Hi, I'm Greg Kidd. I'm the CEO of USBC, which are tokenized deposits. Also the president of Vast Bank, which is the issuer for those, and work with Hard Yaka, which is an investor in many of the fintechs. We're a big user of yours, and thanks Jess for coming today.
Thank you very much. I'm Jess Houlgrave. I'm the CEO of Wallet Connect. I'm based in Lisbon. I have a background across all things fintech. I'm very excited to be here.
So, Jess, Wallet Connect is a term we hear, but you've actually got the company that's called Wallet Connect. I take it you have the trademark name for Wallet Connect.
We do have a trademark for Wallet Connect. That's right.
So, just tell me a little bit about your background and tell me what Wallet Connect is, just for our audience so we know the scope of what you're doing.
So, my background spans a mixture of things from economics, traditional finance. I learned about Bitcoin about just over 10 years ago now and went down that rabbit hole. Did a few different things in the merchant acquiring space, and most recently I joined Wallet Connect and I've been there for two years now. Wallet Connect is a network, both a technical network as well as a broader ecosystem network of about 700 different wallets. Those range from the everyday wallet that a consumer might have on their mobile phone like MetaMask, Trust Wallet, OKX Wallet, all the way through to the custodian and institutional wallets that you might have heard of like BitGo or Fireblocks, for example. And on the other side of the network, we have about 60,000 different applications. These could be a Web3 game, a DeFi protocol, a payment processor, and the merchants that sit behind that. Our technology allows encrypted communication between each side of this network to facilitate different messaging types. So it might be a compliance message, but it might result in an onchain transaction value. This year, we'll move about 400 billion dollars of transactions across all different blockchains between apps and wallets.
And so, is Wallet Connect a protocol? Is it like a TCP/IP kind of protocol, or is it a private proprietary way of doing things?
It's a protocol. So it's open source. TCP/IP is a really great analogy actually. The way our platform works is that if you are a wallet, you integrate some version of our Wallet Connect wallet SDK. And if you're an app, you integrate in many different ways, either directly with our APIs or with an SDK that's built on top of the platform. We run a relay system on a decentralized network of nodes. We have about 22 different node operators that support these messages. Effectively, it's like a handshake being created between the app and the wallet to open up a communication channel.
So, I confess we're actually a client of yours already. I just didn't know if it was the same Wallet Connect. That's why the trademark question. But yes, when we do our Stripe-like drop-in for all the crypto wallets and some of the other custodial wallets, it is Wallet Connect. Can you talk a little bit about the boundaries between where you go and where Stripe goes in terms of what this allows sites to do for taking money?
Yeah. So really you can think about the end user when they go onto a merchant to make an e-commerce transaction. Firstly, they're asked, 'Do you want to pay in crypto?' They click yes. And then they're asked to connect their wallet. When you see that QR code pop up, that's you.
That's the point at which Wallet Connect gets pinged.
So you scan the QR code, and that's what opens up this connectivity channel between the app and the wallet. Then the app can ask all sorts of different things. In the merchant e-commerce use case, it's asking the wallet to make an onchain payment. But it could be all sorts of different messaging under the hood.
That's how I would connect my non-custodial MetaMask wallet. But are you doing custodial wallets as well?
One of the biggest areas of growth for us this year has been in the custodian and institutional space. A few years ago, most institutions that were holding crypto were just doing that. They wanted to have exposure to Bitcoin or Ethereum. What we've seen over the last few years is a lot of institutional capital now wants to do things with that crypto. They want to be able to stake, vote, participate in DeFi pools, and many other things. Our network is a seamless way that as a custodian you can provide access to all of that without needing to make one-by-one technical integrations with all of these platforms. You still have a lot of security. You can allow list only specific apps, and you can customize the policies and the ways that your custodian wallet and those applications can interact with each other. It's a really effective way for custodians to expand their offering to those institutions.
So, let me just make sure I have this right. I'm used to doing things through Stripe by using my credit card or debit card. I'm just back from India and China. In India and China, I was scanning QR codes all over the place. But each of those was like the India one was just in India. It was India Stack. The identity was from Aadhaar. In China, it was WeChat and I was just doing it within a big WeChat network. But it sounds like Wallet Connect is more interoperable than all of that. That this would work across really any geographical boundaries and anything that can be done really. I guess you're bypassing the card networks and going right to the wallet. So that money flows over either blockchain rails or other rails, but not through the classic clearing and settlement of the card networks. Is that correct?
That's correct. So Wallet Connect is a truly global platform aside from sanctioned countries. It can be accessed and used anywhere. Our end users span pretty much every country in the world really. Either through the QR code, and you're right, in Asia that's a much more familiar form factor than it is in some other parts of the world, although I think that's changing a little bit. So either by scanning our QR code or if you're doing mobile to mobile through a kind of deep linking or universal linking action, there are various ways of instantiating those connections. But it is truly global and it does pipe past the card network. We just launched recently in Singapore with a payments company where the QR code is displayed on the point of sale device. This means that once the wallet scans that QR code and hits pay, what's happening underneath the hood is onchain. A transaction is taking those stablecoins from the wallet directly to the payment service provider.
So I'm going to ask, I'm kind of climbing down into the weeds. Do I scan it from a viewer within the app, or what if I just scan it with my camera and there are multiple wallet apps on my phone? What happens then? A little bit of nuance there.
It slightly depends on the operating system of the phone. If you scan it with your Apple device, it will probably open the first crypto wallet that you installed on your device. On Android, it tends to open up the last crypto wallet that you used ironically. Typically, we suggest end users if they're opinionated about which wallet they want to use, that they do it from in the app. But many users still only have one mobile wallet. So if you just scan it from the operating system window, then you'll get to the right place.
So you're all technology. You're not like a regulated entity.
No. No. We really class ourselves as a messaging system. We don't sit in the flow of funds. We never touch the funds. We never even actually see the messaging that's being passed between the app and the wallet. That's fully encrypted. It means we can't see the transaction at all. That's really important from a privacy perspective, but also from the perspective of front-running transactions. It's really a very secure communication channel that just happens between the app and the wallet. We're completely out of that.
You do the identification, the authentication, but you leave the authorization to the wallet to figure out with their risk rules or whatever what can or can't get done.
Correct. Exactly. It's very customizable. Different wallets, especially if you're thinking about a custodian institutional wallet versus a MetaMask or a ledger hardware device, all of these different wallets will have very different policies, permissions, ways of working. You can customize that in the way that you interact with the network.
So, do you get sucked in on some of the regulatory hoopla about this? Like the way I think most countries have not figured out how to deal with DeFi yet. They've just basically given it a hall pass, including the Americans and the Europeans. Is that you want to just kind of give an update on the regulatory status and basically how you're kind of navigating those waters?
So for us as a company and as an organization, because we're not regulated, we tend to stay a little bit out of that. There are a couple of really interesting things that have happened over the last year though. One is in Europe with the MiCA regulation, and in Singapore with some of the regulation that's happening there. The travel rule has started applying to self-custodial wallets. So here we're talking about a flow that's taking place from a self-custodial wallet to a regulated environment, and there is a requirement to understand who owns that wallet. How do you prove the ownership of a self-custodial wallet? You have to do something with the private key. Historically, that took the form of a Satoshi test, sending a very small amount of crypto so that you can prove that you own that wallet. On the Wallet Connect network, you can also just use the private key to sign an off-chain message, a kind of verification message. One of the biggest areas of growth over the last year has actually been these kind of travel rule compliance messages that have been passing through the Wallet Connect network. That's been actually a regulatory tailwind for us in many ways. Also the reason that we've expanded quite significantly into the Bitcoin space, for example, where we didn't really have that much of a role before. But with some of this regulation as well as the development of more applications in Bitcoin, we've seen a lot of growth there. I think the other big regulatory impact that we've seen in the last 12 months has of course been change of administration in the US, GENIUS Act, stablecoins is top of everybody's mind. We've just seen very big growth still from an absolutely very small number, but very big growth and very big interest in payments, especially as more fintechs, more traditional payment institutions are clocking onto the fact that stablecoins are a great way of moving money.
Wow. So, I'm thinking of one of my portfolio companies is Brave, which is a privacy-preserving browser, and they've now built directly into the browser the ability to hold crypto and whatnot. But this really seems to be taking us in the direction where you could simply feel like you have your money just right in your browser. And so it brings us to sort of an Amazon one-click world, but not just again within the Amazon silo, but really across everything. It feels to me like a moment like where we went from CompuServe and AOL to the worldwide web. I mean, is that...
