July 31, 2025 • 49 mins
Stablecoins are emerging as one of the most active areas of cryptocurrencies. The idea of using blockchain rails to transmit money has captured the attention of legacy financial institutions as well as policymakers, as evidenced by the recent passage of the GENIUS Act, which builds out a regulatory framework for that business. But what are the opportunities. And how do stablecoin providers actually make money? On this episode, we speak with Jeremy Allaire, the co-founder and CEO of Circle, which is the company that backs USDC, the second biggest stablecoin on the market. We discuss the company's business model, concerns about financial stability, and the prospects for stablecoins to open up entirely new avenues of payments and commerce.
Read more:
Trump Crypto Group Offers Proposals to Boost Digital Finance
FIS Partners With Circle to Offer Bank Stablecoin Payments
Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:21):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, I have three thoughts about stable coins.
Speaker 3 (00:27):
Oh boy, here we go.
Speaker 2 (00:28):
Three just three. One is I think within the broader
realm of cryptos, stable coins are real and here to
stay and probably going to be important. Two, some of
them seem like an absolute cash money maker because you
don't pay a yield to the holders. You collect the
yield for what you have backing it. It's a great
business model. It seems amazing. And Three, as the child
(00:49):
of the great financial crisis generation, I'm convinced that if
crypto is ever implicated in the future financial crisis, it
might have something to do with stable coins.
Speaker 3 (00:58):
You stole all my talking, honest, I had like the
note written down that you know, issuing liabilities that mostly
return nothing is a wonderful business model.
Speaker 2 (01:08):
What else did you could just restable?
Speaker 1 (01:10):
Well?
Speaker 3 (01:10):
Also, I was thinking stable coins are basically the primary
touch point of crypto to the regulated financial system, and
so you would expect some of those financial stability concerns
to potentially materialize there. And then The one thing you
didn't mention that I'm interested in is also this idea
of competition directly with the banks, and as stable coins
(01:32):
get more money market fund like maybe more deposit like
we have some stable coins that issue yield. Now, what
does that actually look like for the financial landscape?
Speaker 2 (01:42):
Totally for traditional payment companies of all sorts. I mean,
we all know that legacy payment companies collect a pretty
big rent so to speak, for use of their network.
In theory, there could be almost no cost at all
for a stable coin transaction, or virtually minimal. It seems appealing.
On the other hand, getting people to switch on masks
(02:02):
from using like a sort of debit card or credit
card to a stable colin as sort of a tricky
chicken and egg problem. But you know, it's a real
competitor to an existing way of doing payments.
Speaker 3 (02:11):
Also, the one thing we didn't mention is it's kind
of becoming important from a fiscal standpoint for the United States.
And you have Treasury Secretary Scott Besson saying that he
expects all this new stable coin issuance to basically increase
demand for US step for treasuries for mostly T bills
and so there's a lot to talk about.
Speaker 2 (02:30):
There's a lot to talk about. We really do have
the perfect guest today. We are going to be speaking
with Jeremy o'lary. He is the co founder and CEO
of Circle Internet. They recently went public in early June
and they've had a monster IPO, incredible demand for this company,
incredible enthusiasm there of course, the sponsor of USDC one
(02:51):
of that. I think it's the second biggest stable coin
out there after Tether. So Jeremy, thank you so much
for coming in studio here on odd lots.
Speaker 4 (02:58):
I'm really excited to be here. As you guys laid out,
there's a lot to talk about.
Speaker 2 (03:03):
I said it in the beginning, stable coins seem like
an incredible business model because here you have all these
people holding a non yield bearing token. They're backed by
in many cases, yield bearing assets that incorporate a lot.
On the other hand, in circles case, a lot of
the money that accrues to you go straight to coinbase.
Explain to us your relationship with coinbase, and so people
(03:24):
can understand sort of the economics of the money that
you bring in and then how it goes out the door.
Speaker 4 (03:29):
Yeah, maybe I'll actually start with something a little bit
higher level than drill in. So when we think about
our business and what we have built and what we
operate is, we think about it as an Internet scale
platform and network utility.
Speaker 5 (03:41):
So we're a set of software.
Speaker 4 (03:43):
On the public Internet that people can build on and
integrate to, and it provides this utility, which is this
global utility for storing and moving value around the world.
And there's a regulated part of it, and there's a
technology part of it. And so as part of that,
we want to build the largest stablecoin network in the
world with the most usage and the most transactions and
the most utility. We talk more about what that looks
(04:04):
like and as we built this, as we launched this
back in twenty eighteen, we knew that we needed to
really focus on building upfront utility and then building really
good distribution relationships. And so in our business, we have
sort of the scale of the network, which is measured
by the number of people who can reach in their
pocket and use USDC. There are over six hundred million
(04:27):
accounts that can access and use USDC around the world.
Speaker 5 (04:30):
A lot of that is through distribution partners that we have.
Speaker 4 (04:32):
Coinbase is one, Finance is another, and many many more.
You can find USDC on Robinhood, on Kraken. You can
find USDC in super apps in foreign countries like New Bank,
the biggest neo bank in Brazil, or in a product
like gcash and the Philippines, which is the dominant financial
product for many Filipinos.
Speaker 5 (04:51):
And so we.
Speaker 4 (04:52):
Make that product available globally, and we have a philosophy
of incentivizing distributors to grow with us. So I think
that's really fundamental to the philosophy. And right now, I
think we're in the early stages of building this. You know,
the numbers in the aggregate are sizeable, but when we
think about what this can grow into in the volume
of money storage and money movement that will happen in
(05:14):
an Internet native way, you know, we think we're still
in the very early stages of that.
Speaker 3 (05:19):
I mean, I understand that argument. But Coinbase also took
I think more than fifty percent of your revenue from
reserve assets last year, which seems like a lot to
pay for distribution when you're already the second biggest stable
coin in the world. Is that partnership you know, well,
the math always makes sense to you, and I guess
(05:39):
how often do you actually renew that agreement?
Speaker 4 (05:42):
Yeah, So a couple things. So, first of all, we
have a great relationship with Coinbase. They've been such a
huge partner and really bet big on this way before
anyone else. And so I think I get Brian a
lot of credit for really seeing that USDC could be
a fundamental part of their entire business.
Speaker 5 (05:58):
And really they've USDC and all their.
Speaker 4 (06:01):
Retail products, their institutional products, they're building new payments products
around it. They're really betting not the entire company, but
they're betting a lot on it, and that's amazing. And
when you think about networks that were built in the past,
from the seventies or the eighties or other times, you
definitely need these big anchor tenants that really bet on
it and help drive the utility. But to the degree
(06:21):
that Coinbase has leaned in, that's really helped create demand
for usage in other places. So Coinbase's largest rival, Finance,
for example, is also a significant partner on this. And
I think with the Genius Act passing, which I know
we'll come back to, and regulatory clarity kind of happening
around the world, we're entering a new chapter in all
of this, we were sort of in the early adopter phase,
(06:42):
which was really primarily anchored in like crypto trading markets
and things like that, And now we're entering this kind
of more mainstream phase where payment companies, banks, financial institutions,
capital markets companies, lots of consumer companies, consumer internet companies
are all getting involved. And so our view is that
the sort of share of the pie, as it were,
is going to be more and more diversified and grow.
(07:04):
The pie will grow and the diversity of the participants
and that will grow over time as well.
Speaker 2 (07:08):
Real quickly, what does the Genius Act mean for your business?
What changes pre and post Genius Act?
Speaker 4 (07:13):
So Genius Act is very significant in our view, and
it's actually in some ways we've been arguing for kind
of federal policy and regulation around this new form of
electronic money to some degree since I went to the
Capitol in twenty thirteen and started articulating a regulatory view
on this, but in a very significant way. Really for
(07:35):
the last five years, we've been pushing for federal regulation.
And what that does is, first of all, it enshrines
in federal law many of the things that we had
made core to the way we operate transparency, having major
audits of our firm safety and soundness requirements. It ensures
that the reserve itself is effectively a cache instrument and
(07:58):
allows this to be treated as a cash instry trument.
And by having that federal framework, it opens up opportunities
in two significant ways. I think the first is now
if you're a corporation, a public corporation, or you're a
financial institution, you now know what these are. You can
hold these and treat these like cash on your balance sheet.
(08:18):
This paves the way for the use of payment stable
coins in wholesale payments, retail payments, as eligible collateral on
capital markets venues. So it really opens up the aperture
of what people can use this for, and it gives
all those financial institutions and companies the clear definition and
the faith that they can interact with this, and they
(08:38):
know it's bankruptcy.
Speaker 5 (08:39):
Protected and all this good stuff.
Speaker 4 (08:41):
The other big thing is that, and this ties into
one of the opening comments, is having this as a
defined part of the US financial system. So stable coin money,
which in my view is a new form of m
one electronic money. Having that as a defined part of
the US financial system means that it can be expanded
internationally in very significant ways. Governments all around the world
(09:05):
will be able to enact their own stable coin laws
as they are, and I can talk about a dozen
countries where that's the case, and they can recognize issuers
that are under federal supervision in the US and enable
those to interact with their markets. And so it opens
up the global adoption here within the regulator financial system
in a very major way. And so for us, all
(09:27):
of that is we view as a tailwind to have
more and more people building on top of this infrastructure
that we've been building.
Speaker 3 (09:34):
So in terms of integration with the financial system and
competition with the banks, of course, you still under the
Genius Act, you do not have access to the Fed's
balance sheet. Is that right?
Speaker 5 (09:45):
That's correct. So a couple things.
Speaker 4 (09:47):
So one is the Genius Act doesn't sort of specify
who has access to the Fed's balance sheet. But it
does say, though, is that eligible reserves in a stable
coin can include cash at the FED, it include short
ration t bills, it can include repo treasurer, rebo facilities,
et cetera. And for US as circle, we actually just
(10:09):
announced very recently that we had filed to establish a
new entity called First National Digital Currency Bank, and First
National Digital Currency Bank is in application with the OCC
to become a National Trust Bank and under the Genius
Act as a large issuer greater than ten billion. You know,
(10:29):
we're around sixty four billion today. You know, we will
come under OCC supervision. And so we're trying to line
up the kind of infrastructure of Circle against the kind
of upcoming regulatory regime, and we want to make sure
we've got the best underlying kind of infrastructure there for
people who would build on us.
Speaker 2 (10:47):
So I said in the intro that my worry is
that if there was ever a financial crisis that involves
crypto connected, it is going to be somehow due to
stable coins. Because I always think like entities that are
pegged to the dollar, the deviate from the dollar, that's
where you get into trouble. People think this is a
dollar and suddenly it's worth ninety five cents. That actually
did happen to Circle in early twenty three, very briefly,
(11:10):
with the collapse of SVB. Could that ever happen again
or is there a way to say this could never
happen again?
Speaker 4 (11:17):
Well, a couple things, So secondary market trading is where
we saw that.
Speaker 2 (11:21):
But we've you were abled, the desks weren't able to
keep it at a dollar. Whatever was that did happen.
Speaker 4 (11:26):
That's because the banks were seized by the federal government
and so banking was not available over that time.
Speaker 5 (11:33):
But nonetheless, it's a really important question.
Speaker 4 (11:35):
It's a fundamental question, right, which is the real question
in my mind is is a full reserve model of
money a safer model of money than a fractional reserve
model of money. And in our financial system today we
do have FDIC for the fractional reserve banks.
Speaker 5 (11:51):
Now that's for small depositors.
Speaker 4 (11:53):
The vast majority of deposits in the banking system are
uninsured deposits. Now, some of those sit with so called
too big to fail financial institutions therefore implicitly have the
bailout power of the federal government, like we'd never let
them fail. But that's sort of theoretical. You could imagine
a scenario where the federal government doesn't have the balance
sheet or it doesn't want to create the inflation or whatever.
Speaker 5 (12:14):
It would be.
Speaker 2 (12:14):
The lack of political appetite.
Speaker 4 (12:16):
Lack of political appetite, I mean that was on the
verge in the financial crisis, that was jamming it through Congress,
which was then challenged later. But I think, and by
the way, this gets to the genesis of circle, like
why did I start this company? I spent a number
of years like reading about what happened with the financial crisis?
How did this happen? What is the nature of money,
what is the nature of central banking, how does the
(12:36):
international monetary system work? All of these things were fascinating
to me. And I was running a completely different kind
of business, which is an online video technology business, and
I kind of thought intuitively that there had to be
a better way. And it was actually through my kind
of introduction to crypto in twenty twelve that I sort
(12:56):
of saw, hey, there might be a path here. And
while lot of people were obviously focused on bitcoin as
a full reserve sort of sound money philosophy, and I'm
sure you've had plenty of people to talk about that
over the years, but for me, at least, the idea
of sound money, of kind of having a different risk
(13:16):
model in the financial system was very appealing to me,
and in particular this idea.
Speaker 5 (13:22):
Of fully reserved dollar digital currency.
Speaker 4 (13:25):
And you know, I'm in adherent to the Chicago School
and the Chicago Plan, I should say, which was a
particular philosophy that was advanced in the aftermath of all
of the bank failures in the nineteen thirties.
Speaker 5 (13:38):
And there were really two responses.
Speaker 4 (13:39):
There was a group of prominent economists, some of Irving Fisher,
who's at the Chicago School at the time, and there
was industry, and the prominent economists said, hey, we could
build a full reserve model where you have essentially government
obligation money or this full reserve form of money that
is in a payment type of institution, a payment bank,
and then you have a separate institution which does credit,
(14:00):
and you can't create new money out of thin air
as banks do. You could only lend the full reserve money.
And the philosophy there was that that would sort of
reduce risk in the financial system and it would smooth
out economic cycles. And that's come and gone as a
debate during the safes and loan crisis, after the Great
Financial Crisis, et cetera.
Speaker 5 (14:22):
But I think the advent of digital currency in particular
creates an opportunity for this that I think is really profound.
And when you think about native money on the Internet.
So take something like USDC with under genius sort of
gets defined as this cash instrument. The reserve instruments we can.
Speaker 4 (14:40):
Discuss are those you know, safe in the sense of
financial stability safe, but you have a fully reserved instrument.
What's powerful about digital currency is it inherits what I
call the superpowers of the Internet, meaning it inherits the
speed and velocity of data on the Internet. And so
all of a sudden, the marginal cost of store and
moving value goes very close to zero, and money velocity
(15:03):
can accelerate significantly, and that creates its own risks. But
this high velocity money that's moving on the Internet, that
can move literally from any person entity, any AI agent,
any business, all these sort of machine interactions, all this
stuff that happens globally, it's kind of crazy to think
about having that be the underlying on that to be
(15:26):
like a bank's stack of lending risk and to have
all of these lending risks I use floating free circulating
on the Internet. And so my view is that the
base layer of money in the Internet financial system, which
I think is a new financial system that's being built
up from the ground up, that the base layer of
money needs to be this full reserve form of money
(15:48):
that is actually safer.
Speaker 5 (15:50):
That begs the question.
Speaker 4 (15:51):
Of how do you do credit and all that good stuff,
which I'm happy to give you my views on, but
I think the philosophy is actually, how do you do
something that's actually safer that people can and look at
and say, I know that this is always available. It's
not that if the bank fails, I might get my
FDI see insurance cap. It's like, I know what this is,
(16:11):
and there's a prudential supervisor and there's actually this enforced
risk management which improves and continues to.
Speaker 5 (16:17):
Improve over time.
Speaker 3 (16:34):
You know, you mentioned the safety of the reserve assets,
and this is something that is in the act. It
kind of defines what you're supposed to hold, so things
like T bills, high quality liquid assets, all that good stuff.
We've been talking about a safe asset shortage in the
financial system for it feels like decades now right, it
feels like there is not enough good collateral to go
(16:57):
round for everyone, and as stable coins amp up, I'm
really curious if you're worried about the crowding out effect,
if there's going to be enough tea bills in the
world to satisfy that one to one reserve requirement.
Speaker 4 (17:10):
Yeah, so if it was exclusively on the basis of
short term government debt and this got to be tens
of trillions of dollars or whatever, then you might have
a mismatch there. Now, obviously regulation isn't going to stand
still on this. So the Genius Act is a significant
piece of legislation, and it defines these framework. That framework
is inclusive of cash that is overclatteralized.
Speaker 5 (17:32):
Lending with repo desks.
Speaker 4 (17:33):
It includes t bills of the shortest duration, and it
does include cash in the financial system, and it includes
eligible reserves at the Federal Reserve as cash as well.
And so over time, as this infrastructure scales, I think
that mixture gives us a huge amount of capacity that
I think, you know, arguably could support many tens of
trillions of dollars of value to it.
Speaker 2 (17:55):
Just to be clear on one specific are you completely
non exposed to non FDIC insured deposits, so completely extricated
yourself from that system.
Speaker 4 (18:04):
No, And in fact, let me describe what we do,
and we today by far operate with the greatest transparency
of any other stable coin, any other regulated stable coin
in the world, and we've done that through a couple
of things. The first is we created a structure called
the Circle Reserve Fund, which is really designed to provide
transparency into the reserves. So we did that with black Rock,
(18:27):
and it's an SEC registered what's called two A seven fund,
so it's a government obligation fund, but it gives daily
transparency into essentially about ninety percent of everything in the reserves.
And so you can look every day, you can search
usd XX. I pulled it up on my bladre and
you can drill in and you can see exactly the
serial numbers of every T bill, the short dration T bills,
(18:49):
and I think we have an average maturity of about
twenty three days in that reserve, and bloombergs is thirteen
right now, but I'm not you know, whatever is that.
That's what it says, look at the screen. That may
just looking at the screen, that may in fact.
Speaker 5 (19:03):
Be what it is today. That's that's what That's what
Bloomberg says. It's great.
Speaker 4 (19:07):
And then you can also see like the global systemically
important banks that we have REPO relationships with, and that's
there as well, so you can see that that's about
ninety percent. And then there's cash, and the cash about
ninety eight percent of the cash is held with a
very limited number of global systemically important banks, and these
(19:28):
global systemically important banks are the sort of lowest credit
risk kind of cash custodian type banks, and so we
hold the reserves there. Now you can argue about how
safe is that cash relative to you know, kind of
shout it out across all kinds of other stuff, but
that's sort of what's there today, and we need to
do that because we need intra day liquidity. We need
(19:51):
to ensure that in the event of five billion, ten billion,
whatever it is, that's always available. And then there's a
very very limited amount which we position in settlement banks
and reserve accounts in different geographies to ensure that it's
easy to create and redeem USDC whether you're in Singapore
or Japan, or Europe and other places. We also have
(20:13):
a separate issuance of USDC and a completely separate reserve
mandate and supervision in Europe as well, so we dual
issue USDC. We issue it under European rules under the
MECA Stable Corn Statutes, and we issue it in the
United States and we have created a way for kind
of fungibility across those is.
Speaker 3 (20:32):
The ultimate ambition to really take on and compete with
the deposit taking institutions in the sense that you want
to get big corporate clients. Maybe the type of clients
that would put their money in uninsured well, they have
so much money, some of it would end up being
uninsured by FDIC, or they might put it in a
money market fund or something like that. And if you're
doing that, doesn't it seem like the biggest hurdle is
(20:56):
the lack of interest paid on stable coin.
Speaker 5 (21:00):
So a couple things I think. The first is that payment.
Speaker 4 (21:04):
Stable coins, which is what the Genius Act governs and
in fact mirror stable coin laws in Europe, in Japan
and in other markets that are bringing these online. These
are designed to be cash instruments that are used in
payments and as a payment system technology. They're not designed
to be risk taking instruments that you would say deposit
(21:25):
and lend. And they're not designed to be investment products.
You're not purchasing a security, you're not purchasing an investment,
and so they're narrowly defined and Genius Act enforces that,
and so I think that's the right design for this
base layer kind of cash instrument. Now that doesn't mean
that you can't build digital tokens that present yield. And
(21:46):
while people call these stable coins, I think that term
of art will probably change. People call them tokenize real
world assets, tokenized money market phones, tokenized treasuries. So we
operate a sizable tokenized money market fund product called us YC,
and us y C is fungible with us DC. So
a business, for example, could hold us YC and earn
(22:09):
the yield that would be your typical kind of government
fund type yield, but have the ability to instantly create
and redeem cash and instantly create and redeem yield. And
so we acquired a company called hash note, and we've
integrated that into our core infrastructure and we've just brought
this online. It's a very powerful structure if you can
have tokenized yield bearing collateral and then instantly uses as
(22:32):
cash for settlement, for trading, for spending, et cetera. And
so I think that that's something that we can kind
of do uniquely because we have this widely adopted payment
stable coin and then kind of marrying those two together
and we can do it in a very very capital
efficient way, because essentially the reserves of USDC mirror the
actual instruments in us y C, and so there's a
(22:54):
sort of fungibility between us YC and USDC reserves.
Speaker 2 (22:58):
Let's talk about the competitive landscape in a few years
from now. So at some point you're going to revisit
your agreement with coinbase. Maybe JP Morgan will have a
payment coin that they're going to want to be the
preferred coin that sits there, and maybe they're going to
be willing to give Coinbase a huge split for pride
of place. Or maybe there'll be some other coin that
(23:19):
they use for inter bank settlements that will be tokenized
in some way to make their transfers with City and
Bank of America and other banks more competitive. We have
seen other coins rise, first digital in Asia for example. Like,
if you're paying all this money to coinbase still and
you you know distribution is so important. What is the
competitive advantage that Circle has in say the year I
(23:41):
don't know, twenty twenty eight.
Speaker 5 (23:42):
Well, I think a couple of things.
Speaker 4 (23:44):
I think the first is that to understand Circle's business
is to understand that we operate an Internet scale platform,
network utility we have very powerful internet platform flywheels and
developer flywheels. We have a network that consists of thousands
and thousands of products and services that have implemented and
(24:04):
integrated to our network. And so every time a developer says, hey,
I want to be able to store and move digital dollars,
they choose to implement USDC because USDC has this really
broad established network and so we have these really powerful
flywheels and as that provides new utility or a user
when say New Bank in Brazil as USDC, well, there's
like one hundred million people at New Bank who can
(24:26):
interact with USDC. Now the rest of the world can
benefit from that user base of one hundred million people,
and so we have network effects that are there, and
those exist in pretty powerful ways. So if you look
at the movement of stable coin in the on chain
ecosystem what sometimes people call DeFi, we have about I
believe today around seventy five percent of the market there.
(24:47):
And we've built protocols that make it very seamless, safe
and secure and capital efficient to transmit USDC across all
these different networks. So we've built developer platforms, we've built flywheels,
for adoption, and this is a classic internet platform model.
The other is that we've built these extraordinary liquidity network effects,
(25:10):
and this is really critical. So over the past number
of years, we've built out on a regulated basis infrastructure
where we're regulated and where we have integration into the
financial systems of Singapore, Hong Kong, Japan, the United Kingdom,
the EU, the US, we've integrated into Brazil, Mexico, and
we've just announced that we're coming online in UAE. So
(25:30):
we've built out these integration points and we've built out
primary liquidity in all of these markets, and so USCC
is available and liquid at scale all around the world.
That's the primary liquidity side, and so that's crucial if
you're going to use this. You need to be able
to know I can get in, I can get out,
and I can do that all around the world. And
then we've created very large secondary liquidity, and that's really
(25:53):
important as well. So when you get down to the
E money product in Vietnam, can you go from that
em money product in Vietnam into USDC and back and
all around the world all these different payment methods and
payment instruments and the actual secondary liquidity between those and
USDC is huge, and so the barrier to entry is
actually fairly high.
Speaker 5 (26:13):
We have these large network modes and right now.
Speaker 2 (26:17):
So it's not just like making a new ERC twenty making.
Speaker 5 (26:19):
A new coin.
Speaker 4 (26:20):
The marginal value of a new stable coin right now
is effectively zero. You have to have established network utility
and then liquidity at scale, and essentially liquidity begats liquidity.
Network velocity extends network velocity, and so you know, we
feel like that's a very very good position. And I
think the ability to be federally regulated and to have
(26:42):
these higher bars on the infrastructure side and what's required
of view is also really important. That's not something for
the faint of heart, and doing that all around the world,
not just in the United States. There's a lot of
focus on the United States, but we've been under significant
regulatory regimes and other jurisdictions for quite some time as well.
Those are you know, meaningful barriers, and I guess the
bigger picture there is like we're just focused on building
(27:05):
this infrastructure, making it easy to adopt by whether it's
a technology company, a fintech company, a bank. We're building
partnerships with some of the biggest core banking infrastructure companies
in the world. We announced something recently with fiserv. Just
yesterday we announced a broad partnership with fis Global. And
these are companies that service tens of thousands of banks,
(27:26):
and we're plugging USDC as an innovation into their infrastructure.
And so we even do it with the card networks
Visa and MasterCard, where they're using USDC as an internal
settlement system to move money from issuers back to home
base faster than the correspondent banking system. There's lots of
places we're getting integrated. And what I like to say
is I believe that the stable stablecoin networks are a
(27:49):
winner take most, not a winner take all.
Speaker 5 (27:52):
Mark.
Speaker 3 (27:52):
This was going to be my next question. Can you
talk about that a little bit more like ten years
from now? What does the landscape actually look like and
what is the interoperability of all these different stable coins
actually look like.
Speaker 4 (28:03):
Yeah, so I think ten years from now, I don't
think we have any idea what it's going to look like.
Speaker 5 (28:10):
But I mean there are several different.
Speaker 2 (28:13):
Component ford looking statement.
Speaker 4 (28:14):
Yeah, yeah, several different components of this. So I think
one is we take as a first principle that stable
coin money is the highest utility form of money that's
ever been created. And it's the highest utility not just
because it has Internet superpowers of speed and it cost efficiency,
but because it's actually the first truly programmable form of money.
(28:36):
And if you're going to have a programmable form of
money where software intermediation and software innovation on top of
money has not existed, open banking is like poor cousin.
So you're introducing a new realm of money utility, and
we're at the very front edges of that, and we
see that already today. I mean the entire phenomenon of DeFi,
which is highly sophisticated market structures that are just autonous
(29:01):
machines effectively running in code on the Internet. That's pretty amazing.
Speaker 5 (29:06):
So when you unleash that, and you unleash that.
Speaker 4 (29:09):
Kind of curve of innovation, like it's sort of like
when mobile devices were out. People were into mobile for
a really long time and they were like, hey, Mobile's
gonna be huge, and Mobile World Congress was like the
biggest conference in the world, and you'd.
Speaker 5 (29:21):
Go there and there's like there were like one hundred thousand.
Speaker 4 (29:24):
People there and and yet it all sucked like like
all the mobile phone devices, everything, everything was, everything was terrible,
but everyone believed in mobile and then obviously the iPhone
came and it wasn't the end, it was the beginning.
Is the point is that like actual innovation with programmable
apps on phones actually started then in a real way.
Speaker 2 (30:00):
I had a use case recently where I wanted there
to be a stable coin use case and I think
maybe this will coming. So I've tried to do vibe
coding where it's like yeah, yeah, cursor and making software yeah,
And I wanted to link up my software to chat
gubt so that it could query the AI yes, and
to access the API, I had to like entering a
credit card with LGPT and then I had to like
(30:21):
copy your auless code. It was really annoying, and I
was like, why can't I just have my cursor be
linked to a stable coin wallet it make the connection
with Chad gbt's AI so that I don't have to
make an account and it just pays per usage. So
that is for intelligence that is coming.
Speaker 4 (30:37):
Definitely what's going to happen, okay, And in fact, this
is where I was getting with my point actually in
response to you tracy, which is, like, we think about
the Internet and like when the marginal cost of storing
and moving information went to zero, the NetWorld output of
information like million xt or when software could be distributed
to a browser, the NetWorld output of software was like.
Speaker 5 (30:55):
Up a million x. So it created these huge growth.
Speaker 4 (30:57):
So my view is that over ten years and use
your tenure, is that the total payment volume, which is
a measure that people like to use, is likely going
to go up by many, many, many orders of magnitude
because you've taken that cost and friction out and because
of the new utility that comes from programmability. And so
my own belief is that the scale of money that
(31:18):
moves in the world will be so much larger than
where we are today. It's sort of the Internet infrastructure
actually hitting the financial system, which is a scary thing
because like, wow, you've got all this money velocity, and
you've got machines that are intermediating this through ais Like,
oh my god. That's one of the reasons why it
needs to be very safe full reserve instruments. But it
(31:39):
also i think gets to the heart of your question,
which is are we going after all the deposits of
the banks or all this is the answer is no.
But my belief is that financial institutions who create either
places where people can lend their money and then that
money can be used for other investing purposes or where
people actually make specific investments with their money, like those
(32:03):
will proliferate. And in fact, I think innovation in both
credit intermediation and in investable assets is about to go
through a new renaissance because of blockchains, tokenization and stable coins.
And so my own view is in a system of
full reserve money, you need to be able to do
credit intermediation with that full reserve money, and you need
(32:23):
to make that credit intermediation be as efficient as possible.
And I think you can build on chain credit intermediation
in a way where you have greater safety, more transparency,
more audible risk management, and you can build market structures
that are far more accessible to more people and institutions
(32:43):
in the world. I think of it as like AdWords
for credit, like you know this sort of these super
scaled or Amazon marketplace for product creators. We haven't entered
that world yet, but I think there will be firms
and that many of them will likely be regulated by
central banks who are standing in that in the structure,
and so it's an opportunity to reinvent what payments, credit investing,
(33:05):
all these things look.
Speaker 2 (33:06):
Like Tracy, I kind of think, by the way, and
we should maybe do. I think the Internet as we
know it in terms of like Internet that's free to
browse is probably going to die because on a matter
of time, you know, if you're like AI bot can
like go search the web, those sites are going to
want payment for having all the scape, and you know,
stable coins can solve that. But it does feel like
(33:27):
we're going to have a totally thing where like you
don't just get to use the web for free. Everything
is like meter based on the data that you're pulling in.
Speaker 3 (33:34):
Yeah, well we were talking about that earlier, right, this
idea that we've already seen traffic start to collapse because
the search engines are just providing AI summaries of individual pages. Yeah,
how long are content providers like us? How long are
they going to stand for that? I don't know.
Speaker 4 (33:51):
Well, can I say something on that, which is we
actually work together with coinbase and a couple of others
on implementing something called X four h two.
Speaker 5 (33:59):
Now you're like, what is that?
Speaker 4 (34:00):
And Mark and JSON talks about this he has over
the years, back in the early days of the web.
Speaker 2 (34:05):
You know, yeah, there you go, ex pay via API
without registration. That's what I want. That's what I want
for my vibor. So there exactly what I'm looking.
Speaker 4 (34:12):
So it's actually a It already exists as a protocol
that is built into the way that every web server,
every web browser, every client that interacts with the Internet works.
Speaker 5 (34:21):
It's a protocol that's there.
Speaker 4 (34:23):
It uses the existing HTTP transport and now you can
actually say, hey, I'm hitting my piece of content or
data and I can challenge whoever's accessing it and say,
you know, to get to this, you need to pay me.
And it can basically come back and say you can
pay me on a blockchain with a stable coin. And
so we're doing that with USDC. We're encouraging developers to
do that. There's lots of third parties that are building
(34:45):
layers for AI agents to use this, and so I
think that's one example, but I think it gets to
the heart of what you're saying, which is there may
be more of a subscription model.
Speaker 5 (34:54):
Spotify is probably.
Speaker 4 (34:55):
The best example where you have the celestial jukebox and
you pay your fifteen bucks and you get access everything.
You know, there's a kind of question about could there
be a celestial data box which is more broad and
where the actual consumer front ends are companies like open
Ai or Google, and you're paying a subscription and then
there's like behind the scenes either pro rata or usage
(35:16):
based model that is actually compensating the actual data providers
and creators, and so lots to be unfold here.
Speaker 3 (35:24):
Yeah, can I ask a slightly awkward question, it's a
leading question, how much do you hate Tether given that
not only are they number one, but you know, there's
been questions over their reserve quality for many years, although
I think some of their transparency has improved. But thirdly,
you know, we had the Tether CEO on a few
(35:44):
months ago, and they're expanding into the US, so that
would seem to you know, directly be competing with you
on your sort of home turf, although I understand you're
also expanding elsewhere in the world. How do you feel
about Tether?
Speaker 4 (35:58):
Yeah, I mean, look, I think our view has always
been that we're building for the long run, and we've
taken a different approach really since inception we've taken a
sort of regulatory first approach, a compliance first approach, becoming
widely licensed, widely regulated, always advocating to improve that, and
(36:19):
that's allowed us to build, obviously, what we think is
a great business. It's allowed us to have deep integration
into the financial sector with banks. If you're a major
institution partnering in this space, the probability of you doing
that with circles reasonably high. And so we built a
really great franchise and we are really well known for integrity,
(36:42):
for trustworthiness. We're a publicly traded company with the highest
standards of governance and accountability that are out there, and
we've always sought to up level that. And so my
view is that if we're building a new Internet financial system,
and that new Internet financial system is going to be
this incredibly broadly used infrastructure and it's going to be
used by mainstream companies and public companies and financial institutions
(37:05):
and financial intermediaries.
Speaker 5 (37:06):
All around the world.
Speaker 4 (37:07):
We're going to integrate with that and build on that.
They're going to want to do that with trusted, well
regulated companies. And so our view is that the early
adopter segment of the market, which has really been dominated
by sort of the crypto trading side of things, is
that early adopter segment.
Speaker 5 (37:23):
We're now going into a different chapter.
Speaker 4 (37:25):
And if you actually look at over the last you know,
eighteen months, we've taken market share. We've taken you know,
material market share, and we're growing in many, many areas.
And I would say also internationally, I would say the
majority of our business now is international. So we're in
many many markets and in many other markets as well.
The regulators are putting in place very clear regulations around
(37:50):
what stable coin issuers need to be and so we
are the only large global dollar stable coin that's legally
available in Europe as an example. And so I think
we just keep doing what we're doing. I think we're
building great infrastructure for companies, for enterprises, for developers, and
we just got to keep doing that and will grow.
And this is a really significant size market. And so
(38:12):
I actually, you know, I have a lot of respect
for what they've been able to build. We took a
different path. We built something also I think really special
and over five years, ten years, as we said earlier, right,
this is very likely a winner take most, not a
winner take all market. And I actually don't think we know,
you know, if they're you know, maybe three or five
big players. I don't know what that'll be in five
years or ten years, but there's probably some that don't
(38:34):
exist yet that will show up too.
Speaker 2 (38:37):
I take it as a sign of maturity. Like years
ago when it came to crypto, people were just excited
about number go up right, and then now it's like
people are really excited about number go sideways. So if
it just stays at one forever, there's like a really
good sign. And so I take it as a sign
of maturity for the industry that there is all this
interest in stable colins. Nonetheless, no pun intended, Nonetheless, you know,
(38:59):
all those public chains are still out there, and USDC
is on a number of chains twenty four. When we
talk about like who collects the profits from this, and
we've talked specifically about say your distribution with coinbase and
whether that do you see value accruing to token holders
of different chains in the future, because it seems to
(39:19):
me like for the most part, as long as it's
like really fast and cheap, it really doesn't matter if
I'm sending something to Tracy, I care about your reputation
and your money in the bank. I don't really care
about what chain that you actually transact over at the end.
So if you want to do it under you Solona
or some layer three that gives almost no value back
to the ether chain or something like that, I don't
(39:39):
really care. Do you see like token holders of the
public chains collecting rents in your future, collecting a meaningful
amount of rents from this on chain commerce?
Speaker 5 (39:52):
It's a great question.
Speaker 4 (39:53):
I'd say a couple of things, And I'm actually going
to relate back to my mobile commentary from earlier, which
is our mental model is that blockchain networks are Internet
operating systems, and they provide a way to store data,
conduct transactions on that data, and provide compute around those
transactions and data. That's what they do their public computing machines.
Speaker 5 (40:13):
And there are a lot of them. There's actually thousands
that have been launched.
Speaker 4 (40:18):
We're on twenty three or twenty four today, and we
see this as a space that is constantly evolving, and
so there's constantly innovation on the layer ones. There's these
layer twos. When I think about where we are relative
to where we were with say iPhone, we're in the
pre iPhone era, of blockchain networks. In my view, I
think there's lots of operating systems out there, just like
(40:41):
there were lots of mobile operating systems, and some of
them got better than others and improve the user experience.
Some of them started enabling consumer things, remember NTT DoCoMo
in Japan or things like that, And so I think
that we're still really early, and so that's one of
the reasons why we've really tried to make sure we're
trying to operate our own stable cooin network on the
(41:02):
best ones that are.
Speaker 2 (41:03):
It just seems to me the decentralized change. You pay
them a rent because you want some advantage of decentralization.
If I'm using USDC, I've already accepted the premise of centralization.
You have money in the Black block Fund. It's about
it's about as centralized and legacy fly as you could
probably get once I've already accepted this premise of centralization,
that my money is just backed by a bank. Well
(41:24):
you do that, Why do I even care? Why pay
these rent to some network of computers?
Speaker 4 (41:29):
So this is this is this is it's a different
layer is Essentially my thinking is that public blockchains are
a general purpose layer that many many applications can be
built on top of. Stable Coins are the killer app
for sure, I will say in my own opinion, but
there are many, many different kinds of applications that can
be built on that, and we need innovation in those
computing platforms. We need higher speed, we need greater privacy,
(41:52):
we need better forms of compute, we need new and
more primitives in that infrastructure, and that needs to expand
we need to get to a point where these public
networks are supporting huge scales of consumer applications and enterprise applications,
and so there's like a growth in that kind of
infrastructure side of it. And those are shared infrastructures that
(42:12):
many people can can take advantage of, and so there
needs to be a kind of fee model on those networks.
We've actually created a way for the fees on many
of these blockchain networks to actually just be paid in USDC,
and so that's something that we see more of happening. That,
like the notion of gas fees or the notion of
gas fees in some other cryptocommodity, will become less and
(42:32):
less common and like fees will just be paid in
stable coin. But I think there is value in these networks,
and I think that there's very likely value for token
holders on these networks if these networks provide scalable infrastructure
that people can take advantage of. Again, stable coin is
one application layer there, and there'll be many many other
(42:53):
application layers on those and so you kind of pay
for the shared the shared state of the machine, the
shared data state, the shared transaction state, the shared compute state.
There's value in paying for that shared state.
Speaker 3 (43:06):
Just on this note, can you tell us when you're
talking to clients or potential partners, like, what is it
that they are most interested in getting from you? Can
you provide us with a sort of hierarchy of needs
for you know, USDC customers in the sense of are
they worried about the speed of the technology? Are they
worried about the reserve assets? And I guess corporate governance
(43:28):
and things like that. How would you prioritize what people
are actually thinking about.
Speaker 4 (43:33):
Well, we have a huge range of types of people
that we work with, from like individual developers that are
creating a new product in some emerging market, to you know,
people building on chain protocols to very large you know,
financial institutions that are looking at using this or integrating
this in different ways, and so the things that they
(43:53):
care about do vary across those, But I would say trust, transparency, liquidity.
Speaker 5 (44:01):
Are really really important to everyone. Right.
Speaker 4 (44:03):
If I'm a developer and I'm building a product, I
need to know that this is a legitimate digital dollar,
that it's accessible in the markets that I'm intending to serve,
that people can easily access it and use it, and
that the infrastructure is good. I can build good product experiences,
I can build good user experiences and build an application
(44:25):
or something from my own customers.
Speaker 5 (44:26):
That works well.
Speaker 4 (44:27):
And so they care about the developer tooling, the on
chain infra, the liquidity, the trust.
Speaker 5 (44:32):
They care about all those things as a startup.
Speaker 4 (44:34):
But even a large company, say you're a big fintech
and you're like, hey, I want to start leaning into this.
I want to add stable coins for payments, or I
want to enable my customers to access DeFi or other
things like that. They're going to care more about the
kind of legal and compliance status of Circle. They're going
to care about the governance of the company itself, but
(44:55):
also of the underlying regulation that affects us, because they
I have to face those same issues whether they're in
the Philippines or in Brazil or in the United States.
So they care a lot about those things. And then
they also care about infrastructure clearly, like infrastructure readiness. Is
this something like I could bring a large number of
users to and then everyone cares about user experience?
Speaker 5 (45:18):
Right? Can I craft an experience.
Speaker 4 (45:20):
Where the crypto disappears, where I don't need to know
what blockchain I'm on, and I don't need to know
about gas pees, and I just want to create a
way for I have stored value. I want to enable
people to move it around really easily. They care a
lot about that, whether you're the biggest company in the
world or a small startup.
Speaker 2 (45:36):
Jeremy Alert, thank you so much for coming on the odlock.
Speaker 5 (45:39):
Thank you, my pleasure.
Speaker 2 (45:41):
Probably the first crypto company I can think of that
actually tried to grow through the regulatory approach and didn't
get destroyed and blocked down. Very impressive and I'm yeah
great chatting with you.
Speaker 5 (45:50):
Thank you.
Speaker 2 (46:03):
Tracy. You know one question I didn't get to ask,
or I forgot to ask, is like the perennial, like
live or buy coffee with a stable coin. At some
point maybe I will maybe I won't. But in the
conversation I started thinking, that's probably the wrong way to
think about it. It's gonna be those machine to machine
payments that if stable coins become a real important payments thing,
(46:23):
it's going to be like those like computer to computer
payments that have to be.
Speaker 3 (46:27):
Seen, right, and they're sort of plugged in the inner
workings of the Internet.
Speaker 2 (46:30):
Yeah, it makes sense. Maybe the coffee thing will happen,
who knows, But like, I don't know.
Speaker 3 (46:36):
I don't find it that hard to buy a coffee
right now, right exactly.
Speaker 2 (46:41):
Buying coffee's is a solved problem as far as I'm concerned.
Speaker 3 (46:44):
Yes, but this is a new problem, You're right, that
could be solved. That's interesting. The other thing I thought
was really interesting was you hit upon the sort of
tension in the decentralization versus like traditional finance, and this
idea that like, okay, it's all about DeFi and blockchain
and all that stuff, but ultimately like black Rock is
holding the money.
Speaker 2 (47:04):
Yeah, no, totally. And this is like, you know, it
goes back to those formative episodes we did with Austin Campbell,
which is a big part of the story to the
extent that this will be a thing, is like just
solving the sort of software payments, because we could do
a million episodes on legacy text acts and why JP
Morgan's or whatever companies internal software will always be They'll
(47:26):
be spending billions of dollars upgrading it whatever it is,
and the difficulty of integrations. But if you just have
like a one off, like so like global platform that
anyone can plug into and program where money can easily
be trend there, that's very powerful.
Speaker 3 (47:40):
Yeah, this is why I say user interface, user experience
is underrated.
Speaker 5 (47:45):
Right.
Speaker 3 (47:45):
That's like me saying Michael Jordan is underrated. But like
that really that really is it? Right? Like that's where
the battleground kind of is the ability to like plug
in and interoperate with all these different systems.
Speaker 2 (47:57):
Yeah, well I'm really excited. I think we should have
a Jeremy back at something.
Speaker 3 (48:02):
Yeah, we should, all right, shall we leave it there
for Let's leave it there. This has been another episode
of the Odd Lots Podcast. I'm Tracy Alloway. You can
follow me at Tracy Alloway and I'm Jill Wisenthal.
Speaker 2 (48:11):
You can follow me at the Stalwart. Follow our guest
Jeremy Alaire. He's at jare Alaire. Follow our producers Kerman
Rodriguez at Kerman armand dash Sho Bennett at Dashbot and
kel Brooks at Kelbrooks. More odd Lots content, go to
Bloomberg dot com slash odd Lots, where we have a
daily newsletter and all of our episodes, and you could
chout about all of these topics twenty four to seven
in our discord discord dot gg slash oud Lots.
Speaker 3 (48:34):
And if you enjoy odd Lots, if you want us
to do more episodes on the future of the payment system,
then please leave us a positive review on your favorite
podcast platform. And remember, if you are a Bloomberg subscriber,
you can listen to all of our episodes absolutely ad free.
All you need to do is find the Bloomberg channel
on Apple Podcasts and follow the instructions there. Thanks for
(48:54):
listening in in
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:21):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, I have three thoughts about stable coins.
Speaker 3 (00:27):
Oh boy, here we go.
Speaker 2 (00:28):
Three just three. One is I think within the broader
realm of cryptos, stable coins are real and here to
stay and probably going to be important. Two, some of
them seem like an absolute cash money maker because you
don't pay a yield to the holders. You collect the
yield for what you have backing it. It's a great
business model. It seems amazing. And Three, as the child
(00:49):
of the great financial crisis generation, I'm convinced that if
crypto is ever implicated in the future financial crisis, it
might have something to do with stable coins.
Speaker 3 (00:58):
You stole all my talking, honest, I had like the
note written down that you know, issuing liabilities that mostly
return nothing is a wonderful business model.
Speaker 2 (01:08):
What else did you could just restable?
Speaker 1 (01:10):
Well?
Speaker 3 (01:10):
Also, I was thinking stable coins are basically the primary
touch point of crypto to the regulated financial system, and
so you would expect some of those financial stability concerns
to potentially materialize there. And then The one thing you
didn't mention that I'm interested in is also this idea
of competition directly with the banks, and as stable coins
(01:32):
get more money market fund like maybe more deposit like
we have some stable coins that issue yield. Now, what
does that actually look like for the financial landscape?
Speaker 2 (01:42):
Totally for traditional payment companies of all sorts. I mean,
we all know that legacy payment companies collect a pretty
big rent so to speak, for use of their network.
In theory, there could be almost no cost at all
for a stable coin transaction, or virtually minimal. It seems appealing.
On the other hand, getting people to switch on masks
(02:02):
from using like a sort of debit card or credit
card to a stable colin as sort of a tricky
chicken and egg problem. But you know, it's a real
competitor to an existing way of doing payments.
Speaker 3 (02:11):
Also, the one thing we didn't mention is it's kind
of becoming important from a fiscal standpoint for the United States.
And you have Treasury Secretary Scott Besson saying that he
expects all this new stable coin issuance to basically increase
demand for US step for treasuries for mostly T bills
and so there's a lot to talk about.
Speaker 2 (02:30):
There's a lot to talk about. We really do have
the perfect guest today. We are going to be speaking
with Jeremy o'lary. He is the co founder and CEO
of Circle Internet. They recently went public in early June
and they've had a monster IPO, incredible demand for this company,
incredible enthusiasm there of course, the sponsor of USDC one
(02:51):
of that. I think it's the second biggest stable coin
out there after Tether. So Jeremy, thank you so much
for coming in studio here on odd lots.
Speaker 4 (02:58):
I'm really excited to be here. As you guys laid out,
there's a lot to talk about.
Speaker 2 (03:03):
I said it in the beginning, stable coins seem like
an incredible business model because here you have all these
people holding a non yield bearing token. They're backed by
in many cases, yield bearing assets that incorporate a lot.
On the other hand, in circles case, a lot of
the money that accrues to you go straight to coinbase.
Explain to us your relationship with coinbase, and so people
(03:24):
can understand sort of the economics of the money that
you bring in and then how it goes out the door.
Speaker 4 (03:29):
Yeah, maybe I'll actually start with something a little bit
higher level than drill in. So when we think about
our business and what we have built and what we
operate is, we think about it as an Internet scale
platform and network utility.
Speaker 5 (03:41):
So we're a set of software.
Speaker 4 (03:43):
On the public Internet that people can build on and
integrate to, and it provides this utility, which is this
global utility for storing and moving value around the world.
And there's a regulated part of it, and there's a
technology part of it. And so as part of that,
we want to build the largest stablecoin network in the
world with the most usage and the most transactions and
the most utility. We talk more about what that looks
(04:04):
like and as we built this, as we launched this
back in twenty eighteen, we knew that we needed to
really focus on building upfront utility and then building really
good distribution relationships. And so in our business, we have
sort of the scale of the network, which is measured
by the number of people who can reach in their
pocket and use USDC. There are over six hundred million
(04:27):
accounts that can access and use USDC around the world.
Speaker 5 (04:30):
A lot of that is through distribution partners that we have.
Speaker 4 (04:32):
Coinbase is one, Finance is another, and many many more.
You can find USDC on Robinhood, on Kraken. You can
find USDC in super apps in foreign countries like New Bank,
the biggest neo bank in Brazil, or in a product
like gcash and the Philippines, which is the dominant financial
product for many Filipinos.
Speaker 5 (04:51):
And so we.
Speaker 4 (04:52):
Make that product available globally, and we have a philosophy
of incentivizing distributors to grow with us. So I think
that's really fundamental to the philosophy. And right now, I
think we're in the early stages of building this. You know,
the numbers in the aggregate are sizeable, but when we
think about what this can grow into in the volume
of money storage and money movement that will happen in
(05:14):
an Internet native way, you know, we think we're still
in the very early stages of that.
Speaker 3 (05:19):
I mean, I understand that argument. But Coinbase also took
I think more than fifty percent of your revenue from
reserve assets last year, which seems like a lot to
pay for distribution when you're already the second biggest stable
coin in the world. Is that partnership you know, well,
the math always makes sense to you, and I guess
(05:39):
how often do you actually renew that agreement?
Speaker 4 (05:42):
Yeah, So a couple things. So, first of all, we
have a great relationship with Coinbase. They've been such a
huge partner and really bet big on this way before
anyone else. And so I think I get Brian a
lot of credit for really seeing that USDC could be
a fundamental part of their entire business.
Speaker 5 (05:58):
And really they've USDC and all their.
Speaker 4 (06:01):
Retail products, their institutional products, they're building new payments products
around it. They're really betting not the entire company, but
they're betting a lot on it, and that's amazing. And
when you think about networks that were built in the past,
from the seventies or the eighties or other times, you
definitely need these big anchor tenants that really bet on
it and help drive the utility. But to the degree
(06:21):
that Coinbase has leaned in, that's really helped create demand
for usage in other places. So Coinbase's largest rival, Finance,
for example, is also a significant partner on this. And
I think with the Genius Act passing, which I know
we'll come back to, and regulatory clarity kind of happening
around the world, we're entering a new chapter in all
of this, we were sort of in the early adopter phase,
(06:42):
which was really primarily anchored in like crypto trading markets
and things like that, And now we're entering this kind
of more mainstream phase where payment companies, banks, financial institutions,
capital markets companies, lots of consumer companies, consumer internet companies
are all getting involved. And so our view is that
the sort of share of the pie, as it were,
is going to be more and more diversified and grow.
(07:04):
The pie will grow and the diversity of the participants
and that will grow over time as well.
Speaker 2 (07:08):
Real quickly, what does the Genius Act mean for your business?
What changes pre and post Genius Act?
Speaker 4 (07:13):
So Genius Act is very significant in our view, and
it's actually in some ways we've been arguing for kind
of federal policy and regulation around this new form of
electronic money to some degree since I went to the
Capitol in twenty thirteen and started articulating a regulatory view
on this, but in a very significant way. Really for
(07:35):
the last five years, we've been pushing for federal regulation.
And what that does is, first of all, it enshrines
in federal law many of the things that we had
made core to the way we operate transparency, having major
audits of our firm safety and soundness requirements. It ensures
that the reserve itself is effectively a cache instrument and
(07:58):
allows this to be treated as a cash instry trument.
And by having that federal framework, it opens up opportunities
in two significant ways. I think the first is now
if you're a corporation, a public corporation, or you're a
financial institution, you now know what these are. You can
hold these and treat these like cash on your balance sheet.
(08:18):
This paves the way for the use of payment stable
coins in wholesale payments, retail payments, as eligible collateral on
capital markets venues. So it really opens up the aperture
of what people can use this for, and it gives
all those financial institutions and companies the clear definition and
the faith that they can interact with this, and they
(08:38):
know it's bankruptcy.
Speaker 5 (08:39):
Protected and all this good stuff.
Speaker 4 (08:41):
The other big thing is that, and this ties into
one of the opening comments, is having this as a
defined part of the US financial system. So stable coin money,
which in my view is a new form of m
one electronic money. Having that as a defined part of
the US financial system means that it can be expanded
internationally in very significant ways. Governments all around the world
(09:05):
will be able to enact their own stable coin laws
as they are, and I can talk about a dozen
countries where that's the case, and they can recognize issuers
that are under federal supervision in the US and enable
those to interact with their markets. And so it opens
up the global adoption here within the regulator financial system
in a very major way. And so for us, all
(09:27):
of that is we view as a tailwind to have
more and more people building on top of this infrastructure
that we've been building.
Speaker 3 (09:34):
So in terms of integration with the financial system and
competition with the banks, of course, you still under the
Genius Act, you do not have access to the Fed's
balance sheet. Is that right?
Speaker 5 (09:45):
That's correct. So a couple things.
Speaker 4 (09:47):
So one is the Genius Act doesn't sort of specify
who has access to the Fed's balance sheet. But it
does say, though, is that eligible reserves in a stable
coin can include cash at the FED, it include short
ration t bills, it can include repo treasurer, rebo facilities,
et cetera. And for US as circle, we actually just
(10:09):
announced very recently that we had filed to establish a
new entity called First National Digital Currency Bank, and First
National Digital Currency Bank is in application with the OCC
to become a National Trust Bank and under the Genius
Act as a large issuer greater than ten billion. You know,
(10:29):
we're around sixty four billion today. You know, we will
come under OCC supervision. And so we're trying to line
up the kind of infrastructure of Circle against the kind
of upcoming regulatory regime, and we want to make sure
we've got the best underlying kind of infrastructure there for
people who would build on us.
Speaker 2 (10:47):
So I said in the intro that my worry is
that if there was ever a financial crisis that involves
crypto connected, it is going to be somehow due to
stable coins. Because I always think like entities that are
pegged to the dollar, the deviate from the dollar, that's
where you get into trouble. People think this is a
dollar and suddenly it's worth ninety five cents. That actually
did happen to Circle in early twenty three, very briefly,
(11:10):
with the collapse of SVB. Could that ever happen again
or is there a way to say this could never
happen again?
Speaker 4 (11:17):
Well, a couple things, So secondary market trading is where
we saw that.
Speaker 2 (11:21):
But we've you were abled, the desks weren't able to
keep it at a dollar. Whatever was that did happen.
Speaker 4 (11:26):
That's because the banks were seized by the federal government
and so banking was not available over that time.
Speaker 5 (11:33):
But nonetheless, it's a really important question.
Speaker 4 (11:35):
It's a fundamental question, right, which is the real question
in my mind is is a full reserve model of
money a safer model of money than a fractional reserve
model of money. And in our financial system today we
do have FDIC for the fractional reserve banks.
Speaker 5 (11:51):
Now that's for small depositors.
Speaker 4 (11:53):
The vast majority of deposits in the banking system are
uninsured deposits. Now, some of those sit with so called
too big to fail financial institutions therefore implicitly have the
bailout power of the federal government, like we'd never let
them fail. But that's sort of theoretical. You could imagine
a scenario where the federal government doesn't have the balance
sheet or it doesn't want to create the inflation or whatever.
Speaker 5 (12:14):
It would be.
Speaker 2 (12:14):
The lack of political appetite.
Speaker 4 (12:16):
Lack of political appetite, I mean that was on the
verge in the financial crisis, that was jamming it through Congress,
which was then challenged later. But I think, and by
the way, this gets to the genesis of circle, like
why did I start this company? I spent a number
of years like reading about what happened with the financial crisis?
How did this happen? What is the nature of money,
what is the nature of central banking, how does the
(12:36):
international monetary system work? All of these things were fascinating
to me. And I was running a completely different kind
of business, which is an online video technology business, and
I kind of thought intuitively that there had to be
a better way. And it was actually through my kind
of introduction to crypto in twenty twelve that I sort
(12:56):
of saw, hey, there might be a path here. And
while lot of people were obviously focused on bitcoin as
a full reserve sort of sound money philosophy, and I'm
sure you've had plenty of people to talk about that
over the years, but for me, at least, the idea
of sound money, of kind of having a different risk
(13:16):
model in the financial system was very appealing to me,
and in particular this idea.
Speaker 5 (13:22):
Of fully reserved dollar digital currency.
Speaker 4 (13:25):
And you know, I'm in adherent to the Chicago School
and the Chicago Plan, I should say, which was a
particular philosophy that was advanced in the aftermath of all
of the bank failures in the nineteen thirties.
Speaker 5 (13:38):
And there were really two responses.
Speaker 4 (13:39):
There was a group of prominent economists, some of Irving Fisher,
who's at the Chicago School at the time, and there
was industry, and the prominent economists said, hey, we could
build a full reserve model where you have essentially government
obligation money or this full reserve form of money that
is in a payment type of institution, a payment bank,
and then you have a separate institution which does credit,
(14:00):
and you can't create new money out of thin air
as banks do. You could only lend the full reserve money.
And the philosophy there was that that would sort of
reduce risk in the financial system and it would smooth
out economic cycles. And that's come and gone as a
debate during the safes and loan crisis, after the Great
Financial Crisis, et cetera.
Speaker 5 (14:22):
But I think the advent of digital currency in particular
creates an opportunity for this that I think is really profound.
And when you think about native money on the Internet.
So take something like USDC with under genius sort of
gets defined as this cash instrument. The reserve instruments we can.
Speaker 4 (14:40):
Discuss are those you know, safe in the sense of
financial stability safe, but you have a fully reserved instrument.
What's powerful about digital currency is it inherits what I
call the superpowers of the Internet, meaning it inherits the
speed and velocity of data on the Internet. And so
all of a sudden, the marginal cost of store and
moving value goes very close to zero, and money velocity
(15:03):
can accelerate significantly, and that creates its own risks. But
this high velocity money that's moving on the Internet, that
can move literally from any person entity, any AI agent,
any business, all these sort of machine interactions, all this
stuff that happens globally, it's kind of crazy to think
about having that be the underlying on that to be
(15:26):
like a bank's stack of lending risk and to have
all of these lending risks I use floating free circulating
on the Internet. And so my view is that the
base layer of money in the Internet financial system, which
I think is a new financial system that's being built
up from the ground up, that the base layer of
money needs to be this full reserve form of money
(15:48):
that is actually safer.
Speaker 5 (15:50):
That begs the question.
Speaker 4 (15:51):
Of how do you do credit and all that good stuff,
which I'm happy to give you my views on, but
I think the philosophy is actually, how do you do
something that's actually safer that people can and look at
and say, I know that this is always available. It's
not that if the bank fails, I might get my
FDI see insurance cap. It's like, I know what this is,
(16:11):
and there's a prudential supervisor and there's actually this enforced
risk management which improves and continues to.
Speaker 5 (16:17):
Improve over time.
Speaker 3 (16:34):
You know, you mentioned the safety of the reserve assets,
and this is something that is in the act. It
kind of defines what you're supposed to hold, so things
like T bills, high quality liquid assets, all that good stuff.
We've been talking about a safe asset shortage in the
financial system for it feels like decades now right, it
feels like there is not enough good collateral to go
(16:57):
round for everyone, and as stable coins amp up, I'm
really curious if you're worried about the crowding out effect,
if there's going to be enough tea bills in the
world to satisfy that one to one reserve requirement.
Speaker 4 (17:10):
Yeah, so if it was exclusively on the basis of
short term government debt and this got to be tens
of trillions of dollars or whatever, then you might have
a mismatch there. Now, obviously regulation isn't going to stand
still on this. So the Genius Act is a significant
piece of legislation, and it defines these framework. That framework
is inclusive of cash that is overclatteralized.
Speaker 5 (17:32):
Lending with repo desks.
Speaker 4 (17:33):
It includes t bills of the shortest duration, and it
does include cash in the financial system, and it includes
eligible reserves at the Federal Reserve as cash as well.
And so over time, as this infrastructure scales, I think
that mixture gives us a huge amount of capacity that
I think, you know, arguably could support many tens of
trillions of dollars of value to it.
Speaker 2 (17:55):
Just to be clear on one specific are you completely
non exposed to non FDIC insured deposits, so completely extricated
yourself from that system.
Speaker 4 (18:04):
No, And in fact, let me describe what we do,
and we today by far operate with the greatest transparency
of any other stable coin, any other regulated stable coin
in the world, and we've done that through a couple
of things. The first is we created a structure called
the Circle Reserve Fund, which is really designed to provide
transparency into the reserves. So we did that with black Rock,
(18:27):
and it's an SEC registered what's called two A seven fund,
so it's a government obligation fund, but it gives daily
transparency into essentially about ninety percent of everything in the reserves.
And so you can look every day, you can search
usd XX. I pulled it up on my bladre and
you can drill in and you can see exactly the
serial numbers of every T bill, the short dration T bills,
(18:49):
and I think we have an average maturity of about
twenty three days in that reserve, and bloombergs is thirteen
right now, but I'm not you know, whatever is that.
That's what it says, look at the screen. That may
just looking at the screen, that may in fact.
Speaker 5 (19:03):
Be what it is today. That's that's what That's what
Bloomberg says. It's great.
Speaker 4 (19:07):
And then you can also see like the global systemically
important banks that we have REPO relationships with, and that's
there as well, so you can see that that's about
ninety percent. And then there's cash, and the cash about
ninety eight percent of the cash is held with a
very limited number of global systemically important banks, and these
(19:28):
global systemically important banks are the sort of lowest credit
risk kind of cash custodian type banks, and so we
hold the reserves there. Now you can argue about how
safe is that cash relative to you know, kind of
shout it out across all kinds of other stuff, but
that's sort of what's there today, and we need to
do that because we need intra day liquidity. We need
(19:51):
to ensure that in the event of five billion, ten billion,
whatever it is, that's always available. And then there's a
very very limited amount which we position in settlement banks
and reserve accounts in different geographies to ensure that it's
easy to create and redeem USDC whether you're in Singapore
or Japan, or Europe and other places. We also have
(20:13):
a separate issuance of USDC and a completely separate reserve
mandate and supervision in Europe as well, so we dual
issue USDC. We issue it under European rules under the
MECA Stable Corn Statutes, and we issue it in the
United States and we have created a way for kind
of fungibility across those is.
Speaker 3 (20:32):
The ultimate ambition to really take on and compete with
the deposit taking institutions in the sense that you want
to get big corporate clients. Maybe the type of clients
that would put their money in uninsured well, they have
so much money, some of it would end up being
uninsured by FDIC, or they might put it in a
money market fund or something like that. And if you're
doing that, doesn't it seem like the biggest hurdle is
(20:56):
the lack of interest paid on stable coin.
Speaker 5 (21:00):
So a couple things I think. The first is that payment.
Speaker 4 (21:04):
Stable coins, which is what the Genius Act governs and
in fact mirror stable coin laws in Europe, in Japan
and in other markets that are bringing these online. These
are designed to be cash instruments that are used in
payments and as a payment system technology. They're not designed
to be risk taking instruments that you would say deposit
(21:25):
and lend. And they're not designed to be investment products.
You're not purchasing a security, you're not purchasing an investment,
and so they're narrowly defined and Genius Act enforces that,
and so I think that's the right design for this
base layer kind of cash instrument. Now that doesn't mean
that you can't build digital tokens that present yield. And
(21:46):
while people call these stable coins, I think that term
of art will probably change. People call them tokenize real
world assets, tokenized money market phones, tokenized treasuries. So we
operate a sizable tokenized money market fund product called us YC,
and us y C is fungible with us DC. So
a business, for example, could hold us YC and earn
(22:09):
the yield that would be your typical kind of government
fund type yield, but have the ability to instantly create
and redeem cash and instantly create and redeem yield. And
so we acquired a company called hash note, and we've
integrated that into our core infrastructure and we've just brought
this online. It's a very powerful structure if you can
have tokenized yield bearing collateral and then instantly uses as
(22:32):
cash for settlement, for trading, for spending, et cetera. And
so I think that that's something that we can kind
of do uniquely because we have this widely adopted payment
stable coin and then kind of marrying those two together
and we can do it in a very very capital
efficient way, because essentially the reserves of USDC mirror the
actual instruments in us y C, and so there's a
(22:54):
sort of fungibility between us YC and USDC reserves.
Speaker 2 (22:58):
Let's talk about the competitive landscape in a few years
from now. So at some point you're going to revisit
your agreement with coinbase. Maybe JP Morgan will have a
payment coin that they're going to want to be the
preferred coin that sits there, and maybe they're going to
be willing to give Coinbase a huge split for pride
of place. Or maybe there'll be some other coin that
(23:19):
they use for inter bank settlements that will be tokenized
in some way to make their transfers with City and
Bank of America and other banks more competitive. We have
seen other coins rise, first digital in Asia for example. Like,
if you're paying all this money to coinbase still and
you you know distribution is so important. What is the
competitive advantage that Circle has in say the year I
(23:41):
don't know, twenty twenty eight.
Speaker 5 (23:42):
Well, I think a couple of things.
Speaker 4 (23:44):
I think the first is that to understand Circle's business
is to understand that we operate an Internet scale platform,
network utility we have very powerful internet platform flywheels and
developer flywheels. We have a network that consists of thousands
and thousands of products and services that have implemented and
(24:04):
integrated to our network. And so every time a developer says, hey,
I want to be able to store and move digital dollars,
they choose to implement USDC because USDC has this really
broad established network and so we have these really powerful
flywheels and as that provides new utility or a user
when say New Bank in Brazil as USDC, well, there's
like one hundred million people at New Bank who can
(24:26):
interact with USDC. Now the rest of the world can
benefit from that user base of one hundred million people,
and so we have network effects that are there, and
those exist in pretty powerful ways. So if you look
at the movement of stable coin in the on chain
ecosystem what sometimes people call DeFi, we have about I
believe today around seventy five percent of the market there.
(24:47):
And we've built protocols that make it very seamless, safe
and secure and capital efficient to transmit USDC across all
these different networks. So we've built developer platforms, we've built flywheels,
for adoption, and this is a classic internet platform model.
The other is that we've built these extraordinary liquidity network effects,
(25:10):
and this is really critical. So over the past number
of years, we've built out on a regulated basis infrastructure
where we're regulated and where we have integration into the
financial systems of Singapore, Hong Kong, Japan, the United Kingdom,
the EU, the US, we've integrated into Brazil, Mexico, and
we've just announced that we're coming online in UAE. So
(25:30):
we've built out these integration points and we've built out
primary liquidity in all of these markets, and so USCC
is available and liquid at scale all around the world.
That's the primary liquidity side, and so that's crucial if
you're going to use this. You need to be able
to know I can get in, I can get out,
and I can do that all around the world. And
then we've created very large secondary liquidity, and that's really
(25:53):
important as well. So when you get down to the
E money product in Vietnam, can you go from that
em money product in Vietnam into USDC and back and
all around the world all these different payment methods and
payment instruments and the actual secondary liquidity between those and
USDC is huge, and so the barrier to entry is
actually fairly high.
Speaker 5 (26:13):
We have these large network modes and right now.
Speaker 2 (26:17):
So it's not just like making a new ERC twenty making.
Speaker 5 (26:19):
A new coin.
Speaker 4 (26:20):
The marginal value of a new stable coin right now
is effectively zero. You have to have established network utility
and then liquidity at scale, and essentially liquidity begats liquidity.
Network velocity extends network velocity, and so you know, we
feel like that's a very very good position. And I
think the ability to be federally regulated and to have
(26:42):
these higher bars on the infrastructure side and what's required
of view is also really important. That's not something for
the faint of heart, and doing that all around the world,
not just in the United States. There's a lot of
focus on the United States, but we've been under significant
regulatory regimes and other jurisdictions for quite some time as well.
Those are you know, meaningful barriers, and I guess the
bigger picture there is like we're just focused on building
(27:05):
this infrastructure, making it easy to adopt by whether it's
a technology company, a fintech company, a bank. We're building
partnerships with some of the biggest core banking infrastructure companies
in the world. We announced something recently with fiserv. Just
yesterday we announced a broad partnership with fis Global. And
these are companies that service tens of thousands of banks,
(27:26):
and we're plugging USDC as an innovation into their infrastructure.
And so we even do it with the card networks
Visa and MasterCard, where they're using USDC as an internal
settlement system to move money from issuers back to home
base faster than the correspondent banking system. There's lots of
places we're getting integrated. And what I like to say
is I believe that the stable stablecoin networks are a
(27:49):
winner take most, not a winner take all.
Speaker 5 (27:52):
Mark.
Speaker 3 (27:52):
This was going to be my next question. Can you
talk about that a little bit more like ten years
from now? What does the landscape actually look like and
what is the interoperability of all these different stable coins
actually look like.
Speaker 4 (28:03):
Yeah, so I think ten years from now, I don't
think we have any idea what it's going to look like.
Speaker 5 (28:10):
But I mean there are several different.
Speaker 2 (28:13):
Component ford looking statement.
Speaker 4 (28:14):
Yeah, yeah, several different components of this. So I think
one is we take as a first principle that stable
coin money is the highest utility form of money that's
ever been created. And it's the highest utility not just
because it has Internet superpowers of speed and it cost efficiency,
but because it's actually the first truly programmable form of money.
(28:36):
And if you're going to have a programmable form of
money where software intermediation and software innovation on top of
money has not existed, open banking is like poor cousin.
So you're introducing a new realm of money utility, and
we're at the very front edges of that, and we
see that already today. I mean the entire phenomenon of DeFi,
which is highly sophisticated market structures that are just autonous
(29:01):
machines effectively running in code on the Internet. That's pretty amazing.
Speaker 5 (29:06):
So when you unleash that, and you unleash that.
Speaker 4 (29:09):
Kind of curve of innovation, like it's sort of like
when mobile devices were out. People were into mobile for
a really long time and they were like, hey, Mobile's
gonna be huge, and Mobile World Congress was like the
biggest conference in the world, and you'd.
Speaker 5 (29:21):
Go there and there's like there were like one hundred thousand.
Speaker 4 (29:24):
People there and and yet it all sucked like like
all the mobile phone devices, everything, everything was, everything was terrible,
but everyone believed in mobile and then obviously the iPhone
came and it wasn't the end, it was the beginning.
Is the point is that like actual innovation with programmable
apps on phones actually started then in a real way.
Speaker 2 (30:00):
I had a use case recently where I wanted there
to be a stable coin use case and I think
maybe this will coming. So I've tried to do vibe
coding where it's like yeah, yeah, cursor and making software yeah,
And I wanted to link up my software to chat
gubt so that it could query the AI yes, and
to access the API, I had to like entering a
credit card with LGPT and then I had to like
(30:21):
copy your auless code. It was really annoying, and I
was like, why can't I just have my cursor be
linked to a stable coin wallet it make the connection
with Chad gbt's AI so that I don't have to
make an account and it just pays per usage. So
that is for intelligence that is coming.
Speaker 4 (30:37):
Definitely what's going to happen, okay, And in fact, this
is where I was getting with my point actually in
response to you tracy, which is, like, we think about
the Internet and like when the marginal cost of storing
and moving information went to zero, the NetWorld output of
information like million xt or when software could be distributed
to a browser, the NetWorld output of software was like.
Speaker 5 (30:55):
Up a million x. So it created these huge growth.
Speaker 4 (30:57):
So my view is that over ten years and use
your tenure, is that the total payment volume, which is
a measure that people like to use, is likely going
to go up by many, many, many orders of magnitude
because you've taken that cost and friction out and because
of the new utility that comes from programmability. And so
my own belief is that the scale of money that
(31:18):
moves in the world will be so much larger than
where we are today. It's sort of the Internet infrastructure
actually hitting the financial system, which is a scary thing
because like, wow, you've got all this money velocity, and
you've got machines that are intermediating this through ais Like,
oh my god. That's one of the reasons why it
needs to be very safe full reserve instruments. But it
(31:39):
also i think gets to the heart of your question,
which is are we going after all the deposits of
the banks or all this is the answer is no.
But my belief is that financial institutions who create either
places where people can lend their money and then that
money can be used for other investing purposes or where
people actually make specific investments with their money, like those
(32:03):
will proliferate. And in fact, I think innovation in both
credit intermediation and in investable assets is about to go
through a new renaissance because of blockchains, tokenization and stable coins.
And so my own view is in a system of
full reserve money, you need to be able to do
credit intermediation with that full reserve money, and you need
(32:23):
to make that credit intermediation be as efficient as possible.
And I think you can build on chain credit intermediation
in a way where you have greater safety, more transparency,
more audible risk management, and you can build market structures
that are far more accessible to more people and institutions
(32:43):
in the world. I think of it as like AdWords
for credit, like you know this sort of these super
scaled or Amazon marketplace for product creators. We haven't entered
that world yet, but I think there will be firms
and that many of them will likely be regulated by
central banks who are standing in that in the structure,
and so it's an opportunity to reinvent what payments, credit investing,
(33:05):
all these things look.
Speaker 2 (33:06):
Like Tracy, I kind of think, by the way, and
we should maybe do. I think the Internet as we
know it in terms of like Internet that's free to
browse is probably going to die because on a matter
of time, you know, if you're like AI bot can
like go search the web, those sites are going to
want payment for having all the scape, and you know,
stable coins can solve that. But it does feel like
(33:27):
we're going to have a totally thing where like you
don't just get to use the web for free. Everything
is like meter based on the data that you're pulling in.
Speaker 3 (33:34):
Yeah, well we were talking about that earlier, right, this
idea that we've already seen traffic start to collapse because
the search engines are just providing AI summaries of individual pages. Yeah,
how long are content providers like us? How long are
they going to stand for that? I don't know.
Speaker 4 (33:51):
Well, can I say something on that, which is we
actually work together with coinbase and a couple of others
on implementing something called X four h two.
Speaker 5 (33:59):
Now you're like, what is that?
Speaker 4 (34:00):
And Mark and JSON talks about this he has over
the years, back in the early days of the web.
Speaker 2 (34:05):
You know, yeah, there you go, ex pay via API
without registration. That's what I want. That's what I want
for my vibor. So there exactly what I'm looking.
Speaker 4 (34:12):
So it's actually a It already exists as a protocol
that is built into the way that every web server,
every web browser, every client that interacts with the Internet works.
Speaker 5 (34:21):
It's a protocol that's there.
Speaker 4 (34:23):
It uses the existing HTTP transport and now you can
actually say, hey, I'm hitting my piece of content or
data and I can challenge whoever's accessing it and say,
you know, to get to this, you need to pay me.
And it can basically come back and say you can
pay me on a blockchain with a stable coin. And
so we're doing that with USDC. We're encouraging developers to
do that. There's lots of third parties that are building
(34:45):
layers for AI agents to use this, and so I
think that's one example, but I think it gets to
the heart of what you're saying, which is there may
be more of a subscription model.
Speaker 5 (34:54):
Spotify is probably.
Speaker 4 (34:55):
The best example where you have the celestial jukebox and
you pay your fifteen bucks and you get access everything.
You know, there's a kind of question about could there
be a celestial data box which is more broad and
where the actual consumer front ends are companies like open
Ai or Google, and you're paying a subscription and then
there's like behind the scenes either pro rata or usage
(35:16):
based model that is actually compensating the actual data providers
and creators, and so lots to be unfold here.
Speaker 3 (35:24):
Yeah, can I ask a slightly awkward question, it's a
leading question, how much do you hate Tether given that
not only are they number one, but you know, there's
been questions over their reserve quality for many years, although
I think some of their transparency has improved. But thirdly,
you know, we had the Tether CEO on a few
(35:44):
months ago, and they're expanding into the US, so that
would seem to you know, directly be competing with you
on your sort of home turf, although I understand you're
also expanding elsewhere in the world. How do you feel
about Tether?
Speaker 4 (35:58):
Yeah, I mean, look, I think our view has always
been that we're building for the long run, and we've
taken a different approach really since inception we've taken a
sort of regulatory first approach, a compliance first approach, becoming
widely licensed, widely regulated, always advocating to improve that, and
(36:19):
that's allowed us to build, obviously, what we think is
a great business. It's allowed us to have deep integration
into the financial sector with banks. If you're a major
institution partnering in this space, the probability of you doing
that with circles reasonably high. And so we built a
really great franchise and we are really well known for integrity,
(36:42):
for trustworthiness. We're a publicly traded company with the highest
standards of governance and accountability that are out there, and
we've always sought to up level that. And so my
view is that if we're building a new Internet financial system,
and that new Internet financial system is going to be
this incredibly broadly used infrastructure and it's going to be
used by mainstream companies and public companies and financial institutions
(37:05):
and financial intermediaries.
Speaker 5 (37:06):
All around the world.
Speaker 4 (37:07):
We're going to integrate with that and build on that.
They're going to want to do that with trusted, well
regulated companies. And so our view is that the early
adopter segment of the market, which has really been dominated
by sort of the crypto trading side of things, is
that early adopter segment.
Speaker 5 (37:23):
We're now going into a different chapter.
Speaker 4 (37:25):
And if you actually look at over the last you know,
eighteen months, we've taken market share. We've taken you know,
material market share, and we're growing in many, many areas.
And I would say also internationally, I would say the
majority of our business now is international. So we're in
many many markets and in many other markets as well.
The regulators are putting in place very clear regulations around
(37:50):
what stable coin issuers need to be and so we
are the only large global dollar stable coin that's legally
available in Europe as an example. And so I think
we just keep doing what we're doing. I think we're
building great infrastructure for companies, for enterprises, for developers, and
we just got to keep doing that and will grow.
And this is a really significant size market. And so
(38:12):
I actually, you know, I have a lot of respect
for what they've been able to build. We took a
different path. We built something also I think really special
and over five years, ten years, as we said earlier, right,
this is very likely a winner take most, not a
winner take all market. And I actually don't think we know,
you know, if they're you know, maybe three or five
big players. I don't know what that'll be in five
years or ten years, but there's probably some that don't
(38:34):
exist yet that will show up too.
Speaker 2 (38:37):
I take it as a sign of maturity. Like years
ago when it came to crypto, people were just excited
about number go up right, and then now it's like
people are really excited about number go sideways. So if
it just stays at one forever, there's like a really
good sign. And so I take it as a sign
of maturity for the industry that there is all this
interest in stable colins. Nonetheless, no pun intended, Nonetheless, you know,
(38:59):
all those public chains are still out there, and USDC
is on a number of chains twenty four. When we
talk about like who collects the profits from this, and
we've talked specifically about say your distribution with coinbase and
whether that do you see value accruing to token holders
of different chains in the future, because it seems to
(39:19):
me like for the most part, as long as it's
like really fast and cheap, it really doesn't matter if
I'm sending something to Tracy, I care about your reputation
and your money in the bank. I don't really care
about what chain that you actually transact over at the end.
So if you want to do it under you Solona
or some layer three that gives almost no value back
to the ether chain or something like that, I don't
(39:39):
really care. Do you see like token holders of the
public chains collecting rents in your future, collecting a meaningful
amount of rents from this on chain commerce?
Speaker 5 (39:52):
It's a great question.
Speaker 4 (39:53):
I'd say a couple of things, And I'm actually going
to relate back to my mobile commentary from earlier, which
is our mental model is that blockchain networks are Internet
operating systems, and they provide a way to store data,
conduct transactions on that data, and provide compute around those
transactions and data. That's what they do their public computing machines.
Speaker 5 (40:13):
And there are a lot of them. There's actually thousands
that have been launched.
Speaker 4 (40:18):
We're on twenty three or twenty four today, and we
see this as a space that is constantly evolving, and
so there's constantly innovation on the layer ones. There's these
layer twos. When I think about where we are relative
to where we were with say iPhone, we're in the
pre iPhone era, of blockchain networks. In my view, I
think there's lots of operating systems out there, just like
(40:41):
there were lots of mobile operating systems, and some of
them got better than others and improve the user experience.
Some of them started enabling consumer things, remember NTT DoCoMo
in Japan or things like that, And so I think
that we're still really early, and so that's one of
the reasons why we've really tried to make sure we're
trying to operate our own stable cooin network on the
(41:02):
best ones that are.
Speaker 2 (41:03):
It just seems to me the decentralized change. You pay
them a rent because you want some advantage of decentralization.
If I'm using USDC, I've already accepted the premise of centralization.
You have money in the Black block Fund. It's about
it's about as centralized and legacy fly as you could
probably get once I've already accepted this premise of centralization,
that my money is just backed by a bank. Well
(41:24):
you do that, Why do I even care? Why pay
these rent to some network of computers?
Speaker 4 (41:29):
So this is this is this is it's a different
layer is Essentially my thinking is that public blockchains are
a general purpose layer that many many applications can be
built on top of. Stable Coins are the killer app
for sure, I will say in my own opinion, but
there are many, many different kinds of applications that can
be built on that, and we need innovation in those
computing platforms. We need higher speed, we need greater privacy,
(41:52):
we need better forms of compute, we need new and
more primitives in that infrastructure, and that needs to expand
we need to get to a point where these public
networks are supporting huge scales of consumer applications and enterprise applications,
and so there's like a growth in that kind of
infrastructure side of it. And those are shared infrastructures that
(42:12):
many people can can take advantage of, and so there
needs to be a kind of fee model on those networks.
We've actually created a way for the fees on many
of these blockchain networks to actually just be paid in USDC,
and so that's something that we see more of happening. That,
like the notion of gas fees or the notion of
gas fees in some other cryptocommodity, will become less and
(42:32):
less common and like fees will just be paid in
stable coin. But I think there is value in these networks,
and I think that there's very likely value for token
holders on these networks if these networks provide scalable infrastructure
that people can take advantage of. Again, stable coin is
one application layer there, and there'll be many many other
(42:53):
application layers on those and so you kind of pay
for the shared the shared state of the machine, the
shared data state, the shared transaction state, the shared compute state.
There's value in paying for that shared state.
Speaker 3 (43:06):
Just on this note, can you tell us when you're
talking to clients or potential partners, like, what is it
that they are most interested in getting from you? Can
you provide us with a sort of hierarchy of needs
for you know, USDC customers in the sense of are
they worried about the speed of the technology? Are they
worried about the reserve assets? And I guess corporate governance
(43:28):
and things like that. How would you prioritize what people
are actually thinking about.
Speaker 4 (43:33):
Well, we have a huge range of types of people
that we work with, from like individual developers that are
creating a new product in some emerging market, to you know,
people building on chain protocols to very large you know,
financial institutions that are looking at using this or integrating
this in different ways, and so the things that they
(43:53):
care about do vary across those, But I would say trust, transparency, liquidity.
Speaker 5 (44:01):
Are really really important to everyone. Right.
Speaker 4 (44:03):
If I'm a developer and I'm building a product, I
need to know that this is a legitimate digital dollar,
that it's accessible in the markets that I'm intending to serve,
that people can easily access it and use it, and
that the infrastructure is good. I can build good product experiences,
I can build good user experiences and build an application
(44:25):
or something from my own customers.
Speaker 5 (44:26):
That works well.
Speaker 4 (44:27):
And so they care about the developer tooling, the on
chain infra, the liquidity, the trust.
Speaker 5 (44:32):
They care about all those things as a startup.
Speaker 4 (44:34):
But even a large company, say you're a big fintech
and you're like, hey, I want to start leaning into this.
I want to add stable coins for payments, or I
want to enable my customers to access DeFi or other
things like that. They're going to care more about the
kind of legal and compliance status of Circle. They're going
to care about the governance of the company itself, but
(44:55):
also of the underlying regulation that affects us, because they
I have to face those same issues whether they're in
the Philippines or in Brazil or in the United States.
So they care a lot about those things. And then
they also care about infrastructure clearly, like infrastructure readiness. Is
this something like I could bring a large number of
users to and then everyone cares about user experience?
Speaker 5 (45:18):
Right? Can I craft an experience.
Speaker 4 (45:20):
Where the crypto disappears, where I don't need to know
what blockchain I'm on, and I don't need to know
about gas pees, and I just want to create a
way for I have stored value. I want to enable
people to move it around really easily. They care a
lot about that, whether you're the biggest company in the
world or a small startup.
Speaker 2 (45:36):
Jeremy Alert, thank you so much for coming on the odlock.
Speaker 5 (45:39):
Thank you, my pleasure.
Speaker 2 (45:41):
Probably the first crypto company I can think of that
actually tried to grow through the regulatory approach and didn't
get destroyed and blocked down. Very impressive and I'm yeah
great chatting with you.
Speaker 5 (45:50):
Thank you.
Speaker 2 (46:03):
Tracy. You know one question I didn't get to ask,
or I forgot to ask, is like the perennial, like
live or buy coffee with a stable coin. At some
point maybe I will maybe I won't. But in the
conversation I started thinking, that's probably the wrong way to
think about it. It's gonna be those machine to machine
payments that if stable coins become a real important payments thing,
(46:23):
it's going to be like those like computer to computer
payments that have to be.
Speaker 3 (46:27):
Seen, right, and they're sort of plugged in the inner
workings of the Internet.
Speaker 2 (46:30):
Yeah, it makes sense. Maybe the coffee thing will happen,
who knows, But like, I don't know.
Speaker 3 (46:36):
I don't find it that hard to buy a coffee
right now, right exactly.
Speaker 2 (46:41):
Buying coffee's is a solved problem as far as I'm concerned.
Speaker 3 (46:44):
Yes, but this is a new problem, You're right, that
could be solved. That's interesting. The other thing I thought
was really interesting was you hit upon the sort of
tension in the decentralization versus like traditional finance, and this
idea that like, okay, it's all about DeFi and blockchain
and all that stuff, but ultimately like black Rock is
holding the money.
Speaker 2 (47:04):
Yeah, no, totally. And this is like, you know, it
goes back to those formative episodes we did with Austin Campbell,
which is a big part of the story to the
extent that this will be a thing, is like just
solving the sort of software payments, because we could do
a million episodes on legacy text acts and why JP
Morgan's or whatever companies internal software will always be They'll
(47:26):
be spending billions of dollars upgrading it whatever it is,
and the difficulty of integrations. But if you just have
like a one off, like so like global platform that
anyone can plug into and program where money can easily
be trend there, that's very powerful.
Speaker 3 (47:40):
Yeah, this is why I say user interface, user experience
is underrated.
Speaker 5 (47:45):
Right.
Speaker 3 (47:45):
That's like me saying Michael Jordan is underrated. But like
that really that really is it? Right? Like that's where
the battleground kind of is the ability to like plug
in and interoperate with all these different systems.
Speaker 2 (47:57):
Yeah, well I'm really excited. I think we should have
a Jeremy back at something.
Speaker 3 (48:02):
Yeah, we should, all right, shall we leave it there
for Let's leave it there. This has been another episode
of the Odd Lots Podcast. I'm Tracy Alloway. You can
follow me at Tracy Alloway and I'm Jill Wisenthal.
Speaker 2 (48:11):
You can follow me at the Stalwart. Follow our guest
Jeremy Alaire. He's at jare Alaire. Follow our producers Kerman
Rodriguez at Kerman armand dash Sho Bennett at Dashbot and
kel Brooks at Kelbrooks. More odd Lots content, go to
Bloomberg dot com slash odd Lots, where we have a
daily newsletter and all of our episodes, and you could
chout about all of these topics twenty four to seven
in our discord discord dot gg slash oud Lots.
Speaker 3 (48:34):
And if you enjoy odd Lots, if you want us
to do more episodes on the future of the payment system,
then please leave us a positive review on your favorite
podcast platform. And remember, if you are a Bloomberg subscriber,
you can listen to all of our episodes absolutely ad free.
All you need to do is find the Bloomberg channel
on Apple Podcasts and follow the instructions there. Thanks for
(48:54):
listening in in
Hosts And Creators
Joe Weisenthal
Tracy Alloway
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.