A conversation with B2C2 executives: Daily turnover of 1 billion US dollars to dismantle the bottom business experience of market makers

Podcast Source: Fintech Blueprint

Podcast Archive: BitPushNews

preface

In this episode, Fintech Blueprint spoke with B2C2 Americas CEO Cactus Raazi. B2C2 is one of the earliest and largest institutional market makers in the digital asset sector, serving around 1,500 institutions and making quotes on more than 440 exchanges around the world.

The podcast discusses market makers' business logic, how balance sheets and signal generation support B2C2's daily stablecoin flow, and why the two extremes of the cryptocurrency market — “risk-free principal aggregation” and “proprietary alpha strategy” — produce vastly different customer outcomes that are often difficult for buyers to understand.

Additionally, they explore why the US capital market provides little structured funding for true risk-taking companies, and whether the current combination of size, speed, and complexity makes this the toughest investment environment Wall Street has ever faced.

Guest background

Cactus Raazi worked on Wall Street for nearly three decades before becoming B2C2 America's CEO in 2024. He began his career in 1998 with Goldman Sachs's money market issuance department — which oversees the issuance of commercial paper — before moving to the credit sales department at the end of 2000, where he was responsible for covering hedge funds engaged in convertible bond arbitrage, credit derivatives, structured credit, and mortgage derivatives. He has been with Goldman Sachs for 13 years and holds Goldman Sachs's record for the highest annual credit sales performance ever.

After Goldman Sachs, he worked as managing director at Nomura Securities (2011—2012) and Tradeweb (2013—2015), where he designed OTC (OTC) trading platforms. In 2015, he co-founded Elefant, an algorithmic market-making platform for corporate bonds. He operated the platform for over six years before being acquired by Exos and was a partner after the acquisition.

Since then, Cactus has led Amber Group's US operations as CEO and co-head of the Americas region, then worked on US strategy at Enhanced Digital Group (EDG). He has a bachelor's degree from the University of California Santa Barbara and a master's degree from NYU Stern School of Business.

The following is a compilation of podcasts:

Lex Sokolin:

I've always wanted to have you on the show. Let's start with big finance. You've been with Goldman Sachs for a long time. How did you get into Goldman Sachs, and how did you get started?

Cactus Raazi:

This was probably the most interesting part of my life journey. I first took a “logistics” role at Goldman Sachs, and I got this job largely because of my good fortune before I joined Goldman Sachs. I was living in Los Angeles at the time, and I had been reading The Street (an early financial site), dreaming of going to Wall Street. I had no idea what that meant. Surprisingly, one of my current best friends, a man named Nathaniel Klipper, called the magazine I work for to ask for advertising information. He asked to send the materials to his Goldman Sachs office. I took this as a sign from heaven and followed up with this gentleman.

Although the ad I was responsible for in that publication never actually ran, he agreed to see me on my next business trip to New York. That meeting began a friendship, and through talking with him and reading a number of books he recommended, I began to learn more about finance. In 1998, I eventually moved to New York without a job and began interviewing all over the place. After being turned down by around 30 companies, I was offered an interview with Goldman Sachs. It took quite a while just to get an interview, but I was fully prepared for the interview at the time. After many previous failures, I got my first job in '98. It's the money market issuing department, that is, the department responsible for overseeing the planned issuance of commercial paper. This isn't the sexiest place to start. But it was my first step into the industry, and everything began to evolve from there.

Lex Sokolin:

Which markets have you been exposed to in turn? It sounds like it's mostly fixed income, but you're also shuttling through different departments of the company.

Cactus Raazi:

Exactly. I started with fixed income, and most of my experience is in the fixed income field. But here's an important asterisk. I've been in charge of sales since around 2000, and my client base was mostly hedge funds at the time. These are the initial customer lists Goldman Sachs assigned to me. Several of these hedge funds have begun studying derivatives. They are convertible bond arbitrage funds and are very interested in interest rate swaps to hedge part of their interest rate exposure. This gave me a lot of exposure to derivative products in general. Later, in the early 2000s, as credit derivatives grew and became popular, it was another important stepping stone in my career. It's a pretty complicated product that many other sales people haven't invested the time and effort to learn and master. This gave me a fantastic opportunity to develop a new group of customers.

Similarly, most hedge funds and that group of large hedge fund clients have since spawned many additional products, structured credit products, mortgage derivatives, and in some cases, products that touch the stock market. The hedge fund customer base is generally very broad, and for the most part, they are open to various products and strategies to achieve their goals. Unlike traditional asset management companies, which are usually limited to a specific scope. So the open mindset and ability of the customer base gave me access to all kinds of products you might call — we didn't call them that then, but now we call them — frontier market products.

Lex Sokolin:

How do you sell to hedge funds? What are they buying?

Cactus Raazi:

They're looking for the most capital-efficient and risk-efficient way to express their views on specific outcomes. I mean, if you think Company X will perform very well in the medium term, you can obviously buy that company's stock. Obviously, you can buy the company's bonds. But you might actually want to consider buying a call option because if you get your predictions right, you'll get better returns. This idea of capital-efficient access to asymmetric exposure is actually at the heart of many (but not all) hedge fund activities. How do I express my views in the most capital-efficient way with the greatest asymmetry of results, whether bullish or bearish.

Lex Sokolin:

Have you come across different types of capital? What is the sales cycle like? I'm curious. You started in this industry from scratch and then built your own network of relationships. Early sales were very complex products with very mathematical structures. And you did it at a time when the market was very volatile. For example, the internet bubble burst in the early 2000s. The 2008 global financial crisis and mortgage collapse. Along the way, there was a boom in hedge funds, and I'm sure you've experienced these, and all the other ever-changing situations, which remind me of the situation we're in today. How did you find a business path from this?

Cactus Raazi:

I often ask myself this question because looking back, I've done a pretty good job, and my productivity data and impact on the business are noteworthy. So, I asked myself what do they have in common? The answer is, I'm attracted to products that are more complex; they're more fun for me. I would also like to add that during the Goldman Sachs interview process, the interview was very difficult. Towards the end of the interview, a true legend, Wall Street legend Phil Off, asked me a question. At the time, I thought my job would go wrong. He said, “If you didn't get the job at Goldman Sachs, what would you do? That's an interesting question. I answered at the time, “I'm good at selling, and I'm probably going to sell the most complicated product I can think of. I thought it was a jet engine at the time.

Frankly speaking, I don't fully understand jet engines until now. But that being said, here's the example I'm citing. I said maybe I'll sell jet engines or something. Once I got into finance and got a job on Wall Street, I continued to move to new products and pursue greater complexity. This continued not only when I worked for large investment banks, but also after switching to electronic trading, setting up my own market making company, and recently entering the digital asset sector. This seemed to be the mainline of my entire career.

Lex Sokolin:

Can you talk about the market conditions you've seen in different businesses? What lessons have been learned about how to perform, how to respond, and how to think in different market cycles? Some say it doesn't matter how the market is; we just do our job; others are very passive. It's like “risk on, risk off,” trying to find the right moment. What are your thoughts on why cycles happen and how to navigate them?

Cactus Raazi:

That's a great question. Incidentally, when I first started '98, a famous long-term capital management company (LTCM) collapsed just a few months after I joined the company. You may remember that it was the most famous hedge fund in the world, made up of the smartest people in the world, but it “nil” in a spectacular way. If I remember correctly, the Federal Reserve actually summoned a bunch of bank CEOs to deal with the mess. Since then, you've mentioned a few different events. Even recently, we had the Archegos family office incident, which effectively brought down the entire Credit Suisse agency. This seems like a recurring theme. Wall Street seems to have a hard time learning its lessons.

But answer your question more specifically. I prefer the latter; you need to be aware of the overall market situation and understand the opportunities presented to you. Many of the best asset managers of all kinds adjust their exposure depending on whether they think the opportunities are favorable or whether the market conditions are challenging. Whether it's extracting returns, extracting alpha against a specific benchmark, or even on an absolute basis. You'll see cash positions fluctuate, or when opportunities simply don't exist, people will choose to wait and see. Usually, the best investors take this approach. I think this question is very interesting because you mentioned some crises, and of course Wall Street has had plenty of opportunities in the past 28 years.

What I want to say is that at this moment, it's very timely to ask this question because I've never experienced it — I've thought about it a lot — I've never considered a market opportunity that would come close to the situation we're experiencing right now. The scale of the future opportunities presented by cutting-edge technology is unbelievable. Trying to think about the complexity of the second-order and third-order effects of these technologies is really puzzling. Finally, the speed of this change is also astonishing. Think of any experienced investor, whether it's Soros, Drucken Miller, or many other famous people, whether it's Taper's troubled debts, Steve Cohen, or an investment hero in your mind. I'm sure if they come to your podcast, they'll probably agree that the scale of future opportunities, the speed of change, and the high dimensions of thinking about future paths present a unique investment challenge.

Lex Sokolin:

The opportunities are greater than ever, but the changes are also faster than ever, and I think this is probably one of the most complicated times to try to sort things out. So on Wall Street, you did a lot of “hand-to-hand combat” and high-level institutional sales and relationship building, then your career moved towards a more software-oriented, digital, and programmatic approach to financial services. Can you talk about what happened next? How did what you did in the past begin to transform?

Cactus Raazi:

I and a group of other professionals strongly believe that the process of trading microbonds — not the kind of big deal that can get you up to speed for a year, but a bunch of scattered businesses. As you know, most asset management companies go through a monthly clean-up process to remove small positions they want to reduce their holdings and increase the small positions they want to increase. These may be due to minor changes in their allocation model, or as a result of people requesting withdrawals, capital commitments withdrawn, or new capital entering the fund.

Therefore, our idea is that the fixed income pricing process can be replicated through algorithms, and we should be able to establish a fully automated market maker to provide excellent services. As you know, most human traders still price the vast majority of large fixed income transactions. They can't worry about these tiny bits at all. For example, buy 1 million here and sell 1 million there. This kind of trivial trade is simply not something most traders want to do. Human traders who handle large amounts of risk don't do this. So we thought, let's build an algorithmic market maker. It needs to be a broker-dealer (Broker Dealer), so this involves the whole process. Then let's go out and start automatically trading bonds. This is a fantastic idea. It may still be a fantastic idea, but it's much more complicated to execute than we anticipated. I don't think the tech stack we got in 2015, 16, 17, 18 was like today, which made that time difficult.

Our biggest challenge is not market structure or technology, but the availability of capital. One of the biggest mistakes my team and I made when starting the company was that market maker companies — no matter how they price them — are capital-intensive organizations. The US capital market has a large amount of capital for early-stage venture capital, growth equity, private equity, etc. But almost no money is being used for so-called “risk equity capital.” Or the idea that if your machine does something wrong, or if your employees do something wrong, you'll lose all your money. This is at odds with what venture investors or growth equity investors are looking for. This is more in line with what hedge fund investors are looking for. Therefore, from the perspective of the capital base required by market makers, Product Market Fit (Product Market Fit) is poor, which is inconsistent with the type of capital that the world's dominant capital market (US) can provide.

Lex Sokolin:

This is a bit of an odd question, but maybe from a defining point of view, this would help. Can you highlight the difference between a custodian or depositor of financial assets, and an exchange, marketplace, or marketplace platform, and a broker or agent? Because I think for many listeners, all of this is mixed up. But if you use fixed income as an example, that would be very helpful. For example, where do fixed income instruments exist? What does it mean to set up a trading place? What is the meaning of the word “venue” (venue)? What does “exchange” mean? What is the role of a salesperson or agent? How are they different?

Cactus Raazi:

Of course. Frankly speaking, it is quite understandable that people are confused about the structure of the fixed income market. It's too opaque. I'm not even sure Claude or ChatGPT fully understood it.

But yes, it does exist. A custodian is where you store your assets. This also applies to stocks. There is microscopic complexity in the market structure. But generally speaking, you'll have companies that provide asset custody services. The custodian can also be a prime broker (Prime Broker) in a sense, but generally speaking, this is where you store your assets. Then you'll have a place where you can trade. The purpose of most of these establishments is price determination. So you have an exchange. The purpose of the exchange is clearly to determine the price. Buyers and sellers come together on the same instrument to form a stack of prices they are willing to buy and sell at. The intersection of these prices creates a deal. Of course, even in an over-the-counter (OTC) market (fixed income is mostly set up this way), as an investor, you will have multiple service providers, usually brokers or broker-dealers, where you can ask the price of the fixed income instruments you want to buy or sell.

A portion of the market is satisfied by market makers. Incidentally, this also applies to stocks and other asset classes such as commodities or forex. A market maker's job is to provide liquidity to an exchange or some other place of execution, or possibly directly to end customers. Once again, there is some microstructure here. Some market makers don't actually serve customers directly for regulatory reasons. They're actually just proprietary traders on the exchange. But at the end of the day, from an investor's perspective, the experience is rich liquidity. First, when you're not trading, your assets are kept in a custodian. As far as I know, the largest custodian bank in the world is Bank of New York (Bank of New York), which manages around $36 trillion in assets. But there are also many smaller operating agencies out there. Once you're ready to trade, you have various execution possibilities. Electronic execution (in a bilateral sense, on platforms such as Tradeweb or MarketAxess) and OTC transactions with large banks, smaller institutions, or even pure broker-dealers.

You actually have a lot of ways to buy and sell. But at the end of the day, you need to have a balance sheet on the other side. In the OTC market, people who buy what you sell are usually for business purposes; they keep the assets on their balance sheets and seek to sell them later. Although this may not be true in an exchange-based marketplace, where there may be an intersection of organic buyers and sellers. I like to use an analogy that almost everyone can understand; it's a used car dealership. You can show up at a used car dealership and buy anything on their site, or you can drive your car over and they'll give you an offer. If you don't like that price, go to another used car shop. This is the fixed income market structure.

Lex Sokolin:

Talk about B2C2, you're responsible for the American business there.

Cactus Raazi:

B2C2 is a global market maker and liquidity provider. Say a little more. There are not only companies in the digital asset and cryptocurrency sector on the market, but there are also such companies in other asset classes, and their business is simply to provide prices to exchanges. The biggest exchange in the digital asset sector is Binance (Binance), so we can use it as an example. But the same applies to many other exchanges like Coinbase Exchange or Kraken Exchange. The idea is that companies like ours, and a few others, offer customers the price to buy or sell cryptocurrencies and digital assets on these exchanges. B2C2 and a few of its competitors also have huge OTC businesses. We directly serve end customers. We have a global franchise network of around 1,500 agencies that have settled in B2C2 and can use our balance sheet as a “storehouse” for assets they want to buy and sell.

Lex Sokolin:

In these two contexts, do terms such as “exchange” and “liquidity” mean the same thing as Wall Street?

Cactus Raazi:

Yes, it's exactly the same. From an institutional investor's perspective — BTW, B2C2 is 100% institutionalized, and we don't have any individual customers. We don't directly serve individuals. We generally serve platforms that serve individuals. But that being said, for most listeners, an exchange (Exchange) works in digital assets the same way it works in traditional securities or other asset classes.

Lex Sokolin:

So let's take a look at our job as a market dealer. You mentioned words like “balance sheet” and “liquidity.” Can you break it down for us, what does providing liquidity mean? What does using your balance sheet mean? What would the world look like with or without market makers backing specific assets?

Cactus Raazi:

Yes, well, the main role of a market maker is to provide a price to the market, and the other party (the so-called “counterparty”) can buy or sell an underlying instrument at that price.

We can use Bitcoin as an example. A simple and obvious example. Our job is to first post the price on the exchange, and anyone else on the exchange can buy or sell some other asset with Bitcoin. Generally, it targets USDC, USDT, or Circle stablecoins, or Tether stablecoins. We can also show prices for many other assets. This is the idea that you can sell USDC to buy Bitcoin, or sell Bitcoin to buy USDC. We publish these prices on over 440 exchanges around the world. Then we also have large OTC transactions directly with end customers, as we have discussed. That end customer could be, for example, a digital asset hedge fund that manages a pool of digital assets on behalf of investors and may have decisions about buying and selling assets, and they will look for the best price. They'll check execution on Coinbase or Binance, or any of the 40 other exchanges we connect to.

Or they might compare that price to contacting us directly. We call it “voice trade” (voice trade), but nowadays it mainly asks for prices through some kind of electronic messaging platform. For example, for a customer, we want to buy 100 bitcoins. They were able to estimate how quickly they could do this at what weighted average price on one or more exchanges and compare it to the price we gave them for 100 bitcoins, and that's what we gave them. So, the job of a market maker is — we use the term “liquidity,” but the common explanation for liquidity is: the ability to buy or sell at a price you are happy with and within a time frame that satisfies you. Prices and time frames change, and the more you focus on getting the best possible price, it usually means the longer the time frame you need, and therefore more uncertainty. This is often a natural trade-off in all markets.

The role of a market maker is to provide prices to end customers or exchanges to facilitate transactions. That's the core of it. From the perspective of “what”, this is a fairly simple business, but judging from balance sheet risk management and the operating reality of trying to avoid “negative choices” (that is, every time we buy, the price falls; every time we sell, the price rises, trying to avoid these consequences), this is the art of making a market.

Lex Sokolin:

This is exactly what I'm asking next, about the risk engine, and how do you hedge all your risk exposure and maintain net neutrality every day? What does that kind of infrastructure look like to give companies the confidence to provide liquidity in all these different places? Sounds like there's going to be a lot of mathematical math.

Cactus Raazi:

There's quite a bit of math, indeed. There are also high differences between market makers in terms of core business models. I can tell you the two extremes.

At one end of the spectrum is a company that actually shows customers what pricing they can get. That means you're not really expressing your views on the market. This means, for example, I saw 5 Bitcoin sell orders on Binance, 5 on Coinbase, 3 on Kraken, and probably 3 more on another platform. So I observed 16 bitcoins being sold. I've observed the price of each. So I now have a price to give 16 bitcoins to an end customer. I only make a small amount of money because I am essentially an agent between the exchange and the end customer. This is a very, very low risk, almost “risk-free principal transaction”. This is the end of the market maker spectrum. The risk is extremely low, they have no view of the market, they don't necessarily have a lot of infrastructure to determine the correct price, but they have the ability to observe available prices and aggregate them to provide to end customers.

That's the service there. This service allows your clients to avoid having to go to a bunch of different exchanges to deal with exchange deposits and other operational issues.

In some cases, compliance considerations may also be involved. So, this is one end, a risk-free principal transaction with extremely low risk. On the other side, there are transactions with a higher risk tolerance. A clear forecasting framework is required for the movement of any asset, whether it rises or falls in the medium term (usually close to the medium term). The framework attempts to use quantification techniques to generate a series of alpha signals, that is, in some cases, a predictive view. For example, in the case of Bitcoin, you can generate a mid-term alpha signal to predict whether the price of Bitcoin will rise or fall within the next five minutes. A high-frequency or short-term alpha signal may predict whether the price of Bitcoin will rise or fall in the next few seconds or even less.

But when all factors are taken together, a company with a highly propensive trading strategy has invested a great deal of time, money, manpower, wisdom, and analytical ability to form a unique insight into any single asset and its price correlation. Therefore, for any particular inquiry, the so-called “correct price” depends not so much on the price available on the exchange, but on the future trend of asset prices predicted by the machine in the short to medium term. These types of companies do exist, but their business models are very different. They tend to use a business model that focuses more on proprietary transactions, so I think their customer experience may be less stable. For example, in some cases, if you ask for a Bitcoin quote, if the signal indicates that the price of Bitcoin is rising, you will get a very bad quote. But if the market maker's signal indicates that the price of Bitcoin is falling, then you might get a better price.

That's the difference between companies. The BTC situation is somewhere in between. We have a pretty complete alpha strategy framework, but overall, our risk tolerance is quite limited. We are affiliated with a listed company, a Japanese listed company called SBI, which means our risk tolerance is more moderate than some companies that are co-owned by the founder or the founder and partner, who may have more autonomy and can adopt more unique strategies for the market.

Lex Sokolin:
The final question concerns the role of market makers. You know, for those who really understand the cryptocurrency market, there are always many different opinions about the role of market makers, the performance of tokens, and the performance of tokens on different exchanges. For example, some people say that if you want to issue a token, you need to hire a market maker to support the initial price. Or, if you look back at the Binance crash in October last year, whether it was Wintermute, GSR, or anything else, the collapse of large market makers actually caused the entire market to dry up liquidity, and prices fell as a result.

I think in the cryptocurrency sector, there is a misunderstanding that it is not just about accepting orders, but is related to the price support mechanism of the traditional stock market. You definitely wouldn't have this kind of discussion in the cryptocurrency space. Where do you think this misunderstanding comes from? What do you think people are actually doing in the crypto space, and why?

Cactus Raazi:

As far as the question you raised is concerned, I think the role of the market is that what market makers really want to do is prove to the market that the tokens we are discussing have sufficient liquidity. Typically, these tokens are newly issued, or are in the early stages. This is because investors are relatively unaware of this type of token, and therefore the trading volume is also relatively low. Normally, if investors think that the token has sufficient liquidity, that is, they can be traded at a relatively low cost, then this perception often forms a virtuous cycle: the perception of sufficient liquidity will attract more investors to consider investing in the asset, or make an initial allocation or purchase, which in turn will further increase liquidity, thus forming a virtuous cycle

Lex Sokolin:

Different features were supported in the early stages, and I think those boundaries are a bit blurred.

Cactus Raazi:

Yes, I mean, the same can be seen in the stock market. Obviously, in the context of an initial public offering (IPO), the underwriter's role is to provide a degree of support and stability for newly issued shares over a reasonable period of time.

If the market demand is extremely strong, they usually hold some shares up front. So I usually call them “green shoe options,” so they can put more stocks on the market. However, even in the securities market, the general idea is to ensure that the issued securities enter the market in a stable manner that conforms to the issuer's medium- to long-term interests, thus winning the trust of institutional investors, making them feel that the securities have stabilized, and that the price trend reflects the market's overall view of the securities. Many of these ideas also apply directly to the cryptocurrency sector. In my opinion, the cryptocurrency sector is made up of robust companies that seek financing, have actual business and application scenarios, and are exploring product market fit and growth potential. On the other hand, cryptocurrencies, whether good or bad, include a large number of, you know, joking, highly speculative assets, the basic value of which is questionable.

This is both an advantage and a disadvantage. Admittedly, the latter part isn't very accurate. Um, yeah, I just wanted to say that this situation isn't very common in the securities market. But if you look at some SPACs (special purpose acquisition companies) that have been listed in the past five or six years, you'll find that quite a few of them didn't become popular investments in the end. So, maybe there is a similar phenomenon in the securities market, and cryptocurrencies are probably being overtouted. But in any case, the point is that in both cases, the market maker is a service provider. As you know, in the field of securities, market makers are investment banks, but their role is to ensure that newly listed investment projects have a certain level of stability and establish good relationships with investors as securities or digital assets develop and grow.

Lex Sokolin:

Yes, I think the difference is that the primary market and the secondary market are two different business lines.

In fact, they all use balance sheets, but in a different way. I want to talk to you about stablecoins, and the increasingly widespread application of stablecoins in the field of fintech. You know, this trend appeared even five years ago. What impressed me was that we actually mixed up two different forms of cash. The interesting thing is, you know, you first worked in the commercial paper business at Goldman Sachs, and I think that just echoes what we're discussing today. The dollar has many uses. Some dollars are used to buy sandwiches at the store. Some dollars are used to earn interest on bank deposits. Some dollars are used in brokerage companies' cash management accounts. You know, these funds could be used to invest in commercial paper or money market funds, etc. From a software perspective, stablecoins are simply tokens backed by different forms of dollars. We only have one word to refer to them, and there is only one rule, and this rule mixes everything up. I know B2C2 has been working on stablecoin-related projects, so maybe we can start with the differences I just mentioned and talk about your views on them. Also, what do you think will change in terms of capital markets?

Cactus Raazi:

Well, you started thinking about stablecoins five years ago, which makes you feel unique because you know that five years ago most of us wouldn't have cared about this at all. But at B2C2, our daily stablecoin trading volume is quite large, around $1 billion. This stems from our extensive trading activity in the digital asset and cryptocurrency sector, and stablecoins can be said to be native financing instruments. Furthermore, it is also related to some of the challenges digital asset companies face in gaining access to traditional banking services. So, you know, digital asset investors have to switch to stablecoins for a variety of reasons, some of which relate to banks. Until recently, traditional financial institutions have lacked interest in cryptocurrencies and digital assets. So, about a year and a half ago, we made a bold bet on stablecoins, believing that there will be more types of stablecoins in the future.

At the time, the topic of discussion in the digital asset market was whether Circle would become Tether, or would Tether surpass Circle. We've always thought this discussion was too naive. We expect more institutions to issue their own stablecoins for various reasons. This is our first bet. The second bet is the programmability of this form of money. We'll talk more about this later, but we think this programmability will become increasingly important over the next 3 to 5 years. Specifically, when it comes to money, as you mentioned, there are different forms of money. We have the means to store value. It is a very common view that money is a store of value, although many monetarists or supporters of currency depreciation will object to this view. But if we leave aside the philosophical aspect, money can store value or transfer value.

And value transfer is where stablecoins really shine. Most people would agree now that stablecoins are actually a better mechanism for transferring value. So what does “better” mean? Like all technology, “better” means faster and cheaper. This is the essence of “better.” And this is the key to the success of almost every new technology. As far as stablecoins are concerned, the unit of currency we can transfer is usually the US dollar. Of course, we're also seeing more and more stablecoins in other currencies. In any case, you can transfer the numerical representation of a unit of currency, which is usually held by a custodian institution, and is faster and less costly than existing systems such as ACH or SWIFT. I'd also like to point out that in some jurisdictions, central banks or some kind of central authority have established instant payment systems to some extent, thereby offsetting the advantages of stablecoins to a certain extent. For example, Brazil's Peixe system, which allows funds to be transferred instantly in Brazil, is extremely fast, and is largely free. 24/7 service.

As a result, in some jurisdictions, they've gone beyond what we can do in America. But more generally speaking, whether in advanced or developing Western economies, the cost of value transfer has always been too high, and stablecoins really solve this problem. I think the second point is coming soon. At that time, even those who are skeptical about stablecoins will have to admit that the stablecoin software itself can run other software. You can think of it as being very similar to some SaaS platforms. SaaS platforms themselves are software, but they open an app store, and all kinds of apps can run on stablecoins. We expect to see this in the next few years.

Lex Sokolin:

So, this isn't a competition with Stripe, nor is it a competition about who can pay more for products on the internet. Instead, it's back to the fundamental problem of using balance sheets to achieve liquidity through various channels, right?

Cactus Raazi:

Yes, I think that's absolutely true. What a coincidence you mentioned Stripe. I was impressed by what Stripe announced at the annual Stripe conference almost a year ago. They plan to establish a stable cryptocurrency network among all merchants, so that financial transactions do not need to go through a bank account throughout the process of transferring value to a store of value. Of course, I don't think any company currently plans to keep their own cash. Most companies agree that keeping cash out of the bank is the right thing to do. This is entirely about corporate governance, and has little to do with whether interest can be earned. This is just a digression, but I'm afraid no CFO would want to keep 100% of the company's cash in some kind of cryptocurrency self-insured wallet. Having said that, being able to transfer funds anytime, anywhere (24 hours a day, 7 days a week) is still one of the most desired goals for many CFOs and finance executives. I think the stablecoin value transfer discussion also reflects this and has the greatest potential.

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