Unchained - How Crypto Neobanks Make It Easier to Earn Passive Income - Ep. 930

Episode Date: October 22, 2025

Neobanks changed how fintech thinks about money. Now, crypto builders want to do the same, without custody. In this episode, Itamar Lesuisse, CEO of Ready, and Mike Silagadze, CEO of EtherFi, argue the real shift isn't about "crypto cards," it's about who controls your assets. EtherFi’s and Ready’s self-custodial apps merge saving, spending, and investing. The result: faster settlement, lower fees, and more transparency, but also new challenges around compliance, credit, and security. Itamar Lesuisse and Mike Silagadze explain how layer 2 networks made crypto cards economically viable after years of failed attempts and how Africa’s FX markets could become the breakthrough use case for crypto banking. Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Mantle Binance Guests: Itamar Lesuisse, Co-founder and CEO of Ready (formerly Argent) Mike Silagadze, Founder and CEO of EtherFi, and Founder of Top Hat Links: The Block: Best crypto cards with token rewards in 2025 Bitcoin Starknet Staking Post by Ready (Formerly Argent)  Timestamps: 🎬 0:00 Intro 💳 1:57 What crypto neobanks are, and why they’re suddenly booming ⚖️ 6:19 Custody as the real divide between traditional and crypto banking 🏦 8:07 From Argent to Ready, turning wallets into full neobanks 💳 10:05 Why early crypto cards failed, and how L2 settlement fixed them 💰 18:49 Credit without credit scores: the rise of collateralized cards 🔒 32:52 How smart accounts and recovery improve wallet security 🌍 44:29 Onchain FX and the next profit frontier for crypto banks 🚀 55:36 How self-custody could reach mass adoption 🔚 58:19 Closing thoughts Learn more about your ad choices. Visit megaphone.fm/adchoices

I mean, I think the big difference, the one, if you could say, like, what is the dividing line between this, whatever you call it, DFIBank, and a normal bank is custody. So crypto alternatives do not take custody of user assets, which the reason that's important is it means nobody can come in and just take all your money. And the level of transparency is, you know, extreme compared to, you know, anything that a traditional bank would provide. You know you put in a dollar. You know exactly where that dollar is. Hi everyone, welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. Mantle is pioneering blockchain for banking, a revolutionary new category at the intersection

of Tradfai and Web3. Follow Mantle underscore official to learn more. Finance is the world's number one crypto exchange, trusted by over 290 million users, with industry leading liquidity, security, and a wide range of digital. asset products, finance is the place to buy, sell, trade, and earn crypto. Download Binance today to get started. Today's topic is Cryptoneobanks. Here to discuss are Itemar Leswis, co-founder and CEO of Reddy, formerly Argent, and Mike Siligodzei, founder and CEO of Etherfi and founder of Top Hat. Welcome, Itamar and Mike.

Great meeting for having me. So this year has seen so many different sectors of crypto just take off. It feels like there's kind of these little mini gold rushes happening everywhere, obviously in stable coins, in perps, in debts, even maybe everything apps. And we're also seeing a big rush in the neobank space. So for people who don't spend their whole life on crypto Twitter, you may not know that there's many tier lists going around ranking these crypto neobanks. But before we get into all that, why do we just make sure everyone understands even what we're talking about. So Mike, can you explain what a crypto neobank is? Yeah, basically think of it as a self-custodial

version of something like a Revolut or New Bank or Chime. So neobanks have, you know, expanded substantially over the last 15 or so years and have grown to become, you know, this massive forest. It's $170 billion space about 100 times larger than D5. But they're fully custodial and suffer from a lot of the same challenges that Tratfai banking suffers from. What Ethify and I guess in Reddy and other players in the space are building are end-to-end crypto-native alternative to these Neobank products that allow you to save, earn, spend, borrow, all in a non-custodial way with lower fees and better rewards and much more flexibility. And Isamar, do you want to expound a little bit on how a crypto neobank's, a crypto neobank differs

from any old regular non-Cryptoneo bank, like one of the fintech options that Mike mentioned? I think the starting point that probably neobank is too broad of a word. You have like 50,000 banks, I think, in the world. Most of them retail. I think remittance fits into that savings, as Mike mentioned, payment, merchant payment.

There's so much into that. I think for us, the view is, Once you start with a different stack, let's say, so stable coin and self-custody, you can do things that traditional neobank will struggle to do or will do in a much slower way. But I think at the end, I really love my definition. We use the same, which is a non-chain alternative to your new bank,

but it has to revolve into specific benefits for users, whether it's cheaper, faster, or things like more yield. Yeah. Okay. So let's also now talk about the origins of crypto banks. Mike, I know people often talk about EtherFi is, you know, one of the original. So why don't you explain how Etherfi got started? Yeah. So, you know, back when we were first pitching our Series A, which was, you know, in 20, 2023, that was actually the original pitch. is we were going to build a vertically integrated crypto app that lets you basically replace your bank. Our starting point for that was what we became pretty well known for, which was our staking product. And that was meant from day one to be a starting point.

So start by building a staking solution, build lots of users, TVL deposits, then layer on our liquid product, which is a defy strategy, basically investing on chain, and then launch the card product and the self-custodial vault. smart contract evolved. And remarkably, it actually kind of worked out as, you know, as planned. And we've now, we tried to coin this term, defy bank that doesn't seem to have caught on. The market seems to have, you know, narrowed in and started calling it crypto neobank, which is a bit concerning, frankly, to me, because, you know, the word bank has very specific

implications. Bank means you're taking deposits and you're regulated and so on. even if you put Neo in front of it, it's still a little bit. But like, you know, the language people are using in the language, so we kind of have to go with it. I think bank alternative is, yeah, is maybe a better way. We have similar lawyers, I see, Mike. Yeah.

Well, actually, Mike, just one question, because you said you wanted to call it a defy bank, so that still would have used the word bank, but like. But it's one word. We said defy bank, all in one word. Oh, oh, okay, okay. Well, so it doesn't matter. You know, people are going to call or whatever people call it.

Yeah, but basically the main, the main, like, kind of feature is that Defi is the plumbing that kind of powers this. It's really like a suite of features. It's not, yeah, just like, like, I think a lot of, like, when I tweeted about this, a lot of people were asking about the cards because like we're everybody's so used to having a credit card and using that to pay. but there's so many other services that can be wrapped right yeah yeah it's it's an end-to-end replacement so i mean i think the big difference the one if you could say like what is the dividing line between this whatever you call it defy bank cryptocurrency and the normal bank is is custody so crypto alternatives do not take custody of user assets which the reason that's important is it means nobody can come in and just take all your money or and the level of transparency is uh you know

extreme compared to anything that a traditional bank would provide. You put in a dollar, you know exactly where that dollar is. It's not that the bank or the entity has re-apoticated it and going out there and started gambling on mortgage bonds. Like, no, no, you put in a dollar, it's exactly where you placed it. So custody is that dividing line that separates the two worlds. Just important to add, it's not to feel, we've been in self-custody for many years. It's not philosophical.

Users get direct benefit. Even as simply as anyone who has banked in the US and Europe would know that you deposit anything double digit $1,000, you get a phone call from your banks. You get, we feel, those questionnaire every single week or months at ready. And the second, you have self-custody, the regulatory surface is much smaller, which means users have much better UX. It's really a direct benefit to users. It's not just philosophical. Exactly, yeah. Yeah, although one thing I will say is in my research, I do think that there's, there's very few, but there are some of these quote-unquote neobanks or crypto-neobanks that are actually custodial. So yeah, they're out there.

Yeah, I don't think they're the more commonly used ones, but I did see at least one. So Itimar, obviously your company started as Argent and it's now where branding is ready. So talk a little bit about how you got started and why you're doing this report. brand. So for us, I would say the defy bank or the on-channel alternative fuel bank was a pitch from Cid Round already. Day zero, we saw crypto coming. We were convinced that what would happen is that like self-custody was so hard that five big exchanges would just hold everyone's money and we would be back to the status quo of few big banks. And we had that pitch with payment. We had like it

was there was no proof of stake on a theorem, but we already had that vision. A proof of stake would your savings account. We had all those elements and we started with the self-custody. And in some way, we kind of had built what we have now, but seven years ago by 2007-1. And so our project was free. There was no seed phrase. There was no gas.

People, there was crazy growth. People would use when compound launch for the first Defy5 protocol, people were starting using it for saving. So we kind of thought we had it. And then, of course, the DFI summer came up. The gas fees exploded. So creating a wallet was impossible. And so our product evolved into a product for Wales.

We had money a billion dollar in assets. We had a single user depositing half a billion dollars into the app. That's not a mass market consumer, Neobank product. It became super safe, cold storage, basically. And so we really evolved into really a technical complex wallet. And even although as we evolved on the chain, level, but move further and further from the neobank.

Then we came to that realization that wallets will not become those products. They are too complex. They are very less opinionated. They are generally doing way to an ecosystem. And so we really wanted to make a strong mark around this, a very different product, different focus, splitting those products, wallet versus crypto crypto neobank. And that's where we did the rebrand to really mark that. Okay, so let's talk about the credit card aspect because, like I said, that is the thing people seem to be focused on.

I don't even know, you know, is it difficult for something that is being powered by defry on the back end, like that kind of operation? Is that hard to get, you know, a connection to Visa or MasterCard or whatever to establish the credit card portion of the services? It's hard to do it right and to make it good. There are many, many, quote, quote, crypto cards out there. Almost all of them are terrible. I mean, I can get into why, but frankly, if you've tried one, you know what I'm talking about. So tons of fees, complexity, no actual crypto in that you have to like sell your crypto for fiat to load the card, stuff like that. Most of them are really terrible.

So it is hard because you have to put in a bunch of sort of plumbing and make sure that you're on side in terms of regulatory requirements. And then it is hard to actually make it good. In our case, we started the card product, the transactions being on layer two from day one. So that is a must have if you want to have a card that doesn't charge you, you know, $1 or $2 in gas every time you do a transaction. But there's lots of abuses, like there's lots of programs that use commercial bins, meaning they use commercial card programs to issue to retail, which is super illegal. You shouldn't do that. And those programs, of course, eventually get shut down.

There's programs that issue cards in regions that are not allowed to issue cards in. So you have to get a legal opinion in every single country, sometimes every state, you know, about where you're able to issue, how you can market, and so on and so forth. So it's hard to make it good and to do it right. That's the short answer. And I would add it was impossible before. Correct. You couldn't have done, I think, what the Define Ready is doing three, four years ago, probably.

Even two years ago was borderline. And then it became possible. So I think there was a, that's why you see the, there's a reason why everything is happening now. And what was that that changed? That made it like a lot easier all of a sudden? There is one, the appetite and the, the compliance, the regulatory clarity. So I think that's probably the biggest change. So you wouldn't have been able to one issue a card

linked to a non-custodial wallet. It was really something on the centralized exchange could do. It was a Fiat card. So the point of Mike is a lot of cards. There is a real difference because once you have a very pure model where it is resettled and stable, I'm pretty sure is the case for FI. You can really lower the cost and have a very efficient model. Cards have always existed, but you might,

you would have paid between 3 and 6% in fees, basically, for every. transaction, partly because the model was less efficient, partly because people would just add a lot of fees. So regulatory appetite, we need a deltuce, low fees for us. Account abstraction play a very big role to have what I think is the pure self-custodial model. It's not like some hosted wallet. And so all those places came together at the right time. And you see VizN MasterCard being extremely open and much more bullish about crypto now than there were three, four years ago. And when you mentioned the regulatory clarity, is that the Genius Act, like the Stablecoin Act here in the U.S. or something else? I don't think the Genius Act really impacted that.

I think it's more before crypto was taboo and dodgy and why people wouldn't take the risk. The reality is I don't think there was clearly a defining policy. It's more it's acceptable. It's mainstream. Everyone knows crypto. They can afford it. So they can afford to do it without having a real thing. reputational risk. Yeah.

And then when you are dealing with the network, like these are MasterCard or whoever, what kinds of questions are they asking you as entrepreneurs? Like, do you feel like there's a higher bar that you have to meet because of, you know, what other services are attached to, you know, the fact that you're not an actual bank, that you don't have custody of the assets? Like, you know, what kind of questions are you getting? Or do they not care? This is a technical detail.

but it's an important one. Pretty much every crypto card program out there, almost every single one, works with a sponsor. So there's another company that has the Visa or MasterCard principal membership, which means they can actually issue the cards. And they get sort of a bin, meaning like a card number block, and they assign that to a partner. So they're sort of lending out their license with Visa.

So these companies, we use a number of them. The main one that we use is the company called Rain. which has been fantastic, you know, that make this much more feasible and including things like stable coin settlement. So we don't need to wire money to a bank account. We can just settle directly in USC. So all these components are, you know, the hard work has been done by companies like Rain to educate Visa and get everything set up so that they understand these crypto card programs and see it as a growth market. It's now at a size where Visa and MasterCard actually care about it, whereas previously,

even though it was around, it was so small that they just, it wasn't even worth the hassle of doing it. Whereas now, I mean, with either if I were doing like a million and a half a day, which is actually meaningful for a crypto card program, it needs to be about a hundred times of that to really be meaningful at a global scale. But for a crypto card program, that's meaningful enough that we're talking to Visa now. They actually care. They're seeing this as a growth area, and they're starting to invest in it and nurturing the growth.

Interesting. And so I also imagine the regulatory aspect is a little bit of a nightmare because another thing people were asking is like, oh, is this card available in this country or that country or, you know, and even like I noticed for the U.S., like it's asking you which state you're in and stuff like that. So just talk about it because like that, that in it up itself just sounds like that that could be, I don't know, like a few hundred, if not even a thousand different types of regulators that you might have. Yeah. So explain that part. Well, so we, I mean, just to put a perspective, we have four full-time compliance people. So, I mean, that doesn't sound like a lot of, you know,

for a crypto exchange, for example, but, you know, for a DFI, you know, product, just that's the overhead here. We have, you know, legal accounts. So we have compliance. We have to get legal opinions. So we have to If we want to issue cards on a reverse solicitation basis in Spain, we have to go to a Spanish law firm, get them to issue a legal opinion. They give us a report that says, here's exactly how you can issue cards to people. Here's exactly what you can and can't do from a marketing standpoint. It's, I mean, it's an actually nightmare, but even as much of a nightmare as it is, it's probably one-tenth of as much of a nightmare than if we were a fully custodial regulated institution. That's the critical part. People don't realize, I think, how all shielded we are from that complexity. You work with rain. We work with Kulipa. They are the regulated entity. I think both of us could decide to be regulated, to integrate vertically.

But I think there's something actually very strong in spitting that for many reasons, which allows us, I think, to stay a tech company versus financial services. And so being able to, this separation of concern makes life much easier. You mentioned different markets. Yes, it's more work for market. But experience has been, I mean, we started, I think, from opposite markets, actually. But I think our experience was that you can really replicate that. But in some markets, we might work with Visa, in some with MasterCard. It's been, yeah, I think it's, as you say, some people took shortcuts.

I love your example of the corporate cards. I think when you see a card that there is in every market with no K-YC up to a million dollars, there's probably something very, very fishy, and a lot of these cars will disappear and will be shut down. Huh. Okay. Yeah. That does make sense because I did have some other questions, which I'll ask in a little bit about that aspect. But I did want to just, oh, I remember actually it was a comment that I was going to make,

which is when you said that you had, you know, people on your staff should do this role and they would literally have to go in and meet the regulator, I thought to myself, oh, okay, so I guess AI isn't removing all. the lawyer jobs just yet? No, unfortunately not. Yeah, still paying a couple thousand dollars an hour for a lot of this stuff. So I did want to ask about the fact. So I don't know how it works in other countries and maybe it's the same.

But at least in the U.S., when you apply for a credit card, and it will check your credit score and things like that. So it seems like that's also happening for this card. So, like, basically, people will have their on-chain identity, but then, and then there will be, it'll be linked to K.C. And then on top of that, it will be linked to their credit score. So is that how to think about it? Like, so in our case, no, we don't check credit score because it's fully collateralized. So we don't issue uncollateralized loans like many card programs do.

We do plan to eventually do that, probably in 2026, we. We'll start, but for now, it's fully collateralized. So you have all your stuff in the Ether 5 Volt, the smart contract wallet, and then we give you loans if you want to borrow against those assets, but it's fully collateralized. So we don't need to check your credit because your loan is backed by assets. So it's more like a debit card. It is issued as a credit card. There's actually an important distinction there. When you issue a debit card, it won't work for a bunch of things.

So it is issued as a credit card, but it is fully collateralized credit. Okay. Very similar model to us. We have debit in some market, it will be credited in others. In Europe, debits works better than credit. In the U.S. credit, it works better than debit. But then users use on chain loans. Okay.

So basically, the credit limit will just be determined by how much ether they have in their fault. Oh. Or any assets. I mean, one of the advantages that, and I'm not sure if Freddie has the same thing, but it's kind of an obvious, you know, next step. In our case, a user can have defy strategies. So you can have assets that are in a strategy vault that's earning, you know, depending on the day. These days, I think, around 10% yield on your stables. And you can use that as your payment currency.

So it's almost a little bit like imagine you have like, you know, an S&P 500. you know, index fund, and you're using that to spend day to day, or are you using that as collateral to borrow against on your credit card? I think that's one of the, you know, incredible things about crypto and defy and why this thing is interesting is that the composability allows you to create products that would be impossible to create in Tradify. Right. So many of our users, just to like finish the loop, like many of our users will have like a bunch

of assets that are earning, let's say, 10%, and then they'll be borrowing an Avey array. which are much lower than 10%. So you're getting this like arbitrage, you know, this interest rate arbitrage basically. Okay. So it's like, because so basically the traditional lines between like your investment account and your savings account and your checking account, they just get like all blended into one thing.

So you don't even have like this separation of like you're keeping money just to transact in one place. Yeah. Got it. Okay. It's exactly. And that's the power of this model and why I think it's going to take over the world. because there's this ridiculous kind of artificial distinction that currently exists, exactly as you say, where like your insurance policy is over here and your investing is over there

and your checking account is here and your mortgage is, and none of them talk to each other. In this case, imagine you have a wallet that has your dollars, your stocks, your art collection, your mortgage, the house, you know, the NFT that represents your house. And the entity, the protocol, sees the entire financial picture of you as a person. and can issue you credit and products and all of it just works seamlessly together. Something that would be completely impossible in TransFi. And even if you were to try to create it, it would be only available to people that are, you know, ultra high net worth.

So that's, I think that's the power of this whole crypto neobank model. I love it. Isamar, did you want to add on that on, on, you know, how it's, it's really, it's, but yeah, it basically kind of like upends the entire way that most people think about you know, how they organize their finances. I think I really love my pawn because, I mean, we see a lot of the same thing. And in crypto, you realize that those, we are trying in the U.S. sometimes to recreate those patterns, but the reality is there's no such thing as checking, savings, et cetera.

And we, I mean, we'll really see also this element of products that exist in trade five, but they are very exclusive products. The collateralized loan is the most, I mean, it's always something that's seen by, used by, you know, Elon Musk, Jeff Bezos, but there are 80s, we use it so much in crypto. It's so common. For us, we really see when we started to do that with Bitcoin, which was not something where we were very active and then we became much more active in Bitcoin, that's where we realized actually there was real demand because it's less easy to do

typically on the Bitcoin world. But also things like even integrating hedge fund investment, basically what we would call exotic investment are much more capable in crypto. everything is tokenized, whether you invest in NARV or some hedge fund, is actually the same thing. So we see, at least in some markets, more of a demand for those. Let's say private banking products. Everyone has access now to private banking products once they're on chain. Okay.

So in a moment, we're going to talk a little bit more about the types of offerings that we're seeing here in these crypto neobanks. But first, we're going to take a quick word from the sponsors to make this show possible. Mantle leads the establishment of blockchain for banking as the next frontier. UR is the access layer that transforms Mantle Network into a purpose-built vertical platform, the blockchain for banking, that enables financial services on-chain. UR unifies and vertically aligns Mantel's focus on payments, trading, and assets, MI4, METH Protocol, Functions of BTC, supported by developer grants, ecosystem incentives, and the industry-leading distribution platform through the UR app, Reward Station, and By-Bit launch pool.

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Binance.com slash E.N. slash terms. Back to my conversation with Isamar and Mike. So let's talk about the backend. Now we kind of talked about the front end. And I mean, we did talk about the backend sort of in an abstract way, but just describe, you know, so if it is really that, you know,

users can kind of use any different types of DeFi offerings in the back or whatever. Like are they limited to certain ones? Like, you know, are only certain ones allowed to work with the card on the front end? Or, you know, how does that all work? And either one of you can go. Yeah. So we have specific votes.

We try to be the easy button for defy. We, you know, in terms of the wallet and smart contract wallet structure, we want to make sure the users don't get wrecked, which means. you can't just sign a random transaction that, you know, we'll drain your wallet. We have a lot of protections and kind of bubble wrap around it. Eventually, like, we want this to be mostly normies using this product. And so we tried to make it simple for people. So we have a product for ETH, a product for BTC, a product for USD.

One click you deposit it and then magically, you know, in a non-custodial way, deploy that into DFI and you don't need to really think about it. Similar. It's not a technical. decision is really a pure product segment. I mean, you will have as many neobank as segment of users. And in our case, extremely opinionated with three assets. It's EUSBTC and USD or local currency.

Could be euro or working on that. And then we have a matrix of like three risk rating. So extremely curated, extremely opinionated. And that's really the product group around to users. If you take a loan, you can't go for like 90% rate. usage ratio of your loan, where you will be right. So it's really, it has to become a product that's right now, I think crypto cards and even ready to be an elsewhere,

wallet where you stick a crypto card. And we have been evolving and by the end of the year, we'll be there where it will feel really like a traditional neobank product on trade five, just with security guarantee around self-custodiality, no one can freeze your funds, et cetera. So that's really a product decision for our our segments would be extremely opinionated. So for some of these rewards in the background, like, like, you know, I noticed Etherfi's

current liquid rewards are 12%. So explain like where that yield is coming from. Yeah, I mean, it's like any defy, those vaults, which have a, you know, a third party strategy manager tend to be very conservative. So there's no directional risk. Usually the risk is just D5 protocols, but the protocols we use are things like AVEA, So I think, for example, the USB vault, there's a bunch of it that's deployed into RIPLUSD on AVE, which is a pretty boring strategy. But RIPO, I believe, is paying incentives to be able to provide those higher yields.

So the short answer is it's mostly lending and various token incentives that generate the yield on the vault. And in our case, we go broader just to add on that. because so lending is something everyone we're also looking, whether it's on N1 or we bring it from any chain you need. But for example, if you look at Bitcoin, we specifically do staking on Starknet because now you can stake Bitcoin. So that's not incentive. That's how to secure the network, which is something we couldn't do months ago.

So now we have native yield, sustainable yield on Bitcoin. But we're also working on things like funds, like fully manage hedge funds, not by us, but like big, big names that manage crypto funds, which means, you know, you have different exposure. They tend to be custodial. They get your funds. They maximize benefits. So that's more like investing in a hedge fund.

So very opinionated, but still a range of risk, reward appetite for users. And so it sounds like some of this is basically just farming on the back end. So, like, I guess, so traditionally the reason that, networks would offer those incentives is to attract people who might stay after the incentive program. But I guess like if they're just offering it to these cards or the neobanks and then the neobanks are just moving the users. I mean, not that it's like necessarily. I'm just more thinking about the networks that are offering this. Like I don't understand necessarily what's in it for them. They're offering these yields to defy because they're trying to interpret.

their assets in defy. They're trying to become a stable coin that's, you know, with ripple, I imagine. They're trying to become a stable coin that's broadly used in Ave and other, you know, defy protocols. And then we participate in that. So what our, I wouldn't even say our job, what the strategy manager's job is to just source the best of available yields in defy, which might be the basis trade, which is, you know, broadly available, might be these token incentives. And generally, historically, and I think for foreseeable future, the, the reward yields in DeFi are going to be higher than in Tradfai, because you're stacking the T-Bill yields,

which are underlying, with additional rewards that come directly or indirectly from the speculative nature of the crypto market. I would say our job is just to bring the best product to users, if that means going on a other chains while being very transparent on the risk. And so that means we do things like, yes, if there is a token reward,

it's automatically repaying the loan, et cetera. making a super symbol for the end users and just them having certain confidence that will get, maybe not the most DGN extreme opportunity, but the best risk adjusted opportunity out there. And we also work with Volkerator, working with Stakehouse, etc. So a very similar approach. I do think the chains doing that still get the stable doing those incentives, still get the benefit. They want liquidity in the system. We are contributing to liquidity in the system.

Right, right. That makes sense. Well, I did also want to ask. So earlier when we talked about how you could kind of compress what in TradFi would be multiple different accounts into one place and then, you know, just like have a credit card that would be attached to all of it. Like talk a little bit about how the security works for that because obviously in crypto, we know there's been so many hacks and people losing funds or their private keys or their seat phrase or whatever. So explain like if someone were to, you know, put what would what in like trotify would be divided across multiple accounts like how does it work for them to keep all of that secure even if it's all in one place yeah i mean i think smart contract security has come a long way since the dow hack where you know a fairly trivial error allowed somebody to you know steal millions um uh and so so there's many layers of protections that come into place so So obviously there's smart contract audits. That's table stakes at this point. You know, you do multiple audits.

We also do formal verification, which is a process where you kind of make a mathematical model of the smart contract and make sure certain, you know, invariants can't be violated no matter what you put into it. We have active monitoring, which is where like there's a system that looks at anything being deployed on chain that might interact or do something to your smart contracts and can proactively pause. the contracts if, you know, if something looks wrong. Operating on an L2 provides some protection because you can,

you need to get the tokens off the L2 to fully sort of escape with them. So, you know, it's not perfect. You know, I don't know, you know, what point you can call it perfect. But we are, I would say, rapidly approaching a level of security and robustness that's close to what you would actually find in, you know, TadFi, you know, TradFi institutions blow up all the time, right? I mean, every year that this, you know, this happens. They usually get bailed out, I guess, but the fact does these blowups happen?

And I mean, I think Defi has shown itself to be, you know, starting to get to close to as robust as anything you can find in TradFi. And I would say it's in some ways here to safeguard the current product we're doing, both for it. I find out as very opinionated product than, you know, we've been in the business of securing billions in wallet. We had more TVL than many L2s. But when it's a generic wallet that can sign anything,

farming something, claiming an air drop, it's much harder. We had a lot of, we work on smart accounts for security for years. Here it's a very opinionated product who are not offering like the latest new protocol that has been live for two months with 600% APR. It's well established. You mentioned Avid, there's more for Lido, very, very well established. a protocol that went through all those years of battle testing and security measure,

plus the wallet itself in our case, we work with smart accounts. There's more than a signer. So even if all the cryptographic material in Europe was compromised, you would still be protected. We are working on adding things like trusted address. You can at times delay. There's a lot of mechanics. Recovery for us have delays.

As I say, it's exactly the same philosophy that we're working. we did on L1 with wallets as high as big as $500 million in wallet. So on that sense, we are pretty comfortable. The biggest risk in a state is more market crash, what you saw a few days ago. Again, if you are focused on USDA, E's and BTC, you were probably fine. But if you start to do other type of investment, having a token that can drop 60% is probably the biggest risk here. Yeah.

And actually, when I asked my question, it was more around the wallet security. But it sounds like right now you have it set up in such a way where it's like somebody can't lose their private keys. Yes. In our case, there's no private key exposed, but you can still have censorship risk. And with our model, you could decide if so much money, you could still have, for example, a hardware wallet. Set that up as an extra signer because really you want to do the extra effort. And then you could craft a transaction that would just... You get escape hatch, basically. The idea is really getting escape hatch,

and that's really something that kind of extraction allows. It's quite standardized now. They are a very good model there. As I say, we have never lost funds from a user. Yeah, any sophisticated system these days, it sounds like on both our sides, it's not just like an EOA, it's not just a wallet. In other words, it's not like a one seed phrase or private key

that controls the whole thing. it's a smart contract. Which means there's a bunch of code there that protects you with, you know, again, in our case, same thing. You can have a hardware wallet that you delegate to sign on behalf of it. You can have ways of recovering in case you lose your phone or your hardware wallet. So in all these cases, we're way, you know, we're well past, again, modern, sophisticated systems are way past the point of just like, okay, here's a wallet. Just please don't lose the phrase or else it's all gone. And how do chargebacks work in this world?

Same thing as in the normal world. If someone disputes a transaction, we escalate it to Visa and goes through the same process. Oh, okay. I see. And they get refunded in Stable. At the end, stable is money. When you were in Neobank in the UK, you didn't have Fiat money. You had EMI money.

It's an e-money, a new type of money because it has a different regulatory aspect and stable is the same. It's just money. Yeah, it's basically like it's a building where there's a revolving door in the middle. And on one day, the revolving door is like defy and then on the other side of the revolving door is like the normal credit card world. So, but it's all housed in the same building. Yeah, that's a great. It's kind of, that's a really great analogy. It's like, where do you place the door? If you look at, for example, a centralized exchange, like a Coinbase, for example, they have that access to defy, but they place the door well within, like, it's almost like there's two countries. There's defy land and tradfai land. They place the door well within like

tradfai land. Whereas like for us and ready, we place the door right on the border where like you don't, you don't get all of the encumbrances they normally get if it was like a, you know, a largely tradfai system, but you get all the benefits that you get from defy. And I think that fundamentally is a better model. I mean, EtherFi, if we were a Tradfai institution with $12 billion in deposits, we would have probably five, six hundred employees. Etherfly currently has 32 employees. And so there's a more than an order of magnitude cost difference in terms of operating this institution that eventually will provide all the same services, in fact, better. And those costs savings go back to users directly or indirectly. It means we don't need to

screw our users and all kinds of hidden fees. We don't need to screw them with 5% FX fee charges and deposit fees and chargebacks and whatever, all this stuff because we don't have as much of a cost basis. That's why this crypto neobank model really can and I believe will replace the Tratify model. It's just much more efficient and better for the customer. At the end, I think that's interesting. That's our philosophy we talked about it at DefConnect is really at ECC. is like the technology is there to make a Neobank-like product 90% more efficient.

I think the stable rails is the big part of it, but you can even put in that AI around customer support. Obviously, we don't need branches anymore, but it has been done for a while. And so the challenge obviously is that there's no user that will come because you have 80% smaller KappaX or OPEX. They need to translate into benefit, whether it's of course. And the easiest one is, of course, lower fees.

But at the end, I think the challenge is for the crypto neobank world is figuring out segments when we can really offer 10x values. And the obvious one has been today, I think for everyone, probably crypto holder, that the second they would cash out to their bank would get their income frozen and leave a month of nightmare. And that's been really low-hanging food for many. Yeah, that makes so much sense. I wonder if there's any bank executives listening to this that are like,

Oh, damn, we shouldn't have done that. Well, I did also want to ask, so talk a little bit about your business model because, you know, this is a world that's quite competitive. And I saw like a breakdown of some of the economics behind the scenes. And it definitely looks like a low, margin, high scale kind of business. So at least the discussion of etherfi that I saw. So, Mike, yeah, talk about the numbers, how you're making it work. I mean, we're very profitable, even with, because I think we do have some. a good amount of scale with the amount of assets.

So right now our run rate is around $85 million a year, which is for 32 employees. I mean, that's a great business. And from a user standpoint, they're getting way lower fees. They're getting 3% cash back. They're getting these great yields on their products. So it really is a win-win.

The reason that our model works more so than any standalone card program, I think any standalone card program is a complete dead end. You can't make money. that way. Because you make a little bit of money on the interchange, which, you know, over time gets compressed, meaning like every swipe, the merchant pays like 2 to 3 percent, and you get a slice of that. So you make a little bit of money on that, but the cost overhead kind of absorbs most of that. But where most of the revenue comes in is there's a spread if people are borrowing, you know, within the product, make a little bit of money there. If they're in the Defi strategy

volts, we make some money there. If they're staking with us, we made a bit of money there. So there's a lot of like layers, but you need to add such that the average revenue per user ends up being, you know, depending on the cohort of users, $500 to $1,500 a year, which in revenue to eat a price, which is great. If you look at a company like Chime, for example, their ARPA is around $200 per year. If you look at a new bank, it's a fraction of that. So you have a model where we're able to generate substantially more revenue from the customer while charging them a lot less fees in providing a better service.

So, I mean, it really is just a better economic model kind of across the board. I totally agree. I mean, target is not how you make your money. I mean, you say it will be compressed if you look at globally Europe, for example, is compressed that through regulation. You don't make money on card. For me, it's a go-to-market marketing angle. It's a product people want, but you offer it almost for free. And then it's everything.

I mean, performance fee basically is the most obvious. That's why we're not, we don't present ourselves as a Venmore or a cash shop. Well, cash up became more than a payment app, but we didn't start as a payment app. It's really payment and investment because it's an investment. And you can buy Bitcoin, buy ease, get yield. That's where you can make real money at scale. But as Mike mentioned, the cost basis is also much smaller. so you can create quite quickly pretty good businesses.

You have a other model. You have a subscription model, of course, on cards, I believe. I'm not if I have the same. We have a premium model. Yeah, we don't, but yeah, that's a good. It's very common. That's all really. I think where really we all start to make a lot of money is when we will move effects on chain.

The volume would be so much bigger there. Move effects on chain, take some spring. there. I think if you take beyond the core currency where trade fire is extremely good, there is a future where we can offer significantly better effects to end users while still making extremely good money there. That will take a few more years. And when you say on-chain, like, I mean, what would that take just like stable coins in every fiat currency? Yes. Okay. Yes. Especially the long tail. That's where you will start. Right now, for Mosca and model, you probably, I mean, all of crypto is USD.

Basically, you settle in USD and then Visa MasterCard will take, we'll make the effects. At a good rate for the large currencies and then up to us, we don't take any fees. We want the lower possible effects. But once you move all of that and you can have, I mean, Buenos Aires right now, it's not good effects. Once we can move that on chain and have a much more efficient effects market,

then there is no doubt of magnitude more money to be made. Yeah, yeah. I mean, it might have to... I got the number of... In Africa, the average effects, the person who had to call with me an hour ago would smile because I'm re-using that, but the average effects on the African market

is 7.5%, the average spread. Oh, wow. One of the market, I think, Ghana was at 20%. That tells you... 20% to another African country. currency or? Always to tend to be dollar. USDC or USD.

So I'm talking for crypto. USDC, USDT to their local currency. So the average for the entire continent 7.5. That's what we're talking about. So offer users, 0.5, it's a 10x improvement already and you can still make another nice margin there.

That's so interesting. It's kind of shocking how far behind we are in that because I think currently the stat that I saw the other day I'm blinking on what the source was, but it said that 99.8% of all stable coins are still denominated in U.S.

dollars. So, okay. We started to see a change. Yeah, I think we started seeing really with Europe because the U.S. did a really good job to value the dollar. And it's the first time

we see that where people are like, I lost 20, 30%. I lost all my yield in effects. are when and so people want at some point to cash out in their local currency and spend that. Yeah. Yeah. Yeah. As an American, I feel, I feel it.

Okay, I did also want to ask. So, oh, yeah, sorry, I remember. So Itamar, because you briefly mentioned this, but, you know, you guys are kind of leading into this BTC-Fi and you have this program with StarkNet. So is this kind of what we were talking about before where they are offering this promotion and it's sort of like a farming thing? Or like just talk a little bit about, you know, why that's a big part of Ready. At the end, as I said, we want the best yield for our users or the best safe yield. Bitcoin is where it was the hardest to find something, to me honest. I mean, on your SDC, on East, you just go, you don't have men on L1.

There are many options everywhere. And so BTCFI is really two things. One, there is organic native yield that is not incentivized. That's the ability to stake. So Starknet is, I believe, the only L2 that is, that is as a multi-sequencer. So it's decentralized, but it's still permission. So it's Starknet running the sequencer. It's phase one.

And then it will be permissionless where anyone can run a sequencer. But that means you have a decentralized network running there and you have a consensus. you have a consensus, all that is live and you have a proof of stake model to secure it. You can stake Stark or you can stake Bitcoin. That means you have native yield the same way that we have native yield with East when we stake it. That's one thing. In parallel, BTC5, where there are incentives, it's on making ZDNet the best place to borrow against Bitcoin. So if you want to borrow USDC against Bitcoin, that's where you have incentives, where the end goal for us is basically having a loan that repays itself to that.

And that, yes, it's efficient, its incentives. Obviously, as that grows, we'll end up to have a place with a lot of liquidity to borrow against Bitcoin. Not as good rate, but still probably some of the best rates in the market. Okay. And Mike, so EtherFi also has Bitcoin, but it's with EBTC, which I'm assuming is Etheri. Okay. Yeah, and we use Babylon and Lombard for a yield generation. And then the defy strategy ball for Bitcoin, you know, sources yield wherever, wherever is to be, to be found.

And out of curiosity, I don't know if this is a public figure, but what percent of people are, or yeah, out of what's being staked on your platform, like what percentage is Bitcoin versus Ether? Oh, it's almost all. Yeah, I mean, we're Etherfi, so that's quite sticky. Okay. You know, our USD, there's quite a few USD deposits that people use. They're both spending and borrowing assets and that's growing. But in terms of assets held on the platform, that's the majority of it is even. That makes sense. I did notice that also the Dow votes on some of the parameters.

So I was wondering how that works with running a business. Like, what does the Dow decide and what does management decide? Well, I mean, everything, the way our governance system works is the Dow elects manager, which in our case is the Labs company. And the Labs company gets a fair bit of latitude in terms of just day-to-day operations. It's not, you know, the sort of nightmarish Dow governance that a lot of protocols fall into where every single decision ends up having to go to a vote. But big decisions that certainly involve anything, you know, using the Dow Treasury. like using tokens for incentives or big partnerships, those do go up for a vote.

Okay. So before we wrap, are there any particular tips that you would, that you think consumers should look for when they're considering which neobanks to use? Sure. Yeah. I mean, there's lots of scams out there. Look, there's a few good products. I haven't looked into them with enough depth to be able to record.

I usually am totally fine recommending competing products. just for people to try it out. But there's a lot of stuff like, again, like programs that if some, if a card program doesn't do KYC or you send a picture of your shoe and it approves you, you know, as your identity, like that's, there's probably an issue there. You probably shouldn't use that product. If a program offers you X percent cashback, but really it's some freaking points program, you know, you should probably look at maybe what's going on there.

So just read the fine print. you know, there's a handful of reputable products out there. They're actually pretty good and, you know, users should choose the one that makes most sense for them. I think the most part is that we're trying to avoid rather than we try to recommend. There are a lot that are too good to be true. And yes, the no KYC is something fine, use it, but don't put all your funds there because at some point it will shut down. I think at the end, the entire point, I mean, I think, Mike, you mentioned that in where we had an exchange role, are we competing on that.

At the end, there is 99.9% of the users are not using and are not on chain. And so this is the pool of users and people should look for products that fit what they like, what they need. The entire point of what we are doing is you can create really hyper-customized experiences. It's so much easier to build, so much faster. And so you can create something that. much better for for your segment if you if you are bit corner you want a car that would generally say I think we have a really good angle you will get great yield it would

work really well but if you only have ease and you want yield we have it but there are probably 10 others who have it too so look at who has some people are better for family cards some better we're working on inheritance if you if you care about that you'll come to us so look for what you need and find a better way for that. Okay. So last question. You know, when I was researching this, I just thought this seems like such a no-brainer for somebody who is interested in crypto and wants to optimize their financial life.

Like, like, definitely for young people, like, no question. Like, just no question. You know, it reminds me of how I'll talk to my parents and they're kind of like, we still prefer going to like a physical bank, right? That's because they're they're used to that. And, you know, for me, like I actually started online banking all the way back in the late 90s, like maybe 98, 99-ish era, which at the time I remember, I had this roommate who worked in finance and she just like tried to make me feel so like I was so stupid for doing online banking. And yeah, like everybody does it nowadays. But anyway,

point is just that when I was thinking about this, I happened to see. So somebody tweeted this like a few months ago, my bank and Dubai called today just to check if I was okay because I haven't used any of my cards in three months. I didn't know what to say. So I just said, yeah, but honestly, it's just because I've been using. And so this is another one of the neobank cards that, like, because I tweeted asking for, you know, what's your favorite neobank or whatever? And this is one that came up multiple times called cast card. I have not looked into this. So this is not an endorsement, but this is what this person just said. They said, because I've been using cast card nonstop since I got it. And I, yeah, I kind of thought to myself, yeah, I could see once somebody gets into this world, like, yeah,

if you can make 10% or 12% off of the money that you have in there in the background, plus, you know, you get all the normal benefits that you have of like what the modern world is used to, with this credit card thing that's been around for decades. Like, why wouldn't you do that? And even just the ease of use that we talked about, where all your accounts are in one place and that's not, or sorry, all your accounts, but all your, all the ways that you use your money are in one account. If that's how to express it, I don't even know how to express it.

So anyway, so I'm just kind of curious for your thoughts on like how quickly you think this will change banking or what it will do to the banking sector. I mean, look, in, in 2000, 2007, back, I mean, at that time, Google existed, the internet was pretty big. Facebook, I think, had already launched. traditional advertising was still substantially larger than an online advertising. And in fact, it was growing. I mean, if you look at the graph, it just was like up into the right. And then over a period of really a couple of years, it just fell off a cliff.

And digital advertising just completely took over. Now, I mean, digital advertising is advertising, basically. I think it's a similar kind of thing where things change slow until they don't. And then they move really fast. I think we're in the tail part of the exponential growth curve, but at some point you hit that kind of inflection point and it just, you know, it just takes off. And then it becomes, it goes from a fringe thing to basically the only model.

And there's going to be, you know, hundreds, probably thousands of companies that, you know, that play in this space. I think people don't realize early we are in that transition. I mean, if I got ready two weeks ago, we didn't have bank. accounts. So only crypto users could deposit money. Now we offer bank account, you send dollar, you have stable, you understand the scene. This is literally, I think this week, I don't know if we have even announced yet. So we are still in that phase where all those building blocks are being built, are being launched. If I look at our roadmap, I feel in three to six months,

the core things, it will feel like a Web 2, trade five product, and then hyper growth can start. But there's still some blocker, I'm sure my guess think also about privacy. So we have some initiatives there. So there were still be some use case where we'll see some blockers, we like some long tail of stable coin, et cetera. So, but I feel it's moving so fast. I struggle to see what will be missing, let's say, a year from now. And that will be a go-to-market game and a race between

our fast crypto products take over for additional finance and of fast traditional finance moves towards crypto. The likes of Breavolute are very crypto-savid. They move very fast. New bank is looking at it. And the like of Clown are looking at it. Okay. The neobanks are not dinosaurs.

They're also working on that. Right. All right. Last quick question, because I realize I had meant to ask this when I asked about security, is just so in the U.S., like when you have a bank account, there was like this FDIC insurance. So like, does that concept apply here at all or no? No.

I mean, I think equivalent to. equivalent insurance policies are going to come into play. Oh, okay. Yeah, because obviously it's self-custodial. Yeah, it doesn't make sense that. Okay. All right, you guys, well, it's been such a pleasure talking to you both. Thank you so much for coming on Unchained. Thanks, Laura. Mike, always great to be with you here. Unchained is produced by Laura Shin with help from Juan Oranovich, Margaret Curia and Pam Majumdard.

Thanks for listening.