The Rise of Custom Blockchains: Fintechs and TradFi’s New Frontier

Mm.

Well, FinTech and Trad by institutions are launching their own layer 1 and layer 2 blockchains.

Companies like Circle Stripe and Robin Hood are pioneering prop blockchains aimed at enhancing global payments, merchant settlements, and also tokenized asset trading.

Buy Bill Par decisions refer to a strategic framework that these organizations use to decide.

How to acquire or develop new tech and also capabilities and building in L1 offers ultimate control and also differentiation but is costly and complex while L2s provide a middle ground by leveraging existing L1 security and also allowing FinTech to customize and scale quickly, while it is redefining the financial services landscape with faster, more accessible.

And programmable solutions.

Joining me live here at the exchange is Tarun Chira, CEO and also co-founder of Gauntlet.

Tarun, great to have you back.

Thank you so much for joining me.

Well, we're seeing a lot of activity when it comes to blockchain.

So when it comes to L ones as well as L2s, talking about what we're seeing from both Fintechs as well as trap by firms and why.

Yeah, so I think a lot of people have just seen the success of stablecoins over the last 5 to 10 years, as well as the regulatory landscape opening up with the Genius Act and potentially with the Clarity Act and the market structure bills, and I think a lot of payments companies are like, wait a minute, this gets around all of our problems.

It's regulatorily friendly now, we don't have kind of this like gray area that we have to operate in and also it allows us to provide a lot of instant settlement and a lot of new technologies for payments, lending, as well as trading.

And I think what you're seeing is people realizing, hey, in order to kind of meet certain regulatory requirements, maybe we have to have a very custom specialized system.

I think there's going to end up being this bargaining that's going to happen where people who go the full custom L1 route, they may find that it's hard to get liquidity or it's hard to kind of get some of the network effects you see in Ethereum or Solana, and we're going to have something that's more of a hybrid.

Um, but I think everyone is obviously excited because they understand the power that exists.

They also know it's regulatorily friendly and everyone from the US Treasury to the European Central Bank to big banks is predicting 1 to $2 trillion of stable coins by the end of the decade, so.

With that trend, it's just a natural expansion for these companies whose businesses either might be disrupted or will expand a lot via stable.

So I think this is a stablecoin story more than it's the L12.

So speaking of which earlier this summer, we saw the launch of A circle in terms of the company going public here and I think a lot of Americans may not have been as familiar with stablecoins.

So what do you think is actually going to happen in this space, especially as retailers, not just financial services institutions, are talking about launching their own coins?

Yeah, I think one interesting thing about stablecoins is everyone thinks about them as like competing directly with a Venmo or PayPal or someone who's doing payments.

But there's a sense in which they also compete with credit card issuers in the sense that like they're much easier to do net settlement with.

You automatically have this network, whereas like I don't need to join a network like Visa or Mastercard to do settlements.

And so in a world where stablecoins become as easy to use as credit cards and you're seeing a lot of actual stablecoin credit cards which are bridging the gap where people have on chain assets, they have Ethereum, they have stablecoins, they have Salonna.

And they're able to pay using a credit card.

Um, in a normal vendor, but they also get the benefits, all the yield that they're earning on the table coins, and I think this idea that the consumer only has to not be earning yield on their assets exactly when they're doing a payment is something that hasn't existed.

A lot of people just keep idle funds that are not earning yield in their bank account, and I think stablecoins allow you to basically just in time, remove assets from a yield bearing source, spend them, and then potentially put new assets in.

And I think this idea that any dormant asset can be a productive asset is something that is fundamentally unique about stablecoin but doesn't really happen in traditional finance for a bunch of different reasons.

One is obviously regulatory reasons, but the other is that it's not really free yield, right, in some sense it really depends on the government's economic policy, whereas in the internet where there's no country you can constantly be generating.

Yeah, that is something that we'll continue to keep our eyes on, and another area of focus when it comes to this market is DAs, and that's something that's been getting a lot of attention.

What do you make of that?

Yeah, so I think there's a couple there's kind of I'd like to take the dialectic on this.

There's like a positive view and a negative view, right?

The positive view is that actually there's a lot of on-chain products like staking, like on chain lending, like a lot of DI that you can only.

That ETFs will not give you.

The only closed down funds maybe will give you and DAs have turned into a more efficient vehicle, non-Bitcoin debs, so Ethereumons have become a more efficient vehicle to get that yield for users in a way that they don't need to know anything about the blockchain.

They can just buy the stock and it's implicitly earning.

And so if you look at something like SAT, Sharp Link, it was like 98% of their assets were staked.

Uh, whereas like the Ethereum ETF has been slogging for 2 or 3 years to get staking approved and that too like only for a small portion of the app.

So I think they serve as a way to get yield, and I think that's the positive.

The negative, of course, is like for the longer tail assets further down on the market cap boards, they're really just an exit vehicle for early investors who, and like a lot of those don't really have any fundamental reasons to be liquid on stock exchanges.

They're barely liquid as tokens.

So you know there's a lot of culprits.

Anyone who's on the top 10 who's doing a da is probably really just.

Exit liquidity for the early industrial and, and last but not least before I let you go, you mentioned regulation.

That is something we're continuing to watch here in the US, especially as we hear what comes out of the White House.

But you also mentioned the European side.

So what are you paying attention to, not just state side but also overseas?

Yeah, I'm actually more interested in like some of the Asian markets, to be honest.

I think Europeica kind of was a bit of a dud and so now they're trying to work through that.

I view Europe as like kind of looking in the past, but if you look to the future, I think a lot of the stuff in Hong Kong and Singapore is super exciting.

Ant Group just announced they're going to tokenize like 8+ billion of assets they have.

I think you're in Asia you see much more excitement about getting real world assets on chain and kind of opening the world to D5.

Yeah.

And finally, before I let you go, you mentioned tokenization, so about 60 seconds here.

How do you see this affecting markets?

Yeah, so I think you know there's been many failures historically in the tokenized stock world in crypto, but I do think tokenized stocks, if done well, will provide a way for users to get custom exposure.

Like right now if you wanted to make your own ETF, it's really expensive, right?

You can make an exchange fund and it costs you millions of dollars a year.

In DeFi, you can make your own ETF for much cheaper, and I think this idea that users can kind of make a portfolio and then it gets managed for them and they don't have to think about it.

That's custom.

That is one thing I think the on chain tokenized stock revolution, tokenized asset revolution will give you that is kind of expensive to do in traditional financing.

OK, Tarun, always great talking to you.

Thank you so much for joining me again.

Thank you.