00:00We certainly see major growth in stable coins over the last year.
00:05Stable coins are really the way to send money in the 21st century.
00:11It's easy, as safely and securely as you send an email.
00:14So our USDC circulates over 185 different countries.
00:19And we see it continuing to grow.
00:22And of course, Scott Bassin has come up to say he himself is pretty optimistic about stable coins.
00:26He sees stable coins growing from, what, $2 trillion from $300 billion currently.
00:33That's a huge jump.
00:35What might drive stable coins to $3 trillion?
00:39Well, we're certainly seeing stable coins be the main medium of exchange on digital asset exchanges, the crypto ethosphere.
00:47But in the last few years, we're also seeing stable coins decouple from those markets.
00:53We're seeing stable coins be used as payments cross-border by companies, by individuals, cross-border remittances, as well as a store of value.
01:02So what we're seeing is stable coins becoming a part of the traditional financial sector in a way that maybe other digital assets aren't, or at least haven't yet.
01:10But isn't it true that stable coins, 80% of stable coins, are still being used for trading?
01:14I mean, you know, 20% needs to go way higher for things like paying for coffees and so on and so forth, right?
01:22Yes.
01:22We're seeing it decouple, actually.
01:24So we're seeing stable coins start to be used by multinational companies, by large financial institutions to send money across border for trade finance and other things.
01:33So I think you're going to see that percentage grow and diverge in the years to come.
01:39We also heard from Scott Bassin saying that he expects stable coins to be gobbling up treasuries.
01:45What could lead to that?
01:48Well, a stable coin like USDC is safe, compliant, trust, and transparent.
01:53And why it is such a solid stable coin is because it's backed one for one by high-quality liquid assets, mostly U.S. treasuries in the form of money market fund shares that are purchasing that.
02:05And so when you have stable coin money, unlike bank deposits that are backed one for one with high-quality liquid assets, the natural thing to back a U.S. dollar stable coin that Circle has done is to back it with treasuries.
02:17China, not to be outdone after banning cryptocurrencies, it's now launched its yuan stable coin recently.
02:25Some say better late than never.
02:27What's your take on the impact of a yuan stable coin internationally?
02:33Well, at Circle, we welcome other stable coins in other currencies because we actually think that's going to contribute to the growth of the stable coin market.
02:40So if, in fact, there's a digital yuan that's issued either by a central bank or by private sector actors, they're ultimately going to need a U.S. dollar stable coin to convert into and to work with.
02:53And we think there's nothing better than USDC.
02:55So our view is the more stable coins that come online in different currencies, the better it will be for the ecosystem as more things move on chain.
03:03But in terms of impact on a dollar-based stable coin, what might that be?
03:09We think it's ultimately going to grow.
03:11We think, again, the more stable coins that are out there, the more people are using stable coins in other currencies, the more they're likely to convert into U.S. dollars.
03:21So we think the pie as a whole is probably going to grow as a result of that.
03:24So we welcome that.
03:25Is there a sense that it has become a geo-strategic, I don't know, component, you know, because China's doing its yuan stable coin because, you know, it's trying to convince the world to move away from its dependence on the U.S.?
03:45Ultimately, I think if you want to play a role in the Web3 ecosystem, you want to have your national currency on the Web, on chain.
03:54So that was a big decision that the United States made in actually creating the first time ever federal framework for stable coins in the U.S. in terms of the Genius Act.
04:03And so other countries, I think, really do need to follow suit because they're going to be left behind if their national currency is not part of the Web3 ecosystem.
04:13Circle is on to something really interesting.
04:15It's working towards a reversible transaction.
04:18Talk to us about the thinking behind that because it's beginning to look and sound like traditional finance.
04:23Yeah, so to take a step back, Circle recently announced that we've created ARK, or we're creating ARK.
04:29It is the first enterprise-grade stable coin specific L1 blockchain.
04:37And what we're doing is, in building ARK, is we're listening to all sorts of folks.
04:40We're listening to the Web3 ecosystem.
04:42We're listening to the TradFi ecosystem.
04:45And we're trying to get the best of both.
04:47We're synthesizing, basically, if you will, what people want.
04:50And one of the things that people want, of course, is immutability.
04:54And they want, in particular, sub-second deterministic finality.
05:00Now, that's a fancy way of saying when a large institution hits that button, sends billions of dollars,
05:05they need to know immediately that the transaction has been validated, will be validated.
05:11Unlike the current general blockchains out there where you have to wait several minutes, it's probabilistic determination.
05:17So on ARK, it will absolutely be immutable.
05:19But we're also hearing folks that say, you know, there are benefits to the TradFi world where, for example,
05:26you have chargebacks for fraud or mistakes.
05:29And so we're also considering a layer on top of the immutable blockchain,
05:33which is an application that would allow folks to opt in under certain conditions that everyone agrees to,
05:38to, quote, reverse a transaction, not to unwind the original transaction, but to be able to have chargebacks.
05:44And so all of that, I think you are seeing a merging of the Web3 ecosystem in the traditional financial sector
05:51and what we call the new Internet financial system.
05:54To put it simply, it's a case of getting your money back if you feel like you've been scammed, correct?
05:59Yeah.
06:00And there's agreement among all the parties that, in fact, there is a mechanism for that.
06:04So you can imagine a bunch of large institutions that have ways of sending money back and forth
06:10and a process for saying, you know, this transaction was a mistake and ultimately they can work it out amongst themselves.
06:16This would all be built into a programmable application layer that would have conditions that everyone would agree to.
06:21But if folks want it and it's very important, then that's something Circle's looking to work with them to build.
06:27Are you testing it out already?
06:29We hope to make announcements fairly soon as to the public test net and rolling out our blockchain.
06:35So stay tuned.
06:37In terms of the stablecoin space, what are some of the risks that you see out there in the next 12, 24 months?
06:44Well, one of the big risks is that not all stablecoins are stable, not all stablecoins are equal.
06:48So something like a USDC, which is trusted, transparent, regulatory, compliant, backed one for one, in some ways is rare.
06:57And other stablecoins that are out there, folks are buying them thinking they represent effectively another U.S. dollar similar to USDC, but they're really not.
07:05We saw Terra Luna.
07:07We saw other folks.
07:08So what Circle is trying to do is make sure that they're a uniform standard for stablecoins globally.
07:13So everyday people can use these things, like in the beginning of the conversation when the man was talking about his granddaughter, that they can use them safely and securely.
07:24The thing is, coordinating regulation, where are we with that?
07:28The good news is, is we're starting to see a trend of more and more regimes coming up with stablecoin specific regulations, much of which, quite frankly, look like the standards that Circle has imposed on itself far before anyone told us we had to.
07:44In the United States, we have the Genius Act, in the European Union, we have MECA, and we're starting to see more and more stablecoin legislation developed.
07:54And in fact, Hong Kong, just last month, their stablecoin ordinance went into effect.
07:59And we understand Singapore is working on its stablecoin specific legislation as well.
08:04Keith, before we go, what should we be looking out for in the stablecoin space?
08:09I think more and more use cases that go beyond just traditional crypto markets.
08:16I think companies now are realizing that waiting five days to send money overseas, paying six and seven percent fees, is no longer going to be the way to conduct business in the 21st century.
08:27So I think you'll start to see that decoupling grow even more that we talked about.
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