Stablecoins could help improve the payments system, said Federal Reserve Gov. Christopher Waller..Speaking Sept. 29 during a financial services conference in Germany, Waller said stablecoins are the latest evolution in how private money is used. He sees a private-public partnership as crucial to ensuring stablecoins are safely developed. “I see stablecoins as simply another choice available to consumers and businesses, where they have signaled a need in the market to further improve payments,” Waller said. “I believe that we must take this articulated need seriously and respect the ability of the private sector to develop new solutions.” Waller sees the Federal Reserve as playing a complementary role during the process by conducting research, bringing together industry stakeholders and operating core infrastructure. An economist, Waller said consumer and business choice drives competition in the financial system, leading to better products, lower costs and increased efficiency. “Some will prefer the features of a centralized financial market infrastructure and its built-in regulatory guardrails; some may prefer to transact on public blockchains, with different models for achieving security and integrity,” Waller said. New technology such as distributed ledger technology and artificial intelligence also present opportunities to enhance transparency, costs and efficiency, particularly in costly and complex cross-border payments, Waller said. He sees the GENIUS Act as an example of how regulation can spark innovation without undercutting financial stability. Passed in July, the GENIUS Act requires stablecoin issuers to keep reserves backing their tokens and defines the status of stablecoins as being under the supervision of the Bank Secrecy Act. Waller’s speech comes as the use of stablecoins rises exponentially. In the third quarter of this year, there was more than $45 billion in net stablecoin inflows, up 324 percent from the second quarter. The rise was fueled by a nearly $20 billion increase in inflows at Tether and $12.3 billion rise in inflows for USD Coin.
