The 40-Year-Old Bank Quietly Banking Crypto's Exchanges and Market Makers

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We are back for another StableAsh live conversation. Really, really excited for this one. It's a really big day for UTB. We are here with the man. You were just on you were just on stage. Right? Or is that true? I was not on stage. But you're are you going to be? I will be on stage. Someone was just saying, is that the guy who's gonna be on stage with this big news? Tell us tell us give us your intro and what happened today and

all of the all of buzz. Mentioned Scott Beck with United Texas Bank based out of Dallas, Texas. I'm the chairman and CEO of our financial holding company, UTB Financial Holdings. We own a 100% of United Texas Bank. The big news today is we are a forty year old bank based in Dallas, Texas. But after working for the past year, we are now officially a national bank. We are no longer a state chartered bank. We have made the migration to be a national bank. So we are super excited, to join, the OCC. That's awesome.

This is a really perfect timing for both sides because actually right now, we're launching a strategic partnership with Dakota,

and Neo. It's all about Neo banking and the transition of, like, both new entrants to the banking conversation on chain, but also companies that have existed and are coming into, you know, really continuing to innovate and bring more of what a traditional banking business looks like now on chain. So you guys have been from what we were talking about such a crucial foundational layer for so many companies even in this room. Give us a little bit of the framing around the role that the bank has played

with with even just the room here today? Like, what with Bitso and some of these other companies that you've been able to support so far? So so the role really revolves around US dollar clearing. It's how either financial institutions, whether they're banks or digital asset companies, have the ability to access the US dollar. And traditionally, the accessing of the US dollar, if you're a US company, is easy. You can have a US bank account.

If you're a digital asset company, right, or you're a foreign bank, not so easy to get a bank account in The United States. And really that all centered around the fact that the money center banks, the JPMorgan, Wells Fargo, Bank of America are the ones that really control that. And there was kind of this idea of the great debanking. We heard of choke point one point o. We heard of choke point two point o.

Well, choke point one point o was really about fifteen years ago when all of the large money center banks debanked a lot of these foreign banks. And so you United States Bank really specializes in for the past ten years. As I mentioned, we're a 40 old bank based out of Dallas. But for the past ten years, we've been banking foreign banks. And that really, over the past seven years, got us into banking crypto companies. Crypto companies that are either domestically based or foreign crypto companies.

As you said, a lot of the a lot of the, customers

are here, at the conference today. Yeah. Yeah. So we're here and again, we're here live in Mexico City at Stablecoin Conference powered by Bitso Business. Let's just dive into specifically today's news. I think this is like a very pivotal moment for the business. Tell us a bit about what this unlocks for for you all and the specific, like, you know, what what happens now? What is now possible that you go from state to federal? What does that mean? It's a it's a great question, Drew.

The the biggest component is the consolidation

of regulation. And that's, I think you can't you can't really say too much about that without actually talking in terms of how this ecosystem works. The ecosystem is effectively powered by the banking system at the end of the day, right? Because at the end of the day, you still have to have an on off ramp into US dollars. Now certainly, all of us that are here today, all of the people that are at the Stablecoin conference talking about Stablecoin and the opportunities that lie to be outside of the banking system.

But even a Stablecoin itself is backed by some kind of a fiat currency. It's either backed by US treasury. It's backed by the US dollar. If it's in a foreign country, may be backed by their foreign currency, like the peso, let's and so what this changeover from us from a state charter bank to a national bank is that this the the smaller regulatory bodies of each of these states have less of an understanding of how global money movement works.

And so us being a 40 year old bank in Dallas, Texas, the regulating body that we had from the state was very much focused on us being a community bank in Dallas, Texas, not necessarily serving a global infrastructure business or certainly the money movement business. So in an example, we move $10,000,000,000 a month of US dollar clearing. Citibank, who is a money center bank, moves $1,200,000,000,000 a day. Right? And so these numbers are pretty big. Yeah.

And so but what the advent of digital assets, money movement, stablecoin allows, the advent of us moving from state charter to federal, really gives us the consolidation underneath the OCC, which is part of the US Department of Treasury. Yeah. And the largest money banks, money center banks in The United States, like a Bank of America, for example, is regulated by the OCC, US Department of Treasury. So we used to be the only fish in the state of Texas

Department of Banking Pond. Now we're a small fish in a much bigger pond. Yeah. But we like the company that we have with these money center banks. Yeah. There's been a lot of focus on the banking conversation in the last six months. It seems like this you know, you have new entrants coming into this conversation. You have the companies recently who have also just been very focused on serving crypto companies with with banking products.

But you guys really seem to stand out in terms of the history that you have and the the perspective that I'm sure that comes with. What what advantage do you see the the to be bringing to the to the conversation given the history you have and maybe some of your personal background? I think you mentioned you were at the OCC for a a stent. Like, what what what advantage does that give you guys? So so the biggest advantage is actually just doing the business.

Really being a foreign correspondent bank and watching how money movement and and being that facilitator of money movement for foreign financial institutions. And and that's that's probably the biggest advantage. Another big advantage is the money center banks, these large banks like a Bank of America or JPMorgan or Citibank, they're the only ones that have the compliance platforms and the scale to be able to move these dollars at scale, a trillion dollars a day. And why?

Because they built their technology from the ground up. And so the of the 4,300 banks in The United States, all of them, but a few, rent their technology from, like, a Jack Henry or a Fiserv or an FIS. We've built our technology from the ground up because we had to. There was no technology to rent. Jack Henry, Fiserv, and FIS do not have a compliance platform for foreign correspondent banking. And so what we announced two weeks ago was really the the backbone of what United Texas Bank has.

So it's compliance first, which is our UTB Prism Sentinel platform, which is really the ability to watch what's going on as that money is moving. That is what you need in order to be compliant under US banking regulation. The second piece of that is our UTB atomic network, which I'm proud to say is now live, and we have the ability to do 24 by seven real time settlement of fiat.

So for those that are listening today that have that were around, you know, pre COVID, pre Silicon Valley Bank Signature and Silverbank going up or under, there used to be two real time settlement networks that existed, Signet and SEN. So the Silvergate Exchange Network and and the and the signatures group Oh, as well. RIP. Yep. RIP. That is what UTB Atomic is. And so UTB Atomic is this real time settlement platform, which really

can provide that backbone for stablecoin on off ramping. Yeah. That's really big. How do you compare and contrast the structure of those two, like, previous examples that didn't work or or had, you know, existential struggles. How do you compare that to how you're building this system and, you know, hope building a successful outcome that doesn't end in that in that outcome?

So to be clear, Signature, Silicon Valley Bank, and Silvergate didn't fail because of their digital asset components or their real time settlement network. The real time settlement network was actually fairly innovative and strong. It was very well adopted. Yeah. Very well adopted. People loved it. People people were relying on it. Like, builders loved it. Developers loved it. What what didn't work? What actually happened?

So what happened to them is is that they forgot banking one zero one, which is don't mismatch your assets and liabilities. So when you're in this settlement business, the deposits that you have in the bank are your customer's operating cash. And so a bank takes in deposits and then lends it out. Well, if you mismatch the timing between when that customer needs their money back and how long you just lent the money out for, you have a problem. Yeah. And so that's banking one zero one.

And so at United Texas Bank, since the very beginning, and you asked about my history, I've actually been in the digital asset business for thirteen years. So I have a background in computer science and a master's in accounting. I actually grew a fascination thirteen years ago with digital asset mining. So I've started building my own mining race, which means I've been through seven or eight crypto winters. We're in one right now. Yes. Right?

And so I knew that when we started in the digital asset business seven years ago, so I was unwilling to lend out any money that we have of our clients that is actually for operating. Okay. And so so this business we're talking about about settlement, that is that is the key differentiator between why remember, we were doing this when those banks failed. Right? We didn't fail because we weren't mismatching our assets and liabilities. Okay. So we've we've seen the we've seen the story unfold before.

We're not going to make the mistake that that they made. We didn't make the mistake. We were doing it back then and didn't make that mistake then, and we'll continue to, you know, advance that ball. From a tech stack perspective, the real time settlement network, UTB Atomic, that's what everybody's gonna be settling on. Okay.

Talk a little bit about the just to really help people understand maybe maybe companies who would be wanting to partner with you or understand how you can unlock these types of functionalities. Might be helpful to share a real use case or case study of, like, maybe someone in the room right now or someone who's worked with you all in this way. Could you walk through, you know, maybe maybe an existing example

that could be helpful? Can't talk about our existing customers, right, because because we are a bank. But I can give you an example of of the type of customer. So you take an exchange. I guess you could talk about Abitzo. I'm not gonna you know, because, obviously, we're here at this conference. We work with Abitzo. But they're they are not a US dollar clearer in the traditional sense of what I'm going to describe because their customers are all non US based customers.

So you take other exchanges, right, who have customers that are US based, and those customers have digital assets on their exchange. They sell their digital asset. They have cash now, and they want their cash in their own bank account. Well, that exchange needs a bank account at a bank like us so that they can do an ACH or a wire to that customer to give them their cash. And so that's the type of customer we have. We have exchanges. We have OTC desks. We have market makers. We have DAOs. We have mining companies.

All those types of companies have some type of treasury management that they need. And what really UTB wants to be and what we have built is the value arbiter treasury management bank. So it does not matter what type of value you have as as a customer of United Texas Bank, whether you have fiat, US dollars, or some type of foreign currency, whether you have a digital asset, Bitcoin or Ethereum, whether you have a stablecoin, USD, c, PYUSD, RLUSD, or a real world asset, you should be able to give that to us.

We can either store it for you. We could convert it for you, and then should we should be able to send that out, whether that be ACH, wire, SWIFT, stablecoin, RTP, FedNow. So that is the place that we want to be. We wanna be that b two b treasury management bank for this ecosystem. Amazing. So I imagine in that you're interfacing often with executives,

key leaders from those types of clients who are either currently working with you or coming to you and asking, you know, how could how could this type of system apply to our business? We at StableDash, I think we have a a pretty deep listener base of operators who are actively trying to implement and improve either their existing systems or get on on base for the first time. What are some themes that you actually hear from those executives or operators who are coming in?

Like common, common maybe pitfalls you see them making or common themes right now of what you're hearing in the market that they're caring about that you could help the operator right now who's trying to solve this? Like what do you, what advice would you give them?

So the first advice I'd give them is keep building, right? Keep building, keep doing innovative things. What you need is an innovative institution that can build with you. And so what we built is a very extensible API set that those builders can connect into. And that's the biggest pitfall that these builders have is that they take something innovative that they have and they're trying to adapt it to the bank because the banking environment in The United States is very rigid, right?

What we've done is we built an API layer on top of our core, so our customers can connect directly into that. And so we're bringing banking to them as opposed to them having to come to us and say, how are they going to change their product to fit in with the bank?

Would you say, I mean, you mentioned choke point one and choke point two, would you say we're in the most optimistic time for banking in terms of digital assets right now? Does it feel like that in your position? Not only feels like that, it absolutely is that, right? So

we talked about it earlier. I know Daniel, the CEO of BITSO at this BITSO conference was talking earlier today to members at the White House on stage. And, you know, that was what they were talking about is the Stablecoin Act, right, which ultimately passed. And now we're waiting for the Clarity Act. That's that is kind of the the underpinning of how every the rules of engagement basically. And so it's absolutely optimistic right now.

I think whether or not the Stablecoin Act gets passed, whether or not it gets passed in one shape or another, this is certainly the best time ever to be in finance and it's certainly the most exciting. And I think the other piece that we didn't even touch on is the advent of artificial intelligence and how AI is really being brought into the forefront in terms of optimizing what's happening within banking. Yeah. And so we've embedded AI both into our UTB atomic and to our prism system.

And so the ability to bank an ever increasing amount of foreign financial institutions and groups, just corporates that need to move money in foreign countries with US dollars,

it becomes that much easier if you know how to use the AI tools. Yeah. And that's what we're doing. Yeah. Yeah. Compliance from my seat, we're seeing a lot of like AI overlap with compliance specifically. Is that where like a core pillar that you're seeing that that takes shape? A 100%

for for far too often. And it really goes by need of necessity. You have to have thousands of people inside of a Bank of America in order to actually have a compliant program. Right? But a lot of that is because you just it's such a volume of data, let's say, in Citibank with a trillion dollars a day coming through. How can anyone or any thousands of people be expected to see what's happening with all of that data?

But with machine learning, that's where that had a tectonic shift, And then this is the next stage with artificial and general intelligence. I should say artificial intelligence. We certainly don't have artificial general intelligence yet. At least we don't think. Although Anthropic just had to pull two things off the shelf, so I don't know where the what what happened with that. But ultimately that's kind of the next phase. That is what's happening now.

And to your point, Drew, the compliance, if you have a compliance first mindset,

really great things I think can happen in this environment for digital assets. Yeah. The the the there seems to be a really big, like, powerful cost center of that what that typically has looked like compared to the the new version of savings that a system using this will implement. So I'm excited to see more of that. I guess question question for you around the stack. You it sounds like you've built and owned and you spent a lot of time actually architecting these core systems internally.

Are you able to speak a little bit about the core, like, one of the one of the key sponsors, for example, for StableDash is a company called Defense, and they do, like, core banking infrastructure for wallets. And, like, you know, similar to Fireblocks and some of these other companies, like, really focused on, like, the the tech technology layer of account provisioning security. Like, are you guys working with folks like that or or people in that position?

Or is it actually truly a lot of this is getting built in house by your teams? More of the the question behind the question is, like, are there certain companies that you've been working with under the hood to help make some of this happen, or where does that start and stop in terms of the the bank specifically? So from a bank perspective, most of what we're doing has been on on the fiat side supporting the digital asset businesses.

Okay. And so from a digital digital infrastructure perspective, we've had to interoperate with many of the names that you just said. Right? So you take a Fireblocks, for example. Fireblocks has a great program for inter interoperability Mhmm. Called their network link system, whereby a financial institution can connect into there so you can be on Fireblocks One dashboard and connect into, let's say, United Texas Bank. Interesting. Right. So so these are the types of things that we're looking at.

I think that, you know, we're really pushing the envelope with a lot of these startup companies that are supporting banks to be in digital assets. And the banks themselves are struggling with how do they want to be in the business for themselves. They're not necessarily doing what we're doing, which is supporting foreign correspondent banks and supporting the digital asset ecosystem.

Most of these banks that we're talking about thinking of going into the business are supporting their customers to access digital assets. And so I think that's kind of the disconnect. I mean, I think there will be a convergence where that happens. Right now it's happening much more of digital asset provider to digital asset provider, an exchange to an OTC desk, a market maker to an exchange. This is where the connectivity is. This is where the settlement is.

And then like I said, I mean, we're very big into foreign correspondent banking also. So that has to do a lot with money movement. Again, Bitso was talking about that, the corridor between The United States and Latin America. How do you move money back and forth? Well, it's great if you use stablecoin, but once you move the stablecoin cross border, somebody still wants a peso. And when it goes the other direction, somebody might still want that US dollar.

So deeply embedding stablecoin also then into the actual payment utilities, you've seen some things happening with Bridge or Visa or Mastercard, where you could actually swipe and use a stablecoin. When the digital infrastructure actually evaporates from the consumer seeing it, that's when you have parity. And the best way I can describe that is if we go way back and we think about HTTP, right, the Internet, you don't know that HTTP or the underlying technology that's powering that is what's running FaceTime.

You just get on your iPhone and FaceTime works. Right? And so that's what needs to happen. It's happening more and more. It used to be really difficult thirteen years ago to spin up a wallet and actually move your keys and move move your Fiat back and forth. Now there's lots of companies that can help you do that. And to a consumer, the consumers want it easy. They want it to just work. And so I think that's what's so exciting to me is what we see happening.

And as a bank, we want to help support these innovators with their treasury management so that they can continue to do that. Sure.

Last question for me, you've spent a lot of time as a technologist, you've seen these types of, I would say, advances and trends and rises and falls throughout, I'm sure, your career. When you look at the buzz of this room and the kind of stable coin hype cycle that we find ourselves in, even though from a like, you mentioned, like the price token token wise, price wise, it is suppressed, but like it does feel like there's a ton of capital coming into startups in this space, things like that. Yes.

What what do you see as like parts of this conversation that are extremely valuable that like maybe companies and use cases that you see as just like obviously not going anywhere versus, hey, this kind of reminds me of like 2001 or like .com bubble stuff. Like, are there any, like, from your perspective, seeing everything you're seeing things that seem like obvious wins versus, hey, maybe I don't know about this, but this kind of seems a little overhyped right now. Well, look, I think I think you're seeing

really some of the larger bellwether companies you keep coming back to a Fireblocks. I mean, are some companies that are the Amazon of digital assets, right? You need some type of an infrastructure wallet system. Fireblocks is clearly looking like they're going to be one of the winners, right? There's other areas like stablecoin, right? There's a lot of groups saying we're going to do the next great stablecoin, but there aren't going to be umpteen gazillion stablecoins that are out there at the end of the day.

So the groups that are coming in and maybe the architectural layer that's actually supporting the stablecoin that too. Every new company is saying, we've got the greatest secret sauce related to how to manage your stablecoins. There's hundreds and hundreds of those startups now. Ultimately, there will only be a few, right. And so I think as you see this, the market landscape continue to evolve, that'll continue to happen. And go back to the Amazon example, right?

Everybody was a .com during the .com boom, the .com bust and some great things came out of that. Yeah.

Scott, this was really fun. Awesome. Thank the conversation. We're gonna be having many more conversations around the just everything that's going around banking innovation around that space, digital assets, traditional companies coming into that, continuing to innovate new companies that are building applications and neo banks coming into this. So we'll continue following this on neo powered by Dakota. Well, we're gonna take a quick break and we'll see you again shortly. Thanks for watching StableDash live.

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