Stablecoins: Africa's Killer Crypto App

March 30, 2023

In this episode of crytpo@scale, we're exploring what might be Africa's killer crypto app, stablecoins. According to data from Coinmetrics, cumulative Stablecoin volumes are at a $9 trillion annualized run rate, exceeding the volumes of all major card networks, except for Visa. Across the African continent, stablecoins are finding meaningful uptake, particularly in markets with low USD liquidity, or countries experiencing currency devaluation.

In today's episode, we're going to explore stablecoins in two parts. First, a global perspective with Joao Reginatto, the VP of Product at Circle, which is the company behind the USDC stablecoin. Second, a local perspective with Ngozi Dozie, Co-Founder of the African digital bank, Carbon.

Follow us on twitter @cryptoatscale.

00:00 - Intro. Stablecoins are the best thing since sliced bread, according to Ngozi Dozie.
02:23 - Introducing Joao Reginatto, VP, Product at Circle and product lead for USDC.
02:48 - What is a stablecoins?
04:21 - Why stablecoins?
13:33 - Not all stablecoins are equal. USDC is pegged 1:1 to the Dollar.
24:22 - What else is Circle focused on to broaden the adoption of USDC?
28:30 - Regulation.
32:10 - What's next for stablecoins?
36:25 - Joao's recommendations.
37:44 - Explooring stablecoins in the African context, with Carbon's Ngozi Dozie.
40:48 - Use cases: access to foreign exchange, hedge against devaluation.
44:05 - Carbon's FX and borrowing woes.
48:22 - Stablecoins as a platform.
52:27 - Challenges to stablecoin adoption.
1:00:06 - Ngozi is scared of the risk of capital flight.
1:03:46 - Ngozi's recommendations.

This episode of crypto@scale is sponsored by Ripple.

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Transcript

[0:00:00] Ngozi Dozie: I am here, because stablecoins in particular, I just find very interesting. I think they're one of the best things since sliced bread, as infrastructure, as a means of transactions. I just think it's added a lot of value to millions of people across the continent. I am, as a personal individual, I am big on the increased adoption of that.

[0:00:24] Justin Norman: In this episode of crytpo@scale, we're exploring what might be crypto's killer app, stablecoins. According to data from Coinmetrics, cumulative stablecoin volumes are at a $9 trillion annualized run rate, exceeding the volumes of all major card networks, except for Visa. Across the African continent, stablecoins are finding meaningful uptake, particularly in markets with low USD liquidity, or countries experiencing currency devaluation.

In today's episode, we're going to explore stablecoins in two parts. First, a global perspective with Joao Reginatto, the VP of Product at Circle, which is the company behind the USDC Stablecoin. Second, a local perspective with Ngozi Dozie, Co-Founder of the African digital bank, Carbon.

This episode of crypto@scale is brought to you by Ripple. Anyone who sent money across borders to or within Africa knows how cumbersome, expensive, and slow the process can be. When it comes to remittances, Sub-Saharan Africa remains the most expensive region to send money to. For businesses, trapped capital, slow settlements, and high failure rates pose major challenges. The current financial infrastructure just doesn't work very well for the modern global economy. Ripple believes that crypto-enabled payments can help. Ripple's payment solution, on-demand liquidity, enables organizations to settle global payments in real-time, at a fraction of the cost, and without tying up working capital and destination accounts.

By leveraging the digital asset XRP as a bridge currency, funds can be sent and received in local currency on either side of a transaction. Across Africa, Ripple is partnering with local financial institutions and fintechs to bring the benefits of better cross-border remittances to the region. To learn more and get in contact with the Ripple team, head over to ripple.com.

Now, I must mention before we start, that our conversations with Joao and Ngozi were recorded before the collapse of Silicon Valley Bank, which led to a brief depegging of USDC, where the stablecoin was trading at less than $1. Without any further ado, here's Joao Reginatto, the VP of product at Circle.

[0:02:23] Joao Reginatto: I'm VP of product at Circle, and I lead what we call the stablecoin product team at Circle. I have been with Circle for a long time now. This is my eighth year with the company. I led the build-out of USDC, our dollar digital currency back in 2017, 2018 when we launched it. Since then, stablecoins became a big topic for Circle. Today, I lead, as I said, the product team, which is the largest product team that we have in the company.

[0:02:48] Gwera Kiwana: Cool. Usually, to start this conversation, we want to ask ChatGPT to explain this concept for us, right? Because some of our listeners may be coming to the podcast, not quite understanding exactly what stablecoins are. I'm going to start with a breed of, I typed in the prompt saying, explain like I'm five. What is a stablecoin? Joao, I'd like you to give ChatGPT a score, I guess, at the end of it and maybe expand.

Here's what ChatGPT thinks. A stablecoin is a type of cryptocurrency that is designed to maintain a stable value, usually pegged to a fiat currency, like the US dollar, or Euro or a commodity like gold. Unlike other cryptocurrencies, like Bitcoin, which can be highly volatile, prices that can change rapidly, stablecoins are designed to have a fixed value, which makes them more predictable and useful as a means of payment and a store of value. Stablecoins achieve their stability through various mechanisms, such as holding reserves, or using algorithmic formulas to adjust supply of the stablecoin. Overall, stablecoins can aim to provide the benefits of cryptocurrencies, such as decentralization and fast transactions, while mitigating the volatility that can make them less practical for everyday use. All right. Do you want to give ChatGPT a score out of 10?

[0:04:00] Joao Reginatto: Score out of 10? Probably a nine out of 10. Yeah. No, that's pretty good. Nine, nine and a half. That was good.

[0:04:05] Justin Norman: That felt pretty advanced for a five-year-old, to be honest.

[0:04:08] Gwera Kiwana: Yeah. Maybe I should say, explain like I'm two-years-old. Can you explain a little bit what is your definition of a stablecoin and what do you think the value of stablecoins is and what you guys are doing at Circle?

[0:04:21] Joao Reginatto: Yeah. I think, and to continue the joke, because it's super interesting, right? That definition is pretty good, but I think what lacks is sometimes a little bit of the why, right? If you step back a little bit, why would you want a digital currency that is stable in nature, right? It's not only about stability, because you could – stability is an arbitrary choice and you could make a currency that is, I don't know, stable at $5 all the time and what does that even mean, right? That's not the only point.

I think the meta point is that really, and we have come to that conclusion at Circle, and I think a lot of other companies have done that as well, is that there was an opportunity as soon as crypto and blockchain technology matured, for people to go back to a vision that I think existed for a long time, which is the idea that money should run on the Internet, right? I think a lot of people for many years have been talking about this idea that perhaps, one of the biggest gaps that the Internet has had in terms of design is that it didn't have a data format for money, right?

We have grown in the last couple of decades to become accustomed to pretty much every digital format, whether it's media, conversation, video, photos, all of that being pretty well defined in how it gets transported over the Internet. We didn't quite have that for money. When I talk about money, then I am referring to the concept of money that I think is more traditional, or customary for just people on a day-to-day basis, right? These days we are debating, is Bitcoin money? Is Ethereum money? Those conversations are super interesting.

If you go to a five-year-old, or to Joe Smith on the street and you ask them what is money, they're going to tell you, well, money is dollars, money is euros, money is pesos and all that. It's what people are used to use on a day-to-day basis. It's what they get their wages on, it's what they pay bread and milk with. I think part of the concept of stablecoins for us is this idea of bringing fiat currencies, bringing money as people know them today, but run them on the internet, right? Run them on these new technology infrastructures that we have, because that allows money to become 10X better, or a 100X better. I think that's really the core concept.

Then the next question immediately has to be, well, but how do you do that? Then as you use the ChatGPT explanation, there are several different ways of doing that. We at Circle in particular, we have chosen this idea of pegging a digital currency to the fiat currency equivalent by just using full collateralization. It's the simplest mechanism, but it's also the one so far that has proven to be the most robust, right? The idea is for USDC, for example, that for every unit of USDC that we issue, there's always $1 that we received prior to that and that we keep in reserves, so that every time that somebody wants to come back from that digital dollar, from USDC back to a dollar, that we have a simple operation to just give people that dollar back. That's the construct that we focus on.

[0:07:13] Justin Norman: We're definitely going to ask you about this collateralization question in a few minutes, but just sticking with the why initially, you talked a little bit about Internet money being a 100 times better than traditional fiat rail. Can we expand a little bit into what makes it better? What are the sorts of opportunities to leverage a stablecoin like USDC and what makes it better than the alternative, or the traditional fiat structure from a stable currency perspective?

[0:07:39] Joao Reginatto: Yeah, that's a great question, Justin. I think when you talk about that, you need to broaden the concept of, again, what is money? Because as I said, money or currency is the perspective that people have on things like dollar, the euro, pesos, whatever, pick your currency. There are many different formats of that that people utilize on a day-to-day basis. You have cash, which is very important in many markets, but it's also disappearing in some more developed economies. You have various different types of electronic money.

I think what blockchain and cryptocurrencies have allowed us to think is really this concept of digitizing cash. Let me explain why we think that's important. I am actually a fan of cash, not that I think it's cool to just be holding tons of cash on your pockets. That's cumbersome. It's not a great medium. I think we forget sometimes about some of the quality properties of cash that are quite, quite interesting. For example, cash does not involve fees as far as transacting. If I bring you a $100 bill and I give it to you, you don't get $100 minus a tiny bit of the bank notes that gets stripped and collected as fees. That is because there's no intermediation. It's basically a peer-to-peer transaction.

I think that's really an important element of how money can work that we forgot over time. The other one is also because of that peer-to-peer nature to the transaction is that it has instant finality. The moment that the dollar bill leaves my hand and gets to your hand, that's it. The transaction is settled. I have no more of it and you have all of it. now. Again, we don't need to wait two days. Wait two days and then check your pocket again and see if that bank note is there. No, it's instant finality. It's a thing that we have grown as humans. We have grown accustomed to understanding.

It's also an instant transaction. All of these properties are good for quality properties of money that over time as we have evolved towards electronic money, we forgot, or we missed on them, because electronic money is not digital. I think it's important to differentiate, right? Electronic does not mean digital. Electronic money means we have moved to all these electronic databases that are controlled by entities. Because nobody could figure out a way to prevent money from being duplicated, you basically had to create this entire infrastructure over the last number of decades, so that you could secure electronic money. Because otherwise, people could duplicate an entry in one of these ledgers on a bank and there you go. You would be fabricating money.

All of a sudden, we created a lot of intermediation. We created a lot of cumbersome parties involved in settling these transactions. We created a lot of cost. I think the idea of digital currencies and stablecoins, they bring those quality properties of cash. Again, they have this idea of peer-to-peer transactions, instant finality, near-free transactions. They bring additional benefits then, which is the fact that, first of all, this technology allows all those transactions to be global. That's a problem that you have with cash. You have only the ability to settle that transaction locally. Both parties have to be co-located. Now, all of a sudden with stablecoins, or digital currency, we can have a peer-to-peer cash-like transaction involving somebody in Nigeria and somebody in Brazil. Completely global in nature. Can go everywhere where the internet goes, or an internet-connected device goes.

I think the second element that makes this technology makes it tremendously powerful – this is where I think the 10X, or even the 100X comes from is the fact that this is not only a currency. This is a protocol. This is a platform that people can build on top of. I think this is the key innovation that happened to the space, because I think you will remember that conversation that happened a few years ago in crypto that I always like to bring back to. Remember when people started talking about Bitcoin with a capital B and bitcoin with a lowercase B, and that was to differentiate the idea of Bitcoin, the currency, this asset that people hold on a digital wallet and they transact with, versus bitcoin with the lower case, the infrastructure, the network, and how the network can be used for, even for different things than settling Bitcoin transactions. It can be used for settling messages and a ton of other things. It behaves a little bit more like a platform.

USDC and stablecoins, they have that characteristic as well. We have the two sides of the coin, pun intended. One side is the bare asset, so the asset that people hold on wallets and they transact with and they get a lot of benefit from. This is really the benefit that's targeted at either individuals, or businesses. They have a balance on that asset. They can transact and they can benefit from all the things that I mentioned about how a digital and global cash-like currency has.

The other side of the benefit though is really for developers. All of a sudden, developers now have a protocol for money on the Internet, have a dollar, or a euro, or a pesos protocol for money on the Internet. They can write code against that. They can create applications on top of that. I think this is what allows this technology to be so interesting, because we have seen so much innovation already in the last four years since launching USDC, but I think we're only beginning to scratch the surface of what is possible.

[0:12:50] Gwera Kiwana: I totally agree. I think what Circle has done has been an amazing feat and digitizing the dollar and turning it into a protocol, a platform that can build many things, I think, is – if you told someone this 50 years ago, they would have had an aneurysm. Let's look at the double side of the coin in two ways with regards to stablecoins. There's two types of stablecoins, right? There's tablecoins that are pegged by algorithms and then stablecoins that are one-to-one pegged, or backed, like USDC, for example. Then, there's also centralized versus decentralized issued stablecoins. Can you give us a quick primer of what that means and why that's been in the news lately? Why both topics have been in the news lately?

[0:13:33] Joao Reginatto: Yeah. I think definitely, one theme that we repeat here at Circle is that, first of all, the term stablecoins has been a term that was defined and it was given to us when we launched USDC. It's not a term that we particularly chose. We tend to use different terms depending on the context of how we're talking about, what we do. It's important, even though the industry has adopted this term, it's important to understand that not all stablecoins are equal. In fact, when you look at each one of those, they're fairly, fairly different. Broadly speaking, as you said, there are a few different mechanisms that people have created over time to basically achieve this goal that we discussed in the beginning, which is we essentially want to bring a currency that people are familiar with the dollar, or the euro. You want to bring a version of that over in digital form over to blockchains.

Basically, that involves some design of a pegging mechanism, as you said, that's usually all about that pegging mechanism and how you maintain that peg. Maintaining that peg can be done by the use of collateral. That's usually one bucket and it's what people call stablecoins that use exogenous collateral. They look somewhere outside of the construct of a stablecoin and they say, what are we going to use as collateral to incur the value of this currency to something that we desire, for example, the dollar?

Our mechanism, as I said, I think it's the most simple mechanism, which involves basically, defining that collateral as actual dollars, right? Customers send us dollars, we set those dollars aside. Then we issue the digital version of those dollars in response to that initial deposit. What that does is that it reassures everybody that you always have those reserves ready to give back to people if people want to redeem USDC back into dollars. We have been doing this since 2018, as I said. We have evolved our understanding of how those reserves should look like. Today, just to give an example, today, Circle holds those reserves partially in cash, partially in actual dollar deposits on banks like Bank of New York Mellon in the United States and a few other partner banks. It holds the remaining part of the reserves in the form of basically, short-term US treasuries. That's held with BlackRock in the case of Circle out of the United States as well.

There are other types of stablecoins that choose to use a different type of collateral. For example, they can use a crypto collateral. Usually, the reason why they do that is to your point where is to have the solution be a little bit more decentralized, right? Because in the case of Circle, the solution is very centralized. There are many centralizing points to the solution. The banks that hold the reserves, there are central points to the solution.

Circle, which is its intermediary that perform the exchange between the digital and the fiat form of the currency is a central party. There are risks associated with you trusting Circle, or trusting banks, even though we think that is a very robust and trustworthy solution. There are risks. If you want to go more down the direction of decentralization, then you want to make sure that the collateral, for example, does not have a centralizing element. You could choose to pick Ethereum as a collateral, which is the case of MakerDAO and Dai, and how they have built their currency.

You can deposit an asset like Ethereum. Ethereum is a decentralized asset, so it doesn't have centralization on that form. Also, all the system is built on-chain, so that the Dai currency, the stablecoin is issued directly on-chain via a smart contract. Again, there's nobody actually controlling that. It's all softer on the Internet.

The risk with those types of constructs, when they use cryptocurrency as a collateral is that you have volatility on the collateral. A certain amount of ETH can issue a certain amount of Dai. What if that amount of ETH fluctuates in price? You might have more or less collateral, depending on the variation in price. If the collateral runs below a certain point, which is a safe point, because it would mean that the currency would be on back then, usually what happens in those circumstances is these systems, they auto liquidate that collateral, and they close those positions to make sure that the system is always tight. That's another type of construct. As I said, it favors decentralization, but it has different types of risks that involved with that.

Then there was a construct that I think in 2022, we saw being experimented a lot. This is the idea of endogenous collateral. It's the idea that you actually don't have collateral to issue a stablecoin, but you issue that stablecoin as a counter action to the destruction of another volatile asset. That's what Terra and Luna attempted to do. There's a lot of debates in the industry about whether that construct is even feasible, if it's even possible to maintain in the long term. I think, certainly for Terra, it didn't work out.

It caused a lot of problems for the sector, because as you said, where now everybody talks about stablecoins, and they try to put side by side with USDC and Tether and USD and what happened with Terra and Luna and Dai and everything else. All these stable coins are tremendously, tremendously different. I think it's up for businesses and consumers to make their own choice. It is important for us to talk about the differences, because the risks are tremendously different for sure.

[0:18:38] Justin Norman: Yeah. There's definitely big differences and to your point, in light of the Anchor-UST debacle. I think regulators are looking at the space in the US in particular. I think there's other challenges to adoption that I'm interested in hearing you talk about, particularly in the context of Circle being one-to-one back with fiat, challenges of liquidity, for example, especially in the context of African markets, where there's such a crunch for USD liquidity in general, which is driving the adoption of stablecoins up.

Shifting gears, as opposed to some challenges for adoption at scale, liquidity regulation, what sorts of things do you guys think at Circle that you're trying to overcome in order to get more stablecoins out in the market and more people using them at scale?

[0:19:20] Joao Reginatto: Yeah. No, you touched on actually some of the main points. Liquidity, I think, is the one that I would raise as number one. Let's talk about what that means, right? I think liquidity, I always talk to the team, liquidity is like thinking about Coca-Cola. Coca-Cola is the most liquid soda in the world. Literally, it is their mission to always be at arm's length. Whenever people need a can of Coca-Cola, you should be able to find it with not a lot of difficulty, or without having to walk too much. That should be the case, ideally, for digital dollars as well.

For stablecoins like USDC, where you have to issue them with actual dollars, right? As I said, the way the operation works is you give us dollars, we take those as part of reserve, and then we issue USDC. The difficulty that that creates from a liquidity point of view is for people who have already access to dollars, it's easy for them to create USDC, right? They just got to send those dollars to Circle and we will instantly issue USDC for you. What if you don't have dollars in the first place? That is the chicken and egg problem, because the folks who are most interested in digital dollars as Square has said before, if they had access to dollars on a bank account, then it wouldn't be such a pain point for them.

Solving for that liquidity in developed markets, I think, it's something that we have done a really good job over the last number of years. We are really interested now in solving that liquidity problem for more emerging markets. Latin America, Africa, Southeast Asia, all those markets that have a really, really strong demand, whether it's on the individual side, or on the business side for settling commerce and trade transactions. There is difficulty in sending dollars to Circle in the first place to issue USDC. We are working, we have some things coming up later this year, but we're working to broaden our network of basically, banking partnership and banking infrastructure to allow for that dollar settlement to happen, so that issuance of USDC can become more prevalent.

The other vision that we have as well is that the world cannot run just on dollar digital currencies, just on dollar stablecoins. We actually need the digitization of basically, every currency in the world. Let me explain why. The idea is that FX markets and being able to swap currencies is also something that is extremely cumbersome and extremely costly in most emerging markets in the world. There's a lot of intermediation, there's a lot of risk that basically implies an in additional cost. That FX component is so important as a base layer for a lot of other things that happen on top, whether it's remittances, or cross-border trade settlement, cross-border B2B payments, all that stuff.

We also believe that crypto and blockchain can just make FX a lot easier. Because again, we have innovations like Uniswap, which is a basically an unstoppable protocol that can allow for the trading of any two assets completely on-chain, with no intermediation with low cost and slippage. Why not utilize that infrastructure that have been invented to also trade any form of currency on-chain?

The gap that we have though is that we haven't yet digitized many forms of currency. I think, we are interested in that. We are actually actively in the market discussing how to build other stablecoins with a lot of other teams. I think Circle as a company, we see ourselves having a mandate to go and build additional digital currencies, like Euro Coin as we have built and maybe a few others.

There are over 200 currencies in the world. I don't think there's one company in the world that will be able to digitize all currencies. That's just not the way to scale. We are very interested in finding smart entrepreneurs in all countries and regions in the world that are interested in digitizing their local currency with the same quality properties of something like USDC, because we believe that model is the right model. Then bring all those digital currencies, all those fiat currencies in digital form over on-chain and allow for very cheap and instant swapping.

I think once you achieve that, then you will be able to hopefully, allow folks in most emerging markets, whether it's individuals, or businesses to actually get access to dollars in a much easier way. We're looking forward to making those advancements there.

[0:23:31] Gwera Kiwana: I really like what you said about the future of what Circle is working on, because I agree. There's 200 currencies across the globe, over 200, and very robust FX markets out there. I think if we zoom in on the individual retail use case, there's a huge need for a stablecoin that people will understand that maybe peg to their own currency, or what have you. Can you give us a little bit more context as to what the future looks like for Circle and USDC in general with regards to the African region specifically?

I'll preface this by saying, like I said earlier, there's a really strong need for dollars and USDC, USDT even have filled that gap in a really incredible way. Can you tell us a little bit more about what the future holds for Circle and any stablecoin design, or issuance, or what have you in the region?

[0:24:22] Joao Reginatto: Yeah. I'll start with the things that we are focusing on. They are not perhaps region specific. Then I'll go back to what we can do that is more particular to Africa. We have been really focused in the last while, and we'll continue to be focused on that in 2023 as well, on this idea of making USDC a protocol, which is what we described earlier. We think there's actually still a lot of tremendous amount of work left to be done in really fulfilling this vision that there is a protocol for dollars on the Internet, and then over time, expanding that then to other currencies. USDC, because it's the longest running asset and currency that we have, it's where we deploy all the innovation and then we port that innovation over to the other products, so Euro Coin and so on and so forth.

A good part of that is continuing to invest on making sure that there is fast, cheap settlement for those transactions. We continue to invest in bringing USDC to new blockchain ecosystems and benefitting from the innovation that's happening in those different ecosystems. In doing that, and we have announced a launch of a product that we call CCTP for cross-chain transfer protocol, it is really, really important then as USDC becomes prevailing in many, many different blockchain ecosystems, we have to make sure that it is easy for developers to not have to think about which version of USDC they're using, or which chain they're going to settle on.

We have developed this technology called CCTP that basically allows USDC to be transported very, very seamlessly from one chain to the other. It's an evolution of the bridging technology that exists today. But because USDC is an asset that holds off-chain collateral, we can bridge it in a particular way. We're super excited to roll in that product out now in the next coming months. We will have, basically, to have a continued investment in connecting that bridge to all of these versions of USDC on different chains.

The other thing, as I mentioned before, and then it becomes to be specific to what we can do in Africa, we are investing in increasing liquidity opportunities in emerging markets. We are vested in making the minting, the issuance, and the redemption of USDC a lot more accessible in regions like Africa, like Southeast Asia, like Latin America, as I said. There's a lot of things that are going to come there.

Then more broadly, I think, for Africa and for some of these regions, I think there's a tremendous amount of opportunity for partnering with local entrepreneurs. This is the part that we were just talking about. I think there's always the interesting conversations to be had about embedding USDC settlement in existing FinTech, or payments products. Again, we can facilitate that liquidity, perhaps a little bit easier when it is from a B2B point of view. Then those businesses can then be a local agent to distributing USDC, given the particular use case for the consumers that they have in that region.

We are super interested in continuing to expand those opportunities. We have a strong business development team on the ground that is interested in having those conversations. We also have our ventures arm and Circle ventures that's basically also interested in seeing entrepreneurs building out more of those solutions. We're keen to invest and write small checks to help those entrepreneurs. Those are some of the things that we are working on on some of the regions, like Africa and others that you mentioned.

[0:27:40] Gwera Kiwana: I'd say, yeah, that we welcome that collaboration. Even us at MFS Africa, we definitely welcome it. I think, one of the things that Circle has done a great job at in the last few years is regulatory engagement. For example, with me and the work that I do, we've made a very strong decision to only touch stablecoins that are, first of all, one-to-one backed and currently centralized. Circle has checked a lot of boxes for our compliance team at a traditional FinTech to be comfortable with wading into the crypto space.

That being said, with pieces with regards to regulation, your CEO, Jeremy Allaire, he's spent a lot of time in DC. You've got a very robust compliance team and regulatory engagement team. Can you tell us a little bit more about what you think the challenges and really, maybe even the promise of regulation looks like for Circle and for stablecoins in general?

[0:28:30] Joao Reginatto: Yeah, for sure. I think the challenges are some of the things that we discuss. I think the challenges perhaps are some things that we as an industry, unfortunately created for ourselves. There was a lot of good innovation and there was a lot of not good innovation. I think people confound sometimes, what's software engineering with what's financial engineering. Software engineering tends to be on the good side of innovation. Anything that is good, new technology that delivers good benefits and is applied to finance, all of that is good. We have seen a lot of that in crypto over the last decade. Then we have seen a lot of financial engineering as well, which is not really technology, right? It's just obfuscation of how things work, making things complex, but trying to pitch it in a different way to especially bad when it's for individuals who don't really understand what is it that they're consuming.

Unfortunately, we have seen that in crypto and we have seen that in our sector, in the sector of stablecoins. That has created a challenge for our sector in the regulatory environment. Because as we discussed before, not all stablecoins are created equal, that's for sure. If you have a broader term, like stablecoins, and if you have some of the catastrophic failures that we have seen in 2022, then all of a sudden, regulators, as anyone, they hit pause, right? They think, “Whoa. Hold on a second, I need to actually become even more educated, because maybe I thought this was completely innovative and good, but actually there are some bad things there that we need to pay more attention.”

It's very natural for people to all of a sudden, hit pause, demand more education, demand more clarity. That just means that the entire, I think, progress that we were maybe achieving from a regulatory point of view, particularly in the US, is going to be slowed down. I think that's just the reality. Things are going to take longer, because of everything that happened, particularly the last year.

I still think we are optimistic. We are seeing the shoots of increasingly sophisticated regulation, whether it's in Europe with MiCA, with the things that in the United Kingdom, people are talking about what's coming out in Singapore, in Asia. Hopefully, will come out in the US as well. I think eventually, we will get away from this phase of a little bit of regulation by enforcement and we will have clarity and we will have perhaps, law that states what's the best way to build stablecoins, how they should be built, how they should be managed. I think that will provide clarity for the industry, for our sector, before the industry as a whole, because the experience that we have, and I don't know if you share that, whereas that there is a lot of FinTech, there's a lot of financial institutions that are just waiting for that clarity, so that they can adopt this technology.

They believe that this is fundamentally better technology than what they have available today, but they don't have that clarity from a regulatory point of view to take the next step. I think that will be positive. As I said, we are optimistic that it's still going to happen. We might have seen a slowdown that we as a sector have created for ourselves, but we're still optimistic about it.

[0:31:27] Gwera Kiwana: I totally agree. I'm very optimistic as well. Even in Kenya, for example, the ETH Foundation was in Kenya last week and they had some really thoughtful engagements with various regulators, grassroots communities, and businesses as well on the ground who are really pulling in that direction. I'm definitely hopeful. I think maybe people focus less on the line going up and more on the ecosystem growing and the use case is actually solidifying. I'm very hopeful and bullish on that.

I want to wind down a little bit, asking you to possibly give us a prediction, or a forward-thinking opinion about what's next. What's coming down the road, especially for stablecoins in emerging markets, like Africa and you’re Brazilian, so in Brazil, what are you hopeful for? What do you hope to see?

[0:32:10] Joao Reginatto: I think we will see the digitization of more currencies. Perhaps, just as the dollar is the reserve currency of the world, the dollar stablecoins, dollar digital currencies will still continue to be the vast, vast majority of, I think, the stablecoin sector from a volume point of view. I think, we are seeing, we are witnessing that already. We have tremendous amount of interest and a lot of conversations going on with folks who are creating stablecoins in all different regions of the world. I think that will continue to be a trend in 2023. I think as we discussed before, people now have a little bit more clarity. Even though we don't have that on a regulatory side, but we have clarity that models like Circles, models like USDCs, full collateralization, transparency, even albeit with that element of centralization that a lot of people have criticized, I think, particularly four or five years ago when the concept of stablecoins started.

Now, people are beginning to realize that it is something that you should be able to live on with and the model is just more robust. We are seeing people leveraging those models in other regions to digitize other fiat currencies. I think that is important for us, because it will allow a lot of other types of use cases to be brought on-chain and people will be able to reap the benefits for all those use cases. I think that trend will continue off of basically seeing stablecoins flourishing in all types of markets and all types of currencies.

The other trend that I think then that we also believe in is that I think the concept that we have – today, we have two separate concepts. We have the concept of the underlying blockchain and we have the concept of a stablecoin. The stablecoin runs on the underlying blockchain. I think, I see a future, I don't know if it's short-term. Perhaps, it will take a little longer, but these two concepts will actually collapse. I think people will realize that the use case for using fiat currencies on blockchains really has been the killer use case for a number of years now, and will continue to grow and expand.

There's a lot of room for the use cases around the native assets on these layer one and layer two blockchains. I think over time, they will become smaller, just compared to the size of the sheer volume of the other utility that we can see. Therefore, the idea of a dollar running on a blockchain will become just the understanding that people have. We will stop talking perhaps about a stablecoin and the underlying blockchain, because I think experiences like, sending USDC, but paying for fees in ETH, or paying for fees in SOH, that is still tremendously cumbersome. That experience has to go away. People have to be able to send $10 on-chain to another party.

If they need to pay fees, they should just deduct fees from that $10 amount and not having to hold another asset. I think those evolutions, we are seeing tremendous focus from developers where it is on blockchain's own wallets, or other parts of the stack to really fix that and fix that soon. I think that is a trend that we will see. All of a sudden, we will realize that what we needed all along was, as I said, just fiat currencies that run on blockchain.

[0:35:13] Justin Norman: You're speaking to a problem that I've had myself.

[0:35:17] Gwera Kiwana: Definitely, we face these problems every day on the continent. Let's wrap up with some recommendations. We want to wrap the show with just going around and just asking everyone to just give a recommendation. Could be related to this episode, could be related to anything really in web3 crypto, about what they recommend. Actually, I'm mad at you, Joao, because you stole my thunder. I wanted to recommend people look into the CCTP, which is the cross-chain transfer protocol from Circle.

Like you said, I think it's incredible. I remember hearing about it last year at Converge. It's basically, essentially the last people to move their USDC, or Euro C across chains. Like you said, it's a bit of an evolution to the bridges, for those who don't know, in the past, have had not great press in that they're targets for a lot of hacks. I think also last week, Vitalik, we were in an event with Vitalik, and he himself said, he'd rather hold a million dollars in ETH on Ethereum than a million dollars in wrapped ETH on some other chain. That's my recommendation is a CCTP. Go check it out. Just if you search for cross-chain transfer protocol in Circle, you'll find it there. Joao, do you have any recommendations for us today?

[0:36:25] Joao Reginatto: I would say, if there are any developers and entrepreneurs in the audience, I would say, as I mentioned just a few minutes ago, focus on software engineering applied to finance. Don't try to do financial engineering, because I think most of what could be invented has already been invented there. I think we still have a tremendous amount of work to do on achieving this vision that we all have that money can just function as any other type of Internet transfer.

The other thing I would say is that, as we mentioned before as well, we are super, super interested in Africa as a region. Our doors are open to collaborating with entrepreneurs with businesses in the region. If you guys are interested in stablecoins, if you have an idea for a business, if you have an existing business that potentially can connect to those rails, reach out to us. We are, as I said, our doors are wide open to discussing them.

[0:37:13] Justin Norman: Yeah, that's a perfect way to wrap up. Where can people find out more about Circle and you and what's the best way for them to get in touch?

[0:37:20] Joao Reginatto: Yeah. You can check circle.com. You can check our Twitter feed as well. We tend to be very active there. We have a Discord around the idea of USDC and building on Circle. Folks can also find that on circle.com and connect over there. I'm on Twitter. I'm on Discord. Happy to talk to developers and entrepreneurs there.

[0:37:40] Justin Norman: Now, here's our conversation with Carbon’s Ngozi Dozie.

[0:37:44] Ngozi Dozie: I'm a co-founder of Carbon. We’re an African digital bank based out of Nigeria. I am here, because stablecoins, crypto definitely was stablecoins in particular, I just find very interesting. I think, they're one of the best instance nice spread, as infrastructure, as a means of transactions. I just think it's added a lot of value to millions of people across the continent. I am for as a personal individual, I am big on the increased adoption of that.

[0:38:13] Gwera Kiwana: We spoke to Circle earlier about USDC and stablecoins. The reason we've asked Ngozi as well to come along is because we wanted to get a more localized perspective and on the ground perspective of what stablecoins mean for Africa, for the African context in general. You recently wrote a piece on your Substack, which we'll link to in the show notes, titled Stablecoins, Boring Yet Revolutionary. Can you give us a summary of that article and what also sparked you to write it?

[0:38:41] Ngozi Dozie: I think, when people think about cryptocurrencies, they typically think about Bitcoin, Ethereum, or the other two million alternative coins. Stablecoins were introduced because of the need for stability, or lack of volatility in pricing. In doing that, I think it's almost like, cleaned the image of crypto. You can't speculate on stablecoins, because by definition, they are tagged to a fixed currency. In this case, the USDC, the dollar. Then it's more of a utility token, rather than a executive asset.

I think for various individual countries, stablecoins are amazing when you think about. I as a Nigerian want to get exposure to dollar, because I'm scared of my Naira devaluing, or I want to make a payment cross border, whether it's in Kenya, China, Thailand, or even just like, hey, I want to save and get USD yields. It's allowed millions of people access to assets that historically were denied them. If I wanted to invest in Amazon stock, or invest in UST bills and just make that payment, without going through some middle person, then stablecoins give that amazing access and at low cost as well. It's speed, it's efficiency, it's cheap. I think that was the essence of the article.

Also, to say that this is just the beginning. I think these are the obvious use cases, but I believe that there will be more use cases that we have no idea of yet. Right now, as more terms, individuals innovate around the space.

[0:40:20] Justin Norman: How do you think about that specifically in the Nigerian context, where devaluation and low USD liquidity for export, and just a lot of inward remittance in general with high cost and fees associated with that? I mean, I would imagine that use cases for stablecoins are exacerbated in a country like Nigeria, and given the uptake that we've seen, that probably proves to be true. How do you think about use cases, whether the ones we're seeing, or future use cases in the African, or Nigerian context in particular?

[0:40:48] Ngozi Dozie: You’re right. I think the use case in terms of a means to access foreign exchange is huge. I'm probably very exacerbated, because of the capital controls in Nigeria, but I think it's definitely a big one, because we have limited dollars. If I'm an SME and I want to make payments across border, this is a quick way to do that. As we discussed earlier, if I want to even just invest and save money, let's go quickly to do that.

I think, because the Nigerian bank system, it's fairly sophisticated in terms of speed of intra-country payments, that benefit that say, stablecoins have in the US where the payment rules are not as sophisticated as many countries in Africa. It's not there, because I could do mobile transfers, it's real-time payments. It's a benefit in stablecoins, but not a big deal in Nigeria. I do think the FX element is huge.

The other element, I think, we don't really talk about is the fact that it's also trusted. The USDC run by Circle, I'm a big fan of, because it's almost like they have their own reserve bank. 80% of their cash they receive, I think it's in treasury bills, 20% in cash in banks. You know that your money is safe. I think, that's an element where I believe can have an impact, even in local settings. One of the things we see, and this is anecdotally talking to the customers, is I'm a Nigerian consumer, I'm saving, if you're on Carbon, or the platform, maybe up to 15% annually.

Inflation is around 21%. You're actually losing money. What we're seeing right now is individuals who are making a rational decision to say, “I want my money to earn more. I'm going to right now change my money into stablecoins, get dollar yields, even if it's 4%, but I'm earning a real interest right now.” Now, the danger of that is that savings, deposits, that's the life of the banking system. Money is fungible. If millions of people are now going to our stablecoins, and this podcast will not help, it will actually exacerbate our problem, when they learn about the opportunity, they can shift money very easily.

What that means then is that if you're a financial institution and you depend on deposits to on lend, then your source of capital is diminishing, or increasing in price. Again, this is why I think the regulators cannot ignore it. The horse has already bolted. The individual consumers are voting with their funds and making rational decisions. When you now have that at scale, it's a potential problem for banks who have historically relied on 2%, 3% cost of funds. Now, all of a sudden, it's going now to different places, different platforms, because the stablecoins make it easy to exit, to go out and come back in when they want. The buyers to entry and exit are very low.

[0:43:35] Justin Norman: We're going to talk a little bit with you. We have some questions about the challenges and what it means for these markets in a few minutes. Before we get there, just one other thing, you talked a little bit earlier just about FX. You had also had anecdote just about Carbon's experience with lendable and I suppose this is from a startup perspective, a particular challenge of raising money, or borrowing in USD, and then having to hedge local currency. Do you want to say a little bit just about that and if you had the opportunity to raise on Goldfincher, use stablecoins, what that might mean.

[0:44:05] Ngozi Dozie: The challenge we face was that as a lending institution, and in many parts of the world, lenders like ourselves have access to wholesale financing, where banks will lend us millions of dollars, etc., using our loan book, or even just our historic financials as collateral. We see how much we've made on these loans historically, so we trust that you can. They're almost like, your bank gives you a credit line. This has been difficult in Nigeria. Lendables, that institution out in New York and Kenya, that they lend to lenders. We brought, I think it was 5 million dollars at the time, to on lend to our customers.

Now, we lend in Naira. Because we couldn't borrow long-term funds in Naira, we had to go to Vendables. We brought 5 million dollars, in dollars. Part of the requirements was that we had to hedge the dollars, so that if there’s any dramatic fluctuations would be covered. Now, as it happened, I think we actually paid them off just before COVID, which was, I mean, if we hadn't, Vendable would own us right now.

Again, the opportunity is a company like Goldfinch, which is basically an intermediary between thousands of individuals who have stablecoins looking for yield. Goldfinch takes those stablecoins and then on-lends to lenders like ourselves. Now, just for context, with Vendable, it was a five, probably a five-month process doing KYC diligence, etc., going through our books, etc. With Goldfinch, there is a similar set up in terms of getting KYC on diligence. The funding is much quicker, because it's almost like a marketplace where I have $1,000 in stablecoins. I want to get yield. I put it on the platform.

You've seen on Goldfinch, where people have raised money in, I think the first transaction was, I think they raised about, I think it was 3 to 5 million dollars in about 15 minutes, right? Now, that's powerful. Now, if you take that and say, bring it into Nigeria, where imagine if you had pool of potential consumers looking for higher yield, people like us who want that and instead of going lender to lender and having the same conversation, actually having a centralized location and that decentralized funding mechanism, it's catalytic to companies like ourselves, who really don't have the track records. We're 10-years-old, but who maybe have just started up? People are saying, “You know what? Yeah, I don't mind. I'll place a bet on them and let's see what happens.”

Again, these are the things that, again, can happen in a regulation aside, I'm sure there are different regulations around that. But I think we've only just started right now. Whether it's even, so we're talking about lenders, maybe it's funding artists, maybe funding innovative programs.

[0:46:54] Justin Norman: Podcasts.

[0:46:54] Ngozi Dozie: It's very exciting.

[0:46:56] Gwera Kiwana: It is. I think that you've touched on something really interesting. I think the use cases are, like you said earlier, we've only just started. We haven't even fully understood what the scale of what we can do with stablecoins. I want to reframe the idea of stablecoins and in this ecosystem in Africa, specifically in the global south. Think of stablecoins as more of a platform, or like pipes, or infrastructure that you can then build on top of.

The use cases you've just described, they're early use cases. But you've touched on a really interesting one with the with Vendable. I want to zoom in on that a little bit with Vendable and Goldfinch even. Access to debt, especially access for businesses to debt is really difficult on the continent. You're contending with a couple factors that just are raising red flags everywhere. It's Africa, red flag. You're in lending, red flag. Here in payments in Africa, red flag, red flag, red flag. Lenders, traditional lenders are just like, “Ooh, it's too high risk.” They price that risk really high. It's really difficult to access debt. Can you tell us a little bit more about the promise of originating loans in DeFi? We're actually going to have an episode about this. We've got an episode planned. If you could tell our listeners in a little bit more of a simplistic way of why is it easier and why is it better for the ecosystem if we're able to access and originate loans and debt in DeFi and crypto, versus SMEs, or even scale ups in fintechs who are lending to access that from traditional lenders?

[0:48:22] Ngozi Dozie: I think, the first thing I would say and the beauty about if I think about stablecoins is it's almost like, it's a global platform. It's the same platform in Nigeria and Thailand and the US and China. It's all a common standard. Now, once that happened, then you just have a larger and broader market. It then means that, so you have talked about DeFi, the initial, the most famous platforms are things like Compound, where I can place a digital asset and borrow digital asset as collateral. Let's say, I put down $100 of BTC, or Bitcoin. I can now borrow $60 of USDC, stablecoin, and then I can use that for whatever I want, etc. That's your – almost your copy and paste of your typical banking transaction, where I want to borrow a million dollars, I put down a house worth 1.6 million dollars and I take that money and I do whatever I want to it. Then if I don't pay back, the bank forecloses.

Now, I think what's exciting about that is that if you use that stablecoin as infrastructure and say, okay, if you take with Carbon, we don't take any collateral. Using stablecoin, or DeFi as a platform, if we're allowed by a regulator, which we're not, it means that all of a sudden, I can easily transfer funds globally. I can collect funds from customers in Nigeria. If the regulation allowed, I could actually then start lending in Kenya, in Thailand, in Brazil, right? Because it's a common currency, USDC, in this particular case. They're common pipes to send money, but also to get payment.

I think that then just allows money in many ways as information, right? We can then easily transmit information as to where are the customers, the best payers, or where are loans very expensive, because the banks there don't want to lend, etc. That is a marvelous world. You've got, I think it was [inaudible 0:50:24] Bank that were looking at some common exchange for payments, but it was called PAPs.

That's a scenario where you are going to have to build new infrastructure, right? To, one, send funds, to also convert funds, have different treasury schemes to make sure that when I'm changing Naira to [inaudible 0:50:46], to CD, to pounds, and everything's up and running. The stablecoin infrastructure exists already. The pipes have been laid. The rates are liquid at 24/7. Given the volumes, the speed, the information is there. That would be an opportunity, instead of building a new to say, let's just take what is existing and execute.

The potential for trade, for breaking down the cost of remittances, or payments, or cost of financing. Because it could be that in Nigeria, let's say, 50 million bank accounts, maybe I only want to lend to a million of them, 2% of those customers. I see that Egypt has a lot more customers that I want to target. All of a sudden, Egypt is open to me, right? In terms of revenue generation, cost reduction, or even reduction of default, it's massive.

[0:51:38] Justin Norman: The world that you just described, you used the term marvelous. Then a bit earlier in the conversation, you also talked about what it might mean for a country like Nigeria, in particular, if some meaningful percentage of users end up moving their savings from a Naira savings account to USDC, or equivalent stablecoin. I guess, shifting gears a little bit, we want to talk about, I think, the challenges to stablecoin adoption at scale and/or the second order effects. Maybe we can start with the second order effects.

There's this question about dollar supremacy, perhaps in the context, also of the e-Naira and CBDC. I'm curious if we can just follow this evolution further, like what's the logical conclusion, or what are the outcomes and what are the challenges that then may crop up as a result of a greater uptick in stablecoins in this context?

[0:52:27] Ngozi Dozie: No, it's a good point. The challenges on adoption should not be underestimated. Even as digital banks, we're finding adoption, or customer shifting from their legacy banks to digital banks. It's a challenge, because the banks have spent millions of dollars historically on branding and building trust. I know some of you digital bank come say, “Okay, you don't know where to find me, but trust me, I'm a custodian of your funds and everything will be fine.” It doesn't make sense, right? Then we have an office. Now, if you now say you've put money in stablecoins, it's somewhere in the ether, no pun intended.

For millions of people right now, that is not acceptable, right? I mean, we get people who want to deposit savings or not, and they say, “But I want to see your office first. I want to know where you are.” Imagine now you're saying, it's somewhere out there, it's decentralized, it's stored on millions of computers, trust us, you're fine. I think that that's a barrier. Coupled with the fact that you mentioned stablecoin, these are terms that I think only a X percent of people are comfortable using. Then it's inevitable that it is linked to all the scandals, whether it's FTX, BlockFi, Mt. Gox. There is a high amount of PR done to if remove the linkage of cryptocurrencies, stablecoins, to terrorism, scandals, etc.

I think there's a lot of work to be done. That's just an adoption before you get into potential issues of, okay, I put my funds there, I've forgotten the password, or the keys to get access to my funds. Even just the user interface, that's not as clean and smooth as what we're used to. The advice I give people is almost – I know Gwera, you talked about this is use this stablecoin platform as infrastructure, and don't even mention it. You can make power remittances, cross-border using stablecoins. End of the day, all the customers want to know is I need to make a payment in Kenya. It's in 50 shillings. Can you do that for me?

What we're doing, I think, is almost like, we're trying to sell a customer a Mercedes-Benz, and then telling them about all the chassis, that cylinders, the spark injection plug, they don't care about. Will they get me from A to B? Do they have plush leather seats? I sold the customer on. I think, cryptocurrencies started off really talking about the plumbing and why it's amazing. We haven't gotten away from that, which is just we're talking about what problem does it solve for the customer, for the end user.

[0:54:59] Gwera Kiwana: I love that, because I agree. I think that in the early days of any new technology, it's really just surrounded – it's adopted by insiders, by nerds. I always liken it to SMPT. I always ask people. I’m like, “Hey, do you know what SMPT is?” When people are like, “Oh, I don't understand crypto. It's so confusing.” I say, okay, do you understand what SMPT is? They say, no. The people that do say, yes, I'm like, okay, you are 1% of the world. Do you understand what email is? They say, “Yeah, of course. I understand what email is. Email is a press a button, and it flies through the internet and goes to where it needs to go.”

SMPT, in the early days of its adoption, was only adopted by people who truly understood the protocol. What stands for simple mail transfer protocol. We've had the likes of Google, well, back in the day, Yahoo, Hotmail, whatever, have built even Microsoft to build clients on top of that. We called them clients back in the day. Now, it's just email. It's just you just push a button and it goes to where it needs to get to. You don't need to understand how it works. I liken that to crypto now.

There are a lot of the people who are in this space are insiders who understand the intricacies. I don't see it's quite exclusionary, in my opinion. There's some people who would like to keep it that way. I think the crypto adoption at scale, we're still having a lot of challenges. You've touched on something that I'm quite passionate about, which is really the mullet, considering using fintech in the front, so something that people understand in the front end, and then crypto powering the back end. One of the challenges that you really articulated really well was the UX challenge, right? The user experience. You've now talked about regulation slightly, but what are the current challenges you see and what do you hope to see with regards to another big, big challenge, which is regulation?

[0:56:44] Ngozi Dozie: I think, right now in Nigeria, there's almost a parallel process, where the central bank has said that if you're a financially regulated company, you cannot touch crypto. You can't use crypto. You can't let your customers trade it. You can't use it on the backend for your operations. At the same time, they're also – the Central Bank of Nigeria is also in the process of launching its own stablecoin. I think we call them CBDC central bank, something coin.

That's on the one hand, you can be frustrated, because we see stablecoins as a great means to serve our customers. Customers want to use it, and for logical reasons to improve their financial situation. We want to also help them. That can be frustrating. On the other hand, the fact that the central bank is also like many other central banks globally, also pushing its own coin, that gives us hope, because then, you know that there's a group of people who are in the space working to understand the challenges, as well as the opportunities.

My belief is that it's just a matter of time, right? I think it's rational for central banks to be by default conservative and a bit circumspect of new innovation. That's their role. That's fine. To the extent that they can study these platforms, test it themselves internally, and maybe with a small beta group, and potentially use sandboxes, I'm very hopeful that in the same way that all these technologies that were looked at in a scan, email, or not very secure, now is part and parcel of the fabric of business right now. My belief is that you will find this happening all over the world.

I think, yes. You see it, whether it's in Brazil, whether it's in India, whether it’s in the States, it's slow adoption, but there's adoption. I expect that that will continue not just in Nigeria, but in other parts of the continent.

[0:58:40] Justin Norman: That's a nice spin to put on that. I think a lot of people will also say as it relates to CBDC, it's like, what are these central banks doing? It's just such a waste. In your view, it's them paying attention to and playing around with the technology in a way that makes sense for them.

[0:58:53] Ngozi Dozie: Yeah. Also, I mean, central banks, or central bankers, they meet often. They have common platforms, common pipes. Once you have one that says, well, this is really good. It's helped us with monetary policy, or getting information, or price stability. It's almost like a virus, because they all need to speak to each other financially, almost a SWIP system. Then if one gets it and is also influential, it's maybe one of the big G7 countries, then it's a matter of time, I think, that the adoption will take place.

[0:59:25] Justin Norman: Yeah, for sure. Just moving on, I think, just to another future facing question, I mean, we talked a little bit about some of the challenges, some of the opportunities. I'm wondering if you think in this context of anything else that you wish to see, or that you hope will happen to further the proliferation and adoption of stablecoins. Maybe it's something as simple as a name change, like you talked about earlier. Maybe we need to find the email equivalent, or something like that. E-money, that's not a good one, but maybe – I don't know if it's that, or just a patience in the adoption, as you said before. How do you think about what needs to happen next, or what you wish to happen in the next five or 10 years for the benefit of stablecoin adoption?

[1:00:06] Ngozi Dozie: I'll flip the question and tell you what I'm scared of right now. We've talked about, from our customer's perspective, the risk of capital flights. Because I have Naira, but I want dollars. I'm going to move my money into a platform. The risk we see as a credit-led digital bank is you have platforms, maybe powered by consumers looking for yield, who can now say, “You know what? Why can't I land in Nigeria? Why can't I land in Ghana?” They've got lower cost of capital, because they're in a low inflation environment, and so the price to pay is not much.

Again, the same platform that you can use to collect savings from Nigerians is the same platform that you can send money to Nigerians. All of a sudden, my customers can receive loans in USDC, or in Naira, because they can be translated easily. Anyone who has dollar can find Naira very easily. We know that to be true. All of a sudden, platform in Thailand, China, India is now lending to my customers. My customers are now saving on different platforms.

All of a sudden, and it's not just Carbon. It is many digital banks and banks now have a diminished business because of that. What do I want to see? I want central bank curves to understand this reality that money is like water. It just flows, right? The consumers are going to make decisions. This is actually a risk to the financial system in country. If you cannot control your money as a central bank, then you cannot fulfill your mandate of whether it's price stability, or inflation, etc.

The solution for us is actually, there's a limited set of people that maybe you want to work with, open up a sandbox, and just for a limited period, let us see whether this thing is as dangerous as many make out to be. Or, maybe it has benefits. It's a controlled manner with people, maybe regulated institutions that you trust, that you're still auditing on a monthly basis. It's not letting the cowboys in. I think a sandbox is almost like a nice halfway house, where you can be like, “We're going to let you do this for five months with your customers. If at the end of five months, we don't like it, we shut it off.” I think, no harm, no foul there.

[1:02:24] Justin Norman: We're going to ask every single interviewee who deals with regulators to share their podcast episode of crytpo@scale with regulators, so that we can get a direct audience. That we're going to ask you –

[1:02:35] Gwera Kiwana: We’re going to build a cult of regulators.

[1:02:35] Justin Norman: - when this episode come out. Yeah, exactly.

[1:02:38] Ngozi Dozie: Yeah. To be fair, didn't we regulators – what I have found is that it's like a church, they're saints and sinners. There are those who are passionate about crypto, and there are those who are vehemently opposed. There are champions in there, which is good. Also, even those who are against it, for the most part, are against it for valid reasons. They're not luddites. They’re just scared that some of the risks and they are risks that a new innovation brings are properly addressed in a timely manner.

[1:03:07] Gwera Kiwana: I agree. I think it's dangerous to look at it as black and white and to think of regulators as these big, bad people. I mean, they're here to protect consumers, to protect the economy.

[1:03:16] Ngozi Dozie: Correct.

[1:03:17] Gwera Kiwana: They will do that however they see fit. Yeah, we're going to wrap the show with a question for you, which we want to understand. Maybe, do you have any recommendations for our listeners? In that audience is possibly regulators, people who are new to crypto, people who've been in crypto for a very long time. Do you have any recommendations on where people can learn more about crypto within the African context? I mean, it could be educational, but also could be a company that you want to shout out, or really, any recommendation. You can give as many as you want, actually, as well.

[1:03:46] Ngozi Dozie: Good question. Of course, now that you asked the question, all the things run away. Look, I would say to, like I said, there are many companies out there doing great things. I don't want to mention anyone in particular, but I do think speaking to founders is a great thing. There's some great writers on Substack, primarily out of Kenya, actually, that they've been doing a lot of writing on crypto and stablecoin in particular. I don't have any direct recommendations.

Of course, as soon as this podcast ends, five will come up in my head. I apologize to all of them. But I do think though that one thing I would look at, I'll get another report of Circle to really understand how USDC works. Because I think looking at it as a listed company with the reporting requirements of a listed company and the governance and transparency that they adopt, those will give people a sense as to one, what is behind this then, and what it takes to build trust.

[1:04:45] Justin Norman: Thanks for listening to this episode of crytpo@scale. If you enjoyed this episode, please do consider sharing with a friend, or a colleague who you think may enjoy it as well. For more updates from the show, follow us on Twitter @cryptoatscale. Thanks again for listening and we'll see you next time.