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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 lmaai

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this series brings you clear

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meaningful insights into finance and beyond

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welcome to episode 49 where we unpack

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how stable coins

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are quietly killing the six trillion dollar payments

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industry and why

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the first trillion dollar fintech

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won't come from Silicon Valley

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it'll come from the collapse of banking as we know it

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this revolution is already happening

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let's break it down

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okay let's unpack this

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imagine a world where moving money um

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anywhere instantly across borders

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is genuinely as simple as sending a text right

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like no middle man taking a slice at every single turn

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no waiting days or weeks for a transaction to settle

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no mystery fees just popping up

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does that sound a bit I don't know futuristic

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it really does

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especially when you think about the scale exactly

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trillions upon trillions moving on systems that feel

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well pretty old sometimes

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yeah they kind of do

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and you know

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for a while

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maybe cryptocurrencies felt like that potential future

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but the volatility

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it just wasn't practical for everyday payments

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what we're diving into today

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based on the sources you shared

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is this really powerful idea that stable coins

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you know the ones designed to keep a stable value

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usually pegged to something like the US dollar hmm

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they might not just be an improvement OK

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they could fundamentally rearchitect how

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money moves globally okay

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so the hook isn't just like faster payment

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it's a complete rethinking of the plumbing underneath

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exactly these sources are arguing

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stable coins

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could change the entire payments landscape

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and crucially

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shift where the real value gets created in this uh

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this new world gotcha

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so our mission here is to pull out the key arguments

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the main insights from this material

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we've got sources looking back at the history

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and others looking forward at stable coins right

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sort of the how we got here and where we might be going

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precisely

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helping you understand not just what they might do

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but why it matters you know

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I'm really intrigued by this idea of rearchitecting

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mm hmm or even collapsing the system

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though

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current way payments work feels incredibly complex

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oh it is complex and like the sources point out

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really seeing that complexity is key to grasping

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the potential disruption here

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one central idea that comes through really strong

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is this thesis

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stable coins aren't just a slightly better way to uh

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connect to the old payment rails okay

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the argument is

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they give companies the ability to bypass

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those legacy rails completely bypass them

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how does that work well

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this is where that concept comes in

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everything is just a book transfer

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if you're stable coin native

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it's it's powerful explain that a bit more

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a book transfer yeah

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so instead of navigating this maze of banks

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networks processors

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hmm if you're operating directly with stable coins

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maybe on a shared digital Ledger

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like a blockchain could be or something similar

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moving value between two parties

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can become just a simple direct update

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two balances on that shared Ledger

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ah okay

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so it's like moving money inside one big bank

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but potentially between anyone anywhere

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that's the idea without needing

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you know

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five different intermediaries to all update their own

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separate books and reconcile later

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okay so collapsing multiple ledgers into a one shared

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transparent view essentially

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precisely now

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the sources do acknowledge

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you know the other view

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that stable coins

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might just end up being another platform

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connecting the current system

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like a new kind of banking as a service right

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just plugging into the old pipes

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yeah but

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they really emphasize that the deeper potential here

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lies in reimagining the payment rails

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from the ground up

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building on this idea of internet native

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stable digital money

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and to really appreciate that kind of reimagining

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it probably

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helps to see how we ended up with the system

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we have now absolutely yeah

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the sources give us a quick but uh

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pretty fascinating look back

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so walk us through that history briefly

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where did all this modern payment stuff start

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according to the sources

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you can trace it back to the 1950s

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Diners Club ah

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the first credit card basically sort of before that

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it was mostly cash

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or maybe companies extending direct credit

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Diners Club created that first closed loop system

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they were the central intermediary cardholder

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merchant Diners

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Club in the middle okay

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one company managing it all

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then what happened then came bank of America

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yeah late fifties

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they tried this

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massive push for mass market credit cards

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famously mailed out

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like millions of unsolicited cards across California

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well I just sent them out

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yep and apparently it was an operational nightmare

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huge challenges managing it

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delinquency rates were apparently over 20%

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tons of fraud just messy

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yikes and that chaos LED to something else exactly

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the realization was look

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managing this kind of thing

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needs cooperation between banks

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that

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spurred the creation of these cooperative structures

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which eventually became visa and Mastercard

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ah okay

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so that created the open loop system

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that's it the four party model

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you've got the card holder

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the merchant the acquiring bank

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that's the merchant's bank

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and the issuing bank your bank

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and visa or Mastercard sits in the middle

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connecting them all right

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spreading the risk and the workload

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and for decades really

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innovation was mostly about

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tweaking and optimizing that model

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making it faster more secure

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but still the same basic structure pretty much

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then the internet hits in the 90s

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and payments start moving more to software

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e commerce takes off

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the sources mention early things like

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apparently the first web purchase was a sting CD huh

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really okay

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yeah and Pizza Hut's Pizzanet

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Amazon eBay

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all that starting up

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and that's when we got companies like Paypal Stripe

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Adyen the gateways

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and processors exactly

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they popped up to help merchants

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handle the complexities of online payments

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you know bundling services

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bridging online and offline

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but they were building on top of the old system largely

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yes that's what the sources emphasize

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great software layers but still

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fundamentally

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relying on that underlying bank and card network

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plumbing they didn't rip it out and replace it right

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so adding features

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but not changing the core infrastructure

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yeah and even newer companies

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the ones focused on enabling other businesses

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to issue cards or offer banking services

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like Marcata or Galileo the base providers right

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they often found that just putting slick

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software on top of quite outdated

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core banking systems well

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it only gets you so far

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it doesn't give you that fundamental leap in speed

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or cost or transparency

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so that leads to the point where people start thinking

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okay what if we built this with internet native money

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right from the beginning precisely

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you started seeing companies like

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you know early Paypal with P2P

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Alipay Mpesa in Africa

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Venmo Wise Airwallex

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they explored digital wallets

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direct P2P alternative networks

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and they often started with customers

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the old system didn't serve well often yeah yeah

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because the traditional system was maybe too expensive

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or too slow or just inaccessible

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they were looking for more uh

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monetary sovereignty outside the old rails

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the big banks and networks must have noticed this shift

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oh definitely and you saw responses

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things like Visa Direct Mastercard

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send banks and governments

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pushing for a faster account to account payments

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with real time networks

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and those still have limitations

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that's what the sources argue

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even these faster systems often

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bump up against technical constraints

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from the old infrastructure

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things like uh

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need to pre fund accounts

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before sending money internationally right

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you need the money sitting there first

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yeah or taking on foreign exchange risk or credit risk

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because the settlement isn't truly instant

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using netting and capital

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batching payments

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and settling the net difference later

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instead of true immediate

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gross settlement for every single transaction

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and still not very transparent

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I guess still often suffering from opacity

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yeah yeah

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it's better

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but not fundamentally different plumbing in many cases

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OK so the evolution path described is closed loop

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trusted intermediary

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then open loop trusted intermediaries

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maybe a step towards open loop

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with partial individual sovereignty of your wallets

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but the sources argue that complexity

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opacity and rent extraction

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you know fees taken at each step

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those problems persist right

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and that brings us back to today

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and stable points as the tech

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that could finally

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let us bypass a lot of that legacy stuff

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exactly this is where it gets really interesting

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talking about collapsing the merchant payment stack

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yeah because when you look at that

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traditional card payment flow

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wow the sources list so many players

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card holder merchant gateway

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PSP payment service provider

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yeah then the acquiring bank

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the card network like Viz MC routing it

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the issuing bank it's a crowd

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it really is and one source uses

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Stripe's recent work with stable coins

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as an example of how this could all be well

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collapsed and the vision isn't just stripe

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using visa more efficiently

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it's about a player like stripe

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potentially acting like a unified entity

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uh huh

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almost like a private central bank for its users as so

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by potentially issuing their own stable coin

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fully backed by collateral held safely somewhere

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like in regulated banks okay

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and if they issue the stable coin

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how does that change the payment flow itself

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well instead of the transaction data

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bouncing between all those banks and networks

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over days you could have atomic settlement

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atomic meaning meaning

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the transfer of value happens

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instantly and completely between the consumers

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and merchants accounts or wallets

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or it doesn't happen at all

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no waiting period no risk of it failing halfway through

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and this happens where on that shared Ledger again

285
00:09:35,833 --> 00:09:36,933
likely yeah

286
00:09:37,000 --> 00:09:38,933
on a transparent open Ledger

287
00:09:39,200 --> 00:09:42,133
maybe a blockchain maybe something else

288
00:09:42,266 --> 00:09:45,000
where the transaction is recorded verifiably

289
00:09:45,100 --> 00:09:47,466
and the value transfer is near instantaneous

290
00:09:47,466 --> 00:09:50,466
so you're cutting out quite a few intermediaries there

291
00:09:50,466 --> 00:09:51,366
exactly

292
00:09:51,366 --> 00:09:53,800
you might not need separate issuing and acquiring banks

293
00:09:53,800 --> 00:09:55,966
doing all that complex reconciliation

294
00:09:56,166 --> 00:09:56,833
the stable coin

295
00:09:56,833 --> 00:09:59,600
issuer just needs banks to hold the collateral safely

296
00:09:59,600 --> 00:10:02,266
and the card network visa or Mastercard

297
00:10:02,266 --> 00:10:04,900
their role in routing that specific transaction

298
00:10:04,900 --> 00:10:05,966
could disappear

299
00:10:06,100 --> 00:10:08,466
because the value moves directly on the Ledger

300
00:10:08,466 --> 00:10:11,066
or via instant instructions to the issuer

301
00:10:11,200 --> 00:10:12,500
clearing and settlement

302
00:10:12,500 --> 00:10:14,466
it's either atomic right there on the Ledger

303
00:10:14,466 --> 00:10:17,200
or may be handled programmatically by smart contracts

304
00:10:17,200 --> 00:10:19,033
for things like disputes or refunds

305
00:10:19,033 --> 00:10:20,833
wow and what about routing

306
00:10:20,833 --> 00:10:23,233
payouts or swapping between currencies

307
00:10:23,233 --> 00:10:25,033
that could become programmable too

308
00:10:25,033 --> 00:10:27,333
build into this new integrated system

309
00:10:27,400 --> 00:10:29,166
and because you're building on a consistent

310
00:10:29,166 --> 00:10:30,366
digital foundation

311
00:10:30,633 --> 00:10:33,100
data standardization gets much easier

312
00:10:33,100 --> 00:10:36,266
no more stitching together that Frankenstein text stack

313
00:10:36,266 --> 00:10:37,466
one source mentioned right

314
00:10:37,466 --> 00:10:40,200
everyone's speaking the same language digitally exactly

315
00:10:40,500 --> 00:10:42,433
fees and reconciliation should

316
00:10:42,433 --> 00:10:43,266
in theory

317
00:10:43,266 --> 00:10:45,833
become way simpler because it's more transparent

318
00:10:45,833 --> 00:10:48,200
and there are fewer parties dipping in along the way

319
00:10:48,200 --> 00:10:50,766
so the outcome sounds like one entity

320
00:10:50,766 --> 00:10:52,733
potentially wearing many hats

321
00:10:52,766 --> 00:10:54,100
yeah player like say

322
00:10:54,100 --> 00:10:57,066
stripe could potentially collapse the stack

323
00:10:57,200 --> 00:10:58,600
they could own the accounts

324
00:10:58,866 --> 00:11:00,200
the issuing function

325
00:11:00,233 --> 00:11:02,833
maybe even credit decisions based on the data

326
00:11:02,833 --> 00:11:05,266
the payment services and act as the network

327
00:11:05,266 --> 00:11:07,666
all on better tech fewer intermediaries

328
00:11:07,666 --> 00:11:10,066
and that gives more control back to the user

329
00:11:10,066 --> 00:11:12,566
it should give near full control and transparency

330
00:11:12,566 --> 00:11:13,433
back to the wallet holder

331
00:11:13,433 --> 00:11:16,366
yeah whether that's you as a consumer or a business

332
00:11:16,366 --> 00:11:17,400
managing its funds

333
00:11:17,400 --> 00:11:19,433
that quote from Simon Taylor you mentioned earlier

334
00:11:19,433 --> 00:11:20,566
really nails it

335
00:11:20,600 --> 00:11:23,000
everything is a book transfer if you're stable

336
00:11:23,000 --> 00:11:23,866
coin native

337
00:11:24,033 --> 00:11:26,366
anyone operating with stables is the gateway

338
00:11:26,366 --> 00:11:28,433
PSP and acquiring bank in one

339
00:11:28,433 --> 00:11:30,166
and everything's a book transfer

340
00:11:30,166 --> 00:11:30,700
yeah yeah

341
00:11:30,700 --> 00:11:32,600
perfectly captures that potential shift

342
00:11:32,600 --> 00:11:35,200
now the sources don't gloss over the challenges right

343
00:11:35,200 --> 00:11:36,666
fraud compliance

344
00:11:36,833 --> 00:11:38,866
absolutely not they're very clear

345
00:11:39,033 --> 00:11:41,900
fraud compliance usability

346
00:11:42,200 --> 00:11:43,433
ensuring there's enough liquidity

347
00:11:43,433 --> 00:11:45,133
these are all really hard problems

348
00:11:45,566 --> 00:11:48,866
but the perspective seems to be their solvable problems

349
00:11:48,866 --> 00:11:50,966
things that entrepreneurs are actively working on

350
00:11:50,966 --> 00:11:54,866
exactly they point to companies like Circle Paxos Agora

351
00:11:55,000 --> 00:11:57,266
various payments focus blockchains

352
00:11:57,566 --> 00:11:59,800
they're all positioning for this future

353
00:11:59,800 --> 00:12:01,366
trying to move up the stack

354
00:12:01,466 --> 00:12:03,700
to offer more of these integrated services okay

355
00:12:03,700 --> 00:12:05,766
so collapsing the domestic stack is huge

356
00:12:05,766 --> 00:12:07,666
but cross border payments

357
00:12:07,666 --> 00:12:10,200
that feels like where the current pain is

358
00:12:10,200 --> 00:12:12,266
maybe even worse absolutely

359
00:12:12,300 --> 00:12:14,433
the sources definitely highlight cross border

360
00:12:14,433 --> 00:12:17,733
B to B payments as a prime area for stable coins

361
00:12:17,966 --> 00:12:20,400
and they cite data suggesting it's already happening

362
00:12:20,400 --> 00:12:21,566
there's real uptake there

363
00:12:21,566 --> 00:12:23,833
why is cross border b to B such a good fit

364
00:12:23,833 --> 00:12:25,400
what's so bad now well

365
00:12:25,400 --> 00:12:26,433
think about the current process

366
00:12:26,433 --> 00:12:28,866
one source references Matt Brown's explainer

367
00:12:29,000 --> 00:12:31,300
a typical international BTB payment involves

368
00:12:31,300 --> 00:12:32,600
multiple bank senders

369
00:12:32,600 --> 00:12:35,166
maybe one or two intermediaries recipients yeah

370
00:12:35,166 --> 00:12:36,700
they rely on networks like Swift

371
00:12:36,700 --> 00:12:38,600
just for messaging back and forth yeah

372
00:12:38,600 --> 00:12:40,800
then you have other clearing counterparties involved

373
00:12:40,800 --> 00:12:42,600
the slow very slow

374
00:12:42,600 --> 00:12:44,900
painfully slow settlement times

375
00:12:44,900 --> 00:12:48,466
often 7 to 14 days think about that

376
00:12:48,466 --> 00:12:51,733
two weeks for money to be in transit tied up

377
00:12:52,033 --> 00:12:53,500
that creates massive risk

378
00:12:53,500 --> 00:12:55,600
counterparty risk and significant costs

379
00:12:55,600 --> 00:12:57,033
and the visibility is terrible right

380
00:12:57,033 --> 00:12:58,100
you just send it and hope

381
00:12:58,100 --> 00:12:59,766
the opacity is extreme

382
00:12:59,900 --> 00:13:01,833
the customer often has no idea where the money is

383
00:13:01,833 --> 00:13:02,766
they have to call their bank

384
00:13:02,766 --> 00:13:04,100
who calls the next bank

385
00:13:04,200 --> 00:13:07,166
the source mentions that infamous example of JP Morgan

386
00:13:07,166 --> 00:13:09,900
apparently losing millions for weeks

387
00:13:09,900 --> 00:13:11,633
just gone into the ether temporarily

388
00:13:11,633 --> 00:13:14,800
wow add in foreign exchange risk at multiple points

389
00:13:14,800 --> 00:13:16,366
high average transaction cost

390
00:13:16,366 --> 00:13:19,133
one source cited 6.6% average

391
00:13:19,166 --> 00:13:21,200
plus for most businesses globally

392
00:13:21,233 --> 00:13:23,166
just getting access to US dollar accounts

393
00:13:23,166 --> 00:13:25,600
or yield bearing accounts is incredibly difficult

394
00:13:25,600 --> 00:13:28,266
okay so how do stable coins attack those problems

395
00:13:28,266 --> 00:13:29,466
they can address them quite directly

396
00:13:29,466 --> 00:13:30,033
uh huh again

397
00:13:30,033 --> 00:13:32,300
using stripes work as an example from the source

398
00:13:32,366 --> 00:13:34,433
they're enabling businesses to get USD

399
00:13:34,433 --> 00:13:37,033
financial accounts that are backed by stable coins

400
00:13:37,033 --> 00:13:39,766
so you can hold a USD balance essentially

401
00:13:39,766 --> 00:13:41,433
but it's represented by stable coins

402
00:13:41,433 --> 00:13:44,066
exactly companies can mint stable coins

403
00:13:44,066 --> 00:13:46,800
create them by depositing regular currency

404
00:13:46,800 --> 00:13:48,800
maybe via services like bridge

405
00:13:48,900 --> 00:13:50,533
they can redeem them back to fiat

406
00:13:50,633 --> 00:13:53,866
they can move money globally using a dashboard or Apis

407
00:13:54,366 --> 00:13:57,433
and potentially issue cards linked to that balance

408
00:13:57,433 --> 00:13:58,966
or swap into other assets

409
00:13:58,966 --> 00:13:59,966
and the key is

410
00:13:59,966 --> 00:14:02,366
trying to stay within that stable coin ecosystem

411
00:14:02,366 --> 00:14:05,300
as much as possible that seems to be the crucial part

412
00:14:05,366 --> 00:14:07,466
while you might still need the traditional system

413
00:14:07,466 --> 00:14:09,966
for the final on ramp or off ramp to local currency

414
00:14:09,966 --> 00:14:11,900
today the core actions

415
00:14:12,266 --> 00:14:14,200
the sending receiving issuing

416
00:14:14,200 --> 00:14:17,066
swapping of stable coins and other tokenized assets

417
00:14:17,066 --> 00:14:18,900
that happens on a different set of rails

418
00:14:19,200 --> 00:14:21,600
potentially much faster much more transparent

419
00:14:21,600 --> 00:14:23,166
so the more you can stay tokenized

420
00:14:23,166 --> 00:14:25,466
maybe using local stable coins if they exist

421
00:14:25,466 --> 00:14:28,033
the more you essentially bypass that slow

422
00:14:28,033 --> 00:14:30,033
expensive correspondent banking system

423
00:14:30,033 --> 00:14:32,466
which means the business using it has more control

424
00:14:32,466 --> 00:14:33,900
and keeps more of the value

425
00:14:33,900 --> 00:14:34,933
that's the promise

426
00:14:35,166 --> 00:14:37,333
less reliance on all those third parties

427
00:14:37,366 --> 00:14:38,833
potentially capture more value

428
00:14:38,833 --> 00:14:40,266
lower costs overall

429
00:14:40,600 --> 00:14:42,633
the sources mentioned companies like squads

430
00:14:42,633 --> 00:14:44,066
rain stability building

431
00:14:44,066 --> 00:14:44,566
tools

432
00:14:44,566 --> 00:14:47,433
to help businesses stay in that tokenized world longer

433
00:14:47,433 --> 00:14:49,366
and the expectation is these companies

434
00:14:49,366 --> 00:14:52,133
will try to grab more of the value chain themselves

435
00:14:52,200 --> 00:14:53,033
yeah because again

436
00:14:53,033 --> 00:14:54,366
if money movement is just a book

437
00:14:54,366 --> 00:14:56,333
transfer within that ecosystem

438
00:14:56,400 --> 00:14:58,700
why wouldn't they try to offer more integrated services

439
00:14:58,700 --> 00:15:00,300
right that makes sense

440
00:15:00,300 --> 00:15:02,766
and even for flows that still touch fiat

441
00:15:03,200 --> 00:15:05,266
there are companies like conduit pay mentioned

442
00:15:05,566 --> 00:15:08,200
working with banks to use stable coins as a bridge

443
00:15:08,200 --> 00:15:08,966
for near instant

444
00:15:08,966 --> 00:15:10,633
cross border transfers yeah

445
00:15:10,633 --> 00:15:12,600
even if it starts and ends in fiat

446
00:15:12,600 --> 00:15:13,800
okay so for cross border

447
00:15:13,800 --> 00:15:16,533
the vision is wallets become accounts

448
00:15:16,566 --> 00:15:20,166
tokens become products the blockchain is the network

449
00:15:20,400 --> 00:15:22,933
resulting in potentially better UX

450
00:15:23,000 --> 00:15:27,066
easier reconciliation more user control transparency

451
00:15:27,066 --> 00:15:28,900
speed interoperability

452
00:15:28,900 --> 00:15:31,900
and lower cost that's a great summary of the potential

453
00:15:31,900 --> 00:15:33,800
laid out in the sources for Cross Border

454
00:15:34,000 --> 00:15:35,433
now let's maybe pivot slightly

455
00:15:35,433 --> 00:15:36,400
and look at the second source

456
00:15:36,400 --> 00:15:37,700
you shared it really

457
00:15:37,700 --> 00:15:40,533
tries to dissect the stable coin market itself

458
00:15:40,566 --> 00:15:42,566
and figure out where value might actually end up

459
00:15:42,566 --> 00:15:43,566
concentrating right

460
00:15:43,566 --> 00:15:45,366
this one breaks the market down into

461
00:15:45,366 --> 00:15:47,100
what was it seven different categories

462
00:15:47,266 --> 00:15:48,600
seven categories yeah

463
00:15:48,733 --> 00:15:50,866
the argument being that payments are complex

464
00:15:50,900 --> 00:15:51,800
and each piece

465
00:15:51,800 --> 00:15:54,300
has different ways to build a competitive advantage

466
00:15:54,466 --> 00:15:56,966
a moat as they call it and capture value

467
00:15:56,966 --> 00:15:59,400
okay a moat being something that protects your business

468
00:15:59,400 --> 00:16:01,233
gives you pricing power exactly

469
00:16:01,233 --> 00:16:03,300
so the categories are settlement rails

470
00:16:03,666 --> 00:16:06,066
stable coin issuers liquidity providers

471
00:16:06,066 --> 00:16:08,033
Lps value transfer

472
00:16:08,033 --> 00:16:11,366
money services like PSP's aggregated APIs

473
00:16:11,366 --> 00:16:13,633
messaging platforms merchant gateways

474
00:16:13,633 --> 00:16:15,000
ramps and finally

475
00:16:15,200 --> 00:16:17,300
stablecoin powered fintech applications

476
00:16:17,300 --> 00:16:17,966
got it so

477
00:16:17,966 --> 00:16:20,466
let's quickly run through where this source sees value

478
00:16:20,466 --> 00:16:22,066
potentially ending up in each one

479
00:16:22,066 --> 00:16:23,966
first up settlement rails

480
00:16:24,033 --> 00:16:27,000
these are seen as potentially incredibly valuable

481
00:16:27,300 --> 00:16:29,100
the moats are things like network effects

482
00:16:29,100 --> 00:16:31,300
everyone wants to build on the rail everyone else uses

483
00:16:31,300 --> 00:16:32,800
right where the money is exactly

484
00:16:32,800 --> 00:16:34,066
deep liquidity low fees

485
00:16:34,066 --> 00:16:35,300
speed reliability

486
00:16:35,600 --> 00:16:37,466
the analysis suggests it might be a winner

487
00:16:37,466 --> 00:16:38,466
take most market

488
00:16:38,466 --> 00:16:40,800
and success probably requires purpose built solutions

489
00:16:40,800 --> 00:16:42,400
just for stable coins and payments

490
00:16:42,466 --> 00:16:44,266
not necessarily general purpose blockchains

491
00:16:44,266 --> 00:16:46,000
trying to do everything okay

492
00:16:46,000 --> 00:16:49,200
next stable coin issuers like circle or Paxos

493
00:16:49,200 --> 00:16:50,400
now yeah

494
00:16:50,800 --> 00:16:52,433
historically they've been big winners

495
00:16:52,433 --> 00:16:53,900
partly from network effects

496
00:16:54,033 --> 00:16:56,200
partly from earning interest on the reserves

497
00:16:56,433 --> 00:16:58,766
but the sources argue they need to evolve

498
00:16:58,766 --> 00:17:00,300
they can't just be asset managers

499
00:17:00,300 --> 00:17:01,300
they need to do more

500
00:17:01,300 --> 00:17:03,433
they need to invest heavily in the infrastructure

501
00:17:03,433 --> 00:17:05,066
compliance integrations

502
00:17:05,300 --> 00:17:07,000
making sure there's deep liquidity

503
00:17:07,300 --> 00:17:09,633
the prediction is that neutral issuers

504
00:17:09,633 --> 00:17:12,166
ones not tied to a specific bank or fintech

505
00:17:12,166 --> 00:17:13,666
trying to compete elsewhere

506
00:17:13,833 --> 00:17:17,000
might win big because of trust and competitive dynamics

507
00:17:17,000 --> 00:17:20,800
hmm so they hold value but they have to keep innovating

508
00:17:20,800 --> 00:17:23,500
their model makes sense how about liquidity providers

509
00:17:23,500 --> 00:17:24,966
the ones making markets

510
00:17:25,400 --> 00:17:27,700
this category is viewed as likely becoming

511
00:17:27,700 --> 00:17:30,466
highly commoditized not much pricing power

512
00:17:30,666 --> 00:17:31,933
the moats are pretty thin

513
00:17:32,033 --> 00:17:33,700
maybe access to cheap funding

514
00:17:33,700 --> 00:17:36,366
reliable systems the prediction is big

515
00:17:36,366 --> 00:17:36,966
established

516
00:17:36,966 --> 00:17:39,200
financial players will likely dominate here

517
00:17:39,366 --> 00:17:41,300
purely stable coin focused Lps

518
00:17:41,300 --> 00:17:43,200
might struggle to build a lasting edge

519
00:17:43,200 --> 00:17:45,833
okay what about value transfer money services

520
00:17:45,833 --> 00:17:46,966
the new PSP's

521
00:17:47,066 --> 00:17:49,800
these are seen as potentially building strong modes

522
00:17:50,000 --> 00:17:51,900
if they build proprietary rails

523
00:17:51,900 --> 00:17:53,833
and get direct banking relationships

524
00:17:53,833 --> 00:17:55,566
not just relying on aggregators

525
00:17:56,166 --> 00:17:58,700
their value comes from that direct bank access

526
00:17:58,700 --> 00:18:00,500
flexibility global reach

527
00:18:00,633 --> 00:18:03,366
managing liquidity handling tough compliance

528
00:18:03,366 --> 00:18:05,200
so they do the hard stuff right

529
00:18:05,366 --> 00:18:08,200
the sources expect them to have moderate pricing power

530
00:18:08,400 --> 00:18:11,200
maybe form regional duopolies or oligopolies

531
00:18:11,200 --> 00:18:13,066
and become very large businesses

532
00:18:13,233 --> 00:18:15,866
supplementing or competing with traditional PSPs

533
00:18:15,966 --> 00:18:18,566
interesting then aggregated APIs

534
00:18:18,566 --> 00:18:19,900
messaging platforms

535
00:18:19,900 --> 00:18:22,400
these are the ones that wrap APIs from other providers

536
00:18:22,400 --> 00:18:24,966
act like marketplaces critically

537
00:18:25,100 --> 00:18:25,666
they usually

538
00:18:25,666 --> 00:18:27,500
don't take on the risk of handling the money

539
00:18:27,500 --> 00:18:30,266
or compliance directly so they connect things

540
00:18:30,266 --> 00:18:32,233
but don't touch the money flow itself

541
00:18:32,233 --> 00:18:34,000
exactly the sources argue that

542
00:18:34,000 --> 00:18:35,666
while they might charge high fees now

543
00:18:35,666 --> 00:18:38,233
they're vulnerable they could get squeezed or bypassed

544
00:18:38,233 --> 00:18:39,900
because they aren't doing the hard parts

545
00:18:40,033 --> 00:18:41,300
to survive long term

546
00:18:41,300 --> 00:18:43,100
they might need to move closer to the customer

547
00:18:43,100 --> 00:18:45,200
and take on more core payment functions

548
00:18:45,200 --> 00:18:46,633
okay merchant gateways

549
00:18:46,633 --> 00:18:49,333
ramps helping merchants accept stable coins

550
00:18:49,400 --> 00:18:51,300
yeah kind of like early stripe for cards

551
00:18:51,500 --> 00:18:54,566
offering developer tools aggregating infrastructure

552
00:18:54,700 --> 00:18:56,900
but the analysis suggests this is tough

553
00:18:57,100 --> 00:18:59,800
established players can just partner with others to add

554
00:18:59,800 --> 00:19:01,800
stable coin acceptance relatively easily

555
00:19:01,800 --> 00:19:04,233
so it's hard to build a moat just doing that

556
00:19:04,233 --> 00:19:05,300
seems to be the view

557
00:19:05,466 --> 00:19:08,200
BDC ramps are seen as a likely losing category

558
00:19:08,200 --> 00:19:09,000
long term

559
00:19:09,300 --> 00:19:12,166
BDB might find niches maybe around treasury management

560
00:19:12,233 --> 00:19:15,900
but lasting pricing power probably not expected here

561
00:19:15,900 --> 00:19:17,133
okay last one

562
00:19:17,200 --> 00:19:19,900
stablecoin powered fintech applications

563
00:19:20,366 --> 00:19:22,966
this is described as a knife fight huh

564
00:19:22,966 --> 00:19:24,766
why because it's relatively

565
00:19:24,766 --> 00:19:27,500
easy to build an application on top of these new rails

566
00:19:27,500 --> 00:19:28,666
once they exist

567
00:19:29,366 --> 00:19:31,466
success here depends heavily on distribution

568
00:19:31,466 --> 00:19:33,666
go to market skills product sense

569
00:19:33,833 --> 00:19:36,033
the sources are pretty skeptical about pure crypto

570
00:19:36,033 --> 00:19:38,233
stable coin consumer apps and develop markets

571
00:19:38,233 --> 00:19:42,000
why is that because existing trusted brands banks

572
00:19:42,766 --> 00:19:44,200
major fintech like new bank

573
00:19:44,200 --> 00:19:45,233
Robin Hood Revolut

574
00:19:45,233 --> 00:19:47,466
or mention can just add stablecoin features

575
00:19:47,466 --> 00:19:49,666
if customers want them they already have the users

576
00:19:49,666 --> 00:19:52,400
right they bolt it onto their existing app exactly

577
00:19:52,433 --> 00:19:54,200
emerging markets might be different

578
00:19:54,200 --> 00:19:56,266
where existing finance is weaker

579
00:19:56,266 --> 00:19:58,166
the Zar pay example comes up

580
00:19:58,166 --> 00:19:58,833
but overall

581
00:19:58,833 --> 00:20:01,466
high failure rates are predicted for consumer startups

582
00:20:01,466 --> 00:20:04,833
built only on this layer business focused apps

583
00:20:04,833 --> 00:20:07,666
solving specific problems might have a better shot

584
00:20:07,900 --> 00:20:10,000
okay that's a really helpful breakdown

585
00:20:10,000 --> 00:20:11,633
so even though there are overlaps

586
00:20:11,633 --> 00:20:14,066
thinking about these distinct roles is important

587
00:20:14,066 --> 00:20:16,466
yeah it clarifies where the analysis suggests

588
00:20:16,466 --> 00:20:17,866
defensible value might be built

589
00:20:17,866 --> 00:20:19,800
okay so let's try and tie these threads together

590
00:20:19,800 --> 00:20:23,066
now the main argument from both sources

591
00:20:23,066 --> 00:20:26,466
really seems to be that stable coins provide this new

592
00:20:26,466 --> 00:20:27,533
tech foundation

593
00:20:27,700 --> 00:20:31,000
that lets companies bypass and fundamentally collapse

594
00:20:31,000 --> 00:20:34,433
the existing very complex payment value chain

595
00:20:34,433 --> 00:20:35,866
right and that collapsing

596
00:20:35,866 --> 00:20:37,866
that removal of all those intermediate layers

597
00:20:37,866 --> 00:20:38,766
and their fees

598
00:20:38,766 --> 00:20:41,566
is why the first source makes that bold prediction

599
00:20:41,766 --> 00:20:44,200
we could see the first trillion dollar fintech

600
00:20:44,200 --> 00:20:45,733
built on stablecoin rails

601
00:20:45,766 --> 00:20:46,766
yeah because the value

602
00:20:46,766 --> 00:20:48,766
doesn't have to be sliced up so thinly

603
00:20:48,766 --> 00:20:50,366
across so many players anymore

604
00:20:50,366 --> 00:20:52,233
and they acknowledge the bumps in the road

605
00:20:52,233 --> 00:20:54,933
fraud compliance regulation usability

606
00:20:55,000 --> 00:20:56,066
absolutely yeah

607
00:20:56,066 --> 00:20:58,166
but the perspective is that these are things

608
00:20:58,166 --> 00:21:00,366
entrepreneurs are actively tackling

609
00:21:00,433 --> 00:21:03,633
it's framed as building real net new systems

610
00:21:03,633 --> 00:21:05,500
not just fiddling around the edges

611
00:21:05,500 --> 00:21:07,800
there will be resistance from the old guard presumably

612
00:21:07,800 --> 00:21:08,966
oh inevitably

613
00:21:09,266 --> 00:21:11,600
incumbents benefit from the current system

614
00:21:11,600 --> 00:21:12,700
but the prediction is

615
00:21:12,700 --> 00:21:14,166
they'll eventually have to join in

616
00:21:14,166 --> 00:21:16,166
launch their own versions or partner up

617
00:21:16,166 --> 00:21:18,100
which brings us back to that final step

618
00:21:18,100 --> 00:21:19,966
in the evolution you described earlier

619
00:21:20,000 --> 00:21:21,833
from closed loop to open loop

620
00:21:21,833 --> 00:21:25,566
trusted to open loop with some user sovereignty

621
00:21:25,866 --> 00:21:28,866
and now potentially towards truly open

622
00:21:28,866 --> 00:21:31,500
digitally native systems where the tech allows

623
00:21:31,500 --> 00:21:34,300
potentially anyone to compete across more of the stack

624
00:21:34,300 --> 00:21:37,400
and users customers gain more direct control

625
00:21:37,400 --> 00:21:39,766
self sovereignty using these open networks

626
00:21:39,766 --> 00:21:41,366
that's the potential path laid out

627
00:21:41,366 --> 00:21:42,233
it is so

628
00:21:42,233 --> 00:21:43,300
the big takeaway here

629
00:21:43,300 --> 00:21:45,366
feels like stable coins might be much

630
00:21:45,366 --> 00:21:47,233
more than just another crypto asset

631
00:21:47,233 --> 00:21:48,566
they could represent a fundamental

632
00:21:48,566 --> 00:21:50,333
reshaping of global payments

633
00:21:50,366 --> 00:21:51,833
not just improving the old system

634
00:21:51,833 --> 00:21:52,366
but potentially

635
00:21:52,366 --> 00:21:54,733
collapsing it into something far more efficient

636
00:21:54,866 --> 00:21:56,666
transparent and uh

637
00:21:56,966 --> 00:21:57,966
user controlled

638
00:21:57,966 --> 00:22:01,300
and the economic opportunity tied to that shift

639
00:22:01,900 --> 00:22:04,233
the sources suggest it's potentially enormous

640
00:22:04,233 --> 00:22:05,700
trillion dollar company enormous

641
00:22:05,700 --> 00:22:07,033
yeah it definitely

642
00:22:07,033 --> 00:22:08,500
leaves you with something pretty significant

643
00:22:08,500 --> 00:22:11,066
to think about what does it really mean

644
00:22:11,066 --> 00:22:14,066
if moving money anywhere becomes essentially

645
00:22:14,066 --> 00:22:15,700
just a book transfer on an open

646
00:22:15,700 --> 00:22:16,766
digital network hmm

647
00:22:16,833 --> 00:22:17,800
and maybe more personally

648
00:22:17,800 --> 00:22:19,300
what does it mean for you

649
00:22:19,300 --> 00:22:20,633
as an individual or a business

650
00:22:20,633 --> 00:22:23,366
to potentially have that much more direct control

651
00:22:23,366 --> 00:22:26,400
that much more transparency over your own funds

652
00:22:26,400 --> 00:22:28,900
in that kind of system what doors does that open

653
00:22:28,900 --> 00:22:30,633
what new challenges might it create