Oct 24, 2023

As part of CoinDesk's State of Crypto 2023 event in Washington, D.C., Circle's Chief Strategy Officer and Head of Global Policy Dante Disparte discusses the future of stablecoins and the regulatory implications around the $123 billion asset class.

Video transcript

Stable coins are $123 billion Cryptocurrency asset class according to coin gecko data and a key piece of infrastructure that bridges traditional payment systems with the digital asset economy. Joining us now to discuss the Circle's Chief Strategy Officer and head of global policy, Dante Dear. Welcome to the show, Dante. Thank you, James. Good to be with you. It's good to have you here. Now, this is the state of crypto. There have been a lot of conversations happening right here today specifically to stable coin legislation in the US. What kind of conversations, what can you tell me about the discussions you've had here today? Yeah, I mean, first of all my hats go off to coin desk for organizing this event. I do think as you could tell from the event itself, there's a lot of interest and a lot of energy in the room overall and a lot of opportunities for both public, public sort of sector leaders and policymakers and then private market actors to get together, which doesn't happen that often in Washington. And so I think there is a lot of interest in staple coins as goes stablecoins policy in the United States. So goes candidly the rest of the crypto agenda. So we're quite keen to see advancements in what we call euphemistically, the mcwaters Bill, which has had a life in the last Congress and in this one and is a very important piece of legislation for the country. When do you think we'll get that stable coin legislation that everyone's waiting for? It feels like kind of a slow go at it. Well, my view frankly is the United States generally, we exhaust all other alternatives and then we end up doing the right thing. I think that same, that, that same sort of policy posture holds true here with stable coins. Obviously, getting a speaker named is going to be an important piece of advancing this, but I already see around the stable coin agenda. Quite a lot of bipartisanship in both the House and in the Senate. The question of course, is getting normal order back in place for which the speaker has to be named in order to advance legislative items in the country. Well, we mentioned it at the top of the show. Tom me, the Republican nominee. If Tom Emmer has voted to be the speaker, do you think we're going to see crypto legislation move forward at a faster rate than we've seen before? Well, look, I've had a number of conversations with Congressman, Congressman Emer over the years and he and his staff have really leaned in and learned quite a lot about this industry. I do see that Congressman Emmer, as a, as a speaker candidate would be very favorable for the industry but also frankly very favorable for us competitiveness underlying, advancing a crypto agenda inside the United States. Is this question of economic competitiveness for the country, job creation for the country and building an operating model where there's investor certainty, not only in the dollar but investing inside the United States. And we know as a company Circle would benefit greatly from having that type of standard set here in Washington. You know, Circle doesn't only operate in the United States and regulation seems to be moving a little bit faster in some other jurisdictions around the world. Is there any particular jurisdiction that you think is really doing it right when it comes to regulation, when it comes to regulating stablecoins? Sure. Well, as you can tell there is a whole host of energy all over the world which I think demonstrates the permanence and the durability of payment, stable coins as an innovation and as an extension of banking and payments, you see countries like Singapore where Circle has just recently received a major payments institution license has comprehensive regulatory structures for this. Japan has recently come online with a series of stable coin regulations that are making the industry more permissible in the country. Hong Kong equally has a set of rules falling into place that I think will broadly bank the sector and broadly provide for activities in the space. Then you cannot ignore what is happening in the United Arab Emirates, in the UAE in Europe and many other places around the world. Having said all of that, I don't subscribe to the view that the United States is somehow a laggard. I think we have a large economy in this domain. I think we're regulated in many instances at the state level. The void of federal leadership requires legislation. Once we get right, the US would of course be the leader economy around the world when it comes to digital assets. So you do think that regulators here in the US are incentivized to think about Stablecoins and thoughtfully think about legislation around Stablecoins. Well, and one of the, one of the arguments of course is that, you know, never, never let a good crisis go to waste and never let a good adversary go to waste. The crisis, of course is 2022 crypto had quite a lot of losses. There were clear consumer protection harms and all kinds of bad conduct in the industry. I think reconciling that is going to be really critical and of course, there's no better way to do that than regulation and consumer protections as a standard that, that promotes this race to the top operating model in the space. Um I also think that um when it comes to stablecoins broadly and circle has demonstrated this with us DC but you see other domestic operators show as much that we can withstand the test of time. We could withstand, you know, the failure of banking inside the United States and be a very durable export product that if you want the dollar to live on the internet, that today's generation of dollar denominated stablecoins, the good actors that are regulated onshore are part of what that dollar competitiveness model looks like. Talk to me a little bit about the EU C. That's the Stablecoin that circle launched over in Europe when you compare it to us markets, how's it going look the Euro from circle the Euro denominated stablecoin URC. Actually, when launched this product, we originally launched it in part to meet market demand that there was a void in the market for euro denominated stable coins that would follow the same type of standards of trust, transparency and accountability that Circle has built around us DC now five years in the making and the void of a Euro was also a critical void to fill what we have said. However, is that with the advent of Europe's markets and crypto assets frameworks, we want to make that a Euro based digital currency innovation and and effectively make it the very first euro euro backed in MICA compliant digital currency. So we're in the midst of getting licensed in France as our European hub. And once we have that license in hand, we would of course onshore that euro. At which point we expect it to grow quite substantially. How are you thinking about getting people to use stablecoins? That's an issue. A challenge that persists throughout many different aspects of the crypto industry. How do you prove that use case? How do you people to use stable coins? Sure. Well, look, oftentimes the question is asked and it was actually asked of us today, what is the killer app in crypto? And I would say, well, there is no better example of a killer app to the extent we are looking at a killer app being defined by usability by millions of people for everyday activities. The stablecoin is it uh US DC? Today cumulatively has processed more than $13 trillion in payments. It is a digital dollar available in more than 190 countries. And one of the major innovations circle has invested in over the last many months is actually powering web three services. So programmable wallets and enabling people everywhere, developers everywhere to build us DC, supporting and broadly digital asset supporting innovations that shortcuts the path adoption of digital assets in a really meaningful way. The big unlock for our sector is millions of users, billions of users and trillions in economic activity that will only come when the technology fades to the background, which I think is a part of how we've been investing in building up this type of service offering at Circle. Circle is really a crypto native company. How do you remain competitive when you have paypal issuing a stable coin? You know, Paypal already has that trusted brand with folks who use it for peer to peer payments. How do you build that trust and how do you remain competitive and gain market share when brands like paypal are entering space? Sure, look in my view and imitation is the sincerest form of flattery. I really do feel that that paypal's entry into the space and paypal's choice of the stable coin architecture as a way of future proofing their own payments platform really does say a lot. The market is big enough. We're talking about trillions and trillions of dollars of what is known as M two money in circulation around the world. And my view simply is that if, if you care about financial inclusion, you care about extending the perimeter of banking and payments, there should be a lot of competition in this space from both banks and non banks and we very much welcome paypal's entry here. The question of course is if you want globally usable digital dollars around the world, they have to be fungible, they have to be able to interoperate with different networks. And that's going to be the real test of time for paypal's digital currency is to what extent can it circulate broadly and freely around the world? And in our view is circle and us DC is a platform designed for openness and payments and money and we very much welcome competition in this space. Can stablecoins and cbds. Coexist. Yeah, look, it's a billion dollar question. Um I, I think number one, the Stablecoin today is of course the existing circulating category of digital currencies. Um and most of them, if not all of them that are successful reference the dollar to varying degrees in a world where a a wholesale central bank digital currency architecture would exist. Uh I think not only are stablecoins um com compatible with that type of innovation, they're also frankly responsive to monetary policy and central banking innovation. The real crux inside the United States and the real place where we're an outlier is we, we're, we're one of the only advanced economies that doesn't have a federal payment systems charter. And I think if we want a CBD C or even fed now to work well, other entities other than banks need to have access to it. Do you think the CBD C is coming in? The U SI? Don't think so for a lot of reasons, not least of which of course is our societal tendency to like freedom to like privacy. I think the air gap between the central bank, your wallet and how you spend your money is a powerful feature in free societies. And I don't think the United States is ready for that operating model. We could barely pass stablecoin legislation in no small measure because of state interests and this boundary question around federal preemption is an societal debate that we have even the fed's own acknowledgement of any central bank experiment at the FED would require congressional authorization before it is even launched. And so I don't, I don't think the US would, would operate in that type of structure, but we should absolutely encourage public sector payments innovation as well in other areas of the world where cbds are maybe being piloted. What's it like working with regulators on stablecoin legislation there? Sure. Well, look, I just returned from a trip to Brazil among other countries. And when you could see a industrial policy at work from the regulators and partnership with their private sector and in partnership with banks and non banks, you could actually see the benefit of of pro growth industrial policy at work in Brazil, for example. Uh and in Brazil, they have launched a whole host of innovations, one of them uh a payment system known as picks that is available across the entire country for both bank and non bank actors all the way up the value chain from large enterprises to small. That's incredibly encouraging. Um And I I think the operating model we need to encourage inside the United States with payment systems. Innovation should be exactly that should follow a uh uh the more optionality we have in payments including cash, the more resilient an economy we will have domestically and the more we can protect the role of the dollar around the world. You mentioned this a little bit earlier. The web three programmable wallet Circle, I believe is taking care of fees there. Can you explain to us what that product is and how we might see it unfold? Sure. Well, so Circle Circle and US DC very broadly is a developer first innovation, the totality of our payment stack and US DC itself is open source technology and that often is missed. For example, you know, it would be the equivalent of paypal enabling anyone anywhere to build a paypal wallet themselves. But most, most of paypal's technology stack is proprietary and closed, meaning benefiting only paypal. Whereas in our world, we're trying to build an operating model in which 1000 flowers can bloom, developers can develop all over the world. And I think that's part of what speaks to us dc's ubiquity all over the world. 190 countries, digital wallets, thousands of digital wallets support us DC. That's a feature of building for open finance. And what we've also realized is that the web three service platform also needs to be, the technology itself needs to be put into the hands of millions of developers all over the world. So that too has become a big technology offering from circle. All right, we got to wrap. But I have to ask you before I let you go. Do you think we're going to get crypto legislation anytime soon? Of course, we have an election coming up next year. We don't have a speaker right now in the house. Hopefully that will get sorted out. Do you think that all of this is kind of just going to delay any real movement on legislation? And we're only going to see something tangible happen in 2025? I do think, I do think there's a possibility this calendar year to attach crypto legislation to a must pass congressional resolution. You must of course acknowledge that we have a budget crisis looming again without a speaker. We have this fiscal cliff and sort of a debt ceiling debate looming once again on the horizon. So I do think eventually a crypto bill can get attached to a must pass congressional resolution, but I'd rather get a really good durable piece of legislation out of, out of Washington than bad legislation that happens quickly. Dante, thanks so much for joining this special show. It was great to hear your insight. Thank you, Jim. That was Circle Chief Strategy Officer and head of global policy. Dante Dear.

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