Markus Franke, Mento | The Rise of Onchain FX and Multi-Currency Stablecoins

Thanks for for being here. Thanks for listening to me. Actually learned a lot again in in the previous presentations. And I can say a big plus one to the points raised there. That was really really cool.

Um, I fully agree with Johannes on the need for multi-currency stable coins. This is why I'm talking about on-chain effects and multi-currency stable coins because there are more currencies in the world um than than just the dollar and there can be many interesting use cases for for non-dollar stable coins. Um, and there's a big need for on-chain effects infrastructure. Um, we just heard it. It's the biggest market in the world.

There's uh more than 7.5 trillion dollars in trading every day estimated by the BIS. So, that is a significant market. Um, and therefore a part of this market will also come on-chain because of all the properties um that we have on-chain. I also really liked the the presentation by by Max from Curve.

He said, um, you can always buy TBL, but what you actually need is need and what you cannot buy is product market fit. This is something that you have to build out in the ecosystem. I think uh both points, the need for local currency stable coins, and um the need for for good product market fit are uh also part of of uh what I want to talk about. I I just uh rejoined uh Celo as head of stable coins and I think to that we created this role there um speaks to the importance of stable coins and FX um especially uh for the Celo ecosystem and um that's what I want to talk about uh a bit. Um, in the end, um why are stable coins and FX a so important use case for Celo in the end is because from the start, how Celo was built, there was a big focus on on these types of use cases, on remittances, on payments, on payments in different countries, on payments with different currencies, on swapping currencies.

On Celo, what you can do is basically you can do transactions and swap and and do anything with stable coins and also pay for your gas fees in stable coins. So, if I send USDC, I pay in USDC. If I pay I send with Tether, I pay in Tether. And if I send a euro, I pay for gas fees in euro. And therefore also there at the transaction, it's much easier for users that are not crypto native, but also also there we can take out a part of the FX risk.

And I think this is really important. Especially we've just seen how volatile currencies, even in like the um yeah, the biggest currencies in the world, how volatile they have become in in the past like 2-3 years. Um there's also focus on having ultra low gas fees. There's a focus on mobile that users can interact with the blockchain with their mobile phone. Um because in many regions of the world, people need to engage in the financial system using their mobile phone.

They don't have I don't know their JP Morgan account or what have you. And this is what I already mentioned, it is a multi-currency ecosystem live on Celo. Um there are many different currencies live and I think for many use cases this is becoming more and more important. Getting access to a dollar in emerging markets is a great use case. Especially when you live in a country where there's high inflation, getting access to a stable currency is amazing because you actually can get around that inflation a bit.

But you might be an entrepreneur, maybe you want to build out a business, maybe you want to get a loan for your business, maybe you want to access credit. And here, if you access credit, and your revenue is in local currency, your loan should also be in current local currency. Otherwise, you would be exposed to FX risk. And again, we heard FX risk can be real, can be significant, especially in in these countries where there is high inflation, FX risk can be very significant. And therefore, there is a need for local currencies, and not only dollar-based stable coins.

Um the differentiation in terms of what we've seen, what is live on Celo has led to a lot of interesting partners that are working um on on Celo, and they have built on Celo. I'll talk a bit more about Tether. I'll also talk a bit more about MiniPay. Um and for those partners, MiniPay is a wallet that is built by Opera. Um these features that I've mentioned are extremely uh important.

Um So, in terms of usage, and this is why I mentioned uh from the talk that Max Held from Curve earlier, you can always buy TVL, but you cannot buy product market fit. This is why these features on Celo that I've mentioned are so important for for stablecoin and FX use cases. Um So, for example, on Celo, we have many currencies live, and I mentioned uh the importance of local currencies, that you're able to trade in different currencies, that you can access a Swiss franc, maybe because you want to get access to to Swiss franc as a stable currency, but also maybe because you're an institution that is based in Switzerland, and you want to engage in your business with stable coins, and you don't want as uh business hold that FX risk against the dollar. Um You want a a Swiss franc stablecoin, um or you want a British pound stablecoin. Or when you're a merchant in Kenya, maybe you want a Kenyan shilling stablecoin.

So, there are Kenyan shillings, Philippine pesos, Colombian pesos, Swiss francs, pounds, and so on live. And And I think this is a first important building block to be able to engage in FX on chain. Um And these building blocks also recently made Celo number one chain for Tether when it comes to weekly active users. I think here we can see there is product market fit. There are a lot of users, especially across Africa, now also across Latin America, and many other regions in the world that are using stablecoins very, very actively.

Maybe because they don't have access to traditional financial system. Maybe because they want to engage in trading. Maybe they just want to send money cross-border or to their neighbor. And here we see a lot of active users being live on Celo. And I think it's interesting if you're building for stablecoins with stablecoins, then maybe you should consider these building blocks that I mentioned when you choose the ecosystem you build in.

Um and these high user numbers that I've mentioned are also one of the reason why Tether chose Celo as the second chain after Ethereum mainnet to launch their USAT, Tether together with Anchorage Digital Bank. I think it's very good that we have like more of these stablecoins. This morning in the first panel, we heard there's two forces here and like more and more stablecoins maybe lead to fragmentation. But on the other hand, these different stablecoins cater different use cases. I think it's important that you have infrastructure that you can easily move between stable coins.

But different currencies of course serve different people in different countries. Different stable coins, maybe some of them are genius compliance, some of them are Mika compliant in Europe, the markets in crypto asset regulation. Some of them provide yield or incentives. Also, I think therefore it's good that more stable coins launch and because you can give the users a choice which stable coins they need. But again, what you then need is proper infrastructure to move from one currency to the other.

Um, one reason for the large user growth we have seen in the past is MiniPay and I think this is one of the products in Web3 that really has product market fit. Again, I I'm mentioned how I like that line, you can always buy TVL but you cannot buy product market fit. I think it's a good point and here we see a product that has product market fit. It's a wallet that is built by Opera, the browser company. Opera has a lot of users worldwide.

I think there are around 300 million users using the Opera browser worldwide. And many of these users don't know how to engage with blockchain or don't know how to engage for example with the FX markets. And in the wallet they have basically abstracted away all the complications that come with sending a stable coin or the complications that come with blockchain infrastructure. Here you basically can find new users via their phone number. You can send stable coin to their phone number.

You can swap easily between different currencies. So you see these pockets here in the MiniPay wallet. You see a USDT pocket and a USDC pocket and if you want to swap from USDT to USDC, you just drag and drop one pocket on the other, and then you've swapped. And I think this like very easy-to-use um functionality is important for for many of the users, and this is why we're seeing uh close to half a billion transactions now in this in this wallet, and uh more than 15 million active wallets growing uh heavily now in 60 countries um of the world with what I think is is really, really cool. And I've mentioned FX is really important.

It's the largest market. Also in the intro we've heard um BIS um estimates 7.5 trillion dollars in um FX market uh every day. And therefore, um all the features that we have on chain are great for this large market, because even though it's the largest market in the world, the market for currencies, it's not 24/7. Uh it settles in T plus two days when you do when you engage in the FX market uh off chain.

If there's a bank holiday in between a weekend, then uh it doesn't even settle in in within two days. Um it's not accessible to everyone. Um it runs off many different uh rails. So, FX is needs new infrastructure, needs this technology, and therefore I think uh large part of the FX market can can move on chain. I think this is an very important opportunity for blockchain um as a whole.

We've also seen, this was already last year uh a very volatile year last year for the dollar. I think over two years the dollar to the euro lost around 16, 17% to the Swiss franc. We saw it in the last presentation even more. So, if we want to work with institutions outside of the US, if they're in Europe, or if they're in Singapore, or Switzerland, or wherever, then it's important to offer basically other currencies or easy ways to swap between different currencies. The FX market is important here.

I've mentioned all of these numbers, but just to see like a a large line against a few other smaller lines against I don't know the equities market or the bonds market. It is just a huge market, the market for currencies and and blockchain infrastructure is is ideal for that. There are a few things I would like to call out in terms of infrastructure. So for example, if you're typical crypto person, then you want to trade, you want leverage, you want like maximum exposure even when it comes to currencies, even when it comes to currencies that are less volatile than I don't know the latest shitcoin, then you want to leverage yourself up and then there's for example an FX market, FX decks that allows you to leverage your FX perpetuals. It's called updown.

updown.xyz where you can then engage in speculative FX trading. There's also Mento, this on-chain FX decks. Mento gives you currently access to 15 different currencies. And what is different with Mento to other decentralized exchanges is typically price finding on a decentralized exchange happens via basically the relationship of the two assets that are traded on this decentralized exchange.

The price adjusts if someone takes out the asset from one side of these pools and and put something in on the other side and then the price directly adjusts. Here in the FX market, in this huge market, prices are determined off-chain. They're determined in the interbanking market, they're determined on FX desks in London or Singapore or here in in New York, they are not determined on chain. So, a euro to dollar pool in this setup doesn't really make sense because someone constantly has to adjust the amounts of euros and dollars in these two pools so that it reflects the off-chain price. And here, this is the difference of Mento as an on-chain FX desk.

Mento uses like all the popular oracles out there, Chainlink infrastructure, Redstone infrastructure, and so on, Pith, to query FX rates and allow users then to swap stablecoin at the FX rate when there's an update. If there's no update on the weekend, for example, then this reverts to an AMM type of market, which then allows users already to constantly trade in the FX market. I think this infrastructure is important to to to be built out more that we can see more FX happening on chain. My time is already up. I'll be around most of the day here.

Let me know if you have any questions then maybe outside. Thank you very much.