Federal Reserve Governor Christopher Waller has expressed support for stablecoins, noting their potential to strengthen the U.S. dollar's position. However, he emphasized the need for proper regulation to ensure their stability.
Federal Reserve's Viewpoint
Waller remarked that stablecoins could become an addition to the U.S. payment system. "I view stablecoins as a net addition to our payment system," said Waller.
Need for Regulation
Waller's comments came as both major political parties in the U.S. sought to establish a regulatory framework for stablecoins. He stressed that this is an important step forward for digital currency legislation. To maintain their peg, issuers hold assets like cash or Treasury bills equal to the number of tokens in circulation.
Risks and Stablecoin Incidents
Despite their potential, stablecoins have faced instability in the past. A recent Moody’s report highlighted that these digital assets have lost their peg multiple times due to market turmoil, regulatory crackdowns, and cyberattacks. Notable incidents include the collapse of Terra’s UST, the FTX scandal, and security breaches affecting DeFi platforms, raising concerns about risks associated with unregulated stablecoins.
Stablecoins have the potential to bolster the U.S. dollar's status as the world’s reserve currency. However, robust regulations need to be devised and implemented to ensure their stability and security.
