Fed Governor Waller Supports Regulated Stablecoins to Strengthen US Dollar’s Global Dominance

Federal Reserve Governor Christopher Waller has expressed strong support for the regulation of stablecoins, stating that they could play a critical role in maintaining and expanding the U.S. dollar's dominance as the world’s reserve currency. In a February 6 interview with the Atlantic Council, Waller, who chairs the Fed Board’s payments subcommittee, emphasized that clear regulatory frameworks for stablecoins could significantly enhance the global reach of the dollar.

Stablecoins as a Global Payment Tool

Waller believes that regulated stablecoins will provide new avenues for payments and strengthen the U.S. dollar's role in international trade, finance, and investments. “What I see with stablecoins is they are going to open up possibilities and other ways of doing payments on the rails,” he explained, highlighting the potential of stablecoins to further cement the dollar's position as a global reserve currency.

He argued that effective regulation of stablecoins would provide the necessary infrastructure to ensure their stability and security, reinforcing the dollar’s use in global transactions. Stablecoins, which are typically pegged to the value of a traditional currency like the U.S. dollar, offer a more efficient and reliable payment system for cross-border transactions.

The U.S. Dollar’s Dominance in Stablecoin Markets

An October 2024 report by venture capital firm Andreessen Horowitz found that over 99% of stablecoin market share is dominated by the U.S. dollar. Tether (USDT), the largest stablecoin by market capitalization, accounts for nearly 80% of global stablecoin trading volume. Waller sees this dominance as an indication that stablecoins are a net positive addition to the U.S. payment system.

“I view stablecoins as a net addition to our payment system,” Waller stated. He emphasized that regulations are necessary to ensure that stablecoins are fully backed and properly authorized, ensuring their stability and security. Waller’s comments come at a time when the global financial landscape is seeing increasing competition for the dominance of reserve currencies, with some nations looking to move away from the U.S. dollar.

Stablecoins and the Global Push for Dollar Alternatives

Efforts to challenge the U.S. dollar’s hegemony are being led by the BRICS nations—Brazil, Russia, India, China, and South Africa—which have called for moving away from the dollar in international trade. Waller, however, believes that stablecoins could make it significantly more difficult for countries to undermine the dollar’s global position.

He noted that dollarization in many countries has been met with various regulations attempting to limit the use of the U.S. dollar. However, Waller pointed out that “it’s a lot harder to stop stablecoins than confiscating currency that people might be hoarding in their bedroom; it’s a little harder to take it off the blockchain.” The decentralized and digital nature of stablecoins provides an added layer of difficulty for countries attempting to block their use.

The Rise of Stablecoins and U.S. Regulatory Developments

Despite Waller’s optimism, a recent Chainalysis report revealed that the U.S. is currently lagging in stablecoin adoption. In 2024, transactions on U.S.-regulated exchanges accounted for less than 40% of the stablecoin market share, while transactions on offshore exchanges surged to 60%. This growing trend has raised concerns that U.S. regulatory uncertainty may push more stablecoin activity offshore.

To address these concerns, U.S. Senator Bill Hagerty introduced the GENIUS stablecoin bill on February 4, 2025. The proposed legislation aims to create a regulatory framework for stablecoins pegged to the U.S. dollar, focusing on digital assets with market capitalizations above $10 billion. Federal Reserve regulations would govern these larger issuers, while individual states would regulate smaller issuers.

On the same day, David Sacks, who served as President Trump’s crypto czar, signaled plans to foster stablecoin innovation in the U.S. as part of broader efforts to support Bitcoin adoption and blockchain development.

Stablecoin Growth and Adoption

The stablecoin market has seen significant growth, with its total market capitalization surpassing $200 billion by January 2025. Adoption rates continued to rise in 2024, driven in part by the growing use of bots for trading and payments. Total stablecoin transaction volumes reached an astounding $27.6 trillion in 2024, surpassing the combined volumes of traditional payment giants Visa and Mastercard by 7.7%.

With regulatory clarity, Waller believes stablecoins have the potential to further bolster the U.S. dollar’s global influence and provide new opportunities for the U.S. financial system. The rapid adoption and evolving regulatory landscape suggest that stablecoins will play an increasingly pivotal role in the future of global payments and finance.