Brian Brooks and Charles Calomiris, former officials at the U.S. Office of the Comptroller of the Currency (OCC), have stated stablecoins can be tools that might help the U.S. dollar maintain its status as a reserve currency. In a recent article, Brooks and Calomiris call for regulations to allow stablecoin issuers to have the clarity needed for the assets to thrive.
Stablecoins Might Help the U.S. Dollar Maintain Its Reserve Currency Status
Brian Brooks, former U.S. Comptroller of the Currency, and Charles Calomiris, former chief economist of the Office of the Comptroller of the Currency (OCC), have issued an op-ed article explaining how stablecoins could contribute to maintaining the status of the dollar as a reserve currency.
Brooks and Calomiris detail that stablecoins can be significant tools in the fight against worldwide de-dollarization, serving as catalysts for the demand for dollars for citizens in developing countries, even when their governments do not support dollarization per se.
They cite Argentina and Venezuela as examples of countries facing extremely high inflation levels with governments taking measures to cut dollar dependency, but whose citizens use dollars to protect their incomes and savings from losing value while stored in their national currencies.
In this sense, they explained:
Faced with the dismal prospect of saving their wages in local currency stored in local bank accounts, more citizens of high-inflation countries are opting to use dollar-backed stablecoins as a synthetic savings account.
Also, referring to the recent decline in the usage of the U.S. dollar as a reserve currency, Brooks and Calomiris explain the problems that a de-dollarized world might bring the U.S., stating:
A de-dollarized world would damage the U.S. The dollar’s reserve status reduces U.S. borrowing costs, which is crucial in an era when government borrowing and spending are at a record high and still climbing.
Regulation Seen as Necessary
Brooks and Calomiris raise a timely issue: regulation is necessary for these instruments to thrive and grow. They refer to the bill backed by Rep. Patrick McHenry, chairman of the House Financial Services Committee, as a significant part of the puzzle to bring stablecoins to the mainstream level.
They stated:
That is why Financial Services Committee Chairman Patrick McHenry’s bill to regulate stablecoins is vital. It would establish federal and state oversight for stablecoin issuers, impose qualifications for reserve assets, and implement rules on redemptions and public disclosure.
The House Financial Services Committee recently passed the Clarity for Stablecoins Act with bipartisan support. In the face of the launch of Paypal’s stablecoin PYUSD, McHenry reinforced the need for clarity in the digital stablecoin market, declaring that “clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential.”
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