TLDR
- Fed Governor Michelle Bowman advocates for stricter stablecoin regulations.
- Bowman emphasizes the need for dollar-for-dollar reserves under the Genius Act.
- Stablecoin issuers to face tougher capital and diversification standards.
- Bowman supports clear regulatory frameworks for both banks and crypto firms.
- Fed reviews long-delayed capital reforms and Basel III Endgame overhaul.
Federal Reserve Governor Michelle Bowman has called for stricter regulations on stablecoin issuers. In prepared remarks for Tuesday’s House Financial Services Committee hearing, Bowman emphasized the need for new rules to promote healthy competition. She seeks to balance the growing digital asset sector with the traditional banking system.
Bowman stressed that it is vital to supervise innovation in banking and digital assets responsibly. “We must continuously improve our ability to supervise the risks to safety and soundness that innovation presents,” she said. The Fed Governor highlighted the importance of adopting new technologies to enhance banking efficiency and broaden credit access.
Capital Standards for Stablecoin Issuers Under the Genius Act
Bowman announced that she will work with other agencies to develop standards for stablecoin issuers. Under the recently enacted Genius Act, stablecoin companies will be required to register formally. These firms will also have to maintain dollar-for-dollar reserves, mimicking the discipline of traditional banks.
The law aims to ensure that stablecoin issuers maintain financial stability. Bowman’s comments highlight her commitment to ensuring that these digital asset companies adhere to bank-like regulations. She emphasized the importance of creating a level playing field between banks and digital asset firms.
Bank and Crypto Firms Clash Over Charters and Regulations
The debate over charters remains a key point of contention between banks and crypto firms. Crypto firms argue that charters would provide clarity and compliance pathways. Banks, however, warn that issuing charters too freely could lead to the creation of under-regulated institutions.
Bowman’s stance reflects an attempt to bridge the divide between traditional financial institutions and the crypto industry. By pushing for tougher stablecoin rules, she aims to set clear regulatory frameworks for all players. Stablecoin firms will be under closer scrutiny, but banks must also adjust to evolving regulations.
Long-Delayed Capital Reforms to Be Addressed
Bowman also plans to update lawmakers on long-awaited capital reform efforts. This includes addressing the Basel III Endgame overhaul, which has faced delays. She emphasized that her approach would focus on “bottom-up” calibration rather than imposing predetermined targets.
The Fed is actively reviewing proposals related to capital surcharges for large banks. This ongoing process reflects the Fed’s careful consideration of regulatory frameworks for both traditional financial institutions and stablecoin issuers. Bowman’s remarks signal an ongoing effort to align digital and traditional financial systems under a more cohesive regulatory umbrella.
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