Paxos CEO on Crypto Today & Why Stablecoins Are Exploding | Charles Cascarilla

I want to be playing in the biggest part of the TAM to build the most valuable business. To me, I look at our TAM and our TAM is enormous. We're trying to replatform the financial system. There's $900 trillion of assets. We got a long way to go. And you do this successfully and you're going to be able to build a very big business doing it. This is like creating an enormous problem where if you own assets, you make a lot of money.

This is the K-shaped recovery. This is the—

Yeah, everyone's coming around to this like affordability crisis. But what it really is, is we're printing money. If you told me we were going to have the most pro-crypto administration and president you could ever possibly imagine, and the average token will be down 80%.

Yeah.

And Bitcoin will be down 50%. And I do think it's the crypto golden age. It's just not the crypto price golden age.

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone, welcome back to Empire. Good to be back. Good to be back. Thanks for dealing with Santin and Rob as I took a little hiatus. So very excited to have Charles Cascarilla back on the podcast. Last time I think we had him on was 2022. He's the CEO, I think, right now of Paxos, co-founder of Paxos.

Last time I checked.

All right, good.

Good.

You're good. Backstory of Charles is I listened to an episode of— when Mike and I were starting Blockworks, I listened to an episode that Charles did in 2017 with Patrick O'Shaughnessy. There's another podcast called Invest Like the Best, and it was this formative podcast for us. And yeah, we were like, okay, this is a real thing. This serious guy is talking about this, you know, Bitcoin and money blowing up and all that kind of good stuff. So we, you know, it's one of the, one of the reasons we love podcasts is that, you know, there's these formative moments. And I think, Charles, your podcast was actually pretty formative for us.

So, oh, that's awesome to hear. I know actually a lot of people really like that podcast, I think because it was a crossover from traditional finance and crypto. Yeah. So it made it maybe a little more accessible than it had been in the past. All right.

So, I mean, you guys have been building Paxos for 14 years now.

Yeah.

2012. I'd love to hear and maybe start with what you think you got right and what you think you got wrong.

I think we got most things wrong, but we got maybe the most important thing right, which is that we recognize that Bitcoin and blockchain were going to fundamentally change the financial system and lead to a replatforming that we are now maybe just on the cusp of finally. And I came across Bitcoin in 2010 actually. So it was pretty early and we were coming out of the financial crisis. And I looked at blockchain and I said, "Well, look, I don't know if it'll be Bitcoin or not, but blockchain could really change how the entire financial system works." Turns out that it's both Bitcoin and blockchain. And I remember when there were colored coins and the idea was you're going to actually put everything on the Bitcoin blockchain and that was going to be the ledger of record. And so that was my initial thought about how this was going to evolve because we predated Ethereum being involved and starting Paxos even. And it was called ItBit at the time. And the idea was, well, we're going to build an institutional platform so that traditional institutions can feel comfortable coming into the crypto and blockchain space. That was wrong. It took them a very long time to get to that point.

It was right, just wrong on the timing.

Yeah, well, you know, there's nothing— there's no difference between early and being wrong in some sense. You know, you have to have the right timing is just as much about being right. And so anyways, I think when we started incubating the business inside what was our asset manager at the time, and we had come out of the financial crisis and we were short subprime and commercial real estate going into it.

You were— who's we?

My co-founder, my partner in the asset manager business, Emil Woods.

Hedge fund or?

It was a hedge fund and it had— investing in public companies as well as private companies. And in private companies, it might be VC-backed companies all the way through to like kind of growth or private equity firms.

Got it.

And he still runs that business today. It's called Liberty City Ventures.

Oh, that's Liberty—

Oh, that's Liberty City Ventures.

You started Liberty City Ventures?

Yeah, we started it. It was part of our broader asset manager. We started it. And then, you know, he still runs it. He was a co-founder of Paxos. We incubated it within the asset management business.

I did not know this.

So we started in 2012, but I didn't come in to start running it full-time until about 2015. And—

You ever wish you just stayed as an investor?

No.

Little easier than running a company.

Plus and minuses to it. I think it probably would have been more lucrative maybe. But I think I would be a much better investor today. And I think about businesses much better because I've been inside of one. And you've seen it from early stages all the way through to later stages. And you can now really understand what's going on underneath and how disruption is happening, that would have been impossible because even though I started an asset manager, I've actually started two asset managers before Paxos, so had founded businesses, they were more services businesses as opposed to product and technology businesses. And you would just totally misunderstand how— what Marc Andreessen said is so accurate about software eating the world and how that could also be very analogous to how blockchain could eat the financial system. In some sense. And, um, so I think we did a very good job of understanding, well, Bitcoin could be something that really changes the world, and blockchain can be something that changes the world. Let's start, um, Paxos. And we invest in a lot of earlier stage companies too, like BitGo, for example, like seed stage. We actually were the, uh, lead— leads of it. Um, so, you know, very early that we were involved in the space. I mean, you could get to the end of, uh, pretty much the internet on Bitcoin in 2010 with about 4 clicks. It always led back to the Satoshi white paper. So, I mean, it just wasn't really hard to know the whole community then. And I remember going to the first consensus in San Jose, and they didn't even have the San Jose Convention Center all to themselves. It was mainly Comic-Con.

Yeah. And it's like Charlie Shrem with the, you know, at a—

Definitely Charlie Shrem amongst other people. I mean, I'll tell you, it was like 80% Comic-Con people, like 20% like Bitcoin people. And I got to tell you what, the Comic-Con people were actually more normal than the Bitcoin people.

Bureaucrats like Belshi, Winklevoss. Boss, Voorhees, Shrem.

Yeah, I'm sure all that— they were all there. But I mean, yeah, just talk about an odd lot of other like people and retail. And I mean, it was, um, it was interesting, you know. I mean, like, you're coming from like an institutional asset manager business and then you're like, uh, sitting here and the people at the Bitcoin conference are more unusual than the Comic-Con people.

Why do you think that you have lasted? Um, it's interesting, Blockworks has some competitors who, you know, they were like formidable competition. And I think the reason that we don't really compete with them anymore is not because, you know, they had bad products or anything. They just weren't able to last as long. I think maybe there's like a— some of the founders just burned out. Some of the— I don't know.

It's—

why do you think that you were personally able to build a company in crypto for 14 years? Very few people from your class are still around.

That's true. There are. I mean, I think partly because you've been around that long, you've probably held crypto and you probably made a lot of money and you're like, well, do I want to keep doing this?

Yeah.

And what keeps me going is the mission and vision of what we're going to achieve as Paxos. Our goal is to open the financial system to everybody and enable any asset to move at any time in a trustworthy way, really re-platform the financial system. That's a big goal. It's something that I think is worth continuing to spend time on. I mean, I could go do other things with my time, but I don't think there is something that would be more valuable, more impactful to society, be more challenging, and be more fun. Um, but also I think, um, maybe unlike other businesses, because we've had that guiding light, even though, uh, the market continues to shift— and by the way, the crypto market moves so unbelievably fast— and how many different cycles we've gone through since, you know, 2010 or 2015, you know, how many times there's been an RWA cycle, how many times there's been different versions of ICOs and meme coins and NFTs. And, you know, I mean, there's all these things that happen, and it's kind of like a lot of, you know, immediate lemming behavior into like the next thing and then the next thing. And it's almost like ADD market. And, you know, you have to kind of step back a little bit and be able to think about where are things going to be on an enduring basis. And, you know, certainly that doesn't mean you're always going to get things right, but it does create an opportunity for you to have longer operating cycles that you're planning around and building a business around. Otherwise, you can easily go down cul-de-sacs. And, you know, we've certainly done that in many different ways because we've been been trying to, you know, bring traditional assets onto the blockchain from the very beginning of the company.

Yeah.

And, you know, we're still only now maybe just starting. I mean, if you would have told me it was gonna take 14 years for you to get to $200 billion of like, you know, or $300 billion of assets, I'd have been like, oh my God, this is like, you know, we're talking about being early.

Yeah.

Um, but, and if you would have told me that, but yet you would have mature public company businesses, I actually would have been surprised too. So that's what is very interesting because you had crypto as an asset class expand in a way I would have never imagined. I remember there was like big battles about whether you could have blockchain and you could without crypto, you know, how many different types of crypto.

2016 and 2017.

Yeah, exactly. I mean, even back in like 2013 or 2014, there were like, you know, different like kind of debates about this. Of course, there were the hard fork wars.

Yeah. Yeah.

Yeah. I mean, you kind of lived through all of this.

Yeah.

And at the same time, what has held true? There's some things that held true. Bitcoin. Has been able to, I think, continue to be a source of truth. Um, blockchains continue to be a source of truth. Um, crypto has a different way to be able to operate in the world and, uh, in communities, continues to hold a source of truth. But if you would have told me that we would end up with tens of thousands of tokens in 2014 or 2015, I would have never— I said, what is this? This is crazy. There's only like 3,000 public companies. Why are we gonna have so many tokens? Um, so there's a lot of things that we had anticipated, and we didn't actually try to enable that market.

Yeah.

And, uh, as an institutional, uh, infrastructure player, we didn't even have customers that wanted it. But that was the most lucrative place to be. Obviously Coinbase has gone out and built a very big business amongst other firms, and the biggest businesses are built around monetizing the fact that you can create retail access to crypto assets, to all the tokens. Yes, to all the tokens. Not to the fact that there's $900 trillion of assets in the world that are going to be re-platformed onto the blockchain. Yeah, those— no one has built, you know, tens and tens of billions of dollar business doing that. I would never believe that.

Do you agree with where the industry has gone? I know, you know, it's not really in your hands. It's just the market dynamics, right? But yeah, there's, you know, 40,000 tokens out there right now.

Yeah.

Yeah. What do you think about that?

So I went to— I always go to Token2049, the one in Dubai and Singapore, and I went to the one in Singapore and I was speaking at it and went on stage and you went into Marina Bay Sands. And this was in like basically the beginning of October. And I probably should have just like listened to my spidey sense. I walked in and I felt like my analogy was it's like you grew up in Austin and you left for 30 years and then you just came back. You wouldn't recognize the town. And I went into Marina Bay Sands to go talk at Token2049, and I looked around and I said, who are all these people spending $600,000 to $1,000,000 on booths? I don't even know any of these.

I texted my co-founder after that. I was at the same event. I said, feels super toppy right now.

That's exactly what I thought.

But I didn't sell.

I didn't sell either. But I, you know, Bitcoin. But anyways, but I, I looked around, I go, I don't even— I feel like a no crypto for old man.

Yeah.

Like I couldn't even understand what was going on. I felt like I didn't even know the industry anymore. And, you know, part of that's Asian retail is like highly speculative. But that was also just kind of the nature of the moment we were in. And then, you know, we've seen like a pretty significant correction since then across all these crypto tokens. I think, um, you know, I don't think we need to have all those tokens, but you should have the ability to create as many tokens as the market is willing to fund because there's lots of different possible businesses that can happen. Yeah, but you know, there is some element of, uh, buyer beware here because it's really completely open to anybody to create a project and issue a token, which is cool. Yeah, uh, but I suspect most of these, if not, you know, the vast majority are going to zero. Yeah, yeah. Agreed.

Yeah. I think about tokens almost like websites where it's like, you know, probably 99.99% of the value accrues to the website provider. No, no. To like 25 websites in the world or probably 100 websites in the world. Right, right. But, but it's great that anyone can go create a website, you know, one-click create a— like you shouldn't shut down the ability to create websites, but most of them are useless and pointless.

Well, it was like if you looked at the airline industry, might be a little bit different now, but American Express has made more money off the airline industry than all the airlines' profits combined over the history of the airline industry.

Yeah, that makes sense.

Right? I mean, it's like some parts of the value chain are much more valuable than other parts of it. Yeah, there is. It's much easier to build a business that enabled people to trade crypto tokens than to launch a crypto token. Yeah, exactly.

Maybe before we get too deep into Paxos's business, because it's changed a lot since I last talked to you. I'd love to hear just your updated commentary on like where Bitcoin and crypto fits in this global monetary capital markets system right now.

Sure. Well, I think it's important to maybe separate crypto and blockchain because I think of crypto as a way of creating incentives and coordination for projects and maybe like non-Bitcoin crypto. And I think that's very valuable. There's lots of ways to be able to create incentives for people to come together as communities to build something. Hyperliquid being a perfect example of that, or you can go on to all kinds of different things, BitTensor, and different places, different ways. You can use a crypto as an organizational mechanism to coordinate people. I think that's really important. You create network effects. Bitcoin, I think of slightly differently. I know there's other things that are trying to be a store of value like Bitcoin, but none have come anywhere close to it. Bitcoin is trying to do something a little bit different. I think of it as mathematical proof of work. And it's in some ways competing with geological proof of work, which is gold. And there's a bit of a question of, well, today, is mathematical proof of work as enduring as geological proof of work? Can you really use it over the next 20 to 100 years? There's going to be new math. Forget about quantum for a second, which I'm no expert on. But you're always going to have new math. You used to have RSA 1028, and then you upgraded to the next one, the next one, the next one. So, you have to keep upgrading. Cryptographic algorithms no matter what. And I think Bitcoin is a solution to creating a mathematical proof of work that you can use because that's better in some ways than geological. It's infinitely divisible. It's more transparent. It's not tied to the physical world, so you don't have still some need for trust of wherever it's being stored. So there's great things about Bitcoin. Uh, but you know, it's only at a couple trillion dollar market cap versus, you know, 40-some trillion for gold. Yeah. And, um, you know, there is a need for something that you can trust because, uh, fiat currency is basically future proof of work. That's the way to think about it.

It's debt, right?

And debt is, I'm going to pay you in the future. And, you know, a little bit of betting on the future is a good thing. Uh, you overbet on the future and it consumes the present, and we're at the stage, and You can never quite ever stop yourself from wanting to keep betting more on the future, which is issuing more debt and then probably investing it in things that don't have a very high ROI. Government spending is probably a negative return in general. And so you just keep issuing more and more debt and you're going to end up destroying a fiat currency. And gold versus dollar, dollar's down like 99% since whatever was that, $19 was the original price and now we're at $5,000 or something, $4,500. So you've obviously already had an enormous decline in the value of the dollar and all their fiat currencies, but that's going to continue to happen unless like, you know, AI gets to a point that we, you know, just creates a productivity boom that could ratify all the debt that exists.

Right.

But I just find that unlikely that we— that will happen. And so I think Bitcoin as a store of value is like in a very good position to continue to go up as it unwinds the risk of mathematical proof of work becoming as valuable or as certain as geological proof of work.

Yeah. Why do you think that it— I agree with every— I love, I love how you lay that out, like mathematical proof of work versus geological proof of work versus future proof of work for the dollar. Why do you think, though, that gold is up 50% year over year and Bitcoin's down 20% year over year?

I think there are different dynamics going on. So I think as much as I would like Bitcoin not to be a risk asset, it is because your journey from speculative asset to store of value is about going through volatility.

Yeah, climbing walls of worry every time. Now we're about to hit the wall of worry around quantum.

Exactly.

Over that wall of worry.

And by the way, this is a really meaningful and important wall of worry to get over, which is how can we show that we can upgrade the math?

Yeah, yeah.

Whether it's quantum or otherwise, like you come up with new proofs, other things aren't even quantum that could be an issue. Um, I'm not a quantum expert. I've watched a lot of it, but You know, I mean, I'm only going to pair it back what other smart people said, but I just think the broader point is not quantum, it's you got to upgrade math over time. Is there a way to be able to do it that creates certainty that if you basically took, uh, your Bitcoin and you said, I'm going to give it to my great-grandchildren, it's going to be something that, you know, you could reasonably presume will be around and be valuable? You know, whether you, you know, think that might be the case for gold or not, most people believe that. Around the world. Yeah. And it's been true for, you know, thousands and thousands and thousands of years. You know, 20 years is not a very long time, uh, less than that, right? So, uh, you know, we have to put things in perspective. If you want to be worth $40 trillion, you're going to have to go through, you know, some pressure cycles of testing like the underlying core, uh, thesis. And then we're at another moment of that now. I don't know if that is actually why it's down 50%. I feel like a lot of times things go down and everyone's like, I wonder why? And you come up with a narrative. And, but, you know, there is a wall of worry that has— that we have now found that is valid, that needs to be overcome. And I think if you looked at gold, you basically had all these central banks that were buying and you had retail all over the world were buying. And, you know, once price starts to go, it starts to go and, you know, it starts to create its own momentum and everyone's like, well, how come gold's up so much? And by the way, now it's down a bunch from the highs. And, you know, you have central banks selling all over the place. Because they're trying to cash in, like Turkey and Poland. I've talked about this in other places. And so, you know, you, you just can't expect these things to go linearly. In some ways, I think this is like the, the, the price you pay for fiat money, which is you have all this liquidity sloshing around looking for the next momentum thing.

The hot ball of money.

Yeah, exactly. And there was like stories about this in like the, the 1920s and '30s where you just like, it felt like money was just like sloshing around the world looking for the next thing. And I think that's exactly what we have going on now. And so it found the next thing that has momentum. And you have all these models and everything that are all based on price momentum. So they look for what they're looking for and they just keep following the trend.

Yeah. I really strongly believe that sometime this year there will be a— Do you remember in 2020, I think it was May 2020, when Paul Tudor Jones called Bitcoin the fastest horse in the race?

Yeah.

And that basically unlocked the career risk for hedge funds to buy Bitcoin.

Yes.

And there's probably been a few of those. Every 3 to 4 years we get one of those moments. Yeah, it was probably— I think Coinbase becoming a public company was big. BlackRock, the ETF.

ETF. Yeah.

Where you unlock the career risk to do these things. And so some— I don't know what it'll be, but I assume something like that could happen this year. And it usually happens at the bottoms. It usually happens when there's a lot of fear and then something happens and then boom, it's off to the races again.

And, you know, there's also the 4-year cycles that people like to look at and that kind of puts you into like October-ish or something. Yeah. So, you know, that comes into play. Play, you know, are you a 4-year cycle believer? Not really, but it, you know, it's hard not to, you know, look at it and say it's kind of worked. It kind of worked. It's, you know, supply. And, um, you know, I think you kind of look at what the price action of Bitcoin is, and, you know, it's obviously very volatile. And, uh, you know, you know, when you start to take away supply, yeah, there's a change. And, you know, the Bitcoin ETFs were the biggest thing that happened. In some ways, the analogy is, well, Bitcoin went public. And when things go public, well, what happens? You probably get a pop, but then there's lots of distribution that happens.

Yeah.

You have a lot of turnover. You have a lot of people who've held it for a very long period of time who've made a lot of money. You have to remember a couple trillion. It's not just percentages that matter. It's also absolute dollars. At some point, if you go from $2 trillion to $3 trillion, a trillion dollars just made.

Yeah, yeah.

Right. And so somebody who has accumulated that trillion dollars, Maybe some of them are the new buyers, but a lot of old holders made a lot of money and, you know, people start to sell. It's logical.

Yeah.

You know, I mean, like, you know, you're, you're still living in dollar terms.

Yeah. $100K was the first time that I started to see people who are, you know, around way before me, like kind of your, your crowd, like 2012, 2013, 2014 people. A lot of that crowd, I mean, maybe a lot of them did sell along the way or something like that, but there was a huge amount of selling by that crowd around sometime in 2025 I started to see it and I think it was less because it had hit this. I think there's a psychological point at $100K. Yeah, but there's also, I think a lot of that crowd got, you know, kind of said, picked their head up after a decade and said, I don't really like where the industry's at anymore. Or now there's AI too and they maybe want to go play with some, some new shiny toy.

So yeah, I mean, some OGs that made a lot of money, you know what I mean? You know, it's just prudent, takes them off the table, go do something. And like, how long, you know, I know someone told me, they're like, my goal isn't to die with the most amount of Bitcoin.

Yeah.

You know what I mean? Like, it's— and so, you know, people decide they want to do other things.

Yeah.

And, you know, that makes sense. And, you know, I get it. Yeah.

Uh, maybe one more markets question and then I, I do want to talk a lot about Paxos. What do you think about just the general markets right now? You're such a great, like, uh, connoisseur of markets.

Um, curious about broader markets.

Yeah. Just broader markets.

Um, you know, I think it's just unbelievably hard to prognosticate right now.

Yeah.

Uh, you know, I know President Trump's— one of his favorite quotes is from Andrew— President Andrew Jackson, and it is something like, um, I was built for a storm, the calm does not suit me.

Yeah.

And, uh, I think that like very much sums things up. So he's kind of a volatility-creating machine.

Yeah, yeah. He's like, oh, it's calm going into the weekend?

Yeah, we need to do something else.

Tariffs.

Yeah, yeah, exactly. Or hey, the markets are selling off too much. And so he's kind of managing the market a little bit. Um, and I think ultimately, you know, which it's really hard to know here is are— if you're the Iranians, and that's kind of like the main focus at the moment— if you're the Iranians, are you in a better negotiating position to drag this out or worse? And what can the US do to like put them in a worse position by dragging it out?

Yeah.

And, uh, and that's very hard to like tell right now. Um, but, uh, and the longer it goes on, the more likely you are to have a very bad adverse action in the markets because the amount of supply chain disruption that's happening across critical areas, not just, um, oil, which people look at, but the cost of diesel fuel, uh, is like, you know, $170, $160, $170 depending on where you're at. Jet fuel, we're running low on it. Helium, what you need for chips, fertilizers, you kind of go on and on. And, uh, you know, this is like, you know, very nonlinear situation, and, uh, you're creating a lot of, um, inflation pressures that can also destabilize the market, including like kind of where long-term bonds are. And, you know, also have an enormous amount of CapEx that's being poured in through AI. You know, depending on exactly how you want to look at it, you could say it's $5, $7, $9 trillion over the next 5 or 6 years. What it costs to put on a terawatt of a data center, I think it was like $35 billion and now it's like $50 billion. I mean, you're talking about pretty serious surge pricing, pricing going up very significantly. Are you going to actually get good returns on that capital and how much disruption is going to happen to a lot of like market cap that exists today? How deflationary is that versus how much does it create one-time surges is a pretty good analogy to the 1990s.

Mm-hmm.

And basically you had this huge CapEx boom and then after the CapEx boom, you have the productivity, which is deflationary, but you also have the fact that you're not spending on the CapEx anymore, and that becomes deflationary. And so you get inflation, then you get deflation. You should actually have higher interest rates now because you're actually going to be spending more capital than you otherwise— anyone otherwise thought. So you need to ration. What is the whole point of interest rates is that you're creating a mechanism to ration capital intertemporally. If you're using more now, you need higher interest rates. You need lower interest rates in the future. Yeah.

So you would, you would bring interest rates up.

You should bring interest rates up.

Yeah. Yeah.

Now that's a different question from whether I would bring them up and not just because President Trump would like, you know, not be happy with me if I was running interest rates, but because the economy is so unbalanced with all of the debt loads that we put in, you don't really know what you could do. In the 1990s, 100% Alan Greenspan should have been raising interest rates. He said irrational exuberance in 1995. The original sin was him not raising interest rates then, right? He allowed giant bubbles to form. And ever since then, we've been on a train of we need to print more money to ratify the prior bubble, right? So we actually— that was the moment where you needed higher rates. Now, I don't know if anyone knows what you can do between these different wars and the AI boom and all the debt. You have a very unstable, what I call equilibrium. It's a disequilibrium that we're in. And we've been in this for a long time. And so people ask me like, why do I think about Bitcoin? I go, well, it's like the anecdote to this problem, which is it very hard to understand what you should price things in, in dollars. Hmm. But I think if you looked at gold, people say, oh, look how much gold has gone up. I think it might be just— or Bitcoin for that matter. I think you might want to just invert that and say, actually, guess how much the dollar has gone down. Yeah. That's really telling us how much the dollar has gone down, not how much those assets have gone up. Because what did 1 ounce of gold used to buy you historically? The rule of thumb was it'd be a month of salary for someone in the army, a soldier in the army, or a fine man suit.

Right.

And by the way, that's kind of about what 1 ounce buys you right now.

Yeah.

It's not crazy price. And like, you know, so, you know, you have like another way of looking at these things, not as dollars, but as, um, really a unit of energy. What is that? A gold is a unit of energy, gets you other things that you have to spend energy on— a suit, a person working for you, whatever it is. And that's all really money is. And so if you reel that all the way back into your question about what I think is gonna happen with markets, so hard to tell what will happen in dollar terms.

Yeah, but those are the only terms to play in right now.

Well, no, because that's why you can hold Bitcoin and that's why you can own gold, which are still denominated. You're denominated in dollars, but if you took the S&P and divided by the price of gold or the S&P divided by the price of Bitcoin. That's a different way to think about other assets.

But you're— you still, you know, as, you know, founder but also fund manager, have to think about, do you buy— yeah, you have $100, how do you allocate the dollars? Do you buy Bitcoin? Do you buy gold? Should you go buy Nvidia? Should you buy Amazon? Like, you know, Google's ripping. Do you— you know, maybe Google's going to win the AI race, first $10 trillion company, buy some Google.

Definitely. And you can buy, um, some, uh, shares of equities and say, I'm think that's going to go up more than anything else against dollars.

Yeah.

Uh, which is another way of like looking at it. So you're trying to think, well, what assets are going to go up versus dollars? And, um, I think in— if you look on a risk-adjusted basis, meaning like what risk are you taking, there are other like somewhat risk-free assets, uh, like Bitcoin and gold. Now Bitcoin's not risk-free yet, but, uh, I think that's what gold is, you know, really widely considered. So, um, you know, if you divided the S&P by the price of gold, it's not like all that nearly as good a return. Yeah, right. I mean, and you know, partly that's global M2 goes up by 10% a year. Like, that's basically how much, right, fiat money is being debased. You have $100 and some trillion dollars right around of M2 globally, and it goes up 10% a year.

Yeah.

So you basically got to earn 10% return just to be flat in dollar spending. And this actually is creating all of, I think, the underlying societal difficulties that we have because people's real wages are not really going up.

Totally.

And, you know, this is like creating an enormous problem where if you own assets, you make a lot of money.

This is the K-shaped recovery. This is the—

yeah, everyone's coming around to this like affordability crisis. But what it really is, is we're printing money. We keep growing M2 in order to be able to support the level of debt that we have.

Yeah.

And, you know, this is like the debt consuming the future and we're living in it.

How would you fix this, though? Because, I mean, we took like kind of our best whack at fixing it. We put, you know, the best entrepreneur of our generation, Elon, on it. Couldn't figure it out.

Yeah. Well, he was trying to fix one part of it, which was that we were spending too much money, which is true, because if you look at the federal government, I guess there's the spending and then there's the printing. Yeah. So right now you cut— you're collecting taxes that are somewhere around 18% of GDP. Which by the way is normal. Yeah, yeah, that's the normal level going back forever, uh, like 50 years or something, 60 years, uh, probably before the Great Society was lost. And, um, you're at— your spending is 24% of GDP. That's like the highest it's ever been near. So we have a spending problem. It's not a taxes problem. Like, we can go say we're going to go, you know, but if you dropped government spending from 26% or 24% of GDP to 21% or 20%, we'd be in a recession right now. And then nobody's voting for that. Yeah, yeah, right. And then, you know, what happens? Well, you raise taxes, you put your— so you're in a— it's just a very, um, challenging time. This is why there isn't an easy answer. Yeah, uh, right. I mean, this is why people keep printing money.

You should buy Bitcoin.

This is why. And this is why. So you, you know, we were very good in my asset management days of being kind of short the problem, and you could be short the problem. There was subprime or other things. But then I realized— and we stayed bearish too long too, by the way, so we weren't by any means perfect on this— but I realized you need to be long the solution. That's why I built Paxos. That's why I think Bitcoin is doing. Gold is in some ways long the solution. You need to be long the solution. We need to be able to create a different type of financial system. And we need to be able to create one that's based on proof of work so that you're actually tied to the present moment and tied to like an intertemporal allocation mechanism that is actually real. Yeah, because fiat money is run by the politicians, which is really like kind of everybody. And you have a tragedy of the commons problem. It's not just the politicians' problem. We're all voting for all this stuff.

Yeah.

You know, who's going, oh, I'm, you know, everyone voted for these politicians to like lower spending. Nobody, nobody voted for that.

No. Yeah, I'd really like a recession for the next 5 years in order to solve our 100-year problem.

Yeah, exactly. Yeah, that's right. I'm gonna vote for a mini depression. Yeah, I'm gonna vote for a mini depression. No one's voting for me. Depression. Yeah, yeah, I'm so—

the people.

Exactly. And so in some ways you could look at the Trump policies and say they were actually being pretty smart about trying to solve this because they wanted to drive energy costs down as much as possible. Yeah, yeah, you know, and to me, this show must be like a Manhattan Project for fusion. You got to drive energy costs down as low as possible because if you do that, you actually have a chance of creating like deflationary growth. And if you had deflationary growth, then like you could support the debt. Yeah, but you're always going to come back to, well, will we ever get our fiscal house in order? Even if economically we could. Yeah, I don't— I suspect the answer is probably not. Yeah.

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All right.

Back to the episode.

You want to get into Paxos?

Let's do it.

Why is maybe looking at Paxos through this light of, okay, you know, you guys were short the, short the problem, you know, 10, 15 years ago, whenever it was. I assume you're talking about 2008, 2009.

Yeah.

Okay. Then you needed to find the solution. Solution is Bitcoin. Why is Paxos the best? You know, you could have built anything, right? You could go build an exchange, you could build a chain. Why is Paxos the thing that you're most excited about building right now?

Sure. Well, by the way, we tried to like create a chain at one point. We tried all kinds of weird things. So we had this thing called BankChain. It was a private chain. It was called a bank chain. It was a private chain.

I can help you with the branding.

No kidding. We had more help than just the branding, though. We had some great people working on it. Jimmy Song was working on this thing, and Mike Flaxman, and we had all these people working at Paxos, and like some of them are still there. And we were creating this chain, and the whole idea was you're going to create a private chain so that, um, traditional institutions would be willing to put their assets on a private chain.

2016, '17, '18? When?

2014, 2015. Yeah, I mean, we were— this is early, and we abandoned that, and I realized it was gonna be all about public chains.

Yeah, yeah.

But from 2013 to 2015, 2014, 2015, maybe it's 2016, whatever it was, right in that time frame, there was a big debate around private chains versus public chains.

Yeah, I remember we got like R3 and Hyperledger and—

yeah, exactly, Corda, you know. And Digital Asset is still around. They've kind of, um— well, now they've got a public chain though. Yeah, now it's like It's a pseudo-public chain. It's, yeah, Canton, it's a pseudo-public, it's still like a, yeah. But, you know, they morphed it. I think that has now been settled. It's going to be public chains.

Yeah.

I think we realized that way back when. And I also thought, well, really what's a chain? It's a database. I don't think we should be in the business of building a database. I want to be in the business of how can we be an infrastructure provider to institutions to use blockchain? How can we provide the tools of disruption? Which I think is what we do and we do well. And that's different from kind of building more of a retail offering. Like, when people talk about an exchange, basically it's a retail broker, um, kind of an exchange mashed together. And we were never about trying to go bring in kind of the retail end user. And, uh, which by the way is arguably a mistake. Uh, certainly been people able to build very valuable businesses doing it. The rationale why we didn't do it was, look, you have the financial system right now. It's very fragmented. Everyone has different relationships with end users. You know, JP Morgan and Bank of America and, you know, you go on and on and all these other small banks and everything else and everyone's got a financial relationship already. Why go compete against those institutions? We'll provide them the infrastructure to enable them to come on to the blockchain world that they can trust. That's done in a regulated way. By the way, I think now is the moment in time for us. That is very true. But what we didn't appreciate very well was how even if we were regulated, institutions would still be very hesitant to come on board.

Mm-hmm.

And secondly, the regulation would be sufficiently ambiguous so that, uh, people could go sign and build big businesses and bring all these retail people on, but other institutions wouldn't be able to respond. And so you actually had a very unusual situation that was completely exacerbated by what the Biden administration did, where by preventing traditional institutions from coming on board but not preventing crypto institutions, uh, you had a great way to be able to acquire end users, right? And so people were able to go do this across the board, around the world, from Binance to, you know, Kraken to OKX to Coinbase. They were able to acquire customers because If you wanted to go trade crypto, you weren't going to Charles Schwab or E-Trade or wherever it was. They weren't even enabling it. Um, and even if they were, it would be like 5 tokens, not like 50 or 75 or 100 tokens. And so you could build, really build big businesses and acquire customers in a way that I had never imagined you'd be able to.

Because you thought they would all just be able to— Charles Schwab and all of them, TD Ameritrade— would just turn on Bitcoin one day.

Well, if someone could acquire 50 million customers, why couldn't Charles Schwab turn it on, right?

Or why wouldn't they turn out the regulations were much nastier than you thought be.

Yes. And they had other businesses and things they needed to protect, etc. Robinhood did do it, by the way.

Yeah.

Uh, so they were probably the one that—

but then they had to turn it off. Remember when they turned off Solana trading? Yeah, they got back into it.

They got back into it. It was like kind of like because they had other ways the regulators were overseeing them. You could just operate with money transmission licenses, no banking license, no trust licenses, whatever, and just be able to enable crypto trading. Just, it was something that I had never, yeah, thought would exist at any type of real scale. Yeah. Um, so that's why, you know, um, you know, well, that's certainly how we maybe misunderstood how the market was going to evolve. But secondly, that's partly what informed why we created Paxos the way we did. Um, I looked at it and said, how can you create trustworthy infrastructure, trustworthy wallet infrastructure, and trustworthy tokenization infrastructure that would allow a replatforming the financial system? And by the way, we're very happy to work with crypto firms and fintech firms, etc., and traditional institutions as well. So our goal was we're going to provide that infrastructure, um, to anybody. And that would be a very valuable business, just like other infrastructure providers are. You know, exchanges, traditional exchanges, are infrastructure providers. Um, broker-dealers are not. Um, it, you know, Visa, MasterCard are kind of infrastructure providers. Uh, the banks are not. You know, you kind of look across the board there's different layers that you tend to have the capacity to be like a common utility, right? And that's what we're trying to build. And I think, you know, now is actually a moment to be able to do that. It didn't exist before because the Trump administration came in and started creating legal clarity, regulatory clarity, policy-type clarity in a way that frankly is— was almost shocking because Trump won was not all that positive for crypto.

Yeah, yeah.

Obviously Biden was, you know, we almost all went to jail.

Yep.

Uh, now, you know, you are in a completely different operating mode, and that means every institution is trying to think about what they can do. Yeah. And so I, you know, I think we finally came around to what— where I thought we would have been. Yeah. A long time ago. Um, and we really, you know, in some ways you could say you skip the steps. You, of course, you had to go through this stuff. Yeah. And you definitely needed to have all these crypto tokens get created, and you needed to have a lot of speculation get involved so that you can make it big enough, so you make it interesting enough that everyone feels like crypto is an asset class, I got to be a part of it.

Yeah, bubbles, bubbles are great. Bubbles bring in capital and people.

That's right.

And then, you know, the right kind of bubbles are great. Yeah, the right kind of tulip bubbles, not so great, right?

Because that's not, not bringing—

but you're not bringing capital and people into tulips.

Yeah, productive bubbles are good.

Like AI bubble and the—

yeah, yeah, AI could be a bubble. That's a good type of bubble. I mean, it's not good to like destroy capital foolishly. But it's— there's different types of foolishness.

Yeah.

All right.

What does your business look like? Okay, so the way I think about your guys' business is basically regulated infrastructure for institutions and fintechs who want to come into crypto, right? So if someone wants to do RWAs, someone wants to do stablecoins, someone wants to, you know, they're a fintech app, they want to offer crypto trading.

Yeah.

They kind of just go to Paxos. And I think your customer list is like Revolut and Nubank and PayPal.

I'm sure I'm botching some of these, but yeah, MercadoLibre and, you know, Interactive Brokers. Yeah. Yeah. So very large institutions.

How do you think about your business? I guess what is Paxos today? And then what are your revenue lines and products that you're offering?

So our business really has two aspects to it. One is the wallet side, and that wallet side enables crypto trading or payments. You know, it might be Stripe, it might be MasterCard, it might be PayPal. Of Venmo trading, et cetera, that all happens on Paxos in the background. So you have the wallet trading and you have the wallet, like, kind of stablecoin infrastructure. That's the logic that business cases that are built on our wallets. And we have custody and we also have self-custody now. We purchased Fortify at the end of last year. And so you can do different types of custody and you can do different types of business logic from the custody that we're providing. That's all the wallet infrastructure side. And that's about half the business. And then the other half of the business is tokenization. That's where we have a white label stablecoin business. It's been other firms in the past, but today it's PayPal Dollar and it's the global dollar that we issue for the global dollar network. And of course, there's lots of other institutions that are talking about how they want to launch.

Global dollar, is that USDG? Is that the one you did with Anchorage and Robinhood?

Robinhood and OKX and Kraken. Mastercard's a part of it. And, you know, there's about 130 institutions that are, um, part of the Global Dollar Network. Yeah. And so we issue on behalf of that consortium.

Um, and that's like 50/50 revenue.

It's about 50/50 between it. We also issue Pax Gold. We have a gold token.

Yeah.

Um, and, uh, we've tokenized equities in the past. We'll definitely do other types of tokenization in the future. Yeah.

Why, um, how do you make money? Is it a SaaS model? Is it an API by usage? Is it like you're making money on the pipes where, you know, money flows through PYUSD and you take BIPs? What's the business model?

You know, there's, there's a couple different ways that we earn, but if you wanted to simplify, you would basically say on the one hand we maybe earn an asset management fee, uh, for the stablecoin business. That's what we earn. We don't, uh, take the float. Um, and then on the wallet side, it's some combination of SaaS fee and transaction fees.

Yeah.

So you basically like, do you have some minimums for coming and using our wallets and the different logic? And then the more transactions you do, we take a, a small piece of the transaction. Yeah.

You ever wish that you, that you instead of sitting behind the scenes, you guys just did the end product like, like stablecoins? You guys, you like the PayPal stablecoin, as I understand it, is, is you guys behind the scenes?

That's right. Yes.

But do you ever look at like Tether and Circle and see USDC and, you know, USDT and you're like, we could have done that better?

Well, we did do it better. It was called BUSD and it was actually, I mean, and There's lots of— this is the Binance dollar. Yeah, that we issued from our New York trust in the same way we issued the PayPal dollar. Uh, Binance didn't do any of the compliance, they didn't do anything related to it. We simply had a business relationship with them and they were great partners and they had the marketing on it and they of course had a big distribution system. Uh, but it wasn't any different than basically Circle as the issuer and Coinbase as a distributor. Uh, it's just that instead of it saying, you know, USDC on it, it would have said like Coinbase US dollar. Um, and, uh, you know, anyways there was lots of, uh, kinds of ins and outs related to what happened there, but that was going to be the winning dollar, uh, 100%.

Why do you feel so confident in that?

Uh, well, you know, basically, uh, USDC depegged, um, and, uh, it was going down.

And are we talking about when, um, First Republic and those—

yeah, they had $3 billion and the government had to basically bail out Circle. Um, so like that was a completely different like situation. And then Tether at the time was also going down, uh, so BUSD was, uh, the third largest on its way to being the second largest, and I think it would have been the largest. Uh, it was a completely regular—

you guys had $24 billion in market cap? That's right, $23 billion.

Yeah.

Wow, this is a crazy chart.

Yeah.

What, what happened?

Uh, basically, um, there was a couple different things related to it, but our regulator at the time, uh, they're not a regulator now because we converted our trust company, the New York Department of Financial Services made us wind down the relationship. We also received a Wells notice.

NYDFS made you shut it down?

Yeah.

Why?

Well, we got a Wells notice from the SEC saying it was a security, which is kind of crazy because I had met with the SEC and they said it wasn't a security. And then we got a Wells notice saying it was. And there was a lot of pressure to base on the whole industry to get debanked. There was pressure on some of our other stablecoins too to not get launched. I mean, it was quite a trying time. And anyways, this was, I think, a coordinated effort because it had Binance's name on it, which of course could have been changed. It could have been changed. It was a branding and marketing partnership. It wasn't a compliance partnership or an operations partnership or a reserve partnership. We were running the whole thing ourselves. Just like we do for all other white labels. So, you know, I think that was like a really unfortunate situation because this was issued through a regulated entity. It was a primary— we had a primary prudential regulator that oversaw everything that we did. And so they could tell you what to do, which is different from USDC where they're issuing from money transmission licenses and Tether is unregulated. And so you basically had the unregulated players win at the expense of being regulated. Hmm. And, you know, it was like definitely, you know, pretty confusing and really disappointing. But when you're trying to shut down what seemed like the whole industry, the first people you go after are the ones that are the most regulated.

Yeah, that sucks.

Yeah.

You were going to be— so you were basically what Circle is to Coinbase. You were to Binance.

Yes.

Yeah.

Wow.

Yeah. This chart is crazy. So I'm— for, you know, folks are mostly listening to the podcast. It was a billion of market cap January of 2021. By the end of 2022, it was $24 billion.

Yeah.

Yeah. Crazy. That sucks.

It was tough. That was a tough thing to go through.

That sucks.

Yeah.

Hard. Is that the hardest thing you guys have gone through?

That was probably one of the most challenging. I mean, certainly the regulatory aspects that were related to were probably the hardest part.

Yeah.

You know, winding it down, I think we did a great job. We never depegged, by the way.

But I'm more saying like, I mean, You know, you raise venture money, you tell them, oh, you tell the board your revenue projections, you're modeling out the future of the business.

You know, you're— how much— you can just do the math of $24 billion, uh, stablecoin, what it would be earning at when you got up to like 5% interest rates, uh, right? It's a billion dollars of revenues. And by the way, it was gonna keep growing, so it wasn't gonna stop. Now we of course are sharing that with Binance, but nonetheless, you can imagine that's a, you know, that's a challenging thing to go through. But, you know, also, um, Uh, it does certainly make you stronger because it forces you to really think about what are the most important things for you to be building, what are the ways in which you have unique, um, uh, market position. And so when you're asking about, well, you know, hey, the white label strategy, I think the white label strategy was creating a scaled stablecoin, uh, scaled stablecoin winner. And, um, and I think it will. I think, I certainly think it will in the future because I think it's gonna be very difficult for, uh, Tether to be a global stablecoin given the way it's positioned and even the fact that it's not fully backed by dollars today. And I think USDC is in a tough position because of the way its economics are shared with Coinbase to the detriment of everybody else. Yeah. And so that does create opportunities. And so maybe that's PayPal's dollar, maybe that's the global dollar. You know, there's a number of global bank consortiums that want to launch dollars. Maybe they won't succeed. You know, we're the infrastructure provider. We want to help them to succeed. but ultimately they have to manage to go to market and, and push the product. So would you like to have total control? Yes. But, um, if you really thought about creating a neutral infrastructure platform that people can build off of, I think that is a, uh, a better, a better business model in the long run.

Um, why hasn't PayPal— so you— so PayPal's stablecoin is like $4 billion? Yes, right now. Which is, which is good, solid, but it's not massive. It's not $24 billion in 2 years.

Yeah.

Why hasn't it? Why isn't it bigger?

Well, there are a couple of problems. Like, so as soon as PayPal launched this, they received a subpoena from the SEC, which was public.

Yeah.

And so that was difficult for them. That slowed things down.

Yeah.

And, you know, they have a big company and they've been doing— working on a lot of—

a lot of CEO turnover.

They're working. They have a lot of like things that they've like been focused on, like trying to address. And I think The stablecoin is very important for them, but, you know, it's always hard to, you know, how do you prioritize things, especially when like you're hamstrung again by like a subpoena. Yeah. And that was like a— that was a tough time. Yeah. You know, and so I actually really applaud the effort they put in to push through, you know, some real adverse pressure that they were feeling.

Yeah. Walk me through when Genius got signed. I think I saw a picture and you were there.

I was there.

Yeah, yeah, yeah. At the, at the Genius signing. Maybe walk me through just how much the business changed from just Genius going through.

So stablecoins, obviously you can look at the chart, you can see how they were accelerating even through the Biden administration, partly because of the Bitcoin ETF and whatever it was. There was just a bunch of tailwinds that was happening for the industry. And then Trump gets elected. And you have the negotiations that went on with Genius, and then you have a bill that gets passed that I think is a very good bill. Uh, you know, no bill is ever going to be perfect. It was— it's a good bill. And when you have a bill pass, you didn't need— you don't need a bill to tokenize dollars. Obviously you don't. We did it before there's a bill, uh, right? I mean, it's like pretty clear. And we were doing it on a regulated basis out of a trust company. So, and we've done it now from Singapore and from Abu Dhabi and from New York. So you don't even need— it's not like there's some special place that you had to do it from. Um, putting a dollar on a blockchain, it doesn't need a law.

Yeah.

Um, but making something a law makes it unambiguous that it is here to stay, right? So if you're different types of institutions that are thinking, well, should I get involved with this or not? I got a lot of other things. Maybe someone else is going to come along and change the rules again. A lot harder to change the law. And that really forced every financial institution around the world to say, what is it going to be our stablecoin strategy? How are we going to respond to this? What's going to happen? They're not going away. They exist. And they exist in a way that, like, can't basically be put back in the box. And I think that was the real significance of the law. And, you know, it's not easy to get a law passed. I mean, you know, and some of the senators can tell you, I mean, that thing almost died 10, 12, 15 times. In some ways, I almost feel like now having also living through Clarity, if a bill doesn't die a lot of times, it was never gonna pass because the market clearing price for like legislative language is the fact that everyone will walk away. And so that's the way you basically find like, you know, thinking as a markets person, I'm like, oh, the market price for like any language in the bill is who will walk away from it. Because that's the only way you get there. And so you have to have like, otherwise there would be no controversy. A bill just passes 100 to 0, right? So, you know, it's not going to pass like that. You're going to have like people who are threatening to walk away, right? And you had that happen a bunch of times. Yeah. And it wasn't easy to get this through, even though, you know, in some ways it's not controversial to put a dollar on a blockchain. People have done and been doing it. Yeah, we were obviously doing it amongst others.

Yeah.

I think it, you know, it really is critical piece. Yeah. Of changing landscape for the industry. Yeah.

There's— but there's different requirements, right? It's now like not only can you put a dollar on a blockchain, it's like 1-to-1 reserves, bankruptcy protections, monthly disclosure, all these things that you guys do. I'm assuming there's some sort of competitive moat there for you guys.

There— well, in some ways you could argue maybe there was more of a competitive moat before because no one knew exactly like what you exactly needed to do. Um, but I think the competitive mode is for us a couple aspects. One is, uh, you can be regulated and Genius compliant. Europe has a different set of rules. In order to create a token that is Genius compliant but also can operate in Europe, you need to have multi-jurisdictional compliance. And we're the only firm that has issued a stablecoin where you have more than one primary regulator, but the token is fungible. Now Circle has a—

They have Eurocoin. It's not USDC in Europe, right?

Well, they have a USDC in Europe, but they don't have a primary regulator in the US. They're still money transmission licenses. Ah, ah, ah, ah. Right? So they actually don't have multi-jurisdictional compliance. We're the only one where you have two primary regulators. We have one in Europe and we have one— it's a Singapore. So we have two places and they have an agreement about how we can operate. And our goal here is to add the OCC as an issuing place so we can have 3. And that is like— so one is like, that's pretty complicated to do. Just issuing a Genius-compliant stablecoin is relatively straightforward. Now you need to go get an OCC trust or a state trust and you need to follow the reserve requirements. So that's pretty important, like a differentiator for us. The second thing that differentiates us is that we operate at scale. We've now minted and burned over $200 billion of stablecoins. So we've had an enormous amount of velocity that we've done. And we've been able to do this very successfully for— since 2000, I guess it was '18 or something, when we first issued a dollar stablecoin. And we've been doing white labels since that long. We started with like a Huobi dollar and we did BUSD dollar. Yeah, we had a Huobi dollar way back in the day. And, you know, and on we went. And why don't you get, you know, partner with the exchanges again?

Seemed like it went well. They're all coming to the US, right? Bybit, OKX, all these.

By the way, they're almost all members of the Global Dollar Network.

Got it.

So, yes.

So why?

OKX is a member and BitMart and, you know, you know, you kind of go on all these different exchanges.

Why would you structure it in this way?

Well, it's not so much us. We, we're the issuer of the global dollar, USDT. The Global Dollar Network is the membership. So anyone can join and be a member. And the whole point is that then the economics can be shared amongst those members. So, uh, someone has balances. If you're a Global Dollar Network member, you can get the interest on your balances. You can decide how you want to pass them along, follow Genius compliant, etc., whatever the rules you have. Um, and there's actually a network advisory committee and there's a governance committee that runs the Global Dollar Network. Now, Paxos is a member of it, but we're just one member of it, just like anybody else can be. Anybody can join it. And so running it that way creates something that I think is different from anyone else where you have a degree of certainty about how the economics are going to operate and how the governance is going to operate that you wouldn't otherwise get. Hmm.

$2 billion market. 1.8.

1.8.

Yeah. Yeah. Not bad. When do you—

It's been around for a year now.

Yeah. What world does— in what world does— like, what has to change for a Paxos-issued stablecoin to challenge— what's Tether at, $140? USDC is at like $80.

I think Tether is $180 and USDC is at whatever, $80. Yeah, something like that. $78. Well, I think there's a couple of things. One is that you're just— you— the market share has been growing. So if you look at Paxos-issued white label stablecoins with USD, sorry, PYUSD plus USDG, you're at $6 billion. And that was basically like $1 billion like last year. So it's like whatever, 5 or 6x, which is gaining a lot of market share. So you went from like, you know, 20 basis points to like 65 or 70 basis points or something like 75 basis points. So you gained a lot of market share, still small market share. And the thing with whether it's PYUSD or USDG or any other like coin that has launched is it takes a while to build some of the other network effects because you're competing on 4 different vectors. One is basically how are you regulated. We just were discussing that.

Yeah.

And I think we have unique regulation for both PYUSD and USTG today, um, and any other person we're issuing for. The second thing is how are you basically paying the rewards, you know, who are you sharing, who's getting what. The third thing is what is your utility. The fourth thing is what is the liquidity. And liquidity and utility are not the same thing. It's like, well, what can I go spend it on? Can I go use it in like every payment network? Uh, liquidity is how easy can I get in and out of it. And liquidity is the hardest thing to build. You can actually build utility easier than you can build liquidity. So building liquidity just takes time. You got to have partnerships. You have to like— it might be trading pairs, but it also might just be in DeFi. It might just be the ability to be able to have efficient reserve mechanisms around the world so that you 24/7, you can create, redeem, and size. And so, you know, when you're at $50 million, like, someone only wants to hold $10 million of your stablecoin. Yeah. You're at $500 million, they might want to only hold $50 million. You get to $2 billion, they might be wanting to hold a couple hundred million, maybe even get to $400 million. So you have limitations on how much you can grow and how much liquidity you can create. And so there is a flywheel that needs to happen.

You got to grow to grow, basically.

Effectively, that's right. And so now PYFD being at $4 billion, yeah, opens them up to a whole different set of markets than you would otherwise be in. Yeah. Um, and, uh, you know, that's why market cap matters and liquidity matters. It's not the only thing. You want velocity too. You can have fake market cap, uh, where you can just kind of manufacture it. And that's a vanity metric. And vanity metrics can be valuable because, you know, people respond to like numbers that they see. But ultimately, if you're saying what's healthy, it's Well, how many wallets are using it? What is the transaction velocity? You know, how much transfers are happening? How is it being used? You know, if you basically, you could have a $10 billion stablecoin that's worse than a $2 billion stablecoin because it was just sitting there being used as one person's treasury.

Right.

Not moving at all. Not, right? Like that's not actually creating any, you know, healthy usage, if you will.

Yeah, it's not like adding to, GDP on stablecoins or anything.

Exactly.

Economic value. Maybe you're talking about that. What are your thoughts on agents and just where we're at in this? I feel like, you know, we just had this Digital Asset Summit.

Yeah.

A lot of people started to talk about agents. What are your thoughts on kind of where we're at in the evolution there?

It's hard to exactly tell, but it's going to change everything.

Super early.

Yeah, it's early. But I mean, you know, I mean, you can easily already put an agent with a MetaMask wallet and go say, come up with a strategy.

Yeah.

And so you can already see how, like, you know, put out like $100 into a MetaMask wallet, whatever you want, and say, all right, come up with a strategy and go deploy.

Yeah.

And it'll go do it for you and be like, well, take more risk, take less risk. Yeah, take a lot more risk. And it will. So you can already see it happening in the edges. And I think there are some very interesting companies that we're talking with where they're trying to think about, well, AI actually changes the entire way in which you use the internet, how you go to websites, what information is being pulled from it versus how much it's an actual somebody who's going to use the internet to go purchase something versus just like understand like what the competitive landscape looks like or scrape information. And so you can start to create payment for bot movement in a different way. Um, you're definitely going to just have agents go do things for you, uh, go book me this thing, and, uh, you're going to want to be able to use stablecoins. And so we definitely see this happening, but it's also quite early.

Yeah.

Um, but the way the pace at which AI is moving— in like 6 months ago, you know, I still found it to be like relatively mediocre in a lot of things. Now I have Claude Code and I'm coding stuff.

Yeah, yeah.

And, you know, I can see like, oh, I wish, you know, I could tell the agent— I could tell Claude to go do this thing or that. Yeah, whatever.

Go book my flight. Oh, I can't because it doesn't have the—

yeah. Or like, oh, um, uh, just go get me some more— get me some testnet tokens from, uh, uh, from like, uh, wherever, uh, Solana or Canton or something. Or I want to go test something on like a Binance Smart Chain, like, go get me the test tokens, go get me some tokens. I don't want to have to like think about it. Here's a wallet, you just go do the whole thing.

Yeah.

So you can already see this like happening just in like the process of coding.

It's very quick. It's interesting. So, you know, I feel like this is one of the most pessimistic crypto natives have ever been. This is a very interesting time in the industry. I think there's this kind of like moment and it's like a feels like a real line in the sand where crypto people have been building for so long, like a decade plus, are very pessimistic actually on crypto right now. Yeah. Mostly because a lot of the tokens are down and stuff like that. But, you know, both on the— so we just had this conference, DAS. The institutions are the most excited they've ever been in the history of the industry. And also, I was just in San Francisco for 2 weeks, you know, meeting with a lot of the both like fintechs, AI companies, payments providers. They're also the most excited about crypto.

Yeah.

That they've ever been. It's just a very, yeah, very interesting time in the industry.

Well, I think that's pretty consistent. Well, first of all, people are bearish. I mean, God, I mean, I remember feeling like the village idiot when Bitcoin went from $10 to $1.

Yeah.

So like, I mean, like, you know, you gotta like, you gotta put some of these things in perspective. And, you know, certainly if you're newer, I think it's maybe easier to be disheartened. But if you, you know, if you told me we're going to have the most pro-crypto administration and president you could ever possibly imagine and the average token will be down 80%.

Yeah.

And Bitcoin will be down 50% in like 15 months after that. And you had legislation that passed. Those would feel completely mutually exclusive possibilities in worlds. And yet they exist together right now. And so I think that's probably part of the reason why people are pessimistic, because you're going, well, what more could we have hoped for? You know, what were we playing for? This is what we were playing for. This was supposed to be the crypto golden age. That's what I thought it was going to be. You know, you asked me like 6 or 9 months ago, I'd say, and I do think it's the crypto golden age. It's just not the crypto price golden age.

Yeah. You know the Meek Mill song? I used to pray for times like this. That's how I feel right now. That's how I feel. Someone was giving us crap because because there's all these institutions on stage. They're like, hey, put all these suits on stage.

Yeah.

I was like, I used to pray for times like this.

Yeah, exactly. That's what we wanted.

Yeah. Right? That's what we've been asking for for a decade.

I'll be honest with you. I mean, I do think this is a crypto golden age in many ways.

Yeah.

But it's not a crypto price golden age. And it's partly because there's a lot of projects that were existing that, you know, as time cycles through, you have to bring something valuable to fruition.

Yeah, yeah.

You know, you have like the 25th chain that nobody's using, right? You know, like, you know, you're like, you have a DeFi protocol that was being suspended at when the TVL purely by like, uh, farming strategies and you've run out of money. Yeah, I mean, that was never like going to be a sustainable business and you were trying to build a network effect and you didn't, right? And by the way, that's totally fine. But I mean, that's why you're going to have a winnowing and you've had these before. You had ICO winters. I know it wasn't during like the golden age, so to speak. Yeah, but, you know, you had a lot of examples where things just got wiped out. But yeah, you know, even after DeFi, we had Terra Luna.

Yeah, it was like a lot of—

yeah, you had a lot. And you know, you have the blow. There's no central bank here like propping up crypto.

Right.

But that's also the good thing because you have so much more freedom to then go out and be able to operate. Yeah. And so like it's going to be painful in many cases. Yeah. But, you know, I think this is when actually the best time to start crypto businesses are because when everybody's raising money and the FOMO is crazy and you like, you walk into the Marina Bay Sands, you don't know like what you're looking at. That's not the right time.

Yeah. Yeah. You want to talk about raising and IPOing?

Sure.

You guys have raised like $500 million, $530, $540, $540, $540.

Yeah.

So you've raised— first off, that's a colossal amount of money to raise. In hindsight, do you think you had to raise that much money?

I think the more money you raise, the better in a business like ours. We're institutional infrastructure. People want to know you're going to be around. Yeah, right. If they're like, oh yeah, you're like, you know, you're going to spend all the money and you do another raise in 2 years. Like, people are like, why would I want to use you for a 5-year contract? So you actually need to have capital in the bank to be able to depict, you know, trustworthiness just from a balance sheet. Obviously, there's other things that depict trustworthiness, like are you regulated? How well have you operated? What are your security postures? But having capital is one of them.

Hmm. When I— I'm looking at valuation, $2.4 billion from 2021. Have you raised since then?

No, we haven't raised since then.

You haven't raised since then?

No.

That's— that's cool. Do you— do you think you'll IPO?

Very likely.

Yeah.

It's always hard to be definitive, but I would say very likely this year. No.

Next year?

Potentially.

2028?

I mean, you— further you get out, the more the likelihood goes up. I mean, the— well, there's a longer answer to that, which is the whole point of capital structure is it helps your business. Right. And it can help your business just because you have more money in the bank. It can also help your business because the people who invest in it can help your business.

Right.

And that might not just be VCs. That could be strategics. So like PayPal's an investor. Interactive Brokers is an investor. MercadoLibre is an investor. Um, you know, you kind of go on. We have a lot of— Bank of America's an investor. We have a number of strategics that are investors. I mean, even Coinbase is an investor in us.

Yeah.

Um, and so that's great. Bring strategics in. And so you can go— we can go raise more money from strategics, and that can help our business. People who are our customers who want to participate in the equity value that we create, right? Um, you can go public, and, uh, that also is a way of creating value because you change your brand you change your immediate access to capital. People can say you have more immediacy.

More people know you.

More people know who you are. More trustability. You know, there's also cost to being public. So you got to just say, well, when do I want to take on a certain cost in my capital structure versus the benefits? And so while like you don't necessarily think of being public as a cost to your capital structure, it really is. You have all these different things you need to do and ways you need to explain things. And so I think, I think there's a valuable lesson from looking at a lot of the companies that have gone public in this first wave. And you need to have the right level of momentum in how your revenues are growing and how they're going to continue to grow and be able to have the consistency to be able to make quarterly numbers in a way that the Street and the market wants. These are complex businesses. They're not easy to understand. Crypto goes through cycles and it doesn't mean that you shouldn't be public. But, you know, it can also be counterproductive. You created liquidity, but if you create liquidity at the wrong price because someone doesn't understand it, uh, versus you were in the private markets and you can go create liquidity, you know, what's the difference? You know, you can do— you have other mechanisms. Now, you don't want to go out into the private markets every single year to go and enable employee and shareholder liquidity, but, you know, on the other hand, you know, the last thing you want to do is basically be in a position where you're sitting here and the stock price is misunderstood and you're you know, down in the single digits or lower. Yeah. And, you know, I mean, there's some stat like, you know, what percentage of stocks below $5 go to zero? I think it was like 80% or something. Like, who wants to be at that, you know, battling that and doing reverse share splits? Yeah.

Like, I think, uh, what's BitGo? BitGo's down to $8. It's down 55%.

Um, and I mean, you know, it's not that BitGo doesn't have a successful business, but you know what I mean? Like, people decided they don't like it today. Yeah, I mean, you know, and so you're getting weighed.

Yeah. What, um, what's your story? Because these are complex businesses, right? I remember when BitGo filed and then it was like, okay, well, is it like a SaaS business? Is this like an AUM type of business? And then all those get different multiples, right?

Definitely. Um, well, definitely SaaS businesses are getting worse businesses now. Are you getting worse?

Yeah, they just got, you know, re-rate— SaaS got re-rated. I was talking to, um, uh, the CEO of one of the of one of the big exchanges. And he's like, look, I'm, I'm even trying to figure out, should we talk about ourselves as a payments business? Because those get slightly higher multiples than exchange business.

I think that's a lot. Not slightly higher, much higher, much higher businesses, much higher, you know, 2 times higher multiples.

Yeah, exactly. So, you know, and they're not public and he's thinking about getting out in, you know, probably 2027. And he's like, you know, we got to think about retelling the story. So how do you think about your story? And even maybe one additional question, there's like, who do you— people love analogies, right? Are you the Stripe of crypto? Are you the— what do you— what's your comparison?

I know, but it's just like sometimes you want to, um, if you're the something of something else, uh, maybe you're the nothing of anything.

It's a good way to put it, right?

So it's like, you know, last thing you want to be like, I don't— I'm the Uber for like, uh, crypto movement or something, you know? You're really nothing, right?

And reasoning by analogy oftentimes leads to the wrong conclusions, but, but it's also helpful too. It's helpful.

Yeah, for sure. Um, you know, I think there's a couple different components to break down here. One is, if you looked at like the price of Bitcoin, it's pretty interesting. It almost looks like the chart of like software stocks, which is kind of interesting. So it's like kind of trading like, you know, something that it isn't. And then you have a bunch of crypto companies that are also trading like software stocks in many ways. And, you know, you're constantly trying to think, what is the TAM? What is the TAM for this business? Like, how big can it be? And if you're just trading crypto and like all these things are going like down 80% and like You're in a depth of winter. You're like, maybe this TAM is really small. And I think that's why people then go, well, maybe we should talk about payments. Guess what? The TAM for payments is enormous. I mean, you have, you know, the market caps of just Visa and MasterCard are well north of trillions of dollars. Right. And that's like, they're like only one piece of the payment puzzle.

Right.

Right. So, you know, you look at all this stuff, you're talking about trillions of dollars market cap. So you can dream really big dreams of payment companies and they can grow really fast for a long period of time. Yeah. And you've seen this with like other companies like Toast or whatever it is. Clover and so on, where they can grow really fast. And, you know, there's some, like, you know, incumbents that can get disrupted, so you can keep gaining market share, plus the market's growing fast. Yeah.

So Toast is a $15 billion company.

Yeah, I mean, it's like, it's grown a lot. I mean, and, you know, so, um, yeah, like, great product and mission critical. And I don't know how it's done recently, but, um, yeah, I was talking to a super user, but he's like, this thing is mission critical. I can never replace it with AI even if I wanted Toast. You can't. Yeah, he's like, he would— he's like, it's just too—

the whole business, the whole restaurant, or the whole—

it's just too much runs on it. Like, I couldn't take the chance that I like vibe-coded something up. And he's like a pretty savvy person.

Interesting.

Um, and I don't know, he's right, but he, you know, he's like a— like, he runs a very successful restaurant business, like $30 million of revenues and a bunch of restaurants. And, um, anyways, so like, that's why I think everyone's like, well, I gotta rotate to like describe myself in a different way. And so, you know, to me, I look at our TAM and our TAM is enormous. We're trying to replatform the financial system. There's $900 trillion of assets. How do I get them on a blockchain? You're basically at like $300 billion. So you're at like 30 basis points. We got a long way to go. And you do this successfully and you're going to be able to build a very big, a very big business doing it. Right. And I don't think that it looks like Stripe per se. They're a payment service provider. So they're going out and acquiring merchants. We don't want to acquire the end user.

Right. We—

Stripe is our customer, right? MasterCard is our customer. Interactive Brokers is our customer. So in some ways you would almost say we look like, you know, you could argue that we look like maybe more of a Visa or MasterCard, but we're not, uh, because we're not trying to acquire the end user. They don't either, but we're not trying to—

Cloudflare. It's like everyone goes crazy.

Yeah. Or the DTCC is something that— and stocks and bonds or something.

That's a good one.

You're an infrastructure layer that others can build off of. Now, it's an— on an open system, so it's not a closed system. So the analogy starts to break down. So I, I think— and I also think there's elements of it that make it look more like a marketplace model. So anyways, I think if you basically said, well, like, what is Paxos? Well, we're the infrastructure provider so that you can operate in the blockchain, and we do that either through tokenization or we do it through wallet software. Those are the way we operate. And, um, uh, most of our customers want to use both. They want to use the wallet software, which is distribution. They want to use the content we're providing, which is the tokens. Yeah. And so you're creating— you have demand and you have supply. Yeah. And so I think that that's why a lot of other businesses are wondering, well, what— how should we approach this so that we can be big enough?

Right.

And by the way, that's why we always had— if we go all the way back to the beginning of this conversation, why did we position Paxos this way? Because I wanted to be playing in the biggest part of the TAM to build the most valuable business.

Yeah.

It was also the hardest place to be. Right. You know what I mean? Easier place was to go monetize crypto prices. Yeah.

Yeah. Build an exchange. Uh, what have you learned about acquisitions?

I think you have to be very careful about acquisitions because 80% of them fail. And every time I make an acquisition, I always say 80% of these fail. How do we make sure that it doesn't fail?

Yeah.

And you know, it's not because those people aren't smart. Uh, so you have to be very careful. There's like 3 different types of acquisitions you can make. One is basically buy some revenues and fire everybody. You just buy the client. Analyst, right? Right. The other one is buy a division and just let them keep running, and like, they're always going to run because they're always like, you know, going to be independent. And then the third and most difficult one is buy something that you're going to like actually integrate in, uh, to your business in a full way. And you said that's the one that you have to be very careful about. You normally don't make, uh, those acquisitions without really thinking about how they're adding to your product set and to your ability to be able to help your customers because you have the right signal.

What did you do with Fortify and Membrane?

And well, Membrane, we're buying licenses.

You're buying licenses.

We're buying licenses to be able to operate in Europe. So that is like relatively straightforward, hard to make that fail.

Yeah.

Uh, you might not use those licenses. That's maybe how you would call it a failure, but we are. And so like you say, that's a success. Uh, Fortify, we're not going to have them be independent. We want to use their wallet technology, uh, in ours, but you have to be very like careful because they're growing fast and doing great. A lot of failures are big companies buying a small company. Mm-hmm. You know, we are 200 people and they're like 45 people. So we're only bigger compared to them. Neither of us are big, right? But that also means we all have, you know, we're all spending 100% of our time doing other things. So if we're going to like go do the integration, it has to be good ROI. So how do you make sure that, you know, our customers will be able to benefit from their wall of technology, their customers can benefit from our regulatory structures in certain cases? How do we make sure that our customers want to be able to access DeFi markets, which is what they are really great at for DeFi, for DeFi, right?

I know you just put that together.

I know it's a little while too.

Yeah.

Yeah. And that's what they're known for. They're institutional. So they have the same type of customers as ours. That's a good set. So you have the same customers. They have an orthogonal product that our customers want and they have a specialty that we don't have. And so that to me is like the recipe for how you make a good acquisition.

Yeah.

Um, and we've looked at other ones. There's other places that we would want to acquire, potentially in the tokenization space, potentially in some of the, uh, stablecoin infrastructure space. So we're out looking for acquisitions, and I expect that we'll make more, but we're going to be like very careful about making sure that we structure in the right way because, you know, we're not just trying to—

you don't spend money just to spend.

Yeah, we don't— like, that's not Yeah, that's not what is going to make a great company. Yeah, that's what we think about every day. How do you build a great company? How can you build a generational company? Yeah.

You have any— a lot of founders listen to the podcast. Any advice for other founders who are also trying to build a generational company?

I have so many things that I could impart if I try to make sure I order them correctly. I think one of the most important things is prioritization. What are you actually going to do? What are you not going to do? Everyone always talks about it. And you feel that even more in crypto because you can go do a lot of things. And we're a horizontal company. We're horizontal infrastructure. We're not vertical. A lot of companies try to be vertical. If you're vertical, it can be a little more consistent because you're like, well, I'm only going to have one type of customer and I'm going to do the entire thing for them. But it does mean that like you're maybe limited. I'm just going to be a crypto exchange or something.

Right.

How do I like branch out into other things? Whereas we're horizontal, we're providing different types of infrastructure. So how do you decide which ones are going to be the most important to create a flywheel effect for your customers. So how are you constantly thinking about what is the thing that you're prioritizing most that's going to create a flywheel effect for your business to grow faster than it would if you just did something that's going to create linear growth? And so that's, I think, you know, the heart of the matter, because you need to be able to, you know, create accelerating growth. That's what's so important. And you have to be careful about that. And you also need to need to be consistent. It's very easy to get turned around. What am I going to— what am I— what do I think is true today? And what do I think will be true in the future? When I have new information, I'll change my mind, but I can't just change my mind every time, like, Twitter decides that something else is cool and hot or whatever, because then you'll definitely, you know, find yourself unable to create product velocity. I think those are maybe, like, the two most important things. And then of course you want to have as few people as possible for as long as possible.

Yeah.

The more people—

surprised you guys only have 200 people.

The better it is. Coordination costs go up. Like, big companies aren't stupid. It's just you have more degrees of connections that need to happen, right? And now that you have AI, I would just always say, like, no matter what, like, uh, you have to lean against the idea that somebody advances in their career because they have more people they manage. It should be people advancing their career because they have more responsibility that isn't necessarily related to people. It's related to how they built, you know, a really successful business and be able to create leverageable ways to do that. And AI makes that easier and easier than ever. You know, this is like more complicated. You needed more people to do things. And if you're not hiring great people, the marginal productivity of a person, no matter how good they are when you add them in, is always going to be very low. Yeah, you want to be positive. I suspect for most companies, it's actually like maybe slightly positive or negative.

Yeah.

And you don't even realize it.

Yeah.

Uh, less people, move faster, um, be able to create, uh, product cycle leverage.

Nice. Any tips for fundraising?

Um, yeah, I mean, there— it's like you really have to think about who you want to be your investors, and you have to think about what the duration of their capital is, and you have to think about how long you want to be running the business for. Right? And so if you're like, I want to operate for like 20 years, build a business for like the next 20 years, you're going to think a lot differently than I'm going to build for the next 5 years and I'm going to sell the company because you need to have capital that can matriculate with you and you want to make sure you have capital that can be there and not just give you dollars, but give you like really important learnings along the way. And, um, some of that might be wanting to have strategic capital that's permanent. Um, you know, it could be company capital, it could be sovereign wealth capital, whatever it might be. So you have to try to match the duration of your capital against the duration of what your business is. And you have to make sure the quality of that capital matches the quality of the business you want to create. And so that's really important. And then when you're going to raise any individual round, um, it's really important to understand those factors against what do you need in that moment, in that time? Because it's so easy to like have to say, I'm just going to show the metrics that I need for the next round. And on the one hand, that is true. You need to have metrics because that's what you're— that's how you show that you're growing and you're building a business that's valuable. But if you're just chasing the metrics, then you're going to have a real different problem. Yeah, because that ends up not being a business anymore and you end up hitting ceiling and a headroom. So raising capital and forcing yourself to like go out and try and raise a lot of capital can be a good forcing function, but it can easily be a very bad forcing function.

Yeah, and you chase the wrong things.

And so getting that product-market fit where you can really see the accelerating cycles, yeah, uh, is not easy to do. Yeah, it takes time and like keep going at it and stay as lean as you can while you're doing it.

Yeah, agreed. Anything that you wanted to cover that we didn't touch on?

I don't know. We've covered a lot of ground, but I feel like we could probably keep going. Yeah. No, I think that— I think like I feel happy about everything we covered here.

All right, good, good. Chad, thanks so much. And thanks for being here, folks, for listening. Thanks for having me.

Cool. Cheers.