Unchained - How New Stablecoin Startup Bridge Got Acquired by Stripe for $1.1 Billion - Ep. 764

Episode Date: January 14, 2025

In October, the crypto industry saw a jaw-dropping acquisition: Bridge, a stablecoin-focused company, was bought by Web2 payments giant Stripe for $1.1 billion. Now, three months later, Bridge co-founder Zach Abrams opens up about the wild journey that led to this moment, from navigating collapses like Terra’s UST and USDC’s depegging, to securing compliance and fraud prevention as core priorities. Zach also delves into his vision for the future of stablecoins, whether the U.S. dollar will continue to dominate, and why global financial infrastructure needs an upgrade. Plus, he recounts how timing and resilience helped Bridge stand out amidst massive industry challenges. Show highlights: 01:49The problems of the payments system and how stablecoins could solve them 13:35 What Bridge is, how it works and what types of consumers it serves 19:33 What significant inconveniences Bridge found throughout its journey 25:56 How Zach’s background in Coinbase influenced the launch of Bridge 30:20 Whether there will be multiple stablecoins or just a couple of winners 33:49 How Bridge worked with their customers to improve its product 39:35 The story of how Bridge was acquired by Stripe for $1.1 billion 46:37 Whether its dependence on banks is a problem for Bridge 53:02 How Bridge deals with fraud and compliance  59:50 What Zach thinks about the competition in the stablecoin landscape 1:04:37 Why Zach believes that the fiat infrastructure landscape is still Bridge’s main competitor 1:10:08 Whether the U.S. dollar will remain the overwhelmingly predominant currency in stablecoins Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Stellar Build Better Polkadot Guest: Zach Abrams, Co-founder of Bridge Links Recent coverage of Unchained on stablecoins: How This Stablecoin Business in Africa Is Taking on SWIFT and Big Banks Why Robinhood CEO Vlad Tenev Is Betting Big on Crypto, Stablecoins, and Prediction Markets CNBC: Stripe's $1.1 billion deal for crypto firm Bridge marks much-needed win for VCs Learn more about your ad choices. Visit megaphone.fm/adchoices

The fact that we were building through a period of time when no one else was building meant that by the time that there was like, you know, excitement about the space, we were miles ahead of everyone else. And this building momentum and use case, which I think we helped create, really, really put us in a very unique position and still that's. Hi, everyone, welcome to Unchained. You're no hype resource for all things crypto. I'm your host, Laura Shin.

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Today's guest is Zach Abrams, co-founder of Bridge. Welcome, Zach. Hey, thanks for having me. I'm excited to be here. Excited to have you. So crypto people frequently talk about how stable coins are superior to traditional payments, and they will say things like they're the first real application of crypto that has found product market fit. But I don't know if people are fully aware of just what the current landscape of

payments looks like and why stable coins are superior and frankly why Strypefelt Bridge was worth an acquisition price of $1.1 billion. So I'd love for you to walk us through a payment transaction in TradFi. And you can pick, I know there's so many different types. So you could just like pick one as an illustrative example. And there's, then walk through one with stable coins so people can kind of hear the differences. Yeah, that's a great way to start. So I can walk through two very different use cases of stable points. So the first is a cross-border payment.

And so someone in the U.S. is sending someone to some money to someone in Mexico or someone in Mexico is sending money to someone in Europe. generally these payments happen in two different ways. One, which would be the traditional consumer way in which the payments work is through what's called netting. So a company like transfer wise or remitly or one of these other consumer applications has money in Mexico and has money in the U.S. and the consumer sends money in the U.S.

and then transfer wise just spits out money from their balance in Mexico. So money doesn't actually move. They basically built this really complicated treasury management system to circumvent all the ways in which money movement is horribly slow. And the second way that money moves is through Swift. So this is generally the way the larger business payments move. So a bank in the U.S. sends money to a bank in Mexico. It moves via a swift payment, which is similar to an ACH or wire, but it's a messaging protocol

for sending payments internationally. And what will happen is the U.S. Bank will send dollars to the bank in Mexico. The bank in Mexico will receive those dollars, and then it will be up to their discretion to convert them into whatever amount of pesos they feel is right. So generally with that payment method, you're paying 150 to 300 basis points and waiting around two days. With the netting method, you're paying around 75 to 100 basis points and the payments are in real time. Stable coins give you sort of the best parts of both worlds in the sense that the nice thing about

the swift payment method is that money can move end to end without needing capital on both sides. So with the stable coin payment, you can take a dollar in the U.S. You can convert it into a stable coin. You can send that stable point over to a partner in Mexico. They can convert that stable point into pesos and then disperse it locally. So you can use local payment methods in both countries. You don't have to use SWIFT so you can use an instant ACH or an RTP or whatever payment in U.S. And you can use a spay transaction in Mexico.

But you don't need to use netting. and you can do all of that for 50 basis points, 75 basis points, or even cheaper. So you get the speed of moving, of using local payment methods with the cost that comes with or even cheaper than the cost of netting. Another area where stable coins are really popular right now versus traditional payment methods or fiat money is that in order to build a fintech application, you need to need to build it on top of Fiat building blocks. And in the U.S., we have decent Fiat it's still really hard to build a Fintech application. In Europe, you have decent Fiat building

blocks. But most of the world doesn't have any building blocks. They have nothing on top of which someone can build a Fintech application. So if you want to build a chime for Argentina or you want to build a Venmo for Africa, you actually don't have the financial building blocks to do it. In the U.S., we just take for granted that someone can, even if it's hard, someone can sign up for some banking APIs and open up an FBO bank account and store funds and move money and what have you. But in large swaths of the world, that's not possible.

And so stable coins are actually providing those financial building blocks. to the large, large, overwhelming majority of the world, it doesn't have anything. And so now an entrepreneur in Africa can build a neobank or a peer-to-peer payment system or, you know, any other financial application that they think is right for their community. Yeah, you know, hearing you describe all this, it reminds me of basically the reason why I even went down the raven hole in the first place and it'll be coming up on. 10 years very shortly. Basically, I was doing this fintech 50 list for Forbes, and I was vetting different companies in different categories. But one of the categories I had also was digital

currencies. And so to learn about the rest of fintech, while I was learning about blockchain simultaneously, it was like so obvious. This was like vastly different and far superior. And the fintech stuff was as I put it, it was just like putting a digital veneer on this decades old infrastructure we had since like the 70s. And so it was just funny, like in that first example that you gave that was a little bit smoother with like a transfer wise or whatever. Like that's supposedly the improvement. But could you just now then I guess summarize all the different problems that exist with kind of traditional payments. Because, you know, it's so you describe a little bit about how they works. But when I look into things like all the intermediaries, how long it takes,

the cost, et cetera, like, you know, if you could just like summarize that briefly and then we'll move on to what bridge does. Maybe just to backup. When we started the company, we had this view that stable coins would be useful. But we didn't know exactly how they would be useful. And once we built our APIs, the developers who've been building on top of us have showed us how they can't be useful. And I've spent a lot of time. My whole career has been in the in tech space, but it was all in the U.S. And stable coins, the problems that they solve are all international. And so, you know, I had a, I had a sense of, and Sean and I, when we started the company, we had a sense of what could be possible, but we didn't know exactly how stable coins

would solve problems for folks in Argentina or folks in Africa or folks in Asia and so on. And now it's pretty, it's much more clear because we have hundreds of teams building on top of us. And I would like, if I were to pull back, the almost every use case is international in some capacity. The biggest problems today that exist with financial services have to do with the fact that it is extremely balkanized and incompatible across countries. And, you know, if you, if you think about the financial landscape and like kind of a systems way, you know, you effectively have a U.S. system that necessitates a U.S. bank account. that only U.S. consumers can access.

And then a European system with European bank accounts, only Europeans can access, and so on. And so you have all these incompatible systems, and moving money between them is extremely onerous and expensive. And so people have, it's either as a result just not possible to access alternative systems or it's extremely expensive to move money across them or slow. and stable coins in many ways there's a bunch of people who are building different ways of

solving this make it either faster or cheaper or possible to access these different systems and that's what's been really really cool to see is that with our APIs you know a lot of developers it's sort of created a new wave of innovation in the financial services space because a lot of this just was not possible. You know, people across Latin America cannot access U.S. accounts easily. But just to explain, because I think a lot of people have had the experience of going abroad and being able to use their credit card. So why is that not an optimal solution?

So if a U.S. consumer goes abroad and uses their credit card, it works, actually. And so I don't know if I would say that that's like a sub. a terrible solution. But what if a U.S. consumer wants to send money to a friend or family member or vendor in Argentina, that is super slow, incredibly slow, and very expensive. Or if someone in Europe wants to send money to someone in Africa, same thing. it's very, very slow, very, very expensive. You're generally paying hundreds of basis points to move that money.

And if you're a business and you're moving large sums of money, it's going to be really slow. And you actually have no idea how much money is going to land on the other side, which is crazy to think about. So, you know, you're paying a vendor and you owe them, you know, 200,000 US dollars, but you're sending Mexican pesos. you actually don't know what FX rate the bank is going to apply on the other side. Or you're someone who travels a lot as a business or business who does work across multiple jurisdictions. And so you just want the ability to store money in local currency, like maybe Mexican Paces, but also store money in dollars because your business runs in seven different countries. Accessing a dollar bank account is really, really hard. And then moving money between that dollar.

bank account and your Mexican bank account is really, really challenging. Or you're an entrepreneur building for, you know, six different countries, but all those countries are really small. So it's really hard to, you know, if not impossible, to serve all six of those countries because they all have very different financial systems, each one with an enormous cost to build and integrate with. So there's just a lot of these international problems that have because it's been, they've been too hard or too costly to solve that, you know, the whole entrepreneurial, global entrepreneurial world has just ignored. And now stable coins are making it possible to solve some of those problems. And now explain what bridge does and how it works.

At Bridge, we're building APIs, orchestration and issuance APIs that enable people to build with stable points. And our view is that stable points are kind of like a scaling layer on top of the Fiat world. And so money will move from Fiat up to the stable point layer across and back down. And our APIs enable you to make all of those movements in whatever way makes sense for your business. The APIs are very flexible. Our whole goal is to serve developers and support whatever they're building. Those developers are building business applications. It might be a cross-border payment app.

They're building neobanking services that might be serving Latam or Africa or wherever else. They're building card products that might want to serve consumers or businesses globally. They're building crypto products that might need to support store balances or on or off ramps. A whole host of folks that are building, you know, we're serving aid disbursements, you know, global payouts for gig workers and so on. So in any capacity of someone is doing something internationally, there is generally a role for stable coins to play. And a lot of folks have come to us to build those applications on top of bridge.

And those APIs connect both TradFi companies as well as stablecoin companies. and I guess like fintechs and there's probably just like a whole host. Yeah, exactly. So we started and our first use case was serving crypto companies because that's who we thought we're going to be the first people we used this. This was two years ago. And we just didn't know. And so we were working with a couple of crypto companies and they wanted to give their

consumers on and off ramps. And that was the first use case. That didn't end up being very big. and then we had we had some cross-border payments companies just inbound to us and they were doing the first one was doing cross-border payments

from Colombia to the US the second one was Mexico to the US and then they showed us that this cross-border payment opportunity was real. We had heard about it and we had kind of theoretically gotten it but it wasn't until they came to build on top of our APIs that we saw and then we had a government aid

organization come to us to disperse aid payments via stable coins. So they're sending aid payments into many different countries. Many of these aid payments are very small. So it is extremely expensive to disperse a large number of payments with a small dollar value to many different countries. In fact, 60 cents of every dollar was ending up getting to the end recipient. They predated our time. They moved over to stable coins and they needed our APIs to be able to do this easily. And now, like, 99% of each dollar gets to, gets to the end recipient. Then we had neobanks come to us because folks were wanted to build

neo-banking services across Latam and Africa in particular. Then we had large enterprises come to us that are selling services, you know, all over the world and they needed to manage their treasury. So move money from Argentina or Nigeria or Malawi or wherever back to the U.S. that they could operate their business and so on. So we've just had every three months, we've had some new use case emerge where somebody out there envisions a way in which stable coins can help their business. And then we work with them to make sure that our APIs can support whatever they want to build. And so now, well, so I don't know, now how many customers I don't even know how you would qualify them, but how many people do you have or how many companies?

Because you're B2B mostly, right? It's not like you're, yeah. So how many customers do you have? And what categories do they fall in? Yeah. So we have like our customers who pay us, our developers. And then those developers have their customers. So yeah.

So it is, it is quite confusing. So we have several hundred. We have like 300, 350 or so teams who are building on our APIs. And just across like a huge swath of folks. So it ranges from really large enterprises, like some of the largest companies in the world, to two-person teams that are just starting out and have some vision. for what they want to do. And wait, and just to clarify when you said that you have developers building on you,

and then you said some of the largest companies in world, do you mean like they're engineers? And okay, so it's like, so some of them are actual financial companies and then they get their developers to do this. And then some are just entrepreneurial developers who are going to launch something that would feed that would serve other people. Is that? Yeah. Yeah.

That's right. And yeah. And the only thing that, the only thing that, the only thing that's, probably common across all of them is that there is something global in what they are doing. And so that could be treasury management, like they're collecting payments in many countries. It could be that they're a marketplace and they're paying people out in many different countries. It could be that their customers need to send money across borders. It could be that their bank serves folks in many different countries.

And so whatever it is, there's something. that necessitates moving funds or serving consumers across multiple different countries. All right. And one thing I noticed is you launched when the collapse of Terraluna was probably still somewhat fresh in the minds of everybody people. Well, so I think there's like two different dates. Then I think maybe you went live or something when the collapse of Silicon Valley Bank caused USC to depeg. So I wonder just generally like has there been an issue with misconceptions about stable coins being a hurdle, like, you know, that you have to, where you have to convince people or maybe you've just kind of let people have their misconceptions or, you know, how do you deal

with that, if at all? Yeah. I mean, we had the first, the first year of the company was extremely hard. We basically started, pivoted into stable coins and terror when it happened. and then one of our first customers, after we pivoted, was going to be FDX. And FTX obviously fell apart. And then we built with a new bank, and then signature Silvergate happened, and then that bank went away. And then we rebuilt again, and then SBB happened. And the week that we had launched for the second time, U.S.D.D.B. And so we were pretty confident that after a year of work that the bridge was going to be that no one was going to want to use stable points.

I would say that the thing that really kept us going through it and the thing that we believe was so I had spent a lot. I had spent a lot of time in financial services. One of my like core beliefs with financial services is that over the arc of time, people are financially rational. People don't change overnight because of perceived risk of something new is high. And so they're being rational. And if the reward is low and that risk is high, then they're not going to do it. And with stable coins, they're financially rational. It's a easier way of building financial services and a cheaper way of moving funds,

a faster way of moving money, that there was a very clear and obvious case for, you know, for them to become a core part of our financial infrastructure, but the perceived risk was high. And so we kind of just knew that there was a, that at some point in time, the switch was going to flip and that we would begin to run downhill. But for the first year, we were certainly going uphill. And with each one of these collapses, the perceived risk was going. up. And our big fear was that we were just going to be too early. That, you know, that the perceived risk of stable coins was not going to, you know, reach some low enough threshold for adoption

to really flip for five years or 10 years or what have you. And we were going to spend it sort of toiling with a very small amount of early adopters. Fortunately, that that did not happen. but it did look pretty bleak there for a moment. And the good thing, though, is that for us, you know, the world, and in some ways the world moved really slowly. You know, I worked on at Coinbase when we launched USC, and it seems like it's taken us forever to get to this moment in time. But then once we started to have a handful of folks using the API,

it really, you know, it really started compounding quite quickly. And as we started adding together more use cases, other people started leaning into the space and building. And so really that point in time after the SVB, that was in hindsight, that was the low point. And then from there, we had a very moderate to increasing wind at our back. All right. So in a moment, we're going to talk about how you went from there to the stripe acquisition, but first a quick word from the sponsors who make this show possible. The Stellar Development Foundation has launched Build Better, an initiative inviting bold ideas from the Web3 community. No coding or technical experience is needed. Share your vision for better finance, creativity, or access, and see it brought to life in Stellar's next hackathon. Developers will build real-world solutions on Stellar's fast,

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On X, Kane's Crypto-chronicles commented, quote, guessing it has more to do with people front-running those who bought Bitcoin ETFs early and are about to qualify for long-term capital gains starting next week. If you have a spicy take and want to hear it featured on the show, please write a review on Apple Podcasts or leave a comment on an episode on YouTube or X. Back to my conversation with Zach. So you briefly mentioned that you had worked at Coinbase,

but before that you and your co-founder had another previous startup evenly, so how did you, like, was that working at Coinbase on USDC? Is that what kind of got you into stable coins? or how did you come to Found Bridge? Sean and I started together, and we started another company together 10 years ago or so. We knew we wanted to build something again, and we knew we wanted to do it together.

We also were excited about the stable coin space generally. And this was really due to two things. One was the time working at Coinbase. When I was at Coinbase, one of the things, I was really excited about the launch of the launch, of the launch of USDA. And in particular, I was running the consumer business at Coinbase. In particular, I was excited about the fact that USDC could be this global bank account.

And this was in like 2009 or 2019. So that was like the first use case that I saw for USC. And we took some steps to do that. And Coinbase took some steps to build that over the subsequent four or five years. but that kind of sat in my mind for a long time. And I had just sort of had this belief that a stable coin could be this sort of financial building block on top of which someone could, you know, offer a U.S. bank account to folks internationally. And so we started and we were building something a little bit different. but in the process of building that we realized how hard it was to build with stable coins.

And that pushed us over a three-month period to eventually pivot into building this infrastructure that would enable people to use stable coins. We thought it was going to be so much easier to sort of take a dollar and settle it somewhere else as a stable coin or take a stable coin in one form and convert it into another form. but it really ended up being very hard. And in the process, we realized our view of the stable coin space was pretty contrarian in that we thought that a lot of the reason why this infrastructure was not built is because there seemed to be an assumption in the stable coin world that there would be

like one or only one or only two stable coins. and maybe even only one or two on one or two blockchains. And our view was that that's just not the way the world would play out. There would actually be many, many stable coins on many, many blockchains. And so there would be immense value in enabling people to take fiat dollars, convert into any of these different forms of stable coins or accept any of these different forms of stable coins and settle them back down into a currency. you know and understand and you're building your service on top of, whether that's a fiat dollar

or a staple coin dollar. And that was our view pretty early on. And so we thought that as the world moved in this direction, these APIs would become more and more and more valuable. In fact, the more stable coins are on more blockchains, the more valuable it is for an orchestrator to help in the middle abstract away all of that complexity. And so we had pretty strong belief in like two things. This was like when we were starting to come, we were like, okay, we just have to believe two things.

And if they're right, then our business will be meaningful. And if either one of them are wrong, we're not valuable at all. And it was one, that stable coins will be important. And two is that there will be many. And if you believe both of those things, then we're at a pretty good position. And over the last two years, it sort of turned out that the first of stable points being important is becoming more and more true and more and more obvious. And there will be many is also becoming more and more true and more and more obvious.

Okay. But when you say more and more obvious, like what do you think that will look like eventually? I mean, we've seen there have been numerous, I think, categories where there tends to be just like a few that take the lion's share and then sort of a longer tail. Is that what your vision is? Or do you think it will be different than that, more diverse? So I think that stable coins, I think that there will be a few that aggregate very large amounts of liquidity like USDC and UST. They have proven to be really resilient. They will continue to be resilient. There's very material network effects at play with those businesses. And you've seen how strong those network effects are with, you know, the amount of effort in time that PYUSD has put into building their stable point and the limited adoption that it has received to date. That being said, I think there's like this huge swath of applications that really don't care about liquidity or the liquidity is kind of like an afterthought.

And many of those applications are financial in nature, you know, fintech businesses and so on. And for them, the stable coin is purely a ledgering mechanism. It's purely a money movement mechanism. It is, it's, it's, it's under, it's under the hood facilitating whatever activity they deem to be necessary. And in those applications, you have total freedom to pick whatever stable coin you want to, you want to choose. And so many folks will choose to pick a stable coin that they can control, that they can benefit from, so they get the yield from, that maybe they can program in a way that is helpful. and unlock some unique value for their business. And so long as it can be easily orchestrated into an out of fiat or other stable coins,

the liquidity piece is irrelevant. And so we think that there's going to be thousands and thousands and thousands of these other stable coins, many of which people won't see. And many of them will be very large, like very, very large. I also think that over time with more regulatory clarity, there's going to be a huge proliferation of, you know, tokenized deposits and other tokenized money-like products that will move and want to be interchangeable with each other and with these more open stable coins like USDC. And you can kind of squint and see the beginnings of this market with J.P. Morgan and their stable coin, which is huge. Most people don't talk about it, but it is enormous and enormously successful. So yeah, so we think the stable coin space is sort of going to be, going to be fragmenting where you'll have these open stable points that are aggregating liquidity.

You'll have these infrastructure stable points where there will be many, many of them. you'll have tokenized deposits and bank stable coins. And there will probably be many more that we're not even thinking about because this market is incredibly early. So let's go back to just when you had your vision, how did you, or not like the initial point, but when you were launching and you had certain conviction, but obviously you were facing all of these obstacles

with all of these news events that were very bearish for stable coins. How did you go from that to being acquired by strike for a billion and $1.1 billion a year and a half later? There was no like brand planned and it seems like it's, you know, looking back two years post launch. It feels almost, you know, impossible. But we basically just put one foot in front of the other. And it's not like any, there was no like magic playbook. But we launched our APIs. We built for a few developers at the beginning.

They had an amazing experience. They told other teams about building with bridge. They came and they had an amazing experience. They told other teams about building with bridge. And this compounded for two years. And we in the process, I think the thing that we were really good at over those two years is we were extremely good at listening to customers and helping unlock markets. So we didn't just launch our orchestration APIs and then those APIs became like huge and successful and we were just like holding on

for dear life. I think that's what some companies do. None of these markets were big enough for that to happen. Instead, we launched these orchestration APIs and they kind of worked for some use cases. And just to explain in orchestration API, what is that? Our orchestration API enables you to send in $1 and spit out a different one. So you could send in a Fiat dollar and get out USDC or send in USDC and get out USDT. And that was our first API. So, you know, if you wanted to do a cross-border payment, you would use our orchestration API to take in a Fiat dollar converted to USDC and then take that USC and then maybe converted into a Mexican peso and then out to the consumer. And we launched our first API and actually it was bad. You know, the first people building

it with it were like, this is not helpful. We don't even really know how to use this or how to, it doesn't work the way we logically think it would work. And we adjusted it to work for their use case. And then we had a cross-border payment company come and they were like, this kind of works, but isn't really what we need, but it's close enough. And there's nobody else who's doing this. So, like, can you make these changes to make it work for us? And we worked with them. We really understood their use case. And in doing that, we unlocked the cross-border payment use case. And then with the payouts use case, that came to us with the aid disbursement. They needed a totally different set of APIs to be able to disperse aid payments because then you're

not doing one-off payments. You're doing one payment in. 10,000 different payments out all at the same time. And we worked with them and we made that use case work. And then we had these neobanks who wanted to use our orchestration APIs, but they didn't work the way they needed them to either. And so we had to go to our banks. We had to go to, we had to go find different bank partners. We had to build totally different APIs. We spent like five months rebuilding a bunch of our infrastructure to work for their use case. And then in doing that, unlocked this whole neobanking market that could build on top of us and so on. And so we didn't just like launch one thing and it became successful. Instead, we had sufficient demand and

inbound interest to give us really good feedback. And then we were excellent at incorporating that feedback and then building APIs that can layer on more and more and more use cases to help our business compound. And we did that five or six times over the course of a year. And the combination of all of those meant that our business was growing immensely. And we were now able to serve like a huge swath of businesses and entrepreneurs who wanted to create in the space. And we have always had a really strong inbound funnel of people who've just been coming to because they've had, because they've known other people who've had a really great experience building with our APIs.

And so that just happened. We just compounded that over two years. And I think that that worked very well for us. And then, you know, while at that moment in time at SBBE, I think that it felt like we had got the timing wildly wrong. It turned out that we got the timing like wildly right. The fact that we were building through a period of time. time when no one else was building meant that by the time that there was like, you know,

excitement about the space, we were miles ahead of every, of everyone else. And this building momentum and use case, which I think we helped create, really, really put us in a very unique position. And still that's present the year. I think we're like the, the, if you're someone building on top of stable coins, our platform is, is the best. place for you to go to build whatever it needs to do, whether you're the largest financial services company in the world or whether you're, you know, a team that just entered YC. And so then how did bridge and Stripe initially become acquainted? We met at a meeting with a regulator. There was the deputy secretary of the treasury was

doing a tour around. a listening tour through meeting with a bunch of companies. And that meeting was the first time I think I had spent time with strike. But before that, though, I was, and this was like first time I'd meaningfully spent time with them, although it wasn't like direct one-on-one time. It was still a small meeting with this person. Before that, though, I was like aggressively trying to. trying to find a way to sell to Stripe.

And I couldn't for the life of me. I like, we had tried like everything under the sun. I mean, honestly, Stripe was like picking and using every other vendor in this space besides us. And so I was like trying to find a way for us to, us to support them. And I just couldn't. And so I hoped that by going to this meeting, it might be some way in which I could better sell. and position, position bridge so that they could use us for something even, even really, really small. And so then how did the acquisition come about? Did you finally just get to pitch them? Or like,

what happened? Not not really. Like, we didn't, we didn't set about selling the company. So it really came because, so I was trying to sell the Stripe. And I knew there were a bunch of things that Stripe wanted to build and that Stripe was investing in or had invested in. And I thought that Bridge would be a better way of doing those things or building whatever this, whatever the next thing is that they wanted to do. So I was spending a lot of time with them and trying to, you know, push on our investors and so on to introduce me to people because I knew that if we won the Stripe business in any capacity, capacity, it would be a huge tipping point for our company. We've just seen, you know, we get a few, one or two of these, these like big customers. It unlocks markets for us because then other

customers that are in a similar category feel comfortable using the same person that that XYZ business uses. And so that was it. I mean, over the summer, I was just like very, I was trying to sell to them. And I think in the process of that, they had, two things had happened. One, which was well beyond, well beyond us. One was that they had a very longstanding belief in crypto generally and increasingly in stablecoin specifically. and, you know, Stripe as a company has been in and out of the crypto space for a long time. In fact, when I joined Coinbase, I joined Coinbase when pay with Bitcoin was like Coinbase's main business, or at least was it's like the company thought it was going to be its main business.

So this is like you could pay at Overstock.com with Bitcoin via Coinbase and stuff like that. And Stripe was the biggest, I think the biggest. customer of this product at the time. And so they had, and this was like 2018 or so, and so they have been in and out of the space. And I think really in a way where they have been trying to find ways to use, like proactively trying to find ways to use crypto to better their merchants and better enable global commerce.

And so they had a longstanding belief and, had come with very much a prepared mind in this space. And two, I think that when they learned about the use cases that we were supporting, it's kind of like a, you know, it seemed, it seemed obvious. It was like a why hasn't this been, why hasn't this been built before type of, type of thing. And it was pretty clear how this, how our business could help a lot of Stripe merchants and how Stripe could really help accelerate our business. So all those things came together such that as, you know, I was selling really aggressively, I think it clicked that maybe it would make sense, maybe it would make more sense for us to partner versus have a,

you know, vendor, customer type relationship. And then from there, things moved very quickly. Okay. Yeah. I, it's funny. the time frame that you mentioned because I remember there's some part of my book where there was like some kind of secret, something or other about Ethereum, like, you know, people trying to just the little backroom stabbing and whatever was going on. But anyway, but what was funny is that somebody said to me something about some dinner somewhere, blah, blah, blah, and they mentioned all the different people that were part of this. I remember the Stripe founders were in this list, but it was at a time when like what they were doing in crypto wasn't really known so I remember being like so like wow I didn't know they were into all that.

Anyway, I was never able to verify it. So hopefully I'm not sprinting missing for me. Well, I'm not even saying what any of it was about. So but anyway, point is just now things are clicking for me. So how does bridge make money? We make money by charging fees on the money that we move through our system. So that's the majority of the way we make money. We have some other ways too, but the overwhelming majority of the funds, the money we make is you're removing money through our orchestration API. So Fiat comes in and then a stable point spits out and we take a small fee for facilitating that money movement. Okay. But meaning like the more volume, the more money you make? Or is it?

Exactly. Exactly. The more volume, the more you use the products, the more money we make. So, you know, if you're a developer building on top of our APIs, we really just want you to be successful. Our interests and your interests are totally aligned. Yeah. Yeah. And it's cheaper for the companies, which is why. Yeah. Yes. Yes. Do you foresee any issues where, for instance, like a bigger TradFi firm could cut off access to the payments infrastructure that you need for your business? I mean, we are dependent on banks for sure. And this was like a very large problem for us when we were getting started is that we couldn't find partners to work with, you know, banks that were that we're willing to, invest in really learning and understanding our business. And so that was, and that's one of the

big reasons why we had to start and stop and, you know, it took us so long to get from idea to a live product and it took us a year. So yeah, so we are very worried about that. I think that it seems like, I, you know, knock on wood, it seems like we are past the, worst point and the most risk in that in that dynamic. And when you say that you're speaking about the political wins that are about to shift next week? Yes. Yes.

Yes. Exactly. Exactly. I mean, it was very bad. It was like, you know, everything that folks sort of re-it was like we, we experienced that, our customers experienced that. I mean, it was such a headwind for our business. some examples.

Like, oh, I'll give a very concrete one even today. There are certain payment rails like Swift that we cannot access. Like, you know, even though, you know, if we wanted to use that, wanted to use that payment rail for whatever reason, we can't. There is no digital asset company in the entirety of the United States that I know of that has access to the Swift payment rail. And the way you get access to it is the. a U.S. Bank and so on.

And so it just doesn't happen. There's only a handful of banks, maybe not even a handful of bank. Maybe there's like two or three banks that have taken the time to educate their regulators on digital assets and invest in the space. And I would say we've had probably dozens of teams who have been building on us, who have had to shutter or pivot because they couldn't find, you know, downstream bank partners in some way, shape, or form to support their business. So beyond just like the clear thing of like, you know, it took us a year to find a bank

partner and so on, there's still, you know, core, there's still core infrastructure that we're struggling to access. and many of our, many of the developers building on top of us have, yeah, been very, very negatively impacted. And just to understand that about Swift, is it that the Swift entity will not allow it? Or is it that regulators won't allow it? Or is that the banks don't want to test the regulators or like what's going on with that? It's honest, it's like a very frustrating situation.

where there are a handful of global banks that will support SWIF payments for digital asset companies, but in order to do that, they charge insane fees. So maybe they charge 30 Bips or something to 30 basis points to move money via SWIFT, which is a crazy amount of money. I mean, imagine you're moving hundreds of thousands of dollars and bit your banking infrastructure once you pay. hundreds or thousands of dollars and fees to move one payment. It's insane. So who's going to use that rail? Only the people who are the riskiest, the most willing to pay because of whatever reason. So then what ends up happening is Swift is like, well, we're seeing a lot of fraud on Swift with digital asset companies. And it's like, yes, because you have not because, not because,

it's digital asset companies, it's because you have structurally set up the market such that only the riskiest companies would ever be using, would be using this rail because of its price it, because they have no other rails to access globally. So one of the things that we've been really trying to convince bank partners is that we don't, like, we're not competing with these other digital asset thing, you know, things. We're competing. We're competing. with like banks. You know, we're competing. And our customers don't look at us like, you know, they're not comparing, you know,

us versus some other very risky, you know, swift partner or something. They're comparing us versus a bank. And that's the market that we're going after. And as a result, we need pricing and access and, you know, underlying financial infrastructure at unit economics that are comparable to a bank. Otherwise, it just doesn't work. And so the market right now is just structurally set up such that it is very challenging for any digital asset company to access this rail.

And the same thing is true with other rails too. I mean, anytime that a bank is trying to, I understand what they're doing, they're trying to charge more to compensate for the risk that they're doing. but it is self-selecting the market into only the riskiest company is moving to use that product. Yeah, and honestly, this is so interesting just because as you're describing this, it just makes me think of every story of disruption where, you know, the fact that they're charging that fee is what is going to kill their offering in the long run and make the competition a no-brainer eventually.

And so they're just setting themselves up for disruption. basically. But one other thing that I want to ask you about is, you know, I've mentioned, I've heard you mention that you, or that the users on Bridge have extremely low incidences of fraud. And, you know, I think because it's B2B, that's how you can do that. So just explain kind of the compliance setup and, you know, what hoops you've had to jump through and, you know, how it is. Because I would imagine that now you're just dealing. dealing with so many jurisdictions. So there's probably some complexity there. Yeah, there's a, there's a, there's a ton of, there's a ton of complexity. And we have, we've invested

an enormous amount in this piece of our business because we've, we've known, like from the beginning, we've known that, you know, if some other fintech starts working with a bank, they start at zero, you know, or maybe they start at five or something and, you know, they built trust. We start at like negative 10 and, and then we have to build our way back to neutral and, and then from neutral we can build into the positive territory. And so we have less than one basis point of fraud across all a bridge today. We, we, which is phenomenal. Like it is, you could compare. us to basically any, you could compare us to a bank. We have way less fraud than a bank. You could compare us to a US-based Mintech. We have way less fraud than them. And especially, you could

compare us to anyone who's dealing with folks internationally. And we would be, you know, many, many standard deviations away from the mean. I think that their fraud has, you know, there's definitely the compliance piece, which has been a huge investment for us. And that is like, you know, because we were KYC and we're doing, you know, risk management on users and users who might be from all over the globe. The other thing that we have done where we've been very thoughtful is how we allow our customers to structure transactions, which really mitigates a lot of this fraud. So a great example here is that we just don't support reversible payment methods. So we just don't support an ACH poll or a card payment or any of

these others that are really rife with with fraud and chargebacks. And that's like an enormous market, but one that we just have felt is not at some point, and especially now that we're partnering with Stripe, you know, we'll probably do more here. But over the first two years of the company, it's just been, it hasn't been, the juice hasn't been worth the suez, or at least the perceived juice for us. And that's meant that if a consumer or a business is sending money through bridge, they're always doing a push payment. They're logging into their bank. They're they're putting in the bank account and routing instructions. They're doing all the confirmations at their bank and they're sending the funds.

And this has really limited a lot of the use cases that we can support. But we've done that because it is by far the safest and most secure and least risky means of facilitating payments through this system. And then the main, you know, with this, the main risk to us, comes with like, you know, other compliance issues with might be money laundering or identity theft and account takeovers and that sort of thing. And so we can focus our compliance efforts specifically on those issues instead of trying to fight every potential compliance issue all at the same time. And but do you have to do compliance work for every jurisdiction

you're in? Yeah. Yeah. Well, well, we operate primarily out of the United States and Europe. So we KYC and onboard and manage, you know, user compliance up to the standards that apply to the jurisdiction into which we are onboarding the user. So we might be onboarding a user in, you know, Mexico via our U.S. entity. And so we would be adhering to U.S. compliance and KYC

and anti-money laundering and so on, obligations in the U.S. Okay, but let's say that it's, you know, making a payment from Mexico to like the Philippines, then do you need compliance for the Philippines too or no? That would depend. Oftentimes, we generally, we have done some payments that are like, you know, country like that, but almost all of our payments move through the U.S. or Europe in some capacity. And so we use our U.S. or European entities to, we onboard users into our U.S. or European entities.

Oh, I see. So you actually, you don't need the full compliance for every single jurisdiction where the, okay, got it. Yeah. Yeah. So we're not regulated in the Philippines, for instance, or, or, you know, some other, some other country. Yeah. Okay.

And then you talked before about how. how you believe that there will be some sort of long tail of stable coins. What criteria does Bridge use to decide which stable coins that will work with? Like, are you, I don't even know, like, at this moment of time, are you only doing reserve backed or how are you choosing? We will, we're pretty, we're pretty agnostic. I mean, we will work with more or less whatever stable coins our developers want to work with. Like even like a like a USDA or yeah. Oh okay. Oh cool. Yeah. We we don't take risk on the

stable coin so it's not really like a risk decision on on our side. And so we we are and we very purposefully just want to be neutral. So we're willing and game to support whatever asset our developers feel most comfortable or are most incentivized or most excited about using. Okay. And so I view the stable coin space right now as being at a really interesting, what I would consider inflection point, partially because of this political change that we talked about. But, you know, as you know, around the time you launched, or I guess, yeah, this was playing out over the course of years. But USDT was like dropping in market share as USDC was ramping up. But then after the DPEG now of USC, USDT has become dominant again. And here we are

at this position where, you know, people saw in 2024 just how much money Tether was making. And now there's a whole host of new competitors that are, you know, some of them have just launched. Others are about to launch. There's ripple stable coin. There's the USDG, which is a form from a partnership of Robin Hood, Galaxy, Cracken, Anchorage, etc. Just generally, what do you think will be differentiators when it comes to this stablecoin composition? Like, what do you think will give any one product and advantage over others? I think it's a great question.

And I wish I knew the answer. I can give you my best guess. I think that there will be a few different vectors of competition. I think that a general purpose open stable coin that aggregates liquidity and primary use case is as liquidity pairs on dexes and exchanges. I think that market is pretty mature and is like going is settling into some form of equilibrium. Now, you know, USDC, my. they're playing around with their economics and seeing what they can do and maybe they're going

to gain some market share and maybe US something bad happens, USDT or something bad, you know, something bad happens and not shapes up the space, but assuming that doesn't happen, I think we're going to settle into some form of equilibrium here where those two are going to be the dominant stable coins that folks use. Then I think that there will be other stable coins. that compete based on economics, which might win certain use cases. And there will be many other stable coins that compete based on distribution within their own platforms. And so that's kind of like what you see with USDG, where they're pushing, you know, specific platforms that have large consumer bases defaulting that as the stable coin within their, within their worlds.

And maybe adoption grows outside of it. But even if it doesn't, and they just have adoption within the ecosystem of USDG participants, it'll be pretty successful. And I think that, and the same is true. Like J.P. Morgan's another great example is that, like, they don't care about competing in the defy world, but their stable coin has trillions of transaction billion. And so it's hard to say that it's not successful. It's just competing along a very different vector as sort of your internal settlement across all the JP Morgan entities. And I'm sure at some point in time, JPMorgan has

designs of opening it up and enabling other banks to participate. And we'll see if that ends up being successful. But I think that most people today think of the stable coin space as the first category, which is, you know, liquidity pairs in DFI. And as a result, jump to the conclusion that the space is sort of mature and it's going to be very hard for others to compete. And there's only going to be two, there's only going to be two companies. And I think that's like, that is just one of the use cases of stable coins. And if this. is successful, we will have many, many different use cases. And it's going to be very challenging for the same stable coin that is optimizing for winning liquidity pairs to be the stable coin that

wins in a JP Morgan use case. That is the stable coin that wins in like the FinSec infrastructure use case. And so are. Yeah. This actually reminds me that when I had Vlad Tendiv on the show and I asked about USDG, he said that, you know, Tethers keeping all of that money that they're making, but that something like a USDG could pay that back to the customers. So clearly there's room for other types of stable coins. So at this point, like, who does Bridge think of as your main competitors? And now with this strike acquisition, like, what are the plans for you two together. So our, I would say our main competitors are, is like the continues to be, and probably for the years ahead will be the Fiat infrastructure, you know, landscape. So like a great example is that we are

moving into the card issuing world. So card issuing is when you when you issue a card, you generally there's a, you need a partner to issue in the U.S., a partner to issue in Mexico, a partner to issue in Brazil, partner to issue in India, partner to issue in in Europe. So it's very challenging to launch a global card because you might need to stitch together 10 or 20 or 50 different partners. And so it becomes enormously costly. with stable coins, you can now give all your consumers a stable coin-based balance, and then you could issue a global card on top of the stable coin balance, because a consumer can hold the stable coin balance in any country.

And your consumer, you don't even have to know that a stable coin is there. It is literally just infrastructure that's global, so you don't have to piecemeal all these different bits of infrastructure together, and it's a better way of issuing a car. The primary competitor there is the, old model. You know, the primary competitor there is the model of stitching together all these pre-existing card-issuers. And that model is proven and no one's going to get fired for doing that model, but it is way slower and way more expensive. And so our job is to help people

understand that the risk is not as high as they might perceive it to be. and to win against these, you know, a very imperfect but established competitors. And the same thing is true in our orchestration APIs. A lot of the things that we're competing against are just fiat infrastructure. Other other Fiat money movement companies, other global FBO type products, which is like a stored balance type product. And so that's our that's our main competitor.

Say that again? For benefit of. Yes, for benefit of exactly, exactly, exactly. And, you know, together with Stripe, this is, you know, so our business has been, from the very beginning, inbound driven. So, but, and not about when the Stripe acquisition was announced, we had, literally 10x more inbound lanes than we had ever had in a in a previous in a previous week and stripe there's two there's two aspects of strike that are that are going to be extremely

um uh helpful for us as we build the business that the first is that um is that they lower the risk for people to work with Rich. There are many folks who were hesitant or were not even considering working with us before who are now willing to because they now know that we've been vetted by and we have the support of Stripe.

The second thing is that Stripe is one of the most global financial services companies and they have dozens of different teams building global products for merchants or consumers or whatever else. And all of those folks are now going to be able to and want to and motivated to build with our APIs, which will also help show, those products ultimately will become successful, but they'll also show the rest of the world what is possible, which will then sort of feed this loop where more people will come and build with us.

And so excited about, you know, both of those things. One is, one is, you know, with their support, being able to really widen the aperture of the folks that we can and who are excited to work with us. And then two, build with Stripe. And as they launch products, inspire, you know, many, many others to build similar or different or, you know, different products with stable quotes. Yeah, I remember in I think as early as 2016 or something, I was at this retreat on Richard Branson's Necker Island. And they were asking like one of the people who was working there about the remittances that she sent home. And she was saying that she was paying like 30% just on the fee alone. And I remember, yeah, back then we were talking about how this was so right for disruption.

And I feel like it's taken nine years basically for, yeah, for now bridge to be. the company that is like poised to actually deliver on those types of savings. Estabal coins are currently overwhelmingly denominated in US dollars. About 99% of them are in US dollars. I find that so fascinating. Why do you think that is and how quickly would you expect other fiat currencies to become a greater proportion? Or do you feel like this is sort of the kind of global, you know, currency of finance,

basically the way that like so many people in the world are learning English or how do you, How do you view that? I think that there will be many different stablecoins, many non-US US dollar stable coins. But I do think that the overwhelming majority of like global AUM will remain in US dollar stable coins. So today there is just, you know, consumers and businesses are speaking. speaking with their wallets and they are only demanding US dollar stable coins. You know, there's sort of two aspects of this. One is that first use case we talked about of like the trading use case. That's just globally denominated in dollars.

So that wins. The second factor is that the other big use case for stable coins is just meeting demand for dollars. There is just immense global demand for US dollars that is undermet by Fiat dollars. And so people are swimming to to U.S. dollars. And then one other thing is that is that one other factor propelling stable coins forward is that they are in many countries as particularly popular in Latam is that there's trading and arbitrage opportunities between the FX market.

So like the stable coin to Mexican peso market might trade slightly different than the U.S. dollar to Mexican PACEA market. And most global FX markets are the trading pair is denominated in U.S. dollars. So this market will likely match the FX market, which is dominated by U.S. dollars. I do think that other currencies will become very important. And I also really hope that they do because it will meaningfully accelerate the utility of state. stablecoins, if you could convert from a US dollar stable coin into a Mexican peso stablecoin and Mexican pesos stable coin into an Argentinian peso stable coin and so on. But I think the primary use case for those will be the end sort of off ramp or pairs for stable coin FX. And so I don't

know how much consumer adoption there will be, but I think it will primarily be a like FX trading adopting adoption use case that facilitates faster global money movement. And so part of it is, I believe it will exist. The other part of it, which might be equal, is that I hope that it exists. Yeah. I mean, just the way you were talking at the beginning about how it's mostly international use cases, I would imagine it is the jurisdictions where the money is just a weaker currency, where those people are drawn to these stable coins. So it makes sense that, Even if it were in their local currency, they would prefer to keep their money in U.S. dollars. So, yeah.

So even if, yeah, one day there is like the full, you know, spread of all the current fiat currencies in stable coins, I do imagine still even then they would all be in smaller proportion to their proportion in the in the field. Yeah. Yeah. I mean, right now, if like the the fiat fx market, I have never. no idea is like 60% US dollars, 40% everyone else. You know, today the stable coin market is like 99.9% US dollars, you know, 0.0 whatever percent, everything else. I think that will change.

It might be 80, 20. You know, it's not going to be the same, but I think that will change. Yeah. All right. Well, Zach, this has been so fascinating. Where can people learn more about you and Bridge and Stripe? You could visit us, visit Bridge online. We're just Bridge.xy Z.

And then I am mostly on Twitter, so at ZC Abrams, ABRAMS. Perfect. Thank you so much for coming on Unchained. Yeah. Thanks for having me. All right. Well, thanks to everybody for joining us today to learn more about Zach, Bridge, and staple coins in general.

Check out the show notes for this episode. Unchained is produced by. me, Laura Shin, with help from Matt Pilcher, Wanda Ranovich, Megan Kavis, Pamu Jimdar, and Margaret Curia. Thanks for listening.