Speaker 1: So the big question is this, how do investors like
Speaker 1: us get access to the ideas, information, and most importantly,
Speaker 1: the right people that give us the tools and information
Speaker 1: we need to make informed and educated decisions to have success.
Speaker 1: That is the question, and this podcast will give us
Speaker 1: the answers. This is Mark Moss, your host. Let's get
Speaker 1: this started. Hello, and welcome to another episode of the
Speaker 1: Market Disruptors podcast. Today I am joined by Matt Gurgler
Speaker 1: and he is general counsel for Reserve stable Coin. He
Speaker 1: is a an attorney. He's working with a stable coin,
Speaker 1: but he actually comes from the payment space, working with
Speaker 1: Venmo and also working in a blockchain research company as well.
Speaker 1: He gets the technology side, he gets the illegal side. Man,
Speaker 1: he just gets it. It It was a really good conversation.
Speaker 1: We talk about the remittance industry. We talk about stable coins,
Speaker 1: the pegs, how they work, maybe if they don't work.
Speaker 1: We talk about Facebook's coin which used to be a
Speaker 1: stable coin. We get into regulations, talking about what may
Speaker 1: or may not hold back the industry, and so much more.
Speaker 1: It's a really good conversation I really enjoyed. We're definitely
Speaker 1: gonna have Matt back, so let's go ahead and just
Speaker 1: jump right into this. All right, guys, welcome to another
Speaker 1: episode of the Market Disruptors podcast. Today I am with
Speaker 1: General Counsel of Reserve stable Coin Matt Girdler, and Uh,
Speaker 1: we've had some conversations before in the past. He's super knowledgeable.
Speaker 1: I'm excited to dig intoay because there's some new developments
Speaker 1: in the stable coin space I want to jump into.
Speaker 1: So anyway, welcome Matt. Great to be here. Mark All Hi, good,
Speaker 1: I'm happy to have you. Happy to jump into the
Speaker 1: conversations today. So UM, I gave you a quick intro,
Speaker 1: but for those um that are listening, why don't you
Speaker 1: just kind of tell us who you are and how
Speaker 1: you got to the black blockchain space and what you're
Speaker 1: doing right now. Sure. Um I got involved in the
Speaker 1: blockchain CRYP the currency space back inteen, around the time
Speaker 1: that the bit license was being proposed. I had been
Speaker 1: working during my one of my summers during law school
Speaker 1: at Venmo helping them apply for money transmitter licenses in
Speaker 1: New York. Basically took their money transmitter statute, made it
Speaker 1: more onerous, and applied it to a technology rather than
Speaker 1: how technology is used. And so UM I got involved
Speaker 1: with my background at Venmo and trying to fight against
Speaker 1: the bit license at the time, and I thought, you
Speaker 1: know what, there are a lot of problems in our
Speaker 1: financial system, predominantly dealing with remittances, cross border payments, UM
Speaker 1: clearing and sort of the time, and I realized that
Speaker 1: cryptocurrencies generally are blockchain generally would be intensive solution to this,
Speaker 1: and so that sort of got me down the rabbit hole. UM.
Speaker 1: I realized that a lot of attorneys, because there wasn't
Speaker 1: much legal guidance at the time, so they would try
Speaker 1: to rely on their experience, but they didn't truly understand
Speaker 1: the technology. So that's sort of the bridge that I
Speaker 1: tried to UM. That's why I tried to bridge was
Speaker 1: studying the technology at a level where I could sort
Speaker 1: of bridge between the lawyers that had been practicing for
Speaker 1: twenty years and the engineers who had never realized that
Speaker 1: this law was applicable to them. UM. So the speed
Speaker 1: up my background. I worked in big law law from
Speaker 1: old Mill Bank UM. Then I went off to co
Speaker 1: found an institutional research firm UM for cryptocurrencies, basically writing
Speaker 1: detailed twenty eight page research reports on individual cryptocurrencies for
Speaker 1: institutional investors. Focused predominantly on the legal and regulatory risks
Speaker 1: that might be real and investment. Some of the projects
Speaker 1: we covered were can um paisas so UM. I've looked
Speaker 1: at some of the more unique regulatory athletics there. Unless
Speaker 1: UM did laws of research last year to join a
Speaker 1: reserve as their full time general council UM. What really
Speaker 1: interests me about Reserve is there's two tokens in their protocol,
Speaker 1: a stable coin and a secondary token. So after reviewing
Speaker 1: all the different ways that crypto currencies have been launched
Speaker 1: and the legal and regulatory risk, I was then able
Speaker 1: to apply my background and learnings to the launch it
Speaker 1: to new crypto currencies. Yeah. Cool, that is a that
Speaker 1: is a really um, really good background that you have.
Speaker 1: It's pretty cool. You know. One thing that I love
Speaker 1: about the space bitcoin and and the space is that
Speaker 1: it's multidisciplinary, right, so like you have to really understand
Speaker 1: a bunch of different subjects at depth to really grasp
Speaker 1: how deep this goes. And so you you know, obviously
Speaker 1: being an attorney gives you one side of it. Uh,
Speaker 1: spending time at digital assets research and really digging in
Speaker 1: gives you that technology side. And then having the even
Speaker 1: payment space like at Venmo. Uh So, man, that's that's
Speaker 1: an awesome background that you have that I'm sure helps
Speaker 1: you a lot with what you're doing now. You're now
Speaker 1: with this new um stable coin reserve. Uh. And and
Speaker 1: let's just talk about stable coins for a minute. So, uh,
Speaker 1: stable coins are something that's become very popular like kind
Speaker 1: of like over the last year. A couple of things. One,
Speaker 1: I mean, really, there's nothing stable, right, everything is always moving.
Speaker 1: So what's it stable against? That's that's one thing. Um,
Speaker 1: So why don't you tell me about that? What what
Speaker 1: is it stable against? Is it stable against the dollar
Speaker 1: or what's it stay able against? It's well, this is
Speaker 1: a cop out answer, but it's stable against something. And
Speaker 1: every stable coin is going to be different, Um, the
Speaker 1: more noteworthy ones, Heather Gemini usd um see all of
Speaker 1: the dollar backs, the outcoin. It's stable relative to the
Speaker 1: price of the dollar, subject to counterparty risk and so
Speaker 1: the quote. But when you think about it, the US
Speaker 1: dollar isn't stable. It is an inflationary currency, so we
Speaker 1: can't say that it's a stable and generally, but it
Speaker 1: is stable relative to the price of the dollar ideally,
Speaker 1: and then you can go to different uh, trust tokens
Speaker 1: coming out with their I think their pound back stable coin,
Speaker 1: and so that will be stable versus a town. But
Speaker 1: as we look at exchange rates between the pound and
Speaker 1: the dollar, those fluctuated and so even those won't be
Speaker 1: stable against each other. So stable really comes down to
Speaker 1: what are you trying to do. At least with reserve,
Speaker 1: we're focused a lot more on the developing countries places
Speaker 1: is where their native currency is going through hyper inflation.
Speaker 1: So our initial launch area, um, most likely next quarter
Speaker 1: is going to be UM trying to give Venezuelans an
Speaker 1: opportunity to put their money into their boulevards into something
Speaker 1: that is more stable than the boulevard initially will be
Speaker 1: pegged to the dollar. Right. It's dealing with ten percent
Speaker 1: daily inflation, right, so as soon as people receive boul
Speaker 1: of ours, they have to find a way to get
Speaker 1: out of bolivars otherwise tomorrow will be ten percent less,
Speaker 1: ten percent less the day after, and that's compounding the
Speaker 1: wrong direction. Right. So, um, you know, one thing is
Speaker 1: this This thing is global, and a lot of people
Speaker 1: in the United States we get kind of trapped with this,
Speaker 1: like thinking that everything is like the United States and
Speaker 1: the US dollar is the reserve currency of the world,
Speaker 1: so it's you know, we the dollars seem stable to us,
Speaker 1: but in other countries they deal with this changing in
Speaker 1: value all the time, right, They're always watching these exchange
Speaker 1: rates and so forth. I don't want to I've too
Speaker 1: far down this rabbit hole, but maybe just poke at
Speaker 1: it a little bit. But you know, we talked about
Speaker 1: stable to what right, everything's moving, And it's interesting, I mean,
Speaker 1: if you really want to go into the history of money,
Speaker 1: for five thousand years, the world kind of was on
Speaker 1: the gold standard really up into the early nineteen hundreds
Speaker 1: and so and really I believe and and history shows
Speaker 1: that for a few hundred years, from like the four
Speaker 1: hundreds to the seventeen hundreds, the world saw a massive
Speaker 1: prosperity when the whole world was on this unified gold standard.
Speaker 1: And it's really interesting that we don't have a measurement
Speaker 1: of wealth today. So imagine if I needed to, I
Speaker 1: was building a house and like whatever, the yard was changed,
Speaker 1: Like the yard is this long today, but now the
Speaker 1: yards this long tomorrow, right, Or like the weight was
Speaker 1: this one day and the weights this, Like you need
Speaker 1: these standard units to measure things against, and I think
Speaker 1: that we don't. We don't obviously we don't have that today.
Speaker 1: Every everything is measure it against each other, but not
Speaker 1: against a standard. What do you what do you say
Speaker 1: about that? Well, if you think about gold, just generally, um,
Speaker 1: gold fluctuates in price. So even if it's going to
Speaker 1: be backing a currency like it was with the gold standard,
Speaker 1: at the price of gold, it's going to fluctuate. What
Speaker 1: does it fluctuate against? It fluctuates against the currency. Well,
Speaker 1: and there's the open market for trading, Like if you
Speaker 1: treat gold as a commodity like a lot of virtual
Speaker 1: cryptocurrencies are are are are are going to be argued
Speaker 1: to be um, that's just a volatile asset. Um. But
Speaker 1: if each currency was measured in gold, for example, so
Speaker 1: the US dollars this many dollars to announce the gold,
Speaker 1: the euros this many euros to announce a goal, the
Speaker 1: boulevards this many boulevards to announce the gold, at least
Speaker 1: everything was tied to one general measurement. But and then
Speaker 1: we would have something to stable against compared against like
Speaker 1: so even if we had like a stable coin that
Speaker 1: was paid to a basket of currencies. UM, at least
Speaker 1: we have something to compare what is stable. I don't
Speaker 1: know if it just seems it seems weird, like how
Speaker 1: do you even back into that equation when you have
Speaker 1: nothing to measure stability against. And I think that is
Speaker 1: an interesting perspective, especially where we're the world is going
Speaker 1: through globalization. Everyone's becoming more tied together, they're more international transactions. UM.
Speaker 1: But at the end of the day, UM, it doesn't
Speaker 1: need to be a stable coin. Maybe it could be bitcoin,
Speaker 1: it could be another virtual currency that doesn't currently exist. UM.
Speaker 1: When I when I initially got interested in the industry,
Speaker 1: people are talking about how you would travel around the
Speaker 1: world and not need to convert into the currency of
Speaker 1: that local jurisdiction because there would just be a global,
Speaker 1: universal payment mechanism that you could use. At the time,
Speaker 1: it was the point because there are only maybe a
Speaker 1: hundred cryptocurrencies at the time. But now there's no reason
Speaker 1: that it needs to be a stable point. Of course,
Speaker 1: it could be a stable but then again, if you're
Speaker 1: dealing with something on a global level, if you're stable
Speaker 1: against one currency, you're not stable to the rest of
Speaker 1: the world. Just hold hold the currency right? Why not
Speaker 1: just hold the currency right? And then you could say
Speaker 1: to take what UM libra is trying to do with
Speaker 1: the basket of different currencies. So you're stable relative to
Speaker 1: a basket of currencies. So I guess the question is
Speaker 1: more stable than not. I think it's definitely less small atile. Yeah,
Speaker 1: I want to jump into libra. We're gonna table that
Speaker 1: for now though. But one thing, you know, I've studied money,
Speaker 1: and i've I've I've been a big believer in gold
Speaker 1: of investing goal for a long time. And one thing
Speaker 1: that's interesting if you look at UM prices throughout history
Speaker 1: and you compare them against a basket of assets. So
Speaker 1: what is this home in the medium home price compared
Speaker 1: to how many barrels of oil would it take? How
Speaker 1: many ounces of gold would it take? How many right,
Speaker 1: how how much copper would it take? And you can
Speaker 1: compare it to assets. That's one thing. And I haven't
Speaker 1: really seen any stable coins pegging into baskets of assets.
Speaker 1: Have you seen that? Wow? I and pretty your audience.
Speaker 1: I did not lay that up for you, but that's
Speaker 1: a beautiful softball throw to me. Um, that's actually what
Speaker 1: we're trying to I was I wasn't trying to do that,
Speaker 1: so I guess tell us how you guys are different. Yeah, So, um,
Speaker 1: this was more over the long term, and it's so
Speaker 1: eventually we want to have all of our assets on Chaine. Um,
Speaker 1: we want to put the assets collateralizing outstanding stable coin
Speaker 1: into appreciating but safe assets. Think tokenized treasuries, think tokenized bonds,
Speaker 1: things that are relatively safe but are appreciating. And the
Speaker 1: ideas that if you get these assets all around the world,
Speaker 1: you could create a basket of assets that is stable
Speaker 1: just generally, not against any currency, not against anything else,
Speaker 1: just stable against the portfolio that's back in it. Of course,
Speaker 1: you then have to have a portfolio that is reasonably stable,
Speaker 1: which is difficult and until we could prove that we
Speaker 1: could do it, it's all an idea. But that's what
Speaker 1: we're trying to do is create a portfolio of assets,
Speaker 1: got to have a stable coin that makes it where
Speaker 1: the stable poin long term isn't back to any currency
Speaker 1: of any jurisdiction. Yeah, because I think you know, I've
Speaker 1: I've come out and I've said many times, especially in
Speaker 1: response to this growing thing of modern monetary theory MMT,
Speaker 1: where they want to just print more money. And I
Speaker 1: say that money is not wealth. Money measures wealth. Wealth
Speaker 1: is assets, and so it makes sense to peg it
Speaker 1: not against money, because money is nothing. Money is a measurement.
Speaker 1: To peg it, just peg it to the actual wealth, right,
Speaker 1: the actual assets. That makes sense? Um? So why so?
Speaker 1: So these stable coins have really started to get popular.
Speaker 1: We've seen a bunch of them jumping up, A bunch
Speaker 1: of big companies, institutions, vcs, etcetera are jumping on board
Speaker 1: with the stable coins. Um. I want to know why
Speaker 1: people should care about stable coins. I want to know
Speaker 1: why companies want to develop stable coins, and why do
Speaker 1: individual people care about stable coins? Sure? Um, I think
Speaker 1: that this sort of the interesting stable coins came out
Speaker 1: of the bubble bursting at the end of early eighteen.
Speaker 1: A lot of people were still saying cryptocurrencies are gonna
Speaker 1: solve remittances. They're going to be a store of value
Speaker 1: for people in countries that um, whose wealth is deteriorating
Speaker 1: because of the local financial system. But when bitcoin loses
Speaker 1: or a cryptocurrency generally loses value during a bubble, well,
Speaker 1: what you're trying to solve doesn't really solve it. So
Speaker 1: I think that's sort of where the idea of well
Speaker 1: maybe stable points to be a lot more interesting. And
Speaker 1: also as you have depths, you're going to need a
Speaker 1: stable payment mechanism within the depth anyway. But um, I
Speaker 1: find that more of a long term thing than a
Speaker 1: short term thing. I think the developing countries is more
Speaker 1: um an interesting short term play. So that's like the
Speaker 1: retail play, right, So, like from a retail perspective as
Speaker 1: a user, like if I put all my money in
Speaker 1: bitcoin or whatever point, it loses, like, that's horrible, I
Speaker 1: lose everything. So why don't I just put it into
Speaker 1: a stable coin that doesn't lose value? That's kind of
Speaker 1: like an individual retails perspective. I guess then you have
Speaker 1: to tell me why it's better than whatever currency I'm holding,
Speaker 1: Like why not just keep it in the dollar? Then? Right,
Speaker 1: then there's that. Yeah, and it comes down to um
Speaker 1: remittance of sending money back home like a PayPal Western Union,
Speaker 1: they take ten to twelve percent feets large largely because
Speaker 1: they solve the last mile problems, and whereas a crypto
Speaker 1: currency transaction will range probably from point zero zero one
Speaker 1: percent to maybe a point one percent or one percent,
Speaker 1: depending on which cryptocurrency you're using so all of a sudden,
Speaker 1: un like if you're trying to use the existing financial
Speaker 1: system from the US trying to send money to let's
Speaker 1: just say Europe, even you send a bank wire will
Speaker 1: cost and it will take a day or two um
Speaker 1: to actually get there, whereas I could send that same
Speaker 1: amount of money more cheaply using a crypt a currency.
Speaker 1: And if it's a large amount, maybe I want to
Speaker 1: make sure that it's stable and value so there isn't
Speaker 1: a volatility risk there. I'm able to move money around
Speaker 1: uh much more easily. Um. But going back to your
Speaker 1: question about why would I want to use the sur
Speaker 1: by this, If you're a retail investor, unless you're sending remittances,
Speaker 1: are dealing with international cross border payments, then most good enough.
Speaker 1: PayPal is good enough, voll is good enough. People in
Speaker 1: the US largely don't need this right now. And I
Speaker 1: believe that cryptocurrency stable points are going to more largely
Speaker 1: take place and grow outside of the US and more
Speaker 1: developed countries. UM. So that's who would use it. People
Speaker 1: who think that the cryptocurrency is better than their either
Speaker 1: currency where they live or they're dealing in a country
Speaker 1: like Cyprus, which took a certain percentage out of bank
Speaker 1: account several years ago. And so that's why a retail
Speaker 1: person I use it. Why would an investor UM investment
Speaker 1: a stable cooin UM? Generally you don't invest in the
Speaker 1: stable coin. You're either investing in the company behind the
Speaker 1: stable coin, a profit sharing agreement, or there's a secondary token.
Speaker 1: And so when we're dealing with feed dollars in a
Speaker 1: bank account, the general business model is very similar to
Speaker 1: a PayPal where they're getting a yield on the app
Speaker 1: the dollars in the bank account from whatever bank that
Speaker 1: they're storing it with. And so it's more money that
Speaker 1: you're holding, more stable point upstanding, the more interest revenue
Speaker 1: that you're collecting UM not all or like an insurance company. Right,
Speaker 1: so they have that float, they can invest the invest
Speaker 1: what they're holding, right, And that's actually where it becomes interesting.
Speaker 1: Where's the different types of financial institutions that people could use.
Speaker 1: Whether it's a trust company like a Gemini, whether it
Speaker 1: is an MSP like trust token UM, what you're allowed
Speaker 1: to do and what investments you're allowed to make are
Speaker 1: very different depending on the type of financial institution that
Speaker 1: you're regulated as and so that's just something to consider. Um,
Speaker 1: what is the money that is back in the stable point,
Speaker 1: where is it, what is it being used for? And
Speaker 1: you just want to make sure that people aren't just
Speaker 1: making large debts that you won't get any benefit at
Speaker 1: the end. But then again, a stable coin is meant
Speaker 1: to not appreciate. Yeah, exactly, it's not meant to appreciate.
Speaker 1: So from a from a retail user perspective, UM, if
Speaker 1: that stable coin could hold value better than whatever fiat
Speaker 1: currency I have available to me, that's one option why
Speaker 1: I'd want to use it UM. The other option would
Speaker 1: be UM. I mean the other option is an investor
Speaker 1: doesn't make sense because it's stable. It's not I want
Speaker 1: to invest in something that's going to go up in
Speaker 1: value and the stable coin is not supposed to do that. UM.
Speaker 1: Now why do we see so? And I guess you
Speaker 1: answered so. The reason why we see big companies vcs,
Speaker 1: etcetera starting stable coins UM, the play, the probably the
Speaker 1: predominant revenue play would be to have those assets under
Speaker 1: management which they could invest and make more money on. Yeah,
Speaker 1: that's one reason why people would be interested in it. UM.
Speaker 1: And at the end of the day, data is valuable
Speaker 1: at the bitcoin isn't anonymous, it's pseudo anonymous. If you
Speaker 1: run a node like you would get access and you're
Speaker 1: able to UM parse the data and analyze that data properly,
Speaker 1: you're able to learn a lot about a transaction. And
Speaker 1: when I think about conglomerates creating their own cryptocurrency and
Speaker 1: running the validator nodes themselves, even if they're not collecting
Speaker 1: personal data directly by looking at your idea or anything
Speaker 1: like that, they're able to glean information about your spending
Speaker 1: habits and what you're using this for. And I think
Speaker 1: that is probably I don't know if that's more valuable
Speaker 1: than the interest from the money backing it, but I
Speaker 1: do see that there's value in that as well. Yeah,
Speaker 1: so that's what some of these stable coin companies would be.
Speaker 1: They have a play possibly on the data as well
Speaker 1: as whatever the float they can do with the float. Yeah,
Speaker 1: got it now. Um let's so with stable coins um
Speaker 1: for dominantly, they're all centrally controlled. You talked about the
Speaker 1: counterparty risk as well, they're essentially controlled, and they're trying
Speaker 1: to peg to something more more stable. So whether that's
Speaker 1: a currency of basket of assets or whatever um, And
Speaker 1: I'm guessing there's all different types of ways that they
Speaker 1: can try to hold that peg um. But historically, doesn't
Speaker 1: it seem like all pegs have always broken, even even
Speaker 1: nation states haven't been able to hold their pegs. Yeah,
Speaker 1: you have to get all stakeholders involved interested in protecting
Speaker 1: the peg. And that's sort of I could speak to
Speaker 1: Reserve because I know that much more intimately than I
Speaker 1: know the other stable print projects out there. But the
Speaker 1: way we approach this differently is we have a secondary
Speaker 1: token that incentivizes arbitragers to keep the teg on exchanges.
Speaker 1: You're always like, you're never gonna be able to keep
Speaker 1: the teg unless it's relatively constant on exchanges. But the
Speaker 1: question is how do you do that. You could perform
Speaker 1: your own market making function, but then you're never going
Speaker 1: to get to decentralized and there's gonna be a lot
Speaker 1: of other issues of trying to keep a peg yourself.
Speaker 1: But if you trust that people are incentivized because they're
Speaker 1: going to profit by keeping the peg, all of a sudden,
Speaker 1: maybe that will Like will that work? Um, we haven't
Speaker 1: seen it done yet, so i'd like to think it
Speaker 1: could work, But I think you have to incentivize everyone
Speaker 1: in the ecosystem to keep the peg because it's in
Speaker 1: their best interests to do so. In a normal the
Speaker 1: outcoin back stable coin, why does a user, why does
Speaker 1: the market make The people that are buying it just
Speaker 1: want to be able to arbitrage and on exchanges, that's
Speaker 1: where their profit is. They're not interested in making it
Speaker 1: stay a dollar because they don't make money off of that.
Speaker 1: They'd rather it's be different. Yeah, I mean George Soros
Speaker 1: one of the most famous and prolific investors in the world.
Speaker 1: I mean, he's famous because of breaking the peg, right,
Speaker 1: So he made a billion dollars in a day by
Speaker 1: breaking the peg. And so that's why it just seems
Speaker 1: like man if if if nations can't even do keep
Speaker 1: the peg, how are these smaller institutions going to do that.
Speaker 1: So it's an interesting challenge that I guess we'll have
Speaker 1: to wait and see how that plays out. Yeah, in
Speaker 1: our white paper, we discussed the saurus attack, and we
Speaker 1: think we've created mechanisms to prevent against run on the
Speaker 1: bank and a saurus attack, largely by after a certain point.
Speaker 1: If we're saying that there are certain assets that appreciate.
Speaker 1: If that means are volved filed, they could go down.
Speaker 1: Maybe it tries to read defaults in a foreign jurisdiction
Speaker 1: for whatever reason, it could default, and maybe that starts
Speaker 1: triggering itsel Off. Our protocol has a mechanism in place
Speaker 1: where it basically prevents withdrawing after a certain point, just
Speaker 1: limited to a paradis share of the basket. That way,
Speaker 1: the first people coming aren't going to take it out.
Speaker 1: They have to sort of trust that the pig will
Speaker 1: be restored to a dollar later on. But it prevents
Speaker 1: a run on the bank and prevents a sourrous attack. Yeah, well,
Speaker 1: that's a really good framework for for the stable coin talk. Um,
Speaker 1: we'll get let's let's jump into some stuff. It's maybe
Speaker 1: a little bit more in your wheelhouse, which is more
Speaker 1: on the regulation side of things. Obviously you understand the
Speaker 1: technical side very well with your background, and so thanks
Speaker 1: for jumping into that with us. But on the regulation side,
Speaker 1: you talked about like working with Venmo and the problems
Speaker 1: they had even transferring money. Um, but now we're talking
Speaker 1: about stable coins and global regulations. So you even just
Speaker 1: said right like most stable coins maybe don't make sense
Speaker 1: in the US, but they make sense abroad. And then
Speaker 1: of course you start running into all different types of
Speaker 1: regulations and things like that. So what are some of
Speaker 1: the big I'm guessing regulations is probably the biggest hurdle
Speaker 1: that stable coins will have to make uh to reach adoption.
Speaker 1: But what specifically are you you think will be the
Speaker 1: biggest problems there? Well, the problem comes down to where
Speaker 1: are you located and who do you want your customers
Speaker 1: to be. If we're gonna say that you're either located
Speaker 1: in the US or you want to have US customers,
Speaker 1: your regulatory responsibilities are going to be very different, and
Speaker 1: it's gonna be a lot more onerous doing it here
Speaker 1: versus elsewhere, um in the world. And that's just sort
Speaker 1: of if you live in the US, this is what
Speaker 1: you have signed up for already. I didn't sign up
Speaker 1: for it, right, UM. So I have this conversation regularly
Speaker 1: with founders like, well, people are doing this elsewhere, um,
Speaker 1: and it's so much easier. There's much more complicated in
Speaker 1: the US. Like then leave specifically stable coins. Really the
Speaker 1: target market is out of the US, right, So now
Speaker 1: you have to deal with each individual country has its
Speaker 1: own laws and then I'm guessing because you're a US company,
Speaker 1: you still have to really somehow be with US laws
Speaker 1: as well. I mean, what's that challenge? Like, yeah, that's
Speaker 1: a it's a very big challenge. UM. I will say
Speaker 1: that the US is largely more onerous in terms of
Speaker 1: your regulatory obligations and what you have to do. So
Speaker 1: there are a lot of jurisdictions actually where if you're
Speaker 1: complying in the US, you'll be your compliance prophecies are
Speaker 1: going to be better than what they would require you elsewhere,
Speaker 1: and most regulators as will allow you to do that.
Speaker 1: As you are regulated in the US as a financial institution.
Speaker 1: Of course, you go into EU and some of like
Speaker 1: the more well some of the bigger countries, that's not
Speaker 1: necessarily the case. But if you come in and being
Speaker 1: regulated by the US, like you're going to be more
Speaker 1: respected when you go to regulators elsewhere. But if you
Speaker 1: are regulated by the US, there is certain information that
Speaker 1: you need to collect and so, like one of the
Speaker 1: big issues is sort of the Sincon and o fat regime,
Speaker 1: which I sort of group into an umbrella called financial crime. Um.
Speaker 1: This requires you to collect certain information about the people
Speaker 1: you're doing business with. But the information that you collect
Speaker 1: is going to be different depending on how risky this
Speaker 1: person is to your business model, and so you have
Speaker 1: to sort of make an assessment of what risk profile
Speaker 1: is every customer that comes in. You need to collect
Speaker 1: certain information, but you might need to collect even more
Speaker 1: information if your research shows that this is an extra
Speaker 1: risky person. And you also have to then monitor this
Speaker 1: person's account. Maybe they're sending very transactions, or they have
Speaker 1: a bunch of small transactions then a large transaction. Now
Speaker 1: you have to analyze, well, what is this money being
Speaker 1: used for? Are we uh like, is this being used
Speaker 1: for legal activity? We need to get more information from
Speaker 1: this person. And on the flip side, if you're purchasing
Speaker 1: the stable coin, you need to know where that money
Speaker 1: came from. And so if you're dealing with are developing
Speaker 1: country or a country outside the US, question is how
Speaker 1: can you prove that the funds come from a legal source.
Speaker 1: Maybe you look at people's bank account records, maybe you
Speaker 1: have them signed affidavit. If it's small enough, they're just
Speaker 1: it just sort of depends, and it's going to be
Speaker 1: very difficult because that's not really how you like traditional
Speaker 1: technology scales, and that's not how many of the financial
Speaker 1: UH industry works in these countries. If you go down
Speaker 1: to UH Columbia for example, Venezuela, Columbia for example. UM,
Speaker 1: there are a bunch of UM market makers that just
Speaker 1: don't do ky C, and you can't plug into that
Speaker 1: ecosystem if you're a US financial institution, So you have
Speaker 1: to sort of go around the existing financial systems and
Speaker 1: build it a new and that's not easy. Yeah, And
Speaker 1: then why would somebody want to comply with that when
Speaker 1: they have other options where they don't have to, Because
Speaker 1: if you want to work out of the well, most
Speaker 1: countries in the world have m L KYC policies. But
Speaker 1: I'm talking about from a customer perspective, Like, if I
Speaker 1: can deal with a market maker that doesn't require k
Speaker 1: K y C, why would I go with somebody who's
Speaker 1: gonna request my children so security numbers in ten years
Speaker 1: of bank statements or whatever? Right, Like, why would I
Speaker 1: want to do that? Yeah, that's a very good question.
Speaker 1: Too much, too much friction, you know. UM. So, so
Speaker 1: each country is its own challenge, so that that that
Speaker 1: that can make it very difficult. I I you know,
Speaker 1: looking at the Facebook Libra coin, which made a bunch
Speaker 1: of noise this past week. It's technically a stable coin
Speaker 1: as well, And it seemed like they didn't even plan
Speaker 1: to launch in the US. Really, they wanted to launch
Speaker 1: I think in India, which was their biggest market, because
Speaker 1: of what's app and like the right in India's just
Speaker 1: like nope, you're a launching here, right? Is that kind
Speaker 1: of what happened? Yeah, India's been on and off. Cryptocurrencies
Speaker 1: are illegal, not illegal, but um, they've been very skeptical
Speaker 1: and it felt largely from a consumer protection angle, Although
Speaker 1: I do appreciate that they focused on one country because
Speaker 1: I think that's a much easier and more targeted way
Speaker 1: of going about building your business and use case than
Speaker 1: just going out globally saying Okay, here's a stable point
Speaker 1: everybody uses. You need to solve the real world problem
Speaker 1: for people, and in India this would have potentially solved
Speaker 1: the real world problem. The problem is you have Facebook
Speaker 1: doesn't isn't looked fondly on by the regulators lately. Largely
Speaker 1: these were data privacy issues, um, but now when you're
Speaker 1: talking about adding financial data and control of people's money,
Speaker 1: all of a sudden, people are going to look at
Speaker 1: that even more strongly based on the response be a
Speaker 1: privacy before because there's nothing probably more important other than
Speaker 1: health information than financial information and a person. Yeah, So
Speaker 1: the regulations they just continue to pile up. I know
Speaker 1: the G twenty was just meeting and they were talking
Speaker 1: about this f T A f or whatever, right, the
Speaker 1: fat fat fat or whatever they call it, and uh,
Speaker 1: they're wanting to impose more regulations and this travel rule
Speaker 1: and whatnot, which I don't want to really want to
Speaker 1: jump into too much, but I saw some comments today
Speaker 1: where they said, uh. I think the Secretary of U. S.
Speaker 1: Treasury was saying, um. He said uh. He said, they
Speaker 1: want to make sure that virtual asset service providers do
Speaker 1: not operate in dark shadows, UM, enable emerging fintech sector
Speaker 1: to stay one step ahead of rogue regimes and sympathizing
Speaker 1: sympathizers of illicit causes searching for avenues to raise and
Speaker 1: transfer fund without detection. Um. And so they're like, we
Speaker 1: want to allow cypic currency to become the equivalent of
Speaker 1: secret numbered accounts, uh, etcetera, etcetera. Right, um, And so
Speaker 1: I mean they kind of get it and they want
Speaker 1: to stop this. I'm curious you know, for me, I've seen,
Speaker 1: you know, specifically around the Facebook thing they're talking about, Well,
Speaker 1: we're always control the on ramps and off ramps, so
Speaker 1: it seems like they at least have that. Of course,
Speaker 1: they're gonna always continue to UM regulate the exchanges as
Speaker 1: best they can, specifically the ones that have on ramps
Speaker 1: and off rams. What for those that are listening on
Speaker 1: ramps and off rams meaning the chance to go from
Speaker 1: crypto back to FIAT. So whether I turned Fiat to crypto,
Speaker 1: crypto back to FIAT, that's an on ramp and off ram,
Speaker 1: so always regulate that. But let's go back into the
Speaker 1: money remittance market. So, uh, the big use case is
Speaker 1: money remittance. If I want to and and I've done
Speaker 1: this because I have people all over the world that
Speaker 1: worked for me, and I try to send money Western Union,
Speaker 1: and I got to drive down to the location. It
Speaker 1: takes me an hour while I'm there, it has to
Speaker 1: be done in cash. It takes thirty to forty five
Speaker 1: minutes to do it. It's super expensive, etcetera. Right, and
Speaker 1: and and it's really expensive. So if I could just
Speaker 1: send them crypto, then that that cuts all that out.
Speaker 1: It's way cheaper, um, et cetera. Now, these as I
Speaker 1: just mentioned, is fat these regulatory people trying to manage
Speaker 1: the on ramp, soft frames, etcetera. But where does remittance
Speaker 1: fall into this? So like if I can just if
Speaker 1: if somebody in Columbia or India can just download an
Speaker 1: app and I can just transfer them points, Like, what
Speaker 1: what can a regulator really do about that? Um, there
Speaker 1: isn't much that a regulator can do about it. This
Speaker 1: is this A is this? Do you see this as
Speaker 1: a war they're going to eventually lose? That's an interesting question. Um, yes,
Speaker 1: but over a much longer horizon than anyone expects. UM.
Speaker 1: I haven't used sort of the financial crimes aspect looking
Speaker 1: at this, but I look at it from the SEC
Speaker 1: perspective of the example of decentralized exchanges. The essential eizes
Speaker 1: exchanges as they currently exist are not really decentralized exchanges.
Speaker 1: Yes they're No, they're not taking custody of funds. So
Speaker 1: that's the argument. But you know who's building you largely
Speaker 1: know who's building it, you know who's behind the project,
Speaker 1: you know who put it out there, you know who's
Speaker 1: responsible up key, who to go with problems. That's not decentralized,
Speaker 1: and that's running it's an exchange. But what were to
Speaker 1: happen if there was a truly decentralized exchange, no one
Speaker 1: knew who was behind the project and people were just
Speaker 1: able to with smart contracts posted at ask prices that
Speaker 1: were executed automatically, which I believe, which I believe there
Speaker 1: will be. There's a there's a need for it, so
Speaker 1: someone's going to build it. Yeah, and I think this
Speaker 1: is probably a tend to fifteen year horizon. Um, some
Speaker 1: people might do it quicker. You might think way sooner hopefully,
Speaker 1: but anyway, go ahead, right, But yeah, the question is
Speaker 1: there's no one to go after at the end of
Speaker 1: the day. You can't turn off, like there's no servers
Speaker 1: to turn off because there it's around the world. And
Speaker 1: so what happens when a regulator can't regulated thing that
Speaker 1: it wants to regulate? So they control the on ramp
Speaker 1: off ramp. But if I never need to get on
Speaker 1: or off, what are they gonna do? Right? And what
Speaker 1: happens when you could then spend that in the real
Speaker 1: world like the market. That's a real question. The thing
Speaker 1: is we're not at that point yet. We're currently dealing
Speaker 1: with I c O S quad Quadraga, Quadrialga, exchange UM,
Speaker 1: runaways UM, We're dealing with much larger fraud and other
Speaker 1: things right now, where I just don't think that's really
Speaker 1: on the regulator's mind. There's just so much low hanging
Speaker 1: fruit right now with that actors that that's who regulators
Speaker 1: will go after first. That's not to say that they
Speaker 1: won't go after others later, but what you said, yes,
Speaker 1: curious someone coming from Venmo and then working on stable coin,
Speaker 1: and then the remittance market is the big piece there,
Speaker 1: and the regulators are trying their best to stop that
Speaker 1: from happening. But if you really open up the remittance market,
Speaker 1: which is the big use case, then it almost has
Speaker 1: to get rid of this regulation. It's like you can't
Speaker 1: really open up the remittance market. I think without that
Speaker 1: it seems like, I mean, because as you're saying, right,
Speaker 1: to get all these individual countries with all their individual
Speaker 1: laws to all work together, like, it's almost like it
Speaker 1: probably would never happen, and so you almost have to
Speaker 1: move outside of that. I would think, I think a
Speaker 1: company like a PayPal um if you're not saying that
Speaker 1: the PayPal would do that I'm saying that a company
Speaker 1: that starts for nothing and takes the PayPal model of okay,
Speaker 1: we need to go and figure out how to spend
Speaker 1: money to each of these countries, and to go through
Speaker 1: the process in each of those countries. It's tedious, time consuming, extensive,
Speaker 1: and it's unclear whether it will even work because now
Speaker 1: we're dealing with cryptocurrency as opposed to I don't know
Speaker 1: digital money of financial institution, so that might be in
Speaker 1: an even harder sell um. Or maybe let's say that
Speaker 1: there are still Paypals not available in a lot of places,
Speaker 1: which is why the money remittance is still trillions of dollars,
Speaker 1: which is why I still have the Western Union because
Speaker 1: I can't pay Pal to those locations. Yeah, and there's
Speaker 1: been a big pain point that if you're gonna send
Speaker 1: remittances you have, like you said, you need to use cash.
Speaker 1: The question is at some point cash has to enter
Speaker 1: the system. Yeah, and so at that you don't prevent
Speaker 1: money wandering. The idea is that if money wandering is found,
Speaker 1: you have enough information to have it go back to
Speaker 1: the regulators that are enforcing um whatever law they're up. So,
Speaker 1: for example, if I remitted money to you, and you've
Speaker 1: never been ky C, but you send that money off
Speaker 1: to someone else. I was KYC when I put the
Speaker 1: money in the bank account. And they're gonna the let's
Speaker 1: say Finncent comes or the Department of Justice comes and says,
Speaker 1: here's a subpoena. I need the records of Mark. Um,
Speaker 1: give me his records, um, right um? Or we need
Speaker 1: to know who this went to, Like, well, I know
Speaker 1: I sent it to you. Here's all the information I
Speaker 1: know about Mark. And you could have sent that off
Speaker 1: to someone else, but then they're just gonna go to you.
Speaker 1: And yeah, you could say I'm not going to help you,
Speaker 1: but then they're gonna right you know um about cash, right,
Speaker 1: I mean, none of this was even around fifty years ago.
Speaker 1: The whole rolls cash. I mean when they when they
Speaker 1: raided the Iraq, Saddam Hussein had pallets and pallets and
Speaker 1: pallets of cash. I mean even just a few years ago,
Speaker 1: the Obama administration sent planes of pallettes of cash to Iran.
Speaker 1: Pallets of cash he sent in the middle of the
Speaker 1: night to Iran. Right um. And so like all this
Speaker 1: like financial regulation is to like we need to know
Speaker 1: where every single penny is going and who's who? It's
Speaker 1: all this is all brand new, isn't it. Um. Yeah, well,
Speaker 1: if you want to even go back to like two
Speaker 1: thousand seven, two eight in the financial crisis, I forgot
Speaker 1: which bank was getting a bail out. I don't want
Speaker 1: to see the wrong name. But they need an infusion
Speaker 1: of like a billion or two billion dollars um And
Speaker 1: this was before Monday. The bill opened on Monday, but
Speaker 1: thanks are closed after by PM on a Friday, and
Speaker 1: so there was no way to wire this money. So
Speaker 1: someone had to fly on a plane with a multibillion
Speaker 1: dollar check to New York from Japan to be able
Speaker 1: to get the money there in time. And yeah, this
Speaker 1: could have we didn't have the solution before. But you're
Speaker 1: saying going back in and further it was all cash. Yeah,
Speaker 1: and that's our legacy financial system is something that this
Speaker 1: gets into philosophy, which like again we always have to
Speaker 1: dip into this, but like, oh, this regulation, like it's
Speaker 1: it's all new, Like is it really even that important?
Speaker 1: And the world hasn't always operated like this, and so
Speaker 1: if it hasn't done has if it hasn't been like
Speaker 1: this for very long, if we operated fine without it?
Speaker 1: Do we need it? And couldn't we just moved to
Speaker 1: a crypto only remittance market. We don't have it anymore.
Speaker 1: I mean, it's the world gonna end. No, it's the
Speaker 1: crypto utopia. But um, we're not starting with a blank slate.
Speaker 1: We're starting with many existing financial regulations, most recently got
Speaker 1: more ownerous doctor in the financial collapse because the free
Speaker 1: market was greedy and we decided to be able out.
Speaker 1: Um a lot of these companies. Um, some people and
Speaker 1: that with the crypto ethos would say, well they should
Speaker 1: have all failed and it's a survival of fit it
Speaker 1: like pre market. Um, that's not what the US government does. Yeah,
Speaker 1: that's not what happened. And that's the U s government
Speaker 1: is responsible for protecting its citizens and they decided that
Speaker 1: this is the right thing for us to do. Whether
Speaker 1: you agree with it or not, Like that's irrelevant. What's
Speaker 1: relevant is there are enough people in Washington, d C.
Speaker 1: That agreed that this was the appropriate response to take,
Speaker 1: and then they took it. And that's what we deal
Speaker 1: with by being in the United States. Yeah. Cool, Well,
Speaker 1: this is such a fascinating topic one that I'm I'm
Speaker 1: really intrigued in and we could sit here and go
Speaker 1: on forever and ever, but I know we need to
Speaker 1: wrap this up, so let me just ask you one
Speaker 1: last thing. So I'm just curious kind of in your position.
Speaker 1: You have this unique perspective on on payments and stable
Speaker 1: coins and where you're at. What are you seeing right
Speaker 1: now in the space that has you excited maybe for
Speaker 1: the near term, six months or twelve months out. I'm
Speaker 1: really excited that UM people are more focused on cryptocurrencies
Speaker 1: that have been out for a while. There's less scams
Speaker 1: out there. UM people are not are raising less money. UM.
Speaker 1: The ones that are raising money are raising five million dollars,
Speaker 1: not the hundred million dollars that billions of dollars that
Speaker 1: others have raised to build a technology. UM. So I'm
Speaker 1: excited about that UM for a bunch of reasons. I'm
Speaker 1: excited for the KIN lawsuit, because the Kin FBC battle,
Speaker 1: because I'm really excited to see what we're going to
Speaker 1: get from that court case. Yeah. I don't think KIM
Speaker 1: has great facts to support the Howie tests, but their
Speaker 1: argument that how we tested and apply is a novel
Speaker 1: and interesting argument that I'm curious to see if that
Speaker 1: will hold any muster um under the in the court.
Speaker 1: Do you think we'll see that play out over the
Speaker 1: next twelve months, um, some of it, But we won't
Speaker 1: have an answer in twelve months, but there will be filings.
Speaker 1: I assume Ken will file for emotion to the smiff
Speaker 1: at some point, because that's usually what you will do.
Speaker 1: The SEC will respond to that, the court will likely say, Okay,
Speaker 1: there's enough to go to trial over. And I expect
Speaker 1: there to be a lot of legal that like not
Speaker 1: I want to call them battles, but legal back and
Speaker 1: force to position each side. Um. And. I think we're
Speaker 1: gonna learn more information about what's going on there from that.
Speaker 1: But no, I don't think that this is going to settle.
Speaker 1: I don't think it's going to end in the next year.
Speaker 1: Year now and then we didn't talk about Facebook Libra
Speaker 1: really um and and we don't have any time left
Speaker 1: to dig into it. But I guess that's something that's
Speaker 1: going to happen over the next six months or twelve months. UM.
Speaker 1: Let me get your opinion. They have been asked by
Speaker 1: US Maxine Waters leading the charge to stop, to halt
Speaker 1: until this is get figured out. Do they halt or
Speaker 1: do they continue and what does the next six months
Speaker 1: look like? For that, the question is telling them the
Speaker 1: halt is vague. I'm not sure. I didn't read what
Speaker 1: the exact response was. But Facebook itself isn't in control
Speaker 1: of the Libre Foundation. It's one of the founding members.
Speaker 1: I think either they or Calibra runs a node for validation,
Speaker 1: but Facebook itself doesn't control it really, And if they
Speaker 1: wanted to like show a more decentralized thing, I think
Speaker 1: they should have taken a further step back so that
Speaker 1: they wouldn't get so much regulatory pushback. But hindsight is
Speaker 1: and you obviously want the marketing push and being asociated
Speaker 1: with that. I think what I'd be more worried about
Speaker 1: is you had already been approached by several regulators who
Speaker 1: were talking about Facebook breaking up big tech companies, and
Speaker 1: regardless of how you feel about that, when you add
Speaker 1: financial too something when you're already being talked about as
Speaker 1: being too big and controlling too much of people's lives, well, yeah,
Speaker 1: so it was just a very poor timing. And so
Speaker 1: ultimately I don't think Facebook has any legal obligation currently
Speaker 1: to stop doing it. It's whether or not they are
Speaker 1: worried enough that Congress might take some action that they
Speaker 1: don't like, whereas it would make sense to stop. And
Speaker 1: I just don't have access to their internal conversations or
Speaker 1: their risk profile or not information to guess whether they
Speaker 1: will push back or not. So as a as a
Speaker 1: hypothetical general counsel, do you tell them, hey, let's hold
Speaker 1: off and see what happens first, or like she just
Speaker 1: go for it. I don't launch in the US. Don't
Speaker 1: launch in the US, right, I needed more information to
Speaker 1: the side if you completely stop or not, but at
Speaker 1: the very least you're not dealing with US customers and
Speaker 1: told us is handle got it? Got it? Great? All right? Well,
Speaker 1: thanks for sticking your neck out on that one. I
Speaker 1: know that's uh, that's always a tough one. Absolutely Well anyway, Matt,
Speaker 1: I know we went a little bit long. Thanks so much.
Speaker 1: It was a great conversation. I love talking about this
Speaker 1: kind of stuff and hopefully everyone enjoyed listening. Now you
Speaker 1: have some really good perspectives. Where where would anyone to
Speaker 1: keep up with you if they wanted? Um, you can
Speaker 1: follow me on Twitter at m a Gurgler, or on
Speaker 1: LinkedIn you could add me just Matthew Gurgler, Great, all right,
Speaker 1: well good stuff. Thanks for taking the time to talk today.
Speaker 1: It's been my pleasure. Have a great day. Hey. If
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