Nathan McCauley: Tokenized Deposits Are The Real Trojan Horse For Banks (Insider Take)

Andy (0:00)

And today, we've got Nathan McCauley talking about why banks are going on chain. Nathan co-founded Anchorage Digital, and they are also leading the charge when it comes to helping banks go on chain. They're one of the first federally chartered digital asset banks in the United States. They issue USAT, that's Tether's US-regulated dollar stablecoin.

And we actually just covered something around USAT and Aave at Avalanche Summit last week. So big, big partnerships that are happening, Nathan is here to talk about it. Nathan, man, welcome to the show. It's a pleasure to have you.

Nathan McCauley (0:33)

Thanks, I'm really happy to be here.

Andy (0:35)

Absolutely, I really enjoyed our last time that we had you on as well. So it's good to have you back. And it just feels like everything, I mean, we're hitting on all cylinders since the last time we had you. Excuse the raunchy language there on my hat, I'll take it off for this one, but it is truly how I feel. And so, man, I think you can tell that we are excited about where we stand, not only in the markets, but also in the industry broadly, about all of the institutional adoption. We're calling it institutional FOMO. It's happening at every level. Stable coins feel like they're a national economic priority. The way that they're twisting duration out of the bond market. It feels like everything is hitting on all cylinders. Is that how it feels inside at Anchorage Digital headquarters as well?

Nathan McCauley (1:17)

Yeah, I think that's exactly right. We're seeing a few mega trends happen. Certainly, the adoption of digital assets across the institutional landscape, banks, broker dealers, fintechs, across stables, across tokenized assets, everybody talking about like, hey, is this... The question now is not do assets come on chain, but how do they come on chain?

Via native issuance or DTCC or some other mechanism by which they come on chain. So the kinds of debates that we're having, the kinds of questions we're having are very tactical, very real solving roadmaps from teams with P&L responsibility. So yeah, we're seeing it across the board.

Andy (1:58)

I had a conversation with someone earlier today. It's not been released yet, but it was with a rep from Tempo, and he was talking about how important the Genius Act was, which was this landmark piece of regulation in the stablecoin space.

Obviously, more recently, we've had the Clarity Act fail to reach cloture. So given that Anchorage and yourself, you guys are interfacing with banks, I'd assume on essentially a daily basis, is the Clarity Act a significant obstacle that has not been overcome and therefore will hinder the banks' entrance into this space, or was it relatively inconsequential and banks are coming in anyway despite Clarity Act?

Nathan McCauley (2:41)

I agree with whoever it was earlier on today from the other team that the Genius Act was an incredible milestone for digital assets. There's a lot of things that come in there. First of all, you look at it and say it itself legally blesses a path for stable coins. There's a first order answer there on there's such a thing as a stable coin. It's a legal entity. It's a legal concept that now can be regulated. But the implication there is that a bunch of the stuff the stable coins depend on are also good. Chains are good. Blockchains are good. Decentralized networks are good. And so it comes with a lot of built-in implications that I think are, in many ways, the unlock for many banks to start to come in. So I would say that Genius was already an unlock. Most banks, their primary business is in movement, settlement, and holding of the dollar. And the fact that the dollar is getting upgraded to like 10 times better product with stable coins, means that all of them now can't ignore what's going on.

So with respect to clarity, is clarity a big loss or is it going to slow us down? I think the way that I would think about it is that clarity was going to be an accelerant. So things were going to go even faster. There was going to be even more FOMO. And I still think that that will take place. I think it was actually really wise what Congress and the administration did with Genius, which is take off a chunk of the overall crypto landscape regulatory structure and pass it as an individual bill.

For those who aren't maybe historians of regulatory history, like probably most people aren't, but unfortunately within crypto we have to be, you'd know that securities legislation actually rolled out over the course of a decade across three different bills, the 30 act, 33 act and the 40 act, each of which established a different thing. So there was a bill to describe what a security is. There was a bill to decide, describe what an investment advisor is. There was a bill to describe what an exchange act. The clarity act tried to bite off all of that across the definitions of assets and across different asset classes as well. And so it was inherently a very ambitious bill.