132: What The GENIUS Act Means For You & Your Money w/ Nick Elledge

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0:42That's why America's beverage companies are sharing more information about our ingredients at GoodToKnowFacts.org. No spin, no judgments, just the facts straight from the experts for more than 140 beverage ingredients. Visit GoodToKnowFacts.org. Hey everyone, and welcome back to the Rich Habits Podcast brought to you by Public.com, a top 10 business podcast on Spotify. Today is going to be a very fun conversation, especially if you are interested in this new frontier that is stablecoins. We're joined by Nick Elledge. Nick is the co-founder and COO of StableCore, the platform enabling community and regional banks and credit unions to offer stablecoins, tokenized deposits, and digital asset trading.

1:30With the Genius Act being signed into law by Donald Trump on July 18, becoming the first major federal legislation in the U.S. to regulate these stablecoins, we thought it would be a really good idea to have a stablecoin expert and successful repeat entrepreneur on the show to share his insights in this evolving industry. Prior to Stablecore, Nick was the co-founder of DataFleets, an encrypted data handling startup. The company was founded at Stanford University to unlock AI in financial services and other regulated industries. DataFleets was backed by leading Silicon Valley investors including Lightspeed Ventures, Jerry Yang, and Mark Cuban and was acquired for more than$100 million in 2021.

2:11Before DataFleets, Nick served as the CIO for a major New York City and London-based family office with multi-generational wealth from financial services. He also worked on the A16Z FinTech deal team in emerging markets private equity and started his career at McKinsey. He's been on the board of six companies and has worked on five continents, which is crazy. He has his MBA from Stanford GSB, an MPA ID from Harvard Kennedy School of Government, and a BA and a BS from Southern Methodist University. The guy is very well accomplished, very, very smart fella, and we're excited to have Nick here on the show.

2:44Oh, it's great to be here. This is a pivotal moment in U.S. finance, a perfect time to be talking about this. Nick, we're excited to have an industry expert on the show to help us all understand exactly what's happening behind the scenes with stablecoins and why it's so important to keep them on our radar. Let's start with the Genius Act. Give us the quick and dirty as to what just signed into law, what you're building with StableCore, and how this new law impacts the crypto industry and your company as a whole. Absolutely. So let's start with the first question you asked about the Genius Act.

3:16It was the first major crypto legislation in the United States ever. The simple way to think about it is for years, the industry has been the Wild West, but finally, crypto is putting on a suit and tie. And it established the framework for payment stable coins, which is a digital layer of money that exists on top of our normal fiat currency and enables financial services around the world 24-7. The goal of the Genius Act and the legislation was to eliminate the fear of another meltdown or depegging of stablecoins like the kind that happened in 2022 when Terra Luna collapsed alongside the collapse of FTX also in 2022.

4:00This was essentially crypto's Lehman Brothers financial crisis moment. The goal was to avoid something like that happening in the future. Now with this law, you're actually going to see banks themselves becoming the providers of these services. Let's break down the Genius Act. There are five things really to know from the Genius Act. So number one is that this law defines a payment stable coin as a digital asset designed to be used for payment or settlement. And it can be redeemed for a fixed monetary value by an issuer. And those can be redeemed back for a dollar one to one for that stable amount at any time.

4:38Number two, there has to be a one to one backing of safe assets, mostly cash or treasuries for every single stable coin. So this outlaws risky algorithmic style stable coins like the kind that Terra Luna was. And it gives consumers in business more confidence that there should be one dollar for every single stable coin out there. And it can always be redeemed one to one. Number three, this is an exclusive club in terms of who can actually issue a stablecoin. You and I cannot go out and issue a stablecoin. It's largely going to be banks and financial institutions, and even financial institutions have to meet a number of rules and create a separate entity in order to issue a stablecoin.

5:17This creates a large hurdle or a moat for the stablecoin issuers, if you will, against primarily non-financial firms. So you can think of Google, Apple, Meta, Walmart, Amazon, companies that probably would be in this space if it weren't for this provision to issue stablecoins. So we're mostly going to see the existing stablecoin issuers and potentially banks and others as the ones who are issuing these. Number four, payment stablecoins are not bank deposits. They do not have FDIC insurance. Also, payment stablecoins cannot collect interest. Now, there are some workarounds that Coinbase and others are doing in order to pay some incentives to hold stablecoins with them, but they are not meant to be yield bearing instruments.

5:57The fifth thing is that payment stablecoins are not securities. We're going to see banks offering stable coins and stable coin payments even within 2025. Okay, so what I'm hearing is we've got this legislature that has kind of laid out the law, right? Beforehand, there was no law, which is why we had the FTX collapse and this sort of Lehman Brothers type feeling back in 2022. Terra Luna style, all that fun stuff actually wasn't fun for anyone, including myself. I did lose some money then. But now the Genius Act is essentially saying, hey, here's what a stable coin is. Here's who can make stable coins.

6:29Here's, you know, what these stable coins can be used for. Here's the backing that goes into them, right? So very much like it sounds like we're kind of laying the groundwork for what is and is not considered a stable coin and their utility as it relates to what these things can actually be used for. That's exactly right. So this is setting the rules of the road for stable coins, which already have trillions of dollars in payments. The total supply of stable coins currently is about$250 billion. and that's forecasted to go up into the multi-trillions in the coming years now that there's regulatory clarity.

7:04So there are going to be more and more of these things out there. And with something that important to payments, to commerce, to the economy, obviously it's going to have to have some rules of the road and be regulated for consumer protection and to make sure everything goes smoothly. So for all of you guys listening right now, it's like, okay, why do I care about stable coins? Literally, this doesn't make sense at all to me. Why is pertinent. Stripe, which is this payment processing titan that pretty much processes all of online payments that, you know, if it's anything you're buying online, Shopify, whatever, like whenever you as a customer swipe your card online, 90 % chance you're doing it through the payment rails of Stripe.

7:40They processed$1.4 trillion of commerce on the internet in 2024. Let's assume that that$1.4 trillion wasn't processed by Stripe, who by the way, charges a 3 % processing fee, And instead, it's paid on stable coins. All of these businesses now are getting 3 % back that they were, you know, spending when it comes to their payment processor. Maybe that allows them to hire more people, invest more in marketing, right? 3 % doesn't sound like a lot, but 3 % of$1.4 trillion is tens of billions of dollars added back to the economy because you now have this new technology called stable coins that allows us to send money back and forth without paying a payment processor a percentage of it.

8:23That's right. And we'll have to see where it goes. I mean, Stripe is one of the most forward thinking. They've made a series of acquisitions in the stablecoin space. So your stablecoin may be going through Stripe at some point if they had anything to say about it. Visa and MasterCard also very advanced on stablecoins and leaning into it. But it's because they have these large existing businesses within payments. They see where the puck is going. They see how important this is going to be. And they are very much investing to try to get ahead of this trend. Now, before we ask Nick our next question, let's take a moment to give a quick shout out to Public.com.

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9:33Let me say that again. 1 % match on all IRA deposits, transfers, and 401k rollovers. Fund your account in five minutes or less only at public.com forward slash rich habits. Paid for by Public Investing, Full disclosure in the podcast description. Let's now jump back to our interview with Nick. Yeah, this is a great conversation and very informational. And I want to make sure that for the everyday person, like Austin alluded to, that we give them two or three nuggets of why stable coins are so important, whether it's liquidity, but just from your opinion, why should people be holding stable coins?

10:09And what is their importance in today's market from an adoption perspective as we move forward with crypto? It's a great question. And unlike other forms of crypto, we have a lot of volatility, a lot of ups and downs. The point of stable coins is to be, as in the name, stable. So it shouldn't be going up and down. It should be one to one. One dollar stable coin equals one dollar out. So it's not a speculation tool. It is largely a way to store value and to process payments. And so the use cases that are gaining fastest adoption, if you happen to be an American in the United States, you may not have an immediate use case for this.

10:44But the first use case that's really gaining a lot of adoption is a store of value outside of the United States. I'd like to say that the U.S. dollar has some of the strongest product market fit in the entire world. And there are a lot of countries where they want to hold dollars and they're not able to. And this is kind of the first time maybe their country has a high inflation rate or they had a currency depreciation. Their currency isn't worth as much against the dollar. They want to be able to hold these. Along with that, a lot of international payments cross-border replacing SWIFT international wires, which can take many, many days in order to settle.

11:15Now you have a way to move money cross-border that's instant and relatively inexpensive. So that actually brings me to my next question. Your website says that you can integrate stablecoins into these payment products, and you gave examples like the ACH and the wire transfers. So do you actually think like in the next 18, 24, 36 months that the world is going to be sending money from one business to another on stablecoin blockchain type vibes or, you know, USDC, Tether, stuff like that? Or am I still going to be have to typing in account numbers and routing numbers in my Bank of Tennessee website here?

11:48Definitely already happening, and especially for those international transfers. So there are two ways that it can happen. One is that you actually understand that you're using crypto, that you understand you're using a stablecoin in order to send that. So you're sending it wallet to wallet. And that requires some sophistication on your part. But a lot of banks are beginning to do what's called a stablecoin sandwich, where it's going bank to bank. But it happens that in between the sandwich bread are the stablecoin. And that is what's enabling it to be same day wire transfer. Suddenly something that used to take days can happen instantly.

12:23And consumers may not even know about it, what's happening behind the scenes. So we're in the early innings of it, but just rational businesses that are trying to move money across border are going to be adopting this more and more. So my next question, Nick, is the Federal Housing Finance Agency issued a directive on June 25th, 2025, ordering Fannie Mae and Freddie Mac to develop proposals for recognizing cryptocurrencies as reserve assets in single family mortgage loan risk assessments. And borrowers can potentially use Bitcoin and other approved cryptocurrencies as reserve assets without converting them to cash, avoiding capital gains.

13:00So as someone who has hundreds of thousands of dollars across Bitcoin, Ethereum, Chainlink, how would Stablecore positively impact my ability to qualify for a mortgage or borrow for a large purchase? Right now, if you walked into a bank branch and you had$100 ,000 in Bitcoin and you asked for a mortgage, they would have no idea what to do with it. They know it's valuable. They know it's worth something, but they don't know how to do a mortgage or how to hold that asset. And so they tell you, we'll go sell that, get some cash and bring it back. This is one of the problems that Stablecore solves for banks.

13:34And the truth is that your bank doesn't actually care about your crypto or your Bitcoin. They want your business. They want your relationship. And so to keep your business, they're going to build out these tools to make sure that they can handle all of your net worth and handle all of your assets. And so Stablecore is working with a number of banks. It's a way for them to recognize the value to be able to hold your asset at the bank. So they will actually hold it on your behalf as collateral against that loan. They're not just going to look at screenshots and be saying, hey, this is the net worth that I have.

14:03You're actually going to be able to transfer it over to your bank and get actual USD mortgages and loans on top of that in order to get liquidity for everyday life. Can you unpack that a little bit more? Because I think it's a little bit confusing. So are you saying I walk in with$500 ,000 worth of Bitcoin, I then give them access to my wallet and transfer my Bitcoin over to them for this mortgage, do they then own the Bitcoin or is it collateralized through my wallet where I still retain ownership, but they have access to it in case I default or something? Yeah, they would only have access to it in case you default, but you won't be able to take it somewhere else or use it in that case.

14:45They're going to lock it down. And that, just like anything else, is going to be used as collateral. And we've had bankers that have told us because a lot of folks think, oh, that sounds risky. It's a very volatile asset. Not sure. But compared to other things that banks lend against, actually, it has some really nice properties. Like it's marked to market every minute. So you always know what it's worth. They can liquidate it anytime, even on a weekend or if they had to. And a lot of folks have this as part of their portfolio and they don't necessarily want to sell it and they want to be able to do other business activities.

15:15Before we jump into our next question with Nick, investors, have you been itching for some in-person events? Well, you're in luck. Our awesome partners over at Blossom Social are hosting their third annual investor social tour, where hundreds of DIY investors across North America meet up in person for an evening of food, drinks, networking, education, and fun. And they're hitting seven different cities on this tour. Los Angeles, Vancouver, Calgary, Chicago, Montreal, Toronto, New York City at the NASDAQ Center. I mean, they've got a ton of really cool things taking place on this tour. You guys know how much we love Blossom as an online social network, and they're all about connecting investors online.

15:57Well, now's your chance to see what the community is all about in real life. And they've even hooked up our listeners with 15 % off coupon code. So if you use Rich Habits 15 at checkout, you will get 15 % off the price of the ticket, which is only$45. Link in the show notes below or visit BlossomSocial.com slash 2025 Investor Tour. All right, Robert, let's now jump back to our conversation with Nick. So Nick, I actually spoke with Brian Armstrong a few weeks ago, CEO of Coinbase, about their recent earnings results. And something that they're very excited about are tokenized securities. So stocks and ETFs that are traded on the blockchain.

16:34Considering this is where the future is headed, this is where they're investing, this is what they are focused on as a company, how is StableCore positioning for a blockchain-first finance world? Well, Brian Armstrong has a front row seat to the future. I would always believe when he says he's seeing something coming down the pike. Tokenization of those assets is growing as fast, if not even faster, than StableCoins, which are getting a lot of the headlines right now. So why is that? Well, the future of markets is 24-7, global and instant. And blockchains are one way, probably the best way, to give traditional assets like stocks and bonds and real estate some of those characteristics.

17:15There's this question, and this is actually what a lot of banks are asking themselves right now. You know, what happens when someone sells a tokenized Apple stock at 2 a.m. on a Sunday? Where does that money go? And that's where banks are now beginning to invest in tokenized deposits because the cash leg of that journey has to settle as fast as the asset leg. So in the future, you're going to see banks having tokenized deposits, having some of your deposits, whether as a business or retail consumer on chain, so that your deposits can interact with the collateral and the assets that are on blockchains.

17:51Yeah, I think tokenized assets is the most exciting part of the crypto space moving forward. And I think it's going to be the one that really kind of levels the playing field for the everyday person that wants to get further involved in cryptocurrency, but be able to invest in other assets that might be out of their reach from their financial perspective. Looking ahead, what is the next major feature or development for Stablecore in your roadmap that you're the most excited about? Because I have my things and I know you have your things. So share with our listeners what's the cool stuff you guys are working on and how does it affect the crypto markets and their wallets in the future?

18:32The future roadmap, which I think is very exciting, is exactly what you alluded to, the tokenization of assets and specifically of tokenized deposits. because stable coins, like we said earlier, are not deposits. They don't count as deposits for the bank. They can't lend against them. And there's no FDIC insurance for it. So essentially, tokenized deposits is taking the best of stable coins 24-7. It's global. It's instant. It's audible. It's on a shared ledger. And you give it these great qualities of a deposit, like the fact that it has FDIC insurance. It can generate interest and yield for you.

19:05And so it's still a deposit fully insured from a trusted bank. But now it's a token. So it gets to ride on blockchain rails with all this other stuff. And it's really exciting when you get into the smart contracts where it can settle instantly 24-7. There's a lot of very interesting programmable stuff that's going to come out of having deposits be tokenized in the future. And you may not know right away that it's a tokenized deposit necessarily. But suddenly, just like cloud computing or other tech trends, you know, it's just working behind the scenes and enabling you to have experiences at your bank that you were never able to have before.

19:40I like that breakdown, Nick. Thank you so much for joining us on this episode of the Rich Habits podcast. I learned a lot. I feel like stable coins have to be at the top of everyone's mind because that's where the future is headed. Right. We talked about the tokenized equities. We're talking about how the Fed, all these different payment rails, like this is where the future is headed. It is now signed into law. like we're trying to bring experts into this equation to you all to learn in real time so if you've not yet learned about stable coins the genius act and like how it's going to impact you maybe your business your portfolio whatever going forward please do that research and we are excited to be a resource for you in that journey and nick thanks for joining we had a blast it was very very informative and we look forward to talking to you soon awesome robert this has been a blast.

20:24Thanks so much. What an awesome walkthrough with Nick. I mean, obviously, this guy is an absolute genius, right? He's been building with crypto and encryption and all this stuff for his whole career, sold his previous company for over 100 million. He's backed by Coinbase Ventures, right? Coinbase invested into his current company, Stablecore. So like this guy is headed in the right direction when it comes to stable coins. And I feel like he did a really great job of breaking down the importance when it comes to the Genius Act, right? Talked about how the law defines what a stablecoin is. It mandates that one-to-one backing of safe assets.

20:56It makes there's like this exclusive club for who can create stablecoins and who cannot, as well as understanding that it's not FDIC insured. So you're not really going to like be getting any of that when it comes to holding your stablecoins and that you're not really earning interest on them either. So really leveling the playing field as it relates to how we think about stablecoins in the future. And again, little bit of a nerdy conversation. We get that. But that's what we do here at the Rich Habits podcast. We find the industry experts, the people who are doing this in the trenches, working in these new technologies and bringing them to you all and saying, hey, here's a person who's built, sold a business, backed by Coinbase.

21:34Like, what do they think about the Genius Act and what are they doing with that information and how is it going to impact you? I feel that he nerded out just to the right amount without getting too granular that people get lost in the information. Because the goal for us, like Austin said, is always bring the experts in so we can break down the hard subjects from a perspective where people can execute. So I love the episode. I think he did a great job. We should probably have him back in the future. Just because these are things that people just don't quite understand. And we want to break down everything we can to help you guys build wealth now and in the future, but also understand what is happening in the crypto markets, especially stable coins, because they're getting more and more important as we get higher adoption rate and more people involved in the crypto space.

22:20Now before we jump into the Q &A section of this episode, gotta give a major shout out to Neos Investments. Neos offers ETFs that seek high levels of monthly income with a keen focus on tax efficiency while providing core portfolio exposure across equities, fixed income, real estate, cryptocurrency, and cash alternatives like T-bills. Their ETFs may be especially interesting for investors looking to generate tax-efficient monthly income inside of their investment portfolios. Their funds may serve as a compelling income-focused alternative or complement to many of the investments already in your portfolio.

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23:33Cryptocurrency is relatively new to the market and has its own specific risks. NEOS ETFs are distributed by Foresight Fund Services, LLC. see. All right, Robert, now that we've talked about the episode, we've heard from some of our sponsors, we got to jump in and answer some questions with the first one coming from Frank N on Instagram. Frank says, I love the show. My question is if I and my wife should consider to contribute into our 401ks via Roth contributions, despite being in the highest tax bracket of 37%. I'm a high earner, great saver, saving roughly$500 ,000 a year. But my thought is I want to maximize my Roth contributions over my life since I'm only 37 years old.

24:14So I'm sort of like paying my future self. But on the same token, because of my high tax bracket, I could save$20 ,000 per year on taxes if I did a traditional 401k instead of a Roth 401k. So what are you guys thoughts on this situation? Yeah, so we had a similar question like this in the past. And in my brain, I'm thinking, okay, you could save$20 ,000 a year on your taxes. That's great. You're already saving half a million dollars a year. Cool. Is an extra 20 ,000 going to change your life? I would rather pay that 20 ,000 a year, knowing that you're only 37, 30 years into the future. My money is my money, right?