EN | Beyond the Dollar The Rise of the Non USD Stablecoins | MERGE São Paulo

Please welcome to uh the merge stage our moderator Hiwa Adeyemo, growth manager at Cast. All right, so let's welcome on stage Tomas David and Bernardo from Trace Finance. Welcome guys on stage. And let's have a chat here. So, David Garcia, ecosystem lead from Arbitrum, Bernardo Brites from Trace Finance, and Tomas Teixeira from BRL One.

And we're going to have a chat beyond the dollar, the rise of non-USD stable coins. I'm super excited to be on stage here with you guys and have this chat. Um if you guys don't know me, I'm Hiwa Adeyemo. I'm the growth manager at Cast, and I'm going to give you guys a little second so you can introduce yourselves a little bit more other than just your name and roles. Um so, go ahead, Tomas.

This Hi. Well, Tomas Teixeira from BRL One. BRL One is a Brazilian real stablecoin issued by a consortium of exchanges, uh which are Bitso, Foxbit, and Mercado Bitcoin. We're working as an industry solution for having liquidity, for having ability to reach and give access with Brazilian real pegged stablecoin. And looking forward to discussing here from you about non-USD stablecoins.

Hi. This is David. I'm ecosystem lead of Arbitrum. And Arbitrum is um a leading layer two scaling solution. We currently secure 16 billion of assets on the network.

Uh we we're typically known for having very strong DeFi ecosystem. And what we currently offer to our to the founders and enterprise developers is the opportunity to either join the Arbitrum One network that's operated directly by us, or alternatively, we also offer the enterprises to fork our codebase and build their own branded blockchain. Thank you. Hey guys. Uh great to be here on a panel with you guys.

Uh so, I'm Bernardo Brites, um CEO and co-founder of Trace Finance. Uh we help large enterprises to move money globally, a lot of that is through stablecoins. So, I'm actually very uh excited to to talk about non-USD stablecoins, which is a thing that I think should have uh been a topic uh for years now, but it's recently coming to to um become a mainstream topic. Um so, the topic is non-USD stablecoins, but I'm going to start start talking about BRL first a little bit. Um so, now BRL stablecoins are the third most issued and used stablecoins in the world.

Um and in Brazil, 90% of all our um crypto transactions are made in stablecoins. And this is not me saying it's um the Central Bank and also some data from Chainalysis. Um so, I want to hear from you guys, why do you think that is the case? Why is that happening? Um do you think because is our our banking system is too closed or because our users are just more attack forward than the rest of the world?

Yeah, so I I would say that's um Pix was an amazing innovation uh in Brazil, and I think a lot of other jurisdictions are copying it now. So, you have like FedNow uh and you have uh a bunch of different um instant payments um systems around the world that are basing themselves out of the amazing work that the Central Bank did in Brazil. So, when you think about the the general market, 99% of it is still USD based, right? And the main reason for this is because most of the cross-border trade is USD based. So, um when you think about um the second largest uh stablecoin um denominated fiat currency, it would be euros, right?

And even then it's super small. It's still about uh half a billion dollars. So, um when we think through the necessity for local stablecoins, um it really comes from the demands of users, of businesses that want to hold those denominated currencies, that want to do other use cases that weren't explored before. Something that is very interesting for us to to remember, right, is that a few years ago, like six, seven years ago, you actually had a bunch of different companies moving money across the world with Bitcoin. Which is not the most uh useful way to move money, but still it was uh liquid, and it was a way that um um companies could do it uh because you could on-ramp it from one side, and then you would have liquidity to sell it on the other side.

Now, was that efficient? You could have a 10% price movement, a 20% price movement on that specific day, and now what? Like, you're going to pay 20% more for your imports? That's not ideal. So, I think that's a non-USD stablecoins, they come to fix uh a problem with the denomination of that trade.

So, if you want to denominate a trade in BRL, or if you have your cost basis in BRL, you wouldn't want to trade with another asset that is not denominated on that currency. So, um I think the market improves over time, and non-USD uh non-USD stablecoins are definitely a welcome improvement to to the current trade system. No, I I I agree to to that. And in a general sense, uh Hiwa, it's something like the first movement was of course like when cryptos there, Bitcoin, Ethereum, and so on. And then uh USD stablecoins solved the problem that the whole world, especially global south, had very difficult access to dollars, okay?

And that is of course having dollars is is the international currency. So, this is a immediate problem that solved, okay? Now, it didn't solve the problem that everybody else didn't have access to local currencies. So, first we're seeing kind of the the other side of of of this movement, which is, okay, now that have USD stablecoins, okay, great, but how actually can I do business in India? How can I do business in Argentina?

How can I do business in in Mexico? So, this is something that counts a lot in in saying that, okay, now I have the MXN in Mexico. You have uh pesos, you have digital currencies, and other things. So, that's in a way a natural consequence of uh the movement that got from USD stablecoins. Second, in the case of Brazil, uh as Bernardo said, Pix was a good example.

There is a strong movement towards a public use of uh innovative ways of of payments, and also some very strong drive by Central Bank, by Securities Commission as well, towards having technology as a way to bring competition. So, this is something that we see that will probably keep happening, okay? And it's only starting now in a way. That's why there's so much difference on on USD and the rest of the world in terms of usage. But lastly, we have that even though everyone in Brazil was using USD stablecoins, the on-ramp was still with Pix.

So, there's a friction there that, you know, it it's it there's a gap. And well, we'll fill this gap. And Trace is doing a good job. We're filling that. But we're filling this gap.

It is important that uh companies like Arbitrum, who's doing business with MXN, B, uh uh coming to Brazil, showing interest in Brazil, we actually have, okay, there's a common ground of technology that the global south economies will be able to use. So, this is only starting. It's going to grow a lot, and it's very very in time of that. Yeah, I also want to add um the element of regulatory arbitrage here, um which is something that um you see across the board in countries where where they are adopting their stablecoins. And so, you're saying that especially international companies wanting to enter those countries, they need to get certain type of licenses to to access the the local currency.

And so, um at least in the short term, there's that regulatory arbitrage in using stablecoins um in the sense that they are one-to-one pegged to the local currency, and that it allows the international companies accessing local currencies in way faster times and in in a way cheaper as well. And I think that's also happening. I mean, I'm not an expert of of Brazil, but um you see that across the board. I see here there's some tax you have to pay, right, on fiat.

There's always a tax to pay.

[laughter]

I actually have a hot take. I would say that's um different fiat currencies um would make us assume that different stablecoins for different local currencies have different demands. So, I would say that a stablecoin in Brazil makes a lot of more sense than a stablecoin in Mexico and such a country, right? If you go and open a bank account in Singapore, you can actually have MXN in your Singapore bank account, right? You can actually settle MXN cross-borders.

You can't do that with BRL. So, um I would argue that a BRL stablecoin makes a lot a lot of sense, and it's probably one of the most demanded currencies uh to have a major stablecoin out of. Do you think that's why it's third place now? Yeah, but it's still very small. We we we we should be in the dozens of billions of dollars of market cap by now.

And I would say we could have a comparable market cap to the USD stablecoins because if you compare the the USD stablecoin market cap versus the the total money supply, it's still very small. So we have a lot of catch-up to do, but I would say that our rate of of growth will definitely be faster because USD stables were were first, right? And and they did all of the work. So now we just need to capture everything that worked with Tether, paving the way with Circle, paving the way with Paxos and so on. Now having Gen Z Act and a lot more clearer regulations overall, right?

And I I would say that BRL stablecoins are poised for for success. I don't think there should be many. I do think that if you have 3,000 stablecoins, you probably don't have any single stablecoin that is attributed I would say volume and and also um I would say we we wouldn't have trust, right? Which is very important. So in the US, you have I would say four five stablecoins that are over a substantial amount.

So let's say a billion two billion dollars. And it should keep being like this. Otherwise, you will have fungibility problems and you have acceptance problems. That's why you have like Visa and Mastercard for for cards. You don't have like 2,000 different acquirers and 2,000 different issuers of cards, for example.

So my next question ties into a little bit of what you said. Um it's like for years, the dream in crypto was to hold dollars to escape a little bit of volatility, right? And now not only with the BRL, but other stablecoins as well, we're seeing a little shift of where people are actually preferring to hold or use their own stablecoins for day-to-day use instead of using USD to kind of avoid paying those taxes and those oops, taxes and FX fees and everything. Um Why do you think that's happening? What Do you see a tendency in that happening every time more and more?

No, there's a tendency of course because Brazilians, even though yes, there's some demand that for USD exposure, Brazilians thinking reals, okay? Not only today to day, but also traders, their P&L is in reals, their expenses are reals, their wages are reals, so even when you're looking at this perspective, there's an real is volatile, but it got 20% up in the last year or so. So it's something that not necessarily holding dollars would benefit a trader or professional to be exposed in USD. In Brazilian reals, this is the case. So first this case that the benchmark here is different.

Second, it's something that the price discovery of Brazilian reals is something that adds to the price discovery in dollars. So it it gets markets more efficient, okay? And then of course, there's the the the the play that happens also in the real world economy for decades, which is the interest rates. There is rates in Brazil. There's a big discussion why, but they are structurally high, okay?

This is something that is out there to compensate and stimulate capital flow to Brazil. And when you see this happening, you see that this interest rates will keep playing a role in subsidizing and making more efficient capital compensation in Brazil. So people will drive to BRL when when they say, "Look, okay, I want to be in real, I want to capture and bring more capital efficiency and have this price discovery that's possible." The real trend is, "Okay, it makes markets more efficient for everyone who's not only Brazilian, but also exporting, importing, and exporters want to hold money in crypto, but they don't want to have exposure to to USD." So this is something that is all about efficiency, about how you do business, how can you make more transparent and faster transactions.

So it's there's no way back. There's no way Yeah. To to add to this, so I mean, the US has been increasing its debt, right? And it's been devaluating its currency at the expense of everyone that's that's holding the the US dollar. And and you got I mean, most of you guys know here very well that from the Brazilian standpoint as well.

And so while typically everything runs on like digital dollars, me as a as an European, I I start considering, "Well, um if if my devaluation is is now like going to be 10 20% a year, then I might as well consider moving into local stablecoins, right? In my case, the real." And so I think that's a that's a trend that that just started and it's just going to I think it's going to play out and people will start also being more conscious of that. And therefore, it's going to it's it's there's going to be more market for for the local stablecoins. I think it's all about inflation as well.

So when you compare the Brazil currency with say Venezuela or Argentina or even Turkey, our inflation is fairly low compared to the interest rates we have. So Brazilians they don't have as as much demands or or need to dollarize the the economy and to actually hold dollars because they they want to have an insurance policy essentially and holding dollars in their their mattress, right? So I would say that Brazilians really think about things in dollars when they are traveling. That's it, right? So that's why you have Nomad, you have like Dollar App, you have a bunch of different

You have Cast. Cast, of course. Which by the way, I am a top 30 user globally. So the experience is amazing. I have never had a car like this.

It's insane. So

[laughter]

and they just raised an 80 million dollar round. Yay. So I would say that's really why you have specific apps for when you travel, for when you're doing dollars. Now Cast is doing BRL as well, right? So you can spend it locally.

But I would say that you you don't have um as much demands for for dollars in Brazil, at least on the consumer side, as you would have for other economies where locally they are essentially holding and trading among themselves because they don't trust their local currency. That's not a a concern for Brazilians. I think that the concern that we have and that imputes us having the needs for for BRL is cross-border trade. It's cross-border investments, right? People wanting to take advantage of the interest rates in Brazil.

They want to do interest arbitrage, right? So those are cases that in my opinion are even bigger than some of the cases that make Argentina wants wants dollars, for example. So the the Brazil trade with the world is over two trillion dollars per year. So I would say that having the Brazil lag is really important to make I think the key word here is liquidity, right? To make liquidity a thing.

Nice. So talking about other cases and beyond just trading on exchanges, what's the one real world use case for BRL stablecoins or even other stablecoins, but that you think that will onboard the next 10 million Brazilians or other people into into crypto? Or is it B2B payments, retail shopping or something else? What do you think it is? Well, first, we will start seeing a lot of AI interacting that.

And then maybe you say, "Oh, it's not really users, it's AI." But this will be embedded in the economy in general. So something that this will bring lots and lots of of volume on the real economy to stablecoins. But in general, it's something again, is efficiency because the real use case like remittances, exporting ports, which is very inefficient today. It's very inefficient today.

And it's real world case like it's really like people sending money to their families. And families who are not able to never would be able to reach USD or or have something like that or even have some capability of being a global economy. And they're doing it right now. So this is something that more to the ground than people helping their families. You can't get more core than that.

I would say businesses are where we see the stablecoin payment demands. And where we we will see it on on BRL as well. So consumer demand is interesting, but it's on the the bigger scheme of things, small, right? So, when you think about remittance flows, um how they move money across borders, it's really dependent on a lot of the fintechs adopting that specific solution as well. So, we see some remittance companies using stablecoins and card companies using stablecoins, but I would say that the demands where really fall short is where currently you have a a big demands for liquidity and it's not there.

So, if you go and trade, let's say, US dollar stablecoins in any of the exchanges in Brazil, um you can't really trade 20 million dollars in one go, right? And you could buy 10,000 dollars. So, if you have a consumer use case to send money through USDT, you could. Um but you currently can't do it if you want to do that it's at scale at an enterprise level. So, hence why I think businesses are the ones that will have the big unlock on on payment volume.

Well, adding to that is something that I totally agree that this liquidity is an issue. That's why I mean, now you can trade BRL one on Mercado Bitcoin, Foxbit, Bitso, Kraken, OKX. And as we see more of that, we we're tackling this this liquidity solutions. Like there are days that millions and dozens of millions of reais are are traded and we're getting there. So, yes, this will definitely help business getting more efficient and and very aligned.

Because for businesses, I think that it really starts to get interesting for them when you have billions of dollars of of liquidity. And we are still on the path there, but I think when we we get to that path, we we will grow really fast. Like How about you, David? I'm not an expert of the the Brazilian market. You can be European market.

I mean, I I mentioned this before, but we talked about a bit about this. It's the the access to the the digital to the local currency for international companies and and the easiness of accessing to to those to the that money that I think it's what it's one of the main use cases for BRL digital and and any other local local or international stablecoin. Yeah, I completely agree. And in my opinion, what we're doing and what I work with today is what is really going to unlock access to everyone. Um Easy access to money, right?

And having people just send money anywhere the way they just want to do it. And today we actually can see the adoption growing in crypto in a way that people don't even know that they're using crypto and they they can just use their money anywhere in any way that they want it. And it's really beautiful to see in the way that we're being able to just plug in other non-USD stablecoins and enable people to just use ARS in Argentina just scanning a QR code and Pix in Brazil just being backed by other stablecoins. And we're going to soon be able to do that in Europe as well. So, it's really nice to see that and I think that's how we're going to really unlock and be able to onboard new people into crypto as well.

No, great. The thing you mentioned with money, there's a thing with naming things. Like in Brazil, we talk about Pix as a way of money. So, I'll send you instead of saying you money, I'll send you Pix. Oh, send me a Pix so on.

So, it's kind of different money. And then we're talking about stablecoin. Oh, I'll send you stablecoin. But ultimately, it's just money.

what it is behind it. They just want the money. Money is like a way to lock information of value to reference. And then you send and you share this information. Now, if it's information, well, we know it's there's a very good way to share information, which is the digital way.

So, that's it's just a natural thing. But in time, maybe instead of sending a Pix, we'll come down to sending money and sending a stablecoin will be just like money. Just send money. Um David, I have a specific question for you. So, from the perspective of a global layer two like Arbitrum, why do you think it's critical for the ecosystem to support local stablecoins like Brazil, um rather than just defaulting to USDC, USDT?

Yeah. So, I mean, the blockchains have no borders. The borders are the internet, right? And and therefore catering to as many users as possible is is just like an advantage of of a blockchain like Arbitrum. And and you see here we are all in in these forums and and you are all interested in in in crypto, in in local stablecoins.

And so, the reason you are here is the reason why Arbitrum's interested in in the local rails and local stablecoins. Nice. And that's it. The internet has no borders, crypto has no borders, and money has no borders. Everyone needs money, right?

And I think that's why everyone kind of started in crypto. And if anyone says anything different, you're lying.

[laughter]

Right? I think that's it, guys. I I would like to thank you all for everyone that stayed here, listened to us, everyone that I mean, you guys for answering all the questions. I know that we could just sit here and talk about stablecoins and everything for the whole day. The guys here will probably stay throughout the event.

So, if you guys have any other questions, we'll be available and walking around. And yeah, thank you guys so much. If you guys have any last remarks? No? Okay.

So, thank you guys very much and yeah, that's it. I'll see you guys around the event. Thank you. Cheers.