Leaders from Circle, the Bretton Woods Committee, and the IMF discuss stablecoins at the Wharton 'Future of Finance' Forum

All views expressed by members are their own and not reflective of the views of the Bretton Woods Committee.

Bill Dudley, Tobias Adrian and Heath Tarbert spoke on a recent panel entitled "The Future of the U.S. Dollar in a Tumultuous Geopolitical Environment." Discussion centered on the following topics:

• Leadership in Digital Innovation - U.S. regulators and policymakers should foster adoption of blockchain and stablecoin technologies to maintain global financial leadership.
• Regulatory Urgency - U.S. stablecoin legislation is critical for creating a robust framework that balances federal and state oversight while ensuring financial stability.
• Global Responsibilities - As the issuer of the world's reserve currency, the U.S. must navigate its policies carefully to help foster a better global payments system and avoid incentivizing dollar alternatives.
• Collaborative Solutions - International cooperation will be essential to modernizing global payments and addressing cross-border inefficiencies.
• Decisive Action - By embracing technological advancements and fostering collaboration, the U.S. can ensure the dollar remains at the heart of the global financial system, driving stability and innovation for decades to come.

On December 9, 2024, leaders from across the financial and policy spheres convened in Washington, DC for the annual Wharton Future of Finance Forum. Chaired by Sarah Hammer, Executive Director at the Wharton School and Adjunct Professor at the University of Pennsylvania Carey Law School, the Forum's purpose was to explore new ways to drive finance forward and unleash capital in an anticipated "bold new era" ushered in by the coming Trump administration.

Stablecoins were a frequent discussion topic throughout the Forum, especially during the panel entitled "The Future of the U.S. Dollar in a Tumultuous Geopolitical Environment." Participants included Bill Dudley, Chair of the Bretton Woods Committee; Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department at the International Monetary Fund (IMF); and Heath Tarbert, Chief Legal Officer and Head of Corporate Affairs at Circle.

Their discussion shed light on how technological innovation, regulatory decisions, and shifting global dynamics are shaping the dollar's future.

Digital Assets and the Modern Payments Revolution

The panel began by addressing the transformative potential of digital assets and improved payment systems. Adrian noted that these technologies are high on the IMF's agenda, signaling their importance to global economic progress. Dudley highlighted that the U.S. is lagging behind countries like Brazil and India, which have embraced national real-time payment systems through mandates addressing systemic inefficiencies. He noted that the lack of U.S. involvement - based on the popularity of existing payment systems and the lack of a mandate from the Fed - is holding back global progress. The unintended costs of sanctions are another reason the U.S. needs to act.

Tarbert emphasized how new technology is already starting to fundamentally rewire how value flows globally. By transitioning from decades-old systems like SWIFT and ACH to blockchain-based platforms, the global financial system can finally experience a transformation akin to the internet's revolution of communications. Ironically, much of this innovation is currently happening outside the U.S. despite taking place in dollars, placing pressure on domestic policymakers to catch up.

The Role of Stablecoins and Blockchain Technology

Stablecoins emerged as a focal point of the discussion, with panelists agreeing they can play a central role in the payments systems of tomorrow. Tarbert expressed optimism about U.S. stablecoin legislation in 2025, which would help the U.S. reclaim control over how the dollar is regulated and used globally. Failure to close this regulatory gap could have long-term consequences for U.S. leadership in the global financial system.

Dudley suggested that properly reserved stablecoins - ideally backed by central bank reserves - arguably eliminate the need for central bank digital currencies (CBDCs). Adrian underscored the potential of blockchain and stablecoins to track legitimate and illegitimate transactions, giving countries in which the dollar is a foreign currency the ability to pinpoint criminal activity.

Geopolitics and the Dollar's Global Position

The dollar's status as the world's reserve currency was another critical theme. Dudley reminded the audience that this status is a privilege earned through sound governance and economic management over decades, and not a guaranteed right the U.S. should take for granted. He warned that overuse of sanctions could incentivize countries to seek alternatives to the dollar, potentially fragmenting the global payments system even further.

Tarbert stressed the global reliance on the dollar, noting the responsibility of dollar stablecoin issuers to avoid destabilizing other economies. This delicate balance between domestic financial reform and international stability will be crucial in the years ahead. Adrian closed by noting that banks should be able to use and hold stablecoins like cash.

The importance of regulation

Cross-border transactions remain expensive and inefficient, presenting a significant challenge for global trade and finance. Adrian highlighted the importance of legal and regulatory foundations for any new payments technology, while Dudley called for coordinated international efforts akin to the post-financial crisis overhaul of OTC derivatives markets, in which regulators and market participants collaborated to devise a better system that eliminates risks.

The Path Forward

The Forum underscored a pivotal moment for the U.S. and its role in shaping the future of global finance. Stablecoins and blockchain can help drive transformative progress in payments systems, enhance financial inclusion, and bolster the U.S. dollar's global standing. Achieving this future hinges on decisive regulatory action, international collaboration, and a commitment to technological innovation. To secure a world where innovation and stability coexist, leaders from the public and private sectors must embrace this opportunity to build a faster, more inclusive payments system.

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