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- [00:00]
Rob Haddock
Every single boardroom is talking about stablecoins right now. Every single public shareholder is talking about stablecoins right now. I was on with one of the biggest traditional asset managers in the world this morning. Why did it was on them they had reached out to talk about stablecoins. Right. There is no world in which you are a large investor, shareholder, company, etc. That you're not actively thinking about your stablecoin strategy today.
- [00:28]
Laura Shin
Hi, everyone.
- [00:29]
Podcast Announcer
Welcome to Unchained, your no hype resource.
- [00:31]
Laura Shin
For all things crypto. I'm your host, Laura Shin. Before we continue, we'll take a quick.
- [00:35]
Podcast Announcer
Word from the sponsors to make this show possible. Binance is the world's number one crypto exchange, trusted by over 290 million users. With industry leading liquidity, security, and a wide range of digital asset products. Binance is the place to buy, sell, trade and earn crypto. Download Binance today to get started.
- [00:56]
Laura Shin
Today's topic is stablecoins part two. We're back with Rob Haddock, general partner at Dragonfly, who is now joined by Sam McPherson, co founder and CEO of Phoenix Labs. Welcome, Rob and Sam.
- [01:09]
Sam McPherson
Good to be here.
- [01:09]
Rob Haddock
Hey, Laura.
- [01:11]
Laura Shin
Our initial stablecoin discussion was with Rob and Mumtaz of Solana and Helios. And we got into a lot of things, but the stablecoin space is so competitive right now that we really only ended up scratching the surface with discussions of things like tech and circle. And there's so many other players that we just didn't even get to talk about. And one of the really big ones that we didn't get to discuss is Athena. So why don't we start there? Something that is kind of interesting. So it's the third largest stablecoin, but actually, ever since October 10th, its market cap has dropped significantly from 15 billion to 10 billion. And obviously the, the reasons for that aren't necessarily Athena's fault, which is kind of interesting. So, you know, why do you think that is? How do you think they can come back from that? And then just generally, how would you position them in this kind of great stablecoin race that we're seeing, you know, take off? And why don't we start with you, Rob?
- [02:14]
Rob Haddock
Yeah, so I guess there was really two questions in there. One is which, okay, so why is this the or come down cap come down over time then? Also, I mean, since we've had the little bit of the leverage washout, and then also, you know, how do we see them playing in the future? I think those are a little bit of different questions. So One is, okay, well there's USD and there's ustb, right? So those are the two different stablecoins that Athena has today. USD is the one that is more well known. It's the larger asset. It's the one that is the, the asset that was you know, at question on Binance when we had the leverage washout a few weeks ago. USD is the 1 that is essentially collateralized by crypto assets. But and you know, the yield comes from, if you stake USD from you know, the basis trade which I think a lot of people understand now and probably at least, at least this audience does. Then there's ustb and USTB is the, you know, version of the Athena stablecoin that is essentially treasury backed. So just sort of like any other, you know, payment stablecoin that a lot of other people have have used across, you know, a bunch of different types of assets that is also in the US issued or just moved over actually to be entirely issued through Anchorage and in a compliant manner with Genius act for whenever that that goes live. And, and so I just want to bifurcate those two a little bit for USD obviously having that being the one that most people are focused on having come down in market cap is in part because what has also happened is that the, the yield on basis has come down. Right? And so a lot of people use USD as a product to one stake it and then get yield. And so the way it works obviously with the basis trade, maybe this isn't obvious, but when you go call it long a bitcoin spot, you go short of bitcoin future, you're getting paid for the funding rate. The funding rate is a function of how bullish or bearish or just how much leverage people have in the ecosystem when they want to go and trade a specific token. Well obviously I guess two weeks ago today we had the largest leverage washout in crypto history. So the demand for leverage has come, has come down quite a bit. We then had more liquidations earlier this week when, when we saw the, we've traded down the past few days since the Fed meeting. And so that you know, yield that you get paid on the basis trade has come down quite a bit. And so they're just, you know, as people think about okay well their relative return on the risk free rate, we've seen a just less demand for that yield and then we've seen some deleveraging and some of the defi native protocol things that are happening there. And so that's to be expected. I Think USD and Athena are somewhat pro cyclical and I think that it will continue to happen because of the fact that as the cycle is doing well like you know, you get more yield and then more people want to be in that asset. So that's that piece. And sorry if this is a long winded answer but I think important to, to to flesh this out. Then there's the USTB. USTBs has held up pretty well. USB also backs USDE and as I've called it, a genius compliant stablecoin for you know, with treasuries behind it. That's been fine, that hasn't moved. And then he said okay, well what do I think about the future of, you know. Well, I think the reality is what they're doing is they're future proofing themselves because they have this asset of USD that is very crypto native that is very pro cyclical as I mentioned. But they also now have these other business lines. They have US TV which is going to be a payment Stablecoin through Genius that could compete with you know, Circle and Tether. And then now they have this white label product that they are also using that can compete with likes of the Auras and the Paxos and the, and the M0 of the world for you know, issuing, they call it white labeled stable coins as well. And so you know, they're doing a little bit of everything because they want to, they understand that Stable coins are going to serve a, a broad variety of use cases. And yeah, I, I think frankly Guy is maybe the single best founder in Defi at the moment and I just would be shocked to ever bet against him as he tries to grow into all those different use cases. So I remain really bullish and we're you know, for full disclosure, one of the biggest backers of Athena and actually the biggest backer of Athena from the outside.
- [06:39]
Laura Shin
Yeah, I agree with that about Guy. Just kind of every single time I talk with him it feels like he has a natural instinct for like the exact right answer. But that's probably just a reflection of how much work he's put in, how much, how prepared he is for all scenarios. It's, it's just very apparent every time I talk to him. Sam, what do you, what are your thoughts about Athena?
- [07:07]
Sam McPherson
Yeah, sure. So yeah, I agree. Guy has done an amazing job. Props to him and the team. They've really come out of nowhere and really like shined this cycle for sure. I've known them for quite a while. Spark was actually one of the first depositors at size into USD back in that was beginning of 2024. So we were really kind of helping bootstrap the protocol back then. So we did extensive due diligence on it and the whole construct made sense. I think what'll be helpful is like so for us as depositors in the protocol, where it went right and where it went wrong as of more late. So our history is we've been deploying capital in there to get access to the funding rates within CEFI exchanges. And so this has sort of just been naturally scaling over like I would say up until about six months ago for that full year that ATHENA was growing from about 0 to 6 billion ish, I would say they were able to feed all of that into the basis trade. The problem is that over the years the basis doing the basis trade became more competitive as people these high yields do not remain. These opportunities naturally get taken advantage of by hedge funds and stuff like that. So over this year the competition increased and the capacity for this trade was starting to hit scaling limits. And it seems like it was tapping out at about 6 or so billion ish. What happened in I would say July. So we were depositors into spark, was deposited into SUSD primarily and the yield was quite good up until about June. What happened then is that there was these arrangements between like say Athena Nava to do like say liquid leverage, which was sort of putting a lot of the yield into this sort of like boosted TVL stuff is like it's a sort of more of a leverage game and less of like a direct deployment into the basis. And so this made SUSDE less attractive for SPARK as sort of a yield generation strategy. And then furthermore, with the integration of say binance with the 12% guaranteed yield, this was funneling most of the yield into these deployments which was disadvantaging depositors into susd. So since then Spark has exited entirely. So the thing about this is like during bull markets, this and with the combined funding of ena, this sort of boosted the market up to the market cap that it peaked at about 15 billion. But I think what's going to happen is it's going to settle out more at where it naturally sits with like organic capacity within the basis. And that's more like at this like 6 or 7 billion range in my opinion.
- [10:10]
Rob Haddock
I think, I mean, I do think it really depends on. I mean, so there's one, there's organic capacity, so there's. Okay, well how much of the basis do we think? I think it could be relatively. I Think we're something like 35 billion of Bitcoin OI right now. And there's, you know, obviously Ethoi, which is much smaller. So there's. Okay, well, how big do we think Athena can be of. Of that OI and that how much basis can they actually do? But there's also, I think the point around like, do you think OI continues to increase? Right, and so like 6 or 7 billion if we take SAM math to be correct, means that. Okay, well, we think that, you know, they can be, you know, something like, you know, 10 to whatever, you know, 15% of the OI in the market, right? Maybe, maybe, maybe a little bit bigger. Okay, well should OI increase and because there's more demand, because it becomes more mainstream, because we get different types of exchanges and you know, different types of, of, of potential venues that people can trade on and, and is there just more people that will come into the space? And so I think that's the question as well. It's really a, it's an input of like how big can they be on a market share perspective, but then also how, how big can the market itself be? And, but I think of course this is why we're seeing a lot of, you know, interest and doing things like USTB and you know, white labels that are backed by, by treasuries like USDB etc.
- [11:32]
Laura Shin
So yeah, well, let's talk about that stablecoins as a service part of their business because obviously now we're seeing there are so many chains that are doing or. And even apps like Jupiter has jupusd, Mega ETH has musd, Sui has Sui usde. So do you, do you feel like we're just going to keep seeing these, you know, like protocol native chains that are, or sorry, stablecoins. And if so then like, is this, is this going to be a bigger and bigger part of Athena's business or.
- [12:08]
Rob Haddock
Yeah.
- [12:08]
Laura Shin
Where do you see that trend going?
- [12:11]
Sam McPherson
Yeah, I guess I can take that. So, yeah, this trend of protocols chains having ownership of like the back end of their stable coins, I think this trend is only going to accelerate. I like definitely, you know, you see with like the hyper liquid situation where they're not really down with paying, you know, the, the all the yield to Circle and Coinbase. And so naturally they want their own stablecoin where they can get access to the underlying treasury yield. So I definitely think that that trend is, is here to stay. This space is quite competitive. There's lots of people vying for this sort of stablecoin as a service, you know, you have Paxos M0, various others. So yeah, it's definitely here to stay. So an interesting point is, so from Spark's view, as we have access to one of the largest amounts of on chain stablecoin reserves, currently over 9 billion in USDs, we're able to facilitate liquidity bootstrapping between all these different types of stablecoins. So for example, recently there was announcement that Spark did a deal with PayPal to bootstrap PIUSD. So Spark is behind the scenes sort of deploying its own balance sheet to facilitate liquidity with piusd with more liquid stablecoins such as USDC and USDT as well as usds. And so this is really helpful for all this, you know, Cambrian explosion of stablecoins that are going to be emerging. Spark is able to provide this sort of liquidity infrastructure on demand and sort of at a very planned scale to bootstrap these stablecoins within DeFi.
- [13:54]
Rob Haddock
So I'm going to, I'm going to disagree with Sam a little bit. The, the, there was a lot of tailwind behind this idea of like a white labeled stablecoin, both defi native and non defi native right after the hyper liquid situation, you know, especially with, you know, the amount of attention that the hyper liquid situation brought on and you know, all the people who put in proposals, clearly that was I think the top for interest at least in the near term. So we had, I think right after that, from what we've seen, a lot of the protocols, a lot of the chains, they all reached out and they said, hey listen, we want to figure out how to do something. We want to have, you know, call it, we want to make sure that the stablecoin is benefiting our chain and not, you know, necessarily benefiting somebody else. What we've seen and what we've heard over the last, you know, call it month, month and a half since that happened is that a lot of people have realized that it's actually quite hard to align incentives around everybody within your ecosystem to do that. And so especially if you're, you know, in the hyper liquid case, you know, it's an application that is, you know, first and by the way, it's an application first for, you know, that's 99% of what's happen happening in the hyper liquid ecosystem. And then there's some of these builders around the space who just don't have yet a lot of use cases, a lot of volume other than potentially being front ends for hyper liquid itself, right and so when you already have a thriving ecosystem, it's really hard to get a protocol to say, yeah, I want to align with the chain, but then I also want this other protocol to align with the chain and get all the protocols around the table. And so that's why you've seen people like Jupiter and others do their own stablecoin. And what we've seen the least is that people have kind of pulled back a little bit and instead the idea has been okay, well how do we then instead incentivize maybe the people that we care more about or that we want to align more with over time. And so I think, you know, what also happened is in the USDH case like it's been, I think pretty hard even within the hyper liquid ecosystem to get people around usdh. So you know, we've heard of a number of, you know, call it, you know, problems in terms of people wanting to align with native markets and USDH and wanting to adopt them relative to just usdc. Right. Because of the deeper liquidity, because of the better infrastructure. And so I, my expectation is that while white label continues to grow that we probably doesn't grow at the pace that like people expected. I think we will probably see a little bit more white label growth continuing on the, you know, called on the bank side or you know, called the traditional financial player side because there's like real incentives around owning those economics. But when you're, when you're an ecosystem and not an application, I think it's a lot tougher and it's a lot tougher when you're entirely on chain versus which, versus doing some stuff off chain because of the ability and the need to like bootstrap a lot of liquidity in these liquidity pools and et cetera. So I think it's probably not going to grow at the pace that like maybe, you know, Mert and I talked about a few weeks ago.
- [17:00]
Sam McPherson
So actually I completely agree with you. Liquidity is the whole thing. And so this is where on chain stablecoin protocols that are, you know, fractional reserve and able to deploy liquidity as the, as the issuer can really step in and shine here. So some of these new emerging stablecoins, Rob is exactly right because they're full reserve and they have to keep 100% off chain treasury backing as part of being compliant pay, they have to pay for market makers to bootstrap liquidity. These, these costs are quite expensive, you know, double digit percentages. But the advantage of on chain stablecoins is that they're able to be these market makers with these new newly emerging stablecoins and the rate is much, much cheaper than like normal LPs. You have to pay pay. So like yeah, we're talking more like you know, high single digit percentages versus like the double digit percentages of market makers. Why is this the case? It's the case because of the demand for stablecoins in general. So right now we see product market fit in. Crypto for stablecoins is just, is very clear. It's just up and to the right bull bear market. It's just going up. And so right now we have a situation where there is like an excessive amount of demand for stablecoins where, but on the lending side there's not the same capacity on the other side. And so this is how you get these sort of access to cheap capital, you know, potentially even sometimes cheaper than exist in tradfi because of all this excess demand for stablecoins. And so this is why protocols like Spark are able to fill this gap for these new stablecoins and fill in this liquidity bootstrapping issue and do it at a reasonable cost.
- [18:42]
Laura Shin
Well, so one other thing that's related but maybe a little bit different is the new open issuance products by Bridge in which different applications can have their own stablecoins but it's centralized on the back end. It's like the company basically creates its own little mini tether or circle. So just for Rob, where you were talking about, you feel like the Athena's stablecoin as a service or these white label things might not take off as much as initially thought, but what do you think of something, you know, which is just similar but not quite the same? You know, this open issuance product, I.
- [19:19]
Rob Haddock
Mean open issuance isn't that different than what we're seeing with like Paxos Labs or what we're seeing with Agora? You know, even M0 is obviously a different kind of governance model but like you know, shared liquidity but you know, your ability to go and have, you know, I guess the difference is for Bridge specifically you can like plug into like their like broader ecosystem of what they do or the broader capabilities of what they do horizontally. Right. Which you don't necessarily have with others. But I mean Paxos has on ramps, off ramps, they have MTLs, they have their all the regulated licenses globally, they have wallet infrastructure, custody infrastructure, etc. Right. So it's, it's not really any particularly different. So it's, I don't know, Athena is, you know, With Anchorage now on the US TB side and USD is what's, what's backing most of these, of these white label products. Um, it's really kind of the same exact thing. It doesn't change what Sam is saying in terms of like. And what, what I mentioned as well in terms of like needing to bootstrap liquidity. Right. So like if you're going to do something on chain, then you need to have the liquidity on chain. You need to pay the people on chain. And that's, that's true for whether it's, you know, open issuance or Paxos or go or M0 or anybody else. The, or the, the. If you're going to do something that's called like a, you know, a payments token that's within your own, call it off chain application that is really only used for your own use case, then it's a different story. And then I think it's a different set of potential. There's a different use case there and then there's a, probably a different infrastructure that's better for you. Right. And now we're seeing people like Braille get involved there who aren't really involved on chain. Right. And some others. And so that's a broader set of use cases that's just like different and I think not necessarily comparable to the on chain stuff that Sam's talking about.
- [21:05]
Laura Shin
Okay. So let's, we're gonna. Because there's just so many of these different players to talk about, we're gonna move on to Tempo, which is another big one that we didn't get to last time when they launched. There were a lot of jokes made about how the initial structure reminded people of Libra or Diem. There obviously was this huge kerfuffle about the fact that this was a chain and not an L2 on Ethereum. Talk a little bit about, you know, what it is that you see as their strategy and, you know, whether or not you think that this will work for them or whether some of the critics, you know, were either right or at least had a good point.
- [21:43]
Sam McPherson
Yeah. So I think in general with all these like launching stablecoins and stablecoin chains, the key point that is going to make the difference between the successful ones and the not so successful ones is distribution. And I think this has been hit on again and again, but it's entirely key. You look at all the successful stablecoins, you know, Tetherhead, Bitfinex, Circle as Coinbase and then, you know, some of these other ones have other exchanges that they're connected to. So Tether is really the one that's been able to break out and like become like used as like cross exchange settlement emerging markets. These kind of like more larger use case that's broken out from its like incubating exchange to our distribution channel in general. But you see a lot more of the like newer emerging ones. If they don't have this attachment to some large distribution channel, they're going to be dead out of the gate, basically. So something like Tempo, that's very interesting like specifically because of the integration with Stripe. Stripe is quite big. So like naturally sort of like these are the ones I'm, I'm more bullish on where there is this distribution connected to it. And so yeah, I think in general we see a trend of like the fintechs coming on chain. The exchanges coming on chain like Base and Coinbase are like a perfect example of the way I think everything's going to play out where you know, all of these fintechs and stuff are wanting to get on. You know, Robinhood has their own chain and so I think they're all going to be progressively coming more and more on chain. A lot of them will have their own stablecoin and like really within their own distribution, it's going to be quite easy to have their own stablecoin in there. Breaking out to the next level that is, that is far more difficult. And so, you know, I'm not saying one way or the other, we'll just see how the market goes with that.
- [23:37]
Rob Haddock
Yeah, I think, I think that's the right point. Right. Which is that sort of defi. Depends on like how you want to define success here. Right. So when you talk to the Tempo team, depending on who you talk to, when you talk to them and like what they're trying to pitch you, it's either like very stripe aligned or it's not stripe aligned. And it's, it's. There's a lot of this like, I think, you know, kind of talking out of both sides in terms of when you talk to the Stripe team, like I know for a fact they're actively like pitching a use case like of oh hey, we have this consolidated offering of, you know, Tempo plus Bridge plus, you know, Stripe and we have all these use cases like they're going out and actively like marketing this and talking to, you know, potential clients about this. And in that case, to Sam's point, like, yeah, they have this distribution. You have this full set of capabilities that you know, Stripe is able to offer across with Bridge and Privy and Tempo. And that allows them to bring people on Chain if it makes sense, right? And so for them, if they want to be on it fully on chain, if there's a use case, there's, if there's a, you know, maybe it's lower cost, maybe it gets rid of some of the intermediaries, maybe it's faster, better for cross border. Like that makes complete sense. Right. And so they have that distribution piece. But then you say, okay, a lot of people are trying to tell you when it's more crypto native conversations, that this is actually a, you know, a permissionless open source, you know, chain that we want everybody to build on and it's not actually Stripe aligned. We see all this is the future of payments, right? And you know, I think maybe by the letter of the law or you know, if you're, if you're very just, I guess if you're really just digging down to like what it actually means to do those things, maybe that's true, right? So like, you know, there, maybe there'll be a permissionless validator set. My guess is it's somewhere in between those two things. And maybe. And they're doing what some of the ways they're thinking about, you know, prioritizing or incentivizing stablecoin transactions is more at the technical level versus a validator set or your permissioning, et cetera. But the question becomes, is, is it aligned with Stripe's economics? And if that's true, then why would any other PSP ever want to put any sort of volume through there? Why would any other network that is theoretically at odds with Tempo want to put volume through there? They won't, right? Like PayPal, checkout.com, they will not want to have any of their volume if they come on Chain on Tempo if it's Stripe aligned. Right? In the same way, you hear from the Solana community that they're worried about USDC being the major stable Coin on Solana because it benefits Base and Bases Coin is probably their biggest competitor. Right. And so you're going to see a lot more of that conversation, which is, okay, well why would I want to benefit my competitor? And so I think we'll see Tempo be successful potentially in this world of which, hey, listen, we can go and pitch current Stripe clients on a consolidated solution. I think we'll see. I mean, right now, if you look at payments that are happening on Chain, they're happening mostly on Ethereum and Tron basically today, right? And so if that's true, we have to have some reason for them to shift over. The reason they're happening on Ethereum and Trante is because that's where the liquidity is. That's where the, the market makers are. That's where people will, you know, actually hold those stable coins today. So they'll have to be some bootstrapping of, you know, of getting that liquidity on. But then when we have like, call it like real payments flowing through from any, anyone else, it really looks like Stripe is trying to be competitive with all of their close partners. Right. At least over time. And so it's not clear to me that they'll be able to go broader. Right. And they'll be able to, to, you know, pull in those other potential, you know, customers that, you know, don't necessarily want to benefit Stripe over themselves. And so I think that's the question that they have to answer and that they've. There's been a bit of maybe talking out of, of or talking to, you know, kind of both sides of that book.
- [27:40]
Laura Shin
Yeah. Just for some examples of those partners, like ones I would put in that category of being kind of competitive with Strike Stripe when. So Visa, Shopify, Revolut.
- [27:56]
Rob Haddock
Yeah.
- [27:57]
Laura Shin
Deutsche bank, like some of these. Mercury New bank, maybe these.
- [28:00]
Rob Haddock
Yeah, I mean it's like a, like a Shopify rich. Like, like Stripe is actually they exist today because of Shopify, like that partnership between the two of them. Stripe did all the processing for Shopify. Yeah. Shopify grew into this big business and they were really aligned for a long period of time. They continue to be. Right. So I think the bigger question will be call it the other PSPs. But I do think there's also a question about people like Visa. Right. Because Visa has been a long term aligned Stripe partner for a long period of time. But theoretically you can do with the full suite of applications we're talking about with original Stripe, you can now do some sort of transaction outside of the Visa network. Right. I don't know what, what, you know, somebody like a Visa will do and how they'll react. You know, they've come out and they've said that they support. My guess is what actually happens in these cases is, you know, people like Circle or people like Visa, people like, you know, someday at checkout.com some of the NEO banks, to your point, right. They'll come out and they'll say, yeah, like we, we support Tempo and we want to be close because, you know, Stripe is a big name and they're powerful and it matters, but they'll push, they'll they'll push somebody else. Right. So they'll support it, but they'll incentivize people to go elsewhere. Like that's what I get. My, my guess is what will actually happen and you know, some of what we're hearing in our conversations with people like that.
- [29:21]
Laura Shin
Wait, I'm sorry. Like when those partners sign up, then, then their competitors will be pushed to use. I didn't know what you were saying at the end.
- [29:29]
Podcast Announcer
Who will be punched?
- [29:30]
Rob Haddock
Let's give an example of, you know, a, another PSP. Right. So like a checkout.com, right. Checkout.com. so, so visa or sorry, not Visa Stripe. They people use certain part like other payment service providers support stripe merchants. Right. And vice versa. Right. So there is. Call it, you know, people where it. You're going to want to support stripe Checkout, you're going to want to support a type of stripe capability. Right. And so a checkout.com might say that we will support Tempo because some of my clients might care. Right. Like that's how the world exists today. Right. But what they're not going to do is they're not ever going to send any volume to Tempo that they're not directed to do. Right. Meaning that they will attend. They will try to push people to other chains if that will happen because they will try not to benefit their competitor if possible. Right. And so that's what we see in traditional payment service processing today and we see in traditional networks is that you, everybody needs to support each other because you want to have the capabilities if you get pushed to do that. But you're certainly not going to incentivize people or base, or have your base support be for a competitor's product.
- [30:40]
Laura Shin
Okay, okay, I get it. Yeah. I mean it is interesting because I am realizing just it is also intertangled. So sometimes it's like.
- [30:55]
Podcast Announcer
You partner with.
- [30:56]
Laura Shin
Someone just in sort of like a minimal way because you don't want to hurt yourself, but then you also don't want to necessarily benefit them. All right, so in a moment we're going to talk about many of the other ventures in this area. But first we're going to take a quick word from the sponsors, make this show possible.
- [31:14]
Podcast Announcer
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- [31:38]
Laura Shin
Easy to use dashboard.
- [31:39]
Podcast Announcer
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- [32:13]
Laura Shin
So yet another entrant into the space is USAT which is a brainchild of Tether and they now have Bo Hinds at the helm, which is a great get for them. Obviously somebody who's extremely well connected politically. They just announced that they'll be launching in December with what they Say will be 100 million users such as the user base of rumble which is 51 million. They're also investing in two to three other companies and will focus on the creator economy to launch. What do you think of their launch strategy?
- [32:48]
Sam McPherson
Yeah, so I think something that's kind of interesting is I think people over index on stablecoin issuers, they actually have very limited control for creating demand for stablecoins. So I think a good example of this. So USCT is a great product but I'm sure they don't necessarily want all their supply on Tron for example, but this is what users want. So there's sort of this natural demand in the market about where people want to use the stablecoin and oddly enough the issuers actually have very little control over this. So it's really like a market demand driven. Tether is a great company, they've done great work so I wouldn't bet against them. But yeah, it remains to be seen how big this Stable Coin's going to get.
- [33:37]
Rob Haddock
Yeah, I think Sam's mostly right and that for the Stable Coin issuers themselves there's not a ton of ability to drive demand. I do think that's a little bit different for Tether specifically because they just keep acquiring everything that they are trying to use to drive demand. I mean this is actually true. Actually I think the person most analogous to Tether right now is not Circle, but it's Ripple if you look at what Ripple is trying to do with rlusd. Right. So you know Ripple bought, they bought Hidden Road, you know, call it the second largest prime broker in the space. They bought Rail which is one of the maybe five or six biggest stablecoin orchestrators in the space. They bought GUI Treasure which is like one of the not big, it's like the fifth biggest treasury management software that exists but like to essentially go and stick rlusd into those businesses. We're seeing Tether already has that distribution, that name brand recognition. You go to Argentina today, like people don't say I want a stable coin, they say I want Tether.
- [34:34]
Sam McPherson
Right.
- [34:34]
Rob Haddock
Like it has branding that is valuable. Whereas in you know, like Circle does not, USDC does not, you know, these others don't. But then they also now have Rumble to your point Laura and they have their, you know, we've seen them bidding on a bunch of different assets, investing in a bunch of different things and they do probably have the ability to call it push stable coins especially as the world gets to call it less crypto native. And more of these fintechs, more of these applications are just like digital dollars. Right. And people like, you know, are just like the benefit of what they for, you know, for whatever reason of having a stablecoin underneath. If you own that company, you can obviously push the distribution through them. So I think Tether is going to do a ton of that. They're, you know, they're going to make, I think it was announced that they're probably going to do like 15 billion of net profit this year. Right. Like that's, that's a war chest that they can. And then they're trying to raise a bunch of money which has been announced potentially. And so I think they're going to do a ton more of that and that will just allow them to continue to, to try to drive distribution for USAT specifically in the US I don't know, that's a different question. Right. So in the US the US is probably the only place where Tether doesn't have, you know, call it maybe, maybe the US and EU are the only places where Tether doesn't have like you know, potentially that name brand recognition over Circle. Right. And so there's a question around do we know whether they'll be able to, you know, really penetrate this market? But listen, with Bo Hinds there, they're politically well connected, you know, I'm sure they'll be able to, you know, strike some interesting deals and you know, buy companies here that they can distribute through as well. So I'd be hard pressed to, to bet against them too much to be honest.
- [36:13]
Laura Shin
Yeah, yeah, agreed. I was amused when I heard you say that Tether and Ripple are maybe the two most similar companies. It's not how I would normally think about it, but I agree from a war chess perspective. Yeah, Just talk a little bit more about the RLUSD thing because that's a fascinating thing to watch. You know essentially they, I mean they've been around forever and they have a ton of money but they've never like really had anything that was a successful product. And then now they're almost cannibalizing XRP by pushing rlusd. Do you agree with that? Or maybe you don't even agree with that assessment?
- [36:54]
Rob Haddock
I guess as XRP was originally thought of and talked about. That's true. Right. So if you think about the history of Ripple, what they were trying to do is this bank software infrastructure and then XRP would be the transfer mechanism that sat within the middle of it. Clearly that never worked. Right. And so like they did some pilots Moneyground and some banks and some ever whoever else but like Nobody wanted like a 40 wall asset that's on their balance sheet to be able to go and transfer, you know, a bunch of, you know, value elsewhere. But I don't know if it's cannibalizing today because XRP today I think is primarily just the war chest and it's a, you know, call it an exposure to, you know, maybe the ripple story and you know, you can debate how much utility it has. Maybe it's just a meme coin. Maybe it's, it's a meme coin. Yeah, some form of, of you know, ripple equity somewhere in between. But rosd, I forget what the exact number is today, but it's like 800-900-million I think outstanding at the moment. You know they're growing, you know they're trying to, to push themselves into these things. It remains, you know, unclear what the ROI will be of course but like it's very clear that ROUSD and Ripple are trying to turn themselves into a, a stablecoin company. They are buying these places where you know, volume and liquidity kind of aggregate. They are buying these things where you know, they can put a lot of, you know, stablecoin liquidity to work. I mean if you look at something like a hidden road, they can probably, you know, easily put 2 to 3 billion dollars to work in stablecoin collateral right now. Right. And if that all gets denominated in rousd. Right. Like that's a, there's a lot of ROI in that acquisition for them. And so I expect that we'll continue to see RL USD get bigger as they continue to do these things. But there, there's no doubt about it. They're paying a lot of money to achieve this. But I guess, you know, why, why build $100 billion war chest if you're not going to go use it? I guess.
- [38:52]
Sam McPherson
Yeah. So completely agree with that. Like only in crypto can you get this. The token comes first and then you can kind of buy your way into long term success. So I think this is definitely a case of that where the XRP army is definitely one of the most fanatical groups of people in crypto and they've really boosted up Ripple to what it is and now with all the acquisitions. Yeah, these are legit businesses. Like Spark interacts with these, we interact with the RL USD team, we interact with, you know, on the hidden road side. So these are revenue generating businesses and I think like I, I definitely wouldn't bet against this. They've got a lot of money and they're actively acquiring key businesses in the space.
- [39:40]
Laura Shin
All right, so let's talk about after usat. Let's talk about Plasma which is another big chain that is piggybacking on the success success of USDT in my opinion if I'm looking at the structure of this, basically it offers zero fee transfers on usdt. You know we all saw the, the plasma ICO was a big success. The tokenomics of this is it has sort of like an EIP 1559 mechanism which basically burns X XPL tokens when there's activity in non stablecoin uses on the chain. So you know we, we actually touched on this very briefly in the, in the past episode actually. But I was wondering, you know, what you thought about this particular chain, how it might do and you know, sort of where you see it in this landscape of competitors.
- [40:34]
Sam McPherson
Yeah, I can start. So yeah, like I think with all these chains it's, it's, it comes back to this thing which is distribution. And so you know, Plasma's had a very splashy entrance into the scene but now it's really on them to you know, get the user base. And so I haven't seen that yet. And like this is really what they're going to need to do to convert this into a long term durable business. As of right now, most of the TVL is being funded by token emissions and so this, we know this is not sustainable in the long run but it's a very good bootstrapping program. So you know, I'm not super in the weeds of what they're doing. But yeah, it's really with any of these stablecoin chains, you know, there's like a new one every day. It's really this connection to distribution that's going to bring long term sustainability for the chain.
- [41:27]
Rob Haddock
Yeah, I don't have a lot to add. I mean I think the, there's a couple of ways to think about you know, some of these stablecoin chains. Right. So if you think about like a Tempo or like a codex, I think maybe an arc will be this way too. I think it remains to be seen some of their marketing but these are definitely more call it like B2B focused. Right. So these are places where they want to go and figure out distribution with businesses themselves with maybe the exchanges, et cetera. They're focused on providing a better rail for global financial systems. Plasma has definitely taken a little bit more of a call it I would say retail approach. Right. So they've built out a lot of these. You know they focus a lot on their TVL programs, a lot on, on bringing people on chain for you know, the initial, you know, airdrop. They and as Sam mentioned that you know, kind of funding that through emissions. We've seen that be I think both successful and how splashy it came out and also has caused a lot of the, no, call it bad price action over you know, over the last few weeks as people kind of, you know, kind of take profits on, on those and they've come out and they've done you know, call it an incredible job marketing. They've talked about you know, wanting to launch Plasma 1 which is their, you know, call it like direct to retail kind of Neo bank. You know, clearly if they can go and build a Neo bank, it's of real scale and put you know, people underneath it on their chain like that'll be a huge win for them. I think, you know, there is a question around whether like the chain or the neobank is meant to come first. Right. So or how much easier it is to, to do one versus the other. Like it would probably be easier I'm guessing for nubank to launch a chain and put a bunch of people a revolut to launch a chain and put a bunch of people on their chain versus like plasma to launch a Neo bank and, and find distribution outside of call it crypto natives who aren't just farming the token. But you know, listen I, they've done an incredible job in terms of marketing today and so you know we're interested to see you know how that that evolves. I know they're also doing some of these like you know, call it exchange to exchange transfers. So, you know, a lot of. One of the things that happens on Tron quite a bit on USDT is like, you know, people moving money between or the exchanges themselves, money between their treasury and, and also between, you know, their, their exchange and another exchange. And I know Plasma has been trying to make a little bit of a headroads and inroads there as well. Very unclear to me. Like, you know, if that's like valuable. Right. But it does allow you to go and say, hey, listen, I got this amount of transaction volume on my chain, which might be good for the token price, but definitely call it from a go to market perspective. They've approached things a little bit differently than I think some of those others.
- [44:11]
Laura Shin
Okay, so another big player is arc. There's more details that have come out since the last conversation with Rob and Mert. So Circle has Now deployed the testnet and they included or they allowed 100 financial institutions, or more than 100 financial institutions, asset managers and tech firms to, you know, to start using it. So BlackRock, Visa, HSBC, Anthropic, were some of the ones named. There were also. Oh, yeah, sorry. Some of the others are State Street, Deutsche Bank, Invesco, and then they have like a bunch of different stablecoin issuers around the globe. So, you know, one in Australia, one in Brazil, one in Mexico, one in the Philippines.
- [45:00]
Podcast Announcer
You know, what do you think when.
- [45:01]
Laura Shin
You, when you look at kind of like how they're approaching this, the different types of players that they're inviting, you know, what does this say to you about their strategy and how effective do.
- [45:09]
Podcast Announcer
You think it'll be?
- [45:12]
Sam McPherson
Yeah, so I feel like I'm repeating myself a bit. But yeah, this is a stable Coin issuer, which is Circle. They do not have access to the distribution. This is why we're there, partnered with Coinbase. And so bootstrapping Chain is a very hard thing to do if you don't have your own user base to bring along. So maybe this is more like a B2B thing, I guess. And in which case, like, you know what, yeah, the business case is a little bit unclear to me, but you know, they could surprise us with some sort of a strategy that I'm not aware of.
- [45:49]
Laura Shin
Yeah, actually, just. Sorry, I did. So I didn't read the entire question I had written, but part of what I had also written was to me it looked like they were, you know, kind of focusing more in that institutional or B2B market. And I think what some of the language that I saw was that they're aiming to be a base layer for financial services from tokenized for financial services. We'll leave it there.
- [46:16]
Sam McPherson
Cool. Yeah, I mean lots of people are launching these types of chains so we'll see. I mean at Spark we're like we're happy to just see how the market plays out and really activate support with our stablecoin allocation system cross chain stablecoin allocation system for whoever the winners of the market are. So, so yeah we're pretty agnostic about this. But yeah network effects are extremely hard thing to overcome and so a lot of like the RWA activity just continues to compound on Ethereum and so bootstrapping a new Stablecoin or new chain in general like one you got to bring distribution that's to get even in the door. But then overcoming the sort of natural network effects in in any network is going to be a hard thing to overcome. So my base case is that RWAs just continue to compound on Ethereum as that is the, the, the market leader right now.
- [47:14]
Rob Haddock
Yeah, I mean on the, it's definitely B2B focused like I mentioned I think in the last one. I think like them and, and Tempo and, and Codex are kind of focused on that space. You kind of hear them all say the same thing which is like okay, well we're gonna have like built in FX and we're gonna have like opt in privacy and we're gonna going to have you know some sort of you know integration into like you know certain types of like end you know bank accounts directly. We're going to be able to do better reconciliation like you know, things like this. Right. And so I, I we'll see how differentiated they actually are. On a technical perspective it sounds like Tempo will probably be the most differentiated from a technical perspective. Obviously they have the, the rest team there and, and, and Paradigm there who's doing I think most of the work specifically and they've you know obviously great, great engineers and so I expect the, the ARC and to be a little bit more call it like out of the box similar to, to, to what Codex is which is on the OP stack. But you know we'll see right now I guess the question around. Okay, well you know Distribution Circle announced CPN back in May. They launched it pretty soon after. You know we're now like several months into it. I happen I've seen people yeah, sorry, CPN Circle Payments Network which is sort of like a standard and a set of APIs for people to kind of send and receive quotes from each other but is not on a blockchain itself, it can settle at any other blockchain. Right. What we've seen to the network effect point that Sam said is there hasn't really been very much volume through CPN maybe as you'd expect relative to Circle. Otherwise there's you know, I know I definitely, or at least I have heard from people who would know that there is, you know, call it more volume that is going through some of these other payment chains, quite a bit more volume. But some of these other payment chains, a lot of these other you know, call it quote unquote orchestration providers who are, are providing these types of services. And so again that was a network effect point and it was a point around whether or not, you know, there was real demand for this and whether or not there were actually adding enough value that they could have a rake essentially. Right. And so like the CPN was plugging into these orchestration players and it was saying okay, well like pay us or I mean right now it's free but over time you can see how they would, they would want to be paid for it. And like you have to add some sort of extra value for there to be another middleman or another intermediary to take a take rate. Right. And we just haven't seen that really work there. And so. Okay, so let's move to the chain itself. Right? Maybe those two things together will allow for additional, potentially an additional use case that will allow them to bring volume to both sides. I think there are ways of which it is interesting and better to build an integrated product with your chain itself. So some of these specific stablecoin like kind of things that you can do like the opt in privacy or prioritizing transactions, you know, paying you know, sponsoring gas or paying gas with stable ones, all that kind of stuff, those are the things that you can do. But at the end of the day I think what a lot of these chains are probably just going to do and how they're going to win is they're going to give away some of like the software stack for free and they're just going to subsidize, you know, transactions utilizing their own tokens.
- [50:35]
Laura Shin
Right.
- [50:35]
Rob Haddock
And so if, if I know Circle hasn't talked about this, I don't know if this is true. I'm completely speculating but I think it's probably impossible to win the quote unquote stablecoin chain meta if you don't launch a token. Tempo is, I mean I don't know if they're saying they're launch or not, but I'M certain they will and I am certain that the others that are doing this well and so Circle, I think is in a murkier situation around whether or not it makes sense for them to launch a token. I mean we've seen the same conversation at base and if they launch a token, my guess is it will do better. If they don't, I think they'll struggle.
- [51:09]
Laura Shin
Yeah, well, I think so. Both them and Tempo say they plan to decentralize. And so if they're going to decentralize, then they do need a token. So it sounds like eventually there will be.
- [51:21]
Podcast Announcer
Yeah.
- [51:21]
Laura Shin
Let's talk about Codex. So how Nan Lee, the founder, came on the show and you know, part of this was like that L2 debate or, or really the L2 criticism of, of Tempo. So Codex is an L2 on Ethereum. It's, it's built with optimism and it's going to focus on the B2B sector as you mentioned. But you know, it's, it's stablecoin focused. And so what Hounan was, you know, kind of talking about in the show.
- [51:52]
Podcast Announcer
Was how he felt that it made.
- [51:54]
Laura Shin
More sense for stables to be on Ethereum, to be settling to Ethereum. And I was wondering, you know, since Dragonfly is an investor in, in Codex, if you could talk about like how you think about that. Because that was such a big thing that people got really upset about in crypto.
- [52:11]
Podcast Announcer
So.
- [52:11]
Laura Shin
Yeah. So why is it that you think it would make sense for stablecoins to settle to Ethereum, you know, versus being on their own chain or, or maybe you think like both will exist.
- [52:20]
Rob Haddock
I don't know. Yeah, I mean I definitely think both will exist. I think as you and actually Mert actually said this, I think two weeks ago when we were had that conversation as well, that he thinks if you're going to have a stablecoin specific chain, it actually makes more sense to be an L2 than it does to be your own. Yeah.
- [52:36]
Laura Shin
And then he, he made fun of himself because he used the word L2 and he knew people were going to go after him. But anyway.
- [52:43]
Rob Haddock
Yeah, because he's obviously not pro L2s generally, but he has a belief that, which I do as well that if you're going to do call it a stablecoin or payment specific chain, it should, should be an do. You know, a big part of that is obviously that as we see call it more native or based roll ups directly into the ETH ecosystem, there's going to be better interoperability than there is across L1s and other L1s. Right. And so you're going to be able to tap more broadly into global liquidity. You're going to be able to have more broadly into some of the financial use cases that are happening elsewhere. If you want to do you need things like Dexes and you need, especially if you're going to do fax, you need, you know, borrow land. But you also, it's, it's going to be good for a, you know, payments chain to have, you know, we'll call it structured products and derivatives that, you know, exist that are people can, you know, swap directly into other ecosystems that may not exist there. Right. And so I think there's also a question around. Okay, well, if you want to do will certain types of users, especially on the business side, will they want to control their own economics, how they want those economics to work? Right. Will they want to potentially have their transactions validated within a, you know, a validator that could theoretically be OFAC sanctioned? How do they want to think about block construction? Like how do you want to think about mev? Right. These things are primarily easier to manage as a, if you have a single sequencer. Right. And you call it like a little bit more centralized, but also not necessarily completely. I mean we could debate about the spectrum of centralization of course, but like I think and then you share the call it the global use case of Ethereum, the liquidity with Ethereum. And so I think it makes complete sense and that's part of the reason that we backed codex as an L2 relative to call it like one of these payment L1s. I also just think the team is incredibly good how non and Momo having built, you know, call it products both in crypto and outside of crypto and Silicon Valley for, for years. And so, you know, we're, we're super bullish on them and, and what they're trying to do. And so yeah, I don't know, maybe, maybe Sam has some perspectives on that as well.
- [55:00]
Sam McPherson
Yeah, sure. So let me speak from my perspective in terms of like this, this L2 versus L1s for like payments and stuff like that. So I agree completely with the premise that L2s are going to be much more important for payments because precisely because they sit close to Ethereum. So Spark is actually a big user of Ethereum as a settlement layer with the, and we do like capital allocation across all these different chains. Now right now most of it is going with finality on the chain. So no matter which chain you go to, you know, it's about like 20 minutes to settle. But with improvements like single slot finality and then having the L2 settlement be directly tied into the finality of Ethereum itself, these types of optimizations drastically improve capital efficiency when you're rapidly moving funds around all these chains. So I think it's because of this tight connection with the consensus on Ethereum that will make L2S a much better place to do payments. So for our product in particular, we have a product called Spark Savings where we export this cross chain yield that's generated across all the chains. And so in order to do that we have to manage the liquidity on the back end and where the reserves are sitting and moving it into the best yield generating opportunities as fast as we can. So this is where, you know, maybe 20 minutes doesn't seem like a long time. But these types of inefficiencies, well, you know, if they can be eliminated, like get down to like a minute, you know, a few seconds, like these are the types of improvements that are just going to compound so that L2s kind of run away with the, like the payments use case.
- [56:43]
Laura Shin
So Sam, I know you referenced a little bit of what you're working on at Spark, but we didn't go into in depth and I was just wondering if you could talk a little bit about like how you are approaching this heightened competition and how, you know, I don't know how much you're talking to sky, but I would imagine you know, some of their strategy and thinking as well.
- [57:02]
Sam McPherson
Yeah, sure. So maybe I could just run over a little bit about like the structure of sky and how it sits now and where Spark sits within the sky ecosystem. So sky was previously MakerDAO and since the transition there's been the rebrand, but also a restructuring of the DAO governance. It was realized early on that this flat DAO structure does not work for making like at scale decisions about lots of capital. And so the idea is that sky converted into more of a. And I want to preface by saying these are not banks, but I think it's a useful analogy. So sky, you can think of it more like a central bank. So it issues wholesale credit to multiple subdaos, of which Spark is one of those subdaos. And you can think of the subdaos like commercial banks, they actually interact with the end customers and this sort of stuff. So Spark itself, we have a couple different products that we offer. So the first one is the second largest lending market on Ethereum, currently over 8 billion in deposits. So this is like I think the old school lending of ETH and Bitcoin, you deposit that as collateral and you could borrow stablecoins against it. How sparklend is differentiated is that we're targeting institutions, we are a very institutionally focused project and so we're not listing every collateral under the sun. The collateral is not rehypothecated. This is meant to be, you know, a simple set of five or so assets that we know people like to borrow at, at scale and then borrowing stablecoins against that. And so this mark, this lending market has been growing quite well. It's, it's doubled actually year over year growth. And we think this is going to continue as institutions continue to come on chain. The second project or product I mentioned before which is a savings which is cross chain earned product on your stable coins so you can deposit USDC or USDT and you can earn the Spark universal savings rate which we think is the best risk adjusted yield in DeFi. So currently generating 4.5% and this is at the scale of billions of dollars. So you could think of it sort of like a cash product but outperforming the fed funds rate that you get on like treasury bill products. And then the last product, which is the allocation system that I mentioned before as well, this is called the Spark liquidity layer. So this is the yield generation system that generates the yield for savings depositors. And so this will deploy capital across opportunities in DeFi and CFI access to the funding rate. It deploys into now the CME via Superstate USCC. We're also one of the largest LPs into the Coinbase Bitcoin borrow product on base, actually even larger than coinbase itself funnily enough. So yeah, we're really kind of providing liquidity everywhere and that that is currently 3 billion deployed feeding into the savings rate.
- [60:01]
Laura Shin
All right, so before we wrap, let's talk about some of these tradfi players that are also now competing in the. I'm going to wrap up a whole bunch of different little news bits and you can talk about any of these players or just generally how you think about them. I know obviously some of these players I'm going to mention they're all quite different in their business. So you can kind of pick and choose. So JP Morgan is experimenting with this deposit token. These are blockchain based tokens that are backed by the licensed depository institution and they represent that a deposit that can be claimed against the issuer. So I don't know if I fully understand it, but when I was Looking at this, I was like, okay, it feels like this is their way of issuing a stablecoin without abandoning the fractional reserve business or something. That's kind of maybe how I was thinking about that. Then we have Visa. They're now using four stable coins on four chains. MasterCard obviously had the $2 billion acquisition of ZeroHash the other day, which I will just quote Thread guy, because this is exactly what I thought when I heard the news, which is who the is zero hash. And then Western Union, you know, is making news about its stablecoin usdp, sorry, usdpt, which may apparently go by wusd. Uh, that's like a trademark application that they have filed. So I'm sure there's other. And then obviously MoneyGram that, you know, they've been involved in stablecoins for a while. Um, they just launched a new app that uses stablecoins on the back end and it's USDC and stellar. I'm sure there's others that I missed. But just, you know, for. For all these different news bits, like when you were looking at all of these tradfi players that clearly are realizing that they're being threatened by the stablecoin competition, like, how do you think about the position they're in and, you know, how you think they should handle this.
- [61:59]
Podcast Announcer
You know, upcoming disruption.
- [62:01]
Rob Haddock
Yeah. So, well, maybe I'll talk more generally. And I was at Money 2020 earlier this week, so if anybody knows what Money 2020 is, it's, I think, the largest fintech conference in the world. A lot of it also happens to, you know, exist around not just fintech itself, but like payments more broadly. You see the banks there, et cetera. And, you know, I was on a panel and my panel, there was a panel before mine about identity, and there was like 10 people in the panel. And then I went backstage, waited for 20 minutes, got my dub or whatever, and then I came out and we were talking about stablecoins and every seat was taken. Right. And every conversation I had last week during my 2020 with all of the traditional players was either about one of the two things was about stablecoins or it was about agentic commerce. Right. I was at the Fed, the Federal Reserve last Tuesday, so a week and a half ago, where, for what they called the Payments Innovation Conference, it was primarily a stablecoin thing, but. But it was, you know, they also talked about Agenda, commerce, etcetera, there. And Governor Waller specifically gave remarks about, call it like a skinny master account for stablecoin issuers potentially, and other fintechs to get access to Fed payment Rails without a, without necessarily needing to be a regulated bank. And so I think the reason I say those things and because like you know, fifth, third was at that event and others is every single boardroom is talking about stablecoins right now. Every single public shareholder is talking about stablecoins right now. I was on with one of the biggest traditional asset managers in the world this morning. Why did it was on them, they had reached out to talk about stablecoins. Right. There is no world in which you are a large investor, shareholder, company, et cetera, that you're not actively thinking about your stablecoin strategy today. We had Bill Gurley talk about it on his podcast a couple of weeks ago. Right. Like this is happening, right? And so this is not the end of those types of announcements. This is just the beginning of them. Some will have more teeth than others. Some will be more actually like deep than others. We've seen starts and stops with MoneyGram before, so we'll see what happens here. But the Western Union thing seems real and we saw that the, the shares traded up afterwards. Right? What does that mean? That means that like the public markets liked this. Right. And so that's an incentive for these companies to continue to go and innovate around this. And so this isn't stopping, this is going to continue. And you know, I could not be more bullish for the state of stablecoin adoption in 2026.
- [64:32]
Sam McPherson
Yeah, sad. So like I definitely this, this is what winning looks like in my view. And so now the banks, I think previously they've tried to fight things like, you know, you're not able to forward interest to users, especially when it comes to like these full reserve stable coins that are just forwarding the risk free rate. I think this should always go to users because this is a no. Like the only time you should be generating additional yield is if there's some trade off in risk. And so what the banking system has historically done is take advantage of these low access users who basically just park their funds in a checking account, they get paid peanuts and then the banks are earning the treasury rate on the back of that. And so fundamentally why this is a big margin for banks, so this is why they're so afraid of stable coins. Because once you get the permissionlessness and openness and composability of DeFi and on chain accounting, basically the end user, you no longer are able to take advantage of the end user like this. And so the, this is the success of stablecoins is driving the banks to adapt. And so now they're forced to compete in this new playing field. So this is why they're coming on chain. And so this is just a natural progression of the success of the industry. I expect this to continue. And yeah, I think it's like with the change in the US regulatory posturing, I think it's all systems go for a huge amount of growth in the near future.
- [66:05]
Laura Shin
Okay, last very quick question, Rob. I think you have your ear to the pulse in dc. Do you know like if this, you know, interest loophole that the Democrats are calling the, you know, what happened ingenious, do you think that's going to be closed off or do you think that that will continue?
- [66:21]
Rob Haddock
I don't think it'll be closed where but I also don't think we're going to get a market structure bill. So you know, there's that conversation as well. But I expect that we're going to see what's like genius. We technically have until January of 27 to do the actual, a lot of the actual rulemaking. Right. And so this is not the end of this conversation around yield. It's not the end of the conversation around some of the nuances with stablecoin issuers. I also think over time we have this. What is ingenious is mostly defining a quote unquote payment stablecoin. I think we're going to start having like carve outs for things that are non payment stable coins but other types of stable coins. So this is going to get more complicated over time.
- [67:08]
Laura Shin
And I'm sorry, what does that mean? Are you talking about like a, a Biddle type thing or what? What is that?
- [67:13]
Rob Haddock
Well, so I mean you talked about the deposit token. Was a deposit token stablecoin. Well in this case it's not. But, but it also means things like you know, eventually over time, you know, could a payment stablecoin right now needs to be essentially like a narrow bank. Right. It needs to be one to one backed by a Treasury. Right. But is the world in which a savings stablecoin exists?
- [67:32]
Laura Shin
Right.
- [67:33]
Rob Haddock
And it doesn't necessarily need to be one to one backed by a treasurer anymore. Do we have yield stable coins? Like these things are probably coming the way and they're probably going to get defined in some way or another, whether that's through legislation or whether that's the rule making at the regulators themselves. So we'll see what happens over time. But I think genius was the start of what is going to be continued conversation around this in D.C. not the.
- [67:55]
Laura Shin
End yeah, yeah, that makes so much sense because the definition is so narrow in that and Obviously there's like 5 million different creative ways to create a stable coin. So okay you guys. Well, we managed to cover at least a lot more. Not everything. I did leave things on the cutting room floor. So if you are a stablecoin project and you didn't get mentioned, I'm sorry, there's just like way too much. But Sam and Rob, it was great chatting with you and catch you all later.
- [68:22]
Rob Haddock
Thanks Laura.
- [68:23]
Sam McPherson
Thanks for having us.
- [68:24]
Podcast Announcer
Welcome to this week's news recap. Let's begin. Global stablecoin push gains momentum as major players announce new initiatives the stablecoin sector saw a wave of major developments this week, underscoring its growing integration into traditional finance. Citigroup announced a partnership with Coinbase to pilot stablecoin payment services, allowing institutional clients to move seamlessly between Fiat and crypto. Citi's head of payments, Deba Palma Shen, said clients increasingly demand programmable 24. 7 payment systems as the bank forecasts a $4 trillion stablecoin market by 2030. Meanwhile, Coinbase deepened its ties to traditional finance through a second partnership with Apollo Global Management to expand stablecoin backed lending and tokenized credit products. Visa also broadened its stablecoin network to four new blockchains, now supporting eight tokens across 40 countries, with stablecoin linked card spending reaching a $2.5 billion annual run rate. Elsewhere, Western Union filed a trademark for WUSD just days after revealing its USD PT stablecoin on Solana signaling plans for global remittance integration. Circle launched the public testnet of its Ark blockchain onboarding more than 100 partners, including BlackRock, HSBC and Visa. And Stable, a Bitfinex backed layer one focused on USDT payments, announced phase two of its pre deposit campaign following backlash over alleged insider participation in the first round. Sam Bankman Fried claims FTX quote was never insolvent end quote in new online manifesto convicted FTX founder Sam Bankman Fried has resurfaced on social Media, publishing a 14 page document claiming the collapsed exchange quote was never insolvent and that customers could have been repaid in full. Posted to his X account late Thursday, the document argues that FTX faced only a temporary liquidity crunch in 2022, which was worsened by its quote external counsel, end quote taking control. Bankman Fried asserted that FTX and its sister firm Alameda Research held up to $25 billion in assets against $13 billion in liabilities and that if their investments had been retained total holdings could now exceed $100 billion, including stakes in Anthropic and Robinhood. The document further claimed the exchange's native FTT token would be worth $22 billion today. The post reiterates arguments Bankman Fried made at trial, where he was convicted on seven counts of fraud and conspiracy and sentenced to 25 years in prison. His renewed effort to recast the FTX collapse comes amid reports that allies are lobbying for a presidential pardon, though prediction markets currently assign the attempt slim odds. Securitize and Consensus prepare for public market debuts BlackRock backed tokenization platform Securitize announced plans to go public through a merger with Cantor Equity Partners 2, a special purpose acquisition company sponsored by Cantor Fitzgerald. The deal values securitize at $1.25 billion in pre money equity, with the combined firm set to trade on Nasdaq under the ticker Secz. As early as January, CEO Carlos Domingo told CNBC that quote tokenization is what everybody's talking about, end quote, adding that the listing will allow investors to quote index themselves to tokenization. Securitize has partnered with firms including Apollo, KKR and BlackRock, having helped launch the latter's Buidl fund on Ethereum. The company has tokenized over $4 billion in assets and will digitize its own equity once public. Meanwhile, Ethereum developer Consensys, creator of the Metamask wallet, is preparing an initial public offering led by JPMorgan Chase and Goldman Sachs, according to Axios. The listing would be one of the most significant for an Ethereum native company. Founded by Joseph Lubin. Consensys develops software that powers decentralized applications and operates the Linea layer 2 network. A company spokesperson said it is constantly explaining exploring opportunities to expand its impact. In related news, a website claiming to be Metamask's token portal surfaced online, driving up betting odds of a mask token launch to 35% on polymarket, though the wallet provider has not confirmed its authenticity and has repeatedly warned users against phishing attempts. Ethzilla sells $40 million in ether to fund stock buyback Ethereum focused Treasury Firm Ethzilla sold $40 million worth of ether from its reserves to finance a share repurchase program, the company confirmed Monday. The move follows pressure from activist investor Dmitry Capybara Stocks Seminikin, who recently acquired a 2.2% stake and urged leadership to address the firm's steep discount to its net asset value. Nav Eth Zilla shares had been trading at roughly half the value of its crypto holdings before the announcement, Chairman and CEO MacAndrew Rudesil said the company plans to, quote, continue selling ETH to repurchase shares until the discount to NAV is normalized. End quote. So far, Ethzilla has bought back 600,000 shares worth $12 million as part of a $250 million buyback plan approved in August. The firm still holds about $400 million in ether, and its stock jumped more than 14% following the news. Founders Fund, led by Peter thiel, holds a 7.5% stake in the company. Polymarket set to relaunch in US with Sports Focus and token plans Prediction market platform Polymarket is preparing to re enter the US within weeks, marking a major comeback after being forced offshore and fined $1.4 million by the Commodity Futures Trading Commission in 2022. The relaunch, expected by late November, will center on sports betting and begin in an invite only phase in during the peak football and basketball seasons, according to Bloomberg. The company recently acquired qcx, a licensed derivatives exchange and clearinghouse, giving it the regulatory footing needed to operate in the US Once again. Chief Marketing Officer Matthew Modaber confirmed that Polymarket will introduce a native token and an accompanying airdrop after the domestic rollout quote. We want the token to have true utility and longevity, modabra said, emphasizing that the launch will follow only once the US platform is fully established. MasterCard eyes $2 billion acquisition of ZeroHash MasterCard is reportedly in advanced talks to acquire Chicago based crypto infrastructure firm ZeroHash in a deal valued at up to $2 billion, according to Fortune. Founded in 2017, ZeroHash builds blockchain and stablecoin infrastructure that enables banks and fintechs to launch crypto trading, payments and tokenization services. Its clients include Interactive Brokers Franklin Templeton and BlackRock's BYDL Fund. The acquisition would mark Mastercard's latest expansion into digital assets following its 2021 purchase of blockchain analytics firm Cipher Trace and its participation in a stablecoin consortium with Robinhood and Kraken. ZeroHash recently raised $104 million in September and at a $1 billion valuation backed by Apollo, Morgan Stanley and SoFi. Mega ETH token sale draws $1.39 billion in bids oversubscribed nearly 28 times Ethereum layer 2 project Mega ETH has closed its highly anticipated public sale after attracting over $1.39 billion in commitments from more than 50,000 participants, according to the project's official post on X. The auction, which aimed to raise around $50 million, was oversubscribed by 27.8 times, highlighting intense demand for the platform's native token. Mega Megaath said that participants who bid below 0.0999 will automatically receive refunds, while bids at that price are currently being reviewed for allocation. Final results are expected by November 5, with refunds for unallocated users to follow. The sale offered 5% of Mega's total 10 billion token supply, with the option of a one year lockup for a 10% discount. Developed by Mega Labs, Mega ETH aims to deliver sub millisecond transaction speeds and process up to 100,000 transactions per second. Drawing backing from prominent figures including Ethereum co founders Vitalik Buterin and Joe lubin. Bot sends HyperLiquid's hype token soaring to $98 before crash, HyperLiquid's native token hype briefly surged from $47 to $98 in under a minute on the decentralized exchange lighter before crashing back to its prior range on Monday. Lider attributed the extreme move to a quote runaway bot that aggressively cleared its order book in a low liquidity market. The platform later removed the price spike from its chart interface, citing user experience concerns, while emphasizing that on chain records remain unchanged. The decision sparked sharp criticism from traders who accused Leider of obscuring market data. Quote you're effectively lying to your users by doing this, crypto analyst Duo nine said on X, arguing the exchange should acknowledge its illiquid order books instead. Others defended the move as practical given charting limitations. Blockworks shuts down news division to focus on data expansion Crypto media outlet Blockworks has announced the closure of its news division as part of a strategic pivot toward data and software products. Co founder Jason Janowitz said the company is quote becoming a software and data first organization, citing strong growth in its analytics business over the past two years. Founded in 2017, Blockworks built its reputation through podcasts, research events and news coverage before launching a data platform now used by investors and blockchain firms. Janowitz noted that demand for Quote data as a primary information source has outpaced traditional reporting. Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Aranovic, Margaret Curia and Pam Majumdar. The weekly recap was written by Juan Aranovic and edited by Stephen Ehrlich. Thanks for listening.