Wall Street Bets Big on 24/7 Perpetual Futures

Sy Taylor  0:10  
Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name is Simon Taylor. I'm your host, head of market dev at Tempo, and author at BrainFood.xyz, and I'm excited to be joined by well, my co-host for the day is Pep Barisha of the MD of Media over at All Things Brain Food. Pet, how you doing, man? Thanks for stepping into Kai's shoes. He was called into some busy meeting at the last second. Welcome back, man.

Petrit Berisha  0:40  
Thank you. Sometimes third choice quarterbacks do all right.

Sy Taylor  0:44  
So good reference.

Petrit Berisha  0:45  
They're paid loads, right?

Sy Taylor  0:47  
You're going to be the ultimate third choice one of these days. You're going to be one of those case studies. I'm pretty sure secretly running things behind the scene for us, tokenized and many other things. And making a debut this week is Charlie Yu, who's co-founder and CTO RWA. XYZ, Charlie. How are you doing, sir?

Charlie You  1:03  
I'm doing great. As we talked about in the pre-show, it's been incredibly busy and exciting year for us. So excited to dive into today's topics with all.

Sy Taylor  1:13  
And last but by no means least is Chuck Olugo, who's the writer at the Stablecoin Blueprint and former product owner at Paxos. Chuck, always good to have you back, sir. How are you doing?

Chuk Okpalugo  1:22  
I'm doing really well, thanks, and thanks for having me back for round two.

Sy Taylor  1:25  
All right, just before we jump into the show, I've got to remind everybody that views and opinions of our contributors today are their own and might not reflect those of companies they represent. Please don't take anything we say as tax, legal, or financial advice. I do want to just briefly mention as well that FinTech NerdCon is coming to you on the 19th and 20th of November to San Diego. Chuck will be there, Pet will be there. Hopefully, Charlie will join us too. Head to fintechnerdcon.com and use tokenize 20 to get yourself 20% off for tickets. And of course, I'm happy to remind you that this podcast is brought to you by Modern Treasury. This episode is sponsored by Modern Treasury. Stablecoins are here, and so are checks and ACH. They're not going away. RTP and FedNow and new types of payments rails are emerging all the time. The challenge now is integrating all of these without slowing down. Modern Treasury offers one single API for fiat and stablecoins, helping teams launch payments products in days, enter new markets, and serve more customers. Trusted by companies like Procore and Navan and Morse, and backed by over $600 billion in payments history, learn how to adapt to changing payments rails with scale and confidence@moderntreasury.com. And the first story this week: Oh my goodness! Trade X Y Z and the New York Stock Exchange owner ICE have planned a U.S. market for 24/7 perpetual futures on Hyperliquid, subject to CFTC approval, of course, trade XYZ markets on Hyperliquid have driven more than $650 billion in volume in just over a year across stocks, indices, and of course commodities like oil. The U.S. market gets dedicated exchange and clearing infrastructure built on Hyperliquid, with access through participating brokers and platforms. Planned contracts cover equities, indices, commodities, FX, and crypto. But products eligibility and timing haven't yet been announced. ICE is also making a strategic investment in trade. XYZ and Stan Druckenmiller is investing too, with possibly his only tweet ever, and it was about this deal, which then Elon quote tweeted saying simply, "Interesting, Charlie. Did you find this interesting, like Elon?

Charlie You  3:53  
Absolutely. I mean, this is absolutely enormous. I think it was sort of foreshadowed by I think earlier in the year when Trump had even mentioned it in his crypto forum, mentioned how he wanted to bring Hyperliquid here. There was last week when Kraken's parent Hayward said that they wanted to bring Hyperliquid Artibright and commodity trading into the U.S., and they were the ones that first sought the CFTC approval, and now of course ICE being a juggernaut in the financial market infrastructure space, they are really in the best position to take advantage of these 24/7 markets that I think everyone here feels is inevitable for all markets. Chirk your thoughts? It is

Chuk Okpalugo  4:40  
really incredible, and I think yes, Kraken did steal the thunder a little bit when they first announced. But this is what we've been dreaming about, right? This is tokenized market infrastructure coming to regulated markets. Obviously, the U.S. is the one of the biggest markets for for trading. You know, all sorts, particularly equities and. This type of perpetual futures trading has already been happening offshore for a number of years, and it's really only this year where the administration, the SEC and CFTC position has aligned with folks who have the capital, the the skills, and the distribution. And so, what I think is really interesting with the ice here is that you know very strong brand. They're connected to the various different platforms and you know futures market brokers who will be distributing this in the U.S. Then obviously with their recently announced joint venture with OKX, they're also going after the global retail market. And so perpetuals are coming to U.S. retail, and I think it's a really big deal that it's being built on public market infrastructure.

Petrit Berisha  5:44  
Onshore is the new offshore. Was that what you're saying, Chuck?

Chuk Okpalugo  5:47  
That's right. That's right. But it's it's you know it's not permissioned. It's not you know private. It's going to be on chain. So we're going to get massive U.S. retail markets in a new asset class that is going to be on chain. And so I think for folks who've been in the space for a long time, this is the moment that we've been waiting for, pending regulatory approval, of course.

Sy Taylor  6:07  
Pending regulatory approval, or the CFTC is is certainly a little bit more open to regulatory approval these days. I mean, for those who aren't familiar, of course, a perp is a perpetual futures contract type of crypto trading agreement that lets you bet on the future price of an asset without ever actually owning it, and it has no expiration date, unlike other types of futures contract like options or swaps and things of that nature. So, what's really interesting about this is I think a lot of Wall Street is very very excited by having access to this instrument, they're generally perceived as as much more efficient because you can get in and out of them. They're they're liquid, hence the term hyper liquid, the largest kind of exchange for that type of asset class there is. But the other thing is hyper liquid is 24/7. So you know, cast your mind back to the original kind of actions that happened with Iran with earlier in the year. Pretty much everybody on Wall Street was watching Hyperliquid oil futures on Trade XYZ move up and down. And there's a famous picture of I think a trader somewhere in the New York Stock Exchange with Hyperliquid's real-time price on top of the rest of their Bloomberg terminal and everything else. This was the mainstream moment, I think, for Wall Street. But Charlie, like, give me some context to this because I imagine you're in that the eye of the storm with RWA. XYZ is Wall Street coming to you trying to figure this stuff out?

Charlie You  7:37  
Yeah, absolutely. We've had names from pretty much everyone that you could actually imagine that would be interested in this, that has come to us asking for this sort of data, and now we don't necessarily specialize in these sort of market data feeds that a lot of these trading firms would actually want, but definitely it is making us reconsider that stance and something that is potentially on the roadmap very very soon. In terms of the 24/7 nature of it, like you said, it just introduces a completely new data set to the market that people are not used to having, and just introduces so many new potential trading strategies that that are available. I mean, everyone sort of operates on the open and closing of the CME right now, and like you had said, when things happen outside of those hours, this was really the only only venue with some semblance of volumes that people were even paying attention to, and I think that this is going to basically force the CME to and all of the other futures exchanges to roll out their 24/7 markets. I know that they did a small pilot on some limited contracts, but even more recently on things like crude oil, they had they withdrew from the CFTC for consideration one of those 24/7 contracts, and I think that they're going to have to greatly reconsider that because clearly there is a lot of appetite to trade 24/7,

Sy Taylor  9:04  
and I think this has sort of drowned out the other news that ICE had this week, which is I think their partnership with OKX had something like 62 companies that they were going to be making available to retail globally, of which you know that was operating under the SEC's new innovation exemption, but as a part of that innovation exemption, the stock issuers could opt out of being involved, and now 33 of the 62 have opted out, and there was only a 30-day opt-out period. There's time left to run on it, so I really think that's interesting. The other thing that's happening is a couple of days ago the DTCC's tokenization service went live, which is like a whole other model. So there's so much to unpack here, and it's going to be. I don't know if 2025 was the year of stablecoins. 26 has been the year of like interest in RWA's, but. 27, the year that like it really goes mainstream, guys.

Petrit Berisha  10:04  
I was just going to say, like 19 months to the day, Charlie. I don't know how deep in the crypto trenches you are these days because of what Simon just mentioned. But and if you remember Jelly Jelly, the token getting delisted on Hyperliquid, and the story is basically this creator launched a meme coin, and then someone like opened a massive short position on this token, which ended up squeezing massively. And Hyperliquid had to delist it. And at that moment, a lot of people were like, "Whoa, is this thing actually like ready for mainstream usage? Is it ready to have a lot of capital behind it on longs and shorts. If basically what ends up happening is someone goes in with a 6 million short on a very illiquid asset that's a meme coin, it gets delisted. By at that point, people were saying it's 13 dudes in a spreadsheet, right? How has Hyperliquid as an eco gone from that in 19 months to where we are now.

Charlie You  11:03  
Yeah, I mean, you have to even just imagine how the platform itself is not even that old. Like it launched in 2024, and so that growing pain of Jelly Jelly, like you're saying, was still really early on in its in its launch. And those are just the natural things that sort of come up as you get more and more experience running a big platform like they are. But I do think another thing to take into account here is that Hyperliquid, in the context of this ICE deal, is really just the technology provider, and so all of the markets that are going to be offered through through ICE in their partnership here with Trade XYZ are entirely run by Trade XYZ, so really, regardless of what Hyperliquid is sort of doing in terms of you know adding some crazy tokens and things like that, it's really up to Trade XYZ to keep things more isolated, even if they are using Hyperliquid as its decentralized tech platform.

Chuk Okpalugo  12:01  
Right, and that's the part I think is most interesting. It's the technology is playing its role as just technology. I think one of the things that folks always push to when talking about distributed technology is unified liquidity. But in this case, the auto books will be separated for regulatory reasons, of course, and so you don't quite get the benefit of the existing liquidity that's been built up in Hyperliquid. However, clearly the benefit, the the years of innovation, the you know kind of years of track record of showing you know execution at scale, shows that the tech platform is ready for prime time, and now trade X Y Z in combination with distribution through ICE, and now we're going to have to rebuild liquidity in those markets. But there'll be separate regulated markets with regulated participants. So again, it's just one of those things of taking some of the benefits of the the platform, the technology, and the proven scale, and then applying it to a different set of participants.

Sy Taylor  12:57  
We're in such a fascinating time for this whole institutional adoption with regulation, with the various approaches being tested, with people getting licenses, but also institutions are starting to put their infrastructure in place, and I think that's part of why the next story is interesting to me, which is Google Cloud is building an institutional crypto custody service on multi-party computation with commercial launch planned for early 2027. So you know Google has been doing a lot with cryptography, and it's Google multi-party compute has separate parties sign blockchain transactions together, so no full private key sits in one place. It bundles transaction signing and policy controls and key recovery into its private preview that it's launching with no pricing announced necessarily. But this is a really interesting move from an organization that has historically been looking to break into enterprises, look to serve them. And if you look at the options for institutional crypto custody, you know, it's Fireblocks, it's Utila. I think there's probably a few other names I'm neglecting to mention, and you guys can jump in and scream, shout them. Defense, of course. Thank you. I would have felt bad if I forgot them, but like those guys are all startups, right? And they can probably do a pretty good job of serving the world's largest institutions, but there is still brand cachet out there. I think for for some of those larger brands. So you know, I'm really interested, Charlie, in your thoughts in in this move as well. Whether you think that this is going to make inroads, or is this just a big press release from somebody who wants

Charlie You  14:43  
it. I think that knowing how big enterprises work means that I'm more bullish on this than I think many other people. Just because adding a another vendor, especially for a large bank, tends to be just a horror. Process and Google Cloud has, of course, already made a lot of inroads into all of these all these institutions. Now, it's of course not as big as someone like a in Azure or AWS, but I think that as the banks want to do more with crypto and other on chain assets, I think it naturally makes sense for all of the tech providers to start to offer something like an MVC. There's really no reason that at the end of the day it's just tech. Like there's no you know real network effect to it or anything really like that. Everything just happens on the blockchains, the regular signature, like everything else. And if a procurement team can do it through someone that they already use instead of bringing in another external party, especially when it is as security sensitive as MPC and the signing is, I think it's a win all around.

Chuk Okpalugo  15:56  
Yeah, absolutely. I think the the procurement angle is the one that I think about as well. But from the bank's perspective, the GM, the the the person who's owning the the project here to explore the infrastructure, I do wonder whether you know this will be enough. The reason I say that is because I think we're seeing across the entire stack of stablecoins, wallets, digital assets, folks are starting to verticalize, and so you start with wallets, then you start to add maybe on-off ramps, payments, compliance. Before you know it, you are the one-stop shop, and so Google is very well placed to do this. But this is just one step along that journey, and I think you know, although it was rumored and then denied, a Visa Fireblocks match up could be a very competitive angle here because Visa also already has banks as you know one of their core stakeholders and customer bases, and does that help you get through the procurement angle? Now, both of those angles have different levels of kind of nuances in terms of whether banks want to work with a potential competitor, how much power do you want to provide to your cloud provider versus the card networks? All those relationships are very nuanced. But I do think that just being the wallet provider or the kind of MPC technology provider is a good way in. But over time, I would expect to see additional product features in order to really be that one-stop shop for that customer,

Petrit Berisha  17:23  
I guess it also depends on where you sit in that verticalization, right? Because we're talking about crypto product verticalization. If you look at Google Cloud Suites, then you could also look take a view that the verticalization is going in another direction. So I guess I'm curious to hear from Simon with kind of the world we're in right now, where cyber is massive, cloud and compute are like just going in one direction only. Is there also an angle where if you are a Google Cloud customer and you're using them for X, Y, and Z in that that direction, rather the further down the crypto stack is that also another form of verticalization?

Sy Taylor  18:05  
Yeah, I think so. A lot of large financial institutions are looking at migrating their core systems to one of the big cloud service providers over the next decade. Yeah, I think it's public knowledge that J.P. Morgan is working with a company called Thought Machine, and a lot of that runs on GCP. I think Lloyd's Banking Group is another one running on Thought Machine, and they're gradually migrating these big internal systems to the cloud. But also, I would say the other side of it is: whilst yes, that's like a nice way in; it gets you through procurement. Don't forget that Google Cloud went down in the UK last week, and Revolut went with it. So you know it's not a guarantee of resilience that you've got a big vendor. And if I'm one of the smaller companies that is crypto native and or cryptography native, I might point out that you know what are you buying here? Are you buying something because it's easy to buy or because it's actually the the safest option. So I really think there's difficult decisions for institutions here. Having gone through procurement with a bank before, generally I find the issue is not just getting through procurement; it's being able to do all the things an enterprise needs you to do within your product. And I think this is where Google already has a lot of that because it is a platform, it's able to do really fine-grained permissions about who can see what under what policy circumstances, and I think that's the thing where they'll bring some of that enterprise width and breadth kind of experience with those organizations. It's not just that they have a contract with them necessarily, but Chuck, really keen to get your thoughts here on like, have you been through that procurement stuff? I mean, I know Paxos, you probably worked with some institutions.

Chuk Okpalugo  19:50  
Yes, on both sides, and I think I think you're absolutely right. There's not just the being an existing contract that exists; it's also. About having the call it the machinery to manage the vendor, or to be the vendor and manage your customer. And look, I think I don't know too much about thought machines. I expect that they will be beefing up their customer management platform very shortly. And yes, Google already has that down, as does Visa. And I think anybody who wants to get into that game of of serving these types of enterprises, it's a build out, and so I see that as a definitely an advantage. But we'll be really keen to see which platforms. You know, we've been talking about banks, but there's also the large financial institutions, the trading houses. You know, Google obviously was working on their universal ledger a while back, more focused on capital markets. You know, from those folks as they think through, you know, as Pet was saying, okay, cybersecurity needs the rapid technology innovations that are happening with AI. Do you just feel more comfortable that Google will protect you from these things than you know a specialized but smaller player? I think we're going to have to see that how that shapes out.

Sy Taylor  21:02  
Yeah, you're buying a brand or you're buying details. I I just I just don't know. Pet, what's your thoughts on all this?

Petrit Berisha  21:09  
Yeah, I I think to to kind of echo Chuck, the right way to look at it will be after we have another hack or an outage. Like it will be in retrospect that people go, this was the right way to go, and I think it's very difficult to say. I think there will be a bit of a horses for courses situation here, where if you currently have a crypto custodian who has been in the trenches for a long time, be it a bit go, Fireblocks, etc., and they're already showing their capabilities, and you don't need to move. I I don't really see that as like a, I don't see any of those customers going to Google Cloud, frankly. But I guess if you are starting to veer into crypto capital markets, into crypto, into custody of your clients' crypto assets, and you're looking at where to go, and you're already a Google Cloud customer. I do think that, as as Chuck and Simon said, I do think that cachet is going to play an important part. I think again that cybersecurity, the AI angle, I think is going to be something that people take into account way more when they're looking at migrating systems, and again, Simon's point, like if you're migrating core banking ledgers, and in three to four years' time, almost every bank has some form of crypto wallet or mirrored tokenized deposit, whatever the the kind of format will be, the form factor they take where they integrate into the kind of tokenized financial system, they're going to need someone like a custodian that provides the infra for that product and that feature. Right. One

Sy Taylor  22:52  
of the things I've noticed is pretty much every large financial institution I talk to these days, and every smaller bank that I speak to, even down to the credit unions, they're all asking like either they've launched tokenized deposits or they are trying to launch tokenized deposits to the point where I'm spending most of my time with Tempo trying to help those organizations figure out the optimal approach to launching their tokenized deposits and to bring them on chain and to to be able to do that. And we're packaging that into much more of a discrete offering because I'm getting the question so much, and every single time you can ask the question, you know, who's your wallet provider, who's your custodian, and they go, I don't know, you tell me, and so I think that moment in time is really really strong for for this type of organization to to enter that void and start to bring it in, and you know, like they're putting the money where the mouth is. I don't know how much assets Alphabet already has on Ethereum and Solana, but they're going to use their own wallet for it, and they're going to get some experience. And it's going to be going to be interesting times. Before we get to part two, I do want to hear from our sponsors that make Tokenize possible. Stablecoin operations usually mean a wallet from one vendor and on ramp from another, and then controls stitched together across all of them. Visa's stablecoin platform fixes this fundamentally. You can mint, move, and manage stablecoins across OpenUSD, and you remain your own custodian, all in one single environment. Then stablecoin linked cards let you spend balances anywhere Visa is accepted. That's Visa, the global leader in payments, and of course sponsor of this show. You can find out more at visa.com forward slash crypto. I've worked in payments for more than 20 years. You can probably tell by the gray hair if you're watching. But the thing with payments is people think that they're easy. It's kind of under the hood, a little bit like sending an email. But the problem is the 1000s of things that can go wrong. Things like fraud. Things like charge. Things like dealing with compliance or reconciliations, and stablecoins fix a lot, but they don't necessarily fix those particular problems. That's one of the reasons I joined Tempo, is because they thought about things like reconciliation and compliance, and they've aimed to fix those hundreds of little paper cuts that developers have to deal with when trying to go on chain. Tempo has things like native account abstraction, block lists, allow lists, and fast, predictable fees. And that really matters if you're sending large volumes of payments or you're dealing with payday. You really want those fees to be predictable. You can't have them changing on you during peak volume. So that's one of the major reasons enterprises choose Tempo, and it's why I did too. You can find out more at Tempo.xyz. Thanks, sponsors. We appreciate you. The next story is about a bank, in fact, called SoFi, and they've launched Sophie. Great name for a consumer tokenized deposit, paying 4.4% APY that converts one to one into its SoFi USD stablecoin. SoFi calls it the first national bank issued tokenized deposit for customers, and each token is held one to one on against the deposit at SoFi Bank, which means it's FDIC insured up to the usual limits, which of course most stablecoins aren't, and you can swap between Sophie and SoFi USD 24/7. So, Chuck, is this just competing with tokenized money market funds as like the savings account on chain? And also, like, what do you think of the rate here?

Chuk Okpalugo  26:39  
Yes, I think all of the yield-bearing instrument options are very dependent on distribution. Who's the user? Where are they getting access? In this case, SoFi has their users with their application. Their mobile application has a crypto kind of section in it where you can trade crypto, and beforehand, you'd have to shift money back to your SoFi savings account. Now they manage the back end, so it's smooth. But this time, on the same ledger within the app, you can now convert it directly to the SoFi token. Now, what is the real impact on the user? Well, let's take the rate first. 4.4%, really good headline number. It's actually available if you just have a regular SoFi account. If you get the special kind of entry requirements, so if you're a new user, you get it for about six months, and then it goes away. And so 4.4% is actually great because you don't have to have those kind of new user benefits. But other than that, I see this as I guess two things. It's an experiment. Can we take this technology? Can we deploy it? Can we put it out there? Can we learn from it and actually have it live in production? And then secondly, you can build other things on top of it in the future because otherwise, the rate differential that we just discussed is okay. It's not that big of a deal, but the fact that you know in the back end, I presume there are some operational efficiencies that they're getting from being able to on the same ledger swap from money in your crypto account to this yield-bearing asset, which is their deposit, from what they were doing before, which was I'm sure managing different ledgers and having to do the all-out reconciliation, but that's just not visible to the user. And so, on the face of this announcement, it seems like okay, there's a rate tokenized deposit as a user. I don't really see a big difference, but I think they've actually achieved a lot in the back end.

Petrit Berisha  28:35  
Chuck, did you look into the earnings for SoFi? I know you're you're you're a bit of an investor buff, no prosumer. Okay, you didn't look not

Chuk Okpalugo  28:43  
recently. I've been preoccupied with all the anthropic stuff. Yeah, it's another conversation.

Petrit Berisha  28:48  
I think it was like crypto is still 161.6 mil gross, but 1.6 mil net. So like they're spending a lot of money to try and drive adoption here. And I guess, like my question to you, based on what you just said, is like the back end efficiency could drive that that down. They could increase the margin on that product on the front end. But does it really matter if there is no added benefit as a consumer based on what the like off chain product offers? If that makes sense. So obviously, the operational backend piece is important because it can be more cost effective, right? But they obviously need to drive like mass adoption to it to then see a significant margin there.

Chuk Okpalugo  29:34  
Yeah, and and that's precisely why I put this into the good experiment bucket. You know, I think, as you know, as builders, to have a hit rate of over 50% of products being successful that you deploy is game changing. That's like S tier, and so I think with every launch, you're trying to understand: okay, can we actually do this? Does it work? How does it work in production? And then what do we learn? What is our. Hypothesis, and if the hypothesis is this is going to five XR crypto users, and it doesn't do that, obviously you're learning something. I don't think they think it's doing that, but I do believe that this is adding value to their crypto product. And I think every trading product, every kind of investment or trading product, will need cash at rest to yield. Robinhood has been doing this for a long time. They put it into their gold product feature. You can get this in your brokerage account. It's just a standard aspect of it, and the question is how to deliver it at what rate. And so for them, they're saying, "Hey, look, this is what we need to do before you had to shift it into your savers account. Which, if you are an existing user, you don't get the preferential rate. So the net benefit is slightly different, but otherwise, net net, this isn't like a groundbreaking innovation. I think it's them proving that you know they can get it to production, learn from it, and like add an additional benefit to the product app. But like you were saying, this isn't like the the core draw. I think this is just a nice to have for a trader or an investor? I

Charlie You  31:01  
think I'm a bit more bullish actually than than Chuck here on this. I think actually a lot of people that I know use SoFi as their primary bank, and SoFi has executed the strategy of having a you know they capture users by doing loan refinancings. They have the you know really high comparatively APY on their savings account, and I actually think that this is a really great opportunity for them to increase the adoption of stablecoins as a whole amongst the crowd that amongst a audience that hasn't necessarily been really exposed to it. Like if you think about who Robinhood users are, sure there's some people who just use it as a brokerage. They make a trade, you know, a few times a year and stuff like that. But I think all of us will agree that a lot of Robinhood's brand is like the degens, you know, the Wall Street bets crowd. People who are who are into crypto, they know about crypto. Versus SoFi, SoFi, it's like not to typecast a lot of my friends who use SoFi, but it's like they're very much of like the low risk crowd, you know. They care to. They went to Stowfi because they wanted to get a better interest rate on their student loans, or they wanted to get the 4.4% APY instead of the three and a half percent. And amongst this crowd, I think that this is a really good chance for them to become stablecoin pilled by doing this. I actually was just settling a payment with a friend, and he was like, "Oh, do you do you have Venmo?" It's like, "Okay, that was higher than the limits on Venmo." It was like, "Cool, do you want to use Zelle?" He's like, "Well, with I can only send $1,000 to you on Zelle." And they're like, "Cool to send me a wire." And he's like, "Oh, but the $25 fee." So I was like begging him, "Please just like send me in stable coins, you know." And now I feel like there's for a long time there was never really a great option for a app that I could like wholeheartedly recommend for someone to just like who isn't into crypto at all to just like be able to send me stablecoins. But it seems like Sofi is actually a pretty great option here. You know, it's a trusted consumer brand. People are used to it. Yeah, you can just swap it in and out of Sophie in order to get the yield and not have to sacrifice the ability to like move that money at any time. And so, I actually think that this is a really great opportunity for them.

Sy Taylor  33:03  
Yeah, it's it's interesting kind of customer adoption play as well for SoFi, as you say, their funnel is about getting people with loan refinancing. So you're looking at mid 20s, early 30s, typically somebody that the big banks didn't look at. But if I'm refinancing a student loan. I'm probably high FICO. I'm probably quite credit worthy. I'm probably somebody you want to build a relationship with over multiple years. But I'm also probably a little bit more crypto literate than the kind of the older generations, or at least more open minded to it. So to have this out of the box in a one stop shop, so many of the other apps don't do the rest of the stuff a bank needs to do, like be able to lend to you. I also think this is an interesting strategy for other banks to try and copy paste. Like this is how you do it: you launch a tokenized deposit, and you launch the ability to have your own stablecoin. And stablecoins can do something magical, which is they can go anywhere that there's a compatible bit of software instantly, 24/7, which your deposits cannot do. Your deposits have to go through the central bank, or they have to go through a clearing network, and that has all of the costs and the pains of wires and ACH or whatever else, and it's limited in how far it can go. But your your ability to pay yield, but also attract deposits still exists, and SoFi plays that game, and so they still want to fund a balance sheet. They still want to do lending. They still want to do that loan refinancing. So what you see with this experiment is maybe it takes off, maybe it doesn't. But there's a model here that's kind of workable and interesting for the future. Pet, would would you use this if there was like an equivalent in the UK that was just like one place you could manage it all.

Petrit Berisha  34:44  
Well, I was I was just thinking about actually when when Chase entered the UK and and the customer acquisition strategy was very aggressive yield on your money. It was very aggressive interest rate on your money when interest rates weren't that high. So obviously. Everyone flocked to Chase UK, becoming their current account. And obviously, some banks had stickier strategies. Like if you were a Monzo Plus subscriber or whatever, then maybe you didn't. But it was a pretty aggressive interest rate. I think the trouble is, like, if you don't, and and maybe Chuck can speak to this. If you don't iterate other product lines fast enough, drive the margin you need as a financial services business. Then that loss leader has no ROI, medium to long term. And lo and behold, like my money now sits in Chip rather than Chase UK, even though I still use Chase UK as my current spending account, but then I'm using it to fund my Amex, so I can earn points for either Virgin or BA Travel. So, like, it's very, it's not that hard to become disintermediated if you don't drive other product offerings, whether that is a credit card, whether that is, as Sai mentioned, loans, you know, even stocks and shares, ISAs, whatever it may be, like if you don't iterate fast enough, someone comes and eats your lunch. And I think every year switching gets easier. Whether it's a crypto-native product, I think in crypto it's even worse because a lot of people using self-custodial wallets, you can just go from X to Y very quickly, which is why it's very difficult to build a moat in financial services. Obviously, a little bit more difficult. It's a little bit more sticky, but I still think that. And looking at the the kind of quarterly earnings from SoFi, crypto is still a footnote. It's a very low margin product. So what are they trying to do? They're trying to drive user adoption, but cross sell into other products that make the margin for them as a business, and I think Charlie's point is interesting. Like, I think that red pilling people into stable coins is actually much much more difficult than people think it is. Like, even consumer to consumer payments, I think it is very difficult. One because people don't necessarily have it idle if they're not in crypto, right? So how do you solve that first issue? Like I have money in my Phantom wallet, USDC on base. None of my friends do. Charlie does. I bet none of his non-crypto friends do. So the idle stablecoin balances are very hard to replicate in a traditionally off-chain business, and then I think after that you're kind of looking at like what is the incentive to send stablecoin to stable peer-to-peer stablecoins? It's free and it's limitless, right? And I think you need to connect those two things. Where it's like, how do you incentivize someone to have idle balances in stablecoins, and how do you incentivize them to spend and transfer, I think the spend part is actually ironically the bit that's been solved the most. Looking at crypto card spend, I still feel there is a disconnect between those other two, and I think that's why you're seeing a lot of verticalization, right? Because people want to solve that stack,

Sy Taylor  37:55  
and I think Ramp and Stripe solved this with financial accounts. Andrew at Ramp, when we spoke to him on tokenized, said $1 is $1. And one of the worst things I think you can do is give your stablecoin a name because I don't know how many people walk around giving names to each individual dollar bill. Hey, hey, Steve. Hey, Tracy. Like, what a weird thing to do to name your dollar bills, and yet we're doing that sort of branding exercise for what should legally be functionally equivalent to $1, as far as a consumer is concerned. The protections are different, but so is e-money. You know, it's it's it's different form of thing, and so that's just like this uncanny valley that we're in. But speaking of launching stablecoins and indeed red pilling people to stablecoins, HSBC has launched Redcoin, its first stablecoin to the 3.3 plus million users of its PayMe app in Hong Kong. This Hong Kong dollar stablecoin users can send it to pay friends or pay at 100,000 different merchants. HSBC says fully backed by high-quality liquid assets held in segregated accounts, and Anchorpoint and Standard Chartered is another JV that got HKMA's Hong Kong Monetary Authority stablecoin issuer licenses back in April 26. So it's Standard Chartered and HSBC are the two big JVs, and so interesting to watch because HSBC's John O'Neill says the wholesale, corporate, and institutional use cases are going to come next. But this is very, very consumer focused, very, very Hong Kong focused, which we know Tether and sort of global south to global South flows have been really important for Asia Pacific and in and out of Hong Kong and China for a lot of the trade finance use cases and whatnot. But Charlie, how much do you see this demand for a Hong Kong dollar and non-US dollar types of stablecoin? And you know, can the banks really help there? Yeah, it's interesting. According to the data.

Charlie You  40:00  
Actually, U.S. dollar stablecoins have only gained in their dominance in over the last few years. I think at one point, and not that they were ever really had started to lose it meaningfully. I think that at its peak, maybe things like the euro stables were one to 2%, and now it's very de minimus in the you know in the number of like basis points like 10s of basis points at this point and so I think that one that speaks to the EU's fumbling the bag in terms of how they had all these micro regulations that made it practically very hard for issuers to issue a euro denominated stablecoin but also really just shows the how much people really like dollars. Now, I do think that in this case with consumer payments, it is. I would read this as more of a play of what Chuck was talking about previously with SoFi, where it is potentially just more of a backend improvement and an experiment, and to see what the adoption will look like. Hong Kong consumer payments is like a pretty interesting market in that it's quite fragmented. You know, in the states, if you have to pay someone, I think pretty much everyone is just going to default to Venmo. Very high market share on that. You know, a little bit of cash app here and there, but there's so many different players in in Hong Kong, you know, there's like WeChat Pay, Alipay, Pay Me, and and so I think it is a interesting experiment that all of the other competitors in that space are going to look at and see how it goes and copy it if it if it works.

Chuk Okpalugo  41:33  
Right, and and look, I props to them for building this out, and you know, as I always want to just make sure that I don't seem as if I'm writing everything off. Throwing shade

Petrit Berisha  41:43  
every every single story is throwing shade.

Chuk Okpalugo  41:45  
It does take a lot of work to get the stuff off the ground, especially at a large bank. I can't imagine the months and months, maybe years of work that went into this. So credit were askew, but let's look at what's happened right now. It's it's a private permission blockchain where they are the only validator. It's not interchangeable with your existing HSBC account. It's only within the PayMe ecosystem. It could be a database. However, the big difference between that and a database is all the learning that they've made and the future planning of projected projects that they are expecting to deploy. And so, what does interoperability look like? What does it look like to connect this with, you know, maybe WeChat and Alipay? What do the institutional use cases look like? And so I think they need to get started somewhere in a controlled environment, and I think that's what is being achieved here. But as of this moment right now, what's the the utility for the user who was already being able to do peer-to-peer payments on their PayMe app, not a big deal, but it's the first step.

Sy Taylor  42:47  
And don't forget, Cash App did this with Bitcoin. Robinhood did the same thing. It was like a closed loop, and everybody said the same thing. Oh, you know, no big deal. And now look at those brands and and what they've enabled. So, Chuck, your point is well made, which is this is a baby step, and it is a very little baby step, possibly one that can't walk yet, more of a crawl. But bad metaphors aside, the nod here to kind of going institutional is really, really interesting. What I am really fascinated about, as somebody who's kind of watch the stablecoin evolution is whether these and how these will start to go open loop. My sense is HSBC has done this on PayMe first because PayMe is a brand new modern infrastructure that exists almost completely separate and outside of the rest of HSBC. If they can bring this into the rest of their organization and the corporate and institutional side, then it's really interesting because HSBC has its tokenized deposit service, which I think offers about five or six different currencies. Has Ant Financial as a client, has some major enterprises, but it's been limited in its adoption by people who do trade finance in the global south or between Asia Pacific and the global south. This is one area where Standard Chartered, through its Zodia Markets business, has been really, really, really effective. Because if you speak to Zodia Markets, what do they do? They are the brokerage between fiat dollars and stablecoin dollars. So if I'm an importer in Kenya trying to buy oil from the UAE, to do that through the existing correspondent banking system can take longer than the oil physically takes to put on a ship and land at the port. It can be sitting in the port three days later, and you might not be able to take it off the ship and own that stuff yet because you're still waiting another week for the dollars to hit a bank account. Tether moves instantly, and if Standard Chartered is on both sides of that, and Zodia Markets at both sides of that, then the Tether moves, and so do the dollar balances. So you get this real-world activity that is already happening that I think the big banks need to buy their way back.

Petrit Berisha  45:00  
I think equally we're we're trying to find I guess as an industry the tension point at when should you have your own stablecoin and in in what ecosystem and I don't think that's particularly well answered I mean for example Polymarket's stablecoin has done pretty well PUSD but there are a ton of other application-based or ecosystem-based stablecoins that haven't, and I think that that is even more difficult when you're talking about consumer finance rather than application, because of all the things we just discussed in the previous story, which is how do you convince people to have idle balances in your stablecoin, and I think there would have to be a very aggressive push by anyone. And again, looking at this holistically, rather than just a pay me in red coin, you have to be very aggressive in terms of like trying to build that wedge and then trying to make it open loop without losing customers into other ecosystems that might be trying to court them, and I think it's a very difficult thing to do. I mean, Chuck, I'm curious to hear. Like, I'm sure loads of people ask you, "Should I have one? Should I not?" And I guess no one knows the answer. But what are the like things that you're seeing that are correlative to people maybe having one than a successful one, if that makes sense.

Chuk Okpalugo  46:22  
Yes, I think you start with defining success, and I try to dissuade folks from seeing tether and circle as success because it's incredibly hard to go back in time and have the path dependency that those two companies had. Now, once you put that to one side and you think about the benefits not being a $10 billion annual revenue income opportunity, you know, asking yourself, do I have a need to have global balances, or do operate finance at a global scale, and where am I being blocked, or what are the frictions of doing that today? And just going to your example of the the specific thing you mentioned, which is capital at rest or dollars at rest. What is the easiest way for me to do that whilst also achieving my other goals? Now, interestingly, with our first example, SoFi, the best way for them to hold balances is a deposit. Now, what's the best technology for them to do that? Well, they're looking at how they're building it together, and they say, "Well, I'd rather own the liability, and I'd want to put it on a technology that I can innovate on." Tokenized deposit becomes the best answer. Now, HSBC, I'm sure, were thinking of a similar question, and they ended up with a stablecoin, but the balances are still held in their reserves, and probably still look like deposits to me, and so you know, thinking through their strategy, their product strategy, and what they're trying to do, is another example of I already have user balances because I have this application Pay Me that has millions of users and distribution and utility, and how best can I make this financial platform work? Now, for other customers or for other platforms, that'll be a different question. For Polymarket, it makes a lot of sense. I'm funding a prediction market trade for consumer, maybe for marketplaces. For there are many examples where there is capital, there's balances held on your platform that have just sat there. Those are great candidates for something. Now, your stablecoin or somebody else's stablecoin depends on whether you can figure out the right economics and how much you care about being able to make the press release that you've got your brand name on a stablecoin. But once you put those things to one side and you've managed the solving the requirements of holding balances for your users in multiple countries without having to rely on antiquated banking as a service platforms. The next question then becomes: Do you need your users to interact with the rest of the world? Because that opens up an entire Pandora's box of liquidity and interoperability that many firms, friends of ours, are working to solve. But that's a separate question, I think. To you know, should you issue one on your for yourself? I think the the core thing is thinking about your product strategy, what you're trying to do, and then seeing you know if moving towards blockchain technology as the solution here, then great, we can hold balances in the way that works best for us. And for folks who have the licenses, deposit tokens are great, and for those who don't, we work with treasuries and the various number of white label issuers to make that happen. I

Sy Taylor  49:27  
suspect we'll see an answer becomes and not all in the world where stablecoins can move anywhere instantly and 24/7. Even the mighty J P Morgan and J P M D is going on chain, and that is going onto public chains. I believe as an off ramp, because a lot of large enterprises who hold stablecoins still want to get back in and out of their bank account, and so they can hold a tokenized deposit, but the deposit is a liability of the bank, and it can't go externally. But that can be swapped to. 24/7 and instantly for a white label stable coin or a broader stable coin, and this sort of both is interesting. I wonder as well how much of what's happened in Hong Kong is a result of the HKMA's stable coin licensing. The fact that is the license exists, and Standard Chartered and HSBC are the two biggest banks there. So this is something that the regulator has done. We should do this thing. Let's figure it out. Like there's a bit of that going on, I suspect as well. Do you need your own stablecoin? Don't know. Do you need 24/7 interoperability? Yes, definitely.

Petrit Berisha  50:35  
And I guess there is a piece of this, right? Which is, do you need it to be in the open world, as a question that I think Chuck posed, but more eloquently, I think overridingly, I would never send Chuck PSUD, right? PolyBarket SUD. I would only ever use that to fund and trade on that platform. And in the same way that when Hyperliquid launched their own stable, people used it to fund and and and as a trade pairing. I think when you're talking about payments, the kind of like more closed loop stablecoin by design always fails to win because in Charlie's example, where he's trying to get his friend to send him a stablecoin, it has to be compatible, right? Like even right now, if I send USDC on Ethereum to my Kraken account on the wrong chain, it won't recognize the deposit. And so there is a lot of interop to go when you're talking about closed loop stablecoins integrating into open loop ones, and that's why I think there is not that much of a that kind of gap between like do you need your own stablecoin and like just using a USDC or a wrapped USDC, which we're seeing come into vogue a little bit, or an alternative. I think that gap is still pretty big because anything to do with payments needs that kind of interop more broadly. So I think there is a ways to go in again finding that tension point into when do you need your own one or where do you play in the open loop systems.

Sy Taylor  52:08  
I wonder if we'll enter a world, Chuck, where having your own branded stablecoin is the same as having your own deposit, because the benefit here is while you're on my platform, I want to collect yield from you, and I'll happily be a quasi narrow bank,

Chuk Okpalugo  52:24  
right? And I think that the interoperability question is the thing. It's a big opportunity. Folks are working on solving it, and I think that's the thing that is is really key here. Why do folks want to monetize the deposits? Okay, it's additional return on the all the effort and equity that they put into their business, can you solve that with a different alternative? I think the answer is yes. It's more challenging. It's been tricky to achieve. Many players are working on making it less tricky to achieve. You know, open standard being one of the latest. But if you can achieve that, you know, fair yield and return from those balances that gets you most of the way. Now there are many firms, particularly consumer firms, who there's an unknown kind of bonus utility of having your brand on something. You don't know until you know many years in the future, and and then it's a counterfactual that it's very hard to to predict. But from the utility and liquidity perspective, working with an existing stablecoin that gets you the rewards that you're expecting, you know, genius and clarity aside,

Sy Taylor  53:31  
if I'm getting all the yield, why do I need my own brand on it? Right, then

Chuk Okpalugo  53:36  
there's a lot of benefit. And so then the final thing to solve is just look if when you the Charlie example and the Sophie example. At the end of the day, you know, both of us in the US, we're just trying to get money value from my account to your account. You know, I shouldn't have to check. Today we have to check. Okay, do I need to send it to you by ACH, and do I accept ACH on my side? And I think in the future we're getting to a point where, you know, I think Cash App has done a really good job at this. My balance is just my balance, and all I ask is how you want to receive it, and the platform handles the rest. And I think that is how branded stablecoins, tokenized deposits, traditional deposits should end up working. We're not there. Just

Sy Taylor  54:15  
disappear.

Chuk Okpalugo  54:16  
Should all they just disappear?

Sy Taylor  54:17  
They should just disappear. I mean, look. Speaking of which, we should probably do the same. It's it's about that time. There's a bunch of stories we didn't have time to cover this week. Kalshi raised a billion at a $40 billion valuation. Ripple wins its final U.S. trust bank approval. This is stories we didn't have time to cover. Tells you a lot about the week. Janus Henderson launched tokenized Nasdaq 100 fund again. Where would have this have been two years ago? And of course, Bitget adds USD and Euro account numbers to its wallet and 100 million users with NOAA. Thank you, everybody, for watching and listening. Really, really appreciate the guests today for joining.

Charlie You  55:00  
Charlie, if people want to find out more about you and RWA, where do they go? Yeah, you just go to our website rwa dot xyz, and yeah, follow me or our company on Twitter. Links will be in the description, I'm sure. How about you, Chuck?

Chuk Okpalugo  55:13  
You can find all my social links on my website. That's chuck dot xyz c h u k dot x y z.

Sy Taylor  55:20  
All right, Pet. How about you?

Petrit Berisha  55:22  
You've got Chuck.xyz. Sick. Got to do something with it. I don't have Pet X Y Z, but we do have Brain Food. X Y Z. You can find me there. Nice.

Sy Taylor  55:31  
And you'll find me there too. And you'll also find me at Tempo. X Y Z. This is the top level domain of choice for this show. You'll also find a lot more of it if you subscribe to us on Apple or Spotify or wherever you get your podcasts. And if you're watching on YouTube, please leave a comment or a review. And remember to subscribe. It's the kind of thing that really helps us out. And I think these types of conversations that we've had from our guests today really deserve that. Thank you very very much, and we'll catch you next time.