Federal Reserve Governor Christopher Waller believes the prevalence of USD-denominated stablecoins in DeFi might actually be solidifying the US dollar's position.
Federal Reserve Governor Christopher Waller believes the prevalence of USD-denominated stablecoins in DeFi might actually be solidifying the US dollar's position as the global reserve currency, instead of undermining it.
At a central banking conference on February 15, Waller noted that nearly 99% of the entire stablecoin market cap is pegged to the dollar. While some might anticipate cryptocurrencies like Bitcoin to someday dethrone the dollar, Waller points out that the vast majority of DeFi activity relies on dollar-backed stablecoins.
"Crypto-assets are essentially traded in US dollars," he stated. "Therefore, any expansion of trading in the DeFi world is likely to simply reinforce the dollar's dominant role."
This sentiment is supported by the dominance of Tether (USDT) and USD Coin (USDC), the two largest stablecoins, representing 90% of the $139.5 billion stablecoin market cap combined. These assets offer traders a stable and liquid alternative within DeFi, without the volatility inherent to most cryptocurrencies.
While acknowledging the potential of rapid crypto growth to decrease reliance on the dollar, Waller stated that there haven't been any significant signs of this happening. He maintained that the dollar's global dominance remains solid.
"I don't foresee the US dollar losing its reserve currency status anytime soon," he emphasized. "If anything, recent developments that some feared might threaten that status have, at least so far, strengthened it."
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