Welcome to Epicenter, the show which talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Kodelika Ads and today I'm
speaking with Zach Abrams, who is the CEO of Rich.
Look, we love investing in new areas of the business and we
described a few of them at cryptos, a particular area of
investment. We made a large acquisition in
the stable coin space. When I looked at stable coins,
it was very clear to me that they were an economically
rational winner. Over time, getting into the
crypto space, the banks were like, you know, if you're doing
anything with stable coins, you're automatically in this
risk bucket. Whereas if you're doing the same
activity but not with stable coins, you're in a different,
different risk bucket. We're starting to make for the
first time regulatory investments.
The long term success of the stable coin space is going to be
downstream of regulatory changes.
I'm Frederica Ants and today I'm speaking with Zach Abrams, who
is the CEO of Bridge Stripe acquired infrastructure platform
and that lets companies issue, move forward and spend staples
of in various ways. We'll get into all of the weeds
in just a bit before that. These are our sponsors this
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start exploring at nosys dot IO. Hi Zach, it's good to have you
here. It's.
Great to be here, thanks for having me.
For listeners who don't know you yet, give us the Cliff Notes
version of your background and how you ended up in payments and
money. So I founded Bridge with Sean
and in maybe 2010 or so, Sean and I founded another company
that was a payments company and we were trying to build a
payment network by tying together university payment
networks. And I don't know if this is a
thing in. In Germany, but in the US, every
school has their own payment network.
That's not like Visa, MasterCard, Amex, Discover.
It's like your campus dollar situation.
These payment networks facilitate billions and billions
of dollars of payment volume. And we were trying to be like
what Venmo is to your bank account, but for these student
payment networks. And then in doing so, bootstrap
a new payment network by tying these together.
Anyways, we tried to build that business for a while and we
were. Woefully unsuccessful because it
turned out to be a university sales business that we were very
ill equipped to do successfully. We sold the company to Square.
And basically, you know, from that point in time, I spent my
entire career in fintech. It's like moving money, building
money. Products were always the most
interesting to me. And, you know, we saw from the
very beginning what felt like really small changes in, you
know, economic access, how big of an impact those could have,
like with Square and they make. It just a little bit easier to
accept card payments, enable millions and millions of
businesses to you know, or or individuals to start businesses
and run them full time when otherwise it would not have been
possible. And so I stayed on that cake
for, you know, a decade plus now.
That's a long time payments kind of to someone who is not in
payments, payments seems and I hate to say this seems somewhat
trivial, no. So kind of you have a balance on
on kind of one account or on one bank account of one wallet and
kind of it, it moves somewhere else.
Tell us about the misconceptions about how money actually moves
versus how kind of the layperson thinks it moves.
Yeah. I mean, I would say the thing
about payments that is so interesting to me is that you
have so many areas where you can be creative and find new
solutions. So, you know, you could build
new products at the UI layer, you know, by basically just
making it easier to see balances and and you know, make a
transaction or what have you. It could be at like actual the
money. Storage layer, it could be at
like the regulatory layer, you know, and it can be and, and it
could keep going down. And like we've seen how like the
best products are not just like innovations in terms of consumer
behavior, but our material changes in.
How? Material changes in in how you
know, in money capabilities that are facilitated by, you know,
regulatory changes or, you know, enabling functionality that
others didn't have and, and a very.
Quick example of this, that is like totally outside the crypto
realm, but Cash App, for instance, Cash App is a
peer-to-peer payment product in the in the US, it's been very,
very successful. Early Cash App enabled you to
instantly send money to any bank account.
This was like not possible in the US before Cash App built
their product. And the way Cash App built their
product was by taking advantage of a debit card refund.
So everybody in the US had a debit card, and you could refund
money to a debit card which then immediately credited.
That balance back to your bank account.
And the Cash App team figured out that you could use this
debit card refund to enable what felt like an instant payment in
the US And, you know, finding these types of opportunities and
being able to figure out how to take all these, like, wildly
complex puzzle pieces and rejigger them together is what
intellectually makes payments very interesting and I think
like stablecoins. You know, bring it back to our
business is sort of an innovation at every layer, which
is particularly fun to, you know, makes it particularly fun
because it enables so many new types of payment experiences.
So. So the Cash App example is very
much a legacy Rails example, right?
I lived in the US for a number of years and it always struck me
how backwards the financial infrastructure was compared to
Europe because kind of like we've had free instant transfers
between bank accounts for really long time.
So why do you think kind of like there's this systemic difference
in how powerful the underlying rails are?
Well, yeah, I mean, this is so this is a, this is a great, a
great, a great question. So.
In the US there are like you know, 1000 X the number of banks
than there are in in Europe. And so in the US we have this
like dual banking structure where you can be a Federal Bank
like JP Morgan or Wells Fargo or have you these are banks that
operate across many different states or you can be a state
regulated. Bank like, you know, the North
Carolina Community Bank, for instance, that would just serve
folks in a specific town in North Carolina.
And this dual banking structure has multiple different
regulators and the net result is that it's a lot easier and
permissive in the US to create banks that operate at different
scales. The benefit of this is you have
a very dislike, very diverse and you know, very competitive
banking ecosystem. And it enables, you know, lots
of neo banking and like a lot of fintech products to be created
because you have so many different banks are trying to
find ways to compete with each other that some banks.
Choose to support fintechs. You know, and they do that by
enabling, you know, exposing their AP is and then a bunch of
new fintech products get get created.
Whereas in in Europe, there's fewer banks and those banks are
much more heavily regulated. The flip side of that is that in
the US, as a result, rolling out any changes to a payment rail
necessitates the bottoms up adoption of that payment rail
because there is not one. Regulator that can say hey
everyone you're now using this bit of functionality and so
you've seen this play out in the US where we have the automated
clearing house that tried to roll out RTP payments, which
have gotten some adoption but not that much adoption and the
Fed has tried to roll out you know FED now, which is getting
some adoption but not universal adoption.
Whereas in Europe they could just say everybody we're in SEPA
and everyone's going to support SEPA Instant and it and it and
it happens. So there are pros and cons to
this. And you know, I think everybody
around the world can can see. The cons in the US where we have
some of the most robust banking infrastructure in the world, yet
some of the worst payment you know and lowest performance
payment rails of any, you know, major developed country.
You've kind of transitioned from the traditional payment rails to
kind of the the new shiny stables rails.
Was there a specific moment that kind of made you say I'm done
with this, I'll see what else is out there.
It wasn't. It wasn't so.
Much like I'm, I'm done with this more that with one of the
reasons that I really liked, you know, financial products.
I'm curious, you know, what drew you to crypto products?
But but for me, I've seen a bunch of different products be
successful. The commonality across all of
them, whether it was Square or Coinbase or you know, Breck's or
what have you, all of these products were made financial
sense. And so that by that I mean, they
enable the payment or some type of functionality to happen
faster or cheaper. And they did it in a way that
was much more durable. And so like Square, you could
accept a card payment at a fraction of the cost and a
fraction of the time invested versus getting a terminal before
or Breck's, if you were a startup, you could sign up and
get a credit card with, you know, a fraction of the
diligence required, you know, to pledge Personal Capital and you
could do it same day, you know, and if you can find those
opportunities, they're just like super obvious.
And, and the most clear example of this is Robin Hood.
You know Robin Hood if you know before you trade for $5 and now
you can trade for free. Of course, if you can build a
sustainable business around free trades, it's going to win.
And when I looked at stable coins, it was very clear to me
that they were an economically rational winner.
Over time, they enabled payments to happen faster or cheaper.
And as a result, it was super clear to me as we started
spending time in the space that at some over some arc of time,
this was going to become a very, very important payment rail.
In some ways it took longer than I thought and in some ways it
took took less time than I thought.
But but, but that's really what drew me to the to the
opportunity and to build in the space.
What year was this? So I was at Coinbase in 2018
when Coinbase was launching USDC with Circle and I was running
Coinbase's consumer business at the time.
So this is, you know, basically the consumer app that people
sign up for and use to to trade. And there was a different group
of folks who was launching USDC and we were tasked with figuring
out how we would use it. And as we started spending time,
you know, figuring out USDC, it was like our first idea was to
make Coinbase into a global bank on top of USDC.
So it enabled you to build financial products across
borders that wasn't possible before.
Our second idea was to facilitate cross-border payments
and peer-to-peer payments through it because it enabled
you to move value, you know, in a way that was much cheaper.
Ultimately, it's taken, you know, I left Coinbase, it took
Coinbase some time to build a bunch of those products, but
that bug sort of stayed, stayed with me.
And then when we started Bridge in 2022, it was shocking to me
that more had not been done over the subsequent 8 years to enable
that type of functionality. Stablecoins had mostly been used
for trading use cases, you know, Defy and Bitcoin settlement and
and so on. And we wanted to make it
possible for others to take advantage of that opportunity.
Were you worried about the regulatory implications of
Staples because in 2022 the situation looked much different
than it does today. There's a bunch of ways in which
I could, I could take that, take that question.
I mean, I think there's, yes, I was, I was, I was worried to
some extent. But at the time when I was
trying to, when Sean and I were trying to start the company, it
was, you know, the 1st order. You know, in Maslow's hierarchy
of needs, you know, we were still at like shelter and water
and, and that was like just finding 1 customer.
And we always viewed it that like if we if we were worried
about the regulatory implications.
Then that meant that we had some business to defend against
regulatory changes and that would be a champagne problem.
And so, so for the first bit we were, we were really just like
hyper focused on shelter and water.
Now that we have a business, it's clear that stable coins are
really starting to work. The, you know, we're starting to
make for the first time regulatory investments that you
know, in trying to work with regulators to help them
understand our business and and the opportunities that are
available. Because it is really clear that
the long term success of the stablecoin space is going to be
downstream of regulatory changes.
And this is like no different. I think all of us in the crypto
space have like operated in a weird and temporary regulatory
zone where most of us could ignore the regulatory
requirements. And it was much like the
Internet in like the mid 90s. There's like this great book
called Who Controls the Internet?
All about like the regulatory changes and regulatory thinking
around the Internet, which like early Internet, everyone thought
that local regulators didn't matter.
You could sell goods anywhere, you could do what you wanted and
so on. And France and PayPal, you know,
got into this whole thing and that reshaped, you know,
regulatory requirements around the Internet.
And we're kind of in the precipice of our sort of France
PayPal moment, but in the stable point and crypto space.
So you recently, recently while back we're acquired by Stripe,
you already alluded to it. Walk us through how that
happened and how much kind of regulatory thinking kind of came
into that. I did not think that heading
into I guess like those conversations were in 2024,
started in 2024, Yeah. And so heading into 2024, even
midway through 2024, I did not think our business was
acquirable, mostly because we were so optimistic about what
was possible with stable coins and it was.
Hard. To envision there being an
Enquirer who was similarly optimistic and had this scale to
put behind that, you know, to, to invest behind that optimism
and had sort of the, the risk tolerance to be pushing forward
in this brand new space. And, you know, it is like, it's
really, it's really complicated. Like take an example of a
business that is like, you know, regulated and to do, you know, a
specific type of banking activity or money transmission
or what have you. And then getting into the crypto
space, we just heard it over and over again from our customers of
like, our board doesn't know if we should be doing stuff in
stable coins or, you know, our regulator doesn't understand
stable coins. So like this is too risky.
The banks were like, you know, if you're doing anything with
stablecoins, you're automatically in this risk
bucket. Whereas if you're doing the same
activity but not with stablecoins, you're in a
different, different risk bucket.
There was no like first principles to it.
It was just deemed to be in this, in this risky, in this
risky category. And it became pretty clear
though, when I started spending time with Patrick, that him and
John and the rest of the, and the rest of the Stripe team were
incredibly optimistic about what was possible with stable corns,
You know, just as much and maybe even in some cases more so than
than I was. And as we spent more time
together, it was clear that we could do a lot more together
than Bridge could do on its own. And, and now I think we're
seeing a lot of that play out where our stablecoin issuance
business, for instance, is growing at a faster rate and is,
you know, much more compelling together with Stripe then it
would be then it would be separate as an independent,
independent entity. And so I think their optimism,
you know, combined with our like shared belief in how far we
could go together is sort of. What?
Made it happen, but I did. I certainly thought the risk and
regulatory stuff was going to be a problem.
I, I actually had one of our investors as part of the process
call Patrick and I was like do everything you can to convince
Patrick not to do the deal as. Part of as part of the process.
And so he called Patrick and put in like a really hard anti sell
around like, you know, are you willing to take the risk and
make the investments and so on to push forward in this space,
even if some things might be competitive with products you're
building internally and so on. And then afterwards he called me
and he was like, no, he's all in, which was great.
Yeah, that's, yeah, some, some, some people are just have a lot
of founders kind of have really unshakable belief in things kind
of like they've once convinced themselves of.
So I think kind of yeah, 100%. I I I hear you.
I totally, I, I agree. I'm guessing you see this with
your business, but like now I feel like there's a bit of a
cheat code that like if you are a founder of a business that has
like worked, you kind of see how important growth curves are, you
know, like cohort curves or growth curves or.
You know what have you in a business and like.
You know, you can apply the same thing to industries as a whole.
And it's like once you see it, it's hard to be, it's hard for
it to be unseen. And, you know, things that are
like really starting to compound.
It takes some like, you know, Herculean force to prevent and
stop compounding once it starts going.
And I think that they could apply that to the stablecoin
space and you could see it starting to compound or you
could apply that to our customers and like the cohorts
and bridge which are starting to compound now.
As I see it, you can like apply it to a bunch of different, a
bunch of different industries, but these like, you know,
starting these increasing growth curves.
Where there is like clear opportunity to continue to
impounding, it's like pretty easy now to gain conviction
regardless of how crazy the idea seems.
Yeah, I I think coming from a payments background and knowing
how worthy of disruption many of the base technologies are,
something so simple and clean a blockchain tech is also
compelling in its own right, so. 100 a hundred.
Percent. I mean, is that what is that
what attracted you to the space? No, I was on a very early wave.
I came for the cryptography and I, I stayed for the permission
is innovation and the agency that kind of it can confer on
people. So, but I, I do actually
appreciate the the operational efficiency gains that you can
get as well. Totally.
So does that mean that like, did you come in was like Bitcoin the
thing that brought you in or? Was yeah, so kind of when when I
came in, Bitcoin was the only thing that was that was around.
So it's a good. Let's talk about the things that
you actually offer. So kind of so far there's been
kind of a lot of kind of like Meta questions, but you have a
platform that offers services to businesses and they they kind of
they come in a number of flavors.
Can you walk us through them? Yeah, we.
We have. Five sort of core businesses,
but but at the OR business product business lines.
But at the end of the day, you know, we're totally focused on
serving developers, so a team. Comes to us and they have a
vision to build a fintech for their local country or to
facilitate payouts. Or you know, a government entity
might come, come to us because it wants to disperse aid.
But you know, these these applications, whatever they are,
come to us and they have an idea around how they want to use
stable coins to facilitate some aspect of their of their
business. And then we provide APIs that
enable them to to take advantage of this tokenized money layer
and to build products that reach more people or serve folks in
new countries or you know, facilitate payouts into
geographies that were cost. Prohibitive or inaccessible
before or whatever that whatever the need might be.
And, and the, the manifestation of that are these five products.
The first are our orchestration AP is that's the first product
we built and that is basically send one type of dollar in and
spit another type of dollar out. So U.S. dollars in, you know,
USD T out, USD T in, you know, USDC out and so on.
And it can take any way shape or form.
So like the US government might use these AP is to send U.S.
dollars? In we convert them into stable
coins and send hundreds of thousands of stablecoin payments
out to end end recipients. The second AP is are are
stablecoin issuance AP is so you can hit an API and you can
create your own stablecoin. So someone could send in USDC
and you could settle it as your own stablecoin and you would do
that so that you can access the economics underlying the
stablecoin. You basically get, you know, 4%
interest on the on the balances. So it and unlocks new economics
for you and it helps you control your dollars so you can make
sure it's on the right block chains, there's no burn fees.
You know, it is a, it is a money platform that you now control.
The third AP is are our FX products.
So you can send in dollars and spit out Mexican pesos or
Brazilian Reyes or a bunch of other currencies, EUR, GVP and
so on. Then we issue.
Cards. On top of that, and then we also
offer wallets. And essentially all of these
products have come together through various needs of
customers to build, you know, whatever stablecoin products
they need. How bespoke is it?
So kind of do you just provide the APIs or do you also do
consulting for say an aid agency comes to you and asks for often
they don't have the most tech forward kind of people in house,
right? So is it kind of like a dual
nature job where you kind of also consult with them or is it
just these are APIs kind of you, you do you?
Yeah. I mean, I think that it is at
the beginning it was like entirely consulting, like an
entirely consulting. That was partially because like
our APIs never quite offered what anyone wanted because like
the V1 maybe met like 50% of the needs of every customer who who
came in, but but also because we're kind of creating a new
category. And so this like whole segment
space didn't really exist when we started the company.
There really weren't companies that were building like, you
know, core financial services with stablecoins.
It like the market was more or less non existent.
And as, as we've created our AP is the market has come around
and matured through a lot of the use cases that have been built
on us and some others. And, and, and, and so the, the
early result is that we're sort of constantly on the frontier of
the market. And I feel like being on the
frontier of the market is, you know, you have to have to play
more of a consulting role. Like you see this now with the
AI companies, you know, they're doing a lot of forward deployed
engineers to help businesses adopt AI because it's not clear
how it's got. There isn't really a playbook
quite yet. And so I would say there's some
areas of our business where we're on the frontier still like
stablecoin issuance is very much on the frontier.
Teams are still figuring out how to issue a stablecoin and how to
grow a stablecoin, what it takes for a stablecoin to be
successful. Whereas other products like our
stablecoin orchestration business, there's now like many
years of data points on like what is working and what is not
working. And if you want to replicate a
use case that we've seen before, like you want to build a
stablecoin neobank like that is super plug and play.
Like you could come to our API, spin up accounts, serve millions
of consumers, and do it extremely quickly.
Super interesting to me out of kind of out of this bunch, the
intellectually most interesting use case is the is the stable
coin issuance just because kind of it goes to the heart of what
money is, right. So maybe give us some examples
of entities that issue their stable coins through you and
kind of what what kind of usage they see, what they use it for,
how much adoption they have? Yeah.
So, well, first I'll take a step back like why, why does stable
coin issuance need to exist in in our view, you know, today the
market is a is a duopoly, more or less it's USDC and USDT, both
of which have been amazing at building these markets and
building really strong products that have like millions of users
and a ton of adoption. However, neither of those have a
business model or or really an interest that is aligned with
enabling stable coins to be a core payment rail.
For instance, in order to convert USD T into dollars,
Tether charges you 10 basis points.
That makes Tether and economically unviable payment
rail. It is like literally would cost
you many hundreds or thousands or 10s of thousands of dollars
more to move money and settle it into a bank via USDT versus
using U.S. dollars. And the same thing is true of of
USDC. Both of these businesses are AUM
oriented. They keep the yield and so it.
It, it, it, it limits how big this space can be.
And we really think there needs to be, you know, a neutral
platform that is optimized for, you know, payments use cases,
that distributes the economics back to the developers so that
they can build whatever products they want.
They can enable better financial services for their consumers and
make sure that there aren't these burn fees or other other
costs that inhibit payments adoption.
And I think like the duopoly will remain really big and
meaningful and I think there will be this like whole world of
other applications that are built around it that ultimately
over time will be much, much bigger than those two.
Issuing your own save a coin. It was quite the rage for a
while and it seems even as someone who who really has
distribution, distribution such as Metamask, as soon as
incentives go away, kind of the outstanding stables drops
precipitously, right. The diopoly you talked about
kind of the way that I see it as divvied up the word.
So USDC is the US and USD T is everywhere else and kind of
they, they are dominant in their own sphere and somehow it
balances. What do you think has hindered
other USD stables from surging? Yeah.
I mean, so I will answer this question via via an analogy
which is sort of the way I think about.
I think about the the one of the ways in which I think about the
market, there is a history of products that were meaningful,
network effects, products that had huge adoption.
And remained monopolies or duopolies for periods of time,
only to lose over the longer arc of time to more open ecosystems.
And one such example are airline booking systems.
Totally sort of niche analogy, but early on with computers, the
first booking systems that were created first, sort of like
online booking systems were really the airlines.
They airlines put all their inventory into a database and
then booking agents could buy computers that were hardwired
into those databases that could look up those flights.
And you created a 2 sided network where the travel agents
on one side facilitated a ton of consumer demand.
And then whichever was called AGDS system, whichever GDS
system had the most inventory was the most attractive to the
booking agents, which then garnered the most demand, which
then attracted more flights into the booking system and so on.
Anyways, American Airlines created the first GDS system
called Apollo, gained huge adoption, was a huge driver of
their business because they basically put their thumb on the
scale. So if you search for a flight,
American was the first flight every time.
Then then United Airlines built another GDS system called
Apollo. That Apollo gained a ton of
adoption on all the routes where American was not successful
because there was no airline that was everywhere.
So United was in the coast and in Chicago and so on.
And so it gained adoption there. And for about 15 to 20 years,
they just completely controlled the GDS markets.
A bunch of other people tried to compete, Eastern Airlines tried
to compete and, and a few of these other continental tried to
compete. But ultimately they they built
failed systems because they just tried to compete head on and
they didn't have the network and so on.
And over time there was just no adoption.
It was too hard to break into the network effects of United
and so on. However, the European airlines
came around and the European airlines realized they were
never going to use an American or United system.
That's just like completely against that, you know what I
mean? They'd be ceding their entire
business to these American networks.
So the the the. European networks built their
own collective GDS system called Amadeus, and when it launched
they immediately won Europe obviously, and now today Amadeus
is the biggest GDS system. Completely supplanting United
and Apollo. And then when the Internet came
around, a fourth one came around, which was Worldspan,
which serve the Expedia's and so on, which is now also bigger
than Apollo and Sabre. And this all happened over a 40
year period. And so anyways, my as I tie this
back to the stable coin space today, a lot of the stable coins
are launching and just trying to do exactly what, you know, it's
like Eastern Airlines trying to create the exact replica of
Apollo, but doing it with no network effects and five years
too late. And so if a stable coin tries to
do that, it's unlikely to be successful.
And what I think we're going to see and what we are helping to
enable is a bunch of stable coins to compete in orthogonal
dimensions, which we think are completely wide open spaces, you
know the equivalent of Europe right now.
And these stable coins are all going to start small and these
networks that we're building are going to start small.
But if you have a 10 year arc of time or a 20 year arc of time,
the opportunity that we are chasing is so much bigger than
the opportunity you know that that USDC and USDT are going
after. They're going after just defy,
you know they're going after just AUM.
They're not sharing any yield. They have burn fees.
Those markets are much more limited than the global market
for money movement. And so that's the market today
that's small that we hope to win and scale over the next over the
next 10 years. Doesn't answer your question
directly, but like this is the arc of time and I don't think
anybody's going to come around and win tomorrow.
Like I don't think USDC or these network effects things take
time, but we're operating on a very meaningful timeline and we
think like this is an enormous, you know, multi decade sort of
platform shift and how money moves.
And I think we're investing behind the opportunity that we
think is going to be bigger over a much longer period of time.
Tell me about these orthogonal dimensions kind of like this
Europe of stablecoin. So kind of what are what are the
dimensions along which kind of you have to differ in order to
kind of potentially become meaningfully successful?
Yeah, like a a great example is banks.
So today it doesn't make any sense for a bank to use USDC or
USDT. If you think that stable coins
are going to be core financial infrastructure, they have to be
used by banks in some capacity. That's just the way money moves
and settles. Globally.
But a bank is not going to use the existing stable coins,
because if you're using someone else's stable coin, they're
getting all the yield. The deposits are held somewhere
else. On someone else's balance sheet.
And again, there are burn fees, so it.
So it costs more money than than using U.S. dollars.
Like think of a card network settling huge volumes of
transactions via USDC. You know right now it would cost
you more money to settle settle via USDC than it does to settle
on U.S. dollars. So these types of opportunities
are completely Greenfield because the existing stable
coins don't have the underlying structures or economics that
support winning in these spaces. They're being used in those
spaces because everybody wants to do an, a science experiment
to like figure out what could be possible.
But actually scaling adoption necessitates having the
underlying economics that align with that use case and align
with that entity. You know, a bank needs the
deposits to be held at their bank.
A bank needs to be capturing the the Treasury yield to the, you
know, to the extent that's where the funds are invested.
And a bank sure as heck needs to ensure that you know they're not
going to be paying a burn fee when stable coins are converted
in and out. I think you kind of you
implicitly already answered this.
But in crypto we kind of, we have this, this duality of world
views. We're kind of half of the people
kind of believe that crypto will replace banks and the other half
kind of believes that crypto will quietly sit underneath
them. So I I take it you fall into the
latter camp? I, I I fall into the into the
latter. Camp.
But but I mean, I think that even, I think it's sort of both
in the sense that like ultimately, if you look at the
crypto ecosystem and the stablecoin ecosystem, the the
foundation, the base layer of the stablecoin ecosystem are
banks. Because every stablecoin is
backed by, you know, every dollar based stable coin is
backed by dollars and treasuries and it could be EUR and euro
treasuries or whatever. But but those assets are held,
you know, at a bank. And so whether even if you're
die, for instance, you die is predominantly backed by USDC and
USDC is predominantly backed by dollars and treasuries.
So if you tie a lot of these stable coins back to the base
layer. It is, it is a bank somewhere
holding the funds. The, the question is, will
consumers ever engage with that bank the way consumers engage
with the bank today, Today consumers engage at that, at
that bank level, you know, to open a bank account and so on.
And in the future, it's very possible that that all of these,
this crypto ecosystem is built on top of these core banks that
are holding the treasuries and so on.
But a lot of the customer engagement happens through a
wallet. And so you're predominantly
engaging with the stable coin, you're issuing a card through
your wallet and so on through your through your wallet instead
of through traditional bank or neobank or or whatever else.
And I think that's totally possible.
And that's what I mean by both is that like banks will continue
to be important at the base layer.
And I do think more and more consumers are going to be moving
to engaging directly with wallets and in the beyond, just
like the adoption of bridge and the folks who were building on
top of bridge. What you can see and what we can
see as like a great proxy for this is just adoption of crypto
back cards is like a great example of this shift.
You know, why would consumers want crypto back cards?
It's because they're using a wallet as a primary spending
spending account and, and in effect replacing a bank.
And so whether you're using like a Ledger wallet or whether
you're using like a Phantom wallet or whether you're using
Gnosis or whatever else, you, if you're, if you're doing that,
it's like your wallet is effectively becoming a bank
replacement. True in that word where these
kind of 10s of thousands of potentially 10s of thousands of
banks kind of issue with their own dollar stable coins how much
will that still matter So kind of kind of the one of the
hallmarks of the dollar is that there's $1.00 right?
Kind of like there's kind of and it's, it's, they're fungible and
kind of like you, you know what you have depending on kind of
like who these things are issued by, obviously how much they
should be valued at could be very different, right.
So kind of you say you have, you have a Silicon Valley Bank
dollar kind of all of a sudden kind of like it may only be
worth $0.70 or something. And if you kind of if you look
at the clearing technology that kind of we have today, I see why
kind of why kind of this pluralistic ecosystem could,
could emerge. On the other hand, I think I
could also make the case that with prices readily available
for everything, you don't actually need a fungible money
token anymore. You, you could just pay in
fractions of fractionalized S&P 500 or kind of whatever stock
you, you may have. So kind of like this, this kind
of universal layer that monies used to supply us with kind of
like in as how much is it really still necessary while technology
advances the way that it does today?
I think it's a great question and I think it is going to be an
amazing experiment over the next 10 years.
As you know, you have all these different assets that are
tokenized and someone, their primary, you know, you could
have let's like take a card for instance, let's just assume that
a card remains the permanent form factor for the next 10
years. Big assumption, but you know,
you have a, you have a card and then.
Backing that card, you could choose as a consumer to back
that card with dollars or EUR or Bitcoin or gold or tokenized,
you know S&P, you know, token, tokenized stocks or whatever
else you deem to be the store of value that is interesting for
you as a consumer. And it's the first time where
that's like really possible I. Don't know what?
Consumers are going to are going to choose.
To date, it has been hard. To get large scale adoption for
people to use a investment asset as a spending asset.
I would say you know you see that with relatively low
adoption of like Bitcoin for payments because most people
believe the value of Bitcoin is going to keep going keep going
up and and the same thing with gold bucks.
You know they believe the value of gold is going to keep going
to keep going up. However, if you see if all of a
sudden government spending goes, you know, let's say like
American, you know, a dollar has become much less trustworthy.
I could easily envision a scenario where someone would
rather sit on top of tokenized gold or Bitcoin to spend than
U.S. dollars. And it, and it's, and it's going
to become, you know, 10 years ago that was impossible, like
literally impossible. And now it's, it's totally easy,
yeah. That kind of naturally segues
into the non-us dollar stable coin kind of domain, right?
If you look at the volume of stables in web, 399% are U.S.
dollar denominated. Is this is this a temporary
phase do do you think? For sure, it's temporary.
Yeah, Yeah, for sure it is like we see it across our business.
There is immense demand for other tokenized dollar formats.
So tokenized Colombian pesos and Mexican pesos and Brazilian
Reyes and GVP and EUR. There is just immense demand,
but the issuers don't really exist.
So we're just in the Super early innings.
And, you know, it's like, I don't know, like I like to read
a lot of like business history books, you know, and like you,
it's in, in the business history books, they're like, you know,
like the GDS example, they're like telling the history of
these GDS systems over the course of like 30 pages, but
it's 40 years of history. So like, you know, you like fly
through 40 years and it feels like it's this like wildly
intense thing and then you try to zoom out and you're like,
holy crap. That actually it, there was like
5 years where there were no competitors at all.
And then I think about like what people would write about this
moment in time. And right now it feels like
there's no other stable coins that exist.
And I feel like when they write the book of this period of time,
you know, it's going to take like 3 or 4 years.
But like the, you know, the, there's going to be like one
page between their only being USDC and USDT.
And then they're being like, you know, 1000 different, different
dollar formatted staple coins. And we're just like right on the
precipice of it. You see, like we see a bunch of
companies starting in Africa and Asia and LATAM and Europe
starting to build stable coins. And then we need to have the
minting and burning infrastructure that enables very
quick redemptions and conversions so that we could
operationally use these stable coins.
And then when that happens, we need to build the liquidity
between these different stable coins so that we can do all of
our FX and so on at like really high velocity with really solid
depth. And I think all of that will
come, but it will take time. How much do you think that
company issued Staples will be a thing?
So kind of if I think kind of like say, I imagine I'm the CEO
of Amazon or Walmart or something, kind of, I would be
absolutely giddy about the prospect of issuing Amazon
dollars that kind of my customers could hold because
it's an easy way of kind of financing the business.
You can give your, you can give kind of say 5% discount if you,
if you spend Amazon dollars at Amazon.
And kind of how do you think we'll see this?
And if so, when? I mean, I think that all.
Things that are economically rational will be tried and and
then it's just a matter of whether consumers.
Will, will want them. And and so, you know, it's not
that different from Amazon gift cards.
And so is this like a better replacement to Amazon gift
cards? Yeah, probably.
And and so as a result will it exist?
Yeah, probably. And like, is it economically
rational for Amazon to try it? Absolutely.
And so they over time, they probably they, you know, it's
just a matter of like when just over the arc of time, people try
and do things that. Are.
In their, you know, economic, in their economic interests.
I, I do think there's a question of like how this will work for
consumers and like what will the adoption be and so on.
But I think gift cards have the, the best, are the best analog.
And I like for Amazon, for instance, if you issue a stable
coin and you can put it directly in consumer, consumer wallets,
you bypass an immense amount of cost that exists in the gift
card market. You know, you're not, you're no
longer traversing on Visa MasterCard rails.
So you know, all those fees and the bank fees and you know,
prepaid car fees, all of those go out the window.
You no longer dealing with, you know, the distributors who are
sitting. Between you and consumers, you
know, putting these on racks and stores and you know, so on and
so forth. So there's a, there's a huge
amount of savings to be had there.
Yeah, this kind of naturally begs the question, what about
custody? So kind of you also offer
wallets as a service. Is this, this is also for your,
your customers, customers, right.
So kind of why, where do you, where do you kind of see the
trade off between kind of safe custody and and convenience
here? What, what kind of what's the
spectrum we, we you expect to see in in on consumers phones?
Yeah. I mean, we just think wallets
are. You know if if if the.
Future is going to be is going to if stable coins are going to
be like an enormous part of the financial future, then wallets
will obviously be incredibly important infrastructure because
all of these stable coins will have to traverse through wallets
and this is. Sort of why, you know, we we
acquired Stripe, acquired Privy and why sort of what that team
has done is so strategically important for our business.
And I just think for like developers who are who are
building products generally we have have taken the view that we
want to support wallet infrastructure in whatever
format makes the most sense for the developer.
So if they want custodial wallets, we will provide that.
And then Privy is the primary product through which we provide
non custodial wallets. And to date, we have seen that a
lot of companies are just, you know, more comfortable with
custodial solutions given the way some of their architecture
works today. And one of my one of my like
personal frustrations coming from the traditional financial
world is, is especially when we work with some of these
companies who want to adopt stable coins.
You know, are, are you familiar with FBO bank accounts saying
maybe no? OK, so basically every financial
product, because it's so costly to move Fiat, every financial
product that's built today is an FBO account, which means that
it's one account with a giant pool of money in it.
And then there is a company that independently maintains a
Ledger. So like, you know, if you have
your Revolute bank account or you have your cash bank accounts
or you have your Chime bank accounts or whatever, generally
all your money is in one more or less one giant account.
And then there's just a Ledger of like, you know, you know,
$2.00 of this balance goes to Zack and you know, so on.
Obviously in crypto that's like totally unnecessary because it's
trivial, easy to spin up wallets.
And the blockchain is like really good at ledgering, like
extremely good at ledgering. It is like what a blockchain is,
is built to do so. So there should never be a need
for FBO bank accounts ever again.
However, every single fintech that was created five years ago
or 10 years ago, all of their business is built on the
assumption that there is an FBO account.
So one of like my big frustrations coming back to
wallet is like all as a result a lot of these companies.
Need. To stand up a custodial wallet
that stores all the stable coins in one wallet and then they
Ledger it independently, which is like wildly inefficient
because you just don't like, like what?
What are we doing here? But because of where we are in
the adoption cycle, we're kind of this is how companies
currently must adopt. And and obviously the folks who
are coming around and building Neo Bay like a stable Coinbase
Neo bank from the ground up would never do that.
They're spinning up a bunch of custodial or non predominantly
non custodial wallets. Everybody has their own wallet.
They're letting the blockchain do the work and then they have a
team that's like one 100th the size.
To maintain a similar type of infrastructure.
Yeah, it's it's wired how inefficient legacy tag often is,
not just because anyone build it deliberately shoddily, just
because kind of it, it's layer on layer on layer on day.
So. Yeah.
And it's just at it's core it, it's just makes, you know, Fiat
makes this fundamental assumption that moving money is
expensive. And the net result of that is
all of this stuff built around the Fiat system to enable it to
feel like money is moving, but money never actually moves.
And stablecoins and crypto enable money to move, you know,
at more or less no cost, depending on the blockchain
you're using. But you know, if you're, if
you're using a low cost blockchain, it moves more or
less at no cost. And so then, when the movement
of money is phenomenally cheap, a whole bunch of new stuff is
possible. Yeah, what?
What do you see as the biggest risk to the Saber coin ecosystem
right now? I, I would say there are three.
So the first is that we only end up with USDC and USDTI think
this is like a huge, a huge risk to the to the ecosystem that we
are building. And I think that if we only end
up with those two stablecoins will be much bigger than they
are today. And those businesses will
obviously be wildly successful. But none of the economics will
go back to consumers because they're going to be a duopoly
and why would they do that? These payments use cases are not
going to be economically viable because they don't want high
velocity of money. They want static AUM.
And so stablecoins will only realize one, one thousandth of
their opportunity. And it's really, you know, as
much as it makes economic sense for there to be 1/3 or 4th or
5th or 6th or what have you, it's that you can't take it for
granted like it does it. Somebody has to build it.
The future has to be created by someone.
And, and we're certainly trying. The second major risk is
regulatory like we're we're all downstream of regulatory
requirements and to believe otherwise would be crazy.
And, you know, we have seen what European regulation has done to
slow the growth of European stable coin market.
And it's been really hard to get that market catalyzed in any
meaningful way. And, you know, the US is being
litigated and re litigated. We saw genius.
And then we have market structure and the community
banks are fighting and the big banks are fighting.
And everyone's saying that stable coins are going to
destroy, you know, you know, going to going to take away all
local businesses because community banks are going to go
away and there's going to be no lending and you know, so on.
So it's like a whole, you know, thing that's going on right now.
The third major risk is Deepak is you know, one of these one of
these two or, or if there's a third one that gets really big
or something. But you know, the we're still at
this very fragile point in the market where the trajectory can
be materially shifted by some major erosion in in trust.
And so I think those are those are probably like the big.
Risk right now. Are there any that you think of
that that I missed? Over reliance on the US dollar.
So I mean kind of like if if you look at the the global
geopolitical situation, it seems unwise to kind of have 99% of
the stables market denominated in U.S. dollars.
I totally I totally agree and we are like.
We want, we just want, like as many folks in as many countries
to be building as many stable coins as they possibly can and
as quickly as possible. Quicker than USD one.
So I mean, Bridge is not a very old company, so you might not
have a lot of regrets, but kind of like if you were to kind of
start over again today, anything you would do differently?
I would say a lot of our regrets stem from a similar behavior,
which is that it was it was so hard to start our company.
And, and like, I think that I don't know how folks listen to
this might think of our company or what have you.
But like you, you know, there was like a whole year where we
did nothing but fail, like, you know, and, and everybody and at
the same time, the entire crypto market was just a complete
wasteland. I mean, this was Terra Luna
happened and then FTX happened and then SVB happened and USDC D
peg and it was like people were like, what are you even doing
wasting your life building? Literally nobody is going to
going to use this. And so we were kind of like
children of the Depression, where like our, our like
cultural norms as a company were shaped by scarcity.
And we were constantly fearful that like the market was going
to go away. And that resulted in constantly
being behind customer demand and when the business really started
working. And so we found ourselves like
scrambling from like issue to issue to issue.
And it was like so interesting for us because like we looked at
the business and we were always like this could all fall apart
tomorrow. And our investors look to the
business and they were like, what are you guys talking about?
Your business is going so well. This is like one of the best
companies that we've seen in a long time.
And we can never get it through our head, which which enabled
us, which which forced us to like under higher, you know, and
we really, you know, redline the team.
It it caused us to invest, you know, behind a bunch of a bunch
of demand. It caused, like me mentally be
to be, you know, never sort of quite realizing where bridge
was. And it's sort of like arc of
it's it's sort of like journey and building a company that's
probably like not one thing, but a theme of things that
consistently. Plagued us over the last couple
years. I let it stand, although kind of
like it it, it veers into humble brag territory.
But Zach, where, where, where can people follow your work and
learn more about what you and Bridge are building?
Visit us at bridge dot XYZ. If you're interested in using
the product, you can sign up there and then you can follow me
on Twitter. I'm just ZC Abrams and then
bridges handle is at Stableport so follow us.
Fantastic. Thank you so much for coming on.
Yeah, thank you for having me. This is very fun.