Ben Errez was part of Intel’s startup team in the early 1980s, collaborated on the first PC with IBM, and served on the founding team of Microsoft Office.
When he says he’s developed a blockchain-based global payments system, it’s likely worth a listen.
Errez is the co-founder and chairman of GreenBox, a customized, blockchain-based payment solutions provider.
Those offerings serve as tollbooths on the payments system, with GreenBox providing them to banks, merchants, and governments.
GreenBox’s origins were in the weeds
Being early on the scene and having a unique vision has helped GreenBox carve a solid niche for itself, with 2022 volume expected to surpass $3 billion. Errez said he and co-founder Fredi Nisan have worked with blockchain technology since early 2017. They began looking at pain points in the space and what technologies could address those issues. Were suitable solutions available? Could they build some on their own?
Errez and Nisan focused on payments, an issue they saw with the fledgling cannabis industry. Banks longed to accept the industry’s considerable revenue but wanted nothing to do with the sector itself.
“That industry needed a solution,” Errez said. “And from our perspective, the solution was fairly obvious. This whole conversation needs to be digital.”
And by digital, Errez meant blockchain, whose benefits were clear from the outset.
“(Transactions) happen instantly,” he said. “They don’t have border references or business references. It’s always on; it’s always verified. It’s always accurate and 100% transparent, and we wanted to be in that business.”
CYN stablecoin offers unique design
GreenBox’s payment solutions include ACH, SEPA, credit and debit cards, and even cryptocurrencies. Soon joining that list will be Coyni (CYN), a stablecoin that supports international payments and processing, marketplace payments, digital dollar accounts, and soon high-yield accounts.
When developing Coyni, Errez and Nisan knew it would need specific properties, even before the Terra collapse. It had to be custodial, entirely backed by an element with guaranteed accepted value. Coyni is 100% backed by US dollars.
It’s also instantly audited, and that is significant, Errez explained. Popular stablecoins are audited weekly or monthly. Errez likens that to telling an air traffic controller about planes that landed yesterday.
The stablecoin must also be transactional. Immediately liquid, it needs to withstand a bank run. Errez said that is where USDC and USDT falter. Circle’s USDC is 61% backed by cash and cash equivalents, while Tether’s USDT is only 3% backed by cash.
Unlike most stablecoins, Coyni is centralized, which has advantages, Errez said. When decentralized coins travel in the cloud, they carry the value and address together. That makes them susceptible to hacks. Coyni only travels by address, with the funds still centrally controlled by a bank.
Coyni is also smart contract-based, which allows transactions to execute only when agreed-upon parameters. Should any issues occur, the contract does not have to be changed.
A critical point for stablecoins is fast approaching
Errez believes a stablecoin must reach a critical mass of at least $500 million to $1 billion in monthly transactions to be effective. And it better get there fast, as proposed regulations have the industry on a timeline.
“Once the regulations are final, or at least in a recognizable shape, the competition will be fierce, and we need to establish our foothold in this industry, probably within the next 12 months,” Errez said.
“And within the next 12 months, we need to be a critical mass. That means that the starting point should be as soon as possible. We intend to issue our Coyni 2.0 by the end of September, and by the end of 2023, we should be over that critical mass; we should be over $1 billion in monthly transactions.”
There needs to be more robust regulation, but those regulations need to work with the dominant market players to protect the nascent industry, Errez suggested.
“Nobody, not even us, wants USDC to go away; it’s just too big,” he said. “The USDC ecosystem is about $54 billion, and the USDT ecosystem is about $100 billion. You don’t want this much money to evaporate; that will cause many small investors to be battered.
“But I think the regulators should chart the path to a much stronger regulatory oversight in years to come. The regulator has to consent to principles that allow stablecoins to behave like regular currency. It’s a digital manifestation of printed currency. That’s its job; to do that, it needs to be custodial and transactional, and that has to find its way into the regulations.”
GreenBox plans affected by crypto swoon but not its ethos
Recent market woes have altered Greenbox’s plans but not their overall mission, Errez said. The original plan was to spin off the stablecoin in a SPAC or IPO, which is on hold until the market heals.
“The IPO market is down by about 90% year over year,” he observed. “The valuations are down by about 20% year over year on both SPAC issuances and valuations. Redemptions of very high market multiples are in decline. We have to adjust for all of that.”
One certainty is that Coyni will target the B2B market, which Errez said is nine times larger than consumer payments. At $120 trillion per year, it’s their target.
The shift to white labeling explained
GreenBox offers white label solutions because it makes sense in today’s market, Errez said. After the introduction of the Internet in the 1990s, banks initially said they weren’t tech companies and that people would always come to the branch. They soon pivoted to mobile banking as they sought market differentiation and a response to the customer’s desire for new technologies.
Three forces are pushing technology adoption, and adoption will happen fast if they all agree on its merits. Just as banking began its shift to mobile in the 90s, it is starting a similar move to blockchain.
“Consumer wishes are in line with that,” Errez said. “The regulator wants supervision of how money gets transferred, what type of transactions are being made, and where the source of money is. The merchants want it; they want the ability to access the money instantly. They don’t want to wait five days until the (bank) delivers the money. They want to be able to replenish their inventory right away.
“Consumers want protection. They want to have visibility into their spending to the fees they pay. Everybody wants to adopt this. So adoption will be swift.
Winning in this rapid market by building your tools is corporate suicide, Errez. Try and predict what the market looks like in three years, which is growing harder.
Companies opt for proven systems, given the adoption that needs to happen and the pace at which it needs to happen. If they fail, you move on to something else.
“I think you will see a lot of solutions, but they will be able to communicate with each other just like mobile banking,” Errez concluded.
Tony Zerucha is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.