Yield Bearing Stablecoins with Coinshift

[00:00:00] Tarun: So there are like 53 plus stablecoins that exist right now. But I think the main thing, if you see like no stablecoin is giving the yield to the user directly on the base asset, other than two stablecoins, Paxos, USDL, and the second one is a USDM by Mountain Protocol. So I'll talk about Paxos because we work with them.

They're putting the money into T bills, which is generating, let's say, roughly 4% per year, right, for the end user. And they're representing that interest rate through a rebasing mechanism with their stablecoin. You cannot just directly use USDL in DeFi. And what it gives to the end user is by just holding csUSDL, you get all the DeFi yield of USDL and you get all the T-Bill managed by Paxos by just holding one asset.

And you don't need to stake anything extra. You don't need to lock it. 

[00:00:48] Umar: Welcome to The Accountant Quits Podcast, where we help accounting and finance professionals learn how to manage a business using crypto. Today's topic is on yield bearing stablecoins. The extra steps needed to tap into DeFi protocols often intimidate web3 companies from putting idle capital to work.

Many of these companies hold large amounts of stablecoins like USDC and USDT sitting idle and earning no yield. 

Since the start of 2025, Coinshift is changing that. They're redefining how users earn passive income on stable assets through their liquid lending token csUSDL backed by U.S Treasury bills.

Unlike traditional stablecoins, like USDC, where users need to actively lend or stake to generate yield, csUSDL is designed to earn yield natively, making it a seamless way to put capital to work. 

If you've been following Coinshift, you know they've been a major player in on chain payments, processing over a billion transactions for companies like UMA, Aave, EtherFi, Perpetual Protocol, and more. 

And today I have the pleasure of welcoming back Tarun Gupta, the Founder and CEO of Coinshift to talk about the company's business model evolution, what this pivot means for the broader stablecoin market, and how csUSDL is positioning itself in an increasingly competitive space.

Lastly, if you're new to this channel, I'd really appreciate your support to help us grow by liking this video and subscribing to our channel. Now enjoy my conversation with Tarun. 

Tarun, welcome and thanks for making the time to be here. 

[00:02:35] Tarun: Thanks for having me. 

[00:02:36] Tarun: I highly appreciate it and I would love to dig deeper. So very, very happy to be here. 

So yeah, the listeners of this podcast will be familiar with you, Tarun. We spoke for the first time on the pod in August of 2023 and the title of the podcast at that time was how Coinshift reduces the admin burden when using Gnosis Safe around the whole multi sig experience.

So CoinShift, like I mentioned in the intro, you are still focusing on the on chain payment use case. You've today processed a billion dollars in payments. And last year, you also expanded into the accounting space with an MVP subledger product, which was expected to become Coinshift's first paid product, meaning keeping payments for free while monetizing the accounting layer.

But also in 2024, you shifted your focus on building csUSDL, this yield bearing stablecoin, which we'll dive into very shortly. Can you walk us through the decision to put the subledger product on hold and pivot towards developing csUSDL. What was like the key turning point for you? 

[00:03:49] Tarun: Yeah, for sure. So a bit of background why we decided to double down on the accounting and sub ledger space.

And then, you know, what happened last year and what are the learnings? So, so from the very beginning, when we started Coinshift, the thesis was to build an on chain treasury management platform. And the core parts of, the on chain treasury platform was always like payments. You have accounting and then asset management, right?

So the thesis was, okay, there is a Venn diagram, Coinshift sits at this intersection of these three layers. And when we actually became like super, I would say like a great traction in payments in the first two years. we were very confident. Okay we need to figure out the second link okay.

Whether it's accounting or asset management. And we did some sort of market research. And at that time, around 2022, and I gave this you know, internal presentation to the team. Okay. Let's double down on accounting. And because, at that time it was like a new thing in terms of like building like payments plus accounting in a single dashboard.

And it was like a lot of our users were using external sub ledgers. So our thought process was okay. If you use Brex today or any neo bank, you actually, you know, do all the payments, card payments, et cetera, et cetera, for your entire treasury. And then you automate your accounting directly through solutions like QuickBooks.

Right. So rather than we solve the accounting. We wanted to always automate it to the accounting solutions. So that was like the thesis. And then obviously you do financial reporting, et cetera. 

But once you go like very deep into this problem statement, you start understanding, okay, QuickBooks cannot itself, like calculate the cost basis.

And you need like truly native crypto solution to do crypto accounting and this problem is not that straightforward of comparing Brex to Quickbooks versus, you know, Coinshift, can automate everything to Quickbooks very automatically. So it's itself, it's, it's a big problem to solve. And we took a lot of time and engineering, you can say, to solve this.

And we actually. developed like a really solid sub ledger, which was combined payments and accounting in a single dashboard, with a multi entity structure. So, so that you can manage your like, you know, entities across the world in a single dashboard with rules and permissions. And then you will be able to sort of automate the cost basis and everything with reconciliation rules, et cetera.

 Right. So we developed our own even ledger system. If somebody is like a crypto native team, they don't want to use QuickBooks, they can use it, literally use our ledger system. 

And basically it was immutable and all the ledgering properties we've developed. Then what we realized last year when we started discussing about the pricing and all, obviously we got a lot of interest of, okay, we were very easily, we had run some numbers and even on the pre product side, we had some projections of half a million dollars of revenue just to be completely transparent on that front and even with the pre product stage.

Right. But then we hired the sales team and we started to think like more as a, as a company, okay, let's do the math there and then how big this can go, right. And, and the timing was changing. Everything was changing. I'm talking like literally last year now. So what happened is like when we did run the numbers and overall started thinking about increasing the price and all those things, we see a lot of friction.

In terms of actually making it as like a sustainable business, given our burn rate and overall, like running the company in a breakeven, even manner. Right. And even to get to the next step. And obviously there are like 10 plus solutions that exist in the crypto sub ledger space as well. Right. But the, the question is like, always we ask this like, okay, how big this can be.

Right. And when we started, we thought it will be very big, but it was like the major learning, the, the time of this market of especially accounting. In terms of number of organizations is not very high, right? If you really want to generate like tens of millions of dollars of revenue per year, it's not there yet.

And if it is there, the place for multiple players does not exist, right? So the time is generally smaller in that segment. 

Because our payments business is like growing in itself. We are almost touching like 1.5 billion in payouts volume. So that is growing. And in itself, it's growing and then customers are like very happy.

We have all the bigger attentions like last three years, customers have not churned and, and we were like very clear. Okay we have found the PMF in terms of sticky customer, right. But whether you can monetize that to the level to make like a sustainable business, we were not there yet. And that's how the research for the last leg of the treasury management, which is asset management started, right?

And then obviously after going very deep into the rabbit hole of, of what can work in the asset management space, I was like, okay, let's, let's see what, because this time we didn't want to only solve the PMF. And acquire the customer. We wanted to solve the business model as well. So that it becomes like a, you know, billion dollar business minimum, right?

So, so that was like the angle and that's how we, we saw, okay, like stablecoins, like in last Feb 2024, we were able to sort of figure out, okay, stablecoins. We're just getting heat, not only in terms of payments, but they have a really smart business model, which we will discuss and, and this sort of give me, you know, this kind of insight. 

stablecoin is itself it's a small bank running in itself. Right. You can embed compliance in the stablecoin. You can have a lot of reserves, which can earn money for you as a business. And still the user can utilize that. And obviously there are like, you know, very creative ways of how you can make money with stablecoin. But end of the day, user is like, okay, using it and, and still you can make money and even you can pass that revenues to the user as well.

Right. So we were very clear. Okay stablecoins is one of the use case which has PMF. And it has a right business model as well. So no, nothing other than that was fitting into, into that, plus the TAM also. So not only like, okay, you have a business model, you have a PMM, but what is the TAM of this?

And then we realized it's like, just getting started. Obviously there will be a huge amount of competition, but we are well positioned because we work with the largest treasuries and we are well positioned to really spend like next decade to, to become like a larger player in that game. So that was like the rationale sort of

 say to, to focus on this. We have not completely like defocus the accounting area, but obviously our priority right now is csUSDL. 

[00:10:27] Umar: I think also based on some of our previous conversation, you never really wanted to charge for the payments product. We did see companies like Utopia Labs, Multis, we've seen their demise as soon as they wanted to like monetize their product.

Some of the projects around payment, they monetize through like their compliance features, certain features around workflows, things like that. Right. I think that was always very strong idea for you not to monetize like payments. 

[00:11:01] Tarun: Yeah. Yeah. Yeah. Payments. Actually monetizing payments is just hard actually.

 We were actually very, very clear, like never to monetize because the movement of money cost right now in crypto is just negligible, right? That is the value proposition of USDC actually. Right. And if you start taking like percentage of that then what is the difference between that system versus like the banking system, right?

So users understand that they have alternatives And they will not pay they will just tag the transaction to your system but they will not pay for as a percentage because there is a free solution out there, right? Which is Gnosis Safe UI. 

So we never considered Gnosis Safe our competitor. But when it comes to money, like you charge, obviously people will move to that.

And we were very clear. We never tried to be honest. And we were also very clear. If you do that, you are on a death path, to be honest. So yeah, it is like a wrong move to even charge payments. 

Unless you are actually solving some of the compliance problems like Deel solves in the payroll space, then you need to think about employee compliance.

And so, so bottom line is whenever you are managing the risk for the company, right. And risk can be defined in many ways or really like high class compliance for the company, right. You can charge it. So this is an edge to charge, but then the question comes, how much you can charge, right. So yeah. Then these are like open questions.

[00:12:24] Umar: I agree. Now to start our conversation on stablecoins and before we dive into csUSDL, I just wanted to give the listeners a clear understanding of how stablecoin issuers actually make money. So if we just take Circle for example, maybe the most simple one, their business model revolves around issuing USDC in exchange of USD cash.

They generate revenue by investing that cash, collateral in TradFi instruments and primarily U.S Treasury bills. Now, USDC itself, it's not a yield bearing stablecoin. If a user, they want to earn a return on their holdings, they have to lend their USDC some DeFi protocols like the Aave or Morpho of the world, but that's an extra step.

Again, that's something we'll pick up later with csUSDL. So beyond just earning yield on that collateral, what other revenue streams exist for stablecoin issuers? 

[00:13:23] Tarun: Yeah, it's a fun thing. I want to double clarify for the listeners about Circle and USDC and I really want to give like a big shout out to them, like why they don't pass the yield to the end user.

So what they, what Circle is optimizing is like they're representing the money use case on blockchain, right? Which is like putting dollars on blockchain and putting all dollar properties as money on blockchain right. What does it mean as I can move money at any given time I can go in and out of that money, right, very easily. 

So, so the more you want to enable those like in and outs like mints and redemptions at scale, you cannot actually invest the underlying reserves into many things. So if you really want to enable like higher redemptions, how will you do that? You need to be backed by reserves all the time.

And that's why generating yield is not very straightforward. Whenever you are generating more yield, your system becomes illiquid, right? And the more it becomes illiquid, it will affect the redemptions. So if you go to Circle's website, you will see they process a lot of redemptions. You see their last three, seven days of redemptions.

And they intentionally show that, right? Because they want to solve the money use case. They want to win the trust of one simple thing. It's a better money, which is fast, cheaper to move. So, so they're not solving the yield use case just to be more and more precise. And then the question comes like, how will you, how will you generate revenue?

Because if you are keeping everything one is to one, right, you will not make money. So that's why they have like reserves, into, as you know, into short term treasury bonds and, and US securities and repos, and, and from there, these are like very highly liquid assets. Within one to two days, they can process all major redemptions.

To be honest, all these class of instruments are super considered to be super secure than even bank accounts, to be honest. So it's like. Your TBills cannot get that easily default, right? By, by US right? Fed can always jump in and do that picture. So that's why they are not giving that yield. And that's why users can do a number of things to generate yield, but it is not Circle's responsibility to be honest, right?

Their, their main game is like, okay, you have one USDC will make sure you'll get one US dollars out of that. And there are other business models. I think they might be doing. I'm not like 200 percent sure. So they have Circle account. It's like they're almost payment infrastructure, right? So once you get like Circle account, you have in and out into USDC at large volumes.

And, and there is a fees. Because whenever you're moving money into dollars, you need to pay fees. So there is like a redemption charges. It changes every other year, to be honest. So last time you talked, I think it was like 10 basis point above when you want to move above like 15 million per day or 10 million per day.

So yes, like for a large institution, they might be paying that fees and they might have some enterprise, sort of solutions as well. Where they, they might be making money, but primarily I think their revenue is from coming from treasury bills and, and it is enough because they're, they are like 2 billion market cap, right?

Even 10 percent of that will give you a lot of to make it sustainable. But for other stablecoins like USDT, they are not only putting the money in the short term treasuries and highly liquid assets, right? They are putting money in silver, metals and other areas as well. I consider them like a bank.

Where, where, they're keeping the reserves. Obviously you can audit and all that. I don't wanna comment, comment it, I dunno about it, to be honest, right. How the reserves are managed and who is auditing it. But the main thing is like if you see their transparency report, it seems they have a pretty diverse strategy in terms of making money.

So end of the day. Can you redeem all the assets to US dollars? I don't know. But when you see the reserves, their reserves are definitely over collateralized, but it is not like dollars, right? Or cash equivalents. It is all kinds of assets you can imagine. So this is another model and that's why stablecoins need regulation.

And, and right now the, the White House is just implementing the stablecoin bill. But if you, if you talk about like Abu Dhabi or Singapore and even MiCA right, they are starting to have like clear regulations around stablecoins. What you can call a stablecoin versus you cannot. And that's how the business model will be much more clearer.

Okay. They can only put money in these kinds of reserves, which have, let's say, double negative credit rating. So generally reserves is one way to generate, like revenue, then you have enterprise plans, et cetera. 

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All right. So now that we've given the listeners like a brief overview of how stablecoin issuers make revenue, could you tell us what is csUSDL on a high level? The meaning of a liquid lending token, I introduced csUSDL as an LLT in the intro of this podcast and why at Coinshift you decided this was a business opportunity worth pursuing.

[00:19:55] Tarun: Yeah, sure. So, so there are like 53 plus stablecoins that exist, right now. And, it's like more to come, I would say more power to everyone. But I think the main thing, if you see like no stablecoin, is giving the yield to the user directly on the base asset other than two stablecoins, which is one is Paxos USDL.

And the second one is a USDM by Mountain Protocol. I'll talk about Paxos because we work with them. So they have launched a stablecoin out of Abu Dhabi. Which has like very strict reserve requirements. You can go to the white paper of Lift Dollar like USDL and you see like the reserve requirements of USDL right?

They're putting the money into TBills which is generating, let's say roughly 4% per year, right? For the end user. And they're representing that interest rate through a rebasing mechanism with their stablecoin. So USDL. So one USDL will always be $1, but through rebasing they'll represent the yield. It means you'll see USDL will grow in number. So today you have one USDL, tomorrow you can have one point something USDL, right? So that's how they have innovated on the base layer, right? Because they are helping you to, to use a stablecoin, but actually it is redeemable, to 1 dollar but it is also giving you extra yield.

And the risk profile is exactly same what Circle is doing. If you practice, 

[00:21:20] Umar: sorry to interrupt you, but why should anyone use Circle at this point? Why should we just not use USDL? Yeah. Well, yeah, 

[00:21:30] Tarun: It's a, it's a beautiful question. The big question, the big thing is like, USDL is not regulated out of, you know, as a US citizen, you cannot do it.

And there are some other restrictions in certain jurisdiction because of passing the yield like this is not regulated because it is almost disrupting the banking model, right? Banks do that. So right now it is regulated out of Abu Dhabi and, and it is generally available for majority of the countries.

But the main thing is generally, our users have entities in Caymans and offshore entities, right? They can easily acquire USDL as a business. So in crypto, it is very common to have like entities other than US, and there is no point, right? If you're a company, why are you holding USDC? Just hold USDL. And then I'll say, why USDL you should hold only csUSDL because that is another layer on top of it.

[00:22:22] Umar: So USDL, like just to compare and contrast with USDC, Circle for example, if they would invest those collateral in Tbills, they would keep 100 percent of the revenue generated from the Tbills, but USDL, their value proposition is instead to pass a portion of those revenue to the end user. 

[00:22:42] Tarun: Yeah, they are majorly passing, I think more than 90 percent of that and it is written like the yield will directly pass and there is some management fees.

So they're running it like a fund. Where they have like a management fees and a distributor fees. So Coinshift is more of a distributor, which we will discuss. So they're the issuer. They'll keep the management fees, pass the yield to the user, like a yield, interest rate, and, and then they have distribution distributor sort of mechanism where they will pass some of the management fees to the distributor.

So they have innovated all these things on their level first. And it was a new stablecoin was launched in like June. And we have been in touch with Paxos since last Feb when I started to sort of figure out this stablecoin game. 

[00:23:24] Umar: Okay. So you spoke about Paxos. You're also collaborating with other partners like Steakhouse Financial and Morpho protocol for USDL, what's the role of each of these companies and also what's the difference then between USDL and csUSDL? 

[00:23:40] Tarun: Exactly. If you understand now USDL, so you cannot just directly use USDL in DeFi. Basically think of it as like it's a rebasing token and, if you want to do lending and borrowing against it, like it cannot work. Like the supply is changing.

 The LTVs will affect all the time. So, so you need to have an accumulating token, which has just changed, uh, the price, not the supply. Right. It's a very similar concept to what stETH does with the Wrapped stETH version. Right. So, so they have WUSDL. So what we decided, our unique concept was, okay, what is the best stablecoin out there, which gives you a very good yield, which has like a yield, which is sustainable, you can say.

And at the same time, it is very solid collateral backed, right? So if you compare, now, you know, MakerDAO, basically has DAI. And to distribute the yield, it has sDAI system, which gives you the entire borrowing yield of the Maker vaults. And this is like a very native way of generating yield. Forget about treasuries and all.

So literally through BTC and ETH, you can mint a stablecoin and you can earn yield on top of it. So this concept was very fascinating since very early days to me. And on the other side, you see MakerDAO is going more and more into RWAs and TBill backed assets. Why they do though?

Because of the stability factor and regulatory factor, right? But still the generation of yield is majorly happening through crypto collaterals, right? So we always wanted to mix these two concepts, like how will you make sure the end user gets the minimum fee TBill rate all the time in the idle assets, plus the lending yield, very similar to a MakerDAO concept.

So what we are doing then as we are taking that WUSDL, we have created our own Morpho vault with Steakhouse Financial, they are the risk curator who is managing this vault with us and we are lending WUSDL Into stETH, cbBTC and couple of others, RWA collaterals will come, right? 

And what it gives to the end user is by just holding csUSDL, you get all the DeFi yield of USDL almost, right?

And you get all the T-Bill managed by Paxos by just holding one asset, right? You don't need to stake anything extra. You don't need to lock it. And, and why? We are calling it like LLT, because it's a lending position. It's a vault receipt token end of the day, right? So this concept we have borrowed almost from EtherFi, you can say so.

So, so what you're doing is essentially you're taking WUSDL, putting into the Morpho vault. And then once you get the csUSDL , it's a vault receipt token, which represents your position in the Morpho vault, which is USDL lent out to cbBTC, stETH, right. 

That's a very unique way to think about a stablecoin backed by Tbills and cbBTC and stETH end of the day and managed by Steakhouse.

And obviously like the owner of this vault it's a multi sig between us, Paxos and Steakhouse Financial. And from there, I think if you create a lot of primary liquidity against csUSDL and redemption liquidity on the secondary and primary side, then it becomes like a token and a stablecoin in itself.

So it's like a very unique way to lock like a stablecoin on a lending protocol, with the T bill backed stablecoin under the hood. So it's a new concept and we are almost the first one who did this and we're very excited, to build this. We are almost at 21 plus million dollars in the last 45 days.

So we are pretty, pretty excited for csUSDL. 

[00:27:11] Umar: And what would be like the user experience of, going on the Coinshift website, minting csUSDL, the expected return. Is there at the moment, any locking period or. Yeah. 

[00:27:24] Tarun: So it's, it's a permissionless asset. if you want to generate yield, around like right now, it's roughly 7%.

Sorry, 7% yield native yield ,right. It's a very sort of low conservative risk strategy. We are running there because as it's USDL and, and only blue chip collaterals we are lending out. So, yeah, I think the process is very simple. Actually, you can go to like Paraswap and you can directly swap from USDC to csUSDL.

We have done the integration there. You don't need to come to Coinshift. It's a permissionless way. So the other factor I wanted to tell is majority of the stablecoins, which gives you yield, like treasury bills and all that. They don't have a permissionless way to do it. So Paxos innovated on, on that as well.

Right? So you don't need to talk to Paxos to acquire USDL. You can go to the Curve pool and all. So similar principles we have done for csUSDL, you don't need to talk to us. It's a permissionless asset, so you can directly do through, Balancer. We have a 5.5 million pool there, which is actively managed.

By one of the largest market maker in the space. So we are doing that pool to 20 million very soon. And you'll be able to sort of swap in and out anytime you want to be honest. 

[00:28:31] Umar: So yeah. So Paxos, yeah, basically to summarize for the listener, they allow anyone in the world in a permissionless way to have access to US TBills with just like 1 Dollar, you can buy like a TBill in a permissionless way. 

[00:28:46] Tarun: Yeah, yeah. That is the magic. And it is not available for US and a couple of other countries. You can see the disclaimers there. 

[00:28:53] Umar: Oh yeah. Now, as per their website today, I was seeing that Paxos powers four different types of regulated stablecoins, including the one you mentioned, Lift Dollar's USDL.

Could you walk us through the regulatory constraints of these different stablecoins and the licenses required by Coinshift to be a minter and issuer of csUSDL, if any? 

[00:29:15] Tarun: Yeah, sure. So, so from the Paxos side, I think they are managing the entire compliance for all their stablecoins, jurisdiction by jurisdiction.

So for example, they have USDP, which is regulated in US. they have a PayPal, PYUSD out of US again, and they have a USDL from Abu Dhabi. They have USDG, like a Global Dollar, built with the Alliance Network, of Anchorage and a couple of other distributors, you can say partners. This is a regulated out of Singapore.

So, so they, they actually work with the government. The best part about Paxos is like their infrastructure company, which works with the government, to regulate these instruments. 

And there is a reserve requirements and everything and how, how to do it. So it's not like, okay, I have a money transmission license and I can just run a financial service and I can maintain any reserves under the hood.

It's not like that. It's fully supervised. Obviously things can still go wrong, but you are betting on the government of these jurisdictions, right? You're not just only betting on Paxos. So it's a very different way to regulate systems. So this is their part. 

To actually issue csUSDL, it's a Morpho Vault receipt token.

So it is fully, like on chain. we don't need to have any as such licenses, right? Because you can acquire Paxos USDL first through a regulated manner. If you want to do KYC, KYB, they have all the licenses here. And then, you can mint a csUSDL through Morpho actually directly. But obviously, we are going to work in certain jurisdictions where you will be able to sort of move large sort of fiat assets directly into CSUSDL and might regulate as a financial services because end of the day, everything is happening onchain. So csUSDL is not regulated. The USDL is regulated, but csUSDL is fully backed by USDL, right. 

[00:31:05] Umar: Got it. Very clear. Now there's so many emerging stablecoins, even though the market supply is still very largely dominated by USDC and USDT. How is, I mean, you already explained that csUSDL is a yield bearing stablecoin, but how do you see csUSDL position around USDC and USDT and what will be the main use cases for of csUSDL versus USDC or USDT? 

[00:31:33] Tarun: Yeah, yeah, sure, sure. So we are not focused on the money use case. So we see USDC as the strongest player and continue to be the money use case. Everyone think about when, when USDC come to mind, it's like, it's my money, right, onchain. So we're not competing on the money use case. What we are competing is on the yield use case where 100 percent of your treasury is not moving all the time. If you are a business or you are an individual practically, or if you are an institution which is keeping like billion dollar balance sheet, right?

You will not move entirely. So can you provide a stablecoin which promises to give you a regulated stablecoin under the hood. And it is highly liquid in the market with a very low conservative risk strategy. That was the sort of thought process. And if you're really successful in that, it means these like billions of dollars, which are sitting idle in the balance sheet we can replace that with csUSDL like asset. 

And the fact that csUSDL is a, is a very solid asset, you can borrow USDC against that if you don't want to accept it. So this is a very unique thing with sort of our asset, the vault size we have, like you can actually, you know, borrow USDC against that.

It's already live so on the Morpho markets and you'll be able to borrow it, right. So imagine now, like I have like $10 million in csUSDL, I borrow 80% of that and I can do whatever I want to do with my USDC right, for an entire year. And I do some obviously borrow rate. I, I need to pay that, but I'm earning yield on a hundred percent of my position.

So think about about like a large market maker or a large institution, their cost of capital is very, very high. So they're not gonna only come for like 7% yield or, or something, right? They can always borrow back. So it is a highly redeemable. So our redemption is not only like swap, our redemption is also borrow against that, like US treasuries.

So that kind of concept we wanted to introduce is like a, it's a collateral asset and it's a safe collateral to use in your balance sheet. And whenever you want to exit, don't exit. You can just borrow against it. You can borrow for a day, you can borrow for an year, right? So it is a highly liquid asset.

What's the boring cost for USDC for example? 

So right now it's like, running at like 10%.

[00:33:54] Umar: Yeah, it's like an effective 3% borrowing cost? 

[00:33:58] Tarun: It's an effective 3% exactly 3% borrowing cost. And easily I think these, these institutions are making more money and even if they borrow plus put back into, let's say Fluid or, or some other like area, they can cut down their borrowing cost as well if they don't have anything to do with the USDC.

So I think it's like an option basically. You don't need to do it. We don't recommend to do it, but we're making it liquid for you right now the cap is $10million. The cap to borrow is $10million, once it is filled out. So $1 million is already filled, uh, right? So once it fills out, we'll make it more open.

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Now, it's not even been two months since csUSDL has been launched. It's been launched at the start of Jan of this year. I want to ask you so far, what have been the main, the biggest challenges, let's say in growing the adoption and how do you plan to scale liquidity in the upcoming months?

[00:36:30] Tarun: Yeah, that's a great question. I think the real challenge is like, you know, all these thesis is great and all that, but end of the day, it's a small, like you're just getting started, right? So you're a, you're a stablecoin project, which is getting in the bootstrap phase. And the, the kickstarting is like very, very hard because, you need to redeem it, right. 

People will ask for the redeem, but if you are giving yield, how will you redeem it, right. So it's just a chicken and egg problem. And we have done like more than three months of work before launching all this to actually make sure people can redeem it, right. That's why we have 5.5million of pool.

So for a 20 million size pool, 5million is a big secondary liquidity on day one, to be honest, right? So, so imagine once these two things will increase. So the real challenge is creating liquidity of getting in and out, right? This is very hard problem and it seems easy from outside, but it is the one of the hardest part in a bull run, especially right now.

The market is leveled down, but. Two months ago, the cost of USDC for your pool is so expensive. You cannot even imagine. I cannot give the numbers here, but it is not something rational, right? It is next level expensive. And, even if you want to really burn your tokens and give a lot of tokens still, it is very, very expensive.

So when the bull run is high. The cost of capital becomes so high for all the LPs to create a secondary liquidity. It's a challenge. And that's why we are working with Balancer. We are like almost one of their launch partners for their V3. It is a very beautiful concept how we bootstrap the pool with them.

So yeah, I think it's, it's one of the challenges. I'll still say it's like mints and redemptions at scale. When you are starting out, when you are doing the due diligence. With these institutions, the first thing is like, okay, how much I can exit, right? And nobody wants to be the only, player basically in the beginning.

So I think these are like clear challenges. 

[00:38:19] Umar: And also the other challenge is perhaps internally for your team. I mean, you were building completely different product. I know you're very well connected in the DeFi ecosystem and you personally have been driving this project a lot, but internally with your team, how has it been to pivot and have people move from building one product to another?

[00:38:41] Tarun: Yeah, I would say like 2024 just to be like more honest and it's been painful, right? It is very stressful, in terms of figuring out, the, the entire stablecoin thing, but at the same time taking some hard decisions of pausing the accounting product because we have invested a lot of money plus energy and our pipeline was very good in terms of the customers.

So saying no to them, it's a, it's pretty hard damn thing. So yeah, it's been challenging, but the end thing is like, you know, what still helps is actually when you see. For example, we recently announced our, our, partnership with GSR, right? So they are one of the largest market makers. They, they put like some money, like good money in, in the balance sheet.

You see these, these players using your product, it gives like a lot of satisfaction and everything is worth it. So yeah, it's been challenging, but I would say like, you cannot trick sort of business. These are like. free markets, right? If you don't provide something useful, people will not use you and not pay for it, right?

And now the business model of Coinshift will become so smooth in terms of will charge the performance fees. So if you make money, we'll make money simple, right? So now we don't need to convince you to pay us and do all those like, you know, SaaS models and all that. Obviously I'm not against that. You can compare it, right?

So it's a very smooth business model. It is very scalable. It is very big TAM as a business. The upside is like very high. The challenge is also very, very high, to be honest. 

[00:40:11] Umar: Now in the upcoming months, or you're currently also working on the launch of the Coinshift DAO, and there'll be the native token of the DAO, the SHIFT token, which will be a key part of aligning the incentives within the ecosystem.

From what I understand, SHIFT will play a role in governance, rewards, and potentially capturing value of performance fees from minting activities. Can you break down the core value of the SHIFT token, how it fits into the broader Coinshift ecosystem and maybe what role it will play with csUSDL? 

[00:40:47] Tarun: Yeah, sure. So currently if you, if you go into the vault parameters, right, when you configure this vault. So our stablecoin, end of the day, it's a vault token. So the security of this vault is who controls this vault, right? Who is curating it. And, and obviously there is a permissionless Morpho market. So Morpho protocol does not control it, but there is some dependency very clearly on the curator and in the honor of this vault in terms of charging the fees, et cetera.

Right, so this part is owned by us, Steakhouse and Paxos in a multisig, which is three out of five. We are public about it. There is no problem in that. But once this becomes like a billion dollar asset right which is a risky thing to, to only rely on, on three out of five, multisig, right? Still, these are three independent entities.

So you can trust all of us. But obviously, we want to decentralize that part slowly, slowly, so that you'll understand like what kind of asset you are interacting of such a large vault size, right? Once it becomes big. So that is like the core use case of, of our governance first is to control the stablecoin and CS focused assets.

So USDL is csUSDL. We are creating like a SHIFT protocol. We'll be sharing like the, the white paper, soon. So what we are building with the SHIFT protocol, it's like a interest rate kind of mechanism for, for our user base. And it's a very beautiful like hyperbolic curve and all that we're doing for the reward system.

So it's end of the day, it's a reward and governance system, but actually helping you achieve basically your cost of capital very, very efficient in the market. So that is like the goal of the token. But governance is the number one use case and there will be some difficulty factors and parameters for the logic of the goals of the csUSDL TVL, et cetera.

So governance will be happening there. So we're working with Aragon there. It's a itself it's a new way to even think about the management of decentralized stablecoins. How will you issue and maintain and grow? It's a new paradigm you want to introduce with each SHIFT. 

[00:42:45] Umar: Tarun, we're slowly heading towards the end of the episode.

 There's two last questions that I want to cover. The first one is about the future of Coinshift. Now, I know you've been very close with the GnosisSafe community from the very early days and Coinshift is built on top of Safe. I was looking at the URL for Coinshift v2, so for me to access the payments product.

It's still beta.coinshift.xyz. The current URL to access the yield Bearing stablecoin product is coinshift.global, right, if I'm not mistaken? 

[00:43:21] Tarun: Now, I want to ask you, what's your vision of bringing these two products together under one single, user interface?

[00:43:29] Umar: And, yeah, what can we expect from Coinshift in the upcoming months and years? 

[00:43:34] Tarun: Yeah. Yeah. I think the long term vision is very clearly, still like becoming the Brex for, for crypto, right. 

 So it should have all the pieces you want to look in your onchain Brex or, or Mercury, for example, like all your neobank onchain.

So what do you want, right? You want payments, you want, treasury management, you want asset management. So if you go to Brex today, like, you can put 80 percent of a treasury in Tbills. Just with a few clicks, right? And they, they automate your accounting. They manage the expense management, everything they do in a single dashboard.

So the vision stays very, very same. I think the crypto market just moves in a very different way. So we want to navigate based on the market demand. But the end version in like a decade or, like next five years, definitely we see when it comes to onchain treasury management, you have payments, automated accounting, and, and full asset management, to one single dashboard.

So csUSDL will be deeply integrated into our B2B platform so that when you're seeing your portfolio, you can see I can go one in one click into csUSDL, my USDC. I can borrow against that. I can sell it right whenever I want. So, so same experience, like Brex tries to give for Tbills, but much more sophisticated in terms of more native to DeFi.

But the only difference between Brex and us will be like, we are the owner of that stablecoin. So we're not only providing you the yield bearing systems or Tbills through some partner. We are owning the asset and that is totally possible through DeFi and through crypto, right? A company like us can own this kind of asset by working with partners.

[00:45:08] Umar: Now, this is the last question I want to ask you before we go, Tarun is you mentioned 2024 was a painful year and, you've been building in the crypto space since 2017 from your early days on the Bitcoin Lightning Network to social key recoveries and then you co founded Coinshift, evolving it from just payments and now launching csUSDL. Looking back at your journey as a Founder, what were some of the biggest lessons you've learned, whether in navigating market cycles, building product market fit, or, yeah, making tough strategic decisions?

[00:45:48] Tarun: I think the,  the number one thing, to be honest, it's a constant learning, right?

So nothing is like fully concrete, but obviously I can give my last year learning specially. So when you actually think, let's say you want to build something big, have a very big vision, right? I think it's all great, but crypto moves almost at lightning speed in terms of innovation at all fronts, all the time.

Right, because the money comes very fast, if some narrative is coming and the money pumps up very fast and the cycles is like crazy, right. So, so obviously the iteration cycle, if it is very, very big, then the biggest learning is have enough capital to sustain your vision, right. So most of the projects and some of our competitors and others, I will say is the hard part is like, you know, when the market is great.

You just see, okay, the money is pumping and anyone can fund you, but that is not the case even after three months. 

In just three months, the game changes. And I'm very clear on like one example, right? Two months ago, just see what was happening with the meme coins and now nobody is talking about it.

Everyone is talking about fundamentals again, right? When the market is down. So things change so fast, right. And if you're really passionate on some problem, have enough runway to, to reach there because it's a long marathon. it's not like a two year journey where, where you think short term.

And obviously you don't need like capital for 10 years, but at least try to have a good capital of, of three to four years at any given time. So that after you find the product market fit, obviously in the beginning, it's just too much capital also destroys the thinking. So balance that capital. That is like my biggest learning and we're able to survive because of that actually, because it's just hard, right?

You, you think something will work and in two months things change and customer base change. Sometimes the customer base is out. 

I'll give you one more example. Last cycle, when we raised, there were 600 DAO tools for 300 DAOs almost. Right. And even if you are just starting a DAO tool, people were raising at $160million valuations.

Right just starting, Because, okay, we have raised or a couple of other players like Utopia have raised from large funds. So every new player is getting money because everyone feels, okay, if Coinshift goes to X valuation, somebody will be an X percentage of that, but the entire market just wiped out.

Right. If you see in the last two years. So, so just be, be cautious of these parameters. Plus other thing is that is like, just to go like super deep into, into the persona and user base, because crypto is getting mature, it's not now you will do some narrative thing and then do some crazy marketing, while paying to everyone. And you will have users. It's not that time. 

People are really getting mature, especially in DeFi. I was like fully wrong about the user base for a couple of months. Like it is very, very professional user base and very intelligent, I would say. And, you just need to like dig very, very deep and, and build something like that will shine with them.

So, so yeah, just stick close to your customers as much as possible. 

[00:48:57] Umar: And do you have any specific resource or maybe close circles you've tapped into that have helped you as a Founder. 

[00:49:06] Tarun: I think, working with Steakhouse has been like a pleasure, Sebastian from, from Steakhouse I consider him like one of the smart person out there to actually understand banking and, how banking works.

So for example, I never see banks as balance sheets. I never see banks as risk management layers, right? So through his articles and all, and it is a very smart person to be honest, who, who connects me all the time if i'm thinking wrong, so obviously and then Balancer team And and their documentation and all. 

If you really want to understand DeFi I would highly suggest to go through like cryptobanking.network or if you want to Sort of understand AMMs obviously Balancer did like a great job in explaining like all these concepts. And for lending and borrowing Morpho as an obvious documentation, these four or five resources as a Founder in DeFi, you should actually go in depth, right?

You should know all these resources, AMMs, lending, borrowing, and crcryptobanking.network. I think these three, almost go like very deep all the time. 

[00:50:12] Umar: All right. Very cool. Well, I'm looking at the time Tarun, we'll have to wrap up. Thanks again for the second episode. I also want to take the opportunity to thank you for the ongoing support at the Crypto Academy.

 So for the listeners, Tarun has been with us since the very first cohort and yeah, we wouldn't have done it without you, Tarun. You've been of immense support. Just to wrap up. If people want to reach out to you, they want to learn more about Coinshift. Where should they go? 

[00:50:41] Tarun: Yeah, Reach me out on Twitter on my Telegram, @tarun1475.

So yeah, I think it works. My Twitter is @tarungupta1475 and my telegram is @tarun1475. 

[00:50:53] Umar: Perfect. I'll be sharing those. Well, thanks a lot Tarun and hope to see you very soon. Perfect. Thank you, sir.