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

Episode Date: April 29, 2024

✨ 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 ⁠  

Total value of stable coins. What do you think? By the end of this decade, by the end of 2030, where are we sitting? 2030. Yeah. Yeah. I feel comfortable saying $3 trillion. Welcome to bankless, where we explore the frontier of stable coins.

This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help me become more bankless. We've Jeremy Aller on the podcast today. This is the man behind the largest staple coin issued in the U.S. 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 USDA had just depegged and was in the middle of recovering,

Operation choke point seemed to be a thing that the U.S. government was doing to squelch off crypto companies from banks and debank 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? 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 Black Rock and Circle partnership.

How big of a deal is this? What does the U.S. government want from stable coins? 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 stable coin over another? And finally, we fast forward to 2030.

This whole vision has realized, what is the total value of Stable? stable coins at that point. 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 being an entrepreneur operator inside of those confines, while also being a very big bull of the world of defy, which is strictly outside of those confines. And he 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. He's inside the world of the regulatory landscape, but USC 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. All right, let's get to the episode with Jeremy Allerer 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 Cracken. Go create an account. If you want a crypto trading experience backed by world-class security and award-winning support

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Now, if you do an initial consultation, Toku will cover the cost of your token valuation, which is what you need for your launch. So don't wait, reach out to the team right now at team at Toku.com. That's team at t-O-K-U.com. Bankless Nation, we are on with Jeremy Aller. He is the co-founder and CEO of Circle, which is the company behind USDC, which is the, world's largest U.S.-based stable coin. Jeremy, welcome back to bankless. Yeah, it's great to be back. Thanks for having me on. It's great to have you. And 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 U.S. There's Silicon Valley Bank. Bankless listeners may remember this or maybe you... It seems forever ago. Yeah, it seems like a long time ago. But Silicon Valley Bank had some issues. the bank as well, where USDC kept billions in funds, was facing potential insolvency. We didn't really know. And USC itself, the stable coin had a brief period of time where it was doing the thing it's not ideally supposed to do, which is depegging from the dollars. Now we are in much calmer waters. And I just want to kick this off 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? Was this the most stressful period of time in circles history, and what did you learn? Well, we've had a lot of really stressful times in our history, so we've been working on this for 11 years and, you know, like, 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 it's pretty good, right? I think 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 then 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, you know, really starting later in January, but going into February, you had a wave of enforcement actions principally by the SEC against an enormous number of U.S.-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 the topic you guys have addressed many times. And then in the matter of seven days,

you had three distinct banks that were completely separate from one another, fail or be seized. And then the threat of a broader regional banking crisis that then ultimately had, you know, 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, you know, this was, you know, a much broader financial stability risk. So 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 in the entire crypto industry was debanked. they were debanked. 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. What does that mean to be debanked, Jeremy? Like it... Meaning if you were a company, let's say you're a firm in the market and 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 to 10,000 companies, those banks stopped. 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. Now, I think when I look 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 U.S. you have, like, the U.S. dollar system and the

regulated banking system. And, you know, there's sort of a view that 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. 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 built up the most transparent reserve structure in the industry. So you can literally look at the reserves in USDC through a, you

publicly listed vehicle, USDX, and you can see, and that's independently audited, independently verified, SEC regulated, and that is the Circle Reserve Fund structure. 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. We have a global network of transaction banking now. We have the ability to create and redeem USDC in the domestic bank networks in the U.S., in domestic bank networks in Singapore, in Hong Kong, in the EU, will soon be launching in markets like Brazil and Mexico. We've announced initiatives 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 G-Sibs, global systemically important banks, as reserve banks that hold the cash piece of what we do,

not the T-Bell kind of part of what we do. So that infrastructure is, you know, far more redundant, far more global with, you 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. Yeah, 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 like 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 J.B. Morgan is one of them. Is that how you would kind describe the before and after of the effect of the banking crisis, is that, like, a circle has been, like, given a route into, like, more of the center of the financial system? So I think well before SVB, you know, saw its challenges, we had been upgrading to the BlackRock-based Circle Reserve Fund structure. And in fact, even at the time, around 85 percent of the Circle Reserve infrastructure, was actually custodyed in Bank of New York Mellon, 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, 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 U.S. bank accounts have to depend on shadow banks in, you know, jurisdictions with no real regulation. And so it's, I think we're in a good place. So when, you know, BlackRock decides, you know, they want to work with a company to enable stable coin transactions with a tokenized fund or when the largest retail bank in Brazil, New Bank, which is an extraordinary company, decides 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 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 Darling's 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. almost every venture company in the world, most venture capital firms, you know, 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, you know, we saw this First Republic, which is another huge regional bank, huge asset manager failed and was taken over by JP Morgan. And 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. 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-Sysms. 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 because we wanted those banks who offered, you know, fundamentally credit to important communities. And that was part of our like social impact commitment. those were all deemed too risky. And so we had to pull back billions of dollars from MDIs and community banks, which is really disappointing. And so I think at this point, though, when we think about just looking at USC specifically, you know, 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, you're putting protocols on, you're transacting, and you want that to be as low risk and as transparent as possible. Yeah, I hear you. It feels like a USC is now much more connected to the mainframe, I guess, of the dollar banking like ecosystem, right? And by the way, I was looking at the USDX, which I think I can go see this. If you Google USDX, you can go Google and see your question is, what backs USDA? You can kind of like 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 like if I'm just to layman's interpret what you were saying, Jeremy, is like the reason you couldn't spread the cash throughout all of these community banks and kind of like, quote unquote, decentralized 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 like on the books kind of protecting the cash reserve in those banks. And so if your circle, you've got to get closer to the mainframe. Yeah. And you've got to park it in kind of like the, I'll use my term for this, the quote unquote, too big to fail type like major banks, basically.

And like that's effectively what you've had to do. 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 defy is trying to accomplish, which is, you know, in a world where you have a technology, these blockchain networks, that effectively 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 security and settlement assurance

in a fraction of a second, and now for a fraction of a cent in many cases. You're creating one of the highest utility forms of money that's ever existed. And in that world, you're actually increasing the velocity of money. There's this concept in monetary theory around money velocity, and the velocity of money has this huge impact on economic activity. 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 way in which that velocity is constrained is essentially through the leverage and risk-taking of banks. So, you know, effectively,

I put a million dollars into Bank A, I don't actually have a million dollars there. I have a liability, and that liability is 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 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 hyper-efficient, like high utility money, you want the base layer that payment stable coin,

as people refer to these, 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. 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 happens in defy is sort of leverage lending, margin borrowing for speculative purposes. It's not, you know, for real use in the real economy. People are not saying, hey, I would like to borrow USC to open a new restaurant or hire more employees, although there is more and more of that. And you do

see some of these defy 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 USC as well. Full reserve money, a payment coin. We want to get back to that later in the conversation, the context of like, does the U.S. government want that? And what does the U.S. government want? But like, let's hold that side of the conversation because you opened up something else, which is like defy and crypto and blockchain and like money at the speed of information, money

at the speed of light and kind of this idea of your like global frictionless, you know, 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 company that you're building, not your first startup. You saw the birth of the internet. You built protocols on the TCIP internet protocol. And now you're building circle and kind of like crypto-native protocols. It's interesting because crypto just hit 15 years old. Yeah. And Bitcoin started in 2009, as many people know. The internet's birthday, Google says, 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. Yeah. So I think about this a lot. And I think it's very different than the evolution we saw from like 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 apps. They were still pretty difficult to use and it was all dial-up modems. It was a 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, wanted this decentralized infrastructure, setting up these nodes and just like everyone was publishing. So you had a sense for, like, 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. Really? Yeah. And so my view is, 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. 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 CAP-X that had been laid out by companies who had basically invested billions into the dot-com boom. And that CAP-X became available and became more commoditized. as well. And so the ability to like deploy 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 what was interesting about it was 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 just never stopped. 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, 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 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. 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 like 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, you know, modular smart contract accounts that are basically creating plugable, 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 legal clarity. And when you have legal clarity, then like households and firms and financial institutions are like, oh, okay,

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. 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 reach a billion users that can transact in something like USDC, but also with other things. I really think we're in a different place. And now it's like sufficient that developers can build all kinds of other applications. Obviously, like, FARCasters are 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 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 right now. You don't care about prices, Jeremy, because you run a staple coin, man. That's a cop-out. Yeah, I'm not pumping any token. 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 a, 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. Of course. But there 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. Yeah. One of the fuels for motivating all of this is of course like Bitcoin invented digital gold, digital money, you know, eth fault suit, like a lot of other like, we all kind of are playing around with assets. But I think before the paradigm of stable coins,

no one actually really saw the paradigm of stable coins coming. But now we actually do understand that stable coins 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 stable coins 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 being a very large part of like blockchain development, where do you think this goes? 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, where are stable coins and just generally speaking, like where do you think this goes in the next 10 years? 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 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 can transact at the speed of the internet and you can 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 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 growth in this can be really dramatic. I think about the kind of market in a couple ways. I think the first is there is a market for electronic cash or electronic money. And today, the market for electronic dollars is a $21 trillion. market. There's $21 trillion of electronic dollars. And most of that is kind of bank risk money.

It's sort of levered money inside of banks. Yeah, yeah. What is that $21 trillion? So is that like money in my bank account, my Wells Fargo account, that would count towards that? Yeah, that's right. That's like M1 money supply. Okay. And so that aggregates up all of the kind of dollar liabilities that exist in the banking sector. And then you can also include on top of that, usually 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 $100 trillion, a little bit more than $100 trillion

because there's all these currencies and all these banks all around the world. Wait, wait, in dollars? So you're not talking about... In dollar terms. Yeah, okay. In dollar terms. We're talking about like the digital euro, for example. Well, no, I'm just talking about like you've got 1.4 billion people in India and they have

rupee accounts and all the corporations and households have rupee. And that's electronic money as well. And one rupees basically. Yeah, M1 rupees, right. So the aggregated electronic money is over $100 trillion. So $150 billion stable coins, 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. We have money that inherits that speed, the best money is going to want to be. and people will want to be the safest money. 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 at just the money stock, basically, just the money stock, there's a huge opportunity to grow the scale of that. 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 on broadcast, right? It's not on streaming platforms. So these migrations take a long time. So in 10 years, could 3% 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? 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 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. capital markets where literally there's, 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, 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 stablecoins is they are kind of 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 are trying to build smartphones. Like, they were awful, like every one of them, like Nokia phones, NTT-Docomo, compact, I-PAC, 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 U.X, mobile broadband,

3G happened, 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 travel and logistics, you know, infrastructure would get completely reinvented by like a company like Uber. Like, that was only made possible. Like, that just became possible. And so I use that analogously to what's happening with defy and what's happening with stable coins and this programmable money model is we actually don't yet know all 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 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.

I think it's actually too difficult to predict that. Jeremy, I still hear in the back of my head the critic or the cynics, saying, okay, you say it's 2003 right now in crypto world, right, in terms of internet years. But like 2003 was sort of the era where, you know, the internet became not just for nerds and geeks, it just like totally went mainstream. 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 stable coins have been in existence for a while now. And 150 billion is like respectable. You know, this credit where it's due. It's only sliver. And like the most simple app on the planet feels like Venmo for crypto. I just want to take my stable coin in a mobile wallet, and I want to just send David some USDC. 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? Have you tried Coinbase wallet with base? It's pretty good. Well, tell me, tell me. Where is it? Why hasn't it come until now? And is that basically what you're predicting?

Yeah. So, I mean, look, I think 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 3 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. You're also not really doing a 25-cent transaction, right? So you have this like super scalable model. But I think I completely agree with you, right? The interoperable, global 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 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. But you also see, you know, like these huge aggregators of end users who are basically building Web3 into their infrastructure. So like grab in Southeast Asia 200 million users, they're using Circles Web3 infrastructure stack, our developer platform, to put Web3 natively in the hands of their users. New Bank in Brazil, 90 million users. These are huge, right? 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 Mercado Libre, you know, doing amazing things by sort of bringing these in. 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, Indonesia and you use the dominant e-money app there or in the Philippines, the dominant e-money app there, or in the Philippines, the dominant an 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 neobanks, right? 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 long been the promise, which is can you take an existing financial contract, and can you represent that in a smart contract and have 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 of composable infrastructure that is defy. So we're at the front edge of that, and in certain places, laws and regulations are going to help accelerate that. So like Micah 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.

Stable coins 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, though, that the utility of a blockchain is way outside of financial, right? And it's 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 applications.

And socials, 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's public with, I think, the second largest gaming company in Korea called Kraftin. They operate one of the largest, like, massive multiplayer online universes out there as 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 unit of account, right, that's there. And like these kinds of products are really just coming. as well. So, but even your analogy of 2003, like 2003, 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 and it really didn't take off until like 2005, 2006. And, you know, 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. Welcome to Consensus 2024. Consensus is one of the biggest hubs for all things crypto, blockchain, and Web 3. This May, Consensus is celebrating 10 years of decentralizing the future.

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secure your spot today and be a part of the transition that's setting a new standard in the world of custody. As we do these 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. But we actually still have to compete with this already entrenched, you know, we still have to compete with Venmo. Sure. 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. 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 2 fintech apps that we have to compete with just on our merits. But then there's also the frontier of just like, what does that? these net new crypto things that are like friend tech or something like ENS. How do you like delineate

between these two lines, Jeremy? How do you think these things are going to go? Yeah, well, I mean, like, I think, you know, if you believe in the fundamental tenets of Web3 and read write 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 And 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.

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 challenge, right? So we have that issue in the U.S. 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 do you have to disclose? You know, there's like a whole 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, 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 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 other jurisdictions are actually providing that regulatory clarity. And so I think we'll get there. But I think that's necessary,

right? Because if economic incentives and economic incentive design and participation in economics becomes a mass scale phenomenon through like decentralized applications and platforms, like you need a basis of law around 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 or letting strangers stay in your house with Airbnb. Like, there's a comfort that has to come. And I think in financial matters, the way that comfort come is not entirely self-policing. 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, he 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, Black Rock 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 U.S. Treasury. There is something that we've been tracking at crypto has been Black Rock's Biddle Fund, where they are using a third-party company, more crypto-native company called Securitize, to actually put treasuries on chain in tokenized form. That was part one of kind of the release and announcement. We just found out probably a week prior to recording this in 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 Ether scan. On the other side of that smart contract is a little function in the code, a redeem function. So people who have these Black Rock 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 stable coin. So now for the first time on chain

what I'm aware of, anyway, at the level of Black Rock, we have a pipeline. We have some bandwidth coming through from treasuries to stable coins. I know you can't speak on behalf of Black Rock, of course. Maybe you can speak on behalf of like crypto and stable coins though in general and circle. How big of a deal is this? What just happened with this kind of redeem function? And where is it going to lead to? I mean, I think it's a really big deal. Obviously, I think, you know, it's been interesting to see the evolution at Black Rock. You know, they became a strategic investor in Circle a couple of years ago, so almost two years ago. And we built out this, like, very innovative, highly transparent reserve structure for USDC. So they were like making a big bet

on stable coins. And I think I got to know Larry Think and the other leadership there and had a lot of long conversations about, you know, digital commodities, digital gold, like what are the different between all these blockchains and I think the team there, you know, Larry certainly got excited about these things, but I think 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 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 amazing because they're, you know, 10 trillion,

I don't know what their current assets under management are, but they're like, like the largest asset manager in the world and a hugely important player. I think just seeing that's been really positive. And, 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 and which you create and redeem ownership be stable coins, just makes tons of sense. And the ability to have that exist on a public infrastructure, which is auditable, verifiable, secure, global, interoperable,

like, it just makes so much sense. 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, 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. It's a really exciting area. I think one of the big things is going to be

when do we have exchanges that can trade these tokens? And not just in the U.S., 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 do you have defy 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 I think it's a very, very exciting start. There certainly have been others that have been experimenting in this. same category over the last year. But obviously BlackRock stepping in is a really, really big deal. 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 stable coins 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 U.S. government to essentially kind of like outsource it 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 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 U.S. 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, U.S. debt is continuing to rock it 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 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 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 happens. 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 have some concerns with exporting the U.S. dollar via stable coin. Anyway, zooming back out to the question, that's kind of the context. I ask the question of what does the U.S. government want when it comes to dollar-backed stable coins? Yeah. There's a lot in there, and there's a lot of great stuff to talk about. I think saying the U.S. government is never an accurate thing. It's not a monolith, right? It's not like this one mind that is the U.S. government and it speaks with one voice, right? The U.S. 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? 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 U.S.

Treasury Department, which is the department that is, in a sense, in charge of the dollar in the world, you know, went around the world and worked with 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, the G20, went

back and they have to do their lawmaking process. And lawmaking processes are different in Japan than they are in Hong Kong than they are in Singapore or Europe or the U.S. So what you've had happened since then is basically all of the major governments have come forward with regulation of payment stable coins and relatively consistent. So there are a set of recommendations at the G20, and the U.S. 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 U.S. financial system. And, you know, that's been happening around the world. I mean, payment stable coins became legal in Japan last year. June 30th, which is just a couple months away,

payment stable coins will be a legal form of money in Europe. And if you want to offer a stable coin 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 stable coin or eurostapoint, 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. They have to follow kind of any money laundering rules. And so you have this happening all around the world. And so as we speak, 2024, 2025,

stable coins 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 Treasury's 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. There's going to be, you know, kind of non-banks, banks, banks. There's going to be

smaller companies, global companies. These are going to be a new thing. And in a sense, that is outsourcing the production, 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 U.S. certainly has been like a private sector-led innovation. 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, 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, the way that this monetary policy transmission has worked, I believe this is where defy and on-chain steps in. I am like a long bull on-chain credit, you know, a hyper-high velocity, high-utility money that can be programmatically controlled and time-locked with very high levels of transparency and auditability and where the actual risk and underwriting and other things can be produced and validated with proofs on chain. 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, credit and lending and savings and investing, the time value of money is better intermediated by on-chain software than it is by persons.

And small tangent to AI, I think AI will play an important role in all of that credit decisioning, too. But like, we could go there and into a whole other topic. 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, okay, there is this new super-high utility model of hyper-efficient internet scale on-chain money. that's happening. Like that genie's not going back in the ball. It's happening. How do we think about monetary policy transmission? We've actually, you know, our chief economist was formerly an economist at the Fed. He's published a number of really exceptional pieces on this topic as well. And, you know,

this gets to the heart of the matter. I mean, it really gets to the heart of the matter. Like, are we building a new internet financial system that is safer, more transparent, more frictionless, more fair, more accessible economically, globally, right? But we have to be a able to perform time value of money transformations, the sort of credit intermediation, with this kind of the safer base layer of money. It's interesting to see the trajectory of circles just getting closer and closer to the metal. It's closer and closer to the firmware here of the dollar. And kind of this last step of kind of a full reserve stable coin, 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 central bank monetary policy type of thing. And it's my perception that a central bank digital currency does not have the political will power to get through in the U.S. like right now. Other countries may try it. Like China certainly can like they can push in whatever they want. I don't think voters are excited when you tell them. We've got a federal CDC. BBCC. No appetite. I think... No appetite. Yeah, there's no appetite. But if you talk about this in terms of

kind of like a stable coin 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. Maybe it feels like an upgraded experience. But let me just ask you, what you just described with stable coins 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, Central Bank Digital currency? I mean, I don't know that it is because, you know, private intermediaries, whether they're, you know, financial technology companies or payment companies like PayPal or banks that decide, like, JPMorgan, that they want to be in this, there, 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 or there's, you know, privately run where privacy standards are upheld, right? I think, you know, 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. You have like the user experience of those platforms are getting better and better and better. 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, you know, 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, but all of these amazing companies. Apple and Microsoft and meta, and then in a lot of other industries, obviously, in bio-pharmaceuticals 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. 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. Yeah, I agree with that.

I think most Americans would be on board with that, like make it kind of a free market competition and like do it privately. We're not comfortable having the government 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 stable coin right now. USDC is number two. And I think what some people in crypto have concerns about is that when it comes to stable coins in the U.S., we go from a position of we've got 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 headline saying in the Stablecoin War Circle and Coinbase acting in Congress to reign 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 testimony in front of Congress. I personally believe no company should be allowed to reference the U.S. dollar without having democratic values inside their USD-backed a stable coin. 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 that testimony in front of Congress? Yeah, I mean, a couple things. First, Carolyn Hill is an amazing person. I have a huge amount of respect for her. She's served in the U.S. government for many years. She's a very

high integrity person, and I think she does extraordinary work. And she represents the entire crypto industry extremely well in front of major policymakers 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 on-chain innovation. So first of all, I have a huge. amount of respect for Carolyn. She's tremendous. I'm not going to comment on everything that she may have said or questions she's asked under oath and testimony. And, you know, 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 U.S. government speaks for itself on these matters. I mean, Wally Adamo, who is the Deputy Secretary of Treasury, he's in charge of all matters of sanctions, illicit finance, countering terrorism finance just, you know, submitted his own testimony last week. You can read it. He has a lot to say about this topic of stable coins. And, you know, 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's built an extraordinary business. They've been highly successful. I think they've been innovative for a very, very long time. That is, I am not saying that. There are bad actors like people who are trying to evade sanctions, people who are, you know, funding North Korean weapons programs,

you know, people who are funding various types of terrorist attacks. You know, 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. 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 stable coin legislation coming, 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 Dollar Stablecoin laws come in 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 networks and internet service provision and with net neutrality and things like that. and you saw this huge proliferation of competition and everything from data services

to communications networks. So I would hope that, you know, regulatory clarity, not just in stable coins, 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. With the growth of the stable coin supply

and the stable coin issues, 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 stable coin issuers and they are all competing in the private markets. 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. MakerDAO has been here for a long time. Frax is, of course, a player. And so, you know, let the best stable coin win, according to the forces of the free market.

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, enshrine this one as like the pseudo-cdc, provide this one with the liquidity benefits, provide this one with like the faith of the government. And that one would also like be a pretty good product 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. Do you agree with those two like alignments of how this might play out and how do you see the forces being at play here? Yeah, I think there are definitely like two distinct arenas, so to speak. I think, you know, this concept of a payment stable coin, which is a term of art that like governments have come up with, and that's the name of the legislation in U.S. Congress right now, but it 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? That there's a framework for that, and the federal government is allowing for that, and then we'll allow any entity that meets the qualifications to go in that market. So that's not the Federal Reserve of 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 stable coin issuer can follow that. We're seeing this as a little bit of a preview in Europe right now. So Micah has stablecoin rules. And there haven't really been widely successful euro stable coins

to date. And, you know, EURC, which Circle and Coinbase both are involved with, has some good success, but obviously way, way different than when USDC. But however, like, when June 30th comes around, I think you're going to see a ton of movement in your 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 that a stable coin is... Big companies? Are there, like, big incumbents, too? Like big EU banks? I think you're going to see big incumbents, 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 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 example of that. But coming back to your question, David, like about these different arenas. 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.

Like, that's super high utility and will grow in utility. I think there's a whole other category, which are these, you know, efforts to create kind of synthetic dollars or algorithmically pegged dollars or various types of crypto-collateralized, 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 account for it as a derivative on my books? Does it need to be registered with derivatives? You know,

like what are these, like, are these securities? 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 and Luna, it was a, the whole thing was an illegal investment management and illegal securities issuance. And the CFTC was involved and said they're violating derivatives law. That's just a U.S. 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, you know, I guess like 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 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. Like, that's a very different set of incentives than, you know, you want to have like a full reserve digital dollar that runs on blockchains. 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 U.S.

kind of entered the stable coin. A gaming, explore what that means like J.P. Morgan coin. That was the thing that was talked about. Like, what would that even look like? I am curious, though, earlier in the conversation, Jeremy, when you talked about it, about Mika and other jurisdictions having stable coin regulation. You also referred to the dollar as kind of like a predator. I've called it like an apex predator as well. I've heard you say that. Oh, you've heard me say that. Okay. So I'm wondering 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 stable coin regulation. Yeah. If I'm like a weaker fiat, I don't necessarily want like this animal called the dollar coming into my fiat economy. I'm just trying to get 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 stable coins and crypto dollars out? Absolutely. And there already are.

I mean, dollar stable coins are illegal in China. They're illegal in India. I mean, they're sort of clearly, I mean, what's happened in Nigeria recently, fundamentally had to do with the FX market between dollar stables and Naira, which was, you know, running in peer to peer market. Are you talking about finance executives getting kind of arrested and caught up in that or something else? I mean, that is a specific incident, but I think the issue for Nigeria is about, you know,

essentially that there's an 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. And so... Because for the place like Nigeria, right, suddenly now in every Nigerian's kind of like hands is the power of the U.S. banking system. and that's never been available to them. Trust me, I get the value problem. So, but to answer your question is, yes, there are monetary sovereignty issues, right? And so I think if you bring this up a level, right, 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. Like, the idea that anyone could do a radio broadcast, you guys, It's your business, right? Like, it was, like, against a 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 then the people in those places were, like, this is better.

Like, don't take it away from me. This is better. And so I think there is a legitimate question, which is, does an internet financial system, which is more likely there are fewer reserve current. 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-piloy 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 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 complex issues in this overtime. Well, Jeremy, I do hope open networks win and open protocols win. Totally. 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. We'll hold you to account for this prediction. 2030? Yeah. Yeah. I feel comfortable saying $3 trillion. Nice. So like almost 2X the current total crypto market cap. 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. Well, Bankless Nation, the year is 2003, and we just had Jeremy Laird on the podcast. Jeremy, thank you so much. Thank you. 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. You know,