Founders Fund investor on stablecoins: one-to-one backed deposits threaten fractional reserve banking but could be the future

don't get in a bake off with Finn. Don't get in a bake off TVPN. Well, our next guest is Bridget from Founders Spun. Welcome to the stream, Bridget. How are you doing? Busy time in Oh, wait. Okay. So, can you say where you are? Last time I was on it was a different format. You guys were in the old format. We were. Yeah.

New studio. We are now in Hollywood Future Capital Media. Media. Yeah. And entertainment. Future home of media. But speaking of future homes, where are where are you right now? So, I'm at ETHC. Where's that? You're So, you're you're literally doing the meme. You're a venture capitalist and you're you're in France.

At a conference. At a conference. Oh, yeah. at a conference conference. One one hour conference, seven days on the beach. Is that what's going on? Oh my gosh. It's productive. It's productive. It's productive. Okay. Okay. She's working here.

Um yeah, I don't know why they have it in France, but last year was in I know why. It looks beautiful. It was beautiful. And all the venture capitalists will be there anyway. All the events with the ocean background. Yeah, it's fantastic. Uh yeah, give us the what actually happens at an event like that.

Is it people kind of voting on direction of the technology or is it just like pitch meeting founders building on top of stuff? What what's Yeah, I would say it's like it's sort of a mixture of everything.

I would say like these conferences probably originally started because the crypto industry is like just so decentralized like for lack of a better word um and everyone lives in different places.

So I think originally it was like for kind of like like-minded individuals to meet up and Peter actually used to go to some of the really early ones called like FC financial cryptography and then they slowly evolved into like ETC there's like token 2049 and it's just a good way to like see everyone in person like obviously in person is so much better than Zoom but people in crypto are just so distributed like they're not really concentrated in one city maybe New York now but it's still kind of like you know since the US isn't like insanely regulatory friendly yet like people are everywhere.

So, no, I feel like there's very serious projects in San Francisco, New York, Puerto Rico, uh Singapore, and Dubai, which is like all over the world. Yeah, totally. Totally. Yeah.

But Joey and I try to do like one-on-one meetings most of the day and like because if you just get caught up in events, it's easy to just do a bunch of events and like not actually get anything done. So, yeah. Yeah. We we we've gotten steamrolled a few times.

we're not crypto native enough to know the full calendar and we'll try and book some crypto people and they'll be like are you crazy?

We accidentally held our crypto days and we just didn't know and we were like well Brian Armstrong's coming on so you know if he's not going to this thing like we actually had some folks from the conference hop on which is cool and it wound up working up well like 2 a. m. our time or something. Yeah. Yeah. Yeah.

Uh and and getting Mert on the stream. We had Mert yesterday and he's always great but he's you know always traveling across the world. Um, I wanted to get the update on the the stable coin world. What's interesting? Is the game over? Circle's out. It feels like the legislation's passing, but what are you seeing?

Is there are there still investment opportunities? Are there still opportunities to build or is it the time of the enterprise SAS integrator in web 2? Yeah. Yeah, it's a good question. Yeah, I think stable coins are definitely the main character right now.

Like we there's a new announcement every single day with something stable coin related. like it's very hypy. Um it's very in the meta, but I think like for good reason. Um I was joking with Joey the other day.

It's like stable coins are basically the the part of crypto that has found the most product market fit and it's just like a tokenized US dollar, which is like kind of ironic because the original crypto was like we're going to rebuild the financial system, everything's going to be Bitcoin denominated, like we're going to do, you know, basically recreate and now we just have like the tokenized US dollar moving around.

Well, everyone was complaining about volatility of the meme coins and the crypto community said, "Fine, we'll give you something with zero volatility. Are you happy now? " And of course, Exactly. Exactly.

Well, it feels like some of that hype uh be I want to get into the the tokenized private assets and tokenized stocks as well. But before that, uh Sachs came out and posted that there was a certain concession in the stable coin uh bill around stable coin issuers not being able to pass yield back to holders.

Could you could you dive into that a little bit because that was felt monumental, but yeah, I think that was something that the banking lobbyists probably snuck into the bill and the bill was like a herculean effort even to just like pass the Senate.

Like it got blocked once um just to like get it like to the Senate was like basically like an insane task.

And I think basically the gist of that is like if too much money flows out of banks and into like stable coin issuers like Circle or you know there's going to be like a million in the US probably um that's money flowing out of like the traditional financial system and then basically like net new money cannot be created via loans because stable coins have to be onetoone backed with like T bills or cash and cash equivalent.

So, so stable coins would kill the entire western financial system. Like I mean basically and they make I mean it makes so much sense because it's like I like I would rather hold my money in stable coins. It's like one to one backed. It's very safe.

And when you put your money in a bank it's like people think it's safe and whatever but it's actually like not that safe. Like they're like lending it out and that's how new money gets created and that's how the economy functions. Yeah. We all experience with the monitor. Yeah. Sorry. Yeah.

And it's it's yeah, we we we all experience this firsthand. I mean, most people in tech with the SVB crisis and First Republic and the idea of FDIC insurance and everyone kind of learns about fractional reserve banking at the worst possible time when there's a crisis.

Um, but you actually wrote an article all about how a stable coin bank might be different. Can you take us through some of what you might expect and and why do we I I feel like there's this whole crypto podcast called like bank list and they're all like don't have a bank at all and that was a meme in crypto for a while.

Why? banks are going to issue stable coins. Yeah. Yeah. Yeah. So, what is the role of the bank going forward? What even what even is a bank like like what why do we need that at all? And then walk me through the stable coin bank idea. Definitely definitely. Yeah. Um okay, let's see. Yeah.

I think me and my friend Obby wrote the piece originally like early this year. We basically were looking into this act that didn't end up passing. It was called the credit card competition act.

it had like a 3% chance of passing the Senate or something, but we were reading it and basically what it did in practice if it were to be like passed into law would be to like allow um or force banks to accept a network other than like Visa or Mastercard.

So, it' basically create this like golden opening for a stable coin network to come in and people to be able to uh pay with stable coins and like all of these things because right now like banks are pretty locked into Visa and Mastercard.

Like they have a trillion dollars in market cap like they're the deacto and they've also been doing like fairly well on the stable coin side. Like they're kind of like innovating actually like pretty well.

Um, so it's kind of like a regulatory thing where you would have to have like the CCCA, the the act I was talking about pass um, in practice for like a a stable coin network to come through. And so that was like the first angle we looked at it.

And then basically we were thinking about, okay, what about like from a consumer banking perspective? And it basically would function the exact same way as a narrow bank would just it's just a stable coin bank. Like your deposits are held onetoone backed. um they're like backed by Ta bills and it's super safe.

But again, it's like if all of that money were to flow out of the traditional financial system and banks and into this, you know, this is why the narrow bank could never get a master account, they could never get a charter and they never actually got a meaningful amount of deposits because it's like a threat to the Fed and like to the the US economy essentially if if it got you know in aggregate like a ton of deposits and that was kind of like the way it would trend I think if it got um a master account.

So yeah, but a stable coin bank, I mean, I think it's something that like needs to exist. Like it it just makes so much sense and the banking system is incredibly antiquated. Like it's actually not safe as we've seen. Y um and so but yeah, I don't know.

A lot of the banks are trying to explore stuff around stable coins now. JP Morgan is trying to pilot like a tokenized deposit program. Viceerve is trying to launch a stable coin. Um, and yeah, and like honestly the incumbents are doing incredibly well.

Like Stripe acquired Bridge, Stripe acquired Privy, Stripe via Bridge launched their own stable coin, USDB. So, it's kind of one of those things where like you want to see all these like net new winners be created, but also like Stripe and a lot of the traditional players are are kind of crushing it.

So, it's interesting to see. What about stocks on chain, private company shares on chain? What are you What are you tracking there? Uh there was a bunch of memes this week. We talked about it with with MERT a little bit, but I'm curious what you're expecting.

Uh it it just seems like there's funny enough a massive amount of demand for US regular publicly listed US stocks just tokenized on chain. Yep. Yep. Yep. Totally. Yeah. So I I actually went to the the Robin Hood event where they announced like the private company shares and and then tokenizing equities.

Um, and yeah, I think basically like if you're tokenizing equities, it makes a ton of sense as a regulatory arbitrage like to to deliver these equities to people outside the US that have historically had a hard time getting them.

But like for people in the US, it actually just makes sense just to like use the traditional, you know, equities market and just buy them from your bank account. Um, and then I think on the private side, yeah, uh, Robin Hood talked about, what do they do like SpaceX and Open AI, I think.

But again, it's really it's it's difficult to issue private company shares. Like we you saw like the OpenAI response, I'm sure. Um it's just one of those things where yeah, it's hard to custody them. Where are they living? What happens like when you redeem them? Um and it it kind of it kind of becomes foggy.

So that's why I think like unless it's like a regulatory arbitrage, at least for tokenized equities, it it makes more sense for outside the US than inside the US. But everyone's doing it now like Kraken issued X stocks. Let's see. Obviously Robin Hood, Coinbase is trying to get into it.

So I mean I think it makes sense but within the US it's probably like a a less interesting market because our system works pretty well as is I would say.

And then I also think like the most interesting thing about like issuing these things on chain is is native issuance such that basically like instead of like wrapping you know Apple stock and then issuing it on say arbitrum like you just like natively like like let's say just like a like I don't know like Mertz's company just like goes public and you natively issue those shares um and such that you don't have to like wrap and unwrap add an extra step where you're taking like counterparty risk you're taking custody risk, there's more fees involved and you don't actually own the underlying like you're trusting someone else to own the underlying.

So the point of crypto was trustless systems. So exactly like if you want to like natively like Tether is doing like tokenized gold, right? Where it's like that's the only asset that represents their gold is that tokenized gold.

It's not like they issued it, you know, on like the CME and then they wrapped it and like tokenized it. So, I think like if you have that extra step of tokenizing, it only makes sense as like a regulatory arbitrage. Otherwise, you should natively issue it.

And I think native issuance is going to become more and more of a thing. And that's going to like drag the rest of the financial system kind of on chain. That's Vlad's vision too with Robin Hood.

It's like if a lot of these companies if you can find a structure that works for like OpenAI, SpaceX, you know, all these like private companies and you just like have them like natively issuing shares of their own that represent, you know, some kind of stake in the company and like a cleancut way, then you don't even really like need to go public, right?

Cuz like that's kind of like your trajectory of like letting outside Yeah, it is interesting the strategy of trying to force the conversation and then potentially force the partnership by just creating these things, right?

Republic was coming out, we had Ken on and he was basically saying, "Yeah, some people plenty of people aren't going to like this, but we think it's sort of the natural evolution and then and then, you know, we'll we'll see what uh what actually pans out.

" Well, I'm sure you have a big day of yaching and wine tasting tomorrow, right? I mean I mean meetings meetings uh business meetings. So, we appreciate you staying up late to hop on the stream. Thanks so much for stopping by. Always great to catch up. Uh we'll talk to you soon, Bridget. Have a good one.

Enjoy the fourth in France. Yes. Uh, if you're looking to get a good night's sleep, head over to eightsleep. com/tbpn and get a new Pod 5. They have a 5-year warranty, a 30 night risk-free trial, and free returns and free shipping. And