🎙️ Ep. 59. Why Klarna’s Stablecoin Is More Than PR

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This week, Simon Taylor is joined by Nilan Peiris, Chief Product Officer at Wise, and Luca Cosentino, SVP of Product at Cross River. Nilan brings deep expertise in cross-border payments from building Wise's platform that now moves £200 billion annually across 90+ banking relationships. Luca leads Cross River's crypto efforts at a bank that serves as infrastructure for many leading fintechs.

🎙️Listen to the full episode here on your favorite podcast app or 📷 watch on YouTube.

Key Takeaways 

Stablecoins as Corporate Treasury Infrastructure

Klarna's announcement of KlarnaUSD - partnering with Bridge and launching on Tempo - marks a notable entry point for BNPL operators exploring stablecoin rails for internal treasury operations. As Nilan Peiris framed it: "This is a pretty sweet use case for a USD stablecoin", noting that currently "to move that money, they use Swift messages today, and those swift messages eventually end up in the US with wire transfers happening between US banks, and it takes quite a long time to just move USD between your own accounts."

Luca Cosentino pointed to dual motivations driving fintech interest: "Number one, there is some genuine simplicity in moving stablecoins over dealing with traditional rails... the second reason is a progressive shift from fintechs, from service providers to platform orchestrators to ecosystem orchestrators, and the stablecoin is one way to create an ecosystem around what you've built."

The abstraction value proposition is particularly compelling. As Luca explained: "Stablecoins are neutral and abstraction at the same time, and that is what makes them, in my opinion, very unique."

This contrasts with traditional fintech abstraction layers that typically introduce trade-offs or opinionated decisions.

Cross River's Fiat-Stablecoin Interoperability Platform

Cross River launched a stablecoin payments platform unifying stablecoin and fiat flows into a single system. Luca outlined the complexity this solves: "The previous situation is you get an ACH that settles in a wallet. If you want the money available immediately, you need to prefund that. Then you need to park that liquidity as some stablecoin or market maker issuer... you have the two ledgers, one for the Fiat rails and one for stablecoin. And then you reconcile and make sure that payment one is reconciled against payment one on the stablecoin."

The platform eliminates this operational sprawl entirely. As Luca described: "There's no need to have different ledgers, there is no need to have different vendors. There is no need to have different pools of capital, but everything can be in the same place."

Notably, demand is coming from unexpected sources. Luca shared that a non-crypto-native company recently approached them saying: "We need a way to send you money. We don't want to do ACH work because maintaining ACH is high compliance cost for us... And what if we just mint stablecoin from our account and we send it?"

Remittance and Dollarization Dynamics

Nilan offered a nuanced view on stablecoin adoption patterns from Wise's global perspective. The distinction matters: "The places we see USD adoption and people holding large USD balances are places where customers don't really trust their currency... The areas where we see customers beginning to hold stablecoins like USDC or other variants, is where customers don't trust their governments, and they don't trust their governments that put in place capital controls."

He raised an important tail risk: "The day you give a stablecoin and one USDC say, is a stablecoin, and you get back 99 cents for whatever reason, something's happened, and it just needs one person to mess up... and you'll have a little bit of a flight away. But I think these are the types of crises that will happen, and the industry will get through and work its way through over the next few years."

MPC Wallet Consolidation and Customer Experience

Paxos's acquisition of Fordefi follows Stripe's Privy acquisition and Fireblocks' Dynamic deal, signaling infrastructure consolidation in the wallet-as-a-service space. Luca confirmed the direction: "MPC probably gives you the flexibility to be very protective on the custody side, but also very flexible on the experience side... I think MPC is a technology that is here to stay."

Nilan emphasized the experience imperative: "If you look at the direction of travel in crypto, it's been in hiding away the complexity whilst simultaneously increasing the security and the distribution of the platform... I've seen some pretty slick apps coming out that are sending stablecoins and stablecoin variants around the world as ways of sending money and moving money."

Banks and Stablecoins: Testing vs. Production

US Bank's stablecoin test on Stellar puts them among growing traditional finance interest in digital assets. Luca's assessment was measured: "Very excited to see banks playing with stablecoins... Public blockchains should have more respect from the regulated industry than what they have today in general. Now, every time I read about testing, it's hard to make comments, because you don't know what's behind that test... I generally get a little bit more excited when I see that things are getting real. Testing, it's easy. Getting real, it's not super easy."

Nilan offered strategic analysis on JPMorgan's payments innovation: "JPMorgan's been probably the bank that impressed me the most over the last decade in terms of how it's grown its payments business... they are, I think, the largest USD Swift clearer in the world. And then you think about the challenge, the threat they've got there from stablecoins most completely killing that market."

Looking Ahead

Luca posed a strategic question for the industry: "Are banks going to become protocol before protocols become banks?"

His perspective: "The partnership of the two is where the most value will be unlocked."

The infrastructure buildout continues. As Luca summarized Cross River's ambition: "We do believe that beyond the use cases that we can power today, we're really building an infrastructure that 20 years from now is still going to be there, and five years from now is going to be super obvious."

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