What Will It Take for Stablecoins to Go Mainstream?

0:12Paul Bances: Welcome to FinTech Corner. We're really excited about launching what's going to be a new stablecoin podcast for us. And so there's a lot of stories to tell. I think that what's happening in the theme of stablecoins is all been kind of a consumer story. we're going to tell a different story. And we'll tell you a little bit about that and set that up for a second. But really great to have Paul Bancis with me as a guest. We're going to kind of dig into his story a bit. He was instrumental and had a key role in really where Stablecoins is today. So we'll kind of dig into that. It's a bit of a backstory to the setup of what we're going to talk to.

0:45Paul Bances: So this is episode one. We're going to get a lot more into where we go with a lot more episodes to come. And excited to dig in. So the first thing I'm just going to set this up with, kind of what is the thesis? We're calling this stable coins going mainstream. What's going to accelerate the adoption in corporate finance and treasury? So if you think of what's happening right now with the Clarity Act and what largely is the bank and crypto lobbies, you know, battling it out in this high stakes battle. When is this bill going to get out? When is it going to get signed? When is it going to get agreed to?

1:18Paul Bances: And what it comes down to really is around yield. And so much of this is a consumer story around the concerns of a flight of deposits around yield for consumer banking. And you look at why that matters. It matters to consumers, but there's a whole different element that's not being told about at all. That's sort of missed. So we kind of say, hey, this is the wrong lens when you kind of look at where this is going to go. Most of stablecoin is all about kind of trading in crypto today. But if more to go mainstream and have all the uses on the business side, in particular businesses that are 20 million in annual revenue and above, like there's a corporate finance and corporate treasury use case here that's welling up.

1:58Paul Bances: You know, we've got a lot to say about that. So that's really the angle of this whole podcast, a series of podcasts. And so let's dig in. So, Paul, just great to have you on. And you've got such a great story, great background. Let's start, you know, talk about, you know, introduce yourself and tell a little bit about your background.

2:15Brett Turner: That's fantastic. Thank you, Brett. And I will say we've picked a fantastic time to kick off this podcast series. There's so many things happening in the market. Every week, there's an announcement that underscores what you said before that, especially in the stablecoin world, you know, the whole narrative of this being a crypto product, etc. That's kind of left behind. And what we're talking about now is just building, you know, infrastructure to move value, payment infrastructure. So it's incredibly interesting time. As you said, you know, I've been very blessed to be able to operate in this space during a really wonderful and interesting time over the last several years.

2:50Brett Turner: You know, my payments background before is I started off as an attorney working with a lot of banks here in Miami, a lot of international banks in Latin America. But then kind of moved over to more of the fintech and sort of non-bank financial institution side. That's when I first joined PayPal back about 15 years ago as an attorney. Then I went over to the payment side, again, moving value and remittances. I worked with MoneyGram. That's where I transitioned from being a lawyer to being more of a general manager and running a P &L. And then I was very, very fortunate to go back to PayPal as one of the founding members of the, we called it the BCDC team, blockchain, crypto, and digital currency team.

3:28Brett Turner: So I was one of the founding members there. I got to work with some extraordinary folks on putting really together the strategy from day one, you know, from zero for PayPal as a payments company to be able to incorporate this new technology that was coming up. And again, it was a very interesting time. If you kind of look at the evolution of things, when I first started here, you'd walk into a room and you talk to people about, you know, blockchain, distributed ledger technology and Bitcoin, and you were met with eye rolls, right? You know, it suffered from a big PR problem at the time. Then you've kind of saw the evolution of that.

4:01Brett Turner: And again, from a PayPal perspective, we always looked at it from payments infrastructure, payment rails, and thought, you know, as a company that's involved in that space, how can we leverage this technology? But there was a lot of things happening in the market with the whole FTX disaster and the whole Terra Luna. But then we kind of survived that and got now to this other end where, as you know, Brett, largest banks in the world, other financial institutions, Visa, MasterCard, everyone that's involved in payments and exchanging value is now looking at this technology and saying, okay, now that we know the technology works, what do we need in terms of infrastructure to be able to have this adoption?

4:36Brett Turner: And not just on the retail side, but consumers, as you said, that's sort of a different market. But when you want corporations and enterprises to be able to use this for all forms of payment, you know, whether it's internal money movement or payment to counterparties, we're seeing a lot that's happening in the market now in the last couple of weeks and months. that sort of validates our thesis back in 2019, 2020, when we were putting this together, that stable coins, a stable value that can leverage the underlying technology is going to add a lot of optionality and choice to payments. Would it ever replace traditional rails?

5:09Brett Turner: It's hard to say, but in the short term, certainly it's going to complement it and be able to really take advantage of sort of that, all of the elements that blockchain gives you, which we know now, the instant settlement, 24 seven availability, but then also, you know, the programmability of it, you know, and the ability to use it with limited intermediaries. So, you know, I was lucky enough to get started in this space from a payments perspective at PayVal. And, you know, I pulled actually some documents we put together for the then CEO and read them the other day and said, yeah, we were onto something very early on.

5:41Paul Bances: So real quick, because this is, this could be a podcast in and of itself, even this, like you have this background as a lawyer, as a corporate lawyer with MoneyGround, and then you kind of make this pivot as in business development. Now you're kind of at the ground floor, really building as the founding team of PYUSD and architecting and launching that. So that's a big shift. I mean, that's probably a little bit of a jump or maybe taking a risk. That sounds a little different. I mean, that, again, like that, there's probably a story that what, what caused you to see that just is ready for a new adventure or were you already kind of also dabbling in crypto and kind of had that background?

6:15Paul Bances: What was sort of the emphasis, the drive there?

6:18Brett Turner: So I was at MoneyGram at the time, and that's when I had switched to running the P &L there. And it was all for the Americas, which if you know remittances, that's an incredibly important corridor when you start thinking U.S. to Mexico, Central America, a lot of interregional remittances in the Latin America and Caribbean region. My interest in stablecoins and just well actually in crypto as a whole started more just on my own. I started noticing it pop up a lot. And from a legal perspective, I was also interested in sort of blockchain and the law and read a couple of books on that. And, you know, there was this phrase that code is law, you know, something that was mentioned often in the early days.

6:52Brett Turner: So just started, you know, sort of looking at the space. But then I was, again, fortunate enough that an old colleague of mine from PayPal, who he used to run the Latin America division and I was his lawyer, you know, went back to PayPal with the mandate under Dan Shulman, the CEO, that we needed to put together a cryptocurrency strategy. At the time, the only thing that PayPal was doing is they were one of the original members of Libro, if you remember that, you know, from Facebook.

7:16Paul Bances: That's right.

7:17Brett Turner: Yeah, Dan, I forgot about that. Yeah. Yeah, yeah, yeah. And, you know, we went in then in 2019 with my colleague, Jose Fernandez-Daponte, who is now with Stellar. He gave me a call and said, look, I really want you to come in as a founding member of this because one of the important elements here is going to be navigating sort of the regulatory aspects of all of this, right? It's not just a go-to-market. It's not the product. It's also, you know, we're living in the gray area here in the US and globally. And quite frankly, that's something that I had done a lot in my career because when the first time I was at PayPal, you were trying to describe to people this whole sort of digital wallets cross-border.

7:54Brett Turner: And you were going throughout Latin America and meeting with all of the regulators there explaining this to them. So navigating that sort of gray area was something that I was accustomed to. So he thought, great idea to put you not only in the head of global market development, also gave me sort of dotted lines from legal and compliance and regulations and GR. because we knew that this was going to be an adventure to sort of navigate, because again, PayPal was a highly regulated institution. And then was lucky enough, again, when you're a small team, you got to play many hats, right? So I remember the early days, you know, now the BCDC team at PayPal is 200 plus, but in the early days, it was four of us sitting in a room making these decisions.

8:35Brett Turner: You know, at the time, I remember, Brett, the market cap for stable coins was 4 billion, right? So 320 now, right? And putting together sort of our thesis. But I think it was the culmination of having had a fintech background with the legal compliance risk background, again, living in the sort of gray area. And then this just general interest, it was never about the speculation. It was never about, you know, how high Bitcoin is going to go. It was all very first principles. You know, PayPal is a payments company. We move value between merchants and consumers and merchants to consumers and P2P.

9:11And we have the Zoom product for remittances, taking a step back holistically and saying, what would digital currencies as a whole, what is this technology going to unlock for PayPal?

9:22Brett Turner: So it was a great time to be involved. So I was fortunate to do that.

9:26Paul Bances: Well, it's not surprising that, you know, Jose picked you because just even the short time that I've gotten to know you too, like you're, it's almost like most interesting man territory or you've done a lot and you've done a lot of things. I think partly it's like, he needs somebody on a special mission. Cause I can imagine going to PayPal too. There's probably like in those days when you're starting for, like you say, four people, it's awesome. It looks like startup within now, you know, what used to be a startup, but you know, decades ago, and there's probably some resistance to that. People are probably like, you know, why are we doing that?

9:56Paul Bances: Does that make sense? There's probably a lot you have to navigate internally. A lot of the stuff that you just have to, again, it's still ground floor aspects of you're going to have to figure this out with not the benefit of the ecosystem as it exists today. There's probably stuff you're having to build and leverage. So yeah, what next? You go to PayPal. I'm sure there's all those layers that you're having to contend with. You're kind of having to navigate and, you know, use all of your, you know, tools in the tool bag to navigate through that. You're on the scene, you're working through it. What's been some of those, you know, that journey, maybe the resistance and then some of the challenges you're facing?

10:29Brett Turner: Yeah, you know, there was a lot of learnings with that, right? Because we didn't want to just adopt what was out there, right? We were trying to position ourselves as we believed early on that for a variety of reasons, you know, the strength of the brands, you know, trust, our regulatory structure, et cetera, that we were in a position not only to just adopt what was out there, but we can actually lead and we can innovate. That took a lot to convince internally, though, because you do have a regulated financial institution here that is subject to a lot of compliance obligations and risk obligations, and it's a global operation.

11:03Brett Turner: And here we are introducing something that's very new to everybody. So it was a great training ground for later when we were trying to then get other companies to adopt what we had built. There was a great training ground internally, PayPal, as to what is it that PayPal needs to see? What are the folks that, what issues do we need to address for folks to be able to get on board and want to support not just adopting this, but being a leader and actually trying to be an innovator and trying to launch some of these capabilities?

11:30Paul Bances: What was, real quick, sorry, what was kind of the strategic get, though, for PayPal? What did it feel like? I'm sure there's part of that you still kind of have to build out the pieces to get more of the green light because it's so early. but then what really, what was the thesis there for PayPal? Why do it? What was it, you know, for PayPal given, you know, some of the other things that are already kind of out there?

11:50Brett Turner: Yeah. So the reality was that there was a couple of things that factored. The first element was that this is coming, right? So it's not a question of we can choose to ignore it or not. We can be owners or renters of this in the future, right? But we knew that technology was coming. Again, I got to work with some very brilliant folks that were analyzing this and saying, look, this can potentially unlock when you have new payment rails that don't have some of those pain points that we had traditionally, this is going to come. And this is going to be, again, optionality and choice and provide a new sort of path to exchange value.

12:24Brett Turner: And we decided early on, as I said, that analysis was, do we just want to, like on traditional rails, sort of be renters of what's out there? Or can we control a little bit more of this? So there was just a strategic aspect of controlling. But the other part was what I said earlier, we thought that brand and trust and sort of our compliance element was very, very important. So we wanted to control to a certain degree, some of these elements, right? And it had to be sort of a controlled environment that we wanted. So when it came to functionalities of the coin itself, in terms of launching our own stable coin, seize and freeze capabilities, how we would talk to regulators about it, we wanted to control our own destiny there.

13:04Brett Turner: And because we realized that the technology was there, like launching a token in terms of managing smart contracts and all of that settled that that all works. The question then becomes is how do you build utility? How do you build distribution? How do you get ecosystem support? And again, because of our existing network, we thought we were in the pole position to be in a way. We have the merchant relationships. We have consumers all around the world. They're used to exchanging value. We know what the pain points are on cross border e-commerce or merchant settlement, or even remittances due to the Zoom product.

13:38Brett Turner: So therefore we, you know, we wanted to make sure that we controlled our own destiny a bit. Plus during that period of time, as I alluded to earlier, a lot of things were happening in the market. You know, so we wanted to make sure that we reduced down the counterparty risk as

13:51Paul Bances: much as we could to be able to manage it sort of internally.

13:54Brett Turner: And I think the folks at PayPal that were in payments and understood the way that it works, they bought on early. They understood what sort of the pain points were that this newer technology can help solve. And there was always a path towards not just building a stable coin for regular use out in the wild. It's weaving that into the existing sort of PayPal workflows, right? And how can this unlock greater e-commerce possibilities cross-border? How can this improve small, medium businesses' cash management by you know, earlier settlement, things to that extent. So always tying it into something that the company was trying to focus on from a customer or a merchant standpoint.

14:34Paul Bances: What were maybe a couple of things going on? Like there's a lot going on. I mean, you think we could kind of, you know, but what might've been the big thing or two that was the catalyst or like, okay, this mission now, the importance of it, the scope of it is now going up. We have to do this. It's not a want to, it's a need to. Like what were maybe some of the factors that really started influencing that that kind of gave you a little bit more wind at the back?

14:57Brett Turner: Yeah, no, it's a great question. So I'll talk about the negative ones first. Obviously, the whole FTX thing happened during that time, and then Terra Luna disaster with an algorithmic stablecoin. There are some issues with some banks out west and a momentary DPEG of a very well-known stablecoin. We used all of that to identify more as opportunities, right? There was a place where we felt for the adults in the room to be able to, you know, convey these messages, you know, sort of change the narrative as a trusted brand and go. And we would proactively go and meet with regulators, even regulators that didn't regulate PayPal per se.

15:35Brett Turner: We would go and meet with them. Just, we thought part of our job was to be evangelists, but to be educators as well. So we took our responsible innovation approach very seriously by making sure that we were careful of what we were putting out there. But first it was all the negative things that were happening that we felt there's an opportunity for us to be leaders now.

15:53Paul Bances: And on that, was that just, again, what we've seen is really a shift in the climate because a lot of it was like, hey, just a free-for-all, a little bit wild west, kind of building stuff for, you know, to ease of utility to kind of get things out there. But then, you know, I would think from PayPal's lens, it's like, okay, everybody knows that there's a lot of good things there, but nobody's really doing it in a more of a regulated way. And ultimately, if it's going to make this leap, that's going to need to happen. I know like Circle, that was kind of a big part of Circle's story. And that was one of the reasons why I kind of started digging into this well over a year ago.

16:27Paul Bances: But the Circle IPO, because you look at their meteoric rise, but part of that story for them, it's almost like they did something a little different. They focused more on the regulatory side. Was that really PayPal's angle too, seeing that, hey, nobody's really doing this. It needs to happen in order to make this leap. Like we could do it in the right way to make it. So that way it could be a kind of a mainstream stepping stone.

16:49Brett Turner: Yeah, absolutely. And that was our approach. We were the first entity ever to get what they call a conditional bit license out of the New York Department of Financial Services. They invented that. And we were the first one together with our partner, Paxos Trust. We were the first entity to then convert a conditional bit license in New York to a very cool. And then we created a trust company under the New York Department of Financial Services as well, just to run our digital business. So absolutely, we thought that we had a competitive advantage, actually, by leaning into the compliance aspect of it and our risk programs and building it in a way that it was not outside of PayPal.

17:25Brett Turner: It wasn't something on the side. It was built within the fabric of PayPal itself. So, you know, when you're looking at it from a compliance or risk management standpoint, you would see the holistic approach with your customer, which included all of their traditional PayPal activity, but now whatever they were doing with digital currencies. And we felt, as I said, that we were in a very good position because we had that credibility with regulators to begin to educate and be able to sort of change the mentality a bit of how they were looking at it after those negative incidents that happened out in the market.

17:56Brett Turner: But that was the negative side. What happened on the positive side was also, you know, a lot of things, Brett, in around 2021, 2022 were popping up. There was the NFT craze. There was a lot of stuff that was happening on DeFi and staking and all of these things that were perhaps, at least from the regulatory side, a little too hip for the room for folks. You know, they were going over on some of these sort of, you know, more complicated sort of structures where we at PayPal went back to sort of first principles and say, look, let's forget about all the hype and all the noise. look at the infrastructure, look at the technology, what blockchain allows you to do.

18:32Brett Turner: And let's now lean into that. And how can that create better efficiency? How can that sort of, you know, revolutionize a little bit how we're providing our services to our customers, both as a PayPal operation, but also customer facing. So there was that as well. And the market started shifting because if you recall, sort of in the beginning, stable coins, really the creation of it was a trading pair for volatile cryptocurrency, right? So you had Bitcoin, you want to get out of Bitcoin, but you didn't want to go to fiat to your bank. So you wanted, you know, an atomic swap, you know, of another token, but then maintain a stable value.

19:06Brett Turner: So in the beginning, that's what people were using stable coins for, is to get in and out of these positions, volatile to non-volatile without having to go traditional rails.

19:14Paul Bances: It's like a crypto trading pause button. What's that? It's like a crypto trading pause button.

19:20Brett Turner: Exactly, exactly. To be able to hold it and then jump back in because sometimes they would do that three, four, five, six, ten times a day.

19:25Paul Bances: Yeah.

19:26Brett Turner: When we started analyzing that and saying, hey, there's no reason why that can't also operate if you have that stable value as a payment for regular payments and counterparties. Because the beginning people were looking at, will Bitcoin be a form of payment? I think the volatility there, and that's not what it was designed to do, I think turned some people off and said, look, Bitcoin may never actually take hold as a form of payment for folks. once able coins started to become better understood then that kind of shifted sort of the mindset and it said then the third part would have to be when sort of then the regulators and the government started paying attention to this right and all of a sudden you're starting to get things like the genius act you're starting to get sort of debates on what's the best way to regulate this and now with clarity act i think all of that started those conversations while we were you know, working all of this and we launched in 2023.

20:17Brett Turner: And I think the fact that PayPal, an incumbent fintech, you know, not a crypto native company, was able to launch this, had a good narrative, had the right controls, had thought through how we were going to do this, helped also those conversations with the regulators realize this is something that we're going to have to take a look at. We can't ignore it because companies like PayPal and others are starting to really embed this into their normal operations. So I think, you know, to a certain degree, companies like us getting into the space sort of made it top of mind for folks as well.

20:48Paul Bances: So if you think to also now you're in build mode, you will kind of understand that, you know, these benefits, you understand kind of what the target is that you're marching toward. You're on a mission. You know, what are those pieces that really at the ecosystem at that time? And like when you mentioned NFT, it's like, it's amazing. It seems like a lifetime ago. That wasn't actually that long ago of how that kind of came and went. But when you now you're on this mission, And what are some of the things, because the ecosystem isn't mature enough, there's not a partner maybe you can have. So some of the stuff you might be having to build and pioneer a little bit.

21:18Paul Bances: But there's also other stuff, like you mentioned Paxos, and finding the right issuer, the right partner. So what was that right? Maybe looking at what you had to build, what you wanted to build, what you needed to partner on and who you needed to partner with. How did you kind of make that assessment? And then that's maybe a segue to a second part of the question. And, you know, why Paxson?

21:41Brett Turner: Yeah, you know, we realized again early on what were our strengths and our strengths came down to, especially in the space, right? Because, again, this is 2019, 2020. Not everybody knows who a circle is or, you know, even a Coinbase or a Kraken or crypto.com. So you started looking at it from we knew trust was going to be a big element here. Right. And, you know, PayPal, again, is built on we have licenses all over the U.S. and in Europe and parts of Latin America and Asia. So it became very important for us to say anyone that we choose to work with, anyone that's going to provide sort of infrastructure for us on the back end.

22:17Brett Turner: We wanted the highest level of regulation as well. Right. Because this is all going to be built on trust. And from the regulatory side, from the merchant side, from the consumer side, and even internally within PayPal and its own risk management of the board is we want to make sure that, you know, we're I always used to say as part of our BCDC group, you know, it's a Hippocratic oath. Right. Do no harm. We live and die by our licenses here, guys. And I made a living before representing banks that had enforcement actions and cease and desist orders. I said, we don't want to be in that world. So the first thing that we have to do here is do no harm.

22:50Brett Turner: So let's innovate, but let's be respectful to the operations that PayPal has. So in choosing partners or in choosing products and services to put out or even functionalities to put out day one, We were always very careful and very self-aware of who we are, who our target audience was, and always making sure that we are highlighting the trust and our regulatory sort of commitment and to make sure that what we were providing to customers was a way for them to get accustomed to this new asset class, accustomed to this new technology, but within certain guardrails to make sure that catastrophes didn't happen early on.

23:27Brett Turner: So we were very, very much providing sort of low risk curated experiences for folks to be able to build on throughout the years. During that process, we did realize we wanted to own certain elements of it. We did do an acquisition of a company out of Tel Aviv, Curve, without the E at the end, C-U-R-V. We did that in 2021, right after we launched our first crypto product to have the talent, the engineers to be able to build some of the infrastructure on our own. Again, and usually that was related to how much do we want to control from a risk management perspective or compliance perspective and things like that.

24:02Brett Turner: So that was sort of how we made that determination and understanding that, you know, that wasn't PayPal's core service at the time, right? We did not have a crypto team. We had sort of researchers that would look at what's happening in the ecosystem and our small group that was putting together the strategy. So we wanted to learn as much as possible as what was out there. We were, again, lucky that we were able to connect with folks that were the adults in the room doing the right things from a regulatory perspective, you know, thinking about, you know, new enough to know that all roads lead to eventual regulation in this space.

24:37Brett Turner: So they were early enough to be able to say, we're going to invest the money in making sure that not only are we compliant, but we're giving the tools that are needed by our potential partners or potential customers being PayPal and what they need to be able to comply with their obligations as well. And that's what led me to Paxos. I was lucky enough to meet their head of strategy at Money 2020 in 2019. And less than a year later, we were live with our first crypto product. It was a wonderful pairing of Paxos and PayPal. Paxos was the first to have a New York limited purpose trust in the crypto space and had been operating for several years.

25:15Brett Turner: And they had great infrastructure from both trading, you know, their custodian, qualified custodian as well. And, you know, had been known in the space already as prioritizing sort of their compliance element and building.

25:29Paul Bances: So it's a perfect pairing because they really have the same mindset. Again, this isn't going to happen. This isn't going to get real or real serious. unless we kind of focus, you know, build that, which is really essentially, if you think in the whole banking landscape, it's a trust layer, which is really allowing for that transparency, the regulatory function to operate in that way, which is really opening itself up to really grow and be used. So yeah, Paxos, maybe a little bit more about Paxos, you know, why, you know, besides that, what were some of the other things that you saw? And then, or maybe even, you know, now you're building together, what were some of the things that you really liked about Paxos that was just, you know, made you guys a part of this journey with them.

26:06Paul Bances: And now you're pairing up, you've got your like minded mission, you're kind of working through this, but then, you know, now you're kind of pioneering some of these things together, because that, you know, a lot of stuff is going on during that period of time. And now you're kind of, but you've got a partner to kind of plow the road with, you know, what was that partnership like? You know, what was, you know, being on journey and on mission with them?

26:26Brett Turner: Yeah, you know, it was very fortunate for us that Paxos realized sort of early on the potential impact of what we were doing, right? So they realized, again, you know, with sort of the broad scale that PayPal already has, you know, the number of merchants and consumers around the world that if we did this right, we did have the potential to be able to really make a significant impact in terms of using stable coins that we moved, you know, not the conversation had moved beyond all of the stuff with Bitcoin, Ethereum and asset class access. And it was really more about stable coins and then leading to other forms of tokenized assets.

27:02Brett Turner: They bought in early that we had the potential to scale this, we had the potential to make an impact. So they invested with us in terms of the design and things that we needed and wanted in terms of which chains that we thought were the most important to be on. And again, from a regulatory perspective, to make sure that we can say that this was a stable coin that is regulated by the New York DFS, that we did have monthly sort of meetings with them jointly to discuss what was happening because we wanted folks to realize that a lot of stuff is going to happen in the market. You're going to have a lot of questions as to who's behind that, but wanted them to know.

27:35Brett Turner: On the distribution layer, you had PayPal and you can trust PayPal as you have for two decades. But then our partner was also one of the highest regulated in the space and had already a track record of working with stablecoins. They had their own stablecoin out for a while. They had actually tokenized other assets. They had a product called PAX Gold, which was a tokenized version of a troy ounce of gold. They still have it, so you can buy that on chain. So it was a perfect example of how tokenizing something sort of changed the nature of how you can interact with it. And they were very, very well informed on that and had a lot of experience.

28:10Brett Turner: So it also helped influence together sort of what the next progression of what we were going to do with respect to the stablecoin and how we were going to put that out there to not only the market, but again, internally as to what potential potential issues we can solve there.

28:24Paul Bances: And that progression, PYUSD, so that kind of came along after working with them for a while. And then, and then that really helped, you know, what was that like in terms of the speed at which that culminated, but I'm sure it's on the back of a lot of other stuff that you're already doing. And everybody, you guys, you both are learning along the way. And all of a sudden, you know, where, so where did that go? Like PYUSD in that journey, how did that come together? And then maybe talk a little bit about like how, you know, that specifically launching that and then the impact that that's had in the market?

28:55Brett Turner: No, it was one of those experiences that we were ready to actually, a little inside baseball, we were actually ready before the actual launch date, but again, because of all the market noise, we thought this may not be the best time for us to come out with that announcement. But we use that time to, again, be an evangelist for this with regulators, both in the US and outside and just continue to educate. So then when we finally launched in 2023, it was not the favorable environment that you have now. It was met with some resistance and some phone calls that came in. But once we were out there and again, we showed folks that this was carefully thought out, that the design principles here incorporated things like compliance and risk and everything else and sanction screening and everything that we really had thought about it holistically, those conversations started to become more of like, well, let's forget about those elements from a regulatory standpoint.

29:50Brett Turner: They just wanted to understand. So how are people using this? What are the use cases? Where do they see the value? So that was a wonderful thing that started to shift in terms of, okay, I understand everything you're telling me, Paul, about how you designed it and how it operates, but why do people care about this? Why are people starting to utilize this? Which was great because that started sort of the education process on, we can't ignore this technology. It could really help and create more efficiencies, etc. But the biggest thing I think I learned from that entire experience, great, the launch.

30:19Brett Turner: That was the easy part. The hard part is, you know, how do you scale this and grow this? Even with the strength and the ubiquity of PayPal is there's so many things that you need out in the market for a stablecoin to actually be a value to someone. Liquidity, utility that we talk about all of the time? What am I going to do with this token? You know, how can I get in and out of the position? How do I hold it? Which chains are supported? That is a full-time job. Like my entire team shifted from what we had been doing before on sort of building this and go to market and strategy to now building ecosystem support.

30:54Brett Turner: You know, which exchanges are going to list you, you know, which wallets are going to support, you know, in which DeFi corners do you want to be in? measuring again the reputation that you want for your token you know in terms of PYUC token but then also the need to have that ecosystem support and the growth so it's a delicate balance there of how much you do on on each side that's why you know eventually when the time at PayPal ended for us and everybody kind of went on their separate ways I actually ended up joining Paxos for a while because I wanted to understand again from an infrastructure standpoint and from a sort of scaling standpoint, what needs to be out there?

31:32Brett Turner: How do you build this? And taking my experience from PayPal and started working a little bit on that, on Paxos with a couple of their products, including USDG, the global dollar network that they had built. And then realized, you know, with all now this news of everybody building a stable coin and they're all going into the markets, the launching part is really, really easy. It's how you create value here is what is the utility for this coin, for this token, and how easy is it for folks and interoperable with other payment methods that they have. And that's the real challenge, right? And I learned a little bit about that at Paxos and started seeing what strategies were working and which ones perhaps weren't.

32:12Brett Turner: And it was a great experience to be able to do that now from an infrastructure standpoint and see sort of, again, other products and other launches that were from Xero to be able to reach some meaningful market capital, but more importantly, meaningful usage.

32:26Paul Bances: Well, that's, again, probably another podcast to dig into, because if you look at now, okay, you're building it, you're launching it, and now you have it. It's out in the wild. People can use it. But then it's like, can they use it? It's like, so what? What now? Is that a little bit of a, if you think of what's going on right now with pretty much every bank, and you can see the headlines, like, if you're a bank, you have to have a digital asset strategy. If you don't, like, you know, there's something wrong, is sort of what's implied there. And that seems to be the case, we work with a lot of banks and they all have now people who are in charge of their digital asset strategy, multiple people, teams in some cases, they're picking partners, they're working through that.

33:04Paul Bances: Is that a little bit, you know, again, it's one thing getting the token or getting some of that stuff, but it's another thing actually making it real and really creating a lot of utility around it, making sure that it could be, you know, fully utilized in the way that the system and the infrastructure utilize today. Yeah.

33:22Brett Turner: We thought about that. Let me go back to PayPal and the unique aspect of why we wanted to launch the stable coin. Part of it was we could automatically build in the utility of the coin because we had the network, right? So just to give you a quick example, today, if you're sitting in Latin America and say you're in Colombia and you need to use PayPal to do a cross-border e-commerce purchase from someone in Europe, you're limited in terms of the financial instruments you can use, you know, because that's considered a cross-border transaction from Colombia. You need a credit card that has international charging capabilities for a merchant, you know, that's run out of the PayPal office out of Asia.

33:59Brett Turner: It's limited, right? So then we were starting to think, well, wait a minute, now there's a potential, and sometimes those type of credit cards are not available to everyone. Well, now you can have sort of a payment instrument, let's call it, that someone can acquire through a local exchange, through local means by converting pesos to PYUSD. And now that Colombian person has international purchasing power, you know, via the PayPal stable coin to be able to buy something from a merchant in Europe, a merchant in Australia, wherever the case may be. We also thought about it from a merchant perspective in terms of settlement.

34:31Brett Turner: You know, we started looking at sort of the normal settlement times for merchants to receive payment from their sales and looked at all those pain points and realized, you know, there's an avenue here, which would be very important for small, medium businesses that are doing a lot of their cash management is we can speed up the settlement time, you know, from once a week to daily, or because it's a stable coin, we can do it several times a day, or you can actually reach a point where you can start settling on a transaction by transaction basis. So we started realizing that PayPal, because of the network we already had, had sort of built in utility, but that was within PayPal, right?

35:06Brett Turner: Now we needed to build, you know, why would someone be interested in using this to send it to the outside. And I think that is the biggest concern now with everybody rushing to build a stablecoin. In certain cases, a proprietary stablecoin, it all depends on what you're optimizing for. A proprietary stablecoin for a particular niche usage, great. But then you have to think of how that transaction ends and then what does the individual do once they receive that token, right? And that's where the investment into the broader ecosystem comes in. For some folks, that will make sense. Hey, I want to use my stablecoin, but I believe my stablecoin can have utility and adoption outside of my garden.

35:44Brett Turner: But others are going to say, hey, it's just an operational efficiency that I am reaching. It all depends on what you're optimizing for. But I think ultimately, the real challenge is going to be if everybody has their stablecoins and there's not a lot of interoperability between these stablecoins, we've kind of gone back to the world that we had before that this technology was supposed to alleviate. You know, we were supposed to walk away from, do you have a PayPal account? Do you have a Venmo account? Cash app? Is your bank on Zelle? No, it's not. We got to go through all of these things. The idea here would be that the commonality would be the payment instrument, the token, and that you can use whatever wallet or provider you want.

36:22Brett Turner: I can use whatever wallet or provider I want. But if you have 200, 300 of these tokens all flowing around, then you're kind of back to the mess where it started, right? I mean, one of the beautiful things about PYUSD, What people don't realize is PYUSD on Venmo and on-chain payments through Venmo now allowed Venmo, which only spoke to Venmo accounts before, to actually have interoperability with a digital wallet sitting anywhere else in the world, provided that they were compatible from a blockchain perspective. If it supported an ERC-20 token, it supported PYUSD, that Venmo customer can now send a payment on-chain through their Venmo account using the stablecoin to a non-Venmo wallet somewhere in Asia, for example.

37:06Brett Turner: That's what the technology is. One of the promises of the technology is opening up sort of those guardrails. too many stable coins coming up now might result in the same sort of scenario that we had before until we figure out some sort of clearing or something in the middle there. But I do believe there's going to be a renaissance period of stable coins, and then we're going to kind of ease on out. And then somewhere, maybe not one to rule them all, but I don't think we're going to have sort of the numbers that we're seeing today.

37:34Paul Bances: Well, it's interesting because obviously PayPal, your former company has been in the news a lot this week. I mean, there's been rumors for a few months. And now you have the big move and big announcement that nothing transacted yet, obviously, but with the rumblings of Stripe and Advent and kind of the play and looking at PayPal. PayPal's stock has been kind of changing a lot, making them vulnerable. And now you've got this play. Just what you'd mentioned, the whole now outside of the PayPal ecosystem using PYUSD to start leverage some of those things, start to cross that chasm a little bit. Is that one of probably many things?

38:09Paul Bances: But one of the reasons why Stripe is really interested there because Stripe now is, it's interesting. They haven't, you've got with Tether and you've got USDC with Circle and then like what's Stripe gonna do? They've been doing a lot in the ecosystem and now you got OpenUSD, so OUSD. So now is that part of the thing that they're looking at too? Are there some things that you know because you're an insider is like, no, there's some real value there and that could be really interesting.

38:36Brett Turner: Yeah, no, I mean, obviously I think first and foremost and looking at it from a payments and merchants and that business, right? And that's where the value is. But obviously I can't help but think, you know, from my side of the world, you know, this is very interesting. Stripe has been, you know, very, very active in the space. As you know, they acquired bridge, you know, for billion dollars, you know, and they have tempo, you know, so they kind of going through all of the different layers, right? They have sort of the settlement layer, the transaction layer of being, you know, sort of the blockchain itself with tempo.

39:06Brett Turner: Bridge is more sort of the orchestration layer and abstracting away some of the complexities, you know, and all of that. And then now, you know, their bridge is behind, you know, OpenUSD, which is a concept that we've seen before in terms of the consortium approach. You know, again, I mentioned Libra that never really quite launched, but the global dollar network at Paxos, you know, was the same concept. What's interesting here though, is it's, you know, at least some of the named participants that went out in the press release and don't know what their roles are going to be. But if you look at that, it's quite an impressive list of folks.

39:38Brett Turner: And I think it's less, you know, about a money grab, although there's a monetization aspect of this where the different participants get to participate in sort of the returns on the underlying reserves. But I really do think it's about creating sort of a standard and interoperability, you know, for folks. And I think I'm excited to see, you know, where that goes. You know, the press release was very light on details, But I'm hearing, you know, towards the end of the year, you know, we might be seeing something. So Stripe has been incredibly active in the space. It would make sense for me and not necessarily whether it's a PYU is deeply or not.

40:12Brett Turner: But again, when you look at it from distribution, when you look at it from utility, you know, adoption and scale, you know, PayPal has sort of just scratched the surface on that. And then obviously PayPal had to focus on a couple of other things in the last couple of years. So it hasn't quite invested as much as they could or should, you know, with a fresh pair of eyes on this from Stripe and saying, hey, how do we finish weaving in all of these sort of digital currencies and infrastructure into what we're doing? It could be quite important as we start to see sort of the ecosystem evolve. So I'm interested in that perspective.

40:47Paul Bances: Yeah, it's amazing to, you know, just being in startups for so long and so much focus is about, you know, building the killer tech, the killer app, you know, you build all these things at the end of the day, like, if you don't have distribution, you don't really have a lot. You've got to have distribution. So it's interesting how that's going to play out for sure. And it's cool that you've been a part of it. Like you were kind of right there. It's, you know, in a part of, you know, the ground floor and kind of working through that and being instrumental and kind of really the build and launch and now we're PYUS and how that fits in.

41:17Paul Bances: And just into the broader ecosystem in terms of stablecoin growth overall. Super cool.

41:22Brett Turner: Yeah. And some of the initial use cases that you're seeing now, we kind of thought of back then, like, you know, one of the big use cases for stablecoin now as I've used to see is in the remittance business, right? So both MoneyGram and Western Union announced, you know, their stablecoins, you know, either settlement with an agent or in certain cases, even the recipient of the remittance can receive the stablecoin into a digital wallet and then decide if and when they go to local currency. That was one of the initial use cases that we had for PYUSD. PayPal owns the Zoom remittance business. So very early on, we did some pilots where we were settling with some of our payout agents in Africa and Asia using PYUSD.

42:01Brett Turner: So that was a wonderful first use case where we showed, hey, there is some value here. There's some efficiency here. We can reduce the pre-funding down from X number of days to be able to settle within the same day. So it was wonderful because we kind of tested that to see is there value here or not. And then you saw the market sort of take off with what Western Union and MoneyGram did. Same on the merchant side. We were one of the first few that sort of incorporated stable coins as a form of payment directly from a merchant to be able to utilize that within your PayPal wallet. So we got to do all of these cool things before sort of the market started evolving.

42:37Brett Turner: but I'll tell you the biggest thing that we learned there, and it's a good transition for future conversations on how you and I connected. And I did realize though that the winner here was not necessarily going to be the biggest market cap and the biggest full, all of that is very important, but it became painfully obvious that you needed all of these other elements to be in place to have corporate adoption of stable coins. One thing is to have a user individual send you a hundred dollars worth of USDC for something I owe you or use it for trading on Coinbase. That's one side. The other side, when we started talking about large merchants, corporates, you know, using it for treasury, B2B payments, all of that, you realized this can't once again sit on the outside.

43:20Brett Turner: This has to be embedded into what they're used to. So all of those elements that perhaps other folks weren't focusing on, rule-based, you know, controls and permissions and reconciliation and compliance and risk, all that boring stuff to certain people was really how you're going to win this space, right? Because the only way you're going to get adoption is by having all of that. So that was also a very interesting thing for us to realize, okay, everything that we held, you know, sort of our thesis in the beginning sort of held throughout that process and underscored again, you need that sort of infrastructure.

43:55Brett Turner: That's why when we built things on PayPal, we abstract away the complexities, You know, users never had to deal with private keys. And, you know, it was very simple, you know, in terms of their usage is very within the app itself, very accustomed to how they were operating within PayPal already so that they can have all those controls in place. Cool.

44:14Paul Bances: Well, we'll close with a little bit of story, a little recap. And then I think that will be that story with a little bit of a segue to the part two, second episode that we do here. But okay, you've done a lot. You've kind of PayPal or PYSD is out in the wild. And now it's like, okay, there's going to be a lot of ecosystem building, use case. I mean, that's going to be an evergreen thing for a long time. So at that point, you being a builder, you shift over to Paxos. You're there for a little while, kind of looking at what next. And then, and that's where we meet. So I'm in New York. I'm, you know, what really inspired me to seeing the, you know, kind of watching this pretty closely, just so much of what, you know, the Travada story and my story has kind of been in, you know, starting Travada is really the rise of data and infrastructure and how that's really going to drive a lot of the automation of workflows.

44:58Paul Bances: And then when you kind of look at AI, it's validating a lot of that. It's around the data. You've got stable coins, really, which is sort of systemic to really the global financial system of how that's going to change. So stable coins has always certainly been really steep more on the blockchain side of it as opposed to crypto, where all of that is sort of big, you know, had the limelight. You look at the underlying blockchain, you hear this from people. It's not about crypto. It's actually about blockchain. That's the thing that's going to be really, really cool. Well, that's all playing out now in spades.

45:26Paul Bances: So it was super interesting, because I think a lot of folks, the stablecoin light, I think was really shined a lot because of Circle and the IPO and the reaction. It was just a meteoric rise, which was awesome. And I think from there, just really digging into this thesis, at least from my standpoint, Trivato side, I'm in New York, I'm talking to one of our investors and kind of pitching some of these thesis kinds of things and really how it intersects. Because a big part of our journey is how can we do this in partnership with banks? And so he's like, hey, you got to meet the Paxos guys. I know them.

45:57Paul Bances: And I know Walter and I know Paul. So the introduction came in. I happened to be there. And you guys took the meeting, pretty ad hoc. I remember coming into the office. I think it was like the same day or maybe the next day. Sure, we can meet. We got a few minutes. You're probably like, I'll take the meeting. Maybe give him five minutes to see what happens here. Is this real? It's like, I'm in. I'm sort of pitching probably this whole crazy pitch about the corporate side. You know, what was your reaction to that? Obviously, that's big shaped of, you know, us now working together. But just from your perspective, how did that all come about?

46:31Paul Bances: You obviously knew, you know, how to translate all that just with your journey. But I'm just so curious of kind of how your initial reaction and then, you know, how that sort of played out and how you see things today.

46:42Brett Turner: Yeah, you know, it's funny you should ask that because I was thinking about that the other day. And it was really, you came in with sort of the right mindset of looking at this space, right? I think one of the mistakes that people make is it's sort of an all or nothing, right? And we do that in this industry all of the time. It's going to completely kill X. Or, you know, even today when we have the conversations, it's stable coins versus tokenized deposits versus central bank digital currencies versus deposit. It's probably a combination of all of those things. You know, extremes usually don't work.

47:14Brett Turner: what I loved about you is that you came in and you said, tell me if I'm crazy, but these are the work sort of, these are the use cases and the workflows that I'm thinking that stable coins can play a role when you start talking about treasury management, cash management, working with banks, etc. And, you know, your articulation of your thoughts early on were right on point, right? There was no hyperbole. You hadn't bought sort of drank the Kool-Aid, but you also had already made the mental leap that realized that there was something there. Usually counterparties, clients fall on one of the two sides where they just come in and they think it's going to revolutionize everything.

47:49Brett Turner: And it's a little difficult to kind of bring them down to normal expectations. Or on the other side, it's a complete uphill battle just trying to explain to this why this matters at all. You're in that sweet spot of realizing this is going to make an impact. Not crazy stuff that we're talking about here. It's everyday pain points, everyday efficiencies. because there's legacy systems out there that are slow, because, you know, I've worked with treasurers and CFOs all my career, so I understand their pain points. And it all just started to make sense. And, you know, from somebody who built a stable coin with the team over at PayPal, you know, hearing a use case that from somebody on the inside that can say, hey, this is exactly where it can play.

48:29Brett Turner: This is exactly where it can add value was very intriguing to me. I said, okay, great. This is sort of the promise, right? You build it first and now you show how it can be used and how it could be incorporated into existing systems, which again, is the same theory that we had at PayPal, right? We have this sort of network. We have what we're doing. We're going to integrate this to improve it. Same thing that you said. This is how treasurers and enterprises run their cash management now and do the treasury management system. How can we improve it by incorporating the technology, stable coins, et cetera?

49:00Brett Turner: So I think for me, it was sort of that perfect union of saying, okay, this is a real world use case, existing pain points. It's not, you know, a solution trying to find a problem is we've identified some problems and we do have tools that can help sort of with some of those problems.

49:14Paul Bances: Well, I think it was fun to me because it was also the like you said, you know, we're both sort of respective insiders into different elements. And we know those elements are going to combine and and be integral with one another. I didn't know a whole lot about, you know, crypto infrastructure and blockchain, you know, a little bit, but not like how this could be so instrumental. And that was the start of the journey a little over a year ago. And I think in some case, I remember it did start with this question. It's like, am I crazy? I kept using that because I really did think maybe I am crazy.

49:46Paul Bances: But I just felt like this has to happen. I don't know how it's going to quite play out. I don't know how these pieces are going to come together. But it has to. This is where it's going. I think I'm not the only – everybody sort of feels that inertia. Everybody knows something's here. I think that what makes this journey really cool is because everybody's kind of learning together and bringing some of their context to what they know. And I think that's what's made this fun and made it in some ways sort of this big collective team effort on what really is the changing of the entire global financial system ultimately.

50:20Paul Bances: Obviously, that's not going to happen overnight. There's a lot that's going to have to unfold. But how everything is going to start to fall into this next planet, how everything's going to stack up, it's going to be different. And it's going to take a little while. And I think it's going to be a lot of fun to get there. So thank you so much, Paul, for that. This is great. I know we, you know, a lot of time transpired, but it just felt like, you know, we were just chatting for 10 minutes. We could probably go, you know, keep going on. But I think a lot of what we're excited about, continue to tell this story.

50:47Paul Bances: There's a lot still to unpack, but great to kind of get started here, hear your story. Really appreciate that. And I think it was fantastic context of where we go from here.

50:57Brett Turner: Great. It's great to be here. And I look forward to the series. Because like I said, it's a wonderful time to kick this off.

51:02Paul Bances: Yep. Well, so we'll wrap that up. Another episode of FinTech Corner. I'm Brett Turner, Paul Bancis, and we'll catch you on the next one. Thank you.