Bitcoin for Corporations 2022 Strategic Vendor - Paxos (02/01/2022)

Great to be here. Glad to be a part of this. It's always fun.

Yeah, great. Thanks a lot. So, I'm the co-founder and CEO of Paxos. And I'll tell you a little bit about what we do at Paxos. We are really at the end of the day an enterprise-grade infrastructure firm. We have a high degree of regulation and we're really built for companies to seamlessly access both the crypto economy and the broader blockchain-based economy. We tokenize, custody, trade and settle digital assets. That includes native blockchain assets like crypto, but also certain assets like, say, tokenized dollars, tokenized gold, and also we've been working on tokenized securities that enable any asset to move at any time, 24/7, highly regulated, in an open manner. And this is, I think, part of the transformation economy that we're seeing broadly that we want to power. And as an infrastructure-only firm, we pride ourselves on being highly regulated. So we were the first trust charter that was approved by the New York Department of Financial Services in May of 2015. We have a conditional charter from the OCC for a National Trust Bank. We're working on a clearing agency with the SEC, and we have a number of other approvals outside the US and others that we're working on. And we've done this because being trustworthy is very important as an infrastructure provider. Large firms are built on us today, such as PayPal and Venmo, but also Mercado Pago in Latin America, Interactive Brokers, and a wide variety of other firms, both in the US and outside the United States. And being trusted and being regulated has been very important for those firms to feel like they can build a business on us for the long term. And today we're about 280 employees. We have ambitious growth goals. We'd like to more than double our employees over the next 12 months, and we've done that by having great investors, Oak, Founders Fund, plus a lot of strategics like PayPal, Mercado Libre, as well as Bank of America. So across the spectrum, firms in many different types of industries and locations.

Yeah, I think the last 12 months has been a time of tremendous change. You know, really, I guess it was in October of 2020 when PayPal launched, and I think that was probably the largest, most mainstream firm that had entered the space. And now over the past really 12 or 15 months or so, things have really accelerated. Certainly, we've seen this in our business where we've been able to add firms like Mercado Libre throughout Latin America, Interactive Brokers, a regulated broker-dealer offering it to their customers to trade, offering crypto to trade. We've seen Venmo be added on, and of course, Facebook Novi launched using a stablecoin to be able to move money in remittances, still in pilot form but looking to expand. And so these are some really big companies that have entered the space on the heels of, I think, what PayPal did in terms of opening up the opportunity. And of course, there's many companies and corporations that have decided to enter the space from a treasury perspective as well as to offer crypto access to their customers. So, a lot has changed around mainstream adoption, and I think that's mainly been so far in really offering crypto. And the reason that's been important is because it creates a lot of community. It creates interaction with our customers. They come back consistently to see how things are doing. They're more engaged, and that's powerful. But it's just the first step, and I think what you're now going to see a lot in this next year is some combination of the change in the broader economy because of Web 3.0 and NFTs, which was another huge theme last year and is continuing on. How you can create digitally native information that can move around and be owned. And then secondly, how you can have payments for goods and services move using blockchain-based systems. I think what Facebook and Novi launched using our dollar stablecoins, which are tokenized dollars, was a really big shift about creating utility for blockchain systems in the broader real economy, and I think that will really translate over the course of the year. So a lot of things that are going to continue to shift. We're at just a rapid adoption moment and rapid innovation moment for the overall industry. That's an exciting place to be. It's an exciting place to be an infrastructure provider that's really trusted. We've built ourselves specifically for this moment, which is how can we facilitate as many different types of users to come into this world and be a part of an open financial system. And so there's on the one hand crypto brokerage products that we offer, and I've talked about some of the customers that we power. We have dollar stablecoins, Facebook Novi being the most notable examples, but we also have a Binance dollar that is widely utilized. There'll be many more customers coming on that I think will really validate stablecoins as a use case in everyday goods and services. And we've also created a settlement service for commodities and securities, real-time blockchain-based settlement for traditional financial assets. So these are all commonly part of our offering as a regulated infrastructure provider.

So we're really proud to have launched them, and you know, they have Mercado Pago, which is the kind of the merchant arm that is similar to Amazon, and they have Mercado Libre, which is kind of similar to PayPal or a financial services arm. And I think that there was a recognition, especially within Latin America, that there's a lot of utility in being able to participate in the ownership of crypto in general, but also in the ability to have payments. And so what was interesting for us about Mercado Libre being able to launch with us is they didn't just offer crypto brokerage to their customers, and they launched initially in Brazil. They have ambitious expansion plans into additional countries, but they also launched with tokenized dollars. And so the reason this is interesting is it's showing an example here of how you're making an asset class available. You're creating a capacity for other countries to really be able to adopt crypto in an easy way, similar to how we have here in the US, whether it was Square or SoFi or Robinhood, but obviously PayPal and Venmo have made it, you know, relatively ubiquitous to be able to purchase crypto. Still, maybe not quite as seamless as we would all like. There's more that needs to happen, but they're bringing that to markets outside the United States. But there's also recognition of the ability to be able to create cross-border movements of money. You know, for instance, many consumers in Latin America hold dollars, but it's not easy. They hold the physical dollars. How can you hold electronic dollars? Not easy. That requires a bank account. They can make that available simply through a wallet function and partnering with us. And so this is part of a broader theme I think we're going to continue to see over the course of the next year, which is you now have the capacity to really be enabling more than just crypto, which creates, I think, an even more vibrant crypto economy. The more that we're enabling a blockchain-based financial system and a blockchain-based economy, the more that will underscore the value that crypto is providing.

Yeah. So, you know, there's a couple aspects to this. Even for, you know, kind of small, nimble players, this is a long-term decision. And so we're here as a partner for the long term. We really take a close approach with each one of the clients that come into us. Even if they just want to simply use our APIs and be able to get moving very quickly, we're here to really work with them, understand what their journey is, what do they want to offer. Sometimes customers come in and they might want to start in a small place. On the other hand, they might want to offer a broader suite of products. So an example could be someone comes in and just wants to enable buy, sell, and hold crypto. And you know, that's a very logical place to start because it's large enough that it really creates customer engagement, but it's small enough that you can wrap your arms around it. But then there become additional capabilities that we bring to bear, such as being able to send and receive into the blockchain, which is something we are able to do for customers. And so that starts to create payments capabilities and transfers capabilities. We have tokenized dollars as well. So that could be something you want to launch, as we were just talking about with Mercado Libre. On the other hand, it might not be something that's important for your particular customer base or your particular corporate needs. So it really does become about how do we have the right high-level discussions, understand where someone wants to go in the long term, and how we can make that possible with near-term goals, and go on this journey together by making sure that, you know, you're hitting the right API endpoints, you're able to build what you need. And this technical scoping and customer success team is something that's very important, that's, again, something we've invested significantly in. And because as an infrastructure player, helping other firms is not a hobby for us. It's not something that we kind of do every once in a while. It's the only thing that we think about. And importantly, since we're not competing with our customers, we're not going to go out and acquire millions and millions of wallets or millions and millions of consumers or whatever it might be, even small numbers. We're not trying to acquire the end user. That's really, I think, reassuring. And so that means that we can have a really good partnership dialogue because there isn't a fear that in some sense we could use that information for something else than making sure we make our customers as happy as possible and as successful as possible. And so this is really a collaborative process for us. We want to make sure that we can do it in a way that makes our customers as successful as possible. And importantly, depending on whether or not the strategy is just, say, domestic in the US or international, we're able to accommodate where that customer base could be. I would say a majority of our customers are actually outside of the United States. Now, some of our largest customers are not outside the United States. You know, they're well-known companies here in the US, but they've launched international expansion. PayPal, for instance, launching in the UK, and they'll launch in other jurisdictions over time. You know, these are about us working with people and making them successful.

Yeah. One of our, I think, key themes for us as a company is how can we partner? How can we be a resource? Because entering crypto, while it has gained a lot of mainstream momentum, is still fairly novel for most companies to get into. It's a different way of thinking about your relationship with your customers. It's a whole different asset class to make available. How to do that in a way that other people have done. How to do it in a regulated way. How to do it in a way that's going to create trust and long-term goals. So there's so much that firms have to think about. And even, for instance, when it's just a firm saying, you know, I'd like to be able to just buy it for our own balance sheet, that still involves a lot of effort, and you all know that as well as anybody, let alone if you're going to say, let's launch this to millions of people in the US and outside the US.