Mar 2, 2016
Welcome to our first episode focused on Bitcoin, digital
currency, and the blockchain. My guest is one of the most
thoughtful people anywhere on this topic and on payments overall:
Circle CEO and Founder Jeremy Allaire.
I met with Jeremy at his office in south Boston's "Innovation
District," a few blocks from where I live myself. They have
quintessential startup space in an old brick warehouse, and we sat
down on a New England winter day for a really fascinating
conversation.
I often talk about the five huge technology trends that are
revolutionizing financial services. Number 4 on my list is digital
currency. Not long ago, even senior leaders in banks and regulatory
agencies dismissed Bitcoin as insignificant and weird at best, and
dangerous at worst. Today, many people still think it's weird and
dangerous, but no one thinks it's unimportant. I'm going to assume
our listeners know the basics - that Bitcoin invented the
"blockchain," which is an open "distributed ledger" of
transactions, visible on the internet, and that being on the
internet makes it (like everything else there) instant and free.
Most people also understand that this can transform our slow,
high-cost payments system, and also any other system that is, in
effect, a chain of transactions or records. Most people also know
the blockchain record is unfakeable, unbreakable, and again,
visible - attributes that can fundamentally change how we organize
things from money and contracts and legal titles to operational
systems and markets of all kinds.
I once wrote a blog post called
"The Benefits of Bitcoin", arguing that the cheap and instant
movement of money can bring incredible upside potential for
financial consumers, as well as new risks. It will eventually
change everything from remittance services to the struggles facing
people on tight budgets who now rely on cash, since it's the only
way to be sure a bill gets paid exactly when it's due.
As understanding of Bitcoin has spread, a new conventional
wisdom has emerged - the notion that the crucial innovation here is
not digital currency, but rather the blockchain, including closed
chains inside companies and closed networks. In our conversation,
Jeremy challenges that idea head-on. He argues passionately that
the big power in this technology is its openness.
He reminds us, for one thing, that the internet initially
spurred hot debate over how to secure the unprecedented free-flow
of information. In a
widely-circulated article on re/code.com last
November Jeremy wrote, "Remember, the Internet was
unreliable, insecure, and filled with creeps and hackers. People
wanted safe, secure, trusted and proprietary networks. That was the
future...(yet) We all know what happened. Smart creators and
engineers from all around the world got inspired by the open
Internet...Permissionless innovation took hold, and we changed the
world." He thinks we now need to take the basic DNA of the Internet
- open protocols and distributed and decentralized networks - and
apply them not just to sharing data and information, but to the
sharing of value.
He also emphasizes a core power of this - the fact that if
you don't have to trust a single centralized institution to
facilitate value exchange, amazing things become possible. Jeremy
refers to bitcoin as a distributor of trust, one that "provides a
highly secure ledger to exchange value around the world." He
believes that just as the early Internet disrupted media and
communications, this wave of innovation will transform the "trust
and assurance" industries - "which includes government, law,
accounting, insurance and, last but not least, finance."
Entering into a global economy in which everything from
social identities to commerce flow instantly and freely is
discomfiting to some. Even though today's closed and proprietary
technology and networks create frustration and high costs for
consumers, Bitcoin critics still doubt the soundness and resilience
of the model. For innovators like Jeremy, though, it is creating a
whole new set of solutions that use financial technology to build
"smart rules" and business logic that can eventually shape the new
laws of global commercial and legal governance.
Jeremy's "aha" moment on this came in 2012, and inspired him
to start a company that would use blockchain technology, which he
calls the "global trust and transaction ledger," to change the way
we store and use money. That company is Circle, a provider of
mobile apps "aimed at enabling greater ease-of-use in online and
in-person payments, enhanced security and privacy for customers,
and the convenience of free, instant, global digital money
transfers." A revolutionary idea. As I say in our conversation, I'm
a Circle customer myself. Every time I use it, it amazes
me.
Before Circle, Jeremy was an entrepreneur who'd already spent
two decades building and leading global technology companies. His
first startup, Allaire Corp, pioneered the use of the Web as a
platform for commerce and business applications, and grew to serve
over 1 million customers around the world. In 2000, Allaire Corp
was acquired by Macromedia, where Jeremy became Chief Technology
Officer and helped transform Flash into a platform for rich
applications and video that became the most widely adopted piece of
software in the history of computing.
He then founded Brightcove, the first Internet video
publishing platform for websites, smartphones, tablets and
connected-TVs. The company has customers in more than 100 countries
and powers video operations for 25 percent of the top 10,000
websites in the world. From 2003 to 2014, Jeremy also served as a
Director at Ping Identity Corporation, an industry-leading software
and online service provider for securing identity on the Internet
whose clients include many of the largest financial institutions in
the world.
In our conversation, Jeremy explains his vision, his long
background in technology, how Circle works, their business model
and plans, and his thoughts about regulation of finance and
fintech. The regulatory challenges are obviously huge. Circle
sought and received the first-ever (and at this writing, still
only) New York State "bit-license." Jeremy talks about the
challenges of becoming licensed as a money transmitter in the U. S.
state-by-state regulatory patchwork. He also recognizes that,
importantly, governments throughout the country and the world see
potential as well as risk in these innovations. An example is that
Jennifer Shasky Calvery, Director of the Financial Crimes
Enforcement Network, has
testified before Congress that
FinCENrecognizes the "potential for abuse by illicit actors," and
that the agency has for almost five years worked with its
regulatory partners on designing rules that provide the "needed
flexibility to accommodate innovation in the payment systems space
under our preexisting regulatory framework."
Jeremy Allaire has an exceptional gift for making
mind-bending technology and regulatory challenges easy to
understand - and for provoking thought. This is, without a doubt,
one of the most fascinating episodes we've had.
Enjoy it, and please be sure to click the "Donate" button
HERE, and to write a review on ITunes, to keep supporting the
show.
And.....Introducing my video series: Regulation
Innovation
Meanwhile, I have a video for you -- two of them,
actually.
Many listeners know I have long been a consultant to the
financial industry, first on regulatory matters and more recently
on fintech. A couple of years ago, someone suggested that I take
the kind of advice people pay me for as a consultant, and distill
it into video briefings that are accessible and affordable for a
much wider market. It was a great idea, and so I began building a
video series offering my advice.
I've focused the videos on the most important question facing
consumer financial services -- How to survive, and actually thrive,
through the twin disruptions that are hitting the industry:
technology innovation, and regulation.
I think everyone in fintech will enjoy them, but the series
is specifically designed as a guide for financial companies - it's
informative, thought-provoking, and practical. It's for both
traditional companies and innovators. And it's for the people
working on innovation, regulation, and building the
business.
I am very confident in saying there is nothing else remotely
like it. Please check it out!
And while you're there, check out my little bonus video
because it answers, at long last, this burning question: "Why does
Jo Ann Barefoot have an Xbox, since she's never played a videogame
in her entire life, and what the heck does this have to do with
financial innovation?"
www.regulationinnovation.com.
See you there!
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