Kraken's $600M Bet on Stablecoin Cards

Speaker 1  0:00  

Simon,

Sy Taylor  0:10  

welcome to tokenized, the show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Simon Taylor. I'm your host for today, author of FinTech brain food and head of market dev over at tokenized. No Kai today, he's off doing busy things. It's almost like stable coins are happening everywhere all at once. But we are joined by some incredible guests making a second appearance. Is Wyatt longeren, who is the GP over at Vanek ventures, and you were previously a GP at Circle ventures. How you doing? Wyatt?

Speaker 2  0:39  

Doing? Well. Thank you for having me.

Sy Taylor  0:40  

Thank you for being back. My friend and another returning guest, the incredible Mark Greenberg, VP of B to B at Kraken. Nice rhyme. You've got yourself there. How you doing? Mark, good to see you again. Sam, good to have you back. And before we get into the fun stuff, I gotta remind viewers and listeners that views and opinions of contributors may be their own and might not reflect those companies they represent. Please don't take anything we say is tax, legal or financial advice. Always do your own research and stay safe. All right. First story since we have you mark, Kraken and MoneyGram have partnered to turn crypto into cash on a global scale, Kraken customers will now be able to withdraw crypto as cash in hundreds of fiat currencies spanning more than 100 countries worldwide, using moneygrams, extensive global cash pickup network. Mark, tell me about this.

Mark Greenberg  1:33  

I'm super excited about it. So cracking. The mission has long been to increase the adoption of cryptocurrency, and a real barrier to that is cash off ramps, being able to use crypto when it makes sense, but also in today's world, also use cash, which makes sense in many cases. This partnership is cracking customers a chance to withdraw cryptocurrency in hundreds of fiat currencies, as you said, hundreds of countries, and it brings together a fantastic, traditional player in MoneyGram. We've been doing this across those 100 countries for many, many years, alongside with our unique capabilities on onboarding identity verification exchange infrastructure. It's just really, really exciting that now on Kraken, you can use one of 500,000 retail locations to off ramp your crypto, if you want to.

Sy Taylor  2:23  

It's unbelievable to me that people who today, day to day, live in the West, don't understand how prevalent cash is in most of the world, Wyatt. And you know, seeing that in circle. I'm sure you're seeing it in many businesses now as well. That off ramps seem to be the constant bottleneck.

Speaker 2  2:40  

Yeah. I mean, getting dollars into stable coins, I don't think has ever really been the problem. It's getting cash out. We made investments in this category as well. We're investors in a company called czar that enables you to actually, just like, walk across the street to your local merchant and exchange stable coins for cash across the global south. So when I saw this news, I thought it was absolutely awesome. I think the other thing here is, like, stable coins day are a wonderful savings and spending tool. If you can attach them to physical networks like MoneyGram, the usability of it explodes. So, you know, being able to touch half a million physical locations in 100 countries is is awesome, and makes stable coins, I think, greatly increases the adoption of stable coins. So, yeah, these are things that really excite us.

Mark Greenberg  3:21  

Yeah, and for me, it's, in a large way, just the start of a partnership. So the foundation is cash, but MoneyGram also supports bank withdrawals in most of those 100 countries. And so expect over the next few months for us to add 100 countries of bank withdrawals as well to that same product. So yes, in many countries, cash will be the way you want to off ramp, and many it'll be via bank transfers, probably a mixture of both. But this partnership just brings their the breadth of their network together with crypto in a really unique way.

Sy Taylor  3:54  

There's an interesting pattern here as well, which is like people assumed Western Union MoneyGram were cooked as soon as stable coins came along, because instant 24/7, cross border, that's not going to work if, like, your fees are really high. Fees are really bad in cross border, like, and they'd always point at the fee structure of a monogram or Western Union without realizing, like, actually, the ability to exchange that at the last mile distribution is an incredibly hard thing to do, and that's what you're paying for. You're paying for the distribution stable coins. Mean they can get the dollars anywhere, but getting it off is different. So talk to me a little bit about what your observation of moneygrams reinvention looks like here. Like, have you seen that from the inside and what's that looked like?

Mark Greenberg  4:37  

Yeah, I'll be honest. So this conversation started with a meeting. I had a consensus last year in Toronto, and I took the meeting kind of begrudgingly, I'll be honest, for exactly that reason, MoneyGram. What are they doing? Old school company, kind of traditional, kind of, you know, cooked in a way, and very cool. Quickly I got excited, because we had a lot of similar motives. As Wyatt said, like 500,000 retail locations, you don't just build that overnight. You don't build it across 100 countries. We have been building Fiat off ramps for years, for more than a decade now, and it is hard. Every country is a slog. And what we found in MoneyGram was a partner who was willing to come to the table for us with us, willing to work with us through all the details of the tech build in all those 100 countries, willing to be creative about how to make it work. And was just a fantastic partner through and through. I won't say it was the easiest implementation either of us have ever done, but you love partners who just work through the massive news sometimes and figure it out. So it's been just a fantastic working relationship with them. And I do think this is the start of a bigger partnership between our two companies as we think about our need for more retail on ramping and off ramping around the globe.

Sy Taylor  6:00  

Yeah. Why interested in your thoughts there on what other initiatives you've seen for that? I mean, there's a lot of local stable coins popping up. How would you rate the maturity of the development of, like, local ramps, local stable coins, and you know, sort of what the key things that need to develop are for that industry.

Speaker 2  6:18  

I mean, these networks today are largely informal, right? So like, if you go down to Argentina, you have the different levels of cash you can get. Stable coins are, like, the most expensive. But if you think about like, who this user is, they're probably somebody, again, that's walking maybe a few minutes down the road to their local merchant and exchanging their local currency for US dollars. They're then physically custodying Those US dollars in their home. So as an example, my partner in this fund, Juan Lopez, tells a story all the time. He grew up in Bogota. His mom still goes across the street and exchanges Colombian pesos for cash and holds that cash. So now, with the introduction to stable coins, you can hold stable coins on your phone in a non custodial wallet. Now with things like what mudigram has done, what SAR is building, what tether is trying to build as well, is you're starting to formalize these networks on top of physical infrastructure. And again, it just like makes it more widely usable right now. Just take my phone, I can go anywhere. I don't have to be in Bogota. I can go to another country and get the same experience. So it just extends the network usability of stable coins. So I think a lot of this infrastructure is being built now. I remember at circle when we did a money grand partnership, for example, that was just getting USDC into those rails. And so now we're extending it beyond just stable coins to any kind of cryptocurrency. So it's really exciting.

Mark Greenberg  7:35  

Yeah, it's funny. So even here in Canada, my mother in law still does that too, right? So Bogota in one spot. But also my mother in law also really still likes this idea of cash in the Canadian market. At Kraken, we've long had, we've worked with the post office here, actually, on in person payments, both cash in and cash out. And it's been surprisingly, was kind of skeptical of it as a product at first, but it was surprisingly a rail that folks use and even want, even in the Canadian market. And so that was always something that we thought about, how could we do that in more places? And how do we bring cash together with crypto? And so this is kind of the much faster path to be able to pull

Sy Taylor  8:15  

that off. The formal banker in me is like cash. It's a double edged sword, amazing for Financial Inclusion in elderly populations, in low income populations, in the segments of society that have not fully digitized and or live outside the formal banking system, and for 98% of the users in cash, that is probably true. The problem is the 2% cash is also extremely convenient for criminals, and unfortunately, it creates a risk surface area that when you are able to move money instantly in 24/7 and then cash it out, then you sort of allow some of the bad guys through the net that was designed to include people, But I know that look monograms regulated. Kraken is regulated. How are you thinking about how you manage that type of risk, especially when it's cross border

Mark Greenberg  9:09  

more and more so first, let's talk about retail locations. Retail locations allow you to do KYC, which is far more reliable nowadays than most online KYC, right? We've all seen all the different ways that ai

Sy Taylor  9:24  

prakes are a thing. One,

Mark Greenberg  9:25  

yeah, it can. Can do all sorts of things to KYC, and there's lots of ways to solve for that, and we work very hard to solve for it. We're all sort of a cast cutting mouse game. Retail makes that a lot easier. And then, yeah, and on top of that, you've got Kraken and all of the look the other form where people often make that same argument. Simon is crypto. We work very, very hard all the time to make sure that we have KYC, fraud, security, AML, all those pieces in the whatever it is, 50 plus jurisdictions in which we're regulated at the moment. And it. Are we perfect? No, is any bank I used to work for perfect at this either? No. But every day we work hard to get a little bit better. And I'd say retail withdrawing to a retail location in cash is actually one of the lowest surface areas for this in a lot of ways, because you just have a different approach to KYC, if you can actually see the person and check an ID or check something right in the moment.

Sy Taylor  10:22  

Indeed, the informal agent networks at the last mile may vary, but somebody like a MoneyGram, I think, is a different thing. And I think that sort of formalizes it. People don't realize that tether is sent to whatever agent in whatever last mile who was selling you air time. And you know how much is really happening there. This is a slightly different thing. So I think that's an important distinction. While we have you, Mark, and this is genuinely not an advertorial, you just had a lot of news this week. You acquired a company called reap for crack and payward, not Mark, acquired a company called reap for $600 million so they're Hong Kong based, founded in 2018 profitable. They issue visa corporate cards funded by stable coins. So stable coin back to cards, and they serve 22,000 businesses across Asia. Fascinating acquisition here getting into the stable coin payments game. Tell me the logic behind this acquisition?

Mark Greenberg  11:18  

Yeah. So Kraken is owned by a company called payward. Payward is the parent company of Kraken. Payward actually owns a whole bunch of other brands already, like NinjaTrader and breakout and see a benchmark and X stocks and one called payward services, which is actually the business that I run. Payward services takes all the amazing things we built in all those companies over the last 15 years and makes them available as a platform for other B to B companies. We've done that on crypto trading, prediction markets, derivatives trading, on and off ramps, yield lending, but we didn't really do it as much on the payment side. That's changing today with this announcement. Stable coin adoption obviously accelerating really, really fast. Businesses using stable coins, using Kraken Pro actually not built for it, but using Kraken Pro as an invoicing tool and a payments tool, quite often, we recognize that our users want, that we recognize that we can offer this to businesses around the world. We already are the number one place where stable coins are exchanged from one to another and to fiat in the world, so as those just build together into this really awesome, even more in depth payward services engine that we're building right now. So super excited. It's a fantastic team. It's been fun getting to know them over the last months, and we look forward to just integrating it into our broader vision over time.

Sy Taylor  12:40  

Wyatt, your thoughts? You know, Stripe acquired bridge, MasterCard, bvnk, moonpay acquired iron. Is there anybody left to acquire at this point? And what does this mean for centralized exchanges that don't have one of these?

Speaker 2  12:55  

I mean, you're totally seeing like the verticalization of the stack. It's really exciting. There are some players out there. So when we were at circle, we were investors in the first round of rain. So that's the reaps, probably biggest competitor today, but it's exciting. Yeah, you're seeing, you know, the stripe stack is now going to be competing with the payward stack, which is going to be competing with the rain stack. And you're seeing everybody go up and down. So I give a lot of kudos to stripe, because in 12 months, they went from having virtually no crypto strategy to acquiring the entire surface area and really picking some of the best companies off the market with bridge and privy, and then, of course, launching tempo, brilliant move. And so I won't speak to Mark's strategy, but it's clear that you're seeing people look at certain things like cards and saying, all right, this is a massive surface area we can own the economics of the network. We need to have this. And I think separately, acquiring reap gets you licenses and a regulatory footprint that would take a lot longer if I had to put, like my corp dev hat on. Brilliant move gets you into the market, gets you, you know, 1000s of customers, as you noted. And again, if we're playing off, like, the on off ramp piece as well, like, these are the customers who want stable coins, who want to save and spend in stable coins. And these card networks are phenomenal, and they're taking off. You're seeing the volumes and the interchange revenue that they can generate. So I think we're just at the beginning, even though you have, you know, $600 million acquisition here, reins valued somewhere in like, you know, close to $2 billion these could be much, much bigger. So I think it's just the tip of the iceberg.

Mark Greenberg  14:28  

Yeah, Simon, last time I was here, we were talking about the crack card, which is inside of our money app. And much the same way, we're just talking about the MoneyGram piece cards allow you to off ramp crypto and use it every day. Reap is one of the best in this business, in that they issue cards for some of the best businesses in the world. They do it in most markets around the world right now, combining their licensing with ours, combining their distribution with ours, just continues to like. Recognize some users will use Kraken and crack in our apps, but we also want to take that same infrastructure we built and support many others, and Reek just helps us do that, bring that same kind of off ramping capability to a whole bunch of other businesses around the world.

Sy Taylor  15:13  

As a payments note, it's been really enjoyable for me to watch the crypto industry really come around to the idea that interchange is a feature, not a bug, and that the narrative has really shifted from like fees are evil, to fees help us deliver on our mission, which is instant, 24/7, most widely available, most accessible forms of finance. And I think that sort of proliferation of choice is interesting, and I hadn't realized mark that payward is sort of operating that company, umbrella strategy, almost like an alphabet with its Waymo and Google and Google Cloud and all of that sort of stuff that you can serve others, like Google Cloud does, but you can also serve people. Help me understand. Just take me inside the services business. Give me an example of any clients you can share and the type of work you do, because I think that White Label Space is going to get really, really hot, especially as the bigger institutions now we're trying to think about, how did they come into the space and and how do you bring all of that capital that's locked in trod fi and bring it to instant 24/7,

Mark Greenberg  16:14  

yeah, our good example of that is bunk, actually. So bunk is one of the largest Neo banks in Europe. They wanted to put crypto trading right into their experience. We built it with them in six weeks, from idea through to it being live for customers, they could use our Mika license. They can use the breadth of our deposit withdrawal rails on the crypto side, all the various pieces that we've built, and that's one client. We have a whole bunch more exciting names in there.

Sy Taylor  16:43  

You come maybe at reveal, that's absolutely fine, but I think just having one of those examples, what a, it's interesting because it's Europe, and I think Kraken is really quite a strong presence across Europe, and maybe not as understood in the US, outside of insiders like Wyatt, who, of course, understand that. And B, because bunk as well, like, what 10, 12 million users, major success story in the European neobank space. So this speaks to my heartland of, like markets, but something that hadn't been part of the stable coin or crypto conversation,

Mark Greenberg  17:13  

and now it's time of connecting it even more, right? So then you start talking about, okay, now we have permissionless equities with tokenized equities. Now we can offer almost broker dealer style services. So equities, we can offer derivatives with the binomial acquisition. We can offer prediction markets. We're actually powering prediction markets for a bunch of broker dealers in Canada right now, so lots of different pieces in our stock that go together here, and it's a bunch of, I guess, the first public success story, but lot more coming

Sy Taylor  17:41  

fascinating. Why any closing thoughts on this story?

Speaker 2  17:44  

I just think the card space is really, really fascinating, especially as you see providers like rain, I'm not sure about reap, but those that are also like program managers and issuers, because they get to control the economics. And that's that's really powerful. And so I think over time, like we've seen certain program managers, let's say, like Marketa, get squeezed on margin while rain has continued to grow, and that's because they get to be both the issuer and the program manager. And rain just announced, for example, that they're now a principal member of MasterCard and Visa. So I think the broader point here as well, is like stable coins are just being ingrained in traditional payments. And to your point, Simon, like, it used to kind of be a it's stable coins or, you know, or nothing. And I think what we're seeing is that the rails are just being put together, and the user experience here is just going to get better and better, and it's going to mean that hopefully billions of people, in short order, have access to these rails and businesses as well. You don't really have to think about the underlying plumbing. It's just we're building smarter routing on top, and it's going to be stable coins plus swift and it's going to be stable coins plus ACH and real time payments. So it's just really exciting to see, like, the biggest companies in the world acquire here, and the biggest companies world partner here.

Sy Taylor  18:59  

You said something I think, really important, that a lot of our listeners will have understood, but I just want to unpack, like, historically, to issue cards, you need three roles, right? You needed somebody who was the sort of the license holder at the bottom, somebody who was directly connected to the Visa and MasterCard gateway so that they could send the transactions through the card network, and then the program manager at the top, who manages compliance, sets the pricing, does all of the that kind of stuff. And Marketo is like the top two. It does program management and it does the issue of processing, but it doesn't necessarily hold the underlying license. Rain is interesting because it does all three. And there are other companies emerging that do all three of those and become kind of full stack, and as a result of that, they own the economics. And owning the economics means you can share more of the economics. You get more economies of scale. You can operate in more international markets. And Visa and MasterCard did something super interesting about 10 years ago, which is. They made their gateways their ability to be direct members, if you plumb all the way into them, cloud native and multi geography and most of the big banks in the world, most of the issuer processors, didn't necessarily plug into that version. They've still plumbed into a data center somewhere, physically and talking to visa that way. So if you're newer, somebody like a rain or, you know, in the traditional space, lithic, or somebody like high note or episode six, those cloud native card issuer providers have a real competitive advantage when it comes to going international. But what they need is the International licensing. So I come back to reap is a very interesting acquisition for that because of the breadth of licensing it had so could be, could be a bit of a hidden secret weapon here. So thank you for letting me play payments nerd for a little while there, guys. I appreciate you, and I also appreciate our sponsors. So we're going to take a quick break here while we hear from them. This episode, if it's not obvious, is brought to you by our friends at visa, a global leader in payments. Visa's tokenized assets platform vtap uses smart contracts and cryptography to help banks bring fiat currencies on chain. Vtap allows financial institutions to issue Fiat backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in vtap. This episode is sponsored by stripe. Internet commerce is evolving pretty rapidly, and agents are now becoming economic actors. They're managing spend and transacting autonomously, and stable coins are becoming the default for them to do so, thanks to their programmable instant global and low cost nature. With stripe, your business is ready for this new agentic economy. Accept stable coin payments from agents, equip your agents with wallets and issue stable coin backed cards so they can spend all through a single integration, from Shopify to ramp businesses trust stripe to get ready for agentic commerce. Learn more@stripe.com forward slash crypto. This episode is sponsored by m zero. Stable coins are becoming global financial infrastructure. It's time for that infrastructure to mature. If you're a brand, you should have your own stable coin set to the behavior of financial flows moving through your product. If you're an issuer, you want to be the stable coin partner for the most valuable brands. M zero is the only platform where issuers and brands get together to build digital money products for the world. M zero make your own money. Get started on mzero.org. All right. Thank you so much to our sponsors. The next story is about coalpay Adding JP Morgan and bvnk blockchain rails to their cross border payments platform. So this extends coal pays cross border, multi rail platform, which does stuff like swift and ACH and real time local payment methods, adding blockchain based settlement across select corridors. The chairman and CEO of coal pay said, adding both public and private blockchain capabilities allows us to optimize how payments move, improving speed, flexibility and efficiency for our clients around the world, fascinating, public and private. So jpm has Connexus, obviously, for its instant, 24/7 capability, BV and K, as you know, does on chain. Wyatt. Did you see this story? And what are your thoughts? Yeah.

Speaker 1  23:36  

I mean, I

Speaker 2  23:37  

think it's very similar to what we were just talking about, which is amazing to see adoption from like s p5 100 payments company pushing blockchain rails. And I think really like admitting that certain corridors, stable coins are better. But at the same time, again, we're not just replacing swift here, we're augmenting it. And I think for you know, certain customers like this is just going to be smart riding on top. You're here to think about cost, speed corridor, what's the client's preference, and so this multi rail future is here. And I think, you know, BV and K, rain, reap, all these companies that we've been talking about are just like, these are the stacks that are being built. And it's amazing to see, like, these massive enterprises starting to plug in. So again, I think this is very thematic, but the whole story we've been telling this entire episode, which is stable coins are a new rail that's being plugged into enterprises and businesses worldwide. Really exciting stuff.

Mark Greenberg  24:32  

Look international money movement still too hard. I think that's pretty obvious. Still. Unfortunately, stable coins are much easier. And I truly believe, over time, the more traditional rails in country make a lot of sense, and then using more instant international rails and replacing swift over time, that's, I think, a step in this direction here we know reap and others, and that. Even, even folks Jerry rigging the Kraken platform today are already doing this at scale. Large companies are doing this. And so expect more announcements like this over time, where we where public blockchains just become part of international money movement. More fulsomely,

Speaker 2  25:17  

maybe one more thing I would, I would add to it really quickly, is like, I think another trend that we're starting to see here is companies, at some point, are going to try to solve for pre funding and having all these bank accounts sitting all over the world. So to the extent that we can use stable coins and have these different last mile settlement features, and so I think stable coins are going to be a lot of the rail for cross border fundings. But if you could hook up to these existing networks, it's going to solve the last mile for enterprises, and ideally that should mean that for Treasurers and for the likes of payward as an example, you don't have to manage all these bank accounts all over the world, and hopefully that will start to pick apart the existing correspondent banking system. So I think that's more of like the meta picture that we're moving towards.

Sy Taylor  25:58  

Tony at ubix talks about having one wallet to rule them all for your corporate treasury, and in that might be tokenized deposits, and it might be stable coins. Instead of having lots of different bank accounts in lots of different places, because I want my deposits in different places as a treasury I'm managing risk. I don't necessarily want it to all be in one bucket, but I do want to control it from a single dashboard. Not 30 different integrations in 30 different markets that I have to maintain to my own SAP or Oracle ERP back end system like that is an integration project that can take years and is incredibly slow and is painful. Like I want to be able to move things instant, 24/7, and you know, people forget that CLS is closed at the weekend. Fed wire is closed on Saturdays, functionally it still will be from 2028 and so you can't actually get last mile settlement in many of those markets over the weekend, anyway. So there's, I still think there's actually a domestic use case, and there's a markets use case for stable coins is settlement. And the banks right now are concerned of like, well, we don't know the capital treatment of stable coins. Are they more like wholesale deposits? Are they more like retail? One could imagine they're going to end up looking more like wholesale but still, I think we have to meaningfully move that forward, and we are starting to see movement from some of the regulators from Basel and elsewhere on how the banks need to think about that, because the client demand for 24/7 settlement is really coming, especially on trade dot XYZ on hyper liquid when there's geopolitical risk over a weekend, traders want to trade. Traders want to hedge, and they can see it all happening on hyper liquid, and they can't do it at the CME or elsewhere. So I think that's going to be a really interesting driving force for a type of settlement that we haven't necessarily seen. Mark Any other thoughts on this story?

Mark Greenberg  27:52  

Yeah, you know, just playing on that point. So we're moving to a world, I think, over time, where permissioned equities will be traded 24/7, right? The stuff we're doing with NASDAQ, what nicey's And DTC are talking about, funnily enough, the hardest part of this is actually figuring out how to get cash in and out on the weekend right now. And so that's another forcing function for more traditional players that may have waited on stable coins to really be bringing them into their ecosystem. And why you can expect, I think, even more of the more of this over the next, the coming months,

Speaker 2  28:27  

there are some also, like, interesting new liquidity networks that are popping up. We just funded one, I can't disclose just yet, but hopefully will come out soon, where, you know, as a result of stable coins, like you're pinging money around the world instantly, but you're actually settling later. And so these new networks have popped up. Prior Examples of this include companies like ARF and Huma, what they've done, but you're seeing this pop up in markets like Africa and Latin America. And in fact, actually, many of the crypto exchanges have kind of served that role over time. I'm sure Kraken does as well, where liquidity gets pushed the edges, and it's actually like these OTC desks, these crypto exchanges and now these new companies that are popping up to service anyone who's moving stable coins globally, which could be payments companies, or, in the case what Mark's talking about, increasingly capital markets

Speaker 1  29:12  

use

Sy Taylor  29:12  

cases. You know, it's something that I think's mispriced or misunderstood about crypto, is that you can have network effects for liquidity. And if you go back to the original ripple vision, it was that, because money becomes instant, like it was supposed to ping around all of these market makers and build out network effects so that it never necessarily got stuck. And I think the idea was always right the timing in 2015 and the aggressive like, we're here to kill banks, by the way, banks will you buy our product might have been bit of an issue at the time, but it was way too early, but it was the right idea, and you can start to see that happening now. Is like stock of local currency and stock of stable coins is building up. I need to rebalance that, and I've spoken to. Several very large FX broker dealer places, FX desks at banks, and they're all trying to figure out, okay, how do we bring institutional heft to this? Because we can absolutely see how much more efficient this could be, and we want to start to play here too. So we're moving out of that just, you know, just Citadel and Jump Street and the hedge funds are playing to actually some of the market structure players are now trying to go tokenized, so that'll be fascinating to watch as well. The last major story I had this week, I thought was a fascinating one, which is bullish, are going to acquire equinity for $4.2 billion so this, of course, is the institutional crypto exchange, and equinity is the leading transfer agent who serves nearly 3000 different stock issuers, 15,000 total global corporates. And they do things like all your corporate actions, all your updating and transferring of legal title. Hence transfer agent, and they process $500 billion in annual payments. So this combo of bullish and equity is the first real, fully integrated, Blockchain enabled, tokenized equity issuer, services provider, with the transfer agent underneath it. Interested mark in your thoughts, you mentioned tokenized equities earlier as a big theme. Your thoughts on this news and the trend it represents?

Mark Greenberg  31:25  

Yeah, it's exciting to see more folks thinking about this space. It's obviously a space we've been thinking about and working on for a long time. I would say there's an obvious play here, and I think it's obvious to me, but I think it's just worth putting out. And which is, this is for sure, are bullish thinking about how they bring tokenized equities to market in the United States, transfer agents are key to that. They're a key part of being able to they're the license that folks like securitize and super state have today, who are some of the folks who are really thinking about permissioned, tokenized equities. So that's really exciting. I would say, though, I think there's like three different angles to this, and in the middle, maybe I'm less excited about which is this piece. On one hand, you've got issuer driven exchange driven permission programs, like what NASDAQ and Nizza are working on. I'm really excited about those kind of programs. I think they're the ones that will likely drive the most permission volume with broker dealers, etc. And on the other hand, you've got permissionless versions, like what we're doing with X stocks and what Ondo does with their global markets product which allow you to operate fully. There's no transfer agent in the mix. There's no the KYC operates much more like stable coins on minting and redeeming. And so I think those are probably the winning markets. I know a lot of people have put a lot of investments into transfer agents, and trying to think about it that way, maybe I'm a little bit more bearish on it, but obviously bullish. Taking a big bite of the apple here and trying to make this part work,

Speaker 2  32:54  

I'm more bullish on this. On bullish

Sy Taylor  32:58  

have to be said,

Speaker 2  32:59  

the transfer agent. It's like the real choke point here, you know, in capital markets. And I think the way that we've approached tokenization actually don't really like the framing of permissionless and permissioned, just because, like, that's not really how capital markets work. And so, like the transfer agent, you can think of it as as the source of truth. And a lot of the way that I think the crypto world approaches tokenization is almost analogous to how, like stable coins evolved in the payments landscape worked, which was they think that we just solved it because we put $1 on a blockchain and boom, we're done right. And as we've learned and matured now, we're at this point where that's not the case, and it's all about merging the old systems with the new. And so if you think about how a lot of tokenization works today, and what I think has been troubling for Van Eck as an issuer and an asset manager to get involved in the space is that we've kind of ignored the transfer agent role, and in the permissionless trading world, we don't necessarily have the best point of view in terms of who's holding the asset, and you can't really restrict it and follow a lot of the regulations. So for example, Reg ms or reg s. There are some, you know, I think interpretations on how that could be viewed, but I'm excited about not creating kind of parallel cap table structures and actually having a transfer agent who could serve as the source of truth you can tokenize. And then I think we just really need to solve for like compliance and permissioning at the level above that. And so that could be done at the exchange this could be done at the blockchain level. I'm sure tempo is probably working on some things here, but, yeah, I think you need transfer agents and broker dealers to play a role here. Eventually, I do think the market structure will evolve, maybe beyond what DTCC has, but I think in the short term, it's a necessary step. And I'm just, I'm following the history of stable coins, and I just see, like, a lot of parallels here, where we're trying to, almost, like, kick the existing system out too early, when we still need it to exist, I think, just to get the large asset managers and large issuers on board, and I

Sy Taylor  34:48  

think there's something to be said for their network effect. There's value in backward compatibility with where all of the capital is today and where all the capital is today is in regulated entities that. Need something that lets them do this, and what a transfer agent does is give you legal backward compatibility. An issuer is perfectly capable of creating a new token on a new chain and doing whatever they like with it, but without a transfer agent, they don't have legal compatibility that would serve somebody like a Vanik, somebody like a Franklin Templeton and a BlackRock, to be able to manage that in quite the same way because they themselves are regulated. I think there's value in that. But I buy your broader point mark that also we're sort of baking in a path dependency to a way we used to do things. And that's challenging, because the thing that the figure has done when they've issued their own stock, for instance, and a lot of what super state's done is you now actually own the stock certificate when you hold that token, and all of the corporate actions and everything that comes around it, suddenly we go away from this, like credible market structure that's like a cottage industry of different people who do different things and shuffle paper around to that can all happen on chain. And so I buy what you're going for, but I just don't know how you make it backwardly compatible without the transfer agent or a change to United States law like and that's not baked into the clarity act as I understood it anyway.

Mark Greenberg  36:16  

Well, let's, I think actually, let's take the parallel from the conversation we're having around stable coins here. If I think about the conversations I was having about stable coins in the banks I worked with 567, years ago, it was actually very similar, oh, there's actually no KYC on the transfer. We can't allow that. That's not possible. We have to do it the way we do it. It has to be fully permissioned. It has to operate so that I can see who the end holder is every single time. And then at some point, folks just realized that maybe you don't have to. Adoption came up. And now you see a different kind of melding of the Old World and the New World, which is the kinds of bridges that build between those two worlds and allow you to take a swift payment and turn it into a stable coin without them having to be interoperable. It's not as if the cash in the stable coin can run through swift we're just really good now at moving between the two tokenized equities, I feel like is exactly the same thing over time. Yes, there's going to have to be bridges that take things from the traditional world into the new world. But this idea that all of the rules and capabilities and things that existed and all the layers that existed to make this system work under one set of Technology have to apply as is for the new set of technology. I'm just not there, and maybe it's four or five years away, but I'm very bullish that we will find a solve for that over time.

Speaker 2  37:50  

I would agree.

Sy Taylor  37:51  

I like the fact that you've taken that spot and good pushback. Wyatt, any thoughts?

Speaker 2  37:56  

Yeah, I mean, I think the answer is probably in the middle, right, which is, do we need all the layers and all the intermediaries that we have in capital markets today? Absolutely not. I think what figure is proposing is an interesting and probably ideal architecture to try to get towards, but you still need the backwards compatibility. So I think that's the key point. And yeah, clarity doesn't address a lot of these things. They kind of just say securities are securities. So there's going to have to be innovation through no action letters and through honestly like technology, where people can pre program certain compliance into smart contracts so that we can actually start to regulate these things. So I think, you know, the positive thing is, we're seeing interesting integrations with the likes of bullish and we're seeing new policy come out. I think companies are trying to push for this stuff. Super state's done a great job. Security has done a great job, but there's still a lot of wood to chop, because I think, like, the pure permissionless nature of this is very, very challenging for a lot of companies because of the lack of oversight. So the answer is somewhere in the middle, I don't know, but this is why we're actively involved. This is why we invest this is why, like, we're trying to find companies that can help solve this for us. Solve this for us, because we think it's going to be huge unlock on the distribution side, which is now you're going to have, like, issuers and the suppliers are going to be anybody with a wallet, right? And it's going to that's going to flow through companies like Kraken. So if we can get the messy middle solved, I think it's going to be a huge distribution

Sy Taylor  39:18  

unlock. Mark, I like that timeframe of maybe it takes four or five years, and let's just let this one run because tokenized equities just aren't there yet, and it could take a while for them to come, and there'll be a lightning in the bottom moment where suddenly that just flips, and it might not happen tomorrow. So you can potentially pre judge things. I think it's a great frame. There's a couple of other stories that we didn't get as much time for this week to go into in depth, but I wonder if Wyatt mark you saw that Falcon X and signum partnered to launch a tokenized credit offering for institutional clients. Tokenized credit again, another asset class, like equities, sort of private credit, has had some challenges. Lately, but tokenizing, it could potentially reduce some barriers to adoption. I know Larry Fink has been talking about tokenization being a democratizing force. Why any thoughts on the on the credit side of the equation?

Speaker 2  40:12  

Yeah, I think you're starting to see like the despite what's happening in traditional private credit markets, like what you're seeing on chain is actually really exciting. Apollo and Morpho as an example. I don't know if it was really announcement or if it was kind of a leak, but there's a big partnership cooking there, and we're seeing a lot of interesting entrepreneurs go attack the credit space broadly, whether it be consumer or integrating into the likes of Apollo, Janice Henderson, et cetera. Centrifuge has also done a great job here. So I think the bigger push is that with the risk and everything that's going on in defi, there's kind of a demand for better assets, and private credit is starting to fill that gap. I think separately, this is where, like the tokenized RWA assets come in, things like real estate, things like USDA. I think a lot of these people are calling these kind of infra fi. But private credit related to different industries, whether it be real estate, whether it be GPU financing, but the main meta theme here is that, like everyone wants better assets on chain, and so these new issuers are popping up, and they're coming through marketplaces like Morpho mark. Any thoughts?

Mark Greenberg  41:15  

Yeah, tokenization is infrastructure. Makes a lot of sense. I think most folks on here will understand that. I think that's a lot of what's happening still in the space on private credit. It's more about how you package private credit and offer it to folks, and it is necessarily about changing the underlying product too much, or changing the permissions around it. Liquidity is still the most important piece to making these things work. I think that works in the institutional space, on private credit, probably doesn't work yet on real estate and some other asset classes, but look forward to seeing more folks try and you got to get this flywheel going. It's a little chicken and egg otherwise. So the more folks who build things like this, the more demand there will be for it, the more liquidity there will be, and the more successful it will be. Over time,

Speaker 1  41:58  

you're

Speaker 2  41:59  

starting to see some liquidity on the pop up, just in unique kind of, like defi ways, right where you're having people supply liquidity. They can earn tokens, as well as, like, building on top of infrastructure like m zero, where people are using, basically turning what would be like an interval fund into, like an on chain vault with treasuries to supply near instant liquidity. You kind of like, blend the overall API down, but you create some liquidity. So there's a lot of interesting experiments here that are happening,

Sy Taylor  42:28  

fascinating to see. And there's a team called Valinor, who's ex Blackstone, that are out there doing interesting thing. I'm an angel investor in a company called fence finance that are quietly popping up everywhere, behind the scenes. And I think a lot of it is dealing with the mechanics of like, let's say I'm a consumer lender or an auto lender. I go get a big line of credit. What I have to do when I have loans coming in the front door is go to my lender and say, look, I've got all of these loans. Now, can I have another tranche of that credit, please? That might take them a couple of days to check the paperwork and to wire the funds across. Maybe it's not happening over a weekend. So there's delays built into that. There's operational administration on both organizations, and then you can push loans out of the front door. That delay that admin just goes away. If it's all tokenized, because I sign the credit agreement as a smart contract, I get loans coming through the front door, and I can pull down on my line of credit, and so the money flows much, much more effectively. And I think that is a real open your eyes moment for anybody who has been in lending historically, for how different this world can look and what it could mean, even for merchants who are wanting to get paid instantly and then go finance their next inventory, or anything along those lines. So there's the like, actual distribution of the capital side of it. And as you were talking about Wyatt, the construction of that fund itself in defi, you can see these early patterns emerging, and you can see the big players starting to come to it. That's all the stories we had time to cover in depth. But this week, we also saw that a 16 Z crypto raised $2.2 billion for its fifth fund. And horn ventures also announced a $1 billion fund too. So shout out, Diogo, the engineer who allocates capital. We'll have you back on the show at some point to talk about that. I'm sure. Open trade raised $17 million to expand stable coin yield infrastructure, Moon pay acquired Solana, execution layer, firm D flow, used by Coinbase and Phantom, interesting, more institutional stuff that about covers us for this week. But Mark, if people want to find out more about you and everything you're doing, what are they good to do that?

Mark Greenberg  44:41  

Payroll.com or kraken.com about

Sy Taylor  44:44  

it. And Wyatt, how about you

Speaker 2  44:47  

can find me at Wyatt, Lonergan on x, or at Vanek, underscore us on x, or vaneck.com

Sy Taylor  44:54  

you'll find me at sy Taylor on all of the socials, screaming into the void@fintechbrainfood.com and, of course. Course at tempo dot XYZ, where we're announcing incredible partners almost every other day, and you'll find a lot more of us, if you like, subscribe, share the show. You do it, and I might just show up. And thank you one day. So really appreciate you guys, and we'll catch you next time.