Fed's Bowman Calls for Embracing Crypto and Tech

The U.S. Federal Reserve's vice chair for supervision, Michelle Bowman, highlighted that the central bank faces a pivotal moment that will shape its role in financial innovation. During her address at the Wyoming Blockchain Symposium, she stated, "We stand at a crossroads: we can either seize the opportunity to shape the future or risk being left behind." Bowman advocates for a principled embrace of innovation to ensure the safety and stability of the banking system. She stressed the importance of banks and regulators adopting new technologies, moving away from an overly cautious mindset. Bowman, appointed by former President Donald Trump and a Fed governor since 2018, noted recent changes such as the end of a program that supervised crypto-involved banks and the removal of 'reputational risk' from examinations, signaling a positive shift for the crypto industry. Bowman pointed out that technologies like artificial intelligence and blockchain can significantly benefit banking. However, she acknowledged that some bankers fear these innovations might threaten traditional business models. "The banking system is constantly evolving," she said, emphasizing that technology will impact it regardless of the banks' responses. To better understand cryptocurrencies, she proposed that staff at the Federal Reserve should hold a modest amount of crypto. "I wouldn’t trust someone to teach me to ski if they had never put on skis," Bowman remarked, suggesting that limitations on staff's investment may hinder recruitment of knowledgeable examiners. In conclusion, Bowman's remarks serve as a call to action for the Federal Reserve to take a proactive approach in leading financial innovation while ensuring stability in the banking sector.