‍The Future of Stablecoin Use Cases

[Music] good afternoon everyone good afternoon um I'm Tage canel Kaur reporter for Tech Crunch and with me we have yeah oh sorry I I thought you were going to introduce us okay I got it uh so my name is sha Lee I'm a co-founder of Ida where fch company uh working on launching stable coin products out of Hong Kong uh my name is Yus K I'm a chief strategy officer programat programat is a uh tokenization infrastructure provider B in Tokyo and prior to program I used to work in Boston Consulting Group so I had experience to work with governmental sector so I'm very happy to be here today hi I'm Nori Nori from JPC I'm founder on the CEO uh we make JPC Japanese and stable coin like usdc thank you hi I'm Ruth um I'm a CEO of my own advisory company ex Banker recovering Banker um I advise central banks on cbdc I advise finex on business strategy product development um I teach at University and I also advise the cyber security firm um and stable coins as part of the crypto ecosystem is something that I've been very passionate about for a long time so I'll be more bringing this sort of ecosystem perspective to the conversation thank you thanks guys um today we'll be talking about the future of stable coin use cases and my understanding is everyone here except Ruth is building you know St coin business um and the first question I'll be asking is can you highlight the features um of your ecosystem in each country and the opportunities you're seeing um building stable coin businesses we can go start with you uh certainly so I will talk about it from the perspective of Hong Kong first um Hong Kong is one of six jurisdictions in the world that actually have a stable coin regime and the stable coin framework uh so what that means is it is it has a regulation that dictates how anti-money laundering rules needs to be complied how kyc rules needs to be complied how the reserve management aspect needs to be complied uh and so on and so forth so it brings a lot of clarity around how a stable coin uh needs to be operating inside of the jurisdictions but but also on use cases in collaboration with other jurisdictions such as Japan that also have a stable coin regime so a lot of the these developments have been happening over the LA past few months and there are a lot of developments both in terms of use cases partnership uh and also International flow primarily focusing on different aspects of stable coins that is starting to really emerge and primarily what that is is that if you look at the stable coin markets today it is roughly 99.99 and and a half% US dollar base so there's an overdominance in terms of US dollar but if you compare that to the international payment system traditional International payment system is roughly about 60% right so there's obviously a big gap between 60% and 99 and a half% or 100% so we like to think um and I I I I believe my panelist will share this view as well that other currency pack stable coins will start to to will start to eat into that market share not because of the not because the overall market share is shrinking but it's actually because it is growing so there will be more needs for non-us dollar Stables to operate into the market but then also operating in a compliant manner so that's what we're seeing um out um especially out here in Asia naraka what are you seeing in Japan so n sorry n yeah in Japan the legal framework was setting place last year so we had a uh legal framework for stable same as Hong Kong market and uh we are doing uh kind of project to establish the new global settlement platform through collaboration with swift so we are aiming the new platform which is fully compliant with the regulations in the financial market so in the past the uh stable coin transactions will be down only I say in the private sectors so in some transaction it can be down in the gr Zone but what we are seeing how to comply with the regulation and how to meet the expectations from Financial market so this is very important to how to say to look for the mass adaption of stable Co use cases so we are working together with uh financial institutions in Japan and also we're involving the top tier Japanese companies and they have a very strong demand to leverage stable coin to update their business operations as well so we are seeing the future to update the existing uh business operation as well not only the financial industry but also the trading business or other business is also can be updated by stable coin so this is the future I'm looking forward the raka you uh were you working on with JP YC uh so um J pyc is a stable coin issuer and stable coin exchange both uh so under Japanese regulation issue license and exchange license is separated and crypt exchange license and uh sa coin exchange license is separated so it's very complicated but it's clear easy and easy to go business and JPC is will be the first one first renser in Japan both issuer and the stable coin exchange no crypto asset exchange can get the stable coin exchange license right now so gpyc will become the first one oh that's interesting when did you get this license uh so uh at first uh digital money type of sa coin is called EP EI electric payment instrument Epi so it's separated by crypto asset Epi is like money not Crypt so for money another license is necessary so Japanese government make it all right um Ruth I have a specific question for you we've all talked about you know stable coins and you um theyve all talked about you know building stable coin businesses and um having to deal with regulation right um how do you see that playing out with the Advent of cbdcs right from different you know governments especially in Asia yeah great question I mean I guess coming even back in time a little bit since 2001 in Europe we have e-money laws right and the whole um nency of stable coins really rather applicable to the e-money concept because you issue something you take Fiat in and you need to make sure if somebody wants to change it back that you actually have enough liquidity to give it back right so uh the e-money principle in my view should have applied all along to stable coin issuance because it should be technologically agnostic the principle was the right one we're starting now to see Japan and other countries following this this and the same thing in Europe and that's all great but I think when we think about cbdc the question is is this another asset class that could compete with stable coins or is there something in the whole technological sphere where you can enable cbdcs to be more useful uh I've been researching cbdc since 2015 it's a bit sort of nerdy really um but now I start to see obviously the European Central Bank putting some money behind the talk I advise the bank of England I'm chairing their privacy group on CBD which is a very sensitive topic around how much data will a government have about you and how will the flows be monitored but a lot of the global cbdc conversations are still around retail cbdc and very much domestic and when we think about stable coins and crypto more General the whole point was cross border seamlessness facilitating things that today are dealt with in the Swift Network which is usually more high value which is complicated expensive and until recently for GPI has been very slow as well in terms of the execution so I do see a whole interesting conversation around uh stable coins and Sean pinched me to this earlier in the conversation around could there be a role for the technological stable coin piece to enable cbdcs to travel cross border now I'm very acutely aware of central bank's monetary policy and the control around the currency within their Market fungibility allowing foreign Banks to hold your currency digitally is is a very sensitive topic and people don't really want to open up in that way but if you think about facilitating retail flows remittances business you have a more controlled volume I think and at the same time you can use the technology around programmability to actually be able to really monitor where's my money going globally which today when we think about cash I mean the UK alone has more than 8 billion Sterling that is sort of somewhere around the globe physically that they don't know where it is so you have a whole high percentage of your domestic currency being in some sort of channels that you can't monitor so bringing this more to the light by using a combination of Technologies and Concepts I think is that opportunity to create cbdc cross border in execution actually if there are so many advantages right um that stable coin technology provides and you know um also like creating CBDs um why is the government or why governments slow in you know adopting it and making it um useful to you know their people yeah I think the question around usefulness is a is a big one because if you think about sophisticated payments markets like the European Union the UK we have I mean Japan you know we have real-time Payment Systems we have high value we have low value we have credit cards we have debit cards we have buy now pay later we have hundreds of different checkout options on e-commerce and you often wonder why is there a need for another retail payment instrument I would almost argue that the domestic need is fairly limited and therefore there will be a real question around interest of adoption why do you convert your commercial bank money into cbdc we've seen this in China it was almost helicoptered into the market and people still didn't use it right so there is a question around the domestic but when we think about crossb International outside of the EU outside of the UK Etc that is when the use case becomes more apparent and this is where efficient infrastructures in terms of speed and cost are not really available to the mainstream citizen or the smaller business you need to go quite through a few hoops and you tend to have intermediaries that extract rent from it and so I think this is actually where the technological opportunity comes in so maybe I'll add a point as well um Dr Ruther is talking about the the vi the vibrant uh ecosystem in terms of local payments as well as International payment and I very much agree I don't think the stable coin um technology is very much to be used for retail payments however there is a programmability aspect to that technology that actually does make sense for retail except it's less about retail payment it's about incentives and rebates right because if you're able to move this currency on chain then the incentives can also be done on chain and that means if you use a wallet and you go to a POS system and You tab your and and You tab your payment yes you're paying for it but at the same time that incentive can automatically be aird dropped to your wallet you know longer have to know oh I'm part of this loyalty system and I'm part of that rebate and I need to take out another card and stand a thing no longer need to do that everything is all programmable but the key difference there is that the programmability is actually can be done at the ecosystem level right every Merchant can design it a certain way rather than only dictated by the central bank right so that's the main difference on that Pro programmable money aspect between a cbdc and a stable coin now terms of crossborder though I totally agree with you right the the notion of having different currencies interact directly with each other that is the billion trillion dollar question how do you do it compliantly while you still are able to bring in the efficiency and the lower in the the and the cost reduction so some of us that are you know working in this industry uh what we are trying to test is is there a possibility where a local currency say in Hong Kong and one in Japan the Yen can we directly interact with each other right do we have that facility and the compliance and the rules in place that allow us to still fulfill AML kyc requirements but we can now go directly currency to currency rather than still rely on the same system that has been in place for 50 years where everything has to be transacted in US dollar that becomes a key test point that could become very interesting for international Commerce and to facilitate real economic trade flow because I don't believe that stable coin you know is only there to facilitate onr and offr to buy crypto assets that's what has been in place for the last six seven eight years but moving on as the home industry matures there's a lot more utility in the traditional sense that can be facilitated and that's some of the things that um you K and I are working on as well um y do you want to touch on that on what you're working on yeah as Johan said uh both countries has a different legal framework and we have a different infrastructure depends on the countri so one approach is how to standardize those infrastructure over legal framework this is one approach but it takes time and cost of course so we try to connect the different system together so this is a different different approach we are trying to do if we successfully connect each market then there will be a big stable coin Market in global and it will be a big benefit for retail users as well and not not only for retail users but also the companies as well because Japanese companies has a a huge transaction with Hong entities so our approach could be impact not only for individuals but also the the companies in railroad as well um Sean you mentioned earlier that you know you see use cases or utility Beyond payments and remittances you know retail use cases um I want each and every one of you to kind of you know touch on one promising use case since we're talking about the future of you know stable coin use cases right um that you envision in the next 5 to 10 years well first of all 5 to 10 years in crypto years is a very long time that's probably three or four Cycles already um but as we as we continue to see the the technology uh being embedded as part of traditional Finance then certainly the complexity and the timing um starts to drag out so I think what we're going to see is um what Yus also mentioned as well is standardization there's going to be some notion of how digital currencies including stable coin uh will will have different uh areas of standardization both in terms of how the token is structured how the messages are being transformed and then also how the settlement layer actually works because you're no longer rely on say Swift to do everything for you if there are alternative ways that you can do it still being compliant then there are things that happened in place that needs to now be embedded in new technology so a lot of these are being put in place at at the same time and also a lot of The Regulators I mean the Japanese regulator and Hong Kong regulator the UAE regulators we're also talking to each other to make sure there's no regulatory arbit charging that are happening as well right you need standardization not only in the technology you also need standardization in the rules so I I know from working with different issuers and JPY as well um there are a number of efforts that are being put in place so what I see is actually less about the Technology Innovation it's much more around maturity on standardizations and policy development herea where's your take on on use cases and the future uh so uh stable coin is programmable money and uh stable coin transaction volume is twice bigger than Visa Network it's very huge so do you mean like globally yeah so so who use stable coin so often the answer is AI uh about 96 or 95 or 96% of transaction is by AI between AIS so after 5 years AI trade off more often do you mean 96% of transactions on stable coins are made by AI made by AI or bot like defi B Arbitrage B and so on so they trade a lot and AI grows first and first so uh become higher is that legal it's not about legal it's just basically Bots Trading with each other but if if you have trading Bots with a certain algorithm hum are using the Bots no what side are humans using the Bots well the humans design the Bots okay well I I like to think the humans design the Bots not the Bots designing themselves that would be pretty scary that's why I ask if was legal yeah usually AI designed to AI vot yeah well okay so you do you want to touch on that Ruth no I mean Ju Just it reflects the current stage of where the market is because it's the use in defi that is sort of fueling this but I think what we're talking about now is and now particularly resonating with Sean's comments around the Loyalty if you want to bring it into even a domestic e-commerce even POS environment the Loyalty aspect is critical and that in itself will make the type of asset class more acceptable to Merchants because they will see the gain in it whilst today it's very hard whether it's remittance or domestic payments people don't accept stable coins in a mainstream but once you create infrastructure and opportunity for economic value you create through this that's when you hit the mark and I think that is something very much fueling the domestic e-commerce but also then the crossb piece around the programmability so I do think we're slowly moving into a different era and as we just said regulations and standardization are critical once the market starts to slightly mature people see the value of Standards if we think about how long it took us to get the world into ISO 20 or 22 as an example we need some standards in this environment particularly around the data what data you carry and how you can automatically read it so that you enable better reconciliation amongst the participants as well so the same things that happened in the old world are now happening here and I think we will see a transition but the point on a ibots is well made and I think this is maybe where we should all come in with a little bit more human override at some stage right yuk what's your what's your um your take on the use cases uh as I mentioned before the most of the transactions of stable coin so far is in crypto world but we are trying to involve the companies in real world so we started the project was Swift to leverage the existing uh capabilities and the platforms because we think uh one of the Hardo to invol real world company is the cost of implementation of the new system for example uh if Banks needs to have a stable coin in their wallet in their own wallet and if they have to create new operating system by their own they have to do a huge investment by and some banks for example JP Morgan or City Bank or other tier one Banks can do that kind of investment but other tier 2 Banks and uh most of the banks de developing countries canot do that so we are trying to leverage the existing capabilities so this is uh one of the key to expand the stable coin rated business in future so we are trying to approach not only the business between developed countries but also the business in developing countries as well because there were a lot of business issues there and stable coins can be one of the solutions for uh that kind of issues so we are seeing of course we are seeing there uh business in developed Market but at the same time in power we are seeing the different words as well and the stable coins also bring a huge impact on that market as well did you want to say something so uh in Japan uh settlement fee is about 3% for for example credit card uh back code QR code payment about 3% is uh exchange fee I think it's very quite high and by sa coin it's become lower about 0. x% and uh every business is very welcome that kind of cost reduce yeah all right I think uh we've come to the end of um our conversation I hope you enjoyed it and if you'd like to learn more about the future of stable coin use cases you can meet our panelists after the session a round of applause please [Music]