$3 Trillion in Stablecoins by 2030 | Jeremy Allaire, USDC Founder

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-the-jeremy-allaire-interview ------ Joining the podcast today we have the man behind the largest US based stablecoin, Jeremy Allaire, the Founder of USDC Circle. A year ago USDC depegged in the face of major banks like SVB and Silvergate collapsing. How did Jeremy deal with that? What year is crypto in internet years? Why don’t we have a venmo for crypto yet? Fast forward to 2030, what’s the total value of stablecoins? Stay tuned because we ask all that and much more. ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🔐 SAFE | ATTEND SAFE{CON} https://conf.safe.global/ 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🏙️ CONSENSUS | SAVE 20% WITH CODE BANKLESS https://bankless.cc/4aykesD ------ TIMESTAMPS 0:00 Intro 5:47 SVB Crisis Reflections 24:00 Crypto Age in Internet Terms 31:15 The Future of Stablecoins 41:42 The Crypto Venmo 56:18 Blackrock’s BUIDL Fund 1:01:44 US Government 1:16:35 USDC vs Tether 1:22:00 Central Bank Stablecoins 1:28:14 Regulatory Protectionism 1:32:25 Closing Thoughts ------ RESOURCES Jeremy Allaire https://twitter.com/jerallaire USDXX - What backs a USDC? https://www.blackrock.com/cash/en-us/products/329365/circle-reserve-fund Circle https://www.circle.com/en/ ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ryan Sean Adams?

  Total value of stablecoins, what do you think? By the end of this decade, by the end of 2030? Where are we sitting?

• 0:05Speaker 01

  2030?

• 0:06Ryan Sean Adams?

  Yeah.

• 0:08Speaker 01

  Yeah, I feel comfortable saying $3 trillion.

• 0:15Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of stablecoins. This is Ryan John Adams. I'm here with David Hoffman and we're here to help you become more bankless. We have Jeremy Allaire on the podcast today. This is the man behind the largest stablecoin issued in the US. We had so much to talk about. A year ago at this time, major banks like Silicon Valley and Silvergate were failing. That's the last time we had Jeremy on the podcast. A moment when USDC had just de-pegged and was in the middle of recovering. Operation Choke Point seemed to be a thing that the US government was doing to squelch off crypto companies from banks and de-bank them. How did he deal with all of that? That's where we start the conversation. And then we discuss, what year is crypto in internet terms?

• 1:00Ryan Sean Adams?

  Are we in the 80s, in the 90s, in the 2000s? How mature is this technology? How much more do we have to go? We also ask, why don't we have a Venmo for crypto yet? And then we get into the BlackRock and Circle partnership. How big of a deal is this? What does the US government want from stablecoins? Are they going to try to block it and reject it? Or are they going to embrace it? At that point, we had to bring up Circle's controversial statements on their main competitor, Tether. They made these statements in front of Congress. Does Jeremy believe lawmakers should prefer one stablecoin over another? And finally, we fast forward to 2030. This whole vision is realized. What is the total value of stablecoins at that point?

• 1:38David Hoffman?

  Jeremy's always such a useful guest. He's seen the rise of the internet and then he's also been watching the rise of crypto at the same time. So it's always fun to pick his brain about comparing and contrasting these differences here. But then he's also kind of just a general polymath. He's very well-versed in macroeconomics and geopolitics and government and legislation and like operating, being an entrepreneur operator inside of those confines while also being a very big bull of the world. World of DeFi, which is strictly outside of those confines. And he's kind of has his one foot on both sides of the camp of like very many different things. He's inside of the world of fintech, but he's also on chain.

• 2:22David Hoffman?

  He's inside the world of the regulatory landscape, but so USDC is also on chain and outside of it as well. And so it's just a very diverse perspective and always just like such an articulate guy. So whenever Jeremy comes on the pod, I always listen.

• 2:35Ryan Sean Adams?

  All right, let's get to the episode with Jeremy Allaire on stable coins. But before we do, we want to thank the sponsors that made it possible, including our number one recommended crypto exchange for 2024. That is Kraken. Go create an account.

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• 5:32Ryan Sean Adams?

  Bankless Nation, we are on with Jeremy Lehrer. He is the co-founder and CEO of Circle, which is the company behind USDC, which is the world's largest US-based stablecoin. Jeremy, welcome back to Bankless.

• 5:44Speaker 01

  Yeah, it's great to be back. Thanks for, uh, thanks for having me on.

• 5:47Ryan Sean Adams?

  It's great to have you. And you know, just to kind of complete the thread, actually, the last time we had you on, Jeremy, was just over a year ago at this time. And it was kind of in crisis mode, I would say. So there was a literal bank crisis at the time in the US. There's Silicon Valley Bank. Bankless listeners may remember this, or maybe you've Seems forever. Yeah, it seems like a long time ago. But Silicon Valley Bank had some issues. Silvergate, the bank as well, where USDC capped billions in funds, was facing potential insolvency. We didn't really know. And USDC itself, the stablecoin, had a brief period of time where it was doing the thing it's not ideally supposed to do, which is de-pegging from the dollars.

• 6:29Ryan Sean Adams?

  Now we are in much calmer waters. And I just want to kick this off to, to complete the circus, the circus. It was a little bit of a circus, too. But complete the circuit here. How do you reflect on that? Like, was this the most stressful period of time in Circle's history? And what did you learn?

• 6:46Speaker 01

  Well, we've had a lot of really stressful times in our history. So we've been working on this for 11 years and faced enormous challenges along the way. But definitely when there are a rapid succession of bank failures, large-scale government regulatory actions, and all that in a rapid succession of a matter of weeks, it's pretty wild. I mean, I think the context setting you did, I think, is pretty good, right? I think we, going into 2023, you had the start of the year where, basically, the bank regulator said, "Don't touch this." They basically gave an order to all banks, "Do not touch any of this," which was then

• 7:30Speaker 01

  caused, I think, a lot of banks to begin to say, "Okay, we need to kind of pull back." There was sort of this Operation Choke Point 2.0 kind of narrative that was sort of out there. And then, really, starting in, later in January, but going into February, you had a wave of enforcement actions, principally by the SEC, against an enormous number of US-based companies and some international companies, all sweeping in. And so the market itself was like, "What's happening in the United States?" And it was a topic you guys have addressed many times. And then you had, in a matter of seven days, you had three distinct banks that were completely

• 8:14Speaker 01

  separate from one another fail or be seized. And then the threat of a broader regional banking crisis that then ultimately had Secretary Yellen and the federal government basically saying, "We will stop any defaults of any uninsured deposits at any major regional commercial bank." And it was sort of a view that this was a much broader financial stability risk. That is all happening, obviously, and I think what is also really important to remember is, during that period of time, that one to two weeks, virtually every single company

• 8:58Speaker 01

  in the entire crypto industry was de-banked.

• 9:02Speaker 01

  They were de-banked. They lost their transactional banking because Silvergate was failed. Signature Bank was shut down. And so even thousands of companies, including international companies, lost their ability to transact. So it caused this just enormous kind of set of challenges operationally.

• 9:20Ryan Sean Adams?

  Wait, what does that mean to be de-banked, Jeremy?

• 9:23Speaker 01

  Meaning, if you are a company, let's say you're a firm in the market and you had, the primary way that you were able to access the trading markets or other things was through a bank like Signature Bank or Silvergate Bank, which was probably 5,000 to 10,000 companies. Those banks stopped, like they literally went away. And so like your accounts went away. And so literally every company in the world that had any interaction with digital asset markets was like, I just lost my ability to function. And so just the fiat world kind of was breaking down. So it was a really special time.

• 10:07Speaker 01

  Now, I think when I look at a year later, I mean, for us, it's been pretty amazing. I think when we talked a year ago, what was fascinating to see was there was sort of this flight from safety, which is this idea that effectively, like, you know, generally, it's like, oh, you have regulated companies in the US. You have like the US dollar system and the regulated banking system. And you know, there's sort of a view that that's like, that's safe. And then, you know, the rest of the world was saying like, I actually don't know if the United States is safe. And so you had a kind of flight from safety. And that was pretty dramatic.

• 10:48Speaker 01

  And that went on, I think, for many months as the whole industry around the world kind of recalibrated. I think for Circle specifically, we've come to the other side of this just in a far stronger place fundamentally, from an infrastructure perspective. I mean, we've built up the most transparent reserve structure in the industry. So you can literally... Look at the reserves in USDC daily through a publicly listed vehicle, USDXX. And you can see, and that's independently audited, independently verified, SEC regulated. And that is the Circle Reserve Fund structure.

• 11:29Speaker 01

  And you can literally see every single T-bill, every single repo agreement. And you can see their precise maturity, et cetera. And so it's just a level of transparency that does not exist anywhere else. And then obviously, you know, what we've been able to do is actually significantly evolve the banking infrastructure. And I think this is an important piece of what's been going on, which is we have taken the path of working with regulators around the world since we started. I think both Circle and Coinbase have really tried to always be like strong, compliant organizations. And that's allowed both of our firms to have really excellent access to the fiat banking system. And that's the, for us, it's the best it's ever been.

• 12:14Speaker 01

  We have a global network of transaction banking now. We have, we have the ability to create and redeem USDC in the domestic bank networks in the US, in domestic bank networks in Singapore, in Hong Kong, in the EU. We'll soon be launching in, in markets like Brazil and Mexico. We've announced initiatives to, to enable on and off ramps for USDC in Japan. So it's like a whole global infrastructure. And we've added multiple, what are called GSIBs, Global Systemically Important Banks, as reserve banks that hold the cash piece of what we do, not the, not the, the T-bill kind of part of what we do. So that infrastructure is, you know, far more redundant, far more global with, you

• 12:58Speaker 01

  know, very strong global scale infrastructure players behind it. And then we just continue to ramp up the transparency. And so that is now, I think, you know, playing out very, very good as like major companies want to build on top of this infrastructure now.

• 13:14David Hoffman?

  Jeremy, maybe to kind of summarize the big changes here that happened in the wake of that banking crisis, correct me if I'm wrong, but my understanding is Silicon Valley, Silvergate, these were banks that would bank crypto companies that were like, quote unquote, like on the margins from the perspective of maybe like the regulators. And they were banking Circle, one of Circle's banking partners. And now like kind of the before, after of the whole banking crisis is now Circle was maybe like banked by like banks on the margins, but has now been brought closer to the fold. You've gotten like stronger, more like inner bank banking partners. I think JPMorgan is one of them. Is that how you would kind of describe the before and after of the effect of the banking crisis?

• 13:59David Hoffman?

  Is that like Circle has been like given a route into like more of the center of the financial system?

• 14:04Speaker 01

  So I think well before SVB saw its challenges, we had been upgrading to the BlackRock based Circle Reserve Fund structure. And in fact, even at the time, around 85% of the Circle Reserve infrastructure was actually custodied in Bank Nierich-Mellen, which is the largest custodian in the world, like $30 trillion of assets and the BlackRock funds. So and then the cash piece, you know, I think every company in this industry has struggled to get major banks to work with them. And in fact, the number of companies in this industry worldwide that have major banks is extraordinarily limited. And so,

• 14:49Speaker 01

  yes, it's true, we've continued to upgrade the kind of scale of the banks that we work with. But you know, some of the other players can't get US bank accounts, have to depend on on shadow banks in jurisdictions with no real regulation. And so it's, I think we were in a good place. So when you know, BlackRock decides, you know, they want to work with a company to enable stablecoin transactions with a tokenized fund, or when the largest retail bank in Brazil, Nubank, which is an extraordinary company to

• 15:24Speaker 01

  To like launch digital dollars. They're working with the companies that have that really deep infrastructure integration into the financial system. And that's, you know, that's a huge part of the role that we play. One thing to note, though, is, you know, I think banks like Signature Bank and Silicon Valley Bank actually were like darlings of Wall Street. Extremely well rated banks, some of the fastest growing banks in their time and quite large. So these were not like niche banks. These are major banks that were institutional in size and scale and had decades of being fundamental banks to huge parts of the technology industry.

• 16:08Speaker 01

  Almost every venture backed company in the world, most venture capital firms. A huge amount there. And so these are not like, you know, a niche community bank in San Diego. You know, these were actually major, you know, some of the largest regional banks in the United States. And so I think that's why, at the end of the day, we saw this First Republic, which is another huge, huge regional bank, huge asset manager failed and was taken over by JP Morgan. You had, you know, one of the largest banks in the world, Credit Suisse, failed right at the same time. So you're having these very large banks failing.

• 16:49Speaker 01

  And so you had, and you had basically central banks sort of stepping in to say, you know, we're not going to let this happen. I think one of the unfortunate things that happened from that is that, you know, while we now hold the cash pieces of USDC almost entirely with these global, systemically important banks, it's just concentrating more money in these G-Sibs. It's sort of concentrating effectively those funds in these too big to fail institutions that effectively have the taxpayer kind of backing them, whether they like it or not. And prior to that, we actually had a program called Circle Impact where we had deployed billions of dollars into community banks, minority depository institutions and community banks.

• 17:34Speaker 01

  Wanted those banks who offered fundamentally credit to important communities. And that was part of our social impact commitment, but those are all deemed too risky. And so we had to pull back billions of dollars from MDIs and community banks, which was really disappointing. And so I think at this point, though, when we think about just looking at USDC specifically, our goal here is that this is as close to like government obligation money as you can have as a digital dollar. And so we've kind of reached that from a fundamental risk perspective. And so if you're going to have a base layer of money on the internet that you're building software against,

• 18:18Speaker 01

  you're putting protocols on your transactions, and you want that to be as low risk and as transparent as possible.

• 18:25Ryan Sean Adams?

  Yeah, I hear you. It feels like USDC is now much more connected to the mainframe, I guess, of the dollar banking ecosystem. And what's interesting is, and by the way, I was looking at the USD XX, which I think I can go see this if you Google USD XX. You can go Google and see your question is what backs USDC? You can kind of see it here, right? It's right here. And so in USDC, you see a lot of treasuries. It sounds like there's still an element of cash reserve, but now that cash reserve is in one of the big banks. And if I'm just a layman's interpret what you were saying, Jeremy, is the reason you couldn't spread the cash throughout all of these community banks

• 19:07Ryan Sean Adams?

  and kind of like, quote unquote, decentralize it a little bit is because it's just too risky. If these banks go under, and they could go under as a sector, for instance, then there's no FDIC insurance on the books, kind of protecting the cash reserve in those banks. And so if you're Circle, you got to get close to the mainframe, and you got to park it in the kind of like the, I'll use my term for this, the quote unquote, too big to fail type like major banks, basically. And that's effectively what you've had to do.

• 19:34Speaker 01

  I think that's right, and it raises like a bigger philosophical question, which is something that we've pursued. And I think it has an enormous amount to do with ultimately what DeFi is trying to accomplish, which is in a world where you have a technology, these blockchain networks, that effectively can can lower the cost of storing and moving value, the marginal cost of storing and moving value to effectively zero, where effectively you can transact at the speed of the internet. You can settle transactions with very high degree of of of security and settlement assurance in a fraction of a second, and now for a fraction of a cent in many cases. You're you're creating like one of the highest utility forms of money that's ever existed.

• 20:19Speaker 01

  You're creating this sort of and in that world, you're actually increasing the velocity of money. There's this concept in in monetary theory around money velocity, and the velocity of money has this huge impact on economic activity. The more the higher the velocity of money, the sort of more economic activity, and that can drive growth. And historically, central banks use interest rates to try and slow down or speed up the velocity of money. But today, the the way in which that velocity is constrained is is essentially through the leverage and risk-taking of banks. So, you know, you know, effectively, I put, you know, a million dollars into Bank A. I don't actually have a million dollars there.

• 21:01Speaker 01

  I have a liability, and that liability is to to that bank. That bank then is an investment company, and they make loans and they leverage your capital. So you have a 12x leverage position. That's the average leverage in a bank deposit. So you have this 12x leverage position, and that's super risky. And so in a world where basically money is going to like move like data on the internet, it's just going to move everywhere at this incredible speed, having that the underlying asset itself be built up on these stacks of leverage is really, really problematic. And so I think, you know, not only do we want like this like hyper-efficient, like high utility money, you want the base layer, that that payment stablecoin, as people refer to these,

• 21:45Speaker 01

  the kind of fundamental payment token, you want that to be as close to the metal as possible. You want that to be basically as close to government obligation as possible. Because then everyone will feel comfortable interacting with it and using it, whether you're like a trader settling $100 million trade or you're an individual. And where DeFi comes in is my belief is that on-chain markets are going to do a far, far better job at allocating capital and risk than traditional banks. And so if I could build an on-chain credit market and that on-chain credit market has the ability to have different types of underwriters of risk that have highly specialized knowledge and who are able to actually be like the credit pool underwriters.

• 22:30Speaker 01

  And people can basically sweep into those pools. They understand like it's still lending, but it's actually on 100% transparent infrastructure, 100% real-time auditable infrastructure. All the risk management that's embedded in the credit infrastructure is transparent. The source code is transparent. You build a dramatically more open and transparent model that can drive lending. And like right now, a lot of that lending that happens in DeFi is sort of leveraged lending, margin borrowing for speculative purposes. It's not for real use in the real economy. People are not saying, hey, I would like to borrow USDC to open a new restaurant or hire more employees, although there is more and more of that.

• 23:13Speaker 01

  And you do see some of these DeFi products that are kind of designed around this kind of on-chain credit intermediation. But fundamentally, like philosophically, we believe in full reserve money, full reserve banking, where you separate the activity of lending from the payment utility. And that's like a core, core philosophy behind Circle and USDC as well.

• 23:34Ryan Sean Adams?

  Full reserve money, a payment coin. We want to get back to that later in the conversation, the context of like, does the US government want that? And what does the US government want? But like, let's hold that side of the conversation because you opened up something else, which is like DeFi and crypto and blockchain and like money at the speed of information, money at the speed of light and kind of this idea of like global frictionless kind of payment transactions. So a question we often ask in crypto is what year is it? In internet terms. Okay, so I know Jeremy, this is not your first like company that you're building. You're not your first startup. You saw the birth of the internet. You built protocols on the TCP IP internet protocol and now you're building Circle and kind of like crypto native protocols.

• 24:19Ryan Sean Adams?

  It's interesting because crypto just hit 15 years old and Bitcoin started in 2009, as many people know. The internet's birthday, if you go Google this, the internet, like Google says, the internet's birthday was in 1983. And 15 years after the birth of the internet was 1998. Okay, so if you like, project that forward. Are we in the late 1990s in terms of like blockchain? I was curious because I know you have a take on this. You've been through the early internet cycles and now you're here for the internet of value cycle. What year is that? Are we in the early 90s and the late 90s? Is this post.com bubble? I mean, certainly 2022 felt to a lot of people like it was a bubble and then a pop.

• 25:01Speaker 01

  Yeah, so I think about this a lot and I think it's very different than the evolution we saw from like the basically these unconnected networks in the 80s and connecting those into sort of the birth of the HTTP protocol, which then kind of gave rise to the web and SMTP protocol, which gave rise to email, which were really in 1998, like the killer, the killer apps. They were still pretty difficult to use and it was, it was, it was all dial-up modems. It was, it was a pretty, pretty, pretty awful infrastructure, but you could build things like, you know, we built an app server. You could build apps in a browser and that was like a really powerful thing and people were, you know, on this decentralized infrastructure, setting up these nodes and just like everyone was publishing.

• 25:45Speaker 01

  So you had a sense for like, wow, this is, you know, this is amazing. I think we're further than that though in crypto. And I actually think where we are is very similar to where we were in like 2003. And yeah, and so my view is, is so you have like multiple convergent things happening at once. And, you know, back in 2003, you had Basically, like client software on the Internet got much better. Like you could build good user interfaces in browsers and the like. Like the standards got better for UX. You had broadband basically taking off. So you didn't have broadband really until 2002.

• 26:29Speaker 01

  And so then you had residential broadband really starting to take off, which created the ability to have these faster pipes. And so not everyone had the faster pipes, but the faster pipes are there. Wi-Fi came out. Like Wi-Fi didn't exist before then, or it was like super niche. And then people started to be able to connect devices that could connect to the broadband. And then you could then teleport like the digital media or the software in different ways. So you had Wi-Fi, you had broadband, you had better client user experiences. And you actually had billions of dollars of capex that had been laid out by companies who had basically invested billions into the dot com boom. And that capex became available and became more commoditized as well.

• 27:10Speaker 01

  And so the ability to like deploy servers, server farms, or to build what we now know as cloud, like the commoditization was happening there. So you had all these things kind of coming together. And it really made the consumer Internet possible. It made e-commerce really work much more broadly. And it made basically software as a service happen. Like that basically starting in like 2003, 2004, SaaS just completely took off. And so you had a, what was interesting about it is from that point forward, it was basically a nonstop period of progress. There was no, I mean, there were some, the public markets did different things. But basically, like the progress basically was just never stopped.

• 27:55Speaker 01

  And I think we're still there, like the progress never stopped. So if I think about blockchain networks, like where we are today, there's a similar kind of convergence that's happening. You basically have like the layering of blockchain networks, which is creating these like really, really powerful scalability models, where you can go very app specific and you can have a deep underlying assurances of security. You're seeing the advent of an application of zero knowledge technology, which is a critical precondition to people feeling comfortable with their privacy and their data and their identity and other things on these networks. You're seeing UX abstraction finally arriving.

• 28:40Speaker 01

  So basically, all of the really hard parts of crypto, which is like, I need to go buy a crypto token, move it to a third-party wallet that I have to set up with like a seed phrase. I have to sign these transactions. I have no idea what I'm doing. Why do I need this gas token? And it costs like $7 to do this thing to get that NFT. It was just awful. And so during that 21, 22, it's like, the reality is like the UX was awful. And so now we have infrastructure and UX abstractions. Gas abstractions, like we run a gas station. Any developer can build with it. And you can basically take away gas for users. It's just like really, really cool. And you're seeing modular smart contract accounts

• 29:25Speaker 01

  that are basically creating pluggable, extensible kind of UX models for wallet experiences that then devs can build all kinds of modules and wallet creators can adapt those. And the UX layers, basically, like, we're seeing that with, you know, a number of wallets that are out there right now. And so the combination of like scalable infrastructure, better UX. And then finally, while this doesn't necessarily feel like it's happening, legal clarity is actually happening in most parts of the world. So almost everywhere in the world, there's like, there's legal clarity. And when you have legal clarity, then like households and firms and financial institutions are like, oh, okay. I know how to, I know what this is. I know how to account for it on my books. I know how to interact with it. And it's like, I now have like a trustworthy infrastructure.

• 30:10Speaker 01

  And so all these things are coming together. And the technology progress in these infrastructure layers is speeding up, not slowing down. So I think this is 2003. I think we're going to see like wonderful, beautiful apps that get consumer scale over the next 12 to 24 months. We will easily be, reach a billion users that can transact in something like USDC, but also with other things. I really think we're in a very, we're in a different place. And now it's like sufficient.

• 30:39Speaker 01

  That developers can build all kinds of other applications. Obviously, like, Farcaster is a wonderful example of like, wow, you can build beautiful apps that have protocols, that have digital tokens, that have extensibility and other things. So I'm very bullish about where we are. And I, you know, I don't really care about exactly what prices are and all that. But like, I really think technologically, we're in a really excellent place.

• 31:05David Hoffman?

  You don't care about prices, Jeremy, because you run a stablecoin, man. That's a cop out.

• 31:11Speaker 01

  Yeah, I'm not pumping any token.

• 31:14David Hoffman?

  That's right. It's always fun to do the infrastructure comparisons of the 90s to what we have now in the blockchain world. Because it seems to be like, I mean, it's of course never going to be a one-to-one comparison, but there's always lessons to be learned, right? There's always patterns to pull out. But always the big difference is that there was never any financial assets in the 90s. And so that's always the thing that kind of breaks down the metaphor, that breaks down the comparisons.

• 31:40David Hoffman?

  One of the fuels for motivating all of this is, of course, like Bitcoin invented digital gold, digital money, you know, ETH, all too, like a lot of other, like, we all kind of are playing around with assets. But I think before the paradigm of stablecoins, no one actually really saw the paradigm of stablecoins coming. But now, we actually do understand that stablecoins have just an insanely large role to play in both the motivations, the financing of development, where we are going. There's $150 billion of stablecoins in this space. And so not only has it kind of defined maybe like the last like four to five years of development, not holistically, but of very being a very large part of like blockchain development. Where do you think this goes?

• 32:20David Hoffman?

  As this infrastructure, technically, like on an engineering and infra perspective, it will get more sophisticated, it will get better, it will improve. But on the financial asset side of things, for stablecoins and just generally speaking, like, where do you think this goes in the next 10 years?

• 32:36Speaker 01

  Yeah, so what I've sort of, and you can ask anyone who's ever worked at Circle this question, is that my view has always been like this is this, this, the progress in basically building an internet financial system that is natively built from the ground up on the internet is like a 10, 20, 30 year project. It takes a really long time. And we set out a very specific vision about a protocol for dollars on the internet that could actually be like scalable and you could transact at the speed of the internet and you could do it for, you know, nearly zero cost and that would be programmable and all that. That was like in the founding of the company nearly 11 years ago. And like, if I look at where

• 33:16Speaker 01

  we are today with just say USDC and this form, this new form of electronic money, like we're basically like at the 1.0 vision. Like we basically have reached like the 1.0 idea. And that's great. And it's already like a scaled network and it has a lot of reach. But I think like, if you talk about the next 10 years, I think the, the growth in this can be really dramatic. I think about the kind of market in a couple of ways. I think the first is there is a market for electronic, electronic cash or electronic money. And today, the, the market for electronic dollars is a $21 trillion market. There's $21 trillion

• 34:00Speaker 01

  of electronic dollars in, in the, in, most of that is, is kind of bank risk money. It's sort of levered, levered money inside of, of banks.

• 34:09Ryan Sean Adams?

  Yeah, what is that 21 trillion? So is that like money in my bank account, my Wells Fargo account that would count towards that?

• 34:16Speaker 01

  Yeah, that's right. That's like M1 money supply.

• 34:20Ryan Sean Adams?

  Okay.

• 34:20Speaker 01

  And so that aggregates up all of the kind of dollar, dollar liabilities that exist in, in the banking sector. And then you can also include on top of that usually the The amount of dollars that are held in like money market funds, which is I think currently five or six trillion dollars. So that's like the dollar electronic money market. And then globally, that's about a hundred trillion dollars, a little bit more than a hundred trillion dollars, because there's all these currencies and all these banks all around the world.

• 34:50Ryan Sean Adams?

  Wait, wait, in dollars? So you're not talking about...

• 34:53Speaker 01

  In dollar terms.

• 34:54Ryan Sean Adams?

  Yeah, okay. In dollar terms. Well, you're talking about like the digital euro, for example.

• 34:58Speaker 01

  Well, no, I'm just talking about like you've got you've got 1.4 billion people in India and they have rupee accounts and all the corporations and households have rupee. And those are electronic, that's electronic money as well.

• 35:10Ryan Sean Adams?

  And M1 rupees, basically.

• 35:12Speaker 01

  Yeah, M1 rupees, right. So the aggregated, that kind of aggregated electronic, the electronic money is over a hundred trillion dollars. So 150 billion stablecoins, very, very small, right? And I would argue that, and this comes back to something I said earlier, that in a world where basically you have money that inherits the physics of the internet, where you have basically the speed, the efficiency, and reach of the internet. And that is what blockchain networks are now providing. When you have money that inherits that speed, the best money is going to be, is going to want to be, and people will want to be, the safest money.

• 35:56Speaker 01

  They're going to want it to be that kind of, almost like government obligation money. And that is going to be the combination of like hyper utility, programmability, transparency, and safety, right? When you put all those together, it's going to be like the new predator form of money. And I believe that it will become the preferred form of money by households, by institutions, by financial players. It will become a preferred form of money because it has the highest utility and safety. And the internet and blockchain networks are going to be providing that ultra-high utility. So our belief is that... The opportunity, just the money stock, basically, just the money stock, there's a huge opportunity to grow the scale of that.

• 36:40Speaker 01

  And it's sort of like, you know, e-commerce originally was like 0% of retail sales. And, you know, when Amazon was a monster company, like e-commerce was still only 10% of retail sales. It's still not even close to the majority of retail sales. You know, same thing with like streaming media, like the vast majority of television consumed is still in broadcast, right? It's not on streaming platforms. So these migrations take a long time. So in 10 years, could 3% of the, you know, or 5% of the electronic money market be in stable coins? That's conceivable over 10 years. Could it be 10% or 15% over 20 years?

• 37:23Speaker 01

  That follows a similar type of adoption arc, but even in that scale, it's significant. The other way to think about the market is basically the utility side of it, which is, you know, you have the money stock and then you have the utility of how you can use the money stock. And, and right now, that's expressed through markets like consumer payments, which is sort of all of these merchant acquiring fees and issuer fees and like this whole stack that imposes essentially a trillion dollar tax on the global economy through all the fees that that has. You have the utility of using that electronic money in capital markets. So the actual volume of activity that goes into capital markets, where literally there's,

• 38:04Speaker 01

  you know, trillions and trillions of dollars of activity that happens there and the payment utility of the pipes that do that. You have the entire international transaction market, cross-border transaction market, which is, you know, households and firms, which is, you know, this huge, slow, inexpensive and fee-prone market. And every single one of these can be improved with blockchain infrastructure, on-chain FX markets, on-chain credit markets. You know, you can move so much of the financial primitives into an on-chain world and you can, I think, fundamentally have the utility of money.

• 38:41Speaker 01

  Have that kind of 10x improvement that we've seen in the utility of communications, the utility of publishing, the utility of other mediums that the internet has produced. That utility can be just that like 10x better. And with a completely different unit economic model. And so the business model of extracting fees and tolls on moving value, I think that's going to be challenged, just like charging for long distance telephone calls is nearly inconceivable, right? So there's the utility side and then there's the money stock and they both grow and feed on each other. And I think one of the really exciting things about stable coins is they are kind of

• 39:21Speaker 01

  platforms and network utilities that exist as protocols that anyone can connect to and build on. Like USDC, any developer in the world, any person in the world can download a piece of software, connect to it and then utilize it as a network. Any developer who wants to have a digital dollar integrated into their own application for settlement or storage or other things, they just have to write code. And so that hasn't existed in the financial system before and that's really profound. And so I think similar to, you know, when, let's just use as another example of a like discontinuous jump in innovation, which was the iPhone. You know, for 10 years, people were trying to build smartphones, like they were awful.

• 40:02Speaker 01

  Every one of them, like Nokia phones, NTT Tacoma, Compaq iPac, Palm Pilot, BlackBerry, like Windows phone, I mean, it was like just a graveyard of people who were like mobile, mobile, mobile software, all this, and it was awful. And then finally, like there was a convergence of things, which was like a good UX, mobile broadband, 3G happened, a good UX and like a really good development model. And then you had like an open platform for mobile that allowed just enormous amounts of entrepreneurial creativity, like no one could have predicted that the The travel and logistics, you know, infrastructure would get completely reinvented by like a company like Uber.

• 40:47Speaker 01

  Like, that was only made possible, like, that just became possible. And so I use that analogously to what's happening with DeFi and what's happening with stablecoins and this programmable money model is, we actually don't yet know all of the things that people are going to invent with programmable, composable money. Like, we're seeing stuff every day and it's amazing, but it's actually, we're like right at the front end of that. And so when that UX layer kicks in and the scalability kicks in, and these are legal instruments that like governments stand behind and say, yes, this is a legal dollar or a legal euro, then I think you start to see totally unpredictable use cases that will emerge. And so it's like, I can't even predict like what are going to be the five killer apps of money in five years from now.

• 41:31Speaker 01

  I think it's actually too difficult to predict that.

• 41:33Ryan Sean Adams?

  Jeremy, I still hear in the back of my head the critic or the cynic saying, okay, you say it's 2003 right now in crypto world, right? In terms of internet years, but like the 2003 was sort of the era where, you know, the internet became not just for nerds and geeks. It just like totally went mainstream. And the way we went mainstream was like killer apps. We had killer apps. And here crypto has been in existence for like 15 years now. And stablecoins have been in existence for a while now. And 150 billion is like respectable, the only credit where it's due. It's only a sliver. And like the most simple app on the planet feels like Venmo for crypto. I just want to take my stablecoin in a mobile wallet and I want to just send David some USDC.

• 42:16Ryan Sean Adams?

  And we don't have Venmo for crypto. Jeremy, where is Venmo for crypto? Where are these apps going to come from in the next 10 years?

• 42:23Speaker 01

  Have you tried Coinbase Wallet with Base?

• 42:26Ryan Sean Adams?

  Well, tell me, tell me. Where is it? Why hasn't it come until now? And like, is that basically what you're predicting?

• 42:33Speaker 01

  So, I mean, look, I think general, like, general payment utility is definitely like the killer app that we'll see. And I don't just view it as like, you know, this is just about the Venmo, the person-to-person type component, right? The beauty of this is that this infrastructure works for every, you know, every dimension in the market. Like there are USDC users that are paying 25 cents for a digital object in a web three game, and they can do it because it actually works. And that exact same technology on that exact same blockchain is being used to settle a $200 million trade bilaterally, peer to peer, between two large trading counterparties. Like, you're not doing a $100 million transaction with Venmo.

• 43:16Speaker 01

  You're also, you know, not really doing a 25 cent transaction, right? So you have this like super scalable model. But, but, but I think I completely agree with you, right? The interoperable, global, you know, direct value exchange is definitely the killer app. And so what's interesting is, and I think what you're seeing is you're seeing the, the bottom up build, which is like, you know, the crypto native companies like Coinbase, building, you know, Base and Coinbase Wallet and connecting that together. You see Binance doing similar things across their platform and Trust Wallet and things.

• 43:57Speaker 01

  But you also see, you know, like these huge aggregators of, of, of end users who are basically building web three into their infrastructure. So like Grab in Southeast Asia, 200 million users. They're using Circle's web three infrastructure stack, our developer platform, to put web three natively in the hands of their users. New Bank in Brazil, 90 million users. These are huge, right? These are, these are user bases that are bigger than the biggest crypto companies in many cases that are building, you know, digital dollars into their apps. You know, another major Latin American giant, MercadoLibre, you know, doing amazing things by sort of bringing these in.

• 44:41Speaker 01

  And we're seeing this happen around the world, which is Super apps, large scale like consumer fintech products that already exist are basically building in blockchain infra and they're building in Web3 clients. And when that starts to happen, that's when you start to connect all these together, right? You start to actually have a world where you have interoperability, right? And it's not just like a new app that someone created. It's actually within apps that are already widely adopted. And so whether you're in, you know, in Indonesia and you use the dominant e-money app there, or in the Philippines, the dominant e-money app there, or in Japan, these sort of fintech e-money apps that are like the Venmos, right, that are kind of the neo-banks, right?

• 45:26Speaker 01

  They're all moving into crypto infrastructure, like all of them are moving into crypto infrastructure. And so that's what lights up the kind of global network and global utility layer at an end user level. And then I think, you know, the other side is basically kind of on the institutionalization front, which is we're in the, as you guys know, like super early days of tokenization, super early days of RWAs, but you know, long been the promise, which is can you take a existing financial contract and can you represent that in a smart contract and have it, you know, the digital token become the mechanism that you flow value in and out of, that then ultimately becomes an instrument that can be used through all of the kind

• 46:11Speaker 01

  of composable infrastructure that is DeFi. So that we're at the front edge of that and, you know, in certain places, laws and regulations are going to help accelerate that. So like MICA in Europe, which goes effective, you know, June 30th, you know, all of a sudden you're going to see it's like legal to issue these digital tokens and, you know, lots of different players can be able to do it. Stablecoins are going to become the digital cash for how you use those. And so the kind of capital markets, which is a giant category, right? You'll start to see more capital markets use cases moving on chain as well. I'm hopeful, I'm hopeful though, that, you know, the utility of a blockchain is way outside of financial, right? And it's

• 46:54Speaker 01

  Sort of a useful technology for so many other things. And that can be in certainly coordinating and incentivizing different kinds of economic behavior to drive an outcome. And you see this with like D pin. But it also can be just a very, very powerful way to have provable data, provable transactions, provable data and provable transactions at scale are useful in a lot of of applications and social is obviously one where that's taking hold. Gaming is another one where that's taking hold. We have a relationship that we talk about and it is public with the, I think, the second largest gaming company in Korea called Crafton.

• 47:35Speaker 01

  They build, they operate one of the largest like massive multiplayer online universes out there as in a traditional game. And they're building something called Overdrive, which is essentially like a kind of Roblox style creator game at scale entirely blockchain native. And then using like USDC as the in game, you know, kind of unit of account, right? That's there. And like these kinds of products are really just coming as well. So obviously, but even your analogy of 2003, like 2003, like not a lot of people even had broadband yet. And so it was still really early, like, you know, YouTube didn't come out until 2004,

• 48:16Speaker 01

  and it really didn't take off until like 2005, 2006. And, you know, it was years, there were still years before a lot of these things. Facebook didn't exist until 2004. And then it was just on college campuses. It didn't really take off until like, you know, 2008, you know, where it really opened up and exploded. So there's still, there's still some work to do for sure.

• 48:38David Hoffman?

  As we do these like comparisons to the internet of old, there's always like the ways that it's the same. And again, ways that it's different. I think especially with crypto, like where is the killer app is always like one of the favorite questions that we ask ourselves. But I think like there's really two frontiers that crypto progresses on. There's the frontier of there, all the financial things that we already do that we know crypto is better at. We actually still have to compete with this already entrenched, you know, we all, we still have to compete with Venmo. Like, so why is there no like Venmo for crypto? Oh, because Venmo exists, like it's actually a good product. And so we have to compete on that front.

• 49:18David Hoffman?

  And then there's like the actual killer app, the net new thing, because like at least Facebook, MySpace, Instagram, Uber. They actually didn't really have too strong of like historical precedence to compete against. There was actually somewhat of a vacuum there. Maybe Uber had to compete with the taxi companies and that's like crypto competing on Venmo, like eventually we'll get there. So there's like two frontiers here, right? There's like the pre-existing web two fintech apps that we have to compete with just on our merits. But then there's also the frontier of just like, what are these net new crypto things that like are like Friendtech? Or something like ENS? How do you like delineate between these two lines, Jeremy? How do you think these things are going to go?

• 49:55Speaker 01

  Yeah, well, I mean, like, um, I, I think if you believe in the fundamental tenants of web three and rewrite own and so on and so forth. You know, a huge part of what will make a lot of these apps killer is the way in which people participate in them and build value in them and share ownership in them. And like, that's fundamental, that's a fundamental paradigm shift. It's a huge paradigm shift and the ability to have participatory platforms. That's not existed before. And so I think we're all waiting for the examples of that to be born in a lot of different categories that are currently run by like centralized platforms.

• 50:40Speaker 01

  And so I think that is a huge difference. Obviously, one huge barrier to that is consistent treatment of digital commodities. And how this digital commodities can be bought and sold and how they're issued and the laws around that, right? Until that's resolved, there's just going to be this, this challenge, right? So we have that issue in the US. We have to have regulatory clarity. It's not sufficient to just have lawsuits, right? We have to have regulatory clarity. We have to be able to know like who issues a digital commodity, when they issue it, what, what do you have to disclose? What are, you know, there's like a whole A bunch of things that are needed. Other jurisdictions are providing a path for that. And then that needs to work around the world because these are all internet scale.

• 51:21Speaker 01

  Like a digital token that exists as a mechanism for participation, governance, incentives, et cetera. Like, that has to be able to work around the world. And so, we have to see that progress. I think that is a real challenge. And obviously, you know, at some level, one could be, you know, very pessimistic about the outlook for that, say, in the United States. I'm always an optimist on a lot of different things, but I, what I see is Congress is getting smarter and smarter. More and more people understand that there are these distinctions between the different types of digital tokens that exist in the world. And, and other jurisdictions are actually providing that regulatory clarity. And so, I think we'll get there.

• 52:05Speaker 01

  And, but I think that's necessary, right? Because, because if, if economic incentives and economic incentive design and participation in economics becomes a mass scale phenomenon through like decentralized applications and platforms, you need a basis of law around that, that, that works at scale. For everyone to be comfortable, like saying, just like everyone got comfortable getting in an Uber with a random stranger, like letting strangers stay in your house with Airbnb, like, there's a comfort that has to come. And I think in financial matters, the, the way that comfort come is not entirely self, kind of self policing.

• 52:44David Hoffman?

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• 56:18Ryan Sean Adams?

  Yeah, I do think that comfort is starting to show up on the institutional side, right? Now institutions, Larry Fink is willing to get in an Uber with crypto, let's say, which is really interesting. Like, we would have been scared to do that, and I think he was, maybe like five years ago, let's say. And speaking of Larry Fink, BlackRock and Circle, you were talking earlier, Jeremy, about a tokenized treasury or real-world assets, let's say. And one of the biggest real-world asset aside from the dollar itself is a treasury, a US treasury. There is something that we've been tracking at crypto has been BlackRock's Bittl Fund, where they are using a third-party company, a more crypto-native company called Securitize,

• 57:01Ryan Sean Adams?

  to actually put treasuries on-chain in tokenized form. Now, that was part one of kind of the release and announcement. We just found out, probably a week prior to recording this and the publishing of this episode, Jeremy, that on the other side of that smart contract, again, this is all beautiful. It's all on Ethereum, it's all in code. You can go see it on EtherScan. On the other side of that smart contract is a little function in the code, a redeem function. So people who have these BlackRock tokenized treasuries can hit that redeem function button, essentially, in the smart contract level on-chain and redeem those tokenized treasuries for what? For USDC, the stablecoin. So now, for the first time on-chain, to what I'm aware of...

• 57:44Ryan Sean Adams?

  Anyway, at the level of BlackRock, we have a pipeline. We have some bandwidth coming through from treasuries to stablecoins. I know you can't speak on behalf of BlackRock, of course. Maybe you'd speak on behalf of crypto and stablecoins, though, in general in Circle. How big of a deal is this? What just happened with this kind of redeem function? And where's it going to lead to?

• 58:06Speaker 01

  I mean, I think it's a really big deal, obviously. I think, you know, it's been interesting to see the evolution at BlackRock. You know, they became a strategic investor in Circle a couple of years ago. So almost two years ago. And we built out this very innovative, highly transparent reserve structure for USDC. So they were like making a big bet on on stablecoins. And and I think, you know, I got to know Larry Fink and the other leadership there and had a lot of long conversations about, you know, digital commodities, digital gold, like what are what are the differences between all these blockchains?

• 58:47Speaker 01

  And I think the team there, you know, Larry certainly got excited about these things. But I think the the team there that was sort of assigned with coming up with strategies and digital assets, like they were really getting, I think, like, strong support from their leadership to like, we want to, we see that this is actually going to be highly disruptive to asset management. It's going to be highly disruptive to the way capital markets work. And they wanted to be at the forefront, which is which is amazing because they're, you know, 10 trillion, I don't know what their current assets under management are, but they're like the largest asset manager in the world and a hugely important player. So it's been, I think, just seeing that's been really positive.

• 59:27Speaker 01

  And I, you know, I think this idea that you can have a financial contract, like I have a contract to own something, I can own a T bill, I can own a house, I can own stock in a company, I can, you know, own part of a sports franchise, I can own lots of things. The ability to express ownership in digital tokens and the ability to have the way in which you create and redeem. Ownership be stablecoins just makes tons of sense. And the ability to have that exist on a public infrastructure, which is audible, verifiable, secure, global, interoperable, like it just makes so much sense.

• 1:00:09Speaker 01

  And so the whole concept of the sort of democratization of capital markets, the ability for far more people in the world to participate in those capital markets, that is only really possible in an on-chain world. So I think having like the, you know, sort of the most popular investable asset in the world, which is T-bills, become tokenized and then have the cash component of it, using the cash settlement piece of it, using a digital cash instrument that is also on-chain. Just it makes tons of sense. And so I think we'll see a lot more examples of this, not just in the T-bill space, but in a lot of other categories.

• 1:00:54Speaker 01

  It's a really exciting area. I think one of the, one of the big things is going to be when do we have exchanges that can trade these tokens and, you know, not just in the US but globally. So, you know, regulators that are approving digital asset exchanges are also starting to approve that those exchanges can list these security tokens. So when do you start getting like global markets for these as well? You know, when, when do you have DeFi protocols that can interact with these? And do that like in a compliant way, right? So there's a lot to build on from here, but it's, I think it's a, it's a very, very exciting start.

• 1:01:35Speaker 01

  And there certainly have been others that have been experimenting in the same category over the last year, but obviously BlackRock stepping in is a really, really big deal.

• 1:01:44Ryan Sean Adams?

  Okay, so to see some of this vision to fruition, there's another player that has to kind of like weigh in on it and a player that seems like almost split brain on the subject of crypto and stablecoins so far. And that is the almighty US government. I'm curious your perspective on this, Jeremy. Like what does the US government want when it comes to? Stable coins, and let me just lay out a few things that is just like context for this conversation and like maybe you would know best. There does seem to be some advantage to the US government to essentially kind of like outsource its CBDC kind of like investment structure to the private sector. We already have the ledger, we already have programmable money, like let's just do it with stable coins, right? And that could be kind of like

• 1:02:29Ryan Sean Adams?

  a CDBC for you. So like there's that, there's also this perceived benefit potentially of what is one of the killer exports of the US right now? It's the dollar. I mean, 80% of worldwide transactions are like handled in dollars, denominated in dollars. I mean, that's absolutely phenomenal. The world loves this product and we can go get it to countries that have subpar banking systems. That's maybe on the pro side of things. Oh, and you might also add, somebody's got to buy some T-bills, don't they? Well, US debt is continuing to rocket up. So that's on the pro side. On the against side of things, though, you were talking about like Circle and the idea of a payment coin and like that

• 1:03:11Ryan Sean Adams?

  being backed as kind of like a fully reserved bank. Arthur Hayes put out a post like probably a month ago and made the point, which like I don't know what you think in terms of its accuracy. It's not clear that Treasury and the Fed actually want like a fully reserved bank at all, right? If they did, they would have already like issued licenses to kind of like make fully reserved happen. The reason is, some of their monetary dials kind of get dulled. Like they use the bank's lending function to kind of like adjust supply of money and maybe they lose that ability. Maybe they lose some sovereignty here in the process. So maybe they have some concerns with exporting the US dollar via stable coin.

• 1:03:52Ryan Sean Adams?

  Anyway, zooming back out to the question, that's kind of the context. I asked the question of what does the US government want when it comes to dollar-backed stable coins?

• 1:04:02Speaker 01

  There's a lot in there and there's a lot of great stuff to talk about. I think The first is like, you know, I think saying the US government is never an accurate thing. It's not a monolith, right? It's not like this one mind that is the US government and it speaks with one voice, right? The US government is, there's three branches of it. They all have their own thing. You have the actual, you know, parts of the government, the agencies that are responsible for things like the dollar, like the Treasury Department or the Federal Reserve. You have, you know, parts of the government that are very, very focused, for example, on national security and on all of the wars that are breaking out around the world and all of the hostile nation-state issues that exist, right?

• 1:04:47Speaker 01

  So the government is a lot of different voices. And so there is no uniform voice on this. But I think the closest thing that we have to a uniform voice on this is that, you know, several years ago, the United States government, through what is called FSOC, which is the Financial Stability Oversight Council, which is basically the heads of all of the big financial regulators, but at the behest of the US Treasury Department, which is the department that is, in a sense, in charge of the dollar in the world, went around the world and worked with

• 1:05:27Speaker 01

  all of the biggest governments in the world at the G20 and said, there needs to be a legal and regulatory framework for what they were calling payment-stable coins. These are going to get really big. They're potentially going to be systemic in size. They have real innovation potential, but there's also like all these risks. There's run risks, there's illicit finance risks, there's all these risks. And we need to agree at a global level that we need to have clear laws and regulations around this new kind of money. And so... That was agreed to at the G20. And all the governments at G20 went back and they have to do their lawmaking process.

• 1:06:11Speaker 01

  And lawmaking processes are different in Japan than they are in Hong Kong, than they are in Singapore or Europe or the US. So what you've had happen since then is basically all of the major governments have come forward with regulation of payment stablecoins. And relatively consistent. So there were a set of recommendations at the G20. And the US basically said to Congress, here's what those recommendations are. We want you, Congress, to act, to actually enact laws that introduce this into the US financial system. And that's been happening around the world. I mean, payment stablecoins became legal in Japan last year.

• 1:06:54Speaker 01

  June 30th, which is just a couple of months away. Payment stablecoins will be a legal form of money in Europe. And if you don't have, if you want to offer a stablecoin to a person in Europe, whether you're offshore or onshore, if you're not issuing it out of an EU-regulated entity, whether it's a dollar stablecoin or euro stablecoin, it'll be illegal. And so you're seeing around the world, like, very clear rules. And basically, they're saying, these are full reserve. They have these narrow set of assets that they can back them so that they're as safe as possible. They have very clear redemption requirements. They have very clear segregation so that if the issuer has a problem, the users can always get their funds.

• 1:07:39Speaker 01

  They have to follow kind of anti-money laundering rules. And so you have this happening all around the world. And so as we speak, 2024, 2025, stablecoins are becoming a defined part of the global financial system, which is really great. We are right at the finish line of the Payment Stablecoin Act, which is a law that is actively working its way through Congress, that the feds contributed to, the treasuries contributed to, the White House is involved, both chambers of Congress. There's a very, very active effort to codify this in the United States. And to get to the heart of your question, which is, what does the government think? Well, first, they think these are going to be bigger and they're going to play a bigger role. And there's going to be a competitive marketplace of issuers.

• 1:08:24Speaker 01

  There's going to be, you know, kind of non-banks, banks. There's going to be, you know, smaller companies, global companies. These are going to be a new thing. And in a sense, that is outsourcing the production, the, you know, the manufacturing and distribution of digital dollars to the private sector. But that's what we do today. You know, 95% of electronic money in circulation is privately issued. It's privately issued by commercial banks. The infrastructure that we use every day, whether it's like SWIFT or your card rails, they're basically technology networks run by consortiums of private sector actors. And almost every innovation that we've had in payment systems in the US certainly has been like a private sector-led innovation.

• 1:09:09Speaker 01

  So I think it is in some ways that, now, I think the deeper philosophical issue, this kind of monetary theory issue, which you refer to in Arthur's Post and in general, kind of comes back to our own philosophical belief, which is that if you have hyper-high-velocity money that exists at internet scale, it needs to be full-reserve money. It needs to be as safe as possible. It's too dangerous to do something else. So then the question naturally becomes, from a central bank perspective, how do you deal with monetary policy transmission? How do you ensure that, like, when you want to have credit expansion, you can have credit expansion? When you want to have credit extraction, you can have credit contraction? These are sort of the kind of smoothing out of the economic cycles that are, you know,

• 1:09:54Speaker 01

  interest rates try and play a role. Interest rates being a kind of the key input into bank lending behavior. And so that has been historically the way that this monetary policy transmission has worked. I believe this is where DeFi and on-chain steps in. I am like a long bull on on-chain credit, a hyper-high-velocity, high-utility money that can be programmatically controlled and time-locked with very high levels of transparency.

• 1:10:23Speaker 01

  And audibility and where the actual the actual risk and underwriting and other things can be produced and validated with proofs on chain. Like you can produce a radically better credit delivery system than the opaque leveraged banking system. And so, you know, this goes back to the founding of Circle, which is we believe in the creation of an internet financial system. And that internet financial system is going to be built on full reserve money. And it's going to be built on the programmability of money and the ways in which the time value of money, which is essentially credit, right?

• 1:10:59Speaker 01

  The time that credit and lending and savings and investing, the time value of money is better intermediated by on-chain software than it is by by persons. And small tangent to AI, I think AI will play an important role in in all that credit decisioning too. But like, we could go there and into a whole nother topic. But but I think that's how I think about that issue. And I think central bankers are now starting to grapple with this like, oh, OK, there is this new super high utility. Model of of hyper efficient internet scale on-chain money that's happening like it's not it's not that genie is not going back in the bottle. It's happening. How do we think about monetary policy transmission?

• 1:11:42Speaker 01

  We've actually, you know, our chief economist was formerly an economist at the Fed. He's he's published a number of really exceptional pieces on this topic as well. And, you know, this is this gets to the heart of the matter. I mean, it really gets to the heart of the matter. Like, are we building a a new internet financial system that is safer, more transparent, more frictionless, more fair, more accessible economically, globally, right? But we have to be able to perform time value of money transformations, the sort of credit intermediation with this kind of the safer base layer of money.

• 1:12:19Ryan Sean Adams?

  It's interesting to see the trajectory of circles just getting closer and closer to the metal, closer and closer to the firmware here of the dollar and that kind of this last step of a kind of a full reserve, stablecoin basically, or like full reserve bank, it sort of cuts your traditional commercial banks out of the loop. But like what I hear, what you just described, Jeremy, it almost sounds like a central bank digital currency. Without using that term, it almost sounds like some form of a proto CBDC or like a privately issued arm of some kind of like a central bank monetary policy type of thing. And it's my perception that a central bank digital currency does not have the political will

• 1:13:03Ryan Sean Adams?

  power to get through in the US like right now. Other countries may try it, like China certainly can, they can push in whatever they want. I don't think voters are excited when you tell them, "We've got a federal CBDC."

• 1:13:16Speaker 01

  Totally. There's no appetite.

• 1:13:18Ryan Sean Adams?

  Yeah, there's no appetite. But if you talk about this in terms of a kind of like a stablecoin with, you know, like a wallet you can use and you kind of like own the private keys and all of these things, I think it's sort of a different story and maybe feels like an upgraded experience. But let me just ask you, what you just described with stablecoins in the US, again, we've got some regulation to kind of get there, but if they follow suit with other countries, is what you described basically a proto or private version of a CBDC, a central bank digital currency?

• 1:13:47Speaker 01

  I mean, I don't, I don't know that it is because, you know, private intermediaries, whether they're, you know, financial technology companies or, or payment companies like PayPal or banks that decide, like JP Morgan, that they want to be in this, they're, you're, you're not the central government, right? And I think one of the reasons why there is so much opposition to CBDCs is fundamentally about privacy and this concept that there's an air gap between you and the government, right? If all encrypted messaging was run by a government server, would you use that or would you use WhatsApp, right? Or if they had a product which was like, "Hey, There's the government-run communications app,

• 1:14:33Speaker 01

  or there's privately-run where privacy standards are upheld. I think clearly, like, society has a preference for some air gap and distance between themselves and their own activities and the government. Even in China, where they do have a CBDC, it's completely failed because people don't trust their government. They trust Alipay and Tencent and WeChat Pay more than they trust the government. Both because of the utility of those products. They're just constantly upgrading, constantly innovating. Like, you have, like, the user experience of those platforms are getting better and better and better.

• 1:15:14Speaker 01

  And even where they say, "Hey, you have to take your disbursement payments in our CBDC." Like, people get out of them as quickly as possible and move into private money. So I think that we use the phrase that the future of currency competition is a technology competition. And if the dollar has to compete in a technology competition globally, the United States has done extraordinarily well, like, better than any country in the world at harnessing the power of private innovation in technology. And you can pick any sector, like, the advancements, the incredible companies that have been built, whether it's Tesla as one example, SpaceX is another Elon Musk example,

• 1:15:58Speaker 01

  but all of these amazing companies, Apple and Microsoft and Meta, and then in a lot of other industries, obviously, in biopharmaceuticals and all these things. There's this extraordinary power of free-market capitalism, of competition, of a rules-based system. And that unleashes innovation in a way that a government-run system can't.

• 1:16:22Speaker 01

  And so if you want to win the technology competition, you ought to work with the companies that are driving technology innovation and are going to be part of that constantly upgradable financial system that blockchains represent.

• 1:16:35Ryan Sean Adams?

  Yeah, I agree with that. I think most Americans would be on board with that, like make it a kind of a free market competition and like do it privately. We're not like not comfortable having the government like control the keys and the database and everything else. And, you know, in this context, Jeremy, I'm wondering if we could talk about Tether for a minute. So Tether is the number one stablecoin right now. USDC is number two. And I think what some people in crypto have concerns about is that we, when it comes to stablecoins in the US, we go from a position of we've got a free market, open competition, to we go into a position of regulatory capture. And like with governments, you can easily see how this could happen. And so part of the crypto industry kind of like cried out and there was a, there was a headline saying,

• 1:17:19Ryan Sean Adams?

  in the stablecoin wars, Circle and Coinbase acting in Congress to rein in Tether. And here's a quote from Caroline Hill, who's the Director of Global Policy and Regulatory Strategy at Circle. She said this, "In the, in the testimony in front of Congress, I personally believe no company should be allowed to reference the US dollar without having democratic values inside their USD-backed stablecoin." And went on, and the tone and tenor of that is like, Tether is not playing by the rulebook and you need to rein them in Congress. What did she mean by the quotes? And like, what's your take on, on that testimony in front of Congress?

• 1:17:57Speaker 01

  Yeah, I mean, a couple of things. First, Caroline Hill is an amazing person. I have a huge amount of respect for her. She served in the US government for many years. She's a very high integrity person and I, I think she, she does extraordinary work and she represents the entire crypto industry extremely well in front of major policymakers in, in the government and internationally, you know, dealing with crypto AML rules and how those are playing out and all the rule setting that has to happen around the world. She's, you know, fighting for, you know, fair rules so that we can continue to have blockchain innovation. So first of all, I have a huge amount of respect for Carolyn. She's tremendous. Like, I'm not going to comment on everything that she may have said

• 1:18:41Speaker 01

  or questions she's asked under oath and testimony. And if you're sitting in front of Congress, you are under oath and you've got to tell them what you think. Like, I think the US government speaks for itself on these matters. I mean, Wally Ademo, who is the Deputy Secretary of Treasury, who's in charge of all matters of sanctions, illicit finance, countering terrorism finance, just submitted his own testimony last week. You can read it. He has a lot to say about this topic of stable coins. And I think there are realities in the market. And there are bad actors, and I'm not saying Tether's a bad actor, by the way. I think Tether has built an extraordinary business.

• 1:19:24Speaker 01

  They've been highly successful. I think they've been innovative for a very, very long time. That is, I'm not saying that. There are bad actors, like people who are trying to evade sanctions, people who are funding North Korean weapons programs, people who are funding various types of terrorist attacks. There are fentanyl traffickers that are using stable coins at a huge scale right now, and it's a plague in the United States. So there are bad actors all over the place, and they're abusing stable coins. And they're abusing stable coins for a lot of different reasons. And I do think that part of what we have to see happen is we do need to have regulation around the world on stable coins.

• 1:20:09Speaker 01

  There should be expectations about the issuers, how they manage risk, their obligations from a compliance perspective, the safety and soundness obligations. Like, all of this, we absolutely should have that. And I think, you know, Tether's a multi-billion dollar company. They have incredible resources, and I expect that they have every opportunity to come and register and be a licensed company around the world. And I would expect that that's what they're going to ultimately do, right? Like, why wouldn't you do that, right? So I think laws and regulations should be accessible to everyone. And I think what I expect to see, I mean, even just the prospect of stablecoin legislation coming.

• 1:20:51Speaker 01

  And this was in their public announcement, led PayPal to say, with regulatory clarity coming, we now want to get in the game and launch PYUSD. And so a giant company with regulatory clarity, I think, when you see stable, dollar stablecoin laws come into effect, you're going to see a ton of companies, major financial institutions, major payments companies, technology companies, I think the competition will increase immensely. Right now, people are afraid to get in this market because they don't know where the rules are. And so I do think that, you know, part of the goal of establishing a regulatory regime is to enable free and fair competition. And the congressional acts in the mid to late 90s that came about created free and competitive playing fields in the communications

• 1:21:34Speaker 01

  networks and internet service provision and with net neutrality and things like that. And you saw this huge proliferation of competition in everything from data services to communications networks. So I would hope that, you know, regulatory clarity, not just in stablecoins, but on crypto asset markets and so on, would bring a lot more competition. That would certainly be what I would, you know, expect to see.

• 1:22:00David Hoffman?

  With the growth of the stablecoin supply and the stablecoin issuers, I kind of see like two different vectors or two different frontiers. Once again, there's like the free market version where there's like, you know, a handful of different stablecoin issuers and they are all competing in the private markets, you know, capitalism, you know, the forces of capitalism produces a better product for the consumer, the weaker ones lose to the stronger ones. And this is of course, like not just a competition from the centralized issuers, but also the decentralized ones as well. Like Athena is a brand new player on the scene, Maker Dow has been here for a long time, Frax is of course a player. And so, you know, let the best stablecoin win according to the forces of the free market.

• 1:22:41David Hoffman?

  And that will certainly allow like good, strong products to rise to the top. On the flip side of things, there's also a benefit to having like the central bank of the United States and the United States government just like say, hey, this is the one. And we actually back this one with a full faith and credit of our money printer. And so like enshrined this. This one as like the pseudo CBDC provide this one with liquidity benefits, provide this one with like the faith of the government. And that one would also like be a pretty good product if one, if the government actually just says like, hey, that one's the best. Now, like how the future actually unfolds, it's probably going to be some sort of medium between the two, I'm assuming.

• 1:23:22David Hoffman?

  But how do you see like, do you agree with those two like alignments of how this might play out? And how do you see these, the forces being at play here?

• 1:23:30Speaker 01

  I think there are definitely like two distinct arenas, so to speak. I think, you know, this concept of a payment stablecoin, which is a term, again, a term of art that like governments have come up with. And that's the name of the legislation in US Congress right now, but is very specific. And it is for the Federal Reserve to basically define a standard, a set of standards and all the expectations of an issuer. And to set those standards and enforce those standards, right? It's to define these standards for a full reserve fiat backed, you know, only backed by things like T bills and the safest cash instruments and the like, with like very strong supervision and audit, right?

• 1:24:14Speaker 01

  That there is a framework for that and the federal government has, is allowing for that. And then will allow any entity that meets the qualifications to go in that market. So that's not the Federal Reserve picking one company. It's saying, here's the rules. Anybody can follow these rules. And obviously, like, anyone who decides to start a bank doesn't necessarily are not successful starting the bank, right? But, you know, I think the concept here is anyone that wants to become a dollar payment stablecoin issuer can follow that. We're seeing this as a little bit of a preview in Europe right now. So MICA has stablecoin rules. And there haven't really been widely successful Euro stablecoins to date.

• 1:24:57Speaker 01

  And, you know, E U R C, which Circle and Coinbase both are involved with, has good, has some good success, but obviously way, way different than when USDC. And, but however, like when June 30th comes around, I think you're going to see a ton of movement in Euro stablecoin space. You're going to be tons of companies that are entering. You might see 50 different companies competing, including big companies. That are competing to do this because it's so clear. Big companies, are there like big incumbents too? Like big EU banks entering? I think you're going to see big incumbents that some of whom are like large pan-European banks who want to be in this market, some of whom are large pan-European fintechs who

• 1:25:39Speaker 01

  will want to be in this market and then obviously like firms that are crypto native, right? So that's an example where I think you'll see like, okay, here's the level playing field, go. And it'll be like, everyone's from the same start, right? There are no winners, you know, today there. So I think it'll be an interesting, an interesting example of that. But coming back to your question, David, like about these different arenas, like payment stable coins, I think are really important, like a fiat-backed instrument that is, you know, people understand it's a legal dollar equivalent and it's redeemable and has interoperability into the existing banking system that like, that's super high utility and will grow in utility. I think there's a whole nother category, which are these, you know, efforts to create

• 1:26:21Speaker 01

  kind of synthetic dollars or algorithmically pegged dollars or various types of crypto collateralized, you know, kind of quasi-pegged dollars. Like that's a whole separate area. And I think it's definitely a lot more complicated from a regulatory perspective. It's not straightforward. Like it's not clear what are these and how should they be treated and how should someone who holds them, you know, treat it? If I'm a corporation and I'm using one of these, like what is this? Am I holding a synthetic derivative? Do I count for it as a derivative on my books? Does it need to be registered with a, with a derivatives, you know, regulator? Like what are these? Like, are these securities?

• 1:27:05Speaker 01

  Like, it's not clear what they are. And I think there's going to be a lot of like, you know, jurisdictional kind of arguing over that. Like the Terra Luna case, obviously the SEC asserted and won its case. And it won its case that basically UST was and Luna, it was the whole thing was an illegal investment management and illegal securities issuance and the CFTC was involved and said they were violating derivatives law. That's just a US matter in that case, but I think like if you asked. Securities and commodities regulators around the world, they'd all pretty much agree about that. So I think if we want these kind of synthetic dollars to have super high utility value, we're going to have to update the laws in the financial system to allow them

• 1:27:48Speaker 01

  to be used for like everyday kind of transactions. Because I think they won't get used for everyday transactions. They might be like, I'm going to pump my yield in this. I'm going to like, go over here for a little while because it's got juice or whatever. That's a whole different, like, that's a very different set of incentives than, you know, you want to have like, you know, a full reserve digital dollar that runs on blockchains.

• 1:28:14Ryan Sean Adams?

  It strikes me how early days we still are. If there's like a $21 trillion like opportunity here, like we're at 150 billion. We don't even have legislation. Like, we haven't even seen the big banks in the US kind of enter the stablecoin game and explore what that means. Like JP Morgan Coin, that was a thing that was talked about, like, what would that even look like? I'm curious, though, earlier in the conversation, Jeremy, when you talked about MICA and other jurisdictions having stablecoin regulation, you also referred to the dollar as a kind of like a predator. I've called it like an apex predator as well. And I'm wondering if-

• 1:28:48Speaker 01

  I've heard you say that.

• 1:28:49Ryan Sean Adams?

  Oh, you've heard me say that. Okay. So I'm wondering if you see, if you think that there's going to be some protectionism that kind of like manifests in some of these jurisdictions, right? So like, we got stablecoin regulation. If I'm like a weaker fiat, I don't necessarily want this like, this animal called the dollar coming into my fiat economy. I'm just trying to get my, my payment coin working and here's this like, thing that's going to suck up all the oxygen. Will there be some protectionist policies, do you think, to keep, keep stablecoins and crypto dollars out?

• 1:29:19Speaker 01

  Absolutely. And there already are. I mean, dollar stablecoins are illegal in China. They're illegal in India. I mean, they're, they're sort of, you know, clearly, I mean, what, what's happened in Nigeria recently fundamentally had to do with- The FX market between dollar stables and Naira.

• 1:29:40Ryan Sean Adams?

  Are you talking about Binance executives getting kind of arrested and caught up in that? Or something else?

• 1:29:44Speaker 01

  I mean, that is a specific incident. But I think that the issue for Nigeria is about, you know, essentially that there's a FX market, that is a market-based FX market, that is a dollar to Naira FX market that's happening with crypto dollars, right? And it reflects a very different value to the Naira than the official value.

• 1:30:10Ryan Sean Adams?

  Well, because for a place like Nigeria, right, suddenly now in every Nigerian's kind of like hands is the power of the US banking system. And that's never been available to them.

• 1:30:20Speaker 01

  Trust me, I get the value.

• 1:30:27Speaker 01

  So, but my, to answer your question is yes, there are monetary sovereignty issues, right? And so I think this, if you bring this up a level, right? Like, and this is a controversial thing to say, but like, in the internet, right? Like, governments were very against the idea that anyone could publish a website. They, like, the idea that anyone could do a radio broadcast, you guys, it's your business, right? Like, it was like against the law to like make an audio transmission available to people in Italy or in lots of other places, right? Open networks, open protocols, open software, it just like had its way. And like, and then the people in those places were like, this is better.

• 1:31:12Speaker 01

  Like, don't take it away from me, this is better. And so I think there is a legitimate question, which is, does, you know, kind of, does an internet financial system, which is more likely there are fewer reserve currencies that are, that are like widely adopted, and where the people in those places and the businesses in those places say, this is better? Like, does law reflect the hoi polloi? Does law reflect, like, the will of the people and society? Does it? Kind of shadow that and in places where it's too threatening to like a very, very deep, maybe corrupt power structure, does it become violent?

• 1:31:55Speaker 01

  Like, these are the kinds of things that the internet has played out. Like, Open Communications Network led to the Arab Spring, and there were vast crackdowns, right? And then all of a sudden, everyone bought like specialized hardware from Cisco to like censor. And, you know, like this nation-state interactions around information, around data, around communications, like Balkanization of the internet, we're seeing some of that. And I think we're absolutely going to see more, more complex issues in this overtime.

• 1:32:25Ryan Sean Adams?

  Well, Jeremy, I do hope open networks win and open protocols win. And I think we're at time. This has been a fantastic conversation. Just one last quick lightning round prediction from you. So, total value of stable coins, what do you think? By the end of this decade, by the end of 2030, where are we sitting? We'll bring you back, you know, in like six years and we'll hold you to account for this prediction.

• 1:32:45Speaker 01

  2030?

• 1:32:46Ryan Sean Adams?

  Yeah.

• 1:32:47Speaker 01

  Yeah, I feel comfortable saying $3 trillion.

• 1:32:52Ryan Sean Adams?

  Nice.

• 1:32:53David Hoffman?

  Like, almost 2X the current total crypto market.

• 1:32:57Speaker 01

  I think this is hyper-high utility and we're at the front edge of a really powerful growth phase over the next five years.

• 1:33:06Ryan Sean Adams?

  Well, Bankless Nation, the year is 2003, and we just had Jeremy Lehrer on the podcast. Jeremy, thank you so much.

• 1:33:12Speaker 01

  Thank you.

• 1:33:13Ryan Sean Adams?

  Guys, we will include some links to the show note, including the link to a dashboard that we talked about. If you are curious on what backs a USDC, you can go see that. Got to end with this, of course, you know, crypto is risky. Maybe not stable coins so much, though, but you could lose what you put in. We are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.