Europe’s €11 trillion stablecoin opportunity, with Sveinn Valfells, Co-Founder of Monerium

0:00 [on-hold music] Welcome to another episode of 51 Insights. Today with Svein Valfells. Svein, welcome to the show. Thank you.

0:13 Svein, Monerium is one of the biggest stablecoin players in Europe and, and one of the oldest as well. You helped organize the first Bitcoin conferences in London long before crypto was even a word in mainstream finance.

0:29 Can you take us back to that time? What did you do there? Why did you get into crypto? Well, I think even further back, back, but one at a time. Um, my background is in tech and I'm trained as a... in physics.

0:41 But then I was dabbling in a bunch of techie things in the late '90s when I was in grad school, and I, I had the opportunity to come across, uh, cryptography and PGP back in the day.

0:51 And, of course, the internet was happening and SSL and all that stuff was unfolding and being, uh, used.

0:56 And I, I took, uh, when I was for a while at Stanford, and I took a cryptography class there, Dan Boneh's class, just by coincidence. I was curious, because I was using PGP to mess around.

1:06 Now fast-forward to 2011 and, and I'm on holiday with my family in Palo Alto, and somebody there, as, as things are in Palo Alto, asks me, "What do you think about Bitcoin?" And I said, "I have no clue.

1:16 Let me get back to you." And then it turned out... And then I went back for summer holiday, and I downloaded the Satoshi client, and, and I looked at it, and I, I did some transactions on Mt. Gox, and it was like...

1:27 I started looking at the code and said, "My God, this really works." The, the, the, the holy grail of online cash, which cryptographers have been waiting to, uh, appear, and this is it.

1:38 But then I took my time, I was living in London at the time, to due diligence and make sure this was not, like, badly done or a hack or something or a fraud.

1:47 So I started going out to hackathons and meeting, uh, some of the devs and, and messing around, and, and gradually sort of entered the ecosystem.

1:54 And, and coincidentally because of a hackathon in Berlin, I, I was invited to help organize the first Bitcoin conference in London in 2012. Uh, Amir Taaki was the person responsible for that one.

2:05 And you just mentioned the holy grail of online cash. What made you realize that Bitcoin is the holy grail of online cash? Well, it's this epiphany eureka moment. You just...

2:17 If you're fortunate enough to have the right set of context to discover something. And, and, and I just happened to have the right background in financial services as well.

2:26 I'd, uh, been investing in, in, in mutual funds, hedge funds, and a bunch of things. So, so I understood. And al- also, I knew crypto. I know code. And so I understood the, the...

2:39 I had the set of, uh, backgrounds required, uh, thankfully. So it was like I, I, I could just have been another fool stumbling across a, a, a coin of gold on the... lying on the street.

2:51 And it's like, uh, this happens, um,

2:54 you know, it's serendipity a- as it were that, that Bitcoin happened to appear at that time because I was just fortunate enough to have the set of experiences and backgrounds to understand what it, um, the implications would be.

3:07 And it was obviously, number one, a payment system of some sort, and number two, uh, a, a new type of asset class because Bitcoin was not cash.

3:16 And then meeting Vitalik at, at another Bitcoin conference in London and then observing what happened, you know, Ethereum come, come to, come to fore, and, and one of my co-founders actually was, uh, participating in the pre-sale there.

3:31 I was not fortunate enough to do that. But, but, but then after Ethereum was launched and it worked.

3:36 So the, the four of us that eventually founded Monerium, we started messing around with Ethereum and wondering how we could put assets on-chain, as Vitalik had envisioned.

3:48 And we identified very early a key dependency of putting money, authorized, regulated, plain old fiat money on-chain because that's the, the money that most people use most of the time in most transactions.

4:03 That, that's how Monerium came about. So you went on, you founded Monerium in 2015. What was that initial idea that you had with Monerium? You, you said you, you wanna put money on-chain. What, what does that mean?

4:18 And how did that connect to Ethereum itself? Well, because crypto is just a token. It's just like you have money now on, on, on paper and plastic, right? And crypto could, in our view, um, uh, represent just anything.

4:35 But for it to represent, for crypto, for Vitalik, uh, any type of smart contract on Vitalik's chain to have any meaningful value in the fiat system, we understood and our basic premise was it had to be authorized and regulated in a major jurisdiction using preferably a proven regulatory framework.

4:55 And it-- So we started, uh, very s- slowly researching both the tech stack and the reg stack.

5:01 So it was not until 2017 that we actually incorporated Monerium and decided to apply for regulation, uh, for authorization, uh, as e-money institution in Europe.

5:12 Because we identified e-money as the only appropriate license for issuing on-chain fiat, AKA stablecoin, uh, in a major jurisdiction at the time.

5:25 Uh, so, uh, this is just this, the same engineering principle that, you know, many, uh, good people abide by, building on proven technology or proven regulation. Uh, e-money has been around since 2000.

5:38 Um, uh, we were the first people, however, to figure it out that to, uh, that i- it was appropriate way to issue fiat on-chain.

5:46 And we set about then talking to regulators, uh, i- inside Europe and, uh, ask them if we could apply for issuing fiat on-chain. Because each different application of e-money needs a separate independent authorization.

5:58 There's plenty of e-money companies that are-- use e-money online, in mobile wallets, on prepaid plastic cards.

6:03 But we were the first ones to come knocking on doors with regulators in 2017 asking if we can put e-money on blockchain.

6:10 And, and there was a lot of blank stares, and eventually it was just two regulators that were receptive.

6:15 It was essentially the FCA in the UK, but the Briti- British were Brexiting at the time, and our home regulator in Iceland.

6:23 Uh, who are, uh, actually quite, uh, eager to, or, or, or curious to embrace something new after having, uh, had to clean up after a, after, after a massive crash in 2008.

6:34 So, so, uh, uh, we wound up applying in Iceland in 2018, and our license was issued in 2019. Now, this is around the same time as, as Circle and Paxos are emerging in, in the US, but...

6:48 And Tether is also emerging, um, i-i-in many different places. But there was nothing happening in, in Europe at the time. And going- Mm-hmm...

6:56 into COVID, we were always aiming at mainstream applications, never at cryptocurrency speculation per se. So going into COVID, we were, uh, testing in beta and improving and extending our roadmap.

7:08 And what we did is we-- So we're the first company, arguably, because the US didn't have, uh, or, uh, proper regulation for stablecoins back in those times.

7:17 We were arguably the first company to get properly authorized to issue, uh, stablecoins in a major jurisdiction. Mm-hmm.

7:23 And we started testing cross-border transactions using different currencies, and we realized that there was a big bottleneck in getting fiat on-chain. And we didn't believe in ramps or exchanges, uh, as intermediaries.

7:36 That's not according to the teachings of Satoshi. So what we did is that during COVID, we integrated our e-money issuance systems directly with SEPA, the main payment system for the main currency of Europe, the euro.

7:50 So we're the first company to, to directly integrate a major currency payment system with Web3, starting with Ethereum and then adding a bunch of chains. Mm-hmm.

7:59 So our roadmap was always to go for the mainstream applications which are emerging now in a big way. And, and, and also our roadmap was always to serve the builders and regulated entities first.

8:12 So now we have a few dozen applications building on us, including there's one in Spain called Fence, which is automated lending system, which essentially has...

8:23 Nobody really knows there's a blockchain powering it, right? But it works much better because it's got a blockchain powering it.

8:28 We have some crypto apps or ramp, ramping apps using us as well, because we essentially provide the ramp, the Euro ramp for free.

8:37 We believe transfers from off-chain TradFi to on-chain DeFi should be seamless, instant, and, and cheap.

8:45 And, uh, most notably, we're powering, uh, on-chain debit cards, uh, the Gnosis Pay Visa debit card, and now, uh, the MetaMask MasterCard debit card as well, providing euros, uh, and sterling for these, uh, debit cards.

9:00 Uh, so there's a lot of, uh, things to unpack here, Sven. I wanna take a step back later also at regulation and how that whole space evolved.

9:09 But, uh, let's take a step back now and imagine that you would talk to a CFO of a multinational company in Europe, and you would explain him

9:22 what is the biggest pain point that you solve with Monerium that Swift and SEPA can't solve today. You can move any currency any time of day instantly to wherever in the world in exchange for anything.

9:37 That's a roadmap too, because what we're rolling out now is, uh, what we've been testing for a little while, is on-chain FX.

9:44 So it's a service to allow our users, uh, whether they be direct users or apps building on us or regulated institutions using us, uh, allowing users to exchange, uh, sterling for euro, euro for sterling, and euro, uh, for dollar eventually.

9:59 And, uh, not just our stablecoins, because we're agnostic, but for other stablecoins as well.

10:04 So, so we, we believe that because the technology underpinning what we call Web3 now is so much more powerful, we believe that all the fiat, basic core fiat services should be represented directly natively on-chain, and that's what we're doing.

10:24 So number one, by issuing fiat on-chain, stablecoins, fully authorized, regulated. Number two, full, uh, seamless, instant, zero cost integration with payment systems.

10:35 And number three, coming now out with exchange services, exchanging, uh, fiat for fiat, whether it be-be our stablecoins or other sta- or, or, or other issuer stablecoins. One of your co-founders is Jón Egilsson.

10:50 His background is at the Iceland National Bank. I think he was vice chairman there. How did his background influence Monero and how you think about money and what you're building?

11:04 Well, um, Jón and I know each other way back. Uh, the other two co-founders, Gísli and Hjörtur, we met, met up with them.

11:12 They had independently set up a cloud services system, but d- independently also discovered Bitcoin and Ethereum.

11:18 But Jón and I, um, uh, essentially the story is we were on a kayaking trip in the north of Iceland in the summer of 2012. I was on holiday from London.

11:28 Uh, Jón was driving and, uh, and so there were three of us in the car.

11:33 At the end of the trip, I offered to reimburse him, uh, the gas cost, and he had just been elected to the board of the Central Bank of Iceland based on his, um, criticism of, uh, uh, Icelandic monetary policy previously.

11:48 Um, and, um, I offered him the, the choice of Icelandic krona or Bitcoin.

11:56 Well, and Jón was fortunate enough at the time also to have the right set of, uh, circumstances or experiences to be able to identify Bitcoin as, uh, something that, that, that could grow.

12:07 So he, he accepted my however many bitcoins I offered him for, for reimbursement of, of gas. This is like our pizza story. It was many, many bitcoins. It was a very expensive trip. So- Yeah...

12:21 but, uh, ba- basically, his background was in, in... engineering in commercial banking, and then after 2008, there was a fresh pair of hands needed in, in lots of institutions in Iceland,

12:33 and he was appointed to the, to the board of the central bank. So that's how he comes in. And again, back to his background.

12:41 When you had those talks with the regulators in Iceland, across Europe, what did you answer them when questions came up about monetary stability and creating money? How does that all work?

12:55 What were your thoughts around those topics at that time, how stablecoins would change the, the monetary landscape?

13:04 Well, we, we, uh, as I mentioned, uh, we started with, um, essentially a re- a research, um, paper for a bank that later did not act on it in any way, shape, or form. Um, but what we

13:19 did then, or first stopped to research the implications of Bitcoin, was at the Bank of England with the research team there.

13:27 And it turned out that they had a very clever team and, and that was very much ahead of the curve, and they were, uh, anticipating all kinds of consequences of putting money on blockchains already back then.

13:37 So the back and forth that we had with them, and a number of other people along the way, including, um, Joe Lubin and ConsenSys in, uh, in New York and, and people at the Harvard Berkman Center in Cambridge, Massachusetts, that sort of led us to draw the conclusion that, number one, um, sure, e-money is, uh, a form of almost like a narrow bank.

14:00 So it's almost like it's a, it's a, it's, it's a license to issue m- um, like a, a demand deposit on its own, independent of all the other functions of a bank.

14:12 So it could have monetary implications because if too much was issued, it w- could create a run on the banks.

14:17 But there's ways for regulators to, uh, mitigate that, for example, just simply by capping issuance, by requiring more capital reserve, or in other ways, capping the amount issued relative to the banks.

14:30 So we're not really worried about e-money creating on its own monetary instability in any way, shape, or form, or other forms of stablecoins. So, and this is not just us.

14:40 This is people inside the system who've been talking about these things. And there's a bunch of people who have been talking about these things for a while, including the people at the IMF.

14:49 And by the time we got our license in, in May 2019, uh, just l- shortly thereafter, Libra was launched, which, um, you know, they, they, they got it wrong.

15:00 They fundamentally misread and miscalculated some of the implications of the way they proposed to put a fiat currency on chain.

15:09 But also, the IMF published a very forward-thinking paper on digital money called Rise of Digital Money, and they listed all the criteria for sound digital money, and they basically are the same as the criteria of the digital-- that the e-money

15:26 fulfills in the United States. And the Genius Act now requires of stablecoins in the US, except for the fact that the IMF goes even further,

15:36 um, than the current e-money license in essentially suggesting that e-money could be, uh, safeguarded with central banks directly through independent issuers.

15:48 But these criteria are really important because they are, they protect the soundness of e-money and digital cash in general.

15:55 They, uh, are issued, um, that they're backed at least one for one in high quality liquid assets denominated in the same currency. Number two, uh, held in segregated accounts.

16:06 So if anything goes wrong, the end user, the holder, has a recourse directly on the underlying assets. And number three, the issuer should al- also have, uh, a minimum reserve to offset any potential losses.

16:19 This is the criteria that E-Money Europe fulfills and has fulfilled for over 25 years. The Stablecoin Act essentially mirrors this. The, the stack and the service stack that we've built in the US is essentially,

16:31 it is applicable almost one for one to the US, emerging US regs.

16:36 Now, American tech bros like making fun of European regs, but lo and behold, there are now the, um, the egg's on their face because through the Genius Act, they've essentially replicated European regs in America.

16:48 So bless them. All the better. But it's very good to have this cross-fertilization of thinking both in tech and reg, um, uh, across major jurisdiction, I'd say.

16:58 And it's for the benefit of the entire financial system that e-money regs be sort of standardized or stablecoin regs be standardized across the major jurisdictions, just like banking regulations are.

17:11 Let's zoom on that in a little bit, what you just mentioned.

17:15 The Genius Act in the US that came this year was a major breakthrough for stablecoins, essentially allowing everyone to create US dollar stablecoins backed by US Treasuries.

17:28 Whereas in Europe, we have MiCA, and you just mentioned that those things tend to be very similar. Can you just explain that a little bit? What did you mean by that? How similar are they, and where are they different?

17:43 Well, um, so what is MiCA? Uh, MiCA, when it comes to stablecoins, says stablecoins in Europe should be e-money. That, that's all it does.

17:53 And we had a, an e-money license for blockchain prior to MiCA, before MiCA was even a name.

17:58 So we anticipated that roadmap, and we're very grateful that the, that the European Commission and, and the European Parliament agree with us. Bless them. Um,

18:07 M-MiCA or MiCA does a couple of other things that I'm not gonna go into, uh, which, um, uh, has separate independent requirements of e-money tokens, but I'm not gonna go into that.

18:17 But the main principle has been observed and upheld that you can issue e-money as a token on blockchain, just like you can i-issue e-money o-on a prepaid plastic Visa debit card. Right?

18:33 So money needs to be fungible one for one, and that's what e-money is.

18:38 E-e-money in Europe, and sorry, I've been using that phrase without defining it, is in European law, is a digital alternative to cash, redeemable one for one always for cash.

18:51 Now, the Genius Act essentially puts, uh, US stablecoins, the payment stablecoins, they call them, it's essentially the same thing, on the same footing.

19:00 They, they, they become a monetary instrument in the same way as a, a, a checking account in a bank or whatever, or a check in general. So they should be fungible one for one.

19:13 The oneness of money, the si- the singularity of money is very important to preserve because money is essentially a standard for value, and it's a standard for value that you use to exchange for services and goods.

19:25 And, uh, and, uh, and money-- So, so it's very important that, uh... And it's legally defined. Fiat is a legally defined standard for, for exchanging value.

19:36 So it's very important to have a sound legal basis for this issuance. I would like to say then, you know, congratulate the Americas.

19:45 Now you can actually start issuing real stablecoins, not just short-term hacks based on MSB licenses and trust, uh, licenses as you have done until now, unlike the real, uh, stablecoins that we have been issuing in Europe, starting with Monero.

20:00 Bless the Americans. We've got to troll them a little bit. So, but anyways- Okay... you know, so Genius Act is, is the same as the European e- e-money in all key criteria.

20:10 And it means essentially you can issue fiat money as a, a cryptographic token on a blockchain in this, in a very similar way as you can issue like a bearer instrument IOU, banker's check, or something like that i- in the US.

20:25 It's always the same dollar, whether it be a token on a blockchain or the, uh, piece of paper in your wallet that is a bearer standard ba- banker's check. Mm-hmm.

20:37 Uh, Christine Lagarde from the European Central Bank recently said that stablecoins would pose a risk to the monetary policy independence of central banks. Why do you think she said that? What does she mean by that?

20:54 I agree up to, up, up to a point because the Americans, again, bless them, um, very, as we know, and I am an American as well as being a European, having lived on both sides of the Atlantic, I go back and forth and, and try to adopt the best of both worlds.

21:09 They're very aggressive and, and risk-seeking entrepreneurs and, and they are promoting the dollar worldwide.

21:17 Now, this erodes the monetary autonomy of other nation-states, such as the European Union, which is a union of states, but, you know, effectively there's a sovereign independent monetary zone there called the Eurozone, right?

21:31 And if you're a central banker trying to, uh, manage monetary stability in one of those other monetary jurisdictions, you don't want people pushing other currency into your area to, to displace the currency that you are managing.

21:46 So what MiCA does, very sensibly in my view, is that it prohibits or restricts the amount of non-European currencies that can be used in regular payments inside the European Union.

22:00 Now, the US dollar happens to be the second-most used, uh, currency in, in Europe because it, it is the reserve currency of the world, uh, for now at least.

22:10 And, and, and so, so it's used in various types of trade in and out of the EU, right? But the EU, uh, is okay with that.

22:19 It's okay with the US dollar being used for speculative purposes in crypto exchanges, but it's not okay with people going to the store and paying with USD at the till in France, in Germany, in Estonia, in It- Italy or Spain

22:36 instead of using the euro. They, they're not okay with that. They put a cap on that. So you also mentioned to me that the biggest too-big-to-fail risk is from the global reliance on US dollar and its infrastructure.

22:51 What did you mean by that? I believe in, in decentralization of risk as a matter of, uh, uh, sort of principle when it comes to international trade.

23:01 There's this wonderful well-known theory in, in, in monetary economics about optimal currency areas, is that people who have very strong political ties or cultural ties, they should use the same currency when they trade between them.

23:16 So there's some natural boundaries in the world which m- in many cases follow geopolitical boundaries about how currencies essentially should be used on a local scale at least, right?

23:30 So, um, but the dollar, uh, is the king. Currencies have this, uh, network effect, and it used to be sterling, and then after World War II, it was the dollar. So it's used everywhere in global trade.

23:41 So there's, and then there's, uh, you know, a few major currencies and a fat tail of, of smaller currencies.

23:47 Now, the world is heavily reliant on dollar now, and very, very regrettably, the current US administration is attacking all the institutions that have protected the soundness of the dollar.

23:58 It's attacking them in many ways. It's attacking the independence of the Fed. It's blowing the budget deficit out of all proportions and also attacking the rule of law in the US.

24:09 So the dollar is, is, is a big risk factor now, unlike any time in monetary history after World War II, except possibly during the early '70s, uh, during the oil crisis and when the gold standard was disconnected.

24:24 So, uh, I know. So I think it's really healthy for the world now to adopt local currencies and Adopt these new technologies of blockchain for these local currencies.

24:34 I believe there will be a fat tail of, um, stablecoins in many other currencies besides USD.

24:41 I think it's a huge opportunity to go after them in, in terms of serving whoever wants to use on-chain fiat in euros, in sterling, in Swiss franc, in Japanese yen, in Brazilian real or whatever, Singapore dollar.

24:55 They, they're all, all these currencies need to be able to re- be represented, to, to be connected to their native off-chain TradFi payment systems, and to be able to, um, uh, trade amongst themselves independent of the dollar because, number one, I think there's, uh, you know, the, there, there's no reason for one currency necessarily to dominate all these transactions all the time.

25:22 And number two, now there's unprecedented risk in the US, as you can see in so many market indicators, for example, the price of gold. So the world needs to embrace...

25:35 The rest of the world outside of the US needs to move away from dollar hegemony and dollar dominance as some of the American, uh, crypto bros espouse.

25:44 It needs to me- move towards more decentralized stablecoin ecosystem, and that's what Moonarium, uh, wants to foster and enable, without giving up the dollar, of course.

25:57 And nevertheless, if we assume for a moment that we're gonna move towards an on-chain economy, and eventually most of those fiat currencies will run on a blockchain,

26:09 99% of stablecoins right now are denominated in US dollars. Why do you think that's the case? And, and what's needed for the euro to catch up? Well, it's essentially American entrepreneurship.

26:25 The Americans went ahead and issued stablecoins without waiting for the appropriate rules to be in place.

26:31 And so bless them, Circle and Paxos were very, uh, entrepreneurial and, and bullish to do that, and now they're being retrofitted, uh, onto the legislation.

26:41 Uh, Tether did the same without, uh, asking anybody i- in any way, apparently. But bless them too, Tether has certainly, I, I think...

26:49 The, the success of Tether proves that it has served many underserved use cases across the world, especially in the so-called developing countries. So why USD? Why has USD been so successful?

27:01 It is because the USD is the reserve currency of the world.

27:04 And number two, there were these companies out there, uh, and entities, uh, specifically Circle, Paxos, and Tether, that just went ahead and issued, uh, USD without waiting for, uh, the appropriate permissions.

27:18 They, they built in the US, Circle and Paxos, on other licenses, uh, but, but, um, they just went ahead and issued. In Europe, we were the first in 2019 to issue the Euro Onchain,

27:30 and then we came out and launched to the, the public in 20, uh, 22. Europeans were much less receptive to using crypto in general and stablecoins in particular, but they're picking up now.

27:43 So, so we had the right regs, but in, in a jurisdiction that, uh, i- has a very, um,

27:50 h- has considerably less risk appetite and in some ways also more sophisticated TradFi systems than many of the jurisdictions that have adopted stablecoins today. But we believe it's still the early days.

28:01 The, the amount of cash sloshing around in the eurozone system, in the TradFi off-chain system, is about 11 trillion. And the Euros Onchain is only a few hundred million by now. I think it's less than a billion even.

28:14 We believe that most of this cash, the 11 trillion that we have in the euro syst- system, will ultimately flow in some way, shape, or form onto blockchain.

28:26 And we are setting ourselves up as being the, the entity that intermediates that by providing the direct SEPA connection, uh, to the, um, off-chain bank accounts by being the issuer, and then now, um, launching, uh, to the public soon, also the entity that helps facilitates the exchange of the euro versus other currencies such as USD, sterling, and others.

28:52 Why do you think it took Europe so much longer than in the US to catch up with stablecoin issuance, even though they were first in actually having regulation in place?

29:03 Is it just risk appetite or are there other things in play that, that Europe needs to change? European, bless them, I mean, I love Europe.

29:10 Uh, uh, and I, I, I speak as a Pan-European, as, as a person who's lived in two European countries, traveled in lots more, and...

29:18 But Europeans are, they're more conservative, they're less, uh, they're more risk-averse, and, um, especially the Americans, uh, but also the Chinese.

29:28 Uh, they're, they're just less entrepreneurial, and they do things differently. So, and that, that's not just in fintech. That's a- across the tech ecosystem.

29:37 So, um, Europeans, and this is, uh, you know, another whole thread about how the European entrepreneurial ecosystem is so farther behind all the other ecosystems for these reasons and also for systemic reasons because there's much less access to capital and, and many of the early customers are, are more reluctant to try something new with a new co, right, with a startup.

30:03 So let me just put it this way. Europe is falling behind. It has been a consequence of this lack of entrepreneurship in Europe, has been very sluggish GDP growth for, for decades now, and Europe needs to reinvent itself.

30:18 It will take another, a generation or two, but Europeans can't just sit there and w- especially when it comes to stuff that Europeans may even have invented themselves, being commercialized much faster and more effectively in other jurisdictions.

30:32 Mm-hmm. Do you think stablecoins is a private economy topic or a governmental national security geopolitical topic? Stablecoin is a global topic, just like banking regulations are a global topic.

30:50 If you want to foster global trade and foster a, a glo- stable global financial system to support that trade, you need to have common regulations, at least up to a point.

31:03 So stablecoin definitely is a global topic which belongs with the G7, which belongs with the G20, which belongs with the OECD, which belongs at the IMF, which belongs at all these organizations that were set up to establish and fost- foster economic development in the past decades, in the past century or so.

31:22 So definitely stablecoins need to be... Well, a stablecoin issued in the US should be acceptable, uh, you should be able to accept it in some way, shape, or form in Europe or Asia, uh, and the other way around.

31:36 So definitely global regulators need to sit down and figure a way.

31:39 And I believe, uh, that the, the-- to do that, and, and I believe that the paper issued by the IMF, uh, in 2019, The Rise of Digital Money, has the blueprint for exactly that. Mm-hmm.

31:52 It outlines how stablecoins should be, uh, issued, safeguarded in high quality liquid assets like T-bills, held in segregated accounts with minimal capital contributions from issuers.

32:03 And also they suggest with the issuers access to safeguarding at the central banks.

32:10 So if you wanna go, uh, do a deep dive, and it's not a very long dive because the paper is only 14, 15 pages, into how stablecoins should look like in all the major jurisdictions, uh, the first place to start is that paper by the IMF, and I don't think you need to read much else.

32:26 And we're gonna link that in the show notes for sure. Then Svein, let's map this out a little bit. We talked about Europe, we talked about Monerium.

32:36 What actually happens on the ground in Europe, and what are some things that you are excited about, that you're looking at, that you're following, that you can tell us about?

32:48 Well, well, well, I'm really-- because Eu- Europe has advantages, too. So, uh, once Europeans, uh, get up and running, they, they, they run pretty efficiently.

32:56 And one of the interesting aspects about Europe when it comes to stablecoins is there's many different currencies in Europe.

33:04 Even though they're interconnected in fairly sophisticated ways, there are still pockets that you could address with stablecoins, uh, much more efficiently than with TradFi systems.

33:13 So number one, Europe has a lot of currencies internally. Number two, Europe is a global trading hub, so there's many use cases in and out of Europe that you could serve

33:25 in a similar way as the US has started serving LATAM and, and Africa and other jurisdictions. So but the trading hubs are different.

33:34 They, they are, for example, corridors from especially the Latin part of Europe to the Latin America, from the Eastern part of Europe and Central part of Europe to, to, to Middle East.

33:44 So you could have cross-border transactions, and we're starting to see cross-border transactions in and out of Europe, um, also independent of the so-called developing markets, um, uh, uh, European trade versus the US.

33:55 I have to say that, that we, we had a early interest in cross-border transactions just after we got our license, but we were not ready to serve those customers back then. Uh, it was during COVID.

34:07 So but we are feeling that pick up once more because people are starting to look at the, the successful use cases in the US and want to replicate them, uh, trading in and out of Europe.

34:18 Svein, some say stablecoins are a winner-takes-it-all or a winner-takes-in-most market. How do you think about the competitive landscape in stablecoins? No, there, there's gonna be a multiplicity of stablecoins.

34:34 It's not gonna be a monopoly or duopoly or oligopoly at all, um, any more than financial services are today. There will be a few, there will be a few tiers, of course. There will be a top tier of widely used stablecoins.

34:49 There will be a second tier and third tier. But stablecoins per se are not really the end goal. The end goal is transfer of value and exchange of value.

34:57 So it will, there will also be companies that start and issue stablecoins, uh, like we're doing. But ultimately, what we're evolving towards doing is

35:07 not just issuing, but also exchanging stablecoins and moving them in and out of the off-chain banking system. So it'll be stablecoin services. There will be services that enable the, the transfer of value across these

35:21 disjoint systems and across, um, geographies as well. And ultimately, I think stablecoins, they will just fade away into the background as some sort of, um,

35:31 um, you know, something under the hood that keeps the engine humming. But, yeah, you won't really care because all you know is that the engine was massively upgraded and you have more horsepower.

35:43 And, and in stablecoin terms, this means that, you know, your, your value will be-- you'll be more efficient in capital terms, and the value-- you can transfer value faster and cheaper than before.

35:53 So stablecoins themselves are not an end goal in any ways at all. They are just a means to an end, which is a more efficient financial system. Hmm.

36:03 One of the things I come across a lot is how investors think about participating in that value creation that's happening in stablecoins right now. In crypto, it's relatively easy.

36:14 They, they just invest in a token, and the token hopefully goes up or into an ecosystem.

36:19 With stablecoins, it's a bit harder because stablecoins are stable by definition, and you need to invest in underlying infrastructure. From that perspective-

36:30 Where do you think will the most value accrue over the next couple of years? Will it be the issuers? Will it be the people that transact? Will it be the on and off ramps? How do you look at that?

36:43 I think the, the, anybody who can serve the full stack of stablecoins, like we're aiming to do, that's where the value-- you can, you can accrue the value and provide value.

36:52 Value is essentially, if you put it back to- into the customer's shoes, is how, how many problems do you serve for the customer? And the customer ultimately doesn't really care if it's an EV or a, a combustion engine.

37:06 It just has to get me from A to B, right? Uh, for, you know, risk-adjusted, price-adjusted efficiently, effectively, right?

37:15 So in the same way, somebody who can s- build a stablecoin stack that serves the end users, the, the consumers, the companies, in our case, the fintech apps of the world, in an efficient way, effective way, those are the, the, the companies that, um, are going to provide value and collect value.

37:35 Um, I also wanna talk with you briefly about technology, the technology stack layer 1s. You mentioned that you're layer 1 agnostic. I assume you support Ethereum, for sure.

37:47 What blockchains layer 1s do you support, and do you have a preference on those? And, and how do you see, uh, those layer 1s next to each other when it comes to performant stablecoin executions?

38:01 When we started, there was no- nothing but Ethereum, and we're still, uh, we're deeply in love with Ethereum and the whole Ethereum ecosystem, and we're totally supportive of it. ConsenSys is a shareholder.

38:12 We are, are on Linea and Ethereum and working with MetaMask. Having said that, we also support a, a bunch of layer 2s that are independent of, uh, of ConsenSys and Ethereum.

38:24 And we have started supporting Cosmos, and we have, uh, on our roadmap, uh, also Canton. So we're totally open to supporting

38:35 layer 1s that are sufficiently differentiated from Ethereum to provide some value that Ethereum doesn't. Now, I just wanna add a personal view, uh, here.

38:45 Um, I think as a company, we're totally open to supporting corp chains as well, and whether they be Stripe or Circle or whatever else. But I, I, as a person, is, is-- am skeptical of them. I think

38:59 the world needs and will gravitate towards some neutral layer 1 ecosystem that will dominate with a bunch of layer 2s.

39:07 Uh, and then, but then there will be, also be a bunch of layer 1 niche chains, potentially like Canton or, or, or others, that are very different from Ethereum in terms of their properties and the use cases that they're built to serve.

39:21 That's an interesting point. I've been talking with many people and, and guests on, on the show about this as well. How do you see corporate layer 1s versus open permissionless layer 1s play out?

39:35 What's your thesis there? I don't see the point. I mean, I think transaction, um, a lot of these, these, these, um,

39:45 these layer 1s, layer 2s do, do whatever needs to be done right now at a very, uh, in very efficient terms. Um, and unless they're very, very different or very specialized, I don't see what value the other layer 1s add.

40:00 Now, I'm-- I may be wrong on that. I may be missing something, and there's, you know, hugely popular layer 1s out there, for example, Solana, which is different from Ethereum, and bless everybody who is using that.

40:12 But I think the network effects will be huge for the layer 1s, um, and Ethereum has a massive advantage there.

40:19 And I think also that the costs and, and the usability is, is going to improve sufficiently that you will really need to be very different to be, survive as a, a layer 1. Mm-hmm. All right, Svein.

40:33 We're almost at the end of the show. I wanna look a little bit into the future as well, the next one, two, three years. What are things that you are excited about for the digital asset space, for stablecoins?

40:47 What do you have on the agenda? What are your priorities? Our priorities now are to grow with the ecosystem. We, we sort of waited it out while the speculative initial adopter crypto bubble phase was happening.

41:02 We love crypto independent of Monerium, but that was not just the use case we were aiming for.

41:06 Now, the use cases are emerging that we've always been aiming for, like the supply chain use cases that we, um, tested in beta in the early days, uh, like cross-border transactions, which we're starting to pick up, like the, the, the FX which we're about to launch.

41:20 So I'm super, super bullish, and I think it's still the very early days.

41:24 Now, Y Combinator had, a year ago or so, a, a request for startups saying that, you know, describing how small the, the, the market cap of stablecoins was then compared to, uh, cash in the banks.

41:38 Well, we got that one many years ago, and we totally agree with Y Combinator and what many other peoples are, are now saying, is that mainstream finance will move to a large extent on-chain.

41:51 It's just new infrastructure, faster, better, cheaper than the old one. The old one will coexist with the, the, the new one for a while. But-- And what, what, what excites me the most is the new apps

42:05 that people are going to build on, um, somewhere on Ethereum ecosystem or some other ecosystem that do something much faster, better, cheaper than TradFi or something that's never been done before.

42:17 And we see already the early use cases emerging, like Aave, like Morpho, like, um, Euler, these peer-to-peer lending systems that are emerging.

42:26 I think they're fantastic because they ultimately, what they do is they facilitate the flow of liquidity in the financial system, and they disintermediate the too-big-to-fail banks.

42:35 They're a huge improvement in addition to the fiat system. They're gonna increase choice and reduce risk in the whole system, um, uh, and cut a lot of costs that, that will, uh, stimulate global trade overall. Mm-hmm.

42:51 All right, Svein. A last question. If there's anything you would like investors or business leaders to know about digital assets, and particularly stablecoins, what would it be? Well, it's just on-chain fiat.

43:05 That's the term we use. If it's properly regulated, fully compliant, as we have been from the very beginning in Europe, and which the US is now becoming, it's just regular fiat on chain. It's not a different instrument.

43:19 The technology, the, the technological representation may be different, but it's like moving from paper to plastic. Uh, this is like moving from paper to token.

43:28 So just think about it as regular money i- in different form, and think about then how you can look at wh- whatever, uh, stack you're working on and see if you can migrate something onto blockchain that, uh, reduces cost and increases efficiencies for whatever you're doing.

43:45 I'm sure a lot of people will, um, especially small and medium-sized businesses and sole traders who don't have access to the most eff- efficient services, will discover that there's something out there that they can do much more efficiently on blockchain than, than they can with TradFi.

44:04 That's a, a great ending word. Svein, before we end the show, a quick lightning round. Short questions, short answers. First question: what's the first cryptocurrency you bought? Bitcoin.

44:19 Second one: what's your favorite stablecoin? Monerum EUR, uh, and also I have to say the Monerum ISK, the Icelandic krona, which we haven't, we don't really support, but, but we issued.

44:32 That was the first stablecoin we issued back in the summer of 2019. It was the ISK on, uh, Ethereum.

44:38 So arguably the first f- properly authorized stablecoin issued anywhere in the world was the Icelandic krona in, on 20th of July, 2019. Mm-hmm.

44:49 If there's any stablecoin company that people should look at except Monerium, who would it be? Oh, um, the-- There, there's so many out there now. We have now a, a bunch of competitors emerging in Europe.

45:04 It took them about five years, but I'm not gonna name any of them, but I welcome them all to the game. We have the greatest respect for Circle and Paxos to have, uh, been as successful as they are.

45:15 I think I ha- I have in, in my mind, probably the greatest respect for Tether of, of all of them. In many respects, I don't know any of them, never met any of them, but we were kind of, we were working at opposite ends.

45:27 They, let's just say they, they went the l- the light regulat- They went the way of, of being unregulated or lightly regulated, and we went the way of being fully compliant and, and just kudos to them for their massive success and the use cases that they've proven.

45:42 But what I'm most interested in understanding now is how Tether is going to evolve. Is it gonna be like Napster and just gonna go sideways, or is it going to evolve and have staying power?

45:53 Will it be shut down or, or, or, which it probably won't, or will it somehow be retrofitted into the emerging regulations? So, um, now I'm, uh, I, I'm looking at Tether for, for, for what they're doing.

46:09 And also what I would say is any of these emerging markets that are starting to issue their own coins, they keep popping up. Um, Brazil, there's a lot of, uh, activity there, uh, from what we understand.

46:21 So I would look at the emerging new ones in the non-developed world, as it were. Then next question, what surprised you most about the, how the space evolved over the last two to three years or the current bull market?

46:36 No, it was, it, it was, um... I think all the speculative activity during COVID was, we didn't anticipate, but once you understood there was a pandemic and there was stimulus, then it was totally understandable.

46:48 But, uh, that, that's the sort of, I would say black swan or, or black polar bear that we didn't anticipate. So I think it boosted the market in many ways,

46:58 but it also biased and skewed the market in favor of speculation. Mm-hmm. And last one, a book or idea that shaped how you think about stablecoins, money, technology, or the future.

47:13 The simplest paper to read, if you come from the balance sheet side, The Rise of Digital Money from the IMF. If you come from the technology side, is the Satoshi white paper and Vitalik's white paper.

47:28 Those three papers I would, I, I would all read again and again. They were all super papers. All right. Svein Valfells, thank you so much for coming on the show. Where can people find more about you, about Monerium?

47:44 [upbeat music] Uh, well, please visit our website, uh, or social media, monerium.com, and we have an account on X and LinkedIn, but we'll, there'll be announcements, uh, coming out in the next weeks and months, so stay tuned.

47:59 All right. Svein, thank you. I wish you all the best with Monerium, and talk soon. Thank you. Likewise. Take care. You obviously like this video enough that you got to the end. Listen, do me a favor.

48:12 Hit that like and subscribe button because I think you'll like it.

48:16 And if you want even more, with more I mean incredible alpha, research, and digital asset market updates, subscribe to our newsletter on 51, that's the number 5-1, insights.xyz, and get the most actionable insights on digital assets.

48:32 See you next time.