The Federal Reserve Board of Governors member, Christopher Waller, says that stablecoins innovation is better than the Central Bank Digital Currency but not without risks.
Waller says that the destabilizing run, where unregulated issuers offer bad financial instruments, was one of the risks around stablecoins.
The Fed Governor outlines the second risk as that of payment system failure due to the decentralized nature of stablecoins. Waller says that the disintegrated payment functions can lead to a discrepancy in settlement standards.
The Governor views the third risk as that of scale, where monopoly issuers could ruin user benefits. Waller says that despite the risks, the Federal Reserve and Congress acknowledge the private sector innovation on payment systems and should get a chance to compete with the traditional banking sector.
The Fed has adopted a moderate stance in stablecoins regulations to foster innovation. The Federal Deposit Insurance is reportedly looking at ways that banks can adopt crypto assets.
Source: Federal Reserve