Regulators Get Ready to Ski the Crypto Slope

The U.S. Federal Reserve has signaled a significant shift in its regulatory approach toward blockchain and digital assets, with Vice Chair for Supervision Michelle W. Bowman advocating for a more open and collaborative framework to integrate emerging technologies into the financial system. In a speech delivered at the 2025 Wyoming Blockchain Symposium, Bowman emphasized that regulators must move beyond an “overly cautious mindset” and recognize the transformative potential of blockchain, tokenization, and artificial intelligence in reshaping financial services [1]. She argued that technological innovation, including crypto products, could enhance efficiency, reduce costs, and improve consumer access to financial services, provided that regulatory barriers are addressed.

A central element of Bowman’s vision is allowing central bank staff to hold small amounts of digital assets, an idea she described as essential for regulators to gain a practical understanding of the technologies they oversee [2]. This proposal is framed as a way to better equip examiners with the knowledge needed to evaluate and supervise new financial tools effectively. “There’s no replacement for experimenting and understanding how that ownership and transfer process flows,” she stated, drawing a parallel to learning how to ski by actually putting on skis. The suggestion reflects a broader effort to align the Fed’s expertise with the realities of the evolving financial landscape [3].

Bowman also highlighted the potential benefits of tokenization, particularly in streamlining asset transfers and reducing risks associated with traditional processes such as re-registering securities or transferring physical assets. She noted that tokenization could enable faster and more cost-effective payments, particularly in international transactions, and suggested that a “tipping point” may be approaching where legal and technological frameworks converge to facilitate broader adoption [1]. The Fed is already exploring how to regulate stablecoins under the recently passed GENIUS Act, a legislative development that positions stablecoins to become a significant fixture in the U.S. financial system.

In addition to blockchain, Bowman acknowledged the growing role of artificial intelligence in banking, citing its dual capacity to both challenge and enhance traditional security and fraud detection systems. During a separate event, she participated in a discussion with OpenAI CEO Sam Altman, underscoring the potential of AI to revolutionize financial services [2]. These developments point to a regulatory environment that is increasingly open to innovation, albeit with a focus on balancing risk management with the promotion of efficiency and growth.

Bowman also addressed concerns about reputational risk, announcing that the Fed would no longer prioritize it in its supervisory framework. This move aims to reduce unnecessary constraints on banks’ ability to engage with a broad range of industries and customers, including those in the digital asset sector. “It is not the role of examiners or policymakers to direct which customers or industries to serve,” she stated, emphasizing the importance of banks’ autonomy in decision-making, provided legal and safety standards are met [3].

The Fed’s evolving stance is being supported by internal changes, including the reintegration of “novel supervision” into the examination process and ongoing staff training initiatives. These efforts reflect a broader commitment to modernizing regulatory practices and fostering a more adaptive, informed, and technologically literate supervisory workforce [1]. With the Trump administration’s broader pro-innovation agenda, the Federal Reserve is positioning itself at the forefront of a new era in financial regulation, one that seeks to embrace the opportunities of blockchain and digital finance while ensuring stability and safety.

Source:

[1] Speech by Vice Chair for Supervision Bowman (https://www.federalreserve.gov/newsevents/speech/bowman20250819a.htm)

[2] Fed's Bowman suggests allowing central bank staff to own small amounts of crypto (https://www.reuters.com/sustainability/boards-policy-regulation/feds-bowman-suggests-allowing-central-bank-staff-own-small-amounts-crypto-2025-08-19/)

[3] U.S. Federal Reserve's New Supervision Chief Sold on Bringing Crypto to Finance (https://www.coindesk.com/policy/2025/08/19/u-s-federal-reserve-s-new-supervision-chief-sold-on-bringing-crypto-to-finance)