Circle CEO's YouTube analogy highlights cryptocurrency and financial system challenges

Lianna Brinded
Head of Yahoo Finance UK
Jeremy Allaire, co-founder and CEO of crypto company Circle. Photo: World Economic Forum

Jeremy Allaire, co-founder and CEO of crypto company Circle, highlighted the biggest problem facing cryptocurrency and the wider financial system in one analogy.

Speaking to delegates at the World Economic Forum in Davos, Switzerland, in a session titled ‘Shaping the Future of Financial and Monetary Systems,’ Allaire said it would be useful to think about digital disruption on an arc, in order to understand where we are on it and where the challenges lie.

“For the financial system, we are at an inflection point and moving from the periphery to the core. [For example] moving away from the likes of just ‘making access better’ to finally visiting the core of financial system — such as, the nature of money, how distributed and utilised.”

He highlighted that this has been ushered on by cryptocurrency and in the last 10 years since the credit crisis, “we’ve seen growth in alternative architecture” like blockchain, cryptocurrency, and stable value currency — such as stable coins.

However, the biggest challenge posed by this level of disruption is regulation and policy. Allaire, using an analogy to show how even media and communications are affected by the same issue, said this means it’s essential that there is tech-driven approach to policy.

“None of us would like to go back to a time where we can’t freely communicate with anyone on the planet without any intermediation with some rare exceptions. We all accept as society, trade-offs. [For example] we have open communications but we also accept the fact that terrorists can recruit people on YouTube. We’re not saying shut down YouTube,” said Allaire.

READ MORE: Circle CEO: Attention on Facebook's Libra is 'double-edged sword' for crypto

“The financial system is different to communications and there are identity and risk issues that are real but we have to revisit how those issues are solved — right now it’s the blunt forced mechanism for enforcement which ends up tying to national sovereigns and their policing mechanisms. We have to look for global schemes and technology driven approaches for identity risk that run alongside blockchains and digital currencies.

In July last year, Allaire spoke to Yahoo Finance about how Facebook’s (FB) cryptocurrency project Libra brings about heightened scrutiny for the industry.

“Ultimately if the Libra Association and its members successfully launch and the Libra cryptocurrencies in use with platforms — not just Facebook's, but Visa’s and Uber's and others — it has tremendous potential to reach billions of people,” said Allaire. “I think it also does bring more attention to the policy issues, and that's a double-edged sword,” he said.