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welcome to money is freedom

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a podcast

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exploring how finance and freedom connect in our lives

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created from thoughtful research

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and narrated by Notebook LM AI

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this series brings you clear

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meaningful insights into finance and beyond

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in episode 18 we dive into

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the transformative potential of stable coins

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in the payments industry

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inspired by the a 16 z crypto article

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how stable coins will eat payments

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we'll explore how stable coins

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are disrupting traditional payment systems

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their advantages in speed

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cost and global accessibility

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and what this shift means for businesses and consumers

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join us as we unpack the rise of stable coins

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and their path to becoming the future of money movement

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welcome back for another deep dive today

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um we're gonna be talking about stable coins okay

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specifically uh

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you know their potential to kind of shake things up

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yeah in the payments industry

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um

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the source that we're using is a recent article from a

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16 z crypto okay

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and let me tell you

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they paint a fascinating picture of the future of money

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it really is fascinating

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like how money could move in the future yeah

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how it could address some of these

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pain points that have been around for so long

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in a system that like

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honestly affects all of us yeah

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for sure it's easy to take payments for granted right

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how about you swipe your card

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tap your phone boom yeah

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transactions done easy

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but you know behind the scenes yeah

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it is a trillion dollar industry

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with a lot of moving parts

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oh yeah

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a lot of opportunity for change for sure

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you know

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the A16Z article throws out some numbers that are

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pretty saggering yeah

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they do in 2023

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global payment systems okay

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processed over 3.4 trillion transactions

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wow moving one point eight quadrillion dollars

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yeah that's 18 zeros

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by the way

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it's hard to even fathom that number just to kind of

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yeah let that sink in yeah

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so it's an insane amount of money

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but you know

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the takeaway here isn't just the volume right

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it's who's getting a cut of this enormous pie right

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payment processors networks

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pulling in trillions in revenue

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yeah and that cost is often passed down to businesses

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and ultimately consumers the end user

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think about that small business down the street yeah

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you know the one you love getting your coffee from

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yeah they're paying almost 15% in fees

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really for every credit card transaction

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wow so if I buy a two dollar cup of coffee

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that little shop is giving up 30 cents wow

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just to process the payment

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that's wild yeah

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that's the reality of these traditional systems

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wow and that's one of the key reasons why

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stable coins are getting so much attention

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okay that makes sense yeah

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uh maybe we should take a step back for a second

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yeah

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and kind of break down how this complex system works

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sure like how do payments actually happen

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yeah so you've got these uh

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payment rails okay

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which are essentially the technological highways

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okay for these transactions

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got it then you have the payment processors

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companies like stripe square

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facilitating that movement of funds

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right

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and then you have payment service providers like Venmo

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Paypal yeah

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giving users access to these systems

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so it's like a multi layered cake

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yeah and each layer is taking a slice

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yeah exactly

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but it's not just about fees right

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yeah there are other inefficiencies too

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the article goes into

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these four key measures of a payment system timeliness

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cost reliability

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and convenience each player

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kind of prioritizes these measures differently

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and it makes it kind of a chaotic landscape

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okay so let's unpack these a bit

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credit cards for example

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right instant processing

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super convenient for the user

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but high fees yeah

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can be a real burden for sure for the business

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and then there's chargebacks

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chargebacks exactly

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debit cards have lower fees

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but they're still subject to processing costs

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yeah and regulatory caps

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right which can limit their use

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especially for international transactions right

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and then there's ACH transfers right

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relatively inexpensive but can take days to clear

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yeah and wire transfers

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oh don't even get started

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yeah those fees on those fees freeze

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each method has its pros and cons

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yeah

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but the current system for sure is ripe for disruption

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definitely and stablecoins offer yeah

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a really interesting alternative

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they do now

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our listeners are pretty savvy when it comes to crypto

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so yeah won't insult their intelligence yeah

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by asking what a stable coin is okay

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but for those who might be tuning in for the first time

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sure we could just touch on the basics yeah

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stable coins are essentially cryptocurrencies

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okay that are designed to maintain a stable value

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gotcha or being pegged or linked to a more stable asset

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like the US dollar or a basket of currencies

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so unlike Bitcoin which can swing wildly

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right in price

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stable coins are designed to hold their value exactly

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making them much more suitable for

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everyday transactions for sure

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and it goes beyond just price stability

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we're seeing

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all these different types of stablecoin models now like

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you know algorithmic stablecoins

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those backed by fiat reserves

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even hybrid models

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each has its own set of advantages and challenges

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which is where a lot of the innovation is

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it seems like people are catching on right

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yeah the article mentions that in the last month alone

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over 28.5 million people

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use stable coins for over 600 million transactions

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it's incredible those numbers are only gonna grow to

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as people discover the benefits

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especially in areas where traditional payments

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systems fall short like remitses

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for example oh yeah

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for sure sending money overseas

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yeah remember those hefty fees yeah

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with stable coins

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sending $200 to Colombia can cost less than a penny

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it's amazing a game changer

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for people who rely on sending money back home

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that's amazing and it's not just individuals right

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no you're right businesses

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businesses especially those operating internationally

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yeah they're starting to see the appeal

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I can imagine imagine

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cutting out all those intermediaries and their fees

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yeah when you're making international payments

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that's huge think about the time and cost savings

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not to mention the reduced risk and complexity

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the article uses the example of a garment manufacturer

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in Mexico okay

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paying a textile supplier in Vietnam okay

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traditionally that payment yeah

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would go through multiple banks

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foreign exchange services

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each taking a cut right

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adding to the processing time totally

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with stable coins that transaction happens directly

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right much faster and at a fraction of the cost

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much more efficient

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it's like streamlining the entire supply chain

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exactly and making it more efficient and transparent

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for everyone for everyone involved yeah

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so we've established that stablecoins offer some

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pretty significant advantages yeah

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over traditional payment methods yeah

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for sure but

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you know how does this theoretical potential

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translate into real world adoption

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are businesses actually making the switch

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yeah that's the key question

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and the article highlights a few trends

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that are paving the way okay

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for broader stablecoin adoption

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and one of the most interesting

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I think

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is the rise of what they call stablecoin orchestration

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stablecoin orchestration yeah

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okay that sounds a bit technical

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it does yeah

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can you break that down a little

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yeah essentially

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it's all about making it easier okay

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for businesses to integrate

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stable coins into their existing operations

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gotcha so

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we're talking about tools that can help them manage

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payroll invoicing subscriptions

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all those essential back office functions

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so it's not about ripping

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or replacing their entire system right

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but rather

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adding a layer of stablecoin functionality on top

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exactly these orchestration tools

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act like a bridge between the traditional

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financial world and the world of staple coins okay

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allowing businesses to reap the benefits

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without having to undergo a massive system overhaul

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and I imagine this is particularly appealing to

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oh yeah

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smaller businesses absolutely

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who might not have the resources right

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for a complete digital transformation right

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it's a way for them to

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kind of dip their toes in the water yeah

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experiment with these faster

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cheaper more globally accessible payments

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makes a lot of sense

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so we've got back office integration happening

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what other trends are we seeing

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another key driver is the increasing integration of

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stable coins

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into platforms that people are already using okay

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so think Venmo Apple Pay

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Paypal

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cash app even revolute

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they're all starting to support stable coins

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in one way or another

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so it's becoming more and more seamless

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exact for users to interact with stable coins

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right without having to

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you know learn a whole new system right

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download a bunch of new apps exactly

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it's all about convenience right

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but there's also a growing incentive

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for businesses to make the switch coin

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stablecoin issuers companies like Circle

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Paypal and tether

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are starting to share profits with businesses that

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adopt their stablecoins

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so it's kind of like a rewards program yeah

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in a way for using stable coins

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businesses can earn a portion of the yield

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generated by these stable coin transactions okay

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which further incentivizes them to integrate

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this technology that's a clever strategy

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it is because it benefits both sides right

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you know

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users get access to a more efficient payment system

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yeah businesses get rewarded for adopting it

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everyone wins win win

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but there's another perhaps even more crucial factor

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yeah driving adoption

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regulatory clarity regulatory clarity

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it's always a big topic when it comes to crypto yeah

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for sure what's the landscape looking like

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yeah what's the current landscape for stable coins

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it's still evolving okay

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but we're seeing positive developments yeah

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The European Union for example

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have already implemented

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the markets in Crypto assets regulation

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or Mica

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it establishes clear rules for stablecoin issuers

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which has

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really boosted confidence in the European market

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and what about the US

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the US is still working on a comprehensive framework

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yeah but there is growing bipartisan support

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okay for stablecoin legislation

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00:10:08,500 --> 00:10:11,400
gotcha the focus is on ensuring that stablecoins

284
00:10:11,400 --> 00:10:14,166
are fully backed by high quality assets

285
00:10:14,166 --> 00:10:15,766
with robust auditing

286
00:10:15,766 --> 00:10:18,700
and measures to prevent illicit activities

287
00:10:18,700 --> 00:10:20,666
so the finding that balance right yeah

288
00:10:20,666 --> 00:10:22,866
fostering innovation and protecting consumers

289
00:10:22,866 --> 00:10:24,100
yeah exactly yeah

290
00:10:24,100 --> 00:10:26,666
and as those regulations become clearer

291
00:10:26,866 --> 00:10:28,800
more businesses will feel comfortable

292
00:10:28,800 --> 00:10:31,666
integrating stable coins into their operations

293
00:10:31,666 --> 00:10:32,200
make sense

294
00:10:32,200 --> 00:10:34,500
they wanna know they're operating within a stable

295
00:10:34,500 --> 00:10:36,400
and predictable legal framework

296
00:10:36,400 --> 00:10:37,166
yeah of course

297
00:10:37,166 --> 00:10:39,266
and each company that makes the switch

298
00:10:39,266 --> 00:10:41,666
sends a powerful message to the market

299
00:10:41,766 --> 00:10:43,666
that stable coins are a viable

300
00:10:43,666 --> 00:10:46,033
reliable and regulated alternative right

301
00:10:46,033 --> 00:10:47,666
it's like a snowball effect

302
00:10:47,666 --> 00:10:50,766
I'm curious with all this talk about payments

303
00:10:50,766 --> 00:10:54,333
yeah are stable coins only useful for that

304
00:10:54,400 --> 00:10:56,000
that's a great question yeah

305
00:10:56,000 --> 00:10:58,100
and this is where things get really interesting okay

306
00:10:58,100 --> 00:11:00,166
the article points out that stable coins

307
00:11:00,166 --> 00:11:02,566
are more than just a payment mechanism

308
00:11:02,566 --> 00:11:05,200
they're also programmable programmable yeah

309
00:11:05,200 --> 00:11:06,566
what does that mean in this context

310
00:11:06,566 --> 00:11:08,966
so it means you can essentially write code

311
00:11:09,066 --> 00:11:11,233
that interacts with stablecoins okay

312
00:11:11,233 --> 00:11:12,466
automating certain actions

313
00:11:12,466 --> 00:11:14,566
or triggering specific events

314
00:11:14,600 --> 00:11:16,400
based on predefined conditions

315
00:11:16,400 --> 00:11:18,066
so it's like building smart contracts

316
00:11:18,066 --> 00:11:19,366
exactly on top of stablecoins

317
00:11:19,366 --> 00:11:20,000
exactly

318
00:11:20,000 --> 00:11:22,800
and this opens up a whole new world of possibilities

319
00:11:22,800 --> 00:11:25,800
yeah imagine being able to automate payments

320
00:11:25,800 --> 00:11:28,766
yeah create personalized financial products

321
00:11:28,766 --> 00:11:32,100
or even build entirely new business models

322
00:11:32,100 --> 00:11:33,633
based on these programmable

323
00:11:33,633 --> 00:11:35,966
stablecoin rails that's mind blowing

324
00:11:36,033 --> 00:11:37,033
it is it's like

325
00:11:37,033 --> 00:11:39,800
stablecoins aren't just about disrupting the payments

326
00:11:39,800 --> 00:11:40,700
industry right

327
00:11:40,700 --> 00:11:41,500
it's about

328
00:11:41,500 --> 00:11:44,466
creating a more dynamic and flexible financial

329
00:11:44,466 --> 00:11:45,400
ecosystem exactly

330
00:11:45,400 --> 00:11:48,100
and this is where we start to see the true

331
00:11:48,100 --> 00:11:50,900
transformative potential of stablecoins

332
00:11:51,066 --> 00:11:53,166
it's about moving from a centralized

333
00:11:53,166 --> 00:11:54,000
gatekeeper

334
00:11:54,000 --> 00:11:58,166
driven financial system to a more decentralized

335
00:11:58,166 --> 00:12:00,700
open and user centric model

336
00:12:00,866 --> 00:12:03,600
so what does this all mean for the average person

337
00:12:03,600 --> 00:12:06,400
yeah how will this stablecoin revolution actually

338
00:12:06,400 --> 00:12:07,700
impact our lives

339
00:12:08,266 --> 00:12:09,600
well in the short term

340
00:12:09,600 --> 00:12:11,833
we can expect to see more businesses

341
00:12:11,833 --> 00:12:14,466
offering stablecoin payment options okay

342
00:12:14,466 --> 00:12:18,000
which could lead to lower prices for goods and services

343
00:12:18,000 --> 00:12:20,433
so I could potentially buy my groceries

344
00:12:20,433 --> 00:12:23,033
my coffee even pay my rent yeah

345
00:12:23,033 --> 00:12:24,233
with stablecoins yeah

346
00:12:24,233 --> 00:12:27,100
knowing that I'm avoiding those pesky transaction fees

347
00:12:27,100 --> 00:12:29,033
exactly and as adoption grows

348
00:12:29,033 --> 00:12:30,100
will likely see

349
00:12:30,100 --> 00:12:32,366
new and innovative financial products emerge

350
00:12:32,366 --> 00:12:33,800
that are tailored to the unique

351
00:12:33,800 --> 00:12:35,700
capabilities of stablecoins

352
00:12:35,866 --> 00:12:37,900
like what think micro loans

353
00:12:37,900 --> 00:12:39,300
automated savings plans

354
00:12:39,300 --> 00:12:42,000
or even decentralized insurance platforms

355
00:12:42,000 --> 00:12:43,833
so it's like giving people more control

356
00:12:43,833 --> 00:12:45,766
exactly over their finances

357
00:12:45,833 --> 00:12:46,100
and

358
00:12:46,100 --> 00:12:48,833
empowering them to participate in the financial system

359
00:12:48,833 --> 00:12:50,766
exactly in new and exciting ways

360
00:12:50,766 --> 00:12:52,700
that's the idea and in the long term

361
00:12:52,700 --> 00:12:54,766
the impact could be even more profound

362
00:12:54,800 --> 00:12:57,366
we could see the emergence of entirely new

363
00:12:57,366 --> 00:12:58,800
business models and industries

364
00:12:58,800 --> 00:13:00,700
built around stablecoin technology

365
00:13:00,700 --> 00:13:02,500
and this like the early days of the internet

366
00:13:02,500 --> 00:13:03,266
exactly

367
00:13:03,266 --> 00:13:06,166
where people were just starting to grasp the potential

368
00:13:06,166 --> 00:13:07,800
yeah of this new technology

369
00:13:07,800 --> 00:13:09,066
and just like the internet

370
00:13:09,233 --> 00:13:11,466
stable coins have the potential to

371
00:13:11,466 --> 00:13:13,233
disrupt existing industries

372
00:13:13,233 --> 00:13:15,033
and create entirely new ones

373
00:13:15,033 --> 00:13:16,400
this is getting really exciting

374
00:13:16,400 --> 00:13:19,300
it is but before we get too carried away

375
00:13:19,300 --> 00:13:21,266
yeah with all the potential benefits

376
00:13:21,266 --> 00:13:23,666
sure are there any downsides or risks

377
00:13:23,666 --> 00:13:25,233
that we should be aware of

378
00:13:25,233 --> 00:13:27,266
of course like any emerging tech

379
00:13:27,266 --> 00:13:29,866
stablecoins aren't without their challenges right

380
00:13:29,866 --> 00:13:31,833
let's talk about some of those potential hurdles

381
00:13:31,833 --> 00:13:34,600
well one of the biggest is scalability okay

382
00:13:34,600 --> 00:13:37,833
as more people and businesses start using stablecoins

383
00:13:37,833 --> 00:13:39,633
the underlying blockchain networks

384
00:13:39,633 --> 00:13:40,600
need to be able to handle

385
00:13:40,600 --> 00:13:42,933
a massive increase in transaction volume

386
00:13:43,000 --> 00:13:44,166
it was kind of like a traffic jam

387
00:13:44,166 --> 00:13:45,200
yeah exactly

388
00:13:45,200 --> 00:13:46,233
the more cars on the road

389
00:13:46,233 --> 00:13:47,500
the slower things move

390
00:13:47,500 --> 00:13:51,066
if transactions become too slow or expensive

391
00:13:51,233 --> 00:13:54,266
it could really hinder that adoption of stable coins

392
00:13:54,266 --> 00:13:57,266
so ongoing development and innovation

393
00:13:57,266 --> 00:13:59,700
in blockchain technology is really crucial

394
00:13:59,700 --> 00:14:02,400
to ensure that those networks can handle the load

395
00:14:02,400 --> 00:14:04,966
that makes sense security is another big one yeah

396
00:14:04,966 --> 00:14:06,566
we've seen with other cryptocurrencies

397
00:14:06,566 --> 00:14:08,800
that they can be vulnerable to hacking

398
00:14:08,900 --> 00:14:10,800
other forms of cyber crime right

399
00:14:10,800 --> 00:14:12,900
people need to feel confident that their money is safe

400
00:14:12,900 --> 00:14:13,566
exactly if

401
00:14:13,566 --> 00:14:14,166
stable coins

402
00:14:14,166 --> 00:14:16,266
are gonna become a mainstream payment method

403
00:14:16,366 --> 00:14:19,266
robust security measures and protocols are essential

404
00:14:19,266 --> 00:14:19,666
yeah

405
00:14:19,666 --> 00:14:22,433
to protect user funds and maintain trust in the system

406
00:14:22,433 --> 00:14:22,900
makes sense

407
00:14:22,900 --> 00:14:25,633
and then there's the issue of interoperability

408
00:14:25,633 --> 00:14:27,000
interoperability yeah

409
00:14:27,000 --> 00:14:30,066
right now the stablecoin landscape is pretty fragmented

410
00:14:30,066 --> 00:14:31,766
okay you have different stablecoins

411
00:14:31,766 --> 00:14:33,366
operating on different blockchains

412
00:14:33,366 --> 00:14:35,400
right and they don't always play nicely together

413
00:14:35,433 --> 00:14:37,400
so it's like having different languages

414
00:14:37,400 --> 00:14:38,733
different currencies

415
00:14:38,966 --> 00:14:41,700
makes it harder for people to communicate and transact

416
00:14:41,700 --> 00:14:45,200
yeah greater interoperability between stable coins

417
00:14:45,200 --> 00:14:47,233
and different blockchain networks is crucial

418
00:14:47,233 --> 00:14:49,633
for those seamless and efficient transactions

419
00:14:49,633 --> 00:14:52,200
gotcha we need a more unified system

420
00:14:52,200 --> 00:14:53,200
where stable coins

421
00:14:53,200 --> 00:14:55,266
can flow freely between different platforms

422
00:14:55,266 --> 00:14:57,833
and services sounds like there's still work to be done

423
00:14:57,833 --> 00:14:58,833
there is but

424
00:14:58,833 --> 00:14:59,466
the good news is

425
00:14:59,466 --> 00:15:01,300
that there's a lot of innovation happening

426
00:15:01,300 --> 00:15:03,000
in this space developers

427
00:15:03,000 --> 00:15:05,566
are working on solutions to improve scalability

428
00:15:05,666 --> 00:15:06,966
enhance security

429
00:15:07,000 --> 00:15:09,833
and bridge the gaps between these different stablecoin

430
00:15:09,833 --> 00:15:12,566
ecosystems that's encouraging to hear

431
00:15:12,566 --> 00:15:15,666
yeah so beyond those technical challenges

432
00:15:15,666 --> 00:15:18,033
are there any broader societal

433
00:15:18,033 --> 00:15:19,666
or ethical considerations that we

434
00:15:19,666 --> 00:15:21,200
should be thinking about yeah

435
00:15:21,200 --> 00:15:22,200
definitely as

436
00:15:22,200 --> 00:15:24,833
stable coins become more integrated into our financial

437
00:15:24,833 --> 00:15:27,466
lives it's important to think about their potential

438
00:15:27,466 --> 00:15:29,700
impact on financial inclusion

439
00:15:29,700 --> 00:15:32,100
privacy and even monetary policy

440
00:15:32,433 --> 00:15:33,666
for example will

441
00:15:33,666 --> 00:15:36,533
stable coins make financial services more accessible

442
00:15:36,600 --> 00:15:38,266
for under served communities

443
00:15:38,366 --> 00:15:41,500
or could they exacerbate existing inequalities

444
00:15:41,500 --> 00:15:43,033
those are great questions

445
00:15:43,033 --> 00:15:45,866
and there are concerns about how they could be used for

446
00:15:45,866 --> 00:15:47,100
illicit activities too

447
00:15:47,100 --> 00:15:49,166
if not properly regulated right

448
00:15:49,166 --> 00:15:51,566
so striking the right balance between

449
00:15:51,566 --> 00:15:52,866
fostering innovation

450
00:15:52,866 --> 00:15:54,866
and mitigating those potential risks

451
00:15:54,866 --> 00:15:56,766
is going to be crucial so

452
00:15:56,766 --> 00:15:57,766
it's a complex issue

453
00:15:57,766 --> 00:15:59,200
with a lot of different perspectives

454
00:15:59,200 --> 00:16:01,100
it is and it's an ongoing conversation

455
00:16:01,100 --> 00:16:03,633
that involves policy makers regulators

456
00:16:03,633 --> 00:16:05,566
technologists and the public

457
00:16:06,033 --> 00:16:08,166
as with any powerful technology

458
00:16:08,166 --> 00:16:09,866
it's essential to have thoughtful

459
00:16:09,866 --> 00:16:11,533
and informed discussions about

460
00:16:11,566 --> 00:16:14,866
how stablecoins can be used responsibly and ethically

461
00:16:15,033 --> 00:16:17,400
so after diving deep into this world

462
00:16:17,400 --> 00:16:18,500
yeah of stable coins

463
00:16:18,500 --> 00:16:22,100
I have to say it's both exciting and a bit daunting

464
00:16:22,500 --> 00:16:24,600
it is there's so much potential

465
00:16:24,600 --> 00:16:26,300
so much but also so much to consider

466
00:16:26,300 --> 00:16:27,266
I agree it really is

467
00:16:27,266 --> 00:16:29,566
a fascinating time to be following this space

468
00:16:29,566 --> 00:16:31,600
but even with all the challenges and uncertainties

469
00:16:31,600 --> 00:16:32,866
one thing is clear

470
00:16:33,100 --> 00:16:36,033
stablecoins are a force to be reckoned with yeah

471
00:16:36,033 --> 00:16:38,633
they have the potential to really reshape

472
00:16:38,633 --> 00:16:41,666
the financial landscape in some profound ways

473
00:16:41,866 --> 00:16:43,500
the article paints a picture of a future

474
00:16:43,500 --> 00:16:47,200
where payments are free instant and programmable yeah

475
00:16:47,200 --> 00:16:48,600
it's a pretty compelling vision

476
00:16:48,600 --> 00:16:52,100
it is and while that future may still be a ways off

477
00:16:52,300 --> 00:16:53,666
the journey has begun

478
00:16:53,766 --> 00:16:56,766
so what can our listeners do to stay ahead of the curve

479
00:16:56,766 --> 00:16:58,400
stay informed okay

480
00:16:58,400 --> 00:17:00,600
read about different stablecoin projects

481
00:17:00,600 --> 00:17:02,600
understand the underlying technology

482
00:17:02,800 --> 00:17:04,833
and follow those regulatory developments

483
00:17:04,833 --> 00:17:07,200
don't be afraid to experiment a little exactly

484
00:17:07,200 --> 00:17:10,066
try using stablecoins for small transactions

485
00:17:10,066 --> 00:17:11,966
explore some of those platforms

486
00:17:11,966 --> 00:17:13,766
tag and services that are emerging

487
00:17:13,766 --> 00:17:14,966
the best way to understand

488
00:17:14,966 --> 00:17:17,633
the potential of stable coins is to experience them

489
00:17:17,633 --> 00:17:19,033
firsthand well

490
00:17:19,033 --> 00:17:21,600
that's about all the time we have for today's deep dive

491
00:17:21,600 --> 00:17:22,666
but before we go

492
00:17:22,666 --> 00:17:25,200
what's one thing you hope our listeners take away

493
00:17:25,200 --> 00:17:26,433
from this conversation

494
00:17:26,433 --> 00:17:28,900
I hope they come away with a sense of curiosity

495
00:17:28,900 --> 00:17:31,700
and a willingness to explore this new frontier

496
00:17:32,000 --> 00:17:34,766
stablecoins are not just a technological innovation

497
00:17:34,766 --> 00:17:36,900
they're a catalyst for change

498
00:17:36,900 --> 00:17:39,066
and the journey is just beginning

499
00:17:39,066 --> 00:17:41,033
beautifully said and that wraps up

500
00:17:41,033 --> 00:17:43,100
our deep dive into the world of stablecoins

501
00:17:43,100 --> 00:17:44,533
and the future of payments

502
00:17:44,866 --> 00:17:46,966
we hope you enjoyed the exploration

503
00:17:47,033 --> 00:17:50,266
until next time stay curious and keep diving deep