How Crypto Neobanks Work: Frax, Cards, and Visa’s Role | Sam Kazemian

Summary

Podcast Summary: Bankless

Episode: How Crypto Neobanks Work: Frax, Cards, and Visa’s Role

Guest: Sam Kazemian (Founder, Frax)
Host: David Hoffman
Date: October 28, 2025

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Overview

This episode dives deep into the evolving concept of crypto neobanks, their role in bridging traditional finance and DeFi, and the future of payments in a world of stablecoins. Sam Kazemian, founder of Frax, joins Bankless to discuss how stablecoins, crypto-native banking platforms, and even Visa’s current role all interact—and ultimately how neobanking and stablecoin adoption could phase out legacy payment rails entirely. Listeners gain an insider’s view of where the biggest battles in crypto-finance are now taking place and what to expect in the near future.

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Key Discussion Points

1. What is a (Crypto) Neobank?

[01:16]

• Traditional Neobank: Fintech companies (like Mercury, Revolut) that offer a superior user experience by acting as a ‘wrapper’ over licensed banks; better than banks’ clunky apps and interfaces.
  • “Neobanks are like this wrapper. They have better fintech applications, easier stuff...” — Sam Kazemian [01:23]
• Crypto Neobank: Extends the neobank concept to crypto and stablecoins. These platforms act as the bridge between on-chain assets and real-world spending, making it seamless to move value between traditional and crypto finance.
  • “The essential thing to think about is basically how can these stablecoins get off chain and interact with the classical financial system and actually make it so that they're essentially one to one with digital cash.” — Sam Kazemian [03:55]

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2. The Shift in Net Worth Location and User Needs

[00:00], [40:21]

• A generational and demographic shift: Increasing numbers of people (especially younger and crypto-native) have most of their net worth on-chain, not in banks.
• The challenge: Previously, people asked “Why would I bring my cash into stablecoins?” Now, the question is shifting to “Why would I bring my cash back to a bank?”
  • “A lot of people now, especially younger people and crypto native people, most of their net worth is on chain… It’s a hassle to move it over to banks.” — Sam Kazemian [00:00]
  • “As more and more people's net worth come on chain, the situation will reverse.” — Sam Kazemian [40:21]

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3. Frax’s Approach: Pipes, Not Platform

[08:34], [09:10]

• Frax aims to be the backend “infrastructure pipes" for neobanks and card platforms, not the consumer-facing bank itself.
• They support others, like EtherFi or Pay, enabling their stablecoin (Frax USD) to power cards, bank integrations, and off/on ramps—without exclusivity or issuing their own cards.
  • “We don't want to actually issue our own card or have a specific bank exclusivity or anything like that.” — Sam Kazemian [09:10]

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4. Branded Stablecoins: Real Money or Gift Cards?

[05:49], [06:42]

• There’s a spectrum from “branded stablecoins” (Starbucks USD, considered programmable gift cards) to “real digital dollars” (USDC, USDT, Frax USD).
• The main competition is about winning payments and savings market share for “real money” stablecoins.
  • “There’s going to be tons of stablecoins...the way that I like to think about it is that there’s essentially a long tail branded stablecoins closer to...gift cards...but the short tail...are playing for the money TAM, which is multi-trillion over the next five years.” — Sam Kazemian [06:42]

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5. The “Genius” (US Regulatory) Standard & Interoperability

[02:39], [14:14]

• “Genius compatibility” refers to complying with new US legislation, creating standards for stablecoin backing and issuance.
• Frax USD: Backed by money market funds and RWAs (real-world assets) with qualified custodians (e.g., BlackRock, Fidelity), making it attractive to large institutions and future-proof for US regulation.
• Key innovation is interoperability: Frax wants to make it easy for any new branded stablecoin to use their infrastructure, creating one-to-one minting/redemption across multiple chains and banks.
  • “If you can be interoperable with as many of these pipes as possible, that’s the real value for a new stablecoin coming into the industry.” — Sam Kazemian [10:33]

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6. Cards as Coordination Layer: The Path to Merchant Acceptance

[22:37], [25:25]

• Most crypto cards today settle via existing rails (e.g., VisaNet), converting stablecoins for merchants who only want bank deposits.
• Short-term: Cards act as coordination tools—users and merchants interact with stablecoins invisibly.
• Long-term: As critical mass increases, merchants will start accepting stablecoins directly, enabling the network to “rip out” Visa (and legacy rails), keeping economic activity fully on-chain.
  • “These cards essentially solve the coordination problem for eventually allowing people to do just peer to peer direct to merchant stablecoin payments.” — Sam Kazemian [22:37]
  • “Once we have a critical mass of people paying with stablecoins we don’t need Visa anymore.” — David Hoffman [26:30]
  • “That is exactly what I’m saying...[it] would be nearly impossible to do that before.” — Sam Kazemian [27:08]

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7. The Proliferation and Competition of Stablecoin Chains

[28:28], [30:06]

• Multiple “stablecoin chains” are vying to become the payment standard (e.g., Plasma, Stable, Tempo, Fractal, Codex).
• Coordination challenge: Which one will dominate for payments (flows) vs. savings/issuance (stock)?
• Eth is ‘king’ for stock/savings, but alternative chains might win for low-latency, high-volume payments (flows).
  • “I think chains like Ethereum will always, always win in terms of the stock or the TVL and the issuance...the flows are the volume of payments between everyone and so those kind of require different specialization…” — Sam Kazemian [30:37], [31:04]

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8. Real-World Institutional Interest and Resilience

[33:17], [34:32]

• Institutional due diligence: Big US investment banks already exploring Frax USD for transactions and investments.
• Main concern: Security and uptime—Ethereum’s reliability is a key selling point.
  • “It’s just much easier to be like, it’s on Ethereum the same way like Bitcoin and Ethereum just don’t have this problem.” — Sam Kazemian [33:17]

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9. “Stock vs. Flow”: Payments Chains vs. Savings Chains

[32:23], [33:17]

• Stock (where funds are held) vs. Flow (where funds move). Ethereum dominates the former; payments chains may compete and gradually gain share over time.

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10. Key Metrics: Money vs. Gift Cards

[43:35], [45:35]

• Winning metrics: Which stablecoins can be spent on cards AND deposited into banks as “real money” rather than just digital gift cards.
• Importance of velocity and utility: “Stablecoins move, not held”—payment coins have high velocity, savings coins (yield-bearing) are held.
  • “Seeing which ones break through that barrier is...the winners in two to three years time.” — Sam Kazemian [42:39]
  • “If you’re moving your stablecoin, they’re probably paying for stuff or they’re loading it in different places. Whereas if you’re holding a stablecoin usually it’s because it’s either yield bearing...or just used in DeFi…” — Sam Kazemian [45:24]

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Memorable Quotes & Moments

• On the inevitable stablecoin takeover:
  “As more and more people's net worth come on chain, the situation will reverse. People will be like, why would I bring my cash back to a bank?” — Sam Kazemian [40:21]

• On Visa being a ‘middleman on borrowed time’:
  “Once we have a critical mass...we can just start swapping the stablecoins directly rather than talking to Visa at all.” — David Hoffman [26:30]

• On stablecoins as programmable gift cards vs. real dollars:
  “The main thing is: is it a stablecoin gift card or is it a real digital dollar?” — Sam Kazemian [07:41]

• On the need for two types of stablecoins (payment vs. savings):
  “I actually now think [checking vs. saving accounts] is like a physical law of economics.” — Sam Kazemian [50:51]

• On metrics that matter:
  “The important thing is the ones that are money will be in both the most important flows and the most important stocks, right, Held as cash. And so those are the unique aspects to look for.” — Sam Kazemian [45:05]

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Notable Timestamps

• [00:00] – Net worth migration to on-chain assets, user pain points
• [01:16] – Defining neobanks in traditional and crypto contexts
• [05:49] – Strategy of platforms (Frax, Athena, EtherFi): pipes vs. fintech apps
• [14:14] – Genius compatibility & RWAs as collateral, infrastructure design
• [22:25] – Cashback on crypto cards vs. traditional card networks
• [25:25] – The path to removing Visa as a payments intermediary
• [28:28] – Explosion of stablecoin chains; potential for standards fragmentation
• [31:01] – Ethereum as “savings chain,” specialized payment chains emerging
• [33:17] – Institutional due diligence, real-life example; Ethereum trust
• [35:49] – Growth metrics and new phases for billions in stablecoin supply
• [37:33] – Difference between payments volume and DeFi volume (GDP impact)
• [40:21] – Sam’s “net worth theory” on where users keep their dollars
• [43:35] – What to look for as this ecosystem matures (real money vs. gift cards)
• [50:38] – Why true payments and savings stablecoins must remain separate

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Final Thoughts

This episode shows the rapid evolution of crypto-native banking—from neobanks serving as bridges, to the coming era when stablecoins may totally displace bank accounts for both savings and payments. The backbone for this future: seamless stablecoin infrastructure, robust compliance, and broad institutional and merchant buy-in. As neobanks proliferate and stablecoins migrate to mainstream use cases, Visa and legacy systems may become just a fallback, not the default. The "bankless" future feels more possible than ever.

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For further info and news on Frax or to connect with Sam Kazemian:

• X (Twitter): @samkazemian
• Frax: frax.finance

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End of summary.

Transcript

[Sam Cassmanian]

People prefer to hold their dollars where most of their net worth is located. A lot of people now, especially younger people and crypto native people, most of their net worth is on chain. And so things that interact with assets on chain, whether it's Ethereum, Bitcoin, it's stablecoins. You need stablecoins to actually interact with these things. It's a hassle to move it over to banks. Some people just only off, off board, right? Stablecoins to banks because they need to spend stuff, right? But then the neo banking stuff, like you said, fixes that problem. The situation will reverse. People will be like, why would I bring my cash back to a bank, right? And it'll be the opposite where right now it's like, why would I bring my cash into stablecoins? What can I, what can I do with it? But it's actually the opposite if most of your stuff is here on chain, right?

[David Hoffman]

Bankless Nation. We're talking about neo banking today here on the podcast. This has been a word all of a sudd. Neobanking and neobanks has just cropped up across crypto, Twitter across crypto. All of a sudden, for some reason, we got Sam Cassmanian from FRAX to come on the show today and talk to us about neobanking and why all of a sudden crypto's focused on neobanking. Sam, welcome back to Bankless.

[Sam Cassmanian]

Always happy to be back.

[David Hoffman]

Maybe we can just start by defining things. What's a neobank and why are we talking about them all of a sudden?

[Sam Cassmanian]

Yeah, I mean, it's funny because they, they weren't at all a part of like crypto, right? Neobanks are basically just things like Mercury Revol startups might use them. They're like a bank wrapper, right? Like, if you think of what a lot of AI companies are, they're ChatGPT wrappers, right? They, they don't actually do the, the foundational model. Same thing with banks, right? Neobanks are like this wrapper. They have better fintech applications, easier stuff to wire rather than the, the, the, the crazy paste the IBAN number, all.

[David Hoffman]

This stuff like a utility extension of a bank. So a bank does, it has the licenses, but banks are just terrible UX and terrible innovators. And maybe the neo bank doesn't have the licenses, but they just, you know, wrap on top of the bank and then do more things. Is that right?

[Sam Cassmanian]

Exactly. And a lot of people always said crypto is super confusing to use. So when can my grandma use it? When can my, my Friends that don't know anything about private keys use it. And like here's the, here's the point where it's the inflection point and it's because of I think stablecoins and honestly the genius act, right? Because without that all these banks would be too scared to even actually bank companies that are building these features, right? And like Visa wouldn't want to be settling in stablecoins and USDC and these other stablecoins they're onboarding.

[David Hoffman]

Right, okay, so what's a crypto Neobank? Is that, is that a thing? Because frax as I understand it is a neobank. We have like things like etherfi, we have some of these like banking, maybe not banks, but banking platforms around in crypto. So like what is a NEO bank in its crypto context? What does that mean?

[Sam Cassmanian]

Yeah, so so basically FRAX as a lot of people probably know from, from listening originally we issued a totally decentralized Stablecoin with, with unique like yield mechanics. We actually have upgraded that to FRAX USD which is a genius compatible stablecoin with, with genius matable backing and then a SFRX USD which is a yield bearing stablecoin which does all of those innovative yield strategies there. But they're two separate products. The thing that FRAX is moving towards as with a lot of big protocols, like you might have seen Athena, they, they announced their usdtb which is a genius compatible stablecoin and their issuance platform which I think is a really important NEO banking feature. And we get to that. I think everyone that has large TAM ambitions for how their stablecoin is used, especially as payments and then as a savings account for like saving features. As a yield bearing stablecoin will have to have these integrations with neobanks, have their own issuance or platform. We also have that that we're rolling out called fraxnet. The essential thing to think about is basically how can these stablecoins get off chain and interact with the classical financial system and actually make it so that they're essentially one to one with, with digital cash. Right? And that, that's the thing that I think neobank solve. Essentially they're the actual bridge between the, the off chain traditional financial system and the new emerging DeFi but also stablecoin system before it was just centralized exchanges, right? If you think of it a couple of years back, right. The only way to come in and off was these central focal points where everyone exchanged their cash for digital assets and then you had to use like MetaMask or like a specific wallet that was a huge bottleneck, right. To get on and off of the blockchain was a huge thing. Now the lines are basically being blurred. If you want to think about it like there are going to be hundreds of thousands of on off ramps and they're going to be very, very smooth. They're going to be very simple. All of these things. Branded stablecoins are essentially a hidden on off ramp. Right. If you have a branded stablecoin you could withdraw it if you, if like Starbucks issues their own or you know these, these neobanks issue their own. They're all new ways to bring people's net worth and their assets on chain if they want to participate.

[David Hoffman]

Okay, so is, is it the, the moment that we're having right now in crypto and the moment being everyone's talking about Neo banking right now is that because things like, you know, the FRAX stablecoin or the Athena stablecoin are all working to become genius compliant so that they can be the $digit integer that is showing up in neobanks like Revolut or like any of the other ones. Is that what we're fighting for? Or, or are things like Athena becoming its own Neo bank and it's actually building out its own fintech app? Or is it both?

[Sam Cassmanian]

Yeah, that's a good question because I think different ones will have like different strategies. So like for us at Prax, we're going to announce some, some big partnerships soon with Ether Fi, a few other ones that we haven't said yet but we will be rolling it out and our view is that FRAX USD should be one of the digital dollars that have the highest tam. Right. There's going to be tons of stablecoins branded ones, right. You know, usdc, usdt, these are, these are used as payments and real money. The way that I like to think about it is that there's going to be essentially a long tail branded stablecoins closer to, I call them stablecoin gift cards. Because think about it, if Starbucks issues like Starbucks USD, right, you're not really going to use that for cross border settlement. Right. Because it's not like a lot of people are going to accept Starbucks USD necessarily.

[David Hoffman]

It's not going to be a trading pair on Hyper Liquid.

[Sam Cassmanian]

Exactly. Or maybe you can go long on Starbucks. But the thing with these is they're like programmable gift cards, right. But the short tail of them, right, like USDT USDC, hopefully FRAX USD, Athena's USDTB. They're playing for the, the money TAM which is multi trillion over the next five years, right? Even Secretary Scott Besson said about 3 trillion of expected payment stablecoin issuance over the next five years by 2030. And that's very important because these stablecoins will do different things. Even though they're digital dollars, even though you know, most of them are genius compatible, some of them are just fiat coins that are very liquid. Right? And the important thing is depending on where on that, on that spectrum that your issued stablecoin falls, you will have a slightly different gtm, right? If you're Starbucks USD, what you want is you want to get it out to people in your distribution channel that buy coffee from Starbucks or maybe adjacent partners, right? There's no reason to try to get, you know, cross border payments or large banks to accept it as deposits. We're trying to actually do that and that there's going to be some things that we're going to announce in the next four to six weeks because we want FRAX USD to be like real money, right? Accepted as deposits one to one with ACH and banking, whether we build that only in our platform or allow people to do that everywhere is I guess different GTM for each. We take a agnostic approach. That's why we're working with really really good neobank or card teams like etherfi. There's also pay, which is a privacy focused version of these spending cards. I think that depending on what the stablecoin is or what the actual GTM is, it's going to look a little bit different. But the main thing is it a stablecoin gift card or is it a real digital dollar?

[David Hoffman]

Okay, okay, I understand is the. Okay, so from what I hear from your answer, FRAX is not trying to build the neobank. You are trying to be the pipes that etherfi which is trying to be a NEO bank runs that uses uses FRAX piping in order to supply EtherFi with a stable coin. But Etherfi is the NEO bank in the sense that it is the customer facing it has the card, it has a, as I understand it, it gives you like an iband number for you to wire fiat into converse it to stable coins. On the, on the flip side, on the crypto side of things, maybe that's your stablecoin. Is that, is that kind of how it's working?

[Sam Cassmanian]

Yeah, exactly. We'll have like API endpoints and SDK and also the fraxnet platform panel where you can convert and move in and out but we won't be issuing like our own FRAX Card we want to power for example all of these very important good UX consumer facing cards and then also work with banks like for example we work with Lead bank which is also the underlying settlement pipes for Stripes Bridge which we're also very close to with. And so we want to actually be the underlying digital dollar. We don't want to actually issue our own card or have a specific bank exclusivity or anything like that.

[David Hoffman]

Yeah, you just want to whitelist your stablecoin to the Neo banks.

[Sam Cassmanian]

Yeah. And when we do that, actually one thing that's very important is we will also actually have coming up a, a white label issuance platform for all of this infrastructure that we've already built and are building. And so if you think about it, we've built this for FRAX USD. There's no reason why if someone doesn't issue with us, right? Like if, if we have a issuance platform and, and your branded stablecoin is used an issue through like the fraxnet platform, you should be able to have one to one with, with, with Lead bank and Bridge and you should be able to have one to one mint and burns across all the 20 chains the Frax USD is on. It's, it's the exact same infrastructure. Right. You don't have to reinvent the wheel. You can just put a different branded stablecoin in there and have this one to one infrastructure. And so I think we'll see a lot of that. And one of our interesting, unique aspects of issuing with us is that we actually are going to try to connect all the different issuance platforms like Braille M0 is a big one. Athena also has, has announced their own issuance platform and right now if you issue with one of them, you're interoperable with only them. Right. Like only the Athena issued ones or only the M0 issued ones. And so the important thing is if you can be interoperable with as many of these pipes as possible, that's the real value for a new stablecoin coming into the industry. Right. And so that's the thing that our issuance focuses on and also focuses on the full yield redistribution overall.

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[David Hoffman]

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[Sam Cassmanian]

Actually that's a, that's a great question because I think, and obviously I'm biased, but I think FRAX USD is probably the most interesting designed genius compatible stablecoin. And to be clear, I know that everyone throws around the word genius compatible but the point is no one's actually licensed right now for genius. The hasn't opened up licensing but the collateral that backs FRAX USD is money market funds with qualified custodians, RWA tokens that actually represent those, those accounting entries. What we've done is we've actually built Frax USD where those RWAs that account for this, these liquid assets. Right? Money market funds, treasury Bills, Custody by BlackRock, WisdomTree, Fidelity, Superstates, USTB. Right. With BNY Mellon. These are all on chain and anyone that has accounts at these places can actually mint and redeem Frax USD without ever even having to log into, you know, FraxNet or any platform. They can, but they don't have to. And so what's actually happening is as FRAX USD grows, we're actually one of the underlying, like liquidity, you know, stablecoins de facto for a lot of these RWAs. And so just like the same way that for the original FRAX stablecoin we had this really powerful curve pool system for all of the, all the people that were in the defi cycle, we're rebuilding this infrastructure in a compliant compatible way while connecting these RWA tokens that are going to be powering all of these genius compatible stablecoins. Right? And so that's, that's really important because the design space for, for like a genius like stablecoin is not very large. You can't do these crazy CDPs and then loop yields and things like that and then output a safe stablecoin. So the design space is very, very thin. Right? Right.

[David Hoffman]

There's only so much collateral, there's only so many different types of collateral that you can pick from the shelf and compose your stablecoin with. For it to be genius compatible. So you have a limited set of options.

[Sam Cassmanian]

Exactly. And so in that limited set of options, right, if everyone kind of looks the same, the innovation is really important because if you can have the same riskless economic backing and you can have the same type of digital dollar that's redeemable for its whole supply, but it's also on chain and liquid between all of these, or it's like the backbone of part of the RWA system. And so like, for example, you can actually liquidate RWAs on AAVE's horizon into FRAX USD custodian contracts as we accept the compatible ones. Right. And so you can get out this liquid stablecoin on chain. These features are really innovative because they set apart things that look almost identical. Right. And so as time goes on, we're like designing how we can actually be the underlying backbone with, with FRAX USD rather than just kind of this inert fiat coin that looks the exact same. And I think that those, those small things will have really, really big impact over time.

[David Hoffman]

Interesting. I'm getting the notion of like a build a stablecoin workshop, like Build a Bear workshop. Is that, is that kind of what you're doing of just saying, like, okay, so if you're connected to all of the collateral, you have the integrations with the collateral and it's like some genius compliant stablecoin over there has this composition and some genius compliant stablecoin over over there has that composition. Well, you've got the pipes everywhere. And so if you need to go and interoperate between A and B and C currencies, which again only has a finite number of collateral backings it that are all making it genius compliant. If you have the integrations everywhere, you can route all of the collateral, unbundle it and rebundle it into a different stable coin because you have all the pipes. Is that, is that what it.

[Sam Cassmanian]

Exactly. And then also the additional thing is the economic alignment, right? Because we actually work with multiple parties here that are large, like securitize superstate payment providers like worldpay and Stripe and Bridge. It's also in their interest, the bigger this grows because we route for example, our fiat on off ramping through Bridge and Stripe, right? And then we also, as the supply increases, BlackRock's Biddle or Superstates, USTB or Wisdom Trees, WTGXX and others that are passing RDD that are compatible increase their AUM. Right. And so it's in their interest to see this grow as well. Whereas if you Think of kind of for example USDC structure. There's one fund, right? It's like the Circle Reserve fund, right? And so everything that mints USDC goes into the AUM of this single fund, right? And so it's, it's a different economic alignment as well. And I think there's going to be a lot of these games where the most aligned and positive sum stablecoin with multiple important parties is the one that in the long term wins. Because there's going to have to be a lot of decisions made about which stablecoins these payment processors support or which ones will, will a bank support and things like that. Like if you think about, for example BNY Mellon, right? They, they actually are the qualified custodian for some of these RWAs, right? And if they're going to think about accepting specific type of stablecoin as deposits, right? As the genius guidance rolls out, well, which ones would they accept? The ones that for example are issued and completely orthogonal to the one the assets that they hold or the one that is actually liquid and they also custody part of the assets itself. Right?

[David Hoffman]

And so like the, the bet here is that Athena's, Athena's got this issuance platform, M0's got this issuance platform, but they're all, again, they're all just connected to the. There's not a large variety of collateral. And so there's got to be a bunch of like assets, the collateral assets that back up the genius compliance stablecoins kind of being traded back and forth, composing and you know, decomposing and recomposing the collateral backings across all the different stablecoins. And if we're betting that like again going back to this Scott Besant quote that is now like ricocheting around the crypto industry like 3, 2 or $3 trillion in stablecoins coming on chain. All of a sudden the volume on all of that collateral backing of Mika, not Mika genius compliant stablecoins. You're making a bet that there's just like a lot of volume there. I'm assuming you take a fee on the volume, right?

[Sam Cassmanian]

Yeah, right now we don't, but I think the end aspect is that we, we can. And also obviously there's a lot of float of Frax USD in DeFi and all of these things and then that is, is, is a lot of income into the frax stao, right? And so that's exactly right. I think, I think what's going to happen is a lot of these things will look the same, but some critical factors like the Alignment and then the, the liquidity will, will be the critical distinguishing factors that lead to more distribution channels opening up for for these stable coins and then being uses money overall.

[David Hoffman]

Okay, so what do you think about the quantity of stablecoins coming online? Because now it's starting to sound like if Etherfi is using FRAX to use FRAX USD or issue their own stablecoin, which one?

[Sam Cassmanian]

I think that's a probably a good question for Mike but I can say that they currently allow USDC spends right on the Ethereum card which is mostly always ranked as the best experience right. The most people love it as an S tier Neobank card and then soon we'll have something big to announce with them. And so the important thing is right now when people load these cards with USDC there isn't underlying yield that's like risk free, right? Because then that can add up to the cash back, right. If you think about right now, 4% risk free yield on top of these cashback rewards could be extremely, extremely lucrative, right? You could get like 7%, 8% back and then you can also augment it with token rewards. So you basically create this program ability of, of a spending bank. And so it's, it's very difficult for classical credit cards or debit cards to really compete if they only have that one layer of cash back rewards with it, right?

[David Hoffman]

Huh huh. So they have the cashback rewards which, where's the value of that? Like the, like the Apple card has 2% cash back. Robin Hood card has 3% cash back. Where do they get that money?

[Sam Cassmanian]

So that money usually comes and I don't know specifically about Robinhood or Coinbase but usually on the underlying comes from the Visa network, right? And so this is actually a really critically subtle but important thing where when you swipe all these cards they're either getting settled in Visa Net or if it's an amex card in American Express's network, they're not actually right now peer to peer like to the merchant holding the stablecoin, right? The merchant doesn't actually even know the, the, the, the customer's paying with a stablecoin that then gets converted into settlement media on Visa Net for example or American Express. What is really interesting to me is that these cards essentially solve the coordination problem for eventually allowing people to do just peer to peer direct to merchant stablecoin payments in two to three years from now. So let me give you an example of what, what, what that means A lot of us originally and, and you, you as well always have been Thinking what if we can just pay directly, right? Like with, with stablecoins or Ether or BTC or something like that. The issue is everyone's debt and everyone's downstream costs are denominated in bank deposits, right? Like USD, right. If you're going to be a company that accepts like USDC or usdt, when you go to pay your employees, they probably just want bank deposits, right? They want money in their bank and not like USDT yet or FRAX USD or things like that. In order to actually get everyone to accept USDT or USDC or FRAX USD and all of these, all of them at the same time have to essentially accept this at once, right? Because otherwise you're going to have all of these conversions back down to bank deposits. And I think the NEO banking cards and all of these things are essentially silently the coordination mechanism where most people on board to these, if there's tens of millions of users in the next year or two, right, they, they're actually spending stablecoins even though the merchant doesn't know it. Right? And then eventually the merchants will be like, well, I can just accept the, the stablecoins, right? And all of my users also are paying with it. There's no reason to accept, abstract it out for, for unnecessary reasons. Right. And so I think the most important thing is these are coordination mechanisms to actually just blur the abstraction between the traditional banking system and the crypto system. And so I actually think that they're one of the most important things to happen in crypto because in the next two to three years they'll coordinate a lot of people starting to pay in stablecoins and then the people that aren't paying, paying or receiving stable coins, they don't even need to know it until they, they learn about it. Right?

[David Hoffman]

Okay, I want to make sure I understand what I think you just said, because I think if I'm understanding correctly, it's kind of profound. So Ether fight card, you swipe it, you spend stablecoins pay card, you swipe it, you send, you spend stablecoins or there are a few of these cards. There's a handful of these cards. MetaMask has a card. MetaMask has a, has an incoming stablecoin, which is probably relevant. And so what you're saying, and so like the. I think the way that Etherfire works is you like swipe your card, you send your stable coins around and they make a transaction on the Visa network with their banking partners so that your stable coins are interoperable with the Visa network. So your card actually works and you can actually pay for the thing and it works in real life. And I think what you're saying is like okay, the, as these cards proliferate and they have competitive advantages because they have extra yield on them. So they're truly just a better product. So therefore we're going to be adopting these cards, these Visa network cards where you send stablecoins to Etherfy and Etherfy makes the Visa transaction and then you get your coffee and then we're going to just have more of those people doing that and more of those people doing that and more of those people doing that. And all of a sudden we have a large population of people sending and swapping stablecoins. And you're saying once we have a critical mass of people paying with stablecoins we don't need Visa anymore. We can actually. Because like all Visa is, is a, it's a, it's a ledger of who of credits and debits and it settles up at the end of the day and then it goes down to the banking layer and then the banks kind of net everything out. And at the, if we have a critical mass of people paying with stablecoins we can just like start swapping the stablecoins directly rather than talking to Visa at all. And all of a sudden like the, the commerce stays on chain and we just like rip Visa out of the whole system. Is that what you're saying?

[Sam Cassmanian]

That's exactly what I'm saying. I'm saying it's that, that, that is exactly what I'm saying. And, and before this, if you think about would be nearly impossible to do that. Right. Because you would have to coordinate everyone accepting stablecoins and owning stablecoins.

[Sponsor/Advertisement Voice]

Yeah, USDC accepted here, everywhere across the world.

[Sam Cassmanian]

Yeah, exactly.

[David Hoffman]

Okay, well this makes me think of Tempo. It was like, oh well, Tempo just wants this. Tempo sees the value in this. Isn't this the entire thesis behind Tempo?

[Sam Cassmanian]

That's a good question. I think that is the long term view of it is that when most of like you said, when Visa net can be torn out, there's going to have to be the flows, right. Of these payments have to go through predominantly. Not just one place, but predominantly in a short list of chains. For example, Stable is doing this for the tether chain. Same with like plasma for usdt. We also obviously have FRAX still for frax USD unique chains and things like that. But then Tempo is just an agnostic neutral layer for all of these kinds of payments. So they have payment channels, they have fast lanes and other things. And we are actually exploring how to have certain unique features in the Tempo chain. We're launch partner there. And so we're looking at how to design something that's very new so that they can actually highlight some of these unique features. Yeah.

[David Hoffman]

So all these stablecoin chains, like plasma stable, even fractal, and then also Tempo, and then there's even more pay is a Celestia roll up, I think. And so they're, they're on their own chain. Aren't all of these stablecoin chains just basically trying to be the standard that, like, hey, we're going to coordinate with stablecoins and we're just going to rip out Visa. But then we implement our stablecoin chain and the only problem is there's like 15 of them. There's also Codex, that's the Ethereum layer 2. 1. Wait, so aren't we kind of running into another standards issue? It's like, sure, we're ripping out Visa because we have this critical mass of people paying with Stable coins. But now, like, okay, but now which blockchain do we use? Is that, Is that what's going on?

[Sam Cassmanian]

Yeah, it's like, well, it's, it's like that famous XKCD cartoon. Like I think a lot of people have seen. It's like there's 14 competing standards. Right. We have to unify them all.

[David Hoffman]

Well, now there's, now there's 15 competing standards.

[Sam Cassmanian]

Yeah, yeah, I, I think there's going to be a short list of them, not 15. And I think that the most important thing is the distribution, like an acceptance of where you're, you're paying. If you kind of look at Tron and Tether, this is like kind of the proto demonstration of this in action, which is wherever these networks are widely accepted for direct payments, they have this sticky network effect that is, again, it's a coordination problem. You can't tear them out because they're accepted everywhere. Everyone has to change what they accept at the same time, otherwise you, you won't be able to do it. And so a lot of it has to do with how fast, cheap and good the technology is. And then if you're honestly first to market in all of these places that accept it. Yeah.

[David Hoffman]

So I do see a little bit of irony in the sense there where you're, you're. What you're saying is these Neo banks with the cards, where these are the coordination tool for us to use to actually like ignore Visa and then get rid of the banks. And I like that. And I see and I take that argument, but we're also just introducing a new coordination problem of like. Yeah, but now we have like 15 different blockchains to coordinate around. Granted it's the market so like let the, the, let the, the best blockchain win but like it is a new coordination problem. Right?

[Sam Cassmanian]

Yeah, I, I think that there's there's basically two things when it comes to stablecoins issuance and, and, and the stock of Stablecoins like the TVL and then the flows of, of stablecoins. Right. The volume of, of payments. Right. And I think chains like Ethereum will always, always win in terms of the stock or the TVL and the issuance. Right.

[David Hoffman]

Because Ethereum is the savings chain. You save your money on Ethereum.

[Sam Cassmanian]

Exactly exactly. And the savings chain and the issuance chain, the root chain essentially is where it's like the final source of truth essentially for large types of assets. And the flows, which is a totally different thing sometimes people confuse them but the flows are the volume of payments between everyone and so those kind of require different kind of specialization of both chain technology and also GTM and distribution. Right. And so it'll be interesting to see, I think Ethereum will, will still remain king of like the issuance and the savings. Right. Of where people hold very, very large amount of money. But it'll be interesting to see if like stable Tempo, fractal plasma codex, which ones differentiate themselves in how.

[David Hoffman]

Yeah yeah yeah you can start to see the whole stock. I love the stock versus flow but not anything related to Bitcoin. The stock versus flow, like Ethereum being the payments chain is like where is the vast majority of BlackRock's bill of fund? It's like 95% on Ethereum, something like that, maybe 87% some are, some are very, very dominant and like yeah, that's yet you save on Ethereum and like where does Etherfi hold its, its biddle on on Ethereum where in so like the slows.

[Sam Cassmanian]

We hold all of ours, we hold.

[David Hoffman]

All of our, Everyone holds their TVL on the bunker coin, the bunker chain, Ethereum and that just makes sense, you know, put it in the safe place, put it in the place that's supposed to, you know, preserve your assets among, about, amongst all costs. And I guess at the higher level, whether it's like a payments alt layer one or an Ethereum layer two, it then that's where the flow, that's where the low latency is, that's where the payments are, that's where the high churn is that makes sense to me. And I think you can see that across Ethereum Defi is like the A implementation on Ethereum dwarfs every other implementation on Ethereum, things like that. Although I wouldn't discount a payment chain growing in such efficient volume that it starts to like eat into stock. I think that's like kind of the bull case for any payments chain. It's like, yeah, we start with payments, but then we become adopted and robust and trusted and then, and then you start to work your way backwards into stock. I think that's how it would work.

[Sam Cassmanian]

Yeah, it's, it's, it's possible and, and it, it's important to take a look. But I'll give you actually a real life example from, from last week. We were talking to a pretty large investment bank in New York to actually move a lot of their cash into FRAX USD and make investments, both private equity and, and public investments in for AX USD. Similar to. If you've seen some IPOs and stuff, they've, they've been done with stablecoins recently and they all have very rigorous kind of DD process. Right. Because they have to file these, especially if they're like moving nine figures of cash into, you know, stablecoins like a new, new digital asset and they have LPs of, of the investment bank and everything. And so one of the things was what happens if the, the chain that you have the rwas on like, like goes down or anything like that. And obviously the answer is Ethereum and Bitcoin don't really go down. Right, right. And there's not a really a credible question. Whereas almost every other chain has had a history of issues in that way. And so it's just much easier to be like, it's on Ethereum the same way like Bitcoin and Ethereum just don't have this problem. Right. That's not a relevant question.

[David Hoffman]

It's cool to hear an anecdote of that whole thesis of like, yo, Ethereum doesn't go down actually showing up where the rubber meets the pavement. How did they react to hearing that? When they're like, oh, thumbs up, like.

[Sam Cassmanian]

Yeah, I mean that's a checkbox. There was a lot of checkboxes. And then what's funny is after the, the Crazy Friday crash, I don't know if we call it like Black Friday or, or Flash Crash Friday. Yeah, that one. I think since everything like FRAX USD was totally fine and everything that's like a total fiat coin and totally redeemable and liquid was fine, they we, we talked to them on Monday and they're like, okay, we're, we're sold. Because anything else that we're like considering, we think it's a much harder sell now to the investment committee. So I preferred the crash wouldn't happen, but it was actually pretty good for us in terms of clearly showing the assets are on Ethereum. It's genius compatible, safe and redeemable. And if you want a real world example, you could look at it on Friday.

[David Hoffman]

Okay, so what kind of growth in this whole world are we kind of expecting? We know again, Scott Bessens 2 to 3 trillion dollars of stablecoins expected to come on chain by 2030. So trillions of dollars of growth in stablecoin supply in five years. But like that's just stablecoin supply. What about like these neobank, the neobank layers, the etherfis, even, even your layer, the ether. Is that where we expect to see growth or do we expect to see growth at the chain layer? Because that's also pretty robust. Even already there's plenty of options there. Kind of maybe simulate how you think this plays out for the next five years.

[Sam Cassmanian]

Yeah, I think it'll be in big chunks and it's actually happening faster than I think a lot of people probably would have thought. Right. Everyone knows how slow banks are and like credit cards, these institutions. But after the genius act, it's almost like they're all like okay, we, we need, we need a plan to, to get involved in all this stuff. And it expedited it 10x and so I think it'll happen in, in big blocks. Right? And one of the things I, I actually want to say is that not all volume and not all like flows are equal. Right? And so right now, for example, Athena's cash card has about 1 million daily spending. If you compare that to like an AMM of 1 million volume, you might be like this is chum change. 1 million volume. This is nothing like you need to hit a billion for 24 hour volume. But these aren't just token swaps, right? These are literally people with loaded stable coins buying stuff on the real.

[David Hoffman]

Like yeah, that's a million dollars of people buying goods. That's gdp.

[Sam Cassmanian]

Exactly. Exactly every single day.

[David Hoffman]

I don't think a billion dollars of AMM swap contributes to GDP numbers, but a million dollars of goods being purch contribute to gdp.

[Sam Cassmanian]

Yeah. And, and I, I think it's, you could even say like those are potentially like equally impressive. Like at least 100 million, right? I think, I think 100 million per 24 hour AMM is probably as, as impressive as like 1 million per day of real world spending card. Right. And, and, and as the, as those things grow in, in real spend they're, they're going to be very valuable. Not all volume is the same and so I actually wanted to write like a comparison to this because like you said really. Well it, they're GDP numbers Right. And so they're not just on chain smart contract like, like transaction.

[David Hoffman]

Yeah. It's not just Internet magic money anymore, it's actually just the economy.

[Sam Cassmanian]

Exactly, exactly. And, and I think that as that goes up the, the amount of stablecoins minted goes up and then as each of these like large institutions, banks, companies, they bring their cash on chain it'll kind of be like a step function. Like it'll be half a billion here, a billion there and then the retail will be more like smooth. Right. And so we're seeing it ourselves right? Like we, we see like 10 million like Frax USD minted but then you know just small growth every day with some like users or people in defi. But then you would go like a month and then we'd onboard a partner and, and then you would sign a deal and then they would move their cash over and start using it. Right. And so I think those things will pick up much more and it'll be very quick and like step wise type of function.

[David Hoffman]

Yeah, I think the reason why I'm getting excited about this is it feels like the last kind of link in the chain to link the chain into a circle. And what I mean by that is like we have the complete end to end life cycle of money of I'm saving my money on Ethereum, I'm getting my forwarded 12% APY, saving my stable coins in my Neo bank I spend, I have now there's plenty of neobank cards out there. We've already like listed off a handful of them. I can go and I can spend my money, I can spend my crypto, I can literally go buy coffee with my crypto right now. It's finally been possible in the last like two years to make that happen. That's great. And now with this whole, with the growth and the maturity of the neobank plus the idea of stable coins just intercepting Visa and us being able to rip Visa out of the system. Once we rip Visa out of the system all of a sudden we have a self sufficient ecosystem where the money and value doesn't leave where we are spending stablecoins buying goods and those vendors receive stable coins. And when they spend their money, they send it, they keep on circulating it back into the system. And so this, that it starts to feel like, you know, ultimately at the end of the day, economies are perpetual motion machines. The only the energy going into an economy is just the value of the goods being produced. And we have that system, it's a closed system inside of crypto and we can actually recirculate the value without actually really like leaking it back back into tradfi. And so you can actually have a fully bankless person never have a bank account and still buy goods, participate in the economy, save their money on Ethereum. You kind of have a complete life cycle of an economy now with the growth of neo banks and stablecoins as settlement layers between neobanks. That's, that's what's exciting to me is that, check me on that, is that, that's what's happening?

[Sam Cassmanian]

Yeah, exactly. And even more, I actually have this theory called like the, the net worth theory, which it goes even a step further, which is like my, my view is people prefer to hold their dollars where most of their net worth is located. If their net worth is located in the traditional system like 401k or like some brokerage on like Charles Schwab or whatever, or interactive brokers, obviously the dollars that interact with those are just bank deposits. And so it is actually a big lift to be like why would I convert my dollars to some other thing that doesn't interact with where my net worth actually is? It's, it's a, it's a big lift. But a lot of people now, especially younger people and crypto native people, most of their net worth is on chain. And so things that interact with assets on chain, whether it's Ethereum, Bitcoin, Whether it's new, RWAs right, like safe funds and all of these things. It's stablecoins. You need stablecoins to actually interact with these things. And so it's almost like it's a hassle to move it over to banks. Some people just only off, off board, right? Stablecoins to banks because they need to spend stuff, right? But then the neo banking stuff like you said, fixes that problem. And then as more and more people's net worth come on chain, it'll, the situation will reverse. People will be like, why would I bring my cash back to a bank? Right? And it'll be the opposite where right now it's like why would I bring my cash into stablecoins? What can I, what can I do? With it. But it's actually the opposite if most of your stuff is, is here on chain. Right?

[David Hoffman]

Yeah yeah, I think we're just missing tokenized equities because that's the last which, which is definitely coming. But that's like the last amount of like part of my net worth that I have in Robinhood is just like you know, Robin clearly Hood stock and coin stock. I mean like if I could just get those in my Ethereum wallet, that'd be the last thing for me. That'd be, that would be it. I'd be done.

[Sam Cassmanian]

Exactly, Exactly.

[David Hoffman]

My goddamn 85 year old landlord who only takes checks.

[Sam Cassmanian]

Well, as soon as, as soon as he dies, you know, or, or onboarded to some, some neobank platform.

[David Hoffman]

Yeah, I don't think he's getting onboarded anywhere. Sam, this is great. I've learned a lot. Is there any other part of this conversation that we haven't like whatever stone we haven't turned over.

[Sam Cassmanian]

I think like basically for now the most important thing is to see which institutions move move quickly on this and which stablecoins are getting integrated. Right. Because there's, there's two important things going back to this spectrum of, of different stablecoins. There's going to be a lot of issuance and some of them will act like gift cards. You, you won't see them accepted as, as like deposits or important things in, in institutional flows. But then there's going to be the short list of real money digital dollars. Right. And seeing which ones kind of break through that that barrier is, is the, is the winners in two to three years time basically.

[David Hoffman]

Yeah. Maybe talk about that a little bit more. Like what, what are you paying attention to? You. I mean you literally just said. But just maybe expand on that. Like what, what signals are you paying attention to? Where are you looking? What are you looking at? Just good to kind of like understand the trajectory of this growth and the contours of the growth. Like what metrics are really important?

[Sam Cassmanian]

Yeah, I think the metrics for things like Frax, USD, these other stablecoins, usdt, you know, Athena's USDTB is what can you do with them going forward? Can you spend them on as many cards as possible? Can you actually deposit them in a few of the banks that are coming out and saying we're actively looking to accept different types of stablecoins as deposits and for a bank that's actually really really fast. Right. Like banks take years to do this but they look like they're really getting on it. Right. Which ones are Those stablecoins. And so the most important thing is just seeing which one is money, which one is most liquid, which one is accepted one to one between all of these places and then which ones are more like digital gift cards. And I think we'll see a little bit more like which stablecoins are issued on the most important chains. Like Frax USD is on 20 plus different chains and it'll be for example on Tempo on day one because they will have unique features and we're building stuff out. The important thing is the ones that are money will be in both the most important flows and the most important stocks, right, Held as cash. And so those are the unique aspects to look for. Is it being moved, is it being used as, as payments? I saw this, really, I forget who wrote it, but it was stablecoins move not held. And so that I think is good because most of the, the stable coins that are like money, they move a lot. They move either between chains, between cards, payments, all of this stuff. And I think that's a really good way to think about it is that if you're moving, if people are moving your stablecoin, they're probably paying for stuff or they're loading it in different places. Whereas if you're, if you're holding a stablecoin usually it's because it's either yield bearing, so it's like a good savings account essentially, or it's just getting used in defi somewhere that essentially again it's getting some kind of yield, which is the same thing.

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[David Hoffman]

That's kind of how I've understood Athena to be a very big savings stablecoin much less of a consumer spending stablecoin and then the dollar back stable coins like tether usdc. These are probably as I would guess the higher velocity stablecoins higher churn like higher spend and then like saving Athena and then you know frax. I would actually categorize frax as also a savings stablecoin simply because you you get if there is an intrinsic yield there's that doesn't exist for tether or USCC and there's an intrinsic yield in Athena. Is that correct? Is my intuition correct here?

[Sam Cassmanian]

Yeah. Overall I think that that's why the new model that we have is too like we have FRAX USD which is just redeemable payment stablecoin essentially and S FRAX USD which is a vault. You stake it in there and then we have these yield strategies including partnership with Athena for carry trade including like USCC we can deploy which is superstates carry trade. Obviously the CDPs and protocol own liquidity. So we actually have the the same exact structure you're talking about in terms of a like a checking account or payment the type stablecoin and and a savings and the thing that I think is the important architecture is that in order to be a good payments stablecoin you need a wide range of places to accept it and the and like the first acceptor is very Costly, right? This is true with all money. The second acceptor is like slightly less costly, but it's still costly. And then the third one is a little bit better fourth one. And then each additional place that accepts it, right. They essentially it becomes more useful. Right. And if you think about what kind of stablecoin is ideal for everyone to start accepting more and more, it's one that you could say this thing doesn't have risk, right? It's, it's like it's very, very low risk. Yeah, exactly. Imagine if every single net acceptor of like a decentralized stablecoin had to do a risk analysis like understand what, what kind of CDP it is or like what kind of carry trade. They, it becomes very costly to make this thing a payment stablecoin because every net n +1 acceptor they have to be okay with it. They have to be able to understand the risk. Whereas if you just say this thing is digital dollar like, like you don't have to even think about anything. It's just a redeemable compliant digital dollar. It becomes easier to make it a payment stablecoin. That's why the most widely accepted payment stablecoins are the safest. Right? And then the savings or yield bearing stablecoins like our SFRAX USD vault or Athena's S U S D E or Maker Sky's S U S D S, people don't pay in them, they save in them. And you hold them because you, they're good risk adjusted yield and, and you don't, you're not convincing the issuer is not convincing merchants and stuff. Hey, accept this thing because that's a very heavy cost to do that. And so that's why having these two things are very important. In fact I used to think this was like an artifact of like the traditional financial system checking accounts and savings accounts.

[Sponsor/Advertisement Voice]

I was just about to ask why.

[David Hoffman]

Do we have checking accounts and savings accounts? Because it sounds like the same goddamn thing.

[Sam Cassmanian]

It's so, so like I used to think like this is an artifact because the traditional financial system is like so like you know, not eff or whatever.

[David Hoffman]

Right.

[Sam Cassmanian]

I actually now think it's like a physical law of economics.

[David Hoffman]

It's, it's fundamental.

[Sam Cassmanian]

Exactly, exactly. The fact that this new system has the same architecture just proves that there's an underlying like physics of the economics. Like I'm saying, where the payments is very optimized so that more and more places can accept it and there's, there's no risk profile and so you can add N +1 acceptors very, very quickly and costlessly. Whereas the savings you. You do not want to optimize for that. You want to offer different kinds of savings accounts and things like that.

[David Hoffman]

You're the savings account is opinionated yield strategies which accepts risk that needs to be audited by the market and checking accounts don't. Checking accounts. It's just like, no, this is a fucking dollar, dude. Just take the dollar.

[Sam Cassmanian]

Exactly. Exactly.

[David Hoffman]

Interesting. Interesting. Oh, I didn't expect to learn why we have checking and savings accounts in this episode, but here we are.

[Sam Cassmanian]

It's an interesting thing because I think in Defi there was a lot of talk before about I think it was Rune the maker and sky founder that I think there was this view that I found compelling actually for a while where it was like we should just replace a bunch of things with yield bearing stable coins because Defi is programmable so there's no reason why everything like AMMS and stuff shouldn't just have yield bearing version so that LPs don't lose out on yield and things like that. And I actually found that compelling for a while until I realized that actually.

[David Hoffman]

There'S a yield as an encumbrance.

[Sam Cassmanian]

Yeah, that's actually a costly structural change because LPs just want a safe. LPs have like AMMs, right? They want a safe unit it's easier to coordinate around. And then the action of LP has its own risk profile. So you separate it and then you just go into your preferred yield bearing StableCoin, whether it's SFX, USD, S, USD S, USD, whatever they're called. Right? It doesn't matter. You just do it when it's idle and you're saving in that. And the fact that this architecture started again in the new crypto financial system I think is good proof that it's like a fundamental law of physics of like of money.

[David Hoffman]

Interesting. Interesting. Sam, I've learned a bunch on this episode. If people just want to learn more about what you guys are doing or just learn more about the subject, where should they go?

[Sam Cassmanian]

I think everyone can can reach me pretty easily on on X and follow FRAX at FRAX and RAX Finance for the for the Defi news and happy to be on anytime and talk with anyone that hits me up.

[David Hoffman]

Awesome. Well, I'm excited for us as an ecosystem to finally close the loop so we can stop going backwards with our money and we get to stay on chain. Sam, thanks for coming on today and teaching me about new banks. Thanks Bankless Nation. You guys know the deal Crypto is risky. You can lose what you put in. But nonetheless, we are headed west. It's not for everyone, but we are glad you're with us on the bankless journey.

[Sponsor/Advertisement Voice]

Thanks a lot.