DeFi's Use of Dollar-Linked Stablecoins Could Boost USD's Global Dominance: Federal Reserve Governor
Summary:
Federal Reserve governor Christopher Waller suggests that U.S dollar-linked stablecoins in decentralized finance (DeFi) may be reinforcing the dollar's global reserve currency status. He notes that about 99% of the stablecoin market is tied to the U.S dollar and the growth in DeFi trading could strengthen its position further. Despite crypto's rapid growth, Waller doesn't anticipate an immediate threat to the dollar's status, even as lawmakers edge closer to passing a stablecoin bill.
Christopher Waller, a governor with the Federal Reserve, suggests that the dominant use of U.S dollar-based stablecoins in decentralized finance (DeFi) could be bolstering the dollar's standing as the premier global reserve currency. During a conference on central banking held on February 15, Waller highlighted that close to 99% of the stablecoin market value has ties to the U.S dollar. He countered speculation that cryptocurrencies such as Bitcoin could potentially dethrone the U.S dollar as the go-to global reserve currency, pointing out the preference for stablecoins, which are primarily pegged to the dollar, in DeFi transactions. Furthermore, Waller explained as cryptocurrencies primarily trade in U.S dollars, growth in DeFi trading is likely to further fortify the dollar's dominance.
Collectively, the two leading stablecoins in terms of market cap, etc- Tether (USDT) and USD Coin (USDC), represent 90% of the total stablecoin market cap which is $139.5 billion according to CoinGecko. These stablecoins hold sway in DeFi by providing traders a highly liquid, mostly price-steady asset for on-chain activity without being exposed to erratic cryptocurrencies.
Despite acknowledging the accelerated deployment of crypto as a potential factor that may decrease reliance on the U.S dollar, Waller argued that there hasn't been significant weakening of the U.S dollar's current dominant status. He shared his views while taking part in the Currency, Central Banking and Climate conference in Nassau, The Bahamas. He doesn't anticipate any immediate threat to the U.S dollar's reign as the global reserve currency.
Legislators are inching closer to sanctioning a stablecoins bill, after an extended negotiation period exceeding 20 months, with House Financial Services Committee Chair Patrick McHenry. On February 7, Representative Maxine Waters revealed to Politico that progress on the stablecoin front was swift.
In an address to Congress last June, Fed Chair Jerome Powell expressed the central bank's perception of stablecoins as a type of money requiring substantial federal oversight going forth. Several months later, Federal Reserve Banks in Boston and New York expressed concerns about stablecoins potentially causing disruptions in the U.S financial landscape.
Published At
2/16/2024 4:04:50 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.