Stable Takes Episode 4: Money20/20, JPMorgan deposit tokens and stablecoin rewards

Stable Takes is a weekly mini-podcast from Tempo on stablecoins, tokenization, and agentic payments. Watch Episode 4 above or read the transcript below.

Tempo's Chief Business Officer, Dan Romero, and Head of Market Development, Simon Taylor, open on Money20/20, where the conversation felt grown up and the two big themes were AI and stablecoins. From there: why JPMorgan issuing a tokenized deposit on Ethereum matters for offramps and bank balance sheets, and what the OCC's GENIUS rule means for stablecoin rewards. Simon reads it through the history of cashback, and they close on how fintechs can pass value back to customers, down to a mortgage priced on stablecoin balances.

This conversation is lightly edited for clarity.

Dan Romero: How are you?

Simon Taylor: A crazy couple of days looking after kids and traveling all over the country, but recovering from Money20/20. How about you?

Dan Romero: Same. I thought it was a great conference this year. I used the term "Super Bowl of fintech," and it very much felt that way. I'd be curious what your biggest takeaway was this year.

Simon Taylor: Biggest takeaway, aside from everybody bemoaning the fact that it's leaving the Venetian, was that it was a very grown-up conversation across both AI and stablecoins and tokenization. In previous years it always felt like they were the naughty kids crashing the party. There was, objectively, a lot of hype. I remember 2021, when every company had bought out all of the sponsorship holes, whereas this year I couldn't name a crypto company that was in the sponsorship holes, aside from some of the obvious ones, your Fireblocks and whomever. It's very much infrastructure companies that are there.

It wasn't garish shows of "look how much money we've just raised." It was serious conversations about payments companies and, in particular, enterprises wanting to get on with it. The banks are still a little bit slow and focus more on tokenized deposits, but the question was: how do we make this real? How about you? What was your biggest takeaway?

Dan Romero: So I hadn't been in 10 years, and I think it's grown up quite a bit since. The last time I was there was, I think, 2016. I'd agree with you that the crypto presence felt light, or if it was crypto, it was branded as stablecoins and a little bit more focused on tokenization and the enterprise side of things, which I guess is normally Money20/20. I didn't see some of the names that I would have expected on the crypto side; there was really no presence. Although walking around the hall, especially restaurant row, you did see folks from various blockchains or protocols. I just don't think there was as big of an in-your-face presence walking around the floor.

There were definitely two big themes. The first was AI, and I think everyone wanted some version of an agentic story, whether that was "use the service with your agents," catering to agents, or the e-commerce stuff that we've been talking about: agentic payments and so on. And then stablecoins. I was really surprised by the number of companies that had stablecoins in their booth messaging, and I was able to identify a couple of new companies that we weren't even talking to and that I didn't realize were doing stablecoins. So that was exciting.

But it definitely felt like AI first, stablecoins second, and I don't really think there was much of a third theme. I'd be curious if you felt there was.

Simon Taylor: No, I would say the same, and maybe that's my observer bias. There's obviously always a lot around merchants and their concerns around card network fees, the evergreen stuff that you'd see at a merchant risk conference, and bank CEOs giving talks, but nothing that really stood out beyond those two topics.

The big one on the AI side, though, is everybody seemingly dancing around the idea of "How am I going to own my territory and my turf? What standards am I going to own? What standards am I going to support?" I think sometimes people try to include stablecoins in that conversation. But to your point, stablecoins felt like they've got their own business case. They're being supported as another rail. Most PSPs support them as one of the many things they offer. So I just felt like it's grown up, and I was bumping into people who had either adopted it or had questions about it.

I thought it was a great show for that. I've got to give Money20/20 the credit: it brings together the most people who work in payments and finance in one place, in one city, at one time. And even if they're not in the expo hall, everybody's there. So I enjoyed it.

Dan Romero: Yeah, I was saying to other folks on the team that it's by far the most efficient conference I've been to. From a culture standpoint, people expect, "Hey, I'm in a 20 or 30 minute meeting, and then I've got another one," and that's completely fine. When I reflect on some of the conferences I've been to this year, maybe you get three meetings a day, and that feels pretty good. Whereas at Money20/20, if you don't get 10 meetings, you're not doing it right. And I can only imagine for you; I caught you at the end of one day, and I think you'd had something like 20 meetings that day.

So that actually leads us to the next topic. In the same week, we had some rumors that JPMorgan was locking down their banking infrastructure, which we've talked about ad nauseam at this point, but at the same time they were issuing a tokenized deposit on Ethereum. I'd be curious about your take on the significance of the tokenized deposit from JPMorgan on Ethereum, and some of the conversations you had last week at Money20/20.

Simon Taylor: Yeah, absolutely. Look, this is the second public chain they've gone on. They obviously went on Base initially. The core use case here is that you have a crypto-native enterprise customer: a stablecoin issuer, one of the many investment banks that have grown up in crypto, or a hedge fund. Those are very big, substantial clients to somebody like JPMorgan, and they have a lot of stablecoins. They obviously want to offramp those stablecoins in the most efficient way possible, and the most efficient way possible is to do it directly via your bank.

The problem is that banks don't necessarily want to hold third-party stablecoins. They find that adversarial to their own business model, and they have some compliance questions. So they're putting their own dollars onto first Base and now Ethereum. I think Ethereum is arguably the most credibly neutral network out there for programmable money, and with all of the challenges around speed and whatever else, it's still got the most liquidity and volume. So you've got to say that's them going a little bit further, whereas Base is very clearly tied to Coinbase, and because of that, I think it's a little easier for them to work in a vertically integrated way with a counterparty.

To go onto a public chain where there isn't that clear counterparty is a really big moment. It's a bank the size of JPMorgan saying, "We do business on a public chain." The signaling value of that is massive. I think the reality is that for the short to medium term, the banks are going to continue to follow their clients and do the things that matter primarily for their clients. But I wouldn't be surprised if JPMD starts showing up on a few more chains now, wherever their bigger institutional clients are pulling them to go. And who knows, there may be other banks that start to follow, because to my mind, this is just a really sensible way to offramp.

Put your dollars on that chain, make sure that only your clients can hold it, and boom: the JPMD that's on Ethereum is effectively a dollar held at JPMorgan. "I have now offramped. I am no longer holding crypto. I'm holding a claim against a bank." And from the bank's perspective, those are all fungible. They make the magic work behind the scenes. So, your thoughts?

Dan Romero: Yeah, I think it's an Overton window shift, and a pretty significant one, because of the signaling value: JPMorgan, the biggest bank, is doing this, and it's doing it on the original permissionless, programmable public blockchain. Bitcoin's the original blockchain, but you really can't do much programming there. So for JPMorgan to be issuing on Ethereum, and then, like you said, I think there's probably a path to being on other chains over the next 12 to 18 months, it's a big signal to the other banks that this is not only okay, but if you're a forward-leaning bank, you should be thinking about this as well.

I think you bring up another important point that I frankly hadn't appreciated until really getting into the weeds with some of these guys, which is the way stablecoins are treated from a bank accounting standpoint. I don't think we need to bore our audience with Basel and all the other rules, but from a capital ratio and balance sheet standpoint, it doesn't make sense to hold stablecoins at rest. So banks are thinking about using them just in time and to do payments, but banks are governed, at least today, by a very different regime, and tokenized deposits play nicely with that arcane set of accounting rules.

So for JPMorgan to actually be doing this is, I think, going to really pull the whole industry forward. People have been talking about tokenized deposits for a long time, but there hasn't been a lot of action. There have been a lot of consortiums and meetings, and you've been in some of those, but I think just actually doing it is the most important thing.

Dan Romero: So the last story this week is that the OCC came out with rulemaking around GENIUS, because I think they had a statutory deadline to get it out by the end of the year. And we had a great blog post from Tempo's own Lindsay Haswell, where we went through and enumerated what's in the rulemaking and how it applies to companies using stablecoins.

I thought the most interesting thing here was getting a little clearer on, to get into the weeds, this: if you're a stablecoin issuer, say company A, and you have company B, which is a fintech platform, and company B has its own customers, how do the rewards go from the issuer of the stablecoin to company B, and what can and can't company B do with its customers? I think there were a lot of questions, and in a world where CLARITY was very much in play, that was going to get redefined even with the rulemaking.

But at this point, it seems like the rules are that if you are driving incentives and more active ways of engaging with the customer, so it's tied to whatever product you're offering, you are able to share some of those rewards, whereas a straight pass-through of yield, and hopefully I'm articulating this correctly, is not okay. So I think you're going to see people really tying anything they're doing with stablecoins to making it feel more rewards-oriented, or you have to be using the product to actually participate in some of that upside. But I'd be curious if you saw anything that was interesting, or just the significance of the OCC actually having rules now for bigger banks and folks.

Simon Taylor: That was the big one that stood out to me as well. But as I stood back and analyzed it, I thought: has there been a bit of a blunder here by the folks who were maybe pushing CLARITY a little too hard towards certain details to get what they wanted? In reality, what's continued is the status quo, and maybe it would always have had some wiggle room in it.

My zoomed-out take on this whole thing, as I read what the OCC is saying in here, which won't be enforceable until August at the earliest, so there's some time before this goes live, is, one, everything's going to be on facts and circumstances. So there's still room for interpretation, and that may change. But two, there's a historical precedent around cashback that I think is particularly interesting.

If you look at cashback, it was originally quite controversial, because people thought, "Wait a second, you're giving people yield for using a credit product, and that's not coming from deposits. That's not deposit funding. That's breaking fractional reserve banking." There was a whole big debate about this when it happened. So the carve-out for cashback was an activity-based rewards mechanism. If you look at your credit card rewards, they're usually tied to some sort of activity. And if you look at a lot of the ways in which yield happens today in some of the big stablecoin-backed card programs, it's usually a form of cashback. It's 4% cashback on spending, or whatever. So we have historical precedents here; this is not unheard of.

I spoke to the CEO of Nubank on my Fintech Brainfood podcast, and he said, "Look, if we are receiving yield, one of the things we're going to try to do is find ways to pass that to our customers in the new global accounts that we're building." And that's something I think a lot of challenger institutions want to do, because they're so much more efficient. They're not entirely monetizing the net interest margin; they're not sitting on that as their primary way of making money. They're making money from transactions and all kinds of other products. That's a disruption to the traditional banking business model that I don't think people have priced in, and I don't think you can fight against it when you have such a massive precedent as credit card rewards. So that's what stood out to me.

Dan Romero: Yeah, and I think that's an important point: money is fungible. Even if you can't directly pass yield to a customer, which I think there was a lot of argument over, about whether it should be allowed or not, if you're a challenger fintech trying to compete with big banks, you could take the net interest margin you're making on the stablecoin and offer other services that are priced better, give more rewards, or just have better functionality.

Obviously Robinhood's made stock trading effectively free, but you could imagine a version of it where "I'm making the money on the net interest margin here, and I'm not charging brokerage commissions." So I think anywhere there's a cost for the consumer today becomes a ripe area for using the overall economics of something like stablecoins to offer a better consumer experience, which is more competition that consumers benefit from.

So I think there's a lot of focus on where yield is directly shared, versus stepping back and saying these are companies that are frankly more customer-centric and keen to win new, younger customers who expect more from the financial products they're using every day. And that is enabled because the company offering those products is able to actually monetize the NIM.

Simon Taylor: And this is one more brick in the wall for the types of companies that have been doing that for a decade and more. If I look at Chime, for instance, or just to pick one at random, SoFi, there are many of these companies that have very differentiated pricing mechanisms and very differentiated go-to-markets. And whilst they might not offer you the same package on a mortgage that some of the bigger lenders might, they may be offering something that works for a student or somebody on a lower income.

That has now come to the mass market with stablecoins. It's gone global, and for platform businesses in particular, yes, we talk about Deel, but for any platform business that operates in global markets, whether it's B2C or B2B, this is a new business model. I think that's been seen and understood by people, and it changes the business case for what you can take to market and how you can monetize it. I've found myself in a fascinating set of enterprise conversations in the past few weeks on exactly that.

So there's still a little way to go on GENIUS, but I'm curious to see whether we move from early adopters to the early majority on the enterprise adoption curve. Certainly the conversations I'm having start to skew a little more institutional, but that's my bias. I think you've probably got more of a 360 view than me. Would you say that's happening from your perspective?

Dan Romero: Totally. And again, I think forward-leaning companies are going to use this as a fungible benefit, and then they're going to figure out, "Okay, if we make money here, how can we pass some of that value back to customers through other products?" Mortgages are a great example of something I haven't heard of anyone doing yet, but you could imagine some challenger coming along and saying, "Hey, get a five or 6% mortgage if you keep some amount of balance with the fintech."

And in a world where the meme is that mortgage rates are too high and you can't buy a house, if this is the best place to get a mortgage, people are going to move balances. That is effectively monetizing the NIM in a way where consumers get the benefit.

Simon Taylor: Yeah, find ways to fund things. It's exciting times.

Dan Romero: Always some very stable takes with you, sir.

Simon Taylor: Cheers.