How Will Stablecoins Replace Traditional Banking

Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Kodelika Ads and today I'm speaking with Zach Abrams, who is the CEO of Rich. Look, we love investing in new areas of the business and we described a few of them at cryptos, a particular area of investment. We made a large acquisition in

the stable coin space. When I looked at stable coins, it was very clear to me that they were an economically rational winner. Over time, getting into the crypto space, the banks were like, you know, if you're doing anything with stable coins, you're automatically in this risk bucket. Whereas if you're doing the same activity but not with stable coins, you're in a different, different risk bucket. We're starting to make for the first time regulatory investments.

The long term success of the stable coin space is going to be downstream of regulatory changes. I'm Frederica Ants and today I'm speaking with Zach Abrams, who is the CEO of Bridge Stripe acquired infrastructure platform and that lets companies issue, move forward and spend staples of in various ways. We'll get into all of the weeds in just a bit before that. These are our sponsors this week. This episode has brought you my noses building the open Internet one block at a time.

Nosis was founded in 2015 and it's grown from 1 of Ethereum's earliest projects into a powerful ecosystem for open user owned finance. Nosis is also the team behind products that had become core to my business and that are so many others like Safe and Cow Swap. At the center is Nosis Chain. It's a low fee layer one with 0 downtime in seven years and secured by over 300,000 validators.

It's the foundation for real world financial applications like Nosis Pay and Circles. All of this is governed by Nosys Dow, a community run organization where anyone with a GNO token can vote on updates, fund new projects, and even run a validator from home. So if you're building a Web 3 or you're just curious about what financial freedom can look like, start exploring at nosys dot IO. Hi Zach, it's good to have you here. It's. Great to be here, thanks for having me.

For listeners who don't know you yet, give us the Cliff Notes version of your background and how you ended up in payments and money. So I founded Bridge with Sean and in maybe 2010 or so, Sean and I founded another company that was a payments company and we were trying to build a payment network by tying together university payment networks. And I don't know if this is a thing in. In Germany, but in the US, every school has their own payment network.

That's not like Visa, MasterCard, Amex, Discover. It's like your campus dollar situation. These payment networks facilitate billions and billions of dollars of payment volume. And we were trying to be like what Venmo is to your bank account, but for these student payment networks. And then in doing so, bootstrap a new payment network by tying these together. Anyways, we tried to build that business for a while and we

were. Woefully unsuccessful because it turned out to be a university sales business that we were very ill equipped to do successfully. We sold the company to Square. And basically, you know, from that point in time, I spent my entire career in fintech. It's like moving money, building

money. Products were always the most interesting to me. And, you know, we saw from the very beginning what felt like really small changes in, you know, economic access, how big of an impact those could have, like with Square and they make. It just a little bit easier to accept card payments, enable millions and millions of businesses to you know, or or individuals to start businesses and run them full time when otherwise it would not have been

possible. And so I stayed on that cake for, you know, a decade plus now. That's a long time payments kind of to someone who is not in payments, payments seems and I hate to say this seems somewhat trivial, no. So kind of you have a balance on on kind of one account or on one bank account of one wallet and

kind of it, it moves somewhere else. Tell us about the misconceptions about how money actually moves versus how kind of the layperson thinks it moves. Yeah. I mean, I would say the thing about payments that is so interesting to me is that you have so many areas where you can be creative and find new solutions. So, you know, you could build new products at the UI layer, you know, by basically just making it easier to see balances and and you know, make a

transaction or what have you. It could be at like actual the money. Storage layer, it could be at like the regulatory layer, you know, and it can be and, and it could keep going down. And like we've seen how like the best products are not just like innovations in terms of consumer behavior, but our material changes in.

How? Material changes in in how you know, in money capabilities that are facilitated by, you know, regulatory changes or, you know, enabling functionality that others didn't have and, and a very. Quick example of this, that is like totally outside the crypto realm, but Cash App, for instance, Cash App is a peer-to-peer payment product in the in the US, it's been very, very successful. Early Cash App enabled you to instantly send money to any bank account.

This was like not possible in the US before Cash App built their product. And the way Cash App built their product was by taking advantage of a debit card refund. So everybody in the US had a debit card, and you could refund money to a debit card which then immediately credited. That balance back to your bank account.

And the Cash App team figured out that you could use this debit card refund to enable what felt like an instant payment in the US And, you know, finding these types of opportunities and being able to figure out how to take all these, like, wildly complex puzzle pieces and rejigger them together is what intellectually makes payments very interesting and I think

like stablecoins. You know, bring it back to our business is sort of an innovation at every layer, which is particularly fun to, you know, makes it particularly fun because it enables so many new types of payment experiences. So. So the Cash App example is very much a legacy Rails example, right?

I lived in the US for a number of years and it always struck me how backwards the financial infrastructure was compared to Europe because kind of like we've had free instant transfers between bank accounts for really long time. So why do you think kind of like there's this systemic difference in how powerful the underlying rails are? Well, yeah, I mean, this is so this is a, this is a great, a

great, a great question. So. In the US there are like you know, 1000 X the number of banks than there are in in Europe. And so in the US we have this like dual banking structure where you can be a Federal Bank like JP Morgan or Wells Fargo or have you these are banks that operate across many different states or you can be a state regulated. Bank like, you know, the North Carolina Community Bank, for instance, that would just serve folks in a specific town in North Carolina.

And this dual banking structure has multiple different regulators and the net result is that it's a lot easier and permissive in the US to create banks that operate at different scales. The benefit of this is you have a very dislike, very diverse and you know, very competitive

banking ecosystem. And it enables, you know, lots of neo banking and like a lot of fintech products to be created because you have so many different banks are trying to find ways to compete with each other that some banks. Choose to support fintechs. You know, and they do that by enabling, you know, exposing their AP is and then a bunch of new fintech products get get created. Whereas in in Europe, there's fewer banks and those banks are

much more heavily regulated. The flip side of that is that in the US, as a result, rolling out any changes to a payment rail necessitates the bottoms up adoption of that payment rail

because there is not one. Regulator that can say hey everyone you're now using this bit of functionality and so you've seen this play out in the US where we have the automated clearing house that tried to roll out RTP payments, which have gotten some adoption but not that much adoption and the Fed has tried to roll out you know FED now, which is getting some adoption but not universal adoption.

Whereas in Europe they could just say everybody we're in SEPA and everyone's going to support SEPA Instant and it and it and

it happens. So there are pros and cons to this. And you know, I think everybody around the world can can see. The cons in the US where we have some of the most robust banking infrastructure in the world, yet some of the worst payment you know and lowest performance payment rails of any, you know, major developed country. You've kind of transitioned from the traditional payment rails to kind of the the new shiny stables rails.

Was there a specific moment that kind of made you say I'm done with this, I'll see what else is out there. It wasn't. It wasn't so. Much like I'm, I'm done with this more that with one of the reasons that I really liked, you know, financial products. I'm curious, you know, what drew you to crypto products? But but for me, I've seen a bunch of different products be

successful. The commonality across all of them, whether it was Square or Coinbase or you know, Breck's or what have you, all of these products were made financial sense. And so that by that I mean, they enable the payment or some type of functionality to happen faster or cheaper. And they did it in a way that

was much more durable. And so like Square, you could accept a card payment at a fraction of the cost and a fraction of the time invested versus getting a terminal before or Breck's, if you were a startup, you could sign up and get a credit card with, you know, a fraction of the diligence required, you know, to pledge Personal Capital and you could do it same day, you know, and if you can find those opportunities, they're just like super obvious.

And, and the most clear example of this is Robin Hood. You know Robin Hood if you know before you trade for $5 and now you can trade for free. Of course, if you can build a sustainable business around free trades, it's going to win. And when I looked at stable coins, it was very clear to me that they were an economically rational winner. Over time, they enabled payments to happen faster or cheaper.

And as a result, it was super clear to me as we started spending time in the space that at some over some arc of time, this was going to become a very, very important payment rail. In some ways it took longer than I thought and in some ways it took took less time than I thought. But but, but that's really what drew me to the to the opportunity and to build in the space.

What year was this? So I was at Coinbase in 2018 when Coinbase was launching USDC with Circle and I was running Coinbase's consumer business at the time. So this is, you know, basically the consumer app that people

sign up for and use to to trade. And there was a different group of folks who was launching USDC and we were tasked with figuring out how we would use it. And as we started spending time, you know, figuring out USDC, it was like our first idea was to make Coinbase into a global bank on top of USDC. So it enabled you to build financial products across borders that wasn't possible before.

Our second idea was to facilitate cross-border payments and peer-to-peer payments through it because it enabled you to move value, you know, in a way that was much cheaper. Ultimately, it's taken, you know, I left Coinbase, it took Coinbase some time to build a bunch of those products, but that bug sort of stayed, stayed with me. And then when we started Bridge in 2022, it was shocking to me that more had not been done over the subsequent 8 years to enable

that type of functionality. Stablecoins had mostly been used for trading use cases, you know, Defy and Bitcoin settlement and and so on. And we wanted to make it possible for others to take advantage of that opportunity. Were you worried about the regulatory implications of Staples because in 2022 the situation looked much different than it does today. There's a bunch of ways in which I could, I could take that, take that question.

I mean, I think there's, yes, I was, I was, I was worried to some extent. But at the time when I was trying to, when Sean and I were trying to start the company, it was, you know, the 1st order. You know, in Maslow's hierarchy of needs, you know, we were still at like shelter and water and, and that was like just finding 1 customer. And we always viewed it that like if we if we were worried about the regulatory implications.

Then that meant that we had some business to defend against regulatory changes and that would be a champagne problem. And so, so for the first bit we were, we were really just like hyper focused on shelter and water. Now that we have a business, it's clear that stable coins are

really starting to work. The, you know, we're starting to make for the first time regulatory investments that you know, in trying to work with regulators to help them understand our business and and the opportunities that are available. Because it is really clear that the long term success of the stablecoin space is going to be downstream of regulatory changes.

And this is like no different. I think all of us in the crypto space have like operated in a weird and temporary regulatory zone where most of us could ignore the regulatory requirements. And it was much like the

Internet in like the mid 90s. There's like this great book called Who Controls the Internet? All about like the regulatory changes and regulatory thinking around the Internet, which like early Internet, everyone thought that local regulators didn't matter. You could sell goods anywhere, you could do what you wanted and so on. And France and PayPal, you know, got into this whole thing and that reshaped, you know, regulatory requirements around the Internet.

And we're kind of in the precipice of our sort of France PayPal moment, but in the stable point and crypto space. So you recently, recently while back we're acquired by Stripe, you already alluded to it. Walk us through how that happened and how much kind of regulatory thinking kind of came

into that. I did not think that heading into I guess like those conversations were in 2024, started in 2024, Yeah. And so heading into 2024, even midway through 2024, I did not think our business was acquirable, mostly because we were so optimistic about what was possible with stable coins and it was.

Hard. To envision there being an Enquirer who was similarly optimistic and had this scale to put behind that, you know, to, to invest behind that optimism and had sort of the, the risk tolerance to be pushing forward in this brand new space. And, you know, it is like, it's really, it's really complicated. Like take an example of a business that is like, you know, regulated and to do, you know, a specific type of banking activity or money transmission

or what have you. And then getting into the crypto space, we just heard it over and over again from our customers of like, our board doesn't know if we should be doing stuff in stable coins or, you know, our regulator doesn't understand stable coins. So like this is too risky. The banks were like, you know, if you're doing anything with stablecoins, you're automatically in this risk

bucket. Whereas if you're doing the same activity but not with stablecoins, you're in a different, different risk bucket. There was no like first principles to it. It was just deemed to be in this, in this risky, in this

risky category. And it became pretty clear though, when I started spending time with Patrick, that him and John and the rest of the, and the rest of the Stripe team were incredibly optimistic about what was possible with stable corns, You know, just as much and maybe even in some cases more so than than I was. And as we spent more time together, it was clear that we could do a lot more together

than Bridge could do on its own. And, and now I think we're seeing a lot of that play out where our stablecoin issuance business, for instance, is growing at a faster rate and is, you know, much more compelling together with Stripe then it would be then it would be separate as an independent, independent entity. And so I think their optimism, you know, combined with our like shared belief in how far we could go together is sort of. What?

Made it happen, but I did. I certainly thought the risk and regulatory stuff was going to be a problem. I, I actually had one of our investors as part of the process call Patrick and I was like do everything you can to convince Patrick not to do the deal as. Part of as part of the process.

And so he called Patrick and put in like a really hard anti sell around like, you know, are you willing to take the risk and make the investments and so on to push forward in this space, even if some things might be competitive with products you're building internally and so on. And then afterwards he called me and he was like, no, he's all in, which was great.

Yeah, that's, yeah, some, some, some people are just have a lot of founders kind of have really unshakable belief in things kind of like they've once convinced themselves of. So I think kind of yeah, 100%. I I I hear you.

I totally, I, I agree. I'm guessing you see this with your business, but like now I feel like there's a bit of a cheat code that like if you are a founder of a business that has like worked, you kind of see how important growth curves are, you know, like cohort curves or growth curves or. You know what have you in a business and like. You know, you can apply the same thing to industries as a whole. And it's like once you see it, it's hard to be, it's hard for

it to be unseen. And, you know, things that are like really starting to compound. It takes some like, you know, Herculean force to prevent and stop compounding once it starts going. And I think that they could apply that to the stablecoin space and you could see it starting to compound or you could apply that to our customers and like the cohorts and bridge which are starting to compound now.

As I see it, you can like apply it to a bunch of different, a bunch of different industries, but these like, you know, starting these increasing growth curves. Where there is like clear opportunity to continue to impounding, it's like pretty easy now to gain conviction regardless of how crazy the idea seems.

Yeah, I I think coming from a payments background and knowing how worthy of disruption many of the base technologies are, something so simple and clean a blockchain tech is also compelling in its own right, so. 100 a hundred. Percent. I mean, is that what is that what attracted you to the space? No, I was on a very early wave. I came for the cryptography and I, I stayed for the permission is innovation and the agency that kind of it can confer on

people. So, but I, I do actually appreciate the the operational efficiency gains that you can get as well. Totally. So does that mean that like, did you come in was like Bitcoin the thing that brought you in or? Was yeah, so kind of when when I came in, Bitcoin was the only thing that was that was around.

So it's a good. Let's talk about the things that you actually offer. So kind of so far there's been kind of a lot of kind of like Meta questions, but you have a platform that offers services to businesses and they they kind of they come in a number of flavors. Can you walk us through them? Yeah, we. We have. Five sort of core businesses, but but at the OR business product business lines. But at the end of the day, you know, we're totally focused on

serving developers, so a team. Comes to us and they have a vision to build a fintech for their local country or to facilitate payouts. Or you know, a government entity might come, come to us because it wants to disperse aid. But you know, these these applications, whatever they are, come to us and they have an idea around how they want to use stable coins to facilitate some aspect of their of their

business. And then we provide APIs that enable them to to take advantage of this tokenized money layer and to build products that reach more people or serve folks in new countries or you know, facilitate payouts into geographies that were cost. Prohibitive or inaccessible before or whatever that whatever the need might be. And, and the, the manifestation of that are these five products.

The first are our orchestration AP is that's the first product we built and that is basically send one type of dollar in and spit another type of dollar out. So U.S. dollars in, you know, USD T out, USD T in, you know, USDC out and so on. And it can take any way shape or form. So like the US government might use these AP is to send U.S. dollars? In we convert them into stable coins and send hundreds of thousands of stablecoin payments

out to end end recipients. The second AP is are are stablecoin issuance AP is so you can hit an API and you can create your own stablecoin. So someone could send in USDC and you could settle it as your own stablecoin and you would do that so that you can access the economics underlying the stablecoin. You basically get, you know, 4%

interest on the on the balances. So it and unlocks new economics for you and it helps you control your dollars so you can make sure it's on the right block chains, there's no burn fees. You know, it is a, it is a money platform that you now control. The third AP is are our FX products. So you can send in dollars and spit out Mexican pesos or Brazilian Reyes or a bunch of other currencies, EUR, GVP and so on. Then we issue. Cards. On top of that, and then we also

offer wallets. And essentially all of these products have come together through various needs of customers to build, you know, whatever stablecoin products they need. How bespoke is it? So kind of do you just provide the APIs or do you also do consulting for say an aid agency comes to you and asks for often they don't have the most tech forward kind of people in house,

right? So is it kind of like a dual nature job where you kind of also consult with them or is it just these are APIs kind of you, you do you? Yeah. I mean, I think that it is at the beginning it was like entirely consulting, like an entirely consulting. That was partially because like our APIs never quite offered what anyone wanted because like the V1 maybe met like 50% of the needs of every customer who who came in, but but also because we're kind of creating a new

category. And so this like whole segment space didn't really exist when we started the company. There really weren't companies that were building like, you know, core financial services with stablecoins. It like the market was more or less non existent. And as, as we've created our AP is the market has come around and matured through a lot of the use cases that have been built

on us and some others. And, and, and, and so the, the early result is that we're sort of constantly on the frontier of the market. And I feel like being on the frontier of the market is, you know, you have to have to play more of a consulting role. Like you see this now with the AI companies, you know, they're doing a lot of forward deployed engineers to help businesses adopt AI because it's not clear how it's got. There isn't really a playbook

quite yet. And so I would say there's some areas of our business where we're on the frontier still like stablecoin issuance is very much on the frontier. Teams are still figuring out how to issue a stablecoin and how to grow a stablecoin, what it takes for a stablecoin to be successful. Whereas other products like our stablecoin orchestration business, there's now like many years of data points on like what is working and what is not

working. And if you want to replicate a use case that we've seen before, like you want to build a stablecoin neobank like that is super plug and play. Like you could come to our API, spin up accounts, serve millions of consumers, and do it extremely quickly. Super interesting to me out of kind of out of this bunch, the

intellectually most interesting use case is the is the stable coin issuance just because kind of it goes to the heart of what money is, right. So maybe give us some examples of entities that issue their stable coins through you and kind of what what kind of usage they see, what they use it for, how much adoption they have? Yeah.

So, well, first I'll take a step back like why, why does stable coin issuance need to exist in in our view, you know, today the market is a is a duopoly, more or less it's USDC and USDT, both of which have been amazing at building these markets and building really strong products that have like millions of users and a ton of adoption. However, neither of those have a business model or or really an interest that is aligned with enabling stable coins to be a core payment rail.

For instance, in order to convert USD T into dollars, Tether charges you 10 basis points. That makes Tether and economically unviable payment rail. It is like literally would cost you many hundreds or thousands or 10s of thousands of dollars more to move money and settle it into a bank via USDT versus using U.S. dollars. And the same thing is true of of USDC. Both of these businesses are AUM oriented. They keep the yield and so it. It, it, it, it limits how big this space can be.

And we really think there needs to be, you know, a neutral platform that is optimized for, you know, payments use cases, that distributes the economics back to the developers so that they can build whatever products they want. They can enable better financial services for their consumers and make sure that there aren't these burn fees or other other costs that inhibit payments adoption.

And I think like the duopoly will remain really big and meaningful and I think there will be this like whole world of other applications that are built around it that ultimately over time will be much, much bigger than those two. Issuing your own save a coin. It was quite the rage for a while and it seems even as someone who who really has distribution, distribution such as Metamask, as soon as incentives go away, kind of the outstanding stables drops

precipitously, right. The diopoly you talked about kind of the way that I see it as divvied up the word. So USDC is the US and USD T is everywhere else and kind of they, they are dominant in their own sphere and somehow it balances. What do you think has hindered other USD stables from surging? Yeah. I mean, so I will answer this question via via an analogy which is sort of the way I think about.

I think about the the one of the ways in which I think about the market, there is a history of products that were meaningful, network effects, products that had huge adoption. And remained monopolies or duopolies for periods of time, only to lose over the longer arc of time to more open ecosystems. And one such example are airline booking systems.

Totally sort of niche analogy, but early on with computers, the first booking systems that were created first, sort of like online booking systems were really the airlines. They airlines put all their inventory into a database and then booking agents could buy computers that were hardwired into those databases that could look up those flights. And you created a 2 sided network where the travel agents on one side facilitated a ton of consumer demand.

And then whichever was called AGDS system, whichever GDS system had the most inventory was the most attractive to the booking agents, which then garnered the most demand, which then attracted more flights into the booking system and so on. Anyways, American Airlines created the first GDS system called Apollo, gained huge adoption, was a huge driver of their business because they basically put their thumb on the

scale. So if you search for a flight, American was the first flight every time. Then then United Airlines built another GDS system called Apollo. That Apollo gained a ton of adoption on all the routes where American was not successful because there was no airline that was everywhere. So United was in the coast and in Chicago and so on. And so it gained adoption there. And for about 15 to 20 years, they just completely controlled the GDS markets.

A bunch of other people tried to compete, Eastern Airlines tried to compete and, and a few of these other continental tried to compete. But ultimately they they built failed systems because they just tried to compete head on and they didn't have the network and so on. And over time there was just no adoption.

It was too hard to break into the network effects of United and so on. However, the European airlines came around and the European airlines realized they were never going to use an American or United system. That's just like completely against that, you know what I mean? They'd be ceding their entire business to these American networks.

So the the the. European networks built their own collective GDS system called Amadeus, and when it launched they immediately won Europe obviously, and now today Amadeus is the biggest GDS system. Completely supplanting United and Apollo. And then when the Internet came around, a fourth one came around, which was Worldspan, which serve the Expedia's and so on, which is now also bigger than Apollo and Sabre. And this all happened over a 40

year period. And so anyways, my as I tie this back to the stable coin space today, a lot of the stable coins are launching and just trying to do exactly what, you know, it's like Eastern Airlines trying to create the exact replica of Apollo, but doing it with no network effects and five years too late. And so if a stable coin tries to do that, it's unlikely to be successful.

And what I think we're going to see and what we are helping to enable is a bunch of stable coins to compete in orthogonal dimensions, which we think are completely wide open spaces, you know the equivalent of Europe right now. And these stable coins are all going to start small and these networks that we're building are going to start small.

But if you have a 10 year arc of time or a 20 year arc of time, the opportunity that we are chasing is so much bigger than the opportunity you know that that USDC and USDT are going after. They're going after just defy, you know they're going after just AUM. They're not sharing any yield. They have burn fees. Those markets are much more limited than the global market for money movement. And so that's the market today that's small that we hope to win and scale over the next over the

next 10 years. Doesn't answer your question directly, but like this is the arc of time and I don't think anybody's going to come around and win tomorrow. Like I don't think USDC or these network effects things take time, but we're operating on a very meaningful timeline and we think like this is an enormous, you know, multi decade sort of platform shift and how money moves.

And I think we're investing behind the opportunity that we think is going to be bigger over a much longer period of time. Tell me about these orthogonal dimensions kind of like this Europe of stablecoin. So kind of what are what are the

dimensions along which kind of you have to differ in order to kind of potentially become meaningfully successful? Yeah, like a a great example is banks. So today it doesn't make any sense for a bank to use USDC or USDT. If you think that stable coins are going to be core financial infrastructure, they have to be used by banks in some capacity. That's just the way money moves and settles. Globally.

But a bank is not going to use the existing stable coins, because if you're using someone else's stable coin, they're getting all the yield. The deposits are held somewhere else. On someone else's balance sheet. And again, there are burn fees, so it. So it costs more money than than using U.S. dollars. Like think of a card network settling huge volumes of transactions via USDC. You know right now it would cost you more money to settle settle via USDC than it does to settle

on U.S. dollars. So these types of opportunities are completely Greenfield because the existing stable coins don't have the underlying structures or economics that support winning in these spaces. They're being used in those spaces because everybody wants to do an, a science experiment to like figure out what could be possible. But actually scaling adoption necessitates having the underlying economics that align with that use case and align

with that entity. You know, a bank needs the deposits to be held at their bank. A bank needs to be capturing the the Treasury yield to the, you know, to the extent that's where the funds are invested. And a bank sure as heck needs to ensure that you know they're not going to be paying a burn fee when stable coins are converted in and out. I think you kind of you implicitly already answered this. But in crypto we kind of, we have this, this duality of world

views. We're kind of half of the people kind of believe that crypto will replace banks and the other half kind of believes that crypto will quietly sit underneath them. So I I take it you fall into the latter camp? I, I I fall into the into the latter. Camp. But but I mean, I think that even, I think it's sort of both in the sense that like ultimately, if you look at the crypto ecosystem and the stablecoin ecosystem, the the foundation, the base layer of the stablecoin ecosystem are

banks. Because every stablecoin is backed by, you know, every dollar based stable coin is backed by dollars and treasuries and it could be EUR and euro treasuries or whatever. But but those assets are held, you know, at a bank. And so whether even if you're die, for instance, you die is predominantly backed by USDC and USDC is predominantly backed by dollars and treasuries. So if you tie a lot of these stable coins back to the base layer. It is, it is a bank somewhere

holding the funds. The, the question is, will consumers ever engage with that bank the way consumers engage with the bank today, Today consumers engage at that, at that bank level, you know, to open a bank account and so on. And in the future, it's very possible that that all of these, this crypto ecosystem is built on top of these core banks that are holding the treasuries and so on. But a lot of the customer engagement happens through a

wallet. And so you're predominantly engaging with the stable coin, you're issuing a card through your wallet and so on through your through your wallet instead of through traditional bank or neobank or or whatever else. And I think that's totally possible. And that's what I mean by both is that like banks will continue to be important at the base layer.

And I do think more and more consumers are going to be moving to engaging directly with wallets and in the beyond, just like the adoption of bridge and the folks who were building on top of bridge. What you can see and what we can see as like a great proxy for this is just adoption of crypto back cards is like a great example of this shift. You know, why would consumers want crypto back cards?

It's because they're using a wallet as a primary spending spending account and, and in effect replacing a bank. And so whether you're using like a Ledger wallet or whether you're using like a Phantom wallet or whether you're using Gnosis or whatever else, you, if you're, if you're doing that, it's like your wallet is effectively becoming a bank

replacement. True in that word where these kind of 10s of thousands of potentially 10s of thousands of banks kind of issue with their own dollar stable coins how much will that still matter So kind of kind of the one of the hallmarks of the dollar is that there's $1.00 right?

Kind of like there's kind of and it's, it's, they're fungible and kind of like you, you know what you have depending on kind of like who these things are issued by, obviously how much they should be valued at could be very different, right. So kind of you say you have, you have a Silicon Valley Bank dollar kind of all of a sudden kind of like it may only be

worth $0.70 or something. And if you kind of if you look at the clearing technology that kind of we have today, I see why kind of why kind of this pluralistic ecosystem could, could emerge. On the other hand, I think I could also make the case that with prices readily available for everything, you don't actually need a fungible money token anymore. You, you could just pay in fractions of fractionalized S&P 500 or kind of whatever stock

you, you may have. So kind of like this, this kind of universal layer that monies used to supply us with kind of like in as how much is it really still necessary while technology advances the way that it does today? I think it's a great question and I think it is going to be an amazing experiment over the next 10 years. As you know, you have all these different assets that are tokenized and someone, their primary, you know, you could

have let's like take a card for instance, let's just assume that a card remains the permanent form factor for the next 10 years. Big assumption, but you know, you have a, you have a card and then. Backing that card, you could choose as a consumer to back that card with dollars or EUR or Bitcoin or gold or tokenized, you know S&P, you know, token, tokenized stocks or whatever else you deem to be the store of value that is interesting for

you as a consumer. And it's the first time where that's like really possible I. Don't know what? Consumers are going to are going to choose. To date, it has been hard. To get large scale adoption for people to use a investment asset as a spending asset. I would say you know you see that with relatively low adoption of like Bitcoin for payments because most people believe the value of Bitcoin is going to keep going keep going up and and the same thing with gold bucks.

You know they believe the value of gold is going to keep going to keep going up. However, if you see if all of a sudden government spending goes, you know, let's say like American, you know, a dollar has become much less trustworthy. I could easily envision a scenario where someone would rather sit on top of tokenized gold or Bitcoin to spend than U.S. dollars. And it, and it's, and it's going to become, you know, 10 years ago that was impossible, like

literally impossible. And now it's, it's totally easy, yeah. That kind of naturally segues into the non-us dollar stable coin kind of domain, right? If you look at the volume of stables in web, 399% are U.S. dollar denominated. Is this is this a temporary phase do do you think? For sure, it's temporary. Yeah, Yeah, for sure it is like we see it across our business. There is immense demand for other tokenized dollar formats. So tokenized Colombian pesos and Mexican pesos and Brazilian

Reyes and GVP and EUR. There is just immense demand, but the issuers don't really exist. So we're just in the Super early innings. And, you know, it's like, I don't know, like I like to read a lot of like business history books, you know, and like you, it's in, in the business history books, they're like, you know, like the GDS example, they're like telling the history of these GDS systems over the course of like 30 pages, but

it's 40 years of history. So like, you know, you like fly through 40 years and it feels like it's this like wildly intense thing and then you try to zoom out and you're like, holy crap. That actually it, there was like 5 years where there were no competitors at all. And then I think about like what people would write about this moment in time. And right now it feels like there's no other stable coins that exist.

And I feel like when they write the book of this period of time, you know, it's going to take like 3 or 4 years. But like the, you know, the, there's going to be like one page between their only being USDC and USDT. And then they're being like, you know, 1000 different, different dollar formatted staple coins. And we're just like right on the precipice of it. You see, like we see a bunch of companies starting in Africa and Asia and LATAM and Europe

starting to build stable coins. And then we need to have the minting and burning infrastructure that enables very quick redemptions and conversions so that we could operationally use these stable coins. And then when that happens, we need to build the liquidity between these different stable coins so that we can do all of our FX and so on at like really high velocity with really solid depth. And I think all of that will

come, but it will take time. How much do you think that company issued Staples will be a thing? So kind of if I think kind of like say, I imagine I'm the CEO of Amazon or Walmart or something, kind of, I would be absolutely giddy about the prospect of issuing Amazon dollars that kind of my customers could hold because it's an easy way of kind of financing the business. You can give your, you can give kind of say 5% discount if you, if you spend Amazon dollars at Amazon.

And kind of how do you think we'll see this? And if so, when? I mean, I think that all. Things that are economically rational will be tried and and then it's just a matter of whether consumers. Will, will want them. And and so, you know, it's not that different from Amazon gift cards. And so is this like a better replacement to Amazon gift cards? Yeah, probably. And and so as a result will it exist? Yeah, probably. And like, is it economically

rational for Amazon to try it? Absolutely. And so they over time, they probably they, you know, it's just a matter of like when just over the arc of time, people try and do things that. Are. In their, you know, economic, in their economic interests. I, I do think there's a question of like how this will work for consumers and like what will the adoption be and so on. But I think gift cards have the, the best, are the best analog.

And I like for Amazon, for instance, if you issue a stable coin and you can put it directly in consumer, consumer wallets, you bypass an immense amount of cost that exists in the gift card market. You know, you're not, you're no longer traversing on Visa MasterCard rails. So you know, all those fees and the bank fees and you know, prepaid car fees, all of those go out the window. You no longer dealing with, you know, the distributors who are

sitting. Between you and consumers, you know, putting these on racks and stores and you know, so on and so forth. So there's a, there's a huge amount of savings to be had there. Yeah, this kind of naturally begs the question, what about custody? So kind of you also offer wallets as a service. Is this, this is also for your, your customers, customers, right. So kind of why, where do you, where do you kind of see the

trade off between kind of safe custody and and convenience here? What, what kind of what's the spectrum we, we you expect to see in in on consumers phones? Yeah. I mean, we just think wallets are. You know if if if the.

Future is going to be is going to if stable coins are going to be like an enormous part of the financial future, then wallets will obviously be incredibly important infrastructure because all of these stable coins will have to traverse through wallets and this is. Sort of why, you know, we we acquired Stripe, acquired Privy and why sort of what that team has done is so strategically important for our business.

And I just think for like developers who are who are building products generally we have have taken the view that we want to support wallet infrastructure in whatever format makes the most sense for the developer. So if they want custodial wallets, we will provide that. And then Privy is the primary product through which we provide

non custodial wallets. And to date, we have seen that a lot of companies are just, you know, more comfortable with custodial solutions given the way some of their architecture works today. And one of my one of my like personal frustrations coming from the traditional financial world is, is especially when we work with some of these companies who want to adopt stable coins. You know, are, are you familiar with FBO bank accounts saying

maybe no? OK, so basically every financial product, because it's so costly to move Fiat, every financial product that's built today is an FBO account, which means that it's one account with a giant pool of money in it.

And then there is a company that independently maintains a Ledger. So like, you know, if you have your Revolute bank account or you have your cash bank accounts or you have your Chime bank accounts or whatever, generally all your money is in one more or less one giant account. And then there's just a Ledger of like, you know, you know, $2.00 of this balance goes to Zack and you know, so on. Obviously in crypto that's like totally unnecessary because it's trivial, easy to spin up wallets.

And the blockchain is like really good at ledgering, like extremely good at ledgering. It is like what a blockchain is, is built to do so. So there should never be a need for FBO bank accounts ever again. However, every single fintech that was created five years ago or 10 years ago, all of their business is built on the assumption that there is an FBO account. So one of like my big frustrations coming back to wallet is like all as a result a lot of these companies.

Need. To stand up a custodial wallet that stores all the stable coins in one wallet and then they Ledger it independently, which is like wildly inefficient because you just don't like, like what? What are we doing here? But because of where we are in the adoption cycle, we're kind of this is how companies currently must adopt. And and obviously the folks who are coming around and building Neo Bay like a stable Coinbase Neo bank from the ground up would never do that.

They're spinning up a bunch of custodial or non predominantly non custodial wallets. Everybody has their own wallet. They're letting the blockchain do the work and then they have a team that's like one 100th the size. To maintain a similar type of infrastructure. Yeah, it's it's wired how inefficient legacy tag often is, not just because anyone build it deliberately shoddily, just because kind of it, it's layer on layer on layer on day.

So. Yeah. And it's just at it's core it, it's just makes, you know, Fiat makes this fundamental assumption that moving money is expensive. And the net result of that is all of this stuff built around the Fiat system to enable it to feel like money is moving, but money never actually moves. And stablecoins and crypto enable money to move, you know, at more or less no cost, depending on the blockchain

you're using. But you know, if you're, if you're using a low cost blockchain, it moves more or less at no cost. And so then, when the movement of money is phenomenally cheap, a whole bunch of new stuff is possible. Yeah, what? What do you see as the biggest risk to the Saber coin ecosystem right now? I, I would say there are three. So the first is that we only end up with USDC and USDTI think this is like a huge, a huge risk to the to the ecosystem that we

are building. And I think that if we only end up with those two stablecoins will be much bigger than they are today. And those businesses will obviously be wildly successful. But none of the economics will go back to consumers because they're going to be a duopoly and why would they do that? These payments use cases are not going to be economically viable because they don't want high velocity of money. They want static AUM. And so stablecoins will only realize one, one thousandth of

their opportunity. And it's really, you know, as much as it makes economic sense for there to be 1/3 or 4th or 5th or 6th or what have you, it's that you can't take it for granted like it does it. Somebody has to build it. The future has to be created by someone. And, and we're certainly trying. The second major risk is regulatory like we're we're all downstream of regulatory requirements and to believe otherwise would be crazy.

And, you know, we have seen what European regulation has done to slow the growth of European stable coin market. And it's been really hard to get that market catalyzed in any meaningful way. And, you know, the US is being litigated and re litigated. We saw genius. And then we have market structure and the community banks are fighting and the big banks are fighting.

And everyone's saying that stable coins are going to destroy, you know, you know, going to going to take away all local businesses because community banks are going to go

away and there's going to be no lending and you know, so on. So it's like a whole, you know, thing that's going on right now. The third major risk is Deepak is you know, one of these one of these two or, or if there's a third one that gets really big or something. But you know, the we're still at this very fragile point in the market where the trajectory can be materially shifted by some major erosion in in trust. And so I think those are those are probably like the big.

Risk right now. Are there any that you think of that that I missed? Over reliance on the US dollar. So I mean kind of like if if you look at the the global geopolitical situation, it seems unwise to kind of have 99% of the stables market denominated in U.S. dollars. I totally I totally agree and we are like. We want, we just want, like as many folks in as many countries to be building as many stable coins as they possibly can and as quickly as possible. Quicker than USD one.

So I mean, Bridge is not a very old company, so you might not have a lot of regrets, but kind of like if you were to kind of start over again today, anything you would do differently? I would say a lot of our regrets stem from a similar behavior, which is that it was it was so hard to start our company. And, and like, I think that I don't know how folks listen to this might think of our company or what have you.

But like you, you know, there was like a whole year where we did nothing but fail, like, you know, and, and everybody and at the same time, the entire crypto market was just a complete wasteland. I mean, this was Terra Luna happened and then FTX happened and then SVB happened and USDC D peg and it was like people were like, what are you even doing wasting your life building? Literally nobody is going to

going to use this. And so we were kind of like children of the Depression, where like our, our like cultural norms as a company were shaped by scarcity. And we were constantly fearful that like the market was going to go away. And that resulted in constantly being behind customer demand and when the business really started working. And so we found ourselves like scrambling from like issue to issue to issue.

And it was like so interesting for us because like we looked at the business and we were always like this could all fall apart tomorrow. And our investors look to the business and they were like, what are you guys talking about? Your business is going so well. This is like one of the best companies that we've seen in a long time.

And we can never get it through our head, which which enabled us, which which forced us to like under higher, you know, and we really, you know, redline the team. It it caused us to invest, you know, behind a bunch of a bunch of demand. It caused, like me mentally be to be, you know, never sort of quite realizing where bridge was. And it's sort of like arc of it's it's sort of like journey and building a company that's probably like not one thing, but a theme of things that

consistently. Plagued us over the last couple years. I let it stand, although kind of like it it, it veers into humble brag territory. But Zach, where, where, where can people follow your work and learn more about what you and Bridge are building? Visit us at bridge dot XYZ. If you're interested in using the product, you can sign up there and then you can follow me on Twitter. I'm just ZC Abrams and then bridges handle is at Stableport so follow us.

Fantastic. Thank you so much for coming on. Yeah, thank you for having me. This is very fun.