Interview with Circle CEO: How does the cryptocurrency crash in 2022 compare to the Internet bubble in the late 90s?

Original title:Circle’s CEO on the future of crypto regulation after the crypto winter and FTX’s failure in 2022 

Original compilation: Qianwen, ChainCatcher

On a new episode of Fortune Leadership Next podcast, co-host Alan Murray, reporter Michal Lev-Ram join Circle CEO Jeremy Allaire to explore how the cryptocurrency crash of 2022 compares to the dot-com bubble of the late 90s Different, the value of cryptocurrencies beyond speculative assets, the future of cryptocurrency regulation, and how Circles partnership with the United Nations can empower Ukrainian refugees through USDC.

Michal Lev-Ram：Weve all heard about the crypto crash of 2022, where $2 trillion evaporated overnight. FTX crashed, sparking a string of headlines and other crashes. In June 2022, the price of Bitcoin fell to $18,000, just a year after it reached its all-time high of $69,000. So, after the crash, what are we left with?

Murray：I think we have the perfect guest to talk about this, and he is the CEO of Circle. Last year he was not immune to the disaster, too, as the volume of transactions on the Circle platform halved. Unlike more speculative tokens, the company operates a stablecoin called USDC, pegged to the value of the U.S. dollar, which he sees as an important part of the industry’s future.

Lev-Ram：Yes, Jeremy has been in the tech industry for decades. He talked about how in his mind it was a bit similar to what happened in the early days of the internet, when traffic was relatively low but valuations were high, and with the dot-com bust, there was a pretty spectacular crash early in its development.

Another interesting thing to mention about Jeremy is that he has been vocal about the need for regulation in the cryptocurrency market since he founded the company 10 years ago. At that time, many colleagues in the market scoffed at his approach. But after the plunge, more and more people seem to be on his side.

Lev-Ram：Yes, just like the early Internet, more regulation can lead to broader and more sustainable markets. Obviously, bigger players will also come on board, and were starting to see that happen now, and Jeremy talked about that as well. We also had a chance to chat with him about his predictions for the future of the industry, and some really interesting applications. To some, cryptocurrencies and digital payments remain something sinister. He will also talk later about how Circle is working with the United Nations and NGOs to support digital payments for Ukrainian refugees through their stablecoin.

Murray：In general, last year was a disaster for crypto, about $2 trillion of wealth evaporated from your name, and after the FTX storm, your company Circle performed better than most companies, but also lost About half the value. So after all of this, tell us what is left of cryptocurrencies? What will cryptocurrencies emerging from the endgame look like?

Circle CEO Jeremy Allaire：I think as someone whos been in Internet technology for almost 30 years, you have to look at all the cycles, thats what they are. You know, in every cycle, you go through a phase where capital and crowds flood into the investment space first, and there are quite a few unfulfilled expectations. And then when you combine those investment cycles with tightening financial conditions, especially when youre addressing technology thats tied to financial assets, you end up with a situation where youre basically facing a lot of Bad situation.

We saw this with the rise and fall of the internet in the late 1990s and early 2000s. Taking history as a mirror, what stage of development are we at now? Weve seen tons of value disappear by half or 80%. But you also see the other side of things, where the sustainable companies retain their strength and governments, regulators and others respond. I think its very constructive and positive. And then, well also see the output of technology investments.

If you only look at cryptocurrencies, for example, 2017 was a market, 2018 was a crypto winter, and 2019 was a complete downturn. But in fact. The many, many technology investments that went into 2017 and the new things starting to come out in 2018 are catalysts for the next era of growth.

Murray：Yes, first part, lets talk about regulation. I see what you mean, its an incentive to invest. But along the way, we learned that cryptocurrencies are great for speculation. What do we know about its potential value other than as a speculative asset?

Circle CEO Jeremy Allaire：I think there are a few things, the first is how to deal with traditional currencies. In other words, the debt of the government is represented in the form of digital currency, so how do people operate traditional currency (not some newly invented currency, nor some new token pegged to a protocol someone invented) on the network ? Affected by factors such as the interest rate environment, although people still intend to save money in the bank, we have also seen a significant decrease in bank deposits by nearly 900 million US dollars, and a substantial increase in the number of people depositing money in high-yield money market funds.

Were seeing a similar dynamic when it comes to stablecoins, where were seeing more and more developers, enterprises, fintech companies, remittance companies building more and more things with this infrastructure. So for us, the benefit of that is fast, global, interoperable settlements in dollars, which is a strong currency.

On the other hand, demand in emerging markets with weak currencies remains strong. Companies like SAP are integrating USDC settlement into their corporate payment methods and into some of the worlds leading remittance companies, making it a core settlement service like MoneyGram. Some large companies have also taken action, such as Visa and Mastercard, which have announced the use of USDC as a settlement measure. The technology has come a long way.

This has been our mantra since our big event last September, and that is to use technology to bring real value to the real world. We argue that we must move from the speculative value phase of cryptocurrencies to the practical value phase. And the practical value phase must be rooted in real money and real technical availability. I think that sets us apart from a lot of other companies that have been focusing on speculative investing, creating exchanges to try and get people to buy the newest tokens.

Lev-Ram：Can you talk about USDC in more detail? Similarly, besides USDC, we also have other stablecoins. Can you talk about the deployment and application of stablecoins?

Circle CEO Jeremy Allaire：The basic vision behind USDC goes back to when we started the company 10 years ago, the idea was that you could take what we thought of as traditional money, government debt money, and represent it as a digital currency. People can use them on the public Internet through open protocols, just like we have established protocols for email, network information exchange, or voice calls, any device can connect to these protocols, and in these cases, information and communication flow.

So, about five years ago, we launched USDC. Its actually the protocol for the U.S. dollar on the Internet. Technically this was not possible ten years ago and was only technically possible five years ago. First, we had become one of the most regulated companies in the industry at the time, working with payments and state banking regulators across the United States to obtain licenses for e-money services. Likewise, in the European Union and the United Kingdom, we can also issue what is considered a stored-value electronic currency. Just like you use PayPal, cash app, or use traditional money transfer products, such as Western Union, basically these electronic currency units are regulated.

The first misconception many people have is that these products are not regulated. In fact, we have been regulated for a long time, and we have cooperated with regulators to achieve the launch of this product, rather than being tied to a specific company or a specific wallet. As a medium of exchange on the Internet, we have completed over $11 trillion in transactions. What I want to say is that we are still in the early days of development, and the future is full of possibilities. This is like talking about how much traffic the Internet was in 2002, and then imagine how much traffic the Internet will be 20 years later. In my opinion, this is still a very early technology. But its entering what I call the broadband moment, and a lot of things are contributing to that moment.

Murray：The way we think about work, where we work, when we work, and how we work has all changed since the pandemic. Is this a problem for businesses? Or, is this a huge opportunity for businesses?

Girzadas: This is a huge opportunity. Although I dont think the answer is clear. To be sure, this presents a set of profound challenges. But at the end of the day, it is also possible to shape entirely new workplaces, especially in the face of longer-term systemic talent, workforce constraints and constraints, that allow people to maximize their workforce potential and allow people to be their authentic selves at work, Increase productivity levels and get a feel for everything they do. But I dont think the patterns are clear. Weve seen a lot of experimentation around hybrid models, around the extent to which co-working is truly achieved. This is also the effect of technology embedded in the workplace, so that employees and work teams feel supported and helped. It also involves cultural elements such as diversity, fairness, and inclusiveness. How to make people feel supported so that they can do real work at work Own.

While companies innovate around these factors and find novel ways to bring them together to make them highly attractive to talent, they also rely on innovation in the workplace and work processes to differentiate.

Lev-Ram：Circle has long argued that companies and markets need regulation, which is not necessarily a popular view in the cryptocurrency community. So, wondering if you could give us some insight into why you think U.S. legislation will specifically regulate stablecoins and what specifically youve been pushing for?

Circle CEO Jeremy Allaire：This started 10 years ago, when the U.S. government actually started regulating this. The Treasury Department issued regulations saying that if you want to play a certain role between the banking system and these virtual currency technologies, you must be regulated as a financial institution, and you must be responsible for knowing your customers, regulating transactions, dealing with terrorism risks, sanctions , tax evasion, all these things. This was the law 10 years ago, and it created a set of requirements for any company that wants to play a role between the banking system, blockchain and digital assets. Thats where this regulation of money transmission and regulation of money services starts. This is a big topic and sets the stage for us to eventually launch USDC because it falls under the scope of this regulatory regime.

Stablecoins have grown rapidly over the past few years. Regulators around the world are keeping an eye on the stablecoin and cryptocurrency markets. You can think of them as two different things. The best representative of these exchange markets is Finance, or specifically Coinbase, the exchange website. Stable currency is also an example, which is a payment system innovation and a currency innovation. Regulators around the world became concerned a few years ago that these things would grow and become widely used and tightly integrated with the existing financial system. So theres been a lot of calls for regulatory requirements, and its really the U.S. leading the way.

The United States promoted regulation through the G7 and subsequently the G20 (there was an organization called the Financial Stability Board, which oversees or sets policy on all G 20 financial regulation). The U.S. government told Congress that we must do this. This is very urgent. This is what Janet Yellen (U.S. Treasury Secretary) said, to the effect that it is urgent for Congress to take action and formulate regulations, otherwise there may be a run, which will lead to substantial loss.

In fact we have found huge problems and the risks have been proven. For example, Terra went bankrupt and Ponzi schemes frequently occurred. But the push for legislation remains, and since these proposals were made, what we are now seeing is that almost all major members of the G20 have enacted or are in the process of enacting stablecoin-related regulations, including Japan, the United Kingdom, the European Union, Singapore, Hong Kong , the United Arab Emirates and the United States, the U.S. Congress may also enact a law targeting payments and stablecoin issuers. So tremendous progress has been made on that front.

Murray：You said last month that the United States had to make a choice between letting the U.S. dollar become the basis for the currency of the Internet, or whether other countries would lead the way instead of the United States. Why is this so important? Why should we care about this?

Circle CEO Jeremy Allaire：The United States has benefited greatly from the prominent role of the dollar. The U.S. dollar provides low-cost borrowing for households and businesses. For the government, the dollar creates a favorable environment for U.S. global trade. It creates a soft power mechanism around the world. This dollar hegemony has existed for quite some time.

But now this hegemony is under great threat. We now often hear that new alliances are being formed to create another payment system. A currency competition is turning into a technology competition. The question is, what do people want the currency of the internet to be? Do people want it to be a digital dollar? Or do people want different currencies, such as digital euros and digital renminbi. For the United States, it needs to respond to this active threat and at the same time embrace opportunities - in a rules-based free market system, through good supervision and free market competition, it can promote the vigorous development of electronic currency and its global presence. Unleash the technical power of market capitalism within the scope, let the digital dollar sweep the world through this technological revolution, and become the foundation of the worlds next generation of commerce and finance.

Murray：What can the United States do to seize this opportunity? What are the requirements?

Circle CEO Jeremy Allaire：Very specifically, the United States needs to establish a federal regulatory regime for payments stablecoins (that is, digital dollars issued by private sector companies). These private companies ensure the safety and soundness of stablecoins by holding the same one-to-one assets as banks, who recollateralize the currency and assume currency risk. This therefore calls for the creation of a fully reserved digital dollar system that can run on this ever-upgrading internet infrastructure. This is happening. So its about establishing a regulatory system with strong federal regulatory standards that the Fed can set so that everyone in the world who uses these standards, whether its Circle, PayPal, or the next company that wants to do it, everyone We all understand what these standards are. They are equivalent to cash on a balance sheet, cash from someones business activities. Then, people can release funds.

Lev-Ram：While regulatory progress is expected, we are also seeing more and more traditional financial players joining the ranks. What do you think about this? Do you think companies like Circle are better positioned to lead the way? Obviously, traditional financial institutions have a large customer base and a lot of influence. How do you see the role they play now?

Circle CEO Jeremy Allaire：Yeah, I think its back to where we were a while ago, there was a stablecoin bill voted in the House of Representatives a while ago. In fact, Congress and the White House are negotiating some of the details. So thats a signal to a lot of people that regulation is happening. So as things become clearer, companies will start to get on board, which is a good thing. This is exactly what the U.S. government wants, and it hopes that big companies will join in.

For us, it was clear that we werent a startup anymore, we were 10 years old and we were a pretty sizeable business today. But we also hope that competitors will enter and industry guidelines will become clearer. My expectation is that this entry of financial institutions is happening everywhere, not just in the United States. For example, Japan has introduced new stable currency laws. In the market, large Internet companies, financial technology companies, and banks are all looking for ways to launch stablecoins. The EU also has a model for launching stablecoins.

We believe it is important to have a trusted neutral market infrastructure. Thats how we position ourselves, we think of ourselves as building protocols, application programming interfaces, and trustworthy and neutral building blocks. We do not favor one blockchain, one exchange, or the payment business we operate. We want these things to be available to everyone.

Lev-Ram：An interesting use case for stablecoins that we came across is that you are working with NGOs and the United Nations to make USDC accessible to Ukrainian refugees, can you explain how this works?

Circle CEO Jeremy Allaire：Fundamentally, the promise of this project is to enable anyone in the world with a mobile phone to receive, send and trade secure digital currency at the speed of the Internet and with the cost efficiency of Internet data movement, which is virtually Zero cost. This could drive true financial inclusion, lower the cost of remittances, which act as a special tax on those who need the money most, and actually open up better forms of humanitarian aid.

So we have an overall initiative called Circle Impact, and a big part of that is working with NGOs around the world to make it easier for those NGOs to distribute digital cash to those who need it most. To do this, we work with multiple United Nations agencies, including the United Nations High Commission for Refugees, and we work with many other top international NGOs to basically enable them to use USDC to send digital cash payments directly to people with mobile phones, These are Ukrainian refugees, Afghan women, Venezuelan doctors, earthquake victims in Syria and Turkey. I mean, these are really important things.

I think global aid agencies are very excited about this because cash is prone to corruption and theft, so a lot of the money doesnt get to the people who need it. And this payment method provides them with a way to achieve this goal. Additionally, we partner with global cash output providers like MoneyGram so you can convert digital cash into local currency and cash no matter where you are.

Murray：You said before that maybe these types of trades are only 5% of the dollar market or whatever. But what will the world look like in ten years? Will the world be a better place ten years from now because of your actions today? Can you describe to us the social value of your project?

Circle CEO Jeremy Allaire：First, a lot of the way we think about the way money moves will change, basically more like how the Internet evolved—well stop thinking about long distance calls, well stop thinking about sending letters because well be able to reach all the places in the world at no cost. knowledge, we are able to make direct video calls with others. The same thing can happen with money, the idea of ​​cross-border payments sounds as absurd as the idea of ​​cross-border email sounds now. In other words, funds will flow at the speed of the Internet, basically at no cost. Any device, any software, any hardware can be used. I think the impact this has on society is huge. I believe that if we can move money in the same way, the velocity of money will explode. And when you have a high velocity of money, that clearly leads to increased economic activity, increased economic opportunity.

Murray：A quick follow up question, I live in Greenwich, CT and am surrounded by a lot of luxury homes purchased by people who charge fees/tolls on financial transactions. If your assumptions are correct, the charges should be reduced and the houses in Greenwich should be smaller. Do you think this is what we ultimately want?

Circle CEO Jeremy Allaire：I dont know if houses in Greenwich will get smaller because thats something the community should be thinking about. But I think yes, the fees will change. The unit economics of media, communications, publishing, and retail will all change, and product quality will improve tenfold. Moreover, the net output of payments activity in the world economy will grow. Therefore, it will actually bring about the law of large numbers (ChainCatcher Note: In the large number of repeated occurrences of random events, there is often an almost inevitable law, this law is the law of large numbers), and some very important scales will appear in the process enterprise.

I think there is also a very critical part of the financial system, which is the extension of credit, which is what I call the time value of money, which involves people who need money now but dont have it, and people who have money now but dont need it. I think that the combination of this high-speed digital currency and programmable things such as smart contracts on the blockchain will also give rise to powerful new means, how to transfer credit to those who need it on a global scale, and to those who need it. business and family.

Murray：Your perspective is inspiring. Now let’s move out of crypto winter and into crypto spring!

Lev-Ram、Murray：Maybe it’s Crypto Summer.

Circle CEO Jeremy Allaire: When cryptocurrency really catches on, people won’t call it cryptocurrency anymore. We rarely say Internet anymore. Were just talking about the internet, or the major technologies were using, so I think the day its done is when it creeps into our lives.