Blockchain, PayPal, Binance US and Race Capital on What’s Next for Crypto
We will get started with something slightly unrelated to crypto which is I asked each of the panelists to share something interesting about themselves to kind of give a flavor of something that I feel is sometimes underappreciated about people who work in crypto which is it is not as stereotypical as folks may think it is. It isn't only about Bitcoin. It isn't only about NAFTA. It isn't only about insert buzz word of the day algorithmic stable coin here. So I don't mean to start with you. Share very quickly your interesting fact. You know my interesting fact actually is about crypto is a fact that I think that not a lot of people really appreciate which is that we did a study that is actually coming out. I think today is Wednesday right. As Wednesday is coming out today that we did in conjunction with Deloitte and we surveyed 2000 CEOs and executives across the retail and merchant space. And they had indicated that 64 percent. So almost two thirds of their customer base was interested in paying and transacting in crypto in the coming 12 months. And again I think
that we really under appreciate crypto and digital currencies as something of use and something of utility. So to bring that into the conversation. So am I. My feedback about myself is I came into crypto by way of tech and fintech. So I've actually lived the last six years in Hong Kong first with Uber for the first three and then financial for the next three. Nothing going on either. Nothing going on out there yet but I'm very glad to be back in the land
of freedom in Chipotle. So it's in that order. So fun fact. I'm born and raised in Hong Kong. I came to the U.S. Anna Edwards 16 and bought my first bitcoin in 2013 but really got into crypto when I was travelling back and forth between here and China. And if you can sort of flashback in 2017 2018 China really was the center of the universe in terms of critical trading and mining. So during those times really met a lot of crazy scam projects and learn a lot. That's how you know when I finally get the chance to meet in Italy in 2018. It really sets him apart. We're going to stop here. OK well I want to push a little bit on what you said about China because I do
think that when had we been having this conversation two years ago and I had asked you know like looking forward where do you think the biggest areas of growth maybe China specifically was one of the areas that was really held up as doing particularly interesting things. In the past 12 to 18 months we've had everything from a complete declaration that any crypto transactions are illicit and with civil and criminal penalties. The you know the government has said very explicitly that state owned companies aren't allowed to do anything related to mining or to have these. How has that changed where crypto is going in the region and what other countries might be taking advantage of the gap left by China's regulatory moves. Well I think you know
sitting right next to Brian he always did have a even more colorful history of finance. I think sometimes I half jokingly would say I think particular anything that the Chinese government really want to block me is that this is really a thing. So in some sense in 2017 2018 I think even before finance came online it was like be and okay. Yes both really was the number one and two. I think those top five in the world interest of trading volume and but what's going on particularly in the last two years during Covid time I think a lot of talent in China have basically left to Singapore to Dubai. Some of them
come back to the US. And I think it was really interesting even though for instance the US there's no clear. But I think the Biden administration really wanted to push for to regulate. And I think this is a really really good sign on mining. I think it's interesting even though you're supposed to not not they're doing it. But I think as I last check there are some. So at least 10 or 20 percent hash power come from China. So it's not completely. You know there's still things going on. But many of the towns again is looking and push a lot of the Chinese entrepreneur to think globally. Brian when folks hear about finance it's often in some sort of regulatory context or you know folks that Reuters this week published a big story about various allegations related to money laundering KYC et cetera. And I think that the biggest regulatory question in the U.S. isn't will crypto continue to be allowed to exist which is
really a genuine question in certain other areas. China of course but also even India in the US it's more like under what circumstances. Yeah well crypto will be allowed to exist. What are the what are the changes that are coming for the players involved from the from the finance U.S. perspective where do you see that landscape evolving into. So I think that you know just the announcement this week with the Senator Loomis and Gillibrand bipartisan legislation that is a really great step. Right. And I applaud the senators for actually taking a stab at it. Right. And you know I think that over the course of time that bill will continue to be perfected. But I think that what we are looking for and what we advocate for at finance us is
clear and consistent and smart regulation. And the reality is as you know right now we are operating in a little bit of a gray area because the rules of the road have not been defined. And what we're asking for and what I think that Bill really tries to accomplish is actually creating standard definitions and then increase standard regulatory frameworks. So we are super supportive of moving forward with those kind of smart deals in place when in your office because you use the word perfected.
What is a perfect bow look like. Well I don't think any bill in Congress is perfect. But I think it's it's a process. Right. And I think that the process starts really when they put the first draft out. And so now we can all see it and we can comment on it. And you know I've met with the senators and their teams which are excellent. And they really truly kind of understand the industry and they're willing to have a dialogue with industry. And so I think that this is kind of a first step in the process. And we're excited to be at the table and going along that process with them and people is going to regulate some financial services providers. A very long time. And one of the earlier ones as it
relates to crypto digital currencies. I also feel like I got an email a week from either PayPal or Venmo pitching me on an upgrade into some sort of PayPal account. Now tell me a little bit more from your perspective where PayPal sees the industry going particularly as it relates to retail payments and not just retail speculation. Yeah I mean I think and I think Brian's right on that. You know we certainly welcome the clarity and the consistency that regulation and and a clear set of rules brings. Because our view really is that it can't be just about speculation. It can't be just about people. Going to the casino
and playing with their dollars. Our view is really about trying to figure out how we get these digital currencies whatever form that they eventually end up taking to be useful for people to be usable for commerce to be usable for payments to be usable for cross-border. And the stat that shared earlier I think is just part of that. To say that I think it could be closer than we think it's going to be closer than we think. The people are going to see that there's value in
instant settlement. They're going to see that there's value and certainty there to see there's value in the transparency that you can get by having crypto that is visible and traceable to a certain extent but still preserves privacy. So I think that from our standpoint PayPal our view has always been that financial services are a way to empower people. It's a way to and we see that. Digital currencies just help us reach more people to become more inclusive and to really expand that the power of digital services to a wider audience.
One of the things that advocates of crypto as a mechanism for financial inclusion like to point to is this is gonna be a way for people who are historically under banks or unbanked to get into the payments ecosystem. If we were talking about the potential uses of remittances the challenge is in a lot of cases. It's non-trivial to sign up for a wallet. You still need a relatively modern smartphone. You still have to provide or should be providing certain forms of identification. Are you seeing you individually or collectively seeing anything in the industry that is also adapting to be more of a like realistic option for people as opposed to a theoretical one. Well we talked about how in September last year that the country
of El Salvador and actually treat Bitcoin out as a legal tender. So Elizabeth Stark who's the founder CEO of Lightning Network really sort of power that and I think the part that is so fascinating to me is at 24 percent of the GDP of El Salvador it's about 6 billion is actually all about remittances which to me open up a whole world of potential between U.S. Mexico U.S. India. There's a lot of possibilities to really drive that. And you know I see you guys. You obviously are working on probably something around it. But it's just so exciting to see an end on top of that. Just to add on to one thing U.S. is
actually particularly mobile phone. Well if I was an Android also ISE the credit card is actually attached to a phone. But that's not the case for the rest of the world not for Southeast Asia. That's why otherwise you won't see things like pace out of Kenya. And that I really think that crypto can help drive because it's really difficult except North America in terms of payment and remittance and all that. So this is what I'm excited about is you know. BLOCK chain crypto web TV kind of whatever buzzword you use is really a technology platform. And so how are you
going to use this technology platform to change historical processes or procedures or industries et cetera. When I was living in Hong Kong it took me I think four days to send money from my city bank Hong Kong account to my Citibank U.S. account for days. And then you know the fees were just insane. If you had you know a Bye NANCE wallet and you're sending it to another financial wallet that's instantaneous and it's free. And I think that that is really game changing. And those are the things that we're focused in on as you know how do we actually focus in on making this a product by combining not only that technology which is obviously key but then the operations. Right. Because you can have amazing technology but you don't pair it with operations and you won't be successful. And I think that you know we talk a lot about the remittances which are an
amazing use case and I think really valuable. But also there's a lot of need here even just in the United States. I mean when we looked at the stimulus payments from this year just two years ago now you know there were 30 million people that were eligible for stimulus payments that could not get them through direct deposit because they didn't have a bank account. They weren't eligible to file electronically. And so they weren't in the system. They had to wait for a paper check to be mailed to some address that the IRS had on file for them from years ago. They were waiting weeks. And at that moment when you needed to pay rent or you need to go buy groceries or do whatever you got that check in the mail. What did you do with it. If you're under banked you went to a cashing a paycheck CAC check cashing place. You paid 20 30 percent for the privilege of cashing that check.
There are real use cases even here in the United States where having access to efficient effective safe forms of digital currency can really really help people. And these are people that have ideas. These are people that are part of the system in other ways. But for whatever reason they're in a banking desert. They don't have a good relationship or a Citibank customer or you know they they just have slipped through the cracks. And this is you know I think a huge opportunity. For us to be able to reach class of people that have just been ignored. I want to add one thing since you talk about stimulus check for Hong Kong. They actually put a stimulus check to which I pay Ali pain. Or the octopus
cock cart. That's efficiency. Yeah. So I think there's not only the technology part but regulatory and government how they push it. It makes a difference. So there's two things that are challenging about what you have described. One is like the last mile problem. OK so you can go by announced finance yourself get money in and out of China. And that is where a lot of the complexity lie is. If anybody has ever helped a less than tech savvy relative attempt to remember their keys that you'd like you're dealing with non-trivial technical technical undertakings as well as just there are banks that will not allow you to fund a U.S. bank so will not allow you to fund a crypto account or you know when you're trying to withdraw it. You are thinking about the volatility of like if I wait today versus tomorrow am I going to make or lose money on this transaction.
So I would be very interested in your perspectives and like what you are seeing that is helping with that crypto last mile. And then to the points about the government and crypto. Sometimes when I say this depending on who I'm talking to people get like a little bit like all these things are anathema to each other because there is a very strong and persuasive set within crypto who really came from the crypto graphic libertarian wing as it were of the industry who are ideologically opposed to the idea that giving the government more access and visibility into people's crypto transactions is a way forward. How are you trying to resolve those things. So you know we in the United States were created for the explicit purpose of being a regulated and licensed entity. So since day one. Right we have been built for that purpose.
Until we as finance U.S. have gone out and got our money transmitting licenses in the state that we operate and we operate in 46 states hopefully 50 by the end of the year. But we have the same licenses as. And so you know everything that they can do we can do. And so what we're thinking about is how do we take this platform and how do we do the things that you're that you're suggesting. We are actively working on that. And I think that there's a lot of things that we can do. Where we borrow from really other examples in other countries where it's working. While the Hong
Kong example is actually a really beautiful example where the government is able to actually effectively airdrop payments into government government. The reason the reason that they could do that we could easily do that in United States. And that is because you know every user on our account is KYC AML BSA screened until we know who they are. Oh I see. No of course not. Sorry I'm out of time. Money laundering drug money comes out of there sometime. My bet. I'm not holding it against you
personally. I wanted to ask you a follow up question because so much of your portfolio so much of your career has been about projecting who's gonna be big. Right. I think the the myth is or as you mentioned that like you were excited about so long before there was even a white paper written about this token. Where are you seeing like the next out or the next FTSE potentially coming from. Are they in the US or by anyone else. Sure. Of course. I think every single investment one when I think about it is always sort of the first principle for when we invested in RTX bit. Max was the
number one also based on a Hong Kong and the thesis was really simple. We think that there should be another really great crypto driven exchange. And but anyway I think for ISE as we look at Solana what a theorem the world basically is the the AWB US on Decentralise Web. And if you think about eight of us by the way it'll be us and Google Cloud they're not going away like
what two is still here but very profitable and. Yeah. But I think like the clear line in my head is you know there's just so interesting is being incentivized by the token side of things. So there's a lot of validator is willing to run validator because they're earning these tokens and then makes sense. So it is like economy of ownership and decentralized web. And what we're thinking and looking at is okay until the eight of us you need to have what will be the next Tulio what will be the data infrastructure that the more sophisticated payment infrastructure storage. There's all these monitoring and
developer's tools. It is not even dare yet. And people are still complaining. And why. And there are people actually running for a nook on. It'll us too. So there's so many so intertwined between went to a massive for developers. That's what we focusing on. I do think that for. For us depends on what you work on for what
we look at. I definitely not regulatory expert and really leave the expert to do this but it's really all about technology. That for the developers and if now they're starting to see Solana I think still monthly active users over two million. Even with a down market there are real people using this. And if you look at buying as us people come into crypto would be amazing. These are real users and that get all the developers so excited about it because real people are using it. Not not all hype. And I think
that's it's actually a really important point because you know to the earlier conversation about 70 percent of our user base has onboard its crypto through us. We are their first crypto experience the gateway drug. And you know I think that we use different terminology. What that shows you is that there is that user base that there is that curiosity. There is that intentionality to come into this area. And the easier that we can make it from a developer community the easier that we can make it for customers the easier that we can solve that last mile problem.
These are the things that really help that pie grow. And I think that that really are going to create the next RTX ISE in the next Salinas. What's your average transaction size for that. Like crypto newbie who has come to it. I don't actually have that information. Is it more that they are sending like gifts to friends or. You know because I think when when folks talk about
there was an earlier session and one of the one of the panelists from Sequoia was like we want crypto to get Internet scale right. We want there to be a billion people. And my question is often like what will they be doing. And can the existing networks handle them. Because we are in a situation right now where even with a relatively limited number of people we have we have outages we have significant downtime. We have every day we would have to write another story about people losing a ton of
money in hacks. We're not seeing scalability built into some of these technologies at the same rates of the desire to reach Internet scale. How are you kind of you know is there anybody in your portfolio that's tackling these questions. How is by not thinking about this. How is people thinking about this. I think that for us the what they're doing with it is actually a really easy question
right now. So up until yesterday you could buy and sell crypto on our on our system and you could use it to pay at any of the PayPal merchants worldwide 30 million whatever merchants. If you have PayPal if you had crypto on our platform you could use that just like cash or just like your checking account or credit card to pay for goods and services that you can use PayPal for. And you know we think that that's that might be the gateway drug because now all of a sudden you can use crypto at Best Buy and use crypto Nike. They don't have to do anything and they get paid out in field. And so it's a very seamless experience for them. As of yesterday we now launch the ability to actually exchange crypto with other wallets like finance or FTSE or others. And so we expect to see a whole new class of folks that are using
crypto in our platform to engage with Web three in the device space to bring in crypto to spend at our merchants from other places. And I think that that's the really exciting part is that we're just at the beginning of this and that you know that the beauty of creating these platforms is that you don't really know what people are going to be able to do with them until they're there. You know I think Uber Airbnb these things were not a gleam in anybody's eye until you had technology with mobile and G.P.S. and payments. And so you know I think the sky's really the limit. And you know from our perspective what we're trying to do is we're trying to take this amazing underlying technology and then package it in a way such that it is usable. So that's where it kind of my tech background comes in is where can we identify the friction in the process and how can we make it seamless and effortless behind the scenes. And so you know we also just launched our taking this this week. So people. Yes. So you can take your soul on it which is live right now. And you can stake it on buying into us. And I think you can generate 5
to 6 percent yield and return. And we have a new feature called Auto Compounding. So you can set it effectively and forget it. And what we really focused in on is not just offer a offering staking because that is kind of the base case but it's doing it in a way that's very user friendly and intuitive. So within a couple clicks you can stake. And so within 24 hours of announcing it we have already 10 million people ArcSight 10 million dollars worth of staking which is obviously quite incredible. I mean like adoption free money is very appealing. It is one of the things that I find interesting about like you
know the raise capital premise is on your site. You talk a lot about it's never too early right to kind of to come and talk to us and that you're very interested in these truly early stage companies. But is there anybody now that you're seeing that you're like. I wish that we had spoken so that I'm kind of in that crypto context of not him core course finance. I think what is really interesting to ISE recently even with the downturn we just invested in an engineer left square block because they want. He really wanted to launch certain things and it couldn't happen. So he left and we're the only investor there. And then we just invested in another engineers that have worked on Libra Facebook before again very very frustrated and wanted to build something on their own. And we're selling really just amazing web to developers in study. On their own and crypto and now they're like you know what. I'm okay to give out my high paying jobs to do something is really meaningful. That's really
exciting. There's another area on the adoption. I'm kind of shifting a little bit. Is the whole and FTSE sort of is is actually most of the user don't even have equipped a wallet. And for the first time they want to put a credit card in to buy some sort of NFTE and whoever to platform and well actually you know so to be the wallet for them for the first time. That whole area have a whole shift of I don't know maybe like label with what 2.5 is really about bridging the two. And we're seeing really
really amazing engineers not just the 20 year old who've never launched anything before but folks that actually have tech things to to production in hundreds of million dollars and go into this space. Super exciting. Edwin you in your other life run a very interesting big cat retirement. I mean like in the most literal sense of you take care of tigers. How do you square your not get it if you Google it. How does that square your commitment to that awareness of
the environmentalism and climate with the you know the elephant in the room of the environmental considerations around crypto. Yeah I know. It's a great question and certainly something that I thought a lot about you know like climate crisis is real. I'm going to go on record as saying man. And I think that we have an obligation to make sure that whatever we're doing whether that's on the Web to space or 1 3 or in the crypto space that we're doing it sustainably because we want this to be for the long haul. So we've actually published in conjunction with the Shery Ahn South Pole a new measurement
framework around this so that we can have a consistent set of measurements around climate impact for mining particularly with proof of work based protocols like Bitcoin like Bitcoin. And you know what we're now doing with that is we're using that to measure not only our own impact but also our full supply chain. And then you know based on that we're going to take some meaningful steps to go and work out that both at the protocol level as well as at the application level to go and start to address that. But our first view was you know there's a lot of ways you can pick any
different country and that is the amount of energy that Bitcoin mining uses. What we wanted to do was really take a science based approach to that measurement. Start off with a baseline and then continuously iterate across that. And I feel very good about the commitment that we're making it that we've actually rolled that into our ESG principles. So we intend to be. And so we measure crypto in exactly the same way that we measure all of our other payments impact. And we're taking action in some.