Currency in the Crossfire: De-Dollarization & US Dollar Competitiveness with Jeremy Allaire

Jeremy: It’s hard to argue with the fact that we’ve got technology competition around the dollar. We’ve got geoeconomic geopolitical challenges, and we’ve got to compete. This is a critical way that we can help the United States compete.

Maggie: And a warm welcome to this evening’s public briefing, Currency in the Crossfire. I’m Maggie lake, and I’m your moderator for this even evening. As many of you, I’m sure, are aware in the headlines, the US dollar is facing unprecedented challenges. Concerted action by Russia and China, the rise of central bank digital currencies, doubts about US macroeconomic policies. I’m thinking a few of you might have heard about the debt ceiling that’s happening. Fierce new competition among global trading partners. I mean, the list is fairly long. At the same time, digital assets, specifically digital dollars, are playing an increasing role in global finance and commerce.

So the question on the minds of many is, how is the US going to navigate these uncharted waters and leverage new tools to preserve the influence, efficiency, and national security attributes of dollar-denominated world order? We’re going to try to shed some light on that very important question as we discuss digital dollars, stablecoins, and ways to ensure the US dollar continues to serve a vital role in the 21st century economy. I’m honored to welcome to the stage Jeremy Allaire, co-founder, chairman, and CEO of Circle. We’re assuming that everyone in the room has a little bit of working knowledge of digital assets, digital currencies. But Jeremy, I think it would be really helpful to sort of set the stage for us and talk a little bit about the competitive landscape. When we’re talking about digital currencies, where are we in terms of adoption and regulation globally?

Jeremy: It’s been fascinating. Obviously, the phenomenon of digital currency has been with us for ten years. And the phenomenon of dollar-based digital currencies has been really on the scene for five or six years. And we’ve had big efforts, some of them failed from big tech companies that thought about launching digital currencies. That spawned a big global regulatory discussion about this. It also spawned nation-state actors to begin to look at how they might compete. And really, several years ago, that the focus on digital currencies, whether it be a dollar digital currency, a yuan digital currency, a euro digital currency started to emerge. And I think the idea of this as a new frontier of technology innovation came into focus. And so over several years, we’ve seen global bodies like the financial stability board come up with recommendations on how to regulate global stablecoins. You’ve seen that begin to work its way into law around the world and into practice in terms of countries that are doing things. 

Obviously, China is ahead of almost every other country in the world, but with a very specific model, which is really centered around government control, government surveillance, and really the government crowding out the private sector in terms of how this technology is going to work. But most of the rest of the world is designing law around a framework that allows for open competition, open innovation, Internet scale use, but with clear regulation around it. And so we’ve seen model laws passed in the European Union. We’re seeing laws about to emerge in the United Kingdom. We’re seeing laws about to be finalized in Japan, Singapore, Hong Kong, other markets. And obviously, this is a very live policy issue here in the United States.

Maggie: It sounds like we’re at a tipping point because plans were being put in place. But I’m seeing now they’re trialing it in China, they’re going to start paying government workers in a town. It’s not in Beijing necessarily, but it’s actually in the real economy in this. So this is moving pretty rapidly right now.

Jeremy: It is in the sense that, yes, we’re seeing that. On the flip side, I think it’s also noteworthy that dollar-based digital currencies are already operating at scale on the Internet. USDC, for example, has handled over $10 trillion of transactions on the Internet, and that’s still in the very early stages. And dollar-referenced digital currencies are the most prominent and predominant use of blockchain technology today. And so the dollar is happening out there, and in some ways in a larger way than some of these others. But it’s not yet an integrated part of the financial system. It’s not yet something that corporations and households and financial institutions know how to interact with, and there’s real safety and soundness issues and the like. And I think that’s where the regulation is really critical. 

But I think as we talked, as you introduced in the broader topic, I think this is not just about what’s happening in digital currency. It’s sort of about what’s happening with the dollar itself and the role of the dollar in a global context and what are the measures that the United States can take to ensure that the dollar remains the predominant currency in the age of the Internet. And so now this is geopolitical. It’s geoeconomic, it’s a strategic issue, it’s a national security issue, it’s a competitiveness issue. And so coming up with a clear framework for this is critical for dollar competition. And the United States can choose a path of allowing private sector innovation to flourish and compete, open Internet innovation grounded in, I believe, Western liberal ideals. Or it can wait around for many other blocs to build alternatives on the Internet to the dollar.

Maggie: I think this touches on important point. Why are they running so hard? So we mentioned China, India, huge rollouts of their already very digital advance on their digital rails they’re laying, experimenting with central bank digital coin. UAE has a huge program that they’ve launched. Why are they all running so fast?

Jeremy: Yeah, I mean, I think there’s been this theme of de-dollarization for a long time, and people talk about it every ten years, and people say, oh, it’s not going to really happen. And I think we’re now at a really different place. And you cannot miss the news every day and hear about different initiatives to denominate different types of trade in alternative currencies or efforts to establish new alternative payment systems. And I think this is part of the multi-polar world that’s emerging. Is there’s a desire to have autonomy outside of the dollar, especially post Ukraine. Very much so. I mean, I think there’s concern about weaponization. There’s concern about what could happen if you’re not on the right side of the United States. That’s a concern that’s driving some things. There’s concern about the indebtedness of the United States government, and that’s a concern for people who hold T bills and the like over a very long term period. And so you’re seeing some of these shifts, you’re seeing reserve status shift and the like. And I think it’s important not to overhype this because these are things that happen over decades, but I think it’s also really critical because it’s a moment of time where things very much feel different. The realignment that’s happening around the world is real, and that’s political and economic and that’s real. And so the kind of efforts to create these alternative systems are much more genuine than ever in the past. I like to kind of think about it as you can sort of say, well, that’s not going to be challenged for a long time. But I think that’s like the frog in the boiling water and I think you got to decide when you’re going to get out and what are you going to do about it. And so, from my perspective, digital dollars having sound regulation around this industry and making digital dollars an export product to the Internet and to the world is really critical from a competitiveness perspective right now.

Maggie: So if we’re seeing this embrace and movement on both, testing it in real time in their economies, getting frameworks regulation around, what’s the impact of that on the US? Where are we versus that? And what is the impact of the dollar’s dominance? Why is this a risk that we’re talking about?

Jeremy: Well, obviously, the predominance of the dollar is incredibly beneficial to the way our government operates, the influence we have in economic behavior around the world, the depths of the trade relationships that we can have. And that is an underpinning for political coordination and collaboration. And so it’s foundational to also, I think, the kind of rules-based order that the United States wants to continue to see. And so I think it’s a critical piece there. I think the other response, though, is I think it’s generally a lot of times people think about the dollar and they think about it as it’s a system run by the Federal Reserve. And the dollar is kind of the monetary policy of the United States. The dollar is the degree to which the US government can finance its debts. Sort of the dollar is these things. Increasingly, though, I think the world needs to understand that currencies are technologies. And we’re talking about the form factor of the currency. And we’ve seen that evolve.  The form factor of the dollar went from being paper cash, to bank credits, to physical checks, to ATM machines, to credit cards and debit cards, to Apple Pay and PayPal, and now stablecoins, right? So the form factor is changing, but we’re in kind of an exponential tech era, right? The compounding nature of technology improvement, open technology improvement, we see that right in front of us with AI at an extraordinary pace right now. And so the kind of obsolescence of technology and the way in which technology amplifies and becomes a huge part of how money works, I don’t think people fully understand how much this is technology competition.

Maggie: I think that’s a really important point because you’re right, this has come up and people always talk about it. It comes up at conferences. It comes up when I host shows on Real Vision and you have people knock it down and say you don’t have any other instrument that’s as stable and that’s as liquid, especially when you’re talking about vis-a-vis Chinese yuan, for instance. However, you’re at a point now where there is this technology that’s making it possible to have an alternative and it’s increasing so quickly. I mean you, if I’m not mistaken, your background is coming up through the Internet and the disruption that happened in media. And there were a lot of people, as someone who used to work in traditional media, a lot of people who said, oh, there’s such deep ties and loyalty and then it exponentially changed before our eyes. Are we at a tipping point with the technology? Is that the difference this time?

Jeremy: I think we are. I mean, blockchains are a breakthrough innovation. They enable these sort of digital cash equivalent instruments to be accessible and usable by any device connected to the Internet, to move at the speed of the Internet with very high security and privacy assurances and increasingly very low cost. And the same kind of openness and interoperability that made global information flows basically go exponential and communications go exponential and software distribution go exponential, and even the way people can sell products kind of go global and exponential. Those are now a reality for, again, the kind of form factor of the dollar. To your other point, I think the dollar is the strongest currency in the world. It does have the best foundation. And so we got to build on that. And so we need to take that and build on it and take that and make it as safe as possible, make it as accessible as possible around the world. And I think one of the things that’s also missed often when people talk about stablecoins or legislation in this area is if you look closely at the kind of proposals that are here. This is about building a safer dollar as well. It’s about building something that people can understand is a cash equivalent instrument that is not subject to bank run risk. That is something that can actually be held and understood as something that has that kind of cash equivalency. And so safety and access are really key, but also exporting the fundamental strength of the US economy and the US government and the US dollar itself.

Maggie: So safer than what?

Jeremy: Well, I think we’re going through another episode of bank failures right now. And that’s pronounced. We’re having issues where we’re continuing to see effectively a business model of you take a dollar and then you create twelve more and you hope that everyone doesn’t come back at the same time and ask for it all back. And so the kind of existing underlying lending-based model has risk, I mean, that’s why it’s so heavily regulated. But at the same time we’re seeing acceleration in payment system innovation. And I think there’s an opportunity here to enable dollar-based payment system innovation and keep that separated from the underlying kind of lending risk. And I think philosophically that’s a big part of what we believe in is sort of being able to have that a safer foundation. So that if I’m holding a digital dollar, I’m not worried. Is this a digital dollar that could have a bank go under around it?  And so again, as you think about this as something that’s projected around the world, that if I’m in Indonesia or in Brazil or I’m in Singapore or wherever I am, and I have one of these in my mobile device, that I know that this is as safe as possible. And that’s really critical. And I think regulation is critical to getting those safety parameters around this established and I’m very confident that we will.

Maggie: So how can the US adapt its policy and financial infrastructure in order to maintain the stability and basically the leadership that we have through the dollar?

Jeremy: Yeah, I think about it in, in a couple of lenses. I think the first is there’s already right now a kind of free-market competition in this, in this technology and it’s growing. And I think as, as you know, federal regulators and, and global bodies have acknowledged, it has the potential to become much, much larger. It’s a critical moment to acknowledge the free market competition, acknowledge the technological innovation, but define the rules of the road. And if you define the rules of the road and how you can do this safely, then you’re going to see more competition, you’re going to see more market participants, you’re going to see banks, you’re going to see non-banks, other payments companies and technology companies that can start to really build on this. 
But you need to have federal laws around this before that can really happen. And so there’s stablecoin legislation that’s in front of Congress and there’s a lot of work I think that’s being done on that. It’s a critical moment, I think, to look at this. This is not about crypto. This is not about Bitcoin. This isn’t about people speculating on, forgive my language shitcoins. This is about how do you take this technology and enable it to be the best medium of exchange that the dollars ever had and do that safely? And so this is, in my mind, critical from that perspective.

Maggie: I think that’s an important point. Does the conversation get muddied by trying to address everything at once or blur the lines between what you’re talking about? Because most of the time you’ll hear there’s a crypto bill, that’s it. It’s a huge umbrella to put things under.

Jeremy: Well, first of all, I’d give the administration a lot of credit, which is that the Presidential Working Group a year and a half ago said the most important priority here is payment, stablecoin legislation. And in fact, Janet Yellen said it’s urgent that Congress act. Congress needs to act. We need to have this. There’s a consensus on that, and that came out of the global consensus. And so there’s an impetus to do this. And I think that’s the right place to start. All the other issues that go with trading and markets and what are these different types of securities or commodities. That’s a harder issue. It’s a more complex issue. And frankly, it’s a separate set of issues from this issue of how is this being applied and used with fiat currency, with payment systems. And so I think the administration’s right to focus on that as a starting point. There’s obviously a debate about how to regulate those other parts of this industry. I think there’s a view that the laws are already there, and there’s a view that we need new laws, and that’s going to be aired out and debated and discussed and legislated as well. But that’s not our focus. The highest priority here is getting this piece right. And I think broadly, this is a bipartisan issue as well. The impetus for this came out of the Biden administration, and now I think we’re seeing members of Congress and Republican leaders in Congress as well really trying to advance this. And so I think this represents a unique moment for, as I like to say, a nonpartisan issue for the United States. And it’s hard to argue with the fact that we’ve got technology competition around the dollar, we’ve got geoeconomic geopolitical challenges, and we’ve got to compete. This is a critical way that we can help the United States compete.

Maggie: Does there need to be a global standard? Are things moving in the direction where there will be a global standard? Are countries coordinating on this?

Jeremy: There is coordination. I mean, in fact, as noted, the Financial Stability Board, which is really the G-20 members, came up with a set of policy recommendations to put in place, and we’re now seeing central banks, finance ministries and as appropriate and needed or necessary legislators in different markets adopting versions of those recommendations. And so while there are some differences amongst them, there’s a lot of general agreement around that. And actually I think there’s an effort now at the Financial Stability Board to continue to kind of harmonize on the broader digital assets issues. But it’s interesting that the dollar is the most advanced in terms of its use in this technology space, but the US is currently the furthest behind in terms of getting to law. And so I think that’s important and maybe the United States is best to be last, I’m not sure. But given the competitive pressures and given the political pressures globally on this issue, it doesn’t feel like something we should be waiting around on.

Maggie: Is there a risk that by not being at the table we lose the ability to set the rules of the road?

Jeremy: I think quite possibly. I mean, I think if we don’t see clear federal statutes around this and it gets punted to after a next presidential election, establishment of a new Congress, et cetera, that’s a huge loss. It’s a huge loss because other regimes are moving ahead. I think it’s a huge loss because without that certainty we can’t unleash the commercial sector, the financial institution environment, the banking environment to be able to use this technology because they’re not going to until there’s real clear federal laws. But importantly as well, there are actors in this market that operate offshore that thumb their nose at US regulators and sanctions evaders and others and that’s a problem too. And so which kind of dollar do you want? And do you want to have a clear definition around that that is something that can be enforced? And so I think there’s also a risk that absolutely the worst kind of things can happen because someone else is expropriating the dollar and not doing it with any of the kinds of supervision that are necessary to do this safely. So I think that’s another risk for the United States right now.

Maggie: So what does smart regulation look like?

Jeremy: I think smart regulation—look, there’s a lot of proposals here and I think one key thing is we need to have a definition of what these are. We need to have a set of very clear requirements around who can issue these, whether you’re a bank that’s going to issue these or you’re a non bank, but you’re going to be regulated by state and federal banking supervisors. So this is something that has to fit in the prudential supervisory framework. There have to be very clear guidelines on the reserves that back these so that these are the safe instruments that we all want them to be. There have to be a set of kind of federally set standards so that the issuers of these are held to very high standards of risk management, transparency and things like that. I think those are the building blocks for this. There are a lot of other adjacent subtle issues as well, but I think that’s the heart of it. And I think the legislation that Chairwoman Waters and Ranking Member McHenry had worked on was a good start. I think there’s again iteration happening on that and hopefully we’ll see some progress.

Maggie: What about consumer protection? We talked before about there tends to be a big umbrella conversation. But we did just have Minneapolis, just recently, Fed President Neel Kashkari was quoted as saying central bank digital currencies are useless unless you want to control, surveil, or tax the hell out of your people. Is this a sticking point? How do we balance the sort of national and economic security concerns, the desire to keep the dollar the dominant preeminent currency, with individual protections? How do we need to think about that?

Jeremy: It’s a critical issue. I mean, I think the China model is pretty clear. The state’s going to surveil everything. They’re going to know everything about everything you do. And I don’t think that’s going to work in the United States. Clearly people want what I like to call an air gap between their digital wallets and their surveillance mechanism. And I think the existing two-tier banking system accomplishes that today in many respects and the BSA AML frameworks, that we have accomplished that in many respects. But in a blockchain environment and an internet environment, there’s actually a risk because there’s more transparency of all these transactions. And so the ability to monitor this by everyone, whether it’s a threat actor, a hostile nation state or your own government is enhanced. And so it’s really critical that privacy preservation be maintained. And I think whether you’re a corporation that doesn’t want people snooping on your business and your transactions, but you’re a law abiding corporation with auditors or you’re an individual that wants the presumption of privacy in their transactions, that’s really, really critical. I think the good news here is that cryptography provides great mechanisms to simultaneously preserve privacy, but also to use cryptography as a way to prove mathematically that someone who’s interacting on these networks is a good actor, has been onboarded properly, that there’s a financial institution that’s monitoring what they’re doing, but it’s not the government itself directly in your transactions. Right? So I think there’s actually breakthroughs that are possible and we’re working on some of those in terms of digital identity technologies that allow for privacy preservation, but also to ensure that actors that are interacting on these public internet networks that can be known to have been verified. And so I think that’s a key issue and I think whatever we do here has to resolve this tension between privacy and national security. And it’s tough needle to thread, but I think there’s new tools that are at our disposal to address these issues. And frankly, I think the Treasury Department and FinCEN and other areas of the Treasury Department acknowledge this and see this and see that actually there’s a lot of really powerful tools here and I think are pretty good at working with industry on how to evolve all this.

Maggie: Yeah, well, presumably this is a problem that someone will solve with innovation and take advantage of the business opportunity that’s around that. This is a very simple question and maybe a slightly ignorant one, but talk to me about stablecoin versus central bank digital currency. The people we see moving, running fast, are very much doing it. So in central bank digital currency, China, for one, can they coexist? How does that look here? What’s the relationship between stablecoin and central bank digital currency?

Jeremy: Yeah, there’s a lot of discussion on this topic, and I think it’s interesting, though, that in most places, payment stablecoin laws are coming into place because the private sector is moving on this. And so that, I think, is there. Obviously, China is a unique, a unique situation for a lot of different reasons. But this has caused and spurned a lot of discussion and debate on the topic. And I think one needs to kind of break it down a little bit, which is if you think about the dollar, I had a conversation a number of years ago at an event with the Chief Information Officer, the CIO of the Federal Reserve, and I said, I’m a technology guy. What is the architecture of the dollar? What is it? What kind of databases are you running on? What kind of software is this written in? What is this? And he talked to me about it, and I was interested. But it’s 40-year-old technology at the core, and we need to ensure that for the dollar to remain competitive, we need to make sure and ensure that the core technology, that underpins what all of us are going to depend on as the core electronic systems, right? That needs to be able to be upgraded. That needs to be able to take advantage of many of the advancements that the private sector is taking advantage of today. Cryptography, distributed ledger technology, these are powerful technologies that can enhance, actually, the safety and soundness of the core infrastructure and can make the way in which dollar movement between central banks works improved. So you have to kind of say at a wholesale level, are there technology improvements that can be done by central banks?

I think everyone agrees, yes, that should happen, and that modernization is just a natural process and the like. But at a retail level, at the level of who’s distributing digital currency and what are the payment systems and rails that are going to be widely adopted around the world, there, that’s where the private sector really comes in. And again, it reinforces what we’ve seen with the two-tier system in the past. And so evolutions in the wholesale architecture of central banking take decades. They take a long time. There’s not the pace of innovation for a whole host of reasons, both because you want to be careful and also because that’s not really the center of technology innovation. At the same time, innovation on the public Internet and innovation with open software. I mean, we all can see it in front of us. It’s extraordinarily fast. And so we have to kind of be able to tap that. And so my view is that and I travel around the world, I meet with a lot of different governments and is that there is this acknowledgment now that there is kind of a wholesale technology that’s needed and then there’s the private sector and what’s happening with things like stablecoins and they’re not mutually exclusive at all. And in fact, over the very long term, they’re in fact can be quite complementary. But we shouldn’t wait around, right? This is a here-and-now issue because you’ve got scale actors, you’ve got the activity, and you’ve got a real, I think, urgency around, again, technology competition, around the form factor of money today.

Maggie: And the genie is not going back in the bottle. I mean, I think of my kids, I have kids who are in high school, they just don’t touch cash. They ask for money. We try to give it to them and I have to Venmo it or something. Like God forbid they touch a $20 bill. They’re happy to take my money. But the genie is not going back in, is it?

Jeremy: No, it’s not. And I think people who have used stablecoins and have used things like USDC, it’s a big AHA moment. It’s kind of like the moment when you realize you could send or receive an email to anyone, anywhere in the world and it just happened. Or the first time you had a video call peer to peer with someone and they were in a different part of the world. You’re like, and this is free, and this just happened? It’s like you have these experiences of the power of the open Internet, the power and reach of this technology, and stablecoins provide that, right? You’re not inside someone’s walled garden. You’re not in some closed loop proprietary system. You’re on the Internet and you can transact directly. Once people start to have that experience, they don’t want to go back. That’s the genie out of the bottle. And I think we’ve seen that with other technologies, right? There was a time when Congress was debating whether or not you’d need an FCC license to build a website where regulators in Italy were saying, you cannot broadcast audio streams into our country because you need to go get a special license to do that. I can have basically all those kinds of things openly on the Internet. And I think there are societal trade offs, right? We have to make sure that there are ways to ensure that criminal abusers and others have no place to hide, right? That’s important. But we also need to preserve that openness, which is so fundamental to the velocity of the Internet economy and what that’s brought for the world.

Maggie: You talked about exporting the dollar before. What do you mean by that? Talk to me a little bit about that. Why is this critical to making sure that we can export the dollar or I think that’s how you put it?

Jeremy: Yeah. So I think at the end of the day, we’re going to live in a world where individuals will be able to open up a smartphone and they’ll be able to download a piece of software, and they’re going to be able to choose which global economic system they want to participate in. And they’re going to be able to choose that by virtue of what digital currencies are floating and available to them. And so in a world such as that, we want to make sure that if that person opens up their phone and downloads that software, that someone wants to send them a digital dollar and they want to transact in that because that is what the network effects. Right. Currencies are a network effect business and the dollar has the best network effects right now, we want to preserve that and accentuate that and expand that. And I think that’s about making these digital cash like form factors work around the Internet. And so it’s an extraordinary amount of, I think, important economic strength that can come from that and to preserve the ability for people to transact in the best currency in the world.

Maggie: Do we have any questions?

Audience 1: Yeah. And maybe this is partially more of a comment, but some of the concerns that you were speaking about of unauthorized entry into networks, exchange, currency exchange networks and things like that. But I think maybe you didn’t mention quantum networks, which really could help there, because of what’s called the no cloning theorem, I think, and the ability to know exactly you can’t sort of perturb quantum information in the way you can regular, traditional classical information because it always leaves a kind of physical record. And that’s going to be something that, if we have quantum networks and quantum computing might really help out in that regard. I mean, it’s built into quantum mechanics. I think it’s the no cloning theorem, and it really could aid there in terms of knowing who could enter your currency exchange networks in an unauthorized way and corrupt them or do some crime or something.

Maggie: This is where I think technology’s ability to also lend a hand, as you mentioned before, it’s understandable because we haven’t been able to keep with the nefarious forces very well in the traditional system. So it’s right to ask the question, will we be able to keep because it’s fine to chase the innovation, but do we have the manpower, the ability, the tools to be able to make sure that we’re protecting it?

Jeremy: It’s a key theme.

Maggie:

Thank you for that.

Jeremy: Blockchains are rooted in this idea that we can use cryptography to strengthen the assurance that we have about data and we can have assurance about transactions and we can have assurance about the output of computers and blockchains are these new kinds of cryptographic computing environments. And many blockchain projects are already thinking about quantum cryptography and what that means and how that can strengthen it. And this infrastructure is ultimately about strengthening the resilience of our infrastructure. It’s actually a major upgrade from what are today not secure systems that have far more porous avenues of exploiting data and transactions. And so it is actually about a new, more secure infrastructure layer on the Internet itself, not just for money, but for data, for knowing what’s real, what’s fake, which is increasingly going to be a major issue in society. And so that’s a little bit of a tangent because we build a protocol for dollars on the Internet, it happens to use this cryptography and underlying infrastructure. That’s a powerful underlying infrastructure. Most people don’t care, right? Meaning they don’t care whether they’re using a crypto, blockchain, anything, right? They just want to know that it’s safe. They want to know it works, it’s fast, it’s accessible, it works anywhere I go, anywhere in the world. And they want to know it’s got the protections that are afforded by being part of the regulated financial system as well.

Audience 2: When you talk about the export of the dollar and the dollar and currencies represent the cultural and values normatives of individual countries, can you talk a little bit about how the extension of the dollar in that way in digitized form over an open Internet actually extends democratic principles and values of the US externally?

Jeremy: Yeah, I think an argument can be made about what happened when the world adopted the open Internet and the ability for information to move more freely, the ability for people around the world to access all the world’s knowledge instantly at no cost, that openness was, in fact, I believe, an export of those kind of fundamental values. And I think it’s one of the novelties of the DNA of the Internet, as I like to call it, is that it does in fact represent that openness, transparency, free society, free competition. It does, in fact engender that it can be turned against a society as well, as we’ve seen in other cases. But it does preserve that. 

And so can we now take that and essentially enshrine those capabilities in the dollar itself? I think that’s a very powerful thing. And it’s not a surprise that around the world there’s enormous appetite for things like these digital dollars because people don’t necessarily trust their governments, their local currencies, they’re fleeing war or other things and they want that assurance. And so by making that accessible and making that available, that actually does extend a value system. But I think this is also why getting regulation right, where we can have this innovation, but we can have it on the public Internet. And the benefits of the values of the public Internet in many ways is quite important.

Audience 3: So at the beginning of the conversation, you mentioned the power of the dollar. So my question is, where does China fit into this narrative? So especially with its recent brokering of deals in the Middle East, does China pose a serious threat in this realm?

Jeremy: I mean, clearly right now, China has an interest in expanding its economic influence, and it’s doing that through trade agreements. It’s doing that through new currency agreements. It’s looking at building alternative infrastructures that people can use. And so it’s moving. And so it does have an impact. In fact, it makes it more urgent for the United States to ensure that dollar infrastructure is widely available around the world. And so I think it is a competitive response. I think there’s a lot of questions that remain about the desirability of, say, individuals or businesses to want to hold something like the yuan because it’s not freely convertible. It doesn’t have the same, in many people’s eyes, rule of law that sits behind the dollar system. And so this is a chance where there is that competition, but there’s a chance to I believe, again, the dollar is the leading currency. There’s a chance to cement that position through technological competition. But it’s competition. There’s no doubt. Right? And the competition doesn’t go away. But you got to compete, and you got to put your best foot forward.

Audience 4: Hey, there. Thank you so much for speaking today. Just have a question regarding the differentiators between a CBDC and USDC, especially in regards to some recent governors banning a CDC in their states. What would you say are some key differentiators between a CBDC and USDC, especially in regards to winning over policymakers and the American public? And would you say there maybe even is a need for a CBDC if USDC was able to kind of take up upon that mantle?

Jeremy: There is no CBDC, and that’s the short answer. Like, it doesn’t exist. It’s a concept. And so I’m focused on what can we build today? How can we compete? How can we build products and services and technologies that people want to adopt and operate those at scale around the world, do it in a regulated way, and build an open, fair, competitive playing field so that there’s more and more competition in this and let that flourish? If eventually there’s upgrades to the core infrastructure of the way, as I say, the back-end of the way the dollar works happens, which I actually think is a good idea, very good idea. As a person who thinks about technology, I think that’s really critical. But that’s, I don’t know, five years away, ten years away. And so we got to focus on now. And so, again, the whole CBDC thing is kind of like a straw man argument. It’s kind of like a boogeyman. It’s this thing out there, and it gets a lot of attention. But the ground truth is that right now the competition is in the market on the Internet, and it’s happening today. And so that’s what the government, I think, first needs to address.

Maggie: Who do you define as the competition?

Jeremy: I mean, look, I think payment system innovation, we think about technology like USDC as a major payment system innovation. I talk about it as a protocol for dollars on the Internet. And so as a payment system, eventually we can, I think, be a better payment system than some of the existing kinds of electronic money systems that we have today. Less and less of us use paper checks. They happen now and then. We use other things. And I think there’s a time when we’re not going to use plastic cards. I think that’s kind of going another direction. And bank wires, not a great experience if you’ve tried to use them very often. And so modernization and competition in payment systems is a huge piece. And so, in my view, in many respects, a technology like USDC, it competes with other mostly private sector driven payment system innovations. And I think there’s real competition in the stablecoin landscape.

Again, there are offshore, unregulated players that are significant and growing, but there are stablecoin products that are being launched all around the world in every jurisdiction. I mean, we’re tracking, I think, 50 to 100 different currency stablecoins that are launching or have launched or launching. And these are meaningful with significant companies, financial institutions, product developers behind them. And so that’s happening. And again, I think if we have federal statutes around stablecoins in the United States, we’re going to see a lot more competition there as well.

Audience 5: Hi, I had a question you brought up that there were other countries that have regulatory frameworks, and the US. Is kind of behind the curve on that. Could you discuss a little bit about a regulatory framework that you think is doing a good job? And what are some of the elements that Congress can learn from that? Thank you.

Jeremy: Sure. No single regulatory framework is perfect. I think everyone knows that, right? There’s always room for improvement. If you take regulation that has just been finalized in the EU that will regulate euro stablecoins, which we actually have a euro stablecoin as well. And we are in the process of having that set up and regulated through France to be part of this now EU-wide framework for euro stablecoins. And it’s an 800 million person block. The euro is a competitive currency. And so we’re working on that. 

I think the regulation there, it does a number of things. It defines a way for non banks to participate in this as well as other financial institutions. It sets reserve requirements. I have some differences of opinion on exactly how that’s set up, but it does set those up. It establishes a clear kind of registration supervision requirement and I think now kind of banking supervisors in the EU are all preparing themselves to begin to operate with this, but it’s part of a broader 600-page legislative framework called MiCA, which is far broader in terms of its coverage of the digital asset ecosystem and the like. But the stablecoin provisions are there. I think it’s good. I think the United States could do better. I think the legislation that is being discussed right now is better. And so I think the United States can have a best-in-class approach to this. And that’s just one example.

Audience 6: Thank you. And just a bit of a cross-jurisdictional analysis. I’m an attorney, so just would like to know how helpful the banks and the financial institutions have been in helping or hindering the crafting of the regulations, given obviously, the disruption to their activity, how important they are to the creation of money, that kind of thing. Because in Australia, it’s been quite different and they’ve been quite helpful on the forefront. So I just like to understand the situation over here. Thank you.

Jeremy: Yeah, I mean, I think there are different components, right? I think there are certainly banks that would really like to see this kind of regulation in place because they want to get in this business, and they can’t because there’s no framework for them to get into this business. I think regulation like that is being discussed would allow banks to issue stablecoins. It would allow banks to hold stablecoins within their balance sheet. It would allow that to be treated as a cash equivalent instrument in the financial sector, whether you’re a bank, a broker dealer, a money services, or payments business, right. It creates a playing field where people can both participate and use this technology. And so there’s absolutely, I think, a desire to see clarity here. And again, banks are not in this market today directly. I mean, they service companies like Circle, but they’re not directly in this market. 

And so I think this would allow them to do that. I think there is some heartburn over the idea that you can have payment system innovation with companies that are not themselves lending institutions. And right now in the United States, lending and payments and the risk of lending is embedded in your payments, the storage of value with these institutions, that’s risky, and there’s challenges with that. But that’s a kind of place, I think, that banks would prefer to kind of have a monopoly on. But in most parts of the world that’s not the case. And so I think this is a chance for banks to participate in this payment system innovation and compete, but also to collaborate and partner and work with firms like Circle and many others who no doubt are either already or intend to compete in this industry.

Maggie: Okay, we are going to leave it there, but as I promised, the bar will reopen and we’ll all be here and Jeremy will be here. So anyone who didn’t get a chance to ask their question question can do so then. But it’s been a fantastic, fascinating conversation, Jeremy. Thank you so much for that. And again, a big thanks to Circle for supporting today’s event. We hope you’ll join us for upcoming events. Thank you so much.

Jeremy: Thanks, Maggie.