The US Federal Reserve views stablecoins as a potential tool to strengthen the global role of the dollar, but their success hinges on clear regulations.
Potential of Stablecoins
Christopher Waller, a Federal Reserve Governor, stated that stablecoins could bolster the global role of the US dollar, but their success depends on clear regulations and solid business cases.
Regulatory Needs and Risks
Waller emphasized the need for a clear legal framework for stablecoins in the United States. He proposed allowing both banks and non-banks to issue regulated stablecoins. However, potential risks include 'run risk,' where issuers must have substantial dollar reserves or Treasury bills to back their tokens.
Global Regulation and Its Impact
Fragmented regulatory legislation may hinder the expansion of US dollar-backed stablecoins beyond the country. Pressure is mounting on US authorities to deliver coherent legal frameworks for such assets to function effectively in domestic and international markets.
The growing popularity of stablecoins necessitates regulation to unlock their potential. Without a clear legal framework, stablecoins may face significant limitations.
