WEBVTT
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Hi, everyone. Thank you for joining us here this morning. Now,
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as you're all aware,
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the reason that we're here is we're at a critical inflection point for the
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financial services industry.
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There's a lot of risk in this moment as these two worlds,
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the fiat world and the stablecoin world come together,
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but there's also tremendous opportunity.
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And as our guests will be sharing later today, enormous first mover advantage.
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But let's get started by what we mean by both rails.
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My dad always said that jargon is a conspiracy against the layperson,
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and fiat rails in particular is an almost ridiculous term to
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describe something that is commonplace in every day.
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These are just the tools and technologies that we all use to manage and store
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money. These are credit cards, bank payments,
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and paper checks.
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And also networks that might be familiar to a more technical audience like
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SWIFT, Fedwire, or SPEI.
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Now these fiat rails are powerful. Firstly,
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they exist at a truly institutional scale.
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You think about the number of financial institutions connected to the SWIFT
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network or the number of merchants and consumers connected by Visa and
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Mastercard.
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You're talking about an almost ubiquitous level of institutional scale.
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Second, fiat rails are reliable and resilient.
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They process tens of trillions of dollars annually with very few unplanned
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outages or gaps in service. And finally,
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fiat rails are compliant and secure.
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They exist under formal government regulation and often with formal government
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backstops. Equally importantly, they set clear,
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transparent, and consistent rules for managing financial crimes, risk,
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and reporting. However,
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fiat rails are imperfect.
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Depending on where you are in the world or the time of day,
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you may be unable to access your funds.
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Fiat rails are slow to settle.
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Access to cash may be unavailable when banks are closed.
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They also evolved in a haphazard fashion over the course of many decades,
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and so fiat rails are fragmented. They're inflexible.
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And because of the number of intermediaries, they could be really expensive.
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So fundamentally, as a consumer or a business,
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funds that are in the realest sense, your money,
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may be very expensive to access or may be unavailable due to bank closures.
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In more recent times, stablecoins have emerged as an alternative rail.
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Stablecoins are not a replacement for, but a complement for fiat rails.
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They address some of the gaps in the fiat rail infrastructure.
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First, these stablecoins are globally available.
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You can access them anywhere in the world with a stablecoin wallet.
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Secondly, they're accessible 24/7.
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They can operate flows when you're awake or when you're asleep. Finally,
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stablecoins are cost-effective.
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Because of the lack of networks costs and the absence of
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intermediation,
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you could process stablecoin transactions for a fraction of a penny,
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which has a really revolutionary impact on enterprises and new founders starting
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fintech businesses. Stablecoins are also programmable.
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You could set conditional rules as to when, where, and how to move your funds.
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So with stablecoin rails, money moves when you need it to.
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You can send a transaction from anywhere in the world to anyone else in the
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world at an ultra-low cost.
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You may think of these as parallel worlds, but in fact, they are converging.
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With the best of both rails,
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you get the reliability and institutional trust of fiat with the
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institutional-level ubiquity.
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You also get the 24 hour/7 speed and programmable efficiency of
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stablecoins with that ultra-low cost profile.
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Now it's worth pausing for a second and discussing a little bit about how we got
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here. I think the key moment for me was the 2008 financial crisis.
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That's when we first saw the emergence of the consumer technology we now know as
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fintech. This was wave after wave of innovation from neobanks like Monzo,
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digital brokerages to Robinhood,
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and remittance providers like Zepz.
What these companies have in common is
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they took the reliability, scale, and protection of fiat infrastructure,
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but they built a new technology stack-making financial services more efficient,
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affordable, convenient, and transparent.
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It was around this time that I also started to read about Bitcoin,
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the ultimate origin story of crypto. In the early days, it was a bit of casino.
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Lots of fad-ish speculation, lots of meme coins, lots of...
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Does anybody remember the initial coin offerings? But since then,
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crypto's really grown up and stablecoins have found utility far beyond
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speculation.
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These were initially a mechanism to allow traders to access much needed
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liquidity. However, since then,
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stablecoins have found mass market utility. First,
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by providing a secure hedge to the dollar,
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hedging against volatile local currencies. Second,
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by enabling 24/7 payments,
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and now extending global commerce to new consumers and merchants across the
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world.
A settlement rail like the Senegal to France rail,
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that previously took 10 days,
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makes commerce all but impossible between two countries that share a common
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diaspora. With stablecoin rails, those transactions can be done in seconds,
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unbottling global commerce.
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We're seeing three powerful growth themes emerge from innovators in this sector.
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The first is to globalize your business. Take Umba,
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a Kenyan bank that has a remittances business to the European and
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US markets.
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What Umba does is it accepts fiat remittances from the EU and from the United
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States,
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and uses Bridge's orchestration platform to take the power of stablecoin rails
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to settle the transaction efficiently. However, in Kenya,
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the local population receives their funds in local currency, in fiat,
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thereby bringing the power of the traditional banking account and the
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traditional banking license to bear.
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Second big trend is to build choice and value for your customers.
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Phantom is a crypto wallet,
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which uses Visa cards to allow customers to gain utility from their crypto
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holdings in the fiat world.
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Doing this requires complex infrastructure that combines the Phantom crypto
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wallet, virtual accounts from Lead Bank, and the Via onchain platform.
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Finally, reduce risk and friction from your fund flow.
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If you take Robinhood,
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Robinhood uses Stripe and the Payments Foundation Model powered by AI
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to reduce fraudulent transactions and while increasing the maximum authorization
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rate that it can get-that way ensuring fast,
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easy liquidity into the brokerage account.
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Wealth managers like Robinhood can also use stablecoin rails to access
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24/7 trading,
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being able to place and settle securities transactions on the weekend when such
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things were previously impossible.
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So what does good look like here and how do you get started?
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Because the thing I really want you to all take away from this presentation
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today is: now is the time to build.
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And what we want to do now is to hear from two guests who are in the midst of
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building their best-of-both-rails business. Firstly, Nader,
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head of corporate banking for BNY.
BNY was formed a mere 226
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years before Stripe.
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I haven't quite figured out how many days that is before the singularity,
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but we'll get back to you next week. BNY, like Stripe,
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also had brainy founders,
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and you can ask Nader about which Broadway musical I'm referring to after the
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presentation today. But from day one,
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BNY's mission has been the same:
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to protect its clients' assets and to manage their funds as efficiently as
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possible.
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They've been through waves of change and innovation-from the digital economy
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where they've built one of the best institutional grade API platforms,
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and now into the onchain world where they first served the crypto economy,
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and now we're helping TradFi companies become DeFi companies.
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Let's welcome Nader.
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Thanks, Fergal.
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So, Nader,
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BNY has a 240-year history of institutional trust.
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I think we're actually 241.
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241.
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I think you missed a year.
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Apologies. We'll update the key cards for next time.
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Why does a bank like yours partner with the fintech economy,
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and how do you enable corporates and fintechs to enable, move, and store funds?
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Yeah. Well, it's a pleasure to be with you all today. So listen,
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if you really think about it, we're a pretty unique company in many ways.
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We're the world's largest custodian.
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We have 60 trillion of assets under custody. We're a big investment manager,
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but we also have a big payments business.
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And we do this for the service of institutions worldwide.
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So whether they're corporates, endowments, foundations, pension funds,
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the largest banks in the world as well, like we count them as our clients.
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We don't focus on the retail side of things.
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So there's like a natural partnership element with fintechs and other
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companies that are servicing individuals,
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because there's a strategic alignment there.
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We're not going after that business. We are really an infrastructure,
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capital markets infrastructure provider.
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So when it comes to stablecoins,
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and generally like digital assets at large,
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I think it's worthwhile noting we've been involved for
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seven years in providing services to stablecoin companies,
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which actually is a pretty long time in the grand scheme of things.
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And it's really because of the core services that we provide.
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They are in demand, and we are in service of our clients.
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So seven years ago,
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it wasn't really mainstream or in vogue to service stablecoin
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issuers,
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but we did find a particular path around the usage of
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our custody services, our payment services,
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and beyond that really provides that institutional scale
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and trust as that foundational layer for which they can build upon. And so
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that's a really key part of why we got involved.
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Great.
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And we were sitting at the table last night with the former Speaker of the
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House, Patrick McHenry,
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who talked about the need to not over-rotate to the regulatory environment of
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today. So if you were advising a founder building a global payout platform,
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how would you advise them to manage their entire lifecycle from issuance to
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operations,
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whilst making sure that they have the agility to comply with the regulatory
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landscape however it evolves?
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Yeah. Yeah. And by the way, like seven years ago, it was, as you guys all know,
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the regulatory environment was ambiguous at best.
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And so that may also end up being the case in the
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future. What you have to do, number one, is figure out, number one:
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do you have a use case?
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Are you just issuing a stablecoin just to issue a stablecoin?
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Because I guarantee you there's a lot of that going on.
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But if you actually have a use case, if you have a network effect,
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and if you have the ability to have stablecoins and payments as a
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core part of your business model,
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then you should partner with folks that have that regulatory scale,
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reliability, and trust. And I think that's the key part.
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There's sort of like three different buckets to make this work if you're a
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founder and you're thinking about, "Who do I partner with?" So number one,
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you need someone, and maybe it's you,
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who has the distribution and the network effect for this product.
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Number two, you need someone, and it may also be you,
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that is really the orchestration layer,
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the tokenization technology provider. And then number three,
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you need a very well-trusted financial institution.
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There's like a really good saying-I won't tell you who said it-but it's like,
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"Crypto need banks more than banks need crypto." And like, listen,
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I think the truth is somewhere in the middle there,
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but the reality is, that is the foundational layer.
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And when you have a trusted and scalable and provider that the
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regulators know, it makes things easier.
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Yeah. I mean, it's the most common question that I get is,
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"Are you building a parallel ecosystem here?" And it's clearly just not the
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case that you need to choose between one or the other.
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The key message should be: "How does your user want to move, store,
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and manage their money,
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and how do you enable them to do that?" And so with that matter,
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we often hear that the biggest hurdle for fintechs is managing that.
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We've talked a lot about how the two worlds converge,
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but managing that gap where things fragment between the crypto and onchain
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world.
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How does BNY help fintechs build a unified stack that allows for that fiat
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crypto interoperability?
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Yeah. Listen,
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the reality is that stablecoins, crypto,
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onchain activities,
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and the fiat world do operate in parallel worlds.
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They do not interoperate today.
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Now you need one for the other for the most part,
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but what we're really focused on is as follows.
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Let's say you have a deposit at a bank, maybe it's BNY,
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maybe it's somewhere else.
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It should be a pretty seamless experience to the end user to shift that
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deposit into, let's say, a stablecoin,
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because you want to make a cross-border payment.
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And then let's say you're accepting a stablecoin,
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and you want to convert it into a money market fund to gather yield
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over a weekend.
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You should pretty easily do that into a tokenized money market fund.
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So that's why we built,
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as the only global systemically important financial institution that has digital
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asset custody,
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because we want to effectively provide one experience
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to really collapse that divide.
It should be absolutely seamless,
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to a customer of a fintech, of what payment rail they need to use.
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It should be based upon,
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it should be dynamically routed to the right rail,
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fiat or otherwise, and it should be based upon cost,
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jurisdiction, and speed.
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Anything else is just us kind of getting way too technical.
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So at the end of the day, it's the user experience, and behind the scenes,
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that's how you interoperate between the different assets.
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So obviously, a dollar is a dollar:
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it functions seamlessly with any other dollar and has the ultimate network
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effect in the global economy. We've started off with USDC and USDT.
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We're starting to see a major proliferation of the brands.
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How do we manage this? Should a fintech issue its own coin?
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Should it use one of the existing high market cap coins?
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What are the right use cases for us to be focused on here?
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Yeah. I mean, again, or should a bank issue its own, right?
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Totally.
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So we get that question a lot. Listen,
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I think it goes back to this. It's just like any other business model,
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or like if you're doing a strategy review of your business,
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it's like if BNY started selling potatoes-we wouldn't start selling
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potatoes.
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If you are a business where payments is a feature and not
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a core part of your strategy, sure,
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you can issue a stablecoin, but I would question what ...
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It goes back to that original kind of metric.
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What's the use case and what's the actual network effect?
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Because ultimately,
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I think you'd be better served by utilizing a widely used stablecoin.
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However,
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if payments becomes a very core part of your business model,
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then there are advantages to issuing your own stablecoin. Number one,
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you generate the yield off of the reserves,
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so you're kind of protecting your margins. Number two,
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you're reducing the amount of third parties involved,
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probably some banks as well. And
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so yeah, number three, you're actually controlling the user experience. So
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that is definitely a choice.
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I think the debate that we're having right now about yield and rewards,
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or however you want to call it, is an important one,
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but it also risks taking us away from the actual utility of this rail and
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focusing on the efficiency gains and the speed gains and the access to liquidity
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gains that you get with or without the yield, I think. So Nader,
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it's 2027. Europe has just retained the Ryder Cup.
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Where are we going to be in that 18-month time frame and how do you see the best
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of both rails coming together?
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Yeah. Well, I don't know about the Ryder Cup. I'll leave that to the side.
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But listen, I think it goes back to
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having one experience, multiple rails in the back.
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I love the examples that you put up of cross-border remittances,
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because those are very near and dear to my heart in terms of like
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family overseas-how do you send them money? It's a pain. it's an absolute pain.
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And if you can make that easy for people,
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or if you can extend a stable currency to folks
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living in places with unstable currencies, that is like a good,
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that's a general good thing to do.
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But at the end of the day, the user experience,
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and I think the companies that will win
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the wallets and minds of their customers, it'll be a seamless experience.
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You won't even know whether you're utilizing a stablecoin or not.
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So that's ultimately,
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I think the best of both worlds means ultimately it's one world and one
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experience.
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Well, that was almost perfectly timed and a perfect way to end the discussion.
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Thanks, Nader. Thanks so much. I really appreciate having you with us.
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Cheers.
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I'd now like to welcome Manuel from Félix Pago.
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Félix was trying to solve the age-old problem with remittances,
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which is how do you get the distribution? And unlike, shall we say,
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traditional approaches,
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Manuel and team chose one of the highest distribution apps in Latin America,
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which is WhatsApp, using the power of WhatsApp's distribution.
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They accept fiat pay-ins and use stablecoin settlement infrastructure to bring
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the best of both rails to life. Welcome, Manuel.
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Thank you.
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So Manuel, what was the problem you were trying to solve when you started Félix?
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Most remittances providers ask you to download a new app. You chose WhatsApp.
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Why and how's it gone?
Definitely. And
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thank you for inviting me, by the way, to this panel.
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And it had a lot to do with what you guys were just discussing.
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I've been fortunate enough to live in many places around the world.
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I'm originally from Venezuela, but moved to the US 20 years ago,
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and then moved to Brazil, moved to Russia, spent a long time in the Middle East.
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Moving money globally has always been in a universal pain.
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But something that really kind of left a mark in me was when it was about 2018,
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I was living in Texas. My parents had also moved to the US.
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My mom calls me one day and she says, "Hey,
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we need to send money to your grandma," who used to live in a rural town in
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Venezuela, and it was money for an emergency. And
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I was sure in my mind that her phone got misconfigured somehow,
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that I just needed to put the phone back in Spanish,
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so it could be easy for her,
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but it turned out that she was right.
It was super frustrating,
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one of the most frustrating experiences, because again,
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it was money for an emergency, and we couldn't simply find a way to do it.
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And it had to do a lot with the situation in Venezuela at the time,
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the whole political situation, but we had to hack our way to send the money.
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We had to send a Zelle, somebody here in the US,
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a person would take the cash out in Venezuela, and drive it to my grandma.
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And it stuck with me, right? But then sometime after that,
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I was in business school and
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literally sitting at a class and I saw a graph illustrating how remittances have
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been growing at exponential rate for the last 50 years or so.
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And the fact was our remittances to Latin America at the time,
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80% of them were still originated in cash in stores.
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So imagine commuting to a store, 30 minutes,
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standing in line, paying outrageous fees,
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and then to then get the money back to your family.
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And that resonated, and I connected with my own personal story,
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because I started realizing that the problem is not just for Venezuela, right?
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It's folks sending money to Mexico, why are not trusting digital apps?
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So that led us to go and literally stand outside Western Unions in Philly at the
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time and trying to talk to remittance senders,
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trying to convince them to talk to us to understand.
You can imagine us standing
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outside very suspiciously, "Hey, are you sending money to your grandma?" "Wait,
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what?" But we learned two key things.
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Number one, folks deeply trust that human experience of the store.
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And two, WhatsApp is already part of the process,
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because they would come out of the store, snap a picture of the receipt,
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and send it over WhatsApp. So after a lot of iteration and understanding,
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we said to ourselves,
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why not build the human experience on WhatsApp and
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emulate that, again, that experience,
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but also enable the communities of the digital payment.
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So that's when we realized that our users are actually leapfrogging digital and
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going directly to conversational. And thankfully,
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that's what led to what Félix is today, which is
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now 5% of the market share of Mexico, 3%,
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almost 3% of the market share of LATAM, and expanding into new corridors.
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That's amazing, Manuel. Why don't we take a look at the product in action?
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You can see the screen down here that we can all see onstage and I can just take
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us through it.
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Yeah. So essentially, again, the user doesn't have to download any apps.
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You just go to WhatsApp, and you just type "Hello."
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Does it go? Yeah, there you go. So obviously,
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sorry for those that don't understand Spanish, but this is just "Hello, Félix."
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And there's two cool things happening today on WhatsApp.
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So WhatsApp per se is allowing businesses like Félix to build these kind of
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intuitive interfaces with buttons and menus,
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but we also have an AI agent on the back that's understanding what the user is
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saying. So in this case, for example, the user is saying,
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"I want to send 200 pesos." And they can put it in dollars,
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they can send voice notes, and we want to understand what the user is saying.
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And again, we're emulating the experience of the store,
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so we're asking who they're goirg to send to. We're requesting the full name,
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that full name.
In this case,
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it's my cofounder who always gets my money from these demos that I do.
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But the essence is that we're running the compliance checks on the back,
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we're running all these ...
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We need to get all the information from the transaction just like it would
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happen in the store. And then at the end,
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we actually have to send the user outside WhatsApp, in a web app,
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to put their card, because inside WhatsApp, you cannot be PCI compliant,
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at least today. Hopefully, maybe Stripe can get something done at some point.
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We're on it.
401
00:25:35.810 --> 00:25:40.490
Yeah, there you go. And boom, that's it. And what's cool is that once you pay,
402
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that's what's powered by Stripe, you get the receipt, right?
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And going back to the original story, this is what they share,
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and now we make it even easier to share that receipt to their family on
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WhatsApp.
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Awesome. And how do stablecoins fit into the picture here?
407
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What's the best of both rails in action for Félix?
408
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Yeah. And it was clear to us that not only we had to build a very simple-to-use
409
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interface, but it also had to be at a decent price point, right,
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as cheap as possible. So again,
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being originally from Venezuela and having lived through a currency getting
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destroyed by central control,
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to me it was kind of almost obvious that crypto had to play a part in here,
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but we actually started looking at the data, right?
415
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So we started getting quotes from the traditional players,
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the traditional FX providers that would be on top of those fiat rails that we
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were showing,
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that by default-because they have all these complexities in their
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treasury operations-they passed down the cost to us.
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So it didn't make sense.
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We couldn't price the product in a way that would make profits to Félix.
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So we started actually scraping trading data from the crypto exchanges here in
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the US and in Latin America-and all the crypto data, not just stablecoins,
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but also Bitcoin and Ethereum and the common tokens.
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I was starting realizing that the answer was pretty obvious.
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We could actually monetize,
427
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we could actually reduce the cost as much as possible,
428
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because a lot of the things that you said is global available,
429
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it's programmable, it's 24/7.
430
00:27:07.630 --> 00:27:10.630
But actually something that to me is more critical is that,
431
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we are trading the USDC in an open market, in an exchange, right?
432
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So we are skipping the intermediaries and going directly to buyers and sellers
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that want to trade. And eventually those costs,
434
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the costs that we're having,
435
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are almost as close to the metal and to the interbank rates that are out
436
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there.
So it helps us reduce the cost as much as possible and pass the savings
437
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back to the user. But what's also interesting, and you see in the interface,
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there's no mention of stablecoin there, right?
439
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And it's what you guys were discussing. It's invisible to the user.
440
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I always say that it could be a donkey going through the border with the money.
441
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The user doesn't care.
442
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What they care is that the money gets there as fast as possible.
443
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So in about 30 to 40 seconds, Manuel,
444
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in terms of your product roadmap, in remittances,
445
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we're often talking about adding value to the recipient.
446
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Where are you going with that concept,
447
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and what can we expect from Félix in the future?
448
00:28:11.930 --> 00:28:13.850
Yeah. And obviously so far,
449
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we are serving the US sender.
450
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We want to maximize the optionality of the receivers.
451
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So we're partnering with a lot of providers locally,
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so that they can get the money anywhere and maximize that amount.
453
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But we're also enabling more services to the US sender,
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such as loans and savings. So again,
455
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so that the beneficiary can benefit from those services that the US sender can
456
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get here in the US.
457
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Yeah.
458
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We're unbelievably excited to see what we can build together with you and the
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Félix team. And thank you so much for joining us.
460
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Thank you.
461
00:28:47.770 --> 00:28:51.410
So just to sum up the common themes across
462
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those conversations, I mean,
463
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the number one thing is to choose the business that you want to be in.
464
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That's the key to getting the best of both rails right. As Nader said earlier:
465
00:29:01.510 --> 00:29:05.490
"Don't be in the business of selling potatoes." However,
466
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financial firms have been in the business of selling financial potatoes for a
467
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long time.
468
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BNY has long since focused on providing asset safety and financial security
469
00:29:16.390 --> 00:29:20.750
to its clients. Félix focuses on solving the remittances problem,
470
00:29:20.810 --> 00:29:22.690
as you just heard so vividly from Manuel.
471
00:29:23.250 --> 00:29:27.410
Every company has an unfair advantage-use it. Second,
472
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use the right tools for the job. BNY invested in APIs.
473
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Félix understood how the power of WhatsApp to be able to handle the
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distribution question in remittances. Thirdly,
475
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own your customers' needs and build with them.
476
00:29:44.030 --> 00:29:47.550
Whatever your version of hanging around the outskirts of a Western Union store,
477
00:29:47.950 --> 00:29:48.590
do that,
478
00:29:48.590 --> 00:29:52.590
and understand the pain points you're solving for.
BNY has done a similar job in
479
00:29:52.650 --> 00:29:57.130
understanding how to bank crypto companies and take TradFi to DeFi.
480
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With that, I'd like to thank you all very much for joining us.
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It's time to go build with the best of both rails. Thank you.