1004. Insights: The stablecoin stack: building real-world payment rails

0:14I'm David Barton Grimley, and on today's FinTech Insider from 11FS, we are talking about stablecoins. Yep, we're talking about those again, but for very good reason, because things are heating up. The global stablecoin market has jumped from 200 billion to 270 billion. So that's a 35 % leap. And monthly transactions have exploded from 750 million to 1.3 billion. Now that 1.3 billion figure is actually quite a significant milestone. Because fun fact, that's about the same volume that Swift is doing every month. So that's pretty significant, right? So yeah, the tailwinds, then they're not just gusts, they're full on gales.

0:56We've got regulatory clarity finally giving institutions the green light in some countries. Best practices are solidifying. And here's the kicker. Payments and trading use cases are actually making money now. So that's right. We've moved on from white papers and hype to some serious real world revenue going on here. So today in partnership with Fireblocks, we are getting practical. How do you actually operationalize stablecoin payments, right? So we're talking architecture, compliance, KPIs, and of course, the gotchas that will trip you up if you're not careful. So let's dive in. Firstly, we have someone who is very familiar with Fireblocks and the work that they're doing in this space.

1:37And that is Ran Goldie, SVP of payments and network at Fireblocks. Welcome, Goldie. Tell us a little bit about yourself and your role at Fireblocks. Yeah, thanks for having me. Great to be here. First time, by the way, on the Fintech Insider. I'm excited. So I guess a little bit about Fireblocks. You know, if you haven't met Fireblocks up until now, Fireblocks is probably the largest platform out there for any company, mostly financial institutions, to build their business for digital assets. So if you are a company like Nubank or Revolut and you want to offer accounts to your users, or if you are a liquidity provider out there or a payments company or anyone else who really wants to start building on top of digital assets, just like stable coins, then 70 % of you are already using Fireblocks probably.

2:31And my role specifically is to make sure that, again, if there is a payments company out there and they have thought about this and they're making the right call and they want to get into digital assets, they want to work with stable coins, they want to move money faster, it's my goal to make sure that they do that on fire blocks. And my other hat is the network hat. So because we already serve more than 2 ,500 different financial institutions, again, those could be the banks, exchanges, trading desks, whatnot, my goal is to make sure that they're all connected and well by the way we'll talk to some of those people on on the show today my goal is to make sure that if you are a payments company coming out of europe and you want to work in latin america for example then we can help you through our network to find the right partner quickly work with them and you know start expanding your business awesome welcome to the pod goldie um and joining goldie we have a fintech insider debut for Anoush Arava Shatian, Chief Product Officer at Zodiac Custody.

3:31Welcome to the show, Anoush. Please tell us a little bit more about your role at Zodiac Custody. Good morning. Absolutely. Very happy to be here and looking forward to a spicy conversation, if we can have one. Let's do it. Brilliant. I head up product over at Zodiac, I'm the Chief Product Officer. What we do, as the name says on the tin. We're a digital asset custodian, globally situated. We are, I would say, our big selling point is that we're bank-bred, bank-bred DNA, bank-bred in terms of what we do, how we offer it. I'm really excited to be here in terms of how we build on that utility, how we build on the network that Goldie just mentioned as well, and how we really think about solving real-world problems for our clients.

4:16So excited to be here. Awesome. It's great to have you. And completing our lineup, we have Lux Tiagaraja, Chief Commercial Officer at OpenPaid. Welcome to the show, Lux. Introduce yourself and tell us a little bit more about your work with OpenPaid, please. Lux Tiagaraja Absolutely. Thank you again, family. And yes, I am also a newbie to this. So it's fantastic to be here. So yeah, I work at OpenPaid. We are currently building what I like to call or we like to call the universal financial infrastructure to help our clients move and manage money globally. We have over 1000 institutional clients.

4:51And previously, we have predominantly been powering the payments, fiat payments that is, for a number of institutions. So we have the digital asset verticals, so we have clients like Kraken, Ripple, B2C2, to your large exchanges, stablecoin issuers, or even market makers. But we also service different verticals like FIs, the CFD vertical as well. And we've recently, in conjunction with five locks, which I'm sure we'll explore further, we're trying to bridge the gap now between the traditional banking and the new blockchain banking and that's obviously via stablecoins. We're processing currently over about 150 billion a year in payments.

5:30So yeah, I am sadly responsible for the revenue number. So I will get blamed when we don't hit it and I will get no gratitude when we do hit it. But no, lovely to be here and looking forward to a spicy conversation. Amazing. It was great to have you all. And yes, I should repeat actually what you what you just said there that the three of you are working together you're cooperating you're part of this network that goldie was the goalie was talking about and i think what's great of that is that you've each got different perspectives from different parts of the stack of how this whole thing um comes together um and we're going to open the discussion by going back to that kind of big headline figure it's it's growing like crazy the volume is going crazy You know, Goldie, I want to come to you first.

6:14Where do you see the growth? Is it regional? Is it all still coming out of Latin America? I mean, that's been the story about stablecoins now for a while. What's powering this? Yeah, that's a great question. I think, you know, maybe before I start answering this question, just to talk about this panel right here, right? So we have Anoush was mentioning that she's from Zodiac Custody, which is a company, and you know, Anoush, I hope that's okay. that me saying this is also obviously backed in a way by standard charter, right? Which is, I think is remarkable that, you know, big banks, you know, global systemically important banks understand that this is an important place to be, right?

6:57And then on the other side, we were talking about Lux and OpenPaid. OpenPaid has been a company that was in a way really revolutionary in the, you know, let's call that normal fiat world. And they've been helping a lot of businesses, you know, that found it hard to establish the proper banking relationships, maybe globally. They were helping those businesses to, you know, to expand, to create more revenue and so forth and are now making the switch. As Lux said, this is on him, right? Let's put it on and now making the switch to digital assets. And I think that those two companies are, you know, some sort of, as you said, it's a tailwind.

7:40It just shows us how we're at a different place in the world. I've been doing this for close to a decade, right? And the fact that we now have a company that's backed by Standard Charter and a company that has already been super successful in the world of fiat coming into this world, I think that already says something, right? So now let's go to your question. You said, what is driving this growth, right? So this growth is really, really driven, I think, by the grassroots. And I think that's how it is really in payments, right? I mean, I think stablecoins really found product market fit early on in trading.

8:16Great. That was like 2014, 15, 16, let's say. This is, by the way, by the time they were just called fiat-pegged assets. No one gave them that cool name, stablecoin. Right. And later, as those trading users actually thought to themselves, hey, this is great. They started, you know, using it for other things. Today, obviously this takes time. Today, almost a decade maybe after the first stablecoin, stablecoins have found product market fit, specifically with businesses and individuals who found it hard to either gain access to a dollar or wanted to move funds faster. And the reason we're seeing growth specifically in the last, I want to say 12 to 18 months is I believe it's a few things, right?

9:06First of all, huge sentiment change in this space. You know, it all started, obviously, you can go to 2024 and you can say, oh, actually, interestingly enough, the Bitcoin ETF was the one that brought this digital asset world mainstream and helped push digital assets in general. But it was really the acquisition that Stripe did, one of the largest PSPs of our world, bought this company called Bridge for$1.1 billion. I think that really made a lot of companies look at this and say, hey, maybe we should start enabling stablecoins as well. And then obviously, as the Trump administration came in, changed the regulation really quickly, actually changed a lot of things.

9:46Obviously, now appointed a crypto czar. Every industry needs a czar, right? So I think with that change, more and more companies are feeling more and more enabled to actually look into stable coins. And this is why, and I don't know if you want to get into this later, the growth of USDC, by the way, recently has been actually faster than the growth of a different coin called USDT. That was probably the largest one. And I think a lot of this is because the Western companies of the world in the US, in Europe, now feel that they can touch these type of assets. They're going to an asset that they feel maybe is a bit more regulated.

10:24So I think that's a big push. And I think, again, all comes from the grassroots, from the people on the ground that want access, faster access to money. So it's becoming institutionalized, more institutionalized with mainstream banks. And that's a good handover to you, Anoush, with that institutional hat and background. Like, how are you, where is the growth, where is the adoption for you? Yeah, absolutely. As Goldie said, right, as you see from a regime change perspective and from a regulatory clarity side as well, the ripple impact that's had beyond the U.S. as well, right? You've seen in the last few weeks as well in Australia itself, right?

11:01Quite, I'd say, a regime that takes its time in terms of forming specific requirements and making sure that those are fit for purpose for the market. There have been a couple of entities that have actually been approved there in terms of having their own issued stablecoins. So you're seeing the pace of change and almost the, if I can say, the FOMO impact as well across the markets and jurisdictions in terms of trying to get the right infrastructure in place, right? Whether that's infrastructure from a regulatory perspective, whether that's infrastructure as well in terms of the tools, right, that are needed.

11:34That goes to the wallet side, that goes to the custodian side, that goes as well in terms of all of the ancillary tools, right? Is the pricing data there? Are the compliance tooling, the blockchain tracing, etc.? Are they all there as well? So as Goldie's mentioned, what we've been seeing is a steady increase, right? Not just in terms of our existing clients, the trading firms, the hedge funds, the PSPs as well, but actually going into different client segments as well that perhaps 24 months ago, 36 months ago, we didn't have access to, right? And you're looking here in terms of specific use cases.

12:10You're looking here at trade finance, right, which is, again, super rife for this type of activity and this type of value transfer at speed, at efficiency, right, and with this optimization. So I'm very bullish about this. I think it's just the beginning. So as it becomes more institutionalized, some of those more complicated financial instruments can then be processed by stablecoin like trade finance, you say, and treasury and all of that kind of stuff, which is super interesting. Lux, I want to go to your perspective from OpenPay looking across the payments gamut. Where are you seeing stablecoin really take off?

12:47Yeah, I think there's been a few things that the guys have also already mentioned. So one, obviously, there was a regulatory clarity that Mika and the Genius Act provided, which then obviously opens up to institutional demand. And I think, as Goldie said, I think someone like USDC benefits hugely from that. If you're an asset manager sitting in the US, which stablecoin are you going to want to mint to buy into a Bitcoin ECF? It's going to be Circle. It's going to be USDC. And they've grown phenomenally well in the last kind of 6-12 months. But then it's also what hasn't changed. Like if you look at over the last 18-24 months, there's probably been a decline in correspondent banking around the world.

13:25You've got end users in Asia. You've got end users in LATAM. You've got end users in Africa who can't get access to offshore dollar banking. They just don't have it because the correspondent banking network hasn't grown as much as it should have. I know that the G20 pledge by 2027, there will be a faster, more quicker route for banking and settlement. But we just, we're not anywhere near that yet. So why would they not trust a stablecoin? And so what you suddenly seen is the shift of the use of stablecoins, which was just as collateral and trading venues like centralized exchanges, to actually a means of moving value across borders.

14:02And that move of that sudden surge in cross-border use case is really what we're seeing at OpenPay. If I look at the verticals we serve, the biggest growth actually has been financial institutions and it's because they're all adopting stablecoins. You know, they are using stablecoins as a payment route in cross-border payment. You've got firms using it as a funding route. So previously where for goods and services, they were accepting euro, sterling, dollar. they now accept stablecoin as a funding route so they now have stablecoin treasury they need to on and off ramp from um you're seeing that in the gaming sector again as a funding route and i think that's the shift that we've only really started seeing um and it's just going to grow tenfold and it's what we're seeing here at open paid it's really those use cases and for me what we finally got and you know i'm not kind of uh boosting goldie's ego uh but we're finally seeing the ecosystem orchestration.

14:56And that's kind of what the Fireblocks network for payments does, right? What you're seeing is, we've got proof that the technology works in blockchain. And what we now need is a key players in the ecosystem bringing the right players together and kind of with Fireblocks is network for payments and that kind of thing. We're finally bringing everyone on the same map. And that really should turbo charge the use cases. So it's amazing. I want to read off some some stats actually that support everything you're all saying. So in Latin America, it's still, I think, very much the lead, I would say from what I can see here, something like 71 % of institutions in Latin are using stablecoins for cross-border payments.

15:33In Europe, it is smaller, more measured, but more deliberate. So it's something like an 18 % of institutions. We still see regulation as a bit of a barrier. So there is some growth there. I want to pivot because you're all beginning to talk about infrastructure and institutional adoption. And I'd like to just sort of set a bit of a grounding here around what do we mean by institutional? What does it mean for the banking infrastructure to take this on? So, Goldie, according to a report that you guys put out, something like 90 % of financial institutions that you surveyed are already running or planning a stablecoin program.

16:19What is a stablecoin program? What does that look like? Right, it's a good question. I mean, look, at the end of the day, it's great that more and more fintechs adopt stablecoins. And, you know, there's an app in Argentina that allows people to hold a dollar in the form of a stablecoin behind the scenes, maybe behind them knowing this. This is all amazing. But if we really want the global financial infrastructure to just move faster, right, and to allow for more sophisticated, let's call that schemes and other types of payment methods, I would say, they all need to adopt this. So the banks need to adopt stablecoins.

17:07So when we say a stablecoin program or be stablecoin ready or whatnot, we actually mean that the banks globally should start looking at this technology as another very valid payments rail. And this is exactly what it is. You know, people, obviously stablecoins right now are super hyped, right? So it's important to remind people stablecoins are faster. Yes. It doesn't mean that they're necessarily cheaper, by the way. and because stable coins are not, you know, they're not magic. They're not the solve for any problem that we have in payments. They're not solving world hunger right now. They're allowing whoever is implementing them to use them as another payments rail to move money faster in some cases and maybe at the same cost in some cases.

17:57And the real value comes, at this point in time at least, comes from the fact that they're so much faster that that speed could actually create some economic value. So I'll talk to, I guess, one of the best use cases that we've seen, which is the importer-exporter use case. I know that Anoush's Zodiac custody is also playing part of those use cases as well. For example, you know, where an importer can pay an exporter, let's say even$40 million if they need to, in a matter of, you know, 10 minutes, instead of doing a swift transfer between two countries that are not the US, which means there are several correspondent banks in the way, which means that necessarily this will take at least a day and a half, two, three days, right?

18:43When that happens, when that importer for the first time pays that exporter 40 million and it takes 10 minutes, that importer will never go back to pay with fiat. And when banks are finally understanding that they actually need to take part of this, they also need to create their own program and provide a stablecoin account where at least business users can actually receive money and send money. Then finally, we will be able to say that this hits mainstream. And what I think will happen, by the way, once banks adopt this, and just internally, I will tell you, Fireblocks started the year with about 40 banks running on our platform.

19:25We're now at about 120. And so this year has really been like monumental in terms of how banks are looking at this. But I think that once banks start providing this infrastructure with stablecoins, then fintechs can build on top of that and other types of apps can build on top of that. And then finally, we'll see this upgrade we're all waiting for. Amazing. And Anoush, so the bank role here is to provide the infrastructure, but also the custody. Where does custody sit within this flow? Yeah, it's a really good question, right? Because there's one thing when you think about infrastructure, right, and providing these rails, and I completely agree, right?

20:03It's not as though suddenly stablecoins come around over the course of the past decade and they replace everything, right? There's very much a complementary flow. As Goldie said, there's very much a, it works in specific corridors and it makes sense. But also there may be some hidden interoperability costs to think about, right? And that's not just interoperability between chains, but also there's a lot of different things. also between off-chain and on-chain, right? All of the multiple intermediaries that the gents have spoken about. When it comes to the custody side, here's where it gets a little bit tricky.

20:36If you think about the majority of the banks that are out there, right, they have to comply with Basel requirements, right? They cannot typically hold assets. If they do hold assets on balance sheet, you know what that results in? A massive capital penalty to them, right? So, So in terms of how you look at it, right, I think it's incredibly, incredibly important that banks do have a stablecoin strategy. I think what they need to do here is think about how are they enabling these end use cases, right? In addition to some internal use cases, but more so actually the end use cases. And I think the import export example is a really good example of that, right?

21:16It's about making sure that the methods and the rails and all of the underlying foundational infrastructure is there. and it's there at scale and it's there at performance and it's there in a compliant manner as well. Amazing. And I guess on ramps and off ramps, I suppose, are a really important part of that, right? Because if you don't have access back into the dollar quickly, then it's going to be difficult to convert out, right? It is. It is. It is. And one of the areas as well, I think it's really good that Goldie pointed it out. So as you said, those are areas of cost, right? You can only incur that cost if it makes sense, if it's got economic value, either through the speed of the settlement or through the overall cost of the transaction as well.

22:02And I think this is where it's getting quite interesting when you look at specific programs that may be out there as well. And one of the things that we do, again, working with Fireblocks, working with major stablecoin issuers as well, is thinking about how do we look at this and how do we incentivize usage? How do we incentivize these rails being used such that the prohibitive costs of, let's say, custody, they aren't involved there, right? And I think you're going to see more and more of that kind of value transfer, I would say, where you see more of an incentive towards making this kind of infrastructure much more accessible as well to remove those disincentives.

22:38Awesome. And Lux, how are you seeing your customers, you know, utilize these rails and bring on stable coins in the mix of all the other different types of payments that they can accept and use. Yeah, I mean, we're seeing it. I'll be honest, it really depends which vertical we look at and really kind of this strategy. Like, you know, from a trading company or a trading shop just doing on and off ramping, that's the most simple use case that we all sort of know very well in this space. But we're seeing it more in payroll, which is something new, right? Which is a great thing when you think about these large global organizations who have got employees all around the world and they have to make their end of month payroll why why use swift when it takes two three days and there's hidden correspondent banking costs when you can do it via stable coins and it's there within minutes um and the costs are very visible we're seeing it definitely in remittance uh you know we know how big the remittance market is and we when we think about what the costs of remittance costs for 200 are they've actually gone up since 2023 which which seems completely anti-illogical when we think about where banking and payments have got to, but yet for someone to send$200 back home, the costs have gone higher.

23:53For me, that's really been two of the big use cases that we are seeing. And really, it's then a function of, I guess, macroeconomic events. As a previous FX trader in my previous life, you look at certain currency volatility, you look at one-year vol on Turkish lira. Or would you feel comfortable holding local currency in Turkey when it's probably volleys around 15 when you could hold USDT, USDT, RLUSD, whatever it may be, any kind of dollar-back stablecoin? It's that kind of use case we're seeing. And as our clients really become more global and a lot of the institutions we have at OpenPaid aren't just a European entity with European clients.

24:34It's usually a European firm with clients all around the world. It really comes back down to that underbanked population that's out there. So we've got a European client who have got clients in the Philippines, in Cambodia, in Indonesia, or we've got them in Mexico, and they want to send dollars in to buy goods and services. That's where stablecoins come in. It comes in as a payment route. And as kind of Goldie mentioned, that's really been the key shift for us is that blockchain is now a payment route. And that's where we're seeing the biggest shift on our client base. And I want to say something else.

25:07And, you know, Lux, you remind me this actually. Actually, two things. One, you mentioned Turkey. Turkey is super interesting because right now the most common use of dollars in Turkey is actually USDT. You can actually, if you go and spend some time in Turkey right now, you'll see that people are paying with a stable coin literally to just buy coffee, which is amazing. The second thing is, this is something, you know, Lux is our, I guess, Lux is the industry's FX expert. This is how I look at him, at least. And he mentioned Turkey and the volatile currency. See, a good example for how stable coins could, in a way, bring us to, I don't know, an easier world is there's already a stable coin called by Lira, right?

25:56That's actually a Turkish Lira stable coin. So even imagine that you still need, David, maybe you still need to hold Turkish Lira for some reason, right? But then, just what Lux was pointing out, maybe then you decide that, you know what, for the weekend, I want to hold that in dollars. or maybe mid-weekend, you actually want to turn that into dollars. With the current system, you cannot. But if you're holding a stablecoin that's a Turkish lira, you could actually do, and again, I don't want to give too many complex notions here to the audience, but with a Turkish lira-based stablecoin, you could actually do what we call on-chain FX and change that to a USD stablecoin during the weekend.

26:41something that you could not have done probably today with, you know, your fiat currencies. And I think, you know, I always go back. This is what we want for the future. We, you know, the people on this podcast right now, we're not Bitcoin maximalists or maybe we are, but it doesn't matter. That's not what we're talking about. We are, we're all about how are we upgrading the financial ecosystem so that businesses and users could do more just like the communication infrastructure has been updated. We're still making phone calls, but now we can do video calls and conference calls and whatnot. That's how I think we're all looking at it here.

27:18Yeah. That's a wonderful way of framing it, Goldie. And I should say the weekend stuff is very important, right? Because if you're running a global treasury operation, it's the weekend that kind of stuffs you up, right? So all of that after hours trading and weekend stuff is extremely important. Just on that note, we're going to take a quick pause here for a break, but don't go anywhere as we'll be diving even deeper into stablecoin adoption with our excellent, amazing panel here after the break. Hey folks, David Breer here, CEO of 11FS. Here's something you might not know about me. I get a lot of people trying to impersonate me online, fake profiles, scam emails, the lot.

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