There’s a lot of conversation going on around the world, a lot of chatter about the potential of the US losing its position as the global reserve currency. What can the United States do about it? And that’s where stable coins come in. Jeremy Allaire is here. He’s the co-founder and CEO of Circle. We think that the world needs a full reserve banking system. We we we think that the world needs much safer base layer money, and that’s what stable coins represent. When you deposit $10 million into a bank, what happens? They’re borrowing a dollar from you, and then they’re permitted to lend it out 12 times. That’s insane. That’s what fractional reserve banking is. One of the motivations for starting Circle was, okay, is there a way to have full reserve payment system money separated from lending money? We could construct that on the internet, actually. And in fact, it’s totally necessary on the internet. >> Money’s about to go from static to supercharged. You’ve talked to lots of central bankers. Are they even aware about what’s coming? The really smart people are like, oh my god.
[00:01:02] Now, that’s a moonshot, ladies and gentlemen. Everybody, welcome to Moonshots. I’m here with my Moonshot mates, Salim Ismail and Emad Mostaque and Peter Diamandis. And today, a special guest, a new friend, someone I hope to have in my life for many decades to come, Jeremy Allaire. He’s best known as the co-founder, chairman, and CEO of Circle, the company behind the stable coin USDC. By the numbers, USDC has market cap of $76 billion, over 90% year-on-year growth, and this past summer did an IPO and raised a billion dollars. Welcome, Jeremy. It’s a pleasure. Thank you, Peter. I’m psyched to hang out with you guys. Yeah, this uh I like to call what you’ve done at Circle an overnight success after 12 years of hard work. Yes. Let me let me let me set the goal here for our listeners. So, the way our banking system works today is kind of
[00:02:00] insane when you look at it, and I hope to dissect that with you. At the end of the podcast today, my hope is that our listeners are going to understand why stable coins on the blockchain are the future of money, the future of payments and transactions. And while stable coins, while they’re safer, they’re also more ethical and operate internet speeds. And finally, I want to discuss why America needs stable coins. So, does that sound good to you? Yeah, absolutely. And I think we can we can bridge off of that into a lot of adjacencies, as well, that hopefully uh you know, build on that, too. I I think we should begin with a definition on stable coins and USDC. Do you want to take a shot, or should I? I I’m happy to. Yeah, I’m happy to. I I I’ve been thinking about this a long time. And and the semantics of all this. So, um look, there there there are a lot of things that call themselves stable coins. And so, what I what I don’t want to do is try and describe the entire topology of of things that that are stable in name only, or or or
[00:03:02] whatnot. And so, I’m going to use a a more narrow definition. And and actually, that narrow definition is now uh really being enshrined in law all around the world. So, the major governments of the world are actually enshrining this definition of stable coins in law as they codify this as a form of legal electronic money in in the global financial system. So, I’m going to use that narrower definition. So, in our conception, a stable coin is a representation of a fiat denominated currency, such as a dollar, a euro, RMB, yen, etc. It is a representation of a fiat denominated currency as a cryptocurrency. So, operating on the internet as a on on public networks, on these public internet networks, colloquially, you know, known as blockchain networks. So, operating on these public networks, and they’re notable in that they are
[00:04:02] they’re not just denominated in fiat. They are actually fully backed and fully reserved by such fiat currency. And there’s a lot of nuance in there, which we can get into, but fundamentally, it is a uh backed one for one, so that when you have one of these stable coins, well, A, they’re stable, meaning that you can always create them or redeem them for the unit, a dollar, a euro, etc. So, you always have that one-for-one creation and redemption. And this and so, therefore, the the mechanism by which you get the stability is that full reserve. So, they’re they’re they’re designed to be very safe, safer than commercial bank money forms of digital currency, but that then operate on the public internet and inherit all of the public internet’s superpowers, which we’ve all come to love, which is openness, interoperability, global reach, programmability, uh you know, you know,
[00:05:02] with marginal costs of moving things that approach zero and move at the speed of the internet. So, that is that is what stable coins are. And and the the legal term in the United States under recently passed federal law is what is called a payment stable coin, meaning it’s good for payment. It’s money good to settle a transaction, basically. Every week, my team and I study the top 10 technology meta trends that will transform industries over the decade ahead. I cover trends ranging from human-aided robotics, AGI, and quantum computing to transport, energy, longevity, and more. There’s no fluff, only the most important stuff that matters, that impacts our lives, our companies, and our careers. If you want me to share these meta trends with you, I write a newsletter twice a week, sending it out as a short 2-minute read via email. And if you want to discover the most important meta trends 10 years before anyone else, this report’s for you. Readers include founders and CEOs from the world’s most disruptive companies and entrepreneurs building the world’s most disruptive tech. It’s not for you if you don’t want
[00:06:01] to be informed about what’s coming, why it matters, and how you can benefit from it. To subscribe for free, go to diamandis.com/metatrends to gain access to the trends 10 years before anyone else. All right, now back to this episode. I appreciate that, and you probably did a better job than I could have. Uh what I I’d like to do, one second, is open with this question. You know, there’s a lot of conversation going on around the world, a lot of chatter about the potential of the US losing its position as the global reserve currency. Uh especially as China, India, and Russia are getting together. Uh my question is, do you think that stable coins could help play a role in maintaining the US the US dominance as a global reserve currency and and stabilize that and back that in some fashion? Yeah, so I I think that um you know, uh currencies have network effects, uh and they have network effects from their their adoption and utility. And they have network effects from their
[00:07:00] liquidity. Um and the dollar, uh you know, basically got plugged into the payment systems of the world after World War II. Um and and and became sort of a a required uh settlement asset for trade. Mhm. And um and and therefore, it gained enormous liquidity. And so, that liquidity and that kind of network utility kind of was has been very strong. Um and so, that’s been sort of the basis uh of the dollar for a long time. But then, after 1971, something profound happened, which I think we all know about, which is uh the the fiat currency, the dollar, which kind of had a consensus uh global consensus behind it. It was somewhat imposed because the US kind of won World War but somewhat imposed. Um the the the dollar, uh you know, it it depegged from gold is one way to think about it. So, it had been a gold-backed a gold-backed currency, and sort of it was kind of
[00:08:00] considered incredibly neutral as a result. Uh you know, you had kind of you had the gold there, and then the dollar was this sort of unit of account, and and governments kind of maintained their own pegs to the dollar, which implicitly meant they were pegged to some amount of gold. And because of ballooning deficits in the 1960s, because of the war that was being waged in Vietnam, uh Richard Nixon uh sort of said, okay, well, we we we we we no longer have the money. So, we don’t have we don’t have it. We don’t have it. And so, we’re going to break. And we’re going to create a government-issued money by fiat. It was just we say it’s the money. Uh so, fiat currency, uh which goes way back historically, the concept of fiat, but fiat currency is a relatively recent phenomenon. Most of monetary history was commodity-backed in some way. There are lots of examples of detethering from that, no pun intended. But um the you know, you you have this break, and um and and then the the currency
[00:09:01] basically became about the full faith and credit. That’s this phrase we know, it’s the full faith and credit. And battleships and armed forces. Yes, full faith and credit. And and yes, and the and the sovereign sovereign power and sovereign creditworthiness. For most countries, it’s sovereign creditworthiness. Like whether you buy an Argentinian bond or South African bond, doesn’t have to do with their military. It has to do with their the the the creditworthiness of the government. And so, I think, you know, there’s been uh these shifts globally, as you as you referenced, in geo-economic powers and and arguably rising hard power, as well. And um we’ve seen that hard power exercised, like the Russian invasion of of Ukraine. You know, we see hard power exercised in other places. But you you you’ve had this question for some time, which has been on people’s minds, and it in particular became exacerbated after Russia invaded Ukraine and the United States government basically went to all
[00:10:02] the the utilities that are part of the dollar network. The actual like these are like software utilities like Swift is a software utility. It’s a messaging standard that broadcast messages around the world and it’s it’s who has access to that messaging protocol is who has access to settle money. And not only did they kind of intervene in that the US government intervened in that it it also like grabbed things from you know basically put a lock on database records which is really what you know if someone holds T-bills or holds there is you’re you’re you’re you’re getting your your read access has been blocked right? So read access was blocked for Russia to a whole bunch of stuff and so that freaked people out. It like really freaked people out. It was like wait a minute this dependable consensus-based international system where full faith and credit is okay there are some question marks about that. And then at the same time we’ve been in a world where there’s these
[00:11:01] you talk about exponential debt we could talk about exponential debt. We’ve had exponentiating debt. And exponentiating debt is like a real issue and so the Bitcoin adherents and and you know I happen to be a Bitcoin adherent adherent as well you know are looking at like sovereign debt as a real issue and so the full faith and credit part becomes challenging. And so all of this is kind of combined into asking this bigger question of is the role of the dollar waning? If you read the 500-year history by Ray Dalio he’ll tell you it is etc. right? So you can kind of look at this from some of these angles debt supercycles the geo-economics geopolitical environment etc. And all of this kind of comes back to your question which is um what can the United States do about it right? I mean there’s the obvious stuff which is is become more neutral or or or less intentional in terms of control. That’s a that’s a that’s a policy choice. It can have less debt
[00:12:02] and and that does not seem to be a politically viable choice in the United States right now. As you guys talk about all the time we’re going to have like insane levels of GDP output from AI and we’re going to just going to basically grow our way out of it right? That’s one one philosophy. We’re going to grow our way out of it and so therefore don’t be worried about the the the the debt and so you keep buying US Treasuries cuz they’re going to be good in 10 years cuz we’re going to be so productive in 10 years. And then but then there’s this other question which is well wait a minute like there isn’t an alternative right? There’s a lot of noise about alternatives. There’s like noise about BRICS and and noise about BRICS currencies but you know the trade settlement in dollars is still 60-some percent even higher maybe as high as 80% and so the question is is what is there something that the United States can do that can support demand for US Treasuries and support continue to strengthen the network effects that it already has.
[00:13:00] And so that’s where the internet comes in right? We’ve we’ve and that’s where stablecoins come in. And you know the the the US famously liberalized and commercialized the internet and exported software utilities made principally by American companies everywhere in the world on the public internet. I think the question is now you know similar like with AI foundation models or with with internet financial infrastructure like stablecoin financial infrastructure blockchain infrastructure can the United States kind of create a a liberal free market competitive regulatory regime and export all of this globally and cement its role not just in the AI arms race but in the in the in this financial utility arms race. And that’s effectively what the policy position of the US government is right now. That is what the genius act represents and so you know the the the fundamental argument is well let’s just make dollars have higher utility by allowing them to kind of compete on the basis of free circulating digital currency on the
[00:14:01] internet and let’s let technology-driven companies be the primary IP generators innovators to kind of continue to evolve these open software stacks to to to kind of lead this and that would essentially continue to protect if you will and bolster the the the US dollar. So that’s a long-winded answer but I think it’s important framing Salim do you want to jump in? I have a specific question for you which I I’m seeing a factor here which could be very exciting but is USDC exclusively backed by T-bills or are there other assets and how do you how do you back it today? Yeah. So USDC is I would argue and Circle itself is sort of the most you know one of the most transparent financial institutions that’s ever been created. If if you go to I don’t know what bank you use you don’t need to tell me but let’s say you bank with Chase or Wells Fargo or I don’t know who you bank with right? If you went and said I want a real-time view or a daily view into every
[00:15:00] instrument that backs the fractional reserve loans that is is relates to the dollar obligations that you have to meet like you’re not going to get that and in fact if the if the Fed and Treasury said to the bank we want to see all that they couldn’t put that together for you. Like the books and records are hard and auditors are just sampling data to get the audits done. So what we’ve done is we’ve constructed a model where essentially 90% of what backs USDC at any given time. Sometimes it’s 85 sometimes it’s 93 but let’s just call it approximating 90% is in a structure which we call the Circle Reserve Fund which we created in in collaboration with BlackRock and effectively what it does is it creates a publicly listed structure called USDXX. You can do a little Google search or whatever and it’ll bring you to a page on BlackRock and you can look inside that daily and you can see every single instrument that’s there. And what you’ll
[00:16:00] find in that 90% is it’s primarily short duration US government Treasury bonds. So they’re it’s it’s all you know 90 days or less but an average duration you could probably tell me cuz it tells you in real time on there I haven’t looked at it but sometimes it’s 10 days 13 days 14 days like a very very short duration averages. And it’s um Treasury over collateralized repo which for those that aren’t familiar that is essentially giant banks take cash from they borrow cash from us overnight. So we give them our cash and then they give us more than that amount of cash in T-bills. So we have over collateralized overnight obligations from banks. And so if the bank can’t pay us back we have the T-bills we’re good and it’s over collateralized. So it’s sort of it’s it’s sort of all what I’ll call fundamentally short-term government obligation risk. And then they also see in there there’s cash and you can see in
[00:17:01] there where the cash is. All the cash that’s in that fund is with Bank of New York Mellon. Bank of New York Mellon all they do is they do a lot of things. I don’t want to I don’t want to diminish but they are the the the biggest custodian of cash. They have this incredible infrastructure. They they custody 44 trillion dollars of assets. So you have it there. >> They’re known as the bankers’ bank. So we bank with the bankers’ bank. And then the other 10% about 98% of that 10% is held with bankers’ banks meaning like you know the the the BNY Mellon’s of the world the State Streets of the world companies like that. And then we have a little bit which we basically position around the world in also high quality banks but also with a little bit with fintech banks to provide kind of immediate liquidity so that if I’m in in Singapore or I’m in Brazil and I want to create a USDC from a local a local bank I can do that basically 24/7. And so that’s that’s
[00:18:02] that’s what is actually there. And so the the that’s somewhat of a long answer but the short answer is it’s T-bills it’s what’s called you know Treasury repo and it’s and it’s cash. And now you know and and we by the way despite people saying unregulated all this sort of stuff obviously there’s a genius act but there’s we we’re also under a framework imposed by the most intense regulator of Wall Street which is actually the New York Department of Financial Services who has a set of specified assets that we are only allowed to hold that so we have to hold ourselves to the to the Wall Street regulator. And and you have I’ve been watching Circle for kind of since its founding and I got to hand it to you for >> have invested as a founder. Well the sheer perseverance you’ve had to navigate all of this regulatory bureaucracy. This is like Nobel Prize winning stuff. >> Well that you you put it that way that was that was that was what made this exciting to me. I mean >> Jeremy what do you put the chances at at founding day that you’d get to today
[00:19:00] honestly? Would you 100% >> I don’t think I mean I don’t think probabilistically because you can’t you can’t do that as a founder. Like it’s it’s all or nothing right? You know you have this conviction you have a vision you see what you’re you want to do and you know it’s possible and then you just fight like hell to to to realize it. Like that is You create the future. That’s that’s that’s mission. And so like that’s how how I thought it but I I did want to say Salim to your comment like like I built internet software companies platform infrastructure companies nothing at this scale but I originally had had studied kind of global political economy international political economy. My academic background was was was not computer science or or technical finance or anything like that. And when I kind of looked at this problem space uh really almost 13 years ago, I uh I was like,
[00:20:00] “Man, in order to actually realize the ideas, it’s going to require changing global policy and then having that global policy kind of get cemented by the major governments of the world.” And I thought to myself, “That sounds really hard. That sounds extremely hard. And I’m up for doing something really hard at this stage in my career because I think you know, I think with a lot of these exponential tech, like it changes society and it changes the rules and it changes what’s possible and you got to change the laws because if you don’t, you can’t do the thing. Um these adaptations require that. And so it’s actually very motivating to me. >> So but you did the you built the tech. You built the tech first and didn’t change the policy first. I think that is something critically important, right? You you built >> Well, a little bit of both. A little bit of both, right? Because like, you know, actually I was um I was just doing a session at the annual meeting of the World Bank and the IMF just today. I’m in DC. And um you know, 12 years ago, almost to the day, it was
[00:21:02] November, uh I I was I was asked I was called to testify to the US Senate about this issue of like can virtual currencies, as they were called back then, can can they exist, what’s the innovation potential, etc. And I was advocating hard for policy at that point. And I would say, while we built the tech, uh you know, before I I put a single dollar in the company, before my investors put a single dollar in the company, I hired the very best regulatory policy advisers in the world to basically help me figure out how how are we going to do this? Like how how how are we What what’s the thread we can pull to to do this in a legal way, in a compliant way? And and we figured that out. And but what that meant though is that while maybe there weren’t stablecoin regulations cuz stablecoins didn’t really exist, there was a body of law around payment systems, electronic money, all these things. And what it
[00:22:01] meant is that to do what we needed to do, we had to be constantly working with policy makers, working with regulators, collaborating with them at every moment. And I think that posture has never changed and it continues, you know, to this day as this gets to me. >> made it otherwise, right? Cuz you’re Otherwise, it’s so easy for them to go, “Wait a minute, he’s trying to act like a central bank. This Enough of this.” And slam the door on you. Eman, do you want to jump in? Yeah, no, I think it’s amazing what you’ve kind of done over the years, perseverance, especially through the dark times. And now it’s really interesting cuz the regulation tailwind is there. But then also you’ve got AI agents literally hitting right now who are possibly the biggest users of AI and stablecoins ever. And you guys have been doing great work with X402 and SDKs and things like that. I’m really curious, how much of your volume do you reckon in 5 years is going to be AI versus humans? Interesting. >> Yeah. Yeah, I think about this a lot.
[00:23:01] And and um I’ll just for a little bit of historical context, you know, the the really inspiring thing when when you Shawn and I were co-founding the company, Shawn Neville’s co-founder, when we were we were we were co-founding the company um back in 2013 is what got us really excited was this idea of programmable money. Mhm. And um you know, it was it was just an idea on napkins, so to speak, back then. There were some papers that some really really incredible people had put out about smart contracts. Um and I got very excited that these blockchain networks could become like distributed compute engines. And um and that, you know, I I had worked on virtual machines, programming languages, I’d worked on application infrastructure, built some of the most popular app servers in the early days of the internet. And I was very excited about this idea of of these kind of um uh trust machines, these distributed
[00:24:00] compute engines that could provide cryptographically verifiable compute outputs and inputs and data and transactions. Like that was like the bomb. That was like, “Oh man, if we have that, like we can actually move economic activity in a broader-based sense, not just moving point value from point A to point B, but like economic activity more broadly. We could actually move that onto the internet. And we could reconceptualize all the building blocks of the economic system. And like that’s what motivated us. And so like the first thing we we were like, “Okay, well, we got to get a protocol for dollars on the internet going cuz like we got to get that going. And we need these we need these networks to become compute engines where you could actually build a protocol layer that’s like a application utility layer. And like we got that 5 years in with Ethereum. And so we got this going, we got the legal going, got the technology going, we wired it up to the financial system. But that was like the super primitive first ideas that we had. And so we’re now now those are coming now those are coming around. And and to your question, so I’m going to answer it,
[00:25:01] which is I think the vast majority of stablecoin transactions are going to be AI intermediated in 5 years. And I think we’re we’re entering a period where economic operating systems are being created. And these the these layer one blockchain networks uh are are are are becoming economic operating systems. They’re designed to contain economic activity. Provable data transactions and compute that is necessary for entities that face each other in a trustless way. That could be AI agents that face each other and need need proving systems basically to to prove identity, yes, but to prove inputs and outputs and other things. And they need to be globally interoperable. It needs to be if there’s an AI agent, you know, spun up out of somewhere in Asia and there’s an AI agent spun up from wherever. I mean, where is sort of all relative anyway, but like the the the these these agents that are increasingly agents with capital are are conducting
[00:26:02] work. Maybe they’re bringing in humans. Maybe humans are bringing them in. It’s both ways. But like the intermediation on that has to happen on an infrastructure like this. Like there’s no infrastructure there’s no other infrastructure. Not having over like credit card networks, right? So it’s it’s happening on this kind of infrastructure cuz it needs to be highly scalable from microtransactions, uh which is you know, we just released a toolkit for microtransactions with X402 and >> way, I love microtransactions. I mean, talk about the number of times I wanted to just donate small amounts, you know, >> Yeah. Yeah. I mean, >> Yeah, but it’s it’s scalable. I I use the metaphor like um uh like email, SMTP does not care about the payload, right? If I send you a picture on email with a with an attachment of a picture of my breakfast and you send me an email back with like a copy of a CIA dossier. Like the payload is is clearly different, but they’re both 100 bytes or whatever it is, right? So the payload is
[00:27:00] the same. The same thing with stablecoin money, right? I can settle a 5 cent transaction on a high-performance layer one blockchain in a fraction of a second. And that 5 cent transaction might be very useful for you know, paying for a few, you know, AI tokens or whatever it is. And on the other hand, like I can settle a billion dollar transaction, which is like a like I just bought uh whatever gazillion barrels of oil and I’m settling that transaction in a safe way on the internet. So very scalable models. Um So I I I’m a big believer in this this convergence between uh AI AI agents I mean, this is the missing financial layer that the internet never had. Exactly. >> data and images and video, but it was missing the whole financial We sort of like patched together this maybe trustable credit card capabilities that, you know, is my credit card safe? But Right. This is I mean, I don’t know. It feels like we’re about to see a hyper
[00:28:01] you know, hyper exponential growth across the board. Eman, you were going to ask a second part of your question, I think. Uh no, I was just um kind of thinking you actually kind of launched Circle before Ethereum and this all came together even. Yeah. And then now it’s kind of moved on and like it feels like we’re going beyond smart contracts because money Yeah. will actually get intelligent. Smart contracts can be a bit dumb sometimes. Yeah, yeah. Well, yeah, I mean, like there’s sort of off-chain and on-chain, right? Like what what what what’s what’s what’s, you know, off-chain compute, which arguably will be a lot of AI, uh you know, you you you still need proving grounds, right? You you need you need you need these proving grounds uh for the off-chain compute. And and that’s where I think the the blockchain networks as kind of economic coordination layers can be very very powerful um and and that’s how certainly how we how we think about it. But when we founded the company, like um you know, the concept of like internet of things and AI and
[00:29:01] blockchains, like that was talked about, but there was we were AI was was, you know, nowhere. I mean, it was it was moving along, you know, just like blockchain’s been moving along and like and people were like, “Yeah, isn’t that just for speculative Bitcoin and shitcoins or whatever?” Yeah, no, yeah, we had that we had that. Um Yeah. you had these things and I’m a big believer and I I know you are, too, Peter, of when, you know, kind of um when you have uh multiple uh exponential technologies that compound each other. >> Convergence. >> Yeah, the converge converging forces. I think that’s one of the the most important things that a tech entrepreneur can do is sort of see this point. >> business models have come out of that. Yes. Right. >> 100%. So I Jeremy, I’ve heard you talk about two scenarios which show how absolutely inane and antiquated our financial system is. And I I would love you to just do it in brief for for everybody, all of our listeners to really get this. When you look at how a brokerage, how you invest
[00:30:02] in stocks through a brokerage, compare that today to what it could be, and then how banks actually work when you deposit $1 million into a bank. What happens? Can you cover those two and and talk about like, you know, when you stop and realize like, “Really, that’s the way it works? That’s insane.” I think that a lot of people don’t understand. I mean, they do viscerally cuz they get nervous when they give their money to anyone. But but like, you know, we’ve heard about bank runs. Like, what is a bank run? Well, a bank run is cuz the business model of a bank is to take a dollar, to borrow a dollar from you. They’re borrowing a dollar from you, and then they’re permitted to lend it out 12 times. That’s insane. That’s what fractional reserve banking is. And I have been a adherent since the founding of this company, and I continue to be an adherent today, of the idea that you can have a separation of money
[00:31:00] and credit, and that you can have full reserve money, where if I give you a dollar, I’m not allowed to do anything with it. It’s a dollar. And I can build a a a super hyper efficient payment system on that extremely low risk form of money. And then if you want to borrow money, it’s got to be borrowing on that full reserve money. So, it’s >> I drill down on that just for a second? This I think is one of the most admirable aspects of Circle where each dollar is fully collateralized. Right? >> Yeah. That’s not the case with say Tether or some of the other coins. What made you How had you make that choice? Because that’s a very principled choice that costs a lot. So, something had you make that kind of principle and go, “We’re sticking by that.” I’d love to hear the history of >> Yeah. Yeah, I mean, there’s there’s a short easy answer, and then there’s a slightly longer like fuller answer that expresses the
[00:32:00] the real thing. The short easy answer is we’re required to by law. So, when we when we built USDC, like, we’re regulated under what are called money transmission statutes. And money transmission statutes are federal law, which guide how electronic money transmission works. And then each state in the United States has a license that you get for being what is called a money service business. It’s essentially a a bank that takes money and moves money, but can’t lend money. So, it is a narrow a narrow focus. And so, in the historical realm, that was Western Union, and then that later became, you know, PayPal and Apple Pay and like all these things. And like lots of lots of fintechs are actually money transmitters. So, we were we were regulated under money transmission law. And let’s say we go to the state of I don’t know Where Where do you live, Celine? New York, New Jersey. Wherever. You’re in a place. Okay, you’re in a place. You’re in a state. The state has a banking regulator. And the banking
[00:33:01] regulator, we had to go state by state and say, “Okay, we’d like a a license to operate in your state.” And they say, “Okay, here it is. You got to post some bonds that are like collateral. And then you have to basically back your electronic money instrument with a a permissible set of investments that are called the permissible investment clauses, which are these super narrow. They’re designed to be hyper liquid you know, kind of kind of assets. And so, that is to to have that that instrument be as safe as possible. So, that’s like the legal short legal answer. But the other’s more philosophical, which relates to the discussion we were just having. And the you know, one of the motivations for starting Circle was I got very interested in the nature of of money, the nature of of banking, and the nature of the monetary system after the Great Financial Crisis. And I studied it. And you know, stuff I already knew like if you’d ever watched It’s a Wonderful Life and you know, like, “Wow, these bank runs.” But like the GFC was like a
[00:34:01] totally different scale. I mean, it was like all this opacity at like all these like levered up instruments. Like, what the what the And and I just and I looked at that, and there were ideas bouncing around as there as there have been from time to time for Okay, is there a way to have full reserve payment system money separated from lending money? And that that that idea came up again after the Great Financial Crisis, and it stuck with me. And and it sort of really occurred to me that a more a sound what I kind of consider a more sound money basis for the banking system makes a lot of sense. And I thought when I started Circle with Sean, it’s like, “Well, actually we could construct that on the internet actually.” And in fact, it’s it’s it’s totally necessary on the internet. Like, you don’t want like these IOUs floating around, free floating, moving around on the internet. That’s like a recipe for total disaster. And so, it’s almost like, “Okay, well, we have to design this this way.” And so, as we move from like the early regulations
[00:35:00] like the money transmission laws into stablecoin laws that sort of deal with this at a at a deeper level as a this is a defined form of money in the financial system level, like that that kind of reserve model became paramount. And it went from an operating reality for us into kind of federal law as well. Um you know, I need a list of all the people you must have threatened along the way, right? Which were competing stablecoin folks, the big tech and financial payment systems like PayPal, the banks and especially the some of the smaller banks, the regulators and monetary authorities, the Fed, the payment intermediaries like Visa and others, firms giving credit and lending, um incumbents in the fiat banking system. I mean, you had to navigate all of that. I’m still navigating it. Doesn’t the Federal Reserve kind of go, “Wait a minute, he’s acting like a central bank. Shut him down.” Don’t you get that response? And how have you navigated that?
[00:36:01] So, a couple things on that. I’ve had a chance to spend a lot of time with the leaders of many of the biggest central banks in the world. Just in the past, you know, couple weeks. And and I shared the stage with the head of the World Bank and the IMF. Now, they’re not central bankers, but they look over like big big big things. I think um One thing that’s really important is that a stablecoin a regulated stablecoin inherits the monetary policy of the central bank. It does not replace it. Like, we do not set interest rates on money. We do not establish the price of You know, nor do we create money. Like, a central bank can create money. As I like to say, they have the they have the sequel insert statement capability in their in their database. You can do it You can do it once. You can do it once. Well, yes, but not even once. I can copy I can copy
[00:37:01] copy once basically, right? And so, we do not create money, nor do we set the price of money. And so, you know, nor nor do we replace the central bank’s core core settlement ledger for at an absolute level for that fiat currency. So, we kind of augment that with an internet infrastructure that makes that particular currency super useful, more useful than I think it it has been before. And we inherit from the monetary policy. So, if the price of money is increasing or the price of money is decreasing, the behavior of of of of markets adjusts accordingly, but we don’t have any role in that. We are We are We are what I call a kind of macro cyclical macro sensitive business like banks in that sense. But we don’t actually We don’t We don’t We’re not
[00:38:00] involved. I don’t go to the rate setting meetings. So, I think probably some probably some listeners are wondering, “Why don’t the central banks issue their own digital currencies?” And the Trump administration said that’s a bad idea. Why? And the other part is, what happens with the genius act when JP Morgan and others say, “Hey, we can do a stablecoin, too.” Like, how do you see all that playing out? Yeah. It’s a great It’s a great question. So, if you probably remember back in 2018 2019, there was a proposal for something which we’re colloquially referred to as Zuck bucks Yeah. that that that came out. And And so, what’s interesting is that, you know, we launched USDC in 2018. We We published our white paper in 2017. And then that was kind of conceptually introduced in 2019. And you know, we were like a little little guy, right? And there was 500 million USDC in circulation. But like, Facebook was like, “Oh my god, they they have 3
[00:39:01] billion users.” Like, all the governments in the world were like freaking out. And you know, there’s probably good reason Right. >> Yeah, right. And And I think the other the other challenge was like Zuck bucks were actually like synthetic money that were going to be like based on a whole bunch of currencies. And they thought like, “Oh, the world’s ready for that.” And it turned out like a lot of governments were very uncomfortable with that idea. So, that was like a wake-up call. And And the result of that wake-up call was that certain governments, notably first the Chinese, said, “We cannot allow private money to kind of kind of come come and sweep the world, right? So, we’re going to respond by building a central bank digital currency. And and research into central bank digital currencies like skyrocketed. The Atlantic Council, I think talked about there were 122 governments researching central bank digital currencies. But China actually had begun work on this
[00:40:01] and I I met the founders of it back in 2014. I I met them in Beijing. And and and then that that project, which was sort of a laboratory project, was like, okay, we got to ship. Uh and when the Chinese decided to ship, they ship. And so, um that launched what is now known as eCNY. And it’s really interesting lesson because the Chinese government is a very powerful government. I think, you know, we we all think about the Chinese government as a as a centrally run government that can just tell people what to do and they’ll do it. Well, in fact, it’s not the case. Uh it’s not the case. Um and that product got launched in 2020 it got launched over 2 years ago uh and no one used it. Like no one wants to use it. Hm. And there’s there’s it’s interesting. You know, no one wants to use it. They made every payment app, every bank, everyone had to have eCNY. Why? Why didn’t people use it?
[00:41:01] It’s because, in my view, uh people want the most innovative product. People want to use the thing that has the most utility for them. And guess what? Alipay and WeChat Pay just have more utility. Hm. It’s like this is like and it’s private sector innovation. Like I can walk into a store and I can go up to the counter and they can say, you know, do you want to buy this? And I yeah, I want to buy this. And it voice authenticates me and I walk out. And that’s like a a feature of Alipay and and WeChat. Okay. Is that a feature that the central government’s going to build? Private sector innovation, technology and software innovation is like it’s all, you know, you may have government funding, etc., but it’s it’s like fundamentally uh entrepreneurship. It’s why, you know, we’re sitting here on Moonshots, right? Entrepreneurship is so key. And I think even in a place where the government can say you have to have this, you have to support this, people didn’t want to use it. And so, what’s actually happened is this has become
[00:42:01] somewhat of a spiritual uh philosophical, maybe not spiritual, philosophical debate. And it it is a debate between the government being in your pocketbook directly and having direct access to your money and your behavior and the choices you make directly, like I’m like piped right into the government’s database, or is there an air gap between me and the government? And today, like 97% or so of the of the of the financial transactions we have are intermediated by private third-party intermediaries. That is that is the way it works today. And if you go back over, say, even 75 years in the West, in the liberal market order, like every major tech technology innovation in money has come from the private sector. You know, that was like check checks and check clearing and ATMs and credit cards and debit cards and
[00:43:00] then like PayPal and and then Apple Pay and then stablecoins and like all this innovation comes from, you know, many times uh consortiums of actors getting together and saying, hey, we’re going to build we’re going to build this new technical utility and we’re going to agree on it and people are going to use it. And and and so, I think in in the United States, uh there’s hostility. There’s just outright hostility to this concept that the government’s going to build all this for us. And and so, you know, I think the Trump administration essentially banned it. Uh so, there’s like nothing going on here. In Europe, the central bank is pushing forward with a digital euro project, but the but but the banks are very resistant to it. The actual commercial banks are very resistant to it cuz they’re like, hey, you’re going to disintermediate me. Hm. But at the same time, the Europeans have passed stablecoin laws and now the banks and others and circle um are are doing euro
[00:44:01] stablecoins. The estimated launch date for a CBDC in Europe is 2029. And and I don’t know if they’re going to have again if that’s going to slip or or what, but like if you’re saying it’s 2029, right? So, by the time you get to Yeah. It’s putting your card on the website. I mean, so I, you know, I think that the this this sort of like, hey, we’re going to take a bet on open source, open internet, software innovation, entrepreneurship, competitive markets, and and a fair playing field. I think it’s a winning bet. So, I think the US has the winning bet right now, but it does come to the other part of your question, Emad, which is like, hey, aren’t these Okay. Okay. Well, JPMorgan and other guys are going to come in and um I I I think a couple things. I think, you know, one is that um you know, for a commercial bank, the the the sort of creating a new under the Genius Act, a commercial bank is actually banned from issuing a stablecoin. Why is that? Because you
[00:45:02] wouldn’t want a stablecoin backed by risky deposits and risky loans. And so, but a bank holding company, a company that owns a bank can also create a stablecoin subsidiary and issue a stablecoin. And then the guys running that are going to say, okay, I have this money I can get over here where I can lend it out 12 times and I capture more margin or I have this thing I can’t do anything with. And and it and it’s ultimate promise is commoditization of payments into where the payments are priced at zero. Well, that was totally not what you were saying. Right. So, there’s sort of a structural thing there, but it still may be that the that the um that banks actually want the payment system utility benefits. They want the programmability of money. They want to offer their corporate institutional clients this innovation. And we actually see huge opportunities to partner with banks and we are. You you’ll see more and more of that. But we’re partnering with banks where they’re like, well, we can just kind of convert in and out of the stablecoin for its for its utility
[00:46:01] on the internet, but then preserve our deposits and lending. And so, you’re seeing some hybridization happen. Um so, but but I think nonetheless, Emad, like there’s going to be a lot more competition. There’s going to be a lot more competition um in in this space and I think my my best reference is that stablecoins are internet platform utilities and networks and they have developer-driven flywheels and network effects and they have liquidity-driven flywheels and network effects. And those are those are significant competitive moats. We have those moats, but we’re not sitting still cuz like there’s so many people who see like this is a huge multi-trillion dollar opportunity. >> So, Jeremy, this has been an incredible moonshot that you’ve effectively achieved your first goals of a decade ago. Um looking 10 years out and speaking to the entrepreneurs who are, you know, our subscribers on Moonshots, what should they be thinking about? Where is, you know, where are the massive untapped opportunities that you’re excited about seeing?
[00:47:01] Yeah. You know, it it touches on something we were we were talking about earlier, um which is well, first of all, I think we’re in the super early stages in all this. Like this is super early stage. Um and, you know, I I like to think about it as uh in in in in through a couple of lenses. The um like the total addressable market of of the the the global financial system is like, you know, I don’t know what it is. It’s like hundreds of trillions of dollars. It’s like this enormous thing. And like the revenue streams of all the intermediaries is, you know, 10 trillion dollars. It’s like this huge thing, right? And and like I think just like earlier epics of the internet where kind of open internet infrastructure and open software kind of collided with industries, restructured the product utility, restructured the unit economics, built a better a better way
[00:48:01] to approach it and unlocked completely new things that weren’t possible before. Those kinds of things happen over 10 or 20 years. They take they take longer than people think. We might be in an acceleration environment because of AI. That may that may come in. But it’s we we still they still take these long arcs. But even after these long arcs, even after 10 or 20 years, the the the platform businesses that get built are trillion-dollar companies. But they still represent a a small percentage of of the equivalent uh of the of the prior regime, right? The viewing hours of broadcast terrestrial cable satellite are still far in excess of people who watch streaming even though we’re like what? >> You were you were in you were in the digital media world, right? And there’s so many great analogies between old media uh and today’s media world and stablecoins. Yeah, please. I use I like to I like to say uh over-the-top internet money. It’s like over-the-top, you know, video. This episode is brought to you by Blitzy,
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[00:50:03] You were going down, you know, you and I have talked about the idea of a the future of the corporation. Yes. >> think is is very cool for entrepreneurs to be thinking about. Uh I will be talking more about that in the in the weeks ahead, but do you mind sort of giving a >> Yeah. a vision statement there? Yeah. Yeah, so I was I was I wanted to share that, which is I I my my first point is it’s early days. Um and and so I think for entrepreneurs and people who are thinking about what what can they do with this technology, like it’s super early. I think the second is that um you know, we’re we’re at the front end of a new operating system paradigm. And I and I you know, we go through these operating these kind of platform shifts uh every, you know, period every so often. Like the web was a platform shift away away from personal computers. It was it was a platform shift in terms of information. We we’ve had, you know, platform shifts in terms of communications utilities and social media social messaging. We’ve had platform shifts in terms of going from desktop to mobile, from you know, from
[00:51:01] data centers to cloud, blah blah blah, right? So we have these platform shifts. And I think we’re we’re we’re there’s two operating system kind of platform shifts happening right now. One is AI foundation models, which are effectively new operating systems. Uh and I I think they they they are compute engines. You write apps that they like and they they execute they execute tasks and they’re far more capable operating systems than we’ve ever had before. So that’s one incredible platform shift. And the other are these economic operating systems, which are, you know, purpose-built blockchain networks. And and these these economic operating systems are another platform shift. And I think with that, you you, you know, just like with other platforms, you get a new set of material to work with. Like with the iPhone, you had the GPS and you had the the touchscreen and you had, you know, other camera, right? So you had you had new facilities to work with. And so you’re getting these new facilities to work
[00:52:00] with with with these economic operating systems these these blockchain networks. You’re you’re getting the ability to have like provable executable contracts that can be deployed and intermediated on the internet. You’re getting the ability to have kind of provable tamper-resistant data structures that can be can be interacted with. And so it creates a substrate where you, for example, could take conceptually what is a corporation and you could actually implement that entirely in software as a mixture of humans and agents. And and and and so like you could form the capital by selling tokens. Uh the token capital can be stored in a treasury that’s on chain and that treasury could be mostly stablecoins. You can automate all of the monetary flows on that. You can have the governance, which is like stakeholder participation, who decides what to do with the treasury, who decides what contracts to enter into or manifest can be the governance layer
[00:53:00] with provable voting entirely done on chain. The entire audit of the books and records and everything that happens is real-time auditable. You can use view keys and other things to kind of create selective disclosure models. And so you can create, you know, on-chain governance, on-chain decision-making. You can have that entity delegate work to AI. You can have it delegate work to humans. You can have the actual contract between the AI and the entity manifest in code. You can have the contract between the humans manifest in code. And you can you can you can build all that. Like that’s available. >> Salim, that’s almost Yes. It’s coming, Salim. It’s like the promise of DAOs without the governance issues. Well, yeah, so I mean DAOs I think are fascinating because they’re they’re an experimental uh experimental thing, but I think uh I I um I, you know, I’ve studied sort of uh you know, 400 years of the development of say the joint stock corporation that then became modern capital markets that then became modern banking and and and the the
[00:54:01] emergence of of of corporations as organizing entities and and then all of this is tied up in I I think about this a lot. Uh it’s tied up in theories of capital and capital and you know, the industrial revolution is all about like capital and labor and it was, you know, Adam Smith versus Karl Marx and what is the ultimate relationship of labor to capital. But now like that’s being disrupted, right? Because uh uh capital can have a relationship to machines and machine labor and not human labor. And this is deeper philosophical questions for society, but those are real things. And what in this world that we’re moving into like I think it’s the first time since the kind of corporations joint stock corporations, the governance models that we have, where we can revisit all of that. We can actually revisit all of that. Jeremy, you’re describing the first fully on-chain corporation, right? Where contracts, payments, treasury, governance agents, even robots are on the
[00:55:01] blockchain Yeah. >> developing products and services and delivering them. 100%. Yes. >> And and and the velocity of those companies is going to be We actually have to have enforcement. Like that’s the other thing. We still need prisons for the humans that do bad things. >> prisons for AIs? >> we still need we still have people who do not meet their commercial obligations and you need to be able to sue them and go after their assets. Like there are certain things we absolutely need. So like the like we’re we’re not there’s there’s no AI court. Uh which is probably a good thing right now. But the the velocity the velocity of those companies is going to be is so explosive that I’m not sure any corporation can compete. So is there a hard takeoff in the future of corporations in that capacity? >> Yeah, so that’s that’s what I think. I I think I don’t know what the time frame is, but I think given exponential uh improvements in AI
[00:56:00] uh and given this technology substrate I think we will we already have like the single founder company phenomenon, right? Which is sort of an AI-driven phenomenon, right? And actually you have on-chain uh kind of on-chain organizations. I mean I mean the the best recent example is something called Hyperliquid. And Hyperliquid is a software protocol, okay? It is just a it is a set of smart contracts that exist on the public internet, okay? It’s open source. It’s a it’s a protocol. It has a token and the there’s stakeholder economics for the people who created it the people who uh who who govern and make choices and make improvement decisions on the protocol itself. And then the protocol itself generates fee revenue from the use of the protocol. Now, it’s a specific protocol that is focused on futures like structuring futures markets >> So perpetual decks if I remember right. It’s yes, it’s a it’s a perpetual derivatives uh uh exchange protocol. But it’s actually now like an underlying
[00:57:00] infrastructure where you can instantiate it for other things. You could create a perpetual for, you know, sports betting. You can create a perpetual for an anything that you want a perpetual future on. Uh you could have a perpetual futures market on AI compute, whatever, you know, whatever you can imagine, right? So they’ve kind of created this thing where you can instantiate on it. And that instantiation derives revenue. Now, that entire protocol and that entire infrastructure has been built, delivered, and operated by 10 people, 11 people, 11 people. It’s doing well over a billion dollars of revenue right now. It’s a billion dollars of revenue. Now, that revenue is actually being returned to the token holders and the stakeholders, which is getting more people to pile in and build on it. So it’s creating compounding network effects for the protocol itself. And I think that um you know, these kinds of uh digital token-based incentive systems combined with AI work AI workers and
[00:58:03] human workers and these kind of new systems of of governance that are possible on these networks that are highly globalized will create kind of super predator corporations, if you will that are that are that are that are, you know, a hybrid of humans and AIs and will will make things. Um they’ll make physical things and they’ll make services and I think that >> They’ll drive the bankruptcy lawyers’ business Well, I mean it’s definitely going to keep the lawyers uh Which will also be AIs, by the way. Um Well, I have a I have a quick I have a quick I know you want to hear Emad’s views on these things, but go ahead, Salim. But we’ll go to Emad next. >> No, no, go ahead. Let’s hear from Emad. I’ve got a thought. I don’t know. I just think it’s going to be fantastic. Like the the US hasn’t recovered in monetary velocity since COVID, right? Yeah, basically what you’re describing and I think this is why you’re building Arc, your own L1 and things like that as well. Money’s about to go from static to supercharged. Yes. And the thing that
[00:59:01] I’m like most fascinated about, like I’ve been working on new economic theory and things like that. How You’ve talked to lots of central bankers. Are they even ready for that pick up in monetary velocity? Cuz that impacts inflation. If you don’t have output, it impacts inflation. >> question, by the way, from Emad. Are they even aware about what’s coming? I’m I’m telling them. I’m telling them. And I think uh the really smart people, and I’m not going to name names, the really smart people are like oh my god. I mean, so this this you’re exactly right, Emad. I think you’re exactly right. Like monetary theory it like the money velocity and monetary theory are going to get upended. And and I think you know, one of the risks, of course, is that, you know, people throw up the gates, right? And say, you know, no. And and and I think um I think the fact that currently, right now, the United States is not throwing up the gates. The
[01:00:01] United States is saying, no. We’re going to we’re going to let this we’re going to let this grow. A similar situation with AI, right? You know, people can throw up the gates. You can throw up the gates or you can you can have prudent regulation and kind of what I call agile policy making, which is an oxymoron. But, you know, agile policy making cuz it will there are going to be these these these things that are that are profound. And I think the concern, of course, if there are people who have studied recent financial crises is, you know, it was the liberalization of derivatives regimes that arguably allowed for the these toxic balance sheets to develop that then led to the blow-ups behind the the great financial crisis, right? So, there’s an argument to be made, you know, and that also had to do with just sort of inherent opacity in the system. And so, one of my first principles is that, and blockchains are are really good at this, is radical transparency and cryptographic proving are like an again part of the new
[01:01:00] toolbox. What’s what’s different? You have this new material to work with, cryptographic proofs. And and that allows for real-time auditability. It allows for a lot of things that weren’t possible. And so, I think, you know, probably like in other areas, um you know, the the um uh the the governments are going to governments are going to need technology people to be writing software to deal with some of this stuff as well. One of my community members, uh Jerry Michalski, is famous for saying abundance equals scarcity minus trust. And and something you’ve done profoundly well is allow create structures for scaling trust. And this is going to help us get to where we want to go. So, I think that’s really really powerful. Um just a comment back to the core future of the corporation. When I’m advising CEOs, and Peter and I are both doing a lot of this right now, what we’re saying is basically create a a digital twin with everything being AI native and digital native with uh smart contracts
[01:02:02] running most of your operations and put the entire company on chain driven by AI. And essentially, that’s going to replace the mothership with all these people at headquarters, bean counters, and policy makers, and product strategy people. Um and if you’re not doing that, you somebody else is doing that to you, and you have a choice. And it’s a really simple discussion. >> I think that’s right. I think that’s right. And I I would say 100% and, you know, now I’m like a New York Stock Exchange listed public company. And and so, like I have a lot I have a lot of embedded infrastructure obligations that are there for a good reason. And so, I’m not that agile startup. I can’t just like poof, I’m on chain. Um uh so, I think the road for for for larger companies that are that have these larger systems of of of of regulation on them is a it’s a it’s a different road. Um but, I think that the the basic advice I agree with. And I think um the
[01:03:03] you know, the there are still open legal questions on a lot of stuff. And and and the tooling is not quite there yet on some of this stuff. Like to do everything like put all your operations in smart contracts, like it’s still it’s still like it’s still hard. Um but, I you know, if I if I look at kind of the progression of things, it’s going to become easier and easier and you know, in in in the coming years. Um And and now the people are starting to conceptualize this. Like there’s going to be people really going after it. And there’s a tools market to to to to develop here as well. Huge. Emad. Yeah. Yeah, I think so I saw kind of you launching your own L1 Arc. And there were two really interesting things on I’m picking up on Salim’s thing about transparency and trust. One is that on the one hand, it’s going to be super fast, like sub-second finality. On the other side, there’s refundability. Like I just got some stablecoins today, and I was like, where
[01:04:01] are they? And they’re like, oh, what’s we sent USDT instead of USDC. And I was like, USDC all the time, obviously. So, I just kind of wondered, how is that balanced there? Like how did you come up with the the requirement finality, but then the ability to reverse transactions as well? Like what was the thinking behind that? >> so actually, there’s a there’s a little bit of misreporting that you probably that you probably picked up on, which is so, fundamental is is sort of deterministic settlement finality as fast as possible, as cheap as possible, right? So, that’s that’s like a fundamental thing, and that is core. And that’s important not just for moving a dollar, that’s important to like the who who owns the house or who owns the stock or did did the contract complete its its execution, right? All all of these things sort of provable final state is like essential. And so, that’s there. Now, what you you have to think about is like, okay, now
[01:05:00] now I have other things. Like I have a I have an issued I have an issued asset that’s a protocol, USDC. And that’s there. And I know that Circle is a regulated centralized issuer, but it it sort of works on the public internet. But Circle, because it’s a regulated centralized issuer, you know, has to follow sanctions law. So, if if if an entity is sanctioned, like we actually have to freeze that that account. And we do that on like 28 blockchains, not just Arc, but on 28 blockchains. That is that is a hard law requirement. Okay. Um and and so, that’s there. But but then you sort of say, okay, well, I want to start using this in in retail transactions. Like I want to buy a cup of coffee with this or or more more realistically, I want to buy a product on the internet that someone’s going to send to me. Um and and there um all of a sudden, there’s other things you need. Like you need metadata. You need other data alongside the cash. That data could
[01:06:01] be the invoice or the receipt. That data could be other other other relevant metadata. So, for example, we are adding a native protocol called Receivo, is what we call it. But it’s essentially like an ISO data messaging protocol that is is useful. It’s like a useful thing for for metadata alongside the actual bearer asset, the the the the monetary asset. And then what we’ve also done is we’ve created, and this is just in R&D right now. We haven’t published it. We’ve created something called the refund protocol. And so, the idea is not that the blockchain itself is reversible. No, the blockchain is not reversible. It’s not that USDC is reversible. No, USDC transactions are final unless they’re sanctioned. Okay? So, that’s just a thing. And and then above that, you create a essentially, you can create a payment protocol that supports a refund. And and that’s experimental right now. But the the concept is that if I do buy the product and it was fraudulent or I do buy the product and I don’t like it. It
[01:07:01] was the wrong product. It was this shitty thing I bought and it’s broken. Came with the whatever it was. You need the ability to have a a way to return value on the basis of whether it’s fraud or just a customer choice. And so, refund protocols is just a proposed protocol. It’s not actually built into the blockchain. It’s a it’s a higher level protocol. And we’ve proposed an insurance pool model so that people can stand in in the transactions and basically buy effectively buy the insurance and and sell the risk. And so, you effectively have a market for the risk of refunds that anyone can participate in. And so, you create a global decentralized market for risk Makes sense. Makes sense. >> that’s that’s actually what we are proposing. We are not proposing a blockchain that reverses transactions. We are not proposing that USDC reverses transactions. We’re we’re working on these higher level things that are I think important at an application layer for ultimate commerce, right?
[01:08:02] >> Jerry, take it home for me one second. When am I buying things on Amazon or Starbucks with USDC? Where is it right now? What is the average user listening today using USDC for, and what will they a year from now? Yeah. So, it’s interesting. Like USDC is widely used around the world. And it’s used in, you know, by people and and businesses in hundreds of countries. And obviously, it got its start as a as a digital cash for investing and trading and as working capital with the digital asset markets. That was what I called the bootstrap utility. Uh 24/7 365 markets need 24/7 365 money, and and and naturally, that that emerged. That morphed into, you know, innovators that are building on-chain uh protocols for financial products. So, borrowing and lending protocols, things like these these derivatives protocols. And so, USDC has become capital in borrowing and lending.
[01:09:02] But what’s really happened in particular over the last couple of years is we’ve seen this really strong growth in its use in cross-border transactions, international transactions. Uh and there’s so many companies now that build products in payroll and payouts and B2B payments and others adding in the stablecoin rail because it’s just a a more efficient medium to to settle transactions into markets around the world, and that relates to another major use case, which is as a store of value. So, this gets back to your dollar question, which is actually people want dollars. People want to hold dollars, and in huge parts of the enormous parts of the world, they’d rather hold a digital dollar that has internet utility than hold a local bank dollar or a local bank currency. And so, there’s sort of this is over-the-top again, like it’s when people figured out, “Oh, I can use WhatsApp instead of paying SMS fees with my local carrier.” And so, there’s sort of this over-the-top phenomenon, and that’s proliferating. And so, you’re
[01:10:00] getting users, and that’s cascading into small businesses who are figuring it out cuz they don’t have big compliance departments. And so, you’re you’re sort of seeing this happen um around the world. And so, by virtue of that, that is not you’re walking into Starbucks. You can There’s plenty of what I call USDC debit cards. So, Visa and Mastercard have wired up to USDC. So, if I’m an issuer and my card is actually the money I have is USDC, you can actually use that USDC to pay at a merchant. Just But it’s the same payment rails. It’s It’s the Visa rail. It’s the Apple Pay. But the actual settlement between the person who gave you that card and Visa is done using USDC, which is kind of cool. But um I think my my view is that the kind of retail commerce uh I mean, you’ve got Shopify just rolled out USDC for all their sellers, and it’s like it’s just there. It just shows up, and they’re incentivizing merchants with like they’ll pay the merchant 50 basis points to accept a payment in USDC. So, that’s coming online this quarter. I don’t know
[01:11:00] what that’s going to do. Stripe has rolled out USDC as a payment method that’s available out of the box to any any merchant. But the the usage in e-commerce is still very very small. And I think that um we still have there’s still work to do on the user experience. There’s still work to do getting more and more what we’ll I’ll just call like mainstream wallets to have this integrated in a simple seamless way. And we need things like the refund protocol. We need We need other pieces there so that like some of the user expectations can be met. And that’s why I think it’s still a couple years away from kind of wide widespread use. You haven’t had your pizza day yet. Equivalent. I mean, there’s lots of transactions happening that are that are that are There are lots of retail transactions happening. There’s lots of every kind of transaction happening. People buying digital goods. People buying, you know, other other things. And And actually, there’s a lot of huge transactions happening, too. The biggest electronic trading firms in the world
[01:12:00] use USDC to settle multi-hundred million-dollar transactions with some frequency. And so, you know, it has all that. But I you know, I think there’s areas from a UX and ultimate distribution perspective that there’s still there’s still work that’s >> So, let’s move it up from the consumer to the CFO. We have a lot of corporate CFOs, CEOs who are on this podcast. You know, 5 years from now, you’re running a multinational organization. Is Is USDC sort of the internet rails of all your transactions through all of your stores around the world? Yeah, I mean, we we we believe that sort of on-chain treasury management is going to become a huge thing. They’re also again lots of companies, lots of startups, lots of FinTechs that are already in this space that are baking USDC into what they do. It’s actually a faster growing startup area, and established companies like Brex just launched USDC as a as a feature for people. You know,
[01:13:02] you’re seeing you know, you know, spin-outs from the the big ERP systems like SAP building like on-chain treasury solutions. So, I think yes, the ability to move money to move money from you know, a tokenized money market into stablecoin cash to settle transactions programmatically, instantly anywhere in the world across geographies is very powerful. And you know, it’s sort of time value of money, capital efficiency, auditability. There’s a lot of really really powerful things there. And I think the the regulatory clarity that’s coming online is is sort of been one of the missing pieces. Until you have you know, USDC is treated as a cash or cash equivalent instrument on a balance sheet that an auditor can say what it is. And you have the the regulatory backing that this is actually legal electronic money from a payment system perspective.
[01:14:00] And you have the tooling and the enterprise infrastructure. That’s all kind of coming online right now. And so, if I look a year out and then 2 years out and you know, certainly 5 years out, that curve I think on that kind of what’s happening with with on-chain treasury is is is one of the most exciting areas of of this space. Salim, what you thinking? Um how do you compare with Tether? What are the big differences? You know, I mean, I think that Tether has actually built an extraordinary business. Um and obviously have have They’re larger than us. So, they’re they’re a good bit larger than us. And I think you know, they they really had a lot of their core strength come from the critical role that they played in offshore crypto markets. I mean, it was actually you know, kind of birthed out of one of the offshore Asian exchanges, Bitfinex. And then obviously other big Asian exchanges adopted it cuz they didn’t have dollar banking. And a lot of them
[01:15:01] were Chinese firms. And And so, they needed to kind of create a way to have a kind of form of dollar banking. So, they got bootstrapped in that, and they’re still very strong there. And so, USDC has grown a lot in these digital asset markets on a on a percentage basis in terms of what’s happening in those markets, but they’re still super super strong there. And so, their growth is is is strongly supported inside of that space. I would say, you know, we’ve also, you know, I think philosophically our our outlook, I don’t know if it’s different entirely, but we’ve always been rooted in this idea that we’re building a new internet financial system. We need to do this in the regulated realm. We need to We need to enshrine this in law. We need to work with You’ve been you’ve been US US first. We’ve been We’ve been US first, and we’ve been, you know, kind of regulatory first, and we’ve built a very strong compliance apparatus. And that’s allowed us to work with some of the biggest
[01:16:01] banks in the world, some of the biggest asset managers in the world, some of the work with the biggest governments in the world. So, those are things that we’ve done. And I think our view is that when we talked about that TAM earlier, this multi-hundred trillion-dollar TAM that’s out there. And And then the TAM just in the revenue streams of of what runs through all of that. Like that’s still on the come. It’s totally there. No one’s totally there. No one’s No one’s No one’s No one’s No one’s really kind of gone into that. And so, I’m I’m comfortable and confident that continuing to do what we do the way we do it is going to lead to you know, continued growth. That’s what That’s what I obviously believe. And I think that this is a market that will support many significant platforms as well. And And I mean, yeah. You’ve definitely taken the road less traveled on that one. I’m going to guess that the Genius Act is generally a great tailwind for you. Am I am I right? My question is what did you do to celebrate when the Genius Act
[01:17:00] got got passed? You know, it’s pretty amazing. Uh really I didn’t you know, I had been you know, sort of working on getting a federal law for for stablecoins for like 4 plus years, 5 years explicitly where there was actually a bill being discussed. And then you know, conceptually for much longer. Um and yeah, it was a pretty pretty extraordinary moment. I think um I uh Yeah, my kids were in summer camp. And so, my wife and I I think I think we I don’t know what we did. We had a good We had We had We had fun. I was in DC. I went to the signing ceremony. And And And that was That was That was pretty powerful. Um but I think it is yeah, to to the question, it is um it is a tailwind because I think it it it starts to build that certainty around what is this form of money? How is it treated? How can If
[01:18:00] I’m a mainstream corporation or I’m a or I’m another financial institution, like I now have the confidence that I can start to use this and build on this. And that’s That’s huge. And it also is recognized around the world. I mean, right now, my team are like the explainers in chief of Genius Act to governments all around the world who are like, “Okay, what is this? What does this mean?” And so, and so, and should we be doing this? And then also, like if you’re a Genius Act compliant stablecoin, like how do we treat you in our financial system? Just like they They all support dollars in their financial system. How do they treat this in their financial system? And so, there’s there’s It’s really causing that. And And those are you know, those are good um those are those are good backdrops. But as as as Immad noted earlier, right? It’s invited so much more interest, so much more competition. You know, I you know, I wouldn’t be surprised to see you know, a new stablecoin every week that’s introduced. It’s reportedly reportedly
[01:19:01] Genius Act compliant even though Genius Act is not yet statutory in effect for a while. But I’m going to create a competitor to you called Square. No, I’m just kidding. We’ve been taken Salim already. So, so Did you hear Circle Circle and Square merged and formed Hexagon? That was That was an April Fools’ joke wasn’t it? Actually. Yeah. Okay. So, Emad and Jeremy, uh question for you. It’s 10 years from now. We’ve got digital superintelligence, um you know, way beyond our current conception, and there’s a trillion agents running around. And these agents have buying authority. They have access to uh uh to stablecoins. Um I mean, is that a viable option a decade from now? Is that How is that going to be even uh conceivable in today’s regulatory structures? Uh and what’s that going to What kind of a hyper-hyper exponential is that going to cause us?
[01:20:00] And how exciting is that future? Emad, you first. Yeah, look, I think that’s a super exciting future. I think, you know, with stablecoins and the way you’ve done it Circle, it’s always like, why would you want dumb money if you can have smart money, right? And obviously, the agents will want smart money, and they will direct it to where is most economically valuable. So, the goal of regulation shouldn’t be to stifle innovation. Like, earlier, Jeremy was talking about the Chinese and the DCEP that turned into eCny. I was a hedge fund manager back then, and Tencent and Alibaba had Alipay and WeChat Pay. They enforced reserve regulations on them cuz the money was going around. This is before the digital one. Yeah, yeah. >> And they basically said, you have to give us all the interest. So, there’s a trillion yuan there where, unlike you know, Jeremy putting it into really high-quality US T-bills and things like that, they just lost billions of dollars a year because of regulation. And then a lot of the Chinese payment regulation slowed down. So, if I look forward 10 years, what’s
[01:21:00] happening is they’re finding the most economically valuable things. And again, we need to define the value to end users. They’re using smart and then intelligent money on optimized rails to move that around. And then you have a self-balancing, self-driving economy if we get it right. If we get the regulations wrong, and there’s going to be this competition to adopt it because money will flow where money is liquid. So, if Europe doesn’t adopt this and other countries don’t, it’ll come to the US, which has the regulation. Then, I think that’s a world of abundance because we’ll finally be allocating stuff where it matters, as opposed to now, most of the money just sits there, dumb. I I I I like that perspective, Emad. I I definitely I definitely share that view. I think there are um you know, there there is such a thing as a control function, uh you know, in in in corporations. And so, I I think the interesting question is is and regula- regula- regulators, mostly what they do is check that you have a control function that’s
[01:22:00] functioning actually. Like, that that that’s actually what they’re like, show me your policy on this. Show me your policy on that. And they’ll get a third-party auditor to come in and perform a SOC 2 audit to make sure that what you said you do, you actually do. And so, controls uh are really important. And so, I think one of the things that that we we need to work towards is um how how do we How do we have provable controls in an AI-intermediated system, both human-in-the-loop and agentic uh provable controls, auditable controls, uh and and get, you know, policy and regulation to deal with these kind of proving grounds again for control mechanisms. And we actually just launched uh an open-source project called Secure Tool, which actually is a is a uh a wrapper on uh OpenAI SDKs for agents that specifically uh enables uh the ability to insert control functions into monetary transactions that agents would conduct, specifically to deal with
[01:23:00] this issue of, wait a minute. Like, I I’m not just going to like delegate that the agent can just party on with this wallet. Like, I’m going to I’m going to actually I’m going to want like the API to have a permissioning structure for the AI itself. Now, that’s just one like example that we’ve crafted. And I think like that’s again, it’s a whole tool entire tool chains can get built up in this area. And and again, I think it’s probably the innovators, the builders, the tool developers, the software creators that are going to figure this out by necessity before like you know, the the you know, the the regulatory bodies. But I I do think um to achieve that hypervelocity, which I do think is an incredible uh world of of output and and capability building and wealth creation and prosperity, like we we have to we have to kind of figure out what are the control functions. And that’s obviously an issue with unbounded AI as well, right? Control functions, societal control functions, etc. So, it’s not unique to financial. It it relates to
[01:24:02] like interaction with critical systems and all that kind of stuff, too. >> If we get it right, the future’s going to be amazing. I remember I remember Jeff Booth saying once that uh what what the reason he was excited about Bitcoin was that it gives you money velocity without debt. And I think what you’ve achieved with USDC is the same thing. You have money velocity without the extreme debt, which Exactly. It’s a first principle. Yep. Oh, Jeremy, um I know that your your 10-year vision, your founding vision, if I have it correctly, was raise global prosperity through the frictionless exchange of value, build safer and more inclusive financial systems uh on a sort of an internet financial system. And and you’ve done that. Uh I’d love to close with like, what’s your vision a decade from now? Is Do you have your founding mission a decade from now? Well, I actually feel like we’re we’re we’re still at the front end of of of realizing that that that mission. Um and
[01:25:00] and and I think um you know, I I talked to my team about this, and I just had a leadership gathering and talked to my team about this, and sort of looked out uh a little bit and and and described some of the things that we talked about here, which is really rewarding to talk about here as well, which is, you know, what what what what is What is the nature What are the nature of corporate forms? What is the impact of this societally? >> our secret that we’re maybe talking about an X Prize on this topic? It’s an interesting idea, that’s for sure. Uh it’s definitely an interesting idea. I I think um I mean, look, the So, I I think we’re early, and I ultimately I want to see like I mean, you could argue like uh data center and and and GPU and energy spend has contributed all the GDP growth in the US this year. So, arguably, at least GDP output has increased because of AI this year. Okay. Yes, for sure.
[01:26:02] >> Um uh and now now converting that into other output is like the the the obviously the thing that everyone’s focused on. I want to see at some point that the the the the economic infrastructure that we’re helping create and the economic velocity that is actually going to be measurable because it’s all measurable on chain. I want to see measurable increases in economic velocity that actually lead to measurable increases in global GDP and prosperity. And I’m not going to be happy until I I can actually see that and measure that. And that’s, you know, that’s we’re not there. We’re not We’re not there. We’re not even close to there right now. Uh and so, you know, that that animates uh my my work uh as I think about >> In the early days, when you digitize system systems, there’s disruptive growth that eventually becomes disruptive growth, and it dematerializes, demonetizes, and democratizes the world. So, I love it. Congratulations, Jeremy, on that. Uh where do we find you on the World Wide
[01:27:02] Web? Your uh What’s your handles? Yeah, so uh best is uh is jerallaire on x.com. And um yeah, that’s that’s my public handle. And then otherwise, you can check out what I’m working on at circle.com. Amazing. Emad >> Uh uh and Salim and and Jeremy, we’re going to all see each other in uh in Riyadh in about 10 days’ time at FIA. >> Yeah, it’s going to be fun. Salim, how’s your week ahead looking? >> USDC for you to sign, Jeremy. Okay. Okay. That’s it. I can I can I can like do a sign I can use a digital signature. Uh Mhm. Emad, how’s your week ahead, buddy? Uh the work always continues, buddy. Yeah, so I I I reach you You know, it’s so funny. I get I get a text from Emad at at like 6:00 at night, and I go, “Where are you?” He goes, “I’m in London.” And then you’re still awake? He goes, “I’m always awake.” Oh, well. Amazing. That’s good. All right, guys. Gentlemen, a real pleasure, and excited
[01:28:00] for excited for USDC and for the world that Circle is creating. Thank you. It’s going to spawn a million new entrepreneurs, probably, you know, 100 million new entrepreneurs, and make the world faster >> congrats on everything. Just incredible. >> you. It’s been a lot of fun. Thank you, guys, so much. Thank you so much. Every week, my team and I study the top 10 technology metatrends that will transform industries over the decade ahead. I cover trends ranging from humanoid robotics, AGI, and quantum computing to transport, energy, longevity, and more. There’s no fluff, only the most important stuff that matters, that impacts our lives, our companies, and our careers. If you want me to share these metatrends with you, I write a newsletter twice a week, sending it out as a short 2-minute read via email. And if you want to discover the most important metatrends 10 years before anyone else, this report’s for you. Readers include founders and CEOs from the world’s most disruptive companies and entrepreneurs building the world’s most disruptive tech. It’s not for you if you don’t want to be informed about what’s coming, why
[01:29:00] it matters, and how you can benefit from it. To subscribe for free, go to diamandis.com/metatrends to gain access to the trends 10 years before anyone else. All right, now back to this episode. [Music] >> Mhm.