The Governor of the Federal Reserve has pledged support to see that banks and non-banks offer stablecoin services in the US under a clear regulatory framework.
Speaking at a conference in San Francisco, Waller highlighted the growing role of stablecoins in payments and finance while stressing the need for proper oversight to ensure their stability and usability.
Stablecoins are digital assets designed to maintain a stable value, usually tied to a currency like the U.S. dollar. While they are widely used for crypto trading, cross-border payments, and dollar access in high-inflation countries, their long-term success depends on regulatory clarity and a strong business model.
Waller warned that without a clear framework, stablecoins could face risks similar to bank runs, where users rush to redeem their holdings, causing instability.
He argued that regulations should focus on the risks stablecoins pose, rather than limiting who can issue them. Both banks and non-banks, he said, should have the opportunity to issue stablecoins as long as they meet necessary safety and liquidity requirements.
He also mentioned that stablecoins face challenges before they reach their full potential. They must be safe, reliable, and properly regulated. Unlike banks, stablecoins have unique risks, including sudden losses in value. A clear U.S. regulatory framework could address these risks while allowing both banks and non-banks to issue stablecoins.
Wallers noted that fragmentation in technology and regulation is another hurdle. Different blockchains do not always work together, making stablecoin use uneven. Adoption also depends on whether businesses and consumers widely accept them.
“While there have been efforts to develop some international standards, the emergence of different global stablecoin regulatory regimes creates the potential for conflicting regulation domestically and internationally,” he said. “This regulatory fragmentation could make it difficult for U.S. dollar stablecoin issuers to operate at a global scale.”
While stablecoins have the potential to improve financial transactions, Waller made it clear that their success should be determined by market demand. He urged private companies to continue innovating while policymakers establish fair rules that allow stablecoins to scale safely and efficiently.
“My hope is that the stablecoin market will grow or diminish on the merits of their benefits to consumers and the broader economy,” he told the audience at the conference.
He also suggested that the private sector has a huge role, as they must “continue to develop innovative solutions that fit a market need while building sustainable business models.”
The Governor’s suggestion comes after US Senators submitted a bill for stablecoin regulation in the US in the first week of February. Senators Tim Scott, Bill Hagerty, Cynthia Lummis, and Kirsten Gillibrand said that the bill will help advance the development of stablecoins in the US as well as provide a framework for consumer safety.
With a milestone hit in the stablecoin market of over $200 billion at the end of 2024, Trump, after emerging as the president of the US, signed an order to stop the development of CBDCs while more effort will go into stablecoins.
Taiwan is another nation that wants to issue stablecoins from its banks. Peng Jinlong, chairman of Taiwan’s Financial Supervisory Commission, outlined the nation’s strategic vision for digital asset integration.
He emphasized that Taiwan is actively working toward providing investors with a more structured and transparent gateway into the cryptocurrency market.
A key component of this initiative is leveraging stablecoins as a crucial intermediary to facilitate easy conversion between the New Taiwan Dollar (TWD) and various digital currencies.
