AI Agentic Compliance and the Coming Stablecoin Margin Collapse: Zack Martin

Hey, boys. How are doing? Mac Martin, good to see you, man. Good to see you also. You guys, I wish we got the memo. I wore a blue polo. I should've wore a black shirt. You're looking great. Thanks for coming on, man. Saving the day. Yeah. We're getting better. I'm updating your banner as well to z a c k because I'm a real one, and I I know. I know there. I don't know, dude. I'm a I'm a I'm a c h.

That's tough. That's tough. Is there are there more Zachs with k's or I know. I know. I knew a I knew a z a k k growing they're growing up. So his parents really went wild there. Poor guy. I should be a z a c h. And so I kinda could, like, shame my parents for letting me do this, like, atrocity. I'm a Zachary, so it should be a c h, but this is how it lies, and so we'll just keep going with it. That's a unique one. That's rare, isn't it? Normally, if you're Zachary, it's you you chop it? Should be. Should be.

Definitely should be. We're here. You saved the day for us. We had a we had a we're supposed to have Greg Bell on from Hedera, and, you know, the the the kid life, he gets Exposure to germs. Family sick. There's kinda no way of dodging it. So thanks for I think you had, what, three three hours notice? So thanks for hopping on. Of course, guys. No. I think this is a really cool topic. And, honestly, I love the intro. You guys I always had a goal to be on CNBC, but that was a far better intro.

So this is, like, very exciting to roll into this. There we go. Plus, like, the background screen. This is just a better experience. So There we go. Hey. There we go. You

yeah, man. Pumped to pumped to catch up with you. We've known you for a a long time, but we've never covered Cipher Owl formally on the show or what you're doing. I'd love I love your perspective about the problem Cipher Owl is solving based on your background and, like, what you experienced along your career? Maybe bring us bring us into your story more on where you've been throughout your career and then how that led you to the problem Cipher Owl is going after. Yeah. No. Definitely. Fast story on this one.

Started out of school at Ernst and Young, did a little bit of taste of forensic accounting,

and got to feel like that was like but a lot of audit, and it was just really tough work. So when we're I'm gonna date myself now. When I was working at the hours of Sarbanes Oxley, it was very aggressive and a lot of work, and so it made more sense to try and move into finance banking instead. And so I left the world of accounting, and I went to Bear Stearns right for the end of that one, very much dating myself for the collapse at that point, but that's originally what got me interested in crypto.

When you see financial markets fall apart with the front row seat, it got really interesting of there's gotta be a better way to do things. From there, I went to a regional bank called William Blair at Chicago, worked all over the bank and and with a lot really closely with a lot of those teams. And I thought crypto was gonna be one of those things that would fade away. And as it kept gaining momentum and not fading away multiple years after years, you knew it was gonna stay around.

And then it co and it coincided with me meeting my wife, having my kids, not being sick today, but being here. And from there, I just made a career change to go to Salesforce, but I was very, very interested in, like, the space. At Salesforce, I covered crypto companies, a lot of fintechs, and just kept seeing this space evolve and really got an idea of how tech stacks interact with businesses and how they actually kind of lay the foundation for success.

From there, had tons of great mentors, ended up getting in touch with Chainalysis. I was one of their first hires on the West Coast. Rowlett's actually the first one, and so kudos to him. He was fantastic and kinda laid the groundwork for me. But while there, covered all your strategic accounts on the West Coast on the private sector side, so your payment processors and a lot of the exchanges. And with the exchanges, we were selling into Coinbase.

They kept building everything better, faster, cheaper internally, which just makes it hard for a salesperson. So when that team decided to spin out and gave me a ring, I grabbed my right hand woman, Alexis, and then we went off and running. And I think we're just trying to do things a little bit different and remove those friction points to make it so much easier for adoption from the institutions, which I know you guys had on earlier today, and then do scale of where we're gonna see these transaction volumes go.

So if you think about the arbitrums of the world

and and other players in the stablecoin space, this is exactly what's gonna have to happen. You I didn't know this. You were actually Chainalysis selling or or looking to sell some of these things into Coinbase. And I know the, you know, the reading between the lines of what you said, that team who was at Coinbase spun out to go start and solve this specifically, speak a little bit to, like, the founders of of Cypher Owl and maybe, like, the story of that specifically.

I didn't know that part. Yeah. So, I mean, we got connected, and it was a lot of coffee shop meetings. And it was one of these things where I kinda left the space, but I still loved it. And I was really worried about if I saw another player that kinda looked the exact same, I wasn't really interested in coming back into it. The founders of Coinbase, or sorry, of Cypher Al, are the most intelligent engineers I've ever seen or ever worked with in my entire life. They came from a background of cruise cars.

So if you think about how you try and figure out how to get petabytes of data up into the cloud, back into a car in an efficient manner, it was like a unfixable challenge. But these guys were the ones that did it. When they decided to move out of autonomous vehicles and into on chain activity, they were able to do some pretty amazing work. With that, they could do with a small team, build out giant giant internal compliance stacks. They could do all kinds of automations.

They were doing things from security to reporting and kind of looked into this as the new financial rails. And so Liu Ming and myself, they convinced me very easily to move on with how fast they could do things and how well they could do things. And then it's been really fun to kind of keep that moving.

From your kind of standpoint, that as well, I think the thing I would love about Cypher All the most and what you're talking about, Zach, earlier is we're just gonna be so agentic focused because it's the only way we can solve this problem. And so having that built in and embedded in the way we built the company from day one on the infra side, I just think it gives us a huge advantage, and it's really exciting. Not saying anything all the players in the space are fantastic. It's us against the bad guys.

And so love everybody that we work with in this community.

We're just trying to do things a little bit different. Yeah. Let let's dive into that a little bit more because especially on Drew's been spending a ton of time in his stable minded conversations. It obviously comes up a ton on stable dash live. But specifically unstable, we, you know, we talked with Latandre, which is very AI counting. Predicate's been on the show. I think Rain and Charles from Rain spent a lot of time talking about agentic workflows when it comes to compliance specifically.

So what does it mean to be, you know, AI AgenTeq forward when you're building out your compliance operations? That's an that's a very, very great point. And love the team over at Predicate. Nikhil, I think, is one of the greatest minds in the space, and so everyone should reach out and talk to him or at least follow him. It's good you guys had him on the on the show.

I think the thing that's gonna be the biggest problems not problems, but I think the most important parts about being agentic first is building with the building the infra layer from the very beginning with that consideration. I think there's a problem where if you were trying to build for yesterday's blockchains and yesterday's transaction volumes, you're going to hit limits.

The new systems have to be they feel almost limitless, and they need to be built with not sticking a bot or AI on top of an archaic infrastructure. I mean, you just see the problems that people are having, let's go in the SaaS world, in Salesforce, Adobe, etcetera. People are saying, no. We just need to go baseline, agentic from the beginning instead of trying to bolt on agents on top of kinda infrastructure.

And so I think from what you guys are talking about with kind of the GenTick commerce going forward with Sablecoins, not all transactions are gonna be created equal. So when I look at what's gonna happen with Sablecoins, we're gonna see massive amounts of transactions, but those margins are gonna collapse. So we have to have a different business model, which means we have to have automation. We have to have the speed of being able to look at that many transactions and run those reports in a very automated fashion.

And then the people that are actually doing the compliance and the investigations,

they need the tools to be able to do it so much faster, so much more accurate, and then use what makes them special, and that's their own, like, human abilities to make judgment calls. Super interesting. We're looking here at the website for modules of s r three screen, reason, research, and report. Let's break these down and just kind of what this looks like. I remember talking with Leo and Ming very, very early on on, like, trying to identify, like, what are these pain points that you're actually solving here?

And it the thing that I recall from those conversations, this was, like, over a year ago, was the part of the process for someone who might be using something like this tool. The identification and the blockchain analytics piece specifically is is important, but a lot of the time, human resourcing, dealing with something like a suspicious activity report come with all of these, like, human in the loop time sucks.

Talk a little bit about the you know, how you're building for someone like that, you know, being at Coinbase and, like, seeing at least how they did it. There are so many, like, hoops and people and processes and time involved with what happens after you flag a transaction or after you find something that looks suspicious. So how does this, like walk us through this s r three stack. This is the first time I'm seeing this. Yeah. No. So I think that you're you're hitting on the head.

And I think that with compliance and what we're trying to do, we really do wanna be focused on human in the loop. But we wanna make sure that when the human is in the loop, they're doing the best things that humans do and not wasting time

preparing documents or anything else like that. So if we start with the screening, I think that screening's a really interesting one. Right now, screening is a tax on the industry. I think that if you're paying in absorbent amounts of per wallet screen, it's just not gonna help scale the industry and it's going to stand in the way of adoption. So what we're trying to do is two major things here. One is we're gonna have the industry best speed on your response times on each of these screens.

And number two is we're gonna need to do it the most efficient cost efficient way possible to make sure that your business is not being taxed on transaction volumes. We're gonna try and find outcome based solutions that are gonna help you run the best compliance program, not just try and adjust your compliance because of costing. From this one also, I think the most important part on the screening is gonna be the speed and the scale of the speed.

So you'll be able to start doing in line checks with those wallets rather than trying to batch them on the back end, which should help unlock a lot of systems. If we move down to reasoning, I think that there's a lot of pieces of this that are really important. One of the things that we do from day one, and I think that we're starting to see some of the other players do it, is we're giving an audit trail for each one of our labels, along with a confidence score of how we feel about each one of those addresses.

So gone will be the days where it's a black box system. You're gonna say, have to trust, hey, we're name your vendor. You gotta just trust us. We know what we're doing. And if you need attribution audits or understanding how we did those labels, hit us up, we'll get back to you in ten days. It's just not gonna be how it works forward, and so that's something from day one we focus on. And then making sure that all of our reasonings for those labels are very transparent and as easy as a Google search.

I'll jump down to question. Prepared to you've probably done this a million times, but we were having you essentially demo this or pitch this, which is great. You know, you do bits and pieces of it, and so this is actually a good practice for me. So when Ming and Leo see this later, guys I'm doing my best. I apologize. But we're we're doing good on this one. The reasoning piece is really, really important here.

So once you see there's risk, once you see the label for it, like, what is actually kinda like how can we how can we give you the reasoning of, like, what what we actually see here? So

Did you see just really quick on this point. I saw yesterday Emily I'll try to find this tweet. Emily from Coinbase, president of Coinbase, like, responding to this. It was on X. This this this guy who was, like, traveling all around the world was in this sort of compliance conversation with Coinbase support or Coinbase compliance investigating, like, hey. Why are you going to all these different countries? Is there a compromise here?

And he was, like, essentially flaming Coinbase on the timeline around, like, how intrusive they are.

And it it sounds like this is kind of the step we're in here. It's like, hey, something looks sus here. You're traveling all these different countries away from your home one. Is this kind of the moment we're in here? Yeah. So I think that one's like again, I think so with the audit trails, I think the most important thing about this is we don't wanna look at things as like one label for one wallet. Right? There's a there's a storyline there.

And and we need to understand that with the timestamp, what is actually going on and that all risk is not gonna be considered equal for all different products and all different business lines. And so when you kinda have that ability to parse out what you think is risky and what you don't think is risky, I I think it's gonna open up a lot more transparency. It it's too difficult when when you have to actually just trust a vendor. And then, I mean, I've seen it before.

Like, it's it's a judgment call at the end of the day, and so you need as much information to say, do you do you agree with or do you not agree with that judgment call? So we're really trying to attack that space a lot and give the the power and the actual vendor and business owner business unit owner of what's actually risk, what's not risk. And transparency is gonna be the most important part of that one. Alright. Round us out here with research. Research. This one's fun.

And I think that, you know, we Drew, you talked to us early. We were putting AI, graphing, and so autografting, autonarratives, autorisk descriptions in our tool from the beginning. So over the last two years. And now it's been really exciting because we've seen the two biggest players in the space kinda add those tools into their into their product suites. So we're really excited what Shane's doing, really excited about what TMR's doing. For us, it's just we've only seen it at table stakes.

What I'm getting really excited about this one on the research piece is we're building investigation tools and investigation services that will help grow and operate at the speed that we're going to see necessary for stablecoin adoption.

So if we're thinking about a Visa, Charles Schwab, or these other larger institutions and the speed of which they're going to have to file SAR reports and to have us all documented, building a team of, you know, 5,000 investigators is not gonna be reasonable, and it's not gonna scale correctly. So with this and having our reporting capabilities, it's gonna be super nice. The other one I thought was and I'm gonna dig back into my accounting days with Ernst and Young.

You get the audit you get to do kind of control modeling. So your consistency in those reports are gonna be so much better. Every person acts a little bit different, especially if they're BPO. So you wanna make sure the consistency is key. And so it's gonna let the people do what's really good people do is run analysis over it instead of preparing those reports. It seems like the like, just looking at the website here, I'd love to dive into the core industries or who who does Cypher OWL really work well with today.

It looks like the approach, at least publicly, is, like, very broad. Like, we are built for every institution, a ton of different types of industries, which makes a ton of sense. I'd love to hear just from your standpoint on the BD sales, go to market revenue side of things, given some of the tailwinds that we're now seeing with the the Clarity Act and I think a lot of bigger institutions and and larger companies who need to be playing by these rules.

If they implement something on chain with stablecoins, it is a must that they implement things like these tools. What industries are you seeing right now maybe being being unblocked

or ready to get in the game that might be using this tool? Like, what are you who is Cipher Owl best for today versus maybe tomorrow post Clarity? No. No. It's a great question. I think that it's a I think each vendor, instead of like a different like, what you're trying to do should be considered, like, who you actually are as a as a purchaser in a company. Like, it's a weird thing. That's where I see compliance vendors at right now.

So you look at a chain analysis, and you're buying and you're definitely buying a logo of of reputation. They've been around the space forever, and they are going to have certain processes and things that might not fit with you exactly and they're not gonna be as flexible, but you're buying the name recognition, and that's gonna be super helpful. With TRM, you're looking at the second biggest player in the space, and they're doing absolutely great work.

And what you're doing there is they've hired so many kinda law enforcement experts, and so you get this great integration with what law enforcement's thinking. And I think that it's if you were focusing on law enforcement, make sure that's your strong suit and seeing what area you're saying, like, that's a fantastic vendor. Elliptic's always been a data provider. They've been overseas, and so sometimes they're a little bit harder for US entities.

But unbelievable team over there, and I think that if you're gonna do data focus and build on it, that's probably one you're gonna lean towards over the other two. With us, we're looking at trying to be a new person in spaces doing things differently and faster and more efficiently. So what we want is that innovator that wants to sit down with us, come up with what their business problems are, and we're gonna build to those things. And then each one of our endpoints and touchpoints are an API.

And so we're here to actually build that infrastructure for what you're trying to do, not build these kinda, like, closed loop black box systems. They're gonna be hard to integrate. Now the other thing I'd add to that as well, when we're seeing all kinds of all the regulations coming down to the the pipeline is gonna tell you, you don't need a single point of failure. So for us, we're gonna see two vendors, and so what you wanna do is find variable vendors.

We're trying to do things so differently that pick one of those main incumbents. Pick one of them that is gonna give you the brand recognition, you're gonna feel super comfortable with because you're not gonna get in trouble for it. Now when you need to think about and experiment with how we want to be doing this in the future, bring us in. We'll be your backup. We can make sure and do all those things.

But as we start approaching new problems that haven't been discovered yet, I think we're gonna be the team that can actually move fastest

and make sure those problems are solved.

Is this a this might be an oversimplified way to think about it, but I imagine the the names that you have listed and maybe historically how those products have worked where you have a dashboard or a person or a team at these companies using that software or using that tool, and then they can kind of manage their compliance and fraud business within that tool, and it operates more of like a standalone system versus maybe today what modern companies, AI driven companies, leaner teams might be needing to do, which is like embedding these types of tools within first party apps or first party platforms or things that they're building for their end clients or for their end teams.

Are you seeing Sci4owl from kind of reading this or listening correctly? It's like more of a modular, customizable infrastructure

that you can use to go build with. I I definitely think that's a great way to look at it. And and I think that for even teams that are intimidated by the idea of building right away or thinking that that might be too complicated, we try to keep a front end that's so easy and simple to use that it's the fastest way to turn something on, get the results you're looking for, and then move from day one. So I think that listen, you have investigate. You

have the dashboard if they want it, but you can also enable these more, like, bespoke

use cases in more of an embedded way. Yeah. Absolutely. And I think that if you look at it, the dream scenario on here is, look, on chain compliance is gonna be part of many different compliance programs. What we'd love to do is embed into a cockpit that allows everybody to have understanding of what's going on in a complete picture to run their compliance programs or their investigation programs.

And then what we wanna do is power it with, you know, whatever our data is and then the compute layer on top of that data to make sure that you are enabled to do your best work in compliance investigations.

Who would you call out on the go to market side specific to for us and our audience, the people that we really, I think, right now attract to the show are issuers, builders, and operators within stablecoin infrastructure, people who are very deep in this world of stablecoins. At least today, that's where I think we have a lot of density. It seems like you guys are going after specifically some of the, like, stablecoin issuers and RWA issuers. Any specific

kinda call to actions for them in this world? It's a great question, Drew. So I think that the most important thing when you're gonna be an issuer of any kind or you're it's interacting with these spaces is gonna be ecosystem monitoring. You're going on a full broad view of what's going on of your token across multiple different assets, and you're gonna get a note kind of just changes along the way in real time about what's going on. Now I think the other part is gonna be very important.

And as we kinda move from the crawl, walk, run, I think monitoring is gonna be number one. Number two will be actioning. But then actually or alerting. So then it will be, hey. We're starting to see these different variations. Because of advanced intelligence, we think it could be certain entities you need to dig into, you need to double click on, or just certain processes that we need to be thinking of. Yeah. So monitoring, alerting, and then action on top of that, and then having bots that can say, hey.

Here's reports of what you need. These are things you need to be shifting. These are contacts that need to be going on. And then doing that in real time where it's hitting you in on your phone mobile if you're, you know, at a kid's soccer game, or if you you are just at work and you wanna tell me over Slack or Teams, it needs to be wherever you're at, and it can't be in a a walled off system that you're swivel cheering in and out of. Yeah. Yeah. Super interesting.

I love I love the differences here and how how you're kind of positioning this specifically to issuers and and folks like that. Dude, this is fun. Would love to have you back.

It also could be really fun to I don't know if this is something that you would be open to, but, like, if there are existing ways to something that we're thinking through, we kinda we kinda did it on this in this conversation earlier with those that system. But, like, if if there are ways that Zach and myself could get access to these types of tools or use them or get the ability to do better storytelling or investigation or coverage of certain assets or teams or companies.

Like, if there's a way that we can use Sci Fi Owl ourselves during the show, and then, you know, let's say we're meeting with someone from Agora or Tether or Circle or whom whomever it might be on the issuer side, you know, we could almost, like, use this type of product. But I don't I don't know how public avail publicly available this stuff is, but let's think through what that could mean. That could be fun. No. No. I love that idea, I love that you're, like, grooming and showing, like, hey.

So can we get some free tools? The answer is always yes, guys. We're very, very nice. The conference has always let the media And you got some cool socks, dude? You got a you got a hat for us? No. No.

I am actually this is something I need to get on because we do not have cool socks. I have hats. That's it right now. So you guys send over address.

Like that last day of the conference where you're just going around, like, hey. What stuff do you need to get rid of? I think I have, like, 10 superscript pair of socks, because it was they they were just like, take them. And I was like, okay. Yeah. Zach, I'm gonna have an even more embarrassing one. There was one year where I had so many leftover socks that I was, like, gonna just outfit my daughter's soccer team in them. I'm like, look. You should You're gonna be this brand by company.

By Centrus twenty twenty four. Yeah. Exactly. And so, yeah, I was like, I I have so many socks from I mean, think about it even when you guys used to go from these things. It's it's the one thing that everybody's like, just take them because we can't have them. So even as a salesperson, you always had too many socks. I can never have enough socks. Speaking of merch, Zach, shout out. You were one of our first ever hoodie owners. I know. Actually, I almost wore it, and I was just thinking about it.

Like, I should have definitely wore it. Actually, you wanna go grab I think I can grab it right now. It's, like, right over there.

Next time gotta bring Brian in. We need to but hats hats are next. I'm like, Drew, we need a stable dash run of hats, especially for I would love to just wear one during the show. My hat Gotta get our sponsors. We gotta get some sponsor merch. Yep. Yeah. I'm Let me know. I'm really happy with our with our merch helper. We definitely get you guys set up with that stuff.

Is it Canary? Are you guys working with Canary? No. We're working with, you know I mean, we're working with a direct vendor. Not not a name brand that you know of, but they're definitely a good value. Jordan Davis' wife runs Canary. You're close to Jordan's. Shout out to Canary. Hey, guys. Real quick. Congratulations to Jordan and having a second child. Jordan.

More babies. We need more babies in the world.