Kyle Lawrence and Moish Peltz sit down with Maghnus Mareneck, Co-Founder & Co-CEO of Cosmos Labs, to discuss how blockchain is moving beyond speculation to practical use in banking. They dive into stablecoins, why banks are finally paying attention, and how Cosmos is building the infrastructure for finance’s next chapter.

Subscribe to Block & Order to learn more about the latest news on the legal side of digital assets!

Follow B+O on Our Socials:

Twitter: @BAndOShow
LinkedIn: Block & Order
Instagram: @blockandorder
TikTok: @blockandorder

Chapters:

00:00 – Welcome to Block & Order
04:25 – Introduction to Maghnus Mareneck & Cosmos Labs
05:48 – Breaking down miner extractable value (MEV) in practice
12:48 – Cosmos vs other blockchains
18:59 – Bank adoption, skepticism to open doors
29:01 – The fight over stablecoin standards
39:22 – How AI is changing blockchain development
46:40 – Final thoughts & predictions

Transcript:

**This transcript has been prepared automatically by AI and may contain inaccuracies**

Kyle Lawrence [00:00:13]:
So, one thing that strikes me right out of the gate about you and your bio, and just for our folks out there, and I’ll introduce, I’ll introduce him formally in a minute. Magnus, you are the co-CEO of Cosmos Labs, not just one, but there’s two of you. Similar to the venerable Mr. Moishe Peltz sitting before you, who is the co-managing partner of the firm. I’m fascinated by how those decisions get made, honestly, because, you know, it’s like in my house, there’s me and there’s my wife, and we’re, I guess, the co-heads of the house, but I know whose vote really counts. So how did you arrive at the decision to have 2?

Maghnus Mareneck [00:00:47]:
Sure, sure, sure.

Kyle Lawrence [00:00:48]:
And what happens if you disagree? I’m really dying to know.

Maghnus Mareneck [00:00:52]:
Yeah, reminds me of that quote from Lord of the Rings where Saruman is trying to convince himself that, you know, he was going to be able to share power with Sauron. And Gandalf is like, there’s only one Lord of the Ring and he does not share power. There is only one Lord of the Ring.

Kyle Lawrence [00:01:14]:
Only one who can bend it to his will. And he does not share power.

Maghnus Mareneck [00:01:28]:
I do not. I guess, like, I mean, so my co-founder is Barry. We met in college. We went— we lived together in school. And I think we are very different people at the core of, like, our mental prowess and where we’re good and where we’re not good. I think I’m much more the sort of like big idea, you know, maybe this could work. Let’s get this started. You know, quit your job kind of guy.

Maghnus Mareneck [00:02:00]:
I think Barry is a lot more of the, all right, how do we actually make this work? How do we build this and who’s gonna use it and what’s our strategy kind of guy? And that worked really well even when we were 18 and 19 years old. Right. And I’m, you know, I’m almost 30. And so, so it’s, this is a long time ago.

Maghnus Mareneck [00:02:19]:
But we would just take a lot of computer science classes together when we were at Penn. And we kind of had that same dynamic where, you know, when we were facing really hard problems, I would sort of have some kind of insight and he would be able to take it home. And that’s kind of just stayed the same. And I think when we were deciding, you know, how to share power or I guess like how to lead, we both recognized in each other that we had a lot of the qualities that we would want in a CEO and that we were missing some of the qualities that we thought were important. And I think it was kind of just this mutual feeling of like, all right, well, if something’s in the new exploration space, like, I’m probably gonna be the voice in the room. And when something’s not, you know, and when something’s in the actual, like, let’s build it phase or let’s sell it phase, let’s strategize about it, I’m gonna listen to Barry. But I think underneath that, you know, there has to be a lot of respect. There’s a lot of friendship there.

Maghnus Mareneck [00:03:12]:
So that’s how it works.

Kyle Lawrence [00:03:15]:
That’s a great way to I like the approach and the recognition that, you know, it takes two to tango and sometimes you need different personality types for different things.

Moish Peltz [00:03:24]:
Yeah.

Kyle Lawrence [00:03:24]:
It’s one of the things that I think makes our firm work exceptionally well. The voices at the top all come from similar yet different backgrounds and have similar yet different approaches. So I’m just always fascinated by the inner machinations of how those things operate. So, which is a perfect segue to welcome to Block and Order today, Magnus Maradek, the co-CEO of Cosmos Labs and a voice that’s been at the intersection of finance and emerging technology for years. Prior to building his company, Magnus has spent time in the wilderness of financial innovation as a contributor to American Banker, covering how new technology reshapes banking from the inside out. Now he’s on the other side of the equation, leading a company operating in the blockchain infrastructure space, where the real work isn’t building the chain itself, but everything that makes it run in production. So please give it up for a warm B&O welcome, Magnus Mareneck. So thank you very much for joining us.

Kyle Lawrence [00:04:16]:
We are off to the races here on B&O this afternoon. Magnus, give us a little bit of a background on what Cosmos Labs does in the space.

Maghnus Mareneck [00:04:25]:
Yeah, so Cosmos Labs is actually the second version of a previous company that I started back in 2022. So in 2022, I called up Barry, my co-CEO, And we sort of got lunch and decided to quit our jobs and go into crypto. I was working at Bridgewater. Barry was working at D.E. Shaw, both very intense hedge fund jobs. And we got really excited, in particular, about this concept of MEV, or miner extractable value, which I’m sure you folks are aware, and folks listening to this podcast are aware, but is essentially a blockchain-only kind of arbitrage that can be extracted by the validators or miners who are organizing the transactions in a block. It was first discovered on Ethereum because there were independent validators who were taking bribes to restructure the transaction order inside of their blocks in order to extract a profit. And the way that they would do that is they would most commonly engage in something called sandwiching, which is basically they would purchase an ask— if they knew that there was a big purchase that was going to happen because they could see the block before it was processed, they would sandwich it with their own purchase and their own sell.

Maghnus Mareneck [00:05:48]:
And essentially what they would do is they would push the middle leg to the maximum slippage amount possible and extract the top, right? And it was risk-free because of the atomicity and the composability of Ethereum or any, any smart contracting language or state machine. And I was looking at this and I was like, first of all, this is illegal in traditional markets. It’s like 100% bona fide illegal. And it’s extremely extractive. It’s basically, you’re getting the worst execution possible on a trade that you could ever get. And so, what I was determined to try to do was, as any good, hopefully, finance think boy would, is like, okay, well, we can try to make some kind of market around this, right? So instead of being able— instead of essentially the validators keeping all the money, you would be able to— the validator should make that money, but then some of it probably should go to the user that’s being extracted from, or at least the LPs, which are actually taking— the liquidity providers and the DEXs that are taking a lot of that hit constantly because they’re trading against toxic flow all the time. And we can make like basically some kind of 3-sided market out of this. Where the miners would have the supply, the demand would be voted on by the independent MEV searchers, as they’re called, or extractors, people running strategies, and then the users would be somewhere in the middle.

Maghnus Mareneck [00:07:14]:
That company we called Skip. The idea was basically, it was a software that let you skip to the front of the line when it came to block ordering. A very creative name, obviously. And we created it at a Terra hackathon back in 2022, because that was the first blockchain we got introduced to, was Terra.

Kyle Lawrence [00:07:35]:
Oh, wow.

Maghnus Mareneck [00:07:35]:
And this was in May 2022. It was a Jump hackathon happened in Chicago. And Do Kwon was there, of course. And we were so just shocked by this situation where You know, there was this, there was this seemingly magical asset that was printing 20% when interest rate was zero. They had $40 billion in the bank. It seemed to be going to infinity. There were huge partnership announcements with reputable players. And at the same time, they were having massive MEV struggles because the way that the whole Terra blockchain worked was there was Anchor, which was this protocol.

Maghnus Mareneck [00:08:15]:
It was a lending protocol where you’d put in dollars and get UST rewards, right? We all know what happened at the end there. But then there was also the natural redemption mechanism of UST, which was you could burn your UST and get Luna, or you could burn your Luna and get UST, and it always balanced. But those unbalances, those lack of— that lack of balance was just MEV people constantly buying and trading the 2 assets. And so there was huge opportunity there. We built the solution. which was the Skip protocol. And we deployed it and we demoed it during that hacker house. And then 2 days later, Terra collapsed to zero.

Maghnus Mareneck [00:08:56]:
And I have—

Moish Peltz [00:08:58]:
Amazing timing.

Kyle Lawrence [00:08:59]:
I love it.

Moish Peltz [00:09:01]:
Yeah.

Maghnus Mareneck [00:09:01]:
Yeah. And we were at the hackathon and I remember calling my girlfriend and saying like, yeah, you know, it’s all gone.

Kyle Lawrence [00:09:09]:
Interest and it’s gone.

Maghnus Mareneck [00:09:11]:
Uh, what?

Kyle Lawrence [00:09:12]:
It’s gone. It’s all gone.

Maghnus Mareneck [00:09:13]:
She’s like, what’s gone? It’s all gone. Like, the, the blockchain’s gone. All the people are gone. They just all left. Like, one day they just, like, just vanished. I don’t know where any of them went. Um, the money’s all gone. Like, the Twitter account is gone.

Maghnus Mareneck [00:09:28]:
It’s not posting. Like, it’s just, I, I don’t know. Like, I, I, I think I gotta get a flight home. Like, I, I think it’s whatever this was is gone. And sort of very strange entry. But they— but so basically what ended up happening was people liked what we did. And so, you know, I guess like good on the actual organizers of that hackathon. Jump actually paid us in real dollars for winning the hackathon.

Maghnus Mareneck [00:09:56]:
And then we ended up raising money and we ended up building on the same stack as Terra. It just so happened to be that the underlying blockchain stack that Terra was on is called Cosmos. Cosmos is a pretty ancient stack as far as blockchain stacks go, going back to 2014, where this brilliant Stanford researcher named Jaekwon published a white paper on a consensus mechanism called Tendermint. Tendermint really was the first proof-of-stake algorithm ever to be created, and was seminal. And it’s referenced in almost every other blockchain consensus or research paper since then. And I think was integral to Ethereum’s proof-of-stake conversion as well. Anyway, he went on to basically build this stack that let you build your own proof-of-stake blockchain, made it really simple, made it really easy, made it really customizable. And when we came into and we discovered Terra, we didn’t know about the rest of the Cosmos ecosystem because Terra was just so big.

Maghnus Mareneck [00:11:03]:
But then as we, over time, we sort of got a lot of confidence on, okay, this is probably the right way to go about things, is there’s going to be a lot of blockchains that are going to need to connect to each other. Cosmos had those features. You know, other alternatives like Ethereum and Bitcoin didn’t really have those interoperability features. And so we decided to take a bet and we’re like, okay, well, there’s gonna be other blockchains that are gonna be successful. We’ll continue to build this solution and we’ll be able to sell to multiple different blockchains. We raised money, we built that system out, we started to make money. We built other tooling on top of the Cosmos stack until we were acquired at the end of 2024 by the Cosmos Foundation itself. And we were— Barry and I were put in charge of Cosmos Labs, which was supposed to be and is the de facto development entity of the entire Cosmos blockchain movement and technology platform.

Maghnus Mareneck [00:11:57]:
And so now we have a shot at sort of leading Cosmos into its next frontier and next path, and basically came into that with a lot of opinions.

Moish Peltz [00:12:09]:
Well, just to continue on that thread, you know, recently I was reading about Vitalik Buterin outlining his new Lean Ethereum roadmap and quantum resistance, native privacy, scaling. I’m curious, one, how the Cosmos ecosystem thinks about the other EVM chains and what they’re doing. And is there a sense of friendly competition there? Or is it just, it’s cool that they’re doing their thing, we’re doing our thing? And then 2, I’m curious what you think about their particular roadmap and whether there’s things that overlap with what you’re work building on or, and so forth.

Maghnus Mareneck [00:12:48]:
Yeah. Happy to go into it. I mean, always, all competition is friendly. We’re all fighting the same fight here and we’re all researching, right? And so we’ve collaborated with the Ethereum Foundation many times on interoperability, especially since that was a struggle for Ethereum and continues to be. And it’s something that I think we’ve historically really led in with the IBC protocol, which is very popular open source, open standard for interoperability. Similar with Solana, a lot of collaboration there too. In terms of the differences and how we see the world and the things that we decide to focus on, I think The truth is, I’m not a— or I didn’t come into blockchain from a research angle. I came in from a commercial angle, and I came in from a markets angle.

Maghnus Mareneck [00:13:44]:
I was really interested in how the infrastructure of blockchain was going to transform global markets. And I was really interested in how, for the first time, you could really create financial systems that, if you had participants that didn’t really trust each other, they could collaborate in this interesting way that I thought was genuinely new. You could genuinely create new kinds of commercial networks that were very tough to organize before. Coming from the hedge fund world and coming from a finance background, I thought that there was potential there. When I got into this seat and leading the Cosmos Initiative, What I really wanted to do is I really wanted to try to take my shot at making that initial thesis a reality, right? Or at least really testing it, which was, will banks and will commercial entities, will financial entities actually purchase this technology and buy in in a really real way, right? And will they start to move money onto this technology and can that be the future for the industry? Because for many years, right, for basically the 4 years prior to, I would say, 2023, I’d been a little bit disillusioned with the use cases of blockchain because they were primarily around, I would say, Ponzi-nomics, right?

Moish Peltz [00:15:11]:
Yeah.

Maghnus Mareneck [00:15:11]:
And sure, everything exciting has Ponzi-nomics, but, you know, Bitcoin and NFTs and all these different things, like, at the end of the day, it was sort of, you know, who’s holding the bag at the end. And, you know, I think retail gets hosed, right? And I saw a lot of the extract— I saw a lot of what that looked like on the extraction side, because I was on the MEV side. And those were— that was the playground for these MEV bots, right?

Moish Peltz [00:15:37]:
Yeah.

Maghnus Mareneck [00:15:37]:
Just to extract left and right, all the slippage, all the spreads, like, just sucked out of the pool. And I sort of just thought at the time, like, okay, this can’t be it, right? Like, obviously, this is not where it ends. And that did end, right? I would say that the retail part of crypto really did. And I sounded like an idiot back then for saying that, but now maybe people feel more similarly. And what I really was excited about is, okay, but how can we actually make the financial system better, right? And who’s going to want to cut their teeth on that problem? Because it’s not just deploy technology and people will come to it. It’s It’s much harder, right? It’s just an objectively very, very hard industry to get into. We’re also playing from the backseat because finance doesn’t trust crypto based off of what’s happened with FTX. And to them, that’s just a straight ticket to jail, right, to be involved in any of that.

Moish Peltz [00:16:34]:
Yeah.

Maghnus Mareneck [00:16:34]:
And so, you’re dealing with the trust issue. You’re also dealing with the technology issue. But then I think the primary thing is you’re dealing with like an empathy issue, right? Because financial systems, or like, let’s take a bank, right? A bank has many different business units, each of which has their own agenda, each of which makes money. Oftentimes that money is from fees, right? And so when you’re trying to sell— and they also hold 80% of the world’s money is inside of a bank, right? And so if you want to actually have real impact, you have to deal with the banks. You have to, right? But a bank is going to— if you come in saying, we have a better system that is more flexible and faster and cheaper and blah, blah, blah, first of all, it’s a losing pitch because the bank doesn’t see what’s in it for them, right? And you might think like, okay, well, we’re going to take over banks, right? And we’re going to replace these systems over time, but you’re not, right? And I think the reason you’re not is because people who want to hold crypto is a very small fraction still. especially want to hold their life savings in crypto. And the things that banking has afforded us has been built over 300 years and for a reason, right? FDIC insurance, right? The knowledge that your money is safe, the ability to get yield, right? The ability to move money seamlessly between parties, the ability to charge back on a credit card. These are things that are so valuable, right? And when you use them, you’re like, thank God it works this way.

Maghnus Mareneck [00:18:07]:
So, we took a little bit of a different approach.

Kyle Lawrence [00:18:11]:
So, am I, in reading your articles that you’ve written for American Banker, and you’ve been published a lot, and what I’m hearing you say now is that we’re sort of moving past this inflection point where there’s a lot of skepticism in the marketplace, and you’re seeing a lot of embrace of this technology. We’re seeing it amongst our clients, even though I still have, I mean, earlier today I had a call With a finance person who’s like, oh, the Bitcoin, I see that back there. I don’t know what this is. Like, there’s still an element of that, but where have we gotten from the point where there’s so much skepticism that it’s a hindrance to there’s enough healthy skepticism that helps us do this better? What was that point? And what do you think the struggles are going forward in terms of adoption? I know it’s a very broad question, but I think you’re well positioned to answer it.

Maghnus Mareneck [00:18:59]:
Yeah, I basically know what you’re asking, I think. And I think the lived experience for me has been, for a long time, banks wouldn’t touch you, right? They wouldn’t talk to you. That has changed, right? They will talk to you. They will take the call, they will meet with you, and they’ll even bring their product people. And so, I think what’s happened is now banks and financial, like, more sophisticated regulated financial institutions will open— the door will be open to you to talk to them, which is huge growth. But what it’s led to become is now these people are trying to understand what it can do for them. Because for a long time, I think they thought, oh, there’s money over there. If we could get into this blockchain thing, the Bitcoin thing, retail wants it, blah, blah, blah, but we can’t just do it because the FDIC or the SEC is going to come down on our heads.

Maghnus Mareneck [00:20:00]:
But then once those doors opened a little bit, they start to ask, okay, what actually should we do? And I think that’s unsolved actually, right? Because if, let’s say you’re a bank, right? There’s a couple options you can go down. The first one is usually, well, I should at least have the ability to provide custody, right? I should be able to offer my clients the ability to hold blockchain assets at my bank, right? That’s usually the first thing they start with. Well, what makes that better from a hot wallet, right? Or what makes that better from holding it in Coinbase or some other place, especially when those places offer crazy yields sometimes? Usually nothing, right? And so that doesn’t really drive anything for them. The second thing they’ll usually look at is crypto trading. Right? So, okay, I’m going to offer my clients the ability to use their bank deposits to be able to buy Bitcoin and hold it with us, right? Or to sell, and maybe I’ll open an OTC desk, something like that. Okay, now maybe, right? But that only really works for banks that have rich clientele, big high-net-worth individuals that like to spend discretionary income on crypto assets, an inherently high-risk asset that’s usually bottom of the totem pole for most sophisticated investors, right? Usually the last little fun, funny money, right, that they’ll spend. And that can be profitable, but it’s profitable for these big banks because big bank— because in the bank totem pole, right, at the very bottom, you have these like really small, under $250 million deposit bases, these tiny communal banks. All they’re doing is doing commercial real estate lending and mortgages.

Maghnus Mareneck [00:21:39]:
Right? No use for crypto. And their clientele couldn’t tell you what a crypto was, right? Like, they wouldn’t even know what that means.

Kyle Lawrence [00:21:47]:
A crypto. I like that.

Maghnus Mareneck [00:21:48]:
Yeah, exactly. A crypto. And then right above that, you have the regional banks, right? So, this is like a Huntington or Fifth Third. And these guys are starting to think about how do we punch above our weight towards the G-SIBs, right? The globally significant international banks. Those are the JP Morgans, the Citibanks, the Wells Fargos of the world, huge, huge trillion-dollar deposit bases. If you’re at $500 billion, you’re thinking about, how do I offer services to attract some of those high-net-worth individuals away from them? Maybe I can move faster. And so that’s where you start to see the crypto trading. That’s where you start to see the custody, and also where you start to see something I think that’s a little more interesting, right? Which is, huh, like, we kind of understand what this is now.

Maghnus Mareneck [00:22:39]:
We understand how it works. We see some of the benefits. Maybe we can actually replace one of our core systems with this technology. Like, let’s try that out, right? And so, okay, actually, maybe we can try to pilot some kind of account where, you know, there’s a smart contract, and it’s a tokenized deposit. And then if 2 users withdraw at the same time, like it has some kind of conditional logic, or if a contract signed that releases a payment, then they start to actually get really creative because they understand how this works. And they start to see this something completely different, which is not Bitcoin, Ethereum, they start to see it as like a genuine technology improvement that can reshape how they program their own capital flow. And how they can extract more fee revenue by offering differentiated services to their clients. Right.

Maghnus Mareneck [00:23:30]:
And now you have something that looks like a real industry, right? Because if you’re able to provide that kind of value, right, if you’re able to, you know, be the next SWIFT, right, or the next kind of invention in financial services that makes people more connected, more productive, more efficient, you know, now you’ve really created something that I think can be long-lasting. And so I spend most of my time trying to figure out what that is and trying to pilot solutions with banks in particular to reshape their systems, help educate them, and really just help them service their customers better by using this tech, right? Which I think is, in my opinion, that’s going to be the longest lasting impact we can have.

Moish Peltz [00:24:16]:
No, and I love that because, I think it’s the yin and the yang. It’s great that there are some chains that are doing a ton of research and are thinking about how can we improve the technology. But I think what that misses is exactly what you’re talking about, is someone speaking to these potentially large end customers saying, what can these tools do for you and helping them figure out those solutions? I think that’s the part that a lot of crypto is missing is the, okay, let’s practically apply this technology into an enterprise. Like, let’s see what we can do to build around that. So that’s fantastic.

Kyle Lawrence [00:24:50]:
And to your point, you know, what you were talking about before, you know, Magnus and what Moishe is bringing up here is something that we’ve talked a lot about on the show, which is one of the hardest things to pierce, at least in my conversations, is the idea that people see the news, they see FTX, and to them, that is That is what crypto is, is just that. It’s a guy who got over his skis and didn’t know what he was doing. And he was running a $25 billion company on QuickBooks and had his girlfriend being the CFO. And to them, that’s all this is. And piercing that to me is an enormous challenge because people only see what’s right in front of them. They can’t see 5 feet in front of their face. So when you’re talking about infrastructure upgrades and blockchain as a whole, not just crypto. And I’m going to use the a crypto line just because it was great.

Kyle Lawrence [00:25:39]:
It’s something my mom—

Maghnus Mareneck [00:25:41]:
You can steal it.

Kyle Lawrence [00:25:43]:
Appreciate that. Let me write that down. 25 minutes. And so that’s just an interesting way that you approach it. It’s the infrastructure layer that’s really the most important, not all the noise that goes all around it, unless I’m completely misreading what you’re saying.

Maghnus Mareneck [00:26:00]:
No, I think I mean, I really think it comes down to, we’ve been living in alternate realities, right? I mean, the blockchain world has been living in a reality of extremely volatile, ungrounded asset movements tied to global liquidity cycles, and specifically interest and risk appetite cycles.

Moish Peltz [00:26:25]:
Mm-hmm.

Maghnus Mareneck [00:26:26]:
I think that’s great if you’re a trader, Right? It’s fun if you’re a trader, because the money really was in being able to see like, okay, these assets are going to pick up, they’re going to be viewed as high volatility, they can be globally traded, blah, blah, blah, blah, they’re unstoppable, all these things. But trading doesn’t make the world go round, right? What makes the world go round is me getting my paycheck and being able to buy a sandwich and all the fun things that we do every day that so far, we have isolated from crypto, right? Because that’s not how the, you know, world doesn’t take stablecoins, nor I think will they ever, is the truth, right? Like, I don’t think stablecoins will replace— or stablecoins as we think of them, right? Like a USDC or a Tether. These are private companies. We better not— we better hope they don’t replace a dollar, right? Or like an actual, uh, currency. Um, Anyway, that’s a little bit of a hot take that I disguised as an obvious conclusion. But so I think really—

Kyle Lawrence [00:27:32]:
So just noting here, folks, we had a slight technical hiccup. We are resuming our conversation with Magnus Maranek. So Magnus, why don’t you pick up with your fancy new background that looks amazing, actually?

Maghnus Mareneck [00:27:46]:
Thank you. Yeah, this is definitely the nicest office that we have. We did a lot of work on this one with all the plants. Could you remind me the last topic we were going over? I got kind of confused with all the technical challenges.

Kyle Lawrence [00:28:01]:
We were largely talking about— well, I was sort of droning on and on about how lamenting the fact that people just see FTX and to them, that’s all it is.

Maghnus Mareneck [00:28:10]:
Right, right.

Kyle Lawrence [00:28:11]:
But we have infrastructure layer now to build upon and take us to the next Next frontier, as it were.

Maghnus Mareneck [00:28:16]:
Yeah.

Moish Peltz [00:28:17]:
Yeah. And then I think you were saying also that stablecoins are never going to work.

Kyle Lawrence [00:28:23]:
And that part we got.

Moish Peltz [00:28:25]:
That part we got. Well, I was going to follow up on that. So maybe we’ll just kind of kick off from there. There was, there was a big launch the other day of, you know, several hundred enterprises teaming together for a new open stablecoin. And I guess you’re skeptical, it sounds like that that’s gonna lead to any great breakthroughs? Or is this all just incremental change that’s not really— it’s just window dressing because there’s a larger thing at play that we’re missing?

Maghnus Mareneck [00:28:51]:
Well, I mean, so you’re referring to OpenUSD? Yep. Yeah, OpenUSD is really cool. I think there are going to be— we’re going to this period where there’s going to be many shots on goal by many different players to create global standards, right? And what I consistently see happening is people are like, oh my God, there’s 14 standards. What we need is a standard to bring them all together, right? And then it’s, oh my God, there’s 15 standards, right? And we’re sort of— we’re in that stage right now. And I’m not entirely sure how it’s going to shake out. But the truth is, people are scared of Circle, and they’re scared of USDT, right? Because how do these systems work? The way that these systems work is when you buy USDC, or when you buy USDT, that underlying collateral, which is yield-bearing collateral, goes into their bank accounts, and they have an arrangement with those banks that they will receive the majority of that interest. And so all of this fighting over who gets the interest. That’s what it’s all about, right, when it comes to stablecoins.

Kyle Lawrence [00:30:05]:
Yup.

Maghnus Mareneck [00:30:05]:
And it is the ultimate fight, because all of these players are in the business of custody at the end of the day, banks included, right? Banks live off deposits. That’s their bread and butter. That’s their lifeblood, right? And why is it their lifeblood? Because banks make most of their money off of lending, right? They lend out for commercial real estate. They lend out for mortgages. They lend out for really everything. for credit cards, et cetera. And they get that interest rate back, and it’s only enabled by the actual fact that they can lend against their deposit base, right? And so, their entire raison d’être is to increase their deposit base. And so, the fight is basically around, okay, who is going to own this collateral? I think what OpenUSD is claiming to be, although it is very much so backed by Stripe, and I hope it is truly separated from Stripe, because a lot of folks see Stripe as competitive, what it’s claiming to be is your collateral ownership is going to be proportional to your usage of the network and your participation in the network.

Maghnus Mareneck [00:31:13]:
I think it could work. It’s possible that it follows the same path as Visa, because Visa, if you know about the history of Visa, It really started as a small consortium, but their primary differentiator was everyone can have ownership in Visa as long as you participate, and your ownership would be proportional to your participation. And that really let it become global in scale. So I’m curious to see how it goes. I think people will— usually with these things, the people who are in entrenched positions do not want to join. The people who are in weak positions want to join. And it’s sort of like usually regulation has to come down to actually force the entrenched players to open up to some degree. So, I’m curious to see how it all evolves.

Kyle Lawrence [00:32:01]:
Well, I mean, you hit the nail on the head when you talk about the banks and how they make money, but how do you convince these players to— short of just saying, hey, you get a piece of the pie, how do you get them from point A to point B? I mean, that seems to be just an enormous obstacle. I mean, look at where we are with Clarity Act. That’s still not going to happen this year, in large part, not the only reason, but because of the banks.

Maghnus Mareneck [00:32:22]:
Yeah. So, your question is, how do you convince these people to switch over to this technology? I think the truth is, and it’s unfortunately the same truth, I think, with anything, which is you got to make it attractive to them, right? And I think you either have to force them to do it, which I’m not in the business of as a non-regulator, Or you have to make it really, really attractive. And not just attractive to be marginally better than what they’re doing today, but you have to make it 10x more attractive because banks also have a lot of switching costs, right? Like, the systems that they’ve been using have been built up over hundreds of years, right? And there’s 300 years of regulation that’s built up over them, watching them and their every move, right? And why do we have all that regulation? To protect people from situations like FTX. Right? To constantly check, okay, where is the money? Do you have the money? Where did you put the money? Can you bring the money back? Do you have enough to cover the withdrawals? All these things. So I think you basically just have to show them why it is so much better, and you have to find reasons for them to want it. And I can say one thing, which is stablecoins are not the reason. Right? Stablecoins are actually very negative to banks. They view that as a growing threat that is siphoning money off of their balance sheet into stablecoins.

Maghnus Mareneck [00:33:49]:
And I think it’s easy to hate on banks, but also, banks are the formulation of 300 years of consumer protection and money management that have a lot of nice things baked in that we take for granted. that stablecoins don’t have. And so, I think there’s going to be some kind of balancing act of stablecoins and all the things they provide, and banks catching up and trying to copy some of those features. And at a minimum, I think what’s going to be good is stablecoins are going to force banks to become better. They’re going to have to compete more on good things. And so, I’m excited about it regardless of which way it goes. I personally don’t think that banks are going to let stablecoins win. I also think users, at the end of the day, especially when it comes to their life savings, will want FDIC insurance and insurances that deposits provide.

Maghnus Mareneck [00:34:49]:
I also believe that systems like ACH and FedNow and Fedwire are going to last longer than we expect. And so, I think really the right way to go about it is to engage the system where it is now, and make it better now, versus being in the future. I also think the stablecoins that have the advantage of being regulatorily immune, because they all play this dance, like, yes, USDC is used in Iran to evade oil sanctions. We all know that is true. There’s clear on-chain activity, and it’s not just millions. It’s billions of dollars. Yes, this is true. Right.

Maghnus Mareneck [00:35:31]:
Can— does Tether say they’re doing something about it? Of course they are doing something about it. Right. They’re doing everything about it. They are checking all of their users somehow through the exchanges. Right. Did the exchange do a good job? We don’t know. Like, somehow some exchange let this person on and bought Tether. So, like, I think eventually that will get shut down.

Maghnus Mareneck [00:35:52]:
Right. There will be clamping around that, especially when it comes to the illegal flows, which will suck a lot of the flows out of stablecoins.

Kyle Lawrence [00:36:01]:
Sure. Always reminds me of when you see a company gets in trouble with justice or whatever it is, and they say, oh, we ran our own internal investigation. Turns out we did everything right. There’s no problems here. But to play devil’s advocate for a second about the banks here and stablecoins and the net impact and the other thing, If you take that to not the United States, you’re somebody in one of these countries that doesn’t have FDIC insurance, you don’t have stable banking mechanisms and protocols that protect your money. You own a coffee shop, you put the money in the bank, it’s gone the next day. Is there a different calculus that people in other countries or other governments will look at? Or maybe there’s a different runway here for these kinds of technologies. I don’t know if that’s something that you’ve looked at in the course of your dealings with these countries.

Kyle Lawrence [00:36:48]:
With American Banker or with Cosmo?

Maghnus Mareneck [00:36:51]:
No, I love it. I mean, I’ve seen firsthand the usage of dollars worldwide and like how great it is. It is, of course, destabilizing to local currencies to have all their users constantly dumping local currency for dollar. It’s usually like the opposite effect that the currencies or that the government is trying to go for. And it’s like, it’s hard to moralize about it, right? Because sometimes these governments are corrupt. Right? And sometimes they’re really not doing the best for their people. Maybe it’s on them that their currency is so bad, but other times, you know, they’re war-torn. Like, it’s hard to really say.

Maghnus Mareneck [00:37:22]:
And, you know, the truth is you don’t really have a lot of options to grow if you’re a country dependent on the dollar. That’s the truth, right? Like, you having your own currency allows you to have things like, you know, building foreign reserves and inflation, right? To like subsidize your own growth and all these different things. I would say I’m glad that stablecoins exist. There will always be some form of globally available dollar. But I caution, you know, what I think is really sad is I unfortunately lived through the collapse of one of the largest stablecoins in the world. And Terra wasn’t held by predominantly US citizens. It was held by Indians and it was held by Africans, right? And it was held by people in Asia and Southeast Asia and Malaysia and in Latin America. And it was held by those people because of the yield and because of the lack of any kind of wealth growth opportunities in their local regions and demolished them, right? And so I think what’s worse than not having access to the dollar is having access to a dollar that ultimately isn’t backed by the people who ensure the validity of the dollar, which today is the banks, right? And also the, you know, ultimately the Federal Reserve.

Moish Peltz [00:38:48]:
Changing topics a bit here. I’m curious about how you think about everything going on with AI and how that makes your job at Cosmos easier if it does, and the kinds of opportunities that AI allows you to speed up development or work on things that you wouldn’t have time to do otherwise. And then I think just multiplied from there, you know, what you think about how just in the blockchain industry as a whole, you know, is there going to be an impact by this and what that impact might be?

Maghnus Mareneck [00:39:22]:
Yeah. AI is a tough one for blockchain.

Moish Peltz [00:39:28]:
Right?

Maghnus Mareneck [00:39:29]:
Because blockchain is code. And blockchain is not just code, but it’s like code as insurance against financial disaster. And one thing that AI is great at is trying something again and again and again and again, and constantly readjusting approach with zero human cost. which makes it an incredible hacking tool. And so I think we’ve already started to see the fallout of that. And it really sucks to see how many protocols have been fully drained or partially drained over the past couple of months— LayerZero, KelpDAO, many others. I think that is going to get worse before it gets better, is the truth. On the bright side, I would say that AI makes learning crypto and using crypto significantly easier.

Maghnus Mareneck [00:40:29]:
And so, while I think it’s hurt public DeFi, it has massively accelerated private use of blockchain as infrastructure, because blockchains generally have very complicated coding patterns. And at their core, they’re distributed computers. Distributed computing is notoriously challenging. Because of the number of race conditions and the number of network coordination problems and consensus and all these things. And so it’s much easier for people who are building applications within their own private servers or within their own use cases to actually import that technology because AI can figure it out for them. And so in some ways, we could have a flood of crypto developers right now. We could have people building all kinds of smart contracts, et cetera. And where I’m seeing that take place is we’re able to go in and make this technology much more accessible than we have historically inside of these older coding environments where you have engineers that wouldn’t otherwise want to pick up a new stack or a new paradigm.

Maghnus Mareneck [00:41:37]:
On our side, when it comes to actually building the Cosmos technology, I mean, Cosmos secures over $90 billion of value today. And we have been very hesitant to use AI for any part of that coding process.

Kyle Lawrence [00:41:51]:
Interesting.

Maghnus Mareneck [00:41:53]:
We use it mostly for infrastructure that we build that is not open source and it’s going to be put into all of these valuable blockchains. And so we’ve really kept any kind of publicly running software to just handmade, I guess is the right term. I don’t know. Homegrown. Yeah, we’ve been very careful about that. But that’s also coming off of a decade of being in a hostile engineering environment where we’ve been the victim of all kinds of attacks and are constantly every day.

Moish Peltz [00:42:30]:
Yeah, it’s a great point. And I think you’re right that the volume and velocity and complexity of those attacks is only going to continue as this technology is used for both good and evil. So. Yeah.

Maghnus Mareneck [00:42:45]:
I mean, if nothing else, it’s going to make these smart contracts ironclad. But I think there’s going to be some pain along the way.

Kyle Lawrence [00:42:54]:
Yeah, definitely agree with you there. We see a lot of the ups and downs with AI. We use it a lot in our firm, but we certainly are not immune or blind to the various risks associated with it. Same with our clients. You know, some clients are all in and others are nope, law firms.

Maghnus Mareneck [00:43:10]:
Right, right. Which is great. Yeah. And it’s affecting other industries even more, right? So going back to banking, that is all bankers are thinking about right now is just how much more sophisticated fraud has gotten. Right? Now you can have swarms of 500,000 agents having, you know, like deceptive conversations with people. And then those agents can spawn processes. And it’s just parallelized the fraud industry to a way that is really hard for smaller banks, especially to deal with, because it’s on them, right? So if you are the victim of fraud, and your account gets drained, then the bank has to repay you. And so to them, it’s really challenging, right? And they don’t have the chops to deal with it.

Maghnus Mareneck [00:44:00]:
They don’t have the deep technical knowledge required to actually combat AI. And so it’s, it’s, it’s a big issue.

Kyle Lawrence [00:44:10]:
That’s scary. Um, you threw me off, uh, but, but it’s true. I don’t disagree with you. Maybe there’ll be a lot more consolidation in the space. It’s kind of the opposite that we all want, but maybe that’s where this road leads. I don’t know.

Maghnus Mareneck [00:44:24]:
Yeah.

Moish Peltz [00:44:25]:
I think also there’s just a recurring theme, right, of this consumer protection piece that, you know, going back to your MEV days, if it’s just, you know, you let the market kind of without regulation, without intervention, without security and protocols and just see what happens, like a lot of consumers are going to get harmed. And so you need responsible infrastructure built around that to help. And that’s part of what we do, right, is working with people on the legal side of consumer protection. But then it’s better if that’s by design versus as an aftereffect or a policy that’s layered on top.

Maghnus Mareneck [00:45:03]:
Yeah, 100%. And I mean, I don’t know. I do think it gets really ugly. Right? When you let these things run rampant. And I do think that all technology’s a double-edged sword, and it’s really empowering, I think, to be on the side that, at least tell yourself that it’s the side that’s actually helping people. And I think with AI, it is one, obviously damaging in many ways and empowers criminals to be more effective. But it also, I think, is a great equalizer, right? When it comes to letting small guys who actively want to use it to build great things, right? Or catch up to competitors and stuff like that. And so we’ve also seen the other side of the coin, which is small banks that didn’t have engineering teams being able to build complicated systems and workflows that are normally only available to banks 20 times their size.

Maghnus Mareneck [00:46:02]:
And be able to punch above their weight. And I think you’re seeing that across all industries. And personally, I’m, there’s some, like this whole SaaS movement, right? Over the past like 50 years where just all these subscriptions, subscription, subscription, and renewal tactics and all this bullshit, like all that software I think is going down because like there’s gonna be a rise of personalized software, either things you build for yourself Or you get someone to cheaply build for you in some way. And so I’m personally excited about that shift that it’s brought about.

Kyle Lawrence [00:46:40]:
That’s fascinating stuff, Magnus. As we get close to running out on time, we covered a lot of ground here today, some really fascinating stuff. You have an incredible background, and really thank you for sharing your insights and wisdom here on the show. Any final thoughts, any predictions for the rest of ’26, or anything you just want to get off your chest, the floor is yours.

Maghnus Mareneck [00:47:01]:
Oh, geez, I’m gonna be careful with the last one.

Kyle Lawrence [00:47:05]:
It’s a safe space here.

Maghnus Mareneck [00:47:07]:
I mean, I think I— so one thing that I’m a really big believer in, and maybe this is a little bit of a Fourth of July topic, is, you know, the— how much I think America in particular is going to benefit from the technology that now we’ve allowed to really grow up on our own soil. I mean, one thing that I must get off my chest is we— I’ve been, you know, I started in blockchain in around 2019. And for a very long time, my company couldn’t get a bank account. And we had to beg, plead, and, you know, do everything just to be able to store our dollars. Right, in a way that was safe, that we could pay our employees, and no one would bank us. And comparing that to now and seeing all my friends, you know, in the industry who’ve been able to start companies and really innovate, I think something really good is going to come to crypto now that you have the United States and the talent here being able to focus on it and innovate when it comes to the financial industry. And no, I think we’re going to see things like ACH going away and being replaced with basically real-time, 24/7, always-on capital markets and payment markets and lending markets. And I think it’s just going to be way, way, way better.

Maghnus Mareneck [00:48:33]:
I think it’s going to affect how expensive the capital is, right? I think like it’s going to affect our interest rates as consumers and just lead to a much, much better future. So I’m excited for that, and I think that’s actually very close.

Kyle Lawrence [00:48:47]:
From your lips to God’s ears. I think we can all sign up for efficiencies in the marketplace, even incremental progress, as we talked about on the show. Well, Magnus Mareneck, thank you so much for coming by. Please, uh, you can find him, uh, Cosmos Labs. We’ll drop his contact information down below in the show notes. Really appreciate you coming by. We hope to have you on again soon.