TL; DR Breakdown
- Waller is not for the thought of subjecting banking rules on stablecoins.
- The Fed feels that with stablecoins, CBDC is redundant.
Federal Reserve board governor CJ. Waller feels that the US should not govern stablecoins by banks’ rules. The Fed differs from the President’s working group proposals on stablecoin rules. One of its proposals is to expose the digital asset to banking rules.
Waller agrees that financial institutions should offer stablecoins. But, he also considers other entities apart from banks that could also provide stablecoins.
Waller objects to proposals
The Fed was talking at a virtual meeting arranged by the Cleveland authorities. He said that stablecoin regulations should address significant uncertainties posed by payment forms.
Wallace feels that the US should not force banking laws on stablecoins. He observed that banking rules have a bias towards lending. Yet, stablecoins lean towards payments. He was categorical that he differs from the suggestions of the PWG on Financial Markets.
The economist says that he feels okay with banks issuing stablecoins. The authority should encourage more banks to offer stablecoins. But he dissents that stablecoins should not be a preserve of banks only.
Federal Reserve governor feels there is no need for CBDC
Besides, he didn’t shy from talking about central bank digital currency (CBDC). Currently, the Federal Reserve is finding ways to handle the issue. They will report on a universal digital token for their reserve.
Wallace feels cynical about coming up with a CBDC. He claims that the Federal Reserve should not come up with CBDC. Moreso, if digital currency might disrupt the payments. He acknowledged that the payment space is already beaming with significant innovations.
Recently, Wallace said that a CBDC would subject federal reserve to race with other banks. He questioned the viability of the project and its long-term goal.
The Fed also alluded to his fears that a Federal Reserve digital currency might not be a solution. He stated that the US payment system might need proper solutions. But, he feels CBDC is not a good solution.
The Fed is not a mere crypto cynic. He acknowledges that payment innovations can emanate from the private sector. He is enthusiastic about stablecoins, and he feels they render CBDCs irrelevant.
Yet, Waller points at three significant risks that come with stablecoins. He feels unregulated issuers are giving wrong financial instruments. This would lead to a destabilizing run.
Besides, he feels another risk might be payment system breakdown.
Finally, he feels that stablecoin acquisition has a risk of scale. This could lead to unfair competition, moreso if there is a mega-stablecoin monopoly.
Despite the risks, Waller feels encouraged by the decentralized nature of stablecoins.