Stablecoin Fragmentation, Money Is Plural, and Why Interoperability Changes Everything

So, you know, one of the focus for today, I know you ran a campaign for for money is plural, and I wanna dive into that a little bit. We we hear this conversation all the time of stablecoin fragmentation, and the more stablecoins that launch are is gonna be a net negative for the space. And I I feel like you as a tree and m zero would lead on the complete opposite side. And so so what what does the plurality of money mean to you? Yeah.

Actually, the way that we look into this, it's thank thanks for asking that question because I love talking about it. I think I think there's some philosophical and some, like, concrete elements about

that, and there are two very different versions of the world. And, obviously, there are interests behind seeing those versions of the world manifest themselves. The concrete side of it first, and then I'll get back to the more philosophical one. The concrete side of of it is that if you look at ignore stablecoins for a second. Just think about the the world, the the way that traditional finance works and the the way the money architecture works for traditional finance. We live in an extremely fragmented world.

Right? So we we we keep talking about this. I think we discussed with you guys before, but if you think about commercial banking, let's stick just with The US. Right? The US has like, four and five thousand banks. Each version of the dollar in each one of those banks is a different version of the dollar. It's, you know, it's practically speaking a a private version commercially issued by banks that have a license to do so off the national currency. But they're different.

I mean, if you're holding Chase dollars on a, you know, balance in Chase in JPMorgan Chase, like, just think of the risk and how thinking about the risk, like, I think explains the difference to people. Think of of the risk that you have. Right? Probably very low, like JPMorgan Chase is a super solid institution, has a lot of protections. Now imagine if you were holding that same amount of dollars, you know, three years ago in exactly three years ago in in SVB. Right? Like, you you can see the difference.

Like, those are not the same dollars. Like, those are they have different risk, you know, they're essentially a liability of a company that has different size, like, you know, different operation and, you know, different risk taking in terms of the business that they're that they're accepting. So, like, that's not to say that, you know, one can fail, another one cannot fail. That that's not the difference, but this is just one illustration to show that these dollars on different banks are physically different.

And yet, we don't we don't index on fragmentation. Right? We don't keep saying like, oh my god. We live in such a fragmented banking world and it's so bad. Why do we not index on that? Because there's good interoperability technology. Right? So over decades and decades of building the financial system infrastructure, we have developed great ideas, things like central banks. Right? Central bank is like an effect effectively one of the the roles that it plays.

Instead, it's a key interoperability solution for the banking system. Right? So you have these master accounts at the Fed. Fundamentally, you move funds from one bank to another, you're destroying, like, balances on the master accounts and recreating on another account. Like, that's effectively how it works. You have clearing houses. You have all these payment rails. Like, these make the fragmented versions of money that we experiment interoperable. And so for that reason, nobody complains about it. Right?

And it's not fragmentation is not the evil thing like in traditional finance. You move that to stablecoins, then you move that to digital money. And we evolved, you know, in all industries, they evolved. You can look back and you can talk about history, but it involved in a different way. Up until now, we still don't have MZero is trying to build. We don't have good interoperability technology for stablecoins. We just don't. Some people usually oppose my argument and they say, wait, but we have trading.

And I'm like, yeah, trading is kind of a poor man's approach to interop. Right? It's it's not really good. Like, trading is very cost inefficient, it's very capital intensive. Like, imagine, just imagine for a second if we had trading as a way for interoperating bank, commercial bank money, right, where you go to a market and say, hey, I have a 100 Chase dollars, how many Bank of America dollars do you get that? It would be super capital inefficient, you wouldn't have to have a lot of money parked.

It will look like FX. Right? It will look like FX, and FX says an interrupt is way more is way less efficient than than interoperability across, the banking system in a single country. But there's a need for interoperability. Use cases, you need to traverse funds across use cases. So what what did it lead to in the stablecoin world? Concentration. Right? So there's a there's a huge kind of magnet or gravity for people to continue to use USDT for them, to continue to use USDC.

Because if you do that, you're going to be interoperable with all these other use cases. And people want to interoperate. Right? People want the network effects of, like, yep. Bring money from your use case to mine, and it will all will work well. However, that that concentration has problems. Right?

I don't think I don't think anyone of us would would, if given the choice, you know, opt for living in a concentrated world where we have, you know, duopoly or maybe a few companies like owning the the the digital form of money for an entire industry versus, you know, a much more plural world where companies can slap their brand to a digital instrument and deepen their relationship with their customers.

I think everybody would choose the latter, but we don't have interoperability technology that's good enough for us to get there yet. I think this is the world that we need to live in. This is the more philosophical, you know, side to the pitch. I think everybody should try. I mean, fragmentation is not an evil thing. Like, we live in fragmented worlds. Look around, right, like cars. Like, cars is a very fragmented industry. People like different models.

Charging right Exactly. Now is

But there are open standards for certain things and open standards and interop facilitate fragmentation and it doesn't become an evil thing. So just think about cars for example. Like the length of the, you know, the wheels, like the chassis dimensions, like those things are standards. Right? Like cars have more or less the same size because, you know, you need to be able to park any car in any space. You need to be able to put them in a garage.

So, like, people haven't invented, you know, like a car where, like, 20 feet, like, distance between the wheels. That wouldn't make sense. Right? That would break break an interoperability standard.

In the same way, like, fueling. Right? Like, every car you go to a gas station is compatible to how you fuel with the gas station. So if you if you any industry in any sector of the world, if you think about standards and standards exist and these products can interoperate, then fragmentation is not a problem at all. And we should stop saying that it is an evil thing and sell it as an evil thing. People who sell it as an evil thing probably have an interest in maintaining a monopoly position.

Speaking of that, just last point there, who is in the best position without having to name names, but just what kind of business models do you think are inherently against this? Like, companies that are benefiting from those types of monopolies existing structurally that I think it's just important to maybe categorize those or call those out. I think about in the car example, right, like you have a Tesla who I know has been very, you know, famous for doing everything in house.

They've they've created they've ruined even the idea of fragmentation because they try to own the entire stack of the chassis and the tech and the software, and it's all as much as possible by them. Like, do you do you see certain parts of this industry that are, you know, maybe inherently just, like, structurally

opposed to this view that that you think are just to help people think through the differences of those two business models? Not not saying that those are inherently evil by any means, but what comes to mind there? No. Absolutely. Yeah. And and, you know, good and evil, like, these things are always relative. Right? Like, if you are if you are in an evil company, you might think you're doing good and vice versa. So I'm I'm not I'm definitely not gonna get into categorizing things as good or evil.

I actually think there will be space for both approaches in the market. Right? Because I think the way I come you guys know I come from a product background and when you're building a product, it's a very hard type of activity because there are always trade offs in in terms of thinking about how the user is going to approach your product. And and convenience is a keyword. Right? Like, people hate inconvenient products or inconvenient solutions.

Like they they will actually, you know, like go over like certain things that are not maybe the best for them if it is the more convenient choice. You know, like things like, you know, drinking soda or eating unhealthy food. Like, the reason why a lot of people do that is sometimes just because it's right. It's easy, it's cheap, like things like that. And and I think in financial services, there's actually a huge demand for convenience. There's, you know, the financial service is super complicated.

As you guys know, there are many different stacks. You know, there are many different types of capabilities that you need depending on the business that you wanna build. And and sometimes people trade off, you know, five service providers for one service provider that can give them the five capabilities instead just because of convenience. Right?

Even if it is a little bit more expensive, even if it controls their business in a way that strategically is not ideal for them, they're still going to trade some of those things off for convenience just for having, you know, a single invoice at the end of the month, a single support channel that they need to call into and resolve issues. And I think that that will not disappear. I think that that will not ever disappear. So there are some companies that are clearly indexing on that. Right?

Some companies that choose you you use the Tesla example very similarly. Right? They wanna own the payment rails that people are going to use. They wanna own actually the digital dollar instrument that people are going to use. And maybe they're they wanna own even the substrate, the the blockchain that people are gonna run these services on. Right? They wanna own the entire stack from top to bottom.

That's going to be extremely appealing for a certain cohort of of businesses, as I said, because it's super convenient. Right? You have one neck to choke as people say in in financial service. You have one provider to go for everything. However, there I've never I've never heard that term. You have one neck to choke. You never heard? No. I mean, that's that's an expression that comes it's an expression that comes from regulation, actually. Regulators use that expression a lot. They're like, it's Yeah. Yeah. Yeah.

Yeah. I I And that can be really great. Like, give me one neck to choke. Yeah. That can be really important for a business, especially larger businesses who need that. You know? Absolutely. Joao, as we But there but there are certain brands, just just to caveat the the opposite, there are certain brands that actually do want to maintain, let's say, strategic control over the infrastructure. Right? They don't want anybody between themselves and their end users. That is also a very large market.

And those folks are going to say, no. We're going to specialize. Right? For this capability, we're gonna get the best provider there. So for for, you know, payment rails, we're gonna pick one provider. For the digital dollar instrument, we're gonna pick another one. For the blockchain, we're gonna be neutral. Right? So there is also that segment in the market for people who are gonna work with many providers. Yeah. And I think you guys, you know, you could sell, it's not, I think, into those providers as well.

I think you guys said it, I would argue, probably the

most foundational level, which is something I just love about the mZERO business model so much that maybe despite what those approaches are, you can still be powering and and equipping whichever philosophy people have with a really, really powerful issuance stack and interoperability stack. I guess last question here as we close. We have some green a green room on deck ready to go. Just I think this is important, especially right now. Any comments just on the you know, you're selling into a lot of issuers.

You're a lot of these issuers are in the hot seat or in in a very direct position with regulation, holding reserves. How do you how do you just generally think about where m zero sits in the regulatory conversation? I think we we asked you about this right when Clarity was kind of getting hot and Genius was was passed. Or actually, right before Genius was passed, you guys were very, very bullish on what that meant for The US. Like, how are you feeling about the regulatory conversation right now with Clarity? Yeah.

We're to feel very good. I think we're in a gosh. It's so much better, the position that we are in The US in this industry compared to two years ago. We you know, to summarize what we do. Right? MZero is kind of a two sided platform. Right? On the one side, we sell this amazing stablecoin issuance stack for issuers. Right? So issuers like MoonPay,

like OneMoney, like Bridge, they they use our technology to be able to issue stablecoins, but they issuers are the regulated entities. Right? So the issuers in the same way that they would be supervised if they didn't use Mzero technology, You know, they they are responsible, as you said, for managing the reserves. They're responsible for, you know, the reporting on these digital instruments that they issue.

They're responsible for, you know, any compliance that has to do with the usage of those instruments, you know, KYC, AML, all the kinds those kinds of things. That doesn't change. The only thing that changes is that if they they are powered by m zero, they use the the best software in the market, you know, as it gives them capabilities to do reward distribution, multiple stablecoin extensions, multiple, you know, customization, anything they want to do for their clients.

Then on the other side, these brands that are building these stablecoins, we we tell them that, you know, it's better for them to leverage the DMZero standard. Again, this has to do with what we were talking about before. In a fragmented world, they need some standards to to allow for interoperability to exist. So every one of these brands building digital on on on top of m zero, whether it's MetaMask, Exodus, USDAI, they all build from a common set of functionality.

And then all this software on all these issuers that are powered by MZero, they kinda quote, unquote understand those stablecoins. And for that reason, these stablecoins can move between these use cases being interoperable. This interoperability side, there's no regulation kind of supervising that. Right? The regulation that we have seen to date has been concentrated on the issuance side.

I think clarity hopefully, the the main thing, clarity, you know, doesn't impact us as much as, you know, the conversation around the the yield distribution for for stablecoin issuers, I think that is the part that obviously we're very interested in because we do think issuers should be able to distribute yield. That's the primary way that they're going to have a commercial relationship with with the brands. Right?

The reason why a brand would go and issue their own digital instrument is part partially because they can monetize those customer balances and that come from getting the yield from the issuer. So we think it's really important that that's, you know, legal and and, you know, a very kosher and normal thing to do.

Outside of that, I think the role the role, you know, we don't we don't play so much of a supervised role because, you know, we're a tech platform, but we would love to continue to engage with regulators to talk more more about this interoperability side of things. Because I think if regulators also wrap their head, the lack of interoperability and, you know, the monopolistic or duopolistic, like, environment that we ended up in the stablecoin sector, I don't think regulators, like, are big fans of that.

Regulators essentially like competition, they like, you know, a free market, and and I think they will be pro interoperability. But I don't think this is for the short term. I think there's a lot of development of technology that needs to happen before we're able to sit in front of, you know, these folks and say, here's how the world could be and it would actually be better for end users. I think we'll get there in a few Awesome.

You guys are definitely seeing you're seeing everything from the front lines, and we just we're thankful to be in it with you. And is Luca and team there with you this week as well? Are you riding solo at eight Denver? I'm riding solo. Just me and and Tony, our CTO, and we're back in New York next week altogether. Cool, man. Well, Jawah, thanks for the time. It's always a pleasure.