{ "episodeId": "SLP717", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "harsha_goli": { "name": "Harsha Goli", "role": "guest", "tag": "HARSHA" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.16, "text": "I want to turn all of you into, places where we can convert pre-coins, and that means integration with the banking system in a way that takes money from fiat and converts it to Bitcoin. Whatever mechanism you have in your mind to actually do that, I wanna hear it because that's what I wanna see. Hi" }, { "speaker": "harsha_goli", "time": "00:19", "start": 18.51, "text": "everyone, welcome back to Stephan Livera podcast. Today, rejoining me is Harsha Goli from Magnolia Financial. Harsha has been a long time Bitcoin, developer, entrepreneur in the space, various companies. Companies, Lightning Labs, FOLDS, Swan, just to name a few, and f- so I know, you know, you were building Magnolia last time we spoke as well, about, I think about a year ago, so, you know, give us kind of the high level, update. What's the big new thing, from you guys?" }, { "speaker": "stephan", "time": "00:47", "start": 47.11, "text": "Yeah, so it's been about a year now, a little bit more than that since we started working on this, and as of this week, we finally like" }, { "speaker": "stephan", "time": "01:00", "start": 60.0, "text": "California and Texas, so that was a really big win for us. And, yeah, I, I guess like, let me just talk about what is we're launching. It's, it's a complicated thing, but also a simple thing. The simplest version of it is we're launching a way for you to have a, like, Bitcoin enabled bank account, essentially. this isn't necessarily a consumer-facing thing, this is something that any business can integrate, right? And this ends up being really, really useful because yes, you can create a, like, you know, exchange-like functionality Really, really interesting like financial flows with this, right? So a really popular one that we're seeing right now is for like Bitcoin back lending. People, actually want to have their, you know, their, loan in actual dollars, not stablecoins. And so when they get stablecoins, that typically means that they have to go to a Coinbase or something, convert it, and lose a couple more points off. so we're finding that integrators are using our services to just do the disbursement in fiat, right? So that's like an example. But it's basically" }, { "speaker": "harsha_goli", "time": "01:58", "start": 118.5, "text": "like A Bitcoin collateralized lending startup, and they're using you instead of having to, like, \"Oh, that might be an option, \"instead of only doing stablecoin to have actual fiat wire." }, { "speaker": "stephan", "time": "02:10", "start": 130.25, "text": "Yep, exactly." }, { "speaker": "harsha_goli", "time": "02:11", "start": 131.29, "text": "Interesting. Okay. yeah, so go, go on. Yeah." }, { "speaker": "stephan", "time": "02:14", "start": 134.11, "text": "Yeah, that, that, that's one example where like, you know, a, a bank as a service for Bitcoin, et cetera, et cetera, like the point of view that we had when starting this was, like, listen, you know, I, I've been working" }, { "speaker": "stephan", "time": "02:30", "start": 150.0, "text": "Actual like real need as we onboard the world, you know? that doesn't mean the custodians that we use have to suck though, you know? And for a long time, that was kind of the case. So we're trying to build one, you know, by Bitcoiners, for Bitcoiners, that actually serves the needs that we have without skimping out on the technology, right? So there is a way to do things like as non-custodial as possible with, you know, lightning, like Fiat to Lightning, right? And it just means moving the money as" }, { "speaker": "harsha_goli", "time": "03:00", "start": 180.3, "text": "And just to be clear, are we talking about the legal custodian aspect of it or also, and al-- and also the crypto, cryptography, you know, self-custody aspect of the custodian? Both in this, in this," }, { "speaker": "stephan", "time": "03:13", "start": 192.66, "text": "instance, yeah. But you're all right, like there is a huge difference, but we are set up to be both." }, { "speaker": "harsha_goli", "time": "03:18", "start": 197.64, "text": "Gotcha. Yeah, and so how'd you get the, you know, the big hard states, right? Like the BitLicense, and I've heard, you know, some of these other states, it's very expensive that you have to put up, you know, a certain amount of money or there's all these co-- regulatory and compliance hurdles. So how are you handling that?" }, { "speaker": "stephan", "time": "03:33", "start": 213.47, "text": "Yeah, it, it is really expensive. and also what we found while going through this, like last year, was the regulators were completely, you know, just, underwater in applications, right? Like Get feedback even from the smaller states, right? So we had to pivot our, our approach here. And we saw what Lead-- or we saw what Bridge was doing with Lead Bank, where Bridge was effectively using the banking institution's licenses, to ride in the US, and we figured that, okay, you know, things are changing in the US right now. Maybe there's a bank or two out here that we can work with, who's a little bit more friendly. When Bridge was doing this about two years ago, that wasn't really the case. The relationship with Bridge means" }, { "speaker": "stephan", "time": "04:17", "start": 257.34, "text": "So we partnered up with a couple different banks, in order to go to not only all the US, but we're actually looking at the EU as well here in just a little bit. so that was kind of our secret sauce, you know, ditching, ditching the MTL like based approach, using the compliance umbrella of existing banking partners, to, to reach more. And, you know, like that was a really big decision for me personally because I really wanted to go direct, like, to the individual licensing route, but what we learned overwhelmingly was, you know Doing this patchwork state approach is really, really tough, you know, it's a hard, it's, it's hard to do from an implementation point of view. And what they really all cared about was, how do we get as many Americans onto our platform as possible, right? And then from there, Europeans, right? And so we just went for the approach that Give us the most jurisdictions possible." }, { "speaker": "harsha_goli", "time": "05:07", "start": 307.19, "text": "Yeah, I see. And so, given the fact that you're going to some of these banking partners, is there anything stopping that? 'Cause I guess couldn't they also offer what you're doing on their own, like, or is that just kind of like, it's not worth their time and effort and money that they're happy to just kind of let you handle this aspect of it? Like, isn't there kind of a risk that if you're building on them, that they could then eventually- You know, go after your own customers?" }, { "speaker": "stephan", "time": "05:34", "start": 333.66, "text": "Yeah, totally. like, I, I, I've thought about this too myself. but the way I think about it, and the way I think that our partners are, like, thinking about it too, is, you know, i- there's a parallel to building, you know, like computer chips, you know? like, yeah, TSMC does own the billion-dollar plants, right, in Taiwan to, to manufacture the computer chips, and sure, you know, people are just asking, like, \"Hey" }, { "speaker": "stephan", "time": "06:00", "start": 360.42, "text": "Reselling it for, you know, a significant amount, maybe putting, putting them in laptops and stuff like that. and we're basically a laptop manufacturer, right? Just like selling to individuals at this point, in, in this metaphor. But my, my, my bet here is that TSMC is really focused on what it is they're doing, which is making sure that they're building the best chips possible, and as a result, what we're doing is making sure that we're building the best laptops possible. And there's really like good symbiotic relationship because they'd like to" }, { "speaker": "stephan", "time": "06:30", "start": 390.34, "text": "You know, they're making execution runs as well as possible with the highest margins possible, and what we're doing is making sure that we're enabling like payments, like, to go through as quickly as possible, as best as possible, in as many jurisdictions as possible." }, { "speaker": "harsha_goli", "time": "06:42", "start": 401.57, "text": "And so, and I guess you'll also be really more focused on the Bitcoin technology aspects of this, where maybe they're kind of a little closer to the regulatory kind of hurdles and regulatory compliance aspects and kind of general banking considerations, whereas you'll kind of be more Sort of into the technical guts of what, you know, a Bitcoin payment person needs, and also what the, like, your customer who will often be an entrepreneur and developer who is building some kind of product that they want to, you know, have banking relationships in there." }, { "speaker": "stephan", "time": "07:16", "start": 436.28, "text": "Yeah, and you're completely right, right? As a result of, you know, my, my, my background in Lightning, there's a lot of really cool tricks and, stuff that we can use in our space to bring a lot of cool functionality to, to a lot of end users, and that's stuff that, you know, our upstream partners aren't, you know, capable of really working on. They were built for a more, like, layer one-centric world, and our systems are very much built for a more layer two-centric world, like things like, you The thing that we really care about is making sure the most features exist for the people that partner with us. So that's a huge thing, right? So you might, like, you, you might, you know, wonder, why doesn't some app have DCA or something like that? It's because their, their financial partner doesn't allow them the option to do something called ACH pull, right? And that, that gets really annoying. You might wonder why your favorite app doesn't have Apple Pay, you know? And that's because their, you know, their, their payments processor doesn't have Apple Pay. It's something that, that gets in the way and adds friction to actually onboarding pre-coiners, and that's what we're trying to solve here, in as many places as possible." }, { "speaker": "harsha_goli", "time": "08:25", "start": 505.41, "text": "Yeah, and I guess maybe another analogy, or I'm curious to get your thoughts if, if this is relevant, but what you see in a lot of countries around the world is they may have some of these wallet apps that have like Buy Bitcoin, and actually it's like a MoonPay integration or like they've got some of this kind of integration, and then that maybe might be a slightly Because it's like sort of an iframe or a redirect style, as opposed to like something that's kind of more native, it's kind of in the app per se or it feels a bit more slick. Is it, is that sort of what you're trying to do as well, that you're trying to do that more slick experience as opposed to the iframe or redirect kind of thing?" }, { "speaker": "stephan", "time": "09:05", "start": 544.75, "text": "Yes, exactly. I can't tell you how, how often I hear people complain about MoonPay because it's clunky, it's got higher fees than most anyone else, and the functionality is super limited, so you can Like, you know, recurring subscription type payments with Moonpay." }, { "speaker": "harsha_goli", "time": "09:20", "start": 560.4, "text": "Yeah, interesting. So I guess, and it's kind of like, it's like how, you know, people whine about Western Union as an example, 'cause like, oh, they've got such high fees. But maybe it's kind of like what they've done is kind of be-- get really good at dealing with the regulatory burden. And in some cases, they're the only-- the Western Union's of the world, in some parts of the world, it's like that was the only option people had, you know Had, had like some kind of, you know, buy Bitcoin with MoonPay sort of thing, and then people feel like it's a bit clunky or it's not as like nicely integrated, things like this. So it's sort of like there's a reason they exist, but at the same time, you know, over time, hopefully the experience improves, and obviously we would like, obviously, if we're Bitcoiners, we want adoption, we want more apps to be able to integrate this as well. So I guess that's, as I'm understanding the difference there." }, { "speaker": "stephan", "time": "10:12", "start": 611.96, "text": "Yeah, no, exactly. I think like something MoonPay did really well from a business point of view forever ago was they made it really easy for everyone to integrate MoonPay, right? To get it in everywhere. And so every random application has MoonPay, and that's great, right, from a business point of view. But at a certain point, those applications need to migrate off, off of MoonPay. And so we figured like, okay, there's gotta be a middle ground here where you don't have to leave your application, or leave your payment processor when you're scaling up" }, { "speaker": "stephan", "time": "10:41", "start": 641.22, "text": "Rates, the fees make sense when you're at a much lower scale and volume. And that's something that, that we're working on here at Magnolia, and I think we've got some really good announcements on that coming out in the next couple weeks here." }, { "speaker": "harsha_goli", "time": "10:52", "start": 651.65, "text": "Cool. So who do you see as the main customers for Magnolia? Just, are, are they existing Bitcoin applications, or are we talking like crypto applications, or are we talking like things that don't even have Bitcoin or crypto in them at all?" }, { "speaker": "stephan", "time": "11:06", "start": 666.29, "text": "Yeah, honestly, all across the board. So right now, we're finding a lot of interest from folks who, like, you know, either do a capital markets related play, or they do something, you know, super niche like, you know, allow people to, I don't know, sell part of their home equity for, for Bitcoin, right? Like, there's a, there's a, a part in their flow where we really like fit in, Bitcoin lending infrastructure, just across the board there, 'cause, you know, we also do" }, { "speaker": "stephan", "time": "11:36", "start": 695.87, "text": "Really cool wallets with the retail audience, I'd like to monetize this somehow, you know, to help pay bills. How can we get a buy Bitcoin like button in here or DCA button in here? Stuff like that, like really all across the board." }, { "speaker": "harsha_goli", "time": "11:46", "start": 705.92, "text": "Interesting. It's interesting you mentioned the Oracle thing, I just remembered as well, 'cause I just did an interview with, the Lagos guys as well, so they mentioned you're actually their Oracle, so I was like, oh, funny, funny enough. so I guess give us a bit of like, what's it like" }, { "speaker": "harsha_goli", "time": "12:06", "start": 726.03, "text": "What, what's the thinking there around being an actual DLC price oracle?" }, { "speaker": "stephan", "time": "12:11", "start": 730.76, "text": "Yeah, I mean, so you know, I guess not" }, { "speaker": "harsha_goli", "time": "12:12", "start": 732.3, "text": "just price, but other things too, yeah." }, { "speaker": "stephan", "time": "12:14", "start": 734.1, "text": "Yeah, yeah, yeah. If you look at the docs, we do like all sorts of att-uh, attestations. I mean, it just makes sense with, with our background and what it is we're trying to do. We're trying to bring a lot of these like financial tools to Bitcoin companies in an easy, affordable way. For the Ligo-like related folks, what they're trying to For the community, but that also wasn't like a fly-by-night institution, right? and so because we're well-regulated, a lot of people in the space know me very well, you know, I, I definitely put in the work, and have been here for ten years, that, that's like a really good name for them to go with, and we're able to, you know, spin that up because of, you know, my background, my team's background in a relatively short amount of time. So it just made sense for us to help the like, Right? it, it integrates very well in our systems, and it's a really good attraction for a lot of other companies in the space who would like to also run a price oracle, because like I said, our like core products are very complementary toward price oracles. So if they start using our price oracle, that's awesome, because that's a way for us to onboard a lot of other financial tools to make their customers' lives happier." }, { "speaker": "harsha_goli", "time": "13:26", "start": 806.1, "text": "Got it. give us an overview on the rates and things like this for people to sign up with you. So I, I presume what we're talking about here is like, businesses and apps who want to sign up with you. Give us or give an idea there of what kind of rates they can expect to pay there?" }, { "speaker": "stephan", "time": "13:44", "start": 824.16, "text": "Yeah, so our, our spread, depending on volume, right? I think starts at one point seven five, and then the more volume you have, the lower we can get that, right? For us, we're a very volume based entity, and, you know, just complete transparency, we have to justify our volume to all of our upstream partners. So the more that we get, the, the better rates we're happy to, to give everyone, right? As far as like the monthly costs go, we basically have two tiers right now. one is for, you know, typical You know, category, and then I'm specifically working on a way to, to, to basically provide a zero dollar minimum. This is effectively one of the announcements that I'll be doing in like a month or two, or a couple weeks here, but a, a way to have a zero dollar minimum with, with a decent spread, right? so that anyone can kind of just pick up our tool, slap it in their application, and get going here, right? That means a real bank account setup in minutes. As long as you're able to pass KYB. so we're, we're really trying to like make that work, and, you know, that's, that's even easier if you're, all you're working on is like Bitcoin or Lightning, and that makes our lives very easy from a compliance standpoint. So why not, right? Why not make it easy for people?" }, { "speaker": "harsha_goli", "time": "14:52", "start": 892.39, "text": "Oh, that's cool. So it can make it easy for entrepreneurs who, like, currently hear about entrepreneurs who sometimes in some parts of the world it's actually hard to take, you know, fiat payments and" }, { "speaker": "stephan", "time": "15:10", "start": 909.52, "text": "Allowed to, onboard, but the institutions can be outside of the US as long as they're servicing, US end users." }, { "speaker": "harsha_goli", "time": "15:18", "start": 917.83, "text": "Got it. Okay. And then in terms of the banking aspect that you're providing, is this to also have like a US bank account that they can- Send fiat into to get, you know, to, to buy Bitcoin with it or like, and then the idea is the developer or the builder of the app who's partnering with you, Magnolia they, are they, are they just gonna have like one bank account thing, or is it gonna be like for each of their end customers, end users will have their own like bank account to send stuff to? I presume it's each of those customers, right?" }, { "speaker": "stephan", "time": "15:50", "start": 950.26, "text": "Yes, each of those, customers. So the model that most banks try to like, you know, get you to use is what you described at the beginning. It's called an omnibus. It's where you have one large bank account that everyone like puts their money into. And so if there's like an accounting error or" }, { "speaker": "stephan", "time": "16:08", "start": 968.28, "text": "Use one address for everyone's money, right? That just seems a little bit kind of crazy to me. So the, the solution that we try to go here with is one where everyone's funds are individually segregated, and so everyone has their own routing accounting number. So there's no way for things to go wrong and for someone else's money to get, to get affected." }, { "speaker": "harsha_goli", "time": "16:23", "start": 983.05, "text": "Got it. And then does that mean the-- Each of the user, let's say you're an app builder now and you're thinking about building, you know, partnering with Magnolia, does that mean the app builder has KYC." }, { "speaker": "stephan", "time": "16:39", "start": 999.26, "text": "Yeah, yeah, yeah. So the KYC happens through our partner Persona, that's an iframe that we have to, like, you know, pop up if someone, if there's like a lot of flags in the Persona iframe, you might go through what's called, it's like hardened KYC or something along those lines, enhanced KYC, right? and that's something that we have to go through. That's more like, not really, like, we don't believe that you are who you are kind of thing. That's a One specific square block, it's stuff like that, that tends to, to kick up those flags." }, { "speaker": "harsha_goli", "time": "17:13", "start": 1033.04, "text": "Interesting. Okay. Yeah. Yeah. Okay. So, I guess, I'm curious to get your take on how things are with the Trump administration, right? Like last we spoke was about a year ago, Trump was only just in, now he's been in for about a year, some of the Biden era stuff is being unwound. What is it like nowadays, building Bitcoin stuff in the US?" }, { "speaker": "stephan", "time": "17:36", "start": 1055.95, "text": "Yeah, it's, it's different for sure, right? So the Genius Bill got passed, right? We're really happy and excited about that. the Clarity Act is, you know, like people are figuring it out right now, I, I do think it's gonna pass, as well. there's actually a lot of pressure from the White House currently to, to get, you know, the banks and the crypto people in the same room, just hug it out and figure it out. That's really exciting. I think Clarity Act is, is really," }, { "speaker": "stephan", "time": "18:06", "start": 1085.57, "text": "It clearly doesn't establish a, like a, a federal license like MiCA, right? So we're, we're gonna be stuck with the MTL system here, and so that's gonna be a pretty big barrier to entry for anyone who's trying to start a business like this. but aside from those things, like it's, the way how things have panned out this whole last year have been kind of fascinating, right? Specifically with the, the loophole in the Genius Bill where, you know, you can just get rewards, right? in stablecoin yield," }, { "speaker": "stephan", "time": "18:36", "start": 1115.63, "text": "Upset with that and, you know, like kind of actually fight back now, and we're watching the fight where, you know, I think the, the Tether CEO actually sided on the side of the banks, you know, to, to try and get rid of that loophole, which is really interesting. So, a lot of things have changed from the licensing standpoint, and compliance standpoint. a lot of the organizations that were in charge of making sure that, you know, the licenses get, get applied and that rules are being followed, they've all been Not really anyone really watching a lot there, and then in the other jurisdictions, there has been a lot of, like, the, their, their budgets have also been cut, but they're, they don't respond anymore to requests, right? Because they're, they're kind of like, you know, overwhelmed. And that's kind of a, a really interesting development. so there's a lot of self-policing going on, is something I've noticed. and with self-policing come cracks, right? So like an example of, of a" }, { "speaker": "stephan", "time": "19:36", "start": 1175.55, "text": "In broader crypto, there's this idea that, you know, like stablecoin, like stablecoin credit cards or stablecoin cards, that's like a really big deal right now. There have been a rise of no KYC debit cards or credit cards, right? And the way how these work is through a compliance, loophole where, you know, if you get a, a debit card through-- for an individual, you have to do KYC, but if you get a debit card or a credit card as a business user, if you've ever been employed by, re-- like This is Ramp or something, you'll notice, or you'll remember, when you get your credit card from Ramp, there wasn't a KYC step there, right? And that's typically because, the compliance departments feel like, okay, this is an enterprise contract, you know, their, and their employees are probably vetted by, you know, the actual employee, employers, and it's probably fine. a lot of trust there, and we're seeing a lot of companies abuse that trust currently and use that to, to create a lot of credit card and debit cards for end users who you know, work for that given employer. And so like, that's, that's an example of like, you know, cracks, you know, that people are taking advantage of. And it's just funny, I'm, I'm reading this and I guess it could" }, { "speaker": "harsha_goli", "time": "20:43", "start": 1243.38, "text": "kind of come back to bite the industry in the ass, right? Because if genuine-- Obviously, I'm, in principle, you know, I'm against AML and sanctions laws, but if genuine, like, fraud and scammers use that route, then You know, that could then become a political issue in the next election, and then it gets shut down and clamped or locked down in some way, you know. So I guess," }, { "speaker": "stephan", "time": "21:06", "start": 1265.58, "text": "Right now, like Visa and Mastercard are being friendly toward the entire industry, but like, yeah, the more tricks people find like this, the harder it'll make for all of us." }, { "speaker": "harsha_goli", "time": "21:15", "start": 1274.93, "text": "Yeah, it's a, it's a interesting one there. also I was curious, you mentioned the Clarity Act being good for Bitcoin, I thought that was like me mostly like a Bitcoin thing, like, what are the actual benefits for, you know, Bitcoiners?" }, { "speaker": "stephan", "time": "21:27", "start": 1286.66, "text": "So for bit, in the Bitcoin world, there's two camps, right? there's the retail folks, right, the everyday hodlers, that kind of thing, and then there's the institutional folks. The institutional folks are really what have been driving the price Bitcoin up for a very long time. honestly, like, I think, whenever, you know, crypto really, you know, does a lot of questionable things, people always rely on the institutional Bitcoin people to showcase, like, \"Hey, look, you know, this is like the good side of crypto. Like, there" }, { "speaker": "stephan", "time": "21:56", "start": 1316.42, "text": "The broader community. The Clarity Act has a lot of benefit for them because what it, what it really, really does is, it, it's, it's a really big green light for a lot of huge institutions that this is an okay bona fide area, and here's how you should handle a lot of the smaller stuff that isn't, addressed in any other legislation like the Genius Bill, right? The Genius Bill is a little bit more narrow. It really was only for stablecoins and a, a very, a very specific mechanism to project, American supremacy overseas, right? That's what it was for. But there's still a lot of unanswered questions in terms of who, who runs what essentially. that's what the Clarity Bill is, and so it, it's, it's really, really relevant for the institutional folks." }, { "speaker": "harsha_goli", "time": "22:42", "start": 1361.63, "text": "Gotcha. So what, what's in there that they need from a Bitcoin, you know, perspective? Like, what are the, some of the things that is like clearing up for them? Is it just like how, you know, the custodian for things or like certain regulate, certain regulations? Like, what, do you know any?" }, { "speaker": "stephan", "time": "22:57", "start": 1377.38, "text": "Yeah, yeah. I think the, the biggest pieces are who are the regulatory bodies specifically for a lot of these, like, a lot of these like money transfer, like, like audiences, these custodians, these like crypto banks, stuff That, you know, I, I, I'm working off of a little bit outdated memory, so I might be wrong, but I believe it's like the CFTC is, you know, supposed to actually take over this specific thing, not the SEC, you know, it's like stuff like that, right? And, okay, and then based on" }, { "speaker": "harsha_goli", "time": "23:25", "start": 1405.25, "text": "that, the institutional- Person might be thinking, \"Oh, okay, I'd rather work with the CFTC on this issue instead of the SEC on that other issue. Therefore, I'm more comfortable now to do some Bitcoin thing.\" Is that what you're- Yeah, exactly." }, { "speaker": "stephan", "time": "23:37", "start": 1417.46, "text": "If the SEC is known to have a big hammer and the CFTC is known to do a lot more like, you know, gentle coaxing, right? As an institution, you'd rather go with the person who's doing a lot more gentle coaxing than the big hammer, you know? and so it, it's, it Like you throw a case at the wall, right? The DOJ comes and" }, { "speaker": "harsha_goli", "time": "24:00", "start": 1440.37, "text": "kind of regulation by enforcement, concern that kind of came up during the Biden era, right?" }, { "speaker": "stephan", "time": "24:05", "start": 1445.13, "text": "Yes." }, { "speaker": "harsha_goli", "time": "24:07", "start": 1447.01, "text": "Interesting, yeah, okay. And I guess the other one is that I know that there's this, the Save Our Wallets campaign, like Macarello and some other guys were onto that, so I think that I, I believe they were trying to get that into the Clarity Act to that like the, you know, Bitcoin developers don't go to jail sort of thing. yeah, very unfortunately, none of" }, { "speaker": "stephan", "time": "24:25", "start": 1464.93, "text": "that has really gotten in. You know, like it's, it's like, super unfortunate actually, like, well, damn you're tragic. it seems like a lot of the stuff that I personally wanted to see in, specifically anything regarding the, the, Sami wallet folks, none of that is being addressed by the, the, like, by reason to go after crypto companies, now it's up to these agencies instead. But that's, that's not gonna matter, I guess, as far as like the samurai wall folks go. Nothing, nothing about that seems to be rescinded or anything like that, which really sucks. Yeah," }, { "speaker": "harsha_goli", "time": "24:57", "start": 1497.19, "text": "that's a, that's a shame. Although, last I saw, I think Trump mentioned he would consider the, you know, freeing the samurai guys, so hopefully, you know, free them, but, Yeah, it's awkward. any other, thoughts on kind of the tension, between, let's say, some of the banks and the quote-unquote, you know, the crypto, and Bitcoin industry?" }, { "speaker": "stephan", "time": "25:18", "start": 1518.47, "text": "Yeah, so, this, this like, is it mainly" }, { "speaker": "harsha_goli", "time": "25:21", "start": 1520.69, "text": "just the stablecoin point of like, basically what I've heard is like, the banks want the yield, right? They see it as like, hey, we're getting, whatever, four percent or whatever it is on the, you know, on their treasury bills, 0.1% to the actual end customer, whereas the stablecoins are sort of like, \"Hey, we can pay out all this yield,\" and now they're fighting over that, and that's apparently one of the big points of contention, right, on this, clarity act, and that's apparently, you know, one of the things that's really been, Gumming up the works there, right?" }, { "speaker": "stephan", "time": "25:52", "start": 1552.19, "text": "Yeah, and that is a huge deal. Like right now, think, think about it like this. It's the same underlying asset for the banks and for a lot of these stablecoin companies. So the only difference is, you know, one pays significantly more. But the difference here is the stablecoin companies also have an entire payment like infrastructure and, you know, like plate that the banks don't have, right? And so for the end user, why not just go for, you know, the one that gives me like, you know, six, seven APY versus, you know, the pittance, you know, pennies on the dollar. And that's a really big deal for these banks, especially these smaller community banks, where they've already been in a little bit of a, I guess a, a precarious situation for, you know, years now. I think during-- there was, the last like conference I was at, Plan B, I saw that there was another banking conference around the same time with a headline, talk that was like, you know, \"Adapter die.\" And so like that's, i-it's not looking good for the small community banks, you know, for Magnolia, like going through and trying to find banking partners that are willing to work with us. I thought it would be a lot harder than what it ended up actually being, because a lot of these smaller banks are, you know, fully on board with adapt or die, you know, and that means embracing crypto and finding other, other like, you know, revenue streams." }, { "speaker": "harsha_goli", "time": "27:09", "start": 1628.66, "text": "Yeah, interesting, 'cause I guess for so long they kind of had this cozy regulatory moat built around them, and now it's almost like Bitcoin and crypto and stablecoins are sort of Coming for them and, trying to compete with them outside, and I guess for a while they probably thought, \"Oh, Mr. Government and Mr. Regulator will protect me,\" but now it's almost like They're, they're sort of saying, \"No, we're gonna take away some of that protect-- that governmental protection.\" so it's, it'll, it's just interesting to see the dynamic play out there, and then maybe that is gonna force more of them to actually have to, you know, compete in the, in the, technological realm of Bitcoin and, you know, using the chain per se" }, { "speaker": "stephan", "time": "27:51", "start": 1670.6, "text": "Yeah, I mean, I think like, over, like, not this past weekend, but the one before, or maybe it was this past weekend, another community bank failed, right? Like, outright failed, not bought out. it's listed on the FDIC's website. Like, it, it is a very real problem for them right now. and so anything that gets their deposits up, they're, they're going for hard." }, { "speaker": "harsha_goli", "time": "28:10", "start": 1690.46, "text": "Do you have any thoughts on where that plays out? Like, do you just think it's just gonna have to be like, like literally just adapt or die? Like some of these banks will partner with, you know, Bitcoin and crypto companies and other, the others die out? Or where do you see it going?" }, { "speaker": "stephan", "time": "28:24", "start": 1703.97, "text": "I think there's always gonna be a place for the small state run community bank. You know, like w-when we think of community, community banks, we think of, what we actually tend to think of are what are like, you know, federally chartered, you know, community banks, but there are also state charters that exist, for a much, much smaller, like depository amount. I think we might see a return to those, because you also have to remember, we are currently in, in an era where we are, accepting more crypto bank applications. The OCC just did NewBank, right, a couple, like a week or two ago, and that is huge, right? It wasn't, so it wasn't just the five that have been an application for, you know, forever. But we're, we're continually adding more, and as we add more, that's going to be a lot of stiff competition toward these community banks. And then on top of it, they Actively by, like cons- consolidation forces. I, I think there might be a couple holdouts over the next ten, twenty years, but I do think the small mom-and-pop credit union is probably gonna have a tough time competing." }, { "speaker": "harsha_goli", "time": "29:30", "start": 1769.52, "text": "Yeah, yeah, we'll see what happens there. kind of focusing back to Bitcoin technology stuff, I know obviously you're, you're, you've been in Bitcoin development for a while yourself. what do you see is most exciting there? I know, I mean, you were touching on earlier Ark and Spark and things like this. So there's been a bit of excitement around other L2s. what, what are you looking at? What's interesting to you there?" }, { "speaker": "stephan", "time": "29:51", "start": 1790.87, "text": "A lot of them are really interesting to me, for a lot of different reasons, but I think the, in- the, the fascinating thing to us, and what we're actually like, you know, putting a couple of bets on ourselves, is like for, for the longest time, for a custodian, supporting many different projects was a very risky endeavor, because it involves, you know, building a lot of support internally and going through a lot of stuff, and it, it's kind of a lot, right? but we found that just by supporting Lightning, there are ways" }, { "speaker": "stephan", "time": "30:22", "start": 1821.55, "text": "In a way where we don't have to run a lot of the infrastructure and we don't have to run a lot of the liquidity, we can ask them to run the liquidity, have it all still be trustless with HTLCs, and be able to support a lot of these smaller projects very rapidly. So that does mean support for Ark, that does mean support for Spark, but it also means support for things like Citra and things like, like Alpen, right? Now, of course, you know, this, these aren't partnership announcements, right? And these are just things" }, { "speaker": "stephan", "time": "30:51", "start": 1850.51, "text": "This is a really interesting use case for Lightning. I think the biggest problem with Lightning, or a large problem with Lightning, has always been routing. But when you're doing things like this at a more institutional level, you can just have direct channels with everyone, and it's not complicated at all, you know? you're just managing relationships at that point. And that, that is, that, and, you know, we- Our compliance policies are written in such a way that moving funds through these kind of bridges is very easy to do, and it's, it's, you know, yeah, once we wrote the policies, once we can do it as many times we'd like. So it's a, it's very low-hanging fruit for us." }, { "speaker": "harsha_goli", "time": "31:26", "start": 1885.68, "text": "So for you, is it a matter of trying to partner with some of the bridging thing, like things like Bolts Dot Exchange or others like that, so that you can mainly focus Lightning, but through them also have support for these other things?" }, { "speaker": "stephan", "time": "31:39", "start": 1899.35, "text": "Exactly. The end user, Institutions that are using us, they don't, they don't see the lightning part, right? To them, money goes in as fiat, it comes out on liquid, right? And that's exactly the flow that I want this to be. I don't need to, I don't wanna show them the plumbing, right? But we're, we're able to do it in a way that makes everyone happy." }, { "speaker": "harsha_goli", "time": "31:56", "start": 1916.08, "text": "Got it. Okay, yeah. And then, I guess coming back to like Magnolia's product and if, so, let's say the listener now is a developer or a builder who wants to build something, what are some of the uses that they could do? Like, obviously DCA, Talk to us about what do you see, the potential uses being?" }, { "speaker": "stephan", "time": "32:15", "start": 1934.7, "text": "Yeah, totally. It's, you, you basically get to treat a bank account like it's a wallet, right? That is a really powerful thing. So things like being able to push money into it with ACH, wire, FedNow, whatever, being able to pull money from other bank accounts, you can do that on a recurring basis for something like a subscription. You can Do it on a, like programmatic pull if some conditions occur, you know, re-collateralize this loan with, you know, by pulling money over here, whatever, right? if Bitcoin goes below a certain price, you know, I'd like to buy more Bitcoin, so, you know, automatically buy, whatever. i-i-we do conversions between stablecoins and on all the major networks and Bitcoin and Lightning. so if you need to, like, convert stablecoins from one place to Bitcoin over there, we do that." }, { "speaker": "stephan", "time": "33:08", "start": 1987.56, "text": "it's basically Right, being able to treat bank accounts as wallets, but it, it ends up being really, really, powerful because it's just a money movement tool that integrates at the foundational layer of the US banking system." }, { "speaker": "harsha_goli", "time": "33:22", "start": 2001.99, "text": "Got it. And so you mentioned there's stablecoins as well, so tell us a little bit about that, like what are you doing on the stablecoin support side? are, are you helping just bridge across, again, different, types of stablecoins and chains?" }, { "speaker": "stephan", "time": "33:34", "start": 2014.48, "text": "Yep, exactly. So, USDC, USDT, and the networks that I think most people use on those, we support all of those. But basically, whatever, whatever system it is you need to, to move the money from, we probably support it. We've, we've ended up supporting" }, { "speaker": "stephan", "time": "33:51", "start": 2031.33, "text": "The goal here for us is to get the money wherever it is into Bitcoin or vice versa." }, { "speaker": "harsha_goli", "time": "33:58", "start": 2038.12, "text": "Got it. Okay. Yeah. And so how does that-- I'm not sure what the latest on, was it U S A T, the like, the, the new US, like, the, the US form of Tether. Do you know a lot about that or not, not yet?" }, { "speaker": "stephan", "time": "34:13", "start": 2052.67, "text": "I, my understanding of it is it is a, it is a like form of USDT that is set up with the genius bill, like to comply with- The Genius Bill. So the, so USDT by itself doesn't comply with the Genius Bill, right? And so technically, if we're enforcing the Genius Bill, it's not gonna be like, you know, usable in the US. But USADT, or I always forget what it's called, that does comply with the Genius Bill, so that is run by, like, there are reserves in a, like US bank-like authority, probably a trust. It, you know, operates on all the major exchanges. I think that's really exciting and interesting, but I also think it's kind of, I, I'm curious to see where that shows up in the US, personally." }, { "speaker": "harsha_goli", "time": "34:55", "start": 2094.75, "text": "Yeah. any thoughts on like- Things like stable channels and some of these other approaches to sort of do a similar thing but not through technically a stablecoin?" }, { "speaker": "stephan", "time": "35:07", "start": 2107.4, "text": "stable channels, I'm actually not super familiar with stable channels. I am really excited about Taproot assets. I, I, you know, I, I think forever ago there was the announcement that USDT was gonna come to it. I think things have gotten really, you know, big and complicated on the, like, a tether side, so I'm, I'm curious to see if that's still gonna be the case. But even if USDT doesn I'd be really excited to see, like, you know, USDC show up with, Taproot channels, and, or Taproot assets. And, y-y-again, if that isn't the case, I'd also be interested to see, like, you know, what, what the next big thing is there." }, { "speaker": "harsha_goli", "time": "35:41", "start": 2140.66, "text": "Yeah. And I presume, I mean, you used to be at Lightning Labs, so I presume you'll be looking to support Taproot assets also." }, { "speaker": "stephan", "time": "35:46", "start": 2146.25, "text": "Yeah. Like, honestly, I think we're, we're really well situated to support it Is you really have to, you have to go where the, where business is. If people aren't asking for something, it doesn't mean they're magically somewhere hidden, it means that no one's asking for it. And so you really gotta, you gotta talk to your customers, understand what they need You know, like work, just work for solutions for them." }, { "speaker": "harsha_goli", "time": "36:14", "start": 2173.51, "text": "Yeah, interesting. So I guess ultimately, I, I, yeah, I think, I think that's probably right in the position you're in. maybe the, the, the Steve Jobsian kind of idea of if I ask them, you know, they would want a faster horse kind of thing, that's more like at the app level of like, there needs to be entrepreneurs out there who are thinking about Maybe there are some uses that we haven't really thought about or maybe they're just not popular, and someone could build that into an app using Bitcoin, and partner with, you know, these different institutions, whether that's yours or someone else, to kind of get the fiat, the fiat bank aspect of it covered." }, { "speaker": "stephan", "time": "36:50", "start": 2209.84, "text": "Yeah, totally. And I, I, I really do love, like, Steve Jobs and his, like, you know, design philosophy. But I also think it's one that's very much set up for, like, you know, more of a retail audience, right? Like, you know, I, like, I know better than most people what they actually want because they're used to something that's so outdated and miserable, right? I don't think we're quite there yet with a lot of the technologies that we have. I think the ideal thing that everyone wants is What the vehicles are underneath, right? That's certainly my end goal, but doing that isn't as-- Well, it's, I, I was about to say something crazy. It's not as simple as building the, the iPhone the first time, which is kind of a crazy, you know, thing to say, but it's, it's really not, you know, like, like my, my ideal end goal here of money transmittance in every, you know, jurisdiction in the world, making it as simple so you don't need to understand what kind of value you're moving. That," }, { "speaker": "stephan", "time": "37:50", "start": 2269.5, "text": "You know, building the, the iPhone the first time." }, { "speaker": "harsha_goli", "time": "37:52", "start": 2272.45, "text": "Yeah, well, I mean, that's the, that's the big irony, right? Like we-- I mean, it's a common example many of us in Bitcoin use. It's like, you can text anyone internationally with whatever WhatsApp and Signal and whatever, why can't you send money just like that, right? Like, now of course, Bitcoin is meant to be that, and yes, if you use a Lightning wallet, you can do that, but, you know, we're still- It takes time for people to actually get comfortable with that. So I'm curious where you're at on like, you know, adoption and w-what, what, should people be doing to increase adoption?" }, { "speaker": "stephan", "time": "38:24", "start": 2303.74, "text": "You know, I, I've been thinking about this like exact thing for a long time. I think, I, in, in the Bitcoin space, there really are two, two large groups of people, and they're not like bridge, and they're not the same, not really. One is like the retail, I'm gonna call them tech enthusiasts like myself, right? People who like using Bitcoin, who like using all the cool little like, you know, features and technologies and, you know, bits of it. and we're, we're firmly tech enthusiasts. Right? It's okay if things are a little bit tough, if I have to read logs and stuff, whatever. If most people don't support it, that's totally cool. And then the other side is like the, the large scale institutions, right? Where they see all this, all the mania in Bitcoin and crypto, and they want exposure to it, but because of compliance reasons, because of their own risk appetite, they're, they're certainly not ready to go in anything like crypto, but Bitcoin is a really good brand name that they're happy to go with. These are two very different people. The, like, adoption to me is bridging that gap. How do we bridge that gap? Payments is the answer, right? It's making it so there's actually utility to it, and the only utility of Bitcoin that I think is, you know, useful is payments. and so, okay, well, payments, and also, I have to, I have to backpedal a little bit. I have to acknowledge that the only utility that Bitcoin has ever truly had, and without any- question is it's had utility as a store of value. And there's a lot of things you can do with a store of value, right? You can take loans out against it, you can use it as collateral, that is the foundation of our like modern financial empire, right? So the more utility that we have with Bitcoin, the more we bridge that gap. How we do that is through, like, honestly, just building more and seeing what the appetite of, of these, you know, individuals are, of, of real people are. But also, yeah, I like, I, I guess what I'm trying to say is Like what, what I don't wanna see is, I don't wanna see stablecoins rule the world, right? But they are currently ruling the world, you know? Like they, they really much are. And so I'm, I'm a little bit at odds with that personally. but at, you know, because also as an operator, I have to, I have to listen to what people want. And if they want stablecoins, then, you know, I'll give them stablecoins, but I'm not gonna be happy about it." }, { "speaker": "harsha_goli", "time": "40:39", "start": 2439.4, "text": "Right, fair enough. Yeah, I mean, of course, I, I wish we could all just go straight to Bitcoin, but, I guess that's, that's where people are at, like most people are at who are, like you, as you said, not in the, you know, tech enthusiast Bitcoin maxi category. Well, a lot of those people, yeah, are kind of, are still at that point. on the- I guess on the privacy side of things, like, do you have any updated thoughts there on like where things are going, things like, you know, silent payments, Payjoin, et cetera?" }, { "speaker": "stephan", "time": "41:10", "start": 2470.0, "text": "I think, I mean, Bitcoin privacy is good, it's not great. there are ways to get privacy like higher, things like, you know, using Lightning, but it's still not great at the end of the day. Lightning is pretty good though. my, like lately actually, you know, as someone who's been working in privacy tech for a long time, it The other side of privacy, right? Like very much recently in the last year or two, where I'm seeing the horrible things people can do with privacy. I'm still very much a privacy maxie, but now I understand why KYC exists to the degree it does, which is super unfortunate, right? Because it's not really about complying with like something as sin-- sinister as the Bank Secrecy Act, it's about dealing with these crazy frauds that we see, and these cra-- and I mean wild like scams," }, { "speaker": "harsha_goli", "time": "41:59", "start": 2519.1, "text": "you know? Big, pig butchering thing in, was it Cambodia or something? I think like a US government went and got them, well, I can't remember the details exactly." }, { "speaker": "stephan", "time": "42:07", "start": 2527.0, "text": "Thank God. Like, yeah, like pig but, like pig butchering is a crazy scam, if, if your audience isn't familiar with it. and it's not the last or the first kind either. Like a really common one that we see are mules as well. that's, that's, you know, normal. That's when people get paid to move the money in, but yeah, those kind of scams, like, you know, having tools in place to deal with them is why a lot of the KYC stuff exists. but the reason why like KYC is getting worse and worse, in my opinion, is because like the, the enforcement agencies involved here to actually try and stop the, the scams, they're not doing their job, right? The, the thing you brought up, that was awesome and incredible, and I think the only example I can refer to as where, you know, agency did their job and stopped these horrible scam centers, Scam centers, they're so much worse than they sound, like, which is crazy. They're, they're typically operated almost entirely by an army of slaves, like real world modern day slaves, people who've been kidnapped, or, you know, lured by, like, you know, a fake job offering, and they're told, you know, if you don't meet your quota of this much money per week, you know, we're gonna take you in this back room and we're gonna beat you, and if you get beat three times, you know, then you're not gonna Like terrible, terrible things that happen. But, you know, the, the like double-edged sword of, of privacy and free money is that we make our borders open to these kind of attackers, right? So It, it's, it's very much like, I, I, I'm seeing that other side a lot these days, and it's not, like changing my heart on privacy in the slightest, but it's making me a lot less ignorant to, To, I guess, my, my ideals, right? And I, I really do appreciate that." }, { "speaker": "harsha_goli", "time": "43:58", "start": 2638.49, "text": "Yeah. Yeah, it's a, it's a tough one because I think it's, you know, I guess on one hand, it's, when you're coming up and you're, let's say, out of power, it's easy to sort of challenge the power and say, \"Well, this is the way it should be.\" But then if you put the shoe on the other foot, like, e-even another example, if, let's say, you are now a Citadel manager, how" }, { "speaker": "harsha_goli", "time": "44:24", "start": 2664.2, "text": "you know, security are you gonna have? But then, like, put the shoe on the other foot, if you were the citadel owner or manager, how do you keep the people in the citadel from being, you know, murdered and mugged and raped and whatever? You know, it's sort of, it's gonna force all of us to have uncomfortable conversations about what are we exactly gonna do about identity and KYC without going the CBDC route, right? Like, how are we actually gonna do this? Is it gonna be some kind of nostra pub key kind of based thing, especially in the age of like deepfake AI video, you know, scamming-- like, there's so many scams online, so it's kind of, it's gonna be a very uncomfortable, sort of, what's the word, tightrope to walk?" }, { "speaker": "stephan", "time": "45:12", "start": 2712.34, "text": "Yeah, very much so. And, you know, like, I think while we like go through this tightrope, tightrope, there's gonna be a lot of people checking us, you know, from the sidelines. And I think there's, there's- It, there's, there's a very big instinct, right, to, to fight back, like, hey, you, you know, you're not in the trenches, you, you don't see the shit I see, you know? Like, you know, it's easy for you to say that, but I think personally, I, I'm gonna really appreciate them, because, like, as we go through here and we have to make like trade-offs and, you know, we, we try and figure out ways to, you know, stick to our ideals but also be pragmatic about it, it" }, { "speaker": "stephan", "time": "45:51", "start": 2751.41, "text": "Today, like, I was really kind of lamenting like, it, it would be really cool if there was some sort of like, you know, crypto based way for us to, you know, authenticate who we were without, you know, like, you know, submitting like passports and, you know, driver's licenses and like some" }, { "speaker": "harsha_goli", "time": "46:08", "start": 2767.7, "text": "ZK thing, I don't know, yeah." }, { "speaker": "stephan", "time": "46:10", "start": 2770.14, "text": "And the person I was talking to, they pointed out that it sounds like what you're describing is Worldcoin, and I'm like, okay, well, hold on, hold on now, you know?" }, { "speaker": "harsha_goli", "time": "46:19", "start": 2778.97, "text": "And so like Where things go, but I, I, yeah. Sorry, go on. Yeah. Yeah, yeah, no," }, { "speaker": "stephan", "time": "46:29", "start": 2788.74, "text": "it, it, it is, and I think I'm really excited to, like, you know, figure out how to get there, because it is possible to get there, you know, it is possible to have a world where we can, you know, defend ourselves from scammers and, you know, fraudsters without, you know, like having to give up my passport or my social security or whatever to some random corporation, you know? There is a world standard, and there is a world where we're able to use, like, you know, whatever currency we want as our store of value, it just takes a little bit more work and it takes a lot of focuses on the friction points, but we can get there." }, { "speaker": "harsha_goli", "time": "47:04", "start": 2824.18, "text": "Yeah, alright. So look, let's finish up, give us the, closing thoughts on, what people can build with Magnolia, and, you know, what, what are the things that, that can be enabled here?" }, { "speaker": "stephan", "time": "47:16", "start": 2836.05, "text": "Yeah, so, basically if you, if you've been working in Bitcoin for any amount of time, you'll, you'll know that you'll, you're gonna run out of the tech enthusiasts pretty quick. any, any long standing Bitcoin company knows this. What I want for all Bitcoin companies is I want to turn all of you into, places where we can convert pre-coiners, right? And that means integration with the banking system in a way that takes money from fiat and converts it to Bitcoin. So wh- however mechan- whatever mechanism you have in your mind to actually do that, whether it's, you know, like letting someone just buy Bitcoin, letting someone, like take loans against, you know, like an asset or in order to buy Bitcoin or You know, to sell some equity to, you know, buy Bitcoin, whatever crazy like, you know, like money flow you have in your mind, I wanna hear it because that's what I wanna see. I wanna see all of these apps become financial apps, because that's what we are. We are fi- like Bitcoin apps are financial apps, and that means we need to integrate and we need to like move money from one system to another." }, { "speaker": "harsha_goli", "time": "48:19", "start": 2899.37, "text": "Fantastic. Well, yeah, I, I want to see more people building Bitcoin apps and hopefully listeners out there are getting some ideas on what they can build and what they can do. so as always, links will be in the show notes. And Harsha, thank you for joining me today." }, { "speaker": "stephan", "time": "48:32", "start": 2911.79, "text": "Thanks so much for having me. Till next time, see you. Peace." } ] }