Reserve Dollar

Jerome Powell

Chair

DeFi

Reserve

The popularity of United States dollar-denominated stablecoins in decentralized finance (DeFi) may be helping secure the dollar’s dominance as a global reserve currency, says Federal Reserve governor Christopher Waller.
“About 99% of stablecoin market capitalization is linked to the U.S. dollar,” Waller <a href="https://www.federalreserve.gov/newsevents/speech/waller20240215a.htm" target="_blank" rel="noopener nofollow">said</a> at a central banking-focused conference on Feb. 15. 
“People often conjecture that cryptocurrencies like Bitcoin may replace the U.S. dollar as the world’s reserve currency,” Waller added. He noted, however, that most DeFi trades use stablecoins largely linked to the dollar.
<blockquote data-ct-non-breakable="true">
 “Crypto-assets are de facto traded in U.S. dollars. So, it is likely that any expansion of trading in the DeFi world will simply strengthen the dominant role of the dollar.”
</blockquote>
Together, the two largest stablecoins by market capitalization — Tether (<a href="https://cointelegraph.com/tether-price-index">USDT</a>) and USD Coin (<a href="https://cointelegraph.com/usdc-price-index">USDC</a>) — account for 90% of the $139.5 billion total stablecoin market cap, <a href="https://www.coingecko.com/en/categories/stablecoins" target="_blank" rel="noopener nofollow">per</a> CoinGecko. 
The two stablecoins <a href="https://cointelegraph.com/news/payments-defi-stablecoin-adoption">play a vital role</a> in DeFi, giving traders a liquid, largely price-stable asset to use in on-chain activity without exposure to more volatile cryptocurrencies.
Waller did note that the “rapid growth” of crypto “could reduce reliance on the U.S. dollar” and cited it as a potential challenge to the currency’s international status, but he also stated there had not been “any notable erosion in the dollar’s dominance.”
<figure data-ct-non-breakable="true">
 <img src="https://s3.cointelegraph.com/uploads/2024-02/f45c3cfb-c228-4596-87ed-46cff38cb659.png" alt="" title="">
 <figcaption style="text-align: center;">
 Waller speaking at the Climate, Currency, and Central Banking conference in Nassau, the Bahamas. Source: Facebook
 </figcaption>
</figure>
“I do not expect to see the U.S. dollar lose its status as the world’s reserve currency anytime soon,” he said. “Recent developments that some have warned could threaten that status have, if anything, strengthened it, at least so far.”
Related: <a href="https://cointelegraph.com/news/printing-money-great-business-new-zealand-central-bank">Printing money for fools is a ‘great business to be in’ — NZ central bank head</a>
Lawmakers are <a href="https://cointelegraph.com/news/maxine-waters-legislators-very-close-deal-stablecoins">close to passing</a> a stablecoin bill after over 20 months of trying to reach a deal with House Financial Services Committee Chair Patrick McHenry, with Representative Maxine Waters telling Politico on Feb. 7 that “we’re working on stablecoin; we’re getting very close.”
Fed Chair Jerome Powell <a href="https://cointelegraph.com/news/fed-sees-stablecoin-as-form-of-money-wants-robust-role-in-its-oversight-powell-says">told Congress last June</a> that the central bank sees stablecoins “as a form of money” and wants a “robust federal role” in overseeing them going forward.
Months later, in September 2023, Boston and New York’s Federal Reserve Banks claimed stablecoins <a href="https://cointelegraph.com/news/us-federal-reserve-banks-stablecoins-money-market-funds-source-financial-instability">could inject instability</a> into the U.S. financial system.
Magazine: <a href="https://cointelegraph.com/magazine/unstable-coins-de-pegging-bank-runs-other-risks-2023/">Unstablecoins: Depegging, bank runs and other risks loom</a>

Stablecoins could boost dollar as global reserve currency: Fed governor

Cointelegraph

Other articles published on Feb 16, 2024

Bitcoin’s Whale Movement: A Signal of Market Strength in 2024

Cardano’s Price Soars as Market Analyst Projects Major Growth

LOVELY SWAP: Revolutionizing DeFi with Cutting-Edge Features

Yellow Card Partners with Stellar Network for USDC Access

Bitcoin Owners Profit as Altcoin Whale Transactions Surge

Your right to bear AI could soon be infringed upon

Join our free newsletter for daily crypto updates!