Key takeaways

• The financial system is moving towards tokenization, with stablecoins poised for significant growth.
• Stablecoin infrastructure is crucial for embedding financial products in applications.
• Stablecoins offer a vastly improved experience for fundraising and transactions over traditional methods.
• Many crypto-native businesses struggle with spending assets due to being underbanked.
• The lack of utility and usability is a major hurdle for stablecoin adoption.
• Integrating stablecoins with existing networks like Visa can enhance usability.
• Developing infrastructure for offshore issuance is essential due to US regulations.
• The crypto industry is expected to grow significantly, with companies positioning themselves as leaders.
• Interchange revenue is a key income source, shared with partners through card transactions.
• Building partnerships with Visa requires strategic networking and understanding their structure.
• Visa is actively forming partnerships in the crypto space to define its role in digital assets.
• Being a nonbank principal member allows for direct Visa settlements, crucial for stablecoin operations.
• The payment ecosystem involves multiple layers, from program managers to payment networks.
• The fintech space is competitive but offers room for many players due to its vastness.
• Collapsing the stack in fintech provides more leverage to share benefits with customers.

Guest intro

Charles Yoo-Naut is co-founder and CTO of Rain, a stablecoin-native infrastructure provider that grew to a $2B company. He co-founded Rain in 2021 after participating in the On Deck fellowship and previously worked at Into It, scaling financial products. Under his leadership, Rain raised $250M and partnered with Visa to advance crypto payments.

The future of stablecoins in financial systems

• The financial system is inevitably moving towards tokenization, with significant growth potential for stablecoins.

  — Charles Yoo-Naut

• Stablecoin infrastructure is essential for embedding financial products into applications.

• Stablecoins provide a significantly improved experience for fundraising and transactions compared to traditional banking methods.

  — Charles Yoo-Naut

• Many crypto-native businesses face challenges with spending their assets due to being underbanked.
• The lack of utility and usability is a significant bottleneck for stablecoin adoption.
• Leveraging networks like Visa can enhance stablecoin usability.

• If we can figure out a way to make stablecoins spendable on a Visa card, you instantly unlock hundreds of millions of merchants globally.

  — Charles Yoo-Naut

• Developing infrastructure for offshore issuance is crucial due to US regulations.

• We had to figure out how to issue to all these different places to solve the cost problem our customers had.

  — Charles Yoo-Naut

Overcoming challenges in the crypto space

• The crypto industry is expected to grow significantly, with companies positioning themselves as leaders.

• We had hopes it would be really big, but two years ago we started transitioning to become more of an infrastructure provider.

  — Charles Yoo-Naut

• Interchange revenue is generated from merchant fees for card transactions, shared with partners.

• We’re in the settlement flow, moving money from the customer to the merchant.

  — Charles Yoo-Naut

• Building partnerships with Visa requires perseverance and understanding their structure.

• You have to navigate the behemoth that is Visa and press the right buttons in the right order.

  — Charles Yoo-Naut

• Visa is aggressive in forming crypto partnerships to define its role in digital assets.

• Visa has been pretty aggressive in their crypto partnerships, wanting to figure out their role in this future world.

  — Charles Yoo-Naut

Enhancing stablecoin usability

• Being a nonbank principal member allows for direct Visa settlements, crucial for stablecoin operations.

• It allows you to settle directly back to Visa, controlling the settlement and owning the bins.

  — Charles Yoo-Naut

• Stablecoin integration is seamless for end users, who may not realize they are using stablecoins.

• Some customers don’t even know stablecoins are powering the program.

  — Charles Yoo-Naut

• The payment ecosystem involves multiple layers, including program managers, issuing banks, and payment networks.

• If I think about the stack, there’s program managers, issuing banks, payment networks, and card issuers.

  — Charles Yoo-Naut

• The fintech space is competitive but offers room for many players due to its vastness.

• Fintech is a competitive space but also a massive space with room for a lot of players.

  — Charles Yoo-Naut

Addressing inefficiencies in payment systems

• Stablecoins can significantly reduce inefficiencies in money movement, benefiting consumers.

• For every dollar you’re sending, there’s $3 pre-funded somewhere, creating inefficiencies stablecoins can improve.

  — Charles Yoo-Naut

• Consumer payment experiences in the US are satisfactory, but underlying inefficiencies exist.

• Most consumers in the US say things are good, but there are inefficiencies in the system.

  — Charles Yoo-Naut

• Future payment upgrades will happen under the surface without changing consumer habits.

• A lot of upgrades will happen under the surface, keeping everything the same for consumers.

  — Charles Yoo-Naut

• Stablecoin settlement reduces collateral requirements for traditional issuers.

• Collateral requirements come down a lot with stablecoin settlement, benefiting issuers.

  — Charles Yoo-Naut

The role of stablecoins in emerging markets

• Stablecoins provide a crucial solution for individuals in emerging markets to access dollar savings.

• Stablecoins are the best way to access dollar savings, seen as just dollars by customers.

  — Charles Yoo-Naut

• The next year will see more mainstream use cases for stablecoins in existing financial flows.

• This next year will bring more mainstream use cases, upgrading existing fintech flows.

  — Charles Yoo-Naut

• Stablecoins enable instant cross-border transactions, improving remittance processes.

• Instead of traditional remittance players, you send a stablecoin instantly.

  — Charles Yoo-Naut

• Tokenization of assets can streamline complex processes like home mortgages.

• Everything will be tokenized and done programmatically, streamlining mortgages.

  — Charles Yoo-Naut

Strategic approaches in fintech

• Partnering with established companies is more effective than going direct to consumer.

• We’re never gonna be the best; it’s better to power the best in the market.

  — Charles Yoo-Naut

• The majority of their revenue and growth comes from markets outside the US.

• The majority of our growth is outside the US right now.

  — Charles Yoo-Naut

• A global issuing footprint can lead to unexpected market opportunities.

• A global footprint allowed us to issue in countries with unexpected demand.

  — Charles Yoo-Naut

• Western Union’s fees may decrease as they become more efficient with stablecoin transactions.

• Western Union can make cost centers more efficient with stablecoin sandwiches.

  — Charles Yoo-Naut

The evolution of crypto and fintech

• The crypto card market will see more niche products targeting specific customer needs.

• More niche products will target specific country or spending pain points.

  — Charles Yoo-Naut

• The current crypto market mirrors the evolution of traditional fintech markets.

• Crypto is speed running what’s already happened in fintech.

  — Charles Yoo-Naut

• The transition to stablecoins mirrors past technological shifts, with transitional products necessary.

• There’s a tipping point where stablecoins become the norm, like past tech shifts.

  — Charles Yoo-Naut

• Once a critical mass of users adopt tokenized money, new products will emerge.

• A ton of unlocks happen once critical mass is reached with tokenized money.

  — Charles Yoo-Naut

Innovations in on-chain finance

• On-chain credit allows for programmatic borrowing and repayment through smart contracts.

• We borrow on-chain, tokenizing credit card receivables for programmatic repayment.

  — Charles Yoo-Naut

• By 2026, on-chain credit will become more mainstream with significant adoption.

• 2026 will see on-chain credit become mainstream, with 5% adoption.

  — Charles Yoo-Naut

• Under-collateralized on-chain lending is an unsolved problem requiring identity verification.

• Under-collateralized lending needs identity verification to avoid losses.

  — Charles Yoo-Naut

• People are more inclined to hold their crypto assets long-term rather than spend them.

• People want to hold crypto long-term, not spend it.

  — Charles Yoo-Naut

Privacy and strategic shifts in blockchain

• There is increasing interest in privacy from traditional institutions and fintechs.

• More interest in privacy from institutions, who find lack of privacy in stablecoins scary.

  — Charles Yoo-Naut

• Polygon is transitioning from a general-purpose chain to a payments-focused chain.

• Polygon is becoming a payments chain, not a general-purpose chain.

  — Charles Yoo-Naut

• High Ethereum mainnet costs forced businesses to adapt their settlement processes.

• We had to customize settlement due to high Ethereum mainnet costs.

  — Charles Yoo-Naut

• The evolution of infrastructure in crypto has improved the onboarding process for users.

• Infrastructure improvements make onboarding easier, with cheaper payments and wallet services.

  — Charles Yoo-Naut

Investment dynamics and market perceptions

• The fundraising landscape for crypto shifted dramatically post-FTX and Terra Luna incidents.

• Post-FTX and Terra Luna, stablecoins were in no man’s land for investors.

  — Charles Yoo-Naut

• Stablecoin businesses struggle to attract investment due to the lack of a token.

• Stablecoin businesses without tokens face valuation challenges for investment.

  — Charles Yoo-Naut

• Investors undervalue established products if they haven’t launched, treating them as new opportunities.

• Investors treated our established products as new seed opportunities.

  — Charles Yoo-Naut

• The decision to pursue additional funding rounds is based on unlocking new opportunities.

• We assess if more capital unlocks new opportunities before pursuing funding.

  — Charles Yoo-Naut

Organizational strategies and growth

• Rain maintains a flat and lean organizational structure to enhance decision-making.

• We maintain a flat culture, hiring high-agency, low-ego people.

  — Charles Yoo-Naut

• Launching a card program requires a non-self-service approach for customer legitimacy.

• Card program launches need structured approaches for customer verification.

  — Charles Yoo-Naut

• The pod structure in engineering allows for flexibility and efficient delegation.

• The pod structure helps delegate efficiently as the team scales.

  — Charles Yoo-Naut

• The company is transitioning from inbound to a more targeted outbound sales strategy.

• We’re shifting to targeted outbound sales due to high demand.

  — Charles Yoo-Naut