The Headless Merchant Economy

Speaker 1  0:10  

Welcome to tokenized. The show focused on stable coins and the institutional adoption of tokenized real world assets. My name is Kai Sheffield. I'm the head of crypto at visa. I'm your host for today, Simon is out of office, but we're joined by a fantastic stand in co host, my friend Noah Levine, partner at a 16 Z crypto. Good to have you here, Noah, how you doing?

Speaker 2  0:31  

Doing great. Excited to be back on the show.

Speaker 1  0:33  

It's great. Last time Noah was on the show, he was on the visa crypto team. And so amazing to have him now as an incredible investor at a 16 z if anyone is raising money in stable coins, you should be talking to doa. And then in addition, we've got some amazing guests joining us. Is G money, crypto OG NFT enthusiast, vibe coder, vibe trader. G money, well, welcome to the show. How are you doing?

Speaker 3  0:58  

I'm good. Thank you for having me on.

Speaker 1  1:00  

And our last guest is Michael Blau CTO at Royal. Great to have you here. Michael, how are you doing?

Speaker 2  1:07  

Great. How are you and I guess, by the way, this is a little bit of a reunion, because I also used to be a partner investor at a 16 Z crypto So, big family here,

Speaker 1  1:15  

the A 16 Z crypto mafia. You can't, you can't escape it one quick bit before we get into the content, I need to remind you that the views or opinions of our contributors today are their own and 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, for the first story, we've got to talk about X 402, it was a big week for agentic payments. We had AWS, they have this Amazon bedrock agent core platform, which partnered with Coinbase and stripe. You had Solana Foundation, partner with Google Cloud, all enabling stable coin payments for AI agents. Noah, you've been at the center of a lot of this on the VC side. You wrote a post a while ago about headless merchants. Can you help, just like, set the scene of what's happening in the x4 two agentic stable coin payments ecosystem, and how should our audience think about what's going

Speaker 2  2:13  

on? Yeah, no, for sure. I think, like, as a starting point, just to kind of overlay the thesis, you know, I think when a lot of people talk about agentic commerce, they think about going to chat GPT, buying groceries, or buying sneakers, putting a card down, and that's sort of the entire experience. I think, from our perspective, we see a much bigger opportunity as it pertains to how is the next class of developers who maybe have never wrote a line of code in their life, but are coming to this through something like Claude code or, you know, Codex with open AI, and they're going to want to get access to a bunch of different developer tools. And because they're, you know, maybe building a project on a weekend, and it's not something that they're going to want to use for a long period of time, they want to buy things on a per usage basis. And oftentimes, their agents are going to ultimately be the actor that's buying in this case. And so we believe that there's going to be a whole new class of kind of, what we're calling headless merchants, where it is presented as a endpoint, rather than a website with a sales team and long term contract agreements. And so I think what we're seeing in the x 402 ecosystem is just a whole new class of endpoints and developer tools that people are using. And I think what's really interesting about these announcements is originally our thesis was the majority of the new merchants that were coming in were going to be sort of these long tail, smaller startups, frankly. And I think it's very encouraging to see bigger companies, you know, such as Google, AWS and other players who are recognize the opportunity and are coming to the space,

Speaker 1  3:37  

and then, Michael, you're building one of these headless merchants in some way. Can you talk a bit about drip stack? Kind of, what was the journey towards where you are today? And like, what does it look like to build one of these endpoints?

Speaker 2  3:51  

Sure, so I'll give you the quick story, because it didn't begin with drip stack. Actually. It began with, I am a passionate crypto engineer myself, and so I love to play with all these new tools. And I saw that a lot of these wallets that were launching, like, agentic wallets, they were proxying and wrapping a lot of these APIs, so that people that had these wallets can start to, like, use it and feel the magic. And I realized, like, I just a lot of what they were selling was just data or prices. And so I actually started by building a reservation tool, right? And so you can allow your agent to book a reservation at a restaurant in New York, and I called it agent res. And that was my sort of beginning to experiment with what it would look like to build a headless merchant without having to use resi directly or open table or whatever. And that's, that's how it started, and that was just a personal side quest. And at Royal what we do is we our sort of mission statement as a company is to explore programmable money for creators. And so I think I've always been a very big sub stack newsletter reader myself, and I felt like it just makes a lot of sense that you. Most of the best content is behind paywalls already on substack. And so how cool would it be to build a tool to let these writers sell their content that is typically behind a paywall directly to agents? And so that's where the grand vision of drip stack began, and we've only been building it for about like three, four weeks, actually. So that's pretty

Speaker 1  5:19  

new, yeah. And then it feels like there are these, like, new endpoints that are popping up every week that are doing really interesting and innovative things. But then there's the question of, okay, what's, where's the demand side? So the supply side is being built out, but who are the buyers? Who's gonna actually go and do these micro payments to be able to purchase? Do you mind? How do you see that ecosystem. And, like, as you've gone down the vibe coding rabbit hole, what problem do you see, x4 two and MPP tempo solving? Like, do you believe in this? We're going to get this open, agentic commerce ecosystem where you're paying micro payments all the time. Or, like, how does it actually help you as an end customer?

Speaker 3  5:59  

Yeah, I definitely think so. Because I think when you look at, like, the structure of commerce, currently, there's a lot of fees, right? And it's also very cumbersome. Like, if I want to today, at the dawn of AI agents, if I want my AI agent to buy something, I literally have to give it, like, access to my credit card, or, like, maybe make another sub credit card on my account and give it access to it, you know, like, it can't create its own bank account. And so it's like, it's funny, because, like, I've been doing stuff on legacy rails, and I've been doing some stuff on crypto rails, and it's like, the crypto rail stuff, it's getting easier and easier to set up, right? Like, there's no necessarily, like KYC to set up trading on a perps exchange, right? And stuff like that. And I just think also, right? Like Michael said, sub stack, you know, it's like, I have to sign up with a credit card, right? And it's like, obviously one, there's credit card processing fees, and, you know, a bunch of fees that go in there, so that even though, for every dollar that I pay, you know how much of that actually goes to creator, it's probably like, 80 cents, 85 cents, I think, with substack, after all the fees are said and done. But like, I think that if anything, like, these X 402, payments will increase margins. And like, especially for low margin business, that matters, right? Where, you know, an extra one 2% it definitely, like, helps, right? And so that's why I think it's, I think it's all converging towards that. And then I think also we're moving away from a, like, pay per seat model, right? And then, like, an all you can eat package, and to, like, eat what you consume, right? So it's like, I think we're starting to see a lot of it with the frontier llms, where there are the $20 the $200 month packages, but then also there's the API stuff, where you're like, All right, well, you know, if I'm utilizing $100 worth of credits, like, I will pay for it, right, some whatever that cost is, plus some margin on top of that, and I'm okay with that, and I'm not necessarily like paying for more than I can use and whatnot. And I think because we've been seeing this more and more and because of the loads on capacity, I think like as consumers, we're probably gonna get more accustomed and more used to saying, Hey, I'm just gonna pay for what I consume. Because probably, I think the most important bills that we have coming up for, like, personal use, is consumption of inference and intelligence through these AI models. And if you're if you're used to paying per token on that front, then you're like, Well, why shouldn't I pay per token if I want to consume your content, right? If I just want to read one article from your sub stack, I'll pay you for that, like I don't need to pay for a full subscription. So I think, you know, it's like the same thing happened during covid, where QR codes were around for a really long time before covid, but they really took off once covid came around, because people were trying to do contactless ordering and all that, right? And I think it this is kind of like one of those similar paradigms where we're used to paying for consumption now for AI and so, like, that's just going to spill over into everything else, where it's like, All right, well, why should I pay you $1,000 a year? I'll pay you for every piece of content I consume from you.

Speaker 1  9:00  

It's a really interesting behavior change to me, because even even within AI, it feels like six months ago, maybe nine months ago, most people were just on subscriptions, and they were paying either $20 a month, maybe $100 a month, maybe $200 a month, and that was just like that was the subscription to get the best AI now as this explosion of agents in the form of whether it's openclaw or Hermes or Claude code or Codex, the use of the agents and how much value they can create just does not fit under a subscription. Like, anyone who's like, really, really token backs, like, there is no subscription to get the demand that you want. And so we're now becoming accustomed to this Pay As You Go model that I'm like topping up credits every few days. It's my biggest expense. Personally, it's just buying credits on open AI and unanthropic. And so it's a great point that, like, once you get that behavior change where people are used to like topping something up and then drawing it down, rather than subscriptions, like, how does that bleed over into other segments? Whether? It's creators, whether it's other types of developer tools. But Michael, go ahead, you were jumping.

Speaker 2  10:04  

I got two things to say, one to comment on what you just said, and something else, which is, who's the demand side today. I think the truth is, and I'll be the one to say it is like these wallets are still pretty hard to use. Okay, even with even with agents and people are doing a really good job of making the UX great, but most of it is like our Nerd circle missed corner of the internet on x right? That being said, there is a category of person that is going to be very, very willing to jump through the hoops of that friction, and it's going to be the people who know that on the other side of that friction is just something that is an incredible use case. And I think that incredible use cases, Kai, you said we're talking about eventually, is trading and investing, right? Like traders and investors have proven to be an audience that is very willing to push through friction to get access to more efficient tools to trade, make money and invest, right? And so I think that category of user may be a very good initial source of demand. That's to answer your first question. And then the second thing about the the token maxing kind of stuff, what's really interesting about that is the pay as you go. Model existed already, right? It was pay per view. It was the old version of iTunes where you would like pay 99 cents for a song, right? Even the App Store still works like this today, right? Like, it's still 99 cents an app, but even though it's 99 cents a song, there's still a lot of overhead for the user to make that purchase. Like, there's a lot of like, mental friction that people don't want to do, which I think is one of the reasons why subscriptions as a business model took off in the first place. And what's so amazing is unrelated to payments whatsoever. Ai, as a tool for the world, is abstracting that away completely, right? And so all of a sudden, now that AI is able to abstract away your purchasing decisions when you're token maxing, like you're not really thinking about the price per token, it's all abstracted away from you, but it really is price per token. That's what's allowing us to almost go back to this model. It's this new interface, right? That lets us go back to pay per view or or pay per use. Yeah, I think Michael makes a really great point, and, you know, kind of touching on some of the the work and the writing that Simon's done, you know, he talks about this idea of the intention economy, where now you have, whether it's developers or consumers or businesses, they're going in with a request or a demand that they want some sort of outcome, and they're probably agnostic to how that outcome gets done. And I think if you think about AI and where it's going, the two most important inputs for AI is compute and data. And so I actually think the Creator economy is like a really interesting segment of that, because today, data is largely limited to whatever is available on the internet. And yet, as you guys know, like, there's a ton of information and asymmetric intelligence that is available from people who just have creative thoughts and you have ideas or have exposure from experience. And so I actually think tipping is going to be a new thing that comes back in much larger in the sort of agentic economy today. I mean, if you go on Twitch and you watch a streamer, you like, you know, tipping is a very common thing to do, I think as time goes on and I go to my agent and I say, Look, I need, I need to do some sort of output, and it requires very niche or specific information, I think there's a world where you have agents that are going to go and tip different whether it's people or other agents for specific content, because they know that if there's no economic incentive for them to provide that information, that information will no longer exist. So I think the way in which you increase data is actually by getting more granular and novel forms of data. And I think creators, and in creator can be a very broadly defined term, right? It could be experts in certain areas. It could be traditional creators as we think of them. I think that's going to be a really big opportunity.

Speaker 1  13:42  

But I think for all of this, you need the infrastructure to be built out to where every user has a wallet inside the platform that they're using. And I think the question is, what should that wallet look like? How should that wallet work? And g money you're talking about kind of the natural, like crypto native, anyone who's like, been in crypto, being able to use those wallets, and how the experiences are getting better. I'm over here a bit on the other side, saying that even as a crypto guy, I would still rather give my agent a card, and I feel like there are more controls that you can have on a card, not having to worry about on ramping I've got to buy stable coins. Oh, I can't buy stable coins with a credit card because a lot of issuers don't want you to use credit to buy stable coins. Being able to just give your card to an agent with the right controls in place, I think, is a really powerful consumer experience that brings in a segment of the population that is into AI but never went down the crypto rabbit hole, and they don't necessarily want to have to stand up a wallet. But on the other side, I feel like there's just this magic of stable coins for settlement. Of if you're going to have this agentic economy and you're going to pay as you go, to be able to buy inference or buy any of these like new developer tools, it pains me to the core to say, Oh. Settlement is going to happen three days later, not on the weekends, not on a bank holiday. It's like, you've got to be able to get the money to those merchants faster. And so that's why, like, we're working so hard at visa to say we think that there's this hybrid model that is cards on the front, stable coins in the back, and being able to make those work really well together is like, we've got to find a way to give wallets to all these agent users, and some portion of them, we think a big portion would rather just put their card in and not have to deal with with stables. But I don't know. Do you mind how you see this playing out over time, and then also, like, the motivations of, why do you give your agent a wallet? Is it to save money and buy shoes, or is it to actually go and make money? And so how do you see the consumer behavior drivers towards more of these users eventually getting

Speaker 3  15:50  

wallets? So I think it starts to and I know Michael touched on this, I think it probably starts with trying to figure out how to make money. I think one of the interesting things like, and I've seen this over the last year, and this is my journey in particular. Is like first when I started, like, being able to actually make stuff with Vibe coding. I started doing, like, some personal productivity stuff. I started doing some health tracking, you know, sorting my files, my emails, like stuff to make my life a little bit easier and more productive. And now I feel like I'm trying to focus on all right now, how do I use these tools to actually make money and bring in money? And I think that's where, like, a lot of people are right now. And to what Michael was saying, is the reason why I think traders and investors are willing to go through a lot of friction initially is because they're like, All right, well, if I can, if I invest $1 and I can make some multiple of that, so more than $1 then this is worth my time, right? And there's always, like, some number that's different for everybody. And so, like, that's kind of where I've been, like, focusing a lot of my time over the last I'd say, like, four months is like, okay, cool. I now know how to, like, make myself more productive. But now, like, how do I bring in money, right? And how do I make money? Because I think that that's one of, I think that's one of the things. Like, it's interesting. I was listening to all in podcasts over the weekend, and that's one of the things they were talking about, too. Is like, we've obviously seen an explosion in Compute, a lot of CapEx spent on intelligence. But like, what has that meant for earnings in the s, p, has there been, like, operating margin expansion, has there been an increase in revenues? We haven't seen that yet. It might be another 24 to 36 months before we actually do see that. But like that, to me, is like, the key point that people are trying to figure out is like, if I if I have a $200 a month Claude subscription plan, can I make? How much more than $200 can I make per month, right? And I think that that's like what people are trying to figure out. And I think the interesting thing is, as I spent more time focusing on this, is that, like, you know, we have four different people on this call, we would all utilize the same exact plan and the same exact model in entirely different ways to make money. Even though they might be similar, they'll be like entirely different, right? Because we all have our unique experience the things that we like to do, and whatnot. So I think we're gonna see an explosion of that. And I think, to me, that's kind of what I've really been waiting for to see more at scale. I've seen it here and there. I'm super curious what you guys have seen, because I'd say, over the last couple of months, the people that I think are making the most money with AI are people that are teaching you and selling you how to make the most money with AI. And like, that's been probably the most profitable thing to do up until now. You know, we were talking about this before the calls, like, I'm now an algorithmic trader, right? Like, I have like, an algo that trades. And like, you know, like, we'll see. Like, the back test went good. I went live last week. I went like, I was comfortable with it, like, I have no developer experience, right? Just my trading experience and, like, that's pretty cool. Even six months ago, I wasn't able to do that on my own. So I think we're going to be seeing an explosion of this

Speaker 1  18:56  

stuff. Yeah. So it's a good transition to the next story of Moon pay acquired Dawn, which Dawn is an applied research lab focused on artificial intelligence and financial markets. So they have the dawn CLI, which is an AI native technology tool for trading. And so it enables anyone to build and deploy a trading strategy inside Claude code or their agent. And I think if you just take that framework of like, how do people use AI to make money. And does that usage drive adoption of new tools and new types of connected commerce? We've talked a bit about there are new people building businesses these, like, one person companies that are going to be using a bunch of tools to do that. But then the other is this idea of, like, vibe trading and vibe investing, which is something like, I don't know about you guys, but like, I have a bunch of friends that are going really deep on, how can you build a thesis and then execute that thesis into a portfolio, literally having the AI say, exactly what you could trade? Which seems like it's like a new behavior in capital markets that know, how are you seeing like, this kind. Concept of vibe trading, investing, like what that looks like?

Speaker 2  20:03  

Yeah, for sure. I mean, I think it's a it sort of represents the next generation of wealth management. You know, I think that nowadays, AI has gotten to the point where you can develop an entire thesis and strategy and then have it go and execute it. And then, more importantly, as time goes on and more news and more information comes in, have it constantly evolve. And so I think there's this convergence between the infrastructure that is supporting, you know, what is agentic trading look like with also the models themselves getting better and being more productive and being able to actually execute on those strategies. And so, you know, I think that in the next few years, we're going to see a significant amount of new types of investment, not only investment vehicles, but also, just like retail people who are who are actively building out strategies and executing them using AI and

Speaker 1  20:47  

Michael, these are, like the customers that you're going after right now. And so I feel like the skeptic in me would say, really retail traders, they're going to try and just ask chat GPT, what to trade like, that sounds like a way to lose body. Like, is there a real fundamental analysis opportunity that you're seeing people say, I'm going to build a long term thesis, I'm going to get access to the right data and information to test that thesis. Like, how much is there, like a real place for retail to play using these tools, or is it just, it's pretending like you're trading, but at the end of the day, it's this is gambling and speculation, like everyone in crypto is used

Speaker 4  21:26  

to. I

Speaker 2  21:27  

think. Let's rewind for a second. Let's forget about agents for a minute. So when you're a trader, you need three things, really. You need a place to execute your trade. You need the live feed of data so you know whether or not you're getting a good price. And then you need, let's say the thesis, the opinion, what to buy, how to choose, like most people don't know. And the reality is, is that I have friends that don't use agents whatsoever. But what they will do is they will go to chat GPT when they will say, what stock should I buy? And Matt Levine, a very famous financial blogger, writes a lot about this. And what's so funny is, what ends up happening is when you ask chat GBT, that, like, it doesn't have necessarily any sophisticated knowledge other than, like, all this stuff that it's learned from the internet on Reddit and Wall Street bets. And so what ends up happening is, you have a lot of these people going to chat GBT. They say, what stock should I buy? Matt Levine talks about this where chat will actually recommend everybody the same stock, and then they'll go buy it, and then it becomes self fulfilling, right? Is like everyone's getting recommended the same thing from chat, because chat is just looking at what people are talking about on Reddit, and everyone's buying it, and then people are making money, and all of a sudden, wow, this is, like, this amazing new agentic trading source, right? Of course, though that's great because it's self fulfilling, but that's not a very serious way for somebody to trade, right? And so the more serious analysis the people that are, let's say, at the big banks that are doing equity research, or the new Rise of the independent sub stack writers or newsletters that do deep, deep, deep financial analysis on their own. All of that stuff is behind pay walls. And so one of the first questions that people ask me, I mean, I am a trader myself, but I have friends that want to get into it, is they're always like, where do I start? How do I know what to buy? Like, I don't even know what to do. They know how to download a Trading App. They know how to get the real time prices, but they have no idea where to start. And so part of what we're focusing on here, at least for drip stack, is we are focusing on these financial writers and the ability to synthesize across them, because it's giving these people a better source than just going to chat and just saying, like, What's everyone talking about on Reddit? With the caveat being there is there is a valid reason to do that. Like, there's a lot of financial markets that are self fulfilling, and so I completely understand that as, like, a total viable strategy. At the same time, if you want to get more serious and sophisticated, you're going to need access to these financial writers, and specifically you're going to want to synthesize across them, because they are, there are a lot of them. And so even then it's like, which one do I subscribe to? Who do I talk to? It's hard. It's too many decisions.

Speaker 1  24:11  

Gee, what is what does this mean for crypto trading? I feel like I can argue two different sides. I could argue that this is somewhat bad for crypto trading, given that the like hot ball of speculative money is now going into equities and commodities and using agents to create like sophisticated strategies to invest in space, data centers and all sorts of like emerging tech, I could also argue that it's good for crypto trading because crypto exchanges, like you said, have lower barrier to entry. You could set up an automated strategy on hyper liquid and like, it's harder to do that on some of the existing exchanges. Do you think that this trend in vibe investing is going to drive more growth in volume of people trading crypto again? Or is it really it's it's the crypto. Traders who are using these tools to trade traditional markets and other types of assets. What are you seeing?

Speaker 3  25:06  

I definitely think it's going to lead to an increase in crypto trading, but not necessarily in tokens and in equity, stock, RWAs, perps, whatever I've already found myself, even though, structurally, the first stuff I built out was for equities, just because I know there's a lot of liquidity there, I know exactly how that market works. But like, I'm becoming more and more interested in trading stuff on crypto rails, through perps and stuff like that. Obviously, the market's still not nearly as mature, because it just kind of got started within the last 12 months. But I definitely think you're probably going to see that like, I think you already see that with equities in that now people are trading stocks in Asia. Korea just opened up to, like US investors recently, and all this stuff. And you see people that are trading overnight in Asia that, I think, before, years ago, when I used to trade. I mean, you needed to have, like, a pretty big institutional account in order to be set up to trade anywhere in Asia. And I focus a lot on just US equities, some European but like, I think it's becoming more and more global, but I think that stuff is going to come on chain. I think you just see ice nice. See all these exchanges trying to offer 24 hour trading, 24/7 I don't know if that's like the best idea, because I do think that one of the things I liked when I was trading was being able to kind of close down on Friday afternoon and, you know, not have to worry about stuff until Sunday and, you know, be at your desk and whatnot. So I think that that's kind of needed for no burnout. But for me, like, I think, like, the overall macro trend is we're going towards trading, slash gambling on everything in a 24/7 environment, you know. And I think those set up specifically for that,

Speaker 1  26:55  

yeah. So Noah, do you see, like, when we think about tokenized RWAs in while the technology of a blockchain can be more efficient than traditional ledgers, what is the demand side driver of why would you purchase a tokenized version of a stock versus traditional version of the stock? Like, is AI going to be part of that and that there are just there are new types of agentic asset management that work on tokenized stocks that don't work on traditional stocks, like, how do you see those, those intersections coming in,

Speaker 2  27:26  

for sure? So I think there's an AI component. But even taking a broader step back from my point of view, the growth of tokenized assets is going to largely come as a byproduct, or a second order effect of the growth of stable coins. I think we're seeing that there is a whole new class of fintechs that are providing access to dollars globally, where people are getting paid in local currency. They're converting to a stable coin or collecting directly into these FinTech products, and then they're using it to save value. Maybe they get a stable coin link card so that they can go and pay. And I think the next natural question that you ask is, you know, well, how can I use those funds to invest? And the easiest way to access an investment product, if you're holding a stable coin, would be through something that sits on the same ledger. So I think that that is where a lot of the demand is going to come for tokenized assets. Is going to be an extension of stable coin native fintechs. However, I think if you take the same argument and say, Well, look, if every agent has a wallet, I think you get the same outcome, where, if every agent has a wallet, then maybe it becomes more efficient, easier to purchase tokenized assets than it would be to purchase a traditional asset, as you would through a broker. So I think there's a similar impact between the two. And if you believe that stable coins are going to grow significantly, then I think tokenized assets will follow

Speaker 4  28:40  

suit.

Speaker 1  28:40  

We're going to move on to the next story in a minute, but before we do, I can't help myself of what about nfts? G money, Michael, you were I feel like we've been in the NFT world for many years, and I'm still a believer that there's value in these digital JPEGs as the world has moved on, like, is there something around AI that makes nfts Interesting again, at least as a technology. Do you see any ways that these come kind of back together?

Speaker 2  29:09  

I my views of this is pretty simple, which is that I never really thought about nfts as actually art or JPEGs. I mean, I've played around a lot in that space myself, and I completely get that, but it is still by far the best digital infrastructure for storing digital provenance and records of of scarce ownership. Like, there are so many things about an NFT that are better than an ERC 20. I know this is not an NFT podcast, but like, we could, we could go into that. And so

Speaker 4  29:39  

I know

Speaker 1  29:39  

many left, not many NFT podcasts left. Man, yeah,

Speaker 2  29:42  

I know. And so, so if, if you're an agent, and you have a wallet and you're going to hold assets, some of those assets are going to be stable coins, and some of those assets are going to be nfts, and that is just 100% going to happen in my head, I don't necessarily think that that has anything to do.

Speaker 1  34:31  

Like some really interesting novel things that are happening here. No, aCZ crypto led the round. Can you talk more about your view on ARK, how you see the potential there in this structure?

Speaker 2  35:12  

Yeah, for sure. So, I mean, I think just taking a step back, our general point of view is that stable coins have become one of, if not the largest products with product market fit in crypto, stable coins are over $270 billion of supply. Obviously, Genius Act, which got passed last summer, provides regulatory clarity for stable coin issuance. We're seeing it being used in all kinds of different use cases, whether it's cross-border money movement, B2B settlement. It's clearly hit an inflection point and has grown significantly, and my point of view is that a lot of the next generation of crypto adoption is going to come a lot more from institutional adoption rather than just retail traders, and I think you know, in Kai, you know this very well through many conversations with banks and asset managers and fintechs, you know, there's I think a specific set of features that they demand or require in order to go on chain, you know, things like, you know, they don't want to pay gas in a volatile, you know, crypto token, they'd rather pay in stable coins something that's more reliable, they want high throughput, low fees, they want things like privacy, and so, you know, I think it's likely that with, you know, a lot of new institutions coming in, some of these more payment-specific or institutional-specific blockchains are likely to see a lot of growth, so you know, I think part of it is a factor of the vision that they have and what they're building towards, but also I think it's very much a bet on Circle themselves, you know, USDC is one of the leading regulated digital dollars globally, Jeremy and the entire team is great, you know, we think they have an amazing vision for the company, and have been very thoughtful throughout the entirety of building the business, and so I think a lot of it has to do with the team and how much we believe in them, but then also the direction of travel of where stablecoins are going.

Speaker 1  36:53  

Yeah, and congrats to the Circle

Speaker 4  36:55  

team.

Speaker 1  36:56  

I think to me one of the most interesting parts of Arc has been their focus on non-USD stable coins and on-chain FX, which it's interesting that, like, it seems like Circle made an explicit decision to say we're going to have USDC and EuroC, and that's it. Circle is not, at least today, I'm not aware of any other non-USD stable coin that Circle has created, so the question is, are we going to live in a world that has every dollar come on chain, and if Circle is not going to be going and creating every dollar, can Arc become this ecosystem where USDC can be paired against other non-dollar stable coins and have this like instant on-chain FX, so I don't know, Michael, how do you guys think about non-dollar stable coins? Is there a role for them? Do you view this as, like, we wake up five years from now and it's still 99.9% dollars, and it's just everyone is using dollar stable coins, or are there these use cases where you need a non-dollar and having chains like Arc, enabling some of the on-chain FX, will play a role.

Speaker 2  38:04  

I think about this from really two perspectives. One is the broader macro question of like strength of the dollar and how that looks over the next 2050 years, and so, like, today it's the winner. We have no idea what's gonna happen, you know what the new currency of the intermediate currency for the transactions and liquidity will be in the world, and so that might happen, but honestly, as an engineer and a developer building in the space, I think about just one thing, and it's liquidity, and so I'm building on stable coins, and one of the reasons why I'm building on stable coins is actually not for the instant settlement, and it's not for the micro transactions, because although we get all that for free, it's the integrations, right? It's the integrations with DeFi, it's the integrations with the yield source, and all of that. And so, if there's a world where there is another stable coin, maybe it's Euro C or something else that actually has a lot of liquidity and support across DeFi, and, and my users, I will be more than happy to integrate it, but right now I'm just going where the most liquidity is, and so that's, and that's just more of like a technical go to market and product roadmap type thing, more than anything else.

Speaker 3  39:10  

To build on that, I think kind of what we've seen in most markets, and especially like in crypto and in stables, is that you know it's almost like a winner take all, right, and even within the stablecoin market itself of US stables, right, it's just a few key players that, that do like a ton of the volume, and I think that that is going to continue for the most part for the foreseeable future. I'm gonna, I'm gonna butcher the thesis, but I remember reading something a couple months ago, early on in the administration, that was kind of like talking about how you know a lot of what Besant and a lot of his cohorts have been working on is kind of like how do you cement US dollar

Speaker 1  39:51  

like just dominance of the dollar across

Speaker 4  39:53  

the world, dominance

Speaker 3  39:54  

is the word, dominance is the word, right, and like a lot of it, right, for the last like 4050 years has been. Even by the petro dollar and oil, right, because a lot of it settles in USD, and what the administration is taking is a lot of really proactive steps of how do you do that now for crypto, because there's obviously a lot of crypto flows going in there, a lot of demand for US treasuries is now coming for crypto. I think crypto companies, these US stable coins are, I think, at this point now the largest buyer of US Treasury, so to give this administration a lot of credit is I think they understood that really early, and I think now a lot of governments around the world are also starting to understand that, but exactly to what Michael was saying is like if I'm a developer creator in Africa, I don't necessarily want my local currency, because that might not have enough liquidity, but I know USD has a lot of liquidity, and then I can pay almost all my expenses with that, right? So, it's almost, you know, liquidity begets more liquidity, and I think we'd have to see what currency leads to long-term dominance, is probably well out of, definitely well out of cryptos control, and is more of a thing of geopolitics that will play over the course of, you know, decades and centuries.

Speaker 1  41:05  

And no, what's what's your take on the reaction of there's still a question of like, what do you do if you're government or central bank and you don't necessarily want to lose your monetary sovereignty, you don't want dollars taking over, like, what, what are the options that they have?

Speaker 2  41:19  

Yeah, so I guess I'll answer that question by also kind of answering the previous question, and I'm gonna say something that's like kind of crazy or controversial, but I actually think one of the biggest use cases for local currency stable coins could actually be store of value, and the reason I say that is I was in Miami for Consensus last week, and I was talking to a founder who has a pretty big stable coin, Neo bank in multiple countries in Latin America, and they have local currency stable coins on their platform, and I was asking, you know, why, what's the demand, why do people want this, and he was saying that, like, the thing you have to understand is there are certain markets where the inflation is 567, percent, but the yield that you get on underlying treasuries is like 15% and so by becoming the issuer of the stable coin, they can actually take local currency, invest that in treasuries, get a very significant amount of yield, and then pass the majority of that to their customers, and so you know, I think when people think about holding local currency stable coins, they're worried that, like, this is going to devalue significantly, I'm going to lose a lot of money, but if you're able to actually capture the treasury yield and pass it on, and as long as the spread between the yield you're providing and the inflation is high. You could actually end up with a more stable or better product than holding US dollars themselves. So, I think on the one hand, there's opportunities for FX, there's opportunities for cross-border money movement, but the reality is, is that I think a lot of the FX flows are going to be a form of banks who receive settlement in the form of stable coins, and I think they are going to have more liquidity due to interbank FX rates, and just, just the scale they have. I actually think an extension of this banking as a service idea, where you can now get better yield, could also be a really big opportunity for local currency stable coins.

Speaker 1  42:54  

Yeah, super interesting, and in just democratizing access to treasury yield is like a really interesting concept, that in a lot of emerging markets I would imagine most day-to-day consumers are not holding treasuries, they're just holding currency. If stable coins are basically tokenized treasuries, but then you have what does that mean for bank deposits, a deposit flight in that market? Like, there's a lot of fascinating things. So, a couple stories we didn't have time for that, want to run through quickly. Elliptic raises 120 million series D, led by One Peak, at a $670 million valuation. Congrats to that team. A Bloomberg report says that Canton developer digital assets are planning to raise $300 million at a $2 billion valuation. BlackRock, JP Morgan launched tokenized money market funds. This is an interesting one. Coinbase becomes Hyper Liquid's official USDC treasury deployer, as USD-H sunsets. Gee, money, I know you've, you've spent some time with Hyper Liquid, would like, I remember there was so much buzz around, like the USDH, you know, the RFP, like, what, what ended up happening with it? I haven't followed that that closely, like, you know, his hyper liquid has just maintained USDC is the core asset. To

Speaker 3  44:04  

be perfectly honest, I have no idea. I haven't been following the story that closely at all.

Speaker 1  44:11  

That was the biggest story, maybe like a year ago, of like who's going to be the stable coin for Hyper Liquid, and like it was like RF fees for stable coins, and now you know it feels like USDC has continued to play that role, and then turn key raises 12 and a half million and round backed by Circle Ventures and Sequoia Capital. Congrats to Turnkey team, big fans of Bryce and the folks there. Well, thank you so much for listening, Michael. Where can people find more about you?

Speaker 2  44:39  

Yeah, so you could follow me on X, so my handle is at Blow Your Mind, my last name Your Mind. And if you want to check out what we're working on with Agent Payments and Agentic Commerce, it's Drip Stack dot xyz, and try Drip is the X handle to check it out and learn more.

Speaker 1  44:54  

What about you, Jake?

Speaker 3  44:56  

You can find me on G Money NFT on all social media. Well,

Speaker 1  45:01  

and you, Noah,

Speaker 2  45:02  

and Levine, 19 on X,

Speaker 1  45:04  

and you can find me at Kai Sheffield on X and visa.com/crypto If you haven't already, please subscribe to Tokenize on Apple, Spotify, or wherever you listen to your podcasts. If you enjoyed this and what more, leave us a review, really helps us. Thank you all for listening. Bye for now.