Federal Reserve Governor Christopher Waller thinks stablecoins could be the key to keeping the US dollar on top globally, but only if regulators stop working at cross purposes. Speaking at a conference in San Francisco yesterday, Waller said, “The stablecoin market would benefit from a US regulatory and supervisory framework that addresses stablecoin risks directly, fully and narrowly.”
Waller pointed out that stablecoins if properly regulated, could “maintain and extend” the dollar’s influence worldwide. Right now, different regulatory approaches in the US and abroad create uncertainty. “The emergence of different global stablecoin regulatory regimes creates the potential for conflicting regulation domestically and internationally,” Waller warned.
Waller calls for a stablecoin framework covering banks and non-banks
The stablecoin market is largely dominated by US dollar-backed coins, with issuers LL claiming to hold reserves like cash or Treasury bills to back their supply. Despite their growth, there’s no single rulebook governing them. Waller also thinks: “There is a risk that state regulations may conflict, which could prevent the use of the same stablecoin across all states and reduce stablecoin scalability.”
Congress is already weighing in. A bipartisan group of senators has introduced legislation that would require issuers to hold one-to-one reserves and comply with anti-money laundering rules. The House Financial Services Committee has also put forward a discussion draft of a bill.
The problem, Waller said, is that without coordination, the US risks ending up with a fragmented system that makes stablecoins difficult to use across different jurisdictions. That, in turn, could slow adoption and limit their effectiveness.
Another major concern is run risk. Since stablecoins are supposed to be fully backed, users expect to redeem them for cash at any time. But history has shown that when confidence is shaken, runs can happen fast. Waller made it clear that any regulatory framework must address this risk head-on. “This framework should allow both non-banks and banks to issue regulated stablecoins and should consider the effects of regulation on the payments landscape,” he said.
Stablecoins could deepen dollarization in struggling economies
In countries (like Argentina, Nigeria, and Venezuela) with weak financial systems, traders are turning to stablecoins to access dollars without relying on local banks.
Many of these economies already lean on the dollar for stability, but accessing it through traditional means can be difficult.
Argentina’s President Javier Milei campaigned on a promise to dollarize the economy, though it remains unclear whether he can secure the reserves needed to make it happen. But over time, reliance on digital dollars could push them toward full dollarization.
The macroeconomic forces at play also favor the dollar’s expansion. Many developing countries face falling birth rates, meaning they’ll age before they get rich. That puts long-term pressure on their economies. The US, however, can sustain its position by attracting high-skilled immigrants. As a result, the demand for dollars—whether in physical cash or stablecoin form—is only expected to grow.
The euro and Chinese yuan are often seen as potential challengers, but Fed governor Waller thinks neither is well-positioned to overtake the dollar’s role, and they likely never will be.
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