"Fed Governor: Stablecoins Boost US Dollar's Global Role, Need Clear US Regulation"

Federal Reserve Governor Christopher Waller has expressed optimism about the potential of stablecoins to extend the global role of the US dollar. Speaking at a conference in San Francisco, Waller highlighted the need for a comprehensive US regulatory framework to address the risks associated with stablecoins while ensuring they remain a strong part of the financial system.

Waller emphasized that a regulatory framework should allow banks and non-banks to issue regulated stablecoins, with clear guidelines on compliance and reserve requirements. This would help maintain and extend the US dollar's international role, as stablecoins have been gaining significance in the digital economy and expanding the reach of the US dollar beyond traditional financial institutions.

However, Waller noted that stablecoins are still vulnerable to liquidity and run risks, underscoring the importance of stringent oversight. Stablecoins are digital assets designed to maintain a steady value, often pegged to a specific currency such as the US dollar. Their issuers typically hold reserves in liquid assets like cash or US Treasury bills to back the tokens, ensuring stability.

Waller cautioned that fragmented regulations at the state and international levels could hinder the global scalability of stablecoins. He noted that the emergence of different global stablecoin regulatory regimes could create potential conflicts in regulation, making it difficult for US dollar stablecoin issuers to operate at a global scale.

State regulators have also played an essential role in shaping stablecoin policies, with several states already implementing or finalizing new laws. Senator Bill Hagerty recently introduced the GENIUS Act, which aims to create a regulatory framework for payment stablecoins and enhance US dollar dominance. The proposed bill includes provisions requiring stablecoin issuers to maintain one-to-one reserves and comply with anti-money laundering laws.

The House Financial Services Committee has also released a discussion draft of a bill aiming to provide more regulatory clarity. However, conflicting state regulations could limit the widespread use of certain stablecoins across different jurisdictions.

Key figures in the crypto industry have weighed in on the role of stablecoins in the broader financial space. David Sacks, Trump's crypto Czar, recently hosted a press conference where stablecoins were a focal point. He emphasized their potential to revolutionize global payments and financial inclusion, noting that stablecoins could potentially generate trillions of dollars' worth of demand for US treasuries, which could lower long-term interest rates.

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