Federal Reserve Governor Waller: Stablecoins may solidify the reserve status of the US dollar

Federal Reserve Board member Christopher Waller stated that he supports stablecoins because they may strengthen the position of the US dollar as a reserve currency, even though they need a clear set of rules and regulations. Stablecoins are digital tokens designed to maintain a stable value. The issuer typically promises to hold liquid assets equivalent to the tokens issued, such as US dollars or US Treasury bonds. Waller, the chair of the Federal Reserve Committee on Payments and Market Infrastructures, said, "I think stablecoins are a net positive for our payment system. You might need some regulatory measures to ensure the funds are in place," and that regulatory authorities should inspect to ensure the funds are adequately backed. He stated that stablecoins can be backed by any currency, but are typically backed by the US dollar. Waller also mentioned that both parties believe legislation regarding digital currencies "is worth advancing". This week, bipartisan senators introduced a bill aimed at establishing a regulatory framework for stablecoins. A report from Moody's Investor Service noted that these essentially unregulated assets are vulnerable to runs and instability. The report said, "Driven by market events such as the collapse of Terra UST, FTX, regulatory enforcement actions, and recent security vulnerabilities in DeFi protocols and attacks on stablecoin liquidity pools, stablecoins have repeatedly lost their peg to underlying assets."