Stable Digital Currencies in Emerging Markets

Carlos Ponce (00:06):

Good morning, everyone. Good Friday, everyone. We're all looking forward to the week. And so, but before we get there, we're going to do one more show this week tech Leaders Unplugged Show, and today we are getting unplugged with our guest, who is Kevin Mohan Nair. He runs engineering Leadership, and leadership at Chipper Cash. And we're going to be talking about a very interesting subject, you know, digital currencies, emerging markets. But I'm going to let him do the talking. For now, I just want to welcome Kevin. Kevin, welcome to the show. It's a pleasure to have you here. So, thank you.

Kevin Mohan Nair (00:46):

Yeah, thanks

Carlos Ponce (00:47):

Thank you, Wade, as ever, for graciously co-hosting this and, being here as part of this. So that being said Kevin, tell us a little bit, let's start with you, Kevin. Tell us a little bit about you, you know, your background, your experience, anything you want to say about yourself, please?

Kevin Mohan Nair (01:07):

Yeah, definitely. And again, you know, I'm really happy to be here. Thank you, Wade and Carlos. So I'm the head of engineering for crypto and investments at Chipper Cash. It's a series C scale-up out of San Francisco. I've been in the FinTech space for, you know, maybe the last 15 years whether it's e-commerce blockchain payments or traditional payroll. So I've been kind of in this space for a little bit. And, you know, previously worked at NASA, worked at a nuclear reactor so, you know, built, built like a satellite launched in space, which is really cool. Just like back in 2009 back in my interning kind of days. So pretty cool there. Yeah, my, my experience or my education actually is from Georgia Tech. So I studied electrical and computer engineering there. And yeah, go jackets, and yeah, I'm also the co… well, the founder of <inaudible>. So, this is, just a platform that I've been building lately. Getting more into AI. You know, obviously, ChatGPT kind of blew up recently and I've been kind of following that more closely in the past year. And yeah, as far as my personal life just enjoyed spending time with family traveling, and of course gaming and, you know, typical nerd things. So a little bit about me.

Carlos Ponce (02:23):

Yeah. Thank you so much, Kevin. Yeah. You mentioned gaming, you know, probably 99% of the people that I know in tech usually like gaming, especially, you know, younger folks, but yeah, it's like a, like a trait of engineers especially. Alright, so let's talk about let's move on to the topic. The topic that you chose for today is stable Digital Currencies in Emerging Markets, right? So you, you claim that there, it's like the hottest technology trend you thought was over, right? So, let's hear it, like, why did you feel that it was relevant for today's day and age? Let's start with that, please.

Kevin Mohan Nair (03:05):

Yeah, absolutely. So crypto, right? We, all know crypto had its really big boom in 2017, and then in 2021, everyone's like, you know, I'm going to buy Bitcoin, whatever, watch it go up, sell it, make a profit, right? These days people are like, you know, crypto's kind of dead. And then NFTs were, you know, a really big thing a couple of years ago. And people are, you know, people hate NFTs now, right? They're like, oh my gosh, like, NFTs are just, you know, JPEGs, I can copy and paste, and now it's mine, right? So what's the point of NFTs? There's actually so much more going on in the space. FTts are being used with basic metadata, right? You can inject basically different pieces of metadata over time. So you can actually have an NFT that shows you the weather, for instance. So there's things like that, you know, that are happening in crypto and just being developed even now. There's so much progress, right? It's kind of crazy. So that's more on the NFT side. What I'm going to talk to you about today is more on, the kind of payment side of things. There are some really interesting phenomena that are going on right now. You know, in the US we don't really get to see all of this, but there are a lot of things happening in the world, you know, that are you know, sort of a storm is brewing kind of deal, right? It's kind of interesting. So I do have a couple of questions for you, right? So one quick question is what kind of savings rate are you guys getting? You know, are you getting, are you getting that sweet 5%, you're getting four point something?

Wade Erickson (04:33):

Well, obviously it, you know, it depends on, you know, whether you're talking about a savings account or a CD or those kinds of things. Obviously, you know, those are reflective of the, the Fed rates and those kinds of things, but obviously,. You’re lucky if you can get 3% on

Kevin Mohan Nair (04:50):

Absolutely. And, and, sorry, go ahead, Carlos.

Carlos Ponce (04:53):

No, no, I was just going to, you know, totally agree with Wade. I mean, it's, I mean, I'm, I consider myself lucky if I get like anywhere between 4 to 5%.

Wade Erickson (05:02):

Exactly. Inflation, right?

Kevin Mohan Nair (05:05):

So, that number, yeah, it's pretty good. Four to 5%, you know, compared to maybe five years ago, that sounds like an, amazing number, but people in other countries are effectively getting 20% right now. You know, people, there are people emerging markets let's say Nigeria, Vietnam, other countries especially with high inflation, right? There are people just buying into USDC. So USDC is a stable coin backed by the US dollar, and it's offered by a company called Circle. So the circle is considered very, like, secure in the sense that you have to really send a dollar from a bank account to really mint, basically to get one USCC on crypto from them that you know, around the world, it's kind of an exclusive, it used to be sort of very exclusive to get USDC. There are other currencies out there like Tether, you know, other less regulated, less kind of you know, transparent currencies that are out there. And people can get a hold of those more, more easily around the world. But USDC C is now becoming more accessible to people around the world. So what are people doing? Let's say in Nigeria, your currency is devaluing by 20% just by buying USDC at the beginning of the year and holding it, let's say it's the end of the year, your dollar rate might've gone from 900 or 700 nira per dollar to 900. Just by holding that, you make a difference of 200 Nira per dollar, right? So you're basically protecting your assets by holding USDC, which is a really interesting trend. So people all around the world in different currencies or like, you know, with national currencies are holding USDC, and it's a really interesting phenomenon because you're, you're seeing 20%, 10% savings rates just based off of holding you know, it's much better than what we have here in and as a savings product. And the question is what happens, you know, there are things like bricks, you know Brazil, Russia, India, China, you know, there South Africa, they're all coming together and they're trying to vent together. And essentially, let's say they build a currency and some kind of issuer, like circle comes along and they say, let's have a Brick dollar, but it's not going to be a dollar, it's going to be a bricks currency, right? Let's just say that it's a competing kind of world in the future, right? Where people can choose to invest in the brick solar or the US dollar via, you know, let's say crypto, right? Or something else. You're going to have, it's really interesting to see a bimodal kind of world where you have the dollar and then a competing very powerful currency as well. It could be an eventual catalyst for war, even if we don't know in the future, right? Let's say the USD would like backed into a court or something like that. So a very interesting phenomenon happening. But again, they're also contradictory because while all these countries under bricks and all the minor countries under bricks as well, is trying to band together under their own currency, the same residents of those countries are also investing in buying USDC and holding that. So you have a very interesting situation. So it may look like a world where people invest and hold both USDC, but also a bricks kind of currency in the future to kind of hedge, you know, their position essentially, of the world to keep their, you know, the value of their assets, obviously. So, we're interested, we're, you know, in this really interesting time and today's actually a very special day. I'm just curious if either of you knows the significance of today.

Wade Erickson (08:49):

Well, what you're talking about is really the Forex exchanges have been around for a long time, but those have been really through somewhat sophisticated investment. You know, you have to have access to the platforms. You obviously have to be able to put your money into those Forex accounts, and that's obviously not an exchange that the average person in Nigeria is going to have access to, maybe can't even access it for country legal issues, you know? cause They don't want currency flowing. So what, what I'm seeing here is that you're just lowering the entry to leverage the concept of current, you know foreign exchange and currency swapping where you, you buy a currency and then like you said, just holding it, you know, most currency exchange, you might even hold it part of a day. What you're talking about is really hedging inflation against a currency that is, you know, stable against inflation. And it's not really the same thing as interest within your currency which is what we would do a US dollar in a savings account. It's really hedging against inflation, which is obviously a big concern in Argentina in many countries. And if you can lower the entry point is that kind of what you're saying here, the context, it's taking Forex models, but applying it to a much easier way for people to, do that without getting in the formal Forex exchanges.

Kevin Mohan Nair (10:17):

Exactly. I mean, people, I mean, at the end of the day, it's holding value in your assets, right? And, yeah, in the US we just have savings accounts. US dollar is, basically the strong currency. Which is why we have, you know, as you know, US citizens or people in the US, we can hold that, but only get a savings rate. But people in other countries, yeah, they're getting this benefit of the dollar strength, right? Just by holding USDC, which is a crypto, right? And one thing that's really interesting about crypto is and even just like, you know, look at social media, look at other things, technology only speeds up the eventual behaviors of people that, you know, things that are already there in place and, you know human connections, things like that. Just using that parallel it's the same idea with crypto, the kind of movements of money that have happened, you know, over wires, whatever, for a longer period of time, they are just facilitated and faster and accessible to retail kind of investor or person who's dabbling in this just via crypto, right? So you're seeing the same movements, people hedging their money. So it's pretty interesting to see that, you know, they're getting those benefits. Meanwhile, their countries potentially are going to join bricks, right? So it's kind of a question of, like you said, there's regulation. So people in Nigeria, can't really use crypto today, right? They're not really supposed to use crypto per the government. The CBN has come out with a regulation back in 2021 saying, you know crypto's essentially banned for, you know, any FinTech platform to really offer in Nigeria. However, Nigeria is, I think the second or first most by crypto in 2022. So they're growing very, very quickly in their crypto usage. And one of the big reasons is that people need it. So, one thing we see is that, when a country has high inflation, as you mentioned, Argentina, Zibo, and Zimbabwe are a huge example of this, right? They have hyperinflation you know, these countries, it's more like a necessity that they have something to hedge their value, right? More than other countries where it's kind of like a convenience, right? And so it's really interesting to see a trend, right? And, just from my perspective, right, as someone Chipper has something like 5 million users and we see a lot of activity, right? As you know, as an engineer in my core, I do a lot of likes, you know, queries to see how movement, like money, is moving on the platform. One thing I've noticed is there's a lot of movement where people simply buy USDC and just hold it for a long period of time. Right? Like a very interesting pattern. So, I can see what, you know, a cross-section of the whole, you know, the population of the world, you know, 1 million is doing, and it's very like consistent, right? So it's really interesting to see this kind of thing. So, you know, from my perspective, I wonder where this is going to go. Let's say in five, or 10 years. You're going to see a world where maybe there's a lot of USDC or crypto, maybe it's something totally like CBDs you know, the Boston Fed is working on basically US dollar coin. So, it's going to be really interesting how that plays out. But also bricks, we know that these countries have a lower, I guess kind of barrier in a sense. cause They're more like, we need a new like currency. So like, you'll see, like Nigeria has come out with the naira. There are other digital currencies out there that are sort of these government currencies, and, you know, maybe they come out with something first. And, and then, you know, as that gains strength over time, you know, it's going to be interesting to see how the CBDC around the world play out against something like a BrickX currency. But yeah just going back to the point about you know, bricks and the possibility of you know, war or something, right? Like at some point, if you have two very powerful currencies in the world you know, I mean, there are many things that could happen, right? No one knows the future. I don't, you know, pretend to either. But you know, it could be that if the US dollar loses a lot of, loses a lot of its value because, you know, USD is strong. It's used for trading, buying goods across different, you know, countries. It's really used to buy you know, exports from other countries, things like that as well. And it retains its value. But what's interesting is if breaks, you know, has its currency that, you know, oil, everything else is baked into it strong, independent asset what's going to happen when you know, the US wants to take their payment on, you know, some kind of interest-bearing, kind of like loan to a country, something like that, right? With the country just kind of they can't offer the US bricks, currency, or anything, right? Like, not in the way that we see it right now. So, it's going to be very interesting to see what happens there. But lastly, going back to the point that I mentioned earlier, right? Today's a very interesting day. So September 15th, 2008 was the day that the Lehman Brothers filed for bankruptcy. So, this was the start of the whole, you know, the financial crisis of 2008. You know, I was a senior in high school in 2008, and I was you know, just coming into the job, you know, the workforce, and I was like, wow, this is a really tough time. So, you can imagine the kind of significance, right, of the today the problems are similar, but they're completely different in, in a different world. We're looking at, you know, not necessarily the US defaulting, but the world is in this kind of much different state. So it's a really interesting kind of concoction of things that are going on right now. But yeah, I mean, I'll, I'll take a pause here and let you ask me anything,

Wade Erickson (16:06):

Carlos looks like there's a question from the audience. Did you want to bring that up?

Carlos Ponce (16:09):

Yeah, yeah. There's a question from the audience. There's a comment from the audience, so, and the comment comes from a viewer, whose name is Eduardo Montes, and he says, diversifying one's portfolio by embracing the adoption of digital currencies. Like BTC, you, I'm assuming it's Bitcoin, right? Or USDC, or, you know, or, or Brix, is a prudent strategy. He says it's intriguing to consider adding BTC to one's holdings, especially with the potential approval of ETFs on the horizon. So that's what he says Thank you, Eduardo, for your contribution. What, what are your thoughts on this, this particular comment?

Kevin Mohan Nair (16:49):

Yeah, absolutely. So the grayscale Bitcoin ETF was just approved essentially, right? So we're, we're already in a world where we're getting approvals for ETFs. We're crypto, which is awesome. Yeah, I mean, in any investment portfolio, you want to have a mixture of assets, right? And you want to diversify. Bitcoin is very strong, you know, if you want to go purely decentralized circle USCC, it's very, it's a company, right? It's, it's centralized in a sense. But Bitcoin is not, right? So if you want to have Bitcoin, let's say BrickX, USDC or a kind of US dollar coin, that's a very good mixture as far as a very long-term inflation hedge type of mixture, for your portfolio.

Wade Erickson (17:35):

Well, I have a question. You know, the Chipper Cash, I noticed that it has a lot of African involvement. Do you see that it is primarily you know, a savings model, or is it they actually using it, to buy goods and more of a utility model where they're actually purchasing through that? That's always been to me since I saw Bitcoin in the beginning, was, a means of purchasing and movement of value through digital currency to property, and other things. Are you seeing that still being a major way of the use of these tools?

Kevin Mohan Nair (18:14):

Yeah, so one thing about a depreciating asset in general, so the naira, you know, we went from, you know like let's say 400 naira per dollar like back in 12, 930 naira per US dollar, right? So it's, it's gone basically tapped in value essentially in purchasing power. So yeah, I mean, it's, it's interesting. And sorry, can you repeat the last part of that? I think there's something I want to comp on.

Wade Erickson (18:44):

Yeah. So the question was really about you know, we've talked, been talking a lot about people buying and holding these currencies, but I, I've always been more interested in them as a means of actually transaction transacting goods and purchasing food products or other kinds of things. And, and, and, you know, really it becoming less dependent on physical paper currencies and stuff. And as we move that direction you know, the government's impacts on their currencies, which most currencies are affected by government actions, not the people. And so, when the value of your local currency changes, it's usually an action of borrowing from a government or something that has nothing to do with the person. So by moving away from the government influences of currencies, that's really been the, the push for digital currencies was to take these federal reserves and all these reserve banks out of the currency and try to stabilize it that way. And, I think all the speculative models around BTC and stuff have really kind of damaged that truth, I think an approach that was there to remove the influences of reserve banks. And so, tell me a little bit about what you're seeing there, because we really haven't been able to get Bitcoin to be a means of trading currency versus, like you said, it's speculation, buy and hold. And, and that's really been how the tool's been used, which is crazy. It's just an entry on a blockchain, right? And it has, it holds no intrinsic value in and of itself, other than the scarcity aspect of it.

Kevin Mohan Nair (20:31):

Yeah, absolutely. I mean you know, Bitcoin, right? What is the value of, I mean, this is going back to the ethos of kind of Bitcoin, right? Which is your keys is your money, right? So people can't take it from you. It's decentralized. I mean, at least not, you know, with forcibly, right? It would have to take it from you in some way. But even then, the idea of yeah, Bitcoin, right? Is that you know, the whole purpose of it is to, at least originally for its speed like a utility. You spend it, you use it, things like that. Over time it became more of an investment tool because people saw, you know, it was essentially you can imagine a stock, you know, if something goes up in value, you know, you buy, you sell you make a profit as the price goes down, you see that people utilize it more, which is an interesting trend. So going back to your question about USDC people hold it. And in Nigeria, as I mentioned, the four 10 versus 930 rate people are more, they're very sensitive to this rate, you know, so if they say, ah, yesterday was nine 20, today's nine 30, I'm not going to get the best rate. Maybe I'll wait till tomorrow. They're still seeing it quite a bit as like an investment kind of product because they you know, at least what we're seeing is that they're seeing it that way because they sometimes transact it, but for the most part, they're holding it because that's the more valuable part of it for them right now, I think it's the rate. If the Nira got stable again we'll probably see that people start spending their USDC holdings a little bit more. Also, USDC is accepted in more and more places every day. So you know, you may be able to one day buy, you know, Netflix your couple months of whatever subscription with that USDC, so you know, so the ability to spend it is really important as well. But yeah, at the moment it's more of a holding pattern, right? Because you want to invest it, keep it, and then spend it versus holding your naira, which probably is half in value since then.

Wade Erickson (22:43):

Yeah, it's kind of interesting that you know, the whole, I think the, the beginnings of Bitcoin were really about the power of the Federal Reserve on the US dollar. And here now we're pegging a, a currency against the very thing that, you know, the digital currencies was to try to differentiate and separate from so we're using a real currency as a peg to against the, the foreign currency. And it's just an interesting angle of just using this as an inflation tactic versus a speculative, you know, it's very different than the way it's used here in the US obviously. cause We have the currency available in our day-to-day lives, obviously. Now, should that change, obviously, and the US dollar, you know, which the bricks and all these other challenges of, you know, moving away from the US dollar is the you know, world's currency for oil in particular. We may see that you know that dependency on Bitcoin or some other digital currency model. But I, I really I think the I think there still is a day when this will be a means of transacting currency against goods like we use regular paper currency for, and that's the day that's always been the future that I, I look at as much as the speculation takes the news, I think that the value of, of trading with these digital currencies is the true utility of the future long term. So I think we're at the top of the hour. Carlos,

Carlos Ponce (24:28):

Yes, Wade. Unfortunately, we're, I mean, we're, we're coming up on time, and but I, I wouldn't want to end it without one question. And again, I told you at the beginning that I was going to be, I might be asking questions from the layman's perspective. So my question is, I mean, we're talking obviously about something that is, let's call it technical in nature. So there's some engineering, there's some interesting, really cool stuff that, that this appeals to a lot of people who are in the tech space, right? However, , when I think of digital currencies, what does this mean for like, the average run-of-the-mill, let's say the housewife, the student, the professional, you know, someone who might not be so intrinsically knowledgeable about, the tech component, but what does this mean for, you know, average run of the run of the mill everyday people like me?

Kevin Mohan Nair (25:26):

Absolutely. I think, you know, people, let's say, you know, a lot of people these days have 401ks, right? These kinds of investment managers let's say you know, hedge funds, other kind of investment managers, any, any large institutional trading firm, they're the ones that are probably going to, you know, let's say the Schwab's out there, whatever. They're the ones that are going to take the kind of in, you know, the money that you have, they're going to invest it for you, and likely you'll see that they're going to start investing these different avenues, right? To kind of hedge inflation and to be able a strong return. So, pretty interesting, what we'll see pretty soon.

Carlos Ponce (26:03):

Alright, let's see what, okay, I was, and for those of you who are watching, you can learn more about Kevin and his work and his experience right there on the ticker at the bottom. It's favor ai.com, make sure you visit it and interact with it, that's where you can also interact with him. And of course, if you want to connect with him on LinkedIn, you can do that right here, LinkedIn/N/KAir. So that's on LinkedIn. And then needless to say, last but not least, the show was sponsored by LogiGear. Success Delivered. So with that being said, again, thank you so much Kevin, Wade as ever. Thank you. Just a quick announcement. Well, it's really not it kind of looks again a work in progress because we're going to be having several guests next week. I'm, I'm still working on the topics and pretty much everything else that we display publicly, publicly. But you can find it by the end of the day today or early Monday morning, you can find the calendar right there on the upcoming section of the Tech Leaders Unplugged website. So it's right there. Just go to upcoming and you'll see what's coming. And we are going to have a bunch of guests with very interesting topics, all things tech right here on Tech Leaders Unplugged. That said, join us right here at nine 30 weekdays next week, and be here or be square. Thank you so much. Thank you, Kevin. Thank you. Wait, see you next time. Thank you.

DISCLAIMER: Kevin maintains his views are his own and not representative of Chipper Cash, where he currently works. Kevin also mentions that none of the material covered in today's podcast should be construed as financial advice.