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Investing.com -- Federal Reserve Governor Stephen Miran said on Friday that widespread adoption of stablecoins could necessitate lower short-term interest rates.
Speaking at the BCVC Summit 2025 in New York, Miran explained that "even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down" the neutral rate, also known as R-star.
The neutral rate represents the short-term interest rate that neither stimulates nor slows economic activity. Miran noted that "if R-star is lower, policy rates should also be lower than they would otherwise be to support a healthy economy," adding that "a failure of the central bank to cut rates in response to a reduction in R-star is contractionary."
Stablecoins, which are cryptocurrencies designed to maintain a stable value against the dollar, are increasingly being integrated into the financial system despite volatility in the broader cryptocurrency sector. According to Miran, dollar-denominated stablecoins enhance the attractiveness of the dollar and other dollar-denominated assets, with significant implications for the U.S. economy.
"Stablecoins are also contributing to the dollar’s dominance by allowing an ever-growing share of people around the globe to hold assets and conduct transactions in the most trusted currency," Miran said.
The Fed governor pointed out that stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets from international purchasers, a trend he expects to continue. This increased demand "lowers borrowing costs for the U.S. government," he said.
With stablecoins likely strengthening the dollar globally, Miran suggested that "depending on the strength of this effect relative to other forces affecting the Fed’s price-stability and maximum-employment mandates, that might be something that monetary policy reacts to."