Key Takeaways
- The narrative surrounding the proposed crypto regulation is gradually changing from the level of the Federal Reserve.
- The Federal Reserve is shifting its stance on digital assets toward creating balanced crypto regulations that foster technological innovation.
- Introducing Stablecoins could strengthen the US dollar’s global financial dominance.
The US government’s official policy and the Federal Reserve’s approach to cryptocurrencies are shifting less than a month into the new Trump administration, which pledged to make America the “crypto capital of the planet.”
According to an X post by FOC reporter Eleanor Terrett, speeches recently delivered by Federal Reserve Governors Michelle Bowman and Christopher Waller highlighted an emerging, more open stance toward cryptocurrencies and their role in the traditional financial system.
Avoid Stifling Innovation
Terrett observed that in their speeches, the FED governors highlighted the need for a clear and reasonable regulatory framework that would encourage financial innovation instead of squeezing its life out of it. Bowman called out the past regulatory approach, comparing it with excessive de-risking, which proved to be out of place during the era of new technologies such as cryptocurrencies.
She further urged the Federal Reserve to create a balanced regulatory structure that would ensure financial stability while promoting innovation. According to Bowman, an excessive focus on safety without considering all the other aspects surrounding the subject could easily stifle innovation in the long run within the banking system, which she pointed out would need to support emerging technologies like crypto.
Soft Supervision Could be Counterproductive
On the other hand, Waller focused on the place of stablecoins within the financial structures, observing that they would strengthen the US dollar’s position as the world’s reserve currency. He emphasized the need for the legal system to support the creation of a stablecoin to broaden the dollar’s reach and boost America’s global financial dominance.
Besides touching on the optimum regulatory approach, Bowman warned against “soft supervision” when she opined that it would prevent new technologies from reaching the market. She believes such methods would be counterproductive in the long term and hinder efforts to address the needs of unbanked and under-banked populations. In their place, Bowman proposed a policy promoting the balance between innovation, safety, and solidity of the financial system.
According to both governors, banking policies that would support underserved communities were needed. They added that financial regulation should include all legitimate businesses and customers, including those involved in crypto and fintech.
Conclusion
Governor Bowman and Waller’s sentiments come at a time when their views could easily influence the future direction of the Federal Reserve’s approach to digital assets. According to Terrett, both governors could be candidates for the position of vice chair for supervision, which supervises how the Federal Reserve interacts with banks and digital asset companies.
