Federal Reserve Backs Stablecoins to Expand US Dollar Reach, Calls for Clear Regulations

• Federal Reserve Governor Christopher Waller believes stablecoins could help extend the U.S. dollar’s reach globally.
• Waller calls for a regulatory framework that allows banks and non-banks to issue stablecoins.
• There is bipartisan support for stablecoin legislation, with a group of Senators recently introducing a bill to create a regulatory framework.

Federal Reserve Governor Christopher Waller highlighted stablecoins’ potential to bolster the U.S. dollar’s global reserve status and called for clear regulations to ensure their stability.

Stablecoins are growing in popularity in retail and cross-border payments, but clear regulations are needed to address risks without hindering progress.

Banks Should Issue Regulated Tokens

Federal Reserve Governor Christopher Waller said stablecoins could expand the U.S. dollar’s reach with a regulatory framework for banks.

Waller emphasized a framework allowing non-banks and banks to issue stablecoins while considering the impacts of payment competition.

At a Feb. 12 conference , Waller described stablecoins as a key crypto innovation for improving retail and cross-border payments.

Waller called for a comprehensive U.S. regulatory framework to address risks and allow banks and non-banks to issue stablecoins.

Waller expressed confidence in the private sector to develop stablecoin solutions, while stressing the need for fair public sector regulations.

He highlighted stablecoins’ role in providing a store of value, access to US dollars, and enabling cross-border payments.

Waller acknowledged challenges like unclear regulations, fragmentation, and risks of “depegs” and failures, stressing balanced regulation for safety.

Stablecoins May Back Dollar Reserve Status

It’s not the first time Waller has supported stablecoins. Last week, he stated they could strengthen the dollar’s status as a reserve currency .

The governor stressed the need for clear regulations to ensure their stability and proper backing. Waller noted that stablecoins, backed by assets like dollars or Treasury bills, require regulatory oversight to confirm collateralization.

Both major political parties support digital currency legislation, with a bipartisan group of Senators introducing a stablecoin regulatory bill this week.

A Moody’s report highlighted risks of unregulated stablecoins, including instability from events like the Terra UST collapse, FTX crash, and DeFi security breaches.

Fed Sees Stablecoins As Payment Cards Rival

Waller’s comments are part of a wider trend of supporting stablecoins among Federal Reserve members.

In a blog post , Atlanta Fed’s Chris Colson praised stablecoins’ shift from crypto tools to mainstream payment methods.

Retailers like Overstock, Chipotle, and GameStop accept stablecoins, though usage is still limited. Stripe supports USD Coin payments.

Colson highlighted concerns over asset stability, regulation, and security risks but noted stablecoins’ potential to rival credit cards.

He shared his experience buying movie tickets with stablecoins, showing their potential for lower-fee, efficient payments.

“While it’s hard to predict whether or not stablecoins will become a universal payment method, the foundation is forming,” Colson said.