At Crypto Finance Forum, Jeremy Fox-Geen, CFO of Circle, joined Antoine Scalia, Cryptio's CEO, to discuss the role Circle is playing in building the future of finance. 

Key takeaways

• Upgraded payments: Web3 money can move 24/7, 365 days a year, instantly, and eliminates the 2-6% fee for moving money within or across borders. 
• Creation of a tokenized dollar, not deposit: Circle is building towards having the underlying assets backing USDC to as close to 100% US Govt. credit risk as possible. It is not an attempt to tokenize bank deposits.
• Meeting the demand for US dollars globally: by minimizing exposure to local credit intermediaries, Circle seeks to empower individuals and businesses globally to directly have access to a global liquidity money network.
• Journey to IPO: Circle sees the added requirements around compliance and transparency of reporting for public companies as opportunities to set new and important standards in the industry.

The value of web3 money

Today, making payments in local currency is easier and more convenient than ever - just a quick tap of your phone, and your purchase is complete. Mobile wallets and contactless payment options have made transactions instant, convenient, and seamless for everyday purchases.

But when it comes to cross-border payments and remittances, significant challenges remain. These transactions often come with hefty fees - typically between 6-8% - which disproportionately impact those who can least afford them. On top of that, cross-border payments can take days to reach the recipient, adding unnecessary delays and frustrations.

Jeremy emphasized how Web3 money can effectively address the challenges associated with cross-border payments. With Web3 money, payments are as seamless and instantaneous as sending an email, available 24/7, 365 days a year.

"Why can't you send your money to anyone, anywhere in the world, nearly instantly, nearly for free, 24/7, 365, the same way you send a photograph, or a text message, or an email?"

Just as the internet revolutionized the way we share information, Web3 money has the potential to redefine how we exchange value, bridging borders and cutting costs in ways that traditional financial systems simply can’t match. Nevertheless, a few key conditions must be met first.

Maturation phase of the crypto industry

The Web3 industry is currently in a crucial phase of maturation, with foundational services still being developed. For the world to fully harness the benefits of Web3 money, several key elements need to fall into place:

1. We need widely accepted, legitimate digital money to unlock Web3’s potential.
2. Software and services must be built to simplify access, making it as user-friendly as possible.

Jeremy highlighted how Nubank - which already serves half of Brazil with over 90 million customers - aims to reach 1 billion people by streamlining access to Web3. By leveraging Circle’s technology stack and integrating USDC as part of its financial infrastructure, Nubank offers its users access to dollars in their bank accounts - without any of the technical hurdles traditionally associated with crypto.

Web3 money and its place in today’s banking system

Some in the web3 industry may hold the vision to create an entirely new financial system that sits outside of the current banking structure by using blockchain technology. 

Jeremy applauded these efforts but highlighted that: “99% of money and financial intermediation exists within the regulated perimeter of the governments of all the countries all the way around the world.”

Perceived reputational risk from banking institutions has not made it easy for digital asset companies to work with them. Jeremy touched on the banking crisis that occurred in March 2023 when Silvergate and Silicon Valley Bank both collapsed over one weekend. This meant that a whole industry was effectively debanked.

Jeremy underscored the importance of the crisis in showing that: “A legitimate industry’s connection to the banking world was pretty delicate.”

Jeremy outlined Circle’s mission to create a tokenized dollar - not tokenized deposits.

Jeremy explained that this means Circle wants: “The underlying assets of USDC to be as close to 100% US Government credit risk as possible.”

As it stands, this is not quite possible in the banking system in the US but Circle is building toward a future where this is possible. Jeremy stressed that Web3 money has to be built alongside the regulated financial system and that Web3 money represents a technology upgrade for the traditional money system.

He explained that:“We’ve built Circle on the premise that money is and always will be regulated.”

He added that Circle has built robust liquidity infrastructure so that web3 money and traditional money are fully interoperable, so that the only limits are the limits of the banking system itself.

Eliminating vectors of risk with tokenized dollars

The structure of today’s banking system is inherently risky. Banks engage in credit intermediation, using customer deposits to lend to others to generate profits, which exposes them to risk. Since the global financial crisis, over 500 banks have failed. Circle aims to mitigate this risk by creating a tokenized dollar, which eliminates credit intermediation and reduces exposure to risks tied to the traditional banking sector.

There are multiple vectors of risk to holding dollars in a country other than the US:

1. The financial institution you’re holding the dollars in could go bankrupt.
2. The local government could come and seize your dollars.
3. The inherent risk of the US dollar itself.

Jeremy highlighted that with web3 dollars: “the instrument is yours and so long as it is in your wallet where you control the keys, you have effectively taken away the government seizure risk. The risk of the institution is no longer the institutional risk of the holding institution - it’s the institutional risk of the issuer of the money, which in this case would be Circle”.

Additionally, the stringent US bank regulatory framework and government backstops reduce many of these risks, making the tokenized dollar a safer alternative by removing the risk of bank failure. This structure can provide greater financial security globally, as users are no longer exposed to the risks of traditional banking institutions.

Circle’s journey to IPO-readiness

At Crypto Finance Forum, CFOs from Ripple, Uniswap, Gemini, and PayPal debated the merits and challenges of going public (watch their discussion here). In his fireside chat with Antoine, Jeremy addressed the news that Circle is considering going public.

He acknowledged that becoming a public company brings unique challenges, such as adhering to SEC standards and undergoing regular audits. Compliance with these rigorous reporting requirements also entails significant costs.

While some may view these obligations as challenging, Circle sees them as opportunities. To serve as the tech infrastructure for the world’s leading companies, Circle not only accepts but embraces the need to meet the highest regulatory standards. Circle has however leveled up the company in the past few years to meet the standards required by public companies so that it is ready for the IPO.