Having traveled extensively through various emerging markets, Nick van Eck, the CEO and co-founder of Agora, understands well the challenges posed by currency debasement and inadequate financial systems faced by people in these regions.
With AUSD, Agora’s principal stablecoin product, van Eck aims to address these nations' unique challenges. “With stablecoins, individuals in countries such as Argentina and India can save money without the fear of inflation or capital controls,” van Eck noted in a recent discussion. “It’s a straightforward yet transformative instrument that can enhance lives, especially in areas where conventional banking fails to deliver.
Van Eck has a rich background as a tech investor and comes from a family with ties to the gold sector — the fund company founded by his grandfather manages one of the largest gold mining funds in the world. From early on, he recognized the potential of Bitcoin as a store of value and resonated with the principles upheld by early Bitcoin enthusiasts.
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Recently returning from a two-week family trip to Patagonia in South America, van Eck discussed the developing role of stablecoins in emerging markets, the driving factors behind stablecoin adoption, and the unique aspects of the Asian market. He explained Agora's strategy in constructing blockchain-based payment systems and highlighted the importance of what he refers to as 'credible neutrality.' The following is a lightly edited version of the conversation.
Journey from Tech Investment to Founding Agora
I began my career at the private equity firm JMI Equity, and I always aspired to be an investor. My initial encounter with Bitcoin occurred while I was at a hedge fund in 2016. The notion of Bitcoin as 'digital gold' struck a chord with me, aligning with many beliefs shared by early Bitcoiners. Though I initially ventured into this space, I continued my journey as a tech investor for many years.
The DeFi summer of 2020 rekindled my interest in crypto as applications like Uniswap and Aave made the concept of an open financial system a reality. For many worldwide, these innovations offered superior alternatives to their existing financial frameworks. Blockchain technologies empower individuals to save and earn money in new ways, signaling the dawn of a financial revolution. Approximately a year ago, I transitioned from the VC firm General Catalyst to launch Agora.
Travels and Their Influence on Agora
I consider myself fortunate to have traveled to regions where financial services are much less accessible than what is commonplace in America. Visiting countries like Argentina and India clarified how varied global opportunities and challenges can be. Providing a financial tool allowing individuals to save without the fear of inflation holds immense value in places like Patagonia and Argentina. My grandmother faced adversities as an immigrant, growing up amid hyperinflation and restrictive capital controls. I have seen similar challenges during my travels, and although I did not experience them firsthand, those journeys made the harsh realities of financial instability resonate deeply with me beyond mere academic understanding.
Differentiation of Agora and AUSD from Other Stablecoins
We stand out for our credible neutrality. For instance, USDC allocates half of its income to Coinbase. Tether lacks official partners, while PYUSD operates essentially as a PayPal subsidiary targeting remittance competition. We aim to be a straightforward fiat-backed coin, minting one AUSD for every dollar deposited in a bank account. Our commitment from day one is to maintain credible neutrality and to expand a high-quality digital dollar network without competing against our clients. Our philosophy advocates for an open model where we share revenue with our partners utilizing AUSD.
Significance of Stablecoins in the Crypto Ecosystem
Stablecoins serve as a vital component of the crypto economy, akin to how money functions in any economy. In Asia and Southeast Asia, they provide a reliable unit of account in regions plagued by limited financial services and volatile local currencies. A common misconception is that stablecoins are purely for trading; they also enable wealth preservation, lending, and additional financial services. In emerging markets, they offer pathways that conventional systems fail to provide.
Challenges to Stablecoin Adoption
The main obstacle is regulation. Although businesses recognize the cost-efficiency and rapid execution of stablecoins, they lack clarity on legal and compliance structures, such as identifying licensed providers. While stablecoins have achieved traction in crypto-centric environments, substantial market potential remains untapped within traditional sectors such as cross-border payments and B2B transactions. I believe this marks merely the onset of an extensive twenty-year journey toward widespread acceptance.
Asia's Role in Stablecoin Trends
Asia is uniquely positioned to spearhead stablecoin adoption due to a high demand for cross-border transactions and a significant, yet unmet, need for access to U.S. dollars in trading, savings, or payments. The continent features a variety of countries, many of which are affluent yet experience considerable dollar demand. Southeast Asia, specifically, showcases a youthful, underbanked demographic eager for competitive financial solutions. With a smartphone, they can access appealing dollar-denominated opportunities like Aave and other DeFi platforms without requiring a bank account.
Comparisons with the U.S. and Europe
The primary distinction lies in access to U.S. banking institutions. In the U.S., financial services are readily available. Conversely, stablecoins fill an essential gap in Asia, proffering dollar-based financial tools to those devoid of access to conventional banking. Consequently, our focus is exclusively on markets outside the U.S. While Hong Kong offers a robust financial ecosystem, beyond that advanced market, ample opportunities arise to deliver superior financial products.
Future of Blockchain Payments
I anticipate a significant shift where most cross-border transactions transition to stablecoins rather than relying on the banking system via Swift today. Additionally, a substantial amount of foreign exchange trading will increasingly settle on-chain. We eagerly look forward to assuming pivotal roles in both of these burgeoning markets.
