Introduction The Decentralized Finance (DeFi) Revolution is taking over traditional finance (TradFi) and centralized exchanges (CEX), with billions in...
A journey of a thousand miles begins with a single step. In this interview, we will see how the CEO of Stably, Kory Hoang, has built up the ideas, visions, and missions for Stably to prepare for the future of stablecoins and blockchain in general.
(Source: Toks Tech)
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Transcript of video below, there may be some grammatical errors.
TOKS TECH: Okay hello everybody. Welcome to today’s conversation. It’s been a while since I last did a video podcast and I had to come out of myself for some… for today’s interview with Kory Hoang of Stably, the CEO of Stably. Kory, can we… can we know who you are and give us a brief expression of yourself?
KORY HOANG: Hello, can you hear me?
TOKS TECH: Yeah, I can hear you, so can you give us a brief introduction of yourself and what you do actively?
KORY HOANG: Yes, certainly yes. My name is Kory. I’m the CEO of Stably. We are a fintech startup from Seattle specialized in creating stablecoins and decentralized financial systems. We were founded in April 2018. My team and I, team of four co-founders, some of which are former Amazon engineers. We raised a $500,000 seed round from venture capitalist and angels, and we took that money from April to December of 2018 to develop USDS, which is now the seventh largest US dollar back stablecoin in the world and we launched it officially in December of 2018. We listed it on Bittrex and within… within two or three months, within two months actually, we listed it on Binance as well. We are one of the five stablecoins or six stablecoins that are featured on Binance. And I think in April or May, we also launched on Binance DEX, we became the first stablecoin to go live on Binance chain, Binance DEX as well. And yeah, we’re gaining a lot momentum. We’re growing very fast and we’re working with major enterprise clients now to help them issue their own brands of stablecoin for their own ecosystems. And in addition to that, we’re also working on acquiring a trust company charter for the state of Washington, so that we will become a fully regulated state charter trust company which will allow us to do a lot more in terms of the products and services that we offer from custody to funds processing so stablecoin issuance to providing compliance as a service or even building exchanges and providing infrastructure for people to build exchanges and lending protocols on top of us.
TOKS TECH: That’s question and it’s an extensive introduction that’s has a lot of meat in it, a lot of detail. So I mean when… when we… when the conversation to interview, one particular question that’s I was sure to ask was and I’m going to ask you right now is: Don’t we have too many stablecoins in the space, we have Tether, we have Paxos and all of those, and I’m beginning to think that is including Facebook is bringing us its Libra proposition for another question, I’m thinking it seems like at this moment in time the rest is for stablecoins, what is it about stablecoins that’s missed Stably want to go into the space and… for this first mover advantage in some sort of time being having a market capitalization of almost four billion and Paxos for instance has had to be capitalization of about sure in a fifty fifty nine billion USD assume Stably around three million USD I’m thinking how do you catch up to this and is the stablecoin market saturated?
KORY HOANG: Yeah absolutely, I think it’s actually closer to five million. There’s another million dollar worth of our stablecoins on Binance chain that’s not reported on coinmarketcap. Anyway that is very small compared to a lot of the largest stablecoins, right. To answer your question, I’ll break it up into two parts. First is our vision of how this industry will evolve in a long run, because ultimately, we’re planning for… you know, the future in the long run. We’re not playing for a short term. And secondly is how we are different or how we plan to grow differently from… you know, or differentiate ourselves from the other players. So first of all… you know, our vision of this whole entire industry is still very early, right. You might think that there are a lot of stablecoins out there and bigger players jumping in might make it more saturated. But this is only the beginning. We believe that there are going to be many many different generations of stablecoins that will be released in the future as more and more entities and organizations realize the benefit that they could derive from issuing their own brand or you know their own stablecoin for whatever purpose is that they need for their own ecosystem, right. So a lot of people have a hard time understanding why a business like Facebook or Walmart which recently announced that Walmart’s going to issue its own stablecoin. They kind of struggle to see why… you know, these businesses need stablecoin. First of all, there’s three major reasons on why businesses might potentially consider issuing their own stablecoin brand. First of all is the amount of earnings they’re gonna make from it, so in order to have a stablecoin, you need to have a deposit of money, right, to the back of that stablecoin. That deposit of money could be monetized in several different ways. You could earn first of all earn interest income off of it and secondly if you have the appropriate lending license or banking license, you could actually lend that money out for consumers or businesses just like a regular bank. So right now that hasn’t happened yet, because most stablecoins are based on the trust company model where a hundred percent of the reserve needs to be there and cannot be lent out. We believe that in future generations of stablecoin, we will have something similar to the banking system that we have today where the reserve of the stablecoin could be lent out just like a regular bank account but you… it will still be redeemable 24/7 for the underlying so this is something we don’t have today yet, right. So I’m kind of talking about the future now, so that’s monetization. Secondly a business might want to issue its own stablecoin because it saves money in doing so. Right now Walmart has to pay these are the Mastercards… you know, one… from one to two to three percent per sale transaction that their customer used a debit or credit card to settle with or to pay with. So if you add up all the sales that Walmart makes a year, that’s a lot of money, right. Like for example, Walmart has… I think five to six hundred billion dollars in sales in one year, now if only like half of that is main credit or debit card which is like two hundred fifty billion dollar, one percent of that it’s already 2.5 billion dollars, right. So Walmart instantly say three to four to five billion dollar a year if people switch to using Walmart stablecoin to pay for Walmart’s products instead of… you know, using their credit or debit card. So that’s the second reason. So we have earnings, we have savings. The last reason is marketing. All right, if a country with its own population can have its own brand of money, then why shouldn’t a company or a business organization that has a lot of either customers or partners or employees, why shouldn’t they be able to issue their own brand of currency… you know, because that would allow that business to not only have a lot more marketing power, it would help with customer loyalty right a business could easily issue like say Walmart, Walmart could easily issue a Walmart stablecoin and tell its customer that hey if you used Walmart’s stablecoin to shop in Walmart, you get 2% discount or 3% discount. Walmart’s already earning extra money and saving money so they can afford to get a lot of these benefits back to their customers to incentivize them to become more loyal and to acquire the stablecoins. If customer have Walmart stablecoins, guess where they’re gonna look likely shop, Walmart right? So these are the three benefits that comes with a brand or an organized organization issuing their own stablecoin. If they have unique features or utilities that they could add on top of just a basic stablecoin, right so their ecosystem has his own network effect, it has its own characteristics, whatever characteristic properties that they want to build or program into the stablecoin itself. You can do that now… you know, stablecoins programmable money, so that’s what we think is going to be the second generation of stablecoin coming out in the next 12, 24 or 48 months, right. The first generation that we have right now what we call Gen 1 is very basic. It’s like our stablecoin USDS similar to Tether, similar to USDC, PAX so whatever, right. They’re very basic, they are a tokenized version of the US dollar, but that’s it. It doesn’t have any additional utilities of benefits, right. When brands like Walmart or Facebook or Costco or even Amazon issue their own stablecoin, not only will it have all the… all the benefits of Gen 1, it will have additional benefits from… you know, their own ecosystem that’s what make it Gen 2. And then generation 3 stablecoin eventually in some… in the future is when we have a lot of generation 2, people are going to start making baskets units… basket units of… you know, Walmart, Facebook, maybe now had like an e-commerce stablecoin, and that e-commerce stablecoin is gonna be made up of Amazon stablecoin, Shopify stablecoin, whatsoever, right. And if you want to talk about fourth-generation stablecoin, maybe that’s when banks officially issue stablecoin, and they used a deposit to facilitate lending operation, right. So now stablecoin itself is involved in the fractional reserve banking system that… you know, pretty much the whole world is running a part. So there are a lot of… there’s a lot of room for a company like us to grow and… and make a name for ourselves in these upcoming years, because still very early in this race. And we differentiate ourselves from the competitors or other at stablecoin issuers by… you know, not trying to build our own brand name and focused too much on our own like USDS brand name or Stably, but we work with larger brands, larger enterprise clients with much larger network effects than us. And we built stablecoins for them, right… we have the technology, we have regulatory partners that could offer compliance and custody solutions. And we could help anybody that are looking to issue their own brand of stablecoin do it and… you know, we’ll share the revenue with that brand and we do that they take care of most of the marketing while we take care of just the back end process and the technology.
TOKS TECH: All right, so have you build any stablecoins for any enterprise yet?
KORY HOANG: Yes, we’re working on a few projects right now. And I think two or three months, we will issue a gold-backed stablecoin in partnership with an enterprise client who is a major gold dealer. So they have a reserve of gold that they want to tokenize and create a stablecoin with which would help open up a new sales channel for their business instead of… you know, selling gold directly. You can sell gold stablecoin which is essentially selling gold. These gold stablecoin would be redeemable for gold that is held at a safe storage vault somewhere. I can’t… you know, disclose too much details about this project, but we will launch it in about two or three months. That stablecoin is not gonna be named Stably, it’s not our brand, it’s not our gold neither. So we’re just… you know, using our back-end infrastructure and technology to help this company issued their own coin
TOKS TECH: Which is quite interesting. I mean gold-backed stablecoin, what is the units of transaction for instance we know USD but that is fiat-backed stablecoin… you know, 1:1 USD could be one simply because it is one-to-one, so how do I spend a gold-backed stablecoin for instance on an exchange to purchase BTC, to purchase ETH?
KORY HOANG: Yeah so again, I can’t disclose too much details but typically what you see in the market is a gold-backed cryptocurrency or stablecoin would be packed to a weight amount or a specific amount of weight in gold. For example, one token would be redeemable for one ounce of gold. This is the case of Paxos. Paxos recently released Paxos Gold which is… you know, going to be one of our competitors in this market. Paxos Gold is redeemable for either gold or cash. And one token, one PAXG is equivalent of one ounce of gold or the same equivalent amount in cash in US dollar. So our process will run very similar to that. You can either redeem it for a specific amount of gold per token or you could redeem an equivalent amount of that token in cash and we… you would go through our partners and our regulated partners in order to go through the issuance and redemption process with the token.
TOKS TECH: That’s interesting. One issue when it comes to stablecoins is… and you also know this contradiction with Tether where people were claiming that Tether did not have the equivalent amount of money in USD, see the number of Tether on the market that is one-to-one because it supposed to be one US dollar to one Tether, same with Paxos, with USDC. And I mean at the point, I think they have a bank statement released which should as they currently actually did have their balance, so now the question to you would be your market capitalization as I mentioned them to correct it should be about 5 million USD at the moment, is we have… which means, we have five million Stably on the markets for users to transact with, so as principal ethically, you supposed to also have 5 million USD in a bank, is this the case, you have 5 millions for 5 million stablecoins?
KORY HOANG: Absolutely we have through our regular trustee, Prime Trust have a hundred percent of our reserve. And we do monthly attestation by a third-party accounting company to make sure that… you know, every single token that we mint on Ethereum or Binance chain is backed by an equivalent amount of US dollar that’s held in the reserve, so you can even log in to our website and check to see how much money is in our reserve right now versus how much how many tokens we have printed because we use the… we use a live API fee directly from Prime Trust in order to broadcast the balance 24/7. And you know… Tether is definitely… you know, a very interesting case because they have shown that they are still very stable, right. They’re trading at near a dollar while their reserve is sitting at like 76 percent or something like that, so why is that? You know, how can that happen? To answer that question, I like to put it in a larger… you know, kind of a bigger picture, a lot more context. If you look at the current banking system, right now, you put $100 for example into a bank account, does that mean that… that hundred dollar is always there? No, no, not at all, because the bank they take a hundred dollar and they lend it out to other people. Now technically they’re not allowed to lend now all $100, they’re allowed to lend out maybe $90, but they have to keep $10 in reserve for you just in case you come in and you want to redeem it, right? And as long as nobody all as long as everybody doesn’t redeem all at once.
TOKS TECH: I think your video is gone off.
KORY HOANG: Hello, can you see me now.
TOKS TECH: Yeah, I can see.
KORY HOANG: Okay yeah, so as long as nobody come in and redeem all at once then the banking system stay fine, right? It doesn’t collapse, it doesn’t have a bank run, everything operates perfectly. That is the case with Tether today. Even though it is only fractionally back with US dollar, the fact that they make redemption so difficult and they limit redemption to only a very few select number of market makers, and… and you know, whales as long as the these whales don’t panic and want to redeem all at once, then the system is okay. Then… you know, Tether is still trading at parity and actually… you know, you could say that Tether would be the first fractionally back stablecoin in the world at this point because of this due to… you know, a lot not not because they intentionally did that, but because as a result of… you know, potentially fraudulent or hopefully not criminal activities, right. But it’s a foreshadow for the future because when banks like… you know, JP Morgan, Wells Fargo or even other banks in other countries like HSBC or whatever decides to get into the stablecoin game and they want to issue their own stablecoin likely their reserve for those stablecoins not going to be a hundred percent back neither. You know, it’s gonna follow some sort of regulation where they put a ratio of say ten to twenty percent which is…. you know, the ratio of banks right now, they keep 10 to 20 percent of the reserve, and they lend out the rest just like a regular bank operation, so that could definitely come into the future as well. For us right now, our market cap is small because, yes it has to be a hundred percent back, for USDS though, we… you know, a couple of things, USDS is not… you know, where we are going to focus a hundred percent of our energy on it was basically the platform that we built to demonstrate our technology and demonstrate that we have the infrastructure to issue a stablecoin, make it work. Now that we have that, we’re going now to work with other bigger partners that wants to issue that wants to use our technology as well to issue their own stablecoin. When those guys issue their own stablecoin, they bring in their own… you know, money, their own capital, their own balance sheet in order to jumpstart the stablecoin. So for example, the gold dealer that we’re working with, they’re going to jumpstart their gold stablecoin with a lot of gold, can’t disclose on the amount, but it is a lot of gold like more gold than…. you know, you and I we’ll probably ever see in our lifetime. But that’s not my gold, that’s… that’s their gold, but because I work with them, they’re gonna bring in their own resources and network to make it work. And I can get a small revenue sharing piece of that. And… you know, I’m happy to do that, and I’ll do that the same thing with many other brands. And you know, I’m right here in Seattle, I’m looking at a Starbucks headquarter, right now… you know, with the flag, so I am hoping as a client and then you can go to Starbucks and see a Starbucks dollar stablecoin one day, right? And hopefully it will be the back end engine that power that…
TOKS TECH: Awesome. Now you do mention revenue sharing more though, we will be curious because stablecoins are supposed to be stable. That’s the whole point and… you know, even though people outside of cryptocurrencies do not understand that the fluctuations in prices, the fluctuations in prices basically helps people make some money off them the difference. What is the revenue generation model for stablecoins? How do stablecoin companies make money?
KORY HOANG: Yeah, sorry, I am looking for my key…
TOKS TECH: Okay, so you found your key…
KORY HOANG: I think so.
TOKS TECH: Alright
KORY HOANG: Okay, sorry. Yeah, lots of way to use a monetary stablecoin, right? Let’s use the most simple way, interest income, all right, you have interest income that you earn so it is a fiat-backed stablecoin then the fiat reserve will pay interest as long as it’s not like a negative interest currency like the Euro or whatever, right? That was not be any interest, actually lose money. If it was more… maybe some third world country money like Vietnamese dong, right, Vietnamese dong is paying 8% a year, the US dollars being about 2% a year… you know, so…
TOKS TECH: There’s from what you saying does it then make more sense to have your stablecoin back by developing country currency considering the fact that they pay more interests, more interest on the deposit. There’s no business sense I don’t know we gotta put on making.
KORY HOANG: Yeah, there it’s a double-edged sword, they have high interest, but they also have higher inflation, so yes, you get interest income, but the total value of your… your whole entire money is gonna be our… you know, balance. It’s gonna be worse less over time, so it depends. It depends on the situation, right. Let’s say, there is a developing country with decent interest rate, but also kind of high inflation, but you look at that country and you make a… you make an analysis and you said, hey this country will benefit from the adoption of stablecoin, and I think stablecoin will… you know, adoption will grow really fast in this country, because this country doesn’t have existing banking infrastructure and what not, right. In a situation like that even though the inflation is high, it might be worth it to expand a stablecoin business operation into that country because if people really adopt it and that the rate of growth for your reserve is fast enough, is high enough, then inflation kind of doesn’t matter at that point, right. At the end of the day, you still own a reserve of fiat that you know that generate interest income that you get to keep. And then the rest of your client they will have a claim to that reserve, so that reserve is not really your money, is… you know, there’s clients money or the token holders money and… but the interest income that’s generated off of it, even though there’s a lot inflation, yes, but the interest rate is good and you’re getting a lot of reserve, so you know, it kind of cancel out, I guess.
TOKS TECH: It is an awesome interview. I just checked the time lasts for the interview because we have 30 minutes max. So what I would have to ask you in Stably and your projects, where is the Stably in the next two to three years?
KORY HOANG: Ah, absolutely, I think a couple of things where… you know, we’re getting our trust license, we’re planning to get that in by the end of 2020, which will allow us to… you know, be a much more powerful stablecoin company. Also we are… you know, planning to partner with more major brands were… even even players like Libra, right. We are… we just applied to Libra camp actually recently. And we’re looking to… you know, build stablecoin on Libra as well and kind of coexist but a lot of these people out there. So yeah, I think it’s a very positive and bright future for the company. And we look forward to… you know, partnering with more brands and bringing stablecoins adoption to the masses a lot quicker through these brands.
TOKS TECH: That’s awesome, it was nice having you here, Kory. And we look forward to seeing Stably grow and become as big as Tether and Paxos as you last one to enterprise stablecoin developments. I mean we would really get in touch and then see what happens.
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