Federal Reserve Vice Chair Faces Scrutiny Over Digital Asset Remarks

According to Cointelegraph, U.S. Representative Stephen Lynch questioned Federal Reserve Vice Chair Michelle Bowman during a Tuesday oversight hearing regarding her previous comments on digital assets. Lynch expressed concern over Bowman's encouragement for banks to fully engage with digital assets, probing the Federal Reserve's involvement in developing crypto frameworks. The inquiry highlighted Lynch's confusion over the definition of stablecoins. During the hearing, Lynch referenced Bowman's remarks from the Santander International Banking Conference in November, where she advocated for banks to engage with digital assets. However, Bowman clarified that her comments were directed towards digital assets broadly, not specifically cryptocurrencies. Lynch's questioning led to a discussion on the differences between digital assets and stablecoins. Bowman explained that Congress, through the GENIUS Act, had authorized the Federal Reserve to explore a regulatory framework for digital assets. She stated, "The GENIUS Act requires us to promulgate regulations to allow these types of activities." The hearing also addressed the stability of stablecoins, which are typically pegged to fiat currencies like the US dollar. While stablecoins are generally stable, there have been instances of depegging, such as the Terra algorithmic stablecoin crash in 2022. Despite these occurrences, most stablecoins maintain their peg with minimal fluctuation. Bowman had previously suggested that Federal Reserve staff should be allowed to hold small amounts of crypto or digital assets to better understand the technology. Travis Hill, acting chair of the Federal Deposit Insurance Corporation (FDIC), also testified at the hearing. The FDIC is among the agencies tasked with implementing the GENIUS Act, signed into law by U.S. President Donald Trump in July. Hill announced that the FDIC plans to propose a stablecoin framework later this month, which will outline requirements for supervising issuers. This development is part of a broader effort to establish regulatory clarity in the digital asset space.