Stablecoins as Geopolitical Instruments

Transcript

Gabe (00:00) everyone, this is Gabe from Shoal Research and I'm here to bring the next episode of Shoal Signal. here with Chunda, the co-founder and CEO of Paxos Labs. And actually I met Chunda a couple of years ago at ZuZalu, which was Vitalik Buterin's network state. and Chunda would come out of the dorm rooms every day at breakfast and lunchtime and then go back into the dorm rooms because he was grinding away on his startup. So yeah, looking forward for him to share a little bit about that and his transition into Paxos. Chunda, please share us a little bit more about what you're doing and your transition from Ion into Paxos.

Chunda McCain (00:23) You Yeah, 100%. Well, and I haven't thought about Zuzalu in a while. Sometimes it still is if that was a parallel universe. And for anyone who does get that reference listening to this, honestly, reach out. I always like to talk to folks who went there. It's a very fun, unique experience we can all reminisce on. But I digress.

Gabe (00:43) Yeah, 100%.

Chunda McCain (01:01) Let's see, we'll start with my journey. mean, if we want to start with the ION days, can jam there. I guess this all started when I decided I wanted to build myself in DeFi. been part of the crypto ecosystem following it since 1718, working in it since 2020. And in 2023, there's just kind of this intersection of a whole bunch of serendipitous moments that made me realize that, you know, at that time would be a really interesting time to build out a DeFi protocol focused on lending and credit around a new type of asset. At that time, was staked and restaked assets in DeFi. But one thing we quickly ran into was the realization that although demand for financial primitives was wide, there was a bigger gap when it came to offering those financial primitives in a clean packaged kind of methodology to the platforms where users were actively investing in these products today. And so we kind of pivoted into a new product line called Nucleus, focused on basically building out these tokenized yield strategies as well as branded stable coin issuance. And it really aligned with what now is the vision of Paxos Labs, effectively trying to ask and answer the question, once enterprises and the largest enterprises around the world take the demand that's existed around digital assets and take that first step to bring it onto their platforms, what do they do next with that capital? And that's the question that we're trying to answer here at Labs. But to take a step back, I can give us a little bit of a broader strokes breakdown of Paxos, Paxos Labs, and the whole, what I like to call a Paxos Extended Universe. Paxos was started about 13 years ago by... our CEO Chad Cascadia, and he was focused on this problem of how do we provide access to crypto rails to the largest amount of people possible, right? And the realization came that you need to do two things. One is you need to first start by enabling people to get that first foot in the door with what we call first step capabilities, the first thing you want to do when you interact with crypto, buy, or sell digital assets on an off ramp and access stable coins. And then simultaneously you need to meet people where they are today, which is at the largest enterprises, financial, consumer and otherwise, that are actively using different types of consumer products and then find ways to embed crypto into those experiences that benefited those products and those enterprises. so Paxos historically is built off suite of what we call first step capabilities of those first things that enterprises want to do when enter into the ecosystem, which is really consolidated into those three core use cases. Buy, hold, sell digital assets that aligns with the crypto brokerage offering that exists at Paxos. So if you pull out your phone today and you go on Venmo or PayPal and you buy Bitcoin, that's settled on Paxos Rails. Similarly, the second pillar there is orchestration on and off ramp. So if you're a merchant on Stripe that wants to accept stable coins and you turn that feature on on Stripe, that's settled with Paxos Rails. And then finally, what Paxos is most known for, the issuance business, right? So USDG, PYUSD, PaxG, and many other assets throughout the years have sat at the bedrock of the Paxos business. On the lab side of the business, we're focused on, all right, all of these assets are great. And they're the great first step for enterprises. How do we go and enable those assets to then be active in the ecosystems that they exist in on the platforms that they exist in? So we focused our mandate on another three pillars, one, which is on-chain stablecoin movement, stablecoin orchestration. Second is generating yield on stablecoins and ⁓ other tokenized assets like gold. And then third is enabling on-chain credit. and lending and borrowing capabilities. And so really combined, you have this full stack experience where from the first step you take into crypto all the way into the 10th year that you're building out your platform, you have a suite of capabilities that help enable you to build out novel solutions for your platform.

Gabe (05:11) Got it, got it. So you guys are really taking customers end to end, you know, from like zero crypto experience, and then your Rails can support this holistic stable coin experience over like an indefinite period of time of scaling.

Chunda McCain (05:27) 100%. The idea of saying I like to use is I don't sell capabilities, I sell solutions. The way that we think about building out solutions here is centered around, we look at problems that enterprises have. Hey, my cross-border remittance is expensive and slow. Hey, I'm not able to monetize these dollars on my platform. Hey, I'm a payment provider and money keeps coming in and out. I want to find a way to retain it on platform. crypto solutions which are just better financial products better financial infrastructure to go and address those problems that these enterprises face.

Gabe (06:01) Yeah, and this kind of transitions into the meat of some of the stuff that I want to personally understand. And from your experience, you have this holistic enterprise perspective of the stablecoin landscape, who the players are, regulation, genius act. So for this in particular, I'm curious about the geopolitical landscape and what is the power that stablecoins actually hold,

Chunda McCain (06:08) Yeah.

Gabe (06:28) especially in the context of USD coins, ⁓ USDC and USDT, PYUSD, these US denominated stable coins, why are they so strong quote unquote? And kind of what is the geopolitical lens or application of these coins in general?

Chunda McCain (06:32) Mm-hmm. Yeah, so I think like, you know, there's a few reasons why stable coins just in and of themselves. And, you know, you see this in the adoption of ⁓ assets like USDT, which don't share back yield, but yet are still propagated around the world. One of the value propositions of stable coins is just access to the stability of the US's currency, right? And I think being in the US, it's pretty easy to discount how good we have it from a currency perspective, but. There's a reality that ⁓ globally, right, US debt and thereby US currency value is effectively propped up by nation states the world round. And so what we're doing here is we're effectively enabling the average, quote unquote, consumer, you call it, in all these jurisdictions that don't have access to direct directly purchase US debt from, you know, directly from the US Treasury, the ability to tap into that by leveraging stablecoins. And the thing that I actually think is a really interesting and pretty understated point when it comes to stablecoins, and specifically US stablecoins, is I think they act as a forcing function to bring the entire world onto crypto rails and to accelerate into crypto even quicker because What some regions are recognizing is that their demand for their currencies is actually decreasing because of the growth of stablecoins in their regions. And so as a byproduct, they have an incentive to build out more robust on-chain rails for their own currencies to justify the ability for their citizens to be able to hold their own currencies. We even see like a pretty interesting cases in like Brazil, for example, because they have a very high rate environment. They're in some cases you can see people building out enterprises that are focused on enabling that high rate environment and their general currency stability to actually act as a yield vehicle. And they're tokenizing that as a product because I might be, you the number might be slightly different than today, but I believe they're the rate of that they're quoting on sovereign debt as somewhere in the 13 to 15 % range. And so if you're hedging out the delta between that and the value of US currency, you actually have a pretty attractive yield product. And if you put that on chain and now you can distribute that globally, you create these really interesting dynamics between how nation states can effectively leverage their own native debt demand in order to create these bespoke products that now they have a platform to distribute that globally. Because historically, if Brazil was in a position where they were like, hey, I want to find a model to enable the global market to access this type of rate trade, it's a lot more difficult. It requires a lot more upfront infrastructure. And also, it's less scalable, right? Because you'll have less firms who can offer those solutions and can offer access to that trade. versus now with stable coins, you can have a digitized Brazilian dollar, you can have a digitized American dollar, and you're able to go and facilitate these really novel strategies. One thing I'm personally interested in is seeing the productization of the historical yen US dollar basis trade and seeing what we can do with that once we're able to create more digital rails to enable that basis trade to continue.

Gabe (10:16) So you're saying the US can kind of maintain dollar dominance by short-cutting the access to treasuries through the stable coins. And then foreign nation states or other countries outside the US are tokenizing yield opportunities and then they can sell those and that gives other countries access to their currencies as well. Is that?

Chunda McCain (10:38) Yeah, you get a lot more dynamic and active in an international rate environment that becomes more reflexive due to investment demand on the basis of underwriting sovereign debt, which is fascinating because these markets have existed historically, but they haven't been as dynamic as they can be and also as widely accessible to the general audience, right? Maybe if you work at a trading firm, everyone knows the yen dollar basis trade, right? But if you go and ask any person on the street, how would you go and access that? They wouldn't know the first thing. But what stable coins and digitizing currencies and dollars the world round allows you to do is to open the door to enable more public access to these types of kind of interrelated currency and debt relationships that historically just have been kind of mitigated to the nation state level and then large investment firms that operate near that.

Gabe (11:41) So for these other countries, what is the reaction that you're seeing? Because obviously, if you're a country and your leverage nationally is the currency, and you have dollar dominance growing, and the ability to transact like USDT, especially in countries and in regions like Southeast Asia, is very dominant. What is the reaction of these different countries and, you know, is it kind of, are they accepting it? We've seen some like bans plenty of times, but yeah, yeah, what's kind of the reaction? How does that?

Chunda McCain (12:10) Yeah. I think I've seen three different reactions. So one of which is the one you've you've mentioned, which is just banning it. Right. ⁓ Banning access to stable coins. is, you know, China's done this or they've been cautious around it. There's certain countries in Africa that have done this. Right. Just outright bans on stable coins because of the threat it poses to their to their national currency. So it's one route you can do. The other route that we see is ⁓ It forces that nation to lean in more to digital assets. I think you see this sometimes in South America, sometimes in Southeast Asia, in the Middle East a little bit, where you have these nation states recognize that, okay, this is inevitable, right? The digitization of all capital is inevitable. What we need to do is accelerate towards it so that way we can compete on a level playing field. with the US, which has already gone a decade plus long head start on building out the infrastructure to support this. So you see a lot of investments being made there in certain regions where they're like, OK, this is an opportunity for us to go catch up and get ahead of these nation states that are banning stable coins. And then there's a third model that I've actually found kind of interesting. This has been in East Asia is actually primarily where I see this. where the legislature fully understands the value of stablecoins, even US stablecoins, and welcome it in. In East Asia, a lot of those countries have very, very tight capital controls on currency demand in order to maintain specific rate environments or to balance import-export demand. And so what you see there actually is this kind of interesting like centralization on specialization of goods and production that sometimes occurs. And or you see new markets be generated for demand for the underlying currency or strict capital controls on money that flows in and out. So I've seen kind of like two different outcomes in East Asian nations. One where they're like, all right, let's take an approach where we take a harder look at what is generating currency demand and let's focus on leaning into that to basically like hedge out the risk of supply shock from US dollar stablecoin demand. And the second thing that I've seen that's been kind of interesting is saying like, okay, we'll allow US stablecoins But we're going to be extremely careful about the tokenization of our own asset. And what we're going to do is we're going to maintain strict capital controls of the tokenization of our native currency and have a very like iron grip on the firms that are doing so to maintain and basically react to the moving demand for US dollars in their region and then turn on and off levers at the enterprise level to generate demand for their own asset in a digitized manner. That I think is this really interesting middle ground of like trying to be cautious and not necessarily fully accelerating towards digitization. But understanding that digitization is inevitable. But there's also this lever if you really want to maintain capital control over your currency value on your own currency by controlling how digitization occurs for your own currency and then also potentially moving that lever forward or pulling it back based on maintaining that balance you want to strike. This is a really interesting model that as I've talked to some, some nation states who are approaching this type of issue that they're thinking.

Gabe (15:37) if you can share and you know, try to accordingly who were like some of the sophisticated actors that you see maybe at the nation level or just like enterprises broadly that maybe we wouldn't quite think was the case.

Chunda McCain (15:49) that are adopting stable coins.

Gabe (15:51) Yeah, yeah, not just adopting, but also kind of like navigating the landscape in a sophisticated manner.

Chunda McCain (15:57) Yeah. So the one country I was thinking about when I was talking about this type of capital control is actually Korea. I spent a decent amount of time. I actually spoke on the their equivalent of the Senate or representative floor last time I was there about the concept of it was more on RWAs. But I spent a lot of time talking with people there and some of the legislators there on how they were approaching stable coins. And the really interesting kind of theme that was that resonated was, hey, currency demand in Korea is is down to a science, right? They're very, very conscientious about managing currency demand in order to maintain stability on the currency on the basis of their import export balances. And so when they look at digitization of the won. they're thinking about it within the context of that historical framework and saying like, okay, what are the levers we can push and pull here to make sure that we don't over induce want supply, but we have some controls over retaining leverage, but also enabling propagation of demand of one for like when it's necessary. And I thought that to be just a really, I mean, their legislation. and legislature has been really stable going forward ever since the previous president came into came into their position. And I think they're taking a really measured and conscious approach to this that I find a lot of nations aren't really thinking that deeply around how digitization could affect their own currency demand and really building out strategy around it. That's a little bit deeper than like complete ban or just fully lean into it and just figure out what happens from there.

Gabe (17:31) Yeah, yeah. That's pretty interesting because historically with digital assets, they've always been pretty particular with inflows and just currency leaving the country in general. We've seen with the exchanges and the kimchi premium of Bitcoin and all this stuff. So yeah, now that you mention it, it kind of makes sense.

Chunda McCain (17:55) Yeah, they understand the market, right? And so they understand how exactly to take a measured approach to navigating it with nuance.

Gabe (18:04) Yeah, yeah, that's interesting. for these customers that you guys are working with, these enterprises, like what is the flavor of... what these different entities look like. Because if we're kind of thinking of like, Paxos is working with some customers, maybe it's like a Coinbase, right? Or a Kraken, et cetera, Binance, But behind the scenes, maybe these can be like sports teams or all these other different types of entities. What is the appetite and kind of the breadth of... folks looking for stable coins, whether it's like a nation state or a sports team, essentially. Yeah, curious.

Chunda McCain (18:39) Yeah, we have spoken with everyone in that gamut from sports teams and leagues to nation states and FIs and PSPs and payroll providers and neo banks and everything in between. DeFi protocols, blockchains, you name it. The way I kind of think about customer segmentation is kind of split in two. And I like to think about it in a problem solution orientation, right? So you usually have what I call like product execution parameters and that sits at the specific ICP. Right. When I'm thinking about how do I activate users on a payroll platform versus how do I activate users on a NEO bank. Two very different experiences. But what I can do is kind of group all the enterprises we work with into two buckets. There are enterprises that maintain a a flow of capital, right? Capital moves in and out with them. And there are enterprises that ⁓ store capital or custody capital, right? And you can get the high level split on their mandate is effectively split based on those objectives. So for those who are managing the flow of capital, think of the payroll companies, payment service providers, credit card issuers, a lot of what they're thinking about. is retention of capital. How do I help my platform retain the billions or millions or tens of millions or trillions of dollars flowing through my system? How do I help them find a reason to stay on my platform and then add value to my enterprise? Now, like I mentioned before, what that looks like is a little bit different depending on the client, what I'm gonna say to a payroll provider versus what I'm gonna say to payment service providers. two completely different things on what that's gonna look like on their app. But the mandate is the same. On the other side, what we're really looking at when it comes to custody or collection of capital is two things. We're looking at maximizing client or user retention, and we're looking at maximizing margins on client dollars, right, or user dollars. And so for them, they're thinking about questions. You know, if I'm a bank, I'm thinking about, hey, if... I don't have excess demand to borrow and I have idle cash on my balance sheet. That's cash that could be utilized that I'm losing money on. How can I further activate this capital? If I'm a NEO Bank, I'm asking how do I enable my users to stay on my platform versus, let's say even just going to use DeFi directly. If I'm an exchange, I might be thinking about how can I enable people to leverage stable coins. to maybe subsidize some of the cost of trading on my application. So there's a whole bunch of different ways that desire to retain users and increase margins exists in that segment of clients, but that's generally the higher level mandate on that side.

Gabe (21:26) Okay, got it, got it. And for these clients, basically you have like different use cases per segment. And then for like some of these active segments, what are like the levers essentially that you can pull on? And maybe you touched on this a little bit earlier, but you know, if I'm like a basketball team, right? Like what is the actual application of...

Chunda McCain (21:35) Mm-hmm.

Gabe (21:51) a stable coin within my institution, right? That's different from a gift card or something, right?

Chunda McCain (21:54) Yeah, 100%. And that's where we get into the world where, like I said before, we shouldn't be selling capabilities. Don't sell a staple coin. Sell a solution to a problem you're facing. If I go talk to a basketball team or when I've spoken with sports teams or consumer platforms that kind of look like that in the past, you usually get a question around, all right, I have So much value flowing through my commerce system, right? There's merch, there's tickets, there's, you know, meet and greets, there's, you know, you name it, And so how can I go and find a way to further, one, increase spending in that ecosystem, two, increase my margins in that ecosystem? and three, create levers to increase user engagement. And so if I want to increase spending, what could I do? Well, I could discount certain experiences if they pay with a stablecoin backed by, let's say a pack of stablecoins or something of that nature, right? Because now if I have my own branded stablecoin in that ecosystem, I'm generating dollars on that. The user is helping me generate dollars and they get kickbacks in the form of discounts on some of their purchases. Or let's say if it's a year long pass, right? because now I'm booking out that revenue for a year and I know exactly how much that dollar is worth on the books for that year as it's being utilized in my ecosystem. Another thing could be, hey, if I want ⁓ users to be able to have access to like unique opportunities, maybe you want an embedded wallet into your platform that has your own branded stable coin. Let's say if users stake that stable coin and generate additional yield, which generates additional margin for the enterprise, then they get access to unique experiences. And so now with embedded wallets, with a stable coin, with stable coin yield, you've created a fan engagement experience. Right. And so it's about using the access to capital as leverage to be able to spend and generate more value for your your users and your clients and your fans. That is really the centerpiece of things like a consumer engagement exercise. Because at the end of the day, really, if you just think about it from a simple first principles perspective, what using stable coins, what crypto does and what DeFi does holistically is it enables you to generate additional revenue with the same dollar and save money that you would spend on some of the inefficiencies of the traditional financial system, which means it's just more capital in your pocket and what is the value of capital in your pocket? You can reinvest that to build a better product, better service, better platform.

Gabe (24:33) Got With these different levers, guess kind of to to re-pick up like the the geopolitics piece and kind of like at the national level, why do you think some of these larger countries, maybe like a China, why haven't we seen like stable coins, you know, flowing maybe even in small adoption, right, across different countries? Yeah, what do you think is kind of the hold there? Is it that the USD is just so powerful global? the market share, right? If you look at USD coins versus other countries, even the EU, it's marginal, right? So yeah, what do you think is kind of the stagnation on that piece and kind of the growth and are you guys looking at this as products that you're taking seriously? How is that?

Chunda McCain (25:17) Yeah, I find them very interesting. think the question I have is probably the question that is in every nation states mind when they are experimenting with this. Also, I'd give, I think China a little leniency. think they use Hong Kong as a bit of an experiment, experimentation venue to explore different initiatives, different stable coin initiatives, which they've done over the years. And I think the biggest question that any, whether you're a nation state or whether you're, building out a bare metal stable coin yourself is what are the demand drivers for this asset? Where are and why are people going to access this asset? And the question I think at the nation state level you have to ask yourself is what primarily if you're not a reserve currency, which is just the US, demand for your currency is driven through the sale of goods and services that are unique to your geography industry it's. Right. And so if you're operating under that function the question should be OK if my wedge if my demand driver is my geography industry et cetera how does tokenizing my currency help drive that demand further. The question the answer might be it doesn't. Right. Right. If say you know you can imagine a world where like let's say you're the primary. ⁓ demand driver for your currency is tourism. There may not be a clear path to say, okay, well, you know, is tourism demand really going to justify, like, to have some way to accelerate tourism demand if I have a stable coin? It could be hard to pin that down. But if you have a more diverse economy or if you have interesting ways to structure a rate environment, like I talking about in Brazil and Japan, then you're in these positions where You can you can look at a Brazil and you can look at Japan and say like they're actually very interesting investment level structural demand drivers for these currencies that exist outside of the sale of goods and services. And so if you can generate those types of incentives from an economic planning perspective there's really large interest in experimenting with stable coins. And you see that reflected in those jurisdictions as well. The growth of Brazilian stable coins is one. the larger regions in South America that are issuing their own digital currencies. Similarly in Japan, they've been opening the door a lot to issuance of Japanese currency, Japanese tokenized currency. In fact, I believe there's news recently about tokenized yen project being worked on. And it's because they have these economic levers to create novel demand drivers for the currencies that have already existed historically, and then they'll just lean into it further by tokenizing it.

Gabe (27:47) And then you guys just came up with a new product, the Amplify Stack, right? And yeah, if you can kind of chat a bit about what it is and how you plug into these countries and to these different enterprises and how you're supporting them through this new product.

Chunda McCain (28:03) Yeah, so like I mentioned before, the mandate that we're focused on on Paxos Labs is really to answer the question, what do you do once you bring stable coins, once you issue a stable coin, once you bring digital assets, whether RWAs or assets endogenous to crypto onto your platform, what are you going to do with them? How do we make sure we make those implementations in that first step successful? One of my biggest fears is I think we're given a window of opportunity to justify the value of our existence as an industry. For those of us who have been around for a while, back in 2017 and 2018 and 2019, there was a concept of enterprise blockchains and enterprise use cases and people really exploring it. And there was a lot of capital investment into it, but that capital investment didn't lead to any results. And so what we're focused on is basically that second leg of... All right, let's make those capital investments to bring these assets onto your platform. But let's make sure we drive real business results once you make that investment. And so the Amplify stack is focused on providing the three pillars of what we call like activating your platform. One is Mint enabling branded digital dollars on your platform where you can retain all of the value of the dollars on your platform through a native stable coin. Second is earn where you're able to deploy that stable coin into additional yield generating opportunities to further retain your users. And then the third is borrow enabling that stable coin access credit or the digital assets under platform to access credit. So that way they can ideally access credit in your native stable coin and then do more with it. And if you notice the idea of the Amplify stack is that you're not supposed to just take one piece out of the stack and kind of run with it, but it comes as a bundle. And in bundling all those capabilities together, you get a full stack holistic digital asset experience that is just much more robust and much more useful to the end user on your platform.

Gabe (29:56) Got it, got it. Yeah, I think this is helpful to understand, at least for me, because I think kind of when we think about stable coins, it's like either yield or like mint and burn, right? And not kind of the extended. business tools, to conduct business, but then also for teams to amplify whatever they're doing on the product side, whether like basketball team or like a nation. And I'm curious, as you're seeing this entire landscape of players and of all shapes and sizes, right, where is the value kind of bubbling the most? where would you say like, hey, yeah, you should kind of pay attention in this corner, under these rocks, right? Where is the interesting things happening and what does it look like?

Chunda McCain (30:43) Yeah, I think to me there's just kind of a few sectors in the market where I think things are happening. I think in FIs, like I have like a personal prediction that I think, you know, in 12 months, over 50 % of the largest FIs in the world will offer crypto assets directly on their platform. I think it's inevitability. I have very high confidence that that will be the case. And so I think if you look at the top of the market, that's where you're going to see a lot of activation energy. If we go down market, right, and we look at, all right, let's look at the fintech sector, let's look at the payment sector, let's look at neo banking. I think where you're going to see an expansion of demand is around the use of DeFi for novel use cases, right? I've gotten demand from PSPs for ⁓ use cases such as credit lines for their merchants embedded into their payment flows. I've chatted with Neobanks who are interested in deploying directly into DeFi are asking like, can I find compliant scalable methodologies of deploying into on-chain yield? And so I think for us and I think for the industry at large where we're like laser focused is really that like step down. from the top line, although there's a lot of investments in the top line as well, step down for that absolute top of the market, because that's where a lot of the innovation is happening. That's where a lot of the next steps are happening, because all these platforms have usually already taken the step to embed stable coins or digital assets, and so we're really seeing them work through, okay, how can I get creative to do the next thing? Because the next thing isn't just like, all right, I do step two, I do step three. It's like, no, I build, you know. WXY and then someone else decides to build DEF and those will look like different things. They'll resonate differently in the market. They'll use stable coins and crypto infrastructure underneath, but they'll express themselves differently in the user experience and that's what I'm really excited to see.

Gabe (32:35) So these, just to restate, these large financial institutions, like traditional institutions, you're saying that essentially we're going to see like a massive in the next 12 months push on stablecoin adoption.

Chunda McCain (32:47) I think stable coin and digital asset, they'll either be issuing digital or stable coins or enabling digital assets directly on their platform.

Gabe (32:55) Got it. And then on that similar vein, especially in DeFi, we have these like super novel financial instruments, Like, you know, tokenized basis trading and something like an Athena on Solana. There's quite a few like ⁓ money manager stable coins. And I think they're trying to move away from the term stable coin, but essentially a fund managing a strategy and deploying it as a coin. Perena is one that comes off the of my head on the Solana ecosystem.

Chunda McCain (33:15) Yeah.

Gabe (33:22) But for these types of assets, what are you seeing these institutions, the large institutions are going for? Is it kind of like the vanilla model or is there appetite for these more like strategy-based assets?

Chunda McCain (33:36) Yeah, it's a good question. I mean, if I'm being frank, think the market just really isn't there yet to go up the risk curve. When getting people acquainted with the intricacies of a new financial system, a new financial operating system, there's a lot of risk just in operating that system in and of itself and being a part of that system. If you start to add, you know, endogenously emerging yield products from that system, you start to go into a realm where people are all right, like, let's let's pull the brakes like I'm taking these, you know, I'm taking these baby steps in this. We can't we can't start running and go, you know, jump in the race car and go full throttle. Right. So I think, you know, they what is interesting about that sector of the market is I think they're doing a really interesting job of blending off chain sources of yield with the benefits of on chain rails. And I think there's a lot of demand for more crypto native audiences and companies to invest in those types of products because they understand the risk. They understand these models. But now they get access to these traditional finance or these markets in traditional finance that was previously only accessible to really large capital allocators. I think that side of the market is really interesting. I'm paying a lot of attention to what's going on there. But I don't expect the demand to be driven from the other side just yet.

Gabe (34:58) So really you're saying like these kind of like vanilla opportunities where the use cases scope down essentially to like, you know, USD backed stable coins and then those turn into their own products.

Chunda McCain (35:14) Yeah, know, lending, can get into, you know, we call staking for digital assets. think people are coming across the bend on that. There's gonna be a lot of activation energy there. We go farther down the risk curve, think ⁓ people are gonna start pulling the brakes on it.

Gabe (35:27) you Got it, got it. And so on that piece, what do you think is like a counter narrative? Like what are people talking about that you think is just garbage or fluff? Maybe it's not garbage, right? But like what is the stuff that's fluff?

Chunda McCain (35:36) Mm. Yeah. so, so here's a piece that, you know, I've just have, I've tried to wrap my head around it. I've tried to really get on the train because it would be fantastic. I mean, for our business, but also just holistically for the industry is agentic payments. and the thing I just struggle with is like, give me the sustainable systemic demand driver for that. That isn't paying for APIs that I could do with a ramp card that does the same. Right. And sure I may nick a few bits off the yield while it's sitting on my on my balance but it's not I don't see what I'm doing beyond that again. It's like what's next. Right. What's next. If there's nothing next and there's no systemic demand driver there then it's not super interesting to me. I think once we see commerce platforms and consumers start transitioning to doing more agentic based purchasing and financing and things of that nature. I think there's a world where that exists. I think the timeline for that is indeterminate. Until we have structural demand drivers there, I remain skeptical. And the heuristic I like to use is ⁓ would you give open claw your credit card information? And the answer most people would say is absolutely not.

Gabe (36:51) Yeah, that makes a lot of sense. on the agent side, the thing that I kind of question is what is the use case in which an agent needs to talk to another agent as opposed to a service? And it's almost like there might be this context-based opportunity where I have context and I put in my agent and someone else has context and they put in their agent and there's a unique experience that is not available.

Chunda McCain (37:20) Yeah, we're like the agents are acting as the intermediary.

Gabe (37:23) Yeah, yeah, it's a bit early. It's a bit early.

Chunda McCain (37:23) Yeah. Being early is just as important, or being on time is just as important as being right. Or at least sticking around until you can be right is very important.

Gabe (37:36) Yeah. So institutions are not asking, at least in your conversation, no one's asking for, you know,

Chunda McCain (37:41) I have had not a single conversation from nation-state to religion to FI to DO Bank to ask me about if we support agent payments. Now maybe I'm talking to the wrong enterprises, but I don't see the demand in market.

Gabe (37:57) Fair enough. That's good insight. Cool man. I think that's pretty much, yeah, that's kind of like the rap for me. The stuff that we covered is for you in general on the geopolitical side, the... these are your customers, right? These nations are your customers and kind of like the US has its angle. The other countries, know, nationally actors have their angles and how they're kind of reacting to this pressure, this pressure dynamic. And then that flows into kind of like your day to day customers, whether it's like, you know, enterprises, financial institutions, even up to like sports teams. Is there anything else that we should know kind of within that stack that we necessarily haven't covered yet?

Chunda McCain (38:38) Yeah, well, the thing I'll clarify there is I don't think we necessarily internalize nation states as our direct customers. However, they definitely are creating environments in which we see more customers arising in those environments because the lever that nation states get to pull is political legislative and those political legislative levers then translate into enterprise demand for products, enterprise demand for services, enterprise demand for capabilities. Now that being said, in that suite, think the thing I'll leave you with here is I think... One thing I am very much kind of a proponent of, and we have an internal philosophy of, is being able to provide a unified platform that kind of abstracts away the complexity of a whole of the minutiae that get involved in financial operations. To provide... Crypto Rails, but not for the sake of Crypto Rails. I think that's something that a lot of folks kind of fall into the trap of. But for the sake of the fact that Crypto Rails are just a better way to operate finance, right? And so my philosophy is, I didn't come into this industry to sell everyone on crypto. I came into this industry to sell everyone on a better way to do finance. A way that... empowers the user, way that empowers self sovereignty and ownership, a way that decreases the amount of middlemen and the amount of friction that exists in legacy systems, and also offers a more equitable system for everyone involved. So I'll leave you with that.

Gabe (40:17) Well, thanks, Trin. We see you working hard doing the gauntlet ⁓ since the Iron Man. Yeah. But great to have you and hope to have you back on soon. Yeah. See you.

Chunda McCain (40:22) I'll my best. Alright guys man, always a pleasure chatting. Catch you.