There is a company that is taking over Crypto a company that's partnering with Trad fire Giants to foist its coin on All of us whether we like it or not That company is circle and in my video Today I'm going to take you through its Latest report one that highlights just How much this company has done to embed Itself in the crypto economy and how it Plans to leverage this position in the Future trust me when I say you're not Going to want to miss this one so sit Tight and don't go anywhere Foreign now as usual when breaking down These reports I like to give a bit of an Overview of the company in question to Start with So in case this is the first time that You're hearing about Circle internet Financial Inc it is the fintech company That's behind the usdc stablecoin However what you may not know is that This company has been around for quite Some time almost 10 years now the CEO And co-founder is a chap called jeremia Lair who has extensive experience in Founding technology companies Circle Originally began with the idea of Integrating Bitcoin payments into Traditional Financial infrastructure and Wanted to become the base layer for a New Financial system the company Launched usdc in September of 2018 right In the depths of the last crypto winter
At that time there wasn't much demand For stable coins or well crypto in General for that matter However with the Advent of D5 summer in 2020 and the nft Mania of 2021 usdc's Use proliferated it went from a CMC Market cap ranking of 22 in early 2019 To its current rank of five now I've Talked about the history of circle in a Lot more detail in a video I made last Year which I'll leave in the description For you folks so armed with that bit of Background let's jump right into the Report now the report is titled quote The state of the usdc economy and it's The first report of this type it kicks Off with a letter from Jeremy himself Which I'll skip over for now tldr he's Happy about the growth of usdc excited About the future and impressed with the Job his team has done so far so Predictable now part of the reason why Usdc has been able to achieve this Growth is the trust that's been placed In the reserves backing the coins in Circulation Usdc is fully backed one-to-one with US Dollars and these are redeemable at any Time and when it comes to those reserves Eighty percent are kept in treasuries With a three-month maturity these are The most liquid of treasuries which Means that conversion into Cash can be Done quickly the remaining 20 of the
Reserves are held in cash at eight Different regulated banking Partners Across the us something I didn't know Though is that these banks have been Chosen based on the social impact that The deposits could have in Underrepresented minority communities However something that you should know Is that by the end of this year all of These reserves will be moved away from These Banks into the circle Reserve fund Which is managed by BlackRock and Custodied by the Bank of New York Mellon Pretty scary that BlackRock will be able To control the reserves for the second Largest stablecoin but be that as it may Then over here here the report's authors Talk about the numerous licenses that Circle has both within the US and abroad They talk about those monthly Attestations that circle undertakes with Its accountants Grant Thornton it also Undergoes yearly audits by the same firm And has published these for the past Three years in future the BlackRock Circle Reserve fund will be audited by Deloitte now one more thing that I'll Add here as well is that the circle Reserve fund will be a fully SEC Registered money market fund which will Offer daily disclosures of the company's Reserves what this shows me is that the Folks at Circle have attempted to go all In on transparency and regulation this
Is because they know that it is a unique Selling point over their main competitor In the space tether As you no doubt know there have been Constant concerns over the reliability Of tethers reserves a lot has been done In order to dispel many of these Concerns but tether has always stopped Short of a full audit let's move on to The next page of the report though and This is on the stablecoin macro economy Over here the authors note the fall in The numbers of people using physical Cash around the world a result of the Increasingly digitized nature of our Economy this move away from physical Cash was greatly precipitated by the Pandemic we got to a stage where people Would not use cash because of fear of Catching an Airborne virus on a piece of Paper but to be fair the move to a Cashless Society was well underway long Before covert appeared some countries Like Sweden for example actually want to Completely eliminate cash and have been Pursuing that end for a number of years Now while a cashless Society may sound Convenient and it could also pave the Way for a dystopian Financial system Dictated by Central Bank digital Currencies or cbdcs this is something That many countries are now trying to Roll out and I'll leave links to the Numerous videos that I've done on the
Subject below either way there's no Doubt that Circle has been capitalizing On this move away from physical cash Before the Advent of stable coins there Was no quote internet native form of Money that could be transacted near Instantly globally and in seamless Integration with digital Commerce of Course Circle wasn't the pioneer of this Technology as that title goes to tether Founded in 2014 but be that as it may The flood around tether as well as the General shift to diversify stablecoin Holdings has meant that usdc has seen Explosive growth for example the supply Of usdc has grown by over 860 percent Whereas the supply of U.S dollar bills Has only grown by eight percent over the Same time frame despite this growth Though the total amount of usdc in Circulation is still but a pittance when Compared to the amount of U.S currency In circulation you can see what that Looks like over here so this growth in Usdc's Supply is only likely to Strengthen over the coming years and That's because of this shift to an Increasingly digitized economy currently E-commerce represents about 21 of all Retail sales and this is expected to Grow to about 26 percent of all all Retail sales in 2026 mobile payments are Also expected to grow by 221 percent Over the next five years another really
Important driver meanwhile is Cross-border remittances for someone who Is now living abroad and sending money Back to the UK it really makes you Appreciate how complicated and Antiquated the traditional Swift Financial system is sending value on a Blockchain was and will continue to be a Game changer for the foreseeable future This is where Circle sees the Predominant use case and potential for a Currency like usdc in 2022 usdc Facilitated 4.5 trillion dollars worth Of transactions on the ethereum Blockchain alone What's interesting about this though is The fact that 60 of those transactions About 2.7 trillion dollars worth were Related to Smart contracts therefore Usdc is not just about sending money but Also being used for a rapidly growing Decentralized Finance ecosystem this Includes lending pools automated market Makers and other daps that have been Transforming the way we conduct on-chain Transfers Circle estimates that there Was at least 30 billion dollars worth of Economic activity in 2022 facilitated With usdc this is based on a number of Assumptions from both a top-down and Bottom-up approach which you can find in The appendix the authors note that the Range of activity applicable to it is Broad quote ranging from consumer
Digital Commerce and corporate treasury Services to foreign aid in Conflict-stricken countries now that Last one is particularly interesting and Will come back to it later in the report The authors also note the growth of usdc Compatible addresses now over 2 million In number Something of note though is the fact That at least 75 of these have balances Of less than 100 This is below the minimum balance Required at most financial institutions Which shows that cryptocurrencies are More inclusionary Circle has also said that this growth in Usdc issuance is independent of Fluctuations in crypto prices as this Chart over here shows this was true for Most of 2021 and 2022 although we have Seen a massive fall in the supply more Recently the authors of the report argue That this could be because of the Growing use of usdc in general Transactional Commerce as opposed to Financial transactions for example with Traditional Fiat currencies there are Estimates that economic activity as Measured by GDP is only about two Percent of fedwire transactions they Also say that only two percent of total Foreign exchange transactions are Related to the global trade in goods and Services therefore the vast majority of
Transactions involved are Financial in Nature and not tied to General Real-world activity however transactions In the usdc economy are a lot more Tangible fifteen percent of usdc Transactions are wallet to wallet which Is indicative of payments between Different individuals so one can make The argument that usdc supports a large Degree of real-world economic Transactions these aren't the only Metrics that support that thesis though The report's authors also say that the Relative trading volume of usdc compared To the amount in circulation is Relatively low this is called the quote Speculative ratio usdc sits at 10 Percent compared to the likes of the US Dollar which is sitting at 20 percent Retail brokerage which is the trading Volume in brokerage accounts versus the Cash balances is sitting at just over 30 Percent however the most interesting Things here are the ratios for those of The other stable coins on the market Usdt and busd this is over 70 which Means that the predominant use case for These stable coins is exchange liquidity This does make sense more generally when You look at the broader order book Liquidity for stable coins on these Centralized exchanges you get a similar Picture with this chart over here which Shows the usdc in circulation versus the
Trading volume as you can see there's Very little correlation between the two This can can be attributed to the fact That less than 10 percent of the usdc Supply is actually on centralized Exchanges quite simply according to this Report usdc is not a stable coin used For speculative purposes it's a not so Subtle dig at the other stable coins out There however I would counter that the Other stable coins serve their own Purposes just because the stablecoin is Used as a trading pair on a centralized Exchange to provide liquidity does not Mean that this use case is less relevant It's an important use case for crypto Users and Traders for one thing anyways I want to move on to the next section as It's perhaps the most controversial and It's on circle's approach to compliance And risk management Now one thing you need to know about all Centralized stable coins is that they Can arbitrarily restrict and Blacklist Certain addresses this is something that They have actively been doing over the Past two years so it's no surprise here That Circle says that they take AML and Countering terrorist financing very Seriously they say that they're doing This because quote we believe that the Safety and integrity of the International Financial System including Preventing and detecting illicit
Financial flows are a critical part of Our company's vision for a providing Well-regulated internet-native financial Services around the world to this end Circle introduced two new initiatives in 2022 The first is the aptly named trust an Acronym for travel rule Universal Solution technology and this is an Industry driven Solution that's meant to Comply with travel rule requirements for Those who don't know what these are they Were first introduced by fincen back in 1996 and require financial institutions To collect information on certain Transactions and pass that information On to the receiving company under the Financial action task Force's Guidance The travel rule applies to any Transaction over one thousand dollars of Course it was inevitable that these Rules would soon be foisted upon virtual Asset Services providers vasps and this Happened back in October of 2021 I've Talked about this in much more detail in My video about fat F guidelines for Crypto which I'll leave in the Description anywho as it relates to Circles trust initiative the report States that Circle has tried to strike a Balance between privacy and compliance With a number of safeguards for example They say that they don't store any Personal data centrally the info is only
Sent directly from One Trust user to Another they also have a mechanism That's able to prove that the sender of The funds is indeed the individual who Owns the wallet and finally in order to Conduct compliance in the quickest and Most efficient way they're partnering With a company called exagger now Whether this really does strike a Balance that preserves privacy is Up For Debate given that circle is a Centralized stablecoin issuer with Closed Source technology we can't Independently verify the claims they Make about centralized storage or the Solutions they use to verify Trust Moreover by relying on this third-party Company to conduct their AML they'll Have to rely on its competence and the Robustness of their own systems as well In addition to trust Circle also has Verite now this is in collaboration with Block coinbase and others and looks to Create a decentralized identity for Those in the broader crypto economy Apparently verite is a decentralized and Open source tool available for everyone To use the main Mo here is that it will Issue credentials to users which will Allow for numerous use cases including AML kyc verifying accredited investor Status social status nft provenance Tracking Etc all of this can be done Without the user having to share any
Personal information moreover Circle Claims that this will all be in the Control of the user such that they can Determine where this is used it sounds a Heck of a lot like Soul band and nfts And if you want more of an overview on Those then you can check out my video Down below moving on though the report Goes on to talk about two instructive Moments of 2022 Ukraine and the tornado Cash sanctions if you'll recall from the Early days of the Ukraine Invasion the Overarching narrative coming from the Likes of the U.S treasury Hotel was that Russia would use cryptocurrency to evade Sanctions in actual fact what we saw was An immense amount of support and funding Coming to Ukrainian forces from those in The crypto community over 60 million Dollars was raised in just a few weeks In the words of Ukraine's vice prime Minister quote while Russia uses tanks To destroy Ukraine we rely on Revolutionary blockchain Tech It wasn't all about Ukraine though and That's because blockchain Tech was also Used to facilitate humanitarian Aid in Venezuela as well as for displaced Refugees now this is all well and good But it eventually brings us onto the Question of tornado cash as you probably Know by now this smart contract mixer Was sanctioned by ofak the office of Foreign assets control last year I won't
Go into the specifics of the action or The arguments around it but I do Encourage you to watch the video that I Made on it and that will of course be in The usual spot the tldr is that ofac Took the unprecedented sep of Sanctioning a smart contract that is a Piece of code instead of individuals Moreover one of the developers behind Tornado has been sitting in a Dutch jail For almost 10 months now while a Fraudster like SBF has the luxury of Living at his parents house but I Digress the reason that Circle enters The picture is because it it was Actively involved in blacklisting Certain addresses and freezing the usdc They held many including myself Questioned circle's commitments to the Idea of censorship as a result of these Actions while some nefarious actors use Tornado cash to conceal their crimes There was a far greater proportion of Users who just wanted to preserve their Privacy to its credit though Circle does Have a number of policy suggestions that The report presents here these include Modernization of the bank secrecy act It's after all 52 years old and there is No distinction between protocols and Software Industry-wide efforts to develop Financial crime compliance tools Although our counter that the tools
Being developed by tracking companies Are already quite effective more about Those in the description encouragement In the use and development of privacy Preserving Technologies well I can get On board with that also the protection Of Open Source software and its Development and finally the development And dissemination of privacy preserving Decentralized identity tools now these Are worthy initiatives for sure but Actions speak louder than words given How dependent circle is on being on the Good side of the regulators and large Trad fire players I think it would Easily sacrifice these ideals for the Sake of expediency I hope the company Proves me wrong this year Now moving on to one of the last Sections though and that's the current State of the usdc ecosystem as I Mentioned earlier usdc has seen a lot of Growth over the last year this is not Only in the amount of Supply but also in The number of blockchains which is Issued on and the protocols that it Integrates with for example usdc is now Available on a total of eight Blockchains and has been integrated with Over 200 protocols this will see usdc Playing an Ever more prominent role in D5 on top of that Circle has partnered With a number of large companies like Stripe Robinhood Twitter Etc similarly
It's also ended Partnerships with large E-commerce providers and payment Processors these include checkout.com MasterCard and Visa among others Meanwhile on the development side Circle Has released a number of products and Services that have enabled developers to Build with usdc one of the most Promising of these will be the cross Chain transfer protocol which will allow Devs to send usdc from one supported Blockchain to another Circle hopes to Issue usdc on a number of other chains This year and there needs to be an On-chained solution to transfer value From one of these chains to the other Moreover this will allow developers to Build cross-chain applications that Integrate numerous different Functionalities such as trading lending Nfts gaming etc etc to my mind if this Is done correctly it could be a game Changer for cross-chain defy Applications the report States quote all Told we aim to empower millions of Developers in rewiring the Global Financial system creating a more open Equitable and internet native foundation For the frictionless exchange of value Now this final section over here then Details circles initiatives to foist Blockchain Payments Technology onto Those people who need it most I won't go Over it here in the interests of time
But I do encourage you to read it if you Get a chance again the report is linked To below Well that's it for most of circle's Report but I wanted to leave you with a Few of my thoughts on what it says it's Quite clear that Circle has some big Ambitions not only is it trying to get Usdc into every corner of crypto and Traditional Finance but it's also Recently released a Euro stable coin Which will have similar goals circle is Also clearly trying to go all in on the Regulated transparent and compliant Narrative not only does this allow it to Better integrate with tradfi but also to Draw clear distinctions between itself And other stablecoin issuers the growth Of usdc's Supply over the past few years Is further evidence that this strategy Has been working I also think that it's Inevitable that usdc will become the Predominant stablecoin in the next two Years however I can't say that I'm Completely happy about that While circle's vision for crypto Payments adoption is something I can get On board with I'm still quite skeptical Of its true underlying motives it is Backed by Goldman it is partnered with BlackRock it is embarked on some Powerful lobbying initiatives to get the Ears of politicians in DC and Brussels It's also shown that it's ready and
Willing to censor transactions should it Be instructed to do so by the powers That be I also think that stablecoin Competition is healthy it encourages Issuers to continue developing better Products and allows people to diversify Their stablecoin Holdings we don't want A monopoly this is part of the reason Why I hope tether does one day come out With a full audit so that it can address The fund once and for all it could also Help to calm the nerves of the Increasingly edgy crypto Community until That time circle is going to continue Its aggressive growth the company still Has big plans for a public listing and Although its planned SPAC merger may Have been canceled late last year it Will be back at the table the moment the Markets turn however it's up to us in The crypto Community to keep that growth In check and constantly call Circle out Should it take actions which call into Question the ideals that we all hold so Dear I know I will And that's it for my video today folks But I'd love some of your feedback Though do you hold any stable coins if So which ones and what do you think of Circle's growth please let me know in The comments and while you're down there I'd like to direct you to my socials Page it has links to my Twitter telegram Instagram and Tick Tock lots of content
Over there that you're not getting here You'll also find a link to my newsletter Which is where I share my personal Portfolio as well as my future video Pipeline the links to all of those are In my socials page below and finally if You found this video helpful slap a like On it subscribe and ping that Bell as Well to make sure you never miss another One time's up for this crypto guy but I'll be seeing you guys very soon tata For now
