Why Every Payment Network Should Settle Onchain

Chris  0:00  

It's fun to just think about if we went back three years, it's 2023 and if you say that the two largest remittance businesses in the world, MoneyGram and Western Union, both have issued their own stablecoin and have embedded self-custodial wallet apps, self-custodial wallets inside of their apps like that would be incredible, like it's just we get numb to like this news is like just like another thing every day, but I think it's just it's such a good proof point of these use cases that people have talked about for decades are now like actually becoming real, and it's just becoming a core part of their business. And

Sy Taylor  0:43  

welcome to Tokenized. My name is Simon Taylor. I am your host for today, author of Fintech Brain Food, and head of market dev at Tempo. This is the show focused on stable coins and the institutional adoption of tokenized real-world assets. Back in the saddle is my friend and my co-host, the one and only Kai Sheffield. How the heck are you, sir?

Chris  1:04  

I'm fantastic. A lot going on as usual. We got to get into it.

Sy Taylor  1:08  

Let's roll. All right. Joining us is Chris Mason, who's the CEO of Orbital. Chris, how are you?

Speaker 1  1:14  

Very well, thank you. And little Jay did after four days at Money 2020 but still, still fighting, still fighting.

Sy Taylor  1:21  

Yeah, money 2020 is the payment Super Bowl, and it was very stable coin flavored this year, for sure. But before we get into the content, I need to remind viewers and listeners that views and opinions of our contributors today are their own and might not reflect those of companies they represent. Please don't take anything we say as tax, legal, or financial advice, and always do your own research. First story: a lot happened in stablecoin settlements. I'm just going to read some of these out, and then throw it over to Kai. So, Mastercard are going to expand their settlement hours using stable coins, so if you are a bank or a financial institution, an issuer, or an acquirer. You can now settle intraday on holidays and weekends. That means you've got more choice about how and when money moves. The settlement works with USDC, USDG, USDP, PY USD, Ripples RL USD, and SoFi USD across Arbiton, base, Canton, Ethereum, Polygon, Solana, Tempo, and XRPL, and they've already got Art Finance, CBW, Bank, Cross River Bank, Lead Bank, and Nouve looking to support that. So that's a pretty rapid adoption, but not to be outdone, of course, Visa also announced a collaboration with Braille to explore stablecoin-based settlement using SBC, a US dollar-backed stablecoin issued by Braille on Canton, and Checkout and Fireblocks partnered to provide stablecoin settlement capabilities. They also launched Flow, a platform that enables PSP and fintech to accept stable coins and crypto from 800 wallets, lot of settlement stories here, from Fireblocks, from Visa, from Mastercard. Kai, talk to me about why settlement matters and why people might sometimes confuse that. I thought stable coins existed. I thought banks could move money between each other.

Chris  3:18  

Yeah, so first, this all just makes me so happy, you know. When I think back to 2021 when we did the first stable coin settlement transaction, I think I've talked about on the show. We, we sent, we had an issuer, crypt.com send us $100 USCC, and we sent it back to them, and we're like, okay, like, is this possible? Like, can you integrate a blockchain into an institutional settlement system, we're like, okay, you could do it now. Where do you go from there? And it's really taken from, from 2021 you know, now five years later, and it's just becoming increasingly like the direction of travel for the whole industry. And I think what's what's particularly encouraging to me is that this is something where it's like every payment company, every payment network, we're all on the same team, and we all see the same vision, that blockchains don't take bank holidays, it's more efficient, you have more control over when and how you move money, and for large value settlements it solves a real problem in the financial system, but you kind of need this network effect, where the more companies that are going on chain and supporting settlement, the more useful that settlement becomes, and we've run into this, particularly on the acquiring side, where a lot of the settlement that we're doing today in stablecoins are issuers paying us when we want to pay acquires, there are acquirers that say, wait a minute, well, you know, I accept payments from multiple networks, and it's not that helpful if Visa pays me in USDC, if, if other networks don't, and then I got to, like, figure out, okay, there's a portion of the volume for this merchant that is, you know, on chain, there's a portion that's off chain, I think, if we can collectively, as an industry. A move where multiple networks, multiple acquires, are all able to be compatible with this form factor. That's where settlement really gets a lot better. And so it's amazing. I'm cheering on the entire industry, every network, like, please, like, join us. We should all move to this as a better form of settlement. And then I think that you know areas that still need to be improved are things like privacy, and so that's something that you know we're spending a bunch of time on. We're big fans of Ben Milne and Braille. I think you know they made an early bet on Canton, and I think when people think about Canton, there there are a lot of people who just think about, you know, institutional capital markets use cases, but we're starting to see the emergence of some interesting opportunities around privacy-preserving payments on Canton, and Braille being a leader, we wanted to start working with them and say, How do we incorporate their stablecoin, their technology into privacy-preserving settlements? I think that's kind of one of the next areas that the space has to go, but it's just great to see everyone moving in the same direction as an industry,

Sy Taylor  6:01  

yeah. Chris, I'd love your thoughts on this, because as somebody who's been to Money 2020 too many times, I know that the Nirvana for the merchants themselves, whether it's Spotify, Netflix, or a retailer, is they want to get paid as soon as possible, but you know, if they're being paid across border and the card issuer, the person that gave you the bank card is in a different country, and their bank is in another. That could take a weekend, it could take longer. They want to get that money as soon as possible. So, the settlement thing is really, really key. Chris,

Speaker 1  6:32  

absolutely. Yeah, absolutely. And I think, you know, I mean, I've worked on both sides of the cards equation, so I've, I did issuing for for city commercial cards, and I ran an AI BMS for First Data for a while, so you know, I think I think the acquirers may not love it, you know, the acquirers would, would, would like to sit on a bit of float sometimes, you know, and but I think those days are starting to disappear now with, with crypto and faster settlement methods, and you no longer have that excuse to you, you know, to sit on those funds for a week or something and say, well, it's a banking system or Swiss not working, etc. etc. So I think it's a great move, and you know, I agree with with Kai, I think you know, around Canton and things, and you know, we have to have some privacy around this, but I think, yeah, speed is of the essence, you know, particularly if you're a higher risk merchant, and you know, you're, you're, you're always, let's say, anxious about, you know, whether you're going to get paid, or your charge backs has gone up too much that week, or something like that, so it's an interesting, it's an interesting equation, but I think it can only make things more efficient and more transparent, and I think I'm all for transparency, you know.

Sy Taylor  7:50  

I think that 24/7 thing is becoming an expectation, like once you've tasted that in some parts of the ecosystem, the pressure really starts to starts to get put on top of you, and this Kai's campaign against bank holidays, I think, is starting to really pay off for the play, but it's also like companies like D Local. I was at dinner with the CEO of Money Gram, we hosted a little fintech brain food dinner in Amsterdam just last night, I think it was on the night before, and he was saying, "Look, my treasury now is all in dollars. I have bank partnerships everywhere, but I don't get money

Chris  8:30  

stuck anywhere. And this is, this has been a game changer for my internal business and my internal operations. And when you have a CEO telling you that that's delivering them tangible value, it's very clear that this is getting to the point where it's where it's making sense. Kai, I want to come back to that privacy point as well, though, because merchants don't want to see their payments on chain. The banks definitely don't want to see their payments on chain. So talk to me more about, like, what problems still need to be solved there in a little bit more detail. Yeah, I think it's just it's one of the barriers to scaling, like right now, I think we've said publicly we're doing around $7 billion of annual run rate in on chain volume across a number of different chains, and so you could kind of get away with, like, all right, well, I haven't seen a dashboard yet that is Visa's on chain volume that some sleuth on Dune has dug up, but like, if you start talking about moving 10s of billions, hundreds of billions, if you're going to move a trillion dollars on chain, like I think that you're only going to see more sophisticated on chain analysis tools, and that combined with more volume that bigger players are using, I would fully expect that if we maintain settlement on public chains, we would get to a point where there would be people mapping out how much volume Visa is doing, and that's just not something that we're comfortable with. That's not something that clients are comfortable with, and so it's, how do you get the benefits of the 24/7 money movement and flexible. Ability without having to have that trade off of now broadcasting to the world how much money is moving through a network, so I think it's a very clear barrier to be addressed. I think there are many different approaches to address it, and we want to experiment with what are the best ways to do privacy preserving settlement, and we think Canton is a good place to start. We think there are other approaches that are going to emerge. So, I think that's one piece. That the other point I wanted to make is that today, like, the my very, like, simple way that I think about settlement and payment systems is it's like a clock, it's like a grandfather clock, where it's just like, you know, the clock strikes a time, and then all the money moves, and then you wait, and then, like, it, and then it clock strikes, and then all the money moves, and I think we need to get to this point where it's just, it's more streaming, it's more like a river, and it's just flowing to the destination of where it needs to go, and so even if you have a settlement from Visa to an acquirer, like the point of doing this is not so the acquirer receives the money earlier, but doesn't make it available to the merchant. It's if the acquirer receives it earlier, they should make it available to the merchant right away, and then, as if the merchant receives it, they should use it to pay a supplier or pay us an employee or freelancer, and so we'd like to just see, you know, a kind of broader move towards streaming money across the economy, and it's we're trying to do our part, you know, to get to the next step faster, but we want to, like, have the whole industry say, "Okay, I got the money now, where can I put it? And I think if you do that, like, that ultimately drives economic growth, and so it's like a really big deal if we can kind of move that, but it takes so many different entities and actors across the payments ecosystem to upgrade with the right infrastructure to be able to, and like that's what it takes time, but I, I am thrilled with how far we've gone.

Sy Taylor  11:52  

Chris, I'm interested, if you'll indulge me as well on just kind of picking up on the grandfather clock point. I mean, given you worked in banking for a while, you're probably familiar with the term multilateral netting, which is one of those terms that sounds like jargon. Do you feel good about just giving that a quick explainer, and why, why banks, in particular, but others get value from netting? Period. And why they might not want money to stream, and what some of the incentive structures there look like,

Speaker 1  12:22  

gosh, you're challenging a little bit there, Simon, but I think, yeah, I mean, I think basically the banks, you know, I used to run World Link for Citi as well, and you know, we did, we had so much volume, we would, we would net probably, you know, 60 to 70% of all our foreign exchange, you know, because we had, we had sufficient, you know, volume to, to offset one against the other, so you know, I think the an institution the size of Visa, for example, or hate to say it, Mastercard, could, could really take advantage of some of that kind of netting, and, and you know, but it will depend on, you know, a lot on whether you know the everyone in the network's comfortable with, with holding a stable coin, I suppose. You know, ultimately, so you know, so I think the, the emerging markets, you know, find, you know, the incidence of ownership is just so much higher. I think in Europe, there's, there's going to be some, some skeptical merchants, and say, well, you know, how do I get back into fiat, etc. but I think, yeah, I mean, I think that the netting thing means that, you know, just reduces a cost for everyone, really.

Sy Taylor  13:30  

So, my understanding of multilateral netting is like, let's say I got 10 banks on either side, they all need to pay each other, but one bank needs to pay, you know, bank number one needs to pay bank number two $10 and bank number two needs to pay bank number one $9 Instead of sending $10 one way and $9 with the other way, we just pay the difference. We just pay the difference.

Speaker 1  13:55  

Yeah,

Sy Taylor  13:55  

but the problem is, for that to work, I need a bunch of time to pass to figure out, like, what are all the smaller transactions that can roll up into the bigger transaction, and that's why we agreed these intraday cutoff times, so that instead of moving trillions in real value, we actually end up moving a few billion in actual money moving, and that makes everybody more capital efficient, because that money that's not moving now can be lent or it could be used somewhere else, kind of on the on the balance sheet, and so that I think it's going to come ahead, and that's a challenge,

Speaker 1  14:29  

isn't it? Yeah, that's going to be the challenge when you know is this is like how often how often you cut off that point in time, and you know to Kai's point is if you're just going to stream stream those transactions and those settlements continually. You're still going to have to have a process, you know, a traditional foreign exchange network would, but you know, you do have to have a process of when does that netting happen and how frequently, and but it can work if it can work for sure. There's no reason why it should be any different.

Chris  14:59  

Yeah, I. These are like the advanced, like payments, PhD kind of treasury questions of how do you balance these faster rails with efficiency of things like netting, and I think that there's there's a role for both. What I like is just having 24/7 rails just gives you more flexibility and just gives you a wider design space to play with, and so it's not your netting because you have to net, because there's no way you can actually move money on Saturday and Sunday, and even if it's not advantageous to net at a certain point, you're doing it anyway, and so it's, it's not to say all netting should go away, or that will go away, it's I think that you can have really smart people inside treasury organizations kind of figure out their own strategies and calculations and what to do across those flows with a greater design space that they can move money when they want to move it, and so I'm really excited to see just more experimentation as these rails get adopted. Heck, yeah, that's a great point. Kai, I didn't want to do that explainer piece, because better infrastructure gives you better optionality. So, thank you for indulging me on my weird little nerd corner there, guys. I'm going to move a story number two. This is about MoneyGram. They have launched MG USD, their stable coin. This is a retail-focused stable coin launched in collaboration with MZero Bridge, Fireblocks, and Stellar. It will be integrated directly into the MoneyGram app in the

Sy Taylor  16:30  

self-custodial wallet, so users will will see the stablecoin. It's initially launched in the US market with plans to scale globally. Just a quick plug, as well. We actually interviewed the CEO of MoneyGram, Anthony Suho, and the CEO of MZero, Luca Prosperie. And you can go to the tokenized YouTube channel to find it. So, interesting one here, of like a lot of folks saying, well, every company launched their own stable coin, shouldn't all of the liquidity go to USDC, USDT. Why would you even launch your unstable coin? Chris, where do you come down on that one?

Speaker 1  17:05  

Yeah, I mean, unfortunately, you know, I would still see, you know, if you look at MoneyGram's main main corridors, you'd say it's in Mexico, India, Philippines, places like Salvador, Guatemala, yeah, and I think when you look at, say, you know, the, you know, the understanding, and you know the usage, let's say, I mean, there would be pretty much all tether markets, really, Mexico maybe being the, the exception, where there's a bit more USDC, so I think the big question is, you know, will will the coin just be used to kind of, you know, mint and burn on each side of the transaction, or will anyone actually want to hold it? And my personal view is they're not going to hold it, you know, but if there's some liquidity that can be created there, then you know, but I think I would have gone straight to USDT, to be honest, but that could have been a could be a compliant step too far for maybe I don't know,

Sy Taylor  18:04  

maybe, maybe also I think having again sat next to Anthony and also spoken to the CEO of one of his competitors over the past few days, what they're finding from their products is people aren't necessarily off ramping, they're just holding the stable coins and they're not converting that stable coin into something else that's got liquidity, they're just directly off ramping with Monogram itself, so they're going and getting cash, so if, if what was landing in my wallet was a stable coin and I was just directly off ramping it, why not make that my stable coin and attach a card to it, and then do more with it?

Speaker 1  18:39  

Steps isn't it? Really, I mean, so then that just makes it a treasury movement product, really. And you know it's not really giving too much utility to the end, the end consumer, let's say, in the more exotic market, but you know, some might start to use it, and you attach a card to it, or a wallet, or you know, then bit by bit, isn't it? And you know, they've got a huge, they've got a huge network. I think it was 60 million, 60 million customers, 500,000 retail outlets. So, you know, if you, if you have that network, I think you know Kai's got a much, much bigger network. I think you know it is probably the, the only formula to really get your, your own stable coin off the ground, you know. Otherwise, I just don't see any real way to activate some of these new coins and really increase usage, other than, you know, the internal treasury use case.

Chris  19:35  

Yeah, I think first on this, it's fun to just think about if we went back three years, you know, it's 2023 and if you say that the two largest remittance businesses in the world, MoneyGram and Western Union, both have issued their own stable coin and have embedded self-custodial wallet apps, self-custodial wallets inside of their apps, like. That would be incredible, like it's just we get numb to like this news is like just like another thing every day, but I think it's just it's such a good proof point of these use cases that people have talked about for decades are now like actually becoming real, and it's just becoming a core part of their business, and yeah, I think the right question is, like, is this a treasury product, and it makes the internal back end more efficient, but no consumer ever knows what it is, or is it a consumer-facing? Do people seek it out and hold it and use it, and does it stay in circulation beyond the MoneyGram app? And, and I don't know, I think that they're going to need to have interoperability with USDT in many of the markets that they're in, and like, what does that look like? You know, what's the liquidity, and how are they going to build liquidity between this and USDT? I think that's an open question, but I give both, both of these companies, like, you know, a lot of respect that I think in many ways they were, they were the target, you know, that you had a generation of stablecoin entrepreneurs saying, like, we're going to disrupt Western Europe, disrupt MoneyGram, like stablecoins are gonna replace the need, and they've said, okay, stablecoins are good technology, we can integrate in, but there's still a lot of local licensing on and off ramps, the networks of the individual storefronts and agents that they have, like they've found a way to really adapt and be able to bring this in, and now we'll see how how successful it ends up being, but you can't really look at either of the remittance companies that say they're behind, like they are in the game and they're playing, and I think in a lot of emerging spaces that's what takes is just be in the game, and if you're in the game, then you can iterate and figure out, you know, the best way for the product to evolve,

Sy Taylor  21:45  

and you're so right, because MoneyGram does - we've spoken to Kraken before, and MoneyGram does cash out for Kraken customers, so if I have a Kraken balance, I can use MoneyGram to get cash out of Kraken. It's like they're doing lots of different things, not just this sort of like core business piece, and imagining Western Union is as well. There are other companies starting to launch products along these lines, and then, of course, when it is your own stablecoin, you're collecting the yield on that, so you kind of get into the bank world of like, well, if these stable coins were just sitting in a wallet for a week, two weeks, and that, why wouldn't I collect the float on that, and that balance

Speaker 1  22:24  

exactly. You're going to make a much, a much better margin, even if you know 10% 5% of that coin gets held, and, and, yeah, I think, I think, I think these guys have to go that way, in terms of kind of multi-channel, and I think you know there's obviously going to be places like India, where I think they're, they're going to struggle just around the kind of local regulation to hold coins and things, but you know, maybe that, you know, they're probably going to have to go like straight out into INR or something, but, but in general, yeah, it's this is step forward, isn't it? And it's, and it's a great, it would be great to watch and see what, see what happens, see what that adoption looks like. Yeah,

Sy Taylor  23:03  

just briefly, Deal also announced that they'd launched DL G USD, and that DL, sorry, USD launched on Tempo, and what they're doing is they're making it one to one redeemable, so most of you will know Deal is the company that does payouts for payroll for employees of record or contractors around the world. They've been able to accept stable coins, about 5% of users get paid in stable coins today. They're planning to expand that, but what they've done now is they've embedded a wallet into Deal, and not only can customers get the stable coins, those stable coins are pegged one to one to the dollar, and they are earning yield inside of Morpho vaults on Tempo. So, plug for Tempo. We'll cover this story a little bit more next week, because we're going to have Tairi from Deal on the show, but big news coming there as well. All right, that's it for the first half of the show. We'll be back in just a moment. This episode, if it isn't already obvious, is sponsored by our friends at Visa, the leader in digital payments. Visa's tokenized asset platform, or V Tap, uses smart contracts and cryptography to help banks bring fiat currencies on chain, whether it's launching a stable coin or deposit tokens or something else. VTAP allows financial institutions to issue fiat-backed tokens, improving financial efficiency and enabling programmable finance. Check out the links in this episode's description to express your interest in VTAP, this episode is sponsored by Stripe. Internet commerce is evolving pretty rapidly, and agents are now becoming economic actors. They're managing spend and transacting autonomously, and stablecoins are becoming the default for them to do so, thanks to their programmable. Instant global and low-cost nature with Stripe. Your business is ready for this new agentic economy. Accept stablecoin payments from agents, equip your agents with wallets, and issue stablecoin-backed cards, so they can spend all through a single integration from Shopify to RAM businesses. Trust Stripe to get ready for agentic commerce. Learn more@stripe.com forward slash crypto. This episode is sponsored by M Zero. Stablecoins are becoming global financial infrastructure. It's time for that infrastructure to mature. If you're a brand, you should have your own stablecoin set to the behavior of financial flows moving through your product. If you're an issuer, you want to be the stablecoin partner for the most valuable brands. MZero is the only platform where issuers and brands get together to build digital money products for the world. MZero, make your own money. Get started on mzero.org All right. Thank you very much to our sponsors. This is a story that came in just as we were going to record, which is Revolut, one of the world's largest neobanks, aims to offer FDIC insured products to the US customer base and stable coins. It applied for its national charter in March, but its US clients will have access to stable coins and deposits in multiple different currencies that we'll trade stocks and cryptocurrencies. Now, for the US listeners, why do I think this is a really big deal, and why did I insist it was on the show? Well, Revolut have 75 million customers globally, they have a million in the US, so the why nowhere anywhere near the biggest neo bank, never mind bank, but never bet against them. Last year they reported 6 billion in revenue and 1.75 in net profit, and they've just been valued at $75 billion And if the rumors are true, then that could get a lot larger very soon, and the product is wildly complete compared to Cash App or what PayPal offers, or any of the even to some extent to Robinhood. It probably competes with Robinhood and Coinbase quite a bit. So they offer zero spread swaps, so you can convert between fiat and USDT and USDC at an exact one to one rate with no fees.

Sy Taylor  27:23  

They have multi chain support already, so pulling on and tempo and a whole bunch of others. They have an advanced exchange for pros, and you can actually spend your everyday spend crypto attached to your card and kind of everything else. So, Chris, obviously you're familiar with Revolut from Europe, but having worked in the US as well, talk to me a little bit about, like, how you see their position in the market and what, what a US listener might want to take from them coming to market.

Speaker 1  27:51  

Sure, I mean, I think I think Revolutes done incredible things and been incredibly innovative in, in your opinion, I think they had a maybe as a similar strategy, of you know, in the early days in Europe, they did some super tight spreads on, you know, traditional foreign exchange, you know, they've developed, you know, massive amount of product compared with the average consumer bank, so obviously everyone should be very worried, and I'd probably say that 75 billion valuations look in a little light, as far as I'm concerned, in terms of where they're going. I think how they've been, how they're entering the US is obviously extremely aggressive, you know, and they, they're aware of how tight these spreads are at some of the major exchanges, and they're going to just make it a super utility and easy to use, and, and cheap, and you know, maybe they'll start to edge up those rates a little bit later on, but I think it's a land grab for customers, and they've been super innovative in terms of what they're, what they're putting out there, so I would expect, I would expect, you know, maybe there will be a Revolution revolution as well in the US. You know,

Sy Taylor  29:05  

fascinated, Kai, by your perspectives on this. I know Revolut is not a product you've used or tested or come across so much, but your views on neobanks and their role kind of convincing the rest of the market to move.

Chris  29:16  

Yeah, I'd love to have the option to use Revolut, so I'm excited. I hope. I hope that this, this happens. I, I think you could just, you can feel the competition growing in financial services, in kind of core consumer business banking, you know, wallets, like in a way that it's just, it feels like you've never had at this level of velocity of how many new entrants are coming, both into different markets, how quickly they're innovating and providing new products, like it is an amazing thing for consumers, like there's no other point in history where consumers have had this many choices and. In this competitive a market of financial services, and I think you know it's not all just because stable coins and blockchain, but I think that that's a part of it, in that you could argue that stable coins have just accelerated fintech and have poured more interest and more capital and kind of just more innovation into companies that are looking to either provide existing products much more efficiently, much lower cost, or provide brand new products, and I think that when that happens, consumers win. I think the big question is going to be like, how sticky do some of the existing banking products end up being, and you know, I think that for a lot of people it's, it's a big deal to change your bank, and you know, that's that's like, you know, changing over payroll, it's like, yep, you, I still use a traditional bank today as my core bank, and so it's like they're all these new products that are coming to market with all these features, with incredible like design experience and product features. How do they convert and get people to move away from banks that haven't really evolved the experience that I could say my bank looks pretty much the same that it did 2345, years ago. And so I'm excited personally to have all of these options and to start to explore, but it is, it is like, can you move over, and what's the lift to move over? I think the zero spread swaps, this is the second time we've seen this in a few weeks. Ramp, I think, announced this as well. That's great for the stablecoin ecosystem. We know that it isn't one to one to move USD to USDT or USDT to USDC. There's a cost of that, but it seems like, again, the competition is they're saying this is the best product for consumers to not have to pay when you're going for one stable coin, another, they're eating the cost of it, and consumers win. Is that something that's going to be long-term sustainable? I think that's the other question of, like, you know, when the volume grows, what does that business look. So, I think Revolut has something that SoFi also has here, which is they have a deposit book underneath it, and they have well, and Revolut especially has a lot of experience in FX, like a massive possibly one of the more sophisticated FX desks in the world, out of any of the banks, like it's really strong on that stuff, so they, I think they can manage it and make it economically work, but also because they are a bank in most of the markets where they operate, their sort of risk of clearing back into

Sy Taylor  32:30  

actual actual settlement, their credit risk is extremely low. So I wonder, like, will they do a sofa at some point and launch SoFi USD, but also have a tokenized deposit, because that tokenized deposit sits on one side of the balance sheet, the stable coin sits on the other, and they can kind of swap between those, and that costs them nothing, because it's a book transfer, then at that point, and this then becomes another argument for like having your own stable coin, but you don't have to brand it that way to the consumers, when I mentioned this story, or I think the SoFi story on X a couple weeks ago, one of the product guys at Ramp reached out to me and said $1 is $1 and I think product people are like pushing that, and if it's driving growth for them, and if they're growing businesses and they're profitable, am I willing to eat a little bit of cost for removing that customer experience friction, and it, my business case still looks great, like not every part of the experience has to be like profitable, and I think that's sometimes how there's a difference in culture between the fintechs and the neobanks and the banks, the banks want every line item on the P&L to be accretive, and I think the neo banks want the overall P&L to be accretive and to grow their customer base, and so they have kind of different motivations when it comes to that stuff.

Speaker 1  33:51  

Agreed, I think one has one one revenue stream offsets the cost, doesn't it? And I, I think they're, I think they're being smart, you know, they used to have the analogy that you changed your, your partner more often than you change your bank, you know, and, and I think, but you know, if I think what you've seen with, like, you know, kind of the younger generations and things, they're so much more flexible with apps, and you know, if you've got this feature and that feature, and you know, it just gets people, people hooked, doesn't it? And then one second

Sy Taylor  34:26  

point, actually, yeah, really good ones, they'll just publish their own neural report in the UK, and they've got 16 million customers now, 50% of those customers are primary banking relationships, so and of the adult working population that's close to 25% I can, that makes them a massive, like consumer banking deposit franchise in the UK, and part of that is generational, so they've been around for so long that, like, elderly millennials like me use them as their primary bank. But also everyone after me, which is like a lot of people now in the working population, because I'm getting really old, like that's a lot of people. So, how many people are getting their first bank account with Revolut? The other thing both of them do really quite well is they have really good kids accounts and family accounts. So, what happens is, you know, executives and people who've done well in their career give their kids a bank card at 1011, 12, and they do things to like help build your credit score as you're getting older, and then by the time you hit 1821, you're going to university, you actually have a good credit score, and that these are all little things that on ramp you in, in a way that, like, you don't notice the thing that's not hurting you today, I think. These, that this boil the frog strategy of like multi generational. I'm going to attract a new user base, and I'm going to do all the things that Gen Z cares about, like, yeah, they want to trade crypto, they want to get access to that stuff, but I want their deposits, and I want that long-term relationship with them. All right. Last story this week, the CME, it's 24/7 crypto derivatives market sees a $50 million opening weekend trading number. This futures and options market sold more than 7200 contracts traded in its first weekend, and they also launched a 24/7 trading feature for Bitcoin volatility futures contracts on Monday 24/7 How about that? And this comes in the same week as the CFTC approved Bitcoin perpetual futures on prediction markets. Cal, she, who also launched Eve Pubs today, Coinbase announced it can connect US institutional clients to crypto options and perpetual futures through its CFTC regulated business, and the ICE CEO said Hyper Liquid is bigger than Nasdaq by daily volume, and disclosed his team has met the founders multiple times. Kai, earlier today we were talking about 24/7 being the expectation, increasingly in banking settlement capital markets is is a whole different ball game here. This, this is this is some big moves in regulatory land and otherwise. Your reaction to this one?

Chris  37:14  

Yeah, I mean it's it's amazing to see what hyper liquid has done, and I think hyper liquid has seems like it started to cross from it was one of the more crypto native product launches that started to go viral and get kind of a an early loyal customer base of both token holders and traders, and so I think it took over. I don't even remember when Hyperliquid really launched and took off, but I remember it taking over, like crypto Twitter, and everyone was just hyper liquid. Now it's becoming something that institutions are actually looking at and saying, wait a minute, like what does this mean for existing derivatives and futures businesses, and so that seems like hyper liquids becoming one of the biggest success stories you're coming out of crypto at the same time, like I couldn't help but noticing we don't talk about price a lot on this on the show, but like Bitcoin's with 62 $63,000 right now, it's it's what it was in I think fall 2024 it feels like some of the energy and excitement has just just left the room, and I think usually when, when Bitcoin, when Bitcoin price is down, it's like, oh, it's it's macro, it's inflation, it's interest rate, like it's easy to kind of point to those figures, but it feels like just the vibes, it's just not exciting anymore. It's not something that you know, the like speculative energy of people are like, you know, getting excited about. It's just Bitcoins kind of become, you know, it's almost like the success of Bitcoin getting to becoming institutionalized and having ETFs and being on Wall Street. That was the dream of an early Bitcoiner, where you said, "Oh, if only there's a Bitcoin ETF, Bitcoin is going to go to a million dollars, and, like, you know, people aren't going to be able to get enough of it. And now Bitcoin has, like, made it to Wall Street, but it's kind of just faded in and become this, like, relatively boring asset that the kids aren't just talking about trading all the time, and it said they're trading on hyper liquid, you know, some crazy leveraged future of some rare metal that's used for data centers, and it's like it feels like AI has taken a lot of the zeitgeist and like the excitement of this future asymmetric upside with these like crazy agentic trading tools and 24/7 kind of perps, and Bitcoin is just kind of over here as like almost a boomer asset, you know, that doesn't really have that that energy, but I don't know, how you guys think about just like where, where Bitcoin is. That was my first reaction to it.

Sy Taylor  39:57  

I feel like it graduated college now to get. A job and put on a suit and got boring, you know, it's kind of, but but what happened when you go into capital markets is you get liquidity and what liquidity does is bring price discovery, so if there's more people trading something then the volatility will go down because like if I, if there's one transaction and somebody buys for a million dollars, then, oh, it looks like the price is a million dollars, and then there's a transaction the next day at $500,000 and it's like, oh, the price is $500,000 that's a thin order book, right? Like, there's not a lot of people trading, the more people trading, that that spread gets tighter and tighter and tighter and tighter and tighter, and as it's come into financial markets, that's happened. Number one, and then number two, like I think the meta has completely shift. The narrative has completely shifted. I was talking to Tony McLaughlin, imagine you know him quite well, Chris. I do, you mix, but Citibank Mafia, you all know each other. He was, he was saying, Simon, something really weird is going on. People want to talk to me about what banking is, and they don't want to talk about crypto prices, and I don't understand, because I built a startup to do stablecoin things, and I thought they'd want innovation and excitement, and they want the boring stuff. Like, boring is sexy. Now that look at this podcast, right. We talk about exactly this type of stuff, and so I think there's a bit of that going on in the crypto meta. Is now like we got to get a job and we got to go institutional, but there's also regulation. So the other thing, regulation wise, is the CFTC commissioner has been quite clear that they want perpetual futures to be onshore, right, and perps. This perpetual future is very different to a futures contract or an option, which is, you know, you have an expiry date, it lasts for a certain amount of time, and you can't get in and out really easily, and those are your only choices if you are a regulated buyer in, you know, of oil in the United States, or in the regulated markets, but hyper liquid can speculate on they can get in, they can get out, they can use pubs to legitimize that onshore is huge. Number one, number two, there was a picture of, I think, some of the traders on the trading floor in the New York Stock Exchange. They had a Bloomberg terminal, but up above the Bloomberg terminal, they had the Hyper Liquid, and they were using that as a price feed. Why? Because Hyper Liquid has perps, and so it's giving you much tighter spreads. And so, if I'm the CEO of ice, all of my clients are saying, when can I get access to hyper liquid, and that's probably something where I'm like, okay, the demand now for 24/7 is so overwhelming, especially when you've got geopolitics at a weekend, so what does the CME do? Well, it already does derivatives on Bitcoin, this Bitcoin is like the toe in the water, the most boring crypto asset I can learn on, and so I launch a Bitcoin perp, and like this story is not about Bitcoin, this story is about trying to get to 24/7 perps as an onshore exchange that then can bring other perps into market, that's my read, Chris. What do you think?

Speaker 1  43:21  

You mean I see it a little bit like, you know, like the Forex CFD boom, you know, it's like people just want more and more leverage, and more, you know, it's like the riskier it gets, or they want to see opportunity, don't they, and everyone's looking for more opportunity and more angles, and you know, people like to nerd out on this stuff, and yeah, and I think that's that's why Hyper Liquid has gone, gone so fast, because, as Kai says, it's just kind of boring just reading the Bitcoin charts now, isn't it? You know, so it's like everyone wants more leverage here,

Sy Taylor  44:00  

there's some lessons in the hyper liquid success that aren't just like YOLO leverage DeFi stuff, right? I think the price discovery it's gotten from its real-time feeds, also the fact that part of the reason that spreads was so slow and it was so performant, it was that they built a dedicated l1 just for this type of trading, like, and they were one of the first dedicated L ones for a specific use case, and that had made them extremely performant, which drew in the traders from other venues, even though, like, Ethereum has more volume, Solana has more volume, Hyperliquid on its own chain succeeded because it owned the technology and its vertical integration, I like that, and when you're, when you own that stack, that, that really, really matters.

Speaker 1  44:46  

Is it faster? Is it, is it faster than, mean, there it's on their own block? Yeah, but is it officially that much faster than anything else?

Chris  44:56  

I think there have been kind of major technical innovation. That their team is driven in performance, but I was going to point out, last I heard, they had like 15 people, it's like it's a very, very small team, so like if you think about the scale of volume that they're driving, you know, with one to two dozen people on on the the full time team, and then also the fact that they generate revenue, which is also something that kind of we're not used to, which is like this new meta of like having a token, but having kind of cash flow kind of equivalent to that token, and so I think they they represent like as a success story of crypto, it's it's almost a, it's a product that looks more like a traditional exchange financial business, but the product is on chain. There's a very small number of people that it takes to maintain the product, and then it's highly profitable in terms of the, the amount of revenue they're able to generate. So, it's a really interesting success story.

Sy Taylor  45:59  

Revenue per employee, I think they're actually ahead of Tether as one of the world's most profitable like projects. If they were a business, they would be. It's a phenomenal story, and no wonder the folks on Wall Street are saying tokenization is the next boom. And I think it's no longer controversial in finance circles to talk about tokenization like the tokenization of money is here. The tokenization of assets is here. The question is how, and the institutions going on chain to public chains is no longer a question, it's how, and how much stays private, and how much, which is, which is again kind of a marked shift. All right. Well, that's all the stories we have time for this week. There's a few other stories we didn't have time to cover, so the fund variant raised 220 2 million, nice number. The Kraken parent payward plans to offer tokenized access to its IPO. Really interesting, how many on-chain companies are doing that by default. Veda brings the vault stack behind Kraken's DeFi earn to Privy 2000 plus developer teams, so Veda being the vault as a service. If you want to do an earn product, they help you build it. And my personal favorite story, I would say this: Tempo submitted a change request to ISO to upgrade the payment message ISO 2002 two to support stablecoins with input from Swift, Standard Chartered, and A and Z, this is the way this is the language banks use to talk to each other when moving any kind of payment domestically or internationally. So, if that supports stable coins, I think that's going to be used huge. So, shout out to the folks that helped us get that one submitted, and we'll be talking more about that at Cybos this year. All right. Well, thank you everybody for watching. Thank you everybody for listening. Chris, if people want to learn more about you and what Orbital does, where do they go to do that?

Speaker 1  47:53  

Our website, I guess, www dot get orbital.com So we have a, you can even email me on Chris dot Mason at get orbital.com So, yeah, be glad to hear from you again. Lots of traffic at the moment, lots of interest. So, yeah, it's great.

Sy Taylor  48:15  

Kai, how about yourself

Chris  48:17  

on X Kai Sheffield at visa.com/crypto

Sy Taylor  48:20  

You'll find me at Sy Taylor on all of the socials, screaming into the poid@fintechbrainfood.com and at tempo dot xyz, where we're launching an advisory service. If you're stablecoin curious and you want us to help you write a strategy, we'd be happy to do it. Copying Kai's footsteps, you guys did that first. I just copied your idea, and you'll find a lot more of this podcast if you go ahead and subscribe, and you convince other people to subscribe too, and if you really enjoyed this show, please leave us a review, it helps other people discover it, and we'll catch you next time. Bye for now.