USD-Pegged Stablecoins Could Boost Dollar Dominance: Fed Governor

The US Fed Governor Christopher Waller, who previously voiced cryptos are “risky,” now throws a positive stance on dollar-pegged stablecoins.

Speaking at a conference in Nassau, Bahamas on Thursday, Waller said that decentralized finance (DeFi) could actually boost dollar dominance. He stressed that dollar-pegged stablecoins, such as Tether (USDT) and USD Coin (USDC), would strengthen the USD’s global reach.

“About 99% of stablecoin market capitalization is linked to the U.S. dollar, meaning that crypto-assets are de-facto traded in USD.”

Any expansion of trading in the DeFi will “simply strenghthen the dominant role of the dollar,” he further noted.

Usually, the rapid growth of cryptos could reduce the reliance on the US dollar. However, it is unlikely, as most DeFi trading uses USD-pegged cryptos, he noted.

Waller took charge on the central bank’s board in 2020 during Donald Trump’s presidential tenure. In February 2023, Waller warned crypto buyers that they could lose their entire investments.

He argued at the time that cryptos don’t have any intrinsic value and amount to nothing more than “risky” speculation. “To me, a crypto-asset is nothing more than a speculative asset, like a baseball card,” he noted.

Stablecoin Bill Coming Soon?

In the meantime, lawmakers in the US are pushing on stablecoin bill – a long-awaited win for cryptos. In a recent interview with Politico, Representative Maxine Waters said that a stablecoin legislation is “very, very close” to reaching an agreement. “We’re working on stablecoin; we’re getting very close,” Waters noted.

Waters has been negotiating on stablecoin legislation with House Financial Services Committee Chair Patrick McHenry for more than 20 months.

Additionally, crypto market heads such as Circle’s CEO Jeremy Allaire have voiced optimism on the US’s stablecoin law. Speaking in an interview with CNBC at World Economic Forum in Davos early this year, he said there is “momentum” and a “very good chance” of seeing a stablecoin legislation this year.

Furthermore, many jurisdictions have emerged in embracing cryptos to foster innovation, while maintaining a key eye on regulatory safeguards. Singapore, for instance, has long been acknowledged as a welcoming environment for the crypto sector.

In August 2023, the Monetary Authority of Singapore (MAS) released a regulatory framework for stablecoins, applicable to single-currency stablecoins (SCS).