Georgy Sokolov - On-chain Payments in Real World: Are we there yet? Wirex

You're good. All right, guys. Allow me to introduce you. Georgie Soo, right? Am I right, Georgie?

This is yours. Have a double check if it's working. It's a great pleasure to have Georgie here with us today. Um, Yrex is an official sponsor of Naples Cth. for us it's a great pleasure because as I I was telling uh before thanks to these guys we can do this kind of uh events.

So uh I want to say thank you for from me from the Napoli team for being here to make to talk about blockchain technology to talk about solutions in order to continue to grow and to continue to scale to mass adoption. Georgi is the co-founder uh and the VP B2B at Tyrex, a digital payment solution platform that is serving more than six million users in 130 countries with 15 years of in experience in business and BD and 20 billions in proceed transactions. Georgie leads Yayx global strategic partnership and push toward seamless blockchainbased payments. His talk he's going to talk about uh our blockchain payments ready for mass adoption. Georgie will explore the current state of onchain payments where real world implementation is already under uh what barriers we still have today.

So expect insights from Yrex journey as a principal Visa partner and Mastercard member that are reshaping the payment landscape. A big applause for Georgie. Thank you. And that's quite a presentation. Um right we will start with a quote um from Bitcoin white paper effectively a bible of this industry to a degree.

Uh just as a reminder right if we were at some uh and it and at at an Ethereum conference it feels easier because quite a lot of people at Ethereum focused conferences are focusing on building something whereas when you come to other types of conferences let's not name the ecosystems. So just as a reminder the this industry started good uh 101 15 years ago for a good reason right the the uh initial idea was to make payments between people decentralized and free right so that the people don't have to rely on any intermediaries to make payments between each other it's not about another shitcoin another memecoin it's not about pumping dumping it's not about just making the next 10x it's actually about bringing some utility and improving the finan financial system as we see it. Um so this has been the vision for a good number of years and um the the vision was and still is quite ambitious right so this technology enables instant cheap and borderless payments uh it has quite disruptive potential around many areas of finance but uh for some reason we for example at wirex we started 10 years ago enabling blockchain payments in the real world. And still today, like how many people here use cryptocurrency for daily payments? Two.

So, and that's quite a crypto savvy audience, right? We're not uh we're not at a McDonald's conference. We're at a crypto conference. So, people here know what what they're doing. And still uh we see that it's still far from adoption, from mass adoption at least.

Um it's been a m bumpy road here, right? So firstly, mostly speculative use cases in this whole industry. Uh and tech historically has been lagging far behind the hype. Uh the technology is only now getting to a stage when it's actually ready for mass market. But the hype around it.

We've seen what three four big bull runs and and and crypto winters as follows. um stable coins which are the main enabler at the moment for this uh uh onchain payment uh world uh they have not been without controversies rightly although first stable coins came about a good 10 years ago it really became a buzzword only recently and um uh I would argue that what enabled stable coins to become a thing um historically they've all been about just um means of exchange uh on a on a crypto exchange, right? When you when you're trading and you need to uh wait for the currency to appreciate, you just swap into stable coins, right? Uh what made them shine was the development of technology combined with the uh increasing interest rate requirement uh in increasing interest rate um environment because historically they had the product market fit from day one but they never had the business model right how do you make money of a stable coin and that's why we had all those questions around uh USDT and where Terra was generating the interest from and uh even USDC had it um ZPEG events and all that because there was simply no way for them to earn money. And then when interest rates started going up, those businesses all of a sudden became not just profitable but some of the pro most profitable business in the world.

Especially if you count uh for the number of employees like tether uh what was it last year this year their profit is comparable to profit of JP Morgan and they have 10,000 times less people working for them right so it's it's a superefficient business um and last but not least why it's stable coins that are important for the payment use case when we started 10 years ago uh the idea was to enable people to buy coffee with bitcoin and although we made it possible. People don't do it like no one buys coffee with Bitcoin. There's a very small use case uh for people to actually spend the currencies like Ethereum, Bitcoin, Solana, whatever when you get paid in this currency or you mine Bitcoin and you have real world expenses to pay. Uh but otherwise people either spend fiat or stable coins and latest developments over the last year year and a half there's been quite some significant things happening. So uh major payment networks start not only talking about them uh they start really implementing them.

Uh the biggest catalyst this year was the acquisition of a company called bridge by stripe for a billion and 1.2 2 billion I think and it's like a 2-year-old company with virtually nothing like a couple of uh couple of quite basic products and that's when the stable coin actually became a buzzword because people suddenly learned that not only the DJs are using them but actually Starlink is using uh stable coins to accept payments across the different geographies because it makes sense because uh it's just easier faster cheaper uh and better uh then technological advancements They've been improving uh the usability. Uh 10 years ago when we started it was impossible to do anything onchain. We had to build a custodial solution because the speed of blockchain transactions was simply not comp comparable to 50 or 100 millisecond window of viscard confirmation of transaction. Now with fast L2s with fast L1's it's becoming possible.

uh regulatory momentum is uh catching up. In the previous talk, we heard about the Genius Act and then Mika and all of that. So, it's it's becoming legal and uh not only crypto companies are starting to go public. Uh many of them are starting to apply for banking licenses. And last but not least, and this is not information from Coin Market Cap, this is actually from Visa's own website.

last year and last year was much smaller volumes than this year. Uh stable coin volumes already surpassed the volumes on Visa and Mastercard networks. Uh of course it's not comparing oranges to oranges because in with in case of Visa and Mastercard, we're talking many many many millions of billions of uh small retail payments in stable coins. It's mostly about settlements, hedge funds, high frequency trading. So it's not really like for like.

Nevertheless, 10 years ago, this would have been unimaginable. Um so what are the actual uh use cases? I would argue that the biggest one is crossber payments and remittances because that's where the biggest frictions are. Like us living in the developed first world countries. Uh you may think why do you need it?

We've got SEPA instant already. Why do you need stable coins? But try sending money from even a European country to another European country which is not part of SEPA. And I'm not talking about sending it to I don't know Argentina or Indonesia etc. That's where all the frictions come in.

That's where payments still take 5 days to a week, cost you $50 to spend to send $10. It's uh very inefficient. B2B payments and treasury management. As I mentioned, turns out that Starlink was using it for quite a while now and more and more companies are starting to uh implement stable coins in their uh day-to-day business payments and uh treasury uh payroll and contractor. With the world becoming more decentralized and more uh remote after uh COVID and all and all of that, people becoming more uh mobile and working from different countries, it makes sense to pay in stable coins rather than worry about if you're a huge corporation, of course, you can pay your 50,000 employees by having a bank account in every country where your employees are located, but it's not practical for a 50 person startup.

Um and then all the other use cases, e-commerce and retail. Uh on e-commerce side, Shopify recently announced that they will be accepting stable points USDC by the end of the year. And this is huge. Uh and not not least uh financial inclusion and accessibility. Again to the example of first world countries, no one needs it here.

But for people who are unbanked, underbanked uh in case of uh various war conflicts and and countries going under sanctions uh ordinary people suffer and then they get cut off international banking system, their home banking system and all of a sudden everyone finds ways and learns and adoption happens overnight. People learn very quickly how to use USDT, USDC, P2P and and all of that. It's just when there is a problem, this becomes a solution. Still yet realistically, as we saw, only two people in the audience use it for for payments, right? So why uh it's still complex.

You still need to know how to manage your private keys, uh blockchain addresses, not forget it, not lose it, uh not lose access to your funds. Transaction fees in many cases are still quite high. Um regulatory uncertainty still remains although it's seemingly improving but uh it's still a lot of this industry is still in the gray zone and real world usability is still limited. It's all good sending stable coins person to person but what a where do you get them and then b where does the person that receives stable coin how do they actually spend it in the real world. So all as always as in many other industries this first and last mile problem is the the toughest.

Um and trust with a lot of companies failing over different u market cycles there's less and less trust and although we don't really see massive migration to onchain and self-custodial solutions it's happening. Um what do we need to make it happen faster and to to ensure that people actually start using it? uh integration with existing fiat systems needs to be seamless. It it it cannot be difficult like people spoiled by choice in the first world can't be bothered and people spoiled by well not spoiled but just like lacking basic uh technical education they can't use it when it's too complex. uh transactions needs to be fast and cheap, gasless.

Ideally, if you buy your coffee for 5, you don't want to pay another 50 p for for gas fees, right? Um the easiest way we think still remains as it was 10 years ago was to give uh people a convenient tool to use the same currency which is a card. If it can be attached to a payment card, it's uh for now ideal. Uh again, not to say that cards will survive 5 10 years from now. It might all change but for now that's still the most accessible tool.

Uh self-custodial solutions uh are not only secure more secure for the users because they exclude third party risks but they're also easier to comply with regulations because it's self-custody and you don't manage people's money. Um and yeah finally it needs to be nice UIUX that people actually like to use and are not forced to use it. Um, so what and that there's several solutions similar to this, but I'll talk about WX because that's what we know best. So we've been in this space for 10 years now. 10 years ago, it was unimaginable to even have a direct conversation with Viso, Mastercard.

They would not let you on the door even via intermediaries and um existing financial institutions. It was very very difficult to find one that would actually be willing to work with crypto. And now uh we've been direct principal member of both Mastercard and Visa uh for many years now. Both Mastercard and Visa have their own crypto programs, divisions, incentive programs, etc. Uh the solution we're talking about is based on account obstruction where uh all this comp well not all of this complexity but a lot of this complexity is removed from the user.

So what a user needs to know. I have a wallet and the wallet is linked to my card and to my IBAN. I don't need to know anymore as a user and I I should just be able to move funds seamlessly. It's based on ZK technology but not only it's it can be based on many other um layer 2s and even layer ones which is fast, private and secure. Transactions are guestless.

So there's no need to pay another penny to to spend your $2. uh cards are accepted by all the merchants around the world and yeah most importantly people want to earn rewards. So what we find interesting is we've been working on this super complex uh selftorial solution and we tell our customers and we talk to people at conferences and tell them well you've been using you've been using the card for many years there's no reason not to trust us as a financial institution because we're licensed we're direct member of visa etc etc but you can now have a fully selfial solution where you can to make your day-to-day payments without us as of your money. You don't trust your money. Trust your money to us.

demo that mostly cares about care about. So how does it work? How does that's how it's how let's imagine you say a user and you know how to manage self you have it you have it you have your stable points in your wallet in your wallet uh the path to make it to move it from your self wallet to make your coffee or bread or rental payment whatever uh you need to sign a transaction on your wallet send it to a centralized exchange where you will be able to offer it exchange it into fiat then send this fiat into your bank account. If you are in a location like Europe, it's fairly easy uh because it's SEPA, it's relatively fast. If you are not in a region or country that supports instant in instant transactions, then it may take longer.

Money may get lost. Uh we had a recent example of a company in Serbia that we paid from the UK and uh a month later they still didn't have the money. It got lost. You can't trace it. Like it it still sucks.

the technology is um not great and then last not least your bank may start asking questions where is the money coming from oh from crypto thank you your account blocked and only then you can spend it in the real world whereas now the tech allows it to happen this way your wallet you spend it that's it you tap your card onchain transaction happens and money gets uh directly from your wallet into the merchants uh account and um and you don't need to trust anyone with your money how it works. There's an interoperability layer based on this ZK rollup. Uh uh this smart account uh is linked to your Visa, Mastercard, SEAR, faster payments, other banking systems. And on the other end, it's linked to your self-custodial wallet which you just connect like you would connect it to unis swap to one in to any um web three uh decentralized application and that's it. You grant a smart contracted permission once.

It would be very unpractical to have to confirm every transaction. So you grant the permission once you set up the limit let's say 500 euros I can spend per transaction or per day you can recall this permission anytime and the most important thing about it so the way it works now uh you have your money you come to a bank and then you ask a bank please take my money to allow me to make payments in real world and the bank will perform KYC the bank will do this the bank will do that and then if they decide to freeze your money they freeze your money right because they have the right in this case. Well, fortunately, unfortunately, that depends on your perspective. You of course you still have to do KYC because it's a real world payment instrument. But now you are the owner, not you coming to the bank and giving them your money and asking them something in return.

You come to the bank and tell them this is my wallet. If you provide me with a service that I'm happy with, I can give you limited access to my wallet to allow you to perform the payments. And if the bank or virus in this case for whatever reason needs to freeze your account, we can stop your card from working, but we cannot touch your funds because your funds are in your wallet and you control the keys. So it's like proper web3 banking. You actually control who you give your access to and you can recall it any moment.

Um so slow and costly ramp problem is settled by uh global card infrastructure. custody risk are removed because it's fully self-custodial and uh now you can spend your stable points in daily life anywhere these roster cards are accepted. Uh who can benefit from this technology apart from of course day-to-day users. So any web three wallet can implement their own card program. They don't need to be a regulated financial institution.

They don't need to worry about KYC about transaction monitoring. this uh infrastructure that we've been building for 10 years will take care of all that. On the flip side, a neo bank that wants to dive into crypto can now offer crypto services to their customers uh and uh instant payments in the real world as well. Businesses can set up business accounts. It's still very difficult for for crypto companies to get even simple bank accounts.

Not as difficult as it was 10 years ago when we were starting, but still not very easy. And here you can get a proper bank account linked to your self-custodial wallet and corporate cards. Dows can manage their treasury wallets and pay in the real world. And pretty much any developer who has an idea where which would benefit from giving users access to real world payment rails, it can now implement it into their products. So cards can be co-branded.

And um final question, are we there for the uh onchain payments? And the answer is pretty much yes. So it's still a little bit clunky. It still needs to be improved which we're working hard on but uh yeah future is coming and no one can stop it. Uh last but not least for Italy uh yeah we we are um it's our second conference in Italy this year.

We have our Vasp here. We are applying for Mika here. So we're betting big on Italy. Historically it's always been top three market for us. So, uh, very important and, um, yeah, we hope to, uh, see more of you as our customers.

Here's some, uh, QR codes to get, uh, the information and, yeah, if we have time for questions, happy to answer questions.

Amazing. Thank you very much. Let's give her a round of applause. Thank you, Georgie.