Why Does Meta Want a Stablecoin? Ft. Brandon Arvanaghi and Anurag Arjun

I would expect Robinhood to become more and more of a, a global, both fintech, equities, and crypto platform. And so it's kind of a combination of what are the exchanges and local licensing that they need, and then what can they do on-chain? But it's very clear that they are on the forefront of the space. They deeply understand it, and it seems to be a big part of their long-term strategy.

Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name is Simon Taylor. I am your host for today, author of FinTech Brain Food and head of strategy over at Sardine. Joining me is my co-host, my friend Kai Sheffield, head of crypto at Visa. How are you doing, my friend?

I am great. There's too much news. It's hard to keep up with. We have a lot to cover. Let's get into it.

We're doing our best. Thankfully, we have some incredible guests. Joining us today is the CEO of Meow, Brandon Arvanaghi. How are you doing, sir?

Doing great, Simon. Thanks for having me.

Remind everybody what Meow does. You guys have an interesting story with stablecoins and crypto.

That's true. Yeah. So Meow is a business banking fintech. We're trying to build something similar to the Costco of financial services. I believe we were the first or one of the first major business banking fintechs in the US. To support natively sending and receiving USDC as a payment rail. So that's been big for us and it's pretty obvious that's where the ball's going.

And of course, also joining us is Anurag, who is founder of Avail and of course, previously co-founder of Polygon. Anurag, remind everybody what Avail is up to.

First of all, thanks for having me here. What we build is really actually infrastructure for the rollup-centric roadmap. So this is basically in the realm of How to scale blockchains really? For those not too tuned into blockchain architectures, you know, like we have this problem of scalability and interoperability and that powers some of these chains that is going on and that's what we really build, right? Like I mean scaling infra and interop infra for public blockchains. But recently we've had a lot of inbounds from the tokenization space, for example, so bunch of RWA or real-world asset backchains launching. And so that's a rough context.

That's phenomenal. The rate things are scaling at the moment, we need infrastructure that can help people scale. All right, before we get into the show, we just need to remind everybody that this podcast is sponsored by our friends at BVNK. And if you've been listening to this podcast, you've probably heard us say every business needs a stablecoin strategy. And if you're looking for the best place to start, that's BVNK. BVNK is the leading provider of stablecoins stablecoin payments infrastructure, helping businesses move money faster, settle globally, and even launch their own stablecoin products, all with licensing and compliance so you can build with confidence. We're proud to partner with BVNK on Tokenized. To learn more, visit BVNK.com. Just one last bit before we do get to the news. I need to remind everybody that views and opinions of contributors today are their own. And might not reflect those of companies they represent. Please don't take anything we say as tax, financial, legal, investment advice. It's not advice on sports. It's not advice on what to wear. It's not shopping advice. It's just not advice. All right, let's jump into the news. Okay. First story this week from everywhere, but we picked it up from Fortune, is apparently Meta, a.k.a. Facebook, Instagram, WhatsApp, are looking at stablecoins again. Uh, so of course many of you will be familiar with Libra, aka Diem. This was the project that got a lot of central bankers very, very angry, but the company is now said to be in discussions with crypto firms to introduce stablecoins as a means to manage payouts to creators, and they've hired a vice president of product with crypto experience to help shepherd some of those discussions. Brandon, can you see this as a desirable thing for somebody like Meta? And do you think they're going to go as big as they went before? What are your thoughts on this story?

I think it's hugely desirable for Meta, and I think they were on the right track. What was it, 4 or 5 years ago when they tried this with Libra and Diem in the first place? I was extremely bullish on that. And you think about what they did. It took them a year to basically find out they couldn't do it. And that was their big bet that year. So I think they have master plans behind the scenes, and when they're able to crack this nut this time around, which I think is a lot more likely, it'll be a big boon to them.

Anurag, any thoughts?

In general, like, when this— we're toying around with, you know, like launching Libra, really, to be very honest, like I joined the industry in 2017, and by the time that Libra was joining, like there was a lot of uproar. In the sense that it would challenge a lot of the existing incumbents. Even at Polygon, we were seriously thinking of integrating with Libra because, you know, they just have immense distribution in general. But that didn't work out. But then, you know, like the whole Instagram-Polygon— Instagram was trying out a bunch of stuff on Polygon in creator monetization, payouts, that stuff, uh, NFT minting, for example. That experiment went on for a year, they shut it down. Even in that context, in India, for example, they've been trying to put in UPI in WhatsApp for some time. That also never really took off. So the thinking has always been there. How do we do micropayments, payouts, that sort of thing? Because see, they have the one thing that most crypto companies don't have, which is distribution. And I think stablecoin infrastructure has matured so significantly over the last 3-4 years, it's almost like a no-brainer, I would say.

I think for me, that's the most interesting point here of a lot of people forget when Libra was started, the idea was both it was going to be a stablecoin and it was going to be a new high-throughput blockchain. And this was late 2018, early 2019. Blockchains were still pretty slow and expensive. And so when they looked at their distribution and their user base, they said, there's no way that we could do layer 1 Ethereum on-chain payments and pay gas fees if you have billions of users with stablecoins. And then also at the time, the existing stablecoins were there, but they were still relatively small and unproven. So it'll be interesting to see how they approach it this go-round. And I think the story was more just a rumor, but I think we're now in an environment where, as Anurag said, like the infrastructure is at least 10 times better than it was in 2019, where you now have blockchains that can scale and there's still more work to do, but I think it's not the barrier that it used to be. And then you also have a number of stablecoins themselves that are starting to scale. And so I think the interesting question becomes for any big tech, whether it's Meta or someone else, does the strategy become about integrating existing stablecoins into their core products, or does the strategy become creating their own stablecoin? And then if they create their own stablecoin, what are the implications of that? I think we'll see this play out in the next few years.

And there's going to be regulatory worries there, but I want to stick with that use case that Anurag talked about for a second because things like creator payouts, and if you think about the scale of Meta's billions of users, 4 billion users, the vast majority of those are not in the United States. The vast majority of those, the average revenue per user is less than a dollar and the cost to serve is around that. So most of their users are not profitable. In fact, Users in advertising markets like the US will have an ARPU closer to $21, $22. In Europe, it's closer to $8, $9, and then the rest of the world, it's tiny. How do you monetize as a tech platform when the vast majority of your users aren't really buying enough stuff through ads so that the CPMs aren't there? Your business model doesn't work for most of your users. You need something else, and local payments rails market by market just hasn't worked. They're only just getting there with Pix in Brazil. And to Anurag's point, UPI is actually quite a difficult thing to play with as an international company. It is intentionally commoditized. You can't monetize it. So how do you do commerce with it? How do you do some of the use cases like creator payouts, like, uh, social shopping, like some of those sorts of things within WhatsApp? I mean, it's very common in India to run an entire business on WhatsApp and to live in that universe in a way that it just isn't. In the United States. So I can see the strategic rationale for this, but Anurag, as well, you could probably educate us on some of the pushback that's come from the Indian Central Bank and some of the regulators towards some of those international businesses, and maybe just kind of explain why stablecoins might be a bit of a better option for somebody like a tech platform.

In fact, actually, we work a little closely with some of the folks behind UPI as well. They've recently come up with this Finternet initiative in general, which is actually this more global payment and programmable payment network essentially. And that has been born out of all these problems of trying to port UPI to other countries, for example. So they've tried pilots in multiple other countries, including UAE, Singapore, France, for example, and so on. So I answer the question in two parts, right? Like the India-centric problem, this is bunch of pushback because it's a very India-specific problem. The regulator has little bit hesitancy in giving away a lot of control to companies operating out of the US, for example. So I won't get into too much of the details, but I think replacing a local payment mechanism via stablecoins is not that easy or that desirable, right? Because something like a UPI or a PIX will always be much more scalable within a specific country. But when we're talking about international payments, right, like, I mean, that makes it especially attractive in general for companies like Meta but various others. And it's not only payments, to be very honest, right? Like, payments is going to be the first step, but there's much more programmability tied in so that all of these big companies, including Meta, right? And I remember when Instagram was doing its due diligence on Polygon, right, and back in the day, I mean, they had all sorts of questions and we could feel that they had a lot of things that they had planned but were not opening their cards.

The Finternet project is one we've not talked about on the show before, but it is fascinating. It actually comes out of the, uh, Augustin Carstens and the Bank of International Settlements. So not the kind of place you would expect. And it solves an interesting problem, which is I've got all of these local domestic payments rails. I've been trying to connect them one-to-one. I've been trying to export the market by market. But there's no way to connect them. And I need an off-ramp from these local rails into things like stablecoins, into other infrastructure. So what would that look like? And that's a market structure for it and an infrastructure. Kai.

I was going to ask Brandon, like you mentioned before, like you might be one of the first business account products that integrated stablecoins, but you weren't crypto before. And so what have you seen, like what was the driving demand for you to add stablecoins as a send and receive option? And then how have you seen that be used by customers on your platform?

Yeah, I think if you ask a lot of the institutional VCs, you might hear that you're going to be paying for coffee with stablecoins on Ethereum or something. I tend not to believe that. I think that's like a lot of hammers looking for nails and ways to deploy mega funds. The use cases we're seeing are very practical. It's companies that are doing most of their financial operations on regular bank rails. Now they need Fedwire, they need ACH, they need SWIFT. They may have contractors overseas, for example, where it's much easier for them to receive USDC as a payment method as opposed to going through SWIFT or another rail. Some creator platforms like what Simon is talking about that might need to do distributions to all their contractors on the platform, they can do it all through one account now or one dashboard, at least on the Meow platform. So these are the practical use cases we're seeing. I don't believe people want stablecoin accounts that we're talking about right now. I think it's fundamentally— if you're talking about overseas contractors, for example, they want access to dollars. And that's why for someone like Facebook and Libra, having a stablecoin on Ethereum seems more like a bug than a feature in some ways. You know, the gas fees and things like that, that just happens to be how the dollarization is kind of formed. That's how access to stablecoins is formed. But logically speaking, people want access to dollars, I'd say, overseas. And that's the use case we're seeing.

Do you know, I was in Zurich last week at the Point Zero Forum with lots of policy folks and lobbyists and regulators and crypto industry folks. And I think the thing that was said quite often in some of these rooms was Libra was a wake-up call and Libra cannot be allowed to happen. There is still very much a view in the policy community that what Facebook, Meta did was challenging the central bank's role in money creation and policy management. If you have 4 billion customers potentially and you are the creator of private money, then you fundamentally move who has influence over the economy away from government towards the private sector. That is the worry. I don't think that's true. I don't think that was ever Meta's objective. I don't think that's necessarily the outcome. But there are serious concerns that we would move from a world of having banks that were too big to fail to having big tech firms that are way too big to fail and even too big to bail out. And when you think about it as the type of risks these people have to manage, you do have some serious questions to answer. So to Kai's earlier point, I sort of wonder if this rumor is true, how you would kind of assuage some of those concerns. And one of the ways might be Actually, a lot of teams left Meta— Aptos, Sui, there are many others— a lot of great teams went out into the market and built interesting things. I, I wonder what we'll see them start to do. So I'm going to move us to the next story. This one we picked up from The Block, but it was also covered quite broadly, which is Robinhood, the famous brokerage and trading app that sells many fintech products for consumers, is going to acquire a crypto trading platform The parent is called WonderFi, and they're going to acquire them for around $179 million US. It potentially sets them up for expansion into the Canadian market and is paid almost entirely in cash. And this follows the acquisition of Bitstamp, which was one of their leads into expanding into Europe. It really is crypto M&A season. Uh, Brandon Arvanaghi, your thoughts on Robinhood and, uh, moving into the Great White North? I know something that you've considered as well?

Yeah, it's challenging to do so. I know that firsthand, uh, but Robinhood's at a scale where it probably makes more sense, uh, than, than a Series A company. Um, and I think they've executed very well lately in the US. So it'll be interesting to see. It's always a challenge, you know, going into a different jurisdiction. There's, there's not only cultural differences that are unexpected, but, you know, there's local regulatory environments you have to deal with that the partnership motion is different. Simon, we've even talked about this, uh, back in the day.

So.

It'll be very interesting to see how they play out there.

Guy, your thoughts I'm interested in as well. There's another thing I found in my own research here that the platform they bought was the only one that had full CIRO approval and CIPF insurance, and they've got an instant footprint now of 1.7 million KYC Canadian users with some trading volume. Is crypto an interesting way, or digital assets or tokenized assets, an interesting way to think about market expansion? What are you seeing from your customers and in your conversations?

I think it's interesting just that Robinhood has acquired two crypto exchanges in the past year, right? Like Bitstamp, I think was, was last year. So I think it's, it's very clear that they are in the crypto business and they're starting to go head to head with Coinbase and some of the traditional exchanges. I think it'll be interesting to see this hybrid of the approach of a traditional centralized custodial exchange business that is licensed and regulated in one of these developed markets, you know, like Canada versus— it seems like they also have the ambition to do a lot more on-chain and whether it's tokenized stocks or just enabling crypto trading in ways that could have much broader reach into many markets. And so I would expect Robinhood to become more and more of a global both fintech, equities, and crypto platform. And so it's kind of a combination of what are the exchanges and local licensing that they need, and then what can they do on-chain. But it's very clear that they are on the forefront of the space. They deeply understand it, and it seems to be a big part of their long-term strategy.

Very different business to the one they were sort of 4 or 5 years ago. They also acquired a company called X1, which is now the Robinhood Gold card. They've been doing some interesting things with AI as well. They also use stablecoins to settle over a weekend. It's kind of one of those case studies of like, if you want to see how lots of companies will operate in 5 years' time, take a look at the things Robinhood are already doing, because I think you can take lessons from some of how they're thinking about their back office and their strategic positioning to how they see the future kind of playing out. Alright, give me a global perspective on this. Like, as you sit looking at this, what do you think about the potential for global expansion? There is some massive markets out there to potentially expand into.

Yeah, I mean, I think, see, this is a template that exchanges have been kind of following. Like, I mean, most namely Coinbase with its BASE offering, right? Like, I mean, it's again coming back to the main point, right? Like they have distribution and they want to control, you know, like this on-chain stack. And doing this Layer 2 chain, right? Like Base is a Layer 2 chain on Ethereum. WonderFi also has a Layer 2 chain on Ethereum, for example. So does, for example, you know, like Binance has their own chain. All the big Chinese exchanges have some chain which is probably either a Layer 2 or some other chain, right? Like most are opting for Layer 2 chains, and that is some of the infra that we also kind of enable. And it is actually a very good playground for things that they cannot enable on the centralized exchange offering or on their app, to be honest, like on their centralized infra, right? So if you look at Base from Coinbase, it has a lot of interesting experiments that are happening that would take time to get on the centralized exchange that Coinbase operates, for example. So I would think, of course, they also had all the licensing in Canada, for example, which I think was a bulk of the value. But this Layer 2 thing also, I would say, is pretty interesting. It's the same way most exchanges are thinking. Most exchanges now have a wallet offering also clubbed in, like Coinbase has Coinbase Wallet, Binance has Binance Wallet, and so on. And so it's this unique combination of the wallet With Robinhood already having an app, I can only guess at their strategy, of course, but you know, like, I think it's a confluence of all of these happening. And I think there'll be a lot of experiments on the WonderFi chain coming soon, which then will make its way to the Robinhood app.

I love that observation. That is just a great place for the centralized WASPs to experiment. In the Indian context, I know Zerodha is a massive player and has done extremely well. Do you see any moves from actors like that, or is it still too difficult from a regulatory perspective?

In India, we do not have too clear regulation in general. Like, that's why someone like a Zerodha— Zerodha, you know, like, I was interested at some point in time, but, you know, like, they're just waiting. I mean, they're just too big to kind of enter a space where, you know, like, there's no regulatory clarity. So I think India is a space which will grows slowly. I actually live in Dubai actually, the UAE, which is much more regulatory friendly. I mean, of course it's a small market, the MENA market is small, but again, bunch of experiments the regulator is looking at this. The Global South actually is seeing tremendous experimentation there. So I think apart from the US, I would take a look at what's happening in the Global South. In Hong Kong specifically, you know, like the Hashkey Group is doing a bunch of stuff there, for example. Hopefully that's a gateway to China at some point in time and so on.

It's going to be fascinating to watch, isn't it? Without question, that sort of Global South development and UAE, both with VARA in Dubai and ADGM in Abu Dhabi, very thoughtful from a regulatory perspective. Brandon Arvanaghi, talk to me about the B2B context here. Do you see demand from people just trying to manage their treasury for getting access to things that work more cross-border, more seamlessly. Is that in your kind of customer profile that you're seeing? They want you to be more global from day one. Is that a demand that you're seeing?

Yeah, cross-border is the biggest use case for sure. Now there is kind of this longer-term potential thesis of stablecoins being a different kind of risk profile to actually hold. As a treasury asset. If you think about how they represent obligations from the government, that is a thesis I've heard, and that is something I don't think is mainstream at all. I think it's something that we could see in 5, 6, 7 years, but right now it's as a payment rail. It's as a way to get dollars to people overseas. And like I mentioned, I think a lot of the reason these stablecoins have boomed— and I think a data point to this, by the way, you're seeing high-throughput chains take more and more of the volume of stablecoin transactions. And that's just simply because it's cheaper on those chains. If you kind of look towards the trend, something like a Libra or a Diem would be the logical kind of conclusion of like a centralized company basically, or a centralized offering having the fastest dollar-based on and off ramp. Globally with embedded distribution. That's if you take things to the logical conclusion, and that's not me voting for that outcome. I just think that's why you see these higher throughput chains having high volumes of stablecoins.

They've got utility. I mean, Tron is one of the fastest growing, uh, and Tron plus Tether in the Asia-Pac region, in a lot of the global south. It's where still the growth engine is, and a lot of that is the speed of throughput and the accessibility.

It's interesting that stablecoins are both like this medium of exchange and store value, and different companies are starting on different sides of it. And so it seems like Brandon Arvanaghi, like you started with using it as this cross-border payment mechanism for your clients in the US to be able to send. Stripe, what we covered last week, the Stripe financial accounts, seems like it's starting more as just like dollar access, store value, and then you can initiate fiat payments from it. So Brandon, what, what's your take on the Stripe financial accounts in dollar-based business accounts outside the United States? Is that a direction that you all would go? It's like today you're US-based customers sending out. Would you offer something on the receive side to businesses outside the United States in, in a similar manner?

Yeah, I think what they're doing is incredible. I think it's going to expand access to dollars globally to people who may not have had it before. And I think that's the big value add that they're doing. And it's very much in line with kind of what I'm describing in my thesis, that people just want access to dollars. And the fact that they're able to serve so many businesses that may not have had that historically or in different countries, that's very, very valuable. And that's why their announcement did, did incredibly well last week. From our side, it's less so the market that we're, we're pursuing. We mostly face kind of US businesses and their use case is to kind of use it as a payment rail for their contractors or counterparties, etc. So there's two different use cases there and we're on the latter one I described.

Got it. Look, well, from having demand for dollars to thanking our sponsors, we're just going to take a quick break to thank the people who make Tokenized possible. We'll be right back. This episode, uh, if it's not obvious, is brought to you by our friends at Visa, a global leader in payments. Visa's Tokenized Assets Platform, VTAP, uses smart contracts and cryptography to help banks bring fiat currencies on-chain. VTAP allows financial institutions to issue fiat-backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in VTAP. This episode is brought to you by Canton Network. Ever wonder where real tokenized asset volume is going? Canton Network, the groundbreaking layer 1 public chain where traditional finance and crypto are starting to converge. Why? Because Canton is the only public network with privacy. No workarounds, no compromises. This is 24/7 markets, on-demand financing with real yield. Where value moves as freely as information on the internet. This isn't just another blockchain. No, this is where the serious money is flowing to solve real market demand and risk. Visit canton.network to learn more. Alrighty, thank you to our sponsors. And we have a story here from Ledger Insights. This is about JP Morgan's blockchain bank account being used to settle Ondo public chain transactions. So JP Morgan has their Kinexys digital payment solution, and that was used to settle in a delivery versus payment transaction for the OUSG tokenized money market fund. And so this is the first time we've seen Kinexys do something on a public chain, and their Kinexys is very much a private chain, but they are doing delivery versus payment, real-time settlement of kind of a tokenized asset, in this case the money market fund, and their classic settlement chain. I find this fascinating. Brandon Arvanaghi, do you see that ability to switch between— we see it with BlackRock's Biddle product, the 24/7 in and out of yielding products— as something that treasury managers will want? And what do moves from behrmoths like JP Morgan mean for you and your business and the space more broadly?

Yeah, when it comes to real-world assets and things on-chain, I, I think you either need everything to be on-chain or it doesn't fully work. If you think about things like lending, for example, if you have collateral against someone on-chain, that's great. But if you're doing something unsecured and you need recourse to something of theirs, well, that's something of theirs also has to be on-chain and there needs to be a legal framework as well that's understood that you can take settlement of whatever the collateral is off-chain. So the financial products on-chain, it's very cool to see, I'd say, but I think it's incomplete until everything's there and say in the logical conclusion, everything's on-chain and it's very high throughput and it just works. Then in theory, that higher throughput makes things more efficient. Than standard rails. But we are a ways away from having everything on-chain with a regulatory framework, with recourse, which is where we are right now.

There's only so much fun you can have on your own chain, and the more that's on a public chain, the more programmable and transparent it gets. But I think the argument against that I've heard is confidentiality, security, privacy. There are some use cases where it's incredibly difficult for some of these institutions to be able to do that stuff. And some of their clients, especially in the larger asset manager space, might not want to because it gives away their trading strategies. It allows people to front run them and so on and so on. So there are good reasons why you wouldn't want to. Anurag, your thoughts when you see this story?

Yeah, I mean, I think in general, this is only going to increase because that experiment with private blockchains that happened in 2017, '18, '19, there was this whole movement around doing enterprise private blockchains that really didn't take off essentially because it was just a very closed ecosystem. Now what has happened in the last 3-4 years is there's so much public chain, like from a scalability perspective, there's just so many chains, right? Like, I mean, essentially, so the scale is not a problem. We have like fast and cheap transactions now. And some of these traditional institutions are now looking to take advantage of the infra that has developed. I mean, it's infra, it's not only just the ledger infra, the blockchain infra, it's also things like how do you on-ramp, off-ramp, OTC players, like when you want to off-ramp from a USDC to a USDT, for example, how do you do that at scale, not primary issuance, for example. I mean, 3-4 years ago when you tried to off-ramp, let's say, a million dollars in USDC to USD, there would be huge slippage, right? Like now it's 0.999 rates, for example. And so I think more and more of these enterprise blockchains will start interacting and it's with public chains in some capacity. I mean, admittedly, the things that are happening in the financial tokenization space are still very limited to accredited investors. Like KYC, AML, for example, and so on. And I think that whole experiment stage has begun, right? Like, I mean, tokenizing the asset is one thing, collateralizing it, for example, Brandon said legal recourse. So it has to work in conjunction with off-chain contracts really, right? Like, I mean, there's no way around that, but we are seeing some interesting things especially beyond the stablecoin thing, like can we give reasonable risk, like access to credit, for example, to yield, for example, all those things.

So if I understand this correctly, so on one side it was the JPM blockchain deposit account on their Quorum kind of permission chain, and on the other side, the delivery of the asset someone was buying was on Ondo chain, which is the real-world asset-focused chain from Ondo as an issuer. And so my first takeaway is like, it's interesting for asset issuers to then have their own chains that they issue the asset onto. And then are we going to see a world where every real-world asset issuer is going to issue onto their own chain? And then if they issue onto their own chain, like there's going to be a ton of interoperability that needs to happen. Between where if cash is going to sit in the form of deposits on one chain and then you're going to have a customer that wants to buy an asset, but depending upon who issues that asset, is there going to be a BlackRock chain and a Fidelity chain and like— so it's hard to try and imagine. Like, I feel like when we've thought about the value of tokenized real-world assets as like this ledger, this universal ledger that you could have both cash and a representation of an asset sitting on the same ledger and then do delivery versus payment. It seems like the way, at least in the very early days it's playing out, is there's still a lot of fragmentation. It's cash is on one chain or one ledger and the real-world asset is on another one. So maybe they're both modern ledgers and interoperability technology is improving. But it doesn't really seem like we've seen as much the original vision of wouldn't it be convenient if cash and assets were all in the same ledger and you could just move them around? Like, you still have to do interoperability. It's just interoperability maybe between more modern systems than interoperability between older ledgers that have been around for a while. But Simon, is that how you read it as well? Yes. Yeah.

Essentially, I read it as you're getting functionally— this would appear to be exactly the same to a customer as if it was all running on the same chain, because if it's instant and it's 24/7, That's what I care about. And can I get in and out of a money market fund? And actually, can it settle anywhere JP Morgan can settle? And can I get the institutional-grade privacy and confidentiality? Uh, don't forget that Solana, I think it was 2 weeks ago, patched a vulnerability in their privacy token system. Off the back of that, everybody cares about privacy. And suddenly people were going to Canton and AVAX and everybody else being like, oh, how do I get privacy? Do I need to be my own chain. And when you are dealing with tens, hundreds of millions of dollars, billions in a single trade, commercial confidentiality and privacy become the primary thing you're looking for. And will you take a little bit more technical complexity for that?

Yes.

But what do you want? You want collateral mobility. You want the ability for once a trade is settled that you're not waiting for a weekend to make that collateral mobile and you want to be putting it to work. You don't want it getting stuck. And if I can solve that for you, but my technical solution involves some interoperability, but it gives you backwards compatibility with the existing banking system and Rails, that's probably a better thing overall. For consumer-grade stuff, you probably don't need much of that. So if you're, uh, sling money, it's somebody coming along with this ledger that lets you just build your business, and 80% of the complexity is this utility. That sits outside your bit. I mean, that's, you know, Brandon, to your point, if you're building something that's like Costco, that's like just really, really hyper-focused on cost, that's like a gift. All of this infrastructure has been pushed outside of the walls of your organization. So I don't think you need what they're doing for everything, but it could become a model that's interesting for the, for some of the bigger, heavier institutional stuff. Brandon, where are you at philosophically on some of those tradeoffs?

Yeah, it's a good question. I mean, I think back to the Spotify days, there was a lot of fragmentation back then before Spotify or Netflix came around and they solved the fragmentation issue. And right now we're seeing the same thing of fragmentation across a ton of L1s, a ton of L2s. And why do we have that? It's because, like you said, Simon, there's not one place for everything. So you have to bridge things across multiple chains, et cetera. So there is a solution in my opinion, like what that looks like is a more kind of cohesive place. It, it could be on the TradFi rails, it could be on one chain, but it's the parallels are pretty obvious to me that that's what's going on.

It's interesting that the Ethereum messaging has really pivoted to be sort of the mother chain, to be the kind of the spine that many people always saw it as. Um, but now it's sort of almost concentrated its mission around that. People are excited again to say, this is kind of the thing we always wanted you to do. Thank you for focusing on simplicity and just being really excellent at that. And maybe that's the vibe shift here is to simplicity and being great at something and recognizing your role as part of a, a bigger ecosystem. Uh, Brandon Arvanaghi, you mentioned big companies with distribution a couple of times and There's a great story here about, uh, Ant Digital, the sister company of Ant Financial, also part of Alibaba, one of the biggest wallets and payments companies in the world, uh, that are partnering with Aave Labs Horizon to build a real-world asset market on Ethereum. And this market will allow qualified users to borrow stablecoins using their tokenized real-world assets as collateral. So this is an L2 run by Ant Financial, built in collab with Aave. To your point, Anurag, look at what's happening out of Hong Kong. Look at what that could mean for the future of some of these wallets, especially if you're looking to serve the APAC region with that wallet. What are your thoughts on big companies doing an L2 as a way into the space?

Yeah, I mean, see, the way to think about it is that when a big company is wanting to kind of enter this space, right, they come from this mindset of controlling their own infrastructure. And this Layer 2 structure allows them to, you know, like, rather than start on a public chain like Solana or on the Ethereum mainnet, right, like, they kind of control their— they can control their infra. That's how they frame it, right? Like, I mean, I can control my infrastructure. And still be interoperable, right? Just also going back to your previous discussion, right, like it's kind of the same thinking the conventional enterprise technology team functions come up with, right? Like they are more comfortable starting out like that. It also lends itself to confidentiality, privacy, that sort of a thing as well. But because, you know, like you mentioned Ethereum being this mothership and this whole Layer 2 ecosystem taking shape. So you have probably north of 200 Layer 2 chains now live on top of Ethereum. And the thing is that the interop piece is partially solved. It remains to be solved fully, for example. But that is a good reason of how companies, big tech companies are approaching this. Specifically to this example that you gave, I don't think it is about the L2. I mean, I think Aave has this initiative called Aave Horizon, that they're planning in general, which is, I mean, they started this initiative called Aave Arc. I think this is 4 years or so back where they were kind of trying to put permissioned RW assets, but that really did not take off because secondary trading on this was also permissioned between known counterparties and such. So that didn't take off. This is a fresh new attempt at pairing permissioned assets with permissionless liquidity. This is also like Apollo did this announcement with Polygon where they have this private credit offering called Acred, which now they're kind of getting into this leveraged product with Morpho and Gauntlet, for example, not getting into the gory details. But really, I think when we talk about this RWA tokenization, The thing is you cannot turn like an illiquid asset into a liquid asset just by tokenizing it, right? Like you have to kind of do something with it. And some of the approaches that a lot of DeFi players are now seriously looking at is can we treat these RW assets as collateral against which, you know, like you could borrow digital stablecoin dollars then put that into use on some other. So this actually, there is very interesting structured products that, you know, we've done a lot of experimentation over the last 4 or 5 years on crypto-native assets. Now we are seeing this on real-world assets.

It's fascinating. Whenever there's a real-world asset, the link back to the real-world asset and who looks after it is kind of interesting. Our good friend Luca Prosperi at mZero, will always say that the great thing about stablecoins is they have settlement finality in their own ecosystem. If they have to reference something off-chain, you lose some of that finality. Similarly with RWAs. But to your point, if you build it as a structured product, then it becomes a different conversation. And experimentation is definitely something crypto is very good at, and it's very good at finding out what not to do. But when you bring it into the real world, there's definitely things to learn from. Kai, your thoughts on this story?

I'm excited to see how we go from the crypto-native world of DeFi, locking up an asset like ETH and borrowing stablecoins, to being able to have some type of traditional asset as the collateral to borrow stablecoins from. The question is, what are going to be those traditional assets? Who's going to issue them? Which protocols are they going to go on? How do you manage identity? Like there are all these pieces like, and to me it's like going from DeFi to on-chain finance. And I think those are two different things like DeFi, the whole value prop is that it's decentralized. On-chain finance, it's supposed to be faster, more efficient. They're going to be trust relationships. Like there's no way to have most financial services without any level of trust if there's any traditional asset involved. And so I think we're just on the cusp of that transition and it's going to be fascinating to see.

Yeah, I think you're in really, really good shape if you want to borrow against an NFT or something that's purely digital, like Wrapped Ether, Solana or something like that. If it's all on-chain already, then the recourse problem is solved, right? If it's overcollateralized by something that's already there. When you get into the real-world thing, you better hope that everything is there. You better hope your spouse is on-chain, your children are on-chain, like everything. So it's a tricky problem. And it's hard to even say we're at the bottom of the first inning. We might be at the top of the first inning there.

It's definitely early, but it's certainly the first things feel like they're hitting product market fit. Every day is a new conversation, a new meeting, and there's always so much to see. And even the little Tokenized podcast is taking off. So shout out to Jared Franklin, who messaged me just as we were starting this podcast, who said, hey man, I listen to most Tokenized episodes. I love it. There's a lot of shows out there that I haven't been able to really get my head around. Most of this seemed like hype before, but you guys are the first ones that have made it feel real. So hopefully we can keep doing that for you. And if you're enjoying the show, we hope you'll share it with some friends. It's been great to share this with some great guests. Anurag, where can people find out more about you and everything you're up to at Avail?

Yeah, you can find me at Anurag, A-N-U-R-A-G-A-R-J-U-N, Anurag Arvanaghi on Twitter. That's the best place to find me.

How about you, Brandon? And everything at Meow.

We're at meow.com. It took me a long time to secure meow.com, so come over there or @Brandon on X. If you're a business that needs access to stablecoins like USDC, I think we're your best bet.

And Kai on X @KaiSheffield and visa.com/crypto.

You'll find me @SYTaylor pretty much everywhere, fintechbrainfood.com and sardine.ai if you're worried about scams, hacks, fraud, fraud or anything of the sort in digital assets. Thank you very much, and we'll catch you next time.