2021 will be remembered as the year that cryptocurrencies become a full time presence on Wall Street and a top agenda item at the world’s central banks.
The potential for cryptocurrencies to digitally enable the financial lives of world’s 1.7 billion unbanked is gaining interest as well as increasing incumbent concern.
- Who needs an ATM when digital cash is available on your smartphone?
- Why pay high currency conversion fees if a digital currency works across border?
- Is a traditional bank account and its ledger-based approach really necessary when low value retail and casual transactions are the use case?
We already see that cryptocurrencies are filling multiple roles. Here’s a bit of history that brings us to today’s discussion.
Grandparent Bitcoin
The progenitor of all this, bitcoin, has firmly established itself as a store of value. Major investors, their bankers, and money managers have peeled off a corner of their assets for placement into the first blockchain-based cryptocurrency. Its appalling energy consumption notwithstanding, bitcoin is more popular, and profitable, than ever. Its volatility is catnip to traders. And the bitcoin exchange services of the Cash App, PayPal and now Venmo are major revenue drivers for those firms.
“Corporate” Currencies
That volatility inhibits bitcoin’s utility as a payments method when low cost, low friction, and certainty are required. Who wants to be concerned about major currency fluctuations during the time it takes to complete a transaction?
Into that gap, multiple companies have proposed, and some deployed, stablecoins, a cryptocurrency backed and pegged to the value of a fiat or soveregin currency like the US dollar or euro. The goal is to simplify exchange within a given country and especially across borders. That proposition has appeal.
A major player in this category is Facebook’s Diem, the current incarnation of its original Libra initiative. Diem’s plan is to employ a few single-currency stablecoins tied to specific major national currencies for use within those countries and regions. A generic, multi-currency Libra Coin, its value tied to a basket of those major currencies, is optimized for cross-border transactions.
Diem is serious in its trust building efforts. Diem is seeking financial services licensing in Switzerland to increase trust in its governance and lower the significant resistance of central bankers around the world. And every Diem coin is in fact backed by fiat currency on deposit. Its “new money” proposition is backed by “old money” in an account.
Central Bank Digital Currencies
Central bankers are not known for innovation. Their role is to maintain stability and trust in the status quo. Their collective reaction to bitcoin’s emergence was a predictable immune response and most broke out in a rash when Libra was announced.
But in the decade since bitcoin emerged, more central bankers have warmed to the concept to varying degrees. Countries as diverse as China and the Bahamas have launched their own CDBCs, digital representations of their currencies, legitimate obligations of the state, backed by their “full faith and credit.”
Other countries, like the US, are evaluating the concept but have made no commitment to issuance.
CDBC use cases may be both broad and narrow. Incumbents in the banking and payments industry, already well down the path of moving money electronically, see few uses. Cash replacement is one area of interest. As use of the physical token declines, some members of the economy may be left out. Digital cash may help. The Bahamian Sand Dollar is meant to reduce reliance on the physical transport of cash and speed payments across an archipelago of islands often swept by hurricane disruptions.
At a very different pole, China’s digital yuan is already in pilot in multiple cities around the country and China wants to make it possible for foreign visitors to use it during the Beijing Winter Olympics next year.
Despite statements to the contrary, China’s CDBC could be employed for geopolitical goals as a challenge to the US dollar’s traditional role as the global reserve currency and its traditional role in global trade. Given China’s dominance in global trade, use of the digital yuan could be required of some trading partners, particularly those along China’s Belt and Road corridor.
And for all countries issuing CDBCs, there is the advantage of the increased visibility of digital cash transactions that eliminates the anonymity of physical cash.
Cryptocurrencies are not going away.
Making Cryptocurrencies Useful for Payments
Both “corporate” stablecoins and CDBCs have multiple virtues. They clear immediately. They are push payments with no credit risk. They settle immediately. Therefore, these transactions should be inexpensive.
That may drive merchant and enterprise interest in accepting them. What’s not to like about immediate funds availability in a payment that doesn’t cost much?
Issuance is one thing. But usage is quite another. The consumer / payer side of the transaction is an unknown. What’s in it for the consumer?
That said, there are those who both believe payers will adopt crypto-based payment method and that merchants, particularly those selling cross-border, will be quite ready to jump on board.
That’s the topic of this Payments on Fire® episode.
First for Diem Acceptance
In this episode of Payments on Fire® we welcome Ran Goldi, CEO of First Digital Asset Group to talk about his broad fintech experience, cryptocurrencies, and his progression into starting First.
First is admittedly way out in front of the market. Diem won’t launch its limited USD backed stablecoin until later this year. But Goldi’s team has already taken key pages out of the fintech playbook:
- Connect merchant shopping carts to the First service and the Diem rails
- Handle authorization and approvals
- Provide risk and fraud management
- And put an API in front of it all to speed consumption of First services
Goldi’s a lot of fun to speak with and his experience gives him an authentic voice in this discussion regarding what is, in fact, the future of money.
Here’s a short video of Goldi pitching his concept
George Peabody:
Welcome to Payments On Fire, a podcast from Glenbrook Partners about the payments industry, how it works, trends and it’s evolution. I’m George Peabody, partner at Glenbrook and host of Payments On Fire. And today, I’m lucky to have back my co-host, Yvette Bohanan. Hey, Yvette.
Yvette Bohanan:
Hi, George. How are you?
George Peabody:
Great. And, great to have you back. So, as I’m fond of introducing Yvette, she is a huge part of the Glenbrook Education Program and, she also has such deep expertise and experience in payments. She brings it herself just a ton to what we do at Glenbrook. So Yvette, what’s on the agenda for our education program?
Yvette Bohanan:
Great question. We are busy over here in education, George. We’ve been working on an upcoming webinar and we have another boot camp as well. So, if you’re new to payments and you want to get your foundation straight and set up-
George Peabody:
Looking forward to that as always.
Yvette Bohanan:
We always have new people in there.
George Peabody:
I’m looking forward to participating again with you for our boot camps. It’s you and you are running the chat channel. Russ Jones and I are doing the stand-up and really digging the conversations we’re having with folks during the course of the workshop. Great questions, good observations on the industry so, really looking forward to getting back to that. But, let’s turn to the reason that we’re here today. This conversation is once again in our Fintech Series and, we’re here to talk with Ren Goldstein, who is the founder and CEO of First Digital Assets. And I’ll just read what it says off the website, Goldie, and then, ask you to give us a whole lot more. So, First Digital Assets Group provides connectivity to allow PSPs, IFSs, banks, currency exchanges, E-wallets and commerce enablers to plug into digital stablecoins like Facebook-led Diem and as well as to facilitate Diem payments just like cards or other payment methods. Goldi, welcome to Payments on Fire, really glad you’re here.
Ran Goldi:
Hey, thank you George. Hi, Yvette. Glad to be here, love the FinTech Series, and if I knew of the bootcamp event before, I would send all my people to your bootcamp. I’m sure it’s amazing as is ever content by Glenbrook.
George Peabody:
Well, thank you for that wonderful set up here. So, Goldi, Diem is just getting going. You’re at the sharp end of the spear here in a whole new area. But, before we start digging into what First does, why don’t you give us a little bit about your own background and how you came to this entrepreneurial expedition that you’re on.
Ran Goldi:
Sure. So, I’ll try to make it quick. I started programming when I was six. This was when I be 100% nerd. This was before people called nerds geeks, and geeks became geek squad, and then it became cool. Mark Zuckerberg made all geeks cool. So, I started programming when I was six and I was the neighborhood nerd helping people build computers and build software. And, as I was 18 after already opening my first startup when I was 16 but as I was 18, I was drafted to Intelligence Services. In Israel where I’m from, you actually have to spend about three years in the military and I was drafted to Intelligence. I actually spent five years because I loved it because it allows you to play with amazing technology and meet amazing people.
Ran Goldi:
And, I would say it’s probably the main thing that made me into an entrepreneur because, when you’re in intelligence in Israel, every week they come and tell you, ” Okay, you have about three days to set up this system and it’s not life or death but our lives depend on it so, go.” And, that gives you a sense of accomplishment for anything and you’re not scared of anything. And, after an amazing five years and the normal South America/India trip that Israeli do after the military, I started doing the next phase for geeks in Israel which is get into the startup industry. I won’t tell you all about my amazing failures, I will just say that I had six colossal, great colossal failures in startups.
Ran Goldi:
It was everything between the video surveillance in 2007, and social gaming in 2009, back when people were buying tomatoes in Farmville on Facebook and other kinds of startup. And I was very fortunate to have my seventh startup which was around advertising technologies after about a year and a half. I think maybe a lot of lessons learned from six failures but, we managed to get it right. And, we had tons of luck and a larger company acquired us, and then actually, we went public in London, The London Stock Exchange. And after being in a public company for about two years, I decided that I probably should quit because I don’t want to see another investor’s face ever. And, I decided that I want to focus on building a business where I could stay in an office and not meet clients. Again, you always want to do 180 degrees of what you did until that point in life.
George Peabody:
You’re following the classic nerd path man, I love it.
Ran Goldi:
Yeah, exactly. And then I decided, okay, you know what I love? I discovered the stock exchange when we took the company public and that fascinated me. And I decided I want to get into finance, I want to get into trading, and we actually started an Algo Trading company. And, that was fascinating for me to learn how really money works in the stock exchange. I won’t spoil it to everyone. It’s not about the value of the company but, I’m sure you’re covering that in a different podcast.
George Peabody:
Goldi, I’m stunned.
Ran Goldi:
Yeah. Who would have thought GME is not worth 40 billion but, that’s covered by other podcasts. So, I did run this Algo Trading company for a few years. Again, we got super lucky with timing and the people we brought on and by 2017, that was acquired by a larger Algo trading company. So, after six colossal failures, two modest but great for my ego at least, success stories, I felt I was ready to take my year of absence and move to Australia and just go to the beach. But then, it was 2017, crypto was almost at its peak because this was mid 17. And, I got approached by an investor that asked me, would I join him and setting up a crypto/blockchain company that would help bring the gospel of blockchain to the masses, and help build maybe the Goldman Sachs crypto.
Ran Goldi:
And I couldn’t say no because, I thought that’s an amazing technology and I thought that’s going to revolutionize payments and I thought everyone is going to agree that Bitcoin is amazing, diem is amazing, and blockchain is amazing. And, this was again 2017, if you would just said Bitcoin in 2017, people would throw money at you. This is before Elon Musk bought 1.5 billion. And then, we raised $25 million to build this company and this is the journey I’m on since then.
George Peabody:
Well, when you said 2017 and crypto and capital letters, I did an eye roll because back there were so many startups looking at Blockchain technology, and they were looking for a problem set to apply it to and basically, they came away with nothing. There really wasn’t beyond the asset value that Bitcoin seems to have settled into a store of value. Always trying to apply to distributed ledger tech or the Bitcoin rails themselves to real world problems, proved pretty elusive for these folks.
Ran Goldi:
100%. And, we were in that problem as well I have to admit. So, the early days were amazing for us. Diem was not in existence yet or a lot of Stablecoins. We only had one Stablecoin in the world, back then, that was called USDT. There’s a lot of news about that. Is that legit or not? Let’s not get into that. But in 2017, we had an amazing run. We grew so fast from… We were three people when we started mid 17, by the end of 2017, we were already about 70 people. We were a profitable company, that never happened to me before, being profitable after a few months. You usually are either never profitable and thank God someone acquired us, or you’re just not profitable and you close the company. And, we were profitable and then, Crypto winter came. And for us, what Crypto winter caused the company, is that from being a profitable company, we became a company that’s losing money on a monthly basis.
Ran Goldi:
And, even though we already work with about a 100 different exchanges and websites from the top names you can think of, and connecting them to credit card processors and helping end users to purchase cryptocurrencies. And, we were developing Wallet technologies and Custodial technologies, all of a sudden within about a month or two, the entire industry… Well, the value of the currencies dropped about 85% to 90%, and the sentiment by investors went 180. So, investors that seven months before had told me, “Goldi, you have to take more of our money, I want to invest more,” we’re now calling to say, “Can I take my money back? I don’t believe in the space anymore.” And, that’s a huge problem for an entrepreneur to have. Obviously, we told them, “No, this is what’s called venture capital. You take a risk.” I don’t know if they explained this in VC school but, we’re not releasing your money and trust us we’re going to focus and we were going to come to you with a plan of why blockchain is not dead and why you should still believe in this space.
George Peabody:
What I was looking for with blockchain when it first really got into the hands of the entrepreneurial community was, blockchain based solutions to real business problems. Now we’ve really zoomed out to a macro place where there’s Bitcoin now valued at a trillion dollars of all the Bitcoin that had been issued, that’s a stunning valuation. And then, more global approaches which are either Facebook’s Diem and that’s what we’re going to be talking about a lot now.
George Peabody:
It in itself has gone through multiple litter evolutions to try to make it more palatable to the global regulatory community. On the one hand, there’s this notion of Stablecoins which is a digital token representation pegged to a domestic currency, Euro, USD. And then, of course there’s the CBDC phenomenon, the Central Bank Digital Currency movement that a number of central banks around the world are now starting to investigate. You’ve now pivoted away from this asset value approach that Bitcoin and Ethereum have represented far more to the transactional model problem sets.
Yvette Bohanan:
Stablecoins.
George Peabody:
Yeah. That stablecoins, CBDC and Diem in particular represents. Why?
Ran Goldi:
Yeah. So, for us Crypto winter was actually a very long period and lasted through I guess 18 and 19. And, through that time we did a lot of hard thinking. While we do believe in Bitcoin for certain applications, Ethereum for other applications, actually think that’s it but, there are other interesting currencies out there. But, one of the major realizations for everyone in this industry is that blockchain is great but it’s just another technology. It’s not the solution, it’s a means to an end. And, I’ll get back to what are the business applications of blockchain but, maybe I’ll try to quote a VC investor that told me, “When I meet a blockchain startup, for the first two meetings I want them to talk about their product without saying the word blockchain. And if by the end of those two meetings, I’m happy about the go-to market strategy about the product, the offering, the value to the user, how they are going to capture that value, how they are going to grow, then I’m going to talk about technology. And, if in that technology stack there’s the word blockchain, fine, I don’t care. It’s just saying MySQL Server or Docker images or whatever.”
Ran Goldi:
So, I really sympathize with that, but that was something that the entire industry had to learn. And for us, what really motivated us to change from working with a lot of currencies to focusing on Stablecoins and CBDCs was that, we noticed that the market is taking those cryptocurrencies, that Bitcoin and Ether and its friends, to a lot more speculative places. And I’ve already done Algo Trading and the normal stock exchange. I’ve already seen speculative players lose all their money. This is not where we wanted to build. We wanted to help build an infrastructure, and we want to help build this gospel of fast settlement of a lot of tech that enables you to program money. We wanted to bring that to the masses and we thought, “Okay, stablecoins, CBDCs is not something that people will try to speculate on or will experience greed as they look at that currency. That is probably where we should focus.” And we were very lucky that shortly after we had that realization, we started to catch when about Diem or Libra, the artist formerly known as Libra as I keep saying.
Ran Goldi:
And, that was actually very exciting for us because we said, “Okay, if Facebook are getting into a project that is about a payment system, and in that payment system, they’re going to utilize blockchain technology as well,” And, I’m saying as well because, there’s a 1000 of different technologies that are powering Diem. But, “Blockchain as well, then okay, this is something where we contribute.” And, this is probably humanity’s best chance to actually hold a device and send a payment or make a payment to a merchant or send money to a friend that’s using blockchain. That’s probably our best chance of this type of solution to proliferate around the world. Because, Facebook has 2.7 billion users because they have surfaces like WhatsApp or Messenger or Instagram and hopefully, they will know how to create a user experience so that the user wouldn’t even care that there’s blockchain below. Because, you know what? No one cares that there’s blockchain below that. It’s only us, the geeks, the nerds and the payments people. And, that’s you George and Yvette as well.
George Peabody:
Guilty as charged man.
Yvette Bohanan:
That’s very true. And I love what you hit on because, that’s always been my acid test talking to people. If they’re talking to me about their idea and they can do it for a while without bringing up that underpinning MySQL version, you know blockchain, that’s a big plus because they get it. They get that this is just a means to an end or a mechanism of technology, and yeah, that’s really important. Now, you’ve been doing a lot of work, you’re focused on Diem for those reasons but, your solution that’s coming out of stealth mode in a big way is initially focused on Diem. Give us your version of the elevator pitch here of what you’re trying to do as first in this space. We understand why you’re here and what got you here but, now what are you trying to achieve that in that long-term vision where you think that this is the humanity’s best chance. How are you going to help humanity here?
Ran Goldi:
Okay, good question. So, how am I going to help humanity?
Yvette Bohanan:
You set yourself up, Goldi.
Ran Goldi:
You’re right. Now I have to save humanity, okay. I’m going to add that to my to-do and Notion. But before that, George, you can scrub that later.
George Peabody:
Maybe not.
Ran Goldi:
That’s going to be the video. How am I going to save humanity? So, I’m sorry your question was why are we doing this? Okay, perfect.
Yvette Bohanan:
Yeah. Coming out of stealth mode, you are really focused initially on Diem but I don’t think you necessarily… It’s a great world’s chance kind of thing, but there are maybe other contenders that’ll come along. How are you positioned in the market? What are you trying to really achieve to move things along in this space?
Ran Goldi:
And what I really wish I would save for humanity, if we’re using that word a lot is that, no one would need to be first of all unbanked. Second of all, we’re all a victim of a lot of technology patches that were created over the years. I’ll give you an example, bank transfers they cost let’s say on average probably a few dollars. If I average the cost worldwide, international bank transfer, and they take two to five days. That’s just a heritage from old technology systems, and we’re paying for that heritage and I think that’s wrong. And again, the people who are unbanked, I think we can help them solve those issues as well. And, I also think that especially today we keep saying in the past decade there’s this global economy, join the global economy, there’s a gig economy, et cetera. It’s still really hard to pay people around the world.
Ran Goldi:
I have a friend who is importing amazing merchandise out of Morocco and, every time she needs to send money to our suppliers, it’s like a five day journey because they don’t accept visa and they don’t have PayPal and she doesn’t their local payment means. And it’s 2021, we’re almost winning a worldwide plague that tried to take us all down. We can solve those financial issues. We can make that happen for everyone. We can make everyone accepting and sending money worldwide. And my thought is that, first of all, I would say I want to make sure that every merchant around the world, again using stablecoins, can get paid instantly because I was a business owner a few times now as well. I know how important it is for cashflow to get your funds ASAP. That’s number one.
Ran Goldi:
Second of all, like I said, I think every merchant should be able to get paid worldwide without, does he have an account with PayPal or not? Or not necessarily PayPal, with a local bank, does he even have access to a local bank or not? I think that’s something worth solving and I think Stablecoins can definitely help do that. But also really, I really think that we’re at a point where we’ve been using money in a very dumb way for a long time now and I think that because coding languages have been in existence for a while, and now it came this Blockchain technology that could enable us to do more interesting stuff and we can program money as well. And I think that if you put the three things I’ve put together, there could be a really big revolution worldwide using those technologies and Stablecoins. And that could take a lot of the fees in the middle out.
Ran Goldi:
My vision is that, today, every merchant needs to talk to a PSP or a gateway or an acquirer to get paid. And, I’m sure you’re talking about this in your payments boot camps but, if I have an e-commerce store and I’m selling hats, I’m not going to set up my relationship with visa directly. What I’ll do is, I’ll probably talk to Checkout.com or PayU or IBN or Stripe, one of the PSPs, there are almost 13,000 of them. And in 90% of cases, they will generate the checkout page for me. And, they will tell me what payment methods I can actually accept. Again, it makes sense because me as a hat seller in my store, I don’t want to start checking source of funds for my users, I don’t want to do KYC to anyone who’s paying, I don’t want to look at sanction lists, I’m just selling hats.
Ran Goldi:
So, I’m using a PSP. But, I think today, technology and I don’t know if it’s going to be Blockchain technology or a group of other sets of technology that there’s a possibility for us to use technology to actually say, “You know what? We don’t need those middlemen PSPs. We can actually have very sophisticated technology pieces that would automatically check sanction lists, that would automatically check your source of funds, and maybe, blockchain would help because there is a transparent settlement layer where I could track your money, anonymously hopefully, and see that everything is okay.” But, my vision is for every merchant from around the world to be able to accept money without paying fees. And, the vision is also for those merchants to also run their business on a digital currency, because then they could also pay their suppliers worldwide or their employees worldwide and everything would be faster, smoother, cheaper.
Yvette Bohanan:
That’s a huge business. Okay. So, let’s unpack all of that a little bit more here. So, I think I’m tracking with you at the… When you’re talking about this confluence or this coming together, and how separated and disjoint things are right now in any payment system essentially out there. You have the initiation of the payment, that’s one thing. You got to figure out what payment methods you’re accepting as a merchant or how you’re going to send money to your friends as a person, you’ve got that whole interface. You have this whole notion in payments of clearing. The messaging layers going back and forth just to figure out, are you legit? Is there money there? Can I authorize this? Is the bank okay with it? Et cetera, et cetera, et cetera. A lot of times in business, we talk about our business domain in our classes and we say, “In B2B, the data’s more important than the payment.” And that data, all the, can I discount this invoice? I’m paying you in full? Am I paying you early in getting this?
Yvette Bohanan:
All of that data is often separate and completely backed or emailed, and has to be reconciled and everything. And then, you have this whole settlement process of actually finally we’re getting to moving the money around. Everybody’s getting paid and trued up and net it out or whatever it is. And what you were really saying there is, with all the technology we have at our disposal today, cloud, internet, and all the consumer and business expectation of the consumer fication of it. I can talk to you in Israel right now, no delay. Why can’t I send you money now, no delay? That’s all really powerful. There’re other things with the system though. You’ve touched on, Diem is actually a system. They’re looking at governance. They’re looking at regulation. They’re looking at harmonizing these regulations across countries. A lot of that work is done by PSPs. As you’re developing this platform, let’s talk about, are you working with PSPs? I think you might have a PSP or two that you’re already engaged with PayU, maybe one of them?
Ran Goldi:
Yeah.
Yvette Bohanan:
And, they’re huge. They’re in emerging markets. How are you translating this vision to the world we have today? How are you working… Let’s bring it home just really specifically, how do PayU and First work together? And what’s the solution that you’re delivering out to merchants right now?
Ran Goldi:
Yeah, you’re absolutely right. So the first step is, to work with the acquirers and PSPs because they already have the relationship with the merchants and they have their trust. And for me as yet another technology provider to come to a hat seller and tell him, “Look, you need to sign with me. I know that there’s this PSP who allows you to accept payments in Visa, MasterCard, Amex, PayPal, Venmo, faster payments, everything. Just please sign with me as well, I’ll give you Stablecoins.” He doesn’t have the energy for that. And that’s why from a go-to marketing perspective, it just makes more sense for us to go to PSPs and help them as we help them offer this to their merchants. But, when we do get to the table with PSPs, one thing that we emphasize is, okay, the fact that now we are saving almost 80% of the fees to those merchants because we’re not using the normal rails of Visa and MasterCard, doesn’t mean you’re going to pocket that.
Ran Goldi:
It means that the merchant is going to give back, and we can settle between ourselves with the remaining let’s say 20%. And, let’s try to give some back to the merchants. That’s step one. And step two, for me at least, is to those PSPs is to tell them, “Look, after we have the merchants accustomed to accepting digital currencies, the next phase is keeping those in a digital currency format.” Meaning, I’m certain that a 100% of the merchants who will start accepting Stablecoins and Diem, wouldn’t even want to hear about those currencies. They would just say, “You know what? If you’re accepting payments on my behalf from Diem, that’s fine. Just make sure I get it back in pounds in my account or dollars in my account. I don’t care about the app right now.” Two or three years from now, I want them to say, “Why should I transfer that back to dollars? There’s the exchange format, anyway, I want to pay someone else in the other side of the world, of course, I want to leave it in a digital form.” That’s my thinking.
Ran Goldi:
And then, when we get to that phase, the next phase where I want to tell the PSPs, “This is time you to actually offer these merchants to run their entire business on a digital currency. Not just to accept payments but also start initiating salary payments for your employees and initiating other payments for your vendors over a digital currency rail.” My hope is that as technology of accepting payments would be more automated and less costly from a fee standpoint. I’m hoping that the business model of managing the entire spectrum of financial services for those merchants, I’m hoping that that business model would be big enough for both the PCPs and ourselves to exist and offer those added value services and start helping merchants get back what they were expecting to get for their merchandise and not I don’t know, three, four, five, 8% less.
George Peabody:
So Goldi, I love that you just said the word value-added service because, part of what you just said I’m thinking, “Okay, first is building on and off ramps to this new method of payment.” And that’s the gateway function, fixed fee. It’s totally dependent upon volume and what you were just talking about was about growing the ecosystem so there’ll be more volume on these purely digital rails. Somehow that doesn’t strike me as sufficient for you. In other words, what are the value-added service that might be on your roadmap beyond the on and off ramp capabilities?
Ran Goldi:
The way I’m looking at it is, I think that businesses today… And, I think that’s true actually for anyone who was running his business on normal financial rays. I think companies today are not managing their finance well enough. And, I think that’s because they don’t have tools to do that. I’ll give you a fairly simple example. I’m just another startup. I’ve raised let’s say millions of dollars. Those millions of dollars are in the bank. They’re literally doing nothing. I’m probably paying more to keep them in the bank and the bank is probably giving an eight to one ratio loans on my money to other people and he’s making money hand over fist. And that to me, that doesn’t make sense. To me, if I have that money and somehow in a very smart way I could somehow have a pure interest for that money in a positive manner for myself… And, I don’t know how much have you guys looked at the different opportunities in the crypto space today. Today, if you deposit $1 in Block Five, for instance. That’s a company that even I think Visa invested in.
Ran Goldi:
If you have $1 and you deposit that in Block Five, you get 17% yearly interest that does not exist anywhere else in the world in the normal banking system. And that’s because the bank takes that interest. He makes that money on your money but, Block Five democratizes that. And, now it’s scary. I’m telling you this now on this podcast, it’s 2021, you think, “Okay. This guy’s weird. He’s talking again about those weird decentralized finance cryptocurrencies, whatever.” Fine, I can handle that. But, what I’m trying to tell you is that I think this technology… And it’s not just Blockchain. Blockchain is something that was invented 10 years ago. They’ll probably be other super amazing technologies for the finance industry. I think those technologies would allow us and our businesses to actually make money from their money, to make money from their cash flow, to somehow create more revenue out of even money that they have just standing out in the bank.
Ran Goldi:
And, that is an example of a value-added service. Another example of a value-added service that I think we would want to offer and I’m sure that’s going to be very big is everything that’s around risk and fraud and, let’s call it Reg Tech. I’m sure you’ve covered this before in your series. Reg Tech is a growing industry. And the reason that it’s growing is that, payments are moving to be more and more electronic, more and more digital. There are more and more Fintechs. As more Fintechs exist, they need more regulatory technology solutions. And that includes risk fraud, AML and KYC’s, source of funds, all of those different solutions. And, those are also a value-added service that we think we want to offer to our partners in the future because as you go into digital payments I’m sure that there will still be regulations. There’s good reasons for regulations. We still would need to uphold to that. And, I think that we would want to offer additional services to minimize progress et cetera.
Yvette Bohanan:
Right. So, just to put a bow on all of this as you’re laying out a better global state of payments here. The other thing that’s going on is that, as George talked about at the beginning of this podcast is there’s Stablecoins and then there’s Central Bank Digital Currencies. And even in the Diem white paper, they talk about Stablecoin being like a stepping stone into Central Bank Digital Currency. How close do you think we are where you just get the Stablecoin stuff, and we’re just going to be seeing more of the CBDC? And if that’s the case, is there a role at all for banks in the future in terms of custodians of your keys of holders of the Reg Tech code, if you will? The keepers of the code that’s running around and enabling all these distributed ledgers. Is there an evolution here, or are we talking about a complete disintermediation? On the spectrum, where do you see this headed for the banks because that’s really where you’re focusing your competitive edge?
Ran Goldi:
I don’t know if I’ll still be alive when banks won’t be around. I don’t know if that’s ever going to happen. Obviously, they do have some role in the future as well, even if it’s just making sure that our digital buys are stored safely somewhere. Let me start with your original question where the first part of your question… Sorry. Stablecoins and CBDCs, they’re basically the same. One is by corporates, one is by countries. I can make a prediction that in the next 10 years, more and more countries hopefully Western countries as well would roll out CBDCs. And, that’s not because I’m a blockchain fanatic, it’s just because that’s technology. We started with pieces of silver, and then we went to bills, and then we went to credit cards, now it’s just you and me on an app and God knows where the money is anywhere. And then, it’s Diem and Stablecoins and other CBDCs, and that just makes sense because technology is just evolving.
Ran Goldi:
You don’t need to believe in blockchain to believe in digital money. And, I really think that the public is not ready to let go of banks. The world is not ready. I always give this example that we as humanity, or let’s put it this way, geeks usually think that when they meet a new technology, “Oh my God, this is going to change the world a year from now. Everyone’s going to use this.” Spoiler alert, that’s just not true. Because, if you go back even five to 10 years, I would show you amazing technologies of how all of us can look at a sporting event together in 3D. I’m not even on the court and there’s an NBA basketball game but I have glasses on my face or I’m seeing all the crowd live and everything but in reality, in 2021 if we all want to talk about a major sporting event, what do we do? We go to this platform that limits you to 140 characters and we write how are we experiencing this event.
Yvette Bohanan:
How awesome it is with the game, yeah.
Ran Goldi:
This is an awesome game and here’s a thread about it. Okay, that’s the best we can handle as humanity and that’s fine because things take time. Technology takes time. So, are we going to see banks 20, 30 years from now? I’m absolutely certain that we will. They’re not going to let go that fast and that’s fine. They have a role as well. But, at the same time I have no doubt that the end of cash and the end of money as we know it is coming in the next 20 years. It’s just a matter of countries feeling comfortable with that change. And like you said, it’s an evolution, it’s not a revolution, it’s going to be slowly because that’s what it takes. Because, we’re still using 140 characters. I think they’ve extended that to 280, but you see, evolution.
Yvette Bohanan:
Evolution. Little baby steps.
George Peabody:
We’re going to need to leave it there Goldi and Yvette. Thank you both very much. Super interesting talking about really the future of money.
Yvette Bohanan:
As your platform gets going, we’d love to check back in and see how things are going and what your perspective is six months or a year from now.
Ran Goldi:
Thank you.
Yvette Bohanan:
You are right on the edge.
Ran Goldi:
Yeah, thank you. Thank you. I’d love to see you again, George. Thank you Yvette.
Yvette Bohanan:
Thank you so much. Good luck to you and your team.
