Fed Official: Staff Should Be Allowed to Hold Crypto

Fed Official Advocates for Crypto Holdings Among Staff

A top regulatory official at the Federal Reserve believes that staff should be permitted to invest a small amount in cryptocurrencies. This, according to the official, would provide them with a practical understanding of the technology.

Fed Vice Chair for Supervision Michelle Bowman stated at a blockchain event in Wyoming on Tuesday that the regulator should consider allowing its staff “to hold de minimus amounts of crypto or other types of digital assets so they can achieve a working understanding of the underlying functionality.”

She further added, “We will soon be establishing a framework for supervising issuers of these assets.”

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

Currently, most Fed staffers and their spouses are restricted from owning crypto or related investment products such as exchange-traded funds or shares in crypto companies.

The Fed tightened its investment rules in early 2022 after unusual trading activity by three top officials in 2020 came to light during the early stages of the COVID-19 pandemic.

Potential Benefits of Allowing Crypto Investments

Recruitment and Rulemaking

Bowman noted that current investment restrictions “may be a barrier to recruiting and retaining examiners with the necessary expertise,” suggesting that easing these rules could enhance staff 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.”

Urging the Fed Not to Stand Still

In her speech, Bowman emphasized that bank regulators should adopt a less skeptical approach to new financial products and “recognize the utility and necessity of embracing technology in the traditional financial sector.”

She acknowledged concerns among some bankers regarding blockchain technology's potential threat to traditional business models. She also noted that technology could “change the banking system regardless of how banks and regulators choose to respond.”

“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 added.

“From a regulator’s perspective, the choice is clear.”

Bowman recognized the risks involved in adopting new technology but suggested that these could be offset by the potentially extensive benefits.

Recent Crypto-Friendly Actions

Bowman’s comments follow other recent crypto-friendly moves under the Trump administration.

• The Fed recently announced it would sunset a supervision program for crypto and blockchain-related activities undertaken by banks, established by the Biden administration in 2023.
• President Trump signed an executive order directing banking regulators to investigate claims of debanking made by the crypto sector.