Hello everyone. I'm Kevin, co-founder of Lon, the issuer of a Canadian stablecoin called CADC. We are Canada's largest stablecoin. We currently have about two-thirds of the Canadian market, and I'm here to talk to you about how we're creating a stablecoin that's creating a stablecoin that's not pegged to the US dollar. So, we are in New are in New York.
So I'm assuming that many of you here are Americans and you use the US dollar, but there are actually quite a few people in the world who don't use the dollar as their everyday currency. So I'm going to spend about 15-20 minutes on how we think about this, what our prospects are, and how the scenario of creating a stablecoin that is different from the US dollar is fundamentally different from creating a US dollar stablecoin. A little background: I got into the blockchain cryptosphere about 10 years ago, started around 2015, founded my first company in 2019 to help Canadians buy and sell stablecoins. And stablecoins are such a niche topic. In 2019 niche topic.
In 2019 , Circle appears to have had less than a billion dollars in assets under management. And we always wanted a Canadian version of a US dollar stablecoin. So we started in 2021, launched the first Canadian dollar stablecoin, CADC, and since then, uh, we've been pushing for regulation, uh, in Canada and around the world to regulate stablecoins, uh, in a way that we can all use them. Uh, in the last year, uh, we've done about half a billion dollars worth of transactions with our Canadian dollar stablecoin, and we're currently the fastest growing Canadian dollar stablecoin in the market. Here's a little map, uh, to show exactly where stablecoins are activated around the world.
Uh, the main one you're probably familiar with is the euro. Uh, we see stablecoins in Asia like Hong Kong, Japan, Singapore, uh, Indonesia, Thailand, and then you have in Africa then you have in Africa , uh, countries like Nigeria, Cameroon, uh, there's like five or six of them five or six of them , uh, in Africa. And Latin America is currently experiencing a boom in terms of local stablecoins. There is the Brazilian real, there is the Argentine peso. There is a Chilean one, I don't remember what it's called in Chilean.
Maybe a peso too. Mexico too. Central America. But all these stablecoins are popping up all over the world, and we're starting to get to the point where we can collectively create a network of stablecoins and create unique use cases that we've never seen before. So I'll take a step back and talk about the difference between US dollar stablecoins and non-US dollar stablecoins.
The secret to a US dollar stablecoin is to accumulate as many assets as possible. Take assets under management, take TVL, lock them in Treasury bonds and earn income on them . This works really well if you Tether. You make billions of dollars with just a few employees. If you're Circle, it's actually not the best business best business model because Circle started distributing revenue back to its distribution partners.
And over time, we begin to believe that assets under management are actually a race to zero. So stablecoin issuers like Circle, Paxos, and Bridge are now competing for the same customers and offering increasingly higher returns to to distribution partners. Over time, as a stablecoin issuer, you become more like an asset manager who simply helps people buy Treasuries, money market funds, and, ahem, various yield instruments. That's exactly what banks do. They charge basis points for this service.
From 10 to 20 basis points. There really is no model in which I can imagine a long-term scenario where a stablecoin issuer would actually retain most of that return and be able to sustain billions of dollars in profit each year. So this approach is a very difficult sustainable income model to actually justify in the long term. However, as a non-USD stablecoin , you can do something different than a USD stablecoin. So, USD stablecoins like Circle and Tether don't make money when you send funds from person A to person B.
They don't get any value in the flow of funds. Whereas non-USD stablecoins almost always have currency conversions that are an integral part of almost every transaction. Whether it's converting to another currency, converting to Bitcoin, Ether, or any Bitcoin, Ether, or any other digital asset. There is a built-in component to currency that we all just don't see. It is usually fixed by a centralized exchange that converts your local fiat currency into any digital assets you purchase.
Instead of essentially combining the fiat currency and currency onofframp component together, we separate these two steps from a centralized exchange, where the stablecoin issuer becomes the onofframp; and then you have a separate, essentially you have a separate, essentially , it could be a centralized or decentralized provider that provides the currency component, which we believe can significantly reduce the cost of input and output, that is, input and output of digital assets. So what you see here on the screen are different ways that we think about stablecoins in general. Here are the basic principles of creating a stablecoin. The technology itself is simple The technology itself is simple . It's just a token that exists on the blockchain.
But what happens behind the scenes is actually very complicated. We think about regulation, we think about policy, we think about infrastructure. Liquidity and market making are a huge issue right now . Uh, the foreign exchange market and where you actually make money, uh, in the long run, and really the velocity of money. Good.
Uh money. Good. Uh , talk about regulation, uh, really quickly. Uh, I'm focusing on Canada. Canada actually has pretty poor regulation of stablecoins.
We have conflicting regulators. Uh, in Canada, there's a federal regime and a provincial regime that's trying to, uh, essentially regulate stablecoins. Not a very good model. Uh, hopefully we'll figure this out, uh, in the long run. Uh, we're pushing regulators to find the right model.
Europe has developed an MA, and now they are actually reviewing how stablecoins should be regulated, the profitability of stablecoins, and how that should be viewed. The US obviously now has a law on clarity around profitability and how they are going to look at rewards for activity. The UK is also reviewing how they design regulation for their stablecoins. They had restrictions before. They used to have limits and things you could do with stablecoins.
I think they are rethinking the structure and really opening up the ecosystem in terms of how they want stablecoins to exist in their ecosystem. And before I get into that, the reason why each of these countries wants to issue their own stablecoin and a stablecoin in their currency is because of monetary sovereignty. Governments now control their money supply and inflation through their own currency. And now the US dollar dominates blockchain and digital assets in terms of payment channels payment channels . People in Canada, Europe, the UK, Singapore, and the UAE are now forced to use the US dollar and give the US, in essence, a monetary advantage by using the US dollar.
All of these countries want to reverse this and allow their citizens and residents to use their local currency to conduct monetary policy through interest rates that they can control. They cannot control interest rates in the US. They cannot control the money supply, and this is very frightening for these government agencies. Policy. So politics becomes really important.
If you've been familiar with blockchain and digital assets for long enough, you're aware of Gary Hendler's blockchain era. It wasn't the best time. We would n't have this kind of event if Gary Gendler was still the chairman of the SEC. We wouldn't have all these people building in the US. If that were the case, politics would play a big role in regulation and how we think about digital assets.
And when a new administration comes into play, especially in the US, it forces governments around the world to really rethink their policies on digital assets, especially their policies on stablecoins. Therefore, it is very important to stay informed about the policy as we create regulations for stablecoins around the world. Infrastructure. In fact, one of the most important aspects of creating a stablecoin is a reliable infrastructure that allows for easy deposit and withdrawal of the stablecoin. What makes a stablecoin hold its value and maintain its peg is the ability to convert into and withdraw from the stablecoin.
If we don't have effective rails for that, then you essentially lose trust from a consumer perspective, and then you start to depend, especially in the secondary market, if your stablecoin starts to depend. Therefore, having effective fiat currencies at the exit of the market is actually very key to creating a successful stablecoin. Integration with internal payment rails is payment rails is another very important aspect. Stablecoins allow you to virtually connect internal payment rails around the world rails around the world . For example, you have internal payment rails in Brazil and Pixa.
You have domestic payment rails in India, UPI. You can connect the two if you have really good connectivity and availability in those countries and then use a stablecoin to move funds across the border. One of the biggest advantages of stablecoins is the possibility of 24/7 availability and the ability to deposit and withdraw funds very easily. So, this is a key component of creating a stablecoin. When you create a non-USD stablecoin, it is very important to consider the uniqueness of your local geography.
Every geography will be different. Your users will have different preferences. Creating a stablecoin, for example, in Canada is very different from creating a stablecoin in Asia, the Philippines, or Singapore. User experience, technology, partners – all of these are very different, and you need to meet the needs of your audience. You need to know how your audience will react to different payment methods.
And in some countries, there are users who are more comfortable using new forms of payment, while in other regions they are more accustomed to existing domestic payment systems. I want to talk about liquidity and market making. I think this is the most difficult part of creating a stablecoin because a lot of it is not actually controlled by the issuer of the stablecoin. This is where the market really comes into play and determines whether this stablecoin is worthy of liquidity and market making if people want to start using it. Liquidity is currently the most challenging issue for non-USD stablecoins because we have not yet reached the transition point where market transition point where market makers will start making markets for non-USD stablecoins.
The largest market The largest market makers such as Winter Mutes, Cumberlands and Jumps of the World have not yet entered this space, and we need to convince the largest market the largest market makers and liquidity companies around the world to start creating markets for non-USD stablecoins; because once we do that, we can really think about a 24/7 constantly active forex market that will allow people to trade currencies around the world in real time without traditional banking hours. This is very important in terms of creating a network effect, allowing us to cut out the middlemen of companies that essentially companies that essentially move money around the world, such as Swift, banks, Wise, Airwex , etc. So if we can work together as an industry to create more non-USD stablecoins, to create these liquidity markets and market making, we can essentially rebuild a lot of that financial infrastructure that Swift currently has a monopoly on around the world. Velocity of money movement. This is where I think the biggest opportunity lies for non- USD stablecoins.
I mentioned earlier that non- USD stablecoins do not reflect the value of the velocity of money that actually occurs in the ecosystem. Non-USD stablecoins have the greatest potential for traction here. We want more transactions. We want more forex. We want more options for exchanging between different currencies.
So the speed of money circulation is actually very important. For example, CDC's market cap is about $2 million, but we can do $500 million in volume in the last year because the money moves very quickly. We can recycle funds on the exchange and in the market to create these positions even with a small sample size of assets under management, and have the ability to do so. For example, if we were to monetize only assets under management, we would probably only be talking about a couple hundred thousand in revenue, but we are generating millions of dollars in revenue just from the forex from the forex component of a small $2 million in assets under management. So this is actually the biggest opportunity that I think a lot of people miss.
Forex is the basis for sellers' unused stablecoins. So this is the last slide, and I want to leave the audience with this: The scenario for a non- USD stablecoin is very different from a USD stablecoin. The US dollar is the reserve currency of the world, as we create stablecoins in different currencies like the euro, the Canadian dollar, the pound sterling, we think about it think about it differently because they are not essentially reserve currencies. We think about regulation, policy, infrastructure, liquidity, exchange rate, and velocity of turnover–these are probably the monetization angles we all use. One of the biggest opportunities that I think Circle, for example, missed was acquiring Bridge and handing it over to a company like Strike.
If Circle were to actually acquire Bridge, I think there would be huge synergies between Circle and Bridge that would allow them to grow exponentially. Combining fiat coin issuance with stablecoin issuance is a key part of what we are trying to do as an issuer of non-USD stablecoins . The ability to combine these two aspects creates much more synergy. Um, I personally think Circle needs to do a better job of adapting and weaning people off USDC. They are now handing it over to companies like Coinbase, but the economics of Coinbase are a bit different than the economics of Circle, and there is a conflict of interest here.
Therefore, we believe that the biggest opportunity for a company like Circle is to create its own create its own APIs that could compete with Bridge. But yes, that's what we think about in Canada. This is what other stablecoin issuers around the world are thinking, and this is how we are building the future network of non- USD stablecoins that work on forex. Thank you.
Automatic transcript — names and jargon may be misspelled.