Stablecoins & Michaela Juric

Transcript

Nick Abrahams:

And joining me today is Michaela Juric, Head of Blockchain Solutions at Novatti. Michaela, welcome to the show.

Michaela Juric:

Thank you so much for having me, Nick. It’s great to be here.

Nick Abrahams:

Oh, fantastic. Now, you’ve got background in the blockchain world, can you tell us a little bit about it?

Michaela Juric:

Yeah, so I actually jumped in with Bitcoin back in 2013 and I started running my own OTC desk. And then from there, I was able to build out a consultancy service, which specialized mostly in helping more bespoke and small businesses within the blockchain industry with a particular focus around regulatory climate and especially the AUSTRAC requirements that came in.

Nick Abrahams:

And you’ve now landed at Novatti as Head of Blockchain Solutions, can you give us a bit of a sense of what does Novatti do?

Michaela Juric:

Yeah, so Novatti is an Australian FinTech company, which specializes in digital payments, so out of that, they have a focus on the B2B sector and that includes acquiring, issuing and cross border payments.

Michaela Juric:

So, in terms of what that looks like, they’ve obviously got a lot of business automation and billing software, card issuing, and they’re also one of 20 institutions in Australia that offer merchant acquiring, so accepting payment via Visa and MasterCard and they also have a number of corporate partnerships like Google, Samsung, Apple, Afterpay, Ripple, just to name a few.

Nick Abrahams:

Wow, okay, there’s some big names that you just rolled off there. Novatti is listed on the ASX, can you give us a sense of what’s the size of Novatti in terms of, I guess, revenue, market cap, those sorts of stats?

Michaela Juric:

Yeah, so the market cap of Novatti at this stage is 68 million, so the revenues for last quarter were about 11 million and it was 32 and a half million for last year.

Nick Abrahams:

Wow, so it’s a great Australian FinTech and payment story, and obviously been around in the payment space for a while and now on the innovation, very much leading into the innovation side of things. You recently announced the AUDD stablecoin. We’re hearing a lot about stablecoins recently, can you tell us a little bit more about the Novatti AUDD stablecoin?

Michaela Juric:

Yeah, so AUDD or the Australian Digital Dollar is Novatti’s Australian dollar backed stablecoin. So, the intention of that is to facilitate payments, transactions and remittances between businesses and their customers.

Michaela Juric:

So, unlike other stablecoins that we’ve seen come up recently in the markets that are either over collateralized or algorithmic, we’ve got a one to one backing, so onto the Australian dollar. So, this means that the risk of AUDD depreciating for example, is significantly minimized. And that’s done essentially by saying that for every $1 we hold in the bank account that AUDD will be minted onto the blockchain.

Nick Abrahams:

Brilliant. I think with the Terra Luna meltdown, I think the algorithmic stablecoin proposition has been put back many years, if indeed it actually gets ahead at any stage. So, obviously, I guess, from the customer’s point of view, critical to know that for the AUDD stablecoin, that it represents effectively reserves of actual Aussie dollars. Who’s the market for this, who will be the customers for the AUDD?

Michaela Juric:

Yeah, so in terms of the customers and what it’s going to look like, potentially anyone can use a stablecoin. A stablecoin can fit in and replace any sort of payment method. So, when we look at who can use it, we look towards use cases. So, we’ve got [inaudible 00:04:52], for example, so offering the stablecoin to allow for fiat backed transactions between other stablecoins to be traded efficiently and seamlessly 24/7, as opposed to waiting for markets to open.

Michaela Juric:

We’ve also got a gateway solution as well, so low cost, virtually instant settlements of both domestic and international payments. And then, of course, we’ve also got AUDD as a trading pair. So again, like I mentioned, creating those FX pairs between other stablecoins, but then, of course, you’ve got other cryptocurrencies and tokens that can be traded as a part of that. And if you are interested in going down that DeFi rabbit hole, of course, I’m sure there will be the staking and yielding farming opportunities through other services.

Michaela Juric:

And most importantly, as well, is that stablecoins and AUDD in particular will provide that store of value. So, in terms of safe, stable, holding of AUDD without concern of fluctuation, in comparison to more volatile cryptocurrencies, like your Bitcoins and Ethereum. So, who is that probably most suited for? People that are dealing with invoice settlement fairly regularly, trade payments, imports, exports, there’s really no limit to who can use it.

Nick Abrahams:

And maybe drilling into how that works a little bit more, so let’s say I’m an organization and I have trade payments, so let’s say I owe money internationally, how would I go about using your stablecoin?

Michaela Juric:

Yeah, so it depends on how you want to do that, so of course you can do that directly. For example, if you’re using a DEX, which is a decentralized exchange, you can swap AUDD with another stablecoin that’s available via that decentralized exchange.

Michaela Juric:

Another process you can use is a third party service, similar, I guess, to a remittance company, so where they would process that swap for you and obviously assist in the insourcing of liquidity.

Nick Abrahams:

And the benefits are, you mentioned the 24/7 nature, because I think we’ve all struggled over the years with that anxiety as you wait for particularly international transfers to land in the receiving accounts and so forth. So, the advantages, I guess, that it’s 24/7, so we don’t have to wait, what time do the banks open and close and so forth in the various geographies that are involved in the transaction, so it’s 24/7, it’s immediate and low cost in terms of efficiency, so are those critical?

Michaela Juric:

Oh, absolutely. And if you want to throw some numbers out there, Nick, I mean, if we look at the time it takes to swap and transact a token, at least on our first reiteration on the Stellar blockchain, it takes about 30 seconds to process that from going to one stablecoin to another, and probably costs you about five millionths of a cent

Nick Abrahams:

Five millionths of a cent.

Michaela Juric:

Yes.

Nick Abrahams:

Okay, you got me at five millionth of a cent, what can I tell you? I’m not sure traditional banks are operating on the five millionth of a cent margin.

Michaela Juric:

I don’t think we’d ever see that in our lifetimes, Nick.

Nick Abrahams:

Well, that’s amazing. Okay, so the cost is extraordinary in terms of the reduction there, and obviously not having the intermediaries involved in the transaction and the immediacy of the transaction.

Michaela Juric:

Absolutely.

Nick Abrahams:

And is it live and running right now, can customers call you up and get going?

Michaela Juric:

Yeah, so at this stage, we’ve actually just done our proof of concept in terms of the infrastructure on our Stellar blockchain. In terms of when it becomes publicly available, we’re hoping that should happen within the next six weeks actually.

Nick Abrahams:

Okay. Well, fantastic. Okay, so very soon. And so, I think we saw recently the ANZ Bank minted a stablecoin for a transaction. I mean, how does your AUDD stablecoin differ from what the ANZ is offering?

Michaela Juric:

Yeah, that’s a great question, Nick. So, I think we can break it down into three components and I think those would be availability, accessibility and utility.

Michaela Juric:

So firstly, on the availability front, AUDD will be blockchain agnostic, which means it will appear on more than one blockchain. So, at this stage we’re coming out on Stellar and XRP Ledger, that’s definitely confirmed. Of course, we are looking to go onto the Ethereum blockchain as well. In terms of our phase two blockchains, obviously that’s under consideration at the moment where we move to next. Of course, the blockchain technology is always expanding, always growing, so always interested to see what’s coming up next.

Michaela Juric:

In terms of accessibility, like I was talking about earlier, anyone can obtain it, anyone can use it, so it’s not refined to a closed market. And then, of course you’ve got the utility as well, so we’ve got real world usage and as soon as AUDD becomes accessible and available, anyone can start building with it, implementing it, sending it and receiving it.

Nick Abrahams:

Right, so it’s really, I guess, part of the proposition is building the community support for AUDD as well.

Michaela Juric:

Yeah, absolutely.

Nick Abrahams:

And so, we’ve talked about a few different stablecoins and the algorithmic stablecoins have probably had their day, at least for the moment, but we’ve got Tether and USDC stablecoins out there and they seem to have a market cap in excess of $100 billion or there about. Where does stablecoins head? Do we have a handful of them, do we have dozens, do we have thousands of them, what do you think the future is for stablecoins?

Michaela Juric:

Yeah, so I’m not sure if we’ll see thousands, unless Elon Musk takes us to the moon and we end up having planet based stablecoins.

Nick Abrahams:

You heard it here first. You never know. Well, you never know what Elon will do from one day to the next.

Michaela Juric:

You never know what the future holds, especially when we’ve got Elon in it. No, if I break it down a bit, I think there’s a few ways we can look at it. And I mean, obviously you’ve mentioned some of the more bigger players in the space, so we’ll start off with that.

Michaela Juric:

So, I know Bianca touched on US Terra in one of your last episodes. And of course, the algorithmic stuff aside, what’s interesting is that Terra was actually created in late 2020, and by its peak in May this year, although shortly before its demise, it topped out at about an $18 billion circulating supply.

Michaela Juric:

Now, by that $100 billion figure, you were mentioning earlier, US Terra would’ve ultimately made up about a fifth of that market. And then in the next second you blink, it’s gone. So, the takeaway from that, fast moving paces around stablecoins, I think it’s very plausible that we’ll end up with possibly hundreds of stablecoins, but I think there’s only going to be a handful that actually proceed and become successful out of that.

Michaela Juric:

So, I know for example, with our project, AUDD and Novatti, it’s by no means obviously algorithmic, but Novatti does have a strong history in ensuring compliance and security through its entire business. So, a big part of our development has been ensuring those technological and operational requirements, so AUDD isn’t part of one of those handfuls that fall out of favor, but is more actually a head if we want to talk anatomy.

Nick Abrahams:

Yeah.

Michaela Juric:

But if we want to come back to that initial question, I think the most enjoyable part about working with an open source decentralized technology like blockchain is that there is constant competition. And I think that’s what’s so fantastic about working almost in an open market, especially around stablecoins.

Michaela Juric:

And you’re probably thinking, surface level, competition sucks, we want to be the best, we want to be the monopoly or we want to be part of that oligopoly, but I think at the end of the day, competition breeds success and I think it pushes us to be more efficient and more innovative.

Michaela Juric:

And I know a key part of the conversation at the moment in regards to stablecoins is that interoperability aspect, so having the stablecoins on different blockchains speak with other blockchains. And a key part of that conversation is anyone can make a stablecoin, but it’s how those stablecoins interact with other stablecoins, other tokens, other cryptos, even other CBDCs for that matter, it will be a driving force of how we keep on top and how, of course, we remain ahead.

Nick Abrahams:

Fantastic and I love the reference to the anatomy. I think it’s always easy to understand with an analogy, so that’s helpful. It’s so fascinating. I mean, do you think the stablecoins, will there be stablecoins for particular industries, will it be, I don’t know, transport will have a particular stablecoin that focuses on it, or do you think it’s more around that interoperability, which is where you’ll see a win?

Michaela Juric:

Yeah, well, I think an interesting example that I believe was raised recently, so we’ve got the internet of things, and I believe there is a project at the moment that’s looking at using a stablecoin like token between cars, so if you are running late to work one day and you’re traveling down the freeway and you need the car in front of you to get out of the way, through that blockchain technology, you’re able to pay that car to move out of the way and essentially pay for a more efficient trip, so I think in terms of using stablecoin specific industries, I think that’s very plausible.

Nick Abrahams:

That’s a great example. I’m in a hurry, get out of my way, rather than using the horn, you’re going to financially incentivize someone to get out of your way.

Michaela Juric:

Exactly, it’s the premium of staying in the right lane.

Nick Abrahams:

You know what? I feel like there’s a business model milking that stablecoin, just driving slowly in the right lane.

Michaela Juric:

I mean, the question will be, how does the highway patrol feed on that?

Nick Abrahams:

Well, I think we’ll have to include them in on… There’s a great example of, I think, the ATO and the Australian Distillers Association have done an interesting blockchain project where, because there’s excise payable on liquor, excise tax, and so using the blockchain, they’ve made that far more efficient as to how the tax is calculated and remitted, so I think government obviously has a position play all this as well, so. Look at us, we’re coming up with all the great ideas here.

Michaela Juric:

Hopefully no one’s writing these down.

Nick Abrahams:

So, what does the future hold for Novatti, where do things move to from here?

Michaela Juric:

Yeah, so obviously at this stage, our main focus is building up the infrastructure around AUDD and ensuring what we have is really fit for purpose in terms of those use cases, especially the ones that we were talking around earlier. So, in terms of future plans, that really depends on where the market demand takes us and what new developments come out of blockchain as well.

Michaela Juric:

So, one thing I’m actually quite keen on and following closely is Project Jump Cannon, which was actually announced by the Stellar Development Foundation earlier this year. And that will actually bring contract functionality to the Stellar blockchain who have some of the lowest fees in terms of blockchain transactions. So, a few weeks ago they actually did a preview release of Soroban, which is their smart contract platform, so it’s very interesting to see what’s coming up with that and obviously very excited to become more acquainted with the opportunities there.

Michaela Juric:

Another interesting part as well, is looking at how quantum computing will affect blockchain technology as well, so obviously we’re talking about Web3 and stablecoins and blockchain technology now, and here we are with almost… When did Bitcoin come out? 2009. We’re already starting to see quantum computing completely blow that out of the water and it’s going to be almost like a Y2K moment, especially around how we protect and how we encrypt wallets and private keys. That’s going to be very interesting and it’s going to be a big part, I think, of who’s going to remain here and who’s going to proceed into the future.

Nick Abrahams:

Yeah, yeah. I mean, it’s a fascinating proposition around quantum and of course, what it will mean for the entire technology sector. Do you have a sense in terms of, and I know no one knows this because there’s a few quantum capabilities that have been announced and so forth, but we probably haven’t seen anything in true production, but do you have a sense of when that… I love the Y2K moment, although I suspect there’s a lot of organizations listening who felt like they spent rather a lot of money preparing for Y2K and nothing happened. Well, it was good that nothing happened, but do you have a sense of how far away is that Y2K moment, do you think?

Michaela Juric:

Oh, good question and it’s almost like how long is a piece of string question.

Nick Abrahams:

Yeah, yeah.

Michaela Juric:

But I think as long as you approach it with a sense of, I wouldn’t say urgency, but a sense of being prepared for it and being aware that it’s coming and not having, I guess, your head in the sand moment.

Nick Abrahams:

Yeah.

Michaela Juric:

I think that’s all you can do at least until we have more information coming out.

Nick Abrahams:

Yeah, yeah. No, it’s definitely something to watch. I mean, it’s been lovely chatting with you, Michaela. Maybe just finally, just for potential customers who may want to use the Novatti AUDD stablecoin, and there are people sitting within organizations and they’ve got remittance issues and so forth, but there’s possibly a degree of concern around going into novel technology and so forth. Do you have any advice or how might they approach this in a way that is not betting the farm, I guess? How should they ease into propositions like the AUDD stablecoin?

Michaela Juric:

Yeah, well, we’ve just launched our website, so audd.digital. You are more than welcome to send an inquiry there via our website and I’d be more than happy to have a chat with you and bring you up to speed and answer any questions you may have.

Nick Abrahams:

Oh, fantastic. Oh, well, that’s great, because I think when I’m speaking to organizations, I think there’s a great deal of interest, but there’s just that concern around, “We don’t want this to go wrong.” But as we’ve seen, the technology is now at an enterprise level and so it is time for organizations to start to look at this.

Michaela Juric:

Absolutely, and the other thing is, as well, obviously there’s no fear in not knowing what you don’t know.

Nick Abrahams:

Right, yeah.

Michaela Juric:

And I think if you’re willing to take that step, I think there’s only good that can really come of it. Even if you don’t necessarily end up using it within your own business, at least you have that opportunity to learn and you can at least put your hand up and say, “Well, I had a crack at it.”

Nick Abrahams:

Yeah, fantastic. And Michaela, I think that one thing that has often been said about technologists is that no one can understand what they say when they talk and you’re a clear example that is not accurate, because it’s been terrific. You’ve really given us a great understanding as to what the offering is today and I’d encourage folks to take Michaela up on that offer and try to learn more about the Novatti offering.

Nick Abrahams:

So, with that, Michaela, I wish you and the team best of luck. Congratulations, once again on getting the AUDD stablecoin out of the garage and wish you best of luck and thanks for joining us.

Michaela Juric:

Thank you so much, Nick. Hopefully I can join you again soon with some more exciting updates.

Nick Abrahams:

Absolutely, I look forward to it, thanks.

Michaela Juric:

Thank you.