Fed Waller casts doubt on stable currency monitoring proposals amid crypto regulation debate

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Federal Reserve Governor Christopher Waller said on Wednesday he disagreed with the Biden administration’s recommendations that only banks should be allowed to issue stablecoins.

In a virtual speech Wednesday afternoon at the Financial Stability Conference at the Federal Reserve in Cleveland, Waller said he was not opposed to stablecoins being regulated as banks, but that banks should not be the only entities authorized to issue these digital currencies, which are fiat-bound or shorter-term.

“I understand the appeal of forcing a new product into an old, familiar structure,” he said.

“But this approach and mindset would eliminate a key advantage of a stablecoins agreement, namely that it serves as a viable competitor to banking organizations in their role as payment providers,” the Fed policymaker added. .

Waller’s comments come after the President’s Financial Markets Task Force recommended earlier this month that Congress propose a new set of rules to regulate stablecoins, specifically noting that only banks should be able to to issue stable coins.

However, some of the biggest players in the industry are embracing these proposals – or at least the broader cryptocurrency regulation debate.

Circle CEO Jeremy Allaire told Yahoo Finance last week that the administration’s proposal “represents significant progress in the growth of this industry. It is truly recognized that as these stable payment coins grow. develop, they could expand to the scale of the Internet relatively quickly “.

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Lack of oversight of stablecoins creates risks, the central banker said, but he suggested that regulators should give innovation the opportunity to compete with other payment systems and create rules more suited to the actual risks of asset class, rather than integrating them into banking regulations.

Waller’s remarks suggest that he was not concerned that stablecoins were reaching rapid scale, as long as there was sufficient competition within the stablecoins industry and the existing banking system. But he added that rules were needed to ensure those reserves are what issuers say they are, and that rules were needed to oversee digital wallets.

If the issuer is backed by safe assets, did not participate in loans, and was subject to ongoing monitoring, that might be enough as a framework, Waller said.

He played down the concerns of the Biden administration to separate banking and commerce to guard against banks that might lend to certain customers on overly favorable terms. Waller said those rules should not apply to digital wallets and issuers that are not involved in lending.

“This does not necessarily mean imposing all the banking rules, which are partly focused on lending activities, and not on payments,” he said.

“With the right network design, stablecoins could also help provide faster and more efficient retail payments, especially in the cross-border context, where transparency can still be low and costs still high,” he said. -he adds.

Waller also reiterated his skepticism about the need for a central bank digital currency, noting that competition and innovation in payment systems is good for consumers.

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