The Federal Reserve's top banking supervisor plans to tell House lawmakers on Tuesday that she will work on new rules for banks and stablecoins, as regulators seek to ensure healthy competition between Wall Street, fintech firms, and cryptocurrency companies.
In prepared remarks for a House Financial Services Committee hearing, Michelle Bowman said: “As a regulator, my role is to encourage innovation in a responsible way, and we must continually improve our ability to oversee the risks that innovation poses to the safety and stability of the financial system.”
She added that new technologies could create a more efficient banking sector that expands access to credit, while at the same time achieving a level playing field with fintech companies and crypto asset companies.
Bowman also said she would work with other agencies to develop capital regulations and diversify activities for stablecoin issuers, as required by the Genius Act, which mandates that these issuers register formally and hold full dollar reserves. She affirmed that the agencies would provide clarity on digital assets and regulatory commentary on proposed new use cases.
Bowman's comments come amid a clash between banks and crypto companies over the future of digital asset regulation, including a battle for banking licenses. For crypto companies, these licenses could offer numerous benefits, including a higher level of legitimacy.
Dispute over banking licenses
Traditional lenders, however, warn that the result could be an unfair environment or a hollowing out of the licensing system, where firms can operate with the legitimacy of a banking license without bearing the full responsibilities that have historically been associated with it.
Bowman's testimony also highlighted her efforts to finalize a number of banking capital measures, including a long-awaited measure known as Basel III.
Bowman said: My approach is to address the calibration of the new framework from the ground up, rather than re-engineering modifications to achieve predetermined methods or preconceived notions about capital requirements.
Bloomberg had previously reported that the Federal Reserve presented other US regulators with the outlines of a revised Basel 3 plan that would significantly soften the capital proposal issued under Joe Biden for Wall Street's largest lenders.
Bowman also said the Fed is working to refine the additional fees imposed on large banks in coordination with broader efforts related to the capital framework.
