# Brazil's 350 basis point outflow tax made stablecoins a regulatory arbitrage play

Research, a Stabledash show. Aug 11, 2026. David Taylor.
https://live.stabledash.com/shows/research/episodes/david-taylor-and-borja-neira-on-brazils-caps-dollarization-kMb8zVZ3c3E

Brazil's tax on money leaving the country drove the stablecoin boom, and now its regulators are adding caps. The guests argue that local currency assets need real reasons to hold them if they are to compete with the dollar.

Brazil's IOF tax costs 350 basis points on dollars moved out of the country through traditional rails, Drew Rogers said in a conversation with David Taylor of Etherfuse and Borja Neira of Tempo. Sending the same money as stablecoins avoids the tax completely, which Rogers calls a regulatory arbitrage.

## Why Brazil, not Mexico

Drew Rogers says Brazil's stablecoin volumes have been exploding for the last four years, with startups and capital following. Mexico has seen much less of that, he says, because its remittance channel is already very efficient. In his view traditional finance works well for large transfers but badly for individuals, who can end up paying as much as 700 bips in fees.

## Caps and holds

Brazil has responded. Drew Rogers cites a $10,000 cap on transaction size and caps of $25,000 on volumes for virtual asset service providers, and David Taylor points to the central bank's plan for twenty-four hour holds on large dollar stablecoin transfers. Rogers traces this kind of thinking to Europe's MiCA, which put transaction limits on stablecoins not denominated in euros, and calls Brazil the first non-Western country to seriously try to level the playing field.

## The central bank's dilemma

Borja Neira says the individual can benefit from access to dollar stablecoins, but asks what happens to the economy as a whole. Europe is pushing to launch CBDCs as soon as possible, he says, while emerging market banks often lack a good core banking system. They must choose between supporting stablecoin issuance and alternatives such as CBDCs, and smaller banks would rather trust JPMorgan than a stablecoin.

## Giving local currency a reason

Drew Rogers says that when people can hold any asset, they choose the safest one. Etherfuse's answer is sovereign debt, which gives people an incentive to hold local currency instead of dollars. David Taylor says he built the company on the idea that local currency worth holding makes on and off ramps good for the local economy. Rogers says lending in USDT or USDC puts a burden on local borrowers, and that large exchanges are already holding Etherfuse assets offshore as collateral.

Drew Rogers expects growth to start wherever people have an incentive to get around traditional finance, naming Russia, China and the Middle East. He sees no one building a sophisticated solution for local currency stablecoins. He hints at a big announcement with a large institution and names Etherfuse as a design partner for Barrel's ION protocol. David Taylor expects a pilot that pays gas in a local currency stablecoin.

## Key takeaways

1. Drew Rogers says Brazil's IOF tax charges 350 basis points on money leaving through traditional rails, and that stablecoins avoid it entirely.
2. Borja Neira warns that broad access to dollar stablecoins helps individuals but raises the question of what happens to the economy as a collective.
3. Drew Rogers says Etherfuse offers tokenized sovereign debt as an incentive to hold local currency and expects collateral to be the first step toward wider non-dollar use.

## Chapters

- 0:00 Brazil's stablecoin caps show countries defending against capital flight
- 2:17 Brazil's 350 bps IOF tax made stablecoins a regulatory arbitrage
- 7:17 Currency is a bundle, and local corridors need dealer incentives
- 11:19 Broad dollar stablecoin access weakens central banks' monetary policy
- 14:54 Local sovereign debt can give people a reason to skip dollars
- 16:59 Crypto pays institutions while individuals and DAOs supply the activity
- 20:51 Central banks must choose between supporting stablecoins and CBDCs
- 24:00 Organic incentives last, while get-rich incentives draw short-term liquidity
- 30:00 Collateral is Etherfuse's main use case for local currency assets
- 35:22 Blockchains cannot survive on transaction fees alone
- 40:01 Barrel's ION protocol could merge fragmented cross-chain liquidity

## Transcript

**Drew Rogers** (0:03)

Afternoon..

**Zach Fowler** (0:16)

Mark, welcome to the party, David Borja. How are guys doing? Good. Good to see you guys. The...

**Drew Rogers** (0:23)

I think the impetus of this meeting is so stale now. So much has happened, but a lot of this, I think, topic is still, like, super relevant. So good to see you guys, but it just shows you how fast things move. What what about it would you say is not relevant now, or is it just... Is there more clarity coming? What's the latest? I I would say the idea that... I mean, I think to con... To frame the context for everybody else, I think one of the discussions we started with was Brazil had capped BaaS.

Transaction size was at $10,000. And I think if you're kind of paying attention, you kinda recognize this stuff was gonna happen. So... And so since then, it's just like a lot of the world's who's... I think at the time, it was somewhat of a surprise. You know? Like, but I think we're starting to see a a little more defensive nature coming from different economies. I'd say, actually, Europe was one of the first with MICA to to start thinking in this way.

But, yeah, it just seems like everyone's accepted the new norm that local countries are gonna have some antibodies to

**David Taylor** (1:34)

capital flight and and making sure that routes through their proper channels. Yeah. I was I was briefly mentioning this with our with our last guest that this was kind of the the inspiration for for this segment here where we were talking about, like I said, Brazil Central Bank wanting to put twenty four hour holds on the large dollar stablecoin transfers. You had this comment here, and then Borja came in. I'm really... I mean, Borja, maybe I'll let you unpack here. Really start diving into what are you...

Well, you know, what are you agreeing with with with what Dave had to say about, you know, the Brazilian real and and local currency flows with... Versus versus dollar flows? Borj is not meeting there. Like, he can He might be getting Well,

**Drew Rogers** (2:17)

maybe in the meantime, I can give some more context between Brazil, but feel free to interrupt me, Jorge, anytime. So we have the the the awesome opportunity to be working in many different countries, especially Latin America. So we get to see the context of these two different countries quite a bit. So, like, Brazil has been exploding the last, I would say, four years with stablecoin volumes. And we're also in Mexico, which has been a lot less, I would say, of an explosion.

And when I talk about explosion, not volumes, but I mean, like, startups, I would say, capital allocation into these countries. And so why... What's the difference? You know? What has... Why are some places taking off and some aren't? Well, I think in this case, it highlights the fact that stablecoins were a regulatory arbitrage or... So to speak in Brazil. Brazil has this tax. It's the IOF tax, and it's it's actually 350 bips.

So when you want to repatriate money from Brazil and traditional Rails, you can move it out, but you have to pay 350 bips. So if you're a if you're a corporation, if you're a, like, a company, saving 350 bips by doing it a different way is, like, a huge incentive. And so we've seen a lot of these smaller companies gain a lot of traction in Brazil because there's this huge opportunity where if you use Sablecoins to move that money out of Brazil, you completely avoid that tax. That doesn't exist in Mexico. You know?

So in Mexico, the the channel of... The remittance channel to move money in and out is super efficient. Right? So the growth in stablecoin volumes is considerable, but it's not been like it has been in Brazil where you have, like, 20 companies getting billion dollar evaluations because they're moving high volumes.

And so there's two things that I think we foresee as EtherFuse is one, Stablecoins has done awesome by creating competition against traditional finance so that traditional finance now has to regress towards the mean or improve their services. Right? But TradFi is actually really good at sending money in large volumes. So, like, when we talk about sending large volumes across borders, TradFi is actually really good.

It's really bad when you're just a person who wants to send money to your immigrant grandmother or something like that. Like, there's so many people in the way between you and the p two p solution that you get up to, like, 700 bips in fees because you just don't have any, like, I'd say, representation. You know? But if you're a big bank or if you're, like, Meta or if you're, like, Hyundai or... You know? Like, you have good means to move money quickly.

So the second is this growth of foreign currencies and stablecoins is predominantly in the dollar. And so every country is gonna have a history of fighting against a local sovereignty predominantly dependent on a foreign dollar. And the first kinda, like, insight that people think like this, especially with stablecoin, was MICA, which put tariffs on non European denominated stablecoins, like transaction limits and things like that.

So I think Brazil is the first time a non Western country really put, like, hard thought into how do we level the playing field, so to speak, for stablecoins who have the same, I would say, tax implications as as traditional finance, and I think that's what we're starting to see. So when we see caps on users, you know, I think that... Or the caps on volumes of $25,000 for VAS. VAS is not a bit. Right? It's just they can move virtual assets. I think what they're saying is, hey.

Big players are starting to use stablecoins to move money out of Brazil just to avoid this 350 bit fee. We have to stop that. But we don't wanna squash growth for, like, wallets and things like that. So it would make sense that there's this limit. Now do I like that? Of course not. I don't like it. You know?

But to me, it just seems like the world is assuming that we're gonna have this dollar denominated growth that is, I would say, anti local in a sense that it it it creates some dependency on foreign assets and that there will always be these loopholes that traditional finance doesn't get to benefit from. And I think we're starting to see, because of the rapid growth in Brazil compared to other countries, them moving a little bit quicker. They probably see it, you know, in their balance sheet.

They probably see these problems happening where, like, dang. I don't know. You could look at the announcements, but, like, big companies are starting to use stable coins to move money. And that if if if those companies benefit by avoiding 350 bp tax on remittances, then that will continue to grow. So what does Brazil do? You know? But that's the context. I mean Dave just gave us the master class.

**David Taylor** (7:17)

You're back now. I don't know how much you heard of what he was saying, but I... I'm even just, like, reading through your tweet right now. And, like, one line that really stands out to me is, like, you said, we need to find a balance between transactional dollarization and portfolio dollarization, which is act... Exactly why central banks find themselves in such a tough spot.

So it's all well and good to build better off ramps that allow the global population to escape local currencies, but that approach is entirely rooted in the biases of our current financial system. Help us break down, like, what are these biases that exist in the current financial system, and, like, where do we where do we begin, like, restructuring this? What is what is the next form factor for the financial system? So first, thanks for having me again. Dave, nice to see you again.

**Borja Neira** (8:05)

And I agree with you. Right? I mean, I've been listening, and the problem with money is not moving large amounts is... Than when you're an individual. And, obviously, a stablecoin is a good solution for individuals. But if we think as a collective, I kinda get what the central banks are doing because the currency is not only one thing, but it's a bundle of things. So one thing that the stablecoins have is basically that they skip that banking... Local banking part, and that is so important for individual.

But it can turn in something that can be dangerous for the central bank and their way to... We can... We we can understand banks. Central banks are the as the ones that send the message to the commercial banks, and the commercial banks send the message to the to the individuals. Right? So in this case, I think we are being biased because we think that we need to rely on a global currency. In this case, obviously, we need the dollar to be the global currency. I... I'm not saying that it's not gonna be like that.

But what I am saying is that why we are not thinking about with this with this just in time liquidity model that we have in Onchain, why we don't think about ways in which we can incentivize dealers to try to serve those corridors? So I can continue if you want, but I I was It's So I'm I'm thinking about this work incentivizing dealers for the... For these corridors. So there there is a common misconception about how large stablecoin... Local stablecoin has to be in order to serve a corridor.

Normally, people think that they have to compete against the dollar, so they have to gain the market share that they have on the... With the fiat counterpart in this case. But in reality, what we need is that the payments are... The bilateral flow of payments are basically we we have to increase the velocity of those in order for the dealer not to have this stock, and they don't hedge the... They don't have to hedge their their inventory. So we don't have... We we have to find ways.

One way could be the solution, which is basically providing it to them. There is two two kind of deals. The first one is directly from the issuer, so it could be, like, distribution from a from a Stablecoin perspective, and the other one could be via... Directly to to the individuals in this case. So you have to basically bet on one of those in this case. So

**Zach Fowler** (10:28)

Dave is...

**Drew Rogers** (10:29)

Quick pause. Dave is shaking his head. What what do you what do you think about this? Oh, no. I mean, glad to hear. Nodding nodding your head is what I mean. You... How how are you... What is your perspective on this? One thing I like about Borg, he's he's way smarter than me, and he's... He articulates things way better. You know? That's so awesome. About him. We all like that. I'm like I'm like blue collar crypto, if that makes sense. Like, I'm building stuff, and he's he's like sophisticated ivory tower crypto.

But but, yeah, I mean, I I would say I completely agree, and it's great because I founded my whole company on that principle that if we create some blue card... Yeah. I like that. Some some value in the local currency worth holding, it it creates some meaningful way to enable on and off ramps and and also do it in a way that's beneficial for the local economy. And... But there's still more to do. But, yes, I completely agree. If we want to be crypto, we can understand

**Borja Neira** (11:25)

currencies as tokens. L one tokens could be. No? It could be an analogy there. I think there is some some research about it. So when you think about multiple tokens that we have on chain right now, a lot of them are basically completely destroyed because of the incentive. And in reality, it's like we can understand the the the governments as a central bank, and we can understand the the the inflation.

We can understand, for example, when when you have to use the token, what is the incentive around it to to to hold it, basically. So if we think about from... With the grid to heart, the power currencies is not only one thing. It's not the transactional part. We have to understand why people want dollars in the first place. So we have to understand why people want dollars in the first place, and we also need to understand the macro perspective.

So one individual can hold dollars is very accessible via a single coins. In reality, in this case, wealthy people, high net worth individuals in in these emerging countries, they also... They already has... Have access to banking rails to have dollars. They've done banking US dollars accounts and and and and and so on. So when you think that you open the door to individuals that are not that wealthy to have US denominated stablecoins, even that you have the issuer risk, of course, and you need a a good legal...

Well structured legal entity around the stablecoin in order to not hold the risk. But when you think about it, you you basically... I mean, I can be the Robin Cook here. Of course, the individual can have access can have access to US denominated stablecoins. But when you think as a collective, what happened to your economy? If you are able to... Everyone to access those those rails, US dollars, in this case, what happened to your central bank that cannot transfer the monetary policy?

And probably people are gonna say, okay. You are coming from Europe, and you cannot complain. You have the euro. Yeah. Probably the euro is one of the biggest... I mean, our approach in Europe is full CBDCs, as you can see. We have Key Valleys that is issuing the the US civil coin for banks, bank consulting, and so on. But the the... We are focusing on CBDCs, so having CBDCs as soon as possible. Right? The problem is in the middle, you have innovation. So you have to be careful because the market is gonna decide.

You can put the walls, but the market is gonna decide what happens with the with the with the reality of some... Of transactions. So if you are not able to incentivize your your currency, in this case, the euro on chain, probably what will happen is... What would happen is that people wanna prefer to use cross currency swaps in order to hedge their position in in euros, to have dollars, and buy tokenized products that are denominated in dollars. So it's not about Europe.

It's just in this privileged position of we have the euros, so we we cannot complain our... Of our payment network. That is completely true, but things are changing. And the ones I can I can tell you that in emerging markets like Latin America, they have very well developed payment solutions and payment networks that are probably better than the European ones? So this is not something that we have to complain about or not. It's something that everything is changing, and we have to we have to be careful.

So Dave Dave, would you concur with the kind of LatAm focused payment corridors, rails, how they function versus

**Drew Rogers** (14:54)

Europe? Yeah. I mean... And to give you my blue collar interpretation... Crypto interpretation, just a simple format is... Yeah. In LatAm, rails are actually better than they are in The States, which, you know, Europe, they're they're quicker. They're faster. They're real time. There's all these, like, SLAs. So... But like, you know, like mentioned, people when given access to hold any asset are gonna prefer the safest asset. So right now, we're seeing... I mean, coming back to Brazil.

I also wanna talk about the chaos of where we're at with crypto too to to... After this. But right now, we're seeing a lot of people restricting the growth in different ways. Like, Brazil has said, hey. Okay. Not... Nothing over $25,000 per person per day, and that's like a restriction. But I also think there should be a a fire burning on the other ends on how do you incentivize local products that benefit the local country to compete. And I think what, you know, Borja said was, hey.

You need to create some incentive to hold it that compensates you for not holding the dollar. Our solution is, you know, sovereign debt, which is highly sophisticated central banks and treasuries coming up with incentives to to convince you to hold their debt instead of the dollar. And in in general, they're required to outcompete performance of the dollar through their yield to get you to even do it in the first place.

I don't think we're seeing enough of the local economies think like that this is actually an emergency for them, you know, and that they need to support and and provide solutions that incentivize local development of these things. So right now, people are using the dollar, let's say, Brazil to to circumvent this this huge tax. Okay. So what are we doing to to tell those entrepreneurs what they can build that creates an alternative solution now that the competition is there?

So that is, I think, my my layman's translation of of everything we're kinda talking about. I also like... You know, not not to segue, but I just think the current state of crypto is so weird with You used the word chaos. What what do you mean? Well, I don't know if you guys saw the latest report from Arrakis, which was... I thought it was so fascinating. So they went down and said Arrakis sees all the words. How do you spell this? A r r a k I s. And then if if you just look right now at...

This is, like, who is holding RWAs. So I wanna talk about this contention, which is between retail and institutions. And I think what we've said is, really, crypto can unlock a lot of value for retail, but traditional finance already serves institutions pretty well. And so... And crypto can probably not even compete. Like, one... We had a big project where someone wanted to move $400,000,000 in a day out of Brazil. Right? So can crypto compete with TradFi? Not really. You know?

It is a lot harder to tokenize an asset, move it over, have liquidity. But but you could if you split that out over. Give? Yes. Yes. Okay. Cool. So what I'm trying to say, what is interesting is the world's crypto's main benefit forever will always be serving trade sizes 95% of all trades, which is under a certain size and and and under a certain, like, I would say, execution time frame. And primarily, the benefit comes to retail. But if you look, the crypto... The ecosystem is almost paying institution...

Institutions to onboard into crypto. These people who don't even need it. Right? They don't... So if you look, I think Solana just announced that Morgan Stanley is a validator. Canon everyday is announcing a a big billion dollar company is now a super validator. So these are companies now making money off of crypto transaction. And why are they doing that?

Because they believe, you know, that all this volume, how we look at things, we look at the value of crypto is volume, you know, and and size and TVL, where if you look at if you look at this report, almost none of these institutions bring any activity, like, period. Most activity and most TVL, I think it was 80 is individuals and DAOs. So crypto native, like, ecosystem. So it's like, what do we have this? We have this, like, very confused minds. Yeah. Here. Like... Yeah. So so where is all the TVL coming from?

It's from crypto native things. Right? But if you look, we're all trying to onboard institutions to the point where we're we're paying them, you know, to... Hey. Come come run a validator. We'll set it up for you. You know what I mean? They're not running... I'm telling you right now, they're not running the validator. You know? And so I just think there's this huge dichotomy. This is... I'm kinda out there right now, but it all kind of makes sense in the sense that, like, central banks have to worry.

What's going on? We're subverting a lot of things here. They're also at the same time not really incentivizing real solutions locally because everyone's scared of yield, which is... Needs to happen to have things grow locally. And then the crypto ecosystem has decided that institutions are the way forward, but there is no evidence that these institutions add any value other than potentially for a short term providing a bunch of liquidity that just sits there idly and is held by four walls.

And so I think we have to... There's gotta be a there's gonna be a huge reckoning coming up here pretty soon where these big numbers that we're seeing that justify raises and rounds are kind of just, like, you know, non... Just incorrect ways that crypto's gonna move forward. So,

**David Taylor** (20:51)

anyways, a lot there. I don't know that it's worth stock there. We gotta let Bora chime in on this. What do you think? I I I saw when you said something, like, people need to stop being scared of yield. He gave a little a little null at what he asking. I

**Borja Neira** (21:04)

mean, I completely agree. I think that that this is happening because we are trying to find the product market fit yet. I think treasury side could be one of the product market fits that are clearly in this case for as much as stablecoin can grow, treasury are needed in order to to... As Dave said, we we need to deal on those, especially on local currencies because you have to be incentivized. I think it's everything about the incentives. You know? It's not only that at a scale. Probably at a scale, if we put...

Is the chicken egg problem. You know? Like, at a scale, if we have these products and everything is... So imagine the two walls completed to each other with the same conditions, same volume, same transactions, so on. Blockchain and DLT solutions are probably there. We don't know yet, but probably there. But from my perspective here, we are changing standards. So probably, I was I was talking to to a to a repo or repo market guy, and he was telling me, like, okay.

In in in blockchain, you have this intraday repo for our repo. Makes sense because when I put my asset as collateral, I don't want to pay interest overnight. Why? If I am using the asset instantly, I would probably prefer just to pay the year... The interest only for the time that I'm using the asset. Right? But the problem with that is all the models, risk models around the the repo are based on overnight. So when you're trying to change that for our... For four hours, intraday repo, may... Maybe it could be...

Like, you can see that as better products. Right? But the price that you have to change the behavior of the market. The same is happening with central banks. So they have to decide which approach do they want to follow. We support a stablecoins, but that can affect the... Our wide banking system. And, probably, we don't have a good banking system yet. So we are trying to build that. I have...

I've been speaking with different emerging market banks, and they are not even at that point of having a a great core banking system. So you're asking them to introduce this innovation that is probably affecting the balance sheet, affecting the risk. So it's it's quite hard for them, especially for the central bank that are trying to just send some message to to people. Right? So I think that they they have to choose the path.

So support stablecoins, issuance, or go with the other way that could be, like, token as the policy, CDCs, and other solutions that could be there. And, yeah, as a small bank, you can you can say, okay. For me, it's better to trust JPMorgan than to trust some stablecoin. I prefer to be in this closed loop network because I I cannot see the clear incentives. So maybe in the future, can see the incentives, but I will join the wave when when the times come. So you don't need to...

In this case, you don't need to innovate. You just have to be there and in the right moment join the wave. But others are trying to innovate. Right? So I think it's all about incentives.

**Zach Fowler** (24:00)

Incentives are... It's it's an interesting thing to actually think about because you can incentivize someone to do something, and if the incentive is good enough... This, Dave, is... I'm trying to kinda tie these points together a little bit. If you incentivize someone well enough, they will do something that they don't really want to or or feel pain around. Yeah. And I...

It sounds like that maybe, Dave, in your view, what is happening, where, like, we are seeing activity, things that look bullish, launches, partnerships, big things on the timeline. Because maybe the incentives are there for them to do that or lean in, but that's actually not something that's, you know, Mike... We were talking with Mike from Morse, and Dave, he wants to talk to you about some stuff. He asked to be introed over email. We asked, do you wanna ask Dave Taylor anything? He's like, no.

Just put me in an email thread. We need to talk. So I'm like, okay. Cool. But something Dee said that he really believes truly and, like, genuinely know he feels this way is, like, just build valuable things that people need. And, like, if that's happening, you don't really need to incentivize people to to use something if it's really, like, you know, cause... Solving a pain. Zach, do you have any any thoughts? I'm confused. See if I'm wrong. Yeah. Yeah. I'm opening your fingers. So

**Borja Neira** (25:18)

I was thinking about organic incentives. No. In this case, this kind of incentives that we are used to in crypto. I mean, the product could be the best in this case. It could be better than the ones that you're using, but you don't have to even have incentives in order to innovate. You're gonna stay as as as you know. Even if you know that you have a hidden cost or whatever because you prefer that safe position that that to innovate in this case. It's just fine.

From my point of view, finding the product market fit is finding also the right organic incentives in order for people to use your product, not only to incentivize

**David Taylor** (25:54)

them using your, for example, your token or whatever. It could be another possibility, but not the way that I'm thinking. I know I was gonna ask Dave this because, like, you know, I'm also... I'm thinking through, like, the the blast l two. Right? I think that's, a perfect example in our crypto sphere of, like, a network running a massive incentive program attracts all this liquidity, and they came for all the wrong reasons, and they just leave like that.

And so how do we not have that happen with maybe even when it comes to, like, Dave, launching a foreign current... Launching a local currency stablecoin, bringing your debt on chain. Like, what are those pain points? What are the right incentives that may not even be monetary that says, hey. We're gonna go through like you did with Kazakhstan to say, hey. We're gonna bring you on chain. Sorry. I got someone else now. Well,

**Drew Rogers** (26:41)

I think multifaceted question. What are the pain points? The one of the book that is, the thesis of what we're trying to do is called... Oh my gosh. The Mystery Capital. Sorry. Forgot what. And, like, the main theme of the Mystery Capital is, like, uniform kinda rules that them to do something across a big ecosystem. You know? Like, there are arguments why why The US did so well. It's because there's nothing like hybrid pockets of bureaucracy that you have to know somebody in order to, like, start a company.

So I would say one of the hard things, like, to your question, which was launching a global product with different currencies, is just that each country has its own unique way of doing stuff. So it doesn't scale very easily. And that's why you see, like, these big companies focusing on, like, just the dollar because it's like, okay. I I can build a product, a SaaS kind of product here, and then the dollars, I'm gonna win the dollar.

So, like, to to tackle the rest of the world, you have to be saying, I'm willing to fight this, like, crazy fight. You know? And every law is different. And, you know, when we're talking about incentives, I agree. We're talking about two different things here, meaning the same idea, but there's there's yield incentives from a central bank, which is to compensate you for holding a store of value that doesn't exist. And then there's get rich incentives, which most of crypto launched based off of that.

So when you talk about yield, every country is crazy. You can almost put a stable coin. Like, every country you can go to and, like, use USDC, and for some reason, they're okay with that. But if you go with a local currency with yield, they'll freak out even though it's better for them. It's wild. You know? Like, why is it okay for me to take a foreign currency and integrate with off ramps, and you're fine with that? But even if I took a foreign issued asset that's yours, all of sudden, you have problems. You know?

And I get it, but it's also very frustrating. You know? So, man, I've So how got over that. Like, how how how do you

**Zach Fowler** (28:52)

surmount that that objection?

**Drew Rogers** (28:55)

I mean, we have a playbook. We have a lot of ways that we can get around it. But what about the ultimate things that make it attractive enough to go through with it? I I mean, the the attractive... The incentive for us is that I don't think anyone in a sophisticated manner is creating a solution for this. I think you have one off people trying to do it, and the TAM is astronomically huge. So that's what's attractive for us. And even just winning one market is a huge, huge company.

So when we build products that can have us scale the product into other countries and then all we have to figure out is the regulatory workarounds, we think it's it's achievable, and we think it's worth our time, if that makes sense. And we don't really see other people, I think, tackling it in a sophisticated way, and so we feel very comfortable continuing on and not... We don't feel like there's a lot of people at our heels at the moment. We're we're gonna pass the mic to you.

Do you have any questions for Dave about EtherFuse?

**Zach Fowler** (30:00)

I don't know if you guys have had a chance to connect yet, but when you think about LocalFX, what EtherFuse is building, what what would you want to know more about? I'm gonna I'm gonna take a break. I will just let you guys take it. I'm just k. So,

**Borja Neira** (30:21)

yeah, I agree with with you, Dave. This is quite complicated. Understanding the different currencies and also monetary policies around them is not just one thing that, no. This is an emerging currency. Let's solve their currency. It's not that easy. Obviously, there are some capital controls also. They want to do that way, so you don't have to disturb them. So my question goes around... Because one thing that I want to to tackle is basically, as I said in the beginning, the currency is a bundle.

And if we are able to unbundle that, avoiding to to use the local banking, one thing that... Or something could be an example of an of an incentive for people to use your asset is basically collateral utility. What are your thoughts about using those as as collateral and the ways that you can perceive?

If we understand tokenization as a way to democratize access to different products, not not to give them liquidity, which is a which is a misconception as well, but also it could open the demand from from from other parts of the world. I want to understand your approach on collateral utility for your assets.

**Drew Rogers** (31:24)

I mean, I don't know that I have a super sophisticated answer other to say, I think the biggest use cases that have taken off for us are for collateral. Meaning, like, lending seems to be a really good use case for our assets for other people. So right now, if you are a big lending market and you're lending in USDT or USCC, you create a burden upon the local borrower. And, also, you have obfuscated yourself from a huge revenue stream of yield where...

I I mean, Tether and USCC do do yield share, but not, I would say, as transparently as we would or our assets. So using our assets to give out loans or or even hold a principal balance of a loan on chain and then distribute funds has been a huge use case. So collateral for a loan has been a great use case. We're also starting to see big exchanges use our assets offshore to hold collateral for a value too.

I wish this was, like, next week or tomorrow because we have a big announcement, but with a big institution, ironically, who who... Whose primary purpose is to create collateral for offshore dysphoria, diaspora. I think I always say that wrong. But to have collateral denominated currency because it doesn't exist because controls are are so sophisticated. So I think that's probably the primary use case that gets us scale in a true way is an asset as collateral that's incentivized to not hold the dollar.

So I I guess if I could give you my layman's answer, it's just I think it's probably the first step to broader usage of foreign currencies or non vocal... Non US currencies or non Western currencies. I mean, this is... I mean, ironically,

**Borja Neira** (33:25)

I I I think I I told you in Mexico that I was with a guy that was telling me that people are looking for this kind of exporting the debt from from these currencies because they are not able to access the the country. So people want to get exposure to this to this debt. So amazing, Amit. Rudolfo. Yeah. You. Have have him call me because I'd love to help him out. Also, you know, I think to

**Drew Rogers** (33:51)

to go back, I think we were saying... You know, we talked about blasts, but the hardest problem I think people in our space have right now is building a product that's a good product that can survive these, I would say, inauthentic injections of capital and engagement and activity that won't last. And so when I bring up the Xerox thing, it's mostly like, hey.

Let's bring exposure into what's really bringing value now and where the value is so that we can effectively fund the right companies because that's not what... What's happening today. Right now, we're funding, like, billion dollar institutions even further. Also, if you look for me, like, the first steps of growth, they're gonna be places like Brazil where there's some regulatory obfuscation. Like, I think where is that gonna be? It's gonna be Russia, China. It's gotta be The Middle East.

It's gonna be anywhere that there's an incentive, whether good or bad, to subvert traditional finance. I think those are where the the biggest growth, like like, actual growth verticals will be before we get to this place where actual blockchain can compete with TradFi on all 100% of trades. We're not there yet. So that's kind of like just a mouthful.

But, you know, every day I look at my burn rate, and I get frustrated that this new billion dollar institution is now earning transaction fees from this new blockchain. So thanks, guys. You could've made... I would've loved that money. You know?

**Zach Fowler** (35:22)

It's awesome. Guys, this was fun. It's fun to, like, bring multiple people on and and kinda hear different perspectives on a similar topic. So

**David Taylor** (35:30)

we really appreciate your time here. Zach, any any sort of... Anything we missed in this research edition and what you I'm not sure we could go deep for days. I I might... I am a little curious on on Borgia's side. Again, like, we made this, like, comment. Dave, you made that comment around the the validators. And, you know, we even talked to Mexico City about, you know, free on and off ramps. I'm like, where do you actually make money? Where should businesses, you know, building on chain be making money?

Where does the value accrue? Jorge, I'm even wondering, like, Tempo can pay for gas in stablecoins. Do we see a version where people are paying in gas in local currency stablecoins? Right now, is this just staying in US dollars? I don't know. Maybe kind of like a two part, like, even partial

**Borja Neira** (36:15)

just brain dump question. But those are just some things that I started thinking through as we're as we're having this conversation. Yeah. I mean, it could be. I mean, there is a possibility of that. Obviously, it's around incentives again. I am very... I mean, I know that you're gonna hate me because of the incentives. It's like a master way to not answer the question, so it was... So, yeah, it could be a possibility to pay guys in other in other stablecoins, local stablecoins.

But the thing here is, obviously, what is a blockchain like? I I always think about the incentives around a network, a transactional network. And, for example, to be a validator just for being a validator, to be a business that runs validators is is okay. But from my point of view, it has to it has it has to change because we we we cannot have business that are already incentivized to run the the network because they are being paid by the network. So, obviously, this can work for a Serium, for example, and I...

Views are my own. This is not tempo side. So I think we can add value in other ways. There are a lot of things, different layers that you can... Basically, application layer, consultancy layer. There are different things, product engineering layer. There are different things that you can do in order to have business around blockchain. But blockchain as a... So as I said, views are my own. Blockchains cannot live only because of transactions. Maybe Ethereum can have this business...

Can have this business model, but not... It's not the case for the model for the model blockchains. That's my my sense.

**David Taylor** (37:50)

Not just transactions. I'm sure that's a whole can of worms that maybe I won't I won't have you open up. Maybe you can chew on that for your next your next your next independent research paper so we don't we don't get you in trouble.

**Zach Fowler** (38:02)

I did say... Looks like you guys just came out with one, creating more liquidity mobility in markets. Looks like this came out yesterday. I guess while I have this pulled up, any... Anything here that you... What's what's the sixty second takeaway... Blue collar crypto takeaway of of

**Borja Neira** (38:19)

this paper here? It's it's it's basically all around the standards. So there are different learnings from from the perspectives of of the different types of blockchain that we were having, like public blockchains versus private blockchains. So all of them has, in this case, trade offs and, obviously, advantages. But in this case, we are focusing on how to join both and and provide liquidity the rails that they need in order to move. So it's it's sort of run the the standards that I said in the beginning.

So if we're able to provide private, interoperable solutions, and at the same time, we stay as a public blockchain, we're able to have a ledger in which assets and and then cash can run-in on the same ledger, and and that basically simplifies everything that is... That goes after that. So for consolation, settlement, some liquidity can move more efficiently, you can reduce those buffers, operational buffers that you have in order to respond to different problems that you can have on on a daily basis.

So that's that's the the main

**Zach Fowler** (39:30)

conclusion. Go check it out on tempo.xyz. You guys are putting out a lot of content. Like, every couple weeks, you guys... Maybe even more frequently than that. You, Simon Taylor, team are just crushing it. I can... It's it's it's been cool to see your just influence over there with thought leadership and and how you'd... How... I think Tempo is really creating an awesome... Like, building a lot of educational resources with your support, and it's been cool to see that happen in recent months.

I guess while we're speaking about liquidity, Dave, last question for you. Any thoughts on what Braille put out yesterday with their... I know you guys have a have a solid solid relationship with with them and have worked together directly the ION protocol. What what is this in your perspective? Like, why is this so important? What what what were your thoughts? Have you taken a chance to dive into it yet? I mean, I can give you our perspective.

**Drew Rogers** (40:25)

We're, like, a design partner here or committed MOU to be... I told Ben, yeah, we'll use it. That's what I said. So I don't know the sophisticated way to say that. So so for us, I mean, there's already other chains, like cross chain protocols, but there's always some, like, stick where it costs money or there's some latency. And part of that is because those people have to make money or they have a token they need to support, so they need some revenue stream for it.

I I think with this, it's just like a commitment of, like, hey. Go from this chain to this one with no value lost. So that's huge because you don't need liquidity on both sides. You could just move it. So it is new, and and so we have yet to see if it lives up to its promise. But if you can move a token from one chain to the next without needing liquidity on other side or having some fee or some time to move it over, you solve a lot of problems.

Like, we have this FX product that it it checks all of our our marketplaces across all sorts of different DeFi protocols and chains. And so that's fragmented liquidity across chain, which sucks because if you just combined it all together, you'd get better rates, and it'd be more simple. So with something like this, we could probably move all our liquidity to one chain and then just use that one chain and distribute it across different chains. So it does solve a quite a bit... A big problem. But

**Zach Fowler** (41:59)

let's see. I hope that it... It's real. That's beautiful. Mean, that was beautiful, especially for especially especially for for being put on the spot. That was awesome.

**Drew Rogers** (42:06)

But knowing Ben and the team... Knowing Ben and the Barell team, I doubt that they would say they're doing something and not have the capability to back it up. And I also wanna say just for Borja, Tempo's a great team. You know, we've said... He said many times, like, this is my own opinion because we're on the boundaries of of things. But Tempo, the thing... The coolest thing about Tempo... So I'm gonna hype up Tempo just so if they listen to this You would. Borja did did a great job.

I I think the the the the coolest thing about them is the talent that they have is scary. You know? I don't know. I mean, from an outsider, it's... I really feel like we're solving different problems or whatever, but they have crazy talent. And so I think that's the coolest thing that they have going on. And Borja's a good example. He's very talented. They're lucky to have him. Talented and and scary,

**Zach Fowler** (42:50)

apparently. Sounds like he has to figure it out. I agree, though, I with It deserves to be said. It deserves to be said. Like, their team is absolutely stacked. And, like, the way that they've placed the right people in the right places. It's... Yeah. There's no doubt that there's a bright future for them. So

**Drew Rogers** (43:07)

John, what's your name?

**David Taylor** (43:10)

A sovereign debt, local currency, pilot, paying for gas in that that that stablecoin specifically for Mexican peso or real, I'm gonna guess, or or let's get exotic with one of the ones in the pipeline, Dave. Yeah. Kazakhstan or or

**Drew Rogers** (43:26)

whatever.

**Zach Fowler** (43:28)

We have a we we have a shared flag, so we're working on it. Let's go. Yeah. Awesome. Cool, guys. Thank you for the time. It's fun to jam. And, yeah, these insights are super appreciated. We'll be putting all of this together. This is actually a part of a research series focused a lot on the topic of FX and cross border payments powered by HopNow. And so we're gonna take a lot of the, you know, some of the topics talked about here and package them up into into some takeaways. So be on the lookout for that.

But until then, thanks for the time. It's always good to see you guys. Thanks. Another great edition of