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Federal Reserve Governor Christopher Waller said he does not expect the U.S. dollar to lose its status as the world's reserve currency due to challenges from cryptocurrencies and the Chinese renminbi.
Crypto Impact: Speaking in the Bahamas, Waller said that despite conjecture that the rapid growth of digital currencies could reduce reliance on the U.S. dollar, the predominance in decentralized finance of trading in stablecoins—which are linked to the U.S. dollar—means any expansion of DeFi trading would likely strengthen the dominant role of the dollar.
Chinese Renminbi: Several factors weigh against the renminbi as an attractive asset for international investors, Waller said, including that it is not freely exchangeable, the Chinese capital account is not open, and investor confidence in Chinese institutions is relatively low.
Bank Holdings: After his remarks, Waller reportedly said he doesn’t want banks holding large amounts of crypto-based exchange-traded funds. The banking agencies last year issued a joint statement highlighting key crypto risks for banking organizations and describing the agencies’ approaches to supervision.
More: Recent Main Street Matters posts from ICBA Senior Vice President of Digital Assets and Innovation Policy Brian Laverdure cover recent crypto collapses, the evolving regulatory environment for digital assets, and the policy debate over treating cryptoassets as securities or commodities.
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