Building Onchain Payment Infrastruture That Serves Europe

Hello, TAPCORN, hello, Berlin. When I walk over to the audience here, I see a room full of builders and founders, and I think I can honestly say that we share the same enthusiasm for building the next generation of FinTAP applications and change the world while we're at it, right? So I bring good news. I think, you know, at least from the stablecoin market, things are really accelerating with new entrants like Stripe, with the acquisition of Bridge, and it really seems like things are going to happen. I've been coming here for the past few years as the CTO of Monerium, mostly talking about the products that we've had, the integrations, and some of the partners that we have in this very audience, but there have also been some internal changes within Monerium.

So we, the founders, so our ex-CEO, Sweden, who is here in the audience, is now the chair of the board, and I've superseded as the CEO. So, when creating this presentation, I put the CEO hat on and created, I think, a very good presentation. It had all the hype in it, it had the graphs that went to the right and up. I was pretty proud of it, and then I threw it away, because today, I'm not going to stand on stage pretending I have all the answers, but I would like to take the opportunity to share with you some of the behind-the-scenes stories, some of the challenges that we faced, some of the decisions that we made along the way. And so, it's kind of a building the on-chain payment infrastructure that serves Europe, lessons from the trenches.

So let's dive into it. So, it's obvious for us, as European founders, that we face one challenge. The on-chain economy is mostly and overwhelmingly denominated in dollar tokens. So I guess many of you can relate to this. We may have funded the company in euros, we hire and we pay salaries in euros, but when it actually comes to managing the corporate treasury, this means that we need to swap into dollar stablecoins, incurring fees, and then back again on the way out to actually make the salary payments.

And along the way, we bear the risk of FX rates moving to our disadvantage. So it's manageable, but as founders, we should not really be wasting brain cycles on those things. So, the obvious answer seems to be, hey, let's create a euro stablecoin. But it's actually more than just a stablecoin, because if we think about all the stablecoins out there, they were not invented to solve the treasury function of a company and make payments. I mean, they were a solution for crypto traders and speculators to actually exit the market at volatile times, be able to survive crypto winter, and move between exchanges without touching bank accounts.

And for that dollar denominated stablecoins were actually a perfect solution. So for a euro stablecoin to be valuable, we also have to solve what we call the last mile problem, which is actually connecting the banking system with blockchain somehow. Actually moving funds from bank accounts on-chain and hopefully be able to do it in the other way as well. So when we started Monerium many years ago, stablecoins were emerging as a category. And like then, like now, we had broadly three token designs available.

These would be your fiat-backed stablecoins, where every token in existence would have the equivalent in a bank account. Boring, right? Then you'd have the crypto-backed stablecoins, which effectively tried to do the same, but instead of fiat in bank accounts, you would have over-collateralized cryptocurrency as the backstop. And then the third component, or the third design, would be your algorithmic stablecoins. Now many of these more exotic designs have, or at least some of them have succeeded, but many of them have failed quite miserably.

And here on the graph, you can see the Terraluna graph, which used to be one for a very long time, and then suddenly a black-swan moment and it went to zero. And if you actually shift this time series a little bit to the left, this could have been the Icelandic banks, where I come from, a few years earlier, where they all fell overnight. So for us, we also understood that if this were to become a mainstream thing, stablecoins, money is inherently political, so it doesn't matter if money is moving on crypto rails or some other rails, they would always be regulated. So the design decision was kind of made easy for us. We wanted to build a euro stablecoin that was boring but efficient.

So we started working. We hired the first employee, Jonkunar, who is our in-house lawyer, somewhere in the room, and we started to work. Six hundred pages later, the application was ready, and we had designed a company with all the right procedures, contingency plans, and a whole nine yards. So the next challenge was actually to figure out how do we get the money from the banking system on-chain. At the time, some of the more reputable exchanges were able to open up bank accounts, denominated in US dollars, because that was used for trading.

So this wouldn't necessarily have helped Monerium in any significant way. And this also didn't align with the vision that we had, so what we were building was something different. It was something that should be modular and embeddable into the fintech products of the future, and none of that existed for the on-ramping through exchanges. We quickly discovered one very simple solution. So how about we take the IPAN, which is the way you used to route payments in Europe, and we associate it with a blockchain address, effectively creating a virtual bank account on top of your wallet.

We thought this was brilliant. And this became a very, very, very efficient way to move money across the boundaries, and solving the last mile problem. And a little peek inside here, this became so effective that we got on the radars of scammers who knew nothing about crypto or DeFi, but would be using our infrastructure to be scanning people. So for those of you who remember when we instated invite codes, that was actually us trying to weed out the scammers. Effectively, if we found one on there, we could trace the lineage in the tree and get rid of them all at once.

This was a painful lesson that we learned. Now, today, since we launched publicly three years ago, our users have transacted, really, over 4.7 billion worth of transactions, and 1.5 billion of those transactions have actually been moving across the SEPA bridge. And 80 to 90% of the volume has actually happened in the last 12 months, so it's growing like crazy.

The next lesson actually came from integrating Eurostable coin into DeFi. So if you're a regular DeFi project, many of you around here have probably used the method of allocating some portion of the tokens to yourselves or to the treasury. You can use those tokens to incentivize behavior, seed the liquidity pools, you know, life is good. We had kind of imposed a constraint on ourselves with having every single token backed by a Euro somewhere, right? So we couldn't just pre-mine Euros.

They had to really exist. And for a small team with a relatively small balance sheet, we couldn't just buy our way into the market. That's not the way we could solve it. So the only possible way we could think of was to reach out to like-minded people and convince them to rally the troopers. And after a few failed attempts on a few different chains, we actually found a community, a home, in this very room.

And I think it's good to kind of shout out some of them, but there are many more. I mean, Gnosis, KPK, Aave, and a lot of others have really helped out on this journey. One of the key unlock was actually to get those founders of those projects to onboard for their personal account. And once they actually had tried it, you know, receiving their salaries and making payments to the landlords, there was sort of an aha moment where, you know, they would become missionaries overnight and become these robots that would just move mountains to make sure that, you know, enough liquidity existed so that they could themselves do the things that they wanted. So the next lesson was, it seems like once you have a stable coin, you have the IPAN for easy top-up, and enough liquidity in DeFi, that proved to be a great foundation to disrupt card payments.

So GnosisPay was here on stage before me, so you know all about that, and now Metamask as well. And this second generation of cards, they actually work a little bit differently. So they allow you to hold your stable coins in a self-cosocial wallet, and then at the time of sale, or point of sale, they will actually make the tokens available for settlement. Just to be absolutely clear about where we are in this journey, if you think about the value chain of payments, it is effectively the issuing bank, the settlement network like Visa and Mastercard, and the merchant bank. And today, the way it works is the issuing bank is using stable coin rails, then redeeming that and settling over fiat rails.

We are actively working with Visa and Mastercard to get our stable coins approved as settlement tokens, kind of unlocking the next layer in the value chain, but the real unlock will come from when stable coins will move from the card holder directly to the merchant, and none of the other thing is needed. I actually think that we are just at the beginning of what is possible with this technology. I get really excited about the ability to hold yield-bearing stable coins in Aave, and because of the atomic nature of blockchains, they will be able to unwrap the tokens at the point of sale to make them available for settlement. And conversely, for credit card kind of behavior, we can think about a future where a loan, you use your crypto collateral to take out a loan at the point of sale, which then gets used for settlement. So I think there are great things happening on this front.

Our vision was always to go to market through our partners, as I mentioned earlier, and we spent many years trying to convince the crypto wallets of the time to embed our solution to unlock the functionality that I'm showing here. We failed. Most of these first generation of crypto wallets would either be crypto only, some of them were kind of integrating with DeFi, and a handful of them would be trying to onboard and on-ramp and off-ramp maybe through the card system, which would be very, very expensive, 1%, 2%, 3%, 4%, 5% in some cases. But for the use case at hand, it didn't really matter because prices of crypto swing like crazy, and it was all worth it. So it wasn't until recently that we started to see a new kind of wallet that is more tailored to normies.

These wallets would effectively try to focus on simplifying the management of the private keys. They would swap out words like exchange or crypto trade, yield, for something more simple like savings accounts and payments. And it's fantastic to see some of those wallets out here, the battery wallet, rebind, seal, there's now also Greenhood's wallet that are integrating many of the components that you've heard about. You will be able to import your Gnosis Paycard into those wallets. You will have integration into the IBANs, making the payments very easy, and then savings accounts that get their yield from Aave.

And there are a great many things happening here. And I was really proud yesterday when I saw a partner of ours tokenize it, who are creating a legal investment platform, kind of a legal ICO for Europe, where they showcase in real time how they could effectively have an investment happening where the investor was going to happen in just a few seconds. It was fantastic. It fills me with pride. And I'm also happy to share with you that through those partners, we are now onboarding more users every day than we are ourselves.

So it seems like at least partially our go-to-market strategy is starting to work. So, did we make any mistakes along the way? Yes, you betcha. Many of them. Is our go-to-market strategy going through partners the best way to do it, as opposed to all the other stablecoins who go through central exchanges?

Well, only time will tell. I can't tell you the answer to that. But what I can tell you is that the stablecoin market has been disrupted in a very significant way. And I think it's going to lift all the boats in the stablecoin market and also in some of the other DeFi protocols that will become mainstream as a subsequent matter. I now hear again the story that it's only going to be USD dollar stablecoins that will matter.

It's all about being able to exchange a local fiat currency into a dollar stablecoin and then use that to transmit over the world and then back to local stablecoins. I just simply cannot subscribe to this idea for two reasons. Number one, I think there will be regulatory pushbacks. As we mentioned, money is inherently political. And number two, we are all here on the mission to bring the world's economy on chain.

And for that to work, we need more currencies, not fewer, and especially not one, right? And in that world, we need to be able to efficiently exchange between those tokens. So earlier this year, we got our last registration because we were preparing for the next era of the company where we are going to facilitate users sending us USDC or crypto and be able to mint URI against it. We think this will solve some of the liquidity requirements for some of the changes where we haven't had as much success as the other asgnosis chain. And also, it's going to support DeFi in a way where now rebalancers that rebalance the pools will be able to trade against Monerium and create bots to trade against the pools doing it in a very efficient manner.

The end result is a world where you can go from one currency to the other. This is what we call the on-chain FX, and we'll be able to do it at close to mid-market FX rates in a similar manner where we bring the liquidity from the FX markets like we did with the SEPA connection. So with that, after having shared some of the stories and insights, I hope I was able to inspire some of you. The only last remaining advice I have for the audience here is, I mean, we've been at it for a long time, right? In crypto years, we're probably something like 100 years old, and we definitely have the battle scars to prove it.

I think it's all about finding the right people who share the vision with you and who are in it for the long haul. With the right people and the right partner, I believe anything is possible, and we eventually will change the world. So with that, thank you for your time. Thank you, Gisli. Time for questions.

We have maybe just one question. Time for one question. Oh, okay. Yeah. Thanks.

Thanks, Gisli. My question is, what is your mode against other fiat-backed stablecoins? That is a good question. So I think the network effects will be one of them. And again, to the point earlier, what is going to be the right way to distribute the tokens?

Is it going to be through some of the centralized exchanges? We see that some of them have had very much success, but we also see that they're paying a lot for that distribution channel, right? So we already know that USDC has been paying something up to 90% of their revenue to Coinbase for that distribution, and this aligns with the conversations we've had with the exchanges. So I'm not ruling them out. I'm just saying, like, I'm not sure that it's a great business to be in.

And we always have the vision of kind of creating this modular effect that I talked about, and I think having, you know, many integrations, different kinds of integrations that are more tailored towards real-world users, because let's be honest, the ones in here, it's just tip of the iceberg, right? What I'm talking about is the rest of the world. And so we are very focused on being able to service use cases like GnosisPay and others that are on that same mission. I hope that answers the question. But it's inherently a tough one.

I don't know the exact answer. Cool. Thank you so much. Excuse me. Thank you.

Thank you.