# Stablecoins are eating finance: A frontline report - Timon | very early Ventures

- Channel: [ETH Belgrade Community](https://streameth.org/eth-belgrade-community)
- Date: 2025-10-07
- Duration: 26:27
- Watch: https://streameth.org/watch/yt-wYIEejhdSsg
- YouTube: https://www.youtube.com/watch?v=wYIEejhdSsg

## Description

Stablecoins are eating finance: A frontline report from the new money stack - Timon | very early Ventures

## Transcript

Um, and today we're going to talk about stable coins, right? So, request for startups is something that YC does every now and then, and it's pretty much um a bunch of partners saying, "Okay, we want builders to build this." And here in 2024, they said, "We'd like to fund great teams building B2B and consumer products on top of stable coins, tools and platforms that enable stable coin finance and more stable coin protocols themselves." So I thought, "Hey, this is pretty cool." Um, so let's see what's in their latest batch. Maybe there is a company that we know um and love. And uh yeah, I went ahead and checked. Um in total there's 142 in the latest batch. And yeah, how many are how many stable coin protocols do we have in there? Exactly zero. It's even worse, it's even zero crypto companies um in there. So, I'm like, okay, that's that's weird. Are they sleeping on on stable coins? Um, okay, maybe there's a lag. So, okay, let's forget the narrative. Let's look at the numbers. And I came to realize, okay, stable coin size is is serious, right? Since 2021 where it was around 35 billion until today where it's 240 billion, we have a compounded annual grow growth rate of around 64%. And that's that's huge. Then you have these funny colors on here that represent sort of where these stable coins live on. And of course it's on the most most of the bulk lives on the the only censorship resistant and uh incredibly neutral blockchain that there is which is of course Tron uh Salana. I mean okay no okay let's let's stop the jokes. Um it's the world computer Ethereum of course. Um so let's yeah so I I would make the case and and say that crypto um stable coins I mean are the first crypto app with a product market fit and yeah why why do I think that's the case? Um there's a couple of reasons for that and um I think the first most obvious one is okay institutions are coming in and legitimizing stable coins right you have black rock coming in with a bidd um tokenized assets fund on chain you have fidelity launching its own stable coin you have Visa settling USDC payments on L1s you have Stripe acquiring bridge for over a billion dollars um these these are serious numbers right then looking at the numbers As we se as we've seen before um adoption is real, right? You we have over $33 trillion in um transferred stable coins over the last year. We have more than 250 million unique addresses and out of which 313K are average we have an average monthly active users um which is sort of unique addresses in this context. And then over 1% of the global M1 money supply is in stable coins. Um then another interesting thing is happening in emerging markets. Um right there's this Castle Island ventures report that I read and most like a really big part of crypto users in Brazil, India, Turkey, Nigeria um use stable coins. Then a really good chunk of that surprisingly use them for yield 40%. And then another good chunk as well use it to even receive salaries. Right? So even if in the western world we don't see that usage as apparent then in in emerging markets this is this is much more tangible and we're much further in that front. Um yeah and then on the infrastructure side we have yeah over a billion dollars in in tokenized tea bills. Um we have stable act and the the genius act that are progressing in the US and hopefully pass Congress um soon. um in Mika. So in Europe, we already have Mika enabling Europe, this first compliant Euro stable coin. That's kind of boring this category, but that's still important and sort of the highest thing to legitim like the the the most important thing that the government can do to legitimize sort of something um which is putting it into into the law book. Um and yeah, also on the narrative side of things, I think there are some shifts happening. we have um stable coins being used not only for trading but there's actually yeah this treasury stack emerging that I'm going to talk about later as well um it goes from speculation to programmable money and overall it's used not only in crypton for cryptonative nerds right but it also becomes a macro relevant sort of infrastructure um so I was thinking okay then YC is sort of living under a rock and we're sort of Yeah. Uh, we're living the future of France already. Um, and and then I went on to Defa Lama and s okay, 191 stable coins. Then when you think about actually using these stable coins where yeah, you need to check which one has the most liquidity if you're sending large sums um which chain their live on etc. And then I was seeing okay this sort of abundance of stable coins is not really yeah good from from the user perspective but it's really fragmented and and shows that UX is pretty bad at the moment. Um, so yeah, I would say no. Uh, we're not fully there yet. Um, and then yeah, I would like to say take a step back and sort of look at what stable coins are actually doing, right? And Matt Brown, this this investor at um, Matrix uh, partners has, I think, a pretty good mental model of how he thinks about this. And he says there's sort of two lenses that you can view stable coin use cases through. And the first one is sort of the bridge um between fiat and crypto world where value is more in the currency itself and it stability than in in the infrastructure and sort of the access to global nearly permissional permissionless form of money um is sort of where where the value acrews especially in countries emerging countries that don't have access to the US dollar right and then on the other side he says okay there's also an emerging use case which is the parallel infrastructure within fiat systems or between different fiat systems. So in this case the value is in the stable coin infrastructure itself much more than in the stable coin itself. Um so yeah and then sort of these properties of being fast cheap are sort of um what create value and then I would add a third sort of dimension to to look at which is sort of the end user proximity. which pretty much means okay how close is this innovation to the end user which makes it feel really tangible and he sees the actual benefits uh from it and um I think taking all these three things together um you can eventually get to sort of this full fullyfledged uh uh fintech stack. So what what do I mean by that? Um, another mental model I would like to introduce is to say, okay, what are the actual order of benefits that come from stable coins? And here I think there's three main ones. There's the first one which is fairly obvious. You have a fast and cheap money movement that comes from stable coins, right? You have lower transaction costs. You have improved liquidity. Okay, that's obvious. That's a no-brainer. And the emerging vertical here is is payments. Easy. A to B. Then the second order of benefit is okay what do I do beyond sort of just transferring stable coins back and forth is okay you can actually earn yield on it and because of that you sort of expand the market that you can target um you can enable things like automation because of smart contracts etc and this frictionless UX sort of unlocks then new new behaviors in the markets and then the third order of benefit which is sort of the highest um order of benefit that sort of utilizes the max um yeah the maximum amount that you can do from stable coins is sort of um yeah neo banks in the end where you have new business models that emerge you have rentseeking intermediaries like swift like the interbanking system that are displaced and then this is where sort of the whole value acrruel from treadfi moves onchain um into the crypto world uh and yeah I think That's sort of where the potential to to redesign the entire financial stack emerges. Um and then what I'm going to do next is I'm going to talk about each of these order of benefits and have a look at what actually happens here. Um so if you talk about payments um this sort of obvious first use case we have on the surface layer sort of what the user sees. Um yeah, pretty pretty obvious what we see already today. 24/7 365 instant global settlement uh transfers in seconds for almost no cost. We have we don't need pre-unded liquidity anymore and that's sort of the foundation for efficient B2B and C consumer payment experiences. That's very obvious I think. Then moving a little bit deeper what what's actually required to do that is vertical specific orchestration uh routing compliance we need yeah solid on and off ramps uh embedded wallets FX liquidity um cash collection settlement merchant tools all these things need to be in place and of course compliance the boring stuff um and then at the core of all that sort of would be what I talked before is sort of the replacement of swift these swift chains and and card networks that sort of power uh crossber B2B platforms. Um and then of course also frictionless consumer remittance products in emerging markets for example. Um right then sort of on top of if we go further again and talk about yield on top of these stable coins um what we see on top is the treasury yield products that we already have today which is yeah simple yield bearing stable coin accounts. Um you have an accessible familiar UX for corporate treasuries individual investors. You have ideally a direct integration with Trefy banking interfaces. Little bit below that you have the actual yield instruments themselves. So tokenized fixed term deposits um transparent shredded markets automated decentralized lending pools matching uh lenders and borrowers efficiently. And then at the core of all that you have the actual composable US treasury tokens for example you have money market instruments real time um net net asset value instant issuance and redemption um of these instruments um and then of course institutional grade security compliance and then liquidity then I I went on to stablewatch.io KO uh it's a pretty cool site if you want to check it out. And then also saw that just to put this into context only 4.5% of all stable coins are yield bearing. So I think that just goes to show how big the opportunity here is and how how underappreciated um that still is. Uh and then sort of if we look at the third big sort of order of effect um which I think is the most interesting one is sort of the neoank UX on the surface layer uh where you can have automated payroll invoicing freelance payments. Some companies already do that today by the way. Um you have consumerfriendly saving investment in investing spending apps effortless onboarding trust minimized mobile first experiences. This is sort of what then I always think about like my mom, right? Like what any everything that we do in crypto, okay, how what does she actually care about? And I think this would be something that she would actually then appreciate and that that's what she would see, right? Um then if we go a little bit below that for that, what do we need? We need yeah white label wallet infrastructure um for custodial non-custodial management. We need built-in compliance KYC transaction policies like predicate for example one of our portfolio companies that do that do that. Um we need modular customizable sort of infrastructure for rapid deployment across different markets because all these different markets have very um different inefficient old systems that all need to sort of um be compatible with. And then at the core of all this, as we talked about before, this is really the where we where we need always on interoperable stable coin infrastructure. Um the these lowcost real-time settlement layers like Ethereum and and its L2s and uh yeah developer friendly composible frameworks uh to really launch these products on top of it. Um so yeah, remember when I said we're not living the future of France yet and what what do I mean by that? And I think you can distill this into sort of um something that I would call a last mile problem where it's not just about creating stable coins but about making them usable, trusted and integrated um into the real world. And I think the blockers are familiar for many people um that okay you have this regulatory gap right where you have um no global clarity everybody's sort of afraid of uh imp impending action from the regulators um conflicting requirements and all that um access in UX is still a big problem where it's hard to on board users um you have limited fiat access and sort of there's this this looming low trust of for non-crypto to users. Um, and then there's also this compliant friction, right? Um, where you have these KYC burdens that kill UX and um, yeah, almost kill sort of this um, crypto ethos that we have, right? Where you have permissionless access to money. Um, and then what do we what do we need to to sort of overcome these challenges? I think is also sort of three points where okay, custody and compliance needs to be solved. Um, we need stable coin orchestration. For example, Sphereet and Plasma are doing that where you have rooting, abstraction and and automation of uh these flows. Also, I think on the wallet layer, there's a lot of work to be done where um I don't see a future where I need to ask you, okay, which stable coin do you want? Is it PI USD or what? And then I only have USDC and then I need to bridge it back and forth just uh to make the transfer. I think it's more it's going to be more of a thing where I see USD in my wallet or in my account and you have USD and I just send it and I don't really care what's happening in the back end. Um and then also on and offs need to be more seamless. Cool. So um what do we see as sort of the road ahead here? Um I think as first big blocker and and thing that's coming is institutional grade infrastructure and custody. We see that already happening. Um that's that's really good. This is really sort of the tailwind and I would say the floor of innovation because it's not really sexy. It's just a requirement. Um regulatory clarity is coming. Um incumbents are continuing and institutions are continuing to build on top of stable coins. Um everybody wants their own stable, right? Um and then um yeah with that institutional liquidity comes in as well. Um and all of this sort of legitimizes and and enhances systemic trust. Then as a second one I think would be localized and non-USD stable coins. So sort of the long tail of USD stable coins that will emerge. Um so where regional issuers can design for local payment rails different in every country uh or many countries and and compliance frameworks. um which would then also reduce USD dependency to some extent um in this in the global stable coins supply. Uh but then I think also that USD supply will continue to grow maybe more than one to 2% um of the the M1 um money supply and I think that's going to be an up only chart. Um and then thinking ahead further is what I think we all would love to see um is sort of the phase two tokenization where other real world assets like equities, bonds, credit, real estate would move fully on chain um where you could have sort of these fractionalized um let's say fractionalized real estate on AV and you can borrow against that and and and do many fun DeFi things with it. Um I think that's going to restructure capital markets. um because of this enhanced transparency and automation and that's really a question of time here. Um ultimately that's going to unlock global participation and novel path for future cruel. I'm really excited for that and I think that stable coins aren't the endgame here. Um they're rather the infrastructure layer for programmable finance and possibly even who knows um sort of kickstart this next wave of mass user adoption. Um, at this point, I'd also like to do my own little request for startups. Um, these are three things that we'd love to see happening, uh, and that we'd love to back. For example, privacy preserving stable coin infrastructure. Um, where you have wallets, payments, or UX layers with built-in privacy defaults. Um, we'd love to see mobile first, stable coin fintex in emerging markets. So think about Revolute but stable coin native built for Africa, Southeast Asia, LATAM um or FX rooting layers between stable coins which are also super important I think where you have onchain swaps between USD, Euro, Brazilian realale, whatever, fiat um with local liquidity. Um so yeah, that's it. Um if you know anyone or if you're building that, feel free to hit me up uh and connect with me. Um, as we already uh uh heard before, there's sort of the stable coin uh article that's coming soon uh that you can check out as well. So, yeah, make sure to follow us on Twitter and stay tuned. >> Hey, big applause. Okay, thank you for the talk. Let's see if there are any questions. So, please you raise your hand and microphone is going to come to you. So, gentleman in the middle. >> Hey, thanks for the talk. Very insightful. Um I wanted to ask um what would in your view like like what would be the edge of a fresh team starting up? I mean you guys are very early ventures right? So um you know we are seeing like tether launching uh like their own chain and um quite a few very like capitalyally backed organizations in the space are pushing the frontiers and they have a a very big platform to to work off of. like how can a startup compete? >> That's a very good question. Thank you for that. Um I think what you're saying is valid and also if you look at this acquisition of of bridge by stripe it's it's huge right and I think if we come in at valuations of of 15 to 25 million that's not really comparable. So we would never sort of come in around uh of of of bridge for example at that stage right but I think there is still um opportunities especially in emerging markets where sort of the barrier to entry is much lower than in these big ones like like the US and and Europe. Um you you do raise a valid point because especially regulation then makes it harder increasingly harder right to sort of uh build and you're not going to acquire all these sort of licenses to do that. So it's a valid point and it's a good question. Um and I would say um look at emerging markets where you have still sort of this regulatory arbitrage um and and have fun there. >> Okay. We had question here in the first row. I have a have a comment and I have a question. So the comment is the following is that you mentioned uh black rocks bidded and from my experience blockchain networks are using biddrix for their adoption by institutions but the thing is that since the beginning if you go under the hood u the primary activity is happening on the steel on Ethereum level and that's it. So other blockchains the supply is provisioned but there is no activity happening there. So just a comment and a question is that um in the nearest future is going to be all these stable coins then there's going to be also number of retail CBDC's and wholesale CBDC's. How do you see their coexistence in terms of these roles? what entity is going to be what is used for what >> are you talking about permissionless and and permissioned stable coins y about that sort of how how they live together >> yeah your opinion on that >> um that's it's it's it's that's a very interesting topic because the more permission the stable coin is the less sort of the less the further apart it is from from this cypher punk crypto ethos. Um so I think and with with everything right you have first innovation that happens and then regulation that catches up slowly and I think we have to sort of push the boundaries on what's possible on the permissionless cypher punk ethos side and then regulation will slowly adapt. So even if you have this Europe for example which is probably hyper permissioned and um yeah sensorable and you can probably tax onchain and and things like that. I think this is still a win in in that sense and you can also see that by by Tether sort of pulling out um of of the OS with this USDT. Um yeah, honestly I think while we have them we should be we should be lucky um and we should be able to use it but then it's more of a political issue right um how regulation will eventually catch up catch up onto that and I think there will always be sort of a space for that. I mean you can even see Monero for example today still existing right even though it's super private and and very much um sort of non-compliant in that sense um so yeah I think the whole pie will grow and with that also this non-permissionless will this actually permissionless part um but I do think that regulation is a danger for that for sure and then I think also thinking about this debate right where sometimes people say like hey um if USDC is permission then why wouldn't I use it on Solana it doesn't it's it's probably the same thing as on Ethereum right but then the the crux here the kicker is that okay sure circle can censor your USDC but then if it's on Ethereum that's that's the only party that can censor your Ethereum uh your your stable coin and not the validators or the builders or what whoever else. Um so yeah, >> thank you. >> Okay, I we had another question there in the middle. >> Thank you for your presentation. Uh I wanted to ask like uh let's say philosophical thing. Uh if we have stable coins right now and uh they have some real world assets like uh US treasuries and so on uh they receive some yield from it. also they receive revenues from fees, commissions and etc. Uh would they share it with us with users of stable coins? >> So let's say if shredfy is completely coming on chain then if all these fees generated typically in shreddy would also occur to the user is what you're saying. Um I think I think that's going to be the market fixing hopefully that um and sort of a competition would emerge as we've seen before sort of there's a very tiny part of the whole stable coin supply that's bearing right and um that I suppose would would would change in the future um and you already have Athena resolve usual and the likes that sort of go in this direction but I think it's still sort of a little early or not as mature sure yet um that we say okay the standard form of payment is going to be a staked uh version of or a yield bearing um USD stable coin. So I think that's where there will be a lot of growth happening. Um and the reason for just USDT being that simple I think at the moment is that um its primary use case is still payments only. Um so especially if or payments only or the USD backing aspect right emerging countries for example um they they care mostly about the USD because that's just so deflationary compared to their local currency right um and then two to 3% of of yield on top of that don't make a big difference that'd be my hypothesis um yeah okay any more questions Okay, then let's give a huge applause.