'We stand at a crossroads': Fed’s Bowman urges more of an embrace toward crypto and tech

The U.S. Federal Reserve's Michelle Bowman says the central bank is at a "crossroads" — one that will determine whether it leads in financial innovation or lags behind.

"We stand at a crossroads: we can either seize the opportunity to shape the future or risk being left behind," Bowman said on Tuesday in remarks before the Wyoming Blockchain Symposium. "By embracing innovation with a principled approach, we can define the course of history and fulfill our responsibility to promote the safety and soundness of the banking system and financial stability."

Bowman, the Fed's vice chair for supervision, spoke about the need for banks and regulators to be open to new technologies and depart from "an overly cautious mindset." Bowman was tapped by President Donald Trump to take on her new role at the central bank after serving as Fed governor since 2018.

Since her confirmation in June, the Fed has ended its program supervising banks involved in crypto and also removed "reputational risk" from bank examinations, which was viewed as a win against crypto debanking. In April, the central bank withdrew guidance that previously discouraged banks from participating in crypto and stablecoin activities.

Artificial intelligence and blockchain technology can be beneficial to the banking system, Bowman said Tuesday.

"Some bankers have expressed concerns about new technologies posing a threat to traditional business models and practices," Bowman said. "But the banking system is constantly evolving, and technology can change the banking system regardless of how banks and regulators choose to respond."

Within the Federal Reserve, Bowman said staff should hold a small amount of crypto to get a better understanding.

"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. "We should consider whether limits on staff investment activities may be a barrier to recruiting and retaining examiners with the necessary expertise, and for existing staff to better understand the technology."