Stablecoins have become too big to ignore and every other regulator is voicing their views on the newest phenomenon in the digital currency industry. The latest is Christopher Waller, a member of the U.S. Federal Reserve Board of Governors. At a recent event, he criticized a working group led by Treasury Secretary Janet Yellen for proposing that banks should take up stablecoin issuance. He also voiced his support for stablecoins, but noted that they require better regulation to protect the U.S. financial system.
Waller, who was nominated to the board by former President Donald Trump, spoke at the 2021 Financial Stability Conference in Cleveland, Ohio. Describing stablecoins as “the highest-profile example of a new and fast-growing payments technology,” he called for their regulation at an early stage. Otherwise, Waller said the U.S. could see them move to other jurisdictions. If that happens, stablecoins would pose a danger to the U.S. economy, but U.S. regulators would not be able to do anything about them.
Waller applauded the efforts by the Presidential Working Group, which is seeking to propose regulations for stablecoins. However, he believes it got it wrong when it proposed in its report that Congress should limit stablecoin issuance to “banks and other insured depository institutions.”
“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,” he told the audience.
The U.S. payments sector has thrived because it fosters innovation, he noted. This innovation can only come from outside the banking sector, especially from technology firms.
“When it does, we should give those innovations the chance to compete with other systems and providers—including banks—on a clear and level playing field,” he urged.
Waller believes that stablecoin issuers should not be subjected to all the rules that banks must abide by. This goes against a proposed bill by Congressman Rashida Tlaib, which calls for all stablecoin issuers to obtain a banking charter and follow all the banking regulations. Known as the STABLE ACT, it was proposed a year ago to ensure that “new financial technologies and payment tools do not prey on vulnerable users.”
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