Fed’s Waller Backs Stablecoin Adoption, Calls for ‘Right-Sized’ Regulation

Federal Reserve Governor Christopher Waller on Monday voiced strong support for stablecoins, emphasizing their potential to improve efficiency in payments while calling for “right-sized” regulation to ensure safety and stability. 

“If stablecoins present a lower cost alternative to consumers and businesses, I am all for it,” Waller said. “Stablecoins are simply another choice available to consumers and businesses,” he added, noting that stablecoins should coexist with cash, bank deposits, and other electronic money forms, provided they meet standards for safety and transparency.

Speaking at the Silos conference, Waller highlighted two models he believes could guide the adoption of stablecoins in the U.S. financial system. The first model he outlined involves tokenized deposits, in which banks represent traditional deposit liabilities on a blockchain for wholesale or cross-border transactions. Waller said this approach could enhance settlement efficiency while retaining regulatory guardrails.

The second model he pitched was  the “stablecoin sandwich,” in which fiat currency is converted to a stablecoin, transferred across borders, and then converted back into local currency at the destination. This method, Waller said, could reduce costs and processing times for international payments, particularly remittances, without compromising security.

Shares of Circle (CRCL), issuer of the second-largest stablecoin USD Coin (USDC), jumped as much as 8.3% in the morning trade. Shares of PayPal (PYPL), which announced its stablecoin, PayPal USD (PYUSD), in August, rose by more than 4%. On Stocktwits, retail sentiment around both Circle and PayPal’s stock trended in ‘bullish’ territory over the past day. 

Retail sentiment around Tether’s USDT (USDT), the largest stablecoin by market value, also trended in ‘bullish’ territory while sentiment around USDC remained in the ‘neutral’ zone. PYUSD and Ripple’s stablecoin RLUSD also showed retail sentiment in ‘bullish’ territory. 

The overall cryptocurrency market was in recovery mode in early trade, with its market capitalization increasing by more than 3% to rise back above $4 trillion. 

Read also: EA Stock Jumps Pre-Market After Announcing $55 Billion Acquisition By PIF, Silver Lake, Affinity Partners

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