Stablecoins in the Balance Navigating Trust and Scale

Thank you for being here. And I think it's fair to say that stable coins have been the buzzword of 2025. Uh name it, PayPal, Stripe, many banks. There is not, it feels like there is not one player that's not looking at stable coins. So I'm absolutely delighted to be here with our guest panelists on this panel to talk about stable coin trust and scale.

Before we start just to anchor and to make sure everybody has the same numbers market cap as I looked yesterday for stable coins is reaching 310 billion. That's a 33% yearon-year growth. Yet 99% of stable coins are still US dollar denominated. And I don't know if you knew that but actually we often think of circle and tether as leading the charge but there is 200 over 200 stable coins in USD alone. So it looks like quite a fragmented market.

It looks like a lot of things are definitely happening. There is no doubt that the genius act was a very big unlock for the entire industry and for all the use cases that are coming. So today delighted to be here and looking to explore with our panelists questions of trust and scale. And actually I thought maybe we should start with use cases because I don't know about you but very often in places where I go people still say yeah but stable coins are just used for cryptocurrency trading. Is it though?

Is it really what's happening? So maybe Marco let's start with you like use cases. What do you see at Tether? What's actually happening when it comes to ST?

Yeah. So really pleasure to be here together with you guys. So uh I mostly worked in emerging markets since I started uh working for Tedar and uh in the beginning we could see like let's say in 2018 1920 that most of the market cap and the volumes was uh built up from trading or derivatives exchange volumes in general. Uh nowadays we see a big shift in payments actually. So I would say after after COVID um and we realized this afterwards uh people at some point couldn't go anymore to exchange cash on the streets uh and in many countries you have uh central bank fixed rate for currencies while you have let's say an informal rate uh on the streets and at some point uh this become from the central bank side this become flexible sometimes they have to let's say release the the fixed rate and people find a way to not lose money to survive.

Um, and during COVID, no one could go and exchange cash on the streets. So, they started using peer-to-peer, especially on probably on Binance was the the most relevant, let's say, exchange where this was happening. And so, we saw a huge increase of peer-to-peer uh for USDT 2021. afterwards uh remittances, cross body payments, trade finance deals and ultimately it comes to the fact that stable coins are cheap and are um fast. Um so you know like uh no nothing to to say against let's say payment schemes but everyone knows that uh payment schemes like Visa, Mastercard, they settle uh twice a day, five days a week.

So if you want to settle a merchant on a Saturday or a Sunday,

you cannot.

Exactly. uh you can do clearing on a Saturday but you cannot settle a transaction and you cannot settle a transaction in the night. So uh this was what made uh big payment processors to say maybe we can use uh stable coins so that our merchants would be happy that we send the money and we send them transaction on a on a Saturday on a Sunday. So, and these actually uh makes a big growth towards the market cap of of stable coins because then USDT and all the stable coins remain in circulation.

Okay. Well, very so I think you're starting to debug the myth that no, it's not just for cryptocurrency trading. Bob, I'm very interested actually in your perspective because you have an incredible background in chat, but also like starting to look at the entire market. What use cases do you see where is the adoption from your perspective?

[clears throat]

So we were an early investor in circle um you know similar to tether a stablecoin and I think this is a very sophisticated group here in Abu Dhabi um this this week but you know if I'm talking to people uninitiated it's really transactions transactions transactions transactions and unlike Bitcoin which is for most people a store of wealth which they recognize will be volatile

then circle circle from the very beginning and Jeremy as the founder and CEO is very clear we want to be the most boring the most regulated uh the most stayed because it's a stable coin so in 2002 when we were hoping to bring circle public via a spa black rockck came in in the private round as we did with our fund and what black rockck provided was a money market of one to house the fully reserved USDC in a money market in treasury bills and cash with access to the Fed window where people can honestly look in the look in the mirror and say a dollar is a dollar is a dollar. So it'll never change in theory. It'll never change in practice and what we're looking for is the use case. And I think, you know, being here today and thinking of my time at at Barclays Bank where we operated in 60 countries around the world, if uh Atlas Merchant Capital using Barclays as a bank was going to send money to Mubata here in Abu Dhabi,

we'd go to our bank, there'd be a correspondent bank somewhere between there and here. There'd be a bank of Abu Dhabi, First Bank probably for Mubatala. They'd all confer two or three or four days later. We'd have a transaction of a hundred million. It would cost us a number of points in terms of transaction fees as opposed to US digital coin instantaneous 247 at the speed of the internet with no one standing in the middle and dimminimous fees.

That's a that's a change in the world. And if someone tried to explain the opposite to us, which is we're going to stay with that banking system, we're not going to accept the fact that the internet and blockchain provide um the trust and the speed. It would be impossible to convince us. So long- winded answer, thank you for asking. But I think the use case is transaction transaction

transaction. Perfect. And all the names you mentioned, you know, this blend of Traty with what was considered DeFi definitely is there. I mean Julian t turning to you from a custodian perspective and a custodian who's actually regulated across the world um the use cases your customers like what are you what are you seeing?

So I think there's there's probably two things to think about. One is uh I think we're starting to see the second generation of stable coins coming out. So what do I mean by that? The first generation we were just talking about was about crypto trading and facilitating that. Now what we're trying to see is what are those use cases?

And I think what we're understanding across the market is there's a huge growth in stable coins. You almost every day you're hearing another bank is issuing that. And why? Because they're trying to find product market fit. And I expect there will be consolidation over time.

And I think that is probably a healthy thing. But if we look at the exact use cases, I think we've got to understand where the current financial services system is inefficient. And that really is going to be supply chain finance, trade finance, remittance processing, etc. When we look at domestic payments, it works for most people. If we look at Visa, Mastercard, it works and it is relatively cheap, if not free.

So I think we've got to um think about where is the pain, where can we settle 247, where can we move a huge amount of money as Bob said instantly at at fractions of what the existing uh financial services sector does and that is where you will get traction and I think that's where it's going to be important to understand where those use cases are.

Okay, perfect. Thank you. And maybe turning to you Michael. So you're based here um and Zen Bank is actually regulated here and I think you also have a role to play in local stable coins. So maybe walk us also through some of the use cases and how you actually seeing that being implemented.

Yeah, sure. [clears throat] Um we are launching a DM stable coin the multi public blockchain. Um in the past actually we have a US dollar dominates and right now you have more stable coins launching in each countries. Um having this actually change a bit actually on the trade behaviors. You can imagine for example like the trade import export from the China and the UEE that could actually think about to settle in the local currency because you can have min and burn on the both sides.

So that's one two actually because stable coin is a basic infrastructure for the day for digital infrastructures we enable also the programmable features.

Yes. Um especially uh when you talk about the e-commerce space when you have a microp payments in the past actually that's you have to suffer from the cost of the swift probably will be too high for the small valued and right now you can imagine actually you can settle by merchant by item to the supplier directly so this can be the second one I think the third one will be most powerful one actually the tokenized access will be more and more you need to have actually the currency p with the RBA uh in order to transact so I think the the the infrastructure itself is very

um critical you know in ter of investment aspect and also the trade aspect. Yeah, I think it's great because so I hope that with this first question we're actually debugging the fact that stable coins are not just for cryptocurrency trading whether it's actually you know payments rail in different countries whether it's actually transaction transaction transaction or this mix of trapfy use cases that are coming on board but also the payment rails of the future you know AI agents would struggle to get a proper bank account so why not a crypto wallet um I want to turn to regulation uh and start talking actually about something that we talked about backstage which is the fact that across the world. It seems that no two countries are taking the same approach for something that ultimately is moving money. Um and so maybe actually Bob if I start with you this time from you know a US perspective it would be great to actually start you know getting your perspective on regulation what change and where are we now and therefore what can happen going forward

just an absolute sea change in regulation from the US with [clears throat] the current administration relative to the prior administration under President Biden Janet Yellen and the Treasury Gary Gendler who is probably the most the the the one I'd accused most of malign neglect in the SEC. Um it was just no no. So we never were accepted at a 4.5 billion valuation for circle over two years. They never allowed the the spa to become public and we've all seen the value of of circle on the market.

You compare and contrast that to the current administration with Scott Bessant in the Treasury, with Paul Atkins in the SEC, with Jay Clayton, the Wall Street cop. The attitude toward financial services is very much financial services. Make regulation more simple. Make capital levels more understandable and probably a little bit lower. Don't try and regulate digital or crypto.

regulate financial services and integrate those two together because we can see the convergence and tokenization and stable coins and exchanges. So the attitude now toward uh being positive about innovation about progress about one set of regulation that covers financial services not one set for crypto or digital and one set for traditional finance is really the future. And when I sit here and look at what I've learned since 2021 about blockchain and that technology and the power of that technology, I'm very comfortable saying that within two or three or four years, we're going to see blockchain is the prominent underpinning of technology for financial services at large and it needs that one integrated uh regulation. So I just think it's been unbelievably positive uh this year and a real sea change to the past and that's what put the US as an investing um uh venue very very different place. Yeah, absolutely.

I mean, Julian, maybe taking taking your views because you're regulated across the world and in many different jurisdictions, right? So, how different does it look like? What actually how Yeah, how fragmented is it? Slightly leading question.

I think there's probably a a couple of things here. One is if you look back at regulation of crypto and stable coins, I think you've had a number of jurisdictions that tried to out Trump, the last one, the next one. So whether um you know MAS in Singapore was leading or the FCA in the UK or ADGM here etc. each of them have all tried to get a more robust more open more engaging set of regulation. I think again Bob is right in terms of yes this is not about crypto this should be around financial services and regulation.

Um I think the other challenge we've got and perhaps I should call out too here is it's the misalignment across jurisdictions. Yes. And I think that is going to cause more and more problems. Um and I think we've got to find ways of helping the regulators to understand the unintended consequences which are in the regulations but also to ensure alignment between these regulators and within the markets to get to the right area. The last point and and you mentioned obviously we are a custodian but actually having definition of what a custodian is I think is critically important for the assurance of the regulations and also of customer funds because while it is about transactions underpinning everything is trust and that is around where are your assets kept how are they uh safe and secure so I think there's a way to go I think we're seeing some great progress in various different uh countries and jurisdictions um but I I think we should understand that we're not aligned across the globe as much as we should be.

Yeah, I agree. And it feels like you know this misalignment actually is counterintuitive because ultimately it's a financial system that needs to work and countries need to have this vision and mission for example from taking from the lead of the US. I mean um I'm curious actually Michael you're based here and so getting your perspective on the region adoption working with regulators what does that look like? Um [clears throat] the UEE is uh very pushed on the innovation agendas. Um if you look at actually the 2030 to the 10 years program we talk about the digital strategies and under digital strategy you have three pillars including uh virtual asset blockchain.

The second one is AI and the third one actually is smart infrastructures. Um if you look at it actually the base foundation again is a stable coin because if you don't have a stable coin all the CBDC you cannot remove the things. Well, with a very ambitious um the agenda is like double the digital economies by double in 10 years. Um the regulation itself is uh you know open enough actually to uh allow the innovations and also actually they take very serious matches. They try to study actually what's the gap and what's the regulation best parts in the other places.

Um we're launching stable coin again. I think this is a really big help actually from the regulators despite actually in the UAE you have a different regulators but I think actually it work well because they heard enough the market noise and they are very ambitious on growing the digital asset hub in the world

again I think you know this idea of ambition what does the future of finance look like seems to be a core theme that every government should take at heart I mean Marco I'm not forgetting you I think it would be amazing to also get your perspective look I mean you know tether has been recently downgraded for example by the SNP you have a different perspective of capital allocation and how you look at at so what's your outlook on actually regulation where it stands today but also why do how do you see things planning forward for 2026

yeah definitely I mean we we really appreciate uh let's say clear regulatory frameworks because bring um solidity to to our market the making a comparison between Mika and Genius Act as we were just talking Genius Act is quite flexible as a regulation so it doesn't taste it doesn't uh state the exact number of each liquid asset that you need to have as part of the reserve. uh Mika instead forces stable coin issuer to have around 60% of reserves in cash which are if you make the math should be um held in at at least 12 banks and it's not easy uh you have been in in in stable coin for a long time it's not easy to open 12 bank accounts and plus you are subject to risk because usually are not the big banks that are going to open your accounts for a stable coin issue so that's really dangerous and coming back to what has been said. Imagine all the jurisdictions doing their different uh reserve uh management policies. So then you live in a world for which you don't have any more fungibility of stable coins because one could issue in US and could redeem in Europe and in Europe the reserve ratio is completely different. So and you should redeem based on the reserve policies of that specific jurisdiction.

So we are trying to uh let's say to to tell our our vision and what should be done in our opinion uh to being able to survive when the market is stressed because when the market is easy everyone is

even all cash is fine but when the market is stressed like when it was Luna in uh in in March April 2022 I was there uh redeeming uh 7.8 8 billion in one day and 24 billion in one month. Is in that moment that you you test not only the stable coin but you test the world banking system connected to it. And [snorts] when it comes to S&P uh to be honest uh we smile because the is a is a judgmental opinion. Um it's it's so they miss out they missed out all uh our income statement and balance sheet.

They miss that we make 500 million a month of profit just of interest rate from the from treasury bills. They miss that we actively uh rebalance hedge or can trim positions. We are not going to wait that bitcoin is going to zero whatever know like and say goodbye. they missed the fact that we have more than 30 billion equity in our balance sheet that we are over collateralized over uh 100% by 7 6.7 billion uh so there are a lot of a lot of things missing but I think that the market is using and individuals and companies are using USDT because uh they see how we work and they see and they saw that in the moment of panic we always redeem then what happens in the secondary market uh is not manageable by us.

If some exchanges don't may not have enough liquidity or they don't have enough uh liquid policies on the on their order books is we cannot handle that. But on the primary market we have to sh show seriousness that's why we always like maintain our policies.

Okay. Um we're almost out of time but my my last question is actually quite a big one. Um 99% of stable coins today are in dollar. We we hear a lot about dilarization. We hear a lot about debasement and so I'm just curious maybe your quick take on do you think we're going to be in a multi-stable coin world?

Is it going to be still dominated by US dollar? Is gold going to have a role to play into that and being conscious of time. So maybe starting with you Michael.

Well I I do believe actually that will be multi- um currencies going to will be happen because in the government point of view actually you want always attract the foreign direct immune uh investment right. Second actually that because of the trade war actually become more efficient. Do you have a more than a US dollar itself? That's my view.

Okay, Julian, what's your view?

Uh, I think it's mixed. I think obviously dollar has a massive role to play globally. Um, but there is absolutely a use case for local and regional uh stable coins. I think you've got to then understand what the use cases are and then understand where those payment corridors are going to be because you may not need to go via the dollar. you could go between two other um but I also think there's a lot of economies which need uh a stable coin to ensure they are kept up to date with the technology and what uh stable co coins can actually give them.

Okay, Bob, [clears throat]

I think the related question which I'm going to answer, I get to make my own is will the central banks create the digital currency or will the private sector and this is a hot debate three, four, five years ago in the US and Eric Rosenrren who was doing the white paper is the president of the Boston Fed is now a member of our team and I recall when he was doing the white paper he pointed out that you know the Fed has absol absolute brilliant economists throughout the United States, but they don't have they no one would hire the Fed to develop technology. And if you think about the Fed wire, the Fed wire was was was invented developed by private actors and then heavily heavily regulated by the central bank. And that's the model. That's when the penny drop for us, which is that the central bank is there to allow the free enterprise system, private sector to develop stable coins. And I think it will be the victory of the few, not the many.

There will be small clubby type of coins for individual banks. But in terms of transaction, transaction, transaction, we'll see a few winners heavily, heavily, heavily regulated by the Fed and by other central banks.

Okay. Wonderful. Mark,

yes. Very briefly, I think that it would be really hard for uh new stable coins to recreate the network effects that uh uh USDT, USDC, and a couple of others have made in emerging markets. Um it's true that local stable coins will play a role. Um and connecting to the gold uh aspect actually the problem when you do a local stable coin and so you can make an onchain cheap and and fast transaction is that the reserve management of it in many countries you don't even have enough depth to back that stable coin. So gold would play a big role in terms of collateral.

We are seeing ter gold uh rising in in terms of market cap and uh we are accumulating more and more gold uh for this reason. Now we own more than 100 I believe 120 tons of gold and we expect that actually ter gold XT will be the next big thing.

Well gentlemen thank you so much. This was a wide-ranging conversation. I feel we could keep going on for hours at least I would love to keep going on for hours because this is a very deep topic. I hope this gives you actually insights into trust and scale for stable coin. We are definitely past having stable coins used only for cryptocurrency trading.

Regulation still needs some harmonization because ultimately we do need financial capital to flow and I think the jury is still open whether we're going to see you know multi or or a few winners but you heard different perspective. Thank you so much, Michael, Julian, Bob.