Circle's CEO on the Booming Business of Stablecoins

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, I have three thoughts about stable coins.

Tracy Alloway (0:27)

Oh boy, here we go. Just three.

Joe Weisenthal (0:29)

Just three. 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 moneymaker 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.

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

Tracy Alloway (0:58)

You stole all my talking points, Joe.

Joe Weisenthal (1:00)

We have the same brain.

Tracy Alloway (1:01)

I have the note written down that issuing liabilities that mostly return nothing is a wonderful business model.

Joe Weisenthal (1:08)

What else? You can just restate in your words.

Tracy Alloway (1:10)

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

Joe Weisenthal (1:42)

Totally. For traditional payment companies of all sorts, 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 en masse from using like a debit card or credit card to a stable coin is a tricky chicken and egg problem. But it's a real competitor to an existing way of doing payments.

Tracy Alloway (2:11)

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 Besson saying that he expects all this new stable coin issuance to basically increase demand for US debt, for treasuries, for mostly T bills. So there's a lot to talk about.

Joe Weisenthal (2:30)

There is a lot to talk about. We really do have the perfect guest today. We are going to be speaking with Jeremy Allaire. 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 there. Of course, the sponsor of USDC, one of the, I think it's the second biggest stable coin out there after Tether. So Jeremy, thank you so much for coming in studio here on Odd Lots.

Jeremy Allaire (2:58)

I'm really excited to be here. As you guys laid out, there's a lot to talk about.

Joe Weisenthal (3:03)

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 accrues to you goes straight to Coinbase. Explain to us your relationship with Coinbase so people can understand the economics of the money that you bring in and then how it goes out the door.

Jeremy Allaire (3:29)

Yeah, maybe I'll actually start with something a little bit higher level and 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 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.