Hey, folks.
We are recording at Chainlink's Smart Cohn event and joining me is Larry Wade, who is the global head of Compliance and Regulatory relations for crypto at PayPal.
Larry, Great to have you.
Tony's great man. Great to be here. I'm a big fan, Thank you, Larry.
And PayPal is doing some amazing things with crypto and blockchain technology. Before we get into all that, tell us a bit about your background and how you got into crypto.
Okay, so I am a bit of a nerd, but I'm also a next college jock, so you know, give me a little credit there. How did I get into crypto? So I went to Columbia from my MBA and one of my classmates one of the smartest guys I've ever met. He was ex military but also a commodity's trade or for one of the big banks. Interesting, and every quarter we kind of have these dinners we have a topic. So this is nearly nine years ago, the topic was bitcoin.
Now me, I am, you know, over twenty years in the risk management field, right so credit risk, operational risks, d ris, et cetera. And you know, I'm like this feels like tulips I don't get it. No again, I'm a nerd. So I've tried to read and underbridged audiobookscount is reading at least four books a month and I've done it over twenty years. Wow. And when you do that one, you learn there are moments in time that
things really change. Yeah too, you will never know everything, right and three, you know, have that childlike curiosity because you never know what might just come your way.
Sure.
So when I we had that and I said, all right, I'm willing to hear you. He said, you know, I think this may be an adoption rate of a new asset class. He's like, and this technology is interesting. It's like, I'm trying to figure it out still, but you should look into it. So I start thinking, Okay, you know I've done an engagement. You know, we're ordering you know, one of the large foreign bank swift operations. I'm like, Okay,
when it came about, it definitely was beneficial. But you're talking the seventies here, right, So you know I can I can I can send an email to Singapore instantly, but I can't send value or you know, you can kind of track what's happening in this kind of internet world, but from a value transfer perspective, there's still times where you don't know who owns what, et cetera. So I got to see that, so I'm sorry, this is interesting.
And then he also says something that really hit in that his daughter said, Daddy, why would anybody want to touch money? And I said, wait a minute, this is also kind of a demographic player as well. Right, So I went home in the rest of she's white paper, and I was blown away. I said, this is one of the most brilliant things I've ever read in my life. How do you solve the double swim prom how do you have a trust this transaction in the digital environment?
And then all of a sudden, my mind went crazy because I started thinking about how I grew up. Sure, and if it was not for the Internet democratizing information, I would not be here. But we still have not democratized value. Yea. And I can make an argument that democratizing value is a bigger play than even information, because if you don't know anything, you need transaction value.
Yeah.
So then I read Blockchain for Dummies and I said, oh my goodness, public blockchain, send me private, private, smart contracts, anything that's if then's probably going to be a smart contract. I went down the rabbit hole of the time, and at the time, I was a management consultant at one of the big foursts, and I went to the senior partner I was aligned to and I told her, I said, look, I think this is going to be something. And I said, there are two areas. I think there'll be a lot
of value. One is on the engineering side, being able to deal with the cryptography, the smart contracts, et cetera. That's going to be something that I understand. But that's not my specialty, I said. Been on the risk side, I said, I think we will see inherent risks we've never seen before. I said, how do you handle a fork This is back when you know forking and all these things. I said, how do you handle these things? I said, I want to try to be one of
the experts in that. And to her credit, she's still a mentor of mine today. She says, Longe doesn't mess with your client work. That time again, I'm consulting for Wall Street banks, asset managers, card companies, et cetera. She said, I support you. So I was able to kind of help develop some of the early blockchain and crypto risking appliance methodologies for one of the Big Four. Got laughed at a lot. A lot of people told me that
I've seen this before. This stuff doesn't make sense. But when you put the hours in, that's when you realize, yes, there's a lot of hyperbolean nonsense, but that's every new innovation, but it solves real problems. So from there I studied it every single day. Wow. And I again, you know what, in my spare time you've talked to my CFO clients,
I will watch podcasts like yours. I remember your early days, and I just dedicated my kind of life to figuring out how can I do my part to democratize value and really try to help the world in that way because I think the velocity of value transfer, the velocity of activity, it just could be very beneficial. So fast forward. Finally, you know, got up to that, you know, getting into the partner level and work hard, you do it, and
this opportunity of PayPal came about. Wow. And you know Dan Shulman prior CEO, had some foresight and that he believed in stable paint technology. Yes, and to get there you had to do some things. You had to have an exchange, you had to have one team transfers, you had to open the PayPal wallet. You to do all these things. And we had this roadmap, but it went from a deck to here's a startup within PayPal. Wow.
And you know, I won't go through the whole long story, but I was fortunateough to be employee one to build out the risk of the appliance strategy for PayPal, s Crypto grop incredible and it's been an amazing journey. I'm blown away by where we are right now. Sure, the tailwinds are just unbelievable. We're still super early, but I think, you know, this is really a thing. Now. That was a very long winded answer. No, that was great.
I mean, what a journey.
And you know one thing that stood out to me. You spearheading at a one of the top four accounting firms, blockchain and these things, and what is it like look looking back to see all of Wall Street and all the big bangs getting involved.
Now it is something that I thought could happen. I took a big risk because of you know, your partner at a big four. That's not a bad life, But I mean, my goodness, what we went through. I mean, you think about it from the various and fair enough, a lot of what happened in our industry was tried and true. Wall Street she against to be honesty, whether it's fraud or commingling of funds or lack of segregation
of duties or opick financialuation, MISSI leverage. This is stuff we've all seen in the risk manager space, but it could have really sunk us. So the fact that the industry is so anti fragile it made it through that, and now we can get on the other side where those incumbents are saying, Okay, maybe there's some value here. I'm excited. I'm blown away. I'm thankful that I have a little bit of a head start in my knowledge base.
I'm thankful PayPal does as well. We were the first, once a regulated branded stable coin, and you know, I'm really really excited to integrate it into real world commerce, and I think that there will be a number of winners. I think in PayPal's case, we have a very clear mandate. Right now. We have a two sided network with almost four hundred million wallets in two hundred countries. We have merchants and consumers. That is what a lot of organizations
would love to have as a base. We've built our muscles the last five years on you know, how do you actually interact on chain in a regulatory compliance manner? And now we can start having fun to say, all right, how do you launch a product like pay with crypto? How do you have a product like we have where you know, bill paid with stable coins? How do you
have py USD rewards? So now we're saying, all right, there are existing flows that faster, cheaper, programmable, nearest the finality just adds value to the entire stack, and how do we get that flywell? Going? Yes, So that's kind of where we are right now where I am, But I'm also just really excited about what everyone else is building. Sure, and I think they'll be you know, closed loop ecosystems
that interact in their times. For example, if I'm a bank doing a syndicated wind farm deal in Canada, do I need to know everyone in my syndicate? No, that doesn't necessarily need to be on chain. But maybe you're trying to settle or do something when I need to go on chain? Well, how do you do that? And we're just travel will come and play and all these different things. So now I'm just really excited about the
problems we get to solve. Sure, and sometimes I can't get I can't believe I get paid to have to think about these firms because I thought about for free for a time. So yeah, overall, just really excited.
Let's talk a bit about p y USC and how it's being used as much as you can share.
Yeah, is it.
Being used behind the scenes for cross border payments but users don't necessarily know, for instance, settlement our merchants accepting it and using it as well.
Great question. So PayPal has a Zoom with X of payments business, and you know that business is in one hundred and eighty countries, so we've already integrated PYUSD in a number of flows there some where the customers have an understanding. For example, pyusc is a funding instrument for your Zoom transaction. Well, now as opposed to maybe you know, using bank or balance et cetera. Utilizing pius D, you can fund that transaction at zero fee and now you
just have the FX. So that's already a benefit to the customer. Now, on the other hand, there's a lot of pre funding and cross border payments as you I'm sure you're aware of. So we also have piloted with two large partners, one in the Philippines one in Africa, where now as opposed to kind of pre funding via wire we're able to utilize PIUSD and have near instant funding. Wow, and now that allows you to manage your float. It's cheaper.
Everyone can now pass on that value. So those are just two use cases that are real right now that we are, you know, really trying to make sure that we grow in a responsible way. But again that's bringing utility. Oh absolutely answer your question. Yes, it's already happening. And after genius and though we don't have rulemaking yet, the signaling of having stable coin legislation that right there has really opened the floodgates. So I'm really excited about twenty twenty six.
So to your point, PayPal has a massive network right of users and merchants, been around for a long time. I remember using PayPal back in two thousand.
And most people don't know we own venmo. Yes, you know, people don't even know that.
So you have the distribution, you have the network build, but our institutions, outside institutions seeing what you're doing and saying, you know what, I want to use PayPal's stable cooins p uy usc.
We are getting tons of inbound to collaborate. We believe in partnerships. Yeah. Again, there's room for everyone to be successful at this and we know what we do well. So to your question, yes, I mean we haven't we announced even the coin based partnership recently like your spark et cetera. But whether there's trad fies, merchants, et cetera. You know, everyone's trying to figure out now that we
have some regulatory clarity. Yeah, well, how do we use the technology to benefit us and treasury operations and things of that nature. So yeah, lots of reach out and that's been really exciting.
It's amazing to see the growth.
And one of the things folks wanted me to ask is that you offer a crypto assets the ability to buy sell on both venmo and PayPal. Are there plans to add more crypto assets as much as you can share?
A good question. So one we're always thinking utility, yeah, and again is it aligned to the value prop that we are trying to execute on, which is revolutionizing commerce. So now again we're really focused on py U s D and p USD is on multi chain right because there are different chains that have different benefits. So you know, the short answer is, you know, if it's aligned to the strategy adding more coins, yes, but we are not trying to be a change. There are organizations that do
that in a fantastic manner. So we are trying to figure out how do we integrate py usd into Venmo and brain tree and hyperwallet and all these other products that we have we know will bring real value to the to the ecosystem.
Yeah, that definitely makes sense. It has to make business sense right now. There was also a crypto rewards program that PayPal launch tell us about that.
Yeah, so rewards are interesting because and it is rewards. It's not interest, it's not yield. You know, if you go into Genius, it's very clear issuers cannot pass along. Though we're not the issue er. Paxos is our issuer, it's our branded and it's it's coregulated. So what we wanted to do is to be able to again bring utility to our ecosystem, to get the flywheel going because ultimately, especially in like the US, though there are you know, issues.
The system works, but how do you incentive people to adopt this technology and then see the benefits of that technology. So being able to hold py USC on memoir PayPal and earn a reward that's utility. So now, and if
you're a merchant or a consumer. So now maybe you're a merchant and you want to use the bill pay product, and you are a small business owner and you're paying your utility bills, but you're holding p y USD and now you're gaining PRUSD rewards and then you're paying out and you're paying out at a lower rate, things of that nature. So we're trying to get that that flywell there.
Or again, you know, you are a consumer and as opposed to maybe sweeping it, you know, immediately to your bank bult you say hey, I'd rather hold this, or I want to convert in and out of another digital asset, or I want to go one play in the DeFi market, things of that nature. So we wanted to try to figure out how can we incentivize our user base to want to hold it, because, as you know, once you hold it, use it, play with it, it starts to
make even my mother. Once my mother, if I said, okay, by you this Bitcoin once she gott and she's like, okay, is what's going on here? So, you know, stable coins, especially in the US, it's why do I need it? You know, I can, I can, I can send VENMO, I can use cash up, et cetera. But we're really trying to kind of help change that behavior so that way, really we can start unlocking the value.
One of the things you guys, which is really cool that you guys are launched was P two P payments with PayPal links. Does that include both crypto assets and P y U s d.
Yep, So I mean being able to send that link. It's purest in the Indi digital asset. And again we're trying to just make it as easy as possible for people to interact and use. Yeah. Again like it. It's fascinating. I like to say electricity, whether it's you know, direct or indirect. And we're not you know, you know Tesla, you know versus uh, you know Edison here. But at this point we just want to turn the light on. Yeah, and PayPal's really good at you can turn the light
on in a simple manner with trust. So we're trying to figure out how can we integrate the technology as much as possible in a seamless manner that's easy for customers to interact with that adds value. So we're working through things like that.
It's great. It's amazing how far things have.
Come, Tony. I truly am blown away. Yeah, and I'm so thankful for all the challenges. Sure, and as a risking compliance professional, I've had to think of many what could go wrongs that you wouldn't even think of what could go wrong? Yeah, but ultimately that's how you build anti fragility. And I've worked as a management soon for a very long time and the truth of the matter is there's lots of things that go wrong behind the scenes, but maybe blockchain technology you might not know it right.
So I'm really really excited. And I think it also aligns with just this overall convergence of where technology is going. I like to say, when people kind of question, they say, what do I really need this? I said, do you think there was gonna be more analog or digital? Do you think an agentic AI or your digital twin is gonna send an AH or dollars or maybe utilize the blockchain exactly? So if you just kind of play this out it's an overall play for the convergence of all
these new technologies coming online. I was in Austin. I'm a big Formula One fan, and I went down to the Grand Prix and first time I got to drive in a an autonomous vehicle. So my wife and I, you know, we're downtown, We're looking at the city and you know, oh, wait a minute, you know, this option got in and I was like wow, And I thought to myself, the Internet of things, when these robots and things like that communicate, it's just even more utility that
we can't even think about at this moment. There's plenty of problems to solved just in what we know.
Yeah, it's fascinating because you have the convergence of all these technologies AI, robotics, crypto, block chain, and much more. And you know, eventually, when we have these humanoid robots, regardless of what they're doing in the economy, they're not going to.
Be using cash, not at all.
It's going to be stable coins.
And what I love about stable coins. And it's funny because I remember the old days, was like I like blockchain, but I don't like the crypto. Yeah, but what people understand is having the value chances for mechanism aligned to the protocol is the AHA for the Web three, right,
and it's one of the flaws of Web two. Web two is actually legal to transact value initially when it was being developed, so you know, you still need those value assets that have incentives for developers, early adopters, and also to kind of again you know, maybe pay that gas fee, et cetera. Stable coins I think are the initial killer app of Web three because it's that true partnership between the FIAT world in this Web three world.
Yeah, and you know.
As a US citizen, it's a ready made market for US treasuries in a regulated way, and you can you can have the pliferation of the US dollar in this tokenized version again in a regulated manner. That way, you know, you can keep governments, you know, comfortable, but then also unlocked the value for citizens. So you know, like, I'm just thankful that we're at this moment where the real world, in that Web three world that we've been looking at all these years, are really starting to merge.
Yeah, it's fascinating, and it's moving at such a rapid pace.
Oh my goodness, I can't imagine when the Clarity Act is past the amount of innovation that's t hundred.
Because ultimately it's fascinating. There was this notion of everyone was a renegade and it just was not true, you know, like like like at the end of the day, you want sensible regulation. You want to work closely with your regulatory and government partners, because if we don't have clear rules of the road, then how do you innovate in a responsible manner? And you don't want the systemic risk
to just be so residually high that it's unbearable. So now that we're starting to get this sensible legislation around the world, now you can build a strategic moat around how do you execute upon it and then innovate simultaneously? And then I'll throw one more thing out there to the viewers. It's not only is it how do you adhere to the regulations in your particular jurisdiction, but how do you manage the other regimes et cetera. Because this is a globally adopted you know, initiative.
So yeah, it's fascinating.
The governments are going to have to align on their regulations like and figure out how do you traade all these things.
Yeah, and that's tough, but again that's the fun of it, right, So how do you partner with your regulators? How do you help educate them? As more sensible relations come online, you start to see the hey, okay, well this part of the world they're using this, this makes sense, So maybe we could do that. So I think we're still very early, but at least now we know that the tailwinds are there, where before it was it's been headwinds for the you know, the last oh my goodness, FIP plus year as easily.
Oh yeah, so as much as you can. What's what's on the roadmap that you can highlight that PayPal is going to do with crypto or p yus.
Yeah, I mean I can tell you wholeheartedly, you know, and as you look at our listen to our CEO Alex Chris. We want to revolutionize commerce. We want to unlock the value of our network. This digital asset revolution is important. I can tell you it is. It is an important initiative at PayPal, specifically, how do we unlock the value of PYUSD. So I think you'll see a lot of innovation where we are integrating PIU s D into core activities that we were not before. But it's
allowing for faster, cheaper, et cetera. And then on top of that, you know, how do you unlock the value around the world? Again, very hard problem, not easy, but it's a challenge that everyone's looking at and you know, you know, we're definitely looking at that as well, because again we're in two hundred countries and how do we lack value for all of our customers.
Oh, for sure, there was something that happened I have to ask you about. Sure it's with Paxos when when they accidentally minted you know, three hundred trillion or something py sc Now I understand stood the benefit of that, that that extra whatever happened there, we all got to see at the same time we got to see when it was fixed versus if that happened at JP Morgan.
Nobody knows, Tony.
Thank you for saying that. And it's fat it's interesting. Problems occur when you innovate, problems occur when you are bau and to your point, you know, in one no customer funds were harmed. This was you know, Paxos owned it immediately we spoke. It was fixed in less than twenty minutes. But because that kind of error happened on chain, the world got to see it, whereas in an error and you know in the trat FI, you know you wouldn't see it in the closed data, right. But yeah,
was it something that was fun for the moment? No? No, is it a great learning lesson for everyone. Did all of our regulatory partners and other partners ass what happened? Yes? Are we working really closely with Paxos to make sure that you know, we continue to show up all the controls and improve and understand all the worker go wrongs. Yes,
but it was a moment. You know, we're past. It wasn't fun, But long term, selflessly, as a risk compliance person, I'm glad that we can continue to build, innovate And again, no customer funds were harmed anything like that.
Right, And this was just the issue.
But the great thing is, and I keep in reminding people, it's not that the erar happened.
Humans make mistakes all the time. But the point is, for.
The first time in history, we were able to all see it, and that's the power of the blockchain. And then it could be fixed right away, burned it right away.
And as an open source stable coin. Yeah, being able to have that transparency. Yeah, I mean, how is that? It's not a negative real you know, it's just again it's error. But there are errors everywhere, Yeah.
Every day. As long as humans are involved, there's gonna be got it.
But the technologies here where we have to trust, we have the transparency, we have the ability to address it right away. So that's really great. What are you most excited about for like twenty twenty six, you know, for the crypto industry.
Yeah, I'm excited for rule making, the comfort genius. I think that's going to unlock a lot of value because we have the legislation, we don't have the rule making yet, right though, if you look at like NYDFS Part two hundred for example, there's a robust regime for stable coins there. What I do know of being in risk management for twenty plus years in this space is that best practice is our leverage. So trying to kind of get ahead of all of that. Definitely, the market, you know, clarity
looking forward to that. I mean, my goodness, what's the commodity? What's this? How do we have the rules so we can now integrate this more to real world activities? Sure, How does the world come together and start unlocking value? How does this overlap with AI. I'm excited to see all of this because I think we're hitting a point in the curve where we're going to see some exponential changes. You know, I use you know, ch GBT five every single day, right if you have said that two years ago,
no way, right? So you know, what's what's what's on the horizon. Given we're in this exponential moment, I'm looking forward to that.
It's exciting, man, really exciting. Follow up question just PayPal looking to use AI in any way AI agents and things like that.
Yeah, I mean, if you you know, listen to our CEO and what we are trying to figure out how to utilize you know, AI in a responsible manner to unlock value for our customers. Absolutely, I don't know in the organization, that's not sure. But if you think about just you know, our again our two side network, the data, the ability to again benefit merchens and consumers. You know, it's something I think everyone's looking at and obviously you know we are as well.
I'm gonna have to have you back on to have a longer form conversation because I'm fascinated by what PayPal is doing, as you know, one of the leaders in the payment industry, and there's still more to go here, absolutely and the innovation. I'm looking forward to the future innovations. But thank you so much for joining from this pleasure.
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