Why Circle’s CEO Says Stablecoin Regulation Is Essential | Leadership Next

0:00I knew that it was going to require changing global policy to take on this technology and in turn changing the policies and laws of the biggest countries in the world. Hi everyone, welcome to Leadership Next, the podcast about the people and trends that are shaping the future of business. I'm Diane Brady. And I'm Kristen Stoller. This week we are speaking with Jeremy Allaire, the CEO of the very popular IPO this year, Circle. First time that he spoke with us, which is at the Fortune Global Forum in Riyadh, Saudi Arabia. and it was months after he had been at the White House in July when President Trump was establishing a legal framework for stablecoins when they signed the Genius Act together.

0:43So he talks to us about that. Well, that's what they do basically is the USDC stablecoin and he has been a lone wolf out there for many years talking about the need for regulation. He very much distinguishes between a lot of the cryptocurrencies out there, stablecoin being very different and just the whole realm of blockchain, financial, and innovation. He's a three-time entrepreneur. Yep, founded Brightcove. And we talk a lot about trust, about regulation, about the balance he's felt between innovation and also lobbying on the Hill as well. Definitely a role that has a more political tone in this environment.

1:21And I think it is an area everybody's curious about because the words financial and innovation have not always ended well in this country. and he has very different predictions for what the future looks like. So we'll be right back with Jeremy after this break. Quantum computing has the potential to transform industries by solving optimization problems, boosting machine learning, and sparking innovation in logistics, finance, and materials science. Jason Garzada, CEO of Deloitte US, is a longtime sponsor of this podcast and is here with us today. Hi, Jason. Thanks for joining us. Great to see you, Diane.

1:58So what is quantum computing and how do you see it transforming industries? Well, quantum computing has been a topic for some time in research circles, certainly closely watched by business. But it's fundamentally a different computing paradigm that uses the principles of physics instead of mathematics to drive computing outcomes. It's been largely the domain of research, and it's becoming seen as being a more viable commercial computing methodology and approach. And I think the real uses will be ultimately around very complex optimization scenarios, further enhancements to scaling machine learning, and also very complicated simulations that could be relevant to a whole host of different business applications.

2:47Jason, what steps should leaders take to prepare for both its potential benefits as well as its potential risks? It's really about readiness planning right now and preparing an organization to understand the implications. So it's about understanding what skill sets would be required, what type of cybersecurity protocols would need to be in place, and begin to think about the types of use cases that would be very germane around optimization and simulation. Excellent advice. Thank you so much, Jason. Jeremy, let's start with the basics of what is stablecoin. This word stablecoin kind of emerged organically.

3:28It was not a word we chose. And the most obvious definition is sort of you have all these cryptocurrencies that are volatile and not stable. And so something came along that was a cryptocurrency that was stable, therefore a stable coin. Now, the definitions around this have really gotten more precise. And so I think that the most important definition is actually the legal definition. So what's happened over the past few years is that stable coins, a particular form of stable coins, have been codified into banking and payments law in many of the biggest jurisdictions in the world. Which is pegged to the currency.

4:11Yes. So in this definition, a stablecoin, what is often in the US, for example, the law calls these payment stablecoins. But in these legal frameworks, a stablecoin is issued on a one-for-one basis with an existing fiat currency, a dollar, a euro, a Hong Kong dollar, a peso, etc. So it's fully reserved. It's typically, by law, required to be held in the safest of backing assets. So unlike a bank, which you give a bank a dollar, they go lend it and invest it 12 times. That's why there's all this risk in banking. Whereas a stablecoin always needs to be redeemable. And so by holding it in these very, very safe, like, you know, T-bills or, or cash with the big cash custodians of the world, or even holding money with the central bank itself.

5:06So this one-for-one backing, this high-quality reserves, and then oftentimes from a technological perspective, what makes these unique and powerful is that the digital currency unit that you issue, the so-called stable coin, like USDC, is something that just free circulates on the internet. And so you're basically untethering the money from the legacy electronic money system and turning it into actual digital assets, actual digital currency that can move around the Internet at the speed of the Internet with very low costs and with high utility. You've had quite a win with that recently, too. In July, I believe you were at the White House with President Trump establishing the legal framework for stable coins, the Genius Act.

5:53Yeah. Tell us about what that was like. Describe the scene. How are you feeling? What was it like meeting with President Trump? Well, you know, it's an amazing experience. And, you know, a lot of times people see these things and they think, wow, this is, you know, where did this come from? I didn't know about this. Well, I've been going to the Capitol for 12 years, testifying to Senate, the House, meeting with policymakers in every country in the world. And really for five years, trying to work with members of Congress to enact a stablecoin bill. And there has been, in fact, a very strong bipartisan effort for many years to do that.

6:34And it really all culminated, obviously, in the past several months as this actually got momentum and bipartisan momentum. And one thing I like to always remind people is that this is the only major piece of bipartisan legislation passed in this Congress. It is it is, in fact, bipartisan, supermajority in the Senate, really broad support in the House. And so this issue of how do we upgrade the dollar? How do we make the dollar more competitive? How do we unleash the market with safety and soundness and consumer protection built in? How do we do that as a national economic, if not national security priority?

7:17So that was really the backdrop for this. And then so coming to the White House and being part of the actual event itself, yes, I certainly got to meet the president. You're a big donor to the president, so I assume you met him before. So actually, I had not met President Trump before. And Circle is a, you know, supports both the Republican Party and the Democratic Party, as I like to say. You know, Circle is purple. You know, we recognize that these are bipartisan issues. and whether it's the stablecoin issues or right now new laws that are being discussed around the structure of digital tokens and the markets for digital tokens.

8:05Again, very bipartisan issue and we're seeing that. And we're in the early days of this technological development. The laws and policies that will need to deal with this new internet financial system are going to continue on for the next five years, 10 years, 15 years, 20 years. So we take a long-term view on how the, you know, the existing legal systems we have are going to evolve. It certainly seems easier under this administration to get all this through, or how are you feeling about it? I feel like that's a complicated, yeah. Yeah, because I'm curious your take on that. There is no doubt that this administration saw the development of blockchain technology, digital assets, and stable coins as an important technology area.

8:55Just like AI is an important technology area, there's other important technology areas, and made a big push to take what had been already, I think, well-moving pieces of legislation and really push that. But also, I think it's an innovation forward, technology forward, entrepreneur forward environment. And that's very positive from my perspective. And so, you know, we're seeing that and I give the administration a lot of credit for really seeing this as an innovation issue, not just a risk. Yeah, I think it's one of the areas people do look at and see a win. You know, you have been, especially in this iteration with Circle, You've been talking to Elizabeth Warren.

9:41You have, you know, with Tether and Howard Lutton. I mean, I feel like you've been out there creating a market, building legitimacy for this. And in many cases, to me, you've seemed like you've been alone in a lot of those pursuits, just from being a figurehead in the industry. Did that take any courage or was it just, hey, if I don't do it, my industry, this company won't exist? I think it's really more the latter. And actually, one thing I'd say is when I got started with the company, one of the things that was very clear to me is to reach the ambition of what I saw becoming possible. I knew that it was going to require changing global policy, not just like literally changing global policy and in turn changing the policies and laws of the biggest countries in the world.

10:32And to actually update them to kind of take on this technology. And that's generally not something that an entrepreneur goes, yeah. It's not me, who? Yeah. But that's actually what I felt. and I felt like at that stage in my career, which again was back in 2013, like that's really hard, but it's worth it. I have this high conviction. I have this belief system and I'm trying to provide leadership. And I think it's been effective and I've grown a huge amount from that experience. I think you said it right, that there's a lot of misconceptions out there about what you're trying to do, I think in this moment, especially people are really hesitant to trust, you know, government, big tech, especially as it relates to money.

11:21So who do you think, you know, we should trust with our money in this digital economy? Certainly as a firm, right, we've gone out of our way to be trusted and transparent and compliant and have good governance and so on. But one of the things I'd say is what's really powerful about blockchains and cryptography and cryptographic innovations in money and economic systems is they actually give us an underlying set of materials to work with that society's never really had. They give us this material where all of the building blocks of economic activity, from who owns what to who transfers what to who borrows what to what risk is underlying that to, you know, the entire life cycle of economic activity can be moved from the, let's just call it the paper slash legacy electronic world into something where everything is transparent, provable, auditable in real time, where you can have the execution of rules and contracts in code and have that all be auditable in real time.

12:42And so this is, you know, part of this is, you know, the reason people call blockchains trust machines or truth machines is that cryptography gives us with math the ability to prove things. And so I think a big part of the impetus, not just for Circle, but for so many others in the industry, is how do we build a more trustworthy economic system with more transparency, more inclusiveness, more visibility, as opposed to one which is opaque and centralized, and we don't really know what's going on, and where that opacity and the risks that are embedded in that opacity are really challenging. So I think it's part of a technology movement to build a more trusted infrastructure.

13:27Blockchain, for sure. I want to go back, not totally to the beginning, unless you have some childhood memories you want to share, but your first company you co-founded. Talk about the genesis of that, because I'd like to take a bit of a walk through the Jeremy Allaire greatest works, because you have had, I think, an interesting history that's brought you to where you are today. Yeah. I mean, look, the only thing I'll say that's relevant from my childhood is I was very lucky to be born in the Apple II generation and had access to really great personal computing technology when I was really young.

14:02And so that captured my imagination about what's possible when you have this technology at your fingertips. You're talking about that 1984 commercial. Before then even. Well, you started your first venture at 14, correct? That is actually true. A layer of sports carts. It was the first venture, which actually in the end has been quite successful because I have unearthed some of these baseball cards recently. Oh, and now they're valuable? With my daughters. And I was like, wow, these are so valuable. What was it? Explain it to us. I mean, basically, you know, I actually had to do with the computer as well, which is I was really interested in baseball, interested in, you know, trading cards because kids that age were like trading cards.

14:42and actually through my brother got really interested in, you know, could you actually predict, statistically predict, like who would be the good players and who wouldn't? You were moneyballing early on. So Bill James is the famous econometrician who wrote the kind of book on the sort of applying statistical metrics to baseball, which then actually relates to the movie Moneyball, which is a great, great book. But so basically, when my grandparents died, my brother and I each got a little bit of money, very small. And I convinced my parents to let me just use it to buy baseball cards and start a baseball card business.

15:23So I was trading cards, you know, going to trade shows, all of that, but also was trying to use spreadsheets, which was very novel at the time, to be able to forecast like which players might be based on their prior record. And then what, bet on them? We'll buy them. We'll buy them. We'll buy the cards. Accumulate the cards, right? Accumulate the cards going into the season and then see how the season goes. But to make a long story short, yeah, I mean, I use this to help pay for college and or at least the spending money of college and so on. But so lucrative business for you. There you go. I think, you know, kind of coming back to the other question, though, during college in 1990, I got really lucky and got connected to the precursor to the Internet.

16:13It was an academic network that was part of a network of academic networks that were connected to other networks of academic networks around the world. But that was the Internet. And I became completely obsessed with this. And there are a lot of experiences that I had at the time in 1990, 91, 92. But basically, it became my obsession. And I was interested in how this could be commercialized as an infrastructure. I was fascinated by the technology protocols of it itself. And really, when I graduated college in 1993, not a technical background, political science, philosophy, economics is the background.

16:55It's usually what you study to go into office. The PPE, isn't it? PPE, yeah, exactly. But I was quite interested in the impact of this globally available technology and how it could actually change society. And that really led, before the web really existed, I was very passionate about all these ideas. And then in the very early genesis of web technology, really saw the opportunity to essentially create a way for people to actually create interactive software that can run through these emergent web browsers and kind of unlock interactivity and commerce and other things on the internet. So that first business, we created a product called Cold Fusion.

17:41We being who? My brother and myself and some other college friends who were really involved in this startup. And I had a highly successful product that millions of people used our products and grew to be kind of some of the most popular tools for building the web and building a lot of capabilities that people had on the web. I've used Brightcove, but that's part two. Yeah, that is part two. Yes, exactly. So really the first phase was about kind of using, enabling the web as an application platform, which was a novel idea in 1994, 1995. That was a public company. We were public for a couple of years.

18:17The dot-com crash happened. We merged with a larger internet software company, Macromedia, where I was CTO. And then that became Adobe. Did you guys collapse? Did your stock, I mean, I mean, the public company in the fall of 2000, yeah, it got hit like a lot of other stocks. But we actually merged. And in fact, the merged entity, we launched some incredible technology and products. And that turned into a highly successful growing business that then eventually Adobe bought for, I think, almost$5 billion. dollars. So, but in the meantime, I had then become very interested in how could the open internet, just like we had the open internet of information, how could the open internet become an environment for richer forms of media, like we're doing right here?

19:09Exactly. Video and television and that I sort of envisioned that there'd be this explosion in how television would be sort of recast and transformed and then founded Brightcove in 2004 on the backs of having created key technology to make video usable on the internet, which was Flash. The same technology that made YouTube possible also made Brightcove possible. And we built that, I built that ultimately into another global publicly traded company that powers, you know, still today, many major media companies, online video and brands and others as well. You know, it's interesting. Do you see a through line in terms of the types of companies that you like to build?

19:55I do, but I'm just curious if you do in terms of just what you gravitate toward. A hundred percent. I mean, at the bottom of this or at the foundation of this is really my belief that the open internet built on open networks, open software, that it increasingly kind of evolves into more and more layers of what society is. And I've been interested in sort of the different kind of shifts of societal functioning from, you know, information to media to communications etc I've always been interested in that the sort of the DNA of the internet and how it applies to those things so that's always been there also also very much with like a goal of connecting the world more deeply and how to connect the more more world more deeply a kind of view that the internet as a economic platform is is one which can help drive not just you know global growth but but more importantly like stronger forms of integration for the whole world and so that's been an animating thesis for me since 1990 really when I first got interested in this and wow that's 35 years now that's amazing so wild but you're so healthy someday you'll be saying, gee, that was 60 years ago.

21:23We'll try. We'll try. That is sort of the backdrop. And I think when I was first getting introduced to the internet in the early 90s, you know, what I was thinking about academically was how does the world work? How does the economic system work? What are these different international political and economic structures? You know, it was the end of the Cold War. It was the kind of, quote unquote, the end of history. at the time. And so I was very interested in, you know, what shapes that could take. And really, that kind of brings us full circle to circle itself, which is after the global financial crisis in 2008 and 2009.

22:09My interests in the global political economy, as I call it, were very seriously rekindled. And I became extremely interested in what went wrong here, What are the issues in the global banking system? What are the issues in the monetary system? What can be changed? And I developed a lot of ideas, but I didn't have anywhere to put them at the time because I was more like an armchair academic, you know, running a video company. And that really led me in 2012 to kind of connect the dots between this innovation of crypto as a technology and these ideas about how one might be able to reshape the way the global economic system works.

22:56And the more I thought about it, the more obsessed I got about it and the more it really led me to want to found Circle in 2013. team. Well, we've talked about, you know, Circle's recent successes, but I know the road hasn't always been easy for you. There have been a couple near-death experiences, Silicon Valley Bank being one. Walk us through those and your leadership during those times and how you came out of it. Well, I would say just as a general comment, entrepreneurship is very difficult. And starting a business, starting anything, whether it's social entrepreneurship or business entrepreneurship, But entrepreneurship is very difficult because generally you see something that's possible that doesn't exist yet.

23:45And so the cognitive bias of almost everyone in the world will be essentially we've already solved that. Why do we need that? Like, you know, and it's just really built in. So like there's like this cognitive bias that people have against these new things. Now, in my case, you know, in 2013, when it was like there's going to be a whole new infrastructure layer for the global economic system. It's going to transform the nature of money. We're going to have new forms of money. We're going to eventually have, you know, machines intermediating all of the economic world. And like and that and in my mind, like that'll take 10, 20 years, et cetera.

24:32But like it's going to happen. And I'm going to start by building on top of Bitcoin. And, you know, Judge Dredd was just arrested. And, you know, the only headlines about this are all about the dark web and so on. Like, let's just say, like, even though I had taken two companies public, you know, the sheer amount of skepticism and, frankly, concern. Like, can I even, should I be talking to you? Are you, like, involved? Are you involved in some, like, whatever? And so, like, you just face incredible hurdles. And so from the very beginning, whether it's the first company or the second company or this company, first, you have to convince people to come along with you who believe in the vision, who believe in the mission.

25:24It has to be a mission. It can't just be we're going to build something and make a bunch of money. There has to be a mission. And, you know, you've got to convince people that it's possible and it's going to be hard. You have to always tell people this is going to be hard. And you only want people who join who are like, yeah, I want something hard. Like if they want something easy, there's plenty of other places to go. If you want something hard, come here. And you're going to face that. So one is just building mission, vision into the culture, building an understanding that this is going to be hard.

25:58These are really key things to develop resilience. Because no matter what, whether it's today where Circle is a global publicly traded company, or when I started and everything in between, you're going to constantly face crises, setbacks, challenges. You're going to have things that are in your control and you're going to have things that are out of your control. Doesn't it help to have a nemesis? Because you were certainly the nemesis for Tether, for example. I remember Silicon Valley Bank where they had a field day because they were not going for the same, you know, the kind of the route you were taking, saying, well, look, here's what happens when you do go within the system.

26:36Do you find that motivating having these others that have looked at you as an alternative that they were trying to differentiate themselves from? Yeah, I mean, look, when I look at things, I generally am not looking at like a nemesis or this or that. I always have to be aware of like what what other things are happening around. And and the market itself, like people who want to use these technologies are going to be giving you feedback. Why do I want to use it? Why do I not want to use it? like what would be better? But for the most part, right, when you're dealing with something as new as this, as like we've invented a new form of digital dollars, that's pretty cool.

27:19Now, when you're dealing with something that new, the vast majority of the opportunity is still in front of you. It's not sort of what's going on around you right now. It's sort of in front of you. And so it really depends on kind of what your ultimate end state goal is. And so for us, you know, we've always known that we want to build something that is trusted, transparent, compliant, well integrated with the existing financial system and helps accelerate and build off of that and had a very high conviction that that would, you know, that would be the right strategy. And there may be other strategies that there may be other strategies that are also successful, but like that strategy we felt very strongly was one that, you know, we could build on.

28:09Well, circling back and again, no pun intended. Was there ever a moment that you felt like, oh, this could be it for the company and how to come back from that? I mean, multiple times. Yeah. I I mean, I think whether it was the Silicon Valley Bank, you know, the bank failures. And by the way, it wasn't just SVB. There were four or five banks that failed. Multiple banks seized simultaneously. The entire digital asset industry, like 5 ,000 to 10 ,000 companies were debanked in a matter of three days. Yeah, it's incredible. Like just a massive, massive shock, right? So it wasn't just the issue with SVB.

28:51it was really like this this broader kind of debanking of an entire industry and which created enormous challenges and and obviously um we responded extremely well to that and and actually we sit here today where our infrastructure runs with many of the world's global systemically important banks we have the best custodians in the world we have a robust regulatory framework on it. Like the, you know, the, the scale of, of liquidity and operations and so on is just extraordinary. Very successful IPO. Definitely. Yeah. I want to just, I'd be remiss not to mention that if I look at pictures of you several years ago, you're a different, smaller, leaner man today.

29:33Do you think that's actually, obviously, you know, tell us your secrets, but I'm curious, how important do you feel your journey to wellness, weight loss, et cetera, was in the success of the company? I think it's very important. Yeah, very important. I think. Was there a moment where you stood there and said, OK, that's it? Well, I'd say a lot of my desire to live well and live long really comes from the love that I have for my children and my wife and my family. Like that's really at the center of that because I want to be as healthy as possible for my family in the end. All of it kind of works together, right?

30:20So mental wellness, physical wellness, spiritual wellness, like all of this works together. So you can be a better person. You can connect and work better with people. You're more resilient. You can handle more stress. You can handle more complexity. You can be more attuned to people and connect better with people, your children, your spouse, others. So it all works together, in my view. And so, you know, I think that's certainly what I've experienced. So Jeremy, you recently made an announcement about a new blockchain. Can you talk to us about that and why when there are so many blockchains out there today?