Odd Lots - Circle's CEO on the Booming Business of Stablecoins

Episode Date: July 31, 2025

Stablecoins are emerging as one of the most active areas of cryptocurrencies. The idea of using blockchain rails to transmit money has captured the attention of legacy financial institutions as well as policymakers, as evidenced by the recent passage of the GENIUS Act, which builds out a regulatory framework for that business. But what are the opportunities. And how do stablecoin providers actually make money? On this episode, we speak with Jeremy Allaire, the co-founder and CEO of Circle, which is the company that backs USDC, the second biggest stablecoin on the market. We discuss the company's business model, concerns about financial stability, and the prospects for stablecoins to open up entirely new avenues of payments and commerce. Read more:Trump Crypto Group Offers Proposals to Boost Digital FinanceFIS Partners With Circle to Offer Bank Stablecoin Payments Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, I have three thoughts about stable coins. Oh, boy. Here we go. Just three. Just three.

One is, I think within the broader realm of crypto, stable coins are real. I'm here to stay and probably going to be important. Two, some of them seem like. an absolute cash moneymaker because you don't pay any yield to the holders, you collect the yield for what you have backing it. It's a great business model. It seems amazing. And three, as the child of the great financial crisis generation, I'm convinced that if crypto is ever implicated in the future financial crisis, it might have something to do with stable coins. You stole all my talking points, Joe. Honestly. I had like the note written down that, you know, issuing liabilities that

mostly return nothing is a wonderful business model. What else did you? You can just restate in your words. Well, also, I was thinking stable coins are basically the primary touch point of crypto to the regulated financial system. And so you would expect some of those financial stability concerns to potentially materialize there. And then the one thing you didn't mention that I'm interested in is also this idea of

competition directly with the banks. And as stable coins get more money market fund like, maybe more. deposit like. We have some stable coins that issue yield now. What does that actually look like for the financial landscape? Totally. For traditional payment companies of all sorts, I mean, we all know that legacy payment companies collect a pretty big rent, so to speak, for use of their network. In theory, there could be almost no cost at all for a stable coin transaction or virtually minimal. It seems appealing. On the other hand, getting people to switch en masse from using like a sort of debit card or a credit card to a stable coin is sort of a tricky chicken and egg problem.

But, you know, it's a real competitor to an existing way of doing payments. Also, the one thing we didn't mention is it's kind of becoming important from a fiscal standpoint for the United States. And you have Treasury Secretary Scott Besson saying that he expects all this new stable coin issuance to basically increase demand for U.S. debt for treasuries, for mostly T bills. And so there's a lot to talk about. There is a lot to talk about. We really do have the perfect guest today. We are going to be speaking with Jeremy Aller. He is the co-founder and CEO of Circle Internet.

They recently went public in early June, and they've had a monster IPO. Incredible demand for this company. Incredible enthusiasm there. Of course, the sponsor of USC, one of the, I think it's the second biggest stable coin out there after Tether. So, Jeremy, thank you so much for coming in studio here on Oddlots. I'm really excited to be here. As you guys laid out, there's a lot of. to talk about. I said it in the beginning. Stable coins seem like an incredible business model because

here you have all these people holding a non-yield-bearing token. They're backed by, in many cases, yield-bearing assets that incorporate a lot. On the other hand, in Circle's case, a lot of the money that accrues to you go straight to Coinbase. Explain to us your relationship with Coinbase, and so people can understand sort of the economics of the money that you bring in and then how it goes out the door. Yeah, maybe I'll actually start with something a little bit higher level. and drill in. So when we think about our business and what we have built and what we operate is we think about it as an internet scale platform and network utility. So we're a set of software on the public internet that people can build on and integrate to and it provides this utility, which is this

global utility for storing and moving value around the world. And there's a regulated part of it and there's a technology part of it. And so as part of that, we want to build the largest stable coin network in the world with the most usage and the most transactions. in the most utility. We talk more about what that looks like. And as we built this, as we launched this back in 2018, we knew that we needed to really focus on building upfront utility and then building really good distribution relationships. And so in our business, we have sort of the scale of the network, which is measured by the number of people who can reach in their pocket and use USDC. There are over 600 million accounts that can access and use USDC around the world. A lot of

that is through distribution partners that we have. Like Coinbase. Coinbase is one. Binance is another and many, many more. You can find USDC on Robin Hood, on Cracken. You can find USDC in super apps in foreign countries like NewBank, the biggest neobank in Brazil or in a product like G-Cash in the Philippines, which is the dominant financial product for many Filipinos.

And so we make that product available globally. And we have a philosophy of incentivizing, you know, distributors to grow with us. And so I think that's really fundamental to the philosophy. And right now, I think we're in the early stages of building this. You know, the numbers in the aggregate are sizable. But when we think about what this can grow into and the volume of money storage and money movement that will happen in an Internet native way, you know, we think we're still in the very early stages of that. I mean, I understand that argument.

But Coinbase also took, I think, more than 50 percent of your revenue from reserve assets last year, which seems like a lot to pay for distribution. when you're already the second biggest stable coin in the world. Is that partnership, you know, will the math always make sense to you? And I guess how often do you actually renew that agreement? Yeah, so a couple things. So first of all, we have a great relationship with Coinbase. They've been such a huge partner and really bet big on this way before anyone else.

And so I think I get Brian a lot of credit for really seeing that USDC could be a fundamental part of their entire business. and really they've baked USDC into all their retail products, their institutional products, they're building new payments products around it. They're really betting, not the entire company, but they're betting a lot on it. And that's amazing. And when you think about networks that were built in the past from the 70s or the 80s or in other times, you definitely need these big anchor tenants that really bet on it and help drive the utility.

But to the degree that Coinbase has leaned in, that's really helped create demand for usage in other places. So Coinbase's largest rival, Binance, for example, is also a significant partner on this. And I think with the Genius Act passing, which I know we'll come back to, and regulatory clarity kind of happening around the world, we're entering a new chapter in all of this. We were sort of in the early adopter phase, which was really primarily anchored in like crypto trading markets and things like that. And now we're entering this kind of more mainstream phase where payment companies, banks, financial institutions, capital markets companies,

lots of consumer companies, consumer internet companies are all getting involved. And so our view is that the sort of share of the pie, as it were, is going to be more and more diversified and grow. The pie will grow and the diversity of the participants and that will grow over time as well. Real quickly, what does the Genius Act mean for your business? What changes pre and post Genius Act? So Genius Act is very significant in our view. And it's actually, in some ways, we've been arguing for kind of federal policy and regulation around this new form of electronic money to some degree since I went to the Capitol in 2013 and started articulating a regulatory view on this. But in a very significant way, really, for the last five years, we've been pushing for federal

regulation. And what that does is, first of all, it enshrines in federal law many of the things that we had made core to the way we operate. Transparency, having major audits of our firm, safety and soundness requirements. It ensures that the reserve itself is effectively a cash instrument. and it allows this to be treated as a cash instrument. And by having that federal framework, it opens up opportunities in two significant ways. I think the first is now if you're a corporation, a public corporation, or you're a financial institution, you now know what these are. You can hold these and treat these like cash on your balance sheet.

This paves the way for the use of payment stable coins in wholesale payments, retail payments, as eligible collateral on capital markets venues. it really opens up the aperture of what people can use this for, and it gives all those financial institutions and companies the clear definition and the faith that they can interact with this, and they know it's bankruptcy protected and all this good stuff. The other big thing is that, and this ties into one of the opening comments, is having this as a defined part of the U.S. financial system. So stable coin money, which in my view is a new form of M1 electronic money, Having that as a defined part of the U.S. financial system means that it can be expanded internationally in very significant ways.

Governments all around the world will be able to enact their own stable coin laws as they are, and I can talk about a dozen countries where that's the case, and they can recognize issuers that are under federal supervision in the U.S. and enable those to interact with their markets. And so it opens up the global adoption here within the regulated financial system in a very very, major way. And so for us, all of that is we view as a tailwind to have more and more people building on top of this infrastructure that we've been building. So in terms of integration with the financial system and competition with the banks, of course, you still under the Genius Act, you do not have access to the Fed's balance sheet. Is that right? That's correct. So a couple things. So one is the Genius Act doesn't sort of specify who has access to the Fed's balance sheet.

But it does say, though, is that eligible reserves in a stable coin can include cash at the Fed. It can include short-duration T-bills. It can include repo, Treasury repo facilities, et cetera. And for us as Circle, we actually just announced very recently that we had filed to establish a new entity called First National Digital Currency Bank. And First National Digital Currency Bank is in application with the OCCC to, to become a national trust bank. And under the Genius Act, as a large issuer, greater than 10 billion, you know, we're around

64 billion today. You know, we will come under OCC supervision. And so we're trying to line up the kind of infrastructure of circle against the kind of upcoming regulatory regime. And we want to make sure we've got the best underlying kind of infrastructure there for people who would build on us. So I said in the intro that my worry is that if there was ever a financial crisis that involves crypto connected. It's going to be somehow due to stable coins because I always think,

like, entities that are pegged to the dollar that deviate from the dollar, that's where you get into trouble. People think this is a dollar and suddenly it's worth 95 cents. That actually did happen to Circle in early 23 very briefly with the collapse of SVB. Could that ever happen again? Or is there a way to say this could never happen again? Well, a couple things. So secondary market trading is where we saw that. But we've... But you weren't able, the desks weren't able to keep it at a dollar. Whatever it was, that did happen. That's because the banks were seized by the federal government. And so banking was not available over that time. But nonetheless, it's a really important question. It's a fundamental question, right, which is the real question in my mind is,

is a full reserve model of money, a safer model of money than a fractional reserve model of money? And in our financial system today, we do have FDIC. for the fractional reserve banks. Now, that's for small depositors. The vast majority of deposits in the banking system are uninsured deposits. Now, some of those sit with so-called too big to fail financial institutions, therefore implicitly have the bailout power of the federal government, like we'd never let them fail. But that's sort of theoretical. You can imagine a scenario where the federal government doesn't have the balance sheet or it doesn't want to create the inflation or whatever it would be. The lack of political appetite. Lack of political appetite. I mean, that was on the

verge in the financial crisis that was jamming it through Congress, which was then challenged later. But I think, and by the way, this gets to the genesis of Circle. Like, why did I start this company? I spent a number of years, like, reading about what happened with the financial crisis. How did this happen? What is the nature of money? What is the nature of central banking? How does the international monetary system work? All of these things were fascinating to me. And I was running a completely different kind of business, which is an online video technology business. and I kind of thought intuitively that there had to be a better way. And it was actually through my kind of introduction to crypto in 2012 that I sort of saw,

hey, there might be a path here. And while a lot of people were obviously focused on Bitcoin as a full reserve sort of sound money philosophy, and I'm sure you've had plenty of people to talk about that over the years. But for me, at least, the idea of sound money of kind of having a different risk model in the financial system was very appealing to me. And in particular, this idea of fully reserved dollar digital currency. And, you know, I'm an adherent to the Chicago school and the Chicago plan, I should say, which was a particular philosophy that was advanced in the aftermath of all of the bank failures in the 1930s. And there were really two responses. There was a group of prominent economists,

some of Irving Fisher, who's at the Chicago school at the time, and there was industry. And the prominent economist said, hey, we could build a full reserve model where you have essentially government obligation money or this full reserve form of money that is in a payment type of institution, a payment bank. And then you have a separate institution which does credit. And you can only, you can't create new money out of thin air as banks do. You can only lend the full reserve money. And the philosophy there was that that would sort of reduce risk in the financial system. And it would smooth out economic cycles. And that's come and gone as a debate during the savings and loan crisis, after the great financial crisis, et cetera.

But I think the advent of digital currency in particular creates an opportunity for this that I think is really profound. And when you think about native money on the internet, so take something like USDC, which under genius sort of gets defined as this cash instrument, the reserve instruments we can discuss are those safe in the sense of financial stability safe. but you have a fully reserved instrument. What's powerful about digital currency is it inherits what I call the superpowers of the internet, meaning it inherits the speed and velocity of data on the internet. And so all of a sudden, the marginal cost of storing and moving value goes very close to zero, and money velocity can accelerate significantly. And that creates its own risks.

But this high velocity money that's moving on the internet that can move literally from any person, entity, any AI agent, any business, all these sort of machine interactions, all this stuff that happens globally, it's kind of crazy to think about having that be the underlying on that to be like a bank's stack of lending risk and to have all of these lending risk IOUs floating, free circulating on the internet. And so my view is that the base layer of money in the internet financial system, which I think is a new financial system that's being built up from the ground up, that the base layer of money needs to be this full reserve form of money that is actually safer. That begs a question of how do you do credit and all that good stuff, which I'm happy to give you

my views on. But I think the philosophy is actually, how do you do something that's actually safer, that people can look at and say, I know that this is always available. It's not that if the bank fails, I might get my FDIC insurance cap. It's like, I know what this is, and there's a prudential supervisor, and there's actually this enforced risk management, which improves and continues to improve over time. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute.

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You know, you mentioned the safety of the reserve assets. And this is something that is in the act. It kind of defines what you're supposed to hold. So things like T bills, high quality liquid assets, all that good stuff. We've been talking about a safe asset shortage in the financial system for it feels like decades now, right? It feels like there is not enough good collateral to go around for everyone. And as stable coins ramp up, I'm really curious if you're worried. about the crowning out effect, if there's going to be enough T bills in the world to satisfy that one-to-one reserve requirement? Yeah. So if it was exclusively on the basis of short-term government debt and this got to be tens of trillions of dollars or whatever, then you might have a mismatch there. Now, obviously, regulation isn't going to stand still on this. So the Genius Act is a significant piece of legislation. And it defines this framework. That framework is inclusive of cash that is over collateralized lending with repo desks. It includes T-bills of the shortest duration. And it does include cash in the financial system. And it includes eligible reserves at the Federal Reserve as

cash as well. And so over time, as this infrastructure scales, I think that mixture gives us a huge amount of capacity that I think, you know, arguably could support many tens of trillions of dollars of value. To wait, just to be clear on one specific, are you completely non-exposed to non-FDIC insured deposits? Or have you completely extricated yourself from that system? No. And in fact, let me describe what we do. And we today, by far, operate with the greatest transparency of any other stable coin,

any other regulated stable coin in the world. And we've done that through a couple of things. The first is we created a structure called the Circle Reserve Fund, which is really designed to provide transparency into the reserves. So we did that with BlackRock. And it's an SEC registered, what's called two- A.7 fund. So it's a government obligation fund. But it gives daily transparency into essentially about 90 percent of everything in the reserves. And so you can look every day. You can search

U.S.DXX. I pulled it up on my Bloomberg right now. And you can drill in and you can see exactly the serial numbers of every T bill, the short duration T bills. And we, I think we have an average maturity of about 23 days in that reserve. And Bloomberg says 13 right now, but I'm not. I don't, you know, whatever. Is that what it says? That's what it says. I'm just looking at the screen. That may in fact. I'm just looking at the screen.

That may in fact be what it is today. That's what Bloomberg says. Great. And then you can also see like the global systemically important banks that we have repo relationships with and that's there as well. So you can see that. That's about 90%. And then there's cash.

And the cash, about 98% of the cash, is held with a very limited number of global systemically important banks. And these global systemically important banks. importantly important banks are the sort of lowest credit risk kind of cash custodian type banks. And so we hold the reserves there. Now, you can argue about how safe is that cash relative to, you know, kind of shard it out across all kinds of other stuff. But that's sort of what's there today.

And we need to do that because we need intraday liquidity. We need to ensure that in the event of $5 billion, $10 billion, whatever it is, that's always available. And then there's a very, very limited amount, which we position in settlement banks and reserve accounts in different geographies to ensure that it's easy to create and redeem USDC, whether you're in Singapore or Japan or Europe and other places. We also have a separate issuance of U.S.DC and a completely separate reserve mandate and supervision in Europe as well.

So we dual issue USDC. We issue it under European rules, under the MECA Staplecoigne Statutes, and, you know, and we issue it in the United States and we have created a way for kind of fungibility across those. Is the ultimate ambition to really take on and compete with the deposit taking institutions in the sense that you want to get big corporate clients, maybe the type of clients that would put their money in uninsured, well, they have so much money. Some of it would end up being uninsured by FDIC or they might put it in a money market fund or something like that. And if you're doing that, doesn't it seem like the biggest hurdle is the lack of interest paid on stablecoins? So a couple things. I think the first is that payment stable coins, which is what the Genius Act governs.

And in fact, mirrors stable coin laws in Europe, in Japan, and in other markets that are bringing these online. These are designed to be cash instruments that are used in payments as a payment system technology. They're not designed to be risk-taking instruments that you would say deposit and lend, and they're not designed to be investment products. You're not purchasing a security. You're not purchasing an investment. And so they're narrowly defined, and Genius Act enforces that. And so I think that's the right design for this base layer kind of cash instrument. Now, that doesn't mean that you can't build digital tokens that present yield.

And while people call these stable coins, I think that term of art will probably change. People call them tokenized real world assets, tokenized money market phones, tokenized treasuries. So we operate a sizable tokenized money market fund product called USYC. And USYC is fungible with USDC. So a business, for example, could hold USYC and earn the yield that would be your typical kind of government fund type yield, but have the ability to instantly create and redeem cash and instantly create and redeem yield.

And so we acquired a company called Hashnode, and we've integrated that into our core infrastructure, and we've just brought this online. It's a very powerful structure. If you can have tokenized yield-bearing collateral and then instantly use this as cash for settlement, for trading, for spending, et cetera. And so I think that that's something that we can kind of do uniquely because we have this widely adopted payment stable coin and then kind of marrying those two together. And we can do it in a very, very capital-efficient way because essentially the reserves, of USC mirror the actual instruments in USYC. And so there's a sort of fungibility between USYC and USC reserves. So let's talk about the competitive landscape in a few years from now.

So at some point, you're going to revisit your agreement with Coinbase. Maybe JP Morgan will have a payment coin that they're going to want to be the preferred coin that sits there. And maybe they're going to be willing to give Coinbase a huge split for pride of place. Or maybe there will be some other coin that they use for interbank settlements that will be tokenized in some way to make their transfers with Citi and Bank of America and other banks more competitive. We have seen other coins rise, First Digital in Asia, for example, like if you're paying all this money to Coinbase still and, you know, distribution is so important. What is the competitive advantage that Circle has in, say, the year, I don't know, 2028? Well, I think a couple things. I think the first is that to understand Circle's business is to understand that we operate an internet scale platform and network utility.

We have very powerful internet platform flywheels and developer flywheels. We have a network that consists of thousands and thousands of products and services that have implemented and integrated to our network. And so every time a developer says, hey, I want to be able to store and move digital dollars, they choose to implement USDC because USDC, has this really broad, established network. And so we have these really powerful flywheels. And as that provides new utility to a user, when, say, New Bank in Brazil adds USC, wow, there's like 100 million people at New Bank

who can interact with USC. Now the rest of the world can benefit from that user base of 100 million people. And so we have network effects that are there, and those exist in pretty powerful ways. So if you look at the movement of stablecoin in the on-chain ecosystem, what sometimes people call defy,

We have about, I believe, today around 75% of the market there, and we've built protocols that make it very seamless, safe, and secure, and capital efficient to transmit USDC across all these different networks. So we've built developer platforms. We've built flywheels for adoption. And this is a classic internet platform model. The other is that we've built these extraordinary liquidity network effects. And this is really critical. So over the past number of years, we've built out on a regulated basis infrastructure where we're regulated and where we have integration into the financial systems of Singapore,

Hong Kong, Japan, the United Kingdom, the EU, the U.S. We've integrated into Brazil, Mexico, and we've just announced that we're coming online in UAE. So we've built out these integration points, and we've built out primary liquidity in all of these markets. And so USC is available and liquid at scale all around the market. the world. That's the primary liquidity side. And so that's crucial. If you're going to use this, you need to be able to know, I can get in, I can get out, and I can do that all around the world.

And then we've created very large secondary liquidity, and that's really important as well. So when you get down to the e-money product in Vietnam, can you go from that e-money product in Vietnam into USC and back? And all around the world, all of these different payment methods and payment instruments and the actual secondary liquidity between those and USC is huge. And so, you know, So the barrier to entry is actually fairly high. We have these large network modes. And right now... So it's not just like making a new ERC 20.

Making a new coin, the marginal value of a net new stable coin right now is effectively zero. You have to have established network utility and then liquidity at scale. And essentially, liquidity begins liquidity. Network velocity extends network velocity. And so, you know, we feel like that's a very, very good position. And I think the ability to be, you know, federally regulated. and to have these higher bars on the infrastructure side

and what's required of use is also really important. That's not something for the faint of heart. And doing that all around the world, not just in the United States. There's a lot of focus on the United States, but we've been under significant regulatory regimes and other jurisdictions for quite some time as well. Those are meaningful barriers. And I guess the bigger picture there is, like,

we're just focused on building this infrastructure, making it easy to adopt by, whether it's a technology company, a fintech company, a bank. We're building partnerships with some of the biggest core banking infrastructure companies in the world. We announced something recently with FISRV. Just yesterday, we announced a broad partnership with FIS Global. And these are companies that service tens of thousands of banks, and we're plugging USDC as an innovation into their infrastructure.

And so we even do it with the card networks, Visa and MasterC, where they're using USDC as an internal settlement system to move money from issuers back to home base, faster than the correspondent banking system. There's lots of places we're getting integrated. And what I like to say is I believe that the stable coin networks are a winner take most, not a winner take all market. This was going to be my next question. Can you talk about that a little bit more? Like 10 years from now, what does the landscape actually look like? And what is the interoperability of all these different stable coins actually look like? Yeah. So I think 10 years from now, I don't think we have any idea. what it's going to look like.

But, I mean, there's several different components to this. A real forward-looking statement. Yeah, yeah, yeah, several different components to this. So I think one is we take as a first principle that stablecoin money is the highest utility form of money that's ever been created. And it's the highest utility, not just because it has Internet superpowers of speed and it cost efficiency, but because it's actually the first truly programmable form of money. And if you're going to have a programmable form of money, where, software intermediation and software innovation on top of money has not existed. Open banking is like poor cousin. So you're introducing a new realm of money utility and we're at the very front edges of

that. And we see that already today. I mean, the entire phenomenon of defy, which is highly sophisticated market structures that are just autonomous machines effectively running in code on the internet, that's pretty amazing. So when you unleash that and you unleash that kind of curve of innovation, like, it's sort of like when mobile devices were out. People were into mobile for a really long time, and they were like, hey, mobile is going to be huge. And mobile world Congress was like the biggest conference in the world. And you'd go there and there's like, there were like 100,000 people there. And yet it all sucked. Like, like all the mobile phone devices, everything was, everything was terrible. But everyone believed in mobile. And then obviously the I

phone came. And that was the end. It wasn't the end. It was the beginning is the point, is that, like, actual innovation with programmable apps on phones actually started then in a real way. They say abs are made in the kitchen. Cool, but who has time for three hours of meal prep and a fridge full of Tupperware? That's why I started using Factor. Factor delivers fresh, never frozen, ready to eat meals that are dietitian designed for balanced science-backed nutrition. No prep, no cleanup. Just heat, eat, and move on. I've got gym days, work days, super long days, and Factor keeps me on track without slowing me down. It's real food, great flavor, and the kind of meals that actually support the work I'm putting in. We're talking chicken pesto, steak with veggies, roasted salmon,

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Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts. I had a use case recently where I wanted there to be a stable coin use case. And I think maybe this will coming. So I've tried to do vibe coding where it's like going on cursor and making software. And I wanted to link up my software to chaty BT so that it could query the AI. and to access the API, and to like enter on a credit card with Chad GPT, and then I had to like copy and paste this code. It was really annoying.

And I was like, why can't I just have my cursor be linked to a stable coin wallet? It make the connection with Chad GPT's AI so that I don't have to make an account. And it just pays per usage for the intelligence. That is definitely what's going to happen. And in fact, this is where I was getting with my point actually in response to you, Tracy, which is like we think about the internet and, Like when the marginal cost of storing and moving information went to zero, the net world output of information like Million X, or when software could be distributed to a browser, the net world

output of software was like up a million X. So we create these huge growth. So my view is that over 10 years, we're going to use your 10 year, is that the total payment volume, which is a measure that people like to use, is likely going to go up by many, many, many orders of magnitude because you've taken that cost and friction out and because of the new utility that comes from programmability. And so my own belief is that the scale of money that moves in the world will be so much larger than where we are today. It's sort of the internet infrastructure actually hitting the financial system, which is a scary thing because, like, wow, you've got all this money velocity and you've got machines that are intermediating this through AI.

He's like, oh, my God, that's one of the reasons why it needs to be very safe, full reserve instruments. But it also, I think, gets to the heart of your question, which is, are we going after all the deposits, of the banks or all this is, the answer is no, but my belief is that financial institutions who create either places where people can lend their money and then that money can be used for other investing purposes or where people actually make specific investments with their money, like those will proliferate. And in fact, I think innovation in both credit intermediation and in investable assets is about to go through a new renaissance because of blockchain's tokenization and stable.

coins. And so my own view is in a system of full reserve money, you need to be able to do credit intermediation with that full reserve money. And you need to make that credit intermediation be as efficient as possible. And I think you can build on-chain credit intermediation in a way where you have greater safety, more transparency, more auditable risk management, and you can build market structures that are far more accessible to more people and institutions in the world. I think of it as like AdWords for credit, like, you know, this sort of these super-scaled or Amazon marketplace for product creators. We haven't entered that world yet, but I think there will be firms and that many of them will likely be regulated by central banks

who are standing in that infrastructure. And so it's an opportunity to reinvent what payments, credit, investing, all these things look like. Tracy, I kind of think, by the way, and we should maybe do a separate, I think the internet, as we know it, in terms of like, internet that's free to browse is probably going to die because on a matter of time, you know, if you're like AI bot can like go search the web, those sites are going to want payment for having all of their data scrape. And, you know, stable coins could solve that. But it does feel like we're going to have a totally thing where like you don't just get to use the web for free. Everything is like metered based on the data that you're pulling. Yeah. Well, we were talking about that earlier, right?

This idea that we've already seen traffic start to collapse because the search engines are just providing AI summaries to individual pages. Yeah, how long are content providers like us? How long are they going to stand for that? I don't know. Well, can I say something on that, which is we actually work together with Coinbase and a couple of others on implementing something called X402. Now you're like, what is that?

And Mark Andreessen talks about this. He has over the years. Back in the early days of the web, you know. Oh, yeah, there you go. Pay via API without registration. That's what I want. That's what I want for my vibe code. So there it is.

What's what I'm looking. So it's actually, it already exists as a protocol that is built into the way that every web server, every web browser, every client that interacts with the internet works. It's a protocol that's there. It uses the existing HTTP transport. And now you can actually say, hey, I'm hitting my piece of content or data and I can challenge whoever's accessing it and say, you know, to get to this, you need to pay me. And it can basically come back and say, you can pay me on a blockchain with a stable coin. And so we're doing that with USDC. We're encouraging developers to do that.

There's lots of third parties that are building layers for AI agents to use this. And so I think that's one example, but I think it gets to the heart of what you're saying, which is there may be more of a subscription model. Spotify is probably the best example where you have the celestial jukebox and you pay your 15 bucks and you get access to everything. You know, there's a kind of question about could there be a celestial data box, which is more broad and where the actual consumer front ends are companies like OpenAI or Google. and you're paying a subscription, and then there's like a behind the scenes, either pro rata or usage-based model that is actually compensating the actual data providers and creators. And so lots to be unfold here, yeah.

Can I ask a slightly awkward question? It's a leading question. How much do you hate Tether, given that not only are they number one, but, you know, there's been questions over their reserve quality for many years, although I think some of their transparency has improved. But thirdly, you know, we had the Tether CEO on a few months ago, and they're expanding into the U.S. So that would seem to, you know, directly be competing with you on your sort of home turf, although I understand you're also expanding elsewhere in the world. How do you feel about Tether? Yeah, I mean, look, I think our view has always been

that we're building for the long run. And we've taken a different approach, really since inception. We've taken a sort of regulatory first approach, a compliance first approach, becoming widely licensed, widely regulated, always advocating to improve that. And that's allowed us to build obviously what we think is a great business. It's allowed us to have deep integration into the financial sector with banks. If you're a major institution partnering in this space, the probability of you doing that with circles reasonably high. And so we built a really great franchise, and we are really well known for integrity, for trustworthiness, we're a publicly traded company with the highest standards of governance and accountability that are out there. And we've always

sought to up-level that. And so my view is that if we're building a new internet financial system, and that new internet financial system is going to be this incredibly broadly used infrastructure, and it's going to be used by, like, mainstream companies and public companies and financial institutions and financial intermediaries all around the world are going to integrate with that and build on that, they're going to want to do that with trusted, well-regulated companies. And so our view is that the early adopter segment of the market, which has really been dominated by sort of the crypto-trading side of things, is that early adopter segment. We're now going into a different chapter.

And if you actually look at over the last, you know, 18 months, we've taken market share. We've taken, you know, material market share. and we're growing in many, many areas. And I would say also internationally, I would say the majority of our business now is international. So we're in many, many markets. And in many other markets as well, the regulators are putting in place very clear regulations around what stable coin issuers need to be. And so we are the only large global dollar stable coin that's legally available in Europe

as an example. And so I think we just keep doing what we're doing. I think we're building great infrastructure for companies, for enterprises, for developers, and we just got to keep doing that. And we'll grow. And this is a really significant size market. And so I actually, you know, I have a lot of respect for what they've been able to build. We took a different path.

We built something also, I think, really special. And over five years, 10 years, as we said earlier, right, this is very likely a winner-take-most, not a winner-take-all market. And I actually don't think we know, you know, if there are, you know, maybe three or five big players. I don't know what that'll be in five years or 10 years, but there's probably some that don't exist yet that will show up too. I take it as a sign of maturity. Like years ago when it came to crypto, people were just excited about number go up, right? And then now it's like people are really excited about number go sideways. And so if it just stays at one forever, that's like a really good sign.

And so I take it as a sign of maturity for the industry that there is all this interest in stable coins. Nonetheless, no pun intended. Nonetheless, you know, all those policies, Public chains are still out there and USDC is on a number of chains. 24. When we talk about like who collects the profits from this and we've talked specifically about say your distribution with Coinbase and whether that. Do you see value accruing to token holders of different chains in the future? Because it seems to me like for the most part, as long as it's like really fast and cheap,

it really doesn't matter. If I'm sending something to Tracy, I care about your reputation and your money in the bank. I don't really care about what chain that you actually transact over at the end. So if you want to do it under Solana or some layer of three that gives almost no value back to the eth chain or something like that. Yeah. I don't really care. Do you see like token holders of the public chains collecting rents in your future or collecting

a meaningful amount of rents from this on-chain commerce? It's a great question. I'd say a couple things. And I'm actually going to relate back to my mobile commentary from earlier, which is, is our mental model is that blockchain networks are internet operating systems. And they provide a way to store data, conduct transactions on that data, and provide compute around those transactions and data. That's what they do.

They're public computing machines. And there are a lot of them. There's actually thousands that have been launched. We're on 23 or 24 today. And we see this as a space that is constantly evolving. And so there's constantly innovation on the layer one. there's these layer twos. When I think about where we are relative to where we were with, say, iPhone,

we're in the pre-Iphone era of blockchain networks in my view. I think there's lots of operating systems out there, just like there were lots of mobile operating systems. And some of them got better than others and improved the user experience. Some of them started enabling consumer things. Remember, NTT docomo in Japan or things like that. And so I think that we're still really early. And so that's one of the reasons why we've really tried to make sure

we're trying to operate our own stable coin network on the best ones that are out there. It just seems to me the decentralized chains, you pay them a rent because you want some advantage of decentralization. If I'm using USDC, I've already accepted the premise of centralization. You have money in the BlackRock Fund. It's about as centralized and legacy phi as you can probably get. Once I've already accepted this premise of centralization that my money is just backed by a bank account or something like that, why do I even care? Why pay these rent to some network of computers for that network. This is a different layer is essentially my thinking, is that public blockchains are a general purpose layer that many, many applications can be built on top of.

Stablecoins are the killer app, for sure, I will say, in my own opinion. But there are many, many different kinds of applications that can be built on that. And we need innovation in those computing platforms. We need higher speed. We need greater privacy. We need better forms of compute. We need new and more primitives in that infrastructure. And that needs to expand. We need to get to a point where these public networks are supporting huge scales of consumer applications and enterprise applications. And so there's like a growth in that kind of infrastructure side of it. And those are shared infrastructures that many people can take advantage of. And so there needs to be a kind of fee model on those networks.

We've actually created a way for the fees on many of these blockchain networks to actually just be paid in USC. And so that's something that we see more of happening, that like the notion of gas fees, or the notion of gas fees in some other crypto commodity will become less and less common. And like, fees will just be paid in Stablecoin. But I think there is value in these networks. And I think that there's very likely value for token holders on these networks. If these networks provide, you know, scalable infrastructure that people can take advantage of. Again, Stablecoin is one application layer there.

And there'll be many, many other application layers on those. And so you kind of pay for the shared state. of the machine, the shared data state, the shared transaction state, the shared compute state, there's value in paying for that shared state. Just on this note, can you tell us, when you're talking to clients or potential partners, what is it that they are most interested in getting from you? Can you provide us with a sort of hierarchy of needs for, you know, USDC customers in the sense of, are they worried about the speed of the technology?

Are they worried about the reserve assets and, I guess, corporate governance? and things like that. How would you prioritize what people are actually thinking about? Well, we have a huge range of types of people that we work with from like individual developers that are creating a new product in some emerging market to, you know, people building on-chain protocols to very large, you know, financial institutions that are looking at using this or integrating this in different ways. And so the things that they, you know, care about do vary across those. But I would say trust, transparency, liquidity are really, really important to everyone, right? If I'm a developer and I'm building a product, I need to know that this is a legitimate

digital dollar, that it's accessible in the markets that I'm intending to serve, that people can easily access it and use it, and that the infrastructure is good. I can build good product experiences. I can build good user experiences and build an application or something from my own customers that works well. And so they care about the developer tooling, the on-chain infra, the liquidity, the trust. They care about all those things as a startup. But even a large company, say you're a big fintech and you're like, hey, I want to start leaning into this. I want to add stable coins for payments or I want to enable my customers to access defy or other things like that. they're going to care more about the kind of legal and compliance status of circle.

They're going to care about the governance of the company itself, but also of the underlying regulation that affects us because they have to face those same issues, whether they're in the Philippines or in Brazil or in the United States. So they care a lot about those things. And then they also care about clearly, like infrastructure readiness. Is this something like I could bring a large number of users to? And then everyone cares about user experience, right? Can I craft an experience where the crypto disappears, where I don't need to know what blockchain

I'm on, I'm on, and I don't need to know about gas fees. And I just want to create a way for, I have stored value. I want to enable people to move it around really easily. They care a lot about that, whether you're the biggest company in the world or a small startup. Jeremy Allaire, thank you so much for coming on AdLod. Thank you. My pleasure.

Probably the first crypto company I can think of that actually tried to go through the regulatory approach and didn't get destroyed and bogged down in the process. Very impressive. And yeah, great chatting with you. Thank you. Tracy, you know, one question I didn't get to ask or I forgot to ask is like the perennial like will I ever buy coffee with a stable coin at some point? Maybe I will, maybe I won't. But in the conversation, I started thinking that's probably the wrong way to think about it. It's going to be those machine to machine payments that if stable coins become a real important payments thing, it's going to be like those like computer to computer payments that have to be

seen. Right. And they're sort of plugged into the inner workings of the internet. Yeah. That makes sense. Maybe the coffee thing will happen. Who knows? But like, I don't know.

I don't find it that hard to buy a coffee right now. No, there's the thing. That's the problem. Right. Exactly. Buying Clovey is a solved problem as far as I'm concerned. Yes. But this is a new problem.

You're right. That could be solved. That's interesting. The other thing I thought was really interesting was you hit upon the sort of tension. in the decentralization versus like traditional finance and this idea that like, okay, it's all about defy and blockchain and all that stuff. But ultimately, like BlackRock is holding the money. Yeah. No, totally. This is like, you know, it goes back to the formative episodes we did with Austin Campbell, which is a big part of the story to the extent that this will be a thing is like

just solving the sort of software payments layer because we could do a million episodes on legacy text acts and why JPMorgans or whatever company's internal software will always be, they'll be spending billions of dollars upgrading it, whatever it is, and the difficulty of integrations. But if you just have like a one-off, like global platform that anyone can plug into and program where money can easily be transmitted, that's very powerful. Yeah. This is why I say user interface, user experience is underrated, right? That's like me saying Michael Jordan is underrated.

But like that really is it, right? Like that's where the battleground kind of is, the ability to like plug in and interoperate with all these different systems. Yeah. Well, I'm really excited. I think we should have a Jeremy back at something. Yeah, we should. All right. Shall we leave it there for now?

Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill Wisenthal. You can follow me at the stalwart. Follow our guest, Jeremy Allaire. He's at Jer Alair.

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