Stablecoins Boost Dollar’s Global Status, says Federal Reserve Governor

• Waller spoke at a central banking-focused conference on February 15.
• The Fed governor stated that the USD is tied to almost 99% of the market cap of stablecoins.

According to Federal Reserve governor Christopher Waller, the dollar’s position as a worldwide reserve currency may be being solidified by the widespread use of stablecoins denominated in U.S dollars in the decentralized finance (DeFi) space.

Waller said at a central banking-focused conference on February 15 that the U.S. dollar is tied to almost 99% of the market value of stablecoins. Bitcoin and other cryptocurrencies are widely speculated to take the place of the US dollar as the world’s reserve currency, according to Waller. Still, he pointed out that stablecoins pegged to the dollar constitute the majority of DeFi transactions.

The overall market value of stablecoins is $139.5 billion, with the two biggest by market size—USDT and USDC—making up 90% of that total, according to CoinGecko.

Stablecoin Bill Underway

An essential part of DeFi, the two stablecoins provide investors with a liquid, somewhat price-stable asset that they may utilize for on-chain transactions without taking a chance on the more unpredictable cryptocurrency market.

Waller acknowledged that the “rapid growth” of cryptocurrency may pose a threat to the dollar’s global standing by decreasing dependence on the dollar, but he also claimed that the dollar’s dominance has not been significantly diminished.

After more than 20 months of negotiations with Patrick McHenry, chair of the House Financial Services Committee, Representative Maxine Waters informed Politico on February 7 that lawmakers are working on a stablecoin bill and are coming very close to approving it.

Last June, Fed Chair Jerome Powell informed Congress that stablecoins are seen “as a form of money” by the central bank, and that a “robust federal role” should be established to regulate their future development.

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