Welcome to Future of Finance, where Fortune asks prominent people at major companies about their jobs, how their firm fits into the crypto ecosystem, and what this all means for how we use money.
Jose Fernandez da Ponte is four years into his second stint at PayPal, and to say the global financial landscape has changed since he left for banking giant BBVA in 2015 would be quite the understatement.
Now a senior vice president overseeing all things blockchain and crypto, Fernandez da Ponte, who’s also worked for Hewlett Packard and McKinsey, discussed why it’s vital for U.S. politicians to provide clarity on digital assets—and how, even with regulation by enforcement at peak levels, he still sees the whole situation as “glass half full.”
(This interview has been edited for length and clarity.)
You’ve held several key roles at PayPal. How would you describe this one?
I have the luxury of leading our digital currencies business, and we’ve been involved in that for the last—I would say in earnest—four years or so. We believe as a company that a significant part of commerce and payments is going to move to digital payment rails, and that’s why we’ve focused on digital currencies writ large—we care about cryptocurrencies but also fiat-backed stablecoins and central bank digital currencies.
Doing payments for the better part of the last 20 years, this is probably one of the first times that I see technology that can substantially redefine payment rails—cost, speed, programmability—things we couldn’t do before that we can do now. So that’s kind of the genesis block of why we got involved in the space.
What drew you, perhaps on a more personal level, to crypto?
I got into the space in around 2015, when I was working in banking, and the first thing that I was doing was trying to move funds from bank accounts in one country to a different country using one of the blockchain protocols. If you look at financial innovation, a lot of that in the last 20 to 30 years has been on the front end—user experience—but not so much on the way that money moves. When you’re able to do things that represent an upgrade on the traditional correspondent banking system, it really opens up a ton of possibilities. And that’s what got me excited.
When you're able to reduce that cost using this technology, then you can start to do things that you couldn't do before—you can start to do micropayments of cents without a fixed fee, you can start to open streaming payments, a channel between you and me for a fixed fee, and start to move value one way or the other. It’s a very exciting set of possibilities.
In the crypto world and the digital currency space, there is a ton of focus on the transfer of value from one wallet to another wallet. Part of what we bring into the equation, and where we think we can help, is that a payment is way more than just moving the value between two wallets. A payment is, in essence, the settlement of a contract, the settlement of a liability. And that means that if I send money to you to send me a good, I need to be able to get that money back if the good never arrives. There is a contractual component of a payment that goes beyond the movement of value between wallets. And that's where the programmability of blockchains plays a really important role.
I probably use Venmo or Paypal a couple times a week. When I talk to other people, many are like, “What’s the point of crypto if I can just use Venmo?” How do you answer that question?
That’s a very good use case, and—(laughs)—I agree with you, Venmo is a fantastic platform. But let me give you one example of something that you can do with crypto now that you couldn't do before.
As you know, we enabled on-chain transfer, so people on the platform have the ability to move crypto in and out of PayPal wallets, a year ago. And now, thanks to crypto, you can actually send value from a Venmo wallet to a PayPal wallet. There is a little bit of this fallacy in use cases, when people ask, “Why do I need crypto to do this?” or “Why do I need a blockchain to do this?” In many cases, it is not a requirement. There are other ways to do it. But this is a very effective way of doing it.
A lot of your work has had an international focus. When it comes to PayPal users overseas—everyday people more so than companies—how does the blockchain help them?
I wouldn't claim by any means that we are in mainstream adoption territory yet, but definitely we are a bit beyond that [initial phase]. People are going to be using it, definitely, and it’s going to be more useful when you have stable, digital instruments that run on blockchains. That's why we spend so much time thinking about stablecoins and CBDCs, and, basically, if you have a Bitcoin or Ether balance with us, you can use it to pay anywhere that PayPal is accepted.
In the crypto ecosystem, I do think that you will see cross-border ecommerce is a use case that we'll see more and more. Imagine that I am a consumer who's in a Latin American country and I want to buy from a merchant in the U.S, but I don't have a credit card enabled for international transactions. I think that we will see, in some of the specific verticals, that digital currency is a really good fit.
Can you talk a bit more about what’s next in terms of adoption?
Gaming is a good example—anything that is media related. And I think that we'll see adoption in business-to-business payments before we see that broadly in consumer-to-consumer payments. Imagine you are a midsize business in the U.S., and you have a supplier that is abroad. Your alternative today to pay them is that you need to make a wire transfer, and it's going to cost you 50 to 100 bucks. You need to do it 9 to 5, Monday through Friday, during banking hours, and that money isn’t going to be transferred for three days, right? Now, if you have an instrument where you have 24/7 availability, instant settlement, it's dollar-denominated, and it’s cheaper, that’s the rational decision. In a global context, I think that's where you will start to see more and more adoption of this.
B2B makes a ton of sense. Do you have any kind of timeline in mind for when consumers similarly embrace this tech?
If I had a crystal ball? Three to five years out. My hope is that in five years we will be in a place where maybe there’s $1 trillion in stablecoin-denominated assets. And when you multiply that by the velocity with which stablecoins circulate, you’re starting to talk about trillions in commerce volume that can be enabled. Really, it’s less of a forecast and more hope and intention.
If Congress were to pass any sort of crypto law, do you agree it would probably be something less spicy at this point—probably some regulations around stablecoins? And if that happened, what happens next?
I think that it’s super important that there is clarity on stable coins in the U.S.—just look at what is going on in the world. There is very clear regulation in places like Europe about what you can and cannot do in the stablecoin space. There is sustained progression toward clarity in places like the UK and Singapore and Hong Kong and Japan. The world is moving toward more clarity, not less clarity. And it is important that the U.S. is part of the team that you see in that market.
I do believe I am kind of on the “glass half full” part of the discussion here. I am relatively hopeful that we will see legislation that is passed for stablecoins in the close future. And there seems to be momentum in Congress. I think it is fundamentally important that there is that clarity in the U.S., because if not, there is a risk that the U.S. falls behind in this whole digital policy space.
Sticking with more macro-level themes, what comes to mind when you hear the phrase “future of finance”?
I think the most macro thing—stablecoins and cryptocurrencies are one flavor of that—is the tokenization of assets, different assets that exist in physical or traditional form. By tokenizing them, you make them easier to share, to fractionalize, to move. If you are an asset management firm, you might be thinking about how you can tokenize a money market fund. Or if you are an art dealer, how you can tokenize illiquid assets like art. Or if you are a company in the entertainment space, you're trying to figure out how to tokenize a physical ticket to get into a concert.
This technology enables creating digital representations of assets that wasn’t possible in the past. And in different parts of finance—from wealth management to banking to payments to remittances—the macro theme for me is the tokenization of all formerly liquid assets.
