Crypto Regulation Update: Fed Governors Speeches Signal Change

• The Federal Reserve shifts toward balanced crypto regulation to foster innovation.
• Stablecoins could strengthen the U.S. dollar’s global financial dominance.
• Fed governors advocate for policies supporting underserved communities and crypto.

FOX reporter Eleanor Terrett recently took to her X account to highlight a shift in the Federal Reserve’s approach to cryptocurrencies. According to Terrett, a pair of speeches delivered on February 7 by Republican Federal Reserve Governors Michelle Bowman and Christopher Waller signaled a more open stance toward digital assets and their role in the financial system.

Related: Federal Reserve Explores Ripple’s RLUSD Stablecoin for FedNow Payment System

In their speeches, Bowman and Waller stressed the need for clear and reasonable regulation that encouraged financial innovation instead of stifling it. Bowman pointed out that past regulatory approaches, like excessive de-risking, proved impractical for new technologies including crypto.

She stated that the Federal Reserve’s regulatory structure should seek a balance between ensuring financial stability and encouraging innovation. Bowman also cautioned that excessive focus on safety could harm long-term innovation within the banking system, which is needed to support new technologies like cryptocurrencies.

Additionally, Waller focused on the possibility of stablecoins to strengthen the U.S. dollar and its position as the world’s reserve currency. He pointed out that when supported by legal regulation, stablecoins could broaden the dollar’s reach and boost America’s global financial dominance.

Soft Supervision Risks for Financial Inclusion

In addition to discussing regulatory approaches, Bowman highlighted the risks of using “soft supervision” to deter new technologies from entering the market. She argued that such methods would not work in the long term and could hinder efforts to address the needs of underbanked populations. Instead, she called for policies that promote innovation while maintaining the safety and solidity of the financial system.

Both governors discussed the need for banking policies that support underserved communities. Bowman stressed that financial regulation should not exclude legitimate businesses and customers, including those involved in crypto and fintech.

Fed Leadership Shifts and Digital Asset Policy

Bowman and Waller’s speeches came at a time when their views could have influenced the future direction of the Federal Reserve’s approach to digital assets.

Related: Fed Rate Cut: Dividend ETFs and Crypto See Massive Inflows

Terrett pointed out that both governors were likely candidates for the position of vice chair for supervision, which oversees how the Federal Reserve interacts with banks and crypto companies.