Long Take: The trend behind PayPal's new Paxos stablecoin and acquisition of FundsDLT by $15T AUC Deutsche Börse
The incumbents are making large infrastructure moves
Gm Fintech Architects —
Today we are diving into the following topics:
Summary: Technology often advances faster than we recognize, with minor inconveniences masking groundbreaking progress. A Bank of America report highlighted a potential $16 trillion market in asset tokenization, pointing towards a digital finance future. PayPal's new USD stablecoin suggests a transformative shift in payment methods, potentially bypassing traditional payment giants. Deutsche Börse's acquisition of FundsDLT hints at a future where large asset classes are integrated onto digital blockchains. Such developments in fintech may be gradual, but they signal profound changes in the financial landscape.
Topics: PayPal, Clearstream, FundsDLT
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Long Take
How adoption feels
Do you ever get frustrated with the speed of Internet on an intercontinental flight?
You’re just trying to check your email and work on a Google doc, but the connection keeps going in and out. It’s so frustrating! And yet, you forget that you are trapped in a winged metal can in the sky, going 500 miles per hour, bouncing signals off a web of cosmic satellites floating around the Earth in space. The cat videos can wait.
This frustration we get with literal miracles is similar across technology and innovation types.
The hype cycle is now so loud, opportunistic, and full of grifters — both individual and corporate — that it is hard to pause and appreciate when actual adoption happens in the wild. We want so much to see the immediate payoff, the wild outcome, the explosive change, that merely progressive change is invisible.
Take this Bank of America equity research report on asset tokenization, suggesting a $16 trillion asset market, published in July 2023. The wrapping of incumbent finance is all over the messaging and estimates. As a reader of this newsletter, you should not be surprised about the claims or trends in the report (e.g., supply chains, digital scarcity, tokenized financial infrastructure) — those are well known and clear. Some of us have seen this direction since 2016!
What is more interesting is that this report exists. Still, after all the blow-up and the financial liquidation cascade and the SEC attacks, we are still keeping to the inevitable story of digital finance on modern rails. It is this belief that makes capital expenditure and operating execution a self-fulfilling prophecy.
PayPal and Payments
We are not going to belabor the basic point — blockchains are economic architecture, tokens are digital assets, non-custodial finance is the financial infrastructure of the future. Instead, let’s look at the latest developments.
PayPal has launched a USD stablecoin, issued by Paxos Trust. You may remember Paxos also as the issuer of the Binance stablecoin, BUSD, until that asset was wound down. Mastercard is also a customer, among others, for crypto exchange. And the trust company had also powered the original