Interview with Ran Goldi from First Digital on Diem, stablecoins, CBDCs

Ran Goldi founder of First Digital delves into one of the hottest topics – Diem, stablecoins, CBDCs

Recently, the Diem Association, formally known as Libra, the Facebook-led digital currency project, announced plans to launch a US dollar stablecoin by the end of 2021. Silvergate Bank would back the launch of the new payments network, and Diem would be providing the tech for the network.

As First Digital has already built the necessary payment rails for the Diem currency ahead of its launch, we sat with Ran Goldi, CEO of First Digital, to find out more about their platform and the implications of accepting stablecoins for the participants within the payments ecosystem.

Bitcoin/cryptocurrencies, Diem/stablecoins, CBDCs. What are the differences between these types of money?

Bitcoin, stablecoins, and other cryptocurrencies, generally speaking, are assets that run on decentralised ledger technology — most commonly a blockchain. But while Bitcoin’s price derives from the supply and demand across various exchanges, between its buyers and sellers, stablecoins take the same underlying technology but are pegged 1:1 to a specific asset, such as that of a US Dollar. This gives them stability, as their name reflects, and by extension, much more practical useability. Investors know that USD 100 worth of a stablecoin bought today will continue to be worth USD 100 tomorrow.

Central Bank Digital Currencies, or CBDCs, are essentially stablecoins issued and controlled by a Central Bank.

Diem is a prime example of a stablecoin; only this one is explicitly offered by the Diem Association to be one of the leading digital payment assets moving into 2021 and beyond.

Strictly referring to stablecoins, what are the benefits and risks associated (primarily for users and merchants) with the development and usage of these forms of money?

One of the most significant benefits of stablecoins is stability, as mentioned earlier. Speculative assets can be great for portfolios, but users and merchants require methods of transacting that don’t vary wildly every day. Because of its inherent volatility, it’s unlikely a merchant will focus on Bitcoin as a primary payment mechanism — even if many support it. We also know that people who have Bitcoin are not using it to buy everyday items. Diem and similar stablecoins provide confidence that these assets will perform identically to the currencies merchants are already familiar with.

A potential risk with stablecoins may come in the form of self-custody. Many options are available for storing digital assets, either on a mobile phone or personal computer, but not everyone wants to carry their bank in their pocket.

However, there are solutions. Just like in legacy banking, large sums of money can be held and protected by professional custodial services or banks with top-of-the-line security measures. For example, the Diem Association has chosen Silvergate, a bank that already has a history of working with cryptocurrency and who will issue and secure Diem upon its launch.

Overall, this means that while the underlying assets may be different, solutions for issues like the protection of assets look much like their traditional counterparts.

One of your visions is ‘for every merchant from around the world to be able to accept money without paying fees’. Does this mean you envisage a world where PSPs would be disintermediated by techs like blockchain/removing the middleman out of payments processing/use of digital currencies?

I don’t think there is any need to take PSPs out of the game, but I do think this technology stands to revolutionise the relationship between PSPs and merchants. Even with the rise of potentially hundreds of unique assets that can be used for payments, a properly set up PSP, using the right system, should be able to handle all of these and actually come out further ahead than they ever traditionally have.

Currently, merchants are charged between 2% - 8% on sales even before the money enters their bank account. One of the major promises of digital assets has been to bring these sorts of fees down substantially. There are also opportunities for many digital assets to offer passive rewards simply for storing them, which could open up new lines of revenue for businesses that regularly have reserves on hand.

There may yet be more interesting business models that could evolve around new currencies, but the major point is that PSPs and merchants both stand to benefit from an increase in efficiency and the promise of new income streams.

So far, crypto like Bitcoin and Ethereum have been used in speculative/investment transactions. What makes you believe people won’t speculate in Diem like they do with Bitcoin/Ether? How will user mentality change?

Because Diem is a stablecoin — pegged to a specific value — there is no speculation to be had, as they are used primarily for transacting.

Will the payment rails/API that First has developed, work only with Diem, or it will support other stablecoins as well? What if you would have to support the digital dollar and the digital yuan? Does politics play a role here?

Our payment rails are designed to ultimately support any and all stablecoins, including future ones and CBDCs. We’re starting with Diem because we feel it will be able to gain the most traction and become the first stablecoin to achieve mainstream adoption. But we do also plan on integrating a wide variety of other assets in the next few years.

As for which assets we choose to support, that is determined by the usage, regulations, and maturity of the blockchain and asset in question. When it comes to other sovereign digital assets, it’s all down to regulation; if regulation allows, we may choose to support that currency. Whether or not China’s Digital Yuan will be available to US customers will be up to the US Government, not us. We will simply ensure our system is compatible with local rules, wherever it is deployed.

Another value-added service First brings is around risk and fraud. In this case, what role will banks play?

We’ve built our identity check and fraud prevention system to the standard required or requested by the merchant. Banks play a different role and have their own risk checks. And we expect that role to evolve alongside regulations as banks become increasingly friendly towards digital assets, particularly in regard to digital asset custody.

As they do, we will adapt to match these policies so that we can continue to stay in line with what these industries require.

About Ran Goldi

Ran Goldi is CEO of First Digital, where he has been creating blockchain-related products and services since 2017, focusing on payment acceptance for stablecoins and CBDCs. Prior to establishing First, Goldi co-founded and managed an algorithmic trading company, acted as VP in a company he took public in the London Stock Exchange and acted as the head of IT investments for a private equity fund.

About First Digital

First Digital enables merchants to succeed in expanding globally and growing revenue through an innovative, global digital payments platform. From Central Bank Digital Currencies (CBDC), stablecoins, Diem, and more we are the first platform to provide reliable and interoperable payment means and trading rails for the evolving cross-border ecommerce market. For more information, please visit: https://www.firstdag.com/