Davos 2023: Former Obama Appointee Discusses How Circle Defragments The Global Economy

Leaders in finance and government recently convened at the annual World Economic Forum (WEF) in Davos, Switzerland, to discuss tough issues (i.e., post-pandemic fragmentation and multipolarity).

Benzinga attended the event and interviewed Corey Then, Vice President of Global Policy at Circle.

Then began his career in law, where one of his first cases involved the headline-grabbing defense of former CEO of Freddie Mac, or Federal Home Loan Mortgage Corporation FMCC.

"This was a big case in that it was on the front page of the newspapers and Warren Buffett was a witness," Then tells Benzinga.

After that, Then joined the White House.

"There, I was in the Counsel’s Office and Presidential Personnel. After that, I ran the economics team for a period of time and served the last four years of the Obama Administration," he says. He eventually left politics for traditional finance, working with Edward D. Jones & Co. on various fintech initiatives.

"This led me to Circle," Then adds. Read on for the full Q&A (the below text was edited for clarity and concision).

BZ: What do you focus on in your role?

Then: I am part of the global policy team, and a contemporary of mine leads UK and EU efforts. My main focus, however, is the U.S. — the biggest market economy in the world. If we win with the U.S., much of the world may follow. I’ve done some work in Singapore and Japan, too, given that we’re a global company with our USDC in about 190 different countries just five years after launch.

How do you help push Circle’s vision?

We're part of the strategy, global policy, and communications team. Between the three of those, there are blurred lines. You can’t do one without the other, especially in this type of emerging industry. This reminds me of working at the White House where we had to break down silos to make sure everybody was on the same page.

All that the external world sees is your collective product. They don’t see how the sausage was made, so to speak. Policies are important in our company strategy; public policy is extraordinarily important to our ability to grow, and our ability to serve our current customers and the customers that we'd like to have going forward.

What challenges do you often face?

The broader crypto sphere has been going through a very challenging time. Circle is not entirely insulated. If the industry sneezes, we could catch a cold. However, we've been focused on utility value as opposed to speculative value since our inception.

We enjoy that we have customers from around the world using USDC for real-world use cases. There’s over $45 billion in circulation and growing. When money flows out of an emerging industry due to bad behaviors and business models, or interest rates rise and there is no longer as much easy money, you end up with the stuff that’s emerging stronger.

It’s crazy how quickly some of the frauds in crypto unravel, right?

I just watched a documentary on Bernie Madoff and he was able to forge documents for 40 years. He had a Ponzi scheme worth billions, and nobody caught him for 40 years because his old paper analog stuff was seemingly trustworthy. On the blockchain, there's nowhere to hide.

What are your thoughts on the whole East and West tug of war, as well as the desire to reduce reliance on the U.S. dollar and the stablecoin debate?

There are about 115 countries looking at central bank digital currencies or CBDCs. This would be the Federal Reserve, Bank of Canada, or Bank of England issuing a cryptographic token. This suggests to us that they understand there's value in the technology and distributed ledger blockchains. There’s value in the ability for money to move faster and more cheaply.

Those 115 countries represent 95% of the world's GDP. We don’t think it’s the right move, however. The analogy is as follows: The FAA sets very rigorous standards for jet engines, and they don't try to manufacture their own jet engine. Instead, they allow Boeing Co BA, Lockheed Martin Corp LMT, and others, to compete and make the best jet engine within those parameters. It’s the same when it comes to money, we think. It sort of flies in the face of the history of the Fed to issue a cryptographic token.

The Fed banks other banks. The Fed doesn’t bank retail users. Consequently, their issuing of a cryptographic token would be a fundamental shift in what they actually set out to do. Second, they would have to make big technology bets the government is likely not in the best place to make, much less be in a position to make upgrades. The third is the privacy component. Tokens can be tracked and these organizations can see precisely how you are spending your money. In America, that would be incompatible with our ethos as a country.

China, on the other hand, launched its own CBDC which has struggled to get adoption. Though they gave out a lot of free digital yuan, the velocity of money is not there, and that probably has a lot to do with privacy fears; the Chinese government already surveils people and gives them social credit scores. This seems like another way of engaging in control.

On the other side of that, I’ve heard the argument that you can have a more targeted or effective monetary policy.

You could implement negative interest rates, or have money disappear at a certain date if it is not used. This could speed up consumption. However, is that a good thing? It seems that a private sector solution to transferring money on the Internet may be a better solution.

Want to talk about some use cases or case studies you are proud of?

Nearly $8 trillion worth of transactions have settled on-chain using USDC, and that’s not anything to sniff at. It’s real money used for a variety of things such as businesses paying suppliers and Treasury management. We’re particularly effective at cross-border payments.

Care to elaborate?

Today, we rely on this system of correspondent banking where a bank in the US, if it wants to send money to Europe, it is slow and expensive. It may take a week, at times, for settlement. Using personal wallets, you can send money instantaneously at a very low cost. That’s a very big use case. Remittances are a big market; about $650 billion annually and growing. There is a big addressable market for people who are in the least good position to wait in line two hours after they get their check for the week at these money service businesses charging 6% and leaving you with lengthy delays. Using USDC, you cut costs and time.

What about programmable money?

In addition to being faster and cheaper, being able to program money into smart contracts allows for a lot of if-and-then statements where you can cut the middlemen out of today’s financial system and cost. For instance, if you’re buying a home, typically there’s an escrow agent that gets paid because there is uncertainty as to whether the deal will close. In the future, you may program money to say: “If a tokenized title arrives in my account on X day, then Y funds must move.” It would a trustless automatic transaction that was set up in advance through a smart contract.

And, with legislation, you could see adoption hyperdrive, right?

We need some legislation in the US. We’ve talked to retailers who are interested in accepting USDC. More and more of them are, actually, doing that on their own. With some appropriate legislation, we can rationalize and create more clarity, particularly around redemptions. In the end, we’re pushing payment system optionality. We partner with Mastercard Inc MA and Visa Inc V. When you use a credit card, there’s a charge, and we’re looking forward to a future where costs can come down for consumers.

Can you talk to me about the Twitter relationship?

This is in regard to micropayments which are usually too expensive to effectuate today. When you get a like on Twitter, because you're a content creator, it would be nice to pay you. With today’s systems, however, that’s expensive. In working with Stripe, which has a partnership with Twitter, creators get paid USDC micropayments. It’s an incentive.

How do you differentiate Circle from competitors?

We like to emphasize payments stablecoin. Stablecoin isn't the greatest term in the world. We sort of inherited it, and it was sort of besmirched by the likes of Terra Luna, which was stable in name only. I think we're a singular company at this point.

There are some offshore entities that don't subject themselves to U.S. regulations. As a result, it is an uneven playing field because you have regulation dodgers and regulation followers. We're obviously in the latter camp.

What are some ways crypto could be used to administer more effective stimulus?

During the pandemic, there was a moment when people were getting stimulus checks. You had to go through a whole process to make sure that you were sending checks to the right address, and so on and so forth. Hundreds of billions of dollars of fraud likely occurred. With blockchain, you may be able to track the funds closely.

Do you have an example of how this tracking helps?

We just entered into a partnership with the UNHCR or United Nations High Commissioner for Refugees, the big humanitarian aid part of the UN. The UNHCR is sending USDC to Ukrainian migrants moving because of the war. You can see where that money ends up going. We’ve also worked with the US government to get aid to workers in Venezuela who were not being paid during the pandemic. We sent USDC directly to those people. A lot of that money stayed on-chain, circulating. That indicates to us that money was used for payments.

I can’t think of a better time to engage in conversations such as this. We’re in Davos, of all places, during the World Economic Forum. Any last comments?

The WEF’s theme — cooperation in a fragmented world — and the examples I just provided are very salient. In the end, we desire to make payment systems better. The US dollar is indispensable.