Crypto Critics' Corner

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Episode 129 – Circle is losing to Tether (feat. Leo Schwartz)

Circle is losing the stablecoin war to Tether (Feat. Leo Schwartz) – Crypto Critics' Corner

Today Bennett and Cas are joined by Leo Schwartz from Fortune to discuss his feature article about Circle, USDC, and why the stablecoin can't seem to overtake Tether in marketcap or volume. Read the article here.

Cas Piancey and Bennett Tomlin are joined by Leo Schwartz to discuss his recent coverage of the evolution of Circle, USDC, and what it means for stablecoins.

This episode was recorded on September 11th, 2023.

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English Transcript:

00:00:05:05 - 00:00:11:15
Cas Piancey
Welcome back, everyone. I am Cas Piancey, and I'm joined, as usual, by my partner in crime, Mr. Bennett Tomlin. How are you today?

00:00:11:16 - 00:00:13:03
Bennett Tomlin
I'm doing pretty well. How are you?

00:00:13:05 - 00:00:20:05
Cas Piancey
I'm doing great. We're joined by a special guest, Leo Schwartz over at Fortune is joining us today. First of all, how are you, Leo?

00:00:20:12 - 00:00:25:03
Leo Schwartz
I'm doing so well. I feel like I'm fulfilling a lifelong dream. So a big honor to be here.

00:00:25:07 - 00:00:28:09
Cas Piancey
I'm sorry if that's in any way close to true.

00:00:28:14 - 00:00:34:23
Leo Schwartz
In my life. I mean, I guess the past few years, I don't think I've been around by a ton. It feels like that.

00:00:34:28 - 00:01:08:07
Cas Piancey
You did an article recently for Fortune entitled Circle Wanted to Create a Financial Revolution, Instead, it's losing the Stablecoin wars to tether. Bennett and I were immediately interested in this article. Obviously, we have a fascination with with tether. I think everyone knows that we we haven't talked about USDC and Circle that much though, and I think this is a good opportunity for us to dive into a different Stablecoin probably most people listening know what a stablecoin is, so I'm just going to give a basic definition 1 to 1 pegged asset that is traded on a cryptocurrency market.

00:01:08:07 - 00:01:19:26
Cas Piancey
So it could be 1 to 1 U.S. dollars, 1 to 1 gold, ounces of gold, 1 to 1, you know, euros or British pounds, whatever. But the idea of.

00:01:19:26 - 00:01:23:04
Bennett Tomlin
One to one pegged apple tokens being traded on FTX.

00:01:23:06 - 00:01:39:15
Cas Piancey
Yes, right. Whatever it may be. That's the idea of a stablecoin There's obviously more than 1 USD based stablecoin USDC is this major alternative to tether. Leo I'd love to hear why exactly are they losing the stablecoin wars?

00:01:39:20 - 00:02:16:27
Leo Schwartz
It's a great question, one that I go into this article. I would say what initially piqued my interest here is that I think there's an inclination in crypto media to always want to focus on the biggest fraudulent actors. Tether is obviously a recurring theme of interest among crypto reporters, but I think it's also worthwhile to look at the other companies which are probably abiding by the rules, at least to some degree more, and I think Circle really falls under that description where their whole thing in comparison to tether is we want regulation, we're working with regulators, we're trying to play by whatever rules are out there, and that's how they try to win over customers.

00:02:17:01 - 00:02:50:17
Leo Schwartz
And for a while it seemed like that was to be really successful. They were founded 2013 by the serial entrepreneur named Jeremy Allaire. In 2018, they launched USDC in partnership with Coinbase. They had the backing of groups like Goldman Sachs. They work hand in hand with other institutional firms and investors, and until last year it really seemed like they were going to be able to compete against Tether, which is obviously this very unregulated company firm that really just turns its nose at any pretense of trying to abide by whatever rules are out there.

00:02:50:19 - 00:03:18:11
Leo Schwartz
So when you look at last year before March Circle's other main competitor, which was BUSD, the Binance backed stablecoin issued in partnership with Paxos, had been effectively kneecapped by regulators in New York. Circle was ascendant. It seemed like they could maybe even overtake Tether. And then the banking crisis happened in March, and it turned out that Circle had $3.3 billion of its reserves trapped up at Silicon Valley Bank.

00:03:18:13 - 00:03:36:11
Leo Schwartz
That was, I think, 8% of its total reserves. Obviously, the main function of a stablecoin, is to serve as just a stable and with that in mind, the fact that all of its reserves were now in question. It set off a weekend of panic where traders were trying to exit out of their position.

00:03:36:14 - 00:03:56:20
Cas Piancey
Can I just ask? Most people are probably familiar with FDIC insurance. If you're not, I think right now it goes up to about $250,000 unless you're a billionaire or multimillionaire, in which case you have free reign and you are fully covered forever. At least that seems to be the case. I'm wondering why Why did they have $3.3 billion at SVB?

00:03:56:21 - 00:04:12:14
Cas Piancey
And considering that such a serious risk factor having so, so many U.S. dollars at one bank, why wasn't there any sort of risk analysis on having this much money in essentially one account?

00:04:12:17 - 00:04:35:10
Leo Schwartz
Yeah, it's a great question. And I think that that's remained a major question for people since that depends on what Circle's party line is, is basically we need to have some portion of reserves in cash as deposits in banks to basically be able to handle liquidity. As you're both aware, and I'm sure many of the reader or the listeners of this podcast are aware, it's very difficult for crypto companies to get banking access.

00:04:35:10 - 00:04:58:28
Leo Schwartz
And basically what Circle said is, you know, we were diversified, they were working with a number of banking partners. We thought we were as diversified as possible. Obviously they were not in the fact that they had 8% of the reserves at Silicon Valley Bank. I think they had $2 billion more deposits than the next biggest non Silicon Valley bank depositor at the bank they had.

00:04:59:02 - 00:05:13:18
Cas Piancey
If you look at more than Silicon Valley banks own company has had at Silicon Valley Bank and Silicon Valley Bank, which is just like when I saw that you would put that in the article, I was like, What? Like what is happening here? This is this, this is crazy. Yeah.

00:05:13:22 - 00:05:35:19
Leo Schwartz
And Paxos notably did not. So Paxos is this other stablecoin company, unlike Circle and we can go into this later. They followed a path of regulation in which they're a trust company with the New York Department of Financial Services. And I think they've come out pretty harshly against Circle really over the past two years and basically said Circle's not regulated and they're not following the same sort of risk analysis we did.

00:05:35:27 - 00:05:49:22
Leo Schwartz
But I would say since that event Circle has still maintained that they were doing everything that they could to play by the rules and they were following proper risk analysis. And really the issue was with the banking system and not with them.

00:05:49:22 - 00:06:18:12
Bennett Tomlin
If I remember correctly, I think two months before their depegs Circle disclosed that they had eight primary banking relationships that they were relying on at that point, including signature Silvergate. I think a customers bank. So the Silicon Valley, along with several others, and over those several weeks leading up to the eventual collapse of Silicon Valley, in that depeg, that number kept reduced as we got closer and closer to it as these banks failed or reduced crypto.

00:06:18:14 - 00:06:40:02
Bennett Tomlin
And so one of the things that I thought was really interesting at that event was Dante Disparte of Circle said that them doing more to try to avoid this kind of situation would have been risk reduction to absurdity. And Paolo Arduino, the chief technical officer of Tether, their largest competitor, said that it was a basic mistake in risk management to do this.

00:06:40:04 - 00:07:08:04
Bennett Tomlin
And that was like kind of a really interesting contrasting in frames between these two companies. And it was especially striking to me just considering Tether's historical tendency to put large amounts of customer deposits in shady companies and then lose tens or hundreds of millions of dollars of them without disclosure. I was struck wondering when I read it, if putting money in Silicon Valley Bank is a basic mistake in risk management, then what is putting money in Crypto

00:07:08:04 - 00:07:09:05
Bennett Tomlin
Capital Corp?

00:07:09:07 - 00:07:11:18
Leo Schwartz
Question For me.

00:07:11:20 - 00:07:14:06
Bennett Tomlin
I anyone really a return.

00:07:14:08 - 00:07:15:26
Leo Schwartz
To a rhetorical question guess.

00:07:15:28 - 00:07:37:04
Bennett Tomlin
Largely rhetorical questions. Kind of get it like a Circle. Probably should have been more diversified. But the interesting kind of undercurrent to me is that Circle was more diversified, say, three months before the dip pegging Circle had significantly more banking relationship ups and then basically got reduced to this point where eventually it was kind of the single point of failure.

00:07:37:06 - 00:07:47:23
Bennett Tomlin
And so it was interesting to me to see in these ongoing stablecoin wars over market cap in general, used to watch Apollo come out and make that kind of statement about his competitor.

00:07:47:23 - 00:08:11:10
Cas Piancey
For me, a question that I and I think I spoke to Bennett about this. They can't do a sweep account. Now, if anyone is unfamiliar with the sweep account, basically it's like if I'm an individual who's making millions of dollars every year, I can tell my my bank or some other third party like, Hey, move anything over $250,000 to a different bank account so that I am FDIC insured across the board.

00:08:11:17 - 00:08:31:18
Cas Piancey
And I understand when you're dealing with billions and billions of dollars, there isn't exactly a sweep account for that, but there are analogs to that as far as I am aware, and there are things you can do to mitigate the risk of having all of this money at one singular bank in one singular account. And I'm just curious, like have they are they doing that now?

00:08:31:18 - 00:08:44:09
Cas Piancey
Have have things changed since then? Is this something that like was a one time thing and they no longer are keeping billions of dollars in a single bank account? Or is this something that is like impossible to avoid for a stablecoin? Well, I.

00:08:44:09 - 00:09:07:04
Leo Schwartz
Will point again, I think Paxos is an interesting foil here, and they have come out pretty explicitly and said this and I know other analysts have as well, which is that it did seem like there were risk mitigation strategies, including getting insurance on deposits they could have followed since then, they've followed different paths. A lot of their cash now is with BNY Mellon, which is obviously a GSIB.

00:09:07:06 - 00:09:29:23
Leo Schwartz
So it seems much less likely that BNY Mellon is going to fail than Silicon Valley Bank would, and I think it'd be in Y Mellon sales. There's probably a lot bigger issues in the world than the Stablecoin losing its peg. They also have this BlackRock fund and I know people some people I talked to said that that seemed like another good place to be able to have deposits instead of having it so many in Silicon Valley Bank.

00:09:29:23 - 00:09:55:17
Leo Schwartz
So again, I put this in the article. I think hindsight is 2020. There's going to be people who said that because of the reality of banking in crypto, maybe there wasn't a better way for them to hold that amount of money. I know one analyst I spoke to, Stephen Kelly at Yale, who's a great and great commentator on this subject, basically said what they were doing is they were following the tech playbook, which is this made the most sense if what you were trying to do was grow as quickly as possible.

00:09:55:23 - 00:10:18:23
Leo Schwartz
Here's a bank that seemed stable, that said, well, hold all this money for you. Why not jump at that opportunity? And it was a black swan event that it failed. Again, I think it's it's debatable to say whether it was as big as this management as obviously Pablo says or even Paxos. But clearly in this event, it really was a catastrophic event for Circle.

00:10:18:26 - 00:10:39:04
Bennett Tomlin
One of the things you talked about, there's kind of the difference in paths that Paxos and Circle have taken over the different years as they've kind of competed here and one of kind of the things that stuck out to me is that for a long time, center was supposed to be doing kind of what Paxos does, where you partner with various companies.

00:10:39:04 - 00:10:59:21
Bennett Tomlin
They are issuing a portion of the stablecoin done in a partnership, and eventually they moved away from that to the model where they're now just kind of circling Coinbase, issuing it. And what I would love if you could kind of talk about kind of the history of Circle's structure and how that's changed over time and like what that reveals about their relationships with other entities.

00:10:59:26 - 00:11:22:21
Leo Schwartz
Yeah, definitely. And I think this is a history that's sort of been left by the wayside but is pretty illustrative of the last five years of of crypto where basically, you know, going back to 2018, Circle had been around for five years and they had a lot of different businesses before doing Stablecoins. They had an OTC desk, which by the way, Ryan Salem was one of the star traders for they were trying to basically do a Venmo equivalent.

00:11:22:26 - 00:11:49:14
Leo Schwartz
None of it was really working. Jeremy always wanted to do a type of overall payment service, like redoing the plumbing of how all of global payments work. And what he said is basically by 2018, thanks to a theory, it was possible to have the type of smart contract enabled stablecoins that he'd always hoped for, and his initial vision for not necessarily USDC, but this entire stablecoin ecosystem was there was going to be this consortium that was called center.

00:11:49:18 - 00:12:10:17
Leo Schwartz
Lots of different crypto firms. Bitmain, the mining company, was going to be one of the first partners. There would basically be part of the consortium which would oversee governance, and then through that consortium, any of the partners could basically issue their own fiat backed Stablecoin. So not necessarily just US dollar based backed, but backed by the euro or the yen or any other number of currencies.

00:12:10:20 - 00:12:34:19
Leo Schwartz
And basically all of this would be done under the guidance of center with a lot of different partner firms. What ended up happening was only one partner firm came on that was Coinbase. They only issued one Stablecoin that was USDC. And basically what I reported for this story is that the reason for that is I think USDC grew beyond any of their possible imaginations.

00:12:34:24 - 00:12:55:09
Leo Schwartz
It soon become, if you look at either their balance sheets now, obviously for Circle, it's their entire revenue source. For Coinbase, it's something like 30% of their revenue source now. And I think the reality is they didn't really want to share the profits and also they ran into a lot of regulatory issues when they realized it wouldn't be possible to start issuing this wide array of stablecoins.

00:12:55:10 - 00:13:20:09
Bennett Tomlin
So I just want to interject there because I think what you kind of get at their highlights kind of an interesting divergence between these two Stablecoin firms. You mentioned in the article that 99% of Circle's revenue is coming from interest income. But then I think you also said that 95% of Paxos revenue was coming from their branding partnership with Binance for Be USDC, which is kind of closer to what Circle's original vision was.

00:13:20:16 - 00:13:29:21
Bennett Tomlin
And so it was kind of interesting to me to see how the revenue source for those two firms diverged so much when USDC was so successful.

00:13:29:21 - 00:13:48:25
Leo Schwartz
I think both of those numbers, if you follow the two companies, they might to some degree agree to common sense, but I still think they're pretty stunning. Where Circle's business has not only entirely become USDC, which everyone knows, but all of this revenue is coming from the fact that they're able to collect the yields created by interest rates on USDC.

00:13:48:25 - 00:14:08:10
Leo Schwartz
So they're not even making money from transaction services or any of the other products that they have that are built on top of USDC. It's basically entirely depend on interest rates. And when you look at Paxos, this is a company that had basically built their model of Stablecoins as a service where a company like PayPal will come in and say, We want a stablecoin and they'll help build it for them.

00:14:08:18 - 00:14:16:04
Leo Schwartz
And all of their money was coming from Binance and I think our pick now represents a lifeline for them.

00:14:16:05 - 00:14:47:18
Cas Piancey
We mentioned that Paolo from Tether was quick to criticize the Circle and USDC make sense. We've also kind of discussed why that's a funny thing for him to do, considering how many regulatory and other issues that and risk assessment issues that Tether has had in its nearly ten years of existing. But what I want to talk about also is that you get this strong criticism from Paxos, and I look at Paxos and I go, the first thing I think about is Binance USD.

00:14:47:21 - 00:15:17:13
Cas Piancey
If anyone wants to take a look at that chart and see something amazing that is straight up and directly down because they were told like you have, essentially you have to stop doing this, stop doing this immediately, right? So clearly Paxos, who seem to think they're really I've seen some of the people from Paxos, you know, speak in front of Congress and like these guys are trying to take the reins on being the ones who are like, we know what regulation looks like.

00:15:17:17 - 00:15:35:20
Cas Piancey
And yet what I'm seeing when I go to the Paxos website is a bunch of stablecoins that have either failed or aren't doing anything and aren't being used for anything. So is this criticism fair from Paxos or are they are they criticizing them because they're a competitor and because they want to take advantage of this moment?

00:15:35:20 - 00:15:58:29
Leo Schwartz
I think it's a good illustration that there's basically cautionary tales. And no matter what model you choose in the Stablecoin game, you know, what Circle decided to do is basically they chose the route of only partnering with the Coinbase, understanding that maybe Coinbase is the enemy, that, you know, I report a lot in the article that I think their relationship has been contentious to some degree just because there's so much money at stake.

00:15:59:02 - 00:16:25:13
Leo Schwartz
But for the most part I think they understand what they're going to get with Coinbase. Coinbase is still not going to get into the type of shenanigans that a partner like Finance would. In contrast, the model that Paxos chose was We're going to be completely regulated under the Nydfs model, but rather than just partner with one company, we're going to try and diversify and basically be able to create Stablecoins as a service for all these different partners and chasing revenue.

00:16:25:13 - 00:16:48:26
Leo Schwartz
They went with finance and obviously the issue with finances and finance took this stablecoin that was regulated and they created an array of unregulated pegged stablecoins with the same branding. And that's ultimately what the regulator DFS didn't like, and that led to the nuking of that product. So I think in either case, I think you'll see pretty fair criticism.

00:16:48:29 - 00:16:50:26
Leo Schwartz
They're just going down different paths.

00:16:50:26 - 00:17:13:02
Cas Piancey
Is tether the path to success in Stablecoins? I like their money, but I'm I'm ultimately asking the seriously right like these other stablecoins are simply failing. And your article points to this I mean this is the crux of the article is why is USDC losing if it is trying to get regulated and trying to do things by the book and and why is Paxos and stuff?

00:17:13:06 - 00:17:34:01
Cas Piancey
I just checked the Pax dollar market cap. It's like $500 million. I mean, that is nothing in cryptocurrency. That is absolutely nothing. So the idea that they're going to be the ones who are dictating regulatory policy is almost laughable to me. When you have an $85 billion stablecoin in tether. And that is just like those numbers are insane.

00:17:34:02 - 00:17:51:01
Cas Piancey
When you reflect on the difference between the two and you have some really nice charts in your article as well where you show like as the USDC has disintegrated, tether has gone nothing but up. Is this the success story for stablecoins for crypto? Is this, is this this success story?

00:17:51:01 - 00:18:13:22
Leo Schwartz
I mean, definitely. I think one of the issues with both Paxos and Circle is they're chasing regulation and I think Circle's really planning for a future in which there is a regulatory regime in the US that really fits their own model, which for them is basically being able to have an account directly with the Fed that rather than having to put their money as deposits with banks, they can just hold their money directly with the Federal Reserve.

00:18:13:25 - 00:18:54:06
Leo Schwartz
Obviously that seems incredibly unlikely to happen any time in the next few years. And barring that, I think it is really difficult for them to compete with a company like Tether, which again says we are going to even have the pretense of regulation, we're going to operate offshore. But what also that means is that will attract all of these crypto companies that don't want to have to touch anything close to the US government, which is the perception of how USDC operates, even though, again, it hasn't really followed this regulatory path in terms of being a trust company with NYDFS or being able to win over lawmakers to actually pass regulation in the US.

00:18:54:10 - 00:19:23:13
Bennett Tomlin
That regulatory question there was an interesting portion of your article, at least interesting to me, interesting to crypto historians about Poloniex. For those who don't know Poloniex used to be a really important altcoin exchange, crypto only exchange where you could trade a lot of tokens that you couldn't trade on more respected places. They even had like a chat box where you could talk to the other people who were trading whatever coin you were trading and make fun of them for their bad trades and stuff.

00:19:23:14 - 00:20:00:04
Bennett Tomlin
Circle ended up buying Poloniex for $400 million. And what was interesting to me was you linked out to some previous coverage about a presentation that they gave discussing the plan with Poloniex, and their plan was to get around previous sanctions violations and other things like that by trying to become the most compliant cryptocurrency exchange. And in reading the slide, their broad plan was to basically become promethium For those who know what that is, they intended to register one entity as a broker dealer, another entity as an alternative trading system for securities.

00:20:00:07 - 00:20:36:19
Bennett Tomlin
And they had gotten an informal indication from the SEC that the SEC would not pursue any enforcement activity against them for prior activity if they had come in and registered like this. And so there's even kind of in the course of this this kind of impression that the SEC wanted Circle and poloniex to be this example of the first non-compliant exchange that came in and became compliant, that ended up not working out and it was sold to Justin Sun for help along with a couple of other investors for less than half of what they paid for it.

00:20:36:22 - 00:20:59:11
Bennett Tomlin
What was your impression when working through this on what Circle hoped was going to come from that investment and the reason I ask this is because when I've discussed promethium and stuff before, the problem with registering in this way and becoming an ATS and a registered broker dealer is that none of the tokens or cryptocurrencies that people want to trade are then things you're allowed to trade, right?

00:20:59:12 - 00:21:10:04
Bennett Tomlin
And so becoming an ATS and a broker dealer in most cases looks like a path towards an exchange with roughly zero revenue. Did you have any idea of what Circle saw that I was missing?

00:21:10:10 - 00:21:29:14
Leo Schwartz
The way that I situate that in in my coverage and what I heard from people and it doesn't go as much into the regulatory question of what their ideal for Poloniex would have looked like. But I think at that stage Jeremy Allaire was really chasing Coinbase still. And again, this was a time when they had Circle Pay, which was like the Venmo type competitor.

00:21:29:16 - 00:21:53:13
Leo Schwartz
They had an OTC desk that was very successful, but crypto is obviously still a business that's about trading cryptocurrencies on an exchange type platform, and I think that they just saw that one of the largest exchanges was available for purchase and they thought again with a clear understanding that I'm a serial entrepreneur, I can do this in a regulatory compliant way that he would be able to shoehorn this in.

00:21:53:13 - 00:22:10:00
Leo Schwartz
And I do think that presentation is a pretty fascinating time capsule of a different SEC, where it does seem like they were having productive conversations where basically the SEC said if you stop breaking the law with money, it's the way it was, but you bring it into compliance. Again, not really understanding what that compliance would have looked like this.

00:22:10:03 - 00:22:33:16
Leo Schwartz
This could work and my understanding is the issue is they kept Poloniex was still available to countries with sanctions in it. And I think that's where the issue came in and they had to pay fines on that. So obviously it didn't work out. But I think what this really was was an error in judgment where Jeremy Blair was trying to create this all encompassing platform for Circle, where it had this core exchange product, which is really necessary in the crypto world.

00:22:33:16 - 00:22:39:24
Leo Schwartz
And obviously within a year it proved that it wasn't going to be able to pass regulatory muster.

00:22:39:24 - 00:22:54:10
Cas Piancey
Christine De Augusta was the original creator of Poloniex Exchange. He sold it to them. And then I guess the suggestion here is that they couldn't get it into compliance, whatever that means, right?

00:22:54:10 - 00:23:06:05
Leo Schwartz
That's my understanding. I think what they say is basically because that was in around 2018, which is when they were getting center in USDC off the ground. And what they say is they wanted to focus all resources on USDC at that point, okay.

00:23:06:07 - 00:23:14:20
Cas Piancey
So they couldn't get it into compliance or they weren't willing to take the measures to get it into compliance, to not to get the FCC off their back. Then they sold it to Justin Sun and now it's okay.

00:23:14:23 - 00:23:16:27
Bennett Tomlin
It's not their problem anymore.

00:23:16:29 - 00:23:38:19
Cas Piancey
Well, I'm just I'm just curious how you can sell a essentially an illegally operating exchange, like if it's not abiding by the rules, one that seems really weird, but also to like poloniex still exists. They have 400 coins on their exchange and they do $150 million in 24 hour trading. It's probably all fake, probably all just in sun.

00:23:38:19 - 00:23:56:06
Cas Piancey
But they, they do some small amount of trading volume per day. I mean, I'm just confused how how this how this happens. And and I'm kind of curious how how USDC was able to so quickly just come back from that without any issues whatsoever. Like that's a huge loss.

00:23:56:06 - 00:24:16:26
Leo Schwartz
Well, there was still a couple of years until its market cap really started growing. I think USDC launches in 2018 and you don't really see the rise of Stablecoins to the degree we see now until the rise of Defi, which was 2020. So there is still a couple years more of maybe not wandering in the wilderness, but not the types of returns that Circle seeing now and then.

00:24:16:26 - 00:24:26:13
Leo Schwartz
Obviously you also have to take interest rates into account where it wasn't necessarily generating a lot of revenue until interest rates started going up and they could start collecting that yield.

00:24:26:13 - 00:24:53:27
Bennett Tomlin
There's this dynamic with these stablecoins and it was kind of Dante's comment about risk reduction to absurdity that kind of struck me with it, where stablecoins more than just about any other multibillion dollar financial fund I can think of, seemed to have a very different view of the financial system than most things like that. But they also seem to have an unusual amount of resiliency.

00:24:54:00 - 00:25:28:18
Bennett Tomlin
Like a Circle broke the USDC broke the buck pretty hard when Silicon Valley initially ended up failing. And what was honestly almost most surprising about it is that they ended up eventually getting it back to Peg involving their three separate plans to get there. But what's kind of interesting to me about that dynamic and about all the times Tether's been able to return to Peg over its history is I'm always reminded of the Reserve Primary Fund in 2008 when Lehman Brothers couldn't pay their commercial paper rate.

00:25:28:20 - 00:25:53:05
Bennett Tomlin
You saw this where that portion of the commercial paper represented less than 2% of the total assets of this multibillion dollar money market fund. But as soon as that part was no longer, it was in default and the like, expected value of the fund as a whole fell to like 98.5 cents or something on the dollar. They saw 80% of the total fund withdrawn in like the next 48 hours.

00:25:53:07 - 00:26:15:03
Bennett Tomlin
And we've yet to see a run on any of the stablecoins like that, despite there being points where they're they're structured largely similar to these money market funds. And we've seen points like with Silicon Valley for Circle or at a couple different points for Tether where they were in many cases less backed than the reserve primary fund at that point was.

00:26:15:05 - 00:26:23:28
Bennett Tomlin
Do you have any thoughts on what dynamics leads Stablecoins to behave so differently and why are people so willing to tolerate it?

00:26:23:28 - 00:26:46:15
Leo Schwartz
Yeah, it's a great question. I mean, I really think it has to do with the stickiness of the products where people don't treat them like money market funds. I mean, if you look at how interest rates are today, if they were similar to money market funds or other similar instruments, everybody would be leaving. Because if you're holding USDC, unless you're certain customers on Coinbase, you're getting no yield on this and the companies are collecting all of it.

00:26:46:22 - 00:27:14:05
Leo Schwartz
So clearly people are using it for very different purposes and they need the product. My understanding of the difference between tether and Circle or USDC where their use cases come is USDC is much more used in defi settings. So people using decentralized apps where obviously it makes sense to be holding a stable fiat like currency within defi apps without having to be constantly going back and forth between cryptocurrencies and fiat, which is slow and expensive.

00:27:14:05 - 00:27:35:26
Leo Schwartz
Whereas Tether is obviously a different use case. I mean, I think a lot of people would say it's made. One is for money launderers or people who wouldn't have access to the banking system. I think there's also a more charitable explanation that it's for a lot of people who maybe are unbanked or want to have access to stable US dollar like currencies but don't actually have access to the U.S. dollar.

00:27:36:01 - 00:27:49:06
Leo Schwartz
But clearly in both cases, people are willing to put up with all of the risk and the fact that they're not getting any yield because they failed to use case for it. And again, that's I think the product market fit that both tether and Circle have really been able to stumble upon.

00:27:49:07 - 00:28:11:18
Cas Piancey
Circle was trying to do their their SPAC back in 2020 to 2021. They're trying to get the SPAC off the ground. It hasn't happened. It's not going to happen. Right. I mean, this is it's done is the concept now like we're not going to go public, We're going to keep this private and we're going to just keep retaining these fees that we're getting in.

00:28:11:18 - 00:28:15:24
Cas Piancey
These interest rates like that that we're able to acquire is that is that the business model now?

00:28:15:25 - 00:28:40:03
Leo Schwartz
I mean, the business model, as it currently exists is a great one. As long as interest rates remain at this level and the market cap remains somewhat at this level, they're pulling in a ton of revenue. I think they're trying to use this opportunity to build out other types of products. A lot of people have suggested that what makes the most sense for Circle would be to move to like a banking like platform, which they already are, and start offering lending, which they've stopped doing.

00:28:40:03 - 00:28:54:01
Leo Schwartz
What they want to do is be able to offer more access like tools, like wallets as a platform is one of their services or integrating with like Shopify to use USDC as a settlement layer engine banking there.

00:28:54:01 - 00:28:57:24
Bennett Tomlin
But they withdrew their application for a bank charter, didn't they?

00:28:57:24 - 00:29:19:11
Leo Schwartz
They never applied. They've said that they're going to on numerous occasions. They never actually applied not to go to in the weeds. But the way this process works is you would apply for a national banking charter with the AOC. See a few crypto companies, including Paxos, have tried that. It seemed like under our old friend Brian Brooks that might have been possible under the new regime.

00:29:19:13 - 00:29:36:09
Leo Schwartz
They've rejected all of these applications. So when I talked to Dom, to the Chief Strategy officer at Circle, he basically said that it doesn't make any sense for them to apply because they'd be rejected at this point. But if they were to do that, what they say they want to be a non lending bank, which is basically what Custodio is also saying.

00:29:36:09 - 00:29:36:22
Leo Schwartz
Yeah.

00:29:36:24 - 00:30:04:16
Bennett Tomlin
Yes. There's a post on Circle's website from January 2021 written supposedly by Jeremy Allaire, where they say Our journey to become a national digital currency bank and they say they intend to become a full reserve national commercial bank operating under the supervision and risk management requirements of the Federal Reserve, U.S. Treasury, SCC and the FDIC. And now, as you mentioned, they seem to have pulled away from that.

00:30:04:19 - 00:30:31:13
Bennett Tomlin
They've pulled away from their spec. We started to mention that they shifted from this consortium model and have changed their ownership more recently to give Coinbase a direct equity ownership in their company. And so yeah, it seems over the last 18 months or so since that SPAC really failed, they have shifted their goals in some regards, no longer going public, no longer immediately at least becoming a bank.

00:30:31:15 - 00:30:40:18
Bennett Tomlin
They had to shut down their lending program, like you mentioned. And so now basically all they do is hold treasuries and issue tokens.

00:30:40:24 - 00:30:52:27
Leo Schwartz
Yeah, the giant money market fund where I guess they collect all the yield themselves and in the meantime to try to build this. Yeah, definitely. I mean they have about $24 billion now of assets under management. Yeah.

00:30:52:27 - 00:31:07:22
Cas Piancey
Do you expect it to keep going down in market cap? I mean as you said, they're losing against tether, right. They're losing against the least regulated stablecoin. Or is there is there a real market fit here and they're going to at least maintain some sort of semblance of multi billions of dollars in their reserves?

00:31:07:22 - 00:31:12:24
Leo Schwartz
I think if I had an answer to that, I should be a short seller trader instead of a journalist. I mean.

00:31:12:26 - 00:31:33:24
Cas Piancey
Honestly, though, honestly, though, Leo, like like let's try to reflect on this, Even if even if the market cap went to zero, the suggestion isn't that it's going to affect the price we're seeing. This would be USD. We're seeing this play out in real time. We've seen the we've seen the market cap of this stablecoin plummet from something like $25 billion to like three or something like that.

00:31:34:00 - 00:32:07:24
Cas Piancey
It's a significant decline and it is going to zero. I mean, I think it's already been everyone's like this, they can't mint anymore. All they can do is continue to redeem. However, the the it's not wavering. It's staying at like $0.99 a dollar. It's not a big deal in terms of the market cap. So like even knowing that like Circle would lose the any kind of presence with USDC, which is a huge if and probably unlike I don't know, probably unlikely, but like there's no way to trade that, is there?

00:32:07:24 - 00:32:20:08
Cas Piancey
Unless you own part of Circle in the secondary markets, which is a another chart that you show in the article. And it does show that while they were valued at I don't have the exact numbers like.

00:32:20:08 - 00:32:24:04
Leo Schwartz
Eight 8 billion was their biggest funding round in April 2022.

00:32:24:04 - 00:32:51:01
Cas Piancey
I think they're valued at 8 billion but they're actually trading for like five, 6 billion or whatever, like there's a pretty significant discrepancy between what they're valued at publicly and what they're valued at in secondary markets. Do you think this is a sign of things to come? Is my question to you, not not saying this is financial advice, not saying like anyone is is is saying you can predict the future, But just based on your reporting, when you saw this, what are your thoughts like what do you think happens here?

00:32:51:02 - 00:33:09:05
Bennett Tomlin
Just to interject. So before you answer, Leo, there was one line in the article that I think kind of points to this, which is part of USDC decline is out of Circle's control. A continued rise in interest rates means that investors want to hold their deposits in yield bearing instruments rather than zero return stablecoins which is something we were kind of pointing at before.

00:33:09:07 - 00:33:36:09
Bennett Tomlin
And like I think to add on to Cas’ point here, like the Stablecoin issuers are in kind of this position where I don't think any of them want to pay any of the yield back to holders one, because that's less yield for them, right? And that's the most important thing. But two, I think that with some of the regulatory questions and stuff that face these stablecoins, many of them see trying to pay any of that yield back as something that increases their own regulatory risk profile.

00:33:36:12 - 00:34:03:27
Leo Schwartz
Yeah, that's definitely true, which is why it's so interesting to see Coinbase doing that because I mean, when you when you read Ezekiel USD, like there's not there's not that much difference between how the US and USDC functions in terms of giving yield back to investors, at least on Coinbase, not with Circle. That's another question for Kass. What I would say is I think what I was trying to get at with my article is that Jeremy had this very grand vision, which is basically USDC would recreate the.

00:34:03:27 - 00:34:04:19
Cas Piancey
Entire.

00:34:04:25 - 00:34:20:03
Leo Schwartz
Rails of global finance. And I think they found is that USDC does have limited use cases right now. They do have successful partnerships with Mercado Pago in Chile with Shopify, with Visa, they're doing settlement stuff. What is.

00:34:20:03 - 00:34:28:22
Cas Piancey
Successful mean? Like how much volume is going through these partnership programs? Is it significant or are we talking about a few handful of millions of dollars or something?

00:34:28:26 - 00:34:48:26
Leo Schwartz
Yeah, with Visa, it's definitely not large. It's only with three payment partners. I mean, they're they're basically positioning it as a pilot. I imagine with something like Mercado Pago or with Stellar, who they're also working with. Like people do want to hold a Fiat or a US dollar like equivalent. If you're in Latin America or Africa and you can have that hedge against inflation.

00:34:49:02 - 00:35:08:00
Leo Schwartz
But again, I think the broader point is there's this is still very far from remaking the entire rails of global finance. So. Well, I don't think it's going to zero. I can't give a number of where I think it's going to settle at being a $20 billion Stablecoin is obviously very different than being a new layer for all of global finance.

00:35:08:00 - 00:35:26:11
Leo Schwartz
I think there's also an interesting point about interest rates, which is what Jeremy says is obviously right now with rates being higher, it means they're getting a higher yield. But when rates go lower, it does mean that traders will go back into making riskier bets. Maybe they'll be more happy to hold USDC, do more with decentralized apps.

00:35:26:18 - 00:35:31:12
Leo Schwartz
So their argument is that when interest rates go back down, their market cap will go back up.

00:35:31:12 - 00:35:44:22
Bennett Tomlin
But I mean, isn't Jeremy undercut in that by the fact that tether has continued growing over the last several months, like even in the chart in your article where you can see the total market cap of stablecoins going down, their competitors going.

00:35:44:29 - 00:36:07:06
Leo Schwartz
Yeah, and what they call they, they refer to that as the flight from safety is their turn of phrase, which is basically in the wake of the Silicon Valley bank crisis or failure and know so-called Operation Choke .2.0. What happened is every single crypto trader who was abroad who was afraid of the U.S. government, moved all their money from USD to tether, which again, maybe there's a floor to that.

00:36:07:06 - 00:36:13:28
Leo Schwartz
It doesn't mean that everything's in it go from tether. It basically means that anybody who's afraid of the US government is going to move their money from USDC to tether.

00:36:13:28 - 00:36:34:07
Bennett Tomlin
And I think that we're kind of getting it. One of the things I find really interesting about Stablecoins in general is they function best when they're when they get closest to like plus are being plausibly in the industry, right? Because so many different industry participants need to rely on these structures. Those participants want that thing to be like as close to neutral as possible.

00:36:34:09 - 00:36:56:05
Bennett Tomlin
And this is why I think people have often been fascinated by some of the relationships with other firms that Tether has, because it seems to really cut against that kind of idea. And so one of the interesting dynamics in this story about Circle that caught for me was when you were talking about the deals for integrations and new blockchains and how those were negotiated.

00:36:56:13 - 00:37:26:20
Bennett Tomlin
And it seemed like that often there was a fee to Circle associated with this, presumably meant to defray the costs for Circle to stand up a team, to run the nodes, to be able to monitor that, whatever. But one of the interesting dynamics in there that you suggested people had told you about was that people who got investments from Circle Ventures were sometimes getting deals that had as part of that deal when they were getting this investment, they were getting integrated on the blockchains and things like that.

00:37:26:20 - 00:37:53:14
Bennett Tomlin
And I think this also kind of relates back to my point about paying yield is all these different activities. I think the less plausibly neutral you are, the more you're potentially attracting the interest of regulators. And so do you think that Circle or stablecoins more broadly are exposing themselves to certain risks by making deals that could be perceived as preferential to companies, that they have specific investments or other relationships with?

00:37:53:21 - 00:38:18:24
Leo Schwartz
I don't know if that would necessarily draw scrutiny from the SCC. I mean, I think the main issue they've had is in some projects I spoke with, they sort of use Circle as a bully where USDC does still hold a huge amount of power in the industry. I mean, the fact that pretty much every I think I did almost 30 or more interviews for this story and pretty much everyone wanted to talk on background like Circle does have an immense amount of influence and power in the industry still.

00:38:18:27 - 00:38:37:00
Leo Schwartz
And I do think this is the first time it's been reported, which is basically what happens when USDC is launched into the blockchain. And again, I think that's a really interesting regulatory question because one of the reasons that I think that that Circle hasn't gone to DFS is that DFS is basically only blessed in theory at this point.

00:38:37:00 - 00:38:55:20
Leo Schwartz
And one of USDC is big business models is to launch across different blockchains. And you would think that if their main priority is increasing overall adoption, they would try and launch on as many blockchains as possible. Or maybe they would even pay the blockchain or there would be no money changing hands. But in fact the blockchains are paying them.

00:38:55:23 - 00:39:17:28
Leo Schwartz
And some people have even said doing a bidding process Circle denied that. But that is at least a rumor that that's going around, that there has been a bidding process in the past to get USDC on blockchains. And again, I mean, I think that just reflects the influence they have. I do think that they are cautious from that regulatory question, which is you can look at Paxos and what happens when you make partnerships with anybody.

00:39:17:28 - 00:39:40:18
Leo Schwartz
Obviously it can backfire. So I don't think they want to be on any blockchain and are being more careful there. But obviously it's not uniform in how they choose which blockchain, which blockchain they want to partner with, and maybe the SEC will start to pay attention to that. And what sort of business relationships they're having and why USDC is being launched and maybe even what revenue sharing agreements that they're creating with blockchains on that.

00:39:40:21 - 00:40:20:22
Cas Piancey
This is not a question related to the Circle necessarily, but I it's something I've been thinking about a lot lately. And Bennett sent sent a tweet from someone neither of us is a huge fan of the other day that espoused as much. And I think that it's a classic situation of the worst person. You know, just made a good point, which is, I don't know about you, Leo, but when I got interested in cryptocurrency in general, it was like I was learning about Bitcoin, learning about Ethereum, learning about kind of these decentralized cryptocurrencies that are have a floating value, right?

00:40:20:23 - 00:40:47:16
Cas Piancey
We don't know how much it's going to be worth tomorrow. We don't know how much it's going to be worth in a month or a year or ten years. It might go up, it might go down. Generally it's gone up, but this was the use case, right? And part of that was that Satoshi Nakamoto, whoever this is, whether it's a group of people or a single individual, they were railing against the banks and the U.S. dollar kind of I don't know what you want to call it, hegemony or whatever, like the the power of the U.S. dollar in the global global financial system.

00:40:47:19 - 00:41:01:24
Cas Piancey
But now it seems like the killer use case for cryptocurrency is being a U.S. dollar derivative. I mean, is that is that right or is that really how do you feel about that? Is that accurate kind of description or or am I going way too far here in that direction?

00:41:01:24 - 00:41:26:00
Leo Schwartz
I think there's a huge irony there. I will say my dad is one of the most supportive people of my journalism career and has learned all about crypto, even though I don't think he cares that much about crypto. And he'll read my articles. And the first thing he said after this article was, Isn't it ironic that like the US Dollar Backs cryptocurrency is one of the most popular ones out there for both Tether and USDC, the.

00:41:26:00 - 00:41:26:08
Cas Piancey
Most.

00:41:26:08 - 00:41:26:26
Leo Schwartz
Popular.

00:41:26:29 - 00:41:48:08
Cas Piancey
For what it's worth, right? This is doing more volume than Bitcoin and Ethereum. And like if we combined tether and USDC in terms of their volume, these are the pillars to having accurate data like price discovery in the cryptocurrency economy. Like without them, who the fuck knows what this would look like? And it's it's wild to reflect on that, you know.

00:41:48:11 - 00:42:09:09
Leo Schwartz
Yeah I don't think it's talked about enough and I mean, I think it's also a sort of a what if where there was a period where maybe algorithmic stablecoins would be able to challenge simple fiat backed stablecoins and obviously that's gone out the window because of some pretty spectacular collapses that both of you have covered very extensively. But at this point, it's basically what we're stuck with.

00:42:09:09 - 00:42:21:13
Leo Schwartz
And yeah, I don't I don't know what to say more than it's ironic that you have a US dollar backed cryptocurrency or two of them that have basically emerged as the main use cases for cryptocurrency and.

00:42:21:13 - 00:42:48:06
Cas Piancey
Specifically just to like put kind of like a nail in the coffin here of the statement is that like the specific use case for tether that they like to espouse is like banking the unbanked. Like wasn't that the whole point of bitcoin? I'm like, I'm sorry, but I, from what I gathered when I first got interested in cryptocurrency, was like, Bitcoin is supposed to be this this alternative to using banks and and dollars using fiat currency.

00:42:48:11 - 00:43:14:14
Cas Piancey
And now it's like, well no, that's what, that's, that's what tethers for people in Argentina and and Russia and places that are having trouble accessing U.S. dollars or the price of their own fiat currency. They're going to use tether not bitcoin, which is like, okay, I mean, when did that happen? Like when did this transition happen from like actually the most powerful and important cryptocurrencies are the ones that are cryptocurrencies in name only, essentially.

00:43:14:14 - 00:43:31:18
Leo Schwartz
And then the other thing is this is the easiest one. If a bank or government wants to copy it, they can basically turn that on at any point. And I think it's still sort of hard to get a good answer from a crypto person, which is, well, you know, they hate cbdcs on instinct, I think. But why is a PayPal type token?

00:43:31:18 - 00:43:42:25
Leo Schwartz
Or even if JPMorgan decides to launch one in partnership with other banks where now anybody maybe globally could have more access to it, why isn't that more advantageous than USDC like.

00:43:42:25 - 00:44:03:13
Bennett Tomlin
You're getting at there? These competitors can potentially start one up in a moment. And the other thing to remember with any of these centralized stablecoins is that they can similarly be shut down. In a moment. Cass talked about a big US deregulator, told them to stop minting and we've seen the expected redeem only pattern since then. But basically all these stablecoins USDC tether.

00:44:03:13 - 00:44:27:27
Bennett Tomlin
Paxos also have blacklists or blacklists in their code where they could, in theory, freeze every single tether every single USDC currently in circulation if they had to. And then if you still wanted to redeem for people who are out there, whatever, you make them come in and sign using the address right and demonstrate that offline or online, but without the transaction or something and then do the redemptions.

00:44:27:29 - 00:44:51:14
Bennett Tomlin
And so I think this is kind of what I was trying to get at when I was blathering on about plausible neutrality and stuff before. Is that because these stablecoins are potentially so incredibly powerful where there are scenarios where USDC and Circle under certain types of pressure, could end up taking out massive swaths of defi in like a single transaction.

00:44:51:16 - 00:45:18:13
Bennett Tomlin
They have such an under-discussed, pivotal place in the ecosystem and I think that like that's kind of what is always striking to me when I'm whenever I have to engage with Stablecoins, which is unfortunately often because of my neuroses, you end up in these situations where you're confronted like Cass is talking about, where these have subsumed the use cases for cryptocurrencies in many ways and have replaced them even in discourse about many of these issues.

00:45:18:21 - 00:45:32:10
Bennett Tomlin
And they are bad at it. Like there are scenarios where every single unbanked person currently relying on tether has those frozen tomorrow. Right? And that's not a thing. You ever hear those companies or those individuals talk about?

00:45:32:10 - 00:45:49:20
Leo Schwartz
Although I do think in the case of both tether and Circle, they're much less ideological than any of the early crypto products. Like I don't think Circle Tour is necessary ideologically a crypto company in the way that, you know, early Bitcoin developers were. I think Jeremy's thing is he wants to create tether I mean I.

00:45:49:20 - 00:45:53:24
Bennett Tomlin
Don't know like plan B and stuff right Like they own yeah themed conferences.

00:45:54:01 - 00:45:59:15
Cas Piancey
They also are in the early days of and buying Bitcoin with their profits as well so yeah.

00:45:59:17 - 00:46:02:17
Leo Schwartz
But is that for ideological reasons or is that for basic.

00:46:02:18 - 00:46:22:12
Cas Piancey
I mean that's what I that's what I believe it's true. It's the same as like to me it's the same as Joe Kwan being like, I'm going to buy a bunch of bitcoin now. And that was like, okay, see now I can get these people who support Bitcoin to support me because I'm a good guy. I'm using my my Ponzi scheme to buy Bitcoin and like, isn't that great for bitcoin?

00:46:22:12 - 00:46:44:10
Cas Piancey
Don't you guys support me doing this where I think, like, I'm not suggesting tether is a Ponzi scheme. It's not. But I am suggesting that they're doing it to garner support for what they're doing, which is just to be a USD derivative. Like they're not doing anything spectacular. They're not doing anything world changing really, and neither is USDC like, as you said, the goal is to change the entire financial system.

00:46:44:16 - 00:46:48:12
Cas Piancey
You're just building a U.S. dollar derivative. You're not changing anything.

00:46:48:12 - 00:47:14:11
Bennett Tomlin
So I just want to interject and say I think that there is more of an ideological drive among the tether executives. One, Carlo Davison, he has like writings on what he thought about Bitcoin that predate even his involvement in Bitfinex. Craig Sellers, when he initially came up with Tether was involved with that, had a whole bunch of stuff about like Mastercoin and stuff and his philosophical dedication to Bitcoin.

00:47:14:17 - 00:47:27:17
Bennett Tomlin
Paolo Arduino only eats meat, so he's clearly a Bitcoin. So I think that some of them at least pay a lot of lip service to the Bitcoin ideology and the Bitcoin mentality.

00:47:27:19 - 00:47:29:06
Leo Schwartz
Shout out to Zeke Faux’s new book.

00:47:29:11 - 00:47:44:06
Bennett Tomlin
I just had one last question, which is you mentioned in your article that Circle has 900 employees, which by my reckoning is about 20 times their largest competitor, which is several times their size. So what are they all doing?

00:47:44:12 - 00:47:45:26
Leo Schwartz
This is a very good question.

00:47:45:29 - 00:47:50:28
Bennett Tomlin
I think I'm being glib. Obviously, don't expect compliance.

00:47:51:05 - 00:47:53:15
Cas Piancey
I would imagine they're doing compliance.

00:47:53:17 - 00:47:54:13
Bennett Tomlin
Yeah.

00:47:54:16 - 00:47:55:06
Leo Schwartz
That's a very.

00:47:55:06 - 00:47:58:03
Bennett Tomlin
Big difference, isn't it?

00:47:58:06 - 00:48:18:11
Leo Schwartz
I will say, you know, I talk with a lot of Circle folks all the time. I do think they have a great team. They have a very large policy team, which is interestingly one of the places where they did see cuts in the layoffs. But I think one of their main functions is really trying to pass regulation. The US, which is one of the main paths forward for them as a company.

00:48:18:13 - 00:48:41:17
Leo Schwartz
They do a lot of marketing. They have a big presence around the world. And to Cass's earlier point about what is the future of the company look like? Is it going to zero or is it going back up? I think they're really trying to compete with tether abroad now and you'll see Jeremy and Dante and other figures on the road a lot where they're really trying to convince merchants or fintech companies and platforms like that to start using USDC.

00:48:41:17 - 00:48:47:21
Leo Schwartz
And I think that's really one of the futures. Whether they can compete with tether or not is obviously a question I don't.

00:48:47:21 - 00:49:08:26
Cas Piancey
See in international market for a heavily regulated stablecoin being something that's going to happen any time soon, but you never know. Just tether is open to a lot more countries automatically, right? Like just by simply not being a US based company and doing things in a much shadier way, they can kind of work with whoever the fuck they want, whereas USDC can't do that.

00:49:08:26 - 00:49:18:02
Bennett Tomlin
The trick is just to never pick up your cell phone when the country code is plus one and never go to a country with an extradition treaty and you can rent any size funds you want.

00:49:18:04 - 00:49:29:09
Cas Piancey
That pretty much covers most of this. Is there anything you want to add before we we sign off here? Leo In terms of like the point of the article, the discussion of these stablecoins, I don't know what you expect anything.

00:49:29:12 - 00:49:58:27
Leo Schwartz
Yeah, I mean, I think like both of you guys, what continues to fascinate me about cryptocurrency is that question, you know, what's the use case of cryptocurrency beyond speculation of money laundering? And I do think stablecoins in a lot of way, in a lot of ways pose the most the bridge with the most potential between the worlds of track fi and cryptocurrency or something, that while we may not know we're interacting with it every day, could really serve on the back end of platforms or apps that we use every day.

00:49:59:00 - 00:50:22:04
Leo Schwartz
And that's really why I was interested in this article. And I think my takeaway from it is we're still really far away from that. And obviously Stablecoins are the number one regulatory question in the U.S. and even there we're very far away from it. So I think being able to explore that question through this company Circle, which says it's going to be us, we're going to be the ones that will bridge these two worlds and finally bring crypto into regulation.

00:50:22:07 - 00:50:28:22
Leo Schwartz
And the reality of how far away they are from that is is pretty illustrative of I think, the current moment in cryptocurrency.

00:50:28:25 - 00:50:47:06
Cas Piancey
Awesome. Well, I think that's going to do it. That's our discussion of yet another stablecoin on yet another episode. I don't I don't do this usually, but if you've enjoyed this please leave a review or a like for us, we've kind of lagged on that for the past several months, so no one does it. So I'm going to go ahead and request that you do that.

00:50:47:06 - 00:51:00:17
Cas Piancey
And then meanwhile, you might have seen my cat Brito. I think she's going to be taking over CEO duties for Kass coin from here on out. So please stop adding me to try to get your money back for Kass coin. Okay. I can't help you out.
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