Federal Reserve Governor Advocates for Stablecoin Issuance by Banks and Non-Banks

In a major policy statement on February 12, 2025, Federal Reserve Governor Christopher Waller highlighted the potential of stablecoins in modern financial systems. Speaking at a San Francisco conference, Waller emphasized the importance of allowing both banks and non-bank entities to issue stablecoins, fostering competition and innovation in the digital payments space.

Stablecoins: Enhancing U.S. Dollar Utility

Waller described stablecoins as a “critical innovation” that could enhance the global reach of the U.S. dollar, particularly for retail transactions and cross-border payments. He stressed that the stablecoin market has matured significantly and could benefit from clear, well-defined regulations that address risks without stifling progress.

Regulatory Framework: Inclusion of Banks and Non-Banks

Advocating for an inclusive regulatory framework, Waller stated that the private sector should have a level playing field for stablecoin issuance. He underscored the importance of balancing consumer protection, financial stability, and innovation. This approach, he argued, would ensure that stablecoin adoption is safe and sustainable.

Private Sector Leadership in Digital Payments

Waller reinforced his belief that private firms should lead innovation in payments, with the public sector ensuring a robust regulatory environment. “The job of the public sector is to create fair and transparent rules, not to compete with private entities,” he said, advocating against unnecessary government interference.

Addressing Interoperability and Fragmentation

The Fed Governor also pointed to challenges in blockchain interoperability, noting that many stablecoins operate on different networks. He urged industry leaders to explore solutions that enable cross-chain compatibility, ensuring that stablecoins can seamlessly function across different ecosystems.

Balancing Risk and Innovation

While supporting stablecoin growth, Waller acknowledged their associated risks. He cited past instances of stablecoin depegging and liquidity crises, emphasizing the need for clear regulations to prevent financial instability. “Stablecoins, like any private money, must be built on a foundation of trust, transparency, and sound risk management,” he added.

Conclusion

Governor Waller’s remarks underscore the shifting landscape of digital finance. By advocating for regulatory frameworks that support both banks and non-banks in stablecoin issuance, he aims to promote a balanced ecosystem where innovation thrives alongside financial stability. The discussion surrounding stablecoins is expected to intensify as policymakers and industry stakeholders seek to shape the future of digital payments.