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Alex Song — Crypto on the Balance Sheet

In this episode of The Role Forward podcast, our host Joe Michalowski and Alex Song, Head of Finance and Capital Markets at Ramp, discuss the concept of crypto on the balance sheet. They chat about Ramp's investment in stablecoins, the mindset behind that investment, and how finance can assume a more strategic role in the business.

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Episode Summary

Cryptocurrency is a hot topic not just in the finance or business world but also in our everyday interactions. But, with all the information available today, it’s still challenging for most of us to understand what it is and how it has and will change the global monetary system.

Luckily, the number of subject matter experts is growing daily, and one of them is our guest, Alex Song, the Head of Finance and Capital Markets at Ramp.

At the beginning of the episode, Alex emphasized that he is not a cryptocurrency expert but is deeply involved in the subject for his current role at Ramp.

However, Alex added considerable value to our show by bringing the concept of one specific cryptocurrency closer to the audience. Alex and our host Joe Michalowski discussed stablecoins, why Ramp invested in them, and how they can benefit Ramp in the long term. Alex and Joe also touched upon the past, present, and future of crypto in a business setting.

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Featured Guest

Alex Song

Head of Finance and Capital Markets, Ramp

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Alex Song is the Head of Finance and Capital Markets at Ramp, a corporate credit card issuer and expense management company based in New York. Prior to joining Ramp in 2020, he spent more than a decade as a private credit and structured credit investor in the hedge fund industry.

Key Themes from the Episode
  • Skepticism around cryptocurrency is understandable, but there are times when a corporate investment could make sense.
  • The North Star for any finance team should always be to help the business serve its customers.
  • We need regulations that allow finance teams to have more faith in crypto investments.

Episode Highlights from John Luttig

6:20 — What Are Stablecoins?

”Stablecoins, as an asset class, are tradable assets. They exist on the blockchain. They don’t look that different from Bitcoins or Ethereum and whatnot. The difference is that there is a currency peg right there. […] Similarly, if you go to Belize or Panama, the local currency sometimes gets pegged to the US Dollar.

That’s also the intent with stablecoins. One coin of this could be USBC, Paxos, or Tara; there are a few stablecoins out there. The idea is basically that this token — we’re going to peg this one for one US dollar. And I think there are a couple of Euro-pegged crypto things out there.

[…] How different stablecoins are set up and constructed, and the peg is maintained, though. That’s where the secret sauce comes from. There’s a lot of differentiation between the different stablecoins out there. How dispensable are some of these pegs? How strong, or how weak are they? That’s the secret sauce. That’s where a lot of diligence goes — into figuring out.”

17:10 — When Investing in Crypto, You Need Subject Matter Experts

”There are a lot of smart people out there, and there are a lot of smart people in the crypto world. Fortunately, some of these are personal or professional connections. Going through every possible avenue, […] which is like the value chain of where these dollars are going or where they are coming out, that’s someone’s job. So getting to know who all these people are, understanding their incentives, and understanding what they do on a day-to-day basis. So that might mean talking to your vendor’s vendor’s vendor.

[…] So the amount of diligence there is probably somewhat surface level for something like this because we are literally starting at square one. We had to essentially establish the entire fact pattern — the ecosystem, who the players are, what their incentives are, and where we fit into that group.”

28:00 — Should Every Company Invest in Stablecoins?

”I think there are a few heuristics that you want to use for something like this. One is strategic. Is this something that you can do that generates some intangible benefits? And for us, as we discussed, it did. It falls into the whole ecosystem of being strategic and impactful in terms of being a good steward of your capital. So for us, it made sense. […]

Let’s say you have a couple of million dollars of cash in your balance sheet, and you allocate X to stablecoins and that you’re making roughly 6, 7, 8, 9% yield on it. You just do the math. What is the outcome of that incremental yield? Is that worth your time going through months of diligence, doing all of this work, and ultimately that Y that winds up being $30,000? Was that worth your time? I would argue that for most entrepreneurs, it probably isn’t. I think you’re very busy building a company and should not be making tactical decisions like that.”

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