Episode 37

Gísli Kristjánsson from Monerium on using your wallet as a bank account

Gísli Kristjánsson from Monerium on using your wallet as a bank account

What We Discuss With Gísli Kristjánsson

One of the barriers for crypto adoption today lies in connecting the legacy financial system to the decentralized one.

While crypto ramps exist to allow the economic value to flow from fiat money into cryptoassets, and vice versa, the process can be painstakingly long for the inexperienced user, as it involves using a crypto exchange.

One company that has built a bridge between the banking system and blockchain without the need to use crypto exchanges is Monerium.

Everyone understands how IBANs work, and using a blockchain IBAN, you are able to move funds from your bank account to your crypto wallet in a few seconds through the Monerium platform.

To discuss how your wallet is now your bank account, I spoke to Gísli Kristjánsson, the co-founder and CTO of Monerium.

In this episode, you will learn;

  • How money moves around the banking system
  • What is Monerium and how it uses a blockchain IBAN for moving funds between a bank account and a crypto wallet
  • Difference between stablecoins and e-money issued by Monerium
  • How Monerium differentiates from a bank & safeguards the interests of its users, and much more.
Connect with
Gísli Kristjánsson
Co-Founder & CTO @ Monerium

[00:00:00] Umar: Welcome to The Accountant Quits, brought to you by Request Finance, an all in one platform for crypto organizations and freelancers to easily manage and track their invoices, salaries, and expenses in a compliant way.

[00:00:15] Umar: On this podcast, we discuss how blockchain will impact the accounting profession and how accountants should prepare themselves for the future of work.

[00:00:23] Umar: My name’s Umar, your host, and even if some might prefer to me as the accountant gone rogue, my job is to provide you with the blockchain knowledge you need, that will be relevant for the accounting industry as a whole.

[00:00:36] Umar: Welcome to Episode 37. One of the barriers for crypto adoption today lies in connecting the legacy financial systems to the decentralized one.

[00:00:47] Umar: While crypto ramps exist to allow the economic value to flow from fiat money into crypto assets, and vice versa, the process can be painstakingly long for the inexperienced user, as it involves using a crypto exchange. One company that has built a bridge between the banking system and blockchain without the need to use crypto exchanges is Monerium.

[00:01:09] Umar: Everyone understands how IBANs work and using a blockchain IBAN you are able to move funds from your bank account to your crypto wallet, in a few seconds through the Monerium platform. To discuss how your wallet is now your bank account, I have the pleasure today to speak to Gísli Kristjánsson, the co-founder and CTO of Monerium.

[00:01:31] Umar: In this episode today, you will learn how money moves around the banking system, what is Monerium and how it uses a blockchain IBAN for moving funds between a bank account and a crypto wallet, difference between stable coins and e-money issued by Monerium, how Monerium differentiates from a bank and safeguards the interest of its users and much more.

[00:01:56] Umar: Gísli, welcome to the show and thanks for making the time to be here.

[00:02:00] Gisli: Thank you, Umar. It’s the pleasure to be.

[00:02:03] Umar: To start, could you tell us a little bit about your personal background, how you first became interested with blockchain and share the story that eventually led to founding Monerium.

[00:02:15] Gisli: Of course be happy to. So I got acquainted with Bitcoin in 2013, and I was actually mad at myself for not having discovered earlier because at that stage, it, it already existed for what four years.

[00:02:30] Gisli: And the reason was I had my first born son the year before. So I didn’t have a lot of time to tinker and play around with things, but it felt to me like I was, you know, late to the game, it was already over. But of course, with the benefit of hindsight, you can see that we were all still really early. And we probably are today, all still, really early.

[00:02:49] Gisli: I got hooked in by sort of the technology of it and I didn’t participate or buy any Bitcoin, you know, until years later. Maybe the reason why I got so interested in it from a technology standpoint was that I’m a mathematician by training, but I’ve been doing like software for most of my life. I’d already spent a time, you know, in the banking system as a bonds broker.

[00:03:13] Gisli: And it was such a small company that we were doing, both the trades, you know, and the settlements and everything in between almost. So I really got to see into the belly of the beast how trades, how the banking system works. And it just kind of blew my mind that, you know, although Bitcoin was relatively rough around the edges, it was a new way to do things in a better way, a much, much better way.

[00:03:40] Gisli: So I said to my then co-founder so we had another company back then. You know, we just have to become a Bitcoin company, you know, back then you, you didn’t even have Ethereum or anything else. So, and remarkably, he said, yes, let’s do it. I don’t know how he came to that conclusion. So we were basically the only two idiots in town talking about Bitcoin and blockchains back then.

[00:04:04] Gisli: Finally we found the other two idiots and we are now the four co-founders of Monerium and it started actually by working and co-founding Monerium with a bank. So we recognize the potential of this technology to become the, you know, the infrastructure and the settlement layer for the, for the banking system for a, a parts of the economic activity. So we set about to work with the bank to you know, create the support where we’d go through, you know, what are the opportunities?

[00:04:41] Gisli: You know, what are the dangers of this and how to think about this and so on and so forth. During this phase, we actually worked on a pilot. With Consensys back when they were just, you know, in scrummy place in New York, there were probably 15 of them back then to actually bring deposits on chain. And we introduced this business case to the bank and they took something like six months, come to no conclusion.

[00:05:08] Gisli: So I don’t blame them really they’re, you know, back then you wouldn’t even have wallets Metamask didn’t exist. And they were constantly asking about like, how do you interface with this? And we were saying, there will be something, some software, which we now know as a wallet that will, you know, control this.

[00:05:28] Gisli: So one, once we saw that, you know, the speed at which they were, you know, progressing, we decided, you know, we couldn’t, as a startup, we couldn’t move at that speed. So we decided to venture on our own. And instead of like building on top of the infrastructure of the bank, we would just become the bank. So, and that sort of, you know, set off the first two years of the company where we were, you know, explaining to regulators what blockchains are, how they would benefit, you know, that the human can’t really. So that’s the origin story of how I got involved and how Monerium, you know, was conceived.

[00:06:07] Umar: Now, before we move into how Monerium helps to move money between bank accounts and blockchain, I want to take a small moment to speak about how money currently moves around the banking system. And maybe go through a very simple example.

[00:06:21] Umar: Let’s say Alice has to transfer Euros 10 to Bob and Alice has a bank account with, let’s say HSBC while Bob has a bank account with Barclays. Could you go through like the process of how net settlements work between banks and the role of like central banks in the middle of the system?

[00:06:38] Gisli: Yeah, I think that’s a very good topic to go through. And maybe your audience is actually very open to this kind of thinking because it’s all accounting at the end of the day in the banking system.

[00:06:49] Gisli: So let’s start first with a simple case where they’re in the same bank. So this becomes really easy because it’s just, you know, the deposits of Alice and Bob are broken down in just a SQL database and to execute a payment from one account to the other, it’s just about reducing the balance from Alice and increasing it with Bob.

[00:07:11] Gisli: Now, where it gets a little bit more complicated is where they’re not customers of the same bank. And if they’re in, you know, in the same currency, this is actually still relatively okay. Because now when the money has to move from one bank to the other, there’s a relationship between the banks themselves. So the sender bank would actually debit Alice’s account and then they would credit not Bob directly, but Bob’s bank and Bob’s bank would on the other end do the same.

[00:07:48] Gisli: So they would, you know, debit Alice’s bank and credit Bob’s bank account. So the net result is actually zero, but there’s a message passing between the two banks in order for them to actually change their ledgers at the same time so that they’re consistent. Well, this is the messaging part. And then there’s a settlement part and that’s actually a separate process where the money actually moves from, you know, the sender bank to the receiving bank.

[00:08:20] Gisli: And that happens in the central bank ledger. So you have multiple ledgers that all need to be reconciled for this to work. So you may know, like with euros, we have a relatively good payment system here in Europe in contrast to many other regions. So this can happen, you know, within the day, in some cases, and, you know, in some other cases, this happens like in two or three days. The reason is all the reconciliation between all the banks.

[00:08:48] Where the story gets really complicated is where you cross currency borders. So where you don’t have a common central bank to do the actual settlement. So then I’m not gonna go into the sort of the long chain of things, but just to open up the, sort of the idea of how this works is that you could essentially have a chain of multiple banks that all need to adjust their ledgers and make sure that, you know, however, I’m changing my accounting system in Bank A that Bank B does the same and Bank C does the same.

[00:09:27] Gisli: So many of your listeners will be familiar with swift and many wrongly think that that’s the settlement layer, which is wrong. Swift, I sometimes jokingly say that it’s, you know, messenger for bankers. It’s purely for sending structured messages between these banks so that they can actually reconcile their local systems with the global chain of events.

[00:09:55] Gisli: And sometimes there’s actually just a mistake. In many cases, it’s a very manual process where you have a human in between almost just going through like the inputs of an email client, typing something in sending a message to the other bank and so on and so forth. So if a message goes wrong, where there’s a mistake being made, you can actually end up in a situation where you kind of lose the payment.

[00:10:19] Gisli: You don’t lose the payment, but the system doesn’t reconcile the chain of banks don’t reconcile. So there’s a back and forth between the bank, you know, employees until you have all the ledgers you know telling the same story. And once you have that, you can actually start the settlement process. And if you’re going through different currencies, this will involve the ledgers of two or three different central banks.

[00:10:43] Gisli: So, you know, this is the way current banking system works. So as long as you’re within a currency region, it’s relatively okay. Once you go across the currency borders, the story complicates a lot. And then if you have to settle something, if it’s not purely a payment, but if you have to do like, do a delivery versus payment kind of thing, where you’re maybe delivering, you know, stocks or bonds as a part of this trade.

[00:11:12] Gisli: Now the story becomes, you know, even more complicated. So this is the reason why you may actually have in your country relatively good payments, but in the back end, it’s a completely different story. And there’s a lot of work that regular users don’t see and manual labor really.

[00:11:31] Umar: Now we’ve given the listeners an overview of how the current banking system works.

[00:11:35] Umar: Could you now introduce to us what is Monerium and how you’ve come up with the quite unique way of sending money directly between bank accounts and blockchain wallets without the need to go through crypto exchanges?

[00:11:49] Gisli: Sure. So number one, we’re a regulated fiat backed stable coin issuer. Now I’m going to use the term stablecoin so that your listeners, you know, can relate to something.

[00:12:02] Gisli: So you can think about this, like a stablecoin, but actually it’s E-money. So it’s recognized as fiat money. So legal tender, you can pay your taxes with E-money. The E-money regulations and legislation has been in existence in Europe for over 20 years. So it’s been battle tested and proven over the last two decades.

[00:12:22] Gisli: So you may not necessarily be familiar with the term E-money, but you surely are familiar with some of the E-money issuers like PayPal and Revolut and others. The cool thing about this license is that you can passport this license throughout Europe, which allows any E-money issuer to serve the 500 million person market in Europe.

[00:12:43] Gisli: So think about us like regulated redeemable on demand bylaw stablecoin issuer. So we actually think this is the best framework for representing digital cash on chain and like Europe exported, the GSM standard. You know, you used to have competing standard, you know, in the states you wouldn’t have interoperability.

[00:13:08] Gisli: If you took your GSM phone to, you know, the states, but now the GSM network is actually is the one the world uses. And we think that the E-money framework is that framework that should be used for stable coins across the world.

[00:13:24] Gisli: And then your second part was how we enable payments between bank accounts and the blockchain.

[00:13:31] Gisli: So we immediately recognized that in order for this to become mainstream, we have to lower the barriers of entry, both in terms of user experience, but also just like, how do you bring your money? The story, always begins there.

[00:13:48] Gisli: Like you’re interested in a blockchain, you have cryptocurrency to pay for your transactions. I have money in my bank. How do I start? And to me it always felt wrong and backwards. If I now had to, you know, send my money using the fiat rails to a centralized exchange. I had to relinquish the control of my wallet. I had to exchange it like it was just multiple steps taking 3, 5, 4 days. And I ended up paying something like 10% for the whole journey.

[00:14:17] Gisli: And it’s just, it’s not going to work for the average user. So we started to think about what if you could simply send your money straight from your bank account to your wallet? What would that look like? We started to dream up like solutions to this. And one of the things that we, I think we innovated a lot here because I haven’t seen a similar product in the market is we allow our customers to associate another kind of identifier to their wallets. They’re used to having their, let’s say their Ethereum addresses, like the 0x9013 or whatever. So you can use this address to transact with other users, you know, be it, to receive money or send money or transact using smart contracts.

[00:15:08] Gisli: But there’s already another system in the legacy banking world called IBANs, the international bank account numbers, and Europeans will be familiar with this.

[00:15:17] Gisli: So what we essentially do is we allow you and we provision an IBAN for you in your name, and we associate it with your Ethereum address. So, you can think about this, just another way to interact with a broader set of people that aren’t onboarded onto a blockchain yet, because we think they’ll all be there eventually, right?

[00:15:44] Gisli: So when you have your wallet and you can see your address, you can also see your IBAN. And whenever somebody, you know, pays you to this IBAN, it will automatically show up as Euros in your wallet. So this way your wallet essentially becomes your bank account because you can receive money from anyone in the SEPA system.

[00:16:12] Gisli: You can use that and that becomes E-money, Euro-e or tokens on chain. And if you need to interact back, if you need to go back into the legacy world, you can simply initiate a payment to any SEPA connected account using their bank account. And once the payment hits their bank account somewhere, it will be in your name.

[00:16:31] Gisli: So they won’t see like Monerium, they won’t see like some centralized exchange. It will just feel like your bank account. So essentially what we’ve done is we’ve removed the need for centralized exchanges and connected you directly into DeFi where you can do the same kind of trades that you would on the centralist exchange,right.

[00:16:55] Gisli: So we in DeFi, it’s more peer to peer. So you’re interacting with the LPs and the smart contracts. and we’ve essentially also removed the need for an external back account, really, because why would you need one when you just have your blockchain wallet? I still have one just for demo purposes to show the on and off product, but you know, I get my salaries paid into my IBAN and they’re just converted into, you know, an ERC20 compatible token in my wallet, and I can see it instantly. So I think that’s the beauty of it.

[00:17:31] Umar: I wanna tell the listeners. So me and Gisli, we met at EthCC a few weeks ago. And when you explained to me how it works, this really blew my mind because I was not familiar with such a system.

[00:17:43] Umar: And for the listeners, you really have to see it. Like it’s one thing to hear Gisli explaining how it works. It’s something else to see it like in front of you. I will share the video in the show notes of the episode of your presentation at ETHcc where you demonstrate a quick walkthrough of how you can actually transfer ETH from your Revolut bank account directly to your wallet.

[00:18:05] Umar: And it’s done in like a few seconds. It’s beautiful how it works.

[00:18:09] Gisli: Yeah, I think we struggled a little bit because we had this vision a long, long time ago, you know, this needed to be done. Number one, you had to have like a regulatory clarity check. We had to have done number two. It had to be interoperable with the legacy banking system, because even though in a blockchain.

[00:18:27] Gisli: Like you have this shared state, you can send cross borders. It’s beautiful. But if you just introduce the blockchain as a siloed system, you just have an N plus one problem, really, you know, meaning that you have all the old systems and then you just have one more to think about. And that’s the reason why we, you know, saw the need for this.

[00:18:47] Gisli: And we’ve been talking about this. We’ve been building towards this future, but it wasn’t until we could demonstrate it, that people actually. That was the aha moment for people. So I encourage the listeners to watch the video that you’re gonna link in your show notes. Perfect.

[00:19:01] Umar: And one of my follow up questions is you did explain that Monerium has an e-money licence and is regulated as such.

[00:19:11] Umar: So e-money is different to stable coins. Can you tell us a little bit more about the process in the background of how the minting process would work and how these euros in fiat are then converted as an ERC20 token on chain and yeah, just this whole mechanism, how it would work.

[00:19:32] Gisli: Sure. So your listeners may be familiar with the sort of three types of stablecoin.

[00:19:38] Gisli: You’d have your fiat backed stablecoin where you have the reserves in the same currency that you’re minting.

[00:19:43] Gisli: You’d have crypto backed stablecoins like DAI, which has collateral, but it denominated in another currency. And specifically in this case, you know, a cryptocurrency.

[00:19:56] Gisli: And then you’d have algorithmic stablecoin, which tried to mimic sort of the role of central bank, where they create incentives to, you know, keep the pack somehow, let the market keep the pack.

[00:20:06] Gisli: So we are in the first category, like the most boring one, let’s say the safest one. I really do hope that you know, many of the others, you know, we find different ways of doing this, but for it to be compliant with the existing world and regulations, it needs to be fiat backed. So whenever you Umar receive a payment into your IBAN, our systems immediately recognize that to be your account.

[00:20:34] Gisli: And, you know, you, we know. Both of your identifiers, the IBAN and your Ethereum wallet. So when it hits in the payment system, when the company receives this on your behalf, we actually sweep it into a pooled account and I can go into details about the pooled account, but at the same time, we mint the equivalent amount to your wallet.

[00:20:58] Gisli: So, this is exactly the same process that PayPal and Revolut do have with the only difference of we break the whole things of our users onto their public keys instead of having a centralized database. And you would use your private key to initiate a payment or a transfer on the blockchain just as you would with any other ERC20 or a cryptocurrency.

[00:21:24] Gisli: So that’s sort of how the money gets into the system. You are now able to freely transact with other users with smart contracts and so on. And once you have to like exit the system, the reverse would happen. So now you would say like, I want to have these Eur100 sent to this IBAN, belonging to my friend.

[00:21:45] We would go into the pooled account. We would take Eur100 out of that account. You’re basically proving, you know, using the ERC 20 token and your signature that you actually hold the tokens. We would burn them from existence and initiate the payment into the legacy system. So that’s sort of a full circle of how the money gets created on chain, but at the same time, we remove the collateral from circulation.

[00:22:14] Gisli: So the net result is zero. We’re not like a bank that changes the amount of currency in circulation. We take the money from the existing banking system, we safeguard it, and then we mint the equivalent amount. So the net is just zero and for the reverse, it’s exactly the same. So that’s the way we do this. And as you mentioned, we can, this has all been automated.

[00:22:37] Gisli: So it usually just happens in seconds. If you’re connected to instant SEPA, it’ll be, you know, in your wallet in, uh, 15 seconds.

[00:22:46] Umar: One of the other follow up questions I have is regards to the gas fees. So transaction fees on the blockchain of course requires gas. So when using Monerium to transfer the funds on and off blockchains, who is bearing the gas fees. Is it Monerium ? Is it the user? How does it work?

[00:23:04] Gisli: So we are, you know, a centralized custodian of the funds, but we are non custodial with respect of the private keys. So the users, once the token exist on Ethereum or any other blockchain, these are just like your normal ERC20. So when you’re transacting, when you’re sending money, when you’re interacting with a smart contract, we don’t participate in that value chain. So we take no fees at all. You just pay the miners or the validators or what.

[00:23:33] Gisli: So then there’s the question. You know, the bridging mechanism and we are the, that’s actually one of our revenue sources. So we actually charge a fee for using the bridge back and forth. So that’s where users would pay, you know, us transaction fees.

[00:23:50] Gisli: But we are weird in that situation. Like all current e-money issuers, they have something called a payment service licence. And in addition to them being e-money issuers. And that licence actually allows them to move funds between accounts. And we actually, you know, argued to the regulator quite, it was important to us that we were e-money issuers only, and not a payment provider because on the chain we don’t participate in the transactions.

[00:24:22] Gisli: We could actually take our APR offline and all the tokens would, you know, move back and forth on, on chain 24/7 without their assistance . So I think that’s really important. It’s a key thing to differentiate from the legacy banking system. So that’s the way that works.

[00:24:38] Umar: And could you give us maybe a walkthrough of how to get started with Monerium and how to create an account like briefly in terms of KYC? Or I understand at this moment in time, of course, it’s only open to residents living in Europe, as you allow money transfer between like bank accounts and blockchains over the SEPA network.

[00:24:59] Gisli: Yes, exactly. So our licence is geared towards Europeans. However, once the tokens live on chain, we don’t have any white listing or anything like that. So it moves freely across borders there. The account creation is, you know, it’s like a regular bank. Like when you sign up with PayPal.

[00:25:17] Gisli: So you go to Monerium.com .You press the blue, Get Started. You select whether you’re an individual or a company, you create an account essentially. Then you link your wallet to our API. And this is done to number one. You’re proving to the back end that you are the owner of this address at the time of your signup. So in a regular banking system, the bank would provision all the accounts, right?

[00:25:47] Gisli: But when you actually come with a blockchain wallet, you generate your own accounts. So we need to have some way to know that the address that you’re, you know, showing us that, that it’s yours. So you create a digital signature using your Metamask wallet and we associate it to your account. Then you go through the KYC process and we can always do a little bit of better work there, but I think we have a relatively okay flow for individuals, but we’re improving it for companies. It’s a much, much more complex and there are many more sort of edge cases when it comes to companies. So once you have KYC, You can ask for your IBAN and we would then provision or a backend system would provision an IBAN and associate it to your address.

[00:26:35] Gisli: And that’s really it. From there. You can, you don’t have to even log into Monerium.com anymore. You could just have your wallet and whenever your friends send you to the IBAN, it will just show up in your wallet.

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[00:28:41] Next, if Monerium, like we said earlier, it has an electronic money licence, similar to the likes of Paypal, Revolut. Would Monerium be considered a bank? And let’s say in the hypothetical scenario that tomorrow Monerium goes bust, what happens to those e-money tokens and how would the user then be protected?

[00:29:02] Gisli: An excellent question. So we are not a bank, a bank is a protected word to use. We sometimes say we are something like, like a narrow bank. Which means that in stark difference from a bank where the bank would, you know, lend out the money. Like people don’t realize this, but when you get your money paid into your salary account, you’re implicitly lending your money to the bank from that second.

[00:29:30] Gisli: So we are different. And by law, we are not authorized to do anything with the money that you sent us other than just to safeguard it. And it’s safeguarded in a segregated account from the company. So in a case where, you know, the company would go bust, like you mentioned, the money is still safe. It’s there.

[00:29:51] Gisli: And on top of the sort of full reserves that we have to maintain, we even have to provide 2% of our own capital to, you know, in case there are some minor discrepancies or something like, so we are not only fully backed. We are over collateralized in fiat terms. So that gives you a really good protection and the e-money tokens then serve as a proof that you own a claim to those, to the pool assets.

[00:30:21] Gisli: And in case of bankruptcy, the e-money tokens themselves are of higher priority than anything else in the company. Even the employee salaries, which is usually the highest ranking claim. So it’s the safest form of money that we can think of. And this was dear to us because everyone remembers the financial crisis in 2008.

[00:30:44] Gisli: But what people don’t maybe know is that when it hit Iceland, it actually took the whole banking system, you know, with it. Overnight. So people sometimes ask this like, is e-money in short, like my money in the bank? And I say, no. And for a good reason, because the insurance schemes, they only cover something like the first hundred thousand euros.

[00:31:08] Gisli: And like, if you’re an individual, that’s okay. But if your company, you know, you’d get the big haircut from that. So, and the other thing is when there’s a systemic thing, when the whole banking system collapses, the first thing to go bankrupt is the insurance scheme. So in our case here in Iceland, you know, the insurances didn’t matter at all because they had something like 0.000001% of the liabilities that they would should ensure, right?

[00:31:37] Gisli: So we thought we have to create a more resilient way and what we are on the mission, we are in the mission of separating the payment instrument, like the thing you used to pay for things and the lending part, which I mentioned earlier. So you see this over and over with technology innovations, like the Tesla, for example, like they took a car, then they unbundled everything.

[00:32:02] Gisli: They removed all the pieces from it and they think thought like, if you don’t have a combustion engine, do you need this part? No, let’s remove it. And then they assembled it again, so it resembles a car, but it’s completely different under the hood. And we are on the same mission to unbundle payments and lending and rebundle with DeFi in a more explicit way where the user understands the risks they’re taking.

[00:32:33] Umar: You mentioned reserves earlier. That’s a good segueway onto my next question, which is. Let me take the EurE for example, EurE is fully backed by reserves. Like you said, in this case, the Euro, that means for every EurE token in circulation, that will have an equivalent Euro denominated reserve, held in custody.

[00:32:52] Umar: Now, if I look at the stablecoins in Euro, there’s not a lot of stable coins in Euro, even though Circle has recently launched the EUROC. And I understood that’s because of the prevailing negative interest rates in the EU, which makes issuing fiat backed euro stablecoins an unprofitable business. That means the issuer of the Euro stablecoins now has to operate at a loss in these negative interest rate environment.

[00:33:21] Umar: I wanna ask you for the case of Monerium, how that would work and whether these prevailing negative interest rate would affect. Would it be a cost, for example, that Monerium at this point in time has to absorb. And recently we’ve also witnessed an increase on, on government bonds in the EU. So is there now a different business opportunity for Monerium?

[00:33:43] Gisli: Yes, that’s a fantastic question. So don’t we live in interesting times. I mean, for the first time in the history of money, we have negative interest rates and people are still grappling with what that means. You know, of course some, it just means like a change in the sign, but really what it does, it kind of sucks the blood out of the banking system and not only for E money providers, but for the whole backing system.

[00:34:06] Gisli: So it’s an unsustainable way of, you know, managing monetary policy. You can do it for a short while, but you can see it on the valuations of the European banks. They’re just being hammered. So to answer your question, yes, this is a cost for Monerium. Having negative interest rates really problematic for the Euro, but mind you, we are not only going to be introducing Euro.

[00:34:30] Gisli: We’ll also have other currencies, like the dollar, like the pound, the Hong Kong dollar. We can go into that a little later. So in the recent months we’ve seen inflation rise and both the US Central Bank and the European Central Bank have been spiking or high in the rates. And at this stage we have 0% interest rates on the Euro.

[00:34:54] Gisli: So it’s not on that cost anymore, but it’s also not the profit center for our E money issuer at this stage. So it’s going to be interesting to see, and I think you’re right. The Euro is the second largest currency in the world. Europeans are the biggest users of DeFi, but we have been completely underrepresented in DeFi up to this point.

[00:35:18] Gisli: And we have been carefully waiting for the right moment to introduce this. And now we are in a stage where, you know, number one, we have the regulatory clearance. We have the connectivity with the legacy banking system and interest rates are on the rise. So I think this is the exact moment where, you know, we should focus on growth and adoption.

[00:35:41] Umar: Transitioning to a different topic, and speaking about building on Monerium. So the documentation to build on Monerium is open source. Could you provide us with an example of how builders would, could integrate with the Monerium API, for example, for their business?

[00:35:58] Gisli: Yes. So. Our tokens are, you know, open sourced. You can go on Github, review them.

[00:36:04] Gisli: You can embed them. It’s relatively easy to embed the ERC20 tokens directly with your software. So on top of that, we have an offchain API, which you can use to do some of the things that we still can’t do on chain. We’re constantly trying to push, you know, the boundaries of what functionality you can put on chain, but in terms of like GDPR, there’s sensitive information like the sender information, the IBAN of the sender, and so on, so forth when you receive the money.

[00:36:32] Gisli: But having said that, yes, I can take the example of a company or a protocol like Request Network, which you are familiar with. And their mission is to allow web3 businesses, to have a suite of software tools where they can manage invoices, they can manage salary expenses, etc.

[00:36:49] Gisli: So what they used to have is the ability to, you know, send out an invoice, and get it paid onchain in cryptocurrency. This means that both the issuer of the invoice and the payer of the invoice have to be on chain at the same time, right. And it’s this piece of the cake is growing, but having embedded the Monerium IBAN into their solution, now they can create an invoice, or a user of software can create an invoice, and the payer just sees an IBAN. They see the amount and the IBAN. So they just pay this invoice like a regular invoice. They don’t need to have their Metamask. They don’t need to understand anything. They just pay it. And what happens, the payment gets received into the IBAN which gets automatically minted as euros on chain triggering the settlement logic of the Request Network platform.

[00:37:43] Gisli: So what this essentially did was broaden the scope of the total addressable market for someone like Request and allow their crypto savvy invoice issuers to invoice companies, maybe big companies that aren’t on chain yet, due to reasons like it’s just hard having a cryptocurrency in the balance sheet. So that’s one example of it.

[00:38:06] Gisli: And another example that I like to take is if you think about something like Revolut or any other challenger bank, most of their innovation is about, you know, having a clean stack tech stack in comparison with the legacy banks. Revolut, for example, has a fantastic UI. They’ve mastered the onboarding, like using the app, it’s just phenomenally good.

[00:38:31] Gisli: But on the back end, they outsource a lot of their services, like the payment services. And like, by being able to buy into crypto, being able to get some yield on the tokens, they outsource a lot of that.

[00:38:42] Gisli: If you think about embedding the Monerium IBAN and the real Euro into something like a wallet, essentially a five man team could replace all the functionality of Revolut completely on check. So you would see the IBAN there, so you could pay back and forth, you know, your friends in the legacy system like Revolut does, you could convert it to crypto just by interacting with, you know, DeFi and Uniswap or anything like that, you could provide FX services by swapping into, you know, from the Eure into USDe or even USDC. So you could provide a lot of the same services completely on chain. And this I think is going to be like huge in the coming months and years where users can build on a homogeneous stack.

[00:39:38] Gisli: So everything is just an ERC20 and sometimes, there’s a company here that provides payment service as a Dapp in the old system, they have something like 30% of the Iceland market. Now they want to go to Denmark and they have to rebuild everything from scratch because the infrastructure there is just different. On a blockchain, if it works in Iceland, it’s going to work all across the world.

[00:40:02] Gisli: So I think we just see things speed up so much more. You could see teams that are, you know, 1/10th or even 1/100th of the size of something like Revolut competing with Revolut and that’s, that’s what we, you know, enable them to do.

[00:40:18] Umar: And at the moment, if we look at the challenges that man faces for adoption, what are some of these biggest challenges and how have you seen the adoption of crypto change, not even from 2018, but let’s say from the last year, till today?

[00:40:35] Gisli: So we’ve always been a little bit focused on mainstream usage. So that’s, you know, like Wayne Gretzky, like skate to where the puck is going, not where the puck is. We think mainstream is coming and actually bear market’s a bit helpful in that sense where.

[00:40:51] Gisli: You’d have a lot of growth. You’d have a lot of focus on companies that, you know, maybe weren’t necessarily sustainable. And we see this, you know, the in prices, we see this enthusiasm with people coming. We’re not seeing a lot of new users, but actually what we are really excited about is, you know, not onboarding, but offboarding, because now you really have a lot of companies that are making their money on chain.

[00:41:17] Gisli: Like they live on chain and they need to wait to interact with the legacy world. So being able to off ramp in these market conditions, I think is going to be the thing that prevails. Crypto will see its rise again, hopefully soon. And then, you know, going into the other direction on wrapping. Again, going to be a thing, but if you think about the challenges, I would say in terms of, for the general space, I think it’s still very experimental.

[00:41:46] Gisli: I think that’s good. We are seeing like different experimentations happen in real time and it’s fun to watch, but it also makes it hard for users to separate the signal from the noise. So I think the industry needs to calm down a little bit. Like we need to start to see the real solutions emerging and where it’s obvious that they’re providing real value.

[00:42:09] Gisli: And I think, you know, FX services, like things that people use today are built on chain. People will see that when you can do it in much shorter time, you can do it cheaper. You can do it cross border. You can do all of it. And for us specifically, the biggest challenge is actually getting enough liquidity into DeFi.

[00:42:31] Gisli: It’s one thing to have the Euro magically happen on chain. Like it appears in your wallet, it’s magic, but then you have to be able to do something with the Euro, right. And for that we’re in a different position from, let’s say a protocol that has like 50% of the tokens in their treasury, and they can use that treasury to see the liquidity pools. The euros that you’ll see in the liquidity pools, they will be real euros.

[00:42:56] Gisli: Somebody had to cuff them up. They weren’t, you know, made up on the fly. So actually just getting the pools to a stage where they can support the user activity. That’s probably the biggest challenge for us and the biggest project going forward.

[00:43:12] Umar: Next speaking a bit about the roadmap and some of the upcoming features even partnerships and milestone that Monerium has.

[00:43:20] Umar: One of them, and because this episode is sponsored by Request Finance, the listeners, I hope by now, you’ve tried to issue an invoice using Request Finance. So for example, you could denominate your invoice in fiat and then choose to receive payment in crypto, and you would do that using Monerium. So for example, the payer, they would not even know that you’re receiving payments in crypto.

[00:43:44] Umar: They would just see, an IBAN number, and that would be the IBAN number of Monerium. And they would pay you in fiat and then you would receive money in crypto. And that’s very simple. You can try it and you can see exactly how it works. You just have to do the KYC of Monerium.

[00:44:00] Umar: And I know there’s a partnership with Superfluid as well, who we also had on this show before. Could you tell us a bit more about those exciting features?

[00:44:09] Gisli: Yeah, I mean, I think we are all, all very excited about the things that, you know, you weren’t able to do in the past. Like most of the things that have been happening so far is about replicating the things that you, that we know from the legacy banking system.

[00:44:23] Gisli: One of the parts as you mentioned Superfluid is very interesting and you had the whole episode on it, where you can start to stream your money. And we think this could be come really big in the future. So we have, like on our mission now to become a first class citizen in DeFi, we are partnering with companies like Superfluid, where you can now start to stream your salaries.

[00:44:47] Gisli: You can receive your salaries in real time and you can start to make payments in the other direction. So that’s something that we are really excited about. The other thing is that I briefly mentioned earlier is the ability not only to receive money on chain and have it automatically minted it like the way you mentioned.

[00:45:06] Gisli: So the payer of an invoice would just pay using an IBAN, there don’t know anything about blockchains and it gets minted. The other cool thing is that, you know, the issuer of the invoice could say, I would like to have 50% of this invoice paid in Euros and the rest in let’s say Ether.

[00:45:24] Gisli: So what happens in the settlement logic is that the invoice itself, when it receives notification of a full payment, it would actually go into Uniswap and swap half of the amount for Ether and place the two different tokens into the invoice issuers wallet. I mean, I think that’s just phenomenal.

[00:45:45] Gisli: The other thing that I’m excited about is going into the other direction. We have so many companies that live on chain that have, that love, like they’re familiar with the quirkiness of using a digital wallet and all that. The thing that they love is to be able to do everything in the same place, to see everything, all the transactions, the revenues, the expenses, and all that. But now they sometimes have to pay salary or rent or something.

[00:46:10] Gisli: And they have to interface with the legacy banking system. Then they have to go through the exact same steps that we mentioned earlier in reverse. So they have to go to a centralized exchange. They have to sell, you know, their cryptocurrency. They have to wait for the payments hitting their bank account.

[00:46:26] Gisli: And in many cases, the bank, you know, seeing the payment coming from a crypto exchange, they will just, you know, close your account or whatever. What we can essentially allow web 3 companies is to, you know, have everything on chain, like the way you did. And when you have to interface with the banking system in the other direction, you just call into our API or use the user interface and send out payments whether it’s salary or rent or anything.

[00:46:54] Gisli: And automating that using the API is some, I can’t reveal too much at this stage, but there’s some interesting announcement that we hope to make soon. And in addition, just finally, we’ll be supporting more chanins. We’re now currently on two, on Ethereum mainet and Polygon, you know, we will be present on all the different EVM compatible chains and non-compatible.

[00:47:17] Gisli: So we also believe in the multi chain vision that you mentioned earlier. So we want to make sure that we are present and this infrastructure and the Euro and diat currency and their native form on chain exists, wherever the users are.

[00:47:32] Umar: Gisli, I’m looking at the time we are on the one hour mark. I need to be respectful of your time.

[00:47:37] Umar: So let’s wrap up the episode for today and maybe have you share your closing thoughts on what you’re looking for perhaps in the coming months, and to summarize this whole episode of how Monerium is helping users, I mean, corporates, individuals have their wallet existing as their own bank account.

[00:47:57] Gisli: So the thing that excites me a lot is the potential of using this infrastructure to change the way the world works.

[00:48:06] Gisli: And I think it’s achievable. I think it’s the only way for it. So having seen how the legacy of banking system works, I’m just flabbergasted at the sort of human ingenuity of like having to put up with such bad technology. Now we have something better and different Our mission to interconnect all the different jurisdictions, whether it’s Europe and Euros and SEPA system, faster payments in the UK, so that users anywhere in the world, in the States, in Hong Kong, that they can sort of upload their money seamlessly on, on chain and interact there, and then download it. So we sometimes say like the last funding round that Monerium paid was led by the co-founder of Wise and Skype co-founders. So Wise is a fantastic example of how you could innovate on top of the legacy banking system.

[00:49:01] Gisli: And we believe once we have the full infrastructure built out, you know, a five man team could essentially create that experience, on top of the infrastructure we are building. So I’m just really excited to see all of that pan out over the next, you know, months and years, I would say.

[00:49:19] Umar: Before we go, there’s a last question that I usually ask my guest, which is, do you have a favorite quote or a Maxim that you live by?

[00:49:27] Gisli: So I was thinking about it and to be completely honest, I have to say no. But, uh, you know, after having my kids, you start to think about what’s important, what traits are important. And one of the things that I’ve identified and I want to try to instill in my boys and my daughter is curiosity. It’s just to, you know, be curious enough.

[00:49:52] Gisli: Don’t accept the answers that you’re giving from a first principle’s thinking, try to take everything apart, try to understand, try to play with it because this is the way, you know, you’ll see things ahead of the curve and it’s just so much fun. So being curious, stay curious is probably the thing that I would sort of focus on and say, I would live by.

[00:50:15] I love this. The title of this podcast is called the accountant quits. And to quit, you have to be curious and it’s only then that you can find other things to do with your life. Gisli, it’s been a phenomenal discussion. I love speaking to you, and hearing you speak about Monerium today.

[00:50:33] Umar: Before we go, if people want to reach out to you, where can people find you? If they want to learn more about Monerium to reach out to you for potential tech collaborations, how should they do so ?

[00:50:44] Gisli: The easiest thing to reach out to me, I’m Gisli K, that’s @gislik on Twitter. My messages are open and Monerium.com is the easiest way to find out more and get in touch. If you want to partner or you become a user, try this phenomenal thing we built.

[00:51:04] Gisli: Perfect. Well, thank you so much for your time today Gisli. Thank you Umar.

[00:51:09] Umar: I would like to thank everyone for listening to this episode. You will find all the links of the episode, show notes and transcript on the website of The Accountant Quits at theaccountantquits.com.

[00:51:20] Umar: Please note that this content is for general information purposes only, and is not a substitute for consultation with professional advisors.

[00:51:29] Umar: If you do know anyone who could benefit from the episode and you care about them, please do share the episode with them. All the episodes are available on Spotify, Apple Podcasts, and Google podcasts, and by leaving us a review and rating, you will support the channel and all your fellow accountants.

[00:51:46] Umar: In order to be notified, each time we release a new episode, do follow us on Instagram and LinkedIn. We hope to have you with us next time, bye for now.

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