Fed executive Bowman campaigns for central bank staff to own crypto

Fed Vice Chair Michelle Bowman is pushing for central bank staff to be allowed to own cryptocurrencies. The central bank executive says that the firsthand experience would improve oversight and help attract talent.

Current Fed rules prohibit its staff from holding cryptocurrencies, but that might change soon as Federal executive Bowman pushes for ownership rights for the reserve bank’s staff.

Bowman pushed for crypto ownership rights for central bank staff

The Federal Reserve Vice Chair for Supervision, Michelle Bowman, on Tuesday suggested that staff at the central bank should be allowed to hold small amounts of cryptocurrency, saying that direct exposure would help regulators better understand the markets they oversee.

Speaking at the Wyoming Blockchain Symposium, Bowman argued that the firsthand use of digital assets would provide valuable insight for examiners tasked with policing crypto-related activities in banks and financial institutions. Current Fed rules prohibit its staff from owning cryptocurrencies.

“There’s no replacement for experimenting and understanding how that ownership and transfer process flows,” Bowman said. “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.”

Bowman said allowing “de minimis” holdings of crypto could also help the Fed attract and retain talent. Many of the central bank’s bank examiners come from private-sector backgrounds where familiarity with digital assets is increasingly valued. These existing restrictions may make public-sector roles less appealing to experts in emerging financial technologies.

Bowman did not specify what amounts or types of assets would be considered acceptable under a revised policy.

Call for cultural change in financial regulation

Bowman urged regulators to shed what she described as an “overly cautious mindset” toward new technologies, including artificial intelligence and blockchain-based systems.

“We must choose whether to embrace the change and help shape a framework that will be reliable and durable — ensuring safety and soundness and incorporating the benefits of both efficiency and speed — or to stand still and allow new technology to bypass the traditional banking system altogether,” she said. “From a regulator’s perspective, the choice is clear.”

Bowman acknowledged that certain risks accompany technological changes. “Risks may be offset or at least determined to be manageable when we recognize and consider the potentially extensive benefits of new technology,” she said.

Bowman also stated that she would seek to curtail the use of reputational risk as a regulatory measure, noting that the Fed and other agencies had already pledged to stop weighing it in supervisory exams.

Critics, including some lawmakers and banking industry groups, have argued that reputational risk is too subjective and has been used to unfairly restrict legitimate business.

Bowman encouraged the banking industry to engage with regulators directly to share expertise about blockchain and digital assets. “I am committed to changing our culture and attitude toward the adoption and integration of technology and new products and services,” she said.

“Change is coming,” Bowman said. “If this is not our approach, then we risk the banking system becoming less relevant to consumers, businesses and the overall economy.”

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