Unchained - Circle's Jeremy Allaire and Sean Neville on Why Crypto Will Be Bigger Than the Web - Ep.71

Episode Date: July 10, 2018

Jeremy Allaire, cofounder and CEO of Circle, and Sean Neville, cofounder and president, discuss why they think the internet of value will be even bigger than the internet of information and how all assets will be tokenized. They also talk about why they're launching a stable coin, how their services in payments, exchange and investing will compete against decentralized versions of the same, and how they chose the assets for Circle Invest -- and why XRP didn't make the cut. They also address the investor presentation circulated that claimed the SEC would not pursue enforcement against Poloniex for prior activity and explain why Circle took investment from Bitmain despite negative sentiment against the mining equipment manufacturer. And they explain how Circle could compete once Wall Street incumbents begin to offer competitive services in crypto. Thank you to our sponsors! Clarity PR: http://clarity.pr Preciate: https://preciate.org/recognize/ Links: Circle.com: https://www.circle.com/en/ Circle's plans around a federal banking license and brokerage and trading registration: https://www.bloomberg.com/news/articles/2018-06-06/circle-in-talks-with-u-s-to-become-licensed-bank-trading-venue Acquisition of Poloniex: https://blog.circle.com/2018/02/26/circle-acquires-poloniex/ XRP in a screenshot of Circle Invest, but offered after launch: https://www.coindesk.com/circle-adds-monero-crypto-investment-app/ The Circle Asset Framework: https://www.circle.com/marketing/pdfs/en/circle-asset-framework.pdf Nathaniel Popper's tweet showing the Circle investor deck indicating the SEC won't pursue action against Poloniex: https://twitter.com/nathanielpopper/status/968202570719117313?lang=en Circle's stable coins + Bitmain investment: https://blog.circle.com/2018/05/15/circle-announces-usd-coin-bitmain-partnership-and-new-strategic-financing/ Unchained episode on stable coins: http://unchainedpodcast.co/why-its-so-hard-to-keep-stablecoins-stable Unchained episode with David Vorick, which includes some comments on Bitmain: http://unchainedpodcast.co/why-asics-may-be-better-than-gpus-even-if-they-tend-toward-mining-centralization-ep67 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, your no-hyp resource for all things crypto. I'm your host, Laura Shin. If you've been enjoying Unchained, pop into iTunes to give us a top rating and review. That helps other listeners find this show. Clarity PR is a global strategic communications agency that shapes market-leading narratives for brands in crypto and blockchain to drive awareness and grow business. Working with clients, including Atlas Quantum and Securitize, Clarity can move quickly to differentiate the value of your business. Please visit clarity.pr to learn more. Raising the bar together with Appreciate, launching this summer. As a sponsor of Unchanged, Appreciate has recognized amazing people because Precate believes in the strength of recognition and relationships and the strength of community. Who will be recognized today? Stay tuned. My guests today are Jeremy Allaire, CEO and co-founder of Circle, and Sean Neville, co-founder and president.

Welcome, Jeremy and Sean. Thank you. Nice to be here. Let's start with what Circle is, Jeremy. what are the primary services you guys offer and how do they fit together? Sure, yeah. So Circle offers a range of products in the crypto space. At the one end, we have a free payment service where people can send or receive payments instantly, including across currencies.

And that's built on blockchain tech. And we'll come back to talk a little bit more about that as we talk about our Fiat stablecoin work as well. And sort of all the way at the other end of the business, we have something called Circle Trade. which is a over-the-counter trading service for crypto, one of the largest market makers in the world in crypto assets. And we also operate trading platforms and investment platforms. So Circle Invest is a retail product to invest in a collection of different crypto assets. Today, that's about seven assets, including the ability to buy the market just with a couple taps.

And then Polonex, which is a crypto exchange that, acquired a few months ago, and which is much more sophisticated in terms of both the range of assets you can trade and also the trading strategies that you can pursue on that. So that's sort of the products today. And we're also launching a new US dollar coin, which is a fiat stable coin in the near future. Over the years, Circle has changed its services and it's also expanded. And earlier, it was a place where you could buy Bitcoin. Then it became a place where you could easily make payments in fiat, but not in Bitcoin. And now it's a place where you can not only buy Bitcoin, but multiple assets, as you mentioned earlier. How has the space overall changed as the

time you've been in it? And how has your strategy changed along with that? I can take part of that. And I think Sean would probably have a lot to add here too. You know, we started the company five years ago. And we were really excited about the idea that this new infrastructure layer for the internet was being created, and Bitcoin was the best and strongest example of that infrastructure at the time. But we were really excited about the idea that lots of different types of assets could be what we now say today, tokenized, but could be turned into digital assets, and they could become programmable digital assets that both traditional forms of money like fiat currency, but also other types of assets could sit on a system like that. And that once that infrastructure

was built, we could really reconceptualize what financial services products were. We could, you know, ultimately make things like payment banking, just a free service on the internet, and we could re conceptualize what things like lending and wealth management and other investment type products would look like all on that crypto-native infrastructure. So those were sort of founding ideas for the company, but, you know, the way the technology has evolved, the way the markets evolved, obviously we couldn't entirely predict. Sean, you could maybe touch on sort of how that kind of path has evolved in line with how the market's evolved. Yeah, and I'm especially interested in that moment where you did drop Bitcoin from the app,

and then what means you decide to reintroduce not only Bitcoin, but multiple assets. Yeah, I can maybe chime in on part of that. I think, you know, first of all, we never, we never stopped working on top of Bitcoin and, in fact, have added other crypto assets over time so that we, you know, Circle Trade operates with many cryptocurrencies, crypto assets. And we never stopped doing that. I think. But there was a period where people could no longer buy Bitcoin, right?

It was that you were using it on the back end, but people, in their experience, were dealing with Fiat. Even then people could still buy crypto assets from Circle. I think you're referring to specifically the Circle Pay app, which is a mobile app that allows people to send and receive money, potentially across currencies, say Euro to dollars and so forth. And that does leverage crypto assets in blockchain tech. In fact, we'd sort of imagine that the future of payments, whether you think of it as a social payment or remittance or whatever category of payment it is, we'd imagine that those things should be operating on top of global standards, like the equivalent of an HTTP, but for money. And, you know, we can we can send each other content using open standards around the world. And we would foresee that in the future payments should execute in the same way, that it should be seamless to send one another payments around the world. And that things like, Bitcoin and the evolution of blockchain technology and crypto assets that fuel them will enable that thing to happen. That doesn't necessarily mean that someone who's sending a dollar to someone else in the U.S. or overseas to India or Europe or wherever it may be necessarily wants

to buy a Bitcoin. It means that they want to be able to seamlessly send money and engage with one another, you know, through the currencies that they, that they already use, even though the payment facility itself may end up involving translation into other crypto assets. And so, you know, that was, that was the focus of the payment product. But certainly it relies on crypto assets to function, and we always still traded those assets. And that, as Jeremy had mentioned, is what led to the emergence of Circle trade and ultimately others. Another piece to this just to maybe answer your question a little bit more, Laura, which is, you know, the goal of someone who wants to make an instant free frictionless payment is, you know, using a fiat denominated transaction. The goal of that user

is really different than the goal of someone that wants to say speculate on a crypto asset. So the difference between a kind of payment behavior versus an investment behavior is really, really important. And we want to very clearly segment those. So people who want to make payments and do that really easily. And again, we believe that for, global mainstream adoption of crypto infrastructure, a lot of that is going to be denominated in Fiat. But for people who want to invest in the underlying assets that fuel these blockchains and other types of assets that are emerging that provide utility for other services or even investment contracts that are tokenized, people really, I think, would benefit from a service

that is very clearly focused on making investments, managing a portfolio, looking at your rate of return, looking at your risk balance, those kinds of things. And so, rather than trying to munge together like an investment behavior with a payment behavior, we have separated out the investment behavior into its own standalone app, which is Circle Invest, which is, I think, a really delightful app for people who are focused on investing in crypto or buying something like Bitcoin or Ethereum or other types of digital assets. Yeah, I used it last night just to see what it was like. and I do agree that it was so simple. It was very fun. It's, you know, I feel like every time I use

this technology, especially if I'm using it directly on the blockchain, you know, through like my own wallet or something, it feels like magic. But, but you guys did put together a great customer experience there. I'm so curious, actually, and I know this might be a little bit of an apples to oranges comparison, but across your four different products, which offerings have the most traction now? Because I view it as maybe a lens through which you could sort of take a snapshot of the overall crypto space right now. So I'm so curious to know where you see the most uptake. Yeah, each of the products really are in different stages or life cycle. So, you know, Circle Pay has been available broadly for more than a couple of years. It has several million

customers. It grew 500% last year. And it's got, I think, pretty significant traction in Europe as well where products like Venmo don't really exist yet. The Poloniacs obviously had an enormous last 12 months. It grew dramatically. We acquired that a few months ago. And that, you know, that's a product that also has several million customers. It has been a leader in, you know, the crypto exchange market. We're obviously in a bear market right now. So we're in a slightly a different environment than, you know, May or June of last year or into the fall. We'd come back to talk about that as well. And then Circle Trade, we've had as a business for several years.

And that's just a very significant scale business right now. Generates pretty significant revenue and cash flow for the company had an enormous growth year over the last year on a lot of different fronts. And then Circle Invest is really new. It went to kind of full general availability. about a month, a month or so ago and has had really good early traction, highly engaged users who keep coming back and using it. And we're very happy with the early traction we're seeing on it. And I'm guessing you'll be making money from, or you already are, as you said, making money

from Circle Trade and I'm sure Polonex, but it seems like the payments offering maybe is, is that's offered for free and that's not a moneymaker for you. Yeah, that's right. Circle Pay is a free service. And I think, you know, we've talked in the past about this. We don't believe there's a business model for payments. We think that payments, whether it's between people or between people in a business or even between businesses, it's just going to be a commodity free service on the internet, just like sharing information or content or data. We think that, you know, crypto assets, blockchain tech, things like applied AI all make it possible to move and synchronize value globally. instantly, very, very cheaply. And so we don't really see a business model in charging fees for payments anymore. And Circle Invest is free as well, but I think maybe you make a little bit of money on the spread or something. Sean, do you want to talk a little bit about how Circle Invest works? Yeah, sure. Circle Invest is, you know, it's a zero commission product. So there's no fee in that sense. Of course, there is a spread in the purchase of the currencies. And, you know, we try to be completely transparent

about what that is, it may vary over time as we continue to add more tokens to the product. But that is a revenue-generating product. So I think in terms of where we're seeing traction, something like Circle Pay is geared more at usage, something like Circle Trade. Typical trades are, say, a million dollars or so per trade. So that's a relatively small number of users, but fairly high, you know, notional volume. So it's, like you said, it's a little bit apples and oranges, but certainly on the consumer side, the notion is, well, payments we do believe ultimately will be free. The notion of paying somebody for holding money or for the privilege of sending it and, you know, updating the ledgers or in the world of traditional money, updating the databases that hold the account balances.

Paying someone to do that, we'll just go to zero. And the Internet should make that for free. But whether Circle does it or not, it's just inevitable that payments as a business goes to free. And so there should be massive usage. And that can be parlayed into other kinds of financial products that are revenue generating. Let's talk about your backgrounds because you both have pretty extensive tech and entrepreneurial backgrounds prior to crypto. And I just want listeners who maybe aren't aware of that to get a taste of kind of what you've been doing. But I also want to know beyond what you did, just how aspects of that experience helped you grasp the potential.

of crypto early and how that has influenced you are thinking about how the space will develop. Sure. I can start. So yeah, I've been working and Sean and I overlap a lot in terms of things we've worked on and so on. So some of this is sort of a shared background. But I've been working in internet-based technology platforms since the early 90s. And, you know, back in 1994, late 93, 94, got very excited about the possibility of open protocols, making it easy to connect and share information and communications and actually build software applications that could run through web browsers. And web browsers had just come out at that time. And so worked on products that were basically aimed at turning the web into an app platform where you could

write code and build interactive applications that could run in browsers and built helped create a product called Cold Fusion, which was one of the first web programming languages and development tools. And that business, AllerCorp sort of evolved into like a whole family of, you know, HTML development tools, server programming languages,

app servers, fundamental infrastructure for sort of building the web, building content apps and transactional apps on the internet. That's how I got to know Sean. And Sean can kind of share more on his background as well. And then that, that grew to be a global public company with millions of customers, and then eventually we merged with Macromedia,

which was one of the bigger Internet software companies in the late 90s. And so basically Macromedia had all the tools for creating content, so creating images, creating web pages, creating animation, creating video, and was the chief technology officer there and worked on a number of different things.

But one of the things that I got really excited about was video on the internet. And similarly, you know, to earlier things, I think saw back in like 2002, 2003 that, you know, open protocols running on these decentralized networks could make it possible to kind of create a model for television distribution and video distribution that kind of replaced cable and satellite and TV or sort of more proprietary closed centralized systems. And then ended up leaving MacMedia and starting another company called Bright Cove, which is a, it's another. a global public company now and, you know, thousands of media companies and major brands use it to kind of run their online television and video platforms. Yes, I've used Bright Cove as a journalist. Yeah, so it's sort of a lot of media companies use it and so on. And I, you know, again, the idea was, you know, the open internet, open networks, open protocols, make it possible to kind of replace how an industry works and open it up to more people globally. So those are kind of common themes. And then

And for me at least back in 2012, when I became much more interested in crypto, what really struck me at least was that what we were seeing with Bitcoin in particular was sort of the birth of a new set of protocols, a new set of open infrastructure that would decentralize not just information exchange and communications and data exchange, which sort of these prior platforms had done. but it was the foundation for how you could do that to value exchange, both sort of the transfer of value between people, but also how you manifest contracts and how you manifest economic relationships, that kind of value exchange could all be built on these open networks and infrastructure. And to me, it felt like, you know, this was probably more significant than the birth of the web and that the next 20 years would probably, in terms of the impact of this, would be probably much, much greater, far greater than the impact of the web. So it just became really

obvious to Sean and I that this was, you know, this was a kind of once in a lifetime opportunity to work on that. But maybe Sean, you can kind of go through your narrative. My background is less technical than Sean's, but certainly very product-centric. Yeah, although I do want to highlight that for listeners, because I also recently interviewed Chris Dixon, who majored in philosophy, and I majored in something called Modern Thought Literature. And so I definitely want to highlight. You can, go into the liberal arts and still and still, you know, have your profession and technology in some fashion. So I don't want people to. Yeah, absolutely. Sean's, what, you're an English major, Sean? Is that right? Yeah. I mean, my background is in engineering, but certainly my undergraduate

degree was in English. And I think particularly this is the birth of the web that carries through to the day. You know, I've met so many amazing computer scientists and software architects and people in all domains, but technical include who have been political science or English or philosophy. Yeah, absolutely believe in the whole education rather than strictly, you know, vocational paths. Yeah, so anyway, but why don't you talk a little bit about your background and then we'll dive deeper into media issues around circle. Yeah, sure. Maybe just, you know, briefly, maybe I'll take it from the perspective of how this is connected to crypto first and then go backward a little bit. I think one of the common threads for me has been,

enabling people to do things that they couldn't necessarily do before, or at least not very easily do before, whether it's been someone who's a graphic designer or a business person allowing them to get their work on the web and distributed around the world to people, making that really easy without requiring a bunch of engineers to help make that happen. Or in the case of crypto, connecting people who may not have access to First World Bank accounts or maybe do have access but are charged a toll for using them in certain ways, helping them create businesses and support their causes and, you know, charities and families and business ideas and, you know, the idea of connecting them globally through a web of finance

is really appealing and I think has some analogs to previous things I've done. And another element to me, maybe a little more on the technical side is just this notion of what is information, how is it, how is information shared? How is it, you know, generated? And if we look at money as another form of data, if it could be treated as just a data type on the open internet, how is that particular data type best created and shared and distributed, you know, globally? And crypto is particularly appealing from that angle.

You know, in my past, I've created server products and worked on languages and frameworks and mobile apps, consumer side and kind of worked at, you know, various stages of different things, been involved in, you know, standards organizations and pushing forward, you know, open standards when it came to the web. And I think a lot of that is relevant, certainly, to this space. But similar to some of the things Jeremy was mentioning, I feel like, although we've known each other for around 20 years and we've done a lot of things together, this particular space is the biggest and the most important thing that we've been engaged in. So I find what you guys were talking about with these open standards and everything and this free flow of value, similar to the way we saw free flow of information. I find all those comments interesting because here you are in this place.

I mean, you guys have been making a lot of moves. We'll just start with one for now. One is that you've applied for a federal banking license. And I think this, you know, in a certain respect, it's sort of like replicates existing structures. But I'm just curious as to why you applied for it and what that would enable you guys to do. This is definitely an example of, I don't know what you call it, telephone. So Bloomberg published a story that with a pretty dramatic headline. But if you actually read the story, it basically says we've had some conversations with folks at the Treasury Department about national charters.

So we have not applied for a banking license. I think Bloomberg had heard that we had had a meeting and got us on the record, you know, saying we had a meeting. So we have not applied for a banking license. We have tremendous banking partners in the U.S. and globally. and I think we definitely want to understand how federal banking regulators are looking at the space. And just to put that in context, we are, you know, we're dealing with a few different things that are kind of at the intersection of banking regulations and crypto. That includes, you know, custodial activities. So, you know, unlike traditional kind of payments companies or brokerages, like we're a custodian of assets.

And that's sort of native to how this stuff works. So we're a custodian of billions of dollars of crypto assets, people who hold assets across our retail and institutional capabilities, including our exchange. And as more and more, you know, institutions get into this space, they want to know, like, are you regulated as a custodian? And because regulated custodians sort of have certain protections and, you know, safeguards, and they're sort of examined differently. And so definitely want to understand that.

Is there something we could do legally that would improve how, you know, institutions look at sort of keeping value in crypto because we want to see more and more adoption of that. So that's one dimension of why we would have those kind of conversations. The other is, you know, we're really close to launching U.S. dollar coin and, you know, we're creating a model for, you know, taking U.S. dollars and turning them into crypto assets in a open standards way, in a way that works with high-quality banking onshore in a regulated environment. And so, you know, the sort of introduction of tokenized fiat in a, you know, in a commercially viable way, that really intersects with how, you know, the U.S. Treasury is in charge of the U.S.

dollar. So it's, you know, I think there's an opportunity to work with the federal government on models for how we tokenize fiat currencies all around the world. And so, of course, we're going to have conversations with federal regulators as we start moving into some of these types of areas. So that's just some context for how a headline like that. got out there, but we have, just to confirm, like, we have absolutely not applied for a federal banking license. Do you intend to? I think we want to continue to grow the business. I think the

question is always, you know, are there things we can't do today legally that would require some other type of license? You know, for example, you know, one of the really powerful things about tokens and smart contracts is the ability to express more complex forms of economic arrangements that can include things like loans and debt and, you know, tokenized lending, tokenized debt offerings are really interesting and you can build some really innovative things that involve assets and people from all around the world. And, you know, we may be able to work with banking partners to do some of that, but if we really want to get close to the metal and kind of reinvent what it means to underwrite and secure a loan using crypto, it may mean that we need other licenses. But that's not a

business we're in right now. And so we'll sort of, as our business plans evolve, we'll continually evaluate what we need to do. So I got this from the same article. And so feel free to correct any misconceptions here. But as far as I understand, you also are looking at registering with the SEC as a brokerage and trading platform. Is that correct? Yeah, that's right. So our highest priority right now is establishing a broker-dealer and an alternative. alternative trading system and operating within that framework. And that's really aimed at enabling us to provide capabilities to businesses and to investors to take advantage of tokenized investment contracts. So we're really excited about what you can do with smart contracts and tokens in

terms of representing investment contracts. And we sort of have a general thesis that we're moving into this era of kind of the tokenization of everything. And that includes, you know, traditional things that are equity like or things that are debt like. It includes the tokenization of and securitization of property and the ability to build really interesting lending and investment models around property. And, you know, all these things are regulated activities. And obviously, the SEC has made it very clear that they view those as regulated activities. We agree about that. But, you know, a lot of the really specific rules around how you do that with a crypto asset haven't really been kind of work through. So that's something we're

pretty actively working towards and, you know, intend to offer capabilities in that area. This is somewhat of a long-term question, although because of how quickly these technologies take off it may be shorter term than I think, but some of the functions that you're talking about offering are also being built as decentralized protocols and smart contracts. So how would you plan to compete with, instance, like a decentralized exchange that isn't taking the kinds of fees that you would probably charge. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game?

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I mean, generally, we've always seen those things as things that could exist together for different use cases, not necessarily pitted against one another. And that can be realized in a few different ways. Something like a level one architecture where you have a base store of value and distributed fashion can also be surfaced in particular applications in a slightly more centralized fashion. So if you have a store of value that's fully decentralized, that may be tradable at level one.

But if it's tradable into smart contracts that are, say, considered investments or securities, then that may require a different set of rules that are encoded in a slightly more centralized fashion. And that's not necessarily a bad thing that can be an enabling thing. And those two different layers, the decentral and the central can work well together to enable people to participate in these kinds of contracts and products. Yeah, that's interesting. That makes sense. That's sort of like these more centralized rel layers that are building on top of the decentralized protocols. Okay, so we're going to discuss Poloniacs and Stable Coins.

and or your stable coin and more, but first I'd like to take a quick break to tell you about our fabulous sponsors. Clarity PR is a global strategic communications agency that shapes market-leading narratives for brands in crypto and blockchain to drive awareness and grow business. Working with clients like Atlas Quantum, Coin Mint, Securitize, Smart Valor, and Verbex, Clarity PR can move quickly to differentiate the value of your business in the noisy blockchain and crypto space. Named as one of the fastest growing agencies in PR Week's top 150, Clarity,

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Let's talk about Circle Invest. The product offers Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Lycoyneiro, and Zcash. How did you decide upon these assets? Yeah. You know, we look at a lot of different things. We're obviously looking at, What are assets that have, you know, significant market cap and liquidity? What are assets that represent what we consider to be, you know, clear categories? You know, a lot of these are either kind of blockchain infrastructures or core kind of payment currency type use cases. We recently published something called the Circle Asset Framework, which is a framework that we look at for any kind of listing decision, whether that's listing in our exchange or something that we'll make markets in with Circle Trade or something that we want to

make available in an integrated way to consumers. What you see there is really just a starting point. Our belief is that over time, retail investors are going to want to invest thematically in lots of different categories. And you see in the product today, buy the market, which is a way to sort of buy market cap-adjusted investment in the full collection of coins that are there. But you can imagine how that could evolve over time to support other types of collections and to, you know, as we get into a world where there's not just, you know, five or 10, but maybe 25 or 50 or eventually thousands of different types of crypto assets. How do you create a kind of experience for a long-term investor, more of a passive investment strategy,

that someone can make and organize that in a way that makes sense to people. So that's very much how we think about Circle Invest. It's not really designed for the day trader. There's lots of, you know, there's crypto exchanges for people that want to trade in everything or trade really broadly and day trade. It's definitely designed towards someone who wants to take a longer-term investment strategy. And those assets were the very clearest to initially, you know, get out there. Sean, I don't know if you want to add to that.

Yeah, maybe just a few things. I think when we look at any project, you want to look at the fundamentals. What are the kind of core tenets of the project? And did they align with the core tenets of the cryptocurrency community? But there's also look at the technology, you know, the team, so committed, experienced team behind it. Is it creating real value for people, you know, sort of set up to succeed? And, of course, their market dynamics to consider because there needs to be indicators

of sufficient liquidity, and then, of course, legal reviews, which may be dependent on the jurisdiction in which the project is listed or launched. So you sort of look at all of those things together to assess any project. I think over time, there will be a lot of really interesting businesses and experiments and collectives that can be tokenized as part of that framework that will become really interesting to people who are not just interested in speculative investment in sort of day trading or swing trading, but making significant investments in those projects and in the value that those specific projects bring to bear. And those are the kinds of projects that we're particularly interested in. At the time you launched Circle Invest,

a coin desk article noted that an initial screenshot included XRP, but you eventually launched without it. Why not list XRP? Yeah, we're obviously continuing to evaluate different payment and settlement tokens. I think there's obviously been, you know, some discussion, you know, and debate around the legal status of something like XRP. And obviously, we're going to, you know, pay very close attention to that and any decisions we make. And for that reason, I was also curious why it was still listed on Poloniacs. And not only that, but just in general, kind of, I was curious to know what standards you're using for whether or not to list coins on Polonex?

Sure. Yeah, so as you know, we took over Polonex a few months ago. Our highest priority has been integrating that into our core operations, stabilizing a lot of things. So I think if you've been a user of Polonex, I think they experienced an unbelievable amount of growth last year. And so just making sure that there's very high availability on the wallet infrastructure. When we took over, there were hundreds of thousands.

of backlogged cases. Many of those need to be kind of wrestled to the ground, you know, from an operations and engineering perspective. So it's just been an enormous effort to just sort of get that into a stronger place. We've also been, you know, changing and improving the verification procedures for the platform, making sure that it's compliant with the U.S. laws around identity verification, lots of things. So those have been our highest priorities.

We're also, of course, looking at the token listing side of it, both, you know, are there assets that are not on Polonex today that we think would be really compelling? And there certainly are, and you can expect to see us launching more assets on the exchange and are there other assets on there that don't make sense, whether it's for market liquidity reasons or lack of developer traction or legal reasons. And so you could expect to see us maybe remove some as well on those criteria. So we don't publicly comment on, you know, what those are or when we'll do that or anything like that. But we have a pretty rigorous framework around that now. And so you'll hear a lot more about that

in the coming, you know, period of time here. And but have you applied that rigorous framework there? Because obviously, if there's questions around the legal status of XRP for your circle invest product, but you're continuing to list it on Polonex, there's either a difference in standard or the standard hasn't been applied. And then on top of that, when I look at the standard, look at the list of all the coins available on Polonics, there's a whole bunch I haven't heard of and that are quite obscure. So I wasn't sure if that was just because you're still in the process of implementing that or if you have already called some. Yeah. So we, you know, basically taking over a platform with the scale and operation is a non-trivial undertaking. It's not like

you take it over and then boom, you can just start flipping switches and doing things. You have to be very careful about it because you're dealing with customer funds and it's more complex than just sort of making those kinds of decisions. But the highest priority has been obviously getting that infrastructure in a really strong place and dealing with the kind of core obligations that we have around making sure it's highly available, making sure that customer issues are being addressed, making sure we are verifying all of our customers in the right way. Those have been the highest priorities, but listings and delistings and that whole framework is also a priority for us, and we're going to be doing a lot there. And a slide from one of your presentations that

was released on Twitter by Nathaniel Popper of the New York Times showed that the SEC had promised you that they would not pursue any enforcement action against Polonics for a prior activity. Is that true? I'm not going to comment on a rumored presentation. Well, there was a screen. a photograph, it wasn't a rumor. Sure, I'm familiar, of course. We absolutely have had very strong engagement with all the relevant regulators, but what we do, you know, we're going to do everything that regulators ask us to do with, you know, that requires compliance with the law. I think this is a space, which is very much a moving target, you know, where this space was back last fall, versus where it was in December and January versus where it is today.

It's evolving rapidly. And regulators' perspective on the space is evolving rapidly as well. So what's important for us is that we have really positive, constructive engagement with regulators all the time. And if there's lines of business that we want to get into that require different forms of licensing, we're going to do that. But if there are regulators that are looking at the market and looking at, you know, activities that they find challenging in the market and they're going to pursue those,

we're going to fully cooperate with them as well on those. And we have touched on this at various points during the interview, but I don't think I've given you an opportunity to really lay out your vision for what you want Poloniacs to be from your blog post introducing or talking about your acquisition of it. It seems like you have a pretty heady vision. Describe what it is that you'd like Poloniacs to eventually look like. Sure. Sean, do you want to take a lead on that and I'll chime in? Yeah, I think, sure, Jeremy, I'm sure you'll have a lot to say on this too,

but conceptually the thing that's pretty exciting to us about the space in general is that we are approaching the time when we can have something like a token marketplace so that people who are starting businesses or interesting projects can tokenize those and surface those things in a marketplace where other people can participate, including investors, if appropriate. And we want to have a platform that supports that, and that means providing software and tooling and technical support for such projects, guidance as appropriate for such projects so that people can launch and support them.

And if we think about what has been referred to as the sort of tokenization of everything, and meaning that all forms of value can become represented as a token, then a marketplace to support those tokens and to offer those in a multi-sided fashion is really interesting. I think that starts with something like an exchange today, but it expands to be much more broad than that. Yeah, I think, you know, at a high level, you know, the phenomenon of ICOs was obviously and has been a sort of experiment in. in capital formation and, you know, obviously it's sort of been heralded as, you know,

this is this, you know, incredible new way for capital formation. Lots of that, as we know, is sort of scammy and really problematic. But I do think that there is a fundamental breakthrough here. And the fundamental breakthrough is it's possible to form capital and to surface investment contracts that allow people to invest and become stakeholders in technologies, in projects, and protocols and in actual businesses, and including being stakeholders, not just potentially getting profits out of how business grows, but being stakeholders in the governance of the business,

you know, sort of voting style mechanisms, being stakeholders that in a hybrid way where you're both an owner and a customer and a user. So there's a lot of really interesting experimentation that's happening right now in essentially the recreation of the idea of the firm. and what do kind of microeconomic organization units in this new global crypto-powered digital economy look like?

And how do you form capital around those? How do you form contracts, whether it's a labor contract or a contract to interact with that business? How do you run all that in a crypto-native way? It's a really fascinating area. And we feel like, again, we're in the really early stages of the ability to kind of reconceptualize and design the modern or post-post-eastern. modern firm around this. And we see a tremendous opportunity to provide what we think of as

kind of market platforms that allow businesses and even individuals to tokenize things, to tokenize businesses and to facilitate market participation in those and to ultimately, of course, provide investment and liquidity options on those as well. So when we kind of think about the long-term here, truly, how do we build out, as Sean said, those multi-sided marketplaces to embrace the possibilities here and just underscore as well that we're still very much in the early stages of this. And I think there's some really interesting experimentation that's happening around everything from the economic models to the governance models and so forth. And we're just excited, obviously, to help try and create tools and help people facilitate doing more of the

things. Yeah, I've spent most of my career as a freelancer, so I kind of love what you're talking about because I think it would be amazing the more people that could be independent and not have to work for a traditional business because I've loved my my stints being independent. So tell me more about your stable coin, USD coin. You've decided to go the route of backing it with dollar reserves. So how does, first of all, why have you chosen that model? Because there's multiple models. And for listeners who missed my stable coin episode, you should definitely go back and listen to that. I will put links to it in the show notes because there's multiple ways you can structure these. And this is one. It's a slightly more centralized method. Why did you go this route?

Yeah, I'll start with that. And I'm sure Sean will add. I think actually, I want to connect a dot to what we were just talking about here, which is, you know, all of these models of tokenization. Let's say if I want to, you know, tokenize a business and that allows people to either invent. invest in it or pay to use a service in it, or I want to tokenize property and I want a slice of the property or I want to get some kind of yield out of it or I want to tokenize a loan and enable someone to have some kind of debt relationship. All of these things need fiat. They all need a way to take at a minimum, a kind of price stable currency to participate in those. And so a kind of fundamental infrastructure that's really missing right now is that. And it really is critical fuel to enable all these smart contract applications to really thrive and grow.

And so that's a really key missing piece. And it's a missing piece too to even realizing the idea that we can move value around the same way we can move information around. I want to move dollars in 10 seconds in an irreversible way globally, securely to any device that's connected to the internet. And tokenize Fiat allows us to do that. And it allows us to provide a way to use Fiat in all of these smart contract infrastructures and projects and applications. You know, so if I'm a business and I want to, you know, tokenize and I want to enable people to invest in my business, it's not likely that I want to receive my investment in ether or a volatile commodity asset, right? Just like I wouldn't want to receive an investment in my business in oil or gold or

bushels or bushels of wheat. So, you know, having that is really important. But also, you know, businesses and people, individuals live in the real world economy. They pay taxes in the real world economy. They are paid salaries and wages and they buy goods and services in real world economies. And obviously there are hyperinflation scenarios where they definitely don't want the real world currency that is in a market. But by and large, in the United States and Europe and most other markets, that's a reality. And so if you're forming financial contracts or you're facilitating payments, being able to do that using something that's denominated in your local fiat currencies really, really important. So for us, you know, the model that we've pursued with U.S. dollar coin is really straightforward. How do we take the benefits of crypto infrastructure and public chains for security, speed, settlement, interoperability, global reach, and extend those benefits to the U.S. dollar.

And we've really, you know, created a model that works that way. Sean, maybe you could talk a little bit about sort of the approach we're taking with U.S. dollar coin and center. And it's quite different than I think a lot of the other Fiat Stablecoin approaches or even just StableCoin approaches generally that are out there. Yeah, sure. I think, you know, there are lots of interesting projects in the space, algorithmically backed stable coin projects, you know, crypto asset backed projects. And obviously, you know, Fiat backed and combinations of those and hybrids. And this is this is a full Fiat back mechanism. but it's not just Circle's mechanism in that Circle has U.S. dollar coin and other potential fiat-backed coins.

What we've done is fostered a framework for multiple members of a network to mint fiat-backed stable coins. Circle is one such mentor of these coins, but you can imagine other companies participating in the same network. And that network is managed by something called C-E-N-T-R-E, which, we are spinning out and donating a good bit of intellectual property to so that it can operate separately. And the notion there is that Center as a network can enforce network rules on all the members that participate in this framework, including Circle. And those rules involve things like ensuring full licensure, solvency, audits, and in general network behaviors. And so that kind of thing can't be managed just by one of the issuing mentors, like, a circle, but needs to be provided by a separate authority. And so Circle is delivering U.S.

dollar coin, but there will also be others who similarly offer U.S. dollar coin using the same exact framework. And the same framework can be used to offer Eurocoin or yen coin and, you know, others in the network that are all pegged to underlying fiat assets. Yeah. So we announced recently that Bitmain had, you know, they'd invest in Circle, but they're also becoming a founding member of Center and setting up businesses to issue Fiat Stable Coins in some Asian markets as well using the Center Protocols and Network. Interesting. Yeah, this is actually very interesting.

Basically, let me recap it for you to make sure that I understood it correctly. Essentially, you have created this nonprofit organization that will set standards for entities that want to accept dollar reserves in order to issue these USD coins. And so there can be multiple providers of the USD coin. Is that correct? That is correct. And other fiat coins as well. So there could be euro coins, yen coins, you know, in any currency market that wants to operate

with this kind of technology. Okay. And so I imagine there will be standards around like auditing, maybe something around the standards for the bank and certain. I don't know, licensing or registration requirements that it has to have, something like that? You got it. Yeah. So it's basically, it's a membership and governance scheme and it's an open source technology, you know, project and open standard protocol definition. So it sort of brings those all together. And the membership and government piece really, you know, to become a member,

you have to be licensed to be able to, you know, issue electronic money, whether as like a money transmitter or being a bank itself, you need to obviously be in good standing with your compliance with that. And you need to also, you know, have the ability to prove solvency so that the minted and issued assets are, you know, fully solvent and are provable and published publicly, regularly. And then there's some, you know, auditing of technical procedures that have to do with how an issuer's own technologies interact with the center smart contracts that are for minting and burning of these tokens to make sure that there's confidence in the quality and reliability there. And there will be an evolving set of other network rules that will emerge around that as well.

This is interesting because I, in that previous episode I did on the stable coins, I had asked one of the guests, he was Roon Christensen, who does Maker Dow, where they, the way they do it is they over collateralize their coin, which is pegged to the US dollar or whose value is pegged to the US dollar. But they, he said to me, oh, you know, that kind of coin is centralized. And I just wonder what his take would be on this because this is more decentralized. But obviously, as we've seen in the past, banks aren't entirely trustworthy. So anyway, yeah, I do think it's a very interesting model, though. Yeah, I mean, I, you know, I think, you know, in our view, like people want dollars. And so they're actual dollars, you know. So I think in the future that people might want something that's not an actual dollar.

They might want something that has stable value that is based on a bond or an algorithm or a mixture of things. Maybe it's a basket of reserve currencies that are algorithmically traded to be price stable. And there's so many ideas for how you can do this in the future. And we're really excited about those. And at the protocol layer, what centers working on can support those kinds of things as well in the future. but for where we're at today, whether it's making payments over public chains or participating in investment contracts, if we really want this to take hold at a mainstream level with businesses and individuals, having fiat money actually work on this infrastructure, we think is quite important.

And so that is why we're using that as a starting place today. Yeah, I think one puzzle piece that would need to be worked out for sure. Well, I mean, actually, this is slightly tangential, but I did read that you guys had pitched yourselves to the OCC to help set standards for custody of crypto assets. I'm just curious what you think would be the recommendations that should be adopted. Yeah, I mean, I think custody over crypto assets is something that, you know, folks who've been in the industry for a while have a pretty good understanding of in terms of how to do it with high levels of security. And it's continuing to evolve. I mean, when we got to.

started really the only thing people were custodying was Bitcoin and you know now people are custodying you know upwards of a hundred different types of crypto assets and it starts to get you know more complicated so what is you know a token could be you know representing a dollar and so you're custodying a dollar it could represent a digital commodity like a Bitcoin or an ether a token could be an investment contract so essentially you're custodying a an underlying bearer instrument that represents some kind of equity value. You know, when you think about what a house or a car is, you know, the actual property is not the physical object. It's the title and the title is is a certificate of some sort.

So if you tokenized those kinds of things, you know, securing and storing and holding on to all these is going to be a really different, a different thing. And it's quite different than, you know, the custody requirements for what a bank is, which is really, you know, you know, the kind of safeguards and record keeping and audits and procedures. And it's really around safeguards and procedures and reporting and visibility and that kind of stuff. That is really what defines a qualified custodian in any given one of these fears. But I think this is going to actually custody of crypto is sort of like saying custody of all forms of property. And it's going to quite quickly exceed the realm that even traditional bank custodianship focused on.

You already answered the next question I was going to ask you, but I do still want to discuss it a little bit more. I have been reading like Bank of New York Mellon, J.P. Morgan and Northern Trust have all been looking at providing custody services. And I've been at some of these conferences where people seem to feel that those institutions are more trustworthy and that once they enter the space, then some of the crypto-native companies won't stand a chance. So I'm just curious, like how do you feel you will compete once once these companies start coming in. Yeah. I mean, I think, you know, people maybe thought AT&T was more trustworthy than, say, Google or Walmart was more trustworthy brand than Amazon or, you know, you name it. I mean, basically, the big industrial giants of media communications and retail have all been replaced by technology companies as the adored brands that people trust. You know, there are obviously chinks in the armor of these big internet companies, and we've seen that play out, obviously. But I think, you know, technology companies have done an incredible job

of delivering exceptional value, great products, incredible user experiences with better economics, then they're kind of pre-technology company counterparts. And so we think in the future of finance, yeah, I think it's going to be, you know, global technology companies that are built natively on this infrastructure that people adore and trust. And so it's going to be kind of one in the market,

not just because you have some old guy's name on your company. Yeah, although I do think with money, it's a little bit of a bigger leap than it would be just for communication. It may be. I mean, the dominant retail banking brand in China is AliPay. And, you know, that is not, you know, Bank of Industrial China or whatever. It's AliPay. It's a company that's barely been around for a few years. And almost 800 million people use it for retail finance. So I think it's very possible for technology companies to establish really tremendous, trustworthy franchises.

I do agree that it's a higher bar. But I think if you look at the generations that, you know, sort of GenX and millennials and younger who have been driving the adoption of these products and services, they've proven quite willing to embrace, you know, technology native brands and companies. And we certainly think that that opportunity exists in this world of finance. Since you mentioned China, I want to discuss that further. China seems to be part of your strategy. You've taken investment from Bidu, IDG Capital Partners, Vibushi Capital, other China-based firms. You formed a separate company Circle China. I don't know what the latest is on that.

You've received investment from Bitmain, one of the largest crypto mining equipment manufacturers and Bitcoin pool operators. So how does China fit into Circle Strategy, especially now given – because I feel like a lot of this stuff happened, except minus the bit main part, happened before we saw this big clampdown in China around crypto. Yeah, I could take part of that and Sean maybe you jump in too. I think we've always been very impressed with the pace of innovation out of the China market, in particular in FinTech, as well. a market, it's just so far ahead of the U.S. and Europe. So there's a lot to learn there. This is an example of a market where they're just way out innovating the West. And so there's always been a lot we want to learn there. I think there is a long-term thesis that we have,

which is that we do think that China is in the process of opening up their economy. We do think that they're in the process of opening up their currency to be more open and interoperable with other reserve currencies. And there's an incredible amount of enthusiasm in China for blockchain technology. I don't know if you've ever been over there. It's fanatical, in fact. So there's just an incredible amount of interest there. The People's Bank of China, you know, this is more info was published on this last week on Coinbase.

I'm sorry, on Coin desk. But, you know, they're marching ahead, building a crypto-powered, you know, reserve, you know, digital currency for R&B. So they're racing ahead, I think, in this area. And so, again, there's just a lot to learn there. At Circle, you know, we have a global strategy. We have, you know, our international headquarters in Dublin. We've got operations throughout Europe.

We've got obviously significant operations in the U.S. And we have operational staff in China. They're employed by Circle China that support the global business. And we have a Hong Kong operation, which, you know, supports Circle trade, which is a significant business in the broader, you know, Asian market in crypto asset trading. So there are a lot of pieces to that. And I want to ask about the Bitmain investment, because Bitmain has a somewhat notorious reputation in the West. I shouldn't have even qualified that with somewhat. I would definitely say it's notorious reputation. Why take venture funding from

Bitmain? Sure. Sean, do you want to take that? Yeah. I mean, I guess one of the things to maybe reiterate or echo a little bit about what Jeremy said is a circle is was founded as an international company. And I think, you know, we're talking together here from the United States. But when we talk about connecting people globally and the new web of finance, that's not just connecting people from, say, New York to California. And I think sometimes in tech, especially in the U.S., we have a tendency to look through a, you know, for better or for worse, a Bay Area lens when the reality is that in this particular space, the lens is very, it's international and Asia focused at this point. It may not be that they're a generation ahead of everyone else, but there are a few years ahead, I think,

and leading the way and leading the way in multiple, along multiple directions, including infrastructure and forward thinking about what this really looks like for all of us down the road. And so that means that there are also really interesting partnerships and including investment partnerships in Asia as well as in Europe and elsewhere that are helpful for the vision that we're attempting to accomplish. I think, you know, Bitmain specifically is the leading Bitcoin company right now in the world, but has a very broad vision. And, you know, Jihan Wu has a long-term vision for the impact of this technology in positive ways on the world. Of course, there have been some debates around governance and approaches to certain things around

the future of Bitcoin and, you know, alternatives paths. And I think one of the things that is challenging with Bitcoin is unlike previous debates around standards and development of, you know, global technology where we had governance mechanisms to allow debates to occur, but ultimately be, you know, timeboxed or somehow sandboxed so that, you know, in the past, say, a Microsoft could disagree with an IBM, but ultimately agree on the same standard, you know, HTTP so that we didn't have multiple protocols. multiple web protocols. But even if there was debate, there was a way to agree on a standard. That hasn't really been the case with something like, you know, Bitcoin specifically. And so

that's led to some disagreements that have been no notable in the community. That doesn't in any way detract from, you know, the broad vision that we're all trying to accomplish here together. So I think that's what I would say in Bitmain's favor. I think some of the allegations against them are also in the direction of whether or not the practices they use are anti-competitive and against decentralization and things like that. So I definitely think, you know, I don't know how founded or unfounded those are. I did explore this a little bit in my episode with David Vorick who has, who started Sia coin and then now has started Obelisk, which is getting into mining. And you know, I also contacted Gihon to find out what his take was on what David was saying.

So it's not fully clear really what happened. You know, it ended up being a little bit he said, she said. But I guess I just wonder if you feel like there's any risk to you guys to partner with somebody who is perceived as maybe not holding this principle of decentralization as high as some other players in the space. Yeah, I mean, I think, you know, if you get to know, Jihon, he is incredibly passionate about decentralization. He's incredibly passionate about this infrastructure being broadly adopted. He's not just wedded to kind of one model for blockchains. For example, he's a huge, huge advocate for, you know,

fiat stablecoins. And that's a completely different, if not orthogonal dimension to something like the kind of core, you know, Bitcoin network. So it's more nuanced and the ideas are broad. I mean, we're passionate about Bitcoin. We're passionate about Ethereum. We're passionate about fiat. We're passionate about security tokens.

We're passionate about a lot of things in crypto. It's not unidimensional. I think there are people who are very unidimensionalists and so on. And that's just not who we are. I don't think that's who Jehan is either. Okay. Well, it's been so great talking with you both. Where can people learn more about you and Circle?

Circle.com. Okay. Great. Well, thanks for coming on Unchained. Our pleasure. Thanks, Laura. Take care, Laura. To learn more about Circle, check out the show notes inside your podcast episode. New episodes of Unchained come out every Tuesday. If you haven't already, rate review and subscribe on Apple Podcasts. If you like this episode, share it with your friends on Facebook, Twitter, or LinkedIn.

And if you're not yet subscribed to my other podcast, Unconfirmed, I highly recommend you check it out and subscribe now. Unchained is produced by me, Laura Shin, with help from Elaine Selby, Frasional Recording, Jenny Josephson, Rahul Singeretti. and Daniel Ness. Thanks for listening.