Federal Reserve governor Christopher Waller said the growing use of stablecoins around the world could strengthen the influence of US monetary policy far beyond America’s borders. He said that countries adopting dollar-linked digital tokens may effectively import US financial conditions, reported Bloomberg.
Speaking at an event in Dubrovnik, Croatia, on Sunday, Waller said stablecoins tied to the US dollar could have consequences similar to those seen under fixed exchange-rate systems. “Countries that adopt it, it’s like a fixed exchange rate system,” Waller said, as per Bloomberg report. “You are going to import US monetary costs, so it’s broadening the reach of US monetary policy in countries that use more stablecoins,” he added.
Stablecoins are digital assets designed to maintain a stable value, usually by linking their price to traditional currencies such as the US dollar. Companies that issue stablecoins typically promise to hold reserves, including cash or US Treasury securities, equal to the value of the tokens in circulation.
Waller has long supported the development of stablecoins. Earlier this year, he said that these digital tokens could help strengthen the dollar’s role as the world’s leading reserve currency, reported Bloomberg. At the same time, he spoke about the need for a clear regulatory framework to govern the industry and protect users.
Why does Waller see stablecoins as important?
Waller believes stablecoins can extend the influence of the US dollar into more economies and financial systems. Because so many stablecoins are backed by dollars and US government securities, their wider adoption could increase demand for dollar-based assets, reported Bloomberg.
Supporters of stablecoins say that they offer faster and cheaper cross-border payments, easier access to digital finance, and greater efficiency in global transactions. Advocates also believe they can help preserve the dollar’s dominance in a rapidly changing digital economy.
What Waller said about central bank digital currencies
While expressing support for stablecoins, Waller again criticized central bank digital currencies, often known as CBDCs. He said that central banks have struggled to identify a compelling reason to issue digital versions of their national currencies, reported Bloomberg.
“There’s nothing that requires a CBDC and only a CBDC to fix,” Waller said. He described the concept as “a solution in search of a problem.”
Waller also claimed that many major central banks have stepped back from their CBDC efforts because they have not found a clear use case. “Almost every major central bank in the world has just stopped,” he told Bloomberg. “They just can’t find a reason for this,” he added.
Waller said that only the European Central Bank and China were actively pursuing central bank digital currencies. “Two banks, and nobody in China uses the thing anyway. They like WhatsApp and Alipay, they don’t even use the stupid things,” he said.
Vujcic pushed back on that assessment and argued that support for a digital euro remains strong within Europe. “There are 21 western central banks that have decided to go with the CBDC,” Vujcic said, referring to the 21 countries that make up the euro area, reported Bloomberg.
The European Central Bank remains committed to launching a digital euro. According to Bloomberg, the ECB plans to begin a pilot phase as early as next year, with a broader rollout targeted for 2029.
European officials view the project as a way to strengthen the region’s monetary sovereignty. Policymakers have expressed concern about Europe’s dependence on major US payment companies such as Visa and Mastercard and the growing popularity of dollar-backed stablecoins.
ECB President Christine Lagarde has repeatedly warned about the risks posed by stablecoins. Earlier this month, she said that even stablecoins denominated in euros could create challenges for financial stability and weaken the transmission of monetary policy, reported Bloomberg.