0:01

Welcome to

0:04

Complex Systems,

0:06

where we

0:09

discuss the

0:11

technical, organizational,

0:14

and human

0:18

factors, underpinning why the world

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works the way it does.

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So a few months ago

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we had an episode with

0:26

Zeke Fox of Bloomberg about

0:28

stable coins and shenanigans and

0:30

leaned a little bit too

0:32

heavily into shenanigans and not

0:35

much into stable coins sort

0:37

of positive story and in

0:39

the spirit of providing balance and

0:41

being intellectually rigorous but mostly cryptosceptical

0:43

person. I wanted to have someone

0:46

well informed on to talk about

0:48

what is interesting happening in the

0:50

space. Well, I will say this,

0:52

you know, I love your show,

0:55

been listening for a long time,

0:57

since he started putting it out,

0:59

and I've been a long time

1:01

follower. I am, of course, I've been in

1:04

the crypto industry for now, eight years,

1:06

full-time, full-time, time, for, I am, of

1:08

course, I've been in the crypto industry

1:11

for now, coming out, tether has been

1:13

more or less known since 2017. I

1:15

think that was when the New York

1:18

Times first published this big piece about

1:20

tether and saying, oh look at all

1:22

the shady stuff going on. Now tether

1:25

is well over a hundred billion dollars

1:27

in total circulating stable coins. And there's

1:29

almost no way that the primary thing

1:31

going on is just unadulterated shatiness.

1:34

So, not being able to explain, okay, why

1:36

is this phenomenon still here? Why is it

1:38

so big? Why are so many important and

1:40

reputable players now throwing their weight behind it

1:42

and increasingly betting on it? Tells you in

1:45

my mind that there's a lot more going

1:47

on here that maybe is less legible than,

1:49

oh, you know, Teather's a shady company or

1:51

has shady origins and therefore this whole edifice

1:53

should be burned down. And that's what I

1:56

took away from that conversation and what I

1:58

came here to push back against. I don't

2:00

necessarily know that I want to burn

2:02

down the edifice, but certainly we'll hear

2:04

some intellectual pushback. Just to contextualize for

2:06

people who might not have as much

2:09

crypto background as you do, I think

2:11

the current historical reasons the crypto community

2:13

calls up market cap, but the total

2:15

value of stable coins is on the

2:17

order of $250 billion, of which about

2:19

60% is tethered, about 25% is USDC.

2:21

I believe it's close to 80% tether.

2:24

Really. Check my stats this morning. I'll

2:26

put a link in the notes for

2:28

it. Okay, 80% I could be wrong.

2:30

I could be wrong too. You know,

2:32

the choice of having all transparent data

2:34

on the block chains mediated by random

2:37

websites that you just Google for is

2:39

like maybe the random website you get,

2:41

you check has it right or not.

2:43

But be that as a way. And

2:45

then the rest is sort of a

2:47

long tale of also runs that each

2:49

have less than $5 billion of assets,

2:52

but total up to 10 15ish percent

2:54

of the market. I think most of

2:56

our audience understands the basic economic model

2:58

of them by now, but in brief,

3:00

I would characterize it as a stable

3:02

coin is a digital token which tracks

3:05

a sort of a tradable interest in

3:07

underlying money market fund, aspirationally, and the

3:09

Tether now says that it is mostly

3:11

a money market fund, mostly managed out

3:13

of counterfeit sterile and US Treasuries. The

3:15

USDC very explicitly just proxies, essentially a

3:18

black rock fund, which anyone could invest

3:20

in, I think, if you have the

3:22

two billion dollar minimum investment size, but

3:24

are essentially tradable claims against that fund,

3:26

and the USDC is to a very

3:28

high probability money good. think reasonable people

3:30

could disagree about tether under various circumstances.

3:33

But there have been other models over

3:35

the years of maybe we can create

3:37

something algorithmic and make a crypto native

3:39

stable coin and they've largely fallen by

3:41

the wayside of the market. Does that

3:43

match your understanding? Yeah, so by the

3:46

way, actually just checked, so actually the

3:48

numbers around 70% of the total stable

3:50

coin supply is tether. USTC is roughly,

3:52

what is it, I think like 20?

3:54

And then the rest is a smattering

3:56

of other smaller stable coins which are

3:58

much less significant relative to the market.

4:01

So the overall story, you're absolutely correct.

4:03

USC here have right now at 21%

4:05

and then everything else is, you know,

4:07

they're roughly 10% remainder. The idea of

4:09

stable coins in crypto is a very

4:11

old idea. And it used to be

4:14

called the holy grail of crypto is

4:16

how can you create a digital asset

4:18

that can be traded globally instantaneously 24-7

4:20

from anywhere in the world just with

4:22

the ability to custody of private key.

4:24

You mentioned in the previous show some

4:27

of the precursors of things like Liberty

4:29

Reserve, which were... completely just basically centralized

4:31

and more or less like what if

4:33

we did PayPal but no KYC and

4:35

no AML and no anything and just

4:37

had emails as sign-ups. So these were

4:39

shut down clearly illegal and you know

4:42

not really viable in the financial universe

4:44

that we live in today. This was

4:46

more or less remixed slash reinvented into

4:48

what was originally called real USDA which

4:50

became tether. Tether and USDC are what

4:52

we call fiat collateralized stable coins, which

4:55

is the obvious thing that you would

4:57

think of when you think about how

4:59

to build a stable coin, which is

5:01

take a bunch of dollars in a

5:03

bank account, issue liabilities against those dollars,

5:05

and boom, now you have a quote-on-quote

5:07

stable coin. There are other more exotic

5:10

schemes, and these exotic schemes came from

5:12

the same kind of ethos that originally

5:14

built Bitcoin and Ethereum themselves, which is,

5:16

well, we want to reduce reliance on...

5:18

centralized parties, right? We actually, you know,

5:20

Bitcoin was created because there was a

5:23

distrust of banks and central bankers in

5:25

the wake of the great financial crisis,

5:27

and there was a thought of, okay,

5:29

we should untether from these people, no

5:31

pun intended, and create our own system

5:33

that operates outside of that entire ecosystem.

5:36

And so how do you do that

5:38

with something that's supposed to be stable?

5:40

Well, of course, the first question is

5:42

stable relative to what and people implicitly

5:44

mean stable relative to the dollar, which

5:46

already kind of ties you to the

5:48

financial world of the US government. But

5:51

this idea of can you use exogenous

5:53

collateral, so not backing it with dollars,

5:55

but still get dollar stability. The answer

5:57

generally is there's two ways to do

5:59

it. One way to do it is

6:01

to over collateralize with other. assets that

6:04

are not stable relative to the dollar,

6:06

but you can kind of control the

6:08

amount of collateral and like de leverage.

6:10

This is what MakerDow, which is the

6:12

oldest decentralized existence today, which is still

6:14

working, fully pegged. It's, you know, the

6:16

jet project that works. There are other

6:19

mechanisms that are a little more complicated,

6:21

such as by creating derivatives, longing an

6:23

asset and shorting an asset, which creates

6:25

a delta neutral thing where you're hedged

6:27

and you don't longer have any delta

6:29

exposure to the underlying asset. that currently

6:32

exists today. It's the largest decentralized stable

6:34

coin in existence. There are some others.

6:36

I feel like to be fair to

6:38

Athena, they've attempted to not brand themselves

6:40

as a stable coin, although they've definitely

6:42

been branded externally as a stable coin.

6:45

Yeah, I think in popular parlance people

6:47

just call them a stable coin, but

6:49

they describe themselves as a synthetic dollar.

6:51

So, which to kind of point to

6:53

the fact that it's a more complicated

6:55

financial instrument than just what generally stable

6:57

coin tends to imply, which... is the

7:00

family in which Luna belonged, in which

7:02

Basis, which is a base coin, which

7:04

is a very very old project that

7:06

was a predecessor to Luna, that were

7:08

built on these models where basically you

7:10

more or less take on more and

7:13

more leverage over time, the larger you

7:15

grow, and you back the thing with

7:17

equity in the project, as opposed to

7:19

backing it with some other type of

7:21

exogenous collateral, and of course backing your

7:23

bank with its own equity. It only

7:25

really works if you have some bigger

7:28

entity that can backstop. your bank equity,

7:30

which is usually a central bank, crypto

7:32

doesn't have a central bank. And so

7:34

if your bank equity turns out to

7:36

not be worth what we thought it

7:38

was, then depositors are wiped out and

7:41

the whole thing collapses. This is what

7:43

happened to Luna and this is what,

7:45

you know, the whole family of stable

7:47

coins that were built on this kind

7:49

of premise. So we're VCs. We invest

7:51

into early stage crypto projects. And so

7:53

I've been looking at stable coin investments

7:56

for, you know, almost a decade now.

7:58

I think we have some understanding of

8:00

the space because we passed. on every

8:02

round of Luna, which is, you know,

8:04

the most famous decentralized stable coin which

8:06

failed. And we passed because we thought

8:09

it was broken that there's... mechanism wasn't

8:11

going to work. There was another one

8:13

called Faye, which we also passed on

8:15

believing that the mechanism wasn't going to

8:17

work. And then we did invest into

8:19

a few decentralized stable coins, such as

8:22

MakerDow, Frax, and Athena, all of which

8:24

have turned out to have survived and

8:26

survived. Not just, okay, they've been around

8:28

long enough, but they've survived. 80% plus

8:30

drawdowns in the underlying collateral, which basically

8:32

says, like, look, if you can survive

8:34

80% drawdown, probably your mechanism works. You

8:37

know, that's like as robust of a

8:39

stress test as you're ever going to

8:41

get in a real-world scenario. Well, I

8:43

think Iron Finance had a post-mortem of

8:45

surviving an 80% boredom where they made

8:47

that exact claim, and that was not

8:50

the last time they were stress tested,

8:52

and they did not survive the last

8:54

one. Iron finance, that was an omework,

8:56

if I'm not. Bold and not so

8:58

correct in hindsight. Obviously the 80% drawdown

9:00

survival is not the reason why you

9:02

should be confident that it's robust It's

9:05

by looking at the underlying mechanisms and

9:07

understanding how they work now There's nothing

9:09

in crypto that's going to survive an

9:11

instantaneous drawdown of enough ferocity and enough

9:13

of a liquidity impairment But there's also

9:15

no central bank that can also survive

9:18

that right? So there's you know famously

9:20

many countries have pegged their currencies to

9:22

the US dollar and have had to

9:24

eventually give up on that peg given

9:26

enough pressure on their reserves So There's

9:28

always, if you look at the history

9:31

of pegs, because ultimately that's what stable

9:33

coin is, is a peg. The history

9:35

of pegs shows that the majority of

9:37

pegs in history have been broken at

9:39

some point. Pags can survive for some

9:41

time, and usually they survive using some

9:43

currency board, having some reserves, defending, defending

9:46

the currency board, defending the peg in

9:48

the market. There's more or less an

9:50

understanding that nothing is forever in finance.

9:52

And it's probably true of decentralized decentralized

9:54

stable coins, at some where we'll have

9:56

a depegging event, because... markets will just

9:59

do some you know three sigma four

10:01

sigma five sigma thing over enough period

10:03

of time but the question is not

10:05

okay is this thing going to work

10:07

forever the question is is this thing

10:09

robust enough for your level of risk

10:11

tolerance which if you're in crypto land

10:14

the answer is that well you know

10:16

For a decentralized stable coin, especially if

10:18

you look at something like Athena, for

10:20

example, Athena pays a yield that's higher

10:22

than what you'd be getting with treasuries.

10:24

And so as a user of Athena

10:27

or is depositor in Athena, you're being

10:29

compensated to some degree for the risk

10:31

that you're taking on. So I think

10:33

Athena right now is paying a 4%

10:35

interest rate, which is not, I don't

10:37

think, higher than... Yeah, that's because markets

10:40

right now are... Yeah, correct. That's because

10:42

markets right now, of the funding rate...

10:44

on purpose markets. We're kind of getting

10:46

in the week here that maybe is

10:48

a little bit opaque to some listeners.

10:50

But long story short, if you look

10:52

at the menagerie of different stable coin

10:55

designs, it's very clear that there was

10:57

an early Cambrian explosion where people were

10:59

trying a bunch of different different stable

11:01

coin designs. It's very clear that there

11:03

was an early Cambrian explosion where people

11:05

were trying a bunch of innovation. It's

11:08

a try a bunch of innovation. It's

11:10

a try a bunch of innovation. We

11:12

just didn't know. And it's kind of

11:14

worth trying, in the beauty of crypto,

11:16

and this is one of the things

11:18

that many people rail against crypto for,

11:20

but I think is genuinely one of

11:23

his virtues, is that it creates this

11:25

space for pure creative destruction, where people

11:27

try a bunch of stuff, and some

11:29

of the stuff works, and ends up

11:31

becoming really valuable, most of the stuff

11:33

fails, and people end up losing their

11:36

money. But the people who end up

11:38

losing their money, there's no bailouts. Such

11:40

that for the people who are putting

11:42

their money into these things, do all

11:44

of them understand the risk they're taking?

11:46

Of course not, absolutely not. There's no

11:49

way because these things are really complicated.

11:51

In many of these cases, the people

11:53

who are building these things didn't also

11:55

themselves genuinely understand how they worked. But

11:57

that is the process through which all

11:59

markets ultimately arrive at more efficiency, more

12:01

innovation, getting new ideas. The beauty of

12:04

the internet is that it allowed that

12:06

kind of creative destruction to happen. in

12:08

so many domains that have now been

12:10

totally transformed. be unrecognizable post the internet,

12:12

right? Is that anybody with just an

12:14

idea, a laptop, can just host a

12:17

startup or a website, and just try

12:19

to compete out in there in the

12:21

world. And mostly startups fail. Most startups

12:23

fail. Most of the start, you know,

12:25

people were saying, you know, I'm going

12:27

to start buying all my groceries from

12:29

a web van, you know, people were

12:32

saying, you know, I'm going to start

12:34

buying all my groceries from a web

12:36

van, you know, Too bad, go find

12:38

the next one, like, you know, suck

12:40

it up, you'll be okay. That is

12:42

the space that crypto is inhabiting for

12:45

money and for finance. Now that's really

12:47

weird because we have an extremely strong

12:49

prior in Western society that money and

12:51

finance is absolutely beyond the realm of

12:53

being able to just, you know, pick

12:55

up rocks and bang them together and

12:58

try things. Crypto says, okay, fine. We

13:00

will stay outside of the regulated spaces.

13:02

We will not... tap FDIC insurance and

13:04

anything. We will not give people the

13:06

impression that this is, you know, insured

13:08

by the government or insured by your

13:10

bank or insured by anybody. We're going

13:13

to create this totally separate space where

13:15

we're going to play out with ourselves

13:17

and incur all the brain damage of

13:19

internalizing all this stuff amongst ourselves. That's

13:21

crypto's answer to... I hear that argument.

13:23

However, a respect for the truth requires

13:26

me to interject that crypto deploys that

13:28

argument strategically in some circumstances. crypto here,

13:30

acknowledging that the community is a very

13:32

diverse one large and just like you

13:34

can't say all startups are all people

13:36

and technists or I believe X. blah

13:38

blah blah. But there is a lobbying

13:41

strategy and the lobbying strategy occasionally is

13:43

that, okay, we are sort of like

13:45

maximal risk takers, firewalled from the parts

13:47

of society which society is determined needs

13:49

to be extremely stable, etc, etc. It's

13:51

a PvP zone. Everyone who enters here

13:54

knows that it's a PvP zone. We

13:56

have that disclaimed floridly on websites. And

13:58

also like institution adoption is coming and

14:00

we are like increasingly tied into, you

14:02

know, the mainstream financial ecosystem and you

14:04

know there's like decks which go out

14:07

to elpies of funds and yada yada

14:09

which just say that like that is

14:11

the reason why you should be an

14:13

elpian this fund is that it is

14:15

eventually going to out-compete and subsume a

14:17

lot of the functions of finance and

14:19

there are people who've been arguing that

14:22

for like 15 years so you know

14:24

eventually I figure like The game of

14:26

strategic ambiguity on whether one is joining

14:28

the adults table has to end at

14:30

some point. So I push back on

14:32

that. I push back on that. So

14:35

if you look at, you know, what

14:37

is the nature of the lobbying that's

14:39

taking place? Because I agree with it.

14:41

Obviously there's been a huge amount of

14:43

spending. I think the number one industry

14:45

by corporate spending in lobbying in lobbying

14:47

in lobbying in lobbying in, was the

14:50

crypto lobbying for. It was not lobbying

14:52

for give us tax breaks or bake

14:54

us into government procurement pipelines or give

14:56

us FDIC insurance or make sure that

14:58

retail customers are allowed to do this

15:00

or that. It was basically don't harass

15:03

us, don't debank us, don't come after

15:05

us and say everything we're doing is

15:07

per se illegal but you won't tell

15:09

us what the rules are, right? And

15:11

if you look at the things that

15:13

crypto has done now that it has

15:16

the ear of the administration, and clearly

15:18

now it's on very different footing than

15:20

what it was even six months ago,

15:22

even six months ago. None of those

15:24

things have taken place. There's been no

15:26

effort by the crypto industry to say,

15:28

give us a government put. Go buy,

15:31

make sure the government buys the dips

15:33

that people don't lose their money in

15:35

digital assets. Nothing of that sort is

15:37

being proposed or would be proposed. Oh,

15:39

the strategic Bitcoin reserve, etc., etc. Some

15:41

of the talk around that has sounded

15:44

a little bit like a government put.

15:46

This is a troubling, this is not

15:48

something that the industry lobbied for in

15:50

any way. Like you look at any

15:52

of the actors who are asking for

15:54

a treaty bikon reserve these are not

15:56

lobbyists like this is crazy Trump town

15:59

stuff that I think also is is

16:01

very very inflated relative to its importance

16:03

like if you look at what the

16:05

treaty bikon reserve actually is it's a

16:07

bad $15 billion of basically criminal seizures

16:09

of Bitcoin that are basically frozen, right?

16:12

They're not going to be auctioned until

16:14

the next administration presumably goes and undoes

16:16

or unleashes the strategic Bitcoin reserve. So

16:18

from the like relative to the balance

16:20

sheet of the US government, it's kind

16:22

of a marketing stunt. in the sense

16:25

of, okay, they're not buying Bitcoin, and

16:27

the Bitcoin that's held on the balance

16:29

is basically just frozen, presumably for four

16:31

years, or until there's an administration that's

16:33

less favorable to this, hasn't been put

16:35

into legislation, and the absolute, like, if

16:37

you look at what happened, what happened,

16:40

is kind of been put into legislation,

16:42

and the absolute, like, if you look

16:44

at what happened when the treaty of

16:46

a headline, that Trump thought was going

16:48

to curry in favor with the industry,

16:50

but... Overwhelmingly, like what is coin-based lobbying

16:53

for? What is, you know, these different

16:55

actors that are trying to get regulatory

16:57

clarity lobbying for? It's just stop banging

16:59

us over the head. I have an

17:01

interesting position on this one. So I

17:03

wrote a piece called Debanking and Debunking,

17:05

which responded to some of the claims

17:08

of industry advocates, which were concentrated in

17:10

the November-2 January 2 January timeframe about

17:12

a particular strain of the pressure that

17:14

the industry had come under. And I

17:16

think advocates have some points on that.

17:18

without, because we're hopefully chatting about stable

17:21

coins today. I won't repeat the entire

17:23

thesis here, but to point people at

17:25

the prior work. Without being super political

17:27

about things, I would also point to,

17:29

I think that some of the regulatory

17:31

engagement that the industry faced the last

17:34

couple years is probably not the way

17:36

the regulatory engagement should work. Some of

17:38

the explicit things that it's asking for,

17:40

there is a stable coin bill, multiple

17:42

competing of a stable coin bill under

17:44

discussion at the moment. There's also like

17:46

market infrastructure bill. I'd be remiss in

17:49

saying that I don't think that crypto

17:51

wants to have the words regulatory clarity

17:53

get deployed somewhat euphemistically, I feel. You

17:55

don't think the crypto industry wants that?

17:57

They don't want parody with like the

17:59

regulatory clarity. a regime for say start

18:02

investing with the you know accredited investor

18:04

exemptions etc they want something which

18:06

looks unlike that for investing into

18:08

tokens generally investing into tokens generally

18:11

including tokens which are substantially equity

18:13

investments and everyone knows it but

18:15

we describe them as other than equity

18:17

investments I mean I would dispute

18:20

that characterization I think everybody who

18:22

is like any version of the

18:24

market infrastructure bill that's been proposed

18:26

has a concept of securities, like

18:28

on-chain securities, that are treated basically

18:30

parapasue with any other type of

18:32

security. But there's clearly also the concept

18:34

of non-securities, which is, you know, you look

18:36

at Bitcoin, you look at ether, the SEC's

18:39

already basically conceded that, okay, this is a

18:41

category that exists. Clearly it exists. The

18:43

question is... What does it take for something

18:45

to start as a security and become that?

18:47

And right now, there's no answer. It's just

18:49

kind of vibes. Is that basically, look, you'll

18:52

know because we will either come after you

18:54

or we won't come after you. And this

18:56

clearly is not good. It's not a good

18:58

way to govern. It's not a good way

19:00

to give startups and the general process

19:02

of capital formation. insight into what they're

19:04

supposed to be doing. The U.S. is

19:06

not uniquely confused by digital assets. Every

19:08

country in the world that has a

19:10

major financial regulator has grappled with, okay,

19:12

how do you solve this problem? Clearly

19:15

there's something that are securities. There's something

19:17

that are not. Cryptos is weird. It's

19:19

different. Yeah, there are elements of it

19:21

that are like securities. They're elements of

19:23

it that clearly are not like securities

19:25

disclosures for a decentralized file storage network

19:27

is just, it just doesn't make, it's

19:29

not useful. And so it doesn't

19:31

solve the problem of giving investors

19:33

clarity, and it also massively increases

19:35

the cost for startups to build

19:37

stuff. The fact that the US has been

19:40

so out of lockstep with the rest of the

19:42

world, to me, vindicates the fact that,

19:44

yeah, nobody says you can do whatever

19:46

the hell you want, and it's just

19:48

Wild West. No country has arrived at

19:50

that being the answer. But no country

19:52

has also arrived at, well, we should

19:54

just kind of give the police or

19:56

the SEC just arbitrary levels of ambiguity

19:58

about what is or isn't and they

20:00

can just decide who to go after

20:02

based on how they're feeling that day.

20:04

So coming from the more start to

20:06

be less crypto-end to the ecosystem, I

20:08

think one would say there is... We're

20:11

relatively like large amount of regulatory clarity

20:13

with regards to what you are and

20:15

aren't allowed to do with giving software

20:17

company shares to someone selling them to

20:19

investors, etc, etc. My claim is that

20:21

if the industry ended up in a

20:23

place where it was as constricted as

20:25

the standard as the standard as the

20:27

standard Silicon Valley startup that doesn't have

20:30

a token involved in it. The industry

20:32

would be very unhappy. I feel like

20:34

we've wandered a little past the garden

20:36

path of some things happening in stable

20:38

coin lands. Would you like to return

20:40

to that stuff? stable coins are such

20:42

an important innovation to take seriously. So,

20:44

you know, if you rewind the clock

20:46

back through, you know, 2016, 2017, the

20:48

perception of stable coins at that time,

20:51

which very much encapsulated in that New

20:53

York Times article in 2017 about tether,

20:55

was largely correct, which is that stable

20:57

coins are basically used for two things.

20:59

One thing is like buying drugs online

21:01

or, you know, criminal, criminal activity, and

21:03

then two, they're trading. And now, why

21:05

did this evolve with respect to crypto

21:07

trading? Maybe buying drugs online, maybe a

21:10

little obvious, why you use that? Because,

21:12

you know, it's hard to do that

21:14

with PayPal. But with crypto trading, the

21:16

answer, of course, was that most of

21:18

these crypto exchanges were very unable to

21:20

get dollar banking. But they wanted to

21:22

have assets trade against what the natural

21:24

pair would be for most traders, which

21:26

is the US dollar. And so having

21:28

a proxy to US dollar or something

21:31

that is pegged to the US dollar.

21:33

is a natural way to build liquidity

21:35

for trading all sorts of assets in

21:37

many different markets around the world. So

21:39

that's where this thing initially arose. So

21:41

I think today what you've seen is

21:43

that the role of stable coins has

21:45

actually expanded significantly beyond these first two

21:47

use cases. Now why is that? The

21:50

answer is because these companies are now

21:52

quite regulated. They work very closely with

21:54

law enforcement. And if you are a

21:56

hacker, a bad actor, a dark net

21:58

market, and you are listing things in

22:00

USDC or USTT. frozen actually pretty quickly.

22:02

It's actually kind of the worst way

22:04

to use dollars to transact in criminal

22:06

activity because it's dollars that can be

22:08

instantly frozen from anywhere at any time

22:11

with a panopticon kind of hanging over

22:13

it and arbitrary depth of traceability for

22:15

these assets. So now that doesn't mean

22:17

that there's no criminal usage of these

22:19

things, but it does mean that it's

22:21

actually not the preferred way for criminal

22:23

activity to take place anymore. You're much

22:25

more likely to actually use something like

22:27

Bitcoin. which cannot be interdicted instantaneously by

22:30

anybody looking at the trace of activity

22:32

on chain. So criminal activity using stable

22:34

coins has really plummeted over the last,

22:36

called three, four years. Now, the second

22:38

category of people using it to trade

22:40

in crypto, that's always remained significant. But

22:42

one of the most notable things about

22:44

this is that if you look at

22:46

when the crescendo of crypto trading activity

22:48

happened, it was actually around 2021. That

22:51

was the crazy bull market where you

22:53

saw NFTs and all the zirp craziness

22:55

that was happening in all financial markets,

22:57

speculative assets. That was when crypto trading

22:59

volumes were at all-time highs on every

23:01

venue. And so what you should predict,

23:03

you know, looking back is that as

23:05

crypto trading volume was increasing, stable coin

23:07

supply was increasing because of the fact

23:10

that it was the lucre of trading

23:12

in crypto exchanges. But what you see

23:14

after that is that actually, although crypto

23:16

stable coin volumes decreased, after the end

23:18

of the 21 bull run, they started

23:20

coming back and turning around. And this

23:22

is true even as treasuries started paying

23:24

out more and more interest rates, which

23:26

actually should have been really pulling money

23:28

out of the stable coin complex because

23:31

people would say, well, wait, if I

23:33

hold a stable coin complex, if I'm,

23:35

if I hold a stable coin, I

23:37

don't get, I get nothing. It's like

23:39

a bank account that pays zero. That's

23:41

kind of bullshit, right? If you're getting

23:43

five percent on treas, that should be

23:45

a treas. and they increased actually to

23:47

a high watermark much higher than where

23:50

they were in 2021. And if you

23:52

look actually in the last year in

23:54

particular, what you see is that stable

23:56

corn supply has been basically continuously increasing

23:58

despite the fact that trading volumes encrypt...

24:00

have been largely sidelined and like kind

24:02

of going down a little bit. So

24:04

what that tells you is that now

24:06

there's more and more use cases for

24:08

stable coins that are again orthogonal to

24:11

what's happening on the crypto trading side.

24:13

So I'd say there are largely three

24:15

other things that are driving stable coin

24:17

demand around the world. I think the

24:19

acknowledgement up in ad reads sounds cooler

24:21

in Japanese. Konobamu Sugino Sponson will take

24:23

you a day, but karyishmos. Cool, right.

24:27

So you're selling Enterprise SAS and a

24:29

prospect asks you about how your API

24:31

manages access. Who does sales call? Linda,

24:33

because they always call Linda. Linda, who

24:36

heroically put together a color-coded map of

24:38

authentication mechanisms and find grained access controls.

24:40

Linda, who tells you she doesn't mind,

24:43

because technically correct is the only acceptable

24:45

form of correct. Linda, who certainly didn't

24:47

get a bachelor's in science and work

24:49

her entire career so that she could

24:52

redundly respond to inbound security question with

24:54

50 shades of the same API question.

24:56

Every company has a Linda, or will

24:58

someday find it needs one. Or maybe,

25:01

you're already at the scale where you

25:03

have dozens. Regardless of your size and

25:05

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25:12

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25:14

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25:41

to them. Go to safebase.io/podcast to learn

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more. Do it for Linda. Can

25:47

I push pause before we get into

25:49

those three things and just click on

25:51

that trading for a moment? So I

25:53

think the way that stable coins being

25:55

used to assist crypto trading as traditionally

25:58

described was there were so obviously one

26:00

the exchanges have difficulty getting in me

26:02

banking relationships for reasons that should surprise

26:04

no one at this point to the

26:06

exchanges are essentially isolated from each other

26:09

and the way that the price of

26:11

a Bitcoin in Japan and the United

26:13

States should track each other if you're

26:15

on pit flyer versus I don't know

26:17

coin base is that someone needs to

26:20

be making markets at both of those

26:22

things and because crypto has largely with

26:24

some exceptions been a cash and carry

26:26

business that requires a trading firm or

26:29

maker or similar to do large transfers

26:31

in size between their accounts of various

26:33

exchanges and stable coins were a major

26:35

sort of structural solution to that problem

26:37

because wire transfers are just terrible for

26:40

doing over the weekend, etc. etc. etc.

26:42

Why transfers are one of the things

26:44

I think the crypto community is rightest

26:46

about is that no one really loves

26:48

wire transfers particularly internationally, but they're the

26:51

best game going on or at least

26:53

happen for a while. The thing that

26:55

I think people underappreciate about to stable

26:57

coins in trading is that much crypto

26:59

is not traded on the spot market,

27:02

it's traded in derivatives markets, such as

27:04

perpetual futures, and the source of a

27:06

non-correlated collateral item was extremely instrumentally useful

27:08

for the growth of crypto trading over

27:11

the course of last. I'm not an

27:13

expert of this eight-ish-nish years, I think.

27:15

Yeah, it was really the transition away

27:17

from bitmacks, but when bitmacks was the

27:19

dominant player, actually they were collateralized in

27:22

Bitcoin, and that made the futures instruments,

27:24

which are collateralized in Bitcoin, so like,

27:26

okay, Bitcoin, so, like, okay, Bitcoin, and

27:28

that made the futures instruments, which are

27:30

collateralized in Bitcoin, so, like, like, okay,

27:33

Bitcoin, okay, Bitcoin, the futures instruments, which

27:35

are collateralized, like, like, 2018, 2019, I

27:37

think is when BINOS started becoming dominant

27:39

in the futures market, and that's when

27:41

everyone moved toward USDC or USTT collateralized

27:44

futures. And so tens of percent of

27:46

all these stable coins in the world

27:48

at the time, I would predict a

27:50

smaller number now, but... not grossly smaller.

27:52

It's probably still tens of percent were

27:55

essentially sitting in finances, well, it's collateralizing

27:57

largely professional features on Bitcoin and somewhere.

27:59

That's right. Cool. So, sorry, I interrupted

28:01

you. You were going to get to

28:04

three emerging use cases, returning control. Yes.

28:06

So the first use case, which is

28:08

maybe the most obvious one, and this

28:10

has been probably the oldest, very significant

28:12

use case for crypto, is basically a

28:15

way of facilitating capital flight. So this

28:17

is, you know, you're a Chinese wealthy

28:19

person, you're Russian, you're in Indonesia, you're

28:21

in India, whatever, and you want to

28:23

get out of your local currency. And

28:26

these are all countries that have pretty

28:28

restrictive capital controls. This is something that,

28:30

if you live in the US, this

28:32

might be a foreign concept to you,

28:34

or it might be just kind of

28:37

opaque of like, what are you talking

28:39

about? If you're an American, and you

28:41

want to buy foreign assets, more or

28:43

less, nobody cares. People will leave, if

28:46

you want to put all your money

28:48

into Indonesian bonds, you go ahead, nobody

28:50

really, nobody really, nobody really minds, right?

28:52

U.S. government isn't even going to ask.

28:54

This is an anomaly. Oh, they will

28:57

ask, as. Well, I think you spend

28:59

a substantial time outside of the country

29:01

as someone who lived abroad for 20

29:03

years, quite familiar with the various ways

29:05

that the government tracks you externally. But

29:08

be there as a mate. Yes, there

29:10

is no rule in principle that says

29:12

an American cap by financial assets in

29:14

other countries and other countries, including peers

29:16

to the United States. There is a

29:19

rule in principle that no, you just

29:21

should not be doing investing overseas without

29:23

government blessing. You should be buying domestic

29:25

assets only. That's right. they live under

29:27

some kind of pretty restrictive capital control

29:30

regimes, right? And so if you look

29:32

at India and China, of course, the

29:34

two most populous countries in the world,

29:36

they are some of the most restrictive

29:39

capital control countries in the world. And

29:41

of course, they're also these growing Asian

29:43

tigers, extremely wealthy, and a lot of

29:45

newly minted wealth in these countries. They're

29:47

like, oh, I should have a, you

29:50

know, people in other countries. They also

29:52

think that. else I think, oh, well,

29:54

you know, you live in any country

29:56

in Asia, right? The length of time

29:58

for which your currency has had the

30:01

same name, or the length of time

30:03

for which your government has been continuously

30:05

operating, is less than 100 years. And

30:07

in some cases, like less than 70

30:09

years. So for almost everybody in these

30:12

countries, they're very acutely aware that things

30:14

might totally change. And I really want

30:16

some more stability, especially if I have

30:18

very large sums of wealth. relative to

30:21

okay I can only own the domestic

30:23

stock market and or you know my

30:25

local currency and so if you're many

30:27

of these countries they've seen massive bouts

30:29

of inflation or currency weakness and so

30:32

they naturally know and this is part

30:34

of the reason why the dollar has

30:36

strengthened so dramatically over the last five

30:38

six years is because other people want

30:40

the dollar people outside the US want

30:43

the dollar so and that's also why

30:45

we have such a massive trade deficit

30:47

is because we have so many financial

30:49

assets from around the world flowing into

30:51

the US which is a little weird

30:54

ex ante, but that's just how it

30:56

works, is we have such an incredible

30:58

set of assets that people are in

31:00

the world want. And the way you

31:02

get access to that is through the

31:05

dollar. So basically, long story short, what

31:07

you've seen for many, many years is

31:09

that people use tether or use USDC,

31:11

but mostly tether, as a way to

31:14

get out of their local currency and

31:16

get into dollars. And most of the

31:18

time, this is illegal. They're doing this

31:20

against the interests of the Chinese government.

31:22

It's kind of fascinating the way it

31:25

happens because if you think about it,

31:27

if you zoom out a little bit,

31:29

right? On the one hand, we know

31:31

that the Chinese government is trying to

31:33

reduce their reliance on US treasuries. So

31:36

the Chinese government was the largest seller

31:38

of treasuries last year. I think they

31:40

sold something on the order of like

31:42

40, 50 billion dollars of treasuries. At

31:44

the same time, Tether was the seventh

31:47

largest buyer of treasuries. Roughly 50 billion.

31:49

And... If you think about it, like,

31:51

you know, if you imagine that a

31:53

lot of this demand is coming from

31:56

Chinese individuals, right? What's happening is that

31:58

Chinese government is dumping treasuries, Chinese indiv-

32:00

individuals are buying tether and when they buy

32:02

tether, tether goes out and buys a treasury

32:04

from the hand of the Chinese government. So

32:07

you're sort of having this rotation from

32:09

the central bank dumping treasuries to on

32:11

the balance sheet of Chinese citizens. And

32:13

so I think this is part of

32:15

the reason why increasingly the US is

32:17

realizing on the one hand, okay, stable coins

32:20

are kind of this like. difficult

32:22

to police, you know, it's kind of

32:24

outside the realm of traditional sanctions and,

32:26

you know, knowing exactly who controls what

32:29

and, you know, when you have a

32:31

account that holds stable coins, you don't

32:33

know who it is. It could be

32:36

a sanction entity, could be somebody in

32:38

Iran, could be somebody in North Korea,

32:40

you have no idea. And so the

32:43

natural response to that is, oh, this

32:45

is bad, we should stamp it out, this

32:47

is clearly subverting the thing which... issuers

32:49

will say is that we are fully

32:51

KYC, C, etc, etc. etc. We comply

32:53

with all anti-sanctions laws, but issuers who

32:55

are less buttoned up and here I

32:57

mean tether mean that with regards to

32:59

people we do business with directly and

33:01

allow to on-ramp and off-ramp dollars where

33:03

there are probably a few dozen of

33:06

these folks worldwide total and we've Ky

33:08

C the heck out of them we're

33:10

pretty sure they say that out of

33:12

them we're pretty sure that they are

33:14

who they say there and we're also

33:16

pretty sure that they are not directly

33:18

proxies for the bad guy list and

33:20

everybody else who holds each other in

33:22

the world. every stable coin works. That's

33:24

also true for USDC. It's true for

33:26

PayPal USD. It's true for every stable

33:28

coin has this model. And now this

33:30

model is fundamentally the model that was

33:32

impugned initially when stable coins were, you

33:35

know, circulating as a concept of, hey,

33:37

this new thing exists, should we stamp

33:39

it out? Naturally, any time something

33:41

new happens in DC, you know,

33:43

the national security apparatus just says

33:45

immediately like, oh, this is against

33:47

US national security interests, let's destroy

33:49

this thing. And that was the initial response that

33:51

you saw from Congress and on the Hill, is

33:54

that stable coins are obviously bad. They're obviously going

33:56

to be used for criminal activity and evading

33:58

sanctions, and therefore we should destroy them. And

34:00

what you've seen is that even before

34:02

Trump came into office, there was an

34:04

about face on this whole thing in

34:07

Congress. Now why did that happen? Did

34:09

Congress suddenly forget about their desire to

34:11

stop North Koreans from using dollars? The

34:13

answer is very simple, is that they've

34:15

realized that the demand for treasuries around

34:17

the world is decreasing. And the exorbitant

34:20

privilege the US has of being the

34:22

reserve currency of the world is predicated

34:24

on this demand for dollars around the

34:26

world continuing to exist. The reason why

34:28

these governments are pulling away from U.S.

34:30

dollars, they want to decouple from the

34:32

U.S. and maybe now we have a

34:35

better example of why they were so

34:37

worried about overreliance on the U.S. At

34:39

the same time, individuals don't, you know,

34:41

it's a collective action problem. Individuals are

34:43

just like, look, that might be great

34:45

for you as a country, but for

34:48

me personally in my bank count, I

34:50

would rather just have a stable currency

34:52

and U. and this fundamentally what it

34:54

represents, is a transfer of power from

34:56

governments and central banks to individuals. Now

34:58

technology sometimes does this kind of thing

35:01

where it ends up weakening the state.

35:03

This is one of the things that

35:05

you saw traditionally in the internet is

35:07

that the internet most classically before the

35:09

internet, you know, the newspapers and TV

35:11

stations were very tightly controlled by governments.

35:14

Even in the US, you know, you

35:16

had to get a license from the

35:18

FTC and like there are certain things

35:20

you can say at certain hours and

35:22

so on. Now it's just implausible that

35:24

anybody could possibly say, oh, you have

35:26

to get a license to get on

35:29

YouTube and start live streaming, right? It's

35:31

just... Obviously the dynamics of control about

35:33

information dissemination. There were many misinformation bureaucrats

35:35

who would have loved there to be

35:37

a license required to make that happen,

35:39

but to be that as a may.

35:42

Absolutely. And even though you see, okay,

35:44

well China seems to be pulling it

35:46

off, the answer of course, yes, but

35:48

not that well. The reality is that

35:50

the nature of the information landscape in

35:52

every country, no matter how authoritarian, has

35:55

changed irrevocably post-internet compared to pre-internet, right?

35:57

Like the fact that you can just

35:59

get on a VPN and message somebody.

36:01

and send them and just talk to

36:03

them directly to anybody in the world

36:05

just means that these memes are spreading

36:08

in a way that is no longer

36:10

centrally controlled. And that's a transfer of

36:12

power over information about media about all

36:14

these things that ultimately we've seen how

36:16

governments have been forced to adapt to

36:18

these changes. So I agree generally that

36:21

the pitches been made that stable coins

36:23

increase dollar supremacy that people and true

36:25

fact like the users of stable coins

36:27

vote for dollars versus other currencies that

36:29

they could hypothetically peg against by. like

36:31

greater than 100 to one margin. I

36:33

think it is over advanced that one

36:36

can necessarily cushion a decline in central

36:38

bank reserves of dollars by using stable

36:40

coin uptake because the bit of an

36:42

apples to orange comparison I think the

36:44

total number of treasuries in the millions

36:46

is many trillions most of them are

36:49

already owned by private individuals if you

36:51

compare the 250 million or as to

36:53

250 billion rather stable coins to the

36:55

total amount of wealth held by private

36:57

individuals or in treasuries that's actually not

36:59

that large. I'm not sure if we

37:02

got to all of your emerging use

37:04

cases yet. No, no, we didn't. So

37:06

that is the second. big use thing

37:08

is just basically people wanting to hold

37:10

dollars were not allowed to hold dollars,

37:12

right? The third use case is you

37:15

see this increasingly happening in just basically

37:17

really rough places that are facing extremely

37:19

high inflation is you see actual retail

37:21

payments adoption of stable coins. So this

37:23

is one of the stories that people

37:25

love to talk about in crypto. It's

37:28

in absolute terms very small just because

37:30

these are countries that don't have very

37:32

high GDP. They're already back. by the

37:34

fact that there's some kind of currency

37:36

crisis going on in these countries. So

37:38

you see this in Argentina, Venezuela, Turkey,

37:40

Iran. You know, a lot of you

37:43

even see this in some places like

37:45

Indonesia is that increasingly you get off

37:47

a plane and your taxi driver will

37:49

say, you know, please play me in

37:51

tether on Tron. Or you know, you

37:53

go into a corner store in Argentina

37:56

or in Venezuela and like they just

37:58

take tether, tether payments, it just says,

38:00

yeah, we take payments in tether. Now

38:02

this is also illegal. These are all

38:04

places where they're trying to hold on

38:06

to a collapsing currency. But of course

38:09

there's huge black markets in all of

38:11

these countries because that's what happens when

38:13

you have a currency crisis is there's

38:15

a black market for other currencies. The

38:17

advantage of using tether or using stable

38:19

coins in general is that it's actually

38:22

surprisingly hard to import green little pieces

38:24

of paper to facilitate your black market

38:26

demand for dollars. Dollarization is a common

38:28

thing that happened. Dollarization is when a

38:30

country basically... sometimes intentionally, but sometimes kind

38:32

of as a final concession to a

38:34

citizenry that is lost faith in the

38:37

currency, moves away from their own currency

38:39

and gets on the dollar. And this

38:41

is what happens when you have currency

38:43

crises or just failed states, is very

38:45

often, they just decide, okay, we're just

38:47

going to use someone else's currency and

38:50

we're no longer have sovereign monetary policy.

38:52

And what civil coins do is they

38:54

basically make much more efficient for users

38:56

or citizens of any country to just

38:58

opt into dollarization themselves. as opposed to

39:00

having to rely on this complex supply

39:03

chain, that very often results in like

39:05

US dollars being priced much higher than

39:07

they should be, because there's often currency

39:09

shortages, right? You just can't get enough

39:11

dollars to facilitate all the black market

39:13

demand in a place like Venezuela or,

39:16

you know, some of these countries that

39:18

are facing very, very high inflation. An

39:20

interesting fact about the world is that,

39:22

while you mentioned that the physical speechy

39:24

greenbacks are often used for these black

39:26

market currencies, other than intended for use

39:29

of United States-based financial institutions and similar,

39:31

is also used for the black market.

39:33

And so there's any number of people

39:35

in the world that end up having

39:37

a bank account and consult to each

39:39

other because they spend some time in

39:41

the US. We give up bank accounts

39:44

to pretty much anybody here. And then

39:46

banks are, I might say, not diligent

39:48

about closing them if you leave the

39:50

country, but that implies that you have

39:52

an affirmative duty as a bank to

39:54

close them if you leave the country,

39:57

but that implies that you have an

39:59

affirmative duty as a bank to close

40:01

them if you leave the country, and

40:03

that's just not true. Given that you

40:05

have a bank count. just don't have

40:07

a person at the bank whose job

40:10

it is to close down accounts for

40:12

that reason. The amount of Zell traffic

40:14

in non-United States countries, particularly ones that

40:16

have a liquid black or gray market

40:18

for US dollars is very substantial. Not

40:20

calling Zell out specifically there, they were

40:23

one that came to mind because they've

40:25

been publicly reported, but one would assume

40:27

that happens on almost all. A fun

40:29

little fact about the world. But yeah,

40:31

broadly, broadly agree with you. You mentioned

40:33

that this use case is small relative

40:36

to all payments, which matches my understanding

40:38

as well. Go figure like rich countries

40:40

do much more payments than countries that

40:42

are experiencing difficulties that are relatively less

40:44

developed. Would you have any, where would

40:46

the trustworthy metrics be? I'm like. how

40:48

much retail usage of stable coin for

40:51

payments. Candidly, I don't think anybody has

40:53

a good estimate of it, because these

40:55

are incredibly inscrutable systems. Like the best

40:57

way you can get a sense of

40:59

it. So probably the only person who

41:01

really knows is probably Binance. So Binance

41:04

pay is the predominant way in which

41:06

these payments are done around the world,

41:08

given Binance is massive global market share.

41:10

But Binance doesn't share any of these

41:12

numbers anybody. You can get a general

41:14

gestalt of what's going on by just...

41:17

going to some of these countries and

41:19

seeing how widespread this activity is, especially

41:21

in places that are suffering really meaningful

41:23

currency crises. But I don't think anybody

41:25

has a good estimate. All we know

41:27

is that it's not a big, it

41:30

doesn't explain very much of the variation

41:32

in total stable coin supply or total

41:34

stable coin flows. But from a humanitarian

41:36

perspective, it's very clearly the most significant

41:38

story for stable coins beyond just, okay,

41:40

it's increasing financial efficiency or allowing these

41:42

people to do this thing they wouldn't

41:45

otherwise be able to do. This is

41:47

one of these things that it's like,

41:49

hey, you go see some of these

41:51

people who are seeing their wealth being

41:53

inflated, you know, like 10% a month.

41:55

And for them, it's like, okay, yeah,

41:58

this is awesome. Like, this is clearly

42:00

way, way better than what we had

42:02

before, or just even the fact that

42:04

we're paying enormous slippage to try to

42:06

get, you know, physical species on the

42:08

black market. And this is one of

42:11

these places where I will also come

42:13

out and defend. black markets and gray

42:15

markets, especially in these kinds of circumstances,

42:17

where I think there are cases when

42:19

the state is just, this is one

42:21

of the things I think if you

42:24

spend all your time in America or

42:26

in places with very well-functioning institutions, you

42:28

come away with this expectation, they're like,

42:30

well, people should usually follow the law,

42:32

and but your bias should be that

42:34

the state is probably doing the right

42:37

thing. And I think in many, maybe

42:39

even the majority of countries by number

42:41

around the world. That is not a

42:43

good assumption. That should not be your

42:45

baseline. Your baseline should be that like

42:47

people for the most part want to

42:49

do the right thing and just want

42:52

to live their lives and countries that

42:54

are controlled and captured by an oligarchy

42:56

or small group of people who are

42:58

trying to enrich themselves at the expense

43:00

of the citizens is the norm. And

43:02

as a result, there's a reason why

43:05

there are so many failed currencies if

43:07

you go look at the history of

43:09

currencies, is because yeah, I think it

43:11

is probably correct that there should be

43:13

way fewer currencies currencies in the currencies

43:15

in the world. I think like the

43:18

fact that there are so many currencies

43:20

in the world is really a function

43:22

of the fact that most states have

43:24

way too much power over their citizens.

43:26

And really, you know, for states that

43:28

have such low state capacity and such

43:31

low fiscal and monetary responsibility, they're kind

43:33

of just pillaging their populations. And if

43:35

they could just say, fuck you, like

43:37

you're responsible for defense and tax collection

43:39

and like that's basically it, and leave

43:41

us to the rest of it to

43:44

just like... try to be productive citizens

43:46

and fend for our families, a lot

43:48

of people around the world will be

43:50

much better off. And you see, you

43:52

know, in Latin America, and especially in

43:54

many African countries, you see this, just

43:56

the degree to which governments have stultified

43:59

their own populations and... gotten in the

44:01

way of, you know, people otherwise trying

44:03

to engage in making themselves better off.

44:05

This occasionally comes up in non-stable coin

44:07

context as well. Theoretically speaking, if there's

44:09

an exam, and while there isn't a

44:12

formal exam, there really is an exam,

44:14

for, you know, working in the regulated

44:16

financial industry, should you facilitate anyone's evasion

44:18

of a law in their country of

44:20

residence? Like, there is a right answer

44:22

to that question. It is no. a

44:25

lot of the facilitation of evasion of

44:27

laws is like the thing that is

44:29

illegal is capitalism. Most bankers and other

44:31

people in the grown-up financial industry don't

44:33

have the level of aesthetic distaste for

44:35

capitalism that say the Chinese government did

44:38

for many decades. And the Chinese government

44:40

will still say something that rounds to

44:42

like, oh no, you know, capitalism without

44:44

Chinese characteristics is definitely illegal here. And

44:46

we also claim dominion over the lives

44:48

of Chinese people wherever they are in

44:51

the world. That's just a claim that

44:53

China makes pretty openly. And then the

44:55

rest of the world sort of gets

44:57

a choice with regards to, well, you

44:59

know, on the one hand, can't openly

45:01

say it because there is a test

45:03

that will be held later and there's

45:06

a right answer on the test. On

45:08

the other hand, we don't agree with

45:10

that moral claim of the Chinese government

45:12

to regulate people throughout the entire world,

45:14

etc. And so acknowledging some tensions here.

45:16

Stable coins are stock and flows business.

45:19

Stock meaning if you think that someone

45:21

is primarily using it for savings, then

45:23

they will tend to have more stable

45:25

coins and then the stable coin economy

45:27

would have an awful lot of assets

45:29

over time. If you think it's primarily

45:32

used for payments, then the actual circulating

45:34

supply needed to support a certain payments

45:36

volume is much smaller than that payments

45:38

volume is in a world where it

45:40

was primarily used for the use case

45:42

of. paying for a coffee in Istanbul,

45:45

then you would expect there to not

45:47

be trillions of dollars of stable coins

45:49

floating around in the future. And the

45:51

same way there aren't trillions of dollars

45:53

of money at the large payments companies

45:55

that are backing all the payments back

45:57

and forth. agree with you, you know,

46:00

attempted to look at it a few

46:02

times over the years and haven't seen

46:04

great numbers with regards to the payments

46:06

adoption, which... Well, so the last piece

46:08

on the payment side, so there's like

46:10

retail payments mostly in these countries that

46:13

are facing currency crises, the last piece

46:15

is international payments, and this is more

46:17

on the B2B side. And this is

46:19

actually the part that is

46:21

easiest to understand and get

46:23

a real sense of, okay,

46:25

what kind of flows are

46:27

going through here. And this

46:29

is also what galvanized the

46:31

recent string of M&A. So,

46:33

you know, most famously, obviously,

46:35

Stripe, which I understand, you

46:37

work with, acquired Bridge for

46:39

1.1 billion, was the headline

46:41

figure last year, there's a

46:44

lot more companies that are,

46:46

you know, acquiring stable coin

46:48

payments, Initially, if you again, rewind

46:50

the clock back to like 2019-2020, where

46:52

were stable coins being used first in

46:54

these kind of international B to

46:56

B payments? The first place was

46:58

actually in the Russia-China corridor. And this

47:00

was because Russia got hit with

47:02

sanctions after the invasion of Ukraine

47:05

and Russia was no longer, you

47:07

know, anybody in Russia was no

47:09

longer able to get US dollar

47:11

banking. And if you're Chinese, you

47:13

don't want to bank in rubles,

47:15

you don't want to get a

47:17

bunch of rubles, like what am

47:19

I going to do with this? And

47:21

if you're Russian, you're like, well, I

47:24

don't want to do this. And

47:26

if you're Russian, you're like, well, I

47:28

don't really want to. Real Place, we start

47:30

to see meaningful financial flows. This was something

47:32

that, you know, no FinTech was servicing this,

47:34

right? This was kind of like, if you

47:37

go talk to the PC desk, they'd say,

47:39

oh yeah, we're seeing some of these commodities

47:41

companies suddenly starting to use tether, that's really

47:43

weird. Can I jump in here and a

47:45

stork analog for this? So many people say

47:47

that stable coins are sort of the internet

47:49

native euro dollar system, where the euro dollar

47:52

system and crypto folks have published a number

47:54

of interesting pieces that are interesting pieces. I

47:56

am non-scriptive folks as well. It's been

47:58

known to be a... thing in

48:00

finance for a while. The basic version

48:02

is when you have a dollar, usually

48:05

isn't fiscal specie, it's a liability of

48:07

someone in the world, most typically in

48:09

the United States, a bank, which is

48:11

regulated by the U.S. government, etc., etc.

48:13

A euro dollar is simply a dollar,

48:16

which is a liability of a bank

48:18

that isn't a U.S. bank. A large

48:20

amount of trade in the world happens,

48:22

and when it's happening between two countries,

48:24

neither of which is the United States,

48:27

it gets settled in dollars. and most

48:29

of the time that is settled offshore

48:31

from the United States in the euro

48:33

dollar system, which ultimately has recourse to

48:35

the onshore US dollar via complicated mechanisms

48:38

that we don't quite have time enough

48:40

to go in here. And so when

48:42

Russia got hit with sanctions in the

48:44

wake of the invasion of Ukraine, what

48:46

that cut them off from was not

48:49

just the onshore settlement of US dollars

48:51

that was cutting them off from a

48:53

lot of the euro dollar centers, such

48:55

as London, etc, etc, etc, etc. So

48:57

that made it difficult for Russian companies

49:00

to buy from the Chinese counter-parties using

49:02

their banks in Western Europe, better regularity

49:04

parts of Western Europe. And so you

49:06

describe this as fleeing from that euro

49:09

dollar system to tell their functioning as

49:11

sort of functioning as sort of a

49:13

synthetic internet kind of euro dollar. That's

49:15

right. For a lot of these import

49:17

export businesses or commodities businesses, a lot

49:20

of the advantages of stable coins are

49:22

beyond just, okay, well I can't get

49:24

dollar banking. So that was the initial

49:26

use case was this Russia China corridor.

49:28

all sorts of businesses around the world

49:31

that actually can get your dollar banking,

49:33

or even US dollar banking, start to

49:35

be using stable coins for payments and

49:37

settlements. And this is a large part

49:39

of what drove Bridge in their whole

49:42

business model, is that increasingly for these

49:44

commodities businesses, like they really care about

49:46

fast settlement, they really care about like

49:48

increasing the utilization of their assets, and

49:50

you know, just waiting an extra three,

49:53

four, five days to settle a transaction.

49:55

just actually meaningful, because these are very

49:57

very low margin businesses. So it actually

49:59

really meaningfully hits into their bottom lines

50:01

to not. have to use some complicated

50:04

path to settlement or doing all the

50:06

stuff that happens in trade finance, you

50:08

can circumvent a lot of it just

50:10

by the fact that stable coins are

50:12

instantaneous, very low fees. There's basically a

50:15

rounding error of middlemen and delays compared

50:17

to what you get with traditional forms

50:19

of. international settlements. They're also much more

50:21

aspirationally fingers to the wind. Even a

50:24

few of correspondent banking relationships and a

50:26

relatively well locked down internal treasury department

50:28

that does good work every Monday, Tuesday,

50:30

Wednesday, etc. etc. etc. You know, your

50:32

your P50 time. So getting technical for

50:35

a moment here, I apologize in advance.

50:37

So if you Graph the time it

50:39

takes for your payments to go from

50:41

A to B over the year. Your

50:43

50th percentile time, P50, might be something

50:46

acceptable. Like maybe it's the next business

50:48

day or two business days later. Those

50:50

are real hypothetical numbers. But your P95

50:52

and P99 times, the worst affected 5%

50:54

and 1% payments, that goes crazy. Like

50:57

weeks, potentially months in the case of

50:59

you drew the short straw with the

51:01

compliance department or you were, you know.

51:03

like sometimes maybe your wire was in

51:05

the middle of a shooting war that

51:08

day because like there like money is

51:10

moving around Europe and suddenly you know

51:12

shooting war in Europe like stuff got

51:14

to disrupted for a while and you

51:16

know very bad news for the people

51:19

who are on the ground also bad

51:21

news for you and you didn't necessarily

51:23

know you had any exposure there until

51:25

your money gets tied up for six

51:27

plus weeks which again low margin business

51:30

is a problematic thing and you know

51:32

say what you will about tether and

51:34

I've said many things about tether over

51:36

the years like the p99 time for

51:38

settlement on tether is not grossly different

51:41

than the p50 settlement time they're both

51:43

like indistinguishable from instantaneous by the standards

51:45

of these parts. So I think this

51:47

you know for many of these businesses

51:50

a big part of the reason why

51:52

you know like as a you know

51:54

crypto VC obviously have a little bit

51:56

of a booster. It's my job to

51:58

kind of proselytize some of these ideas.

52:01

And I've been telling the story that

52:03

like, yeah, I think crypto is great

52:05

for micropayments and macro payments. And these

52:07

macro payments, which is very largely these

52:09

kind of international trade type situations, it

52:12

always made sense, but it really wasn't

52:14

happening basically at all outside of this

52:16

Russia-China thing until about mid-2023. Mid-23 is

52:18

when we started seeing. a really rapid

52:20

growth rate in the amount of B2B

52:23

international payments that started to happen in

52:25

Singapore. I don't have a complete picture

52:27

of why it started to pick up,

52:29

but you basically can see 20, 30

52:31

percent month-over-month growth for almost all the

52:34

businesses that were servicing this sector, start

52:36

around then, and it's basically still continuing.

52:38

And my guess is that it's a

52:40

little bit of an O-ring model type

52:42

situation where it's kind of like, okay,

52:45

well, in principle you could do this.

52:47

But if you're some old school commodities

52:49

business and you're like, you know, trading

52:51

Cobalt, it's like, okay, well, I'm not

52:53

going to open a metamask wallet, like

52:56

I'm not going to buy, like I

52:58

have to buy gas, like how am

53:00

I going to fit this into my

53:02

accounting system? How do I pay taxes

53:05

on this? Like what am I, like

53:07

no, I'm not gonna, maybe in principle

53:09

I could, but you have not sufficiently

53:11

explained to me how to do this.

53:13

So yeah, I'm not gonna do it

53:16

and my son doesn't know how to

53:18

do it. So no. There's also shelling

53:20

points in every industry and market and

53:22

etc. where if you're asking for a

53:24

method that is not like the usual,

53:27

one of three things that we do.

53:29

And so. in a world where hypothetically

53:31

there were huge amounts of adoption, I

53:33

think a narrative for that adoption might

53:35

be certain places, adopt a shelling point

53:38

and then suddenly there is a pool

53:40

in adjacencies there. Most of these startups,

53:42

what they do is, they also make

53:44

it, the counterparty doesn't actually have to

53:46

take stable coins. So they handle the

53:49

FX on the other side, so like,

53:51

okay, you're sending stable coins, but that

53:53

person gets, you know, Turkish Lira. all

53:55

of that for you, so we're abstracting

53:57

that complexity from you. Now these vendors,

54:00

or these on-ramps and off-ramps, existed in

54:02

all these countries, but it was kind

54:04

of on you, if you were trying

54:06

to do this in 2022, to figure

54:08

out who are these off-ramps, how do

54:11

I get competitive pricing, you know, how

54:13

do I onboard onto like all these

54:15

parties for all my counterparties and all

54:17

these different countries, just took time. for

54:20

a product that good to actually be

54:22

able to be built. And now we're

54:24

at the point where those kind of

54:26

products can be built. There's bridge, which

54:28

of course is acquired by Stripe, there's

54:31

now conduit, there's new start, like we

54:33

invested recently in one called Codex, which

54:35

is doing something very similar, but focused

54:37

largely on initially Southeast Asia. So you

54:39

see increasingly many of these geographies, this

54:42

coordination problem, if everybody's on the same

54:44

network, then actually would have been easier

54:46

for stable coins to get up and

54:48

running, but it. systems that basically say,

54:50

look, your counterparty doesn't need to know

54:53

anything about stable coins. You counterparty doesn't

54:55

need to take the stable coins at

54:57

all. Actually, we'll give your counterparty whatever

54:59

currency they want as long as it's

55:01

within our currency network. So, um, you

55:04

mentioned bridge a couple of times. I

55:06

have to make the arbitrary disclaimer. I

55:08

used to work for Stripe. I used

55:10

to work for Stripes. I used to

55:12

work for Stripes. I used to work

55:15

for Stripes. I used to take the

55:17

Eloecs. I'm. caused maybe less by government

55:19

action as was the historical case for

55:21

economic blocks and more by just organic

55:23

behavior of people transacting across borders thanks

55:26

to the internet. And in places like

55:28

Southeast Asia, you might do a substantial

55:30

amount of your online shopping from businesses

55:32

that ship into the place that you

55:34

live, but don't necessarily, they're not necessarily

55:37

based in the place that you live.

55:39

They might have material operations there, etc,

55:41

etc, etc. etc. But payments might be

55:43

at the mother ship and as you've

55:46

probably seen from living in Singapore part-time,

55:48

getting money from Singapore to the Philippines

55:50

is fairly complicated. despite there being a

55:52

large amount of commerce that happens along

55:54

that corridor. This is one place where

55:57

I think the crypto industry's argument that

55:59

Americans don't understand how privileged they are

56:01

living in a world where Indiana and

56:03

Florida use the same currency and seamlessly

56:05

move between Indian dollars and Florida dollars.

56:08

It's a wonderful thing. Like true statement,

56:10

Americans don't understand how important the fact

56:12

of the world that is. The even

56:14

prior to stable coins, the crab, for

56:16

example, one of the taxi services that

56:19

is... basically pan Southeast Asia at this

56:21

point, had to do an incredible amount

56:23

of work to make that work and

56:25

eventually ended up expanding and to grab

56:27

a bootstrapped their own payments network simply

56:30

because like one there was a market

56:32

need for payments network and two they

56:34

had an internal operational need for doing

56:36

that to run essentially a taxi ride

56:38

sharing business. So to the extent that

56:41

I'm often skeptical about this stuff but

56:43

like watchful waiting eye on things I

56:45

you kind of classically in the tech

56:47

industry expect disruption to happen in the

56:49

places that are least well served in

56:52

the status quo and in developing nations

56:54

that are in you know increasingly tight

56:56

internet-based economic blocks with each other in

56:58

places like Southeast Asia and similar which

57:01

might not have great domestic payment rails

57:03

that are already heavily interconnected by global

57:05

mega corpse that is the place where

57:07

you know you would expect to see

57:09

I don't want to say patient zero,

57:12

that sounds bad. That's where you like

57:14

expect to see the early boost of

57:16

adoption. Indeed, some of that has been

57:18

seen. This is one of the things

57:20

I've noticed from many Americans will tell

57:23

me like, well, you know, I don't

57:25

know anyone who uses stable coins, like

57:27

it must be just, you know, criminal

57:29

activity or where, you know, what, what

57:31

is this for? I would surmise that

57:34

probably the US will never be a

57:36

meaningful adopter of stable coins because we

57:38

already have great, like you mentioned, you

57:40

know, using Zell or, you know, PayPal

57:42

or whatever, you know, Venmo. These are

57:45

all fantastic services. There's a lot that's

57:47

done to paper over the complexity of

57:49

moving money around within the US. And

57:51

it works fairly well. It's not perfect.

57:53

Wire transfer stuck. ACH is kind of

57:56

embarrassing. But overall, it's good enough. And

57:58

like that's one of the rules of

58:00

technology disruption is that good enough is

58:02

very hard to displace. So that is

58:04

not true in other parts of the

58:07

world. And overwhelmingly, the story of stable

58:09

coin adoption is not in America. The

58:11

only path that I could honestly see

58:13

for stable coins being meaningfully adopted in

58:16

America is as an assault driven by

58:18

the big tech companies against Visa and

58:20

MasterCard. If basically at some point Apple

58:22

and Google decide, you know what? Now

58:24

their crypto is totally kosher and we

58:27

can do whatever we want apparently under

58:29

this administration. We're just going to completely

58:31

route around. You know, when you do

58:33

tap to pay, we're going to give

58:35

you back 30 bips on every transaction

58:38

if you use... stable coins instead of

58:40

using, you know, Visa or MasterCard. And

58:42

then we'll just take some other side

58:44

from the merchant and now the merchant

58:46

will be better off. I could see

58:49

something like that happening if the... sort

58:51

of duopoly is weakened enough by this

58:53

DOJ antitrust thing that's going on right

58:55

now. But beyond that, I think it's

58:57

pretty unlikely that in the U.S. we

59:00

would end up having stable coin adoption

59:02

meaningfully. I largely think you're right with

59:04

their prognostication and being bearish on U.S.

59:06

adoption, acknowledging that U.S.-based payments rails have

59:08

any number of felicity to them, spent

59:11

a couple of years in my career,

59:13

being even ahead against those. They are

59:15

a moving target and getting better over

59:17

a year. Fed now has been fed

59:19

later for a while, but it will

59:22

eventually land someday. When you compare that

59:24

against other places that are seeing, I

59:26

know the Japanese word for it, bubbly,

59:28

no, that's not the right word. This

59:31

sort of rapid growth of stable coin

59:33

adoption, there is no incumbent in the

59:35

market that is rapidly innovating on those

59:37

use cases specifically, and but in the

59:39

US, incumbents are innovating. I would take

59:42

the other side of tech companies attempting

59:44

to get into a fight with large

59:46

financial companies due to a combination of.

59:48

huge amounts of internal reticence and lacking

59:50

will to do big splashy things also

59:53

in tight solution with their general reticence

59:55

to two things that will cause the

59:57

bullside to be painted on them in

59:59

Washington DC and I finger to the

1:00:01

wind, not using any non-public information, I

1:00:04

think that to various large tech firms

1:00:06

would see that as a paintable Zionos

1:00:08

in Washington DC sort of thing. That's

1:00:10

very plausible and I think after the

1:00:12

Libra hearings in 2019 when Facebook famously

1:00:15

tried to launch their own digital currency,

1:00:17

I think that was the takeaway for

1:00:19

many big tech companies, which is never

1:00:21

touch the stuff like don't even whisper

1:00:23

the word crypto or like you will

1:00:26

be just headshot in front of Congress.

1:00:28

I think it's very clear that there's

1:00:30

been a vibe shift in DC about

1:00:32

the attitude towards crypto and this administration

1:00:34

in particular is kind of mercurial and

1:00:37

you know it's a little bit unpredictable

1:00:39

with respect to what they like and

1:00:41

what they don't like but I would

1:00:43

be surprised so I agree with you

1:00:45

when you talk to the people involved

1:00:48

it's like they certainly seem very protective

1:00:50

of their current position in the market,

1:00:52

and they've learned these lessons over time

1:00:54

of, you know, don't anger the powers

1:00:57

that be otherwise, you know, bad things

1:00:59

can happen to your core business. At

1:01:01

the same time, it would be surprising

1:01:03

if these gigantic monopolies that basically control

1:01:05

every element of your digital life did

1:01:08

not also find some way into your

1:01:10

wallet, where today, you know, I mean,

1:01:12

for Apple pay, my understanding is that

1:01:14

Apple makes pretty good money from the

1:01:16

up. Is it my understanding? I think

1:01:19

it's been publicly reported that Apple Pay

1:01:21

gets 15 basis points on transactions. They

1:01:23

facilitate, which is a good business to

1:01:25

be in. Amazing business to be in,

1:01:27

especially as more and more payments are

1:01:30

moving in that direction. And if you

1:01:32

just think about what it's going to

1:01:34

look like in 10, 15 years, it

1:01:36

would be surprising if the person who

1:01:38

owns the customer and has the entire

1:01:41

technology network doesn't end up subsuming more

1:01:43

and more of that margin over time.

1:01:45

There's been a Cambrian explosion explosion of

1:01:47

payment of payment methods even X-scripto-scripto. primarily

1:01:49

exscripto over the last couple of years.

1:01:52

The insight is primarily driving the explosion

1:01:54

of payment methods. If you own the

1:01:56

relationship with customer payment. method is a

1:01:58

natural adjacency to it deepens your relationship

1:02:00

with the customer allows you to earn

1:02:03

margin with people who are on the

1:02:05

outer edges or ecosystem and functions as

1:02:07

a way to bring those people who

1:02:09

are on the outer edges the ecosystem

1:02:12

closer and closer to the core ecosystem

1:02:14

where you sell them things that make

1:02:16

quote unquote the real money would agree

1:02:18

with you that it would be a

1:02:20

shocking world where the number of payment

1:02:23

methods in 2050 were approximately similar to

1:02:25

the number of payment methods that there

1:02:27

were in 2005 or 2025 for that

1:02:29

matter. something really

1:02:31

weird would have to happen in the

1:02:33

next 25 years. But there are a

1:02:36

variety of ways that, say, large tech

1:02:38

companies or other people with large passionate

1:02:40

user bases could go about doing things,

1:02:42

which accomplished the strategic goal of getting

1:02:44

them more plugged into the lives of

1:02:46

the customers without necessarily upsetting the apple

1:02:48

cart too much with regards to the

1:02:50

maximally regulated parts of the financial industry.

1:02:52

In the virtue of stable coins, just

1:02:54

to put a different frame at which

1:02:56

to think about stable coins, A lot

1:02:58

of the incentive behind building stable coins

1:03:00

is very similar to the incentive behind

1:03:02

crypto generally, which is that we hate

1:03:04

the traditional financial system, we hate the

1:03:06

way you guys have built all the

1:03:08

stuff, but we obviously don't have the

1:03:10

agency to be able to change it

1:03:12

directly. So we're just going to be

1:03:14

able to change it directly. So we're

1:03:16

just going to leave that alone, you

1:03:19

guys have built all the stuff, but

1:03:21

we obviously don't have the agency to

1:03:23

be able to be able to change

1:03:25

it directly. So we're just going to

1:03:27

the more. possible you think it is.

1:03:29

And so almost always the answer is

1:03:31

you do a V2 and you slowly

1:03:33

start shifting over traffic to the V2.

1:03:35

And that may be the ultimate answer

1:03:37

to how to understand what stable coins

1:03:39

even are. Is that I don't think

1:03:41

it's that implausible that over time what

1:03:43

you see in stable coins in like

1:03:45

10, 15, 20 years is you start

1:03:47

to see reserve ratios on stable coins.

1:03:49

And all of a sudden you start

1:03:51

to see more and more things that

1:03:54

start to look. like the exact same

1:03:56

stuff that we had with banking regulation

1:03:58

is that they're also making you know

1:04:00

loans to businesses. and they're also doing

1:04:02

consumer loans, and they're also doing all

1:04:04

sorts of other things. And it really

1:04:07

increasingly looks less like, oh, it's a

1:04:09

banking hack, and it's like this weird

1:04:11

thing to facilitate, you know, crypto-brows paying

1:04:13

each other, and it just becomes the

1:04:15

V2, that let's pretend that 2008 never

1:04:18

happened, and we can start over and

1:04:20

thinking about how to do banking regulation,

1:04:22

knowing how the internet turned out. And

1:04:24

that that that may be, I'm... Agnostic,

1:04:26

you know, relatively low confidence that that

1:04:28

will happen, but I think that's another

1:04:31

way to think about what stable coins

1:04:33

kind of are. What if we just

1:04:35

ran it back and we didn't have

1:04:37

to actually repeal any of the oil

1:04:39

regulations, but we just created a second

1:04:41

system that didn't have any of them.

1:04:44

And it turns out, like, it's almost

1:04:46

impossible to get regulations to repeal. It

1:04:48

just doesn't happen. It's a kind of

1:04:50

technical debt that politically you just cannot

1:04:52

get rid of old. So it's like,

1:04:54

oh, you like, you like terrorist financing,

1:04:57

you like terrorist financing? Oh, you like

1:04:59

criminals and bad people being able to

1:05:01

use dollars? As I've observed in other

1:05:03

contexts, it's very difficult to get people

1:05:05

to acknowledge that the optimal amount of

1:05:07

fraud is greater than zero, despite that

1:05:10

being a fairly core element of the

1:05:12

financial industry. And so, a tough public

1:05:14

choice problem, but I'm sorry. No, I

1:05:16

mean, that was the core of my

1:05:18

point. Well, Steve, thank you very much

1:05:20

for your time today. Where can people

1:05:23

find you on the internet? Just Google

1:05:25

my name, H-A-S-E-B, and you can find

1:05:27

my Twitter as well as a bunch

1:05:29

of my writing. And you're also a

1:05:31

recurring guest on the podcast Chopping Block,

1:05:34

which I think is under Unchained. There

1:05:36

are two podcasts I listen to in

1:05:38

crypto all the time. Again, I'm a

1:05:40

bit skeptical, but frequently hear things then

1:05:42

that are worth my time. And so

1:05:44

if they're listeners who are wondering where

1:05:47

to start there, chopping Black is one

1:05:49

of the options. so many times fucked

1:05:51

up really dramatically. And there's a lot

1:05:53

that the crypto industry has done to

1:05:55

appropriately deserve the skepticism of people in

1:05:57

the wider world. I think that's going

1:06:00

to continue. There's no way that we're

1:06:02

done making gigantic snafoos and face planting.

1:06:04

But I do think what's happening here,

1:06:06

and you notice it with every cycle

1:06:08

of crypto, despite the fact that it

1:06:10

keeps face planting, it also always gets

1:06:13

back up and it doesn't disappear, doesn't

1:06:15

go away. Which is a sign that

1:06:17

what's happening in the space. is really

1:06:19

important. Something really important in the world

1:06:21

is being served by this crypto-shaped thing

1:06:23

that we've created. I think getting a

1:06:26

really deep understanding of what that is,

1:06:28

behooves anybody who cares how the 21st

1:06:30

century is going to end up playing

1:06:32

out. Well, I continue keeping watch rely on

1:06:34

things, although we'll say, you know, not casting

1:06:36

aspersions on yourself, but you are certainly

1:06:38

not the first person, and 20 and

1:06:40

25 is not the first time that

1:06:43

argument has been made. And previous things

1:06:45

that were... definitely going to be the

1:06:47

use case, did not turn out to be

1:06:49

the use case, but I will say as

1:06:51

a skeptical onlooker myself, stable coins are certainly

1:06:53

the thing that seems to have the most

1:06:55

actual adoption by real people and

1:06:58

they do seem to be increasingly

1:07:00

used for corp to corp business

1:07:02

to business that, international payments, international

1:07:04

treasury movements, etc. And so there

1:07:06

is a plausible world in which

1:07:08

that ends up being a you know, fairly

1:07:10

material part of the international payments mix

1:07:12

going forward. I think it's also plausible

1:07:15

that they might kind of recede into

1:07:17

the background in sort of a way

1:07:19

that no one really thinks about correspondent

1:07:22

banking on their average Tuesday, unless they're

1:07:24

directly involved in it. And plausibly, like

1:07:26

no one will remember, using correspondent banking

1:07:29

on their average Tuesday, unless they're directly

1:07:31

involved in it. Plausibly, like no one will

1:07:33

remember that they're actually using stable

1:07:35

coin rails, so see you next week

1:07:37

on complex systems. Thanks for tuning in

1:07:40

to this week's episode of Complex Systems. If

1:07:42

you have comments, drop me an email or

1:07:44

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1:07:46

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