Why Stablecoins Matter for Banks and the Dollar

entirely new industry. Whether this is a stable coin which is essentially expanding the network of the value of the dollar in this case, the sort of a stable coin in itself, or if it's something like a pure network asset like bitcoin or ethereum. These are assets that don't have necessary something underlying it, but are held up by the power of the community and the network effects inherent

and the builders and developers on top of it. So it's really a way for the first time to own a network asset that wasn't really possible for And so what a stable coin is is the marrying of essentially the real word asset of the dollar or any currency around the world with that of tokenization, which then essentially brings it both the speed and distribution of the Internet. And if you think about what the Internet did for information, basically stable coins and tokenization is now doing that for

money and value. And that's why you see this massive expansion. The growth that you've seen in stable coins is really what you see when you put something on the Internet, which is essentially global scale, reach, distribution, and everything else that comes with that.

basket of assets and in the case of something like circle treasury bills or maybe just you know, in the case of sort of what the HKMA is mandating it has to be in the currency, so on hundred dollars. But also some people have, especially in the early days when there was no regulation in no clarity around it, have basically put other assets in them, and so controversially in the early days, and the reason why teather has had a controversial past, according to some is because some of

those assets consisted of bitcoin. So what they would say is, hey, we have x amount of bitcoin, and then essentially we would mint a certain amount of dollars based on the value of bitcoin which we had in the reserve, and the reserve asset essentially creates that way in which we sort of represent the dollars. So if you have a one hundred million dollars worth of bitcoin, then I can basically mint on a hundred million dollars worth of dogs, and if the bitcoin goes down, I have to basically

buy more. If it goes up, then maybe you so well you can basically create kind of a stable reserve balance. This is of course much less controversial when you do it with cash or with treasury bills because there's a clear value denomination, But when you start mixing it with

digital assets in the past, that was more controversial. Tether has definitely moved further away from that, but in its early days it was essentially pegging against that, and it was also an era of sort of experimentation as well. People were sort of seeing these kind of interesting new financial constructs and say, okay, this could be a stable coin.

This is how we do this, And when bitcoin didn't have the legitimacy the head today, using that as an underlying asset, it would have been controversial, but that was really the history, and the history was also around how do I onboard people into the digital assets world? You know, now we talk about it in terms of crypto or with three for instance, and if I tell someone, you know what, you can enter this world by converting your

one thousand dollars into one thousand digital dollars. It's a much easier way to onboard someone and then they can start buying other tokens and on, and really the biggest use case for stable coins has been trading and purchasing and activities that are on chain or in exchanges, so all of the decentralized exchanges where people can trade, all conferences, the stable coins have a big use case, and of course it's used for remittisances and everything else like that as well.

and share. I wanted to talk about the recent US legislation in particular, you know, the Genius Act. Can you explain why this is so important?

So that's one way to look at it just macro what it means. But the other thing is that this administration certainly believes, which is maybe diferent what the previous administration believe, that stable coins is a way for the

US to continue its dollar hegemony through stable coins. Now, when you consider where these stable coins are being used, they're used all over the world, but they're growing tremendously in places like Nigeria, South America, Southeast Asia, places that really couldn't be dollarized in a classical sense because you couldn't even have a bank account, and now with a cryptoallet, I can now have digital dollars, and dollars has always been desired in these markets, that's just no way of

reaching it. So you could say that in a way, they've been assimilated to the dollar at a young age.

And so therefore, if you talk about these rising nations, which are mostly young populations like prinstance, Mina, Africa, South America, they're also essentially growing up to the dollar, and that's basically a way which you can create that influence, which is also the reason why other markets are in the world are looking at this and say, okay, how do we either counter or deal with that sort of circumstance,

because that's something that you can really control. Also, the governments themselves have no oversight of it in a classical sense, So if you're a bank, you have to be banked first in order to receive any currency, and the bank itself might restrict you from being able to exchange money

or maybe to buy dollars. But with a stable coin, basically the internet is all you need and wallet and someone or across the world can send it to you and you can transact with it, which basically means that the digital dollars that were in the form of stable coin becomes the way in which you transact in many

of these economies, effectively dollarizing these economies even more. And that's actually one of the key areas around why it's important for the US because of course a big part of the US business model is around essentially using the dollar, right, and it's exactly it's a reserve currency of the world. How do you make sure that it's the reserve currency of the world. You know, basically you sort of enter the internet and make it the native currency. And so

that's a strategy white so important to the US. And what is also interesting is that because of the Genius Act, banks before were not allowed to enter into that space. So expect that every major bank, maybe even smaller banks, are all going to start issuing their own stable coins.

I mean, you even talk about companies like Walmart and Amazon and possibly Google and Apple, all of them who have so much dollars in their treasuries, Well, they could issue a stable coin now, and they could basically use it for their own commerce and receive transaction fees or use them in different forms of commerce. And it also enables money to move faster from place to place and also brings you more loyalty to the customer because they're now attached to your currency as it.

It's expensive, and what happened when we reduced the call or the phone call to something that was essentially deminimus in terms of the cost. The value basically didn't come in terms of making the call. The value came on the speed of the connection that we had and the ability for us to conduct business faster and have more interactions. I can always reach you all the time. And what happened.

Networks grew faster, business grew faster, Expansions happened because transactions were cheaper, faster, better, And that's basically what we have with blockchain. So to me, this is Actually they're positive for society because I'm not able to transfer money across the world cheaper, better, faster. I mean, think about all the extraction that happens for people who are unbanked, right, I mean, there's so so much value that goes away.

Is it isn't it better that instead of paying really large type of transaction fees where it's not just about the swift transfer, but about the middleman who basically is able to gouge you sometimes ten twenty percent on the transaction, that it now goes with nine nine percent of their value to the actual end user, and then in their local communities they get to spend it in local economies.

Now what does it mean though for the banks, Well, it means that banks are going to be changing the business models around acquiring te bills or maybe looking at ways and incentivizing customers to deposit their stable coins that they would then generate active yield on, you know, in the same way that you would do term deposits for example. Right, So there's still ways in which you would make money.

I don't think the bank is gone because they would still have their trading strategies and their yield generitorise they just have to be more competitive and ultimately also more transparent, which I think is just better for the consumer.

I grew up in basically still when we had an East and West Europe, and I remember my mom used to work at the eastern side of Berlin, and so when you cross that border, the dollar was the most desired thing. It's like the whole black market around basically trading either Deutsch MARKO dollar back in the day. And that had to do with because it was stability, it could be used as global trade and that sort of

image persists. So the dollar is the desired asset. Also from a branding standpoint, I mean, it's not only about the utility, it's also Hollywood, it's movies. It's all that kind of stuff, right, you grow up to like, you know, whether you do a business deal in the media, you talk about it in dollars, you don't talk about it in other current and right, so that all of that

sort of matters. And I would say now as a result of that, for deck to get that digital adoption, if it's in the dollar, it just has a much more legitimate framing, and especially if it's now licensable through the Genius Act or maybe also what Hungko was doing with their stable coin, it just makes it that much more safer and accessible.

party was railing so much against was the CBDC. The reason why the CBDC is such a negative construct, because in some ways they're both digital, is that one the government has full control over your money, like they can literally take it out of your account right and that type of control means is never your money and you don't have the freedom to transact because they can also side where the stable coin technically speaking, it's in your wallet,

the issuer isn't, you know, they have to comply, but they're not actually issued by the government per se, and it's not controlled by a single entity. They can just basically delete your money as it were, takes stuff away

from you. So I think the construct over it as a stable coin, actually I think will reverse that tread because now you have the safety and the assumed security of owning your assets, which is also the argument where people were so into bitcoin, because there's an asset that I have self custody over that I control versus I put it in the bank. So you know, putting in the bank, the bank can lock you out. You can be debanked or unbanked. And then and they're using it

as well. In some cases you've heard some of these stories and as a result you are excluded from the financial world, but all the assets that you have in there you lose as well. Here you have an element in which you can scale self custody. So this is also an important point because you know, in the older generations, it wasn't that on typical to have a lot of cash, maybe in your back pocket or like in Japan, underneath your bed, you know, that type of stuff. That is

something which wasn't feasible or practical anymore. But in the digital construct you could actually have your money yourself or a certain amount and have the freedom around that. So I think it's a way in the combat sort of this dedoorganization. Having said that, I think US exceptionalism is unique. And I know there's some proponents who are like saying, Okay, well, the US is kind of done for and you know,

all that type of stuff. I don't believe that. The reason why I don't believe that is because the US has probably the only country in the world where it can have this amazing amount of creative destruction. Right It's the place where you can blow things up, and somehow it still works because as a culture it celebrates that and it's because it focuses so much on the individual versus in other places it's much more focused on the collective,

for instance, diverging a little bit. China's sort of reach in AI for instance and other technologies would not be, in my view, as advanced if it wasn't for the US, because it's something to comput against. So the US pushes a boundary because they have that exceptionalism, this innovation, and then China reacts to it as its ability to create and produce and innovate as well. But if it wasn't for the US, I think China would nearly be as competitive or maybe as advanced because it doesn't have to.

And that's basically the difference between I would say that two, both of them being incredibly ingenious in their work. But I think that you need that exceptionalist I think the world needs that exceptionalism, and the dollar represents that in a way.

table coin. And the difference about the HKMA license is that it does have the ability to do it with different basic currencies. So is it possible it is? Is it in the works? No? Right, I mean, that's obviously something that is being investigated, is being observed. But for sure China is looking at Hong Kong as the test bed for that as it always has been, right, Hong Kong has always been sort of the experimental financial sandbox for what happens in and out of China to learn from.

And clearly, and this has been already publicly said by the Chinese government, they are also observing and reacting to what the US is doing with the Genius Act and stable coins and blockchain technology because they realize that, you know, neither country wants to be behind in any form of any shape of anything related to technology. It doesn't matter whether there's robotics, whether there's AI, whether it's you know, compute or where there's blockchain.

digital assets. When you look at the demographics, and especially younger demographics in places like South Korea or Turkey or you know, places in the Mid East, it's something like sixty to seventy percent of people under the age of thirty in some of these places exclusively old crypto. So they don't buy stocks, they only owly tokens. You know they're going to get older, and they don't just suddenly switch and say, oh, you know, I should buy some stocks.

They keep buying crypto, So you have to be ready for that market. You can't just say, you know, things that used to work ten years ago or twenty years ago are the same, which is true for everything. I mean, change is the only content, sort of famous proverb. So I think here Hong Kong recognizes this, but I think there was sso a few catalysts. If you think about what happened in Hong Kong before, you know, with the disruptions with protests with COVID, Hong Kong also lost a

lot of its financial luster. People left Hong Kong, went to Singapore, went to Dubai, went all over the world. So Hong Kong wants to sort of reclaim that crown that is rightfully hers as it were, and digital assets

is one way to do that. But I think it's also around how do you engage the next generation in this area of financial inclusion, because that's a big topic as well, which is that people who understand the stock market and understand traditional forms of finance, they're in their particular world but most people don't actually understand finances as all. They're not financially literate. Hong Kong is a little bit of an exception because most people here understand and grow

up in money. But think about the rest of the world. I grew up in Europe and we don't talk about money at all. And how do you include more people into the space? And again, digital money, digital assets. Tokenization democratizes access and also educates people about it because it's now accessible. Think about how inaccessible it is for a first person to enter the financial world. It's not a bank acout. He has been able by shares, he has a stand about money, He needs to pass certain kind

of you know, like tests and queries. He has no way of experimenting and playing around with it, which basically tokenization makes it much easier to do. So it's part of that as well. But that's why it's so important for Hong Kong to stay relevant in a financial future that is digital. You have to embrace blockchain and neoge assets.

Stable coin just does as a fraction of a cost, and you can still have it with the safety and security of knowing that it's a dollar or whatever currency that would be. So that value then essentially flows directly into the economies that they're building, and so it just makes a lot more sense. Now. What it also means for global trade is it makes it much more fluid and much more transactable because now I can just do it very quickly as opposed to having to deal with

a bank. Just think about how much money through a wire transfer is stuck inside a bank somewhere that even one day, but on average sometimes three to five days in some cases. People will tell you stories of we send a wire transfer, and two weeks later, I'm still waiting for it. Well, that's maybe a bit of an exception. The promise is that that period of time is essentially

opportunity lost. And maybe thirty or forty years ago, when the world was a little slower, it didn't matter, like it's okay if the money arrives a week later, but today, one day. I mean to think about you being a trader or you forge, that opportunity cost is tremendous, right, It's not just a matter of it let the money come in. Maybe in the laborer construct it's okay, but in a capital construct literally seconds can matter, right or

minutes or certainly hours then, let alone days. So that means from a transaction standpoint, it's not just reducing fees, it's the value of I get the money right away, and I can deploy it right away, and I can do something with it right away. That is really important. I mean, ask anyone who sort of trades and assets

of all sorts the opportunity costs related to that. It does disrupt things like credit and lending that will have to change as well, but it just has to requires them to be more innovative and also offer more value. As a result of.

it could be in the form of a bitcoin. Theoretically, if they're sophisticated enough, which is not very difficult, they could say, hey, wait a second, this was send from a wallet that comes from a Russian bank or something. They could basically technically block that, and it's up to the basically on and off ramps to do that. So it's not the blockchain that does that, it's just basically

on and off ramps. So it means that the asset itself is yours, but for you to utilize it in the way you wanted to, there might be some restrictions. And one would argue that's one of the reasons why, you know, Russia, for instance, their banks have essentially legalized crypto for that reason. But I would also counter this thought as well in terms of sure, the US has sanctioned, you know, using swift, but how effective has it really been in the sense that it hasn't really crippled the

Russian economy. Things seem to be going okay for the most part. They're still able to deploy weapons and putin sales, seems to be able to say the things he wants to say. Generally speaking, I think the age of the sanctions as we see only work when the world is unified in their direction, which they're not so, meaning that

you've got different alliances around the world. It's no longer a US centric world in the traditional sense of if the US wants to Dissuay, everyone follows, because US also had a lot of good will which they've lost over time. You know, when you look at the alliances. I mean, India is a US ally, but they also do business with Russia. And China, like, there's many pathways around. So I don't think the issue of swift is only something

related to what's happening in the US. It's also the alliances that you need to have with different countries around that, and I think stable coins and crypto are just visualizing

what's already happening in the world today. Again, I would argue that actually that becomes a more powerful way for them to continue that influence, because you know, if you want to have influence in a place like Russia and they're using stable coins, actually having the Russian economy become more dollarized, I would argue, is much more soft power and maybe even hard power for America than just be able to sort of turn on and off of the swift buttons.

no intermediary is ever going to touch that money. And if that money was transferred from that wallet or you know, from whatever sort of wallets that they've tracked that they know is North Korean, it would immediately be frozen wherever it was set. So that's something that's very easy to detect.

bank account. I don't want that. Blockchain has the ability for you to anonymize the identity of who owns it, but the transactions themselves is essentially that display of truth. And that's actually what makes it work because every time I do a transaction, I can verify that this transaction is real and the whole world is witness to it. But I don't need to know that it's your money, and you know, you don't have to be too technical

about it. But what you can now do with schools and blockchain with zero knowledge proofs, is you can now also attest, for instance, the value of what you might have without ever revealing your wallet. You know, like today, for instance, when you have to give a credit statement, right, I mean you have to literally, outside of a letter, print out your bank statement, send it over to whoever agent is doing it, and say, look, this is proof

how many assets I have. You know, maybe I cross off the bank account, but like, oh, I see it's a JP Morgan account, and look you have ten million here and I know your name, right, Whereas on blockchain I don't even have to know your name. I can just attest because blockchain can say I could verify this and this absolute truth because the blockchain can be tempered that Okay, he has enough assets, and I just need to know that you have enough assets. I don't need

to see everything. And when you do your tax refund, how ridiculous is that, here's my passport, so you can see everything about me, so I can go buy one hundred dollar thing to get like a you know, three dollars discount on tax, and then all of that information is in some database that is completely unsecure in some shopping mall. It's crazy, and we think it's normal. It's not normal at all because it's just been normalized societally,

and blockchain solves all of that. So again it's not to say that you're anonymous, but you can use it as proofs.

the world, give or take. And we tokenized that. We tokenized that first as a way to create collateral and then later on to essentially offer it for people to buy, essentially as a kind of quasi fractionalized asset. The vision behind that was so I grew up learning classical music. My parents are musicians, specifically my mother. She didn't anything about money. And by the way, this is not just

true for artists around the world. It's more even more true for artists in Europe, I would say, or just generally people in Europe, right, because you know, we don't talk about money. It's not like in Hong Kong or in Singapore. It's normal to have a you know, in dinner you talk about real estate and stock market and prices. You don't do that in Europe. Like if someone does that, you're like, mm, you're kind of weird, you know my crowd type of thing, right, it's like it's like, gosh,

it's like rude to talk about money. So we are generally quite financially illiterate, I would say, in those circles. But that also means in the capitalist world that we live in, we get taken advantage of. So you give money to an agent, they run it for you and they abuse it. And today in the digital construct, that entity is called Spotify. There's no musician in the world that makes money selling music, right, they have to do gigs, they have to do other things. Music is advertising, But

who makes the money off the music? Someone like Spotify and Spotify used to be the agent, I mean, was personified by an agent or something. But the point is that the middleman takes all the value because they understand money and they can transact from that. So how do we break that cycle? And the idea was the stradivarius instrument has always appreciated historically over decades between ten to fifteen percent a year that's also why groups like fifteen

per year. Yes, and that is also why Nippon Foundation and banks around the world, especially Japanese ones literally by violence and just vaultam. But that's obviously a little known fact.

historical importance. And today the world's most famous violinists or play on a strat or del jesu because these are the two most valuable instruments and they have the best sound. So that's kind of that value construct. The point is that, you know, if I go to a traditional investor and say, hey, you should buy a strat because it's a good investment. Unless he's culturally inclined or he's into music, it doesn't matter,

and that's okay. But to me, the opportunity that was more exciting was how do I teach people who don't know anything about money about the world of money, and by tokenizing something they appreciate, which is every musician in the world will say a Strata viarus is valuable. They know it's worth millions, but they can never afford it.

So they're not going to buy a bitcoin and then I'll got my bonds or tesla because they don't care, but they will care about that, and in that process they're going to start learning about money because they're going to say, Okay, I have an ownership in this strat or it goes up in value, I appreciate it, I can talk about it, I love it, and at the same time, I can also make money on this, and

then suddenly I understand what it's all about. So the inspiration was, rather than trying to teach people about money in let's call it somewhat abstract concepts of stocks or commodities, copper or gold, o lithium, this is pretty abstract For people who don't deal in this kind of world, why don't you own assets in you know, the artists that

you love. That is a much easier way to teach people about value and money because they immediately appreciate the constructs themselves because they're passionate about it.

a board ape, excepted to keep penguin. And the floor price of a pudget penguin is now fourteen eighth to fifteen eath. It's a serious asset, right, and of course crypto punks, which are for the og assets that are worth hundreds of thousands or some of these millions of dollars. But anyway, the point is that these are cultural artifacts that have meaning. And just quickly, why do these NFTs have value? To your point about the birken bag, why

do people buy birkenback and why do buy rolics? People don't buy a rolics to tell the time, and they don't buy a broken bag to put stuff in it. The utility is not the reason. It's the status, the cultural capital that is associated with it, right, whether I made it, or whether it's the group of people who own a rolex that I want to be associated with, or that status at success and in the world of digital assets, that's represented by NFTs. And you can see

this in every context. When you have a new wealth class emergent, this is important to recognize. Crypto is a new wealth class for the most part. Yes, sure you have Wall Street and institutions getting into it now, but the class that got into crypto didn't come from money.

wine or something like that. But because that was the culture of the wealth class of that time, which is you have to be dressed a certain way, and you had a certain kind of the chorum in terms of what you drink and do and even smoking in the eighties, and then you had this new form of wealth, which is a Silicon valley and the tech wealth, and these guys were all you know about I don't drink, I wear hoodies and so on, and suddenly you had billionaires

with hoodies, right, and they created a whole new type of sort of cultural capital where they're driving electric cars. And now it's kind of wild to see how these sort of sports where brands are now priced almost like luxury, where brands in some cases precisely because that audience that is that new wealth class, have emerged into that and

that's their product category. So the same people who, let's say, were the Wall Street bankers in the eighties, Maybe that's not their cup of tea, But for the Silicon Valley guys, that's a cup of tea. And what we're seeing here is with NFTs and digital assists, it's the same. So where it's going to go is we're going to see this toganization of everything. And the biggest form of current form of tokenization, which you see in old coins like all these funny meme coins and tokens and other things

and gaming tokens, what they're really tokenizing is attention. And I think a lot of people misunderstand that because I think it's like out of thin air. But I would argue attention and digital advertising is kind of out of thin air as well, because what are you really trading or investing in. You're trading the attention of here's a biddle board, here's a banner, here's a TV ad. Right arguably, broadcast networks like Bloomberg, you make a lot of money

probably on advertising and sponsorships. That is also a form of attention or sort of paying for that attention that may be fleeting, but it's still important for generating business from that and now through tokenization, you have a way of owning that attention. And what was the form of digital attention in the early days of the Internet, It was a website. If you remember, back in the nineties, we had a website, and today we have many websites.

If you look at your TikTok page, your Instagram page, your website, your LinkedIn profile, these are just evolutions of websites and all of these are forms of generating attention. And all of these forms of attention are going to be tokenized. Now, that doesn't mean that they're gonna be valuable, just like you know, there's someone who has a million followers on Instagram is probably a little bit more for valuable than someone who has five thousand followers or a

hundred followers. But the point is there is a value, as small as it might be, and that's now represented the toganization and the first wave of all these tokens that have come out are that which means, if this is true, then we're gonna have billions and billions of tokens as we have billions and billions of websites.

attension if you look at all the treasury companies. What's happening, you know, between companies accumulating bitcoin, whether it's like a strategy or a DDC or whichever, right, all these companies are basically showing the value of digital assets or like the circle IPO which was incredibly blockbuster success. All of these basically pointing attention to it, so it would be remiss for us not to look at that seriously. But I'm not really at liberty to discuss our specific plans,

but it's definitely clear that we're looking at it. As a company. We are very institutionally focused. We do have a roster of some of the most sophisticated investors in the world. We also have over three thousand shareholders, so we're a little bit of a different beast. And I would say us, having worked in the space, you know, having the revenues that we have, which hasn't been nine digital the last four years, has made us very much

a consistent player in the field. So I think again, I think the timing is right, but you know, I'm not at liberty to discuss some more specifics other than to say that it is very important for us, and of course we are here to also deliver value to our shareholders and our stakeholders.