30s Summary

Christopher Waller of the Federal Reserve Bank suggested that stablecoins, a type of digital currency, might be beneficial for the financial system by reducing the need for payment intermediaries. He also noted that decentralized finance could coexist with traditional finance. Other US lawmakers believe stablecoins could strengthen the dollar’s global dominance. Former Speaker of the House Paul Ryan stated stablecoins might mitigate a debt crisis and keep the dollar competitive. Meanwhile, US Senator Bill Hagerty proposed an Act providing regulatory clarity for stablecoins. Despite this, a report from Chainalysis revealed the US lags in stablecoin adoption.

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On October 18, Christopher Waller from the Federal Reserve Bank made a speech at the Institute of Advanced Studies. He said that stablecoins, which are a type of digital currency, could be a good thing for our current financial system. He mentioned that these coins could cut down the need for payment middlemen, which could mean payment costs worldwide could go down. But, he was quick to say safety isn’t guaranteed with stablecoins.

His exact words were, “If we can put up enough safeguards to minimize risks and other problems, like the potential use of these coins in shady financial dealings, then stablecoins might be a useful form of payment. They could also be a safe option on many new trading platforms.”

Interestingly, Waller also mentioned that decentralized finance (a fancy phrase for non-traditional, tech-driven finance practices) could coexist with traditional finance, not replace it. Some US lawmakers also think this, saying that decentralized finance and dollar-denominated stablecoins could make the dollar even more dominant in the world market for decades to come.

In June, the former United States Speaker of the House, Paul Ryan, wrote an article for The Wall Street Journal. He talked about how stablecoins could help lessen the looming debt crisis. Further, he argued that by driving demand for US Treasurys and US dollars, stablecoins might help the dollar stay competitive against the Chinese yuan and maintain its status as the world’s top currency.

In October, US Senator Bill Hagerty introduced an Act called the ‘Clarity for Payment Stablecoins Act’ which expands on a similar proposal by Rep. Patrick McHenry in 2023. The most noteworthy updates to the Act include provisions for state-level regulation of stablecoins and the removal of a clause that classified stablecoins as securities.

Despite all this, a recent report from Chainalysis showed that the US is behind in adopting stablecoins. According to them, the market share of stablecoin transactions on US-regulated exchanges fell below 40% in 2024. On the flip side, the share of transactions via non-US regulated exchanges rose to 60% this year.

Source: Cointelegraph