Bank-Only Stablecoins Limit Innovation, Fed's Waller Says

Federal Reserve Governor Christopher Waller broke with a report from regulators earlier this month and said he disagrees with the idea that stablecoins should only be issued by banks because it would limit payment-system innovation and competition. From a report: Earlier this month, the Treasury Department, Federal Reserve and other regulators urged lawmakers to let them police stablecoin issuers like banks with robust capital requirements and constant supervision, and said their issuance should be limited to banks. "I disagree with the notion that stablecoin issuance can or should only be conducted by banks, simply because of the nature of the liability," Waller said in remarks prepared for delivery at the Cleveland Fed and Office of Financial Research's conference on financial stability Wednesday. "It serves as a viable competitor to banking organizations in their role as payment providers." Waller raised numerous risks and benefits with stablecoins, in particular the lack of a regulatory framework to ensure that they aren't subject to runs and that their systems remain sound. "Strong oversight, combined with deposit insurance and other public support that comes with it, is what makes bank deposits an acceptable and accepted form of money," he said. "Today stablecoins lack that oversight, and its absence does create risks."

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[Anonymous Coward]

You are free to avoid crypto and defi, but why do you feel the need to stop me from using it?

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[Anonymous Coward]

The current financial system has bubbles and crashes, and destroys people`s lives, why should I trust the government to regulate crypto?

Re: "DeFi" = "Deregulated Finance"

[AcidFnTonic]

Cant throw the working class a bone either.

Re: "DeFi" = "Deregulated Finance"

[AmericanBlarney]

Probably because a significant number of people using it are doing so to dodge paying their fair share of taxes, facilitate scams or other malfeasance.

All cryptos and Defi want gov't to backstop them..

[tekram]

and to bail them out when it crashes. That is the whole argument behind regulation. The early adopters want to front run the late adopters but they realize without gov't backstop, they will not be able to maximize their gains because of the lack of late adopters. So they want a backstop in that late adopters be enticed by their greed to buy in at a high price and let the late adopters and the US gov't be the bag holders when everything crashes. Innovation is fine, but not at a price that the rest of the

Stop calling them "stable" coins!

[humankind]

If nobody has to provide independent evidence these so-called "stable-coins" are actually "stable" then they should be called stable coins; they shouldn't be promoted as being associated with fiat, when they're not compelled to prove it.

As it stands, the top two "stable" coins in the crypto market: USDC and Tether, have not had independent audits. Their claims of being "asset backed" are as legit as Fox News is "fair and balanced."

Bitcoin has had 3 drawdowns in excess of -80%, wha

[tekram]

A rhetorical question: What happens to the investment landscape if it suffers a 4th? If there is cryptos regulation, the gov't may have to provide insurance or guarantees. Should the US taxpayers pay for the loss of 80% because someone wants innovation? Do you remember Credit Default Swap? That was a doozy of an innovation wasn't it? Warren Buffett called these instruments "financial weapons of mass destruction.".

"invovation" is not hallways for the better

[Dorianny]

The innovation of mortgage-backed securities and collateralized debt obligations (which were sold as AAA rated safe assets,) caused the 2008 Financial Crisis and the Great recession. We could use less "innovations" which are sold as "safe assets" like Stable coins but in reality are extremely risky.

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[OrSpace]

I don't think it brings any risk. Even I, as an e-commerce owner, do not see this as a risk. For me, the risk is to fall into the hands of scammers who can take advantage of my finances, so I chose a reliable platform for online payments and there I was able to open an IBAN Account [genome.eu] and I want to say that I am satisfied with the work of this platform.