The Pomp Podcast - #1388 Jeremy Allaire | The $34 Billion Stablecoin King

Episode Date: August 1, 2024

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

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

CEO of Circle, Jeremy Allaire. In this conversation, we go over USDC. What is it? Where is it popular? Who's using it? Why are they using it? And what is the future of stablecoins going to look? These products are incredibly popular globally. They are probably the second most popular product market fit in all of crypto. And Jeremy is building the future of what stablecoins are going to look like. And today he unpacks all of the insights that he and his team have been working on for so long. I really hope you guys enjoy this conversation. Here is the episode with Jeremy Allaire. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.

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Jeremy, I thought a great place to start the conversation is stable coins, in my opinion, are the second most popular product in all of crypto. You've got Bitcoin and then stable coins seem to have this like perfect product market fit. They're spreading like wildfire globally. I thought maybe you could just help me understand like, who is using these products? Where are the most popular places around the world? And what are people doing with these stablecoins? Yeah, I mean, it's been fascinating to see the evolution, right? When we conceptualize USDC back in 2017, you know, the idea was we could take, you know, what we think of as a dollar, we could have a token-based version of that, and that it would be this kind of open protocol for

dollars on the internet and and eventually you know every wallet everywhere in the world would have access to this and could transact in this and our vision was that it would it would be something that would be accessible you know way beyond sort of crypto traders right which is that was the bootstrap use case that we're all so familiar with which is if you've got a 24 7 market that operates on chain operates on blockchains you need 24 7 you know digital cash right so that was sort of the to go alongside those markets so that was sort of the bootstrap you case use case but the the vision has always been that um basically any form of utility for dollars in the world um will ultimately um be you know substituted with digital currency dollars in in this form

and so it's always from my perspective been a question of of when not if what's been fascinating to watch is over the past few years, so we've been at this for over six years with USDC. We've been working on digital fiat on blockchains for about 11 years, but USDC specifically for over six years. The last few years, we've just started to see this really interesting shift. And if you track my Twitter feed, you'll see me kind of retweeting all the time about all these new uses that are going on. And it's incredible. It's across the board. It's everything from peer-to-peer transactions to an incredible amount of growth in international transactions. So B2B and B2C payroll models. We've seen in the past couple of years in particular,

we've seen proliferation in countries all around the world where people want to store value. They don't want to store value in Bitcoin because it's too volatile. They don't want to store value in their local currencies because they're too volatile. They want to store value in dollars, in digital dollars. And so USDC as a store of value has been growing. And so we see demand throughout Latin America, Asia, Africa, in many, many places. And so that's been fascinating to see. And we're seeing families who are using it in flexible ways.

They've got savings versions where they'll take their USDC and they'll apply some of it into like an Aave protocol to get, you know, 5% or 10%, you know, yield. We see, you know, we see people who are in many cases, small and medium enterprises. This is one of the areas we're seeing really interesting growth, small and medium enterprises in international markets that are preferring to settle transactions in USDC, certainly compared to their existing system. imagine you're a a buyer of of goods in say brazil and you're buying from a supplier say in vietnam or wherever that is somewhere else in the traditional financial system right you've got to go from one currency into dollars through the correspondent banking system with fx charges time delays then come back into another currency uh that you know has more fees and often settlement time delays to ultimately you know settle that but if you can basically say hey

i got a wallet you got a wallet just send me usdc it settles instantly it's like settles faster than a wire it settles instantly you're holding digital dollars which is you prefer to hold on as opposed to you know some of these other currencies and so it has this immense utility and so So what's fascinating to me is, you know, with these kinds of phenomenon, it's oftentimes like the end users and the SMEs that are at the forefront of driving new Internet technology adoption. It's not the large corporations, right? The large corporations have these big compliance departments and they've got, you know, these finance and accounting organizations that are like, I don't know what this is. I don't know if we can do this. But it's the SMEs who are agile and who can make decisions and move quickly and are comfortable adopting these new technologies, whether that was CRM technology like Salesforce or, you know, you pick it or AWS.

That was all startups originally. It wasn't, you know, the CIA putting stuff in the cloud, right? So you have this phenomenon. And so we're seeing just these proliferation of all these use cases. There's many, many more that we could talk about. But and it's, you know, from my perspective, though, it's still, you know, we're still in the very early stages of this when you think about the ultimate scale that this can have. So there was a transition from kind of physical dollars to I'll call them electronic dollars, right? Obviously, physical dollars have some advantages around anonymity.

I can literally just pay it to you without any sort of transaction fee, you know, in person. But the world definitely wanted the electronic version. And there was this massive adoption and proliferation of US dollars globally when that technology shift happened. Is this just an extension of that? And really, it's the technology shift is allowing more people to get access to dollars that already wanted it. And you aren't necessarily having to go convince people, hey, you want dollars. It's just now the access and the empowerment of unsatisfied demand that existed globally. Yeah, it's interesting. I like the way you're framing it. And I would sort of add to that a couple of things. So the dollar has product market fit. Okay. So like dollar's got product market fit, which is, you know, stability and network effects, right? The dollar has network effects because people understand what it is and they're willing to like denominate contracts in it and settle in it, et cetera. The internet also has product market fit.

Everyone understands, wow, the internet, if I have a laptop or if I have a mobile device and I have software, I can do more with that. And so really what we're talking about is internet native technology architectures and merging with the dollar. And so you have these two things that have immense product market fit, and you're making them more natively bound together.

And so in some ways, that's at the heart of what's happening with this new internet financial system that's being built. But I think we think about this in terms of how do we improve the global financial system? How do we actually even improve the utility of the dollar itself? And, you know, what got me into this whole space, you know, almost 12 years ago was my own journey in trying to understand the roots of the great financial crisis that took place. And I wanted to understand, you know, where did all this risk come from? Why was that risk so opaque? what was the role of central banks of monetary policy of and the kind of structure of the international monetary system this was well before you know uh i knew anything about bitcoin or

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

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

taking it and they're fractionally reserving it and they're making loans like 10 times over your money. So stable coins are safer, right? They're designed to be full reserve. So one is a safer base unit, right? So that's key. And then the second is compared to existing electronic dollars, if you want to think about that, that instead of sort of these closed networks that are proprietary and and closed networks that are you know kind of you know literally run on kind of proprietary hardware software uh etc what if instead you had open networks and you had open protocols and you had permissionless access and which is what the internet is that's why this merging of the internet with dollars this concept is so powerful is that

what makes this kind of electronic money so different is that it is internet native. It takes the DNA of the internet, open networks, open access, interoperability, open protocols, open source software. Like this is the material of the internet that makes the internet so powerful. When Marc Andreessen says software eats the world, it's that DNA. It's that capability that keeps consuming utility after utility after utility. And so it's that when you take that and combine it with this sort of very safe, full reserve instrument, then you have digital dollars with internet superpowers. And that's where the product market fit is like the end user, they're not thinking about this, right? Your friend in Columbia, you know, is not thinking

about all of this, but they are like, I got an Android device. Someone told me to download, you know, phantom wallet or whatever it is. And they sent me, you know, 25 USDC and I just received it instantly. And then I'm now transacting with others and I can get an interest rate and I can do these things. And it just works the same way that my WhatsApp works. It works the same way that these other things work. So for them, it's just like, of course, this is better. Like, Of course, this is better. And so we're breaking away from closed legacy systems where the risk in those is the opaque bank lending IOU risk. And we're moving to more open, accessible, efficient, and safer monetary units that can move on these networks.

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

So how do you all think about regulation intersecting with kind of these open networks and maybe capturing as much of the open network value as you can, but obviously still operating within a regulated environment and kind of, you know, fulfilling the requirements there? Yeah. So there's a lot in that question. You know, I think there are a few things. I think on the open network side, the first part of the openness is that, you know, it's sort of like the web. Like anyone can put a piece of content on the web, right? Now, if you are in a country and you put a piece of content on the web and it's illegal content, then like you're breaking the law, right? And so there are enforcement. The ISP might have to do something or the platform that

hosts the content might have to do something or whatnot. So there are laws on open networks and get enforced all the time and the internet had to had to deal with this right um you know it was like we're recording and publishing right now uh you know this this audio and this video and it's it's going to be accessible to basically everyone in the world that has an internet connection you know 25 years ago or whatever that was like that was pretty inconceivable because there were laws and regulations in almost every country that said you need to get a license to put audio content in front of the people of my country you need to get a different license if you want to put video content in front of people in my country and guess what society decided universally

everywhere that they wanted open access to information now there's great firewalls there's other mechanisms of censorship that exist but fundamentally society voted and policy makers were responsive to the society's will and and so i believe policy responds to social utility and what and what what what the masses of people and not just like individuals but like business society all these things respond to and so when i think about the innovation of crypto assets the innovation of public blockchains the innovation of digital currency i think we're in a similar kind adoption curve, where the utility is very clear. For people, the utility is very clear. But there are illegal uses. There are illegal activities. There are people who are trying to

hide money, evade taxes, fund terrorism. We can't ignore that fact. And so we do, there is this kind of social contract that exists between people who kind of intermediate money and and and sort of like this kind of obligation to try and not allow illegal things to happen so so my view is there's an opportunity in this space to actually materially improve the way that we deal with that right people obviously talk about like blockchain analytics and you know how how the the actual lack of anonymity and so on but there's other things privacy technology the cryptography zero knowledge proofs uh and fully homomorphic encryption these sort of advances in cryptography are are going to are going to make it possible to have highly

private transactions but with the ability if needed to to allow an auditor or allow a third party to kind of know what's happened and um and and with identity similarly like the the models for kyc and the models for um uh kind of record keeping uh for transactions that move money right the bsa kind of aml regime and its updates through the patriot act in the united states at least that there's real progress that can be made to to deal with some of the risks that exist there but do it in a way where we don't have to give up uh as much uh as much information to as many people because part of the problem with the current financial system is that the way it works is essentially every financial institution you deal with is basically behind the scenes

sending around records of you and all your personal information it's just proliferating all around the world which creates honeypots of data uh and um and and there's ways to improve that so i guess there's a long-winded way of saying um there have to be rules for intermediaries and and broadly that's what's happening worldwide vasps or virtual asset service providers crypto asset service providers the different acronyms around the world they have obligations they have obligations to know their customers they have obligations to to to determine and detect if they're doing something that is is perceived to be illegal they have an obligation to report these things and there's new technology that is i think going to improve how we can transact safely

efficiently privately but still get the benefits of an open network still get the benefits of vast interoperability around the world, still get the benefits of programmable money, on-chain protocols that interact with that money. We can get all of those benefits while also kind of improving on these kind of compliance models in a way which better reflects society's needs. One of the most fascinating developments, I think, in the traditional financial world over the last decade or so is the compliance programs. And obviously, there's been much more onerous requirements put on these banks in particular.

But in recent years, we've seen reports that very large popular banks had Mexican drug cartels laundering money through their bank, etc. And so people say, hey, you've become more onerous on the compliance side. In terms of the requirement of the bank, they've obviously had to hire an incredible amount of people. They've had to build out all these systems. But you didn't stop actually the money laundering, etc. And so as you dig deeper into that problem, sometimes what you will see is the bank will say, well, we have reported every potential fraudulent or criminal action to whatever the required reporting agency is. It's just there's so many of them that it's impossible for them to go through every single one. And so obviously some are going to kind of fall through the cracks.

And I think the critique of maybe the legacy kind of banking compliance programs is they are incentivized to report as many as possible, which makes it very hard to kind of decipher signal from noise. How do you think about when everything is on a blockchain kind of in the crypto world? I think one of the promises is that everything is available, right, kind of publicly. And so anyone could audit from anywhere in the world, but also there may be ways to use technology and automation and AI and kind of machine learning to, you know, figure this out maybe in a more optimized way to actually stop bad people from doing bad things rather than just like kind of cover your ass and, hey, we reported 10,000 transactions yesterday. So like, you know, we're good. Yeah. I mean, there's a lot we could talk about here. I think the systems for kind of analyzing and understanding financial crime in the existing financial system are not very sophisticated.

We've heard the data from Interpol and others that 98% of money laundering in the banking system goes undetected. That's a vast amount. I think the last time I heard the estimate, it was like $2 trillion a year of money laundered through the banking system. So it's clearly not working at that level. I think in a world where more activity moves on chain, where stored value, payments, corporate treasuries, working capital, capital market transactions, where more and more activity moves on chain.

We will have vastly better technology for both privacy and compliance. And that's like the holy grail. It's like, how do we actually improve the amount of privacy that we have today, but also make the kind of compliance effectiveness stronger? And this is going to be a major area for policymakers in the coming decade. and um you know there's there's there's also a lot of danger and you know one of the biggest criticisms of you know uh of central bank digital currency concepts is like i don't want the government in my pocket i don't want the government having like a real-time feed of every single thing

that i'm doing no matter what assurances they give i think it's really interesting in china where China has built a central bank digital currency. And China has absolute power. Like they can kind of tell people what to do. They've made this available and they've mandated that different kind of banks and wallet apps have it as available, but no one uses it.

And you have to ask, why does no one use it? I think there's two reasons. One is they don't actually trust their government. They don't actually want to transact in a medium that they fully understand is not private, right? The second is private sector innovators are innovating with technology and software so much faster, so much continuously

that there's just no way that that technology can keep up. So, but on this issue, say back here, home base, I think that this kind of nexus of kind of privacy and compliance is going to be a major issue. And I think just like with internet communications, which in the end allowed for a far freer world of information exchange, information publishing, information access, free communications, like we will be towards that end of the spectrum with money. I firmly believe that we will. And I think that society will demand that. They'll say, this is better. This is better for us. It's better for our families. It's better

for businesses. It's better for our capital markets. They will go there. And we're going to have to come up with ways of dealing with kind of financial crimes related issues that also don't create these giant back doors of government having total observation of everything. Because that is a dangerous state of affairs. We don't know who's going to be in charge in any government, anywhere, at any time. You see the incredible range of political strife that's happening in countries around the world. You can have an authoritarian government that pops up, that decides, I don't care what the justice system says. I don't care what the laws are on the books. I control the Supreme Court. I'm going to do what I want to do to maintain power.

And we have to defend against that. We really have to defend against that. And I believe that this technology can help us defend against that. But we also do need to build systems that make it harder for criminals to act. So it's maybe a lot to ask for. Yeah, USDC is a regulated stable coin. I have heard from people in the United States, they want to use USDC because it is regulated.

That is a positive that attracts them to it. Almost the regulatory status is a magnet for usage in the United States. I have also anecdotally heard from people outside of the United States, particularly in developing nations. I don't wanna use USDC because it is regulated. They view it as like the US government coin.

Now, it's always hard to tell because you get kind of anecdotes on both sides. I would say that most people I interact with on a day-to-day basis, like the regulation, they think that it's a kind of a competitive advantage and stable. But I got to imagine that those anecdotes, there are people globally that say,

hey we don't want the regulated thing we want a fully open system that doesn't have kind of the government oversight is that subset of the global population just somebody that you say hey you know we're not going to be the product for every user and so let's go focus on the one who want the regulated stuff or do you think that there's a world where uh you can kind of convince that you know subset of user base actually that maybe the usdc and the regulatory status are for them you know as well i mean our view is if if if we want this technology to be used broadly in society if we want households to depend on it for their savings if we want businesses to make it a primary way that they hold working capital and transact if we want capital markets which consume

the most utility of money today, to use it in investments and lending and trading and the like. We want all those things to happen. You've got hundreds of trillions of dollars of activity that happens in the existing financial system. Within that existing financial system, with that hundreds of trillions of activity, the hundred trillion of legal electronic money that's out there, the multiple hundreds of trillions in debt and equity capital markets transactions, and on and on within those hundreds of trillions all of that is done with legal electronic money okay so i believe the market for legal electronic money that's utilized in this infrastructure is vast that's the market that i'm focused on i'm very focused on that and i think that what we're

seeing out in the in the world is actually very consistent with that view which is that when people learn oh usdc is fully backed and is and is audited by a big four auditing firm and is supervised by regulators to make sure that it is doing things all properly uh that you know it's it's actually held with the largest custodian bank in the world uh that the actual you know management of say the t-bills that back it are managed by the largest asset management company in the world and you know when when people learn that and understand what that means they're like that is absolutely the best product i want to use that that feels like the safest that feels like it's going to be the most liquid it feels like it's going to be here

it's going to have staying power and so everywhere you see a mainstream payments company visa stripe mastercard world pay or a mainstream trad5 player like blackrock franklin templeton you know these other players the one stable coin that they're using is usdc and in these emerging markets like i cannot tell you how many hundreds if not thousands of startups that are working with with usdc to build products and services in every country of africa every country in latin america every country in southeast asia because there's so much demand for wanting to use a technology like this so i think that that's important that's always been our view and i think that if you look at the existing market the hundreds of trillions of dollars of value that move in the existing

system that uses legal electronic money i think we can grow we have a lot of room to grow there um there may be there may be other markets uh that uh that we can't serve uh and and that that very well may be the case um and uh and that's okay because the the mainstream market is very large five years ago i went on cnbc and they asked me you know what was one of the most important things from a milestone basis in crypto and at the time china was talking about a cbdc and so i was beating the table saying the united states should tokenize the us dollar and the thought process was if you are sitting in a country where you don't want your local currency uh you would like us dollars but if it's hard to get could be dangerous could be expensive and you could

simply go on the internet and buy another nation state currency that had some stability to it you would then go towards that and so if china had one in the united states did not obviously people would start to uh onboard there um and so it was really a dollar access or dollar uh kind of permanent um thought process the united states government did not do that you guys did tether did right there these stable coins now have uh furthered the american dollar kind of of adoption globally. But obviously, the U.S. government now is faced with maybe not a choice, but definitely some thinking around we have private companies that are tokenizing our dollar. They are driving that U.S. dollar adoption. Should we as the U.S. government get into that game?

Should this be a kind of government-oriented thing? Now, how do you think about, one, do you think the government will do that? But also, two, if they were to do that, is that a competitive thing? Is that all like all boots rise together and it's just validating what you all are doing? How do you kind of look at the government's role here on a potential central bank digital currency? Or, you know, maybe they just partner and they say, hey, we want to work with you guys and make this even more popular. Yeah, I think a couple of things. I think they're sort of like, what is the actual kind of technology architecture of the dollar? What is the role of the U.S. government in that versus the private sector? And then what is the

what is the actual what is the us government actually doing right now in this space and so you know maybe first just when you think about the the technology architecture that that that is that the dollar is today um at the core there's like a centralized database server it's probably new jersey uh or somewhere near the new york fed um and it's like an oracle database and it has records uh of like the the assets uh that are reserve assets for for banks but basically that is that that that electronic database is is sort of the that is the the record of the dollar right and so um the most of the dollars though that we interact with we're not actually logging into that database like you and i don't have access to that but there are um you know basically banks who have

fed master accounts so those banks have access through apis have access through like ftp servers that pass around text files it's super exciting um uh you know basically have the ability to kind of um you know access that but what actually they're doing is they maintain their own separate databases so they run their own you know probably oracle databases and those oracle databases they're actually able to create money so you know they they they have say a hundred dollars from you they actually create a thousand dollars like they make new records themselves so the vast majority 95 of the electronic money in circulation is privately intermediated privately issued and most of its debt money it's issued uh in that way but it's fundamentally you know the the the

model that exists in almost every part of the world um uh but in the us in particular is is that the private sector is is the intermediary of electronic money to the public and um and and that that's important philosophically uh and i think that that exists there now on top of those databases that are run inside those banks then you have a whole bunch of other technologies like you You have interbank ledger systems. You have credit card networks. You have different ways to tokenize money in the form of what we think of as tokenized money,

like your token that represents your Apple Pay credential, your card credential. So you have these kind of layers. So that's sort of like the technology architecture of the dollar today. Now, my view is that what makes the Western system economic and sort of market system so powerful is that it's built on open, competitive free markets, private sector innovation, driven by entrepreneurs, driven by capital investment. And we've seen an incredible, incredible track record of great American companies building great technology products that lead the world. And the role of the U.S. government is to set the rules.

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

And so the number one thing that the US government can do is lay down the rules of the road and let the private sector compete and innovate. And that is, in fact, what US government policy is. The priority of the United States government, the priority of the Federal Reserve, of the US Treasury Department, and of Congress is to enact payment stablecoin laws that basically enshrine this new form of full reserve digital dollar money that can be privately issued. safely regulated and supervised including under federal reserve supervisory standards and let that grow and scale and and i think that that is the official policy today and that is what's being worked on by policy makers and i think that's a great outcome um and i think that will lead to um you know an enormous amount of of competitive uh innovation uh in the space how do you think about um tether right uh we saw the bitcoin conference some folks were trying to pit tether and usdc against each other um on one hand uh you both have dollar stable coins that's the majority of the assets uh on the other hand i think people

perceive that you're taking out of different strategies on how you're going to compete in the marketplace so um what's kind of like the internal conversation of uh tether usdc and maybe pros cons or competitive dynamics yeah i mean look i have a huge amount of respect for for tether and what they've built they've built an incredible business in many respects um you know and you know they built it in in in the way that they've built it um and so i think you know that's there i'm focused on the the infrastructure that we need to build to realize the vision that we have for an internet financial system the blockchain infrastructure that's going to make this work at scale for consumers around the world the the development platforms that are going to make

programmable money a reality for tens of thousands and eventually hundreds of thousands of developers and enterprises around the world the deep integration into financial systems around the world the deep integration into banking systems around the world and working with governments around the world to to ensure that this can be treated as legal electronic money so we can go after those multi hundred trillion dollar markets right that's what i'm focused on that's what i've always been focused on and i think that we can build a great business doing that um tether recently reported first half uh financials like 5.2 billion in profit in the first half of the year uh you all have a very similar if not you know almost the exact same

business model. And so as assets rise, you guys take that capital, you put it into treasuries. It's a good time to be doing that, right? Interest rates are high. How do you think about your financial performance and its relationship to interest rates in a world where when interest rates come down, is that a headwind for the business in a world where maybe stocks will go up or asset appreciation occurs? But for you guys, actually, you're better off with higher interest rates or is there some other calculation? So I think about it differently. So in kind of banking and monetary theory, interest rates and what the Fed is doing when they set an interest rate is they're trying to set the price of money. And effectively, if they want to slow down

economic activity, they kind of increase that interest rate. So they're increasing the price of money that naturally will like slow down economic activity. And so for people who happen to just have cash, they're not doing something with that. That gives them some economic benefit over time. But when interest rates are reduced or they come down, maybe down to zero or maybe down to 3% or whatever that is, as interest rates come down,

what the goal is to stimulate economic activity. And there's a measure of that. That's kind of what central bankers talk about as money multipliers, which is the velocity of money. And so in a lower interest rate environment, there's higher money velocity, which means that there's more capital being put to work, that money that's, quote unquote, on the sidelines is put to use. It's invested. It's invested in assets that people hope will rise in value, in companies that will produce more profits, in all this kind of thing. And so stablecoin money like USDC is, I believe, some of the highest velocity money that exists in the world.

It has some of the highest utility of any money that exists in the world. And as it becomes legal electronic money in most parts of the world, its ability to be used in the real economy will expand very significantly. And so my own view is that. as interest rates decline the demand for stable coins is going to surge and and that we're going

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

rate might be two and a half, three percent. And that might be kind of the optimal environment where you get this super high velocity and you actually see a lot of growth. So I'm quite bullish about declining interest rates. It's obvious that as like market cap of USDC goes up, there's more assets, wherever interest rates are, you're kind of making money. Do you guys make more money given a higher velocity or like higher turnover or transaction volume? Or is it just simply like market cap is the way people should think about it? Yeah. So the kind of conceptual model to think about Circle is, you know, we operate a stablecoin network and our stablecoin network is a platform and a utility that is generally available on the internet. And so there's the collection of

protocols that we operate. We have the smart contracts that are our stablecoin protocols. We have the cross-chain transfer protocol, which enables for seamless transactions of USDC between different blockchain networks. We have, you know, utilities that we're building to facilitate, you know, gas fee payments in stablecoins. We've got, you know, kind of wallet as a service infrastructure to basically embed stablecoin transaction capabilities in consumer applications, enterprise applications. So we have this whole stack that makes up the stablecoin network.

And it's a platform that we try and get developers to build with. Developers can build anything that they can imagine with this. And so there's sort of the open internet, you know, kind of model and people build with it. So we want to grow our stablecoin network to be the largest and most actively used in the world. And, you know, right now there are, you know, there are more on-chain transactions done with USDC than any other stablecoin.

So we have the most activity on-chain and we feel really good about our ability to grow that. We don't monetize any of the activity on the network. We don't monetize any of the transactions or other things that happen on the network. We do monetize some of the developer utilities that people use. And so that is a different income stream for us that is discreet from the kind of reserves uh that we manage um but i think you know as a as a company right we're building a lot of new products and services uh we keep rolling those out um and we we're thinking about a lot of different ways that we can grow our revenue um you know from new products in the future as well various blockchains have different levels of popularity um you know one of the shocking stats

i think over the last couple years was how popular uh tron had become as a stablecoin blockchain where do you all see usdc being kind of most popular today from a blockchain standpoint and then is there any that are fast growing or you think you know could become much more popular in the future but you haven't realized yet so yeah historically you know ethereum was the the major chain for usdc and and now you know we've seen really fast growth um from some competing layer one blockchains like solana solana has had extraordinary growth with usdc i mean it's it's it's been it's been incredible has it passed ethereum um by some measures yes um so there's some noise in that data so i'm not the expert i'm not going to attempt to comment on that but it's

been it's been extraordinary the the growth there but we're also seeing the you know the fastest growing um you know layer two blockchain with usdc right now is is the base blockchain that coinbase has launched and that's growing on a lot of different metrics um but also other major layer twos uh you know our arbitrum uh has has grown a lot uh zk sync avalanche is another layer one near protocol has had some recent really significant growth so you know there are a lot of areas where we're seeing really interesting growth i think our view is we're still in the early days of blockchain network innovation blockchain networks are kind of like competing operating systems that are, you know, competing for speed, scalability, other features.

And so there's a lot of competition there. And we want to make sure if there's a compelling new platform that needs digital dollars, that we can build partnerships with these networks and these ecosystems to bring our protocols to those networks. And, you know, I think you'll see more and more of that from us because we, again, we think it's early days. and yeah i like to use the analogy of of netflix um it's it's an interesting one i used to be an online video guy uh before i was into uh all this crypto stuff and you know netflix is what people

call over the top you know video over the top television right you don't need your cable you just go over the top the internet and you just you have the netflix app right and in some ways like stable coins are like over the top money right it's sort of like you just have this money it it goes over the top of the internet and so on. But, you know, just like with Netflix, right, where, you know, there's just been mass proliferation of devices like that, that screen right over there, these devices here, like literally there are thousands of different device platforms that want to have Netflix, right? Because if you build a screen, like, and it doesn't have Netflix on it, whether you're a car or a refrigerator or, you know, a TV set,

right you're at a disadvantage you need to have netflix and so netflix has an enormous enormous product engineering effort to make sure that the netflix app is everywhere that people want it and they have to maintain that too by the way like you know that samsung tv that you bought 10 years ago that has netflix on it it's still got to work and so we're building the capacity to make sure that usdc eurc cctp these protocols that make our stablecoin network work that we can bring them to all these platforms we can make sure that we've got that kind of cross-platform reach and that no matter where users show up to interact with an app or transact that we're there and so we have a fairly significant commitment to continuing to build in this space and

and while there there will be you know larger winners in the blockchain space there'll be you know uh network effects and other things we think that that innovation is is not slowing down and certainly in a world where you know the entire user base of the internet is on chain um and and using a wide array of different on-chain applications not just financial but you know in gaming and social and identity and all these other areas right the the blockchain infrastructure of today is not going to be the blockchain infrastructure of of tomorrow what about geography so there's certain countries where you're seeing you know kind of a very impressive growth or maybe geographies that we wouldn't think of but they have become very big users

of these stable coins yeah i mean it's it's it's sort of it's amazing um so you know the significant majority of of of of usdc adoptions is outside the us um i think greater than 70 percent um is outside the us uh we see um you know strong growth in emerging markets all around the world there's also fairly strong growth in developed markets in in asia as well so it's a mixture of developed and emerging markets but we absolutely see uh we're seeing really interesting growth happening uh in emerging markets in particular yeah now um my last question for you i think is kind of about the long-term vision and kind of how big you know this all is um on twitter you retweet lots of stuff of kind of what people are using this for

uh i have seen everything from kind of traditional payments and uh kind of adoption to you know on chain insurance where this is you know the the kind of uh um you know currency of choice how do you think about um you know if you sit down you say 10 20 years from now this is what it's going to look like like what is that world yeah so i think we're in the super early days um and and and so which is exciting because it's already kind of big right but it's it's exciting it's super super early days and i i think about this in a couple ways i think the first is you have a currently a total addressable market of about 100 trillion dollars of legal electronic money Most of that is bank intermediated electronic money.

And so I do believe that stablecoin money, this full reserve kind of stablecoin money that has internet scale utility, programmability, like we'll take a larger and larger share of that over time. I have to use sort of the growth of other internet utilities as a proxy to think about the growth that could happen here. So it took 20 years for online video to reach even 15% of video viewing hours. 85% is still terrestrial broadcast cable satellite.

It took 30 years for e-commerce to reach something like 25% of retail sales. So it takes a long time. but if in 10 years if in 10 years five percent of the of the of the global market of electronic money with stablecoin money that would be extraordinary right and and that seems that seems very achievable i think the unpredictable part is and the exciting part is is twofold one is that in all these other areas where internet utilities software powered internet utilities kind of took hold oftentimes they kind of reduced the marginal cost of say storing and

moving information or or or communications or publishing media they kind of brought the marginal cost to zero and and as the marginal cost of storing and moving information moved to zero the net world output of information and communications and media like million x is like it exploded and so i believe the same principle is going to apply here with blockchain networks and stable coins the marginal cost of storing and moving value is approaching zero and when that happens the the velocity of money is going to increase orders of magnitude and so the demand for that will grow far larger than the demand that we've had in the legacy system I don't know exactly what that means, but I know it means that the total addressable market of

money will actually be a lot bigger because we've restructured the actual economics of how this works. The other thing that's exciting, which is also unpredictable, is we've never had programmable money. We've never had programmable composable protocols of money. We've never had something like that. And it's kind of like if you think back to when the iPhone came out and the first smartphone came out, like the first smartphone that people could build on, no one actually knew what you were going to be able to do with that. There are all these ideas about mobile, mobile this, mobile that, and you could kind of conceptualize them. But then once you actually had a surface and 3G bandwidth and these kind of hardware capabilities, like entrepreneurs,

developers came in and invented millions and millions of applications that have changed the world. So many of these have changed the world and opened up possibilities that we never knew were there. Programmable money is the same, right? When entrepreneurs and developers get their hands on programmable, composable money on the internet, they're going to build things that create utility for money that have never existed before. We can't think of them right now. That's exciting. And so it's that kind of velocity of use and then it's the kind of hyper utility that we can't even see yet that's so exciting. And so from my perspective, you know, that's what we want to be part of over the next 5, 10, 15 years is just fostering that and growing that and hopefully, you know, building something that is really valuable for society. I think you guys have a great head start. So I'm cheering for you and hope that you guys are

even more successful than you think you will be. So thanks so much for doing this. We'll do it again in the future. Thank you, Pom.