Fed's Top Regulator Pushes for Clearer Rules as Banks and Crypto Converge

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Quick Breakdown

• Federal Reserve Governor Michelle Bowman plans to push for new regulations covering banks and stablecoin issuers to ensure fair competition.
• She aims to implement the Genius Act’s strict requirements for stablecoin reserves and oversight.
• Bowman will also update Congress on progress in capital reform, including Basel III Endgame adjustments.

Bowman to Congress: Innovation is welcome, but discipline comes first

Federal Reserve Governor Michelle Bowman is heading to Capitol Hill with a clear message: traditional banks and crypto players can compete in the same arena, but only if everyone follows the rulebook.

In remarks prepared for Tuesday’s House Financial Services Committee hearing, Bowman signalled her intention to drive forward fresh regulations for both banks and stablecoin issuers, a move she says will foster “healthy competition” between Wall Street and the fast-evolving digital asset sector.

‘Innovation must be responsible’

Bowman acknowledged that new technologies can expand credit access and improve banking efficiency. However, she stressed that regulators must continually adapt to supervise emerging risks.

“As a regulator, it is my role to encourage innovation in a responsible manner,”

she said, noting that the Fed’s oversight must evolve alongside financial technology.

Stablecoins face bank-like discipline under the Genius Act

A major focus for Bowman will be implementing the recently passed Genius Act, which requires stablecoin issuers to register and hold one-to-one reserves, effectively demanding bank-level safeguards for firms acting like banks.

Bowman said the Fed will collaborate with other agencies to draft capital and diversification standards for issuers, aiming to level the regulatory playing field between lenders and their crypto and fintech competitors.

The push comes as banks and crypto firms clash over access to federal charters. Crypto companies argue that charters would offer clarity on compliance, while banks warn that granting them too easily could create “charter-lite” institutions.

Basel III endgame and bank capital rules back in focus

Bowman will also brief lawmakers on the long-delayed Basel III Endgame capital reforms. She emphasized her preference for “bottom-up” calibration, tailoring rules to actual risk rather than targeting preconceived outcomes.

The Fed is currently revisiting capital surcharges for major banks and weighing a softened version of the previous administration’s proposal.

Bowman is positioning herself as a referee in a rapidly converging financial system, reminding both banks and crypto firms that innovation can’t replace the hard work of maintaining robust capital buffers.