Circle Just Fixed Stablecoins (And It Changes Everything)

Transcript

I was a trader at JP Morgan for five years. You know, we traded eight trillion dollars a day of FX every day, right? And that's that's the like off-chain demand with the liquidity and the systems that we have today. Um it's all quoted against the dollar, but also against euros and Aussie dollar. And it's because these businesses have needs like they have cash sitting [music] everywhere in the world. Sometimes they want to speculate. >> What's the future of USDC look like? Uh how will it change? How will the the demographic of it change? the dynamic of how it's used.

>> Welcome back to the rule. >> This is your home to learn from the biggest guests, the brightest [music] minds at the tip of innovation. >> Our goal is to help spread the collective knowledge of everyone in our community. >> We are breaking crypto out of its [music] echo chamber and taking it to the real world. >> Sit back, relax, and enjoy it. >> Rachel, welcome to the show. >> Hey, thanks for having me, Robbie. >> Absolutely. Thanks for coming on. Uh it's your first time on the show. It's an absolute pleasure to host you and uh it's quite a special day. Circle stable chains are live. We're in testnet and uh feels like beginning of a new chapter.

>> It is. Yeah. It's the beginning of the economic operating system for the internet. We're super super stoked to talk about our public test net, how it came together, the partners, the use cases, and the journey so far. >> I love it. I love it. I think you put it really well. This is the operating system for internet finance and now we're in this digital age. Um before you came on I was talking about uh uh securitized tokenize the world. It's it generally feels like we're in this modernize Wall Street moment, this movement where we're trying to modernize Wall Street and bring it closer to the tech world to generally make these things more efficient. I'd love to hear from you, you know, your your story when it comes to Circle, how you were able to

to play an instrumental role in bringing Arc to life. Maybe you could just start from the beginning, right? Like what what is it what is it like when you guys first had this idea of building a stable chain and then walk us through what the early steps were to ultimately stand this thing up? >> Yeah, for sure. Um, so, hey everyone, my name is Rachel. I'm a fintech and crypto builder. I've been in the space a long time. I like to call myself sometimes the crypto abuela. Uh I'm originally from Venezuela which is what brought me to crypto in the first place and macro and e economics you know I lived through these experiences that uh you all see in the papers right economic collapse uh stable coins and bitcoin u so that's

where I started my career um I started in Wall Street trading uh then I went to start a startup uh was called trigger it let you trade with uh rules and finance and we did you know crypto Triggers. Um, and my co-founder Adrian is actually our uh engineering lead for ARC. So, I'll get to that in in a moment. But, you know, that started led me to Circle. Um, so I met Jeremy, you know, early on in 2017. So, it's been eight years. Um, and so, you know, Trigger was acquired by Circle and I've been at Circle building USDC for eight years and, you know, saw firsthand how we, you know, went from Bitcoin to stable coins, scaling stable coins.

We're now, you know, over 300 billion in circulation. And in that journey of scaling USDC to dozens and dozens of blockchains, you know, we kept on encountering the same problems over and over again with partners and institutions. Um, and we kept a list, you know, I'm on the product team, so we kept a list of, all right, how do we solve these problems to being these partners and these builders on chain? Um, and so, you know, it's been many years in the making where we knew that we always wanted to launch our own blockchain. Um, and you know, now for the last few years, we're we're building ARC. And it's really a continuation of Circle's vision and mission of enabling the frictionless exchange of value, but

this time it's it's purpose-built. It's purpose-built for the internet financial system. It's purpose-built for stable coins, tokenization. You just talked about tokenization and commerce. Um and so you know ARC is here. ARC is here now. Um and it's a layer 1 blockchain uh EVM compatible. Uh it's you know aim to unite the real world economic activity to really bring that onchain innovation with the existing like real world econom uh economic activity. Um and it's really designed to meet like the needs of developers and businesses really building onchain. Uh so we're focused on building net new valley onchain.

>> Love it. I mean, you guys have had such an integral part of the the onchain world, the digital asset world rely on Circle and USDC for such a long time that you you've become entrenched and instrumental in the space. Uh for for a while there there was a kind of a running joke that Ethereum was a layer two on Circle. Uh which I found pretty funny. And now you've decided to to kind of go in this direction where like you said it's an L1. It is EVM compatible. So you've got, you know, some uh some compatibility and composability with the rest of the ecosystem, but it is an L1.

Could you describe what went into the decision and the product choice of choosing to build an L1 versus something like an L2? >> For sure. And we debated it a lot on the team. Um so you know let me let me we just thought that the requirements of the traditional financial systems and the partners and the services weren't really being met with the existing you know blockchain systems and in particular with L2s. Um so here are the problems that we wanted to solve. Unpredictable gas fees uh cryptovolatile tokens unclear accounting rules. Every time when you talk to a partner these things come up. These are clear pain points where you know east and soul like they have to hold it on the balance sheet. they don't know how to transact

with it. Um and you know it causes paper just to get it like in their treasury operations let alone to then expose it to their customers like they have to start doing all these abstraction SDKs uh settlement times was unclear and this is you know the point about L1 or L2 where it's for every blockchain it's very difficult to tell you know to crisply say like when a block is finalized when a transaction is clear defined irreversible and so we really wanted to zero in on this de clear definition of settlement ment finality. Um, and it with layer 2, it's really challenging to do that, right? You have like the provers, the sequencers, the things and like we tried to explaining that to like bank CFOs and you could see

like their brain is just like whoa. So, you know, a clear crisp definition of uh settlement finality was important. And then number three is you know proof of concepts are fine and public blockchains are great for many things but once you start to scale like B2B flows, corporate treasury, sensitive trading applications, payroll um they need private systems like today's financial worlds are not interoperable but they're private and the existing privacy solutions today are usually add-on. Mhm.

>> Uh they're either like you know a protocol or like a private ERC20 and for L2s like there's no escaping that like the state is still public on Ethereum. So for those you know for those three like payoints and reasons we decided to build ARC as a layer one purpose-built for stable coins purpose-built for the economic operating system and it has these three amazing properties. stable coins as native gas uh starts with USDC. We're going to expand to many more stable coins, dollar and non-dollar supported. Stable coins are money and so companies can now pay with like digital money uh without holding anything else on the balance sheet. It has instant settlement finality. So all blocks and

you can see it on the block explorer. It's pretty cool. They like finalize in less than one second. So it's really snappy, clear, irreversible and then you know not live on tested but on the road map will be often compliant privacy. Um and so that is you know built from the ground up uh to be you know shielded balances and transactions uh you know configurable privacy so private smart contracts and these builders at these companies and these institutions can say okay well I need to be compliant with my auditors or my regulators um and you know they'll need tools and systems and a programmable layer that's built for that. So that's you know that's those are the core features that really we think are going

to unlock adoption more broadly uh for more stable coins and tokenized assets to come on chain. I I love the focusing around privacy and I'm not sure if you've seen Zcash recently, but there's a broader wave of people that are really becoming interested in privacy. And I think it's important as stable coins become more and more uh popular and entrenched and just widely adopted. >> Uh we're going to see a fuzzy line between stable coins and CBDC's. And I know Europe is is already kind of going in the CBDC direction and people are going to want to take privacy into their own hands. And like you said, it's opt-in.

You're not going to force people into it, but you're going to give people the option uh if they choose to enact that that privacy. >> Um I I also want to just double double click on some of the conversations that you're having with banks, Wall Street companies, these sorts of things. Like you said, there you can see the fear in their eyes when you know you're talking to them about single sequencers and rotating decentraliz. you're talking them all of this lingo that you know make is making their head spin. Were they at a certain did they try to understand did they put ahead of digital assets or ahead of tokenization kind of nominate someone to really like just fully immerse themselves in this or were they like when you start talking that language they go no that's not us that's not our world we'll let you focus on

that trust you to make those decisions but we're not going to go into that world where we aren't as familiar >> it's it's really a vault and so like I've had these conversations for many years at circle you know, I would say maybe three years ago, it's like the digital asset innovation team, the the think hub, and you start there and they're really trying to bring the proof of concept to life and educating, but since the start of the year, like the demand is there, and the the buyer persona who is like really advocating for stable coins and public blockchains has changed. So now we are speaking to you know the head of payments, the head of corporate treasury, >> um the head of policy, many of the new

fintexs have now head of stable coins and so the conversations like immediately shifted because we have the buyin of the decision makers and the business owners at the table and they really want to understand because you know their customers are asking for it. their boards are demanding a stable coin strategy, an AI strategy and you know they come to circle to to have these conversations to offer the platform and now we have ARC that we can you know better explain how it all work at the programmable blockchain layer.

>> Was was there an inflection point where you were talking to these people and like you said you know they maybe weren't the head of payments or head of policy or these department heads at these major institutions. Was there an inflection point where they that changed now you started to find yourselves in the rooms with the department heads able to really move and shake and talk to decision makers? >> Yeah, I think this summer with genius definitely was the inflection inflection point. You know that when they know that it's law a lot of it's d-risked >> um and they see you know big big day brands and AI companies and fintech companies and public companies. Um, you know, I think our our public IPO this summer also helped. Um, so it's just, you know, a wave of of major change in

public markets legislation, but also the technology, like the tech technologies solid, >> you know, like you have advancements in privacy, you have advancements at the wallet infrastructure, you have advancements just in liquidity and stable coins. So, it's those three things this year are the puzzle pieces for us to really, you know, take advantage of the moment and the art test couldn't really couldn't really come at a more perfect time. >> Relay, low fees, lightning speed, and the power of multi-chain at [music] your fingertips. Instant multi-chain payments. Choose any token on any chain.

75 plus network supported. More than 5 million users. 8 billion plus volume processed. 70 million plus transactions. Fast, reliable, everywhere. Start swapping today. Only on Relay. Habachi. Provable. [music] Trade pers with speed and security. Earn rewards. Visit hbachi.xyz. Trading on fire. The wait is over. [music] The Talis testnet is live. Be part of the revolution. Join now [music] at testnet.talis.network. >> Yeah, I I completely agree. What? I think it's a really relevant comment that we actually just got here in the chat. Uh who's this? They say Ryan Boland says, "What is happening is not once in a lifetime. It only happens one

time. Hope everyone is paying attention. Appreciate you guys for launching ARC." Um I I I think it's great. I think this is continuing the evolution and the proliferation of blockchain technology, ultimately becoming deeper and deeper into the financial system until it subsumes the financial system altogether. and and this is what we know and expect when we when we operate with money in the modern digital age. Um >> I'm curious how you're thinking about the go to market for ARC. Um I think as as you know a lot of the USDC is currently on Ethereum as well as Ethereum L2, some of it's on Salana, but there's billions and billions on uh these other L1s. Will you see is there going to be a push to try to bring the

USDC over to ARC? If so, what does that look like? If not, why not? Yeah. So this goes to the use cases that we're really interested like what what is day one of Bayet what is the arc no pun intended of of of arc in itself and we're really interested in this concept of a global liquidity hub right and so like USDC and other staples are highly liquid you know the proliferated across many blockchains and leveraging arc as a stable coin liquidity hub >> where it you know leverages the fast finality so all transactions finalized in less than one second. It has the deep liquidity of USDC of the on andoff ramps first and foremost like we you know have

a breadth of on and off ramps across thirdparty distributors but also our first party gibbs and Brazil and Mexico uh Asia US Europe and the interop that we have which is with CCTP and gateway that already powers around 90% of you know the multi-chain transfers we want to leverage arc as the liquidity hub for any developer any business, any user in any institution to go to and from Arc seamlessly, right? Like we acknowledge like not all applications are going to live on ARC. Um not all assets are going to live on ARC, but what we can do is to leverage it as a liquidity hub. So, you know, you can have like your stables sitting on ARC and we'll be able to go from one second,

one cent, one click to and from any USDC supported uh blockchain. uh do stable swaps do FX which I want to talk about the partners that we have bringing on board with the asset issuers and that's sort of like a go to market value prop that we think is really missing in the space is you know ones tend to be silos and arc is not that arc is truly meant to like enable the money to flow across blockchains >> I I remember Jeremy came on our show and he spoke to my co-host Andy I was unfortunately not on that one but I remember a really uh strong takeaway way that they both had from the conversation which was they want USDC to be everywhere. They want it to be like like

Netflix you can watch on your phone, you can watch on your laptop, you can watch on your TV, you can watch all these places and USDC should be the same. It should be ubiquitous and it makes sense as because you've already gotten distribution through all of these L1s. You're going to have ARC be the hub, but you're going to have your tentacles into into all these places. That that makes a lot of sense. I also want to talk about the partners because all of these other the all these partners will help in some way shape or form with distribution or go to market or operations all these sorts of things and you guys have amazing partners day one partners that are starting to roll out on test net and eventually mainet. Um, just to set the scene a little bit more before we get into the partners, I had a uh Tony from

uh Ubiquiti uh come on the show uh last week and he described stable coins as these little bundles of joy that you pass around because and banks love them because they're able to do FX when they're able when they go in and out of of these different stable coins. We were kind of discussing the stable coin fragmentation that you know can happen as as everyone seems to you know now have a stable coin. And so when bringing banks on, it makes a ton of sense now to to kind of think about these as they're clearing in and out of USDC as well as other stable coins. So I'd love to get into the into the banking relationships and the partners that you have coming on day one. Maybe you can just rattle off some of the highlights. Uh we don't want to leave anyone out, but I I'd love to

to hear from you as a product person. what is your perspective on on the real fundamental partners that you think are going to reshape the way that we're thinking about finance onchain and off? >> Yeah, so super excited like we're seeing such an incredibly diverse group of of partners come together over the last few months and from global GE banks to payment companies to your DeFi marquee builders, stablecoin issuers and capital markets participants. You know these companies when I look at them just face value they manage trillions of assets they have huge money flows power billions of transactions and you know it's to I think you said it like it's

the uniqueness of circle that can bring this new emerging ecosystem together to start exploring testn net um and you know power the the ecosystem economy. So we have we're announcing over a 100 plus partners who are exploring testn net with us and you know they range from you know capital markets. So Apollo is a great example. They want to bring private credit funds that have access to, you know, potentially better liquidity because we talked about the liquidity hub and we have these like private credit assets and TMFs that can be composable assets for trading and then you bring them with D5 protocols.

You have more access expanded to a different investor set. Uh you have Bank of New York, Melon, uh New York Stock Exchange, State Street, uh Black Rockck, Deutsche Bank, Goldman Sach, Standard Charter, uh and that's you know like in the banks and assets category. When you talk about the global fintexs and the big enterprises and like the web twos, you know, Rex, ramp, cloudare, Mastercard and Visa, right? We th those hard networks are going to start settling between their merchant banks and stable coins, you know, exploring doing it on ARC. Um, we talked about the asset issuers. So, you know, none of

this works if you have no assets. And so, the first assets that we're we're focused on are stable coins. And this is dollar stable coins. So, other dollar stable coins, but also non-dollar stable coins. So there's really been a lack of you know uh other you know USDC like highquality fiat stable coins in different jurisdictions and we're announcing you know seven or eight today Australian dollar Brazilian rayi Japanese yen uh Mexican peso Philippine peso Canada and so once you have those you know high quality asset issuers then you know the ecosystem starts to emerge so they can be embedded into the developer ecosystem, they can start

doing, you know, swaps with curve or new new per exchanges and then those are the hedging primitives that then the payment companies can use. So, you know, we're just super excited to be marrying the best of DeFi, the best of crypto, the edges of onchain innovation with these Fortune 500 big enterprises that are there at the door ready to experiment. >> It's incredible. you I you guys have been such a pillar of the industry for so long. It it must feel really good to see it come to fruition.

>> Yeah. I mean as a product builder like there's nothing like a launch day, right? Like uh you know this is a test net. It's it's exciting. You know it's there'll be many versions of test nets, different features. Uh but I'm just really excited to get builders on this. Um quick plug you know go to arc.network network, check out the docs, start deploying your contracts. It's available for testing. Give us feedback OnX, on Discord, wherever, wherever your crypto finds you. >> I love it. As as a builder, there's nothing more that you want to to see the thing that you built get adopted and and see it get used and start to get that feedback and build that feedback loop.

That's as a builder, that's that's exactly what you want. Um I quick question on the on the geographical stable coin launches. Um, you know, the and I I saw I think it was your head of legal head of policy out in DC. Uh, I believe it was DC with the Fed payments conference that happened recently. The stable coin super cycle as as we're calling it is really integral to this administration and and uh maintaining and and encouraging and and increasing dollar homogyny around the world. So when you kind of balance these two things, how do you think about the the right balance to strike between US dollar denominated stable coins and and

some of these more regional stable coins that aren't in the US dollar? How do you how do you kind of square how do how do you balance these two worlds? >> Yeah, I mean global like stable coins are now what is it 300 billion and dollars is 95 96%. Um, if I was a betting woman, like I don't think that's the ratio that's going to be the same over the next 10 years. Like the dollar, you know, it still dominates in major parts of the world. But there's billions of people that use other currencies day in and day out. And, you know, we're we're going to start seeing a shift of like global, you know, market cap for stable coins um go away from dollar denominated to also

local dollar denominated, right? And that's you know for payments for liquidity for FX like that's going to happen over some curve. Um and you know but we believe al obviously dollars will still dominate because that's what what businesses and people want and you know we we've exported dollars really well um to the to the rest of the world. Um but you know FX in and of itself is a huge market. I mentioned >> I was a trader at JP Morgan for five years. you know, we traded $8 trillion a day of FX every day, right? And that's that's the like off-chain demand with the liquidity and the systems that we have today. Um, it's all quoted against the dollar, but also against euros and Aussie dollar. And it's because these

businesses have needs like they have cash. It's sitting everywhere in the world. Sometimes they want to speculate. Um, and moving that onchain is going to present a real value prop to those users. um a real value prop to the you know global policy makers um in these in these institutions as well. So uh I'm super excited about FX onchain. I think also when you marry things like perpetuals and um prediction markets like those are new instruments that FX traders don't have. Um, and so, you know, you'll we'll bring the assets, we'll bring the partners, obviously bring our policy makers along the way to really make programmable effects thrive

on ARC. >> Asset management redefined, built on ERC 7621. Standardize how you launch, manage, and trade onchain baskets. This is Alvara, the standard for onchain asset management. Blockchain shortcuts, templates, and widgets launch without friction for builders by builders. Visit enso.build. I think you said programmable FX and FX in general is an 8 trillion industry per day.

>> Yeah. Traded every day. >> That's in that is incredible scale. And I think it for the for capital efficiency reasons it it is inevitable that this will come onchain and it it sounds like you're building ARC in such a way that it could become the home of FX. >> I hope so. We believe it. You know I mean FX markets already trade 247. So the value prop of onchain is the settlement value, right? Because you still have to wait two days to settle between the banks and then that's you know risk introduced into the system. If you have stables settling against each other 247 on the internet, you know, you're taking away credit risk from the system. You're taking away risk from the

system. Money should flow more freely. And what was missing was a a blockchain that has privacy, stable gas, fast finality, but also the issuers who are ready at the table to deploy and the ecosystem that we talked about, the banks, the asset, the the trading firms, the fintexs to all make it come together. So that's, you know, you'll see a lot of us talking about that over the next few months and the use case so it can really come alive on ARC. >> Love it. Um, is this a one-way street? Like once these firms, a lot of the day one partners that you mentioned, once they start operating onchain and facilitating onchain finance, they'll never go off.

>> That's the hope. I don't think they'll go off. I mean, they'll they'll probably like go off until, you know, until you and I can start paying in stables and actually using it. Um, you know, they'll it's a slow migration. Uh, I think, you know, they'll they'll definitely come on. They'll stay. It's more safe. It's a better system. Uh, but it's going to take a long time uh for it to like completely exit the system. >> Yeah, makes sense. Um, a lot of the the biggest things, you know, they're they're they move at a glacial pace because glaciers are big. This is a big a big movement. So, uh, it takes time to steer the ship.

>> Uh, Rachel, I know I know we're we're coming short on time. Last question I have for you. Um, Circle is predominantly known for USDC. Now, you guys are rolling out ARC and you're rolling out some of these more regional back stable coins. Um, what's the future of USDC look like? Uh, how will it change? How will the the demographic of it change, the dynamic of how it's used? Um what what what can you say about what comes next for USDC given the the excitement and the uh the hype around ARC? >> Yeah, I mean I think you'll you'll see us continue to do the things that have worked for USDC very well, right? So we met we talked about it early on the show. My mental model is USDC is like

Coca-Cola, right? Like our goal, our job is to make it so that anywhere in the world you can reach. Oh, and you have USDC there just like Coca-Cola. I personally like Diet Coke. Um, but same same thing. Um, so you know, more more settlement banks, more on and off ramps all over the world in the places where, you know, it's hardest to reach, more blockchains, so USDC, you know, will always be there. um interoperable, more distributors. Um so working with these great companies to integrate USDC so that they can then expose it on behalf of their customers. Um I'm excited to see how USDC as a native gas in a blockchain really comes to like right

and so you know I call it the silent unlock right when with stable coins or gas you sort of just dismiss it and say like oh so what? But >> it's to me it's kind of like a chat GPT moment where it just fades in the background and then users are like ah everything just works and it fades in the background. Um and so you know you'll start to see like a lot of use cases with USDC with privacy with credit you know expanding credit on onchain um and just you know doing what we do best which is making you know dollars liquid on the internet.

>> Yeah. Incredible. Rachel, thanks so much for joining. Really really appreciate it. We've already seen the power of USDC. We know what it can do as a collateral mechanism for PERBs, for other elements of onchain finance. Uh it really feels like this is this is kind of the beginning of a new era uh as USDC continues to proliferate and ARC comes online. Congrats again on the test net. >> Thank you so much. Thanks for having us. Go check out ARC. ARC.network. >> Absolutely. We'll see you next time. Thanks, Rachel. Bye.