecoin out, and in some ways it feels like those are actually easier flows, and you have an expectation that there is one side of the market that is stablecoin native that you can work with, and so I'm actually hearing less about the stablecoin sandwich right now and more about what we announced today was you know stablecoin prefunding, being able to send the stablecoin to Visa for us to pay out in fiat, and then that tends to be like stablecoin native money movers, fintechs, and then banks say, "Okay, I want to be able to reach stablecoin wallets, but I don't want to deal with the stablecoin. So I'll send you fiat, and then you pay out in the stablecoin. And those are the flows that are starting to to gain more traction now. But Jacqueline, I'm curious what what you see in the market of like how the stablecoin sandwich has evolved versus some of these these other flows.

Jacquelyn Melinek  7:59  
I like the the term stablecoin sandwich. I don't think I've used that one before, but something I talked about with Amy Oldenburg from Morgan Stanley, and the episode hasn't aired yet, so your listeners get it first. It's kind of like the on and off ramp friction point, and it was an interesting conversation. It made me think about how exactly what Kai is talking about. Like you got to bring fiat in, and then you kind of convert it to stable coins and then maybe they convert it back out right and it's just so many different like steps and intermediaries. But what if we just on ramped and never off ramped? Like I don't know if that world exists today, but down the line where you know maybe we bring a U.S. dollar on chain, convert it to a stable coin, we converse with stablecoins, but everything we do is on chain. The same way, like so much of the money that I make is never physical cash. Like I would say, like 99.9% of it is digital dollars, just a number on a screen. I use my like Visa credit card to you know swipe it, and that's that. But I think so much of the attention on like on and off ramps is because it's a new technology and it's not necessarily like baked in already, and so like if we start to get these like full stack developments or you know banks or these different networks deciding they want to own the accounts, not just the rails, I think it'll become more commonplace.

Sy Taylor  9:21  
I think more tokens are coming as well because you have tokenized deposits and everything that the banks are doing there. So they're they're on their own chains, and is that easier to interface with than traditional payments in some cases? I saw you know SoFi has its SoFi USD, and they will 24/7 swap that for their tokenized deposit, and that's kind of an interesting model to think about because you know if your fiat only works office hours and your stablecoins work 24/7, you need a sort of fiat like money that can work 24/7 at the bank, and tokenized deposits give you that. So I wonder if those two things combine. Manuel, I loved your. Point about like what impact this is having for users and customers. Do you see that in your partner stack it's getting easier for you, or in in the partnership side on the bank side, or are you still finding that there's a lot of education to do to make sure that your customers getting that great experience from the local banks and and wherever else,

Manuel J Godoy  10:22  
I think it's definitely definitely much easier than it was, you know, five years ago for sure. Also, with regulators, right? We have to regulators also a big stakeholder here, in which they're more and more comfortable with the fact that you know we have moving stablecoins, right? And and we have a wallet product, or stablecoin wallet is part of the flows rather. There's still some nuances like you have to have a traditional MSB account registering NMLS when it comes to monitoring machine licenses. Maybe it's going to change right with this editor type of players where they actually have a charter bank in stablecoin and you can register that account. So that's that's shifting, but it's definitely easier. The challenge that we have, though, is that in central countries of Latin America, it's it's challenging still. So we still have to go and and work with traditional players, right? That those are the ones that really kind of like hold the cards and and have the distribution locally, and you don't have as many sort of liquidity providers locally. So it's something that we discuss with with actually both Mastercard and Visa, but also with Circle in terms of like how can they support that liquidity given that they have this strong presence there, right? And so then we can actually use the rails in those places. When you think about that, so obviously Mexico, Colombia, Brazil, they have strong liquidity, right? So strong kind, like stablecoin and crypto activity, but then when you get to like Nicaragua, El Salvador, El Salvador is different. Nicaragua, Honduras, Guatemala, liquidity is hard to find, so you do have to play with the traditional players.

Sy Taylor  11:52  
So interesting to watch that develop and and leaning on those bigger companies that that have that bit of experience. Kai, any any final thoughts on this story? Yeah,

Cuy Sheffield  12:00  
I was gonna say like when when you started, like as you've evolved with with Felix, my understanding of of the model was we've seen Wise and a number of the kind of traditional remittance companies have the model where they have bank accounts all over the world, and they can maintain float in those accounts, and so when you make a cross-border payment, you know from the U.S. to Mexico through Wise, you're not actually moving the money in in real time. They have an account in Mexico with pesos that they can pay out to. And my understanding was that the potential innovation of stablecoins in kind of your bottle was you don't need to have pesos sitting in that account. You could actually move the money cross border in a stablecoin, but then the downside is well, then you have to find a partner that you can liquidate into pesos to be able to pay out. And so the tradeoff was like you don't have to lock up capital, you don't have to have that bank account with a bunch of pesos in it, but your FX rate might not be as good. Is that the right way to think about these different models? And like as you've grown, are you now getting to the point where you do have bank accounts all over Latin America that you're keeping some pre-funded liquidity in, and you're just using stablecoins to rebalance those accounts, or like how do you compare those those two models?

Manuel J Godoy  13:14  
Yeah, for sure, that's a fair comment, and and yes, you're right. You know, the what I love about stablecoin is that you're really, if you think about it, we're doing what Wise did on chain. We're tokenizing that flow because think about it, stablecoin is bits. There's nothing moving, right? It's a ledger transactions. You have dollars on one side, you have peers on the other side, right? The powerful thing about our model is that crypto or stablecoins or it's a 24-seven market. So whenever we want to find that liquidity, we find it with retailers directly. We go to the marketplace and we just say we have USDC. Who gives me pesos? Effectively, with their center mediating, right? You know, FX traders or banks. So no, we still don't need that local account to prefund. We still do a stablecoin, right? But the beautiful part is that we go to a marketplace and we and we trade directly, and that allows us to eliminate fees, intermediary fees, and also find an FX rate as close to interback as possible. Obviously, you know the beaters of the world they take a cut, but as you get enough scale, right? You can, I mean, literally those fees go down, and you can see them on their website. It's the same as any crypto platform in the world. So that's the value of it, right? That we're able to trade this in the open market 24/7 without a need to pre-fund significantly on the liquidity issue that we have. Again, it's it's about like not finding those marketplaces locally, and so we do have. There is some. It's not like it's zero. There are some OTCs and and some folks doing this in these smaller in the smaller maybe countries, but for those we do have to find to serve. Those corridors effectively, we do have to find more traditional partners and find that, or doing that pre-funding model, right? And and I bet you that for Wise in smaller quarters, that's probably the same case, and that's why again, that's why like countries like Guatemala, Honduras, or immigrants from those countries, they don't use Wise, like they don't know about Wise. I don't know what the price is. They use Western Union, they use MoneyGram, right? They use the traditional folks because they do have that strong liquidity in both places, and they have more decent prices. They have the ability to do it, so that's the challenging thing. It's really serving all the Latin American users the same way as we serve. So like in the in the in the bigger maybe quarters.

Sy Taylor  15:44  
I am super interested to go a little deeper into this. I'm going to bring in the next story because I think it's kind of linked to all of this and the the consumer experience. This is Rain having launched embedded stablecoin wallets that partners can put inside their own apps. The wallets are non-custodial, so a bit like Privy and Turnkey and and those types of wallets, and users sign in with a pass key or a code sent to their email or phone. Dollars come through a virtual account or on ramp. Fund a stablecoin linked Visa or Mastercard, and then go to local bank accounts through local payouts. Custodial wallets on earning on balances are due before the end of 26, with yield coming from third party providers and partners that already have a wallet provider can actually keep that wallet provider. So your turnkeys, your privies, whoever, but then they can plug it into cards and get all of the rewards and on ramps and payouts that that Rains kind of built. Brains kind of building an interesting rewards partnership model. Jackie, I'm interested in your views on them as a business. They've obviously been growing dramatically. Every time I speak to Robert Dragonfly, he's saying like this thing's absolutely flying. Have you got any perspectives on them as an org?

Jacquelyn Melinek  16:57  
Yes, I actually sat across from Fruk at a dinner in Singapore during Token 2049 that Cass was hosting, and he's definitely busy. So I think Rock from Dragonflies got that right. But I think the strategy for Rain is probably what I find the most interesting. You know, it's been building like bundles piece by piece. You know, we got the up top part for Wars that came like last November, Ansa for like stored value came in August. The OCC trust charter filing, although it's not approved, but they filed. And then now the wallets piece, and so like I kind of see the company moving from just being a card issuer behind someone else's app to really kind of like holding the balances. And I personally think like that is where a lot of the relationship lives. But the fact that rain powers so many of these different cards is also a smart move in itself. It kind of goes back to what we were just talking about on the front of distribution and customers. I think that's like the biggest unlock. Is like if you have the distribution, that's like more than what most people have, right? And then if you have the balance that owns the customer, then I guess whoever holds the balance, I should say, owns the customer, right? And so then, like Rain just moved away from like just the card side to actually having the full account, and it goes into like that full stack story that we were talking about before, and like putting it all in one place, which I think people would appreciate.

Sy Taylor  18:21  
You know, it starts to remind me, Kai, of like this full stack thing that I think Moonpage is trying to do. You obviously look at Stripe and what they've been able to acquire and put together. Your your thoughts on on all of that?

Cuy Sheffield  18:33  
Yeah, I think that's the direction. There are times of bundling and what times of unbundling. Now it's like everyone bundling things together and to vertically integrate stack. I think Rain's roadmap is just a good indication of how stablecoin linked cards are maturing and growing as this global category. And I think the biggest thing is a few years ago, all of the customers of Rain were crypto natives. You know, they were existing stablecoin wallets that you just needed access to cards, and so Rain provided a great solution to be able to get a card live, and I think really helped to to create this category where the easiest way to spend a stablecoin was just you know through a Visa card, and I think over time they've now gotten the point where it's not just existing stablecoin native fintechs that are looking to issue cards, it's established Web two fintechs. It's potentially banks in certain markets, and so I think as they go up market and they're they're starting to work with these larger players, if you're trying to issue a stablecoin link card, but you've never done a stablecoin wallet before, like it's more of a pain to say, okay, let me go to to one company for the the wallet, and then another company for compliance, another company for the card, and so being able to bundle that together and to say we can help take you end to end from today your entire business is fiat to now you can issue a stablecoin link card with a stablecoin wallet. And do payouts and do rewards, so I think it's really smart how how they've started to to stitch this stack together, and I think we'll just see the types of companies that they're able to support continue to grow and and become more traditional enterprises, banks, fintechs, and not just the crypto and stablecoin natives anymore.

Sy Taylor  20:18  
Well, the payments nerd in me loves this one because, like, I know they partner with like Lithic and Episode Six and Paymentology on the card issuing processing side, but then they have their own license in Puerto Rico. But then they've acquired Anser and UpTop, and now they're doing wallets. And there's so much of this that's like a hybrid between fiat and stablecoins. And they they give this example of like a freelancer paid in dollars who cashes out in pesos, which feels very Felix, but it reminded me of the something that John Connorson said I think at Stripe Sessions, which is Felix Pargo is possibly the most interesting remittance company in the world right now. It just happens to use stablecoins, but the users don't notice that. And I think Rain is possibly the most interesting growth fintech infrastructure company that just happens to use stablecoins, but increasingly its customers won't notice it. So, do you think that's going to be critical for this to cross over? We've got to hide the letters after the the stablecoin and just kind of keep pushing that into the background.

Manuel J Godoy  21:23  
Yes, for sure, and I I couldn't agree more with that statement, and and I I actually thank John about it because I it's it he clearly understands what we're doing, and a big fan of Rain, by the way. I do agree that they are a very strong infrastructure company that uses Stablecoin, and and that makes it more compelling for folks to use them. On the freelancer point, I think it's important to know that yes, it does feel Felix, but we don't serve freelancers in Latin America, right? We serve blue-collar workers, migrant workers in the U.S. that send money abroad, and it's a very important distinction because it's it's a different value prop, right? So when you think about, you know, I know the top folks and Lithic and Ark maybe as well, they cater to those folks that are there that are looking to get dollars and get it back into into fiat. We're making it just easy for the person here, and that's why it's very important for us to abstract the stablecoin component because again, it doesn't matter to them, right? I'm very fascinated, by the way, on all this stablecoin infrastructure. I believe, obviously, I believe that it's the future, I guess. But I don't think so many people are aware. Maybe that's why the the crypto world is just how powerful DeFi is in general. So we're talking about you know stablecoin card infrastructure, of course, but the potential of everything be done on chain via DeFi, be lending, be a yield, right? It's so powerful that if it weren't for AI, I think everybody would be kind of paying close attention to DeFi. So in general, I'm a huge, huge fan of infrastructure in crypto, and I think more and more users are never going to know or care that stablecoin is behind the scenes,

Sy Taylor  23:05  
and the earn product is becoming a default, isn't it, Manuel? To that sort of point, I do think that DeFi thing is kind of just another part of the story besides stablecoins on the infrastructure side.

Jacquelyn Melinek  23:17  
Yeah, I also think on the front of the the DeFi side, I was like nodding as Manuel is talking. Is I think in the early days DeFi was seen as more of like a zany, degenerate kind of like unknown world. If you understood, you know, crypto technology or blockchain, like you would be able to use it. But increasingly, I think it's becoming more of a sophisticated sector that we should be thinking about. How can we enable DeFi products, protocols, apps, etc. in a way that brings it to the public market and isn't limited to just those who understand the tech. And I think that is like one of the big unlocks too-is making it accessible and understandable and just easy to use because it is, in my opinion, better than the existing rails that we have out there. It's just a matter of actually baking it into the systems or not baking it in at all, and then showing people like, "Hey, you could engage on chain through these protocols, and it doesn't have to be through like your traditional bank or something like that.

Cuy Sheffield  24:16  
And then manual. When I look at like Western Union and MoneyGram and like how they're using stablecoins right now, it feels like they're trying to build these like global stablecoin native neobanks, where people hold dollar accounts and they could earn yield, and and it's like they're starting to monetize the receive side of their networks that normally they weren't able to do. So, how do you think about the impact on the business model of remittances, if that's the direction that some of the big players are going, and like, do you see it the same way? Where it's like remittances, it's almost like the the remittances the the customer acquisition wedge. Yeah, it's the way that you engage, you can kind of get someone in the door, but you're not. Make money. It used to be on the rinse fee. Then it was on the FX, but now it's like you know you make money on a cut of the yield that they earn in your stablecoin yield bank. Like, what what does the monetization look like in long term or not?

Manuel J Godoy  25:12  
100% I and I love I love this question and this topic, and I have a very strong opinion on it. And I may be wrong, and a strong opinion is loosely held. Maybe I believe there's only going to be two stablecoins winners, and it's going to be USDC and maybe USDT. I mean USDT. I mean they're both already kind of winners, if you will, right? But but I think the other ones that are being created, they don't make any sense. Again, they have to be traded. You have to find liquidity. Like there's no world in which you go and pay in cash in in in Guatemala, in Guatemala, a small town with a US, I think it's USDPT, the Western Union one, like that doesn't exist, and that's not going to exist for the next few years. What's going to happen is that the USDC and USDT is going to be continually much more prevalent everywhere in the world, and that's going to improve the liquidity, right? Going to the earlier points, thanks to all these new products being being you know put out there, but the the yield piece is important, right? So so what happens is that then you gotta give back the liquidity, right? And so all this is happening, of course, in in regulation, and we'll see what happens, whether the the Clarity Act actually passes, and you have the Genius Act, of course, and whether banks like this or not, right? I think all this plays into into plays a part here, of course, but I do believe the yield, the the circle and and other folks, they do have to pass the yield. They have to share some of that revenue. That's a challenge for them, of course. But I strongly don't believe that any other token is going to exist. And also, not only the ones that are pegged to the dollar. I think that what matters about stablecoin is the fact that it's pegged to the U.S. dollar. I don't think eurocoin has has really taken off whatsoever because people want access to the U.S. dollar, and that may actually not be as well known even in the U.S. Like folks want the dollar, they want the stability of the dollar, they want the reliability of the dollar, they want the reputation of the dollar, they want to hold the funds there, because they know we all know what could happen if you don't in some countries, at least particularly Latin America, but the same case all around the world. So I'm a big proponent of there's going to be maybe two players long term, and Western Union and and Monogram. I think it's a fair experiment that they're doing. They do have the distribution, they have the brand, they have the the scale to do some something like this. So maybe some of this is gonna really click, but ultimately they're not gonna find liquidity, right? Where are they gonna trade that back to to local currencies or to dollars?

Sy Taylor  27:48  
So I've got a slightly different take that I don't think disagrees with your point, but builds a nuance into it, which is if I look at deal contractor payouts, they have DL USD, and the user the last mile, is living inside that deal wallet, just like they live inside a Felix wallet, right? And what they see is dollars, and then what they do is they directly off-ramp that as cash or to a local bank account. So where my user is captive in my app and I already have distribution, why would I not keep the yield in in that scenario? And I think there is a a viable use case for my own stablecoin where I can capture the yield. I'd also hold a candle for open USD as well. I think that's going to be something that brings the banks more into the conversation. I think they they view private stablecoin issuers much more of a threat than something that's more of a consortia base. But I generally buy the idea of a power law for liquidity reasons. Of course, I do. Like I, I don't have to worry about arbitraging $1 against $1 in many parts of the world. It's, it's kind of, it's held at par. And the more liquidity I have, the less risk I have on that dollar depegging or whatever else in the in the stablecoin world. So slightly, slightly nuanced build on your point, but I think it's no reason why MoneyGram or Western Union couldn't also adopt those stablecoins and off ramp to them and kind of go that way too.

Manuel J Godoy  29:13  
I actually agree, by the way, Samuel, on the point because I do agree that if you have an ecosystem, then you make that token very valuable, but that can happen with very few players. Like if you have a global e-commerce, you can actually do it. For example, deal can potentially you know pull it off. But I don't see anybody doing. I want to buy a deal stablecoin via Coinbase. Like I don't know if there's going to be value there.

Sy Taylor  29:37  
Yeah.

Cuy Sheffield  29:38  
Yeah. I I think I've not surprisingly on the side of side, but it's like it's so early in the overall stablecoin space. I will be very surprised if five to 10 years from now it's just USDC and USDT, as there are so many companies that have yet to kind of really enter in a meaningful way, and and it depends on the use case. I don't think there's room for hundreds. To have a lot of liquidity, but I think that there's more than just two. But Jackie, what what's your take on on the stablecoin wars and market share? Kind of how how impenetrable is the the network effect of USDC and USDT over time?

Jacquelyn Melinek  30:14  
You know, I I hear all the takes, and it's very obvious just by market cap that USDT is the winner right now, and I think I lean maybe more towards Kai's take and what you just mentioned, because like we got Tether, we got USDC, and then we got like Athena Dai and some other ones like trailing behind. But then there's also like the PayPal's of the world, right? And even like Ripple's RLUSD, where it's like they have the market and they have the users, and again, it goes back to the conversation around distribution. Like, why wouldn't PayPal create their own stablecoin instead of using Tethers? Like, it doesn't make sense for them to do that, in my opinion. One, they get to own the whole stack of it, or maybe not the whole stack, but like the actual issuance of the token, and then like the yield and the rewards around it, and then the other thing I think is like USDC and USDT kind of serve different markets currently, and maybe they wouldn't like me saying that, but USDT I view as the stablecoin for you know a global audience, but specifically more emerging markets, whereas like USDC, I think of as an American stablecoin, and I think both of them would like to be everything and everything in between. But that is just like how I see it, and I honestly think most people would concur with that. But all is that to say is like there are these other stablecoins out there, and they're going to keep emerging. And like when it becomes so easy to launch a stablecoin, like Agora, for example, I think you guys had Nick Van Eck on right. Agora is a perfect example of this, where it's like they help people launch stablecoins, and it's like why wouldn't you just do that so you could own the relationship as the issuer? Maybe it's easier to just like plug in USDC or USDT, but if I was like a massive bank, I personally or an app, I personally think I would go the route of launching one.

Sy Taylor  32:09  
Yeah, who has the ecosystem and what's that trade-off? I think we're going to see a lot of experimentation on that. Yeah, I'm going to take a quick pause here while we hear from our sponsors, and we'll be right back. 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 link 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. Right, thank you to our sponsors. The next story was DRW and Marix have done what the SAP and Kaiko call the first ever OTC derivative on a fully tokenized index, a total return swap on iBox run on Canton, so the swap references the S and P iBox USD liquid grade investment index, which Kaiko tokenized, and Kaiko then feeds the official index values used to value the trade. It was executed on Derivenix's platform, which gives both sides one shared record of the trade affirmation through the entire process, and of course, this follows S and P leading a strategic investment round into Kaiko. And Jackie, Kaiko's been out here for a while trying to deal with indexes for crypto and tokenization generally. There's this fascinating thing happening on Wall Street now, where it feels like the reins are off and tokenization is starting to happen, but indexes just haven't been part of the conversation. What's your take on this?

Jacquelyn Melinek  34:26  
Yeah, I actually worked at S and P before I got into the crypto world, so it's always nice to see that they're kind of on the cutting edge of this. They also did the M and A activity with Open Zeppelin, I believe that was last month. Yeah, but yes, to that point about the indexes, the first thing I noticed is actually what like got tokenized here, which is the index. And to your point on that, like it's not necessarily something that we see so often. But I think what's interesting is that S and P gets to keep control of its data, its IP, and then in my opinion, maybe that's the only reason a benchmark. Provider like this would put their name on something like this because, like, index providers make their money by you know licensing. They've spent decades protecting how that data gets distributed, and then like these institutions get comfortable when they see like the incumbents like keep those rights. So when crypto kind of so to speak asks them to give it up, it maybe changes the the playing field there. But like, I think S and P is putting money behind that view. To your point about the round, it just led that round, right? I think it was like 100 million or 120 million, something in that range. And on the front of like S and P's index, and for anyone who isn't really like fluent in capital markets, I think a total return swap is like two firms agreeing to the exchange to return on something. Like here's the index, and with like out either side owning the underlying bonds, the real cost is more on the back office side of things, not specifically the trade, like confirmations, valuations, and reconciling records against each other for the life of the swap, right? Yeah. So I think it's interesting. Like it goes all the way through, but I don't know if you guys feel similarly. Yeah.

Sy Taylor  36:13  
No, I love it because this is the dream. Like I was a long-suffering bank employee back when we were first talking about having a single golden source to eliminate reconciliation and like imagine all of the back office savings this would have and and generally like incumbents start at cost savings, but there's also like a bunch of revenue opportunities that come out the other side of it. But don't underestimate those cost savings and what that can mean and the new products you can build once you've got a single record, because that's what enables all of this 24/7 stuff we love and the programmability is you need that single record in the first place. The reason money gets stuck and money slows down and has to close at the weekend is so people can catch up with what the traders were doing and kind of let all of those processes run. I'm quite excited by this because it's just part of this bigger theme of Wall Street is starting to starting to really lean in, and Kai, we saw Clarity didn't pass, but the SEC's been moving, and the CFTC's been moving. You know, like what's your read on on on all of this stuff?

Cuy Sheffield  37:12  
Yeah, I mean, I I love what S and P is is doing. It it feels like they're really leaning into the space. I thought the Open Zeppelin we talked about a few weeks ago was a really smart move. It's cool to see the businesses of these on-chain data companies continue to evolve and mature and kind of go into real capital markets. And yeah, I think for Kaiko, my understanding is that they started with kind of DeFi data and on-chain data for kind of crypto investors. Our friends at Allium, shout out to them. They were doing crypto data. Now it's capital markets companies coming to them. They're on Bloomberg, and so it's it. It feels like we're realizing if if we're going to bring capital markets on chain, the data component is going to be so important. The ratings, these oracles, and it's not easy to do. It's it's not something that you can just kind of wake up and and figure out how to manage Canton data and and connect that to an off chain. So it's like there's a role to play for many of these companies that have grown up in the space. And then you know, shout out to Canton and Yuval and Eric. Like they're showing up everywhere. Basically, every major bank that we talk, every capital markets kind of asset manager, like they're doing something with Canton, and I think it's still you know many of these are are proof of concepts and pilots. There's a lot of anticipation on the DTCC and some of the work that they're doing with with Canton. That's that should be rolling out soon, and so it feels like they they've been able to find a way to kind of demonstrate, you know, many use cases that are kind of just untouched by there. There's not another blockchain that is doing this type of swap trade between two. Like it's it's just like it's one of those things that like they're finding a role to play, and so we're really excited and optimistic that Canton's gonna gonna be a big player there.

Jacquelyn Melinek  38:59  
Yeah, I had Yavol on the podcast too on my side, and I feel similarly about that. And it was funny because when I was talking to him, he said so many people like focus on the word blockchain and the tech and everything, and like that's not something that he sells. He said essentially, I sell solutions and ways to like make people money, you know. And so many people focus on like pilots with like no paths to revenue, and so it's like an interesting point on that side too because that kind of feeds into exactly like what this is. Is it really is kind of making a better connection there?

Sy Taylor  39:32  
I think I first met Yuval in 2015. He's been at this for at least 11 years. You know, Blythe Masters was the CEO back then, but he was one of the founders still, and he came from Citadel. He'd been on Wall Street for a while, and I think being able to talk the talk and actually understand some of this lingo is like half of the battle. And then knowing what the buying motivations are and how to sell it is is such a big piece. And don't forget, next week we're going to see the DTCC switch on tokenized stock. Probably later this week, as you're listening to this, we are in for some watershed moments on Wall Street. Like it's about to get very real, very very soon. And Manuel, do you follow this stuff at all? Do you do you do you watch what's happening in the financial markets in in the US, or you're more focused on what what FX rates will do for you?

Manuel J Godoy  40:20  
No, for sure. I mean, and and especially as we evolve from just as a remitas company to a true, you know, multi-product. Of course, all these things we're following closely, but more from a definitely from a spectator seat, right? More more following what's going on rather than than still having strong opinions yet, just yet.

Sy Taylor  40:36  
I get it. It's there's only so many businesses you can run at once, and keeping up with the news is pretty hard. That's why we do this podcast. A couple of European stories to close us out this week. So USDC has become the EU's first significant e-money token under Mica, and Kraken's parent, Paywood, has agreed to buy Lithuania's Salbo Bank. So USDC, the EBA picked USDC out of 45 notified e-money tokens, and takes over supervision of its reserves, liquidity, its own funds, and redemption plans from France's ECPR on the 12th of November. So that's the European Banking Authority. It's also signed an MOU with the New York's DFS, which oversees Circle's New York regulated operations. Ooh, for the regulatory nerds, that's interesting, isn't it? And then regarding Payward's Seldo acquisition today, obviously they are an e-money license from the Central Bank of Ireland, which is like MTL for the United States money transmission. Obviously, you can do a little bit more with it, but Saldo passports them as a bank into Finland, Sweden, Germany, the Netherlands, and it had 162 million euros of assets. So they're a they're a bank now, and they can go into to more markets. Start wherever you like with this, Jackie. Maybe the the EBA and USDC. Have you been following the amount of work that's been happening there on on the the European position,

Jacquelyn Melinek  42:02  
yeah. I mean, I typically follow the regulatory market and the U.S. side, but the European side comes up in conversation. I mean, obviously, Micah was one of the early leaders on that front, and I think on the EBA note, I think it's kind of like a badge and a burden at the same time. I don't know if you all feel similarly, but it's a badge because obviously, like a bank or corporate issue or corporate treasurer, sorry, can now point to a single EU level supervisor, which is you know easy to get to, hopefully, and then it's a burden on the other side because it comes to just one source and stricter requirements. But that's kind of my take there. And then on the the front of like the USDC side, whether it kind of makes one fungible USDC easier or harder to defend, like harder from operationally, but then stronger commercially. I think that's maybe where my head's at. But then maybe that's exactly what an institution wants to hear and see is like two supervisors talking to one another, right? I don't know if you feel that way. Yeah, I mean, who would have thought this

Sy Taylor  43:04  
two years ago? And and right, because if you have a lot of people holding USDC in Europe, how do you know those European businesses and consumers have that protected? You want to supervise it. It means for Circle, I'm now having to have two separate reserves that I'm reporting to two separate regulators, but I think they've data lean into that, and it means that the stablecoin dollar becomes global in the global north in the way that I think it has been for for Manuel in the global south for quite some time in quite a different way. Kai, did either of these two stories catch your

Cuy Sheffield  43:38  
eye? Yeah, I'm I'm trying to jog my memory of kind of what what this rule was like when Mica came out, and so my understanding is what makes a stablecoin significant. It's more than 10 million holders or 5 billion euro in value, and so am I thinking about it right that like you know USDC is what 75 or 80 billion total in supply, but there's a portion of USDC that is regulated under MiCA that is technically minted in Europe under their MiCA entity in France. That portion of USDC, that 5 billion, the reserves are actually managed in different ways. Where what a lot more of that are in bank deposits in European banks. So it's it's that portion, which is still so weird to me that you can have a single product or ticker in USCC, but depending upon where it's minted, there could be a different reserve composition behind it, which I'm I'm really interested to see how that scales and evolves. And the other thing I was trying to remember, maybe maybe you you followed this way of like, there was something around Mika that that mentioned that if a stablecoin you know was being kind of widely used to pay for things, then the regulator could force some type of cap, and so there there have been these kind of interesting rules that you're like, wait, what would that look like? How would that come into effect? And like, yeah, is 5 billion euro? Yeah, is is that the bar of what makes it significant? And so, I'm I'm behind on on my Mika details. I feel like there there's a whole a whole full time job of of following you know Mica and and the European regulation.

Sy Taylor  45:16  
Well, and so we saw Sarah Breeden, the deputy governor of the Bank of England in Bangkok a couple of days ago come out and say that they don't think they need to do a consumer or business facing CBDC right now because you know stablecoins and tokenized deposits are happening. I think what's happening behind the scenes is very interesting. Is the US and European and UK regulators are talking a lot more, and that's exciting to me because it means we could get towards 24/7 money across the Atlantic, and it will be really hard for the stablecoin issuers. I think it just will; it will suck. But you know, when we speak to Nick and Agora or or any of these businesses, they're all like, "We will take that pain because we think the opportunity of it being fungible across that border is is hugely exciting, and of course, you know, Paywood got its Fed Master account. Although it's been paused back in March, they applied for an OCC trust charter. They've now acquired an EU bank. Jacqueline, any thoughts on this? Because the the CEO is saying they're going to go collecting licenses all over the place. There's there's been a chance to spree.

Jacquelyn Melinek  46:21  
Yeah, I think it's interesting, and I think acquisitions, like they sound good on paper, but it's all about execution.

Sy Taylor  46:29  
Oh yeah, it's

Jacquelyn Melinek  46:30  
kind of like putting two families together, and it's like it might not always work. It might be crazy, but it could work, right? And I think we've seen this with other acquisitions in the past, like Ripple acquiring Hidden Road for over like a billion dollars, but like buying Saldo gives Payward or Kraken a license, a balance sheet, and then that passporting into Finland, Sweden, Germany, Netherlands, all in one deal. And I think had they done it on their own, it would have taken years, if not like a decade. So I think you know it is smart, and it's just all kind of about how it plays out, and whether or not the kind of return there is. I wouldn't. I don't want to say instant because it will take time to like embed that, but that's really my opinion here. It's like a much shorter path than a new charter having to apply, get into those markets, and then like once you kind of own that bank, you know nobody maybe can debank you unless you go absolutely able. Let's

Sy Taylor  47:28  
see. Yeah,

Sy Taylor  47:28  
yeah.

Speaker 1  47:29  
So

Sy Taylor  47:29  
the the regulator can punch you in the face, but it's very hard for them to. It's very rare they actually shut them down.

Jacquelyn Melinek  47:34  
That's what I was saying. Like unless you go, yeah.

Sy Taylor  47:37  
But and on that, I think we saw both Amex and Bank of America got massive fines this week for for AML violations. One even cease and desist order. So, like part of being regulators is you have to deal with all this pain, but you continue to do business while you're doing it. So, you know, hopefully, it's more more legitimacy. Manuel, any any reflections on us poor Europeans trying to keep up with what's happening in Latam?

Manuel J Godoy  48:00  
No, in general, not necessarily about Europe, but more about the the M and A. Obviously, you're seeing it in the U.S. as well, in Latin America, where it makes sense to just get the regulatory footprint faster. Right? It does create a mode, right? You you have more defensibility if you're able to do that successfully, I mean, to Jacqueline's point, it's definitely not easy. But folks that can make it work are going to be winners because it's increasingly important to be closer to the regulator. But to be closer to the regulator, it means that you have to make sure that you execute well for sure.

Sy Taylor  48:34  
Yeah, it's it's so many stories of like half done M and A that just turns into like six companies in a trench coat. There's there's a lot of those in payments for sure. All right, guys. There's a couple of stories we didn't have time to cover this week. BNY lends Citadel Securities cash overnight against the tokenized U.S. Treasury. We'll be speaking to BNY shortly, and their head of product, Federated Omez plans tokenize funds with Prometheum for Q1 2027, I have no idea what that means. And EQX Labs plans 11 tokenized US stocks and an ETF on Hyperliquid. And finally, our friends at Mesh bought a company called Bluevo for exchange connectivity. Congrats to our sponsors, Mesh, on that. All right, thanks everybody for listening and watching, Manuel. If people want to find out more about you and Felix Pargo, where do they go to do that?

Manuel J Godoy  49:25  
Yes, for sure. For me, particularly, they can go to X at Manuel J Godoy M M A U E L J G O D O Y M. They can also find Felix at Felixpago.com and@x.com at at Felixpago F E L I X P A G O, and looking forward to getting more followers there.

Sy Taylor  49:45  
Heck yeah, Jacqueline, how about you?

Jacquelyn Melinek  49:48  
You can find me on X at Jack Melinick, J A C Q M E L I N E K, or you can subscribe to our newsletters where we cover DeFi tokenization, stablecoins, a whole slew of. Token relations for Solana, Ripple, Chainlink, etc. etc. at StrataMedia.co. S-T-R-A-T-A Media.co. Thanks, guys.

Sy Taylor  50:10  
Do check it out, folks. Amazing, Kai. How about you and Visa?

Cuy Sheffield  50:14  
Oh, next. Kai Sheffield, Visa.com/crypto.

Sy Taylor  50:16  
You'll find me at SY Taylor on all of the socials at BrainFood.xyz, where we've got a sparkly new website and an advisory business. You'll find me at tempo.xyz, making payments go a little bit faster every single day, and of course at fintechnerdcom.com, where tickets are still available and you can get 20% off with tokenized 20. My God, I've got a lot to promote. And speaking of promoting things, I should promote you liking and subscribing to this show because if you enjoyed this conversation half as much as I have, then I hope you will do that. It really helps us, and it means other people will get to enjoy it too. Thank you very much, and we'll catch you next time.