Hello and welcome to another episode of the OddLots podcast.

Hello and welcome to another episode of the OddLots podcast. I'm Joe Weisenthal. Tracy, I have three thoughts about stable coins. One is I think within the broader realm of crypto, stable coins are real and here to stay and probably going to be important.

Two, some of them seem like an absolute cash money maker because you don't pay any yield to the holders. You collect the yield for what you have backing it. It's a great business model. It seems amazing.

And three, as the child of the uh great financial crisis generation, I'm convinced that if crypto is ever implicated in a future financial crisis, it might have something to do with stable coins.

You stole all my talking points, Joe. Honestly, the same brain. I had like the note written down that, you know, issuing liabilities that mostly return nothing is a wonderful business model.

Well, also I was thinking stable coins are basically the primary touch point of crypto to the regulated financial system. And so you would expect some of those financial stability concerns to potentially materialize there. And then the one thing you didn't mention that I'm interested in is also this idea of competition directly with the banks. And as stable coins get more money market fund like maybe more depositlike, we have some stable coins that issue yield. Now what does that actually look like for the financial landscape?

Totally. For traditional payment companies of all sorts, I mean we all know that legacy payment companies collect a pretty big rent so to speak for use of their network. In theory, there could be almost no cost at all for a stable coin transaction or virtually minimal. It seems appealing. On the other hand, getting people to switch on mass from using like a sort of debit card or credit card to a stable coin is sort of a tricky chicken and egg problem, but you know, it's a real competitor to an existing way of doing payments.

Also, the one thing we didn't mention is it's kind of becoming important from a fiscal standpoint for the United States. And you have Treasury Secretary Scott Bessant saying that he expects all this new stable coin issuance to basically increase demand for US debt for treasuries for mostly tea bills. And so there's a lot to talk about.

There is a lot to talk about. We really do have the perfect guest today. We are going to be speaking with Jeremy. He is the co-founder and CEO of Circle Internet. They recently went public in early June and they've had a monster IPO. Incredible demand for this company. incredible enthusiasm. They are of course the sponsor of USDC, one of I think it's the second biggest stable coin out there after Tether. So Jeremy, thank you so much for uh coming in studio here on OddLots. I'm really excited to be here. As uh you guys laid out, there's a lot to talk about.

I said it in the beginning, stable coins seem like an incredible business model because here you have all these people holding a non-yield bearing token. They're backed by in many cases yield bearing assets that incorporate a lot. On the other hand, in Circle's case, a lot of the money that occurs to you goes straight to Coinbase. Explain to us your relationship with Coinbase and so people can understand sort of the economics of the money that you bring in and then how it goes out the door.

Yeah, maybe I'll actually start with something a little bit higher level and then drill in. So when we think about our business and what we have built and what we operate is we think about it as an internet scale platform and network utility. So, we're a set of software on the public internet that people can build on and integrate to and it provides this utility which is this global utility for storing and moving value around the world. And there's a regulated part of it and there's a technology part of it. And so, as part of that, we want to build the largest stable coin network in the world with the most usage and the most transactions and the most utility. We can talk more about what that looks like.

And as we built this, as we launched this back in 2018, we knew that we needed to really focus on building upfront utility and then building really good distribution relationships. And so in our business, we have sort of the scale of the network, which is measured by the number of people who can reach in their pocket and use USDC. There are over 600 million accounts that can access and use USDC around the world. A lot of that is through distribution partners that we have like Coinbase. Coinbase is one, Binance is another, and many, many more. You can find USDC on Robin Hood, on Kraken. You can find USDC in super apps in foreign countries like New Bank, the biggest NEO bank in Brazil, or in a product like GCash in the Philippines, which is the dominant financial product for many Filipinos. And so, we make that product available globally. And we have a philosophy of incentivizing, you know, distributors to grow with us. And so, I think that's really fundamental to the philosophy. And right now I think we're in the early stages of building this. You know, the the numbers in the aggregate are sizable, but when we think about what this can grow into and the volume of money storage and money movement that will happen in an internet native way, you know, we we think we're still in the very early stages of that.

I mean, I understand that argument, but Coinbase also took, I think, more than 50% of your revenue from reserve assets last year, which seems like a lot to pay for distribution when you're already the second biggest stable coin in the world. Is that partnership, you know, will the math always make sense to you? And I guess how often do you actually renew that agreement?

Yeah, so a couple things. So, first of all, we have a great relationship with Coinbase. They've been such a huge partner and really bet big on this way before anyone else. And so I think I give Brian a lot of credit for really seeing that USDC could be a fundamental part of their entire business. And really they've baked USDC into all their retail products, their institutional products. They're building new payments products around it. They're really betting not the entire company, but they're betting a lot on it. And that's amazing. And when you think about networks that were built in the past from the 70s or the 80s or in other times, you definitely need these big anchor tenants that really bet on it and help drive the utility.

But to the degree that Coinbase has leaned in, that's really helped create demand for usage in other places. So Coinbase's largest rival, Binance, for example, is also a significant partner on this. And I think with the Genius Act passing, which I know we'll come back to, and regulatory clarity kind of happening around the world, we're entering a new chapter in all of this. We were sort of in the early adopter phase, which was really primarily anchored in like crypto trading markets and things like that. And now we're entering this kind of more mainstream phase where payment companies, banks, financial institutions, capital markets companies, lots of consumer companies, consumer internet companies are all getting involved. And so our view is that the sort of share of the pie as it were is going to be more and more diversified and grow the pie will grow and the diversity of the participants and that will grow over time as well.

Real quickly, what is the genius act mean for your business? What changes pre and post Genius Act?

So Genius Act is very significant in our view and it's actually in some ways we've been arguing for kind of federal policy and regulation around this new form of electronic money to some degree since I went to the capital in 2013 and started articulating a regulatory view on this but in a very significant way really for the last 5 years we've been pushing for federal regulation and what that does is first of all it enshrines in federal law, many of the things that we had made core to the way we operate, transparency, having major audits of our firm, safety and soundness requirements. It ensures that the reserve itself is effectively a cash instrument and allows this to be treated as a cash instrument.

And by having that federal framework, it opens up opportunities in two significant ways. I think the first is now if you're a a corporation, a public corporation, or you're a financial institution, you now know what these are. You can hold these and treat these like cash on your balance sheet. This paves the way for the use of payment stable coins in wholesale payments, retail payments, as eligible collateral on capital markets, venues. So it really opens up the aperture of what people can use this for and it gives all those financial institutions and and companies the clear definition and the faith that they can interact with this and they know it's bankruptcy protected and all this good stuff.

The other big thing is that and this ties into one of the opening comments is having this as a defined part of the US financial system. So, stablecoin money, which in my view is a new form of M1 electronic money, having that as a defined part of the US financial system, means that it can be expanded internationally in very significant ways. Governments all around the world will be able to enact their own stable coin laws as they are, and I can talk about a dozen countries where that's the case, and they can recognize issuers that are under federal supervision in the US and enable those to interact with their markets. And so it opens up the global adoption here within the regulated financial system in a very major way. And so for us, all of that is we view as a tailwind to have more and more people building on top of this infrastructure that we've been building.

So in terms of integration with the financial system and competition with the banks, of course, you still under the Genius Act, you do not have access to the Fed's balance sheet. Is that right?

That's correct. So a couple things. So one is the Genius Act doesn't sort of specify who has access to the Fed's balance sheet. What it does say though is that uh uh eligible reserves in a stable coin can include cash at the Fed. It can include short duration T bills. It can include repo treasury repo facilities etc. And for us as circle, we actually just announced very recently that we had filed to establish a new entity called First National Digital Currency Bank. And First National Digital Currency Bank is in application with the OC to become a national trust bank. And under the Genius Act, as a large issuer, greater than 10 billion, you know, we're around 64 billion today, you know, we will come under OC supervision. And so we're trying to line up the kind of infrastructure of Circle against the kind of upcoming regulatory regime and we want to make sure we've got the best underlying kind of infrastructure there for people who would build on us.

So I said in the intro that my worry is that if there was ever a financial crisis that involves crypto connected, it's going to be somehow due to stable coins because I always think like entities that are pegged to the dollar that deviate from the dollar, that's where you get into trouble. People think this is a dollar and suddenly it's worth 95 cents. That actually did happen to circle in early 2023 very briefly with the collapse of SVB. Could that ever happen again or is there a way to say this could never happen again?

Well, a couple things. So, secondary market trading is where we saw that. But you weren't able the desks weren't able to keep it at a dollar. Whatever it was that did happen. That's because the banks were seized by the federal government and so banking was not available over that time. But nonetheless, it's a really important question. It's a fundamental question, right? Which is the real question in my mind is is a full reserve model of money a safer model of money than a fractional reserve model of money.

And in our financial system today, we do have FDIC for the fractional reserve banks. Now, that's for small depositors. The vast majority of deposits in the banking system are uninsured deposits. Now, some of those sit with so-called too big to fail financial institutions, therefore implicitly have the bailout power of the federal government, like we'd never let them fail. But that's sort of theoretical. You could imagine a scenario where the federal government doesn't have the balance sheet or it doesn't want to create the inflation or or whatever it would be.

The lack of political appetite. Lack of political appetite. I mean, that was on the verge in the financial crisis that was jamming it through Congress, which was then challenged later. But I think and by the way this gets to the genesis of circle like why did I start this company? I spent a number of years like reading about what happened with the financial crisis how did this happen? What is the nature of money? What is the nature of central banking? How does the international monetary system work? All of these things were fascinating to me and I was running a completely different kind of business which was an online video technology business and I kind of thought intuitively that there had to be a better way and it was actually through my kind of introduction to crypto in 2012 that I sort of saw hey there might be a path here.

And while a lot of people were obviously focused on Bitcoin as a full reserve sort of sound money philosophy and I'm sure you've had plenty of people to talk about that. Oh yes. Over the over the years, but for me at least the idea of sound money of kind of having a different risk model in the financial system was very appealing to me and in particular this idea of fully reserved dollar digital currency and you know I'm an adherent to the Chicago school and the Chicago plan I should say which was a particular philosophy that was advanced in the aftermath of all of the bank failures in the 1930. 1930s and there were really two responses. There was a group of prominent economists some of Irving Fischer who was at the Chicago school at the time and there was industry and the prominent economist said hey we could build a full reserve model where you have essentially government obligation money or this full reserve form of money that is in a payment type of institution a payment bank and then you have a separate institution which does credit and you can only you can't create new money out of thin air as banks do. you could only lend the full reserve money and the philosophy there was that that would sort of reduce risk in in the financial system and it would smooth out economic cycles and that's come and gone as a debate during the savings and loan crisis after the great financial crisis etc.

But I think the advent of digital currency in particular creates an opportunity for this that I think is really profound and when you think about native money on the internet. So take something like USDC which underrogenius sort of gets defined as this cash instrument the reserve instruments we can discuss are those you know safe in the sense of financial stability safe but you have a fully reserved instrument. What's powerful about digital currency is it inherits what I call the superpowers of the internet. Meaning it inherits the speed and velocity of data on the internet. And so all of a sudden the marginal cost of storing and moving value goes very close to zero and money velocity can accelerate significantly and that creates its own risks.

But this high velocity money that's moving on the internet that can move literally from any person entity any AI agent any business all these sort of machine interactions all this stuff that happens globally it's kind of crazy to think about having that be the underlying on that to be like a bank's stack of lending risk and to have all of these lending risk IUS floating free circulating on the internet and so my view is that the base of money in the internet financial system which I think is a new financial system that's being built up from the ground up that the base layer of money needs to be this full reserve form of money that is actually safer that begs the question of how do you do credit and all that good stuff which I'm happy to give you my views on but I think the philosophy is actually how do you do something that's actually safer that people can look at and say I know that this is always available it's not that if the bank fails I might get my FDIC insurance cap. It's like I know what this is and there's a credential supervisor and there's actually this enforced risk management which improves and continues to improve over time.

You know, you mentioned the safety of the reserve assets and this is something that is in the act. It kind of defines what you're supposed to hold. So things like tea bills, highquality liquid assets, all that good stuff. We've been talking about a safe asset shortage in the financial system for it feels like decades now, right? It feels like there is not enough good collateral to go around for everyone. And as stable coins ramp up, I'm really curious if you're worried about the crowning out effect, if there's going to be enough tea bills in the world to satisfy that 1:1 reserve requirement.

Yeah. So, if it was exclusively on the basis of short-term government debt and this got to be tens of trillions of dollars or whatever, then then you might have a mismatch there. Now, obviously, regulation isn't going to stand still on this. So the genius act is a significant piece of legislation and it defines this framework. That framework is inclusive of cash that is overcolateralized lending with repo desks. It includes T bills of the shortest duration and it does include cash in the financial system and it includes eligible reserves at the Federal Reserve as cash as well. And so over time as this infrastructure scales I think that mixture gives us a huge amount of capacity that I think you know arguably could support many tens of trillions of of dollars of value.

So wait just to be clear on one specific are you completely non-exposed to non-FDIC insured deposits? Are you completely extricated yourself from that system? No.

And and in fact, let me describe what we do. And we today by far operate with the greatest transparency of any other stable coin, any other, you know, regulated stable coin in the world. And we've done that through a couple of things. The first is we created a structure called the circle reserve fund, which is really designed to provide transparency into the reserves. So we did that with BlackRock and it's an SEC registered what's called 2A7 fund. So, it's a government obligation fund, but it gives daily transparency into essentially about 90% of everything in the reserves. And so, you can look every day. You can search USDXX. I pulled it up on my blue. There you go. And you can drill in and you can see exactly the serial numbers of every T bill, the short duration T bills, and we I think we have an average maturity of about 23 days in that reserve. And um Bloomberg says 13 right now, but I'm not I don't I you know, whatever. Is that what it says? That's what it says. I'm just looking I'm just looking at the screen. That may in fact I'm just looking at the screen. That may in fact be what it is today. That's that's what Bloomberg says. Great. Um

And and then you can also see like the global systemically important banks that we have repo relationships with and and that's there as well. So you can see that that's about 90%. And then there's cash and the cash about 98% of the cash is held with a very limited number of global systemically important banks. And these global systemically important banks are the sort of lowest credit risk kind of cash custodian type banks. And so we hold the reserves there. Now you can argue about how safe is that cash relative to, you know, kind of sharted out across all kinds of other stuff. But that's sort of what's there today. And we need to do that because we need intraday liquidity. We need to ensure that in the event of 5 billion, 10 billion, whatever it is, that's always available. And then there's a very very limited amount which we position in settlement banks uh and and reserve accounts in different geographies to ensure that it's easy to create and redeem USDC whether you're in Singapore or Japan or Europe and and other places.

We also have a separate issuance of USDC and a a completely separate reserve mandate and supervision in Europe as well. So we dualissue USDC. We issue it under European rules under the Mika stable coin statutes and we issue it in the United States and we have created a way for kind of fungeibility across those.

H is the ultimate ambition to really take on and compete with the deposit taking institutions in the sense that you want to get big corporate clients maybe the type of clients that would put their money in uninsur well they have so much money some of it would end up being uninsured by FDIC or they might put it in a money market fund or something like that and if you're doing that doesn't it seem like the biggest hurdle is the lack of interest paid on stable coins

So a Couple things I think the first is that payment stable coins which is what the Genius Act governs it and in fact mirrors stable coin laws in Europe in Japan and in other markets that are bringing these online. These are designed to be cash instruments that are used in payments and as a as a payment system technology. They're not designed to be risk-taking instruments that you would say deposit and lend. And they're not designed to be investment products. You're not purchasing a security. you're not purchasing an investment. And so they're narrowly defined and Genius Act enforces that. And so I think that's the right design for this base layer kind of cash instrument.

Now that doesn't mean that you can't build digital tokens that present yield. And while people call these stable coins, I think that term of art will probably change. People call them tokenized real world assets, tokenized money market phones, tokenized treasuries.

So we operate a sizable tokenized money market fund product called USYC and USYC is fungeible with USDC. So a business for example could hold USYC and earn the yield that would be your typical kind of government fund type yield but have the ability to instantly create and redeem cash and instantly create and redeem yield. And so we acquired a company called Hashnote and we've integrated that into our core infrastructure and we've just brought this online. It's it's a very powerful structure if you can have tokenized yield bearing collateral and then instantly uses as cash for settlement for trading for spending etc. And so I think that that's something that we can kind of do uniquely because we have this widely adopted payment stable coin and then kind of marrying those two together and and we can do it in a very very capital efficient way because essentially the reserves of USDC mirror the actual instruments in USYC and so there's a sort of fungeability between USYC and USDC reserves.

So let's talk about the competitive landscape in a few years from now. So, at some point, you're going to revisit your agreement with Coinbase. Maybe JP Morgan will have a payment coin that they're going to want to be the preferred coin that sits there. And maybe they're going to be willing to give Coinbase a huge split for Pride of Place. Or maybe there'll be some other coin that they use for interbank settlements that'll be tokenized in some way to make their transfers with City and Bank of America and other banks more competitive. We have seen other coins rise, First Digital in Asia, for example. like if you're paying all this money to Coinbase still and you you know distribution is so important what is the competitive advantage that Circle has in say the year I don't know 2028

Well I I think a couple things I think the first is that to understand circle's business is to understand that we operate an internet scale platform and network utility we have very powerful internet platform flywheels and developer flywheels we have a network that consists of thousands and thous thousands of products and services that have implemented and integrated to our network. And so every time a developer says, "Hey, I want to be able to store and move digital dollars, they choose to implement USDC because USDC has this really broad established network."

And so we have these really powerful flywheels and as that provides new utility to a user when say new bank in Brazil adds USDC, wow, there's like 100 million people at New Bank who can interact with USDC. Now the rest of the world can benefit from that user base of 100 million people. And so we have network effects that are there and those exist in in pretty powerful ways. So if you look at the movement of stablecoin in the onchain ecosystem, what sometimes people call DeFi, we have about I believe today around 75% of the market there. And we've built protocols that make it very seamless, safe, and secure and capital efficient to transmit USDC across all these different networks.

We've built developer platforms. We've built flywheels for adoption. And this is a classic internet platform model. The other is that we've built these extraordinary liquidity network effects. And this is really critical. So over the past number of years, we've built out on a regulated basis infrastructure where we're regulated and where we have integration into the financial systems of Singapore, Hong Kong, Japan, the United Kingdom, the EU, the US. We've integrated into Brazil, Mexico, and we've just announced that we're coming online in UAE. So, we've built out these integration points, and we've built out primary liquidity in all of these markets. And so, USDC is available and liquid at scale all around the world. That's the primary liquidity side. And and so that's crucial. If you're going to use this, you need to be able to know I can get in, I can get out, and I can do that all around the world.

And then we've created very large secondary liquidity, and that's really important as well. So when you get down to the e-money product in Vietnam, can you go from that e-money product in Vietnam into USDC and back and all around the world? All these different payment methods and payment instruments and the actual secondary liquidity between those and USDC is huge. And so the barrier to entry is actually fairly high. We have these large network modes and right now, so it's not just like making a new ERC20, making a new coin. The marginal value of a net new stable coin right now is effectively zero. You have to have established network utility and then liquidity at scale. And essentially liquidity begets liquidity. Network velocity extends network velocity. And so you know we feel like that's a very very good position.

And I think the ability to be you know federally regulated and to have these higher bars on the infrastructure side and what's required of you is is also really important. That's not something for the faint of heart. and doing that all around the world, not just in the United States. There's a lot of focus on the United States, but we've been under significant regulatory regimes in other jurisdictions for for quite some time as well. Those are, you know, meaningful barriers. And I guess the bigger picture there is like we're just focused on building this infrastructure, making it easy to adopt by whether it's a technology company, a fintech company, a bank. We're building partnerships with some of the biggest core banking infrastructure companies in the world. We announced something recently with Fiserve. Just yesterday, we announced a broad partnership with FIS Global. And these are companies that service tens of thousands of banks. And we're plugging USDC as a innovation into their infrastructure. And so we even do it with the card networks, Visa and Mastercard, where they're using USDC as an internal settlement system to move money from issuers back to home base faster than the correspondent banking system. There's lots of places we're getting integrated.

And what I like to say is I believe that the stable coin stablecoin networks are a winner take most not a winner take all market.

This was going to be my next question. Can you talk about that a little bit more like 10 years from now what is the landscape actually look like and what is the interoperability of all these different stable coins actually look like? Yeah. So I think 10 years from now I don't think we have any idea what it's what it's going to look like. But I mean there there's several different components.

Yeah. Yeah. Several different components to this. So I think one is we take as a first principle that stablecoin money is the highest utility form of money that's ever been created. And it's it's the highest utility not just because it has internet superpowers of speed and it cost efficiency but because it's actually the first truly programmable form of money.

And if you're going to have a programmable form of money where software intermediation and software innovation on top of money has not existed, open banking is like poor cousin. So you're introducing a new realm of money utility and we're at the very front edges of that. And we see that already today. I mean the entire phenomenon of DeFi, which is highly sophisticated market structures that are just autonomous machines effectively running in in code on the internet. That's pretty amazing. So when you unleash that and you unleash that kind of curve of innovation, like it's sort of like when mobile devices were out, people were into mobile for a really long time and they were like, "Hey, mobile's going to be huge and Mobile World Congress was like the biggest conference in the world." And you'd go there and there's like 100,000 people there and and yet it all sucked like like all the mobile phone devices, everything was everything was terrible, but everyone believed in mobile. And then obviously the iPhone came and that was the end. It wasn't the end. It was the beginning is the point is that like actual innovation with programmable apps on phones actually started then in a real way.

I had a use case recently where I wanted there to be a stable coin use case and I think maybe this will coming. So I've tried to do vibe coding where I was like going on cursor and making software and I wanted to link up my software to chat GBT so that it could query the AI. Yes. And to access the API I had to like enter in a credit card with GPT and then I had to like copy and paste this code. It was really annoying. And I was like why can't I just have my cursor be linked to a stable coin wallet? it make the connection with Chad GBT's AI so that I don't have to make an account and it just pays per usage that is intelligence

That is definitely what's going to happen and in fact this is where I was getting with my point actually in response to you Tracy which is like we think about the internet and like when the marginal cost of storing and moving information went to zero the net world output of information like millionxed or when software could be distributed to a browser the net world output of software was like up a millionx so we create these huge growth so my view is that over 10 years, we're going to use your 10-year, is that the total payment volume, which is a measure that people like to use, is likely going to go up by many, many, many orders of magnitude because you've taken that cost and friction out and because of the new utility that comes from programmability.

And so my own belief is that the scale of money that moves in the world will be so much larger than where we are today. It's sort of the internet infrastructure actually hitting the financial system which is a scary thing because like wow you've got all this money velocity and you've got machines that are intermediating this through AI like oh my god that's one of the reasons why it needs to be very safe full reserve instruments.

But it also I think gets to the heart of your question which is are we going after all the deposits of the banks or all this is the the answer is no but my belief is that financial institutions who create either places where people can lend their money and then that money can be used for other investing purposes or where people actually make specific investments with their money like those will proliferate. In fact, I think innovation in both credit intermediation and in investable assets is about to go through a new renaissance because of blockchains, tokenization and stable coins. And so my own view is in a in a system of full reserve money, you need to be able to do credit intermediation with that full reserve money. And you need to make that credit intermediation be as efficient as possible. And I think you can build onchain credit intermediation in a way where you have greater safety, more transparency, more auditable risk management, and you can build market structures that are far more accessible to more people and institutions in the world.

Tracy, I kind of think by the way, and we should maybe do a separate, I think the internet as we know it in terms of like internet that's free to browse is probably going to die because on a matter of time, you know, if you're like AI bot can like go search the web, those sites are going to want payment for having all their data scraped. And you know, stable coins could solve that, but it does feel like we're going to have a totally thing where like you don't just get to use the web for free. Everything is like metered based on the uh the data that you're pulling.

Yeah. Well, we were talking about that earlier, right? This idea that we've already seen traffic start to collapse because the search engines are just providing AI summaries to individual pages. Yeah. How long are content providers like uh like us? How long are they going to stand for that? I don't know.

Well, can I say something on that which is we actually worked together with Coinbase and a couple of others on implementing some something called X42. Now, you're like, what is that? And Mark Andrees talks about this and he has over the years back in the early days of the web, you know. Oh yeah, there you go. Actually, pay via API without registration. That's what I want. That's what I want for my V code. So there exactly what I'm looking for. So it's actually a it already exists as a protocol that is built into the way that every web server, every web browser, every client that interacts with the internet works. It's a protocol that's there. It uses the existing HTTP transport. And now you can actually say, "Hey, I'm hitting my piece of content or data." And I can challenge whoever's accessing it and say, you know, to get to this, you need to pay me. And it can basically come back and say, you can pay me on a blockchain with a stable coin.

And so we're doing that with USDC. We're encouraging developers to do that. There's lots of third parties that are building layers for AI agents to use this. And so I think that's one example, but I think it gets to the heart of what you're you're saying, which is there may be more of a subscription model. Spotify is probably the best example where you have the celestial jukebox and you pay your 15 bucks and you get access to everything. You know, there's a kind of question about could there be a celestial data box which is more broad and where the actual consumer frontends are companies like OpenAI or Google and you're paying a subscription and then there's like a behind the scenes either Pratta or usagebased model that is actually compensating the actual data providers and creators and so lots to be unfold here. Yeah.

Can I ask a slightly awkward question? It's a leading question. How much do you hate Tether given that not only are they number one, but you know, there's been questions over their reserve quality for many years, although I think some of their transparency has improved. But thirdly, you know, we had the Tether CEO on um a few months ago, and they're expanding into the US. So that would seem to, you know, directly be competing with you on your sort of home turf, although I understand you're also expanding elsewhere in the world. How do you feel about Tether?

Yeah, I mean look, I think our view has always been that we're building for the long run and we've taken a different approach really since inception. We've taken a you know a sort of regulatory first approach, a compliance first approach, becoming widely licensed, widely regulated, always advocating to improve that. And that's allowed us to build obviously what we think is a great business. It's allowed us to have deep integration into the financial sector with banks. If you're a major institution partnering in this space, the probability of you doing that with Circle is reasonably high. And so we built a really great franchise and we are really well known for integrity, for trustworthiness. We're a publicly traded company with the highest standards of governance and and accountability that are out there. And we've always sought to uplevel that.

And so my view is that if we're building a new internet financial system and that new internet financial system is going to be this incredibly broadly used infrastructure and it's going to be used by like mainstream companies and public companies and and financial institutions and financial intermediaries all around the world are going to integrate with that and build on that. They're going to want to do that with trusted well-reggulated companies. And so our view is that the early adopter segment of the market which has really been dominated by sort of the crypto trading side of things is that early adopter segment. We're now going into a different chapter. And if you actually look at over the last, you know, 18 months, we've taken market share, we've taken, you know, material market share and we're growing in many, many areas. And I would say also internationally, I would say the majority of our business now is international. So we're in many many markets and in many other markets as well the regulators are putting in place very clear regulations around what stable coin issuers need to be and so we are the only large global dollar stablecoin that's legally available in Europe as an example.

And so I think we just keep doing what we're doing I think we're building great infrastructure for companies for enterprises for developers and we just got to keep doing that and we'll grow and this is a really significant size market and so I actually you know I have a lot of respect for what they've been able to build. We took a different path. We built something also I think really special and over 5 years 10 years as we said earlier right this is very likely a winner take most not a winner take all market and I actually don't think we know you know if there you know maybe three or five big players I don't know what that'll be in five years or 10 years but there's probably some that don't exist yet that that will show up too.

I take it as a sign of maturity. Like years ago when it came to crypto, people were just excited about number go up, right? And then now it's like people are really excited about number go sideways. And so if it just stays at one forever, that's like a really good sign. And so I take it as a sign of maturity for the industry that there is all this interest in stable coins. Nonetheless, no pun intended. Nonetheless, you know, all those public chains are still out there and USDC is on a number of chains, 24.

When we talk about like who collects the profits from this and we've talked specifically about say your distribution with Coinbase and whether that do you see value acrewing to token holders of different chains in the future because it seems to me like for the most part as long as it's like really fast and cheap. It really doesn't matter if I'm sending something to Tracy. I care about your reputation and your money in the bank. I don't really care about what chain that you actually transact over at the end. If you want to do it under Salana or some layer three that gives almost no value back to the ETH chain or something like that, I don't really care. Do you see like token holders of the public chains collecting rents in your future or collecting a meaningful amount of rents from this onchain commerce?

It's a great question. I I'd say a couple things and and I'm actually going to relate back to my my mobile commentary from earlier which is our mental model is that blockchain networks are internet operating systems and they provide a way to store data conduct transactions on that data and and provide compute around those transactions and data. That's what they do. They're public computing machines and there are a lot of them. There's actually, you know, thousands that have been that have been launched. We're on 23 or 24 today. And we see this as a space that is constantly evolving. And so there's constantly innovation on the layer ones. There's these layer twos. When I think about where we are relative to where we were with say iPhone, we're in the pre iPhone era of blockchain networks in my view, right? I I think um there's lots of operating systems out there just like there were lots of mobile operating systems and some of them got better than others and improved the user experience. Some of them started enabling consumer things. remember NT Docomo in Japan or or things like that. And so I think that we're still really early. And so that's one of the reasons why we've, you know, really tried to make sure we're trying to operate our own stable coin network on the best ones that are out there.

It just seems to me that decentralized chains, you pay them a rent because you want some advantage of decentralization. If I'm using USDC, I've already accepted the premise of centralization. You have money in black the black rockck fund. It's about it's about as centralized and legacy fi as you could probably get once I've already accepted this premise of centralization that my money is just backed by a bank. Why do I even care? Why why pay these rent to some network of computers? So this is this is it's a different layer is is essentially my thinking is that public blockchains are a general purpose layer that many many applications can be built on top of. Stable coins are the killer app for sure. I will say in my own opinion, but there are many many different kinds of applications that can be built on that. And we need innovation in those computing platforms. We need higher speed. We need greater privacy. We need better forms of compute. We need new and you know more primitives in that infrastructure and that needs to expand. We need to get to a point where these public networks are supporting huge scales of consumer applications and enterprise applications. And so there's like a a growth in that kind of infrastructure side of it and that's those are shared infrastructures that many people can can take advantage of. And so there needs to be a kind of fee model on those networks. We've actually created a way for the fees on many of these blockchain networks to actually just be paid in USDC. And so that's something that we see more of happening that like the notion of gas fees or the notion of gas fees in some other crypto commodity will will become less and less common and like fees will just be paid in in stablecoin. But I think there is value in these networks and I think that there's very likely value for token holders on these networks if these networks provide you know scalable infrastructure that that people can take advantage of. Again, stablecoin is one application layer there and there'll be many many other application layers on those and and so you kind of pay for the shared the shared state of the machine, the shared data state, the shared transaction state, the shared compute state. There's value in paying for that shared state.

Just on this note, can you tell us when you're talking to clients or potential partners like what is it that they are most interested in getting from you? Can you provide us with a sort of hierarchy of needs for you know USDC customers in the sense of are they worried about the speed of the technology? Are they worried about the reserve assets and I guess corporate governance and things like that? How would you prioritize what people are actually thinking about?

Well, we have a huge range of types of people that we work with from like individual developers that are creating a new product in some emerging market to you know people building onchain protocols to very large you know financial institutions that are looking at using this or integrating this in different ways and so the things that they you know care about do vary across those but I would say trust transparency liquidity are really really important to everyone, right?

If I'm a developer and I'm building a product, I need to know that this is a legitimate digital dollar, that it's accessible in the markets that I'm intending to serve, that people can easily access it and use it, and that the infrastructure is good. I can build good product experiences. I can build good user experiences and build an application or or or something for my own customers that works well. And so they care about the developer tooling, the onchain infra, the liquidity, the trust. They care about all those things as a startup.

But even a large company, say you're a big fintech and you're like, "Hey, I want to start leaning into this. I want to add stable coins for payments or I want to enable my customers to access DeFi or other things like that." They're going to care more about the kind of legal and compliance status of Circle. they're going to care about the governance of the company itself, but also of the the underlying regulation that affects us because they have to face those same issues whether they're in the Philippines or in Brazil or in the United States. So they care a lot about those things and then they also care about infra clearly like infrastructure readiness. Is this something like I could bring a large number of users to?

And then everyone cares about user experience, right? Can I craft an experience where the crypto disappears, where I don't need to know what blockchain am I on I'm on and I don't need to know about gas fees and I I just want to create a way for I have a I have stored value. I want to enable people to move it around really easily. They care a lot about that whether you're the biggest company in the world or or a small startup.

Jeremy Alert, thank you so much for uh coming on. Thank you. My pleasure. probably the first crypto company I can think of that actually tried to go through the regulatory approach and didn't get destroyed and bogged down in the process. Very impressive and um yeah, great chatting with you. Thank you.

Tracy, you know, one question I didn't get to ask or I forgot to ask is like the perennial like will I ever buy coffee with a stable coin at some point? Maybe I will, maybe I won't. But in the conversation, I started thinking that's probably the wrong way to think about it. It's going to be those machineto-achine payments that if stable coins become a real important payments thing, it's going to be like those like computer to computer payments that have to be seen, right? And they're sort of plugged into the inner workings of the internet. Yeah, that makes sense. Maybe the coffee thing will happen. Who knows? But like I don't know.

I don't find it that hard to buy a coffee right now. No, that's the thing. That's the problem, right? Exactly. Coffee is solying coffee is a solved problem as far as I'm concerned. Yes. But this is a new problem. You're right. it could be solved. That's interesting.

The other thing I thought was really interesting was you hit upon the sort of tension in the decentralization versus like traditional finance and this idea that like okay it's all about DeFi and blockchain and all that stuff but ultimately like Black Rockck is holding the money. Yeah. No, totally. And this is like, you know, it's it goes back to those formative episodes we did with Austin Campbell, which is a big part of the story to the extent that this will be a thing is like just solving the sort of software payments layer because we could do a million episodes on legacy texts and why JP Morgans or whatever companies internal software will always be they'll be spending billions of dollars upgrading it, whatever it is, and the difficulty of integrations. But if you could just have like a oneoff like so like global platform that anyone can plug into and program where money can easily be transmitted that's very powerful.

Yeah. This is why I say user interface user experience is underrated. Right. That's like me saying Michael Jordan is underrated. It's but like that really that really is it right? Like that's where the battleground kind of is the ability to like plug in and interoperate with all these different systems.

Yeah. Well, I'm really excited. I I think um we should have uh Jeremy back at some point. Yeah, we should. All right. Shall we leave it there for now? Let's leave it there. This has been another episode of the Odd Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway. And I'm Joe Wisenthal. You can follow me at the stalwart. Follow our guest Jeremy Aair. He's jer. Follow our producers Kerman Rodriguez at Carmen Arman Bennett at Dashbot and Kellbrooks at Kellbrooks. For more OddLots content, go to bloomberg.com/odlots where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 247 in our Discord, discord.gg/odlots. And if you enjoy OddLots, if you want us to do more episodes on the future of the payment system, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely adree. All you need to do is find the Bloomberg channel on Apple Podcast and follow the instructions there. Thanks for listening. Yeah. Heat.