Money Code
The future of finance is digital. Welcome to Money Code, the show that decodes stablecoins and the evolution of programmable money for builders, investors, and decision-makers. Each week, join hosts Chuk Okpalugo, Author of Stablecoin Blueprint and Raj Parekh, Head of Payments/Stablecoins at Monad Foundation as they break down the systems and strategies of seasoned operators in the space, revealing the insights you need for better build and buy decisions.
Money Code
Tokenized Deposits vs Stablecoins: Inside JPMorgan’s Kinexys w/ Naveen Mallela
Presented by Stablecon Media and Powered by BVNK
In episode 8 of Money Code, hosts Chuk Okpalugo and Raj Parekh are joined by Naveen Mallela, Global Co-Head of Kinexys at J.P. Morgan. They discussed the vision for Kinexys, how deposit tokens like JPMD differ from stablecoins, and how interoperability, credit creation, and just-in-time liquidity will reshape global finance.
About Stablecon
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By convening the brightest minds in fintech and crypto, Stablecon provides attendees with world class thought leadership and fosters unparalleled networking and strategic collaboration across the digital payments industry. Whether you’re building, advising, or navigating this new frontier, this is the room where it happens.
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BVNK is the leading provider of stablecoin payments infrastructure, helping businesses move money faster, settle globally, and even launch their own stablecoin products. Head to https://bvnk.com/ to learn more.
Connect with the Hosts & Guest
Chuk Okpalugo: LinkedIn, X, stablecoinblueprint.com
Raj Parekh: LinkedIn, X, monad.xyz
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So I think that uh the secret sauce for uh people to succeed in this space is interoperability. Um we view our goal as bridging the web 2 and the web 3 worlds.
Chuk Okpalugo:This is MoneyCode. It's a show where we decode stablecoins and programmable money so that you can better prepare for an on-chain future. I'm Chuck Okpalugo, your host and author of Stablecoin Blueprint. And I'm here with my co-host, Raj Parekh, head of Stablecoins and Payments at Monad. How you doing? Well, live at Money, Money2020. This is exciting. Live at Money20/20, we've got a great guest today. We're joined by Naveen Mallela, global co-head of Kynexys, which is a division within JP Morgan focused on digital assets. Prior to Kynexys, he held various leadership roles with JP Morgan. He's a keen enthusiast of all things digital currencies, authored white papers and CBDCs, shared ledgers, deposit tokens, and has been part of multiple industry initiatives shaping the landscape of digital money. Lavine operates at the intersection of traditional finance and emerging blockchain infrastructure. So besides Kynexis, he's effectively driving how JP Morgan is adapting to digital assets, blockchain rails, and tokenization. So very, very significant for the future of finance. And we're really, really happy to have you here today. How are you doing today, Naveen? Thanks for having me. Wonderful, delighted to be here.
Chuk Okpalugo:with?
Naveen Mallela:Yeah, I mean, uh, as you said, Chuck, we've been working in this space for a decade now. Like while large parts of the industry were taking a wait and watch approach, we were coming at it from a lot of conviction. We were coming at it from the standpoint that distributed ledgers and tokenization has the potential to fundamentally rewire financial services. So it was that promise which led us institutionally to go big on all things blockchain since over a decade back. Um, there have been a number of firsts that Kinexys and earlier Onyx brought into the blockchain world. Quorum, one of the leading enterprise blockchain platforms, came out of the stables of JP Morgan. Um, the first cash on chain product, which is what I architected, JPM Coin, way back in 2019. The first uh repo product, tokenized repo product, uh programmable money and now deposit tokens. So number of us, all driven by deep conviction. And um, it's also one of those rare instances where um we've not been too pressed for commercial outcomes. We were sort of given the latitude to actually just, yeah, sort of uh explore, scale, and uh there wasn't too much expectation of commercial outcomes, which is quite unusual for JP Morgan, I should say.
Chuk Okpalugo:Yeah. And and so, how would you describe your kind of what Kinexys is doing today and the problems it solves and the kind of customers that you have?
Naveen Mallela:The remit of Kinexys is um franchise-wide. Um so the way we set it up as Kinexys is that we build products for the entire bank. So while um I focus primarily on digital payments, so uh tokenized deposits, uh programmable money, uh, and the likes, there are other parts of Kinexys products like fund tokenization, um digital financing, digital debt. Um yeah, so so there's an entire suite of products across uh the lines of businesses. And again, that is driven uh by the fact that you need to look at with with tokenization and blockchain by bringing in assets, cash, all of these capabilities onto shared ledgers, you create emergent capabilities, right? Like the it's not capabilities which exist today, but capabilities which can be brought about by the confluence of all of these things. So that's what we are most excited about.
Chuk Okpalugo:Right. And I think from your vantage point within JP Morgan, you see such a broad swath of payments and settlements and so on. I think even before thinking about what Kinexys does, it's helpful to understand just where you see problems in payments in general, given your vantage point.
Naveen Mallela:Payments have come a long way, especially if you think about domestic payments with uh with real-time payment infrastructure, with infrastructure like PICS in Brazil, with infrastructure like UPI in India. Like domestic payments has come a long way. Where the challenges are is cross-border payments. So that is still a frontier where there is significant opportunity, and that is what we think uh tokenization um can sort of bring about significant uh improvements. The last 10-15 years, you had all of the fintechs who made a major transformation in terms of removing some of the friction or in terms of changing how the retail users interact with financial services. But at the core of it, the plumbing didn't change. A lot of the innovation was driven by pre-funding and being really smart about how you do the pre-funding and you know how you deploy the funds. But the core of money movement really didn't change. I will be provocative and say that since the advent of Swift, cross-border payments has not really changed. And that's about 50 years. Right? Um, so we do think that um tokenization, the ability to bring infrastructure onto shared programmable ledgers um really can uh bring about the much needed transformation in wholesale money movement.
Raj Parekh:And maybe you could describe a little bit more of like the difference between how Knexis actually evolved also. I mean, we've talked about you guys building connexus for almost a decade at this point. Um what were and you've you've kind of touched on a few of the different problems. Maybe you go a level deeper. Like, how was the original journey of Kinexys when you guys first started? And what's like what's been the unlock and the uh and where we are today? Maybe just like take us through that journey as well.
Naveen Mallela:Yeah. We've been very uh deliberate in terms of our approach. Um the way we describe it is like the three concentric circles moving outwards. So we started with a single bank ledger. So at the very onset, what we said was how do we introduce distributed ledgers to the bank? Uh, how do we introduce distributed bookkeeping into the bank? So in 2018, 2019, for the first time, we introduced a multi-asset uh multi-cash ledger into JP Morgan. Um, so but it's still within the confines of JP Morgan. And the use cases we were trying to solve was how can we make money movement within the JP Morgan franchise 24 by 7 and seamless? Um, JP Morgan is a considerable franchise. We have a considerable footprint. Um, being able to just move money without cutoffs in a programmable, event-driven manner itself was very useful for our clients. So that is what we started off with in terms of a book transfer system, a cross-border book transfer system. And then from then on, the second iteration was now how do we expand it to a multi-bank solution? So that is where we set up a separate entity, partier. We brought multiple banks together, Deutsche Bank, Standard Chartered, DBS, all of these banks together. How do we make it a multi-bank solution? That's part-year. And then finally, now where we are is the universal ledger. Single bank ledger, multi-bank ledger, universal ledger. Universal ledger is really deposit tokens. Um in June, we've launched JPMD, um, our first uh institutional on-chain, public, public on-chain product. Um, and that's the one which we are most excited about scaling going forward.
Raj Parekh:And maybe um, like you know, you talked about some of the bank partners there, but maybe describe like, you know, why does Deutsche Bank want to work with Kinexys and JP Morgan also? Like, as you guys have, you know, went from one bank ledger to a you know multi-entity to now multi-partner setup, like what was that journey like? And what are the motivations and what you've seen, like reception from some of the partners that you guys have brought on also, where they do want to work with something that's built from JP Morgan, uh, leverage that, um, you know, given like the trust and credibility you guys have also garnered over the last many years.
Naveen Mallela:Yeah. So I mean, the move towards um shared ledgers requires the institutions to come together. You can't have shared ledges without collaboration, right? Like, and this is an unusual space for banks, right? I mean, if you if you look at the history of financial infrastructure, right? Like, if go back to Swift, go back to Visa, go back to MasterCard, go back to CLS, all of this infrastructure were brought about by banks coming together and creating these industry infrastructure. But there hasn't been since CLS in 2000, early 2000 or late 90s, there hasn't been really anything very similar. So it is unusual for banks to sort of come together and stand this infrastructure. It has happened in the past, but not often enough. But this time around, the move towards shared ledges, universal ledges, does require everybody to come together. You can't innovate in your silos. That is exactly what we are looking to move away from. So it's been also unusual for us. Um, in part year, for the first time, we set up an entity outside of JP Morgan, like within the core payment space. Um, we got multiple partners in. We are uh one of the one of the partners, one of the partners on the cap table, by no means a dominant partner. So it is an unusual setup for us to sort of uh bring together the industry into a consortia kind of setup, think about it more like a utility and stand it up. It it goes against the very ethos of sort of what we do, but that is what is the need of the hour.
Chuk Okpalugo:Right. But it's like you said, it reflects back to how you've seen financial infrastructure develop in many other areas, uh, the exchanges in the US, the clearing uh entities in Europe and Australia and so on, where you know it's classed with pain. Yeah. And then folks realize, hey, it's better for us all together if we create this consortium or shared JV or some other thing where the JV isn't the entity that's supposed to create uh its own profit. It's supposed to be distributed evenly across the parties, but then now there's a platform that you can then compete on, yeah, say the application layer and so on. And so is that how you see the progression going from okay, each bank will realize, especially if they're global, that there's a 24-7 way to manage their own capital. Then uh you've mentioned partier, the kind of cross-bank ledger. And then you mentioned the third step, this universal ledger. How does how do we get from partier to the universal ledger? Universal ledger.
Naveen Mallela:So this is a very um, that's a very interesting question, right? Like in many ways, we jumped from a single bank ledger to a universal ledger. We didn't think that the jump would happen so quickly, purely because of the favorable regulatory environment that we find ourselves in. There are uh still a number of unanswered questions in terms of uh like privacy, um, in terms of uh the ability to sort of have uh KYC and uh permissioning uh capabilities. There are a few design problems which still need to be solved for before universal ledges can truly take off. So we do see a place in the world for shared ledges. I think the really interesting question is going to be we see the stack as going to fundamentally change going forward. Um if you think about the banking stack, all of us have some experience in the banking stack, right? Like every bank has their own channels, your payment systems, your core banking systems, your clearing gateways. In this brave new world, you're going to have shared infrastructure, you're going to have shared ledges, you're not going to have bank-specific channels, you're going to have wallets tied to institutions and users, you're not going to have payment systems, you're going to have smart contractor and orchestration. So the infrastructure is no longer the moat. Now, so how do you compete in this world? Um, do you compete by being an issuer, by the quality of your balance sheet? Even that is coming under question with a lot of consortia thinking about consortia stable coins, right? Like, so like if everything is going to get mutualized, right? Like, how are you going to differentiate? How are you going to compete? Um there are no easy answers around some of these things, but these are some things uh to be thought through. We as JP Morgan, you know, have a view that um the issuer, the issuance still needs to be the preserve of institutions. So we don't think that a consortia model of issuance really scales. Okay. We think that every institution needs to have their own branded liabilities or assets to offer. But that is our point of view. There are others who think quite differently.
Chuk Okpalugo:Right. And what would you say are the key drivers of that point of view?
Naveen Mallela:I mean, again, to um my point earlier, um, we sort of feel that, at least from a JP Morgan standpoint, the thing that differentiates us is the quality of our balance sheet. Uh, the the brand, the JP Morgan brand. Um, so a JPMD, for that reason, stands at a distinct and a compelling advantage, I would argue, compared to other deposit tokens or stable coins. Right. For us to mutualize that into a consortia coin, at least from our standpoint, uh, you know. Loses the magic. Yeah, yeah. So um loses its magic, right? Like so, again, from that standpoint, uh we we have a very clear thought process in terms of um, you know, sort of having a JP Morgan branded liability. Uh and all of these need to interact. Don't get me wrong, interoperability is critical. This is not about recreating the silos. There's going to be a JP Morgan issued liability, a Bank of America issued liability, uh, Wells issued liability. And all of these needs to interoperate with each other, um, whether uh that is through uh uh a central bank uh system of some sort. Um there are various models out there, but interoperability is critical, but interoperability does not equal consortia.
Chuk Okpalugo:And you mentioned and thinking through the different features of uh chains that need to occur. So you mentioned privacy and you know it can be dissolved in a range of different ways, uh interoperability. Do you see that that happening on public permissionless infrastructure? Or are there limitations to that that you think may not get solved, and therefore the universal ledger, as you described, may need to be something that's not public at permissionless?
Naveen Mallela:Yeah, that's a really interesting question. I I don't know. I mean, the fact of the matter is that public permissionless at this point in time for institutional usage, there are still a few design questions out there. Um, can we get there? Yes. Um soon? I don't know. But till that point in time, there would still be a place in the world for permissioned shared infrastructure things like partier. Um so so yeah, there will be coexistence. There'll be certain use cases where universal public permissionless will give you the kind of scale, will give you the kind of network efforts which is important. But for really wholesale institutional type use cases where things like privacy is important, where KYC boundaries are important, for some of those use cases, you'd still want to look at some sort of a permission chain.
Raj Parekh:Okay, awesome. And maybe maybe a couple of things, like maybe you can help maybe unpack JP JPM dollar or JPMD a little bit further as well for the audience who maybe don't know. And also maybe describe like how you expect companies, startups, or other folks to say, hey, I actually want to work with JPMD. Like, how does that work?
Naveen Mallela:Yeah. JPMD is uh, we believe, a compelling alternative to stable coins. So we are big believers in deposit-based products, uh, some would say self-servingly, but uh um I mean it comes from a very uh sort of deep conviction. If you if you look at the monetary system of today, you have different kinds of money. You have central bank money, you have commercial bank money, you have e-money, M0, M1, M2. Um, we don't think that the structure fundamentally changes going into the world of digital currencies. Um we think that fractional banking, the ability to create credit, the two-tier banking system has stood the test of time. Obviously, there'll be people who debate that, but generally speaking, it has worked. It has stood the test of time. And for that reason, going forward as well, if you believe in the two-tier system, a dominant part of the two-tier system is commercial bank money. So that's where deposit-based products are important going into the world of digital currencies. So that is where, since JPM Coin, we've always innovated in terms of launching deposit-based products. So the first product of JPM Coin was more like an account-based product. It's like putting a deposit account on chain. JPMD is putting a stable coin-like token, but which has deposit-like characteristics. Deposit-like characteristics in terms of how it looks like on the balance sheet on the asset side, like it's not one-to-one backed. Um, it has the ability to create credit or money multiplier, so it's fractional. Um, it has deposit insurance, it is interest bearing. And most importantly, it has certainty in terms of financial, accounting, tax treatment. It is it is fungible with deposits. So, for all of those reasons, we do think that it's a credible and a compelling alternative to stable coins for institutional usage. Uh, that's JPMD. So we look forward to scaling some of these efforts.
Raj Parekh:And how do you expect um, like if I'm an early stage company today or I'm you know I'm a business and I want to actually use JPMD for all the properties that you've talked about, how how do I see that? Do I do I even see it at all? Is it very much in the back end via you know the universal ledger or uh but how do I interact with it?
Naveen Mallela:Yeah. We have, as I said, two products. JPMD is our public uh blockchain product. Um, but uh for the longest of time, we've been, as I said, cash on chain product is our blockchain deposit accounts. So our single bank ledger, our permission chain, uh as we call it. So if we start from there, where we see clients getting a lot of value is the ability to move their liquidity 24 by 7 without cutoffs, cross-border, cross-currency. I'll give you an example of a payment service provider. Liquidity is the lifeblood of payment service providers, right? Like, I mean, with this pre-funded model, what you want to do is you want to optimize the liquidity. So if you think about like uh I'll give you an example of uh a PSP which has Aussie dollars in our Sydney branch, uh, for example. Um, you can't really extract Aussie dollars out after, let's say, 10 a.m. in the morning, but you need dollar liquidity out here in the US. So you have Aussie dollars over there, and here you're stretched on your US dollar liquidity with the possibility of running into overdrafts. So, how do you like solve for that, right? Like, how do you ensure that your liquidity can operate as one single hole, cross-border cross-currency? That's what we solve for today. And that is where FX, the ability to do 24 by 7 FX without cutoffs, the ability to move money without cutoffs, all of that is something that has found a lot of commercial traction uh till date. Going forward with JPMD as well, where we think um like tokenization, there is there is a Cambrian explosion of all things tokenization. But you need on-chain cash to service all of these tokenization efforts. Stable coins are not the singular answer for a number of reasons, you know. As I said, whether it is the single singleness of money or whether it is the pre-funded model, you know, stable coins is a solution, but not the solution. So that is where we think other on-chain products like JPMD will be a compelling alternative. So that's that that's how I'd like to think about it.
Chuk Okpalugo:How do you think about where stable coins fall short versus where stable coins are particularly useful in that context?
Naveen Mallela:Where stable coins fall short is one is again, uh not a day goes by without a new headline of somebody launching a stable coin, right? Like how these are going to clear uh with each other? How you I think the whole singleness of money question remains, right? Like uh today, uh a JPM bank account or a JPM issued US dollar trades on par with a Bank of America issued US dollar because of the Fed backstop because of the two-tier monetary system. You don't have that kind of a construct for stable coin. So not yet. Uh and uh even going forward, uh yeah, I'm I struggle to see how that would come about. I it it would resemble most closely like FX markets, right? Like so they will trade at tiny spritz uh to each other. So anyway, so we can debate that, but there is the singleness of money question. The second is uh the pre-funded model. Uh again, for institutional usage, um, so much of cross-border payments gets done on intraday credit. Pre-funded models will not work at scale. Like, if anybody's looked at this for any length of time, straight out of the gates, people will tell you like most institutions operate with 30% of the liquidity that is required throughout the day to service. So they start with 30% of the liquidity uh in terms of processing the payments. With stable coins, you'll have to have 100% of that liquidity. So the pre-funded model is another area where it falls short. The obvious advantages are the whole peer-to-peer nature of it, because of what they are. Deposit products can't transcend the KYC boundaries as freely as a stablecoin. Every time a deposit-based product transcends a KYC boundary, there's a liability transformation. You cross a JP Morgan KYC boundary, you transform from a JP Morgan liability to a Bank of America liability. A stablecoin there is Chuck, you and I could transact using USDC. Neither of us need to have any KYC relationship with uh circle. So it does have the advantages of being peer-to-peer and reachability. Um, so I would say that that is an advantage. But um, but yeah, I mean, I'm sure that other people would stand on other sides of the debate uh for this one.
Chuk Okpalugo:Right. And I think uh the openness and the almost the permissionlessness of the stable currents being a bare instrument, give it advantages in certain areas. And I think payments is such a broad space. And oftentimes debates about payments conflate different use cases for different users in different contexts. Uh and so I think it's really good to dissect where certain things do better, and as you mentioned, uh where there is this friction from the KYC requirement, and oftentimes that could be emerging markets or uh kind of peer-to-peer cross-border. And I'm sure you know you start at the bottom of saying retail and move up to S and B and the mid-market, stablecoins may have uh an advantage. But then, as you were mentioning, talking about uh large multinationals and enterprises that already essentially have accounts with JP Morgan and it's really managing treasury across uh borders and managing liquidity, then for those institutional use cases where they really don't want to have their funds be having come in from a non-KYC entity, then you know, having the risk management and the kind of KYC control of a tokenized deposit or tokenized deposit-like asset may be advantageous.
Naveen Mallela:Yeah, I would also say that um again, uh right, uh we are still very early in this whole evolution of uh stable coins. Um but um increasingly what you'll see is regulation come in. You would want different, you would see the different countries come in and wanting to protect the consumers or the users in their respective countries, which means that it will have to start getting regulated, right? Like you you will offshore entities will need to work with licensed entities within a particular country, licensed WASPs within a particular country to be able to distribute stable coins in any particular region. And then suddenly you start realizing well, that is what correspondent banking is all about, like this chains of trust. Why did why did correspondent banking get created in the first place? Because you create this chains of trust. But I absolutely agree with you, Chuck, that the ability to shorten these chains, especially in certain corridors, right? Like making it more peer-to-peer instead of these long hops. Right. I I think that is definitely an area which we all need to work towards.
Chuk Okpalugo:Yeah, and removing intermediaries, I think, is a key part of the puzzle where you know I think many folks confuse what Swift does. Yeah. I think Swift is slow. Yeah. I mean, it's just messaging, it's very fast. Yeah. And it's really the processes that the banks who are part of a daisy chain of a particular payment.
Naveen Mallela:The ledgers are the slow ones. Swift is just coordinating the update of the ledgers. And I think what needs to happen is these islands of ledgers need to come together into shared ledgers, the right things. Right.
Chuk Okpalugo:It's really that that's a great way to say it. It's really about connecting islands of ledgers. And you know, that's what blockchains are supposed to be. That's the that's the solution, right? Yeah. Uh and I think when you mentioned um pre-funding and uh the ability to, you know, how much capital do you need to support these things? And you know, obviously, when you're moving assets on blockchains, whether it be tokenized deposits or stablecoins, uh, you can move that asset very, very quickly globally. Uh, I think another element is, you know, in building when building it in a permissionless way or maybe on an open network, you have more folks who can provide, like you mentioned, the entry-day liquidity. And so you're broadening the scope of credit providers. And there are many kind of uh payment financing firms who like provide credit to cross-border payment companies, obviously, banks are with large provider, revolving facilities. And so it look seems like the landscape of cross-border payments is changing in order to help solve this liquidity problem and overall reduce the pre-funded balances. What other things need to be solved to really scale cross-border payments?
Naveen Mallela:So, which you've uh hit a key point of that. Um I I keep telling people, you know, payments sometimes are slow, not because of lack of infrastructure, but because of lack of liquidity. Um when we go and talk to our clients about 24 by 7 payments, they are like, listen, you can provide 24 by 7 instant payments, but what I without instant access to liquidity, it's it's only partly useful. And that is where liquidity solutions, whether it is in terms of being able to tokenize collateral and use that more fungibly for cash or creating these short-term uh uh marketplaces, liquidity marketplaces. Uh, those are things which go hand in hand for payments. Typically, payments has been very focused on payments, and some of these liquidity solutions tended to be more capital markets. With tokenization, you start breaking some of those silos. You start, once you start bringing assets, collateral money all on single chains, you start bringing, I mean, this whole world of composable finance, right? You start building all of these Lego blocks of capabilities together to solve for this problem in its entirety. I think that's that's what's most uh exciting.
Chuk Okpalugo:So, for example, just to help break that down, would that be a either payment service provider or actual business or corporation who has assets, needs liquidity, and now they have more abilities to get liquidity cheaply?
Naveen Mallela:And yeah, let's take a very simple example. Absolutely that, right? Like um, for example, a corporate uh typically they have money market funds, they have treasuries, they have high-quality liquid assets, but you want to source liquidity for two hours, three hours. You don't want to wait for collections to come in before you want to make a payment. So the ability to tokenize some of that in a multi-asset ledger and access liquidity for a very short duration, for a very precise duration, that is transformative. Or the ability, I'm long euro, I need dollar liquidity for this particular uh segment of time. The ability to swap euro without having to do an outright FX transaction, the ability to use one currency as collateral and source. Right. What is FX swap like? But in a very short term duration? I think those are some of the solutions which we as Kinex have done a lot of work over the last two, three years. They're not taught in the same vein as payments, but these are all very critical components to bring in just in time liquidity. The entire edifice of cash management has been built in just in case liquidity. You have liquidity in multiple places, but with all of this, you move away from just in case to a just in time liquidity kind of solution.
Raj Parekh:It's really interesting because as you're as you're talking, you can see the parallels between public blockchains versus, you know, you know, as you call it universal ledgers. Yeah. Some of the shared principles around limit fragmentation. You want to create more a symbiotic relationship with ecosystems. There's actually a lot of shared, I think, interest and excitement around some of those principles that you laid out as well. And I guess maybe like, you know, given what I mean, even like the way you're talking about smart like swaps and smart contracts, these are all things that the public, you know, blockchain sector and like the crypto space like broadly thinks about as well. Like, how do you see these two worlds actually intersecting even further? I mean, if we can align on some of the principles, yeah, um, I think there's some debate between you know deposit tokens versus the singleness of money with stable coins. And you know, I think it's an ongoing debate that will continue to play out. But how do you see these worlds potentially intersecting as well? Or maybe are we always going to be in parallel roads, kind of moving in you know, in different directions as well?
Naveen Mallela:So there'll be some narrow banking maximalists who believe that narrow banking is the way to go. Uh, there'll be maybe if you can define narrow banking for narrow banking uh being like stock standard, right? Like uh a narrow banking, like most payment service providers, right? Like one-to-one, you're just a payments organization. You don't create credit. So, in a world where there is no credit creation, credit creation doesn't happen through banking system, credit creation happens through other specialized vehicles, maybe private credit vehicles. And you move into a world where it is, you know, one-to-one, the liabilities and assets, right? Like there's a complete matching of asset liabilities. So there are some, which is the stable coin model, right? Like one dollar of stable coins is backed with one dollar of bankruptcy, remote, high-quality liquid assets. So there is that model, and then there is the two-tier model which I spoke about. Um, but that notwithstanding, I again, there will always be horses for the courses kind of um model, right? Like there will always be uh use cases where stable coins will dominate. Um, especially, at least in my mind, low-value remittances in um hard-to-reach corridors. That's a no-brainer where I think stable coins will dominate. But on the other end of the spectrum, I will struggle to see large institutional usage of stable coins, for example, for on-chain trading and settlement or for um large multinational corporates moving billions using stable coins. You know, I simply struggle with that. That probably will be more the realm of tokenized deposits, deposit tokens. CBDCs are some sort of central bank equivalent money equivalent, will always be there to provide that risk-free settlement for security settlements. So we have all of these different forms of money. They will continue to exist and they'll continue to interoperate. So I don't think there is going to be a singular uh solution. So, yeah, and I don't think these are parallel lanes either. All of them need to interoperate with uh each other, but my overarching point is no one product will subsume the others.
Raj Parekh:No, it makes it makes total sense. And you know, I think the the market, as you've called out, is massive. I mean, these these are these are hyper-liquid markets across multiple different dimensions that have been operating for centuries at this point as well. And they've always coexisted to your point. And obviously, over the last you know, decade or so, with the rise of you know stable coins, it's now created a new economy per se that's now like starting to emerge. Um at the same time, you guys have also, I think, done an incredible job with Kinexys and like starting to say, hey, we're now gonna bridge the innovation that's now possible with some of these universal ledgers as well. But maybe if you can talk about maybe your vision and maybe what what comes next? I mean, a lot of the building blocks we've talked about takes years to build. I mean, these aren't just, you know, if it was just easy to build a tech and ship it like a consumer product or consumer app, then you know, maybe we'd see a lot of these things. But to your point, there's multiple dimensions when it comes to payments. It's liquidity, it's not just like the infrastructure itself. Like, what comes next for you guys? Like, what's what's connexus', you know, next you know, a few years look like?
Naveen Mallela:So I think that uh the secret sauce for uh people to succeed in the space is interoperability. Um, we view our goal as bridging the web 2 and the web 3 worlds. We don't think that there is enough economics in pure web 3 kind of use cases, which is why the web 3 players are coming to Web2 and some of us, more Web2 players, are also bringing Web3 technologies to the mix. The hard part for us has been the integration. Like without interoperability, you will have massive fragmentation of liquidity, which means that some of these networks will not achieve scale. For these networks to achieve scale, you need to have seamless interoperability between the new infrastructure and the current infrastructure. That is where we spent a lot of effort in terms of making our blockchain products be able to interact with the clearing systems of today. So they need to be able to talk to stable coins, they need to be able to talk to the clearing systems of or the real-time payment uh systems of today and be able to manage that liquidity seamlessly. So that's been uh sort of our efforts. And in in many different ways, I think the winners will be the ones who are able to do that bridging seamlessly. Because, again, as I said, we will, while the end state is quite clear and all of us are agreed on the end state, we will be on an extended state of coexistence for some time to come.
Raj Parekh:Yeah, that's a that's a fascinating point. I mean, there's there's so much to impact. I know we're getting close on time here, but maybe we can jump into some rapid fire questions.
Chuk Okpalugo:Yeah, awesome. Um yeah, I've still thinking through the real-time liquidity creation for cross-currency asset swaps and FX swaps. My mind is racing a lot of various different uh kind of ideas and opportunities to build in that space. So we'll we'll have to chat about that later. Um, but for now, let's go through some quick, rapid fire questions. The first one will be easy. Um, where do you see what how would you define success for either Connexis Party or the Universal Ledger for the next five years?
Naveen Mallela:For us, success would be uh when we become a mainstream business within JP Morgan. We are off to a very promising start, but we are still far away from being a mainstream business. In five years' time, if you were to achieve that, that would be massively that would be a massive success for us. Uh, how do you how do you define mainstream business? Mainstream business, like uh uh today our payments business is close to a $20 billion book. That's not mainstream. That's what's that's what's mainstream, right? Like so. We are far, we are far away from that. Uh but we absolutely have the conviction that uh we can get there.
Chuk Okpalugo:Yes, excellent. And then um what is your uh kind of favorite or top recommendation for content, either like a movie, books, uh, or any other type of content?
Naveen Mallela:There's so many things which come to mind, but most recently I've been reading uh the history of debt, 5,000 years of debt. It dispels so many notions about uh money. Like so many economics books start with bot a system, how money came about, and it completely dispels the myth of bot having ever existed. The earliest forms of money was credit. And it just talks about the history of credit, the history of debt. Um I I I thought that was fascinating, and uh it has a lot of parallels to how we think about and particularly relevant for the kind of debate of credit creation or credit creation, deposits and stable credit.
Chuk Okpalugo:Exactly.
Naveen Mallela:Yeah.
Chuk Okpalugo:Okay, you have to be preparing for debate there. Um and then finally, who else do you you admire in the in the space uh that we should bring on the show?
Naveen Mallela:So many individuals, right? Some of the work uh that uh the stable coins have done, uh like what Circle has done, what Paxos has done, is is is amazing. Like I can go on and talk about uh about some of the shortcomings of stable coins, but the fact of the matter is that they just generally created massive credibility for everybody working in the blockchain space. So I have a huge amount of respect for some of the innovation and what uh they've pushed through. Um so so yeah, I mean, I would love to hear uh some perspectives, uh, especially as they start going into more web to use cases, especially with uh Circle Payments Network, for example, or some of the folks from Stripe, right? Like some of the more mainstream players, how they are thinking about um this, I think that that would be a fascinating perspective.
Chuk Okpalugo:We can definitely make that happen. That's awesome. Great. Well, as we wrap up here, uh, where uh can folks listening learn more about you and and can access?
Naveen Mallela:We have uh a significant digital footprint. We are continuously updating that, and we are not shy of being in the media, right? Like so you can you can read us, uh read about us all. Um in fact, we would uh we are very vocal about some of the progress that we are making, not just to shine the spotlight on some of the achievements of Kinexys, but also to shine the spotlight on the possibilities on where the industry needs to be going. Right. So most of the Kinexys.com, like a website. So as part of jpmorgan.com, like we have like uh a Kinexys landing phase where we have a significant footprint of all the Kinexys offerings as well as the most recent client testimonials and collaborations.
Raj Parekh:And what about you, Raj? You can find me on LinkedIn at Rajpark and Amana.xyz.
Chuk Okpalugo:And for me, you'll find me on stablecombullyprint.com, LinkedIn, Chuck Offigo, and on X Chuck underscore XYZ. I mean, this has been great. Thanks for joining us. This is awesome. Thanks for having me for this fascinating conversation. Thank you. Thanks so much for listening to Monika. There was so much to take away from today's conversation. I learned a lot, and I hope you did too.
Raj Parekh:If you enjoyed this episode, do us a favor, share it with someone you know, or give us a five star rating on Apple, Spotify, or wherever you get your podcast from. Until next time.
