Federal Reserve (Fed) Governor Michelle Bowman is urging US regulators to abandon their “overly cautious mind-set” regarding cryptocurrencies, blockchain technology, and artificial intelligence (AI).
Speaking at the Wyoming Blockchain Symposium, Bowman emphasized the need for a proactive approach to adapt to emerging technologies, marking a departure from the more conservative stance of previous regulatory bodies.
She underscored the importance of choosing to embrace this change and creating a regulatory framework that is both reliable and efficient. “We must ensure safety and soundness while incorporating the benefits of speed and efficiency,” she asserted.
The choice is clear from a regulator’s perspective: we can either stand still and let new technology bypass the traditional banking system or help shape its future.
According to Bowman, dollar-pegged cryptocurrencies have the potential to disrupt traditional payment infrastructures while offering new opportunities for the banking sector.
The Federal Reserve also disclosed last week the discontinuation of its “novel activities” supervision program, which was designed to monitor banks’ interactions with the cryptocurrency and fintech sectors.
This program, launched in 2023, faced criticism for imposing significant restrictions on banks engaging with digital assets. The Fed has determined that such specialized oversight is no longer necessary, citing an improved understanding of the risks involved and how banks can effectively manage these challenges.
By incorporating digital asset oversight into its conventional bank supervision framework, the Federal Reserve aims to foster an environment that supports innovation in the financial sector.
Governor Bowman’s remarks and the regulatory changes she advocates reflect a pivotal moment for the US financial landscape, as regulators seek to balance innovation with the need for safety and stability in the banking system.
Featured image from DALL-E, chart from TradingView.com
