Jeremy Allaire has overseen the growth of stablecoin USDC from a market cap of about half-a-billion dollars last year to USD 4.8 billion today. He joined host Teana Baker-Taylor to discuss the many moving parts to the USDC ecosystem, which Jeremy and his team began working on back in 2017. From the start, they envisioned a protocol layer for fiat digital currency.
Late that year, they formed Centre, which at the time was nothing more than a place to house IP around what they were building. They were committed to the idea of building an open standard by which the ecosystem could be built around and there could be governance around.
In 2018, Coinbase joined them to launch the Centre consortium specifically and as an issuer of USDC. In the fall of that year, Centre launched and Coinbase launched as an issuer alongside them, since which time it has grown significantly. The Centre consortium governs many things, including the open-source IP, policies surrounding how reserves work, compliance information, security and operational procedures that issuers must perform, such as regulation and licensing requirements, as well as which blockchains USDC gets deployed on.
Very recently, Centre appointed financial industry veteran David Puth as CEO. Most recently, David was CEO of CLS Bank International, a global consortium owned by the 70 most critical financial institutions in the world and operating the largest global multi-currency settlement system, supporting more than USD 1.7 trillion in transactions per day.
(5:00) “David really has a passion for the future of currency, the future of how it will work in the monetary system and really shares the vision that all of us had around building that on public blockchains, building that on open internet infrastructure, building it around scs specifically. So he’s building Centre independently. There will be many other companies that join as members. There will be new issuers of new currencies. So that’s on its own track,” said Jeremy.
Circle itself is the minting issuer of USDC, providing the market infrastructure that lots of firms around the world could integrate to and build on top of.
(3:44) “USDC was the first stablecoin to be developed out of the Centre consortium, it’s certainly not going to be the last. And furthermore…we really see these global stablecoin arrangements, which are really consortiums of private sector actors, as being critical market infrastructure for the future of the international monetary system and the future of how finance works,” said Jeremy.
Circle, which released an API last year that is growing hand over fist, is not technically a bank at the moment. But they provide a set of capabilities that businesses, other financial institutions and fintechs can build on. That’s essentially a transaction banking core that includes the ability to custody, store and build customized apps on digital dollar account infrastructure.
Around that there’s a wide range of rails they offer through API services, including the ability to move value using traditional banking transfer methods — wires, card networks, etc. — but also move seamlessly on multiple blockchains with USDC. For instance, a company could take a credit card payment and settle as USDC in an account they could use themselves or present to end users. It’s a seamless movement between digital currency native treasury infrastructure and the public blockchain ecosystem and the legacy financial system.
It’s also a set of API services that people can pay a subscription fee to access plus usage fees. Hundreds upon hundreds of companies are starting to adopt these services. In addition to institutional trading firms, electronic market firms, brokerages, OTC offices and family offices, Circle serves blockchain startups, crypto finance firms, traditional fintech, remittance products, saving products, lending products and commerce firms.
Stablecoin Use Cases
Circle has worked with the Bolivarian Republic of Venezuela to use USDC as a way to bypass some of the controls that the regime puts on individuals and entities. For instance, they delivered digital dollars into the hands of frontline healthcare workers fighting COVID who aren’t getting support from their own government as one powerful use case. In addition, multiple governments hold accounts with Circle and art starting to use USDC, one of which is a dollarized economy that is accepting tax payments in USDC.
Circle also has a partnership with Visa, which they began in December 2020. They are in the early stages of rolling out different phases of that partnership. It spans a number of things, including a joint go-to-market relationship to get fintech, banks and commerce marketplaces in the Visa ecosystem to adopt USDC and Circle APIs. They are working on a solution called Visa Partner Wallets.
(11:34) “Visa is very progressive in basically creating a way for crypto wallets around the world to issue Visa credentials, to issue cards and tokenized credentials,” explained Jeremy.
Circle will also be introducing a card program enabling businesses that want to use USDC in their own treasury and cash management infrastructure to also use that not just for onchain transactions but also for card payments as well.
(14:32) “When I get asked ‘what are the use cases for USDC,’ my answer is what are the use cases for dollars? And basically, every use case in the world that you have for dollars is a use case for USDC. And so we are at the beginning stages of that very, very broad use. And it’s going to be a capital markets infrastructure. It’s going to be a retail and B2B payments infrastructure. It’s going to be a treasury management infrastructure. It’s going to span all of this,” said Jeremy.
USDT was originally built on Ethereum, which has been trying to tackle scaling issues, as high fees impact transactions. Now USDT is supporting other networks, including the likes of Algorand and Stellar, Teana noted.
(16:29) “It’s not clear that it’s a winner takes all space. And in fact I think there will be a great deal of very successful layer-one public chains,” said Jeremy.
The industry is witnessing the emergence of public chains that are optimized for things like DeFi, cross-border payments, digital security applications, embedded devices, NFTs and gaming, as well as blockchains that have a very specific regional focus.
(17:09) “When we think about Centre-standard stablecoins like USDT, we think of it as a protocol. So if you think about http, the protocol of the web, it’s not tied to Mac or tied to Windows. It’s a cross-platform…Everyone wants their digital content to work everywhere, to be cross-platform. And I think digital money is the same thing…If you have digital dollars, they should work on every platform,” said Jeremy.
The Circle chief remains extremely bullish about Ethereum and believes it has an unparalleled technical and developer community. He is excited about Ethereum 2 but says “we have to be patient.”
Circle recently launched an institutional trading program. During the course of 2020, as the crypto asset markets blossomed, there was an incredible amount of interest form institutional firms that wanted to get involved. Circle wanted to create a program that was tailored to those firms that would give them the best in class to their infrastructure and APIs as well as to automate everything they would need to do with stablecoins. It’s a way for those companies to get white-glove support and service and get extremely attractive economics in terms of using the infrastructure. The program has grown a lot, and Circle is scaling it even more this year.
Circle has been outspoken about how to build governance models for global adopted stablecoins, including extensive work they did last year with the G20, the Financial Stability Board, working on defining how governments should set policy and supervise global stablecoin arrangements.(24:30) “Our view is that what we’re going see over next two-to-three years is rapid growth in these global stablecoin arrangements, not just in US-dollar but in many markets — emerging markets and other major developed markets with private sector actors, banks, fintechs, crypto firms issuing stablecoins in a consortium model on a set of common standards. I think that’s really the model that is going to take hold and achieve scale with billions of end users in the next few years,” said Jeremy.
Stablecoins on public blockchains and other cryptocurrencies as well as individuals that want to transact with bitcoin, digital commodity money or fiat-backed digital currencies like USDC — all of those are becoming more mainstream. There are now very clear rules of the road for banks, fintechs and other financial institutions so that they can get involved.
Meanwhile, FinCEN proposed rule changes that would apply KYC standards to non-custodial wallets, which had the industry up in arms.
(28:10) “This very, very short notice of public rulemaking had a lot of problems in it. I have been fiercely opposed to procedurally how that’s going about and the substance. And I’m not alone, some other major, major players. And we successfully stopped it. That was announced yesterday, that this is going to be a much more extensive review period,” said Jeremy.
FinCEN is a good partner to the industry, said Jeremy, and they want to work with the industry to come up with ways to address the risks they care about.