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How the government should regulate stablecoins is a high priority of the Biden administration, New York Fed President John Williams said during the Bank for International Settlements Innovation Summit.
He sees a role for stablecoins in payments — in cross-border payments as well as more generally, he said. Broader cryptocurrencies, though, have some “fundamental flaws” in that they’re not being used as a means of exchange and the high costs involved, Williams said.
While stablecoins and crypto are shaking up traditional financial and payment systems, he doesn’t expect that they’ll eliminate traditional systems altogether. “It isn’t really about the end of banking — it’s more of a hybrid approach,” he said.
“We need more from a whole business model point of view.” Rather than replacing conventional financial systems, the new technology “creates a more complicated model,” Williams said.
“The focus is not so much on should it happen or shouldn’t it happen, but how to make the system more efficient” while protecting consumers, mitigating risk, and ensuring anti-money laundering protections, he said.
Bitcoin (BTC-USD) has been exerting some strength on Tuesday, rising 3.6%, breaking above $42K. Still, it remains range-bound in the past two months, generally staying under $45K.
The two biggest stablecoins by market cap are Tether (USDT-USD) and USD Coin (USDC-USD).
From earlier this month (March 9), President Joe Biden signed an executive order to direct government agencies to examine potential benefits and risks of crypto as it seeks to keep the U.S. a leader in innovation.
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