Beyond Fiat: Entering A Post-USD Stablecoin Era

[Music] um in terms of today's agenda it's very straightforward um we will be talking about current approaches and so what we may not mean by that uh is each of the panelists will have a few minutes uh to talk about what they're working on and how they're approaching uh non-the-out stable coins or just this space in general um the second topic of conversation is we're going to be talking about the current and future regulatory environment for these approaches and last but not least we'll also be talking about a possible market adoption for non-fat stable coins so I'm really excited to have this substantive discussion um so if we can give all of our panelists around a pen I'd really appreciate that okay awesome um so we're gonna start just uh down a line and everybody has a chance to just introduce yourself as well as what you're working on and spend some time uh talking about your approach and how you're thinking about this space thank you sure my name is Richard I'm a co-founder of international civil currency we're basically trying to do uh private money that is not back to fiat currency uh we're paying the basket of financial asset kind of a gold standard uh 2.0 where we have more acid than just gold available now to pay your currency and then that's what we're doing we're trying to decentralize this process as much as possible and uh yeah but can you explain that a little bit about how it works sure uh that that's sorry so basically we're back to a basket of uh Global stock Global bonds short-term treasury gold and cash and we maintain the fact through security Market forces but essentially what we do is we issue a loan to different reserves that are decentralized and they maintain the fact by when they sell a token they implement the reserve and if the bank goes up and down their Arbitrage opportunity and we can also step in and recalling the loan if the the peg drops below that is that is that detail I don't want to lose everyone it's like no that was pretty good I've asked them questions about how it works let me say a little bit more about it because I think it's really cool so like ordinarily you might think of an issuer of a of a currency that's backing it with something you know we're used to this model like uscc and all these dollar pigs stable coins where it's like you send them money they hold all of this sets and they give out coins so there's one issue we're holding all the value and then you can come back to them with the token and then you get whatever the value is in the Redemption process but the the model if I understand it please correct me if I'm wrong here is a little bit different where um rather than one entity holding all the assets you have many different entities that can hold the assets they're called reserves and then there's this Central entity that's almost it's like a little bit like a central bank there's this one entity that can that can actually mint the token itself and so these other Reserve entities they can borrow the token when it's newly minted and sell it into the market and then they're the ones holding the reserves but then now they have debt they have to eventually repay that debt uh back to this sort of Central Bank entity that can that was the one that minted the token and that debt is denominated not in dollars but is denominated in terms of the value of this portfolio that they then have to hold in order to make sure that they can repay that debt later right because if they just held dollars and the value of this portfolio goes up then they would not have enough money to repay their debt so they are incentivized by the fact that their debt is denominated in this Diversified portfolio of assets to hold that Diversified portfolio of assets and thus you get this sort of semi-decentralized uh sort of asset backing model did I get that right it we we did uh follow a reserve for a lot of inspiration so that kind of makes sense why you kind of get it 100 well it's different and it's different what we're doing it's really cool um so um so yeah so I mean I think it's so cool that um you know the way you put it of like you know there was this gold standard where we had this one asset gold and it's like well wait a minute these days there's all these different assets and and I'll I'll get to myself in reserve in a second here because the thing is like these days people already hold their wealth in a portfolio of different assets right if you ever Triumph portfolio it's not just gold it's not just dollars it's you know some real estate some stocks some bonds you know whatever else um like that is actually the de factive main store the de facto main store of value for the world today not Fiat currencies so in a way the world has already made the transition but we haven't done that in a monetary sense we haven't like monetized that type of asset portfolio and then started just using that as money um instead we trade back into Fiat currencies uh to do our business but I think it's so cool um to to this idea of like can we just monetize the thing that we already use as a store of value and just turn that into a medium of exchange and unit of account itself rather than having to switch back and forth all the time which is what we all spend our lives doing um so anyway so Reserve is just a different approach to achieve that same end so Reserve has created this protocol that just allows anyone to create a token on ethereum that is issuable and redeemable one for one kind of going back more like the usdc model where it's like one Central entity holding the collateral but it's on chain so it's just a smart contract can hold whatever basket of assets the creator of one of these tokens defines and Reserve is just this underlying framework so anyone can use the reserve framework to create what's called an R token which is then sort of this it can become thought of as a currency that's issued issuable and redeemable for whatever that basket is and so these days because all of the world's assets are not tokenized the reserve protocol is really only usable for like making interesting baskets of like defy assets so these days people have baskets of like C tokens and a tokens and you know curve tokens and flux F tokens have been added and like you can play around with all sorts of different things like that you can try to beat inflation by earning yield and that sort of thing eventually we want it to be portfolios of you know stocks and bonds and gold and real estate and all sorts of things that ISC already put in their baskets so that's what Reserve is Stefan um founder of trueflation and we've launched nuon which is a flat coin I've been in crypto for over a decade I spent as the CEO of bitcoin.com a lot of my career trying to build a peer-to-peer electronic payment ecosystem so we've got 20 million wallets we built 500 000 Merchants worldwide where you could actually go and pay and purchase products with your crypto assets we very quickly realized though that people didn't want to spend their Bitcoin the Bitcoin cash or their ethereum to buy pizza you don't want to be the guy that spent ten thousand Bitcoin buying a pizza that was done before that created the market and helped create the market and people wanted stable coins but we were running a lot of our transactions on top of the Bitcoin cash blockchain and while super cheap super fast um we didn't have a stable coin then the governments decided to shut down economies shut down travel we couldn't do Commerce anymore and then we're telling us don't worry about inflation don't worry about it we got you covered they be no inflation oops oops no it'll be transitory and then we got to where we are today so I looked under the carpet we saw how old it was and it's a century old the process they did do it they do it manually they track 60 000 items on a panel basis and they do it um monthly we wanted to do it daily census-based API fed you know LED and you're talking about the process for measuring inflation for measuring the cost of inflation and we were doing this at the time when Tara was just taking off so algorithmic stable coins indigenous algorithmic stable coins using their own token as collateral and so as we were scaling up we um Tara blew up so we had to change Balaji and chain link or Sergey put out a competition who's got an inflation dashboard because they didn't believe it either and so we said we've already done it we've built the back end let's just do a nice front end and that has got triplation as a source of Truth for how the economy is performing through the metric inflation we now have 12 subcategories we have some 50 categories under each of those categories and we're getting more and more granular as we go on but what we still were really passionate about was building this Flat Point why because we lose 15 over the last two years anybody holding US Dollars has lost 15 percent in purchasing power according to trueflation so how do we leverage trueflation as the true source of inflation metrics to be able to retain and not be hit by this hidden tax and that's what we really built out and we launched it about a month ago so it's super young um we're still learning so we partner and hopefully maybe we will be announcing Partnerships with ISC with reserve and maybe a couple of other stable coins to really sort of grow the need for decentralized flat coins or inflation protected or inflation beating stable coins I think that's a really great explanation of the why for not only true inflation but also new on could you expand a little bit more about the new one protocol and how it works so basically in simple terms think of your US dollar plus minus trueflation as the peg that is how we calculate the Peg and that Peg is sourced from trueflation triplation provides that price feed at a premium and it's hosted by chain link nodes and node operators so it is decentralized from a feed perspective number one number two is the incentivization is through Arbitrage obviously when the price is above the peg people want to sell it into the market mint it and then sell it into the market and vice versa if it's below the peg um that's sort of the general principle of how it works um obviously it's over collateralized and we do not we only use digital assets as collateral so we don't use stable coins we use ethereum wrapped ethereum linked uh State lsds and then arbitrum and chain link okay so it's like a CDP model yes okay and then why do CVP creators why are they willing to borrow something that is going to appreciate relative to the dollar when they could borrow dollars instead they couldn't they could do that but they have inflation protection associated with it and what we're trying to Hope is that we'll build out lending capabilities associated with the new one so it's like a tips you've got inflation protection on the new one itself which then you can use as collateral which is stable because you've got the peg price and at the same time it's appreciating based on inflation so you have the inflation protection on there and you could borrow against that or you could then drive swaps or derivative exchanges I I didn't quite understand that code because it seems like uh like with inflation the borrowers always win because the debt they have to pay back later is worth less so it seems like if I'm borrowing if I'm creating a CDP and borrowing I would always prefer to borrow in US Dollars than something that's compared to something that's inflation protected where if there's lots of inflation I'll have to pay back more than if I had borrowed in dollars that that was that's the question I'm getting at it sounds like you do have a mechanistic answer but I just couldn't quite follow how it works yeah no I mean so your collateral is earning yield they're in Ave pools so they're earning yields on Arbor Farms um but if inflation Hits 10 you're right then you're likely to see the pain repayment requirements grow faster unless crypto picks up faster um you're likely to see your repayment requirements be higher but that's where we built out the capability to trade it directly so you don't need to actually mint you can buy it on the market itself and those that may events they also are receiving rewards from the protocol Reserve Revenue as well so protocol fees then provide a reward and those include liquidations that are in those collaterals themselves yeah it's at some point they'll probably match the interest rate that expected inflation will match the interest rate that you would borrow die versus new on so if they're matched uh then it's just like do you want a short inflation or or not and that's it like just the same way as tips you take the government borrows against tips but the interest rate in order to borrow is usually adjusted for expected inflation so I don't think noon would have that problem it's just if the expected inflation is very high they matter they might have a problem in the interest rates right not not as I they might have a problem that they would need to run a negative interest rate uh but then that yeah they someone mentioned at the last podcast it might be a good solution in those situations but if expected inflation is two percent and then the interest rate is higher than that then there will be any problem the current interest rate is zero percent on neurons they're correct it's zero percent right so at the moment with expected inflation might be okay but it depends on the actor and when you're talking about the interest rate where is that interest rate like who's that rate being paid to yeah so so essentially you you want to compare uh borrowing U.S dollar so probably die right if I want to borrow that what's the interest rate on that if I deposit if you're on the property probably at the moment I'm not sure five percent uh expect maybe it's more you uh but then it would match with expected inflation if expectation so yeah when you Mint new on you don't pay any interest rate there's no borrowing fee for borrowing okay so but then if there was a negative rate where is that money coming from to pay the borrowers from a pool so we have a special pool designated for the revenues that hold back some of them thank you for the long-winded introduction I feel like I understand now okay um yeah I'm kind of different than these guys here I basically lead the blockchain research team at coinbase currently and uh have been focusing on everything on-chain data related so every time coinbase onboards a new chain or we try to integrate new chains into our protocols we take care of understanding what's happening on that chain and um and see how users are actually using these products on chain so by specifically focusing on the on-chain data perspective uh so especially with stable coins that's one of the biggest Trends we've been focusing on is where they're being used today uh you know which change which layers who are the who are you actually using them what kinds of users are using them um and how can we grow usage of crypto as a whole using stablecoin as kind of a an entryway an entry Gateway for instance since you have the mic could you just kind of expand upon that a little bit like what are you seeing on chain in terms of user behavior for Stable Minds yeah it's um it's it's it's interesting in the sense of first the biggest Trend we've seen this year has been uh I'm sure folks in crypto are aware there's a big migration of liquidity to layer twos uh on on from ethereum and from other blockchains as well um part of this of course is you know there's just kind of pool of capital that flows to different layers just in the hope of getting air drops um but even discounting for that uh we've seen kind of some you know actual uh real usage in terms of uh flow of capital mainly driven by pools of liquidity available to to do trades in to do activities in and more specifically applications that are not just defy native but you know novel applications so one particular one we spoke about earlier has been um games and um decentralized gambling platforms uh so this is a fact that folks may not know but uh one of the largest folders of stable coins in all of crypto today is this entity called staked us uh which which you know uh is basically a platform where you can you know bet on sports scores right so some sort of application that incentivizes real usage uh from crypto Natives and from external participants as well to to you know um have fun and you know and and potentially speculate on unvolatility right so of of various outcomes uh thank you very much for that Sid and I'm jumping around a little bit but Nevin I think it would be really nice if you could expand a little bit more on the role that rsr plays in the uh Reserve ecosystem and like kind of uh if you don't mind providing just like one more layer of depth with regards to the reserve protocol in that regard yeah sure um so uh okay so again with the reserve protocol you can create a token that's fact it's issuable and renewable for whatever basket has been defined so let's say that's you know some part gold some part you know dollars and some parts Apple stock or something um now if any one of those tokens uh has a dislocation from what it's supposed to represent so let's say the gold token's supposed to be worth like one ounce of gold and the gold token issue where you know lost some gold now it's only worth half an ounce of gold um there's a mechanism that's part of the reserve protocol that I think is pretty cool which is that basically there's an excess pool of capital that can be seized in order to make up for that and try to make it so that the stable coin holders don't take a loss and so the way that that works um like the reason why you can have this excess pool of capital is that if the assets that back the token are being lent out like over collateralize on-chain loans via compound or Ave they can be generating some yield so the stable Point itself can sort of be making money along the way and part of that money can be paid in an ongoing way to stakers basically people who put up their capital and they they get a stream of income for putting their Capital up but in exchange if one of these shortfalls occurs their Capital can be seized to make up for that okay and so the way that it works in the reserve protocol is we sort of combine that function with governance so you can stake your reserve rights tokens rsr which is the governance token in the protocol that makes it available for this eventuality it can be seized to cover those shortfalls but also if you've staked your tokens on a particular R token one of these stable coins then by default you can participate in the governance of that R token so you sort of have skin in the game you want to make sure to to have an evolving basket that's never going to default so that you don't actually lose the money because you sort of have the first loss Capital um and uh I guess one final thought on that is that in the long term a lot of this we see as a governance challenge is like how should these decentralized governance mechanisms work if we're governing you know hundreds of billions or even trillions in value eventually in the success scenario you know creating like a non-fiat based World Reserve currency you know simple token voting like really probably not um and so our our approach to that is basically to make it so that any R token can have any governance mechanism that the Creator desires so it's super easy to deploy in our token you can like go to a website and like fill in some values and literally do it in five minutes you kind of want to think about those values so hopefully more than five minutes but it's super easy to do that but you also if you wanted to can create any sort of governance contract you want that that controls the r token with whatever logic and like voting polity that you envision and so we hope that if our tokens start to get popular people will try many different governance mechanisms like this is meant to be you know in this success case this over the next five years could be like one of the most active test beds for different forms of decentralized governance in all of crypto and then whatever works can be reused with other applications as well um and you know the reserve rights token is basically this available governing population but you could even create an R token that's not governed by the rsr stakers it could have some other mechanism if you wanted to so yeah that's how it works thank you yeah um so one of the goals for this panel is to help everyone who's here to have a better understanding of all the protocols and the different approaches so before I'm going to do something a little different so before we go into like the current Regulatory and expected future regulatory environment for these types of projects I'd like to open up the floor for any clarifying questions that anybody might have with regards to any three of the protocols that were discussed does anybody have any questions with regards to like how ISC Works how Reserve works or how or how a new one works no takers that's fine so um so next oh yes oh please for the the treasury that for the the first two guys I can't remember your names I'm sorry Richard and Evan thank you so for Evan for Reserve I the mechanism for let's say rebalancing or changing changing the structure of the treasury the facts an asset is clear it's through governance and there's a big experiment there but for Richard um how does the rebalancing works yeah is that an option yeah essentially we for now like I we're still setting up our governance and we we're quite open to feedback but like the idea is that we want the or or our population to be able to vote towards a new portfolio but we we set a rebalancing mechanism that is very slow so even if for example the governance goes complete a wire they're like yeah everything uh should be backed by Bitcoin and they they go 100 Bitcoin and then people are currently holding the ISC token they have more than 100 days to sell their token and move out uh because we're we're rebalancing one percent uh per day essentially of the difference of where we are currently and where we want to be so currently our portfolio is 20 of each asset of course those asset goes up and down in value so we're also rebalancing one percent of this difference which is currently very small because those assets don't move that much but there was a vote to change that then we'll also walk very slowly towards that goal but eventually we'll reach that goal if if like it's a change that's very good then people will stay if it's a change of three bad then everyone will abandon uh ISC and maybe someone else starts a new one but but essentially the governor's token will lose all its value because now it's governing a token as everyone left so that's where that's what we're relying on it's like we're kind of like reserved but a very very specific uh token and we're kind of going betting that this governance will work but if it eventually if that this one does not work we don't want the holder of the ISC token to lose any value that's for us that's a priority if the system is a whole fail and like and so on that's okay but the holder of the stable coin should not lose I think the reserve has the same mindset with their rsr acting as as a as an insurance essentially that the important thing is that the holder of the currency is not does not have to worry worry about their value uh that that's supposed to be represented thank you yeah thank you very much uh Richard when you talk about having this portfolio of different stocks bonds um Commodities gold Etc who's actually set you know setting the standard of what goes into those you know which which uh stock markets which Bond markets which team which treasuries from which countries what are the weightings like how often does that how does that get decided and how often does that sort of change and get managed right so generally when we speak about what's the portfolio we we're kind of very general the global stock right uh and actual portfolio is very specific it's like this ETF very very specific and they're there when we rebalance like let's say the governance wants to change the ETF and so on they will also specify exactly which ETF they want to so we could essentially as especially as uh more and more assets move to on chain we could essentially hey never mind the ETF we have now this asset on chain that's where we're gonna use much more transparent uh we're kind of also waiting for assets to be Unchained but we wanted to launch like in the meantime like there's going to be a very long transition repair we want to be live from day one while asset or not yet Unchained but yeah we quite expect right at the moment it was us the initial thing uh but yeah the Dao will essentially when they they decide to re to set a new portfolio they will specify which ETF or which exactly which asset they want uh we might eventually allow multiple assets to represent one asset so multiple uh Global stock ETF good work uh but the moment it's very specific it's one ETF yeah I actually have a question for nuan which is like I'd like to understand a little bit more your thoughts about the scalability of new one and how you might do that with the collateral that you have available to you yeah I mean so at the moment the collateral is limited to only digital assets um and non fiat currency pegged assets so we consciously stayed away from usdc and part of the main reason was solely the d-peg that happened right when they freeze a bank account then you just see what happens right and so if that could ever happen again you know it's unlikely to happen although if you look at multi-chain as an example you know an individual goes to jail and then all the reserves disappear but that's unlike less likely to happen in sort of decentralized protocols and so we've just the way we want to grow that is there are two strategies that we have around that one is working on being able to allow individuals on different chains to provide collateral so if you have assets on one chain rather than bridging it across and figuring out how to use it how do I leverage those assets on that chain and then Mint new on how do we ensure all of that how do we make that work that's not the process that's going to happen overnight but we're trying to test that across two different chains and then adding new digital assets to the collateral Hub those those are the Angles and strategies that we have I have a follow-up I mean with digital assets especially with yielding digital assets isn't the yield rate you know the the stability of this of the currency depending upon yield being somewhat sustainable right I mean yield is is what drives a lot of crypto today which is like you know greed right people wanting to leverage people wanting to leverage right and borrowing right so how do you like see that playing out with like variable levels of yield so ideally we want to generate revenue and then provide that Revenue back to those people that are providing the collateral right so there's a financial incentive and a financial reward to do that as we mentioned earlier we don't charge for the actual minting or borrowing of new on itself um and then ultimately where are the yield opportunities with nuan and what could you do with that that is attractive enough either to purchase it on the market or to actually uh mint itself directly on the yield bearing Assets in the collateral hub yeah we haven't looked at that really yet we're just looking to ensure that we can bring a minimal yield how can we more more aggressive what are the yield opportunities do we have with collateral and how do we do that all on a non-custodial basis we don't want to be responsible for the reserve we want it to be as non-custodial as possible at the moment we're running at about 130 140 over collateralization so well how do we you know that's still pretty inefficient um you know how do we get maybe not to a terror level not uh but more at a frax level where we're sort of 80 with exogenous exogenous exogenous right and I think Nevin um you were really curious to talk today about kind of like different uh talk about different types of uh collateral and also like the intersection of the collateral that we use as well as like the regulation um of uh stable coins that are collateralized like let's say by Securities right um so could you expand on some of your thoughts about where we are in terms of the current regulatory environment yes um okay so the point I want to make here is just that you know we've kind of already in this discussion established the idea of what if you had a currency that's backed by you know a portfolio of assets like what we already hold to protect our wealth today the the main problem from my perspective there um that like reserve and isk are both trying to solve in different ways um is those are all Securities or for the most part those are securities and so there's this whole regulatory framework that's been built since you know at least in the U.S uh from the U.

S perspective you know since 1933 and it's evolved with like this existing Tech stack where we didn't have blockchains so everything was on paper for a while and then it was in these private databases because of that as far as I can tell there's this enormous knot of like regulation and like companies that like fill certain roles and the way everything is defined uh for for how security is trading and settlement and custody and so on happens today um and that basically as far as I can tell makes it not legal to just tokenize existing you can't just tokenize Apple stock and then have people trade it on uniswap as simple as that would be technologically like that would have happened you know four or five years ago if it were legally not difficult to do and probably there'd be significant trading volume like you'd be actually pretty useful for the financial world if you know if ordinary assets could all just be tokenized and we could like borrow and lend against them and yeah um no no no no that's very different so you know the the synthetic approach of of having you know someone takes the long side someone takes the short side and you have the synthetic asset that supposedly tracks I mean first of all that was apparently also illegal and they got sued for doing that um so no they got sued they got sued yeah dokwon got served like on stage at a conference or something anyway um anyway anyway yeah um yeah but so but anyway so yeah I think that that approach isn't as good or scalable or safe but even so it's probably also illegal today so we have this problem of like we could potentially you know even forgetting about all this stable currency stuff that we're excited about you could potentially just you know uh enormously you know make that make the financial markets for the entire world like all of Forex and all of trading of all assets just like way more efficient you know lower risk a ton by making it so you can do trustless swaps for anyone in the world you know self-custody I mean you guys have all drunk the Kool-Aid so you see what I'm saying um the problem is I think we probably are going to need to convince at least because the U.S kind of is the dominant Financial regulator we have to convince U.S Congress to like change the laws in order to do this I don't even think it could possibly be that like just Regulators like just the SEC could do rule makings and sort of clear path for this given the behavior of the SEC that seems pretty unlikely maybe some future Administration so I think it's probably a lawmaking process it feels to me like I don't know maybe that takes like 10 years from now like I don't think that that's like a simple thing to do and yet think about all of the value that humanity is leaving on the table if we don't allow ourselves to just take our ordinary boring Financial assets and have them as tokens and so the way that I see this is that like it's obviously the case that that would be extremely valuable um it's you know it's probably illegal today so there's like statutory change that has to happen and the other thing is that you know crypto Market participants are probably not going to think about all the ways that that's going to go poorly all of the problems that's going to cause right because they just want to make tons of money right um and so but the thing is there's probably all sorts of bad things that will happen as a result of this as well if we do it and so so basically you know I haven't figured out the right path forward here but I think basically the crypto industry uh there needs to be at least a contingent of people that seriously think through all of the problems that will occur and let me just give you one example Nations typically don't want foreign Nations that are their adversaries to acquire controlling voting uh shares in like systemically important corporations and then control them from abroad um for sort of obvious reasons um and there's laws about this so you have to report uh you know who you know holders of which countries hold your securities in order to prevent you know these problems well luckily that's something that you could solve super easily with smart contracts right you just have to be like yeah anyone can have a financial interest but in order to vote your shares you have to like prove that you're a citizen of this country which you know anyway there's actually cool ways to do that um zero knowledge but but that's just one example like I think there's going to be like tons of examples you know one other very boring thing is like the markets won't close so it'll be like a completely different way of life for like everyone in traditional Finance like maybe that's terrible for all those people maybe they really wouldn't want that so so anyway my point is just that um the main barrier to being able to eventually create you know sort of move off of the Fiat standard onto the asset-backed currency standard you know not just gold but like the portfolio that we are all already hold I think the main barrier is this like uh legal challenge that probably requires statutory change and I think if we're not going to be dicks about it we need to really think through all of the other consequences and try to find a way to finesse it and do that uh you know so that it actually leads to like a nice elegant functioning Financial system 20 years from now or something but it just taking that analogy though I mean I love that right and but I don't want to wait 10 years um and if you can find a faster way I'm open to it but I just don't see it but if you look at the the Fiat world right it has its crashes every 10 years right it really goes up and then it comes down rock hard and it's getting bigger and bigger each of these Cycles is that not also a learning of experimentation new products being developed new loopholes being uh discovered um shouldn't we in the crypto World also be trying to experiment at the cost there's going to be some cost associated with it but the rewards can outweigh the costs yeah it's just like um you know if regularly if law gets made in response to crises then um I mean I think that's often the only way it gets made um unfortunately but like you know if we if we can make a law because of opportunity and because of envisioned possible future crisis maybe we'll have more time to think it through this is kind of happening with AI right now you know lawmakers are actually starting to think through what should the laws be even though there's not really a crisis um impending um whereas like the Securities laws you know in 1933 was passed because of the stock market crash that led to the Great Depression so it was like oh my God we have to fix this so I think if we just kind of push the envelope and like you know let things like UST happen over and over again and FDX and whatever and then like make laws to prevent things it's like I I don't know I just worry that that could go poorly I went to Korea Korea literally was a month after Tara blew up and you know a lot of us maybe not all of us but a lot of especially Koreans lost a hell of a lot of money in Terra Luna's blow up and um but the momentum the energy at Korea blockchain week one month after that blow up was so strong I gotta go back to work I gotta work hard I gotta Now find what's the next opportunity what do I need to build how I mean how do I maybe build something new that's not necessarily legal but how can I find new investors what's the next board Aid to invest in right but it was just that momentum that positive energy that was so I mean I couldn't believe I mean you just couldn't believe it after one month after Terror and the rest of the West was super depressed we were all worried we lost all our asset what are we gonna do where do we gotta go and anyway yeah I mean I think blockchain is a little bit similar to the internet uh for better or worse there's gonna be great things so it's going to use the Internet it's going to be great things that are going to use blockchain I think it's going to be much more efficient but of course there's going to be like a side effects to that like there were a side effects to the internet uh the same way I think blockchain is Unstoppable like this the internet was Unstoppable it's something that we kind of are forced to embrace is something that the regulator the countries will be forced to embrace at some point uh and in the meantime I think we we don't really have a choice if we want to innovate and let's say change things uh I'd say we need to adopt the Airbnb or their Uber approach if they constantly ask is this legal can I ask for ride Services uh in in cities and so on they would have been told no uh but because they already launched and they kind of right at the border of like is this it's a question like well they're not technically on the side of the road offering right Services therefore there should be allowed to very clearly the regulator at you like oh that's like competing with taxi and so on there was reason 100 years ago why there was taxi regulation and so on but those were outdated and now we have right right l hearing which is much better than whether it's taxi uh offered and that's good and they had to move quickly though in order to okay that's good but in this maybe to be regulated or maybe there isn't don't need the regulation anymore and everybody offer while error sharing and the finally we get rid of Taxi regulation maybe same thing with Airbnb and hotel or maybe they coexist together but if they always ask oh we're gonna wait until it's 100 clean and like the regulator says yes you can do it that way then you're you're never gonna have an Airbnb over uh and same I think for for like a currency that's not uh necessarily fiat currency maybe a government could do it actually and pull it off because a government could not shut down in our government from launching such a currency uh maybe that's that's how it's going to go I'm not sure um so just expanding on that a little bit it reminds me of a story that I once heard from Nevin uh which is about the first uh coinbase employee um who was approached by The Regulators and The Regulators said to coinbase hmm we don't really like this Bitcoin thing so could you please shut it off uh and so coinbase had to patiently explain to The Regulators that no in fact they could not shut down Bitcoin uh and um you know I I just kind of want to I can see that in this panel there are two very different points of view and I actually think that both approaches are very important to get to the place where we want to go um you have Nevin's approach which is to work with regulators and also Congress and Lobby or advocate for a particular position where also there's this possibility where you could force The Regulators to capitulate because you become too big to F with right so I'd love to get your thoughts on like kind of the wisdom of either approach and like kind of how you feel about that yeah I mean I actually think that the approach that you're taking is an interesting one to do that so quick quick collaboration like um uh so well all right I I don't think I can do it justice I don't think I can explain it yet um but like I guess what I would say is if there's a way to operate like uber that means that the thing you're doing is mostly legal and like maybe there's a few questions here and there um uh but if we're talking about you know like oh let's just tokenize Apple stock right now it's just probably going to be unambiguously not legal right so so I think that um yeah I think the approach the the general Spirit of what you're talking about if that can be found I think it's just more ambiguous in this case uh because of how regulated financial markets already are whether there's a way to do something like this that is pretty sure where it's legal mostly and then have it get really big and then have Regulators sort of like fix things around the edges yeah that could be fine so I hope someone figures out how to do that maybe maybe one of these two approaches is going to do that what I mean just my argument and my experience with Regulators is you give them a tiny little finger a digit on the finger they take the whole arm and the whole body um and and if you look at coinbase as an example they were officially licensed they went through the whole route they got legitimate legitimized and they listed all approved by the SEC and then all of a sudden they still get slapped on the hands and arguably arguably they were using a law that was written in 1933 and it was an individual that was really driving that and Congress is I think aware that that's not a timely piece of paper to reference anymore and so I I do hope that The Regulators come around because there's no way we are ever going to get traditional finance and institutional money into this industry if we don't have a legal framework that they can rely on I I 100 agree I do think though that the point around uber Amazon didn't go and ask Barnes and Noble we want to come and compete against you Netflix didn't go to Blockbuster and say we're going to come how can we compete against you can you give me a framework how to come after your movie business we don't do that that's not what disruption is really about it says it in the word we're here to disrupt your business we're disrupting the central banking industry business we're disrupting the financial services industry these industries are ginormous they're quadrillions as Sergey puts it in his presentations right they manage derivatives our pensions our health care everything so how do we do that how do we do that in the frame without asking them for permission to go down that path and to me that I think is is the exciting thing that's why I'm here because I love doing that because they're I'm fed up with these 1933 year old rules that is supposed to dictate how we live in a life of mobile phones and electricity is everywhere you know we actually have lights working here we have a fan a ventilator you know we have stuff that actually works 33 I don't think every household had a fan had light bulbs you know anyway yeah yeah I think uh like to kind of also with this discussion uh to frame it a bit we're all talking from a very U.S Centric point of view uh like you know we are sitting in France and you know there's a whole world out there and you know that's of not the US right uh and that's something we've been seeing from the data perspective as well is just uh P2P transfers um on chain using stable coins in regions that are not the US you know uh especially in especially with the case of flat coins where currencies could actually be of help right with high inflationary rates we've seen especially in South America uh usage is South America and Southeast Asia usage tremendously rise over the over 2023 um which is a significant Trend falling on from the trend of dapps like axi infinity and things like that so do you like track the transactions being sent into the chain and you can figure out where they're coming from um not all yeah there's just a disturbs the types of services they use the types of services that they you know route to Etc uh just observing the chain activity um um so and especially on cheap chains like polygon and you know where they fees aren't that high seeing these stable coin flows is pretty encouraging to see and like that's the kind of more tied with your Uber example right if you can get a real life service to actually catch fire these countries and be of real utility you know hopefully you have a global wave that's you know not just U.S Centric we're not all just waiting on on that right foreign so On a related question um because Stefan you mentioned that the current financial markets is um trillions and trillions of dollars and you're right then it is into why inter weaved into everything that we do and um and what you said that said there said about stable coins and their utility how do you see the future of these really interesting non-theat-back stable coins um in the next five to ten years how will they be used I mean how will you replace a multi-trillion dollar Financial system and do you see them co-existing I mean obviously they're okay this I can't I can't but the government we see that as actually being a super big industry in the next three years that's going to be at least the three if the market stays the same it's going to be a 300 billion dollar industry in the matter of no time why because they have the distribution and they still have like yeah exactly I mean hey anyway yeah but I mean I think stable coins will work out so what I'm trying to say is it will work alongside those um Fiat currencies I mean cbdc it may not even be on a blockchain I don't even know if they're on a blockchain they're just called cbdc but but so many people thank you all right so I ate I don't think it's a liquidity problem but more than like who's gonna accept this and why would you accept it if nobody else accept it yet I think we're gonna need uh a glue that essentially a very easy way for for retail to exchange my currency into your currency it might be usdc and maybe the whole world still use USD if I use my my own currency and then I onboard someone else and then we use a better currency and then over time we can convince more and more people to come in but without that glue and I think blockchain is quite it's fairly easy to to build that glue like the only glue that we're missing right now is like or that's not like very very good is to go back to the normal world if you have world right so I can send uh someone uh ISC and they can exchange it for usdc very quickly and then send it forward so that can all be done on chain very easily but it's going to be hard to pay for coffee because they're not Unchained they're they need a Fiat processor and that a lot of people are working on that uh but that that still like needs to be like there's a lot of work that needs to be done there there's this where it's very hard compared to credit card to use crypto still I don't feel safe I wouldn't want my mother to use crypto to even though it would be great she could send me money very easily it's like no it's fine like just go to the bank wire money or accept my wire like it's much easier much safer sure it's 50 but uh like the people are solving that yeah yeah I know it's hard people use credit cards don't know how it works and that's okay that's great I hope yeah but yeah a lot of people are working on that so uh uh one more thing to add in your question of like you know how how would people actually start using these non-fiat currencies hypothetically um like my my take on that is that um in the in the sense of like huge mass adoption I think it's very unlikely to happen uh as long as the major Fiat currencies don't like really unravel um like as long as they're basically working people are basically just going to use them um uh just thinking about what I could ask your phone to do through the microphone um yeah um but so but the thing is um The Reserve project has some experience um we built a stable coin wallet that people use in Latin America um substantially in Argentina and Venezuela where there's High inflation and in those countries you know people don't start off wanting US dollars they start off wanting their own local currency because that's what they pay for things in obviously it makes sense but if your currency starts to lose value fast enough then suddenly you want US dollars is kind of the default thing to switch to um and and so we saw quite a lot of adoption uh of this dollar wallet particularly in Venezuela where inflation was the worst um and you know like thousands of merchants signing up to take payments um in US Dollars on this like weird newfangled platform um which like if you go to you know any City here in France and try to sign them up to you know accept the digital staplecoin Euro they'd be like you know why it doesn't make any sense um and so my basic take is that like if uh the Euro or the dollar like really unravels at some point you could see demand you know Skyrocket for an alternative um that's something that you know is proven it's been around long enough some people have used it it's being used as a store of value or whatever but hasn't really been used massively as a medium of exchange so if suddenly everybody wants to hold it instead of holding you know sort of foreign cash into the mattress then now you have this huge population of people who are holding this thing and it's more convenient to just transacting it directly so I think that if we see I think the the scenario where we really as a world switch from the Fiat standard to asset-backed currencies of some form um is a world where there's it's really in response to some massive crisis California there are babies [Music] well I mean it seems like with currencies and financial products generally because it's so valuable to use the one that everyone else accepts and because with financial products it's hard to understand them and you end up generally following the crowd unless you're like a huge institution making early decisions I think that would end up just being like a snowball and kind of a power lot where there's like one that's like most popular by far and then there's like a second that's still used in like some countries and then like you know maybe a long tail of like you know ones that are used on the side more as investment products or whatever um how that competition goes and which one gets selected I think is you know a feature of you know you know just Market competition yeah I think so yeah I imagine they're I mean yeah being a sort of power loss situation it's so far though oh yeah [Music] um everything it could be broken down by locality too like it could be geographical locality or just Community some Community prefer that but the advantage of crypto again it's going to be so easy to change from one to the other that it's not gonna necessarily always converge to one rule off but it might be one that's a major one like the USD and then there's a bunch of other currency that are working very well and I used to have one question but now I have to it's okay okay after the discussion uh the first one is about Argentina Venezuela about the adoption of stable coins so um I know in Argentina people are perceiving it as same as US Dollars and they are looking for US dollars but there are also many other countries like turkey Egypt even if the adoption strike is higher uh they don't see it same as paper paper dollars they are still saying this is you know this is a thought it's not the same thing so why do you think or how does this adoption happen because they don't have access to paper dollars or what is the motivation here um so it's a really good question um I think that um well in Argentina paper US dollars are ubiquitous and everyone has access to them um in Venezuela that wasn't true for a while and then it became true um uh and but there are I mean okay you can't transact paper dollars at a distance right so people do have an incentive to use electronic money for that reason um also if you're a merchant or a person who's dealing with any amount of money like once you start to amass a lot of paper dollars if you're not in a country where you can Bank those paper dollars um then that starts to become a logistical problem for you and so I think those basic things end up driving the demand for basically digital dollars and then I think people would by default prefer to just have like an American bank account that they can transact with if everyone in the world just could have an American bank account there'd be less demand for stable coins for sure um the thing that we saw is you have to make it really easy for people to move money in and out to convert local currency into you know the stable coin and back again um and so uh once we managed to find a way to do that um then we started to see a huge amount of usage um because uh yeah because I mean that's obviously the thing you need to do you know there's a lot of merchants that don't accept uh so we're proud we got to the point where it was 27 000 merchants in Venezuela where you can pay with our app directly with stable coins and buy goods and services but then there's you know countless more where you can't and so you have to be able to convert back out into the local currency even if it's hyperinflationary if you convert back into it and then you pay uh 30 seconds later then you're not worried about the the inflation rate and so if you have enough of that liquidity which like in Turkey I think that that's I don't think anyone's built that really in Turkey I don't think that there's like necessarily the same level of liquidity and maybe I'm wrong but um super early yeah yeah but I think that that could cause a huge amount of adoption of crypto thank super short about actually somewhere because Daniel's report is great but it's not focusing on stable coins I'm looking at Google translator it's selling a lot actually about that are using just like drugs this is the only resources of you publish uh coinbase research somewhere yeah happy to send you the link we we just published last week actually oh yeah uh we have about three more minutes um so I saw there were like one two three like a lot of questions here so if you could just uh try to limit time limit your answers um I think we can get through all the questions um so yeah I think this gentleman actually had his hand up first so thanks all right so so you guys know there's a problem that needs to be solved and presumably everyone else here knows there's a problem and in Venezuela people out of desperation no there's a problem I have friends in Argentina that go to the store uh and and they don't know if they're paying the right price because it's double what it was a week ago and they don't know if it's the store or the whole economy or what what are you guys doing or who are you partnering with that's letting people know they have a problem that can be solved or that needs to be solved like some people are discovering it but maybe there's some education that's needed are you guys thinking about that I can start um from from at least from the client-based perspective I mean where you know trying to go live with bass which is a layer two uh the Big Goal there is to bring the next billion uh users on chain uh and a large part of that is just education like how do you use basic lunch and activities how do you do how do you use a wallet uh bring them on for you know very cheap uh transaction fees and then try to have them use products uh like these guys over here and and potentially just get them on board with crypto right and a large part of that is education so that's the goal with base foreign it's I mean it's Global of course um but uh the focus is to bring people who aren't on chain at all on chain their first interactions hopefully happen by base and like you know slowly start to grow from there so there's a big crypto native audience which you know potentially a lot of folks here at Target you know there's a trillion dollars of market cap and crypto to Target but there's so much more outside right and so we want to bring that uh on board yeah absolutely so that's one of the big uh initiatives we want to see built on base right um and you know um so it's one of the four uh requests for for projects that we're trying to have on baseware you know you know inflation is is a big issue right and and while there are ETFs and other products that address that uh if we can have a crypto native way to address that fully crypto native transparently on chain where we can audit it we spoke about this earlier you know the beauty of the blockchain is that you can be transparent anyone in the world can see how this monetary system is run um and if you can see that algorithmically and verify the math for that and people can understand it like you said it's a bit complicated uh at the moment but if we can make people understand it that's that's you that's the goal right yeah yeah so I guess I wanted to get your comments on two things um so one is what do you think of like non-us jurisdictions because so I I come from Singapore right um and there I think the regulations are much more aligned with like what works like what's useful to us as a country we're not so protectionist because we're very trade dependent um and we're very open we've got a huge Commodities market and a huge FX market right um so what do you think about experiments in regions outside the US uh in strong Financial Centers beyond the US um and also I want to get your thoughts on like use cases uh kind of going back to the point about Uber um so request Finance focuses specifically on global payroll we're not as big as some other players but we've done over 350 million dollars in payroll um so what do you think about other use cases that are non-speculative um to drive the optional stable coins I think non-us experimentation is is a great idea um one practical idea for how to enable that is um these days you can all passports are like digitally signed by the nation that issues them and so you can scan them with like I think it's like an NFC Reader um and it's possible then to create a zero knowledge proof proving which country you're from without any other information about you or potentially I think you probably make one just proving that you're not from the US so you could have basically a standard like a token standard where there's like a white list that's maintained by some company would have to to pay to do this or people would have to pay to do it or whatever and then if you just have sort of the non-us crypto population validated on chain because the issue is if you if you issue some product that's supposed to be for non-us users but it's on chain there's really no way to screen out us users without like if you have some heavy kyc process and then it's like ah no one wants to touch that so if you had a super light way to for people to not identify themselves but just prove that they're not a U.

S person and then be part of this enormous non-us defy ecosystem then you could potentially enable a lot of experimentation maybe you could also have you know just the Singapore population albeit it's a smaller one but um you know maybe there's a family of you know 10 countries together something that could have their own sort of defy ecosystem part of me hates this I'm like no I don't want any discrimination on chain I you know I don't like that path in a way but maybe that's a way to to do that sort of uber type example where it gets really big and it's obviously really valuable before it can sort of be stopped on a global level and then maybe the you know the US's of the world have to adopt it yeah um man I feel like we'd go for like 30 minutes or an hour but unfortunately our time is up uh can we give all the panelists a round of applause um again thank you so much for joining um uh I know that you this gentleman had a question we can talk outside and before we go I'd like to show Sid Sid's gonna be giving a talk right what time is that talk yeah I think four or four thirty something like that yeah yeah I have never seen better on-chain like user Behavior Analysis except for like the stuff that comes out of this gentleman's mouth so please attend that talk it's very very good um thank you very much for your time okay [Applause]