Unchained - Crypto Firms, Fintechs and Banks Hope to Dominate Stablecoins. Who Will Win? - Ep. 888

Episode Date: August 15, 2025

Stablecoin-focused blockchains are popping up everywhere. Stripe, Circle, and more are betting they can dominate payments. But are these chains even needed? And will Ethereum ever be ready for real-world assets?  Austin Campbell, NYU professor and founder of Zero Knowledge Consulting, joins Unchained to cut through the hype. From why “the market eventually eats you” to how consumers, not companies, could be the real winners, Campbell unpacks the competitive landscape and warns that the ultimate champion might be someone who isn’t even on the field today. Thank you to our sponsors! Walrus Xapo Bank Guest: Austin Campbell, NYU Stern professor and founder and managing partner of Zero Knowledge Consulting Links: Unchained:  Circle to Launch Layer 1 Blockchain ‘Arc’ Stripe Is Building Its Own Layer 1 Blockchain: Report Fortune: Top crypto VC Matt Huang to lead Stripe blockchain Tempo as CEO, stay at Paradigm Timestamps: 🎬 0:00 Intro 💸 4:23 Whether the world really needs stablecoin-specific blockchains 🧪 9:45 How Stripe’s Tempo chain could gain an edge in the payments game 🌐 12:25 Why Circle’s Arc might struggle to stand out 🏆 15:19 Who could emerge as the winner of the stablecoin payments race 🗺️ 20:35 What the broader stablecoin chain landscape looks like right now 🏦 23:36 Whether crypto companies have a real shot at disrupting traditional finance 🙋‍ 27:51 Who could end up being the biggest winners 🧱 31:52 Why Ethereum may not be ready for the RWA moment 🔮 34:52 Who’s best positioned to capitalize on the next wave of blockchain-based payments Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody wants to pick winners and losers. Like, is it going to be the apple or is it going to be the potato, right? Like, which one of these are we doing? And I'm saying the future actually looks like gazpacho, right? Like, it's just going to, everything's going to be in there and it's all together. I worry right now that, to be totally honest, and I've said this elsewhere, we're seeing a whole lot of MySpace and very little Facebook. And the answer to who will win is none of the people currently on the field.

Hi, everyone. Welcome to Unchained. resource for all things crypto. I'm your host, Laura Shin. The stable coin race is heating up in a big way, with both big and small players getting in. I had a conversation with Austin Campbell about how it might shake out and was surprised by what he said. Once stable coins become integrated, he believes the system could end up all being a lot less decentralized and censorship resistance than the ideals that crypto has long espoused. Austin seems to think that tech innovation will matter less and financial regulation would matter more and could even prevent disruption from happening to the same extent

as has happened in other industries. This sort of echoes what Jim Bianca was saying in the recent interview I did with him, that regulation will end up being the kingmakers. I do wish I had managed to ask Austin about one thing. He talks about how the fact that Ethereum validators didn't censor anything related to the by-bit hack shows that Ethereum isn't ready for prime time when it comes to real-world assets. I suspect a number of you would find us to be fighting worse. My main question is that it could become not just a slippery slope, but a full-on quagmire if Ethereum were to censor in those instances, especially for less clear-cut cases. I was also surprised when Austin called out a couple of blockchains that are, yes, in the top 25,

but not part of the hype cycle. And he said that he thought they had the potential to be better solutions than Ethereum for real-world assets. At this moment in time, I'm skeptical of those claims, even though. as I'm aware that a lot could change in the next five or ten years. Either way, Austin is engaging as always. Let us know what you think about the show by commenting on an episode or in any platform or by writing us a review. Enjoy. At Unchained, we believe the future should be decentralized, and that includes our data. That's why we use Walrus, the fast, dynamic, verifiable data layer. Learn more about the platform that's powering our future at walrus.xyZ. One early Bitcoin,

sold 30,000 BTC too soon, missing out on over a billion dollars. Don't want to make the same mistake? With Zopo Bank, eligible members can get instant cash without selling their Bitcoin. Check out ZopoBank.com slash Unchained for more. Hands up, everyone. We've got exciting news. Bits and Biffs, our Macro Meets Crypto Show, is officially spinning off into its own podcast feed, YouTube channel, and X account. If you've been enjoying the deep dives into interest rates, monetary policy, and how they intersect with the crypto markets, make sure to follow Bits and Bips

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Welcome, Austin. Hey, Laura, thank you for having me back. This week, we saw multiple announcements that show that the stable coin race is heating up in a big way. First, on Monday, Fortune reported that stripe, in conjunction with CryptoVC firm paradigm, is developing a layer one blockchain called Tempo for Stablecoin payments. And on Tuesday, Circle announced he'll be launching its own stable coin focus blockchain arc. And this is on top of several other stable coin chains there in the works like plasma, stable, codex.

So before we just like go into the details on all of these different chains, just explain why it is that you think we're seeing so many stable coin focused blockchains and like why we even need chains that are focused on stable coins. Yeah, so I think, you know, to give what I will describe as call the median corporate response to many of these things, it's that people themselves are using stable coins for things. If you look at things like Stripe, if you look at Circle, this is obviously the reason these businesses are in existence and interested is paying for things with dollars through the form of like electronic money. So it's not surprising they're looking at these implementations and trying to build ones where they capture the value. If you want to be financially nihilistic about it, the answer is to why they're doing it as people appear to give them money to do it, right? Like many of these L-1s have been very successful, tokens have gone up, right? If you want to be financially idealistic about it, I think the thing you would say is that most, if not all, but probably most of the modern blockchain implementations are insufficient for tokenization of real-world assets because they just haven't grappled with a lot of the tension that comes with the decentralized, those versus the fact that the real world itself is actually very centralized in many ways.

And so people are trying to build custom solutions that can bridge that gap and be a little bit more effective. Now, which one of those do I believe? Some of all of it. And so what is it about a chain that's focused specifically on stable coin payments that is necessary or maybe it's not, but that, you know, these players seem to think is necessary that isn't offered by existing public blockchains. Okay, so I would say maybe the best example of this. I was back at J.P. Morgan in the day when we were thinking about what waiter became onyx. And one of the things you think about with financial applications is what are the transaction

preferences of the underlying people and what are they using it for? So like a good example of the critique of the architecture of Ethereum that I think is meaningful is if we were to try to put all payments on Ethereum and it's lunchtime, and I'm standing in line at a deli and I'm trying to buy a sandwich. And I've got a tap to pay. And when I do that, I pay some tiny gas fee and stable coins go to the other side. And Taylor Swift decides lunchtime is a great time to drop a new album and people are buying it at the same time. I don't want to pay $100 gas fee to buy my sandwich. Right. And so transaction preferences are not monolithic, right? Like the speed and level of security that you need is definitely diffuse. Like trying to rush to buy a limited edition

an NFT versus buying a sandwich versus, I don't know, clearing a $50 billion repo trade, all have very different parameters to them. And so on one level, it may make sense for there to be certain very payment-focused chains that have very predictable and low fees so that you don't end up in a situation where, like, nobody can buy lunch because of Taylor Swift. Not an insult to the Swifties, right? Just a conflict on the platform. Two, I think there is also the issue that you run into there of things like spam,

resilience and why do you have blockchain fees to begin with? And very purpose-oriented chains where maybe you can only do push payments, eliminate a lot of that behavior, because like if you want to spam me by sending me many small amounts of money, I guess, sure, thanks. And so less features is sometimes more for some of these chains. The last part, and this I think is very under-discussed in the blockchain world, but like having dealt a lot with stablecoins, I think about it a lot, is the security component of that. And the example I use to describe this, we can use stable coins,

but I'll use something that's hopefully a little bit funnier for the audience, is if we tokenize a lot of real assets so that people can buy them and pay for them on chain, and one of the things we tokenize is title for house, if somebody's grandma's house is tokenized and the NFT gets stolen by the North Koreans, what do you do? Right.

And by the way, there's a small subset of people in crypto who will say, well, I guess the North Koreans own the house now. My answer to that is that cannot possibly be how that works, right? Because the U.S. military has strong views on the North Korea's attempting to move into somebody's house. And it's not going to happen. This is back to my point of like the blockchain may be decentralized, but the real world is not. Okay. So now the question becomes, how do you get it back?

And to your point on blockchain architecture, the first answer I'm going to get from people is, well, issuers will have freeze and seize capability and therefore they can take the house back. And I say, ah, yes, that's good, unless it was the issuer that got hacked and compromised. And if that's the case, what do we do next? And the answer there is really either you need a controls framework and validator set that will individually revert transactions and keep things somewhat permissioned, which is how a lot of the banks and payments companies think about this. So if you look at the architecture in a lot of the bank chains, there is transaction reversibility.

Or you're going to need to drop an entirely new smart contract. repudiate the old one and essentially replace all the tokens as of a point of time. And the problem with that is if you're doing that second approach, you essentially can't have defy in its current form. Because if that happens to like USDAC, I invite all of our listeners to think about what happens to all like the USDA ETH or like USDC curve like AMM pools and what happens to all the borrow lend protocols when Circle repudiates its old smart contract and drops new ones.

Hmm. Okay. Well, so then I'd be so interested to hear because like we're entering the space where clearly there's me a ton of competition. And so I'd love to just go through one by one and hear what you think are kind of the advantages and disadvantages of these different chains. So let's start with the tempo one, which is the one that Stripe is doing apparently with Paradigm. And it's actually going to be led by Matt Huang, Fortune reported, who's also staying at Paradigm at the same. time. It's sort of like, I know this isn't exactly apples to apples, but like it reminds me of like a jackdorcy type of thing. Like I'm just going to like lead a whole bunch of different things. But I'd be curious to hear, you know, what you think are the main advantages that Stripe would

have or Tempe would have and disadvantages. So I actually think the main advantage there is literally stripe. And what I mean by that is the current world largely does not exist on blockchains, right? If we look at the amount of money flowing through blockchains, blockchain people get very excited and it feels large when numbers of annual settlement get into the trillions. But I will remind everybody that international wire transfers alone are 1.25 quadrillion annually as an estimate. A number is so large, it sounds like my 10-year-old made it up. And so the amount of activity on blockchains is still extremely small. Stripe has a large and significant payments processing business using traditional rails. So if Stripe also has a blockchain and they could effectively do the sandwich, that is to say, now people can pay for things on chain.

And if the receiving person on the other side wants dollars in a bank account, Stripe is going to be one of the entities that could be very good at functioning as a bridge, pun intended, given their acquisition, between these two sort of spaces. And that, to me, is probably the biggest advantage Stripe has. Number two, boy, do they have a lot of customers and specifically customers in the merchant space, if you look at who Stripe deals with. And so if we're talking about something that could scale, something that can be used by regular two-legged people without being like deep technological experts and something that can exist in both worlds, Stripe's got a pretty decent shot at it, right? Like, there may be better, but anybody better is probably an even more scaled financial institution. Like, is J.P. Morgan going to launch a public L1? If not, Stripe's in pretty good shape. And by the way, you know, if you're watching for canaries in the coal mine of if this sort of thing is working, look for what the other payments companies do in response or to evolve their own platform offerings. So like the visas of the world, the mastercards of the world, PayPal, who already has their own stable coin.

Oh, okay. Huh. Interesting. Well, we'll circle back to that in a moment. So now let's talk about ARC, which is Circles, new blockchain that they announced. and that one they announced, you know, around like right when they did their earnings report. I'm sure you saw like people like Adam Cochran tweeted, this isn't an L1 and it's offensive to call it such as a consortium chain of private pre-approved validators who even have

permission to refund transactions via dispute protocols. And he goes on. So, yeah, I'm curious to hear what you think are the advantages and disadvantages of that. Yeah. So I would say Adam is at war with reality with his comments. And what I mean by that is if you've ever worked in payments, things like dispute resolution, chargebacks, et cetera, are like name of the game type stuff for two different reasons. One is if you don't have that functionality, you're going to be an open forum for like fraudsters,

scammers, bad actors, and essentially provide an extremely poor experience, depending on which side you come down on, on either to your buyers and sellers, and people are just not going to use it. Right. Again, back to the real world not being decentralized, Laura, if you're a vendor and I'm your customer and I buy something from you and it's broken and I want to get a refund, now what? Right. This is the kind of thing payment processors have to deal with. Two, in many jurisdictions, there are legal obligations around this. So if you say, well, your blockchain shouldn't have this functionality. Somebody's sitting at a payments role, just hears a giant sucking sound. knowing all the money that they're going to be paying people without the ability to get it back. Right. So again, the real world is not decentralized.

Either I got the product or I didn't. It's a binary state of a physical object. That is what it is. Circle-specific, like, design. I think they need a consortium because the reality is Circle doesn't have many direct customers. If you look at the number of people who have Circle accounts, it's not that high. If you look at the distribution of USDC, there's mainly one source of it. that's a little company we've probably heard of called Coinbase. And so they do not have the

advantage of striped paths of tons of native onboarded customers who can use things one to one. So if you're a company like Circle and you're not going to do a consortium, my next question is, how the heck are you going to acquire all your customers? I think they're kind of trapped into doing that. But then that becomes why is Circle in particular going to win at this? And I'll be honest and say I'm quite skeptical there. Right. Like Circle having a revenue sharing, agreement with Coinbase and having to build a consortium model in that fashion, it's probably good for like Coinbase and Coinbase's distribution may work. But if you're trying to get like banks and merchants and payment processors on there, but most of the interest revenue is being

shared with Coinbase, they're all just going to say now. Yeah. Yeah. Where I was leading to next was, you know, when I looked at tempo, my immediate thought was, oh, in a way this competes with basis Shopify integration. But, you know, so I kind of, I can't remember. I think I like wrote this somewhere or or at least it's just a thought that I've had. And I'm not the originator of this. I think I've seen other people say that looking back, it kind of feels like Coinbase probably should have acquired to circle because like or maybe you disagree

with me. But like in my head, I'm a little bit like, you know, the. And like for for Coinbase to own the distribution and like in this hypothetical world, if they own the distribution and USC, then I feel like they would have been better positioned to compete against Stripe. But anyway, so regardless, so you know, you can answer either the real world as it exists or the hypothetical, but I'd be curious for how you think this competition will go down between Stripe and Coinbase slash Shopify.

I worry right now that, to be totally honest, and I've said this elsewhere, we're seeing a whole lot of my space and very little Facebook. And the answer to who will win is none of the people currently on the field. And the reason I say that is, again, having come from the very large banking world and seeing the scale of money transfers, you know, I kind of look at things like Stripe and Coinbase and Spotify. And I'm like, oh, that's a cute little side business you've got there. And I don't mean that in like a negative way, right? Like, they've actually done an extremely good job. If you look at like what the leadership team at Coinbase has done or like how Stripe has built their business, I actually think the world of what they've done in that regard. But I'm also saying that tells you what a titan some of the largest financial entities are that they could have done so well.

And it's like, congrats, you're 2% of the size of J.P. Morgan. And so my worry is that over time, you're essentially going to have somebody very large come over the top. with a complete international payments franchise. Because if you look at FX volumes, what happens if standard chartered launches stable coins in an L1 or like Deutsche Bank or like JPMorgan and not tokenized bank deposits, right? But like actual proper stable coins that people can use permissionless, you know, and then integrate into the rails of those companies.

I would be terrified as some of the current competitors that I'm just going to get trucked by those offerings. Because like if you think Coinbase has a lot of customers, go look at some of the megabanks globally. And so when I look at this, I look at all of them and think they're in a race against time of some of the big guys, either cycling out their current management for younger people or that management getting the punchline on what's going on and getting into the game.

Because, you know, tech is used to network effects that come from like social stickiness, but that's not how network affects and finance work. that's largely liquidity and yield driven, right? Like, great example. It'll be trivial for me to build like a relatively significantly productive, you know, call it asset gathering business in the money market space if I'm willing to pay an above market interest rate by just burning capital on my part. But the problem is those companies, or excuse me, those customers are not sticky.

The moment I stop doing that, they'll leave and go to other options. Like it's a constant dynamic rebalancing. And what it means is the really big point. players who have distribution and can cross subsidize are very hard to compete against. That's why we can't, like from 2008 on get rid of these Siffy banks. Okay, so in a moment we're going to talk a little bit more about how this competition will play out, but first a quick word from the sponsors to make this show possible. At Unchained, we care about the future of decentralization.

So it only made sense for our media content to be decentralized. That's why we use Walrus. It's the fast, dynamic, and verifiable data layer for on-chain builders. And it's not just data management, Walrus ties directly into smart contracts, unlocking new possibilities for programmable content delivery, subscriptions, and community engagement. So as we imagine what decentralized media can become, Walrus is the tech we trust to help build it. Learn more at walriss.xy-Z. Selling your Bitcoin just to get cash?

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It's securely held until your loan is repaid. Check them out at sapobank.com slash unchained. So I want to continue with some of these other chains. And then we'll go back to this competition question. You know, we have in the works, this plasma blockchain, we have another one stable, you know, we don't have to go through all of them. But, you know, some of them have, like, pretty heavy-hitting investors or teams behind them. You know, Tether is obviously involved in plasma.

So, or they invested in plasma and then they're building stable. So can you just talk a little bit about how you think about those chains and how they might compete in this environment? Yeah. So one thing I'll say, you know, I said this earlier and I'll remind everybody again, transaction preferences are not monolithic. I think what we're looking at right now is a lands. where we assume all of these people are competing against each other may be wrong, right? Because, like, to give a, like, metaphor to make it accessible to people, I live in New York City,

all of, like, the Yankees and the Mets and the Knicks and the Nix and the Nets and the Giants and the Jets are professional sports teams here, but they don't all compete against each other, right? Like, there is competition within the subsets, but if the Giants are playing the NICs, something has gone terribly wrong. And what I mean by that is if you look at it. it where tether is used is a good example. Almost all of the major usage of tether is in one of two places. It's either in crypto trading or in emerging markets payments, right? And that's the truth. Nobody is using tether onshore in the United States to like pay for things with credit

cards or like go to the bodega or something like that. Or if they are, it's like de minimis amounts. On the other hand, USDC is more frequently used for that in the United States. You can get literally a coin-based debit card if you have a coinbase. account, have USDC in your account, go tap to pay with things in the United States. They're like different segments of the payments market, which is bigger than people think. And I think what you're going to find with many of these efforts with the blockchains is that the user base and the core activity of the people involved are going to drive where they focus their efforts. So if something like what Tether is doing becomes a swift replacement for Eurodollar style payments, especially in

the global south, you know, especially among merchants and consumers, I would be zero surprised. But does that really compete with what like Stripe is trying to do? Honestly, no. In fact, they may interact with each other in a way that creates more market opportunities for them than if neither existed, right, or even only one existed. So as I think about competition, the traditional space is so large. And many of these efforts are relatively like attached to current things that have been sort of niche expansions that I think most of them, you know, a little bit like the early internet, Laura, are supportive of each other by existing because they're just drawing more attention to the space. I really think all of them are eating away like tiny piranhas,

right, at the behemoth that is like Visa or MasterCard. Okay. So, you know, earlier when you talked about how you felt like a big bank, you know, would kind of look at any of these efforts in scoff, I mean, the history of technology is littered with incumbents that could not disrupt themselves or would not. I mean, just even in our lifetimes, you know, like blockbuster, borders, Kodak, you know, I mean, this has happened just so many times. So what makes you think that traditional banks could really, you know, be competitive in this area? So I'm going to point out something important about what you just said about all these disruptors. How many of those were financial companies? I mean, none of them, but.

Finance is different. And what I mean by that is tech is usually not the driver of results, right? Like, I worked at a bank that on day one in training, the CEO came on and said, we have bailed out the U.S. government twice in the past hundred years. And I expect you to behave accordingly. Right. And what I would say is finance is a scale game, not a technology game. And often the technology matters less than people think so long as it is sufficient to get the job done.

Right. Like whether you get the best price or not on a bond trade often has very little to do with whether J.P. Morgan or Goldman Sachs's or Morgan Stanley's technology is incrementally better. It's actually the risk management judgment of the traders. Right. And so the reason that I look at this and sort of as both the banking person, and a blockchain person say sometimes I think people are missing the punchline is it's a very sort of tech thing to want to compete on the verticals that they understand without understanding

the verticals that actually lead to results. So I'm a little bit more skeptical of these results from companies early on leading to massive restructuring of the total financial system. I think the area that's most amenable to what you just said is payments because payments right now have a lot of market structure problems that are, let's be honest, partially regulatory more than technology. Like banks, if they wanted, they're not going to. Let's be clear, banks are terrible at working with each other. But if they wanted to, all of them could just put together a shared private database to do instant payments globally right now. Right. There's not a technological blocker out that. There's a willingness blocker. And so disruption there, I think, is very meaningful.

but banks are giant entities that do way more than just payments. And one of the things I very much always cautioned people about is do not generalize from your local circumstances as somebody who is like a retail customer of a bank to what the business of the actual bank is. For many of these banks, the retail customers are like a small like pocket of the world and not an unimportant one. But like if J.P. Morgan's entire consumer business like Chase vanished tomorrow, they're still a gigantic. financial institution. Right. And so, you know, what I'm trying to drive home here is this is a very complex multivariable problem of which tech is only one pillar.

And that's why I think I bring a little bit more skepticism on massive transformation there, also because there's a coordination problem, right? Like if somebody adopts a method of payment, but the guy on the other side hasn't, you can't transact. And so it really is the global liquidity network that matters. So I think rather than the traditional tech model of like incumbents being disrupted and being completely destroyed and then a new thing rises and then they'll eventually get disrupted and destroyed and then a new thing, right? Like the sort of sharp thin model of technological development, finance has been significantly more iterative. It looks like steps where everybody gets dragged along because you need that network effect to transact with money.

And I really think this is an extremely important point in this L1 debate that people are having. And I think a lot of investors are going to be very disappointed, having invested at valuations that assume total market disruption if things go well. And then they find out that actually, no, in this space, you don't eat the market. The market eventually eats you. So, okay. So I just need to understand then. How do you think this is actually going to play out? Like, who are going to be the big winners and losers?

Because it sounds like you're saying, we're seeing all these upstarts. and none of them is really going to succeed the way that people are betting. And it almost sounds like you're saying that the banks are going to be the big winners, which like, if that's the case, then Satoshi is rolling over in their grave if they're in a grave. So that would, that would, I don't think people would, I don't think people would be, if that were really the outcome here, I think people in crypto would quit. They would be like, this is not what I signed up for. So I'll start.

I think the biggest winner will be consumers. Right. Let us not forget there are a lot of forms of technological development that maybe any individual company doesn't capture it, but the net benefit to like consumers in the economy is huge. So I do think the number one winner here is going to be consumers. Because like, let me remind everybody of the current deal that you have with a bank, okay? And this is from the retail perspective.

And by the way, I almost 100. percent odds you're getting ripped off right now because here's what they do. Give us deposits. We're going to go lend those deposits and take a ton of risk. If it goes well, we're going to say we're awesome and pay ourselves giant bonuses. If it goes poorly, the bank goes bankrupt and you might lose all of your money. And by the way, we don't pay you any interest. Right. Like, again, like, if you're a VC in this space or like, you're just somebody who's in the stock market, imagine I pitch you an investment that is like, you give me, you know, $100,000. And if it does great, I keep all the profits, but if it goes down, you take the losses. That's what your bank is actually doing to you

with most deposit accounts in the United States of America. It's deranged. And so I think breaking that paradigm with things like stable coins that create better options and better networks is incredibly valuable. Even if any individual company does not accrue the gains, consumers writ large and the economy will accrue those gains. And then you are taking less risk and probably getting paid interest on safer deposits. This is good for everybody. Right now, people using our system for payments are giving a giant subsidy to certain subtypes of borrowers.

And by the way, since banks don't retain a lot of mortgages, it's not like the average person buying a home. Those go generally into the market to get securitized. It's like project loans, commercial real estate, like certain kinds of structured finance, It's basically billionaires are getting a subsidy. So breaking that, I think, is good. Now, number two, do I think the banks are going to be winners writ large? As a segment, yes.

Specific banks within that, oh, is there a lot of danger here, right? Like, I would tell you, I think a lot of banks are going to consolidate or get disaggregated by the trend of crypto, right? Like right now, the modern bank is this super dense entity, you know, a little bit like crypto exchanges where we talk about decentralization and then created the most centralized financial entities possible. Right. Like your bank is handling your lending and your deposit account and your payments and selling you investment products. Right. It's like the all singing, all dancing thing.

And I think one of the things crypto will do is unbundle the banks. So the answer is to where the winners will emerge is who understands this unbundling effect? correctly and either remains bundled by transforming their business offerings to become more modular, or actually picks one of those niches and dominates it. And that is why I'm saying I'm skeptical blockchain natives will dominate. Now, that's not a statement there's not value for blockchain natives, but I'm saying everybody wants to pick winners and losers. Like, is it going to be the apple or is it going to be the potato, right?

Like, which one of these are we doing? And I'm saying the future actually looks like gazpacho, right? Like it's just going to, everything's going to be in there and it's all together. All right. Well, one other question is so I'm sure you know that people are going on TV and saying that Ethereum is the staple coin chain. And I was just curious what you thought this particular activity would have on, you know, this narrative for Ethereum. Yeah. So I actually said this at an event yesterday put on by the Ethereum Foundation.

I don't think Ethereum is ready for prime time for real-world asset issuance for the exact reasons that I just previously described. Like, we just witnessed with the ByBit hack that the Ethereum validator set is currently in a place where they're not really willing to do things about significant exploits. And so I would ask the entire Ethereum community, let's assume a worst-case scenario happens and Tether or Circle's private keys get compromised. and a hacker is now in control of the smart contract on Ethereum for USDC or USDT, including all of their freeze and seize capabilities. What do you do? Right? Like, what are you doing with your hands?

What is your game plan at that point? Because it's going to break everything on that chain. And until we have significantly more mature risk management tooling around like the Ethereum product, it is not ready for prime time. And like, again, as a financial practitioner, or I've heard so many people tell me, well, this has never happened before. It's not a risk. And I'm like, this is how people blow up nonstop. Like, you've just told me what I heard from long-term capital management. You've just told me what we heard from the MBS people. You've just told me what I heard

at J.P. Morgan when the London whale was going on. Like, oh, it's fine. There can't be a problem. Okay. The fact that a risk has not explicitly happened yet is not a statement that it won't happen in the future. And so there are design and functionality things that are like well known in traditional finance that could have stopped a lot of these hacks. And so people are going to look at them and be like, if you don't build them, we are going to, I don't know, go launch an L1 that has these capabilities, which may partially explain some of the trend we're seeing right now. Right. Like to give a really trivial one, if people remember the Mango Markets hack with Avi, right, a lot of the issue there was that Mango markets was lending against spot prices and illiquid tokens, which is insane. Right. If I'm on a

repo desk at a major bank and I have something that just ripped 100% in the past 20 minutes and somebody comes to me to borrow against it. I'm not using that price to loan to them. I'm going to take like a 48 hour trailing average and a bare minimum and be like, yeah, I'll loan to you, but like a 10% LTV on this current price. Like stop it. Right. And again, these are very common things that are understood. So really the dialogue between both sides needs to improve. Because again, there are real technological benefits to open access consensus ledgers. That is very important that it will matter. But if you can't build in some of these risk management frameworks, right,

we're just going to end up at a point where it's like we have two equally broken systems talking past each other. Okay. So this is so interesting because, you know, here I started the conversation by noting all this activity. And the thesis, and tell me if I'm wrong, your thesis is that forget about all these like upstarts. It's going to be the big banks that that win the day or not just banks, asset managers, payments companies, some of the upstarts. My thesis is that people like to think of markets like literal financial markets

in the form of discrete winners and losers as though like it's, you know, you know, building A wins or building B wins. Okay, okay. But okay. So then which of the upstarts you think are best. position to capitalize. Okay. So I'll say some things that I think will probably surprise people here, especially given the tenor of some of my previous comments. One, Bitcoin, obviously. There, the credible neutrality is very important. Bitcoin has never said, I'm trying to be a regulated

financial asset used for these things. I'm trying to be like extra sovereign money or, you know, however you would term it. And they're doing a good job of that. So in Bitcoin's case, if the North Koreans steal it, somebody goes, yeah, they're the legal owner now. That's kind of working as intended, which tells you there are some things that will be very good for and some things it's unusable for, but I think there's product market fit there. I think stable coins have definitely been a winner, right? Like how we have designed getting units of currency onto a blockchain and moving around dollar tokens is a big win. Now, does that mean circle or tether or the long-term winner? No, but stable coins is a product. Definitely, yes, they are here to stay. Of specific

upstarts within that space, look, Coinbase has gotten big enough that they're going to be something. Either they get acquired by somebody gigantic or continue growing themselves. I like their odds, right? Circle a little bit less clear because if you look at money supply versus the size of circle, they're much smaller on a relative basis than Coinbase. If we're looking at L-1s that I think are credible, like I'll say some things that I think people are going to be surprised by. Probably the best answers to the security question that I talked about from the RWA side currently come from people like Avalanche, right? Because if you look at how you can build subnets, That's actually a legitimate solution to the problem that I just raised.

And I'm sorry. So a subnet, can you explain just like why that is preferable over, for instance, like an L2 on Ethereum? You could have a subnet with a fully permission validator set that's doxed. So the problem with the current L2 design for Ethereum is you have a single sequencer. Right. So, you know, if I'm base, I have to go as Coinbase to pitch to Binance, hey, why don't you put your stuff on like my thing and I take all the profits? That is a hard conversation, right? An avalanche subnet because of the consortium model, right, as we think about credible neutrality,

that's a term that is really under discussed in crypto, because here's one form, like Bitcoin or Ethereum on the base layer. Okay. Well, let me give you another potential form of credible neutrality. Imagine an avalanche subnet where the validators, which are permission, so Randos can't join, are like the 500 largest financial companies globally. I think it's going to be hard to individually. appropriate things on that chain, but that doesn't mean that any one of them can just change the rules.

Right. And so those sorts of consortium or consensus models have been very under explored in blockchain, but have been incredibly successful in financial history. You know, an advantage I have as a business school professor is reading about that stuff. And so that's why I think about something like an avalanche subnet over a centralized sequencer. It's decentralization, but in a very different form. Right. And then if you're looking at asset controls and like permissions and identity and authentication,

there are people like, say, Stellar is a good example of somebody who's actually thought about that a lot, even though everybody likes to pretend they don't exist. Or if you're looking at just interdiction, look at what Mistin Labs did with the CETIS hack, contra like the bybit hack on Eve. So there are people making very serious efforts at this. And the question becomes who adopts them and where does the value accrue? All right, Austin. Well, it's always super interesting to chat with you.

You said a number of things I didn't expect you to say. So thank you so much for sharing your thoughts on Unchained. Thank you. I hope it was useful and maybe surprising in the good way for some people. Yes, it was. Hands up, everyone. We've got exciting news. Bits and Bips, our Macro Meets Crypto Show, is officially spinning off into its own podcast

feed, YouTube channel, and X account. If you've been enjoying the deep dives into interest rates, monetary policy, and how they intersect with the crypto markets, make sure to follow Bits and Bips wherever you can. at your podcasts on YouTube and on X. You'll find the links to YouTube, X, and other podcast platforms in the show notes. If you're watching this, there's a QR code on screen. We'll be posting here for a few more weeks, but starting in September, Bits and Bips will launch on its own feed. For now, we will publish longer clips from the show on those accounts. Remember, go to the show notes now and

subscribe to Bits and Bips. That's Bits, plus sign Bips, spelled BIPS, on YouTube as and wherever you get your podcasts. Welcome to the weekly recap. We begin this week with a major development in a long-running legal saga. Kwan, co-founder of Terraform Labs, has pleaded guilty in U.S. federal court to conspiracy to commit fraud

and one count of fraud in connection with the 2002 collapse of the TerraUSD Stablecoin and its sister, Token Luna. The Stablecoin's failure wiped out an estimated $50 billion in value and impacted hundreds of thousands of investors worldwide. Prosecutors said Kwan misled the public by concealing the role of an outside trading

firm that helped restore TerraUSD's dollar peg during a 2021 depegging event. He knows that he should have disclosed that role and takes responsibility, said defense attorney Sean Hecker. Quan, a South Korean national, was arrested in Montenegro in 2023 while using a forged passport. He faces up to 25 years in prison, though prosecutors will seek no more than 12. As part of his plea, Kwan will forfeit $19 million and his interests in Terraform Labs and its cryptocurrencies. Turning to a brewing dispute over blockchain security, Blockchain Project Kubik says it has achieved majority control of Monaro's mining power, claiming a 51% share of the network's hash rate. The move coincided with a six-block chain reorganization that replaced 60 previously vowsy.

validated blocks, raising concerns over the risk of double spending and transaction censorship. Led by former IOTA co-founder Sergei Evin Cheglo, Kubik uses a useful proof-of-work model that redirects Monero mining rewards into USDT, which is then used to buy and burn its own QBIC tokens. Its share of Monero's hash rate has grown from under 2% in May to more than 25% in July before crossing the majority threshold this week. While Ledger's CTO, Charles Gillame, warned Manero appears to be in the midst of a successful 51% attack. Some developers dispute that conclusion. From mining power to market power, one company made a spectacular entrance to Wall Street.

Crypto Exchange Bullish surged onto the New York Stock Exchange on Wednesday, delivering one of the year's most dramatic market debuts. Shares, trading under the ticker, BLSH, opened at $90, a 143% jump from the $37. price and briefly climbed to $118 before closing at $68. The rally pushed Bullish's market capitalization above $10 billion, nearly doubling the $5.4 billion it had initially sought. Led by former NYSE President Tom Farley and backed by investor Peter Thiel, Bullish caters to institutional clients, blending decentralized finance technology with centralized oversight.

The institutional wave in crypto has begun. Farley told CNBC, pointing to strong interest from professional investors. The Cayman Islands-based company processes more than $2.3 billion in daily trades and recently partnered with the Salana Foundation to integrate Solana native stable coins for faster settlements. In tech regulation news, big changes are coming for crypto app developers. Google Play will introduce new rules on October 29th, requiring custodial crypto wallet and exchange apps in more than 15 jurisdictions. including the United States, European Union, United Kingdom, and Canada to obtain local licenses

and follow industry compliance standards. In the U.S., affected developers must register with the Financial Crimes Enforcement Network as Money Services Businesses, which involves implementing anti-money laundering programs. EU-based providers will need to register as crypto-asset service providers under MECA rules. Following criticism from industry figures, Google clarified that non-custodial wallets are exempt from the policy. Non-custodial wallets are not in scope, the company stated on X, adding that its help center will be updated to reflect the change. Meanwhile, in decentralized governance, one major protocol is moving toward legal recognition. The Uniswap Foundation has unveiled a proposal

to register its governance under Wyoming's decentralized, unincorporated nonprofit association framework, or DUNA. The entity to be called Duny would give Uniswab's Dow, legal recognition, liability protections, and the ability to handle off-chain functions such as tax compliance and contracting. If approved, the Dow Treasury would transfer $16.5 million worth of UNI tokens to a Duny-controlled wallet to fund a legal defense reserve and cover an anticipated IRS bill of under $10 million for prior tax obligations. The move could also pave the way for activating UNISWOP's long-discussed fee switch, which would direct a portion of liquidity provider. fees to the Dow Treasury.

We're excited for governance's next era, one that's defined by greater autonomy, recognition, and sustainability. The foundation posted on X. On the corporate front, a fintech firm is making a massive bet on alt coins. FinTech firm Alt5. Sigma announced plans to raise $1.5 billion to stock its corporate treasury with World Liberty Financial's WLFI tokens and cash. The capital will come from selling 200 million shares at $7.50

each through a mix of direct and private offerings. Under the deal, Alt 5 will receive $750 million in WLFI tokens at $0.20 per token, equal to roughly 7.5% of the total supply and $750 million in cash. World Liberty financial co-founders Zach Whitkoff and Eric Trump will join Alt-5, board, with COO Zach Folkman serving as a board observer. ALT5 operates an over-the-counter digital asset trading platform and a crypto payment gateway. We did a full dive into alt-coin treasury companies this week with Athena founder Guy Young and Dragonfly partner Rob Haddock. Don't miss it. In Washington, there is a leadership change at the

White House's Crypto Advisory Council. Bo Hines, executive director of the White House Crypto Council and head of the Presidential Council of Advisors for Digital Assets is stepping down after seven months in the role. Announcing his departure on X, Heinz called the position the honor of a lifetime and said he will return to the private sector. During his tenure, Heinz helped organize the first White House Crypto Summit,

supported the Genius Act regulating stable coins, and opposed central bank digital currencies. Deputy Patrick Witt is expected to succeed him. Hines said he plans to remain, active in advancing the U.S. crypto industry. Over in the mergers and acquisition space, a high-profile proposal is stirring pushback. The Layer Zero Foundation has offered to acquire the Stargate cross-chain bridge in a deal initially valued at $110 million. The proposal would dissolve Stargate's DAO, discontinue its STG token, and allow holders to swap for Layer Zero's

ZRO token at a fixed ratio. Layer Zero CEO Brian Pellegrino said the goal is to help Stargate execute on its ambitious roadmap and integrate more closely with the Layer Zero ecosystem. Stargate, launched by Layer Zero in 2022, is described as the industry's most used bridge with over $70 billion in historical volume. However, the offer has triggered an emergency counterproposal from Dow members seeking independent advisors and competing bids from Binance, Circle, Solana, and others. Critics have raised concerns over conflicts of interest as both projects share founders and major token holders. The acquisition requires 70% approval from STG holders to pass. And finally, a patent fight that could shape the future of bank issued stablecoins.

Wyoming-based Custodia Bank says it may hold a competitive edge in the post-Genius Act stablecoin market through a U.S. patent granted in 2022. The patent covers tokenized bank deposits. Cryptographic tokens issued by banks and backed one-to-one by three. fiat deposits and could apply to bank-issued stable coins now being explored by major institutions such as J.P. Morgan, Citigroup, and Bank of America. CEO Caitlin Long said, Custodia is aggressively pursuing infringers, though no legal action has been disclosed. Experts note the patent could serve as a bargaining chip, enabling licensing or cross-licensing deals, while also cautioning that its validity could be challenged. The renewed interest comes

as banks ramp up stablecoin initiatives under the new federal law. J.P. Morgan has already piloted a USD deposit token on Coinbase's base network. Custodia, meanwhile, launched the Avet Stablecoin in March with Vantage Bank, aiming to build a consortium of smaller banks protected by the patent. Time for fun bits. BitMex co-founder Arthur Hayes just speed ran the crypto trading cycle. Sell low, buy high, and hope for the best. A week ago, he dumped $2,000.

2,373Eath for about $8.3 million at $3,507 each. This weekend, he marched back in with $10.5 million in USDC, buying them all back at over $4,150. On X, he tagged Fund Strats, Tom Lee, and vowed, I pinky swear I'll never take profit again. Cryptotrater James Wynn couldn't resist. Arthur sold the bottom, bought the top. When he aped back in, it was an Insta short signal. But jokes aside, Hayes' fomo might be paying off. By the time of this recording, ETH was trading above $4,500.

Sometimes the wrong trade is just early performance art. Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Oranovich, Margaret Curia, and Pam Majumdar. The weekly recap was written by Juan Aranovich and edited by Stephen Erlich. Thanks for listening.