The Agentic Economy: How AI Agents Will Transform the Financial System with Circle Co-Founder and CEO Jeremy Allaire

0:05Today I know priors, we have Jeremy Allaire, the co-founder and CEO of Circle. We'll be talking about cryptocurrency, AI, agentic payments, AI evolving on the blockchain, and a variety of other topics. Great. Well, thank you so much for joining us today. It's a pleasure to have you. It's great to be here. Thank you. So maybe we can start with you just giving a quick overview of Circle, what you do, how you approach the world, because I think we're going to be talking a lot about stablecoins, crypto, AI, and how all these things tie into sort of the agentic future. But I'd love to just start with sort of origins of the company, what you all are up to, and we can go from there.

0:36Yeah, for sure. So, yeah, Circle's been around for a while. I co-founded the company over, yeah, 13 years ago or so, 2013. And really, at inception, I was really excited about this idea that we could create a protocol for dollars on the internet. And I had been really excited about what was happening with technologies like Bitcoin and had been working on the kind of internet infrastructure for a long time and got really excited. Like if we had like a protocol for dollars on the internet that, you know, potentially we could have a way to store and move value, you know, instantly, globally, frictionlessly at no cost, ultimately.

1:16The other idea that we were really excited about back then was this idea of programmable money and the idea that eventually these networks, blockchains, would become like operating systems. And you could actually have machines that intermediate economic activity and financial activity on the internet, including like autonomous software machines. And back then, we didn't have generative AI or anything like that. But this sort of idea of kind of commoditizing the kind of payment utility layer with like very safe digital, dollar digital currencies, and then having like programmability of that with machines that are kind of tamper resistant, can run on the internet.

1:55That's what kind of drove the founding of the company. And the view was like, if we could do that, like we could actually improve the financial system, make it safer, make it more accessible, make it more efficient and kind of derive new utility from money that we haven't had before. And so that was sort of where - Why is the dollar aspect of that important? So if you look at a lot of the things that happened in cryptocurrency in the early days, it was really about creating things that were divorced from the traditional financial system if possible, or were not dollar centric. So, for example, Bitcoin was in part a response to the great financial crisis and the view that all sorts of weird bailouts happened there.

2:27And therefore, we needed some alternative sort of financial infrastructure for the world. Yeah. So I think so I actually it's what's very interesting is like I, you know, I believe in kind of Austrian economic thought. I was, you know, studying Austrian economic thought like in the early 1990s for a very long time. And so I've been interested in sound money theory. And actually, it was studying the kind of impact of the global financial crisis that drew me into this, because my view is like, there has to be a way to build like a safer financial system. And the key issue there was, I was interested in this idea of full reserve money.

3:05And in some ways, Bitcoin is full reserve money, because you know, you kind of, there is no way to fractionally lend Bitcoin per se. Full reserve money means currency that's backed by something hard behind it, some asset. Doesn't necessarily mean it's a hard back. Full reserve money is different than, say, full reserve banking, I should say, is different than fractional reserve banking. And so, you know, back in, there was another major economic collapse, which was the Great Depression, the run on all the banks and all that fun. And in the 1930s, there was a really big debate about, like what's the right construct for the banking system and the financial system.

3:42And there was a proposal from a group of economists called the Chicago Plan. And the kind of ringleader was a Chicago economist, actually, it might have been a Yale economist or Princeton at the time, but Irving Fisher, who wrote a book called 100 % Money. And that idea was that full reserve money was essentially, you know, government obligation money. So it's still the obligation of the government, like the U.S. government in that instance. But that essentially you can have that and you can hold that, but you can't take that and then fractionally lend against it. So you have kind of a full reserve, but you can only lend full reserve money.

4:22And so that was a big proposal for how to structure the way the financial system worked. And it was actually lobbied very, very hard against it by the banks. And the banks really liked fractional reserve. They like to be able to have the inherent kind of leverage and risk taking and instead convince the government to establish or they collectively with the government sanction established a insurance company called the Federal Depository Insurance Company Corporation. And so that was a kind of corporate insurance model, but the risk taking still existed. And so we've continued to kind of face those issues.

4:57The Great Financial Crisis was an example of 30x leverage, 12x leverage, 14x leverage against these sort of base layer. And so my philosophy has been, well, right now, in terms of general utility, our existing economic system, like it does depend on really major reserve currencies like the dollar. And my view is like, that's going to continue for a while, maybe 30, 40, 50 years. It'll continue for a while. But what we want to do is construct a system that is, in fact, safer. So a full reserve form of money. And that's what stablecoins are. That's what dollar stablecoins are. And in fact, with the Genius Act that passed last year, it's sort of codified in law.

5:37Like, you can't do anything with this. It's like this very narrowly bound, narrow money kind of model. And so I think in some ways, like that original vision, we've now got established in laws around the world. And now we have to do more with it. We have to make it extraordinarily useful. You can lend that form of money as well, but it's just that you can't do fractional reserve. So what are stablecoins currently backed by? My understanding is, for example, the stablecoin companies are big buyers of treasuries or US treasuries and other sort of instruments like that. Can you explain a bit more what tends to back these things?

6:10Yeah. So up until really the last couple of years, you know, stable coins like USDC had to be always one for one redeemable against, you know, very safe liquid assets. And we couldn't take risk outside of what was permitted under the kind of payment system laws that regulated us. And so that was circled. there are other people who didn't take that approach. And, you know, but, you know, sort of fiat stable coins in this way, we're back that way. Now, laws have now come into play in major jurisdictions, whether it's in Europe or Japan or the US, etc. And we've been following the, whatever laws apply to us, you know, whenever they apply to us, obviously.

6:54But what that's really led to is an architecture, which is basically what's now federal law, which is really holding only short duration U.S. government treasuries or treasury collateral that is overnight with global banks. So that's very safe overnight treasury collateral for cash. And then some amount in cash that is for kind of immediate liquidity. But in that case, it's sort of holding it in these sort of big custodial institutions like Bank of New York that holds hundreds of trillions of dollars, et cetera, of assets. And so that is essentially the architecture of USDC. And we're very transparent.

7:36We have daily transparency onto most of it through a system we set up with BlackRock. So USDC is like a crypto token that anybody can effectively purchase and in exchange for$1 you'd get one USDC and the USDC continues to be backed by a government treasury like a short-term T-Bell or some cash or some exchange. That's right. It's backed by treasuries, repos, and short duration T-bills. The average duration tends to be of like the T-bills and that portfolio tends to be around like 13 days. So it's super, super liquid and kind of, it sort of allows it to be treated as like a cash instrument. What do people do with it?

8:15What are the main use cases of USDC? The conception of this obviously is like a general protocol for dollars on the internet. And in fact, the whole design is, This is like a general purpose, general architecture money. And we actually see it used, you know, from at the very smallest end, like someone who's paying, you know, 25 cents for a digital object in a digital game that's built on a blockchain, that would be like one end. Or even now we're starting to see, and we'll come back to this topic, I'm sure, you know, AI agents that are paying for the output of essentially the AI tokens of another AI agent.

8:49And they're spending, again, just$1,$0.50,$0.20, et cetera. So super tiny transactions at one end, all the way to the largest electronic trading firms in the world that do huge amounts of capital markets activity who are settling multi-hundred million dollar transactions. And the powerful thing is, it's all the same. Just like if I send you an email and my email is like, hey, this is what I had for breakfast, the payload of that is the same as if I sent you an email that had like a CAA dossier attached to it. Like USDC doesn't care, you know, so as a, as a general architecture, it can be used across a huge range of things.

9:27And we have everything from merchants in Stripe and Shopify that are using it to Visa, actually using it themselves to actually move money on their own internal network instead of using the legacy banking system to lots and lots of kind of neobanks, remittance companies that are using it as a way to move value. You know, a great kind of B2B fintech ramp just yesterday launched, you know, USDC as like core to their treasury system. You can use it to pay invoices, pay anywhere in the world. My sense is some of the reasons people do this is number one, you can do it at any time. So for example, if I send a wire, I know a lot of crypto companies, for example, that when they raise money, they ask you to send USDC because instead of hitting a wiring deadline in the afternoon, you can wire the money on the weekend.

10:09You can send money anytime. It just works the way the internet works, right? I mean, our expectation is like, I can pick up, you know, my WhatsApp or I can pick up my WeChat and I can just communicate in video with anyone anywhere and it just works. Right. And my expectation is like, hey, if I make a piece of software, like, and I put it on the Internet, like billions of people can access it. I don't need to do something special. And I think that's, you know, basically this is just Internet native and it runs on Internet protocols. And so it behaves the way that any piece of data or content behaves on the Internet, which is what our expectations are.

10:40You know, most people's expectations are. Yeah, I was just trying to enumerate a little bit of like what makes it a superior instrument for all sorts of purposes. And one is 24-7 accessibility. Two, maybe some form of transaction fees relative to the volume. And then three is, my sense is it's also a way for people to participate in U.S. dollars who often would not have access directly. And so they use cryptos as almost a proxy too. Yeah, for sure. I mean, I think store value is a really big thing and we see that. And in fact, like the law that was passed last year, the Genius Act, like a big motivation for the administration.

11:11And this is something that we've been proposing and kind of pushing for a long time is that this is a way to continue to export the dollar. And so we're now exporting digital dollars and we're doing that all around the world. And that's like strategically important to the United States and from a geopolitical, geoeconomic perspective. But, you know, there's other things too, which is, this comes from my own background as well, which is these are, this is programmable money. There's never been programmable money. Like you actually have essentially like our stable coin network is just a public API on the public internet that anyone can plug into and use.

11:47And so if I'm a developer and I want like global dollar settlement and I want to provide that as a capability to my users, I don't have to ask permission. I can just go connect to that smart contract, connect to that public API, and boom, I have now an application with global digital dollar utility. And so that's really different. Yeah, and smart contracts is basically a way to write code that's wrapped around this money that allows you to effectively have a virtual contract online. So you can say under XYZ conditions, pay this out. We're going to generate a financial instrument off of this. And it's just kind of based on this other layer that you can plug into effectively.

12:23Yeah, that is definitely the case. And I think the idea of programmable money was, again, this early idea that we had. And smart contracts was sort of the original expression. But when I looked at that 13 years ago, my view was that blockchain networks are operating systems. They're going to be operating systems. And so when we think about operating systems, we have lots of paradigms for that. We have mobile operating systems. The web was itself kind of an operating system with a runtime and a language model and an object model. And, you know, clouds became kind of like these big virtual operating system environments.

12:57AI foundation models are now essentially operating systems that execute tasks and other things. Blockchains are operating systems. And they have compute engines. They have virtual machines. And you can write Turing complete code. You can write software that runs on these. but there's some really key attributes that make them different. So the first is that the code is sort of tamper-resistant. Once it's published, it's sort of like out as like a machine that's tamper-resistant. The second is it's perfectly auditable. You can audit every single input and output of that machine, of that code in real time.

13:29Because it's all on a public blockchain, so anybody in the world can look it up. So it's like all the compute is public, accessible, it's open-sourced by nature, and that's really powerful as well. And, you know, it also has these sort of essentially kind of transaction and compute integrity assurances. And this is really key, and it ties back to AI as well, which is like you want assurances that the machine is doing what it said it's going to do. And you want kind of the inputs and outputs to be provable and the state of the machine to be provable. And these are things that it was not easy to do in the past.

14:06And so these network computers, these operating systems now provide for that. And as we're moving into the AI-driven economic system, right, having those mechanisms becomes even more important. It happened to be important for financial transactions where, you know, integrity, proof, audibility, verifiability are like intrinsic in a fiduciary apparatus. That was like really key. But now when we're dealing with, you know, kind of autonomous actions in the economy, that also becomes extremely important. It would be great to talk about that because, you know, geez, probably seven, eight years ago, me and my friends used to speculate that the most likely place maybe the AGI would emerge, which again, I don't think is going to be the case in the future, would be off of the blockchain because you had these effectively agents, very simple agents even running back then in some sense in terms of doing transactions on the blockchain.

14:58And you had these economic games that were multi-turn economic games to some extent that these actors could play. And so we said, isn't that a great place to basically evolve intelligence, right? Because you have these multi-term games, you have economic incentives, you have game theory, you learn all sorts of lessons off of that. Obviously, there's a very different world now with sort of generative AI and foundation models. But I'd love to hear your view of where is, where are Genentech payments going? Yeah. And is it going to be crypto? Is it going to be more just traditional banking systems?

15:24Is it a hybrid? Like, what do you think are the drivers of that? I mean, there's a lot in there. There's a lot we could talk about. So maybe first, like, I think, you know, My own view is that we're going through a pretty steep kind of curve right now. We're like in about three months into a pretty dramatic shift in kind of the fundamental capabilities of technology, probably the most dramatic that I've ever seen in my own time in technology. And I think that shift is effectively going to mean that a couple of things in my view. So the first is that more and more of the actual work that is done in the real economy, especially in, you know, kind of what we call the white collar economy, but in many, many areas of service and delivery and so on, like so much of that is going to be conducted by AI agents.

16:23And so AI agents conducting the work, AI agents collaborating with each other, AI agents consuming services from each other and kind of purchasing effectively specialized intelligence or output, et cetera. Like this is we're on a really interesting curve there. And so the kind of agentic economy is being born as we speak. And in that world, we need a different infrastructure for the financial intermediation. Why? Well, we don't have an infrastructure that can support that. We don't have an infrastructure that can work globally, interoperably, instantly, that can be programmed through software layers by arbitrary pieces of software.

17:05That doesn't exist. We need an infrastructure where the agents themselves can dynamically create and spin up different kind of financial endpoints themselves. We need transactions that can scale potentially into the billions or trillions of transactions. We don't have that. We also need the ability to kind of handle transactions at micro scale as well. So, you know, for example, consuming a certain amount of intelligence might be five cents or 10 cents as it is with these. And so we need we need that to work. We need that to work in real time, again, between any piece of hardware, software, anywhere in the world.

17:42Isn't arguably all that, though, stuff that people have been talking about for a long time in terms of just crypto, like the benefits of crypto? It hasn't really become possible until really just the last couple of years. So it really took kind of third generation blockchains to actually deliver on this. So now today, like, you know, you actually can look at like transaction volumes of USDC, which is by far the most transacted digital currency in the world, way more than anything else. And transaction volumes have grown incredibly. And off of like a monetary base, it's also growing, but the transaction volumes are growing way faster.

18:17And that's because money velocity is picked up. The cost to transact is now subcent reliably. And so when you take out the cost, you can do more transactions. And so with ARK, which we can come back to, we now have an infrastructure where we can conduct transactions for a millionth of a penny, which just was never feasible before. Yeah, tell us more about ARK, because I know you folks are rolling this out as your own blockchain, et cetera. I would just love to learn more about what it is, what are the use cases, what the branch is. set up. I would love to talk about that. I want to finish one other thought on this sort of agentic piece, which is, I think, in addition to this sort of financial infrastructure that's needed in this world and the role that will play, and it ties back to your actual kind of question and stuff that you were thinking about before, is my own view is that agents and seeing what happened with OpenClaw and Moldbook and all this stuff is all really interesting because it showed that you could actually see emergent forms of cooperation, of interaction, of engagement amongst AIs.

19:24And that's pretty powerful. And clearly, like, we're at the front edge of that. Like, there's going to be a lot more of that. And so if you have AI agents that are from around the world, they could be generated from lots of different models and LLMs and the like. and they need to kind of coordinate. They need a medium, a trustworthy medium where they can do that, where they can instantiate an entity, where they can store value in that entity. They can execute and arrange contracts that intermediate the work and the tasks and that where all of it is real-time mathematically and computationally provable.

20:03And so blockchain infrastructure now actually gives us the building blocks for when I say agentic economic activity, most people think, oh, that's e-commerce or payment. It's not. Agentic economic activity is actually how does the organization of what we used to think of as labor and capital, but essentially like kind of how does this organization of kind of compute work happen and what kinds of kind of corporate forms might emerge in that world to do that? And so I'm actually quite interested in that. That does tie to ARC because that's a design surface that we care about, which is basically, we describe ARK as an economic operating system.

20:43And this goes back to a comment I made earlier, which is these networks are operating systems. And we're moving now from the kind of like early adopter era, which you're very familiar with, which was mostly around like, you know, speculation on different things. There were some interesting things like NFTs or whatever. But like, we're now moving very squarely because of stable coins into like the real economic activity side of this. And I think my view is that as we go forward, the substance of what we think of as contracts, the substance of what we think of as corporations are going to be software machines themselves.

21:23And so we're going to see this progression. And so ARK, as an economic operating system, is conceived of as a compute environment for laying down all of the building blocks of economic activity, whether that's storing value, moving money, or instantiating a corporate form, or manifesting and intermediating complex contracts. Like, a lot of this stuff, which was conceptual a long time ago, is now, like, real. And we have a legal basis for it. We have a regulatory clarity for it increasingly. And it's interesting is that the drivers of this machine economy are actually machines. And so our view is ARK is designed for this moment, which is a moment when machines are going to play a larger and larger role in all of the output of the economic system.

22:15So if I look at a lot of the blockchains that people have found exciting over the last few years, obviously there's Bitcoin, which was almost purposefully designed in a certain way to make it a little bit less adaptable to all these new things that are happening now. Solana, Ethereum, et cetera, have been in the past the traditional places that people have thought about ways to build smart contracts, to build a lot of the types of things you just described. What do you think is the difference between some of these more traditional L1s or blockchains and sort of what you're doing at ARK? Yeah. So a few big things.

22:46I think the first is that, you know, as I think you were sharing or we were talking about before we started recording, but like, you know, I think a lot of the designs on blockchains from let's call it the early adopter phase, a lot of it was sort of like, hey, we're going to build something that is completely, you know, censorship resistant or outside of the reach of governments. It's sort of like we're building an alternative universe. And that's like the goal. And I think, you know, decentralization is itself a good goal. But I think as we move from early adopter to sort of mainstream scaling, where, you know, whether it's, you know, a major company like Walmart or it's, you know, a household that's thinking about like how they store their wealth, the intermediaries, and there will continue to be intermediaries, we're not all going to be your own bank.

23:37The intermediaries have obligations in terms of the kind of like robustness of the infrastructure that they have to run. And so ARK is actually set up with a number of features. One is that it's actually a known validator set. And so the infrastructure operators of ARK are major financial infrastructure companies. And those are companies that are held to these very high standards for InfoSec compliance, reliability, availability. What are some examples of some of the validators on your network? So we haven't announced the validators yet, but that will come in due course. But, you know, the model at a high level is that you have financial companies, financial infrastructure companies, including possibly like large technology companies that are responsible for running the infrastructure.

24:32So it's a distributed infrastructure. But because of that, we're able to provide assurances. We're able to provide assurances that like the bad guys aren't running your transactions. And we can also run assurances that transactions actually have settlement finality. They can't be hard forked. They can't be reorged. And so you can get what's called deterministic settlement finality. And that's really important, whether it's a security or a piece of cash or whatever it is, in essentially hundreds of milliseconds. And that's really important. The other piece is that it's sort of designed with real money as the foundation.

25:07So there's not like a volatile gas token. USDC is actually the default native token, which is now under the law, essentially like a legal form of electronic money. So you have real dollars as the way that people understand. And so to a company that's like doing this, it's like I pay AWS credits. I understand how to budget for that. My treasury, my operations, my compliance, et cetera. So this allows basically for like actual usage to be make sense both to the user, to the developer, to the corporations, the FIs that deal with this. So that's really important. And then I think the other is like we've been building in a lot of primitives that are important to like the way that payment systems work, the way that capital markets work, the way that, you know, the privacy requirements that are needed in some of these cases, but still allowing for like compliance to happen.

25:58So we've kind of purpose built this for a different kind of set of participants who need to run on it. And we've had the advantage as Circle of working with many of the leading financial institutions that are getting into this space over the last couple of years, whether it's the visas or the Black Rocks or the Bank of New York Mellons or all these types of companies. So we've been able to work with them and we've been able to work with governments around the world to hear like, hey, like central bankers all over the world, like what's important as you think about like allowing this internet infrastructure to run the financial system.