Education, Podcasts

Money 3.0: Rafael Cosman from TrustToken talks about stablecoins

In this episode of Money 3.0, Abra founder and CEO Bill Barhydt is in conversation with Rafael Cosman, the co-founder and head of engineering of TrustToken.

Bill and Rafael cover a lot of ground in this conversation including Rafael’s thoughts on how Facebook’s Libra project could impact the stablecoin ecosystem and what’s coming next from TrustToken and Abra.

Check out the episode wherever you get your podcasts, or find a full transcript of the conversation below.


Bill Barhydt: Hello everyone, Bill Barhydt here. Welcome to another episode of Abra’s 3.0. I am particularly excited about today’s episode. We’re going to be talking about stablecoins. And, with me, I’ve got Raphael Cosman co-founder, and head of engineering and product at TrustToken. So, Rafael, welcome to Money 3.0.

Rafael Cosman: Thank you. Good to be here.

Bill Barhydt: I’m thrilled to have you here. We’re going to get into a stablecoins. What’s happened, their role in the crypto ecosystem. I also want to talk about, we’re going to talk about TrueUSD, which is your first product and I understand you’ve got some new products coming out, which we’ll get into. But, how did you get into crypto in the first place? What was your first foray into crypto, and what was your kind of route to get here at TrustToken?

Rafael Cosman: Yeah, I originally heard about crypto, when I was an undergrad studying computer science and I had just seen it as a really cool technology but only started working at full time, and really focusing on it within the last couple of years. And, it was really seeing the opportunity that was here in crypto, especially with Tether being such a popular product but also so untrustworthy. That was really interesting to me and my co-founders and we said, “Hey, there’s a big opportunity here to build a much more trustworthy version of this type of thing.”

Bill Barhydt: Yeah. Now, and so you were down the road here at Stanford. Was there a community already of people a few years ago that were focused on crypto, where you could talk about it with other people, or were you just more or less a party of one at that point?

Rafael Cosman: There was a little bit, it was small. We do have Dan Boneh, who is one of the fathers of cryptography. He’s a very famous-

Bill Barhydt: He’s amazing.

Rafael Cosman: cryptography professor. And, I took a bunch of his classes, and that was one of the things that started to get me interested in it. But, I think that for me, just like many other people, it can sort of be kind of an intellectual curiosity within those sort of moment. And, you say, “oh wow, there’s actually a huge opportunity here to build some products and tools that can really change the world.”

Bill Barhydt: Fantastic. And, how did you, you have a co-founder as well. How did you guys get together and what’s the story there?

Rafael Cosman.: Yeah, so I actually have three co-founders. There’s Jai, Steven, and Tory. And Jai, and I met shortly after I graduated Stanford, and we met at an event and went on a long walk together afterward and saw there’s just a ton of alignment, which mean what we wanted to do with our lives, and the sort of impact we wanted to have on the world. And, so we decided, it made a lot of sense for us to team up, and we just spent a lot of time hacking on projects, figuring out what we wanted to do.

Bill Barhydt: Now when you and I first spoke a couple of years ago, you guys were trying to do something quite different or different than what you’re doing now. How did you guys end up making that transition to, from what you were doing, I should say, to what you’re doing now?

Rafael Cosman.: Yeah, so, when we originally started this company, it was actually an estate planning company. So, we made software that helps people make their wills and trusts. And, then we were getting to get into a certain stage with that product. We had our first customers trying to get our first revenue. and we just saw what was happening in crypto, and just got very interested in it and saw the opportunity that was presented in terms of with Tether. And, we said, “Hey estate planning, we think it can work, and it could be a very good company. Good product for us to build, but we think this is a bigger opportunity.”

Bill Barhydt: Sure, by the way, I don’t know if you saw this, I don’t remember who the company was, but I saw this product on Twitter, somebody talking about it a couple of weeks ago where they basically deal with what happens with your Bitcoin when you die. Right. So, I guess that would have been a little bit of a mash-up between what you were doing before, and what you’re doing now. I mean, I hadn’t really thought much about it, but it makes a lot of sense, right? I mean, private key management when you die is clearly an issue problem.

Rafael Cosman.: Yeah, it is. I think we were in a somewhat unique position of because of the company we were building, we were two sort of tech guys, but our first hire was actually an attorney, Michael, who’s still on our team today. And, we had a combination of tech experience but also legal experience. And, when we were looking at crypto, we thought that gave us a very unique lens. And, some of these products like tokenized assets you have, you’re connecting, let’s say yet currencies to the blockchain. It really does require both a lot of technological expertise and also legal expertise to pull those off, well.

Bill Barhydt: Got you. So, why the transition to stablecoins, and talk about where you are in that now. I mean, your life obviously and where you are as a company.

Rafael Cosman: Yeah. So, it was we were looking at like what are the in crypto there’s a lot of hype. I think everyone sees that there’s a ton of hype. It comes in waves, but there is, there are a certain number of use cases, and products that have real value, real business models, and products that help a lot of people. And, we were thinking about crypto, and we said, we know we want to launch products that are used by real people, real actual users, and don’t care about what we’re building. And, we saw stablecoins as a very, very good use case there, where Tether had demonstrated that there were literally billions of dollars of demand for a USD-backed stablecoin, but it left the door wide open for competition to come in. Because they, unfortunately, become so mistrusted by the community. And, so we launched our product TrueUSD, and since then there have been a couple of other competitors that have come in. But, I think it was a very, very unique moment, in the world of startups where someone proves out a multi-billion dollar market but then allows competition to come in by having such a poor reputation.

Bill Barhydt: Yeah. Okay. So, let’s take a step back. What is a stablecoin? What are the stablecoins that are out there, and what’s different between your stablecoin, and the other stablecoins that are out there? So, let’s take those one at a time. So, what’s a stablecoin?

Rafael Cosman: Yeah. Okay. So, a stablecoin is a price-stable cryptocurrency. So, you’ve probably all heard of Bitcoin, Ethereum and so on. These cryptocurrencies are highly volatile. They can be worth, $10,000 one day, $5,000 the next day. And, that makes them very exciting for speculators and people that want to invest in them and potentially have a large upside. But, it makes them less useful for many other applications. Like if you’re a business and you want to pay your employees or you’re a customer and you’re trying to check out from the supermarket, some of these cryptocurrencies like Bitcoin and Ethereum are less attractive for those types of use cases because they could be worth 5 percent or 30 percent less in a very short period of time given how volatile they are. So, stablecoins are, they eliminate that problem, but they still keep a lot of the advantages that cryptocurrencies have in terms of, secure and fast transactions with anyone anywhere in the world, 24/7. And, that’s very difficult to do with the alternative, the kind of payment methods that we have today, like sending bank wires.

Rafael Cosman: So, that’s what stablecoins are. And, there are several different models for how to build stable points. So, there are fiat-backed stablecoins like our product TrueUSD where for every TrueUSD that’s in circulation, there is a dollar that’s sitting in a bank account, and you can anytime take your TrueUSD and redeem it for the dollar. Or, you can send in dollars, and get TrueUSD. So, it’s one for one fungible with the US dollars. Then there are stablecoins that are backed by crypto assets. And, so Dai is the most famous one of these. And, Dai is actually backed by Ethereum that is locked up in a smart contract.

Rafael Cosman: And, because Ethereum is volatile, it has to be over-collateralized. So, there might be 150 or 200 percent, the amount of Ethereum that is sitting in that smart contract in case Ethereum, goes down that way the Dai will still be backed. And, then there are what are called purely algorithmic stablecoins where there aren’t any assets, fiat assets or crypto assets, that are directly backing the tokens. And, that model. Some folks have designed things like that, but there aren’t any coins of that type that have a large market cap today.

Bill Barhydt: And, how do you, I mean your name is TrustToken as a company. How do you instill trust, in the users who are taking it on faith, and they’re not technical, that if I have a hundred dollar worth of TrueUSD in my wallet, that there really is a hundred dollars somewhere, backing that?

Rafael Cosman: Yeah. So, that’s a place that we’ve invested very heavily. And so, some of the things that we’ve done that some of the other, asset-backed stable points have yet to do. Not only do we get monthly attestations of the funds that back TrueUSD, but we actually have a top 50 accounting firm that does a real-time reporting. Where they plug into our banks directly, and they show online real-time 24/7 that the number of dollars in those accounts matches the number of TrueUSD tokens in circulation. So, that’s something that any token holders can check anytime.

Bill Barhydt: So, in other words, I’m effectively looking online if I want to add a realtime quasi-audited, I don’t know if that’s the right phrase or certainly certified third party accounting firm-based overview of what’s in the bank versus what’s in circulation from a crypto token perspective.

Rafael Cosman: Yeah, that’s exactly right. We can’t technically use the term audit yet. I think it’s missing certain criteria, but we’re working on, we’d like to get to that point.

Bill Barhdt: I see, I see. Okay. And, from a compliance perspective or legal perspective, what are you, are you a money transmitter? What is your legal status as a company?

Rafael Cosman: Yeah, so our company is a money services business registered here in the United States. And, one of the — from a compliance perspective, we do have a responsibility to do a full KYC check on everyone that purchases, and redeems TrueUSD. So, no one can go from TrueUSD to Fiat or vice-versa, unless we’ve checked that they are legit. They’re not a money launderer or a terrorist or anything like that. And, then we also work with the banking partners, and they’re the ones that hold all the US dollars and touch the fiat. We actually don’t touch any of the fiat. We do that all through third party banking partners. And, that’s part of what adds trust to the system that, there’s that sort of separation of responsibilities within our company and the trust companies and banks that hold the funds.

Bill Barhydt: And, do you have to be a money services business in all the countries you operate? Or can you do that just via your US money service business? Because I assume you have customers all over the world, right?

Rafael Cosman: Yeah. So, just US money service business.

Bill Barhydt: Yeah. That’s fantastic. So, now I also understand you have multiple currencies now besides in addition to TrueUSD, you have true, I think pounds, True Hong Kong dollars, Canadian dollars if I have that right.

Rafael Cosman: That’s right. Yeah. So, since launching TrueUSD, we’ve got four other currencies. We’ve launched TrueGBP, TrueCAD, TrueAUD, and True HKD. And, we think that those products, they are, we think they’re quite useful in the same way that TrueUSD is useful where you know, just like TrueUSD allows anyone anywhere in the world to transact US dollars 24/7 and all of a sudden selling and almost free. We’re now expanding that to basically have multicurrency support where we can put a full multicurrency account in the pocket of every person on the planet, and say you can transact in any of these currencies with anyone else, 24/7 with minimal fees.

Bill Barhydt: And, the online overview of what’s the bank balance is for those Hong Kong dollars is just, is there to see just like the US dollar balance, it’s no difference. Is that true?

Rafael Cosman: So, for those, additional accounts and we have the monthly attestations, but we’re still working on getting the real-time reporting setup. It is a little bit more difficult because we’re working with different banking partners for those. And, we launched them more recently, but I just know where I need to add a few.

Bill Barhydt: I see. So, those banks would be outside the US effectively? Because they’re not US currencies or there at least different banks.

Rafael Cosman: Yeah, some of them are inside the US some of them are outside the US.

Bill Barhydt: I see. Very interesting. Okay, and talk about the technology architecture. When, if I have a wallet or if I’m holding, managing private keys, what am I getting technically when I’m holding TrueUSD?

Rafael Cosman: Yeah. So, TrueUSD is an ERC20 token. And, so for folks that aren’t familiar, the ERC20 tokens they’re a type of token that’s built on top of Ethereum. You’re going to think of Ethereum as being like a decentralized computer, and you can write all kinds of programs on this computer, that will run in a trustless way. And, the ERC20 token is a particular type of program where it’s a very simple program. It’s basically just keeping track of everyone’s balances of this thing that we called TrueUSD.

Rafael Cosman: And, if you’ve got a balance under TrueUSD, then you can transfer some to another person just by calling the smart contract, signing a transaction and saying that you want to make that transfer. And, so what you’re holding if you hold TrueUSD is — it’s literally just a balance in that smart contract, which says Bill Barhydt has 52 TrueUSD. Rafael has 20 TrueUSD, and that number in my contract that is what TrueUSD is.

Bill Barhydt: Got you. And, do you know how many people are holding TrustTokens today? TrueUSD or otherwise, other currencies?

Rafael Cosman: Well, yes and no. So, the number of wallets that are on-chain, that we can view and that’s usually in the thousands or tens of thousands, you know, fluctuates up and down. But, there is a lot of information that’s off-chain that we can’t see. So, for example, an exchange, where they’re holding huge amounts of TrueUSD and then that’s held in one single hot lot. Or a colder lot. And, they could have thousands or tens or hundreds of thousands of users that are holding this TrueUSD. And, there’s no way for an external party to be able to see how many users are using TrueUSD.

Bill Barhydt: Do you have any guesstimates as to how many, if you would include the exchanges, how many people that might be?

Rafael Cosman: We’ve got some guesstimates, but they’re wide error bounds, that I don’t know if there’s anything that we can say with confidence on that side.

Bill Barhydt: And, what is the dollar volume of tokens in circulation today?

Rafael Cosman: Well, okay, so market cap is very well defined. They’re easy to measure entry. TrueUSD has a rate cap of around 182 million. But, one of the issues of the volume, is that volume is very easy to fake. And, so it, unfortunately, is the case that most volume in crypto across all markets, most volume is actually fake. And, you can look at certain exchanges that have very strong reputations and it’s more like that their volume is real. But, there are a lot of exchanges that have fake volume. And, so the reported volume on a coin market cap for TrueUSD is oftentimes in the, $200 million or so over 24 hours. But, that does fluctuate a lot. And, we do think that a lot of that may be fake volume. And, that’s the case across crypto. That there are many exchanges that have sort of incentivized to report fake volume.

Bill Barhydt: Sure. And, when you say fake volume, that’s transaction volume as opposed to just the number of the dollar value of true tokens in circulation, which you can’t fake because those are mapped one-to-one with dollars. So, if I was to go to the website right now and look up the dollar volume of TrueUSD, what number would I see, or close to what number would I see?

Rafael Cosman: Yeah, so TrueUSD, that the actual market cap today, 118 million. That’s what you can say in coin market cap that’s very reliable, but the volume which right now is reporting to be 243 million, that you’d have to really, you have to really dive into that and figure out what parts are real and parts are fake. Unfortunately, many people do take this kind of thing on faith and that’s not, it’s not really accurate. And, if you look at on-chain volume, that unfortunately is also very easy to fake because, if you look in generate, if you could take a million TrueUSD and just juggle it back and forth between two wallets a thousand times and you’d have generated billion dollars of on-chain transaction volume. And, so when people would report on-chain transaction volume for Ethereum or Bitcoin or other coins, you really should also look to look at that with a skeptical eye because it is so easy to inflate those numbers.

Bill Barhydt: So, for you, it sounds like the most important metric is just the amount of TrueUSD in circulation. Is that accurate?

Rafael Cosman.: Yeah, that is accurate. But, then we also focus on a lot of the things that are leading indicators of that in terms of the integrations that we’re building with exchanges. While that’s another partner is the level of trust that we have with the community and so on.

Bill Barhydt: Right. So, that leads to the next few questions, which is why are people using TrueUSD? To your knowledge, what is the most important one or two use cases that are driving people to use it and how are they getting it? So, let’s start with the first one. What are the use cases that you think is driving the 182 million to be in circulation in the first place?

Rafael Cosman: Yeah, so I’d say, so probably the biggest use case there is trading on cryptocurrency exchanges where a lot of exchanges, a lot of the biggest exchanges in the world don’t have US dollars. And, the reason they don’t have the US dollars it’s because it is difficult for regulatory, and compliance reasons for them to work with banks. That’s what we specialize in is working with banks and being highly compliant and having a very strong KYC checks and so on. And, so these, many of these exchanges, they struggle to be able to have US dollars or other Fiat currencies directly on the exchange. But, it’s not a problem for them to have stablecoins on the exchange because that’s just another cryptocurrency. And, they’re, you know, historically, the way that the cryptocurrency, ecosystem worked is that there were a small number of exchanges, like let’s say Coinbase that did have fiat, they had US dollars and they would act as the on-ramp for people to get money into crypto.

Rafael Cosman: And, then there were a lot of exchanges that were just crypto-only, and people would trade back and forth on these crypto-only exchanges. But, the world is somewhat shifting now where rather than these exchanges being the gateways for bringing money into crypto, stablecoins are taking on that role. And, the reason that that makes more sense and it’s helpful for people is because you can put your money into a stablecoin and that stablecoin can be listed on all kinds of different exchanges. Whether or not those exchanges can support fiat directly. And, so then once you have your money in that tokenized form, like TrueUSD, then you can move it around easily anywhere.

Bill Barhydt: Right. Makes perfect sense, and that’s obviously how large extent news like [inaudible 00:19:35], work where there is no Fiat on-ramp or off-ramp from the banking system. There are 100% a stablecoin-based if you’re holding Fiat on their system or stablecoin-based fiat, I guess is more accurate.

Rafael Cosman: That’s right. And, so that is actually the, that today it’s more common than not, that you have it. The exchanges do not have their own fiat but are doing that through stablecoins.

Bill Barhydt: Right now. There are several stablecoins that they support, and all the exchanges support a why are people using TrueUSD when they’re using it versus a tether or another form of stablecoin?

Rafael Cosman: Yeah, that’s a good question. So, today I’d say there are four main stablecoins on the market with a significant market cap. There’s Tether, USDC, Paxos, and TrueUSD and there’s also Dai, which is a bit smaller. And, that’s the one that’s crypto-backed. It’s backed by Ethereum rather than fiat. But, for these four large fiat-backed stablecoins, I think Tether is by far the largest, it’s got about $4 billion of market cap and the other ones are in the hundreds of millions. So, they’re a whole order of magnitude smaller. And, the primary thing that makes people not want to use Tether is that they do have somewhat of reputation these days in the space. And, that’s because of some of the stuff that has happened in terms of them being, subpoenaed by the federal government. And, subpoenaed by the New York regulators and losing a lot of their banking relationships, getting hacked. A lot of issues that they’ve been facing that have really challenged their trust with the community.

Bill Barhydt: So, if you put tether aside then you talk about the other three, but you know, yourself and Paxos and USDC, which I think is a Circle, and if I remember right and Coinbase is that, yeah. How do you feel that you differentiate yourselves like that group of kind of core competitors?

Rafael Cosman: Yeah. So those four products are pretty similar, you know, and then people don’t know which one that they want to choose. The thing that we’re focusing on the most in order to differentiate TrueUSD is building deeper integrations with the wallets, exchanges, and other apps that we work with. And, so, we as a company have developed two main strengths. One is compliance and the other one is fiat on-ramp. And, when we look at across the ecosystem, you know, these two problems are problems that almost every exchange and most wallets face at some point. And, so what we’re working on is providing a solution to them where we can provide a really seamless process for getting KYC and on ramping fiat that is; you as an exchange, you could list our token TrueUSD, and that would give people the ability to move fiat onto your exchange, through TrueUSD, but it’s not the kind of seamless experience that let’s say a Coinbase customer would have. And, through a deeper integration with exchanges and wallets, we think that we can create that kind of deeper seamless experience. Even with companies that might have difficulty being able to get those banking relationships and so on themselves.

Bill Barhydt: Got you. And, so let’s segue that into the on-ramps and off-ramps, right? So how are people getting TrueUSD today?

Rafael Cosman: Yeah, so we offer TrueUSD through our app. So, if you go to you can create an account, you go through our KYC process and then you can send it and let’s say a $10,000, wire, you getting 10,000 TrueUSD. Send in 10,000 TrueUSD, you get a $10,000 wire.

Bill Barhydt: Can I do that in any country in the world?

Rafael Cosman: Not quite any country there are certain countries that are on the OFAC list, the US has sanctions against.

Bill Barhydt: I can’t do it if I’m in Iran or North Korea or Sudan or something like that.

Rafael Cosman: That’s right. But other than that, anyone anywhere in the world is able to purchase and redeem TrueUSD.

Bill Barhydt: And, that’s bank all bank wire-based rails.

Rafael Cosman: That’s all bank wire-based today. Although we are working right now and adding additional payment methods. And then, but you know, that’s the one and only place where TrueUSD is actually created or redeemed. That’s like the original source of every TrueUSD. Every TrueUSD came through that app. At some point, but a lot of the folks that are purchasing and redeeming TrueUSD, they are actually partners or institutional players that are sort of reselling to USD in one way or another. And, so, you know, we have many partnerships including a partnership with Abra and other companies and folks that list TrueUSD or use TrueUSD and allows you TrueUSD to be purchased, let’s say with other payment methods, or folks that are merging making on exchanges such that retail customers can purchase through USD Binance, or Kx or wherever, whatever exchanges they, they might happen to be trading on.

Bill Barhydt: I’ve been reading a lot and hearing a lot and, and talking to the press a lot about this whole travel rule issue, in the money service business world, which I think is going to be an interesting aspect of the stablecoin ecosystem in the next few years. Are you familiar with the travel rule?

Bill Barhydt: Okay. So, the bank seemed to be okay with this idea that if, if I buy TrueUSD by wiring you money, they, you know who I am because I’ve gone through a rigorous KYC and background process on your site that you mentioned. And, I can then send that via Abra or an external wallet or some of the products to a user that you don’t know. Right? And so, the bank obviously doesn’t mind that they don’t know who is then receiving that token from the other person who they do know. Right. And, do you think that’s going to change over time or do you think that the regulators and the banks will remain comfortable with the idea that it’s only the on-ramps a person using this the on-ramp or off-ramp? That I have to know.

Rafael Cosman: Okay. So, I was like, let’s dive in. The travel rule. So the travel or what it specifically is saying is that a digital asset service provider like let’s say an exchange,

Bill Barhydt: well, the general itself as his general money service business regulation, which precedes crypto. Right. I mean the travel world has been around for, since basically the Patriot act. Now we’re talking about the application of the travel rule explicitly to crypto. Which is slightly different.

Rafael Cosman: Yeah. So, the FAT of the Financial Action Taskforce has recently released guidance saying, you know, the travel rule does apply to crypto and they’ve provided some guidelines on to exactly how it applies to crypto. And, what they said is basically if that, you know, if I’m an exchange and you are an exchange and someone is let’s say transfers money from my exchange to your exchange, that I have to send along a little piece of information, you know, with some of that user’s KYC data and this is something that banks do today and it’s pretty straight forward and well known how this done in the conventional finance world.

Rafael Cosman: But, in crypto there’s still a lot of open questions of how that information actually be transferred and how do you make sure that you’re not violating someone’s privacy and so on when you’re doing that. So, it is something that we’ve, that we’ve thought a bunch about. Um, there isn’t right now a single solution that you know is, we see a lot of cryptocurrency companies, adopting. And, so I think, I think over the next six months or so, we’re going to be seeing various solutions roll out. It is something that we’re very interested in or thinking about, but I don’t think that there’s a single solution yet. Today.

Bill Barhydt: Yeah. Now, if I realize this isn’t your core business, but just as an aside, if I actually take Bitcoin from, let’s say Coinbase and send it to Abra and then take that money from Abra and send it to a cold wallet or an offline wallet on my hard disk, it’s not on an exchange. And, then take that and send it to Vietnam chain transaction to another wallet and then send that to another exchange. There’s no way that they, the last exchange can know that the money started at Abra or at Coinbase. There’s simply no physical way to know or guaranteed to know. And just so it seems to me that this is going to be a big uphill challenge to even be able to comply in a lot of ways.

Rafael Cosman: Oh, I don’t think it’s actually quite as bad as a situation as that, because my understanding of the guidance that Fiat has put forward is that, you know, this information, this K was this, this certain amount of KYC did, it has to be transferred. If someone sending money from let’s say one exchange to another in one digital asset service provider to another digital asset service provider. But if you take some funds off of an exchange and you put it onto let’s say a hardware wallet that you control that and then you, and then you, let’s say from there you send it to a friend or you send it to another exchange or whatever you want to do with it. At that point there isn’t any KYC data that has to be set. That’s my understanding of-

Bill Barhydt: That’s my understanding as well.

Rafael Cosman: So, I think that, that we don’t have to solve that. I think that problem of how would you get the KYC data to travel with the funds, even if it goes into let’s say hardware wallet. While I only need to solve that, I think it really is just transferring between digital asset service providers.

Bill Barhydt: Yeah. I think my point is that there’s no technical problem to be solved. It’s just the whole point of the travel rule, what they think the travel rule is and how it should apply to crypto is mostly untenable because when you overlay what they want to do with the scenarios I’m describing, you end up with a whole bunch of data that’s completely useless, because all of the scenarios in between of where the money could be or go or whatever, they can’t account for it. And, so I’m just questioning whether or not it’s even useful at all at some level. I mean, we’re not here to make regulation of course, but it just seems like there’s other things that they could be spending a time on that are more useful than just the movement of crypto between exchanges. But you know, who knows. So my understanding is you’ve got a new product, coming out as well, you want it, you want to talk a little bit about that?

Rafael Cosman: Yeah, that’s right. So, you know, we’ve been over the last, years out, we’ve been having a lot of companies come to us and ask us about, supporting them with a more, a deeper integration around either a compliance fee on-ramp or both. And so, we’ve been thinking about that and, and come to the realization that it really these two problems of compliance if on-ramps are really problems that almost every crypto company faces at some point, whether they’re an exchange or a wallet or, and many others. And, that it makes a lot of sense for rather than every single crypto company to be building out, you know, their own compliance team and their own integrations to be able to accept fiat and get the relevant licenses and partnerships and so on.

Rafael Cosman: That it really does make sense for a company like artists really invest in building a great solution that we can offer to many other partners. And, we see that as a strong way to differentiate, TrueUSD and true currency products because we think there’s a potential for, uh, true currencies to become one of the easiest ways to get money in and out of crypto regardless of what app you’re in. So, you could imagine a, you know, like the kind of seamless experience that you have on an app like Coinbase. You can imagine that in hundreds of different crypto apps being able to easily get KYC then get your money in or out of the app.

Bill Barhydt: And, from the app developers’ perspective, that will be like an API based or will it screen-based solution? How would that look from a developer perspective?

Rafael Cosman: Yeah, from a developer’s perspective, that’ll be, I think we’re going to be offering APIs and STKs for being able to do that.

Bill Barhydt: Okay. Well really exciting. I’m sure a lot of people are going to be interested in that. So, that leads me to two other questions. Like how do you guys make money? Uh, and well, we’ll start with that one. How do you make money?

Rafael Cosman: Yeah. So the way we make money from our true currency products such as through USD is off of the interest from the US dollars that are backing through USC. And, so, you know, all those dollars are held by banking partners that we work with and that my agenda in a certain amount of interest. And so, um, you know, the more we can grow TrueUSD, then the larger that revenue can be. And, that’s the same way that, um, many other fiat-backed stablecoins make money as well.

Bill Barhydt: No. Are you allowed to, let’s call it the, the money that you’re holding, the, let’s call it the float. Are you allowed to lend that float or are you only allowed to generate interest at the bank itself, provides to you?

Rafael Cosman: We’re only generating interest that the bank itself provides to us. And, there’s in our actual legal agreements with these banks, there’s, you know, very, very conservative, uh, rules about what they can do with those funds. Because we as a business we need to make money but also our top priority is making sure that the token holders are protected is that, you know, there will always be a US dollar backing TrueUSD.

Bill Barhydt: Because money market rates in the US are very, very low right now. Right. Obviously. So, the return in equities, you know, it’s going to be sub 3 percent, right? So, would you ever consider lending that money out directly to other borrowers at higher rates? Or is that something that you wouldn’t even, you would not be able to do or even consider doing?

Rafael Cosman: Well, so I’d say our top priority is making sure that token holder would never lose money or be at risk. And, so, you know, we as a business, you know, look for or are interested in ways that we can, you know, have a modest return on that capital, but without creating any risk for token holders that I think is really our prime directive is making sure that token holders are protected at the end of the day. And, so that very much does limit, you know, what we can do with that capital. But that’s okay. We think that that is a good long term investment.

Bill Barhydt: So, ultimately then your, your business model is really dependent upon this growing to billions upon billions of dollars so that you can generate the kind of revenue from that interest, is that a good assessment? Or, assumption?

Rafael Cosman: Well, you know, we think that TrueUSD and our other true currency products, um, you know, while they are, you know, while they are successful products that, use on many different exchanges, may not want and so on, we do see them as a one piece of a broader puzzle where we want to make, you know, compliance and fiat on-ramps, you know, across all of crypto as easy as and as seamless as possible. And, I do think that many crypto companies feel like that is one of the things that’s holding back, holding crypto back from achieving a more widespread audience, and trio is one piece of that puzzle. And, we don’t see TrueUSD. As the only way I’m far from it. The only way that our company is to be making money because we were also offering these additional services to many other companies. Okay.

Bill Barhydt: So, that leads to the second question, which, which was how do you see the business models evolving? Right. We’ve talked about exchanges and not having fiat on-ramps and exchanges as being the primary business model driver and usage for stable coins. Right now, do you think that will be the case in four years? Do you think that people will be using stable coins for other applications at scale four years from now?

Rafael Cosman: Well, I think that stablecoins, are going to find more and more use cases and it’s, they’re going to become, more used in conventional markets as well, not just in crypto markets. And, I also think stablecoins may start to be used under the hood in more places where you can have let’s say payment apps that are doing international payments using stabled clients and you as an end-user might not even realize they are using a stablecoin. You might just know you’re sending money to someone in another country. And, so, I do think there’s a lot of growth ahead of stablecoins and the growth over the last couple of years at the state of the market as a whole has been tremendous. And, so I think a lot of that is going to come from entire new applications that we haven’t seen before.

Bill Barhydt: Right. So, that’s interesting, right? Because one of the biggest issues with cross-border commerce, meaning, I mean Argentina and I want to buy something from the US or vice versa, is this issue of chargeback risk. Right? If I’m using a credit card in one of those countries, buying from another country, not only is the rate five or 6 percent but the issues of dealing with cross border chargebacks are, are enormous. Right? And, so the utopian scenario there from a merchant’s perspective is, is that I actually get a cash payment, and basically let the contract rules or the, you know, the contract between myself and the buyer apply. Right. And so it seems like stablecoins could actually be a great way to facilitate that somehow.

Rafael Cosman: Yeah, that’s absolutely right. And, that’s one of, it’s one of the advantages that they look points have and you know, and you can use smart contracts that create any sort of rules that you want around stablecoin payments. But you know, by default, if I send you TrueUSD, that is a totally secure and irreversible transaction, but you know, one of the other things that, one of the advantages I stayed with have, especially when it comes to payments, international payments, is that they work instantly 24/7 anywhere in the world.

Rafael Cosman: And so we do see a lot of let’s say trading firms where, you know, you might be a trader in Japan, I’m a trader in the UK and if I want to send you $1 million for a trade that we just completed, then if I send you a bank wire, it’s going to take a long time to get there. And if it’s a Friday evening, it might not get there until Monday, Tuesday or Wednesday. Right. Whereas it could be a Sunday at 1:00 AM and if I send you a stablecoin transfer that’ll get there in 15 seconds. And that’s a huge value add for those sorts of folks.

Bill Barhydt: Absolutely. So how does this relate to what Libra and Facebook and the whole Libra association Calibra wallet to what they’re trying to do? It seems like they are trying to create that person to person and person to merchant stablecoin model that is integrated into Facebook’s merchant service, WhatsApp, Instagram everywhere, right? I mean are they going to get this done and is it a nail in the stablecoin coffin or does it help?

Rafael Cosman: Good question. Actually a lot of folks have asked us that about, you know, is Libra a competitor and there are they going to wipe out the existing stable points? Actually, Libra has been a huge, huge boon for us and for many other stable point companies. And, the reason is that, you know, they’ve, Facebook’s one of the largest companies in the world, and them announcing that they are investing significant resources in a stablecoin project that has opened all kinds of doors where stable coins, where now you know, fortune 500 companies around the world are looking at stable points and saying, wow, there must be a significant opportunity here and we need to start figuring out how can we use the points in our business? What sort of partnerships or investments should we be making?

Rafael Cosman: And, you know, it’s actually, there are some things that we’re going to be announcing soon that I can’t share at the moment, but it has definitely opened a lot of doors for us. And, you know, Libra is also probably quite a ways away from actually launching. Some possibly it might not launch, but they’ve definitely faced strong headwinds from regulators. And I’ll also had many of them, many of their partners, you know, such as PayPal and others back out of sort of the Libra coalition. And, so they’ve both put a lot of wind into the sails of stablecoins. So I just, you know, the letter of the largest companies in the world saying this is a huge opportunity, so big that we want to go after it, but they also, it probably will be a while before they actually present any of the competition.

Bill Barhydt: Let’s talk for a second about why they’re doing Libra the way they’re doing it. I mean, they obviously could have done it the way you’re doing it, which is to build an ERC 20 or Ethereum-based token where they’re simply holding a pot of dollars or a pot of euros, or both. Like they could have a Libra dollar, a Libra, Euro, a Libra, yen, labor pay. So et cetera, et cetera. But instead, they chose not only to create a basket, but more importantly to not use Ethereum and basically create their own blockchain.

Bill Barhydt: Now I believe the reason that they’re doing that is, is that they know that they have a billion users across all of the services. And, if they were all to basically start using ERC 20 base stable coins, it would be a disaster because the theory of network couldn’t handle the load and transaction fees would skyrocket to where they were when Crypto Kitties were popular and Bitcoin was at 20,000. And, so I’m curious to get your perspective on that and how that relates to what you guys will have to do overtime to get to those other use cases in a scalable way.

Rafael Cosman: Yeah. So, I mean I hope that we do have some of those problems. Um, I guess first of all, touching on the, currency side, you know, their decision to make it at the token that’s backed by a basket of currencies, we think that that is somewhat antithetical to the real power that cryptocurrencies and smart contracts provide. You know, we see as we’re, we’re putting out building blocks that many other folks can use TrueUSe and True British Pound and True Hong Kong Dollar and then, you know, any developer in the world today could write a smart contract that is a basket and you could say, I’m going to do 50 percent this one d.

Bill Barhydt: I actually think that’s an easy problem to fix. I think that was a mistake. I think they’ve, I think internally there’s, my impression from what they’ve said publicly, I don’t have any inside info is that they are moving in the direction of recognizing that mistake. So, my point is, is this is still the same, which is whether they have multiple baskets, which are, one is dollars, one is euros, or they mash them up together. The point is the same, right? They don’t trust Bitcoin and Ethereum to scale and therefore they need their own system. Is that correct? When you think about it in the context of Facebook’s numbers and the number of users versus we are in our, shared ecosystem of exchanges and wallets and et cetera, et cetera.

Rafael Cosman: Well, so as you see those as two separate issues. Sure. And so on the currency one, you know, I do think that the model of producing individual currencies and then allowing ecosystem to develop around those, and create vice baskets, I think that is a better model. And, I think that Facebook folks might see that. But-

Bill Barhydt: I think they will get there eventually because I think they’re creating unnecessary political discussions that don’t add any value to either the consumer or to their company in general. Right. So I think they’ll punt on that soon enough. And, then it really becomes the other issue, which is more about architecture and which platform do I develop on?

Rafael Cosman: Yes, on the architecture side, you know, and that’s a place where, you know, TrueUSD is not just an ERC 20 token, you know, we recently added support for Binance Chain. And, so TrueUSD is also a BAP-2 token and that chain has different trade-offs in that theory. You know, it’s got much faster block times around one second instead of 15 seconds. And, you know, just that I mean is that if you want until let’s say, buy a cup of coffee at Starbucks, that using the Binance Chain instead of the Ethereum token might be a good choice. Um, and, and as we, as we look, as we watched the blockchain, uh, ecosystem developing and we see different winners and losers coming out, we can definitely add support for TrueUSD to other blockchains or even potentially build our own blockchain down the road. It is something that we’ve considered, but you know, we wouldn’t want to build that unless we felt confident that it would be used. And, be genuinely useful to our users. But if slash when the time comes, that’s not something that we would hesitate to do.

Bill Barhydt: So, the bottom line is if it went when, let’s say when, when Bitcoin goes to 50,000 and if they’re even comes along for the ride check and we have the next crypto kitty craze or whatever, whatever the equivalent is, you are not afraid that you guys won’t be able to scale person to person transactions with crazy gas fees or mining fees or whatever the equivalent is?

Rafael Cosman: No, because we, we will just be adding, so you know, if their name is really climbed up, you know, developers and users will be moving on to new blockchains and there’s nothing that stops TrueUSD from being able to go across blockchain to those folks as well. And, so similarly with Libra, you know, them adding Libra support, adding an ERC 20 version of Libra and adding a finance chain version of Libra, that would be totally possible and reasonable for them to do as well as having it on their own chain.

Bill Barhydt: I see. So, in theory, you could, and, or maybe you are working on this, I don’t know, EOS or Stellar or even I guess, I don’t know, Ripple-based versions, IOU, various versions of what you’re doing right, that’s all theoretically possible.

Rafael Cosman: Yeah, that’s absolutely possible. And many, many of those blockchains, maybe those folks have approached us and asked us if we could add support and you know, it is a significant developer and investment on our side to be able to do that. But it’s something that I’m interested in doing over time as we can see which blockchains end up getting the most use and which ones not.

Bill Barhydt: Is there one protocol you’re particularly excited about that isn’t getting a lot of use today? I’m curious.

Rafael Cosman: I don’t want to speak to any particular one right now. How come? I know, I think, uh, I think having a, I think having our say across a variety of protocols, you know, ones that focus more on decentralization, like Ethereum or that focus more on speed. I think having across a variety that chosen different trade tradeoffs, I think that’s really the best model.

Bill Barhydt: Right. I agree with that, but if you were developing a TrueUSD from scratch today, would you do it the way you’ve done it?

Rafael Cosman: Ah, yeah. I think that we would, I think that, um, if we, if we had billions and billions of users, we might be moving forward building our own chain. I can see that happening much sooner. But, you know, given the level of use usage that we have right now, that the blockchains that we’re on are serving as well.

Bill Barhydt: Gotcha. How many employees at TrustToken?

Rafael Cosman: There are 23 right now.

Bill Barhydt: Cool. And, all here and we’re in your office in San Francisco, all here in San Fran?

Rafael Cosman: We’ve got a couple of folks that are remote and we’re actually right now opening up an Ireland office and we just think it’s helpful to be able to hire a poly talent across multiple jurisdictions.

Bill Barhydt: Absolutely. And you guys are venture capital-backed?

Rafael Cosman.: Yeah.

Bill Barhydt: How much have you announced in terms of raising so far, how much have you raised?

Rafael Cosman.: We’ve raised about 30 million.

Bill Barhydt: Great. Fantastic is there anything else our audience should know about a TrustToken or TrueUSD?

Rafael Cosman.: I’d say if you’re interested in our products, you know, feel free to go to and you can learn more about them and you can purchase them. A lot of folks don’t know just how easy it is to purchase and redeem stablecoins. And, if you’re a trader or you’re a fund manager or you know, whatever work you do inside of crypto then true currencies can definitely may very likely be helpful.

Bill Barhydt: Fantastic. Well, Abra users, you can also deposit a TrueUSD into the Abra app now. So, if you’re in one of the hundred-plus countries that our user base supports, I’m assuming many of them, you can now go to the TrueUSD websites, sign up to be able to wire money in there and then deposit the money directly into Abra and there’s dozens of currencies you can buy and sell using true USD in our platform now. So, we’re particularly excited about that. So, so well done to you guys for doing that and making such a cool feature available for our users.

Rafael Cosman: Thank you. It’s, I think really working with their team as well.

Bill Barhdt: Yeah. Thank you very much. So, let’s, let’s stop there, I think this has been a fantastic discussion. Thank you so much for the time. So, it’s Rafael Cosman co-founder and head of engineering and product at TrustToken. Thank you so much for the time. This has been awesome. I think a lot of our users are going to learn a lot today and that’s what we strive for here. So, yeah, my pleasure. All right, so that’s a wrap, another episode of Abra Money 3.0.


About Abra

Established in 2014, Abra is on a mission to create a simple and honest platform that enables millions of cryptocurrency holders to maximize the potential of their assets. Abra enables both individuals and businesses to safely and securely buy, trade, and borrow against cryptocurrencies – all in one place. Abra’s vision is an open, global financial system that is easily accessible to everyone.

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