ICYMI: Circle CEO on Crypto Regulations, the Biden Administration & Stablecoins

Circle CEO, Jeremy Allaire, recently appeared on CNBC Squawk Box to discuss the regulatory environment for the crypto industry, what the Biden Administration may have in store, and how to understand the unique role of stablecoins, like USDC, in the financial ecosystem. ICYMI, here’s the full video of the interview and transcript below.

Andrew Ross Sorkin: Welcome back to Squawk Box this morning. The top currency regulator saying that clarity around cryptocurrency regulation is on its way. 

Brian Brooks: We’re very focused on getting this right. We’re very focused on not killing this. And it’s equally important that we develop the networks behind bitcoin and other cryptos as it is that we prevent money laundering and terrorism financing. 

Andrew Ross Sorkin: Joining right now to talk about the state of crypto regulation, the rise of stablecoins, and so much more, is Circle CEO, Jeremy Allaire. Jeremy it’s great to see you this morning. You just heard this idea that regulators don’t want to stop this. The question I’d ask you though is you don’t know who is necessarily coming into this next administration and how they’re going to feel about bitcoin and cryptocurrencies. Are you getting any kind of feedback from that transition team yet?

Jeremy Allaire: Thanks Andrew. You know, it’s really a mixed situation. I think this is a world where there’s a lot of different parts of both the left and the right that understand this differently. And frankly, there’s a lot of misunderstanding. On the one hand, you have on the very liberal end of the spectrum, a view that somehow this is not good for individuals who have less access to the financial system when in fact the opposite is the case. This technology in particular stablecoins hold promise of opening up and widening access to the financial system more deeply than the existing banking system. On the other hand, you have big banks and those in Congress they may lobby aggressively saying, hey these firms in this space need to have tighter rules around them. They can’t be allowed to have less strict rules, like PayPal and Square, and certainly crypto firms have. And then you have moderates both on the left and right who see this constructively. 

Andrew Ross Sorkin: Let me just ask you about stablecoins. I still wish you’d tell me real quick. Let’s do it in 30 seconds. The Biden Administration. Do you believe that they’re going to be positively predisposed to cryptocurrency and making it broader or more tightly regulated. 

Jeremy Allaire: I think that they will be ultimately supportive because this is an infrastructure change as big as the initial commercial internet and their going to be focused on infrastructure changes that make America more competitive. And this is absolutely going to be a core building block in that. 

Andrew Ross Sorkin: Let’s move on to stablecions vs bitcoin. You have a stablecoin. It’s actually had a high degree of success. I mean the numbers are off the charts. It’s up 500%. Just explain to the viewers who are uninitiated what the difference is frankly between something like a stablecoin relative to a bitcoin. 

Jeremy Allaire: A stablecoin like USD Coin or USDC is a digital currency that is backed by dollars that are held in the traditional banking system. And so it’s really, as some people like to say, it’s a new form factor for dollars. It is a way to take the stability of a dollar sitting inside the federal reserve governed banking system, and then imbue it with the powers of cryptocurrency, which is the ability to transmit it globally, instantly, frictionlessly, the same way we can exchange information, data and content. So it’s really a way to turbocharge dollars, or other fiat currencies, by running them on top of blockchain infrastructure. 

Andrew Ross Sorkin: Explain this though. Oftentimes we hear that one day the Federal Reserve could decide to issue their own version of a digital version of a US dollar. If that were to happen would that effectively crowd out a stablecoin? 

Jeremy Allaire: Right now, whether it’s the Federal Reserve or the European Central Bank, or central banks around the world, there’s obviously a lot of interest in this topic, there’s a lot of research around central bank digital currencies. But the reality is that right now leading companies in the private sector, whether it’s out of the crypto industry such Circle and Coinbase, or major firms like Visa, or major internet technology firms are racing ahead to implement stablecoins as a new fundamental innovation in how money moves around the world. I think the real question is basically over the coming let’s say two, three, four years, is there some convergence there. Are the standards that are built in industry and by fintechs and by the private sector, do those things converge with the safeguard with the safeguards central banks care about and is there a supervisory role that makes sense. 

Andrew Ross Sorkin: Let me ask you a different question. How many coins, digital currencies, do you think could exist in a meaningful way five or ten years from now. I ask because people right now look at bitcoin as the holy grail of them. Your coin now has had some success. Is there an unlimited number? If there’s an unlimited number, you’d say actually maybe these things don't have that kind of value. Maybe there really are only a couple of them. By the way, I used to think there would only be a couple of television streamers or a couple apps people would use. Now everyone has so many. So hard to konw. Where do you land? 

Jeremy Allaire: I think there will continue to be a very broad proliferation in token based digital assets. Just to unpack that mouthful. Similar to the analogy you give, no one believed that everyone who could create something was going to be able to distribute it to any other consumer in the world whether it be content, or a craft, or a product, or their labor. Internet based markets have been very transformative. They’ve enabled these long tails to exist. Now in financial markets, we haven’t seen something quite like that. But you have to differentiate. You have pure digital commodities, like bitcoin or ether. And then you have assets that are issued that are themselves tied to some other asset, like an underlying reserve bank deposit, or equity in a company, or a loan contract. So the proliferation is really going to be in basically these crypto assets that represent real things in the real world, like property. And so ultimately, yes, I think there will be very very broad proliferation of digital assets in the market. 

Andrew Ross Sorkin: Jeremy Allaire, it’s a pleasure to see you as always. We look forward to following your progress. But come on back because it’s a story and a conversation that isn’t going away anytime soon.