Where Are We on Stablecoins?
22 Jan 2026 09:15h - 10:00h
Where Are We on Stablecoins?
Session at a glance
Summary
This discussion at the World Economic Forum examined the current state and future potential of stablecoins, featuring perspectives from the IMF, Circle (a major stablecoin issuer), and experts focused on Africa and digital assets. The panel explored the dramatic growth in stablecoin usage, with $33 trillion in transactions last year representing a 72% increase, though the total value of stablecoins remains at around $300 billion. Key drivers of adoption include significantly reduced transaction costs for remittances, faster settlement times, and financial inclusion for the unbanked population, particularly in developing markets like Africa where stablecoins provide protection against high inflation and currency volatility.
The discussion highlighted stablecoins’ role as programmable money for the internet age, enabling new use cases from AI agent transactions to cross-border trade settlement. Major companies like Stripe, Visa, and BlackRock are integrating stablecoins into their platforms, while the technology shows particular promise for small and medium enterprises and virtual economies. Regulatory frameworks like the U.S. Genius Act and Europe’s MiCA have provided clearer rules, though international interoperability remains a challenge. The panel addressed concerns about interest-bearing stablecoins potentially disrupting traditional banking, with arguments that this represents an evolution rather than replacement of the financial system.
Participants discussed monetary policy implications, suggesting that increased money velocity through instant settlements might actually require smaller monetary bases rather than causing inflation. The conversation concluded that while stablecoins remain a small fraction of the global financial system, they represent a fundamental shift toward more efficient, inclusive, and globally accessible payment infrastructure that will continue evolving over the coming decades.
Keypoints
Major Discussion Points:
– Explosive Growth and Adoption of Stablecoins: The panel discussed the dramatic increase in stablecoin usage, with $33 trillion in transactions and $350+ billion in assets, driven by benefits like reduced transaction costs, faster settlements, and financial inclusion, particularly in developing markets like Africa where traditional banking is limited.
– Regulatory Framework and Policy Environment: Extensive discussion of recent regulatory developments including the Genius Act in the US and MiCA in Europe, with focus on how these frameworks establish safety requirements (like reserve backing) while enabling innovation, and the need for international regulatory interoperability.
– AI Integration and Programmable Money: The panel explored how stablecoins serve as “programmable money” that can facilitate AI agent transactions and the broader digital economy, with stablecoins providing the necessary infrastructure for high-velocity, low-cost transactions between AI systems and enabling new forms of economic activity.
– Impact on Traditional Banking and Monetary Policy: Debate over whether interest-bearing stablecoins would cause massive flight from bank deposits, the competitive pressure stablecoins place on traditional financial institutions, and how the increased velocity of digital money might affect monetary policy and inflation dynamics.
– Global Financial Inclusion and Cross-Border Payments: Discussion of how stablecoins address critical needs in developing economies, particularly for remittances, hedging against local currency inflation, and enabling small businesses to participate in global commerce without traditional banking infrastructure.
Overall Purpose:
The discussion aimed to provide a comprehensive assessment of the current state of stablecoins, examining their rapid growth, regulatory developments, technological innovations, and potential to transform global payment systems and financial infrastructure.
Overall Tone:
The tone was generally optimistic and forward-looking, with panelists expressing enthusiasm about stablecoin potential while acknowledging legitimate regulatory and policy challenges. The discussion maintained a balanced, expert-level analysis throughout, with panelists building on each other’s points constructively. There was some tension around the banking industry’s concerns about competition, but this was addressed thoughtfully rather than dismissively.
Speakers
– Gerard Baker – Editor-at-large of the Wall Street Journal, typically writes about macroeconomics and geopolitics, session moderator
– Dan Katz – First Deputy Managing Director of the IMF (International Monetary Fund)
– Jeremy Allaire – Co-founder and CEO of Circle (stablecoin company)
– Vera Songwe – Co-founder of the Liquidity and Sustainability Facility based in the UK with focus on Africa
– Siu Yat – Co-founder of Animoca Brands based in Hong Kong
– Audience – Various audience members who asked questions during the Q&A session
Additional speakers:
– Pierre Gramenny – Managing Director of the European Stability Mechanism (lender of last resort of Europe)
– Drishti – Global shaper from India and entrepreneur
Full session report
Comprehensive Summary: World Economic Forum Discussion on Stablecoins
Introduction and Context
This World Economic Forum panel discussion examined the current state and future potential of stablecoins, bringing together diverse perspectives from international financial institutions, technology companies, and regional development experts. Moderated by Gerard Baker, Editor-at-large of the Wall Street Journal, the session featured Dan Katz (First Deputy Managing Director of the IMF), Jeremy Allaire (Co-founder and CEO of Circle), Vera Songwe (Co-founder of the Liquidity and Sustainability Facility with focus on Africa), and Siu Yat (Co-founder of Animoca Brands based in Hong Kong). The discussion aimed to provide a comprehensive assessment of stablecoins’ rapid growth, regulatory developments, technological innovations, and potential to transform global payment systems and financial infrastructure.
Market Growth and Current State
Gerard Baker opened the discussion by highlighting the dramatic expansion in stablecoin usage, citing $33 trillion in transactions over the past year representing a 72% increase. Jeremy Allaire provided additional context, noting that Circle’s USDC specifically has experienced over 80% annual growth for multiple years straight and 580% year-over-year transaction volume growth in Q3 alone.
However, Dan Katz provided crucial analytical perspective by distinguishing between transaction volume and actual economic substance. He emphasised that whilst the $33 trillion figure appears impressive, much of this volume comes from AI agent trading activity, and the total value of stablecoins remains at approximately $300 billion, which he characterised as “still very, very tiny” in the context of the global financial system. This distinction between high-velocity trading activity and genuine economic adoption became a recurring theme throughout the discussion.
The speakers identified several key drivers behind meaningful stablecoin adoption. Vera Songwe highlighted the technology’s particular relevance for Africa, where stablecoins provide significant benefits including reduced remittance costs from 6 cents per dollar to virtually nothing, protection against high inflation, and financial inclusion for populations lacking traditional banking access. She noted that globally, 1.5 billion people do not have access to a bank account, with 650 million of these on the African continent alone.
Siu Yat provided concrete examples of adoption during COVID-19, particularly in the Philippines and Indonesia, where stablecoins enabled daily payroll systems in developing countries where traditional credit systems are unavailable. He emphasised growth in virtual economies and gaming, where stablecoins serve as a bridge between digital assets and real-world transactions.
Financial Inclusion and Cross-Border Payments
The discussion revealed stablecoins’ significant impact on financial inclusion, particularly in emerging markets. Vera Songwe provided striking statistics about Africa’s digital asset adoption, noting that 20% of Binance’s 300+ million users are located in Africa. She highlighted that remittances have tripled compared to development assistance over the past three years, with stablecoins playing an increasingly important role in these flows.
The technology shows particular promise in countries with high inflation and capital controls, particularly Egypt, Nigeria, and Ethiopia, where stablecoins provide both a hedge against local currency devaluation and access to global commerce for businesses lacking traditional banking infrastructure. Vera noted that stablecoins enable African businesses to trade directly with partners in Asia without going through traditional correspondent banking relationships.
Siu Yat emphasised how stablecoins create global liquidity, enabling 200-300 million users worldwide to transact seamlessly with businesses globally, creating new forms of economic participation previously impossible due to traditional banking limitations. This “democratisation of finance” allows small businesses and individuals in developing countries to participate in global commerce on equal terms.
Technological Innovation and Programmable Money
The discussion revealed stablecoins’ evolution beyond simple payment mechanisms into what speakers termed “programmable money” for the internet age. Jeremy Allaire outlined diverse applications including cross-border trade settlement, e-commerce payments, remittances, and savings vehicles across major platforms. He particularly emphasised stablecoins’ critical role in enabling AI agent transactions, which require high-velocity, low-cost payments that traditional banking systems cannot support.
Siu Yat provided an insightful analogy comparing programmable money to the democratisation of media, explaining how stablecoins enable non-finance professionals to create financial products for the first time. This “open source money” concept, he argued, represents a fundamental shift similar to how the internet democratised content creation, allowing anyone to build financial applications without traditional banking infrastructure.
Jeremy described emerging blockchain networks specifically designed for agentic compute and AI economic activity, with stablecoins serving as the native currency for these systems. He envisions a future where AI agents conduct continuous economic activity, requiring payment infrastructure that traditional banking systems cannot provide due to cost and speed limitations.
An audience member raised questions about commodity tokenisation, to which Jeremy responded by highlighting emerging on-chain markets like HyperLiquid, where tokenised commodities use stablecoins for collateral and settlement, indicating that the technology’s applications extend well beyond simple payments into complex financial instruments.
Regulatory Framework and Policy Environment
The panel devoted considerable attention to recent regulatory developments, with speakers generally expressing optimism about emerging frameworks whilst acknowledging ongoing challenges. Jeremy Allaire discussed the significance of the recently passed Genius Act in the United States, which established clear regulatory requirements defining stablecoins as payment instruments with mandatory reserve backing. Crucially, he explained that stablecoins are prohibited from paying interest under current law in multiple jurisdictions to maintain their cash-like safety characteristics and prevent them from competing directly with bank deposits.
Dan Katz emphasised the importance of international regulatory coordination, noting that cross-border benefits of stablecoins require scale and interoperability between different jurisdictions’ regulatory approaches. He highlighted that whilst frameworks like the Genius Act represent progress, effective implementation requires continued work through various rulemakings and international cooperation.
Vera Songwe offered a unique perspective on regulation’s potential benefits beyond safety, suggesting that stablecoins can serve as governance and fiscal policy enhancement tools by improving transparency and reducing illicit financial flows. She argued that properly regulated stablecoin systems could encourage better monetary and fiscal policy discipline in emerging markets, with Dan Katz noting that competitive pressure could incentivise countries to improve their fiscal and monetary frameworks.
The speakers agreed that regulatory frameworks should enable competition between stablecoins and traditional financial systems for consumer benefit, rather than protecting incumbent institutions. However, they acknowledged that achieving this balance whilst maintaining financial stability requires careful calibration of rules and ongoing international dialogue.
Monetary Policy and Financial System Impact
One of the most intellectually stimulating aspects of the discussion concerned stablecoins’ potential impact on monetary policy and traditional banking systems. Jeremy Allaire introduced the provocative concept of “new physics of money,” arguing that stablecoins’ hypervelocity characteristics might actually require smaller monetary bases to achieve higher economic velocity, fundamentally changing how central bank interest rate mechanisms operate.
Dan Katz provided a measured IMF perspective on these monetary policy implications, acknowledging that velocity increases could affect traditional mechanisms whilst emphasising that such changes are supply-driven rather than demand-driven and therefore unlikely to cause significant inflationary pressures. He noted that central banks regularly update operational frameworks and can adapt to stablecoin integration, though this requires careful study and gradual implementation.
The discussion addressed concerns raised by Pierre Gramenny from the European Stability Mechanism about whether instant payments and settlements through stablecoins might dramatically increase money supply velocity and impact inflation. Both Katz and Allaire argued that increased velocity would likely require smaller rather than larger monetary bases, directly challenging conventional monetary theory concerns about inflationary pressures.
Vera Songwe highlighted how stablecoins could improve efficiency in emerging markets by moving from five-day settlements to real-time transactions, whilst also increasing liquidity in banking-constrained environments where banks primarily hold government paper rather than extending credit to businesses.
Alternative Currency Models and Reducing Dollar Dependence
The panel explored innovative approaches to reducing dollar dominance in global stablecoin systems. Vera Songwe detailed work that “a group of us” are undertaking to design an African stablecoin platform backed by Special Drawing Rights (SDRs) – the IMF’s international reserve asset – rather than dollars. This system would enable direct trading in multiple currencies and better reflect Africa’s diverse global trade patterns, particularly with Asia.
This SDR-backed approach, she argued, would reduce intermediation costs whilst encouraging better monetary and fiscal policy discipline in emerging markets. The system represents a significant departure from current dollar-denominated stablecoin dominance and could provide a model for other regions seeking monetary sovereignty whilst benefiting from stablecoin technology.
Jeremy Allaire, whilst promoting continued growth of dollar-denominated stablecoins like USDC, acknowledged the legitimacy of alternative approaches. The discussion revealed a constructive tension between those favouring existing dollar-based systems and those advocating for more diverse currency models to serve different regional needs and reduce systemic dependencies.
Banking Industry Competition and Future Architecture
The panel addressed significant concerns from traditional banking institutions about competitive pressures from stablecoins, particularly regarding potential deposit flight. Jeremy Allaire dismissed banks’ concerns as “totally absurd,” drawing parallels to money market funds and arguing that stablecoin rewards programmes are similar to existing financial product incentives without threatening the banking system.
He envisioned credit delivery systems built on top of stablecoins, creating what he characterised as safer and more efficient lending mechanisms than traditional bank lending. This represents a fundamental reimagining of financial system architecture, with digital cash serving as the foundation for new forms of credit intermediation.
Dan Katz took a more diplomatic approach, acknowledging legitimate concerns whilst emphasising that regulatory frameworks should enable healthy competition between stablecoins and traditional financial systems. Vera Songwe suggested that stablecoins could complement rather than replace traditional banking, particularly in emerging markets where banks face liquidity constraints and primarily hold government securities rather than extending business credit.
The speakers generally agreed that closer relationships between stablecoin issuers and traditional banking systems would be more beneficial than viewing them as competitors, though they differed on the extent to which existing banking architecture might need to evolve.
Areas of Consensus and Disagreement
Despite representing different institutional perspectives, the speakers demonstrated remarkable consensus on several fundamental issues. All agreed that stablecoins provide significant benefits for financial inclusion and cross-border payments, particularly for unbanked populations in developing economies. They acknowledged that clear regulatory frameworks are necessary and beneficial, though international coordination remains essential for optimal cross-border functionality.
Perhaps most surprisingly, both the IMF representative and stablecoin CEO agreed that increased money velocity from stablecoins could be deflationary rather than inflationary, challenging conventional monetary theory concerns and suggesting that the technology might require smaller rather than larger monetary bases.
However, the discussion revealed several areas of constructive disagreement. Dan Katz and other speakers differed on the significance of the $33 trillion transaction volume figure, with Katz arguing it was misleading due to AI agent trading activity, whilst others defended its importance as representing meaningful economic activity growth.
A significant philosophical divide emerged between those favouring dollar-denominated systems and those advocating for alternative currency models. Jeremy Allaire promoted continued growth of dollar-based stablecoins like USDC, whilst Vera Songwe actively works to develop SDR-backed alternatives to reduce dollar dominance and better serve diverse regional trading relationships.
Future Challenges and Outlook
The discussion identified several critical questions requiring further investigation and development. The mechanics of risk supervision in a hypervelocity money environment remain unclear, as do the ultimate competitive dynamics between stablecoins and traditional banking systems. Specific mechanisms for how central banks will adapt interest rate policy to account for stablecoin velocity effects need development.
International regulatory interoperability remains a significant challenge, with different jurisdictions developing varying approaches that may not seamlessly connect. The technical standards for AI agent payment protocols using stablecoins require development, as do frameworks for tokenised commodities markets and other emerging applications.
The panel concluded that whilst stablecoins remain a small fraction of the global financial system, they represent a fundamental shift toward more efficient, inclusive, and globally accessible payment infrastructure. The technology’s ability to provide financial services to unbanked populations, reduce transaction costs, and enable new forms of economic activity suggests continued growth and integration with traditional financial systems.
The speakers emphasised that stablecoins’ success will depend on continued regulatory clarity, international cooperation, and thoughtful integration with existing monetary policy frameworks. Rather than replacing traditional financial systems, stablecoins are more likely to create hybrid architectures that combine the efficiency and accessibility of digital currencies with the stability and regulatory oversight of established institutions.
The panel’s diverse perspectives highlighted that stablecoin development will likely follow different paths in different regions, with emerging markets potentially leapfrogging traditional banking infrastructure whilst developed markets focus on integration and interoperability. This divergence presents both opportunities for financial inclusion and challenges for global regulatory coordination that will shape the technology’s evolution in the coming years.
Session transcript
Good morning everybody, welcome to this session on where are we with stablecoins, past, present and future. Thanks very much indeed for joining us. I’m Gerry Baker, I’m editor-at-large of the Wall Street Journal, typically write about macroeconomics and geopolitics but like everybody have an interest in this phenomenon, this growth broadly of cryptocurrency and of course particularly what’s been happening in stablecoins.
Got a terrific panel here with a range of perspectives and views on this topic, just briefly introduce them. We’ve got to my immediate left Dan Katz, first Deputy Managing Director of the IMF. Next to him Jeremy Allaire, co-founder and CEO of Circle, of course one of the big stablecoin company.
To his left Vera Songwe who’s co-founder of the Liquidity and Sustainability Facility based in the UK, although with heavily focus on Africa, aren’t you Vera? And on my far left Siu Yat, co-founder of Animoca Brands based in Hong Kong. Just to set the stage, obviously we’ve seen a dramatic explosion in the use of stablecoin just in the last few years.
The numbers are latest data with a $33 trillion worth of transactions in stablecoin last year, that was a 72% increase on the year before. I think over $350 billion worth of stablecoin assets now. Everybody seems to expect this growth to continue.
We’ve had a lot of focus, interesting focus on the regulatory environment, Genius Act of course passed in the United States last year, other countries also establishing a regulatory framework for dealing with stablecoin.
I suppose I think to me the most fascinating story we’ll get into all aspects of this but the most fascinating story to me is the question of you know of what is the ultimate potential here. I know the sort of passionate the evangelists for crypto generally see stablecoin because obviously because as the name implies because of its stability as a real disrupter of the global payment system representing a significant challenge to existing financial institutions, reducing friction in domestic and especially international transactions with all the potential something some of the people I speak to think that ultimately perhaps replacing traditional financial institutions in so many of these payment systems.
Others think maybe the potential is more limited. So we’ll get into all of that and we’ll get into a lot of the details but once again thank you all for being here. So let me start with you Dan.
We have seen as I said this explosion of the use of stablecoin in the last few years. What have been the main drivers of that growth? Well thanks
Gerard Baker it’s great to it’s great to be here. In terms of what’s been the main driver for that growth I think that’s actually a helpful framing for understanding the way that the evangelists as you put it and also maybe you could say the reactionaries look at it.
So the 37 trillion dollars of transaction volume I think is actually a little bit misleading because a lot of that transaction volume you know might be trading back and forth between AI agents and your various other forms of digital transactions which may not actually be that tied to economic substance.
So I generally prefer to look at what’s the total volume of Stablecoins that’s been issued, which absolutely has been growing. But in the context of the global financial system, $300 billion is still very, very tiny. So I don’t think we quite yet know where this is going.
What is clear, though, is that there are both very significant potential benefits from the deployment of stablecoins across improvements in both domestic and cross-border payments in terms of financial inclusion.
I think that’s often an overlooked benefit, but a really important one. And then, of course, that’s offset by potential risks, whether that’s financial stability risks, so as a result of runs on particular stablecoins, or whether that’s a result of payment fragmentation that could silo liquidity, or as a result of disintermediating the banking system, which I think is oftentimes the most severe risk that folks are focused on.
And from an emerging markets perspective, the threat of currency substitution and very, very volatile capital flows. But it’s really early days. And so I think, you know, from the perspective of the fund and from the perspective of economic policymakers, it’s important to remain balanced, to work to establish clear rules and frameworks.
And we’ve seen a lot of progress on that front. But be very open-minded, both of the benefits and the opportunities as this ecosystem starts to interact with the traditional financial system.
So Jeremy, let me ask you, so sort of almost to flip that, my opening question on its head about why have we seen this explosive growth? I mean, to Dan’s point, OK, the transaction number is one thing, but the actual total value of stablecoins is another 300 billion, which, again, as Dan says, is a drop in the bucket, not only of total, obviously, financial assets, but actually even of crypto, of total crypto assets.
So to sort of flip the question around, maybe, you know, why haven’t we seen even faster growth? Why aren’t people adopting stablecoin more? And, you know, presumably, again, from your perspective, you firmly expect them to do so.
And how is that going to unfold?
Well, I mean, look, I… It depends on your definition of fast. You know, we’ve seen USDC grow over 80% a year for multiple years straight.
We saw in Q3, our most recently publicly reported quarter, we saw transaction volume in USDC grow 580% year-on-year. You know, across so many other metrics, the amount of USDC flow across blockchain networks also growing at huge growth rates. What’s interesting for us, though, is this gets into the original question, which is when we think about this, really, from inception when we designed this in the first place, we think about general purpose, general architecture, money for the internet.
Fully reserved, very safe, fully reserved. Now we’re getting prudential frameworks to provide for that safety in a digital cash instrument that can scale from a transaction that might be between one AI agent and another AI agent that needs to consume digital tokens for $0.25, all the way up to a bond purchase that might be a billion-dollar bond purchase settled internationally, and everything in between.
And so when I look at the use case proliferation that we’re seeing, it’s extraordinary. We are seeing use grow in cross-border trade settlement. We’re seeing use grow in trade finance.
We’re seeing the biggest e-commerce platforms like Stripe and Shopify adding USDC payment acceptance in their own platforms. We’re seeing the biggest remittance companies and neobanks adding USDC as a way to store value, as a savings vehicle, as a payment system capability. The biggest payments networks in the world, like Visa and MasterCard, now using USDC as an internal settlement infrastructure.
The biggest asset issuers and asset managers, like BlackRock and Apollo, issuing private credit products on-chain or other fund products on-chain, where the primary way that you create and redeem these new securities is with things like USDC.
and then obviously in peer-to-peer transactions. I think one of the things that I think people often mistake is there’s a lot of USDC and stablecoin in general that comes in and out through these big aggregators like a Binance or a Coinbase or others, quote-unquote crypto exchanges.
But what’s interesting about these platforms is that, yes, people are using them for trading and investing, but they’re also using them for savings. If you look at a platform like Binance with over 300 million users, 20% of their users are in Africa, far higher penetration of users in Africa than the banking system in Africa. And people are using it primarily as a dollar substitution mechanism, as a way to store value, make peer-to-peer payments, etc.
And so the use cases are growing in every sector of the economic system. And with the regulatory clarity, I think, that’s breaking out all around the world, we expect that to accelerate as well.
You moved us nicely on there by talking about Africa to Vera. The vast bulk, I think it’s true so far, of the stablecoin activity we’ve seen is obviously fiat currency-backed and in particular US dollar-backed. But Vera, I know you’ve been, particularly in Africa, working on alternatives.
Can you tell us how that sector of the market is growing?
Yes, no, I think, thank you very much. I want to come back to the 33 trillion number. And it’s not clear to me that one needs to dismiss it just because the money velocity is increasing, because that is what 33 trillion is.
It’s the money velocity. Yes, the base is 300 billion, which is already a big number when you talk about how quickly it has grown. But in Africa in particular, I think there are four, I think, positive use cases for it, which is one of the reasons why it’s growing so fast.
The first one is just about transaction cost and arbitrage. And so far, for the last, I would say, 15 years, one constant agenda item on the G20 has been reduce the cost of remittance transfers. Remittances are more important to Africa than aid.
has been and actually cumulatively over the last three years, remittances have tripled compared to overall development assistance. So this is how important it is. However, for every dollar that is sent out onto the continent you have 0.06, so let’s say if it’s $100, $6 of payments, costs and transactions, which is quite expensive.
In addition to that, if you’re transacting over the weekend, then you have to wait for Monday, right? So if you’re a small business transactions person, those three or four days, sometimes on the continent it’s actually five days in terms of sending resources. With stablecoins, it takes minutes and it costs a dollar.
So one of the beautiful things about the Genius Act is really that it has now created a regulatory framework for stablecoins, but the big beautiful budget was going to start taxing remittances by $5. So you’re gonna add already 6%, you’re gonna add another 5%, with stablecoin you can do that. The second thing that is important for stablecoin is of course the hedge against the inflation in many of our countries.
Post COVID, we have about 12 to 15 African countries where inflation was above 20%. And so essentially, the fastest way to poverty increases is inflation. And so what you wanna do is what stablecoin is doing is providing people with a safety net, with a safe account.
6.5 billion people globally do not have, sorry, 1.5 billion people globally do not have access to a bank account. 650 million people on the African continent. With a smartphone, you have access to stablecoin so you can actually save in a currency that is not exposed to the fluctuations of inflation and making you poorer.
So that’s another big contribution of the stablecoin. Can you give us a sense of what the take up is so far in Africa? I’m assuming.
You have a lot of take up in the countries where inflation. And I think stablecoin also, in some sense is almost a directional way of looking at monetary policy and restrictions on capital controls. Where you have higher capital controls, any country that has higher capital controls has stablecoin use quite high.
So we have the three biggest stablecoin users on the continent today are Egypt, Nigeria, Ethiopia, to some extent South Africa, but South Africa is because SME businesses are using it. and this is the last point that I was going to make is actually also small and medium enterprises, the large bulk of stablecoin use on the continent is below a million dollars, which means it’s mostly SMEs transacting on it.
So it’s a huge inclusion and financial inclusion, as you said, too.
Yeah, so what’s your sense of the immediate potential, the short-term potential of the growth in stablecoin and ultimate potential? I mean, where does this go?
I mean, I guess I’ll take it from the lens from the entirely virtual economy, which is kind of where we’re sitting, you know, between video games and digital assets purely. I mean, the state of crypto broadly went from, you know, like six, seven years ago to, you know, about three to four hundred billion to basically three trillion. And so that’s very much a proxy as well, as those economies grow in themselves, not just the rise of Bitcoin, but the entire crypto economy.
Of course, the use of stablecoins grows well. And I think the very initial use of stablecoins was this on-off ramp as well. It was kind of really, if you think about it, the bridge to the real world, not just as an RWA, but literally, oh, I have assets that are worth something in the digital world that are entirely virtual, so to speak.
And now how do I bridge it so I can, you know, buy something in the real world and do that? And that actually, stablecoins really sort of perfected that model at start.
And I’m right, that has up to now been quite a significant component of the stablecoin.
It certainly has been a significant component for the initial growth. But I think it’s much more significant today because the other thing that’s also happened, and especially during COVID, we saw this in places with, you know, some of our products, in places like Philippines and Indonesia, there was basically mass adoption of places where they needed to make virtual income.
And virtual income can be made through activities that are done in those digital worlds, right? They used to call it the metaverse. Metaverse is kind of out.
But the point is that people are still making money in those environments. They make them in these digital assets, in crypto tokens. They may be, you know, not real.
However, they would then trade them out into stablecoins. And then the next thing you know, because they have a wallet, they’ve got a bank account of some form where they wouldn’t normally get banked because, you know, $5 isn’t worth a bank account. But $5 is a lot of money in places like the Philippines.
And then what’s interesting also is this financial inclusion that actually introduces a form of financial literacy. And I think it’s interesting because, you know, for those of us who’ve been around for a while, I think it’s a little bit synonymous of looking at media consumption in the internet back in 1995 and 96, right?
The growth is rapid, but in relative media consumption compared to TV and newspapers, it seems very low. And I think with stablecoins and broadly with digital assets, we’re kind of at that stage, right? $3 trillion is a big figure, but at the size of, you know, the stock market and generally speaking, it’s still a tiny, tiny fraction, which I think represents that opportunity.
The other thing, of course, is that we think of this also as the asset class of the youth. So it’s not just developing, it’s also for young people. If you look at South Korea, the majority of people under the age of 30 now exclusively deal in digital assets of some form or fashion.
Sometimes they don’t even care about stocks, which is why people talk about tokenizing stocks themselves. And so what is that bridge, right? So I think the growth of stablecoins is going to grow, not just because of the demand in the physical world, better, faster, cheaper, all the arguments that we’re seeing here, just on the topic of unbanked.
I mean, you know, we’re used to T plus two, sometimes T plus seven, depending what it is. But in places of these countries, you need, you know, you basically, you need it there in the second. Because, you know, why do we have payroll systems that pay us on a monthly basis?
We think that’s normal because we’ve got credit systems around. But in those places, you need to have your payroll on a daily basis. And stablecoins is one of the best use cases for that.
So it’s growing from there.
Jeremy, we’re all obviously now completely used to the idea that artificial intelligence, you know, the adoption of artificial intelligence is not only now pretty well universal, but we’re expecting, obviously, the dramatic acceleration of it in a increasingly short kind of timeframe.
Can you tell us how stablecoin, what role stablecoin can play there and how AI will affect stablecoin?
Sure. I’d start with maybe some basic, which is when we got started working on this almost 13 years ago, the idea that got us very excited was that, first, that you could have kind of money as like a native data type on the internet.
So you could have digital dollars, just like you have digital music or communications, like kind of basic building blocks, and that it would be programmable. And the programmability idea was through the advent or the proposal of the idea of smart contracts. And 12 years ago, 13 years ago, that wasn’t a thing.
Now we have very mature computing networks, these blockchain networks, that are able to execute code. And what’s powerful about it is that these smart contracts, they’re publicly verifiable. So that’s really important when you’re dealing with transactions amongst unknown counterparties or, for example, when you’re dealing with transactions between an AI agent and another AI agent.
And so we now have kind of the computing material to provide a kind of assured, verifiable, cryptographically verifiable way to conduct transactions. And so that’s powerful in a whole bunch of things. It’s powerful for bringing more financial market infrastructure online and innovations in the way financial services get built and delivered and rendered.
But it’s particularly important in this growing world of agentic economic activity. And so right now, what we’re seeing is this proliferation in new technology standards for basically payment protocols for AI agents and payment protocols for AI agents that primarily use stablecoins as the actual medium of exchange.
If you think about AI agents that making these high-velocity transactions at very low cost to do work or consume data, etc. Like taking out your Visa card or firing up a bank wire, or it’s just completely absurd. And so we need a medium of exchange that can scale down to fractions of a cent, that has the money velocity and speed of the Internet, that works openly, globally, interoperably.
Any software or hardware-connected device in the world that may have AI, a genetic activity happening on it, being able to transact. And critically, you know, with AI, one of the big concerns is truth. Not just hallucinations, but also, how do we know, who is this AI agent acting on behalf of?
And how do I verify that its output and its work is correct? And so, what we’re really seeing is sort of the next generation of blockchain networks, things like ARK, which Circle’s building on, there’s other new blockchain networks, are actually being designed specifically for agentic compute.
They’re designed specifically for the financial and economic activity of a world where three years, five years from now, one, I think, can reasonably expect that there’ll be billions, literally billions of AI agents conducting economic activity in the world continuously, on a continuous basis.
They need an economic system. They need a financial system. They need a payment system.
There is no other alternative, in my view, other than stablecoins to do that right now, and that can keep up with that pace of technological change. And so that’s a, it’s a critical focus for us, but not just us. There’s a lot of other folks that are interested in this and contributing to the technical standards to support this upgrade to our digital economic system.
Let’s talk about, if we, about, can I just, just to quickly interject,
just because Jeremy was talking about programmability and… Agentica, absolutely, it’s going to be huge. The programmable aspect of basically money is actually, I think, the other part that’s really revolutionary.
The whole DeFi economy comes from the fact that you can actually program money. And I think the parallel of it is a little bit like open source. For the first time in the world, you have a kind of open source money that is basically reserve-backed.
But what you can now do is create products and services on top of it that weren’t accessible before. And when you think about what the internet did in the early days, it provided that toolkit for media. You weren’t a media professional, but now you could enter the world of media.
You could be a kid, you could be a programmer. You didn’t have to come from the world of finance. And I think it’s very interesting when you look at the origins of a lot of the people in the crypto world.
They don’t originally come from finance. They come from many other industries. But they became sort of included in this world of finance.
They learned about it. And then they brought their own creativity, their own ideas to the space and say, hey, how about we do this? Or maybe we should do a prediction market, or maybe we should do something in gaming.
They just integrated that. And in a way, previously, because money was kind of locked in sort of traditional systems, only experts could enter. Essentially, you couldn’t grow that space.
And I think the real incredible added opportunity is, by open sourcing money, you bring the entire global creativity, which I think is the opportunity for economies as well to say, you know what, you don’t have to have a finance degree, but you can now dabble with this.
And then from there, you can develop and then actually become more financially literate, just in the same way that we used to call digital literacy, I think.
This raises, again, helpfully brings us on to the next topic I wanted to discuss, which is the policy environment. And firstly, the regulatory environment. And, you know, given these extraordinary innovations you’re seeing, I mean, we had the Genius Act, obviously, last year.
You know, and I wanted, Dan, if you could tell us what, you know, obviously, its principal provisions were, you know, required reserve backing, you know, some sort of certain protections. How is that, from your perspective, how is that working? Is it?
I mean, often when you get a significant piece of regulation, it works in some respects and then you discover that there are whole areas actually which are either over-regulated or under-regulated. What’s your sense of the regulatory climate right now, especially in the U.S.?
Sure. So, I mean, with respect to the U.S. specifically, I think it’s quite early, right?
I mean, certainly Genius was a big step forward in terms of establishing some clear rules of the road, but at the same time, you know, there’s still a range of rulemakings that regulators need to go through to figure out how to appropriately calibrate the regulatory framework.
And then critically, you know, I think one of the key things is going to be the interaction between regulatory frameworks internationally. And we have seen, you know, progress on the international front, obviously MECA in the EU and lots of other jurisdictions introducing their own frameworks. But if you really want to realize the benefits of stablecoins, particularly from a cross-border transactions perspective, and of course you really need scale to generate a lot of the benefits that we realize could be realized with stablecoins, you need to have effective interoperability.
And so I think that’s really the next regulatory frontier that folks need to work on. But just kind of stepping back for a minute from the funds perspective in thinking about global economic growth and stability, you know, the reason why we need these clear regulatory frameworks is a concept that I think it’s really important for everyone to keep in mind when thinking about these developments, and that’s competition, right?
And so one of the reasons why I think there are such exciting potential use cases for stablecoins is the competitive dynamics that they will bring into the traditional financial system. And I don’t begin to know exactly what this is going to look like over the next decade and beyond, whether stablecoin issuers will be the dominant provider of mediums of exchange or stores of value, or whether the technological underpinnings that exist in the ecosystem will be absorbed.
to the traditional financial system, but I think it’s critical that we allow this process to play out because ultimately it’s consumers are gonna benefit from the efficiency gains that the market will respond to.
And that would also extend, by the way, to the role of currencies generally in the international environment. And so, as we’ve already heard, as stable coins create the potential for additional uptake in jurisdictions that have weak fiscal and monetary frameworks for dollars or for other currencies, that creates a competitive pressure on those countries themselves in order to improve their fiscal and monetary frameworks, which I think is an important element that we shouldn’t also lose as we’re thinking about concepts like monetary sovereignty.
Vera, I mean, that’s obviously, and talk a little bit also about, you talked in your opening remarks a little bit about the role of the dollar, but the importance of perhaps a de-dollarization. I know you’ve been working on a sort of alternative currency-backed stable coin.
Yes, no, I think that’s, thank you, and that’s a very good segue. So one of the biggest fries, and just to be clear, stable coin is not crypto, right? At least a fiat-based stable coin, which is backed by some liquid currencies, is what we’re talking about here.
And I think if you look at the African continent, we have over 50 countries. We have the African Continental Free Trade Area Agreement. Countries need to trade.
We have a lot of capital controls on the continent, so it’s very difficult to move around if you’re trading. And essentially, part of that is about weak fiscal policies, deficits, debts, and also monetary policy that sometimes is not always appropriately anchored. And what you can do with stable coins, and what we’re trying to do actually, a group of us, design an African stable coin platform, which essentially is backed by the SDRs.
And so sort of the underlying assets will become. you know, still fiat currencies, U.S. treasuries, but then it begins to mirror Africa’s trade with the rest of the world.
And if you take, for example, one of the advantages, we’re beginning to trade a lot in rim and beads, right? Today, we have to go through the dollar, the intermediation cost. And so if you can do a stable coin platform that has, the SDRs, of course, have the seven largest currencies of the world, then you begin to, it does not impact on monetary policy, because today what we have, if you’re in Nigeria, the 59 billion is mostly U.S.
D.C.’s. And so there is already a monetary policy dislocation that is happening, because even if the Nigerians are mostly buying, I was just talking with the Bank of Industry, they are mostly purchasing Brazilian machinery for agriculture, but they are switching through the dollar and or Chinese machinery.
And essentially what this kind of system will do is one, it will push monetary policy to anchor better on inflation, push fiscal policy, hopefully, to be slightly more prudent. And then what happens is that you don’t have the sort of dollar domination, which is what I think everybody’s afraid of. And it is true today, 75% of the stable coin environment is with U.S.
D.C.’s, which are basically dollar denominated. But the good news about it is also, I want to say for Africa, at least, that the other part is not all fun and games. I think there are some drawbacks.
One of the biggest drawbacks, particularly more in the crypto world, is a little bit about transparency, AMLs, and those kinds of safeties. I think with blockchain, we are able now to build in sort of truths to the system. In Africa, we have talked for the last another 15 years about illicit financial flows and the fact that, you know, the mining companies take out the resources and we cannot appropriately fiscalize that.
This is another way of doing that in a more appropriate way and actually really following the payments and the system. So I think for us, it actually is a governance enhancer. It’s a fiscal policy enhancer.
And well done, it’s a monetary policy disciplinary tool.
I’ve got a few more questions for me, but so please, we’ll open it up to questions from the floor in a second. Jeremy, one very lively debate that’s going on right now in the context of regulatory policy environment is the question of interest-bearing stablecoin, of interest payment on stablecoin. This has been actually here at the forum, at the meeting this week, this topic of lively debate with, perhaps not surprisingly, banks expressing great concern about the possibility of interest being paid on stablecoins.
I think I saw Brian Moynihan, Bank of America CEO, saying that could lead, would lead to a massive flight of bank deposits into stablecoin. What’s your, and we can explore the implications of that, sort of the monetary policy implications and other things of that, but what’s your, where are you on that and what do you think, do you think he’s right, that this, you would see a very dramatic shift out of traditional bank deposits if that were to happen?
So there are a few, I think, key issues here. I think there’s the sort of, the law and policy issue. There’s the actual kind of data about what, you know, what’s here and then kind of how does this go forward.
And I think embedded in all of this is sort of, in my view, sort of taking a first principles approach to how we’re designing an Internet-native financial system, which is sort of how we think about things.
So maybe just to touch on each of these, I think the first is we have a law, the Genius Act, in the United States and we have laws in Europe, MECA. We have laws in Japan for stablecoins. We now have laws in the UAE, Hong Kong, Singapore imminently, and in many other places.
In every single one of these jurisdictions, stablecoins are prohibited from paying interest. That is because stablecoins, payment stablecoins, and in fact the law in the United States defines a payment stablecoin as a cash instrument that is a payment token that is used as a form of of Payment and Settlement, right?
This is the fundamental definition, and I think it’s the correct definition, and that’s the work of the FSB, that’s the work of the G20, that’s the work of central bankers who’ve looked at this and said, we see this as a payment system innovation, this needs to have the safeguards of kind of cash-level money, and really that was the regulatory design that came out of a lot of work, five years of work, that work went into the development of the stablecoin bill, which eventually became known as the Genius Act in the US, and that is the law, and I think that’s very good, and I think that’s the right law.
Now, there’s sort of a second piece, which is stablecoin issuers, such as Circle, are prohibited from paying interest, but we generate income, we make money from reserves and other revenue sources, and we build partnerships with lots of companies.
We have a partnership with Coinbase, we have partnerships with Binance, we have partnerships with Visa, we have partnerships with so many different companies, and we have economic arrangements with these firms, and they may decide, based on income that they generate from us, that they want to incentivize people to use stablecoins, which are so-called rewards.
I think the discussion has been, really, banks are not happy that companies that are involved in promoting the adoption and use of stablecoins are paying rewards, they’re saying, hey, isn’t this just a way to provide a substitution for a bank deposit, and isn’t that gonna suck all the deposit base away from banks, it’s gonna basically undermine the ability for banks to have money, to actually have a base in order to give credit, it’s gonna draw away credit from the real economy, and when we’re in a stress condition, the economy’s gonna implode, and we’re gonna have no credit, and it’s gonna be a huge recession.
I mean, that’s the kind of reductio ad absurdum kind of logic that flows through. Is it absurd? It’s totally absurd, in my view, and it’s totally absurd for a couple of reasons.
I think the first is that rewards around financial products exist, those rewards around financial products exist in every balance that you have, with a credit card that you use, they exist around so many other financial products and services that we have.
and these rewards are actually very important. They help with stickiness, they help with customer traction, et cetera. They are not themselves like these huge monetary policy dampeners.
The second is just the historical fact, which is that this is exactly what was said when government money market funds emerged. The exact same arguments were made. Government money market funds are going to draw away all the deposit base and as that happens, there will not be lending.
And so we have, I don’t know what the aggregates are now. It’s been around $11 trillion of dollar money market funds that grew in various different circumstances. But that has not stopped the ability for lending to happen.
The other is that lending itself is moving away from the risk taking of banks. A huge amount of lending is moving towards private credit. Last night, a very important capital markets participant was pointing out that the vast, vast majority of GDP growth in the United States, if you look at through many, many cycles, the vast majority of GDP growth was funded by capital market formation around junk bonds.
So private credit issuing junk bonds, capitalizing the build out of the American technology advancements, not bank credit. Now, I’m jumping around on a lot of topics here, I realize, but I think the bottom line from my perspective is we want stable coin money to be cash instrument money, prudentially supervised, very, very safe money.
And then I think what we wanna do is we wanna build models for lending that build on top of stable coins. And that’s, you know, DeFi’s an early example of that, where people are borrowing and lending these. And I believe we can create very, very efficient credit delivery systems built on these very, the sort of digital cash type forms of money.
And these credit delivery systems actually can be safer, more transparent, more efficient, more inclusive, more globally available than what we have with bank credit today. And so this is a change in the architecture of the financial system. It will play out over decades.
And I think we need to kind of preserve that structure.
Vera, yeah, do you wanna weigh in on this?
Yeah. Yeah, I wanna come in quickly. In Africa, again, and in.
and I think it is true for some developing countries. A lot of our bank deposits are government paper and are short-term deposits, so banks don’t lend as much. And so there’s a huge illiquidity problem on the continent.
And what we’re hoping that stable coins will do is provide a little bit more liquidity and velocity of money for the businesses to happen. So it’s almost like your junk bond sort of releasing the economy and deepening. I think we heard today, even in Europe, that there is constraints in building capital markets.
One of the constraints for building capital markets on the continent is precisely this illiquidity in the system, which stable coins begins to fix. And so, but I think actually, and one of the reasons why stable coin has come so fast and it’s huge adoption, is because the banks themselves took too long to get to central bank digital currencies that everybody has been waiting for as long.
And my sense is over time, what we will see is maybe a closer relationship between the circles of the world and the banking system. I think there is, because again, this is really a payment system. There is still going to be a lot of the monetary policy functions that remain with central banks.
And where we should be, it’s not saying, one is going to take away the other, it’s how are we going to create a system? I think the Genius Act, Micar, and everybody else is beginning to say, and that’s why we’re saying it’s a payment settlement system, but then there’s the whole collateral management, central depository systems that the banks will still continue to do.
And I think we do need to find where is that bridge so that the real sort of collide. I think that’s the argument.
Maybe just as a closing statement to this argument also is that the liquidity isn’t just domestic, of course, the liquidity is global. Just how the internet distributed information to the world to consume, now you can do commerce with literally the entire world. About two to 300 million people around the world have stable coins that are US dollar denominated.
Every American, European, Asian business can now transact with them relatively stably and safely. They don’t have to worry about low currency. They don’t even have to worry about, I mean, those people can’t sign up with a PayPal or Venmo account, right?
They don’t have a way of having a credit card, and you can now do business with them, right? So both ways, right? So I think that’s the added dimension as well, that adds much more liquidity to the entire space.
Thank you. We have time for some questions. Please, this is your opportunity to talk to some of these experts.
Gentleman in the front, would you stand up, please, and identify yourself, and you’ve got a microphone there.
Sure. Sure, my name is Pierre Gramenny. I’m the Managing Director of the European Stability Mechanism.
So it is the lender of last resort of Europe. I would like to congratulate all the speakers and you for the very insightful discussion. And I have a question to which I don’t have the answer.
But what struck me most from all the points was this issue of instant payment, instant settling, and liquidity. And if I remember correctly, the money supply is the amount of money there and the velocity at which it circulates. So my question is, to which I don’t have the answer, but it would be important to think of it, would be the following.
With all these instant payments and settlements, don’t we have money supply that grows tremendously? And if it grows tremendously because of the velocity, will that have an impact on inflation, on monetary policy?
I’m very glad you asked that question because we’re going to come on to monetary policy, PV, whatever. So go on, Jeremy, you want to answer that?
I’ll just give my quick take. I actually think it’s the opposite. I actually think that, I call it the new physics of money.
And so basically, just like the marginal cost of storing and moving a piece of data is effectively zero. We can now move infinite data at the speed of the internet at zero cost, or the marginal cost of. Publishing software in the world is zero.
And now with AI producing software, the marginal cost of actually producing software is effectively zero. So we have these collapsing marginal costs. And on these networks, the marginal cost of storing and moving value of any form, whether it’s a digital dollar or a tokenized bond, effectively goes close to zero.
Now there may be intermediary tasks that introduce costs, but fundamentally the physics of money becomes the physics of the Internet. And what that means is actually you need a smaller monetary base in order to achieve a dramatically higher amount of economic velocity. And so I actually think this is a prudential and monetary theory question.
It is unresolved. I think about this a lot, which is hypervelocity of money is potentially a very good thing in terms of money velocity kind of as a mechanism to transmit economic activity could be a real driver and growth enabler.
I think risk supervision in that is very different. So that’s an unknown, how to do risk supervision and something like that. But I actually think the monetary base is lower.
But I do think over the long run, this will affect how interest rate policy setting happens. So interest rates are designed to affect money multipliers, money multipliers creating money velocity. So I actually think this will change the calculus that central banks have to use as they think about the interest rate setting mechanism because of the nature of this new physics of money as they think about it.
These things need to be studied, obviously, by perhaps folks like you and your team. Our chief economist thinks about this as well. And obviously we’re still small but growing rapidly, so we are thinking about it a lot.
Dan, the impact of all this on monetary policy seems to be of great interest to the International Monetary Fund.
Yeah, absolutely. So we’re one of these groups that are working on these issues that Jeremy is quite right need to continue to be studied. that Jeremy made.
In terms of the interplay between the velocity of money and inflation, you know, the classic equations, I would say, are really designed to measure the balance of demand and supply for money. And what’s interesting about the impact of digital assets on the velocity of money is it’s really more of a supply-driven function, increase in the velocity, rather than a demand-driven increase, which if there was an imbalance between demand or if demand was higher than supply, that’s where you would tend to see inflation.
And so I actually think Jeremy could quite be right, that actually we’ll ultimately end up with a smaller monetary base and not have, you know, significant inflationary pressures as a result. More generally, in terms of the operation of monetary policy, look, I think it’s very difficult to say today where things are going. So much will depend on what happens across the entire ecosystem, how banks compete with stable coins and how stable coins more generally get integrated into the financial system.
But I would observe that for central banks, actually updating their operational frameworks is an exercise that they go through quite regularly. In fact, in the United States and in Europe, over the last decade, we’ve had fundamental transformations over the way that the central bank actually conducts monetary policy from an operational perspective.
And so this is something that central banks, you know, are already thinking about and will continue to think about, and we shouldn’t, you know, wet ourselves to a particular framework that’s frozen in time.
We have time for one more question, if anyone…
I would just answer very quickly that essentially for us in the emerging market world, it is actually about efficiency. I think when we talk about Europe, we’re talking about, you know, accelerating real-time gross settlements. That’s what we’re trying to do.
So I don’t think it’s a contradictory. And so I agree with you. It’s a little bit…
At least Africa has been five days of settlements, whereas Europe is one hour. And so you’re saying, should we stay at five days? Because, and I think it’s…
with a whoring to efficiency.
So, yeah, just because there is interest in another question. Very quickly, Missy, if you would stand up, please, and identify yourself.
Hi, everyone. I’m Drishti, a global shaper from India and an entrepreneur. I just have two questions.
We know the stable coins have proved their utility as a settlement and liquidity instrument in the tokenized real estate market, but I wanted to understand how viable it is in terms of commodity tokenization, especially when it is volatile, and how does it work in terms of hedging when commodity-backed assets are relying on stable coins?
All right. We’re so short of time. I’m only going to allow one of you to answer.
Whoever wants to answer that question.
I can take that.
Jeremy.
Basically, tokenization of other assets, whether it’s gold or oil or some other commodity, is happening, but you need to marry those with stable coins for actual cash settlement, and you need to marry those with traditional market structures that people use for hedging.
So options and derivatives markets, et cetera. And so what we’ve seen is an explosion in on-chain markets that are all stable coin-based, markets like HyperLiquid, where basically people are building tokenized instruments for basically providing derivatives on every single form of commodity and asset that’s in the world, and stable coins are the collateral, the relative margin, and the liquidity for that.
And so I actually think market infrastructure to support tokenized commodities is maturing very, very fast, and stable coins play a key role in supporting that.
We are unfortunately out of time. Thank you all very much. The title of this session was Where Are We on Stable Coins?
I think our excellent panel has answered that question both in terms of where we are now, what the potential is, what the various challenges are, and I think generally speaking a very good overview of what is a rapidly evolving subject.
So ladies and gentlemen, please join me in thanking the panel. Thank you.
Dan Katz
Speech speed
171 words per minute
Speech length
1055 words
Speech time
368 seconds
Transaction volume reached $33 trillion with 72% year-over-year growth, though actual stablecoin assets are $300 billion which remains small in global financial context
Explanation
Dan Katz argues that while the $33 trillion transaction volume figure appears impressive, it can be misleading because much of it involves trading between AI agents and other digital transactions that may lack economic substance. He emphasizes that the $300 billion in total stablecoin issuance is still very small in the context of the global financial system.
Evidence
The $33 trillion transaction volume with 72% year-over-year growth, compared to $300 billion in actual stablecoin assets issued
Major discussion point
Growth and Adoption of Stablecoins
Topics
Economic | Cryptocurrencies
Agreed with
– Jeremy Allaire
– Vera Songwe
– Siu Yat
Agreed on
Stablecoins provide significant benefits for financial inclusion and cross-border payments
Disagreed with
– Vera Songwe
Disagreed on
Significance of $33 trillion transaction volume figure
International regulatory coordination needed for cross-border interoperability and realizing full benefits
Explanation
Dan Katz contends that while the Genius Act was a significant step forward in the US, effective interoperability between different regulatory frameworks internationally is crucial. He argues that to realize the full benefits of stablecoins, particularly for cross-border transactions and achieving necessary scale, countries need coordinated regulatory approaches.
Evidence
References to MECA in the EU and various jurisdictions introducing their own frameworks
Major discussion point
Regulatory Environment and Policy
Topics
Legal and regulatory | Data governance
Agreed with
– Jeremy Allaire
– Vera Songwe
Agreed on
Regulatory frameworks are essential and progressing globally
Regulatory frameworks should enable competition between stablecoins and traditional financial systems for consumer benefit
Explanation
Dan Katz emphasizes that competition is a key concept for understanding stablecoin developments and their potential benefits. He argues that regulatory frameworks should allow competitive dynamics to play out between stablecoins and traditional financial systems, as this competition will ultimately benefit consumers through efficiency gains.
Evidence
Discussion of competitive pressures on countries with weak fiscal and monetary frameworks to improve their systems
Major discussion point
Regulatory Environment and Policy
Topics
Economic | Consumer protection
Stablecoins may require smaller monetary base due to hypervelocity of money, potentially changing central bank interest rate mechanisms
Explanation
Dan Katz suggests that the velocity increases from stablecoins are supply-driven rather than demand-driven, which means they are unlikely to cause significant inflationary pressures. He argues that this could actually lead to needing a smaller monetary base while still achieving higher economic velocity.
Evidence
Reference to classic economic equations measuring balance of demand and supply for money
Major discussion point
Monetary Policy and Financial System Impact
Topics
Economic | Cryptocurrencies
Agreed with
– Jeremy Allaire
– Vera Songwe
Agreed on
Stablecoins will fundamentally change monetary policy and financial system operations
Disagreed with
– Jeremy Allaire
Disagreed on
Impact on banking system and monetary policy
Central banks regularly update operational frameworks and can adapt to stablecoin integration
Explanation
Dan Katz points out that central banks routinely update their operational frameworks and have already undergone fundamental transformations in how they conduct monetary policy. He argues that adapting to stablecoin integration is part of this ongoing evolution rather than an unprecedented challenge.
Evidence
Examples of fundamental transformations in US and European central bank operations over the last decade
Major discussion point
Monetary Policy and Financial System Impact
Topics
Economic | Legal and regulatory
Jeremy Allaire
Speech speed
161 words per minute
Speech length
2472 words
Speech time
919 seconds
USDC has grown over 80% annually for multiple years with 580% year-over-year transaction volume growth in Q3
Explanation
Jeremy Allaire counters the notion that stablecoin growth isn’t fast enough by highlighting USDC’s impressive growth metrics. He argues that the growth has been substantial and accelerating, with transaction volumes showing particularly strong increases.
Evidence
USDC growing over 80% annually for multiple years and 580% year-over-year transaction volume growth in Q3
Major discussion point
Growth and Adoption of Stablecoins
Topics
Economic | Cryptocurrencies
Disagreed with
– Vera Songwe
Disagreed on
Approach to dollar dominance in stablecoins
Stablecoins enable cross-border trade settlement, e-commerce payments, remittances, and serve as savings vehicles across major platforms
Explanation
Jeremy Allaire describes the broad proliferation of stablecoin use cases across different sectors of the economy. He argues that stablecoins are being adopted by major platforms and companies for various financial functions, from small AI agent transactions to billion-dollar bond purchases.
Evidence
Stripe and Shopify adding USDC payment acceptance, Visa and MasterCard using USDC for internal settlement, BlackRock and Apollo issuing on-chain products, Binance with 300 million users (20% in Africa)
Major discussion point
Use Cases and Applications
Topics
Economic | E-commerce and Digital Trade | Inclusive finance
Agreed with
– Dan Katz
– Vera Songwe
– Siu Yat
Agreed on
Stablecoins provide significant benefits for financial inclusion and cross-border payments
Critical for AI agent transactions requiring high-velocity, low-cost payments that traditional banking cannot support
Explanation
Jeremy Allaire argues that AI agents conducting economic activity need a payment system that can scale down to fractions of a cent with internet-speed velocity. He contends that traditional payment methods like credit cards or bank wires are completely inadequate for the billions of AI agents expected to conduct continuous economic activity.
Evidence
New technology standards for AI agent payment protocols, blockchain networks like ARK being designed for agentic compute
Major discussion point
Use Cases and Applications
Topics
Economic | Future of work | Digital business models
Genius Act established clear regulatory framework prohibiting interest payments on stablecoins, defining them as payment instruments
Explanation
Jeremy Allaire explains that stablecoins are legally defined as payment instruments in multiple jurisdictions and are prohibited from paying interest. He argues this is the correct regulatory approach, as stablecoins should function as cash-level money with appropriate safeguards rather than as interest-bearing deposit substitutes.
Evidence
Laws in US (Genius Act), Europe (MECA), Japan, UAE, Hong Kong, and Singapore all prohibiting stablecoin interest payments
Major discussion point
Regulatory Environment and Policy
Topics
Legal and regulatory | Cryptocurrencies
Agreed with
– Dan Katz
– Vera Songwe
Agreed on
Regulatory frameworks are essential and progressing globally
Banks fear massive deposit flight if stablecoins pay interest, but this concern is overblown based on money market fund precedent
Explanation
Jeremy Allaire argues that banks’ concerns about stablecoin rewards programs are unfounded, comparing them to the historical emergence of money market funds. He contends that rewards programs are common across financial products and that the lending system has adapted to money market funds without collapse.
Evidence
Historical precedent of $11 trillion in government money market funds not preventing lending, majority of US GDP growth funded by capital market formation rather than bank credit
Major discussion point
Interest-Bearing Stablecoins Debate
Topics
Economic | Consumer protection
Disagreed with
– Dan Katz
Disagreed on
Impact on banking system and monetary policy
Credit delivery systems can be built on top of stablecoins, creating safer and more efficient lending mechanisms
Explanation
Jeremy Allaire envisions a new financial architecture where very safe digital cash (stablecoins) serves as the foundation for more efficient credit delivery systems. He argues that this approach can create lending mechanisms that are safer, more transparent, and more globally accessible than traditional bank credit.
Evidence
DeFi as early example of borrowing and lending with stablecoins, shift of lending toward private credit markets
Major discussion point
Interest-Bearing Stablecoins Debate
Topics
Economic | Digital business models
Agreed with
– Dan Katz
– Vera Songwe
Agreed on
Stablecoins will fundamentally change monetary policy and financial system operations
Stablecoins essential for billions of future AI agents conducting continuous economic activity
Explanation
Jeremy Allaire predicts that within 3-5 years, billions of AI agents will be conducting economic activity continuously and will need an appropriate financial system. He argues that stablecoins are the only viable payment system that can keep pace with this technological change and provide the necessary scale and interoperability.
Evidence
Proliferation of payment protocols for AI agents using stablecoins, blockchain networks being designed specifically for agentic compute
Major discussion point
Future Technology Integration
Topics
Economic | Future of work | Digital business models
Blockchain networks being designed specifically for agentic compute and AI economic activity
Explanation
Jeremy Allaire describes how next-generation blockchain networks are being purpose-built to support AI agent economic activity. He emphasizes the importance of cryptographically verifiable transactions for AI-to-AI commerce, where traditional verification methods are inadequate.
Evidence
ARK blockchain network that Circle is building on, technical standards for AI agent payment protocols
Major discussion point
Future Technology Integration
Topics
Infrastructure | Digital standards
Tokenized commodities markets using stablecoins for collateral and settlement are rapidly maturing
Explanation
Jeremy Allaire explains that tokenization of commodities like gold and oil is happening alongside the development of on-chain derivatives markets. He argues that stablecoins serve as the essential collateral and liquidity mechanism for these tokenized commodity markets.
Evidence
Markets like HyperLiquid building tokenized instruments for derivatives on commodities with stablecoins as collateral
Major discussion point
Future Technology Integration
Topics
Economic | Digital business models
Vera Songwe
Speech speed
180 words per minute
Speech length
1540 words
Speech time
512 seconds
Stablecoins provide significant benefits for Africa including reduced remittance costs from 6% to $1, hedge against inflation, and financial inclusion for unbanked populations
Explanation
Vera Songwe outlines four key benefits of stablecoins for Africa, emphasizing their role in reducing transaction costs and providing financial access. She argues that stablecoins address critical issues like expensive remittances, high inflation, and lack of banking access that have persisted despite years of policy attention.
Evidence
Remittances costing 6% vs $1 with stablecoins, 12-15 African countries with inflation above 20% post-COVID, 650 million unbanked Africans, remittances tripling compared to development assistance
Major discussion point
Growth and Adoption of Stablecoins
Topics
Development | Inclusive finance | Digital access
Agreed with
– Dan Katz
– Jeremy Allaire
– Siu Yat
Agreed on
Stablecoins provide significant benefits for financial inclusion and cross-border payments
Disagreed with
– Dan Katz
Disagreed on
Significance of $33 trillion transaction volume figure
Major adoption in countries with high inflation and capital controls, particularly Egypt, Nigeria, and Ethiopia
Explanation
Vera Songwe identifies a pattern where stablecoin adoption correlates with capital controls and inflation levels. She argues that stablecoins serve as a directional indicator of monetary policy restrictions and provide an alternative for countries with challenging economic conditions.
Evidence
Egypt, Nigeria, and Ethiopia as the three biggest stablecoin users on the continent, correlation between capital controls and stablecoin usage
Major discussion point
Growth and Adoption of Stablecoins
Topics
Economic | Cryptocurrencies
Stablecoins can serve as governance and fiscal policy enhancement tools, improving transparency and reducing illicit financial flows
Explanation
Vera Songwe argues that blockchain-based stablecoins can address long-standing governance issues in Africa, particularly around resource extraction and illicit financial flows. She contends that the transparency of blockchain technology can help countries better track and fiscalize economic activity.
Evidence
15 years of discussion about illicit financial flows from mining companies, blockchain’s ability to build in transparency and follow payments
Major discussion point
Regulatory Environment and Policy
Topics
Legal and regulatory | Development
Agreed with
– Dan Katz
– Jeremy Allaire
Agreed on
Regulatory frameworks are essential and progressing globally
Developing African stablecoin platform backed by SDRs to reduce dollar dominance and enable direct trading in multiple currencies
Explanation
Vera Songwe describes efforts to create an alternative to dollar-dominated stablecoins by developing an African platform backed by Special Drawing Rights (SDRs). She argues this would better reflect Africa’s diverse trading relationships and reduce dependence on dollar intermediation.
Evidence
75% of current stablecoins are dollar-denominated, African Continental Free Trade Area Agreement covering 50+ countries, trading relationships with Brazil and China requiring dollar intermediation
Major discussion point
Alternative Currency Models
Topics
Economic | Cryptocurrencies
Disagreed with
– Jeremy Allaire
Disagreed on
Approach to dollar dominance in stablecoins
SDR-backed system would mirror Africa’s global trade patterns and reduce intermediation costs
Explanation
Vera Songwe explains how an SDR-backed stablecoin system would eliminate the need for dollar intermediation in Africa’s trade relationships. She argues this would reduce costs and better align the monetary system with actual trade flows, such as direct purchases of Brazilian or Chinese equipment.
Evidence
Example of Nigerians purchasing Brazilian agricultural machinery or Chinese equipment while having to go through dollar intermediation
Major discussion point
Alternative Currency Models
Topics
Economic | E-commerce and Digital Trade
Stablecoins can increase liquidity in banking-constrained emerging markets where banks primarily hold government paper
Explanation
Vera Songwe argues that in many African countries, banks primarily hold government securities and short-term deposits rather than providing lending. She contends that stablecoins can provide additional liquidity and money velocity to support business activity and capital market development.
Evidence
Banks in Africa holding mostly government paper and short-term deposits, constraints in building capital markets due to illiquidity
Major discussion point
Interest-Bearing Stablecoins Debate
Topics
Economic | Development
Agreed with
– Dan Katz
– Jeremy Allaire
Agreed on
Stablecoins will fundamentally change monetary policy and financial system operations
Stablecoins provide efficiency improvements, moving from five-day settlements to real-time in emerging markets
Explanation
Vera Songwe emphasizes that for emerging markets, stablecoins represent a significant efficiency gain in settlement times. She argues that the focus should be on achieving efficiency rather than maintaining slower settlement systems, comparing Africa’s five-day settlements to Europe’s one-hour settlements.
Evidence
Comparison of five-day settlements in Africa versus one-hour settlements in Europe
Major discussion point
Monetary Policy and Financial System Impact
Topics
Economic | Development
Siu Yat
Speech speed
226 words per minute
Speech length
1178 words
Speech time
312 seconds
Growth driven by virtual economies and gaming, with stablecoins serving as bridge between digital assets and real-world transactions
Explanation
Siu Yat explains that stablecoins initially served as an on-off ramp between virtual economies and the real world, allowing people to convert digital assets into usable value. He argues that this bridging function was crucial for the early growth of stablecoins, particularly as virtual economies expanded during COVID.
Evidence
Crypto economy growing from $300-400 billion to $3 trillion over 6-7 years, mass adoption in Philippines and Indonesia during COVID for virtual income generation
Major discussion point
Growth and Adoption of Stablecoins
Topics
Economic | Digital business models
Programmable money allows open-source financial innovation, enabling non-finance professionals to create financial products
Explanation
Siu Yat argues that stablecoins represent “open source money” that democratizes financial innovation by allowing people without traditional finance backgrounds to create new financial products and services. He compares this to how the internet enabled non-media professionals to enter media creation.
Evidence
Origins of crypto professionals coming from non-finance industries, development of prediction markets and gaming financial products by non-finance experts
Major discussion point
Use Cases and Applications
Topics
Economic | Digital business models | Development
Essential for daily payroll systems in developing countries where credit systems are unavailable
Explanation
Siu Yat explains that in many developing countries, people need daily rather than monthly payroll because credit systems are unavailable to bridge income gaps. He argues that stablecoins provide an ideal solution for immediate, low-cost daily payments that traditional banking cannot efficiently support.
Evidence
Comparison of monthly payroll systems in developed countries with credit access versus daily payroll needs in developing countries
Major discussion point
Use Cases and Applications
Topics
Development | Inclusive finance
Global liquidity creation enables 200-300 million stablecoin users worldwide to transact with businesses globally
Explanation
Siu Yat argues that stablecoins create global liquidity by enabling people worldwide to transact in stable currencies with businesses anywhere. He emphasizes that this includes populations that cannot access traditional payment systems like PayPal or credit cards, thereby expanding the global commerce network.
Evidence
200-300 million people worldwide with US dollar-denominated stablecoins who cannot access PayPal or Venmo accounts
Major discussion point
Future Technology Integration
Topics
Economic | E-commerce and Digital Trade | Inclusive finance
Agreed with
– Dan Katz
– Jeremy Allaire
– Vera Songwe
Agreed on
Stablecoins provide significant benefits for financial inclusion and cross-border payments
Gerard Baker
Speech speed
158 words per minute
Speech length
1311 words
Speech time
497 seconds
Stablecoins represent a potential significant disruptor of global payment systems and challenge to traditional financial institutions
Explanation
Gerard Baker frames the discussion by noting that passionate crypto evangelists view stablecoins as having the potential to fundamentally disrupt global payment systems and reduce friction in domestic and international transactions. He suggests this could ultimately lead to replacing traditional financial institutions in many payment systems, though acknowledges others think the potential may be more limited.
Evidence
$33 trillion worth of stablecoin transactions in the last year with 72% increase, over $350 billion worth of stablecoin assets
Major discussion point
Growth and Adoption of Stablecoins
Topics
Economic | Cryptocurrencies | Digital business models
Regulatory frameworks like the Genius Act are establishing clearer rules but may reveal over-regulated or under-regulated areas
Explanation
Gerard Baker observes that significant regulatory developments like the Genius Act have provided required reserve backing and protections, but notes that major regulations often work in some respects while revealing areas that are either over-regulated or under-regulated. He questions how well the current regulatory climate is working, particularly in the U.S.
Evidence
Genius Act passed in the United States, other countries establishing regulatory frameworks for stablecoins
Major discussion point
Regulatory Environment and Policy
Topics
Legal and regulatory | Cryptocurrencies
AI adoption acceleration will significantly impact stablecoin development and usage
Explanation
Gerard Baker notes that artificial intelligence adoption has become universal with dramatic acceleration expected in increasingly short timeframes. He seeks to understand what role stablecoins can play in this AI revolution and how AI will affect stablecoin development and adoption.
Evidence
Universal adoption of AI with expected dramatic acceleration
Major discussion point
Future Technology Integration
Topics
Economic | Future of work | Digital business models
Audience
Speech speed
136 words per minute
Speech length
225 words
Speech time
99 seconds
Instant payments and settlements through stablecoins may dramatically increase money supply velocity and impact inflation
Explanation
Pierre Gramenny from the European Stability Mechanism raises concerns about whether the instant payment and settlement capabilities of stablecoins could cause money supply to grow tremendously due to increased velocity. He questions whether this velocity increase could have significant impacts on inflation and monetary policy, noting that money supply consists of both the amount of money and the velocity at which it circulates.
Evidence
Money supply equation including both amount of money and velocity of circulation
Major discussion point
Monetary Policy and Financial System Impact
Topics
Economic | Cryptocurrencies
Stablecoins face challenges in commodity tokenization due to volatility and hedging complexities
Explanation
Drishti, a global shaper from India, questions the viability of stablecoins in commodity tokenization markets, particularly when dealing with volatile commodities. She seeks to understand how hedging mechanisms work when commodity-backed assets rely on stablecoins for settlement and liquidity.
Evidence
Proven utility in tokenized real estate market but questions about volatile commodities
Major discussion point
Future Technology Integration
Topics
Economic | Digital business models
Agreements
Agreement points
Stablecoins provide significant benefits for financial inclusion and cross-border payments
Speakers
– Dan Katz
– Jeremy Allaire
– Vera Songwe
– Siu Yat
Arguments
Transaction volume reached $33 trillion with 72% year-over-year growth, though actual stablecoin assets are $300 billion which remains small in global financial context
Stablecoins enable cross-border trade settlement, e-commerce payments, remittances, and serve as savings vehicles across major platforms
Stablecoins provide significant benefits for Africa including reduced remittance costs from 6% to $1, hedge against inflation, and financial inclusion for unbanked populations
Global liquidity creation enables 200-300 million stablecoin users worldwide to transact with businesses globally
Summary
All speakers acknowledge that stablecoins offer substantial benefits for financial inclusion, particularly for unbanked populations, and significantly improve cross-border payment efficiency by reducing costs and settlement times.
Topics
Economic | Development | Inclusive finance
Regulatory frameworks are essential and progressing globally
Speakers
– Dan Katz
– Jeremy Allaire
– Vera Songwe
Arguments
International regulatory coordination needed for cross-border interoperability and realizing full benefits
Genius Act established clear regulatory framework prohibiting interest payments on stablecoins, defining them as payment instruments
Stablecoins can serve as governance and fiscal policy enhancement tools, improving transparency and reducing illicit financial flows
Summary
Speakers agree that clear regulatory frameworks like the Genius Act and MECA are necessary and beneficial, though international coordination is needed for optimal cross-border functionality.
Topics
Legal and regulatory | Cryptocurrencies
Stablecoins will fundamentally change monetary policy and financial system operations
Speakers
– Dan Katz
– Jeremy Allaire
– Vera Songwe
Arguments
Stablecoins may require smaller monetary base due to hypervelocity of money, potentially changing central bank interest rate mechanisms
Credit delivery systems can be built on top of stablecoins, creating safer and more efficient lending mechanisms
Stablecoins can increase liquidity in banking-constrained emerging markets where banks primarily hold government paper
Summary
All speakers acknowledge that stablecoins will require adaptations in monetary policy frameworks and could lead to more efficient financial systems, though the exact mechanisms may differ.
Topics
Economic | Cryptocurrencies
Similar viewpoints
Both speakers emphasize the transformative potential of programmable stablecoins for enabling new forms of economic activity, particularly in AI and virtual economies, and democratizing financial innovation.
Speakers
– Jeremy Allaire
– Siu Yat
Arguments
Critical for AI agent transactions requiring high-velocity, low-cost payments that traditional banking cannot support
Programmable money allows open-source financial innovation, enabling non-finance professionals to create financial products
Topics
Economic | Digital business models | Future of work
Both speakers highlight how stablecoins address specific needs in developing economies, particularly where traditional financial systems are inadequate or restrictive.
Speakers
– Vera Songwe
– Siu Yat
Arguments
Major adoption in countries with high inflation and capital controls, particularly Egypt, Nigeria, and Ethiopia
Essential for daily payroll systems in developing countries where credit systems are unavailable
Topics
Development | Inclusive finance | Economic
Both speakers believe that concerns about stablecoins disrupting traditional banking are manageable and that financial systems can adapt, drawing on historical precedents of successful integration of new financial instruments.
Speakers
– Dan Katz
– Jeremy Allaire
Arguments
Central banks regularly update operational frameworks and can adapt to stablecoin integration
Banks fear massive deposit flight if stablecoins pay interest, but this concern is overblown based on money market fund precedent
Topics
Economic | Legal and regulatory
Unexpected consensus
Stablecoins should not pay interest and should function as payment instruments rather than deposit substitutes
Speakers
– Dan Katz
– Jeremy Allaire
– Vera Songwe
Arguments
Regulatory frameworks should enable competition between stablecoins and traditional financial systems for consumer benefit
Genius Act established clear regulatory framework prohibiting interest payments on stablecoins, defining them as payment instruments
Developing African stablecoin platform backed by SDRs to reduce dollar dominance and enable direct trading in multiple currencies
Explanation
Despite representing different perspectives (IMF, stablecoin issuer, and African development), all speakers agree that stablecoins should function as payment systems rather than interest-bearing deposit alternatives, which is unexpected given potential commercial interests.
Topics
Legal and regulatory | Economic | Cryptocurrencies
Velocity increases from stablecoins may actually require smaller monetary base rather than causing inflation
Speakers
– Dan Katz
– Jeremy Allaire
Arguments
Stablecoins may require smaller monetary base due to hypervelocity of money, potentially changing central bank interest rate mechanisms
Credit delivery systems can be built on top of stablecoins, creating safer and more efficient lending mechanisms
Explanation
Both the IMF representative and stablecoin CEO unexpectedly agree that increased money velocity from stablecoins could be deflationary rather than inflationary, challenging conventional monetary theory concerns.
Topics
Economic | Cryptocurrencies
Overall assessment
Summary
The speakers demonstrated remarkable consensus on key issues including the benefits of stablecoins for financial inclusion, the necessity of appropriate regulatory frameworks, and the potential for positive transformation of monetary systems. Areas of agreement span technical capabilities, regulatory approaches, and economic impacts.
Consensus level
High level of consensus with constructive alignment on fundamental principles. This suggests the stablecoin ecosystem is maturing toward shared understanding of best practices and appropriate regulatory frameworks, which could accelerate adoption and integration with traditional financial systems.
Differences
Different viewpoints
Significance of $33 trillion transaction volume figure
Speakers
– Dan Katz
– Vera Songwe
Arguments
Transaction volume reached $33 trillion with 72% year-over-year growth, though actual stablecoin assets are $300 billion which remains small in global financial context
Stablecoins provide significant benefits for Africa including reduced remittance costs from 6% to $1, hedge against inflation, and financial inclusion for unbanked populations
Summary
Dan Katz argues the $33 trillion figure is misleading due to AI agent trading and lacks economic substance, preferring to focus on the $300 billion in actual assets. Vera Songwe defends the importance of the velocity figure, arguing it represents meaningful economic activity and shouldn’t be dismissed.
Topics
Economic | Cryptocurrencies
Impact on banking system and monetary policy
Speakers
– Jeremy Allaire
– Dan Katz
Arguments
Banks fear massive deposit flight if stablecoins pay interest, but this concern is overblown based on money market fund precedent
Stablecoins may require smaller monetary base due to hypervelocity of money, potentially changing central bank interest rate mechanisms
Summary
Jeremy Allaire dismisses banks’ concerns about deposit flight as ‘totally absurd’ and argues for a new financial architecture built on stablecoins. Dan Katz takes a more measured approach, acknowledging potential changes to monetary policy mechanisms while emphasizing the need for careful study and gradual adaptation.
Topics
Economic | Legal and regulatory
Approach to dollar dominance in stablecoins
Speakers
– Jeremy Allaire
– Vera Songwe
Arguments
USDC has grown over 80% annually for multiple years with 580% year-over-year transaction volume growth in Q3
Developing African stablecoin platform backed by SDRs to reduce dollar dominance and enable direct trading in multiple currencies
Summary
Jeremy Allaire promotes continued growth of dollar-denominated stablecoins like USDC, while Vera Songwe actively works to develop alternatives to reduce dollar dominance through SDR-backed systems that better reflect Africa’s diverse trading relationships.
Topics
Economic | Cryptocurrencies
Unexpected differences
Velocity of money and inflation impact
Speakers
– Jeremy Allaire
– Dan Katz
– Pierre Gramenny (Audience)
Arguments
Stablecoins essential for billions of future AI agents conducting continuous economic activity
Stablecoins may require smaller monetary base due to hypervelocity of money, potentially changing central bank interest rate mechanisms
Instant payments and settlements through stablecoins may dramatically increase money supply velocity and impact inflation
Explanation
Unexpectedly, Jeremy Allaire and Dan Katz both argue that increased velocity from stablecoins would actually require a smaller monetary base and not cause inflation, directly contradicting traditional economic concerns raised by the audience member from the European Stability Mechanism. This represents a fundamental disagreement about basic monetary theory implications.
Topics
Economic | Cryptocurrencies
Overall assessment
Summary
The discussion revealed moderate disagreements primarily around implementation approaches rather than fundamental opposition to stablecoins. Key areas of disagreement included the significance of transaction volume metrics, approaches to dollar dominance, and the extent of disruption to traditional banking systems.
Disagreement level
The disagreement level was moderate and constructive, with speakers generally supportive of stablecoin development but differing on specific approaches and timelines. The most significant disagreement was between those favoring dollar-denominated systems versus alternative currency models, and between those seeing stablecoins as complementary to traditional banking versus those envisioning fundamental architectural changes. These disagreements reflect different regional perspectives and priorities rather than fundamental opposition, suggesting the field can accommodate multiple approaches simultaneously.
Partial agreements
Partial agreements
Similar viewpoints
Both speakers emphasize the transformative potential of programmable stablecoins for enabling new forms of economic activity, particularly in AI and virtual economies, and democratizing financial innovation.
Speakers
– Jeremy Allaire
– Siu Yat
Arguments
Critical for AI agent transactions requiring high-velocity, low-cost payments that traditional banking cannot support
Programmable money allows open-source financial innovation, enabling non-finance professionals to create financial products
Topics
Economic | Digital business models | Future of work
Both speakers highlight how stablecoins address specific needs in developing economies, particularly where traditional financial systems are inadequate or restrictive.
Speakers
– Vera Songwe
– Siu Yat
Arguments
Major adoption in countries with high inflation and capital controls, particularly Egypt, Nigeria, and Ethiopia
Essential for daily payroll systems in developing countries where credit systems are unavailable
Topics
Development | Inclusive finance | Economic
Both speakers believe that concerns about stablecoins disrupting traditional banking are manageable and that financial systems can adapt, drawing on historical precedents of successful integration of new financial instruments.
Speakers
– Dan Katz
– Jeremy Allaire
Arguments
Central banks regularly update operational frameworks and can adapt to stablecoin integration
Banks fear massive deposit flight if stablecoins pay interest, but this concern is overblown based on money market fund precedent
Topics
Economic | Legal and regulatory
Takeaways
Key takeaways
Stablecoins have experienced explosive growth with $33 trillion in transaction volume and $300 billion in assets, though this remains small relative to the global financial system
Major benefits include reduced transaction costs (from 6% to $1 for remittances), financial inclusion for 1.5 billion unbanked globally, and protection against inflation in emerging markets
Stablecoins are essential infrastructure for AI agent transactions and the future digital economy, enabling programmable money and open-source financial innovation
Regulatory frameworks like the Genius Act have established stablecoins as payment instruments with required reserve backing, prohibiting interest payments to maintain cash-like safety
The technology may fundamentally change monetary policy mechanics due to hypervelocity of money, potentially requiring smaller monetary bases and affecting central bank interest rate mechanisms
Alternative currency models like SDR-backed stablecoins could reduce dollar dominance and improve monetary/fiscal policy discipline in emerging markets
Stablecoins represent a shift toward new financial system architecture with credit delivery systems built on top of digital cash rather than traditional bank lending
Resolutions and action items
Need for continued international regulatory coordination to enable cross-border interoperability and realize full stablecoin benefits
Requirement for further study of monetary policy implications by institutions like the IMF and central banks
Development of technical standards for AI agent payment protocols using stablecoins
Implementation of SDR-backed African stablecoin platform to enable multi-currency trading and reduce intermediation costs
Unresolved issues
How to conduct risk supervision in a hypervelocity money environment remains unclear
The ultimate competitive dynamics between stablecoins and traditional banking systems are uncertain
Specific mechanisms for how central banks will adapt interest rate policy to account for stablecoin velocity effects need development
The debate over interest-bearing stablecoins and rewards programs continues between stablecoin issuers and traditional banks
Questions about the impact of increased money velocity on inflation and monetary supply remain theoretically unresolved
How to balance stablecoin innovation with maintaining monetary sovereignty in emerging markets
The long-term relationship between stablecoin platforms and traditional banking systems requires further definition
Suggested compromises
Building closer relationships between stablecoin issuers like Circle and traditional banking systems rather than viewing them as competitors
Maintaining stablecoins as payment settlement systems while preserving central bank monetary policy functions
Allowing stablecoin rewards programs (similar to existing financial product incentives) while prohibiting direct interest payments on stablecoins themselves
Creating hybrid systems where stablecoins provide payment efficiency while banks continue collateral management and central depository functions
Developing complementary rather than competitive relationships between stablecoins and traditional financial institutions to serve different aspects of the financial ecosystem
Thought provoking comments
I generally prefer to look at what’s the total volume of Stablecoins that’s been issued, which absolutely has been growing. But in the context of the global financial system, $300 billion is still very, very tiny. So I don’t think we quite yet know where this is going.
Speaker
Dan Katz
Reason
This comment provided crucial context by challenging the seemingly impressive $33 trillion transaction figure and reframing the discussion around actual scale. It introduced analytical rigor by distinguishing between transaction volume (which can be inflated by high-frequency trading) and actual issued value, setting a more realistic foundation for the entire discussion.
Impact
This comment immediately shifted the tone from potential hype to measured analysis. It prompted Jeremy Allaire to defend the growth metrics more substantively and led to a more nuanced discussion about what constitutes meaningful adoption versus speculative activity.
We are seeing use grow in cross-border trade settlement… The biggest payments networks in the world, like Visa and MasterCard, now using USDC as an internal settlement infrastructure. The biggest asset issuers and asset managers, like BlackRock and Apollo, issuing private credit products on-chain
Speaker
Jeremy Allaire
Reason
This comment was insightful because it moved beyond theoretical potential to concrete institutional adoption, demonstrating that stablecoins are already being integrated into traditional financial infrastructure rather than just replacing it. It showed the technology’s legitimacy through major institutional partnerships.
Impact
This shifted the conversation from ‘will stablecoins be adopted?’ to ‘how are they already being integrated?’ It provided credibility that influenced subsequent discussions about regulatory frameworks and monetary policy implications.
With a smartphone, you have access to stablecoin so you can actually save in a currency that is not exposed to the fluctuations of inflation and making you poorer… 650 million people on the African continent [don’t have bank accounts].
Speaker
Vera Songwe
Reason
This comment was particularly thought-provoking because it reframed stablecoins not as a technological novelty but as a critical financial inclusion tool addressing real economic hardship. It provided concrete context about how stablecoins solve actual problems (inflation hedge, banking access) rather than just offering convenience.
Impact
This comment fundamentally shifted the discussion from developed market perspectives to emerging market realities, influencing subsequent conversations about monetary sovereignty, regulatory approaches, and the global implications of dollar-denominated stablecoins.
The programmable aspect of basically money is actually, I think, the other part that’s really revolutionary… For the first time in the world, you have a kind of open source money that is basically reserve-backed… You weren’t a media professional, but now you could enter the world of media.
Speaker
Siu Yat
Reason
This analogy comparing programmable money to the democratization of media was particularly insightful because it provided a familiar framework for understanding a complex innovation. It highlighted how stablecoins could democratize financial innovation beyond traditional finance professionals, similar to how the internet democratized content creation.
Impact
This comment deepened the discussion by introducing the concept of financial democratization and innovation accessibility. It influenced Jeremy’s subsequent detailed explanation of AI agents and programmable money, and helped frame stablecoins as an enabling technology rather than just a payment method.
I actually think that… you need a smaller monetary base in order to achieve a dramatically higher amount of economic velocity… I actually think this will change the calculus that central banks have to use as they think about the interest rate setting mechanism because of the nature of this new physics of money.
Speaker
Jeremy Allaire
Reason
This comment was exceptionally thought-provoking because it challenged fundamental assumptions about monetary theory by suggesting that increased velocity through technology could actually require less money supply, not more. The concept of ‘new physics of money’ introduced a paradigm shift in thinking about monetary policy.
Impact
This comment prompted the most substantive monetary policy discussion of the session, with Dan Katz providing a detailed IMF perspective on velocity versus inflation dynamics. It elevated the conversation from practical applications to fundamental economic theory, demonstrating stablecoins’ potential to reshape central banking.
A lot of our bank deposits are government paper and are short-term deposits, so banks don’t lend as much. And so there’s a huge illiquidity problem on the continent. And what we’re hoping that stable coins will do is provide a little bit more liquidity and velocity of money for the businesses to happen.
Speaker
Vera Songwe
Reason
This comment was insightful because it challenged the developed market assumption that stablecoins would necessarily compete with bank lending. Instead, it showed how in emerging markets, stablecoins could actually enhance liquidity where traditional banking fails to provide adequate credit intermediation.
Impact
This comment reframed the entire debate about stablecoins versus traditional banking from competition to complementarity, particularly in emerging markets. It influenced the discussion about regulatory approaches and demonstrated why one-size-fits-all policies might not work globally.
Overall assessment
These key comments fundamentally shaped the discussion by introducing multiple analytical frameworks and challenging assumptions. Dan Katz’s early reality check prevented the session from becoming overly promotional and established analytical rigor. Vera Songwe’s emerging market perspective consistently broadened the conversation beyond developed market assumptions, while Siu Yat’s democratization analogy and Jeremy’s ‘new physics of money’ concept elevated the discussion to consider fundamental paradigm shifts. Together, these comments created a multi-dimensional conversation that moved from basic adoption metrics to complex questions about monetary theory, financial inclusion, and the future architecture of the global financial system. The interplay between these perspectives created a more nuanced understanding of stablecoins as both a practical solution to current problems and a potentially transformative force in global finance.
Follow-up questions
How to appropriately calibrate regulatory frameworks through upcoming rulemakings for stablecoins
Speaker
Dan Katz
Explanation
The Genius Act was a step forward but regulators still need to work through various rulemakings to properly implement the regulatory framework
How to achieve effective interoperability between international regulatory frameworks for stablecoins
Speaker
Dan Katz
Explanation
Cross-border benefits of stablecoins require scale and interoperability between different jurisdictions’ regulatory approaches
How the competitive dynamics between stablecoins and traditional financial systems will evolve over the next decade
Speaker
Dan Katz
Explanation
Uncertainty about whether stablecoin issuers will dominate or if traditional financial systems will absorb the technology
How hypervelocity of money affects monetary policy and what new risk supervision frameworks are needed
Speaker
Jeremy Allaire
Explanation
The ‘new physics of money’ with near-zero marginal costs may require different approaches to monetary policy and risk management
How interest rate policy setting will need to change given the new velocity characteristics of digital money
Speaker
Jeremy Allaire
Explanation
Traditional interest rate mechanisms designed to affect money multipliers may need recalibration for digital money systems
What is the actual impact of increased money velocity on inflation and monetary policy
Speaker
Pierre Gramenny (audience member)
Explanation
Concern about whether instant payments and settlements could lead to tremendous money supply growth and inflationary pressures
How to build appropriate bridges between stablecoin systems and traditional banking functions
Speaker
Vera Songwe
Explanation
Need to determine how stablecoins as payment systems can coexist with banks’ continued roles in monetary policy and collateral management
How central banks should update their operational frameworks to account for stablecoin integration
Speaker
Dan Katz
Explanation
Central banks regularly update operational frameworks and need to consider how stablecoins will affect monetary policy implementation
Disclaimer: This is not an official session record. DiploAI generates these resources from audiovisual recordings, and they are presented as-is, including potential errors. Due to logistical challenges, such as discrepancies in audio/video or transcripts, names may be misspelled. We strive for accuracy to the best of our ability.
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