Fed Governor Waller: Stablecoins are an important innovation in DeFi, but there is still a risk of bank runs

Fed Governor Waller expressed his views on decentralized finance at the Vienna Macroeconomics Seminar held by the Vienna Institute for Advanced Studies in Austria. He said that stablecoins are another important innovation of DeFi. Stablecoins were born in the world of cryptocurrencies and aim to provide a "safe" asset with stable value for trading. Almost all stablecoins are pegged to the US dollar on a one-to-one basis. They provide buyers and sellers with an opportunity to trade in a decentralized manner, using stablecoins as a settlement tool. Since stablecoins are actually digital currencies, they can reduce the need for payment intermediaries, thereby reducing global payment costs, but their security is not guaranteed, and history is full of cases of synthetic dollars being run on. Therefore, stablecoins face all the problems faced by any real dollar substitute. If appropriate guardrails can be established to minimize the risk of runs and mitigate other risks, such as their possible use for illegal financing, then stablecoins may benefit in terms of payments and can be used as safe assets on various new trading platforms.