DeFi Deep Dive | Unpacking Stablecoins with Jordan Miller, Regulatory Policy Specialist at Circle
Go inside an overlooked corner of decentralized finance
This week, I let a good friend of mine do all the work for me. I met Jordan Miller through a class at Georgetown in the fall of 2021 where his knowledge of and passion for digital assets slowly chipped away at my skepticism (and I maintain that he drifted towards the middle as well!)
Stablecoins are a type of digital asset designed to track the price of an external asset with the goal of eliminating the volatility present in Bitcoin or other popular cryptocurrencies. The simplest example is a digitized US dollar—a token pegged 1:1 to the value of $1 US dollar. Lost already?
Stablecoins represent one of the most promising use-cases for digital asset technology over the long term, yet are often overlooked or conflated with Bitcoin, NFTs, or news of the latest crypto crisis.
So I turned to Jordan to help us de-blackbox this important corner of decentralized finance. The interview ranges from defining a stablecoin, top use-cases, catalysts for mainstream adoption, to Circle’s strategies for navigating an ever-changing regulatory landscape. Without further adieu…
Can you give an overview of your position with Circle, what the company does, and how that fits into the digital asset ecosystem?
The Strategy, Policy and Communications team serves as Circle’s main point of contact with lawmakers, regulators and civil society around the world while promoting accurate media coverage and strategic thought leadership. My colleagues come from diverse public policy, media and development backgrounds, including from the U.S. Treasury, the White House, International Financial Institutions, European Union decision-making bodies and private sector firms. As part of Circle’s broader mission, I conduct research and writing to bolster our interaction with the U.S. administration (think Treasury, Commerce and the Fed) as well as our engagement with foreign regulators. Many of our responses are regarding pending laws and regulations, which lead to further engagement with policymakers and their staff, and, at times, civil society. My focus areas include anti-money laundering and sanctions, regulations in East Asia and Africa, CBDCs, International Financial Institutions (IFIs), and humanitarian stablecoin use cases.
My background in innovation policy actually began in the federal government under the Obama administration, starting with internships at the Department of Commerce and then the White House National Economic Council, before branching out to think tanks like CSIS, and working for the Chief Economist at the IMF. I’m really excited about the ability to increase the access and efficiency of the world’s payment rails using cutting edge technology, and knew I wanted to get involved in this space even before graduating from my master’s midway through 2022.
In a new industry filled with lots of hype and, to put it kindly, “creative destruction,” Circle is a really exceptional circumstance in my mind. We’re a global financial technology firm that issues an audited digital U.S. dollar, USDC, which users can send natively on eight public blockchains for payments, commerce, and financial applications. While people in the wider digital asset space may be familiar with USDC as a safe haven asset for trading, our mission statement is to “raise global economic prosperity through the frictionless exchange of value,” and I’ve really seen that power our actions during my time here. We’ve worked with a range of global entities to use USDC to facilitate payments where bank rails don’t or can’t exist, and invest in bringing financial literacy to unrepresented communities both in the US and globally.
Whether it’s Bitcoin, NFTs, or DeFi, I get the sense people can’t distinguish much of the digital asset space. What is a stablecoin and how do they differ from mainstream cryptocurrencies like Bitcoin and the fiat cash in your bank account?
Well, the traditional definition of a stablecoin is a digital currency designed to track the price of an external asset, with the goal of eliminating the price volatility afflicting other cryptocurrencies. It doesn’t really make sense to try to spend Bitcoin for a coffee, just in case it gains or loses value, but a digitized US dollar can be useful in daily purchases, for making payments abroad, as well as for storing value. There are actually many different types of stablecoins, categorized by the mechanism through which they keep their price at a set peg, but the safest and most reliable is a “fiat-pegged” stablecoin, such as USDC, which we call a “payment stablecoin” or “tokenized cash.” People familiar with the space will agree that USDC is the most stable and transparent digital dollar stablecoin available, and considering we want to bring this technological advance to the wider economy, we can only do that with a rock solid reputation and a trustworthy product. To give users and regulators peace of mind about our reserves, USDC is attested to monthly and audited yearly with weekly updates on the Circle website. To give you some idea of our growth, USDC’s market capitalization went from $520 million in January 2020 to $43.5 billion at the start of March 2023, which is an increase of about 8,250%.
What are the top 3 use cases for stablecoins?
I’m glad you asked! Even when people have heard of stablecoins, they sometimes view them as useful only in the digital asset ecosystem, when this couldn’t be farther from the truth.
In traditional finance, there are still huge efficiency unlocks in terms of the time it takes to settle transactions (think how long it takes for money to clear into your bank account) and the speed of payment, even here in the developed world – despite the fact that our payments infrastructure is relatively advanced. I find that Venmo is a good mental model for this; consider the time that it takes to withdraw money to your bank account using Venmo, and how fast the peer-to-peer Venmo part of the system is compared with the banking layer underneath. That banking layer is very old, made up of dozens of counterparties, and running Cobal, a 1990s era scripting language. By using distributed ledger technology, stablecoins address those inefficiencies because they keep everything digital, transparent, and programmable. I can send you money to your digital wallet that settles near instantly, has cheaper fees than the domestic Automated Clearing House (ACH) network, and allows you to track your payment using a blockchain ledger. There’s also no reason you can’t build a Venmo-like application on top of these rails, so that customers have the same experience.
Another major use case for USDC is cross-border payments. Sending international payments can be a true nightmare, even between banks, because there is no central bank overseeing everything. Fees are high, banks need to have corresponding relationships in each country to move money across borders, such as through the SWIFT system; and the settlement time can take up to 8 days, which is not good for businesses or customers. Of course, that’s if there is even a bank in your area to begin with. Circle has done a lot of work with disaster relief and foreign aid programs, for example, particularly in Ukraine, but also in Turkey after the recent earthquakes. One of the major concerns continues to be getting aid to internally displaced persons (IDPs) in Ukraine, who may not have bank accounts in the areas they’re fleeing to (or at all), and need to receive disbursements from organizations such as the UN. Circle has partnered with UNHCR to deliver cash payments via USDC on the Stellar Blockchain, which the recipient can then cash out for hard currency at any one of 380,000 MoneyGram locations worldwide. There’s no need to have a bank account in their area of resettlement.
Likewise, we’ve seen a major uptake in remittances and credit provision using USDC. One of our largest partner exchanges in Latin America reported a 400% increase in remittance volume using USDC, which users can then cash out instantly harnessing services like MoneyGram. Fees for remittances globally can be as high as 8.2%, which the UN has rightly called unacceptable. Using blockchain networks, these fees can be as low as cents on the dollar, and remittances can go directly to someone’s mobile phone. Because blockchains make money programmable, we also see people using “smart contracts,” essentially automated software applications, to lend to users in developing countries such as Kenya, Mexico and the Philippines without onerous requirements or the potential for bias. Last I checked, they’d lent out over $100 million to 2.2 million borrowers. These examples showcase how blockchains harnessing stablecoins can be a financial instrument, a parallel payments messaging system, and a developer platform wrapped into one.
How is Circle navigating the regulatory landscape?
Circle has a number of core policy principles that guide our approach to working within the regulatory landscape. In our view, the use of money needs to be free regardless of its form factor, and should be designed to promote competition. Consumers should have payments optionality. We feel strongly that privacy for the user needs to be enshrined in these technologies from day one, but also that Circle as a company needs to be transparent and accountable with its practices and reserves. That includes making sure that Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures are met, considering how important those requirements are towards the prevention of illicit activity. We’re also fully committed to making sure that this technology has a tangible benefit for the underrepresented, given that billions of people around the world continue to be unbanked even today.
Part of that endeavor means responsible regulatory compliance. Circle is licensed as a Money Transmitter in 48 U.S. states and territories, is registered as a Money Services Business under the Treasury Department's Financial Crimes Enforcement Network (FinCEN), and has an in-principle license with the Monetary Authority of Singapore. We have focused U.S. efforts around the need for sound stablecoin regulation and, internationally, the need to harmonize regulatory standards to reduce regulatory arbitrage.
What needs to occur for stablecoins to go mainstream?
Right now, the most important effort is for the United States to adopt legislation to create regulated frameworks for the issuance of stablecoins. Circle is currently regulated under state money transmission laws, but federal regulation would allow for increased utility and protection for consumers. A federal stablecoin bill will be crucial to provide both federal and state pathways for stablecoin issuers; and, hopefully a federal framework would provide a model for other countries looking to regulate stablecoins.
What’s more, I feel strongly that stablecoins are just one piece of this puzzle. Broadly, the crypto ecosystem needs a far greater focus on user experience, whether through wallets, cross-chain bridges to transfer funds, or compliant privacy solutions. Consumers shouldn’t have to think about these advances when they’re using the technology, but they’ll definitely be needed on the backend to make the experience more friendly. New technologies are cool, but meeting user needs will be what brings widespread adoption.
Ultimately, Circle is building for more entities to accept USDC directly, since Circle’s API systems allow merchants to receive USD in their bank accounts even when receiving USDC. It’s also worth pointing out that there are a growing number of solutions for using USDC in your daily life that already exist: major eCommerce platforms like Shopify and card networks like Visa and Mastercard are adopting USDC for settlements, and I too have my own debit card which lets me use USDC for payments anywhere Visa is accepted. The bottom line is that when people no longer need to convert back to USD at the end of the day, applications that allow you to use USDC natively will likely see a growth in users.
Do you see stablecoins integrating with traditional banking in the future?
I think there’s an impulse to see us as competition, but ultimately, the consumer benefits from the payments optionality that digital assets, and USDC, brings. Especially here in the US, it seems that consumers want solutions that are going to integrate into platforms that they use already, and partnering with traditional banking is a good way to do that. Self-custody was a key part of the digital asset breakthrough and has major impacts on parts of the world where banking is insufficient, but it may not work for everybody. USDC and open, permissionless blockchains can be compatible with sound banking practices.
What are you most excited about in the next 1-2 years for the stablecoin space?
We’re starting to see a real explosion of interest and adoption in stablecoin technologies abroad, particularly in East Asia. It’s been fascinating to work with regulators in these countries because they are committed to embracing stablecoins as a major means of payment. The same is true in the European Union, where the Markets in Crypto-Assets (MiCA) bill is the first piece of comprehensive regulation we’ve witnessed to lay a comprehensive framework. Seeing governments that are proactive and engaged inspires confidence that these transformative technologies have a bright future.
Jordan Miller is a Senior Regulatory Policy Specialist at Circle, the company responsible for the USDC stablecoin. He is an edge technologist experienced in policy and strategy for emerging innovation in the private and public sectors, with a background in digital dollar stablecoins and blockchain, big data, and AI. He is a published researcher with the Global Digital Currency Association (2022), the Georgetown Public Policy Review (2022), and former President of the Georgetown Technology Policy Initiative.
Until September 2021, he served as the Staff Assistant for the Chief Economist at the International Monetary Fund, focusing on vaccine supply chains, blockchain/Central Bank Digital Currency, and digitization projects. He has also conducted cybersecurity and AI policy research at think tanks such as CSIS and GMF, produced autonomous vehicle guidance at the White House, and led battery electric vehicle deployments at the Center for Transportation and the Environment.
He holds a Master of Policy Management degree from Georgetown University's McCourt School of Public Policy, and a bachelors in Political Science and History from the University of Pennsylvania School of Arts and Sciences where he was also a Leonard M. Tannenbaum Public Policy Fellow.
Previous Publications
The following publications do not necessarily represent the views of Circle Internet Financial Ltd. or any of its subsidiaries.
Beyond Terra: An Assessment of Stablecoin Benefits and Policy - Global DCA, 2022
Internet Cash: The Ongoing and Prospective Use of Public Private Partnerships to Build Infrastructure for Central Bank Digital Currencies (CBDCs) - Georgetown Tech Policy Review, 2022