Stablecoin special: Zach Abrams (Bridge) and Henri Stern (Privy)

Zach Abrams, the CEO and cofounder of Bridge, the leading stablecoin orchestration platform, and Henri Stern, CEO and cofounder of Privy, the leading crypto wallet infrastructure, sit down with John to discuss the future of stablecoins, issuing, and what it will take for crypto to become ubiquitous. Both companies recently joined Stripe, and are uniquely positioned to dissect how crypto is changing financial infrastructure. Key moments (00:00) Introducing Bridge + Privy (06:39) How stablecoins are being used today (14:27) US Dollar dominance (25:50) The future of banking (34:35) Blockchains (42:27) Building a modular stack (47:14) Open issuance (56:55) M&A (01:11:02) The future of stablecoins

• 0:00Speaker 00

  Stablecoins are the biggest financial innovation happening right now, so I invited two experts for a pint. Zach Abrams, founder of Bridge, the leading stablecoin orchestration platform, and Henry Stern, the founder of Privy, the leading crypto wallet infrastructure. Both these companies recently joined Stripe via acquisitions, and they're in the thick of helping both crypto companies and regular companies build with stablecoins. Cheers.

• 0:21Speaker 01

  Cheers.

• 0:24Speaker 00

  Okay, lots to talk about with both Bridge and Privy. I realized with Bridge, when you started it, it was 2023. Was that at the very nadir of the doom loop for crypto?

• 0:35Speaker 01

  We started right before then. So we started right when it was interesting, which maybe made it worse.

• 0:41Speaker 00

  Which is fine.

• 0:43Speaker 01

  You did not know it was going to be horrible. This was, it wasn't 2023 is when we launched our APIs. 2022 is when we start, Sean and I started the company.

• 0:51Speaker 00

  Okay.

• 0:52Speaker 01

  And raised money. And then immediately after we raised money, Terra Luna happened.

• 0:56Speaker 00

  Ah.

• 0:56Speaker 01

  And then the whole space was nuked. And then FTX happened and it was nuked again.

• 1:02Speaker 00

  Okay, so remind me of the vibes here. Like 2022 was still, like that was pre-FTX.

• 1:09Speaker 01

  Pre-FTX, the things were going really well. It was before, like when the Ukraine war happened, the whole sort of economy started to shift. And it was before that. VC funding was really high. And then by June, it was gone. Everywhere was, everything had, you know, the most of the space had evaporated, but especially in the crypto space. And at the time, to mark this in crypto years, when we started the company, the first idea we had was using your bank account to acquire NFTs. So it was the NFT phase of. The carbon dating of the company. Yes.

• 1:54Speaker 01

  And that's where almost all the volume was, was NFT drops.

• 1:57Speaker 02

  The other thing I was gonna say just about Bridge's beginnings is we had an early all hands at Privy, where it was a lunch and learn and one of our teammates, Max, worked with Zach Pryor. And so Zach came to pitch Bridge to Privy.

• 2:11Speaker 01

  Yep.

• 2:11Speaker 02

  Be like, we're gonna work on stablecoins. And we were like, what is this guy talking about? This is not a market. It does not exist.

• 2:17Speaker 01

  Well, on our side, when the NFT market blew up, our initial product went away. And we were sort of pivoting around to try to figure out what we wanted to do. One of our first ideas was to build wallets as a service. And which was, is obviously your business. At the time, I don't think that you, maybe you existed, but at least it wasn't, you weren't, you weren't on our radar at all. And I remember looking at the space and being like, no, that's a tar pit.

• 2:50Speaker 01

  There's nothing for us to build there. It's so deeply competitive. And then we quickly moved on and went our way to stablecoins. So for me, looking back, like you went through the exact same thing, saw that same idea, saw that same opportunity and was like, yes, this is, this is the thing. Obviously built something really good there.

• 3:06Speaker 00

  And so how do you describe Posh, Bridge does today to people?

• 3:10Speaker 01

  We enable developers to build with stablecoins. And it could be anything they want to build. So we help folks like SpaceX use stablecoins to move money cross-border. We help folks like Dollar App build neo-banks on top of stablecoins. We help folks like Felix Pago build cross-border payments experiences with stablecoins. We help treasurers rebalance their internal funds with stablecoins. Stablecoins are sort of this broad payment platform, on top of which a bunch of new payment experiences can be built. And we build APIs to let people use it.

• 3:41Speaker 00

  I want to come back to all those use cases, but maybe first to catch up. So how about Privy? Where in the crypto hype and then bust and then re-hype cycle did you guys start Privy?

• 3:51Speaker 02

  Peak hype.

• 3:55Speaker 02

  I'd worked in crypto prior and I think I came out of that experience thinking this space is incredible. We have these rails that can be used to sort of codify ownership on the web in a way that hasn't been possible before, but also no one cares about building like products that people actually want to use. And so this is an endless space where we'll work on protocols, but never actually, no offense to protocols, which I think are deeply useful, but only if they get carried through all the way to.

• 4:18Speaker 00

  You need the actual end customer use cases.

• 4:21Speaker 02

  And so I left and I think Pete Crypto brought me back, which is I was like, I want to work on data tokenization, which was the initial idea. A good place to do that was crypto. So our first version of it was can we build data tokenization that would enable crypto companies to privately KYC people, which is a very 2021 idea of like, you know, these private pools of liquidity that you need to be KYC for.

• 4:43Speaker 00

  Oh my gosh, I remember.

• 4:44Speaker 02

  That led us to wallets, which was, this is really hard because people don't have the means of actually signing for things and most users don't want to get a wallet. And so we're like, we should solve that problem first and then we can come back to it. And that's how we got to.

• 4:58Speaker 00

  And so how do you describe to people how privitos today?

• 5:01Speaker 02

  We build basically digital asset accounts. Wallets are the means of controlling cryptos, stablecoins, any digital asset. And so we build APIs so developers can build basically digital asset accounts directly into their app rather than requiring a user to go outside the app to get an account. You can get it as part of your neo bank payments platform, consumer app, and those are the people that we serve. But basically we give you the means of controlling assets in app.

• 5:27Speaker 00

  Yes. So is it basically no one plans to be disrupted by stablecoins, funnily enough? And so if you're a remittance app, if you're a neo bank, if you're any of these guys, you want to natively build digital asset functionality into your app and you guys provide the wallet infrastructure for them to do that?

• 5:46Speaker 02

  Exactly. And I think the goal is to say like, you shouldn't need a PhD or deep interest in self sovereignty. In order to want to engage in the space, you should be able to do it as easily as you do anything else on the web and we make that possible.

• 5:57Speaker 00

  When I talk to business people who are not in Stablecoins, and especially maybe say people who are in fintech but not in stablecoins. They say, I'm sure hearing a lot about stablecoins, but it doesn't seem like they're actually happening yet in a real way. And obviously, the Stripe Bridge Privy House view informed by all the data we're seeing in our customer usage is like, no, they're happening. Like, they're maybe not happening for you yet in a big way, but they're happening at an industry level. But I think people have a hard time visualizing because they say, well, I don't, you know, pay at the bar using stablecoins. I am myself not paying deep today, therefore, I just don't see it. Maybe you guys can level set for people what's actually working? Because like, consumer retail payments in the US are not, you know, the hotbed of stablecoin innovation.

• 6:42Speaker 00

  Just where is the stablecoin stuff happening today?

• 6:44Speaker 01

  The first use case was predominantly cross-border payments. And it was taking money in, you know, our first developer was this team called Zulu. And they were a company based in Colombia, and they were taking Colombian pesos, converting them into stablecoins, sending those stablecoins through the Bridge APIs, converting them into dollars. So you go from Colombian pesos to US dollars via stablecoins. And for a bunch of reasons, it was cheaper and faster. And they showed us the cross-border payment opportunity. Because before then, I actually had no idea that stablecoins would be useful for cross-border payments. And then since then, we've seen like neo-banks, like Dollar App and so on, become very, very successful,

• 7:26Speaker 01

  building on top of us. And there are global US dollar app built on stablecoins that can be used all across Latam.

• 7:33Speaker 00

  Okay, so cross-border payments.

• 7:35Speaker 01

  Yep.

• 7:36Speaker 00

  Dollar balances, dollar holdings for people in emerging markets. Anything else?

• 7:43Speaker 01

  After that, we've seen, so SpaceX came to us, they're selling Starlink all over the world. And so as a result, they're collecting local, so people are paying for Starlink and, you know, dozens, many dozens of different countries with their cards. So they're getting local currencies in all these countries, and they need to repatriate all those funds to the US. Because they fund their business out of the US. And so they started using us to bring currencies back to the US. And so they would take money out of a bunch of different countries in Africa and Latam and send it to the US via stablecoins.

• 8:16Speaker 00

  How do they do the initial conversion from, you know? Rwandan local currency, or Bolivars, or what have you, to US dollars.

• 8:25Speaker 01

  So, we do that for them, but the way that we do that is that in almost all these markets now, there are very robust FX markets, effectively, that exist between a stablecoin like USDC or USDT and the local currency. And this was like the last, you know, with each one of these crypto cycles, like more of the infrastructure gets built that enables the next thing. And in the last crypto cycle, the big thing that happened was that all these local exchanges started. So you had local exchanges in Latam, in Africa, the Middle East, the Philippines, all begin to get scale. And those exchanges are dominated by stablecoin volume, and they've effectively just become alternative FX markets.

• 9:10Speaker 01

  What's the remaining gap like? Is there the biggest gap between marketing and reality of this is doable today? I would say that the biggest thing that we see in the market is that these FX markets, so, you know, converting between Mexican peso and USDC or Mexican peso and dollar. Some of these fiat markets are phenomenally deep and phenomenally efficient. So, someone could send $100 million to Mexico and convert it into pesos without moving the market. But the stablecoin market is not as deep. So, it's hyper-efficient. The interesting dynamic at play is that in the fiat FX markets, as you get bigger, your pricing comes down.

• 9:52Speaker 01

  In the crypto markets, as you get bigger, your pricing goes up because the spreads widen. So the market is way more efficient for startups. I see. Over time, the markets get deeper and deeper, and so the startups are scaling and scaling and scaling. We see that with like Felix Togo and others.

• 10:09Speaker 00

  I think what you're highlighting with the FX dynamic is underappreciated in crypto being a platform on which, you know, it's like a shelling point for everyone to come together to create better things. And so we now have just more efficient ways to convert bottle of ours to US dollars than we had before. It's not particularly crypto native, that particular leg, but crypto is load bearing in bringing everyone together.

• 10:33Speaker 02

  That's kind of what we see, I think, in our market, which is to say, like, you know, my analogy is, is stable coins. It's a very self-serving software to hardware analogy, but like stable coins are like Starlink for, you know, money. Where you need the ground stations to actually, you know, beam the pipes up from, you know, coax or fiber onto a line of sight like zero gravity, like space. Once it's in zero gravity, it's super efficient to actually move the data around and move the money around. But the ground stations on the ground have to be built. And at least where we take care of the market is mostly after you guys have done the really hard work of converting fiat to crypto, then the question is, what can you actually do with the crypto? And that's where, you know, obviously wallets and those are the powers that people will come to us for.

• 11:15Speaker 00

  That analogy may be deeper than you think, because do you know in the Starlink network where they started with more ground stations and then over time they're enabling more satellite to satellite connectivity to reduce the need for ground stations? And so it could be a pretty deep analogy. Okay, same question to you, Henry, where just what are people actually using stable coins for?

• 11:35Speaker 02

  For us, it's so a lot of it is basically once, you know, wallets as the account system are kind of like the control plane. And once you have the stable coin, what can you do with it? And so I think the majority of what people use us for is one, specifically the holding. I want to hold these assets and I want to put these assets to work. So it's opening up credit markets and yield generally for people who otherwise didn't have access before. And one of the things that's like shocking about USDT is like USDT is like a zero 100 hedge fund. Like they keep all of the carry for you, which speaks to how like much people want stable currency across the world. And then the other thing that we're seeing to your point about startups is kind of the emergence of like fintech super apps. A lot of early stage companies that now have the actual stack to build

• 12:17Speaker 02

  everything that has taken, you know, the neo banks of the world, the revolutes, the clarnas. Decades to build than they can do in a year because everything's ready for them here. So those are the sort of two types of use cases, which is I want to build like bank accounts that are fully global, that work for any consumer once they can get their hands on crypto. And then I want to make sure that these assets are put to work either through traditional markets or by actually investing in other assets.

• 12:38Speaker 01

  Yeah, that's what, I mean, one of the things I'm most optimistic about is you have, like the financial world before, if you wanted to expand into a bunch of different countries, you had to uniquely build your US infrastructure, uniquely build your European infrastructure, uniquely build your Mexican infrastructure. And the next company that came around had to do the same thing, you know? And then the next company around had to come and do the same thing. And, uh, you know, now what's possible is you have a wallet and one person just needs to build a US dollar stablecoin. And then you throw it into the wallet and now you have a US balance. And then someone else in the world needs to build a Naira stablecoin and now you have Naira. Someone else in the world, JP Morgan, JP Y stablecoin. Now you have.

• 13:20Speaker 00

  Yeah, previously it was N squared and now it's just N.

• 13:22Speaker 01

  Yeah, exactly. You kind of open source your financial stack. And, you know, it's like very early days in this. And to get here, we need local stablecoins. And right now, stablecoins are dominated by US dollars. But you open source your financial stack and the companies who are building on top of this are behind today, but basically making a bet that the cumulative power of all the builders in the world is going to create a better application over N years.

• 13:46Speaker 00

  Why have the local stablecoins been so slow? Cause like, you know, US dollars are not that big a share of global currency balances. But the, you know, US dollars are 95 plus percent of stablecoin balances. What's going on with the euros and the Canadian dollars and the Swiss francs?

• 14:04Speaker 01

  My theory is that this is like revealed preference. US dollars are not that big a share for, you know, physical reasons. Exactly. Whereas the true preference, if you go to a country that, you know, I can think of many, and you have a crisp hundred dollar bill that's worth a lot more than like any other currency. I've traveled to places where I have euros and dollars and people are like, no, give me the dollars first.

• 14:24Speaker 00

  So I believe you in the emerging market context where, you know, clearly if you're in Turkey and you can hold like Turkish lira or US dollars, that's not even really a contest. I don't, as a European, I'm not that unhappy holding euros. I'm not that concerned about it. And so Euro stablecoins, Swiss franc stablecoins, just other major market stablecoins should be a lot bigger.

• 14:44Speaker 02

  This is where, I mean, I don't know, the two dichotomies to me is like US versus global. And then it's like B2B versus B2C. I think the majority of the stablecoin market today is B2B. And that'll change, but like the reality is basically where it is B2C, it's emerging markets, hence the US dollar preference. And where it's B2B, it's American companies, hence the US dollar preference. So supposedly it'll even out over time, but at least for now, it seems to be revealed preference that like dollars are.

• 15:09Speaker 01

  I think that's probably true. I think that the majority of the two main use cases for stablecoins for, or the main use case for stablecoins for many years was trading. And in that market, everything is just quoted in dollars and there's a real network effect. So, you know, as more and more liquidity was built around a few dollars, that that makes sense. I think over time, you will see more of these stablecoins, but but ultimately those same network effects are going to, you know, I think perpetuate. I think you're going to see while like physi-, you know, fiat US dollars are X percent of the global market. A stablecoin US dollars are going to be, you know, way more forever. But I do think we, and I hope we get to local stablecoins being 15, 20% of the market

• 15:53Speaker 01

  because you need them transactionally in all these markets and you want to have alternative FX markets and you want people to be able to store in local currencies. I think that's going to create much better experiences, but we're not there yet.

• 16:04Speaker 02

  And to your point just about the history of this, Tether got started as a like deposit asset for trading. You didn't want to basically have to trade out back to dollars. You didn't want to hold your position overnight. So you would move into a stablecoin.

• 16:15Speaker 01

  And they couldn't get dollars.

• 16:16Speaker 02

  And they, exactly. But I think like it's a 24/7 currency. You don't have to like wait to move. So I think, you know, why should you care if you're working on a business today that broadly handles money, but is like, you know, my money works fine.

• 16:29Speaker 01

  Yes, yes.

• 16:30Speaker 02

  It's like, I think the UX is going to be much better for consumers to actually have an always on like money rail. Beyond that, there's a reality which is

• 16:41Speaker 02

  You get to have a relationship with your user that's much longer lasting. Extensively Uber has done this where Uber drivers get financing for their cars via Uber. But now any company can really do this where instead of like paying out and then the relationship ends because the bank now owns the user, they can maintain a relationship with the user via these accounts that they enable. So every company ostensibly has a neo-banking arm that they can build into this to create a much tighter loop of benefits to their constituency.

• 17:07Speaker 00

  But what's the long-term equilibrium here? Because presumably consumers don't want their money spread out across, you know, 15 different services they interact with, or do they?

• 17:15Speaker 02

  I mean, credit card shopping such as I see it on Reddit, sub threads would say that maybe they do. But I think this is the entire point and where at least Privy gets dinged a lot with embedded wallets is it used to be the wallet was the users and you would carry it with yourself from like app to app to app and you had a single point where you held everything. And that's great for, you know, centralization of these controls. It's really bad for UX because it means you're running third-party software on every site you go to. We've enabled an inversion of that whereby the app can serve their own self-custodial wallets as part of the app experience, but it creates this fragmentation. And at least to me, this is the real opportunity for building these like money networks where if you can help users make sense of that fragmentation where even though you have

• 17:56Speaker 02

  your assets in 15 different apps, each app on your phone is a bank. You have some control plane where you can manage those assets between all of them.

• 18:04Speaker 00

  It's not that fragmented if it's programmable.

• 18:06Speaker 02

  That's the hope.

• 18:07Speaker 01

  Yeah. I think that the, the, this question is like overwhelmingly going to be dictated by regulatory requirements. I think in like a free market, then what we would resolve to like 90% US dollars or something.

• 18:22Speaker 00

  Is MICA good, bad, fine?

• 18:24Speaker 01

  I would say it seems to be fine, but it could be bad. And I think the thing with all of these like regulatory requirements are that they're sort of like untested. And so what is, what's basically happening is there's like a few folks who are, who are compliant in Europe and they're stretching it to, you know, the, the regulatory requirements to meet their like specific needs. And then over time, they're going to clamp down and what it looks like to be complying in Europe will probably be different, very different in five years versus today.

• 18:58Speaker 00

  Oh, interesting. So you're saying we haven't seen MICA enforcement yet?

• 19:01Speaker 01

  Yeah.

• 19:01Speaker 00

  And that will inform people's views of MICA?

• 19:03Speaker 01

  Yes, exactly. Like, the way that USDC is complying with the requirements are very different than the way local European issuers are complying with the requirements.

• 19:14Speaker 02

  The interesting delta for us at least was we saw European customers trying a lot more things under MICA because at least they knew ostensibly where the lines were.

• 19:24Speaker 00

  Yeah.

• 19:24Speaker 02

  Which wasn't true before Genius. And now we're seeing that with Genius where people are willing to engage. So I would argue that compared to what existed before, which was no clarity and no willingness to engage, something is better than nothing.

• 19:35Speaker 00

  It's been very good for the European crypto.

• 19:36Speaker 01

  Totally.

• 19:37Speaker 00

  Yeah. You described Tether as a 0.100 hedge fund. I hadn't heard that before. But it feels to me that paying out 0% of the yield is not the long-term equilibrium when it comes to stablecoins. And so what happens to Tether?

• 19:53Speaker 02

  So I went to Kenya on holiday a year ago.

• 19:59Speaker 00

  Well, it's very widespread in emerging markets today.

• 20:01Speaker 02

  And there was a poster that had a crypto app on it, and there were two logos on it. It was Bitcoin, it was Tether. So I do think brand matters in a sense. And I think like, if you ask someone, do you want Tether or alternate stable, they will pick Tether. And so I think for the most part, and you have more views on this with open issuance, but like, they will be brought into our operability and every app can have their own so that they can choose how to program their stablecoin. But I wonder if the network effects are already so entrenched and so powerful that maybe they're forced to change somehow the yield management works, but it's too far established for it to be a complete inversion?

• 20:37Speaker 01

  Yeah. I mean, I think Tether is going to be wildly successful. I mean, it already has been. It's like arguably one of the most-

• 20:44Speaker 00

  They seem to be no hate for themselves.

• 20:45Speaker 01

  Yeah, one of the most successful fintechs in the last like three decades or something. But I think there will be, and continue to be, I think there is this like enormous network effect behind their business. That being said, I think that pretty soon, like in the next year- Any consumer who wants access to the risk-free rate is going to have access to it. And I think that is going to create a sucking sound from some USDT. But I also think that it's going to take the market and expand it materially. What I hope happens is that USDT grows, but instead of it's at 60%, 70% of the market, it becomes 10% of the market.

• 21:27Speaker 02

  The alternative point is simply, also, let's figure out the alternative. The reality is you can hold Tether, or you can lose 25% of your net worth every year.

• 21:36Speaker 00

  I agree. I'm just wondering, what's the long-term competitive equilibrium? Like, in five years, do you think Tether pays yield?

• 21:41Speaker 01

  No.

• 21:42Speaker 00

  Really?

• 21:43Speaker 02

  No. I would take the same side of that.

• 21:45Speaker 00

  Just because that is their worldview.

• 21:47Speaker 01

  Yeah.

• 21:48Speaker 02

  I don't think they have to in order to stay dominant.

• 21:50Speaker 01

  Yeah. The areas where Tether is most successful, which is in trading, there is no need to pay yields back, and the network effects there are really material. That being said, I think that the trading use case was 100% of the market two years ago, was 80% of the market today, and will be 5% of the market in some number of years.

• 22:12Speaker 00

  We're talking about the international adoption of stablecoins. Where I've been explaining it to people is, I feel like it's pretty common that you have very network-effect-y products that are adopted first internationally and then come into the US. And so WhatsApp used to only be used internationally. And then it was used by Americans who are cosmopolitan and had international friends. You know, or like, I travel abroad a lot, you know, or whatever. It's like, if you have WeChat, it's because you know people in China. And so for a while it was that. And now it's more mainstream in the United States. And it's not totally broadly used, but it's pretty commonly used. That feels to me the story of how stablecoins get adopted in the United States,

• 22:57Speaker 00

  where you start to see some of these network effects being used. Is that the case, or will we just see other ways they're adopted?

• 23:04Speaker 02

  I think we're at least seeing a complete sigmoid in terms of like where the adoption's happening. So you have these absolute whales, like apps and companies that have, call it 20,000 users, but the users are moving millions of dollars in assets through trading and investing and using stablecoins heavily in the US and elsewhere. And then on the other side, you've got a long tail.

• 23:24Speaker 00

  So the whales are the businesses or the traders?

• 23:26Speaker 02

  The traders.

• 23:27Speaker 00

  Okay. So you have very large US traders doing all this stuff.

• 23:29Speaker 02

  Exactly. And then on the other side, you've got much smaller consumers abroad in a much wider network that you're talking about. But I suspect you kind of see this, like, you know, it's going to be a two-pronged strategy where it comes in through both ends.

• 23:43Speaker 01

  I think that's true, but I mean, I think right now we see, you know, the dynamic that you're mentioning certainly playing out. And like a great example of this is like the poly markets of the world, like global markets built on top of stablecoins. They're now coming into the US. Those same markets are going to be stablecoin oriented and so people are going to be able to deposit from their bank accounts, but it's all going to land in stablecoins because you want one global market. And we're seeing the same thing with fintechs where, you know, you have folks who are expanding internationally, eventually you just want one dollar balance. You're not going to want many different, many different dollar balances. And I think that's like definitely the case. I think that as we look, you know, startups that are starting today, even if you were

• 24:25Speaker 01

  just serving the US market, it makes sense for you to build on stablecoins for, you know, it's cheaper, it's like much faster go-to-market, but you also know that eventually you probably will want to go international and this is the foundation that enables you to do that.

• 24:41Speaker 00

  Everyone wants to be future-proof and stablecoins are the only way to do that.

• 24:45Speaker 01

  Yes.

• 24:46Speaker 02

  Well, it's cool. As a European, at least, you know, as a French person, like it always felt tough to see French startups because the market's too small and like there's too many European like differences, like selling into France doesn't mean you can sell into Spain or Germany.

• 24:57Speaker 00

  Yep.

• 24:58Speaker 02

  And the US has never had that problem because the market is like so big.

• 25:00Speaker 00

  Yes.

• 25:01Speaker 02

  And it's kind of cool to see that at a fintech level, which is always kind of landlocked, playing out globally, where there's just a much bigger opportunity if you can build a global business from day one.

• 25:09Speaker 01

  The other like amazing dynamic is that the fintech Ecosystem just overall has been very concentrated globally. Like in the US, we don't appreciate how many banks there are. And how many of them are willing to support, you know, all these different crazy fintech ideas? And how many of them have APIs and, you know, lending products or card products or what have you? But in some countries, you go into a country, there's one bank. And that bank has like no interest in enabling you to build a fintech. And as a result, the consumers in that market see no advancement in their financial experiences. And so stablecoins represent like the first opportunity for like large swaths of the world.

• 25:48Speaker 00

  People in the US do not have a good mental model for how different the banking ecosystem in every other country is. Because the US is so sweet generous, it's like 5,000 banks or whatever the number is currently in the US. Whereas every other banking market has between three and eight banks. It's very concentrated and generally pretty steady.

• 26:09Speaker 01

  Yeah, when we were like talking to a bunch of founders in all these different markets, some of them would tell us like, oh, we're getting our bank license in, you know, whatever country. And like in my mind, I'm just like, oh, that's like the equivalent of getting like an MTL or something like whatever. You know, and in their mind, like, no, this is like a huge, a huge deal. And now I have like a much deeper appreciation.

• 26:31Speaker 00

  Who will build the successful neo bank in the US?

• 26:35Speaker 01

  And was it going to be a single super app? Or is it actually going to get fragmented as like, you know, there'll be more of them because it's.

• 26:43Speaker 00

  Okay, it sounds like you have a thesis here.

• 26:46Speaker 01

  Well, I think it's actually much more likely to your point about like this is open sourcing the like fintech stack. Like the reality is you actually get to pick and choose the layers at which you want to play. You can offer credit to your consumers or you can offer like, you know, balances to your consumer. You can offer payments to your consumer, but you don't have to bundle all of them if you don't want to. So I think we'll see like two things, we'll see, I would argue that today, the closest things.

• 27:06Speaker 02

  Are like, I guess, call it Robin Hood and Cash App are the closest things I see to like a European style neo bank working in the US. I think gravity has shifted thanks to the sort of stuff that crypto is enabled and stablecoins have enabled. And I basically wonder if it's going to be singular platforms or if it's just going to become a part of the fabric of many more platforms.

• 27:26Speaker 00

  I think that will happen, but if you think concretely, like if you measure neo banking primacy as where does your paycheck get deposited? Like at least in my case, I moved to the US for college and when I was there freshman year in college, I set up a Bank of America account and my Stripe paycheck to this day is like deposited in that Bank of America account. And like in 10 years' time, who are people getting their paychecks deposited into?

• 27:52Speaker 01

  I think that the market is going to, I think that these banks are still going to be really big. They were, same thing happened to me. I was on, I was on campus and someone gave me a free Duke t-shirt to sign up for a bank account. And I've still had that bank account, you know.

• 28:10Speaker 00

  So they really understand the CAC to LTV dynamics or like those t-shirts are cash money.

• 28:15Speaker 01

  It's like a venture type outcome for them.

• 28:18Speaker 02

  Like is banking going to be as sticky as it was if you have a lot more competition in the market, which ostensibly this will, you know, engender.

• 28:26Speaker 01

  Well, what I think is going to happen, I think that most financial experiences are going to be rebuilt on blockchains. I think lending is going to be rebuilt on blockchains. I think obviously like trading is going to be, I think saving is going to be, spending is going to be, I think a lot of these financial experiences are going to get rebuilt on blockchains and they will all compound each other to make the next generation of neo-banks that are building on top of crypto wallets materially better across a bunch of, a bunch of different, a bunch of different dimensions. And as a result, I think there will be a pretty material fragmentation of the, of the, of the market versus where it is today. And it's already relatively fragmented.

• 29:07Speaker 02

  A very hard day for us at Privy was SVB. It's a lot of stressful.

• 29:12Speaker 01

  That was the first week we launched.

• 29:16Speaker 00

  Oh my God.

• 29:17Speaker 02

  Yeah, that was, it was a long few days and we were, you know, asked by our backers to diversify risk a little bit more than we had up till then. It was our only bank account. And so we've been built basically like, you know.

• 29:33Speaker 02

  Accounts at like three different institutions. And at least the pitch for self custody in crypto is to say the account is yours. The skin that you choose to take it through, meaning the UX of the actual sort of rails, the add on services that you get, all of that will come through the sleeve that I guess you put the account in.

• 29:48Speaker 00

  Yes.

• 29:49Speaker 02

  But the account is yours and can be ported over and over and over again. So I think that's one of the big questions I'm interested in over the next decade is what is the split of custodial versus self custodial accounts?

• 29:58Speaker 00

  So this is like a very old time analogy, but many people don't realize that, you know, Chase built their own software, you know, the big banks do. But if you bank with a credit union or a midsize bank, they absolutely do not build their own banking software for the ledgering and managing the accounts and anything like that. And there's, you know, Fiserv, there's Jack Henry, there's First Data, there's a few companies like this who build the bank cores as they're known. And so the banks are actually, you know, a balance sheet and a credit strategy and a brand and various things, but in front of all this software that is provided by someone else. And so are you saying that your vision is that there's much more of that where you can plug in the crypto equivalent of a bank core?

• 30:40Speaker 00

  Again, this is like a total tradfi analogy, but you can plug in the crypto equivalent of a bank core into a neo bank or, you know, maybe Uber and Lyft want to build this for their drivers, you know, or something like that. Is that basically your vision of where things go?

• 30:53Speaker 02

  That's, I think, the hope in many ways for where things should go or could go. I think, you know, it's very much an open question. It's a big part of where we feel is privy that we have a responsibility to trying to make sure that it's kind of an even playing field and there are good opportunities on both sides of the aisle. But yeah, I think that's exactly the point. I think the point would be the ledger.

• 31:12Speaker 00

  Yes.

• 31:13Speaker 02

  Is already public.

• 31:13Speaker 00

  Right.

• 31:14Speaker 02

  Because it's on chain. The account is really like cryptography. It's like private keys that people should be able to take with them. And accordingly, you can move the banking core yourself as a consumer. And I think the Uber and Lyft analogy is at this point a very tired crypto analogy. I'm sure you've heard it. But the, the old crypto dream was what if Uber basically enabled you to like have a different rating system based on where you were in a different pool of like the core network is shared, but then the actual app and delivery mechanism through which you have is something that you can like build on top of much, much more easily.

• 31:46Speaker 00

  Yeah. Was that a woefully out of touch analogy for me showing just how?

• 31:51Speaker 01

  No, I've been trying to figure out how do we how do we explain self custody in because the only self custodial like asset is cash. And so I it's very helpful actually to have more more mental models for it.

• 32:01Speaker 00

  So one of the mistakes I think people make thinking about crypto is they think of it as a discreet invention like, you know, one day we had computers, but of course, one day we had like Univac and you know, then we had the Apple one and then we had the Macintosh, you know, and actually the computers got much better over time to the point of almost being different things. And I think similarly, people think of blockchains happening at one point in time, but like we tried for the payments use case, we tried raw Bitcoin, no lightning or anything back in the day in like 2013, 2014. That was not a good payments blockchain, I'll tell you that. Despite the fact that the Bitcoin white paper really talks about payments as the core use case rather than many things that have really worked for Bitcoin.

• 32:45Speaker 00

  And so I'm curious, as you look at the last five to 10 years of blockchain advancements, just how would you guys describe them?

• 32:52Speaker 01

  We started building, you know, payments use cases on top of blockchains like two, three years ago. And it became very clear to us immediately that none of these things were optimized for this use case. And it was like a bunch of micro decisions that, you know, probably made sense for different use cases that were being optimized for, but but made it really hard for us to be successful. So like one example is that on some blockchains, in order to make the address,

• 33:28Speaker 01

  make it possible for that address to accept USDC, you have to fund it and and prime it so that it is available to accept that USDC and that might cost 30 cents.

• 33:38Speaker 00

  You can't send USDC to an address that doesn't have it?

• 33:41Speaker 01

  Yeah, that does not have gas and has not been basically programmed to accept USDC.

• 33:49Speaker 02

  Because it would be stuck there, post-fact.

• 33:51Speaker 01

  Yeah, the transaction would just get denied and you couldn't get it out. And so, imagine that you want to use this blockchain to create millions of wallets at the same time. That becomes phenomenally expensive. The other thing is that the majority of these blockchains, in order to send a stablecoin transaction, you need this other random token. Now, it's kind of just like common that folks are comfortable with that. Or just the throughput requirements on blockchains, or the failure rates on blockchains are relatively high for payments use cases. I mean, in fact, the first time we did an aid payment dispersment, we were working with the US government to disperse aid payments into LatAm.

• 34:36Speaker 01

  We were sending tens of thousands of payments, which was like a lot for us. It's not that much for Stripe. It took us like 18 hours to send all of those transactions.

• 34:46Speaker 00

  And what was the bottleneck?

• 34:48Speaker 01

  It was the... Basically, all of the transactions need to be serially sent and confirmed through the blockchain. And what would end up happening is that there's a relatively high failure rate for these. So, a decent number would fail. We'd have to capture them, chronicle them, and then resend them. And it's just because they're not picked up.

• 35:14Speaker 02

  No worse fate working on a blockchain than having to manually set the knobs for the transaction. When you get to that place, you know it's a dark, dark time.

• 35:21Speaker 01

  Yeah, and so we just realized time and time again that there's been blockchains that have been built for trading use cases and blockchains being built for storage use cases, but not many blockchains that were built for payments use cases, which have their own, you know, it's hundreds of very small decisions that add up to a materially improved experience if you want to build payment infrastructure.

• 35:48Speaker 00

  Wouldn't Solana, people say Solana solves this? It's a blockchain built for scalability?

• 35:54Speaker 01

  Solana is a great blockchain for a lot of use cases, but it's still not great for payments. Yeah.

• 36:01Speaker 02

  Maybe a geeky, very geeky take on this. Like, if you go through the history, it's like very early Bitcoin is, I think, the reemergence of like peer-to-peer computing from the like, you know, late 90s, early aughts, where instead of these being volunteer networks like Tor is or others, this is now, we've built incentivization into P2P. So you have a means of incentivizing resource coordination globally through these networks. So that's like step one. I think step two with Ethereum is we've gone from a single-purpose chain, Bitcoin, to now actually a programmable chain. So this is like akin to like Von Neumann architecture. You move from like fixed like programs to you can now store the program separately from the like compute and you can have the computer do anything. And so these are like Turing complete, they are actually Turing complete blockchains.

• 36:47Speaker 02

  And you know Ethereum is the world computer in that regard. And I think the phase we're in now is scalability. So this is, you know, the L2s, Solana, and also specialization. And I think a lot of what crypto gets wrong is a super tribal take. Like, the meme is, we want to bring on the next billion people. But I think a lot of people don't mean it because if you bring on the next billion people, then you're no longer the rebel fighting for this technology. If the technology gets accepted, which feels very hard. But I think conversely, the appropriate concern is like we know how to build scalable systems. Just use a database, like they were great. And so if we give away a lot of what has made these systems janky,

• 37:30Speaker 02

  but has been needed for us to scale this technology and we re-centralize, then what was all this for anyways? And this is, I think, like a sensible way to say if crypto becomes solely regulatory arbitrage, it'll have been because we'll have taken away a lot of things that make these real special. So I think some of the like defensiveness around new chains. Comes from like three things. It's like too many scam chains around and people being like, "Well, this isn't you chain. It's probably a scam." And like instead of adding, you know, the XKCD comic, instead of adding your 15th standard, just use one of the ones that's already here. The second, I think, is a fear of, "I've bled for this, and now these newcomers are going to take it away from me." And I think the third really rational one is like

• 38:13Speaker 02

  a concern that there are easy technical paths to solving some of the inefficiencies that blockchains introduce, but those come at a cost. The UX can be better, but the questions of self-sovereign T-decentralization and so on are given up. But at least the way I would see it is like, Tempo is another computing device. You know, sometimes the mobile phone is a great form factor for doing a number of things. Sometimes the computer is. Sometimes, rarely, the iPad is. But like, you need different computing forms to do these things. And like, I think Tempo is a chain purpose-built for like one use case, and it doesn't mean it'll be good for everything. But conversely, it doesn't mean the other things are like particularly good for that either, payments being.

• 38:51Speaker 01

  Yeah, I think it's like interesting where you see these like, this isn't like a blockchain specific thing, but you see these like pockets where there are moments in time where a bunch of people build the same thing to solve the same problem, because the problem becomes so acute that like the world is like, "Oh, this is a, this is obviously a thing that someone needs to build a solution around to do it." And if you zoom into the blockchain, where we've seen this now twice, where a couple of years ago, everyone was building scalable blockchains, you know, Sui and Aptos and Solana, and all of these kind of came out right around like the same time period to solve the scalability problems of Ethereum and Bitcoin. And then now, we're going through the same moment where everyone's realizing

• 39:33Speaker 01

  that those blockchains that were previously created were really good, but not great for payments use cases. And we have Tempo and others coming out to solve the payments, the payments use case, and all of them seemingly coming out and going to market at the same time, which is a good thing for the blockchain ecosystem, because, you know, one or many of these will solve these problems.

• 39:53Speaker 02

  And this was a part of the conversations that we had at Privy when talking to Stripe about M&A, which was like, what are conditions under which we think we can be successful here? And I think one of them was the need to be able to work with competitive endeavors, endeavors competitive to Stripe itself and the, you know, no offense to the Bridge as well. And I think the point was to say it's way too early in market development to try and like verticalize the stack. Part of the core value prop of the stack is that actually it's like layered and you can assemble it in the way that best fits your use case.

• 40:24Speaker 00

  Yes.

• 40:25Speaker 02

  And I think, you know, at least the fear that I'm seeing is people thinking, well, this is a play at owning the entire thing as opposed to like owning modules that you can intercompose that I hope, you know, for the sake of us being useful to Stripe, that Stripe will compose so that Stripe users get a really great experience leveraging Bridge, leveraging Privy, but where Privy and Bridge customers can use whatever they want to get the best possible experience for their use case and their users. So that's at least part of what I've been excited about, but I think has taken, you know, talking to my team and so on about, you know, this is how we'll work with Tempo and this is how we won't.

• 40:56Speaker 00

  I think it's like if you're serious about all these layers of the stack, you can't bind them all together because just like there's no way you're going to get that much. You know, if Microsoft is serious about the Office suite, they're going to have it run on Mac and Windows because you're just not going to get a meaningful market share of an Office suite otherwise.

• 41:14Speaker 02

  And beyond that, like Microsoft, you know, at this point has its own laptops, but like they're not building their own chips. Maybe, maybe they are, but like the point is you can't verticalize the entire.

• 41:23Speaker 00

  They're not building their own laptops that are running, you know, Windows after, yeah.

• 41:26Speaker 01

  Ultimately, we want these blockchains to solve payments use cases. You know, folks are only going to build payments use cases around infrastructure that they feel like is open and neutral.

• 41:38Speaker 00

  Yeah.

• 41:38Speaker 01

  There's not a world where there's like a JP Morgan chain and a Stripe chain and a Bank of America chain and there's like a thousand, you know, unique company, company blockchains. That's not going to happen.

• 41:48Speaker 02

  The one thing I think I'll note is a lot of the things that are being solved by Tempo are theoretically possible on any other chain. But I think this is one thing that we often get wrong in the space, which is the gap between the theoretically possible and the actually true. And so of the Tempo features that I know our customers are excited about, the ability to sponsor gas with any asset, the ability to have batch transactions built into the chain, really reliable throughput where transactions aren't getting dropped, or priority lanes for payments where you're not paying more because something happened on the chain. All this stuff is theoretically possible elsewhere, but I think making it a primary purpose of the chain and making it something that comes out of the box with it ends up

• 42:31Speaker 02

  leading to a very different developer experience if you're building with it.

• 42:34Speaker 01

  You didn't touch on the most controversial of all of those, which is decentralization.

• 42:39Speaker 02

  Yeah, and I think the two sides are like, if you work... I think the set of launch partners that Tempo has is exceedingly exciting, because if you build for these customers, it's been super true of how previous sought to build, which is we will build for customers, they will dictate our product roadmap in a very real way, and that is how we stay away from shiny object syndrome where we're building stuff that no one actually cares to use. And I think if Tempo can do that and deliver for the partnerships that they have, they'll build an exceedingly useful payment chain. I think it comes at the risk of actually over-centralizing, and I think the real question is over a two-year, three-year journey, can they make good on actually decentralizing

• 43:22Speaker 02

  the validator set and the people who are running transaction validation on Tempo altogether?

• 43:27Speaker 00

  Doesn't this get to the related question, which is like, nobody really knows how a token should be valued. In particular, it's not clear, it's at least never been clear to me, that you could have 10 times the transaction volume on Ethereum, or 100 times the transaction volume on Ethereum, and no one can really tell you mathematically what that should correspond to in terms of the Ethereum token price.

• 43:50Speaker 02

  And I think if you try to reason about it, it bottoms up on like, this is how much value will accrue to the underlying token holder. This is what's so interesting about the dynamics, like Ethereum, I think, has vastly underperformed its utility as a network.

• 44:00Speaker 01

  Yeah, it's like a value capture, value creation.

• 44:03Speaker 02

  Yeah.

• 44:04Speaker 01

  And like Ethereum, wild value creation, like of all the blockchains, minimal value capture. Whereas there are a bunch of others where, you know, like Solana is probably perfect. You know, value creation, value capture. And then there's, there are some others where there's like very little value creation, lots of value capture.

• 44:22Speaker 02

  You should name them.

• 44:24Speaker 02

  No, but that's where I think Bitcoin at least is very simple. Like, we know what we're valuing and it is valued by the market in that way.

• 44:30Speaker 01

  Yeah, yeah, and, and Solana. Yeah, it all, it all depends on what your reference point is. Is your reference point other crypto assets or is your reference point companies?

• 44:42Speaker 00

  Why is crypto so tribal? Is it just because people, it's as if people, it's as if everyone was a shareholder in their soccer team? And like people are constantly starting new soccer teams? Is that basically what's going on?

• 44:53Speaker 02

  I think there's two reasons. I think one, people's relationship to money is very complicated. And I think, you know, as a French, like being a French person in the US, like it's stark to see the difference between how people interact with money as a thing. And so I think it is that. It is like soccer teams and a self of identification with something that's like quasi-religious. Especially because like, you know, working in crypto for the last decade has been just being rejected time and again by like anyone else. Like, you know, you can tell how the crypto market is going by how people describe what they do. I work in, in, you know, tech or in fintech or, but I think being part of a leper colony for long enough creates really strong bonds of kinship with others. And then on top of that, you've got money.

• 45:38Speaker 02

  And that creates, I think, an insane amount of tribalism where you feel like if anybody else succeed.

• 45:43Speaker 00

  Yes.

• 45:43Speaker 02

  It comes at your detriment.

• 45:44Speaker 00

  Everyone has to share a suffering together.

• 45:46Speaker 02

  Yeah, and I mean, I think crypto being so zero sum is such a great shame because there's such an opportunity to make this technology.

• 45:54Speaker 00

  Zero sum in mindset, to me.

• 45:55Speaker 02

  In mindset, exactly. No, it's not, and it shouldn't be. It's very positive sum.

• 45:58Speaker 00

  Right.

• 45:59Speaker 02

  But I think we all act as though someone else succeeding means we are doing less well.

• 46:03Speaker 00

  Yes.

• 46:03Speaker 02

  Yeah.

• 46:03Speaker 00

  What has changed in your guys' world post Genius Act?

• 46:06Speaker 01

  On our side, it has been this.

• 46:10Speaker 01

  Incredible tailwind to our business. The benefits of stablecoins have not changed. You know, you can

• 46:17Speaker 00

  And they were legal before, so it's funny. It's not a technical change to your business.

• 46:21Speaker 01

  Yeah, like the building of global products and the economic benefits of using stablecoins, the cross-border opportunities of stablecoins, all of these benefits were there, but the perceived risk of engaging with stablecoins or issuing stablecoins was really high.

• 46:36Speaker 00

  So it made everyone comfortable with doing stuff with stablecoins?

• 46:38Speaker 01

  Yes, yes. It purely like in people's ROI brain, you know, it lowered the risk upfront and increased the

• 46:48Speaker 00

  It was like an official statement from the US government that

• 46:50Speaker 01

  You can try things now. Yes, and so that's the first thing that happened. And the second thing that happened is, you know, we launched this open issuance platform because now all these folks are interested in launching stablecoins and now people realize there's license for them to participate in the market and this market is likely going to be very big and a permanent part of the US financial ecosystem.

• 47:12Speaker 00

  Describe the open issuance strategy and early customers and just like what's going on there?

• 47:16Speaker 01

  Yeah, we have, Bridge was sort of predicated on the belief that, you know, one, stablecoins would be important, and then two, that there would be many of them. And our belief that there would be many of them was, you know, just purely based on like companies acting in a self-interested manner and that they're going to want to control the infrastructure on top of which they're built and they're going to want the underlying economics of the stablecoin.

• 47:41Speaker 00

  And importantly, this has not been the case up to now where it's mostly been USDC and Tether is like where most stablecoin balance is.

• 47:48Speaker 01

  Yeah, and it was all USDC, all Tether for a long time, and that was because the perceived risk of issuing a stablecoin, creating a stablecoin, doing that was really high. And we then, over the last, you know, basically year, have been building this open issuance platform that makes it really easy for any platform to come to us to issue their own stablecoins so that they can access the underlying economic benefits and they can control the money on top of which whatever financial experience they want is built.

• 48:17Speaker 00

  So who is issuing their own stablecoin and who should issue their own stablecoin? Like who listening to this should be like, I should issue a stablecoin?

• 48:24Speaker 01

  I mean, everybody who's sitting on top of money, they should issue a stablecoin. That's the market is all money at rest. And today, we're issuing stablecoins with Phantom. We're issuing stablecoins with MetaMask. We're issuing a stablecoin for Hyperliquid.

• 48:42Speaker 00

  These are all the leading crypto wallets in the first two cases and a trading platform in the third case.

• 48:46Speaker 02

  This has been an interesting duopoly that we've seen, which is a lot, you know, one of the things that we find really important is to serve both, you know, traditional businesses who are otherwise uninterested in crypto other than the benefits that crypto gets them, and then crypto businesses. And I think both have like, are going to be big businesses. I mean, one of them already are and crypto businesses will continue to grow. But I think it's really important to serve both because you have early adopters in the crypto businesses who are the first to do these things that then set the rails for this is how it's done for everyone else. And I think Genius has at least opened it up so that you have a lot more traditional businesses engaging as early adopters and willing to be early adopters of the tech itself.

• 49:20Speaker 01

  Yeah, like what we see on the adoption curve is you had a lot of the crypto businesses, you know, the Phantoms, the MetaMask coming and issuing stablecoins, issuing stablecoins first. We very quickly see the fintechs coming after them. And this is like any of those folks who are building a global neo-bank. They're sitting on top of stablecoins. They're sitting on top of millions, tens of millions, hundreds of millions, billions of dollars of stablecoins. And they can literally just swap them out and all of a sudden earn, you know, 4% on all of those balances. It is extremely economically rational for them to do that.

• 49:52Speaker 02

  Is the yield the only reason why you would want to do it as a business sitting on a balance?

• 49:56Speaker 01

  No, the other, the other really big reason is that then you control your money. And so, and that manifests in two ways. So, one is, let's say you want to build on a specific blockchain. Let's say you want to build on Tempo or you want to build on Arc or you want to build on Sui or you want to build on Aptos or what have you. If it's your stablecoin, you can guarantee that it will be available to you. Or maybe you want to build your own blockchain. You can guarantee that your asset will be available wherever, wherever you move. And then the second thing is that you control all of the fundamental economics of it. So right now, a lot of stablecoins like Tether, for instance, charges burn fees when you move out of that stablecoin. So let's say you build a giant platform on top of a stablecoin.

• 50:41Speaker 01

  And then over time, that stablecoin changes the economic game. And now, all of a sudden, in order to move in and out of it, there are additional fees. Now, all of a sudden, to move in and out of it, there are delays if you want it, you know, if you want it free, but if you want it fast, you have to pay more for it. All the economics of building on the platform, like, it's not that different than being Zynga and building on Facebook, you know, and then all of a sudden, Facebook is like, "Oh, you're making more money than we are, like, why don't we take that money?"

• 51:07Speaker 00

  So it just reduces general platform dependence, which can be economic, but can be roadmap and all those things.

• 51:11Speaker 01

  But it feels like the leap from "I want to use stable coins, should I build my own?" This is if you're already convinced that you want to use stable coins, these are the advantages of building your own, like, do you have the pitch for the people who, you know, have balances in a Chase account and are generally saying, "Well, I have earning yields, like, my savings account kind of works," like, what's the pitch for the business that, you know, is otherwise not using stable coins at all? So I think that ultimately, all, like, corporate treasuries will move into stable coins. So, like, let's say you're a large global company and you have a business, and I was actually talking to one such company, you have a business in the US and then you have a business in Brazil. And in order to move money from the US to Brazil, you actually, because of the way your entities are set up, you need to move it from the US to Ireland,

• 51:55Speaker 01

  Ireland to Singapore, Singapore to Brazil. You know, today, that's swift, settle, swift, settle, swift, settle. In the future, you should just tokenize your treasury, set up wallets and all balances, click a button, and it goes one, two, three, four, down into thing. And that should be your own stable coin, because you don't want your balances commingled with everyone else and you want access to the yield.

• 52:14Speaker 00

  That's a very good analogy, where, yeah, say for a corporate treasurer, they then have their own system for kind of managing their treasury. But importantly, people think, "Won't this be crazy if there are thousands, tens of thousands of stable coins?" Part of the vision is that they're all interoperable, right?

• 52:29Speaker 01

  Yes. There will be, ultimately, these stable coins will recede into the background purely as infrastructure. And I believe that in a couple of years, you know, today, you look at a product and you're like, "Oh, that's a stable coin balance and that's a dollar balance," and like, it's like another FX out there. And actually, there are many, because you could have a wallet, and in that wallet, you could have US dollars, and you could have USDC on Solana and USDC on ETH and USDT on Tron and so on.

• 52:55Speaker 00

  But, so, like... Is the right analogy for people? Because I think when people hear everyone's going to have their own stablecoin. Currently, stablecoins are very different. It's a big thing. You know, they're very hard boundaries between them. Maybe people's mental model should be like you have money in different bank account, like with different banks. And moving money between banks isn't like completely instant and trivial, but it's pretty trivial. And that's maybe the mental model.

• 53:22Speaker 01

  Yeah, and I think it will be like completely trivial to move money like, you know, already for moving money to MetaMask, to Phantom with stablecoins we issue, it's a seamless transition. And when you move from one to the other, it settles as cash or MUSD. And that's going to be the case as money pings all around the world when it comes to Stripe. And then when it goes to Walmart, then when it goes to Amazon and so on, it will just change shape and be attributed to each of the different entities.

• 53:48Speaker 00

  How about you, the genius question, how's changed your life?

• 53:51Speaker 02

  So we're a software business. In this regard, I feel very grateful compared to both of you. We have a much simpler life than you do. And we're not involved in the flow of funds. And so we build software, we build, you know, really key management and then everything that comes with it, which enables these digital asset accounts. So what it's really done for us is it's opened up a lot of new business for us of companies who were not willing to engage, who are. So much broader US customer base, much broader fintech base, and then much larger companies who are now engaging in this.

• 54:23Speaker 00

  What got you excited about joining Stripe?

• 54:25Speaker 02

  Many things. I think so, Zach, we have a strong interweaving journey with Zach where I think, so the first time I met Zach was when he was talking about, you know, what Bridge was, and we all thought this is a crazy idea. Stablecoins are not a thing. The second time I met Zach, I think I was your reference call for Sequoia.

• 54:46Speaker 01

  Oh, yeah, yeah, yeah.

• 54:47Speaker 02

  Where our joint investor at Sequoia was like, do you want to talk to Zach? Like, I feel like it'd be helpful for him to understand what we're like to work with.

• 54:56Speaker 01

  Yeah.

• 54:57Speaker 02

  And then the third time was you were my reference for Ribbit. And then the fourth time, we were doing a lot of work together. And I think you had a choice sentence, which was something along the lines of, in the next two years, we will either work together or we will compete very heavily. And it wasn't said as a threat, it was said as a pure statement of fact, which I think was factual in fact.

• 55:22Speaker 00

  Because why you guys were building was so close to each other.

• 55:24Speaker 02

  We're building very different products in so many ways, like I would argue that you guys are building like the programs. You guys are building, stablecoins are programs.

• 55:31Speaker 00

  No, but geographically close.

• 55:32Speaker 02

  But geographically close, and there's a sense that as you expand, you'll want to move into each other's spaces. So I think this is part of the answer, it's the least romantic part. But the least romantic part of the answer was, there was a real sense of if we want to move fast and we want to have real impact in the space, there is deep value to bundles. And to being able to layer our software with stablecoin orchestration, stablecoin issuance, with traditional fiat money movement and rails, with the networks that Stripe is built across, like, you know, marketplaces and merchants. And so there was a sense of we can take what are 10-year roadmaps for us, with many possibilities of death, and turn these into two-year roadmaps, where the expected value that we have in the world

• 56:13Speaker 02

  becomes much, much greater if we're able to, you know, become a part of a whole that can serve something much more complete. So that was the first one. I think the second one, which is going to sound very brown-nosey, so, sorry. It's like, a lot of how we've shaped Privy was looking at Stripe as a business, and what it meant to take very complex things and make them more simple, and hopefully work towards elegance of APIs in order to unlock things that otherwise would not be possible. And so, at least from, you know, in a world in which we were going to be acquired, who would the acquirer be? I think it romantically made a lot of sense for us that this would be it. And then frankly, going back to Zach, I think having seen him go through the journey

• 56:56Speaker 02

  and talking to him about, you know, what it was like, felt very reassuring. It felt like, you know, he had sort of walked so we could run. I don't know how you would do this, but like basically, he had done all of the hard things of figuring out M&A and integration, and we got to sort of follow him.

• 57:12Speaker 01

  Paved the road, paved the road for you to go down, yeah.

• 57:15Speaker 00

  What about you, Zach?

• 57:16Speaker 01

  So first, when we started talking, I didn't think our company was acquirable.

• 57:22Speaker 01

  Like I just didn't, I thought we were so optimistic about what was possible with stablecoins. No one else could be more optimistic? No one could be more, there was like the Venn diagram of companies that were as optimistic and had like the capital behind it, you know, and the tolerance to push this space forward. It was like, there was like, I didn't think there was anybody in that intersection. So I think as like, we went through the process, we, you know, Sean and I were kind of like the whole time, like, this is like not real.

• 57:57Speaker 01

  And then over time, it became pretty apparent that it was real and there was like a very, like a strong shared belief in how big the opportunity ahead was. And I feel like we have pushed the stablecoin space forward in this like, like pretty material way over the last two years and we wanted to continue pushing the space forward and pushing it as far as it could possibly go. And it was pretty clear that that was like much more possible to do that together than to do it, to do it alone. I mean, there's just a lot of things like our stablecoin issuance platform that we just launched, an amazing opportunity.

• 58:38Speaker 01

  We could launch that as an independent business, but it is a very different opportunity, a very different set of customers that are interested in working with us as a result.

• 58:48Speaker 02

  Well, a question I have that, you know, Asta, my co-founder and I have been asking is like, how has your view of M&A changed over the last, call it year, through a few iterations? I mean, obviously you've done have any before.

• 58:59Speaker 01

  Yes.

• 59:00Speaker 02

  Hopefully you will do M&A post-fact. We've not discussed it you from the prospect, but like, what's changed about your old view on this is how we should acquire and integrate companies within Stripe?

• 59:10Speaker 01

  Yeah. At some level...

• 59:13Speaker 00

  Bridge and Privy make me much more bullish on M&A because we had an idea going in and Stripe was very much taking crypto and stablecoin seriously and there's no way we would collectively be where we are now, or there's no way Stripe would be where we collectively are now had we not bought Bridge and Privy. Now, I think not everything is like crypto where I think the cultural difference between companies like Stripe that essentially grew up before crypto, I mean technically the Bitcoin paper precedes Stripe but you know for all intents and purposes grew up before crypto, and more crypto native companies, I basically think that cultural

• 59:58Speaker 00

  difference is useful and part of what we are bringing in is that culture and that's probably not true in other pure like, you know, we know how to build software and you know how to build a bunch of things. And so it makes me more bullish because of how well it has worked broadly speaking. I think the other real nuance is like Oracle buys companies for you know 15 times PE when they're growing at 15 to 20% in a mature industry and then they pull out 10% of the cost, blah, blah, blah, but it's like this total rinse and repeat of very established, you know, companies and they know how to do that really well. And they're exceptional by the

• 1:00:43Speaker 00

  way, they're almost like a quasi-private equity firm, but it's a different thing. Whereas I think the real art is how do you grow new initiatives internally through acquisitions and do that well? And there are, there is priority here and you know, we always try to learn from that. And you know, Google is a good example of YouTube is now a $50 billion revenue business and I believe they literally had no revenue. I mean, they were hemorrhaging money when Google acquired them, but importantly, they had no revenue. And now it's like one of the crown jewels in Google. And actually, as you look across a huge amount of Google, it was all acquired in at this incredibly early stage. You know, there were acquisitions that became Google Maps and separately Google

• 1:01:27Speaker 00

  Earth and you know, Google Docs and all this kind of stuff. And there's actually some good acquired episodes on this recently. And I think that is a different skill to Acquire things that are growing 10x and build those businesses. And a big part of the art of it, and you guys have seen, is companies are sort of

• 1:01:50Speaker 00

  standardization machines because there's a way they do things, right? And when a large company makes an acquisition, the natural tendency is like, okay, great, we're going to do things the Stripe way now. And there are some places where it's valuable to do things the Stripe way. Like, there are certain things Stripe is good at, but it's incredible art to, okay, these are things that we're going to standardize. These are things where, yeah, you guys are going to stay doing it the startup way, and that's more freewheeling than the Stripe way, and that's great.

• 1:02:24Speaker 01

  When we closed the deal, I reached out to a bunch of folks who had sold their companies to get feedback on, like, how did you like it? Was this good? Was it not good? And there was, for sure, there was a fair share of horror stories and regret and tears. But the person who was the most impactful was this guy who leads integrations at Google. And he had seen YouTube and Nest and Waze and DeepMind and all these really successful and some unsuccessful.

• 1:02:56Speaker 00

  Sure.

• 1:02:56Speaker 01

  And one of the things that he told me, because I was coming in, I think any founder who comes in a company is like, you like running your company? You think you're pretty good at running your company? There's a reason why your company was bought, and so you kind of want to keep running your company and doing your thing. And he was telling me that now he's seen, basically, all these acquisitions, and you buy a company because you believe that there is some way in which one plus one equals more than two. And so if you totally stay independent and you don't do any form of integration, there is like one plus one equals maybe two, but probably less than two. Almost certainly, like definitionally, you are setting yourself up for less than two.

• 1:03:41Speaker 01

  And so at some point in time during the journey, there is like this moment that comes, and it could be in year one, or it could be in year five, or whatever, where it becomes clear that the two need to come together to like create that value.

• 1:03:56Speaker 00

  You have to learn how to use the stuff that the large company has, because otherwise, why are you going to work together?

• 1:04:02Speaker 01

  Yeah, and it doesn't happen right away, but at some point it becomes clear, and then you need to lean into it.

• 1:04:07Speaker 00

  Yes.

• 1:04:07Speaker 01

  And a great example of this is like DeepMind at Google. DeepMind was a totally separate business, separate everything for 10 years. But now AI is like its thing, and now it's one.

• 1:04:18Speaker 00

  Yes.

• 1:04:19Speaker 01

  And the art was like enabling it to stay its own thing and like push forward the frontiers. But as soon as we entered this moment, bringing them together.

• 1:04:30Speaker 02

  It's like a bit of collective faith. We can suspend this belief that the connection points arise in ways that are organic.

• 1:04:38Speaker 00

  Yeah. A big part of my conviction is we think crypto-enabled transactions are going to be a very large part of the economy and just Stripe's business in the relatively near future. But then it's also the case that there isn't going to be a crypto economy and a regular economy, and never the two shall meet. And we're already seeing this. Like, one of my favorite, one of the most bullish stablecoin things in my mind is the Felix Pago website. Felix Pago is a remittance app, it's powered by stablecoins. It doesn't mention stablecoins or crypto anywhere on the website. It just talks about customer value, the fact it has nice integrations, WhatsApp and things like that. And so Felix Pago is just off-competing in the remittance space.

• 1:05:21Speaker 00

  And you know, same with, you know, you're talking about neo-banks starting to integrate you of your fiat balance and your stablecoin balance. And so we're just seeing this convergence. And so I think our collective belief is, okay. We can build something really compelling on the infrastructure side here. There's actually a lot to build, like there's a lot of scope to have a good offering in the market. And so that's why it ends up being better together. And then the integration challenges, again, you have these like separate companies, separate code bases, and you're trying to integrate as you grow like an absolute banshee. That's just like, I don't know, it's a fun challenge, let's just say.

• 1:05:57Speaker 02

  I mean, it's so, everything about it is so hard. Like, I did not appreciate how hard it is. Like, even little things like, you know, our CRM is different from Stripe's CRM is different from your CRM. You know, and bringing those things, you know, and if, so if we're all talking to the same customer, who's on first?

• 1:06:15Speaker 00

  Yes, and, you know, we have acquired, you know, Bridge and Privy at the inflection, it's really working kink in the lifecycle, where everyone talks about, you know, that hold on for dear life startup stage. And so then what you have, when you have an acquisition, is you're at the hold on for dear life startup stage. If this thing really has product market fit, oh, and now we have to layer on a CRM migration, and all these other things, and just no one has more bandwidth. Like, most startups are already at, running at 120% capacity. And so, you know, you can't add more things on, which, anyway, is what makes it challenging.

• 1:06:50Speaker 02

  CRM migration, though, must come. Yeah. What was the, I'm curious on the other side, obviously, having been on the, our side of the, our side of the table. What was it like on your side of the table? Like, is there a, is there a good back up routine between like you and Patrick, or like other people on the Stripe side of the room of like, there is a pro champion, and there is a like, wet blanket as part of the acquisition talks? Like, how do you make decisions?

• 1:07:14Speaker 00

  Surprisingly, no, where I think, look, all of me, Patrick, Will, Rob, you know, we're all super bullish on crypto, you know, super bullish on you guys after we met you. And so it's not like anyone, like, I don't think they would survive the company very long if someone was walking around like, I don't know, I don't think this table going thing is going to be a thing. And so.

• 1:07:37Speaker 00

  The debate you're always having is, do we build this in-house? Like, for every acquisition, there is some price that is too expensive. And of course, part of the challenge there is early-stage startups. It's just like so hard to put a number on things like venture rounds. It's like, you know, what is the price? Like, what people are paying at some level? And so you end up doing a lot of math and it kind of comes down to some amount of gut feel. And yeah, with a lot of spreadsheets backing up that gut feel. And a lot of it is about the founders and the team. Because what you're buying is not what already exists. Again, it's not like that Oracle late-stage, we're going to buy Cerner and there's the existing business and customers and everything like that.

• 1:08:21Speaker 00

  It's like, we are going to build the leading crypto infrastructure products together over the coming decade. And there's just a lot of uncertainty in that. So, last question, just what do you guys project the next two to three years looks like for each of you on the product side, on the business side?

• 1:08:40Speaker 02

  I think, like, I don't know, it's been true thus far and we're still early, obviously. But it's been true thus far that like every year we look at the company and it's completely unrecognizable from the prior year. And I think if we can keep that up for another three years, like, we're really in business and it's going to be very interesting three years from now. So I suspect the scale of customer and the amount of like, call it household names who are not, you know, it starts in many ways with fintech because they are the most exposed to money as a thing. But I think my hope is that the amount of household names and stablecoins themselves become ubiquitous, where they are just a part of the fabric of reality if you're interfacing with like, you know, economic systems in the world.

• 1:09:22Speaker 02

  One, I think I hope wallets become ubiquitous whereby everybody has a means of owning and controlling digital assets and being able to port them across platforms and being able to put them to work in ways we couldn't have imagined. And then I hope, I think, there's a sort of two-step going on, which is Stripe itself becomes much more crypto-native and crypto kind of suffuses the entirety of how the company operates in like a few ways, which is it's like another rail that Stripe users can like choose to utilize. But also, it is a superpower that like...

• 1:09:57Speaker 02

  Separate from being another rail is just a whole new means that they get to tap into. Like, you know, some stuff, it's like, you know, if you want to do a stablecoin sandwich to move money from A to B, there were other ways of doing it that might not have been as good. But there are things that you can do now with Call It Open Editions that you just could not have done before. And then I also think, like, hopefully Stripe is like the best purveyor of crypto tooling via, you know, Stripe's efforts, via the brands that it has in Bridge and Privy. So my hope is that we're able to, at least on the Privy side, grow the team really sensibly to a place where we're both delivering extreme value to like standalone customers that we have that we can dream of today,

• 1:10:38Speaker 02

  who are like really incorporating us as a core part of their stack, like akin to AWS and level of importance. And then also serving that through Stripe and enabling Stripe products.

• 1:10:49Speaker 01

  Yeah, I mean, on, I agree with, like, you know, what you said at the beginning really resonated. Like, our company, you know, same with Bridge, totally unrecognizable versus last year or the year before. Before Bridge, there really wasn't that much infrastructure, really any infrastructure, to build, you know, financial experiences with stablecoins. So that kind of means, like, you know, we started the company three years ago. Our APIs were available for like roughly two years. So that means there's kind of only been like two years-ish of teams building at like the application layer on top of, on top of stablecoins. And so, you know, it's like, I feel like I am like, even though I live in this,

• 1:11:31Speaker 01

  like constantly reminded of how early we are and how few applications have been built and how few of the big problems that need to be solved have been solved. And I think what I'm most excited about is more and more of those teams coming and building on that application layer, which pushes the frontier of stablecoins forward. And, you know, that then forces us to change our company, to change our APIs and change who and how we serve people.

• 1:11:57Speaker 00

  I really agree with what you're saying, which is people still have no idea how big stablecoins are going to be. And I think they discount us because it feels like there's a lot of hype right now, but... We're going to look back when stablecoins are 100x bigger and just think of this moment as so cute.

• 1:12:13Speaker 02

  One question I have is whether they will in fact disappear and to me at least it's one place where it's for companies building on stablecoins really important to maintain optionality like you know the joke is something like Bitcoin grows one death at a time which is a person holding gold dies and a new generation will decide to hold the digital equivalent. Like it's not just I think a difference in like degree, it is a difference in kind in a few different ways. And so I think the question of like will it be branded as stablecoins or will you just like lose track of the fact that it's the underlying medium? To me, that's a real question that like I'm interested in. I can see both paths five years from now. I think it's more likely that actually people will be more aware of this infrastructure because it is unique in different ways. Ah, interesting. I'm in the other camp. I think it will recede into the background.

• 1:12:58Speaker 00

  I think I'm more in Zach's camp because there's so many tech improvements where like remember when everyone was talking about Ajax? Like JavaScript application that like applications are still you know JavaScripts web applications, but just we don't talk about Ajax anymore. Or you know, there was a time when all your iPods went solid state and didn't have a spinning hard disk and your songs didn't skip anymore. But like just it happened, life got better.

• 1:13:21Speaker 02

  Yeah, but it's like a cloud or you know. Are stablecoins the cloud or the solid state drive or are stablecoins the computer? Because we talk about the computer today, like I can, I can, you know, you might have told me, well, you have a spreadsheet, but I've got a human computer over here. Yeah.

• 1:13:35Speaker 00

  Yeah, we do and we don't talk about the computer, right? Like my car now unlocks.

• 1:13:40Speaker 00

  When I walk up to us, it's just a car.

• 1:13:43Speaker 02

  But I think both. I think your car is like, you know, 38 computers. But then you also do have your computer. I think potentially that's how it happens. For the most part, it will recede and it will become a fabric of like reality. But in some places, I think it'll be like blindingly obvious. Yeah.

• 1:13:56Speaker 00

  Okay, we're going to do another one of these in five years' time and we'll check back in on the whether people are still talking about stablecoins despite 100x the volume. Alrighty, thank you guys.