September 28, 2022
  • September 28, 2022

Circle CEO: USDC Stablecoin Too Big To Ignore

By on September 2, 2021 0

Stable coins are proliferating – with perhaps some competition and coexistence with central bank digital currencies (CBDCs).

To that end, Circle CEO Jeremy Allaire told Karen Webster that just as digital offerings themselves have evolved and gained in value, the supervisory relationships that regulators will establish with stablecoins issuers will evolve. also along the way.

See also: USDC Creator Circle Seeks Full Reserve National Commercial Bank Status

It has been a busy few months for Circle as the company plans to go public through a Special Purpose Acquisition Company (SPAC) on the US stock exchanges.

And in a nod to the sweeping changes to come in the financial realm, the company has announced its intention to become a national full-reserve digital currency bank.

Allaire said that since the launch of USDC in 2018, the long-term plan has been to create “large-scale, systemically important infrastructure – including payment infrastructure – for a digital dollar currency in the financial system. global “.

Regulation is appropriate

Allaire said the impending regulatory review is appropriate because “as something like this becomes so important naturally – whether you are the Federal Reserve or the US Treasury Department or other federal level agencies – the question is naturally also to whether it will ultimately be something that is supervised in the same way as other banking activities.

As for the push towards domestic banking services (provided by FDIC), Circle plans to go more directly into digital currency-based lending business and provide a range of custodial services.

A full reserve model is not only possible, but in fact desirable, he said. A fully booked digital dollar currency in this case is basically held with very liquid short-term liquidity and dollar-denominated treasury instruments, allowing lending markets to be built on top of the digital currency itself.

Some academics might speculate that stablecoins will never reach critical mass or compete directly with CBDCs because regulators will not allow it. Allaire rejected this notion, stating that “this is not an academic discussion… it gets big”.

We are in the early stages of lending markets, he said, where parties deal in digital assets and creditors borrow against digital assets. Interest rate markets are forming, in part thanks to centralized intermediaries lending to each other. The reserve model satisfies the liquidity requirement to support loans and transactions.

“It’s a little shocking to people because it’s happening so fast,” Allaire said.

The company also plans to have a main account with the Fed, which would allow the company to move stablecoins on behalf of clients without middlemen.

At a high level, digital currencies can find use among these activities as they clearly function as payment instruments. Allaire said that buyers and sellers do not use stablecoins to generate returns on their investment, even though stablecoin deposits can generate high returns for holders under a decentralized credit system based on Internet.

“And obviously, the law on the transmission of money applies to these [payment] activities, whether it’s a PayPal balance, Square balance, or USDC balance, ”he said. “… We are very interested in the safety, soundness and fundamental liquidity of something that is closer to ‘full’ reserve.”

His view is that regulators will need to familiarize themselves with the risk and control environment of digital currencies that can operate on the public internet due to the innovation in financial services that digital assets on public blockchains will support and will speed up.

The “old” anti-money laundering (AML) and know your customer (KYC) frameworks may not apply – at least in terms of technology – he said, while infrastructure markets are moving towards decentralization, raising a “major set of challenges.” “He said it will be essential for businesses to know that they are dealing with compliant people or entities. Anti-fraud and anti-money laundering principles can still be applied,” but in a new light, with a look to cutting-edge technology for establishing identities (tokenization and digital transactions, after all, have helped transform the payments traditionally tied to ACH and wire transfer activities. banking).

As he put it, “Review manuals don’t exist for these new technologies… but when money becomes like a JPEG file or an MP3 file, progress will come in part thanks to public blockchains, and the company will ultimately benefit. “

Regulations will evolve, he said, telling Webster that for the first time in a very long time, technology and innovation are hitting the economic system and the financial system the same way they are hitting other industries in a very long time. because of the internet.



On: Despite price volatility and regulatory uncertainty, a new study from PYMNTS shows that 58% of multinational companies are already using at least one form of cryptocurrency, especially when transferring funds across borders. The new Cryptocurrency, Blockchain and Global Business survey, a PYMNTS and Circle collaboration, probing 500 executives about the potential and pitfalls that crypto faces as it becomes part of the mainstream financials.