US Fed Vice Chair for Supervision Michelle Bowman has suggested allowing central bank staff to own small amounts of crypto.
Speaking at a blockchain event in Wyoming on Tuesday, she said that direct crypto exposure would help regulators better understand the underlying technology.
“Our approach should consider allowing Fed staff to hold de minimus amounts of crypto or other types of digital assets.”
Currently, the Federal Reserve does not allow its officials to hold or trade crypto. Effective 2022, the policymaking Federal Open Market Committee extended the ban to crypto investments. However, Bowman’s push might change the ownership rights for the reserve bank’s staff.
The Fed executive said that though there may be plenty of resources to learn about these assets, “there’s no replacement for experimenting and understanding how that ownership and transfer process flows.”
“I certainly wouldn’t trust someone to teach me to ski if they’d never put on skis, regardless of how many books and articles they have read, or even wrote, about it,” she addressed at the conference.
Further, allowing “de minimus” holdings of crypto would help the Fed attract and retain talent, she added.
Bowman Emphasizes Regulators to Embrace Blockchain
Michelle Bowman urged regulators to embrace nascent tech like blockchain, or risk allowing it to bypass the traditional banking system altogether.
She called regulators to shed what she described as an “overly cautious mindset” toward new technologies.
“Regulators must understand new products and services and recognize the utility and necessity of embracing technology in the traditional financial sector.”
She also flagged risks that come from any rapid transformations, adding that they may be offset when benefits are considered.
Besides, she highlighted several promising developments in banking, including tokenization of assets, which could solve problems in transferring ownership.
“Tokenized assets enable a transferor to pass title without changing a custodian or moving any physical security or asset,” the Fed vice chair said.
Fed Executive Calls Industry to Help Regulators Better Understand Crypto
Bowman has further sought help from the crypto industry to educate regulators on blockchain and digital assets. Additionally, she would like to curtail regulatory scrutiny tied to reputational risk, suggesting framing new rules.
“I would also like to encourage the industry to engage with regulators to help us understand blockchain and its potential to solve other problems,” she noted. “Change is coming.”
If this isn’t our approach, then we risk the banking system becoming less relevant to consumers and businesses, she added.
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