The Stablecoin Trade on The Money Movement

This week on The Money Movement, we are blessed and excited to have our special guest, legendary crypto trading OG Dan Matuszewski of CMS Holdings, on the show. By way of background, Dan has been deep in trading crypto since 2012, and built a legendary trading desk here with us at Circle, and went on to found and run a proprietary crypto fund CMS Holdings.

Jeremy Allaire: [00:11:22] Hello, I'm Jeremy Allaire, and this is the Money Movement Show, where we explore the issues and ideas driving this brave new world of digital currency and blockchains. This week we're going to be focused on what I'm calling the Stablecoins trade. Stablecoins trade is is sort of looking at this world of stablecoins through the lens of really where where they came from, which was trading in crypto markets. The history of stablecoins their role in these digital assets and crypto markets and how they've evolved their current evolution. And then obviously kind of where they're going. The broadening role, what all that looks like and very excited this week to help us navigate this and talk through this. We're joined by Dan Matuszewski, just a little bit of background. I know, Dan, from having worked together for years building Circle trade. But Dan is someone who has really been in these crypto markets really as long as anyone truly one of the OGs in trading in this space, Dan, has probably held and traded more Stablecoins than almost anyone in the world and has obviously witnessed their explosive growth. And so he's gonna be giving us tremendous perspective and experience. Welcome, Dan. [00:12:49][86.7]
Dan Matuszewski: [00:12:51] Welcome. Yeah, nice having me, Lily. It's great to be here. Don't be in the corner. Yeah, it's I think it's nice. Yeah. [00:13:01][10.7]
Jeremy Allaire: [00:13:02] It's sort of it's alluding to a few things and. Yeah, it's good. Thanks, man. Awesome. So look, we got a ton we want to cover and and we'll get to all that. But I just think it's always fun. I want to I want to have you just share a little bit of your your history, your story. How did you arrive into crypto? When did you arrive in crypto? Why did you think it was like going to change the world? What kind of what what brought you here? [00:13:31][29.6]
Dan Matuszewski: [00:13:32] Yeah, fair. So to be fair, I didn't think I was gonna change the world. When I first got into it, I was working at a hedge fund called Bay Hill Capital, which is about forty five minutes out of Boston in middle nowhere. I was trading equity options. So basically S&P 500 names, like all the options that are on that, like we have like a ball product that we sort of both around it. So that was my job at the time. And I had found out about crypto and the crypto to Bitcoin. Right. Like, that was like the whole game then probably through I think it was one of those, like, crazy anarchist blogs, like Zero Hedge. It was it was sort of a known thing. Right. Like lived in the fringes of markets and like people do about it. I mean, I've gotten like a lot of, like, color in like sort of the larger financial world when it hit a dollar and then we did ten dollars. So like we knew sort of about it. But doesn't Exchangeable Bit Floor, which was in New York that blew up. Right. Roman went to work at Acts is like the whole history of that thing. But I had a maker taker exchange models. You got paid to provide liquidity. And at the time at the fund I was at specifically dealing with like the hedging of the options. So trading the stock throughout the day to sort of do that. So I've gotten very into sort of the lower level trading activity, like with the market, like I was doing with routing and different order types. And I was like, all right, well, this crypto thing is like small. I can trade it because there's no conflict with anything I'm doing in my day job and like, maybe I can make a little money doing it. [00:15:02][89.6]
Dan Matuszewski: [00:15:02] And that was really how I got started with it. Turned out OK. Yeah. No, I didn't know a ton about Bitcoin before I started trading it. [00:15:10][7.7]
Dan Matuszewski: [00:15:10] Right. I was like, all right, well you can send it to me. I kind of get like the thesis and then you just go down that radical right and you're like, well, what is mining? And I knew, like, inevitably lose money trying to be a miner. And then you, like, try to like figure out we're like, oh, like maybe I can move to this exchange and do this art. So they got was like a gateway drug in sort of a larger the that I just like jumped in full time. It was Kraken in race. The money I'd got to know Jessica. I was doing a lot of the volume on Kraken at the time. A significant amount is very small. They all changed by that, like I was a portion of it. And then I was like, all right, well, I'm going to need to do this. There's only a couple places that make sense right now, and the exchange is the clear business model. So, like, you're either a miner or you are sort of a developer for one sole proprietor or you were working at one of the exchanges. It's that's kind of to this day in the sense like you change with a big business that generates all the revenue in the industry. So I went to work for Kraken and was there six months. You guys raised money at the time with your series A? I was living in Boston. Still, you guys like down the street from me. You're in four point. I was overrun, so I remember and I shot a cold email. And so to got to know you guys and then inevitably, like, made my way over. And then obviously worked Circle traded that built that desk out over time. And then. Now I work with Bobby Jones, dear W Druin, who is with us at Circle at the end. [00:16:36][86.0]
Dan Matuszewski: [00:16:36] And then we're just basically trading the equivalent of what, like a hedge fund strategy would be, but using principle capital currently. So that's like. So but I've been doing it now eight years going on. So yeah, I've seen some things and some iterations. [00:16:48][12.0]
Jeremy Allaire: [00:16:50] Yeah. You know where the bodies are buried. Of them. So actually so just on the on the, on the, the origin story, as we say, like I remember when we first met and you know, we obviously were, you know, we were all fired up about like, hey, look, this digital currency thing is actually going to become like the way that the payment system works. It's gonna be like the way that value moves around. And how do we, like, takes the art, make digital currency? How do we do all this sort of stuff? And I think obviously for you, you were more focused on like, hey, look, there's this great opportunity to trade Bitcoin and this is in Boston. And this is a good group of people and and and all of that. But like back in the early days, there's sort of like the crypto macro thesis, like by definition, like Bitcoin itself is a macro thesis. Right. You know, how early on did you actually buy into the let's just say like the long thesis, the long kind of global macro thesis that says, like, the world is going to go to shit and this is going to grow as a store of value? [00:17:54][64.2]
Dan Matuszewski: [00:17:55] Probably way later. But what I will say is the guy who started bail, this guy, Alex, was like the main trader in the euro dollar option paid way back in the day. Right. So he was there when the euro got created. Right. He's like I remember saying, this is like look like I've seen the birth of a currency. And he's like I've seen how this, like, all kind of plays out and like what has to happen. He's like, all I know is if this is gonna work out, this thing has to go up tremendously. And. So you're just like this doesn't make any sense. Like where it is currently, like they're gonna be at zero and things got get much higher. So I will say the first time I really thought it could be very large is when you started like advocating the possibility of it. And then you just handicapping. Right? Right. Well, I think it's got this chance of getting there, maybe, which is like an impossible task. But you start to get the idea of like. All right. Well, anyway, the base I've got to go. I don't think I really started seeing it as like a true form of, like, value storage or even like this great idea that's like this is like sort of the maybe end result of like where money sort of has to go until way later. Like twenty, fifteen, twenty sixteen where I start. You started seeing material amounts of it in dollar terms being like kept by counter parties and specifically like somebody Asia where we would like see you is sort of like only Natha Crypto natives. Right. Like they just live their entire sort of balance was constructed out of it. And that was like I was like, alright, well there's like really people that are like doing this, like this is gonna like work and there's like a trend there. But like when it was when it was small, like it was I was it was I was not I was not buying that thesis yet for a bit. [00:19:28][93.4]
Jeremy Allaire: [00:19:29] Yeah. I've always believed it. [00:19:31][1.7]
Dan Matuszewski: [00:19:32] No, I mean it's right. Like or much more likely to be right now than it was. [00:19:37][5.0]
Jeremy Allaire: [00:19:37] Like I said, this actually it's a good Segway. Right. So twenty, fifteen, twenty, sixteen people in Asia, you know, moving into this, moving to bitcoin. Right. And and basically like a relatively unfriendly environment in Asia for like getting dollars in and out of the these exchanges that that are over there. And so, you know, Tether is born and it's sort of born out of a need out of Asia more than anything else. And, you know, I want to get into Tether in a minute and talk about that separately. But just like, you know, you you saw the birth of Stablecoins. And there obviously there were a few different attempts at this in the very early stages, the first stages. So like as a trader, when this when these very first emerge, what did you think? [00:20:35][57.4]
Dan Matuszewski: [00:20:36] Well, Tether like when it first emerged, wasn't really that useful from what I remember. Like it was around, but nobody was paying in any mind. It really start to get big when it connects. Lost their banking in Taiwan because they think a couple Taiwanese banks that they used and they had a ton of activity flowing through there. So you could generally interface dollars to trade Bitcoin in Asia via that vehicle. So that wasn't okay. And people could keep dollars there, too, right. That there wasn't a huge people like like I think talk about this capital flight scenario. Like people trying to get dollars, like out of Asia, but like most of the demand driven side for like Tether was like speculative track in the early like that earlier and earlier. Right. So what once the next guy jammed up on the banking side and started to move more into like the Tether denominated stuff that was. When did I start to become really useful and that shoehorned people into it? Right. Because they're like, all right. Well, now I'm going with it anyways. Like, I can use it other places. And when you start to see was smaller exchanges that were trying to set up couldn't or wouldn't get banking. It's hard. Right. Yeah. This is really it's a monch and it's like just a huge regulatory battle and like such a heavy headache in the gate that they're like, well, we can just bootstrap this with by using Tether. And that's really like what happened is like people were like, well, you need to go get a bank and get a full lines department and that or you could just like slap Tether on. [00:21:53][77.7]
Jeremy Allaire: [00:21:54] It's like, do you have an address? There is crypto shadow banking, sort of, you know, to four. A lot of different market participants, too, to sort of get get on these rails. But I think obviously people figured out like, wait a minute, like these dollars move fast, relatively speaking, if I'm a trader. Right. Like, if I can if I can go across it, change that onto like the like holding like working capital and all these places and getting credit lines and all these places and like I mean, you still might want to do that. But like just in terms of, you know, as venues grew, which like twenty seventeen. Right. Was like this really significant kind of growth in venues and diversification of that, I would say continued like the utility value kind of kicked in from a trader perspective, I think. Right. [00:22:39][45.3]
Dan Matuszewski: [00:22:40] Yeah. What's it when you started using it, you're like, this is pretty useful, right. And like everybody sort of had that depending on how like early you needed to be forced into it. Obviously, like if you couldn't, like, secure keep your own banking, you got pretty comfortable with it pretty fast. And like, there's also this sort of size thing. Right. Like, once Tether got to a certain size, people became a lot more comfortable with it because like the risk associated with it seems to like how much less. And also, as it starts to be like taking on more venues, it's a liquid OCC. It's like liquid on screens like you. You become much more comfortable with it as an asset that you're sort of holding. Tether is unique in the sense that Tether prices as a risk asset as opposed to well and like DAI, but like Tether it really of the dollar base, Stablecoins, USDC is just a dollar. Right. Like you just like move in that you don't think about it, thankfully. But like Tether has a history of like moving and like that matters. And like the malls are close to the peg. And the more that's like on it, like that's like the fingers like that. [00:23:34][53.7]
Jeremy Allaire: [00:23:35] Yeah. Yeah. So I think, you know, for a lot of people who are kind of looking at this for the first time, they're like, why would anyone ever, you know, want to rely on something like that when it's like, you know, we don't even know it's there, we don't even know what the assets are like. You know, it turned out actually those assets were a mixed bag. I still still kind of are. But people people that just didn't care. [00:24:00][25.9]
Dan Matuszewski: [00:24:02] He yeah, they I mean, I definitely don't like they're willing to, like, tolerate a lot of sort of like non optimal transparency on it. And I think the reason for that is because there's enough market participants that can create redeem it at a dollar that it just like stays pretty tightly wound that peg now so that globally it doesn't matter of you can't directly sort of Arbat back to dollar as long as there's people that can and it keeps clearly being kept in line, people are less concerned with it. Right. Like, it's good enough and it's like taking everywhere. So, you know, I don't know. I don't I don't I don't see that changing unless there's a material regulatory action that forces people to, like, rethink that risk. [00:24:42][39.5]
Jeremy Allaire: [00:24:42] Yeah, well, we'll we'll get we'll come around to that in a few minutes and talk about the kind of where we are today and where we're going. But but just in this space to say because we're kind of going through like that, a little bit of history here. So obviously, this is that's sort of the first the first kind of, you know, liquid dollar stablecoins that that has been out there. [00:25:04][22.0]
Jeremy Allaire: [00:25:06] You have these crypto collateral like crypto collateralized, you know, projects. And there've been a bunch of those over the years, but sort of, you know, DAI sort of being being the most prominent one, you know. How do you look at that category? And we'll get we'll get to USDC in a second. But how do you look at that category as a trader specifically? [00:25:26][20.8]
Dan Matuszewski: [00:25:28] Yeah. So the problem another way, there's a problem with die like that issue with using it as opposed to the dollar ones is it's much more likely that guy's going to trade away from its peg than anything else just because, like the creation and redemption mechanisms to, like, keep it in line are like less robust than you're going to have more, say, Tether or USDC. Right. Like, those are just going to get smashed in line so much that. And the other, like always lingering risk with that stuff is that there's still unknown unknowns like in that like smart contracts that like we saw this in the crash in March. Right. Where they liquidate a bunch of GDP is zero or whatever it was. There's like there's still some, like, bugs that have to get like schook out of this thing as opposed to like a good Tether and USDC. Like, you just put dollars in the bank, they give you the tokens and like, it's somewhat centralized. So you can trust that a little bit more so than a decentralized system where they. Yeah, we don't entirely know how to things. Kind of like rhetoric on like a certain stress that that's the big issue. I think that has that being said, though, DAI is the most censorship resistin. Yeah. Stablecoins dollar that you have out there. So like that has some value to it. [00:26:31][63.3]
Jeremy Allaire: [00:26:32] Yeah. Yeah. The spectrum membrane censorship resistance. And then you have like, you know, at the other end, like something that's like regulated, orderly, compliant, like, you know exactly what it is and it's under a regime and supervised and all the stuff which is sort of where USDC is. But I think like that the key kind of key concept here, though, is specifically as a trader, specifically in what I call the crypto capital markets, like the market infrastructure layer, the dollar market infrastructure layer like it. Obviously, you know, from a trader perspective, you need that redeem ability and it needs to be redeemable into actual like bank accounts, getting liquidity. [00:27:08][36.3]
Dan Matuszewski: [00:27:09] Yeah. I mean, like, we don't do a ton of business and DAI. We do. But like we're using DAI usually a bit like a last resort if we're able to use Tether or USDC like that's just how we're gonna operate. [00:27:18][9.8]
Jeremy Allaire: [00:27:20] Yep, yep, yep. Yep. Cool. So. So yeah. I guess, you know, relate to that. Obviously you were you were working closely with, with us as we launched USDC and and had the constructive center. And you know this as you know, like, you know, our, our vision has been, you know, how do you actually create a standard for fiat digital currency and like a standard that like creates interoperability that eventually is used for payment and settlement really broadly among like, you know, all the leading fintech wallets, digital wallets, like, it ultimately becomes like an actual medium of exchange outside of trading. But at the same time. Right. As we know, like the bootstrap use case, you know, for USDC has been trading. If just talk a little bit about, you know, your view on sort of the, you know, a little bit of the origin of USDC because you had a front row seat and you were helping to create those markets. Right. Little bit of on the origin there. And then, you know, I think, yeah, we'll move into the like the kind of where it's headed thing. [00:28:29][69.8]
Dan Matuszewski: [00:28:30] Yeah, I remember it was like a race. Like everybody knew there was like the PAX product. It was the G USD and those USDC and like everybody because like you would hear it sort of rippling between like all the regulators, like all what was going on. And like we all knew they were like coming down the pipe. But it was like, all right, we're going to hit it for it. Who's going to have the product? Like, who's going to have, like, the iteration of it? Yeah. So, I mean, look like Tether had a bunch of shocks in it, right. Where it d pegged it like would trade down to like eighty cents or it would trade up like a couple percent. So there was a need in the market or at least. Perceived me in the market for much more pegged stablecoins. Out there that would, in effect, have to be. I'd have to, but likely be much more regulated, compliant. And like sort of the version of those like I'll hold the second iteration if stablecoins. So I'll come out there. And I think that was what really drove the market demand for it. And the idea was that your balances in your exchanges that you like natively face your bank accounts with anyway should just be a stablecoins. And that should be like a seamless thing, that there shouldn't be this concept that these dollars are any different. If you can just like Moubarak, it's like super useful. Like it's an extremely, extremely powerful thing. As a trader and as Eco-System, like we kind of just live in stablecoins any way we try to avoid going back and forth where bank because money that's kept in the bank is generally less useful than money we have like actionability. Also, the interest rates in crypto are just massively better than you're ever going to have in your bank card anyway. Yeah, you're taking risk on it, but like dollars are effectively seven dollars anyway. So you basically have like today. Well, you know, the take the leading dollar stablecoins and how they can be deployed. [00:30:08][98.0]
Jeremy Allaire: [00:30:09] Right. You basically have like a payment system that works anywhere in the world with final instant reversal settlement in like minutes with like very high security, with very low costs, relatively speaking. And so that's great from a trading perspective. Right. Just like executing with that but then you actually have like these new capital markets, like debt markets that effectively have been created, an institutional setting in a retail setting like you have, like the the the the retail versions of it and the people who pile into the retail versions of it on exchanges and other defined stuff. And then you have like actual institutional demand for borrowing against this. And like these are basically, you know, these are Internet credit markets that now exist in digital dollars. And, yeah, they're obviously, you know, delivering attractive young you know, we're doing stuff in that now, too, right. Right. [00:31:02][53.2]
Dan Matuszewski: [00:31:02] So I think that I think, as we pointed out, like the main reason that there's like a very, very high implied interest rate with all of like the dollar sort of products that exist in Indy five. But even like the bilateral stuff, absolute lenders' is because there's an incredible demand for leverage from the mostly retail user base that's trading crypto, right? Yeah. And like you see this you see this largest in the implied interest rate view, the futures curve. You know, the fact that a September delivery of Bitcoin trades at a pretty nice premium to the current spot price. So you can just buy spot, sell future and collect that different. But you need cash in order to do that. Right. So you get you get this like a lending rate that works its way to it's very high right now because the market's been running out, but something like 20 percent for eath, which is a dollar rate. So you can lend your dollars out for sort of four percent just September. Yeah. Which is crazy time. I don't think that that trickles into, like, people looking to borrow. Right. So if I can go borrow 50 million dollars at four percent or five percent. That's great for me. Right. Because I'm going to like net four times that over like the same time frame. So I think that's what draws the trading entities into, like borrowing a ton of money and then like that sucks, like sort of the money back into like the Stablecoins sort of ecosystem. So that's that's the cycle as I've seen it sort of playing out. [00:32:21][78.8]
Jeremy Allaire: [00:32:22] And you're seeing effectively that's like, you know, people staying sticky in the stablecoins circulation grows, it's getting deployed and cycle, as it were, in these different kind of strategies. [00:32:32][9.9]
Dan Matuszewski: [00:32:33] Yeah, it stays right. Like you get the money in and then, like, it just doesn't tend to go the other way as much. Yeah. So, I mean, we've seen big destruction of like PayPal coins, like throughout history and like their markets and stuff. But like the net is clearly like off that direction of get more money in this ecosystem. [00:32:47][14.1]
Jeremy Allaire: [00:32:48] Yeah. Yeah, absolutely. So I like, you know, obviously from a trading like the sort of trading markets, these like lending markets like these are obviously, you know, big pieces. But I think like today, we're certainly seeing we have a front row seat on this. But like people are starting to discover that this stuff is actually useful for payments and settlement there. You know, this is you can actually, you know, whether you're a business or you're an individual or you're someone who lives in somewhere where you rather have dollars, like there's all of these places where people are saying, hey, these are actually like dollars are a good store value. These digital dollars are actually even even a better, smarter value because they're sort of self sovereign. And you can do, you know, sort of have the utility value in the Internet, but sort of, you know, this sort of transition from market infrastructure into payment system like that, that's obviously like that's, you know, from our perspective, like that's the long thesis. And, you know, there's all this noise around this stuff around the world with like CVC and, you know, ah ah stablecoins private sector stablecoins going to be, you know, effectively permitted as payment systems in the West, US and so on. [00:34:00][72.2]
Jeremy Allaire: [00:34:01] What are you What are you thinking on on this sort of this jump from like markets infrastructure to actual like payments infrastructure? [00:34:09][8.9]
Dan Matuszewski: [00:34:11] Yeah. So we say we don't have the ground zero. Look at it. But from what we get told anecdotally from the people that are on the large side. So you've got to take a stablecoins markets like they work in this sort of fashion where you have large individuals and corporates that will like generate huge blocks of it. And they're selling it to secondary brokers who are then like sort of the end middlemen that distributed everywhere. So there's kind of this network that's built and we tend to only know the people that play in the larger sort of ticket round. But what we hear is that specifically, like over the course of this year is that there's been like a pretty large demand for dollars and a lot of, like, regions where it's that you don't like. It's hard to hold dollars like structurally or they can't. Or if they can, they're worried about like seizure and or like risk of that money, like sort of sitting in accounts that, like our visit will be a threat. So there's this is really good for Stablecoins because like, you can just hold them natively to yourself. You don't have to, like, trust me. But there's been a lot of demand from regions like that for people hoping for. And I think, like a lot of people try to push Bitcoin as this narrative of like this store of value, they're like, well, you can hold Bitcoin. And the reality is people want dollars. They want stability, like bitcoin moves around it. Yeah, yeah. I like this idea that, like all like you can just keep your wealth and that is like you people can't do that if it moves around 50, 60 percent every year. And yes, it has generally gone up. But like what if it's been over that eight month period and you needed that money? [00:35:37][86.8]
Jeremy Allaire: [00:35:38] People who have meaningful long term savings that want to allocate some of that savings into these sort of long term risk assets? That's a great place for Bitcoin or specked. Right. And then but but for the average person around the world who is like I need a like a now store of value and that like, you know, I got to, you know, pay my pay my expenses and not, you know, massive depreciation and so on. They're looking at things obviously differently. [00:36:06][27.9]
Dan Matuszewski: [00:36:07] Right. They're looking for dollars people. That's what they want. They want to keep their value in dollars stables and they ultimately want them. So, yeah. That's been the big driver. A lot of the new issuance because you took all of this new issue. It's clearly isn't going to quit, though, like the good guys have any year, but it's money. Getting pushed into this system is orders of magnitude more than we saw and even like twenty. Seventeen. [00:36:26][19.5]
Jeremy Allaire: [00:36:27] Yeah. Now we're definitely we're witnessing that firsthand, which is which is pretty cool. We've talked about a bunch, you know, coming back to like regulations. So like like there's lots of regulation in the space, you know, all kinds of stuff going on. But like Stablecoins basically is now are now like very much a front center topic. And, you know, the the you know, the FSB is, you know, doing this stuff. We've been involved in that. Like there's gonna be a global regime around private sector stablecoins, which I think is ultimately a really positive thing, because essentially what that means is that like G20 and beyond, private sector stablecoins are gonna be essentially, you know, a a valid payment system, a valid, you know, infrastructure that like you can build financial markets around, that you can build payment systems. Right. You can do all the stuff around. It's just there's gonna be a bunch of rules around what it is to be an issue or what it is to, you know, what kind of licensing you need, what kind of, you know, ruleset you have to follow, which, you know, we have kind of self governance around that now through center. But like, there's gonna be governance, governance around that, you know, over the next year, you know. Do you do you think that's like a huge positive? Do you think that negatively affects things like Tether? Like, you know what? What do you think happens there? [00:37:48][80.6]
Dan Matuszewski: [00:37:49] I think so. I don't know, because I it kind of depends on how they treat it. Right. Like there's there's a bad world in this, too. Right. There's a world where they're like you have to have travel rule level enforcement of every transaction. And then it's like, does this even work? Like, how can you even like, be using this stuff like on chain if everything like so that that's definitely the FA this is going to be terrible. But then the good could be is like. Right. If you police the on and off ramps, everything that happens inside is like fine. And I don't know where that's going to shake out. Right. Like I'm not I do not understand enough of like how the nuances of, like, those conversations go, like where they're like trying to land that thing. And like, I would assume you guys are more on that. All right. If it's coming out of the banking sector like we got it and then, like, once a doubt, it's like, good to go. But I can very much see people being like, well, why would lot of these transactions that happen in the middle, like, why is that not subject to the same level of, like, oversight that we would do if they were in a traditional sort of banking side? So that concerns me is that they'll use it as a way to block some of this stuff. And the problem is it's all dollars at the end of the day. So they do have some jurisdictional ability to sort of like take it on, which concerns me. And this is, I think, why people gravitate sometimes towards Tether is because they assume. Nobody really knows how this is ever going to play out, that Tether is going to be a much more resistant to changes that potentially move it more towards that more heavily regulated side. With that being said, like there's no doubt at the end of the day. So it's not like they're going to be like on some day they could finally get dollars are different than USDC dollars. So we'll see how all that. But that's what scares me is like a user of all these things is like, how are they going to craft this stuff on it? [00:39:26][97.4]
Jeremy Allaire: [00:39:26] Yep. Yeah. I mean, there's there's a lot of industry were happening around that right now, too, to kind of come up with, you know, kind of technical solutions to how you can deal with things like record keeping on transactions that are happening on public chains, but still enable like the seamlessness of the experience and what you're trying to do, I think. Yeah. I mean, I think that my take is that over time, like jurisdictional arbitrage on like businesses, that intermediate crypto dollars is going to be difficult over time. [00:40:02][35.1]
Dan Matuszewski: [00:40:03] Yeah. Which is like in between zone. Right. It's like, well, you're not big enough, but like you're still trying to it's like where I think it's like all at risk. [00:40:11][8.0]
Jeremy Allaire: [00:40:12] Yeah. I mean obviously you take something like Libra and because the potential systemic scale of it is so large, like it's locked down. I mean it's basically a lockdown network. Right. Right. Yeah. Well. [00:40:23][11.0]
Dan Matuszewski: [00:40:24] I think it's gonna to be a very interesting one that's gonna bite its head is so like part of the part of the thig with dollars that like it always stops dollarization of like other areas. It's been like you have to get physical currency. Right. And like that slow down. Like, it just does go digital. And there's just dollars like walking around, like that's a little lower grade currency. It's going to get nuked. Yeah. This thing gets like enough critical mass. And I'm very curious how, like, those places are going to react to that. Yeah. Well, it's very possible. They're just they're like, no, you can't do it like this. [00:40:55][30.2]
Jeremy Allaire: [00:40:56] I mean, this is like I use the analogy of like what happened with over the top is this concept that existed meeting communications on the Internet, which is basically like, you know, there used to be all these like regulated firms in every country that would like handled like who could broadcast information, who could publish, you know, who could who could, you know, intermediate like voice conversations. Like that was a pretty regulated space, very regulated with big national monopolies, with guns in some cases like government run infrastructure in lots of places. And then like, you know, boom software on the Internet and everything went over the top. And like anyone can broadcast anywhere. Anyone can share information anywhere. Anyone can communicate with anyone instantly, peer to peer censorship resistant. All this stuff launched and kind of the world rolled over, you know, in a sense like because people were like, this is just better. I want this is better. It's faster. It's cheaper, it's easier. I like it. And like it was it was is almost impossible for these national governments to say, no, you can't use Skype or, you know, you can't use Twitter. You've had obviously interventions that have happened. You've got, you know, firewalls that are, you know, doing stuff. Is the market moving? No kidding. I just checked with you. I was debating with with people before we started. Like, while we're talking, are we going to cross twelve thousand or four, twenty five on Bitcoin on a theory? But I haven't looked so anyway, I don't know. I'd also say since as over the top kind of concept and like digital currency is over the top. Right. And this is, you know, this kind of thing where, you know, stablecoins like can exist on the Internet. And as you said, like, if I'm in Zimbabwe or I'm in Argentina or I'm, you know, pick your pick your place. It's not that it has that kind of power. And, you know, are people just gonna vote with their smartphones, what economic system they want to participate in? You know, in a sense. Right. [00:42:56][120.1]
Dan Matuszewski: [00:42:57] Right. I just I. I don't know. This is like this is all getting out there, too, right. It's really just sort of being like, what are the knock on effects? It's just the money is such a more powerful thing than not that like media is not a really important thing, but like controlling your money and your sort of ability to like police and or like your currency is such an important part of the nation. [00:43:20][23.8]
Jeremy Allaire: [00:43:21] Fiscal policy, taxation,. [00:43:23][1.5]
Dan Matuszewski: [00:43:25] Everything changes if suddenly you don't really have a handle on it or you're like stuck using somebody else's and you didn't want to. I don't know. [00:43:31][6.0]
Jeremy Allaire: [00:43:31] I don't know how this and this this is like the big, long macro thesis on digital currency, which is like this is building a new global economic order that it's going to be more, more, more global digital currency based. [00:43:42][11.4]
Dan Matuszewski: [00:43:43] Right. And it's going to just be dollars or we'll be crypto. Right. This is the other thing is like, is it really gonna be dollars at the end of the day once everybody had dollars or something synthetic. Yeah. Or no. I mean, that's that's way out there. And it's cool to make those projections. But I think in the short term, you're going to have some like. Resistance. [00:44:00][17.2]
Jeremy Allaire: [00:44:01] Yeah, yeah, yeah. For sure. Well, actually, so just maybe actually in the short term, I think this is one of the things that we're seeing is like big fin tax, big payment companies, banks. Other people are basically wading into the waiting. They're waiting in the stablecoins. And so, like, you know, one of the really critical things is, you know, we had this OCC guidance a couple of weeks ago that said, hey, banks can custody crypto. And that, you know, presume these also include Stablecoins. But we're seeing you know, we're seeing sort of this very strong engagement now from, you know, lots of different players in the traditional, quote unquote, digital payments, fintech and even banking sector who are like they're wading into this and including with things like USDC, like what does that look like maybe a year from now where all of a sudden, like these rails are just like connected up and people can use them in kind of more of the mainstream products that they they know and love and use today instead of just like, you know, their crypto. Well, that maybe is a little bit more trading focused. [00:45:08][66.6]
Dan Matuszewski: [00:45:09] This could be great. Right. They could take all this these happens. They actually connected and you're like Embla like with that like dollars around and it's so much better than the current experience is terrible. [00:45:17][8.3]
Dan Matuszewski: [00:45:18] Right. Like if you have, if I got money and Bank of America like I got to give it to somebody and Paypal, it's like yeah you can do it but like it's, it's crappier than it needs to be. And like it's weird right. Because like it's one of these things that like technology just like never like, like you and I can send money from Binance to like it and like nobody cares. [00:45:39][21.4]
Dan Matuszewski: [00:45:40] And it's like, why is that so easy yet? Two mega companies that have hundreds of billions in revenue. Yeah. And like, I don't know. I mean, it's clearly that way we're getting a lot. It's kind of I mean, there's no chance it doesn't get there. It's like who's who's going to push it so that it becomes like standard and everybody has to have it. [00:45:58][18.3]
Jeremy Allaire: [00:45:59] We're working on it now. [00:46:00][1.7]
Dan Matuszewski: [00:46:01] It's going to be somewhat better. I mean, I see this all the time. I was like, it would be amazing to just have a bank account that was USDC plugged in. Right. Like, if I could just use my Bank of America account and also like. All right. I got to send 50000 USDC somewhere like boom, just like that. That would be such a powerful, useful value. And can. [00:46:20][19.3]
Dan Matuszewski: [00:46:21] Maybe you could tap some tap some crypto yields at the same time. Yeah. And by that I mean like that's probably like going to take a little more. [00:46:27][6.5]
Dan Matuszewski: [00:46:28] I'm sure they're like risk compliance guys that I need. [00:46:30][2.0]
Dan Matuszewski: [00:46:30] Like it took him this long to like get comfy on that side, like let alone like what you write. [00:46:35][5.1]
Jeremy Allaire: [00:46:36] But most young people like their, you know, like when you whatever demand deposit account. Right. You're you're a grown man with a family. Dan. But most young people with adjuvanted has got that's like square cash, Venmo Revolut. Yeah. PayPal, that kind of thing. Right. So, you know, the front edge of banking is is fintech products. Right. And near near bank type products. Right. Maybe they'll be the first two to tip the scales. [00:46:59][23.1]
Dan Matuszewski: [00:47:00] That makes sense. I mean, like probably squares. The first is the long majority. You do that though, right? They have Bitcoin. You can go in and out like it's not much of a leap to go. Well, like, how do you go from there to dollars? Conceivably, they've already taken care of the fraud issues on Bitcoin side. Right. Right. Dollars Stablecoins not like a ton of difference. Yeah. I mean, that would be good to have them be like the first person to do it. Yeah. Well, see, I could be useful. It would be I would 100 percent switch all my banking or whoever does that. [00:47:29][29.0]
Jeremy Allaire: [00:47:30] Well, there's Taizé. So. So tying into like more like the the crypto trading thesis. Right. So kind of undergirding all this stuff are like blockchains that can actually like run tokens and smart contracts. And, you know, that's sort of, you know, part of the obviously like the EEF growth. There's a lot of things driving that. But like, you know, parliament is like Stablecoins are now an actual killer app. Like majority of transactions on chains are stablecoins transactions. And like, when you light this stuff up and you start lighting it up in consumer use cases, like people go, oh, wow. This is consumer skat. Obviously, there's like scalability issues, throughput issues, cost issues, all the stuff that's kind of happening, you know, and there really is like super intense competition for like third generation change that can actually scale. And, you know, that's obviously a place where where people are are taking positions. We're doing multi chain with USDC, largely because we see that there's a lot of innovation happening in terms of like scalability. If you want to have, like apps and services that have tens or hundreds of millions of users, like pushing on chain transactions, like you can't do that on a theory today. [00:48:38][67.9]
Dan Matuszewski: [00:48:39] Right. Yeah. I mean, it's choking under the current load, and that's already really expensive. So, yeah, I mean, like, I agree, it's it's unclear if it's gonna be like Ethe 2.0 whenever and wherever that looks like or if it's going to be some other second generation high throughput performance. [00:48:54][15.0]
Jeremy Allaire: [00:48:54] Like I'm taking a multi train world. Right. So you're going to have like interoperability and have like. A standard thing to say across those. [00:49:02][7.3]
Dan Matuszewski: [00:49:03] Yeah, I mean, I definitely think it's gonna be a multi. It's just like it's unlikely that you're gonna be able to get everybody to, like, coagulate around one, like, especially because it's so dispersed right now. [00:49:13][9.5]
Jeremy Allaire: [00:49:13] Yep. Yep. Stephanie, our bet. Cool. So I think we're gonna run up on time here. But I think, you know, this this sort of couple of couple kind of high level things. So like your your broader view, like right now as a trader in the crypto markets, like they are their own. It is their own world. Right. You've got all these different tokens. You got healthy sort of you know, you can you can decide what you want about the different projects and the integrity and or quality or meaningful value of those. But like, you have this like completely naison, like pure play, digital asset market, but as like a market infrastructure, like we were just talking about, like, it's like got huge advantages over what we think of as classic market infrastructure. Do you think this just like you do these merge do do it like do all financial assets eventually merge into this space? Do they converge over time? Is this like, you know, is the build out that's happening in crypto markets actually like the build out of the new financial markets? Or do you think these are just parallel for a really long time? [00:50:24][70.4]
Dan Matuszewski: [00:50:25] Parallel for a really long time? Because, like, I just I don't think the traditional assets like settlement clearing, like, you don't think about it. Right. You don't go and trade a bunch of stocks and then like like, oh, like where do you like where is it posted and what is the market like. You just got it. Just like you push the button and it's like done, it's large. I don't think it solve problem, but it's not there's not like a pain point there where people are like, well, I need to own my shares of Apple and have them like custody local, like she's like not a thing. So I don't see a ton of push from that community to suck in any of the larger sort of pieces that are going on in digital assets. I mean, I see some world way in the future where they're like, this is silly. Why do we have these two things running independently? [00:51:07][42.1]
Dan Matuszewski: [00:51:08] What are they? You have much more likely is like you interactive brokers account that you just like deposit USDC and like that might be a bridge way to come. I did a payment settlement medium that obviously connects first, right? Yeah. And I think that's going to be it for a while because it's just it's not a pain point for a lot of people, for most of the major asset classes. As far as I know, they go on 700. They get maybe portions of it that are just like Bosket from a back office side and like they'll pull it in. [00:51:33][25.2]
Dan Matuszewski: [00:51:33] Like this was the whole enterprise blockchains push the bike for five years ago. And that may bear fruit for a couple of things. But like in aggregate, I don't think there's like really guidance sitting around being like, thank God we can finally use like x Blockchains to settle our share. Now,. [00:51:48][14.8]
Jeremy Allaire: [00:51:48] I just I certainly in that in that realm, I guess the the is like you can you can you open up liquidity on things that in the past didn't have didn't have the option for that. Right. I mean, even like today, front page Wall Street Journal has got like the growth in like essentially fractional buying of, you know, you know, shares of of Amazon and Tesla up on brokerages and stuff like, you know, basically slicing and dicing things in ways that are that are transmittable, sellable by like a a global retail base. [00:52:21][32.6]
Dan Matuszewski: [00:52:22] I'll be great. Look, I mean, if you think about it in terms of, like, the fact that you could open up an asset class to a larger retail world wide participation, yeah, that's moderate. But there's just regulatory wise. I don't see that happening anytime that I mean, look, we can't even get an ETF like, let alone, you know, like it. [00:52:37][15.4]
Dan Matuszewski: [00:52:37] It's just like it's just so hostile down there. But is that I mean, Amela, old school products. [00:52:42][4.1]
Jeremy Allaire: [00:52:42] Yeah. Look, I believe that the inertia of the existing kind of apparatuses is very significant. I think there is this sort of, you know, interesting phenomenon where basically like the COVID effect, right. There's like this things accelerate in certain areas like, you know, e-commerce just like grew in a quarter, like the amount it grew over the last ten years, like it was just like like, you know, crazy. And you see now the numbers of, like, you know, a lot of these allys players out there. But like, dude, do you know, do basically do governments say, you know, shit, we really need to be like we need to be at the front edge of what this next technological shifts are and we're gonna lean into it. And, you know, we're gonna you know, because we have to because, like, that's what companies need to do right now. It's what society's need to do right now. It's sort of like there's a bigger like, you know, we've got to stop hanging onto the past and just accelerate. We've got to get to just more efficiency, because that's what happens when you have global depression. [00:53:50][67.6]
Dan Matuszewski: [00:53:51] Maybe I don't really see any crypto. Right. Like, if anything, it just being ignored. Like people are just stop talking about Libra, right? Like the conversation just died. And like everybody's like focusing on other stuff from the regulatory side of it, so I don't know, I would say. [00:54:05][14.0]
Jeremy Allaire: [00:54:07] I'm talking like over like several years. [00:54:09][2.0]
Dan Matuszewski: [00:54:12] I would say if there's anything that is doing that, it's like the fact that China is pushing it forward. Right. And like, nothing is a better incentive to get your regulatory act together than some other country potentially getting it together. I think that matters way more. Yeah. I don't know. The COVID hasn't seen that payments were like a pain point for people. Right? Like, yeah. So like they even managed to give everybody those checks. Right. And that seems like an impossible Herculean task at the time. So I don't know. I'm not sure that, like, that's where they're like trying to push. I think they are looking at it like the whole work from home angle with it. All right. Like, this is like a thing. How do people do this? Like, companies obviously had to deal with that internally. But I don't know. [00:54:49][37.6]
Dan Matuszewski: [00:54:49] I'm that I think the payment side was like, all right, we've got to fix this. [00:54:52][2.8]
Jeremy Allaire: [00:54:54] Yeah, it's interesting. So, you know, maybe maybe that kind of rap, a little bit like give us your give us your your long thesis right now. [00:55:03][9.6]
Dan Matuszewski: [00:55:04] I'm there on crypto and crypto. I mean, look like I'm I'm a believer in the asset as the whole will grow like over time. I think if you're out there, like punching individual bets on like names like that's probably not a good plan. I think, like liquidity will continue to like aggregate towards the largest, most used sort of pieces of the pie. And like, look, there's clearly demand worldwide for like assets that are like specifically like showed that not only from inflation, but like from their own like governments in some capacity. And I don't see that trend going the other direction anytime soon. I mean, you're seeing a huge rally in metals, too, right? That's not random, right? It there's like kind of continues going on. And there's a big push from the Fed to, like, even just change their thought process on inflation entirely. So I don't know. I think the stocks got a bit at it until like that sort of changes in the world. So, yeah, I don't know. [00:55:54][50.2]
Jeremy Allaire: [00:55:55] OK. So three years. Total market cap of Fiat back digital dollars. Stablecoins. [00:56:03][8.0]
Dan Matuszewski: [00:56:04] Oh. So what do we add right now? Like, what's the quarter? [00:56:06][2.5]
Jeremy Allaire: [00:56:07] About half billion. [00:56:08][0.6]
Dan Matuszewski: [00:56:09] I think it's three years. I think you'll crack 50. [00:56:12][3.1]
Jeremy Allaire: [00:56:13] Crack 50. [00:56:13][0.2]
Dan Matuszewski: [00:56:15] Yeah. But I think at some point there's a number. Right. There's a number of the dollars in Stablecoins that would like caps. Like there's going to be a regulatory conversation like that. No, I feel like it's like twenty five, maybe like 30. Like there's gonna be like hey can you pause. [00:56:28][13.9]
Dan Matuszewski: [00:56:29] It's first act like we have to talk about this, you know that [00:56:31][2.4]
Jeremy Allaire: [00:56:32] Those conversations are happening. [00:56:33][0.6]
Dan Matuszewski: [00:56:34] Yeah. So it's getting there. Right. So I think the trend is in that direction. But like I, I'm also like I'm not going to be like I would like straight line and some like things in between. [00:56:44][10.0]
Jeremy Allaire: [00:56:44] So how long until it's a trillion dollars in, in, in Stablecoins. [00:56:47][3.0]
Dan Matuszewski: [00:56:49] Well that is a lot. Right. How much cash is there even in the U.S. since the value that I cash that you also have. [00:56:53][4.9]
Jeremy Allaire: [00:56:54] You know, money markets, gold, money markets are what, five trillion? [00:56:57][2.9]
Dan Matuszewski: [00:56:58] I think you got ten years for a trillion, 10 years for trying. [00:57:01][2.6]
Jeremy Allaire: [00:57:01] All right. [00:57:01][0.1]
Jeremy Allaire: [00:57:02] I'm going to stick around for that law. A few things, right? Bitcoin is only about 10 years on it. We've been at this seven, eight years, so we now live on that. [00:57:12][10.8]
Dan Matuszewski: [00:57:13] That's a lot. That's a lot of value. [00:57:15][1.4]
Dan Matuszewski: [00:57:16] Yeah, we'll see. I think it's faster. I'd love to be proved wrong. [00:57:21][5.5]
Jeremy Allaire: [00:57:22] Awesome. Dan. Such an awesome conversation. So great to have you hanging out here today. Thank you. Thanks for having me. Yeah, absolutely. So some awesome perspective from Dan, really. Obviously, just an incredible view on the history of all this and what's going on and where it's going. Next week, we're going to turn our attention back to this sort of rising role. A lot of what we've talked about here and this rising role of digital to our stablecoins in the mainstream financial system. So several weeks ago, as mentioned, the acting head of the OCC, the largest regulator of national banks, the United States, Brian Brooks, issued guidance that that said that banks, national banks in the United States could hold in custody cryptocurrency crypto assets on behalf of their customers. Question I'm asking is, what might this mean for banks and financial institutions adopting Stablecoins? So next week, very excited to have as a special guest, Brian Brooks, to talk about the role of the digital dollar and digital, our stablecoins in the U.S. financial system. We're going to get his view on the latest OCC guidance and what this means for crypto dollars in the banking system. How Stablecoins can drive core payment system innovation in the U.S. and globally. Till next time, stay well. Stay safe and stay informed. Thank you. [00:57:22][0.0]

Jeremy Allaire
Co-founder, CEO, Circle
Dan Matuszewski
Partner, CMS Holdings