Fed Official Argues Crypto Ownership Could Sharpen Regulatory Insight

Fed Vice Chair for Supervision Michelle Bowman has called for a review of the Federal Reserve's restrictions that prohibit staff from holding cryptocurrency, advocating for a policy that would allow them to own "de minimus" amounts of digital assets. This shift, she argued at a blockchain event in Wyoming, would enable Fed employees to develop a hands-on understanding of the technology they are tasked with regulating. “There’s no replacement for experimenting and understanding how that ownership and transfer process flows,” she stated, comparing the need for practical knowledge to learning to ski from someone who has never skied.

Currently, Fed staff and their spouses are barred from owning crypto or related products, including ETFs and shares in crypto firms, a policy tightened in early 2022 following revelations of questionable trading activities by three senior officials during the pandemic. Bowman acknowledged the need for conflict-of-interest safeguards but emphasized that the current rules could hinder recruitment and limit expertise as digital assets become more prominent in the financial sector.

Bowman also urged regulators to move beyond what she described as an “overly cautious mindset” and embrace emerging technologies like blockchain. She warned that excessive skepticism could leave traditional financial systems behind. “Technology could change the banking system regardless of how banks and regulators choose to respond,” she said, highlighting the potential for distributed ledger technology to revolutionize finance.

The Fed’s regulatory stance appears to be evolving under the Trump administration, which has taken a more favorable approach to crypto. Recently, the Fed announced it would end a supervision program for blockchain-related bank activities established under the Biden administration. Meanwhile, Trump signed an executive order directing regulators to investigate claims of "debanking" by the crypto sector and conservative groups.

Bowman’s comments align with the launch of the American Innovation Project (AIP), a nonprofit initiative aimed at bridging the gap between policymakers and the digital asset industry. The group, backed by major players like Coinbase, Kraken, and Digital Currency Group, focuses on fostering bipartisan dialogue and education on emerging technologies. Kristin Smith, president of the Solana Policy Institute and a key figure in the crypto policy landscape, leads the AIP board.

Bowman also encouraged the crypto industry to assist regulators in understanding blockchain and its potential applications. She emphasized the importance of collaboration in shaping a regulatory framework that balances innovation with risk management. As the industry continues to grow, regulators face the challenge of ensuring safety and soundness while embracing the efficiency and speed that digital assets offer.

Bowman’s remarks were delivered at the Wyoming Blockchain Symposium, where other notable figures in the financial and crypto sectors were also present. Among them was Senate Banking Committee Chair Tim Scott, who outlined plans for new legislative efforts, and SEC Chair Paul Atkins, who hinted at a potential shift in the agency’s approach to digital assets.

Source: [1] US Fed official: Staff should be allowed to hold a little crypto (https://cointelegraph.com/news/fed-staff-should-be-allowed-crypto-holdings-top-official) [2] Fed Official Pushes to Let Staff Own Small Amounts of Crypto (https://coinpaper.com/10589/fed-official-pushes-to-let-staff-own-small-amounts-of-crypto) [3] Fed Official Urges Central Bank Staff to Hold 'de Minimus' ... (https://cryptonews.com/news/fed-top-official-urges-central-bank-staff-to-hold-de-minimus-crypto/) [4] New crypto advocacy group debuts at Wyoming summit (https://cointelegraph.com/news/crypto-policy-group-launch-wyoming-summit) [5] American Innovation Initiative Kicks Off at Wyoming ... (https://intellectia.ai/news/crypto/american-innovation-project-launches-at-wyoming-blockchain-symposium)