EN | Are Stablecoins Becoming Core Financial Market Infrastructure | MERGE São Paulo

Okay, let's move it to our next the um session. Are stable coins become core financial market infrastructure? Please welcome to the stage uh our moderator Mariana Maria, journalist at Zumi. Hi everyone. I want to introduce Andre Portilho, partner at BTG Pactual, Antonio Souza from Visa, Jonathan Shin from Dot Pay, and Cactus Raazi from B2C2.

So, our panel is are stable coins becoming core financial market infrastructure? And to start uh our panel title is a question, so our opening question is are stable coins becoming core financial market infrastructure? Who wants to start? Andre wants to start. Me?

I don't want [laughter] to but you. Uh good morning everyone. Good morning my fellow panelists. Uh I think uh I mean maybe becoming is uh it's a strong word, but I think it's definitely in the first stages uh of becoming uh main core a main core infrastructure, right? Uh when you think about what's happening with everything in terms of tokenization, which means uh financial uh instruments, financial assets moving on chain, uh money needs to be on chain as well.

And so uh stable coins is one of these forms of uh on chain money. So, definitely it will uh become uh mainstream. Can I go? Please. So, hello guys.

Thank you for for being here today. Um I think that it's from me that I am a crypto builder and I have been working in the crypto environment for some time. And for first of all, it's very very nice to see events like we are seeing right now with all new face. And this for me it's already uh a sign that we are moving from the hype that the crypto was before and to where we are now. Uh of course, we can we can't say that crypto stable coins is a hype anymore.

We are moving trillions of dollars annually. But, it's still under the uh institutional environment. So, uh the adoption the retail is still very few. There are some lack on clear rules, um the user experience for people it's not the the best one uh yet. But, of course, we can say that stable coin it's a main component to become uh part of the the financial structure and to work together with the system that we already have today.

I don't believe that uh stable coin will move all those the the traditional system to only stable coin, but I do believe in a hybrid model where we will have stable coin together with the system legacy systems that we are working today. Yeah. Uh I'm JC. Uh hi everyone. Uh I would like to bring uh from a new angle because for our company Red Dot Pay, uh we are focusing on B2C.

Uh we have on board more than 7 million users in over 100 countries. From the retail perspective, how they view stable coin? A lot of them, they are not looking it as a hype or as a a a tool. They are looking as it as a survival skill because for example, imagine if you receive your salary, for example, $100 and the other day it become $50 and the other day it's $20. So, for you this is not an option.

It's a survival skill. You need to convert your asset to some things that you can preserve your values. Where this where stable coin coming in. And what we do is that Red Dot Pay, we serve as a payment infrastructure and then to facilitate the stable coin based payments. So, uh what we do is very simple.

For users, when they have stable coin, they need to find something uh to utilize their stable coin. We have a stable coin card. They can buy something, for example, they can buy groceries um from the international merchants. They can also do transaction for cross-border payment. So, from our perspective, stable coin is a infrastructure more than just a hype.

Hi. Uh Cactus from B2C2. We're a global market maker and I think the short answer is yes, absolutely. The specific examples I would point to is the company Stripe, a big global uh payment uh servicing company that has basically uh invested very heavily in stable coins as uh as a as a Stripe specific rail to move activity away from banks. Um you can look at Western Union that's launching a stable coin basically to compete directly with Tether uh for their user base.

They have about 150 million people that use Western Union monthly. Um you can look at Fidelity that launched a stable coin. So, whether you're looking at banks, payments, and other places, it seems that stable coin is in fact becoming a key part of infrastructure going forward. Okay, and Portilho, starting with you. What are the benefits stable coins can bring to financial operations both for banks, financial institutions, and for users?

I mean uh stable coins uh builds on top of a new technology, okay, that uh bring not only uh different use cases, but also a new type of uh efficiency to uh the things that uh we already do. Oh, from uh moving money 24/7 uh with much less friction, much less uh intermediaries, uh at a cheaper price, uh from being able to uh automate some uh let's say uh treasury uh management things. Uh everything related to People talk a lot about the stable coins in the for retail, okay? But, there's also a lot of uh uses and use cases in the wholesale uh system. I will give an example.

Uh when you start having like uh treasuries or type of assets in tokenized form, everything that uh you can do in terms of collateral management, uh repo, this eventually can be moved on chain as well. And you need a tokenized instrument uh and you need a stable coin to be able to DVP to do repos. And so, what we are seeing is that okay, these new uh instruments, new technology as it gets integrated to the traditional financial systems and things start to move, we're going to see uh universal markets, atomic settlements, uh instantaneous transfer money uh around the globe, and also everything related to collateral management moving also on chain. This will not only make the speed of money uh way more fast than it is right now, but will also unlock a lot of capital that we do right now gets locked in all of these use cases. Imagine uh things like uh the repo market, for example, that most right now happens on a overnight uh basis.

This eventually will be doing intraday. Okay? So, eventually uh to uh where we repo, people who hold assets, they can repo their assets uh and then uh use this to do other things. So, to get leverage and so forth. So, I think we'll probably moving uh from like the overnight world that we used to live right now to a more instantaneous market eventually doing intraday repos, things like that.

And I mention this because again, most of the times we are here talking about the retail use case, which are very important. What what you mentioned, right? There's a lot of use cases that are very important. But, also when you think of the wholesale market, we're talking about trillions and trillions and trillions of dollars that uh happens every day. And this will completely change the way that we do things.

So, definitely And I mean, we can be talking here probably the whole day about our new use cases. And these are the ones that we already know and we'll just well, change the way uh that we're doing. This what happens in the first stage of innovation. The second stage where given this new instrument, this new infrastructure, people start to iterate and bring new things and use cases we are not imagining right now. So, this is what probably going to happen.

Okay, and you have a lot of experience at the traditional financial market. So, I wanted to do a comparison for we have today in market infrastructure and what could be if stable coins become mainstream? Again, I think that there will be a lot of like uh not only business implications, but also eventually some macroeconomic implications as we have uh an acceleration the speed of money. Uh and again, capital will be unlocked. So, uh it's hard to understand and even we can talk about I mean, uh the impact of stable coins as they get uh integrated in emerging market, the weak currency for instance, that can be a a lot of like a consequence not only in terms of the business case in the companies, uh but also in macroeconomic uh uh matters.

Okay, Cactus, you seem like you want to talk, so [laughter] Unfortunately, I agree with Andre. I was hoping to disagree. But, really if you think about it, the the progress in terms of technology, it's almost always the case that uh new technology for it to be widely adopted is either faster or cheaper or both. And when you think about stablecoin transaction processes, regardless of whether they're for payroll, uh for uh generalized payments, for a lot of different applications, repo for example, which is obviously an institutional application. If you can do it faster or cheaper, it's it's uh quite likely that that technology is going to succeed as long as it is uh it gets regulatory approvals.

And certainly in the United States, we've got a sufficient amount of regulatory approvals now for stablecoins. So, it uh it does seem that this is going to be a big driver. The only other thing I wanted to add for the stablecoin conversation is oftentimes we confuse two different states of the world. There is a transfer of value, that's stablecoins in motion, and there's a store of value. So, in in developed markets, the store of value idea is not particularly useful.

You know, when you keep your money at JP Morgan Bank, you're not generally shouldn't be worried that it's going to go away. However, the transfer of value in developed markets is very useful, even in even in uh you know, very forward markets like Western Europe or the United States. Um and then in other marketplaces, the store of value becomes uh far more useful when the local banks might not be as as uh solid or trustworthy. Okay, and in emerging markets like Brazil, do you see stablecoins just like a bridge to fiat or are we approaching a point where stablecoins are the final settlement currency? Well, the first is this is my first time down in Brazil, and this is not exactly what I think of when I think of an emerging market.

You know, it's like this is just just as developed as our markets uh in many ways. Um so, having said that, uh I I think of uh I think the stablecoin native solutions are really where we're going to likely end up. There's a number of companies that are here that offer a stablecoin native user experience or their or their entire premise is stablecoin based, and I I see that that is going to be a success factor going forward. Okay, so Antonia, Visa is part of the 21st century financial market infrastructure. So, maybe credit and debit cards were the first payment innovation that we have.

But, we have a lot of other things, including stablecoins. So, to you, how can stablecoins turn payments easier and also make the life of bankers and another members of financial markets easier? Uh yes, uh Visa is in the market for so long, and the credit and and debit cards are probably one of the first innovations into the digital area. So, what we are seeing right now is a moment where so many technologies are coexisting. So, we have stablecoins, tokenized assets, CBDCs, and all of this is coexisting with the traditional payment methods.

Uh and what we see with this is that as I said, is a hybrid hybrid model where we have we continue to have all those technologies, and we at Visa we see that our part on that is to connect those dots and offer to our clients, offer to issuers, acquirers, and our cardholders solutions that can be trustable, secure, that has a user experience that the way that they are used to to like the with the Visa cards, and help them to understand that the technology is solving issues, is solving problems, and they don't need to I I am used to say that at the end of the day, our goal is that our users don't need to understand what's blockchain, what's stablecoin. They just need to understand that this is a solution that solve their problems. And this is where we as Visa have been working. We are trying we are developing stablecoin linked cards. We are leader on that, and we are delivering to our uh our customers that's the same experience that they already used to.

Uh and to our uh institutional clients, we are offering them solutions like Visa Direct, so they can move stablecoins in a trustable way with a partner that they already trust they already uh used to work. So, at the end of the day, and answering your your question, stablecoins can offer together with tokenized tokenized uh transactions, authentication, and artificial intelligence, all those technologies together deliver to our clients a more secure, a more scalable, and a better a way of to do payments. And this is what we go. It's where everybody win, right? Okay, so but one more question.

How does Visa want to participate in the era that stablecoins are the core financial market infrastructure that we're talking about in this panel? As I I already said, we have several products. Uh first of all, we understand that today great of our partners are looking for us asking to understand better how they can and work with stablecoins. And Visa has integrated stablecoin into our global products and into our networks, so our clients can use it without friction. They can use it they can understand and start to to work with stablecoin in an easy way.

Uh and we have been doing this in several fronts. So, we have the Visa Direct solution that is enabling payouts and pre-fundings to cross-border money movements. We have the settlement, so we can uh enable to our issuers and our acquirers to settle directly with us with stablecoins. Today, we have BYUSD, uh USDC, USDE, and Euro C S uh stablecoins that are already under the the settlement infrastructure that Visa has. Uh we have our a huge team of of consultants that is helping clients globally to understand to develop their strategy with stablecoin.

I'm used to say that great part of the banks in the world will define their strategy in stablecoin, but first they need to understand, they need to educate be educated, and understand if they will go now or in a near future and why. And we are helping them to understand how do this with Visa Direct Visa University course, and doing projects that come since the disco- discovery till the implementation. And of course, I I can't finalize this without saying about the stablecoin linked cards. Uh we have been seeing a huge increase on number of stablecoin cards in the world. We have today more than 130 programs live globally, and we are leading on on that environment.

And this is where uh the daily routine with stablecoin reality, because now I can go to the grocery, I can go to I can pay my Uber, I can use the stablecoin in my daily my my daily uh shop without the necessity to do the transfer, do the burn, and convert these to fiat. So, all this environment is where we are delivering, and it's where we we aim to to help the clients to have best ways to move, to pay, and be paid, and add these stablecoins just as one new way, uh one new technology, one new currency that our clients can use to move money. Okay, and JC, as we were talking about crypto cards, Redeeem Pay offers a similar product with stablecoins. So, can you please tell us more about that and use cases, and

[clears throat]

of course, where is better to use uh stablecoin linked card than an ordinary card? Yep. I I think payment has long been, you know, a very um uh troublesome problem in the market. For example, um there are a lot of uh freelancers they are working in Brazil. But, that maybe they are coming from Europe.

And then they are getting salary from someone uh some employer from the US. So, there are three countries, and then there are three currencies they need to settle. But, with stablecoin, what is breakthrough is that is the cross-border penalty. Because previously, when they want to receive the euro from um their family, they are going to pay the penalty of the fee, and that has been like three to five days waiting. And then it's the same when they receive the money from their employer in the US.

Uh when stablecoin come, it's a game changer. They can receive the stablecoin, or they can send the stablecoin. And what we do is that there are a lot of cards in the market, but they can only power by their local fiat currency uh offered by the bank. But, for stablecoin card, it's no matter where you are at and where your families are look uh uh uh are living. And then with this card, you are able to spend everywhere.

Of course, with the powerful infrastructure by Visa, you can spend in over 150 millions uh merchants in the world. And another thing is about, you know, um with the stablecoin, what they can do is it makes a lot of growing asset opportunity possible. Uh this stablecoin is a RWA, but now we see more like the uh MMF as RWA, and more financial product available in some emerging countries. Um previously, they just think, "Okay, how I can use my money efficiently?" And now they think, "How we can preserve our money?"

And for the coming month or years, they can think how they can grow their assets. To get access to those high-quality uh uh assets, it was only able to um get access from the, you know, you are in the very developed countries like US. Okay, so we always talk about how these rails should not be perceived by the end users, but for now we're going to talk about this later, but for now, I want to know, JC, what happens in the back end for you to provide a stable coin linked card and how companies could use these rails to make their daily their daily routine easier. Yeah. For example, like in Brazil, if you are better pay users, actually you can send the stable coin, you know, from everywhere in the world or they can send the local fiat like you into the iPad account we create for them.

And they can receive the BRL in just 2 minutes. The back end what we do is that when we receive Europe, we just have a local vast license exchange. The exchange is to stable coin and we send stable coin to the local service providers the VASP to exchange to the BRL and settle it with the local payment service provider and lend it to our users' wallet. It seems complicated, but for the front end it's very intrusive. The users can finish this in 5 seconds or 10 seconds.

And at the back end you manage everything with API and everything's automatic. Okay, so last but not least, Cactus, uh say if stable coins are truly core financial market infrastructure, they should be invisible to the end user. That was what we're talking about. So, are we close to a point where a Brazilian use a Brazilian user can pay with a stable coin on their phone without knowing which chain and which specific coin they're using in the background? I think we're close.

We have a For example, B2C2 has a product in the market that's live and in production that allows any on any one of our onboarded clients to exchange one stable coin for another instantly with no counterparty risk and with effectively at at razor sharp institutional prices. We have no fees. We don't charge anything. We just reflect the prices in the market. But as we all know, there are stable coins, but they're not always trading at par.

So, if something is trading below par, we reflect that. And so that allows that allows any user to transact from PYUSD to the Fidelity coin, obviously Tether and Circle, USDG and about a dozen other stable coins and we're adding also non-dollar stable coins including a BRL one and crown as an example. EURC is already on board and as the as stable coins grow both in terms of the the number of issuers like Western Union coin, but also the number of currencies. They're they're all coming aboard and it allows very fast. We don't do the effects on balance sheet.

We actually have multiple effects partners and we shop the best actual effects rate and the effects rates that we offer are almost always significantly better than a local partner. For example, in Colombia or in Mexico, they tend to they like our rates better. Whatever. So, Japan as well, I might add. So, there's there's you know, we have a global footprint already.

This is already in production. So, anyone in this audience that wants to set up a facility to be able to accept many stable coins, but only settle in a preferred treasury asset. For example, there may be someone in this audience that wants to accept Tether and Circle and USDG and many of the things that we've mentioned, but just settle in Agora, aUSD. Just arbitrarily picking Agora. We're friendly with them.

They're also on our platform. You can do that already today. Instantly, free with no counterparty risk. So, when you see these key pieces of infrastructure in the market, you realize that it's quite likely no one else needs to worry about these problems. They've already been solved by specialists like us.

Mari, I just add a point here on the on the question. Do you disagree? No. Oh, that's

[laughter]

I was hoping someone would disagree and it would get very tense, but No, I I just want to to add related to the the timeline that we are right now. I would say that if we think 10 years ago, to think of someone with a count in dollar would be very difficult. Right? Because to have the experience to have an account in dollar, I have account account in Charles Schwab and always when I I am dealing with that, it's it's not the best experience that I have. But today, it's difficult to find to not find someone that has Wise, Revolut, or Nomo account.

They're dollar accounts, right? So, I think that we are in a evolution of the the environment of the financial environment where it will it will go to the it's it's a common sense to go to the the the the option to have a stable coin account. And this is the stable coin cards are already a stable coin account, right? So, it's something it's a logical next steps. I'm not the one that to say it will take 3 years or 5, but I I could say that we are close.

Yeah, Antonia, and just as we have a few minutes, I would just ask you to tell us what you're doing at the stable coin industry and what do you foresee happening in the next few years? Yeah. Well, today we are developing several from from the since the stable coin settlements to the the cards. We are now working with issuance. We are developing what we call a Visa stable coin platform where we have issuance that we can enable our clients to issue and manage stable coin.

If they want to issue their own stable coin, that's possible as well. We are working with partners to help on the compliance because we know that this is a lack from the environment and we are working with partners to help our clients on this. So, Visa is being the bridge between the traditional and the the crypto markets. It's nice to say that we have been working with those markets for so long and we pretty understand the both sides and we we are connecting, being the bridge between those two and helping of course to deliver a secure and scalable way. Because at the end of the day, we all want stable coin to be scalable and have a better experience to be used in a daily routine.

And this is where we is our target and our mission on the environment. Okay, Portillo, JC, Cactus, any thoughts? I think I think to the next I would say 3 to 5 years which cannot like we talk about integration of this technology with AI. I think it's we don't talk about hype anymore. As the stable coins get adopted and get integrated in the in the financial systems with players like us have several different types of players here and we start to see new applications with AI and a chain tech instruments happening together.

I think that's where the the new and astonishing things will will happen. We are very in the beginning of these this process. We're just scratching the surface, but given the speed that things are evolving, I think we're going to we between this panel in 3 years from now, I think we'll be talking about a completely different environment. Of course, we need regulation to allow companies to do that. Regulation is happening okay everywhere.

US, Brazil, Europe. As we have these like several different things happening, regulation, companies, technology maturing and with these technology, that's where the big innovation will come. So, let's see. Yeah. I think for the coming years, I I think stable coin will become the gateway.

Not everybody they will hold their local fiat currency in in the bank account. They will hold the stable coin. And there will be more fintech company like us to facilitate them with this gateway to send it to their local fiat currency. Because if the stable coin is more stable and the when the regulation come, it become more acceptable and also is accessible. So, it will become the gateway for everybody who want to keep the value, who want to send the value, the starting point will be stable coin.

The second is about the AI. Also, our company also looking at this because it will You are not for the app we are building right now is for human to use. We are building everything just for human to serve and browse. Everything is based on our behavior. But when it comes to AI, what you need to do is that you just make your company everything become a skill.

And this skill is not used by a human anymore. It's just a code. And then this code you what you need to handle is about the privacy of your customer and the security of your product and how to decentralize those sensitive information to make sure the AI will not, you know, disabuse it. And then you are building a protocol and a security protocol. And you are building some skills so that in AI can be the tool to to utilize the skill.

So, stable coin will still be the gateway for the AI to um make through for example some transaction to buy from the grocery, to buy from the travel agencies. And this something we are building. We have time for one more comment. Yeah, please. The the one thing I would point out for the next couple of years is going to be around programmability.

I think it's very very likely that we're going to start to see software sitting on top of stable coin software and the specific cases that I can point to are marketing. I think if you look at the arc of marketing over the last 100 years, marketing dollars continue to go towards finer and finer pinpointing of specific people and specific behaviors. That is most doable with stable coins where you can run software on top of stable coins to to affect behavior from a marketing perspective. Another great example, in my opinion, is underwriting. So, underwriting is another example over the last 100 years.

You used to you know, you used to only lend to people that were in your own community or in your own church. And then about 60 years ago, we started with Fair Isaac and some FICO-based scoring and credit scoring and it's all proxies. And And when you can put software on top of the actual wallet, you can start to have a cleaner and cleaner underwriting signal that you can use. So, those are a couple. Marketing, underwriting.

There are more examples, but these are very specific examples. When you open up stable coins to the developer community, it's very and my my mental model is very similar to what we saw with the App Store on iPhones. It took a few months for the Apple team to convince Steve Jobs that we should open this up to third-party developers, but once they did, that unleashed the app economy. And And we've seen that in other platforms such as Salesforce with thousands of apps, Slack with many hundreds, if not thousands, of apps. I would be I'm highly confident we'll see the same thing in stable coins where we'll start to see applications running on top of stable coins and those applications will be very specific and there's a lot of money behind them.

Marketing, underwriting, and other examples where I think that that that that's a big part of what the future holds. Yeah, that was a lot. This conversation, I hope everyone enjoyed. We could spend all the day here talking, but we have to finish. So, thank you, guys.

Thanks. Thank you.

Thank you, guys.