On August 19, the Fed’s Vice Chair for Supervision, Michelle W. Bowman, addressed a blockchain symposium and outlined the Fed’s approach to blockchain technology, the costs of “reputational risk” in bank supervision, and principles for tailoring a regulatory framework that welcomes technology.

Bowman highlighted the U.S. is at the beginning of what appears to be a “seismic shift” in the way we understand money, value and the fabric of the financial system. She noted the recent enactment of the GENIUS Act, which will bring stablecoins to the forefront of financial system discussions and position them to disrupt traditional payment rails. Regulators will be taking steps to create a framework for digital assets and blockchain adoption within banks, emphasizing regulatory certainty, risk-based rules, consumer protection, and openness to innovation. The Fed stated the industry should expect constructive engagement with bank supervisors, who must understand new technologies and their risks and benefits, while developing a regulatory framework that supports innovation and preserves America’s leadership in financial technology.