The Breakdown - The TradFi-Crypto Fusion Is Here

Episode Date: October 8, 2025

Galaxy Digital just launched Galaxy One — a platform merging crypto, stocks, and yield accounts into a single financial hub. Coinbase is pursuing a banking charter. Stripe and stablecoin issuers are driving a yield war that could upend global banking profits. Standard Chartered warns of $1T in emerging-market capital flight to stablecoins. From TradFi’s defensive moves to FinTech’s stablecoin play, today’s Breakdown explores how the financial system’s borders are dissolving before our eyes. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Tuesday, October 7th, and today we are talking about the increasing blend between Tradfai and Crypto. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the breaker Discord. You can find a link in the show notes or go to bit. LY slash breakdown pod.

Well, friends, I had been planning on talking about how this week seemed like one of those weeks where every day we get to say, hey, it's a new all-time high day. But then as I'm recording this, Bitcoin has taken a nosedive back down to 122,000. So maybe it's a little too early to call October forever. Anyways, I'm sure we will come back to market action later in the week. But for now, we are going to talk about one of the big themes that we have had going on all year, which is, of course, the intersection of Tradfai and Crypto. A prime example of that, Galaxy Digital has launched a unified crypto and stock trading platform

called Galaxy One. The platform will offer users a cash account yielding 4%, crypto trading in custody, as well as zero commission trading for U.S. equities and ETFs. Banking is provided by full-chartered and insured partner Cross River Bank. In addition, accredited users will have access to a high-income investment note offering 8%. That product is not FDI insured and will be funded by Galaxy's institutional lending business. Announcing the product CEO Mike Novograt said, we've spent years building institutional quality infrastructure to serve the world's most sophisticated investors. Now we're extending that edge to individuals. We're seeing a lot of crypto companies take advantage of the new regulatory environment to offer these kinds of

merged trading platforms or financial everything apps. Prior to recent SEC guidance, it wasn't strictly legal to offer both stocks and crypto on the same platform, and mixing in savings accounts added another layer of regulatory scrutiny. Now the Atkins SEC is explicitly looking to trial everything apps, and the largest US crypto platforms are rushing in. This is also a bit of an echo of the last cycle, which was overrun with crypto lending platforms targeting retail users. At this stage, Galaxy 1 doesn't have a crypto lending function for retail traders, but that's a big part of Galaxy's institutional product. However, retail traders will be able to lend their stocks to earn yield. And providing a pretty direct line to the last cycle, the product is being managed

by former BlockFi CEO, Zach Prince. In the detonation of 2021 Crypto Lenders, BlockFi was a company that was caught in a bad spot, rather than seemingly engaging an outright fraud. Still, for many, it's impossible not to draw the parallels. Said Prince in a press release, as technology reshapes how people invest, expectations are clear, more yield, easier access from a single platform, and opportunities that extend beyond traditional boundaries. Galaxy 1 delivers exactly that, a unified opportunity to earn yield on cash, trade crypto, and access U.S. equities, all supported by Galaxy's financial discipline, institutional oversight, and professional team trusted by some of the world's most sophisticated institutions. Prince added, we have an exciting roadmap ahead and are excited to deliver

a differentiated financial experience to our clients. Dave Weisberger, the co-CEO of Coin Routes, noted that this is just where the financial industry is moving. He said these integrated platforms running on stable coins are, quote, going to take over from the legacy financial system. It's not going to just be Galaxy, every brokerage platform who can is going after a vertically integrated solution to provide enhanced yields, payments, and investment all on the same platform. E-trade's doing it, Robin Hood's doing it, Galaxy's doing it, it's going to make saving in Bitcoin dramatically easier. Now, Stablecoins are another piece of the puzzle, and Stripe CEO Patrick Collison believes they will force much better yield for customers. In Washington, the battle is still

underway with the banking lobby trying to ban yield pass-throughs for stablecoin accounts, but many believe that fight is a foregone conclusion with consumers the victor. Nick Carter wrote a long post on Sunday laying out how he sees the battle going. His basic thesis was that the duopoly of Circle and Tether is fragile to disruption, and banks would need to compete on yield. Collison added his view, replying, Yes, I think that stablecoin issuers are going to have to share yield with others, but this is just one instance. Everyone is going to have to share yield.

Today, the average interest on U.S. savings deposit is 0.4%. And 4 trillion of U.S. bank deposits earn 0% interest. Things aren't better in the EU. 0.25% average interest on non-corporate deposits, and corporate deposits just 0.51%. In my view, this is going to change. Depositors are going to and should earn something closer to a market return on their capital. Speaking to the fight with the banking lobby, he added, The business imperative here is clear.

Cheap deposits are great, but being so consumer hostile feels to me like a losing position. DeShar Jane, the co-founder of multi-coin capital, had similar thoughts. Commenting on Collison's post, he responded, The Genius Bill is the beginning of the end for banks' ability to rip off their retail depositors with minimal interest. Post-Genius bill, I expect the big tech giants with mega-distribution, meta, Google, Apple, etc., to start competing with banks for retail deposits. The tech giants will offer stable coins with better yields and better U.S.,

instant settlement, 24-7 payments, free transfers. These stablecoins will be embedded into the most widely distributed apps and operating systems in the world. Banks are going to have to pay more interest to depositors, and their earnings will significantly suffer as a result. The banking lobby tried to protect their profits with the Genius Act's prohibition on passing interest to stable coin holders, but that is easily circumvented as you can see by Coinbase's yield sharing with customers. Now, the actual limitations in the Genius Act are a little different to the way Jane envisions this competition going. The bill prohibits non-financial firms from issuing stable coins, so we're not likely to see meta issue their own stablecoin anytime soon,

but the tech giants don't need to be issuers they can piggyback on any number of stablecoins that currently exist or will be launched in the near future. Whether it's meta or Striper Galaxy, however, it's clear that everyone in FinTech is preparing to offer very competitive interest on stablecoin deposits. The banking lobby could still win the day, but optimism from crypto and FinTech is growing. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. communities and builders are left behind while capital sits locked out.

Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the world's first blockchain purpose-built for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure, networks can now be financed in real time, operated more efficiently and scaled to meet the $3 trillion-dollar telecom and utilities market. This is fintech for infrastructure, connecting capital directly to business. builders and returning revenue seamlessly to funders. No middlemen, no bottlenecks, just sovereign,

resilient infrastructure that works for people, communities, and investors alike. Learn more at Althea.net and find them on Crackin to join the future of infrastructure finance. Now going one step further than Galaxy, Coinbase is pursuing a trust banking charter to get ahead of regulatory changes. The exchange is applied for a national trust company charter under the regulatory purview of the OCC. A trust charter is slightly different to a commercial banking charter, but it will expand the products that Coinbase can offer and bring them squarely within the regulatory perimeter. Greg Toussar, the VP of institutional products said in a statement, an OCC charter will streamline oversight for new offerings and enable continued innovation to integrate digital assets into traditional finance. We're not the first

crypto company to seek a federal charter, and we won't be the last. Both ripple and circle, for example, have ongoing applications for the same charter. Former Coinbase engineer Luke Youngblood said that the charter would allow Coinbase to, quote, offer basically built-in on-ramp, off-ramp, and no longer have to use partner banks, on-ramps, and off-ramps. Essentially, Coinbase will be able to plug directly into Fed infrastructure, use the ACH system, and interact with TradFi rails without needing a banking partner. Youngblood added, when I worked there back in 2022 before I left, it was not that great. The features like the Coinbase debit card didn't work very well. Brandon Peterson, a reporter at Punchbowl News commented, trust theoretically have more limitations than other

types of banks when it comes to business activities, but the distinction has blurred over the years. In the announcement post, ToSAR confirmed, Coinbase has no intention to becoming a bank. It is our firm belief that clear rules and the trust of our regulators and customers enable Coinbase to confidently innovate while ensuring proper oversight and security. Still, the exchange clearly has an Everything app targeted on their roadmap. Now, Standard Chartered has warned that the rise of crypto banking and stable coins could be disastrous for emerging market banks. In a Monday research note, their global research department suggested that more than a trillion, dollars could flow out of emerging market banks into stablecoins by 2028. They noted that dollar-based

accounts are extremely desirable in these markets, writing, stablecoin ownership has been more prevalent in EM than DM, suggesting that such diversification is also more likely in EM. Offering dollar-based accounts to businesses in the EM work is a big part of Stripe's stable coin strategy. In many regions, it has never been acceptable for legitimate businesses to operate outside of the banking system, but a trusted partner like Stripe changes the math dramatically. We're already starting to see the effects of EM customers fleeing to stable coins. Crypto capital flight from countries like Argentina and Turkey was already well documented over the past cycle. Venezuela seems to be the latest country to adopt stable coins, with many merchants starting to quote prices and tether, or, as it's known

locally, finance dollars. The Venezuelan Bolivar currently has an inflation rate above 200%, and it's going through an acute currency collapse through hyperinflation. As the dominoes of stablecoin adoption keep falling, it's easy to imagine far more frequent currency crisis across the EM world, and that is especially true if standard charter is correct, and capital flight is on the order of a trillion dollars. Lastly today, coming back to the idea of crypto lending picking up again, Bernstein is very optimistic about the future of crypto lender figure.

Figure was one of the crypto IPO crop that went public late in the last quarter. So far, their stock's performance has been quite strong, gaining 40% across a very steady first month. In initiating coverage of the stock, Bernstein wrote, just as stable coins tokenize the dollar and drive instant payments without any centralized intermediary, tokenized loans digitize and disintermediate lending markets. Their analysts noted that figure has a 75% share of the $17 billion tokenized loan market. That's relatively tiny to basically every other market in lending, but Bernstein sees an opportunity to grow and disrupt traditional lending. They commented that figure has managed to reduce capital requirements by 90%, and loan turnaround times by

75% compared to Tradfai lenders. A big part of the model is operating a two-sided lending market, allowing them to operate with far less capital. Bernstein gave a price target for the stock that implied 34% upside from here. So could we see a return of crypto lending as a part of this cycle, wherever we are in this cycle? Remains to be seen, but Tradfai analysts have their eye on it. For now, that's going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.