The blockchain is for more than just cryptocurrencies, but how can banks best put this technology to work?
Zack Bishop from Synovus Financial, a one-time crypto miner, is with us to talk about the blockchain and a new stablecoin project that his bank is part of.
A few takeaways from the conversation:
- Banking modernization is coming fast, leaving little room for an institution to hang back and then be a fast follower.
- He says the stablecoin is mostly an infrastructure project to help incorporate the blockchain down the road.
- Working on the stablecoin has Synovus’s innovation teams thinking of themselves like fintech upstarts.
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Below is a full transcript of my interview with Zack Bishop.
Zack, could you give us a brief introduction to Synovus for our listeners who may not be too familiar with who you are?
Absolutely. Now let me even provide a little bit of background also. We’re a $57 billion bank headquartered in Columbus, Georgia, primarily in the Southeast. (We) look like many of our peers – our services span the gamut from commercial and consumer to investment and mortgage services. In 2012, Synovus went through and consolidated 30 bank charters into one through just a major consolidation. For me, specifically, my group consists of about 1,000 team members – groups like tech and innovation and bank operations, digital physical security, project management, call centers, all the fun, exciting, non-revenue lines.
Synovus was one of the four banks that are the founding members of the USDF Consortium, which started up in January to create and offer a stablecoin that would be called USDF. For those of you who are relative newcomers to this corner of the financial world, a stablecoin is a cryptocurrency whose value is pegged to an established reserve asset, hence the stable in its name. Zack, give us an overview of the USDF coin, including when it might be in circulation and what it will be pegged to.
To us, Terry, is really about innovation. We’re trying to push the envelope every way we can to build the best bank of the future. I feel like money movement is that specific item that would differentiate banking today compared to tomorrow. Those banks embracing and adopting today, I feel, will be in a position of power in the future, so we’re having fun with it. The USDF stablecoin, what it really is a tokenized deposit that moves through a blockchain, the Provenance Blockchain specifically. The stable portion of that really just means it’s at a fixed value. For example, for the purpose of this call, we could say each minted coin could be worth $1. I think that’s as simple as it can be described: that a stablecoin, a tokenized deposit that has a fixed value, can move real time through the Provenance Blockchain, through this consortium that we’re part of.
What got Synovus involved in this project? What does it mean for your bank to be part of this consortium, in terms of your responsibilities and your contribution to first getting the coin issued, timeline for doing that and then getting it adopted out in the marketplace?
I don’t know if those timelines are important to me yet. I’m sure they’re important to a lot of people. Each of the members do have responsibilities in a consortium. For example, things we are focused on right now is building the middleware. The middleware that accurately and timely connects to core platforms using cloud-based APIs and services to connect the blockchain, the Provenance Blockchain, to the core. We want this connector, if you will, to be core-agnostic. You can connect to a legacy core, a modern core, it will not really matter. That’s one of the big assignments under way now. It’s not just about completing – it’s about trying to build it great, fast, secure, and scalable. We feel like this middleware is going to be a big piece of that. That’s what we’re working on right now.
What problem do you see USDF solving for that can’t be solved by an existing currency or other financial product or mechanism? And what makes you think that your customers at Synovus need or want a stablecoin and that they’ll use it?
Wow! That’s a hard one. I look at this as being invisible to the customer. It’s not a product offering as much as it is a foundational operational piece of the bigger puzzle. Consider it almost, in some ways, infrastructure modernization. Sure, it can move contracts or money real time, but there will always be your options out there to do that, along with many other products. It can handle bank-to-bank clearing, or person-to-person, or business-to-business money movement. But I guess summarizing the answer, we’re not trying to solve something that is broken. I think we’re expanding the value of something that works today. Moving transactions to and through the blockchain is very, very efficient and it’s a secure way to reposition the infrastructure for the future. I don’t think that the customer may or may not ever even know. What they will know is they just get a more seamless, smooth, transparent, real-time experience when they interact with other bank products and services.
This is not your first rodeo in the crypto space. In the past, you were a crypto miner, so tell us about that, including what got you involved, how long you were at it, and don’t leave out the part about what the price of Bitcoin was when you cashed out your last coin.
This is terrible. It’s actually embarrassing. But look, I’m an ex-programmer and tech lover and innovator. When something as exciting as crypto mining begins, I wanted to be a part of it. It was never the excitement of making money. Realistically, I never even thought it would take off. I really just wanted to figure out what it was and be a part of it. I started mining in late 2012, if I’m not mistaken. I originally had one mining rig in my basement, but my wife made me move it to the garage because it created too much heat. When I moved up to two rigs in our house, my kids started getting frustrated because I was slowing down the network, creating lags in the games they were playing. But I think I mined from 2012 to 2016. And, yeah, it was profitable, the price of the coin grew. It had peaks and valleys. I’m not sure other than a few spikes, did it ever really move away from the $400 to $800 range per Bitcoin. I believed in the concept, but I couldn’t see cultural adoption moving the price range to where it is today. I just didn’t have that vision. So when my kids started college, I started dumping coins. They were free to me. They really just were generated out of thin air at the time for fun. I think the highest Bitcoin that I sold at that time was around $750. Oh my God! I wish I knew what I know now, what I knew then – my goodness, it would be a different day. But it really taught me a lot.
I can be sure we would not be having this conversation today if you would have stuck it out longer. But Zack, how much impact has your personal experience as a crypto miner had in getting Synovus thinking about moving into crypto? And how much has it helped in addressing the many challenges, that no doubt have arisen, as you and your partner banks seek to create that stablecoin?
A lot, but it wasn’t just the cryptocurrency or the value, Terry. I think it was how mining worked, how nodes expanded, and the foundation and stability of the blockchain – how it works, how it scales, the security. I remember our team building a syndicated lending system that moved contracts through the blockchain as a proof of concept in 2016. I think as banks transform and mature and begin to adopt future technologies, the cultures of the banks begin to get excited about modernization. We all remember back in the early 2000s, when every bank’s motto was, “Oh, that’s OK, we will just be a fast follower.” I think that was all pre-fintechs and pre all the transformation out there that’s now competing, and the disruptors. It’s not only about the tool, or in this case, the product. I think it’s truly about stacking hands as an organization, believing that modernization is a very important piece of the path to success.
Your USDF group of banks ranges from $60 billion in assets down to around $10 billion, with your bank close to the top end of that range. The fact that we’re talking about a stablecoin that’s being created by a group of banks, does that origin make any difference in your mind regarding the desirability of the coin, its applicability, its usefulness compared to other coins?
Yeah, I mean, who knows? But at the end of the day, we’re doing something, partnered together with the focus on building the best banks we can for tomorrow. A stablecoin, I don’t think, will work without a consortium. No single bank, no matter what the size of that organization is, can convince the other 4,000 banks to use their proprietary product. But if you welcome all banks, or all FDIC-insured banks, to be a part of it, that may help the entire industry, not just Synovus. Our goal is not to have four banks be a part of this – I think our goal is to have 30 or 40 more by the end of this year. Man, just keep reaching out and keep expanding.
Where does the Federal Reserve fit into all of this? First, banks having a greater ability to move funds bank to bank without involving the Fed, that could be a problem for them. On top of that, we all know that a number of central banks, including the Fed, are starting to work on central bank digital coins that have a similar quality in some ways to stablecoins. Do you see clashes coming as both stablecoins and CBDCs build up more momentum?
That’s a great question also. Listen,…