Fed official says cryptocurrencies and stablecoins will strengthen but won’t threaten dollar

The official said that the use of USD stablecoins in the decentralized finance space is a good thing because it can strengthen the strength of the US dollar.

A U.S. Federal Reserve official said the increased use and adoption of U.S. dollar stablecoins could benefit the U.S. dollar’s ​​status as the world’s dominant currency. Christopher Waller, a member of the Federal Reserve Board of Governors, said that the decentralized finance industry is good for the United States.

Stablecoins and DeFi are bullish for the dollar

Waller said at a recent event in the Bahamas that DeFi adoption will support the dollar’s ​​dominance due to the industry’s reliance on stablecoins. Waller said many people often "speculate that cryptocurrencies such as Bitcoin may replace the U.S. dollar as the world's reserve currency." However, he noted that much of the market capitalization in the DeFi space relies on the value of the U.S. dollar. Then he added:

“As such, any trading expansion in the DeFi world is likely to only reinforce the dollar’s ​​dominance.”

Waller’s views appear to differ significantly from many others who believe cryptocurrencies threaten the U.S. dollar. Even Waller has previously argued that a shift away from the U.S. dollar toward cryptocurrencies could jeopardize monetary policy in the future. However, his recent speech seems to conclude that this situation may not actually lead to a weaker dollar.

Earlier this month, California Democratic Rep. Maxine Waters said in a statement in an interview that U.S. lawmakers are working on stablecoin regulation. Waters noted that lawmakers are "very, very close" to reaching an agreement but did not specify details or a timeline for the upcoming regulations. However, she did mention that the deal could give the Fed oversight powers. Maxine has been negotiating with House Financial Services Committee Chairman Patrick McHenry for nearly two years.

Other stakeholders also believe stablecoins need regulation. U.S. Treasury Secretary Janet Yellen told a congressional hearing that the regulations would address issues in the cryptocurrency market and protect investors from market risks. She did make it clear that regulation should target stablecoins 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 $5.4 billion in excess equity, with cash equivalents covering 90% of all tokens issued in Q4 2023. A recent report from independent audit firm BDO confirmed that Tether Holdings Limited added nearly $2.2 billion in excess reserves last quarter, bringing the total to a record high of $5.4 billion. The company's excess reserves came from a huge net profit of $2.85 billion as of December 31, 2023, the report said. About $1 billion of that comes from accrued interest on U.S. Treasury securities, with the remainder coming from Tether Holdings’ gold and Bitcoin (BTC) reserves.

While Tether’s numbers are impressive, its reputation has taken a bit of a hit. That's according to a January report from the United Nations Office on Drugs and Crime. The USDT stablecoin is the cryptocurrency of choice for illegal activities in Asia. Reports indicate that criminals are using USDT to conduct fraudulent activities, including money laundering and butchery, a growing romance scam. #稳定币监管 #美元