The Wolf Of All Streets - What If The Stablecoin Market Collapses? Dante Disparte, Head of Global Policy At Circle’s USDC

Episode Date: December 14, 2022

My special guest is Dante Disparte, Head of Global Policy At Circle’s USDC. We are talking about the current market situation and whether the stablecoin market is strong and resilient to all the stresses.  Dante Disparte: https://twitter.com/ddisparte ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Stablecoins #Cirlce #Crypto 0:00 Intro 1:30 Live on Yahoo 4:10 Dante Disparte 7:40 Can stablecoins collapse? 13:30 Stress test for stablecoins 15:30 Comparing USDC and USDT 18:00 CBDCs vs stablecoins 21:50 How does USDC make money 25:00 The value of stablecoins 31:00 The reserves of USDC 34:00 Coinbase switching from USDT to USDC 35:00 What to expect from 2023 41:00 1000 people work for Circle The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

There's been endless fear, uncertainty, and doubt in the crypto space, and a lot of that now has been centered around stablecoins. Now, Binance obviously halted USDC withdrawals for a little while. Coinbase is encouraging their users to switch from USDT to USDC. And of course, this year, we've had the blowups of algorithmic stablecoins like UST. But I want to talk about something. I bring on an expert. I've got Dante Disparte today from Circle, a man who you may remember just one year ago was having his own Senate hearing. SPF didn't quite make it to his, obviously, we know. But Dante, you know, he showed up and represented the industry well. And now we have him here to talk about everything happening right

now in the crypto space, as well as all the news surrounding stablecoins. You don't want to miss this. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Let's go. finance appearance yesterday. So here's what happened. About two hours before Yahoo was going live, I got a random request to come on the show and talk about SBF, FTX, and of course, the congressional hearing that day, what was going on with finance. They gave me basically this list of general topics that we might touch, but everybody knows exactly what you're going to talk about whenever you go on TV right now and talk crypto. Well, what they didn't tell me was that Brad Sherman, the only guy to have gotten an F from the crypto advocacy group, which he wears like a badge of honor, literally the biggest crypto hater, arguably on the planet, but certainly in the U.S. government.

What I didn't know is that they were going to be interviewing him for eight minutes right before me. There would be no commercial break. I would watch him, and then they would switch right to me 30 seconds later and ask me, hey, what did you think of that? So, yeah, to be honest, I rarely, as you know, get particularly emotional. I don't even get particularly emotional when I lose tons of money or when my money is locked up in Chapter 11 bankruptcy on platforms like Voyager. I come, I show up, I smile. But that pissed me off. He pissed me off because there was not a single honest thing that he said. And right now, I think it's important to note that many of these politicians, regulators, legislators, of course, the mainstream media, it's easy for us from our echo chamber and from our bubble and from a place of knowledge and experience to dispute what they say and get angry at their lack of knowledge or their bad takes. But I think it is important in general to understand that most of them just don't care or they just don't know.

As important as this is to us, it's not really that important to them. So it's acceptable to understand their bad takes. But what we need to do is push back and educate them better. But in his case, he knows exactly what he's doing. He knows exactly what he's doing. He's proposed an outright ban on crypto, doesn't think it should be regulated because it thinks it will be given credibility. But if you guys missed that, you can check it out on Yahoo Finance. I actually found out today that as far as the video clips that they've posted, it was their most viral video they've basically ever had. So I appreciate you guys all sharing that around. But listen, I'm not the only person that has to go answer for the crypto industry on a regular basis on TV. I seem to only get the call, by the way, when things are terrible. Nobody ever calls me in the bull market. It's like, who can we get to cope on behalf of the entire industry today? And they bring me.

But today I have someone who's actually arguably much better at it. And that is Dante Disparte from Circle, man. How are you doing today? Great to be on with you, Scott. It's a fateful anniversary. Yeah. So let's talk about that anniversary. What were you doing a year ago today? Well, look, a year ago this day, it was my job to sit in the hot seat in the Senate Banking Committee. So it's a little bit of policy whiplash to have the same hearing occur. Except this time around, you could argue that perhaps the policymakers and regulators like Brad Sherman would feel vindicated that

their calls to alarm that crypto was excessively risky and so on might be answered. On the other hand, you and I and others who are very careful watchers of the space would say the technology did not fail. Good old fashioned garden variety 2008 fraud is fraud. and the speed with which, you know, justices met it out and financial forensics tell a story of the failures of Terra Luna, the failure of FTX and the losses of confidence in money this year. It's not just a crypto winter in some respects. It might be an ice age, but the technology ultimately, like all technologies, is a tool. And I think it will be an enduring tool in financial services and in people's lives. I think we all agree on that point. But that obviously brings us to stablecoins and what USDC

is doing specifically, because that clearly is a fundamental part of the technological advancement of the crypto space. I've actually made the argument repeatedly that for now, even with all of the promise of crypto and all the things we talk about that it can do, that the singular true killer app has actually been dollarized, tokenized dollars, aka stable coins, crypto coins, whatever people want to call them. But what you guys have built is probably the most used and single most viable use case that we have for crypto. Well, and this is why in no small measure, Scott, the world is paying attention to it, right? You will have to rewind the tape. It was in 2019 where originally the Facebook Libra project

was brought to market. And since it has catalyzed before Libra, the idea of central bank digital currencies was literally buried in the annals of the IMF or the World Bank as a particularly bad idea. After the Libra project came and went and its obituaries were written many times, we don't have to relitigate that. 105 central banks around the world want to create a central bank digital currency. Today, the very best operating proxy for a form of digital money that you and I could send, spend, save, and secure with the trust, the speed, and the instantaneity of the internet is a stable coin. And of that category, let's be brutal, right? Not all have met the first of the two terms of art, stable, and certainly not in this environment. And few have met the other standard coin. And to meet the classical definition of money, you have to have

three properties satisfied, unit of measure, unit of account, and store of value. And we think USDC has not only been the flight to safety asset in these very turbulent times in the crypto markets, but actually in the real economy, it has endured all of those types of tests. And even today, over the last 24 hours, it's now a $45 billion total circulation of USDC. And so historically, as with Terra Luna and today with FTX and sort of all the turmoil in the marketplace, USDC is that flight to safety asset. In the same way, the real U.S. dollar is when the global economy has uncertainty. Can stable coins collapse? I mean, that's the title of the stream today in the first place.

I know it seems a bit hyperbolic and a bit dramatic and a bit clickbaity, but I don't think anything applies to those categories now in the crypto space for your average user, considering probably half the people or more who are in crypto in some way have very directly felt one of these insolvencies or failures. Sure. Well, look, I do think as a general matter in my own Senate hearing and as Jeremy Allaire and others go around the world, educating people about the distinctions between how Circle operates and maybe products and services that have the namesake stable coin, but are anything but stable or stable in name only. We've been taught the lesson, right? Terra Luna this year was an epic failure.

But was it a stable coin, right? Or was it financial alchemy clashing with the Internet? And it also there, too, has all these tinges of good old fashioned garden variety fraud. That is an example of failing that test. The other big questions relating to the remaining category of stable coins is that all too often the policy and regulatory conversation prioritizes bank-like risks, but forgets about the real purpose of a stable coin, or what we like to call a dollar digital currency like USDC, is individual ownership, universal transmissibility, and the ability to provide for redemption at par for a US dollar, even in the issuer's bankruptcy. After 2022, none of those risks are abstractions anymore. And that's why so many people are paying attention to it. The other piece I would say is of all of the crypto innovations that we have seen over the years, the stable coin garners the most policy and regulatory attention

and frankly, market attention, because it's the most likely to be plugged into the real economy and the traditional financial system to do things that you cannot do if to be banked is about brick and mortar and if money is just in physical form. Yeah, that all makes perfect sense. So effectively, as long as you're backed one for one, and that is vetted and regulated and very clear in theory, you could redeem every single coin in existence. Wouldn't have a very good business. Well, you wouldn't have a very good business, but that basic value proposition only matters and is only demonstrable during periods of stress. One thing to remind people, the $45 billion of USDC in circulation today is a net

number. Throughout the course of its existence, we have redeemed successfully $100 billion in counting, and we have cumulatively processed more than $7 trillion in on-chain transactions. The other thing I would say, and this is really important, is a lot of stablecoin projects often look like monetary airline miles, but they're only usable on closed networks or in single exchanges or single blockchains. Circle, broadly speaking, has taken the all ships rising approach, right? We have very specifically been, since day one, a multi-chain company. We have very specifically tried to build a canonical native version of USDC

on multiple public blockchains. And the reason simply is as those chains start to become increasingly high performant and you follow the developer community and the reason simply is as those chains start to become increasingly high performant and and you follow the developer community and the robustness of those chains then usdc by by virtue of being multi-chain innovation is universally available it's bridgeable it's always available and and sort of portable to individuals around the world and that's a powerful feature that doesn't enter the stablecoin conversation all too often. And we don't talk about bridges here. It's become a four letter word because of that. We don't talk about Bruno. Right. And so you talk about the redeemability, obviously, and the fact that it's always one for one. I love when people talk about pegs on individual exchanges of stable coins going off, which to me is completely irrelevant,

obviously, as long as you can redeem those coins one for one. But I do think there's a lot of confusion for people as to what that means. But speaking of being able to redeem, obviously, it was huge news yesterday. I'll go ahead and bring it up. I have the story here that Binance temporarily halted withdrawals of stable coin USDC as investor concerns mount after FTX collapse. Now, this caused a lot of hand waving and was a huge head shaker and, you know, caused people to say that Binance was going the way of FTX. But is that what's really happening here? I mean, can you give aars of Binance's banking relationships, nor how its white-labeled stablecoin issuer, Paxos, has structured its product. But what I can say is you'll remember, and I'm sure many of your listeners and viewers will remember, that not too long ago, some of the crypto headline news was that Binance

and Paxos jointly auto-swapped USDC on their exchange and put in its place the Binance white label stablecoin issued by Paxos, BUSD. The move, ultimately, I analogized it a little bit to NASDAQ taking your Apple stock and giving you RadioShack without having asked for your permission. But ostensibly, one of the points that I think does matter here, and this is generally, I think, true of all exchanges around the world, is not your keys, not your crypto. There are some teachable lessons about not all these assets are created equal, even if they're dollar pegged. The liquidity, the banking integrations, the forms in which you could use a USDC is radically different than any

of its nearest peer stable coins. And so I have a suspicion that some of this liquidity challenge that might have appeared over a 24-hour period may be born from that move. Otherwise, I simply cannot infer about how they've structured their banking relationships and the on and off ramps to the stable coins they've preferred. I think what's notable, obviously, is that Binance is an offshore exchange. So in theory, we're not really talking about Americans here. And the preferred asset that people are trying to withdraw is clearly USDC. Well, again, how we perform in tests like these are just good boundary cases of the engine works, right? The liquidity works. What big banks do is known as asset liability management. It's not enough to just

take my word for it or Jeremy's word for it and promissory statements on Twitter. Hopefully all of crypto and all of finance has learned their lesson that relying on promissory statements on Twitter is insufficient, right? There is this concept of trust but verify. A lot of stable coins, a lot of crypto projects are now starting to embrace sunlight. I like to joke in a little bit of a homage to Batman, that Circle was born in it, right? From the very first instance of USCC entering circulation, we've created a cottage industry around auditors providing attestations of proof of reserves. We wanted to create a race to the top in terms of trust, transparency, auditability, and

disclosure. Today, you could literally get daily proof of reserves down to the individual QSIP numbers of treasuries that are comprising the lion's share of USDC in circulation. That's a very high bar. I think it's an important bar because the minimum expectation people have of an instrument like USDC is that it is in fact a dollar and that there's no buyer's or spender's remorse if they want to use it for crypto trading or for making a basic transaction. Yeah, makes perfect sense. You alluded, that analogy is actually incredible,

taking Apple stock and converting it for RadioShack, which we all know is bankrupt. So BUSD, therefore, obviously, is the RadioShack in this case. It's funny because we once reached out to Circle to do a potential debate between you and Paolo Arduino or Jeremy, who I've obviously had on the show. And I actually have it pulled up because she made the most hilarious comment. He or she, I actually don't know. She said, Circle and Tether are not a direct comparison. It's like comparing apples to Play-Doh. actually have it pulled up because she made the most hilarious comment or he or she actually said circle and tether are not a direct comparison. It's like comparing apples to Play-Doh. I've obviously I've shared this with Paolo and he kind of laughed because we're friendly. But

if BUSD is Radio Shack, where does tether really, really fit into the hierarchy? Well, look, I mean, you know, and by the way, the RadioShack comparison is not to draw a comparison on the quality of a particular token. It's to draw the ire that the consumer and the stock market and the news media would flag for the lack of consumer participation in the swap of someone's assets. That's the point I'm trying to make. And the customer did not participate in the swap of those assets. That was something done to optimize on-chain dollar liquidity and on-chain revenue or on-platform revenue and not something the customer necessarily participated in. That's the point I'm trying to make.

I also would argue, and I've said this for a long time now, you know, if Circle and USDC's single competitive set was the existing category of stablecoin issuers in circulation, then I don't think as a company we have sufficient imagination. Our competitive set is broad, global, real world financial economic activity. And so, you know, sure, in the crypto league tables, it's nice to be number four today. And I suspect, you know, it won't be long before we can look into the future and say those league tables were not the right competitive set for Circle or USDC. I think of Circle's business activity as financial markets infrastructure

at internet scale that also happens to use cryptography and blockchains. And so our addressable market is hundreds of billions of dollars of global remittances that are stuck in the 1700s, global commercial activities that are stuck in the 1800s. If you wanted to ship commercial goods today, you need an irrevocable letter of credit from correspondent banks that literally do not speak to each other. And so that open use case of payments and always on digital dollars is the real digital currency space race. The short term activities of poker chips in a crypto casino. I mean, interesting, generate circulation today, really important bootstrap use case. But we've got our eyes on a much bigger price.

Yeah, you have to start somewhere and you obviously have your eyes on the much bigger prize. So where do central bank digital currencies come into that story? I don't think you're concerned about Brazil doing it or the Bahamas doing it or Bermuda doing it, or even probably China doing it per se. But if we do see a Fed dollar, a United States central bank digital currency, where does that leave private currencies like USDC? Yeah, well, look, honestly, Scott, it's the most often asked question of every stakeholder that we engage with from investors to the media to policymakers and think tanks. The good news is I take great pride in this metaphor, money talks, wealth whispers, power is silent. And if you really, really want to inform a policy conversation as big and as

complicated as that one, you're not going to do it only on crypto Twitter, you have to actually be in the room. And what I can tell you is that in a strange example of the crypto and fintech upside down, the question of central bank digital currencies is one of those areas where banks, fintechs, and crypto companies have common cause in thinking they're a particularly bad idea. For example, would you really want to have a personal retail account with the Fed? No. Would the Fed really want to have you as a customer? Probably not. In fact, I could tell you for a fact, the Fed's own Project Hamilton paper, which was produced by the Boston Fed that are the center of excellence on

the CBDC conversation, says three things about a CBDC in the United States, bearing in mind that Congress has not given Fed any authorities to do this, right? So this is super abstract. A CBDC in the United States would have to be intermediated, i.e. flowing through the two-tiered banking system. It would have to be KYC. In other words, someone's going to have to conduct a know your customer screening on you. And number three, it would have to be privacy preserving. I can literally not think of a better proxy for those three standards than regulating privately issued dollar digital currencies like USDC, and then creating this idea of fungibility between like-for-like digital currencies so that they could interplay with

the banking system, the credit and payment system, and then more generally payment systems. And so I think it's an anti-Western idea, and I'm willing to wager we're not going to see a dollar digital currency issued from the Fed, but rather well regulated payment stable coins like USDC end up filling that void and allowing the United States and the West to win the digital currency space race. Yeah, it seems like you guys have already done the hard work, right? This is not easy. I mean, you know, the expression like the pioneers get the arrows and settlers get the land. Many people may not like that expression, but you know, this stuff is not easy. Keeping always on digital dollars working at the scale of USDC. This is not an abstraction. USDC today is in 191 countries because of the open blockchain

infrastructure that we leverage. We've processed trillions of dollars of on-chain transactions. We've been integrated very deeply into traditional financial services firms. And that experience is hard to replicate. And so when some say if the Fed doesn't do it, then China and the PBOC, the Chinese central bank, will win and digitize the yuan and replace the dollar globally, they almost negate how money moves today. The dollar, like Coca-Cola, is under every tree everywhere and available all over the world because of its transmissibility through public-private innovation and through the free market. Digitizing it and turning the dollar into a cryptographic token is not only values aligned, it's a part of driving US competitiveness and, frankly, global security. Yeah. That was a great question from the audience

and one that I get literally every day, not even specific to you, but how does a stablecoin make money? How does Circle make dollars off of USDC? It's obviously a highly profitable business. Yeah. Well, first of all, I appreciate the question. I guess it's from Miguel Hernandez. The issue, of course, this is not a charitable activity. Right. I do think a lot of the infrastructure we're built, we're building can fill a void of digital public goods. Everyone everywhere should be armed with a digital wallet that's privacy preserving in which they could interact and have an economic life on the Internet and interactions on the Internet that are privacy preserving. That piece is a digital public good.

How we make money on USDC is pretty straightforward. Number one, USDC is 20% cash, 80% treasuries in the care, custody, and control of US regulated financial institutions. And of course, as a result of that very conservative dollar base, it's interest sensitive. And so the nominal spread of keeping parity of all USDC in circulation with its reserves generates net interest income for Circle. That's one piece of the puzzle. The other ways the company makes money are what I like to call the four S's of payments. How do you send, spend, save and secure denominated in USDC? And I don't know about you, but if as an individual or as a company, you've interacted with blockchains, oftentimes they're anything but frictionless. And

in many cases, they're anything but trusted. And so Circle and Circle account and Circle services have abstracted away a lot of the friction and a lot of the choice and a lot of the issues of interacting with multiple blockchains. So that's one other piece of the business model. The last piece is it's what good is all of this innovation if there's no off-ramp? And that's why when there's a crisis in the world or there's a lack of trust or a liquidity problem, USDC grows globally because it's the most proximate digital asset connected to dollar liquidity in the US regulated banking system. Crypto works insofar as you have an off-ramp, right? And the dollar is the currency of the internet in no small measure because of payment stablecoin innovations like USDC.

So that's how we make money. And we're regulated, C to shining C in the United States and many other jurisdictions around the world as a payments company in no small measure, because that's the core activity we're all about, money movement. It's interesting when we see people railing against centralized exchanges, which to some degree is fair at this point, but they also have their purpose. As you just mentioned, I think it's disingenuous to pretend that you can just hold all of your coins in a private wallet forever and never exit through an off-ramp to dollars to pay, I don't know, your kids' school tuition and your taxes and your mortgage. Right? So there has to be a happy medium there. There has to be a way for people to exit into actual dollars, even if

you believe that the future is purely crypto. Well, and Scott, therein lies the point. The internet was a genuinely disruptive technology. And if you were a traditional print publication pre-internet and you watched and did nothing and you didn't adapt and you didn't have a digital transformation strategy, then you looked like a turkey a couple of days before Thanksgiving. Blockchain, however, and the advent of cryptography and these tools, because literally that is what they are. And it's going to be very easy and very instinctive for people to clutch their pearls after 2022 and never, ever want to use these words again because they will be linked to fraud and linked to SBF and linked to FTX and Terraluna and Doquan. However, these are technologies and

they're not disruptive technologies, rather they're augmenting technologies. And the most powerful thing that can happen for hundreds of millions of people around the world to have access to always on trusted device centric payments and software intermediate financial services is that these tools converge with the real world. What good is your Internet hot money if you can't pay your bills with it? What good is your Internet digital asset tokens if it doesn't speak to the traditional banking system? That convergence requires that crypto puts down its knives and its arms and that traditional finance stops looking at crypto as a threat and starts looking at these innovations as essential for their own relevance in the 21st century. And so my message to the world and anybody listening is with the big banks and traditional financial institutions, watch what they do when it comes to cryptography, digital assets, and blockchain, not what they say. JP Morgan. Yeah. I mean, Jamie Dimon is like one of the

most outspoken critics, has these incredible one takes, you know, hot takes on why crypto is awful. Meanwhile, on the back end, they're offering crypto services to all their wealthy clients. They've taken, I think they've gone out and they basically have gotten a trademark for a wallet. They're using a private blockchain for transactions. I mean, it really is a watch what they do, not what they say, as you said. Do we get to a world then though, where instead of a central bank digital currency, where USDC has become trusted and large enough where I can pay my kids tuition and I can pay my taxes and I can pay my mortgage in it. And I literally never need that off ramp.

The hard fact is, while people might be quick to dismiss this, and this was the basis of my own Senate hearing this time this day last year, it is it's very easy to dismiss the innovation as little more than poker chips in a crypto casino. In fact, the chairman of the Senate Banking Committee had that exact incredulity as he was asking me and grilling me questions, bearing in mind I bothered to show up. But if you just paid attention to the crypto casino and you ignored what is happening in the real world and what is happening with this convergence that I spoke of,

then you would miss the green shoots. The green shoots today, MoneyGram globally creating crypto on and off ramps and integrating USDC as a medium of exchange for global remittances. Visa, MasterCard equally. The Visa network is 70 million merchants strong. And that's the point is the technology is being abstracted into the background. And the ability to have trusted device-centric payments that you could beam to people peer-to-peer and that you could use through near-field computing at endpoints all over the world is already happening today.

Check out Bitso in Mexico and Circle have created a really powerful and persistent US-Mexico remittance corridor. And that's the breakthrough for this innovation and this technology. Now, is it easy to then say, well, crypto then is irrelevant as a capital markets activity? I'd say perhaps not. Too easy to dismiss decentralized finance, too easy to dismiss crypto trading and digital assets because they are risky, but they have intrinsic value and they're fulfilling activities that, again, would not be possible if banking was brick and mortar and finance was only moved around on analog rails. That's the breakthrough. And you mentioned decentralized finance just now. It seems like Circle in particular will

have a very difficult needle to thread between being compliant or popular with legislators and regulators, but also being a fundamental part of a decentralized finance system that offers an opt out from the banks and those very sort of legacy systems that we're talking about. What is USDC's role in the future of DeFi? And I guess what is the future of DeFi in context of everything we're seeing happening now with centralized failures and exchanges? Well, and so Scott, you mentioned, I think, some points that really get to purity, right? The point of crypto at the philosophical level and the technological level was democratization of finance. And so I think there have been some really powerful, teachable lessons in 2022 about the aspects of crypto

that have fared very well, despite all the turmoil. It's the technology-powered properties of it, right? Today, USDC is the most widely used digital currency in DeFi, period. 75% of all USDC held is actually off exchanges, period, on what are known as EOAs or externally owned addresses. And the dispersion is global in scope, which suggests that people are using USDC as a store of value and a trusted asset. And the utility value phase is what we're really all about. That utility value has three building blocks. Number one, trusted, transmissible digital dollars on the internet, step one. Step two, you have to build

for programmability. There's a Cambrian explosion in this industry that is developer first and it's about building for programmability. Third, you need to build for composability. And if you've built a digital dollar on a closed blockchain, what I like to remind my banking friends, a Google spreadsheet on Amazon's cloud is not a blockchain, does not a blockchain make. The point of these innovations is about composability, programmability, and internet scale dollars. We think we've got a couple of those building blocks and we've got green shoots all over the world that suggest that the innovation is not going away, but we're now transitioning from the speculative value phase to the utility value phase. That's the core message that USDC and Circle are all about. So we have a few questions

about the backing of USDC. I know that it's very public and transparent, but maybe you can just jump on it as well. And Dave here says, how does retail know if USDC is backed one-to-one through third-party audit or through Merkle tree proof of reserves? That's a great well. And Dave here says, how does retail know if USDC is backed one-to-one through third party audit or through Merkle tree proof of reserves? That's a great question. And so, as I said before, the difference between a Rolex and a replica is consistency. We have been providing, since before there was even an industry of large major household name accounting firms, in our case, Grant Thornton, has been providing a monthly backward-looking attestation on proof of reserves. Those attestations are not lighthearted work,

but to produce one, our finance team works with Grant Thornton. Grant Thornton then verifies that money is actually in a bank account. And every month since the first USDC was issued until today, these reports and arrears accumulate. Circle itself is also an audited company on an annual basis, right? We have also now recently uploaded the share of treasuries in USDC in a fund managed by BlackRock, which is the largest asset manager in the entire world. That's strictly treasuries that provides daily information. We will share that with you, Scott, so you could share it with your listeners on the show notes. But people can get

daily information, a daily snapshot of USDC in circulation and all the reserves backing it. Candidly, some of the on-chain proof of reserves work that is happening today, I think only tells one side of the balance sheet story. Yeah, liabilities are not accounted for. You need proof of liabilities and you need one more, which is that especially with the case of exchanges, a lot of the activity happens in what are known as omnibus accounts or in real cash. That's intransparent if all you care about is proof of reserves on chain or proof of liabilities on chain. So tech alone is insufficient when you're talking about the financial scale

of many of these operations today. It also seems like centralized exchanges to some degree, not all of them, of course, but in this initial phase of sharing their proof of reserves, counted customer deposits as assets rather than liabilities. That's not your money. But this gets back to fundamentals, right? 2008, crypto was born from the hulking wreckage of the 2008 financial crisis. And the core principles underpinning it, I think, matter more today than ever before. Custody of your own assets, trust ultimately in what you can see in evidence, and have some basic fundamental building blocks. That, you know, revisitation of original principles and core principles, I think is going to be really important after 2022. Yeah, I think everyone can agree on that. And we talked about, obviously, the Binance news, and we all know that there's sort of,

well, I won't give it a term, but just it seems a bit dishonest to just convert everything from USDC to USD without the permission of their users. But then you also have Coinbase, which is asking people to switch from USDT to USDC, right? And so why are we seeing Coinbase make that move? They said because they want you to switch to a trusted stablecoin. They're waiving the conversion fee. I believe Coinbase actually is a partner with Circle, so it makes a lot of sense. But is this a similar situation just in the other direction? Well, it's not similar in no small measure because the end user is making the choice, right? I think it would have been a heck of a lot more controversial if Coinbase made that choice for you unilaterally, right? And so I think this

is a very different proposition. This is a company putting out an opportunity for people to enjoy a flight to safety switch in their own view. But the consumer is still making that choice. That I think is a very, very different operating model. Yeah, I agree. That makes perfect sense. So we're in sort of the depths of this crypto winter. I think you called it a crypto ice age, which I had not heard before. And it certainly feels like we're in a 10,000 year period

of down prices and FUD and nonsense going on in this industry. But we still need to look forward now. It's the end of 2022 to 2023. What are your expectations for the growth of USDC in 2023? Do you think that you can continue to increase in market cap while the industry is obviously reeling from all of these collapses? Do you think that 2023 will be a good year for USDC? Yeah. Well, in so many ways, one, we're very, very optimistic and candidly in a very strong, not only financial position, but we think regulatory position. You cannot buy insurance when your house is on fire. And I think that's been one of the teachable lessons in 2022 across the board, not just in digital assets, but in finance and in life. It's been a particularly complex year. We are very, very optimistic about 2023 and years

beyond. And that's what we're building for as a company. Today, we build our business and operate our business on a platform of strength and regulatory clarity. Today, we also anticipate that one of the single most important issues that the Senate and Congress and the US government will solve is actually payment stablecoin legislation. And the next breakthrough in this entire industry is the United States not just taking a hurry up and wait posture and being gleeful about the collapse that harms millions of consumers and millions of businesses where they're caused by fraud or caused by poor technology or failed regulation. We really think it's critical for the United States to actually legislate and regulate.

Twice now, we've had major crypto collapses. The third time, the economic consequences may not be contained to crypto finance. And that could be the collapse of a very large global stablecoin, the failure of global exchanges. A lot of these innovations are connected to the real economy and they're connected to real people and so um i'm optimistic that people will legislate and i'm optimistic that with legislation comes greater competition for circle and others but also a heck of a lot more user adoption that makes us mainstream and everyday everyday usable yeah i think we can all agree that we need sensible legislation. But this story just breaking from block work, senators can't agree on path for stablecoin regulation during hearing,

right? Which is just ironic with what you were just saying. And it just crossed my sort of a news right now. I mean, they had a committee hearing on this yesterday with the Senate Banking Committee. And I don't know if it's because of the normal partisan politics, although I can't see how this is a partisan issue, but inevitably everything becomes one. But if they can't even agree and they argue, they don't know how to define what it is, how can we hope to get sensible regulation, legislation on this anytime soon? Yeah, well, first of all, I guess it looks like I have to go back. Oh, yeah. It's from a year. I actually, actually came up literally, but it's from the year ago when you did it. So what I can report, I was going to say, if that's today's news, then I have to definitely

go back and talk to my friends in the Senate. If on the other hand, that's a year ago news, then what I can tell you is there has been really, really material bipartisan collaboration on the stable coin agenda. I can speak not on behalf of any member of Congress or any senator, but, you know, Chairwoman Waters, Patrick McHenry in the House Financial Services Committee, and their teams and their staff have done really thoughtful, really deep work in looking at boundaries to promote competition for the dollar becoming the currency of the internet and boundaries to effectively unlock what I think of in the United States as a fintech constitutional crisis. Remember,

a company like Circle, whether you like it or not, is licensed in every of the states that requires a license. And those licenses carry examinations and they carry engagement with state banking supervisors and regulators. So we're regulated. You might not like how we are regulated at the federal level, but then solve for the void. The United States is alone in all of the global modern economies and not having a payment systems charter or a license at a federal supervisory level. That's a gap. And so if the U.S. really wants to compete globally, its job is not to digitize the dollar and disrupt its own banking system. It's actually to create a level playing field for bank and non-bank actors to compete in how

money moves in the 21st century. And I think we'll get there. I remain very, very optimistic that we'll get there. And in fact, again, the president's working group on financial markets, which is the body that advises the White House on global financial issues, has flagged payment stable coins as their topmost issue in crypto. Not the failure of global exchanges, not the likelihood of algorithmic stable coins blowing up, or the likelihood that near shore frauds would occur in this industry like FTX. It was the stable coin agenda is the top one on their minds. And it should be.

I mean, Lummis and Gillibrand, when they proposed their bill, that was certainly at the forefront and seemed like the thing that could be addressed first. And this should be the most important thing, because as much as we want to talk about the assets that we love, Bitcoin and Ethereum, whether securities, all of these things, this is the dollar, right? So you have to imagine that the houses of Congress both would take this and the White House, as you said, would take this extremely seriously because it's a representation of their currency, the global reserve currency all over the world. Yeah. And therein lies, I think, frankly, the opportunity, right? Back to

where we began, many are likening this period of time as sort of a digital currency space race. And the stakes are very high. 105 central banks are thinking about digitizing their national currencies. The Europeans are particularly antagonistic on this topic. And many, many regulators are saying, well, an FTX or a Terraluna couldn't have happened here. My counter argument is risk avoidance in the 21st century is not a great strategy. We need to encourage thoughtful, responsible innovation, thoughtful, responsible risk taking. And the only way I think the United States wins this digital currency space race is by incentivizing whole of society competition, ingraining our value systems in this digital currency movement on the internet, and allowing companies like Circle to thrive.

When I joined Circle, we had fewer than 200 people. Today, we have 1000 people employed in 35 states and counting in 12 countries. This is a really great, powerful example of entrepreneurialism at work. And I hate the fact that we're working, that our policymakers are often working against that as opposed to enabling that happening in the United States. Well, I know we're up against time. I have 1,000 more questions, but I'll ask them next time. You can follow Dante at D Disparte on Twitter. Where else can people find you and keep up with you guys are doing, be able to track those BlackRock audited treasuries and such that I know that they're

so interested in on a very day-to-day basis? Yeah, well, look, Circle.com is the home of all things Circle and USDC, including all of the trust and transparency information. If you care about what I have to say personally, I have a personal website, which is my first and last name.com. But Scott, really great being on with you today. No holds barred and great way to celebrate my Senate hearing anniversary. Well, I very much appreciate it. So much so that I brought up news from a year ago to discuss as if it was fresh and new, but there it was coming across on December 14th. So guys, everybody, please follow Dante, obviously.

Check out everything that they're doing. And we appreciate you always having a very honest voice and showing up to things like Senate Banking Committee hearings when you know you're just going to get screamed at and criticized the entire time. Everyone, tomorrow, 9.30 a.m. Eastern Standard Time, we've got a mega roundtable. I've got Raul Paul, Lex Oakland, and Mike Alfred. And obviously, we've had Mike mega round table i've got raul paul lex oakland and mike alfred and obviously

we've had mike alfred on the show a lot got a tweet go very very viral either yesterday the day before that said take all your funds off binance so i absolutely want to ask him why he said that and if he has any evidence uh accordingly but or if we're just uh spreading more fear uncertainty and doubt once again thank you dante everybody else i will see you tomorrow thanks again peace uncertainty and doubt. Once again, thank you, Dante. Everybody else, I will see you tomorrow. Thanks again. Peace.