TOKEN2049 - Stablecoins: The Separation Of Money And State?

so just to quickly kick it off I'll I'll give it here and to all the panelists and please just quickly introduce yourself and the company that you're here representing okay I'm Raphael from true USD or one of the largest asset-backed tokens two hundred million dollar market cap listed I'm Alyssa major exchanges and we're going to be coming out with several additional tokenized currencies over the last couple of months but we're really excited about and we think that the space has a huge opportunity here for growth hi my name is Vishal Gupta I'm head of business development liquidity circle I help on US DC and Polonia X USD sees the second largest stable coin according to market cap 240 million we're super excited about where this markets going and we're happy to be a part of it hi my name is rich Hill I'm the co-founder of Paxos we are a weird as a this is a digitization platform and our main product right now is packs it is a it is the world's first fully regulated USD one-to-one stable coin we're very excited to be to be promoting that everyone my name is Sean a co-founder of digits platform that organizes physical goal we have currently issued a token called dgx that represents one gram of goal I think from this whole panel here I see it on the other end of the spectrum which is more of an asset back coin so it's more like a stable as set coin instead of a go stable point to see so as the first kind of question I'll ask all the panelists to quickly define their version of a perfect stable coin sure so I'd say fully backed dima bull compliance stable if you have all those things and that's a great stable plan yeah I agree you know we we really we want to make sure that you can bring you can put money in and take money out as easily as possible we want to lift any conflicts they're going to make it as as easy as possible it's funny like similar to like venmo if I told you like it's easy to put a dollar in but you may or may not be able to take it out you're gonna have a problem with that vamo dollar so we just try to make it as easy as possible we use a multi issue or format to allow that to happen so you can buy from one issuer and sell to another um we think it's important for it to be regulated so it's highly trusted and it can interact very well with the traditional financial services industry and also we think it's important that stable coins may be highly liquid and work very well globally so I don't think it's the characteristics are probably as mentioned is going to be something that's very transparent it has to be something that's fully auditable publicly accessible as well for the holdings of it and it clean liquid yeah and a well regulated token so in 2018 you know the year was by many called the year of stable coins cryptocurrencies were in a bear market and there were just so many different stable cones popping up more than 200 million dollars in venture capital was raised for a whole bunch of different stable coins so so my question is why why did it all happen at this one pretty short period of time well I'd like to say that I think 2019 is actually gonna be the year of stable coins and I because I think that there's gonna be a lot of different tokenized Fiats and potentially other tokenized assets that are gonna be coming online in 2019 like total number of tokens launched will be larger in 2019 in 2018 and market cap increase may also be larger and also I think that actually it makes more sense to think of them as tocut as tokenized assets rather than stable coins because you could say like true USD is a stable coin but what about like true euro or chu Hong Kong dollar you know those are all stable coins but what people care about is they want an exposure to that particular asset or they want to bring the old of bringing that particular real world asset into the blockchains into the blockchain and be able to trade it on exchanges and so it really is a lot more than just about having a stable asset I think that the first use case is really um listed training and using something like a US dollar to settle a trade has been something that the market really wanted especially in a volatile time and to your point I think that you're gonna see a lot of evolution the next year you know for us it's going to be more issuers and more coins on the table so I think for us we've been around since 2012 so we've seen how the space is developed over time you know we've seen there's a high demand for for a stable coin and people have a have a need to trade from crypto to crypto rather than encrypted to Fiat which is what we were previously provided okay so I guess why last year you know I think we saw that demand quite two years ago and it took us quite a bit of time to get the pieces in place to launch something that was approve and regulate it and you know that took us over a year so I think last year was you know kind of when that kind of came together you know I definitely think 2018 was a year of validation in everything validated the concept of stable coins the idea of cryptocurrency itself started from this value transfer and across model means of additions acting value I think stable coins at least serve that very purpose if 2017 was sort of an ICO year 18 my family they are stable coins I do think that this use case will definitely perpetuate down the lines of alcohol physical assets that's why the jig says a go token itself is just getting started as we speak right now yeah so that there is still you know it's still the dominant stable coin even at this point but if we look at that their dominance in terms of supply issued just in the last six months it went from 97 percent about 70 percent so lost close to 30 percent in market share so is there still this year is the still need for something like tether which is largely unregulated in the market well I think that tether will always have a market because if you are a money launderer or a drug smuggler if you're doing something that's completely illegal Heather is a way better choice than any of the newark stable coins and then i think that the the you know for legit traders i think we're starting to see them more and more move over so I think that we're gonna shift from a market where it's you know ninety ten in Heather's favor to a market where it's ninety ten in favor of newer more legit stable coins but I think Heather is never gonna go away yeah I think that our team really just having blinders on to make sure that our coin and then you know our point is easy to trade the first use case is really a list of training get that thing to be easily traded it's a regulated state stable coin we shouldn't irregularly the world and we're happy to we're happy to sit on those financial rails so I think in the last the last four or five months since pax was launched you know we were working really really hard to get on exchanges to make sure that there's good liquidity for our stable coin and work with various trading desk but I still think that the amount of head start that us DT has had it's quite substantial so we're still working very hard to lose liquidity and we're going to continue to work hard at boost the quality and increase demand but I would still say that you know they they are probably still quite dominant of the quiddity I take the view that although tediz dominance came down from 97 to 70 percent as you pointed out by the entire market of stable coin since it we're not a lot more than just the difference between the dollar stuff and I do think that this when I say it validates that concept of a stable coin and there are more and more institutions getting involved in stable kinds of trading mechanism the OTC desk be every other call token there's pet against a stable fine it kind of gives people a good and a relatable reference to what the road dollar value is in a real world as compared to the nominating against bitcoins or even eaters yeah I think one of the reasons why you're still seeing too you know a tethered dominance is that they have great order books as well you know the cost of execution tether pairs versus any of our our coins are just not as it's good yet you know we're building actively to make sure our order book like cost of execution is lower right so like you put a thousand dollar order and it cost you a hundred dollars an execute the order give me a problem right and we just have to maintain and I think all of us sitting on on the stage right now I just have to make sure that we have great order books so I have a question for shown specifically you know dgx is a gold back stable coin and for Fiat back stable coins the business model is pretty apparent it's just earning interest on the on the reserves but what's what's the business model for the gold reserves and generating revenues there it is probably one of the more commonly asked questions that this this trip to Hong Kong here like like fiat tokens itself who actually are interest bearing instruments D Jake's as Co tokens of our negative view instruments in general so it costs us such a doll and sense to install go then to actually earn interest on it so the business model of interest essentially is to create a foundational layer of a currency is to create these install value for people to transact using go and then to build second layer solutions on top of it be lending networks payment channels that's where we could monetize off the token itself so the most most of the business model is always do a longer-term plea it's not evident at the start of issuance by is more on the transactional application layer that will happen in time to come yeah that's actually a problem that we are we are now looking for solutions for not for true USD before some of the other currencies that we're gonna launch because many of the major world currencies like euro and yen have negative interest rates similar to gold where you're paying to store them and so it's a question that we have as well but we are prioritizing launching the currencies that have positive interest rates because the business model is much clearer so so currently they're you know about ten or maybe even more fiat backed stable coins and to me it seems that you know in five years it's just because there's just not that much differentiation to me it seems that the market will likely consolidate but I'm curious about what the panelists think but you know the future will there still be a whole bunch of different fiat blackstable coins or will the market console they didn't you know maybe a fewer largest stable coins yeah I mean I think that part of the reason that circle and coinbase came together to create the center consortium was that we see a multi-issue world we see a world where everybody can play and become a part of the part of the the center team I mean specifically for to become an issue where there's a pretty high high bar but we we want to you know we want to have more issuers we want we want to have more points how do you incentivize more a shirt well issuers so in terms of the actual like breakout of how issuers are getting paid it's it's a it's part of the center consortium and it's an agreement amongst the issuers themselves and we you know we have governance laws that allow us to negotiate that I think there's a there's definitely you know a lot more differentiation amongst the table coins then most people actually look to and you know I think we definitely see the man for what centers do and it makes a lot of sense I think from our perspective you know in order for institutions traditional financial services to want to want to interact more with stable coins to want to integrate more into payment systems there's a very complicated legal framework that has been put in place you know including ensuring that you know you know that we are a bankruptcy remote organization there's no loss of customer funds there's proper compliance procedures and all that kind of stuff so we think of ourselves is doing that pouring layer and you know being that stable coin that has those pieces in place regarding your point of consolidation I do think that in the future of let's say like go back to opens itself they could exist that say more than five or ten different liquid not gold coins and there could be trading between each other on an average basis so part of my background previously I came from a gold trading institution where we were charging go between Japan the US so I do see that a potential future where different tokens itself could be denominated in different sizes in different weighted yourself and there could be an arbitrage there was what probably gave rise to the whole trading activity of gold back in the 80s and 90s when digital platforms became more accessible to the retail and any to show traders I want to briefly also talk about JP Morgan Chase just two weeks ago they announced their own JPM coin and you know it's somewhat of a stable claim even though it's more of a settlement layer for on a permissioned etherium blockchain but I want to ask the panelists what do you think you know is this good for the blockchain and crypto space overall or deviate viewed more as a negative development I do think it is a beneficial thing for this space and I think right now they are targeting a very different market from all four of us but I could see you know if their market continues to grow and they expand that they could eventually at Viacom adjacent and that they could become a direct competitor to what we're doing yeah I think that it really does validate a lot of the work that we've been doing you know the specific I don't see them as absolutely competitive anything that it's potentially a cooperation in the future I really do think that these private coins are going to grow and we want them to grow and we want them if they if they want to become public we want them to become part of our multi assur format if it makes sense I think any credible player entering the space is a net positive - to everyone here so you know we're very encouraged to see that and I think the use case makes a lot of sense and we're looking to see how I'll stick it expand that I think it's very good legitimacy - to the industry as a whole as to whether what the JPM coin be used publicly or not I don't mean really matters in that case it's more about actually promoting the use case of what all these guys are doing right like dollar tokens could be trainable and it is being backed and actually done on a proof of concept basis by someone like JP Morgan yeah I think it's a good thing for for everyone in the industry so today you know we most we only have Fiat back stable coins here but there are other methods for stabilization such as over collateralized by cryptocurrencies for example die or bitusd uses this method also senior rich shares based tokens so what do you think about these methods and you know are there any disadvantages or advantages that are that come with these methods yeah so right now the split of the market is roughly ninety ninety seven percent in Fiat back coins and three percent in crypto collateralized coins that's that's primarily died and I think that the the thing that most people many people miss is that it's not so much about you know which one is more stable or which is a better system that there's a big feature that traders really want that only Fiat back coins that can provide which is they want to be able to move between their stable coin and US dollars without crossing a spread and with die if you want to take a million die and turn into a million dollars you will pay a significant spread trying to make that move and that's a that's a big problem for most traders so the the largest use case for died today I understand is that people want to leverage their ether instead of locking up their ether and making more Die buying ether locking it up and that to get levered either but I don't think that people are using it nearly as much for traitor yeah I think um you know the key characteristics of a stable coiner stability in trust and when we were creating us DC under on her Center we looked at everything and we believe that Fiat fact is really the way to go that's where we built it and we will continue to innovate in that space yet back makes the most sense for us as well I think most traders want to keep it simple you know cryptocurrency has enough volatility already so having two volatile instruments betray against each other may not make the most sense I speak in perspective of died I think it's a great and innovative way to hed collateralize crypto as we shall fight a lot the volatility of crypto is really there so what's the real point of the chip making something on top of it but I think what die is trying to do right now is to create a multi collateral system where gold itself could be part of that system it's not to collect rise die as to whether it is a collateral system is it a Fiat back system I think and another day is new form of a substance right the actual thing itself has to work he has to be liquidy numbers be regulated he has to be transparent that's probably the more important key features I also want to talk about rebates and discounts so one of them you know one of the ways to incentivize people to use the stable coins have been rebates taxes has some experience with that also Gemini has used this method previously and basically you just you go to an institutional player or or OTC desk and you give them $1 for a discount and that way you incentivize them to use it a little bit more so I'm curious what you think about this method for marketing and how utilized is it in the industry I'm happy I mean our core Praga Denver to make sure that the markets are effective our order books are are good you know any rebate programs the out there and it must be for everybody to some degree are really meant to be you know lighter fluid not and if they they've done in the past and it's probably not something you can do for a long time in general we shy away from any of those types of programs I think that you know because we sit in there in a multi-issue or world we do see a world where you could potentially become a reseller of USD C and C I can economic you know upside for that we're still building our program so we're really excited about inviting others to join that Center so I think you know historically in financial services exchanges for example have a you know maker taker program where you charge and they provide rebate and so you know we've seen it happen before in in you know in the exchange that we run as well a bit we do provide you know a fee and a rebate program and then encourage us to create those platforms so I think you know to the extent that it's used amongst table coins I think that makes sense to a limited degree if that helps promote liquidity and that helps users get in and out of these table coins more effectively more efficiently so I think that makes a lot of sense I think yeah if it's used too aggressively there will be negative outcomes so you know that's why stable points aren't always one-to-one and you know the stable coins do have different prices and I think some of that is driven by to a degree by these such programs but again you know the ultimate goal is to create more liquidity and I think disabled coins should do like what I said earlier do everything we can to put more liquidity as long as that as long as that does not affect the actual price and the redeeming function of a stable coin so for us for example you know we have redeemed somewhere around 400 million so that's very large that's you know three to four times the size of our market cap so I think it's important to have such programs but also ensure that ease of redemption is always available so so we've not offered rebates and it's not something that we would ever want to do I think and the reason is because we see it as something that ultimately hurts the end user and really breaks trust with them because if I sell my token to someone for a 99 cents then they're gonna go dump it into the market and it's gonna bring down the price of the token on exchanges and and from what we've seen over the last few months most this is something that most of our competitors did and you did see that effect on exchanges where you know we're for almost all of our competitors there were significant periods of time when when you know one token did not have the buying power of a dollar it had the buying power of 99.5 cents or maybe 99 cents and so that means if I'm an end-user I am NOT getting I'm not getting my money's worth for this token and that that is sending a signal to them of like look I as the token issue or I'm willing to do things that directly hurt you the end user that's not something that I would want to do and I think that one of the places where true USD is is strongest among our competitors is that we are we are the most trusted and if you look at real volume if you look at real market cap consistently true USD comes out on top and it's the it's the coin that people go to when they really want to you know move out of Bitcoin when they want something that they can trust I think that's a long-term investment that we've made and are very committed to another question that I have so one of the tweets Cameron Winklevoss from Gemini he said that at this point it's completely impossible to get an audit of a stable coin and that's because you know the infrastructure for that is just not there so most of the companies just do at the stations by auditing firms or by other firms do you think that you know in the future there's the infrastructure will develop and you know it will be more possible to do actual audits and be technically more compliant I think it's a is a method of having different platforms to be able to speak to each other well as a bull I bag house itself do not talk to each other it's not possible to audit let's say like bank accounts in my example in physical goals or you could see the go bus they are there right so an auditor that comes into the vaults he counts them about go boss is there always on there well I can't be the same as well for like let's select all the stuff but I do think that in the future there will be a reporting standard there would be some form of governance a guideline that will come up that enables each of us here to actually fully represent the holdings the company i think is pretty hard to be Cirelli stages in the industry for there to be actual you know proper reporting standards or regulation in place I'm having said our experience you know it studying Krypton 2012 there were no regulations back then and we just had to talk to regulators and come up with best practices and I think the best part is that you are watered over time we've trust from regulators and you know other governing bodies so I do think that even though there's and you know I guess an exact standard I think that you know doing everything we can right now to to to ensure that the market first very stable points ours especially what you know would be good for a long way so yeah this is a place where we are making very large investments in doing everything we can to build trust and have complete integrity with our clients and so we actually recently made a very exciting announcement that we are partnering with a firm called Armani know which is one of the top accounting firms United States and they are building they are about to release a real-time dashboard which is gonna be like a real time report of the funds that the actual USD which means that like they are connecting directly to our bank partners and I'm gonna show in real time and we're we are completely not you're not touching those numbers at all it's directly from the banks to the accounting firm and so that's a way that we can move from you know currently we have these week these monthly anti stations but we can move to a real-time model and that's something that that no other stable point to my knowledge has ever has ever done in a partnership with an accounting firm like this so it's a place where we are we're always innovating looking to push the limits this is one you know I think one of the most important things for being the best able one also so you know all this table comes that we have here today they have to be compliant with regulations so my quick question to everyone here is you know what has been your experience with dealing with regulators how do they view stable coins as a whole and just overall how how'd they perceive it yeah I mean I think one of the reasons why I've been excited to be a part of the circle team is that they really our focus is really to innovate on top of the financial rails the existing financial regulatory rails and I think that USC sees a perfect example of that and you know a lot of what we do is really to inform regular regulators on what's happening and the innovations that are happening in our industry and we've been yeah we've been excited to kind of push that along so we were actually regulated by New York Department financial services Nonis us as a trust bank but they've actually also approved our PACs token as an actual financial product that they would separately regulate so in antonius our product regulated but we are also part of a regulated company which is very different from MSB registration which is voluntary so you know we work with them very closely they care a lot about customer client safety client funds KY CML procedures which we share with them they examine they come to examine our books our four CDs or records in Reverse and make sure that we are actually doing what we say you know obviously that goes to bank accounts of where we store assets as well Edina Singapore government has been a very forthcoming with welcoming the idea of like blockchain technology and crypto for them to at you understand what exactly is a digital gold product it's not something new digital go is existed for a couple of years right now and just reinventing the will in terms of like telling people that this essentially is a blockchain token that is publicly accessible by anyone something that they have been trying to get to cross with so digit as a whole we have been fully compliant with any kind of coming regulations as coming to place specifically for digital go token product regards to that so far the government has been pretty forthcoming so we're kind of running out of time so I'll ask one last question kind of open-ended how do you think the stable coin space will develop in the next five years what are some things that you anticipate in the space and how do you think will happen yeah so I think the term stable coin is going to go out of home and and I think asset tokenization is that actually the better way to think about it because there's I think there's gonna be over the course and then the next couple of years a proliferation of different stable coins there in tokenized assets we're focusing on fiat currencies I could be launching several over the next several months so we're very excited about and down the road there's gonna be more commodities like what digits is doing as well as all kinds of other assets are gonna be coming on chain and these are these are things that people want not just for stability because they want exposure to those assets or they want to move Hong Kong dollars let's say into crypto and be able to move them back out so that's what I see as a future friend I think it's gonna be a very very large market in the next couple years yeah I mean the most obvious use case currently has been listed trading and we're gonna see that broaden out to other coins other fiat coins I think it's gonna be and we were talking backstage I think it's really gonna be interesting to see what happens with the FX market as you bring in new coins and you know we get rid of some of the some of the back-office trouble so you have n FX trading itself it'll be interesting to see where cryptocurrencies can take this I also you know first use cases listed trading that now you see OTC settlement both of spottin derivatives we're seeing lending we're seeing retail I mean we're getting a lot of inquiries on like how to take this you know take the stable coin world further and I think in the next five years is really hard to predict but I think you know step one is really just broaden out listen listen use case think we're great organization of more assets and definitely more use cases you know to add to that you know I think it makes we're quite hopeful that this year we'll see stable points stable kryptos we use more in the world outside of crypto we're seeing some interest from traditional players and solving some problems they have so we're quite hopeful that we'll we'll see some of that this year this future reckon is somewhere between five to seven years from now hopefully stable coins itself would be the medium of exchange between different kind of like Global payment reels that could be fascinating retail use case institutional use case and everything else from there so now we have a Q&A session for anyone who wants ask questions we'll have about three to four minutes so anyone who wants to ask questions just raise your hand and microphone hi guys PES radiata radix do you see the stable queen or the Fiat back token ever replacing the traditional banking system yeah actually yeah I mean it's it's tough right like I think that we're gonna end up seeing is that a lot of the bank rails that you see currently may end up looking more like a stable coin over time you may not know it's a stable coin when you're actually using it some of the digital wallets and them not even crypto wallets was like go to Google you know Google Play Store or Apple Store and all of a sudden you're swiping the group to buy an app and that developer gets paid real time for your download that stuff can all happen with cryptocurrencies I think you're going to start seeing and some of the things start getting replaced but use end users may never know so another question hi could you share a little bit about stable coins as a mode of remanence yeah absolutely I think that is right now like the trading use case is the biggest one but I think we remittance is very much on the horizon I think we'll start to expand in the next couple of years one of the key things that's gonna enable that is having multiple tokenized currencies because what we'd like is I could be working in the UK and maybe my family lives in anted States and I want to be able to send I want to send money home and I can take you know I can take pounds very easily tokenize those into true true British pound then the liquidity is sourced from a crypto exchange and it's immediately turned into true USD and then you end up in a with a wire in your bank account and that means that there's no international wires that need to happen and so this can be one of the fastest ways to be able to send money internationally and you can get much tighter spreads than you normally do for retail FX which tends to have really really big spreads yeah I'm I apologize if you guys discussed this already but when I think about fiat backed stable coins I feel like in the future you'll have just central bank ish digital currencies right so we'll be direct central bank money on the blockchain so that kind of obviates the need for feedback stable coins because you can just have a direct direct claim with the central bank rather than something that's basically is kind of like Imani it's still a wholesale Bank money you know it's it's just just a wrapper right for getting moving money around on better rails but if you can just have this the central banks directly issue that and you would have that direct relationship rather than going through a JP Morgan or the wholesale inter-cell 'men business you know all that I mean that that would be a really big game-changer yeah I think I think that could happen in the future but like the amount of time that would take from now until when let's say the US government is comfortable enough with smart contracts that they are comfortable you know launching their own smart contract and minting us you know tokenized USD for people that I think is gonna be at the at least it's gonna be several years but I think that's gonna be a very very large amount of time and potentially they may choose to work with partners in the industry rather than doing it all on their own because it is a type of expertise that the government really does not have today and by that time at least we at least my team feels very confident that we will have a wide set of products across many many different fiat currencies and potentially other assets as well and so it's not something that we're very concerned about as a company we see it as a potential opportunity for us in fact there are actually about 20 governments right now studying stable coins I guess with their own currency they've been doing that you know varying extensive time and no one has really pulled the trigger yet you know I think we definitely believe that eventually it makes a lot of sense they've always made a lot of sense Fiat back stable coins make a lot of sense so we definitely do see that coming and you know I think that if you look at how financial systems work today central banks don't always directly access everything they still use banks money center banks to basically implement their various policies so we definitely do think that there's role for for central bank backed stable coins to coexist with what we are doing here as well yeah and I think I think a lot of what we said is that there's gonna be continuing innovation in the space and I think it's gonna come from the private sector you know there's a lot more to do than just creating that coin I do think that that reality is probably like Raphael saying it's gonna be a very far here time but if that actually happens the use case of that would be restricted to a couple of activities let's say like interbank settlement stuff it would not likely be used in a public manner it will likely be serving a very specific institutional use case we'll take one last question all right that's it then thank you very much for listening and have a great have a great day you