A member of The Board of Governors of the U.S. Federal Reserve is calling for laws that would allow banks and institutions to issue dollar-pegged digital assets.
In a speech given by Christopher J. Waller at a recent conference in San Francisco, the Fed governor argues for a regulatory framework that would allow blue-chip financial institutions to issue regulated stablecoins.
According to Waller, stablecoins could be extremely beneficial to the financial system because they have numerous use cases such as broadening access to US dollars, easy cross-border payments and retail payments.
“The first theme I will explore is one that I have discussed in the past – the safety and soundness of stablecoins and the need for a clear regulatory regime for stablecoins in the United States…
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.”
However, Waller says there are potential risks associated with stablecoins, including the possibility that they could become de-pegged from the fiat currency they are linked to.
“Stablecoins are forms of private money and, like any form of private money, are subject to run risk, and we have seen ‘de-pegs’ of some stablecoins in recent years. Additionally, all payment systems face the risk of failure, and stablecoins are subject to clearing, settlement, and other payment system risks as well.”
Earlier this month, Republican Senator Bill Hagerty of Tennessee proposed the GENIUS Act, a bill to regulate and define stablecoins as well as establish licensing and reserve requirements for issuers.
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