Christopher Waller, a governor at the Federal Reserve, took issue with recent suggestions for stablecoin regulation in a November 17 speech.
Specifically, Waller was responding to a recent report on stablecoins from the President’s Working Group, a Treasury-led group of financial regulators. He described the report’s central push when it comes to the risks and rewards of stablecoins:
“The PWG report described one approach to that cost-benefit equation: restricting the issuance of ‘payment stablecoins’ to insured depository institutions and imposing strict limits on the behavior of wallet providers and other nonbank intermediaries.”
He did not object to banks becoming stablecoin issuers. The problem, Waller said, is that restricting issuance to banks reduces competition and ultimately payment efficiency:
“I disagree with the notion that stablecoin issuance can or should only be conducted by banks, simply because of the nature of the liability. I understand the attraction of forcing a new product into an old, familiar structure. But that approach and mindset would eliminate a key benefit of a stablecoin arrangement — that it serves as a viable competitor to banking organizations in their role as payment providers.”
The debate over stablecoins has heat up in a big way over the past year. Total market cap has increased five-fold, and U.S.-based issuers are seeing greater transparency as a way forward.
As the central bank of the United States, the Fed will be central in determining the future of a digital dollar. It is a standing debate whether the issuance of such a digital dollar would require the suppression of competing private stablecoins, or if those private stablecoins could do the job better.
In the current monetary system, the Fed mints physical cash that regular people can use, but only provides digital accounts to commercial banks, who then disperse those digitized values among regular users. Whether or not to disintermediate this system is another critical concern in the argument over a digital dollar.
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