A go-to guide for stablecoins and crypto’s future

JEREMY ALLAIRE: I’m talking about money, and so money is like, is it really there? Are people going to steal it? Are people committing crime with it? How do I know I can get it back? Is this system secure? In the United States through the Genius Act, we now have a federal law governing the issuance and operation of what are called payment stablecoins, which is this new kind of digital dollar electronic money, whether you call it crypto or blockchain or digital assets or all this stuff, it’s becoming much more mainstream.

BOB SAFIAN: That’s Jeremy Allaire, CEO of Circle, the crypto fintech who’s booming IPO in June re-sparked the IPO market. I wanted to talk to Jeremy about how the newly adopted Genius Act in the US is impacting cryptocurrency. Plus why Circle’s stablecoin pegged to the US dollar is creating such a stir and what people misunderstand about how digital assets are changing the financial system. Whether you’re a meme coin aficionado or a crypto skeptic, Jeremy offers a clear-eyed guide to blockchain-based money, including why companies from Shopify to Stripe to major banks are jumping into stablecoins. So let’s get to it. I’m Bob Safian and this is Rapid Response.

[THEME MUSIC]

I’m Bob Safian. I’m here with Jeremy Allaire, CEO of fintech firm Circle. Jeremy, thanks for joining us.

ALLAIRE: Thank you, Bob. I’m really pleased to be here with you.

Copy LinkThe advantages of stablecoins

SAFIAN: You have had quite a busy season. Circle’s IPO in June was a big success. Stock price today is almost double its opening price in the process. Circle sort of became a symbol for a revived IPO market overall for the maturing crypto industry. Do you like being in the middle of attention, the center of attention that way, or would you rather just keep your head down and focus on the business?

ALLAIRE: It has been a really wild time. It’s not just because whenever people say, “Hey, we helped open the IPO market.” A lot of VCs and founders are very grateful because it’s like you can’t create the environment. But I think the bigger thing is just there’s a lot more awareness about stablecoins, about what we do, about this technology transformation. But it has been a whirlwind.

SAFIAN: Circle’s known for its stablecoin USDC, the US dollar coin. Stablecoins, they’re a cryptocurrency whose value is pegged directly to another asset that mirrors that asset, if I have that right. Can you explain to the listeners what the advantage of a dollar based stablecoin is? I mean, today all money is effectively digital, whether it’s my direct deposit check or using a credit card or transferring money between accounts. Almost everything happens electronically. How are stablecoins different aside from that they’re tracked on a blockchain ledger?

ALLAIRE: Yeah, it’s helpful to use other analogies that we have from the internet. For a long time you had people say, “Hey, we have digital cable. I have 500 channels. I have video on demand. This is amazing. It’s digital, right?” But it wasn’t actually on the open internet. It wasn’t based on open internet protocols. It wasn’t open and permissionless. And when the protocols got strong enough, I was part of this in the digital media world, where you could actually stream video directly to any device anywhere in the world and anyone could actually become a publisher of video. You had this extraordinary explosion of video content and you had completely new models of who’s a creator, how distribution happens. That model has played out in many other places. I could get software on my Windows computer back in the mid-90s and it was like, “Hey, why would I ever want a piece of software on a web browser?”

But we now have basically nearly free software distribution to anyone in the world. Anyone can create interactive services for billions of people. Wow. And so it’s a very similar story with money. We do have electronic money, but that electronic money is in all of these stove piped systems. It’s trapped in proprietary networks, it’s country specific. We’ve never had an open network model, and that’s what blockchain infrastructure and that’s what stablecoins really represent, and that’s led us into this world where now the kind of cost of storing and moving value anywhere in the world to any device, to any person, peer-to-peer, just like we’re having this peer-to-peer video thing here, has effectively gone to zero. Stablecoins are making digital dollars accessible to billions of people all around the world with the efficiency and seamlessness of the internet. And that’s really just getting started. It unlocks so many new forms of economic activity that hasn’t been possible in the past.

SAFIAN: It can sound a little bit arcane to folks who aren’t inside how money actually moves around in the world. I mean, you do business with banks, with credit card companies, people can use USDC on Stripe or on Shopify. What do those partners get out of it and what do their customers get out of it?

ALLAIRE: So when we think about investing in the stock market, for example, today you have to wire funds into a brokerage account and then you have to trade with the brokerage and then there’s a day or two for the actual settlement to happen, and it’s only available from 9:30 AM till 4 PM and holidays… So that’s the way that most people have thought about investing. Along comes digital assets and all of a sudden these are 24/7, 365 continuously settled markets that operate everywhere in the world and every country in the world. It’s very different. So now you’re in a world where you’re investing, trading, settling at internet speed, and so you need internet speed dollars. You need to have dollars that can actually move and trade and settle in the same way. So that was what I call the bootstrap use case for this. That’s what kind of got the flywheel spinning on this.

Our vision is much broader. This is going to rewire the whole global financial system. Some of the first places that started to spill over was individuals and small business owners and households around the world realized, wait a minute, these are very safe dollars that I can store in custody myself. I can transact directly on the internet with other people with this. There’s no gatekeeper. And I can do this and hold my value in dollars instead of my local currency. And I can use them like I use other internet services. And so you saw this spillover into this emerging stablecoin financial system and that grew into hundreds of millions of people. And then that’s spilled over into business owners who in all of these markets began to realize that, wait a minute, I’m in Brazil. I’m buying from someone who is in Asia and we can just settle up directly with these digital dollars.

And so you’ve seen this growth in international payments and we’ve seen essentially other internet phenomenons like the consumers figure it out and then small business figures it out and then eventually the big guys figure it out. Now major institutions are waking up to the fact that this is a very powerful new form of electronic money. So the card networks are enabling people to store value in this instead of bank accounts and make payments. Companies like Stripe and Shopify have basically realized that, wait a minute, I can accept USDC for payments and it doesn’t cost anything to accept it.

It’s like I can visit your website. It doesn’t cost me anything to visit your website. I can send you an email. It doesn’t cost me anything to send you an email or have a long distance video call. Similarly, if I can just take a digital payment from anyone in the world that has these digital dollars, I can receive it. I can give more value to the merchant compared to the 1%, 2%, 3%, 4%, even 5% sometimes that these processors and others take out. And so I think those are examples of very leading edge fintechs who are saying, “Hey, this future financial system is going to be built on internet rails.” And in fact, Shopify is a great example because usually you talk about giving the consumer a cashback. They’re actually giving the merchant for every dollar that the customer pays, they’re giving them 5 cents. They’re paying merchants.

Copy LinkWhy businesses and fintech giants are turning to USDC

SAFIAN: The funds that would have maybe gone to a credit card company or someone else. They’re just refunding it back to doing it directly.

ALLAIRE: That’s exactly right. And the traditional financial industry, big global, systemically important banks, the exchanges like ICE, which runs the New York Stock Exchange and all the futures exchanges. They’re all getting in. The uses are something you can’t do with existing payment systems. I want to make a 5 cent micropayment for a digital item in a digital game on the internet, all the way to the biggest electronic markets companies in the world who are trading gazillions of dollars. And so it’s a general purpose, general architecture form of internet native money and people are figuring it out.

SAFIAN: And the stablecoins, they’re not backed by actual dollars, right? They’re pegged to dollars, but it’s not like you’re a bank and you’re holding the actual dollars themselves. I mean, you’re adding to the money supply, aren’t you, by adding all these stablecoins?

ALLAIRE: It’s very different. So that friendly bank deposit that you have, you don’t actually have dollars there. You have an IOU. I give you a million dollars Mr. Bank and you give me an IOU that says you have the right to come back and get a million dollars. What they do is they take it and take risk. So the dollar you have is an IOU against a highly leveraged lending book, 12X leverage. So that dollar is in some ways a risky dollar because it’s actually backed by the credits, by all the credit that’s out there.

SAFIAN: And this is why there’s federal insurance for a certain amount of bank deposit-

ALLAIRE: Up to $250,000.

SAFIAN: Up to a certain amount.

ALLAIRE: Yes. But the vast majority of money in the banking system is uninsured.

SAFIAN: Right.

ALLAIRE: The philosophy of a stablecoin, and this has been core to our philosophy, is why don’t we build a safer form of money that is fully reserved? So I always know that I can always get my dollar back and there’s no lending happening. There’s no what’s called rehypothecation of the money, and it’s actually a safer dollar. 90% of the assets backing USDC, for example, are short duration government treasury bills. If everyone came and said, “Hey, you’ve got whatever it is, there’s over 70 billion USDC in circulation right now.” Everybody says, “I want it all back at once.” We could redeem out the whole thing one for one. A bank can’t do that.

Copy LinkThe safety and transparency behind fully reserved stablecoins

SAFIAN: Because you’re not operating as a bank. You’re not lending the money out the way a bank does.

ALLAIRE: I believe in this very safe, full reserve model of money for many, many different reasons. Some philosophical, some also practical, which is, hey, wait a minute, if I’m going to have this digital dollar and I can have it and transmit it anywhere in the world on the internet and it can pass hands in a fraction of a second for a fraction of a cent that needs to be really safe. Everyone who touches that needs to know I can always redeem it. The internet needs a very safe base layer of money. And then things like borrowing and lending can be built up on top of that. And you’re seeing that. You’re seeing borrowing and lending protocols and credit markets being built up on top of these blockchains. And so you’re seeing slowly this development of a new internet financial system built from this new safer base layer of digital currency money.

SAFIAN: Part of the challenge of starting a new currency is building up trust around it. And so by having it be fully backed in this way, you reinforce that perceived risk, right? That this is not truly a stablecoin. You want to say, “No, it is stable.”

ALLAIRE: Right. I mean that’s exactly right. And in the EU, in Japan, in Hong Kong, Singapore, and as of this July in the United States, the Genius Act, we now have a federal law governing the issuance and operation of what are called payment stablecoins, which is this new kind of digital dollar electronic money. And it sits alongside… You’ve got bank electronic money, you’ve got stablecoin money, you’ve got physical cash, you’ve got central bank deposits. This is a new form of money that is being codified in law. And that will ultimately, coming back to your point Bob, is that’s what’s going to give people the confidence that, oh, okay, this is something that everybody can use. And so that’s kind of causing this race into, oh my God, this is going to rewire the financial system. This is going to be this huge thing.

SAFIAN: I’ll confess that I have long been a skeptic about cryptocurrencies. They seem so speculative for potential abuse. But as Jeremy spells out his vision for stablecoins, I can see the appeal. So how does Jeremy envision protecting Circle’s efforts from potential abuse, and what about the rest of the crypto world? Has he cheered it on or resent it? We’ll talk about that and more after the break. Stay with us.

[AD BREAK]

Before the break, Circle’s Jeremy Allaire explained why stablecoins are having a moment buoyed by the newly passed Genius Act. Now he talks about the pros and cons of working in the crypto industry, how he manages the inevitable setbacks, and whether the Trump family’s crypto activity is a conflict of interest. Plus, what people most misunderstand about where crypto and blockchain are moving. Let’s jump back in.

Copy LinkThe impact of the Genius Act

You had spent years lobbying for legislation in the US. When the Genius Act finally passed, did you celebrate? What did you do to celebrate?

ALLAIRE: Yeah, absolutely. I mean, it’s funny. New regulations on your business, yay. This is kind of like, hey, we’ve invented self-driving cars. We’re not going to get them out there unless there’s rules of the road, literally. In order to unleash exponential tech innovation, there’s a social contract. You have to work that out because it introduces all kinds of new risks, all kinds of new challenges. There’ve been a lot of fraudsters and hucksters dealing with digital currency stuff. It’s been plagued by total scammers.

And so just frankly, even though we’ve always done things the right way and tried to be this trusted, compliant regulated firm, there’s all this noise. Money is like, is it really there? Are people going to steal it? Are people committing crime with it? How do I know I can get it back? Is this system secure? Really important stuff, which regulation really helps with? And there’s been regulation, but now it’s being codified around the world in almost every major country in the G20 into hard law. And so this is becoming part of the financial system now. Regulatory clarity highly differentiates between the crazy stuff over here. And no, this is actually money that’s actually being built into the financial system. So it’s validating. That’s why it’s celebrated.

SAFIAN: The crypto industry has been a little bit like the Wild West. You got meme coins and crypto exchange, FTX, and these booming bus cycles. Are those associations a challenge for Circle or do you embrace the full sort of crypto community and ethos, or do you really try to, no, we’re different?

ALLAIRE: I mean, look, there’s a reason why they call it frontier tech. And when we step back and think about the internet, there’s things on there that we can all completely detest and think are a complete waste of people’s time. And then there’s extraordinary things happening with AI and there’s commerce, so there’s huge varieties. And so to say the internet is a little bit like saying crypto, and I think people will realize that over time, whether you call it crypto or blockchain or digital assets or all this stuff, it’s becoming much more mainstream. And I think as we go forward, it’ll be like saying the internet, the way we trust and work with the internet.

Copy LinkCircle: “The hardest job you’ll ever have”

SAFIAN: I read that you tell every new hire at Circle that this is going to be the hardest job you ever have. Why is that?

ALLAIRE: So I do say that when I recruit people. Doing what we do is really hard. We face extraordinary obstacles. We face exogenous shocks. We face enormous amounts of scrutiny. We face bankruptcy multiple times. These huge ups and down cycles and setbacks, it is a roller coaster. And so you just have to be ready for very hard things.

SAFIAN: And for you as a leader, I mean when the narrative swings as it does so aggressively between whatever hype and skepticism, how do you keep your team focused? How do you talk to your team when there are those… Because for you, you’re so kind of used to it in a certain way. This is sort of part of the game, but not everyone has been in that game.

ALLAIRE: I think this applies probably to any startup business or emerging industry. People have to be really grounded in the mission of the company, and they have to believe that the vision and mission is realizable because if you don’t have that, you’ll give up. You’ll give up. We’ve had the same mission since inception, to increase global economic prosperity through the frictionless exchange of value, that an internet financial system can in fact increase opportunity for everyone in the world, and that we can actually increase prosperity. And that’s a deeply held conviction for me. It’s a deeply held conviction for the company.

SAFIAN: And so are you reminding your team about that when these kinds of swings happen?

ALLAIRE: Absolutely. There’s different dimensions to leadership, so you can get people on the mission, et cetera, but you also got to… Here’s how we’re going to freaking deal with these issues. You have to take tough medicine. You can’t just kumbaya it. Maybe a big initiative that you’re doing, you just have to axe the whole thing. It’s jarring for people. I had to restructure the company. I sold off different pieces of the company. We went through the regional banking crisis, we went through the FTX collapse. All of these things have these huge cascading effects. You have to take them on and deal with them. It’s never a straight line. I mean, one of the things I tell my employees is we’re a public company, but it’s not a straight line. No one knows what’s going to happen tomorrow. Some god-awful thing could happen that causes markets to go blah, blah. And we just don’t know. And there’s many things that are exogenous and there’s going to be things that are endogenous to you and you have to take them all on. And it’s never a straight road. It’s always winding.

Copy LinkNavigating the Trump administration and potential conflicts of interest

SAFIAN: As you’re talking about this, and I’m thinking back to the issues of trust we talked about earlier. The Trump administration has provided a tailwind to crypto supporting the industry in a way that you were facing headwinds during the previous administration. At the same time, Trump and his family, their personal crypto dealings and the creation of the Trump coin, these have sort of sparked these claims of conflict of interest. Does that undermine the credibility that you’re working to build? Do you have ongoing interactions with the President or his team offering them advice about what’s needed in this area?

ALLAIRE: We absolutely engage with the Trump administration. We engaged with the Biden administration. I mean, I’ve been doing this 12 years through multiple administrations and I’ve spent time with any C chairs and treasury officials and fed officials and Congress on both sides of the aisle constantly. And I think as the technology has matured, that has sort of led all political leaders, whether you’re the government of India, the government of Korea or the government of the United States to be like, okay, we now need to take this on.

SAFIAN: And Trump’s personal engagement, his family’s personal engagement with crypto, is that a good thing for you or is that not a good thing for you? Or is this just one of these areas where I just got to deal with it so it doesn’t matter?

ALLAIRE: I mean, yes, I need to deal with it because it doesn’t matter. But what I would say though is that SEC rules, CFTC rules, Treasury Department rules, new laws bind everyone, whether it’s a family business that has an affiliation with a president, everybody’s got to play by these rules, and that’s what’s important. And having rules is better than not having rules. There were a lot of Democrats who had significant concerns about the Genius Act just on the principle of maybe there’s a conflict of interest, et cetera. And I think what a lot of them ultimately concluded is what we believed, which is everybody’s got to play by the rules. You want to have clear regulation. If you build something big, you got to be supervised by federal banking regulators. All this stuff is really key. And the market will decide what are the best companies, best products, best technologies.

Copy LinkUnlocking the future with programmable money and smart contracts

SAFIAN: The crypto world and stablecoins have gone through such maturation in a relatively short period of time. What do you think people still most misunderstand about the crypto industry, about stablecoins?

ALLAIRE: One of the things that people have not yet gotten their heads wrapped around, even people who’ve kind of said, “Hey, wow, this could really improve how money moves and payments work.” There’s a bigger thing in the background here, which is about programmable money. And this was part of what drew me into this space 12 years ago. Part of the promise of this technology was that you’ll be able to create smart contracts, code that are contracts that intermediate money, commerce, financial arrangements, economic arrangements. It’s sort of taking economic activity, commercial activity, even legal activity and enshrining it in code and then enabling it to execute arrangements that verifiable machines on the internet can do for us. It’s a little bit like AI agents, but it’s sort of this whole-

SAFIAN: Yeah, it sounds reminiscent of AI agents, but it’s some sort of automatic transaction or agreement on the terms of transaction.

ALLAIRE: Yes, trade and finance and commerce and commercial arrangements have all still been in kind of legacy fiduciary-type systems and we’re going to upgrade all of that. And I believe lead to million-x increases in the velocity of money in the world. And so it sounds very abstract, but it’s sort of like saying in 1998 or 2000, there are going to be hand-held devices and you’re going to be able to do all these amazing things on these hand-held devices and that are going to change the way you can do all these things. And it was like 10 or 15 years in the desert, but eventually you got a surface area that was programmable that connected enough of these pieces where you had this explosion in new utility of software through these devices.

And I think smart contracts on the internet are going to be a similar thing. And we’re at the front edge of that where developers, entrepreneurs, builders are figuring out that, oh my God, I can build this on-chain software. So it’s this software that runs on blockchains that opens up completely new utility for business and commerce and the financial system. And so we work with thousands of startups around the world who are all building on-chain. It’s a huge movement. We’ve got developer platforms, we’ve got-

Copy LinkCircle’s Arc platform

SAFIAN: I saw you announced a platform, a hosting platform called Arc. Is that what you’re referring to here? This is a platform where some of this can happen?

ALLAIRE: Absolutely. Arc will be a great platform for this, and there are many competing blockchain networks that are kind of compute engines for building all of this. And yes, we’re moving into that in a very serious way.

SAFIAN: It’s interesting, because what you’re talking about is there are these assumptions about the way the world works, the financial world works, the business world works that we take for granted, we don’t even realize that there are assumptions. And what you’re saying is, yeah, we can do these a completely different way, a more efficient and effective way, and it’ll open up new things.

ALLAIRE: And a higher utility way. The best example of that is AdWords. We lived in a world where there were magazines and people bought ads and newspapers, and then along came a thing where it’s like, actually you could have a real time auction marketplace where you could take someone’s intention or interest and auction it in a highly, highly specific way. And that was a complete rebuild of the entire way that people would market and advertise. That only became possible because of the super scale of the way information velocity and news happened on an open network on the internet. And so something like credit, like why can’t there be an AdWords of credit? Why can’t credit get delivered radically more efficiently to people and individuals and the AIs and other things at huge speed with incredible efficiency, with lower risk, with greater transparency, with more observability, actually create a safer, fairer, more efficient global credit delivery system than the guy sitting behind the desk at the bank? And this is the raw material that we’re working with and we’re at the front edge of that. Broadband has just arrived.

SAFIAN: It’s still early days for all this.

ALLAIRE: Still very early days, super early days.

SAFIAN: And we’re going to have booms and busts before we get to the promised land.

ALLAIRE: Absolutely. You’re going to have… I mean, look, there’s capital flowing in. There’s more capital flowing in. You’re going to have big companies doing big things, and a lot of it’s not going to work, but there’s going to be some great internet scale platform companies that are built out of this, and we certainly hope Circle can be one of those.

SAFIAN: Well, Jeremy, this was great. Thanks so much for doing it.

ALLAIRE: My pleasure, Bob.

SAFIAN: Jeremy’s ideas and explanations are so thought-provoking about smart contracts and frictionless high velocity money, terms I’m not sure I ever expected to use, but Jeremy also seems willing to acknowledge the precariousness of what he’s pursuing even as he believes it’s inevitable. I find myself harking back to his comment that the journey he’s on at Circle is never a straight line. That’s true for all of us. Change may be constant, but progress is intermittent. In the moment, all we can do is work toward the future that we hope to see. We can’t see around the bends in the road ahead, but the choices along the way are ours. I’m Bob Safian. Thanks for listening.