The Pomp Podcast - Jeremy Allaire, CEO of Circle: Circle's Place In Crypto

Episode Date: March 4, 2019

Jeremy Allaire is the CEO of Circle, one of the most well respected crypto incumbents. In this conversation, Jeremy and Anthony Pompliano discuss Jeremy's experience taking numerous companies public, the similarities he sees with the dot-com bubble, how he has built Circle, and why he's so bullish on Tokenized Assets. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Jeremy Allaire is the CEO of Circle, one of the most well-respected crypto incumbents. In this conversation, we discuss Jeremy's experience taking numerous companies public, the similarities he sees with the dot-com bubble, how he has built Circle, and why he is so bullish on tokenized assets. This wide-ranging conversation was both fun and educational for me. I hope you enjoy it too. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions

and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys, lots to cover today. We've got Jeremy here. We've got some news to go over that they recently announced. They've got a fairly large business and he's going to tell us a little bit about how he's built that. So thank you very much for coming, sir. Thanks, Pom. Great to be here.

Absolutely. This isn't your first rodeo. You've built a number of companies previously and stuff. Maybe just walk us through kind of background and some of the things you did previously so that you can kind of talk through that stuff. Yeah, sure. Yeah. So I I've been in the Internet industry, Internet tech industry since the early 90s. And so when I was in college, you know, really starting in 1990, I got really excited and involved in in the Internet. And when I graduated college in 1993, there was I had a liberal arts degree. So that wasn't in and of itself like philosophy and political science wasn't that useful for getting a job during a recession. So but I had I had become basically like an Internet ideologue and it's been all my time with that. And so I I sort of decided I wanted to, you know, become like an Internet consultant and build a consulting business. And that led to developing a whole set of ideas for how you could actually build interactive software on the Internet.

so prior to the fall of 93 there were no web browsers um and so the first web browser came out in the fall of 1993 which was mcsa mosaic it was technically the second web browser but the first sort of graphical web browser and i very quickly became convinced that this could be used to actually build interactive online services Back then, it was sort of like people were putting brochures on the Internet. But I got really excited about this idea that the decentralized Internet with an open protocol layer like HTTP and HTML would make it possible to actually allow anyone in the world with an idea and, say, a little bit of time and money to create an online service that could be accessed by anyone with an Internet connection. So we started with my brother, with some other friends out of college, our first company, Allaire Corp., and basically built a product called ColdFusion, which became wildly popular as one of the first programming languages and development tools for building interactive applications delivered through web browsers. So, what people call software as a service today, it was sort of you could build these kinds of interactive apps.

And that business, you know, we were just out of college, didn't know what we were doing. You know, really eventually we raised venture capital and we grew it to, you know, literally, you know, hundreds of thousands of businesses using this really broadly adopted technology. And it was basically we built out a portfolio of like what are called app servers, programming languages, development tools, content management systems, sort of all the kind of core building blocks for that that phase of, you know, interactive software and content on the Web. And that was a public company. We we grew it and were public for a couple of years. And then after the bubble burst, we ended up merging it with a larger internet software company called Macromedia. And I became the chief technology officer at Macromedia. And the big agenda there, which you probably remember, was Flash.

And so as a combined company, we had about half a billion in revenue and many, many millions of customers. But, you know, the Flash Player became the most widely distributed piece of software in the history of computing, like 98% of computers had it. And for us, that was really about how can we create a layer of customer experience on the internet, which could really bring a really high fidelity of kind of software, media, video kind of experiences. And so we built a whole platform around that. And that was very, very successful. But I got really excited at the time about the idea that open decentralized networks could be used to distribute video. And that the sort of centralized models of video distribution, which were things like cable and satellite, would essentially be Internet TV. and internet TV would be anyone could publish anywhere in the world. And, you know, even brands would themselves become video publishers. And so I ended up leaving and incubated a company

and started another company called Brightcove. And basically Brightcove is an online video platform. And it's now I think the most widely adopted kind of white label online video platform Grew that business, took that company public. It's still a publicly traded company, significant all around the world. And that sort of was the second business. And then in 2012, this gets to the crypto piece, it became mildly obsessed with crypto. and um and then in early 2013 sean neville and myself co-founded uh circle um but i i think the interesting like the thread that you can kind of run through all this is that i've always been

interested in the idea that the internet is this open permissionless decentralized infrastructure and that you can layer kind of software protocols on top of it and those software protocols allow you to kind of reconstruct how kind of fundamental aspects of society works. And that was always inspired me with the prior businesses. And I think given my background in political economy, which was what I studied, Bitcoin was just mind expanding because it really connected a lot of dots for me. And it was very obvious to me right away that this was the kernel of kind of a missing layer of infrastructure that the internet really has needed for 25 years. And, you know, Sean and I, of course, obsessed, went down the rabbit hole and really started to think about the implications

of this, where this might go, how the technology might evolve, what kinds of products and services and fundamentally what could be different about the world for humans everywhere? How could we think about the organization of the world economy differently, given the idea of open, permissionless money and open, permissionless financial contracts. And those ideas were so powerful that we felt like the first 20 years of the internet, the web, communications, all that was really disruptive and obviously has changed the way the whole world works. We felt like this next 10 to 20 years was going to be even greater in its impact and wanted to just commit our time and our lives to that. What did you feel like when you saw, you know, that first wave,

we'll call kind of the first chapter of your career, right? Building the company and taking it public in the middle of the internet boom. How much of that felt like today, right? And so let's break it into two parts there's the pre-mania right of kind of you know let's call it 1990 to 96 97 yeah um how much of that felt like there was kind of bull and bear type markets like we're seeing in crypto or was it just kind of this slow steady build-up and then let's talk about the media in a minute yeah for sure so you know i think um you know my experience with the early internet mirrors, in many ways, this experience with crypto. I mean, I feel like, so I was, you know, hacking and doing interesting projects with the internet,

again, starting in like 1990. There was no web. It was totally raw. It was not a good customer experience. You just, you had to kind of deal with the fact that not a lot of people were even using it or connected to it. And so it really wasn't until, you know, essentially, you know, 1995, 1996, when, you know, dial up services combined with, you know, Windows 95, you know, combined with AOL, adding a web browser, Netscape becoming available. There's sort of like a period that was like a set of catalyst moments where it was useful and that got a lot of people excited.

but it was still really immature infrastructure. You really couldn't do that much, but it was inspiring and there were tons of companies getting started. And that, to me, really felt like where we were in crypto in 2016, 2017. And in many respects, I think the ICO bubble and the IPO bubble of of the tech bubble are very very similar which is um you know the people can paint the possibility of the technology and they can see the transformative impact it's it's it's sort of in some ways patently obvious what those can be uh and uh people want to participate in it they see you know values rising quickly uh you know tons of companies jump in you know with a business plan, basically, and say, oh, we're going to revolutionize this or that. And investors are

gullible because values have been rising so quickly. But the reality kind of comes crashing down, literally. And the reality is that in the late 90s, the infrastructure wasn't there. It was the worldwide weight. Most people were on dial-up connections. There wasn't really great, high quality consumer client experiences. Things like Flash didn't exist. Things like more modern HTML capabilities didn't exist. The technology wasn't at a place where it could scale and deliver a great customer experience. And so the businesses that raised all this capital and all this hype, they basically floundered because adoption wasn't there. And then the reality of they're losing money, they don't have the growth that they want, then investors figure that out,

and then it just kind of crumbled. And I think that largely mirrors what we've seen with crypto projects. I think there's been some tremendous successes. There's been really high quality projects that have gotten funded and are being built. But the reality was that the vast majority weren't actually useful or usable. Forget about the scams and frauds and stuff for a moment. But basically, the infrastructure is not ready. I mean, even Vitalik in the midst of 2017 said, this is like kind of beta or even pre-beta infrastructure. Use it at your own risk.

That's not an infrastructure where you sort of say, yes, this is the future of the financial system. So I think the parallels are real. And when I look at today, I see a lot of tremendous teams and projects that raised capital that are executing on their R&D agendas and that are starting to execute on their kind of consumer or product agendas that are starting to get traction. And I see sort of some of the big names like, you know, Bitcoin and Ethereum, which are which are more like infrastructures, you know, making, you know, continuing to make progress. And you can see on the horizon the kind of technical breakthroughs that are needed to give this scale. Just like in 2001, 2002, so when I was at Macromedia, we could see there was just like a trickle of broadband at the time. Very few people had broadband in their homes.

But you could see that that was going to be the next big phase of growth. And that if that happened, like boom, everything becomes possible. And I think that's sort of the case with scalability, basically. So scalability of public chains and the ability to have that work with great security, which is sort of the ultimate balance here, scalability and security at the same time, that's right on the horizon. And when that takes place, then it's sort of like when broadband came, like then the promises can come true. And it feels like that's within sight in the next couple of years. So I'm extremely optimistic, just like I was extremely optimistic in 2002 when most venture capital firms had abandoned investing in Internet companies. They'd abandoned like e-commerce was a dirty word, just like, you know, now I think for a lot of funds, they're saying, oh, no, this is, you know, it was either a bubble or there's nothing there.

It's not going to work. I think the smart investors realize that we're actually in a high conviction period where there's a tremendous amount of innovation happening and we can see that next set of infrastructure coming. And that's when this really kind of goes really exponential in terms of end user value, utility value from these platforms. Yeah. Well, one thing that's really interesting to me listening to you talk about this is, one, the infrastructure really matters. right and and it's going to have a moment the infrastructure has to have the moment before all the applications etc happens two is uh it's the bill gates quote right we kind of overestimate what we can do in one year underestimate in 10 yeah and then the third thing that's really interesting is um just as investors you know claim to have pattern recognition with entrepreneurs

and building companies entrepreneurs can have very specific pattern recognition in technology cycles, right? And so it's this element of being able to say, it's not just that there's a new technology wave. I can actually kind of feel, hey, we're at the first bubble. Then there's a little bit of a crash and a lull. And then here comes this, you know, and when you get to that level of feel with the market cycles, what happens is right now is actually when majority of the sophisticated, successful entrepreneurs are most excited because they understand that, look, when I go hire employees, the employees that want to work at my company right now really believe, right? They're here for the long run. The venture capitalists who are investing really believe

they're here for the long run. And it is a much different environment and a much harsher environment than 2017 when, you know, you and I could have thrown a rock anywhere and somebody was raising $50 million. Yeah. Yeah, for sure. For sure. Let's talk about Circle and kind of what you guys are doing that. Right. So 2012, 2013, there's not that many people who are into crypto, let alone, I'm going to go build a company in the space. Right. Um, talk a little bit about kind of the initial idea, uh, how you guys decided, look, this is worth going and spending time and money on versus, you know, I'm sure a hundred other ideas that you've had along the way. Yeah. Yeah. Um, what's funny is like, I wasn't planning to start another company.

uh the conversations with my wife were were were probably going in the other other direction in terms of thinking about what what i was doing i had i was running a public company um and uh but you know the power of cryptocurrency uh to draw one in is is is phenomenal it's real so uh you know i think way down the rabbit hole um very very quickly convinced like this is going to change the world. I still deeply believe that. And I believe that, yeah, I mean, I won't pick an exact timetable, but, you know, ultimately, billions and billions of people are going to be interacting financially with each other, with businesses, with a myriad of different types of financial relationships running over this infrastructure. And it will change the world.

So that that excited us and excited me. I think, you know, the early genesis with Circle was in early 2013 when kind of step back and kind of did the math. I think one was we could see, you know, Bitcoin was sort of what there was then. there were very few other significant things going on. And we were, frankly, I think, very hopeful that Bitcoin would evolve to be a much more broad, open development project with a broad, robust community of open source developers. We were hoping that the standards efforts around things like Bitcoin improvement proposals would make a lot of progress. That didn't really happen in our view. But I think a lot of the ideas that were put on the table, there were ideas for issuing assets on top of the Bitcoin blockchain. People probably remember

colored coins. And there were other projects that were looking to do that. There were proposals on ways to add fuller smart contract functionality. But those two ideas in particular, kind of issuing custom tokens and programming the tokens, we looked at those and said, that's going to happen. And we expected it would take several years for that to really materialize, which it really did. But it turned out it was just a clean room new blockchain, Ethereum, that implemented of those largely because of frustration with the insular nature of the Bitcoin core development community who was shutting out any other contributors. So sort of the development of Bitcoin froze and for ideological reasons largely. And you could argue that those were good reasons

if you're just focused on the sound money kind of use case. But we expected those things to transpire. And the conclusions that we had, and this is, again, in early 2013, was those things are going to happen. Better scalability will happen as well. And if those things happen, you basically have the ability to reconstruct every component of the global financial system on top of crypto and on top of public blockchains. And if that became possible that to us meant that you could probably build a new kind of global internet platform company that was you know delivering delightful uh services to people and businesses built all around that a kind of new global purely internet-based bank um that was running entirely

on digital money and um so we really set out to do that that's what we set out to build um and uh you know the early name of the company we had to pick a name we didn't know what our brand was going to be so i think we were you know boston internet financial services um we happened to be in boston this was nondescript it was like a secret name we didn't we never traded with it um but the point was internet native financial services have never existed like There's services like E-Trade or your web or mobile app to interact with your bank account. But the actual core, the actual what you're interacting with is not internet-based. It's funny because the way I describe it is we had the analog age of assets, which is kind of up to the 80s, maybe early 90s.

Then we went to electronic age, right? And it's really the electronic ages, electronic assets, kind of in air quotes, but it's just representing the physical assets. Now what you're describing is digital native assets, right? It's kind of the actual asset itself is digital. There's no physical representation of it. Yeah. I mean, what most people don't feel or what most people don't realize is that the U.S. dollar is an Oracle database running on a Sun Solaris machine in a server at the Fed. That is the U.S. dollar.

The US dollar is a SQL database. The record is a SQL database. And payments are basically, you know, comma-delivered text files that are pushed around on FTP servers, on secure FTP servers. That's what ACH is. That's what Swift is. So the quote-unquote electronic money system is an arcane system that is decades and decades old. It's not modern. It's not secure.

And it's certainly not open and permissionless, which is obviously part of it. And so there has been the introduction of software into the financial system, but money itself is not digital. Until crypto, you don't actually have truly digital money where the asset can become a bearer instrument and it is not possible to copy. Right. This is the innovation of the preventing double spending is, you know, digital artifacts are incredibly powerful. MP3s were an incredibly powerful digital artifact because you could copy it. The same song could instantly be everywhere for free. But with money, you don't want that. You don't want the same dollar to instantly be everywhere for free. So, you know, that was a huge part of the crypto breakthrough is by, you know, applied cryptography, peer to peer networking.

And, of course, fundamentally, these very, very brilliant incentive structures, we now have money that is truly digital and that is not in a single database. It's on a blockchain. Do you feel like the, so back to the U.S. dollar example, I think the way you articulate it is interesting because basically what you're saying is, look, this is old technology, right? And just like every other piece of technology you use, you want the latest and greatest, right? And that technology is not the latest and greatest of what it could be. Do you feel like there's risk in kind of that central database specifically around money? I think a lot of people talk about it from, oh, they're centralized companies. They have your user data, all of those types of things.

But around money specifically, is there more or less maybe the same amount of risk as, let's say, user data in a centralized server environment? How do you kind of think about that? Yeah, I mean, it's interesting on a number of levels. I guess, you know, digital bearer instruments are a new phenomenon. We had, you know, we had bearer instruments in the past, but now we have these digital bearer instruments and they're more powerful than the past, right? a digital bearer instrument, there's a much higher threshold of security risk around those, you know, hence the huge growth in, you know, criminal attacks on people who have crypto assets, for example. These bearer instruments can move at the speed of the internet. They can move intergalactically.

You know, they have some attributes that old bearer instruments did not. Um, so it does create, um, a different set of, of risks and security risks, um, that are quite different than, uh, a centralized money system. Um, I think, um, it does raise the question, and this is where I think, you know, there's a need for this infrastructure and these assets for many of them to be truly decentralized, where you can, in a self-sovereign manner, control it. But society will also demand and does demand that there are trusted intermediaries as well. And so I think companies like Circle, companies like Coinbase, I think are in that hybrid world where we're licensed and regulated. We behave more like banks in some cases, but

we're allowing people to interact with the open permissionless internet as well. And so trying to find that balance. And if people want to be their own bank and they want to take those digital assets and move them to a hardware device, move them to a brain wallet, move them to another venue, they have the freedom to do that. So that freedom is really, really key and important. But there is still this role for intermediaries, we think, as well. And governments will ultimately require that as well. Yeah. And part of it is the more technical you are, the less that you may think you need something like that. But the vast majority of people on this planet are not technical. They definitely need, you know, great user experiences, great interfaces, great kind of intermediaries, right?

All of those things actually increase the adoption and increase the functionality for, you know, again, I don't know, four, five, six billion people who don't know how to write any sort of software code. yeah and and i think in this world specifically where um it used to be you know i think of it as like the internet you had to understand networking right and you can connect to the internet right and so you gotta be somewhat technical but it was networking yeah now it's much more software-based skills right and so if you don't have that you need something to use and i think that there's a lot of companies that are trying to step in obviously circle's done a great job doing that um but it's not only needed from like a regulation standpoint it actually increases the value for everyone else right we want to get as many people on board to the quote-unquote

network as absolutely yeah so i think that's really part of the challenge going forward is you know people talk about like where's the killer app uh there's lots of killer apps right obviously self-sovereign money uh non-sovereign digital money that's a pretty killer app and it's really valuable to a lot of people. I was just reading an article today. It was a story out of Venezuela. And I think it might have been from this New York Times piece that came out recently. But there's a guy who got his wealth into Bitcoin. And he was fleeing Venezuela for Colombia. And he was like, I don't want to take the risk of having a USB disk. I don't want to take the risk of having a paper wallet so he used a brain wallet he memorized his seed phrase and he walked across

the border and he brought all of his wealth with him with a seed phrase in his brain like that's awesome that's incredible that is incredible and that is human freedom and that's tremendous and that we have to preserve that um but like you said that's not you know your average person is not going to memorize their seed phrase they can't remember their password to gmail i think They need the option for that, you know, and so I think the key is, you know, when people think about killer apps is whether it's sort of storing value or making payments or seamlessly investing in some investment contract that happens to be a smart contract or entering into an economic relationship that's mediated by smart contracts. All of those things have to become as easy as search or Gmail or, you know, your your, you know, mobile messaging apps or they just have to be that easy and trustworthy at the same time and need to give people the freedom to have complete freedom as well. And so that's the I think the balance that we need to find. And I think that's the balance that we're trying to strike with products that we're working on now is to be able to kind of work across those spectrums.

But like crypto isn't useful for payments today. It's useful in some cases. And there are some what I characterize as mostly niche use cases today. And it isn't so much that it's about scalability or cost. Like if only we had Lightning Network, everyone would make payments in Bitcoin. I don't believe that. I think Lightning's useful as a layer two technology for a lot of things, but I don't think it's going to drive mass payment adoption. You need fiat stablecoins or stablecoins more broadly, and you need the user experience of funding those,

taking funds out of those, spending those, using those, not require that you have MetaMask and know how to pay gas fees to a smart contract, which is just simply inconceivable for the average person, right? So there's just like a threshold of usability that needs to exist. And again, we're very, very close on some of these things. And I hope that Circle can be a company to help solve some of those, along with a lot of others in the industry. But, you know, we're getting there.

Yeah, I want to go back to the early days of Circle, because I think what a lot of people know you for today is not actually how you got started. Right. And so maybe talk a little bit about the first product you guys built and the evolution to, you know, this kind of multi-strategy or multi-product company today. Yeah, absolutely. I'll go through that narrative. So, you know, the first thing that we built was we knew we wanted to build a kind of new type of kind of almost like global bank. So the first thing that we built was a platform. So we built platform infrastructure, that we built a transaction banking system, we built an identity and risk system, and we built a settlement system that could seamlessly move between the legacy banking

system and crypto rails. And that was really key because the first product that we wanted to create was a payment product. And we wanted to create a way where people could use fiat currency with any bank account in the U.S. and Europe, which was the initial target, and seamlessly move fiat value over the Bitcoin network. And our concept was that we would use Bitcoin as a settlement network and we would essentially marshal or move fiat in and out of that very quickly. And so that was actually the first product that we built. And it worked. It absolutely worked. And actually, people who wanted to use Bitcoin really loved it because it actually turned into one of the cheapest, fastest ways to get Bitcoin. But there were challenges with it,

which is that Bitcoin as a settlement rail had a lot of issues. Transaction time, the number of confirmations, volatility, and volatility continued to be significant, and cost. I mean, the transaction fees tended to get so slow, expensive, and price volatile. So as an intermediate kind of settlement currency and settlement network, it didn't work. As an open network, it was great. So the idea was that our digital wallet would work with any other digital wallet because we were all speaking the Bitcoin protocol. So there were challenges with with what we built um and i think one of the challenges was we wanted to have this like incredibly fast seamless experience where you could just like connect any debit card

and with very little information just instantly be transacting with this and that was really attractive to fraudsters really attractive to cyber criminals um and i think was you know i think very challenging for our banking partners and our card scheme partners who, you know, I think it was running up against the limits of what they were comfortable with. So we put a pause on using the Bitcoin network and began work at the time on something called Spark, which became US dollar coin. And I'll come back to that. But one of the things that happened in the interim was in order to create that CirclePay, that product, we built a treasury and trading operation where we managed real-time liquidity between fiat and crypto.

We built out this both automated trading engine, and then as the customer demand grew, a desk where we sourced liquidity to handle all this customer volume. We ended up building one of the most efficient, connected trading platforms for Bitcoin. And so starting in 2014, that started to grow. 2015, it continued to grow. 2016, it really started to grow. And by 2017, it was a huge business. And so our second product is Circle Trade, which is our market making and OTC service, emerged out of the infrastructure that we built for payments.

And its original design was to support that payments infrastructure. And then we saw like, OK, this is actually a great service in and of itself. So we really allowed that to grow. And then in the summer of 2017, obviously, during this sort of dramatic growth in ICOs and so on, we, like I think others, became very, very excited about tokenization. and we thought you know we very much thought that in the coming years that uh you know tokenized economic contracts tokenized financial contracts would become a much much bigger thing and we were seeing kind of in the crypto exchange market kind of the early examples of what like a token marketplace could be and so we got to know the poloniex founders really well because they

were a client of ours with circle trade um makes sense and they happen to be from boston we were in boston so we spent more time together and it became pretty clear that um you know they needed help um the business was growing extremely fast and uh they needed help with technology operations support compliance risk regulatory you name it like they they it was a very small very small team and, and, and they did not have a lot of experience like scaling out things. So, um, from our perspective, you know, Poloniex was actually a really great company because they were at the forefront of working with developers who were launching new projects and helping create the markets for those. And, you know, that kind of being a place, a marketplace where you're bringing

these kinds of new tokenized projects into the market. It was a really unique early position. Our long-term vision is, we think there's going to be mass proliferation in tokenized assets. We think there's going to be far, far greater numbers of stablecoins with multiple currencies. We think there's going to be multiple significant store of value, privacy-focused digital currencies. we think there's going to be proliferation in utility tokens that are used to power crypto networks and crypto apps. So, going from maybe dozens of meaningful utility tokens today to thousands. And then last but not least, we're very big believers in the idea that financial contracts, equity-like, debt-like, property-like financial contracts will be

tokenized. And we believe there'll be very large multi-sided markets that are similar to internet markets we have for other things to enable those, to enable people to issue those and enable people to exchange those. And so for us, acquiring Poloniex was not just, hey, let's acquire this exchange that has all these people trading digital currencies. This is a foundation and a building block to a much bigger long-term vision. And so, we've now kind of completed roughly a year of transforming the infrastructure to be ready for this broader vision that we have, providing much stronger kind of security protocols, our own custody infrastructure for it, de-risking the platform and putting in place a framework for curating the markets,

selecting projects to launch, and have now really started to do that much more proactively. One question I have about Poloniex, and I think everyone talks about the technology and crypto, and it's very focused on what I'll call more hard skill type stuff. But there's some soft skill stuff that a lot of these companies in 2017 suffered from pretty drastically, right? So customer support, the regulation type stuff. And some of it, I think, is any company that goes from very number, very small number of customers to a lot. There's just you got to hire people. You got, you know, there's those types of like scaling issues.

And some of it is even if you have all the people, you still have to know what to do, how to do it. Right. The things to focus on, not focus on, et cetera. I think Poloniacs, when you guys made the acquisition, the general sentiment was, oh, wow, here's a group of entrepreneurs that have success building Internet companies, have scaled things, have taken them public. There was a lot of people who liked the technology and the exchange, and then they felt like this was a great merging of that technology and had some issues right around support and all that. But you guys were going to be able to help really kind of do that. And it was pretty quick. You could see the sentiment of people saying, wow, like it's actually getting better.

Right. And obviously, I think that you guys did a bunch of stuff in the background. Do you think that there are a bunch of other companies that suffered from that in 2017 where they would be unable to do that themselves? And they're going to need these big, you know, kind of I'll call it the crypto incumbents to step in and really help with that. But or do you think that this is something where they just need a lot more time and even money and they'll be able to build it out? And if there's another bull run like we saw, they'll be ready for that. Do you think that that consolidation is essential or do you think that we can stay with some kind of fragmentation and let those young companies really kind of grow into their own? I think it's it's it's very much both.

I think it depends on the specific problem space. But, I mean, the beautiful thing about software and entrepreneurship is, you know, there's just this constant kind of fount of new idea creation and development. And the kind of laboratories where that happens aren't always in large companies. Um, and, uh, you know, I, I think the, the internet and cloud software and, you know, open source and distributed development, all of these things make, you know, innovation easier in some ways or, and, and faster and can move at a greater velocity. I think, um, I think there's going to be a lot of projects that, uh, will, will grow and scale and they don't have to be consolidated, et cetera.

I think there are others that will, will need to be consolidated. And there's plenty that are just going to Peter out, um, which is very natural. Um, so I don't, I don't think it's a, it's an either or something like that. Um, it would be interesting to see over the next few years in particular in the, in the kind of these, the markets space as the market space, um, very likely does require more regulatory capability, uh, and the opportunities to kind of do regulatory arbitrage, uh, get smaller and smaller. Um, I think that will, that will force

a lot of, of, of players out or to be consolidated. Um, but that, that'll take some time. Yeah. Um, I tend to agree with you on this idea that every stock bond currency commodity is going to get digitized or tokenized over time. Um, one thing that you guys did, uh, after you moved from the Bitcoin rails and the ability to kind of transact money was you created a, um, uh, a stable coin, right? So maybe talk a little bit about kind of the thought process to create your own, how you thought about actually keeping it stable, right? Cause there's a bunch of different options there. Um, and then what you guys are doing with, uh, with it today. Sure. So kind of going back to the first thing that we worked on, which was how do we take fiat money and use

public blockchains as the settlement infrastructure for fiat money? That was the problem we wanted to solve. And our belief back then was that if you could do that in a standardized way, then digital wallets everywhere in the world could just be interoperable with each other. And it would be more like the web or email. We'd have this seamless ability to transact with people instantly, but still with the price stable value of their everyday currency, right? So that was what we originally set out to do. Our view back then and our view still now is that there have to be actual open technical standards that people can follow. There has to be a protocol and a set of standards that people can contribute to that are open for that purpose. And so we began work

Um, we, we started work on the technology for stable coins, um, as, as early as early 2017. And then in late 2017, we announced that we were forming a project called center, which was going to be an open standard and an, an open, uh, open source implementation of, uh, kind of fiat payment model. Um, not a lot of people paid too much attention at the time. But then in the summer, we announced the first milestone of Center, which was the first implementation, which is the U.S. dollar token and the U.S. dollar coin. Now, Center was created as a membership-based consortium.

So it's not Circle. It's not Coinbase. It's Center. And Center exists to define the technical standards for fiat money on the internet, to define the self-governance framework for people who become issuers of that fiat token. And that's really important that there is a set of standards. It's almost like a self-regulatory framework for companies that are going to issue these. And the key is that this is a protocol where the issued tokens are fungible. I want to be able to use my US dollar coin. If I got it from Circle, I want to be able to redeem it with Coinbase or redeem it with another issuer.

And so this is really key is that interoperability and fungibility, especially with money, is really core. So we've taken that approach, which is very unique. And now Circle and Coinbase are launched as issuers and we're taking a big step towards that. So the concrete details are U.S. dollar coin is a fiat asset-backed stable coin. Customers can, from 80 countries, send funds from a bank account, and they'll be tokenized into U.S. dollar coins. We hold 100% of the funds that they've sent to us in reserve. It's a one-to-one asset-backed token.

We prove that every month. One of the largest auditing firms in the world, Grant Thornton, does a monthly published attestation. They review all of the bank accounts and they review the issued and in circulation tokens and they publish that attestation. It's grown very fast. It is now, I think, a really powerful way to move value on and off of the blockchain. And it has great liquidity.

You can redeem it at any time for a dollar, which is the whole point. So it actually is redeemable. You're not worrying about some weird, opaque offshore bank accounts that are always changing. Or sometimes you can get redemption, or sometimes you can't. It's really straightforward, very transparent,

and you can use it. And because it's an ERC-20 token, it's got incredible compatibility already. So I think like 120 companies or some huge number of companies already support it. Wallets, exchanges, custodians, a lot of the DeFi companies that are out there are using it as their U.S. dollar mechanism, whether as a collateral mechanism or paying it out in loans. And so it's really become very, very useful. Um, and it's, it's now, I think within the market-making community, um, considered sort of best in class as a way to move dollar value around because they can actually, it's actually

liquid, you know? So it's, it's been a very good early success. And, um, I think, uh, we have, you know, we have a lot of ideas for where it can go. And so, uh, I recently wrote, uh, in this piece, I was talking about JP Morgan. they just announced this new JPM coin. They've basically come out and said, look, we're going to use it internally. They're not the first. I think Silvergate Bank's been moving money around internally on a blockchain. HSBC's been moving money around on their own internal blockchain. They said, I think they moved like $250 billion last year doing this.

One of the things that I wrote about, and to me, the concern is much more with the incumbent Wall Street banks, is they come out and they say, OK, I have a fiat-backed digital currency. So the U.S. dollar, JPM coin, they use it internally. Then they get institutional adoption with peers and with clients. They then push into retail and people start using it there. And then at some point, very similar to in 1971 with the U.S. dollar, they basically say, we're actually going to break the peg. We are going to come off of that U.S. dollar backing. And essentially what they do at that point is they become a central bank.

They can print at will their digital, the JPM coin. And it feels like that's a really dangerous thing. I mean, that scenario I don't think is likely. Okay. This is what I want to talk about. Talk me through probable, not probable, et cetera. Well, the reason is that they're a Federal Reserve regulated bank. And there's reserve requirements.

And there's Basel III, which is the global standards for the health of a balance sheet and what amount of leverage. All banks, their core business model is creating money. That's what they do. Money's not created by central banks. Money's created by bank banks. I love that. Yeah, I mean, that's what they do. They get a deposit, and then they create 10 more units, or whatever the ratio is, from that one deposit.

They create money based on a deposit that they have with the hope, with the risk, that the people who they've given that money to on credit will ultimately pay them back. great. So it's a leverage business. And it's a money creation business. That's the very core of what banking is. So would a JPM want to be able to do fractional reserve? Of course, because that's their core business model. I mean, that's the very essence of banking. So that's not so much breaking the peg. That's just doing their business. I think they would not be permitted to go beyond the reserve requirements that they have as a bank under the supervision of the federal government and under supranational schemes like Basel, which basically governments have signed on to in a legislative capacity. And those are the

reserve requirements that exist for banks everywhere. So that's the law. And so I don't see them going outside of that. It does raise the question of at what point are things like asset-backed or fiat-backed stablecoins fractional. If I'm a bank and I'm issuing a stablecoin token, I absolutely want to be able to do it on a fractional reserve basis because that's what I do for a living. Yeah, that's really interesting. I think the example I gave is probably the extreme, where you just completely break. What you're describing is there is probably going to be some ability for them to do it on a fractional reserve basis up to a limit that is governed in some way.

Do you see issues with the fractional reserve side? And I frankly haven't thought about it enough to have an opinion here where it's a pretty well understood business model that we've kind of seen what some of the risks are, how that plays out in traditional fractional reserve scenarios. So it deposits money and they lend it out. When you get to this asset-backed digital currency, if there's a fractional reserve mechanism there, do you foresee that being problematic? Do you think that it fits very similar to the traditional business? How do you look at that?

Yeah, it's an interesting one. I mean, I think one of the potentially attractive things about central bank digital currency is the possibility that the central bank has, in a sense, better visibility into the underlying health of the financial institutions. So if you take the financial crisis as an example, the bank regulators, they had no idea what were in these balance sheets, right? The quote unquote integrity of the balance sheets and whether or not they were healthfully leveraged or leveraged according to the kind of safety and soundness requirements, they didn't know. And the banks didn't know either. And so the theoretical question would be, if fiat money, if credit, if derivatives, if securities were all digital tokens and mediated by smart contracts and blockchains, could regulators have dramatically more visibility into the health of the economy and the health of any given financial intermediary? intermediary. And in theory, they could. Now, there's sort of privacy questions, and there's sort of ways that you'd have to think about kind of, these are, you know, people talk about proof

of reserves with like, you know, crypto balances. Well, you can imagine if your full stack of the financial system is built with crypto assets and blockchains, and that takes on a whole new meaning. So I think that it actually, in some ways, crypto assets, tokenized assets, tokenized fiat, things like this, have the potential to not only support the existing model for banking, but also make it significantly safer and safer to monitor from a risk perspective. Yeah, so I think, you know, I was actually just with a giant global auditing firm and, you know, they're really passionate about public blockchains and the idea that, you know, as more and more even like corporate treasuries move to tokenized assets, then it could really transform the way in which you can audit, right? Yeah. I mean, look, a blockchain is basically just a new accounting mechanism. Right. And it's for the digital world. So I look at it. And so if you are an accountant or you are an audit firm and you can figure out how to leverage this, it should give you a significant advantage of what you do today. For sure. Yeah. You know, one of the things I wanted to maybe ladder off that on and talk about is, you know, people talk a lot about security tokens. And we're very interested in that as well, as you know, with the acquisition that we've done. And I think, you know, what's interesting to me is the straightforward thing would be to say, hey, I've got some Delaware shares. Can I tokenize those?

And now they're, you know, they're shares on the blockchain or they're tokenized shares, et cetera. And I think there's good reasons to do that. I think that there's a whole bunch of benefits you get from that. But the more interesting question is, is what is a natively digital corporation? And what does it mean to have the voting, the governance, the corporate treasury all be based on crypto assets and all be intermediated by tokenized contracts? And, you know, it becomes possible to think about the governance, the voting, the ownership, the treasury functions, which then in turn has to do with everything from payroll to how you interact with businesses. And so a lot of the building blocks for building an actually an entirely digitally native corporation that's all built on public chains is emerging. And that's what's interesting to me is not so much like how do we create a Delaware C-Corp that has a, you know, you take the jurisprudence of Delaware and you put some thin layer of that into a smart contract.

Again, I think that's really powerful and interesting. The long term, though, is there's obviously platforms like Aragon, which are really trying to push this of these decentralized autonomous organizations and trying to build those functions entirely in that way. And I think we're probably a ways off from that being something that a global auditing firm would say, yeah, we get that. But I think when we think about the real disruptive potential, it's that microeconomic organizations, the microeconomic units of organization could be entirely run in software and be inherently automatically global and have economic relationships that are inherently automatically global. And that's extremely powerful and certainly where we'd like to see things. what you're talking about here um there's a gentleman who uh who previously gave me this example and i thought it would perfectly articulate it it was the publishers when they first saw the internet right so media take a newspaper publisher they see the internet and they say oh my god i can

now take my physical paper sure i can basically scan it onto the internet and there's a website and anyone in the world can go read the newspaper i don't have to give them a physical copy it's the pdf version yeah and everyone was super excited about that and there's value right like you you can absolutely give it to more people and all that stuff but it missed out on the ability to do dynamic headlines update articles you know distribution all these things that we now know as meet as digital media yeah um it took a while for people to understand here's what this internet thing can do and how to actually leverage it yeah what you're describing is almost exactly the same right the kind of initial um ideas around tokenized securities is take what we have put it

on a blockchain. And there's value. It just doesn't tap into the full potential. And I think that you guys recently announced last year that you were the intention to acquire SeedInvest. You've now closed that. So one, congratulations. Thank you. But two, maybe just talk a little bit about why do you go do that? And two, how do you see their platform positioning you well for that world that you just described. Yeah, absolutely. Very related. So in our vision, we believe that more and more businesses are going to be able to directly raise capital on the internet and raise capital from Main Street investors, from institutional investors, from investors all around the world, and that the capital assets that they raise will increasingly become more

liquid and tradable, and that there's a tremendous opportunity to transform capital formation and private capital markets more broadly. So, we think what's happening with crypto is part of that. And in a lot of people's minds, they're sort of like, oh, there's this weird cryptocurrency trading thing over here. And then there's the stock market over here. We actually see a lot of convergence. But right now, today, there is no global marketplace for private capital, for private financial contracts. It doesn't exist. And I would have you think about it similar to uh the retail world or the media world or the publishing world pre-internet right um in the retail world like you you had to have a pretty good scale to be able to have

uh distribution and to to reach a lot of people with your product um it was it was hard but you know platforms like ebay and then the amazon marketplace the alibaba marketplace just as examples, made it possible for anyone who's creating any product anywhere in the world to reach anyone. And they were commerce platforms, logistics platforms. It just blew it open. And the model of centralization in retail was kind of torn down. I think the same thing with advertising, right? If you were someone who gave tennis lessons in a city or whatever it was, it was inconceivable for you to be able to run targeted advertising that would reach exactly the right people and they could be from anywhere in the world and you know adwords created a massive

efficient global market for uh for advertising and you see this in in other areas in publishing and content in video um we're participating in that right now with this podcast in terms of radio and i think um the same thing is very much possible for for for entrepreneurs and for people building businesses. And by that, I don't just mean like your classic tech startup that might do like seed VC type money. I'm talking about someone who's a landowner in an emerging market that has yield from their land and they have no way to securitize that and participate in a global capital market. It's impossible, but it should be possible. Just like the person that you know, makes, you know, plastic, you know, things or makes custom scarves in Bangladesh

can sell on Alibaba and reach a global audience. It should be possible for the financial contracts that help businesses grow and even individuals over time. When you think about the tokenized, you know, future value of labor or other things, it should become possible for that to be expressed in a digital form to be discoverable and distributable through global marketplace and to make the economic actors be able to participate more freely in that. So that's what we think becomes possible. Seed Invest is a great addition to the Circle family. We're really excited to have Ryan and James and the team there joining us. For folks that aren't familiar, they really were at the forefront of creating ways for businesses to raise capital

directly on the internet using equity and crowdfunding models. They helped put together the JOBS Act. They helped get it through Congress. They helped FINRA and the SEC as the exemptions got defined for that. And they were among the very first companies to be launching direct internet fundraising models for businesses. They've got a nice business that grew very nicely last year. It's profitable. And it really gives us a great capability. So, they have a service where if you're a startup and you want to raise capital, you can go through their platform and they will underwrite your capital raise. They'll do an offering that can be managed with both accredited investors and unaccredited investors and international investors. They handle all of

the investment marketing. They handle the fulfillment, the payment, the getting the securities held. They have a custody model for those securities. And they've really created this kind of capital formation engine. And they've got kind of an end-to-end service for that. that fits really nicely with what we see as the future of finance, this democratization of finance. How can more and more companies go digitally native, issue securities directly on the internet from a broad range of investors, and ultimately also have the secondary markets for those as well? So SeedInvest really, really helps us march towards that vision. And the kind of digital security piece of this or the security token piece of this, that piece, as you know, is more nascent.

There are experiments in it. I know you guys have been involved in some of those. And frankly, you know, the SEC is still getting their head wrapped around this. And so there aren't like a whole bunch of registered security tokens that are out there. it's still, I think there's a lot of heavy lifting to ultimately get to standards and kind of agreement with regulators on how that's all going to work. We'll be right there working with them to make sure it works and is feasible from a technology perspective and ultimately from a market perspective. But that's sort of the next big heavy lift is to really, really make sure that

things like the JOBS Act and the benefits of raising capital over the internet can also get the benefits of cryptocurrency technology, blockchains, digital securities. Because I think it's interesting because Jay Clayton, he's really passionate about how do we make private capital markets more open? How do we allow growing businesses better access to capital? How do we let mainstream investors participate in that? How do we open up private capital markets, which globally is massive and it needs to be transformed. And I think it actually ends up that crypto assets and blockchains are the way that we're going to do it. So I just don't think Jay has realized that yet.

Do you think an aspect of this that took me a long time to wrap my head around, but now I have started to gain confidence and I just don't know when it happens or if the regulators are thinking about this yet. one of the promises of all this digital securities blockchain etc is that you could write the law or the regulations into the code right and and so the the general thesis here is if i'm the sec today you and i do something that is uh breaks the regulation they've got to come figure out who we are what we did they build a case they spend millions of dollars right one or two years then they enforce on us so they're very reactive to us doing something that is non or outside the

regulations. If the code is written into the law and you and I try to do something that we might even mean to do something that breaks the regulation, the code could actually stop the transaction, right? And turn a regulator into a proactive player in the marketplace. One is there's a bunch of technical stuff that still needs to be figured out. Two, I think, is would that hold up in a court of law? And there's all that kind of stuff that goes into it. But I'm more interested in the regulator's perspective, right? I think that technologists generally believe in this macro trend of automation and kind of efficiency gain from technology. I just don't have insight into the regulators approach to that type of stuff. Right. And so we see them. I think public

comments are very encouraging of we want to encourage innovation. We want to open private markets. Do you think that they've gotten that far yet or kind of any insights there as to how you think they maybe should be thinking about this idea of writing the law and the code? Yeah. I mean, I certainly think that there's discussions happening around some of those topics um it's it's not a coincidence that in the past five years the the concept of reg tech has emerged as a as a thing and there's like reg tech startups and they're all trying to sell tech to regulators to help with automation and you know or to help companies who comply with regulations and used to be like compliance was like a software category but reg tech uh is a category uh and i

think there's something there, obviously. But this issue of essentially writing the law into the code, I think that's real. I think it's going to be very incremental, right? We're going to start with effectively the share certificate number and the accreditation, investor ID, transfer restrictions, like this thin KYC AML, this sort of shim on top of it. But the real security is like, let's actually take a look at those governance docs and take a look at what requires votes and what are the votes and what are the bylaws and what are the classes of stock and what are all of the mechanisms that exist to protect preferred investors versus common and all these kind of provisions. And, you know, those things will take a lot longer to actually

get into code. And ultimately, it's only beneficial if they're recognized, if those things are recognized by a court. And so in some ways, this isn't, I think, going to come down on high where all of a sudden the SEC or someone says, yeah, you can have all of the terms of security written in code. It's going to come from case law. It's going to come from an issue coming up with a company and a court saying this is allowable, or it's going to come from states passing laws like Delaware did, originally just to say you could keep your cap table records on a blockchain. But it'll be states, because ultimately, these corporations are domiciled in states or in

countries, as it were, passing laws that basically say that, for example, a vote on A change of control could be effectuated using, you know, votes conducted on a blockchain using tokens that have been issued to these sort of shareholders and that that's OK, that that counts just like, you know, a DocuSign now counts. For sure. So I think some of that will come through kind of case law and things like that. How does some of this stuff change on the regulation, licensing and legal front when it becomes decentralized? So decentralized organizations, decentralized exchanges. What's kind of your thoughts there around some of that? Yeah, I mean, it's one of the most fascinating dimensions to all of this is, you know, in a world where you as an economic actor choose to interact entirely with a code based organization.

um you know you you have the free will to do that and you know so long as you understand that that is what you're interacting with i think um uh it'll be interesting to see whether some governments at some point sort of assert themselves saying well if you're an individual or you're a business and you're interacting with one of these things here's your obligations or Here's our our rights. I haven't seen that happening yet. But I think, you know, my general take on a lot of this stuff is that, you know, the Internet has shattered existing regulatory frameworks for decades. and people probably forget that if you wanted to broadcast an audio conversation to someone in Italy, you needed a license from the Italian government. Well, the internet came and guess

what? We can all broadcast to everyone everywhere and we don't need a license. And in a sense, when these decentralized infrastructures reach scale, generally speaking, people like it it's better it's a better world and i think in a in a world of decentralized finance people and businesses are gonna say we like this this is a better world and it gives us more control it's less expensive we can move faster we get all these we you know rent seekers dissipate and we get more value and i think um you know when billions of people are going to be able to interact with each other and with, you know, through economic contracts seamlessly over the internet, no one's going to want to go back. And so, I think that it's just going to require

governments to adapt. And that's not to say that there aren't still going to be obligations around protecting consumers or obligations around money laundering or, you know, these are important kind of social contracts that exist, but the way that those take shape may really change. So I think with some of these things like decentralized autonomous organizations, there will be some DAOs that come along that become really big and successful and potentially have the equivalent of tens of thousands of quote unquote employees, but who have only an interaction with a smart contract and who are generating income and maybe maybe the income is still taxable and reportable in their home jurisdiction but the the software is just a

piece of software is that a corporation no well it's kind of like the bitcoin network right with miners like if you think about it there's no company that's paying them it's just an algorithm that's governing yeah so these resources i think so i mean i think i think crypto networks that are effectively DAOs, in a sense. It's just a new form of human social and technological organization. It hasn't existed before. It exists now. It's very powerful. Those will grow. There'll be more and more of them. They'll be very, very big. And that's positive. That's positive for society and humanity. And again, I think ultimately, when things become really positive it's hard for governments to take them away from people it's

like it'd be very very hard for governments to say we're taking away the internet right even countries that have you know censorship on the internet or that filter for things they still like they're not taking away the internet because the internet is so powerful that would be uh just like such a monumental step backwards for any given society well and the part that's always been so interesting to me is take you know bitcoin for example there's there would be a rational argument you could make that hey if this decentralized digital currency becomes a global reserve currency there would be material impact on a number of countries around the world right and there would be reason to believe that they wouldn't want that to happen right there's no ceo

there's no headquarters to go you know what i mean it's just it's this decentralized thing and so not only can they um will they not take it away because of the power and all that stuff yeah but even if they said, we want to take it away, they would have a really hard time kind of putting the genie back in the bottle. And that's not to say the kind of anarchist view, you know, screw the government. It's just more of what happens when that's a corporation, right? What happens when that's something else? Like you get into a world that, again, it's just a lot to think about and we haven't seen it before. Yeah. I mean, I think some of the most ambitious projects are, you know, decentralized algorithmic stable coins. And again, none of them have really taken hold and gotten

scale, but clearly there will be. There will be some. And that even have a pegging mechanism to a basket of fiat currencies. So you could imagine a global digital currency unit that's algorithmically pegged to the major economies of the world, which runs entirely decentralized and kind of has its own internal market structure to it that is just code that allows anyone to have a stable global digital currency that's instantly convertible into any fiat currency. That is absolutely on the horizon and really, really powerful. And more powerful than, say, a Bitcoin, in my view. Oh, why is that? Well, because everyday transactions, people need a price-stable asset. And so, I think if you're looking at a hedging asset or a long-term store of value asset,

Bitcoin is very attractive. But for everyday economic activity, you really need price-stable assets that are really tied to stable economies and the currencies of stable economies. That's how we're going to transact. That's when we decide to enter into a three-year bond contract with someone, it's going to have to be denominated in price-stable assets. It would be insane otherwise. You can't price risk. You can't price credit.

You really can't do anything. um so either you know something like bitcoin gets so broadly adopted that it's price stable um which i think you know by design i think we're probably decades and decades away from that yeah it's really interesting um to think through some of these solutions are short-term medium-term and long-term solutions and um you know i always talk about uh venezuela for example a lot of people always say oh you know that that's where bitcoin's taking hold and there's data that suggests that there are plenty of people who are running to bitcoin but if you're a venezuelan and you want to walk across the border like the example you gave earlier yeah and all you want

to do is preserve your wealth yeah you're not looking for an investment opportunity you're just saying i don't want to lose money owning u.s dollars would be a great option so things like u.s dollar coin exactly are potentially really attractive everywhere in the world and um and And a brain wallet works for ERC-20 tokens, too. So it's not specific to Bitcoin. It was funny. I just came back from Asia. And it was interesting just meeting with different folks.

And I think there's a lot of passion for US dollars. And US dollar markets in Asian economies are really, really highly valued. And, you know, U.S. dollar stable coins are really, really attractive all the way down to the individual as well as like the wealthy. Right. So, you know, I think one one thing that's a little bit unknown is where we see surging growth in stable coin, you know, fiat stable coin adoption as effectively a way for people to to protect and move value offshore. And it seems like that is a very real thing. And when you look at the sort of offshore capital markets, offshore currency, it's quite large globally. And stablecoins become, in some ways, even better than some of the alternatives. Yeah, it's so interesting.

the, um, you know, look, being a citizen in the United States, you know, many people working on technology being born in the United States. Um, there's a very, uh, there's a lot of benefits that, and then there's some disadvantages to it, right? You kind of come from a very Western centric mindset. And, uh, one of the things that, um, I've really tried to do is travel as much as I can, cause you just get a different version of the world, right? And some of you agree with some you don't and you kind of end up somewhere in between. But the one thing that I see a lot of American born entrepreneurs specifically miss is just how big the rest of the world is. There's like 330 million people. Yes. The United States has a lot of, you know,

economic activity, et cetera. But places like India or China are just, it's almost impossible to comprehend how much bigger they are than the U S. Sure. You look at like, uh, you know, Indonesia, I think, is like 600 million people. You're like, what? Crazy. Yeah. And everyone there has a need for a price table currency. Absolutely.

Yeah. Yeah. Yeah. You know, the internet, and this is one of the things that got me into crypto in the first place, which was, holy cow, like if you can blow out how money is stored and moved globally and make it usable to the average smartphone user, it can be really radically transformative. And I think when you add this new layer of, you know, contracting and economic contracting that people who have these, you know, digital money can interact with, then it becomes

incredible because you can now basically start to reconstruct economic relationships all around the world over the internet with fewer intermediaries. And that's the really, really transformative piece. It's not just about remittance or moving money around. It's about actually entering into economic relationships and being able to do that in a way where you don't have to take counterparty risk, where you can have the trustworthiness of the finality and security of a blockchain in an economic relationship. That's profound. Absolutely. Before I wrap up, i always ask a couple of rapid fire questions sure uh what do you think is the most important company in crypto can't say circle the most important company in crypto

um i think right now uh it's the ethereum developer community oh interesting okay explain Well, Ethereum right now has the most adoption as a blockchain platform that you can build apps on and smart contracts on. And the Ethereum developer community, not just the people developing the core of Ethereum, but the broader Ethereum developer community, to me, are like the forefront of developing this new kind of crypto economy. There are really exciting new blockchain projects that are looking to compete with Ethereum, replace it, but no one has yet. And, you know, these kinds of platforms get built when you've got, you know, broad developer adoption and people contributing as well. So I think it's most important because if the Ethereum community, both the core developers and the broader developer community can get through their scaling kind of challenges, then it represents probably, you know, really tremendous breakthrough for everybody. Okay. What do you think is the one regulation that you would improve or change if you could? You know, I think what I'd like to see is clarity in major jurisdictions on the differences between kind of cryptocurrencies, crypto commodities, utility tokens, and security tokens.

And so it's really the classification. And in particular, with security tokens, I think it's very important that governments create definitions for how these can be launched and used without just taking the old capital market rules and applying them. I think that they need to figure out how to embrace the power of internet distribution, the power of open networks, the power of global investor bases. That's what's powerful about this. And they have to embrace that if they want to enable the market benefits. If it's just we're going to try and jam this through the existing frameworks, I don't think it accomplishes much. Yeah. Yeah. So it's sort of with it's essentially like the the classification of these different asset types and sort of the specific rules around them. That's the area I think needs. And we're seeing progress on that in a lot of markets. But that's the one that needs the most work. Got it.

What do you think is going to happen in the future? What's one thing that maybe other people aren't expecting or people aren't talking about as much as you think they should be? Yeah, I mean, it's actually something we've been talking about for a long time, which is it seems really obvious to us that in the coming years that basically payments will go to zero, that the entire business model of payments will go to zero, that we'll be able to exchange payments with each other anywhere in the world instantly with no fees, whether it's between people or people in businesses. and that all the business models that exist around extracting a toll for receiving a payment, enabling a payment, et cetera, will basically go to zero. And that's really powerful because I think that has to do with sort of the movement of value in the global economy and what becomes possible. So that to me is significant.

I don't put a specific year on it, but it just strikes us as something that is inevitably going to happen. And we see, I think, what Venmo, right? There's no fees on Venmo. And there's applications that are trying it now. It's closed networks in terms of you have to have an account. Sure, on the closed network, your CirclePay is free as well. Yeah, and so I think that that is probably more likely than not to happen.

As you said, the hardest part is when. Yeah, but I think in particular that that will be built on interoperable crypto-based rails, right? So that any wallet can communicate to any other wallet and it just works. That's what we see happening. Yeah, makes sense. What's the most important book you've ever read? The most important book I've ever read. I have to really think about that one.

Really? That's the one you want to think about? Yeah. I've read a lot of books. Really interesting. I'll have to get back to you on that. All right. I don't want to give too quick of an answer.

okay save it for next time the one uh the one caveat i'll say is uh many people pick books that they feel like had a lot of influence on their life yeah as a proxy for for importance um the i asked one non-crypto question and then you could ask me a question to uh to end it the non-crypto questions about aliens do you think that they exist or not yes yes why sort of uh mathematical probability my god yes that's my whole argument yeah it's just the math suggests that it would be near impossible for them not to exist yeah all right uh what one question do you have for me um what are you most excited about that's happening right now in crypto most excited about um there's a lot i think part of it is uh

we spent a lot of time with institutional investors, um, just in the nature of asset management. And, um, there's still a lot of like, Hey, is this even legal? You know, what's a blockchain kind of very, uh, what I'll just call elementary starting point, which, yeah. Which by the way, everyone starts there. Right. So, so it's just their time they're behind in time, but, but they'll get ramped up quickly. Um, but the thing that I see, uh, i think taking hold as a narrative that's really exciting to me is the break from like decentralize the world crypto you know only etc and much more around uh here's products that are being built here's solutions to those types of problems um here are um how this fits into

automation or or interview uh integrates with other innovative technologies that you're already familiar with and to me that is um a more macro conversation that uh one is easier for them to understand two uh is much more believable i think to them right when they don't understand all the nuances of the technology but three and the more important part is uh there's a higher likelihood in their mind that they are going to make money by investing in that stuff and so what you see is you're seeing more sophisticated people come to the table but it's not on you know hey there's this new utility token and we're going to go trade it and make a bunch of money. Right. Right. It's much more kind of what you and I probably think are the sustainable narratives to get that

community involved. Yeah. It'll take a while, but, but I think that that is, you know, for the long-term growth of the industry, really important. That makes sense. Cool. You want to throw a book out there? No. No. All right. That's fine. Look, I really appreciate you taking so much time. We've quite a bit and uh i am i'm a huge fan of what you guys are doing i think that uh thanks mom you you are one of the um the first people that had what i call a crypto incumbent company that i talked with and and you really believed in everything's going to get tokenizer digitized and you've been playing chess to kind of see that happen definitely playing chess which uh which i appreciate so we'll have to do this again absolutely look forward to it thank you hey everyone pop here if you

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