Stablecoins and Global Financial Inclusion

Huge swaths of the global population have mobile devices, but don't participate in the financial system. Stablecoins and the proliferation of digital currencies present an exciting new opportunity for people to connect to a more open and inclusive financial system, creating new economic opportunities for those who have been excluded from the banking sector.

This week we are joined by several guests who bring a wide range of perspectives on the potential for stablecoins to broaden access to the global financial system for billions of people. We are joined by Harish Natarajan, Lead Financial Sector Specialist on Payments & Market Infrastructures in the Finance, Competitiveness and Innovation Global Practice at World Bank; Danelle Dixon, who is the CEO and Executive Director of the Stellar Foundation, one of the preeminent blockchain projects in the world that is focused on global financial inclusion, and by Tristan Cole, Founder and CEO of Sempo, an innovative startup leveraging stablecoins to power digital money distribution in partnership with leading global NGOs.

We will dig into the big picture challenges, the technical innovations that stablecoins on public blockchains represent, and a hands-on view of the impact these technologies are having today on people everywhere.

jeremy: [00:12:08] Hello, I'm Jeremy allare. Welcome to The Money Movement, a show where we explore the issues and ideas driving this brave new world of digital currency and blockchains. Today, we're going to talk about stablecoins and global financial inclusion. I think everyone understands, at least at a high level, that there are enormous sectors of the population all around the world domestically in the United States and in markets all around the world without access to the financial system or with varying degrees of access to the financial system. And that has a tremendous impact on people's ability to gain livelihood, to store value, to participate in the economy safely. And there's been this very clear asymmetry that has existed between these masses of people who have access to the Internet and increasingly have access to the Internet through powerful smartphones and mobile devices that have become more and more affordable, but yet still do not have proper participation in the financial system and it's a critical issue and we're gonna explore that more today. I think even those that do have some degrees of access oftentimes face punitive costs, time delays and real limitations and burdens that the average person doesn't have when dealing with things like storing money, moving money or or even generating savings. And so digital currency obviously emerged nearly a decade ago, and it's often been heralded as a solution to this problem, to increasing financial inclusion. Banking, the unbanked, making payments and remittances, more low cost, accessible, etc. But after seven years, it's been off to a slow start. But now, literally as we speak, we are starting to see this explosion in Stablecoins and Stablecoins as stable value digital currencies, often denominated in things like digital dollars, like USDC hold really great promise to actually fulfill some of these broad ambitions that many in the digital currency and blockchains sector have had for the last decade. So today we're going to be exploring all of those issues as we focus in on stablecoins and global financial inclusion. So this week we are joined by several guests who bring a very wide range of perspectives on the potential for Stablecoins to broaden access to the global financial system for billions of people, including Harish Natarajan of the World Bank, Denelle Dixon, who is the CEO and executive director of the Steller Foundation, and startup founder Tristin Cole, an Australian based startup back called Sempo, which is really at the cutting edge of using Stablecoins in disbursements to those without banking. So to kick this off, we're going to zoom out into a global view with Harish, who is the lead for payment systems development at the World Bank, who spent a lot of time focused on these issues over a long period of time. And he's both been analyzing and making recommendations to global leaders and policymakers around these topics. Welcome, Harish. [00:15:41][213.3]

Harish Natarajan: [00:15:44] Hi. How's everybody doing? [00:15:45][1.2]

Jeremy Allaire: [00:15:46] I'm very good. Thanks for joining us today. [00:15:48][1.6]

Harish Natarajan: [00:15:49] Yes, thank you. Thank you for inviting me. It's a pleasure to be here. [00:15:52][3.0]

Jeremy Allaire: [00:15:53] Excellent. Well, so first, I want to maybe sort of have you talk a little bit really broadly about the problem space. What is the challenge that the world faces in terms of participation in the global financial system? [00:16:08][14.6]

Harish Natarajan: [00:16:12] Generally there are, broadly, maybe five different kind of challenges, which I would would like to outline. The first one is clearly financial exclusion. I think you already alluded to that. This is to a large extent. Of course it is. It is a global it was markets and economies, but certainly not restricted to them that are pockets of national exclusion within high income countries. And just to quote some statistics, based on the data which we gather at the World Bank on which is called a Fintech Survey, which basically measures the number of people who have access to the most basic level of financial inclusion of access the top. So that is a possibility both in the lower and middle income countries as of 2017, 2018 for high income countries it is over 93 points. And so it kind of shows the gap between the lowe income and high income countries, but also the same time, which shows that even with high income countries, it's not 100%. So that's that's the perhaps to the very first one, the second one is also the limited usage of people who have access to get an account with the limited usage of use of that would make an additional payments, there kind of as for the statistics, we are tracking, less than 50 percent in the lower income countries actually use it for making additional payments. Whereas it's about 90% in high income countries. The thought it is about access to finance. This is a lot of talk about savings instruments. Could you estimate use loans and so on, there the gap is actually even bigger between poverty in low income countries and high income countries in Europe, pocketbook individuals and businesses here, for example, on savings, the gap is like 20 percent for low income countries versus 54-55% percent for high income countries and similarly all week from a regulatory financial institution is just about 15 percent lower income and middle income countries. And then there's a gap of four or five trillion dollars for placing these in terms of the financing gap for them. And this is one point three times the kind of global funding. So it kind of shows the gap of what is the demand versus what is the supply? And then the fourth area is about cross-border payments. And you alluded to that at the start. It's big, it is costly. The only aspect, of course, peoples, which is currently very diligently measured, is on remittances in which the World Bank as a marching mechanism for that. And then as part of our estimates, the cost of setting $400 is around six point seven percent. Now, it is a significant improvement from the past, but still way too high. And then the last one is I think this is not much talked about and I call it the case of ignored middle in the cross-border payments. So if you segment the market, you have the larger corporates. So who have access to multinational banks, and, I think the world is not so that the experience of cross-border peoples is not necessarily that bad, but and then at the bottom end, you have remittances, which are, of course, expensive. Well, based on some statistics I quoted you. But there is a functioning market that offers services available. We can send money to most of the countries almost instantaneously, even if it is based on the cash flow as a nation and as postman, because people are able to get notified that the money is available, that they would withdraw. So it's a functioning market and inefficient. But it's still functioning. But there's this little which is not being fully sought. And these are the new age services like freelance workers will coming into emerging markets, small merchants and small businesses participating in the global value chains. And for them, the experience of cross-border business is really rotten and it's really they're not being sold well. And I think for them, the expenses of getting back. So I would I would say these are perhaps the five leaders, at least the ones from my vantage point. [00:19:55][222.8]

Jeremy Allaire: [00:19:55] There's an incredible amount of work to do. Clearly. [00:19:57][2.0]

Harish Natarajan: [00:19:58] Yes indeed. [00:19:59][0.3]

Jeremy Allaire: [00:19:59] It seems like the sort of we all kind of take for granted sort of the utility value that we see in the financial system. Living in a developed market, for example. And it really feels like whether you're an SME or an individual on a vast scale, like really harnessing the utility value of money is harder. It's more expensive. It's more difficult. And in some cases, just completely nonexistent. Yeah, that's that's extremely helpful context. And really, you know, again, kind of zooming out, looking at the data, looking at the gap that we have. And as I said, I think, you know, a lot of us have come from the technology world and the Internet world and the software world into this because we want to solve some of these problems. You also alluded to, you know, the fundamental technology innovations that have been happening, digital payments, mobile payments. Obviously, we've seen rising levels of participation because of that. And obviously, in some cases, you know, incredible leapfrogging even in developing markets. But we still obviously, just given what you've just said, we have the these sort of profoundly uneven access. And it's across a lot of different dimensions of the utility. But I want to focus in a little bit on this immediate opportunity. So how can digital currency and in particular in Stablecoins and what the IMF describes as sort of hybrid central bank digital currency models, where you've got private sector actors operating digital currency environments, but in concert with the central bank money, which is obviously an emerging phenomenon. But just as we look at these global stablecoins things like USDC, things like Libra that are on the horizon. How do you see that transforming access to financial services? [00:21:52][113.5]

Harish Natarajan: [00:21:54] Yes, I think I think maybe a kind of a bit of maybe a little bit of a contextualization here. So one wouldn't be that it would be good to segment the market. So let's take a look. Think about. People who do not have access to a accounts or who do not have access to payment services. And I think if you go behind and ask the reasons why people don't not have access and why they're not using it, got some very interesting information. Right. So in some cases, like it is about lack of funds and this is more or less basically it not doesn't necessarily mean that they don't have any money to do. It just means that the amount of money they have is perhaps not enough to justify larger amount of fees and so on. [00:22:35][40.4]

Jeremy Allaire: [00:22:35] Right. [00:22:35][0.0]

Harish Natarajan: [00:22:36] And then it is too expensive that it is the documentation requirements required to open an account is at least to onorous for them. So I think that a lot of fundamental reasons behind it. So any solution which has to address this problem has to address those types of issues. And the way I see it now? I think the digital currencies and stablecoins as a club do not necessarily address these issues to some extent, maybe will on the cost side, but not necessarily on the other issues I mentioned. So that is one. One segment. Right. The other segment are people are people who have able to meet all the requirements but simply did not have efficient mechanisms for them to use and make payments. And I think they're clearly I think all these different designs has a role to play. And then again, you have to also look at it against all the other innovation which also happens. If you have forced payment systems kind of being looked worldwide, API banking is just coming out. I think one has to really compare this against that and see which which one really moves forward, maybe taking the specific case of classic cross-border payments. I thought I see a role for, oh, for digital currencies to potentially play a bridging mechanism to kind of bridge between the currencies and the sending side of the receiving side. Expanding the pool of entities were able to offer services. Currently, you are really relying on the money transfer operators and then you live with the last postwoman banks. Well, I think this model of digital currencies can bring in new players on the crypto exchanges and so on and subject to them being properly regulated, meeting all those AML safety requirements of departments and foreign exchange and capital controls. I think they really expand the market with more options and perhaps a better design. But they got it from my side as they have to meet the requirements for the regulators perspective. And they are there for a good reason. And I think any solution has to have to either meet them or obviate the need for them. [00:24:28][112.4]

Jeremy Allaire: [00:24:29] But, yeah, I mean, what we're clearly seeing this burst sort of digital cash innovation and on chain stablecoins are an example of that. And we're seeing obviously global regulatory frameworks, the FX, FSB recommendations, other things, batoff, recommendations for regulatory regimes saying, hey, this is this is great innovation. We've got to make sure, you know, your intermediaries can meet their obligations and so on. But we're obviously seeing organically very, very, very fast growth and demand in particular for these these digital dollars, which which actually maybe leads to another another high level question, which is, you know, in this world where digital currencies exist, like digital content and digital data on the Internet, a given digital currency can exist everywhere that the Internet exists. And so, you know, in theory that the Chinese digital currency, if you have a software wallet that could support it, you could connect directly and settle the liability with the Central Bank of China from any mobile phone in the world. Again, these digital currency is built on the public Internet. Whether it be permission to a public blockchains really creates an interesting meta level issues for for kind of how we think about global currency models. And and do we believe that the the advent and growth of of digital currencies based on the major world's major reserve currencies of the world, are going to drive us towards more, you know, whether it be dollarization or something else. You know, what do you see emerging in that arena? [00:26:08][99.1]

Harish Natarajan: [00:26:09] I think clearly the technology is showing what is possible and what is feasible from a technological perspective. I know that itself. I think when also, as I was saying earlier, when we used to contextualize that against one of the other innovations happening, and I would perhaps classify them as incremental innovations in the sense that building on the existing system. Right. And sort of things like the Swift Global Payments Initiative, then there are the interconnections for payment structures which are happening in many parts of the world, then also new institutions coming in to create platforms for interconnecting different national systems. But to go to the fast payment systems on both sides. So there are various incremental innovations to happen. And on that, of course, the particular company we and looking at a global currency, one is, of course, under the argument. But the amount of automation and implementation challenges that raises the question of which will be faster, which will be much more tangible results immediately versus the immediate long term issues. And also other issues that have to be looked at as financial sector regulations are very jurisdiction specific. So the world is going to be united through a network and from the technology perspective, for financial sector regulations there are different jurisdictions and different regulations. Certain areas in which that is harmonization globally. But clearly, there are there's a desire to maintain control with the global macroeconomic framework within those jurisdictional boundaries. So any global currency model has to take those into account. And everything has to come up with the proper global coordination and governance structure to ensure that somebody benefits on which will be achieved through having control, not lost. So I think the technology is pointing to the direction of what is feasible. And I think we have to see what is back to go, given the other considerations to go to also just objectives we have. [00:28:02][112.5]

Jeremy Allaire: [00:28:03] Yeah, yeah. Without a doubt. The Internet continues to collide with nation states and create a lot of really fun policy challenges for everyone, whether it's data and privacy or cybersecurity or money, you know, all these things that really get stirred up. Well, Harish, this has been a really excellent conversation. Your high level perspective here is very, very deeply appreciated and helps really set the stage for both the problem space and some of the challenges that we need to move through to get through this. So really appreciate you coming on the program today. Thank you. [00:28:38][34.9]

Harish Natarajan: [00:28:38] Thank you. [00:28:38][0.2]

Jeremy Allaire: [00:28:39] Thank you. [00:28:39][0.2]

Harish Natarajan: [00:28:41] Absolutely. [00:28:41][0.0]

Jeremy Allaire: [00:28:43] So some of some of these numbers obviously are staggering, you know, access to savings or credit, proper participation in the financial system. Costs that are, you know, orders of magnitude higher than what what many folks deal with on a domestic payment basis. Really, really significant. But that really helps guide us forward. I think in terms of really solving what we think here is a major problem in the world. And so with that, I, I want to kind of turn now to a practical more hands on view of how Stablecoins and Blockchains can help solve some of these problems. And I'm very pleased to welcome Danelle Dixon, CEO of the Stellar Foundation, a project who are, quote, creating equitable access to the global financial system. Hello, Danelle. [00:29:31][48.0]

Denelle Dixon: [00:29:32] Hi, Jeremy. So great to be here. Thanks for having me. [00:29:34][2.2]

Jeremy Allaire: [00:29:35] You're welcome. Really nice to see you and really appreciate you joining today. Well, you know, maybe we'll start a little bit with you. You've spent a lot of your career helping to foster open access to information, including, I think, driving some really significant Internet companies, technologies that touched hundreds of millions of people. Maybe just start with talking with a bit about what drew you into the digital currency realm and why blockchains why this problem right now? [00:30:04][29.2]

Denelle Dixon: [00:30:05] Yeah, it's very much the same as why I went into the the space of the Web and what I call the content side of the web to begin with. I think that so much that we had promise to be able to create access to information and ideas and innovation for everyone all over the world. And I think that, you know, taking all of those learnings and some of the things that we did wrong on the content side of the Web, I think that, you know, we handled privacy in a way that we said regulators stay away from us. We actually don't need your help to figure out privacy. And I think we were wrong when we first did that. I think to be able to take those learnings and move that over to another part of a technology that can actually have even greater impact because it's dealing with money and access to the financial system, which we take for granted. I think from where we sit, it just creates an opportunity to be able to do this side right. And what I mean by that is to engage with regulators all over the world to help to create and foster those relationships, to not look to like, supplant, but look to enhance a financial system that exists today. So there's just so much opportunity here. And I think Blockchain is just the beginning. You know, when I first started it, it's I've been in this space for a little over a year. And when I first started, I used to call it nascent technology. I don't think it's nascent anymore. I think it's like pretty. It's picked up pretty quickly and moved. And so I feel like using this technology layer, which frankly, not not everyone in the world needs to understand that layer of technology, much like you don't need to understand the underpinning underpinnings of the Internet, but you need to be able to to gain benefits and to derive value from it. And that's our goal. And so for me, that's just crazy. Exciting. [00:31:47][101.8]

Jeremy Allaire: [00:31:48] Yeah, it really is. I mean, I think both of us have have the perspective of these other phases, the Internet. And we can see the analogies. We can see where, where, where things break and so on. But yeah, I mean, everyone opens up their mobile phone and can get to all the content everywhere and have access to all the world's knowledge. And, you know young people sort of grab it and take it for granted, and just like, of course, there is infinite knowledge that I can access with like a voice command. But but, you know, I think probably in 10 years, right. If if you're successful, if we're all successful, people say the same thing about the way that they interact with the economy, the way that they interact with with money. So I want to I want to focus in on the work you're doing, really specifically with the Stellar Foundation. And I mentioned that the mission in introducing you, creating equitable access to the global financial system. Talk about that mission and talk about how, you know, we're starting to tackle that that very, very immense problem, that problem that Harish helped articulate for us in the numbers. [00:32:50][62.0]

Denelle Dixon: [00:32:51] Yeah. That was awesome to hear those numbers. I mean, we focus on just a few of those numbers in terms of one point seven billion adults globally are unbanked. And so from our standpoint, if you think about that number. But then you juxtapose that with two thirds of them actually have mobile devices. Right. And so if we can actually take those two numbers and put them together and try to solve that problem. Yeah. Yeah. Like you can, then you can see where the value of something like this can happen and folks can get access to it. So for us, we tried to synthesize our mission into that one sentence, creating equitable access to the global financial system. Recognizing, though, that that's a mission that takes a really long time to accomplish. So you kind of got to break it up in bite sized chunks. And so for us now, what we're focused on is really developing what we call a minimum viable or even larger ecosystem to think about making sure all the players in that whole stack are there so that this technology layer can actually really be pushed out to the world in a way that that can solve some of the problems that we just heard about this morning. And you got to think about it as, again, like there's this underpinning, which is the Blockchains, but then there's Stablecoins, which you obviously know so much about, and how those stablecoins interact and create the opportunity to go from fiat currency to digital currency back to fiat. So if you so choose to go in and on and on and off the blockchains, what we really need to do from Steller is a public blockchains. And what we really need to do is create those what we call in our ecosystem anchors so those on ramps and off ramps that you can actually get in and out of the blockchains from Fiat to digital, digital to Fiat. And so our focus, the bite sized chunk that we're focused on, at least for this year, is really developing even more. We have many that are already participants in the ecosystem. [00:34:38][106.5]

Jeremy Allaire: [00:34:39] You have a lot of activity in the stablecoins space with Steller. [00:34:42][3.3]

Denelle Dixon: [00:34:43] And we have and we would like a lot more even Circle. We would like Circle. So we have this to have these corridors open so that you can actually see payment channels and you can see folks actually interacting and using this for remittances. And just for cross-border payments, it's it's already pretty great, but it's that bite sized chunk of growing that anchor base and creating the financial institutions which aren't necessarily banks. There they're a lot. They come in different shapes and forms. They're all regulated on the edges. And so that's an important piece because regulators know how to deal with money. And so I think that's an important component, too. So that's our core focus, is to work with regulators, to get them comfortable with blockchains generally and to get them to understand that this is actually enhancing their system and their ability to be able to provide even more access to their constituents. [00:35:29][45.8]

Jeremy Allaire: [00:35:31] That makes a lot of sense. Familiar territory. I think, you know, when that happens, you you sort of see that there's sort of the digital watch lighting up the on and off ramps, lighting up. What does that look like to those? You know, I guess that the 70 percent of the one point seven billion or whatever, the one point two billion, what does it look like for them? What becomes possible for them as that happens. [00:35:57][26.4]

Jeremy Allaire: [00:35:57] So I think that's it's such an important question. And I think about it all the time. I think about it in, like the World Bank example. If you think about folks out there in the world who don't have bank accounts, but you can they can have a wallet and they actually don't need to understand that they can if they so choose, but don't need to be able to understand all the inner workings of blockchains. But if their wallet allows them to take their currency, to convert it to digital and then to send it to family, that's in some other region. It's actually that simple. Or if the World Bank, for example, were to lend money using a digital wallet or a digital currency that they control, and then it gets all the way down to the farmer that's doing the actual work through a wallet again. And that farmer doesn't can't. He can or she can know, but they don't need to know how this all came to be. It's just another layer of technology that they get used to. [00:36:46][48.5]

Jeremy Allaire: [00:36:48] Right. That they they can turn on WhatsApp or they can turn on their phone and they can click a URL and get to content and do all these things. They they sort of take it for granted that they have the world in their hand. And then there's this missing piece. So we're really trying to fill in, fill in that layer. And again, encouraging signs, I think, as you talked about, there are these sort of layers and getting these pieces in place and I look at, you know, things like public blockchains and then Stablecoins that sort of building blocks for this new global financial system, this new, more opening and inclusive global financial system. And a lot there's a lot of talk about, you know, the sort of value exchange piece getting value from point A to point B, taking the cost down. We need easier, more access. But what are the next layers that get built? You know, again, hearing Harish talk about the disparities in terms of access to other financial services. Are those the next layers that come once we get this value exchange layer kind of dealt dealt with? [00:37:48][60.3]

Denelle Dixon: [00:37:49] I think it's that. So if you think about what does it mean for someone who doesn't have a bank account and can't get access to a bank account? The most important thing for them is to be able to access something that simple, clean, easy to use. I think what we haven't done enough of on the Blockchains side is using applications that focusing on those applications from the user standpoint and just ease of use and simplicity. So I do think we need to have that those wallets that we have, many of them that are out there in the world already. But then we also need to be able to have we just a company Destock is actually launching and they're they're able to allow folks in all parts of the world to be able to purchase shares of stock in the US. But from everywhere in the world, those are the kinds of things that really opens up the infrastructure and the ability to really derive value. So it's these applications that come in again from. It has to. They have to be simple from the user standpoint. And then they just open up opportunity. What about if you could hold assets? We already have this and some chains where you can hold assets and and get interest rate those assets. And so you don't have to have a bank account to do that because some folks can't get to the banks. I mean, it's hard for us to understand that. But in other countries, things aren't just on the corner. So these are just these kinds of applications are going to allow users to be able to just feel like they're present in this ecosystem that they've never been a part of before. [00:39:11][82.3]

Jeremy Allaire: [00:39:12] That's that's a it's a great vision speaking vision, you know. Paint a picture for for us all of what you see in in three years. In five years. We're seeing acceleration. It's taken a while to get here. But lots stuff kind of coming in to place. What what do you what do you hope what do you hope that we see? [00:39:29][16.8]

Denelle Dixon: [00:39:31] So I think it's a funny because I was just thinking this morning. We're doing a webinar next week on anchors. Again, anchors are those financial institutions like, for example, Circle, who is the issue and stablecoins or they can provide an on and off ramp there. They come in different shapes. We have fourteen hundred folks attending from all over the globe because everyone's interested in how they can be part of this and become part of the system. So I feel like we're gonna have all of these. I love the way that you think about lighting. Lighting these visions up all around the world. We're gonna have all these endpoints that you can see all around the world. And then I really do believe it's going to take some time, just like, for example, you know, email. If you think about this as the blockchains in the same way, email, you can send email not just within one walled garden. You can send it outside all these. Add to all the different walled gardens. That is what I think we're going to see. So we're gonna be able to see corridors open up, people really being involved and part of the ecosystem. And then I think we'll see a lot more folks come in to develop these applications that we talk about from the user standpoint. So really solving user problems. So we're laying the foundations. You guys are. We are. In terms of here's the foundational technology that you can use and now we just need like all these innovative, creative folks out there to be thinking about ways to engage. And that's what I think we're gonna see in the next three years. [00:40:45][74.7]

Jeremy Allaire: [00:40:46] I wholeheartedly agree. It's really, really nice to to to to hear your thoughts on this. Denelle, it is great to have you on. Thank you so much. And look forward to seeing you really soon. [00:40:58][12.1]

Denelle Dixon: [00:40:59] Thanks, Jeremy. Take care. [00:41:00][0.8]

Jeremy Allaire: [00:41:00] Absolutely. So I think this this sort of vision of these layers getting built and the kind of blockchains layer, the stablecoins layer, these new types of markets that are available. And then, you know, this is all fundamentally open public infrastructure that creators, engineers, software creators, designers can go on top of, much like we kind of collectively built out the experience of the Web. So very, very interesting time for developers. Very interesting time for for creators as these layers come into place. And we can all kind of hack on the global financial system a bit. I actually want to speaking of of a building, I want to turn now to a startup entrepreneur who's very much hands on building and delivering solutions for financial inclusion, using stablecoins and doing this in partnership with global NGOs such as Oxfam. Very pleased to welcome Sempo co CEO Tristan Cole. Welcome Tristan. [00:42:02][61.8]

Tristan Cole: [00:42:05] Thanks, Jeremy. It's a pleasure to be on. [00:42:07][1.4]

Jeremy Allaire: [00:42:08] And I have to double thank you, because I believe it is very late for you in Australia. [00:42:13][5.1]

Tristan Cole: [00:42:15] Very late or very early. [00:42:16][1.2]

Jeremy Allaire: [00:42:18] Is this early, I guess. [00:42:18][0.9]

Tristan Cole: [00:42:20] Yeah [00:42:20][0.0]

Jeremy Allaire: [00:42:21] OK. You're going to go for a run after this. [00:42:23][1.9]

Tristan Cole: [00:42:24] We'll see probably not. It's it's yeah. It's it's quite early. It's a pleasure to be on. [00:42:29][5.2]

Jeremy Allaire: [00:42:30] Thanks, Tristan. You know, I think that the backdrop of, you know, big picture, what the challenges are in the world, you know, a little bit on this. You know, this infrastructure is coming in place. You're now, you know, at the forefront of using, you know, cutting edge payment technologies for the delivery of funds to those that are most in need of help. Maybe you to start talk a little bit about the mission of Sempo. [00:42:53][23.4]

Tristan Cole: [00:42:56] Yeah, sure. You know, from our firsthand experience, we've found that cash is the most important thing in the world. You know, when you think of NGOs distributing like humanitarian assistance or development, a lot of what is done today is actually just giving people goods and services. But you know, what we're seeing in the industry over that and what we've seen over the last decade is that slowly NGOs are starting to give more cash. And that's because it's more empowering, it's more transparent for donors and it's ultimately more effective for everyone. And the stat that I always like to bring up is that 70 percent of Syrian refugees actually sold the aid they were given to buy what they actually needed, which is just astonishing that people are receiving these these goods and NGOs are giving things that, you know, people say they think people need, but we're not we're not sure. And instead, they're just going out onto the market and selling it. And, you know, that's why we got into it, to help NGOs distribute money effectively. And, you know, today where we're at over a run rate run rate of over a million transactions, you know, for aid and development, working with, as you said, NGOs like Oxfam, we ran the first cryptocurrency powered aid program in the start of 2019 in Vanuatu with Oxfam Australia that was funded by the Australian government. Now we've done projects with the Red Cross and Mercy Corps. And I think, you know, what we're trying to do is really focus on these these application layer products. You know, how do we help these people who don't have access to financial services today? You can't start a business if you don't have access to a bank account. You can't do all these things that we just take for granted. [00:44:38][102.4]

Jeremy Allaire: [00:44:39] Right. Yeah. I mean, I think when you when you look at these really incredibly challenging parts of the world. Right. Remote communities, refugees, displaced persons, communities, as you said, they just they don't have any access to the banking system at all. Maybe specifically as we talk about digital currency, Stablecoins, etc, you know, what role can these play? Not just in the dispersement piece, which I think is is is a huge piece, sort of digital cash in people's hands, but in sort of bridging people into participating in the financial system itself. [00:45:14][34.5]

Tristan Cole: [00:45:16] Yeah, I mean, disbursing cash is kind of the tip of the problem. It is. It is so hard. I mean, the stat that was brought up was a one point seven billion people were unbanked. Right. You can't when we're talking about distributing money to these people today, the best the best case is literally giving them stacks of physical cash. You know, NGOs will go down a river, you know, with a pile of money in a backpack because that's more safe than driving a car. They're less likely to be attacked by, say, terrorists or or other entities. And I think that that's the start of the problem. But what we've discovered through our work of last three years with NGOs is that it's actually this is financial exclusion for these people, that that is causing the real the real problem. You know, from from some of our firsthand experience in Vanuatu, when weapons can be there, the most exciting thing for them was these plastic bills, these plastic bills that were being swapped over from paper bills like you've got in the US. And the reason people were really excited about this was because they could you know, people today are burying their money in Vanuatu. And as a form of savings. Right. And these plastic bills weren't rock. So that's why they were getting so excited about it. Yeah, well, that's just crazy. A little bit more. A little. A little bit. So, I mean, when we heard that it's like people laugh, but it's it's true. And then, you know, some some Oxfam staff we were working with. They were losing nearly 20 percent of their money when they were sending sending funds back to their families. So it's all these problems that just come up. And, you know, we live in the US or Europe or Australia. We just don't experience this first hand. I think when it comes to real access to the financial system, it's the financial exclusion is causing a lot of these issues. Financial inclusion can be as simple as access to a basic transaction account on a smartphone. And the reason this is so powerful is because you look at a lot of these banks and these banking branches today as as was mentioned, they can be like two hours down the road. You know, they're not they're not accessible for lot of people today. [00:47:35][139.1]

Jeremy Allaire: [00:47:36] It needsto be entirely in your pocket, obviously. So I know some of the issues that you're identifying, things like, you know, the risk of delivering cash or the accountability. I know, which is a really big issue for for NGOs with with with funds distribution, that sort of accountability versus transparency, security, all these things and then sort of access. It sounds like some of those things have led you to Blockchains based stablecoins and the power of those as as as, you know, a secure store of value, but also in a very efficient medium. Maybe talk a little bit about your journey into Stablecoins, how you're using them today, how you expect them to kind of play a role in your initiatives going forward. [00:48:25][48.9]

Tristan Cole: [00:48:27] Yeah, sure. I mean, when when we started looking at technologies that could really help us with a problem. And that's where we came from. We had a problem that we were trying to run these cash transfer programs and really obscure parts of the world that don't have strong banking systems today. You know, we we were just looking at a bunch of different technologies. And we actually started with just, you know, issuing issuing credits on a centralized database. And we're like, OK, that's that's cool. That can work. And that's how a lot of systems today work. You know, they're just centralized databases. But as we started to scale and work with, you know, larger NGOs, they started to have more expectation around trust and transparency of funds. And I think when it comes to stablecoins, what we're seeing in a lot of the use cases, especially with USDC now we're exploring a program in Venezuela where money that just you can't use the local currency, that people need access to dollars and it makes, you know, something like USDC makes it really easy for us to run those programs. I think, ironically, when it comes to Stablecoins, you know, one of the biggest use case really is that stability. Right. You know, if you're a small corner store who sells a two dollar loaf of bread, you just can't expect to lose twenty five percent the next week because, you know, Bitcoin drops 25 percent for some obscure reason. And I think that's such a small you know, that is the reason that they're starting to get such uptake among businesses and for real use cases around the world. [00:50:01][94.5]

Jeremy Allaire: [00:50:02] Yeah, I mean, as people figure it out, right, they they say, oh, this is this is sort of like if I have, you know, a messaging app and now it's now it's money and. And as I like to say, people around the world are going to vote with their smartphones, kind of what what financial system that they want to participate in. But with that in mind, you know, looking out two or three years, maybe not forever, you know, are we approaching a tipping point? And what might this mean for those who have really struggled to participate in and have been excluded from the global financial system? [00:50:38][36.4]

Tristan Cole: [00:50:40] Yeah. I suddenly think we are. I mean, we're seen over the last few months that COVID is really accelerating that transition to digital money. You know, when I look out two to three years at Sempo, I think we see like two worlds, really. And one is one of privatized money. What we've got today in these closed systems of these closed financial system. This is run by like a single corporation. There's another future and another alternative, which is know decentralized money that is more of a public good. And I think, you know, when you look at those walled gardens, it it is, I think, a little bit scary because it when you compare it to cash, just physical cash, it is quite regressive. Yeah. You know, we have seen in in Kenya and M-PESA is just blocking entrepreneurs and businesses from accessing that that network that is basically a public good in Kenya. You know, when M-PESA, it goes down in Kenya, that's national news, which is just insane to think about. And it's run by a single private corporation. Yeah. And M-PESA can block entrepreneurs just because it doesn't agree with that business model. It doesn't align with that business model, which is just. [00:52:00][79.7]

Jeremy Allaire: [00:52:01] Yeah, I was gonna say it gets to this. And I think people are familiar with electronic money. They've got. We have electronic money. Isn't that isn't that isn't this just electronic money? We're talking about digital cash. And there's really a big difference between, you know, a bear instrument that is a form of digital cash and sort of walled garden electronic money. And, you know, and actually central banks are quite aware of that. And it's a very delicate issue when you hear people talking about things like central bank to draw currency is like, yeah, I I met at one point with the product manager of cash at the Federal Reserve and I thought, that's pretty cool. There's a product manager of cash. Cash is a product and you know, there's attributes of it that are really important. And I think there are obviously legitimate concerns around around abuse and financial crime. And so I think just like the world is navigating the sort of on a razor's edge issues of privacy, issues of identity. This is a razor's edge issue as well, probably in the years to come. [00:53:07][65.8]

Tristan Cole: [00:53:08] Yeah, definitely. And it's it's interesting that you touched on central bank digital currencies, because I think, you know, over the next two to three years, we will see like a sovereign nation issue their own digital dollar or digital currency, which is, I think, really exciting because at the end of the day, it's something as important as money. That's something that is tracking the credits and debits of society. You know, it needs to involve everyone. It needs to involve the community. It needs to involve regulators and not just be one private corporation that's running it. [00:53:38][29.7]

Jeremy Allaire: [00:53:39] Totally agree. Tristan this has been great. I really appreciate your perspective. Congrats on all the success. Really hoping that you guys can continue to drive the kind of change that's needed in our financial system. And thanks again for waking up so early. [00:53:52][13.7]

Tristan Cole: [00:53:55] Thank you, Jeremy. It's been great to be on the podcast. [00:53:57][2.5]

Jeremy Allaire: [00:53:59] Excellent. All right. Take care. [00:54:00][1.4]

Tristan Cole: [00:54:02] Bye bye. [00:54:02][0.1]

Jeremy Allaire: [00:54:04] So I think I'm hearing from from all three of our guests today the possibilities of of an open, inclusive, transparent, accessible, efficient financial system is obviously what has inspired so many of us to be builders and innovators in this space over the past decade and more and more people coming in. I think there really is a sense that we can change what's possible for people everywhere. And I think that was the feeling we had with the web of information and communications is the feeling we have here with this world of a global digital money. And the more that our digital economy is open and inclusive and integrated, the value that can be brought into the world is really tremendous. So we are, I think, on the precipice of this being a reality at a really large scale. And we are tracking that obviously here at The Money Movement and that actually leads us into next week. I'm really excited for the program next week. We're going to go in a very hands on way into the actual movement of money. And we're going to follow Stablecoins around the world from businesses in the US to people in Europe to Asia coming in and out of different currencies into Latin America, through marketplaces to India. And it's going to travel at the speed of the Internet. And we're going to show everyone what the power of this is and how this is so, such a huge, significant improvement in that is emerging in our global financial system. All right. Can we really excited for that program? And then also very excited to announce that the following week, on Thursday, June 25th, we'll be joined by the former secretary of treasury and former chief economic adviser to Obama; Larry Summers. We'll be doing a one on one fireside chat to talk about these issues. Talk about some of the global economic system issues. The role of digital currency and get his views on this should be a very exciting program. And we'll have more on that soon. And until next week, stay well. Stay safe and stay informed. Thank you. [00:54:04][0.0]


Harish Natarajan
Lead, Payment Systems Development Group World Bank
Denelle Dixon
CEO and Executive Director, Stellar Foundation
Tristan Cole
Co-CEO, Sempo