Public Mint, a blockchain startup, will launch its first blockchain-based yield product in October – but using U.S. dollars instead of any cryptocurrency.
“We’re the opposite of Tether,” said Paulo Rodrigues, Lisbon, Portugal-based CEO and COO, referring to the stablecoin that the U.S. Department of Justice has found does not always maintain the dollar reserves it claims. “We run on dollars, for ‘normies’ [the general population] , not just for crypto people.”
That said, Public Mint is very much a blockchain company. It launched in 2020 with a payments app that provides instant cross-border settlement using Ethereum blockchain, developed under the Hyperledger Besu open-source program for enterprises.
However the company, which is domiciled in Delaware, adopted a model that is friendly to incumbent banks. It envisages banks serving as custodians while Public Mint creates a technology layer on top that can support a variety of services. Payments is the first; a lending function called Earn is slated to go live next month.
Dollars for DeFi
In some respects, this is rebuilding the status quo. One difference is that by putting dollars onto the blockchain, smart contracts can be used to program how they are used. Another is that dollars can be funneled into the kind of blockchain-based financial apps that do not exist in the traditional world, be they found on centralized digital-asset exchanges, or in the DeFi world.
Earn is such a program – designed as a “decentralized autonomous organization”, an organization that operates by coded rules – that blends returns from three underlying technology projects, such as Aave, an open-source protocol designed to generate high returns on short-term lending within the crypto space.
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Rodrigues says Earn should be able to provide users with annualized returns in the 6 percent to 8 percent range, whereas money sitting in a bank account will earn next to nothing.
DeFi investments are, of course, risky. However, Public Mint pools users’ deposits across hundreds of bank accounts in the U.S. which are government-insured, a mechanism it hopes will protect customers from hard losses. This is only possible because it operates in dollars, which banks will accept, rather than in bitcoin or ether, which banks won’t touch.
The Salesforce way
Rodrigues says Public Mint’s strategy for growth mirrors that of Salesforce.com, the giant cloud-based customer relationship-management service.
That’s no coincidence: the early backer and mentor to Public Mint is Halsey Minor, an early investor in Salesforce.com as well as founder of CNET, a 1990s-era pioneer in online content media, and other tech companies in the U.S.
“We’re following the same pattern as what Salesforce did for data, but we’re doing it for programmable money,” Rodrigues said. That is: build a core settlement system and begin to add components that attract users.
Earn, for example, is “low-hanging fruit”, Rodrigues said, that will naturally attract people looking for an alternative to bank deposit accounts. Over the next two years, Public Mint will roll out other services, such as debit cards, foreign exchange, and wealth products.
All of these will operate as blockchain financial services, but built around the U.S. dollar-based core system for settlements and payments, and which therefore is structured to carry out know-your-customer, anti-money laundering, and other compliance functions.
Where normies meet techbros
It also creates a touchpoint where “normies” looking for better returns for their dollars intersect with crypto players who crave access to that liquidity to continue running DeFi operations. And it creates an opportunity for open-source developers to come up with new ideas based on U.S. dollars instead of relying on Tether or other stablecoins.
The strategy’s success requires growth, however: the entire DeFi space operates on increasing liquidity. This is a reflection of the biggest weakness in the crypto world: that without support from income streams generated in the real economy, values of crypto coins or networks are dependent on the “network effect” – which critics of crypto equate to a pyramid scheme.
Rodrigues says Public Mint is launching features like Earn to generate those volumes. He expects it will eventually attract the attention of companies. Corporate treasurers have so far found blockchain-based payments difficult to manage, because they aren’t integrated with SWIFT or their banking relationships. Public Mint’s dollarized strategy might be the way to deliver the promises of blockchain finance without the hassles of crypto, Rodrigues says.
Public Mint’s marketing must mention the risks involved with Earn, but its overall thrust is aimed at mainstream users who are not aware or interested in crypto. The company wants to avoid blockchain jargon and complexity, and operate like a traditional financial account.
This approach puts Public Mint in competition with other corporate-backed projects, such as Diem, the anticipated stablecoin and related services backed by Facebook.
It would also have to compete should the U.S. government ever introduce a digital dollar, although Rodrigues sees this as an opportunity to serve as a technology processor for the Federal Reserve.
“Facebook is doing with Diem what we’ve been doing,” Rodrigues said. “But there’s a lot of space for people to operate, and the Fed would want to use more than just one technical provider [for a CBDC].”