US, EU central banks clash over stablecoin regulation

On Monday, US and European central bankers presented opposing arguments on stablecoins.

While Federal Reserve Governor Christopher Waller supported private sector cryptocurrencies, Bundesbank President Joachim Nagel warned against supporting “innovation for innovation’s sake.”

In two contrasting speeches at a conference in Frankfurt, Waller and Nagel highlighted the growing transatlantic divide among interest-rate setters regarding digital tokens, which track the value of fiat currencies and are a cornerstone of crypto trading.

These remarks come amid a push from the administration of US President Donald Trump for the widespread adoption of mostly dollar-backed stablecoins from private sector issuers.

This initiative has alarmed European officials, who are intensifying their efforts to create a digital euro backed by the European Central Bank (ECB).

“If stablecoins offer a lower-cost alternative for consumers and businesses, I am all for it,” Waller said at the Sibos banking and finance conference in Frankfurt.

He also criticized the ECB’s plan to launch a central bank digital currency, arguing that the private sector is in a much better position to innovate.

“You don’t want the government deciding which technologies get used,” Waller said. Waller also emphasized the international role of stablecoins, saying they are “an attractive option in countries where access to dollar banking services is expensive or limited.”

These comments could fuel concerns among European policymakers that dollar-backed stablecoins could diminish the global role of the euro and even weaken monetary policy in the Eurozone.

A few hours earlier, Bundesbank President Nagel, one of the most influential policymakers on the ECB’s governing council, took a completely different stance.

In his opening speech at Sibos, Nagel focused on the “previously unknown risks” posed by stablecoins and warned, “Many things can go wrong. We cannot support innovation just for the sake of innovation.”

The ECB has repeatedly warned that it could lose control over its monetary policy if dollar-denominated stablecoins become widely used in the Eurozone.

“As central banks, we will not accept any development that would weaken our ability to effectively implement monetary policy,” Nagel said, adding that “the stabilizing role of central bank money must not be undermined.”

Waller dismissed these concerns, arguing that stablecoins are just another form of private sector money that has long coexisted with central bank money like cash.

“Stablecoins are a new form of private money and will continue to coexist with other payment instruments,” Waller said, arguing that the growing demand for stablecoins reflects “the need for further improvements in payments in the market” by consumers and businesses.