Dialogue with the founder of Circle on blockchain

Guest: Jeremy O'Laur, Founder, Chairman and CEO of Circle, USA Sean Neville, Founder and President of Circle, USA As a potentially transformative technology, blockchain has been hailed as the "next big thing" in financial technology and related fields, and has become a hot topic in mainstream and financial media reports. Blockchain has also become the focus of attention of major institutions in the financial system and related industries - from central banks to regulators, financial technology start-ups and even major banks. There is no doubt that the widespread application of blockchain technology, which is essentially decentralized and disintermediated, will have a significant impact on intermediaries such as banks. However, in the eyes of many multinational banks, blockchain will not only not make banks redundant, but may make banks do better. Focusing on hot issues such as the impact of blockchain technology on the banking industry and regulators, the attitudes of regulators in various countries towards this new thing, and the possible risks of the widespread use of this technology, our reporter recently had a dialogue with two founders of Circle, a pioneer in the global blockchain field.

Banks can fully adopt blockchain technology

Host: What kind of company is Circle? Is it a technology company or a financial company?

Jeremy O'Laurel: We are a software-based financial company, and we are building a global payment platform. The most important thing is blockchain technology. When we founded Circle three years ago, we hoped that payments could be transmitted like information. Why can we do this at this point in time? This is mainly because there have been many technological breakthroughs in the past three years, the most important of which is blockchain technology, which can realize the safe, real-time and global transfer of currency.

Our goal is not to replace currency, but to connect the world's currencies so that users in all countries can use their fiat currencies to transfer value globally for free. To achieve this vision, we need to connect major currency zones around the world. To do this, we started in the United States and the United Kingdom, connecting the US dollar, pound sterling and euro with blockchain technology, machine learning risk management, cloud computing and mobile software development with excellent design.

Circle's social payments mobile app enables customers in the United States and Europe to send and receive payments instantly with a customer experience similar to sending text messages and social media without paying any transaction fees.

Moderator: The essence of blockchain technology is decentralization and disintermediation. When one person transfers a portion of assets to another, the transaction can be completed without a fixed central server. What major impact will this have on banks as intermediaries? What motivation do these institutions have to adopt this technology?

Jeremy O'Laurel: Blockchain can be used to provide basic services that are essential to any financial system, and it is often better and more efficient than the tools we use now. Banks can fully adopt this technology. First, the distributed clearing model of blockchain technology has many processing advantages; second, going forward, digital currency will become a very good general direction, and in the process of transforming from traditional currency to digital currency, banks have a lot of room for innovation. We believe that banks and blockchain innovation companies will advance in a mutually integrated manner. In fact, how banks view blockchain technology can refer to how media and telecommunications companies viewed communications when the Internet was just starting 20 years ago. Now sending emails and WeChat are free, and blockchain technology can make the way money operates become like the Internet, achieving instant, global, free, open and interesting. Of course, in this process of change, the distribution of interests of participants will be adjusted to a certain extent.

Moderator: According to UBS's research, blockchain can enable near real-time settlement of most types of financial transactions, thereby eliminating counterparty risk, releasing capital, and significantly reducing transaction costs; blockchain can also achieve a split model at the data and service levels, allowing individuals to actually become managers of their own accounts; blockchain relies on a decentralized computing model, and its properties determine that it is more powerful and secure than the proprietary, centralized computing model used today, which helps create a safer, more reliable system at a much lower cost.

Jeremy O'Laurel: Yes, for example, the bank's exchange fee is about 3% to 4%, but Circle's is 0.2% to 0.3%. In the future, this number will gradually approach zero. We believe that banks whose main business is exchange will be greatly affected in the future.

Moderator: Blockchain technology is based on the Internet and cloud technology, and its own security may be breached. If it is put into large-scale use, will there be uncontrollable risks if it is infected and invaded by computer viruses? How to prevent such risks?

Sean Neville: Bitcoin blockchain has no risk of virus attacks since its inception because it is based on

The principles of cryptography are excellent from the perspective of network security. If one day, quantum computers come out and challenge existing cryptography, this will not only threaten the security of the Bitcoin blockchain, but also the entire society's technical system.

Global financial regulators pay close attention to blockchain

Jeremy O'Laurel: Technology itself is not regulated, but its commercial application is subject to regulation. Blockchain technology is no exception. At present, the technology is within the scope of the entire financial regulatory system, and we work with regulatory authorities to promote its development. In the early days, the Bitcoin blockchain had relatively few participating nodes and relatively high risks. Now that there are many participating nodes and the amount of computing is huge, it is almost impossible for its network security to be breached.

Moderator: So, for financial regulators, how should they regulate the application of blockchain technology and where should the regulatory focus be? What is the current attitude of regulators in various countries towards blockchain technology?

Jeremy O'Laurel: The main application scenario of blockchain technology is how to transfer money in real time. Because blockchain technology is still a new form, we believe that regulators should have an open attitude towards it and not be too strict at the beginning. For other scenarios that may appear in the future, different types of regulators can conduct classified supervision according to the different situations of their respective industries.

Blockchain technology itself will provide regulators with more and newer capabilities. It is a public ledger in which all data is stored. With the support of technology such as Circle, regulators can actually see more information and content, making real-time monitoring possible. When we worked with regulators in the United States, they talked about how Circle provided more risk-related information than banks. Not only that, when more and more transactions occur on the blockchain, regulators can better play a role in supervising other financial institutions, with greater synchronization and operability.

Three years ago, when we talked about blockchain with governments, they were very reluctant to communicate and cooperate. Now they are very interested. We have a lot of exchanges with the Central Bank of China. The British regulators support us to enter their market. Japan is also discussing how to promote digital currency legislation. Central banks of various countries have set up digital currency research groups. This is a direction we are seeing now. The UK is moving faster in this regard and hopes to make a difference in launching digital currency. The Federal Reserve is moving slower and is not in a hurry to launch digital currency.

Moderator: Yes. Over the past year, blockchain has attracted strong interest and a lot of investment. Since the Wanxiang Blockchain Lab held the Global Blockchain Summit in Shanghai last year, Chinese regulators have also become increasingly interested in blockchain. In early 2016, the People's Bank of China publicly stated that it would strive to issue digital currency as soon as possible.

At present, blockchain technology is still a new form, and regulators should adopt an open attitude towards it. For other scenarios that may arise in the future, different types of regulators can carry out classified supervision according to the different situations of their industries.

The distributed clearing model of blockchain technology has many processing advantages; banks have a lot of room for innovation in the transition from traditional currency to digital currency. Blockchain can be used to provide basic services that are vital to any financial system, and it can do it better and more efficiently than the tools currently used, so banks can fully adopt this technology.