This Week in Startups - The Rise of Stablecoins with Circle’s Jeremy Allaire | E2004

Episode Date: September 6, 2024

This Week in Startups is brought to you by… LinkedIn Jobs. A business is only as strong as its people, and every hire matters. Go to https://www.linkedin.com/twist to post your first job for free. Terms and conditions apply. Google Cloud. Accelerate your startup journey with the Google for Startups Cloud Program. Get up to $200K in Google Cloud credits – or up to $350K for AI startups – plus training and guidance. Apply at⁠ https://startups.google.com/twist Beehiiv. Power your newsletters with AI tools, referral programs, and ad network features—all in one platform. Get 30 days free and 20% off your first 3 months at https://www.beehiiv.com/twist * Todays show: Circle’s Jeremy Allaire joins Alex Wilhelm to discuss the growth of stablecoins (49:06), stablecoin market infrastructure (22:23), their impact on global financial systems (56:07), and more! * Timestamps: (0:00) Circle’s Jeremy Allaire joins Alex Wilhelm (2:08) Jeremy's early career and the evolution of the internet (5:28) Transition from Macromedia to Circle's founding (12:10) LinkedIn Jobs - Go to https://www.linkedin.com/twist to post your first job for free. (13:21) Bitcoin, stablecoins, and Circle's compliance (20:53) Google Cloud - Get up to $200K in Google Cloud credits – or up to $350K for AI startups – plus training and guidance. Apply at https://startups.google.com/twist (22:23) The current state and future of stablecoin market infrastructure (28:07) Integrating stablecoins with traditional finance (34:12) Beehiiv - Get 30 days free and 20% off your first 3 months at https://www.beehiiv.com/twist (35:40) Stablecoins' impact on global financial systems (41:30) Circle's business model, scalability, and blockchain potential (49:06) Growth of USDC and other currency stablecoins (51:10) USDC market cap trends and interest rates (56:07) Stablecoins in the global financial system and US regulation * Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com Check out the TWIST500: https://www.twist500.com * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Follow Jeremy: X: https://x.com/jerallaire LinkedIn: https://www.linkedin.com/in/jeremyallaire Check out: https://www.circle.com * Follow Alex: X: https://x.com/alex LinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm * Thank you to our partners: (12:10) LinkedIn Jobs - Go to https://www.linkedin.com/twist to post your first job for free. (20:53) Google Cloud - Get up to $200K in Google Cloud credits – or up to $350K for AI startups – plus training and guidance. Apply at https://startups.google.com/twist (34:12) Beehiiv - Get 30 days free and 20% off your first 3 months at https://www.beehiiv.com/twist * Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland * Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow TWiST: Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups Substack: https://twistartups.substack.com * Subscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

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Power your newsletters with AI tools, referral programs, and ad network features, all in one platform. Get 30 days free and 20% off your first three months at beehive.com slash twist. Welcome back to this week in startups. My name is Alex. I'm Alex over on X or Twitter,

if you want to call it that. Today, we have a very special guest, one that I've been looking forward to talking to for some time. Now, I've been covering crypto since 2013, 2014, somewhere in there. Back when Bitcoin was either double or triple digits, if you want to know how far back that was. And a question that has always come up is, what will be the killer use case for crypto? Some people said store of value. Some people really leaned into trading. I think that the union of those two things is the real thing that crypto is going to unlock for the world, and that is stablecoins. So, Today on the podcast, we have Jeremy Aller back.

Jeremy is the co-founder, CEO, and chairman of Circle. Jeremy, hey, welcome back to the show. Thank you, Alex. It's awesome to, awesome to be here. Excited for the conversation. Yeah, so before the show, we were talking about the ancient past, the 90s, if you will, and the era of the internet that brought us into the 2000s. You founded a company called Aller that made Cold Fusion.

Tell us about how you took that company and ended up the CTO of Macromedia. Yeah, absolutely. So just, yeah, going way back in time, just even before I founded that company, I got involved in the internet in 1990. And the thing that got me interested in this was I experienced firsthand the sort of power of open networks, distributed and decentralized networks, open protocols, open source software. This is sort of what I like to refer to as like the DNA of the internet. And I experienced that as I was looking at, you know, what was happening with the collaboration. of the Soviet Union. I was sort of studying that. And I basically, you know, I went very deep on technology and became convinced that like this would be transformative to the world. And then in 1994, as the very first like graphical web browser technology emerged, it became really clear like, okay, we now have like a piece of software that you could render content and applications and other things into, which led to this concept of sort of the web as an application platform. And so with my brother and others, we co-founded a lair, which built, as you noted, Cold Fusion.

And Cold Fusion came out in January of 1995, and it was the first commercial web programming language. There were some things like Pearl, if you remember Pearl, and people would write C code behind web servers to like make things dynamic in web browsers. But Cold Fusion really made it easy and accessible to anyone who had an idea and like $1,000 to build an interactive application you can deliver through a browser. And that was a really big concept in 1995. And that like took off. And we rode the whole wave of people building websites, e-commerce, bring content online.

We had literally, with the whole family of tools that we built out, we had millions of developers using our software. And then as, as that market matured, like, we, we took the company public in early 1999. And we were unfashionable because we were profitable. Most companies going public in the dot-com era were not profitable at all. But it was good. But we were kind of an armed supplier to the whole Internet 1.0 revolution. And then after we went public, we merged with Macromedia, which was also a huge provider

of tools for building the Internet, building the web, building content, and so on. And I became the chief technology officer of that combined company and then helped pioneer the use of Flash, which we all probably remember as like a very powerful piece of software for doing deeper forms of media, communications, interactivity over the internet. And that was, yeah, that was back in 2001. So, so going back quite some time. I mean, we outgrew Flash, but I do think Flash gets a bad rap in retrospect. Like, we used it for a really long time. Flash was great until we, I don't know, had better stuff. But I feel like there's a lot of like Monday morning quarterbacking about the demise of Flash that I don't think is entirely full.

fair. I know a lot about it. I know a lot about it. Yeah. So this is a little bit of a layup for you, but, you know, giving your conversation about the internet, open protocols, decentralization, what brought you from the end of your time of Macromedia to 2013 when you decided that, hey, we need to found Circle, we need to start working on the stable coin issue. I presume that there's some ideological kind of parallels between those two points. Yeah. So, I mean, if you go back to sort of what brought me into the internet in the first place, I was actually studying international political economy. I was sort of looking at kind of comparative economic systems, political systems.

I was very interested in sort of international economic systems, stuff like that. I got, you know, excited about the internet, got excited about sort of the transformation of these open networks and what that can do for information and information distribution and software distribution. And that was sort of led there. And then actually, it was at Macromedia where, you know, we back in in, you know, I was 22 years ago, we put a seamless way to play video into Flash Player in March of 2022, or 2002, sorry. And we basically made like video playback ubiquitous on

the internet. And we kind of made it for the first time, it was like easy for anyone to like put video into a browser. And that really, that led to the development of YouTube, which exploded. That was all built on Flash Player video. And that also led me to found a company Bright Cove, which basically was taking, again, these fundamental DNA of the internet, open networks, open protocols, distributed systems. And my idea was, well, we could basically enable any, any company, any media company to directly distribute video and television on the internet. And back in 2004, right, we had just started getting broadband. We had just started getting Wi-Fi. We didn't really have mobile devices yet, but there were all this talk about connected

devices. And it was very clear, like, okay, I could see how, like, we're going to have all these connected devices. We're going to have Wi-Fi and mobile broadband, and that's going to unleash video in a way that it wasn't possible. So built up a kind of online television distribution system, online video platform. And that, you know, that was kind of a continuation of sort of, okay, there's now new stuff you can do on the internet. It's richer. It's fuller. It's sort of more true to things people thought during the dot-com era would be possible. actually became possible in Web 2 when you had these sort of more technology proliferation that was better.

And that was a very successful business and grew and we IPOed Breitkov in early 2012. So we sort of grew it to that point. And so here's sort of getting to the answer to the question, which is when the financial crisis hit in 2008 and 2009, that like, significantly stimulated my earlier interests that were my earlier kind of academic interests. And I sort of became like an armchair political economist. And so I found myself reading a huge amount about the nature of money, central banking, the international monetary system, the nature of fractional reserve banking, like all this stuff, I became really interested

because I was like, how did this happen? And is there a better way forward? Is there a better way to build the international monetary system. And, you know, it's not the kind of thing where, you know, you sort of wake up one day and say, I'm going to create a startup to, you know, transform the international monetary and economic system. It's not, you know, it's not a typical thing that you just decide to do. But so at that time, 2009, you know, 2010, like, I didn't do that because there wasn't a clear path to do that.

It was more just, I'm interested in this. And then in 2012, actually, not long after I took Bright Cove Public. I came across crypto and went down the rabbit hole and got very excited about the technology. And I am a technologist. I'm a product guy. And I kind of looked at it from a technology first perspective. And I saw several things. I was like, wow, this is actually a technical breakthrough.

There are problems. There are computer science problems that have been solved here that are really powerful. And I think the first time I synchronized the Bitcoin blockchain onto my laptop. and was able to conduct a transaction using that directly over the internet. That was like the NCSA mosaic moment for me. It was like, oh, my God, this direct infrastructure where you can safely and provably conduct a transaction directly with a counterparty over an open source protocol on the internet.

It's like, wow, this is a breakthrough. This is a missing, it's a fundamental missing piece of the internet. And the more that my co-founder and I dug in, the more that, and in particular into like the technical community, there are a lot of people in the technical community of crypto back then who were really jazzed about ideas like, how could you use this tech to not just have Bitcoin, but issue other types of now we call them digital assets or digital tokens on these networks. And, you know, I had built virtual machines and helped build programming languages and stuff in the past, as we've just talked about.

And so there was discussion of how could you make these types of digital assets, programmable? How could you have programmable money? How could you have smart contracts? And these were like ideas on napkins for a lot of people. There were a couple of white papers and stuff. But it was very clear that all those things would happen. And we could see very clearly how all those things would happen.

We didn't know the exact timeframe, but we knew that those would happen. And when we looked at all that and I kind of merged that with my thinking about like, how do you build a safer financial system and how do you build a more open financial system, all this like converged. And I became basically, it's all I could think about, totally obsessed and obviously decided to found Circle. And, you know, the basic idea, and it goes back to something we were talking about before we started the show, the basic idea was, can we create like an HTTP for?

for money? Can we create a protocol for dollars on the internet that is open, programmable, etc? That was the idea, you know, 10, 11 years ago. And now we've done it. Like, it's here and it's happening. And as you introduced, right, it's sort of killer app of crypto and it's, and it's really starting to take off. But it took a long time to build it. But now it's quite, it's quite a significant scale, but yet still very early. Founders, I know that you're keeping a close eye on your burn rate. I am too. In today's venture market, every single hire you make has to be perfect, right? You can't make mistakes. You got to keep that runway as long as possible so that you can run more experiments and you need talented people to run those experiments and figure out how you're going to

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F-R-E-E? What a great price? LinkedIn.com slash twist. That's right, LinkedIn.com slash TWIST to post your job for free. Hermes and conditions, course, apply. So thinking about the moment that we saw Bitcoin reach the more broader technological consciousness and then stable coins today, I see a bit of a gap between them. And I know this is perhaps me being an old fuddy-duddy.

But when I think about Bitcoin programmable money and reforming the world's financial and economic systems, it seems a little bit strange that we've ended up at a place where the coolest and most hot thing on the blockchain is digital dollars. And we'll get to in a minute, digital euros. Is there a tension between the desire for decentralization and more transparency and then stable coins having themselves tied to existing fiat currencies? I think, my view, and this has been the sort of circle path since we started, was this concept of a kind of hybrid system where if we want to move to a world where a huge percentage of the money that's stored, like the stored value and where economic transactions and economic coordination, all kinds of

economic coordination, not just payments, but like more complex forms of contractual coordination, where more and more of these things are happening on the internet natively, on chain, as people like to say. If we want to get to that world, we have to start from the world we have, right? And we have, you know, the dollar is the strongest currency in the world. The dollar, and you can, you can say, hey, there's 34 trillion of debt and, you know, the U.S. government could maybe, like, fall overpaying its debts or it's overextended or it's, you know, take the Ray Dalio argument about these sort of these long.

running cycles and are we in a decline cycle? And that's legitimate discourse. Like I firmly believe that's very legitimate discourse. But like from a here and now perspective, most people in the world want a network that effectively gives them a stable unit of account and gives them a powerful technologically and utility-wise, powerful medium of exchange. And I think, you know, dollars themselves and digital dollars specifically are really, really a powerful and preferred medium. And so that's a starting point. And we need it rooted in real dollars.

That's why the way we've designed USDC is sort of, you know, getting as close as we possibly can to like government obligation money. And, you know, kind of this fully reserved. So people who hold are like, wow, okay, this isn't as risky as a bank deposit. This is like, you know, T bills and like, and basically, you know, cash that's held with the safest custodians in the world.

And like that, that's, you know, for the people who really drill in, they can see, wow, this is, this is an ultra safe dollar money and it has all this utility on the internet. And that is highly useful. And it is a hybrid world because we are, you know, Circle is a centralized regulated entity. But the protocols of public blockchains are open network protocols. The USDA protocol and the CCTV protocol, these protocols, these are open public permissionless protocols that developers can build on, that end users can connect to, and there's these vast ecosystems of startups and enterprises and big companies that are

connecting to these protocols in the same way that people connected to the HTTP. And so you have this kind of hybrid model. You get the benefits of this public internet infrastructure, and you get the sort of reliability, certainty, compliance, legality of a digital dollar that's sort of anchored in its core in the existing dollar system. And then providing that interoperability layer so that, you know, You want that interoperability layer. A lot of people, you probably remember this when, like, Skype came out.

Like, it was like, wow, I can't believe it. I can have free phone calls on the internet. Amazing. Obviously, we use all kinds of stuff for that now. But, like, you know, for a while, it was, like, really important that, like, you had interoperability. You could use, like, Skype out. If you remember, Skype out was like, oh, I can use my Skype to, like, get on a regular connect to the legacy phone system, right?

Now, it's not quite the same analogy, but it's similar here in that, like, you want interoperability. You want basically the ability to like come on and off chain very, very seamlessly and easily all around the world. Yeah, I had in my notes, is Circle a Tradfai company or a crypto company? I tried to answer that question while prepping for our chat today. And I ended up having no answer to it. I'm glad you think that it's hybrid because that makes me feel better about not being able to put the company into one camp in particular. I do want to go back just a little bit to the point about reserves and so forth. I looked into the funds that you guys hold through your main Black Rock fund, if you

will. Reserve fund. Yeah. Exactly. By the way, I do love that in the SEC filings is like, who can purchase this? Not you. Just circle. Kind of cool to have your own fun. But if you go through the reserves, apart from just standard bank balances, you guys do hold an enormous amount of U.S. federal debt. And when we think about the Euro stable coin, EURC, which has seen some pretty impressive growth lately, does that mean that Circle is going to hold the underlying backing assets for the Euro stablecoin in EU and Euro denominated debts as well? Yeah. So the European stablecoin laws actually affect both USDC and EURC.

And so July 1st, we announced that we were the first global. stable coin issuer to have both a dollar stablecoin USDC and a Euro stablecone EURC legal electronic money in the European Union and issued and made available in the European Union itself. So it's both dollars and euros that are under that regime. We're the only major company and global player with a dollar stable coin that is actually legally compliant now there. But specifically to your question, the laws kind of prescribe, you know, the kind of safety of the reserves and what you need to do. And euro needs to be held in euro cash or it can be held in basically like the highest rated

European government bonds. So think of it as German tea bills or say French tea bills, right? Bundes bonds, for example. Jeremy, that's Italy erasure. Come on. I'm just telling you, what are the highest rated, you know, government bonds? And so some portion, a meaningful portion of the reserves can be held that way. Now, EURC is new. It's growing. But it's, you know, we're not at the stage where we have that sort of same exact structure as EOSDC. But we're optimistic about the potential for Eurostable coin.

And of course, we'll evolve to ensure, obviously, it has to be legally compliant. but we do have the ability to kind of, you know, have a similar structure to USDC. All right, everybody, you know, being at a startup is a team sport. You're not going to get there alone, man. You got your founders, you got the early team members, of course, investors, most importantly, that first couple of customers, right? And you all work together to get your company off the ground. And I have great news for you and your team.

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All right, let's get back to this amazing program. All right. Let's talk about the state of stable coins as a market. You and I are both token terminal fans on Twitter. And they had a really excellent set of charts that shows four critical data points here. One is upper left is outstanding supply, total stable coins in circulation, nearly back to an all-time high if I'm reading that chart correctly. But the charts that really stood out to me was the number of stable

coin holders, the amount of transfers, and how quickly things are moving around. It seems that all the charts right now for stable coins are up and to the right, almost at an accelerating pace. So, Jeremy, why is this moment proving so fecund for the stable coin market? Yeah, it's interesting because over the years, and I would say even say two years ago, a year ago, people are always asking like, you know, what does it take for this to achieve like mainstream scale, right? And, and, you know, my answer has typically been, there's sort of three key things that we need to solve, right? And by we, I don't just mean circle. I'm sort of like,

collectively, like all of us together are trying to figure out how to solve this. One of those is infrastructure. So the infrastructure, the blockchain networks themselves, and my mental model for these blockchain networks is these are internet operating systems. And basically, we need higher performance, higher throughput internet operating systems, these blockchain networks. And so that's been a big jump. Over the past couple of years, we've firmly moved into the sort of third generation of blockchain networks through high performance layer one blockchains and these layer twos.

And what that effectively means is that you can do higher throughput and the transaction costs for per transaction or either a sub-assent or a penny or whatever. And so, you know, this is, you know, Brian. Armstrong tweets about, you know, sub-second, sub-penny transactions, like, we're there, right? And, you know, there are these high-performance networks. And that is contributing to that growth because, you know, you bring the unit costs down, the margin cost down, you make the throughput higher. It's sort of like going from dial-up to broadband and Web1.0 to Web2.

We're kind of going through that infrastructure upgrade, and that's unleashing more utility. Now, the second thing is that stablecoin networks like ESDC are network-effect businesses. They are platforms that people build on, meaning developers build apps to integrate to the protocol. And the more apps that are integrated, the more utility the network has, the more people who have the digital asset, the more utility the network has. And so you have these kind of positive network effect models. And then the more that happens, the more the developers say, hey, like, I'm at a competitive disadvantage if I'm building a product if I don't support USDC.

And so you have the infrastructure upgrades. You have these really interesting, both user and developer network effects that are starting to really take hold. And then you also have what I'll call like real usability improvements. And it's part of the infrastructure upgrade. You know, you probably remember, you know, just even two, three years ago, right? You know, to use a stable coin, you need to like go buy it somewhere. And then you need it to like go get like a browser plug in.

the browser plug in, in order to use it, you need it to buy, like, Ethereum. And like, that cost a bunch. And there's like fees. And then like takes to like seven minutes to transfer the Ethereum to your self-custody wallet. And like, it's just like completely nonsense. Completely nonsense. And and so it would be like totally justified for someone to say like, who in the right mind is going to use this? But now, you know, you literally through, through web-based interfaces and mobile app interfaces, you can onboard into a wallet with like the onboarding experience of like onboarding to like WhatsApp with a mobile ID, a pass key, a face ID, like these kinds of things.

It's secure and you don't have to remember seed phrases and all this jazz. And you can, you know, the, what I like to call the on and off ramps, which is sort of the way in which you can kind of get from the, you know, existing, you know, money system into the on-chain system is much, much easier and getting better. And so all of that combined is creating conditions that allow it to be easier to adopt and use stable coins. And sort of the final boss in all of this is the government. And so what we're really, I think what's really exciting is that all around the world,

almost every major jurisdiction from Japan to Hong Kong to Singapore to all Europe, the UK, UAE and the United States, all these jurisdictions are putting in place laws and regulations that define stable coins as legal electronic money and a part of the real world financial system. And so as those laws happen, then that really opens up the universe beyond the crypto early adopters to everyone. And so like I think by the end of 2025, we, we believe that like stable coins will be a legal integrated part of the financial system, like pretty much really broadly. And so that's why I also

think those charts are great and they're fun to look at and I, and we're excited about that. But we also recognize like it's still super early days when you think about how how large this phenomenon can be. Because we're still, we're kind of like in the crossing the chasm metaphor, Jeffrey Moore's kind of thing. I think we're kind of like midair trying to leap over the chasm right now. We have not crossed, we have not crossed the chasm. Things could still go bad and we could plummet. But I think, I think we're going to make the lead. Okay, I want to get the future currencies point in a second, but on the wallets point,

I do think that the user interface for crypto writ large has gotten so much better over the last 10, 15 years, but also in the last couple of years to your point. Is there a time in the future that you can see when I have, okay, let's just say a city bank, account and I have a debit card and I want to go purchase something and it's a USDC transaction and Citibank could effectively mediate between my checking account balance of dollars and to digital dollars that it might have for its own kind of swapping purposes. And I can use a trad card in a USDC transaction without needing to have a stable coin coin account account or MetaMasca account or Coinbase account, whatever.

And I can just use what I have and not even know that I've switched from regular dollars to digital dollars. So there's a lot in that question. I think, so I think there's a lot of things happening simultaneously that are, that are, that align with what you're describing. So on the one hand, we are seeing more and more, what I'll broadly call like the fintech forward banks or like the, what are often called neo banks, right? More and more of these firms that are just adding directly the ability.

to use stable coins. And so whether that's New Bank in Latin America or that's Revolut in Europe or, you know, a kind of brokerage app like a Robin Hood, obviously, you know, in some ways, you know, some of these huge crypto firms like Coinbase and Binance that have like 400 million users combined, those are like kind of financial super apps increasingly where you can hold a balance, you can take your paycheck, you can have a card attached to it. You could do these things and they make it seamless to get USDA and stuff like that. So we're seeing more and more of this ability to store value in what you would think of as

dollars. It is USDC. And actually, we work with both Visa and MasterC today. And they have programs in place where a card issuer, so someone's issuing like a Visa card or a MasterCard, those card issuers can issue a card where the month. money that is being spent is actually stable coin. And so you're spending USDC. And there's a big proliferation of these, especially in emerging markets, we're seeing all

these products launch with, they're basically like the neobanking style digital wallet apps that have a card and it lets you use stable coin as your way to store value because people want to hold dollars. And then you spend it in the existing card network rails. and it settles using USDC. So those card issuers can actually settle the funds that they owe to Visa or MasterC or MasterC actually using USDC itself. So it's actually being used as a settlement rail for between the financial institution

and the card networks. So that's an interesting thing that's happening on that side. On the other side, we're seeing like merchant acquirers. So, you know, the world pays of the world, you know, the checkout.coms of the world, the nouvees of the world, the stripes of the world, offering options for settlement on the on the on the merchant side in USC. So we're seeing. Yeah. So actually one of the coolest things that we saw earlier this year was John Collison at their big annual conference got up and did his kind of one more thing thing. and he basically said, hey, look, you know, Crypt is back, but it's USDC and it's stablecoins.

And he demoed basically like in the Stripe checkout product, which they're rolling out. It's like the product that you could just add as a merchant to your website or your app or whatever. In the Stripe Checkout product, like USDC payment acceptance will be right there alongside card payment acceptance. And he was really excited about it and talked about it. There's a video of him on Twitter you can see. And he basically shows like, hey, you can now. settle, look how easy this is. You can have instant settlement on Solana they demoed with USC. The money arrives to the merchant instantly and the fees are much lower. And he sort of made

a kind of like, this is how payments should work. And so we're starting to see these sort of connection points, again, the hybrid model, these connection points that are there. And I do think that to your, precisely to your question, as the kind of legal status of this becomes more clear that more and more financial institutions will sort of say, hey, yeah, I'm going to use this as like a settlement layer because it's a very powerful way to do that. And it could be like a business says, say, I'll take USC because I get the money instantly and it's lower fees, like good for me, the business. And then on the other side, there's more and more of these end user products, whether it's a traditional bank, a neobank, a crypto super app, like these different types of apps,

where it's a seamless experience to scan a QR code. And as I tweeted about earlier this year, like iOS opening up NFC to third-party wallets is a really big deal. And that will enable, yeah, that will enable Web3 wallets that have USDC. In theory, it'll enable them to do tap pay. Right. So you can actually use your phone with a wallet with USBC. to make a transaction to a merchant out of point of sale. Other people have to do stuff.

The processors, the acquirers have to enable blockchain transactions. The wallet developers themselves need to upgrade their wallets to add NFC tech and they need to get approved by Apple. And like, there's a number of things that need to happen. But these are all things that are kind of in the 2025 horizon, which is pretty cool. Okay, everybody, you know I love newsletters. I love sharing knowledge and what I'm up to through my newsletter. And if you've got a newsletter, you've got to check out Beehive.

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What a great product. A question that keeps coming up in my mind as I listen to you is, who are you making mad? Because you're disrupting something. You're not disrupting. the dollar, you're actually, I think, strengthening the dollar by helping it become digital. Absolutely. Buying U.S. government debt. Similar thing in Europe. But, you know, if I was the leader of a country that had a less stable currency and my citizens were trying to offload their local assets for $4,000, which they now can do with

USDC, do you run into people telling you to get lost from their national borders? Well, within the international financial system, right? You have a lot of different currencies, obviously. There's hundreds, literally. And you have a lot of different kind of approaches to, in the traditional system, how money is allowed to move. And in some big markets, you have very strict laws and capital controls, like China and India, right?

Those are probably the two biggest examples. And, you know, you don't see us going to China trying to drive. DC. We can't do that. It's not, that will be funny, but it wouldn't work. No. And so in many parts of the world, you have what are called, you know, free-floating currencies, and you have kind of open,

open currency exchange, and there's no restrictions on, you know, a person holding different types of currencies. And so huge parts of the world, that is the case. But I think it'll be very interesting. I do think that this is an area where it's certainly going to be complex from a policy and political perspective.

And, you know, I think I like to refer to, you know, stable coins as over the top money. Like we had over the top money. Yeah. Yeah, OTT money. It's like OTT media, OTT communications, OTT software distribution, like all this stuff. Like the internet kind of let you do this. And so stable coins are like OTT money. You know, Netflix is OTT television, but like, you know, different countries have different laws about what Netflix

can and can't do. And so we will have to navigate that, and we are. And so what's actually happening is more and more countries are actually putting stablecoin laws on the books. And they're figuring out like, okay, well, here's how foreign issued stablecoin like USC is going to be allowed to work in our country. And, you know, the intermediaries within those countries that are allowed to be distributors or providers and what are the reporting requirements and other things.

So there are going to be laws that react to this. But at the same time, right, there's utility. There's like the raw utility that exists and end user preference. And I've said this in the past. Like, I think increasingly over the next decade, people everywhere will be able to vote with their smartphones, what economic system they want to participate in. And that is going to create complex issues. But I do think that that is a path that will emerge.

It's going to be ultimately very, very good for open systems. I think that the That'll go well for I mean that's sort of my thesis from 30 years ago Open internet wins Right I mean I mean look if you

As you said earlier We're looking at the Soviet style economy What was one of the problems? Well it was information You can't essentially plan on this you have all the information They couldn't get that by definition Erigo everything was out of whack at all time So I think you and I share a transparency leads to efficiency arguments

I just I wonder what will happen when I don't know Bricks countries for example opt out of this because they want to have stricter capital controls and so forth. I mean, they're going to end up isolated not only from digital money writ large, but also I just think from an economic system that is experimenting in a way that

really helps people escape what you might call bad economic geography-derived luck. Like, I was born in the U.S. I had dollars my whole life. Right. Good fortune. It poses significant questions for

governments over time. And my own belief is that it just seems inevitable over the coming decades that there'll be like because of the internet, because of digital currency, because of the proliferation of this technology, it's likely that there will be fewer, you know, fewer major international currencies. I mean, there already are very few major international currencies. You look at that in the trade flow data and sort of what happens and trade flow, right? But I think even all the way down to the, to the kind of domestic use, right, I think that there will end up being fewer. And that ultimately can be very, very positive for economic development. It can be very, very positive for financial stability.

It can be, it can be, it can be, it can, it can be, it can, it can, it can, it can, it can, it can, it can, some difficult choices for, you know, for countries around the world. And even in the U.S. government itself, like the Treasury Department or the U.S. government, they don't necessarily want to have like their economic policy decisions, which they're mandated to make for the domestic U.S. population. Now all of a sudden, they're like, oh, now we need to think about the Argentinians or now we need to think about the this. That is already the case. Like, interest rates follow the Fed and, you know, we're effectively exporting our inflation or exporting our cost of money. And it already happens that way, that it's called the Triffin dilemma in

monetary theory that exists for a reserve currency. But I do think that these issues will drive towards more consolidation in currencies over time. We are going to get to interest rates in just a couple seconds. I want to talk about circles, business model, and then also it's history through Spax, IPO filing, and so forth. But sticking just to the currencies and blockchains point, I think there are 15 supportive blockchains for USDC today. You guys have the $16 now. Ah, your website led me astray.

This is what happens when things are moving quickly. 16 blockchains. I apologize, Jeremy. Yeah, that's right. That's right. You're fine. The dollar's table coin, the euro's table coin. You know, I guess maybe the right question is, is there a time?

the next couple years when it's 10 currencies and 50 blockchains or is it going to be more like four currencies and 20 blockchains? How much more did those numbers go up in the near show? Yeah, so a couple things. I think first I'll talk about blockchains themselves. Sure. While to some people, they might say, hey, you know, EVMs have one and it's layer one, layer two's super chains, all this stuff. That's like done. I don't agree with that. What I see, and I use, My mental model on this is mobile, which is, and you can remember this well, pre-Iphone, there were like 17 different mobile operating systems. There was the Symbian operating system, Windows phone, remember Palm Pilot, Blackberry,

NTT Docomo, you know, you had tons of different, tons of these different. And everyone was trying to get developers to say build on this and get their handsets distributed and all this stuff. It was all awful. Like none of it was any good. It was true. It was, it was, none of it was in a group. Yeah. It was all trash.

Like, and people were like, you go to mobile world Congress and it was like, and the people be showing off their like the, what they did with their Symbian 60 or whatever. It was just awful, right? So one could argue in some ways, like as, it being frank, right? Like blockchain experiences and like the usability of blockchains and like the capabilities of blockchains like up until more or less now, like has been kind of awful, right? It's sort of like, here's this incredible, you know, these are like operating systems. They're competing for capabilities, developers, end user capabilities, friendliness, et cetera.

And I would very clearly say, we have not yet achieved an iPhone moment of blockchain networks themselves. Wait, I want to push back on that because base, which is associated with Coinbase, has been growing incredibly quickly. And I follow a lot of folks who build on crypto. And I keep seeing more and more notes about base. And so to me, in my head, I was questioning, is this the kind of like iPhone moment, faster, cheaper, integrated, backed well by a major company? So that was my impression. I don't think you're trying to say that it's not the iPhone moment, but you seem to think that we still aren't there yet. Is that fair?

Well, there's so much still to be done. Meaning like, and by the way, we're a huge fans of base. We have like all, you know, our products are supporting base and coinbase. is a key strategic partner in in in in in in us DC and so like it is it is great and it's amazing what they've achieved and like I'm constantly retweeting cool stuff that they're doing and stuff so it's it's really good um but like we need to be in a world where blockchain networks are not just supporting financial transactions they're supporting social games content intellectual property they're supporting providence of data for

aIs they're supporting you know AI agent transaction flows they're supporting retail scale applications, you know, digital tokens that are used in like super large mainstream application utilities, right? All this stuff. You can't do that today. You can't do it. Like the throughput's not there. Everything falls over.

So we're not scalable in that sense. We need to be able to get to millions of transactions per second on these networks over time. And that is achievable. And look, I think the whole paradigm for. for software engineers and developers and the user experience side of this is still quite early as well. So that's just sort of looking back

in my own experience in sort of the maturation of platform software and developer experience and user experience. We're not quite there. And I would agree, though, that we're getting darn close, right? But in my mind, even if you get to a paradigm, let's say you have a blockchain that really clicks, like we're still going to end up with kind of layers above that that proliferate the number of

networks that are out there. And so I do think we'll have a period of time where, you know, there's this concept of like an app chain, which is like, you know, if I'm, let's say I'm some large Asian internet company and I have 500 million users on my app and I want to start using digital tokens and stable coins and smart contracts. And I open that up to my end users. There's like everything in the market today would just collapse. It just can't support that.

But you can imagine a world where you have almost like virtual private clouds in AWS, you have kind of like these spun up infrastructures that are spun up as kind of these connected blockchains, network of networks type models that support this scaling. And basically like all of that is sort of fragmentation and more infrastructure development. And we want to make sure as circle. that our stablecoin network protocols, which is USDC, EURC, CCTP, other things that we're building in terms of like gas fee abstraction,

there's a lot of stuff we're building, that all of that is sort of abstracted away for users and developers. And we're going to continue to support the new ecosystems that come. So whether it's 15 or 50, I can't give you an exact number, but what I can say is we are continuing to be, build and deploy and launch our stable coin network infrastructure on more blockchain networks. And I don't know when that kind of reaches its iPhone moment or reaches the point of

diminishing returns. I don't know. I don't know. In terms of the question around currencies, we've obviously launched USDC and EURC. And I can't say, you know, we're not going to launch other currencies. But what I would say is we're seeing all around the world, whether it's an emerging markets or developed markets, we are seeing, because stablecoin laws are coming into effect, we're seeing high-quality stable-coin projects coming online in a ton of different places around the world. And so I think like 2025 will be a year where you see high-quality, you know, peso stable coins and, you know, yen stable coins and Aussie dollar stable coins and pound sterling stable coins, you're going to see more of these. We don't need to be the issuer of all of these

different foreign currency stable points. What we need, though, is we need quality regulated firms that can build on the same kind of infrastructure that we've built up so that you have like really good interoperability. And so that the applications can be built that can use all these really easily. And so that's something that we're quite excited about. We've published a lot about on-chain FX and what that could look like. And we're excited about the potential growth in additional currency stable coins. But right now, we're quite content with dollars and euro as circle products. Why would you see the Australian stable coin market, the Japanese unstable coin market,

the, I don't know, the Swedish Kroner stable coin market to another company, when you already have the, I mean, you have enough money, you have a great brand, you have experience, you already know the regulators to some degree. Why would you let, you know, Billy Bob or Jackie Jane in Australia come up with the, what would that be like? AUDC. AUDC, thank you. I mean, look, you know, there's just a, there's like focus is one thing.

Like, we have to be focused. And, you know, I think every, every one of these is complex. There's complex legal and regulatory issues. The local preferences of, say, the central bank and other things, play a role. And we sort of think about like what's the market size, how big of a market is this? Coming back to some of the discussion we had earlier, like, we genuinely believe that, you know, the role of the dollar in particular in this age of an internet financial system is going to grow. And, and, you know, I think it will be the biggest. And so we want to, you know, obviously

keep a lot of our energy focus there while also enabling those kind of connection points and on and off ramps in markets around the world. And so we want to encourage that development. And I think we are encouraged by the developments that are happening. But we don't feel compelled that from a kind of business or ecosystem perspective, that's something that we have to do. And you can always buy them later. If someone does all the work of building in aUSDC and, you know, they're not going to

become as big as company doing USDA because there's fewer Australian dollars out there in demand, you can always just snap them up later. Who doesn't love a little tech company M&A? You know, well, apart from LenaCon, but different topic. All right. So, I went back in time and looked at the data from USDA's circulation. It's market cap, if you will. It was at the start of 2020, about $500 million, which was less than I actually kind of remembered.

By the end of 2021, it was $42.5 billion. Today, it's in the $34, $35 billion range. But a huge growth in USDC circulation, during the $1.2. time in which interest rates were doing interesting things. I made you a graphic, Jeremy. I have lots of graphics. I have lots of charts. Well, this is one I made just for you. And you can tell that I made it because it's the ugliest thing you've ever seen. But this is the federal funds rate. As you can see, coronavirus time. It went out zero, rose very quickly. The company, as I understand it, does better when money has more value because you're sitting on lots of

reserves. Is that a fair statement? Not necessarily. No. You know, I think, you know, if you if you if you think about like monetary theory and from from both a central bank perspective and from a say a bank perspective, there's sort of this idea of a neutral interest rate. And there's sort of a, there's sort of a, the zero lower bound that we lived with for a while after the great financial crisis and monetization of government debt and other things. And then you had obviously like this sort of shock response to your sharp inflation and

and sort of a monetary tightening. And we have these cycles obviously where you have kind of changes. But like the kind of nominal interest rates and or kind of neutral interest rates and where those land, I think broadly that concept of a neutral interest. interest rate, which some people today think might be around 3% or 2.75% or something like that, where it's sort of neither restrictive nor or nor, nor easing, right, is potentially like the ideal state. And so whether you, when you're a central bank or a bank itself, like high interest rates are not great. Like, well, yes, there might be some incremental income from sort of reserves or

or deposits in a bank's case that comes from that, it's a restrictive environment. There's less economic activity. There's less money velocity in the economy. There's less invested capital. And so when interest rates go down, yes, the actual like reserve income that we may receive on a unit basis may go down. That is just factually true and obvious, right? But at the same time, when the price of money gets cheaper, money velocity picks up and capital investment picks up and economic velocity picks up. And that's reflected in both risk capital in terms of like investment in market, but it's also affected in the real economy. The goal of that declining interest rate is to continue to get in real investment in the real economy.

And those are supportive of a growth of a stable coin. So we're, you know, we're, you know, know, we've been through different cycles. We've been through an easy cycle. We've been through a restrictive cycle. And so now we're going to learn what a more moderate or cycle looks like maybe. Like we don't know when no one can predict their future. But yeah, I think, you know, so I think our view is that, you know, you have, you have kind of multiple forces.

You have these macro forces that we don't control, which is just like what the, what the economy is doing and how central banks are responding. Like, we just, we have nothing to do with that. On the other hand, we have a platform network and we have a, and we have user flywheels, developer flywheels. We're building this very high utility form of digital money. We're building this really powerful developer platform that has its own intrinsic growth dynamics to it.

And that, you know, I believe when you think about the total addressable market of legal electronic money today, which is on a global basis, over $100 trillion, like, I, I believe that a, the portion of that of that legal electronic money high, the portion of that is sort of dollar stable coins and euro stable coins or sort of stable coins is going to grow. It will grow over time, whatever the interest rate is. Right. And so this is why I look at this and say, hey, we're in the really early days here. We're talking about only 160 billion dollars out of $100 trillion that are in stablecoins today. So we're super early.

And if you think that like internet scale utility, what it did for media or communications or for transportation or software distribution, if you think that internet money and this kind of thing can be as transformative as those other things, like we might see a world in 10 or 15 or 20 years where 10% of the world is in something like this. That's actually like when you think about internet markets and their growth, like 10% is takes decades to get to that. But in the next one to two decades, I do think we could see a world where 10% of money is like stablecoin money. And that would be extraordinary. And, you know, we hope to be an important part of it.

Okay. So let's bring that chart back up and pull what you just said against this. Because I think it's actually very illustrative of the dynamics I play here. So if you're watching the video of this, I added some arrows. Green is when the fed's raising rates. reds when they're going down. And then the blue dots are different financial moments from from circle. The first blue dot is the initial SPAC filing. And then the second blue dot is the repricing of the SPAC. And then the third blue dot is the end of the SPAC. And then the fourth blue dot

is the company announcing earlier this year that it is filed privately to go public. And you might be surprised given the relationship between holding reserves and interest rates, higher rates, hold reserves, more money. That circle was putting together a SPAC dealable and rates were zero. But to Jeremy's point, economic activity at that point was so high, stable coins were enjoying their first peak, I guess, if you will, in the 2021 era. So it sounds Jeremy like money was inexpensive, things were very active, that was great for Circle, because everyone was buying Stiple Coins. And now when rates are higher, you might make more money in the short term, but if you want

to grow the pie as much as you can in the longer term, more economic activity is better than more near-term cash flow, ergo, lower rates could yield a bigger company down the road. I think it's a good conceptual model. I think that's exactly the right conceptual model. Okay. So in that case, then, my point, but I was going to ask you, you know, rates are going to go down soon. Are you concerned?

But it sounds more like you would frame that as a very short term or near term. My view has been for, you know, quite some time now. that rates need to come down. It's critical that rates need to come down. Because I think it is ultimately, we need to ensure that there's a healthy economic environment. And so, you know, I've been of that view, you know, for some time. And I think the market's been of that view as well.

I mean, you know, so, you know, the markets, you know, you know, obviously banks, stable coin issuers like Circle, I think we're all of the view that, you know, we need to see lower rates to sustain the economy. And to create an environment that is a better environment for entrepreneurs, a better environment for small businesses, a better environment for large companies, a better environment for capital that needs to be invested, for growth, for long-term growth. When you have more money at rest and you have more money on the sidelines and you have people who don't want to take risk, which is how economic growth happens. People take risk. They sort of say, hey, I want to build a new factory. I want

to open a new restaurant. I want to hire more employees. We want to encourage that. And lower interest rates are really critical to that. And I think also really important to the growth of the internet financial system. Yeah. It's interesting how much this feels like we're having a quasi-essential banking conversation, even though we're not. Because Circle sits in such, like, the center of an economic web of different entities that we have to talk about secondary effects and so forth. We do. I wish we had like two more hours to just riff about the future of money and so forth, but we don't. I do want to look ahead, though, a little bit.

We talked about regulations around the world. And I saw you guys had a, hey, honestly, I'm going to say, I slickly produced a hero video of you talking about regulations and coffee and purchasing and so forth. Um, audio quality was fantastic. Ten points. Your engineers for nailing that. Um, but what is the state of, of regulations here in the U.S.? And how optimistic are you that we are not going to fumble the bag, as it were? Yeah. I remain very optimistic about it. And, and, you know, look, we're now, like, in the thick of a presidential election cycle. Um, and so kind of, you know, all bets are off for the next eight weeks or whatever it is for for anything happening in anything. Yes.

So obviously a lot of the attention is on sort of what are going to be the policy agendas of either, you know, a Trump or a Harris administration and all that jazz. But I think there's been a huge amount of work in the United States with multiple stakeholders on payment stable coin. The Payment Stablecoin Act, which is sort of, you know, in my view, in a fairly mature state, bipartisanship in the House and I think also from Senate leadership. I think we've seen great engagement from the administration, the White House, the Treasury Department, the Fed. And it's something that has been set as a priority by the administration to get done for a couple of

years. And I think a lot of the kind of key things that needed to be thought through and how to do this in a way which supports, you know, private sector innovation, the kind of safety and soundness characteristics that are necessary, making sure that the Fed plays an important role, in fact, a critical role in establishing the standards for what dollar stable coins are, but also giving a pathway to, you know, state-based issuers and regulators, sort of like the dual banking system today. You can be a state chartered bank or a federally chartered bank. So creating a kind of model for that. You know, there's been a huge amount of work, and I'm quite confident that we will see Payment Stable Coin Act become law.

I'm not, you know, I'm not a prognosticator on that, but it seems like everyone wants to see that happen. And it's still possible that could happen inside of this Congress, potentially in the lame duck session. But, you know, that all depends on, you know, presidential election outcomes. And, but this is, you know, even Maxine Waters just said publicly, I think, in the last week, like, if she were to be chair of the committee, if they, if they won the House and the Democratic side, like, this is on, you know, top of her list. So, or near the top of her list, you know, and Frank, it's the top of the list for Patrick McHenry and the Republicans as well. So I think, you know, you're seeing, you're seeing a lot of desire to get that done. So let's say that Circle goes public and forget all the details that are off, just assume public. for a second, and the government shows up and starts buying shares because you're buying their debt, you're doing their digital currency for them, essentially, and they start buying shares in the

company, would that make you comfortable or uncomfortable? Yeah, I've never given a thought to that. And I actually, I don't know if governments really even do that. Like, I have no idea. They don't, is the answer to that question. I think you guys are such an interesting company that's working with such an interesting currency and the potential to become so large that I think we're going to have to ask new questions down the road.

This is a five or ten year point, to be clear. But there's so much interesting stuff that could come as like a public-private partnership, if you will, between governments, currencies and stable coin providers. I can see the Australian government supporting a private company that was. Yeah. I mean, look, the financial system is highly regulated. and it's sort of like the energy system is highly regulated, our transportation systems are highly regulated, our space travel systems are highly regulated, the production of medicines

are highly regulated, like most technologies and significant infrastructure in society are highly regulated. Like the software industry has sort of had an epic of like 30 years where it was not highly regulated, but now if you're doing anything really big and really interesting with software, whether it's AI or you know, you're applying it with hardware and self-driving cars or you're building a global digital currency system or whatever it is. Like if you're doing things that kind of intersect into these kind of highly regulated spaces that have these really big impacts on society, that makes sense. Like I'm not at the view like, hey, like this is, you know, if it becomes really important

to society and their particular kind of covenants and like a social contract that needs to be in place around what you do and whatnot. That is what exists today. And so there are different levels of regulation. There's sort of very light regulation. There's heavier regulation. And we have like global systemically important banks. And those are more highly regulated than, you know, the Wichita Community Bank or whatever it is. Right. You know, so if what we're building, you know, becomes, you know, systemically important or what have you, then we're going to have a different relationship with not just the U.S. government, but other other governments as well. These are way off in the future things because this is definitely not that today.

We're nowhere close to that. But what we are focused on is, obviously, we have a vision for what an internet financial system can look like. We have a vision for what open, programmable, composable money can bring to the world. And the innovation of that and the open internet and what that makes possible. And we want to make sure that that can come. come to life and not be stifled. And that, and that does require policymakers and governments to actually create more degrees of freedom for innovation to happen, as has happened in other,

major areas of the internet. I tried to frame the question in the most neutral or positive way possible because I was trying to get away from what the Chinese government does with golden shares and so forth. And more like the government might want to be a partner in more ways than one in that question. But I agree. We're a long ways out. Okay. Before I let you go, you guys filed privately to go public. As you and I both know, we're staring down the last couple weeks before an election. And I'm presuming that you guys won't be pulling the trigger before the election. What can you tell us about the vibe about when you guys might decide to list? Yeah. I can't comment on any open regulatory filings or matters. There's one thing I can't say,

which is that, you know, we are very committed to being a U.S. listed, you know, publicly traded company. And a big part of our success as a company has to do with the trust and transparency that we have, that we've provided in what we do. And that we believe that if you're facing USC as a user or as a business or as a financial company, and, you know, you want to, you want that trust and transparency and being held to the standards of U.S. public company standards, the transparency, the accountability, the government governance, the ethics, all that is very important to continuing to build on what we've already done. And so we're committed to that. And we believe it's a really important step for us as a company. Oh, I agree with all that. I think going public

is a great thing. I don't know why it became, you know, business persona non grata amongst a lot of unicorns today, but I think it's great transparency, shared upside in the public. Just everyone gets a bit more visibility. And I think it's great, especially for companies like circle. So we will talk to you again, in and around IPO time. We'll see when that is. But Jeremy, thank you so much for dropping by Twist yet again. As always, I learned quite a lot.

We appreciate it. If you're not following us on your podcasting platforms, do that. We're on YouTube. We go live. We have lots of fun. My name is Alex. We'll see you guys soon. Goodbye.