Federal Reserve Official Says Crypto and Stablecoins Will Strengthen and Not Threaten US Dollar

UTC by Tolu Ajiboye · 3 min read
Federal Reserve Official Says Crypto and Stablecoins Will Strengthen and Not Threaten US Dollar
Photo: Freepik

According to the official, the use of dollar stablecoins in the decentralized finance sector is good because it strengthens the USD.

Federal Reserve official has said that a rise in the usage and adoption of dollar stablecoins could be beneficial for the greenback’s role as the world’s dominant currency. According to Christopher Waller, who is on the Federal Reserve’s Board of Governors, the decentralized finance (DeFi) sector is good for the US.

Stablecoins and DeFi are Good for the Dollar

Speaking at a recent event in the Bahamas, Waller said DeFi adoption will support the dollar’s dominance because of the sector’s reliance on stablecoins. According to Waller, many people usually “conjecture that cryptocurrencies like Bitcoin may replace the US dollar as the world’s reserve currency.” However, he pointed out that the majority of the market value of the DeFi sector relies on the value of the dollar. He then added:

“So it is likely that any expansion of trading in the DeFi world will simply strengthen the dominant role of the dollar.”

Waller’s opinion seems to differ significantly from that of many others who believe cryptocurrencies threaten the dollar. Even Waller has previously argued that a future where people move from the dollar to cryptocurrencies could endanger monetary policy. However, his recent speech seems to conclude that the situation may not actually lead to a weakened dollar.

Early this month, Rep. Maxine Waters (D-Calif.) said in an interview that US lawmakers are working on stablecoin regulation. Waters noted that lawmakers are “very, very close” to reaching a deal, but did not specify details of the upcoming regulation, or a timeline. However, she did mention that the deal may give the Federal Reserve oversight powers. Maxine has been in negotiations with the head of the House Financial Services Committee, Patrick McHenry, for nearly two years.

Other stakeholders also believe that stablecoins require regulation. US Secretary of the Treasury Janet Yellen said in a congressional hearing that the regulations will fix problems in the crypto market and protect investors from market risks. She did specify that the regulation should be for stablecoin and “crypto assets that are not securities”.

USDT and Crime

Tether’s USDT, the world’s largest stablecoin and the third-largest cryptocurrency by market cap, recently reported excess equity of $5.4 billion and cash equivalent cover of 90% of all tokens issued in the fourth quarter of 2023. A recent report from independent auditing firm BDO confirmed that Tether Holdings Limited added nearly $2.2 billion in excess reserves last quarter, pushing the total to an all-time high of $5.4 billion. According to the report, the company’s excess reserves came from the heavy net profit of $2.85 billion realized by December 31, 2023. About $1 billion of this was from interest accrued from the United States Treasuries, with the rest from the Tether Holdings’ gold and Bitcoin (BTC) reserves.

While Tether has recorded impressive numbers, its reputation has taken a bit of a hit. According to a January report from the United Nations’ Office of Drug and Crime Unit. The USDT stablecoin is the preferred crypto for illicit activity in Asia. The report states that criminals are using USDT for fraudulent activities, including money laundering and pig butchering, a growing romance scam.

Altcoin News, Cryptocurrency News, News
Related Articles