United States Federal Reserve Governor Christopher Waller said that stablecoins could expand the reach of the US dollar while calling for a regulatory framework that would allow banks to issue dollar-pegged digital currencies.
Stablecoins are an “important innovation for the crypto ecosystem with the potential to improve retail and cross-border payments,” Waller said at a conference in San Francisco on Feb. 12.
He added that the stablecoin market had matured and “would benefit from a US regulatory and supervisory framework that addresses stablecoin risks directly, fully and narrowly,” adding that both non-banks and banks should be able to issue stablecoins.
“This framework should allow both non-banks and banks to issue regulated stablecoins and should consider the effects of regulation on the payments landscape, including competing payment instruments.”
He also expressed confidence in the private sector to build stablecoin solutions for businesses and consumers while calling for clear regulations.
“I believe in the power of the private sector to develop solutions that benefit businesses and consumers, with the job of the public sector to create a fair set of rules for market participants to operate within,” he said.
Waller acknowledged their current use cases in providing a safe store of value within crypto trading, access to US dollars, especially in high-inflation countries, cross-border payments, and retail payments, which are currently limited.
“I am seeing a lot of new, private sector entrants looking to find ways to support the use of stablecoins for retail payments,” he said.
However, there are challenges, such as a lack of a clear regulatory framework in the US, fragmentation between different state and international regulations, and the need for balanced regulation that ensures safety without stifling innovation. He also highlighted the risks of “depegs” and failures
Earlier this month while speaking at the Atlantic Council on Feb. 6, Waller described stablecoins as “synthetic dollars” that were just like commercial bank money and that “open up other payment possibilities.” He added:
“If they can do that in a way that opens competition, broadens the reach of the payment system, drives down costs, makes things faster and cheaper, I’m all for it.”
Related: Rep. Waters calls for support on bipartisan stablecoin legislation
The Fed governor concluded with a hope that “the stablecoin market will grow or diminish on the merits of their benefits to consumers and the broader economy.”
He reiterated that the private sector needs to continue developing innovative solutions “that fit a market need while building sustainable business models,” while the public sector needs to establish clear and targeted legal and regulatory frameworks coordinated across states and national boundaries “to enable private sector innovation at a global scale.”
Magazine: Coinbase and Base: Is crypto just becoming traditional finance 2.0?
