WEBVTT - How Stablecoins Became a Powerful Force in Crypto 0:00:10.119 --> 0:00:13.840 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:13.920 --> 0:00:17.960 I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, here's 0:00:18.000 --> 0:00:20.239 the thing that I've been thinking about a lot with 0:00:20.280 --> 0:00:22.760 respect to crypto. You know, in the early days, when 0:00:22.800 --> 0:00:25.479 it was just Bitcoin maybe a few other coins, seem 0:00:25.560 --> 0:00:28.160 like there was this sort of pirate mentality. Cipher Punk 0:00:28.400 --> 0:00:30.400 the Silk Road was one of the first apps where 0:00:30.400 --> 0:00:34.159 people actually used crypto. But it feels like as the 0:00:34.200 --> 0:00:37.559 industry has grown up, the effort to avoid or evade 0:00:37.600 --> 0:00:41.840 the existing regulatory system has really fallen into the background. Yeah, 0:00:41.920 --> 0:00:45.240 I think that's right. I mean, I guess stable coins 0:00:45.280 --> 0:00:48.000 would be the prime example of this, right, And one 0:00:48.040 --> 0:00:50.400 thing about stable coins that makes them really interesting to 0:00:50.440 --> 0:00:53.760 me is that they're basically the way in which crypto, 0:00:54.000 --> 0:00:57.320 or a big chunk of crypto actually interacts with the 0:00:57.360 --> 0:01:02.040 traditional financial system. So a lot of them have financial 0:01:02.080 --> 0:01:05.320 assets that are backing them, so they kind of interact 0:01:05.560 --> 0:01:08.840 with banks through their reserve funds. And then the other 0:01:08.920 --> 0:01:12.720 question I have is if you're going to create a 0:01:12.760 --> 0:01:17.280 stable coin that has a bank charter and that invests 0:01:17.319 --> 0:01:20.440 a lot in you know, traditional financial assets like t 0:01:20.600 --> 0:01:24.520 bills or commercial paper, Then what is the benefit versus 0:01:24.959 --> 0:01:27.400 going into something like a money market fund or just 0:01:27.440 --> 0:01:30.120 a bank deposit. Right, if you're going to interact with 0:01:30.200 --> 0:01:33.200 regulated institutions, which you implicitly are if you buy a 0:01:33.240 --> 0:01:36.119 stable coin and the stable coin issue or hold money 0:01:36.240 --> 0:01:38.600 in a regulated bank, then they're gonna be all kinds 0:01:38.640 --> 0:01:41.800 of rules. If you're going to interface therefore with a 0:01:41.880 --> 0:01:46.560 regulated finance, My question is what is the point of crypto? Yeah, exactly, 0:01:46.760 --> 0:01:49.080 that's exactly it. And the other thing I would say 0:01:49.400 --> 0:01:52.080 is there's been a lot of talk about stable coins 0:01:52.280 --> 0:01:55.360 this year because we had the big crypto crash, and 0:01:55.560 --> 0:01:59.440 whenever that happens, we tend to see some disruptions I 0:01:59.480 --> 0:02:02.000 guess the pegs of a lot of stable coins, And 0:02:02.000 --> 0:02:04.680 of course the famous example this year was while there 0:02:04.680 --> 0:02:07.760 were two but we had the algorithmic stable coin um 0:02:07.880 --> 0:02:12.320 Tera slash Luna, which basically crashed and died. But we 0:02:12.400 --> 0:02:15.600 also had Tether, and there are lots of questions swirling 0:02:15.600 --> 0:02:18.400 around Tether whether or not it can hold its peg. 0:02:19.080 --> 0:02:21.880 But of course those are only two stable coins within 0:02:22.000 --> 0:02:25.520 a very vast ecosystem of stable coins. And today we're 0:02:25.520 --> 0:02:28.200 going to be talking about another one. Yep, we are. 0:02:28.320 --> 0:02:31.880 And so you know, Tether is the biggest stable coin 0:02:31.960 --> 0:02:35.720 that out there, but close on its heels and maybe 0:02:35.760 --> 0:02:39.200 even more important in the world of defy is the 0:02:39.320 --> 0:02:43.240 usd coin us d C, which is issued by the 0:02:43.280 --> 0:02:47.680 company Circle, and it's extremely powerful, it's really big, it's 0:02:47.720 --> 0:02:51.320 growing and influence. It may surpass Tether very soon or 0:02:51.480 --> 0:02:54.360 very plausibly at some point. So I'm very excited to 0:02:54.400 --> 0:02:57.680 say that we have the founder, the co founder and 0:02:57.840 --> 0:03:02.040 CEO of Circle on the on the podcast as our guest, 0:03:02.120 --> 0:03:04.880 Jeremy Hilaria. Thank you so much for joining us. Thank 0:03:04.919 --> 0:03:07.680 you guys. Super excited to be here. I'm really excited 0:03:07.680 --> 0:03:09.760 about this conversation because I just have like there's so 0:03:09.800 --> 0:03:13.600 many questions, so much interested, so much interest in stable coins. 0:03:13.600 --> 0:03:16.200 But to start off, what is Circle and how to 0:03:16.320 --> 0:03:19.840 Circle make money? Yeah, So first of all, just very 0:03:19.919 --> 0:03:22.959 quick backdrop. We started Circle. I co found a Circle 0:03:23.040 --> 0:03:28.640 nine years ago and the basic idea was, and my 0:03:28.680 --> 0:03:32.680 background before Circle was starting internet software platform companies, software 0:03:32.680 --> 0:03:36.680 infrastructure companies working in areas like delivering software on the Internet, 0:03:36.720 --> 0:03:39.640 delivering media on the Internet, delivering communications on the Internet. 0:03:39.640 --> 0:03:43.080 Always interested in how public Internet infrastructure could change the 0:03:43.120 --> 0:03:45.840 way certain things happened, Like now you guys do this 0:03:45.880 --> 0:03:49.160 podcast instead of just writing so UM. I was really 0:03:49.240 --> 0:03:52.760 drawn into crypto technology and and what this was ten 0:03:52.840 --> 0:03:55.840 years ago and then crystallized the ideas behind Circle nine 0:03:55.880 --> 0:03:59.279 years ago. And it's actually interesting hearing your your introductory 0:03:59.320 --> 0:04:02.800 remarks because when we started, it was actually, you know, 0:04:03.240 --> 0:04:05.520 right when the federal government said, hey, if you want 0:04:05.520 --> 0:04:08.920 to interact between the banking system and these virtual assets, 0:04:09.000 --> 0:04:12.280 like you've got to be regulated as a money transmission company. 0:04:12.320 --> 0:04:14.720 And that was the first regulation actually was was then, 0:04:15.160 --> 0:04:17.560 and like that's when Silk Road was taken down. And 0:04:18.000 --> 0:04:19.800 but you know, we we were coming into this with 0:04:19.880 --> 0:04:22.880 this idea, which at the time we called a hybrid 0:04:23.279 --> 0:04:27.040 model of digital currency UM. And the idea was, how 0:04:27.080 --> 0:04:29.680 could we take what we think of as traditional money 0:04:29.960 --> 0:04:33.360 i e. Government debt money and and and sort of 0:04:33.400 --> 0:04:37.320 represent that as a digital currency but operated on these 0:04:37.400 --> 0:04:42.320 new public protocols, on these new public Internet infrastructures. Because 0:04:42.320 --> 0:04:46.080 I had sort of seen these public infrastructures enable free 0:04:46.080 --> 0:04:49.800 global communications and and seamless distribution of software to any 0:04:49.800 --> 0:04:53.039 Internet connected device, and you know, all these transformations have 0:04:53.160 --> 0:04:56.719 happened in data, software, media communications, and I thought, wow, 0:04:56.880 --> 0:05:00.800 if you had public infrastructure that's all built on open 0:05:00.839 --> 0:05:03.600 source and anyone can run the nodes and you could 0:05:03.920 --> 0:05:09.280 have a way to provably represent something and transact it 0:05:09.760 --> 0:05:13.240 directly between nodes on the Internet, that would be really powerful. 0:05:13.279 --> 0:05:16.360 So we got this idea of hybrid model that connected 0:05:16.400 --> 0:05:21.080 the traditional banking system to these new public blockchain rails 0:05:21.800 --> 0:05:24.840 an infrastructure, and so we were always pursuing that um 0:05:25.120 --> 0:05:27.520 first with the consumer app, which tried to do it 0:05:27.560 --> 0:05:30.080 by building on top of the bitcoin network, which was 0:05:30.880 --> 0:05:34.640 not a great idea just because bitcoin Bitcoin didn't evolve 0:05:34.720 --> 0:05:38.000 so back in you know, the idea was, oh, bitcoin's 0:05:38.040 --> 0:05:40.920 first mover, there's a lot of open source developers, there's 0:05:40.920 --> 0:05:43.320 going to add a lot of capabilities. Back then, there 0:05:43.400 --> 0:05:45.880 was this idea of hey, you could issue other assets 0:05:45.920 --> 0:05:48.640 on top of it, and you could extend its programming 0:05:48.760 --> 0:05:53.000 model to support more sophisticated programming, and this idea of 0:05:53.000 --> 0:05:56.239 programm mobile money, which was really a motivation behind Circle, 0:05:56.720 --> 0:05:59.000 but it sort of struggled and and it went a 0:05:59.000 --> 0:06:02.800 different direction based the technology was really you know, there 0:06:02.839 --> 0:06:06.640 was sort of an ideological um uh kind of framing 0:06:06.680 --> 0:06:08.800 of that and then the sort of second generation of 0:06:08.800 --> 0:06:12.479 blockchain technology emerged in the form of ethereum, and that 0:06:12.520 --> 0:06:15.279 actually created the building box where we could actually create 0:06:15.640 --> 0:06:18.440 a protocol for dollars on the Internet, and that gave 0:06:18.480 --> 0:06:21.800 birth to USDC, which you reference but fundamentally circled. Just 0:06:21.839 --> 0:06:24.200 to come back to your core question. You know, we 0:06:24.279 --> 0:06:30.120 are a financial platform company. Were regulated in the United States, 0:06:30.120 --> 0:06:32.039 were regulated in other parts of the world as well, 0:06:32.480 --> 0:06:37.080 and we operate this stable coin market infrastructure known as USDC. 0:06:37.320 --> 0:06:40.479 We also just recently introduced a euro stable coin called 0:06:40.800 --> 0:06:45.320 euro coin or euroc and the stable coin market infrastructure. 0:06:45.600 --> 0:06:48.520 We we sort of face the market on what I'll 0:06:48.560 --> 0:06:51.440 call a wholesale or institutional level, and so lots of 0:06:51.440 --> 0:06:53.600 other companies can connect and build on top of it, 0:06:54.080 --> 0:06:57.520 and we issue and operate this and um. We also 0:06:57.680 --> 0:07:01.680 alongside that run a set of services that are really 0:07:01.760 --> 0:07:06.280 for for businesses, developers, startups, fin techs, others that want 0:07:06.279 --> 0:07:09.040 to really integrate this kind of technology into their own 0:07:09.080 --> 0:07:13.440 operations in different ways. But fundamentally, you know, the billion 0:07:13.760 --> 0:07:16.720 USDC and circulation are close to that today. You know, 0:07:16.960 --> 0:07:20.160 we we generate interesting come from those and so in 0:07:20.200 --> 0:07:24.240 the current rate environment, that's that's significant UM. And and 0:07:24.240 --> 0:07:26.720 then and then we have these other these other kind 0:07:26.720 --> 0:07:29.640 of what we call transaction and treasury services and crypto 0:07:29.680 --> 0:07:32.920 services that are kind of financial infrastructure as a service 0:07:33.200 --> 0:07:36.720 that we also monetize. So you mentioned the idea of 0:07:36.760 --> 0:07:41.800 being able to UM send and verify transactions through the 0:07:41.840 --> 0:07:44.920 through Internet nodes as being very very powerful. Can you 0:07:44.960 --> 0:07:48.840 explain that a little bit more? Because you know, when 0:07:48.920 --> 0:07:52.800 when I look at financial services today, if I want 0:07:52.800 --> 0:07:55.000 to deposit my money, I can do it in a bank, 0:07:55.160 --> 0:07:56.960 I can put it in a money market fund. If 0:07:56.960 --> 0:07:59.000 I want to send money, I can send it through 0:07:59.000 --> 0:08:01.240 a bank, and you know, I think we'd all agree 0:08:01.280 --> 0:08:03.880 that might not be the most efficient way of doing it. 0:08:03.920 --> 0:08:07.280 But I can also send money through something like PayPal. 0:08:07.560 --> 0:08:12.200 So what exactly is the value add here from sending 0:08:12.280 --> 0:08:16.560 money via the blockchain via ethereum in the case of circle, Like, 0:08:16.600 --> 0:08:19.040 what are we adding and how does it differentiate itself 0:08:19.040 --> 0:08:23.600 from traditional financial services? Yeah, so I think kind of 0:08:23.640 --> 0:08:27.600 come back to a few things just that are kind 0:08:27.600 --> 0:08:30.960 of first principles that we've been going after. UM. I 0:08:31.000 --> 0:08:36.199 think the first is the Internet itself is essentially this 0:08:36.280 --> 0:08:40.960 collection of open protocols that anyone can connect to. And 0:08:41.040 --> 0:08:44.000 as long as your computer can speak those protocols, you 0:08:44.040 --> 0:08:46.320 can do a lot of things. You can have direct 0:08:46.520 --> 0:08:49.640 peer to peer communications. You can put a piece of 0:08:49.720 --> 0:08:52.080 software on a on a server and then anyone with 0:08:52.120 --> 0:08:54.520 a browser can connect to that software. So it provides 0:08:54.520 --> 0:09:00.360 software distribution, um, it provides protocols for sending messages, mails, 0:09:00.480 --> 0:09:04.520 text messages, other things. So all these protocols exist and 0:09:04.520 --> 0:09:07.280 and alongside those there's what what is often referred to 0:09:07.320 --> 0:09:10.200 as the payload of those protocols. So there's sort of 0:09:10.400 --> 0:09:14.200 different types of data. So the Internet has basic you know, 0:09:14.280 --> 0:09:17.560 data zeros and ones, and it has more structured standard 0:09:17.600 --> 0:09:20.480 forms of data like uh an MP four audio file 0:09:20.920 --> 0:09:25.080 or a a piece of content on the web or 0:09:25.120 --> 0:09:28.440 all these different types of formats. But the Internet up 0:09:28.520 --> 0:09:34.280 until roughly ten years ago, lacked any protocols that allowed 0:09:34.640 --> 0:09:40.640 you to directly represent value too directly in an open protocol, 0:09:41.000 --> 0:09:43.160 and this is the key concept in using an open 0:09:43.200 --> 0:09:46.440 protocol to exchange that value. There was no built in 0:09:46.559 --> 0:09:49.800 data type on the Internet for money, and so there's 0:09:49.840 --> 0:09:54.920 obviously with the with the advent of cryptographic record keeping 0:09:55.520 --> 0:09:59.839 and and effectively these kind of ledger these kind of 0:10:00.040 --> 0:10:04.080 provable uh distributed ledger systems. You now actually have a 0:10:04.120 --> 0:10:07.960 building block that is on the public Internet that allows 0:10:08.000 --> 0:10:14.920 people to represent incorruptible, in controvertible data. And that's what 0:10:15.040 --> 0:10:17.640 money is. It's a record keeping system and it's a 0:10:17.679 --> 0:10:20.600 way to sort of adjust the entries of that. You've 0:10:20.720 --> 0:10:24.920 never had that on the public Internet. So along time 0:10:25.040 --> 0:10:28.679 something like bitcoin, which is a native form of money 0:10:28.679 --> 0:10:31.800 on the Internet, and so naturally the next kind of 0:10:32.200 --> 0:10:35.640 logical step was, well, what about if we could take 0:10:36.160 --> 0:10:41.400 the fundamental powers of that cryptographic money, which is accessible 0:10:41.520 --> 0:10:44.640 to any Internet connected device that can transact at the 0:10:44.640 --> 0:10:48.880 speed of the Internet, with very high security assurances and 0:10:49.000 --> 0:10:54.080 privacy assurances, with theoretically the ability to over time drive 0:10:54.160 --> 0:10:58.959 the cost of confirming and settling with finality those transactions 0:10:58.960 --> 0:11:03.040 to something approaching zero euro. Well, then that becomes incredibly powerful. 0:11:03.440 --> 0:11:06.920 That becomes as powerful as when you know, software made 0:11:07.040 --> 0:11:09.720 voice communications free on the Internet. So what if you 0:11:09.720 --> 0:11:13.320 could actually have protocols that could represent what we think 0:11:13.360 --> 0:11:15.200 of as a dollar. And we'll come back to that 0:11:15.240 --> 0:11:17.200 because that gets into a lot of like what makes 0:11:17.240 --> 0:11:20.400 us stable? Coin stable? What is money? What are dollars? 0:11:20.400 --> 0:11:22.880 All that fun stuff. But if you could, if you 0:11:22.880 --> 0:11:25.120 could actually have that and have a public protocol like 0:11:25.160 --> 0:11:27.559 we have HTTP for the Web, anyone can connect to it, 0:11:27.720 --> 0:11:30.520 can exchange data. It's given us all the world's knowledge 0:11:30.559 --> 0:11:33.240 instantly at effectively no cost. What if we could have 0:11:33.280 --> 0:11:37.480 a protocol for dollars and euros and pounds and other 0:11:37.640 --> 0:11:40.720 and other currencies. But let's just start with dollars and 0:11:40.720 --> 0:11:45.319 and make that accessible so that any person, any entity, 0:11:45.480 --> 0:11:48.840 and any software developer can directly transact those over the 0:11:49.000 --> 0:11:52.320 over the public Internet, and and doing it with with 0:11:52.360 --> 0:11:54.360 all those kind of built in features. So the way 0:11:54.360 --> 0:11:57.640 I put it is, the existing financial system doesn't have 0:11:57.720 --> 0:12:03.280 Internet superpowers, and now we have, through public blockchain infrastructure 0:12:04.040 --> 0:12:06.839 and and and mechanisms like stable quence, we now actually 0:12:06.840 --> 0:12:09.920 have dollars with Internet superpowers, and and that's really exciting 0:12:09.960 --> 0:12:28.240 for a whole host of reasons. So I want to 0:12:28.280 --> 0:12:31.000 dive into a bunch of those questions and some of 0:12:31.040 --> 0:12:33.240 the opportunities. Before I do, I want to take care 0:12:33.240 --> 0:12:36.200 of like one sort of maybe it's a housekeeping question 0:12:36.360 --> 0:12:38.920 or a sort of nuts and bolt question, but what 0:12:39.160 --> 0:12:42.679 is the status? Are you still going public via cn D? 0:12:43.000 --> 0:12:46.880 Is that still on yes, very much so, so we're 0:12:46.880 --> 0:12:51.520 in registration with the sec UM. We initially announced that 0:12:53.040 --> 0:12:58.079 about a year ago and in February. Because the the 0:12:58.440 --> 0:13:01.319 sort of initially announced deal had a sort of time 0:13:01.360 --> 0:13:03.200 and had to be completed in we were not going 0:13:03.280 --> 0:13:06.960 to hit that exact time, we kind of renegotiated the 0:13:07.000 --> 0:13:10.000 deal and did what I like to call a respect 0:13:10.160 --> 0:13:14.640 so we respect um instead of despact. So we respect 0:13:14.720 --> 0:13:17.880 and I think I'm on a noteworthy basis. The value 0:13:18.160 --> 0:13:21.280 of the company went up by a d percent, which 0:13:21.320 --> 0:13:25.040 is not what you've typically seen in SPAC deals. They've typically, 0:13:25.080 --> 0:13:28.080 in fact, almost universally gone the opposite direction. But that 0:13:28.200 --> 0:13:30.480 was we moved from a four point five billion dollar 0:13:30.559 --> 0:13:33.400 valuation to a nine billion dollar valuation, and our our 0:13:33.440 --> 0:13:36.760 financial outlook, you know, sort of had materially improved, and 0:13:36.840 --> 0:13:38.880 so that that was sort of happening. But we did 0:13:38.880 --> 0:13:41.720 a couple of other things. One was, you know, most 0:13:41.720 --> 0:13:44.920 spacts are also have a fund raise attached to them, 0:13:44.960 --> 0:13:47.240 called a pipe, and we had originally done about a 0:13:47.240 --> 0:13:50.760 four million dollar pipe, and that's a conditional financing. Once 0:13:50.840 --> 0:13:53.719 the transaction completes, then you get the money. We we 0:13:53.800 --> 0:13:56.880 eliminated that. We said there's no cash condition, we're going 0:13:56.920 --> 0:14:01.240 to eliminate the pipe. But instead we wanted the ability 0:14:01.320 --> 0:14:04.160 to raise capital privately because we had a lot of 0:14:04.200 --> 0:14:07.360 interest in the company and so why wait another six 0:14:07.480 --> 0:14:10.000 nine months or whatever it was. And so about a 0:14:10.080 --> 0:14:14.040 month or so after the respect, we announced a four 0:14:14.440 --> 0:14:18.000 million dollar financing with black Rock and Fidelity in Martial Waste, 0:14:18.320 --> 0:14:20.640 and so that was that was a private financing. So 0:14:20.720 --> 0:14:23.640 they purchased equity in the company privately. But we are, 0:14:23.840 --> 0:14:27.160 you know, in our sec comment review cycle and and 0:14:27.160 --> 0:14:30.600 and we anticipate the spacking in Q four. That's the 0:14:30.600 --> 0:14:35.320 current the current thinking right now, given the criticism around 0:14:35.440 --> 0:14:37.480 a lot of SPACs at the moment, do you do 0:14:37.520 --> 0:14:41.120 you kind of wish that maybe you you'd considered another 0:14:41.200 --> 0:14:43.520 venue for raising money or like, how do you feel 0:14:43.560 --> 0:14:46.520 about the process in retrospect? Well, it's interesting is that, 0:14:46.640 --> 0:14:49.440 you know, we we made a decision that we wanted 0:14:49.480 --> 0:14:53.440 to be a publicly listed company. We also, prior to 0:14:53.520 --> 0:14:57.760 doing our our spect transaction, had raised four fifty million 0:14:57.760 --> 0:15:00.720 dollars in a in a private fundrai is and then 0:15:00.760 --> 0:15:03.480 we've now just you know, recently raised this four million 0:15:03.960 --> 0:15:07.200 and we have a kind of robust financial outlook as well, 0:15:07.280 --> 0:15:10.040 So the capital raise wasn't really the essence of it. 0:15:10.120 --> 0:15:12.640 We wanted to become a public company, and at the time, 0:15:13.600 --> 0:15:18.120 the factis fact model seemed like an efficient way to 0:15:18.240 --> 0:15:22.840 become a public company. In retrospect, a crypto company in 0:15:22.880 --> 0:15:27.160 a novel new industry plus a renewed amount of scrutiny 0:15:27.200 --> 0:15:30.720 its facts. Hindsight, you could say, well, maybe that wasn't 0:15:30.840 --> 0:15:33.200 the right thing, but I think no matter what, because 0:15:33.240 --> 0:15:37.920 of the novelty of our business and and the nature 0:15:37.960 --> 0:15:40.680 of our business right it's it's just a longer review 0:15:40.760 --> 0:15:43.840 cycle to kind of become a listed company, which I 0:15:43.840 --> 0:15:46.240 think is totally appropriate because it's a whole bunch of 0:15:46.280 --> 0:15:49.720 different types of accounting issues and risk issues and disclosures 0:15:49.720 --> 0:15:52.440 and the like. And so the bottom line for us 0:15:52.480 --> 0:15:54.960 is we wanted to become a public company. We think 0:15:55.440 --> 0:15:59.040 as a kind of financial infrastructure company that lots of 0:15:59.040 --> 0:16:01.120 other people are building on top top of. It's actually 0:16:01.120 --> 0:16:07.280 really important to have that level of transparency, visibility, assurance, accountability, 0:16:07.400 --> 0:16:09.480 and that's what's really important for us at the end 0:16:09.520 --> 0:16:12.160 of the day. And so we're totally committed to that. 0:16:12.280 --> 0:16:14.600 And and so you know, in a sense because we 0:16:14.600 --> 0:16:17.119 were able to restructure even the deal that we had 0:16:17.280 --> 0:16:19.960 in ways that were I think very favorable for the company. 0:16:20.280 --> 0:16:22.360 We're like, let's just continue down that path and and 0:16:22.400 --> 0:16:24.480 just see it through. There's a lot of flavors of 0:16:24.520 --> 0:16:26.360 stable coins, so I want to get into some of 0:16:26.360 --> 0:16:28.120 the like what even is a stable coin? But does 0:16:28.160 --> 0:16:31.080 Tracy mentioned in the intro this year we've seen the 0:16:31.120 --> 0:16:35.520 collapse of the Terra stable coin. There's always scrutiny about 0:16:35.640 --> 0:16:38.520 tether and but you know, when thinking about how this 0:16:38.560 --> 0:16:39.920 is going to evolve, I have it's sort of a 0:16:39.920 --> 0:16:43.040 two part question on regulation, but a like what is 0:16:43.040 --> 0:16:45.560 a stable coin? Like what is the closest thing some 0:16:45.560 --> 0:16:47.760 people compare them to money market funds? What is a 0:16:47.800 --> 0:16:51.440 stable coin? And then because there are so many flavors, 0:16:51.480 --> 0:16:54.160 and because you know, I could be an anonymous person 0:16:54.200 --> 0:16:56.840 on the Internet based anywhere in the world and create 0:16:56.920 --> 0:17:00.360 some sort of algorithmic based stable coin or D five 0:17:00.520 --> 0:17:03.360 based stable coin where I hold other crypto assets and 0:17:03.400 --> 0:17:06.200 maker and die as an example of that, is there 0:17:06.240 --> 0:17:10.960 any prospect of a unified stable coin regulation that actually 0:17:11.240 --> 0:17:15.440 captures all these definitions? And who should be responsible if 0:17:15.440 --> 0:17:18.679 someone in the US buy goes onto an exchange and 0:17:18.760 --> 0:17:22.320 buy something that's called a stable coin. Who should be 0:17:22.359 --> 0:17:26.560 responsible for ensuring that, well it stays stable? Yeah, there's 0:17:26.720 --> 0:17:28.600 there's a lot of a lot of topics in there. 0:17:29.040 --> 0:17:31.800 So I think, um, and and and I think we'll 0:17:31.800 --> 0:17:34.560 get to the regulatory piece and sort of you know, 0:17:34.800 --> 0:17:38.520 how how you know, the average joe, no pun intended 0:17:38.680 --> 0:17:42.680 can differentiate all these things? Um uh, you know as well? 0:17:42.760 --> 0:17:44.960 And and and how to and how to regulators different 0:17:45.480 --> 0:17:47.880 differentiate these I think the first thing I would say 0:17:47.920 --> 0:17:50.520 is we didn't pick the name stable coin. You know, 0:17:50.640 --> 0:17:53.359 there's that was sort of like the market came up 0:17:53.359 --> 0:17:56.320 with that, that concept. And and what's interesting is if 0:17:56.359 --> 0:18:01.000 you kind of go through circles own you know, marketing 0:18:01.040 --> 0:18:03.200 and how we look at this, we keep talking about 0:18:03.400 --> 0:18:08.080 dollar digital currencies or fiat digital currency as opposed to 0:18:08.080 --> 0:18:09.760 the words stable coin. And I'm not sure if the 0:18:09.760 --> 0:18:12.680 words stable coin will be here forever. Although I didn't 0:18:12.720 --> 0:18:15.000 think the phrase worldwide Web was the best thing to 0:18:15.080 --> 0:18:17.679 describe this great internet thing that we were building, but 0:18:17.800 --> 0:18:21.520 it persisted. So whatever the name, it does then come 0:18:21.520 --> 0:18:24.760 into a well, well what is this and how do 0:18:24.760 --> 0:18:27.359 you differentiate these things? I think The really important thing 0:18:27.400 --> 0:18:31.520 to understand about the approach that we took, which was 0:18:32.160 --> 0:18:37.280 prior to launching USDC, we became broadly regulated in the 0:18:37.400 --> 0:18:42.119 United States as an electronic money transmitter, and that is 0:18:42.160 --> 0:18:46.040 a tried and true framework for payment system innovation in 0:18:46.080 --> 0:18:51.600 the United States. Virtually every contemporary electronic payment system innovation, 0:18:52.400 --> 0:18:55.760 whether that be um you know, things that maybe don't 0:18:55.760 --> 0:18:58.959 feel that innovative now, like you know, prepaid debit cards, 0:18:59.040 --> 0:19:04.560 but then PayPal, cash at Venmo, Apple, pay Stripe itself 0:19:04.600 --> 0:19:06.959 and many of the services it provides all kind of 0:19:06.960 --> 0:19:10.760 fit under this kind of framework. And under that is 0:19:11.160 --> 0:19:14.760 the framework that USDC is regulated. And so you know, 0:19:15.119 --> 0:19:18.359 despite the I think that the representation that these are 0:19:18.359 --> 0:19:21.920 on regulated, it's just not true. We've been regulated since 0:19:22.040 --> 0:19:25.639 day one on this and and money transmission regulation is 0:19:25.760 --> 0:19:30.159 designed to protect individuals. So that and it's the same 0:19:30.280 --> 0:19:32.880 kind of framework, and it's called the money in Europe 0:19:33.160 --> 0:19:35.720 and similar you know kind of regulations in Asia and 0:19:35.880 --> 0:19:38.960 pan and others. But basically, we are required by law 0:19:39.560 --> 0:19:45.119 two hold a one for one reserve against that electronic 0:19:45.200 --> 0:19:48.640 money instrument. We have to do it in segregated accounts 0:19:48.640 --> 0:19:51.360 that are not accessible to the company for its own operations, 0:19:51.800 --> 0:19:56.120 which are segregated in the event of something like an insolvency. 0:19:56.280 --> 0:19:59.119 So there's a framework that's there for for this kind 0:19:59.280 --> 0:20:02.560 of money, and it's used every day. We all use 0:20:02.600 --> 0:20:05.399 it every day, and so that does exist, and that 0:20:05.560 --> 0:20:09.159 is a reasonable framework for these But I think it 0:20:09.280 --> 0:20:11.440 is a new arena and there's a different level of 0:20:11.480 --> 0:20:16.160 transparency that's required. Like, no one's asking PayPal right now, Hey, 0:20:16.200 --> 0:20:19.600 that thirty five billion dollars of balances that hang out 0:20:19.640 --> 0:20:22.240 and PayPal like, what are you invested in? Are you 0:20:22.320 --> 0:20:24.920 taking risks? Are you doing? No one asked that because 0:20:25.280 --> 0:20:27.639 they understand that it's a regulated company that is not 0:20:27.720 --> 0:20:30.760 allowed to do much beyond just like cash and cash 0:20:30.760 --> 0:20:33.760 equivalence and that sort of short term stuff. But because 0:20:33.800 --> 0:20:36.800 this is crypto, and because these are these digital tokens 0:20:37.000 --> 0:20:39.800 that people are holding, and because of the history of 0:20:39.960 --> 0:20:42.679 hacks and thefts and fraud and all the other stuff, 0:20:42.840 --> 0:20:45.560 people are paranoid, justifiably, and so there's just a lot 0:20:45.640 --> 0:20:48.600 more scrutiny on these things, and I think that's appropriate. 0:20:48.880 --> 0:20:52.760 We actually just recently started publishing, and we're doing it monthly, 0:20:53.000 --> 0:20:55.680 and we intend to do it daily. Literally the acquisites 0:20:55.760 --> 0:20:58.600 for the serial numbers of every single three month or 0:20:58.680 --> 0:21:02.000 less Treasury bill that hold. So people literally could see 0:21:02.359 --> 0:21:06.040 what is the risk of this, and so you know, 0:21:06.080 --> 0:21:09.000 that's that's sort of a framework that's there now when 0:21:09.000 --> 0:21:10.760 you zoom out and you say, wow, there's all these 0:21:10.760 --> 0:21:14.400 different things. From a regulatory perspective, there has been an 0:21:14.400 --> 0:21:17.120 attempt and it started a couple of years ago when 0:21:17.640 --> 0:21:19.639 the G seven and then the G twenty and the 0:21:19.640 --> 0:21:23.760 Financial Stability Board, these sort of supernational groups of regulators, 0:21:23.760 --> 0:21:26.159 said hey, we need a framework to regulate what they 0:21:26.240 --> 0:21:29.600 called global stable coins, and and then they kind of 0:21:29.640 --> 0:21:32.600 came up, here's our policy recommendations, and then that kind 0:21:32.600 --> 0:21:35.280 of dropped down to the major G twenty countries, and 0:21:35.280 --> 0:21:37.000 then each country has kind of been working on this, 0:21:37.400 --> 0:21:40.280 and the recommendations in the US came out last fall, 0:21:40.840 --> 0:21:43.600 which was the p w G Report on Stable points, 0:21:44.000 --> 0:21:46.520 and they said, we need to regulate these. You need 0:21:46.560 --> 0:21:49.399 to regulate them within the kind of payment and credential 0:21:49.440 --> 0:21:52.800 supervision standards of the financial system, and we need to 0:21:52.800 --> 0:21:55.680 do that, they said, quote unquote urgently because there's something 0:21:55.720 --> 0:21:58.240 like a run risk that could happen, or theseings could 0:21:58.280 --> 0:22:01.520 get much bigger and get what happened there was a 0:22:01.520 --> 0:22:04.400 collapse of one of these so called stable coins, and 0:22:04.840 --> 0:22:08.040 that you know, emphasize it. Now Congress is really working 0:22:08.040 --> 0:22:10.719 on this very intently, and they were before the Terrort collapse, 0:22:10.800 --> 0:22:13.919 like bipartisan effort in the House and the Senate and 0:22:13.920 --> 0:22:17.960 others working on this. And now there's a definition and 0:22:18.080 --> 0:22:20.760 you know there's a uh, you know, a rumored bill, 0:22:21.160 --> 0:22:23.879 although I think it's pretty confirmed at this point, of 0:22:23.960 --> 0:22:29.000 a Payment Stable Point Act. So it's clearly defining these 0:22:29.080 --> 0:22:34.240 are for payments. They exist under the Payment System Banking 0:22:34.240 --> 0:22:40.639 Credential Supervision framework and you know, issuers of these have 0:22:40.760 --> 0:22:44.280 to sit under we'll have to presumably if these laws 0:22:44.320 --> 0:22:47.359 come into effect, have to sit under that kind of 0:22:47.359 --> 0:22:51.800 registration and supervision um framework. And you're seeing similar things 0:22:51.840 --> 0:22:56.520 emerged in the UK in Singapore have just gone into law. 0:22:56.640 --> 0:23:00.399 In the EU there's a whole framework for stable coins 0:23:00.520 --> 0:23:04.400 which will go into effect, and so kind of the 0:23:04.400 --> 0:23:07.960 the international regulatory community came up with the framework. It's 0:23:08.040 --> 0:23:11.160 kind of finding its way down into parliaments and congresses 0:23:11.200 --> 0:23:14.359