Circle’s Jeremy Allaire: Cryptocurrencies Are Not A Zero-Sum Game

Digital currencies are not an all-or-none, zero-sum endeavor.

So says Jeremy Allaire, CEO of Circle, who told Karen Webster that there’s plenty of room for bitcoin, its brethren and offshoots, for volatile cryptos as well as for more stable versions (e.g. stablecoins) in this burgeoning asset class.

He said we are going to see continued proliferation in the adoption and development of cryptos generally.  We’re also due to see dramatic growth in fiat digital currency models – whether done via private companies, consortium models or government-led initiatives.

The conversation came after the company said it had raised $448 million from a series of investors.  That funding, Allaire said, represents a nod from the financial services ecosystem that there is institutional interest in supporting the development of stablecoins.

There’s been extraordinary growth in digital currencies like USDC and, he said, the coins themselves are fostering innovation in payment systems while providing a building block for other financial applications.  For USDC, he said, growth has clocked in at a compounded annual growth rate of more than 6,000 percent.

“There’s wide recognition that stablecoins running on public blockchain infrastructure are here to stay,” said Allaire.  Stablecoins operate in a compliant manner that the financial and payment industry participants can interact with, he added.

That doesn’t mean that bitcoin goes the way of the dodo. There’s a significant role for what Allaire called “digital commodity money” – and bitcoin is indeed a form of that currency. El Salvador recently embraced bitcoin as legal tender, and Allaire predicted that other nations, particularly in Africa, would consider similar routes toward adopting cryptos.  “I think you’ll see more and more countries holding bitcoin and other digital commodity monies in reserve. I think it’s a smart move for more and more countries to do that,” he said.

 Many Forms and Paths 

“There are many, many different types of crypto assets that economically incentivize a lot of different things,” maintained Allaire. “All of them can grow.”

Though it may seem like there’s a space race in place – where governments are developing CBDCs, and consortiums back Diem, for example – Allaire said that the bulk of innovation in the digital currency realm has come from the private sector, just as has been seen with innovation in the banking system, for example.

“Payment innovations, like credit cards and debit cards and Apple pay and PayPal, well, they didn’t come from the federal government. They came from private sector actors. And it’s likely to be no different in the age of Internet money,” he said.

Internet money will continue to evolve but will be tied to open models rather than closed-loop models, he contended.

The key is for the private sector to work with governments and address the things governments really care about: being in charge of the money supply and guiding monetary policy. All those things are critically important in the fiat currency world and will continue to be, said Allaire, and can be applied to these innovations like stablecoins. There’s a path forward through regulatory frameworks and evolving forms of oversight tied to charters and licenses (though efforts to build federal charters have been unsuccessful through the last few presidential administrations).  There are, indeed, other regulatory efforts being made in other countries around the globe.

“You care about safety and soundness. You want well-supervised, well-risk-managed, with capital preservation and liquidity,” he said.

Blockchain-based finance can dramatically improve the opacity that exists in the current financial system, helping it far exceed what the existing financial system has been able to deliver so far.  Thus, DeFi can leverage blockchain for specialized record keeping such as land title applications, or for digital goods. Right now the biggest areas are borrowing and lending.  In terms of greenfield opportunity for lending disintermediation, consider that tens of billions of dollars mark DeFi volumes, but there’s $300 trillion in the debt and equity markets rife for more transparency.

“Everything is real-time auditable by every market participant,” he said. “If I’m an institutional counterparty interacting with that, I would prefer DeFi because I know exactly what’s going on. I can see the risk management, literally, in real time.”

Looking ahead, he said that the funding will be used to expand Circle’s team and help develop recent initiatives such as Circle Yield, a new service housed in the firm’s Early Access program which allows firms to take dollars, convert them into USDC, and then lend them out through a program and earn relatively higher yields than would be seen elsewhere.  Strategically, this allows treasurers and corporate finance professionals to hold assets on the balance sheet that are not necessarily bitcoin while improving liquidity.

“You’re going to see growth and prevalence in stablecoin adoption and digital commodity money as well… running hand-in-hand in more and more places around the world,” he said.