Fed Governor: Stablecoins Benefit Financial Systems
21 Oct, 2024 ● Crypto people
On Oct. 18, Federal Reserve Bank Governor Christopher Waller addressed an audience at the Institute of Advanced Studies, emphasizing that well-regulated stablecoins could enhance the current financial system.
Waller explained that “Stablecoins can reduce the need for payment intermediaries and thereby reduce costs of payments globally,” but he also cautioned that stablecoin “safety is not assured.” He elaborated, stating:
“If appropriate guardrails can be erected to minimize run risk and mitigate other risks, such as their potential use in illicit finance, then stablecoins may have benefits in payments and by serving as a safe asset on a variety of new trading platforms.”
Waller also suggested that decentralized finance (DeFi) could complement traditional finance rather than replace it entirely.
This perspective aligns with some US lawmakers who believe that DeFi and dollar-denominated stablecoins could help extend the dominance of the US dollar for decades.
On June 14, an article by former United States Speaker of the House Paul Ryan was published in The Wall Street Journal, arguing that stablecoins could help address the looming debt crisis.
Ryan highlighted that stablecoins increase demand for US Treasurys and US dollars, helping the dollar remain competitive against the Chinese yuan and maintaining its role as the global reserve currency.
In October, US Senator Bill Hagerty introduced the Clarity for Payment Stablecoins Act, building on Representative Patrick McHenry’s 2023 stablecoin bill.
The most notable updates to the bill include provisions for state-level regulation of stablecoins and the removal of a clause in the 2023 version that classified stablecoins as securities.
Despite these legislative efforts, a recent Chainalysis report revealed that the US is falling behind in stablecoin adoption.
The report noted that, in 2024, the market share of stablecoin transactions on US-regulated exchanges fell below 40%, while the share of such transactions on offshore exchanges rose to 60%.
Sources:
https://cointelegraph.com/news/stablecoins-benefit-financial-system-federal-reserve-governor
