The Rise of Stablecoins with Circle’s Jeremy Allaire | E2004
10 Sep 2024 (8 days ago)
Circle’s Jeremy Allaire joins Alex Wilhelm
- The speaker believes in the potential of an open and programmable financial system on the internet.
- The speaker believes that stablecoins are the key to unlocking the true potential of cryptocurrency.
- The speaker, Jeremy, is the co-founder, CEO, and chairman of Circle.
Jeremy's early career and the evolution of the internet
- In 1990, he became interested in the internet, specifically open networks, decentralized networks, open protocols, and open-source software.
- In 1995, he co-founded Allaire, which created ColdFusion, the first commercial web programming language.
- After Allaire went public in 1999, it merged with Macromedia, where he became the chief technology officer and helped pioneer the use of Flash.
Transition from Macromedia to Circle's founding
- An interest in international economic systems led to an early excitement about the internet and its potential for information and software distribution.
- 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.
- 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.
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Bitcoin, stablecoins, and Circle's compliance
- Bitcoin has reached broader technological consciousness.
- Circle is a centralized and regulated entity, but the protocols of public blockchains are open network protocols.
- Circle holds a significant amount of US federal debt through its BlackRock fund.
- The European stablecoin laws affect both USD Coin (USDC) and Euro Coin (EUROC).
- Euro Coin reserves must be held in Euro cash or the highest-rated European Government Bonds.
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The current state and future of stablecoin market infrastructure
- Three key factors are contributing to the growth of stablecoins: infrastructure improvements, network effects, and improved usability.
- Blockchain networks, analogous to internet operating systems, have undergone significant upgrades, enabling higher throughput and lower transaction costs.
- Stablecoin networks benefit from positive network effects, where increased adoption by users and developers leads to greater utility and further adoption.
- Usability has drastically improved, with simplified onboarding processes and user-friendly interfaces making stablecoins more accessible.
Integrating stablecoins with traditional finance
- Financial technology companies and "neo-banks" are increasingly incorporating stablecoins, allowing users to utilize stablecoins directly.
- Major card networks, Visa and Mastercard, have programs that enable card issuers to offer cards where stablecoins are the form of money being spent.
- Merchant acquirers, such as Stripe, are providing settlement options in USDC, offering benefits like instant settlement and lower fees.
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Stablecoins' impact on global financial systems
- Countries with strict capital controls, such as China and India, present challenges for stablecoin adoption.
- The increasing use of stablecoins will likely lead to more countries establishing regulations for their use.
- 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.
Circle's business model, scalability, and blockchain potential
- There is potential for growth in the number of blockchains and stablecoins, but the exact numbers are uncertain.
- 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.
- Circle, the company discussed, is focused on building stablecoin network infrastructure and supporting new ecosystems as they emerge.
Growth of USDC and other currency stablecoins
- 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.
- 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.
- 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.
USDC market cap trends and interest rates
- The market cap of USDC, a stablecoin, experienced significant growth during a period of fluctuating interest rates.
- 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.
- While high interest rates may generate incremental income from reserves, they can also hinder economic activity and money velocity.
Stablecoins in the global financial system and US regulation
- Lower interest rates are crucial for economic growth, fostering an environment conducive to entrepreneurship, business expansion, and job creation.
- The financial system, similar to other critical infrastructure and industries, necessitates robust regulation to ensure stability and safeguard the interests of society.
- There is a strong bipartisan push within the US government to pass the payment stablecoin act, potentially even before the upcoming presidential election.