Onchain FX Is the Missing Piece for Stablecoins

Cuy Sheffield  0:10  

Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. I'm Kai Sheffield, head of crypto at Visa. No Simon today; he's on a well-earned vacation, but stepping in once again, I'm joined by our guest co-host Noah Levine, partner at A16Z Crypto. How's it going, Noah? It's

Noah Levine  0:29  

going great. Happy to be here again.

Cuy Sheffield  0:31  

Good to have you joining me. And then we've also got making their debut, Didier Laval, founder and CEO at Tetra Digital Group, who launched the first Canadian dollar-backed stablecoin earlier this year. Welcome to the show, Didier. How are you doing?

Didier Lavallee  0:46  

I'm well. Thanks for having me.

Cuy Sheffield  0:48  

Great to have you. And then making his second appearance, we've got the legend Eric Queetham, founder and CEO of Velocity. Thanks for joining us, Eric. How have you been?

Eric Queathem  0:59  

Been doing well. Good to see you guys. Big week for Velocity. Look forward to sharing more.

Cuy Sheffield  1:03  

Yeah, I'm excited to get into it. Before we get into the show, a couple of quick bits. I need to remind you that the views or opinions of our contributors today are their own. Do not necessarily reflect those of the companies they represent. Nothing we say should be taken as tax, financial, investment, or legal advice. Do your own research. All right. So coming back to Eric for the the first story, Velocity raises a $38 million Series A to help businesses tap stablecoin growth. Instead of reading out the the press release, Eric, first congratulations! This seems like a huge step for you all. Tell me more about the round and what are you building with Velocity?

Eric Queathem  1:39  

Yeah, no, I appreciate it. As you know, you know fundraising in any environment is never easy, so it's a big, big milestone for the team to get this deal over the line. We've brought on now some just really phenomenal partners spanning, I think, expertise across broader fintech more broadly. So that is is also a big part of why we're so excited in the round to have some of these new partners, particularly those who are just starting to dip their feet in and start to either invest in or think about stablecoins as a core kind of strategy within their broader organization. But I think you know more broadly, there was a headline this week that kind of really summed up the business, which was Velocity raises 30- million to make stablecoin payments boring enough for big businesses, and I think that's like just encompasses what we set out to build from day one, which is you know there's been this unbelievable growth in people coming on chain. It's largely been I think for hyper focused areas within the market, and I think we're still very early in terms of adoption and and what we saw in the market was nobody was really filling that void, particularly in the super enterprise space where folks just didn't have the internal expertise to think about procuring or building out every aspect of what it would look like to come on chain and to take advantage of what stablecoins can bring to their their treasury and their broader financial operations, and so that's we've set out to build. We're we're still early in our in our 10 year. We're 16 months old, but we've made a lot of great progress over the last year. And obviously, having now some capital to go double down and accelerate what we're doing is pretty exciting.

Cuy Sheffield  3:14  

And then, do you see yourselves as a stablecoin orchestration provider? Like, I feel like this term has been used so much that's always like trying to categorize where different stablecoin infrastructure companies sit, and they're like stablecoin issuers pretty well understood what that role is.

Eric Queathem  3:30  

Yeah,

Cuy Sheffield  3:31  

a stablecoin payment company that helps businesses is that orchestration? Is that something different than orchestration? Like, how do you think about the broader landscape of the different stablecoin payment companies out there, and where you want velocity to to fit it.

Eric Queathem  3:45  

Yeah, it's a good question, and and one we get often as people are trying to figure out who's providing what services within the broader value chain. And obviously, the value chain within the space looks fundamentally different than traditional payments. I think the word orchestration, particularly coming from an acquiring background, often meant you're not sitting within the flow of funds. You're purely providing some sort of technology service, and that technology is is connecting different aspects of the ecosystem. And so, we certainly think of ourselves, and we are much more than that. We are a regulated business. We do sit in the flow of funds. We do provide capabilities that mimic or look and feel like any sort of payments institution. In some cases, you know, services that a bank might be offering. And so, I'm not sure the industry has kind of landed on the right set of terminology in terms of how to describe this new set of capabilities. But ultimately, what we're bringing together under a single API is the ability for anybody to send and receive, hold, grow, or get access to on-chain credit, all through a single API, enterprise-grade, and global in nature.

Noah Levine  4:52  

Yeah, Eric, you know, obviously have a tremendous background in acquiring, doing a lot of stuff on the corporate treasury flows as well. I'm curious, like, which use cases and influence. Are you finding that stablecoins are uniquely providing value for these customers?

Eric Queathem  5:04  

Yeah, I think what's interesting is there's so many different use cases, and I think what's been tricky about getting businesses excited about coming on chain is is finding the use case that is low enough risk and has really kind of clear guardrails on it in order to get them experimenting, and so I think we go into organizations and we'll have a conversation with maybe a CFO or a treasurer. Sometimes I had a payment, and we'll leave with maybe a dozen ideas on where stablecoins can add value to their payments or their banking infrastructure. But ultimately, I think the success in kind of all of us and and bringing the world on chain is much more about finding the easiest path for them. And what we found is that most businesses have a lot of comfort and understanding about what happens in the consumer payment side of the world. Obviously, you know brands like Visa bring this phenomenal layer of trust into what's happening within consumer payments, and so what we found to be very successful in those conversations is finding opportunities to enhance very small aspects of where they're operating today. So maybe it's something as simple as an acquirer who's operating a lot of markets but is struggling to get settlement back into a market into the right currency in order to settle downstream merchants. Maybe it's enterprise merchant who's doing a lot of acquiring in a in a market and and collecting those funds in market, but then ending up with a lot of trapped cash or the inability to move that quickly into other places around the world. And so, I think for us, the real kind of aha moments in these conversations is coming where we can solve an existing pain point off the back of a set of operational or financial operation functions that they really understand today, the idea that we're going to introduce them to an entire new payment flow or kind of massively reinvent the back office, I think, is just a step too far. And so, while there are great use cases more broadly across the enterprise, for us, we've been really focused on what is largely internal first-party treasury movement, and I think that's what you're seeing a lot in the market more broadly. Is first, in order to build a product or to interact with your downstream customers, you kind of got to build it first. Like you need to understand it as an as an organization yourself. And so, from that aspect, it's been largely focused on internal treasury movement to start, and then over time, I think they'll build the capabilities internally-not maybe the technology capabilities, but just the comfort to then start deploying these capabilities to their downstream customers.

Cuy Sheffield  7:31  

And Didier, so you are a stablecoin issuer. You you launched one of the first Canadian dollar stablecoins. Does that resonate with you? How how do you relate to what the use cases are of what people are are looking to do with a Canadian dollar stablecoin. Are they the same as what you see people doing with with U.S. dollar stablecoins?

Didier Lavallee  7:50  

Yeah, no, absolutely. I think Eric said two things on on the use cases that that really resonated with me. Is I mean, the first one would be like people are very excited about this, but you do walk out of these meetings, and there's a plethora of things you can do. And the reality is, like, you have to start with one, right? So, our capability to talk to the corporates and and essentially identify the a low value, low risk, high opportunity transaction flow to to really double down on, and for a Canadian token, that is often cross border into the U.S. Right, so the U.S. is our biggest trading partner. Something like 80% of Canadian organizations buy goods or trade with U.S. organizations. So there's a lot of back and forth that's happening, and today that flow for corporates is incredibly convoluted. Right, so you're dealing with primarily your financial institution. You have no transparency on that transactions. It's costly. It's slow. It's often T plus 2t, plus three. Sometimes they lose wire. So it could be very difficult for an organization that's looking to maximize treasury management. And there's a lot of appetite in fintechs, fast-moving companies to essentially better the system. The other thing about Canada that that's interesting is we still don't have real-time rails. So you're nine years into a project led by the Bank of Canada, and there's no capability for businesses to settle. Call it 20-four-five. Right, the ideal is 20-four-seven, but there's none of that capability. And forget programmatic. So there's a lot of opportunity for stable Canadian stablecoins domestically first and foremost, and then the second piece that we are seeing is cross-border a lot of activity. I mean, one of the stats that we like to share is one in five Canadian sends money abroad, so the remittance corridors are really strong between certain jurisdictions, and and that's a really good way for a token to be there. I like to think that Canada's trying to do the good work on non-USD stablecoins. Obviously, the flow is denominated by USD, but over time, I do believe there's more and more appetite. And even in the U.S. we're talking to a lot of Fortune, let's say 100 Fortune 50 companies that are transacting up north, and that are starting to use stable coins, and they want that Canadian token as part of their infrastructure. So we're we're very bullish on the opportunity.

Noah Levine  10:17  

It's very interesting. I think you know, oftentimes, obviously, when we talk about stable coins, it's very much in the cross-border context, but you know, haven't heard many examples where there's a real strong domestic use case, and so I think it could definitely be interesting, especially markets to your point, where there isn't a real-time payment system to use stablecoins almost to leapfrog the existing payment schemes. Kai, you know, I'm very curious. Obviously, today big announcement with Visa stablecoin platform. Kind of curious how how Visa views stablecoins, and specifically where both the information on what this announcement means, and from your end, what use cases do you see for for Visa as a network to leverage stablecoins?

Cuy Sheffield  10:53  

Yeah, I mean this is something obviously that we worked on for for a long time when when Noah was here at Visa, and then Eric. Like I think we've had a bunch of discussions around it. I think now that you have Open USD unveiled that it's going to exist and it's going to come to market later this year, and we're incredibly excited to participate in the ecosystem. The question really becomes like, how do you access and use it? And what we're very focused on doing is we want to make Visa the best way to access and more importantly use OUSD, and so we've been building out a bunch of infrastructure internally to take existing Visa clients in platforms they already have access to, you know, that they're already plugged into inside of Visa, and expose the capabilities for them to mint OUSD, be able to set up wallets, either bring their own wallet or providing a managed wallet as a service solution, and then be able to start to experiment with actually moving OUSD around. And so we're kind of opening the sandbox now, bringing in clients, and excited to have this going into when OUSD goes live, and I think the big use case that I keep coming back to that every time we talk, Eric, I think really stands out is is just that the opportunity on acquire or settlement, where I think stablecoin settlement today it's become one of the like real case studies of problems that stablecoins can solve in real payment systems, improving kind of backend operations, enabling them to happen, you know, seven days a week when typically it's five days minus bank holidays. But the majority of activity that we've seen on stablecoin settlement, it's been issuers that are issuing stablecoin link cards that are crypto-native companies that are then settling with Visa. I think that the next phase and step in the market is how do we really unlock settlement out to acquirers, and so we're working really hard towards how do you get that seven-day a week being able to have Visa pay acquirers in stablecoins like OUSD that they can acquirers get the money faster, and then they could get money to the merchants faster. Then the merchants could get money to suppliers faster, and you could create this cycle. And I think it also becomes like a major distribution angle of imagine if every time someone is spending at a specific merchant acquired by a member of OUSD, OUSD is being minted and then paid out to that acquirer and going to that merchant, and so we haven't even like started this. It's like so early that while the issuing side is developed, we got to get the acquiring side going. And so, Eric, you're you've been inside of acquire like you're like a acquiring payments PhD. How do you think about this specific use case, and like, what is it going to take to really unlock that at scale from the acquirer perspective?

Eric Queathem  13:48  

Yeah, I mean, we we we we started building this at WorldPay back in in 2020. We were the first acquirer to launch stablecoin settlement, and the use case then was all of the exchanges who needed stablecoins as a trading pair, which obviously was the first major use case within stablecoins, and so we were saving them effectively, you know, 20-four to 40-eight hours of of getting the fiat we were settling them into some digital asset that then allow them to use that as a trading pair to go source assets that they've already sold to their downstream retail institutional customers. I think the next evolution of that is like so. What are the use cases for which a large business first, probably as the most natural next starting point, would have need for stablecoins? And I think it's a little bit of that network effect, right? Like the the enterprise merchant only really is is craving stablecoins if they also then have use cases downstream. And so I think those use cases are now starting to be more clearly identified, particularly around like internal cash management. And when you think about a treasure getting comfortable coming on chain, I think the most natural place for them to on ramp volumes, like to bring fiat into their on chain environment, whatever that looks. Like is via the existing settlement process they have via their acquire today, and so I think what we're going to start to see is first treasurers getting really excited about both holding a bit of liquidity on chain and then solving some internal complexities that come from just the the web of complexity that comes from operating around the world with sometimes 10s, if not hundreds, of banks and 1000s of bank accounts. Simplifying that from an internal treasury perspective, then saying, "Well, actually, I need more capital on chain. Where's the most natural place for that to come? I'll tell Stripe or Additor, WorldPay, whoever, like, "Hey, I want 5% of my settlement. I think that will be the start of like the most natural place where large businesses will start to come on chain, and I think obviously what Visa has been doing and and the other networks have been pushing towards, I think starts to imagine a world where a consumer can actually interact with a merchant and settle value at the same time that goods are exchanged, and I think that's got to be the north star of of how commerce operates in the future, right? And no matter how good the payment rails are, which I would put probably you know Europe is the leader in terms of like peer capabilities, you still find that there are gaps and issues related to those fiat rails, and so the only way I can imagine the whole world going to real time commerce at the consumer interaction level is stablecoins, which means both the issuing side and the acquiring side have to come on board as the two primary funding in and funding out sources.

Cuy Sheffield  16:29  

Yeah, and then I I want to move us along to the a relevant story, and then Didier would would love your take on it. So now we have Hyundai becomes the first major South Korean company to introduce internal stablecoin transfers. So, speaking of corporate treasurers inside large entities getting comfortable stablecoins, Hyundai ran its first live cross-border treasury transfer. They moved $20,000 from Hyundai America to Hyundai Mexico, converting dollars into USDT and back using Hyundai Card, which is their their credit card entity. So, the transfer took an average of seven minutes end to end, against three to four hours to move the same tokens through correspondent banking, and so Didier, like, what is this signal, and are you seeing more of this again internal corporate treasury sophisticated companies moving between different entities? Like, do you think this is the use case for the industry right now, on on the next leg, I

Didier Lavallee  17:24  

certainly think at the corporate level it is it is the use case, and it's something we see. I mean, I don't think anybody understands maybe Canada as well as I do, but the you know I would say like Canada has a couple of things going for itself, right? So we have the Maple Eight, some of the largest pensions in the fund, they operate all over the world, right? They invest all over the world. They have ports, airports, all sorts of infrastructure. So they're moving value along. We have companies like Brookfield, which is well known operator globally as well. We have some of the largest uranium companies of the world, some of the largest oil and gas companies of the world, some largest metals and mining companies in the world, specifically gold, gold companies. So these are companies that are operating globally, transacting globally, and moving value globally. They are all using this. Additionally, Canada has sold some of its valuable real estate over the years, including some of our infrastructure. So we do have foreign operators that are here taking Canadian dollars and shipping them overseas as well. So I certainly think that this is is the use case that not I think it's the use case that we do see. It's internal corporates that are operating globally that are looking to move value. Now traditionally that value moves in dollars, and I don't necessarily think that's going to change, but what you want to do is you want that fungibility or interoperability of tokens in different pools, and I think that's where the market needs to be better at solving these problems. There's obviously liquidity pools, dexes where you can transact, you know, let's say CAD or token with with USDC and OUSD eventually. I'm sure, but realistically, you need more liquidity for these corporates to be moving hundreds of millions of dollars and being able to do this on-chain FX. So, I think if I would be kind of bullish on a piece of infrastructure, it's enabling the corporates to use stablecoins, but then also enabling on-chain FX for the the global movement to really be seamless.

Noah Levine  19:26  

Yeah, Didi, I think that's a really great point. You know, I feel like we've been seeing this specific use case for a few years now. I remember, you know, one of the most exciting parts of you know when Bridge got acquired, one of the use cases they were doing was helping SpaceX and Starlink repatriate funds from Nigeria back to the United States. A lot of times, these flows require moving between fiat and stablecoins using crypto exchanges. You know, one question that I've always had, and I think is very relevant to what you guys are working on, is: Is there an opportunity to increase the efficiency for these flows by using local currency stablecoins pegged to dollar stablecoins? And so, I'm curious. You know, from your experience with CAD, are you seeing examples where it's actually more efficient or or more price effective moving between dollar stablecoins and local currency stablecoins using on-chain FX versus through a crypto exchange?

Didier Lavallee  20:14  

Yeah, so we work on a lot of those use cases, specifically dedicated the Canadian and USD corridor right now, it is definitely cheaper and faster. But I would be very transparent saying you don't have huge liquidity in these pools yet, right? These pools are just getting started. So if you want to do a couple of $1,000 I mean the the Hyundai example is fascinating because 20 grand, right? Which seems minuscule for them to report on, but I think it's their first transaction. If you want to do low-value transactions, it works really well. You can load a domestic pair, so CAD pair. You hit a liquidity pool, you convert into $1 token. That conversion is already cheaper than a traditional FX leg that a financial institution would would charge you, and then you know you can get taken into a U.S. provider and off ramp USD. So Canadian corporates happy because they're earning dollar. Sorry, CAD. They're sending CAD, and the U.S. side of the leg is happy because they're getting dollars, which is what they care about. The authenticity comes in the cost of the transaction, the speed the transaction, and then the on-chain effects, which is still cheaper, even though there's not a ton of liquidity. I think over time, being able to replicate that transaction at scale is a huge unlock. If you can prove liquidity and you already have the efficiency around speed and cost, it's great. And then over time, it's programmable, right? I think Eric's point around being able to just really automate all these use cases, and over time, like, and and I think Kai, you made the point as well. Like, as the transaction happen, the issuance happen, the funds move. I mean, a lot of businesses we work with, that's what they're working towards. Yeah,

Cuy Sheffield  22:00  

Eric, what's what's your take on on on-chain FX? What is it going to take to be able to actually do it at scale? What are the the missing pieces now?

Eric Queathem  22:07  

Yeah, I think for us, we're probably less bullish on the ability to build enough liquidity to do those swaps outside of maybe a couple of core markets. Canada is probably a very good example. I don't know the market super well, but our view is your primary source of liquidity is going to come from native or local currencies moving into OUSD, USDC, USDT. Like that's going to probably be where your primary source liquidity is, and so that's kind of the bet we've taken and connecting into a really broad set of venues. Say we connect to 20-two different liquidity partners that allow us to trade local currency into typically a U.S. dollar-backed stablecoin, and so we think liquidity is going to continue to compound there. And we haven't seen enough momentum in any single market or corridor, which leads you to believe that you could do a local native stablecoin into something dollar backed, or even do like you know a Canadian dollar back stablecoin directly into EuroC or something like that. So I think we have a long way to go. I think it'd be fantastic, but I think we're not probably hopeful that that's a short term opportunity, and so we're more focused on getting to that depth liquidity and local currencies.

Noah Levine  23:21  

Yeah, it feels like you know. In in any case, you know, a big unlock is going to ultimately be banks coming in and being liquidity providers. Whether that's them receiving stablecoins and providing local currency on the back end of that, or I think even in a crazy future, banks actually being liquidity providers for decentralized exchanges themselves. And so, you know, I've had a lot of meetings with with banks recently who've who've asked me, you know, what what should we do from a stablecoin perspective? Where can we provide something very useful? And you know, something I've always come to is, you know, rather than using a crypto exchange, why why aren't banks themselves becoming the the counterparty for these types of transactions? And you know, obviously there are compliance questions, and in different markets, there's different regulatory capabilities, and obviously banks are are going to move with caution. But I think in the long run, we're going to start seeing some of the same existing providers that provide FX today start to play a role in in these flows as well.

Eric Queathem  24:11  

Yeah, I mean we we open a new market in in Iceland where like we want to trade USDC for local currency. Nobody wants to trade back on the other end. Like there's nothing coming on chain there. So the only way you solve that is you go to a local bank and you try to do a an off chain FX trade. And so I think there's going to be a huge opportunity as certainly volume grows and and all of these new corridors that are non kind of g5 currencies to consume a lot of those FX economics if if you have a big FX desk. Yeah, we we think there's a real role for banks. But before we get on to the next story, let's hear from the sponsors that make Tokenize possible.

Sy Taylor  24:49  

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 contract. 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. Here's a problem many businesses are up against: managing money is pretty painful. With slow apps built by banks on infrastructure from the 70s, designed before the internet was even a concept, it's often slow, cumbersome, and doesn't work well across borders. Stablecoins are changing this. Stablecoins are fundamentally a better way to store, manage, and spend money all around the world. They're offering a borderless alternative for those looking to move money instantly, spend anywhere, and earn on their savings. Stripe helps businesses unlock these benefits to build global by default fintechs designed once to work everywhere. Learn more about how you can use stablecoins at stripe.com/crypto. This episode is sponsored by M Zero. Launching a stablecoin used to mean accepting somebody else's technology stack, one fixed provider, bundled layers, no flexibility when your business changes or the market moves. M zero is modular stablecoin infrastructure that keeps every single layer independent. You can choose your unregulated issuer, design how your stablecoin behaves, and even tap into shared liquidity from across the network. Your stablecoin becomes built around your business, and it's configurable, so you can optimize the tech as you grow. Make your own money. Get started at mzero.org. All

Cuy Sheffield  26:54  

right, switching gears a little bit from stablecoins to tokenized real-world assets. DTCC runs the first live tokenized stock and treasury trades with J.P. Morgan, BlackRock, and Goldman. They converted assets held at the DTCC into tokens, used them in live production trades on july 15. Almost 40 companies taking part. J.P. Morgan tokenized shares of Investco QQQ ETF posted them as collateral to beat a margin call at CME Group, converted them back, and so for the first time, a central counterparty has accepted tokenized assets as margin, and so these pilots were on settling on Hyperledger Bezu and the Canton network. Now I have to to start with you first as the A16Z's recent investment in digital asset and kind of your interest in Canton seems like DTCC is is moving here. What what's your take on this overall story and kind of where tokenized real world assets are are going?

Noah Levine  27:52  

Yeah, no, I think it's extremely exciting. Obviously, we've known that DTCC has been exploring the space for a while, but this is sort of one of the first examples of of seeing them come and actually do something in real production, and you know, I think one of the interesting parts of the story is, you know, it's not just about purchasing or swapping assets. I think there's also a big story around collateral management here, and you know, the ability to have more efficient real-time collateral management for these assets. And so, I think that not only that, but also being able to connect sort of the cash leg as well as is an opportunity where where stablecoins are going to ultimately play a big role. The digital asset team has obviously been very close to DTCC and you know have been talking about this for a while, so it's it's really exciting to see it come into production. You know, I'm curious. You know, Didier, from your experience, obviously within RBC and you know within banking, like what do you think of this announcement, and how do you see this impacting the space?

Didier Lavallee  28:44  

So I was a settling counterparty for DTCC for years, and the equivalent Canadian as well. So CDS, I think I still have shell shock from dealing with those counterparties. It is very constructive to see them moving so fast and very exciting from announcement to proof of concept. You know, we leaned into a lot of the corporate use cases for stablecoins in the first part of the show. I think one of the parts that excite us the most at Tetra is you know the settlement leg of anything that's tokenized. We operate other infrastructure at Tetra, so we're a qualified custodian up here in Canada, and we also have software and tooling that we sell to financial institution. and And giving the background of the team, and most of us has worked in asset servicing, custody, foreign exchange, and public equities, we're very constructive as to what this will bring. I think QQQ and and collateral are great places to start. We have obviously with Biddle and and Benji, you've seen a lot of money market funds as well, and and experiments there. I think this is going to be one of the fastest growing areas for digital assets over the next five to 10 years, right? I say five to 10 years, a little bit of a longer term, just because there's a lot of infrastructure to build around this. The banks need to be active participants, which they're starting to be. But yeah, super constructive and really plays into the stablecoin use cases as well, because you need that settlement value.

Cuy Sheffield  30:16  

It's interesting as a domestic use case that the more assets come on chain if they're going to be traded. There's a role for particularly local currency stablecoins if it's in a market outside the U.S. to settle those trades. But I want to test a thesis out with you guys that I've been thinking about a lot more lately. It feels like you have these two trends that are happening of stablecoin adoption, you know, more regulatory clarity, more infrastructure coming out, people driving stablecoin payments, particularly on the B 2b side, and then you've got tokenized RWAs where capital markets are being upgraded and transformed, and a lot of times, like these things are like happening in parallel. It feels like there are only going to be more intersections of them, and the question that it leads me to is really, how big does the stablecoin supply need to get to be able to service, let's say, hundreds of trillions of dollars of transaction value? And when you see projections of oh, stablecoins are going to go to to 3 trillion, that's the supply people holding stablecoins. But why would regulated institutions hold a stablecoin if they could hold a tokenized treasury at the DTCC? And if you could go 24/7 between tokenized railroad assets and a stablecoin, then isn't it possible that we end up in a world where the money that's at rest is increasingly held in securities, yeah, like treasuries and money market funds, and stablecoins become more of this liquid medium of exchange that still is doing 10s, hundreds of trillions of volume, but you don't actually need 3 trillion in supply sitting there because a lot of the funds at rest could actually sit in tokenized treasuries. So, Eric, I guess how do you think about that? Of like, how much supply do we actually need for the payment utility to happen in stablecoins?

Eric Queathem  32:06  

I think it's spot on. Like I think this is obviously I've not been super close to the the formation of OUSD, but I think part of it has to be because like USDC is like a really good payment token, but actually it's a not a very good offering if I actually want to hold value on chain. And I think this is where we're starting to see the world bifurcate, which is like when I have activities that are sending and receiving, I need one one type of asset, and that asset needs like really good depth, liquidity, and all these complex currencies, and it needs certain attributes that allow me to execute payments in the most optimal way. But as soon as those funds come to rest, and the in the activity is now about holding capital on chain, the set of assets that I might want, or the token, or or potentially some sort of other treasury instrument looks fundamentally different, and I think that's where we're starting to see this diversion. I think you've seen a couple of coins, kind of or tokens, grow up looking to be that right, AUSD, USDG, things that kind of offer some sense of more like Treasury esque capabilities, but I think you're exactly right. Like if payments are happening in real time, actually I should be on ramping, moving, and off ramping that asset in a matter of minutes, right? Which would mean the actual supply needed in the world if if all payments volume globally came on chain is like I don't know maybe 1/100 of total daily settled payment volume. It's not like you know total assets in circulation in the world, right? And so I think you're you're spot on, Kai, in that thinking. And we've seen that a lot. And and certainly as we're thinking about building the capabilities internally of Velocity for holding, they're going to look fundamentally different than what it means to move or send and receive capital.

Cuy Sheffield  33:45  

It also feels to me, and curious what what you think, Didier. But like the way that the stablecoin market that we've known that we've seen grow up has been dollar access as one of the main use cases, and it's been very bottoms up long tail. And so this growth in supply to get to what 260 300 billion supply, there are a lot of people that are sitting on USDT that are in emerging markets who don't really have access to dollars, but as we cross to say okay the customers for stablecoins where the biggest growth is, it's now institutions, it's now corporates, it's payment companies. Like one, they have access to dollars, and so it's not that they need just a way to hold dollars. And two, they have access to securities. Yeah, if they'd like, their corporate treasury could hold you know tokenized treasuries, and so it feels like that massive payment market customer base isn't really looking for the same value proposition as the like bottoms up emerging market and consumer base was, and so you could see just like the velocity, the units of transaction value volume per supply is going to increase, but you don't need as much supply as what people have traditionally thought. But how do you think about that in the context of a Canadian dollar stablecoin? What is success for your coin? Of like, do you need 50 billion in supply for it to be successful, or it's actually like your north star in the way you measure it is the transaction volume and how efficiently it can move between other assets or even deposits, like when funds are are sitting at rest.

Didier Lavallee  35:18  

Yeah. So a couple of things in terms of North Star, the two that we really like to track or interested in, and we're we're starting Glow is, although Canada is about 2% of global GDP, it is a g7 trading FX pair, so it's about 6% of global flows of money, right? So how much of that value are we getting out of that Canadian token, right? So you can make that relative pair on a stablecoin market, as an example, and see how much of it you're capturing. The other piece is as the world has been shifting slightly away from U.S. Treasuries in terms of allocation, they're increasing in other markets, including Canadian Treasuries. So if you can make a Canadian token that's competitive, therefore you can pay some kind of yield rewards on it, and incentivize other markets to hold your Canadian token. Then you're watching as well how much supply there is out there for the token. So it's not just transaction. I think we're watching not. I think we are watching total amount of supply as well, but it's really kind of a treasury use case, as Canada is seen as a stable country from a macroeconomic standpoint, but I do believe Canada, being Canada, we have we're the land of oligopleys, right? We got six big banks, three big grocery chains, two drugstores, three telecoms, right? We love these big organizations that control markets, they will likely have their own treasury deposit token format that they will use to settle. I think that makes a tremendous amount of sense, and and candidly, is you know there's a lot of experiments happening, and Tetra is in a lot of these conversations with the big six banks up here. One of them is our investor, National Bank. We also have some credit unions and investors, and some disruptors like Wealthsimple And what you're seeing is, you know, you likely have these consortium-like, a little bit like OUSD, that are going to be present in market and that are going to use their own version of a settlement layer when they're looking to trade or hold themselves, right? I think that raises the question, though, that we talked about on the corporate use case as well. Is that liquidity outside of those markets going to be important? Because if you have a payments layer that's stablecoin led, and then you have that transaction or maybe holding layer with big financial institution that's tokenized in sub format, whether it be a tokenized treasury, tokenized deposit, you need interoperability between those two segments to be able to really bring the value that this ecosystem can bring, and that's likely where there's going to be some innovation needed. I mean, the U.S. is, I think, a great example. As Eric mentioned, there's fragmentation. There's a lot of U.S. token that are happening, right? And ultimately, like you don't go to J.P. Morgan and get a different dollar billed, and if you go to Bank of America, it is the same thing, and the user experience needs to be the same. So I do see a I call it a two or three tier system. I do believe over time you will have different token standards for different use cases, and in Canada and in the kind of financial infrastructure we see, that is already part of the dialog.

Cuy Sheffield  38:30  

Yeah, super interesting to to see how this this plays out. But it wouldn't be a tokenized show with my friend Noah as a guest co-host if we didn't spend a little bit of time on agentic payments. We we can't help ourselves, and so it's it's almost like we were joking that this is the the tokenized mullet now of like we start with stablecoins of real world assets, and then we end with like weird agentic payments that you know we've got at least cover one. And so Visa put out a report with our friends at Artemis on agentic payments from the ground up. We looked at x4 102 volume, found that there's been about $19 million of what we consider real volume with 134 million transactions since May 2025 So that's significantly less than some of the other numbers that you see. No, I know you've also done a bunch of work around how to figure out what's actually going on with x4 102 and who's using it and and what for. So, would love your initial take on on the report and just like how how do you see the current status of x4 102 and MPP and the agentic payments you know use cases for stablecoins?

Noah Levine  39:35  

Yeah, for sure. Well, first of all, it was a great report. Definitely shout out to the Artemis team. They do a great job with these. And yeah, I mean, I think like you know, both in in my own research as well as you know, reading the report, I think that a lot of the numbers that get thrown around in terms of agentic commerce are oftentimes inflated. And you know, if you actually look at the numbers and look at the data, it's very clear that the majority of the volume is actually like a very small subsection of users, and it's unclear on an adjusted basis. Is really how real it is, you know. I think we're in a place right now where there's a lot of amazing companies that are building really good infrastructure to make it such that you can have your agent transact and access tools, whether it's compute or whether it's data or other forms of specialized research. I think the biggest challenge right now, and Kai, I know we've talked about this many times, but there seems to be kind of a demand issue where you know you have a lot of people that have access to these tools, but don't necessarily have great things to build or don't know what to build, and as a result, it's really challenging to see these numbers go up. And then I also think too, it's it's kind of challenging to look at this as an overall aggregate basis and dictate whether it's a lot of volume or a little bit of volume, because a lot of these transactions are single cent or even sub one cent, and so as a result, the overall volume ends up looking somewhat kind of small. But Kai, curious. Obviously, you know this was a report that that you guys did. I'm curious what your big, you know, the biggest takeaways you had from from

Cuy Sheffield  40:52  

it. Yeah. So the the other side was the top 1% of x4 two buyers. About 4000 wallets are driving over 90% of the volume. So feels like there's like a very very small subset. I might be in that cohort of one of those wallets that's driving x4 102 volume, and I've got a bunch of thoughts. But Eric, first, like, how deep are you down the agentic rabbit hole? Are you a believer? Is x4 102 gonna work? Are there stablecoin use cases, or is this like 50 years away, and we're all crazy, you know, thinking that you know this is this is going to matter in the near term?

Eric Queathem  41:28  

Yeah, look, I think we should probably trim them a little bit, clean it up for summer, like let let it let it grow back next season. Yeah, look, I think on the consumer side, I like I'm just I'm not seeing it right. I think the the data has shown that even when people do want to hold stablecoins, like their preferred way to pay is still to put a Visa credential on the front of it. And so, like I, I just I'm really struggling, and you know, still keeping very close to a lot of my friends in the in the broader acquiring world. The man doesn't seem to be there. I think what's disappointing to me, like which is just like odd to me, is that like the world's not talking more about the use cases on the B 2b side, which I think are just so real and create so much value. Right, I think I've shared this number maybe potentially on here before. There's like $400 billion of accounts payables and receivable clerks interacting around the world-that's like their their total cost of this labor, all that could be solved with some form of B 2b agentic commerce. Like that's a real world problem to go solve, and like I struggle to find sometimes the the real world problem that we're solving in in a lot of the consumer facing agentic topics. And so I'm somewhere between a bull case and like a little bit of a believer, but if you start talking more about the opportunities on the B 2b side, I'm all in. Yeah,

Cuy Sheffield  42:48  

it's it's a good point that the vast majority of the mind share and discussion is the consumer kind of vibe coder. There's much less experimentation that we've seen on B 2b agentic payment flows. Shout out to Sean Neville and the Catena folks. I know they've been spending a bunch of time on on agentic treasury and are doing some some great work. What about you, Didier? Have where's your agentic perspective in the the rabbit hole?

Didier Lavallee  43:14  

Yeah, I would say probably not dissimilar to Eric. Although I do think it's incredibly exciting to see in action, so I was at Stripe Sessions and I saw some of the live demos they were doing on Tempo, and the velocity and speed of transaction is certainly something that caught my eye, and I was like, "That that's pretty cool, but hence that's pretty cool, right? I'm not necessarily sure that the market is there, although to me it really highlights the gap that traditional payments infrastructure has, right? The capability of handling that amount of value, that amount of volume at that speed. And then, Kai, you said something around pennies or cents on $1 I mean, if you looked at what Stripe was doing on Tempo, it was like four or five decimal points from the period, right from zero. The traditional payment system just can't handle that. So, if you take a long-term view, that over time you will see more transactions, higher velocity, more fragmentation of transaction, then you're in the early days of what this technology can really do so long term, pretty constructive. Short term, I don't think their use cases are necessarily there. To lean in a little bit into Eric's comment, programmable treasury use cases for B 2b are showing up. Part of the reason we joined the Tempo consortium and we issue on Tempo is because their network at the corporate level that are looking to do global payouts, and Canada is often one leg for the DoorDashes, the Airbnbs, the Ubers, the Shopify's, etc. And that's where I think that Agentic will likely start is being able to, you know, have your agents payout globally in all these different tokens to. Different end users or end wallets or end agents. So for that, I'm pretty constructive on. But it's at scale; it's not facing the consumer.

Noah Levine  45:08  

Kai, one question I have for you: When you think of the demand side, where do you see the majority of agentic commerce volume coming from in the future? And what are some things on the frontier that you're excited about?

Cuy Sheffield  45:19  

Noah knows. I've I've been very very deep down down this rabbit hole. Like I I think that the interesting space that we're in right now with x4 two, it's the it feels like a toy. It's fun to experiment with, and you can show a demo, and you're like, oh that's cool. That's something I haven't seen before, but how is that going to help me? And like, why would I use it? And so it's this really interesting time when the supply side is growing. Like we're seeing, I think there are 40,000 plus endpoints that are available, and that's growing. You know, every week basically, that there are things that agents can buy. The power of agents and the intelligence of the underlying models and and the harnesses that keeps getting better, and so you have this like genius that has a wallet that has access to all these tools, but the big question is okay. Well, well, what could you do with it? And I think right now there's this like constraint of human time and creativity, where like I have agents that I run on Hermes at Open Claw, and they're kind of just sitting around waiting for me to tell them to do something, and then they'll like go do it. But I can't come up with okay, what what should I spend on? What should I buy? What you should you should work on? And so I think there are going to be some really interesting angles and experiments to move more from like agent assistant commerce, where the agent is your assistant, your intern, you're telling it what to do, and it goes and does it, to more autonomous commerce use cases where agents can have higher order objectives that they can then pursue independently for longer running tasks. It's kind of the same way that people have gone from like typing every prompt in as they vibe code to writing what's called a loop, and have the agent then create goals and objectives, you know, to go down. So, I'm most excited about the furthest, like more autonomous type of use cases where the agent is working towards an objective, discovering tools, spending on those tools, rather than me having to micromanage. Let me approve that one cent transaction that you're doing, and like tell you what endpoint to go to. It's very very hard. I think the big question on B 2b is just going to be the risk tolerance of corporates. When I see like stablecoin plus agentic, it's like risk squared. It's like whoa, like of things that could go wrong. Like how do you get someone to like start there seems very very tough. I think that there will be companies that are either already AI or agent native who might not have been thinking about stablecoins but are looking to automate you know a lot of their treasury operations. And so if you're either already agent native, then adding stablecoins to B 2b flows could make sense, or if you're already stablecoin native, you know some of the crypto companies starting to experiment with agentic. I just have a hard time, like in the next few years, of if you go to a traditional corporate and you bring both of those pieces together at the same time, like that just it it sounds like there's going to be so many risk considerations of of what could go wrong. But Eric, your your thoughts on that? Like, does it start on one side or the other? Or you're saying, bring an agent B 2b use case to a trad corporate and just like start there on the first thing they do.

Eric Queathem  48:30  

I'm stuck on this concept of agentic commerce looping. I think we we've just coined something new here. Yeah, look, I think having spent a lot of time at McKinsey consulting large corporates, as well as close to 10 years at WorldPay and FIS. What any leader can really get their head around is cost savings. Like it's an easy thing to track, to measure, to deliver on. And at McKinsey, doing cost saving projects was always fun because in a project you knew exactly what you delivered to the company, right? You do think that's like revenue base, grow the business, pivot the strategy. Like it's more fun, but it's hard. Like it's hard to deliver. And I think what's interesting about agentic commerce from a B 2b perspective to me is like there's really clear cost savings. Like I spend $2 million a year on payables receivable clerks, CTO, CFO. I want that number down to 100,000 Tell me what we have to do and like deliver it. And so, I think because it's so measurable versus like the experiences you're talking about on the consumer side, like they're cool but hard to measure. Like the impact on your life, like you enjoy it, but everyone else is like, I don't know what I'm getting out of this, like because I actually don't enjoy it. Like it's it's not fun. And so I think on the business side, where you'll get traction is when you can put up a piece of paper that says CFO. I think I can take $5 million of cost savings out, and he immediately runs the number on what is multiple. He's just like, oh, that's accreted to the tune of $500 million We should do it, and I think that's going to be enough to push people towards. Now the difficulty with it is like it only works when the network effect is there, and so I'm expecting like Visa to swoop in and like somehow solve this because you know you'll bring this broad network of connectivity where everybody feels like there's a safe space to go do this, and so I think it's easy to convince people to do this because the the dollars are real. I think it's very hard to execute because you need the network effect. You need buyers and suppliers on both sides of that that equation to to want to do it at scale.

Cuy Sheffield  50:28  

Yeah, some great points and a bunch of stories. We don't have time for UK's HMRC adopts a no gain no loss tax treatment for crypto lending. Just two weeks after launch, one of the big stories been Robinhood chain, and that's now 11% of all stock token holders in the market. We're seeing Alpaca announces 130-5 million raise. I know they're behind a lot of the tokenized stock activity, and then Moonpay, which I believe is their sixth acquisition in in 2020-six they are just buying up a bunch of companies. They acquire Y Combinator backed startup Glide. So thank you so much for listening, Noah. Where can people find more about you?

Noah Levine  51:05  

And Levine 19 on X.

Cuy Sheffield  51:07  

About you, Didier?

Didier Lavallee  51:08  

At Didier Tetra on X.

Cuy Sheffield  51:10  

And you, Eric,

Eric Queathem  51:12  

Velocity XYZ, and at Queetham on all socials.

Cuy Sheffield  51:15  

And you can find me at Kai Sheffield and visa.com/crypto So if you haven't already, please subscribe to Tokenize on Apple, Spotify, wherever you get your podcasts. If you enjoyed the show, you want more, please leave us a review. Helps other people find it. Appreciate everyone listening. Great show. Thank you all. Bye for now.