Panel | Institutional Use Cases and Adoption Limits of Non-USD Stablecoins

Hello everyone. Good to see you in this beautiful venue and city. So obviously um we all know USD stable coins. Um they're about like 99% of the market even more. But today we want to shed a light on all non-USD stable coins and kind of um why institutions are looking into them as well.

what the barriers are for regarding adoption and and what we can expect for the kind of next years because um obviously with regulation in Europe things will probably change now that institutions are getting involved big time. So um with our guests um we would like to discuss these topics and I would love for everyone of you to introduce yourself quickly please. So I would start. Hello everyone. I'm Silva.

I'm CPO of Forge and mainly we are a stable for euro and dollar and we try to push the euro as far as possible. So good discussion.

Hi I'm Peter. I'm CTO at all unity. We're building a multicurrency, multi-chain stablecoin platform, which means uh that we already launched the Euros denominated stable coin, the Swiss Frank denominated stable coin, and we really believe into the future in the future of of non-USD stable coins. Uh and and that's uh why we build our platform.

Yeah. Hi, good morning everyone. My name is Johannes. I'm the managing director of the Frankin Association. Um we're the steward of Frankencoin.

Frankcoin is a fully decentralized Swiss Frank stable coin. It's the largest in the market and um we're kind of the Swiss guys, right? Um always talking about store of value instead of transactions, but that's going to be an interesting conversation with you as well after I guess.

Hi, I'm Sil. I'm the co-founder of Highly. We're lay one blockchain optimized for CK based applications and specifically everything related to confidentiality.

Great. Um I'll I'll have some questions for you today and obviously feel free to chime in anytime. Some questions are for all of you and some are uh just kind of individually but we can just talk about it casually. So my first question would actually be to all of you and it would be when institutions are actually looking at non-USD stable coins today, what in your view is the most realistic use case that they're actually kind of thinking about when they when they kind of want to learn more about them.

Whoever wants to go first,

I start. Um so on our side uh when we speak with no USD stable coin and use case we have one use case with with demand for now is for let's say institutional entity that is a European base when you uh you do your accounting report in Euro and when your reality is in Euro you need to have this stable coin Euro stable coin for for that purpose uh but it's cryptonative entity and behind this cryptonative entity is more let's say I network individual theme small asset manager and in term of let's say in the forward use case we the more advanced discussion is with corporate and mainly for payment uh and cross and cross border payment and treasury management and the last point that is quite interesting is about discussion we have with traditional market infrastructure uh exchanges clearing members and the custodian that is the main and it's more for collateral management uh and settlement for securities on chain. [clears throat] Um I I go next. Uh so I think the the first question is um and so I I heard that a lot um when when I told people that we're building a euro denominated stable coin, especially people in crypto, you usually tended to react like why do we need that? Yes.

So because we have this US dollar dominance um 99% or even more um of stable coins used in in crypto are US dollar denominated stable coins. And um I think and that's the that's the response to the question as well because I think that non-USD stable coins really um can't copy the the history of stable coins. Um so kind of uh being becoming like strong in in the crypto space. I think the especially the non-USD stable coins need to play important role in the the real world and in in real world use cases because um in the end so where is the relevance for for different different currencies? So like Swiss Swiss Frank or euro or Hong Kong dollar and so on.

Of course in the real economy because um if people u want to receive salaries, if businesses want to pay in the end they they do this in the in the local currency and we see more and more adoption in the in the real world. Um also thanks to to Stripe for example um integrating it into their products and banks being interested in in using stable coins and and other distribution platforms. stable coins being integrated into fintex um fintex systems as well and um therefore I really believe that um the the usage for non-use stable coins will mostly be in the the real world. I agree and disagree with you here, Peter, because I think you're you're you're kind of interesting with the, you know, the Swiss Frank and the Euro, and those two cannot be compared. I'd argue here with the Euro, I would agree fully with you.

It's, you know, it's [clears throat] transactions, it's replications, um, payments, you know, but for the Swiss Frank as a special case is a bit different because it's more a store, you know, I've said that before. I'm going to say it a couple of times probably today again. this store of value thing which has its place also not just in the real world obviously you know agreed it that we need to go towards real world applications and what we see but also for cryptonative users that want to move into a less volatile asset which is not losing value as the dollar does and that's where probably and you know argue with me if there's other currencies that have those properties uh the Swiss Frank is kind of this it's not digital gold it's just like the less less volatile store of value you have on chain and which also cryptonatives can use and and we see see institutions being quite interested uh in that you know that to get back to your question here uh what institutions see but then liquidity becomes a big big bottleneck which probably is more one for us than for you guys because we cannot just go and mint new Swiss Franks or Frankencoin with fiat because it's decentralized so that's like the where you know we're building.

Perfect. Yeah. S any no comment here? Peter, then

I could I could make a comment. Just wait if you want to also wanted to say something. Um that's you raised an interesting point because I think we really need to look into like every currency and uh kind of like judge um so what's the what's the real usage for it because I agree like um Swiss Frank uh really plays an important treasury um treasury function um I think with even with euro um because you said it's for for transactions that's true but also when looking into into Europe as a whole um we have the euro system with zipa instant and so on like the the infrastructure is pretty far developed. So it's also a little bit a question how many transactions are done in Euro stable coins within Europe. Yeah.

Um so that's uh maybe maybe also there other other people in the round have have an opinion to that but um so especially from the global perspective um when we have stable coins in in in different different currencies um we we leverage that use case of um global remittance and FX and I think that's that's where it really becomes interesting especially on the transaction side. Yeah. And Peter on on that note of institutional use cases for institutions that are already managing multiple currencies generally speaking um is there something where non-USD stable coins can actually kind of improve uh the workflow also for them compared to the kind of traditional banking rails that they're using today?

Yeah. So in in in general stable coins can be used um in in four verticals how I always say it. So it's um in payments, it's in remittance. So if you send money around the globe, it's in settlement if you if you settle for example crypto assets or um reward assets and it's in treasury. So you you hold it and you want to earn yield and um I think these coming to the institutions I think we need to to judge how like in what vertical they are and where they're located because like I said for example for for European banks um doing transactions from within Europe.

I think um I I suppose that every bank would prefer doing transactions within Europe with with the SAP system because that's the easiest for them and probably also the cheapest. So um I think that's that's not the really the use case. But um in global remittance and in FX I think it's a incredible help um to to use stable coins as a as a platform also for for integrating the technology into into fintech products and so on. I think it's way more easy than using banking as a service or or other um companies and platforms of that kind. And um and then also I think that's uh that has always been the endgame I think also for people working in blockchain when it comes to settlement because of course it's the it's the yeah the the holy grail that we maybe can achieve in the end that you have uh tokenized assets um tokenized reward assets from all across the globe and you can settle them instantly on chain.

I think that uh would also be an uh incredible uh future for for banks doing those kind of businesses.

Great. Yeah. And seal from um kind of a payments infrastructure perspective where are non-USD stable coins um kind of simplifying crossber settlement today would you say? Well, in the context of the euro, there's actually um I would say a massive bootstrapping issue compared to the um US dollar, which is that no one wants this for remittances. It's extremely useful within the Euro zone, but like we pay people in stable coins in dollars in the Philippines or elsewhere, but they do not want euros.

So, that's one less use case that we can have in order to bootstrap just liquidity um for euro in general. And then you have you mentioned settlement and that's actually another tension that we have in the Euro zone which is on the one hand we want to move really fast in which the with what the ECB considers commercial money but like Euro [clears throat] stable coins but at the same time they're moving forward with their own version of the Euro stable coin. They're moving forward with a moving forward with their digital euro. So it's moving a little bit in all different directions. And as for payments, like currently it it sort of works, but it's completely lackluster when you compare it to like the residual demand that exists for dollar stable coins and and [clears throat] Johannes, uh, when we look a bit more onchain, obviously crypto markets are very USDcentric.

Um, and what role would you say play non-USD stable coins within DeFi and onchain in general today? Yeah, I mean there's I always make this point for this differentiation between an asset and a mean of transaction, right? Because if you're the transaction, you don't really want to hold that asset. And that's where the dollar makes a lot of sense because then you want to have just the most liquid market you can get with the lowest slippage, with the lowest fees, with the easiest on and off ramps. Um so where I see non-d stable currency in DeFi is as an asset meaning [clears throat] you want to use a certain product you want to go short something you want to leverage something uh you want to build a basket you know that good example with the Frank is is suck it which is a DTF which is kind of a I think it's it's positioned as a ETH plus which is less volatile and and better right and and that's where uh nonur non-doll stable coins can play a very strong role depending on who you are and what you want to do, right?

Obviously, from my perspective, the Swiss Frank is the obvious choice for the globe for everyone because it's stable. But there's certain people who might want to have short exposure to euro because they are doing trading there or they might want to leverage the euro or they are have business which are uh offchain in whatever market and want to hedge against their local currency. you know, there's many many um options and things where you can use that. Now, that said, I think as a settlement currency, it's hard to compete with the dollar. And [clears throat] anyone issuing a a nond dollar stable coin, um I would kind of suggest try not to compete with the dollar on settlements.

You're going to you're going to die just because of the liquidity the dollar has. But there's other things and and those are I would argue to be found more in DeFi than in the in the centralized or or CDI as you would call it, right? Because in DeFi you can only use stable coins. They are often more efficient um because they have im like immediate settlement. you don't have counterparty risk uh rather than having those same products in the decentralized world or they might not even be accessible because not the whole world has the same access to financial services as we do in in central Europe and they might also need

or want this.

Yeah. And also stable coins have always been the safe haven in fast markets, right? Um so if kind of the the prices go down so to um to just like go out and um and and wait and um also what we shouldn't forget especially also with the politics that the you that the um Americans are doing these days um there's a huge devaluation of the dollar. Yeah. So if you if you hold a dollar whatever you got it one year ago um so you lost quite some money in in parity towards the euro for example and that might also be the case in the future that um so if people want to get out in fast markets so that they better use the Swiss Frank euro or another stable currency

and and that it's actually interesting because right now it goes the other way around there's now many people thinking because you have still have the petro dollar that the dollar might appreciate even though you know Trump administration is kind of printing hard and that's why for example there was a discussion our community going on not too too long ago with with liquidity you know where you can use liquidity and it's actually been proposed I think yesterday um it's not live it's been it's going to live next week if no one vetos it but you can now leverage your Swiss Frank go short uh sorry leverage your dollar or liquidity dollar with a yielding liquidity dollar against the Swiss Frank so there's goes both ways right you go short Swiss Frank there's a need for that there is a demand for that and I think this is the same with with any currency and that's where it makes a lot of sense to have those currencies if they are liquid enough.

Yeah.

Yeah. Thanks for this great overview on kind of institutional use cases. I I want to talk a bit about the adoption constraints. What's kind of holding growth back a bit and uh a question to all of you. I mean as we mentioned today as well um or you mentioned today liquidity is obviously a huge um aspect here and it's kind of the the the biggest barrier in for some institutions at least to to engage um yeah and without liquidity institutions also can't really rely on these markets.

So it's kind of this chicken and egg problem and yeah I would be curious how do you uh see this liquidity liquidity barrier liquidity issue solved? That's a good question. Liquidity to be honest is a nightmare for Sabonisha. Is really expensive. It's costly and there is a lot of concern.

So I would say liquidity and accessibility is the the key element for establish on our side. I think there is not only one good question, one good answer sorry but on our side the strategy was to try to be uh let's say cryptonative compatible but also trade file in parallel. So we push the same strategies and for example circle or det for euro I means to to increase the network and to increase the distribution we consider centralized exchange we consider broker uh crypto broker and also protocol like uh within this uh this this network. So we push this um we push this use case. It could be trading margin call margin loan sorry but also lending borrowing on on defy.

Uh but it's not uh it's not enough and it's it's really expensive. So we need in parallel to have some some usage and some use case. That's why we we push for institutional use case in parallel. uh we want to leverage on what on let's say on what asset we have within sust for institutional use case with our client for for payment we discuss with market infrastructure to to enable uh to enable euro stable coin within their their legacy system. We try also to uh uh to allow security on chain to ensure there is a economic activity within uh within this ecosystem because without it you you don't need a stable coin a stable stable coin.

Uh so we try to do it in in parallel but uh well it's a it's a kind of price because everything is is difficult. You have compliance constraints and you have a liquidity cost that is not so obvious. uh every time you you you on board a market maker it's a cost of capital for the bank. So it's not so it's really a charge. So uh we need to be careful and we need to um to on board let's say partnership that is relevant.

Um I think I would answer that question around adoption um again from the from the perspective of um the theory that non-USD stable coins really need to um happen in the in the real world and um I think so when looking at the at the crypto world I think adoption is is mostly driven by paying incentives right um so if you if you you do like launch campaigns and you pay incentives and then you usually are able to um to to gain TVL um in the real world it's a little bit different and from from my perspective um the distribution topic will be really be the the driving factor for for adoption of non-USD stable coins which in the end means so once uh the revolutes the stripes and Amazon's SAP and so on in this world are adopting stable coins then um via this distribution the non-USD stable coins can also grow That's certainly one point art like real or adoption. Um keep in mind one problem you have with liquidity on chain now I'm talking about decentralized markets you know um unis swap amms and so on is that they're extremely capital heavy the cap you have debt capital which is basically parked on fragmented markets you know you have to have it on every chain uh you're basically launching something and that is super inefficient from a capital perspective because you have in our case worse than your case because we you know we have to minted you have capital costs. Um there is engineering solutions to that. There's a lot of you know research and building going on with intent based stuff onchain um OTC deals RFPs uh basically unified liquidity across chains and so on. So I think this problem um in absolute terms at least for us for a decentralized stable coin will become smaller over time a bit but apart from that you know as you said um usage people wanting to buy it but also people willing to buy it venues you know liquidity comes with venues where can you obtain that stable coin and if you can't buy it anywhere um you will not have any liquidity and unfortunately especially centralized exchanges is most of them are their business models are still geared very much towards highly volatile tokens and that is reflected in fees um and that is reflected in you know like the their um onboarding processes as well that they're you know they're built for meme coins and not for stable coins just an example one one on-ramp which we were working with and we stopped working with them um bottom line they charge 7% and you know that might work for a highly volatile meme coin but you can't charge 7% on the stable coin and then someone has to foot that bill because they're arguing yeah this is compliance cost and this is like our card cost we have um and that just kind of you need to build new venues for that I I argue and and I believe just you know the the very big players circle tether is just being subsidized heavily so that they have those cheap on-ramps um as they have right now.

or just to uh to jump into what you said. Um Jes um when we speak with for example this big traditional market infrastructure and when they consider stable coin within their legacy system for example collateral management and so on. uh the first question they ask is how we can modelize the the stable coin uh with their risk framework what would be the the LTV uh do we consider that stable coin our euro stable coins so for stable coin is it like corporate from session no it's a kind of question we have and one point that is quite important they point out the liquidity because this liquidity is not efficient today but it is proxy to to the adoption. So if your stable coin is considered as liquid and the metrics have of liquidity comes from it's not efficient but come from centralized exchange come from unis swap or curve or curve swap and so they they calculate the the spread they calculate the slipage and so on and after they will consider it as a liquid asset and from my side the main point that's why I say it's a it's a race is we we want uh euro stable coin to be considered not as an asset but I like a fat you know what I mean that I mean it's not a product is an infrastructure per se and this is the main point that's why I think there is a race for euro because for dollar it's I think it's quite difficult but for euro there is room and we need to have an equivalent of of the or circle in euro to integrate this kind of of market infrastructure and when they speak about they don't consider as a regulated one or let's say a bank dollar one they consider as the most liquid they consider circle they consider sometimes t when they will be regulated so the race of dollar it's let's say win and we need to have it for for eur so that's why it's quite this question of liquidity because it's accessibility but you cannot on board all the world so you need to have liquidity on chain you need to have a secondary market to ensure it is accessible by by let's say the the world and this liquidity is really a key point and it's not so obvious. See if anything you want to you want to add here on liquidity.

Well, one big question here will be what the regulation looks like and in particular what happens with like central bank euro uh in regards to commercial money because that that's basically the big cheese like everything we do is to put tokenized assets on chain. The thing is that there's a very heavy book of regulation regarding delivery and settlement. And the moment you start realizing or you agree from a regulatory standpoint that yep commercial money actually stands for is equivalent to ECB money, you can just do settlement on chain and all hell breaks loose. And it is very very very unclear that the ECB or the regulation wants to move there. But at the same time, it allows the Euro zone to experiment quicker.

Um, so it's the it's a really big thing. Either uh the guys at the ECB move fast enough that we can actually get central bank money on different chains if they manage to publish something faster than a report every 3 years or um you'll have to have a circle.

The question back to you is this it's a political one, right? Um, do they want to experiment faster?

No.

Exactly. I mean, that's what we see in Switzerland as well. The the FINMO and and you know, Lutus inventor said it very nicely in an interview two weeks ago. First priority stability, second priority stability, and third party stability, right? That's how how FINMA, the Swiss financial regulator thinks.

They don't want experiments.

Um, I think history tells us about like something that happened already. I mean you've like Son you probably know this better than I do but I read a really really heavy book on the history of infrastructure and settlement systems in Europe and basically you had CSD clearing houses everything else and then like mid 2000s we said oh yeah we're actually going to have a central thing called T2S that's going to centralize everything and that's going to be easier I guess we're going to have the exact same thing like people will be able to like marginally innovate on the fringes just to move right enough uh to build something like circle like and then the ECB gets the together and say oh actually we may have something that works now and you guys can actually have digital euro that works

and then C I have another questions for you which key technology enablers would you say are are still missing today for institutions to actually [clears throat] adopt and really kind of scale non-USD stable coins

I mean you already you always have the three uh usual suspect like performance compliance and confidential iality on these three aspects. It's still very lackluster and we're all vibe coding solutions together and trying to make it work. Um, which is why I believe that there's like still significant innovation that could happen at the Euro level. Um, just trying new stuff like you can try using zero knowledge technology in order to make compliance faster. You could leverage EIA signatures.

you could leverage the fact that every single European citizen has a digital uh signed ID card that could be used for KYC or even just to wire money. Um but again it's a political question. Uh very difficult to answer. Um I actually really want to highlight the one point that you mentioned confidentiality. I think that's that's the the most underrated but most important topic I think to really drive real world adoption because I think um like us in crypto so we kind of dealt with that in in the past so that we that we know like okay so we somehow uh [clears throat] the transactions are transparent um so we we can deal with that but uh if a large corporation is like Zmens also is going to use stable coins for payments um kind of without confidentiality it would be a no-go for them so therefore It's great to see so many initiatives these days really um trying to solve that and I think there's a really big tension here uh between and and I'm curious what you think about this for example which is like the playbook for stable coins is let's try and pick up the slack and get to the level where the US stable coins are but it it seemed from the discussion that it were much more on institutional use cases than the usual payments or or remittances use cases where in our case confidentiality would be much more of a pressing issue.

But the thing is in order to bootstrap liquidity and everything else, you have to play ball. You have to be in the curves. You have to have liquidity. You have to have LTV which basically goes against u developing or bootstrapping confidentiality features. So I'm I'm just curious like what we do to get there.

Why not both? Well, um piggy piggy like you know piggy [clears throat] back on top you build it without confidentiality build it up and then you know we we we're having those conversations for example where you then piggyback on top of it and you have a part or you you enable also confidential um transactions on top of your stable coin s for example offers that right

it was a very different discussion that we had talking with different euro stable coin issuers with like yeah yeah confidentiality this is fantastic this is Perfect. This is in 15 years when we actually are out of the dead zone and we make sure that we have enough LTV that we don't look like idiots compared to US double coins. So, it's definitely like the fifth of sixth uh priority.

I can't argue with that. [laughter]

Um [clears throat] and Johannes, obviously decentralized stable coins have different approaches in in many ways than um yeah, bank issued models. And my question to you would be for institutions does that bring certain advantages or also trade-offs? What would be like just the main few points there?

I mean one very big advantage is that we're unencumbered with many of the very restrictive um regulations which make life hard for centralized stable coins. For example um you know DeFi composibility yield on top of it. And that obviously is there's a lot of institutions that basically, you know, they want to use centralized stable coins because they have this regulatory clarity and and especially the path to liquidity. That's always the big point, right? How can you get from my stable coin back into fiat if I need to?

But then they're actually from a use perspective they're a lot more interested in this decentralized models because then they they have the whole DeFi world at their fingertips and they can you know potentially start giving yield to their clients um with it or they can use it so that their clients can can use their assets and borrow against it which is also a lot harder doing with a centralized stable coin. So I think DeFi composability is the big big um advantage which you know just because centralized stable coins because of the regulation are not allowed to do it. It's a play field where and and a decentralized stable coins in that sense. It's nothing else. You know, how does protocol like Francoin differ from protocol like a or Morpho?

It's a lending market. It's just the difference is that it's a lending market with which is a one-sided lending market because the other side is just a fixed, you know, Swiss Frank representing this the value of the Swiss Frank. So it's it's yeah it's DeFi playfield composibility

and um Peter and Silva when obviously with with regulation now um emerging in Europe and obviously being active for um getting close to one and a half years now. Um, I would be curious, would you say this also had like some barriers along with it for certain institutions or is this just really the the kickstart for making this all possible or do you see some some barriers with regulation in general?

Well, I I think um so from from the crypto perspective, I think um regulation is is always uh making things more difficult. Um from the from the real world perspective regulation open opens doors for for adoption.

Yeah well regulation you are in Europe so regulation is um it's really uh painful a little bit difficult. Um so uh yeah I think at the end there will be one or two or three stable coin but with bank maybe cryptonative entity that is regulated also uh but the main point today is the prohibition of interest of this kind of by this feature is really concerning I think is the same for for us now so we are in the same level now so it's quite good for that uh and that's why defi is push a lot because it is maybe the only gray area that that allow stab to uh to distribute shield. So, but we need to have a clear message from the regulator on that.

Yeah. Um well then uh one last closing question um to all of you maybe one or two sentences um answers please. So, um, when we're really talking about the future of non-USD stable coins and and scaling this institutional adoption, I want to ask you if if we have this conversation again in in 5 years maybe or 2030, we're sitting here again. Um, what would have need to happen happen for for institutions to really widely adopt non USD stable coins? What's like the main main thing simply put for you?

Third Donald Trump term.

Good one, Lindy. [clears throat] I mean, maybe the old guys going getting um how you call it going into their pension and uh the new generation understanding the risks and actually having [clears throat] them in

from the infrastructure side. um confidentiality as a door opener and um other than that really distribution so that uh large platforms adopt stable coins um so no USD uh securities on chain it will allow to have this kind of economy and yes that's it

perfect yeah I I love that we now went from the other direction for the last question that's perfect and I can close with a thank you very much and have a great rest of the conference.