#1388 Jeremy Allaire | The $34 Billion Stablecoin King

Jeremy Allaire is the Co-Founder, Chairman, and CEO of Circle. In this conversation, we talk about USDC, what it is, where it is popular, who is using it, why they are using it, and the future of stablecoins. ======================= Gemini is the safe and secure way to trade crypto. Gemini is offering eligible new users the opportunity to earn $100 in BTC when they trade $1000 in crypto within their first 30 days of signing up. Head over to https://www.gemini.com/partners/pomp and start trading crypto to earn $100 in BTC. ======================= Xapo Bank, the world’s first fully licensed Bitcoin-enabled bank, offers military-grade security with an unmatched blend of physical and digital security, as well as pioneering regulatory oversight, so your funds are always protected. Beyond secure storage, they enable you to grow and use your Bitcoin. Earn daily interest in Bitcoin, spend with zero FX fees using a global card, and make instant payments via the Lightning Network for unrivalled access and convenience. Visit https://www.xapobank.com/pomp to join. ======================= Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website at https://meanwhile.bm/ to join the waitlist for a policy and to learn more. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

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

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up guys? Bang bang. Today, we've got a very special treat for you. I have the $34 billion stablecoin king here live in studio. We have the co-founder, chairman and CEO of Circle, Jeremy Allaire. In this conversation, we go over USDC. What is it?

• 0:46Anthony Pompliano?

  Where is it popular? Who's using it? Why are they using it? And what is the future of stablecoins going to look? These products are incredibly popular globally. They are probably the second most popular product market fit in all of crypto, and Jeremy is building the future of what stablecoins are going to look like. And today, he unpacks all of the insights that he and his team have been working on for so long. I really hope you guys enjoy this conversation. Here is the episode with Jeremy Allaire.

• 1:11Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:35Anthony Pompliano?

  Today's episode is brought to you by Gemini. Gemini is a fantastic platform. How do I know? Because I've used it for years. These guys get it. They right now have a special offer where they are offering all eligible new users the opportunity to earn $100 in Bitcoin. That's right, 100 big ones. They're going to get out in Bitcoin if you go and you trade $1,000 in crypto within the first 30 days of signing up. What is Gemini? Gemini builds crypto products that are simple, elegant, and secure. Tyler and Cameron Winklevoss, the billionaire Tyler and Cameron. Winklevoss founded Gemini in 2014 with the security first mentality and ethos of asking for permission, not forgiveness. They've been pioneers for the crypto industry since day one.

• 2:20Anthony Pompliano?

  And unlike many exchanges, they are available in all 50 US states. Gemini has tools for new and advanced traders. They've got an advanced trading platform called Active Trader, which is where crypto traders go for advanced charting tools, access to over 300 crypto trading pairs, and multiple order types to trade the way you want. Head over to Gemini.com/partners/pomp and start trading with Gemini today to earn $100 in Bitcoin. That's right, Gemini will give you $100 in Bitcoin if you head over to Gemini.com/partners/pomp and you trade $1,000 in crypto within the first 30 days. Today's episode is brought to you by Zappos Bank. Let this sink in for a moment. Over half a trillion

• 3:05Anthony Pompliano?

  dollars in Bitcoin has been lost or stolen. Whether that is misplaced hardware wallets or an exchange that went bust, the risks are very real. That's why I think where and how you store your Bitcoin is absolutely critical. Now meet Zappos Bank, the world's first fully licensed and regulated Bitcoin-enabled bank. They're known as the Fort Knox of Bitcoin. With over a decade of expertise in Bitcoin custody, they blend no holdback security, including military-grade Swiss bunkers, cutting-edge digital protocols, and strict regulatory oversight. This comprehensive approach ensures your funds are always protected, no matter what. With Zappos Bank, you can grow your wealth with interest paid out daily in Bitcoin. You can spend anywhere with zero FX fees using their global card, or you can make instant

• 3:48Anthony Pompliano?

  payments with the Lightning Network. Head over to Zappobank.com/pomp to join. That's X-A-P-O-B-A-N-K.com/pomp. Go check out Zappobank today. Today's episode is brought to you by Meanwhile. Meanwhile is the world's first licensed and regulated life insurance company built for the Bitcoin economy. Operating on the Bitcoin standard, they do everything in Bitcoin. You pay in Bitcoin, they pay claims to your family in Bitcoin, you take out policy loans entirely in Bitcoin when you need liquidity. Meanwhile, Bitcoin life insurance has redefined what it means to hodl. Protect your family from life's uncertainty and a broken financial system. Build intergenerational Bitcoin wealth while the cost of living skyrockets in dollar terms.

• 4:32Anthony Pompliano?

  Get all the tax and legal benefits of life insurance now in Bitcoin. They are actively binding policies today. Whether you are a long-term Bitcoiner or are just considering it for the first time, a Bitcoin whole life policy could make sense for your wealth plan. Visit their website, meanwhile.bm, to join the waitlist and to learn more about the world's first Bitcoin life insurer. Again, that's meanwhile.bm. Go check them out today.

• 4:58Anthony Pompliano?

  Jeremy, I thought a great place to start the conversation is stable coins, in my opinion, are the second most popular product in all of crypto. You've got Bitcoin and then stable coins seem to have this like perfect product market fit. They're spreading like wildfire globally. I thought maybe you could just help me understand like who is using these products? Where are the most popular places around the world? And what are people doing with these stable coins?

• 5:19Speaker 02

  Yeah, I mean, it's been fascinating to see the evolution, right? When we conceptualized USDC back in 2017, you know, the idea was we could take what we think of as a dollar, we could have a token-based version of that and that it would be this kind of open protocol for dollars on the internet and eventually, you know, every wallet everywhere in the world would have access to this and could transact in this. And our vision was that it would be something that would be accessible, you know, way beyond sort of crypto traders, right? Which is, that was the bootstrap use case that we're all so familiar with, which is if you've got a 24/7 market that operates on chain, operates on blockchains, you need

• 6:04Speaker 02

  24/7, you know, digital cash, right? So that was sort of the, to go alongside those markets. So that was sort of the bootstrap use case. But the vision has always been that. Basically, any form of utility for dollars in the world will ultimately be substituted with digital currency dollars in this form. And so it's always, from my perspective, been a question of when, not if. What's been fascinating to watch is, over the past few years, so we've been at this for over six years with USDC, and we've been working on sort of digital fiat on blockchains for about 11 years, but USDC specifically for

• 6:46Speaker 02

  over six years. The last few years, we've just started to see this really interesting shift. And if you track my Twitter feed, you'll see me kind of retweeting all the time about all these new uses that are going on. And it's incredible. It's across the board. It's everything from peer-to-peer transactions to an incredible amount of growth in international transactions. So B2B and B2C payroll models. We've seen, in the past couple of years in particular, we've seen proliferation in countries all around the world where people want to store value. They don't want to store value in Bitcoin

• 7:30Speaker 02

  because it's too volatile. They don't want to store value in their local currencies because they're too volatile. They want to store value in dollars, in digital dollars. And so USDC as a store of value has been growing. And so we see demand throughout Latin America, Asia, Africa, in many, many places. And so that's been fascinating to see. And we're seeing families who are using it in flexible ways. They've got savings versions where they'll take their USDC and they'll apply some of it into like an Aave protocol

• 8:04Speaker 02

  to get 5% or 10% yield. We see people who are, in many cases, small and medium enterprises. This is one of the areas we're seeing really interesting growth, small and medium enterprises in international markets that are preferring to settle transactions in USDC, certainly compared to their existing system. Imagine you're a... A buyer of of goods in, say, Brazil and you're buying from a supplier, say, in Vietnam or wherever that is somewhere else. In the traditional financial system, right? You've got to go from one currency into dollars through the correspondent banking

• 8:47Speaker 02

  system with FX charges, time delays, then come back into another currency that, you know, has more fees and often settlement time delays to ultimately, you know, settle that. But if you can basically say, hey, I got a wallet, you got a wallet, just send me USDC, it settles instantly. It's like settles faster than a wire. It settles instantly. You're holding digital dollars, which is you prefer to hold on as opposed to, you know, some of these other currencies. And so it has this immense utility. And so what's fascinating to me is, you know, with these kinds of phenomenon, it's oftentimes like

• 9:28Speaker 02

  the end users and the SMEs that are at the forefront of driving new internet technology adoption. It's not the large corporations, right? The large corporations have these big compliance departments and they've got, you know, these, you know, finance and accounting organizations that are like, I don't know what this is. I don't know if we can do this. But it's the SMEs who are agile and who can make decisions and move quickly and are comfortable adopting these new technologies, whether that was CRM technology like Salesforce or you, you know, you pick it or AWS. That was all startups originally. It wasn't, you know, the CIA putting stuff in the cloud, right? So you have this phenomenon. And so we're seeing just these proliferation of all these use cases. There's many, many more

• 10:09Speaker 02

  that we could talk about. But and it's, you know, from my perspective, though, it's still, you know, we're still in the very early stages of this, when you think about the ultimate scale that this can have.

• 10:22Anthony Pompliano?

  So there was a transition from kind of physical dollars to I'll call them electronic dollars, right? Obviously, physical dollars have some advantages around anonymity. I can literally just pay it to you without any sort of transaction fee, you know, in person. But the world definitely wanted the electronic version and there was this massive, you know, adoption and kind of proliferate. Excuse me, of US dollars globally when that technology shift happened. Is this just an extension of that? And really, it's the technology shift is allowing more people to get access to dollars that already wanted it. And you aren't necessarily having to go convince people, hey, you want dollars. It's just now the access and the empowerment of kind of unsatisfied demand that existed globally.

• 11:03Speaker 02

  Yeah, it's interesting. I like the way you're framing it and I would sort of add to that a couple of things. So the dollar has product market fit. Okay, so like dollars got product market fit, which is, you know, stability and network effects, right? The dollar has network effects because people understand what it is and they can and they're willing to like denominate contracts in it and settle in it, et cetera. The internet also has product market fit. Like everyone understands like, wow, the internet, if I have a laptop or if I have a mobile device and I have software, like I can, I can do more with that.

• 11:43Speaker 02

  And so really what we're talking about is sort of internet native technology architectures. And, you know, kind of merging with the dollar. And you, so you have these kind of two things that have immense product market fit. And you're making them more natively bound together. And, and so that's at, in some ways, that's at the heart of what's happening with this new internet financial system that's being built. But, but I think, um, you know, there, there, there is a, we, we think about this in terms of, you know, how do we improve the global financial system? How do we actually even improve the utility of the dollar itself?

• 12:26Speaker 02

  And, you know, what got me into this whole space, you know, almost 12 years ago, was my own journey in trying to understand the roots of the, of the great financial crisis that took place. And, and I wanted to understand, you know, where did all this risk come from? Why was that risk so opaque? What was the role of central banks, of monetary policy of, and the kind of structure of the international monetary system? This was well before, you know, I knew anything about Bitcoin or crypto. I was sort of interested in these problems.

• 13:09Speaker 02

  Ultimately, though, what got me excited was this idea that if you're going to build a new sort of internet-based financial system, you know, in what ways could that be superior to the legacy financial system, which includes this legacy electronic money that's there? Well, one is that you'd want the base layer of money in that internet financial system to be a like fully reserved money as opposed to fractionally reserved money.

• 13:49Speaker 02

  You'd want to be able to have the digital dollar, as it were, to be as close to a kind of government obligation money as possible. And we're, we've made enormous progress towards that. It's taking a long time, but we're, you know, at a place where effectively, and with regulatory regimes coming online around the world for, for payment stablecoins like USDC, we're basically getting this kind of base layer, which is, you know, this is fully reserved. It's not like a bank deposit. If you, if you put your money, most electronic money is bank deposit money. You, you put your money with a bank and then you get an IOU. And that IOU is sort of, is in theory, like I can on demand, go get that back, but actually

• 14:33Speaker 02

  you're basically giving them a loan and then they're taking it and they're fractionally reserving it and they're making loans like 10 times over, over your money. So, stablecoins are safer, right? They're designed to be full reserve. So, so one is a safer base unit, right? So that's, that's key. And then the second is compared to existing electronic, you know, electronic dollars, if you want to think about that, that... Instead of sort of these closed networks that are proprietary and closed networks that are, you know, kind of, you know, literally run on kind of proprietary hardware, software, et cetera.

• 15:15Speaker 02

  What if instead you had open networks and you had open protocols and you had permissionless access? And, which is what the internet is. That's why this merging of the internet with dollars, this concept is so powerful is that what makes this kind of electronic money so different is that it is internet native. It takes the DNA of the internet, open networks, open access, interoperability, open protocols, open source software. Like this is the material of the internet that makes the internet so powerful. When Marc Andreessen says software eats the world, it's that DNA, it's that capability that keeps consuming utility after utility after utility.

• 15:57Speaker 02

  And so it's that, when you take that and combine it with a, this sort of very safe full reserve instrument, then you have digital dollars with internet superpowers. And that's where the product market fit is like the end user, they're not thinking about this, right? Your friend in Colombia, you know, is not thinking about all of this, but they are like, I got an Android device, someone told me to download, you know, Phantom Wallet or whatever it is, and they, and they sent me, you know, 25 USDC and I just received it instantly and then I'm now transacting with others and I can get an interest rate and I can do these things and it just works the same way that my WhatsApp works, it works the same way that these other things work.

• 16:42Speaker 02

  So for them, it's just like, of course, this is better. Like, of course, this is better. And so we're breaking away from closed legacy systems where the, the risk in those is the opaque bank lending IOU risk and we're moving to more open, accessible, efficient and, and safer monetary units that can, can move on these. Networks.

• 17:09Anthony Pompliano?

  So when you have an open network, I think there's kind of a pro and a con, right? There is less regulation perceived because people say, hey, we used to have this closed network that we oversaw and it was kind of this system that we at any point could stop the movement of money. We could onboard or offboard different organizations or people, etc. So if you are a regulator and you hear open, you may not be as excited initially until you start doing some of the homework. On the other hand, an open network obviously allows anyone to participate with an internet connection and there's the person in Columbia that just downloads a wallet is now kind of hooked up with global financial capabilities like anyone in the United States. So how do you all think about regulation intersecting with these open networks and maybe capturing as much of the open network value as you

• 17:54Anthony Pompliano?

  can, but obviously still operating within a regulated environment and fulfilling the requirements there?

• 18:00Speaker 02

  Yeah, so there's a lot in that question. I think there are a few things. I think on the open network side, the first part of the openness is that it's sort of like the web. Anyone can put a piece of content on the web, right? Now, if you are in a country and you put a piece of content on the web and it's illegal content, then you're breaking the law, right? And so there are enforcement. The ISP might have to do something or the platform that hosts the content might have to do something or whatnot. So there are laws on open networks and they get enforced all the time. And the internet had to deal

• 18:38Speaker 02

  with this, right? We're recording and publishing right now this audio and this video and it's going to be accessible to basically everyone in the world that has an internet connection. 25 years ago, or whatever that was, that was pretty inconceivable because there were laws and regulations in almost every country that said, you need to get a license to put audio content in front of the people of my country. You need to get a different license if you want to put video content in front of people in my country. And guess what? Society decided universally, everywhere, that they wanted open access to information.

• 19:21Speaker 02

  Now, there's great firewalls, there's other mechanisms of censorship that exist, but fundamentally...

• 19:27Speaker 02

  Society voted and policymakers were responsive to the society's will. And, and so I believe policy responds to social utility and what, and what, what, what the masses of people and not just like individuals, but like business, society, all these things respond to. And so when I think about the innovation of crypto assets, the innovation of public blockchains, the innovation of digital currency, I think we're in a similar kind of adoption curve where the utility is very clear, like for, for, for people, the utility is very clear. But there are illegal uses, there are illegal activities, there are people who are trying

• 20:10Speaker 02

  to hide money, evade taxes, fund terrorism, like we can't ignore that fact. And so we do, like, there is this kind of social contract that exists between people who kind of intermediate money and, and, and sort of like this kind of obligation to try and not allow illegal things to happen. So, so my view is there's an opportunity in this space to actually materially improve the way that we deal with that, right? People obviously talk about like blockchain analytics and, you know, how, how the, the, the actual lack of anonymity and so on, but there's other things.

• 20:55Speaker 02

  Privacy technology, the cryptography, zero knowledge proofs and fully homomorphic encryption, these sort of advances in cryptography are, are gonna, are gonna make it possible to have highly private transactions, but with the ability, if needed, to, to allow an auditor or allow a third party to kind of know what's happened. And, um, and, and with identity, similarly, like the, the models for KYC and the models for, um, uh, kind of record keeping, uh, for transactions that move money, right?

• 21:40Speaker 02

  The BSA kind of AML regime. And it's updates through the Patriot Act in the United States at least, that there's real progress that can be made to to deal with some of the risks that exist there, but do it in a way where we don't have to give up as much as much information to as many people because part of the problem with the current financial system is that the way it works is essentially every financial institution you deal with is basically behind the scenes, sending around records of you and all your personal information. It's just proliferating all around the world, which creates honeypots of data.

• 22:21Speaker 02

  And and there's ways to improve that. So I guess there's a long winded way of saying there have to be rules for intermediaries and broadly, that's what's happening worldwide. VASPs or virtual asset service providers, crypto asset service providers, the different acronyms around the world, they have obligations. They have obligations to know their customers. They have obligations to to determine and detect if they're doing something that is is perceived to be illegal. They have an obligation to report these things. And there's new technology that is, I think, going to improve how we can transact safely, efficiently, privately, but still get the benefits of

• 23:05Speaker 02

  an open network, still get the benefits of vast interoperability around the world, still get the benefits of programmable money, on-chain protocols for that interact with that money. We can get all of those benefits while also kind of improving on these kind of compliance models in a way which better better reflects, you know, society's needs.

• 23:30Anthony Pompliano?

  One of the most fascinating developments, I think, in the traditional financial world over the last decade or so is the compliance programs. And obviously, there's been much more onerous requirements put on these banks, us in particular. But in recent years, we've seen reports that, you know, very large, popular banks had Mexican drug cartels laundering money through their bank, etc. And so people say, hey, you've become More onerous on the compliance side, you know, in terms of requirement of the bank. They've obviously had to hire incredible amount of people. They've had to build out all these systems, but you didn't stop, you know, actually kind of the, the money laundering, et cetera. And so as you dig deeper into that problem, sometimes what you will see is the bank will say, well, we have reported every potential fraudulent

• 24:11Anthony Pompliano?

  or criminal action to whatever the required, you know, reporting agency is. It's just there's so many of them that it's impossible for them to go through every single one. And so obviously some are going to kind of fall through the cracks. And I think the critique of maybe the legacy kind of banking compliance programs is they are incentivized to report as many as possible, which makes it very hard to kind of decipher signal from noise. How do you think about when everything is on a blockchain, kind of in the crypto world? I think one of the promises is that everything is available, right? Kind of publicly, and so anyone could audit from anywhere in the world. But also there may be ways to use technology and automation and AI and kind of machine learning to, you know,

• 24:54Anthony Pompliano?

  figure this out, maybe in a more optimized way to actually stop bad people from doing bad things, rather than just like kind of cover your ass and hey, we reported 10,000 transactions yesterday. So like, you know, we're good.

• 25:06Speaker 02

  Yeah, I mean, so a lot we could talk about here. I, I, I think the, the, the, the systems for kind of analyzing and understanding financial crime in the existing financial system are not, are not very sophisticated. I, you know, we, we, we've heard the data from, you know, Interpol and others that, you know, 98% of money laundering in the banking system goes undetected. That's a vast amount. I, I think the last time I heard the estimate, it was like $2 trillion a year of money laundered through the banking system. So it's a, it's clearly not working at that level.

• 25:47Speaker 02

  I think in a world where more activity moves on chain, where, you know, stored value, payments, corporate treasuries, working capital, capital market transactions, where more and more activity moves on chain, we will have vastly better technology for both privacy and compliance. And, and, and that, that's like the holy grail. It's like, how do we actually improve the amount of privacy that we have today? But also make the kind of compliance effectiveness stronger. And this is going to be a major area for policymakers in the coming decade.

• 26:31Speaker 02

  And you know, there's, there's, there's also a lot of danger. And you know, one of the biggest criticisms of, you know, of, of central bank digital currency concepts is like, I don't want the government in my pocket. I don't want the government having like a real time feed of every single thing that I'm doing, no matter what assurances they give. I think it's really interesting in China, where China has built a central bank digital currency. And China is, has absolute power, like they can kind of tell people what to do. They've made this available and they've mandated that different kind of banks and wallet apps have it as available, but no one uses it.

• 27:13Speaker 02

  And, and you have to ask, why does no one use it? I think there's two reasons. One is they don't actually trust their government. They don't actually want to transact in a medium that they fully understand is not private, right? The second is private sector innovators are innovating with technology and software so much faster, so much continuously, that there's just no way that that technology can keep up. So, but on this issue, say back, back here, home base, I think that this, this kind of nexus of kind of privacy and compliance is going to be a major issue.

• 27:55Speaker 02

  And I think just like with internet communications, which in the end allowed for a far freer world of information exchange, information publishing, information access, free communications, like we will be towards that end of the spectrum with money. I firmly believe that we will. And I think that, that society will demand that. They'll say, this is better, this is better for us, it's better for our families, it's better for businesses, it's better for our capital markets. They will go there. And we're going to have to come up with ways of dealing with financial crimes-related

• 28:32Speaker 02

  issues that also don't create these giant backdoors of government having total observation of everything, because that is a dangerous state of affairs. We don't know who's going to be in charge in any government, anywhere, at any time. You see the incredible range of political strife that's happening in countries around the world. You can have an authoritarian government that pops up that decides, I don't care what the justice system says, I don't care what the laws are on the books, I control the Supreme Court, I'm going to do what I want to do to maintain power, and we have to defend against that.

• 29:13Speaker 02

  We really have to defend against that, and I believe that this technology can help us defend against that. But we also do need to build systems that make it harder for criminals to act. So it's maybe a lot to ask for.

• 29:30Anthony Pompliano?

  Yeah. USDC is a regulated stablecoin. I have heard from people in the United States, they want to use USDC because it is regulated. That is a positive. It attracts them to it. Almost the regulatory status is a magnet for usage in the United States. I have also anecdotally heard from people outside of the United States, particularly in developing nations, I don't want to use USDC because it is regulated. They view it as the US government coin. Now, it's always hard to tell, because you get anecdotes on both sides. I would say that most people I interact with on a day-to-day basis like the regulation, they think that it's a competitive advantage and stable. But I got to imagine that those anecdotes,

• 30:13Anthony Pompliano?

  there are people globally that say, hey, we don't want the regulated thing, we want a fully open system that doesn't have the government oversight. Is that subset of the global population just somebody that you say, hey, you know, we're not going to be the product for every user. And so let's go focus on the one who want the regulated stuff. Or do you think that there's a world where you can kind of convince that subset of user base actually that maybe the USDC and regulatory status are for them as well?

• 30:40Speaker 02

  I mean, our view is if we want this technology to be used broadly in society, if we want households to depend on it for their savings, if we want businesses to make it a primary way that they hold working capital and transact, if we want capital markets, which consume the most utility of money today to use it in investments and lending and trading and the like, we want all those things to happen. You've got hundreds of trillions of dollars of activity that happens in the existing financial system. Within that existing financial system, with that hundreds of trillions of activity, the hundred trillion

• 31:25Speaker 02

  of legal electronic money that's out there, the multiple hundreds of trillions in debt and equity capital markets, transactions, and on and on. Within those hundreds of trillions, all of that is done with legal electronic money. Okay. So I believe the market for legal electronic money that's utilized in this infrastructure is vast. That's the market that I'm focused on. I'm very focused on that. And I think that what we're seeing out in the world is actually very consistent with that view, which is that when people

• 31:59Speaker 02

  learn, oh, USDC is fully backed and is audited by a big four auditing firm and is supervised by regulators to make sure that it is doing things all properly, that it's actually held with the largest custodian bank in the world, that the actual management of, say, the T-bills that back it are managed by the largest asset management company in the world. And when people learn that and understand what that means, they're like, that is absolutely the

• 32:40Speaker 02

  best product. I want to use that. That feels like the safest. That feels like it's going to be the most liquid. It feels like it's going to be here. It's going to have staying power. And so everywhere you see a mainstream payments company, Visa, Stripe, Mastercard, Worldpay, or a mainstream TradFi player like BlackRock, Franklin Templeton, you know, these other players, the one stablecoin that they're using is USDC. And in these emerging markets, like I cannot tell you how many hundreds, if not thousands of startups that are working with with USDC to build products and services in every country of Africa,

• 33:25Speaker 02

  every country in Latin America, every country in Southeast Asia, because there's so much demand for wanting to use a technology like this. So I think that that's important. That's always been our view. And I think that if you look at the existing market, the hundreds of trillions of dollars of value that move in the existing system that uses legal electronic money, I think we can grow. We have a lot of room to grow there. There may be, there may be other markets that that we can't serve and that very well may be the case. And and that's okay, because the mainstream market is very large.

• 34:04Anthony Pompliano?

  Five years ago, I went on CNBC and they asked me, you know, what was one of the most important things from a milestone basis in crypto? And at the time, China was talking about a CBDC. And so I was beating the table, saying the United States should tokenize the US dollar. And the thought process was if you are sitting in a country where you don't want your local currency, you would like US dollars, but if it's hard to get, could be dangerous, could be expensive. And you could simply go on the internet and buy another nation state currency that had some stability to it, you would then go towards that. And so if China had one and the United States did not, obviously, people would start to onboard there. And so it was really a dollar access

• 34:47Anthony Pompliano?

  or dollar kind of permanence thought process.

• 34:52Anthony Pompliano?

  The United States government did not do that. You guys did. Tether did, right? These stablecoins now have furthered the American dollar kind of adoption globally. But obviously, the US government now is faced with, maybe not a choice, but definitely some thinking around, we have private companies that are tokenizing our dollar. They are driving that US dollar adoption. Should we, as the US government, get into that game? Right? Should this be a kind of government-oriented thing? Now, how do you think about, you know, one, do you think the government will do that? But also, two, if they were to do that, is that a competitive thing? Is that like all boots rise together and it's just validating what you all are doing?

• 35:37Anthony Pompliano?

  How do you kind of look at the government's role here on a potential central bank digital currency? Or, you know, maybe they just partner and they say, hey, we want to work with you guys and make this even more popular?

• 35:46Speaker 02

  Yeah, I think a couple of things. I think there's sort of like, what is the actual kind of technology architecture of the dollar? What is the role of the US government in that versus the private sector? And then what is the, what is the actual, what is the US government actually doing right now in this space? And so, you know, maybe first, just when you think about the, the technology architecture that, that is, that the dollar is today. At the core, there's like a centralized database server. It's probably in New Jersey or somewhere near the New York Fed. And it's like an Oracle database and it has records of like the, the assets

• 36:29Speaker 02

  that are reserve assets for, for banks. But basically, that is, that, that, that electronic database is sort of the, that is the, the record of the dollar, right? And so,

• 36:42Speaker 02

  The most of the dollars, though, that we interact with, we're not actually logging into that database. Like, you and I don't have access to that. But there are, you know, basically, banks who have Fed master accounts. So those banks have access through APIs, have access through like FTP servers that pass around text files. It's super exciting. You know, basically, have the ability to kind of, you know, access that. But what actually they're doing is they maintain their own separate databases. So they run their own, you know, probably Oracle databases. And those Oracle databases, they're actually able to create money. So, you know, they, they, they have, say, $100 from you, they

• 37:26Speaker 02

  actually create $1,000. Like, they make new records themselves. So the vast majority, 95% of the electronic money in circulation is privately intermediated, privately issued, and most of it's debt money. It's issued in that way. But it's fundamentally, you know, the, the, the model that exists in almost every part of the world, but in the US in particular, is, is that the private sector is, is the intermediary of electronic money to the public. And, and, and that, that's important philosophically, and I think that, that exists there. Now, on top of those databases that are run inside those

• 38:08Speaker 02

  banks, then you have a whole bunch of other technologies. Like, you have, you know, interbank ledger systems, you have credit card networks, you have, you know, different ways to tokenize money in the form of, of what we think of as tokenized money, like your, your token that represents your Apple Pay credential, your card credential. So you, you have these kind of layers. So that's sort of like the technology architecture of the dollar today. Now,

• 38:37Speaker 02

  My view is that what makes the Western system economic and sort of market system so powerful is that it's built on open, competitive, free markets, private sector innovation driven by entrepreneurs, driven by capital investment. And we've seen an incredible, incredible track record of great American companies building great technology products that lead the world. And the role of the US government is to set the rules. The role of the US government is

• 39:17Speaker 02

  to make sure that if there's a breakthrough technology, that it's safe. Self-driving cars, electric vehicles, new forms of rockets, new forms of synthetic biology, you know, safe deployment of AI, safe deployment of crypto, right? So it's to make sure that this can be safely deployed, but let that market innovate and you will get the best outcomes. And that's worked historically. Almost every form of electronic money innovation that we can name in the West is private sector led. So it's, I think it's the way things are done, the way things have been done. And now we're sitting here today with, I think, the most revolutionary form of electronic money innovation that we've ever had, which

• 40:01Speaker 02

  is true internet programmable money, internet scale, digital currency programmable money. And so the number one thing that the US government can do is lay down the rules of the road and let the private sector compete and innovate. And that is in fact what US government policy is. The priority of the United States government, the priority of the Federal Reserve, of the US Treasury Department, and of Congress is to enact payment-stable coin laws that basically enshrine this new form of full reserve digital dollar money that can be privately issued, safely regulated and supervised, including under

• 40:42Speaker 02

  Federal Reserve supervisory standards, and let that grow in scale. And I think that is the official policy today. And that is what's being worked on by policymakers. And I think that's a great outcome. And I think that will lead to You know, an enormous amount of competitive innovation in the space.

• 41:05Anthony Pompliano?

  How do you think about Tether, right? We saw the Bitcoin conference. Some folks were trying to pit Tether and USDC against each other. On one hand, you both have dollar stable coins. That's the majority of the assets. On the other hand, I think people perceive that you're taking out of different strategies on how you're going to compete in the marketplace. So what's kind of like the internal conversation of Tether, USDC and maybe pros, cons or competitive dynamics?

• 41:34Speaker 02

  Yeah, I mean, look, I have a huge amount of respect for Tether and what they've built. They've built an incredible business in many respects, you know, and they built it in the way that they've built it. And so I think that's there. I'm focused on the infrastructure that we need to build to realize the vision that we have for an internet financial system. The blockchain infrastructure that's going to make this work at scale for consumers around the world. The development platforms that are going to make programmable money a reality for tens of thousands and eventually hundreds of thousands of developers and enterprises around the world.

• 42:19Speaker 02

  The deep integration into financial systems around the world, the deep integration into banking systems around the world. And working with governments around the world to ensure that this can be treated as legal electronic money. So we can go after those multi hundred trillion dollar markets, right? That's what I'm focused on. That's what I've always been focused on, and I think that we can build a great business doing that.

• 42:44Anthony Pompliano?

  Tether recently reported first half financials and like 5.2 billion in profit in the first half of the year. You all have a very similar, if not, you know, almost the exact same business model. And so as assets rise, you guys take that capital, you put it into treasuries. It's a good time to be doing that, right? Interest rates are high. How do you think about your financial performance and its relationship to interest rates in a world where, you know, when interest rates... Rates come down, is that a headwind for the business in a world where, you know, maybe stocks will go up or kind of asset appreciation occurs. But for you guys, actually, you know, you're better off with higher interest rates? Or is there some other calculation?

• 43:22Speaker 02

  So I think about it differently. So in, in kind of banking and monetary theory, you know, interest rates and what the Fed is doing when they set an interest rate is they're, they're trying to set the price of money. And if, if, you know, effectively, if they want to slow down economic activity, they, they kind of increase that interest rate. So they're increasing the price of money that naturally will like slow down economic activity. And so for, for people who happen to just have cash, they're not doing something with that, that gives them some economic benefit over time. But when interest rates are reduced or they come down, maybe down to zero or maybe down

• 44:05Speaker 02

  to 3% or whatever that is, as interest rates come down, what the goal is to stimulate economic activity. And there's a measure of that. There's kind of what, what, you know, central bankers talk about as money multipliers, which is the velocity of money. And so in a lower interest rate environment, there's higher money velocity, which means that there's more capital being put to work, that money that's quote unquote, on the sidelines is put to use. It's invested, it's invested in assets that people hope will rise in value, in companies that will produce more profits, in all, all this kind of thing.

• 44:44Speaker 02

  And so stablecoin money like USDC is, I believe, some of the highest velocity money that exists in the world. It has some of the highest utility of any money that exists in the world. And as it becomes legal electronic money in most parts of the world, its ability to be used in, in, in the real economy will expand very significantly. And so my own view is that as interest rates decline, the demand for stablecoins is going to surge. And that we're going to see incredible growth in the both the amount of stablecoins

• 45:26Speaker 02

  in circulation, the velocity and turnover of the use of those stablecoins, and their utility in society as a whole. So that's, to me, that's extremely positive. So I'm of the view, I'd really like to see interest rates come down. I think that they're too high. And if you talk to bankers in the traditional sense, they also feel the same way. High interest rates means that fewer people are borrowing. Higher interest rates means fewer companies are investing. So they want to see what oftentimes is referred to as a neutral interest rate. And, you know, a neutral interest rate, given kind of persistent inflation around 2.5% or whatever it ends up being, right? A neutral interest rate

• 46:07Speaker 02

  might be 2.5%, 3%. And that might be kind of the optimal environment where you get this super high velocity and you actually see a lot of growth. So I'm quite bullish about declining interest rates.

• 46:23Anthony Pompliano?

  It's obvious that as like market cap of USDC goes up, there's more assets, wherever interest rates are, you're kind of making money. Do you guys make more money given a higher velocity or like higher turnover or transaction volume? Or is it just simply like market cap is the way people should think about it?

• 46:39Speaker 02

  Yeah, so the kind of conceptual model to think about Circle is, you know, we operate a stablecoin network. And our stablecoin network is a platform and a utility that is generally available on the internet. And so there's the collection of protocols that we operate. We have the smart contracts that are our stablecoin protocols. We have the cross-chain transfer protocol, which enables for seamless transactions of USDC between different blockchain networks. We have, you know, utilities that we're building to facilitate, you know, gas fee payments in stablecoins. We've got, you know, kind of wallet as a service infrastructure to basically embed stablecoin transaction capabilities

• 47:22Speaker 02

  in consumer applications, enterprise applications. So we have this whole stack that makes up the stablecoin network. And it's a platform. That we try and get developers to build with. Developers can build anything that they can imagine with this. And so there's sort of the open internet, you know, kind of model and and people build with it. So we want to grow our stablecoin network to be the largest and most actively used in the world. And, you know, right now, there are, you know, there are more on-chain transactions done with USDC than any other stablecoin. So we have the most activity on-chain. And we feel we feel really good about our ability to grow that. We don't monetize any of the activity on the network.

• 48:07Speaker 02

  We don't monetize any of the transactions or other things that happen on the network. We do monetize some of the developer utilities that people use. And so that is a different income stream for us that is discrete from the kind of reserves that we manage. But I think, you know, as a as a company, right? We're building a lot of new products and services. We keep rolling those out. And we were thinking about a lot of different ways that we can grow our revenue, you know, from new products in the future as well.

• 48:39Anthony Pompliano?

  Various blockchains have different levels of popularity. You know, one of the shocking stats, I think, over the last couple of years was how popular Tron had become as a stablecoin blockchain. Where do you all see USDC being kind of most popular today from a blockchain standpoint? And then is there any that are fast-growing or you think, you know, could become much more popular in the future, but you haven't realized yet?

• 49:00Speaker 02

  So, yeah, historically, you know, Ethereum was the the major chain for USDC. And and now, you know, we've seen really fast growth from some competing Layer One blockchains like Solana. Solana has had extraordinary growth with USDC. I mean, it's it's been it's been incredible.

• 49:18Anthony Pompliano?

  Has it passed Ethereum?

• 49:20Speaker 02

  By some measures, yes. So there's some noise in that data. So I'm not the expert. I'm not going to attempt to comment on that, but it's been extraordinary, the growth there. But we're also seeing the fastest growing Layer 2 blockchain with USDC right now is the base blockchain that Coinbase has launched, and that's growing on a lot of different metrics. But also, other major Layer 2s, Arbitrum has grown a lot, ZK Sync, Avalanche is another Layer 1, Near Protocol has had some recent really significant growth. So there are a lot of areas where we're seeing really interesting growth. I think our view

• 50:03Speaker 02

  is we're still in the early days of blockchain network innovation. Blockchain networks are kind of like competing operating systems that are competing for speed, scalability, other features. And so there's a lot of competition there. And we want to make sure if there's a compelling new platform that needs digital dollars, that we can build partnerships with these networks and these ecosystems to bring our protocols to those networks. And I think you'll see more and more of that from us, because we, again, we think it's early days. And I like to use the analogy of Netflix. It's an interesting

• 50:43Speaker 02

  one. I used to be an online video guy before I was into all this crypto stuff. And Netflix is what people call over-the-top video, over-the-top television, right? You don't need your cable, you just go over-the-top the internet, and you have the Netflix app, right? And in some ways, like stablecoins are like over-the-top money, right? It's sort of like you just have this money, it goes over the top of the internet, and so on. But just like with Netflix, where there's just been mass proliferation of devices, like that screen right over there, or these devices here, or like literally, there are thousands of different device platforms that want to have Netflix, right? Because if you build a screen, and it doesn't have Netflix on it, whether you're a car, or a refrigerator...

• 51:29Speaker 02

  Or you know, a TV set, right? You're at a disadvantage. You need to have Netflix. And so Netflix has an enormous, enormous product and engineering effort to make sure that the Netflix app is everywhere that people want it. And they have to maintain that too, by the way, like, you know, that Samsung TV that you bought 10 years ago that has Netflix on it. It's still got to work. And so we're building the capacity to make sure that USDC, EURC, CCTV, these protocols that make our stablecoin network work, that we can bring them to all these platforms. We can make sure that we've got that kind of cross-platform reach.

• 52:09Speaker 02

  And that no matter where users show up to interact with an app or transact, that we're there. And so we have a fairly significant commitment to continuing to build in this space. And, and while there will be, you know, larger winners in the blockchain space, there'll be, you know, network effects and other things. We think that that innovation is not slowing down. And certainly in a world where, you know, the entire user base of the internet is on-chain and using a wide array of different on-chain applications, not just financial, but, you know, in gaming and social and identity and all these other areas, right? The blockchain infrastructure of today is not going to be the blockchain infrastructure of tomorrow.

• 52:52Anthony Pompliano?

  What about geography? So there's certain countries where you're seeing, you know, kind of very impressive growth or maybe geographies that we wouldn't think of, but they have become very big users of these stablecoins.

• 53:02Speaker 02

  Yeah, I mean, it's, it's, it's sort of, it's amazing. So, you know, the significant majority of, of, of USDC adoptions is outside the US. I think greater than 70% is outside the US. We see, you know, strong growth in emerging markets all around the world. There's also fairly strong growth in developed markets in Asia as well. So it's a mixture of developed and emerging markets. But we absolutely see, we're seeing really interesting growth happening in emerging markets in particular. Yeah.

• 53:41Anthony Pompliano?

  Now, my last question for you, I think, is kind of about the long-term vision and kind of how big, you know, this all is.

• 53:50Anthony Pompliano?

  On Twitter, you retweet lots of stuff of kind of what people are using this for. I have seen everything from kind of traditional payments and kind of adoption to, you know, on-chain insurance where this is, you know, the kind of, you know, currency of choice. How do you think about, you know, if you sit down and you say 10, 20 years from now, this is what it's going to look like, like what is that world?

• 54:13Speaker 02

  Yeah. So I think we're in the super early days and, and, and so, which is exciting because it's already kind of big, right? But it's, it's exciting. It's super, super early days. And I, I think about this in a couple of ways. I think the first is you have a currently a total addressable market of about $100 trillion of legal electronic money. Most of that is bank intermediated electronic money. And so I do believe that stablecoin money, this full reserve kind of stablecoin money that has internet scale

• 54:52Speaker 02

  utility, programmability, like we'll take a larger and larger share of that over time. I, I have to use sort of the growth of other internet utilities as a proxy to think about the growth that could happen here. So it took, you know, 20 years for online video to, to, to, to reach like even like 15% of video viewing hours, like 85% is still terrestrial broadcast cable satellite, right? It took like 30 years for e-commerce to reach something like 25% of, of retail sales, right? So it takes a long time. But if in 10 years, if

• 55:37Speaker 02

  in 10 years, 5% of the, of the, of the global market of electronic money was stablecoin money, that would be extraordinary, right? And, and that seems, that seems very achievable. I think the unpredictable part is, and the exciting part is, is twofold. One is that

• 55:56Speaker 02

  In all these other areas where internet utilities, software-powered internet utilities kind of took hold, oftentimes, they kind of reduced the marginal cost of, say, storing and moving information or communications or publishing media, they kind of brought the marginal cost to zero. And as the marginal cost of storing and moving information moved to zero, the net world output of information and communications and media, like million X, it exploded. And so I believe the same principle is going to apply here. With blockchain networks and stablecoins, the marginal cost of storing and moving value is approaching zero. And when that happens,

• 56:41Speaker 02

  the velocity of money is going to increase orders of magnitude. And so the demand for that will grow far larger than the demand that we've had in the legacy system. I don't know exactly what that means, but I know it means that the total addressable market of money will be, will actually be a lot bigger because we've restructured the actual economics of how this works. The other thing that's exciting, which is also unpredictable, is we've never had programmable money. We've never had programmable, composable protocols of money. We've never had something like that. And it's kind of like, if you think back to when the iPhone came out and the first smartphone came out, like the first

• 57:24Speaker 02

  smartphone that people could build on. No one actually knew what you were going to be able to do with that. There are all these ideas about mobile, mobile this, mobile that. And you could kind of conceptualize them. But then, once you actually had a Surface and 3G bandwidth and these kind of hardware capabilities, like entrepreneurs, developers came in and invented millions and millions of applications that have changed the world. So many of these have changed the world and opened up possibilities that we never knew were there. Programmable money is the same, right? When entrepreneurs and developers get their hands on programmable, composable money on the internet, they're going to build things with that that create utility for money that

• 58:09Speaker 02

  have never existed before. We can't think of them right now. That's exciting. And so it's that kind of velocity of use and then it's the kind of hyper utility that we can't even see yet. That's so exciting. And so from my perspective, you know, that's what we want to be part of over the next five, 10, 15 years is just fostering that and growing that and hopefully, you know, building something that is really valuable for society.

• 58:39Anthony Pompliano?

  I think you guys have a great head start. So I'm cheering for you and hope that you guys are even more successful than you think you will be. So thanks so much for doing this. We'll do it again in the future.

• 58:47Speaker 02

  Thank you, Paul.