Fed’s Bowman calls for embracing blockchain in banking system

Investing.com -- Federal Reserve Vice Chair Michelle W. Bowman urged regulators to embrace blockchain technology and digital assets within the banking system during her speech at the Wyoming Blockchain Symposium 2025 on Tuesday.

Bowman described the current moment as "the beginning of what appears to be a seismic shift" in how we think about money and financial systems, comparing blockchain’s potential impact to past transformations like industrialization and the internet.

She highlighted several promising developments in banking, including tokenization of assets, which could solve problems in transferring ownership by enabling faster transactions without changing custodians or moving physical securities.

"Tokenized assets enable a transferor to pass title without changing a custodian or moving any physical security or asset," Bowman said, noting that while many banks have begun developing this technology, broad adoption hasn’t yet occurred.

The Fed Vice Chair also addressed the recent passage of the GENIUS Act, which positions stablecoins to become "a fixture in the financial system" with potential to disrupt traditional payment rails. Banking agencies are now working to create a regulatory framework for stablecoins.

Bowman acknowledged that regulators have historically approached new technologies with "caution and skepticism" but emphasized that this mindset must change. She announced that the Federal Reserve would no longer consider "reputational risk" in its supervisory process, a change aimed at addressing the problem of "de-banking" in the digital asset space.

"We must adopt an approach that does not penalize or prohibit a bank from banking a customer engaged in legal activity," she stated.

Looking forward, Bowman outlined principles for a tailored regulatory framework for blockchain and digital assets, including regulatory certainty, well-calibrated rules, consistency with consumer protection laws, and maintaining American competitiveness in innovation.

She also suggested allowing Federal Reserve staff to hold small amounts of cryptocurrency to better understand the technology, comparing it to teaching skiing: "I certainly wouldn’t trust someone to teach me to ski if they’d never put on skis."

Bowman concluded by framing the current moment as a crossroads where regulators must "either seize the opportunity to shape the future or risk being left behind."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.