Retail CBDCs to stablecoins: Circle’s Dante Disparte discuss use cases and future of crypto

There are few characters in crypto more outspoken than Dante Disparte, Chief Strategy Officer and Head of Global Policy at Circle. 

He regularly expresses his opinions on anything and everything in crypto — from stablecoin regulation to US-China competition in the digital asset economy.

And last week, he was on the ground at Singapore Fintech Festival 2022, once again giving his two cents on the future of crypto. During a panel moderated by the Monetary Authority of Singapore’s (MAS) Head of Payments Development and Data Connectivity Jo Yeo, Disparte displayed his usual fire when laying out his opinions on developments and debates within the Web3 and crypto community.

So what did he have to say?

Crypto should be about outcomes, not technology

For Disparte, blockchain tech and crypto is at a crossroads. And with the crypto winter waning, he’s looking forward to the crypto spring, and a new era where digital currency and blockchain finance are becoming increasingly normalised. 

Citing a Deloitte finding in which nearly 75 per cent of retailers plan to accept either crypto or stablecoin payments within the next two years, Disparte argued that crypto is on the verge of mass adoption, and that this is the industry’s signal to switch gear and begin discussions about what blockchain and crypto should do, instead of about what the tech is. 

“The breakthrough of crypto is not the tech, it’s what outcomes the tech enables,” he pointed out.

In particular, Disparte saw huge potential for crypto to help traditionally underserved communities — a point he has previously made in an article on why the US should not adopt a CBDC. 

During the panel, Disparte reminded the audience that “we live in a world with billions of people on the margins of the formal economy and on the margins of being banked.” These underserved populations have no form of identification that would be recognised by traditional Know-Your-Customer (KYC) processes, yet these very same people have access to low-cost Internet-connected devices. 

These populations, according to Disparte, are in emerging and developing markets, and form one of the greatest use cases for crypto and a compelling reason for crypto and blockchain adoption.

In these markets, people want access. People are more connected and more thoughtful about enfranchisement and empowerment and agency, than being at the mercy of a traditional banking system that has forgotten about them for about a century.

Ends, rather than means, therefore, is what Disparte sees as the future of crypto.

CBDCs: Yes to wholesale, no to retail

In response to Yeo’s question on whether CBDCs would have a place in the financial ecosystem, Disparte presented what was perhaps his most hotly debated take — that retail CBDCs would not be a good innovation. 

While Disparte conceded that in principle, CBDCs would have some use cases alongside traditional fiat currencies, especially for those in communities underserved by the traditional banking sector, he was vehemently opposed to the idea of a retail CBDC.

Disparte envisions central banks as institutions that protect monetary policy and monetary sovereignty, and as such, believes that there should be an ‘air gap’ between the central bank, the banking system, and private wallets. 

As soon as this ‘air gap’ is broken, you now have a form of money that is not censorship resistant, not privacy preserving, and will create, at least in my view, a limit on the revolution in fintech that we have been seeing over the last 100 years.

Therefore, while CBDCs can have some use cases, governments and central banks would need to be cautious about the form that these CBDCs take.

Disparte therefore suggests that CBDCs would function well as part of the ecosystem if they were available as a form of wholesale payments innovation as opposed to a retail innovation. 

Don’t just trust the “stable” in stablecoins

Naturally, Disparte had something to say about the future of stablecoins, especially given that Circle manages USDC, a stablecoin pegged to the USD. 

Specifically, Disparte argued that there is much more to a stablecoin than its name; it’s also about the coin’s management and tech. 

There are coins out there that I call ‘stable-in-name-only-coins’. It’s extremely easy, and maybe a little too easy, to name the product or create comparably named products, but the real distinction lies in how they are built.

Operational transparency, Disparte stresses, is something that needs to be taken seriously. He credits the success of USDC to the high standard of operational transparency, as well as the fact that Circle takes their reserve requirements seriously.

Therefore, Disparte believes that if a stablecoin company or issuer cannot answer the question ‘show me the money’, it is highly likely that they have something to hide. 

In addition, Disparte also asserted that Circle and USDC are “operating at a prudential standard better than the top 10 global systemic financial institutions in the world”. This, according to Disparte, is because they keep stringent limitations on their reserves, which include US dollars and US treasury obligations. 

The crypto market this year has seen some spectacular developments, most notably the collapse of the supposedly blue chip Terra and UST stablecoin.

USDC, on the other hand, has remained relatively quiet — no major scandals or layoffs, or any other upheavals. Dante, it seems, is walking the talk when he suggests that USDC is truly holding a candle to traditional financial institutions, and providing some food for thought along the way.

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