Hello everyone. Thank you so much for joining us today. I'm Alice Snowfall, CEO and co-founder of Notaben. And today I have with me Jack McDonald, SVP of stable coins at Ripple. Jack, can you please share a few words about your background?
Sure. Thanks for the opportunity to be here. I'm excited to talk to you and talk to you about Ripple's partnership with Notaben. I've been in the financial services arena my whole career. I joined Ripple two and a half years ago and I am responsible for running the stable coin business here. Got into crypto in 2018 after selling a company that was in the traditional finance infrastructure. So have a lot of experience in TradFi and getting more and more experience here in the digital asset arena.
Awesome. Thank you so much and I look forward to our conversation today. You mentioned that you started back in the day with another company that Ripple ended up acquiring. I wanted to first of all get a bit of a sense from you on how your experience as an operator shaped the way that you've been approaching stable coin strategy today at Ripple.
Yeah, it's a journey for sure. The company that Ripple acquired was called Standard Custody and Trust, which ironically I started with a Ripple co-founder Arthur Britto back in 2018. And the idea was to build custody infrastructure specifically for institutions to hold digital assets. And so over the course of four or five years, we built that business out and went through some highs and lows of the crypto industry. Ripple ultimately decided that they wanted to get into the stable coin business and I'm sure we'll talk more about that and decided to acquire the company and utilize the trust company entity that we had in New York to expand our charter to issue a stable coin. The experience I had and prior to that I had 14 years as an operator CEO of a company called Conifer that had a broker dealer, a middle office, a fund administration business etc. And I think the experience as an operator is invaluable because it allows you to get very close to the customer. And I think often times and we've seen it in all of our travels where there's technologies looking in search for a problem to solve. And so understanding what customer needs are particularly in a new space like digital assets I think is extremely helpful to being able to understand product market fit which is always one of the challenges particularly when you're introducing new technologies and how that marries together with the regulatory environment that one may choose to live in and certainly everything we do at Ripple is very regulatory focused as it is with Notaben and I think bringing those experiences together has been very helpful. Also, I think you're hungry as an operator. You work very closely with the different teams whether it's the product, the engineering, etc. And so I'm excited with the role I have now.
Awesome. It's great to hear. I definitely think that role as an operator where you can see cross-function be super well as well as see both the high level big picture but be able to translate it into those customer needs is just super invaluable. Especially I guess over the last few years as Ripple has been building out its financial infrastructure stack and has been moving away from or has been moving broader and being known for one thing. Would love to hear in your own words how you describe what Ripple is actually building towards and how the stable coin piece has kind of fit nicely into that.
Sure. One of the things I love about Ripple is that the mission really hasn't changed since 2012 when Chris Larsen and Arthur Britto started the company, which is really to empower institutions to move value on chain the way that information moves on chain today. And so everything we're doing at Ripple is really focused on building institutional grade infrastructure to allow institutions to collect, hold, exchange, and pay out value. And you're right, Alice, that initially that was focused on the cross-border payments business. Really the remittance business back in 2012, 2013 that has now evolved into a much broader payments business with the acquisition of a company called GTreasury a year ago where now we are in touch with 1,400 brand name big institutions, corporate treasurers and CFOs etc and bringing those institutions on chain, 13 trillion worth of value that they touched last year and so that's a massive opportunity. So we've got a very broad and deep payments business. We have a custody business now both in terms of enterprise software but also a managed custody business that we were running in Standard Custody and now we're starting to export to other jurisdictions. We have a stable coin business. We have a capital markets business, a big both trading and markets business and a prime brokerage business through an acquisition of a company that was called Hidden Road, now Ripple Prime. And so when you put all these businesses together one of the things that they have in common is the ability to leverage a stable coin. So we know a lot about stable coin payments whether it's cross-border or domestic instant settlement etc. And increasingly in the capital markets business stable coins are being used for cross-asset class margining and for collateral mobility. And so as a payment instrument we're excited about utilizing either the network that Ripple has built and by extension through our partnership with you, but also probing deep into the capital market space. And one of the common denominators is the stable coin RLUSD, our dollar-backed stable coin that can be used really across all those different business units.
Yeah, it's phenomenal to see how that's shaping up together. You mentioned 1,400 companies with GTreasury and then obviously all the other institutions that Ripple's interfacing with whether that's the Ripple custody or Ripple Prime. It seems that we're seeing that institutions are past the question of whether to use stable coins though of course would love to hear a little bit where you're seeing kind of that demand. But more or less and what we're seeing at Notaben is they're stuck on how to do it safely at scale because they want to make sure that they're able to interact with as many counterparties that they're able to trust where the counterparties are and so forth and so is that how you would maybe look at this and what does stuck actually look like?
I think about three different factors that are drivers or hurdles to institutional adoption and in no particular order of importance. There's regulatory clarity, there's infrastructure and there's education and I think the infrastructure side of it, the solutions that you and we build are largely there to meet the customer demand. They will continue to evolve over time as use cases evolve and scaling evolves. But I think by and large whether they're blockchain enabled or other the operational infrastructure exists today to allow institutions to invest specifically around stable coins. Obviously we got a lot of tailwind through the GENIUS Act last year. Our fingers are crossed that the CLARITY Act will be voted on favorably in Congress here in the US soon. And there are other pockets of regulatory clarity that are happening around the world. And so regulation is now a tailwind as opposed to a headwind. We're not there yet. We have a lot more room to go. But largely I think there's been positive signals for institutions to start to adopt digital assets. And I think stable coins are really the least controversial if anything or the most obvious first step that many institutions can make in terms of entering the digital asset space. And so then it really comes down to education and it's understanding what the art of the possible is, what sort of considerations an institution might want to make, how deep an institution wants to go into the operational side of the business or whether they want to have that all abstracted away and choose partners like Ripple who can help them, you know, move value on chain without them actually getting, you know, deeply involved. And so I think it's that evolution that needs to happen at the institutions and institutions, you know, vary in terms of how comfortable they are with new technologies and new processes. And so we don't underestimate the inertia that exists with incumbents. If you're a traditional financial asset manager and you've been using traditional banks and rails, it's a big leap to envision a new future world where essentially there's a new operating system for capital markets that would require changes to a lot of the infrastructure and systems that you might have in place today. So, it requires some patience and I think the educational component cannot be understated.
Yeah, 100%. And it's one that we at Notaben are very thoughtful about because I think as you mentioned there's a few pieces to it. There's one about how involved do you want to be in the digital asset space or how much do you want to understand all the nuances but there's also I think an honesty and responsibility on companies like Ripple and Notaben to not only simplify some of this and bring it along to them but also meet companies where they are today and understanding how do we also plug our infrastructure into the world that they understand as long as it works in both ways. I guess with this want to dive a little bit more on the infrastructure side. When you said institutional adoption depends on several things. But on the infrastructure side we have more or less what we need today and we do have efficient settlement rails with stable coins. What else does it depend on concretely?
I go back to in part the regulatory and the compliant side of that and I think that's part of the power of the partnership that we have. I think institutions are used to understanding who their counterparties are, who their customers are, a lot of that has to do with regulatory licenses, etc. And so when you evolve into a new landscape with different types of players, institutions want to have comfort and confidence in who they're dealing with. And so if it's a payment that's being made using a stable coin, I think part of it is understanding the license that the partners that they have in terms of could be the infrastructure, it could be the stable coin issuer, it could be a qualified custodian that they're using to custody the asset, it could be a payment service provider, and really understanding what those different licenses mean and what's required to get them and how much an institution can trust on them. I think also understanding and having confidence in who they're dealing with directly who on the other side of the trade or the transaction is imperative and that just takes a little bit of time because in many cases it is a nuanced reality that's different from what they've dealt with and so for example what Notaben does at the verification at the transaction layer gives a lot of comfort and everything that we've set out to do specifically with our stable coin has been targeting institutions who are going to value that level of regulatory scrutiny. So, we chose specifically to go the regulated route. Not all stable coins are the same. Many are unregulated. Many are backed by some mix of fiat and other crypto. You know, we are very specific about the licenses we have. We're very specific about what backs our stable coin. And that's a selling point for us. We want to find like-minded institutions who value that and who are going to choose us because of the support we have with partners like yourselves, the BNY Melons and the Deloittes of the world, but also who value the infrastructure that we have in terms of how we bring our products to market.
Yeah, 100%. And I think that builds a lot of trust and credibility in what you're bringing to market here. And so I wanted to maybe jump a little bit more here. You know, talking about what institutions expect. In traditional payments, you know, straight through processing has been the baseline assumption. And what we've noticed over the years is, you know, often times in digital assets and particularly with stable coin institutions, we see that sometimes is the exception. When we're adding a compliance layer, not just as an industry we just realize that this is not how smoothly things work on the transaction side for customers where straight through processing rate is not where it ends up landing. What's actually preventing that today in your opinion and what does an institution have to put in place before a stable coin payment can run end to end without anyone touching it?
I think it really comes down to the network and what an institution is trying to achieve through using a stable coin payment. It's a payment instrument. It has all the advantages of being on chain. So cheaper, better, faster, you know, and more secure if it's done properly. But then you're only as good as that last mile payout, for example, if you're making a cross-border payment. And one thing I've learned at Ripple since joining almost three years ago is how fragmented the payment business can be, particularly in developing countries and emerging markets and whatnot. And so if you're only, you know, making payments to G7 countries and you're using, you know, traditional banking partners, it generally tends to be a lot smoother than if you're pushing into secondary and tertiary markets. And so I think really understanding the complexity of a payments network which is how we think about it and as we build out our payments business we think about that network effect and we can't be in every market around the world. We're in a lot of them, you know, 100 or 150 markets as you guys are but there are other markets and so finding partners where the need arises we can extend that last mile too is really critical and then having our customers understand that, you know, many of the legacy customers that we have at Ripple who have been with us for over a decade understand that complexity but some of the newer entrants who are coming in who expect just a switch to flick and all of a sudden everything to be seamless 24/7 instantaneous around the world might be underestimating the importance of that last mile and how that operates.
Yeah, I think that makes a lot of sense. And I would say that what we've seen as well is even when transactions happen among G7 and we see that, you know, traditional institutions starting to interact with crypto institutions often times a lot of the infrastructure that they're used to to be able to have great straight through processing is still not as mature on our end or there isn't as much trust in it yet in it being kind of universal having those I would say almost like best-in-class standards out there that they're all adopting and that's even creating kind of some additional friction here. But I think the point related also to the last mile is just super critical because we can sit and tout all day all of our, you know, as an industry all these visions of what we're trying to get to but we just have to be very practical about how to solve that last mile to make sure that the technologies that we're putting forward are actually having a big advantage over what people are used to otherwise.
Yeah. I think it's also perhaps in hindsight an overreliance on the legacy incumbents who institutions have been used to dealing with and, you know, rightly or wrongly that you place a lot of confidence in banks when you call up and wire money and I think it's rightly placed confidence, you know, in most cases but sometimes that wire can take two or three days and that's just become I think an acceptable sort of practice. What we're talking about in the digital asset space with blockchain based stable coin payments is it can happen instantaneously and so sometimes I think the expectation gets ahead of the reality that we're still in this evolutionary sort of process and I think time will come but I think the sort of things that you're building and I go back to this verification at the transaction level to have an open network but to have that confidence in what you're building at Notaben I think is really important for that institutional customer who is going to be wading into the space. There's a perhaps false sense of confidence with the legacy systems and so they're having to I think revalidate their assumptions and to perhaps do diligence again and really learn a new operating system.
