Podcast Episode 2: Pain Points in Crypto Infrastructure
Reggie Young: We're here today to talk to Sara Xi, the chief product officer from Prime Trust. PrimeTrust is building to be an amazing infrastructure in the blockchain and fintech space. And here on Fintech Layer Cake, we love talking about how good infrastructure can help founders and builders. So we're excited to dive in.
Matt Janiga: We'll be talking to Sara about her path to Prime Trust, where Prime Trust fits in the blockchain ecosystem and any tips she has for founders and builders to think about leveraging infrastructure providers like PrimeTrust.
Reggie Young: So Sara, would love to start off just hearing a bit about your background.
Sara Xi: Thank you, Reggie. Thank you, Matt. I'm very happy to be here. My background is a mixed bag but pretty much all in financial services. I worked in traditional cap markets for 14 years in New York City before I moved to Silicon Valley. I was very interested in bringing my cap markets experience into blockchain and crypto space. So this is my third crypto start-up. And Prime Test has a very unique market position. We're a fintech infrastructure provider. So I'm sure you guys are aware. There is a huge space for infra providers that hasn't been very well understood. But when you think about it, it was all the businesses launching new products in blockchain and crypto space. They all share the same set of functions that they need. And oftentimes, as they start their business, they don't quite understand what they need.
So we not only offer the whole ecosystem of products they need but also walk hand-in-hand with them and explain to them these are the considerations. And because we've gone through all the integrations with different partners and we staff an internal team to help our customers, that central position to launch new products and optimize existing products and services for our customers is really helpful, especially when they're just getting into crypto and trying to understand the space and what they need to get started.
Matt Janiga: That's awesome, Sara. We're wondering if you maybe could take our listeners a level deeper. So imagine I'm a founder. I know I want to do something in crypto. Actually funny enough, I have a friend from college who is hanging out in the Bay Area this week to work on some tokenization offerings with a couple of engineering and dev friends that he has, so very timely. And we were talking about you guys last night. He was asking me how does he think about using Prime Trust. And I said you know what, I am talking to the best person about that tomorrow.
So imagine I'm my friend, Jeff. I'm getting started in crypto. I know I've got some cool software that I'm getting ready to launch. I know I'm doing something where I'm tokenizing. I'm in the blockchain. I'm thinking about rights and settings. How do I think about leveraging Prime Trust to take my project from code in theory to put it into actual practice?
Sara Xi: Good question. Let me walk you through a typical journey and what every business needs might be a subset, but I'll try to take you on with a journey that covers most of the offerings we have. Think about it as if you were to start a crypto business, let's say, jobs business. The first step, if you service any end user that touches real money, touches fiat, you will have to KYC that end user and understand their source of funds. So KYC is typically the first hurdle. It's really hard to do. It's always having a manual component, and there's so many vendors. And to be honest, a lot of founders came to me, they didn't even understand what are all the checks. So we have all that figured out.
We do use vendors and we add our own logic to make the API responses easier to understand and improve the real-time approval rate. So once the KYC piece is taken care of, let's say the end user is get to go. Then if you need to hold any crypto, you oftentimes want to have a custodian holding it to own that relationship and the responsibility. So Prime Trust has a trust license, and we are a custodian who can custody any asset, but mostly crypto and fiat. So you can open a custodial account with Prime Trust. And once the account is open, most of the time, you need some fiat to on-ramp to some token. So that fiat on-ramp involves using banks. And which bank, we kind of keep it very transparent to our customers. They don't need to worry about it. We optimize what banks we’re integrated with.
So we offer your typical ACH, wire, credit/debit card, all the rails. So our customers can use that to add fiat into the custodial account. And once you have money, then in the tokenization story, I would love to understand more what Jeff is up to. But typically, we have a liquidity API for people to on-ramp to specific crypto or, for example, if you're layer one, you need to distribute your tokens. You can be the supplier. We can help you with the distribution. So we can play on both sides. That's the basic foundational layers of our product offering. But on top of that, that's where it becomes interesting because we are an infrastructure provider. We can do a lot of product innovation and push it really quickly and efficiently to our customers.
So for example, we are launching a crypto IRR product. It's about to go live actually in less than a month. So market is soft and in this kind of market condition, people are looking for two things. One is how do I have a longer time horizon. The natural question is, okay, can I put some crypto in retirement funds, maybe not a lot, but a good way to diversify for the long term. So we actually get a lot of demand on making crypto accessible to retirement funds. So we have an API that's about to go live. Anyone who wants to add crypto to their retirement offering can use it. So that's one example.
Another interesting angle is everyone is looking for return these days. Credit market is — the stock market rebounded today. But everyone is seeking some return in the near bear market. So the new angle we're thinking is, okay, let's make staking more accessible. So that's another product we're potentially considering, not going into the specific timeline yet but definitely something we are looking into. So that's also very interesting because as an infra provider, we can easily come up with product innovation ideas, test the water with our existing customers, get some feedback from prospects. And if we launch a product, it's quickly accessible to our customers, who are businesses, but then also very accessible and impactful to consumers like you and me.
Matt Janiga: Nice. If I can go back and summarize to make sure I got all that because we love TL;DRs on this podcast, thanks to Reggie. He writes a fantastic newsletter, Fintech TL;DR. If I’m going to sum it up for our listeners then, it sounds like if you're building in the crypto space, let's say you're Jeff and his friends, you want to think about KYC. You want to think about who's going to help you with the custodial needs. You want to think about ramps, on-ramps, token distribution, which I would consider a ramp.
And then fourth, you want to think about especially if you're starting a project or you're starting a company, if you don't have an idea on revenue or run rate, especially in our current environment, you want to think about how can you add other products and services that might help you boost revenue and kick out that run rate. They help your company stay in market longer. And the biggest TL;DR of it all is it sounds like with Prime Trust, founders, builders, operators can get all of that leveraging your great infrastructure platform. Is that right?
Sara Xi: Yes. All in one is probably overused but really think of it as an ecosystem that evolves with you, with the founders and CEOs. So we're never static. We constantly look at the market and see what our customers need next and try to add to the stack. So the idea is you integrate with our API ones. But hopefully, we grow with you and we add new products that you need down the road.
Matt Janiga: This has been really great. Reggie, do you think it makes sense for us to go deeper, even pull up a level, and talk about building blocks with working with crypto and blockchain in general? Because I know Sara is such a great expert there.
Reggie Young: Yes, absolutely. I love the frame. It's an ecosystem, not an all in one. I think that's an important framing. Love it. But yes, I would love to hear, Sara, what you think are some of the key foundational building blocks. I know we talked KYC is a feature that you need, but I'm curious what you see as the core foundational Legos to play with.
Sara Xi: I think making KYC easy for your end users is really important. And there are lots of ideas there. It's not, first and foremost, in many founders' minds that you can't start a business without knowing who your end users are and how to improve the approval ratio. And in cases where people don't have all the documents, how do you gather them as quickly as possible and push them through the onboarding process is really important. And we've done this for so long. We optimize our vendors. And we also figure out what's the best way to staff our internal team so that we can help our customers move their end users through the pipeline because it's all about customer acquisition and how quickly you can onboard them. So that I can't stress enough.
A lot of my founder friends come to me and always say, don't try to do that yourself because it's a lot of work and that's not where you want to focus your time. The other thing is as the infra provider, we aggregate all the volumes from our customers. So we have economies of scale where we can share some savings with our customers. Also, we staff the manual team once, an in-house team to handle manual interventions. And it's probably not making economic sense for a new business to staff that team in-house. Again, economy of scale. So that's another important angle for infrastructure providers. I'm sure you guys have seen something similar.
But coming back to your question, KYC is definitely most important. And the other part, I think as a foundational building block is just to figure out how you're going to safekeep your assets and how you're going to distribute it. Those are things we've had for a long time, but we actively optimize the vendors we use, the venues we use. And also the important role a custodian can play is we have a network of customers. So if you trade with anyone in our network, we can essentially settle on our own ledger. We don't have to do any on-chain transaction, make it very fast and instant. And you only deal with on-chain when you withdraw. That's another benefit.
Another thing I want to mention is the network of customers we have cover different sectors within crypto. So we have this network that we can essentially build out partnerships. So we might have a customer who's in, for example, on-ramp or wallet but they need a different service that, for example, a card issuance provider has that might also be in our network. Because we are the custodian, we can make the back-end very seamless, but we can also make the intro. So that's interesting ideas. We can play on top of it. Network these days, being able to connect different businesses together, I think adds a layer of value that's not often mentioned but actually is really valuable to connect people and expand their businesses.
Matt Janiga: That’s awesome. Sara, it's been really great to hear you talk about the power of the infrastructure that your company provides. Reggie made me watch this movie recently. It was called Spider-Man. I don't know if either of you’ve seen it. Obviously, Reggie has because he made me watch it. But there's this line in there where the guy on goals telling him with great power comes really great responsibility. We do a lot of thinking about that. What do we owe our customers? Stability. How do we constantly improve an up-level and uplift in those spaces here at Lithic.
We'd be curious to hear your thoughts around the responsibility of being an infrastructure provider, especially as I think in our current market conditions, there might be some consumer-focused companies or B2B-focused companies that are tempted to try and do the pivot or try and bolt-on an infrastructure offering. And it strikes us at least from our experience that it is not an easy thing to do. It's not just, hey, let’s donate the layout of our layers. I think you mentioned some operational teams and things like that. We were wondering if you would share with us the way that you guys think about the responsibility you owe your customers and then maybe some of the things you're doing under the hood to help make sure that you honor those things for them.
Sara Xi: Yeah, it's a great point. I like your quote a lot. The way I see it is at the core of it because we're a central — like AWS for fintech, for blockchain. We can't fail technically. If our system is not available, it really affects a lot of customers. So we invest as a company very heavily in system availability and stability. Our CPO is also investing a lot of his personal time and expanding his team on that. So that's on the technical front.
But also in terms of planning product strategy, the way I usually think about it, it's three overlapping circles. We have product innovation like interesting new products. That's our responsibility to be a step ahead of our customers, things they haven't thought about. It's our job to think about it and explain to our customers why you might want to consider it for your portfolio. The other circle is internal optimization.
Do we have more innovative banking APIs we can add? Or how do we make cross-border payments cheaper and more efficient and faster? So we invest a lot of our spin velocity on optimizing those rails and adding new banks or more innovative ways to make funds move faster and cheaper.
The third bucket is really controls. So with credit cards, for example, in crypto space, chargeback ratio can be high. It's our responsibility to keep everyone operating within the confines of what the banks require and we handle chargebacks. And we also give our customers suggestions on how you can improve your customer onboarding. It starts with who you onboard to really reduce fraud in this space. That's the overlapping circle view that I usually apply to planning out our product strategy and road map. I think it also aligns with our responsibility, not just in terms of making our system available all the time, but also help our customers with product innovation. But also remind them, here are the things we need to operate within and how to operate that business more compliantly.
Matt Janiga: This is absolutely fascinating. I'm wondering if you're comfortable taking us a click deeper. I'd love to just maybe compare some notes around maintenance windows, deployment schedules. I know on our end, very typical in the card space. So listeners, founders, operators that are out there, whether you're running a BaaS platform or you're building B2B, B2C types of things in TradFi. You're used to your infrastructure provider may have a maintenance window Sunday night at 3:00 a.m. or they may have a certain level of SLAs or uptimes. I'm curious how do you all think about that in your space with Prime Trust and what you owe your customers there.
Sara Xi: Aside from the obvious, you pick your window that's affecting people the least. I think communication and transparency are key. People understand everyone needs to do maintenance window no matter how big a provider is. But being able to be very transparent and give people enough status updates, emailing our customers. Big customers, we have account managers contacting them directly. The timely communication, enough advance notice, I think, are key and people are generally very understandable when we have to do that. That's really it.
And then also just plan with a bit longer runway. We try not to do last-minute maintenance window. We try to plan out quite far in advance and every maintenance window needs to have a strong reason why we need to have that window. I don't know if you have anything different, but it's the basics that actually really help people.
Matt Janiga: That's so awesome. Yeah, I was just super curious about how given you all aren't tethered to Visa and Mastercard the way that we are, the way our customers are, and also given the fact that your product, because of that untethering, is much more global in nature. We see providers, Lithic, Unit, others, end market doing this stuff. We've got to go market by market. We've got to plug into the old world pipes and plug into those things, where there's almost a freedom that you all have to do it. It’s just fascinating to hear about. Does it change anything as you're thinking about maintenance and other stuff?
Sara Xi: It's actually harder because people trade crypto all the time. So what is the ideal window? It's hard to say. We went through a period, we tried to figure out is there a time frame that's particularly easier. And it's also about planning to really make the window as tight as possible. Another thing that helps is we generally communicate we absolutely need a small window to do that and how it will improve your experience. Then it becomes a no-brainer to our customers why we need that small window. Our teams spend a lot of time trying to figure out what's the smallest window and what's the best time frame in order to do that. Because really, people trade crypto at all odd hours. With our volume, we see lots of trends and patents, and it's really over the place.
Matt Janiga: That's awesome.
Sara Xi: Here’s something funny. People love to trade around holidays.
Matt Janiga: How interesting.
Sara Xi: After a big meal, no better thing to do than trading crypto.
Matt Janiga: Can you track it, where after people in the East Coast are finishing Thanksgiving dinner, you see like, wow, somebody must have been talking to Uncle Mel about crypto, as you're starting to see those activations with your customers?
Sara Xi: We see macro trends. We have trades going through our system. So we can tie it to specific hours.
Matt Janiga: Do you have a Black Friday? I know for us in cards land, e-commerce, we have kicked off around Black Friday. Now it's moved a little bit earlier, almost the same kind of post-Thanksgiving dinner concept you were touching on a second ago. And then it runs up until Christmas for last-minute shoppers. Do you guys have something similar where you have those heavy windows and periods?
Sara Xi: We have sporadic windows. What I can say is, for me personally, I don't plan major activities around holidays, just in case, and I usually monitor what's going on around holidays.
Matt Janiga: That’s awesome. That's great.
Reggie Young: To zoom out a little bit, Sara, I'd love to hear your take on some of the harder infrastructure problems in blockchain right now. I started my first job in law school at a firm that focused on crypto, and this is not that long ago but several years ago. And it's just wild to me how much has changed and how much new opportunity there is for infrastructure. But I think there also still are some core bottleneck infrastructure issues that need to be solved. So would love to hear your take on what you think some of the biggest ones are?
Sara Xi: Great question. I think, for me, the two things that really stand out is, one, we’ve so many new layer ones coming out, interoperability and how to be able to deploy apps. Basically EVM compatibility to me is pretty important and how to really figure out where the trend is going to go. So many layer ones, which ones have the most promise, and how do you design your app so that you can deploy at a mass scale. That to me is just technologically fascinating. I have a tech background. So I do read a lot about different layer ones, their differences.
I have my personal best but I'm not going to comment on this here. But to me, I think in the future — well, people are focusing on a few things. Ethereum, the upcoming merge, is it going to take place in time? I think that's really interesting to me because it is the most established chain for a lot of apps and has the most developer network. But with so many new ones coming, cheaper, faster, I'm very interested in seeing how this plays out. And then also in 2023 when they do the sharding and really be able to reduce gas prices, I think that will be phenomenal. The hope is everything takes place, hopefully not further delayed. So this is on the blockchain infrastructure front.
The other point that's really interesting is how to make it easier for consumers like UMA or maybe not even UMA but people who are just getting into the blockchain space to use it. It is still pretty hard to use, just to figure out MetaMask wallet. I think for a lot of people, even people who are a little bit technical, it's not the easiest thing. Or for example, just to sign up for an account on an exchange, you got to upload a lot of documents. And tomorrow, if you want another account, you have to upload those documents again. How do you do privacy preserving KYC? And hopefully, you do it once. Some crazy idea could be if you do it once, it becomes a privacy NFT in your own wallet. Then you truly do a DeFi model, you push it to the consumer, then you don't have to keep going through the process of uploading your ID and hope that wherever your ID is in the cloud, it's kept safe. You control who has access to your private information.
I think that piece, I know a lot of businesses are tackling it, but that will truly make it easier for people to get into crypto space. And then if we can figure out easier ways for people to have access to self-custody wallets or do blend it like self-custody or a semi-institutional custody to make it easier. Because right now, I think the fear for a lot of people is, oh my gosh, I have to write down this C-Phrase because if I lose it, then there's no way to restore it. There are middle grounds that can be played with. But making the UX easier for end consumers, making KYC easier and not so repetitive every time you need to apply for a new account, I think will ease the hurdle.
For me, personally, how do we encourage mass adoption of crypto is really important. Otherwise, we'll never get there. I think from what we've seen in the past few months or even past half the year, crypto is here to stay with all the volatility. But how to get average people to get into it and really use it is what we'll make or break it.
Matt Janiga: Very cool, very cool. I think piggybacking off of that, you listed off some really exciting things. What are you really excited about coming up for the rest of 2020 as you think about blockchain infrastructure?
Sara Xi: Rest of 2022?
Matt Janiga: 2022. Thank you, Sara. As you can tell, I'm still stuck in 2020 like so many people.
Sara Xi: I think everyone is stuck in 2020. It's like the last two years didn't happen.
Matt Janiga: That’s right.
Sara Xi: I'm very interested in the true power of smart contracts, not just NFT and how much so far, but what you can do with smart contracts to solve real-world problems. We talked about privacy preserving a little bit. But there are so many applications. Why is title search, why is that so hard? You can easily solve that with a smart contract and turning every transaction into an NFT. And potentially, if you have enough data, that process can be very fast, very easy and low cost. Or how we use smart contracts to solve royalty. A lot of people are looking at it. But if we tokenize it correctly, you can pay every player in the ecosystem from the artist to the platform, to the buyer. You can pay everyone fairly and automatically. That's where I see the true power of smart contracts lies, and that's something I'm really excited about.
But to go back to my earlier point, to do all of that, you need a very secure, fast and efficient and scalable chain. So which layer one is going to stand out is also something that's very interesting.
Matt Janiga: Very cool, very cool.
Reggie Young: That's fascinating. For the last section of our podcasts, we like to ask our guests to help us look into the future a little bit, gazing into your crystal ball. A question top of mind for me is what trends are you seeing in crypto on an off-ramp? What do you see coming this year and 2023?
Sara Xi: I think easier UI/UX has probably continued to stay. I think a lot of B2C businesses are focused on that because the people who are very technically fluent, they've already gotten into cartel. So for a new user acquisition, you’ve got to make it easier. You've got to make it secure for average consumers. I can’t tell you how many of my friends and neighbors come to me to ask for help to get into crypto. So the easier we can make the UX, the more likely you're going to succeed. And we need to make it as easy as crypto needs to be its own payment rail.
So you guys are in the card space. But really, there's the word currency in cryptocurrency for it to be a true currency. It needs to be really easy to use. It's just another payment rail. It could be maybe a store of value. We don't know yet. But for it to truly be a payment rail, it needs to be really easy to acquire. I don't think currently it's that easy to acquire. And it needs to be really easy and secure to use, so that people can really get into it. That, to me, is really important.
And the other aspect that we didn't really talk about but I'm sure, especially for the two of you that you think about a lot, is what more regulatory clarity is going to come out. When the executive order came out, the market reacted very positively because it's a way to restore people's confidence in this space and know that there will be clarity around and guidance and regulation around what can and cannot happen. I think it's almost psychological. People need to have confidence in the space to really get into it. And I think in the coming year, there will probably be more clarity around crypto, different tax treatments. I'm just guessing, but that will really help people feel more assured and confident in the space and get into it.
Matt Janiga: That’s awesome. Just taking us a level deeper, are there certain things you think are must-haves coming out of that executive order? Probably the reason I ask, Reggie and I have read these things ad nauseam the time they come out. And you get all excited, hey, here’s the fintech one or here’s something on modernizing payments or something else along those lines. And some agencies are like, great.
I think the commerce department has already published a bunch of questions dealing with the crypto order and thinking about what do they need to do to get ahead there, how do they get smarter on that. And I've worked with some of those folks before. They're absolutely fantastic over there. I know FinCEN has a lot of really thoughtful folks thinking about these types of issues and thinking what does that do for KYC, AML. And they've been engaged in obviously not just through the regulatory process, but through the hill process as well, through legislation over the last few years, including the 2020 Modernization Act, which as everyone knows I still live in 2020 from my earlier comments.
I would love to hear from you, what are some of the must-haves you think coming out of that order? Because usually it’s super long. There’s something for every agency to play with. But what are the two to five things you think this administration has to nail to really advance things for blockchain and crypto?
Sara Xi: It's not my specialty, and I'm not sure I have two to five things. But I think more clarity around tax treatment. It sounds really tactical, but people are all gassed about it. And I think a lot of the areas like your best effort to self-report. And then for us, we spend a lot of time trying to make sure we have accurate data, accurate Siemens impact reporting for our customers and their end users. So more clarity around that, I think, will just help the industry operate more efficiently and take the guesswork out of it.
Matt Janiga: No, that makes total sense. And that's definitely one of the things that I know has kept me from going deeper in crypto. I just don't want to deal with the taxes. I already have a hard enough time with regular taxes. I just don't love the work and why do I have to buy into so much of this stuff.
Sara Xi: Exactly, yeah. A lot of people have an accountant literally for that very reason. And even the accountants, they have to constantly read and keep up to speed and download all the transactions and try to figure out. So I think that will just help us all operate a bit more efficiently if there's more clarity in that space.
Matt Janiga: One of the things I know Reggie and I — we hear about from time to time in our circles are central bank digital currencies or CBDCs. We’re curious if you could peek into your crystal ball, what do you think the future is for central bank digital currencies. Even if it's not one year out but it's multi-years out. Just curious what your thoughts are on that.
Sara Xi: I actually think it's going to accelerate. I think something major won't happen within a year, mostly because if we don't do it, for US, I think it's about national competitiveness. Because you look at other countries, especially take China, for example, they invest very heavily on CBDC. About their ledger, they talk a lot about it. I actually think they already have the product. I think something I read was they try to push it to basically pay everyone in CBDC. It didn't go very well because there are older folks who didn't even have the technology, but they're trying to figure out how do we help people who, going back to our early point, were not technical to get into it. And it happened to be a government can do whatever they want, and they invest very heavily in it.
We read a lot about the CBDC in the US, and I think the ledger is super fast. That is one sure way to get people to adopt cryptocurrency in the everyday setting. So I remain very interested and confident in something major that will happen in this space. And maybe that's a great thing for all of us because it will really get people more open to using cryptocurrency as a true currency because now you have basically the central bank backing it. So it takes a lot of uncertainty out of it, and that will lower the entry barrier to the space.
Matt Janiga: Nice.
Reggie Young: Yes, that's fascinating. That makes sense. I hadn't thought about the speed of payments as a good hook for a CBDC, but that makes total sense. I know some folks talk about crypto as a solution in search of a problem. But I would love to get your take on what you think some of the problems that blockchain is currently solving for.
Sara Xi: I'll keep bringing it back to my earlier point, it's the smart contract. The real-world problem, there are so many of them. Basically to set up program level commands, it will run on its own under certain conditions on a public blockchain, traceable, auditable. There are still many problems it can solve. And I think once the hype around crypto price and NFT price dies down a little bit, people will really focus more on the technology and the adoption of the technology. To me, every hour saved is an hour that people can spend on doing more productive things. So the automation part of smart contracts and how it can automatically tokenize things and then pay different parties on a blockchain and make sure that people can focus their time on doing what's more value-added is fascinating. And that's where smart contracts can truly change our life.
I think we're on the path to get there. But honestly, I gave a few examples earlier about royalty, about title search. But even KYC, if we tokenize people's private data, that's a way to push control to individuals and really spend less time. Or even when you go to doctors, how many times did you go to doctors, fill out the same form with your PII data and medical history? Why can’t that be tokenized? So it's basically in a wallet on your phone and when you go to a different provider, you don't have to fill out the paper form again. So in health care and insurance alone, there's so many applications that can save us money and actually make all of our lives better. No more paper forms. We do live in 2022, but we still go to doctors and fill out a paper form.
Matt Janiga: Nice. All right, Sara. We've been asking you to gaze into your crystal ball, and thank you. I have at least a clearer picture of the future for blockchain and crypto. And it seems really fabulous, just absolutely excited for what's coming. But we are called Fintech Layer Cake, that's the podcast name. So we're going to ask you to kind of blend our two favorite topics, layer cake and crystal ball gazing, and answer one last question for us. Can you use your crystal ball and tell us what type of cake are you going to have at your next birthday party?
Sara Xi: Awesome. That doesn't even require a crystal ball. If it's a summer birthday party, my son was born in summer, it will be an ice cream cake, probably chocolate ice cream cake.
Matt Janiga: Nice.
Reggie Young: Excellent.
Sara Xi: I was born in winter. For me, it's vanilla cake with chocolate frosting. I like the classics.
Matt Janiga: Nice.
Reggie Young: Love it. Those are great.
Sara Xi: What about you?
Matt Janiga: Reggie, do you know off the top of your head?
Reggie Young: I don't. I'm a June birthday, so I tend to go with the ice cream cake.
Matt Janiga: I like the yellow cake, give me the Betty Crocker, Duncan Hines, straight from the box. And then if you want to go to the store and buy a tub of chocolate frosting, that's really great. And that's my go-to favorite.
Reggie Young: Not a Funfetti cake?
Matt Janiga: No, Funfetti is for my kids. Yeah.
Sara Xi: That’s hilarious, Matt. I've actually done them many times. They're actually great, very easy to put together and taste great.
Matt Janiga: Absolutely. All right, wonderful. Well, Sara, thank you so much.
Sara Xi: Thank you. It's been a pleasure. Great conversation.
This episode of the Fintech Layer Cake podcast features a deep dive on pain points in crypto with Sara Xi, Chief Product Officer of Prime Trust.
Fintech Layer Cake is presented by Lithic and hosted by Matt Janiga, our general counsel, and Reggie Young, our product counsel and author of the Fintech Law TL;DR newsletter.
What is PrimeTrust?
Sara Xi: We're a fintech infrastructure provider. There is a huge space for infra providers that hasn't been very well understood. All the businesses launching new products in blockchain and crypto space all share the same set of needed functions. And oftentimes, as they start their business, they don't quite understand what they need.
We not only offer the whole ecosystem of products they need but also walk hand-in-hand with them and explain to them these are the considerations. And because we've gone through all the integrations with different partners and we staff an internal team to help our customers, that central position to launch new products and optimize existing products and services for our customers is really helpful, especially when they're just getting into crypto and trying to understand the space and what they need to get started.
What does a typical crypto journey look like?
- If you service any end user that touches fiat, you will have to KYC that end user and understand their source of funds. KYC is typically the first hurdle.
- You want to think about who's going to help you with the custodial needs.
- Once the account is open, you need to on-ramp some fiat to token.
- If you're starting a project or you're starting a company, you want to think about how can you add other products and services that might help you boost revenue and kick out your run rate.
What is the responsibility of being an infrastructure provider?
Sara Xi: It's our responsibility to keep everyone operating within the confines of what the banks require and we handle chargebacks. And we also give our customers suggestions on how you can improve your customer onboarding. It starts with who you onboard to really reduce fraud in this space. That's the overlapping circle view that I usually apply to planning out our product strategy and road map. I think it also aligns with our responsibility, not just in terms of making our system available all the time, but also help our customers with product innovation.
When do maintenance windows and deployment schedules happen?
Sara Xi: Pick your window that affects people the least. Communication and transparency are key. Give people status updates, email your customers, or have account managers contact them directly.
It's actually harder because people trade crypto all the time. So what is the ideal window? It's hard to say.
What are some of the harder infrastructure problems in blockchain right now?
Sara Xi: We’ve so many new layer ones coming out, interoperability and how to be able to deploy apps. Basically EVM compatibility, to me, is pretty important and how to really figure out where the trend is going to go. So many layer ones, which ones have the most promise, and how do you design your app so that you can deploy at a mass scale.
The other point is how to make it easier for consumers, who are just getting into the blockchain space, to use it. Just to sign up for an account on an exchange, you have to upload a lot of documents. How do you do privacy preserving KYC?
And then if we can figure out easier ways for people to have access to self-custody wallets or do blend it like self-custody or a semi-institutional custody to make it easier.
What are you really excited about coming up for the rest of 2022 as you think about blockchain infrastructure?
Sara Xi: I'm very interested in the true power of smart contracts to solve real-world problems. Why is title search so hard? You can easily solve that with a smart contract and turning every transaction into an NFT.
Or how we use smart contracts to solve royalties. If we tokenize it correctly, you can pay every player in the ecosystem, from the artist to the platform, to the buyer. You can pay everyone fairly and automatically.
To do all of that, you need a very secure, fast, efficient and scalable chain.
What trends are you seeing in crypto on their way out? What do you see coming this year and 2023?
Sara Xi: Easier UI/UX has continued to stay. For new user acquisition, you’ve got to make it easier and secure for the average consumer. Crypto needs to be its own payment rail.
What are some things you think this administration has to nail to really advance things for blockchain and crypto?
Sara Xi: More clarity around tax treatment. And then for us, we spend a lot of time trying to make sure we have accurate data, accurate Siemens impact reporting for our customers and their end users. So more clarity around that, I think, will help the industry operate more efficiently and take the guesswork out of it.
Be sure to check out Crypto and Fintech: A World of Opportunities at the Intersection to keep learning about crypto.
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Fintech compliance. It can be complicated and overwhelming — even if you've been in the industry for a while. But what if there was a podcast that made learning about it a piece of cake? That's what Fintech Layer Cake is about.
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