Katie Haun and the Future of Stablecoins | Digital Dollars

The Rise of Stablecoins and Katie Haun’s Vision for Digital Dollars

In 2018, while Bitcoin’s value hovered around $4,000 and many considered cryptocurrency a fleeting trend, Katie Haun engaged in a public debate in Mexico City with Nobel laureate economist Paul Krugman. Rather than focusing on Bitcoin’s price volatility, Haun championed the potential of stablecoins.

She argued that these digital tokens, pegged to the value of the U.S. dollar, could provide the advantages of blockchain technology without the inherent price fluctuations of conventional cryptocurrencies. This concept, however, was initially dismissed by Krugman.

From Prosecutor to Crypto Investor

This debate wasn’t a pivotal moment in Haun’s career, but it exemplifies her forward-thinking approach. A former federal prosecutor, Haun possesses a unique background for the crypto investment world. She dedicated over ten years to investigating financial crimes and established the government’s inaugural cryptocurrency task force.

After becoming Andreessen Horowitz’s first female partner in 2018 and co-leading their crypto funds, she founded Haun Ventures in 2022, managing assets exceeding $1.5 billion.

Navigating Independence and Industry Relationships

Establishing her own venture firm has presented certain challenges. Despite her prior role at a16z and the connections it afforded, the two firms haven’t publicly co-invested since shortly after Haun launched her fund. Furthermore, Haun resigned from Coinbase’s board last year, while Marc Andreessen continues as a director.

Addressing her relationship with Andreessen Horowitz at TechCrunch’s StrictlyVC event, Haun minimized any potential discord, acknowledging a shift in collaborative efforts. “There’s no ‘gentleman’s agreement,’” she stated, echoing a question about avoiding competition with her former employer. “I still maintain communication with Andreessen Horowitz, though we haven’t pursued joint deals recently.”

This apparent divergence in investment strategies could reflect the competitive nature of the industry or the difficulties of transitioning from a prominent Silicon Valley firm to directly compete with former associates. Regardless, Haun is now forging her own path, with stablecoins remaining central to her vision.

Understanding Stablecoins

Unlike cryptocurrencies like Bitcoin or Ethereum, which are prone to significant price swings, stablecoins – such as Circle’s USDC and Tether’s USDT – are designed to maintain a consistent value of $1. This creates a digital equivalent of traditional currency that can be transferred across blockchain networks.

Haun’s early belief in stablecoins now appears remarkably insightful. Barely existent in 2015, they now represent a quarter of a trillion dollars in value. They have become the 14th largest holder of U.S. Treasuries globally, and last year, stablecoin transaction volume reportedly surpassed that of Visa.

“People initially questioned the value proposition of stablecoins a few years ago,” Haun remarked. “I’ve described it as an ‘If it works for me, it works for everyone’ situation.”

Global Accessibility and Financial Inclusion

For many in the United States, the existing financial system functions adequately, offering options like Venmo, bank accounts, and credit cards. However, Haun, drawing on her experience as a prosecutor, recognizes that this isn’t the case globally.

In nations with unstable currencies or limited banking infrastructure, stablecoins provide instant access to a stable, dollar-denominated value that can be sent internationally for minimal fees. “In Turkey, people view Tether not as a cryptocurrency, but as money,” she explained.

Evolution and Growing Adoption

The technology underpinning stablecoins has advanced considerably. International transfers once cost $12, while Circle’s USDC is now fully backed one-to-one by dollars held in JP Morgan accounts and audited by Big Four accounting firms.

Consequently, the corporate sector is taking notice. Walmart and Amazon are reportedly exploring stablecoins, alongside other major companies like Uber, Apple, and Airbnb. The primary driver is economic efficiency; stablecoins offer a means to transfer U.S. dollar value using cryptocurrency networks, potentially saving these companies billions in processing fees.

Regulatory Concerns and the GENIUS Act

However, this shift raises concerns about potential economic disruption. While Circle and Tether aim to maintain sufficient reserves to support their tokens, unlike traditional banks, these reserves lack government insurance. Furthermore, the possibility of major corporations issuing their own currencies raises questions about monetary policy and banking regulation.

Concerns extend beyond economic instability. Not all stablecoins are created equal, with some lacking the backing and oversight provided by companies like Circle. The collapse of TerraUSD, which wiped out $60 billion in value, serves as a cautionary tale.

Recent events, such as the issuance of a stablecoin by President Trump’s family, have highlighted potential conflicts of interest and the influence of political factors on the industry.

These issues have come to the forefront as Congress debated the GENIUS Act, legislation designed to establish a federal regulatory framework for stablecoins. The bill passed the Senate with bipartisan support, but faces opposition from some, including Senator Elizabeth Warren, who has labeled it a “superhighway for Donald Trump’s corruption” due to a loophole regarding family members of government officials.

Haun’s Perspective on Regulation

Haun expressed frustration with the lack of existing regulations, stating that clear rules would have prevented some of the recent controversies. “Had there been rules of the road in place, there would have been a framework for determining what constitutes a security, a commodity, and the necessary consumer protections.”

While generally supportive of the GENIUS Act, Haun criticized its prohibition on yield-bearing stablecoins. She questioned why consumers shouldn’t receive interest on their stablecoin reserves, similar to savings accounts.

Regarding concerns about money laundering and terrorism financing, Haun argued that the traceability of blockchain technology makes it less susceptible to illicit activities than cash. She cited Treasury Department testimony indicating that 99.9% of money laundering crimes utilize traditional bank wires, not cryptocurrency.

The Future of Tokenized Assets

Looking ahead, Haun envisions a future where a wider range of assets – including money market funds, real estate, and private credit – are “tokenized” and accessible to global markets 24/7.

“It’s simply a digital representation of a physical asset,” she explained, noting that BlackRock and Franklin Templeton have already tokenized their money market funds.

This tokenization could democratize investment access, allowing individuals with limited capital to own fractional shares of assets like Apple or Amazon.

“While inevitable, this transformation won’t happen overnight,” Haun cautioned. However, she remains confident that the same factors driving the success of stablecoins – speed, cost-effectiveness, and accessibility – will propel this change forward.

Haun’s persistence in advocating for stablecoins, dating back to her 2018 debate with Krugman, appears to be yielding results. The key question now is whether regulators can adapt to this evolving technology while addressing legitimate concerns about corruption, consumer protection, and financial stability.

Despite skepticism about stablecoins representing only 2% of global payments, Haun views this as a typical pattern of technology adoption, often taking longer than anticipated.

“We believe it’s still very early days,” she concluded.

For a more in-depth understanding of Katie Haun’s insights, you can access the full conversation here: