Andrés Salcedo of Etherfuse on Tokenizing Sovereign Bonds for Latin America

Speaker A: We really think that the future of cash is going to be yield bearing stablecoins. No. And then it's a matter of how secure is this yield bearing stablecoin in the sense of the sources of the stable coins of the yield. Sorry. And not being a black box because it doesn't mean we don't. We never. We are never going to be the highest yield, but we're going to be a mirror of the central bank. No. Because that's what is back in our assets. Uh, that we can't get out of.

Speaker B: Hey everyone, welcome to the Smart Smart Economy podcast where we ask your favorite builders the questions you wish you could ask yourself. This is a production of neonestoday.com and I'm your host, Dylan Grabowski. In this episode we're joined by Andres Salcedo, the head of business development at Ah, EtherFuse, a blockchain platform that bridges tradfi and defi by tokenizing government backed sovereign bonds. In this conversation, we discuss Andy's experiences growing up in Venezuela and how crypto was a life raft. The strengths and opportunities for blockchain in Latin America as a market, the stable bond offerings of Etherfuse, the six regions that Etherfuse supports, how etherfuse improves foreign exchange processes, and so much more. Just a reminder, nothing said in this podcast is a solicitation to buy or sell any tokens and that the guest or host might hold tokens discussed in any given episode. You can check out a Full disclaimer@www.neonestoday.com. and if you enjoyed this episode, please consider rating and reviewing it on your favorite podcasting platform and sharing with your friends and family. Every rate review like comment and share helps us reach more people and bring you better content and more of your favorite guests. With all that said, I really enjoyed speaking with Andy and I hope you enjoy the conversation too. What's up everybody? Welcome to the Smart Economy podcast. Today we're joined by Andres Salcedo, the head of business development at Etherfuse. Etherfuse is a blockchain platform that bridges tradfi and defi by tokenizing government backed sovereign bonds. Andy, how you doing today?

Speaker A: All well, thank you, Dylan. Thank you for the invitation.

Speaker B: Yeah, I'm, um, super psyched to chat with you. The first time we kind of crossed paths was in Monterrey at East Mexico in November of last year. And then we saw each other, or I guess October and then saw each other again in Buenos Aires. And you've kind of been on the Etherfuse grind. Uh, yeah, Past year now?

Speaker A: Uh, yeah, almost a year now. Almost a year now. It's been very fun growing a lot with the NE for Fuse and very excited of what's to come, uh, especially during these cryptos downturns in terms of pricing of btc, there's much more to blockchain than Bitcoin and the price appreciation of those tokens. So very excited, uh, that it's been nonstop basically, and how people are leveraging this technology to build better services and better, better financial services for people such as in Latin America now. Uh, so, yeah, um, uh, uh, when they, uh, tell me, oh, isn't bitcoin down or eth down? I'm like, dude, my job has gotten way more intense. You know, you have no idea. Once they put the, that, that magnifying glass again during the next halving, you know, it's, it's, it's going to show a lot of results of what has happened under the hood with what exists today. No.

Speaker B: Yeah. Yesterday I was reading, uh, a news article that said that tweets about Bitcoin and Ethereum at all time lows since 2020. But at the same time we've seen like a 40% growth, uh, in RWAs alone just in 2026. So as prices are going down, we're seeing more and more adoption. And that's honestly why I wanted to have you come on the pod, because A, you're working in this RWA realm, but also B, Latam is just this growing region that is using blockchain and crypto for the reasons that it was made. Um, I often say that being up here in the States, a lot of crypto users or crypto folks kind of speculate on the price and that's what our relationship is with these assets. But of course, throughout the rest of the world, they, the actual technology is used to empower people and to make situations better for people who might not have necessarily the best, uh, rules and regulations within their traditional financial markets themselves. So it's going to be really fun to kind of dig into these topics. But before we do that, I just kind of want to get a little bit of your background and to start, what's your kind of genesis with Bitcoin and crypto? When was the first time you came across Bitcoin or Ethereum? What were your initial thoughts? Did it click immediately or did you need a few years before it made sense?

Speaker A: Yeah, well, well, my interest, my, my, my story is, is kind of different from people, uh, going down the rabbit hole because I got into blockchain and crypto due to necessity. No. Uh, as you know, uh, I've told you before, I'm from Venezuela. No. Uh, Venezuela. And my background is more in private equity and investment banking. No. Venezuela is a very interesting economy in the sense that during 2017 we got hit with massive hyperinflation from our currency. So you are seeing, just to put it, uh, in perspective, people used to raise prices twice a day in bolivares. And you got devaluation of the Bolivia. Bolivia. The bolivar versus the US dollar of almost 50, 50% a day. No. So since my lifetime they have removed 13 zeros from the currency. Uh, because just to give you an example, I was working in the biggest bank in Venezuela and we had to call SAP S A P to basically add more zeros to their net to their platform because you couldn't fit the amount of zeros that you needed to, to, to have an account take. No. Or you went to a restaurant and you had to pass your debit card uh, like three times to pay for your dinner. You know, it was like 999-999-99-99, plus 999-9999 then. And then you did the difference. No. So it's, it's, it's, as you could see, it's a very fast moving economy. When you're in hyperinflation, you have to be very fast with your corporate finance decisions. And that expands not only to the personal but to the To. To. To. To Also to. To bigger aspects. No. Of the companies that we were working with and managing. No. So basically you got an invoice and that invoice, before the bolivar is hit, you already had dollars aligned to pass them to dollars because dollars was that, that uh, mode of safety? Uh, also another curious thing during that time is that the uh, Venezuelan banks lost their settlement banks in dollars so they couldn't custody dollars. So crypto was a natural fit. No. Within, within the ecosystem. No. So USDC and USDT and the first stables. No. Were very much a, a, that store of value. No. For, for these corporate companies. No. And, and, and, and also for individuals. No. Like I've paid for Moto taxis in Venezuela with USDT, you know, since 2020. Uh, uh, they, they sell in the supermarkets. You pay with USDC and usdt, you know, so it's, it became that altern when you couldn't place that you couldn't even hold bolivares because in the morning it was worth $10, in the afternoon it was worth 5. So you had to spend your bolivares as fast as you can to get a source of uh, a source of reserve of value that it might be dollars or it might be even milk or whatever, you know. But you had to get rid of a depreciating asset that was appreciating so fast. So my story begins from there, uh, seeing also the aspect of this better this basically globalization and standardization of financial services via uh, blockchain that most regions don't have access to. And I think hits a lot with the point that you were referring before that in the US it's totally different use cases. No, it's let's buy NFTs, let's do gaming, let's do in Venezuela is I need to buy milk. You know, I need to not lose my, my money in a 50% devaluation rate a day. No. And Venezuela uh, it's that their economy is like 9 out of the 10 things that you put in your mouth to eat are imported. So everything has to go through US dollars in the end. So I really saw how the, how a country becomes crypto via its supply chain. That that's what uh, what one of my main thesis know that it's, it's once port fees and your suppliers and importation fees in crypto is that's where it goes downstream more than going from the grassroots. No retail upwards. But yeah, it was a very interesting dynamic experience. Uh as you can see there's a lot of Venezuelans in the crypto world right now that are familiar with the use cases of what you're talking about and these real world use cases. And yeah, the situation got so hard in Venezuela that I said that I uh, had to leave. I went to Mexico and in Mexico understanding very well the market over there. I worked in the biggest exchange in Latam, used to be the head of crypto. Then after that I moved more to the frontiers and working with blockchain networks. Uh, I used to lead the real world asset team there and got to meet the team at Etherfuse and it's uh, really impressed with the product that they were building. We kept continuing chatting and they invited me over and it's almost been a year with them. Uh, I like to say that I work with uh, eight Mormons out of Salt Lake City ex boy and an ex Apple that hired a BD Latino. That's me. So uh, to be honest I'm very impressed with the team, their capabilities of, of the thesis that they have and the niche that we found within this.

Speaker B: That's super cool. Yeah, um, amazing. This is the beauty of crypto Right. That you get to build an international team and you get to meet people from all around the world, and all thanks to the Internet one before we kind of move on. I am really curious, though, because, you know, you're. You're college educated, you've got your master's degree. You know, not everybody, and not everybody has the opportunity to go to school. So, you know, it doesn't strike me as completely crazy that you stumbled on bitcoin, you stumbled on crypto, you started learning about the values that blockchain and crypto can offer to you and your people. But what about, like, the everyday person in Venezuela? Are they also learning about blockchain and crypto? Like, are grandmas able to use usdt, uh, themselves? Is the broader population also starting to understand the power of being able to use a stablecoin?

Speaker A: Yes. Yes. And I think you'd see that with Venezuela had one of the biggest. They had a power outage for like four days in 2018. And I think the, uh, P2Pmarkets of Binance went down like around 20%. So, uh, the same happened. There's a famous lore in Minnesota, like, it's. It's such an aggressive economy that you have to go to the fringes and really to the Internet to. To survive. No. So what do I mean by this? You know, Venezuela was one of the biggest Runescape gold miners in the world. No, like, that was a huge chaos of the lore of Runescape that people were going to Runescape because the minimum salary in Venezuela is around $4 a month. So how can you feed a family with that? No. So people have to go to the fringes, and obviously that gray zone is the Internet. No. And basically becoming. Earning money from the Internet. No. So people had to be super adaptive on how they're going to earn revenue. No, that might be selling gold on. On Runescape or. Or selling gold on. Whoa. No.

Speaker B: Or.

Speaker A: Or basically all this Axi Infinity that. I think there's interesting stories in the Philippines know as well of all these grandmothers working from their home and earning more than their son. That is a doctor. No, like, because of the, the wages. No. So I really think that as the Internet freed information because in the sense of, like, doesn't matter where you come from in terms of your college education, you're gonna. You're gonna have the highest standards available of information on the web. Right now. Crypto is also making that with basically with goods and services now, uh, and being able to own information. And that is owning your crypto and value via The Internet. So, yeah, what I was saying before, no, uh, I have pictures that I can send with you after. But it's basically people selling platins, uh, in the roads for usdt. And that's what they said. Or the hot dogs for USDT. And this is 2020. No, it's six years ago. So when you're faced with the necessity, you learn pretty fast. That's what I'm trying to say. Uh, and that goes above. Obviously there's a niche that starts learning first and then it gets expanded to the other people. But I think everybody's very familiar over there of cryptocurrencies. And it's not very familiar of. You don't need to know how a television works to start turning it on or how a combustion engine works to start using a car. No, it gets their use case done and that's what they were searching for. And they know the mechanisms of how to search. And the same goes applies to your mom when she opens her email. She doesn't know need to know how HTTPs ah works or how the Internet works or what's behind the encryption. No, no, she says just there to read her messages. And the same goes there for, for these types of situation that you just want to pay for your groceries, you want to receive money from your loved ones, or you want to pay for things. No. Or you want to sa. So it's more of a necessity thing.

Speaker B: So, yeah, um, when I was in Monterrey, you would go to like a street vendor and it would be like a grandma who's using mercado pago on her phone for being able to send and receive funds. It was just so integrated the way that the bank can be used with a cell phone. And so a large portion of the folks in Monterrey, and I would assume in Mexico more broadly, are just familiar with using cell phones for making payments. Is it the same in Venezuela? Is the population kind of mobile phone savvy?

Speaker A: Yeah, yeah, super, super mobile phone savvy. And to be honest, it's the owner only source of information. You know, like there's, there's a lot of, uh, there's a, there's. There has been a very sad story in Venezuela in the past 20 years, and I'm pretty sure everybody's familiar. And that has gone in hand with an increased, uh, government controls in all aspects of your life. And the safe haven for that was the Internet.

Speaker B: No.

Speaker A: In terms of how you communicate, how you get information, how you can send money. Also the necessity of hyperinflation. Imagine when you can't even send money because the zeros don't fit. There has to be a push because if not there's gonna be a lot of like unhappiness, uh, in the streets. Not because people can't. It's a failed system. No per se. So you have to get familiar with the tools that are gonna help you survive in those situations very fast.

Speaker B: Yeah. Um, and then just kind of tapping in on the educational aspect. You studied in Colombia and in Venezuela during your time in college. Was blockchain and crypto being talked about? Because when I was in grad school here in the US in the early 2010s, Bitcoin was just becoming a thing and a lot of our professors just waved it off and um, said it was funny Internet money and it wasn't taken seriously. During your time in college and in master school, were they talking about blockchain and crypto a little bit more seriously or had it not quite hit that point yet?

Speaker A: During my pre grad. Not as much, no. Uh, but everything that starts funny can get very serious very soon. No. The uh, you just have to cross that chasm.

Speaker B: No.

Speaker A: In a certain sense. But in the masters. Yeah man in the masters. In Venezuela, uh, during hyperinflation. No. In such a misery, like uh, m. Miserable context, you, you were having people that were having all sorts of problems that are being fixed with cryptocurrencies. So USDT and USDC and blockchain. No more beyond Bitcoin. No. Already were a necessity. No. And, and, and in that context in that room, and it was already a tool being used a lot for cross border payments for, for a myriad of things. No. So as you could see in an economy that brings nine out of ten things that you consume from outside and you don't have US dollars or US dollar settlements. Crypto is a, is, is, is a tool that you're going to use whether you like it or not. No. Bitcoin obviously change a little bit its narrative from there on. No. Before when I got first into bitcoin, that first started through bitcoin was via local bitcoins in those days. No. That you could see local bitcoins had had this one during the same power outage. You could see how the transaction volume drops considerably. And that's basically Venezuela in the back end of those P2Pmarkets. Not before Binance P2P. So we were using it more as a use case more than this is the future of money. I uh, think that was more a luxury to have because you were worried of Your future of tomorrow, not the future of money. So your timeframes were very different.

Speaker B: Yeah. Interesting. And so when you're looking on crypto Twitter right now, a lot of folks that are talking about Latam is saying latam's the future. This is where there's going to be a lot of adoption, there's going to be a lot of growth here. But what I'm curious about is the situation in Venezuela is a lot different than the situation in Mexico, which is a lot different than the situation in Argentina. What is kind of Latam as a market? What do you look at the strengths and opportunities for Latam as a market for blockchain, for crypto, for stablecoins? And then how do you also look at different regions of Latam, uh, to meet different users and different needs that crypto and blockchain offer?

Speaker A: Well, that's a great question. And I think where you could see the need for these types or the opportunity. It's basically margins. The return on equity of financial services in Latam is the biggest, I think, continental wise, I think it's around 17 to 15%. That's the return on equity that bank, the banking system has and it should be more. This is just a reflection of the lack of new competitors and the moat that existing people have in these countries. And also the frictions that you have. No. That justify these bigger margins. No. Latam regretfully, is a very siloed economy in the sense of regulation and the sense of like if you're regulated in Salvador, it's not the same as being regulated in Mexico. It's not the same as being ant. Also, the, these markets are not connected between them. No. So that's why the innovation that you see in Mexico doesn't spill abroad.

Speaker B: No.

Speaker A: Or spill over to the other countries. No. That, that might be not the same case when you're trying to build in Europe now. So obviously for the incumbents, it's a bigger ROI in terms of conquering the markets outside. Right. In terms of the mass. But, uh, there's a bigger profit in these regions and each region has their specific problems or use cases that you have to attend to now. So an app that might be very successful in Colombia might not be the same in Brazil or in Venezuela or in Mexico. So there's a lot of, there's a big opportunity for niche builders in each one of these regions. Not that right now what blockchain is providing is that composability of a fast spillover to other, to other regions and also avoiding that. How would you say it. The uh, strength shirt. Camisa Fuerza, you know that, that the local rails and the local system provides and all the composability of blockchain. I think that stack is what's key to make it easy for builders to build for each one of these countries.

Speaker B: Awesome. Yeah, I love it. Um, you brought up Europe and there's eu, there's Mica. Ah, there's these kind of regional authoritarian bodies of regulators that kind of pass down financial laws for all of the different countries within the eu. And I'm not familiar with this, but I'm just wondering if there's something similar, um, forming in Latam. Is there a, a group of countries that are starting to think about economic policies together or is it still just very much siloed like you were saying? And it looks like it will continue to be siloed for at least the near term future.

Speaker A: I think it will continue to be siloed. There has been a lot of push, mainly political driven such as mercosur, the brics. No. But in the end these are very unstable regions with kind of a very heavy pendulum effect of who leads now, who leads in the future. Uh, so the accords that they are, uh, the, that exist. No. Don't tend to last that much and are mainly a, uh, political agenda of the incumbents between them that South America goes from left to right very fast. So as you could see, uh, it's, it's very hard for, for, for, for there to be a consensus long term. Not only that, but there's a lot of distrust between the players of the game. No. So I think blockchain really does provide that same level playing field for them, uh, in terms of like the new bricks coin that they're trying to take off. Are you really, do you think China is going to trust the Central bank of Russia to maintain the ruble as the form of payment or they're going to trust each other? I think that's a great narrative for Bitcoin in that sense. That's why they're paying for oil imports and gold. No, I'm sending planes full of gold from one place to the other. It's kind of the same, but in, in, in Latam, ah, there's a lot of like it's, it deviates a lot. No, there's a lot of volatility in the agendas of each one of the, the governments. No. And within those governments.

Speaker B: Yeah. Awesome. Okay. So you mentioned at the beginning of our conversation that you worked at Bitco, uh, Bitso and you were also in the RWA realm at BNB chain. So I'm curious, how did your experience at an exchange, the largest exchange in Mexico and how did your exchange, uh, your experience working for a blockchain ecosystem itself, how did those two different crypto verticals kind of um, make it possible to do what you're doing at Etherfuse right now? And what were some of the lessons that you learned from working on the ecosystem side and on the exchange side that make your role uh, feasible? Uh, working on the app side now?

Speaker A: Okay, yeah, I would say I'm not on the app side right now. I'm more on the infrastructure side. No, we're more of an infrastructure player. But due to that our main business is B2B2C and B2B2B. No, we help other people integrate our products within their products within their apps and help building from there. No, uh, but to that comment, to your first question within Bitso, I uh, think in Bitso you get to learn a lot. Basically it's a gray area between uh, crypto and the real world. Working on an exchange and seeing how decentralized player that's in a natural evolution of those times of how they are basically getting people on chain, whether that be, whether through vi, uh, usdt. No, as you know, Mexico is the biggest remittances market in corridor in the world. No. Around $60 billion are traded a year and flows, uh, and opening those initial infrastructure that you're going to need for people getting money as fast and as cheaply from the US to Mexico and vice versa. Also Mexico's biggest export and import market is the U.S. no. So we have very highly integrated supply chains that need movement of money and capital between them. Uh, uh, I think you get to learn a lot how a company of that scale that Bitso is very big operates in all these different regions, not only in Mexico, but it's also in Brazil, also in Argentina, also in Colombia. You see that these use cases overlap between latam and you get a really good experience to see that our use cases down here are much more plain and simple of remittances cross border. Basically one of the things that you have to build a lot towards the discretionary income of the people that you're tending to. So in Mexico the discretionary income is not enough for you to start saving. So basically uh, that the average person. No, so you're, you're seeing people that are going to have 200 bucks or 300 bucks at the end of the month, if that's a Good case non these countries. So you really have to build towards what are their use cases that they're needing that they're doing right now. That's not going to take out out of the the total income that they have per month also it's building around those and it's payments in there or it's uh, remittances or it's. Yeah. Uh, it's basically their day to day things that are a necessity for them. No, and not go for I'm m going to sell you the latest NFT of cryptopunks. No, if you really want to go to the massive scale and within BNB chain. I think BNB chain is a super global company. Uh and very non US focused. No like it's mainly Asia, Latam, Africa. So it's very much on the fringes not only of the world but also of crypto.

Speaker B: No.

Speaker A: Because when you work on a blockchain in a blockchain network it's basically you're seeing those firsthand builders in all their stages from incubation from start from an idea known a hackathon to incubation to a startup that's going to get an accelerator then from there how they grow and what are the things that they need and what are the different verticals that that exists within each one of these, these blockchains. Because uh, in the end like when you're, when you're working as a BD there are some companies that are organized as per area and for more that I used to lead the real world squad there. It's you see a global like you see projects from everything also from ticketing and events or from NFTs or whatever. No. And you get a really complete picture that you kind of grab those pieces of the puzzle to build a uh, unique perspective of how the world in crypto is growing and which are the players and which, which feeds into who know because sometimes there's a lot of shovel sellers and it's people selling shovels to the gold miners and then you have the people that are actually extracting gold and then you have people that are doing the logistics for gold just to put a metaphor here and all of a sudden of how it works and also it's really curious to see how these pieces interact between them though.

Speaker B: Yeah. Awesome. As we kind of zoom into Etherfuse and what you're working on, I want to just touch upon RWAs what are the opportunities that RWAs are doing to create better access for investors and businesses to markets and really what I'm interested in hearing about is how are RWAS enhancing or increasing cross border market interconnectivity? How are RWAS making it better for an investor in the US to invest into Latam or APAC or other parts of the world? What are the ways in which RWAS are connecting investors internationally?

Speaker A: Yeah, and I think it goes hand by hand because RWA is an item but in the end it's an item of an ecosystem and that ecosystem is blockchain. So basically this new wave of RWAS is providing the necessary elements for these things to happen. No. Of what you just said. No. For those cross border, for those investors, foreign investors to get invested into a country, for fintech providers to provide a wallet and bankerize their users and for a myriad opportunities. So it's just about building these elements that are necessary and exist already in tradfi. Because you're not reinventing the wheel. No in a certain sense but you're making the wheel better instead of going from wood to rubber in a certain sense. And one of the things that is also very curious is that RWAS and assets per se are also evolving because let's just say that you invest. You invented the combustion engine. Are you going to build a horse with the combustion engine? Uh, or a model of a horse? No. You're going to build cars? No. So it's basically the same use case but better. No. Uh uh. And, and that's where I think we found our niche within Etherfuse. That's basically creating a product that can move like cash but earn like bonds. No. So for those that don't know what erfu does we do yield bearing stablecoins backed only by sovereign debt of each country denominated in their national currency. So what does this enable? This enable stablecoin issuers to issue if you have big distribution and you're fintech app and you want to do your own stablecoin you can basically issue a stablecoin in Mexican pesos without even touching Mexico. Just using our assets uh, such as Cetis for Mexico. No. To back your coin. No, I have an FX risk or if um, you're a fintech uh you provide micro credits or micro lending and you don't have a way you have to work with local banking to bankerize your users basically be a wallet you can provide them and m non custodial savings account using our assets. Right now we are in six different regions and we see myriad of we I like to say that we sell nails and you can build chairs or spaceships not with it so uh, uh, when they ask me for my, for my ICP it's like God damn there's so many ways you could use us. No, because it can go from escrow accounts on rewards platform it could go into escrow accounts for lending, it can go for stableco issuance, it could go for these types of fintechs that I mentioned before that they rather go for the non like uh, there's a lot of fintechs right now that by embedding wallets within their products they can bankerize their entire user base without being having the constrictions of being a bank and the regulatory constrictions of being a bank. Or are there these fintechs the same that instead of leveraging this is the incumbents of, of of stablecoins they can issue their own. You know and it's an incredible business model for them because stablecoin issuer keeps all the yield for themselves. That's not our case. We have to share everything. But because we're a yield bearing stablecoin. No. And another way also to put it is that we're basically bringing the risk free rate on chain and when you go into corporate finance when you do a cost of acquis cost uh, of capital um M model the formula always starts with what's the risk free rate of a country? And the risk free rate or what they use is the proxy that's used is how much does that country pay me and the time horizon that I'm going to invest in and that, that is the, the sovereign debt yield basically. You know so we, we don't provide the highest yield but we provide the risk free rate yield on chain in that and that native currency. So I think that's key also one of the things and the asymmetries that we see is that uh, within the crypto world I think it's like 99% of the stable coins in the crypto are USD denominated and that's not the reality of the world. And blockchain is not going to change how the it is going to change how the world does businesses but it's not going to change it in terms of geography. No. So what I think it's going to look like in the future it's mainly the M M2 mass of each country dollarized and the symmetry between that and what exists today on uh chain is right now is 98 or 99% USD but actually in the real world it's around 60 or 70. So there's a lot of uh, market to capture and to grow and to develop in these regions that might be in a later step due to how innovation works that people are trying to conquer these higher returning markets or more attractive markets such as the USD and the Eurozone.

Speaker B: So you mentioned that um etherfuse supports six different regions and so we're talking about six different currencies. Are you starting to see um, the difference in this asymmetry? You mentioned that 60% of the world is maybe using dollar and there's 40% other currencies out there that people are operating and building within. Are you seeing now as you offer tokenized assets and support for tokenized assets and currencies outside of the US dollar, Is this reflected in the way that users are using the stable bonds and FX on Etherfuse? Are you starting to see this differentiation where you're not having 99% of the activity on the infrastructure only being US uh denominated stablecoins but more so are we starting to see this, this difference come on chain come into the infrastructure

Speaker A: for sure, for sure. And within E for fuse we don't tend to the US at the moment. No but we tend to the other countries and all the other countries settle in USD. No for their cross border for the outside payments. However these people need. If you're going to have the complete loop on chain leveraging blockchain, you're going to need both parts. You're going to need your national currency and you're going to need the US dollar on chain. So if you're trying to mix mash this between the FIAT and the US dollar you're going to have a very, you're going to have a lot of extra steps not that are going to create more enthropy at the end of doing financial services between them. And also one of our theories is also that we are very heavy proponents that the yield bearing aspects of our tokens help compensate that cost of transactions that each legs have. And the more efficient the market the more relevant this is for people to actually not have to lose a lot of capital between cross border payments or remittances or doing fx.

Speaker B: Hm, awesome. Let's talk a little bit about the products. Um, when I saw you on stage in Monterey um, you were, I was just starting to hear for the first time ever about stable bonds and I was just trying to wrap my head around this and understand a little bit better. So maybe um, we can just talk to the expert here what are stable bonds and what are the markets that these types of tokenized investment Vehicles are addressing for sure.

Speaker A: So stable bonds, our concept of stable bonds are yield bearing stablecoins that basically are each one of our tokens. Of our six tokens are six different currencies that are backed by sovereign debt of short term duration. So this enables you to do a lot of things and uh, not only a lot of things but also at the risk free rate of each one of these tokens. So you're basically earning when you go to accounting and you see cash and equivalents. An equivalent is a T bill. No, because it's the most liquid market when they need these economies. And not only that but uh, a bill of the US of $1 is a promise of payment, of repayment of the US government of $1. So the same goes with their debt and that's the risk free asset. So basically right now with this six different currencies you enable fintech providers, wallet providers who actually have that currency on chain to distribute to their users. You know, without opening a virtual account for each one of their users and tending to get the plugs in from these AP banking APIs are very uh, silo. No. To their users to actually provide a services. No. So it's, it's our stable bonds are like I said, they move like cash but uh, earn yields like bonds. So it's what we believe. When I said my example before of we invented the combustion engine. Why are we going to build, keep building horses, we can build a car. No. And so we really think that the future of cash is going to be Eurobarian stable coins. And then it's a matter of how secure is this year bearing stable coin in the sense of the sources of the stable coins of the yield. Sorry. And not being a black box because it doesn't mean we are never going to be the highest yield but we're going to be a mirror of the central bank. No, because that's what is back in our assets, uh, that we can't get out of. So that's our niche. Our niche is sovereign debt denominated in local currency to provide the currency on chain that earns yield at the risk free rate.

Speaker B: So beyond just offering access to different bonds uh, across different regions of the world, um, and tokenizing this so that you can, you can have access to this without actually having to hold like the physical piece of paper or its equivalent in the country. What are some of the innovative ways that you see your customers, your users leveraging these, these new stable bonds? Are there arbitrage opportunities that they're taking advantage of? Are There new borrow lend opportunities that they're taking advantage of. What are just kind of some interesting use cases that you've seen folks using stable bonds for.

Speaker A: Well one of the ones that I've seen a lot like has created a lot of buzz recently is these distribution platforms that instead of they want to issue stablecoins but they don't want to build the infrastructure to maintain the stable coins. So they basically issue a stable coin backed by our assets and they're keeping 100% of the yield that we provide for them. So we have a lot of customers that have gone uh that's why I say that we're sometimes B2B2B B2B2C also that's one of the B2B2B so there's basically these large distribution uh distribution networks that are already crypto savvy and already crypto native that need these assets on chain instead of building this infrastructure in each one of the countries to issue these assets. So, for example KRQW that's uh, uh KRQW that from Korea they use our KTB asset to collateralize their token. Uh uh, uh amongst others no that current the NDA that I shouldn't tell. No but uh basically this one I say because it's public. No but basically you have a lot of people that don't have to have a physical presence in these countries and have a treasury that manages the maturity line of each one of these bonds and managing that investment portfolio each one they, they could just use our token in the back end to, to issue their token. Now which are another that it also has me very interesting. Well the non crypto native companies and fintechs that are around that right now they're seeing to the sides and saying hey maybe embedded in a wallet makes perfect sense to bankerize all these uh, all these, all these users that we already have and also we have for example some micro lending platforms that have over 500k users that are implementing a wallet and they want to use us for rewards or they want to use us as a savings account for their users and being that that nature of that all in one app. No. Or that could be from the B2B side for, for me for example I am a crypto native worker. No And I don't have and usually all my financial services are on chain. How do I get uh if, if you are dollar based how could you budget yourself dollar based on chain if you don't have a Mexico alternative and Mexico has a fluctuation of around 20% of pesos versus dollars. So one year your, your expenses could be 20% higher or 20% lower. And you need that position on chain in order to actually ah, have financial planning. And that's the same with companies. Ah, so uh, that's from the individual aspect. Then you get people that are doing cross border. When you see that you have a yield bearing assets on both leg of the cross border that each one is earning I don't know, seven bips a day or five bits a day. But Mexico market's so efficient that you can go get the FX fee from 5 bips. Imagine if you do the two legs of the transaction with your bearing assets, you might even end with the profit, you know, after reducing with the cost. No. So it's, it's, it's, it's very interesting how different people are using us, are using our nails or to build spaceships or to build chairs. Just to go to a final loop. No here, no. So we have a lot of spaces, builders, we have a lot of chair builders. No. And that's the power of blockchain, that composability of you providing an element. And that's where real innovation happens when you grab two technologies, join them together to do a new use case and address a new use case. You know, and who knew that smartphones and uh, Internet and GPS is going to create Tinder just to put you an example. So, so that's, that's basically, it's, it's the way how you combine these ingredients that's very interesting. You know, uh, and you can go from what I said before this non fintech as crypto savvy fintechs. The crypto savvy fintechs that want to have their stable coins, the non crypto savvy fintechs that want to enable banking for their users, stable uh, coin issuers that want to issue without having a presence in that country, you know, and having that position for their clients, persons, uh, such as myself that do cross border payments, you know, between myself. No, uh, and cross border import exporters or treasury also OTCs that want to do treasury optimizations know that they basically have a big float on dollars and a big float on Mexican pesos, but they rather have that yielding instead of putting extra steps to actually put it to yield. No, because the extra step is you have to have your banking account, you have to have your investment account, you have to send money from here to there, you have a lockup in your investment account, you depending on the horizon or the maturity of the bonds that you bought. You could sell them or buy them not to have access to those to that money that simply be a blockchain. With one click you swap into USDC or with one clip you ramp it into your Mexican pesos that we're actually providing right now. MXN ramps that our products are easy to buy via MXN transaction. You can get fast into setes or Mexican tokens. We're also going to deploy in the coming weeks peaks for Brazil now that via BRL you can buy our DeSoto assets. So right now the six regions we have are Mexico, Brazil, Eurozone, UK with Gilts, uh, Korea with KTV. Ah US try with USD T bills though. And we're planning on expanding very rapidly on more than a dozen of countries by the end of the year while we enable the ramps for these countries.

Speaker B: No, love it. Um, please.

Speaker A: And only sovereign debt. That's our niche. Only sovereign debt.

Speaker B: Only sovereign debt.

Speaker A: Just so I don't get a call like hey can you uh, tokenize my, my real estate uh fund. You know we do sovereign debt guys. That's our niche.

Speaker B: Awesome. Maybe um, and please uh, feel free to correct where I might be wrong. But um. From the few times I've been to Mexico in the past year um, what I've been able to gather is it's very difficult to kind of become a fintech company and it is decentralization and non custodial solutions that act as kind of a workaround for that solution or for that problem. So how does the decentralized, the non custodial nature of Etherfuse make it possible to be innovative in a country like Mexico that doesn't necessarily have such a open minded fintech regulation right now.

Speaker A: It impacts a lot with the, with the comment that I was saying of the specific fintech providers that are not crypto savvy that they're learning that with a wallet they can be a bank but without the regulations of a bank? No. And being non custodial really provides you, you know that these users are taking decisions by their own hand that you're offering enough information for them for to know that these assets are back, that they exist not and that, that, that, that they're holding them themselves. No. So it's, it's your relay, you're relegating the power to the users. I think that decision realization and it's avoiding a lot of, of those regulatory matters and all that are more a symptom, not a cause. No. And regulation is always trying to keep up with current technology and I think That's a dilemma that's been for thousands of years. I just imagine the caveman trying to regulate fire and that's how you get laws. But yeah, uh, it's a very. The concept of non custodial has its advantages and there is trade offs than anything. No, just as it's easy, uh, it's easier for you in some aspects. It must be much. It might be harder for you in other aspects. No, but right now, given that it's such an exponentially better solution to what we, what we have nowadays, the trade offs are less and less and are getting as the world and as each one of these countries get to know more the technology and what you can build with it. No. And the use cases, they get more lenient towards it. And I think that's one of the strides that is happening for example in Mexico with the new regulation that they're trying to propose for digital assets. It's hard being holding latam because what applies for Mexico maybe doesn't apply for Argentina or maybe it doesn't apply for Colombia. So there's a lot of siloed aspects that you have siloed markets for each one. But I think the globality of blockchain is shedding a lot of light towards these regulations to move in conjunction.

Speaker B: That's an interesting question because um, like you just mentioned, regulators have to react. And after FTX collapsed, the way that the US reacted was Operation Choke Point 2.0 kicking all these people, all these blockchain companies out of their bank accounts, making it impossible to launch a blockchain company in 2023 and 2024 here in the US and this was just how we dealt with that. Uh, well, with the FTX collapse, um, and thank God operation choke point 2.0 is no longer a thing here. Uh, because this administration undid what the last administration did. But how do you keep your finger on the pulse for the various different regions that Etherfuse operates within? Because it seems like every other year outlook for regulators and policymakers can change. So like right now the US is trying to make laws with clarity Act. Mexico is trying to make new fintech laws. How do you guys kind of pay attention to what's going on with the regulators and the policymakers and each of the countries that you offer solutions for? And in what ways are you kind of immune to either outcome because of the non custodial nature of Etherfuse?

Speaker A: Well, yeah, uh, it's an interesting question and definitely it's hard to keep the pulse on. But our main focus Right now is that we issue out of Mexico. So that's where we. And regulated under Mexico. So that's where we keep our pulse mainly. No. So from where we issue is where we care. And we also avoid tending to other geographies that for example, we don't tend to US customer base and precisely until we get more clarity around how this is going to work and what are going to be the necessary things. No, we're going to see if we offer our stable bonds in the US in the short term or not. So it's very much dependent on where you issue from. Because where you issue from doesn't mean that you might be a company Internet company in Serbia and you're considering Serbian laws. But being in the Internet is worldwide. So that doesn't mean that other people from Zimbabwe can go into your dot com. So the same nature applies here in crypto. Know that it's mainly from where you're, you're regulated and you're issuing from the main concern. Cool.

Speaker B: Um, we have 10 minutes left and there's a few other things I want to talk on, so maybe we can just talk really quickly about EtherFuse FX. Why is EtherFuse able to provide USD to MXN transactions faster and cheaper than banks?

Speaker A: Well, I think that's a losing, uh, competition for banks. No, Swift takes in between three to five days. If you ever have done a Swift transaction. Uh, just to give a little bit of insight of what Swift Swift is international messaging system between banks that basically they uses to move money around the world. No, this, this, this system has different members that help getting money from one part of the world to the other part of the world.

Speaker B: No.

Speaker A: Uh, and settle. No. And the settlement times during those Swiss transactions might last between three to five days. No. Usually it's a bank that sends a message to the bank. You're sending money from Portugal to New York. Well, they send the money, the bank of Portugal talks to the bank and in the UK that then talks to the bank in the US and it can get stuck in any of that middle office. Is that transaction. Not only that, but you don't decide the FX rate that you're going to get at the end. And you're going to get that at the end of five days. No, you're going to. When your money appears in your account. No. So usually the fees that you see during banking on Swift is 3 to 5% know that you're losing and that's a huge financial cost, um, for a lot of, uh, people. No. And not only that but you have to subsidize that moment from when the money leaves to the money entries. No. So that also increases the cost the, the, the enthalpy that these, these types of transactions cost. Instead of crypto transactional uh, Solana takes 0.15 seconds. No. To accomplish. No. The settlement time is super fast. No. There is finality to the transaction that you're secure that's going to come by and from there on uh, not only in time, it's exponentially cheaper because you only pay for the gas fees. No. So that's maybe 10 cents. No. That you pay or 15 cents. No. That's a fixed cost no matter the money that the amount of money it's not variable, it's a fixed cost depending on the gas fees that you're going to send that are happening. Each blockchain has their own Ethereum might be more expensive. Solana might be cheaper. Layer uh, two might be cheaper as well. No. And it's pennies. It's infinitely more cheaper than a normal transaction. When you're talking in the realms of 100k 50k and you're paying 3k for transaction fees, it's stupid. No, like when you pay 50 uh, cents for that same transaction and get it on the same day also. So that's why I think it's a very uh. Then you get to the other aspect. Okay. How do you compete with the guys that are already doing crypto? No. For cross border. Well when you have the two legs of the yield bearing stable coins.

Speaker B: No.

Speaker A: The yield actually compensate the financial costs of those pennies. So yeah. That's how you compete then with that next layer of if your product's much better than banks. But is it much better than OTCS for example though?

Speaker B: Love it. You broke it down super simply actually. So thank you for that. Um, you mentioned settlement uh, finality, the value prop that blockchains offer. So what are the different networks that Etherfuse supports today?

Speaker A: Currently we support Stellar Solana, Polygon Base and Monad. And we are planning on expanding not only on more than a dozen uh, assets, new stable bonds that we want to issue, but also expanding on the ramps that we want to be participating with such as Pix in Brazil and other. Much more to come. No. And also on other blockchain networks that we announced on our time that we are currently in discussions with Nodu because the blockchain networks have recognized the importance of having these types of elements within your blockchain to actually build upon and help other people build upon of um, having nails within their ecosystem, let's just say.

Speaker B: So when you're going out and doing bd, what does that look like for you? Are you going to conferences and talking to blockchain networks? Are you talking to businesses? Are you talking to sovereign wealth funds? Are you talking to family investment offices? Everybody under the sun. What are the kind of target markets for your bd?

Speaker A: Uh, I would say right now at the moment it's everybody under the sun. Our amount is huge. So we might be talking to alternative asset managers that want to reduce, want to increase their net IRR to LPs. That's basically alternative asset managers get ranked of what's the investment return to their, to their limited partners and transaction costs of 3 to 5% uh, in a fund that provides real estate is huge. No, when you can decide between if you're upper quartile performer or a middle performer. No. Or an average performer, uh, or uh. So yeah, it's everybody under the sun. No, mainly it's people that are already interested in crypto and it might be from lending protocols on Defi, on Solana, or it might be these alternative asset fund issuers or it might be the fintech providers. No, but basically with the BD right now that we see is first getting people to know how our product works and planting those seeds so see them and then when it's time to sow them it's much easier that conversation. Uh, but yeah, uh, right now I think we have focused a lot in the lately with those more crypto native uh companies and also blockchain foundations to really sell what we're doing now in the terms of what are the benefits that this is going to bring for their ecosystem. Also from traditional finance, our banking partners, for them to know that this is going to be a moat for them in the future and a uh, way for them to grow passively their aum, um, by partnering with us to uh, proceed to do distribution on chain a uh, sovereign debt held under them. So it goes hand in hand. Also curiously enough we have had a lot of interest from governments lately to help us to, to, to for us to help them tokenize the, their sovereign debt and put them on chain because they have seen the benefits of having this open ecosystem that anybody can build upon to provide better financial services for their communities.

Speaker B: Awesome. And as we zoom out and wrap up the kind of last question I want to dig into, and this is kind of higher level, maybe a bit philosophical but, but at the beginning of the year, on January 1st of this year, I would have bet money that the stablecoin market market cap would have at least grown by 50% by July. Uh, right now. And we've really kind of see it just stay stable throughout the whole year. It's been hovering at around $300 billion in market cap. But we've seen RWAs just kind of grow up and to the right in terms of adoption and, and funds and things that are being tokenized. So from where you sit, from your perspective, why do you think stablecoins have struggled to grow in market cap and we've seen just the RWA asset class more broadly grow much more rapidly?

Speaker A: Well, I think it's a saturation point and growth is nonlinear for each one of these assets. No. So, uh, as you could see with $300 billion outstanding in stable coins, you know, they have had a pretty good run and they're going to keep having a pretty good run and that it's more of a moment of the market. No. And when you see stable coins and crypto prices in January were double of what we're seeing today. So uh, if it's, you have to see a lot by the other side of the coin in that transaction. So if you put it, let's put it on bitcoin prices of January of 120, that could mean that we will be around 500 billion. No. Or 600. 600 billion. Uh, and RWA is right now a, a new uh, uh, very uh, early. No. In terms of, of where it's grown. Might have like three years running now we're live since 2024. You know, then and right now is when you're seeing that great migration and with a lower saturation point for the industry of this asset class growing.

Speaker B: No.

Speaker A: Within crypto. No. So also the growth is non linear. We might stagnate a little bit more in the future. And it's different uh, behaviors for each one of these assets class because they're driven by two different things.

Speaker B: Totally awesome. Uh, Andy, what is the best way for somebody to get in contact with you and who do you want to talk with?

Speaker A: Yeah, perfect. Well, uh, I would say that the best way to get in contact with us is to reach out via our webpage. Um, you could easily book a demo with me would be our webpage and I can show you what we do at Etherfuse. Also you could find me on Twitter with Andy Defi. Andy, as it sounds fi, that's basically it. And defi. And yeah, feel free to reach out. No, I'm always super interested in talking to new people and show them what you're building know and give them the show me your crib experience. No, but it's your business. No. Uh, and you can reach out there. I'm happy to tend to anybody know that's more interested in talking about this.

Speaker B: Awesome. Etherfuse.com is where anyone can go to find out more about what Etherfuse is and what they're working on and to also book a demo. And so with that said, Andy, thank you so much for taking the time to chat with us today. It was fantastic to connect with you for, uh, the Smart Economy podcast. It was really great to have you on.

Speaker A: Thank you so much, Dylan. This was great experience and I hope to see you again soon. Uh, it's always good seeing a familiar face in these conventions.

Speaker B: Awesome. Well, uh, I'll definitely be coming to find you next time, um, at a conference where I see Etherfuse.

Speaker A: For sure, for sure. I'll have you their merch saved.

Speaker B: Love it. And I'll rock it during, uh, the next podcast episode too.

Speaker A: Yeah, I'll get it down there soon. No, that's for sure.

Speaker B: Awesome. Cheers. Thanks a lot, Andy.

Speaker A: Thank you. Take care.

Speaker B: Thank you so much for tuning in to the Smart Economy Podcast. To stay in the loop with all of our latest episodes and insights, head over to www.smarteconomypodcast.com and don't forget to subscribe, uh, to our YouTube channel for all of our video content. If you enjoyed today's discussion, please consider showing your support by liking, commenting, reviewing and sharing this episode via your favorite podcasting platform. Your feedback helps us reach more listeners and bring even better content your way. We'd also love to hear from you, so please drop a comment on Spotify or YouTube to share what topics you'd like us to cover next or who you'd like to see as our next guest. And if you or someone you know might make for a great guest, please reach out. We're always on the hunt for fresh voices and new perspectives. And of course, for our Neo token holders out there, please consider voting for Neones today as your council representative. We've proudly been serving the Neo ecosystem since 2017 and will continue to do so by putting portions of our council rewards directly back into ecosystem growth initiatives. Once again, thank you so much for tuning in and we can't wait to catch you next time.