The Coming Explosion in Stablecoins: Trillions Will Be Tokenized

25:40And so there's a lot of twists and turns and you never know exactly what kind of boomerang effect you get. It will certainly be the ultimate irony for kind of the choke point 2.0 if the companies that were choke pointed actually end up being the winners because they learn the lessons that no one else could learn. Are you starting to see corporates using stablecoins? I've just, you know, because for me, there's many of these multinationals that have all sorts of payment flows everywhere. They pay enormous amounts of banking fees. There's a lot of restrictions. So if you're a metals and minings company, you're in Angola and you're in Tanzania and whatever, and you need to move money around, are you starting to see the rise of corporates yet?

26:19Definitely. There's many examples of this. There's a couple of different elements around stablecoins. When we talk about stablecoins, everyone just says dollars. And I think that's rightfully so because it's the vast majority. I think we have the largest stable coin outside of dollars, and it's a gold stable coin, and it's still less than a billion dollars, right? So it's mainly dollars. And so why do you need a dollar stable coin? Well, because everybody wants a dollar, and it's really hard to get dollar bank accounts, especially if you're outside the U.S. Even in the U.S., by the Federal Reserve's own studies, 20 or 25 percent of the American population is unbanked or underbanked.

26:54So why do you need a stable coin? Because you don't have a bank account. Why do you need a stablecoin? Because you're outside the U.S. and you don't have access to a dollar bank account. Why do you need it? Because you need to be able to move money in real time. Maybe you're a trading company. Maybe you're doing remittances. You know, you're a person in the U.S. and you want to send money to Mexico. You need to move not in three days in high fees. You want something that's immediate. The other reason could be because you want something that's programmable. You know, you're getting to this agentic economy that everyone's talking about.

27:24and you write about so much. How could you have an agentic economy without having a stablecoin? Having something that's programmable. Mark Andreessen has said software is going to eat the world. And if that's true, and I think it is, software is going to eat money too. And what does software eating money look like? It's a stablecoin. It's not the way the current money system works. So there's so many examples of where people would need to use a stablecoin versus the current rails. No dollar access, slow dollar access, no bank account access programmable usages and so some big examples of that are people paying suppliers in other countries in dollars and now they can sit there and hold dollars and not turn into some local fiat where you have a currency that is unstable and depreciating which most do against the dollar over time even though you know we're always worried about the u.s debt load which is unsustainable of course it's still not as bad as most other countries that you could be living in and so all of those things have pushed the need for either corporates or for consumers to use dollars and the tam is huge here you're maybe at 22 trillion of m2 today you have dollars there's 100 trillion of global m2 uh it's probably growing what do you think eight or ten percent a year i mean you write about this all the time in five years you're talking about like 150 trillion dollars of m2 in the world and you know 30 plus i mean you know you're not gonna have 250 billion of stablecoins, they're going to have, you know, trillions, maybe tens of trillions of dollars of stablecoins, which is, you know, a huge shift that's going to happen in the world.

29:02And even Scott Besson understands another old long term GMI person. He understands that you finance the deficit by the stablecoins because you're basically moving out the euro dollar market to end users all around the world. See, that's exactly what it is. And I don't often get into like the intricacies of the plumbing around euro dollars and stuff, because not everyone understands, so it's always so fun to talk about it. I think that's exactly what's happening. So central banks are selling dollars today. They're selling dollars. They're actually buying gold. They're doing other things. But you know who wants dollars?

29:38All the individuals in the world. They want dollars. And you can't get it. But with a smartphone, you have 85 % of the world penetrated on a smartphone. Maybe, I'm going to guess, less than 5 % of the world has access to a good dollar bank account. And, by the way, only 6 % or 65 % of the people even have access to good bank accounts in general. And other currencies. So you have this huge need to go from 5 % dollar penetration to 85 % or 90 % penetration through a smartphone. You can go directly to the end user. Dollar is a product everybody wants. It's just being delivered in a way that nobody can use or get access to.

30:14I mean, just think about that for a second, right? I mean, everybody wants this. You can't get it. And, you know, stable coins is the solution. People don't realize most of the dollar supplied to the world actually come through the Japanese banking system, a bit of the Korean banks. And it used to be the European banks until they completely destroyed themselves. All the dollars come through those systems because they get direct access to dollars. And so it's really hard then if you're a Filipino to get it because you don't have direct access and your local banks don't either very easily. They have to go to the Japanese banking system to get it.

30:47Exactly. I mean, the layers of banks, you know, maybe people understand this. Well, why can't I get a dollar? You're in the Philippines or something. The reason is you're that bank and they probably have some small bank. Maybe it's a big one that needs to go to another bank, probably in the region. And then they might go to a U.S. bank and that U.S. bank might be moving the money. And that might be like a really big one might be moving money from one of the smaller U.S. banks. And so you could have, you know, maybe it's only two hops, but it could be five or six hops. many days, many fees, lost interest, as opposed to instantaneous.

31:19I mean, a stablecoin is moving 24-7, which is important, not just 9-5, but it's also moving instantaneously, virtually for free, and it's programmable. And, you know, this is a big shift because, really, there's nothing special about financial information. It's regulated and very valuable, but it's just information. It can be turned into code, just like your email gets turned into code, just like this video call is turned into code. there is no specific reason why it needs to move slow. It's not like a physical bar of gold or some cows or whatever, a piece of land. That's physical. Actually, money and financial information is not.

31:58So the idea that it's moving less efficiently than how you get mail, physical mail, or how Amazon can deliver you toilet paper to your house is bananas. It doesn't make any sense, right? I mean, why can you get toilet paper in two hours, but it takes you four days to move a dollar that isn't anything except for electronic? Here's another big one. Another long-term GMI guy hit me up and said he was running treasury trading and everything else at National Australia Bank, Drew Bradford. And he's like, well, we've been developing stable coins infrastructure because the US is going to T plus one settlement for equities and everything else.

32:38But if you're in Australia, you basically got another T plus three settlement for FX. And they have to go through the Japanese banks to actually make the payments. It's like we've got hundreds of billions of dollars of the Australian economy tied up because of a settlement. So we just use stable coins and we can settle instantaneously. It all goes away. By the way, that's exactly right. You know, the FX settlement is basically T2 or T3. you're now selling equities in T1. You know, there's this huge capital drag as a result of that. And, you know, lots of Asian players have exactly brought this up and basically said, well, we need to use a stable coin so we can, you know, stop trapping all this capital.

33:17And it's not just capital trapped in like equities trading or FX trading. You know, it's trapped throughout the whole economy, you know, all over the place. Everything that you want to do, T1 or T2 settlements, you know, by our own estimates, it's probably trillions. And everyone's taking that interest from you. You don't realize, but everyone's taking a scoop of the interest from trapping your capital. That's right. And if you basically said, and I think the accurate number is somewhere between 500 billion and a trillion dollars is trapped. You know, that's a lot of money each year. That's 50 billion to, you know, more more money that is lost to different firms.

33:54And of course, getting put into maybe a frictional middleman. And I think you're going to definitely have changes that will happen to the capital markets that tends to take a little bit longer because, you know, you really solve these problems at the edges where that's where disruption happens. So here's the way the current system isn't working anymore. And we kind of went through a bunch of those ways. And the system's not working. You start to build up expertise to solve the problems to get to scale. And then you can go in and solve some of the really big, more mass market problems because you've built up the expertise and the capacity to solve them.

34:28How are you thinking about fungibility of stablecoins? Because they're being built across a number of different chains. How does that world figure itself out? Because you can't have to check what kind of wallet do you need to take a payment from somebody because they're doing it on Solana and you're only settling on ETH or whatever it is. How are you thinking about that? We're still very early days in stablecoins, precisely by what you described, because we're even sitting here talking about chains in some ways. You know what I mean? It's like sitting here. It's not a perfect analogy. It's like talking about what database.

35:01Do we have any idea what database all this information is moving through between you and me right now? No. And why would we? It's completely superfluous. Now, somebody knows the answer to that. We just don't know. Just like no one knows how their smartphone works. Somebody does, but you don't need to know. What you're trying to figure out is what problem can you solve? And it should be, I want to move instantaneous payments. And you shouldn't have to think about these other aspects. And partly, the legislation that's passed in the U.S. goes some way to making that possible because it's setting consistent reserve requirements and regulatory requirements.

35:32That's not going to make everything perfectly fungible, but it comes pretty close. The whole idea is that a stablecoin should be essentially the safest bank in the world that you're trying to create. It's basically, in many ways, a narrow bank, but it's not even a bank. You send money to Paxos, we buy T-bills, it's held in a segregated account. If Paxos fails, you still have it. So when you have a Paxos stablecoin, and by the way, this is different from Circle and Tether, when you hold a Paxos stablecoin, you have an asset, which is the U.S. government debt, which I guess is a liability. But nonetheless, you own the asset.

36:03You don't have a claim against Paxos. You're not loaning money to Paxos. When you own USDC or own Tether, you're loaning money to those companies. They are only licensed or not even regulated in many places. and so you're giving them a zero loan, a zero dollar loan, zero interest rate loan. And that means you have a commercial liability. It's a debt instrument that you're holding when you hold USDC. It's not an asset. People don't realize that. Nobody realizes that. And I mean, it's been a little bit frustrating because that was the whole reason why we went and got the trust. Because when you, we hold your assets, we're putting them outside of Paxos's name.

36:42If Paxos goes bankrupt, you still get your assets. That allows it to be treated as a cash-in-cash equivalent. And by the way, this is exactly what the legislation does. That's why I think it's great about the legislation, is it's codifying the rules under which we already operate as a New York trust or in Singapore, regulated by the MAS, or even in Abu Dhabi by the FSRA. They require it to be done this way. But believe it or not, neither Tether nor Circle are actually regulated. They have licenses, and so you don't have these types of protections. And the legislation enables that. It still won't create perfect fungibility, but it should come pretty close.

37:17And what you have is T-bills and overnight repo over-collateralized by treasuries backing a stable coin. And when you do that, you basically are making it as safe as you possibly can. Maybe the maturity is like two to three weeks or something. Basically nothing on the whole thing. You have half of it overnight and then half of it spaced out over a month. And that's the most liquid thing. That's the safest dollar in the entire world. It's far safer than dollars in a bank because you're just holding T-bills in somebody's name. And I think that's the really interesting thing is you can now make the payment system.

37:51Which was the idea when I tried to start that world's safest bank, it was to have a non-fractional reserve bank that just held T-bills. And this is an electronic version of that. That's basically all a stablecoin is if you build it correctly. Now, you can start to add other assets in. Well, I'll just put a little bit of gold or a little bit of Bitcoin. And by the way, that's fine, but it's not a dollar stable coin, you know, which is how Tether is set up or, you know, hey, I'm going to, you know, you know, put a bunch in banks and I'll be over the FDIC limit by a lot. And like if it fails, I have a problem like Circle did with Silicon Valley Bank.

38:24So those are the problems that can be manifested if you're not operating this correctly. But when you do operate correctly, it can be treated as cash and cash equivalents under accounting, moved very easily, and you've now segregated the payment system from the banking system. and you take the payment system, and it's not tied to fractional reserves. You can actually have a far safer financial system now when you have a fully reserved instrument that people are moving around that you then build the leverage on. And that doesn't exist today because of a lot of legacy reasons. They're good reasons, but they've created this too-big-to-fail system that is not just for too-big-to-fail.

39:03It's even too small to fail at this point. Nobody can fail. you couldn't even allow Silicon Valley Bank or anyone else to fail no one can fail by the way there is no such thing as a failure in a bank like the regulators come in and they divide up the assets I mean it's like there's no such thing as a bankruptcy for a bank but you should have an ability for the shareholders and even the debt holders to have a loss but you can't when the whole payment system is completely tied together it's like a ball of thread you can't unwind it This is a way to unwind the Gordian knot of the financial system through stablecoins.

39:39And I think it could be a hugely powerful thing for the U.S. dollar because we have a lot of debt to issue. Everyone wants dollars. I don't know if it's a good thing that you can create enormous demand for U.S. dollar debt because it allows you to be more unsustainable. But on the other hand, you know, it really does probably reinforce the ability of the U.S. to dollarize the world, which is ultimately good for our values and for the economic system that we're promoting. Yeah. And on the flip side, we all own Bitcoin and that goes up when they keep debasing the currency anyway. So the kind of whole game is to be played here and it's all set up the infrastructure for that.

40:16I've always thought it was a transition to a new system. And as part of that transition, you're debasing the old system. But you've got the life raft, which was Bitcoin. And now you've got the way of changing the system to the better to get rid of the flaws. Here's a question for you that's interesting to me. And I want to get your thoughts on it. Circle is trading at an enormous valuation suddenly. And to me, it's either because everybody's an idiot or we're missing the fact that there are network effects at play here. And I'm just thinking for you as well. You're talking about the infrastructure to build on, but it's what builds on the network that creates the actual value of the network in the end.

40:58Is that what you think is going on here? that people are extrapolating out? I think there's definitely elements of that. I mean, it's very interesting to see at one point, you know, it had, I think, a bigger market cap than Coinbase. It's got a bigger market cap than its stable coins. Yes, I mean, it's like, yeah, I mean, so you're certainly discounting an enormous amount of growth and network effects and the ability to monetize those network effects. I mean, that's what the market has to be doing. You know, it's always hard to, like, comment on exactly, like a competitor where the market is. For you, in your choose, you either think, okay, it's a bad signal and people are just getting delusional or, okay, if the market's telling us there's potential, a lot of network effects, then what does that mean for Paxos?

41:44By the way, I think it's probably both. You know what I mean? Just like anything, you know, the markets get like over exuberant and you have technical effects because there's so much of the supply is locked up and, you know, you can't even get a borrow and other of things. So like, you know, it doesn't take a lot for like it to become almost like a get a meme stock effect for periods of time. So there's probably some elements of that. But obviously, it's also telling us something about network effects, in my opinion. And I think that's also in some ways showing how valuable a network is and why you want to actually have it set up in a way where you have infrastructure enabling the network where the economics are shared amongst everybody, because it's going to be so valuable.

42:26You want to be able to participate in it, and so you want there to be something that is neutral. And I think that's what we consistently hear from people. That's why MasterCard joined, and that's why Fiserv or WorldPay has joined, and Robinhood, lots of big companies that use stablecoins or are in payments. They're trying to think about, well, how do we make sure that we set up the right foundation if this is really going to be as transformative as everyone is talking about and as they think? And, you know, I certainly think that if you don't set it up the right way, then, you know, it would be really unusual situation to have one or two firms take all of this opportunity from very large incumbents that could very easily sit here and adopt something that would change that.

43:16And also, you know, to your point, the reason, you know, one of the reasons that I got into all of this beginning was because of the Cyprus Bank bail in. When you realize the dollar was not your dollar, right? It was lending money to the bank, which is what is happening with Circle and Tether. And people aren't realizing they're repeating the same thing. And this is a really important point that doesn't matter until it really fucking matters. And by the way, it almost did. You know, when Silicon Valley Bank failed, they were the single largest creditor,$3.3 billion to Silicon Valley Bank. And, you know, essentially, if the government had bailed out Silicon Valley Bank, which is bailing out Circle, they would have failed.

43:50And, you know, you know, that's a kind of an amazing thing. But everyone, the network effects are so strong and there are so few alternatives that, you know, to be able to push through that effect. But that's why the legislation is important, because it's getting rid of this regulatory arbitrage that they're both existing in to this day, which is that they're basically issuing zero-cost debt and no one fully realizes that that's actually the implication when you hold it, that you've made a loan to it. But if you went on Coinbase's books and you look at their 10Q, guess what? It shows a loan to circle.

44:26It doesn't show USDC. It's a loan to circle. That's what USDC is. And by the way, that's the same thing with Tether. And it doesn't mean that they're not fully backed. It doesn't even mean that they're going to fail. It just means that your relationship with them is different than it appears. And the whole point is legislation and the way we're running things are going to shift that dynamic. You know, I mean, what's so interesting about a dollar stablecoin is ultimately it's a wrapper. And the dollar is a wrapper, I mean, theoretically for T-bills. You could make it a wrapper for a lot of other things like Maiden Lane and a sieve and like, you know, corporate debt, which the Federal Reserve has periodically put onto its balance sheet.

45:11But, you know, it basically should just be T-bills. It's actually really simple. By the way, it used to be a wrapper for gold. And it was a wrapper at$19, then$23 or$24, and then$30, whatever it is, and they got up to$43 or something. You know, you can always go back to the dollar being a wrapper for something else. So, like, going back to, like, your endgame point, like, how does this end? Like, you could very well end where the dollar is now a wrapper for Bitcoin and gold and T-bills or just one of them. whatever it might be, or maybe not, right? And, you know, something else altogether happens.

45:42But, you know, a dollar is just a wrapper. That, I think, is where the network affects. And it's the second side of your business, which is tokenization, right? These networks can be used for tokenization of anything. So, i.e., anything can be wrapped and moved around the system. And I think this is still not fully appreciated yet. Yes, FIG are trying to do some stuff. People are doing stuff. But people have no idea the size of these markets, which is the equity market. The DTCC do, I don't know, four quadrillion dollars of settlements. Yeah, they hold$130 trillion or something of assets. It's great.

46:18They literally hold like 15 % of all the world's assets in something no one even knows. It's amazing. They do a good job at doing that, holding it. Well, think about this for a second. If a dollar is just a wrapper, what happens when you tokenize the thing that it's wrapping? So why couldn't the U.S. Treasury just tokenize U.S. debt and issue it on chain? And then what is the dollar? It's a smart contract that anyone could just drop treasuries into. And, you know, I mean, like, so I'm, you know, I think there's like second and third order effects that maybe the equity markets need to also be thinking about.

46:55because once you start tokenizing the underlying reserve asset, which should happen, like there's no reason why the treasury needs to have, you know, some intermediary do it. They could just have it happen themselves. And once you do that, anybody's holding treasuries, goes to a smart contract, they're tokenized, you put it in the smart contract, and out comes a stable coin, right? And so like, and, you know, you start to think along those lines, you know, it's not just about even one issuer anymore. It'll be about many issuers. And it'll be about like, well, what is what should you pay for that?

47:33Nothing. Zero. So that's the question. What should you pay for this? How long is this arbitrage of, you know, people like Tether's the world's most valuable company. No, it's borrowing money at zero interest and receiving interest. You know, it's just it's just an interest rate arb in gigantic size. So it's free money. Yes. But that's got to get competed away very soon, right? Because you guys have and several others have got kind of interest bearing stable coins, but you've not been allowed to use them in the US. Yes. Or, you know, you set up something like the global dollar network where you can pay out the interest, at least to the intermediaries.

48:10I personally think a interest bearing stable coin is exactly where you want to get to, because you shouldn't just be democratizing access to dollars, which is what a stable coin is doing. You should be democratizing access to the risk-free rate. In what world should the wholesale rate be 4.25 and the retail rate is 0-2 %? There's no way that, and that should be completely compressed. In every other industry the internet has completely compressed the spread, and if you actually think about lending money to a bank, especially once you're over a$250 ,000 FDIC limit, you are taking on credit risk.

48:43You should be getting paid more than the risk-free rate unless you're getting services that you value and are willing to take less. But you should be able to make sure that everyone gets the risk-free rate as the base rate, not just very sophisticated people. I actually think it's profoundly undemocratic and completely a poor social and economic policy for us not to make it easily and readily available, which you can do with the new technology. It didn't exist before. That's why it was that way. Now it should be available. But the current stablecoin bill doesn't make that possible. maybe the market structure bill will.

49:19And I think when you get to that point, in the case of Circle or anybody else, Tether, they're doing a great job of going out to people who don't have any access to dollars. You're like the Maslow hierarchy of needs, the monetary Maslow hierarchy of needs. You're like, I just want dollars. I don't care about anything else. Getting dollars to me is better than nothing. You get dollars. And you might not be getting interest back from the issuer, but that's okay. You have the dollar. and maybe you can go into the DeFi ecosystem or the centralized exchanges and they'll give you a yield on it anyways.

49:52And so you're kind of able to mask, at least for some time, that the issuer is keeping a big chunk of interest. But I wonder how long that will last for. And in certain cases, you see there are really big deals that are being done with individual distributors of stablecoins because there is pricing pressure that's creeping in. I think like the V2 or V3 model of stablecoin should be all the interest is going back to the end user. Right. I mean, you know, and maybe if you have a retail user and like, you know, I don't know, Chile or something and they can't get dollars and, you know, they're fine with no interest.

50:29You always have something that you're collecting, but it should, I think, pretty quickly become a Dutch auction to the risk free rate. The other thing that I've talked about for a long time, in fact, when I first ever wrote about blockchain, it was the idea that like OTC options, that whole market, because that's just a smart contract with collateral attached. And it's a big ton of it had to go to the exchanges in the end because it's such a big fucking mess. I just don't see why all of that doesn't get tokenized because we've essentially doing it with perps and instant settlements and everything on on DeFi exchanges.

51:08And again, that's another quadrillion dollar market. I think that's exactly right. I mean, when you talk about these kind of complex structured derivatives and structured products, they're just smart contracts. It's just that they're not on chain. So you need some centralized intermediary to say, like, here's what's going on, because you have one person and you have another person, and what's the source of truth? Well, by the way, that's the whole point of the blockchain. Now, it hasn't gotten to the point where it could provide enough utility compared to an exchange change because everyone's already plugged into it.

51:43And, you know, there's a lot of capital tied up there and other things. But as you solve other problems on chain and you build up scale, it's inevitable that everything will migrate on chain. It's just a timing set. I just feel like we just break apart all of these parts. And the issue is at the center of the financial system, nobody knows who owns what. And there's a ton of capital tied up. And as you start peeling back all the layers, you start freeing up capital, and ownership becomes a real thing as opposed to a false thing. That's right. Yeah, because you just have all these layers of intermediaries.

52:16And in order to make things move, you had to create joint ownership, just like everything at the DTC is held in this company called CD &Co, which most people definitely don't know DTCC, and they probably don't know CD &Co. But basically, everything is held in what is called street name. And so you can't have anybody fail because you have mutualized ownership of everything. You don't own any of the underlying stock in your account. You'd have to pull it into your account. And it's very complex. Do you remember when I went down this rabbit hole and I found out that, you know, just speaking to the New York Fed and the DTCC and Euroclear and the ECB, that at the center of the clearing system, there is no client segregation.

52:59That's right. If anything goes wrong, the Fed lends the money and takes collateral, which is anything. And you don't own anything. Nobody owns anything. As you said, it's all mutualized. I think we got to the logical conclusion of scale. And all of history is essentially about bundling and unbundling, empires and technologies. You kind of bundle because you're getting returns to scale. And then you get so big and it becomes so fragile and something disruptive comes along. that you then have to unbundle everything and then you rebundle again. And I think that's why everyone is pushing decentralization in so many aspects of society because we hit the end of centralization creating returns to scale, and now it's creating actually negative returns to scale, most likely.

53:45And you need to break things apart. You have new technology that comes along. That's disruptive, and nobody necessarily likes it, but we're getting used to more and more disruption. But it still has never come for the financial system. It came for a lot of other industries. for telecom and media, whatever. It's coming for the financial system. It was held back by regulation. But, you know, even kind of the most aggressive and difficult environment of the Biden administration still didn't stop this from moving forward because it has so much truth to it. You know what I mean? Like that is a sign of like how strong the truth is that even trying to fight it was still fighting the tides of time and the tides of change.

54:26And so decentralization is going to be such an enormous unbundler of value, whether it's capital that we've talked about, ways in which people are going to be able to get access to products, some really big changes. Are you seeing when you're speaking to clients and new clients, them thinking about what chain their stable coin exists on? Definitely. And is it my working hypothesis, and you'll know better than I will, is that EVM seems to be the most obvious because it's got the largest, broadest ecosystem. And I've been saying this, people like Ethereum's dead. I'm like, I don't think so. I think the financial system, you know, no bank I've ever been into ever has had an Apple computer.

55:12The whole fucking lot is Microsoft operating systems. You know, it's like they do it. Yeah. Well, it's such an interesting way of approaching it. On the one hand, like no one should really care about like the underlying chain because it's just like, what can you do and what speed can you do it in and what's the cost? And what is the privacy and what is the anonymity? And so I actually think we're very far away from like being at the final word of chains. Of course, there are network effects. So this could not shift. Yeah. And we shouldn't and we won't even know what chain is like. I don't know what what Wi-Fi you're on.

55:50I don't know anything what computer you're on. It makes no difference. We should never know. Exactly. And so there's a couple of things to unpack with what you just said that I think are interesting. One is part of the reason why you've been able to get such adoption is because it's always been pseudo anonymous, which means that, like, you know, my identity and your identity is masked. But you can see exactly what's moving and you can more or less trace it back, you know, because there's some place that you had to get onto the world. And like, you know, these companies do graph analysis and you can pretty much figure everything out.

56:20but could you put a whole economy on a chain where you don't have privacy of the transactions like say you're JP Morgan I'm Goldman Sachs like you can't have the value of our movements constantly be shown even if you're you know grossing and netting everything up and then do that like HP to like some supplier and this thing and that you can't this is a very difficult thing to imagine so somehow you're going to have to begin to add privacy in which ironically not having privacy is what made this reach an adoption curve. And now the next question will be, how do you enable privacy? I think that's one thing.

56:53The second thing is that ultimately these chains are programmable databases. You want that to be as cheap as possible, right? You know what I mean? Like you want your AWS to be as cheap as possible. You don't want the token to go up. You want it to not go up because if that's what you're paying for access to the network in, you need it to be cheap, Right. And so when we talk to companies, they're always concerned about like, well, especially in payments, how to make this as cheap as possible. So you want to go cheap. You want to go one direction. On the other hand, some people say, I want to have this be as secure as possible.

57:24I want to have this be as decentralized as possible. And that's where you see people go towards Ethereum. And, you know, of course, then there's Bitcoin, which is a whole different animal, because that's really an asset as opposed to a chain. To go back to your point, it's a really interesting point. Right. The token price is essentially the value of the slot on the blockchain. Now, the more popular it is, even if it's cheap, it still means it goes up in cost. That's right. That's the perverse effect here is like you're just a layer on top of AWS. You want to pay as little as possible for basically the program you're running on top of AWS because every chain is running on the cloud.

57:59So, you know, if you want your chain to actually be cheap, you don't want it to be expensive. but of course you want it to be widely utilized and you want people to hold the token and have an incentive for like using the network so you're like you have a very tricky balancing act and so it's not just about price with like an l1 or an l2 or even l3s or whatever it is because if the token is valuable you get more security and people build more facilities and services on top of it so the network's more valuable to you as well so yeah it's really interesting i hadn't thought of it that way and you know but then you're like you know i don't want to pay 30 every time i do a transaction on a chain you know that doesn't work or twenty dollars or something you know you can't have the surge effect so you know there's a lot of balance and that's why um i still think it's pretty wide open for l1 l2 um uh development um but clearly the you know whether it's ethereum or obviously solana has done an unbelievable job too of like becoming the other chain that everyone talks about um lots of things being built on bitcoin but we're still so early um and those early network effects might be valuable but you never know if that's the friendster myspace to the facebook that's coming um but maybe not you know i mean like you just can't quite tell because we've gotten to a lot of scale on one hand but again 900 trillion dollars of assets and you got like three trillion dollars of crypto and you got like 250 billion dollars of like dollars of real world assets pretty tiny pretty tiny and so you know it's absolutely possible that everything we're thinking could completely invert.

59:34I think this will hopefully this conversation will get people thinking how actual large the use of blockchain will be over time and in a multi-chain world. And this is the one thing I keep saying is like it's a$3 trillion asset class today, the blockchain, the tokens. And it's going to 100 trillion in shorter time than anybody imagines. Just because they're going to use, there's 900 trillion of assets, plus all the derivatives and everything else. There's quadrillions of stuff that will end up on chain that will accrue value to these chains. So of course, they're going to be worth 100 trillion plus.

1:00:07Well,$900 trillion is just the assets. That's not the derivatives and everything else like you were saying. And, you know, I also think what we didn't touch on is that crypto isn't just about like a store of value or like a chain mechanism. It's also a whole different way of being able to create network effects and actually change the way in which people work together and live together and operate together as communities. It's a coordination layer. Yeah. So it's a whole coordination layer. And so, you know, I don't know. I was talking to one, a DeFi protocol in Solana, and they were telling me, guess how many assets they add a day?

1:00:45Just pick a number. 20, 10. 33 ,000. What? they didn't even know how many they had listed on there because you just go to like pumped out fun and then you put it on uh you put it on this uh you know defi swapper and anyways my point is that like there's three or four or five million dollar of sorry not dollars types of tokens um on just solana as an example um yeah a lot of those aren't gonna end up being worth something but you're gonna find like innumerable ways to use things and shift things around and change the way in which people are interacting, just like we're doing now. Our lives are radically different than what someone looked like 40 years ago in our lifetimes.

1:01:29It's crazy how much different it is. What is it going to look like if you start to fast forward 10 or 20 years where things are multiplying even faster? Another thing people don't appreciate is I love crypto because they come up with the first crazy use case, turn it into wild, rampant, ridiculous speculation, go bust and out of the Phoenix rises the ashes, right? The whole NFT thing was proving that value, that valuable assets should and can be on chain. And we're seeing that with the art market surviving. Pump.fund to me, super interesting. Yes, humans love to speculate in an AI driven world.

1:02:06We're probably going to do more of it. But it's the instant speed of capital formation that is the signal in all of this. So we think of how the capital formation markets work, VC and all of this stuff. This is showing where it's going. I completely agree with you. I think it's so easy to dismiss it because there are so many examples of either egregious behavior or just silliness. But, you know, there's market signals in that. And, you know, there's noise and there's signal and, you know you have to look through it and in part this is like shumptarian like creative destruction uh you know in real time like you know steroids uh fed by money printing but it's creating the solution uh that money printing is actually creating a solution it's just not doing it in a way that um you know looked like uh one we've seen before and because there's new ways of doing it and so i think that's why there is a signal here um and it's easy to dismiss it and just say well we're just going to be focused on like, oh, how you can put real estate records on chain.

1:03:04A hundred percent agree. That's actually what Paxos is focused on. But I always tell people you can't dismiss crypto as just being like, you know, pets.com, you know, on like, you know, times a thousand. You know, there's also a lot of truth in this as well. And you have to like, you know, understand where that's the case. And that truth isn't just that there's a chain. Like that's very easy and like fashionable to say, oh, I just think blockchain is the interesting thing. No, if you think blockchain is interesting, you also have to think crypto is interesting. and how interesting in exact which ways.

1:03:35That's a big debate, which I think is very valuable to have. But you can't dismiss crypto and just say blockchain. You're completely missing the entire understanding of what's happening. Yeah, because it's a coordination layer with behavioral incentives. It's ultra powerful, which is why it's the fastest adoption of any technology the world had ever seen until AI came along because of this. And it happened at a retail level, and it got a lot of retail people a lot of money out of all of this. So it's incredibly empowering. So final question for you is what's coming up in the next six months, 12 months for Paxos?

1:04:08What are you excited about? Well, look, I'll tell you what we're seeing. And it's unbelievably exciting. You know, because the Trump administration has come in, there's been a sea change where people can say this isn't just about a price driven operating cycle. And that's historically how crypto has operated. Price goes up. Everyone gets involved. Price goes down. Everyone runs for the hills. Right. And that's why you have these huge swings up and down. And that is changing because I think the average token is down. I don't know what it is now. Maybe it was a month or two ago. It was 50 % or something.

1:04:41Prices are down a lot. Normally, prices are down that much. You kind of lose the enthusiasm, the interest, or you just have a retrenchment. But it's been quite the opposite because you can have a fundamentally driven operating cycle right now, which to me is the best environment for Paxos because it's not driven just by price. We're not here just to monetize price. I mean, we do in some ways, but that's really not our business. We're not running a retail exchange. We're not trying to monetize price. We're trying to monetize fundamental adoption. And if you look at the number of financial institutions that are coming in, we just saw Fiserv and MasterCard announce something this week.

1:05:14I can tell you from what we're seeing, all of the largest financial institutions are going to launch crypto and stablecoin applications this year. Maybe it'll be the end of the year. It'll be early next year. But they're all coming. And they're not stopping because the price has gone down. And if anything, they're trying to think, how can we go faster? Everyone else is doing it. They understand there's a four-year period here of regulatory clarity and certainty and consistency. It could be more, but it's at least four years or three and a half now. And they can't miss it. And so I think the next six to 12 months is going to be the most exciting time for Paxos, but it's also going to be the most exciting time for seeing how this fundamentally changes society.

1:05:54because you're going to go from just this early adopter world. And man, when I was in it at the beginning, I mean, it was really early adopter. It was like 20 people and like weird. And it's weird now, but it's just like a completely niche thing. Now you're going to be talking about everybody using it and hopefully nobody even knowing because that's when you really like hit the point of changing society and you've reached the potential that we saw all those years ago together. Look, Chad, amazing as ever. Thank you for being, I mean, people don't know, but you've taken everybody on the journey.

1:06:26You've been my go-to person on a lot of this journey from when we first set up Real Vision all the way through to now. And it's just amazing to see what you're doing and how your thesis is playing out. And you've squarely planted the flag in the right place and the world is coming to you now. And it's going to be really exciting for you guys. So I'm really excited for what you guys get done in the next few years. Well, it's been awesome being on this journey with you. It's hard to imagine how long ago we started together, you know, all the way back pre-financial crisis. you know but you're looking great I hope I'm looking as good as you you are you are my friend anyway great to see you and hopefully we'll meet up soon as ever fantastic conversation with Chad we could have talked for hours about everything there's so many things happening in this space it's hard to it's hard to keep your your mind on all of the things that are happening because this is not just money and Chad is working on all of that but there's also the new forms of how capital is raised.

1:07:24We're seeing that in memes. We're seeing how the internet is going to go onto these rails in a number of different ways. And it's really exciting for Chad because he's building out the kind of unsexy part, but it's the side that makes it run for everybody as every corporation, every bank, every financial institution starts using and every payment is made over stable coins. and everything starts to become tokenized. So exciting world, great conversation. I'll see you next time. Hey, Real Vision viewers. A quick pause to introduce you to today's sponsor, Axelar. Axelar is building the rails for the next wave of global finance, not just crypto, but the future of how assets move, how markets connect, and how institutions plug into open systems.

1:08:13Think of it this way. Bitcoin brought digital gold, Ethereum brought smart contracts, but Axelar is bringing connectivity, the secure link between your favorite blockchain and traditional financial institutions, rushing to plug in. It's why top-tier firms like Dragonfly, Polychain, Coinbase Ventures, and Binance Labs are backing Axelar, and why global giants like Deutsche Bank, Mastercard, Apollo Global and JPMorgan are already building on it. If you believe the future of finance is open, programmable, and interoperable, Axelar is the gateway. Want to digest deeper? Visit realvision.com forward slash Axelar or follow on X at Axelar.

1:08:58That's A-X-E-L-A-R, the gateway to open finance. Today's video is sponsored by VeChain, the leading layer one built for real world adoption. VeChain launched all the way back in 2015, built for real-world utility before most people had even heard of blockchain. One of the oldest protocols and boasting 100 % uptime since launch, it's known for powering real-world solutions and partnerships with global brands like the UFC. Now, they're entering a new user-focused chapter powered by adoption in the vBetter ecosystem and an ambitious technical roadmap dubbed the VeChain Renaissance. Renaissance builds on VeChain's history of real utility and adoption to deliver a faster, more flexible core protocol designed to meet the needs of builders and drive mass adoption.

1:09:52The next phase kicks off on July 1st with the launch of Stargate, VeChain's new staking program. It's an evolution that brings VeChain closer to delivering its vision of a world powered by Web3 without compromising on reliability or stability. The future is here and it's scalable, sustainable and evolving with purpose. Check the links in the description to find out all you need to know about VeChain Renaissance and the updated staking opportunities available through Stargate. If you like this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future.

1:10:34Just one click away.

1:10:53Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, Forex, and beyond. With a simple and intuitive platform, you can trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone.

1:11:29Not all applicants will qualify. Plus 500. It's trading with a plus.