The Rise of Stablecoins with Circle’s Jeremy Allaire | E2004

Circle’s Jeremy Allaire joins Alex Wilhelm (0s)

• The speaker believes in the potential of an open and programmable financial system on the internet. (0s)
• The speaker believes that stablecoins are the key to unlocking the true potential of cryptocurrency. (1m50s)
• The speaker, Jeremy, is the co-founder, CEO, and chairman of Circle. (1m59s)

Jeremy's early career and the evolution of the internet (2m8s)

• In 1990, he became interested in the internet, specifically open networks, decentralized networks, open protocols, and open-source software. (2m31s)
• In 1995, he co-founded Allaire, which created ColdFusion, the first commercial web programming language. (3m25s)
• After Allaire went public in 1999, it merged with Macromedia, where he became the chief technology officer and helped pioneer the use of Flash. (4m36s)

Transition from Macromedia to Circle's founding (5m28s)

• An interest in international economic systems led to an early excitement about the internet and its potential for information and software distribution. (5m50s)
• The development of a seamless video player technology led to the founding of Brightcove, an online video distribution platform, based on the principles of open networks and distributed systems. (6m19s)
• The 2008 financial crisis sparked a deep dive into the complexities of the monetary system, leading to an interest in cryptocurrency and its potential to revolutionize finance. (8m14s)

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Bitcoin, stablecoins, and Circle's compliance (13m21s)

• Bitcoin has reached broader technological consciousness. (13m30s)
• Circle is a centralized and regulated entity, but the protocols of public blockchains are open network protocols. (16m21s)
• Circle holds a significant amount of US federal debt through its BlackRock fund. (18m42s)
• The European stablecoin laws affect both USD Coin (USDC) and Euro Coin (EUROC). (19m1s)
• Euro Coin reserves must be held in Euro cash or the highest-rated European Government Bonds. (19m51s)

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The current state and future of stablecoin market infrastructure (22m23s)

• Three key factors are contributing to the growth of stablecoins: infrastructure improvements, network effects, and improved usability. (23m19s)
• Blockchain networks, analogous to internet operating systems, have undergone significant upgrades, enabling higher throughput and lower transaction costs. (23m30s)
• Stablecoin networks benefit from positive network effects, where increased adoption by users and developers leads to greater utility and further adoption. (24m36s)
• Usability has drastically improved, with simplified onboarding processes and user-friendly interfaces making stablecoins more accessible. (25m19s)

Integrating stablecoins with traditional finance (28m7s)

• Financial technology companies and "neo-banks" are increasingly incorporating stablecoins, allowing users to utilize stablecoins directly. (29m13s)
• Major card networks, Visa and Mastercard, have programs that enable card issuers to offer cards where stablecoins are the form of money being spent. (30m14s)
• Merchant acquirers, such as Stripe, are providing settlement options in USDC, offering benefits like instant settlement and lower fees. (31m20s)

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Stablecoins' impact on global financial systems (35m40s)

• Countries with strict capital controls, such as China and India, present challenges for stablecoin adoption. (36m36s)
• The increasing use of stablecoins will likely lead to more countries establishing regulations for their use. (37m55s)
• The widespread adoption of digital currencies, including stablecoins, could result in a decrease in the number of major international currencies, potentially leading to greater economic stability and financial development. (40m21s)

Circle's business model, scalability, and blockchain potential (41m30s)

• There is potential for growth in the number of blockchains and stablecoins, but the exact numbers are uncertain. (47m18s)
• The speaker believes that the blockchain ecosystem has not yet reached its full potential and compares its current state to the pre-iPhone era of mobile operating systems. (43m41s)
• Circle, the company discussed, is focused on building stablecoin network infrastructure and supporting new ecosystems as they emerge. (47m24s)

Growth of USDC and other currency stablecoins (49m6s)

• There is a strong belief that the role of the US dollar will grow in the internet financial system, making it the biggest, so a lot of energy and focus will be directed there. (50m2s)
• While encouraging the development of connection points and on and off ramps in markets around the world, there is no pressure to build a USDC in every market. (50m21s)
• If a company builds a USDC in a market like Australia and it doesn't become as big as the main USDC, it can always be acquired later. (50m44s)

USDC market cap trends and interest rates (51m10s)

• The market cap of USDC, a stablecoin, experienced significant growth during a period of fluctuating interest rates. (51m11s)
• A neutral interest rate, estimated to be around 2.75% to 3%, is considered ideal as it avoids being overly restrictive or stimulative to the economy. (52m40s)
• While high interest rates may generate incremental income from reserves, they can also hinder economic activity and money velocity. (53m5s)

Stablecoins in the global financial system and US regulation (56m7s)

• Lower interest rates are crucial for economic growth, fostering an environment conducive to entrepreneurship, business expansion, and job creation. (59m15s)
• The financial system, similar to other critical infrastructure and industries, necessitates robust regulation to ensure stability and safeguard the interests of society. (1h4m1s)
• There is a strong bipartisan push within the US government to pass the payment stablecoin act, potentially even before the upcoming presidential election. (1h2m15s)