Fed recognizes potential of stablecoins in payments and strength of dollar

While some view cryptocurrencies, and especially stablecoins, as a threat to the dominance of the US dollar, the Fed is taking a more nuanced view. 

Recently, several executives at the US Federal Reserve Bank (Fed) have acknowledged that stablecoins, if properly regulated, could coexist harmoniously with the traditional financial system, even strengthening it. These executives have emphasized that stablecoins They have everything they need to revolutionize payments; They have also pointed out that its adoption could reinforce the role of the dollar on the global stage, despite the regulatory challenges that must be addressed to fully unlock its benefits.

The potential of stablecoins in payments according to the Fed

Several Federal Reserve leaders have expressed positive views on the potential of stablecoins to improve the efficiency and accessibility of payment systems. 

For example, Jerome Powell, the chairman of the Fed, has highlighted the ability of these digital currencies to serve as money and, therefore, as means of payment. Powell has even acknowledged that the agency needs a strong role in this emerging sector, arguing that they are “a form of money” and that can provide multiple benefits to users and companies as long as clear legislation is established to facilitate their use and adoption. 

Stablecoins have the ability to facilitate Faster and cheaper transactions, especially in the realm of cross-border payments, where fees and processing times are often high. So if an immigrant needs to send remittances to family in another country, stablecoins could significantly reduce costs and speed up the arrival of those funds.

But, in addition to their efficiency, stablecoins could Promote financial inclusion by providing access to payment services to people who are currently unbanked or have limited access to traditional banking services. In regions where banking infrastructure is poor, stablecoins could offer a viable alternative to make payments and store value securely. This aspect is particularly relevant in emerging economies where the adoption of mobile technologies is high, but access to formal banking services is limited.

The role of the dollar is strengthened by the use of stablecoins

Contrary to popular belief that cryptocurrencies pose a threat to the dollar, the Fed appears to be leaning toward the idea that stablecoins, particularly those pegged to the US dollar, could strengthen their position as a global reserve currency. 

En statements In recent days, Fed Governor Christopher Waller argued that such digital currencies could further cement the dollar’s ​​role as the primary currency used in international trade and finance. He said that if dollar-denominated stablecoins are widely adopted around the world, demand for dollars would increase, which in turn would bolster their value and global influence.

According to Bloomberg, Waller pointed out that stablecoins have the potential to “maintain and expand” the international role of the dollar, as long as they are based on solid use cases and harmonized regulatory standards are implemented.

In this context, stablecoins could also facilitate the internationalization of the dollar by making it easier and cheaper to transact in dollars in jurisdictions where access to U.S. banking services is limited. By removing the frictions associated with traditional bank transfers, stablecoins could broaden the reach of the currency and increase its use in trade and investment globally.

Payments expert Chris Colson also I speak on the potential of stablecoins as a new, more efficient and secure form of payment. Colson said that these stablecoins are gaining adoption thanks to their ability to provide stability compared to traditional cryptocurrencies and the participation of companies such as Visa and MasterCard, which are integrating them into their systems and services. 

“While Bitcoin and Ethereum dominate the headlines, stablecoins are quietly becoming an important part of our daily lives”, Colson said.

The promise of innovation and the need for regulation

The statements from these executives reflect a deep understanding that stablecoin financial innovation can bring significant benefits to the economy, as long as it is managed responsibly. 

Currently, the lack of clear regulation for these stablecoins has created uncertainty and increased the risk of illicit activities, although it is also true that companies in the sector have focused on implementing different security systems and collaborating with different agencies to mitigate these potential risks. Still, a solid regulatory framework is essential to ensure user confidence in stablecoins and promote their widespread adoption.

Investing in cryptoassets is not fully regulated, may not be suitable for retail investors due to high volatility and there is a risk of losing all invested amounts.